M &T B A N K C O R P O R AT I O N 2 0 1 5 A N N U A L R E P O R T
Cover Art: American artist Man Ray created an important early body of work while residing in an art colony in Ridgefield,
New Jersey, from 1913 through 1915. Ridgefield Landscape was a seminal work for the artist and among the first of his modernist
paintings. It reflects the artist’s attraction to the severe, geometric qualities of the works of certain Post-Impressionists.
Simplifying and flattening the forms of the countryside, he translated houses, trees and terrain into a two-dimensional study
of interlocking, overlapping planes – a “new reality.”
Man Ray’s Ridgefield Landscape is housed in the Montclair Art Museum, which opened in 1914 in the tree-lined, residential
area of Montclair, New Jersey. It was a pioneer of its time as one of the country’s first museums to primarily collect American art.
Rooted in its values of diversity and creativity, the museum understands the importance of art to society.
This is the latest in the series of annual reports to feature the work of artists with strong connections to the communities
served by M&T Bank.
Man Ray (1890–1976), Ridgefield Landscape, 1913, oil on canvas, Montclair Art Museum, gift of Naomi and David Savage, 1998.13
© Man Ray Trust / Artists Rights Society (ARS), NY / ADAGP, Paris 2015
M&T Bank Corporation
Contents
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Message to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. iv
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. xxxv
United States Securities and Exchange Commission (SEC) Form 10-K. . xxxviii
Annual Meeting
The annual meeting of shareholders will take place at 11:00 a.m. on
April 19, 2016 at One M&T Plaza in Buffalo.
Profile
M&T Bank Corporation is a bank holding company headquartered in
Buffalo, New York, which had assets of $122.8 billion at December 31, 2015.
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, Maryland, New Jersey,
Pennsylvania, Delaware, Connecticut, 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.
M&T Bank Corporation and Subsidiaries
Financial Highlights
For the year
Performance
2015
2014
Change
Net income (thousands) . . . . . . . . . . . . . . . . $ 1,079,667
$ 1,066,246
+
1%
Net income available to common
shareholders — diluted (thousands) . . . .
987,724
978,581
+
1%
Return on
Average assets . . . . . . . . . . . . . . . . . . . . . . .
Average common equity . . . . . . . . . . . . . .
Net interest margin. . . . . . . . . . . . . . . . . . . . .
Net charge-off s/average loans. . . . . . . . . . .
1.06%
8.32%
3.14%
.19%
Per common share data
Basic earnings . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7.22
Diluted earnings . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . .
7.18
2.80
1.16%
9.08%
3.31%
.19%
$ 7.47
7.42
2.80
3%
3%
-
-
¨ —¨
Net operating
(tangible) results(a)
Net operating income (thousands) . . . . . . $ 1,156,637
$ 1,086,903
+ 6%
Diluted net operating earnings
per common share . . . . . . . . . . . . . . . . . . .
7.74
7.57
+ 2%
Net operating return on
Average tangible assets . . . . . . . . . . . . . . .
1.18%
Average tangible common equity . . . . . .
Effi ciency ratio(b) . . . . . . . . . . . . . . . . . . . . . . .
13.00%
57.98%
1.23%
13.76%
59.29%
At December 31
Balance sheet data (millions) Loans and leases,
net of unearned discount . . . . . . . . . . . . . $ 87,489
$ 66,669
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
122,788
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91,958
Total shareholders’ equity . . . . . . . . . . . . . .
Common shareholders’ equity . . . . . . . . . .
16,173
14,939
Loan quality
Allowance for credit losses to total loans
1.09%
Capital
Nonaccrual loans ratio. . . . . . . . . . . . . . . . . .
.91%
Common equity Tier 1 ratio(c) . . . . . . . . . . .
Tier 1 risk-based capital ratio . . . . . . . . . . .
11.08%
12.68%
Total risk-based capital ratio . . . . . . . . . . . .
14.92%
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
10.89%
Total equity/total assets . . . . . . . . . . . . . . . .
13.17%
Common equity (book value) per share . .
$ 93.60
Tangible common equity per share . . . . . .
64.28
Market price per share
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121.18
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134.00
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111.50
96,686
73,582
12,336
11,102
1.38%
1.20%
N/A
12.47%
15.21%
10.17%
12.76%
$ 83.88
57.06
125.62
128.96
109.16
+ 31%
+ 27%
+ 25%
+ 31%
+ 35%
+ 12%
+ 13%
- 4%
(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 effi ciency ratio, are net of applicable income tax eff ects. 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.
(c) Final Basel III rules became eff ective for M&T Bank Corporation and its subsidiary banks on January 1, 2015.
ii
DILUTED EARNINGS
PER COMMON SHARE
SHAREHOLDERS’ EQUITY
PER COMMON SHARE AT YEAR-END
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
$6.55
$6.35
$7.88
$7.54
$8.48
$8.20
$7.57
$7.42
$7.74
$7.18
$66.82 $72.73 $79.81 $83.88 $93.60
$37.79 $44.61 $52.45 $57.06 $64.28
Diluted net operating(a)
Diluted
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
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
$884.3 $1,072.5 $1,174.6 $1,086.9 $1,156.6
$859.5 $1,029.5 $1,138.5 $1,066.2 $1,079.7
17.96% 19.42% 17.79% 13.76% 13.00%
8.32%
10.93%
9.67% 10.96%
9.08%
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.
iii
Message to Shareholders
iv
T
he past year was another challenging one for the U.S. banking industry,
testing the viability of business models and the ability of management
teams at community-focused banks of all sizes across the country.
Complex, still-evolving regulatory requirements confront the industry
and continue to drive heightened investment in compliance, risk and capital
management infrastructure. A slow and uneven economic recovery, an
unusually persistent low-rate environment, concerns abroad and rising
competition from outside the regulated banking industry all placed further
performance and consolidation pressures on small and mid-sized banks.
M&T’s results were impacted by such factors in 2015, as they
have been over the past several years. The progress we made on our risk
management infrastructure earned some measure of validation through
the approval and completion of the merger with Hudson City Bancorp,
Inc. (“Hudson City”). It was an arduous journey, one that validated the
need for those investments as well as extraordinary regulatory compliance
costs, while reaffirming that scale, efficiency and credit discipline remain
as competitive advantages.
Using generally accepted accounting principles (“GAAP”), net
income was $1.08 billion in 2015, an increase of 1% from $1.07 billion in
2014, while diluted earnings per common share registered $7.18 in 2015,
a decrease of 3% from the earlier period. The impact of merger and
v
acquisition charges incurred in connection with the consummation of the
Hudson City transaction on the first day of last November dampened those
2015 results by $61 million net of tax, or 44 cents per common share.
Following our traditional practice, which helps investors better
understand the impact of merger activity on M&T’s financial statements,
we also provide M&T’s results on a “net operating” or “tangible” basis.
Net operating results exclude the effect of intangible assets as well as
the after-tax impact of merger-related expenses on both the income
statement and balance sheet. Such charges are akin to the cost of entry
in consummating a merger and will not continue as part of the normal,
ongoing expense required to operate the new franchise. Under this
measure, M&T’s net operating income was $1.16 billion last year, improved
by 6% from $1.09 billion the year prior. Diluted net operating income per
common share amounted to $7.74 in 2015, a 2% rise from 2014. The net
operating results for 2015, expressed as a rate of return on average tangible
assets and average tangible common shareholders’ equity, were 1.18% and
13.00%, respectively.
M&T’s primary source of revenue is net interest income, comprised
of interest received on loans and investments, less interest paid on deposits
and borrowings, which, expressed on a taxable-equivalent basis, was
$2.9 billion for 2015, an increase of 6% from the prior year. Two somewhat
offsetting factors combined to affect that rate of growth. First, average
earning assets increased by $9.5 billion or 12%. Tempering the positive
contribution from that growth, however, was a narrowing of the net interest
margin, which is taxable-equivalent net interest income expressed as a
percentage of average earning assets. Let’s review the details.
vi
Average loans notched a 10% increase of $6.2 billion, rising to
$70.8 billion, while average holdings of investment securities grew by
$2.9 billion to nearly $14.5 billion. Those investment securities expanded
M&T’s layer of high-quality liquid assets, funds which otherwise could
be used to expand lending, but which are being held in reserve so that
they can be readily turned into cash in times of economic stress. Total
loans at December 31, 2015 were $87.5 billion, inclusive of loans acquired
from Hudson City.
The net interest margin was 3.14% in 2015, a decrease of 17 basis
points from 3.31% the year before. The pressure on the net interest margin
continued as a result of the low interest rate environment that prevailed
throughout most of the year. Those pressures began to ease in late
December, when the Federal Reserve raised its benchmark interest rate by
0.25%—the first increase since June 2006, some nine and a half years ago.
As the economy continued to improve during the year, however
slowly, the repayment performance of M&T’s loan portfolio remained
steady. Net charge-offs expressed as a percentage of average loans
outstanding were 0.19%, unchanged from the same figure in 2014 and
just over half the bank’s long-term average of 0.36% since 1983. Expressed
in dollar terms, net charge-offs were $134 million, compared with $121
million in the prior year. M&T’s allowance for losses on loans and leases
stood at $956 million as of December 31, 2015, representing 1.09% of
loans outstanding.
Non-interest income from fees and other sources totaled $1.8
billion in 2015, an increase of 3% from 2014. Revenues from mortgage
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banking increased by 4% over the prior year to $376 million. Trust income
declined by 7% to $471 million, which reflects the April divestiture of
Wilmington Trust’s trade processing business and its associated revenues.
This transaction is representative of our efforts to direct resources towards
services that will provide the most value to our clients over time. In
connection with the divestiture, M&T realized a $45 million gain, included
in other revenue from operations.
Non-interest expense increased to $2.8 billion, up from $2.7 billion
in the previous year. The increase primarily reflects the impact of the
Hudson City merger, which includes two months of its operating expenses
as well as $76 million of pre-tax merger-related expenses. The efficiency
ratio, the cost to produce a dollar of revenue expressed in percentage
terms, improved from 2014 by 1.31 percentage points, to 57.98%. Adjusting
for the impact of the merger and a $40 million contribution to the M&T
Charitable Foundation made in the second quarter, expenses declined
slightly from 2014.
Upon reflection, our financial performance and condition in
2015 merit no small measure of pride. Considering the environment, our
businesses have performed remarkably well. The retail banking business
opened 178,119 consumer checking accounts, issued 38,001 credit cards,
originated 63,665 auto loans totaling $1.5 billion and wrote 20,234
mortgages totaling $4.2 billion. On the commercial side, 17,714 loans
totaling $19.4 billion were underwritten. Wilmington Trust was appointed
to act as the trustee or agent on 4,149 new corporate debt, loan agency,
structured finance and equipment finance transactions generating over
viii
$8 billion of average deposit and investment fund balances. The wealth
advisory services group was engaged by 330 new clients to provide them
with services to manage and preserve their assets.
M&T’s fundamental performance in 2015, against the backdrop
of the competitive environment and the significant investment made
in its risk management infrastructure, remained strong relative to the
industry, as evidenced by a return on tangible common equity of 13.0%,
which is above the median of the 20 largest commercial bank holding
companies headquartered in the United States. Over the past year, M&T’s
tangible book value per share, an important measure of value creation for
investors, grew by 12.7%, significantly outpacing this entire group. Over
the past five years, our compound annualized growth rate of 14.1% was
exceeded by just two others.
M&T has long prided itself on a patient approach to mergers
and acquisitions, entering into partnerships that made sense and which
were additive to shareholder value. We are not motivated by growth for
growth’s sake and, even while cognizant of gaps that may exist in our
geographic footprint, prudence has always dictated that we wait for the
right opportunities for expansion. Such was the case with Hudson City,
in which we moved in a meaningful way into new, adjacent markets
with 135 branches utilized by 217,707 consumer households with
553,067 accounts. The fact that this merger was immediately accretive
to operating earnings and tangible book value per share, and brought an
increase of as much as 80 basis points to our regulatory capital ratios,
demonstrates our unwavering commitment to the careful stewardship
of our shareholders’ capital.
ix
OUR EVOLVING APPROACH
In 1983, or 33 years ago, I became Chief Executive Officer of M&T Bank.
During that period, the bank’s total assets have grown from $2.1 billion
to $122.8 billion. Concurrently, its earnings grew from $5.3 million
to $1.1 billion, its personnel complement from 2,096 to 17,476 and its
branches from 59 to 811. The value of its shares grew at a compounded rate
of 14.8%—the best return of the 100 largest banks that were in existence
at that time—only 23 of which are still around today. M&T is among the
eight banks that are able to borrow money in the public marketplace at the
narrowest of spreads and is one of just seven banks out of the top 20 that
have a rating of B+ or better in the S&P Stock Guide. During the financial
crisis, it was one of just two commercial banks out of 20 then included in
the S&P 500 that did not reduce its dividend, and at no point in the last
33 years has it had to raise additional common equity in the public markets.
Within the entire universe of 586 U.S. publicly traded stocks that have
traded continuously since January 1, 1980, M&T’s annualized total return
through the end of 2015, including reinvested dividends, of 18.7% ranks
twenty-fifth. Berkshire Hathaway, widely considered the gold standard for
shareholder returns, returned 19.5%, ranking sixteenth in the same analysis.
The bank continues to maintain its headquarters in Buffalo, New
York, where it was founded 160 years ago and where today almost 40%
of our employees still work. Until 2003, save for a boutique operation in
New York City, M&T’s franchise was essentially located in Rust Belt cities
that are poorer than the national average—many in locations where people
know when you are born and care when you die.
x
M&T has always focused on serving its communities. It has had
the highest possible Community Reinvestment Act (“CRA”) rating from
its federal regulator since 1983. M&T encourages its colleagues to get
involved with those institutions that enhance a community’s quality of
life, and it has made $190 million in charitable contributions during the
past 10 years. Last year alone, M&T employees contributed 307,873 hours
of their time and served on 2,115 not-for-profit boards.
The bank also spends a great deal of time recruiting and
developing its colleagues. In the last 10 years it has, without interruption,
continued its long-standing practice of adding young talent to its ranks,
enlisting 842 recent college and business school graduates into its
training programs. These young people—combined with more seasoned
external hires, all of whom bring a widely varied set of backgrounds and
viewpoints—engender diversity that broadens our perspective, enriches
the workplace and ultimately results in better dialogue. The bank further
establishes bench strength by rotating high potential colleagues into
different disciplines and geographies. Today, there are more than 800
who have worked in two locations, and 84 in three.
M&T has 14 members on its Management Committee and they
have been with the bank an average of 25 years. Bank-wide, the tenure
of M&T’s employees averages 10.4 years—more than twice that of the
financial services industry. These colleagues exhibit an intense personal
responsibility to the bank and to one another. Their tenure and tenacity
have meant that the bank has always gone the extra mile to correct any
single mistake in its transactions or weakness in its overall systems.
xi
M&T concentrates on details—on getting things right no matter the
amount of work involved—and demands the highest moral conduct of its
colleagues. Fundamentally, M&T focuses on its clients and tries to do the
right thing the right way. Taken together, these traits are part of the bank’s
culture—overarching principles that have been essential to its success.
It is in this context, with a sense of humility, that we say it should
not have required a reminder from our regulators that stronger systems,
programs and infrastructure were needed for a bank of our current size
and complexity. We fell behind in building our risk management processes
and have come to learn—the hard way—that the task of catching up is
far more costly than simply keeping pace. This is a lesson that we have
embraced and will not readily forget. The experience of the past three
years has been additive to our cultural DNA.
We have worked tirelessly since 2013 to put our house in order.
M&T has engaged 12 consulting firms at an aggregate cost of $178 million
over that time. The team handling the anti-money laundering program,
consumer and corporate compliance, as well as capital planning and stress
testing and other risk management areas increased from 128 to 807. Our
overall cost of compliance, which peaked at $441 million in 2014, retreated
somewhat to $432 million last year.
M&T has built a vast and intricate system for capturing and tracking
additional information and augmenting knowledge of our customers.
We have already completed reviews of 71% of our 3,558,681 M&T clients
that are required to go through the new process for determining risk of
money laundering or other financial crimes. Imagine the permutations
xii
of letters, emails, phone calls and meetings it took to gather the required
intelligence. We are cognizant of the inconvenience to our customers and
aware that it came as the result of our having to play catch-up. By our own
estimate, it was necessary to contact some individuals or businesses nearly
five times to successfully collect the needed material. While we regret the
necessity of putting our customers through this process, we do not regret
the fact that we are now closer to those customers and know them better
than ever before. And given the intensity with which we have tracked
down the additional data, they most assuredly know us!
In addition to updating client profiles, the bank continues to
screen transactions for suspicious activity. In 2015, M&T’s automated
monitoring system reviewed 768,984,034 transactions for signs of
suspicious activity. Such scrutiny, along with the use of other money
laundering detection tools, may help in uncovering financial crimes,
money laundering or a terrorist cell by flagging transactions emanating
from local establishments to notorious locations around the world.
So too has our capital governance process, put in place to ensure
the bank’s capital structure is sufficiently robust, strengthened our
internal planning and improved risk awareness across the bank. The
publicly disclosed results of this process give the investment community
more insight as to how M&T and its peers would perform in stressed
economic conditions.
New capital rules provide better differentiation among the
types of activities that M&T and other banks engage in by applying higher
risk-weightings to assets such as equity exposures, certain trading
xiii
portfolios, derivatives and securitizations, whether accounted for on or
off bank balance sheets.
M&T’s risk management infrastructure is, without a doubt, broader
and more comprehensive. A steadfast commitment spans the organization,
including intense involvement from both executive management and the
Board of Directors. The Risk Committee of the Board provides oversight
of a robust risk governance structure and, last year, convened 16 times
to review 5,673 pages of materials and produced 141 pages of minutes.
Executive management is actively engaged through the Management
Risk Committee, which serves as the central forum for the identification
and escalation of key risks. Organized under that body are eight Risk
Governance Committees, each of which has oversight of a specific risk
category. Since the implementation of this governance regime nearly two
years ago, these committees have met 222 times to discuss existing, new
and emerging risks, reviewed 34,196 pages of presentations and reports
and produced 1,329 pages of meeting minutes. The comprehensive reach
of the risk management framework that spans 189 committees across the
bank has become a catalyst for improvement. For example, the quality
of data has been enhanced, as has the transparency of information. The
organization is, as a matter of consequence, more vigilant and more adept
at policing itself.
There is little question that the lens of time has sharpened our
perspective. M&T needed to improve its foundational infrastructure in
order to deal with the challenges and pace of change of the world today.
The bank has reinforced its risk management in a manner designed to
xiv
support an organization that aspires to grow. This is not to say that our
work is done—ongoing investment in compliance, technology, systems and
personnel will be needed to keep pace with the evolving financial industry
landscape well into the future.
THE ROLE OF TRADITIONAL BANKING
It is hardly the case that M&T and 6,174 other U.S. banks and thrifts are
entirely content with the current environment in which we operate. The
U.S., and indeed the global economy, suffered a financial crisis of horrific
proportions—one in which a handful of banks, but not all, played a pivotal
role. In its wake, public officials, reflecting the mood of the public at large,
demanded change—and change, most assuredly, they have seen. Yet, from
a banker’s perspective, the very word “bank” continues to be convenient
political shorthand for financial shenanigans. For institutions that see
local banking as both a service and a calling, convincing officials of our
good intentions feels like a Sisyphean task.
Just as M&T needed to keep pace with the rapid changes that
have occurred in the world since the crisis, so too must the industry, the
government and the public be cognizant of the need to stay abreast of the
swiftly changing environment and move forward.
Since the 1980s, government agencies, regulators and politicians,
in combination with market forces, have shifted the equilibrium of the
banking industry. New entrants, public policy and enhanced regulatory
oversight have all contributed to this change. In this environment,
just at a time when disadvantaged members of our communities are in
need, regional banks find themselves playing a diminished role in their
xv
traditional activity of supporting economic growth by taking deposits,
extending credit and facilitating trade and commerce. A restoration
of those crucial roles will require a healthier dialogue between bankers
and regulators, an appreciation of the unintended consequences
of new policies, a grasp of the implications of technological change,
and an understanding of the rapidly evolving financial services
industry as a whole.
IMPROVING THE DIALOGUE: Though small and mid-sized banks
played little, if any, role in the crisis, they have been swept into this
vast change, and the resulting disproportionate burden is distracting
them from their traditional focus on servicing local families, businesses
and farmers. Despite a shared objective of maintaining the safety
and soundness of the financial system, today’s banking environment
is typified by a relationship between institutions and governing
agencies that is less than collaborative—a product, it seems, of a
political atmosphere where pressure remains upon banks to prove
themselves reformed.
There is sometimes a lack of coordination among different
agencies. Post-crisis regulation conferred new powers and created new
governing bodies. Each agency is attempting to administer and exercise
its granted authority. However, various regulatory organizations can have
different criteria for assessing the same issue. For example, M&T had
three different agencies analyze its mortgage portfolio, and each required
a unique sample of mortgages that the other two had not seen. In 2015,
M&T underwent 36 different inspections across 10 agencies. Each review
xvi
brought as many as 15 regulators to the bank and, at one point last
year, eight exams were being conducted simultaneously. In the past,
some of the supervisory bodies conducted their examinations together,
compiled their findings, and then made a joint presentation to an
organization’s board of directors. More recently, such reviews have
been conducted separately and accompanied by individual written
reports and presentations to a bank’s board. This inevitably results
in fragmented assessments of banks and makes it difficult for banks
in defining priorities to facilitate necessary change.
A measure of improved coordination could help in reducing
some of the unnecessary duplicative work needed to fulfill regulatory
requests, and free up resources to make faster progress in reforming the
system, allowing for a rebalancing of our responsibilities toward serving
our customers.
Dodd-Frank created the Consumer Financial Protection Bureau
(“CFPB”)—an agency whose mandate is as simple as it is broad: consumer
protection. For 72 years, the Federal Trade Commission was tasked with
protecting consumers from “unfair” or “deceptive” business practices.
With its inception, Dodd-Frank added the term “abusive.” Although
the CFPB has power under the law to promulgate regulations to ensure
clarity, no further definition of this term has been published, creating a
“you’ll know it—when I see it” atmosphere, leaving banks uncertain about
what is required to remain above reproach.
While these are but a few examples, the recurring theme is
that banks have been working with new regulations that are constantly
xvii
evolving, sometimes with a lack of clarity, but always with a certain degree
of urgency. In that regard, M&T is no different from regional banks that
have always endeavored to provide banking services in a manner that
governing agencies, shareholders, clients and communities would find
exemplary. However, that task becomes increasingly difficult when the
rules of the game and the supervisory process are, at times, managed in a
conflicting manner. Amidst the uncertainty and angst that this engenders,
it is difficult for traditional banks to use their renewed culture, fortified
by heightened risk management and compliance discipline, in the service
of their core mission.
APPRECIATING CONSEQUENCES OF PUBLIC POLICY: History has
demonstrated that thoughtful legislation can accelerate and even pivot
the direction in which our country’s economy moves. However, we are
reminded frequently that unintended consequences can arise out of the
best of intentions. Not only do the benefits often not reach their intended
recipients but, at times, previously unforeseen issues emerge as a result.
The Federal National Mortgage Association (“Fannie Mae”) and
The Federal Home Loan Mortgage Corporation (“Freddie Mac”) were
created with the laudable goal of increasing home ownership. These
institutions were granted regulatory and capital advantages that, combined
with their implicit U.S. government guarantee, allowed them to dominate
competition from the private market. Fannie Mae and Freddie Mac began
pursuing non-traditional mortgage loan programs—moving into the
subprime and Alt-A market segments characterized by lower credit quality.
By the eve of the financial crisis, they had extended 39% of the $4.6 trillion
xviii
of those mortgages then in existence—loans that subsequently resulted
in large scale defaults and borrowers losing their homes.
In 2010, the government eliminated the federal guarantee
program and began exclusively originating loans directly to students,
with the promise of reducing the cost of the program to taxpayers. College
education debt outstanding at that time was $811 billion. By the end of 2015,
that figure had grown to $1.3 trillion. In fact, student loans are the fastest
growing category of consumer debt, now ranking as the second largest, after
mortgage loans. The average student debt at graduation has risen by 56%
over the past 10 years, from $18,550 to $28,950. Ninety-day delinquency
rates have risen sharply from 6.4% to 11.6% over the past decade—a
harbinger of higher losses, whose cost will ultimately be borne by taxpayers.
At the same time, increased debt burdens are contributing to lower rates
of household formation and home ownership as well as reduced business
start-ups among the generation of recent college graduates.
Beyond these unintended results, there are other areas in which
it is difficult to understand whether the benefits of public policy have
reached the intended recipients.
The Small Business Administration’s (“SBA”) 7(a) guaranteed loan
program is intended to expand access to capital for small businesses, yet
only about a third of the country’s commercial banks participate in it and
the number declined by 13% between 2012 and 2015. Since the recession,
the SBA has attempted to simplify program requirements and streamline
processes in order to boost borrower participation. Commercial loans
xix
under $1 million are deemed by the government to be “small business”
in nature. Despite program improvements, SBA-backed loans under
$1 million are 40,047 units or 41.3% below their 2007 pre-recession levels.
The SBA program remains too cumbersome for many banks to use in
extending credit to small businesses. It is hardly surprising that credit
availability as measured by CRA data for loans under $1 million remains
34.9% below 2007 levels, a decline of nearly $115 billion.
The Durbin Amendment, included in the Dodd-Frank legislation,
imposed price controls on the interchange fees that banks could charge
retailers, with the expectation that annual savings—which a recent
academic study estimated at up to $8 billion per year—would be passed on
to consumers and smaller merchants. Researchers found that, despite the
creation of such “savings,” there was no evidence that consumers and small
businesses saw any of it. Instead, the study concluded, big-box retailers
were the real winners.
The collective goal of all stakeholders in the financial system—the
banking industry, the regulators, the legislators, and the public—should
be to foster a safer and more productive environment in order to create a
fair, equitable, growth-oriented, yet transparent system that promotes the
expansion of the overall economy and the betterment of businesses and
consumers alike. As we do this, we must also be keenly cognizant of the
absolute imperative that the most disadvantaged members of society not
be left behind in the wake of these efforts.
xx
TECHNOLOGY AND ITS IMPLICATIONS: Rapidly changing technology
in combination with the need for continued expenditure on compliance
infrastructure is creating a dual challenge for regional banks. Consumers
demand the ability to seamlessly interact with banks from anywhere
and on any number of devices. Traditional banks are increasingly caught
in a vise—they cannot afford to shortchange investment in the mobile
and online banking technologies that their clients want, as well as in
the cybersecurity that will keep their customers’ information and assets
safe from global criminals. Yet banks also have to simultaneously bear
the higher regulatory and compliance expenses and decreased revenues
brought about by legislation and regulation meant to address the ills of the
last crisis. The largest banks, on the other hand, are able to take advantage
of their massive size to shrug off the impact of compliance costs, fines and
penalties, and still have the wherewithal to invest in the latest technologies.
As a result, they are increasingly gaining a competitive advantage over
these smaller banks. For instance, five of the largest banks were able to
grow their aggregate same-store retail deposit balances at a rate nearly
twice that of the rest of the industry over the last three years.
A recent J.D. Power and Associates® survey noted that mid-sized
and regional banks were seeing their long-held customer satisfaction
advantage over large banks erode, a development attributable primarily
to the large banks’ ability to meet customers’ quickly evolving preferences
in mobile and Internet banking. It would seem that a legislative canon that
purports to better regulate those institutions deemed “too big to fail” is
unwittingly creating a class of banks that may be “too small to succeed.”
xxi
THE CHANGING LENDING LANDSCAPE: For centuries, banks have been
the principal source of financing for commerce and industry—bolstering
this country’s economy since before it was constituted a nation—and
operating under charters to gather deposits and make loans to businesses
as well as individuals. Forty years ago, nearly 70% of all private sector loans
were made by 19,372 banks and thrifts across the United States. Today,
just 48% of loans are made by one-third as many banks.
Lending standards have loosened over the last several years; the
markets across our regional footprint are intensely competitive, almost
frothy, with both pricing and loan structure coming under pressure. Loan
features such as interest-only payments for the life of the loan and fixed
rates for long periods of 10 to 15 years have re-emerged while pricing is
being pushed downward, sometimes below minimum sustainable levels
of profitability. Banks of all sizes remain engaged, aggressively competing
for a limited number of high-quality opportunities that satisfy increasingly
stringent regulatory standards, while at times reaching beyond their
natural geographic footprint.
In recent years, players from outside the industry have stepped in
to capitalize on a more restrained banking system. A variety of non-banks—
hedge funds, private equity firms, business development companies, direct-
lending funds, non-bank mortgage originators, online platforms, peer-
to-peer lenders, real estate investment trusts and a host of others—offer
loans to businesses of every description, conduct mortgage banking and
commercial real estate lending, and make other consumer loans. A recent
survey commissioned by a leading independent market research firm
xxii
found that approximately one-quarter of U.S. small and mid-sized
companies have reportedly obtained credit from non-bank lenders, with
79% saying it is easier than working with a bank and 94% indicating they
would do so again.
The International Monetary Fund noted in a research paper
that “the interplay of different regulations (capital, liquidity, activity
restrictions and governance) and increased compliance costs and legal
risks may be affecting banks’ willingness to support certain activities.”
A 2015 survey conducted by the Federal Reserve in partnership with state
banking regulators found that compliance costs for community banks
represented 22% of their net income. While indicating that it was too soon
to weigh such expenses against their systemic benefits, the report still
noted that the costs are “sufficient to frustrate bankers.”
As regulators build higher walls around the banking sector, and
lending and other traditional banking activities continue to migrate out of
the regulated portion of the financial system, we have to be concerned that
a false sense of security is being created. The world of non-bank financial
participants is intimately linked with that of the regulated sector. No
better example of this linkage exists than the interdependency between
the largest U.S. banks and hedge funds and private equity firms.
Designed as private investments for high-net-worth and
institutional investors, modern hedge funds employ a variety of strategies.
Some are market-neutral funds aimed at hedging market risk using
offsetting positions, while others engage in short-selling securities in
xxiii
anticipation that the fund will be able to buy them back in the future
at a lower price.
Private equity firms were originally created to pool money to
acquire stakes in companies, either partial or full ownership. Today, the
reach of these firms is extensive—they own hotels, Manhattan apartments,
distressed loans, water utilities in California, sewer systems, school bus
services, a natural gas export facility and a hydropower dam in Uganda.
The largest operator of rental homes in America is owned by a private
equity firm.
These firms have grown rapidly in both size and number. From
2000 to 2015, assets managed by hedge funds grew from $237 billion to
$2.7 trillion, more money than the individual economic outputs of all but
the world’s five wealthiest nations. The rapid expansion of the private
equity industry is comparable to that of the hedge fund industry—there are
3,300 private equity firms headquartered in the United States. Since 2000,
the number rose 143% while their assets under management grew nearly
six-fold to $4.2 trillion.
Five of the largest banks, which account for 93.6% of derivative
exposures and 90.5% of U.S. banking industry trading revenue, have an
interdependent relationship with their hedge fund and private equity
clients. Such firms and their funds depend on large banks’ balance sheets
to increase leverage and enhance returns, and large banks in turn earn
substantial fees from these clients. As one market participant noted,
“Without hedge funds, there wouldn’t be prime brokers, and without
prime brokers, there wouldn’t be hedge funds.”
xxiv
Those five banks service 41% of all hedge funds. Just one of these
banks services 20% of the 10,268 hedge funds in the United States. The
funds borrow money from these banks to expand returns through the use
of repurchase agreements (“repos”), a form of short-term secured lending
that can be used to finance long-term investments. Such vehicles became
notorious during the financial crisis when lenders had to sell mortgage-
backed securities at fire sale prices and credit markets froze up. A sudden
pullback in repo funding was blamed for the collapse of Lehman Brothers.
One recent estimate suggests that repurchase agreements account for 47%
of hedge fund financing.
Banking regulators are well aware of the risk posed by these
securities financing transactions and have enacted significant regulation to
limit their potential to cause harm. One Federal Reserve official noted that
such transactions, “…create sizable macro-prudential risks, including large
negative externalities from dealer defaults and from asset fire sales.” Said
differently, when repos go wrong they can pose great risk to the system.
While the repo business itself generates very low returns, by
providing this type of financing to hedge funds, large banks cement their
symbiotic relationship with these non-bank players and garner their
more profitable trading and advisory business. Then there are the fees
paid to large banks by private equity clients, which alone accounted for
an estimated 14% of all investment banking fees in 2014, compared with
2-3% in the mid-1990s. Financial institution clients, which include private
equity firms and hedge funds, provide 45% of the largest banks’ revenue
and utilize 56% of their balance sheets.
xxv
Since the end of the financial crisis, non-banks—particularly
hedge funds and private equity firms—have benefited from increased
regulation and capital requirements placed on banks, providing leveraged
loans and credit to both small and mid-sized companies while operating
with limited governmental oversight. These firms grew their loan
portfolios by 13.2%, compared with 0.5% growth within the commercially
chartered U.S. banking industry. Banking regulators, concerned with
managing the risks posed to banks when their clients take on high levels
of indebtedness, have restricted the amount of capital that they can
provide to highly leveraged companies. Free from these restrictions,
non-bank lenders have filled the gap and, as of 2013, represented 85%
of the $596 billion leveraged loan market, up from just 37% in 1998. In
fact, one private equity firm’s credit assets under management grew from
inception in 2005 to over $80 billion in 2015, a feat which took M&T 33
years to achieve.
Following the implementation of new bank capital and liquidity
standards, the business of mortgage servicing rights has subsequently been
forced to migrate to non-bank servicers who are not bound by those rules—
or the same banking relationship to the homeowner. In 2010, none of the
top five and only one of the top 10 mortgage servicers were non-banks. By
2015, five of the top 10 servicers were non-banks, with servicing balances
amounting to $1.3 trillion, or about a 13.6% market share. Notably, the
fourth largest servicer is controlled by a private equity firm.
The rapid growth of hedge funds and private equity firms
has been driven, in part, by an incentive compensation structure that
xxvi
differs dramatically from that extended to lenders at traditional banks.
Hedge funds, private equity firms and other non-bank players have
no restrictions on size or type of compensation. The pay formulae for
managers of hedge funds—who can earn 2% in management fees and up
to 20% of the gains in their funds (“2-and-20”), as well as private equity
management fees and so-called “carried interest”—are all tied to the size
of assets managed as well as performance of their fund. So significant are
these fees that had Berkshire Hathaway charged 2-and-20 starting in 1965
for a $1,000 investment, the investor would have ended up with $527,000
instead of the $7.5 million that would have been earned through 2014.
In 2014, the top 25 individuals in the hedge fund industry together
earned $11.6 billion and the top seven private equity partners made a total
of $2.3 billion. The nation’s highest paid hedge fund manager earned $1.3
billion—or, put another way, nearly 47 times the compensation of the
highest paid bank CEO and 18,288 times that of the average commercial
bank employee in the United States.
Traditional banks that have withstood the test of time understand
that as markets become more ebullient, they must step back and remain
disciplined even at the expense of short-term gains. At M&T, our objective
has always been to deliver consistently for our clients, irrespective
of market volatility, and to cultivate new relationships during market
downturns, when others are constrained by the after-effects of imbibing
too freely during boom times. A 2015 study conducted by banking
regulators noted that while non-banks had 23% of the $3.9 trillion large
syndicated loan market, a share that has nearly doubled over the past
xxvii
10 years, they held 72.8% of the non-performing exposures. As non-
banks make new forays into the lending space, one wonders if the proper
mechanisms are in place to balance their desire to increase the size of their
portfolios with the level of institutional restraint required to pull back from
the extension of credit to businesses whenever conditions, terms and risk
reach the inevitable peak of the cycle. Nor can one imagine that these
new entrants, who reside far from the communities where they lend,
will be there to provide leadership and support local businesses during
difficult times.
EMPOWERING SMALL BUSINESS: Increased regulation of the banking
sector has made it difficult for banks to serve certain market segments
profitably, while making customers’ borrowing experience more
burdensome. While the economy as a whole appears to be expanding,
small businesses, once a significant source of job creation and a leading
indicator of the economy’s health, have not fully recovered from the
recession. Employment at these businesses remains 1.5% below their
2007 peak and their sentiments are further dampened by sluggish sales
growth since the recession. Sales at small firms are still 10% below
pre-crisis levels.
At the same time, access to capital remains elusive. The Federal
Reserve’s Joint Small Business Credit Survey conducted in 2014 showed
that 20% of respondents felt too discouraged to apply for credit. Those
small businesses that did apply were denied needed financing 44%
of the time. The denial rate increased to 50% when the applicant had
revenues of less than $1 million. Traditional banks, with their sharply
xxviii
increased infrastructure costs, find it difficult to earn an adequate return
as these small loans require the same level of initial review and ongoing
monitoring, yet produce much less revenue to cover those costs.
To some extent, non-bank lenders have stepped into this credit
void to provide small business loans, typically those under $250,000,
offering convenience through web and mobile credit application portals
coupled with shortened decision and funding timelines. The Federal
Reserve estimates that non-bank financing to small businesses has
doubled every year since mid-2000. While non-banks offer convenience,
speed and expanded access to capital, borrowers often pay a substantial
premium for that access. One of the largest non-bank lenders to small
business reported in its disclosures that it originated $1.2 billion in loans
during 2014 at an average annual percentage rate of 54.4%.
The decline of small business activity is hastened at both ends
of the generational spectrum. Many small business owners from the
Baby Boomer generation are reaching retirement age and choosing to
sell their businesses. On the other hand, Millennials—today’s would-be
entrepreneurs—are ill-equipped to secure the capital needed for business
formation. The net worth of those under 30 has fallen by nearly half since
2007. Millennials today have nearly twice the amount of student debt
compared with the same demographic 20 years ago.
The post-recession period has yielded the lowest average pace of
new business formation in the 22 years the Bureau of Labor Statistics has
tracked such data. Start-ups peaked at 715,734 in 2006, creating 3.6 million
new jobs. Since 2009 and the beginning of the recovery, the average
xxix
number of new start-ups per year has fallen to 620,668 creating only 2.8
million new jobs annually. When companies do form, they are employing
0.6 fewer workers than a similar start-up in 2006. The drop-off in new
business formation means that the population of businesses with less than
100 employees is contracting as well.
Small business lending has long been the province of banks. There
is a higher calling to banking—a mission to support community development
and the collective betterment that accompanies it. In the wake of the crisis,
the industry has perhaps been distracted from that mission and, despite
the influx of new players in the lending space, the small business engine
continues to sputter. While the fundamental lack of small business start-ups
is worrisome, perhaps more troubling is the contraction in the number of
those companies that have long been community bulwarks. When a small
business owner sells his or her business—sometimes to a firm that is distant
from the community—and retires, a leadership vacuum is created; a local
leader is lost. If the next generation of potential leaders is not financially
capable of stepping in, the cycle will perpetuate. This is a problem the
banking industry can help to solve provided it gets back to doing what it
does best and endeavors to remove barriers to small business entry while
reinvigorating the American entrepreneurial spirit.
CHOOSING THE BEST WAY FORWARD
So much—indeed, too much—of our public discussion about banks and
banking today looks back in anger. Neither fines nor sanctions nor—even
more consequentially—regulatory change have restored public trust. Today
we face a turning point. Will we continue to look for villains to punish or
xxx
will we take steps that will enable banks to serve again as agents of an
expanding prosperity? Those of us at regional banks such as M&T feel
this need most keenly. As matters stand, our dialogue with government
officials is sometimes difficult, marked by a cloud of mistrust and suspicion
that continues to hang over banks, large and small. The expansion of
regulation has affected those of us not among the ranks of giants. We have
witnessed, through the rise of non-bank players, a subtle but steady shift in
which regional banks are playing an ever-diminished role in the financial
leadership of the communities and small towns of America that they have
traditionally served so well. Such is the collateral damage of far-reaching
regulation inspired by the misdeeds of a few but affecting the whole of
the banking industry.
This is not a complaint about the state of our business, which
remains healthy, nor even about our prospects, which remain robust.
It is an expression of concern that the kinds of communities and
customers we serve will not have access to the credit and capital they
need—notwithstanding so much regulation enacted in the name of their
protection. In many respects, the business model of traditional banks is
more relevant than ever before—their role in growing and improving
their communities is essential to helping disadvantaged citizens in an
era when government programs do not seem to have the desired impact.
We know with certainty—because we have done so, historically—that
regional banks such as ours, when not disproportionately burdened by
the costs and complexity of government action, can play an even more
positive role for our communities.
xxxi
The reach of public policy and regulation is extensive—much of
it constructive but some of which has missed the mark, failing to help
its intended beneficiaries. One can think here, for instance, of student
loans; in the five years since the government eliminated the federal
guarantee program, it has come to dominate that market while student
debt outstanding has increased by more than half, becoming second in size
only to that of mortgage loans. This has made it difficult for young people
to start entrepreneurial ventures and afford their first homes. Similarly,
the past forays by Fannie Mae and Freddie Mac into subprime lending,
with the assistance of Wall Street, have put these agencies in a structural
limbo. This leaves unanswered the question of how to serve an entire
segment of would-be homeowners. The exigencies of the Federal Housing
Administration have led some banks to limit their participation in its
insurance program for loans to low-to-moderate income borrowers, raising
the question as to how people of modest means will be served. Likewise,
the complexities of SBA programs have reduced the number of small banks
participating while small businesses with revenues of less than $1 million
experience reduced access to needed capital. The Durbin Amendment, in
the name of bringing lower costs to the public, has given big-box retailers a
windfall with no savings to the person on the street, yet raised the cost
of providing banking services to underserved consumers. The unrestricted
compensation of non-bank lenders and their inherent remoteness from
borrowers raise concerns about how these customers and communities
will fare when the economic cycle turns.
All of which is to say that public policy is not science; past action
can require future adjustment. Indeed, a fixation with the past—with the
xxxii
view that banks are, inherently, somehow a threat to the economy rather
than a pillar of the financial system—itself poses risks. One can only
hope that, working together, elected and appointed officials and industry
leaders will seek to avoid a grim scenario in which capital is concentrated
among a handful of banks even as lending and risk is dispersed to the
barely-regulated shadow banking sector. There, where the transparency
required of M&T and our peer banks is nowhere to be found, lie the
risks for the larger economy of the same type which blindsided us in
2008. That underscores how paramount it is that regional banks are not
so diminished that they are unable to continue to wear the mantle of
leadership in their communities that they have traditionally borne.
The stakes are high. We simply cannot help but acknowledge
that our economy is not the source of job creation it once was. Small
businesses, formerly a leading force of economic growth, play a much
diminished role today, not least because it is more difficult for lenders
to provide the credit that realizing business dreams requires. It is past
time for government and the banking industry to turn the page and
begin to work together—not to serve the narrow interests of lenders
or investors but to advance the broader goal of reinvigorating the
American economy.
The best cultures are seldom the most insular. Over the past few
years, M&T has learned an expensive lesson on the perils of not keeping
pace with change. It is crucial, however, to emphasize that we have
learned. At its best, our culture is one open to suggestion and criticism
from all quarters. From this, we gain wisdom for tomorrow, not merely
xxxiii
a lesson for the moment. In that respect, we are not unlike our country or
our economy, both of which have, over time, demonstrated the resiliency to
endure change and the humility to learn from it. At the heart of our nation’s
innovative, entrepreneurial spirit is its willingness to overcome adversity
and drive toward ends that, while new and different, are unquestionably
better. Now, having endured the last financial crisis, it is time to direct our
full attention to identifying and pursuing a constructive way forward.
The progress we at M&T have made in the last 12 months—a year
that was challenging, yet rewarding—is in large measure the result of
the determination, dedication and toil of our colleagues. Their integrity
and character, their unwavering commitment to doing the right thing
the right way, and their willingness—indeed, eagerness—to go above and
beyond the call of duty, is the reason I am confident in our ability to
thrive and prosper in service of our communities in the years to come.
To the employees and directors of M&T Bank, my friends and colleagues,
I extend my sincere thanks.
Robert G. Wilmers
Chairman of the Board
and Chief Executive Officer
February 19, 2016
xxxiv
Robert E. Sadler, Jr.
Former President and
Chief Executive Officer
M&T Bank Corporation
Denis J. Salamone
Former Chairman and
Chief Executive Officer
Hudson City Bancorp, Inc.
Herbert L. Washington
President
H.L.W. Fast Track, Inc.
M&T Bank Corporation
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
Janet M. Coletti
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
René F. Jones
Executive Vice President
and Chief Financial Officer
Darren J. King
Executive Vice President
Gino A. Martocci
Executive Vice President
Kevin J. Pearson
Executive Vice President
Michael J. Todaro
Executive Vice President
Michele D. Trolli
Executive Vice President and
Chief Information Officer
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
Robert T. Brady
Vice Chairman of the Board
Former Chairman of the Board
and Chief Executive Officer
Moog Inc.
Brent D. Baird
Private Investor
C. Angela Bontempo
Former President and
Chief Executive Officer
Saint Vincent Health System
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
Richard A. Grossi
Consultant
Johns Hopkins Medicine
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.
Newton P.S. Merrill
Former Senior
Executive Vice President
The Bank of New York
Melinda R. Rich
Vice Chairman
Rich Products Corporation
and President
Rich Entertainment Group
xxxv
Robert E. Sadler, Jr.
Former President and
Chief Executive Officer
M&T Bank Corporation
Denis J. Salamone
Former Chairman and
Chief Executive Officer
Hudson City Bancorp, Inc.
Herbert L. Washington
President
H.L.W. Fast Track, Inc.
M&T Bank
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
Atwood Collins III
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
Peter J. Eliopoulos
Ralph W. Emerson, Jr.
Jeffrey A. Evershed
Eric B. Feldstein
Tari L. Flannery
James M. Frank
xxxvi
Timothy E. Gillespie
Lawrence E. Gore
Robert S. Graber
Sam Guerrieri, Jr.
Harish A. Holla
Neil Hosty
Carl W. Jordan
Michael T. Keegan
Nicholas P. Lambrow
Michele V. Langdon
Yakov Lantsman
Lon P. LeClair
Robert G. Loughrey
Alfred F. Luhr III
Christopher R. Madel
Paula Mandell
Louis P. Mathews, Jr.
Richard J. McCarthy
Donna McClure
William McKenna
Mark J. Mendel
Frank P. Micalizzi
Christopher R. Morphew
Michael S. Murchie
Allen J. Naples
Peter J. Olsen
Drew J. Pfirrman
Eileen M. Pirson
Paul T. Pitman
Michael J. Quinlivan
Christopher D. Randall
Daniel J. Ripienski
John F. Robbins
Paris F. Roselli
M. Julieta Ross
Anthony M. Roth
John P. Rumschik
Allison L. Sagraves
Mahesh Sankaran
Jack D. Sawyer
Jean-Christophe Schroeder
Susan F. Sciarra
Eugene J. Sheehy
Douglas A. Sheline
William M. Shickluna
Sabeth Siddique
Glenn R. Small
Philip M. Smith
Deepa Soni
Michael R. Spychala
David W. Stender
Douglas R. Stevens
Kemp C. Stickney
John R. Taylor
Christopher E. Tolomeo
Patrick M. Trainor
Scott B. Vahue
Linda J. Weinberg
Jeffrey A. Wellington
Tracy S. Woodrow
Brian R. Yoshida
DIRECTORS
Robert G. Wilmers
Chairman of the Board
and Chief Executive Officer
Brent D. Baird
Private Investor
C. Angela Bontempo
Former President and
Chief Executive Officer
Saint Vincent Health System
Robert T. Brady
Former Chairman of the Board
and Chief Executive Officer
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
Richard A. Grossi
Consultant
Johns Hopkins Medicine
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.
Newton P.S. Merrill
Former Senior
Executive Vice President
The Bank of New York
Melinda R. Rich
Vice Chairman
Rich Products Corporation
and President
Rich Entertainment Group
M&T Bank
Regional Management and Directors Advisory Councils
AREA EXECUTIVES
R. Joe Crosswhite
Michael T. Keegan
Paula Mandell
Jeffrey A. Wellington
REGIONAL PRESIDENTS
Jeffrey A. Wellington
Western New York
Allen J. Naples
Central New York
Stephen A. Foreman
Central/Western Pennsylvania
Nicholas P. Lambrow
Delaware
August J. Chiasera
Baltimore and Chesapeake
Peter M. Black
Greater Washington and
Central Virginia
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
Thomas C. Koppmann
Southeast Pennsylvania
Thomas H. Comisky
New Jersey
Frank P. Micalizzi
Tarrytown /Connecticut
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
Margaret O’Connell
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
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
Michael D. Metzger
Kim Peterson
Allen Short
Michael J. Wellman
New York City /Long Island
Division
Earle S. Altman
Jay I. Anderson
Brent D. Baird
Louis Brause
Martin Seth Burger
Patrick J. Callan
Anthony J. Dowd
Lloyd M. Goldman
Peter Hauspurg
Leslie Wohlman Himmel
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
Marc Iacona
Laurence Kessler
Anne M. Kress
Joseph M. Lobozzo II
Mark S. Peterson
John K. Purcell
Ronald S. Ricotta
Victor E. Salerno
Derace L. Schaffer
Amy L. Tait
Linda Cornell Weinstein
Kevin R. Wilmot
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
NEW JERSEY /
PENNSYLVANIA / DELAWARE /
MARYLAND / VIRGINIA /
WEST VIRGINIA
Baltimore-Washington
Division
Thomas S. Bozzuto
Daniel J. Canzoniero
Jeffrey S. Detwiler
Scott E. Dorsey
Steve Dubin
Kevin R. Dunbar
Gary N. Geisel
Richard A. Grossi
John F. Jaeger
John H. Phelps
Marc B. Terrill
Ernie Vaile
Central
Pennsylvania Division
Mark X. DiSanto
Rolen E. Ferris
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.
Robert H. Newton, 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
Steven I. Field
Roy A. Heim
Joseph H. Jones, Jr.
David C. Laudeman
Eric M. Mika
Jeanne Boyer Porter
Robert P. Powell
Greg Allen Stewart
Larry A. Wittig
New Jersey Division
Michael W. Azzara
William G. Bardel
Scott A. Belair
Victoria H. Bruni
Cornelius E. Golding
L. Robert Lieb
Donald O. Quest
Joseph G. Sponholz
Northeast
Mid-Atlantic Division
Richard Alter
Clarence C. Boyle, Jr.
Nicole A. Funk
Stephanie Novak Hau
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
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
xxxvii
SEC Form 10-K
xxxviii
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, 2015
‘ 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
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes Í
No ‘
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 ‘
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)
Accelerated filer ‘
Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
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, 2015: $14,816,451,138.
Number of shares of the Common Stock, $0.50 par value, outstanding as of the close of business on February 12,
2016: 159,094,858 shares.
(1) Portions of the Proxy Statement for the 2016 Annual Meeting of Shareholders of M&T Bank Corporation in
Parts II and III.
Documents Incorporated By Reference:
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 5
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
P A R T I
rates 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV.
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 . . . . . . . . . . . . . . . . .
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
B.
V. Deposits
A.
B.
Form 10-K
Page
4
48
48
22
20,119
84
120
20,123
82
63,125-129
125,134
111-112
73
60,131-137
59-73,112,131-137
72,131,135-136
48
85
22,42,88,91
141
22-32
32
32
32-34
34
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.
36-38
36
100
20
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
D.
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, 2015 and
C.
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Income — Years ended
December 31, 2015, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Comprehensive Income — Years
ended December 31, 2015, 2014 and 2013 . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows — Years ended
December 31, 2015, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Changes in Shareholders’ Equity
— Years ended December 31, 2015, 2014 and 2013 . . . . . . . . . . .
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.
E.
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 . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director
Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . .
P A R T I V
Form 10-K
Page
21-22,100,109
8-13
36-37
37
37-38
38
20
21
38-101
102
102
103
104
105
106
107
108
109
110-184
100
185
185
185
185
185
185
185
185
185
186
186
186
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
186
187-188
189-191
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, 2015 the Company had
consolidated total assets of $122.8 billion, deposits of $92.0 billion and shareholders’ equity of $16.2
billion. The Company had 16,331 full-time and 1,145 part-time employees as of December 31, 2015.
At December 31, 2015, 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, 2015, 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,
2015, M&T Bank had 807 domestic banking offices located in New York State, Maryland, New
Jersey, Pennsylvania, Delaware, Connecticut, 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, 2015, M&T Bank had consolidated total assets of $122.1 billion, deposits
of $93.1 billion and shareholder’s equity of $15.1 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, Maryland, New Jersey, Pennsylvania, Delaware,
Connecticut, Virginia, West Virginia, and Washington, D.C., and on small and medium-size
businesses based in those areas, although loans are originated through 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, 2015, Wilmington Trust, N.A. had total
assets of $1.9 billion, deposits of $1.4 billion and shareholder’s equity of $476 million.
4
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, fiduciary and custodial services to its clients. As of December 31, 2015, Wilmington Trust
Company had total assets of $1.1 billion and shareholder’s equity of $545 million. Revenues of
Wilmington Trust Company were $115 million in 2015. The headquarters of Wilmington Trust
Company are located at 1100 North Market Street, Wilmington, Delaware 19890.
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, 2015, M&T Insurance Agency had assets of $30 million and shareholder’s equity of $16
million. M&T Insurance Agency recorded revenues of $27 million during 2015. The headquarters of
M&T Insurance Agency are located at 285 Delaware Avenue, Buffalo, New York 14202.
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, 2015, M&T Real Estate
had assets of $20.5 billion, common shareholder’s equity of $17.9 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 $798 million of revenue in 2015. 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, 2015, M&T Realty Capital serviced $11.0 billion of commercial
mortgage loans for non-affiliates and had assets of $420 million and shareholder’s equity of $102
million. M&T Realty Capital recorded revenues of $109 million in 2015. 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, 2015, M&T Securities had assets of $49 million and shareholder’s equity
of $37 million. M&T Securities recorded $98 million of revenue during 2015. 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, 2015, WT Investment Advisors had assets of $43 million and
shareholder’s equity of $38 million. WT Investment Advisors recorded revenues of $41 million in
2015. The headquarters of WT 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 $17 million and shareholder’s equity of $16 million as of December 31,
2015. Wilmington Funds Management recorded revenues of $17 million in 2015. The headquarters of
Wilmington Funds Management are located at 1100 North Market Street, Wilmington, Delaware
19890.
5
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, 2015, WTIM has
assets and shareholder’s equity of $26 million each. WTIM recorded revenues of $4 million in 2015.
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,
2015.
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.
Proposals to change the applicable regulatory framework 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.
Significant changes in this regulatory scheme arising from the 2010 Dodd-Frank Wall Street
Reform and Consumer Protection Act (“Dodd-Frank Act”) has affected the lending, deposit,
investment, trading and operating activities of financial institutions and their holding companies, and
the system of regulatory oversight of the Company. As required by the Dodd-Frank Act, various
federal regulatory agencies have proposed or adopted a broad range of implementing rules and
regulations and have prepared numerous studies and reports for Congress. However, given that
many of these regulatory changes are highly complex and are not fully implemented, the full impact
of the Dodd-Frank Act regulatory reform will not be known until the rules are implemented and
market practices develop under the final regulations.
6
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 (“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. Its investment advisor subsidiaries are subject to SEC regulation.
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 are to serve as a managerial
and financial source of strength to their subsidiary depository institutions, including committing
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.
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 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. 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.
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.
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.
M&T Bank is a New York chartered bank and a member of the Federal Reserve Bank of New
York. As a result, it is subject to extensive regulation, examination and oversight by the New York
State Department of Financial Services and the Federal Reserve. New York laws and regulations
govern many aspects of M&T Bank’s operations, including branching, dividends, subsidiary
activities, fiduciary activities, lending, and deposit taking. M&T Bank is also subject to Federal
Reserve regulations and guidance, including oversight of capital levels. Its deposits are insured by the
FDIC to $250,000 per depositor, which also exercises regulatory oversight over certain aspects of
M&T Bank’s operations. Certain subsidiaries of M&T Bank are subject to regulation by other federal
and state regulators as well. For example, M&T Securities is regulated by the SEC, the Financial
Industry Regulatory Authority and state securities regulators, and WT Investment Advisors is also
subject to SEC regulation.
7
Wilmington Trust, N.A. is a national bank with operations that include fiduciary and related
activities with some limited lending and deposit business. It is subject to extensive regulation,
examination and oversight by the Office of the Comptroller of the Currency, which governs many
aspects of the operations, including fiduciary activities, capital levels, office locations, dividends and
subsidiary activities. Its deposits are insured by the FDIC to $250,000 per depositor, which also
exercises regulatory oversight over certain aspects of the operations of Wilmington Trust, N.A.
Certain subsidiaries of Wilmington Trust, N.A. are subject to regulation by other federal and state
regulators as well.
The Dodd-Frank Act broadened the base for FDIC insurance assessments which 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.
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 to laws and regulations imposing 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.
Capital Requirements
M&T and its subsidiary banks are required to comply with applicable capital adequacy standards
established by the federal banking agencies. Beginning on January 1, 2015, M&T and its subsidiary
banks became subject to a new comprehensive capital framework for U.S. banking organizations that
was issued by the federal banking agencies in July 2013 (the “New Capital Rules”), subject to phase-
in periods for certain components and other provisions.
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 revised 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 revised 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.
Among other matters, the New Capital Rules: (i) introduce a 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.
8
Pursuant to the New Capital Rules, the minimum capital ratios 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. M&T made such election in 2015. 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 were 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. M&T’s
regulatory capital ratios are presented in note 23 of Notes to Financial Statements filed herewith in
Part II, Item 8, “Financial Statements and Supplementary Data.”
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
9
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 are publicly disclosed, and 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 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, and the next submission is due on April 5, 2016.
The Federal Reserve Board generally limits a BHC’s ability to make quarterly capital
distributions – that is, dividends and share repurchases, 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.
10
Liquidity
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.
However, beginning in January 2016 M&T is subject to final rules adopted by the Federal Reserve
and other banking regulators (“Final LCR Rule”) implementing a U.S. version of the Basel
Committee’s Liquidity Coverage Ratio 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 was
January 1, 2016, with the requirement fully phased-in by January 1, 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.
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.
Enhanced Supervision and Prudential Standards
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. The Federal Reserve Board adopted amendments to Regulation
YY to implement certain of the required enhanced prudential standards. Those amendments, 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.
11
Volcker Rule
On December 10, 2013, the federal banking regulators and the SEC adopted the so-called Volcker
Rule to implement the provisions of the Dodd-Frank Act limiting proprietary trading and investing in
and sponsoring certain hedge funds and private equity funds (defined as covered funds in the
Volcker Rule). The Company does not engage in any significant amount of proprietary trading as
defined in the Volcker Rule and has implemented the required procedures for those areas in which
trading does occur. The covered funds limits are imposed through a conformance period that is
expected to end in July 2017. The Company is required to divest of certain assets that constitute
covered funds; however these divestitures are not expected to have a material impact on the
Company’s consolidated financial condition or results of operations.
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,
information systems, internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, 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. 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.
Limits on Undercapitalized Depository Institutions
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.
The Federal Reserve Board and the OCC have specified the same or similar levels for each category.
Effective January 1, 2015, the New Capital Rules created new prompt corrective action requirements
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%; 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.
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
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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 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.
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 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 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.
In its DIF restoration plan, the FDIC designated that the DIF reserve ratio should be 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.
13
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 $73
thousand of such expense in 2015.
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.
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.
Executive and Incentive Compensation
Guidelines adopted by the federal banking agencies 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. The Federal Reserve Board has 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
14
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 updated resolution plans in December 2015.
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
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
15
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.
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.
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
16
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. 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.
Consumer Protection Laws and the Consumer Financial Protection Bureau Supervision
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. They are also subject to consumer
protections laws governing their deposit taking activities, as well securities and insurance laws
governing certain aspects of their consolidated operations. The CFPB issued new integrated
disclosure requirements under the Truth-in-Lending Act and the Real Estate Settlement Procedures
Act that became effective in October 2015. These requirements impose new timelines for the
provision of disclosures to borrowers.
The Dodd-Frank Act established the Bureau of Consumer Financial Protection (“CFPB”) with
broad powers to supervise and enforce most federal 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, including M&T Bank.
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.
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.
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 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
17
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.
Bank Secrecy and Anti-Money Laundering
Federal laws and regulations impose 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, these provisions
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 “Regulatory Oversight.”
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.
Federal Reserve 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 monetary policy, especially its open-market
operations and the discount rate, to influence the level of interest rates and to affect the strength of
18
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 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). The public may read and copy
any materials that M&T files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington D.C. 20549. The public may obtain information about the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
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.
19
Table 1
SELECTED CONSOLIDATED YEAR-END BALANCES
2015
2014
2013
(In thousands)
2012
2011
Interest-bearing deposits at banks . . . $ 7,594,350 $ 6,470,867 $ 1,651,138 $
Federal funds sold . . . . . . . . . . . . . . . . .
Trading account . . . . . . . . . . . . . . . . . . .
Investment securities
—
273,783
83,392
308,175
99,573
376,131
129,945 $
3,000
488,966
154,960
2,850
561,834
U.S. Treasury and federal
agencies . . . . . . . . . . . . . . . . . . . . . .
14,540,237
12,042,390
7,770,767
4,007,725
5,200,489
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
124,459
991,743
157,159
793,993
180,495
845,235
203,004
1,863,632
228,949
2,243,716
Total investment securities . . . . .
15,656,439
12,993,542
8,796,497
6,074,361
7,673,154
Loans and leases
Commercial, financial, leasing,
etc.
. . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate — construction . . . . . . . .
Real estate — mortgage . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . .
20,576,737
5,183,313
50,374,837
11,584,347
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
Total loans and leases . . . . . . . . . .
Unearned discount . . . . . . . . . . . . . . .
87,719,234 66,899,369
(230,413)
(229,735)
64,325,783
(252,624)
66,790,186
(219,229)
60,377,875
(281,870)
Loans and leases, net of unearned
discount . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . .
Loans and leases, net . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Core deposit and other intangible
assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate and other assets owned . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-bearing deposits . . . . . . . .
Interest-checking deposits . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . .
87,489,499
(955,992)
66,668,956
(919,562)
64,073,159
(916,676)
66,570,957 60,096,005
(908,290)
(925,860)
86,533,507
4,593,112
65,749,394
3,524,625
63,156,483
3,524,625
65,645,097
3,524,625
59,187,715
3,524,625
140,268
195,085
122,787,884
68,851
66,875
85,162,391
35,027
63,635
96,685,535
115,763
104,279
83,008,803
29,110,635 26,947,880 24,661,007 24,240,802
1,979,619
2,939,274
33,783,947
4,562,366
1,044,519
2,307,815
46,627,370 41,085,803
3,063,973
13,110,392
176,582
170,170
1,989,441
36,621,580
3,523,838
322,746
Total deposits . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . .
91,957,841
2,132,182
10,653,858
106,614,595
16,173,289
73,582,053
192,676
9,006,959
84,349,639
12,335,896
67,118,612
260,455
5,108,870
73,856,859
11,305,532
65,611,253
1,074,482
4,607,758
72,806,210
10,202,593
Table 2
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
SHAREHOLDERS, EMPLOYEES AND OFFICES
Number at Year-End
2015
2014
2013
2012
2011
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,693
17,476
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
863
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,551
15,782
766
15,015
15,893
796
15,623
14,943
799
15,959
15,666
849
20
Table 3
CONSOLIDATED EARNINGS
Interest income
Loans and leases, including fees . . . . . . . . . . . . . $ 2,778,151 $2,596,586 $2,734,708 $2,704,156 $2,522,567
Investment securities
2015
2014
2013
2012
2011
(In thousands)
Fully taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exempt from federal taxes . . . . . . . . . . . . . . . .
Deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest income . . . . . . . . . . . . . . . . . . . .
372,162
4,263
15,252
1,016
340,391
5,356
13,361
1,183
3,170,844 2,956,877
209,244
6,802
5,201
1,379
256,057
9,142
2,934
1,387
2,957,334 2,941,685 2,792,087
227,116
8,045
1,221
1,147
Interest expense
Interest-checking deposits . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . .
1,287
54,948
26,439
1,018
430
199,983
284,105
Net interest income . . . . . . . . . . . . . . . . . . . . . . 2,842,587 2,676,446 2,673,229
Provision for credit losses . . . . . . . . . . . . . . . . . . .
185,000
Net interest income after provision for credit
1,404
44,736
27,059
615
1,677
252,766
328,257
1,404
45,465
15,515
699
101
217,247
280,431
124,000
170,000
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
2,598,516 2,389,756
270,000
204,000
losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,672,587 2,552,446 2,488,229 2,394,516
2,119,756
Other income
Mortgage banking revenues . . . . . . . . . . . . . . . . .
Service charges on deposit accounts . . . . . . . . . .
Trust income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokerage services income . . . . . . . . . . . . . . . . . .
Trading account and foreign exchange gains . .
Gain (loss) on bank investment securities . . . . .
Total other-than-temporary impairment
(“OTTI”) losses . . . . . . . . . . . . . . . . . . . . . . . . .
Portion of OTTI losses recognized in other
comprehensive income (before taxes) . . . . . .
Net OTTI losses recognized in earnings . . . . . .
Equity in earnings of Bayview Lending Group
LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues from operations . . . . . . . . . . . . .
Total other income . . . . . . . . . . . . . . . . . . . . . .
Other expense
Salaries and employee benefits . . . . . . . . . . . . . .
Equipment and net occupancy . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . .
Amortization of core deposit and other
375,738
420,608
470,640
64,770
30,577
(130)
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
—
—
—
—
—
—
(1,884)
(32,067)
(72,915)
(7,916)
(9,800)
(15,755)
(47,822)
(4,120)
(77,035)
(14,267)
477,101
1,825,037
(16,672)
399,733
1,779,273
(16,126)
453,985
1,865,205
(21,511)
374,287
1,667,270
(24,231)
496,796
1,582,912
1,549,530 1,404,950
269,299
38,201
272,539
38,491
1,355,178
264,327
39,557
1,314,540 1,203,993
249,514
40,917
257,551
41,929
intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . .
61,617
26,424
100,230
52,113
785,608
883,835
Total other expense . . . . . . . . . . . . . . . . . . . . . . 2,822,932 2,689,474 2,587,866 2,469,751 2,441,879
1,260,789
1,674,692
Income before income taxes . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401,310
595,025
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,079,667 $1,066,246 $ 1,138,480 $1,029,498 $ 859,479
1,765,568 1,592,035
562,537
60,631
101,110
693,990
33,824
55,531
887,669
46,912
69,584
812,308
1,642,245
575,999
627,088
Dividends declared
Common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 374,912 $
Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81,270
371,137 $
75,878
365,171 $ 357,862 $ 350,196
48,203
53,450
53,450
21
Table 4
Per share
Net income
COMMON SHAREHOLDER DATA
2015
2014
2013
2012
2011
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.22
7.18
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.80
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . .
Common shareholders’ equity at year-end . . . . . .
93.60
Tangible common shareholders’ equity at year-
$ 7.47
7.42
2.80
83.88
$ 8.26
8.20
2.80
79.81
$ 7.57
7.54
2.80
72.73
$ 6.37
6.35
2.80
66.82
end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payout ratio . . . . . . . . . . . . . . . . . . . . . . . .
Table 5
52.45
64.28
37.56% 37.49% 33.94% 36.98% 44.15%
57.06
44.61
37.79
CHANGES IN INTEREST INCOME AND EXPENSE(a)
2015 Compared with 2014
Resulting from
Changes in:
2014 Compared with 2013
Resulting from
Changes in:
Volume
Rate
Volume
Rate
Total
Change
Total
Change
(Increase (decrease) in thousands)
Interest income
Loans and leases, including fees . . . . . . . . . $182,975 248,119 (65,144) $(138,676) (16,282) (122,394)
Deposits at banks . . . . . . . . . . . . . . . . . . . . . .
222
1,891
Federal funds sold and agreements to
7,938
8,160
1,267
624
resell securities . . . . . . . . . . . . . . . . . . . . .
Trading account . . . . . . . . . . . . . . . . . . . . . . .
Investment securities
U.S. Treasury and federal agencies . . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(29)
(134)
(48)
169
19
(303)
(50)
(101)
(29)
(27)
(21)
(74)
32,695
77,565 (44,870)
138,299 158,630
(20,331)
(1,724)
(886)
(1,052)
(20)
(672)
(866)
(1,395)
(1,884)
(7,534) (19,986)
(489)
12,452
Total interest income . . . . . . . . . . . . . . . . $214,788
$ (1,786)
Interest expense
Interest-bearing deposits
Interest-checking deposits . . . . . . . . . . . $
Savings deposits . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . .
—
(729)
11,544
(84)
1,576
35,519
(323) $
323
2,708
7,356
(273)
363
(3,437)
4,188
189
1,213
71,014 (35,495)
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)
Total interest expense . . . . . . . . . . . . . . . $ 47,826
$ (3,674)
(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. RiskFactors.
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
22
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.
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
23
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 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, Maryland, New Jersey, Pennsylvania,
Delaware, Connecticut, 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.
RisksRelatingtotheRegulatoryEnvironment
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 stockholders. These regulations and supervisory guidance affect
24
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.
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 have resulted 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 have had 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 and the
liquidity-related provisions of the Federal Reserve’s liquidity-related enhanced prudential
supervision requirements adopted pursuant to Section 165 of Dodd-Frank 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, U.S. federal banking agencies have been taking into account
expectations regarding the ability of banks to meet these new requirements, including under stressed
25
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 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.
RisksRelatingtotheCompany’sBusiness
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 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 loans acquired at a discount 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.
26
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
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 have also negatively
impacted 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.
27
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 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.
Federal Reserve capital planning and stress testing rules generally limit a bank holding company’s
ability to make quarterly capital distributions – that is, dividends and share repurchases – 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 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
28
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.
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 recently expanded its business through acquisition and may do so in the future. 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 actual or potential acquisition targets
operate are highly competitive. The Company may lose customers or fail to retain the customers of
29
acquired entities as a result of an acquisition. Acquisition and integration activities require M&T to
devote substantial time and resources, and as a result M&T may not be able to pursue other business
opportunities while integrating acquired entities with the Company.
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, incur higher operating expenses or realize less
revenue than originally anticipated related to an acquired entity.
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 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.
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 or timely 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 instances involving financial services and consumer-based companies
reporting unauthorized access to and disclosure of client or customer information or the destruction
or theft of corporate data, including by executive impersonation and third party vendors. 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.
30
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 and other 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
for litigation and governmental investigations and inquiries, 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.
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,
31
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. UnresolvedStaffComments.
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, 2015, the cost of this property (including improvements subsequent to the
initial construction), net of accumulated depreciation, was $11.2 million.
M&T Bank owns an additional facility in Buffalo, New York (known as M&T Center) with
approximately 395,000 rentable square feet of space. Approximately 89% of this facility is occupied
by M&T Bank and its subsidiaries, with the remainder leased to non-affiliated tenants. At
December 31, 2015, 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 three 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 290,000 square feet and their combined cost (including improvements
subsequent to acquisition), net of accumulated depreciation, was $27.0 million at December 31, 2015.
M&T Bank also owns a facility in Syracuse, New York with approximately 160,000 rentable
square feet of space. Approximately 46% of this facility is occupied by M&T Bank. At December 31,
2015, the cost of this building (including improvements subsequent to acquisition), net of
accumulated depreciation, was $2.0 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 93% of Wilmington Center. Wilmington Plaza is
100% occupied by a tenant. At December 31, 2015, the cost of these buildings (including
improvements subsequent to acquisition), net of accumulated depreciation, was $43.0 million and
$13.0 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
approximately 32% and 89% of these facilities, respectively. At December 31, 2015, the cost of these
buildings (including improvements subsequent to acquisition), net of accumulated depreciation, was
$10.5 million and $7.4 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 809 domestic banking offices of M&T’s subsidiary banks at December 31, 2015, 318 are
owned in fee and 491 are leased.
Item 3. LegalProceedings.
M&T and its subsidiaries are subject in the normal course of business to various pending and
threatened legal proceedings and other matters 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 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
32
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 subsidiary is the subject of certain governmental
investigations arising from actions undertaken by Wilmington Trust Corporation prior to M&T’s
acquisition of Wilmington Trust Corporation and its subsidiaries, as set forth below.
DOJ Investigation: Prior to M&T’s acquisition of Wilmington Trust Corporation, the
Department of Justice (“DOJ”) commenced an investigation of Wilmington Trust Corporation,
relating to Wilmington Trust Corporation’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 Corporation by M&T. On January 6, 2016, the U.S. Attorney for the District of Delaware
obtained an indictment against Wilmington Trust Corporation relating to alleged conduct that
occurred prior to M&T’s acquisition of Wilmington Trust Corporation in May 2011. M&T strongly
believes that this unprecedented action is unjustified and Wilmington Trust Corporation will
vigorously defend itself.
The indictment of Wilmington Trust Corporation could result in potential criminal remedies,
or criminal or non-criminal resolutions or settlements, including, among other things, enforcement
actions, potential statutory or regulatory restrictions on the ability to conduct certain businesses (for
which waivers may or may not be available), fines, penalties, restitution, reputational damage 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 Corporation,
alleging that Wilmington Trust Corporation’s financial reporting and securities filings were in
violation of securities laws. The cases were consolidated and Wilmington Trust Corporation moved
to dismiss. The Court issued an order denying Wilmington Trust Corporation’s motion to dismiss on
March 20, 2014. A motion to stay the case is currently pending before the Court.
Other Matters
The Company is the subject of an investigation by government agencies relating to the origination of
Federal Housing Administration (“FHA”) insured residential home loans and residential home loans
sold to The Federal Home Loan Mortgage Corporation (“Freddie Mac”) and The Federal National
Mortgage Association (“Fannie Mae”). A number of other U.S. financial institutions have announced
similar investigations. Regarding FHA loans, the U.S. Department of Housing and Urban
Development (“HUD”) Office of Inspector General and the DOJ (collectively, the “Government”) are
investigating whether the Company complied with underwriting guidelines concerning certain loans
where HUD paid FHA insurance claims. The Company is fully cooperating with the investigation.
The Government has advised the Company that based upon its review of a sample of loans for which
an FHA insurance claim was paid by HUD, some of the loans do not meet underwriting guidelines.
The Company, based on its own review of the sample, does not agree with the sampling methodology
and loan analysis employed by the Government. Regarding loans originated by the Company and sold
to Freddie Mac and Fannie Mae, the investigation concerns whether the mortgages sold to Freddie
Mac and Fannie Mae comply with applicable underwriting guidelines. The Company is also
cooperating with that portion of the investigation. The investigation could lead to claims by the
Government under the False Claims Act and the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, which allow treble and other special damages substantially in excess of
actual losses. Remedies in these proceedings or settlements may include restitution, fines, penalties,
or alterations in the Company’s business practices. The Company and the Government continue
settlement discussions regarding the investigation and although progress has been made, the parties
have not yet reached a definitive agreement. Based upon the current status of these negotiations,
management expects that this potential settlement should not have a material impact on the
Company’s consolidated financial condition or results of operations in future periods.
33
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. MineSafetyDisclosures.
Not applicable.
Executive Officers of the Registrant
Information concerning M&T’s executive officers is presented below as of February 19, 2016. The
year the officer was first appointed to the indicated position with M&T 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 M&T takes place
immediately following the Annual Meeting of Shareholders, and until their successors are elected
and qualified.
Robert G. Wilmers, age 81, is chief executive officer (2007), chairman of the board (2000) and
a director (1982) of M&T. From April 1998 until July 2000, he served as president and chief
executive officer of M&T and from July 2000 until June 2005 he served as chairman, president
(1988) and chief executive officer (1983). 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 60, is president (2007), chief operating officer (2014) and a director
(2007) of M&T and of M&T Bank. Previously, he was an executive vice president of M&T (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 60, is an executive vice president and chief credit officer (2004) of M&T
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).
Janet M. Coletti, age 52, is an executive vice president (2015) of M&T and M&T Bank, and is in
charge of the Company’s Human Resources Division. Ms. Coletti previously served as senior vice
president of M&T Bank, most recently responsible for the Business Banking Division, and has held a
number of management positions within M&T Bank since 1985.
William J. Farrell II, age 58, is an executive vice president (2011) of M&T 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 55, is an executive vice president (2007) and chief risk officer (2014) of
M&T. 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 Affairs. 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.
34
Brian E. Hickey, age 63, is an executive vice president of M&T (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 banking 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 51, is an executive vice president (2006) and chief financial officer
(2005) of M&T. 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 board and a director (2014) of Wilmington Trust Investment
Advisors, and is a director of M&T Insurance Agency (2007). Mr. Jones is chairman of the board and
a director (2014) of Wilmington Trust Company.
Darren J. King, age 46, is an executive vice president of M&T (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 50, is an executive vice president (2014) of M&T and M&T Bank, and is
responsible for M&T’s non-retail banking segments in the metropolitan New York City, New Jersey,
Baltimore and Washington, D.C. markets. He also is responsible for M&T Realty Capital.
Mr. Martocci was a senior vice president of M&T Bank from 2002 to 2013, serving in a number of
management positions. He is an executive vice president (2015) and 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, and a
member of the Directors Advisory Council (2015) of the New Jersey Division of M&T Bank.
Kevin J. Pearson, age 54, is an executive vice president (2002) of M&T 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 M&T’s Credit Division and
for managing all of M&T Bank’s commercial banking lines of business. Previously, he was
responsible for all of the non-retail banking 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.
Michael J. Todaro, age 54, is an executive vice president (2015) of M&T and M&T Bank, and is
responsible for the Mortgage and Customer Asset Management Division. Mr. Todaro previously served
as senior vice president of M&T Bank and has held a number of management positions within M&T
Bank’s Mortgage Division since 1995. He is an executive vice president (2015) of Wilmington Trust, N.A.
Michele D. Trolli, age 54, is an executive vice president and chief information officer (2005) of
M&T and M&T Bank. She is in charge of the Company’s Technology and Banking Operations, which
includes banking services, corporate services, digital and telephone banking, the enterprise data
office, enterprise security and enterprise technology. 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 50, is an executive vice president (2009) and treasurer (2008) of
M&T 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).
35
PART II
Item 5. MarketforRegistrant’sCommonEquity,RelatedStockholderMattersandIssuer
PurchasesofEquitySecurities.
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 2015, 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, 2015 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.
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, 2015, and their weighted-average exercise price.
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)
Plan Category
Equity compensation plans approved by
security holders:
2005 Incentive Compensation Plan . .
2009 Equity Incentive Compensation
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not
approved by security holders:
2008 Directors’ Stock Plan . . . . . . . . . .
Deferred Bonus Plan . . . . . . . . . . . . . . .
2,363,583
3,700
3,904
26,365
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,397,552
103.43
79.21
121.18
66.74
$103.02
3,442,092
512,620
70,270
—
4,024,982
(1) As of December 31, 2015, a total of 1,866,706 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 $155.76 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.
36
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.
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 Nasdaq 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, 2010 and ending on December 31, 2015. The KBW
Nasdaq 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*
$250
$200
$150
$100
$50
$0
2010
2011
2012
2013
2014
2015
M&T Bank Corporation
KBW Nasdaq Bank Index
S&P 500 Index
Shareholder Value at Year End*
M&T Bank Corporation
KBW Nasdaq Bank Index
S&P 500 Index
2010
100
100
100
2011
91
77
102
2012
121
102
118
2013
2014
147
141
157
162
154
178
2015
160
155
181
* Assumes a $100 investment on December 31, 2010 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.
Issuer Purchases of Equity Securities
On November 17, 2015, M&T announced that it had been authorized by its Board of Directors to
purchase up to $200 million of shares of its common stock. The 2015 repurchase program rescinded
and replaced a similar plan that was authorized by the M&T Board of Directors in February 2007.
M&T did not repurchase any shares pursuant to either plan during 2015.
37
During the fourth quarter of 2015, M&T purchased shares of its common stock as follows:
Period
(a)Total
Number
of Shares
(or Units)
Purchased(1)
October 1 - October 31, 2015 . . . . . . . . . . . . . . .
November 1 - November 30, 2015 . . . . . . . . . .
December 1 - December 31, 2015 . . . . . . . . . . .
2,764
1,901
7,124
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,789
(c)Total
Number
of Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
—
—
—
—
(b)Average
Price Paid
per Share
(or Unit)
$120.97
124.45
124.42
$ 123.61
(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
$200,000,000
$200,000,000
(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. That program was replaced by a program announced on November 17, 2015 to purchase up to
$200,000,000 of M&T’s common stock. No shares were purchased under either program during the
periods indicated.
Item 6. SelectedFinancialData.
See cross-reference sheet for disclosures incorporated elsewhere in this Annual Report on Form
10-K.
Item 7. Management’sDiscussionandAnalysisofFinancialConditionandResultsof
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 $122.8 billion at December 31, 2015. 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 $122.1 billion at December 31, 2015, is a New York-chartered
commercial bank with 807 domestic banking offices in New York State, Maryland, New Jersey,
Pennsylvania, Delaware, Connecticut, 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 the states noted above and on small and
medium size businesses based in those areas, although loans are originated through 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.
Wilmington Trust, N.A. is a national bank with total assets of $1.9 billion at December 31, 2015.
Wilmington Trust, N.A. and its subsidiaries offer various trust and wealth management services.
38
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 November 1, 2015, M&T completed its acquisition of Hudson City Bancorp, Inc. (“Hudson
City”). Immediately following completion of the merger, Hudson City Savings Bank merged with and
into M&T Bank. At the effective time of the merger, pursuant to the Merger Agreement, each share
of Hudson City common stock was converted into the right to receive either 0.08403 of a share of
M&T common stock (the “exchange ratio”) or cash having a value equal to the product of the
exchange ratio multiplied by the average closing price of M&T common stock for the ten trading
days immediately prior to the completion of the merger (such stock or cash, the “merger
consideration”), depending on the election of the holder of such share of Hudson City common stock
and subject to the proration and adjustment procedures as specified in the Merger Agreement. As a
result, M&T paid cash consideration of $2.1 billion and issued 25,953,950 shares of M&T common
stock in exchange for Hudson City shares outstanding at the time of acquisition.
The Hudson City transaction has been accounted for using the acquisition method of
accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were
recorded at estimated fair value on the acquisition date. Assets acquired totaled approximately $36.7
billion, including $19.0 billion of loans and leases (including approximately $234 million of
commercial real estate loans, $18.6 billion of residential real estate loans and $162 million of
consumer loans). Liabilities assumed aggregated $31.5 billion, including $17.9 billion of deposits and
$13.2 billion of borrowings. Immediately following the acquisition, the Company restructured its
balance sheet by selling $5.8 billion of investment securities obtained in the acquisition and repaying
$10.6 billion of borrowings assumed in the transaction. The common stock issued added $3.1 billion
to M&T’s common shareholders’ equity. In connection with the acquisition, the Company recorded
$1.1 billion of goodwill and $132 million of core deposit intangible asset. The core deposit intangible
asset is being amortized over 7 years using an accelerated method. The acquisition of Hudson City
expanded the Company’s presence in New Jersey, Connecticut and New York.
Net acquisition and integration-related expenses (included herein as merger-related
expenses) associated with the Hudson City acquisition totaled $61 million after tax-effect, or $.44 of
diluted earnings per common share during 2015 and $8 million after tax-effect, or $.06 of diluted
earnings per common share in 2013. There were no merger-related expenses in 2014. The Company
expects to incur additional merger-related expenses during 2016. As of December 31, 2015, the
remaining unpaid portion of incurred merger-related expenses was $56 million.
Effective January 1, 2015, the Company elected to account for its investments in qualified
affordable housing projects using the proportional amortization method as allowed by the Financial
Accounting Standards Board (“FASB”). Under that 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
adoption was required to be applied retrospectively. As a result, financial statements for periods
prior to 2015 have been restated. The adoption did not have a significant effect on the Company’s
consolidated financial position or results of operations, but the restatement of the consolidated
statement of income for the years ended December 31, 2014 and 2013 resulted in the removal of $53
million and $48 million, respectively, of losses associated with qualified affordable housing projects
from “other costs of operations” and added the amortization of the initial cost of the investment of a
similar amount to income tax expense.
Regulatory Oversight
M&T and its subsidiaries are subject to a comprehensive regulatory framework applicable to financial
holding companies and their bank and non-bank subsidiaries. Significant changes in regulatory
requirements arising from the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Dodd-Frank Act”) have affected the lending, deposit, investment, trading and operating activities of
financial institutions and their holding companies, including the Company. As required by the Dodd-
Frank Act, various federal regulatory agencies have proposed or adopted a broad range of
implementing rules and regulations and have prepared numerous studies and reports for Congress.
The implications of the Dodd-Frank Act for the Company’s businesses will continue to depend to a
large extent on the ultimate implementation of the legislation by the Federal Reserve and other
agencies. A discussion of the provisions of the Dodd-Frank and other regulatory requirements is
included in Part I, Item 1 of this Form 10-K.
39
The Company is subject to the Federal Reserve’s revised comprehensive risk-based capital
and leverage framework for U.S. banking organizations (the “New Capital Rules”), subject to certain
transitional provisions. The New Capital Rules, which became effective for the Company on
January 1, 2015, substantially revised 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.
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 only 25% of M&T’s trust preferred securities
were includable in Tier 1 capital, and in 2016 and thereafter, none of M&T’s trust preferred securities
are 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. On April 15, 2015, in accordance with its 2015 capital plan, M&T
redeemed the junior subordinated debentures associated with $310 million of trust preferred
securities of M&T Capital Trust I, II and III. 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.” A further
discussion of the Company’s regulatory capital is presented herein under the heading “Capital” and
in note 23 of Notes to Financial Statements.
On September 3, 2014, various federal 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, including 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 “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 outflows
over the 30-day period (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 mortgage-backed securities, qualify under the rule as
HQLA, with classes of assets deemed relatively less liquid and/or subject to a 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 Company for the modified LCR was January 1, 2016,
with the requirement fully phased-in by January 1, 2017. The Company believes that it is in
compliance with the LCR Rule. A detailed discussion of the LCR is included in Part I, Item 1 of this
Form 10-K under the heading “Liquidity.”
The Company is also subject to the provisions of the Dodd-Frank Act commonly referred to as
the “Volcker Rule” which became effective in July 2015 (subject to a conformance period, as
applicable). Pursuant to the Volcker Rule, banking entities are generally prohibited from engaging in
proprietary trading and owning or sponsoring private equity or hedge funds, which are “covered
funds” under that rule. Under the Volcker Rule, the Company is now required to be in compliance
with the prohibition on proprietary trading and covered funds established after December 31, 2013.
The Federal Reserve extended the compliance period to July 21, 2016 for investments in and
relationships with covered funds that existed prior to January 1, 2014. The Federal Reserve has
indicated that it intends to further extend that compliance period to July 21, 2017. The Company
believes that it has not engaged in any significant amount of proprietary trading as defined in the
Volcker Rule. 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 consolidated financial condition or its results of operations. Nevertheless, the Company
may be required to divest certain investments subject to the Volcker Rule by the end of the
compliance period, as extended.
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 were required
40
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.
M&T and M&T Bank have since made substantial progress in implementing a BSA/AML program
with significantly expanded scale and scope, as recognized by the Board of Governors of the Federal
Reserve System in its Order approving M&T and M&T Bank’s applications to acquire Hudson City
and Hudson City Savings Bank. M&T and M&T Bank are continuing to work towards the resolution
of all outstanding issues in the written agreement.
Critical Accounting Estimates
The Company’s significant accounting policies conform with generally accepted accounting
principles (“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 that is, in part, attributable to credit quality 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 loans acquired at a discount,
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, 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, financial condition or disclosures of fair value information.
41
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 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
Net income of the Company during 2015 was $1.08 billion or $7.18 of diluted earnings per common
share, compared with $1.07 billion or $7.42 of diluted earnings per common share in 2014. Basic
earnings per common share were $7.22 in 2015 and $7.47 in 2014. Net income in 2013 totaled $1.14
billion, while diluted and basic earnings per common share were $8.20 and $8.26, respectively. The
after-tax impact of merger-related expenses associated with the Hudson City transaction was $61
million ($97 million pre-tax) or $.44 of diluted earnings per common share in 2015. There were no
merger-related expenses in 2014. In 2013, the after-tax impact of merger-related expenses associated
with the then-pending Hudson City transaction was $8 million ($12 million pre-tax) or $.06 of
diluted earnings per common share. Expressed as a rate of return on average assets, net income in
2015 was 1.06%, compared to 1.16% in 2014 and 1.36% in 2013. The return on average common
shareholders’ equity was 8.32% in 2015, 9.08% in 2014 and 10.93% in 2013.
Financial results associated with assets acquired and liabilities assumed in the acquisition of
Hudson City have been reflected in the Company’s consolidated statement of income since the
November 1, 2015 acquisition date adding approximately $110 million to net interest income, $21
million to the provision for credit losses, and $116 million to other expense, including $76 million of
merger-related other expense. In addition to the impact of the acquisition, the Company’s financial
performance in 2015 as compared with 2014 reflected a further increase in net interest income that
was largely attributable to higher average balances of loans and leases, higher noninterest income
that reflected a pre-tax gain of $45 million ($23 million after taxes) related to the April 2015 sale of
the Company’s trade processing business within the retirement services division of its Institutional
Client Services business, and increased operating expenses, in part reflecting higher salaries and
benefits costs and cash contributions to The M&T Charitable Foundation. 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.
42
In addition, the Company’s holdings of Visa and MasterCard shares were sold in 2013 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.
Taxable-equivalent net interest income totaled $2.87 billion in 2015 and $2.70 billion in each
of 2014 and 2013. Average earning assets increased $9.5 billion, or 12%, in 2015 as compared with
2014 due predominantly to higher average balances of loans and leases of $6.2 billion and investment
securities of $2.9 billion. Loans and investment securities obtained in the acquisition of Hudson City
added approximately $3.1 billion and $409 million, respectively, to average earning assets in 2015.
Offsetting the impact of higher earning assets was a 17 basis point (hundredths of one percent)
narrowing of the net interest margin, or taxable-equivalent net interest income expressed as a
percentage of average earning assets, from 3.31% in 2014 to 3.14% in 2015. Lower yields on
investment securities and loans and leases outstanding led to that narrowing. 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 narrowing of the
net interest margin, from 3.65% in 2013 to 3.31% in 2014.
The provision for credit losses in 2015 increased 37% to $170 million from $124 million in
2014. The pre-merger Hudson City allowance for credit losses was eliminated in acquisition
accounting and as provided for by GAAP, a $21 million provision for credit losses was recorded for
incurred credit losses in connection with the $18.3 billion of loans acquired at a premium that were
not individually identifiable as impaired at the acquisition date. Net charge-offs were $134 million in
2015 compared with $121 million in the prior year. Net charge-offs as a percentage of average loans
and leases were .19% in each of 2015 and 2014. The provision for credit losses was $185 million in
2013, when net charge-offs were $183 million, or .28% of average loans and leases.
Other income totaled $1.83 billion in 2015, compared with $1.78 billion in 2014 and $1.87
billion in 2013. Higher commercial mortgage banking revenues, loan syndication fees and the
aforementioned gain on the sale of the trade processing business in 2015 were partially offset by
lower trust income associated with the divested business, decreased residential mortgage banking
revenues and a decline in service charges on deposit accounts. The Hudson City transaction did not
have a significant impact on other income. Reflected in other income in 2013 were net gains on
investment securities of $47 million. 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. Reflected in
gains and losses on investment securities in 2013 were other-than-temporary impairment charges of
$10 million on certain privately issued collateralized mortgage obligations (“CMOs”).
Reflecting the impact of the Hudson City acquisition and the previously noted application of
new accounting guidance for investments in qualified affordable housing projects, other expense
increased 5% to $2.82 billion in 2015 from $2.69 billion in 2014. During 2013, other expense totaled
$2.59 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 $26 million, $34
million and $47 million in 2015, 2014 and 2013, respectively, and merger-related expenses of $76
million and $12 million in 2015 and 2013, respectively. Exclusive of those nonoperating expenses,
noninterest operating expenses aggregated $2.72 billion in 2015, compared with $2.66 billion in 2014
and $2.53 billion in 2013. The increase in such expenses in 2015 as compared with 2014 was largely
due to higher costs for salaries and employee benefits and charitable contributions, partially offset by
lower professional services costs. Reflected in operating expenses for 2015 were approximately $40
million of operating expenses associated with Hudson City. In addition to the impact of Hudson City,
the increase in salaries and employee benefits expense was largely attributable to annual merit
increases for employees and higher pension expense. The rise in noninterest operating expenses
43
from 2013 to 2014 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 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 58.0% in 2015, compared with 59.3% and 56.0% in 2014 and
2013, respectively. The calculations of the efficiency ratio are presented in table 2.
Table 1
Increase (Decrease)(a)
2014 to 2015 2013 to 2014
Amount % Amount %
EARNINGS SUMMARY
Dollarsinmillions
2015
2014
2013
2012
2011
Compound
Growth Rate
5 Years
2010 to 2015
$214.8
7 $ (1.8) — Interest income(b) . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,195.3 2,980.5 2,982.3 2,968.1 2,817.9
47.8
17
(3.7)
(1) Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
328.3
280.4
284.1
343.2
402.3
167.0
6
1.9 — Net interest income(b) . . . . . . . . . . . . . . . . . . . . . 2,867.0 2,700.1 2,698.2 2,624.9 2,415.6
46.0 37
(61.0) (33) Less: provision for credit losses . . . . . . . . . . . . . .
170.0
124.0
185.0 204.0
270.0
— —
(46.7) — Gain (loss) on bank investment securities(c) . .
—
—
46.7
(47.8)
73.2
45.8
3
(39.2)
(2) Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,825.1 1,779.3 1,818.5 1,715.1 1,509.8
Less:
144.6
10
(11.1)
(1)
49.8
51.8
4
4
Salaries and employee benefits . . . . . . . . . . . .
1,549.5 1,405.0 1,355.2 1,314.6 1,204.0
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . .
1,273.4 1,284.5 1,232.7 1,155.2 1,237.9
33.3
.9
19.0
2
3
3
(124.6)
(7) Income before income taxes . . . . . . . . . . . . . . . .
1,699.2 1,665.9 1,790.5 1,618.4 1,286.7
Less:
(1.3)
(5) Taxable-equivalent adjustment(b) . . . . . . . . .
24.5
23.7
25.0
26.4
25.9
(51.0)
(8)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
595.0
576.0
627.0
562.5
401.3
3%
(7)
5
(14)
—
9
9
8
8
—
9
$ 13.4
1 $ (72.3)
(6) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,079.7 1,066.2 1,138.5 1,029.5
859.5
8%
(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%.
(c)
Includes other-than-temporary impairment losses, if any.
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 $4.7 billion at
December 31, 2015 and $3.6 billion at each of December 31, 2014 and 2013. Included in such
intangible assets was goodwill of $4.6 billion at December 31, 2015 and $3.5 billion at December 31,
2014 and 2013. Amortization of core deposit and other intangible assets, after tax effect, totaled $16
million, $21 million and $29 million during 2015, 2014 and 2013, 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
44
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; incentive
compensation costs; travel costs; and printing, supplies and other costs of completing the
transactions and commencing operations in new markets and offices. Those expenses totaled $76
million ($48 million after-tax) in 2015 and $12 million ($8 million after-tax) in 2013. Also considered
as a merger-related expense in 2015 was a provision for credit losses of $21 million. GAAP provides
that an allowance for credit losses associated with probable incurred losses on loans acquired at a
premium be recognized. Given the recognition of such losses above and beyond the impact of
forecasted losses used in determining the fair value of acquired loans, the Company considers that
provision to be a merger-related expense. There were no merger-related expenses in 2014. 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 $1.16 billion in 2015, compared with $1.09 billion in 2014 and $1.17
billion in 2013. Diluted net operating earnings per common share were $7.74 in 2015, $7.57 in 2014
and $8.48 in 2013.
Net operating income expressed as a rate of return on average tangible assets was 1.18% in
2015, compared with 1.23% in 2014 and 1.47% in 2013. Net operating income represented a return on
average tangible common equity of 13.00% in 2015, 13.76% in 2014 and 17.79% in 2013.
Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in
table 2.
45
Table 2
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
2015
2014
2013
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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,079,667
16,150
60,820
$ 1,066,246
20,657
—
$ 1,138,480
28,644
7,511
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,156,637
$ 1,086,903
$ 1,174,635
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7.18
.12
.44
7.74
$
$
7.42
.15
—
7.57
$
$
8.20
.22
.06
8.48
Other expense
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,822,932
(26,424)
(75,976)
$2,689,474
(33,824)
—
$ 2,587,866
(46,912)
(12,364)
Noninterest operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,720,532
$ 2,655,650
$ 2,528,590
Merger-related expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and net occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
51,287
3
504
24,182
75,976
21,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
96,976
$
—
—
—
—
—
—
—
$
836
690
1,825
9,013
12,364
—
$
12,364
Efficiency ratio
Noninterest operating expense (numerator)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,720,532
$ 2,655,650
$ 2,528,590
Taxable-equivalent net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Gain (loss) on bank investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net OTTI losses recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,867,050
1,825,037
(130)
—
2,700,088
1,779,273
—
—
2,698,200
1,865,205
56,457
(9,800)
Denominator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,692,217
$ 4,479,361
$ 4,516,748
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57.98%
59.29%
55.98%
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 101,780
(3,694)
(45)
16
$
$
98,057
13,228
(1,232)
11,996
(3,694)
(45)
16
Average tangible common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,273
At end of year
Total assets
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 122,788
(4,593)
(140)
54
Total tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 118,109
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,173
(1,232)
(2)
14,939
(4,593)
(140)
54
$
$
$
$
$
$
$
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
Total tangible common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
10,260
$
7,553
$
6,848
(a) After any related tax effect.
46
Net Interest Income/Lending and Funding Activities
Net interest income expressed on a taxable-equivalent basis totaled $2.87 billion in 2015, up 6% from
$2.70 billion in 2014. That increase was the result of higher average earning assets in 2015, including
$3.7 billion of average earning assets obtained in the acquisition of Hudson City. Average earning
assets rose 12% to $91.2 billion in 2015 from $81.7 billion in 2014. That growth, however, was
partially offset by a 17 basis point narrowing of the net interest margin to 3.14% in 2015 from 3.31% in
2014. That narrowing was largely the result of lower average yields on investment securities and
loans and leases outstanding.
Average loans and leases increased $6.2 billion or 10% to $70.8 billion in 2015 from $64.7
billion in 2014, due in part to $3.1 billion of average loans obtained in the acquisition of Hudson City.
Loans associated with Hudson City totaled $19.0 billion on the acquisition date, consisting of
approximately $234 million of commercial real estate loans, $18.6 billion of residential real estate
loans and $162 million of consumer loans. Including the impact of the acquired loan balances,
average balances of residential real estate loans increased 31% or $2.7 billion to $11.5 billion in 2015
from $8.7 billion in the previous year. Reflected in those amounts were residential real estate loans
held for sale, which averaged $415 million in 2015 and $403 million in 2014. Commercial loans and
leases averaged $19.9 billion in 2015, up $1.0 billion or 5% from $18.9 billion in 2014. Average
commercial real estate loans increased 7% or $1.8 billion to $28.3 billion in 2015 from $26.5 billion in
2014. Average consumer loans totaled $11.2 billion in 2015, up $584 million or 6% from $10.6 billion
in the prior year predominantly due to growth in average automobile loan balances.
Taxable-equivalent net interest income totaled $2.70 billion in each of 2014 and 2013. Growth
in average earning assets in 2014 was also 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 a $1.4 billion automobile loan securitization transaction completed during the third
quarter of 2013.
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48
Table 4 summarizes average loans and leases outstanding in 2015 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
2015
2014 to 2015
2013 to 2014
Commercial, financial, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate — commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate — consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity lines and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In millions)
$19,899
28,276
11,458
2,216
5,913
3,074
Total consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,203
5%
7
31
32
(2)
7
6
6 %
1
(14)
(23)
(2)
5
(4)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$70,836
10%
(1)%
Commercial loans and leases, excluding loans secured by real estate, aggregated $20.4 billion
at December 31, 2015, representing 23% of total loans and leases. Table 5 presents information on
commercial loans and leases as of December 31, 2015 relating to geographic area, size, borrower
industry and whether the loans are secured by collateral or unsecured. Of the $20.4 billion of
commercial loans and leases outstanding at the end of 2015, approximately $18.0 billion, or 88%,
were secured, while 42%, 26% and 21% were granted to businesses in New York State, Pennsylvania
and the Mid-Atlantic area (which includes Delaware, Maryland, New Jersey, 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, 2015 aggregated $1.2 billion, of which 50% were secured by
collateral located in New York State, 16% were secured by collateral in Pennsylvania and another
14% were secured by collateral in the Mid-Atlantic area.
49
Table 5
COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT
(ExcludesLoansSecuredbyRealEstate)
December 31, 2015
New York Pennsylvania Mid-Atlantic(a)
Other
Total
Percent of Total
Automobile dealerships . . . . . . . . . . . $1,645
1,727
Manufacturing . . . . . . . . . . . . . . . . . . .
1,139
Services . . . . . . . . . . . . . . . . . . . . . . . . .
774
Wholesale . . . . . . . . . . . . . . . . . . . . . . .
742
Real estate investors . . . . . . . . . . . . . .
595
Financial and insurance . . . . . . . . . . .
Transportation, communications,
304
utilities . . . . . . . . . . . . . . . . . . . . . . . .
509
Health services . . . . . . . . . . . . . . . . . . .
394
Construction . . . . . . . . . . . . . . . . . . . . .
217
Retail
. . . . . . . . . . . . . . . . . . . . . . . . . . .
166
Public administration . . . . . . . . . . . . .
22
Agriculture, forestry, fishing, etc.
. . .
419
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,653
$ 868
1,024
707
498
230
308
394
206
260
233
69
138
273
$5,208
(Dollars in millions)
$ 441
531
1,069
497
242
211
$ 747 $ 3,701
3,601
3,191
1,878
1,301
1,253
319
276
109
87
139
257
378
188
213
39
33
277
$4,376
265
95
50
85
1
1
11
1,220
1,188
892
748
275
194
980
$2,185 $20,422
18%
18
16
9
6
6
6
6
4
4
1
1
5
100%
Percent of total . . . . . . . . . . . . . . . . . . .
42%
26%
21%
11%
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%
24%
26
15
16
7
5
7
100%
80%
16
4
100%
20%
24
17
22
9
8
—
100%
84%
12
4
100%
28%
21
17
17
7
9
1
100%
80%
9
11
100%
9%
22
21
26
10
7
5
100%
82%
12
6
100%
23%
23
16
19
8
7
4
100%
(a) Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia.
International loans included in commercial loans and leases totaled $191 million and $167
million at December 31, 2015 and 2014, respectively. Included in such loans were $64 million and $61
million, respectively, of loans at M&T Bank’s commercial banking office in Ontario, Canada. The
remaining international loans are predominantly to domestic companies with foreign operations.
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 2015 and 2014, compared with 65% in 2013. At December 31, 2015, the
Company held approximately $29.2 billion of commercial real estate loans, $26.3 billion of consumer
real estate loans secured by one-to-four family residential properties (including $353 million of loans
originated for sale) and $6.0 billion of outstanding balances of home equity loans and lines of credit,
compared with $27.6 billion, $8.7 billion and $6.0 billion, respectively, at December 31, 2014. The
substantial increase in the residential real estate loans reflects $18.0 billion of remaining loans
obtained in the acquisition of Hudson City. Those loans totaled $18.6 billion on November 1, 2015.
50
Included in commercial real estate loans at December 31, 2015 and 2014 were construction loans of
$5.1 billion and $5.0 billion, respectively, including amounts due from builders and developers of
residential real estate aggregating $1.6 billion and $1.5 billion at December 31, 2015 and 2014,
respectively.
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 69% of the commercial real estate loan portfolio at the 2015 year-end. Table 6
presents commercial real estate loans by geographic area, type of collateral and size of the loans
outstanding at December 31, 2015. New York City area commercial real estate loans totaled $8.3
billion at December 31, 2015. The $6.8 billion of investor-owned commercial real estate loans in the
New York City 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 39% 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 13% of the total.
51
Table 6
COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT
December 31, 2015
New York State
New York
City
Other Pennsylvania
Mid-
Atlantic(a)
Other
Total
Percent of
Total
(Dollars in millions)
Investor-owned
Permanent finance by property type
Office . . . . . . . . . . . . . . . . . . . . . . . . .
Apartments/Multifamily . . . . . . . . .
Retail/Service . . . . . . . . . . . . . . . . . .
Hotel . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial/Warehouse . . . . . . . . . . .
Health facilities . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,168
1,866
1,378
648
213
37
197
$ 900
640
460
426
224
81
30
$ 532
333
436
263
292
21
11
Total permanent . . . . . . . . . . . .
5,507
2,761
1,888
Construction/Development
Commercial
Construction . . . . . . . . . . . . . . . . .
Land/Land development . . . . . . .
Residential builder and developer
Construction . . . . . . . . . . . . . . . . .
Land/Land development . . . . . . .
418
309
585
10
400
24
1
17
361
46
131
21
$ 1,380
765
924
627
272
86
27
4,081
827
190
223
193
$ 446
371
489
283
274
12
19
1,894
$ 4,426
3,975
3,687
2,247
1,275
237
284
16,131
421
78
242
162
2,427
647
1,182
403
15%
14
13
8
4
1
1
56%
8%
3
4
1
Total construction/
development . . . . . . . . . . . . .
1,322
442
559
Total investor-owned . . . . . . . . . . . . . . . .
6,829
3,203
2,447
1,433
5,514
903
2,797
4,659
20,790
16%
72%
Owner-occupied by industry(b)
Health services . . . . . . . . . . . . . . . . .
Other services . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile dealerships . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . .
Real estate investors . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
453
185
156
96
75
70
38
383
453
387
171
181
204
59
60
212
378
278
201
229
160
153
69
257
796
653
308
192
149
263
67
360
Total owner-occupied . . . . . . .
1,456
1,727
1,725
2,788
320
82
59
156
32
55
2
5
711
2,400
1,585
895
854
620
600
236
1,217
8%
5
3
3
2
2
1
4
8,407
28%
Total commercial real estate . . . . . . . . . .
$8,285
$4,930
$ 4,172
$8,302
$3,508
$ 29,197
100%
Percent of total
. . . . . . . . . . . . . . . . . . . . .
28%
17%
14%
29%
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 . . . . . . . . . . . .
4%
19
16
33
15
12
1
20%
34
19
24
3
—
—
17%
27
18
31
4
3
—
12%
23
16
27
10
12
—
9%
17
19
35
11
9
—
11%
24
17
30
10
8
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
100%
100%
100%
100%
(a) Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia.
(b) Includes $472 million of construction loans
52
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 73% of the aggregate dollar amount of commercial real
estate loans in New York State secured by properties located outside of the 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 62% and 51%,
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 and New York State comprised 12% of total commercial real estate loans as of
December 31, 2015.
Commercial real estate construction and development loans made to investors presented in
table 6 totaled $4.7 billion at December 31, 2015, or 5% of total loans and leases. Approximately 95%
of those construction loans had adjustable interest rates. Included in such loans at the 2015 year-end
were $1.6 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 $2.5 billion
and $2.4 billion at December 31, 2015 and 2014, 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, 2015 and 2014 aggregated $39 million and $308 million, respectively. At December 31,
2015 and 2014, commercial real estate loans serviced by the Company for other investors were $11.0
billion and $11.3 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 $26.3 billion at
December 31, 2015, including approximately 33% secured by properties located in New York State,
7% secured by properties located in Pennsylvania, 31% secured by properties in New Jersey and 10%
secured by properties located in other Mid-Atlantic areas. At December 31, 2015, $353 million of
residential real estate loans had been originated for sale, compared with $435 million at
December 31, 2014. The Company’s portfolio of alternative (“Alt-A”) residential real estate loans
(referred to as “limited documentation loans”) held for investment increased by $3.9 billion to $4.3
billion at December 31, 2015 from $339 million at December 31, 2014. The increase was due to the
portfolio of limited documentation loans acquired with the Hudson City transaction which totaled
$4.0 billion at December 31, 2015. 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. Hudson City loans that were eligible for limited documentation
processing were available in amounts up to 65% of the lower of the appraised value or purchase price
of the property. Hudson City discontinued its limited documentation loan program in January 2014.
Loans in the Company’s Alt-A portfolio prior to the Hudson City transaction were originated by the
Company prior to 2008. Loans to individuals to finance the construction of one-to-four family
residential properties totaled $34 million at December 31, 2015 and $35 million at December 31, 2014,
or less than .1% of total loans and leases at each of those dates. Information about the credit
performance of the Company’s residential real estate loans is included herein under the heading
“Provision For Credit Losses.”
Consumer loans comprised approximately 13% of total loans and leases at December 31, 2015
and 16% at December 31, 2014. Outstanding balances of home equity loans and lines of credit
53
represent the largest component of the consumer loan portfolio. Such balances represented
approximately 7% of total loans and leases at December 31, 2015 and 9% at December 31, 2014. No
other consumer loan product represented at least 3% of loans outstanding at December 31, 2015.
Approximately 39% of home equity loans and lines of credit outstanding at December 31, 2015 were
secured by properties in New York State, 21% in Pennsylvania, 27% in Maryland and 3% in New
Jersey. Outstanding automobile loan balances rose to $2.5 billion at December 31, 2015 from $2.0
billion at December 31, 2014. That increase reflects consumer demand for motor vehicles.
Table 7 presents the composition of the Company’s loan and lease portfolio at the end of 2015,
including outstanding balances to businesses and consumers in New York State, Pennsylvania, the
Mid-Atlantic area and other states. Approximately 39% of total loans and leases at December 31, 2015
were to New York State customers, while 16% and 31% were to Pennsylvania and the Mid-Atlantic
area customers, respectively.
Table 7
December 31, 2015
LOANS AND LEASES, NET OF UNEARNED DISCOUNT
Percent of Dollars Outstanding
Mid-Atlantic
Outstandings New York
sylvania Maryland
Penn-
New
Jersey Other(a) Other
(In millions)
Real estate
Residential . . . . . . . . . . . . . . . . . . .
Commercial . . . . . . . . . . . . . . . . . .
$26,270
29,197
Total real estate . . . . . . . . . . . . .
55,467
Commercial, financial, etc.
Consumer
. . . . . . .
19,213
Home equity lines and loans . . . .
Automobile . . . . . . . . . . . . . . . . . .
Other secured or guaranteed . . .
Other unsecured . . . . . . . . . . . . . .
5,953
2,519
2,409
719
Total consumer . . . . . . . . . . . . .
11,600
Total loans . . . . . . . . . . . . . . .
86,280
Commercial leases . . . . . . . . . . . . . .
1,209
Total loans and leases . . . . .
$87,489
33%
45
40%
42%
39%
29
23
39
34%
39%
50%
39%
7%
14
11%
26%
21%
23
13
23
20%
16%
16%
16%
5%
13
9%
12%
27%
10
7
23
19%
11%
9%
11%
31%
6
17%
4%
3%
7
7
—
4%
13%
3%
13%
5%
10
8%
6%
9%
8
4
3
7%
7%
2%
7%
19%
12
15%
10%
1%
23
46
12
16%
14%
20%
14%
(a) Includes Delaware, Virginia, West Virginia and the District of Columbia.
Balances of investment securities averaged $14.5 billion in 2015, up from $11.5 billion and $6.6
billion in 2014 and 2013, respectively. The significant rise in such balances since 2013 reflects the net
effect of purchases of mortgage-backed securities and the impact of investment securities sales and
securitizations. 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, including the requirements of the LCR that became effective in January 2016.
Purchases of Fannie Mae and Ginnie Mae mortgage-backed securities totaled $3.5 billion in 2015,
$5.2 billion in 2014 and $2.2 billion in 2013. Additionally, mortgage-backed securities retained from
the acquisition of Hudson City were $1.2 billion at December 31, 2015. Furthermore, 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 Administration
54
(“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. Mortgage-backed securities added to the investment portfolio
through these origination activities were $65 million in 2015, $135 million in 2014 and $1.7 billion in
2013.
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. Furthermore, as mentioned previously, immediately following the
acquisition of Hudson City, the Company restructured its balance sheet by selling $5.8 billion of
investment securities obtained in the transaction.
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 2015 or 2014. Pre-tax other-than-temporary impairment
charges of $10 million were recognized during 2013 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
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, 2015, 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 $5.9 billion in 2015, $5.5 billion in 2014 and $2.3
billion in 2013. Interest-bearing deposits at banks averaged $5.8 billion in 2015, compared with $5.3
billion and $2.1 billion in 2014 and 2013, respectively. The higher levels of average interest-bearing
deposits at banks in 2014 when compared with 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 (including the LCR) 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 $74.2 billion in 2015, up from $69.1 billion in
2014 and $63.8 billion in 2013. The Hudson City acquisition added approximately $17.0 billion of
core deposits on November 1, 2015, including $9.7 billion of time deposits, $6.6 billion of savings
deposits and $691 million of noninterest-bearing deposits. The Hudson City acquisition contributed
approximately $2.8 billion to the Company’s average core deposits in 2015. Excluding the impact of
the merger, growth in average core deposits from the prior year reflects an increase of approximately
$1.6 billion in commercial customer deposits. The growth in average core deposits from 2013 to 2014
55
reflects increases of approximately $2.6 billion of deposits from trust customers and $1.7 billion in
commercial customer deposits. Funding provided by core deposits represented 81% of average
earning assets in 2015, compared with 85% and 86% in 2014 and 2013, respectively. Table 8
summarizes average core deposits in 2015 and percentage changes in the components of such
deposits over the past two years. Core deposits aggregated $89.3 billion and $72.0 billion at
December 31, 2015 and 2014, respectively.
Table 8
AVERAGE CORE DEPOSITS
Percentage Increase
(Decrease) from
2015
2014 to 2015
2013 to 2014
Interest-checking deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In millions)
$ 1,250
41,522
4,103
27,324
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$74,199
24%
5
40
6
7%
12%
10
(15)
8
8%
The Company also receives funding from other deposit 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
$501 million in 2015, $366 million in 2014 and $325 million in 2013. Cayman Islands office deposits
averaged $216 million in 2015, $327 million in 2014 and $496 million in 2013. Brokered time deposits
averaged $37 million in 2015, compared with $4 million in 2014 and $279 million in 2013. The
Company also had brokered interest-bearing transaction and brokered money-market deposit
accounts, which in the aggregate averaged $1.1 billion in each of 2015, 2014 and 2013. The levels of
brokered 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 is 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. Short-term
borrowings represent borrowing arrangements that at the time they were entered into had a
contractual maturity of less than one year. Average short-term borrowings were $548 million in 2015,
$215 million in 2014 and $390 million in 2013. The increase in 2015 was predominantly due to short-
term borrowings from the Federal Home Loan Bank (“FHLB”) of New York of $2.0 billion assumed
in the Hudson City acquisition. Those short-term fixed-rate borrowings have various maturity dates
throughout 2016 and contributed $361 million to the increase in the average balances of short-term
borrowings in 2015. There were no short-term borrowings from the Federal Home Loan Banks in
2014 or 2013. Also included in short-term borrowings were unsecured federal funds borrowings,
which generally mature on the next business day, that averaged $138 million, $156 million and $284
million in 2015, 2014 and 2013, respectively. Overnight federal funds borrowings totaled $99 million
at December 31, 2015 and $135 million at December 31, 2014.
Long-term borrowings averaged $10.2 billion in 2015, $7.5 billion in 2014 and $4.9 billion in
2013. M&T Bank has a Bank Note Program whereby M&T Bank may offer unsecured senior and
subordinated notes. Through December 31, 2015, only unsecured senior notes totaling $5.5 billion
have been issued. Average balances of notes issued under that program were $5.3 billion in 2015, $2.9
billion in 2014 and $657 million in 2013. During March 2013, $300 million of three-year floating rate
notes and $500 million of three-year fixed rate 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 notes. During 2015, M&T Bank issued $1.5 billion of fixed rate notes of which $750
56
million mature in 2020 and $750 million mature in 2025. The proceeds from the issuances of
borrowings under the Bank Note Program have been predominantly utilized to purchase high quality
liquid assets that meet the requirements of the LCR. Also included in average long-term borrowings
were amounts borrowed from the Federal Home Loan Banks of New York, Atlanta and Pittsburgh of
$1.2 billion in 2015, $692 million in 2014 and $30 million in 2013, and subordinated capital notes of
$1.5 billion in 2015 and $1.6 billion in each of 2014 and 2013. 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. In 2013, $250 million of 4.875%
subordinated notes of the Company matured and were redeemed. In November 2014, M&T Bank
redeemed $50 million of 9.50% subordinated notes that were due to mature in 2018. In the first
quarter of 2014, M&T redeemed $350 million of 8.50% junior subordinated debentures associated
with trust preferred securities. In accordance with its 2015 capital plan, on April 15, 2015 M&T
redeemed the junior subordinated debentures associated with the $310 million of trust preferred
securities of M&T Capital Trusts I, II and III. Those borrowings had a weighted-average interest
rate of 8.24%. Junior subordinated debentures associated with trust preferred securities that were
included in average long-term borrowings were $605 million in 2015, $889 million in 2014 and $1.2
billion in 2013. 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 $1.5 billion in 2015 and $1.4 billion during each of 2014 and 2013.
Agreements to repurchase securities assumed in connection with the Hudson City acquisition
totaled $6.9 billion at November 1, 2015. Immediately following the November 1, 2015 Hudson City
acquisition date the balance sheet was restructured and $6.4 billion of the assumed repurchase
agreements were repaid. The agreements held at December 31, 2015 have various repurchase dates
through 2020, 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, 2015, 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 2.95% in 2015, compared with 3.12% in 2014 and 3.43% in
2013. The yield on the Company’s earning assets declined 15 basis points to 3.50% in 2015 from 3.65%
in 2014, while the rate paid on interest-bearing liabilities increased 2 basis points to .55% in 2015
from .53% in 2014. The yield on earning assets during 2014 decreased 38 basis points from 4.03% in
2013, while the rate paid on interest-bearing liabilities declined 7 basis points from .60% in 2013. The
narrowing of the net interest spread in 2015 and 2014 reflects the ongoing impact of the low interest
rate environment on the yields earned on investments and loans, higher average balances of
investment securities and long-term borrowings, and the higher levels of deposits held at the Federal
Reserve Bank of New York.
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 $31.7 billion
in 2015, compared with $28.8 billion in 2014 and $26.5 billion in 2013. The increases in average net
interest-free funds in 2015 and 2014 reflect higher balances of noninterest-bearing deposits, which
averaged $27.3 billion in 2015, $25.7 billion in 2014 and $23.7 billion in 2013. The increase in average
noninterest-bearing deposits in 2015 reflects an increase in commercial customer deposits of $1.5
billion. The growth from 2013 to 2014 includes an increase in commercial customer deposits of $1.4
billion. In connection with the Hudson City acquisition, the Company added noninterest-bearing
deposits of $691 million at the acquisition date. Goodwill and core deposit and other intangible assets
averaged $3.7 billion in 2015 and $3.6 billion in each of 2014 and 2013. Goodwill of $1.1 billion and
core deposit intangible of $132 million resulted from the Hudson City acquisition. The cash
surrender value of bank owned life insurance averaged $1.7 billion in each of 2015 and 2014 and $1.6
billion in 2013. Increases in the cash surrender value of bank owned life insurance are not included in
57
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 each of 2015 and 2014 and .22% in 2013.
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 3.14% in 2015, 3.31% in 2014 and
3.65% in 2013. 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.
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, 2015 and 2014. Under the terms of those interest rate 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 interest rate 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 2015, 2014 and 2013 were
not material to the Company’s results of operations. The estimated aggregate fair value of interest
rate swap agreements designated as fair value hedges represented gains of approximately $44 million
at December 31, 2015 and $73 million at December 31, 2014. The fair values of such interest rate 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,
2015 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 $22
million of collateral with the Company. Additional information about interest rate 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.
58
Table 9
INTEREST RATE SWAP AGREEMENTS
Year Ended December 31
2015
2014
2013
Amount
Rate(a)
Amount
Rate(a)
Amount
Rate(a)
(Dollars in thousands)
Increase (decrease) in:
Interest income . . . . . . . . . . . . . . . . . . $
Interest expense . . . . . . . . . . . . . . . . .
—
(44,219)
—% $
(.07)
—
(44,996)
—% $
(.09)
—
(41,326)
—%
(.09)
Net interest income/margin . . . . . . . $
44,219
.04% $
44,996
.06% $
41,326
.06%
Average notional amount . . . . . . . . . . . . $1,412,340
Rate received(b) . . . . . . . . . . . . . . . . . . . .
Rate paid(b) . . . . . . . . . . . . . . . . . . . . . . .
4.42%
1.28%
$1,400,000
$1,160,274
4.42%
1.19%
5.03%
1.47%
(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 $170 million in 2015, compared with $124 million in 2014 and $185 million in 2013. Net loan
charge-offs aggregated $134 million in 2015, $121 million in 2014 and $183 million in 2013. Net loan
charge-offs as a percentage of average loans outstanding were .19% in each of 2015 and 2014,
compared with .28% in 2013. 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.
59
Table 10
LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES
Allowance for credit losses beginning
balance . . . . . . . . . . . . . . . . . . . . . . . . . $ 919,562
$ 916,676
$925,860
$ 908,290
$ 902,941
2015
2014
2013
2012
2011
(Dollars in thousands)
Charge-offs during year
Commercial, financial, leasing,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate — construction . . . . . . . .
Real estate — mortgage . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . .
60,983
3,221
26,382
107,787
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
Total charge-offs . . . . . . . . . . . . . . .
198,373
178,742
253,510
230,755
309,487
Recoveries during year
Commercial, financial, leasing,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate — construction . . . . . . . .
Real estate — mortgage . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . .
30,284
6,308
7,626
20,585
Total recoveries . . . . . . . . . . . . . . .
64,803
22,188
4,725
14,640
16,075
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
Net charge-offs . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . .
Allowance related to loans sold or
securitized . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses ending
133,570
170,000
121,114
124,000
183,184
185,000
186,430
204,000
264,651
270,000
—
—
(11,000)
—
—
balance . . . . . . . . . . . . . . . . . . . . . . . . . $955,992
$ 919,562
$ 916,676
$ 925,860
$908,290
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 . . . .
78.57%
97.67%
99.02%
91.39%
98.02%
.19%
.19%
.28%
.30%
.47%
1.09%
1.38%
1.43%
1.39%
1.51%
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 acquired loans requires estimating cash flows expected to be collected on the loans
and discounting those cash flows at then-current interest rates. For acquired loans where fair value
was less than outstanding principal as of the acquisition date and the resulting discount was due, at
least in part, to credit deterioration, 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 associated with such loans. 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 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
60
acquired at a discount subsequent to 2008 and accounted for based on expected cash flows was $2.5
billion and $2.6 billion at December 31, 2015 and 2014, respectively. The decrease is largely
attributable to payments received offset by the addition of $688 million of purchased impaired loans
from Hudson City on November 1, 2015. The nonaccretable balance related to remaining principal
losses as of December 31, 2015 and 2014 is presented in table 11. The addition of purchased impaired
loans from Hudson City added $116 million to the nonaccretable balance related to principal losses at
the time of acquisition. The Company regularly reviews its cash flow projections for loans acquired
at a discount, including its estimates of lifetime principal losses. During each of the last three years,
based largely on improving economic conditions and borrower repayment performance, the
Company’s estimates of cash flows expected to be generated by loans acquired at a discount and
accounted for based on expected cash flows improved, resulting in increases in the accretable yield.
Excluding expected cash flows on the purchased impaired loans acquired from Hudson City, in 2015
estimated cash flows expected to be generated increased by $77 million, or approximately 3%. That
improvement reflected a lowering of estimated principal losses by approximately $58 million,
primarily due to a $42 million decrease in expected principal losses in the commercial real estate
loan portfolios, as well as interest and other recoveries. Similarly, in 2014 the estimates of cash flows
expected to be generated increased by approximately 2%, or $98 million. That improvement also
reflected a lowering of estimated principal losses, largely driven by a $47 million decrease in
expected principal losses that was predominantly in the acquired commercial real estate loan
portfolios. In 2013, estimated cash flows expected to be generated increased by $179 million, or
approximately 3%. That improvement was also largely driven by a reduction of estimated principal
losses, including a $160 million decrease in expected principal losses in the commercial real estate
loan portfolios.
Table 11
NONACCRETABLE BALANCE — PRINCIPAL
Remaining Balance
December 31,
2015
December 31,
2014
(In thousands)
Commercial, financing, leasing, etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,806
48,173
113,478
17,952
$ 19,589
70,261
15,958
29,582
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$190,409
$135,390
For acquired loans where the fair value exceeds the outstanding principal balance, the
resulting premium is recognized as a reduction of interest income over the lives of the loans.
Immediately following the acquisition date and thereafter, an allowance for credit losses is recorded
for incurred losses inherent in the portfolio, consistent with the accounting for originated loans and
leases. The carrying amount of Hudson City loans acquired at a premium was $17.8 billion at
December 31, 2015. As noted previously, a $21 million provision for credit losses was recorded in
2015 for incurred losses inherent in those loans. GAAP does not allow the credit loss component of
the net premium associated with those loans to be bifurcated and accounted for as a nonaccreting
balance as is the case with purchased impaired loans and other loans acquired at a discount. Despite
the fact that the determination of aggregate fair value reflects the impact of expected credit losses,
GAAP provides that incurred losses in a portfolio of loans acquired at a premium be recognized even
though in a relatively homogenous portfolio of residential mortgage loans the specific loans to which
the losses relate cannot be individually identified at the acquisition date.
Nonaccrual loans totaled $799 million at each of December 31, 2015 and 2014, improved from
$874 million at December 31, 2013. As a percentage of loans outstanding, nonaccrual loans
represented .91%, 1.20% and 1.36% at the end of 2015, 2014 and 2013, respectively. Improving
economic conditions in the U.S. have generally had a favorable impact on borrower repayment
61
performance. The decline in nonaccrual loans since the 2013 year-end was largely due to lower
commercial real estate and residential real estate loans on nonaccrual status. Since December 31,
2013, additions to nonaccrual loans were more than offset by the impact on such loans from
payments received and charge-offs.
Accruing loans past due 90 days or more (excluding loans acquired at a discount) totaled $317
million or .36% of total loans and leases at December 31, 2015, compared with $245 million or .37% at
December 31, 2014 and $369 million or .58% at December 31, 2013. Those loans included loans
guaranteed by government-related entities of $276 million, $218 million and $298 million at
December 31, 2015, 2014 and 2013, respectively. Approximately $44 million of such guaranteed loans
were obtained in the acquisition of Hudson City. Guaranteed loans also 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 $221
million at December 31, 2015, $196 million at December 31, 2014 and $255 million at December 31,
2013. 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.
62
Table 12
NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA
December 31
2015
2014
2013
2012
2011
Nonaccrual loans . . . . . . . . . . . . . . . . $ 799,409
Real estate and other foreclosed
(Dollars in thousands)
$ 874,156
$ 799,151
$1,013,176
$1,097,581
assets . . . . . . . . . . . . . . . . . . . . . . . .
195,085
63,635
66,875
104,279
156,592
Total nonperforming assets . . . . . . . $ 994,494
$ 862,786
$ 941,031
$1,117,455
$ 1,254,173
Accruing loans past due 90 days or
more(a) . . . . . . . . . . . . . . . . . . . . . . $
317,441
$245,020
$ 368,510
$ 358,397
$ 287,876
Government guaranteed loans
included in totals above:
Nonaccrual loans . . . . . . . . . . . . . . $
Accruing loans past due 90 days
47,052
$ 69,095
$ 63,647
$ 57,420
$ 40,529
or more . . . . . . . . . . . . . . . . . . . .
276,285
217,822
297,918
316,403
252,503
Renegotiated loans . . . . . . . . . . . . . . $ 182,865
$ 202,633
$257,092
$ 271,971
$ 214,379
Accruing loans acquired at a
discount past due 90 days or
more(b) . . . . . . . . . . . . . . . . . . . . . . $
68,473
$ 110,367
$ 130,162
$ 166,554
$ 163,738
Purchased impaired loans(c):
Outstanding customer balance . . $1,204,004
Carrying amount . . . . . . . . . . . . . .
768,329
Nonaccrual loans to total loans and
$369,080
197,737
$ 579,975
330,792
$ 828,571
447,114
$1,267,762
653,362
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 . . . . . . .
.91%
1.20%
1.36%
1.52%
1.83%
1.13%
1.29%
1.47%
1.68%
2.08%
.36%
.37%
.58%
.54%
.48%
(a) Excludes loans acquired at a discount. Predominantly residential mortgage loans.
(b) Loans acquired at a discount that were recorded at fair value at acquisition date. This category does not
include purchased impaired loans that are presented separately.
(c) Accruing loans acquired at a discount 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 $768 million at December 31,
2015, or .9% of total loans. Of that amount, $658 million is related to the Hudson City acquisition.
Purchased impaired loans totaled $198 million at December 31, 2014.
Accruing loans acquired at a discount 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 $68 million at December 31, 2015 and $110 million at December 31,
2014.
63
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 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 aggregated $147 million and $149 million
at December 31, 2015 and December 31, 2014, respectively.
Charge-offs of commercial loans and leases, net of recoveries, were $31 million in 2015, $37
million in 2014 and $98 million in 2013. 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. In 2015, the Company recovered $10 million relating to this relationship. Commercial
loans and leases in nonaccrual status totaled $242 million at December 31, 2015, $177 million at
December 31, 2014 and $111 million at December 31, 2013. The December 31, 2015 balances for the
largest individual commercial loans placed in nonaccrual status during 2015 were $22 million with a
commercial maintenance service provider with operations in New Jersey and Pennsylvania and $15
million with a multi-regional automobile rental agency. The increase in nonaccrual commercial loans
from the 2013 year-end to December 31, 2014 also was not concentrated in any particular industry
group and no individual borrower relationship exceeded $14 million of the increase in commercial
loans and leases.
Net charge-offs of commercial real estate loans during 2015, 2014 and 2013 totaled $7 million,
$3 million and $12 million, respectively. Reflected in such charge-offs were net recoveries of $2
million in each of 2015 and 2014 and $12 million in 2013 of loans to residential real estate builders
and developers. Commercial real estate loans classified as nonaccrual totaled $224 million at
December 31, 2015, compared with $239 million at December 31, 2014 and $305 million at
December 31, 2013. The decline in such nonaccrual loans since December 31, 2013 was due, in part, to
improving economic conditions. Nonaccrual commercial real estate loans included construction-
related loans of $45 million, $97 million and $132 million at the end of 2015, 2014 and 2013,
respectively. Those nonaccrual construction loans included loans to residential builders and
developers of $28 million at December 31, 2015, $72 million at December 31, 2014 and $96 million at
December 31, 2013. 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, 2015 is presented in
table 13.
64
Table 13
RESIDENTIAL BUILDER AND DEVELOPER LOANS, NET OF UNEARNED DISCOUNT
December 31, 2015
Year Ended
December 31, 2015
Nonaccrual
Net Charge-offs (Recoveries)
Outstanding
Balances(b)
Balances
Percent of
Outstanding
Balances
Percent of Average
Outstanding
Balances
Balances
New York . . . . . . . . . . . . . . . . . . . . . $ 622,489
Pennsylvania . . . . . . . . . . . . . . . . . .
154,627
424,774
Mid-Atlantic(a) . . . . . . . . . . . . . . . .
404,544
Other . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,132
25,533
1,344
1,304
(Dollars in thousands)
.50%
16.51
.32
.32
$ 2,215
822
(4,577)
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . $1,606,434
$ 31,313
1.95%
$(1,540)
.32 %
.58
(1.04)
—
(.09)%
(a) Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia.
(b) Includes approximately $21 million of loans not secured by real estate, of which approximately $3 million
are in nonaccrual status
Net charge-offs of residential real estate loans aggregated $9 million in 2015 and $13 million in
each of 2014 and 2013. Residential real estate loans in nonaccrual status at December 31, 2015 were
$215 million, compared with $258 million and $334 million at December 31, 2014 and 2013,
respectively. The decrease in residential real estate loans classified as nonaccrual in 2015 reflects
improved repayment performance by customers, in general, and in 2014 the payoff of $64 million of
loans to one customer that were secured by residential real estate. Net charge-offs of limited
documentation first mortgage loans were $1 million in 2015, $4 million in 2014 and $8 million in
2013. Nonaccrual limited documentation first mortgage loans totaled $62 million at December 31,
2015, compared with $78 million and $81 million at December 31, 2014 and 2013, respectively.
Residential real estate loans past due 90 days or more and accruing interest (excluding loans
acquired at a discount) aggregated $284 million (including $44 million obtained in the acquisition of
Hudson City) at December 31, 2015, $216 million at December 31, 2014 and $295 million at
December 31, 2013. 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, 2015 is presented in table 14.
65
Table 14
SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA
Year Ended
December 31, 2015
December 31, 2015
Net Charge-offs (Recoveries)
Nonaccrual
Outstanding
Balances
Balances
Percent of
Outstanding
Balances
Balances
(Dollars in thousands)
Percent of
Average
Outstanding
Balances
Residential mortgages
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Mid-Atlantic(a) . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,908,655
1,849,675
1,313,586
6,345,909
1,156,451
4,402,423
$60,990
15,904
14,963
7,862
14,353
37,606
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,976,699
$151,678
Residential construction loans
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Mid-Atlantic(a) . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,383
4,821
5,536
672
2,867
13,295
$
142
808
—
—
—
653
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
33,574
$ 1,603
Limited documentation first mortgages
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Mid-Atlantic(a) . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,793,036
92,558
52,336
1,656,719
46,853
618,328
$ 16,671
1,962
3,438
2,145
3,467
34,267
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,259,830
$ 61,950
First lien home equity loans and lines of credit
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Mid-Atlantic(a) . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,352,335
874,170
713,750
39,983
210,693
20,959
$ 16,741
9,876
6,420
234
528
1,321
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,211,890
$ 35,120
Junior lien home equity loans and lines of
credit
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Mid-Atlantic(a) . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
962,533
391,369
871,569
137,326
323,553
45,225
$ 29,332
4,507
8,825
2,191
1,334
2,679
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,731,575
$ 48,868
Limited documentation junior lien
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Mid-Atlantic(a) . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
848
345
1,608
391
746
5,373
9,311
$
$
—
34
83
—
—
362
479
.88%
.86
1.14
.12
1.24
.85
.69%
2.22%
16.75
—
—
—
4.91
4.77%
.93%
2.12
6.57
.13
7.40
5.54
1.45%
1.24%
1.13
.90
.59
.25
6.30
1.09%
3.05%
1.15
1.01
1.60
.41
5.92
1.79%
$ 2,884
591
1,367
537
866
937
$ 7,182
$
64
16
—
2
—
170
$ 252
$
919
183
(354)
(40)
15
648
$ 1,371
$ 2,032
1,301
713
(2)
8
13
$ 4,065
$ 4,562
1,560
4,140
(27)
268
288
$10,791
—%
$
9.87
5.20
—
—
6.73
128
—
(1)
(1)
(33)
387
5.15%
$ 480
.07%
.04
.10
.07
.08
.06
.07%
.93%
.42
—
.21
—
1.50
.77%
.05%
.20
(.65)
(.01)
.03
.10
.03%
.15%
.15
.10
(.01)
.01
.07
.13%
.48%
.39
.46
(.07)
.08
.68
.40%
12.94%
—
(.06)
(.18)
(3.52)
6.56
4.65%
(a) Includes Delaware, Virginia, West Virginia and the District of Columbia.
66
Consumer loan net charge-offs during 2015 totaled $87 million, compared with $68 million in
2014 and $60 million in 2013. The increase from 2014 to 2015 reflects a $20 million charge-off of a
single personal usage loan obtained in a previous acquisition. Included in net charge-offs of
consumer loans were: automobile loans of $12 million in 2015, $14 million in 2014 and $11 million in
2013; recreational vehicle loans of $12 million, $13 million and $15 million during 2015, 2014 and
2013, respectively; and home equity loans and lines of credit secured by one-to-four family
residential properties of $15 million in 2015, $19 million in 2014 and $12 million in 2013. 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 $118 million at December 31, 2015, compared with $125 million at each of December 31,
2014 and 2013. Included in nonaccrual consumer loans at the 2015, 2014 and 2013 year-ends were:
automobile loans of $17 million, $18 million and $21 million, respectively; recreational vehicle loans
of $9 million, $11 million and $12 million, respectively; and outstanding balances of home equity
loans and lines of credit of $84 million, $89 million and $79 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, 2015 is presented in table 14.
Information about past due and nonaccrual loans as of December 31, 2015 and 2014 is also
included in note 4 of Notes to Financial Statements.
Real estate and other foreclosed assets aggregated $195 million at December 31, 2015,
compared with $64 million at December 31, 2014 and $67 million at December 31, 2013. Reflected in
real estate and other foreclosed assets at December 31, 2015 were $126 million of assets obtained in
the Hudson City acquisition. Gains or losses resulting from sales of real estate and other foreclosed
assets were not material in 2015, 2014 or 2013. At December 31, 2015, the Company’s holding of
residential real estate-related properties comprised approximately 88% 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 expected repayment performance associated with the Company’s
first and second lien loans secured by residential real estate, including loans obtained in the acquisition of
Hudson City that were not classified as purchased impaired; 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, 2015 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) slower growth in private sector employment in upstate New York and central Pennsylvania than
in other regions served by the Company and nationally; (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 global commodity and
export markets, including the impact international economic conditions could have on the U.S.
economy; Federal Reserve positioning of monetary policy; and continued stagnant population
growth in the upstate New York and central Pennsylvania regions (approximately 55% of the
Company’s loans are to customers in New York State and Pennsylvania).
67
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 $2.1 billion at December 31, 2015 and $1.8 billion at December 31, 2014.
Increases in criticized loan balances since December 31, 2014 included approximately $133 million
categorized as commercial real estate loans and $214 million as commercial loans. Approximately
98% of loan balances added to the criticized category during 2015 were less than 90 days past due
and 94% had a current payment status. Given payment performance, amount of supporting collateral,
and, in certain instances, the existence of loan guarantees, the Company still expects to collect the
full outstanding principal balance on most of these loans. The borrower industries most significantly
impacting the higher level of criticized loans were services and manufacturing. The New York City
area was most affected by the increases.
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. At least
annually, updated financial information is obtained from commercial borrowers associated with pass
grade loans and additional analysis is performed. 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 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 securing the Company’s residential real estate loans is 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, 2015, approximately
54% 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 34% of the
aggregate home equity portfolio) consisted of junior lien loans that were behind a first lien mortgage
68
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, 2015, the balance of junior lien loans and lines that
were in nonaccrual status solely as a result of first lien loan performance was $22 million, compared
with $24 million at December 31, 2014. 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. When evaluating individual
home equity loans and lines of credit for charge off, 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, 2015, approximately 87% 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
10% 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 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 46% 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 at a discount 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
69
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. For loans
acquired at a discount, 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 such
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 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 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 December 2015
that the U.S. economic recovery had continued, although there was room for further improvement in
the labor markets and inflation continued to run below the Federal Reserve’s longer-run objective.
70
Economic indicators in the most significant market regions served by the Company also showed
improvement in 2015. For example, in 2015, average private sector employment in areas served by
the Company was 1.9% above year-ago levels, but trailed the 2.1% U.S. average growth rate. Private
sector employment increased 0.7% in upstate New York, 1.2% in areas of Pennsylvania served by the
Company, 1.5% in New Jersey, 2.1% in Maryland, 1.7% in Greater Washington D.C. and 1.4% in the
State of Delaware. In New York City, private sector employment increased by 2.8% in 2015.
Nevertheless, the U.S. economy remains susceptible to slow global economic growth, a strong U.S.
dollar and its impact on trade, 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 $781 million and $762
million at December 31, 2015 and December 31, 2014, respectively. The allocated portion of the
allowance for credit losses related to impaired loans totaled $90 million at December 31, 2015 and
$83 million at December 31, 2014. The unallocated portion of the allowance for credit losses was
equal to .09% and .11% of gross loans outstanding at December 31, 2015 and 2014, respectively. That
relative decline reflects the impact of loans obtained in the Hudson City acquisition that were
recorded at fair value amounts that reflected anticipated credit losses and was not considered
significant. 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.
71
Table 15
ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES
December 31
2015
2014
2013
2012
2011
Commercial, financial, leasing, etc.
Real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated . . . . . . . . . . . . . . . . . . . . . . .
. . . $300,404
399,069
178,320
78,199
(Dollars in thousands)
$ 273,383
403,634
164,644
75,015
$288,038
369,837
186,033
75,654
$246,759
425,908
179,418
73,775
$234,022
459,552
143,121
71,595
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 955,992
$ 919,562
$ 916,676
$925,860
$908,290
As a Percentage of Gross Loans
and Leases Outstanding
Commercial, financial, leasing, etc.
. . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . .
1.46%
.72
1.54
1.47%
1.02
1.70
1.45%
1.15
1.60
1.37%
1.14
1.55
1.47%
1.42
1.19
Management believes that the allowance for credit losses at December 31, 2015 appropriately
reflected credit losses inherent in the portfolio as of that date. The allowance for credit losses was
$956 million or 1.09% of total loans and leases at December 31, 2015, compared with $920 million or
1.38% at December 31, 2014 and $917 million or 1.43% at December 31, 2013. 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. As
noted earlier, GAAP prohibits any carry-over of an allowance for credit losses for acquired loans
recorded at fair value. However, for loans acquired at a premium, GAAP provides that an allowance
for credit losses be recognized for incurred losses inherent in the portfolio at the acquisition date.
The declines in the ratio of the allowance to total loans and leases and the ratio of the allowance
allocated to real estate loans at December 31, 2015 from December 31, 2014 reflects the impact of
loans obtained in the acquisition of Hudson City, including $18.0 billion of residential real estate
loans of which $652 million were considered purchased impaired loans recorded at a discount and
$17.4 billion were acquired loans recorded at a premium. The decline in the ratio of the allowance to
total loans and leases since December 31, 2013 also reflects the impact of improvement in the levels of
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 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 2015, 2014 and 2013 was 120%,
115% and 105%, 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;
72
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 30% increase in the balance of classified credits in each risk grade.
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 $75 million that could be identifiable under the
assumptions for credit deterioration, whereas under the assumptions for credit improvement a $41
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, 2015, however residential real estate loans comprised
approximately 30% of the loan portfolio. Outstanding loans to foreign borrowers were $265 million
at December 31, 2015, or .3% of total loans and leases.
Other Income
Other income aggregated $1.83 billion and $1.78 billion in 2015 and 2014, respectively.
Reflected in that improvement were higher commercial mortgage banking revenues and a $45
million gain from the sale of the trade processing business within the retirement services business of
the Company that was largely offset by lower trust income associated with that divested business.
The acquisition of Hudson City did not have a significant impact on other income. Other income in
2013 was $1.87 billion and included net gains on investment securities (including other-than-
temporary impairment losses) of $47 million and gains from securitization activities of $63 million.
Excluding those specific items, noninterest income in 2014 rose $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.
Mortgage banking revenues were $376 million in 2015, $363 million in 2014 and $331 million
in 2013. 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, totaled $281 million in 2015, $287 million in 2014
and $251 million in 2013. The decrease in residential mortgage banking revenues from 2014 to 2015
reflects a decline in revenues associated with servicing residential real estate loans for others. 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.
New commitments to originate residential real estate loans to be sold totaled approximately
$3.5 billion in 2015, compared with $3.2 billion in 2014 and $5.6 billion in 2013. Included in those
commitments to originate residential real estate loans to be sold were commitments of
approximately $235 million in 2015, $337 million in 2014 and $1.1 billion in 2013 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 originally
set to expire on December 31, 2013, but was extended and is now available to borrowers through
December 31, 2016. Nevertheless, volumes associated with that program have declined since mid-
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2013. Realized gains from sales of residential real estate loans and loan servicing rights 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 $74
million in 2015, compared with gains of $75 million in 2014 and $123 million in 2013.
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 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 2015, 2014 and 2013 were reduced by approximately $5 million, $4 million and $17 million,
respectively, related to the actual or anticipated settlement of repurchase obligations.
Loans held for sale that were secured by residential real estate totaled $353 million and $435
million at December 31, 2015 and 2014, respectively. Commitments to sell residential real estate loans
and commitments to originate residential real estate loans for sale at pre-determined rates were $687
million and $489 million, respectively, at December 31, 2015, $717 million and $432 million,
respectively, at December 31, 2014 and $725 million and $470 million, respectively, at December 31,
2013. Net recognized unrealized gains on residential real estate loans held for sale, commitments to
sell loans and commitments to originate loans for sale were $16 million and $19 million at
December 31, 2015 and 2014, respectively, and $20 million at December 31, 2013. Changes in such net
unrealized gains are recorded in mortgage banking revenues and resulted in net decreases in revenue
of $3 million, $1 million and $63 million in 2015, 2014 and 2013, respectively.
Revenues from servicing residential real estate loans for others totaled $206 million in 2015,
$212 million in 2014 and $128 million in 2013. Residential real estate loans serviced for others totaled
$61.7 billion at December 31, 2015, $67.2 billion a year earlier and $72.4 billion at December 31, 2013
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 $37.8 billion, $42.1 billion and $46.6
billion at December 31, 2015, 2014 and 2013, respectively. Revenues earned for sub-servicing loans
were $116 million in each of 2015 and 2014, compared with $35 million in 2013. 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. Similar additions were $4.3 billion in 2015 and $3.2 billion in 2014. Capitalized
servicing rights consist largely of servicing associated with loans sold by the Company. Capitalized
residential mortgage servicing assets totaled $118 million at December 31, 2015, compared with $111
million and $129 million at December 31, 2014 and 2013, 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 aggregated $95 million in 2015, $76 million in 2014 and
$80 million in 2013. Included in such amounts were revenues from loan origination and sales activities of
$53 million in 2015, $41 million in 2014 and $48 million in 2013. Commercial real estate loans originated
for sale to other investors totaled approximately $2.0 billion in 2015, compared with $1.5 billion in 2014
and $1.9 billion in 2013. Loan servicing revenues were $42 million in 2015, $35 million in 2014 and $32
million in 2013. Capitalized commercial mortgage servicing assets totaled $84 million at December 31,
2015, $73 million at December 31, 2014 and $72 million at December 31, 2013. Commercial real estate
loans serviced for other investors totaled $11.0 billion at December 31, 2015, $11.3 billion at December 31,
2014 and $11.4 billion at December 31, 2013, and included $2.5 billion, $2.4 billion and $2.3 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 $96 million and $58 million, respectively, at December 31, 2015,
$520 million and $212 million, respectively, at December 31, 2014 and $130 million and $62 million,
respectively, at December 31, 2013. Commercial real estate loans held for sale totaled $39 million, $308
million and $68 million at December 31, 2015, 2014 and 2013, respectively.
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Service charges on deposit accounts aggregated $421 million in 2015, compared with $428
million in 2014 and $447 million in 2013. The lower levels of fees since 2013 resulted from declines in
consumer service charges, particularly overdraft 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 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 declined to $471 million in 2015, compared with $508 million in 2014 and
$496 million in 2013. Revenues attributable to the ICS business were approximately $220 million in
2015, $244 million in 2014 and $234 million in 2013. The ICS revenue decline in 2015 reflects the
April 2015 divestiture of the trade processing business within the retirement services division.
Revenues related to that business reflected in trust income (in the ICS business) during 2015, 2014
and 2013 were approximately $9 million, $34 million and $38 million, respectively. After considering
related expenses, including the portion of those revenues paid to sub-advisors, net income
attributable to the sold business during those years was not material to the consolidated results of
operations of the Company. The sale resulted in an after-tax gain of $23 million ($45 million pre-tax)
that was recorded in “other revenues from operations” in the consolidated statement of income.
Revenues attributable to WAS were approximately $218 million, $224 million and $214 million in
2015, 2014 and 2013, respectively. Total trust assets, which include assets under management and
assets under administration, aggregated $199.2 billion at December 31, 2015, compared with $287.9
billion at December 31, 2014. The decline in trust assets at December 31, 2015 as compared with a
year earlier was predominantly due to the customer account balances included in the April 2015 sale
of the trade processing business. Trust assets under management were $66.7 billion and $68.2 billion
at December 31, 2015 and 2014, respectively. The Company’s proprietary mutual funds held assets of
$12.2 billion and $13.3 billion at December 31, 2015 and 2014, respectively.
Brokerage services income, which includes revenues from the sale of mutual funds and
annuities and securities brokerage fees, totaled $65 million in 2015, $67 million in 2014 and $66
million in 2013. Trading account and foreign exchange activity resulted in gains of $31 million in
2015, $30 million in 2014 and $41 million in 2013. As compared with 2014, higher activity in 2015
related to interest rate swap transactions executed on behalf of commercial customers was largely
offset by decreased market values of trading account assets held in connection with deferred
compensation arrangements and lower gains associated with foreign exchange activities. The
decrease in trading account and foreign exchange gains from 2013 to 2014 largely reflects lower
levels of 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. There were no significant gains or losses on
investment securities in 2014 or 2015. 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
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response to changing regulatory capital and liquidity standards. Other-than-temporary impairment
losses of $10 million were recorded in 2013. 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 2015 or 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 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 $14 million in 2015, compared with $17
million and $16 million in 2014 and 2013, 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 $477 million in 2015, compared with $400 million in
2014 and $454 million in 2013. The increase in 2015 as compared with 2014 reflects the $45 million
gain from the sale of the trade processing business, $15 million of gains from the sale of equipment
previously leased to commercial customers and higher loan syndication fees. Reflected in other
revenues from operations 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. Those latter fees totaled $6 million in 2015, $11 million
in 2014 and $4 million in 2013.
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Included in other revenues from operations were the following significant components. Letter
of credit and other credit-related fees were $134 million, $129 million and $132 million in 2015, 2014
and 2013, respectively. Tax-exempt income earned from bank owned life insurance, which includes
increases in the cash surrender value of life insurance policies and benefits received, totaled $53
million in 2015, compared with $50 million in 2014 and $56 million in 2013. Revenues from merchant
discount and credit card fees were $105 million in 2015, $96 million in 2014 and $84 million in 2013.
The continued trend of higher revenues since 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 aggregated $38 million in 2015 compared with $42
million in each of 2014 and 2013. Automated teller machine usage fees totaled $14 million, $15
million and $17 million in 2015, 2014 and 2013, respectively. Gains from sales of equipment
previously leased to commercial customers were $17 million in 2015 and $2 million in 2014. Similar
gains in 2013 were less than $1 million.
Other Expense
Effective January 1, 2015, M&T adopted amended guidance from the FASB for accounting for
investments in qualified affordable housing projects under which the initial cost of such investments
is amortized to income tax expense in proportion to the tax benefit received. The adoption of this
accounting guidance did not have a significant effect on the Company’s consolidated financial
position or results of operations, but did result in the restatement of the consolidated financial
statements for 2014 and earlier years to remove net costs associated with qualified affordable
housing projects from other expense and include the amortization of the investments in income tax
expense. As a result, the amortization included in income tax expense was $47 million, $53 million,
and $48 million in 2015, 2014 and 2013, respectively.
Reflecting the application of the new accounting guidance, other expense totaled $2.82 billion
in 2015, compared with $2.69 billion in 2014 and $2.59 billion in 2013. Included in such amounts are
expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and
other intangible assets of $26 million, $34 million and $47 million in 2015, 2014 and 2013,
respectively, and merger-related expenses of $76 million in 2015 and $12 million in 2013. There were
no merger-related expenses during 2014. Exclusive of those nonoperating expenses, noninterest
operating expenses aggregated $2.72 billion in 2015, $2.66 billion in 2014 and $2.53 billion in 2013.
The most significant factors contributing to the increase in 2015 were costs associated with the
operations obtained in the Hudson City acquisition, higher costs for salaries and employee benefits
and increased contributions to The M&T Charitable Foundation, partially offset by lower
professional services costs. 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.
Salaries and employee benefits expense in 2015 totaled $1.55 billion, compared with $1.40
billion and $1.36 billion in 2014 and 2013, respectively. Excluding $51 million of merger-related
expenses predominantly related to severance for former Hudson City employees, the higher expense
level in 2015 as compared to 2014 was largely attributable to the impact of annual merit increases for
employees, higher pension and incentive compensation costs, and the impact of the additional
employees formerly associated with Hudson City. 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. Stock-
based compensation aggregated $67 million in 2015, $65 million in 2014 and $55 million in 2013.
Reflecting employees associated with the operations obtained from Hudson City, the number of full-
time equivalent employees rose to 16,979 at December 31, 2015, compared with 15,312 and 15,368 at
December 31, 2014 and 2013, respectively.
The Company provides pension and other postretirement benefits (including a retirement
savings plan) for its employees. Expenses related to such benefits totaled $100 million in 2015, $63
million in 2014 and $87 million in 2013. The Company sponsors both defined benefit and defined
contribution pension plans. Pension benefit expense for those plans was $63 million in 2015, $28
million in 2014 and $53 million in 2013. Included in those amounts are $23 million in 2015, $22
million in 2014 and $21 million in 2013 for a defined contribution pension plan that the Company
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began on January 1, 2006. The increase in pension and other postretirement benefits expense in 2015
as compared with 2014 was largely reflective of a $31 million increase in amortization of actuarial
losses accumulated in the defined benefit pension plans. Similarly, the decline in pension and other
postretirement benefits expense in 2014 as compared with 2013 was the result of a $27 million
decrease in amortization of actuarial losses accumulated in the defined benefit pension plans at the
end of 2013. No contributions were required or made to the qualified defined benefit pension plan in
2015, 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 2014 the Society of Actuaries released new mortality tables that were used in the
determination of the benefit obligation beginning with December 31, 2014. The impact of that
revision was to increase the benefit obligations as of December 31, 2014 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 2015 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 4.39%; and a discount rate of 4.00%. 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 $350,000; and the discount
rate would have resulted in a decrease in pension expense of $7 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 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, 2015, the Company had cumulative
unrecognized actuarial losses of approximately $494 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 $45
million in 2015, $14 million in 2014 and $41 million in 2013. The decrease in the cumulative
unrecognized actuarial losses from $512 million at December 31, 2014 was primarily attributable to
the aforementioned amortization of unrealized losses in 2015 and the actuarial gain resulting from a
25 basis point increase in the discount rate used to measure the benefit obligation as of December 31,
2015. Offsetting those gains in 2015 were actuarial losses resulting from investment returns on the
qualified plan assets that were lower than the expected return on those assets.
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
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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, 2015, the combined benefit obligations of the Company’s
defined benefit postretirement plans exceeded the fair value of the assets of such plans by
approximately $501 million. Of that amount, $283 million was related to the non-qualified pension
and other postretirement benefit plans (including $92 million associated with acquired Hudson City
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 $218 million as of December 31, 2015 and $172 million as of December 31, 2014.
Contributing to that change in the funded status was the acquisition of Hudson City in which the
projected benefit obligation of the acquired qualified plan exceeded the fair value of assets by
approximately $28 million. The remaining change was the result of lower asset balances at the end of
2015 partially offset by a reduction in the projected benefit obligation as a result of increasing the
discount rate used to measure such obligation to 4.25% at December 31, 2015 from 4.00% at
December 31, 2014. 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 $501 million at
December 31, 2015. Accordingly, as of December 31, 2015 the Company recorded an additional
postretirement benefit adjustment of $490 million. After applicable tax effect, that adjustment
reduced accumulated other comprehensive income (and thereby shareholders’ equity) by $297
million. The result of this was a year-over-year decrease of $13 million to the additional minimum
postretirement benefit liability from $503 million recorded at December 31, 2014. After applicable
tax effect, the $13 million decrease in the additional required liability adjustment increased other
comprehensive income in 2015 by $9 million from the prior year-end amount of $306 million. In
determining the benefit obligation for defined benefit postretirement plans the Company used a
discount rate of 4.25% at December 31, 2015 and 4.00% at December 31, 2014. A 25 basis point
decrease in the assumed discount rate as of December 31, 2015 to 4.00% would have resulted in
increases in the combined benefit obligations of all defined benefit postretirement plans (including
pension and other plans) of $79 million. Under that scenario, the minimum postretirement liability
adjustment at December 31, 2015 would have been $569 million, rather than the $490 million that
was actually recorded, and the corresponding after tax-effect charge to accumulated other
comprehensive income at December 31, 2015 would have been $345 million, rather than the $297
million that was actually recorded. A 25 basis point increase in the assumed discount rate to 4.50%
would have decreased the combined benefit obligations of all defined benefit postretirement plans by
$75 million. Under this latter scenario, the aggregate minimum liability adjustment at December 31,
2015 would have been $415 million rather than the $490 million actually recorded and the
corresponding after tax-effect charge to accumulated other comprehensive income would have been
$252 million rather than $297 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.
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 $34 million in 2015 and $32 million in each of 2014 and 2013.
Expenses associated with the defined benefit and defined contribution pension plans and the
RSP totaled $97 million in 2015, $60 million in 2014 and $85 million in 2013. Expenses associated
with providing medical and other postretirement benefits were $3 million in 2015 and $2 million in
each of 2014 and 2013.
Excluding the nonoperating expense items already noted, nonpersonnel operating expenses
totaled $1.22 billion in 2015, compared with $1.25 billion in 2014 and $1.17 billion in 2013. The decline
in nonpersonnel operating expenses in 2015 as compared with 2014 was predominantly attributable
to lower expenses for professional services and litigation-related costs, offset, in part, by higher
charitable contributions of $28 million. Professional services costs related to BSA/AML activities,
79
compliance, capital planning and stress testing, risk management and other operational initiatives
were elevated throughout 2014. Litigation-related charges in 2014 were associated with pre-
acquisition activities of M&T’s Wilmington Trust entities. Similarly, the higher level of nonpersonnel
operating expenses in 2014 as compared with 2013 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.
Income Taxes
The provision for income taxes was $595 million in 2015, $576 million in 2014 and $627 million in
2013. The effective tax rates were 35.5% in 2015, 35.1% in 2014 and 35.5% in 2013. As noted earlier,
effective January 1, 2015 the Company adopted amended guidance from the FASB for accounting for
investments in qualified affordable housing projects, which resulted in the restatement of the
consolidated financial statements for 2014 and earlier years. The adoption of the guidance resulted in
higher effective tax rates than existed prior to such adoption. Income tax expense in 2015 reflected
two largely offsetting items. The Company attributed $11 million of non-deductible goodwill to the
basis of the trade processing business sold in April 2015, which reduced the recorded gain, but did
not result in an income tax benefit. During the fourth quarter of 2015, the provision for income taxes
was reduced by $5 million to reflect technology research credits related to 2011 through 2014 that
were accepted by the Internal Revenue Service in December 2015. 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 35.6%. 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
Assets and revenues associated with international activities represent less than 1% of the Company’s
consolidated assets and revenues. International assets included $265 million and $213 million of
loans to foreign borrowers at December 31, 2015 and 2014, respectively. Deposits in the Company’s
office in the Cayman Islands totaled $170 million at December 31, 2015 and $177 million at
December 31, 2014. 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 banking office in Ontario, Canada as of December 31, 2015 were
$95 million and $35 million, respectively, compared with $93 million and $41 million, respectively, at
December 31, 2014. The Company also offers trust-related services in Europe. Revenues from
providing such services during 2015, 2014 and 2013 were approximately $26 million, $31 million and
$26 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.
80
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 81% of the Company’s earning assets at
December 31, 2015, compared with 83% and 88% at December 31, 2014 and 2013, 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, 2015, M&T Bank had short-term and long-term credit facilities with the
FHLBs aggregating $20.5 billion. Outstanding borrowings under FHLB credit facilities totaled $3.1
billion and $1.2 billion at December 31, 2015 and 2014, respectively. Such borrowings were secured
by loans and investment securities. As a result of the Hudson City acquisition, the Company assumed
$2.0 billion of short-term borrowings from the FHLB of New York. Such borrowings have fixed rates
of interest and mature at various dates during 2016. M&T Bank and Wilmington Trust, N.A. had
available lines of credit with the Federal Reserve Bank of New York that aggregated approximately
$11.9 billion at December 31, 2015. 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, 2015 or December 31, 2014. During 2013, M&T Bank initiated a Bank Note
Program whereby M&T Bank may offer unsecured senior and subordinated notes. Notes issued
under that program totaled $5.5 billion at December 31, 2015 and $4.0 billion at December 31, 2014.
The proceeds of the issuances of borrowings under the Bank Note Program have been predominantly
utilized to purchase high-quality liquid assets to meet the requirements of the LCR.
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. However, pursuant to the Dodd-Frank Act, the Company’s junior
subordinated debentures associated with trust preferred securities have been phased-out of the
definition of Tier 1 capital. Effective January 1, 2015, 75% of such securities were excluded from the
Company’s Tier 1 capital, and beginning January 1, 2016, 100% were excluded. The amounts
excluded from Tier 1 capital are includable in total capital. In accordance with its 2015 capital plan,
in April 2015 M&T redeemed the junior subordinated debentures associated with the $310 million of
trust preferred securities of M&T Capital Trusts I, II and III. 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. Information
about the Company’s borrowings is included in note 9 of Notes to Financial Statements.
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 $99 million and $135 million at
December 31, 2015 and 2014, 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 $170 million and $177 million at December 31, 2015 and 2014, respectively. The
Company has also benefited from the placement of brokered deposits. The Company has brokered
interest-bearing transaction and brokered money-market deposit accounts which totaled $1.2 billion
and $1.1 billion at December 31, 2015 and 2014, 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
81
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.
Table 16
DEBT RATINGS
Moody’s
Standard
and Poor’s
Fitch
M&T Bank Corporation
Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A3
A3
A–
BBB+
M&T Bank
Short-term deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prime-1
Aa2
Long-term deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A2
Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A3
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A-1
A
A
A–
A
A–
F1
A+
A
A–
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 and less than $1 million were held at
December 31, 2015. The total amount of VRDBs outstanding backed by M&T Bank letters of credit
was $1.7 billion and $2.0 billion at December 31, 2015 and 2014, respectively. M&T Bank also serves
as remarketing agent for most of those bonds.
Table 17
MATURITY DISTRIBUTION OF SELECTED LOANS(a)
December 31, 2015
Demand
2016
2017-2020
After 2020
(In thousands)
Commercial, financial, etc.
Real estate — construction . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . $ 6,698,123
228,312
$ 2,793,943
2,254,510
$ 8,591,155
2,390,705
$ 910,574
263,313
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,926,435
$5,048,453
$10,981,860
$1,173,887
Floating or adjustable interest rates . . . . . . . .
Fixed or predetermined interest rates . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) The data do not include nonaccrual loans.
$ 9,490,265
1,491,595
$ 859,983
313,904
$10,981,860
$1,173,887
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, 2015 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
82
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, 2015 and the timing of the
expiration of such commitments.
Table 18
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
December 31, 2015
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 . . . . . . . . . . . . . . . . . . . $ 9,298,958 $2,842,903 $
Deposits at Cayman Islands
959,123 $
9,408 $ 13,110,392
office . . . . . . . . . . . . . . . . . . . . . . . . .
170,170
—
—
—
170,170
Federal funds purchased and
agreements to repurchase
securities . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . .
Long-term borrowings . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
150,546
1,981,636
1,106,613
96,308
79,549
—
—
4,171,994
173,921
41,057
—
—
3,578,887
111,408
26,177
—
—
1,796,364
110,533
45,076
150,546
1,981,636
10,653,858
492,170
191,859
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,883,780 $ 7,229,875 $ 4,675,595 $ 1,961,381 $ 26,750,631
Other commitments
Commitments to extend credit . . . . $ 9,373,814 $6,232,926 $4,462,044 $4,074,516 $24,143,300
3,330,013
Standby letters of credit . . . . . . . . . .
55,559
Commercial letters of credit . . . . . . .
Financial guarantees and
1,243,397
274
1,602,143
10,851
372,002
44,434
112,471
—
indemnification contracts . . . . . . .
182,607
255,678
524,204
1,831,833
2,794,322
Commitments to sell real estate
loans . . . . . . . . . . . . . . . . . . . . . . . . .
782,885
—
—
—
782,885
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,952,300 $ 7,732,275 $5,402,684 $6,018,820 $ 31,106,079
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, 2015 approximately $1.7
billion was available for payment of dividends to M&T from banking subsidiaries. Information
regarding the long-term debt obligations of M&T is included in note 9 of Notes to Financial
Statements.
83
Table 19
MATURITY AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES
December 31, 2015
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$103,274
$ 196,723
$
.17%
1.15%
$
—
—
—
—
$
299,997
.81%
Obligations of states and political subdivisions
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
365
7.37%
2,436
7.01%
1,239
1.33%
1,988
3.62%
6,028
4.70%
Mortgage-backed securities(b)
Government issued or guaranteed
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
576,694
2,447,729
3,452,726
5,209,479
11,686,628
2.50%
2.51%
2.51%
2.44%
2.48%
Privately issued
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
3.05%
Other debt securities
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,744
2.17%
Equity securities
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Total investment securities available for sale
49
4.60%
4,076
4.03%
—
—
—
—
—
—
74
4.06%
1,702
6.18%
157,751
166,273
5.13%
5.07%
—
—
—
—
83,671
.52%
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
683,102
2,651,013
3,455,667
5,369,218
12,242,671
2.15%
2.41%
2.51%
2.52%
2.46%
Investment securities held to maturity
Obligations of states and political subdivisions
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,174
3.89%
72,120
5.34%
12,137
6.09%
—
—
118,431
5.00%
Mortgage-backed securities(b)
Government issued or guaranteed
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88,108
2.82%
385,686
530,756
1,549,062
2,553,612
2.83%
2.83%
2.79%
2.81%
Privately issued
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,366
2.34%
26,131
2.37%
34,699
2.42%
113,895
181,091
2.65%
2.56%
Other debt securities
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
6,575
5.73%
6,575
5.73%
Total investment securities held to maturity
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment securities
128,648
483,937
577,592
1,669,532
2,859,709
3.08%
—
3.18%
—
2.87%
2.80%
2.89%
—
—
554,059
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 811,750
$ 3,134,950
$4,033,259
$7,038,750
$15,656,439
2.30%
2.53%
2.56%
2.59%
2.45%
(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.
84
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, 2015
(In thousands)
$ 1,122,133
746,727
1,846,740
1,571,492
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,287,092
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 was January 1, 2016, subject to a phase-
in period. The Company has taken steps as noted herein to enhance its liquidity and is in compliance
with the phase-in requirements of the rules.
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, 2015, 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.
85
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 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, 2015 and 2014 the estimated impact on net interest
income from non-trading financial instruments in the base scenario described above 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
2015
2014
(In thousands)
+ 200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 243,958
145,169
+ 100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(99,603)
– 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(145,106)
– 100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$246,028
134,393
—(a)
(74,634)
(a) The Company did not analyze this scenario as of December 31, 2014.
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 increases in interest rates during a twelve-
month period of 100 and 200 basis points, as compared with the assumed base scenario, as well as
gradual decreases of 50 and 100 basis points. In the declining rate scenario, the rate changes may be
limited to lesser amounts such that interest rates remain positive at all points of the yield curve. In
2015, the Company suspended the -200 basis point scenario due to the persistent low level of interest
rates. This scenario will be reinstated if and when interest rates rise sufficiently to make the analysis
more meaningful. 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.
86
Table 22
CONTRACTUAL REPRICING DATA
December 31, 2015
Three Months
or Less
Four to Twelve
Months
One to
Five Years
After
Five Years
Total
(Dollars in thousands)
Loans and leases, net . . . . . . . $ 46,877,145
642,272
Investment securities . . . . . .
7,655,272
Other earning assets . . . . . . .
$ 5,585,890
789,077
775
$ 18,463,915 $16,562,549 $ 87,489,499
15,656,439
10,723,070
7,656,047
—
3,502,020
—
Total earning assets . . . . . .
55,174,689
6,375,742
21,965,935
27,285,619
110,801,985
Interest-checking
deposits . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . .
Time deposits . . . . . . . . . . . . .
Deposits at Cayman Islands
office . . . . . . . . . . . . . . . . . .
Total interest-bearing
2,939,274
46,627,370
2,977,150
—
—
6,321,808
—
—
3,802,026
2,939,274
—
— 46,627,370
13,110,392
9,408
170,170
—
—
—
170,170
deposits . . . . . . . . . . . . . .
52,713,964
6,321,808
3,802,026
9,408
62,847,206
Short-term borrowings . . . . .
Long-term borrowings . . . . .
554,220
1,783,880
1,577,962
804,967
—
6,766,051
—
1,298,960
2,132,182
10,653,858
Total interest-bearing
liabilities . . . . . . . . . . . . .
55,052,064
8,704,737
10,568,077
1,308,368
75,633,246
Interest rate swap
agreements . . . . . . . . . . . . .
(1,400,000)
500,000
900,000
—
—
Periodic gap . . . . . . . . . . . . . . $ (1,277,375) $(1,828,995) $12,297,858 $ 25,977,251
Cumulative gap . . . . . . . . . . .
35,168,739
Cumulative gap as a % of
(3,106,370)
(1,277,375)
9,191,488
total earning assets . . . . . .
(1.2)%
(2.8)%
8.3%
31.7%
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 limited 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 trading account 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 trading account 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
aggregated $18.4 billion at December 31, 2015 and $17.6 billion at December 31, 2014. The notional
amounts of foreign currency and other option and futures contracts entered into for trading account
purposes were $1.6 billion and $1.3 billion at December 31, 2015 and 2014, respectively. Although the
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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 $274 million and $161
million, respectively, at December 31, 2015 and $308 million and $203 million, respectively, at
December 31, 2014. Included in trading account assets at December 31, 2015 and 2014 were $24
million and $27 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, 2015 and 2014 were $28 million and $30 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. Also included in the trading account were
investments in mutual funds and other assets that the Company was required to hold under terms of
certain non-qualified supplemental retirement and other benefit plans that were assumed by the
Company in various acquisitions. Those assets totaled $33 million and $25 million at December 31,
2015 and 2014, respectively.
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 $16.2 billion at December 31, 2015 and represented 13.17% of total assets,
compared with $12.3 billion or 12.76% at December 31, 2014 and $11.3 billion or 13.28% at
December 31, 2013.
Included in shareholders’ equity was preferred stock with financial statement carrying values
of $1.2 billion at December 31, 2015 and 2014. 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 and when declared, are 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 $14.9 billion or $93.60 per share, at December 31, 2015
compared with $11.1 billion, or $83.88 per share, at December 31, 2014 and $10.4 billion, or $79.81 per
share, at December 31, 2013. In conjunction with the acquisition of Hudson City, M&T issued
25,953,950 common shares, which added $3.1 billion to common shareholders’ equity on
November 1, 2015. Tangible equity per common share, which excludes goodwill and core deposit and
other intangible assets and applicable deferred tax balances, was $64.28 at December 31, 2015,
compared with $57.06 and $52.45 at December 31, 2014 and 2013, respectively. The Company’s ratio
of tangible common equity to tangible assets was 8.69% at December 31, 2015, compared with 8.11%
and 8.39% at December 31, 2014 and 2013, respectively. Reconciliations of total common
shareholders’ equity and tangible common equity and total assets and tangible assets as of
December 31, 2015, 2014 and 2013 are presented in table 2. During 2015, 2014 and 2013, the ratio of
average total shareholders’ equity to average total assets was 13.00%, 13.13% and 12.82%, respectively.
The ratio of average common shareholders’ equity to average total assets was 11.79%, 11.83% and
11.77% in 2015, 2014 and 2013, 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
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adjustments to reflect the funded status of defined benefit pension and other postretirement plans.
Net unrealized gains on investment securities reflected in shareholders’ equity, net of applicable tax
effect, were $48 million, or $.30 per common share, at December 31, 2015, compared with $127
million, or $.96 per common share, at December 31, 2014 and $34 million, or $.26 per common share,
at December 31, 2013. Information about unrealized gains and losses as of December 31, 2015 and
2014 is included in note 3 of Notes to Financial Statements.
Reflected in net unrealized gains at December 31, 2015 were pre-tax effect unrealized losses of
$71 million on available-for-sale investment securities with an amortized cost of $4.4 billion and pre-
tax effect unrealized gains of $175 million on securities with an amortized cost of $7.7 billion. The
pre-tax effect unrealized losses reflect $20 million of losses on trust preferred securities issued by
financial institutions having an amortized cost of $124 million and an estimated fair value of $104
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.
As of December 31, 2015, based on a review of each of the 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 $24 million and $29 million, respectively,
at December 31, 2015 and the Company does 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.
The Company assessed 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, 2015 and 2014, the Company had in its held-to-maturity portfolio privately issued
mortgage-backed securities with an amortized cost basis of $181 million and $202 million,
respectively, and a fair value of $142 million and $158 million, respectively. At December 31, 2015,
87% of the mortgage-backed securities were in the most senior tranche of the securitization
structure with 28% 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 16% at December 31,
2015, 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, 2015. The weighted-average default percentage and loss severity assumptions utilized
in the Company’s internal modeling were 33% and 81%, respectively. The Company has concluded
that as of December 31, 2015, 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.
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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 $297
million, or $1.86 per common share, at December 31, 2015, $306 million, or $2.31 per common share,
at December 31, 2014 and $98 million, or $.75 per common share, at December 31, 2013. The decrease
in such adjustment at December 31, 2015 as compared with December 31, 2014 was a result of several
factors including a 25 basis point increase in the discount rate used to measure the benefit
obligations of the defined benefit plans at December 31, 2015 as compared with a year earlier, along
with the amortization during 2015, as required under GAAP, of unrealized losses previously recorded
in accumulated other comprehensive income as of December 31, 2014. Both of these factors had the
effect of decreasing the required adjustment, but were largely offset by investment returns on plan
assets that were less than the assumed rate of return. The increase in the adjustment at 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. 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.
On March 12, 2015, M&T announced that the Federal Reserve did not object to M&T’s
proposed 2015 Capital Plan. Accordingly, M&T was allowed to maintain a quarterly common stock
dividend of $.70 per share; continue to pay dividends and interest on other equity and debt
instruments included in regulatory capital, including preferred stock, trust preferred securities and
subordinated debt that were outstanding at December 31, 2014, consistent with the contractual terms
of those instruments; repurchase up to $200 million of common shares during the first half of 2016;
and redeem or repurchase up to $310 million of trust preferred securities. As previously noted, those
latter securities were redeemed in April 2015. Common and preferred dividends are subject to
approval by M&T’s Board of Directors in the ordinary course of business.
Cash dividends declared on M&T’s common stock totaled $375 million in 2015, compared with
$371 million and $365 million in 2014 and 2013, respectively. Dividends per common share totaled
$2.80 in each of 2015, 2014 and 2013. Dividends of $81 million in 2015, $76 million in 2014 and $53
million in 2013 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 2015, 2014 or 2013. However, M&T
commenced a program to repurchase its common shares in accordance with the approved 2015
Capital Plan, and in January 2016 repurchased 948,545 shares for $100 million.
M&T and its subsidiary banks are required to comply with applicable capital adequacy
standards established by the federal banking agencies. In July 2013, the Federal Reserve Board, the
OCC and the FDIC approved 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.
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 its
subsidiaries, 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
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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.
Pursuant to the New Capital Rules, the minimum capital ratios as of January 1, 2015 are as
follows:
• 4.5% CET1 to risk-weighted assets;
• 6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;
• 8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and
• 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial
statements (known as the “leverage ratio”), as defined in the regulation.
Pursuant to the New Capital Rules, non-advanced approaches banking organizations,
including M&T, were allowed to make a one-time permanent election to exclude the effects of
certain accumulated other comprehensive income or loss items reflected in shareholders’ equity
under U.S. GAAP. M&T made that election during the first quarter of 2015. 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, in
2015 only 25% of M&T’s trust preferred securities were 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. 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.”
The regulatory capital requirements applicable to M&T and its bank subsidiaries as of
December 31, 2015 are presented in note 23 of Notes to Financial Statements.
Fourth Quarter Results
Reflecting the impact of merger-related expenses associated with the acquisition of Hudson City, net
income during the fourth quarter of 2015 was $271 million, down from $278 million in the year-
earlier quarter. Diluted and basic earnings per common share were each $1.65 in the final quarter of
2015, compared with $1.92 and $1.93 of diluted and basic earnings per common share, respectively, in
the corresponding 2014 quarter. The annualized rates of return on average assets and average
common shareholders’ equity for the fourth quarter of 2015 were .93% and 7.22%, respectively,
compared with 1.12% and 9.10%, respectively, in the year-earlier quarter.
Net operating income aggregated $338 million in the fourth quarter of 2015, compared with
$282 million in 2014’s final quarter. Diluted net operating earnings per common share were $2.09
and $1.95 in the fourth quarters of 2015 and 2014, respectively. The annualized net operating returns
on average tangible assets and average tangible common equity in the fourth quarter of 2015 were
1.21% and 13.26%, respectively, compared with 1.18% and 13.55%, respectively, in the similar quarter
of 2014. Reconciliations of GAAP results with non-GAAP results for the quarterly periods of 2015 and
2014 are provided in table 24.
Net interest income expressed on a taxable-equivalent basis totaled $813 million in the final
2015 quarter, 18% above $688 million earned in the year-earlier period. The growth in such income
resulted predominantly from an increase in average loans outstanding, which rose $15.3 billion or
23% to $81.1 billion in the final 2015 quarter from $65.8 billion in the year-earlier quarter. Also
contributing to the improvement was a 2 basis point widening of the net interest margin, to 3.12% in
the fourth quarter of 2015 from 3.10% in the year-earlier quarter. The increase in average loan
balances was largely attributable to loans obtained on November 1, 2015 associated with the
acquisition of Hudson City, which added $12.5 billion to average loans in 2015’s final quarter.
Average commercial loan and lease balances were $20.2 billion in the recent quarter, up $1.1 billion
or 6% from $19.1 billion in the final quarter of 2014. Commercial real estate loans averaged $29.0
billion in the fourth quarter of 2015, up $1.9 billion or 7% from $27.1 billion in the year-earlier
quarter. The Hudson City transaction added $151 million to average commercial real estate loans in
the final 2015 quarter. The growth in commercial loans and commercial real estate loans reflects
higher loan demand by customers. Average residential real estate loans outstanding rose $11.7 billion
to $20.4 billion in the recent quarter from $8.7 billion in the fourth quarter of 2014. That increase
91
reflects the impact of the $18.6 billion of residential real estate loans obtained with the Hudson City
acquisition on November 1, 2015, which added $12.2 billion to average loans during the fourth
quarter. Included in the residential real estate loan portfolio were average balances of loans held for
sale, which totaled $368 million in the recent quarter, compared with $435 million in the fourth
quarter of 2014. Consumer loans averaged $11.5 billion in the recent quarter, up $614 million from
$10.9 billion in the fourth quarter of 2014. That increase was largely due to higher average balances
of automobile loans and also reflects $110 million of average consumer loans added in the Hudson
City transaction. Total loans at December 31, 2015 increased $18.9 billion to $87.5 billion from $68.5
billion at September 30, 2015. That growth reflects the $19.0 billion of loans obtained with the
Hudson City acquisition on November 1, 2015, of which $18.4 billion remained at December 31, 2015.
The net interest spread for the fourth quarter of 2015 was 2.94%, up 2 basis points from 2.92% in the
year-earlier period. The yield on earning assets was 3.48% in the final 2015 quarter, up 4 basis points
from the fourth quarter of 2014. That improvement was predominantly due to significantly higher
average balances of loans. The rate paid on interest-bearing liabilities in the fourth quarter of 2015
and 2014 was .54% and .52%, respectively. The contribution of net interest-free funds to the
Company’s net interest margin was .18% in each of the fourth quarters of 2015 and 2014. As a result,
the Company’s net interest margin widened to 3.12% in the final quarter of 2015 from 3.10% in the
year-earlier period.
The provision for credit losses was $58 million during the final 2015 quarter, compared with
$33 million in the year-earlier period. A $21 million provision for credit losses was recorded in the
fourth quarter of 2015, in accordance with GAAP, related to loans obtained in the Hudson City
acquisition that had a fair value in excess of outstanding principal. GAAP provides that an allowance
for credit losses on such loans be recorded beyond the recognition of the fair value of the loans at the
acquisition date. Net charge-offs of loans were $36 million in the fourth quarter of 2015, representing
an annualized .18% of average loans and leases outstanding, compared with $32 million or .19%
during the fourth quarter of 2014. Net charge-offs included: residential real estate loans of $2 million
in the recently completed quarter, compared with $3 million in 2014’s fourth quarter; net recoveries
of commercial real estate loans of $2 million (including recoveries of $5 million on loans to builders
and developers of residential real estate properties) in the final 2015 quarter, compared with net
charge-offs of less than $1 million in the year-earlier quarter; net recoveries on commercial loans of
$3 million in 2015, compared with net charge-offs of $9 million in 2014; and net charge-offs of
consumer loans of $39 million in the recent quarter, compared with $19 million 2014’s fourth
quarter. Reflected in net recoveries on commercial loans and leases in the fourth quarter of 2015
were $10 million of recoveries of previously charged-off loan balances with a motor vehicle-related
parts wholesaler. Net charge-offs of consumer loans in 2015’s final quarter included a $20 million
charge-off associated with a personal usage loan obtained in a previous acquisition.
Other income totaled $448 million in the recent quarter, down from $452 million in the final
quarter of 2014. That modest decline resulted from lower trust income and residential mortgage
banking revenues associated with loan servicing activities, partially offset by higher loan syndication
fees and commercial mortgage banking revenues. The decline in trust income was predominantly
attributable to the impact of the second quarter 2015 divestiture of the Company’s trade processing
business within its retirement services business.
Other expense in the fourth quarter of 2015 totaled $786 million, compared with $666 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 $10 million and $7
million in the fourth quarters of 2015 and 2014, respectively, and merger-related expenses of $76
million in the fourth quarter of 2015. There were no merger-related expenses in the fourth quarter of
2014. Exclusive of those nonoperating expenses, noninterest operating expenses were $701 million in
the fourth quarter of 2015, compared with $659 million in the corresponding quarter of 2014.
Substantially all of the increase came from the impact of the operations obtained in the Hudson City
acquisition. Excluding the impact of the acquisition, higher expenses for salaries and employee
benefits, reflecting the impact of merit increases and higher pension expense, were offset by lower
professional services and other costs. The Company’s efficiency ratio during the fourth quarters of
2015 and 2014 was 55.5% and 57.8%, 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
2015 and 2014.
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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 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. During 2015, certain methodology and
organizational changes were made and, accordingly, the financial information for the Company’s
reportable segments for 2014 and 2013 has been restated to conform with the methods and
assumptions used in 2015. Financial information about the Company’s segments, including the
impact of the changes noted above, 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 contributed net
income of $99 million in each of the years ended December 31, 2015 and 2014. Declines in 2015 in net
interest income of $7 million and service charges on deposit accounts of $2 million were offset by a
$3 million decrease in the provision for credit losses, due to lower net charge-offs, a $4 million
increase in merchant discount and credit card fees and lower costs for FDIC assessments of $2
million. The decline in net interest income resulted from a narrowing of the net interest margin on
deposits of 18 basis points offset, in part, by an increase in average outstanding deposit balances of
$615 million. Net income for this segment aggregated $101 million in 2013. The modest decline in net
income in 2014 as compared with 2013 reflected lower net interest income of $20 million, largely
offset by an $8 million decrease in the provision for credit losses, due to lower net charge-offs, higher
merchant discount and credit card fees of $4 million and a decline in other operating costs. The
lower net interest income reflected a 42 basis point narrowing of the net interest margin on deposits,
partially offset by a $478 million increase in average deposit balances.
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. The Commercial Banking segment recorded
net income of $431 million in 2015, up from $403 million in 2014. That 7% improvement resulted
from: a $7 million rise in net interest income, reflecting growth in average outstanding loan and
deposit balances of $1.3 billion and $569 million, respectively, partially offset by a narrowing of the
net interest margin on loans and deposits of 8 basis points and 6 basis points, respectively; increased
gains from the sale of equipment previously leased to commercial customers of $15 million; higher
credit-related and other fees of $8 million; and an $8 million decline in the provision for credit losses,
reflecting a partial recovery of $10 million related to a relationship with a motor vehicle-related parts
wholesaler previously charged-off in 2013. Net income for the Commercial Banking segment in 2013
was $407 million. The modest decline in 2014 as compared with 2013 was largely due to a $40
million decrease in net interest income and lower credit-related fees of $10 million, largely offset by a
$44 million decline 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 previously
noted. The lower net interest income was predominantly attributable to a narrowing of the net
interest margin on deposits and loans of 48 basis points and 8 basis points, respectively, partially
offset by higher average outstanding balances of loans and deposits of $1.2 billion and $826 million,
respectively.
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The Commercial Real Estate segment provides credit and deposit services to its customers. Real
estate securing loans in this segment is generally located in New York State, Maryland, New Jersey,
Pennsylvania, Delaware, Connecticut, Virginia, West Virginia, the District of Columbia and the western
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. Net income recorded by the Commercial Real Estate segment was
$341 million in 2015, 8% above the $316 million recorded in 2014. That improvement reflects increases
in net interest income and mortgage banking revenues. The $23 million rise in net interest income
resulted largely from increases in average outstanding loan and deposit balances of $1.4 billion and
$393 million, respectively, partially offset by a narrowing of the net interest margin on deposits and
loans of 11 basis points and 6 basis points, respectively. The increase in mortgage banking revenues of
$13 million was largely reflective of an increase in loans originated for sale and higher servicing
revenues. Net income contributed by the Commercial Real estate segment totaled $329 million in 2013.
The lower net income in 2014 as compared to 2013 was predominantly attributable to a $35 million
decrease in net interest income, resulting from a narrowing of the net interest margin on deposits and
loans of 52 basis points and 12 basis points, respectively, offset, in part, by higher average outstanding
balances of deposits and loans of $402 million and $131 million, respectively. The lower net interest
income was partially offset by a $14 million decrease in the provision for credit losses, primarily due to
lower net charge-offs, and a lower FDIC assessment allocation.
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. Net contribution from the Discretionary Portfolio segment totaled $52 million in 2015,
8% higher than $48 million in 2014. That improvement reflected the impact of residential real estate
loans obtained in the acquisition of Hudson City. Partially offsetting the favorable impact of those
loans on net interest income was a 27 basis point narrowing of the net interest margin on investment
securities, resulting from the Company’s allocation of funding charges associated with those assets. A
$9 million year-over-year decrease in the provision for credit losses also contributed to the
improvement in the segment’s net income. Those favorable factors were partially offset by higher
loan servicing and other costs. Net income for the Discretionary Portfolio segment in 2013 was $32
million. Reflected in this segment’s results for 2013 were net losses from investment securities of $56
million (pre-tax), including $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 and $10 million of other-than-temporary impairment charges, predominantly
related to certain of those privately issued mortgage-backed securities. Partially offsetting those
losses were $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. Also
contributing to the improvement from 2013 to 2014 was a decrease in intersegment charges due to a
lower proportion of residential real estate loans being retained and originated for portfolio rather
than being sold and a $5 million increase in net interest income. The higher net interest income was
largely attributable to a $4.9 billion increase in average balances of investment securities and a 14
basis point widening of the net interest margin on loans.
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. 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
loans and also sub-services residential real estate loans for others. Residential real estate loans held
for sale are included in this segment. Net income for the Residential Mortgage Banking segment was
$89 million in 2015, up 5% from $85 million in 2014. The improved performance in 2015 resulted
from lower amortization of capitalized servicing rights of $19 million (reflecting lower prepayment
trends), partially offset by increased professional services, personnel costs and centrally-allocated
loan servicing expenses. Net income contributed by the Residential Mortgage Banking segment was
$92 million in 2013. The $8 million decline in net income in 2014 as compared to 2013 was due to the
following significant factors: a $71 million decline in loan origination and sales revenues (including
94
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; and a $16 million decline in net interest income, attributable to a $637 million decrease in
average loan balances and a 46 basis point narrowing of the net interest margin on deposits. Largely
offsetting those unfavorable factors was an $80 million increase in revenues from servicing
residential real estate loans (including intersegment revenues), predominantly the result of sub-
servicing activities.
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, Maryland, New Jersey, Pennsylvania,
Delaware, Connecticut, Virginia, West Virginia and the District of Columbia. 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. Also included in this segment are
consumer loans and deposits obtained in the acquisition of Hudson City. Net income for the Retail
Banking segment totaled $268 million in 2015, compared with $273 million in 2014. An $8 million
rise in net interest income, largely due to increases in average outstanding loan balances, and a $4
million decline in the provision for credit losses, largely due to lower net charge-offs, were more than
offset by a $6 million decline in fees earned for providing deposit account services, a $5 million
decrease in servicing revenues related to securitized automobile loans, and higher operating
expenses, including expenses associated with operations added in the Hudson City acquisition. This
segment’s net income declined 15% in 2014 from $321 million in 2013. The primary contributors to
that decline were: a $53 million decrease in net interest income, largely due to a 15 basis point
narrowing of the net interest margin on deposits and a $537 million decrease in average outstanding
loan balances; a $17 million decline in service fee income resulting predominantly from lower service
charges on deposit accounts; and 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.
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, including the
November 2015 Hudson City transaction, M&T’s share of the operating losses of BLG, merger-related
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 $199 million,
$158 million and $145 million in 2015, 2014 and 2013, respectively. The most significant factors
contributing to the unfavorable performance in 2015 as compared with 2014 include: higher personnel-
related expenses, including the impact of merger-related expenses and increased pension costs; a
decline in trust income, predominantly due to the impact of the sale of the trade processing business
within the retirement services division of ICS in April 2015; and higher charitable contributions. Those
unfavorable factors were offset, in part, by lower professional services costs, largely related to elevated
2014 costs associated with BSA/AML and other company-wide initiatives, the $45 million (pre-tax)
gain from the sale of the trade processing business in April 2015, and the favorable impact from the
Company’s allocation methodologies. 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 associated with issues that were alleged to
occur at Wilmington Trust prior to its acquisition by M&T in 2011. 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
and the favorable impact from the Company’s allocation methodologies for internal transfers for
funding charges and credits associated with earning assets and interest-bearing liabilities of the
Company’s reportable segments and the provision for credit losses.
95
Recent Accounting Developments
As previously noted, the Company adopted amended accounting guidance for investments in
qualified affordable housing projects under which the initial cost of investments in qualified
affordable housing projects is amortized in proportion to the tax credits and other tax benefits
received from such projects and recognized in the income statement as a component of income tax
expense. As required, the guidance was applied retrospectively to all periods presented. The
adoption of this guidance did not have a significant effect on the Company’s consolidated financial
position or results of operations, but did result in the restatement of the consolidated statement of
income for the years ended December 31, 2014 and 2013 to remove $53 million and $48 million,
respectively, of 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.
The Company amortized $47 million of its investments in qualified affordable housing projects to
income tax expense during the year ended December 31, 2015.
In the first quarter of 2015, the Company adopted amended accounting guidance from the
FASB related to 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.
The adoption of this guidance did not have a significant effect on the Company’s consolidated
financial position or results of operations.
Effective January 1, 2015, the Company adopted amended accounting guidance for
repurchase-to-maturity transactions and repurchase financings. The adoption had no impact on the
Company’s consolidated financial position or results of operations. The Company has made the
required disclosures in note 9 of Notes to Financial Statements.
In January 2015, the Company also adopted 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 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. The Company’s adoption of this guidance on January 1, 2015 did not have a significant
effect on the Company’s consolidated financial position or results of operations. The Company has
made the required disclosures in note 4 of Notes to Financial Statements.
In January 2016, the FASB issued amended guidance related to recognition and measurement
of financial assets and liabilities. The amended guidance requires that equity investments (excluding
those accounted for under the equity method of accounting or those that result in consolidation of
the investee) to be measured at fair value with changes in fair value recognized in net income. An
entity can elect to measure equity investments that do not have readily determinable fair values at
cost less impairment, plus or minus changes resulting from observable price changes in orderly
transactions for the identical or similar investment of the same issuer. The impairment assessment of
equity investments without readily determinable fair values is simplified by requiring a qualitative
assessment to identify impairment. When a qualitative assessment indicates impairment exists, an
entity is required to measure the investment at fair value. The guidance eliminates the requirement
for public business entities to disclose the method and significant assumptions used to estimate the
fair value that is required to be disclosed for financial instruments measured at amortized cost on the
balance sheet. Further, the guidance requires public entities to use the exit price when measuring the
96
fair value of financial instruments for disclosure purposes. The guidance also requires an entity to
present separately in other comprehensive income, a change in the instrument-specific credit risk
when the entity has elected to measure a liability at fair value in accordance with the fair value
option. Separate presentation of financial assets and financial liabilities by measurement category
and type of instrument on the balance sheet or accompanying notes to the financial statements is
required. The guidance also clarifies that an entity should evaluate the need for a valuation allowance
on a deferred tax asset related to available-for-sale securities in combination with the entity’s other
deferred tax assets. This guidance is effective for annual periods and interim periods within those
annual periods beginning after December 15, 2017. The Company is evaluating the impact the
guidance could have on its consolidated financial statements.
In September 2015, the FASB issued amended guidance for measurement-period adjustments
related to business combinations. The amended guidance requires that an acquirer recognize
adjustments to provisional amounts that are identified during the measurement period in the
reporting period in which the adjustment amounts are determined. The acquirer will be required to
record, in the same period’s financial statements, the effect on earnings of changes in depreciation,
amortization, or other income effects, if any, as a result of the change to the provisional amounts,
calculated as if the accounting had been completed at the acquisition date. This guidance is effective
for adjustments to provisional amounts that occur in annual periods and interim periods within
those annual periods beginning after December 15, 2015. The Company does not expect the amended
guidance to have a material impact on its consolidated financial statements.
In May 2015, the FASB issued amended disclosure guidance for investments in certain entities
that calculate net asset value per share (or its equivalent). The amended guidance removes the
requirement to categorize within the fair value hierarchy all investments for which fair value is
measured using the net asset value per share practical expedient. The amendments also remove the
requirement to make certain disclosures for all investments that are eligible to be measured at fair
value using the net asset value per share practical expedient. Instead, those disclosures are limited to
investments for which the entity has elected to measure the fair value using that practical expedient.
This guidance is effective for annual periods and interim periods within those annual periods
beginning after December 15, 2015. The Company does not expect the amended guidance to have a
material impact on its consolidated financial statements.
In April 2015, the FASB issued amended accounting guidance for debt issuance costs. The
amended guidance requires that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.
This guidance is effective for annual periods and interim periods within those annual periods
beginning after December 15, 2015. The Company does not expect a material change in the
presentation of its consolidated financial position upon adoption of this amended guidance.
In February 2015, the FASB issued amended accounting guidance relating to the consolidation
of variable interest entities to modify the evaluation of whether limited partnerships and similar legal
entities are variable interest entities or voting interest entities and to eliminate the presumption that
a general partner should consolidate a limited partnership. The amended guidance also eliminates
certain conditions in the assessment of whether fees paid by a legal entity to a decision maker or a
service provider represent a variable interest in the legal entity and reduces the extent to which
related party arrangements cause an entity to be considered a primary beneficiary. The new guidance
eliminates the indefinite deferral of existing consolidation guidance for certain investment funds, but
provides a scope exception for reporting entities with interests in legal entities that are required to
comply with or operate in accordance with requirements similar to those in Rule 2a-7 of the
Investment Company Act of 1940 for registered money market funds. This guidance is effective for
annual and interim periods within those annual periods beginning after December 15, 2015. The
Company does not expect the amended guidance to have a material impact on its consolidated
financial statements.
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
97
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 to have a material impact on
its consolidated financial position or results of operations.
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. In August 2015, the FASB deferred the effective date of this
guidance by one year. The amended guidance is now effective for annual reporting periods beginning
after December 15, 2017, 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.
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
98
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 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.
99
Table 23
QUARTERLY TRENDS
Earnings and dividends
Fourth
Third
Second
First
Fourth
Third
Second
First
2015 Quarters
2014 Quarters
Amounts in thousands, except per share
Interest income (taxable-equivalent basis) . . . . . . . . . . . . . . . . . . . . . $908,734 $ 776,274 $766,374 $ 743,925 $ 762,619 $748,864 $ 740,139 $ 728,897
66,519
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78,499
73,964
77,226
74,772
95,333
65,176
77,199
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
813,401
58,000
448,108
786,113
699,075
44,000
439,699
653,816
665,426
689,148
30,000
38,000
497,027 440,203
686,375
696,628
687,847
33,000
451,643
666,221
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxable-equivalent adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
417,396 440,958
154,309
140,074
6,248
6,357
459,547
166,839
6,020
381,254 440,269
156,713
133,803
6,007
5,838
674,900
29,000
451,111
665,359
431,652
150,467
5,841
674,963
662,378
30,000
32,000
420,107
456,412
667,660 690,234
433,715
143,530
5,849
360,251
125,289
5,945
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270,965 $ 280,401 $286,688 $ 241,613 $ 277,549 $ 275,344 $284,336 $ 229,017
Net income available to common shareholders-diluted . . . . . . . . . . $248,059 $ 257,346 $ 263,481 $ 218,837 $ 254,239 $ 251,917 $260,695 $ 211,731
Per common share data
Basic earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.65 $
1.65
.70 $
1.94 $
1.93
.70 $
1.99 $
1.98
.70 $
1.66 $
1.65
.70 $
1.93 $
1.92
.70 $
1.92 $
1.91
.70 $
1.99 $
1.98
.70 $
1.63
1.61
.70
Average common shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150,027
150,718
132,630
133,376
132,356
133,116
132,049
132,769
131,450
132,278
131,265
132,128
130,856
131,828
130,212
131,126
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
.93%
7.22%
1.13%
8.93%
1.18%
9.37%
1.02%
7.99%
1.12%
9.10%
1.17%
9.18%
1.27%
9.79%
1.07%
8.22%
3.12%
3.14%
3.17%
3.17%
3.10%
3.23%
3.40%
3.52%
discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.91%
1.15%
1.17%
1.18%
1.20%
1.29%
1.36%
1.39%
Net operating (tangible) results(a)
Net operating income (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 337,613 $ 282,907 $290,341 $ 245,776 $ 281,929 $ 279,838 $289,974 $ 235,162
Diluted net operating income per common share . . . . . . . . . . . . . . .
1.66
2.09
Annualized return on
2.02
2.01
1.94
1.68
1.95
1.95
Average tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average tangible common shareholders’ equity . . . . . . . . . . . . . . .
Efficiency ratio(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance sheet data
In millions, except per share
Average balances
1.21%
1.15%
1.24%
1.18%
13.26% 12.98% 13.76%
13.55% 13.80% 14.92% 12.76%
55.53% 57.05% 58.23% 61.46% 57.84% 58.44% 58.20% 62.83%
1.08%
11.90%
1.24%
1.35%
1.18%
Total assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 115,052 $ 98,515 $ 97,598 $ 95,892 $ 98,644 $ 93,245 $ 89,873 $ 86,665
83,096
Total tangible assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,288
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,265
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63,763
Loans and leases, net of unearned discount . . . . . . . . . . . . . . . . . . .
67,327
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,576
Common shareholders’ equity(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,007
Tangible common shareholders’ equity(c) . . . . . . . . . . . . . . . . . . .
110,772
103,587
15,786
81,110
85,657
13,775
9,495
94,989
88,446
14,441
67,849
73,821
11,555
8,029
94,067
87,333
14,195
67,670
72,958
11,404
7,873
89,689
82,776
12,780
64,763
70,772
11,015
7,459
86,311
79,556
10,959
64,343
69,659
10,808
7,246
92,346
85,212
13,376
66,587
71,698
11,227
7,681
95,093
87,965
12,978
65,767
75,515
11,211
7,660
At end of quarter
Total assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,788 $ 97,797 $ 97,080 $ 98,378 $ 96,686 $ 97,228 $ 90,835 $ 88,530
84,965
Total tangible assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77,950
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,364
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,135
Loans and leases, net of unearned discount . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68,699
Common shareholders’ equity, net of undeclared cumulative
118,109
110,802
15,656
87,489
91,958
87,276
80,062
12,120
64,748
69,829
94,272
87,807
14,495
68,540
72,945
93,552
86,990
14,752
68,131
72,630
94,834
87,959
14,393
67,099
73,594
93,137
86,278
12,994
66,669
73,582
93,674
86,751
13,348
65,572
74,342
preferred dividends(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible common shareholders’ equity(c) . . . . . . . . . . . . . . . . . . .
Equity per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible equity per common share . . . . . . . . . . . . . . . . . . . . . . . . . .
14,939
10,260
93.60
64.28
11,687
8,162
87.67
61.22
11,433
7,905
85.90
59.39
11,294
7,750
84.95
58.29
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
Market price per common share
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 127.39 $ 134.00 $ 128.70 $ 129.58 $ 128.96 $ 128.69 $ 125.90 $ 123.04
109.16
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121.30
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116.10
124.05
111.78
127.00
117.86
124.93
112.42
125.62
118.51
123.29
111.86
121.95
111.50
121.18
(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 transactions.
(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.
100
Table 24
RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES
2015 Quarters
2014 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
Income statement data
In thousands, except per share
Net income
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,965 $ 280,401 $ 286,688 $ 241,613 $ 277,549 $ 275,344 $ 284,336 $ 229,017
Amortization of core deposit and other intangible
assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses(a) . . . . . . . . . . . . . . . . . . . . . . . .
5,828
60,820
2,506
—
3,653
—
4,163
—
4,380
—
4,494
—
5,638
—
6,145
—
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 337,613 $ 282,907 $ 290,341 $ 245,776 $ 281,929 $ 279,838 $ 289,974 $ 235,162
Earnings per common share
Diluted earnings per common share . . . . . . . . . . . . . . . . . $
Amortization of core deposit and other intangible
assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses(a) . . . . . . . . . . . . . . . . . . . . . . . .
1.65 $
1.93 $
1.98 $
1.65 $
1.92 $
1.91 $
1.98 $
.04
.40
.02
—
.03
—
.03
—
.03
—
.03
—
.04
—
Diluted net operating earnings per common share . . $
2.09 $
1.95 $
2.01 $
1.68 $
1.95 $
1.94 $
2.02 $
1.61
.05
—
1.66
Other expense
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 786,113 $ 653,816 $ 696,628 $ 686,375 $ 666,221 $ 665,359 $ 667,660 $ 690,234
Amortization of core deposit and other intangible
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,576)
(75,976)
(4,090)
—
(5,965)
—
(6,793)
—
(7,170)
—
(7,358)
—
(9,234)
—
(10,062)
—
Noninterest operating expense . . . . . . . . . . . . . . . . . . . $ 700,561 $ 649,726 $ 690,663 $ 679,582 $ 659,051 $ 658,001 $ 658,426 $ 680,172
Merger-related expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . $ 51,287 $
Equipment and net occupancy . . . . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . . . . . . . . .
3
504
24,182
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . .
75,976
21,000
— $
—
—
—
—
—
— $
—
—
—
—
—
— $
—
—
—
—
—
— $
—
—
—
—
—
— $
—
—
—
—
—
— $
—
—
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,976 $
— $
— $
— $
— $
— $
— $
—
—
—
—
—
—
—
Efficiency ratio
Noninterest operating expense (numerator) . . . . . . . . . . $ 700,561 $ 649,726 $ 690,663 $ 679,582 $ 659,051 $ 658,001 $ 658,426 $ 680,172
Taxable-equivalent net interest income . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Loss on bank investment securities . . . . . . . . . . . . .
813,401
448,108
(22)
699,075
439,699
—
689,148
497,027
(10)
665,426
440,203
(98)
687,847
451,643
—
674,900
451,111
—
674,963
456,412
—
662,378
420,107
—
Denominator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,261,531 $1,138,774 $1,186,185 $1,105,727 $1,139,490 $1,126,011 $1,131,375 $1,082,485
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55.53%
57.05%
58.23%
61.46%
57.84%
58.44%
58.20%
62.83%
Balance sheet data
In millions
Average assets
Average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 115,052 $
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,218)
(101)
39
98,515 $ 97,598 $ 95,892 $ 98,644 $ 93,245 $ 89,873 $
(3,513)
(20)
7
(3,525)
(45)
14
(3,525)
(38)
12
(3,525)
(31)
10
(3,525)
(53)
16
(3,514)
(25)
8
86,665
(3,525)
(64)
20
Average tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,772 $ 94,989 $ 94,067 $ 92,346 $ 95,093 $ 89,689 $ 86,311 $
83,096
Average common equity
Average total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,007 $
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,232)
12,787 $ 12,636 $ 12,459 $
(1,232)
(1,232)
(1,232)
12,442 $ 12,247 $ 12,039 $
(1,232)
(1,231)
(1,231)
Average common equity . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,775
(4,218)
(101)
39
11,555
(3,513)
(20)
7
11,404
(3,514)
(25)
8
11,227
(3,525)
(31)
10
11,211
(3,525)
(38)
12
11,015
(3,525)
(45)
14
10,808
(3,525)
(53)
16
11,648
(1,072)
10,576
(3,525)
(64)
20
Average tangible common equity . . . . . . . . . . . . . . . . . $
9,495 $
8,029 $
7,873 $
7,681 $
7,660 $
7,459 $
7,246 $
7,007
At end of quarter
Total assets
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,788 $ 97,797 $ 97,080 $ 98,378 $ 96,686 $ 97,228 $ 90,835 $
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,593)
(140)
54
(3,525)
(49)
15
(3,525)
(35)
11
(3,525)
(28)
9
(3,525)
(42)
13
(3,513)
(18)
6
(3,513)
(22)
7
88,530
(3,525)
(59)
19
Total tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 118,109 $ 94,272 $ 93,552 $ 94,834 $
93,137 $ 93,674 $ 87,276 $
84,965
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,173 $ 12,922 $ 12,668 $
(1,232)
(1,232)
(3)
(2)
(1,232)
(3)
12,528 $
(1,232)
(2)
12,336 $ 12,333 $ 12,169 $
(1,232)
(1,231)
(2)
(3)
(1,232)
(3)
11,887
(1,232)
(3)
14,939
(4,593)
(140)
54
11,687
(3,513)
(18)
6
11,433
(3,513)
(22)
7
11,294
(3,525)
(28)
9
11,102
(3,525)
(35)
11
11,099
(3,525)
(42)
13
10,934
(3,525)
(49)
15
10,652
(3,525)
(59)
19
Total tangible common equity . . . . . . . . . . . . . . . . . . . . . . $ 10,260 $
8,162 $
7,905 $
7,750 $
7,553 $
7,545 $
7,375 $
7,087
(a) After any related tax effect.
101
Item 7A. QuantitativeandQualitativeDisclosuresAboutMarketRisk.
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. FinancialStatementsandSupplementaryData.
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, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Income — Years ended December 31, 2015, 2014 and 2013 . . . . . . . . .
Consolidated Statement of Comprehensive Income — Years ended December 31, 2015, 2014
and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows — Years ended December 31, 2015, 2014 and 2013 . . . . . .
Consolidated Statement of Changes in Shareholders’ Equity — Years ended December 31, 2015,
2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103
104
105
106
107
108
109
110
102
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, 2015
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, 2015.
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
103
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, 2015 and December 31, 2014, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2015 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, 2015, 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 19, 2016
104
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)
December 31
2015
2014
Assets
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,368,040 $ 1,289,965
6,470,867
Interest-bearing deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,392
308,175
Trading account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities (includes pledged securities that can be sold or repledged
7,594,350
—
273,783
of $2,136,712 at December 31, 2015; $1,631,267 at December 31, 2014)
Available for sale (cost: $12,138,636 at December 31, 2015; $8,919,324 at
December 31, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,242,671
9,156,932
Held to maturity (fair value: $2,864,147 at December 31, 2015; $3,538,282 at
December 31, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,859,709
3,507,868
Other (fair value: $554,059 at December 31, 2015; $328,742 at December 31,
2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
554,059
15,656,439
328,742
12,993,542
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,719,234 66,899,369
(230,413)
66,668,956
(919,562)
65,749,394
612,984
3,524,625
35,027
5,617,564
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $122,787,884 $ 96,685,535
(229,735)
87,489,499
(955,992)
86,533,507
666,682
4,593,112
140,268
5,961,703
Liabilities
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,110,635 $26,947,880
Interest-checking deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,307,815
46,627,370 41,085,803
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,063,973
13,110,392
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
176,582
170,170
Deposits at Cayman Islands office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,582,053
91,957,841
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
192,676
150,546
Federal funds purchased and agreements to repurchase securities . . . . . . . . . . .
1,981,636
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,567,951
1,870,714
Accrued interest and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,006,959
10,653,858
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84,349,639
106,614,595
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,939,274
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,
2015 and December 31, 2014; Liquidation preference of $10,000 per share:
50,000 shares at December 31, 2015 and December 31, 2014 . . . . . . . . . . . . . . . .
Common stock, $.50 par, 250,000,000 shares authorized, 159,563,512 shares
issued at December 31, 2015; 132,312,931 shares issued at December 31, 2014 . .
Common stock issuable, 36,644 shares at December 31, 2015; 41,330 shares at
1,231,500
1,231,500
79,782
66,157
December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,608
3,409,506
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,807,119
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(180,994)
. . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss), net
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,335,896
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $122,787,884 $ 96,685,535
2,364
6,680,768
8,430,502
(251,627)
16,173,289
See accompanying notes to financial statements.
105
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
2015
2014
2013
Loans and leases, including fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities
Fully taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exempt from federal taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,778,151
$2,596,586
$2,734,708
372,162
4,263
15,252
1,016
340,391
5,356
13,361
1,183
209,244
6,802
5,201
1,379
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,170,844
2,956,877
2,957,334
Interest expense
Interest-checking deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,404
44,736
27,059
615
1,677
252,766
328,257
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
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,842,587
170,000
2,676,446
124,000
2,673,229
185,000
Net interest income after provision for credit losses . . . . . . . . . . . . . . . . . .
2,672,587
2,552,446
2,488,229
Other income
Mortgage banking revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokerage services income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account and foreign exchange gains . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on bank investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other-than-temporary impairment (“OTTI”) losses . . . . . . . . . . . . .
Portion of OTTI losses recognized in other comprehensive income
(before taxes)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net OTTI losses recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of Bayview Lending Group LLC . . . . . . . . . . . . . . . . . . .
Other revenues from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
375,738
420,608
470,640
64,770
30,577
(130)
—
—
—
(14,267)
477,101
362,912
427,956
508,258
67,212
29,874
—
—
—
—
(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
Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,825,037
1,779,273
1,865,205
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,549,530
272,539
38,491
26,424
52,113
883,835
1,404,950
269,299
38,201
33,824
55,531
887,669
1,355,178
264,327
39,557
46,912
69,584
812,308
Total other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,822,932
2,689,474
2,587,866
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,674,692
595,025
1,642,245
575,999
1,765,568
627,088
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,079,667
$1,066,246
$ 1,138,480
Net income available to common shareholders
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 987,689
987,724
$ 978,531
978,581
$1,062,429
1,062,496
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7.22
7.18
$
7.47
7.42
$
8.26
8.20
See accompanying notes to financial statements.
106
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
2015
2014
2013
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,079,667 $1,066,246 $1,138,480
Other comprehensive income, net of tax and reclassification
adjustments:
Net unrealized gains (losses) on investment securities . . . . .
Unrealized gains (losses) on cash flow hedges . . . . . . . . . . . .
Foreign currency translation adjustment
. . . . . . . . . . . . . . . .
Defined benefit plans liability adjustments . . . . . . . . . . . . . . .
(79,114)
796
(925)
8,610
93,275
(96)
(2,607)
(207,407)
(2,865)
—
381
178,589
Total other comprehensive income (loss) . . . . . . . . . . . .
(70,633)
(116,835)
176,105
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . $1,009,034 $ 949,411 $1,314,585
See accompanying notes to financial statements.
107
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
2015
2014
2013
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,079,667 $ 1,066,246 $ 1,138,480
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170,000
99,019
49,906
26,424
396,596
9,029
(67,759)
(46,338)
(289,139)
323,330
(8,327)
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)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,742,408
1,099,041
932,324
Cash flows from investing activities
Proceeds from sales of investment securities
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,654,850
183,892
16
23,445
1,081,802
13,172
Proceeds from maturities of investment securities
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,392,331
662,959
998,413
468,999
1,034,564
287,837
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) decrease in loan servicing advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition, net of cash acquired
(3,614,324)
(29,431)
(99,317)
(2,326,744)
6,445,451
(81,936)
448,271
(5,347,145)
(21,283)
(53,606)
(2,421,162)
(4,819,729)
(73,161)
(484,689)
(197,931)
(1,977,064)
(9,105)
123,120
(1,521,193)
(129,563)
(1,004,923)
Bank and bank holding company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,932,596)
10,876
—
19,531
—
95,706
Net cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,714,282
(11,710,371)
(2,203,578)
Cash flows from financing activities
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
504,393
(2,167,405)
1,500,000
(8,912,474)
(375,017)
(81,270)
—
69,766
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
Net cash provided (used) by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,462,007)
10,311,753
957,573
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,317)
1,373,357
(299,577)
1,672,934
(313,681)
1,986,615
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,368,040 $ 1,373,357 $ 1,672,934
Supplemental disclosure of cash flow information
Interest received during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,134,311 $ 2,893,153 $ 2,894,699
301,734
Interest paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
389,008
Income taxes paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400,329
378,660
257,553
411,912
Supplemental schedule of noncash investing and financing activities
Real estate acquired in settlement of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Acquisition of bank and bank holding company
67,753 $
43,821 $
44,804
Common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock awards converted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of
3,110,581
28,243
Assets acquired (noncash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,567,632
31,496,212
—
—
—
—
—
—
—
—
Securitization of residential mortgage loans allocated to
Available-for-sale investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,023
—
646
See accompanying notes to financial statements.
108
134,698
1,690,490
— 1,245,444
30,879
1,760
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
Total
2013
Balance — January 1, 2013 . . . . . . . . . . . . . . . $ 872,500 64,088
—
Total comprehensive income . . . . . . . . . . . .
—
Preferred stock cash dividends . . . . . . . . . .
Amortization of preferred stock
—
—
3,473
—
—
3,025,520 6,477,276
— 1,138,480
(53,450)
—
(240,264)
176,105
—
$10,202,593
1,314,585
(53,450)
discount . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,000
Exercise of 407,542 Series C stock
warrants into 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
—
—
350,000
warrants into 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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
Balance — December 31, 2014 . . . . . . . . . . . $1,231,500
2015
Total comprehensive income . . . . . . . . . . . .
Acquisition of Hudson City Bancorp, Inc.:
Common stock issued . . . . . . . . . . . . . . . .
Common stock awards converted . . . . . .
Preferred stock cash dividends . . . . . . . . . .
Exercise of 2,315 Series A stock warrants
—
—
93
13
137
914
8
5
—
—
—
—
—
—
—
—
(558)
—
—
—
(9,000)
(93)
(13)
37,890
163,891
1,636
575
2,608
—
—
—
—
—
(131)
—
— (365,171)
—
—
—
—
—
—
—
—
—
—
—
—
38,027
164,805
1,644
(109)
2,608
(365,171)
65,258
2,915
3,232,014 7,188,004
(64,159)
$ 11,305,532
—
—
—
85
128
633
43
7
3
—
—
—
—
—
—
—
—
—
—
(307)
—
—
— 1,066,246
(75,878)
—
—
(3,500)
(116,835)
—
—
(85)
45,306
122,476
9,545
1,658
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)
66,157
2,608
3,409,506
7,807,119
(180,994)
$ 12,335,896
—
—
— 1,079,667
(70,633)
1,009,034
— 12,977
—
—
—
—
— 3,097,604
28,243
—
—
—
—
—
(81,270)
into 904 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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
1
155
438
45
7
2
—
—
—
—
—
—
—
(244)
—
—
(1)
43,040
88,455
10,301
1,754
293
1,573
—
—
—
—
—
(102)
—
— (374,912)
—
—
—
—
—
—
—
—
—
—
—
3,110,581
28,243
(81,270)
—
43,195
88,893
10,346
1,761
(51)
1,573
(374,912)
Balance — December 31, 2015 . . . . . . . . . . . $1,231,500
79,782
2,364
6,680,768 8,430,502
(251,627)
$ 16,173,289
See accompanying notes to financial statements.
109
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
1. Significant accounting policies
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, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut,
Virginia, West Virginia and the District of Columbia and on small and medium-size businesses based
in those areas. 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.
ConsolidatedStatementofCashFlows
For purposes of this statement, cash and due from banks and federal funds sold are considered cash
and cash equivalents.
Securitiespurchasedunderagreementstoresellandsecuritiessoldunderagreementsto
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.
Tradingaccount
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.
Investmentsecurities
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
110
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 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.
Loansandleases
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
111
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 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.
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. For purchased impaired loans and other loans
acquired at a discount that was, in part, attributable to credit quality, 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.
For all other acquired loans, the difference between the fair value and outstanding principal
balance of the loans is recognized as an adjustment to interest income over the lives of those loans.
Those loans are then accounted for in a manner that is similar to originated loans.
Allowanceforcreditlosses
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 loans acquired at a discount are
also considered in the establishment of the allowance for credit losses.
Assetstakeninforeclosureofdefaultedloans
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.
Effective January 1, 2015, the Company adopted 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 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
112
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 adoption resulted in an
insignificant increase in other real estate owned.
Premisesandequipment
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.
Capitalizedservicingrights
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.
Salesandsecuritizationsoffinancialassets
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.
Goodwillandcoredepositandotherintangibleassets
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.
113
Derivativefinancialinstruments
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 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.
Stock-basedcompensation
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.
Incometaxes
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.
Effective January 1, 2015, the Company made an accounting policy election in accordance
with amended accounting guidance issued by the Financial Accounting Standards Board to account
for its investments in qualified affordable housing projects using the proportional amortization
method. Under the proportional amortization method, the Company amortizes the initial cost of the
investment in proportion to the tax credits and other tax benefits received and recognizes the net
114
investment performance in the income statement as a component of income tax expense. The
adoption of the amended guidance did not have a significant effect on the Company’s financial
position or results of operations, but did result in the restatement of the consolidated statement of
income for the years ended December 31, 2014 and 2013 to remove $53 million and $48 million,
respectively, of 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.
The cumulative effect adjustment associated with adopting the amended guidance was not material
as of the beginning of any period presented in these consolidated financial statements.
Earningspercommonshare
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.
Treasurystock
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. Acquisition and divestiture
HudsonCityBancorp,Inc.
On November 1, 2015, M&T completed the acquisition of Hudson City Bancorp, Inc. (“Hudson
City”), headquartered in Paramus, New Jersey. On that date, Hudson City Savings Bank, the banking
subsidiary of Hudson City, was merged into M&T Bank, a wholly owned banking subsidiary of M&T.
Hudson City Savings Bank operated 135 banking offices in New Jersey, Connecticut and New York at
the date of acquisition. The results of operations acquired in the Hudson City transaction have been
included in the Company’s financial results since November 1, 2015. After application of the election,
allocation and proration procedures contained in the merger agreement with Hudson City, M&T
paid $2.1 billion in cash and issued 25,953,950 shares of M&T common stock in exchange for Hudson
City shares outstanding at the time of the acquisition. The purchase price was approximately $5.2
billion based on the cash paid to Hudson City shareholders, the fair value of M&T stock exchanged
and the estimated fair value of Hudson City stock awards converted into M&T stock awards. The
acquisition of Hudson City expanded the Company’s presence in New Jersey, Connecticut and New
York, and management expects that the Company will benefit from greater geographic diversity and
the advantages of scale associated with a larger company.
115
The Hudson City transaction has been accounted for using the acquisition method of
accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were
recorded at estimated fair value on the acquisition date. The consideration paid for Hudson City’s
common equity and the amounts of acquired identifiable assets and liabilities assumed as of the
acquisition date were as follows:
(In thousands)
Identifiable assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest-bearing deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
131,688
7,568,934
7,929,014
19,015,013
1,079,787
131,665
843,219
Total identifiable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,699,320
Liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,879,589
13,211,598
405,025
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,496,212
Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,203,108
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,064,284
3,110,581
Common stock issued (25,953,950 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,243
Common stock awards converted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,203,108
In early November 2015, the Company sold $5.8 billion of investment securities obtained in
the acquisition and repaid $10.6 billion of borrowings assumed in the transaction.
In connection with the acquisition, the Company recorded approximately $1.1 billion of goodwill
and $132 million of core deposit intangible. The core deposit intangible asset is being amortized over a
period of 7 years using an accelerated method. Information regarding the allocation of goodwill
recorded as a result of the acquisition to the Company’s reportable segments, as well as the carrying
amounts and amortization of core deposit and other intangible assets, is provided in note 8.
116
In many cases, determining the fair value of the acquired assets and assumed liabilities
required the Company to estimate cash flows expected to result from those assets and liabilities and
to discount those cash flows at appropriate rates of interest. The most significant of these
determinations related to the fair valuation of acquired loans. Approximately $688 million of the
loans acquired from Hudson City had specific evidence of credit deterioration at the acquisition date
and it was deemed probable that the Company would be unable to collect all contractually required
principal and interest payments (“purchased impaired loans”). Such loans were acquired at a
discount from outstanding customer principal balance of $1.0 billion. For purchased impaired loans,
the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest
income over the remaining lives of the loans. The difference between contractually required
payments at acquisition and the cash flows expected to be collected at acquisition, as shown in the
following table, reflects the impact of estimated credit losses and other factors, such as prepayments.
Contractually required principal and interest at acquisition . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual cash flows not expected to be collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 1,
2015
(In thousands)
$1,304,366
(498,919)
Expected cash flows at acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest component of expected cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
805,447
(117,251)
Estimated fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 688,196
The remaining acquired loans had a fair value of $18.3 billion and outstanding principal of
$18.0 billion, resulting in a premium which will be amortized over the remaining lives of the loans as
a reduction of interest income. In accordance with GAAP, there was no carry-over of Hudson City’s
previously established allowance for credit losses.
The following table discloses the impact of Hudson City since the acquisition on November 1,
2015 through the end of 2015. The table also presents certain pro forma information as if Hudson
City had been acquired on January 1, 2014. These results combine the historical results of Hudson
City into the Company’s consolidated statement of income and, while certain adjustments were made
for the estimated impact of certain fair valuation adjustments and other acquisition-related activity,
they are not indicative of what would have occurred had the acquisition taken place on the indicated
date. In particular, no adjustments have been made to eliminate the impact of gains on securities
transactions of $102 million in 2015 and $104 million in 2014 that may not have been recognized had
the investment securities been recorded at fair value as of the beginning of 2014. Furthermore,
expenses related to systems conversions and other costs of integration of $97 million are included in
the 2015 periods in which such costs were incurred. Additionally, the Company expects to achieve
further operating cost savings and other business synergies as a result of the acquisition which are
not reflected in the pro forma amounts that follow.
Actual Since
Acquisition Through
December 31, 2015
Pro Forma
Year Ended December 31
2015
2014
(In thousands)
Total revenues(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$111,168
(21,175)
$5,132,662
1,011,463
$5,406,291
1,445,779
(a) Represents net interest income plus other income.
In connection with the Hudson City acquisition, the Company incurred merger-related
expenses related to 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 preparing for systems conversions and/or integration of
operations; 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 Hudson City employees); travel costs; and other costs of completing the
transaction and commencing operations in new markets and offices. The Company expects that
117
there will be additional merger-related expenses in 2016. There were no merger-related expenses
during 2014. As of December 31, 2015, the remaining unpaid portion of incurred merger-related
expenses was $56 million. The Company also recognized a $21 million provision for credit losses
related to the $18.3 billion of Hudson City loans acquired at a premium. GAAP does not allow the
credit loss component of the net premium associated with those loans to be bifurcated and accounted
for as a nonaccreting difference as is the case with purchased impaired loans and other loans
acquired at a discount. Neverthless, GAAP requires that an allowance for credit losses be recognized
for incurred losses in loans acquired at a premium even though in a relatively homogenous portfolio
of residential mortgage loans the specific loans to which the losses relate cannot be individually
identified at the acquisition date. Given the recognition of such losses above and beyond the impact
of forecasted losses used in determining the fair value of the loans acquired at a premium, the initial
$21 million provision for credit losses has been noted as a merger-related expense.
A summary of merger-related expenses included in the consolidated statement of income for
the years ended December 31, 2015 and 2013 follows:
2015
2013
(In thousands)
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,287
3
Equipment and net occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
504
24,182
Other cost of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
836
690
1,825
9,013
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,976
21,000
12,364
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $96,976
$12,364
Saleoftrustaccounts
In April 2015, the Company sold the trade processing business within the retirement services
division of its Institutional Client Services business. That sale resulted in an after-tax gain of $23
million ($45 million pre-tax) that reflected the allocation of approximately $11 million of previously
recorded goodwill to the divested business. Revenues of the sold business had been included in “trust
income” and were $9 million, $34 million and $38 million during 2015, 2014 and 2013, respectively.
After considering related expenses, net income attributable to the business that was sold was not
material to the consolidated results of operations of the Company in any of those periods.
118
Investment securities
3.
The amortized cost and estimated fair value of investment securities were as follows:
December 31, 2015
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
Estimated
Fair Value
(In thousands)
299,890 $
5,924
294 $
146
187 $
42
299,997
6,028
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,592,959
74
28,438
137,556
73,795
142,370
2
20,143
1,514
10,230
48,701
2
1,188
20,190
354
11,686,628
74
47,393
118,880
83,671
Investment securities held to maturity:
Obligations of states and political subdivisions . . . . . . . . . . . . . .
Mortgage-backed securities:
12,138,636
174,699
70,664
12,242,671
118,431
1,003
421
119,013
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,553,612
181,091
6,575
50,936
2,104
—
7,817
41,367
—
2,596,731
141,828
6,575
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
554,059
—
—
554,059
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,552,404 $228,742 $120,269 $15,660,877
2,859,709
54,043
49,605
2,864,147
December 31, 2014
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . . . . . . . . . . $
Obligations of states and political subdivisions . . . . . . . . . . . . . .
Mortgage-backed securities:
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
119
No investment in securities of a single non-U.S. Government or government agency issuer
exceeded ten percent of shareholders’ equity at December 31, 2015.
As of December 31, 2015, 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
A or
Better
BBB
BB
B or Less
Not
Rated
Average Credit Rating of Fair Value Amount
(In thousands)
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . $ 124,355 $125,041 $ 95,246 $
— $
— $
— $29,795
Privately issued mortgage-backed
securities . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . .
Other debt securities . . . . . . . . . . . .
181,165
28,438
144,131
141,902
47,393
125,455
39,020
9,629
8,411
17
1,485
1,175
61,379 29,354
— 102,821
35,104
18,600
44
—
7,711
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $478,089 $439,791 $152,306 $62,881 $30,529 $156,525 $37,550
The amortized cost and estimated fair value of collateralized mortgage obligations included in
mortgage-backed securities were as follows:
December 31
2015
2014
(In thousands)
Collateralized mortgage obligations:
Amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 188,819
149,632
Estimated fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$209,107
165,860
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. There were no
significant gross realized gains or losses from the sale of investment securities in 2015 or 2014.
The Company recognized $10 million of pre-tax other-than-temporary impairment losses
related to privately issued mortgage-backed securities in 2013. 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 2015 or
2014.
120
At December 31, 2015, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106,349 $
202,864
2,729
159,866
106,383
203,235
2,941
159,739
Mortgage-backed securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . .
471,808
11,593,033
472,298
11,686,702
$12,064,841 $12,159,000
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,174 $
72,120
12,137
6,575
34,311
72,419
12,283
6,575
Mortgage-backed securities held to maturity . . . . . . . . . . . . . . . . . . . . . . . . .
125,006
2,734,703
125,588
2,738,559
$ 2,859,709 $ 2,864,147
121
A summary of investment securities that as of December 31, 2015 and 2014 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, 2015
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . . . . . . . . . . $ 147,508 $
Obligations of states and political subdivisions . . . . . . . . . . . . .
Mortgage-backed securities:
865
(187) $
(2)
— $
1,335
—
(40)
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . 4,061,899
—
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,711
Collateralized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,935
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,073
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(48,534)
—
(335)
(462)
(207)
7,216
43
2,063
93,344
153
(167)
(2)
(853)
(19,728)
(147)
Investment securities held to maturity:
Obligations of states and political subdivisions . . . . . . . . . . . . .
Mortgage-backed securities:
4,246,991
(49,727)
104,154
(20,937)
42,913
(335)
5,853
(86)
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
459,983
—
(1,801)
—
228,867
112,155
(6,016)
(41,367)
502,896
(2,136)
346,875
(47,469)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,749,887 $ (51,863) $ 451,029 $(68,406)
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)
The Company owned 1,007 individual investment securities with aggregate gross unrealized
losses of $120 million at December 31, 2015. Based on a review of each of the securities in the
investment securities portfolio at December 31, 2015, the Company concluded that it expected to
122
recover the amortized cost basis of its investment. As of December 31, 2015, 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, 2015, the Company has not identified events or changes in
circumstances which may have a significant adverse effect on the fair value of the $554 million of
cost method investment securities.
At December 31, 2015, investment securities with a carrying value of $4,245,300,000,
including $3,333,653,000 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 $2,136,712,000 at
December 31, 2015. 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
2015
2014
(In thousands)
Loans
Commercial, financial, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,223,419 $18,280,049
Real estate:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,249,059
24,125,778
5,183,313
11,584,347
8,636,794
22,614,174
5,061,269
10,969,879
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86,365,916
65,562,165
Leases
Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,353,318
1,337,204
Total loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: unearned discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,719,234
(229,735)
66,899,369
(230,413)
Total loans and leases, net of unearned discount . . . . . . . . . . . . . . . . . . . . . . $87,489,499 $66,668,956
One-to-four family residential mortgage loans held for sale were $353 million at December 31,
2015 and $435 million at December 31, 2014. Commercial real estate loans held for sale were $39
million at December 31, 2015 and $308 million at December 31, 2014.
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, 2015, approximately $2.5 billion of commercial real estate loan balances
serviced for others had been sold with recourse in conjunction with the Company’s participation in
the Federal National Mortgage Association (“Fannie Mae”) Delegated Underwriting and Servicing
(“DUS”) program. At December 31, 2015, 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
123
loans. Charges incurred for such obligation, which are recorded as a reduction of mortgage banking
revenues, were $5 million, $4 million and $17 million in 2015, 2014 and 2013, respectively.
The outstanding principal balance and the carrying amount of loans acquired at a discount
that were recorded at fair value at the acquisition date that is included in the consolidated balance
sheet were as follows:
December 31
2015
2014
(In thousands)
Outstanding principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,122,935
Carrying amount:
$3,070,268
Commercial, financial, leasing, etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78,847
644,284
1,016,129
725,807
247,820
961,828
453,360
933,537
$2,465,067
$2,596,545
Purchased impaired loans included in the table above totaled $768 million at December 31,
2015 and $198 million at December 31, 2014, representing less than 1% of the Company’s assets as of
each date. A summary of changes in the accretable yield for loans acquired at a discount for the years
ended December 31, 2015, 2014 and 2013 follows:
For Year Ended December 31,
2015
2014
2013
Purchased
Impaired
Other
Acquired
Purchased
Impaired
Other
Acquired
Purchased
Impaired
Other
Acquired
(In thousands)
Balance at beginning of period . . $ 76,518 $ 397,379 $ 37,230 $ 538,633 $ 42,252 $ 638,272
Additions . . . . . . . . . . . . . . . . . . . .
—
(247,295)
Interest income . . . . . . . . . . . . . . .
Reclassifications from
—
(158,260)
—
(178,670)
—
(36,727)
—
(21,263)
117,251
(28,551)
nonaccretable balance, net . . .
Other(a) . . . . . . . . . . . . . . . . . . . . .
19,400
—
49,930
7,385
60,551
—
24,907
12,509
31,705
—
149,595
(1,939)
Balance at end of period . . . . . . . $184,618 $ 296,434 $ 76,518 $ 397,379 $ 37,230 $ 538,633
(a) Other changes in expected cash flows including changes in interest rates and prepayment assumptions.
124
A summary of current, past due and nonaccrual loans as of December 31, 2015 and 2014
follows:
Accruing
Loans
Acquired at
a Discount
Past Due
90 Days or
More(b)
Accruing
Loans Past
Due 90
Days or
More(a)
Current
30-89 Days
Past Due
Purchased
Impaired(c) Nonaccrual
Total
(In thousands)
December 31, 2015
Commercial, financial,
leasing, etc.
. . . . . . . . $20,122,648 $ 52,868 $
2,310 $
693 $
1,902 $ 241,917 $20,422,338
Real estate:
Commercial . . . . . . . .
Residential builder
and developer . . . .
Other commercial
construction . . . . .
Residential . . . . . . . . .
Residential-limited
documentation . . .
23,645,354
172,439
12,963
8,790
46,790
179,606
24,065,942
1,507,856
7,969
5,760
6,925
28,734
28,429
1,585,673
3,428,939
20,507,551
65,932
560,312
7,936
284,451
2,001
16,079
24,525
488,599
16,363
153,281
3,545,696
22,010,273
3,885,073
137,289
—
—
175,518
61,950
4,259,830
Consumer:
Home equity lines
and loans . . . . . . . .
Automobile . . . . . . . .
Other . . . . . . . . . . . . . .
5,805,222
2,446,473
3,051,435
45,604
56,181
36,702
—
—
4,021
15,222
6
18,757
2,261
—
—
84,467
16,597
16,799
5,952,776
2,519,257
3,127,714
Total . . . . . . . . . . . . . . . . $84,400,551 $1,135,296 $ 317,441 $ 68,473 $768,329 $799,409 $87,489,499
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 developer . . . .
Other commercial
construction . . . . .
Residential . . . . . . . . .
Residential-limited
documentation . . .
22,208,491
118,704
22,170
14,662
51,312
141,600
22,556,939
1,273,607
11,827
492
9,350
98,347
71,517
1,465,140
3,484,932
7,640,368
17,678
226,932
—
216,489
—
35,726
17,181
18,223
25,699
180,275
3,545,490
8,318,013
249,810
11,774
—
—
—
77,704
339,288
Consumer:
Home equity lines
and loans . . . . . . . .
Automobile . . . . . . . .
Other . . . . . . . . . . . . . .
5,859,378
1,931,138
2,909,791
42,945
30,500
33,295
—
—
4,064
27,896
133
16,369
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
(a) Excludes loans acquired at a discount.
(b) Loans acquired at a discount 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 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 $56,784,000 in 2015, $58,314,000 in
2014 and $62,010,000 in 2013. The actual amounts included in interest income during 2015, 2014 and
2013 on such loans were $30,735,000, $28,492,000 and $31,987,000, respectively.
125
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, 2015:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 commercial construction
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . .
Residential
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . .
Residential-limited documentation
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . .
Consumer:
Home equity lines and loans
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . .
Automobile
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . .
Other
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
1
3
9
49
3
6
2
4
2
58
1
26
2
9
8
63
192
7
46
57
102
13
40
817
$ 55,621
99
12,965
32,444
$ 50,807
99
12,827
31,439
$(4,814)
—
(138)
(1,005)
$
—
(19)
—
(245)
49,486
4,169
3,238
48,388
4,087
3,242
(1,098)
(82)
4
10,650
10,598
(52)
368
10,375
6,194
267
4,024
426
1,536
2,175
5,203
1,818
137
150
948
1,995
116
396
460
10,375
6,528
267
4,277
437
1,635
2,175
5,204
1,818
137
150
948
1,995
116
396
92
—
334
—
253
11
99
—
1
—
—
—
—
—
—
—
—
—
(159)
—
—
(49)
—
—
(483)
—
(121)
—
(677)
—
(10)
—
(43)
—
—
(45)
$204,800
$198,405
$(6,395)
$(1,851)
(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.
126
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-limited documentation
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.
127
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-limited documentation
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.
128
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 troubled debt restructurings that have subsequently
defaulted. Loans that were modified as troubled debt restructurings during the twelve months ended
December 31, 2015, 2014 and 2013 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
$52,152,000 and $49,799,000 at December 31, 2015 and 2014, respectively. During 2015, new
borrowings by such persons amounted to $4,425,000 (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 $2,072,000.
At December 31, 2015, approximately $11.1 billion of commercial loans and leases, $10.4 billion
of commercial real estate loans, $20.9 billion of one-to-four family residential real estate loans, $3.9
billion of home equity loans and lines of credit and $3.6 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
2015
2014
(In thousands)
Commercial leases:
Direct financings:
Lease payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,058,605
81,269
Estimated residual value of leased assets . . . . . . . . . . . . . . . . . . . . . . . . . .
(102,723)
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,022,133
79,525
(103,777)
Investment in direct financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,037,151
997,881
Leveraged leases:
Lease payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated residual value of leased assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95,316
118,128
(41,556)
102,457
133,089
(44,288)
Investment in leveraged leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
171,888
191,258
Total investment in leases.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,209,039
$ 1,189,139
Deferred taxes payable arising from leveraged leases . . . . . . . . . . . . . . . . . . . $ 160,603
$ 169,101
Included within the estimated residual value of leased assets at December 31, 2015 and 2014
were $50 million and $48 million, respectively, in residual value associated with direct financing
leases that are guaranteed by the lessees or others.
129
At December 31, 2015, the minimum future lease payments to be received from lease
financings were as follows:
Year ending December 31:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 277,993
245,892
193,580
143,406
95,217
197,833
$1,153,921
The amount of foreclosed residential real estate property held by the Company was $172
million and $44 million at December 31, 2015 and 2014, respectively. At December 31, 2015, there
were $315 million in loans secured by residential real estate that were in the process of foreclosure.
130
5. Allowance for credit losses
Changes in the allowance for credit losses for the years ended December 31, 2015, 2014 and 2013
were as follows:
2015
Commercial,
Financial,
Leasing, etc.
Beginning balance . . . . . $ 288,038
Provision for credit
losses . . . . . . . . . . . . . .
43,065
Net charge-offs
Real Estate
Commercial
Residential
Consumer
Unallocated
Total
(In thousands)
$307,927
$ 61,910
$ 186,033
$75,654
$ 919,562
25,768
19,133
79,489
2,545
170,000
Charge-offs . . . . . . . . .
Recoveries . . . . . . . . .
(60,983)
30,284
(16,487)
9,623
(13,116)
4,311
(107,787)
20,585
Net charge-offs . . . . . . .
(30,699)
(6,864)
(8,805)
(87,202)
—
—
—
(198,373)
64,803
(133,570)
Ending balance . . . . . . . $300,404
$ 326,831
$ 72,238
$ 178,320
$ 78,199
$ 955,992
2014
Beginning balance . . . . . $ 273,383
Provision for credit
losses . . . . . . . . . . . . . .
51,410
Net charge-offs
$324,978
$ 78,656
$ 164,644
$ 75,015
$ 916,676
(13,779)
(3,974)
89,704
639
124,000
Charge-offs . . . . . . . . .
Recoveries . . . . . . . . .
(58,943)
22,188
(14,058)
10,786
(21,351)
8,579
(84,390)
16,075
Net charge-offs . . . . . . .
(36,755)
(3,272)
(12,772)
(68,315)
—
—
—
(178,742)
57,628
(121,114)
Ending balance . . . . . . . $ 288,038
$307,927
$ 61,910
$ 186,033
$75,654
$ 919,562
2013
Beginning balance . . . . . $ 246,759
Provision for credit
losses . . . . . . . . . . . . . .
124,180
$ 337,101
$ 88,807
$ 179,418
$ 73,775
$ 925,860
275
3,149
56,156
1,240
185,000
Allowance related to
loans sold or
securitized . . . . . . . . .
Net charge-offs
—
—
—
(11,000)
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)
—
—
—
—
(11,000)
(253,510)
70,326
(183,184)
Ending Balance . . . . . . . $ 273,383
$324,978
$ 78,656
$ 164,644
$ 75,015
$ 916,676
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
131
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 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.
132
The following tables provide information with respect to loans and leases that were
considered impaired as of December 31, 2015 and 2014 and for the years ended December 31, 2015,
2014 and 2013.
December 31, 2015
December 31, 2014
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
(In thousands)
Unpaid
Principal
Balance
Related
Allowance
With an allowance recorded:
Commercial, financial, leasing, etc.
. . . . . . . . . . .
$ 179,037
$ 195,821
$44,752
$ 132,340
$ 165,146
$ 31,779
Real estate:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85,974
95,855
18,764
Residential builder and developer . . . . . . . . . .
Other commercial construction . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential-limited documentation . . . . . . . . .
Consumer:
Home equity lines and loans . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,316
3,548
79,558
90,356
25,220
22,525
17,620
5,101
3,843
96,751
104,251
26,195
22,525
17,620
196
348
4,727
8,000
3,777
4,709
4,820
83,955
17,632
5,480
88,970
101,137
19,771
30,317
18,973
96,209
22,044
6,484
107,343
114,565
20,806
30,317
18,973
14,121
805
900
4,296
11,000
6,213
8,070
5,459
507,154
567,962
90,093
498,575
581,887
82,643
With no related allowance recorded:
Commercial, financial, leasing, etc.
. . . . . . . . . . .
93,190
110,735
Real estate:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101,340
116,230
Residential builder and developer . . . . . . . . . .
Other commercial construction . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential-limited documentation . . . . . . . . .
27,651
13,221
19,621
18,414
47,246
31,477
30,940
31,113
273,437
367,741
Total:
—
—
—
—
—
—
—
73,978
81,493
66,777
58,820
20,738
16,815
26,752
78,943
96,722
41,035
26,750
46,964
263,880
371,907
—
—
—
—
—
—
—
Commercial, financial, leasing, etc.
. . . . . . . . . . .
272,227
306,556
44,752
206,318
246,639
31,779
Real estate:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187,314
212,085
18,764
Residential builder and developer . . . . . . . . . .
Other commercial construction . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,967
16,769
99,179
Residential-limited documentation . . . . . . . . .
108,770
Consumer:
Home equity lines and loans . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,220
22,525
17,620
52,347
35,320
127,691
135,364
26,195
22,525
17,620
196
348
4,727
8,000
3,777
4,709
4,820
150,732
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
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$780,591
$935,703
$90,093
$762,455
$953,794
$82,643
133
Year Ended
December 31, 2015
Year Ended
December 31, 2014
Average
Recorded
Investment
Interest Income
Recognized
Total
Cash
Basis
Average
Recorded
Investment
Interest Income
Recognized
Total
Cash
Basis
(In thousands)
Commercial, financial, leasing,
etc.
. . . . . . . . . . . . . . . . . . . . . . .
$236,201
$ 2,933
$ 2,933
$ 181,932
$ 2,251
$ 2,251
Real estate:
Commercial . . . . . . . . . . . . . . .
Residential builder and
166,628
6,243
6,243
184,773
4,029
4,029
developer . . . . . . . . . . . . . . .
59,457
335
335
91,149
142
142
Other commercial
construction . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . .
Residential-limited
20,276
101,483
2,311
6,188
2,311
4,037
62,734
126,005
1,893
9,180
1,893
6,978
documentation . . . . . . . . . .
118,449
6,380
2,638
133,800
6,613
2,546
Consumer:
Home equity lines and
loans . . . . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
21,523
25,675
18,809
905
1,619
729
261
175
113
18,083
35,173
18,378
750
2,251
690
248
295
191
Total
. . . . . . . . . . . . . . . . . . . . . . .
$768,501
$27,643
$19,046
$852,027
$27,799
$18,573
Year Ended
December 31, 2013
Interest Income
Recognized
Commercial, financial, leasing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 155,188
Real estate:
Average
Recorded
Investment
Total
(In thousands)
$ 7,197
Cash
Basis
$ 7,197
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential builder and developer . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other commercial construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential-limited documentation . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer:
Home equity lines and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
197,533
147,288
96,475
183,059
149,461
12,811
44,116
15,710
4,852
1,043
5,248
6,203
6,784
683
2,916
634
4,852
796
5,248
4,111
2,341
183
515
208
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,001,641
$35,560
$25,451
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.
134
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 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, 2015
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,442,183
738,238
Criticized accrual . . . . . . . . . . . . . . . . . . . . . .
241,917
. . . . . . . . . . . . . . . . . .
Criticized nonaccrual
$ 23,098,856
787,480
179,606
$1,497,465
59,779
28,429
$ 3,432,679
96,654
16,363
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,422,338
$24,065,942
$ 1,585,673
$3,545,696
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
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 $55 million and $21 million, respectively, at
December 31, 2015 and $63 million and $18 million, respectively, at December 31, 2014. 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 $20 million and $28 million, respectively, at December 31, 2015
and $27 million and $28 million, respectively, at December 31, 2014.
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
135
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 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, 2015
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . . . . .
$ 44,752
$ 19,175
$ 12,727
$ 13,306
$ 89,960
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . . . . . .
Purchased impaired . . . . . . . . . . . . . . . .
255,615
37
307,000
656
57,624
1,887
163,511
1,503
783,750
4,083
Allocated . . . . . . . . . . . . . . . . . . . . . . . . .
$300,404
$ 326,831
$72,238
$178,320
877,793
Unallocated . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2014
Individually evaluated for
78,199
$955,992
impairment . . . . . . . . . . . . . . . . . . . . .
$ 31,779
$ 15,490
$14,703
$ 19,742
$ 81,714
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . . . . . .
Purchased impaired . . . . . . . . . . . . . . . .
251,607
4,652
291,244
1,193
45,061
2,146
165,140
1,151
753,052
9,142
Allocated . . . . . . . . . . . . . . . . . . . . . . . . .
$ 288,038
$ 307,927
$ 61,910
$186,033
843,908
Unallocated . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,654
$ 919,562
136
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, 2015
Individually evaluated for
impairment
. . . . . . . . . . . . . . . . . . $
272,227 $
234,132 $
207,949 $
65,365 $
779,673
Collectively evaluated for
impairment
Purchased impaired . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 20,148,209
1,902
28,863,130 25,398,037
664,117
100,049
11,532,121
2,261
85,941,497
768,329
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . $20,422,338 $ 29,197,311 $26,270,103 $ 11,599,747 $87,489,499
December 31, 2014
Individually evaluated for
impairment
. . . . . . . . . . . . . . . . . . $
206,318 $
252,347 $
232,398 $
69,061 $
760,124
Collectively evaluated for
impairment
. . . . . . . . . . . . . . . . . .
Purchased impaired . . . . . . . . . . . . .
19,244,674 27,148,382
166,840
10,300
8,406,680
18,223
10,911,359
2,374
65,711,095
197,737
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,461,292 $27,567,569 $ 8,657,301 $10,982,794 $66,668,956
6. Premises and equipment
The detail of premises and equipment was as follows:
December 31
2015
2014
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105,435
443,507
Buildings — owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,108
Buildings — capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
229,919
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
614,591
Furniture and equipment — owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,019
Furniture and equipment — capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
82,335
406,522
1,131
219,152
586,429
18,853
Less: accumulated depreciation and amortization
Owned assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,406,579
1,314,422
732,315
7,582
739,897
686,372
15,066
701,438
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 666,682
$ 612,984
Net lease expense for all operating leases totaled $102,356,000 in 2015, $104,297,000 in 2014
and $103,297,000 in 2013. Minimum lease payments under noncancelable operating leases are
presented in note 21. Minimum lease payments required under capital leases are not material.
137
7. Capitalized servicing assets
Changes in capitalized servicing assets were as follows:
For Year Ended December 31,
2015
2014
2013
2015
2014
2013
Residential Mortgage Loans
Commercial Mortgage Loans
(In thousands)
Beginning balance . . . . . . . . . . . . . . $109,871 $ 126,377 $104,855 $ 72,939 $ 72,499 $ 59,978
26,754
Originations . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . .
—
Recognized in loan securitization
transactions . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . .
—
(45,080)
13,696
(44,821)
—
(27,367)
—
(16,212)
—
(19,161)
28,285
289
29,914
—
35,556
243
52,375
272
15,922
730
—
(14,233)
Valuation allowance . . . . . . . . . . . .
118,303
—
109,871
—
126,377
(300)
83,692
—
72,939
—
72,499
—
Ending balance, net . . . . . . . . . . . . . $118,303 $ 109,871 $126,077 $ 83,692 $ 72,939 $ 72,499
For Year Ended December 31,
2015
Other
2014
2013
2015
(In thousands)
Total
2014
2013
Beginning balance . . . . . . . . . . . . . . $ 4,107 $ 11,225 $ 8,143 $ 186,917 $210,101 $ 172,976
79,129
Originations . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . .
272
Recognized in loan securitization
transactions . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . .
—
(49,906)
—
(68,410)
9,382
(6,300)
—
(3,378)
44,207
1,019
65,470
243
—
(7,118)
23,078
(65,354)
—
—
—
—
—
—
Valuation allowance . . . . . . . . . . . .
729
—
4,107
—
11,225
—
202,724
—
186,917
—
210,101
(300)
Ending balance, net . . . . . . . . . . . . . $
729 $ 4,107 $ 11,225 $202,724 $186,917 $209,801
Residential mortgage loans serviced for others were $61.7 billion at December 31, 2015, $67.2
billion at December 31, 2014 and $72.4 billion at December 31, 2013. Reflected in residential mortgage
loans serviced for others were loans sub-serviced for others of $37.8 billion, $42.1 billion and $46.6
billion at December 31, 2015, 2014, and 2013, respectively. Commercial mortgage loans serviced for
others were $11.0 billion at December 31, 2015, $11.3 billion at December 31, 2014 and $11.4 billion at
December 31, 2013.
The estimated fair value of capitalized residential mortgage loan servicing assets was
approximately $249 million at December 31, 2015 and $228 million at December 31, 2014. The fair
value of capitalized residential mortgage loan servicing assets was estimated using weighted-average
discount rates of 12.4% and 11.9% at December 31, 2015 and 2014, respectively, and contemporaneous
prepayment assumptions that vary by loan type. At December 31, 2015 and 2014, the discount rate
represented a weighted-average option-adjusted spread (“OAS”) of 1119 basis points (hundredths of
one percent) and 1065 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 $99 million and $87 million at December 31, 2015 and 2014,
respectively. An 18% discount rate was used to estimate the fair value of capitalized commercial
mortgage loan servicing rights at December 31, 2015 and 2014 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.
138
The key economic assumptions used to determine the fair value of significant portfolios of
capitalized servicing rights at December 31, 2015 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.92%
Impact on fair value of 10% adverse change . . . . . . . . . . . . . . . . . . . . . . $ (9,208,000)
(17,696,000)
Impact on fair value of 20% adverse change . . . . . . . . . . . . . . . . . . . . .
11.19%
Weighted-average OAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact on fair value of 10% adverse change . . . . . . . . . . . . . . . . . . . . . . $ (7,758,000)
Impact on fair value of 20% adverse change . . . . . . . . . . . . . . . . . . . . .
(15,011,000)
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact on fair value of 10% adverse change . . . . . . . . . . . . . . . . . . . . . .
Impact on fair value of 20% adverse change . . . . . . . . . . . . . . . . . . . . .
18.00%
$(4,302,000)
(8,300,000)
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.
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, 2015
Core deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 887,459
177,268
$750,624
173,835
$ 136,835
3,433
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,064,727
$924,459
$140,268
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
139
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, 2015 was approximately six years. Amortization expense for
core deposit and other intangible assets was $26,424,000, $33,824,000 and $46,912,000 for the years
ended December 31, 2015, 2014 and 2013, respectively. Estimated amortization expense in future
years for such intangible assets is as follows:
Year ending December 31:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 42,185
30,733
23,462
18,026
13,323
12,539
$140,268
In accordance with GAAP, the Company completed annual goodwill impairment tests as of
October 1, 2015, 2014 and 2013. 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.
A summary of goodwill assigned to each of the Company’s reportable segments as of
December 31, 2015 and 2014 for purposes of testing for impairment is as follows.
December 31
2014
2015
Transactions(a)
December 31
2015
Business Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 748,907
907,524
Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
349,197
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Discretionary Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Residential Mortgage Banking . . . . . . . . . . . . . . . . . . . . . . . . .
1,144,404
Retail Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
374,593
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 115,459
494,349
305,192
—
—
164,787
(11,300)
$ 864,366
1,401,873
654,389
—
—
1,309,191
363,293
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,524,625
$1,068,487
$4,593,112
(a) All increases relate to the acquisition of Hudson City on November 1, 2015. The $11 million decrease in
“All Other” represents goodwill allocated to the trade processing business sold in April 2015. Further
information related to those transactions is provided in note 2.
140
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, 2015
Amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . .
$ 150,546
$1,981,636
$2,132,182
0.06%
0.43%
0.40%
For the year ended December 31, 2015
Highest amount at a month-end . . . . . . . . . . . . . . . . . . . . . . .
Daily-average amount outstanding . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . .
$ 202,951
187,167
$1,989,257
360,838
$ 548,005
0.08%
0.43%
0.31%
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%
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, 2015 matured on the next business day following year-end.
Other short-term borrowings at December 31, 2015 represent borrowings from the FHLB of New
York that were assumed in the acquisition of Hudson City. Those borrowings mature at various dates
in 2016.
At December 31, 2015, the Company had lines of credit under formal agreements as follows:
M&T Bank
Wilmington
Trust, N.A.
(In thousands)
Outstanding borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,108,243
29,189,620
Unused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
147,739
At December 31, 2015, M&T Bank had borrowing facilities available with the FHLBs whereby
M&T Bank could borrow up to approximately $20.5 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 $11.9 billion at December 31, 2015. M&T Bank and Wilmington Trust, N.A. are
required to pledge loans and investment securities as collateral for these borrowing facilities.
141
Long-term borrowings were as follows:
December 31,
2015
2014
(In thousands)
Senior notes of M&T Bank:
Variable rate due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,000
550,000
Variable rate due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
499,984
1.25% due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
749,851
1.40% due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
503,527
1.45% due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
648,628
2.25% due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
749,219
2.30% due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
749,650
2.10% due 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
749,236
2.90% due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 300,000
550,000
499,969
749,756
503,118
648,243
748,965
—
—
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated notes of M&T Bank:
1,158,216
1,899,281
1,161,514
1,400,000
213,417
218,883
6.625% due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.585% due 2020, variable rate commenced 2015 . . . . . . . . . . . . . . . . . . .
5.629% due 2021, variable rate commencing 2016 . . . . . . . . . . . . . . . . . . .
419,800
409,361
518,797
428,627
400,846
538,961
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 . . . . . . . . .
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 Statutory Trust III — due 2033 . . . . . . . . . . . . . . . . . . . . . . .
Southern Financial Capital Trust III — due 2033 . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
15,635
25,817
6,583
145,717
147,291
96,349
15,464
53,244
7,889
20,902
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
$10,653,858
$9,006,959
The variable rate senior notes of M&T Bank pay interest quarterly at rates that are indexed to
the three-month LIBOR. The contractual interest rates for those notes ranged from 0.62% to 0.75%
at December 31, 2015 and from 0.54% to 0.61% at December 31, 2014. The weighted-average
contractual interest rates payable were 0.69% at December 31, 2015 and 0.56% at December 31, 2014.
142
Long-term fixed rate advances from the FHLB had contractual interest rates ranging from
1.17% to 7.32% with a weighted-average contractual interest rate of 1.66% at December 31, 2015 and
1.68% at December 31, 2014. 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 4.58% at December 31, 2015 and from 3.61% to 4.30% at December 31, 2014. The
weighted-average contractual interest rates payable were 4.00% at December 31, 2015 and 3.90% at
December 31, 2014. The agreements reflect various repurchase dates through 2020, 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 consisting primarily of government guaranteed
mortgage-backed securities of $2.0 billion and $1.5 billion at December 31, 2015 and 2014,
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 subordinated notes of M&T
Bank that mature in 2020 converted to variable rate notes in December 2015. These notes now pay
interest monthly at a rate that is indexed to the one-month LIBOR. The contractual interest rate was
1.64% at December 31, 2015. The subordinated notes of M&T Bank that mature in 2021 will convert
to variable rate notes in December 2016. These notes will then pay interest quarterly at a rate that is
indexed to the three-month LIBOR.
The fixed and variable 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 were 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 1.18% to 3.67% at December 31, 2015 and from 1.08% to
3.58% at December 31, 2014. The weighted-average variable rates payable on those Junior
Subordinated Debentures were 1.78% at December 31, 2015 and 1.66% at December 31, 2014.
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. On April 15, 2015, M&T redeemed all of the issued and outstanding
Capital Securities issued by M&T Capital Trust I, M&T Capital Trust II and M&T Capital Trust III,
143
and the related Junior Subordinated Debentures held by those respective trusts. In the aggregate,
$323 million of Junior Subordinated Debentures were redeemed.
Long-term borrowings at December 31, 2015 mature as follows:
Year ending December 31:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,106,613
3,452,420
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
719,574
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,306,326
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,272,561
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,796,364
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$10,653,858
10. Shareholders’ equity
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 as of December 31, 2015 and 2014 is presented
below:
Shares
Issued and
Outstanding
Carrying
Value
(Dollars in thousands)
Series A(a)
Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation
preference per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,000 $230,000
Series C(a)
Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation
preference per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,500 $ 151,500
Series D(b)
Fixed Rate Non-cumulative Perpetual Preferred Stock, $10,000 liquidation
preference per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,000 $500,000
Series E(c)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock, $1,000
liquidation preference per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000 $350,000
(a) Dividends, if declared, are paid at 6.375%. Warrants to purchase M&T common stock at $73.86 per share
issued in connection with the Series A preferred stock expire in 2018 and totaled 719,175 and 721,490 at
December 31, 2015 and 2014, respectively.
(b) Dividends, if declared, are 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, are 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.
In addition to the Series A warrants mentioned in (a) above, a warrant to purchase 95,383
shares of M&T common stock at $518.96 per share was outstanding at each of December 31, 2015 and
2014. The obligation under that warrant was assumed by M&T in an acquisition.
144
11. Stock-based compensation plans
Stock-based compensation expense was $67 million in 2015, $65 million in 2014 and $55 million in
2013. The Company recognized income tax benefits related to stock-based compensation of $29
million in 2015, $31 million in 2014 and $29 million in 2013.
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, 2015 and 2014, respectively, there were 3,954,712 and
4,398,496 shares available for future grant under the Company’s equity incentive compensation plan.
Restrictedstockawards
Restricted stock awards are comprised of restricted stock and restricted stock units. Restricted stock
awards granted in 2015 and 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 2015 and 2014 require
a performance condition to be met before such awards vest. Unrecognized compensation expense
associated with restricted stock was $14 million as of December 31, 2015 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 218,183 in 2015, 221,822 in 2014 and 269,755 in 2013, with a weighted-
average grant date fair value of $24,726,000 in 2015, $24,765,000 in 2014 and $27,716,000 in 2013.
Unrecognized compensation expense associated with restricted stock units was $6 million as of
December 31, 2015 and is expected to be recognized over a weighted-average period of
approximately one year. The number of restricted stock units issued was 324,772 in 2015, 299,525 in
2014 and 315,316 in 2013, with a weighted-average grant date fair value of $37,070,000, $33,406,000
and $32,380,000, 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, 2015 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed in acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
789,411
324,772
215,215
(357,457)
(3,443)
$ 99.53
114.14
119.85
98.35
100.95
761,645
218,183
—
(325,518)
(28,422)
$ 96.36
113.33
—
92.68
104.60
Unvested at December 31, 2015 . . . . . . . . . . . . . . . . . . . . .
968,498
$109.38
625,888
$ 103.82
Stockoptionawards
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 2015, 2014 and 2013 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, 2015 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed in acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,432,870 $ 105.31
1 1 3.16
156.82
107.06
137.50
200
1,843,159
(954,684)
(97,835)
Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . .
4,223,710 $126.65
Exercisable at December 31, 2015 . . . . . . . . . . . . . . . . . . . . 4,223,266 $126.65
1.7
1.7
$43,761
$43,755
145
For 2015, 2014 and 2013, M&T received $93 million, $127 million and $172 million,
respectively, in cash and realized tax benefits from the exercise of stock options of $6 million, $9
million and $12 million, respectively. The intrinsic value of stock options exercised during those
periods was $17 million, $26 million and $34 million, respectively. As of December 31, 2015, 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 2015, 2014 and 2013 was not significant.
Upon the exercise of stock options, the Company may issue shares from treasury stock to the extent
available or issue new shares.
Stockpurchaseplan
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 89,384 shares issued in 2015 and 85,761 shares
issued in 2014. No shares were issued in 2013. For 2015 and 2014, M&T received $9,296,000 and
$8,607,000, respectively, in cash for shares purchased through the employee stock purchase plan.
Compensation expense recognized for the stock purchase plan was not significant in 2015, 2014 or
2013.
Deferredbonusplan
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 26,365
and 29,297 at December 31, 2015 and 2014, respectively. The obligation to issue shares is included in
“common stock issuable” in the consolidated balance sheet.
Directors’stockplan
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, 2015, 225,763 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 10,279 and 12,033 at December 31, 2015 and 2014, 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
2015
2014
2013
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,372
72,731
Interest cost on benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(96,155)
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,005)
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,825
Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 20,520
69,162
(91,568)
(6,552)
14,494
$ 24,360
60,130
(87,353)
(6,556)
41,076
Net periodic pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,768
$ 6,056
$ 31,657
146
Net other postretirement benefits expense for defined benefit plans consisted of the following:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 914
2,995
Interest cost on benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,359)
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106
Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 605
2,778
(1,359)
—
$ 742
2,691
(1,359)
360
Net other postretirement benefits expense . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,656
$ 2,024
$ 2,434
Year Ended December 31
2015
2014
2013
Data relating to the funding position of the defined benefit plans were as follows:
Pension Benefits
Other
Postretirement Benefits
2015
2014
2015
2014
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year . . . . . . . $ 1,813,409
24,372
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,731
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Plan participants’ contributions . . . . . . . . . . . . .
—
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(83,593)
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . .
247,340
Business combinations . . . . . . . . . . . . . . . . . . . . .
—
Medicare Part D reimbursement . . . . . . . . . . . .
(69,728)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,484,193
20,520
69,162
—
4,619
300,444
—
—
(65,529)
$ 67,502
914
2,995
2,619
—
(2,431)
56,539
420
(7,061)
$ 60,592
605
2,778
3,498
—
7,793
—
495
(8,259)
Benefit obligation at end of year . . . . . . . . . . . . .
2,004,531
1,813,409
121,497
67,502
Change in plan assets:
Fair value of plan assets at beginning of year . .
Actual return on plan assets . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . .
Business combinations . . . . . . . . . . . . . . . . . . . . .
Medicare Part D reimbursement . . . . . . . . . . . .
Benefits and other payments . . . . . . . . . . . . . . . .
1,505,661
(14,069)
8,367
—
194,903
—
(69,728)
1,506,684
56,430
8,076
—
—
—
(65,529)
Fair value of plan assets at end of year . . . . . . . .
1,625,134
1,505,661
—
—
4,022
2,619
—
420
(7,061)
—
—
—
4,266
3,498
—
495
(8,259)
—
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (379,397) $ (307,748) $(121,497) $(67,502)
Accrued liabilities recognized in the
consolidated balance sheet
. . . . . . . . . . . . . . . . . $ (379,397) $ (307,748) $(121,497) $(67,502)
Amounts recognized in accumulated other
comprehensive income (“AOCI”) were:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 494,279
277
Net prior service cost . . . . . . . . . . . . . . . . . . . . . .
$ 512,473
(5,728)
$ 4,200
(9,096)
$ 6,737
(10,455)
Pre-tax adjustment to AOCI . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
494,556
(194,608)
506,745
(198,897)
(4,896)
1,927
(3,718)
1,459
Net adjustment to AOCI.
. . . . . . . . . . . . . . . . . . . $ 299,948
$ 307,848
$ (2,969) $ (2,259)
147
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 $161,657,000 as of December 31, 2015 and $135,891,000 as of
December 31, 2014. Included in the amount at December 31, 2015 was $30,439,000 assumed in the
Hudson City acquisition.
The accumulated benefit obligation for all defined benefit pension plans was $1,951,425,000
and $1,782,387,000 at December 31, 2015 and 2014, 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, 2015 the Company
recorded a minimum liability adjustment of $489,660,000 ($494,556,000 related to pension plans
and $(4,896,000) related to other postretirement benefits) with a corresponding reduction of
shareholders’ equity, net of applicable deferred taxes, of $296,979,000. In aggregate, the benefit
plans realized a net gain during 2015 that resulted from several factors, including: an increase in the
discount rate used in the measurement of the benefit obligations to 4.25% at December 31, 2015 from
4.00% at December 31, 2014 and the amortization during 2015 of unrealized losses previously
recorded in accumulated other comprehensive income as of December 31, 2014. Both of these factors
increased other comprehensive income, but were largely offset by losses incurred in the qualified
pension plan as a result of investment returns that were less than the expected return. As a result, the
Company decreased its minimum liability adjustment from that which was recorded at December 31,
2014 by $13,367,000 with a corresponding increase to shareholders’ equity that, net of applicable
deferred taxes, was $8,610,000. 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
2015
Net loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . .
Amortization of loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 26,631
6,005
(44,825)
$(2,431)
1,359
(106)
$ 24,200
7,364
(44,931)
Total recognized in other comprehensive income, pre-tax . . .
$ (12,189)
$ (1,178)
$ (13,367)
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
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 2016:
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net prior service credit
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(3,228)
30,912
$(1,359)
8
148
Pension Plans
Other
Postretirement
Benefit Plans
(In thousands)
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 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 2015, 2014 and 2013 associated with
the defined contribution pension plan was approximately $23 million, $22 million and $21 million,
respectively.
Assumptions
The assumed weighted-average rates used to determine benefit obligations at December 31 were:
Pension
Benefits
Other
Postretirement
Benefits
2015
2014
2015
2014
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.25% 4.00% 4.25% 4.00%
Rate of increase in future compensation levels . . . . . . . . . . . . . . . . . . . . . . 4.37% 4.39%
—
—
The assumed weighted-average rates used to determine net benefit expense for the years
ended December 31 were:
Pension Benefits
Other
Postretirement Benefits
2015
2014
2013
2015
2014
2013
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.00% 4.75% 3.75% 4.00% 4.75% 3.75%
Long-term rate of return on plan assets . . . . . . . . . . . . . . .
6.50% 6.50% 6.50%
Rate of increase in future compensation levels . . . . . . . . . 4.39% 4.42% 4.50%
—
—
—
—
—
—
On November 1, 2015 pension and other benefit obligations were assumed as a result of the
acquisition of Hudson City. Initial liabilities and net costs were determined using a 4.25% discount
rate, a 3.50% increase in compensation and a 6.50% expected return on assets.
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 6.50% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2016. The rate was assumed to decrease
to 5.00% over 27 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108
3,180
Accumulated postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(96)
(2,729)
PlanAssets
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 an 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
149
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 domestic and international equities, including through mutual funds. Debt
securities include investments in 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 $209,878,000 (12.9% of total assets) of real estate, private investments, hedge funds and other
investments at December 31, 2015. 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, 2015, by asset category,
were as follows:
Fair Value Measurement of Plan Assets At December 31, 2015
Quoted Prices
in Active
Markets
for Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
(In thousands)
Asset category:
Money-market funds . . . . . . . . . . . . . . . . . . $
Equity securities:
69,634
$
37,958
$ 31,676
$
M&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic(a) . . . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . . . .
Mutual funds:
148,800
106,993
9,433
Domestic(a) . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . .
445,663
348,869
148,800
106,993
9,433
445,663
348,869
1,059,758
1,059,758
Debt securities:
Corporate(c) . . . . . . . . . . . . . . . . . . . . . . .
Government . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds:
105,499
120,346
7,492
Domestic(d) . . . . . . . . . . . . . . . . . . . . .
51,028
Other:
Diversified mutual fund . . . . . . . . . . . . .
Private real estate . . . . . . . . . . . . . . . . . .
Private equity . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed deposit fund . . . . . . . . . . . .
284,365
70,343
2,787
5,603
119,549
11,596
—
—
—
51,028
51,028
70,343
—
—
81,861
—
209,878
152,204
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
105,499
120,346
7,492
—
233,337
—
—
—
—
—
—
—
2,787
5,603
37,688
11,596
57,674
Total(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,623,635
$1,300,948
$265,013
$57,674
150
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)
Total
Asset category:
Money-market funds . . . . . . . . . . . . . . . . . . $ 29,458
Equity securities:
M&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic(a) . . . . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . . . .
Mutual funds:
154,252
214,127
16,170
Domestic(a) . . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . .
305,817
381,101
(In thousands)
$ 29,458
$
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
172,026
—
—
—
27,847
27,847
96,936
—
—
42,430
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
(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 33% of the mutual funds were invested in investment grade bonds and 67% in high-
yielding bonds at December 31, 2015. Approximately 55% of the mutual funds were invested in
investment grade bonds and 45% in high-yielding bonds at December 31, 2014. The holdings within the
funds were spread across diverse industries.
(e) Excludes dividends and interest receivable totaling $1,499,000 and $2,047,000 at December 31, 2015 and
2014, respectively.
Pension plan assets included common stock of M&T with a fair value of $148,800,000 (9.2% of
total plan assets) at December 31, 2015 and $154,252,000 (10.2% of total plan assets) at December 31,
2014. No investment in securities of a non-U.S. Government or government agency issuer exceeded
151
ten percent of plan assets at December 31, 2015. Assets subject to Level 3 valuations did not
constitute a significant portion of plan assets at December 31, 2015 or December 31, 2014.
The changes in Level 3 pension plan assets measured at estimated fair value on a recurring
basis during the year ended December 31, 2015 were as follows:
Balance –
January 1,
2015
Purchases
(Sales)
Total
Realized/
Unrealized
Gains
(Losses)
Balance –
December 31,
2015
Other
Private real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,162
6,234
Private equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,264
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Guaranteed deposit fund . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ (125)
(975)
14,258
11,407
$ 750
344
(834)
189
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,660
$24,565
$ 449
$ 2,787
5,603
37,688
11,596
$57,674
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 2016, the Company may make contributions to the qualified defined benefit pension plan in
2016, but the amount of any such contribution has not yet been determined. The Company did not
make any contributions to the plan in 2015 or 2014. 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 $8,367,000 and $8,076,000 in 2015 and 2014, respectively.
Payments made by the Company for postretirement benefits were $4,022,000 and $4,266,000 in
2015 and 2014, respectively. Payments for supplemental pension and other postretirement benefits
for 2016 are not expected to differ from those made in 2015 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:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,923
82,899
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,480
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,309
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
98,138
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
561,736
2021 through 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,771
8,834
8,952
8,979
8,973
44,338
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 $34,145,000, $32,466,000
and $31,797,000 in 2015, 2014 and 2013, respectively.
152
Income taxes
13.
The components of income tax expense were as follows:
Year Ended December 31
2015
2014
2013
(In thousands)
Current
Federal
State and city . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $130,349
21,549
$ 378,978
50,790
$ 371,249
68,035
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,898
429,768
439,284
Deferred
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
State and city . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
324,317
72,279
65,503
27,345
106,537
33,248
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
396,596
92,848
139,785
Amortization of investments in qualified affordable housing
projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,531
53,383
48,019
Total income taxes applicable to pre-tax income . . . . . . . . . . $595,025
$575,999
$627,088
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, 2015, M&T Bank’s tax bad debt reserve for which no federal income taxes
have been provided was $137,121,000. 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. There were no significant gains or losses on bank investment securities in 2014
or 2015. No alternative minimum tax expense was recognized in 2015, 2014 or 2013.
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
2015
2014
2013
Income taxes at statutory federal income tax rate . . . . . . . . . . . . . . $ 586,142
Increase (decrease) in taxes:
(In thousands)
$574,786
$ 617,949
Tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and city income taxes, net of federal income tax effect . . .
Qualified affordable housing project federal tax credits, net . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(33,102)
60,988
(15,297)
(3,706)
(31,752)
50,788
(14,827)
(2,996)
(34,747)
65,834
(17,994)
(3,954)
$595,025
$575,999
$627,088
153
Deferred tax assets (liabilities) were comprised of the following at December 31:
2015
2014
2013
Losses on loans and other assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 637,955
55,962
Postretirement and other employee benefits . . . . . . . . . . . . . .
60,337
Incentive and other compensation plans . . . . . . . . . . . . . . . . .
57,640
Interest on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
148,722
Retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,090
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
162,086
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 605,273
34,052
36,450
79,147
120,222
64,017
3,527
100,999
$ 645,713
30,023
37,772
100,725
—
63,101
1,404
121,561
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,194,792
1,043,687
1,000,299
Leasing transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized investment gains . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on subordinated note exchange . . . . . . . . . . . . . . . . . .
Retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(285,074)
(31,121)
(59,171)
—
—
(56,731)
(55,611)
(280,596)
(82,065)
(46,393)
(3,125)
—
—
(63,814)
(284,370)
(21,779)
(46,041)
(6,075)
(9,397)
—
(49,450)
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
(487,708)
(475,993)
(417,112)
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 707,084
$ 567,694
$ 583,187
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.
154
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, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,548
$ 12,379
Increases in unrecognized tax benefits as a result of tax positions taken during 2013 . .
2,267
—
$ 28,927
2,267
Increases in unrecognized tax benefits as a result of tax positions taken in prior
years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
4,429
4,429
Decreases in unrecognized tax benefits as a result of settlements with taxing
authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,854)
(487)
(2,341)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in unrecognized tax benefits as a result of tax positions taken during 2014 . .
14,611
769
14,696
—
Increases in unrecognized tax benefits as a result of tax positions taken in prior
years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
453
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in unrecognized tax benefits as a result of tax positions taken during 2015 . .
10,712
8,108
Increases in unrecognized tax benefits as a result of tax positions taken in prior
years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Decreases in unrecognized tax benefits as a result of settlements with taxing
authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized tax benefits acquired in a business combination . . . . . . . . . . . . . . . . . . . . . . . .
(1,515)
7,232
3,869
—
807
(274)
3,567
Gross unrecognized tax benefits at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24,537
$ 7,969
Less: Federal, state and local income tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrecognized tax benefits at December 31, 2015 that, if recognized, would impact
the effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,581
8,108
807
(1,789)
10,799
32,506
(11,377)
$ 21,129
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, 2015 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. Examinations by the
Internal Revenue Service of the Company’s federal income tax returns have been largely concluded
through 2014, although under statute the income tax returns from 2010 through 2014 could be
adjusted. 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
2011. It is not reasonably possible to estimate when examinations for any subsequent years will be
completed.
155
14. Earnings per common share
The computations of basic earnings per common share follow:
Year Ended December 31
2015
2014
2013
(In thousands, except per share)
Income available to common shareholders:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,079,667
(81,270)
Less: Preferred stock dividends(a) . . . . . . . . . . . . . . . . . . . . .
—
Amortization of preferred stock discount(a) . . . . . . .
$1,066,246
(75,878)
—
$ 1,138,480
(54,120)
(7,942)
Net income available to common equity . . . . . . . . . . . . . . . .
Less: Income attributable to unvested stock-based
998,397
990,368
1,076,418
compensation awards . . . . . . . . . . . . . . . . . . . . . . . . .
(10,708)
(11,837)
(13,989)
Net income available to common shareholders . . . . . . . . . . . . $ 987,689
Weighted-average shares outstanding:
$ 978,531
$1,062,429
Common shares outstanding (including common stock
issuable) and unvested stock-based compensation
awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Unvested stock-based compensation awards . . . . . . .
138,285
(1,482)
132,532
(1,582)
130,354
(1,700)
Weighted-average shares outstanding . . . . . . . . . . . . . . . . . . .
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . $
136,803
7.22
130,950
7.47
$
128,654
8.26
$
(a) Including impact of not as yet declared cumulative dividends.
The computations of diluted earnings per common share follow:
Year Ended December 31
2015
2014
2013
Net income available to common equity . . . . . . . . . . . . . . . . . . . . . $998,397
(In thousands, except per share)
$990,368
$ 1,076,418
Less: Income attributable to unvested stock-based
compensation awards . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,673)
(11,787)
(13,922)
Net income available to common shareholders . . . . . . . . . . . . . . . $987,724
Adjusted weighted-average shares outstanding:
$ 978,581
$1,062,496
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 . . . . . . . . . . . . . . . . . . . . . . . . . .
138,285
(1,482)
132,532
(1,582)
130,354
(1,700)
730
894
949
Adjusted weighted-average shares outstanding . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . $
137,533
7.18
131,844
7.42
$
129,603
8.20
$
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 common shares of approximately 2,268,000 in 2015, 2,017,000 in 2014 and 3,847,000 in
2013 were not included in the computations of diluted earnings per common share because the effect
on those years would have been antidilutive.
156
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
Income
Tax
Net
(In thousands)
Balance — January 1, 2015 . . . . . . $ 7,438 201,828 (503,027) (4,082) (297,843)
Other comprehensive income
before reclassifications:
Unrealized holding gains
116,849 $(180,994)
(losses), net
. . . . . . . . . . . . . .
8,921 (142,623)
—
— (133,702)
52,376
(81,326)
Foreign currency translation
adjustment . . . . . . . . . . . . . . .
Gains on cash flow hedges . . . .
Current year benefit plans
losses . . . . . . . . . . . . . . . . . . . .
Total other comprehensive
income (loss) before
reclassifications . . . . . . . . . . . . .
Amounts reclassified from
accumulated other
comprehensive income that
(increase) decrease net
income:
Amortization of unrealized
holding losses on held-to-
maturity (“HTM”)
securities . . . . . . . . . . . . . . . .
Losses realized in net
income . . . . . . . . . . . . . . . . . .
Accretion of net gain on
terminated cash flow
hedges . . . . . . . . . . . . . . . . . . .
Amortization of prior service
credit . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial
losses . . . . . . . . . . . . . . . . . . . .
Total reclassifications . . . . . . . . . .
Total gain (loss) during the
—
—
—
—
—
— (1,323)
— 1,453
(1,323)
1,453
398
(572)
(925)
881
— (24,200)
— (24,200)
8,612
(15,588)
8,921 (142,623) (24,200)
130 (157,772)
60,814
(96,958)
—
—
—
—
—
—
3,514
130
—
—
—
—
3,514(a)
(1,383)
2,131
130(c)
(49)
81
—
— (141)
(141)(d)
56
(85)
— (7,364)
— (7,364)(e) 2,620
(4,744)
— 44,931
— 44,931(e) (15,989)
28,942
3,644
37,567
(141) 41,070
(14,745)
26,325
period . . . . . . . . . . . . . . . . . . . . .
8,921 (138,979)
13,367
(11) (116,702)
46,069
(70,633)
Balance — December 31, 2015 . . . $16,359
62,849 (489,660) (4,093) (414,545)
162,918 $ (251,627)
157
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
Other comprehensive income
before reclassifications:
Unrealized holding gains
18,450 (161,617)
115 (105,797)
41,638 $ (64,159)
(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 (loss) before
reclassifications . . . . . . . . . . . .
Amounts reclassified from
accumulated other
comprehensive income that
(increase) decrease net
income:
Amortization of unrealized
holding losses on HTM
securities . . . . . . . . . . . . . . . .
Amortization of losses on
terminated cash flow
hedges . . . . . . . . . . . . . . . . . .
Amortization of prior service
credit . . . . . . . . . . . . . . . . . . .
Amortization of actuarial
losses . . . . . . . . . . . . . . . . . . .
Total reclassifications . . . . . . . . .
Total gain (loss) during the
—
—
—
—
—
— (4,039)
(4,039)
1,432
(2,607)
—
(165)
(165)
65
(100)
— (347,993)
— (347,993)
136,587
(211,406)
(29,818) 180,005 (347,993) (4,204) (202,010)
79,122 (122,888)
1
3,373
—
—
(7,911)
—
—
— 14,494
3,373
6,583
—
—
—
1
—
7
—
—
7
3,374(a)
(1,324)
2,050
7(d)
(3)
4
(7,911)(e)
3,105
(4,806)
14,494(e)
(5,689)
9,964
(3,911)
8,805
6,053
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)
158
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 reclassifications:
Unrealized holding gains
155,393 $(240,264)
(losses), net . . . . . . . . . . . . . .
77,794 (129,628)
— — (51,834)
20,311
(31,523)
Foreign currency translation
adjustment . . . . . . . . . . . . . . .
Current year benefit plans
gains . . . . . . . . . . . . . . . . . . . .
Total other comprehensive
income (loss) before
reclassifications . . . . . . . . . . . . .
Amounts reclassified from
accumulated other
comprehensive income that
(increase) decrease net
income:
Amortization of unrealized
holding losses on HTM
securities . . . . . . . . . . . . . . . .
OTTI charges recognized in
—
—
—
— 546
546
(165)
381
— 260,452 — 260,452
(102,227)
158,225
77,794 (129,628) 260,452 546 209,164
(82,081)
127,083
279
4,008
— —
4,287(a)
(1,683)
2,604
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)
3,107
(4,808)
— 41,436 — 41,436(e)
(16,264)
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)
(a) Included in interest income.
(b) Included in OTTI losses recognized in earnings.
(c)
Included in gain (loss) on bank investment securities.
(d) Included in interest expense.
(e)
Included in salaries and employee benefits expense.
159
Accumulated other comprehensive income (loss), net consisted of unrealized gains (losses) as
follows:
Investment Securities
With OTTI
All Other
Balance at January 1, 2013 . . . . . . . . . . $(55,790)
78,422
Net gain (loss) during 2013 . . . . . . . . . .
$ 92,581
(81,287)
Balance at December 31, 2013 . . . . . . .
Net gain (loss) during 2014 . . . . . . . . .
22,632
(18,114)
Balance at December 31, 2014 . . . . . . .
Net gain (loss) during 2015 . . . . . . . . . .
4,518
5,403
11,294
111,389
122,683
(84,517)
Defined
Benefit
Plans
(In thousands)
$ (276,771)
178,589
(98,182)
(207,407)
(305,589)
8,610
Other
Total
$ (284) $(240,264)
176,105
381
97
(2,703)
(2,606)
(129)
(64,159)
(116,835)
(180,994)
(70,633)
Balance at December 31, 2015 . . . . . . . $ 9,921
$ 38,166
$(296,979)
$ (2,735) $ (251,627)
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
2015
2014
2013
(In thousands)
Other income:
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,984
81,558
Credit-related fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter of credit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,724
Gains from loan securitization transactions . . . . . . . . . . . . . . . . .
$ 50,004
72,454
56,708
Other expense:
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of capitalized servicing rights . . . . . . . . . . . . . . . .
Advertising and promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
346,840
49,906
59,227
401,946
68,410
$ 56,120
72,271
59,889
63,066
335,794
65,354
56,597
International activities
17.
The Company engages in limited international activities including certain trust-related services in
Europe, 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. Assets and revenues associated with international activities represent
less than 1% of the Company’s consolidated assets and revenues. International assets included $265
million and $213 million of loans to foreign borrowers at December 31, 2015 and 2014, respectively.
Deposits at M&T Bank’s Cayman Islands office were $170 million and $177 million at December 31,
2015 and 2014, 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. Revenues
from providing international trust-related services were approximately $26 million in 2015, $31
million in 2014 and $26 million in 2013.
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.
160
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, 2015.
The net effect of interest rate swap agreements was to increase net interest income by $44
million in 2015, $45 million in 2014 and $41 million in 2013. 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 each of 2015 and 2014, and $1.2 billion in 2013.
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:
Notional
Amount
Average
Maturity
(In thousands)
(In years)
Weighted-Average
Rate
Fixed
Variable
Estimated Fair
Value Gain
(In thousands)
December 31, 2015
Fair value hedges:
Fixed rate long-term borrowings(a) . . . . . . $1,400,000
December 31, 2014
Fair value hedges:
Fixed rate long-term borrowings(a) . . . . . . $1,400,000
1.7
4.42% 1.39%
$43,892
2.7
4.42% 1.19%
$ 73,251
(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, 2015 mature as follows:
Year ending December 31:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500,000
400,000
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
500,000
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$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 $18.4 billion and $17.6 billion at December 31, 2015 and 2014, respectively. The notional
amounts of foreign currency and other option and futures contracts entered into for trading account
purposes aggregated $1.6 billion and $1.3 billion at December 31, 2015 and 2014, respectively.
161
Information about the fair values of derivative instruments in the Company’s consolidated
balance sheet and consolidated statement of income follows:
Derivatives designated and qualifying as hedging
Asset Derivatives
Fair Value
December 31
Liability Derivatives
Fair Value
December 31
2015
2014
2015
2014
(In thousands)
instruments
Fair value hedges:
Interest rate swap agreements(a) . . . . . . . . . . . . . . . . . . . . . . . . $ 43,892 $ 73,251 $
Commitments to sell real estate loans(a) . . . . . . . . . . . . . . . . . .
1,844
728
45,736
73,979
— $
656
656
—
4,217
4,217
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:
Interest rate contracts(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange and other option and futures
10,282
533
17,396
754
403
846
49
4,330
203,517
215,614
153,723
173,513
contracts(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,569
31,112
7,022
29,950
222,901 264,876
161,994 207,842
Total derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $268,637 $ 338,855 $162,650 $ 212,059
(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 Gain (Loss) Recognized
Year Ended
December 31, 2015
Year Ended
December 31, 2014
Year Ended
December 31, 2013
Derivative
Hedged
Item
Derivative
Hedged
Item
(In thousands)
Derivative
Hedged
Item
Derivatives in fair value hedging
relationships
Interest rate swap agreements:
Fixed rate long-term borrowings(a) . . . . . . . $(29,359) $28,719 $(29,624) $28,870 $(40,304) $38,986
Derivatives not designated as hedging
instruments
Trading:
Interest rate contracts(b) . . . . . . . . . . . . . . . . . $ 10,755
Foreign exchange and other option and
futures contracts(b) . . . . . . . . . . . . . . . . . . .
9,337
$ 3,398
$ 9,824
7,670
8,598
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,092
$ 11,068
$ 18,422
(a) Reported as other revenues from operations.
(b) Reported as trading account and foreign exchange gains.
162
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 were approximately $18 million and $28
million at December 31, 2015 and 2014, 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 $59 million and $161 million at
December 31, 2015 and 2014, respectively. After consideration of such netting arrangements, the net
liability positions with counterparties aggregated $55 million and $103 million at December 31, 2015
and 2014, respectively. The Company was required to post collateral relating to those positions of
$52 million and $90 million at December 31, 2015 and 2014, 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 ratings 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, 2015 was $13
million, for which the Company had posted collateral of $6 million in the normal course of business.
If the credit risk-related contingent features had been triggered on December 31, 2015, the maximum
amount of additional collateral the Company would have been required to post with counterparties
was $7 million.
The aggregate fair value of derivative financial instruments in an asset position, which are
subject to enforceable master netting arrangements, was $23 million and $104 million at
December 31, 2015 and 2014, respectively. After consideration of such netting arrangements, the net
asset positions with counterparties aggregated $19 million and $46 million at December 31, 2015 and
2014, respectively. Counterparties posted collateral relating to those positions of $22 million and $46
million at December 31, 2015 and 2014, 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 was a net liability position of $50 million and $35 million at December 31, 2015 and
2014, respectively. Collateral posted with clearinghouses was $99 million and $61 million at
December 31, 2015 and December 31, 2014, respectively.
19. Variable interest entities and asset securitizations
During the years ended December 31, 2015 and 2014, the Company securitized one-to-four family
residential real estate loans that had been originated for sale in guaranteed mortgage securitizations
with Ginnie Mae totaling $65 million and $135 million, respectively, and retained those securities in
its investment securities portfolio. Pre-tax gains on such transactions were not material. 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
163
originated. The Company recognized pre-tax gains of $42 million related to loans previously held for
investment, which were recorded in “other revenues from operation,” and pre-tax gains of $28
million on newly originated loans, which were reflected in “mortgage banking revenues.” As a result
of the securitization structures, 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. 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.
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, 2015 and 2014, the carrying values of the loans in the securitization trust were $81
million and $98 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, 2015 and 2014 was $13 million and $15 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, 2015 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, 2015
and 2014, the Company included the junior subordinated debentures as “long-term borrowings” in
its consolidated balance sheet and recognized $24 million and $34 million, respectively, 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 $1.1 billion at December 31, 2015 and $1.2 billion at December 31, 2014.
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 $295 million, including $78 million of
unfunded commitments, at December 31, 2015 and $243 million, including $56 million of unfunded
commitments, at December 31, 2014. Contingent commitments to provide additional capital
contributions to these partnerships were not material at December 31, 2015. 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.
As described in note 1, effective January 1, 2015 the Company retrospectively adopted for all
periods presented amended accounting guidance on the accounting for investments in qualified
affordable housing projects whereby the Company’s investment cost is amortized to income taxes in
the consolidated statement of income as tax credits and other tax benefits resulting from deductible
losses associated with the projects are received. The Company amortized $47 million, $53 million
164
and $48 million of its investments in qualified affordable housing projects to income tax expense
during 2015, 2014 and 2013, respectively, and recognized $62 million, $68 million and $66 million of
federal tax credits and other federal tax benefits during those respective periods.
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, 2015.
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.
• Level 1 — Valuation is based on quoted prices in active markets for identical assets and
liabilities.
• 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.
• 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 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.
Tradingaccountassetsandliabilities
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 and other
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.
Investmentsecuritiesavailableforsale
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.
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, 2015 and 2014. 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 4% to 10% with a
165
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, 2015, the total amortized
cost and fair value of securities backed by trust preferred securities issued by financial institutions
and other entities were $28 million and $47 million, respectively, and at December 31, 2014 were $30
million and $50 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.
Realestateloansheldforsale
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.
Commitmentstooriginaterealestateloansforsaleandcommitmentstosellrealestateloans
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.
Interestrateswapagreementsusedforinterestrateriskmanagement
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.
166
The following tables present assets and liabilities at December 31, 2015 and 2014 measured at
estimated fair value on a recurring basis:
Fair Value
Measurements at
December 31,
2015
Level 1(a)
Level 2(a)
Level 3
(In thousands)
$
273,783
$ 56,763 $
217,020 $
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
299,997
6,028
11,686,628
74
47,393
118,880
83,671
—
—
299,997
6,028
—
— 11,686,628
—
—
74
— 47,393
—
—
—
—
65,178
118,880
18,493
Real estate loans held for sale . . . . . . . . . . . . . . . . . .
Other assets(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
392,036
56,551
—
—
392,036
46,269
—
10,282
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,965,041
$121,941 $ 12,785,351 $57,749
12,242,671
65,178
12,130,026
47,467
Trading account liabilities . . . . . . . . . . . . . . . . . . . . .
Other liabilities(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
160,745
1,905
162,650
Fair Value
Measurements at
December 31,
2014
— $
—
160,745 $
1,502
— $
162,247 $
—
403
403
Level 1(a)
Level 2(a)
Level 3
(In thousands)
$
308,175
$ 51,416 $ 256,759 $
161,947
8,198
8,731,123
103
50,316
121,488
83,757
—
—
161,947
8,198
—
—
—
—
64,841
—
8,731,123
—
103
— 50,316
—
—
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
167
(a) There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during the
years ended December 31, 2015 and 2014.
(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, 2015 were as follows:
Balance — January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . .
Total gains realized/unrealized:
Included in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Included in other comprehensive income . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers in and/or out of Level 3(a) . . . . . . . . . . . . . . . .
Investment Securities Available for Sale
Privately Issued
Mortgage-
backed
Securities
Collateralized
Debt
Obligations
(In thousands)
Other
Assets and
Other
Liabilities
$103
$50,316
$ 17,347
—
—
(29)
—
—
3,254(c)
(6,177)
—
87,061(b)
—
—
(94,529)(d)
Balance — December 31, 2015 . . . . . . . . . . . . . . . . . . . . . .
$ 74
$47,393
$ 9,879
Changes in unrealized gains included in earnings
related to assets still held at December 31, 2015 . . . . .
$ —
$
—
$ 8,850(b)
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(a) . . . . . . . . . . . . . . . .
Balance — December 31, 2014 . . . . . . . . . . . . . . . . . . . . . .
Changes in unrealized gains included in earnings
related to assets still held at December 31, 2014 . . . .
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(c)
(2,018)
—
$
$
103
—
—
8,209(c)
(20,976)
—
83,417(b)
—
—
(70,011)(d)
$ 50,316
$ 17,347
$
—
$ 18,196(b)
168
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(a) . . . . . . . . . . . . . . .
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
$1,023,886
Collateralized
Debt
Obligations
(In thousands)
$ 61,869
Other
Assets and
Other
Liabilities
$ 47,859
(56,102)(e)
116,359(c)
(978,608)
(103,685)
—
—
4,508(c)
—
(3,294)
—
1,850
$63,083
—
$
—
$
$
97,845(b)
—
—
—
(141,763)(d)
$
$
3,941
3,431(b)
(a) 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.
(b) Reported as mortgage banking revenues in the consolidated statement of income and includes the fair
value of commitment issuances and expirations.
(c) Reported as net unrealized gains on investment securities in the consolidated statement of
comprehensive income.
(d) Transfers out of Level 3 consist of interest rate locks transferred to closed loans.
(e) Reported as an OTTI impairment loss or as gain (loss) on bank investment securities in the consolidated
statement of income.
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.
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 10% to 90% at
December 31, 2015. 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 $210 million at December 31, 2015, ($106 million and $104 million of which were classified as
169
Level 2 and Level 3, respectively), $173 million at December 31, 2014 ($94 million and $79 million of
which were classified as Level 2 and Level 3, respectively), and $222 million at December 31, 2013
($173 million and $49 million of which were classified as Level 2 and Level 3, respectively). Changes
in fair value recognized during the years ended December 31, 2015, 2014 and 2013 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 $75 million, $55 million and $58 million, respectively.
Assetstakeninforeclosureofdefaultedloans
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 $29 million and $19 million at December 31, 2015 and December 31, 2014,
respectively. Changes in fair value recognized for those foreclosed assets held by the Company were
not material during each of 2015, 2014 and 2013.
Significantunobservableinputstolevel3measurements
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, 2015 and 2014:
Fair Value at
December 31,
2015
(In thousands)
Valuation
Technique
Unobservable
Input/Assumptions
Range
(Weighted-
Average)
Recurring fair value
measurements:
Privately issued
mortgage– backed
securities . . . . . . . .
Collateralized debt
$
74
Two independent
pricing quotes
—
—
obligations . . . . . . .
47,393
Discounted cash flow Probability of default
Net other assets
(liabilities)(a) . . . . .
9,879
Discounted cash flow
Loss severity
Commitment
expirations
Fair Value at
December 31,
2014
(In thousands)
Valuation
Technique
Unobservable
Input/Assumptions
10%-56% (31%)
100%
0%-60% (39%)
Range
(Weighted-
Average)
Recurring fair value
measurements:
Privately issued
mortgage– backed
securities . . . . . . . .
Collateralized debt
$
103
Two independent
pricing quotes
—
—
obligations . . . . . . .
50,316
Discounted cash flow Probability of default
Net other assets
(liabilities)(a) . . . . .
17,347
Discounted cash flow
Loss severity
Commitment
expirations
12%-57% (36%)
100%
0%-96% (17%)
(a) Other Level 3 assets (liabilities) consist of commitments to originate real estate loans.
Sensitivityoffairvaluemeasurementstochangesinunobservableinputs
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.
170
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.
Disclosuresoffairvalueoffinancialinstruments
The carrying amounts and estimated fair value for financial instrument assets (liabilities) are
presented in the following table:
Carrying
Amount
Estimated
Fair Value
Level 1
Level 2
Level 3
December 31, 2015
(In thousands)
Financial assets:
Cash and cash equivalents . . . . $ 1,368,040 $ 1,368,040 $1,276,678 $
Interest-bearing deposits at
91,362 $
—
banks . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . .
Investment securities . . . . . . . .
Loans and leases:
Commercial loans and
7,594,350
273,783
15,656,439
7,594,350
273,783
15,660,877
—
56,763
65,178
7,594,350
217,020
15,406,404
—
—
189,295
leases . . . . . . . . . . . . . . . . .
20,422,338
20,146,201
Commercial real estate
loans . . . . . . . . . . . . . . . . . .
29,197,311
29,044,244
Residential real estate
loans . . . . . . . . . . . . . . . . . .
Consumer loans . . . . . . . . . .
Allowance for credit
losses . . . . . . . . . . . . . . . . . .
26,270,103
11,599,747
26,267,771
11,550,270
(955,992)
—
Loans and leases, net . . . .
Accrued interest receivable . .
86,533,507
306,496
87,008,486
306,496
—
—
—
—
—
—
—
— 20,146,201
38,774 29,005,470
4,727,816
21,539,955
— 11,550,270
—
—
4,766,590
306,496
82,241,896
—
Financial liabilities:
Noninterest-bearing
deposits . . . . . . . . . . . . . . . . . $ (29,110,635) $ (29,110,635)
— $ (29,110,635)
Savings deposits and interest-
checking accounts . . . . . . . .
Time deposits . . . . . . . . . . . . . .
Deposits at Cayman Islands
office . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . .
Long-term borrowings . . . . . . .
Accrued interest payable . . . . .
Trading account liabilities . . .
Other financial instruments:
Commitments to originate real
(49,566,644) (49,566,644)
(13,135,042)
(13,110,392)
— (49,566,644)
— (13,135,042)
(170,170)
(2,132,182)
(10,653,858)
(85,145)
(160,745)
(170,170)
(2,132,182)
(10,639,556)
(85,145)
(160,745)
(170,170)
—
—
(2,132,182)
— (10,639,556)
(85,145)
—
(160,745)
—
—
—
—
—
—
—
—
—
estate loans for sale . . . . . . . $
9,879 $
9,879
— $
— $
9,879
Commitments to sell real
estate loans . . . . . . . . . . . . . .
875
875
Other credit-related
commitments . . . . . . . . . . . . .
Interest rate swap agreements
used for interest rate risk
management . . . . . . . . . . . . .
(122,334)
(122,334)
43,892
43,892
—
—
—
875
—
—
(122,334)
43,892
—
171
Carrying
Amount
Estimated
Fair Value
Level 1
Level 2
Level 3
December 31, 2014
(In thousands)
1,373,357 $
1,373,357 $1,296,923 $
76,434 $
—
6,470,867
308,175
12,993,542
6,470,867
308,175
13,023,956
—
51,416
64,841
6,470,867
256,759
12,750,396
—
—
208,719
Financial assets:
Cash and cash equivalents . . . . $
Interest-bearing deposits at
banks . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . .
Investment securities . . . . . . . .
Loans and leases:
Commercial loans and
leases . . . . . . . . . . . . . . . . . .
19,461,292
19,188,574
Commercial real estate
loans . . . . . . . . . . . . . . . . . . .
27,567,569
27,487,818
Residential real estate
loans . . . . . . . . . . . . . . . . . . .
Consumer loans . . . . . . . . . . .
Allowance for credit
losses . . . . . . . . . . . . . . . . . .
8,657,301
10,982,794
8,729,056
10,909,623
(919,562)
—
Loans and leases, net . . . . .
Accrued interest receivable . . .
65,749,394
227,348
66,315,071
227,348
—
—
—
—
—
—
—
— 19,188,574
307,667
27,180,151
5,189,086
3,539,970
— 10,909,623
—
—
5,496,753
227,348
60,818,318
—
Financial liabilities:
Noninterest-bearing
deposits . . . . . . . . . . . . . . . . . . $(26,947,880) $(26,947,880)
— $(26,947,880)
Savings deposits and interest-
checking accounts . . . . . . . . .
Time deposits . . . . . . . . . . . . . . .
Deposits at Cayman Islands
office . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . .
Long-term borrowings . . . . . . .
Accrued interest payable . . . . .
Trading account liabilities . . . .
Other financial instruments:
Commitments to originate real
(43,393,618)
(3,063,973)
(43,393,618)
(3,086,126)
— (43,393,618)
(3,086,126)
—
(176,582)
(192,676)
(9,006,959)
(63,372)
(203,464)
(176,582)
(192,676)
(9,139,789)
(63,372)
(203,464)
—
—
—
—
—
(176,582)
(192,676)
(9,139,789)
(63,372)
(203,464)
—
—
—
—
—
—
—
—
estate loans for sale . . . . . . . . $
17,347 $
17,347
— $
— $
17,347
Commitments to sell real
estate loans . . . . . . . . . . . . . . .
(7,065)
(7,065)
Other credit-related
commitments . . . . . . . . . . . . .
Interest rate swap agreements
used for interest rate risk
management . . . . . . . . . . . . . .
(119,079)
(119,079)
73,251
73,251
—
—
—
(7,065)
—
—
(119,079)
73,251
—
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
172
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.
Cashandcashequivalents,interest-bearingdepositsatbanks,depositsatCaymanIslandsoffice,
short-termborrowings,accruedinterestreceivableandaccruedinterestpayable
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.
Investmentsecurities
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.
Loansandleases
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 interest-checking deposits 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-termborrowings
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.
Othercommitmentsandcontingencies
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.
173
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 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
2015
2014
(In thousands)
Commitments to extend credit
Home equity lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,631,680
57,597
Commercial real estate loans to be sold . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,949,933
Other commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
488,621
Residential real estate loans to be sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
212,619
Other residential real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,802,850
Commercial and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,330,013
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55,559
Commercial letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,794,322
Financial guarantees and indemnification contracts . . . . . . . . . . . . . . . . . .
782,885
Commitments to sell real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,194,516
212,257
5,161,273
432,352
197,825
11,080,856
3,706,888
46,965
2,490,050
1,237,294
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 $2.5 billion and $2.4
billion at December 31, 2015 and 2014, 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.
174
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.
The Company occupies certain banking offices and uses certain equipment under
noncancelable operating lease agreements expiring at various dates over the next 23 years. Minimum
lease payments under noncancelable operating leases are summarized in the following table:
Year ending December 31:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 96,308
93,926
79,995
64,819
46,589
110,533
$492,170
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. Subject to the
outcome of the matter discussed in the following paragraph, at December 31, 2015, 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.
The Company is the subject of an investigation by government agencies relating to the
origination of Federal Housing Administration (“FHA”) insured residential home loans and
residential home loans sold to The Federal Home Loan Mortgage Corporation (“Freddie Mac”) and
Fannie Mae. A number of other U.S. financial institutions have announced similar investigations.
Regarding FHA loans, the U.S. Department of Housing and Urban Development (“HUD”) Office of
Inspector General and the Department of Justice (collectively, the “Government”) are investigating
whether the Company complied with underwriting guidelines concerning certain loans where HUD
paid FHA insurance claims. The Company is fully cooperating with the investigation. The
Government has advised the Company that based upon its review of a sample of loans for which an
FHA insurance claim was paid by HUD, some of the loans do not meet underwriting guidelines. The
Company, based on its own review of the sample, does not agree with the sampling methodology and
loan analysis employed by the Government. Regarding loans originated by the Company and sold to
Freddie Mac and Fannie Mae, the investigation concerns whether the mortgages sold to Freddie Mac
and Fannie Mae comply with applicable underwriting guidelines. The Company is also cooperating
with that portion of the investigation. The investigation could lead to claims by the Government
under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of
1989, which allow treble and other special damages substantially in excess of actual losses. Remedies
in these proceedings or settlements may include restitution, fines, penalties, or alterations in the
Company’s business practices. The Company and the Government continue settlement discussions
regarding the investigation and although progress has been made, the parties have not yet reached a
definitive agreement. Based upon the current status of these negotiations, management expects that
this potential settlement should not have a material impact on the Company’s consolidated financial
condition or results of operations in future periods.
M&T and its subsidiaries are subject in the normal course of business to various pending and
threatened legal proceedings and other matters in which claims for monetary damages are asserted.
175
On an on-going basis management, after consultation with legal counsel, assesses the Company’s
liabilities and contingencies in connection with such 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.
22. Segment information
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 was 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. 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. Effective January 1, 2015, the Company made certain changes to its methodology for
measuring segment profit and loss. Those changes in the measurement of segment profitability were
largely the result of updated funds transfer pricing and various cost allocation reviews. The most
significant changes to the funds transfer pricing resulted from ascribing a longer duration to non-
maturity deposits, which significantly benefitted the Retail Banking segment. The cost allocation
review having the largest impact related to a branch cost study. That study consisted of transaction
reviews and time studies which resulted in a higher cost allocation from the Retail Banking segment
to the Business Banking segment. As described in note 1, effective January 1, 2015, the Company
made an accounting policy election to account for its investments in qualified affordable housing
projects using the proportional amortization method. That election resulted in the restatement of
prior period financial statements to remove losses associated with qualified affordable housing
projects from “other noninterest expense” and include the amortization of the initial cost of the
investment in income tax expense. In 2015, the Company changed its internal profitability reporting
176
to move a builder and developer lending unit from the Residential Mortgage Banking segment to the
Commercial Real Estate segment. Accordingly, financial information presented herein for 2014 and
2013 has been restated to reflect those changes to provide segment information on a comparable
basis, as noted in the following tables.
Year ended December 31, 2014
Net income (loss) as
previously reported
Impact of
changes
Net income (loss)
as restated
Business Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . .
Discretionary Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential Mortgage Banking . . . . . . . . . . . . . . . . . . . .
Retail Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 119,809
411,139
316,129
48,098
95,006
119,916
(43,851)
(in thousands)
$ (20,539)
(8,211)
(169)
245
(10,464)
153,442
(114,304)
$
99,270
402,928
315,960
48,343
84,542
273,358
(158,155)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,066,246
$
—
$1,066,246
Year ended December 31, 2013
Net income (loss) as
previously reported
Impact of
changes
Net income (loss)
as restated
Business Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . .
Discretionary Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential Mortgage Banking . . . . . . . . . . . . . . . . . . . .
Retail Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 111,040
391,340
321,793
29,968
99,392
182,401
2,546
(in thousands)
$ (9,975)
16,053
7,493
2,268
(7,069)
138,549
(147,319)
$ 101,065
407,393
329,286
32,236
92,323
320,950
(144,773)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,138,480
$
—
$ 1,138,480
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, 2015, 2014 and 2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
Net interest income(a) . . . . . . . $ 338,855 $ 345,773 $ 365,786 $ 753,604 $ 746,344 $ 785,987 $ 577,922 $ 555,358 $590,009 $ 86,083 $ 74,204 $69,020
28,114 27,464 (3,824)
Noninterest income . . . . . . . . .
263,925 142,948
254,295
290,142
125,087
130,833
105,149
108,195
102,613
Provision for credit losses . . . .
Amortization of core deposit
and other intangible
assets . . . . . . . . . . . . . . . . . . . .
Depreciation and other
amortization . . . . . . . . . . . . .
Other noninterest expense . . .
Income (loss) before taxes . . .
Income tax expense
447,050 450,922 468,399 1,043,746 1,000,639 1,049,912 720,870 680,445 720,842 114,197 101,668
16,547
(8,003)
(7,339)
25,089
26,550
18,883
76,791
33,213
15,513
7,599
6,613
65,196
17,129
—
—
—
—
—
—
—
—
—
—
—
—
407
198
264,163 263,734 270,759
405
566
288,303
588
284,091
564
19,247
289,582 169,688
16,300
169,039
14,314
679
173,345 49,839
891
33,522
1,330
27,313
166,967
167,900 170,892
729,788
682,747
682,975 539,938 502,445 526,570 56,080 50,708 19,424
(benefit) . . . . . . . . . . . . . . . . .
68,209
68,630
69,827
298,758
279,819
275,582 199,297
186,485
197,284
3,654
2,365 (12,812)
Net income (loss) . . . . . . . . . . . $ 98,758 $ 99,270 $ 101,065 $ 431,030 $ 402,928 $ 407,393 $340,641 $ 315,960 $ 329,286 $ 52,426 $ 48,343 $ 32,236
Average total assets
(in millions) . . . . . . . . . . . . . . $
5,339 $
5,278 $
5,107 $
24,143 $
22,860 $
21,710 $ 18,827 $ 17,405 $ 17,305 $26,648 $ 20,798 $ 16,630
Capital expenditures
(in millions) . . . . . . . . . . . . . . $
— $
2 $
1 $
— $
— $
— $
— $
— $
— $
— $
— $
—
177
Residential Mortgage
Banking
For the Years Ended December 31, 2015, 2014 and 2013
Retail Banking
All Other
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
Total
2014
2013
Net interest
income(a) . . . . . . . $ 63,939 $ 67,482 $ 83,574 $ 917,041 $ 908,828 $ 962,214 $ 105,143 $ (21,543)$ (183,361)$2,842,587 $2,676,446 $ 2,673,229
Noninterest
income . . . . . . . . .
336,099
331,366 325,454
324,953
336,042
373,628
594,586
599,870
672,576
1,825,037
1,779,273 1,865,205
400,038 398,848 409,028 1,241,994 1,244,870 1,335,842
699,729
578,327
489,215 4,667,624 4,455,719 4,538,434
Provision for credit
losses . . . . . . . . . . .
Amortization of
core deposit and
other intangible
assets . . . . . . . . . . .
Depreciation and
other
amortization . . . .
Other noninterest
(5,225)
(1,508)
(10,906)
72,953
77,158
72,502
62,074
(12,954)
(3,679)
170,000
124,000
185,000
—
—
—
—
—
— 26,424
33,824
46,912
26,424
33,824
46,912
27,883
47,086
48,698
35,291
37,788
34,599
64,852
61,848
57,120
148,925
164,906
156,823
expense . . . . . . . . .
233,651 216,556
221,984
682,594
668,919
687,275
959,345
854,883
713,873
2,647,583 2,490,744
2,384,131
Income (loss)
before taxes . . . . .
Income tax expense
(benefit) . . . . . . . .
143,729
136,714 149,252
451,156
461,005
541,466 (412,966) (359,274) (325,011) 1,674,692 1,642,245
1,765,568
55,151
52,172
56,929
183,638
187,647
220,516 (213,682)
(201,119) (180,238)
595,025
575,999
627,088
Net income (loss) . . $ 88,578 $ 84,542 $ 92,323 $ 267,518 $ 273,358 $ 320,950 $(199,284)$ (158,155)$(144,773)$ 1,079,667 $ 1,066,246 $ 1,138,480
Average total assets
(in millions) . . . . . $
2,918 $
3,076 $
2,651 $
11,035 $
10,449 $
10,997 $ 12,870 $ 12,277 $
9,262 $ 101,780 $
92,143 $
83,662
Capital
expenditures
(in millions) . . . . . $
— $
— $
— $
14 $
14 $
40 $
68 $
57 $
89 $
82 $
73 $
130
(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 $24,463,000 in 2015, $23,642,000 in 2014 and $24,971,000 in 2013 and is eliminated in “All
Other” net interest income and income tax expense (benefit).
178
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 real estate 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. Residential real estate loans
obtained in the Hudson City acquisition on November 1, 2015 have been included in this segment.
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. Consumer loans and deposits obtained in the
acquisition of Hudson City have been included in this segment. 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31
2015
2014
2013
(In thousands)
$(48,972) $(49,800) $(50,128)
(16,235)
(12,014)
(13,791)
(15,375)
(20,102)
(22,411)
(13,332)
(14,503)
(21,137)
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, 2015, approximately $1.7 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 that 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.
179
The bank subsidiaries are required to maintain reserves against certain deposit liabilities.
During the maintenance periods that included December 31, 2015 and 2014, cash and due from banks
and interest-earning deposits at banks included a daily average of $664,586,000 and $555,575,000,
respectively, for such purpose.
Beginning in 2015 new regulatory capital rules applicable to bank holding companies and
banks became effective. 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. Pursuant to the rules in effect as of
December 31, 2015, the required minimum and well capitalized capital ratios are as follows:
Š Common equity Tier 1 to risk-weighted assets . . . . . . . . . . . .
Š Tier 1 capital to risk-weighted assets . . . . . . . . . . . . . . . . . . . . .
Š Total capital to risk-weighted assets . . . . . . . . . . . . . . . . . . . . .
Š Leverage — Tier 1 capital to average total assets, as
4.5%
6.0%
8.0%
6.5%
8.0%
10.0%
defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0%
5.0%
Minimum Well capitalized
Under the previous capital adequacy guidelines, Tier 1 capital and Total capital as a
percentage of risk-weighted assets were required to be at least 4% and 8%, respectively. In addition,
the required leverage ratio of Tier 1 capital to average total assets was 4%. At December 31, 2014, to
be considered “well capitalized,” a banking institution had to maintain Tier 1 risk-based capital, total
risk-based capital and leverage ratios at least 6%, 10% and 5%, respectively. As of December 31, 2015,
M&T and each of its banking subsidiaries exceeded all applicable capital adequacy requirements.
180
The capital ratios and amounts of the Company and its banking subsidiaries as of
December 31, 2015 and 2014 are presented below:
M&T
(Consolidated)
M&T Bank
Wilmington
Trust, N.A.
(Dollars in thousands)
December 31, 2015:
Common equity Tier 1 capital
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,485,426
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . .
4,259,977
11.08%
$10,680,827
$476,106
11.33%
86.87%
4,242,817
24,664
Tier 1 capital
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . .
12,008,232
10,680,827
476,106
12.68%
11.33%
86.87%
5,679,969
5,657,089
32,886
Total capital
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . .
14,128,454
12,589,917
480,415
14.92%
13.35%
87.65%
7,573,292
7,542,786
43,848
Leverage
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . .
12,008,232
10,680,827
476,106
10.89%
9.75%
22.38%
4,408,971
4,381,617
85,082
December 31, 2014:
Tier 1 capital
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,644,765
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . .
3,093,874
12.47%
$ 8,043,185
$435,558
10.46%
57.22%
3,077,101
30,447
Total capital
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . .
11,767,308
10,048,277
439,867
15.21%
13.06%
57.79%
6,187,747
6,154,201
60,893
Leverage
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
(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.
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 $30 million at December 31, 2015.
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 $4.1 billion and $4.8 billion at
181
December 31, 2015 and 2014, respectively. Revenues from those servicing rights were $23 million,
$26 million and $31 million during 2015, 2014 and 2013, respectively. The Company sub-services
residential real estate loans for Bayview Financial having outstanding principal balances totaling
$37.7 billion and $41.3 billion at December 31, 2015 and 2014, respectively. Revenues earned for sub-
servicing loans for Bayview Financial were $115 million in each of 2015 and 2014 and $33 million in
2013. In addition, the Company held $181 million and $202 million of mortgage-backed securities in
its held-to-maturity portfolio at December 31, 2015 and 2014, 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
2015
2014
(In thousands)
19,874
$
11,306
Money-market savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
865,274
572
10
1,096,533
—
12
Total due from consolidated bank subsidiaries . . . . . . . . . . . . . . . . . .
865,856
1,096,545
Investments in consolidated subsidiaries
Banks and bank holding company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated subsidiaries (note 19) . . . . . . . . . . . . . . . . .
Investment in Bayview Lending Group LLC . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,714,937
16,172
23,824
30,264
73,147
11,945,516
16,217
33,578
46,716
81,034
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,744,074
$13,230,912
Liabilities
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56,796
513,989
$
59,950
835,066
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
570,785
16,173,289
895,016
12,335,896
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . $16,744,074
$13,230,912
182
Condensed Statement of Income
Year Ended December 31
2015
2014
2013
(In thousands, except per share)
Income
Dividends from consolidated bank subsidiaries . . . . . . . . . . . . $ 480,000
(14,267)
Equity in earnings of Bayview Lending Group LLC . . . . . . . .
2,364
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 480,000
(16,672)
7,755
$ 700,000
(16,126)
9,992
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
468,097
471,083
693,866
Expense
Interest on long-term borrowings . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and equity in undistributed
income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before equity in undistributed income of
24,453
16,793
41,246
47,700
15,107
62,807
73,115
15,994
89,109
426,851
19,965
408,276
27,284
604,757
35,986
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
446,816
435,560
640,743
Equity in undistributed income of subsidiaries
Net income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,112,851
(480,000)
1,110,686
(480,000)
1,197,737
(700,000)
Equity in undistributed income of subsidiaries . . . . . . . . . . . .
632,851
630,686
497,737
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,079,667
$1,066,246
$1,138,480
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7.22
7.18
$
7.47
7.42
8.26
8.20
183
Condensed Statement of Cash Flows
Year Ended December 31
2015
2014
2013
(In thousands)
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,079,667
Adjustments to reconcile net income to net cash provided by
$1,066,246
$1,138,480
operating activities
Equity in undistributed income of subsidiaries . . . . . . . . . .
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . .
Net change in accrued income and expense . . . . . . . . . . . . .
Loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(632,851)
(3,655)
21,780
119
(630,686)
(6,522)
23,419
—
(497,737)
1,535
31,979
—
Net cash provided by operating activities . . . . . . . . . . . . . . .
465,060
452,457
674,257
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
755
—
14,038
14,793
—
—
10,721
10,721
(322,621)
(375,017)
(81,270)
—
76,364
(350,010)
(371,199)
(70,234)
346,500
110,601
—
(140,000)
3,295
(136,705)
—
(365,349)
(53,450)
—
140,799
Net cash used by financing activities . . . . . . . . . . . . . . . . . . .
(702,544)
(334,342)
(278,000)
Net increase (decrease) in cash and cash equivalents . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . .
(222,691)
1,107,839
128,836
979,003
259,552
719,451
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . $ 885,148
$ 1,107,839
$ 979,003
Supplemental disclosure of cash flow information
Interest received during the year . . . . . . . . . . . . . . . . . . . . . . . . $
Interest paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes received during the year . . . . . . . . . . . . . . . . . . .
1,905
30,420
16,696
$
2,094
47,003
24,588
$
2,224
71,090
45,237
184
Item 9. ChangesinandDisagreementswithAccountantsonAccountingandFinancial
Disclosure.
None.
Item 9A. ControlsandProcedures.
(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, 2015.
(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, 2015 that have materially
affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.
Item 9B. OtherInformation.
None.
PART III
Item 10. Directors,ExecutiveOfficersandCorporateGovernance.
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 2016
Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission
on or about March 4, 2016.
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 2016 Annual Meeting of Shareholders which will be filed with the
Securities and Exchange Commission on or about March 4, 2016.
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 2016 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange Commission on or
about March 4, 2016.
Item 11. ExecutiveCompensation.
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 2016 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission on or about March 4, 2016.
185
Item 12. SecurityOwnershipofCertainBeneficialOwnersandManagementandRelated
StockholderMatters.
Incorporated by reference to the caption “STOCK OWNERSHIP INFORMATION” contained in the
Registrant’s definitive Proxy Statement for its 2016 Annual Meeting of Shareholders, which will be
filed with the Securities and Exchange Commission on or about March 4, 2016.
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. CertainRelationshipsandRelatedTransactions,andDirectorIndependence.
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 2016 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission on or about
March 4, 2016.
Item 14. PrincipalAccountantFeesandServices.
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 FOR THE YEAR ENDING DECEMBER 31,
2016” contained in the Registrant’s definitive Proxy Statement for its 2016 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission on or about
March 4, 2016.
PART IV
Item 15. ExhibitsandFinancialStatementSchedules.
(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.
186
Signatures
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 19th day of February, 2016.
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
/S/ ROBERT T. BRADY
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/ RICHARD A. GROSSI
Richard A. Grossi
Chairman of the Board
and Chief Executive Officer
February 19, 2016
Executive Vice President
and Chief Financial Officer
February 19, 2016
Senior Vice President and
Controller
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
187
/S/ JOHN D. HAWKE, JR.
John D. Hawke, Jr.
/S/ PATRICK W.E. HODGSON
Patrick W.E. Hodgson
/S/ RICHARD G. KING
Richard G. King
Newton P. S. Merrill
Melinda R. Rich
/S/ ROBERT E. SADLER, JR.
Robert E. Sadler, Jr.
/S/ DENIS J. SALAMONE
Denis J. Salamone
/S/ HERBERT L. WASHINGTON
Herbert L. Washington
/S/ ROBERT G. WILMERS
Robert G. Wilmers
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
February 19, 2016
188
EXHIBIT INDEX
2.1
2.2
2.3
2.4
2.5
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
10.1
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).
Amendment No. 4, dated as of April 16, 2015, 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 17, 2015 (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 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).*
189
10.2
10.3
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
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).*
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, 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
5, 2015 (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).*
190
10.21
10.22
10.23
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 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).*
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).*
Hudson City Bancorp, Inc. Amended and Restated 2011 Stock Incentive Plan.
Incorporated by reference to Exhibit 4.6 to the Form S-8 dated November 2, 2015 (File
No. 333-184411).*
Hudson City Bancorp, Inc. 2006 Stock Incentive Plan. Incorporated by reference to
Exhibit 4.7 to the Form S-8 dated November 2, 2015 (File No. 333-184411).*
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. 333-43175, 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, 333-
189097, 333-207030 and 333-184411. 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.
191
Direct Stock Purchase
A plan is available to common shareholders and the general public whereby
and Dividend
shares of M&T Bank Corporation’s common stock may be purchased directly
Reinvestment Plan
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.
Inquiries
Requests for information about the Direct Stock Purchase and Dividend
Reinvestment Plan and questions about stock certificates, dividend checks,
direct deposit of dividends 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
Internet Address
www.mtb.com
Quotation and Trading
M&T Bank Corporation’s common stock is traded under the
of Common Stock
symbol MTB on the New York Stock Exchange (“NYSE”).
mtb.com
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COVER & SEC 10-K:
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