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M &T B A N K C O R P O R AT I O N 2 0 1 7 A N N U A L R E P O R T
mtb.com
COVER & SEC 10-K:
10%
NARRATIVE:
80# MCCOY SILK COVER, PRINTING 4/C PROCESS + 341 GREEN + 433 GREY + UV SPOT GLOSS ON ARTWORK ONLY
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)
Louisville, KY 40233-5000
Suite 1600
Computershare
462 South 4th Street
Louisville, KY 40202
Computershare
P.O. Box 505000
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”).
Cover Art: Haymee Salas and her students from the DreamYard Project created the mural panels featured here, which appear
on the exterior of the M&T Bank branch located in the Bronx, NY. The mural celebrates the culture and diversity of the Bronx,
with each panel vibrantly showcasing the unique people and historic places that make up this community.
DreamYard is a nonprofit organization established in 1994 in the Bronx. Their mission is to cultivate the skills necessary for
local youth to achieve their goals and become leaders and innovators. Much like M&T Bank, DreamYard is committed to its
community and the arts. The organization is recognized and widely supported as a cultural force in the neighborhood.
The art project was commissioned in celebration of our branch’s opening and to beautify the community. DreamYard
students and M&T Bank employees collaborated with the artist to finish the polka-dot border of the mural.
This is the latest in the series of annual reports that features works from artists with strong connections to the communities
served by M&T Bank.
Haymee Salas and the DreamYard Project, 2017, Grand Concourse M&T Bank Branch, Bronx, NY.
INSIDE FRONT COVER: 4/C PROCESS + 376 GREEN
INSIDE BACK COVER: BLACK + 376 GREEN
“
At our core and in our heart,
we are and forever will be a
community bank working on
behalf of the customers and
communities we faithfully serve.”
– Robert G. Wilmers
ULTRAWHITE TRANSPARENT VELLUM 100#T SHEET: PMS422
PAGE 1
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I N M E M O R I A M
1 9 3 4 – 2 0 1 7
4/C PROCESS + PMS 422 / 100# MOHAWK SUPERFINE ULTRAWHITE EGGSHELL
M&T Bank Corporation
Contents
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Message to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxiii
United States Securities and Exchange Commission (SEC) Form 10-K . . . . . xxxvi
Annual Meeting
The annual meeting of shareholders will take place at 11:00 a .m . on
April 17, 2018 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 $118 .6 billion at December 31, 2017 .
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 .
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M&T Bank Corporation and Subsidiaries
Financial Highlights
For the year
Performance
2017
2016
Change
Net income (thousands) . . . . . . . . . . . . . . . . $ 1,408,306
$ 1,315,114
Net income available to common
shareholders — diluted (thousands) . . . . 1,327,517
1,223,481
Return on
Average assets . . . . . . . . . . . . . . . . . . . . . . .
Average common equity . . . . . . . . . . . . . .
Net interest margin. . . . . . . . . . . . . . . . . . . . .
Net charge-off s/average loans. . . . . . . . . . .
1.17%
8.87%
3.47%
.16%
Per common share data
Basic earnings . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8.72
Diluted earnings . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . .
8.70
3.00
1.06%
8.16%
3.11 %
.18%
$ 7.80
7.78
2.80
Net operating
(tangible) results(a)
Net operating income (thousands) . . . . . . $ 1,427,331
$ 1,362,692
Diluted net operating earnings
+ 7%
+ 9%
+ 12%
+ 12%
+ 7% (cid:30)
+ 5%
per common share . . . . . . . . . . . . . . . . . . .
8.82
8.08
+ 9%
Net operating return on
Average tangible assets . . . . . . . . . . . . . . .
1.23%
Average tangible common equity . . . . . .
Effi ciency ratio(b) . . . . . . . . . . . . . . . . . . . . . . .
13.00%
55.07%
1.14%
12.25%
56.10%
At December 31
Balance sheet data (millions) Loans and leases,
net of unearned discount . . . . . . . . . . . . . $ 87,989
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
118,593
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92,432
Total shareholders’ equity . . . . . . . . . . . . . .
Common shareholders’ equity . . . . . . . . . .
Loan quality
Allowance for credit losses to total loans .
Nonaccrual loans ratio. . . . . . . . . . . . . . . . . .
16,251
15,016
1.16%
1.00%
Capital
Common equity Tier 1 ratio . . . . . . . . . . . . .
10.99%
Tier 1 risk-based capital ratio . . . . . . . . . . .
12.26%
Total risk-based capital ratio . . . . . . . . . . . .
14.75%
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
10.31%
Total equity/total assets . . . . . . . . . . . . . . . .
13.70%
Common equity (book value) per share . . $ 100.03
Tangible common equity per share . . . . . .
69.08
Market price per share
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170.99
176.62
141.12
-
3%
- 4%
-
3%
-
1%
- 2%
+ 2%
+ 2%
+ 9%
$ 90,853
123,449
95,494
16,487
15,252
1.09%
1.01%
10.70%
11.92%
14.09%
9.99%
13.35%
$ 97.64
67.85
156.43
158.35
100.08
(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.
ii
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BLACK + PMS 376 + PMS 269
2/22/18 9:11 PM
PANTONE 376 + PANTONE 2915 + PANTONE 130 (SPECIAL MIX) + PANTONE 269 + BLACK
DILUTED EARNINGS
PER COMMON SHARE
SHAREHOLDERS’ EQUITY
PER COMMON SHARE AT YEAR-END
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
$8.48
$8.20
$7.57
$7.42
$7.74
$7.18
$8.08 $8.82
$8.70
$7.78
$79.81 $83.88 $93.60 $97.64 $100.03
$69.08
$52.45 $57.06 $64.28 $67.85
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
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
BLACK + PMS 376 + PMS 269
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PANTONE 376 + PANTONE 2915 + PANTONE 130 (SPECIAL MIX) + PANTONE 269 + BLACK
2/22/18 9:11 PM
(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
$1,174.6 $1,086.9 $1,156.6 $1,362.7 $1,427.3
$1,138.5 $1,066.2 $1,079.7 $1,315.1 $1,408.3
Net operating income(a)
Net income
17.79% 13.76% 13.00% 12.25%
8.16%
10.93%
9.08%
8.32%
13.00%
8.87%
Net operating return on average tangible
common shareholders’ equity(a)
Return on average common shareholders’
equity
Message to Shareholders
iv
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T
his letter cannot fail to discuss the unexpected and dramatic
change that occurred this past December: the death of Robert G. Wilmers,
Message to Shareholders
Chairman and Chief Executive Officer. No other loss could be so
central to our system of values — so core to the essence of who
we are today. No amount of comment or reflection could capture the
impact of an individual so influential. Yet, it is such reflection that helps
us to comprehend where we are today and brings clarity to where
we are headed.
There is no denying that, over the course of 35 years, Bob
became synonymous with M&T. To a great extent, his success was
our success, and his impact was broad, as he influenced banking,
civic, and community leadership alike. Consider that the American
Banker chose him as Banker of the Year just six years after recognizing
him with a Lifetime Achievement award — or that diverse commentators
looked to this very letter year after year for guidance as to where
banking was headed — or quite possibly where it should. His civic and
community recognition was diverse, ranging from Citizen of the Year
in Buffalo to accepting one of France’s highest distinctions, the
Chevalier de la Légion d’Honneur.
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Leading an organization for three and a half decades — setting
its standards for performance, its principles for how we approach serving
our clients, colleagues, shareholders, regulators, and communities —
is not a common occurrence. It would be only natural for each of our
constituents, many different people — from many different places, to be
concerned about our direction.
To understand fully why M&T will not only carry on, but carry
on in the tradition of Bob Wilmers, requires one to see that which is
not readily apparent. Permit me to explain. Underneath the surface at
M&T there exists a continuous process — a process of self-selection —
that, over time, has forged a unique culture. For many years, potential
employees had to be willing to join a regional bank headquartered in
Buffalo, marked by strong performance, but operating in slower growth,
mid-tier cities in an area once described as the “rust belt.” Joining our
team, uprooting one’s career and family, is a choice that not all were
willing to make. Those who have chosen not only to join M&T, but to
remain with us, have readily embraced our approach to banking itself.
At its foundation, this approach is distinguished by careful underwriting
and a broad understanding of, and involvement in, communities. In
modeling and managing those principles, Bob Wilmers set in motion
the best sort of succession plan, one based not on any single person, but
on a team of colleagues who share a consistent approach to business
grounded in a time-honored culture. It is a process that has repeated
itself, time and again, at all levels in our company.
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Bob’s skill at planning for the future was distinguished by an
awareness that the growth and prosperity of M&T was never the product
of one individual. To be sure, it has been and will continue to be influenced
by the quality of our leadership, but it is no top-down enterprise. It stretches
through layers of M&T and beyond to our advisors, and to civic, cultural,
and political leadership throughout our communities. It transcends banking
and is a partnership with other businesses in our markets. Preparing for the
future, done well, is tackling the most important issues of the day, preparing
for both internal and external changes.
Bob’s planning for the future started close to home,
looking for top talent, whether it was found among business school
graduates or English majors, to position M&T for success in a
changing world. He established a culture in which emerging leaders
were constantly presented with new challenges, most often through
a seemingly unending stream of probing questions. Those who
successfully navigated this process were afforded new opportunities
for growth — whether through moving to a new market such as
Baltimore or Poughkeepsie; taking on a new challenge such as
responding to a regulatory requirement; or finding new talent oneself —
all the while asking questions of our own. The fruit of these efforts
over decades is an experienced senior leadership team, with an average
tenure of 23 years with M&T. The three senior leaders who served as
Vice Chairmen in recent years, and remain at the helm of M&T today,
have a combined 83 years of experience with M&T — we each spent
nearly half of our lives working side by side with Bob. He also realized
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that it would sometimes be necessary to reach beyond our own walls
to secure the best talent in critical disciplines vital to M&T’s long-
term success. Take the example of our wealth management practice.
As our reach expanded, he recognized that the investment advisory
capabilities that had served us well in our local markets no longer
sufficed as we increasingly competed on a national and global scale. He
promoted an effort to expand our capabilities to better serve these larger
clients, an effort that yielded 19 new senior professionals including an
experienced team of economists. Similarly, he ensured that we invested
in risk management and compliance capabilities commensurate with
our growing reach, adding 328 professionals throughout our risk
management area over the past five years. A leader with more than 30
years of experience was brought in to direct this compliance area —
just one among many examples through which our senior ranks were
reinforced with new expertise. Bob’s planning touched every part of
the organization.
His preparation did not overlook the importance of M&T’s
Board of Directors to the company’s culture, growth, and character
over the years. Understanding this deeply, he was active in ensuring that
its makeup was well-suited for the challenges facing the company and its
customers today. Six of the 15 non-management directors, or 40%, were
elected within the last three years. These new members contribute a
wealth of expertise in disciplines relevant to the future direction of M&T,
ranging from advanced manufacturing, to healthcare, to cyber-security,
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to the science of banking and finance itself. They complement the rich
experience of the entire Board, with an average tenure of 12 years and
which includes four members with prior experience as chief executive
officers of banking institutions.
Recognizing that M&T’s prospects are tightly linked to its
communities, for Bob, planning for the future extended outside the
company into the leadership of the civic and cultural organizations that
constitute the fabric of the regions that we serve. Such involvement
reached far beyond financial contributions, as important as those can be,
to cultivating the leadership of the various pillars of the community. In
practice, supporting leadership could start with sponsoring a national
search to find individuals with appropriate skills or assembling local
business talent to serve on boards. From there, it blossoms into regular
meetings where questions are asked, assumptions are challenged, and
goals are established. If it sounds familiar, it should. In much the same
way that talent is nurtured at M&T, so too is it developed in organizations
spanning education, municipal and state government, business advocacy
groups, museums, and the arts from Buffalo to New York City to Baltimore
and beyond. Planning for the future, by necessity, is comprehensive, and
Bob was never done.
These are but a few examples of preparations, some widely known
and others far less visible, that have positioned M&T to prosper, whatever
the future might bring. This understanding of succession is a long way
from what might be called the formal, formulaic, or mechanistic approach
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on which regulators and even large shareholders do — and probably
must — insist. But it’s the best sort of succession. It is what has been
happening here for over three decades.
It is truly an honor and privilege for me to have been chosen
to serve — but there are others who came before me who could have
done the same, and there are colleagues today who equally stand ready
to carry on the M&T way of doing business. The building of M&T,
preparing for the future, is a constant effort, never finished. But my
colleagues, my fellow Board members, and I have chosen to be part of
this endeavor over many years. It is one to which we are deeply committed
and well-prepared to continue in the interest of our clients, communities,
and shareholders alike. So, yes, to all who are part of the M&T family,
rest assured that Bob’s planning, his legacy, built a strong foundation
for our prosperous future.
ABOUT THE MESSAGE
The M&T Message to Shareholders has a long, rich history. The title
is Message to Shareholders, but its spirit is that of a message to one’s
partners. For M&T, that also includes employees, customers, civic leaders,
and the local markets we serve. Since the audience is broad, so too is
the range of topics considered. No matter the topic, candor and honesty
prevail above all else, even if the subject is unpopular. The reasoning is
straightforward — events and issues that are important to our partners
are, by definition, important to us.
x
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The Message to Shareholders was extremely important to
Bob. Throughout his career, he humbly did his work, quietly leading by
example, without calling attention to himself. But every year, through
this Message, we could count on him to become unusually visible and
vocal about issues important to M&T and our partners. He realized that
his experience and his position afforded him the opportunity to use these
pages for a greater good. He conveyed information that was compelling,
insights that were keen and warnings that were often prescient. Raising
issues, in his eyes, raised awareness — spurring change, advancement, and
progress in our business, in our industry, and in our markets. Said simply,
being an advocate for one’s partners is the embodiment of being a good
banker — a community banker.
Inside the company, the Message to Shareholders is simply referred
to as “The Letter”; mention those words and everyone understands the
reference. Its preparation is a team sport. Many colleagues are involved
and countless hours are spent researching topics and trends as they emerge
throughout the year. Each of these issues is assessed for its business
impact and its worthiness for inclusion in these pages. Involvement, in
any capacity, is a badge of honor. While the actual writing of the message
occurs mainly in January and February, the work goes on all year, starting
as soon as the ink is dry on the prior year’s message.
The annual Message to Shareholders is a tremendous source of
pride for everyone at M&T. It is our privilege, in fact our duty, to continue
to prepare the annual “Letter” in this tradition of candor, fulfilling the
legacy that defines M&T.
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FINANCIAL RESULTS
This past year marked the 35th and, sadly, final year of Bob Wilmers’
stewardship of M&T on behalf of its shareholders. Thirty-five! Many of us
have experienced the rewards of entrusting our capital with him for well
over three decades, benefiting from the prudent and conservative approach
to banking that he espoused. Indeed, from the start of the second quarter
of 1983, when Bob was named Chief Executive Officer, through the date
of his passing, those who invested with him enjoyed a more than 126-fold
appreciation in M&T’s stock price, which equates to a 15.0% compounded
annual growth rate. The company was profitable in each of his 139 quarters
at the helm. Earnings per share increased in 28 of 35 years, including 23
consecutive years spanning two recessions. Such growth was due, in no small
part, to the fact that credit losses averaged 35 basis points and exceeded 1%
of loans only twice throughout his tenure. Growth in earnings supported
growth in dividends, which increased for 26 consecutive years from 1983 to
2008. Those payments, which held steady even in the aftermath of the severe
recession, resumed their ascent this past year.
Bob’s final year of stewardship was a capstone to his career and
his track record, and yet another year in which we benefited from his
extraordinary leadership. Let’s take a look at the numbers:
Net income surpassed that of any prior year in our company’s
history. Net income was $1.41 billion last year, rising 7% from $1.32 billion
in 2016. That net income represented diluted earnings per common share
of $8.70 for the past year, an increase of 12% from $7.78 the previous year.
Last year’s net income expressed as a return on average total assets and
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average common equity was 1.17% and 8.87%, respectively. Both figures
were improved from the 1.06% and 8.16% scored in 2016.
Since 1998, M&T has consistently reported “net operating
earnings,” which we believe provides investors with insight as to how
mergers and acquisitions affect our financial performance. Net operating
income for 2017 was $1.43 billion, increased from $1.36 billion in the prior
year. Diluted net operating earnings per common share were $8.82 last
year, a rise of 9% from $8.08 in 2016. Net operating income, expressed as a
rate of return on average tangible assets improved year over year to 1.23%
in 2017 from 1.14%, while the rate of return on average tangible common
equity grew to 13.00% from 12.25% in 2016.
Taxable-equivalent net interest income, which represents the
difference between what we earn on loans and investments and what we
pay on deposits and borrowings, swelled by nearly $319 million or 9% and
totaled $3.8 billion in 2017. That improvement was fueled by a widening
of the spread between the average yield on earning assets and the
average cost of funds that support those earning assets of 36 basis points
(hundredths of one percent) that produced a net interest margin of 3.47%.
That measure was 3.11% in 2016. Thoughtful management of interest rate
sensitivity, not just in 2017 but in years prior, enabled us to benefit from
the actions taken by the Federal Reserve last year to raise the upper end
of its target range for the short-term Fed Funds rate to 1.5% with three
increases, following just a single raise in each of the two preceding years.
Tempering the impact of the widened net interest margin,
loan growth was somewhat muted in 2017. Strong growth in consumer
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lending, primarily loans to finance automobiles, recreational vehicles,
and boats, was not enough to offset planned runoff in our portfolio of
residential mortgage loans primarily acquired through our merger with
Hudson City Bancorp, Inc. (“Hudson City”). Commercial loan balances
decreased as new originations were insufficient to outpace unusually
high levels of payoffs and paydowns.
Slow but steady economic growth, combined with lower
unemployment and rising asset prices, continued to bolster our clients’
ability to service their loans from M&T. Net charge-offs as a percentage of
average loans were just 16 basis points, down slightly from the previous
three years and matching the levels last seen in 2006 and 2000. Otherwise,
that net charge-off rate was the lowest level reported since 1987. Reflecting
that strong repayment performance and other factors, the provision for
credit losses totaled $168 million in 2017 compared with $190 million in
2016. The allowance for loan losses increased slightly from $989 million
at December 31, 2016 to $1.02 billion at the end of 2017, representing 1.16%
of outstanding loans compared to 1.09% at the end of 2016. That modest
increase reflects the changing composition of our loan portfolio.
Non-interest income grew at a steady pace as well, increasing
by 2% or $34 million after excluding $21 million of gains on investment
securities in 2017 and $30 million in 2016. Mortgage Servicing, Wealth
Management, and Institutional Client Services, the latter two of which
we refer to and have branded as Wilmington Trust, were bright spots.
Residential mortgage servicing saw the onboarding of 191,003 loans
last year, adding some $39.4 billion of principal balance to our servicing
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platform. Trust income, primarily derived from our Wilmington Trust
businesses, continued to grow steadily, rising 6% over 2016. That increase
reflected the impact of balance growth from existing and new clients,
both aided by robust capital markets activity.
Expenses remained well controlled, even though last year
included elevated levels of legal-related costs that predominantly pertained
to matters at Wilmington Trust prior to its acquisition by M&T in 2011.
Significantly, we reaffirmed our commitment to the communities
that we serve by contributing $50 million to the M&T Charitable
Foundation in 2017. That was up from $30 million in the previous year
and represented the largest amount of annual giving in our nearly 162-
year history. The charitable contributions in 2016 and 2017 extend a
practice that dates back three decades, prior even to the Foundation’s
establishment. Over that 30-year timeframe, contributions to community
organizations have averaged 2.15% of our net operating income. The
recent contributions will help to sustain our commitment to good
corporate citizenship well into the future.
The results this past year produced an efficiency ratio, which
expresses noninterest operating expenses as a percentage of revenues
and which reflects the cost to produce a dollar of revenue, of 55.1%,
improved from 56.1% in 2016. Generally speaking, a lower efficiency
ratio is preferable.
The impact of the Tax Cuts and Jobs Act which, under the accounting
rules, resulted in $85 million of additional income tax expense in the past
year, paves the way for lower Federal income tax rates in the years ahead.
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During 2017, we repurchased 7,369,105 shares of M&T common
stock at an average price of $163.64 per share, returning $1.2 billion of
capital to shareholders as well as an additional $457 million in the form of
common stock dividends. This amounted to 123% of 2017’s net operating
income after preferred stock dividends. Distributions notwithstanding,
capital ratios improved. The Common Equity Tier 1 ratio, a measure of
tangible common equity relative to risk-weighted assets and the capital
ratio closely watched by our regulators, grew from 10.70% to 10.99%.
Common shareholders’ equity per share improved from $97.64 to $100.03
while tangible common equity per share increased from $67.85 to $69.08.
TRENDS IN BUSINESS LENDING
Tempering our optimism from M&T’s improved earnings and profitability
was the somewhat muted growth in loan balances. The decline in
our commercial and industrial loan portfolio during a time of steady
economic improvement is quite unusual, and initially counterintuitive.
These loans, which finance the growth of middle market and small
businesses within our markets, had increased at an annualized rate of
more than 7% from the end of the financial crisis through 2016, as the
economic recovery took hold. However, this trend slowed and then
reversed in 2017, as our total balance of commercial and industrial loans
declined by 4% during the year.
An examination of the wider banking sector suggests that this trend
is not unique to M&T. The rate of growth in commercial and industrial
loans by U.S. banks has gradually declined over the past three years, and
remained barely positive in 2017, growing only 1.2% year over year. The
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same trend was evident for M&T’s regional bank peers, institutions of
a comparable size and with a customer focus similar to our own. The
median comparable loan growth rate for these peers was only 1% during
the first three quarters of 2017, markedly slower than the 3% growth rate
observed as recently as 2016. Deteriorating business loan growth during a
sustained economic expansion is without historical precedent for banks.
Since World War II, commercial and industrial loan growth by U.S.
banks has declined to a 1% annual rate only during or in the immediate
aftermath of recessions.
One might conclude that we are seeing weakened demand for
credit, overall. Not so, however. Credit to businesses, broadly defined,
increased in 2017 at a pace consistent with that in recent years. Yet, its
source has changed. A growing share has migrated from banks to the
capital markets — corporate bonds underwritten by investment banks
and, increasingly, loans underwritten by a new breed of asset managers,
often sponsored by private equity partnerships or hedge funds. These
loans and bonds are generally not held by their underwriters, but instead
resold to a variety of credit investors such as insurance companies, public
mutual funds, private loan funds, and a plethora of other such vehicles.
For investors, loans are but one of a multiplicity of investment options
from which they may choose as they manage the constant tradeoff
between perceived risk and potential returns. It is not surprising that
this transition has occurred amidst a sustained period of placid market
conditions, as the memories of the financial crisis of a decade ago recede.
However, past experience suggests that benign conditions do not last
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forever. The differing model of credit investors may have significant
implications for the businesses that have come to rely on them as a source
of credit — implications which may only become fully apparent should
conditions deteriorate.
Recent data highlights the extent of this change in the funding
of companies. Growth in business credit totaled $412 billion in the first
three quarters of 2017, the vast majority of which was through the capital
markets. A full $250 billion of this growth, or more than 60% of the total,
was in the form of corporate bonds, which have been the predominant
source of new credit to businesses since the financial crisis. In contrast,
lending by traditional U.S. commercial banks was, in aggregate, responsible
for only $39 billion, or less than 10% of the total increase. Commercial
and industrial loans extended by the 25 largest domestic banks, which
hold more than half of all such loans by banks, or $2 trillion in total, grew
only $5 billion in aggregate during this timeframe. The remainder of the
growth in business credit was comprised of loans originated through the
capital markets, and often held by credit investors. For instance, holdings
of business loans by mutual funds alone increased by $13 billion, more than
two and one half times the amount for large banks.
This trend represents a fundamental shift that impacts the bond
between borrowers and the holders of their credit, particularly for
middle market companies like those served by M&T and our peers. The
relationships between borrowers and credit investors are more distant,
and often more temporary, than those between borrowers and traditional
commercial banks.
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For banks like M&T, lending is not a one-time event but a long-
term partnership. Inherent in our model is the expectation that, when we
extend credit to a business, we will retain that loan through good times
and bad — this links the fate of lenders and business owners. Our decisions
are predicated on lending in a manner sustainable for both parties.
In contrast, the transactional nature of the capital markets yields
a very different relationship between these new credit investors and
businesses. Such investors seek flexibility to allocate capital among a
range of alternatives, of which loans to businesses are but one of many.
While these investors have played a growing role of late, there is no
certainty that this will continue — either when returns in other areas
of the economy prove more attractive, or when the perceived risk of
investing in such loans becomes too great. This is amplified by the fact
that those who invest in loans to businesses through vehicles such
as mutual funds lack a direct relationship with or knowledge of the
borrowers in whose debt they have invested. They rely instead on third
parties that underwrite and structure the loans but have little ongoing
interest in these businesses.
These trends have occurred against a sustained backdrop of
stable market conditions, marked by exceptionally low volatility — a term
that describes the fluctuations in financial markets, such as the prices of
stocks or bonds. The low volatility of recent years suggests that investor
sentiment has been favorable indeed — their worries remain distant.
Measures of investors’ expectations for future bond market variability this
past year were near a two-decade low. The average level of one gauge of
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stock market volatility during 2017 was half its average during the prior
twenty years. Conditions have been so docile that, according to a recent
analysis that stretches back to 1885 — the year that Grover Cleveland, a
former mayor of Buffalo, became the 22nd president of the United States —
stock market fluctuations last year were among the lowest over that
132-year period. In this environment, prices of U.S. financial assets, as
measured through equity and bond indices, have increased almost
without interruption since the depths of the crisis.
However, as in past economic expansions, low volatility can create
complacency for both borrowers and lenders, as the memories of past
crises fade and the road ahead looks clear. Businesses are able to access
financing with terms that do not reflect the true extent of the risk incurred.
Amidst easing credit conditions, borrowers may overstretch, taking on
debt that may prove unsustainable in a downturn.
Against this backdrop we have observed, with concern, changes
in lending to American businesses — notably, growing debt burdens and
loosening credit standards. Businesses with access to financing have
taken full advantage of the current benign conditions, borrowing more
at historically low costs. U.S. corporations issued a record $1.6 trillion in
bonds during 2017, with the volume of bonds issued by firms lacking an
investment grade credit rating reaching a level more than double that
prior to the financial crisis. The volume of new loans to companies with
high levels of debt, or so-called leveraged lending, reached a new record of
$1.4 trillion during 2017, also more than double the pre-crisis amount. As a
result, total corporate debt has increased by $3.3 trillion, or 62%, since 2008.
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This past year marked the second-highest number of acquisitions
of middle market businesses by private equity partnerships, transactions
that are largely financed with debt. We observed this trend among the
middle market companies that we serve. The loans used to fund these
acquisitions are sold to credit investors through structures including
collateralized loan obligations and private credit funds. Such funds,
which may be sponsored by the very same private equity partnerships,
have grown to hold more than $600 billion of assets under management.
In such acquisitions, the debt that these companies must support
relative to their future earnings has reached the highest level since
the financial crisis.
Credit investors have also become far more willing to forgo
the protection offered by so-called covenants that, for example, limit
borrowers’ ability to take on additional debt or require them to meet
specified financial targets. There has been a steady drumbeat of new
nomenclature marking this change: “covenant-lite,” “covenant-wide,”
among many others — each ultimately a euphemism for an easing of credit
standards. A growing share of new loans excludes covenants that were
heretofore standard. Leveraged loans lacking such protections altogether,
also known as “covenant-lite” loans, comprised less than 5% of issuance
as recently as 2007, prior to the financial crisis; this increased to 75% in
2017. The relaxation in standards that began with the largest companies
has recently extended to borrowings by smaller firms. For example, 36%
of syndicated loans to middle market firms in 2017 were considered
“covenant-lite,” up from 15% just one year prior. For many other loans, at
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least one of the typical standards is often waived, or the terms to which
the borrower must adhere are eased. These so-called “covenant-wide”
loans may offer the appearance of protection but, in practice, allow firms to
operate with higher leverage than was historically the case.
As the economy continues to expand and corporate earnings
continue to improve, the potential long-term repercussions of these
changes are not yet visible. Credit conditions appear favorable.
Delinquency rates on commercial and industrial loans for banks, and
corporate bond defaults, are near the lowest levels in the last thirty years.
Yet economic cycles are likely not things of the past. Inevitably, some
unforeseen event will bring these favorable conditions to an end.
Of particular interest to M&T is the potential impact of these
trends on businesses residing in our local markets and our portfolio should
economic fortunes change. At all times, banks like M&T have a strong
incentive to work with customers under duress to achieve the best possible
outcome for both lender and borrower. Often, this requires flexibility and
persistence as customers work their way through challenges, with the
bank serving as not just a provider of credit but as a trusted advisor. While
not every story ends in success, this patient approach generally yields the
best possible outcome for all parties including the community at large. As
distant credit investors take the place of community banks, it is very much
unclear whether their decisions will, or even may, consider factors beyond
those financial in nature. Such investors clearly cannot fill the advisory
role played by banks, and seem unlikely to consider in their decisions
factors such as a business’s vital role in its local economy. In some sense,
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the increase in volatility that appeared during the writing of this Message
in February of 2018 is a welcome development — reminding businesses of
the fickle nature of the capital markets in the face of changing investor
sentiment. While we hope that the new lenders are never put to such a
test, we cannot help but be concerned by the potential implications for
businesses and communities of the type that we serve. Regardless of what
the future may bring, our deep, long-standing local market knowledge
will remain a key source of advantage, both in serving our customers
and understanding emerging risks that we, and our clients, may face —
knowledge that the capital markets will be hard-pressed to replicate.
We believe that we can best fulfill our duty to shareholders and
clients alike by adhering to our long-standing underwriting discipline,
informed by the insights gained through our businesses. Avoiding imprudent
risk has allowed us to serve as a consistent source of credit to our customers
in good times and bad. We will not jeopardize our ability to do so in the
future by compromising our standards in pursuit of short-lived gains. The
new terms such as “covenant-lite” will not enter our lending vocabulary.
Viewed through this lens, our pace of loan growth in 2017 is more palatable.
OUR PROGRESS
The conditions of the past year have, however, also provided M&T with
the opportunity to take stock and to plan for the future. It was a time to
further advance projects started years ago and a time to begin new efforts,
to sow the seeds for continued success. In an era of benign credit, an
appreciating stock market, and rising interest rates — the proverbial good
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times for banking — it was the perfect time to prepare for what history
tells us will eventually be a return to less favorable circumstances.
Understanding and managing risk, credit risk in particular, has
been our historic source of strength. But this is hardly the time to be
complacent. We fully recognize that the loans that would be tested by the
next credit crisis already exist in our portfolio or will enter it in the coming
months and years. It’s precisely why we continued to invest in our credit
infrastructure this past year.
Our investment in 2017 spanned the credit life cycle — from
the assessment that we perform on credit applications, to the monitoring
of credit already on our books, to the way that we handle problems.
Our credit teams used newly-developed, risk-based underwriting
methodologies to concentrate their efforts where the risk might be
considered greatest. This more efficient approach frees up resources
to perform extensive what-if analyses on our portfolios. The credit
administration team, whose ranks have grown by 44% to 184 individuals in
the past three years, performed 9,815 different analyses on a population of
29,277 loans in 2017. We have refined our monitoring capabilities to capture
changing market conditions, and redesigned risk monitoring reports to help
better capture the changes in our risk exposures. Our experience reminds
us that these new capabilities will one day prove useful.
The year also brought continued progress in building out our
important New Jersey franchise, a legacy of our acquisition of Hudson
City. Residential mortgage balances have declined at a pace consistent
with our expectations when we agreed to the merger in 2012. Hudson
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City’s $28 billion of residential mortgage loans at that time have
decreased to $12 billion today, contributing to our earnings while at
the same time releasing capital. Returning more of this capital to our
investors remains a top priority.
The other legacy of Hudson City was a branch network that
provided an entrée to an attractive, contiguous market. Our investments in
this region during the year continued our progress over the period since
the acquisition. This past year we hired 15 branch managers within the
state and, following an approach that has long served us well, relocated 15
additional branch managers from other corners of our footprint to help
propagate our culture and way of doing business — creating a powerful
combination of intimate market knowledge and tenured small business
expertise. That group of branch managers, along with seven new business
bankers, was put through the paces of a ‘boot camp’ designed to teach
mastery of small business prospecting, product, and credit skills. This
ongoing commitment to continuing education has helped grow our team
of small business experts seven-fold to 145 since 2016. It’s clear that this
‘boots on the ground’ approach is working, facilitating our growth in the
region. The newly-expanded team added over 300 new clients in 2017.
In just a short time, we have put down roots in the Garden State and are
already the state’s fourth-ranked Small Business Administration lender.
Our 24 commercial lenders also continued to advance with momentum
in this business, increasing the number of customers by 11% and average
outstanding balances by 14% relative to the prior year. Progress in New
Jersey is steady and measured — and will continue that way.
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Also worthy of note is the progress of the businesses under our
Wilmington Trust brand, which are closer to realizing their full potential
after several years of investment. Their risk management and control
environment has been upgraded. Significant efforts were made in talent
and leadership development as well as enhancing our service offerings.
Along the way, a few non-core businesses were divested — those that did
not fit our blueprint — generating gains that funded additional investments.
Now, two core fee businesses — Wealth Management and
Institutional Client Services — emerge poised to diversify our business,
bring new clients, and add more value to the existing. Wealth Management
provides private banking, fiduciary, investment management, and wealth
planning advice to clients ranging from first-time investors to families
whose wealth spans multiple generations. With a particular focus on
business owners, the team partnered with Babson College to produce
original research on business succession planning strategies and delivered
378 strategic wealth assessments to our clients in 2017. Institutional Client
Services provides corporate trust, custody and retirement plan services to
corporations and other entities — establishing and maintaining records,
processing payments, and safe keeping collateral and securities. Its
trustee market share for U.S. asset-backed and mortgage-backed securities
increased to 13.3% in 2017, ranking fourth, a significant improvement
from its 5.5% share in the prior year. In 2017, these businesses together
contributed 34% of M&T’s total fee revenue. The positive momentum of
these businesses during the year — with 6% growth in trust fee income,
combined with greater operating efficiency as the investments of earlier
years bore fruit — enhanced their operating leverage and earnings.
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While there were many achievements in 2017 of which to be
proud, the resolution of the Written Agreement with the Federal Reserve
stands head and shoulders above all others. This past April, our regulators
determined that our Bank Secrecy Act/Anti-Money Laundering (“BSA/
AML”) infrastructure was of a sufficient scale and quality to terminate
that agreement which had been in place since June of 2013. This marks
the end of a four-year journey that our firm has no desire to repeat — but
one we will never forget. No other event in our history, including the
financial crisis and 24 bank acquisitions, has had such a lasting impact
on our operations and our psyche. To have our regulators recognize the
significant investments and achievement in building a sustainable, scalable
BSA/AML program is especially gratifying.
That period of time truly did prove costly and even restrictive
on our ability to grow. Our spending on BSA/AML was a significant part
of a broader investment in risk infrastructure that exceeded $1.7 billion
over those four years. It is true that this investment will pay dividends in
keeping us safe, and can be leveraged to better understand our customers.
Our new risk management infrastructure and talent also position us
extremely well for advancing our business approach and culture to new
clients and adjacent markets. However, the cost of falling behind — the
need to catch up at rapid speed — served to crowd out resources that
were needed for critical investments in customer convenience and new
services. Looking back, it is clear that we could have better served our
constituents by not falling behind in the first place. That one is on us —
but so are our plans for the future.
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LOOKING FORWARD
Over the four months from May to August of this past year, we took it upon
ourselves once again to reflect on the past five years and to look forward
to the next five. Our efforts stem from a keen awareness that constant
adaptation is needed to keep pace with the changing banking landscape.
Economic conditions, the legislative and regulatory environment,
competition, consumer preferences, and the pace of innovation are vastly
different than they were even a few years ago. Ways of banking that were
previously deemed revolutionary are now considered ordinary.
Against this backdrop we set priorities to focus on those areas
with the greatest opportunity to bring value to our clients and for M&T to
continue to differentiate itself in the face of increasing competition. Each
of our businesses has a vital role to play in driving our evolution.
The heart of our commercial banking business has always been
the extension of credit based on deep local market knowledge. However,
a study conducted as part of our review identified several areas where
we have the opportunity to better support the full needs of our clients.
These results highlight ways for us to build upon our traditional lending
relationships by presenting clients with a broader solution set, including
specialty businesses ranging from payment processing, to insurance, to
providing strategic advice on topics ranging from acquisitions to tax-
efficient structuring. As a foundation for this initiative, we will seek to both
attract top product specialists in targeted areas and invest in additional
product training so that our bankers are better equipped to “bring the
whole bank” to our clients. Incentives matter as well — we will recognize
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and reward collaboration among our lenders and product specialists as
they work together to broaden the client dialogue. The success of our
work also depends on the quality of our supporting technologies. For
instance, major upgrades to our commercial loan origination systems
estimated to cost $69 million are currently underway with the aim of
relieving administrative burdens, thereby enabling our teams to spend
more time advising clients. We are also investing in tools to make it easier
for businesses to manage their working capital. Upgraded technology and
enhanced talent in our specialty commercial businesses complement our
expertise in lending and local market knowledge, enabling us to meet the
comprehensive needs of businesses that we serve.
It is easy to attribute our history of financial strength during the
most difficult points of an economic cycle to our conservative approach to
credit. However convenient, such attribution masks an equally important
factor — the stability of our core deposit franchise and our customers’
affinity for sticking with M&T as their principal depository over long
periods of time. In this light we examined our growth in new checking
accounts, our most stable form of funding. Our research revealed that
in recent years, 49% of new M&T checking accounts were opened by
customers age 35 years or younger, compared to an average of 55% for
an industry benchmark. Keeping pace with the changing preferences of
our customers — both current and future — is essential to maintaining
this principal advantage. Doing so will require augmenting our long-
tenured employees with additional expertise in digital, data analytics,
and marketing. It will also require regular training and revised incentive
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structures to help accelerate adoption of the digital services we deliver.
A steady stream of upgrades to our mobile application will assist customers
not just with account opening and access, but with money movement and
security. Notable among them will be the 2018 launch of Zelle, a consumer-
to-consumer mobile payment solution. As investments are made in digital
capabilities and talent, the number and location of our branches and
ATMs will continue to be evaluated against the pace of transition in our
customers’ preferences.
The progress in our Wealth Management practice during 2017
positions this business for continued growth. Consider that slightly fewer
than ten percent of our commercial customers avail themselves of our
transition planning or wealth management services, or that an additional
165,000 consumers who utilize our retail banking services could be
considered “affluent” based on the amount of money they have available to
invest but do not currently use our planning services. By partnering with
commercial bankers, Wealth Management professionals and their broad
suite of offerings are perfectly suited to serve business owners contemplating
ownership transition, preserving the wealth earned over a lifetime. These
same professionals will also bring their expertise to the affluent consumers
that we serve. Realizing the full potential of this business will require hiring
additional experienced client advisors in key markets. The preparatory work
of the last few years is ready to pay dividends.
Similarly, growth in our Institutional Client Services (ICS) business,
both in revenue and capabilities, has established strong momentum. But, as
with our other businesses, there is still upside. For instance, ICS realized the
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largest growth in market share among U.S. corporate bond trustees in 2017,
but with a 4% share, significant opportunity remains. Similar potential for
growth exists in the municipal bond, structured finance and loan agency
markets. The industry is taking notice, enabling us to attract leading talent
into each of these growing product areas, with 149 new hires in 2017
alone. We will seek to build upon this momentum in order to expand our
capabilities, both nationally and internationally.
Our evaluation also revealed that our pace of developing and
deploying new technology, particularly in the planning stages of projects,
could be further refined. We identified an opportunity to become more
nimble by shifting to agile development approaches — delivering new
products and services more quickly and at a lower cost, shortening time
to market and payback. The use of outside partners to deliver emerging
technology solutions provides another means toward this end, leveraging
their expertise to expand our capabilities.
Beyond all else, no factor has been more responsible for our long-
term success than M&T’s commitment to consistently developing and
maintaining a deep pool of talent. It is true, of course, that ensuring that our
business model remains relevant requires a combination of growth in fees,
prudent risk management, efficient capital and resource allocation, and
cultural adaptation. However, not a single one of these is attainable without a
continued investment in our colleagues — both existing and new. The process
of reframing and refreshing our approach to talent, how the company attracts,
retains, and develops employees to meet the changing environment, is the key
to continuing to differentiate M&T long into the future.
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We look forward to 2018 with great optimism. The financial results
and the work done in 2017 lay the foundation upon which we can build
on the successes of the past. As the company, the industry and indeed, the
world evolve, so will our talent, our capabilities, and our business practices —
just as we have done for the past thirty-five years.
OUR COLLEAGUES
I am particularly appreciative of the efforts of my 16,793 colleagues who
come to M&T every day, to make a difference in the lives of our customers
and our communities. It is they who are the real heroes, the difference
makers, the ones who have made M&T so successful in the past and
will carry us into the future. Our appreciation is more than just words.
We are committed to helping our colleagues, across all generations and
backgrounds, to grow their talents. Part of that growth will include exposure
to broad and diverse experiences, equipping our colleagues to successfully
navigate the full range of challenges they may face. But most of all our
commitment means engaging and empowering our employees by creating
an environment where everyone can thrive, where each of us has an equal
opportunity to reach our full potential and to share in the success of M&T.
René F. Jones
Chairman of the Board
and Chief Executive Officer
February 22, 2018
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Denis J. Salamone
Former Chairman and
Chief Executive Officer
Hudson City Bancorp, Inc.
John R. Scannell
Chairman of the Board
and Chief Executive Officer
Moog Inc.
David S. Scharfstein
Professor
Harvard Business School
Herbert L. Washington
President
H.L.W. Fast Track, Inc.
M&T Bank Corporation
Officers and Directors
OFFICERS
DIRECTORS
René F. Jones
Chairman of the Board
and Chief Executive Officer
René F. Jones
Chairman of the Board
and Chief Executive Officer
Richard S. Gold
President and Chief
Operating Officer
Robert J. Bojdak
Executive Vice President
and Chief Credit Officer
Janet M. Coletti
Executive Vice President
John L. D’Angelo
Executive Vice President
and Chief Risk Officer
William J. Farrell II
Executive Vice President
Brian E. Hickey
Executive Vice President
Darren J. King
Executive Vice President
and Chief Financial Officer
Gino A. Martocci
Executive Vice President
Doris P. Meister
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
Laura P. O’Hara
Senior Vice President
and General Counsel
Michael R. Spychala
Senior Vice President
and Controller
Julianne Urban
Senior Vice President
and General Auditor
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.
Gary N. Geisel
Former Chairman of the Board
and Chief Executive Officer
Provident Bankshares
Corporation
Richard S. Gold
President and Chief
Operating Officer
Richard A. Grossi
Former Senior Vice President
and Chief Financial Officer
Johns Hopkins Medicine
John D. Hawke, Jr.
Senior Counsel
Arnold & Porter
Richard H. Ledgett, Jr.
Former Deputy Director
National Security Agency
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
Robert E. Sadler, Jr.
Former President and
Chief Executive Officer
M&T Bank Corporation
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xxxiii
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.
John R. Scannell
Chairman of the Board
and Chief Executive Officer
Moog Inc.
David S. Scharfstein
Professor
Harvard Business School
Herbert L. Washington
President
H.L.W. Fast Track, Inc.
M&T Bank
Officers and Directors
OFFICERS
René F. Jones
Chairman of the Board
and Chief Executive Officer
Richard S. Gold
President and Chief
Operating Officer
Kevin J. Pearson
Vice Chairman
Executive Vice Presidents
Robert J. Bojdak
Janet M. Coletti
Atwood Collins III
John L. D’Angelo
William J. Farrell II
Tari L. Flannery
Brian E. Hickey
Darren J. King
Gino A. Martocci
Doris P. Meister
Michael J. Todaro
Michele D. Trolli
D. Scott N. Warman
Senior Vice Presidents
John M. Beeson, Jr.
Keith M. Belanger
Deborah A. Bennett
Peter M. Black
Daniel M. Boscarino
Arthur J. Bronson
Ira A. Brown
Christina A. Brozyna
William S. Buccella
Daniel J. Burns
Nicholas L. Buscaglia
Matthew S. Calhoun
Noel J. Carroll
Mark I. Cartwright
Kevin J. Cavalieri
David K. Chamberlain
August J. Chiasera
Jerome W. Collier
Thomas H. Comiskey
Francis M. Conway
Cynthia L. Corliss
R. Joe Crosswhite
Carol A. Dalton
Peter G. D’Arcy
Ayan DasGupta
Dominick J. D’Eramo
Donald P. DiCarlo, Jr.
Shelley C. Drake
Michael A. Drury
Gary D. Dudish
Peter J. Eliopoulos
Ralph W. Emerson, Jr.
Thomas F. Esposito
Jeffrey A. Evershed
Eric B. Feldstein
xxxiv
DIRECTORS
René F. Jones
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.
Gary N. Geisel
Former Chairman of the Board
and Chief Executive Officer
Provident Bankshares Corporation
Richard S. Gold
President and Chief
Operating Officer
Richard A. Grossi
Former Senior Vice President
and Chief Financial Officer
Johns Hopkins Medicine
John D. Hawke, Jr.
Senior Counsel
Arnold & Porter
Richard H. Ledgett, Jr.
Former Deputy Director
National Security Agency
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
James M. Frank
James J. Gifas
Robert S. Graber
Carol N. Grosso
Cecilia A. Hodges
Harish A. Holla
Gregory Imm
Carl W. Jordan
Michael T. Keegan
William T. LaFond
Nicholas P. Lambrow
Michele V. Langdon
Lon P. LeClair
Elizabeth P. Locke
Joseph A. Lombardo
Robert G. Loughrey
Alfred F. Luhr III
Susan F. MacDonald
Paula Mandell
Louis P. Mathews, Jr.
Richard J. McCarthy
William P. McKenna
Mark J. Mendel
Frank P. Micalizzi
Christopher Mone
Christopher R. Morphew
Michael S. Murchie
Allen J. Naples
Peter G. Newman
Laura P. O’Hara
Peter J. Olsen
Anabel I. Pichler
Eileen M. Pirson
Paul T. Pitman
Christopher D. Randall
Rajiv Ranjan
David N. Richardson
Daniel J. Ripienski
Paris F. Roselli
Anthony M. Roth
John P. Rumschik
Allison L. Sagraves
Jack D. Sawyer
Jean-Christophe Schroeder
Eugene J. Sheehy
Douglas A. Sheline
William M. Shickluna
Sabeth Siddique
Glenn R. Small
Philip M. Smith
Sean P. Spiesz
Michael R. Spychala
David W. Stender
Douglas R. Stevens
John R. Taylor
Christopher E. Tolomeo
Patrick M. Trainor
Julianne Urban
Scott B. Vahue
Indy N. Weerasinghe
Linda J. Weinberg
Jeffrey A. Wellington
Tracy S. Woodrow
Brian R. Yoshida
97143_corp015411 2017_Narrative_L12rev.indd 34
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M&T Bank
Regional Management and Directors Advisory Councils
AREA EXECUTIVES
R. Joe Crosswhite
Peter G. D’Arcy
Michael T. Keegan
Paula Mandell
Michael S. Murchie
Jeffrey A. Wellington
REGIONAL PRESIDENTS
Shelley C. Drake
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
Mark J. Stellwag
Albany/Hudson Valley
Peter G. D’Arcy
New York City/Long Island
Philip H. Johnson
Northern Pennsylvania
Ira A. Brown
Philadelphia/Southern
New Jersey
Daniel J. Burns
Rochester
Peter G. Newman
Southern New York
Thomas C. Koppmann
Southeast Pennsylvania
Thomas H. Comiskey
New Jersey
Frank P. Micalizzi
Tarrytown /Connecticut
DIRECTORS
ADVISORY COUNCILS
NEW YORK STATE
Albany Division
Kevin M. Bette
Nancy E. Carey Cassidy
Richard A. Fuerst
Michael Joyce
William Lia, Jr.
Christopher Madden
Lisa M. Marello
Michael C. McPartlon
Lauren Van Dermark
Central New York Division
James V. Breuer
Carl V. Byrne
Mara Charlamb
James A. Fox
Karyn Korteling
Robert L. Lewis
Robert H. Linn
Joseph Mancuso
Margaret O’Connell
Richard J. Zick
James Pennefeather
Robert R. Sprole III
Frank H. Suits, Jr.
Terry R. Wood
Hudson Valley Division
Elizabeth P. Allen
T. Jefferson Cunningham III
John K. Gifford
Michael H. Graham
William Murphy
Patrick Paul
Andrea L. Reynolds
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
Tim M. Shults
Michael J. Wellman
New York City/Long Island
Division
Jay I. Anderson
Brent D. Baird
Louis Brause
Martin Seth Burger
Patrick J. Callan
John F. Cook
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
Marlene Bessette
William A. Buckingham
R. Carlos Carballada
Christopher J. Czarnecki
Timothy D. Fournier
Jocelyn Goldberg-Schaible
Marc L. Iacona, Sr.
Laurence Kessler
Anne M. Kress
Jett Mehta
Dwight M. Palmer
Ronald S. Ricotta
Victor E. Salerno
Derace L. Schaffer
Kevin R. Wilmot
Southern New York Division
George Akel, Jr.
Lee P. Bearsch
Richard J. Cole
Joseph W. Donze
Albert Nocciolino
NEW JERSEY / PENNSYLVANIA /
DELAWARE / MARYLAND /
VIRGINIA /WEST VIRGINIA
Baltimore-Washington Division
Thomas S. Bozzuto
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
Michael J. Schwab
John D. Sheridan
Glen R. Sponaugle
Daniel K. Sunderland
Sondra Wolfe Elias
Central Virginia Division
Otis L. Brown
Robert J. Clark
Daniel Loftis
Bart H. Mitchell
Michael Patrick
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
New Jersey Division
Michael W. Azzara
William G. Bardel
Scott A. Belair
Victoria H. Bruni
Cornelius E. Golding
L. Robert Lieb
Donald O. Quest
Paul Silverman
Joseph G. Sponholz
Northeast
Mid-Atlantic Division
Richard Alter
Clarence C. Boyle, Jr.
Nicole A. Funk
Stephanie Novak Hau
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
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
Emily Bittenbender
Jonathan Brassington
Edward M. D’Alba
Linda Ann Galante
Eli A. Kahn
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
97143_corp015411 2017_Narrative_L12rev.indd 35
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xxxv
SEC Form 10-K
xxxvi
97143_corp015411 2017_Narrative_L12rev.indd 36
2/22/18 9:12 PM
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2017
or
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 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 (cid:3) No (cid:3)
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 (cid:3) No (cid:3)
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 (cid:3) No (cid:3)
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 (cid:3) No (cid:3)
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. (cid:3)
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
Non-accelerated filer
Emerging growth company
(cid:3)
(cid:4) (Do not check if a smaller reporting company)
(cid:4)
Accelerated filer
Smaller reporting company
(cid:4)
(cid:4)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:4)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:3) No (cid:3)
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, 2017: $22,601,176,633.
Number of shares of the Common Stock, $0.50 par value, outstanding as of the close of business on January 31, 2018: 150,176,904 shares.
(1) Portions of the Proxy Statement for the 2018 Annual Meeting of Shareholders of M&T Bank Corporation in Parts II and III.
Documents Incorporated By Reference:
M&T BANK CORPORATION
Form 10-K for the year ended December 31, 2017
CROSS-REFERENCE SHEET
Item 1. Business....................................................................................................
Statistical disclosure pursuant to Guide 3
I.
Distribution of assets, liabilities, and shareholders’ equity; interest rates
PART I
and interest differential
A. Average balance sheets .......................................................................
B. Interest income/expense and resulting yield or rate on average
interest-earning assets (including non-accrual loans) and
interest-bearing liabilities ...............................................................
C. Rate/volume variances ........................................................................
Investment portfolio
A. Year-end balances ..............................................................................
B. Maturity schedule and weighted average yield..................................
C. Aggregate carrying value of securities that exceed ten percent of
Form 10-K
Page
4
55
55
26
24,122-123
89
shareholders’ equity.......................................................................
123
Loan portfolio
A. Year-end balances ..............................................................................
B. Maturities and sensitivities to changes in interest rates .....................
C. Risk elements
Nonaccrual, past due and renegotiated loans .....................................
Actual and pro forma interest on certain loans...................................
Nonaccrual policy...............................................................................
Loan concentrations ...........................................................................
Summary of loan loss experience
A. Analysis of the allowance for loan losses ..........................................
Factors influencing management’s judgment concerning the
24,126
87
70,127-130
128,134
115-116
79
67,132-136
II.
III.
IV.
V.
adequacy of the allowance and provision ...................................... 67-79,117,132-136
B. Allocation of the allowance for loan losses........................................78,132-133,135-136
Deposits
A. Average balances and rates ................................................................
B. Maturity schedule of domestic time deposits with balances of
55
$100,000 or more ...........................................................................
VI. Return on equity and assets ......................................................................
VII. Short-term borrowings .............................................................................
Item 1A. Risk Factors..............................................................................................
Item 1B. Unresolved Staff Comments ....................................................................
Item 2. Properties..................................................................................................
Item 3. Legal Proceedings ....................................................................................
Item 4. Mine Safety Disclosures...........................................................................
Executive Officers of the Registrant ........................................................
90
26,48,94,97
140-141
27-38
39
39
39-40
40
40-42
Item 5. Market for Registrant’s Common Equity, Related Stockholder
PART II
Matters and Issuer Purchases of Equity Securities.............................
A. Principal market..................................................................................
Market prices ......................................................................................
B. Approximate number of holders at year-end ......................................
43-45
43
103
24
2
C. Frequency and amount of dividends declared ....................................
D. Restrictions on dividends....................................................................
E. Securities authorized for issuance under equity
compensation plans ........................................................................
F. Performance graph..............................................................................
G. Repurchases of common stock ...........................................................
Item 6. Selected Financial Data ............................................................................
A. Selected consolidated year-end balances............................................
B. Consolidated earnings, etc. .................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations...................................................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .................
Item 8. Financial Statements and Supplementary Data ........................................
A. Report on Internal Control Over Financial Reporting ........................
B. Report of Independent Registered Public Accounting Firm...............
C. Consolidated Balance Sheet — December 31, 2017 and 2016 ..........
D. Consolidated Statement of Income — Years ended December 31,
2017, 2016 and 2015 ......................................................................
E. Consolidated Statement of Comprehensive Income — Years
ended December 31, 2017, 2016 and 2015 ....................................
F. Consolidated Statement of Cash Flows — Years ended
December 31, 2017, 2016 and 2015 ...................................................
G. Consolidated Statement of Changes in Shareholders’ Equity —
Years ended December 31, 2017, 2016 and 2015 ..........................
H. Notes to Financial Statements ............................................................
I. Quarterly Trends .................................................................................
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ....................................................................
Item 9A. Controls and Procedures...........................................................................
A. Conclusions of principal executive officer and principal financial
officer regarding disclosure controls and procedures.....................
B. Management’s annual report on internal control over financial
reporting .............................................................................................
C. Attestation report of the registered public accounting firm................
D. Changes in internal control over financial reporting ..........................
Item 9B. Other Information.....................................................................................
PART III
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 ..................................................
PART IV
Form 10-K
Page
25-26,103,113
9
43-45
44
45
45
24
25
45-104
105
105
106
107-108
109
110
111
112
113
114-189
103
190
190
190
190
190
190
190
190
191
191
191
191
Item 15. Exhibits and Financial Statement Schedules............................................
Item 16. Form 10-K Summary ...............................................................................
SIGNATURES.........................................................................................................
191-194
194
195-196
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, 2017
the Company had consolidated total assets of $118.6 billion, deposits of $92.4 billion and
shareholders’ equity of $16.3 billion. The Company had 15,913 full-time and 881 part-time
employees as of December 31, 2017.
At December 31, 2017, M&T had two wholly owned bank subsidiaries: Manufacturers and
Traders Trust Company (“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, 2017, 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,
2017, M&T Bank had 780 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, 2017, M&T Bank had consolidated total assets of $118.1 billion,
deposits of $94.4 billion and shareholder’s equity of $14.3 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.
4
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, 2017, Wilmington Trust, N.A. had total
assets of $5.0 billion, deposits of $4.4 billion and shareholder’s equity of $530 million.
Wilmington Trust Company, a wholly owned subsidiary of M&T Bank, was incorporated as a
Delaware bank and trust company in March 1901 and amended its charter in July 2011 to become a
nondepository trust company. Wilmington Trust Company provides a variety of Delaware based
trust, fiduciary and custodial services to its clients. As of December 31, 2017, Wilmington Trust
Company had total assets of $1.1 billion and shareholder’s equity of $572 million. Revenues of
Wilmington Trust Company were $134 million in 2017. 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, 2017, M&T Insurance Agency had assets of $41 million and shareholder’s equity of
$20 million. M&T Insurance Agency recorded revenues of $32 million during 2017. 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
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, 2017, M&T Real Estate had assets of $26.5 billion, common shareholder’s equity of
$25.7 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
$997 million of revenue in 2017. 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, 2017, M&T Realty Capital serviced $16.2 billion of commercial
mortgage loans for non-affiliates and had assets of $812 million and shareholder’s equity of $151
million. M&T Realty Capital recorded revenues of $145 million in 2017. 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, 2017, M&T Securities had assets of $53 million and shareholder’s
equity of $45 million. M&T Securities recorded $94 million of revenue during 2017. The
headquarters of M&T Securities are located at One M&T Plaza, Buffalo, New York 14203.
5
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, 2017, WT Investment Advisors had assets of $48 million
and shareholder’s equity of $42 million. WT Investment Advisors recorded revenues of $39 million
in 2017. 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 and shareholder’s equity of $39 million each as of December 31, 2017. Wilmington Funds
Management recorded revenues of $24 million in 2017. The headquarters of Wilmington Funds
Management are located at 1100 North Market Street, Wilmington, Delaware 19890.
Wilmington Trust Investment Management, LLC (“WTIM”) is a wholly owned subsidiary of
M&T and was incorporated in December 2001 as a Georgia limited liability company. WTIM is a
registered investment advisor under the Investment Advisors Act and provides investment
management services to clients, including certain private funds. As of December 31, 2017, WTIM
has assets and shareholder’s equity of $25 million each. WTIM recorded revenues of $1 million in
2017. 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,
2017.
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 activity 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 was interest on loans. 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 DIF and
6
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 the regulatory scheme arose from the 2010 Dodd-Frank Wall Street
Reform and Consumer Protection Act (“Dodd-Frank Act”) which is an extensive and comprehensive
system of regulatory oversight that affects nearly all aspects of a financial institution, particularly
having an effect on the lending, deposit, investment, trading and operating activities of financial
institutions and their holding companies. As required by the Dodd-Frank Act, various federal
regulatory agencies proposed or adopted a broad range of implementing rules and regulations that are
subject to further rulemaking, guidance and interpretation by the applicable federal regulators.
However, given that many of these regulatory changes are highly complex and are not completely
implemented, the full impact of the Dodd-Frank Act regulatory reform, both on consumers and
M&T, will not be known until the rules are implemented and market practices develop under the
final regulations. Furthermore, political developments, including the change in administration in the
United States, have added uncertainty to the implementation, scope and timing of regulatory reforms,
including those relating to the implementation of the Dodd-Frank Act.
Described hereafter are material elements of the significant federal and state 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
and do not include any potential or proposed changes in current laws or regulations.
Overview
M&T is registered with the Board of Governors of the Federal Reserve System (“Federal Reserve”)
as a financial holding company and 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. In addition, M&T’s banking subsidiaries are subject to regulation,
supervision and examination by, as applicable, the New York State Department of Financial Services
(“NYSDFS”), the Office of the Comptroller of the Currency (“OCC”), the FDIC and the Federal
Reserve and their consumer financial products and services are regulated by the Consumer Financial
Protection Bureau (“CFPB”). Further, financial services entities such as M&T’s investment advisor
subsidiaries and M&T’s broker-dealer are subject to regulation by the Securities and Exchange
Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), and the Securities
Investor Protection Corporation (“SIPC”), among others. Other non-bank affiliates and activities,
particularly insurance brokerage and agency activities, are subject to other federal and state laws and
regulations as well as licensing and regulation by state insurance and bank regulatory agencies.
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
7
as well as regulations requiring, among other things, maintenance of capital, record keeping, and
reporting. M&T’s non-U.S. (European) businesses are subject to bank secrecy/anti-money
laundering/know your customer-type regulations by non-U.S. regulators in the jurisdictions where
those businesses operate.
In general, the BHCA limits the business of a BHC to banking, managing or controlling banks,
and other activities that the Federal Reserve has determined to be so closely related to banking as to
be a proper incident thereto. In addition, bank holding companies are expected to serve as a
managerial and financial source of strength to their subsidiary depository institutions, including
committing resources to support such subsidiaries. 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,
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).
Activities that are financial in nature include securities underwriting and dealing, insurance
underwriting and merchant banking. 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 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
discussion.
M&T elected to become a financial holding company on March 1, 2011. To maintain financial
holding company status, a financial holding company and all of its depository institution subsidiaries
must be “well capitalized” and “well managed.” 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 has over both the banking and non-
banking activities of bank holding companies, functional regulators such as the SEC regulate their
affiliates’ 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 (“FRBNY”). As a result, it is subject to extensive regulation, examination and oversight by the
NYSDFS and the FRBNY. 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, FINRA, SIPC, and state securities regulators, and WT
Investment Advisors is also subject to SEC regulation.
Wilmington Trust, N.A. is a national bank with operations that include fiduciary and related
activities with limited lending and deposit business. It is subject to extensive regulation, examination
8
and oversight by the OCC 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.
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.
Distributions
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 common stock repurchases by M&T are
subject to the oversight of the Federal Reserve. As described below in this section under “Stress
Testing and Capital Plan Review,” dividends and common 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 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 addressed other issues affecting the numerator in
banking institutions’ regulatory capital ratios. The New Capital Rules also addressed asset risk
weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios.
Among other matters, the New Capital Rules: (i) introduced 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
9
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.
Pursuant to the New Capital Rules, the minimum capital ratios are as follows:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
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”).
In calculating regulatory capital ratios M&T must assign risk weights to the Company’s assets
and off-balance sheet items. M&T has an ongoing process to review data elements associated with
certain assets that from time to time may affect how specific assets are classified and could lead to
increases or decreases of the regulatory risk weights assigned to such assets.
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’s capital plan rule and supervisory Comprehensive 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, as well as other requirements, over a nine quarter planning
horizon under a “severely adverse” macroeconomic scenario generated yearly by the federal banking
regulators. See “Stress Testing and Capital Plan Review” herein.
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, although a notice of proposed rulemaking is pending which may change these
thresholds.
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, unrealized gains and losses on 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, were permitted to 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
10
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 beginning in 2016, none of M&T’s trust preferred securities were
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. 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 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: baseline, adverse and severely adverse scenarios. M&T is also required to
conduct its own stress analysis (together with the Federal Reserve’s stress analysis, the “stress tests”)
to assess the potential impact on M&T of the economic and financial conditions used as part of the
Federal Reserve’s annual stress analysis. The Federal Reserve 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. A summary of results of the Federal Reserve’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’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 (or any approved amendments to such plan). The comprehensive capital plans
include a view of capital adequacy under various scenarios — including a BHC-defined baseline
scenario, a baseline scenario provided by the Federal Reserve, at least one BHC-defined stress
scenario, and adverse and severely adverse scenarios provided by the Federal Reserve. 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 on a quarterly basis to allow the Federal Reserve 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 may object to a capital plan if the plan does not
show that the covered BHC will maintain sufficient regulatory capital ratios on a pro forma basis
under expected and stressful conditions throughout the nine-quarter planning horizon covered by the
capital plan. 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. The CCAR
rules, consistent with prior Federal Reserve guidance, also provide that capital plans contemplating
11
dividend payout ratios exceeding 30% of net income will receive particularly close scrutiny. M&T’s
annual CCAR capital plan is due in April each year and the Federal Reserve will publish the results
of its supervisory CCAR review of M&T’s capital plan by June 30 of each year.
The Federal Reserve 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. 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.
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, in January 2016 M&T became 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 (“LCR”) requirement. The LCR requirement 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. The Final
LCR Rule requires a subject institution to 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 prescribed
hypothetical outflow and inflow rates, which reflect 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). As of January 1,
2017, the Final LCR Rule has been fully phased-in and M&T will be required to publicly disclose its
LCR beginning in October 2018.
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. In May 2016, the Federal Reserve and other federal
banking regulators issued a proposed rule that would implement the NSFR for large U.S. banking
organizations. Under the proposed rule, the most stringent requirements would apply to bank
12
holding companies with $250 billion or more in total consolidated assets or $10 billion or more in
on-balance sheet foreign exposure, and would require such organizations to maintain a minimum
NSFR of 1.0 on an ongoing basis, calculated by dividing the organization’s available stable funding
(“ASF”) by its required stable funding (“RSF”). Bank holding companies with less than $250
billion, but more than $50 billion, in total consolidated assets and less than $10 billion in on-balance
sheet foreign exposure, such as M&T, would be subject to a modified NSFR requirement. The
modified requirement allows the qualifying bank to apply a 70% factor to the RSF denominator in
determining the NSFR. Under the proposed rule, a banking organization’s ASF would be calculated
by applying specified standard weightings to its equity and liabilities based on their expected stability
over a one-year time horizon and its RSF would be calculated by applying specified standardized
weightings to its assets, derivative exposures and commitments based on their liquidity
characteristics over the same one-year time horizon. Originally proposed to take effect in January
2018, the rule is yet to be finalized with no indication of a new implementation date.
Cross Guaranty Provision
The cross guaranty provisions in the Federal Deposit Insurance Act (“FDIA”) were enacted by
Congress in the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 (“FIRREA”)
and require each insured depository institution owned by the same BHC to be financially responsible
for the failure or resolution costs of any affiliated insured institution. Generally, the amount of the
cross guaranty liability is equal to the estimated loss to the DIF for the resolution of the affiliated
institution(s) in default. The FDIC’s claim under the cross guaranty provision is superior to claims of
shareholders of the insured depository institution or its BHC 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 guaranty
provision 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 to enact enhanced prudential standards applicable
to foreign banking organizations (“FBOs”) and bank holding companies with total consolidated
assets of $50 billion or more, such as M&T. The Federal Reserve adopted amendments to Regulation
YY to implement certain of the required enhanced prudential standards. Those amendments, which
are intended to strengthen supervision and regulation of bank holding companies and FBOs
incorporate new requirements to help increase the resiliency of the operations of these organizations
and ensure the stability of the U.S. financial system and economy in the event of such an
organization’s failure. These requirements include regulatory reporting, capital adequacy, capital
stress testing, risk management, and liquidity. The liquidity requirements and risk management
requirements became effective as to M&T on January 1, 2015. In March 2016, the Federal Reserve
issued a revised proposal regarding single counterparty credit limits, which would impose a limit on
a banking organization’s credit exposure to any single unaffiliated counterparty as a percentage of
the organization’s capital. A final rule has not been issued.
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 Volcker Rule was effective on April 1, 2014; however, the Federal Reserve
exercised its authority to extend the compliance deadline to July 21, 2017 with respect to covered
13
funds. The Company does not engage in any significant amount of proprietary trading as defined in
the Volcker Rule and implemented the required procedures for those areas in which trading does
occur. The covered funds limits are imposed through a conformance period that ended in July 2017.
During 2016, to comply with requirements of the Volcker Rule, the Company sold the collateralized
debt obligations that had been held in the available-for-sale investment securities portfolio. Further,
the Company sought, and received, from the Federal Reserve, a five-year extension (to July 21,
2022) to either divest or terminate its investment in one venture capital fund.
Safety and Soundness Standards
Guidelines adopted by the federal bank regulatory agencies pursuant to 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. The FDIC has specified by regulation the relevant capital levels for each
category. The FDIA’s prompt corrective action provisions only apply to depository institutions and
not to bank holding companies. The Federal Reserve’s regulations applicable to bank holding
companies separately define “well capitalized.” A financial holding company that is not well-
capitalized and well-managed (or whose bank subsidiaries are not well capitalized and well
managed) under applicable prompt corrective action standards may be restricted in certain of its
activities and ultimately may lose financial holding company status. Under existing rules, an
institution that is not an advanced approaches institution is deemed to be “well capitalized” if it has
(i) a CET1 ratio of at least 6.5%, (ii) a Tier 1 capital ratio of at least 8%, (iii) a Total capital ratio of
at least 10%, and (iv) a Tier 1 leverage ratio of at least 5%.
An institution that is categorized as undercapitalized, significantly undercapitalized or critically
undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal
banking regulator. Under the FDIA, in order for the capital restoration plan to be accepted by the
appropriate federal banking agency, a BHC must guarantee that a subsidiary depository institution
will comply with its capital restoration plan, subject to certain limitations. The BHC must also
provide appropriate assurances of performance. An undercapitalized institution is also generally
prohibited from increasing its average total assets, accepting brokered deposits or offering interest
14
rates on any deposits significantly higher than prevailing market rates, 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 Act and Federal Reserve 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) 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. deposits are insured by the
DIF of the FDIC up to the limits set forth under applicable law. The FDIC imposes a risk-based
premium assessment system that determines assessment rates for financial institutions. 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. Under the current system, premiums are assessed quarterly.
In March 2016, the FDIC adopted a final rule that imposes a surcharge of 4.5 cents per $100 of
assessment base, after making certain adjustments, for depository institutions with total assets of at
least $10 billion, including M&T Bank. The surcharge became effective July 1, 2016 and will last
until the DIF has reached the required level set forth in the DIF restoration plan. If the DIF has not
reached the required level by the prescribed time, the FDIC will impose a special assessment on
institutions with assets greater than $10 billion. M&T Bank recognized $95 million of expense
15
related to its FDIC assessment and large bank surcharge and Wilmington Trust, N.A. recognized
$579 thousand of FDIC insurance expense in 2017. Beginning in 2018, amounts paid for FDIC
deposit insurance will no longer be deductible for purposes of determining federal taxable income.
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 $6
million of expense related to its FICO assessments and Wilmington Trust, N.A. recognized $87
thousand of such expense in 2017.
Acquisitions
The BHCA requires every BHC to obtain the prior approval of the Federal Reserve 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 before acquiring certain nonbank financial
companies with assets exceeding $10 billion and (ii) provide prior written notice to the Federal
Reserve 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 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 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 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, 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 several 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,
16
director or principal stockholder. The Federal Reserve issued comprehensive guidance on incentive
compensation policies (the “Incentive Compensation Guidance”) intended to ensure that the
incentive compensation policies of banking organizations do not undermine the safety and soundness
of such organizations by encouraging excessive risk-taking. The Incentive Compensation Guidance,
which covers all employees that have the ability to materially affect the risk profile of an
organization, either individually or as part of a group, is based upon the key principles that a banking
organization’s incentive compensation arrangements should (i) provide incentives that do not
encourage risk-taking beyond the organization’s ability to effectively identify and manage risks,
(ii) be compatible with effective internal controls and risk management, and (iii) be supported by
strong corporate governance, including active and effective oversight by the organization’s board of
directors. These three principles are incorporated into the proposed joint compensation regulations
under the Dodd-Frank Act, discussed below. Any deficiencies in compensation practices that are
identified may be incorporated into the organization’s supervisory ratings, which can affect its ability
to make acquisitions or perform other actions. The Incentive Compensation Guidance provides that
enforcement actions may be taken against a banking organization if its incentive compensation
arrangements or related risk-management control or governance processes pose a risk to the
organization’s safety and soundness and the organization is not taking prompt and effective measures
to correct the deficiencies.
The Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish
joint regulations or guidelines prohibiting incentive-based payment arrangements at specified
regulated entities having at least $1 billion in total assets, such as M&T and M&T Bank. The
agencies proposed initial regulations in April 2011 and proposed revised regulations in 2016 that
would establish general qualitative requirements applicable to all covered entities, additional specific
requirements for entities with total consolidated assets of at least $50 billion, such as M&T, and
further, more stringent requirements for those with total consolidated assets of at least $250 billion.
The general qualitative requirements include (i) prohibiting incentive arrangements that encourage
inappropriate risks by providing excessive compensation; (ii) prohibiting incentive arrangements that
encourage inappropriate risks that could lead to a material financial loss; (iii) establishing
requirements for performance measures to appropriately balance risk and reward; (iv) requiring
board of director oversight of incentive arrangements; and (v) mandating appropriate record-keeping.
For larger financial institutions, including M&T, the proposed revised regulations would also
introduce additional requirements applicable only to “senior executive officers” and “significant risk-
takers” (as defined in the proposed regulations), including (i) limits on performance measures and
leverage relating to performance targets; (ii) minimum deferral periods; and (iii) subjecting incentive
compensation to possible downward adjustment, forfeiture and clawback. If the final regulations are
adopted in the form proposed, they will impose limitations on the manner in which M&T may
structure compensation for its executives.
In October 2016, the NYSDFS issued guidance emphasizing that its regulated banking
institutions, including M&T Bank, must ensure that any incentive compensation arrangements tied to
employee performance indicators are subject to effective risk management, oversight and control.
The scope and content of the 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
17
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, core business lines, interconnections and
interdependencies, and management information systems, among other elements. The most recent
resolution plan for M&T was filed in December 2017.
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 Bank submitted its most recent resolution plan in December 2015, as
required. The next resolution plan for M&T Bank is required to be filed by July 1, 2018, reflecting an
FDIC-directed extension from the original filing due date of December 31, 2017.
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:
(cid:129)
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;
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
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.
(cid:129)
(cid:129)
In addition, under federal law, the claims of holders of domestic deposit liabilities and certain
claims for administrative expenses against an insured depository institution would be afforded a
priority over other general unsecured claims against such an institution, including claims of debt
holders of the institution, in the “liquidation or other resolution” of such an institution by any
receiver. As a result, whether or not the FDIC ever sought to repudiate any debt obligations of M&T
Bank or Wilmington Trust, N.A., the debt holders would be treated differently from, and could
receive, if anything, substantially less than, the depositors of the bank. The Dodd-Frank Act created a
new resolution regime (known as “orderly liquidation authority”) for systemically important financial
companies, including bank holding companies and their affiliates. Under the orderly liquidation
authority, the FDIC may be appointed as receiver for the systemically important institution, and its
failed subsidiaries, for purposes of liquidating the entity if, among other conditions, it is determined
at the time of the institution’s failure that it is in default or in danger of default and the failure poses a
risk to the stability of the U.S. financial system.
If the FDIC is appointed as receiver under the orderly liquidation authority, then the powers of
the receiver, and the rights and obligations of creditors and other parties who have dealt with the
institution, would be determined under the Dodd-Frank Act provisions, and not under the insolvency
law that would otherwise apply. The powers of the receiver under the orderly liquidation authority
were based on the powers of the FDIC as receiver for depository institutions under the FDIA.
However, the provisions governing the rights of creditors under the orderly liquidation authority
were modified in certain respects to reduce disparities with the treatment of creditors’ claims under
18
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 and Cyber Security
The federal banking regulators have adopted rules that limit the ability of banks and other financial
institutions to disclose non-public information about consumers to non-affiliated third parties. These
limitations require disclosure of privacy policies to consumers and, in some circumstances, allow
consumers to prevent disclosure of certain personal information to a non-affiliated third party. These
regulations affect how consumer information is transmitted through diversified financial companies
and conveyed to outside vendors. In addition, consumers may also prevent disclosure of certain
information among affiliated companies that is assembled or used to determine eligibility for a
product or service, such as that shown on consumer credit reports and asset and income information
from applications. Consumers also have the option to direct banks and other financial institutions not
to share information about transactions and experiences with affiliated companies for the purpose of
marketing products or services. 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.
In October 2016, the federal banking regulators jointly issued an advance notice of proposed
rulemaking on enhanced cyber risk management standards that are intended to increase the
operational resilience of large and interconnected entities under their supervision. Once established,
19
the enhanced cyber risk management standards would help to reduce the potential impact of a cyber-
attack or other cyber-related failure on the financial system. The advance notice of proposed
rulemaking addresses five categories of cyber standards: (1) cyber risk governance; (2) cyber risk
management; (3) internal dependency management; (4) external dependency management; and (5)
incident response, cyber resilience, and situational awareness. In March 2017, regulations enacted by
the NYSDFS became effective that require financial institutions regulated by the NYSDFS, including
M&T Bank, to, among other things, (i) establish and maintain a cyber security program designed to
ensure the confidentiality, integrity and availability of their information systems; (ii) implement and
maintain a written cyber security policy setting forth policies and procedures for the protection of
their information systems and nonpublic information; and (iii) designate a Chief Information Security
Officer. M&T Bank is in full compliance with these requirements.
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. Such 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, the Electronic Fund
Transfer Act, the Real Estate Settlement Procedures Act, the Servicemembers Civil Relief Act, and
various state law counterparts. Furthermore, the CFPB has issued integrated disclosure requirements
under the Truth in Lending Act and the Real Estate Settlement Procedures Act that relate to the
provision of disclosures to borrowers. There are also consumer protection laws governing deposit
taking activities (e.g. Truth in Savings Act), as well securities and insurance laws governing certain
aspects of the Company’s consolidated operations.
The Dodd-Frank Act established the 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:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
risks to consumers and compliance with the federal consumer financial laws, when it
evaluates the policies and practices of a financial institution;
the markets in which firms operate and risks to consumers posed by activities in those
markets;
depository institutions that offer a wide variety of consumer financial products and
services;
depository institutions with a more specialized focus; and
non-depository companies that offer one or more consumer financial products or services.
One of the important rules in governing deposits is the Electronic Fund Transfer Act which, among
other things, 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 one-time debit card transaction sent for approval that exceeds the
customer’s available balance will be declined. Overdrafts on other types of transactions (e.g. checks,
recurring debit card transactions and ACH transactions) 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
20
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.
The CFPB issued final rules that change the reporting requirements for lenders under the
Home Mortgage Disclosure Act. The new rules, which went into effect on January 1, 2018, expand
the range of transactions subject to the requirements to include most securitized residential mortgage
loans and credit lines. The rules also increased the overall amount of data required to be collected
and submitted, including additional data points about loans and borrowers.
Community Reinvestment Act
The CRA is intended to encourage depository institutions to help meet the credit needs of the
communities in which they operate, including low- and moderate-income neighborhoods, consistent
with safe and sound operations. CRA examinations are conducted by the federal agencies that are
responsible for supervising depository institutions: the Federal Reserve, the FDIC and the OCC. A
financial institution's performance in helping to meet the credit needs of its community is evaluated
in the context of information about the institution (capacity, constraints and business strategies), its
community (demographic and economic data, lending, investment, and service opportunities), and its
competitors and peers. Upon completion of a CRA examination, an overall CRA Rating is assigned
using a four-tiered rating system. These ratings are: “Outstanding,” “Satisfactory,” “Needs to
Improve” and “Substantial Noncompliance.” The CRA evaluation is used in evaluating applications
for future approval of bank activities including mergers, acquisitions, charters, branch openings and
deposit facilities. M&T Bank has a rating of “Outstanding.” M&T Bank is also subject to New York
State CRA examination and is assessed using a 1 to 4 scoring system. M&T Bank has an
“Outstanding” rating from the NYSDFS. Wilmington Trust, N.A. was subject to the CRA until
March 3, 2016 when the OCC changed its designation of Wilmington Trust, N.A. to a special
purpose trust company, which exempts Wilmington Trust, N.A. from the requirements of the CRA.
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 examination by the FRBNY, on June 17, 2013, M&T and M&T Bank
entered into a written agreement with the FRBNY related to M&T Bank’s Bank Secrecy Act
(“BSA”)/Anti-Money Laundering (“AML”) procedures pursuant to which M&T and M&T Bank
implemented a BSA/AML program with significantly expanded scale and scope. M&T and M&T
Bank resolved all outstanding issues in the written agreement and the FRBNY terminated the written
agreement on July 27, 2017.
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,
21
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.
Federal Reserve Policies
The earnings of the Company are significantly affected by the monetary and fiscal policies of
governmental authorities, including the Federal Reserve. Among the instruments of monetary policy used
by the Federal Reserve 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 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 the economy, the level of inflation or the price of the dollar in foreign exchange
markets. The monetary policies of the Federal Reserve 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 and wealth services with other
banking institutions and thrifts and with firms in a number of other industries, such as credit unions,
personal loan companies, sales finance companies, leasing companies, securities brokerage firms,
mutual fund companies, hedge funds, wealth and investment advisory firms, insurance companies
and other financial services-related entities. 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, provisions of the Gramm-Leach-Bliley Act of 1999, the Interstate
Banking Act and state banking laws have allowed for increased competition among diversified
financial services providers and e-commerce and other Internet-based companies.
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
22
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.
23
Table 1
SELECTED CONSOLIDATED YEAR-END BALANCES
2017
2016
2015
2014
2013
(In thousands)
Interest-bearing deposits at banks.............. $
Federal funds sold ......................................
Trading account .........................................
Investment securities
5,078,903 $
—
132,909
5,000,638 $
—
323,867
7,594,350 $ 6,470,867 $ 1,651,138
99,573
376,131
—
273,783
83,392
308,175
U.S. Treasury and federal agencies ...... 13,851,832 15,090,578 14,540,237 12,042,390 7,770,767
Obligations of states and political
subdivisions .......................................
Other .....................................................
180,495
845,235
Total investment securities ............. 14,664,525 16,250,468 15,656,439 12,993,542 8,796,497
64,499
1,095,391
157,159
793,993
124,459
991,743
27,151
785,542
Loans and leases
8,066,756
8,125,925
Commercial, financial, leasing, etc. ..... 21,900,258 22,770,629 20,576,737 19,617,253 18,876,166
Real estate — construction...................
5,716,994 5,061,269 4,457,650
Real estate — mortgage ....................... 44,965,038 48,134,198 49,841,156 31,250,968 30,711,440
Consumer.............................................. 13,251,665 12,130,094 11,584,347 10,969,879 10,280,527
Total loans and leases ..................... 88,242,886 91,101,677 87,719,234 66,899,369 64,325,783
(252,624)
Unearned discount ................................
Loans and leases, net of unearned
discount ........................................ 87,988,983 90,853,416 87,489,499 66,668,956 64,073,159
(916,676)
Loans and leases, net....................... 86,971,785 89,864,419 86,533,507 65,749,394 63,156,483
Goodwill ....................................................
4,593,112 3,524,625 3,524,625
Core deposit and other intangible assets....
68,851
66,875
Real estate and other assets owned ............
Total assets................................................. 118,593,487 123,449,206 122,787,884 96,685,535 85,162,391
4,593,112
97,655
139,206
4,593,112
71,589
111,910
Allowance for credit losses ..................
140,268
195,085
35,027
63,635
(1,017,198)
(955,992)
(253,903)
(919,562)
(988,997)
(229,735)
(248,261)
(230,413)
Noninterest-bearing deposits ..................... 33,975,180 32,813,896 29,110,635 26,947,880 24,661,007
Savings and interest-checking deposits ..... 51,698,008 52,346,207 49,566,644 43,393,618 38,611,021
6,580,962 10,131,846 13,110,392 3,063,973 3,523,838
Time deposits .............................................
322,746
Deposits at Cayman Islands office.............
Total deposits .................................. 92,432,146 95,493,876 91,957,841 73,582,053 67,118,612
260,455
Short-term borrowings ...............................
Long-term borrowings ...............................
9,493,835 10,653,858 9,006,959 5,108,870
Total liabilities ........................................... 102,342,668 106,962,584 106,614,595 84,349,639 73,856,859
Shareholders’ equity .................................. 16,250,819 16,486,622 16,173,289 12,335,896 11,305,532
175,099
8,141,430
2,132,182
177,996
176,582
170,170
201,927
192,676
163,442
Table 2
SHAREHOLDERS, EMPLOYEES AND OFFICES
Number at Year-End
2017
2016
2015
2014
2013
Shareholders.................................................... 18,864 19,802 20,693 14,551 15,015
Employees....................................................... 16,794 16,973 17,476 15,782 15,893
796
Offices.............................................................
833
855
863
766
24
Table 3
CONSOLIDATED EARNINGS
Interest income
Loans and leases, including fees......................................... $ 3,742,867 $ 3,485,050 $ 2,778,151 $ 2,596,586 $ 2,734,708
Investment securities
2017
2016
2015
(In thousands)
2014
2013
Fully taxable .................................................................
Exempt from federal taxes............................................
Deposits at banks ................................................................
Other ...................................................................................
209,244
6,802
5,201
1,379
Total interest income .................................................... 4,167,795 3,895,871 3,170,844 2,956,877 2,957,334
340,391
5,356
13,361
1,183
361,494
2,606
45,516
1,205
372,162
4,263
15,252
1,016
361,157
1,431
61,326
1,014
133,177
61,505
1,186
1,511
189,372
386,751
46,869
15,515
699
101
217,247
280,431
87,704
102,841
797
3,625
231,017
425,984
46,140
27,059
615
1,677
252,766
328,257
Interest expense
Savings and interest-checking deposits ..............................
Time deposits......................................................................
Deposits at Cayman Islands office......................................
Short-term borrowings........................................................
Long-term borrowings ........................................................
Total interest expense ...................................................
56,235
26,439
1,018
430
199,983
284,105
Net interest income ........................................................... 3,781,044 3,469,887 2,842,587 2,676,446 2,673,229
185,000
Provision for credit losses...................................................
Net interest income after provision for credit losses .......... 3,613,044 3,279,887 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.............................
Other revenues from operations..........................................
(7,916)
(9,800)
437,859
Total other income........................................................ 1,851,143 1,825,996 1,825,037 1,779,273 1,865,205
375,738
420,608
470,640
64,770
30,577
(130)
—
373,697
419,102
472,184
63,423
41,126
30,314
—
362,912
427,956
508,258
67,212
29,874
—
—
363,827
427,372
501,381
61,445
35,301
21,279
—
331,265
446,941
496,008
65,647
40,828
56,457
(1,884)
—
—
383,061
—
—
426,150
—
—
462,834
—
—
440,538
170,000
190,000
124,000
168,000
Other expense
Salaries and employee benefits........................................... 1,650,729 1,623,600 1,549,530 1,404,950 1,355,178
264,327
Equipment and net occupancy ............................................
134,011
Outside data processing and software.................................
69,584
FDIC assessments ...............................................................
56,597
Advertising and marketing..................................................
39,557
Printing, postage and supplies ............................................
46,912
Amortization of core deposit and other intangible assets ...
621,700
Other costs of operations ....................................................
Total other expense....................................................... 3,140,325 3,047,485 2,822,932 2,689,474 2,587,866
Income before income taxes ............................................... 2,323,862 2,058,398 1,674,692 1,642,245 1,765,568
627,088
Income taxes .......................................................................
Net income ......................................................................... $ 1,408,306 $ 1,315,114 $ 1,079,667 $ 1,066,246 $ 1,138,480
Dividends declared
295,141
172,389
105,045
87,137
39,546
42,613
682,014
272,539
164,133
52,113
59,227
38,491
26,424
660,475
269,299
151,568
55,531
47,111
38,201
33,824
688,990
295,084
184,670
101,871
69,203
35,960
31,366
771,442
595,025
743,284
575,999
915,556
Common ....................................................................... $ 457,200 $ 441,765 $ 374,912 $ 371,137 $ 365,171
53,450
Preferred .......................................................................
81,270
81,270
75,878
72,734
25
Table 4
Per share
Net income
COMMON SHAREHOLDER DATA
2017
2016
2015
2014
2013
8.72
Basic ..........................................................................
$
8.70
Diluted .........................................................................
Cash dividends declared....................................................
3.00
Common shareholders’ equity at year-end........................ 100.03
Tangible common shareholders’ equity at
year-end.......................................................................... 69.08
Dividend payout ratio........................................................ 34.24% 35.81% 37.56% 37.49% 33.94%
8.26
8.20
2.80
79.81
$ 7.22
7.18
2.80
93.60
$ 7.47
7.42
2.80
83.88
$ 7.80
7.78
2.80
97.64
52.45
64.28
57.06
67.85
$
Table 5
CHANGES IN INTEREST INCOME AND EXPENSE(a)
2017 Compared with 2016
2016 Compared with 2015
Resulting from
Changes in:
Resulting from
Changes in:
Total
Total
Change Volume
Rate
Change Volume
Rate
(Increase (decrease) in thousands)
Interest income
Loans and leases, including fees ...................... $265,542
Deposits at banks.............................................. 15,810
Federal funds sold and agreements to resell
securities ........................................................
Trading account ................................................
Investment securities
3
(240)
U.S. Treasury and federal agencies.............
Obligations of states and political
(1,888)
subdivisions..............................................
Other ...........................................................
(3,215)
Total interest income................................... $279,532
7,912
7,092
257,630 $710,191 703,099
(21,398) 37,208 30,264 10,805 19,459
—
(232)
3
(8)
(32)
195
(65)
(31)
33
226
3,520 15,273
(11,753)
(3,947) 12,524 (16,471)
(2,061)
(3,302)
173
87
(2,552)
(6,593)
$727,526
(2,251)
(301)
3,890 (10,483)
Interest expense
Interest-bearing deposits
Savings and interest-checking deposits ...... $ 45,473
43,341 $ 41,564 10,724 30,840
Time deposits .............................................. (41,336) (31,283) (10,053) 75,782 59,607 16,175
(61)
235
Deposits at Cayman Islands office..............
Short-term borrowings......................................
660
(3,923)
857 (22,606)
Long-term borrowings...................................... (41,645) (44,662)
389
(2,114)
(53)
1,288
2,132
182
450
1,809
1,948
3,017 (21,749)
$ 97,727
Total interest expense ................................. $ (39,233)
(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.
26
Item 1A. Risk Factors.
M&T and its subsidiaries could be adversely impacted by a number of risks and uncertainties that are
difficult to predict. As a financial institution certain risk elements are inherent in the ordinary course
of the Company’s business activities and adverse experience with those risks could have a material
impact on the Company’s business, financial condition and results of operations, as well as on the
values of the Company’s financial instruments and M&T’s common stock. The Company has
developed a risk management process to identify, understand, mitigate and balance its exposure to
significant risks. The following risk factors set forth some of the risks that could materially and
adversely impact the Company, although there may be additional risks that are not presently material
or known that may adversely affect the Company.
Market Risk
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:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
A decrease in the demand for loans and other products and services offered by the
Company.
A decrease in net interest income derived from the Company’s lending and deposit
gathering activities.
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.
Other-than-temporary impairment of investment securities in the Company’s investment
securities portfolio.
A decrease in fees from the Company’s brokerage and trust businesses associated with
declines or lack of growth in stock market prices.
Potential higher FDIC assessments due to the DIF falling below minimum required levels.
An impairment of certain intangible assets, such as goodwill.
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:
(cid:129)
Changes in interest rates or interest rate spreads can affect the difference between the
27
(cid:129)
(cid:129)
(cid:129)
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.
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.
Such changes may decrease the demand for interest rate based products and services,
including loans and deposits.
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.
(cid:129) Movements in interest rates also affect mortgage prepayment speeds and could result in
the impairment of capitalized mortgage servicing assets, reduce the value of loans held for
sale and increase the volatility of mortgage banking revenues, potentially adversely
affecting the Company’s results of operations.
The monetary, tax and other policies of the government and its agencies, including the Federal
Reserve, have a significant impact on interest rates and overall financial market performance. These
governmental policies can thus affect the activities and results of operations of banking companies
such as the Company. An important function of the Federal Reserve is to regulate the national supply
of bank credit and certain interest rates. The actions of the Federal Reserve influence the rates of
interest that the Company charges on loans and that the Company pays on borrowings and interest-
bearing deposits and can also affect the value of the Company’s on-balance sheet and off-balance
sheet financial instruments. Also, due to the impact on rates for short-term funding, the Federal
Reserve’s policies also influence, to a significant extent, the Company’s cost of such funding. In
addition, the Company is routinely subject to examinations from various governmental taxing
authorities. Such examinations may result in challenges to the tax return treatment applied by the
Company to specific transactions. Management believes that the assumptions and 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. In December 2017,
President Trump signed into law the Tax Cuts and Jobs Act which is one of the most significant
overhauls to the United States federal tax code since 1986 and could have a significant impact on
domestic and international tax consequences. 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:
(cid:129)
It can affect the value or liquidity of the Company’s on-balance sheet and off-balance
sheet financial instruments.
28
(cid:129)
(cid:129)
(cid:129)
(cid:129)
It can affect the value of capitalized servicing assets.
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.
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.
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.
Risks Relating to Compliance and the Regulatory Environment
The Company is subject to extensive government regulation and supervision and this regulatory
environment can be and has been significantly impacted by financial regulatory reform initiatives.
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
the Company’s lending practices, capital structure, amounts of capital, investment practices, dividend
policy, growth and expansionary activity, 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, can pursue 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 U.S. government and others have undertaken major reforms of the regulatory oversight
structure of the financial services industry. M&T has been subject to increased regulation of its
industry as a result of certain and possible future initiatives. M&T continues to expect scrutiny in the
examination process and more aggressive enforcement of regulations on both the federal and state
levels. Compliance with new regulations and supervisory initiatives could increase the Company’s
costs, reduce its revenue and/or limit its ability to pursue certain desirable business opportunities.
29
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, such activity could affect the behaviors of third parties with which the
Company deals in the ordinary course of 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.
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.
Capital standards imposed as a result of the Dodd-Frank Act and the U.S. Basel III-based capital
rules have had a significant effect on banks and bank holding companies, including M&T. The 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 requirement to maintain more and higher quality capital, as well as greater liquidity than
historically has been required, and generally increased regulatory scrutiny with respect to capital and
liquidity 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 U.S. 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 the Dodd-Frank Act 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 requirements, including under stressed conditions, in
approving actions that represent uses of capital, such as dividend increases, common stock share
repurchases and acquisitions.
M&T’s ability to return capital to shareholders and 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.
Any decision by M&T to return capital to shareholders, whether through a common stock dividend
or through a common stock share repurchase program, requires the approval of M&T’s Board of
Directors and depends in large part on receiving regulatory approval, including through the Federal
Reserve’s CCAR process and the supervisory stress tests required under the Dodd-Frank Act
whereby M&T’s financial position is tested under assumed severely adverse economic conditions.
Prior to the public disclosure of a BHC’s CCAR results, the Federal Reserve will provide the BHC
with the results of its supervisory stress test and will offer a one-time opportunity for the BHC to
reduce planned capital distributions through the submission of a revised capital plan. The Federal
Reserve may object to any capital plan in which a BHC’s regulatory capital ratios inclusive of
adjustments to planned capital distributions, if any, would not meet the minimum requirements
throughout a nine-quarter period under severely adverse stress conditions. In January 2017, the
30
Federal Reserve finalized a rule modifying the capital plan and stress testing rules for the 2017 cycle.
The rule eliminated the qualitative component of CCAR for bank holding companies with total
consolidated assets between $50 billion and $250 billion, such as M&T. The qualitative assessment
considered factors including the comprehensiveness of a BHC’s capital plan, the assumptions and
analysis underlying the plan, and the extent to which the BHC had satisfied certain supervisory
matters related to its processes, analyses, controls and governance. The Federal Reserve will continue
to evaluate these factors through the regular supervisory process and targeted horizontal reviews of
particular aspects of capital planning. If the Federal Reserve objects to M&T’s capital plan, it could
impose restrictions on M&T’s ability to return capital to shareholders, including through paying
dividends, entering into acquisitions or repurchasing its common stock, which in turn could
negatively impact market and investor perceptions of M&T. In June 2017, the Federal Reserve
announced that it did not object to M&T’s capital plan; however, M&T cannot be certain that the
Federal Reserve will not object to future capital plans submitted through the CCAR program.
In addition, Federal Reserve capital planning and stress testing rules generally limit a BHC’s
ability to make quarterly capital distributions – dividends and common stock share repurchases – if
the amount of 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. Under these rules, for example, if a 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. 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 in accordance with 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 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 prescribes 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, core business lines,
interconnections and interdependencies, and management information systems, among other
elements. The most recent resolution plan for M&T was filed in December 2017. 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 Bank
submitted its most recent resolution plan in December 2015, as required. The next resolution plan for
M&T Bank is required to be filed by July 1, 2018.
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.
31
If an orderly liquidation of a systemically important BHC or non-bank financial company were
triggered, M&T could face assessments for the Orderly Liquidation Fund (“OLF”).
The Dodd-Frank Act creates a mechanism, the OLF, for liquidation of systemically important bank
holding companies and non-bank financial companies. The OLF is administered by the FDIC and is
based on the FDIC’s bank resolution model. The Secretary of the U.S. Treasury may trigger a
liquidation under this authority after consultation with the President of the U.S. and after receiving a
recommendation from the boards of the FDIC and the Federal Reserve upon a two-thirds vote.
Liquidation proceedings will be funded by the OLF, which will borrow from the U.S. Treasury and
impose risk-based assessments on covered financial companies. Risk-based assessments would be
first made on entities that received more in the resolution than they would have received in the
liquidation to the extent of such excess, and second, if necessary, on, among others, bank holding
companies with total consolidated assets of $50 billion or more, such as M&T. Any such assessments
may adversely affect the Company’s business, financial condition or results of operations.
Credit Risk
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.
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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.
The Company 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.
Liquidity Risk
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 operate 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.
33
Recent regulatory changes relating to liquidity and risk management have also 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.
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 non-bank 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 — Distributions” 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.
Strategic Risk
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. Some of the Company’s non-bank competitors
are not subject to the same extensive regulations the Company and its subsidiaries are, and may have
greater flexibility in competing for business. In particular, the activity and prominence of so-called
marketplace lenders and other technological financial services companies have grown significantly in
recent years and is expected to continue growing. 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
34
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.
Operational Risk
The Company is subject to operational risk which could adversely affect the Company’s business and
reputation and create material legal and financial exposure.
Like all businesses, the Company is subject to operational risk, which represents the risk of loss
resulting from human error, inadequate or failed internal processes and systems, and external events.
Operational risk also encompasses reputational risk and compliance and legal risk, which is the risk
of loss from violations of, or noncompliance with, laws, rules, regulations, prescribed practices or
ethical standards, as well as the risk of noncompliance with contractual and other obligations. The
Company is also exposed to operational risk through outsourcing arrangements, and the effect that
changes in circumstances or capabilities of its outsourcing vendors can have on the Company’s
ability to continue to perform operational functions necessary to its business. In addition, along with
other participants in the financial services industry, the Company frequently attempts to introduce
new technology-driven products and services that are aimed at allowing the Company to better serve
customers and to reduce costs. The Company may not be able to effectively implement new
technology-driven products and services that allow 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 difficult 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, 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.
35
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 expanded its business through past acquisitions 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
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 and to have a
diverse workforce. Competition for qualified and diverse 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 type of 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.
36
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.
Information security risks for large financial institutions such as M&T have increased
significantly in recent years in part because of the proliferation of new technologies, such as Internet
and mobile banking to conduct financial transactions, and the increased sophistication and activities
of organized crime, hackers, terrorists, nation-states, activists and other external parties. 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. There have also been several highly
publicized cases where hackers have requested “ransom” payments in exchange for not disclosing
customer information.
As cyber threats continue to evolve, the Company may be required to expend significant
additional resources to continue to modify or enhance its layers of defense or to investigate and
remediate any information security vulnerabilities. The techniques used by cyber criminals change
frequently, may not be recognized until launched and can be initiated from a variety of sources,
including terrorist organizations and hostile foreign governments. These actors may attempt to
fraudulently induce employees, customers or other users of the Company’s systems to disclose
sensitive information in order to gain access to data or the Company’s systems. These risks may
increase as the use of mobile payment and other Internet-based applications expands.
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 and
potential sanctions, 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 and operations 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
37
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.
Discussions of the specific risks outlined above and other risks facing the Company are
included within this Annual Report on Form 10-K in Part I, Item 1 “Business,” and Part II, Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Furthermore, in Part II, Item 7 under the heading “Forward-Looking Statements” is included a
description of certain risks, uncertainties and assumptions identified by management that are difficult
to predict and that could materially affect the Company’s financial condition and results of
operations, as well as the value of the Company’s financial instruments in general, and M&T
common stock, in particular.
In addition, the market price of M&T common stock may fluctuate significantly in response to a
number of other factors, including changes in securities analysts’ estimates of financial performance,
volatility of stock market prices and volumes, rumors or erroneous information, changes in market
valuations of similar companies and changes in accounting policies or procedures as may be required
by the FASB or other regulatory agencies.
38
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Properties.
Both M&T and M&T Bank maintain their executive offices at One M&T Plaza in Buffalo, New
York. This twenty-one story headquarters building, containing approximately 300,000 rentable
square feet of space, is owned in fee by M&T Bank and was completed in 1967. M&T, M&T Bank
and their subsidiaries occupy approximately 98% of the building and the remainder is leased to non-
affiliated tenants. At December 31, 2017, the cost of this property (including improvements
subsequent to the initial construction), net of accumulated depreciation, was $9.6 million.
M&T Bank owns and occupies an additional facility in Buffalo, New York (known as M&T
Center) with approximately 395,000 rentable square feet of space. At December 31, 2017, the cost
of this building (including improvements subsequent to acquisition), net of accumulated depreciation,
was $10.6 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 $27.5 million at December 31,
2017.
M&T Bank owns a facility in Syracuse, New York with approximately 160,000 rentable square
feet of space. Approximately 46% of that facility is occupied by M&T Bank. At December 31, 2017,
the cost of that building (including improvements subsequent to acquisition), net of accumulated
depreciation, was less than $1 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 97% of Wilmington Center. Wilmington Plaza is
occupied by a tenant. At December 31, 2017, the cost of these buildings (including improvements
subsequent to acquisition), net of accumulated depreciation, was $41.6 million and $12.3 million,
respectively.
M&T Bank also owns facilities in Harrisburg, Pennsylvania and Millsboro, Delaware with
approximately 220,000 and 325,000 rentable square feet of space, respectively. M&T Bank occupies
approximately 30% and 89% of those facilities, respectively. At December 31, 2017, the cost of
those buildings (including improvements subsequent to acquisition), net of accumulated depreciation,
was $10.3 million and $8.8 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 782 domestic banking offices of M&T’s subsidiary banks at December 31, 2017, 308 are
owned in fee and 474 are leased.
Item 3.
Legal Proceedings.
M&T and its subsidiaries are subject in the normal course of business to various pending and
threatened legal proceedings 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
39
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 $50 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 Litigation Matter
M&T’s Wilmington Trust Corporation subsidiary is the subject of certain litigation 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.
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. Wilmington Trust Corporation moved to
dismiss. The Court issued an order denying Wilmington Trust Corporation’s motion to dismiss on
March 20, 2014. Plaintiffs’ motion for class certification was granted on September 3, 2015. Fact
discovery was stayed by Court order during extended periods of this litigation. On December 19,
2016, the Court issued an order lifting the existing stay in its entirety. Fact discovery was completed
on or about August 15, 2017. On December 12, 2017, the Court issued an order extending certain
pre-trial deadlines, pushing all dates off until after the completion of the criminal trial involving
certain individual witnesses. Expert discovery must now be completed by July 31, 2018 and
summary judgment motions must be fully briefed by October 31, 2018. The Court has removed this
matter from the trial calendar and no trial date has been set.
Due to their complex nature, it is difficult to estimate when litigation or investigatory matters
may be resolved. As set forth in the introductory paragraph to this Item 1 — Legal Proceedings,
losses from current litigation and regulatory matters which the Company is subject to that are not
currently considered probable are within a range of reasonably possible losses for such matters in the
aggregate, beyond the existing recorded liability, and are included in the range of reasonably possible
losses set forth above.
Item 4. Mine Safety Disclosures.
Not applicable.
Executive Officers of the Registrant
Information concerning M&T’s executive officers is presented below as of February 22, 2018. 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.
40
René F. Jones, age 53, is chief executive officer, chairman of the board and a director of M&T
and M&T Bank (2017). Previously, he was an executive vice president (2006) of M&T and a vice
chairman (2014) of M&T Bank. Mr. Jones had overall responsibility for the Company’s Wealth and
Institutional Services Division, Treasury Division, and Mortgage and Consumer Lending Divisions.
Mr. Jones is chairman, president and chief executive officer (2017) 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. Mr. Jones is chairman of the board and a director (2014) of Wilmington Trust
Investment Advisors, and is a director (2007) of M&T Insurance Agency. Mr. Jones is chairman of
the board and a director (2014) of Wilmington Trust Company. Previously, Mr. Jones served as chief
financial officer (2005) of M&T, M&T Bank and Wilmington Trust, N.A. and had held a number of
management positions within M&T Bank’s Finance Division since 1992.
Richard S. Gold, age 57, is president, chief operating officer and a director of M&T and M&T
Bank (2017). Mr. Gold is responsible for the Mortgage, Consumer Lending, Retail, Business
Banking and Legal Divisions. Previously, he was an executive vice president (2006) and chief risk
officer (2014) of M&T and was a vice chairman and chief risk officer (2014) of M&T Bank. Mr.
Gold had been responsible for overseeing the Company’s governance and strategy for risk
management, as well as relationships with key regulators and supervisory agencies. He served as a
senior vice president of M&T Bank from 2000 to 2006 and has held a number of management
positions since he began his career with M&T Bank in 1989. Mr. Gold is an executive vice president
(2006) and a director (2017) of Wilmington Trust, N.A. and a director of Wilmington Trust
Company (2017).
Kevin J. Pearson, age 56, 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 Bank’s Commercial
Banking, Credit, and Technology and Banking Operations Divisions. Previously, Mr. Pearson served
as senior vice president of M&T Bank from 2000 to 2002, and has held a number of management
positions since he began his career with M&T Bank in 1989. 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).
Robert J. Bojdak, age 62, is an executive vice president and chief credit officer (2004) of M&T
and M&T Bank, and is responsible for the Company’s Credit Division. 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 (2004) of Wilmington Trust, N.A.
Janet M. Coletti, age 54, is an executive vice president (2015) of M&T and M&T Bank,
overseeing 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 60, is an executive vice president (2011) of M&T and M&T Bank, and
is responsible for managing administrative and business development functions of the Company’s
Wealth and Institutional Services Division, which includes Institutional Client Services and M&T
Insurance Agency. Mr. Farrell joined M&T through the Wilmington Trust Corporation acquisition.
He joined Wilmington Trust Corporation 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.
41
Brian E. Hickey, age 65, 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 co-managing with Mr. Martocci M&T Bank’s commercial banking
lines of business and all of the non-retail banking segments in Upstate New York, Western New
York and in the Northern, Central and Western Pennsylvania and Connecticut regions. Mr. Hickey is
also responsible for the Dealer Commercial Services line of business.
Darren J. King, age 48, is an executive vice president (2010) and chief financial officer (2016)
of M&T and executive vice president (2009) and chief financial officer (2016) of M&T Bank. Mr.
King has responsibility for the overall financial management of the Company. Prior to his current
role, Mr. King was the Retail Banking executive with responsibility for overseeing Business
Banking, Consumer Deposits, Consumer Lending and M&T Bank’s Marketing and Communications
team. 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 (2009)
and chief financial officer (2016) of Wilmington Trust, N.A.
Gino A. Martocci, age 52, is an executive vice president (2014) of M&T and M&T Bank, and is
responsible for co-managing with Mr. Hickey M&T Bank’s commercial banking lines of business
and all non-retail banking segments in the metropolitan New York City, New Jersey, Philadelphia,
Delaware, Baltimore and Washington, D.C. markets. He is also 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, an executive vice president of M&T Real Estate, co-chairman of the Senior Loan
Committee and a member of the New York City Mortgage Investment Committee. Mr. Martocci is
also a member of the Directors Advisory Council of the New York City/Long Island (2013) and the
New Jersey (2015) Divisions of M&T Bank.
Doris P. Meister, age 62, is an executive vice president (2016) of M&T and M&T Bank, and is
responsible for overseeing the Company’s wealth management business, including Wealth Advisory
Services, M&T Securities and Wilmington Trust Investment Advisors. Ms. Meister is an executive
vice president and a director (2016) of Wilmington Trust, N.A., an executive vice president and
director of Wilmington Trust Company (2016), and a director (2016) of M&T Securities. Prior to
joining M&T in 2016, Ms. Meister served as President of U.S. Markets for BNY Mellon Wealth
Management and was a Managing Director of the New York office of Bernstein Global Wealth
Management.
Michael J. Todaro, age 56, is an executive vice president (2015) of M&T and M&T Bank, and
is responsible for the Mortgage, Consumer Lending and Customer Asset Management Divisions. 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 56, is an executive vice president and chief information officer (2005) of
M&T and M&T Bank. Ms. Trolli leads a wide range of the Company’s Technology and Banking
Operations, which includes banking services, corporate services, digital and telephone banking, the
enterprise data office, enterprise and cyber security, and enterprise technology.
D. Scott N. Warman, age 52, 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 an executive vice
president and treasurer of Wilmington Trust Company (2012).
42
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
M&T’s common stock is traded under the symbol MTB on the New York Stock Exchange. See
cross-reference sheet for disclosures incorporated elsewhere in this Annual Report on Form 10-K for
market prices of M&T’s common stock, approximate number of common shareholders at year-end,
frequency and amounts of dividends on common stock and restrictions on the payment of dividends.
During the fourth quarter of 2017, 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, 2017 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, 2017, and their weighted-average exercise price.
Plan Category
Equity compensation plans approved
by security holders.....................................
Equity compensation plans not approved
by security holders.....................................
Total ...................................................
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)
135,827 $
81.68
3,278,036
23,078
158,905 $
85.36
82.22
40,676
3,318,712
(1)
As of December 31, 2017, a total of 537,090 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 $168.81 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.
43
Deferred Bonus Plan. M&T maintains a deferred bonus plan which was frozen effective
January 1, 2010 and did not allow any additional 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, 2012 and ending on December 31, 2017. The KBW
Nasdaq Bank Index is a market capitalization index consisting of 24 banking stocks representing
leading large U.S. national money centers, regional banks and thrift institutions.
Comparison of Five-Year Cumulative Return*
$300
$250
$200
$150
$100
$50
$0
2012
2013
2014
2015
2016
2017
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 ......................................
100
100
100
121
138
132
134
151
151
132
151
153
175
195
171
194
231
208
2012
2013
2014
2015
2016
2017
* Assumes a $100 investment on December 31, 2012 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.
44
Issuer Purchases of Equity Securities
On July 18, 2017, M&T announced that it had been authorized by its Board of Directors to purchase
up to $900 million of shares of its common stock through June 30, 2018. A repurchase program
authorized in July 2016 by M&T’s Board of Directors was completed during 2017. In total, M&T
repurchased 7,369,105 common shares for $1.21 billion during 2017.
During the fourth quarter of 2017, M&T purchased shares of its common stock as follows:
Issuer Purchases of Equity Securities
(c)Total
Number of
Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
(d)Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units)
that may yet
be Purchased
Under the
Plans or
Programs (2)(3)
(a)Total
Number
of Shares
(or Units)
Purchased (1)
(b)Average
Price Paid
per Share
(or Unit)
Period
October 1 — October 31, 2017 ..................................................
November 1 — November 30, 2017 ..........................................
December 1 — December 31, 2017 ...........................................
Total............................................................................................ 1,348,295 $ 166.91 1,343,356
800,969 $ 166.59 800,000 $541,998,000
544,780 167.36 543,356 451,062,000
— 451,062,000
2,546 171.94
(1) The total number of shares purchased during the periods indicated includes shares purchased
as part of publicly announced programs and 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 July 18, 2017, M&T announced a program to purchase up to $900 million of its common
stock through June 30, 2018.
(3) On February 21, 2018, M&T’s Board of Directors approved a program to purchase an
additional $745 million of M&T common stock through June 30, 2018.
Item 6.
Selected Financial Data.
See cross-reference sheet for disclosures incorporated elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Corporate Profile
M&T Bank Corporation (“M&T”) is a bank holding company headquartered in Buffalo, New York
with consolidated assets of $118.6 billion at December 31, 2017. 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 Manufacturers and
Traders Trust Company (“M&T Bank”) and Wilmington Trust, National Association (“Wilmington
Trust, N.A.”).
M&T Bank, with total assets of $118.1 billion at December 31, 2017, is a New York-chartered
commercial bank with 780 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
45
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 $5.0 billion at December 31,
2017. Wilmington Trust, N.A. and its subsidiaries offer various trust and wealth management
services. Wilmington Trust, N.A. also offered selected deposit and loan products on a nationwide
basis, largely through telephone, Internet and direct mail marketing techniques.
On 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. Pursuant to the merger agreement, 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 that added $3.1 billion to M&T’s common shareholders’
equity. Assets acquired totaled approximately $36.7 billion, including $19.0 billion of loans
(predominantly residential real estate loans) and $7.9 billion of investment securities. 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.
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:
(cid:129)
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
46
(cid:129)
(cid:129)
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.
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. 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, loan servicing rights, goodwill and 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.
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
47
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 for the Company during 2017 was $1.41 billion or $8.70 of diluted earnings per common
share, up 7% and 12%, respectively, from $1.32 billion or $7.78 of diluted earnings per common
share in 2016. Basic earnings per common share also increased 12% to $8.72 in 2017 from $7.80 in
2016. Net income in 2015 totaled $1.08 billion, while diluted and basic earnings per common share
were $7.18 and $7.22, respectively. Expressed as a rate of return on average assets, net income in
2017 was 1.17%, compared with 1.06% in each of 2016 and 2015. The return on average common
shareholders’ equity was 8.87% in 2017, 8.16% in 2016 and 8.32% in 2015.
The enactment of the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017 reduced the
corporate Federal income tax rate from 35% to 21% effective January 1, 2018 and made other
changes to U.S. corporate income tax laws. GAAP requires that the impact of the provisions of the
Tax Act be accounted for in the period of enactment. Accordingly, the incremental income tax
expense recorded by the Company in the fourth quarter of 2017 related to the Tax Act was $85
million, representing $.56 of diluted earnings per common share. The additional expense was largely
attributable to the reduction in carrying value of net deferred tax assets reflecting lower future tax
benefits resulting from the lower corporate tax rate.
During the fourth quarter of 2017, the Company realized after-tax gains from investment
securities of $14 million ($21 million pre-tax) that added $.09 to diluted earnings per common share.
Gains from investment securities increased the Company’s net income in 2016 by $18 million ($30
million pre-tax), representing $.12 of diluted earnings per common share. There were no significant
gains or losses on investment securities in 2015.
The Company increased its contribution to The M&T Charitable Foundation by $44 million in
the final 2017 quarter, bringing total charitable contributions for all of 2017 to $50 million, thereby
reducing net income by $30 million, or $.20 of diluted earnings per common share. Charitable
contributions were $30 million in 2016 and $46 million in 2015. After applicable tax effect, those
contributions equated to $.12 and $.20 per diluted common share in 2016 and 2015, respectively.
On October 9, 2017, Wilmington Trust Corporation, a wholly owned subsidiary of M&T,
reached an agreement with the U.S. Attorney’s Office for the District of Delaware related to alleged
conduct that took place between 2009 and 2010 prior to the acquisition of Wilmington Trust
Corporation by M&T. Under the terms of that agreement, Wilmington Trust Corporation was
required to pay $60 million and settled the government’s claims. The settlement amount included
$16 million previously paid to the U.S. Securities and Exchange Commission in a related action. The
result was a payment of $44 million that is not deductible for income tax purposes. Wilmington
Trust Corporation did not admit any liability.
As of September 30, 2017, the Company increased the reserve for legal matters by $50 million.
That increase, coupled with the non-deductible nature of the $44 million payment, reduced net
income in 2017 by $48 million, or $.31 of diluted earnings per common share.
The Hudson City transaction was accounted for using the acquisition method of accounting and,
accordingly, the results of operations acquired in such transaction have been included in the
Company’s financial results for the final two months of 2015 and for all of 2016 and 2017. The
acquired operations added to the Company’s average earning assets, net interest income and non-
interest expenses. Net acquisition and integration-related expenses (included herein as merger-related
48
expenses) associated with the Hudson City acquisition totaled $22 million after-tax effect, or $.14 of
diluted earnings per common share during 2016 and $61 million after-tax effect, or $.44 of diluted
earnings per common share in 2015. There were no merger-related expenses in 2017.
Taxable-equivalent net interest income increased 9% to $3.82 billion in 2017 from $3.50 billion
in 2016. That improvement resulted from a widening of the net interest margin, or taxable-equivalent
net interest income expressed as a percentage of average earning assets, from 3.11% in 2016 to
3.47% in 2017. Partially offsetting the impact of the widened net interest margin was a 2% decline in
average earning assets to $110.0 billion in 2017 from $112.6 billion in 2016. Taxable-equivalent net
interest income in 2016 was 22% higher than $2.87 billion in 2015 due predominantly to a $21.4
billion increase in average earning assets. That increase reflected higher average balances of loans
and leases of $17.8 billion, principally due to the full-year impact of the Hudson City acquisition, and
interest-bearing deposits at banks of $3.1 billion. Offsetting the impact of higher earning assets was a
three basis point (hundredths of one percent) narrowing of the net interest margin from 3.14% in
2015. Lower yields on investment securities and an increase in rates on interest-bearing deposits,
reflecting the impact of time deposits in the former Hudson City markets, led to that narrowing.
The provision for credit losses decreased 12% to $168 million in 2017 from $190 million in
2016. The provision in 2015 of $170 million reflected $21 million, as provided for by GAAP, for
incurred credit losses in connection with the $18.3 billion of loans acquired in the Hudson City
transaction at a premium that were not individually identifiable as impaired at the acquisition date.
Net charge-offs were $140 million in 2017, $157 million in 2016 and $134 million in 2015. Net
charge-offs as a percentage of average loans and leases were .16% in 2017, .18% in 2016 and .19%
in 2015.
Other income totaled $1.85 billion in 2017, compared with $1.83 billion in each of 2016 and
2015. Comparing 2017 with 2016, higher trust income and service charges on deposit accounts were
partially offset by a decline in residential mortgage banking revenues and lower gains on investment
securities. During 2016, higher gains recognized on sales of investment securities and increased
trading account and foreign exchange gains as compared with 2015 were offset by a $45 million gain
in 2015 on the sale of the Company’s trade processing business.
Other expense increased 3% to $3.14 billion in 2017 from $3.05 billion in 2016. Other expense
in 2015 totaled $2.82 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
$31 million, $43 million and $26 million in 2017, 2016 and 2015, respectively, and merger-related
expenses of $36 million and $76 million in 2016 and 2015, respectively. Exclusive of those
nonoperating expenses, noninterest operating expenses aggregated $3.11 billion in 2017, compared
with $2.97 billion in 2016 and $2.72 billion in 2015. The increase in such expenses in 2017 as
compared with 2016 was largely due to higher costs for salaries and employee benefits, professional
services and charitable contributions, and increases to the reserve for legal matters. The increase in
noninterest operating expenses in 2016 as compared with 2015 reflects the full-year impact of the
Hudson City acquisition and higher costs for salaries and employee benefits and FDIC assessments.
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 55.1% in 2017, compared with 56.1% and 58.0% in 2016 and
2015, respectively. The calculations of the efficiency ratio are presented in table 2.
In 2017, in addition to the impact of the Tax Act already noted, M&T adopted new accounting
guidance for share-based transactions. That guidance requires that all excess tax benefits and tax
deficiencies associated with share-based compensation be recognized in income tax expense in the
income statement. Previously, tax effects resulting from changes in M&T’s share price subsequent
to the grant date were recorded through shareholders’ equity at the time of vesting or exercise. The
49
adoption of the amended accounting guidance resulted in a $22 million reduction of income tax
expense in 2017, or $.15 of diluted earnings per common share.
On June 28, 2017, M&T announced that the Federal Reserve did not object to M&T’s proposed
2017 Capital Plan. That capital plan includes provisions for the repurchase of up to $900 million of
common shares during the four-quarter period starting on July 1, 2017, an increase in the quarterly
common stock dividend in the second quarter of 2018 of up to $.05 per share to $.80 per share, and
the issuance of subordinated capital notes in the third quarter of 2017 of $500 million. M&T may
continue to pay dividends and interest on equity and debt instruments included in regulatory capital,
including preferred stock, trust preferred securities and subordinated debt, consistent with the
contractual terms of those instruments. Dividends are subject to declaration by M&T’s Board of
Directors. In July 2017, M&T’s Board of Directors authorized a new stock repurchase program to
repurchase up to $900 million of shares of M&T’s common stock subject to all applicable regulatory
limitations, including those set forth in M&T’s 2017 Capital Plan. In accordance with M&T’s 2017
Capital Plan, M&T repurchased 2,726,102 shares of its common stock during the last six months of
2017 at a cost of $449 million and issued $500 million of subordinated capital notes during 2017’s
third quarter. In accordance with M&T’s revised 2016 Capital Plan, during the first half of 2017,
M&T repurchased 4,643,003 shares of its common stock at a total cost of $757 million, and during
the first quarter of 2017 M&T increased the quarterly common stock dividend from $.70 to $.75 per
share. In the aggregate, M&T repurchased 7,369,105 shares of its common stock during 2017 at a
cost of $1.21 billion.
On February 5, 2018, M&T received notice of non-objection from the Federal Reserve to
repurchase an additional $745 million of shares of its common stock by June 30, 2018. This amount
is in addition to the previously announced $900 million of common stock authorized for repurchase
under M&T’s 2017 Capital Plan and its current stock repurchase program. The additional
repurchases of up to $745 million will be made under the terms of a new stock repurchase program
approved by M&T’s Board of Directors on February 21, 2018.
On July 25, 2017, the Federal Reserve Bank of New York terminated its written agreement with
M&T and its principal bank subsidiary, M&T Bank, that had been entered into in June 2013. Under
the terms of that agreement, M&T and M&T Bank implemented an enhanced compliance risk
management program designed to ensure compliance with the Bank Secrecy Act and anti-money-
laundering laws and regulations (“BSA/AML”) and took other steps to enhance their compliance
practices.
50
Table 1
EARNINGS SUMMARY
Dollars in millions
Increase (Decrease)(a)
2016 to 2017 2015 to 2016
Amount % Amount %
2017 2016 2015 2014 2013 2012 to 2017
Compound
Growth Rate
5 Years
$ 279.6 7 $ 727.5 23 Interest income(b) ........................................... $4,202.4 $3,922.8 $3,195.3 $2,980.5 $2,982.3
97.7 30 Interest expense...............................................
284.1
629.8 22 Net interest income(b)..................................... 3,815.6 3,496.8 2,867.0 2,700.1 2,698.2
20.0 12 Less: provision for credit losses......................
185.0
30.3 — Gain on bank investment securities(c)............
(29.4) (2) Other income................................................... 1,829.9 1,795.7 1,825.1 1,779.3 1,818.5
(39.2) (9)
318.8 9
(22.0) (12)
(9.0) (30)
34.2 2
7%
2
8
(4)
46.7 —
1
190.0
30.3
170.0
—
124.0
—
168.0
21.3
426.0
328.3
280.4
386.8
Less:
27.1 2
65.8 5
273.1 13
Salaries and employee benefits ................ 1,650.7 1,623.6 1,549.5 1,405.0 1,355.2
74.1 5
150.4 12
Other expense........................................... 1,489.6 1,423.8 1,273.4 1,284.5 1,232.7
386.2 23 Income before income taxes ........................... 2,358.5 2,085.4 1,699.2 1,665.9 1,790.5
5
5
8
Less:
25.0
7.6 28
172.3 23
627.0
93.2 7 $ 235.4 22 Net income ...................................................... $1,408.3 $1,315.1 $1,079.7 $1,066.2 $1,138.5
Taxable-equivalent adjustment(b)............
Income taxes ............................................
2.5 10
148.3 25
27.0
743.3
24.5
595.0
23.7
576.0
34.6
915.6
$
6
10
6%
(a)
(b)
(c)
Changes were calculated from unrounded amounts.
Interest income data are on a taxable-equivalent basis. The taxable-equivalent adjustment represents additional income
taxes that would be due if all interest income were subject to income taxes. This adjustment, which is related to interest
received on qualified municipal securities, industrial revenue financings and preferred equity securities, is based on a
composite income tax rate of approximately 39%.
Includes other-than-temporary impairment losses, if any.
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 each of
December 31, 2017, 2016 and 2015. Included in such intangible assets was goodwill of $4.6 billion
at each of those dates. Amortization of core deposit and other intangible assets, after-tax effect,
totaled $19 million, $26 million and $16 million during 2017, 2016 and 2015, respectively.
M&T consistently provides supplemental reporting of its results on a “net operating” or
“tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and
other intangible assets (and the related goodwill, core deposit intangible and other intangible asset
balances, net of applicable deferred tax amounts) and gains and expenses associated with merging
acquired operations into the Company, since such items are considered by management to be
“nonoperating” in nature. Those merger-related expenses generally consist of professional services
and other temporary help fees associated with the actual or planned conversion of systems and/or
integration of operations; costs related to branch and office consolidations; costs related to
termination of existing contractual arrangements to purchase various services; initial marketing and
promotion expenses designed to introduce M&T Bank to its new customers; severance; 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 $36 million ($22
million after-tax) in 2016 and $76 million ($48 million after-tax) in 2015. 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
51
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 considered that
provision to be a merger-related expense. There were no merger-related expenses in 2017. 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 $1.43 billion in 2017, compared with $1.36 billion in 2016 and $1.16
billion in 2015. Diluted net operating earnings per common share were $8.82 in 2017, $8.08 in 2016
and $7.74 in 2015.
Net operating income expressed as a rate of return on average tangible assets was 1.23% in
2017, compared with 1.14% in 2016 and 1.18% in 2015. Net operating income represented a return
on average tangible common equity of 13.00% in 2017 and 2015, compared with 12.25% in 2016.
Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in
table 2.
52
Table 2
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
2017
2016
2015
Income statement data
Dollars in thousands, except per share
Net income
Net income.................................................................................................................................................................................. $
Amortization of core deposit and other intangible assets(a).......................................................................................................
Merger-related expenses(a).........................................................................................................................................................
Net operating income ......................................................................................................................................................... $
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 ............................................................................................................. $
Other expense
Other expense ............................................................................................................................................................................. $
Amortization of core deposit and other intangible assets ...........................................................................................................
Merger-related expenses .............................................................................................................................................................
Noninterest operating expense ........................................................................................................................................... $
Merger-related expenses
Salaries and employee benefits................................................................................................................................................... $
Equipment and net occupancy ....................................................................................................................................................
Outside data processing and software.........................................................................................................................................
Advertising and marketing..........................................................................................................................................................
Printing, postage and supplies ....................................................................................................................................................
Other costs of operations ............................................................................................................................................................
Other expense .....................................................................................................................................................................
Provision for credit losses...........................................................................................................................................................
Total.................................................................................................................................................................................... $
1,408,306
19,025
—
1,427,331
8.70
.12
—
8.82
$
$
$
$
1,315,114
25,893
21,685
1,362,692
7.78
.16
.14
8.08
$
$
$
$
3,140,325
$
3,047,485
$
(31,366 )
—
3,108,959
(42,613 )
(35,755 )
$
2,969,117
$
—
—
—
—
—
—
—
—
—
$
$
5,334
1,278
1,067
10,522
1,482
16,072
35,755
—
35,755
$
$
1,079,667
16,150
60,820
1,156,637
7.18
.12
.44
7.74
2,822,932
(26,424 )
(75,976 )
2,720,532
51,287
3
785
79
504
23,318
75,976
21,000
96,976
Efficiency ratio
Noninterest operating expense (numerator)................................................................................................................................ $
3,108,959
$
2,969,117
$
2,720,532
Taxable-equivalent net interest income ......................................................................................................................................
Other income...............................................................................................................................................................................
Less: Gain (loss) on bank investment securities.........................................................................................................................
Denominator ............................................................................................................................................................................... $
3,815,614
1,851,143
21,279
5,645,478
$
3,496,849
1,825,996
30,314
5,292,531
$
2,867,050
1,825,037
(130 )
4,692,217
Efficiency ratio ...........................................................................................................................................................................
55.07 %
56.10 %
57.98 %
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 .............................................................................................................................................................................
Average tangible common equity....................................................................................................................................... $
At end of year
Total assets
Total assets.................................................................................................................................................................................. $
Goodwill .....................................................................................................................................................................................
Core deposit and other intangible assets.....................................................................................................................................
Deferred taxes .............................................................................................................................................................................
Total tangible assets ........................................................................................................................................................... $
Total common equity
Total equity ................................................................................................................................................................................. $
Preferred stock ............................................................................................................................................................................
Undeclared dividends — cumulative preferred stock.................................................................................................................
Common equity, net of undeclared cumulative preferred dividends .................................................................................
Goodwill .....................................................................................................................................................................................
Core deposit and other intangible assets.....................................................................................................................................
Deferred taxes .............................................................................................................................................................................
Total tangible common equity .................................................................................................................................................... $
(a)
After any related tax effect.
120,860
$
124,340
$
(4,593 )
(86 )
33
116,214
$
(4,593 )
(117 )
46
119,676
$
101,780
(3,694 )
(45 )
16
98,057
$
$
16,295
(1,232 )
15,063
(4,593 )
(86 )
33
10,417
16,419
(1,297 )
15,122
(4,593 )
(117 )
46
10,458
$
$
13,228
(1,232 )
11,996
(3,694 )
(45 )
16
8,273
118,593
$
123,449
$
(4,593 )
(72 )
19
113,947
$
(4,593 )
(98 )
39
118,797
$
122,788
(4,593 )
(140 )
54
118,109
$
16,251
(1,232 )
(3 )
15,016
(4,593 )
(72 )
19
10,370
$
$
16,487
(1,232 )
(3 )
15,252
(4,593 )
(98 )
39
10,600
$
16,173
(1,232 )
(2 )
14,939
(4,593 )
(140 )
54
10,260
53
Net Interest Income/Lending and Funding Activities
Net interest income expressed on a taxable-equivalent basis aggregated $3.82 billion in 2017, up 9%
from $3.50 billion in 2016. That growth resulted from a widening of the net interest margin to
3.47% in 2017 from 3.11% in 2016. The improvement in the net interest margin was predominantly
the result of higher yields on loans due to the higher interest rate environment in 2017. The Federal
Reserve raised its target Federal funds rate by .25% in December 2016 and by the same increment in
each of March, June and December 2017. Partially offsetting the favorable impact of higher interest
rates was a $2.6 billion, or 2%, decline in average earning assets to $110.0 billion in 2017 from
$112.6 billion in 2016 that reflected lower interest-bearing deposits at banks.
Average loans and leases increased to $88.8 billion in 2017 from $88.6 billion in 2016.
Average balances of commercial loans and leases increased $584 million or 3% to $22.0 billion in
2017 from $21.4 billion in 2016. Average commercial real estate loans increased $2.3 billion or 7%
in 2017 to $33.2 billion from $30.9 billion in 2016. Consumer loans averaged $12.6 billion in 2017,
up $784 million or 7% from $11.8 billion in 2016 due to growth in recreational vehicle and
automobile loans. Average residential real estate loans declined $3.5 billion or 14% to $21.0 billion
in 2017 from $24.5 billion in 2016, predominantly due to ongoing repayments of loans obtained in
the acquisition of Hudson City.
Taxable-equivalent net interest income in 2016 increased 22% from $2.87 billion in 2015. That
growth was predominantly attributable to higher average earning assets in 2016, partially offset by a
three basis point narrowing of the net interest margin in 2016 from 3.14% in 2015. Average earning
assets rose $21.4 billion or 23% to $112.6 billion in 2016, reflecting higher average loans and leases.
The higher level of average earning assets reflected the full-year impact of assets obtained in the
acquisition of Hudson City on November 1, 2015. The narrowing of the margin reflected higher rates
paid on interest-bearing deposits, including the impact of time deposits in the former Hudson City
markets.
Average loans and leases rose $17.8 billion or 25% in 2016 from $70.8 billion in 2015. The
most significant factors contributing to that increase were the residential real estate loans obtained in
the Hudson City acquisition and growth in the commercial real estate loan and commercial loan and
lease portfolios. Reflecting average balances of loans obtained in the Hudson City transaction of
$16.3 billion in 2016 and $3.1 billion in 2015, average residential real estate loans increased $13.0
billion to $24.5 billion in 2016 from $11.5 billion in the previous year. Average commercial loans
and leases increased $1.5 billion or 8% to $21.4 billion in 2016 from $19.9 billion in 2015.
Commercial real estate loan average balances in 2016 were up $2.6 billion or 9% from $28.3 billion
in 2015. Average consumer loans rose $638 million or 6% in 2016 from $11.2 billion in the prior
year, predominantly due to growth in average automobile loan balances.
54
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Table 4 summarizes average loans and leases outstanding in 2017 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
2016 to 2017
2015 to 2016
2017
(In millions)
Commercial, financial, etc................................................................ $
Real estate — commercial ................................................................
Real estate — consumer ...................................................................
Consumer
Automobile..................................................................................
Home equity lines and loans .......................................................
Other............................................................................................
Total consumer ......................................................................
Total ................................................................................. $
21,981
33,196
21,013
3,256
5,455
3,914
12,625
88,815
3 %
7
(14)
19
(6)
18
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— %
8 %
9
114
24
(2)
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25 %
Commercial loans and leases, excluding loans secured by real estate, totaled $21.7 billion at
December 31, 2017, representing 25% of total loans and leases. Table 5 presents information on
commercial loans and leases as of December 31, 2017 relating to geographic area, size, borrower
industry and whether the loans are secured by collateral or unsecured. Of the $21.7 billion of
commercial loans and leases outstanding at the end of 2017, approximately $19.4 billion, or 89%,
were secured, while 39%, 24% and 23% 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, 2017 aggregated $1.3 billion, of which 47% were secured by
collateral located in New York State, 18% were secured by collateral in Pennsylvania and another
14% were secured by collateral in the Mid-Atlantic area.
56
Table 5
COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT
(Excludes Loans Secured by Real Estate)
December 31, 2017
New York Pennsylvania Atlantic(a)
Other
Total
Total
Mid-
Percent of
Automobile dealerships..................... $1,700
Services ............................................. 1,288
Manufacturing ................................... 1,597
794
Wholesale..........................................
647
Financial and insurance.....................
605
Health services ..................................
Transportation, communications,
389
utilities............................................
622
Real estate investors..........................
257
Retail .................................................
364
Construction ......................................
156
Public administration ........................
26
Agriculture, forestry, fishing, etc. .....
136
Other..................................................
Total .................................................. $8,581
Percent of total ..................................
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 ..................................................
$
876
702
889
569
322
222
365
226
349
280
67
73
188
$ 5,128
(Dollars in millions)
$ 534
1,238
477
477
316
647
365
268
281
287
35
51
107
$5,083
$ 925
232
489
171
322
133
277
102
176
61
—
—
63
$2,951
$ 4,035
3,460
3,452
2,011
1,607
1,607
1,396
1,218
1,063
992
258
150
494
$21,743
19%
16
16
9
7
7
6
6
5
5
1
1
2
100%
39%
82%
11
7
100%
24%
23%
14%
100%
83%
13
4
100%
86%
10
4
84%
7
9
83%
11
6
100%
100%
100%
24%
24
15
18
8
6
5
19%
23
21
20
12
5
—
26%
21
16
15
10
5
7
10%
23
17
16
17
2
15
21%
23
17
17
11
5
6
100%
100%
100%
100%
100%
(a)
Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia.
International loans included in commercial loans and leases totaled $77 million and $228
million at December 31, 2017 and 2016, respectively. Included in such loans were $54 million and
$95 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 67% of the loan
57
and lease portfolio during 2017, compared with 69% and 64% in 2016 and 2015, respectively. At
December 31, 2017, the Company held approximately $33.4 billion of commercial real estate loans,
$19.6 billion of consumer real estate loans secured by one-to-four family residential properties
(including $356 million of loans originated for sale) and $5.3 billion of outstanding balances of home
equity loans and lines of credit, compared with $33.5 billion, $22.6 billion and $5.6 billion,
respectively, at December 31, 2016. The decrease in residential real estate loans reflects pay downs
of loans obtained in the Hudson City acquisition. Included in commercial real estate loans at
December 31, 2017 and 2016 were construction loans of $8.1 billion and $8.0 billion, respectively,
including amounts due from builders and developers of residential real estate aggregating $1.6 billion
and $1.9 billion at December 31, 2017 and 2016, respectively. Commercial real estate loans also
included loans held for sale totaling $22 million and $643 million at December 31, 2017 and 2016,
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 75% of the commercial real estate loan portfolio at the 2017 year-end. Table 6
presents commercial real estate loans by geographic area, type of collateral and size of the loans
outstanding at December 31, 2017. New York City area commercial real estate loans totaled $8.9
billion at December 31, 2017. The $8.1 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 33% 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 20% of the total.
58
Table 6
COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT
December 31, 2017
New York State
New York
City
Other
Penn-
sylvania
Mid-
Atlantic(a)
(Dollars in millions)
Other
Percent of
Total
Total
Investor-owned
Permanent finance by property
type
$
Office ............................................... $ 1,622
1,380
Retail/Service ...................................
1,378
Apartments/Multifamily...................
789
Hotel.................................................
465
Health facilities ................................
339
Industrial/Warehouse .......................
170
Other.................................................
6,143
Total permanent .........................
Construction/Development
Commercial
Construction..................................
Land/Land development ...............
1,169
358
Residential builder and
developer
Construction..................................
Land/Land development ...............
Total construction/
development............................
1,915
Total investor-owned .............................. 8,058
Owner-occupied by industry(b)
367
21
947
601
756
350
492
206
33
3,385
642
33
10
18
$
$
493
385
405
295
334
306
12
2,230
$ 1,380
994
603
712
704
261
23
4,677
599
46
1,814
209
48
38
219
206
414
576
459
327
399
359
13
2,547
1,166
72
429
276
$ 4,856
3,936
3,601
2,473
2,394
1,471
251
18,982
5,390
718
1,073
559
703
4,088
731
2,961
2,448
7,125
1,943
4,490
7,740
26,722
Other services...................................
Retail ................................................
Automobile dealerships....................
Health services .................................
Wholesale.........................................
Manufacturing..................................
Real estate investors.........................
Other.................................................
Total owner-occupied ................
166
106
176
134
60
87
34
99
862
Total commercial real estate ................... $ 8,920
401
177
191
303
77
211
31
181
1,572
$ 5,660
223
277
210
153
134
132
28
272
1,429
$ 4,390
613
396
170
216
302
147
52
347
2,243
$ 9,368
32
162
179
24
96
38
2
5
538
$ 5,028
1,435
1,118
926
830
669
615
147
904
6,644
$ 33,366
Percent of total ........................................
27%
17%
13%
28%
15%
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 .......................
Total ........................................................
3%
16
14
32
15
18
2
100%
16%
29
19
29
7
—
—
100%
14%
25
19
28
10
4
—
100%
10%
20
16
29
16
9
—
100%
10%
15
15
37
16
7
—
100%
10%
20
16
31
13
9
1
100%
(a)
(b)
Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia.
Includes $337 million of construction loans.
15%
12
11
7
7
4
1
57%
16%
2
3
2
23%
80%
4%
3
3
2
2
2
—
3
20%
100%
59
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 64% 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 58% and 46%,
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 15% of total commercial real estate loans as of
December 31, 2017.
Commercial real estate construction and development loans made to investors presented in
table 6 totaled $7.7 billion at December 31, 2017, or 9% of total loans and leases. Approximately
99% of those construction loans had adjustable interest rates. Included in such loans at the 2017 year-
end were $1.6 billion of loans to builders and developers of residential real estate properties. 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 $3.3 billion
and $2.8 billion at December 31, 2017 and 2016, 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, 2017 and 2016 aggregated $22 million and $643 million, respectively. At
December 31, 2017 and 2016, commercial real estate loans serviced by the Company for other
investors were $16.2 billion and $11.8 billion, respectively. Those serviced loans are not included in
the Company’s consolidated balance sheet. In January 2017, M&T Realty Capital Corporation began
sub-servicing a commercial mortgage loan portfolio and obtained other assets increasing loans
serviced for others by $2.7 billion. The assets acquired were not material to the Company’s
consolidated financial position.
Real estate loans secured by one-to-four family residential properties were $19.6 billion at
December 31, 2017, including approximately 35% secured by properties located in New York State,
8% secured by properties located in Pennsylvania, 28% secured by properties in New Jersey and
11% secured by properties located in other Mid-Atlantic areas. The Company’s portfolio of
alternative (“Alt-A”) residential real estate loans (referred to as “limited documentation loans”) held
for investment decreased by $571 million to $3.0 billion at December 31, 2017 from $3.6 billion at
December 31, 2016. A portfolio of limited documentation loans acquired with the Hudson City
transaction totaled $2.8 billion and $3.3 billion at December 31, 2017 and 2016, respectively. 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
60
individuals to finance the construction of one-to-four family residential properties totaled $22 million
at December 31, 2017 and $21 million at December 31, 2016, 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 15% and 13% of total loans and leases at
December 31, 2017 and 2016, respectively. Outstanding balances of home equity loans and lines of
credit represent the largest component of the consumer loan portfolio. Such balances represented
approximately 6% of total loans and leases at each of December 31, 2017 and December 31, 2016.
Approximately 40% of home equity loans and lines of credit outstanding at December 31, 2017 were
secured by properties in New York State, 25% in Maryland, 21% in Pennsylvania and 3% in New
Jersey. Outstanding automobile loan balances rose to $3.5 billion at December 31, 2017 from $2.9
billion at December 31, 2016. That increase reflects continued consumer demand for motor vehicles.
Table 7 presents the composition of the Company’s loan and lease portfolio at the end of 2017,
including outstanding balances to businesses and consumers in New York State, Pennsylvania, the
Mid-Atlantic area and other states.
Table 7
LOANS AND LEASES, NET OF UNEARNED DISCOUNT
December 31, 2017
Outstandings
(In millions)
Real estate
Residential.................................. $ 19,613
33,366
Commercial ................................
52,979
Total real estate .....................
20,463
Commercial, financial, etc. .............
Consumer
Home equity lines and loans ......
Automobile.................................
Other secured or guaranteed.......
Other unsecured .........................
Total consumer ......................
Total loans ........................
Commercial leases ..........................
5,294
3,544
3,581
848
13,267
86,709
1,280
Total loans and leases ....... $ 87,989
Percent of Dollars Outstanding
Mid-Atlantic
New Penn-
York
sylvania Maryland
New
Jersey Other(a)
Other
6%
35% 8%
44
13
41% 11% 10%
39% 24% 12%
12
19
9
21
9
6
24
40% 21% 25%
26
18
40
30% 17% 16%
39% 15% 11%
47% 18%
9%
38% 15% 11%
10
28% 5%
6
14% 8%
6% 6%
13
7
10
3% 10%
7
6
2
5% 10%
11% 8%
3% 2%
11% 8%
18%
15
16%
13%
1%
26
54
3
22%
16%
21%
17%
(a)
Includes Delaware, Virginia, West Virginia and the District of Columbia.
The investment securities portfolio averaged $15.5 billion in 2017, up from $15.0 billion and
$14.5 billion in 2016 and 2015, respectively. The changes in the average balances reflect the net
effect of purchases, offset by maturities and pay downs of mortgage-backed securities. During 2017,
the Company purchased $1.4 billion of mortgage-backed securities, predominantly Ginnie Mae and
Freddie Mac securities, and $219 million of U.S. Treasury notes. The Company sold $512 million of
61
available-for-sale Fannie Mae and Freddie Mac mortgage-backed securities during 2017 largely due
to the limitations on the amount of those type of securities that are permitted to be included in the
highest tier of “high quality liquid assets” for the Liquidity Coverage Ratio (“LCR”) calculation. The
Company also sold a portion of its holdings of Fannie Mae and Freddie Mac preferred stock during
December 2017 for a gain of $18 million. The preferred stock sold had a cost basis (after previous
write-downs) of $3 million. During 2016, the Company sold all of its collateralized debt obligations
that were held in the available-for-sale investment securities portfolio for a gain of approximately
$30 million. Those securities were sold in large part in response to the provisions of the so-called
Volcker Rule included in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-
Frank Act”).
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.
The Company manages its investment securities portfolio, in part, to satisfy the requirements of the
LCR that became effective in January 2016. The LCR is intended to ensure that banks hold a
sufficient amount of “high quality liquid assets” to cover the anticipated net cash outflows during a
hypothetical acute 30-day stress scenario. For additional information concerning the LCR rules, refer
to Part I, Item 1 of this Form 10-K under the heading “Liquidity.”
In addition to the sales noted above, the Company may occasionally sell 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. The amounts of investment securities held by the
Company are influenced by such factors as demand for loans, which generally yield more than
investment securities, ongoing repayments, the levels of deposits, and management of liquidity
(including the LCR) and balance sheet size and resulting capital ratios.
The Company regularly reviews its investment securities for declines in value below amortized
cost that might be characterized as “other than temporary.” There were no other-than-temporary
impairment charges recognized in 2017, 2016 or 2015. Based on management’s assessment of future
cash flows associated with individual investment securities as of December 31, 2017, 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 and federal funds sold. Those other earning assets in the
aggregate averaged $5.6 billion in 2017, $8.9 billion in 2016 and $5.9 billion in 2015. Interest-
bearing deposits at banks averaged $5.6 billion in 2017, compared with $8.8 billion and $5.8 billion
in 2016 and 2015, respectively. The amounts of interest-bearing deposits at banks at the respective
dates were predominantly comprised of deposits held at the Federal Reserve Bank of New York. The
levels of those deposits often fluctuate due to changes in trust-related deposits of commercial entities,
purchases or maturities of investment securities, or borrowings to manage the Company’s liquidity.
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 $92.1 billion in 2017, compared with $92.2
billion in 2016 and $74.2 billion in 2015. The decline in average core deposits in 2017 as compared
with 2016 reflected a $3.6 billion, or 33%, decrease in time deposits, predominantly related to
62
maturities of relatively high-rate deposits obtained in the acquisition of Hudson City, partially offset
by growth in noninterest-bearing deposits, in part reflecting balances associated with trust customers.
The higher average core deposits in 2016 as compared with 2015 were predominantly reflective of
the impact of the merger with Hudson City. 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. Funding provided by core deposits
represented 84% of average earning assets in 2017, compared with 82% and 81% in 2016 and 2015,
respectively. Table 8 summarizes average core deposits in 2017 and percentage changes in the
components of such deposits over the past two years. Core deposits totaled $90.4 billion and $93.1
billion at December 31, 2017 and 2016, respectively.
Table 8
AVERAGE CORE DEPOSITS
Percent Increase
(Decrease) from
2017
2016 to 2017
2015 to 2016
(In millions)
Savings and interest-checking deposits .......................................... $
Time deposits..................................................................................
Noninterest-bearing deposits ..........................................................
Total................................................................................................ $
52,210
7,327
32,520
92,057
2 %
(33)
8
— %
19 %
167
10
24 %
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 deposits, averaged $775 million
in 2017, $1.2 billion in 2016 and $501 million in 2015. The decline in such deposits in 2017 from
2016 was predominantly the result of maturities of time deposits obtained in the Hudson City
acquisition. The higher level of time deposits over $250,000 in 2016 as compared with 2015 was due
to the full-year impact of deposits obtained in the acquisition of Hudson City. Cayman Islands office
deposits averaged $185 million in 2017, $199 million in 2016 and $216 million in 2015. Brokered
time deposits averaged $59 million in each of 2017 and 2016 and $37 million in 2015. The Company
also had brokered savings and interest-bearing transaction accounts that averaged $1.2 billion in
2017 and $1.1 billion in each of 2016 and 2015. 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 one year or less. Average short-term borrowings were $205 million in 2017,
$894 million in 2016 and $548 million in 2015. The higher levels of such borrowings in 2016 and
2015 were predominantly due to short-term borrowings from the Federal Home Loan Bank
(“FHLB”) of New York assumed in the Hudson City acquisition. Those short-term fixed rate
borrowings matured throughout 2016. Also included in short-term borrowings were unsecured
federal funds borrowings, which generally mature on the next business day, that averaged $132
million, $151 million and $138 million in 2017, 2016 and 2015, respectively. Overnight federal
63
funds borrowings totaled $125 million at December 31, 2017 and $112 million at December 31,
2016.
Long-term borrowings averaged $8.3 billion in 2017, $10.3 billion in 2016 and $10.2 billion in
2015. M&T Bank has a Bank Note Program whereby M&T Bank may offer unsecured senior and
subordinated notes. Unsecured senior notes issued under that program totaled $5.0 billion and $5.2
billion at December 31, 2017 and 2016, respectively. Average balances of outstanding senior notes
issued under that program were $4.8 billion in 2017, compared with $5.3 billion in each of 2016 and
2015. The lower average balances of the senior notes in 2017 resulted from redemptions and
maturities that exceeded new issuances under the Bank Note Program. Also included in average
long-term borrowings were amounts borrowed from the Federal Home Loan Banks of New York,
Atlanta and Pittsburgh of $820 million in 2017, compared with $1.2 billion in each of 2016 and
2015, and subordinated capital notes of $1.7 billion in 2017, compared with $1.5 billion in each of
2016 and 2015. During 2017, in accordance with M&T’s 2017 Capital Plan M&T Bank issued $500
million of fixed rate subordinated capital notes that mature in 2027. Junior subordinated debentures
associated with trust preferred securities that were included in average long-term borrowings were
$518 million in 2017, $515 million in 2016 and $605 million in 2015. 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%. Also included in long-term borrowings were
agreements to repurchase securities, which averaged $490 million in 2017, $1.8 billion in 2016 and
$1.5 billion during 2015. 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. Matured repurchase agreements totaled $650
million and $800 million during 2017 and 2016, respectively. The repurchase agreements held at
December 31, 2017 totaled $422 million and have various repurchase dates through 2020, however,
the contractual maturities of the underlying securities extend beyond such repurchase dates.
Additional information regarding long-term borrowings, including information regarding contractual
maturities of such borrowings, is provided in note 9 of Notes to Financial Statements. The Company
has utilized interest rate swap agreements to modify the repricing characteristics of certain
components of long-term debt. As of December 31, 2017, interest rate swap agreements were used to
hedge approximately $4.6 billion of outstanding fixed rate long-term borrowings. Further
information on interest rate swap agreements is provided in note 18 of Notes to Financial Statements.
Changes in the composition of the Company’s earning assets and interest-bearing liabilities, as
discussed herein, as well as changes in interest rates and spreads, can impact net interest income. Net
interest spread, or the difference between the taxable-equivalent yield on earning assets and the rate
paid on interest-bearing liabilities, was 3.27% in 2017, compared with 2.93% in 2016 and 2.95% in
2015. The yield on the Company’s earning assets increased 33 basis points to 3.82% in 2017 from
3.49% in 2016, while the rate paid on interest-bearing liabilities decreased one basis point to .55% in
2017 from .56% in 2016. The widening of the net interest spread in 2017 as compared with 2016 was
predominantly due to the effect of increases in short-term interest rates initiated by the Federal
Reserve during late 2016 and 2017 that contributed most significantly to higher yields on loans and
leases. The slight narrowing of the net interest spread in 2016 as compared with 2015 reflected the
ongoing impact of the low interest rate environment in those years on the yields earned on
investment securities, higher rates paid on interest-bearing deposits (largely associated with time
deposits obtained in the Hudson City acquisition) and higher amounts of relatively low yielding
balances 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
64
core deposit and other intangible assets. Net interest-free funds averaged $39.7 billion in 2017,
compared with $36.8 billion in 2016 and $31.7 billion in 2015. The increases in average net interest-
free funds in 2017 from 2016 and in 2016 as compared with 2015 reflect higher balances of
noninterest-bearing deposits. Those deposits averaged $32.5 billion in 2017, $30.2 billion in 2016
and $27.3 billion in 2015. The growth in average noninterest-bearing deposits in 2017 as compared
with 2016 reflects higher levels of deposits of trust customers. In connection with the November 1,
2015 acquisition of Hudson City, the Company added noninterest-bearing deposits of $691 million at
the acquisition date. In addition to the impact of the Hudson City acquisition, growth in noninterest-
bearing deposits in 2016 as compared with 2015 reflected an increase in commercial and trust
customer deposits. Shareholders’ equity averaged $16.3 billion, $16.4 billion and $13.2 billion in
2017, 2016 and 2015, respectively. The rise in shareholders’ equity from 2015 to 2016 reflected $3.1
billion of common equity issued in connection with the acquisition of Hudson City, as well as net
retained earnings. Goodwill and core deposit and other intangible assets averaged $4.7 billion in each
of 2017 and 2016, compared with $3.7 billion in 2015. Goodwill of $1.1 billion and core deposit
intangible of $132 million resulted from the November 1, 2015 Hudson City acquisition. The cash
surrender value of bank owned life insurance averaged $1.8 billion in 2017, compared with $1.7
billion in each of 2016 and 2015. Increases in the cash surrender value of bank owned life insurance
are not included in interest income, but rather are recorded in “other revenues from operations.” The
contribution of net interest-free funds to net interest margin was .20% in 2017, .18% in 2016 and
.19% in 2015.
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 3.47% in 2017, 3.11% in 2016 and
3.14% in 2015. 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 earnings assets and interest-bearing liabilities. Periodic settlement amounts arising
from these agreements are reflected in either the yields on earning assets or the rates paid on interest-
bearing liabilities. The notional amount of interest rate swap agreements entered into for interest rate
risk management purposes was $7.4 billion (excluding $2.0 billion of forward-starting swap
agreements) at December 31, 2017 and $900 million at December 31, 2016. Under the terms of those
interest rate swap agreements, the Company received payments based on the outstanding notional
amount at fixed rates and made payments at variable rates. The $6.5 billion increase in notional
amount from December 31, 2016 reflects additions of $2.9 billion of interest rate swap agreements
designated as cash flow hedges of variable rate commercial real estate loans and $3.6 billion of
interest rate swap agreements designated as fair value hedges of fixed rate long-term borrowings.
There were no interest rate swap agreements designated as cash flow hedges at December 31, 2016.
65
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. In a cash flow hedge, unlike in a fair value hedge, the effective portion of the
derivative’s gain or loss is initially reported as a component of other comprehensive income and
subsequently reclassified into earnings when the forecasted transaction affects earnings. The
ineffective portion of the gain or loss is reported in “other revenues from operations” immediately.
The amounts of hedge ineffectiveness recognized in 2017, 2016 and 2015 were not material to the
Company’s consolidated results of operations. Information regarding the fair value of interest rate
swap agreements and hedge ineffectiveness is presented in note 18 of Notes to Financial Statements.
Information regarding the effective portion of cash flow hedges is presented in note 15 of Notes to
Financial Statements. 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, 2017 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 $12 million of collateral with the Company. The average notional
amounts of interest rate swap agreements entered into for interest rate risk management purposes, the
related effect on net interest income and margin, and the weighted-average interest rates paid or
received on those swap agreements are presented in table 9.
Table 9
Increase (decrease) in:
Interest income ................... $
Interest expense ..................
Net interest
income/margin ................. $
INTEREST RATE SWAP AGREEMENTS
2017
Year Ended December 31
2016
2015
Amount
Rate(a)
Amount
Rate(a)
Amount
Rate(a)
(Dollars in thousands)
3,916 —% $
(.03)
(20,966)
— —% $
(.05)
(36,866)
— —%
(.07)
(44,219)
24,882
Average notional amount(c).... $4,766,575
Rate received(b) ......................
Rate paid(b) .............................
2.30%
1.79%
.02% $
36,866
$1,357,650
.04% $
44,219
$1,412,340
.04%
4.39%
1.64%
4.42%
1.28%
(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.
(c) Excludes forward-starting interest rate swap agreements not in effect during the year.
In addition to interest rate swap agreements, the Company has entered into interest rate floor
agreements that are not accounted for as hedging instruments but, nevertheless, provide the Company
with protection against the possibility of future declines in interest rates on its earning assets. At
December 31, 2017, outstanding notional amounts of such agreements totaled $6.3 billion. There
were no similar agreements at December 31, 2016. The fair value of those interest rate floor
66
agreements was $3.7 million and was included in trading account assets at December 31, 2017.
Changes in the fair value of those agreements are recorded as “trading account and foreign exchange
gains” in the consolidated statement of income.
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 $168 million in 2017, compared with $190 million in 2016 and $170 million in 2015. Net
charge-offs of loans were $140 million in 2017, $157 million in 2016 and $134 million in 2015. Net
charge-offs as a percentage of average loans and leases outstanding were .16% in 2017, compared
with .18% in 2016 and .19% in 2015. 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.
Table 10
LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES
Allowance for credit losses beginning
balance............................................................
Charge-offs during year
Commercial, financial,
leasing, etc.................................................
Real estate — construction...........................
Real estate — mortgage ...............................
Consumer .....................................................
Total charge-offs .....................................
Recoveries during year
Commercial, financial,
leasing, etc.................................................
Real estate — construction...........................
Real estate — mortgage ...............................
Consumer .....................................................
Total recoveries.......................................
Net charge-offs ..................................................
Provision for credit losses .................................
Allowance related to loans sold or
securitized.......................................................
Allowance for credit losses ending
balance............................................................
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 .......................
2017
2016
2015
(Dollars in thousands)
2014
2013
$ 988,997
$955,992
$919,562
$916,676
$925,860
64,941
267
28,463
130,927
224,598
59,244
137
30,801
141,073
231,255
60,983
3,221
26,382
107,787
198,373
58,943
1,882
33,527
84,390
178,742
109,329
9,137
49,079
85,965
253,510
21,196
8,894
12,671
42,038
84,799
139,799
168,000
30,167
4,062
11,124
28,907
74,260
156,995
190,000
30,284
6,308
7,626
20,585
64,803
133,570
170,000
22,188
4,725
14,640
16,075
57,628
121,114
124,000
11,773
18,800
13,718
26,035
70,326
183,184
185,000
—
—
—
—
(11,000)
$1,017,198
$988,997
$955,992
$919,562
$916,676
83.21%
82.63%
78.57%
97.67%
99.02%
.16%
.18%
.19%
.19%
.28%
1.16%
1.09%
1.09%
1.38%
1.43%
67
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 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, including its estimates of lifetime principal losses. 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 acquired at a discount subsequent to 2008 and
accounted for based on expected cash flows was $1.0 billion and $1.8 billion at December 31, 2017
and 2016, respectively. The nonaccretable balance related to remaining principal losses associated
with loans acquired at a discount as of December 31, 2017 and 2016 is presented in table 11. 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. In 2017, estimated cash flows expected to be generated by acquired
loans increased by $66 million, or approximately 3%. That improvement reflected higher estimated
principal, interest and other recoveries largely associated with purchased-impaired residential real
estate loans acquired from Hudson City. In 2016, estimated cash flows expected to be generated by
acquired loans increased by $50 million, or approximately 2%. That improvement reflected a
lowering of estimated principal losses by approximately $33 million, primarily due to a $19 million
decrease in expected principal losses in the commercial real estate loan portfolios, as well as interest
and other recoveries. Similarly, in 2015, excluding expected cash flows on the purchased impaired
loans acquired from Hudson City on November 1, 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.
Table 11
NONACCRETABLE BALANCE — PRINCIPAL
Remaining balance
December 31,
2017
December 31,
2016
(In thousands)
Commercial, financial, leasing, etc............................................................................. $
Commercial real estate ...............................................................................................
Residential real estate .................................................................................................
Consumer....................................................................................................................
Total ...................................................................................................................... $
3,586
28,783
33,880
7,482
73,731
4,794
39,867
59,657
11,275
115,593
68
For acquired loans where the fair value exceeded 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 totaled $11.5 billion and
$14.2 billion at December 31, 2017 and December 31, 2016, respectively. 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. As a result, in addition to the impact of estimated credit losses included in the determination of
the fair value of loans acquired from Hudson City at a premium, the Company recorded a $21 million
provision for credit losses in the fourth quarter of 2015 for incurred losses inherent in those loans at
that time. Subsequent to the acquisition date, incurred losses associated with those loans are
evaluated using methods consistent with those applied to originated loans and such losses are
considered by management in evaluating the Company’s allowance for credit losses.
Nonaccrual loans aggregated $883 million at December 31, 2017, compared with $920 million
and $799 million at December 31, 2016 and 2015, respectively. As a percentage of total loans and
leases outstanding, nonaccrual loans represented 1.00%, 1.01% and .91% at the end of 2017, 2016
and 2015, respectively. The lower level of nonaccrual loans at December 31, 2017 as compared with
December 31, 2016 reflects the effects of borrower repayment performance and charge-offs. The
increase in nonaccrual loans since the 2015 year-end reflected previously performing residential real
estate loans obtained in the acquisition of Hudson City that subsequently became over 90 days past
due and, as such, were not identifiable as purchased impaired as of the acquisition date. Those
nonaccrual loans totaled $215 million and $190 million at December 31, 2017 and 2016,
respectively. Following the acquisition accounting provisions of GAAP, Hudson City-related loans
classified as nonaccrual were not significant at December 31, 2015.
Accruing loans past due 90 days or more (excluding loans acquired at a discount) totaled $244
million or .28% of total loans and leases at December 31, 2017, compared with $301 million or .33%
at December 31, 2016 and $317 million or .36% at December 31, 2015. Those amounts included
loans guaranteed by government-related entities of $235 million, $283 million and $276 million at
December 31, 2017, 2016 and 2015, respectively. Guaranteed loans included one-to-four family
residential mortgage loans serviced by the Company that were repurchased to reduce associated
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
$207 million at December 31, 2017, $224 million at December 31, 2016 and $221 million at
December 31, 2015. 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.
69
Table 12
NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA
December 31
2017
2016
2015
(Dollars in thousands)
2014
2013
Nonaccrual loans...................................................... $882,598
Real estate and other foreclosed assets .................... 111,910
Total nonperforming assets...................................... $994,508
$ 920,015
139,206
$1,059,221
$ 799,409
195,085
$ 994,494
$799,151
63,635
$862,786
$874,156
66,875
$941,031
Accruing loans past due 90 days or more(a)............ $244,405
Government guaranteed loans included
in totals above:
$ 300,659
$ 317,441
$245,020
$368,510
Nonaccrual loans ................................................ $ 35,677
Accruing loans past due 90 days or more........... 235,489
$
40,610
282,659
$
47,052
276,285
$ 69,095
217,822
$ 63,647
297,918
Renegotiated loans ................................................... $221,513
Accruing loans acquired at a discount past
due 90 days or more(b) ......................................... $ 47,418
Purchased impaired loans(c):
$ 190,374
$ 182,865
$202,633
$257,092
$
61,144
$
68,473
$110,367
$130,162
Outstanding customer balance............................ $688,091
Carrying amount................................................. 410,015
$ 927,446
578,032
$1,204,004
768,329
$369,080
197,737
$579,975
330,792
Nonaccrual loans to total loans and leases,
net of unearned discount .......................................
Nonperforming assets to total net loans and
leases and real estate and other foreclosed
assets .....................................................................
Accruing loans past due 90 days or more(a) to
total loans and leases, net of unearned
discount .................................................................
1.00%
1.01%
.91%
1.20%
1.36%
1.13%
1.16%
1.13%
1.29%
1.47%
.28%
.33%
.36%
.37%
.58%
(a)
(b)
(c)
Excludes loans acquired at a discount. Predominantly residential real estate loans.
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.
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 contractually required principal and 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 aggregated $410 million at December 31, 2017, or .5%
of total loans. Of that amount, $378 million related to the Hudson City acquisition. Purchased
impaired loans totaled $578 million at December 31, 2016, of which $512 million related to the
acquisition of Hudson City.
The Company modified the terms of select loans in an effort to assist borrowers. 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
70
charge-offs. In accordance with GAAP, the modified loans are included in impaired loans for
purposes of determining the level of the allowance for credit losses. Information about modifications
of loans that are considered troubled debt restructurings is included in note 4 of Notes to Financial
Statements.
Residential real estate loans modified under specified loss mitigation programs prescribed by
government guarantors have not been included in renegotiated loans because the loan guarantee
remains in full force and, accordingly, the Company has not granted a concession with respect to the
ultimate collection of the original loan balance. Such loans totaled $189 million and $171 million at
December 31, 2017 and December 31, 2016, respectively.
Charge-offs of commercial loans and leases, net of recoveries, aggregated $44 million in 2017,
$29 million in 2016 and $31 million in 2015. Commercial loans and leases in nonaccrual status were
$241 million at December 31, 2017, $261 million at December 31, 2016 and $242 million at
December 31, 2015.
Net recoveries of previously charged-off commercial real estate loans during 2017 and 2016
were $5 million and $2 million, respectively, compared with net charge-offs of commercial real
estate loans during 2015 of $7 million. Reflected in those amounts were net recoveries of $9 million
in 2017, $4 million in 2016 and $2 million in 2015 of loans to residential real estate builders and
developers. Commercial real estate loans classified as nonaccrual aggregated $202 million at
December 31, 2017, compared with $211 million at December 31, 2016 and $224 million at
December 31, 2015. Nonaccrual commercial real estate loans included construction-related loans of
$17 million, $35 million and $45 million at the end of 2017, 2016 and 2015, respectively. Those
nonaccrual construction loans included loans to residential builders and developers of $6 million at
December 31, 2017, $17 million at December 31, 2016 and $28 million at December 31, 2015.
Net charge-offs of residential real estate loans totaled $12 million in 2017, $18 million in 2016
and $9 million in 2015. Residential real estate loans in nonaccrual status at December 31, 2017 were
$332 million, compared with $336 million and $215 million at December 31, 2016 and 2015,
respectively. The higher levels of residential real estate loans classified as nonaccrual since 2015
reflect previously performing loans obtained in the acquisition of Hudson City that subsequently
became more than 90 days delinquent after 2015. Such nonaccrual residential real estate loans
aggregated $215 million and $190 million at December 31, 2017 and 2016, respectively. Those loans
could not be identified as purchased impaired loans at the acquisition date because the borrowers
were making loan payments at the time and the loans were not recorded at a discount. Following the
acquisition accounting provisions of GAAP, Hudson City-related nonaccrual residential real estate
loans were not significant at December 31, 2015. Net charge-offs of limited documentation first
mortgage loans aggregated $2 million in 2017, $4 million in 2016 and $1 million in 2015.
Nonaccrual limited documentation first mortgage loans were $96 million at December 31, 2017
(including $65 million obtained in the acquisition of Hudson City), compared with $107 million
(including $70 million obtained in the acquisition of Hudson City) and $62 million at December 31,
2016 and 2015, respectively. Residential real estate loans past due 90 days or more and accruing
interest (excluding loans acquired at a discount) totaled $233 million (including $21 million obtained
in the acquisition of Hudson City) at December 31, 2017, $281 million (including $49 million
obtained in the acquisition of Hudson City) at December 31, 2016 and $284 million (including $44
million obtained in the acquisition of Hudson City) at December 31, 2015. 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, 2017 is presented in table 13.
71
Table 13
SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA
December 31, 2017
Nonaccrual
Year Ended
December 31, 2017
Net Charge-offs
(Recoveries)
Percent of
Average
Outstanding
Outstanding
Balances
Percent of
Outstanding
Balances
Balances
(Dollars in thousands)
Balances
Balances
Residential mortgages:
New York ........................................................................ $ 5,622,578 $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $16,588,398 $
1,396,890
1,134,921
4,250,083
1,011,467
3,172,459
73,684
15,681
11,414
61,159
9,301
64,180
235,419
Residential construction loans:
New York ........................................................................ $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $
6,254 $
2,689
1,611
1,491
4,018
5,625
21,688 $
Limited documentation first mortgages:
New York ........................................................................ $ 1,303,392 $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $ 3,003,258 $
62,736
36,364
1,153,828
28,860
418,078
First lien home equity loans and lines of credit:
New York ........................................................................ $ 1,243,335 $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $ 2,948,971 $
780,219
634,107
60,682
202,522
28,106
Junior lien home equity loans and lines of credit:
New York ........................................................................ $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $ 2,337,525 $
856,958 $
328,990
708,954
103,927
296,648
42,048
Limited documentation junior lien:
New York ........................................................................ $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $
747 $
320
1,316
384
600
3,919
7,286 $
—
344
—
—
—
71
415
40,451
5,155
2,812
23,512
1,373
22,802
96,105
14,734
9,385
6,863
350
2,389
1,085
34,806
18,544
4,227
10,425
1,720
2,892
1,553
39,361
—
—
—
—
—
333
333
(a)
Includes Delaware, Virginia, West Virginia and the District of Columbia.
1.31% $
1.12
1.01
1.44
.92
2.02
1.42% $
—% $
12.77
—
—
—
1.27
1.91% $
3.10% $
8.22
7.73
2.04
4.76
5.45
3.20% $
1.19% $
1.20
1.08
.58
1.18
3.86
1.18% $
2.16% $
1.28
1.47
1.65
.97
3.69
1.68% $
—% $
—
—
—
—
8.50
4.57% $
4,606
588
(505)
2,887
227
2,288
10,091
(48)
(62)
—
—
—
(18)
(128)
1,041
(88)
260
310
226
104
1,853
3,737
1,878
2,019
11
106
2
7,753
1,505
199
875
189
366
(204)
2,930
(2)
—
53
(35)
—
151
167
.08%
.04
(.04)
.06
.02
.07
.06%
(.92%)
(3.19)
—
—
—
(.27)
(.60%)
.07%
(.13)
.64
.02
.66
.02
.06%
.29%
.23
.30
.02
.05
.01
.26%
.17%
.06
.12
.16
.12
(.49)
.12%
(.22%)
—
3.88
(9.33)
—
3.47
2.13%
72
Net charge-offs of consumer loans during 2017 aggregated $89 million, compared with $112
million in 2016 and $87 million in 2015. During 2016, the Company accelerated the charge off of
consumer loans associated with customers who were either deceased or had filed for bankruptcy that,
in accordance with GAAP, had previously been considered when determining the level of the
allowance for credit losses and were charged-off following the Company’s normal charge-off
procedures to the extent the loans subsequently became delinquent. Charge-offs of such loans totaled
$25 million and $32 million in 2017 and 2016, respectively, and included $17 million and $22
million of loan balances with a current payment status at the time of charge-off. Included in net
charge-offs of consumer loans were: automobile loans of $34 million in 2017, $32 million in 2016
and $12 million in 2015; recreational vehicle loans of $16 million, $24 million and $12 million
during 2017, 2016 and 2015, respectively; and home equity loans and lines of credit secured by one-
to-four family residential properties of $11 million in 2017, $17 million in 2016 and $15 million in
2015. Nonaccrual consumer loans were $108 million at December 31, 2017, compared with $112
million and $118 million at December 31, 2016 and 2015, respectively. Included in nonaccrual
consumer loans at the 2017, 2016 and 2015 year-ends were: automobile loans of $24 million, $19
million and $17 million, respectively; recreational vehicle loans of $6 million, $7 million and $9
million, respectively; and outstanding balances of home equity loans and lines of credit of $75
million, $82 million and $84 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, 2017 is
presented in table 13.
Information about past due and nonaccrual loans as of December 31, 2017 and 2016 is also
included in note 4 of Notes to Financial Statements.
Real estate and other foreclosed assets totaled $112 million at December 31, 2017, compared
with $139 million at December 31, 2016 and $195 million at December 31, 2015. Net gains or losses
associated with real estate and other foreclosed assets were not material in 2017, 2016 or 2015. At
December 31, 2017, the Company’s holding of residential real estate-related properties comprised
approximately 96% 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 real estate values on the Company’s portfolio of loans secured
by commercial and 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, 2017 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;
73
(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 volatile nature 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 53% of the Company’s
loans and leases are to customers in New York State and Pennsylvania).
As described in note 5 of Notes to Financial Statements, the Company utilizes a loan grading
system to differentiate risk amongst its commercial loans and commercial real estate loans. 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 totaled $2.5 billion at December 31, 2017 and $2.4 billion at December 31, 2016.
Approximately 99% of loan balances added to the criticized category during 2017 were less than 90
days past due and 96% 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.
Loan officers in different geographic locations with the support of the Company’s credit
department personnel continuously review and reassign loan grades based on their detailed
knowledge of individual borrowers and their judgment of the impact on such borrowers resulting
from changing conditions in their respective 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 credit department reviews all criticized
commercial loans 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 contemplated. 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 credit department. Accordingly, for real estate collateral securing
larger commercial loans 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
74
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. Loans to consumers that
file for bankruptcy are generally charged off to estimated net collateral value shortly after the
Company is notified of such filings. At December 31, 2017, approximately 56% 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 69% (or approximately 30% of the aggregate home equity
portfolio) consisted of junior lien loans that were behind a first lien mortgage loan that was not
owned or serviced by the Company. To the extent known by the Company, if a senior lien loan
would be on nonaccrual status because of payment delinquency, even if such senior lien loan was not
owned by the Company, the junior lien loan or line that is owned by the Company is placed on
nonaccrual status. At December 31, 2017, the balance of junior lien loans and lines that were in
nonaccrual status solely as a result of first lien loan performance was $10 million, compared with $12
million at December 31, 2016. 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 and for purposes of estimating incurred losses in
determining the allowance for credit losses, the Company gives consideration to the required
repayment of any first lien positions related to collateral property. 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, 2017, approximately 83% 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
21% 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 targeted 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
75
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 44% 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 impaired. For loans acquired at a discount, the impact of estimated future credit losses
represents the predominant difference between contractually required payments and the cash flows
expected to be collected. Subsequent decreases to those expected cash flows require the Company to
evaluate the need for an additional allowance for credit losses and could lead to charge-offs of acquired
loan balances. Additional information regarding the Company’s process for determining the allowance
for credit losses is included in note 5 of Notes to Financial Statements.
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 commercial loans and commercial real estate loans under the
Company’s loan grading system. 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 credit 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 and recreational vehicle loans, which generally have higher rates of
loss than other types of collateralized loans.
76
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 2017
that the U.S. labor market has continued to strengthen and that economic activity has been rising at a
solid rate. Economic indicators in the most significant market regions served by the Company also
showed improvement in 2017. For example, in 2017, average private sector employment in areas
served by the Company was 1.6% above year-ago levels, but still trailed the 1.7% U.S. average
growth rate. Private sector employment increased 0.5% in upstate New York, 1.0% in areas of
Pennsylvania served by the Company, 1.6% in New Jersey, 2.0% in Maryland, 2.0% in Greater
Washington D.C. and 0.8% in the State of Delaware. In New York City, private sector employment
increased by 1.9% in 2017.
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 14. 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 aggregated $760 million and
$761 million at December 31, 2017 and December 31, 2016, respectively. The allocated portion of
the allowance for credit losses related to impaired loans totaled $76 million at December 31, 2017
and $83 million at December 31, 2016. The unallocated portion of the allowance for credit losses
was equal to .09% of gross loans outstanding at each of December 31, 2017 and 2016. 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
77
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.
Table 14
ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES
December 31
2017
2016
2015
2014
2013
(Dollars in thousands)
Commercial, financial, leasing, etc. ..... $ 328,599
439,490
Real estate ............................................
170,809
Consumer .............................................
78,300
Unallocated ..........................................
Total................................................. $1,017,198
$330,833
423,846
156,288
78,030
$988,997
$300,404
399,069
178,320
78,199
$955,992
$288,038
369,837
186,033
75,654
$919,562
$273,383
403,634
164,644
75,015
$916,676
As a Percentage of Gross Loans
and Leases Outstanding
Commercial, financial, leasing, etc. .....
Real estate ............................................
Consumer .............................................
1.50%
.83
1.29
1.45%
.75
1.29
1.46%
.72
1.54
1.47%
1.02
1.70
1.45%
1.15
1.60
Management believes that the allowance for credit losses at December 31, 2017 appropriately
reflected credit losses inherent in the portfolio as of that date. The allowance for credit losses was
$1.0 billion or 1.16% of total loans and leases at December 31, 2017, compared with $989 million or
1.09% at December 31, 2016 and $956 million or 1.09% at December 31, 2015. 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. The increase in the ratio
of the allowance to total loans and leases at December 31, 2017 as compared with December 31,
2016 and December 31, 2015 reflects the pay down of Hudson City acquired residential real estate
loans, which generally had lower ascribed loss factors, offset by an increase in automobile and
recreational vehicle loans with higher ascribed loss factors. 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 for credit losses to nonaccrual loans
at the end of 2017, 2016 and 2015 was 115%, 107% and 120%, respectively. Given the Company’s
general 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
78
assessing the adequacy of the Company’s allowance for credit losses. 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 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:
(cid:129)
(cid:129)
(cid:129)
For consumer loans and leases considered smaller balance homogenous loans and evaluated
collectively, a 50 basis point increase in loss factors;
For residential real estate loans and home equity loans and lines of credit, also considered
small balance homogenous loans and evaluated collectively, a 15% increase in estimated
inherent losses; and
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:
(cid:129)
(cid:129)
(cid:129)
For consumer loans and leases, a 20 basis point decrease in loss factors;
For residential real estate loans and home equity loans and lines of credit, a 10% decrease in
estimated inherent losses; and
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 $87 million that could be identifiable under the
assumptions for credit deterioration, whereas under the assumptions for credit improvement a $29
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, 2017, however residential real estate loans comprised
approximately 22% of the loan portfolio. Outstanding loans to foreign borrowers aggregated $159
million at December 31, 2017, or .2% of total loans and leases.
Other Income
Other income totaled $1.85 billion in 2017, compared with $1.83 billion in each of 2016 and 2015.
The rise in other income from 2016 to 2017 was largely attributable to higher trust income, merchant
discount and credit card fees and service charges on deposit accounts, and lower losses associated
with M&T’s share of the operating losses of Bayview Lending Group LLC (“BLG”). Partially
offsetting those improvements were a decline in mortgage banking revenues and lower gains on
investment securities. As compared with 2015, the impact of gains realized on investment securities
and higher trading account and foreign exchange gains in 2016 were offset by the impact of a $45
million gain recognized in 2015 on the sale of the Company’s trade processing business within the
retirement services division. Revenues and net income attributable to the sold business were not
material to the Company’s consolidated results of operations in 2015.
Mortgage banking revenues aggregated $364 million in 2017, $374 million in 2016 and $376
million in 2015. Mortgage banking revenues are comprised of both residential and commercial
mortgage banking activities. The Company’s involvement in commercial mortgage banking activities
79
includes the origination, sales and servicing of loans under the multifamily loan programs of Fannie
Mae, Freddie Mac and the U.S. Department of Housing and Urban Development.
Residential mortgage banking revenues, consisting of realized gains from sales of residential
real estate loans and loan servicing rights, unrealized gains and losses on residential real estate loans
held for sale and related commitments, residential real estate loan servicing fees, and other residential
real estate loan-related fees and income, were $245 million in 2017, $255 million in 2016 and $281
million in 2015. The lower residential mortgage banking revenues in 2017 as compared with 2016
were the result of a decrease in gains from origination activities, reflecting a decline in origination
volumes and a narrowing of the associated margins. The decline in such revenues from 2015 to 2016
predominantly reflects a decrease in revenues associated with servicing residential real estate loans
for others.
New commitments to originate residential real estate loans to be sold declined 5% to
approximately $3.0 billion in 2017 from $3.1 billion in 2016. Such commitments aggregated $3.5
billion in 2015. 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 aggregated to gains of $60
million in 2017, $71 million in 2016 and $74 million in 2015.
Loans held for sale that were secured by residential real estate aggregated $356 million and
$414 million at December 31, 2017 and 2016, respectively. Commitments to sell residential real
estate loans and commitments to originate residential real estate loans for sale at pre-determined rates
totaled $595 million and $347 million, respectively, at December 31, 2017, $777 million and $479
million, respectively, at December 31, 2016 and $687 million and $489 million, respectively, at
December 31, 2015. Net recognized unrealized gains on residential real estate loans held for sale,
commitments to sell loans and commitments to originate loans for sale were $10 million at December
31, 2017, $15 million at December 31, 2016 and $16 million at December 31, 2015. Changes in such
net unrealized gains are recorded in mortgage banking revenues and resulted in net decreases in
revenue of $5 million in 2017 and $3 million in 2015. The aggregate impact of changes in net
unrealized gains was less than $1 million in 2016.
Revenues from servicing residential real estate loans for others were $185 million in 2017, $183
million in 2016 and $206 million in 2015. Residential real estate loans serviced for others aggregated
$79.2 billion at December 31, 2017, $53.2 billion a year earlier and $61.7 billion at December 31,
2015. Reflected in residential real estate loans serviced for others were loans sub-serviced for others
of $56.6 billion, $30.4 billion and $37.8 billion at December 31, 2017, 2016 and 2015, respectively.
Revenues earned for sub-servicing loans totaled $103 million in 2017, compared with $98 million in
2016 and $116 million in 2015. During 2017, the Company acquired additional sub-servicing of
residential real estate loans aggregating $35.6 billion of outstanding principal balances. The
contractual servicing rights associated with loans sub-serviced by the Company were predominantly
held by affiliates of BLG. Information about the Company’s relationship with BLG and its affiliates
is included in note 24 of Notes to Financial Statements.
Capitalized servicing rights consist largely of servicing associated with loans sold by the
Company. Capitalized residential mortgage servicing assets totaled $115 million at December 31,
2017, compared with $117 million and $118 million at December 31, 2016 and 2015, respectively.
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 totaled $119 million in each of 2017 and 2016,
compared with $95 million in 2015. Included in such amounts were revenues from loan origination
and sales activities of $66 million in 2017, $76 million in 2016 and $53 million in 2015. The changes
in such revenues from year-to-year reflect changes in loan origination volumes. Commercial real
80
estate loans originated for sale to other investors totaled approximately $2.5 billion in 2017,
compared with $2.9 billion in 2016 and $2.0 billion in 2015. Loan servicing revenues aggregated $53
million in 2017, $43 million in 2016 and $42 million in 2015. Capitalized commercial mortgage
servicing assets were $114 million at December 31, 2017, $104 million at December 31, 2016 and
$84 million at December 31, 2015. Commercial real estate loans serviced for other investors totaled
$16.2 billion at December 31, 2017, $11.8 billion at December 31, 2016 and $11.0 billion at
December 31, 2015, and included $3.3 billion, $2.8 billion and $2.5 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 aggregated $217 million and $195 million, respectively, at
December 31, 2017, $713 million and $70 million, respectively, at December 31, 2016 and $96
million and $58 million, respectively, at December 31, 2015. Commercial real estate loans held for
sale were $22 million, $643 million and $39 million at December 31, 2017, 2016 and 2015,
respectively. The higher balance at December 31, 2016 reflects loans originated later in the year that
had not yet been delivered to investors.
Service charges on deposit accounts totaled $427 million in 2017, compared with $419 million
in 2016 and $421 million in 2015. The increase in service charges in 2017 as compared with 2016
reflects higher consumer and commercial service charges of $5 million and $3 million, respectively.
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 aggregated $501 million in 2017, compared with $472 million in 2016 and
$471 million in 2015. Revenues associated with the ICS business were $254 million in 2017, $230
million in 2016 and $220 million in 2015. Improvements in ICS revenue in 2017 and 2016 as
compared with the respective prior year reflect increased fees earned from money-market funds and
stronger sales activities. Retirement services income also rose in 2017 as a result of higher revenues
resulting from growth in collective funds balances. Revenues attributable to WAS totaled $222
million, $212 million and $218 million in 2017, 2016 and 2015, respectively. The increased
revenues in 2017 as compared with the earlier years reflect stronger sales activities and improved
equity market performance. Total trust assets, which include assets under management and assets
under administration, totaled $241.5 billion at December 31, 2017, compared with $210.6 billion at
December 31, 2016. Trust assets under management were $82.5 billion and $70.7 billion at
December 31 2017 and 2016, respectively. Trust assets under management include the Company’s
proprietary mutual funds’ assets of $11.2 billion at December 31, 2017 and $10.9 billion at
December 31, 2016. Additional trust income from investment management activities was $25
million, $30 million and $33 million in 2017, 2016 and 2015, respectively, and relates to fees earned
from retail customer investment accounts and from an affiliated investment manager. The decline in
such revenues in 2017 reflects, in part, lower balances managed. Assets managed by the affiliated
manager totaled $6.7 billion and $7.3 billion at December 31, 2017 and December 31, 2016,
respectively. The Company’s trust income from that affiliate was not material during 2017, 2016 or
2015.
81
Brokerage services income, which includes revenues from the sale of mutual funds and
annuities and securities brokerage fees, aggregated $61 million in 2017, $63 million in 2016 and $65
million in 2015. Trading account and foreign exchange activity resulted in gains of $35 million in
2017, $41 million in 2016 and $31 million in 2015. The lower level of such gains in 2017 as
compared with 2016 resulted largely from reduced activity related to interest rate swap transactions
executed on behalf of commercial customers. As compared with 2015, the higher level of such gains
in 2016 resulted largely from increased activity related to interest rate swap transactions executed on
behalf of commercial customers and higher gains associated with foreign exchange activities. 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.”
The Company realized net gains from sales of investment securities of $21 million in 2017 and
$30 million in 2016. There were no significant gains or losses on investment securities in 2015. Of
the $21 million of net gains recognized during 2017, $18 million were associated with the sale of a
portion of the Company’s Fannie Mae and Freddie Mac preferred stock holdings. The preferred
stock sold had an amortized cost basis (after previous other-than-temporary impairment write-
downs) of approximately $3 million. During 2016, the Company sold all of its collateralized debt
obligations that had been held in the available-for-sale investment securities portfolio and that had
been obtained through the acquisition of other banks. In total, securities with an amortized cost of
$28 million were sold. Divestiture of the majority of those securities would have been required in
accordance with the provisions of the Volcker Rule. There were no other-than-temporary impairment
losses on investment securities in 2017, 2016 or 2015. Additional information about other-than-
temporary impairment considerations is included herein under the heading “Capital.”
Other revenues from operations aggregated $441 million in 2017, compared with $426 million
in 2016 and $463 million in 2015. The increase in other revenues from operations in 2017 as
compared with 2016 reflects lower losses from BLG and higher merchant discount and credit card
fees. The decline from 2015 to 2016 was largely due to the $45 million gain from the sale of the
trade processing business in 2015.
Included in other revenues from operations were the following significant components. Letter
of credit and other credit-related fees totaled $123 million, $120 million and $134 million in 2017,
2016 and 2015, respectively. The decrease from 2015 to 2016 was largely due to a decline in loan
syndication fees. Revenues from merchant discount and credit card fees were $120 million in 2017,
$111 million in 2016 and $105 million in 2015. The continued trend of higher revenues since 2015
was largely attributable to increased transaction volumes related to merchant activity and usage of
the Company’s credit card products. Tax-exempt income earned from bank owned life insurance,
which includes increases in the cash surrender value of life insurance policies and benefits received,
aggregated $58 million in 2017, compared with $54 million in 2016 and $53 million in 2015. The
increase from 2016 to 2017 was due to higher proceeds received from death benefits. Insurance-
related sales commissions and other revenues totaled $43 million in each of 2017 and 2016,
compared with $38 million in 2015. Automated teller machine usage fees aggregated $15 million in
2017 and $14 million in each of 2016 and 2015. Gains from sales of equipment previously leased to
commercial customers were $6 million in 2017, $8 million in 2016 and $17 million in 2015.
M&T’s share of the operating losses of BLG recognized using the equity method of accounting
and cash distributions received resulted in gains of less than $1 million in 2017, compared with
losses of $11 million and $14 million in 2016 and 2015, respectively. Those amounts are reflected in
82
“other revenues from operations.” During the second quarter of 2017, the operating losses of BLG
resulted in M&T reducing the carrying value of its investment in BLG to zero. During that quarter,
M&T received a cash distribution from BLG that resulted in the recognition of income by M&T.
M&T expects cash distributions from BLG in the future, but the timing and amount of those
distributions cannot be estimated at this time. BLG is entitled to receive distributions from affiliates
that provide asset management and other services that are available for distribution to BLG’s owners,
including M&T. The operating losses of BLG in 2016 and 2015 reflect provisions for losses
associated with securitized loans and other loans held by BLG and loan servicing and other
administrative costs. Information about the Company’s relationship with BLG and its affiliates is
included in note 24 of Notes to Financial Statements.
Other Expense
Other expense aggregated $3.14 billion in 2017, compared to $3.05 billion in 2016 and $2.82 billion
in 2015. Included in those amounts are expenses considered to be “nonoperating” in nature consisting
of amortization of core deposit and other intangible assets of $31 million, $43 million and $26
million in 2017, 2016 and 2015, respectively, and merger-related expenses of $36 million and $76
million in 2016 and 2015, respectively. There were no merger-related expenses in 2017. Exclusive of
those nonoperating expenses, noninterest operating expenses aggregated $3.11 billion in 2017, $2.97
billion in 2016 and $2.72 billion in 2015. The most significant factors contributing to the increase in
such expenses from 2016 to 2017 were higher legal-related and professional services expenses,
increased salaries and employee benefit costs, and higher contributions to The M&T Charitable
Foundation. The rise in noninterest operating expenses in 2016 as compared with 2015 was largely
attributable to costs associated with the operations obtained in the Hudson City acquisition, higher
salaries and employee benefits expenses and increased FDIC assessments.
Salaries and employee benefits expense aggregated $1.65 billion in 2017, compared with $1.62
billion and $1.55 billion in 2016 and 2015, respectively. The higher level of expenses in 2017 reflects
the impact of annual merit increases and higher incentive-based compensation costs. The higher level
of expenses in 2016 as compared with 2015 reflects the full-year impact of the additional employees
formerly associated with Hudson City as well as annual merit increases and incentive compensation
costs. There were $51 million of merger-related expenses included in salaries and employee benefits
expense in 2015 predominantly related to severance for former Hudson City employees. Stock-based
compensation totaled $61 million in 2017, compared with $65 million in 2016 and $67 million in
2015. The number of full-time equivalent employees were 16,456 and 16,593 at December 31, 2017
and 2016, respectively, compared with 16,979 at December 31, 2015.
The Company provides pension and other postretirement benefits (including a retirement
savings plan) for its employees. Expenses related to such benefits totaled $92 million in 2017, $94
million in 2016 and $100 million in 2015. The Company sponsors both defined benefit and defined
contribution pension plans. Pension benefit expense for those plans was $51 million in 2017, $52
million in 2016 and $63 million in 2015. Included in those amounts were $30 million in 2017, $25
million in 2016 and $23 million in 2015 for a defined contribution pension plan that the Company
began on January 1, 2006. The decrease in pension and other postretirement benefits expense in 2016
as compared to 2015 reflected a $15 million decrease in amortization of actuarial losses accumulated
in the defined benefit pension plans. The Company made $200 million of voluntary contributions to
the qualified defined benefit pension plan in 2017. No contributions were required or made in 2016
or 2015.
The accounting guidance for defined benefit pension plans reflects the long-term nature of
benefit obligations and the investment horizon of plan assets. Amounts recorded in the financial
statements reflect actuarial assumptions about participant benefits and plan asset returns. Changes in
actuarial assumptions and differences in actual plan experience compared with actuarial assumptions
83
are deferred and recognized in expense in future periods. Amortization of accumulated unrealized
losses had the effect of increasing the Company’s pension expense by $29 million in 2017, $30
million in 2016 and $45 million in 2015. 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 $38 million in 2017, $37 million in 2016 and $34 million in 2015.
Excluding the nonoperating expense items already noted, nonpersonnel operating expenses
were $1.46 billion in 2017, compared with $1.35 billion in 2016 and $1.22 billion in 2015. The rise
in nonpersonnel operating expenses in 2017 as compared with 2016 was predominantly the result of
higher legal-related and professional services costs, including $64 million of additions to the
Company’s reserve for legal matters in 2017, and increased contributions to The M&T Charitable
Foundation. As previously noted, in 2017 Wilmington Trust Corporation reached an agreement
related to alleged conduct of that subsidiary prior to its acquisition by M&T. The increase in
nonpersonnel operating expenses in 2016 as compared with 2015 was largely due to costs associated
with the operations obtained in the Hudson City acquisition and higher expenses for FDIC
assessments, advertising and marketing, partially offset by lower charitable contributions.
Income Taxes
The provision for income taxes was $916 million in 2017, $743 million in 2016 and $595 million in
2015. The effective tax rates were 39.4% in 2017, 36.1% in 2016 and 35.5% in 2015. The increase in
the effective rate in 2017 from 2016 primarily reflects the impact of the enactment of the Tax Act
that was signed into law on December 22, 2017, reducing the corporate Federal income tax rate from
35% to 21% effective January 1, 2018 and making other changes to U.S. corporate income tax laws.
GAAP requires that the impact of the provisions of the Tax Act be accounted for in the period of
enactment. Accordingly, the estimated incremental income tax expense recorded by the Company in
the fourth quarter of 2017 related to the Tax Act was $85 million. That additional expense was
largely attributable to the reduction in carrying value of net deferred tax assets reflecting lower future
tax benefits resulting from the lower corporate tax rate. The Company also adopted new accounting
guidance for share-based transactions during the first quarter of 2017. That guidance requires that all
excess tax benefits and tax deficiencies associated with share-based compensation be recognized as a
component of income tax expense in the income statement. Previously, tax effects resulting from
changes in M&T’s share price subsequent to the grant date were recorded through shareholders’
equity at the time of vesting or exercise. The adoption of the amended accounting guidance resulted
in a $22 million reduction of income tax expense in 2017. The October 2017 settlement between
Wilmington Trust Corporation and the U.S. Attorney’s Office for the District of Delaware resulted in
a $44 million payment by Wilmington Trust Corporation that is not deductible for income tax
purposes, resulting in a higher effective tax rate in 2017. Excluding the impact of the Tax Act, the
change in accounting, and the non-deductible nature of the payment referred to above, the
Company’s effective tax rate in 2017 would have been 36.0%.
84
The increase in the effective rate in 2016 from 2015 reflects the impact of generally recurring
tax credits and other tax-exempt income being a smaller percentage of 2016’s higher income before
income taxes. 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.
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 also be affected by any change in income tax laws or regulations 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 $159 million and $292 million of
loans to foreign borrowers at December 31, 2017 and 2016, respectively. Deposits in the Company’s
office in the Cayman Islands aggregated $178 million at December 31, 2017 and $202 million at
December 31, 2016. 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 at M&T
Bank’s commercial banking office in Ontario, Canada included in the amount noted above as of
December 31, 2017 and 2016 totaled $114 million and $133 million, respectively. Deposits at that
office were $45 million at December 31, 2017 and $50 million at December 31, 2016. The Company
also offers trust-related services in Europe. Revenues from providing such services during 2017,
2016 and 2015 were approximately $24 million, $25 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.
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 84% of the Company’s earning assets at
December 31, 2017, compared with 83% at December 31, 2016 and 81% at December 31, 2015.
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
85
borrowings. At December 31, 2017, M&T Bank had short-term and long-term credit facilities with
the FHLBs aggregating $20.2 billion. Outstanding borrowings under FHLB credit facilities totaled
$577 million and $1.2 billion at December 31, 2017 and 2016, respectively. Such borrowings were
secured by loans and investment securities. M&T Bank had an available line of credit with the
Federal Reserve Bank of New York that totaled approximately $12.0 billion at December 31, 2017.
The amount of that line is dependent upon the balances of loans and securities pledged as collateral.
There were no borrowings outstanding under such line of credit at December 31, 2017 or
December 31, 2016. M&T Bank has a Bank Note Program whereby M&T Bank may offer unsecured
senior and subordinated notes. The outstanding senior notes issued under the program totaled $5.0
billion at December 31, 2017 and $5.2 billion at December 31, 2016. The proceeds from those
borrowings have been predominantly utilized to purchase high-quality liquid assets that meet the
requirements of the LCR. Pursuant to the Bank Note Program, during 2017 M&T Bank issued senior
notes consisting of $900 million that mature in 2022 and $750 million that mature in 2020, and
subordinated notes of $500 million that mature in 2027. In January 2018 M&T Bank issued an
additional $1.0 billion of senior notes under the Bank Note Program that mature in 2021.
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 but, similar to other subordinated capital notes, are considered Tier 2 capital and are
includable in total 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 totaled $125 million and $112 million at
December 31, 2017 and 2016, 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 $178 million and $202 million at December 31, 2017 and 2016, respectively.
The Company has also benefited from the placement of brokered deposits. The Company has
brokered savings and interest-bearing checking deposit accounts that aggregated $1.3 billion and
$1.2 billion at December 31, 2017 and 2016, respectively. Brokered time deposits were not a
significant source of funding as of those dates.
The Company’s ability to obtain funding from these 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 15. Additional information regarding the terms and
maturities of all of the Company’s short-term and long-term borrowings is provided in note 9 of Notes
to Financial Statements. In addition to deposits and borrowings, other sources of liquidity include
maturities of investment securities and other earning assets, repayments of loans and investment
securities, and cash generated from operations, such as fees collected for services.
86
Table 15
DEBT RATINGS
Moody’s
Standard
and Poor’s
Fitch
M&T Bank Corporation
Senior debt.................................................................................
Subordinated debt......................................................................
A3
A–
A3 BBB+
M&T Bank
Short-term deposits....................................................................
Long-term deposits....................................................................
Senior debt.................................................................................
Subordinated debt......................................................................
Prime-1
Aa3
A3
A3
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, 2017, while the value of VRDBs in the Company’s
trading account at December 31, 2016 totaled $30 million (all of which were remarketed in January
2017). The total amount of VRDBs outstanding backed by M&T Bank letters of credit was $1.0 billion
and $1.3 billion at December 31, 2017 and 2016, respectively. M&T Bank also serves as remarketing
agent for most of those bonds.
Table 16
MATURITY DISTRIBUTION OF SELECTED LOANS(a)
December 31, 2017
Demand
2018
2019 - 2022
After 2022
(In thousands)
Commercial, financial, etc...................................... $6,680,842 $3,297,264 $ 9,054,468 $1,222,500
500,088
Real estate — construction .....................................
Total ................................................................... $6,720,142 $6,796,056 $13,125,258 $1,722,588
39,300 3,498,792 4,070,790
Floating or adjustable interest rates ........................
Fixed or predetermined interest rates .....................
Total ...................................................................
(a) The data do not include nonaccrual loans.
$11,491,904 $1,127,247
1,633,354
595,341
$13,125,258 $1,722,588
The Company enters into contractual obligations in the normal course of business that require
future cash payments. The contractual amounts and timing of those payments as of December 31, 2017
are summarized in table 17. 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
87
are not necessarily indicative of future cash flows. Further discussion of these commitments is provided
in note 21 of Notes to Financial Statements. Table 17 summarizes the Company’s other commitments
as of December 31, 2017 and the timing of the expiration of such commitments.
Table 17
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
December 31, 2017
Payments due for contractual
obligations
Less Than One
Year
One to Three
Years
Three to Five
Years
(In thousands)
Over Five
Years
Total
Time deposits ...................... $ 4,371,128 $1,506,243 $ 694,392 $
Deposits at Cayman
177,996
Islands office ....................
175,099
Short-term borrowings ........
8,141,430
Long-term borrowings.........
429,445
Operating leases ..................
294,547
Other....................................
Total..................................... $ 5,644,219 $6,059,586 $2,207,024 $1,888,650 $15,799,479
—
—
1,390,917
96,638
25,077
—
—
4,287,399
157,788
108,156
—
—
1,761,858
82,195
35,398
177,996
175,099
701,256
92,824
125,916
9,199 $ 6,580,962
Other commitments
639,345
Commitments to extend
credit................................. $10,430,283 $6,166,719 $4,312,025 $4,101,281 $25,010,308
Standby letters of credit....... 1,613,555
2,497,844
Commercial letters of
credit.................................
Financial guarantees and
indemnification
contracts............................
Commitments to sell real
estate loans .......................
812,217
Total..................................... $12,955,660 $7,202,038 $4,986,622 $6,657,169 $31,801,489
3,434,381
2,531,516
395,180
418,045
220,572
812,217
35,980
89,640
24,372
46,739
9,965
794
—
—
—
—
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, 2017 approximately
$397 million 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.
88
Table 18
MATURITY AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES
December 31, 2017
Investment securities available for sale(a)
U.S. Treasury and federal agencies
Carrying value................................................
Yield...............................................................
Obligations of states and political subdivisions
Carrying value................................................
Yield...............................................................
Mortgage-backed securities(b)
Government issued or guaranteed
One to Five
Years
Five to Ten
Years
(Dollars in thousands)
Over Ten
Years
One Year
or Less
$ 613,355
$1,334,132
$
1.15%
.93%
60
8.49%
1,475
7.73%
$
—
—
—
—
—
—
1,054
6.28%
Total
$ 1,947,487
1.08%
2,589
7.15%
Carrying value ..........................................
Yield .........................................................
526,508
2,242,117
3,105,033
2,842,734
8,716,392
2.36%
2.37%
2.37%
2.29%
2.34%
Privately issued
Carrying value ..........................................
Yield .........................................................
Other debt securities
Carrying value................................................
Yield...............................................................
Equity securities
Carrying value................................................
Yield...............................................................
Total investment securities available for sale
Carrying value................................................
Yield...............................................................
Investment securities held to maturity
Obligations of states and political subdivisions
9
3.27%
451
3.23%
—
—
3
4.57%
2
5.07%
14
5.07%
28
4.39%
5,737
2.85%
72,580
50,064
128,832
2.88%
3.19%
3.01%
—
—
—
—
—
—
100,956
1.11%
1,140,383
3,583,464
3,177,615
2,893,866
10,896,284
1.59%
1.92%
2.38%
2.31%
2.12%
Carrying value................................................
Yield...............................................................
14,622
5.42%
9,844
5.96%
96
6.76%
—
—
24,562
5.64%
Mortgage-backed securities(b)
Government issued or guaranteed
Carrying value ..........................................
Yield .........................................................
131,026
568,983
755,646
1,732,298
3,187,953
2.71%
2.71%
2.71%
2.70%
2.71%
Privately issued
Carrying value ..........................................
Yield .........................................................
5,396
1.38%
22,216
29,548
78,528
135,688
1.39%
1.41%
2.24%
1.89%
Other debt securities
Carrying value................................................
Yield...............................................................
Total investment securities held to maturity
Carrying value................................................
Yield...............................................................
Other investment securities..................................
Total investment securities
Carrying value................................................
Yield...............................................................
—
—
—
—
—
—
5,010
4.56%
5,010
4.56%
151,044
601,043
785,290
1,815,836
3,353,213
2.93%
—
2.72%
—
2.66%
—
2.69%
—
2.70%
415,028
$1,291,427
$4,184,507
$3,962,905
$4,709,702
$14,664,525
1.74%
2.03%
2.44%
2.46%
2.19%
(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.
89
Table 19
MATURITY OF DOMESTIC CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
WITH BALANCES OF $100,000 OR MORE
December 31,
2017
(In thousands)
Under 3 months ................................................................................................................. $ 582,191
409,847
3 to 6 months .....................................................................................................................
479,884
6 to 12 months ...................................................................................................................
929,073
Over 12 months .................................................................................................................
Total.............................................................................................................................. $ 2,400,995
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 enacted the LCR rules requiring a banking company to
maintain a minimum amount of liquid assets to withstand a standardized supervisory liquidity stress
scenario. The Company is in compliance with the requirements of those 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, 2017, the aggregate
notional amount of interest rate swap agreements entered into for interest rate risk management
purposes that were currently in effect was $7.4 billion. In addition, the Company has entered into
$2.0 billion of forward-starting interest rate swap agreements that will become effective as a like
amount of currently effective swap agreements mature. 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
90
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. The model considers
the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the
magnitude and timing of the repricing of financial instruments, including the effect of changing
interest rates on expected prepayments and maturities. When deemed prudent, management has taken
actions to mitigate exposure to interest rate risk through the use of on- or off-balance sheet financial
instruments and intends 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 20 displays as of December 31, 2017 and 2016 the estimated impact on net interest
income in the base scenario resulting from parallel changes in interest rates across repricing
categories during the first modeling year.
Table 20
SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES
Changes in interest rates
Calculated Increase (Decrease)
in Projected Net Interest Income
December 31
2017
2016
(In thousands)
+200 basis points .................................................................................................
+100 basis points .................................................................................................
-50 basis points ....................................................................................................
-100 basis points ..................................................................................................
$
81,570
64,434
$
— (a)
(94,014)
227,283
147,400
(98,945)
— (a)
(a)
The Company did not analyze this scenario.
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 and decreases in interest rates
during a twelve-month period as compared with the base scenario. In the declining rate scenario, the
rate changes may be limited to lesser amounts such that interest rates remain positive on all points of
the yield curve. In 2016, the Company suspended the -100 basis point scenario due to the persistent
low level of interest rates. This scenario was reinstated in June 2017. 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. Given recent increases in short-term interest rates,
91
management believes that the likelihood of potential volatility of interest rates has increased. As a
result, in 2017 management added interest rate swap agreements designated as hedging instruments
to mitigate the Company’s exposure to such potential volatility. As previously noted, the Company
has also entered into interest rate floor agreements that are included in the trading account. Such floor
agreements provide the Company with protection against the possibility of future declines in interest
rates on its earning assets. In light of the uncertainties and assumptions associated with the process,
the amounts presented in the table are not considered significant to the Company’s past or projected
net interest income.
Table 21 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.
Table 21
CONTRACTUAL REPRICING DATA
December 31, 2017
Three Months
or Less
Four to Twelve
Months
One to
Five Years
(Dollars in thousands)
After
Five Years
Total
Loans and leases, net............. $51,842,785
520,333
Investment securities.............
Other earning assets .............. 5,131,215
Total earning assets ......... 57,494,333
Savings and interest-
checking deposits ............... 51,698,008
Time deposits ........................ 1,727,540
Deposits at Cayman Islands
office ..................................
Total interest-bearing
deposits.......................... 53,603,544
Short-term borrowings ..........
175,099
Long-term borrowings .......... 2,129,940
177,996
Total interest-bearing
liabilities........................ 55,908,583
Interest rate swap
agreements.......................... (6,900,000)
Periodic gap........................... $ (5,314,250)
Cumulative gap ..................... (5,314,250)
Cumulative gap as a % of
total earning assets .............
$ 6,054,727
1,328,986
777
7,384,490
$16,871,871
4,242,086
—
21,113,957
$13,219,600
8,573,120
—
21,792,720
$ 87,988,983
14,664,525
5,131,992
107,785,500
—
2,643,588
—
2,200,635
—
9,199
51,698,008
6,580,962
—
—
—
177,996
2,643,588
—
200,268
2,200,635
—
4,519,396
9,199
—
1,291,826
58,456,966
175,099
8,141,430
2,843,856
6,720,031
1,301,025
66,773,495
—
$ 4,540,634
(773,616)
6,400,000
$20,793,926
20,020,310
500,000
$20,991,695
41,012,005
—
(4.9)%
(0.7)%
18.6%
38.0%
92
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 for trading account activities consist predominantly of interest rate
contracts, such as interest rate 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 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 totaled
$29.9 billion at December 31, 2017 and $21.6 billion at December 31, 2016. The notional amounts of
foreign currency and other option and futures contracts entered into for trading account purposes
were $530 million and $471 million at December 31, 2017 and 2016, respectively. Although the
notional amounts of these contracts are not recorded in the consolidated balance sheet, the unsettled
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 $133
million and $137 million, respectively, at December 31, 2017 and $324 million and $174 million,
respectively, at December 31, 2016. Effective January 2017, certain clearinghouse exchanges revised
their rules to re-characterize required collateral postings for changes in fair value of exchange-traded
derivatives as legal settlements of those positions. As a result, the fair value asset and liability
amounts at December 31, 2017 have been reduced by contractual settlements of $136 million and
$12 million, respectively. Included in trading account assets at December 31, 2017 and 2016 were
$23 million and $22 million, respectively, of assets related to deferred compensation plans. Changes
in the fair values 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, 2017 and 2016 were $27 million and $26 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 trading account assets 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 $24 million at each of December 31, 2017 and
2016.
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.
93
Capital
Shareholders’ equity was $16.3 billion at December 31, 2017 and represented 13.70% of total assets,
compared with $16.5 billion or 13.35% at December 31, 2016 and $16.2 billion or 13.17% at
December 31, 2015.
Included in shareholders’ equity was preferred stock with financial statement carrying values of
$1.2 billion at December 31, 2017 and 2016. On October 28, 2016, M&T issued 50,000 shares of
Series F Perpetual Fixed-to-Floating Rate Non-cumulative Preferred Stock, par value $1.00 per share
and liquidation preference of $10,000 per share. On December 15, 2016, M&T redeemed 50,000
shares of the Series D Fixed Rate Non-cumulative Perpetual Preferred Stock, par value $1.00 per
share and liquidation preference of $10,000 per share, having received the approval of the Federal
Reserve to redeem such shares after issuing the Series F preferred stock. Further information
concerning M&T’s preferred stock can be found in note 10 of Notes to Financial Statements.
Common shareholders’ equity was $15.0 billion, or $100.03 per share, at December 31, 2017,
compared with $15.3 billion, or $97.64 per share, at December 31, 2016 and $14.9 billion, or $93.60
per share, at December 31, 2015. Tangible equity per common share, which excludes goodwill and
core deposit and other intangible assets and applicable deferred tax balances, was $69.08 at
December 31, 2017, compared with $67.85 and $64.28 at December 31, 2016 and 2015, respectively.
The Company’s ratio of tangible common equity to tangible assets was 9.10% at December 31, 2017,
compared with 8.92% and 8.69% at December 31, 2016 and 2015, respectively. Reconciliations of
total common shareholders’ equity and tangible common equity and total assets and tangible assets
as of December 31, 2017, 2016 and 2015 are presented in table 2. During 2017, 2016 and 2015, the
ratio of average total shareholders’ equity to average total assets was 13.48%, 13.21% and 13.00%,
respectively. The ratio of average common shareholders’ equity to average total assets was 12.46%,
12.16% and 11.79% in 2017, 2016 and 2015, respectively.
Shareholders’ equity reflects accumulated other comprehensive income or loss, which includes
the net after-tax impact of unrealized gains or losses on investment securities classified as available
for sale, unrealized losses on held-to-maturity securities for which an other-than-temporary
impairment charge has been recognized, gains or losses associated with interest rate swap agreements
designated as cash flow hedges, foreign currency translation adjustments and adjustments to reflect
the funded status of defined benefit pension and other postretirement plans. Net unrealized losses on
investment securities reflected in shareholders’ equity, net of applicable tax effect, were $44 million,
or $.29 per common share, at December 31, 2017 and $16 million, or $.10 per common share, at
December 31, 2016, compared with net unrealized gains of $48 million, or $.30 per common share,
at December 31, 2015. Changes in unrealized gains and losses on investment securities are
predominantly reflective of the impact of changes in interest rates on the values of such securities.
Information about unrealized gains and losses as of December 31, 2017 and 2016 is included in note
3 of Notes to Financial Statements.
Reflected in the carrying amount of available-for-sale investment securities at December 31,
2017 were pre-tax effect unrealized gains of $85 million on securities with an amortized cost of $3.5
billion and pre-tax effect unrealized losses of $128 million on securities with an amortized cost of
$7.4 billion. Information concerning the Company’s fair valuations of investment securities is
provided in note 20 of Notes to Financial Statements.
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
94
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.
As of December 31, 2017, 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. At December 31, 2017, the Company did not intend to sell
nor is it anticipated that it would be required to sell any of its 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, 2017 and 2016, the Company had in its held-to-maturity portfolio privately issued
mortgage-backed securities with an amortized cost basis of $136 million and $158 million,
respectively, and a fair value of $111 million and $121 million, respectively. At December 31, 2017,
87% of the mortgage-backed securities were in the most senior tranche of the securitization structure
with 21% being independently rated as investment grade. The mortgage-backed securities are
generally collateralized by residential and small-balance commercial real estate loans originated
between 2004 and 2008 and had a weighted-average credit enhancement of 17% at December 31,
2017, 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. The weighted-
average default percentage and loss severity assumptions utilized in the Company’s internal
modeling were 33% and 61%, respectively. Given the terms of the securitization structure, some of
the bonds held by the Company may defer interest payments in certain circumstances, but after
considering the repayment structure and estimated future collateral cash flows of each individual
senior and subordinate tranche bond, the Company has concluded that as of December 31, 2017 those
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.
95
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 $305
million, or $2.03 per common share, at December 31, 2017, $273 million, or $1.75 per common
share, at December 31, 2016 and $297 million, or $1.86 per common share, at December 31, 2015.
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.
As described herein under the heading “Overview,” M&T announced on June 28, 2017 that the
Federal Reserve did not object to M&T’s 2017 Capital Plan. Furthermore, on July 18, 2017, M&T’s
Board of Directors authorized a new stock repurchase program to repurchase up to $900 million of
shares of M&T’s common stock subject to all applicable regulatory limitations, including those set
forth in M&T’s 2017 Capital Plan. During 2017, in accordance with the 2017 and 2016 Capital
Plans, M&T repurchased 7,369,105 common shares for $1.21 billion. The remaining amount of
authorized common share repurchases pursuant to the 2017 Capital Plan at December 31, 2017
totaled $451 million and is expected to be repurchased during the first two quarters of 2018, along
with the additional $745 million approved by M&T’s Board of Directors on February 21, 2018. In
2016, M&T repurchased 5,607,595 common shares for $641 million. M&T did not repurchase any
shares of its common stock in 2015.
Cash dividends declared on M&T’s common stock totaled $457 million in 2017, compared with
$442 million and $375 million in 2016 and 2015, respectively. Dividends per common share totaled
$3.00 in 2017, compared with $2.80 in each of 2016 and 2015. Dividends of $73 million in 2017 and
$81 million in each of 2016 and 2015 were declared on preferred stock in accordance with the terms
of each series. The decline in preferred stock dividends in 2017 from the two immediately preceding
years resulted from the lower dividend rate for the $500 million of Series F preferred stock issued in
October 2016 as compared with the like-amount of Series D preferred stock that had been redeemed
in December 2016.
M&T and its subsidiary banks are required to comply with applicable capital adequacy
standards established by the federal banking agencies. Pursuant to those regulations, the minimum
capital ratios are as follows:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
4.5% Common Equity Tier 1 (“CET1”) to risk-weighted assets (each as defined in the
capital regulations);
6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets
(each as defined in the capital regulations);
8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets (each
as defined in the capital regulations); 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 capital regulations.
In addition, capital regulations provide for the phase-in of a “capital conservation buffer”
composed entirely of CET1 on top of these minimum risk-weighted asset ratios. When fully phased-
in on January 1, 2019 the capital conservation buffer will be 2.5%. For 2017, the phase-in transition
portion of that buffer was 1.25 %. The regulatory capital amounts and ratios of M&T and its bank
subsidiaries as of December 31, 2017 are presented in note 23 of Notes to Financial Statements. A
detailed discussion of the regulatory capital rules is included in Part I, Item 1 of this Form 10-K
under the heading “Capital Requirements.”
The Company is subject to the comprehensive regulatory framework applicable to bank and
financial holding companies and their subsidiaries, which includes regular examinations by a number
of federal regulators. Regulation of financial institutions such as M&T and its subsidiaries is intended
primarily for the protection of depositors, the Deposit Insurance Fund of the FDIC and the banking and
96
financial system as a whole, and generally is not intended for the protection of shareholders, investors
or creditors other than insured depositors. Changes in laws, regulations and regulatory policies
applicable to the Company’s operations can increase or decrease the cost of doing business, limit or
expand permissible activities or affect the competitive environment in which the Company operates, all
of which could have a material effect on the business, financial condition or results of operations of the
Company and in M&T’s ability to pay dividends. For additional information concerning this
comprehensive regulatory framework, refer to Part I, Item 1 of this Form 10-K.
Fourth Quarter Results
Net income during the fourth quarter of 2017 was $322 million, compared with $331 million in the
year-earlier quarter. Diluted and basic earnings per common share were each $2.01 in 2017’s final
quarter, compared with diluted and basic earnings per common share of $1.98 in the corresponding
2016 quarter. The annualized rates of return on average assets and average common shareholders’
equity for the fourth quarter of 2017 were 1.06% and 8.03%, respectively, compared with 1.05% and
8.13%, respectively, in the final quarter of 2016.
Net operating income during the fourth quarter of 2017 was $327 million, compared with $336
million in the similar 2016 quarter. Diluted net operating earnings per common share were $2.04 and
$2.01 in the fourth quarters of 2017 and 2016, respectively. The annualized net operating returns on
average tangible assets and average tangible common equity in the last three months of 2017 were
1.12% and 11.77%, respectively, compared with 1.10% and 11.93%, respectively, in the like period
of 2016. Reconciliations of GAAP results with non-GAAP results for the quarterly periods of 2017
and 2016 are provided in table 23.
Taxable-equivalent net interest income totaled $980 million in the final quarter of 2017, up 11%
from $883 million recorded in the year-earlier period. That growth was attributable to a 48 basis point
widening of net interest margin to 3.56% in the fourth quarter of 2017 from 3.08% in the year-earlier
quarter. Partially offsetting the favorable impact of the higher margin was a 4% decline in average
earning assets from $114.3 billion in the fourth quarter of 2016 to $109.4 billion in the final 2017
quarter. Average commercial loan and lease balances were $21.6 billion in the recent quarter, down
$375 million or 2% from $21.9 billion in the last quarter of 2016. Average balances of commercial real
estate loans aggregated $33.1 billion in the fourth quarter of 2017, $316 million or 1% higher than
$32.8 billion in the year-earlier quarter. Included in the commercial real estate loan portfolio were
average balances of loans held for sale of $259 million in the final 2017 quarter, compared with $524
million in the year-earlier period. Average residential real estate loan balances decreased $3.1 billion to
$20.0 billion in 2017’s fourth quarter from $23.1 billion in the similar quarter of 2016, reflecting
ongoing repayments of loans obtained in the acquisition of Hudson City. Included in the residential
real estate loan portfolio were average balances of loans held for sale of $372 million and $410 million
in the fourth quarters of 2017 and 2016, respectively. Consumer loans averaged $13.2 billion in the
final 2017 quarter, up $1.0 billion, or 9%, from the last three months of 2016. That increase resulted
from higher average balances of automobile and recreational vehicle loans. Total loans and leases at
December 31, 2017 increased $64 million to $88.0 billion from $87.9 billion at September 30, 2017.
Higher commercial real estate and consumer loans were predominantly offset by lower residential real
estate loans, reflecting ongoing repayments of loans obtained in the Hudson City acquisition. The net
interest spread widened in the fourth quarter of 2017 to 3.34%, up 46 basis points from 2.88% in the
year-earlier quarter. The yield on earning assets in the final three months of 2017 was 3.93%, up 48
basis points from the corresponding 2016 quarter. That rise reflects the impact of increases in short-
term interest rates initiated by the Federal Reserve in mid-December 2016 and in 2017 that
contributed to higher yields on loans and leases. The rate paid on interest-bearing liabilities in the
2017’s fourth quarter was .59%, up two basis points from .57% in the similar 2016 quarter. That
97
increase was largely due to higher rates paid on deposits. The contribution of net interest-free funds to
the Company’s net interest margin was .22% and .20% in the fourth quarters of 2017 and 2016,
respectively. As a result, the Company’s net interest margin widened to 3.56% in the final quarter of
2017 from 3.08% in the corresponding 2016 period.
The provision for credit losses in the final quarter of 2017 was $31 million, compared with $62
million in the year-earlier period. Net loan charge-offs were $27 million in the last three months of
2017, representing an annualized .12% of average loans and leases outstanding, compared with $49
million or .22% during the similar period of 2016. Net charge-offs in the fourth quarters of 2017 and
2016 included: residential real estate loans of $2 million in 2017 and $5 million in 2016; net
recoveries of previously charged-off commercial real estate loans of $4 million in 2017, compared
with net charge-offs of $1 million in 2016; net charge-offs of commercial loans of $5 million in 2017
and $17 million in 2016; and net charge-offs of consumer loans of $25 million and $26 million in
2017 and 2016, respectively. The net recoveries of commercial real estate loans in 2017’s final
quarter reflected $4 million of recoveries on a previously charged-off loan to a residential builder and
developer. Net charge-offs of commercial loans and leases in the fourth quarter of 2016 included a
$12 million charge-off associated with a multi-regional manufacturer of refractory brick and other
castable products.
Other income aggregated $484 million in the fourth quarter of 2017, up 4% from $465 million
in the year-earlier period. That improvement resulted predominantly from increased gains on bank
investment securities and higher trust income. An $18 million gain was recognized on the sale of a
portion of the Company’s Fannie Mae and Freddie Mac preferred stock holdings in December 2017.
The $8 million increase in trust income was primarily the result of higher revenues in the ICS
business, reflecting increased fees earned from sales activities, and the WAS business, reflecting
stronger sales activities and improved equity market performance.
Other expense totaled $796 million during the fourth quarter of 2017, compared with $769
million in the year-earlier quarter. Included in such amounts are expenses considered to be
“nonoperating” in nature consisting of amortization of core deposit and other intangible assets of $7
million and $9 million during the quarters ended December 31, 2017 and 2016, respectively.
Exclusive of those nonoperating expenses, noninterest operating expenses were $789 million in the
final 2017 quarter, compared with $760 million in the year-earlier quarter. That increase reflects
higher contributions to The M&T Charitable Foundation in 2017 and increased expenses for salaries
and employee benefits. The rise in salaries and employee benefits expenses in the last three months
of 2017 as compared with the year-earlier period was largely attributable to the impact of annual
merit increases. The Company’s efficiency ratio during the fourth quarters of 2017 and 2016 was
54.7% and 56.4%, respectively. Table 23 includes a reconciliation of other expense to noninterest
operating expense and the calculation of the efficiency ratio for each of the quarters of 2017 and
2016.
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
98
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. Furthermore, changes in management
structure or allocation methodologies and procedures may result in changes in reported segment
financial data. During 2017, the Company revised its funds transfer pricing allocation related to
certain deposit categories. Accordingly, prior period financial information for 2016 and 2015 has
been reclassified to provide segment information on a comparable basis. Financial information about
the Company’s segments is presented in note 22 of Notes to Financial Statements.
The Business Banking segment provides a wide range of services to small businesses and
professionals within markets served by the Company through the Company’s branch network,
business banking centers and other delivery channels such as telephone banking, Internet banking
and automated teller machines. Services and products offered by this segment include various
business loans and leases, including loans guaranteed by the Small Business Administration, business
credit cards, deposit products, and financial services such as cash management, payroll and direct
deposit, merchant credit card and letters of credit. The Business Banking segment contributed net
income of $116 million in 2017, up 12% from $104 million in 2016. That improvement resulted
from a $22 million increase in net interest income, reflecting a widening of the net interest margin,
and higher merchant discount and credit card fees. This segment recorded net income of $110
million in 2015. The 5% decline in net income in 2016 as compared with 2015 was attributable to
higher centrally-allocated costs largely associated with the acquired Hudson City operations, an
increase in FDIC assessments of $3 million and higher personnel costs and advertising and marketing
expenses of $2 million each, offset, in part, by a $15 million rise in net interest income and a $3
million decline in the provision for credit losses. The growth in net interest income reflected an
increase in average outstanding deposit balances of $986 million.
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 $437 million in 2017, compared with $411 million in 2016. That 6% improvement
resulted from a $24 million increase in net interest income and a lower provision for credit losses of
$23 million. Those favorable factors were partially offset by higher allocated operating expenses
associated with data processing, risk management and other support services provided to the
Commercial Banking segment. The increase in net interest income resulted from a widening of the
net interest margin on deposits of 32 basis points and higher average outstanding loan balances of
$961 million offset, in part, by a narrowing of the net interest margin on loans of 15 basis points. Net
income for the Commercial Banking segment totaled $431 million in 2015. The 5% decline in net
income from 2015 to 2016 reflects the following factors: lower letter of credit and other credit-
related fees of $15 million, largely due to loan syndication fees; higher FDIC assessments of $13
million; an increase in the provision for credit losses of $10 million; lower gains on the sale of
previously leased equipment of $9 million; an increase in personnel costs of $5 million; and higher
allocated operating expenses associated with data processing, risk management and other support
services provided to the Commercial Banking segment. Those unfavorable factors were largely
offset by a $32 million rise in net interest income and a $4 million increase in corporate advisory
fees. The higher net interest income resulted from higher average outstanding loan and deposit
balances of $1.4 billion and $794 million, respectively.
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
99
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. Commercial real estate loans held
for sale are included in this segment. Net income for the Commercial Real Estate segment was $364
million in 2017, up 4% from $350 million in 2016. That improvement resulted from higher net
interest income of $41 million and a lower provision for credit losses of $4 million, offset in part, by
lower trading account and foreign exchange gains of $11 million, largely due to decreased volumes
of interest rate swap transactions executed by commercial customers, and higher operating expenses.
The increase in net interest income was attributable to a $1.5 billion increase in average loan
balances and a 38 basis point widening of the net interest margin on deposits, offset, in part, by a
seven basis point narrowing of the net interest margin on loans. This segment’s net income increased
3% in 2016 from $341 million in 2015. That improvement resulted from: a rise in net interest
income of $30 million; higher mortgage banking revenues of $27 million, resulting from increased
loan origination activities; and higher trading account and foreign exchange gains of $8 million,
largely due to increased volumes of interest rate swap transactions executed by commercial
customers. Those favorable factors were partially offset by increased FDIC assessments of $14
million, a $10 million rise in personnel-related expenses, a $5 million increase in the provision for
credit losses and higher allocated operating expenses associated with data processing, risk
management and other support services provided to the Commercial Real Estate segment. The
higher net interest income was attributable to a $2.3 billion increase in average loan balances and a
19 basis point widening of the net interest margin on deposits, offset, in part, by a 22 basis point
narrowing of the net interest margin on loans.
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 income of the Discretionary Portfolio segment aggregated $135 million in 2017
and $164 million in 2016. The decline in net income in 2017 was due to a $69 million decrease in net
interest income, reflecting a $3.5 billion decrease in average loan balances and a 10 basis point
narrowing of the net interest margin on loans, and lower gains realized on investment securities. The
decline in average loan balances resulted from ongoing repayments of loans obtained in the Hudson
City acquisition. Those unfavorable factors were partially offset by lower loan and other real estate-
related servicing costs. The Discretionary Portfolio segment recorded net income of $59 million in
2015. The improved performance of this segment in 2016 as compared with 2015 was due to a $248
million rise in net interest income, which reflects the impact of residential real estate loans obtained
in the acquisition of Hudson City, and higher gains realized on investment securities. Those
favorable factors were partially offset by increases of $25 million in the provision for credit losses
and $16 million in FDIC assessments, and higher loan and other real estate servicing costs.
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
western 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. The Residential Mortgage Banking segment’s net income declined 18% to $46 million in
2017 from $55 million in 2016. That decline reflected lower revenues from mortgage origination
and sales activities of $14 million and from servicing residential real estate loans of $6 million (each
including intersegment revenues). Partially offsetting those unfavorable factors were lower expenses
associated with intersegment loan servicing. Net income for the Residential Mortgage Banking
100
segment in 2016 was down 25% from $74 million in 2015. That decline reflected lower revenues
from servicing residential real estate loans for unaffiliated parties of $23 million and a $10 million
decrease in net interest income offset, in part, by increased intersegment revenues.
The Retail Banking segment offers a variety of services to consumers through several
delivery channels which include branch offices, automated teller machines, telephone, mobile 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 and recreational
vehicle loans (originated both directly and indirectly through dealers), home equity loans and lines of
credit, and credit cards. The segment also offers to its customers deposit products, including demand,
savings and time accounts; investment products, including mutual funds and annuities; and other
services. Net income for the Retail Banking segment totaled $377 million in 2017, up 28% from
$294 million in 2016. That improvement was predominately due to an increase in net interest
income of $103 million, a $13 million decrease in the provision for credit losses and lower
personnel-related expenses of $7 million. The higher net interest income was primarily due to a
widening of the net interest margin on deposits of 34 basis points offset, in part, by lower average
outstanding deposit balances of $3.4 billion reflecting net maturities of time deposits obtained in the
Hudson City acquisition. This segment’s net income was up 2% in 2016 from $288 million in 2015.
The rise in net income 2016 as compared with 2015 reflected an increase in net interest income of
$156 million, predominantly due to the impact of deposits obtained in the acquisition of Hudson
City. That benefit was largely offset by the following unfavorable factors: a $47 million rise in the
provision for credit losses, including partial charge-offs of $32 million recognized on loans for which
the customer was either bankrupt or deceased; increases in expenses for personnel, equipment and
net occupancy, and advertising and marketing of $45 million, $18 million and $11 million,
respectively, that include the impact of the expanded operations associated with the acquisition of
Hudson City; higher FDIC assessments of $10 million; and higher allocated operating expenses
associated with data processing, risk management and other support services provided from
centralized service areas.
The “All Other” category reflects other activities of the Company that are not directly
attributable to the reported segments. Reflected in this category are the amortization of core deposit
and other intangible assets resulting from the acquisitions of financial institutions, M&T’s share of
the operating results 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 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 $66 million, $64 million and $223 million in 2017, 2016 and
2015, respectively. The modestly higher net loss in 2017 as compared with 2016 reflected the
incremental income tax expense of $85 million recorded as a result of the enactment of the Tax Act,
higher legal-related and professional services costs of $95 million, including additions to the reserve
for legal matters, and an increase in personnel-related expenses. Partially offsetting those unfavorable
factors were: lower merger-related expenses of $36 million (there were no such expenses in 2017);
higher trust income of $29 million in 2017; tax benefits of $22 million recognized in 2017 associated
with the adoption of new accounting guidance requiring that excess tax benefits associated with
share-based compensation be recognized in income tax expense in the income statement; and the
favorable impact from the Company’s allocation methodologies. The improved performance in 2016
as compared with 2015 was predominantly due to the favorable impact from the Company’s
allocation methodologies and a $61 million decrease in merger-related expenses associated with the
101
acquisition of Hudson City. Reflected in 2015’s results was the $45 million pre-tax gain related to
the sale of the trade processing business within the retirement services division.
Recent Accounting Developments
A discussion of recent accounting developments is included in note 26 of Notes to 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 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.
102
Table 22
Earnings and dividends
Amounts in thousands, except per share
Interest income (taxable-equivalent basis) .......................
Interest expense ................................................................
Net interest income ...........................................................
Less: provision for credit losses .......................................
Other income ....................................................................
Less: other expense...........................................................
Income before income taxes .............................................
Applicable income taxes...................................................
Taxable-equivalent adjustment.........................................
Net income........................................................................
Net income available to common shareholders-diluted ...
Per common share data
QUARTERLY TRENDS
2017 Quarters
2016 Quarters
Fourth
Third
Second
First
Fourth Third Second
First
$ 1,083,146
102,689
980,457
31,000
484,053
795,813
637,697
306,287
9,007
$ 322,403
1,066,038
100,076
965,962
30,000
459,429
806,025
589,366
224,615
8,828
355,923
1,039,149
92,213
946,936
52,000
460,816
750,635
605,117
215,328
8,736
381,053
1,014,032
91,773
922,259
55,000
446,845
787,852
526,252
169,326
7,999
348,927
990,284
107,137
883,147
62,000
465,459
769,103
517,503
179,549
7,383
330,571
976,240
111,175
865,065
47,000
491,350
752,392
557,023
200,314
6,725
349,984
977,143
106,802
870,341
32,000
448,254
749,895
536,700
194,147
6,522
336,031
979,166
100,870
878,296
49,000
420,933
776,095
474,134
169,274
6,332
298,528
$ 302,486
335,804
360,662
328,567
307,797
326,998
312,974
275,748
Basic earnings ...........................................................
Diluted earnings........................................................
Cash dividends..........................................................
$
$
2.01
2.01
.75
2.22
2.21
.75
2.36
2.35
.75
2.13
2.12
.75
1.98
1.98
.70
2.10
2.10
.70
1.98
1.98
.70
1.74
1.73
.70
Average common shares outstanding
Basic..........................................................................
Diluted ......................................................................
150,063
150,348
151,347
151,691
152,857
153,276
154,427
154,949
155,123
155,700
155,493
156,026
157,802
158,341
158,734
159,181
Performance ratios, annualized
Return on
Average assets...........................................................
Average common shareholders’ equity ....................
Net interest margin on average earning assets (taxable-
equivalent basis) ............................................................
Nonaccrual loans to total loans and leases, net of
unearned discount .........................................................
Net operating (tangible) results (a)
Net operating income (in thousands)................................
Diluted net operating income per common share .............
Annualized return on
Average tangible assets.............................................
Average tangible common shareholders’ equity ......
Efficiency ratio (b)............................................................
Balance sheet data
In millions, except per share
Average balances
Total assets (c) ..........................................................
Total tangible assets (c) ............................................
Earning assets ...........................................................
Investment securities.................................................
Loans and leases, net of unearned discount..............
Deposits ....................................................................
Common shareholders’ equity (c).............................
Tangible common shareholders’ equity (c) ..............
At end of quarter
Total assets (c) ..........................................................
Total tangible assets (c) ............................................
Earning assets ...........................................................
Investment securities.................................................
Loans and leases, net of unearned discount..............
Deposits ....................................................................
Common shareholders’ equity, net of undeclared
cumulative preferred dividends (c) ........................
Tangible common shareholders’ equity (c) ..............
Equity per common share .........................................
Tangible equity per common share...........................
Market price per common share
High ..........................................................................
Low ...........................................................................
Closing ......................................................................
$
1.06 %
8.03 %
1.18 %
8.89 %
1.27 %
9.67 %
1.15 %
8.89 %
1.05 %
8.13 %
1.12 %
8.68 %
1.09 %
8.38 %
.97 %
7.44 %
3.56 %
3.53 %
3.45 %
3.34 %
3.08 %
3.05 %
3.13 %
3.18 %
1.00 %
.99 %
.98 %
1.04 %
1.01 %
.93 %
.96 %
1.00 %
$ 326,664
2.04
360,658
2.24
385,974
2.38
354,035
2.15
336,095
2.01
355,929
2.13
350,604
2.07
320,064
1.87
1.12 %
11.77 %
54.65 %
1.25 %
13.03 %
56.00 %
1.33 %
14.18 %
52.74 %
1.10 %
1.21 %
1.09 %
1.18 %
13.05 % 11.93 % 12.77 % 12.68 % 11.62 %
56.93 % 56.42 % 55.92 % 55.06 % 57.00 %
1.18 %
$ 120,226
115,584
109,412
14,808
87,837
93,469
15,039
10,397
119,515
114,872
108,642
15,443
88,386
93,134
15,069
10,426
120,765
116,117
109,987
15,913
89,268
94,201
15,053
10,405
122,978
118,326
112,008
15,999
89,797
96,300
15,091
10,439
125,734
121,079
114,254
15,417
89,977
96,914
15,181
10,526
124,725
120,064
112,864
14,361
88,732
95,852
15,115
10,454
123,706
119,039
111,872
14,914
88,155
94,033
15,145
10,478
123,252
118,577
111,211
15,348
87,584
92,391
15,047
10,372
$ 118,593
113,947
107,786
14,665
87,989
92,432
120,402
115,761
109,365
15,074
87,925
93,513
120,897
116,251
109,976
15,816
89,081
93,541
123,223
118,573
112,287
15,968
89,313
97,043
123,449
118,797
112,192
16,250
90,853
95,494
126,841
122,183
115,293
14,734
89,646
98,137
123,821
119,157
112,057
14,963
88,522
94,650
124,626
119,955
113,005
15,467
87,872
94,215
15,016
10,370
100.03
69.08
176.62
155.77
170.99
15,083
10,442
99.70
69.02
166.85
141.12
161.04
15,049
10,403
98.66
68.20
164.03
147.55
161.95
14,978
10,328
97.40
67.16
15,252
10,600
97.64
67.85
15,106
10,448
97.47
67.42
15,237
10,573
96.49
66.95
15,120
10,449
95.00
65.65
173.72
149.51
154.73
158.35
112.25
156.43
120.40
111.13
116.10
121.11
107.01
118.23
119.24
100.08
111.00
(a)
(b)
(c)
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 23.
Excludes impact of merger-related expenses and net securities transactions.
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 23.
103
Table 23
RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES
2017 Quarters
2016 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
Income statement data (in thousands, except per share)
Net income
Net income ........................................................................... $ 322,403
Amortization of core deposit and other intangible
assets (a) ............................................................................
Merger-related expenses (a) .................................................
Net operating income...................................................
4,261
—
$ 326,664
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 ......
$
2.01
.03
—
2.04
Other expense
Other expense....................................................................... $ 795,813
Amortization of core deposit and other
intangible assets ................................................................
Merger-related expenses ......................................................
Noninterest operating expense.....................................
(7,025 )
—
$ 788,788
355,923
381,053
348,927
330,571
349,984
336,031
298,528
4,735
—
360,658
4,921
—
385,974
5,108
—
354,035
5,524
—
336,095
5,945
—
355,929
6,936
7,637
350,604
7,488
14,048
320,064
2.21
.03
—
2.24
2.35
.03
—
2.38
2.12
.03
—
2.15
1.98
.03
—
2.01
2.10
.03
—
2.13
1.98
.04
.05
2.07
$
1.73
.05
.09
1.87
806,025
750,635
787,852
769,103
752,392
749,895
776,095
(7,808 )
—
798,217
(8,113 )
—
742,522
(8,420 )
—
779,432
(9,089 )
—
760,014
(9,787 )
—
742,605
(11,418 )
(12,593 )
725,884
(12,319 )
(23,162 )
740,614
Merger-related expenses
Salaries and employee benefits ............................................ $
Equipment and net occupancy .............................................
Outside data processing and software ..................................
Advertising and marketing...................................................
Printing, postage and supplies..............................................
Other costs of operations......................................................
Total .............................................................................
$
—
—
—
—
—
—
—
Efficiency ratio
Noninterest operating expense (numerator) ......................... $ 788,788
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
60
339
352
6,327
545
4,970
12,593
5,274
939
715
4,195
937
11,102
23,162
798,217
742,522
779,432
760,014
742,605
725,884
740,614
980,457
Taxable-equivalent net interest income ...............................
484,053
Other income........................................................................
Less: Gain on bank investment securities ............................
21,296
Denominator......................................................................... $ 1,443,214
965,962
459,429
—
1,425,391
946,936
460,816
(17 )
1,407,769
922,259
446,845
—
1,369,104
883,147
465,459
1,566
1,347,040
865,065
491,350
28,480
1,327,935
870,341
448,254
264
1,318,331
878,296
420,933
4
1,299,225
Efficiency ratio.....................................................................
54.65 %
56.00 %
52.74 %
56.93 %
56.42 %
55.92 %
55.06 %
57.00 %
Balance sheet data (in millions)
Average assets
Average assets...................................................................... $ 120,226
Goodwill...............................................................................
Core deposit and other intangible assets ..............................
Deferred taxes ......................................................................
Average tangible assets................................................
(4,593 )
(75 )
26
$ 115,584
119,515
(4,593 )
(82 )
32
114,872
120,765
(4,593 )
(90 )
35
116,117
122,978
125,734
(4,593 )
(98 )
39
118,326
(4,593 )
(102 )
40
121,079
124,725
(4,593 )
(112 )
44
120,064
123,706
(4,593 )
(122 )
48
119,039
Average common equity
Average total equity ............................................................. $
Preferred stock .....................................................................
Average common equity..............................................
Goodwill...............................................................................
Core deposit and other intangible assets ..............................
Deferred taxes ......................................................................
Average tangible common equity ................................
$
16,271
(1,232 )
15,039
(4,593 )
(75 )
26
10,397
16,301
(1,232 )
15,069
(4,593 )
(82 )
32
10,426
16,285
(1,232 )
15,053
(4,593 )
(90 )
35
10,405
16,323
(1,232 )
15,091
(4,593 )
(98 )
39
10,439
16,673
(1,492 )
15,181
(4,593 )
(102 )
40
10,526
16,347
(1,232 )
15,115
(4,593 )
(112 )
44
10,454
16,377
(1,232 )
15,145
(4,593 )
(122 )
48
10,478
At end of quarter
Total assets
Total assets ...........................................................................
Goodwill...............................................................................
Core deposit and other intangible assets ..............................
Deferred taxes ......................................................................
Total tangible assets.....................................................
118,593
120,402
(4,593 )
(72 )
19
$ 113,947
(4,593 )
(79 )
31
115,761
120,897
(4,593 )
(86 )
33
116,251
123,223
123,449
(4,593 )
(95 )
38
118,573
(4,593 )
(98 )
39
118,797
126,841
(4,593 )
(107 )
42
122,183
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 ......................................................................
Total tangible common equity .....................................
$
(a)
After any related tax effect.
16,251
(1,232 )
(3 )
16,318
(1,232 )
(3 )
15,016
(4,593 )
(72 )
19
10,370
15,083
(4,593 )
(79 )
31
10,442
16,284
(1,232 )
(3 )
15,049
(4,593 )
(86 )
33
10,403
16,213
(1,232 )
(3 )
16,487
(1,232 )
(3 )
14,978
(4,593 )
(95 )
38
10,328
15,252
(4,593 )
(98 )
39
10,600
16,341
(1,232 )
(3 )
15,106
(4,593 )
(107 )
42
10,448
104
123,821
(4,593 )
(117 )
46
119,157
16,472
(1,232 )
(3 )
15,237
(4,593 )
(117 )
46
10,573
123,252
(4,593 )
(134 )
52
118,577
16,279
(1,232 )
15,047
(4,593 )
(134 )
52
10,372
124,626
(4,593 )
(128 )
50
119,955
16,355
(1,232 )
(3 )
15,120
(4,593 )
(128 )
50
10,449
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Incorporated by reference to the discussion contained in Part II, Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” under the captions “Liquidity,
Market Risk, and Interest Rate Sensitivity” (including Table 20) and “Capital.”
Item 8. Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data consist of the financial statements as indexed and
presented below and Table 22 “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, 2017 and 2016......................................................
Consolidated Statement of Income — Years ended December 31, 2017, 2016 and 2015 ............
Consolidated Statement of Comprehensive Income — Years ended December 31, 2017, 2016
and 2015.....................................................................................................................................
Consolidated Statement of Cash Flows — Years ended December 31, 2017, 2016 and 2015......
Consolidated Statement of Changes in Shareholders’ Equity — Years ended December 31,
2017, 2016 and 2015..................................................................................................................
Notes to Financial Statements ........................................................................................................
106
107
109
110
111
112
113
114
105
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, 2017
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, 2017.
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
René F. Jones
Chairman of the Board and Chief Executive Officer
Darren J. King
Executive Vice President and Chief Financial Officer
106
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
M&T Bank Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of M&T Bank Corporation and its
subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of income,
comprehensive income, changes in shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 2017, including the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company's internal control over
financial reporting as of December 31, 2017, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of
their operations and their cash flows for each of the three years in the period ended December 31,
2017 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, 2017, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated 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 the
Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
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
107
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.
Definition and Limitations of Internal Control over Financial Reporting
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 22, 2018
We have served as the Company’s auditor since 1984.
108
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
December 31
2017
2016
1,420,888 $
5,078,903
132,909
1,320,549
5,000,638
323,867
10,896,284
13,332,072
3,353,213
2,457,278
(Dollars in thousands, except per share)
Assets
Cash and due from banks.............................................................................................................. $
Interest-bearing deposits at banks.................................................................................................
Trading account ............................................................................................................................
Investment securities (includes pledged securities that can be sold or repledged of
$487,151 at December 31, 2017; $1,203,473 at December 31, 2016)
Available for sale (cost: $10,938,796 at December 31, 2017;
$13,338,301 at December 31, 2016) ...................................................................................
Held to maturity (fair value: $3,341,762 at December 31, 2017;
$2,451,222 at December 31, 2016) .....................................................................................
Other (fair value: $415,028 at December 31, 2017;
$461,118 at December 31, 2016) ........................................................................................
Total investment securities ...............................................................................................
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..................................................................................................
461,118
16,250,468
91,101,677
(248,261)
90,853,416
(988,997)
89,864,419
675,263
4,593,112
97,655
5,323,235
Total assets ....................................................................................................................... $ 118,593,487 $ 123,449,206
415,028
14,664,525
88,242,886
(253,903)
87,988,983
(1,017,198)
86,971,785
646,451
4,593,112
71,589
5,013,325
Liabilities
Noninterest-bearing deposits ........................................................................................................ $ 33,975,180 $ 32,813,896
52,346,207
Savings and interest-checking deposits ........................................................................................
10,131,846
Time deposits................................................................................................................................
201,927
Deposits at Cayman Islands office ...............................................................................................
95,493,876
Total deposits ...................................................................................................................
Short-term borrowings..................................................................................................................
163,442
1,811,431
Accrued interest and other liabilities ............................................................................................
9,493,835
Long-term borrowings..................................................................................................................
106,962,584
Total liabilities..................................................................................................................
51,698,008
6,580,962
177,996
92,432,146
175,099
1,593,993
8,141,430
102,342,668
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, 2017 and December 31, 2016;
Liquidation preference of $10,000 per share: 50,000
shares at December 31, 2017 and December 31, 2016..............................................................
Common stock, $.50 par, 250,000,000 shares authorized, 159,817,518 shares issued
at December 31, 2017; 159,945,678 shares issued at December 31, 2016 ...............................
Common stock issuable, 27,138 shares at December 31, 2017;
32,403 shares at December 31, 2016.........................................................................................
Additional paid-in capital .............................................................................................................
Retained earnings .........................................................................................................................
Accumulated other comprehensive income (loss), net.................................................................
Treasury stock — common, at cost — 9,733,115 shares at December 31, 2017;
(431,796)
3,764,742 shares at December 31, 2016....................................................................................
Total shareholders’ equity ................................................................................................
16,486,622
Total liabilities and shareholders’ equity ......................................................................... $ 118,593,487 $ 123,449,206
1,847
6,590,855
10,164,804
(363,814)
2,145
6,676,948
9,222,488
(294,636)
(1,454,282)
16,250,819
1,231,500
1,231,500
79,909
79,973
See accompanying notes to financial statements.
109
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
(In thousands, except per share)
Interest income
Loans and leases, including fees ....................................................... $ 3,742,867 $ 3,485,050 $ 2,778,151
Investment securities
2015
2017
Year Ended December 31
2016
Fully taxable.................................................................................
Exempt from federal taxes ...........................................................
Deposits at banks...............................................................................
Other ..................................................................................................
Total interest income ..............................................................
361,157
1,431
61,326
1,014
4,167,795
361,494
2,606
45,516
1,205
3,895,871
Interest expense
Savings and interest-checking deposits .............................................
Time deposits.....................................................................................
Deposits at Cayman Islands office ....................................................
Short-term borrowings.......................................................................
Long-term borrowings.......................................................................
Total interest expense .............................................................
Net interest income ............................................................................
Provision for credit losses .................................................................
Net interest income after provision for credit losses .........................
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 .........................................
Other revenues from operations ........................................................
Total other income..................................................................
133,177
61,505
1,186
1,511
189,372
386,751
3,781,044
168,000
3,613,044
363,827
427,372
501,381
61,445
35,301
21,279
440,538
1,851,143
87,704
102,841
797
3,625
231,017
425,984
3,469,887
190,000
3,279,887
373,697
419,102
472,184
63,423
41,126
30,314
426,150
1,825,996
372,162
4,263
15,252
1,016
3,170,844
46,140
27,059
615
1,677
252,766
328,257
2,842,587
170,000
2,672,587
375,738
420,608
470,640
64,770
30,577
(130)
462,834
1,825,037
Other expense
1,549,530
Salaries and employee benefits .........................................................
272,539
Equipment and net occupancy...........................................................
164,133
Outside data processing and software ...............................................
52,113
FDIC assessments..............................................................................
59,227
Advertising and marketing ................................................................
38,491
Printing, postage and supplies ...........................................................
26,424
Amortization of core deposit and other intangible assets..................
660,475
Other costs of operations ...................................................................
2,822,932
Total other expense.................................................................
1,674,692
Income before taxes...........................................................................
Income taxes......................................................................................
595,025
Net income ......................................................................................... $ 1,408,306 $ 1,315,114 $ 1,079,667
Net income available to common shareholders
1,650,729
295,084
184,670
101,871
69,203
35,960
31,366
771,442
3,140,325
2,323,862
915,556
1,623,600
295,141
172,389
105,045
87,137
39,546
42,613
682,014
3,047,485
2,058,398
743,284
Basic ....................................................................................... $ 1,327,503 $ 1,223,459 $
1,223,481
Diluted ....................................................................................
1,327,517
987,689
987,724
Net income per common share
Basic ....................................................................................... $
Diluted ....................................................................................
8.72 $
8.70
See accompanying notes to financial statements.
7.80 $
7.78
7.22
7.18
110
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Comprehensive Income
(In thousands)
Year Ended December 31
2016
2015
2017
Net income ....................................................................... $ 1,408,306 $ 1,315,114 $ 1,079,667
Other comprehensive income (loss), net of tax and
reclassification adjustments:
(79,114)
Net unrealized losses on investment securities............
796
Cash flow hedges adjustments.....................................
(925)
Foreign currency translation adjustment .....................
8,610
Defined benefit plans liability adjustments .................
Total other comprehensive loss ..............................
(70,633)
Total comprehensive income .................................. $ 1,403,157 $ 1,272,105 $ 1,009,034
(64,406)
(94)
(2,614)
24,105
(43,009)
(19,766)
(9,912)
2,241
22,288
(5,149)
See accompanying notes to financial statements.
111
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(In thousands)
Cash flows from operating activities
Net income ..................................................................................................................................................................... $ 1,408,306 $ 1,315,114 $ 1,079,667
Adjustments to reconcile net income to net cash provided by operating activities
2017
2015
Year Ended December 31
2016
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...............................................................................................
Net cash provided by operating activities ..............................................................................................................
168,000
109,587
56,172
31,366
400,790
15,429
(53,467 )
(17,896 )
(201,981 )
711,657
153,972
2,781,935
190,000
106,996
50,982
42,613
174,013
21,036
(63,222 )
(12,282 )
60,263
(665,649 )
(36,453 )
1,183,411
170,000
99,019
49,906
26,424
396,596
9,029
(67,759 )
(46,338 )
(289,139 )
323,330
(8,327 )
1,742,408
Cash flows from investing activities
Proceeds from sales of investment securities
Available for sale ...................................................................................................................................................
Other.......................................................................................................................................................................
534,160
178,468
63,513
94,749
5,654,850
183,892
Proceeds from maturities of investment securities
Available for sale ...................................................................................................................................................
Held to maturity .....................................................................................................................................................
2,131,118
528,585
2,309,208
609,080
2,392,331
662,959
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 decrease in loan servicing advances........................................................................................................................
Acquisition of bank and bank holding company, net of cash acquired .........................................................................
Other, net........................................................................................................................................................................
Net cash provided (used) by investing activities ...................................................................................................
(251,185 )
(1,425,690 )
(132,378 )
1,931,492
(78,265 )
(78,966 )
37,761
—
19,825
3,394,925
(3,562,711 )
(214,791 )
(1,808 )
(2,952,129 )
2,593,712
(107,693 )
170,141
—
277,961
(720,768 )
(3,614,324 )
(29,431 )
(99,317 )
(2,326,744 )
6,445,451
(81,936 )
448,271
(1,932,596 )
10,876
7,714,282
Cash flows from financing activities
504,393
Net increase (decrease) in deposits ................................................................................................................................
(2,167,405 )
Net increase (decrease) in short-term borrowings .........................................................................................................
1,500,000
Proceeds from long-term borrowings ............................................................................................................................
(8,912,474 )
Payments on long-term borrowings ...............................................................................................................................
—
Purchases of treasury stock............................................................................................................................................
(375,017 )
Dividends paid — common ...........................................................................................................................................
(81,270 )
Dividends paid — preferred...........................................................................................................................................
—
Redemption of Series D preferred stock........................................................................................................................
—
Proceeds from issuance of Series F preferred stock ......................................................................................................
69,766
Other, net........................................................................................................................................................................
(9,462,007 )
Net cash used by financing activities .....................................................................................................................
(5,317 )
Net increase (decrease) in cash and cash equivalents....................................................................................................
Cash and cash equivalents at beginning of year ............................................................................................................
1,373,357
Cash and cash equivalents at end of year....................................................................................................................... $ 1,420,888 $ 1,320,549 $ 1,368,040
(3,075,322 )
11,657
2,145,950
(3,433,440 )
(1,205,905 )
(457,402 )
(72,734 )
—
—
10,675
(6,076,521 )
100,339
1,320,549
3,554,673
(1,937,105 )
—
(1,119,898 )
(641,334 )
(441,891 )
(81,270 )
(500,000 )
495,000
161,691
(510,134 )
(47,491 )
1,368,040
Supplemental disclosure of cash flow information
Interest received during the year.................................................................................................................................... $ 4,155,723 $ 3,903,374 $ 3,134,311
400,329
Interest paid during the year ..........................................................................................................................................
378,660
Income taxes paid during the year .................................................................................................................................
Supplemental schedule of noncash investing and financing activities
Real estate acquired in settlement of loans .................................................................................................................... $
Acquisition of bank and bank holding company
405,290
494,205
498,951
276,866
121,292 $
124,033 $
67,753
Common stock issued ............................................................................................................................................
Common stock awards converted ..........................................................................................................................
Fair value of
Assets acquired (noncash)...............................................................................................................................
Liabilities assumed..........................................................................................................................................
—
—
—
—
—
—
3,110,581
28,243
—
—
36,567,632
31,496,212
Securitization of residential mortgage loans allocated to
Available-for-sale investment securities....................................................................................................................
Capitalized servicing rights........................................................................................................................................
36,747
422
24,233
248
65,023
646
See accompanying notes to financial statements.
112
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders’ Equity
Common Additional
Dollars in thousands, except per share
2015
Balance — January 1, 2015.............................. $ 1,231,500 66,157
Total comprehensive income............................
—
Acquisition of Hudson City Bancorp, Inc.:
—
Preferred Common Stock Paid-in Retained
Earnings
Stock Issuable Capital
Stock
Treasury
Stock
Total
2,608 3,409,506 7,807,119
— 1,079,667
—
(180,994 )
(70,633 )
— $12,335,896
— 1,009,034
Accumulated
Other
Comprehensive
Income
(Loss), Net
Common stock issued ...................................
Common stock awards converted .................
Preferred stock cash dividends .........................
Exercise of 2,315 Series A stock warrants
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..........................................................
— 12,977
—
—
—
—
— 3,097,604
28,243
—
—
—
—
—
(81,270 )
—
—
—
—
—
—
—
1
—
(1 )
155
438
45
7
—
—
—
—
43,040
88,455
10,301
1,754
—
—
—
—
—
2
—
(244 )
—
293
1,573
(102 )
—
—
—
—
—
—
—
—
—
—
—
— 3,110,581
28,243
—
(81,270 )
—
—
—
—
—
—
—
—
—
43,195
88,893
10,346
1,761
(51 )
1,573
—
(251,627 )
—
(374,912 )
— $16,173,289
—
Common stock cash dividends - $2.80 per
share..............................................................
—
Balance — December 31, 2015........................ $ 1,231,500 79,782
2016
Total comprehensive income............................
Preferred stock cash dividends .........................
Redemption of Series D preferred stock...........
Issuance of Series F preferred stock .................
Exercise of 87,381 Series A stock warrants
into 41,439 shares of common stock ............
Purchases of treasury stock...............................
Stock-based compensation plans:
—
—
(500,000 )
500,000
—
—
—
—
—
—
—
—
Compensation expense, net .......................
Exercises of stock options, net ..................
Stock purchase plan...................................
Directors’ stock plan .................................
Deferred compensation plans, net,
including dividend equivalents..............
Other..........................................................
—
—
—
—
—
—
169
18
—
2
—
Common stock cash dividends - $2.80 per
share..............................................................
—
Balance — December 31, 2016........................ $ 1,231,500 79,973
2017
Total comprehensive income............................
Reclassification of income tax effects
to retained earnings........................................
Preferred stock cash dividends .........................
Exercise of 374,786 Series A stock warrants
into 204,133 shares of common stock ..........
Purchases of treasury 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..............
—
—
—
—
—
(64 )
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(374,912 )
2,364 6,680,768 8,430,502
—
— 1,315,114
(81,270 )
—
—
—
—
(5,000 )
(43,009 )
—
—
—
— 1,272,105
(81,270 )
—
(500,000 )
—
495,000
—
(4,750 )
—
16,132
(12,190 )
275
535
—
—
—
—
—
—
(93 )
—
—
4,748
— (641,334 )
(2 )
(641,334 )
—
10,989
— 181,789
10,319
—
1,543
—
27,290
169,617
10,594
2,080
—
—
150
—
3
1,015
2
—
(219 )
—
163
1,015
—
(441,765 )
2,145 6,676,948 9,222,488
—
—
(441,765 )
(294,636 ) (431,796 ) $16,486,622
—
— 1,408,306
(5,149 )
— 1,403,157
—
—
64,029
(72,734 )
(64,029 )
—
—
—
—
(72,734 )
(28,746 )
—
(47,670 )
(12,142 )
2,563
270
—
—
—
—
—
—
28,746
—
—
— (1,205,905 ) (1,205,905 )
—
—
—
—
—
59,738
84,416
8,268
1,656
12,004
72,274
10,831
1,926
595
(156 )
—
(457,200 )
(363,814 ) (1,454,282 ) $16,250,819
—
Common stock cash dividends - $3.00 per
—
share..............................................................
Balance — December 31, 2017........................ $ 1,231,500 79,909
—
—
(457,200 )
1,847 6,590,855 10,164,804
—
—
(298 )
(368 )
(85 )
See accompanying notes to financial statements.
113
M&T BANK CORPORATION AND SUBSIDIARIES
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”) are in
accordance with accounting principles generally accepted in the United States of America (“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 significant accounting policies are as
follows:
Consolidation
The consolidated financial statements include M&T and all of its subsidiaries. All significant
intercompany accounts and transactions of consolidated subsidiaries have been eliminated in
consolidation. The financial statements of M&T included in note 25 report investments in
subsidiaries under the equity method. Information about some limited purpose entities that are
affiliates of the Company but are not included in the consolidated financial statements appears in
note 19.
Consolidated Statement of Cash Flows
For purposes of this statement, cash and due from banks and federal funds sold are considered cash
and cash equivalents.
Securities purchased under agreements to resell and securities sold under agreements to
repurchase
Securities purchased under agreements to resell and securities sold under agreements to repurchase
are treated as collateralized financing transactions and are recorded at amounts equal to the cash or
other consideration exchanged. It is generally the Company’s policy to take possession of collateral
pledged to secure agreements to resell.
Trading account
Financial instruments used for trading purposes are stated at fair value. Realized gains and losses and
unrealized changes in fair value of financial instruments utilized in trading activities are included in
“trading account and foreign exchange gains” in the consolidated statement of income.
Investment securities
Investments in debt securities are classified as held to maturity and stated at amortized cost when
management has the positive intent and ability to hold such securities to maturity. Investments in
114
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.
Individual securities are written down through a charge to earnings when declines in value
below the cost basis of a security are considered to be other than temporary. In cases where fair value
is less than amortized cost and the Company intends to sell a debt security, it is more likely than not
to be required to sell a debt security before recovery of its amortized cost basis, or the Company does
not expect to recover the entire amortized cost basis of a debt security, an other-than-temporary
impairment is considered to have occurred. If the Company intends to sell the debt security or more
likely than not will be required to sell the 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. Realized gains and losses on the sales of investment securities
are determined using the specific identification method.
Loans and leases
The Company’s accounting methods for loans depends on whether the loans were originated by the
Company or were acquired in a business combination.
Originated loans and leases
Interest income on loans is accrued on a level yield method. Loans are placed on nonaccrual status
and previously accrued interest thereon is charged against income when principal or interest is
delinquent 90 days, unless management determines that the loan status clearly warrants other
treatment. Nonaccrual commercial loans and commercial real estate loans are returned to accrual
status when borrowers have demonstrated an ability to repay their loans and there are no delinquent
principal and interest payments. Consumer loans not secured by residential real estate are returned to
accrual status when all past due principal and interest payments have been paid by the borrower.
Loans secured by residential real estate are returned to accrual status when they are deemed to have
an insignificant delay in payments of 90 days or less. Loan balances are charged off when it becomes
evident that such balances are not fully collectible. For commercial loans and commercial real estate
loans, charge-offs are recognized after an assessment by credit personnel of the capacity and
willingness of the borrower to repay, the estimated value of any collateral, and any other potential
sources of repayment. A charge-off is recognized when, after such assessment, it becomes evident
that the loan balance is not fully collectible. For loans secured by residential real estate, the excess of
the loan balances over the net realizable value of the property collateralizing the loan is charged-off
when the loan becomes 150 days delinquent. Consumer loans are generally charged-off when the
115
loans are 91 to 180 days past due, depending on whether the loan is collateralized and the status of
repossession activities with respect to such collateral. Loan fees and certain direct loan origination
costs are deferred and recognized as an interest yield adjustment over the life of the loan. Net
deferred fees have been included in unearned discount as a reduction of loans outstanding.
Commitments to sell real estate loans are utilized by the Company to hedge the exposure to changes
in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for
sale recorded in the consolidated balance sheet includes changes in estimated fair market value
during the hedge period, typically from the date of close through the sale date. Valuation adjustments
made on these loans and commitments are included in “mortgage banking revenues.”
Except for consumer and residential mortgage loans that are considered smaller balance
homogenous loans and are evaluated collectively, the Company considers a loan to be impaired for
purposes of applying GAAP when, based on current information and events, it is probable that the
Company will be unable to collect all amounts according to the contractual terms of the loan
agreement or the loan is delinquent 90 days. Regardless of loan type, the Company considers a loan
to be impaired if it qualifies as a troubled debt restructuring. Impaired loans are classified as either
nonaccrual or as loans renegotiated at below market rates which continue to accrue interest, provided
that a credit assessment of the borrower’s financial condition results in an expectation of full
repayment under the modified contractual terms. Certain loans greater than 90 days delinquent are
not considered impaired if they are well-secured and in the process of collection. Loans less than 90
days delinquent are deemed to have an insignificant delay in payment and are generally not
considered impaired. Impairment of a loan is measured based on the present value of expected future
cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the
fair value of 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 initially 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.
116
Allowance for credit losses
The allowance for credit losses represents, in management’s judgment, the amount of losses inherent
in the loan and lease portfolio as of the balance sheet date. The allowance is determined by
management’s evaluation of the loan and lease portfolio based on such factors as the differing
economic risks associated with each loan category, the current financial condition of specific
borrowers, the economic environment in which borrowers operate, the level of delinquent loans, the
value of any collateral and, where applicable, the existence of any guarantees or indemnifications.
The effects of probable decreases in expected principal cash flows on loans acquired at a discount are
also considered in the establishment of the allowance for credit losses.
Assets taken in foreclosure of defaulted loans
Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential
real property and are included in “other assets” in the consolidated balance sheet. 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.
Upon acquisition of assets taken in satisfaction of a defaulted loan, the excess of the remaining loan
balance over the asset’s estimated fair value less costs to sell is charged-off against the allowance for
credit losses. Subsequent declines in value of the assets are recognized as “other costs of operations”
in the consolidated statement of income.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation. Depreciation expense is
computed principally using the straight-line method over the estimated useful lives of the assets.
Capitalized servicing rights
Capitalized servicing assets are included in “other assets” in the consolidated balance sheet.
Separately recognized servicing assets are initially measured at fair value. The Company uses the
amortization method to subsequently measure servicing assets. Under that method, capitalized
servicing assets are charged to expense in proportion to and over the period of estimated net
servicing income.
To estimate the fair value of servicing rights, the Company considers market prices for similar
assets and the present value of expected future cash flows associated with the servicing rights
calculated using assumptions that market participants would use in estimating future servicing
income and expense. Such assumptions include estimates of the cost of servicing loans, loan default
rates, an appropriate discount rate, and prepayment speeds. For purposes of evaluating and measuring
impairment of capitalized servicing rights, the Company stratifies such assets based on the
predominant risk characteristics of the underlying financial instruments that are expected to have the
most impact on projected prepayments, cost of servicing and other factors affecting future cash flows
associated with the servicing rights. Such factors may include financial asset or loan type, note rate
and term. The amount of impairment recognized is the amount by which the carrying value of the
capitalized servicing rights for a stratum exceeds estimated fair value. Impairment is recognized
through a valuation allowance.
117
Sales and securitizations of financial assets
Transfers of financial assets for which the Company has surrendered control of the financial assets
are accounted for as sales. Interests in a sale of financial assets that continue to be held by the
Company, including servicing rights, are measured at fair value. The fair values of retained debt
securities are generally determined through reference to independent pricing information. The fair
values of retained servicing rights and any other retained interests are determined based on the
present value of expected future cash flows associated with those interests and by reference to market
prices for similar assets.
Securitization structures typically require the use of special-purpose trusts that are considered
variable interest entities. A variable interest entity is included in the consolidated financial statements
if the Company has the power to direct the activities that most significantly impact the variable
interest entity’s economic performance and has the obligation to absorb losses or the right to receive
benefits of the variable interest entity that could potentially be significant to that entity.
Goodwill and core deposit and other intangible assets
Goodwill represents the excess of the cost of an acquired entity over the fair value of the identifiable
net assets acquired. Goodwill is not amortized, but rather is tested for impairment at least annually at
the reporting unit level, which is either at the same level or one level below an operating segment.
Other acquired intangible assets with finite lives, such as core deposit intangibles, are initially
recorded at estimated fair value and are amortized over their estimated lives. Core deposit and other
intangible assets are generally amortized using accelerated methods over estimated useful lives of
five to ten years. The Company periodically assesses whether events or changes in circumstances
indicate that the carrying amounts of core deposit and other intangible assets may be impaired.
Derivative financial instruments
The Company accounts for derivative financial instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-
for-sale security, or a foreign currency denominated forecasted transaction.
The Company utilizes interest rate swap agreements as part of the management of interest rate
risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and
interest-bearing liabilities. For such agreements, amounts receivable or payable are recognized as
accrued under the terms of the agreement and the net differential is recorded as an adjustment to
interest income or expense of the related asset or liability. Interest rate swap agreements may be
designated as either fair value hedges or cash flow hedges. In a fair value hedge, the fair values of the
interest rate swap agreements and changes in the fair values of the hedged items are recorded in the
Company’s consolidated balance sheet with the corresponding gain or loss recognized in current
earnings. The difference between changes in the fair values of interest rate swap agreements and the
hedged items represents hedge ineffectiveness and is recorded in “other revenues from operations” in
the consolidated statement of income. In a cash flow hedge, the effective portion of the derivative’s
unrealized gain or loss is initially recorded as a component of other comprehensive income and
subsequently reclassified into earnings when the forecasted transaction affects earnings. The
ineffective portion of the unrealized gain or loss is reported in “other revenues from operations”
immediately.
The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in
the fair value of real estate loans held for sale. Commitments to originate real estate loans to be held
118
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-based compensation
Stock-based compensation expense is recognized over the vesting period of the stock-based grant
based on the estimated grant date value of the stock-based compensation, 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. As
discussed in note 26 herein, effective January 2017 the Company adopted amended accounting
guidance which requires excess tax benefits or deficiencies associated with stock-based
compensation be recognized in income tax expense. Previously, tax effects resulting from changes in
M&T’s share price were recorded through shareholders’ equity.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax effects attributable to differences
between the financial statement value of existing assets and liabilities and their respective tax bases
and carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates and laws.
The Company evaluates uncertain tax positions using the two-step process required by GAAP.
The first step requires a determination of whether it is more likely than not that a tax position will be
sustained upon examination, including resolution of any related appeals or litigation processes, based
on the technical merits of the position. Under the second step, a tax position that meets the more-
likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than
fifty percent likely of being realized upon ultimate settlement.
The Company accounts for its investments in qualified affordable housing projects using the
proportional amortization method. Under that 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
investment performance in the income statement as a component of income tax expense.
Earnings per common share
Basic earnings per common share exclude dilution and are computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding (exclusive of
shares represented by the unvested portion of restricted stock and restricted stock unit grants) and
common shares issuable under deferred compensation arrangements during the period. Diluted
earnings per common share reflect shares represented by the unvested portion of restricted stock and
restricted stock unit grants and the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in earnings. Proceeds assumed to have been received on such
exercise or conversion are assumed to be used to purchase shares of M&T common stock at the
average market price during the period, as required by the “treasury stock method” of accounting.
GAAP requires that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) shall be considered participating
119
securities and shall be included in the computation of earnings per common share pursuant to the
two-class method. The Company has issued stock-based compensation awards in the form of
restricted stock and restricted stock units that contain such rights and, accordingly, the Company’s
earnings per common share are calculated using the two-class method.
Treasury stock
Repurchases of shares of M&T common stock are recorded at cost as a reduction of shareholders’
equity. Reissuances of shares of treasury stock are recorded at average cost.
2. Acquisition and divestiture
Hudson City Bancorp, 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.
The Hudson City transaction was 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 (predominantly residential real estate loans) and $7.9 billion of
investment securities. 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. 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 seven
years using an accelerated method.
120
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 included in the Company’s consolidated financial statements for all of 2015. 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 necessarily indicative of what would
have occurred had the acquisition taken place on the indicated date.
Actual Since
Acquisition
Through
December 31, 2015
Pro Forma
Year Ended
December 31, 2015
(In thousands)
Total revenues(a) ..........................................................................
Net income (loss)..........................................................................
$
111,168
(21,175)
$
5,132,662
1,011,463
(a) Represents net interest income plus other income.
In connection with the Hudson City acquisition, the Company incurred merger-related expenses
of $36 million in 2016 and $97 million in 2015 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. In 2015, 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. Nevertheless, 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. There were no merger related
expenses in 2017.
121
A summary of merger-related expenses included in the consolidated statement of income for the
years ended December 31, 2016 and 2015 follows:
2016
2015
(In thousands)
Salaries and employee benefits........................................................................................
Equipment and net occupancy .........................................................................................
Outside data processing and software..............................................................................
Advertising and marketing...............................................................................................
Printing, postage and supplies..........................................................................................
Other costs of operations .................................................................................................
Other expense..............................................................................................................
Provision for credit losses................................................................................................
Total ............................................................................................................................
$
5,334
1,278
1,067
10,522
1,482
16,072
35,755
—
$ 35,755
$ 51,287
3
785
79
504
23,318
75,976
21,000
$ 96,976
Sale of trust accounts
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 during 2015. 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
2015.
3. Investment securities
The amortized cost and estimated fair value of investment securities were as follows:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(In thousands)
Estimated
Fair Value
December 31, 2017
Investment securities available for sale:
U.S. Treasury and federal agencies.................................. $ 1,965,665 $
Obligations of states and political subdivisions...............
Mortgage-backed securities:
2,555
— $
36
18,178 $ 1,947,487
2,589
2
Government issued or guaranteed ..............................
Privately issued...........................................................
Other debt securities ........................................................
Equity securities...............................................................
8,755,482
28
136,905
78,161
10,938,796
59,497
—
2,402
23,219
85,154
98,587
—
10,475
424
127,666
8,716,392
28
128,832
100,956
10,896,284
Investment securities held to maturity:
Obligations of states and political subdivisions...............
Mortgage-backed securities:
24,562
109
49
24,622
Government issued or guaranteed ..............................
Privately issued...........................................................
Other debt securities ........................................................
3,201,443
110,687
5,010
3,341,762
Other securities ................................................................
415,028
Total ................................................................................. $14,707,037 $ 115,073 $ 169,036 $14,653,074
3,187,953
135,688
5,010
3,353,213
415,028
13,746
27,575
—
41,370
—
27,236
2,574
—
29,919
—
122
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(In thousands)
Estimated
Fair Value
December 31, 2016
Investment securities available for sale:
U.S. Treasury and federal agencies.................................. $ 1,912,110 $
Obligations of states and political subdivisions...............
Mortgage-backed securities:
3,570
386 $
77
9,952 $ 1,902,544
3,641
6
Government issued or guaranteed ..............................
Privately issued...........................................................
Other debt securities ........................................................
Equity securities...............................................................
10,980,507
45
134,105
307,964
13,338,301
88,343
—
1,407
45,073
135,286
113,989
1
16,996
571
141,515
10,954,861
44
118,516
352,466
13,332,072
Investment securities held to maturity:
Obligations of states and political subdivisions...............
Mortgage-backed securities:
60,858
267
224
60,901
Government issued or guaranteed ..............................
Privately issued...........................................................
Other debt securities ........................................................
2,263,297
121,481
5,543
2,451,222
Other securities ................................................................
461,118
Total ................................................................................. $16,256,697 $ 173,948 $ 186,233 $16,244,412
2,233,173
157,704
5,543
2,457,278
461,118
7,374
37,120
—
44,718
—
37,498
897
—
38,662
—
No investment in securities of a single non-U.S. Government, government agency or
government guaranteed issuer exceeded ten percent of shareholders’ equity at December 31, 2017.
As of December 31, 2017, the latest available investment ratings of all obligations of states and
political subdivisions, privately issued mortgage-backed securities and other debt securities were:
Average Credit Rating of Fair Value Amount
Amortized
Cost
Estimated
Fair Value
A or
Better
BBB
(In thousands)
BB
B or Less
Not
Rated
Obligations of states and political
subdivisions ............................................ $ 27,117 $ 27,211 $15,874 $ — $ — $ — $11,337
Privately issued mortgage-backed
7
securities ................................................. 135,716 110,715 23,459
Other debt securities .................................. 141,915 133,842 6,980 61,054 32,684
— 33,124
Total ........................................................... $304,748 $271,768 $46,313 $61,070 $32,684 $87,233 $44,468
— 87,233
16
The amortized cost and estimated fair value of collateralized mortgage obligations included in
mortgage-backed securities were as follows:
Collateralized mortgage obligations:
Amortized cost ............................................................................................... $138,527 $162,027
Estimated fair value ....................................................................................... 113,516 125,848
December 31
2017
2016
(In thousands)
123
Gross realized gains on investment securities were $23,251,000 in 2017 and $30,545,000 in
2016. During 2017, the Company sold a portion of its Fannie Mae and Freddie Mac preferred stock
holdings held in the available-for-sale investment securities portfolio for a gain of $18 million.
During 2016, the Company sold its collateralized debt obligations held in the available-for-sale
portfolio for a gain of $30 million. There were no significant gross realized losses from sales of
investment securities in 2017 or 2016. There were no significant gross realized gains or losses from
sales of investment securities in 2015.
At December 31, 2017, the amortized cost and estimated fair value of debt securities by
contractual maturity were as follows:
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 ......................................................................................................
Mortgage-backed securities available for sale............................................................
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 ......................................................................................................
Mortgage-backed securities held to maturity .............................................................
Amortized
Cost
Estimated
Fair Value
(In thousands)
$
616,908
1,356,410
72,642
59,165
2,105,125
8,755,510
$10,860,635
613,866
1,341,344
72,580
51,118
2,078,908
8,716,420
10,795,328
$
14,622
9,844
96
5,010
29,572
3,323,641
$ 3,353,213
14,656
9,865
101
5,010
29,632
3,312,130
3,341,762
124
A summary of investment securities that as of December 31, 2017 and 2016 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
Fair
Value
Unrealized
Losses
12 Months or More
Fair
Value
Unrealized
Losses
(In thousands)
December 31, 2017
Investment securities available for sale:
U.S. Treasury and federal agencies.............................................. $ 278,132
Obligations of states and political subdivisions...........................
—
Mortgage-backed securities:
Government issued or guaranteed .......................................... 2,106,142
3,067
—
Other debt securities ....................................................................
Equity securities...........................................................................
2,387,341
(1,761) 1,669,355
474
—
(16,417)
(2)
(84,892)
(13,695) 3,138,841
(10,449)
61,159
(424)
18,162
(15,482) 4,887,991 (112,184)
(26)
—
Investment securities held to maturity:
Obligations of states and political subdivisions...........................
Mortgage-backed securities:
2,954
(4)
6,110
(45)
Government issued or guaranteed .......................................... 1,331,759
5,061
Privately issued.......................................................................
1,339,774
Total ............................................................................................. $3,727,115
(7,036) 265,695
(1,216)
55,255
(8,256) 327,060
(6,710)
(26,359)
(33,114)
(23,738) 5,215,051 (145,298)
December 31, 2016
Investment securities available for sale:
U.S. Treasury and federal agencies.............................................. $1,710,241
Obligations of states and political subdivisions...........................
Mortgage-backed securities:
—
(9,950)
—
2,295
593
(2)
(6)
Government issued or guaranteed .......................................... 6,730,829
Privately issued.......................................................................
—
Other debt securities ....................................................................
100
Equity securities...........................................................................
17,776
(113,374)
—
(1)
(422)
81,003
27
85,400
151
8,458,946 (123,747) 169,469
(615)
(1)
(16,995)
(149)
(17,768)
Investment securities held to maturity:
Obligations of states and political subdivisions...........................
Mortgage-backed securities:
17,988
(126)
11,891
(98)
Government issued or guaranteed ..........................................
Privately issued.......................................................................
17,481
57,016
86,388
Total ............................................................................................. $9,113,677 (131,937) 255,857
618,832
17,911
654,731
(6,842)
(1,222)
(8,190)
(532)
(35,898)
(36,528)
(54,296)
The Company owned 1,163 individual investment securities with aggregate gross unrealized
losses of $169 million at December 31, 2017. Based on a review of each of the securities in the
investment securities portfolio at December 31, 2017, the Company concluded that it expected to
recover the amortized cost basis of its investment. As of December 31, 2017, 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, 2017, the Company has not identified events or changes in
125
circumstances which may have a significant adverse effect on the fair value of the $415 million of
cost method investment securities.
At December 31, 2017, investment securities with a carrying value of $2,401,871,000,
including $1,942,287,000 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 $487,151,000 at
December 31, 2017. 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
2017
2016
(In thousands)
Loans
Commercial, financial, etc....................................................................... $20,474,696 $21,351,119
Real estate:
Residential .......................................................................................... 19,619,259 22,584,141
Commercial......................................................................................... 25,345,779 25,550,057
Construction........................................................................................ 8,125,925 8,066,756
Consumer................................................................................................. 13,251,665 12,130,094
Total loans........................................................................................... 86,817,324 89,682,167
Leases
Commercial......................................................................................... 1,425,562 1,419,510
Total loans and leases .............................................................................. 88,242,886 91,101,677
Less: unearned discount...........................................................................
(248,261)
Total loans and leases, net of unearned discount..................................... $87,988,983 $90,853,416
(253,903)
One-to-four family residential mortgage loans held for sale were $356 million at December 31,
2017 and $414 million at December 31, 2016. Commercial real estate loans held for sale were $22
million at December 31, 2017 and $643 million at December 31, 2016.
As of December 31, 2017, approximately $3.3 billion of commercial real estate loan balances
serviced for others had been sold with recourse in conjunction with the Company’s participation in
the Fannie Mae Delegated Underwriting and Servicing (“DUS”) program. At December 31, 2017,
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.
126
In addition to recourse obligations, as described in note 21, the Company is contractually
obligated to repurchase previously sold residential real estate loans that do not ultimately meet
investor sale criteria related to underwriting procedures or loan documentation. When required to do
so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans.
Charges incurred for such obligation, which are recorded as a reduction of mortgage banking
revenues, were not material in 2017, 2016 or 2015.
A summary of current, past due and nonaccrual loans as of December 31, 2017 and 2016 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
December 31, 2017
Commercial, financial,
leasing, etc. ........................................ $21,332,234 167,756
Real estate:
(In thousands)
1,322
327
21 240,991 $21,742,651
Commercial..................................... 24,910,381 166,305
Residential builder and
—
developer...................................... 1,618,973
Other commercial construction....... 6,407,451
—
Residential ...................................... 15,376,759 474,372 233,437
Residential — limited
documentation.............................. 2,718,019
5,159
23,467
83,898
4,444
—
Consumer:
Home equity lines and loans........... 5,171,345
Automobile ..................................... 3,441,371
Other ............................................... 4,349,071
—
—
5,202
Total...................................................... $85,325,604 1,078,943 244,405
38,546
78,511
40,929
6,016
16,815 184,982 25,288,943
—
—
7,582
1,135
4,706
6,451 1,631,718
10,088 6,445,712
282,102 235,834 16,610,086
—
105,236
96,105 3,003,258
9,391
—
24,102
47,418
—
—
—
74,500 5,293,782
23,781 3,543,663
9,866 4,429,170
410,015 882,598 $87,988,983
December 31, 2016
Commercial, financial,
leasing, etc. ........................................ $22,287,857
Real estate:
53,503
6,195
417
641 261,434 $22,610,047
Commercial..................................... 25,076,684 183,531
Residential builder and
5
developer...................................... 1,884,989
Other commercial construction....... 5,985,118
922
Residential ...................................... 17,631,377 485,468 281,298
Residential — limited
documentation.............................. 3,239,344
4,667
77,701
88,366
7,054
—
Consumer:
Home equity lines and loans........... 5,502,091
Automobile ..................................... 2,869,232
Other ............................................... 3,491,629
—
—
5,185
Total...................................................... $87,968,321 1,025,245 300,659
44,565
56,158
31,286
12,870
31,404 176,201 25,487,744
1,952
198
11,537
14,006
14,274
16,707 1,922,326
18,111 6,096,324
378,549 229,242 19,017,471
—
139,158 106,573 3,573,441
12,678
1
21,491
61,144
—
—
—
81,815 5,641,149
18,674 2,944,065
11,258 3,560,849
578,032 920,015 $90,853,416
(a)
(b)
(c)
Excludes loans acquired at a discount.
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.
Accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value.
127
If nonaccrual and renegotiated loans had been accruing interest at their originally contracted
terms, interest income on such loans would have amounted to $63,872,000 in 2017, $68,371,000 in
2016 and $56,784,000 in 2015. The actual amounts included in interest income during 2017, 2016
and 2015 on such loans were $31,425,000, $33,941,000 and $30,735,000, 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 and included in the consolidated balance sheet
were as follows:
Outstanding principal balance ......................................................................................
Carrying amount:
Commercial, financial, leasing, etc.........................................................................
Commercial real estate............................................................................................
Residential real estate .............................................................................................
Consumer ................................................................................................................
December 31
2017
2016
(In thousands)
$ 1,394,188 $ 2,311,699
31,105
228,054
620,827
123,413
59,928
456,820
799,802
487,721
$ 1,003,399 $ 1,804,271
Purchased impaired loans included in the table above totaled $410 million at December 31,
2017 and $578 million at December 31, 2016, 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, 2017, 2016 and 2015 follows:
For the Year Ended December 31,
2017
2016
2015
Purchased Other
Purchased
Other
Purchased
Other
Impaired Acquired Impaired Acquired Impaired Acquired
(In thousands)
Balance at beginning of period ..... $154,233 $201,153 $184,618 $ 296,434 $ 76,518 $ 397,379
Additions.......................................
—
Interest income.............................. (47,452) (82,605) (52,769) (123,044) (28,551) (158,260)
Reclassifications from
49,930
nonaccretable balance ................ 51,137 16,437 22,384
Other(a) .........................................
7,385
—
Balance at end of period ............... $157,918 $133,162 $154,233 $ 201,153 $184,618 $ 296,434
22,677 19,400
—
5,086
— 117,251
(1,823)
—
—
—
—
(a) Other changes in expected cash flows including changes in interest rates and prepayment
assumptions.
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.
128
The tables that follow summarize the Company’s loan modification activities that were
considered troubled debt restructurings for the years ended December 31, 2017, 2016 and 2015:
Year Ended December 31, 2017
Pre-
modification
recorded
investment
Number
Post-modification (a)
Combination
of
Concession
Types
Principal
Deferral
Other
(Dollars in thousands)
Total
Commercial, financial, leasing, etc. ............................
Real estate:
217 $ 111,036 $ 25,051 $ 6,459 $
57,153 $ 88,663
Commercial ...........................................................
Residential builder and developer .........................
Other commercial construction .............................
Residential .............................................................
Residential — limited documentation ...................
83
3
2
141
20
44,924 17,039
12,291
168
868
— —
168 —
31,827 16,633 —
911 —
4,230
22,975 40,882
10,879 10,879
168
17,974 34,607
4,572
3,661
—
Consumer:
Home equity lines and loans..................................
Automobile ............................................................
Other ......................................................................
Total ............................................................................
Year Ended December 31, 2016
110
69
9
10,049
1,378
160
8,585 10,213
1,137
491
1,378
1,203 —
160
160 —
654 $ 216,063 $ 62,302 $ 7,818 $ 121,402 $191,522
175
—
Commercial, financial, leasing, etc. ............................
Real estate:
164 $ 154,093 $102,446 $ — $
41,673 $144,119
Commercial ...........................................................
Residential builder and developer .........................
Other commercial construction .............................
Residential .............................................................
Residential — limited documentation ...................
81
6
3
119
21
44,870 23,558 4,576
39,660 22,958 —
250 —
3,113
20,057 11,771 —
1,047 —
3,560
15,603 43,737
15,123 38,081
3,032
2,782
9,367 21,138
3,964
2,917
Consumer:
Home equity lines and loans..................................
Automobile ............................................................
Other ......................................................................
Total ............................................................................
11,870
1,264
1,209
761 —
103
55
163
79
45
739 $ 279,696 $164,883 $ 4,676 $
1,124
968
11,110 11,871
1,264
1,209
98,856 $268,415
85
196
129
Year Ended December 31, 2015
Commercial, financial, leasing, etc. ...........................
Real estate:
Commercial ..........................................................
Residential builder and developer ........................
Other commercial construction.............................
Residential ............................................................
Residential — limited documentation ..................
Consumer:
Home equity lines and loans.................................
Automobile ...........................................................
Other .....................................................................
Total ...........................................................................
Pre-
modification
recorded
investment
Number
Post-modification (a)
Combination
of
Concession
Types
Principal
Deferral
(Dollars in thousands)
Other
Total
127 $ 101,129 $ 50,807 $12,926 $
31,439 $ 95,172
58
2
6
85
11
56,893 48,388 4,087
—
10,650 10,598
—
460
10,743
267
6,528
10,485
—
437
1,962
3,242 55,717
— 10,598
10,375 10,835
4,277 11,072
2,072
1,635
—
71
287
302
155
116
817 $ 204,800 $123,206 $17,683 $
2,175
1,818
1,995
7,378
3,053
2,507
5,204
948
396
7,379
3,053
2,507
57,516 $198,405
(a)
Financial effects impacting the recorded investment included principal payments or advances, charge-offs
and capitalized escrow arrearages. The present value of interest rate concessions, discounted at the effective
rate of the original loan, was not material.
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, 2017, 2016 and 2015 and for which there was a subsequent payment default during the
respective year 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 $60,000, amounted to
$93,103,000 and $63,543,000 at December 31, 2017 and 2016, respectively. During 2017, new
borrowings by such persons amounted to $88,077,000 (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 individuals ceasing to be directors or officers) were
$58,517,000.
At December 31, 2017, approximately $11.9 billion of commercial loans and leases, $12.7
billion of commercial real estate loans, $15.3 billion of one-to-four family residential real estate
loans, $2.3 billion of home equity loans and lines of credit and $5.2 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.
130
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
2017
2016
(In thousands)
Commercial leases:
Direct financings:
Lease payments receivable..................................................................... $1,159,584 $1,136,815
79,449
Estimated residual value of leased assets...............................................
(107,535)
Unearned income ...................................................................................
Investment in direct financings ......................................................... 1,138,989 1,108,729
89,666
(110,261)
Leveraged leases:
Lease payments receivable.....................................................................
Estimated residual value of leased assets...............................................
Unearned income ...................................................................................
Investment in leveraged leases ..........................................................
92,918
110,328
(38,760)
164,486
Total investment in leases................................................................................ $1,279,509 $1,273,215
81,359 $ 139,067
Deferred taxes payable arising from leveraged leases..................................... $
87,821
88,491
(35,792)
140,520
Included within the estimated residual value of leased assets at December 31, 2017 and 2016
were $37 million and $47 million, respectively, in residual value associated with direct financing
leases that are guaranteed by the lessees or others.
At December 31, 2017, the minimum future lease payments to be received from lease
financings were as follows:
Year ending December 31:
(In thousands)
2018 .............................................................................................................................. $ 310,207
297,599
2019 ..............................................................................................................................
208,613
2020 ..............................................................................................................................
150,553
2021 ..............................................................................................................................
96,871
2022 ..............................................................................................................................
183,562
Later years ....................................................................................................................
$ 1,247,405
The amount of foreclosed residential real estate property held by the Company was $108
million and $129 million at December 31, 2017 and 2016, respectively. There were $497 million and
$506 million at December 31, 2017 and 2016, respectively, in loans secured by residential real estate
that were in the process of foreclosure. Of all loans in the process of foreclosure at December 31,
2017, approximately 45% were classified as purchased impaired and 19% were government
guaranteed.
131
5. Allowance for credit losses
Changes in the allowance for credit losses for the years ended December 31, 2017, 2016 and 2015
were as follows:
Commercial,
Financial,
Real Estate
Leasing, etc. Commercial Residential Consumer Unallocated
Total
(In thousands)
2017
Beginning balance ........................................... $ 330,833 362,719 61,127 156,288
Provision for credit losses ...............................
6,715 16,094 103,410
Net charge-offs
41,511
78,030 $ 988,997
168,000
270
(7,931) (20,799) (130,927)
Charge-offs.................................................
8,983 42,038
12,582
Recoveries..................................................
Net (charge-offs) recoveries ............................
4,651 (11,816) (88,889)
Ending balance ................................................ $ 328,599 374,085 65,405 170,809
(64,941)
21,196
(43,745)
—
—
—
(224,598)
84,799
(139,799)
78,300 $1,017,198
2016
Beginning balance ........................................... $ 300,404 326,831 72,238 178,320
Provision for credit losses ...............................
6,902 90,134
Net charge-offs
33,627
59,506
78,199 $ 955,992
190,000
(169)
(4,805) (26,133) (141,073)
Charge-offs.................................................
7,066
8,120 28,907
Recoveries..................................................
Net (charge-offs) recoveries ............................
2,261 (18,013) (112,166)
Ending balance ................................................ $ 330,833 362,719 61,127 156,288
(59,244)
30,167
(29,077)
—
—
—
(231,255)
74,260
(156,995)
78,030 $ 988,997
2015
Beginning balance ........................................... $ 288,038 307,927 61,910 186,033
25,768 19,133 79,489
Provision for credit losses ...............................
Net charge-offs
43,065
(16,487) (13,116) (107,787)
Charge-offs.................................................
4,311 20,585
Recoveries..................................................
(8,805) (87,202)
Net charge-offs ................................................
Ending balance ................................................ $ 300,404 326,831 72,238 178,320
(60,983)
30,284
(30,699)
9,623
(6,864)
75,654 $ 919,562
170,000
2,545
—
—
—
(198,373)
64,803
(133,570)
78,199 $ 955,992
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 targeted 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 loans and commercial real
estate loans that are in nonaccrual status and by applying loss factors to groups of loan balances
based on loan type and management’s classification of such loans under the Company’s loan grading
system. Measurement of the specific loss components is typically based on expected future cash
flows, collateral values and other factors that may impact the borrower’s ability to pay. In
determining the allowance for credit losses, the Company utilizes a loan grading system which is
applied to commercial and commercial real estate credits on an individual loan basis. Loan 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-
132
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.
The following tables provide information with respect to loans and leases that were considered
impaired as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and
2015.
December 31, 2017
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
Recorded
Investment
December 31, 2016
Unpaid
Principal
Balance
Related
Allowance
With an allowance recorded:
Commercial, financial, leasing, etc. ......................
Real estate:
(In thousands)
$177,250 194,257 45,488 168,072 184,432 48,480
Commercial .....................................................
Residential builder and developer ...................
Other commercial construction .......................
Residential .......................................................
Residential — limited documentation .............
67,199 75,084
5,320 5,641
4,817 20,357
101,724 122,602
77,277 92,439
308
647
9,140 71,862 86,666 11,620
506
7,396 8,361
448
2,475 2,731
3,457
4,000 86,680 105,944
6,000
3,900 82,547 97,718
Consumer:
Home equity lines and loans............................
Automobile ......................................................
Other ................................................................
With no related allowance recorded:
Commercial, financial, leasing, etc. ......................
Real estate:
Commercial......................................................
Residential builder and developer ...................
Other commercial construction........................
Residential .......................................................
Residential — limited documentation .............
Total:
Commercial, financial, leasing, etc. ......................
Real estate:
48,847 53,914
13,498 15,737
3,220 5,872
8,027
3,740
776
499,152 585,903 75,762 484,498 558,385 83,054
8,812 44,693 48,965
2,811 16,982 18,272
3,791 5,296
656
89,126 115,327
— 100,805 124,786
138,356 149,716
5,057 5,296
5,456 9,130
13,574 18,980
9,588 16,138
261,157 314,587
— 113,276 121,846
— 14,368 21,124
— 15,933 35,281
— 16,823 24,161
— 15,429 24,590
— 276,634 351,788
—
—
—
—
—
—
—
266,376 309,584 45,488 268,877 309,218 48,480
Commercial......................................................
Residential builder and developer ...................
Other commercial construction........................
Residential .......................................................
Residential — limited documentation .............
205,555 224,800
10,377 10,937
10,273 29,487
115,298 141,582
86,865 108,577
9,140 185,138 208,512 11,620
506
448
3,457
6,000
308 21,764 29,485
647 18,408 38,012
4,000 103,503 130,105
3,900 97,976 122,308
Consumer:
Home equity lines and loans............................
Automobile ......................................................
Other ................................................................
Total............................................................................
48,847 53,914
13,498 15,737
3,220 5,872
8,027
3,740
776
$760,309 900,490 75,762 761,132 910,173 83,054
8,812 44,693 48,965
2,811 16,982 18,272
3,791 5,296
656
133
Year Ended December 31, 2017
Interest Income
Recognized
Year Ended December 31, 2016
Interest Income
Recognized
Average
Recorded
Investment
Total
Cash
Basis
Average
Recorded
Investment
(In thousands)
Total
Cash
Basis
Commercial, financial, leasing, etc. ....................... $240,157
Real estate:
3,894 3,894 277,647 8,342 8,342
Commercial....................................................... 207,616
Residential builder and developer..................... 16,209
Other commercial construction......................... 15,142
Residential ........................................................ 110,646
Residential — limited documentation .............. 93,097
4,497 4,497 175,877 4,878 4,878
6,419 6,419 29,237 2,300 2,300
1,001 1,001 19,697
644
7,177 3,406 98,394 6,227 3,154
5,981 1,607 103,060 5,999 1,975
644
Consumer:
Home equity lines and loans............................. 47,323
Automobile ....................................................... 15,045
3,363
Other .................................................................
Total ....................................................................... $748,598
1,681
1,025
308
410
99
83
31,983 21,316 769,259 31,397 21,885
400 36,493 1,325
81 19,636 1,242
440
9,218
11
Year Ended December 31, 2015
Interest Income
Recognized
Average
Recorded
Investment
Total
(In thousands)
Cash
Basis
Commercial, financial, leasing, etc. ..........................................................................
Real estate:
$236,201 2,933 2,933
Commercial ..........................................................................................................
Residential builder and developer........................................................................
Other commercial construction ............................................................................
Residential............................................................................................................
Residential — limited documentation..................................................................
335
166,628 6,243 6,243
59,457
335
20,276 2,311 2,311
101,483 6,188 4,037
118,449 6,380 2,638
Consumer:
Home equity lines and loans ................................................................................
Automobile...........................................................................................................
Other.....................................................................................................................
Total...........................................................................................................................
21,523
905
261
25,675 1,619
175
113
729
18,809
$768,501 27,643 19,046
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. 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.
134
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.
Real Estate
Residential
Builder and Commercial
Commercial Developer Construction
Other
(In thousands)
December 31, 2017
Pass .............................................................................................. $20,490,486 24,380,184 1,485,148 6,270,812
164,812
Criticized accrual......................................................................... 1,011,174
Criticized nonaccrual...................................................................
10,088
240,991
Total............................................................................................. $21,742,651 25,288,943 1,631,718 6,445,712
December 31, 2016
Pass .............................................................................................. $21,398,581 24,570,269 1,789,071 5,912,351
165,862
Criticized accrual.........................................................................
Criticized nonaccrual...................................................................
18,111
Total............................................................................................. $22,610,047 25,487,744 1,922,326 6,096,324
741,274 116,548
16,707
176,201
723,777 140,119
6,451
184,982
950,032
261,434
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 $34 million and $25
million, respectively, at December 31, 2017 and $44 million and $32 million, respectively, at
December 31, 2016. 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 $32 million,
respectively, at December 31, 2017 and $16 million and $39 million, respectively, at December 31,
2016.
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. Given the inherent
subjectivity and potential imprecision involved in determining the allocated portion of the allowance
for credit losses, the Company also provides an inherent unallocated portion of the allowance. The
unallocated portion of the allowance is intended to recognize probable losses that are not otherwise
identifiable and includes management’s subjective determination of amounts necessary to provide for
the possible use of imprecise estimates in determining the allocated portion of the allowance.
Therefore, the level of the unallocated portion of the allowance is primarily reflective of the inherent
imprecision in the various calculations used in determining the allocated portion of the allowance for
135
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,
Real Estate
Leasing, etc. Commercial Residential Consumer
Total
(In thousands)
—
45,488
10,095
December 31, 2017
Individually evaluated for impairment ............................. $
7,900 12,279 $
Collectively evaluated for impairment ............................. 283,111 363,990 47,645 158,530
Purchased impaired...........................................................
—
Allocated........................................................................... $ 328,599 374,085 65,405 170,809
Unallocated .......................................................................
Total..................................................................................
December 31, 2016
9,457 12,543 $
Individually evaluated for impairment ............................. $
Collectively evaluated for impairment ............................. 282,353 348,301 47,993 143,745
Purchased impaired...........................................................
—
Allocated........................................................................... $ 330,833 362,719 61,127 156,288
Unallocated .......................................................................
Total..................................................................................
12,500
48,480
3,677
9,860
1,918
—
—
75,762
853,276
9,860
938,898
78,300
$1,017,198
82,980
822,392
5,595
910,967
78,030
$ 988,997
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)
266,376
December 31, 2017
Individually evaluated for impairment ........................ $
760,309
Collectively evaluated for impairment ....................... 21,476,254 33,117,512 19,023,843 13,201,050 86,818,659
Purchased impaired .....................................................
410,015
Total............................................................................. $21,742,651 33,366,373 19,613,344 13,266,615 $87,988,983
December 31, 2016
760,452
Individually evaluated for impairment ........................ $
Collectively evaluated for impairment ........................ 22,340,529 33,222,080 21,871,726 12,080,597 89,514,932
Purchased impaired .....................................................
578,032
Total............................................................................. $22,610,047 33,506,394 22,590,912 12,146,063 $90,853,416
268,877
224,630
226,205
517,707
201,479
202,163
387,338
65,466 $
65,565 $
59,684
22,656
641
21
—
—
136
6. Premises and equipment
The detail of premises and equipment was as follows:
December 31
2017
2016
(In thousands)
Land .................................................................................................................. $
Buildings...........................................................................................................
Leasehold improvements..................................................................................
Furniture and equipment — owned ..................................................................
Furniture and equipment — capital leases .......................................................
98,077 $ 104,671
448,442
454,610
232,936
239,956
636,219
676,665
14,849
18,039
1,487,347 1,437,117
Less: accumulated depreciation and amortization
Owned assets................................................................................................
Capital leases ...............................................................................................
756,245
5,609
761,854
Premises and equipment, net ............................................................................ $ 646,451 $ 675,263
830,832
10,064
840,896
Net lease expense for all operating leases totaled $114,362,000 in 2017, $113,663,000 in 2016
and $102,356,000 in 2015. Minimum lease payments under noncancelable operating leases are
presented in note 21. Minimum lease payments required under capital leases are not material.
7. Capitalized servicing assets
Changes in capitalized servicing assets were as follows:
For the Year Ended December 31,
Residential Mortgage Loans
2016
2015
2017
Commercial Mortgage Loans
2016
2015
2017
(In thousands)
Beginning balance ........................... $117,351 $118,303 $109,871 $103,764 $ 83,692 $ 72,939
Originations ..................................... 28,792 28,618 35,556 34,620 40,117 29,914
—
Purchases .........................................
Amortization .................................... (31,864) (30,208) (27,367) (24,308) (20,045) (19,161)
114,978 117,351 118,303 114,076 103,764 83,692
—
—
Valuation allowance ........................
Ending balance, net.......................... $114,978 $117,351 $118,303 $114,076 $103,764 $ 83,692
243
638
699
—
—
—
—
—
—
For the Year Ended December 31,
2017
Other
2016
2015
2017
Total
2016
2015
Beginning balance ........................... $
Originations .....................................
Purchases .........................................
Amortization ....................................
Valuation allowance ........................
Ending balance, net.......................... $
— $
—
—
—
—
—
— $
729 $
—
—
(729)
—
—
— $
(In thousands)
4,107 $221,115 $202,724 $186,917
— 63,412 68,735 65,470
243
—
(3,378) (56,172) (50,982) (49,906)
729 229,054 221,115 202,724
—
—
729 $229,054 $221,115 $202,724
699
638
—
—
137
Residential mortgage loans serviced for others were $22.6 billion at December 31, 2017, $22.8
billion at December 31, 2016 and $23.9 billion at December 31, 2015. Excluded from residential
mortgage loans serviced for others were loans sub-serviced for others of $56.6 billion, $30.4 billion
and $37.8 billion at December 31, 2017, 2016, and 2015, respectively. Commercial mortgage loans
serviced for others were $13.6 billion at December 31, 2017, $11.8 billion at December 31, 2016 and
$11.0 billion at December 31, 2015. Excluded from commercial mortgage loans serviced for others
were loans sub-serviced for others of $2.6 billion at December 31, 2017.
The estimated fair value of capitalized residential mortgage loan servicing assets was
approximately $234 million at December 31, 2017 and $235 million at December 31, 2016. The fair
value of capitalized residential mortgage loan servicing assets was estimated using weighted-average
discount rates of 12.2% at each of December 31, 2017 and 2016 and contemporaneous prepayment
assumptions that vary by loan type. At December 31, 2017 and 2016, the discount rate represented a
weighted-average option-adjusted spread (“OAS”) of 1,067 basis points (hundredths of one percent)
and 1,095 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 $132 million and $119 million at December 31, 2017 and 2016,
respectively. An 18% discount rate was used to estimate the fair value of capitalized commercial
mortgage loan servicing rights at December 31, 2017 and 2016 with no prepayment assumptions
because, in general, the servicing agreements allow the Company to share in customer loan
prepayment fees and thereby recover the remaining carrying value of the capitalized servicing rights
associated with such loan. The Company’s ability to realize the carrying value of capitalized
commercial mortgage servicing rights is more dependent on the borrowers’ abilities to repay the
underlying loans than on prepayments or changes in interest rates.
The key economic assumptions used to determine the fair value of significant portfolios of
capitalized servicing rights at December 31, 2017 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 ..............................................
12.16%
Impact on fair value of 10% adverse change ................................ $ (8,935,000)
Impact on fair value of 20% adverse change ................................ (17,159,000)
10.67%
Impact on fair value of 10% adverse change ................................ $ (6,838,000)
Impact on fair value of 20% adverse change ................................ (13,267,000)
Weighted-average OAS .....................................................................
Weighted-average discount rate ........................................................
Impact on fair value of 10% adverse change ................................
Impact on fair value of 20% adverse change ................................
18.00%
$ (5,885,000)
(11,342,000)
138
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
(In thousands)
Net Carrying
Amount
December 31, 2017
Core deposit ....................................................... $
Other ..................................................................
Total ................................................................... $
887,459 $
182,568
1,070,027 $
820,110 $
178,328
998,438 $
December 31, 2016
Core deposit ....................................................... $
Other ..................................................................
Total ................................................................... $
887,459 $
177,268
1,064,727 $
789,988 $
177,084
967,072 $
67,349
4,240
71,589
97,471
184
97,655
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. Amortization expense for core deposit
and other intangible assets was $31,366,000, $42,613,000 and $26,424,000 for the years ended
December 31, 2017, 2016 and 2015, respectively. Estimated amortization expense in future years for
such intangible assets is as follows:
Year ending December 31:
2018 ............................................................................................................................... $
2019 ...............................................................................................................................
2020 ...............................................................................................................................
2021 ...............................................................................................................................
2022 ...............................................................................................................................
$
24,522
19,086
14,383
9,681
3,917
71,589
(In thousands)
In accordance with GAAP, the Company completed annual goodwill impairment tests as of
October 1, 2017, 2016 and 2015. 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
139
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, 2017 and 2016 for purposes of testing for impairment is as follows:
(In thousands)
Business Banking ............................................................................................................ $
864,366
Commercial Banking ....................................................................................................... 1,401,873
654,389
Commercial Real Estate ..................................................................................................
—
Discretionary Portfolio ....................................................................................................
—
Residential Mortgage Banking ........................................................................................
Retail Banking ................................................................................................................. 1,309,191
All Other ..........................................................................................................................
363,293
Total................................................................................................................................. $ 4,593,112
9. Borrowings
The amounts and interest rates of short-term borrowings were as follows:
Federal Funds
Purchased
and
Repurchase
Agreements
Other
Short-term
Borrowings
(Dollars in thousands)
Total
At December 31, 2017
Amount outstanding ...................................................... $ 175,099
Weighted-average interest rate ......................................
$
0.92%
—
—
$ 175,099
0.92%
For the year ended December 31, 2017
Highest amount at a month-end..................................... $ 204,977
Daily-average amount outstanding ................................
188,459
Weighted-average interest rate ......................................
0.69%
$ 1,500,000
16,164
$ 204,623
1.27%
0.74%
At December 31, 2016
Amount outstanding ...................................................... $ 163,442
Weighted-average interest rate ......................................
$
0.32%
—
—
$ 163,442
0.32%
For the year ended December 31, 2016
Highest amount at a month-end..................................... $ 225,940
Daily-average amount outstanding ................................
203,853
Weighted-average interest rate ......................................
0.28%
$ 1,974,013
689,969
$ 893,822
0.44%
0.41%
At December 31, 2015
Amount outstanding ...................................................... $ 150,546
Weighted-average interest rate ......................................
0.06%
$ 1,981,636
$ 2,132,182
0.43%
0.40%
For the year ended December 31, 2015
Highest amount at a month-end..................................... $ 202,951
Daily-average amount outstanding ................................
187,167
Weighted-average interest rate ......................................
0.08%
$ 1,989,257
360,838
$ 548,005
0.43%
0.31%
140
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, 2017 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 matured at various dates during 2016.
At December 31, 2017, M&T Bank had lines of credit under formal agreements as follows:
(In thousands)
Outstanding borrowings ................................................................................................. $
Unused............................................................................................................................
576,954
31,624,206
At December 31, 2017, M&T Bank had borrowing facilities available with the FHLBs whereby
M&T Bank could borrow up to approximately $20.2 billion. Additionally, M&T Bank had an
available line of credit with the Federal Reserve Bank of New York totaling approximately $12.0
billion at December 31, 2017. M&T Bank is required to pledge loans and investment securities as
collateral for these borrowing facilities.
141
Long-term borrowings were as follows:
Senior notes of M&T Bank:
Variable rate due 2017 ................................................................. $
Variable rate due 2022 .................................................................
1.25% due 2017............................................................................
1.40% due 2017............................................................................
1.45% due 2018............................................................................
2.25% due 2019............................................................................
2.30% due 2019............................................................................
2.10% due 2020............................................................................
2.05% due 2020............................................................................
2.50% due 2022............................................................................
2.90% due 2025............................................................................
Advances from FHLB:
Fixed rates ....................................................................................
Agreements to repurchase securities.................................................
Subordinated notes of Wilmington Trust Corporation (a wholly
owned subsidiary of M&T):
December 31,
2017
2016
(In thousands)
— $
249,558
—
—
499,907
644,977
746,919
743,788
739,961
638,872
749,404
550,000
—
499,999
749,946
501,829
649,012
749,473
749,735
—
—
749,320
576,876
421,771
1,154,737
1,084,694
8.50% due 2018............................................................................
200,000
207,651
Subordinated notes of M&T Bank:
6.625% due 2017..........................................................................
5.585% due 2020, variable rate commenced 2015.......................
5.629% due 2021, variable rate commenced 2016.......................
3.40% due 2027............................................................................
—
409,361
500,000
491,176
409,526
409,361
500,000
—
Junior subordinated debentures of M&T associated with preferred
capital securities:
Fixed rates:
BSB Capital Trust I — 8.125%, due 2028 ..............................
Provident Trust I — 8.29%, due 2028.....................................
Southern Financial Statutory Trust I — 10.60%, due 2030 ....
15,682
26,847
6,664
15,659
26,293
6,620
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..................................................................................................
$
146,794
148,617
96,640
15,464
54,466
8,051
9,635
8,141,430 $
146,256
147,954
96,494
15,464
53,834
7,968
12,010
9,493,835
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 were 2.05% at December 31, 2017 and
ranged from 1.18% to 1.26% at December 31, 2016. The weighted-average contractual interest rate
was 1.22% at December 31, 2016.
142
Long-term fixed rate advances from the FHLB had contractual interest rates ranging from 1.97% to
5.98% at December 31, 2017 and from 1.17% to 7.32% at December 31, 2016. The weighted-average
contractual interest rate was 2.06% at December 31, 2017 and 1.65% at December 31, 2016. 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 4.09%
to 4.58% at December 31, 2017 and from 3.65% to 4.58% at December 31, 2016. The weighted-average
contractual interest rates payable were 4.31% at December 31, 2017 and 4.05% at December 31, 2016.
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 $442 million and $1.1
billion at December 31, 2017 and 2016, 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 rates were 2.78% and 1.97% at
December 31, 2017 and 2016, respectively. The subordinated notes of M&T Bank that mature in 2021
converted to variable rate notes in December 2016. Those notes now pay interest quarterly at a rate that is
indexed to the three-month LIBOR. The contractual interest rate was 2.12% at December 31, 2017 and
1.57% at December 31, 2016.
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 risk-based capital guidelines, the Capital
Securities qualify for inclusion in Tier 2 regulatory capital. The variable rate Junior Subordinated
Debentures pay interest quarterly at rates that are indexed to the three-month LIBOR. Those rates ranged
from 2.23% to 4.71% at December 31, 2017 and from 1.74% to 4.23% at December 31, 2016. The
weighted-average variable rates payable on those Junior Subordinated Debentures were 2.83% at
December 31, 2017 and 2.33% at December 31, 2016.
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
143
contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated
Debentures in whole or in part, subject to possible regulatory approval.
Long-term borrowings at December 31, 2017 mature as follows:
Year ending December 31:
2018 .............................................................................................................................. $ 701,256
2019 .............................................................................................................................. 2,282,016
2020 .............................................................................................................................. 2,005,383
502,487
2021 ..............................................................................................................................
2022 ..............................................................................................................................
888,430
Later years .................................................................................................................... 1,761,858
$ 8,141,430
(In thousands)
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, 2017 and 2016 is presented
below:
Series A (a)
Fixed Rate Cumulative Perpetual Preferred Stock,
$1,000 liquidation preference per share .......................................................................
Series C (a)
Fixed Rate Cumulative Perpetual Preferred Stock,
$1,000 liquidation preference per share .......................................................................
Series E (b)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock,
$1,000 liquidation preference per share .......................................................................
Series F (c)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock,
$10,000 liquidation preference per share .....................................................................
Shares
Issued and
Outstanding
Carrying
Value
(Dollars in thousands)
230,000 $ 230,000
151,500 $ 151,500
350,000 $ 350,000
50,000 $ 500,000
(a) Dividends, if declared, are paid at 6.375%. Warrants to purchase M&T common stock at $73.77 per share issued in
connection with the Series A preferred stock expire December 23, 2018 and totaled 257,008 at December 31, 2017.
(b) 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. 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.
Dividends, if declared, are paid semi-annually at a rate of 5.125% through October 31, 2026 and thereafter will be
paid quarterly at a rate of the three-month LIBOR plus 352 basis points. The shares are redeemable in whole or in
part on or after November 1, 2026. 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)
144
In addition to the Series A warrants, a warrant to purchase 95,500 shares of M&T common
stock at $518.32 per share was outstanding at December 31, 2017. The obligation under that warrant
was assumed by M&T in an acquisition and expires on December 12, 2018.
11. Stock-based compensation plans
Stock-based compensation expense was $61 million in 2017, $65 million in 2016 and $67 million in
2015. The Company recognized income tax benefits related to stock-based compensation of $35
million in 2017, $31 million in 2016 and $29 million in 2015.
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, 2017 and 2016, respectively, there were 3,278,036 and
3,667,800 shares available for future grant under the Company’s equity incentive compensation plan.
Restricted stock awards
Restricted stock awards are comprised of restricted stock and restricted stock units. Restricted stock
awards granted since 2014 vest over three years. Restricted stock awards granted prior to 2014 vested
over four years. A portion of restricted stock awards granted after 2013 require a performance
condition to be met before such awards vest. Unrecognized compensation expense associated with
restricted stock was $15 million as of December 31, 2017 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
181,939 in 2017, 218,341 in 2016 and 218,183 in 2015, with a weighted-average grant date fair value
of $29,557,000 in 2017, $24,085,000 in 2016 and $24,726,000 in 2015. Unrecognized compensation
expense associated with restricted stock units was $6 million as of December 31, 2017 and is
expected to be recognized over a weighted-average period of approximately one year. The number of
restricted stock units issued was 235,983 in 2017, 348,297 in 2016 and 324,772 in 2015, with a
weighted-average grant date fair value of $38,364,000, $38,795,000 and $37,070,000, respectively.
A summary of restricted stock and restricted stock unit activity follows:
Restricted
Stock Units
Outstanding
Weighted-
Average
Restricted
Stock
Grant Price
Outstanding
Weighted-
Average
Grant Price
Unvested at January 1, 2017................................... 739,350 $ 111.21 499,324 $ 109.92
162.46
Granted ................................................................... 235,983
108.97
Vested..................................................................... (481,002)
Cancelled ................................................................
128.64
(11,774)
Unvested at December 31, 2017............................. 482,557 $ 133.05 373,744 $ 135.41
162.57 181,939
114.06 (290,935)
(16,584)
129.15
Stock option awards
Stock options issued generally vested 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 2017, 2016 and 2015 were not significant.
145
A summary of stock option activity follows:
Weighted-Average
Stock
Options
Outstanding
Exercise
Price
Life
(In Years)
Aggregate
Intrinsic Value
(In thousands)
Outstanding at January 1, 2017.............................. 1,594,591 $ 139.60
162.57
200
Granted...................................................................
116.20
Exercised................................................................ (658,400)
Expired ................................................................... (270,979)
165.46
Outstanding at December 31, 2017........................ 665,412 $ 152.23
Exercisable at December 31, 2017......................... 665,010 $ 152.23
0.8 $
0.8 $
18,086
18,072
For 2017, 2016 and 2015, M&T received $72 million, $172 million and $93 million,
respectively, in cash and realized tax benefits from the exercise of stock options of $10 million, $15
million and $6 million, respectively. The intrinsic value of stock options exercised during those
periods was $31 million, $42 million and $17 million, respectively. As of December 31, 2017, 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 2017, 2016 and 2015 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.
Stock purchase plan
The stock purchase plan provides eligible employees of the Company with the right to purchase
shares of M&T common stock at a discount through accumulated payroll deductions. In connection
with the employee stock purchase plan, 2,500,000 shares of M&T common stock were authorized for
issuance under a plan adopted in 2013. There were 66,504 shares issued in 2017, 97,880 shares
issued in 2016 and 89,384 shares issued in 2015. For 2017, 2016 and 2015, M&T received
$9,730,000, $9,528,000 and $9,296,000, respectively, in cash for shares purchased through the
employee stock purchase plan. Compensation expense recognized for the stock purchase plan was
not significant in 2017, 2016 or 2015.
Deferred bonus plan
The Company provided a deferred bonus plan pursuant to which eligible employees could elect to
defer all or a portion of their annual incentive compensation awards and allocate such awards to
several investment options, including M&T common stock. Participants could elect the timing of
distributions from the plan. Such distributions are payable in cash with the exception of balances
allocated to M&T common stock which are distributable in the form of M&T common stock. Shares
of M&T common stock distributable pursuant to the terms of the deferred bonus plan were 19,633
and 23,188 at December 31, 2017 and 2016, respectively. The obligation to issue shares is included
in “common stock issuable” in the consolidated balance sheet.
Directors’ stock plan
The Company maintains a compensation plan for non-employee members of the Company’s boards
of directors and directors advisory councils that allows such members to receive all or a portion of
their compensation in shares of M&T common stock. Through December 31, 2017, 255,816 shares
had been issued in connection with the directors’ stock plan.
146
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 7,505 and 9,215 at December 31, 2017 and 2016, 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:
2017
Year Ended December 31
2016
(In thousands)
2015
Service cost ........................................................................ $
Interest cost on benefit obligation......................................
Expected return on plan assets...........................................
Amortization of prior service cost (credit) ........................
Recognized net actuarial loss.............................................
Net periodic pension expense ............................................ $
20,193 $
79,270
(108,524)
557
29,263
20,759 $
25,037 $
83,410
(108,473)
(3,228)
30,145
26,891 $
24,372
72,731
(96,155)
(6,005)
44,825
39,768
Net other postretirement benefits expense for defined benefit plans consisted of the following:
2017
Year Ended December 31
2016
(In thousands)
2015
Service cost ........................................................................ $
Interest cost on benefit obligation......................................
Amortization of prior service credit...................................
Recognized net actuarial (gain) loss ..................................
Net other postretirement benefits expense......................... $
1,172 $
3,716
(1,359)
(988)
2,541 $
1,595 $
4,971
(1,359)
60
5,267 $
914
2,995
(1,359)
106
2,656
147
Data relating to the funding position of the defined benefit plans were as follows:
Pension Benefits
2017
2016
Other
Postretirement Benefits
2017
2016
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year ............. $2,007,158 $2,004,531 $ 109,922 $ 121,497
25,037
1,595
Service cost........................................................
1,172
83,410
4,971
Interest cost........................................................
3,716
—
3,085
Plan participants’ contributions .........................
2,929
(28,308)
Amendments and curtailments ..........................
—
(30,088)
4,827
(10,553)
Actuarial (gain) loss...........................................
(8,511)
—
Medicare Part D reimbursement........................
592
630
(11,133)
Benefits paid ......................................................
(11,265)
(82,339)
68,637 109,922
Benefit obligation at end of year ....................... 2,188,736 2,007,158
20,193
79,270
—
—
172,180
—
(90,065)
Change in plan assets:
Fair value of plan assets at beginning of year ... 1,642,131 1,625,134
88,564
Actual return on plan assets...............................
10,772
Employer contributions .....................................
—
Plan participants’ contributions .........................
Medicare Part D reimbursement........................
—
(82,339)
Benefits paid ......................................................
Fair value of plan assets at end of year.............. 2,014,891 1,642,131
—
—
7,588
3,085
592
(11,265)
—
Funded status.......................................................... $ (173,845) $ (365,027) $ (68,637) $(109,922)
Accrued liabilities recognized in the consolidated
balance sheet........................................................ $ (173,845) $ (365,027) $ (68,637) $(109,922)
Amounts recognized in accumulated other
comprehensive income (“AOCI”) were:
—
—
7,574
2,929
630
(11,133)
—
251,381
211,444
—
—
(90,065)
Net loss (gain).................................................... $ 460,622 $ 460,562 $ (13,936) $
(36,466)
Net prior service cost (credit) ............................
(50,402)
Pre-tax adjustment to AOCI ..............................
Taxes..................................................................
13,251
Net adjustment to AOCI .................................... $ 341,697 $ 281,456 $ (37,151) $
3,505
464,067
(182,611)
2,948
463,570
(121,873)
(6,413)
(7,737)
(14,150)
5,568
(8,582)
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 $165,210,000 as of December 31, 2017 and $160,433,000 as of
December 31, 2016.
The accumulated benefit obligation for all defined benefit pension plans was $2,158,601,000
and $1,979,225,000 at December 31, 2017 and 2016, respectively.
148
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. Amortization of net gains and losses is included in annual net periodic
benefit expense if, as of the beginning of the year, the net gain or loss exceeds 10% of the greater of
the benefit obligation or the fair value of the plan assets. As indicated in the preceding table, as of
December 31, 2017 the Company recorded a minimum liability adjustment of $413,168,000
($463,570,000 related to pension plans and $(50,402,000) related to other postretirement benefits)
with a corresponding reduction of shareholders’ equity, net of applicable deferred taxes, of
$304,546,000. In aggregate, the benefit plans realized a net gain during 2017 that allowed the
Company to decrease its minimum liability adjustment from that which was recorded at
December 31, 2016 by $36,749,000. The net gain reflects an amendment to the former Hudson City
postretirement health and life plans. 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
2017
Net loss (gain) .................................................................... $
Amendments and curtailments...........................................
Amortization of prior service (cost) credit ........................
Amortization of actuarial (loss) gain .................................
Total recognized in other comprehensive income,
pre-tax ............................................................................. $
2016
Net loss (gain) .................................................................... $
Amendments and curtailments...........................................
Amortization of prior service credit...................................
Amortization of actuarial loss............................................
Total recognized in other comprehensive income,
pre-tax ............................................................................. $
29,323 $
—
(557)
(29,263)
(8,511) $
(30,088)
1,359
988
20,812
(30,088)
802
(28,275)
(497) $
(36,252) $
(36,749)
24,736 $
(28,308)
3,228
(30,145)
(10,553) $
—
1,359
(60)
14,183
(28,308)
4,587
(30,205)
(30,489) $
(9,254) $
(39,743)
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 2018:
Amortization of net prior service cost (credit) .................................. $
Amortization of net loss (gain)..........................................................
557 $
44,416
(4,729)
(830)
Pension Plans
Other
Postretirement
Benefit Plans
(In thousands)
149
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 2017, 2016 and 2015 associated with the
defined contribution pension plan was approximately $30 million, $25 million and $23 million,
respectively.
Assumptions
The assumed weighted-average rates used to determine benefit obligations at December 31 were:
Pension
Benefits
Other
Postretirement
Benefits
2017
2016
2017
2016
Discount rate......................................................................... 3.50% 4.00% 3.50% 4.00%
Rate of increase in future compensation levels .................... 4.33% 4.39% —
—
The assumed weighted-average rates used to determine net benefit expense for the years ended
December 31 were:
Pension Benefits
2016
2017
2015
2017
Other
Postretirement Benefits
2016
2015
Discount rate ....................................................... 4.00% 4.25% 4.00% 4.00% 4.25% 4.00%
Long-term rate of return on plan assets .............. 6.50% 6.50% 6.50% —
Rate of increase in future compensation
levels ................................................................ 4.39% 4.37% 4.39% —
—
—
—
—
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.
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.
The company’s defined benefit pension plan is sensitive to the long-term rate of return on plan
assets and the discount rate. To demonstrate the sensitivity of pension expense to changes in these
assumptions, with all other assumptions held constant, 25 basis point increases in: the rate of return
on plan assets would have resulted in a decrease in pension expense of approximately $4 million; and
the discount rate would have resulted in a decrease in pension expense of approximately $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. Additionally, an
increase of 25 basis points in the discount rate would have decreased the benefit obligation by
150
$76 million and a decrease of 25 basis points in the discount rate would have increased the benefit
obligation by $80 million at December 31, 2017.
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 2018. The rate was assumed to decrease
to 5.00% over 11 years. A one-percentage point change in assumed health care cost trend rates would
have had the following effects:
Increase (decrease) in:
Service and interest cost......................................................................................... $
(57)
Accumulated postretirement benefit obligation ..................................................... 1,454 (1,316)
63 $
+1%
-1%
(In thousands)
Plan assets
The Company’s policy is to invest the pension plan assets in a prudent manner for the purpose of
providing benefit payments to participants and mitigating reasonable expenses of administration. The
Company’s investment strategy is designed to provide a total return that, over the long-term, places
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 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 25 to
60 percent equity securities, 10 to 65 percent debt securities, and 10 to 85 percent money-market
investments/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. Assets are managed by a combination
of internal and external investment managers. Equity securities may include investments in domestic
and international equities, through individual securities, mutual funds and exchange-traded funds.
Debt securities may include investments in corporate bonds of companies from diversified industries,
mortgage-backed securities guaranteed by government agencies and U.S. Treasury securities,
through individual securities and mutual funds. Additionally, the Company’s defined benefit pension
plan held $304,463,000 (15% of total assets) of real estate funds, private investments, hedge funds
and other investments at December 31, 2017. 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.
151
The fair values of the Company’s pension plan assets at December 31, 2017 and 2016, by asset
category, were as follows:
Fair Value Measurement of Plan Assets At December 31, 2017
Quoted Prices
in Active
Markets
for Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(In thousands)
Total
Asset category:
Money-market investments ................................... $ 117,648 $
Equity securities:
62,706 $ 54,942 $
M&T .................................................................
Domestic(a).......................................................
International(b) .................................................
Mutual funds:
154,818
240,763
13,349
154,818
240,763
13,349
Domestic(a)..................................................
International(b).............................................
205,509
405,200
1,019,639
205,509
405,200
1,019,639
—
—
—
—
—
—
Debt securities:
Corporate(c) ......................................................
Government ......................................................
International ......................................................
Mutual funds:
Domestic(d)..................................................
89,751
235,984
2,176
—
89,751
— 235,984
2,176
—
243,456
571,367
243,456
—
243,456 327,911
—
—
—
—
—
—
—
—
—
—
—
—
Other:
Diversified mutual fund ....................................
Real estate partnerships ....................................
Private equity ....................................................
Hedge funds ......................................................
Guaranteed deposit fund ...................................
80,227
3,747
31,484
178,080
10,925
304,463
Total(e) .................................................................. $2,013,117 $
80,227
842
—
125,966
—
207,035
—
—
—
—
—
—
1,532,836 $ 382,853 $
—
2,905
31,484
52,114
10,925
97,428
97,428
152
Fair Value Measurement of Plan Assets At December 31, 2016
Quoted Prices
in Active
Markets
for Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(In thousands)
Total
Asset category:
Money-market investments.................................... $
Equity securities:
M&T..................................................................
Domestic(a) .......................................................
International(b)..................................................
Mutual funds:
Domestic(a) ..................................................
International(b) .............................................
Debt securities:
Corporate(c) ......................................................
Government.......................................................
International ......................................................
Mutual funds:
Domestic(d) ..................................................
39,556 $
35,562 $
3,994 $
164,474
200,595
14,364
250,472
290,172
920,077
104,909
121,869
13,073
164,474
200,595
14,364
250,472
290,172
920,077
—
—
—
—
—
—
— 104,909
— 121,869
13,073
—
205,847
445,698
205,847
—
205,847 239,851
—
—
—
—
—
—
—
—
—
—
—
—
Other:
Diversified mutual fund ....................................
Real estate partnerships.....................................
Private equity ....................................................
Hedge funds ......................................................
Guaranteed deposit fund ...................................
92,691
3,112
21,924
106,250
10,992
234,969
Total(e)................................................................... $1,640,300 $
92,691
768
—
85,270
—
178,729
—
—
—
—
—
—
1,340,215 $ 243,845 $
—
2,344
21,924
20,980
10,992
56,240
56,240
(a) This category is mainly 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 77% of the mutual funds were invested in investment grade bonds and 23% in
high-yielding bonds at December 31, 2017. Approximately 75% of the mutual funds were
invested in investment grade bonds and 25% in high-yielding bonds at December 31, 2016. The
holdings within the funds were spread across diverse industries.
(e) Excludes dividends and interest receivable totaling $1,774,000 and $1,831,000 at
December 31, 2017 and 2016, respectively.
Pension plan assets included common stock of M&T with a fair value of $154,818,000 (7.7% of
total plan assets) at December 31, 2017 and $164,474,000 (10.0% of total plan assets) at
December 31, 2016. No investment in securities of a non-U.S. Government or government agency
153
issuer exceeded ten percent of plan assets at December 31, 2017. Assets subject to Level 3 valuations
did not constitute a significant portion of plan assets at December 31, 2017 or December 31, 2016.
The changes in Level 3 pension plan assets measured at estimated fair value on a recurring basis
during the year ended December 31, 2017 were as follows:
Balance –
January 1,
2017
Purchases
(Sales)
Total
Realized/
Unrealized
Gains
(Losses)
Balance –
December 31,
2017
(In thousands)
Other
Real estate partnerships .......................................... $
Private equity..........................................................
Hedge funds............................................................
Guaranteed deposit fund.........................................
365 $
6,821
29,839
—
Total ................................................................... $ 56,240 $ 37,025 $
2,344 $
21,924
20,980
10,992
196 $
2,739
1,295
(67)
2,905
31,484
52,114
10,925
4,163 $ 97,428
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. The Company made voluntary contributions of $200 million to the
qualified defined benefit pension plan in 2017. The Company did not make any contributions to the
plan in 2016 or 2015. The Company is not required to make contributions to the qualified defined
benefit plan in 2018, however, subject to the impact of actual events and circumstances that may
occur in 2018, the Company may make contributions, but the amount of any such contributions has
not been determined. 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
$11,444,000 and $10,772,000 in 2017 and 2016, respectively. Payments made by the Company for
postretirement benefits were $7,574,000 and $7,588,000 in 2017 and 2016, respectively. Payments
for supplemental pension and other postretirement benefits for 2018 are not expected to differ from
those made in 2017 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:
2018..................................................................................................... $
2019.....................................................................................................
2020.....................................................................................................
2021.....................................................................................................
2022.....................................................................................................
2023 through 2027 ..............................................................................
88,407 $
94,317
98,753
103,968
107,298
594,900
7,318
7,207
7,055
4,402
4,302
19,830
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
154
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 $38,229,000, $36,766,000
and $34,145,000 in 2017, 2016 and 2015, respectively.
13. Income taxes
The components of income tax expense were as follows:
2017
Year Ended December 31
2016
(In thousands)
2015
Current
Federal ................................................................................................. $363,043 $428,750 $130,349
State and local ..................................................................................... 94,714 95,426 21,549
Total current ................................................................................... 457,757 524,176 151,898
Deferred
Federal ................................................................................................. 367,308 147,662 324,317
State and local ..................................................................................... 33,482 26,351 72,279
Total deferred ................................................................................. 400,790 174,013 396,596
Amortization of investments in qualified affordable housing projects .... 57,009 45,095 46,531
Total income taxes applicable to pre-tax income ........................... $915,556 $743,284 $595,025
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, 2017, 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
$7,195,000 in 2017 and $11,925,000 in 2016. There were no significant gains or losses on bank
investment securities in 2015. No alternative minimum tax expense was recognized in 2017, 2016 or
2015.
The Tax Cuts and Jobs Act (“Tax Act”) was signed into law on December 22, 2017, reducing
the corporate Federal income tax rate from 35% to 21% effective January 1, 2018 and making other
changes to U.S. corporate income tax laws. GAAP requires that the impact of the provisions of the
Tax Act be accounted for in the period of enactment. Accordingly, the estimated incremental income
tax expense recorded by the Company in the fourth quarter of 2017 related to the Tax Act was $85
million. That additional expense was largely attributable to the reduction in carrying value of net
deferred tax assets reflecting lower future tax benefits resulting from the lower corporate income tax
rate. During preparation of the Company’s 2017 income tax returns in 2018, additional adjustments
related to enactment of the Tax Act may be identified. Any such adjustments are not expected to be
material, but will be recognized in accordance with guidance contained in Staff Accounting Bulletin
155
No. 118 from the U.S. Securities and Exchange Commission. The Company also adopted new
accounting guidance for share-based transactions during the first quarter of 2017. That guidance
requires that all excess tax benefits and tax deficiencies associated with share-based compensation be
recognized as a component of income tax expense in the income statement. Previously, tax effects
resulting from changes in M&T’s share price subsequent to the grant date were recorded through
shareholders’ equity at the time of vesting or exercise. The adoption of the amended accounting
guidance resulted in a $22 million reduction of income tax expense in 2017.
Total income taxes differed from the amount computed by applying the statutory federal
income tax rate to pre-tax income as follows:
2017
Year Ended December 31
2016
(In thousands)
2015
Income taxes at statutory federal income tax rate .............................. $813,352 $720,439 $586,142
Increase (decrease) in taxes:
Tax-exempt income ....................................................................... (40,778) (35,364) (33,102)
State and local income taxes, net of federal income tax effect...... 83,327 79,155 60,988
Qualified affordable housing project federal tax credits, net ........ (16,015) (15,091) (15,297)
—
Initial impact of enactment of Tax Act.......................................... 85,431
(3,706)
(9,761)
Other ..............................................................................................
$915,556 $743,284 $595,025
—
(5,855)
Deferred tax assets (liabilities) were comprised of the following at December 31:
2017
2016
(In thousands)
2015
Losses on loans and other assets........................................ $
Retirement benefits............................................................
Postretirement and other employee benefits......................
Incentive and other compensation plans............................
Interest on loans.................................................................
Stock-based compensation ................................................
Unrealized losses ...............................................................
Other ..................................................................................
Gross deferred tax assets...............................................
Leasing transactions ..........................................................
Unrealized gains ................................................................
Capitalized servicing rights ...............................................
Depreciation and amortization...........................................
Other ..................................................................................
Gross deferred tax liabilities .........................................
Net deferred tax asset ........................................................ $
345,609 $
590,288 $
637,955
45,322
143,067
148,722
26,009
52,512
55,962
25,050
36,616
60,337
37,900
61,266
57,640
26,676
52,181
72,090
—
10,741
—
162,086
106,876
66,247
572,813 1,053,547 1,194,792
(285,074)
(266,268)
(181,159)
(31,121)
—
(94,285)
(59,171)
(71,108)
(51,781)
(56,731)
(63,959)
(52,733)
(55,611)
(87,200)
(21,599)
(487,708)
(488,535)
(401,557)
707,084
565,012 $
171,256 $
The Company believes that it is more likely than not that the deferred tax assets will be realized
through taxable earnings or alternative tax strategies.
The income tax credits shown in the statement of income of M&T in note 25 arise principally
from operating losses before dividends from subsidiaries.
156
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
Federal,
State and
Local Tax
Unrecognized
Income Tax
Benefits
Accrued
Interest
(In thousands)
Gross unrecognized tax benefits at January 1, 2015 ......................... $ 10,712 $ 3,869 $ 14,581
—
8,108
Increases as a result of tax positions taken during 2015 ................ 8,108
807
807
—
Increases as a result of tax positions taken in prior years ..............
Decreases as a result of settlements with taxing authorities .......... (1,515)
(1,789)
(274)
10,799
Unrealized tax benefits acquired in a business combination.......... 7,232 3,567
32,506
Gross unrecognized tax benefits at December 31, 2015 ................... 24,537 7,969
12,237
—
Increases as a result of tax positions taken during 2016 ................ 12,237
656
656
—
Increases as a result of tax positions taken in prior years ..............
Decreases as a result of tax positions in prior years.......................
(1,595)
(710)
(885)
43,804
Gross unrecognized tax benefits at December 31, 2016 ................... 35,889 7,915
13,019
Increases as a result of tax positions taken during 2017 ................ 13,019
—
1,379
— 1,379
Increases as a result of tax positions taken in prior years ..............
(500)
(168)
Decreases as a result of settlements with taxing authorities ..........
Decreases as a result of tax positions taken in prior years ............. (3,144) (3,475)
(6,619)
51,083
Gross unrecognized tax benefits at December 31, 2017 ................... $ 45,432 $ 5,651
(10,727)
Less: Federal, state and local income tax benefits ............................
Net unrecognized tax benefits at December 31, 2017 that,
if recognized, would impact the effective income tax rate.............
$ 40,356
(332)
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, 2017 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 2016, although under statute the income tax returns from 2014 through 2016 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
2013. It is not reasonably possible to estimate when examinations for any subsequent years will be
completed.
157
14. Earnings per common share
The computations of basic earnings per common share follow:
Income available to common shareholders:
Net income............................................................................................
Less: Preferred stock dividends(a) .......................................................
Net income available to common equity ..............................................
Less: Income attributable to unvested stock-based
compensation awards.........................................................................
Net income available to common shareholders .........................................
Weighted-average shares outstanding:
Common shares outstanding (including common stock
issuable) and unvested stock-based compensation awards ...............
Less: Unvested stock-based compensation awards ..............................
Weighted-average shares outstanding........................................................
2017
Year Ended December 31
2016
(In thousands, except per share)
2015
$1,408,306 $1,315,114 $1,079,667
(81,270)
998,397
(81,270)
1,335,572 1,233,844
(72,734)
(8,069)
(10,708)
$1,327,503 $1,223,459 $ 987,689
(10,385)
153,092
(933)
152,159
158,121
(1,341)
156,780
138,285
(1,482)
136,803
Basic earnings per common share..............................................................
$
8.72 $
7.80 $
7.22
(a)
Including impact of not as yet declared cumulative dividends.
The computations of diluted earnings per common share follow:
2017
Year Ended December 31
2016
(In thousands, except per share)
2015
Net income available to common equity ...................................................
$1,335,572 $1,233,844 $ 998,397
Less: Income attributable to unvested stock-based
compensation awards.........................................................................
Net income available to common shareholders .........................................
Adjusted weighted-average shares outstanding:
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 ....................................................................
Adjusted weighted-average shares outstanding .........................................
(8,055)
(10,673)
$1,327,517 $1,223,481 $ 987,724
(10,363)
153,092
(933)
158,121
(1,341)
138,285
(1,482)
392
152,551
524
157,304
730
137,533
Diluted earnings per common share ..........................................................
$
8.70 $
7.78 $
7.18
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 401,000 in 2017, 2,171,000 in 2016 and 2,268,000 in 2015 were not
included in the computations of diluted earnings per common share because the effect on those years
would have been antidilutive.
158
15. Comprehensive income
In February 2018, the Financial Accounting Standards Board issued accounting guidance related to
reclassification of certain tax effects from AOCI so that following enactment of the Tax Act the tax
effects of items within AOCI reflect the appropriate tax. The guidance provided for a reclassification
from AOCI to retained earnings for the effect of remeasuring deferred tax assets and liabilities
related to items within AOCI at the 21 percent corporate tax rate established by the Tax Act. The
impact of that reclassification was an increase in retained earnings as of December 31, 2017 resulting
from items remaining in AOCI as of that date as follows:
Net unrealized losses on investment securities .................................................................. $
Defined benefit plans liability adjustments ........................................................................
Cash flow hedges and other................................................................................................
Increase to retained earnings .............................................................................................. $
8,065
53,960
2,004
64,029
The following tables display the components of other comprehensive income (loss) and
amounts reclassified from accumulated other comprehensive income (loss) to net income:
(In thousands)
Investment Securities
All
Defined
Benefit
Total
Amount
Before
With OTTI (a)
Other Plans
Other
(In thousands)
Tax
Income
Tax
Net
Balance — January 1, 2017 ............................................. $
Other comprehensive income before reclassifications:
46,725 (73,785) (449,917) (8,268) $(485,245)
190,609 $(294,636)
Unrealized holding gains (losses), net ......................
Foreign currency translation adjustment...................
Unrealized losses on cash flow hedges.....................
Current year benefit plans gains ...............................
(8,746)
—
—
—
(6,259)
—
—
—
—
—
— 4,447
— (12,291)
—
9,276
(15,005)
4,447
(12,291)
9,276
7,269
(2,206)
4,837
(3,650)
(7,736)
2,241
(7,454)
5,626
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 .....................
Gains realized in net income.....................................
Accretion of net gain on terminated cash flow
hedges ....................................................................
Net yield adjustment from cash flow hedges
currently in effect...................................................
Amortization of prior service credit..........................
Amortization of actuarial losses................................
Total .................................................................................
Reclassification of income tax effects to retained
earnings.........................................................................
Balance — December 31, 2017 ....................................... $
(8,746)
(6,259)
9,276 (7,844)
(13,573)
6,250
(7,323)
—
(18,351)
3,387
(2,928)
—
—
—
—
3,387 (b)
(21,279) (c)
(1,333)
7,195
2,054
(14,084)
—
—
—
(137)
(137) (d)
54
(83)
—
—
—
(27,097)
—
—
(802)
— 28,275
— (3,916)
—
—
(5,800) 36,749 (11,897)
(3,916) (b)
(802) (e)
1,541
315
28,275 (e) (11,126)
2,896
(8,045)
(2,375)
(487)
17,149
(5,149)
—
—
19,628 (79,585) (413,168) (20,165) $(493,290)
—
—
—
(64,029)
(64,029)
129,476 $(363,814)
159
Investment Securities
All
Defined
Benefit
Total
Amount
Before
With OTTI (a)
Other Plans
Other
(In thousands)
Tax
Income
Tax
Net
Balance — January 1, 2016 ............................................. $
Other comprehensive income before reclassifications:
Unrealized holding gains (losses), net ......................
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.......................................................
Gains 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 period...................................
Balance — December 31, 2016 ....................................... $
Balance — January 1, 2015 ............................................. $
Other comprehensive income before reclassifications:
Unrealized holding gains (losses), net ......................
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
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 period...................................
Balance — December 31, 2015 ....................................... $
16,359 62,849 (489,660) (4,093) $(414,545)
162,918 $(251,627)
30,366 (110,316)
—
— 14,125
—
—
— (4,020)
—
—
—
(79,950)
(4,020)
14,125
31,509
1,406
(5,557)
(48,441)
(2,614)
8,568
30,366 (110,316) 14,125 (4,020)
(69,845)
27,358
(42,487)
—
3,996
— (30,314)
—
—
—
—
3,996 (b)
(1,572)
(30,314)(c) 11,925
2,424
(18,389)
—
—
—
—
(4,587)
—
—
— 30,205
— (26,318) 25,618
(155)
—
—
(855)
(155)
30,366 (136,634) 39,743 (4,175)
(70,700)
46,725 (73,785) (449,917) (8,268) $(485,245)
(94)
61
(155)(d)
(2,782)
(4,587)(e)
1,805
18,319
30,205 (e) (11,886)
(522)
333
27,691
(43,009)
190,609 $(294,636)
7,438 201,828 (503,027) (4,082) $(297,843)
116,849 $(180,994)
8,921 (142,623)
—
—
— (24,200)
—
— (1,323)
— 1,453
—
— (133,702)
(1,323)
1,453
(24,200)
—
—
—
52,376
398
(572)
8,612
(81,326)
(925)
881
(15,588)
8,921 (142,623) (24,200)
130 (157,772)
60,814
(96,958)
—
—
3,514
130
—
—
—
—
3,514 (b)
130 (c)
(1,383)
(49)
2,131
81
—
—
—
—
—
—
—
(7,364)
— 44,931
3,644 37,567
8,921 (138,979) 13,367
(85)
56
(141) (d)
(141)
(4,744)
(7,364) (e)
2,620
—
28,942
44,931 (e) (15,989)
—
26,325
(14,745)
41,070
(141)
46,069
(70,633)
(11) (116,702)
162,918 $(251,627)
16,359 62,849 (489,660) (4,093) $(414,545)
(a) Other-than-temporary impairment.
Included in interest income.
(b)
Included in gain (loss) on bank investment securities.
(c)
Included in interest expense.
(d)
Included in salaries and employee benefits expense.
(e)
160
Accumulated other comprehensive income (loss), net consisted of the following:
Investment Securities
With
OTTI
All Other
Defined
Benefit
Plans
(In thousands)
Other
Total
Balance at January 1, 2015 ............................................ $
Net gain (loss) during 2015 ...........................................
Balance at December 31, 2015 ......................................
Net gain (loss) during 2016 ...........................................
Balance at December 31, 2016 ......................................
Net gain (loss) during 2017 ...........................................
Reclassification of income tax effects
to retained earnings.....................................................
Balance at December 31, 2017 ...................................... $
4,518 $ 122,683 $ (305,589) $
(2,606) $ (180,994)
5,403
9,921
(84,517)
8,610
(129)
(70,633)
38,166
(296,979)
(2,735)
(251,627)
18,417
(82,823)
24,105
(2,708)
(43,009)
28,338
(44,657)
(272,874)
(5,443)
(294,636)
(10,755)
(9,011)
22,288
(7,671)
(5,149)
(3,115)
(4,950)
(53,960)
(2,004)
(64,029)
14,468 $ (58,618) $ (304,546) $ (15,118) $ (363,814)
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:
2017
Year Ended December 31
2016
(In thousands)
2015
Other income:
Credit-related fee income ................................................................ $ 77,580 $ 70,424 $ 81,558
52,724
Letter of credit fees..........................................................................
52,984
Bank owned life insurance ..............................................................
Other expense:
Professional services ....................................................................... 289,862 268,060 267,540
49,906
Amortization of capitalized servicing rights ...................................
17. International activities
The Company engages in limited international activities including certain trust-related services in
Europe, collecting Eurodollar deposits, engaging in foreign currency transactions associated with
customer activity, 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 $159 million and $292 million of loans to foreign borrowers at December 31, 2017
and 2016, respectively. Deposits at M&T Bank’s Cayman Islands office were $178 million and $202
million at December 31, 2017 and 2016, 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. Deposits at M&T Bank’s office in Ontario, Canada were $45 million at December
31, 2017 and $50 million at December 31, 2016. Revenues from providing international trust-related
services were approximately $24 million in 2017, $25 million in 2016 and $26 million in 2015.
161
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, collateral and/or settlement provisions protecting the at-risk party.
Based on adherence to the Company’s credit standards and the presence of the netting, collateral or
settlement provisions, the Company believes that the credit risk inherent in these contracts was not
significant as of December 31, 2017.
The net effect of interest rate swap agreements was to increase net interest income by $25
million in 2017, $37 million in 2016 and $44 million in 2015.
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
(In thousands)
Average
Maturity
(In years)
Weighted-
Average Rate
Fixed
Variable
Estimated
Fair Value
Gain (a)
(In thousands)
December 31, 2017
Fair value hedges:
Fixed rate long-term borrowings(b)................. $ 4,550,000
2.9
2.27%
2.09% $
573
Cash flow hedges:
Variable rate commercial real estate
loans(b)( c) ................................................... 4,850,000
Total ................................................................. $ 9,400,000
December 31, 2016
Fair value hedges:
2.0
2.5
1.52%
1.36%
$
66
639
Fixed rate long-term borrowings(b)................. $
900,000
1.1
3.75%
2.08% $
11,892
(a) Effective January 2017 certain clearinghouse exchanges revised their rules such that certain required
payments by counterparties for variation margin on derivative instruments that had been treated as
collateral are now treated as settlements of those positions. The impact of such rule changes at
December 31, 2017 was a reduction of the estimated fair value losses on interest rate swap
agreements designated as fair value hedges of $41.1 million and on interest rate swap agreements
designated as cash flow hedges of $16.3 million.
(b) Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and
pays at a variable rate.
(c) Includes notional amount and terms of $2.0 billion of forward-starting interest rate swap agreements
that will become effective upon maturity in 2019 of $2.0 billion of agreements currently in effect.
162
The notional amount of interest rate swap agreements entered into for risk management
purposes that were outstanding at December 31, 2017 mature as follows:
Year ending December 31:
2018 .............................................................................................................................. $ 500,000
2019 .............................................................................................................................. 4,250,000
2020 .............................................................................................................................. 3,500,000
2021 ..............................................................................................................................
—
650,000
2022 ..............................................................................................................................
500,000
2023 through 2027........................................................................................................
$ 9,400,000
(In thousands)
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 $29.9 billion and $21.6 billion at December 31, 2017 and 2016, respectively. The notional
amounts of foreign currency and other option and futures contracts entered into for trading account
purposes aggregated $530 million and $471 million at December 31, 2017 and 2016, respectively.
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 instruments
Interest rate swap agreements (a)............................................................. $
Commitments to sell real estate loans (a) ................................................
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:
Asset Derivatives
Fair Value
December 31
Liability Derivatives
Fair Value
December 31
2017
2016
2017
(In thousands)
2016
639 $ 11,892 $
33,189
734
45,081
1,373
— $
283
283
—
1,347
1,347
8,797
2,526
8,060
5,210
494
1,019
735
399
Interest rate contracts (b)....................................................................
Foreign exchange and other option and futures contracts (b)............
74,164 228,810 132,104 167,737
5,657
6,639
91,144 249,988 138,903 175,510
Total derivatives....................................................................................... $ 92,517 $ 295,069 $ 139,186 $ 176,857
5,286
7,908
(a)
(b)
Asset derivatives are reported in other assets and liability derivatives are reported in other liabilities.
Asset derivatives are reported in trading account assets and liability derivatives are reported in other
liabilities. The impact of the variation margin rule change at December 31, 2017 was a reduction of the
estimated fair value of interest rate contracts in the trading account in an asset position of $136.2 million and
in a liability position of $12.2 million.
163
Year Ended
Amount of Gain (Loss) Recognized
Year Ended
December 31, 2017
December 31, 2016
Hedged
Hedged
Derivative
Item Derivative
Item Derivative
Year Ended
December 31, 2015
Hedged
Item
Derivatives in fair value hedging relationships
Interest rate swap agreements:
(In thousands)
Fixed rate long-term borrowings (a)................ $(52,392) 51,628 $(32,000) 30,906 $(29,359) 28,719
Derivatives not designated as
hedging instruments
Trading:
Interest rate contracts (b) ................................. $ 5,398
Foreign exchange and other option and
futures contracts (b) ......................................
6,821
Total ...................................................................... $ 12,219
$ 14,042
$ 10,755
7,665
$ 21,707
9,337
$ 20,092
(a)
(b)
Reported as other revenues from operations.
Reported as trading account and foreign exchange gains.
The amount of gain (loss) recognized in the consolidated statement of income associated with
derivatives designated as cash flow hedges was not material.
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 $16 million and $28 million at December 31,
2017 and 2016, 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 or settlement 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 $13 million and $34 million at
December 31, 2017 and 2016, respectively. After consideration of such netting arrangements, for
purposes of posting collateral, the net liability positions with counterparties aggregated $13 million
and $30 million at December 31, 2017 and 2016, respectively. The Company was required to post
collateral relating to those positions of $12 million and $27 million at December 31, 2017 and 2016,
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 of 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
164
position on December 31, 2017 was less than $1 million, for which the Company was not required to
post collateral in the normal course of business. If the credit risk-related contingent features had been
triggered on December 31, 2017, the Company would not have been required to post any additional
collateral with counterparties.
The aggregate fair value of derivative financial instruments in an asset position, which are
subject to enforceable master netting arrangements, was $13 million and $15 million at
December 31, 2017 and 2016, respectively. After consideration of such netting arrangements, for
purposes of posting collateral, the net asset positions with counterparties aggregated $13 million and
$11 million at December 31, 2017 and 2016, respectively. Counterparties posted collateral relating to
those positions of $12 million and $9 million at December 31, 2017 and 2016, 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 variation margin payments
depending on the contracts being in a net asset or liability position. The amount of initial margin
collateral posted by the Company was $52 million and $111 million at December 31, 2017 and 2016,
respectively. The fair value asset and liability amounts of derivative contracts at December 31, 2017
have been reduced by variation margin payments treated as settlements of $136 million and $70
million, respectively. Variation margin on derivative contracts not treated as settlements continues to
represent collateral posted or received by the Company. For those contracts, the net fair value of
derivative financial instruments cleared through clearinghouses for which variation margin is
required was a net asset position of $2 million and $63 million at December 31, 2017 and December
31, 2016, respectively. Collateral posted by the clearinghouses associated with that net asset position
was $2 million and $81 million at December 31, 2017 and 2016, respectively.
19. Variable interest entities
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, 2017 and
2016, the Company included the junior subordinated debentures as “long-term borrowings” in its
consolidated balance sheet and recognized $23 million and $24 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 $1.0 billion at each of December 31, 2017 and December 31, 2016. 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 $420 million, including $201 million of
unfunded commitments, at December 31, 2017 and $294 million, including $102 million of unfunded
commitments, at December 31, 2016. Contingent commitments to provide additional capital
contributions to these partnerships were not material at December 31, 2017. The Company has not
165
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. 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 serves as investment advisor for certain registered money-market funds. The
Company has no explicit arrangement to provide support to those funds, but may waive portions of
its allowable management fees as a result of market conditions.
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, 2017.
Pursuant to GAAP, fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement
date. A three-level hierarchy exists in GAAP for fair value measurements based upon the inputs to
the valuation of an asset or liability.
(cid:129)
(cid:129)
(cid:129)
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.
Trading account assets and liabilities
Trading account assets and liabilities include interest rate contracts 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
166
through reference to quoted prices in less active markets for the same or similar securities or through
model-based techniques in which all significant inputs are observable and, therefore, such valuations
have been classified as Level 2.
Investment securities available for sale
The majority of the Company’s available-for-sale investment securities have been valued by
reference to prices for similar securities or through model-based techniques in which all significant
inputs are observable and, therefore, such valuations have been classified as Level 2. Certain
investments in mutual funds and equity securities are actively traded and, therefore, have been
classified as Level 1 valuations.
Real estate loans held for sale
The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair
value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale
includes changes in estimated fair value during the hedge period. Typically, the Company attempts to
hedge real estate loans held for sale from the date of close through the sale date. The fair value of
hedged real estate loans held for sale is generally calculated by reference to quoted prices in
secondary markets for commitments to sell real estate loans with similar characteristics and,
accordingly, such loans have been classified as a Level 2 valuation.
Commitments to originate real estate loans for sale and commitments to sell real estate loans
The Company enters into various commitments to originate real estate loans for sale and
commitments to sell real estate loans. Such commitments are considered to be derivative financial
instruments and, therefore, are carried at estimated fair value on the consolidated balance sheet. The
estimated fair values of such commitments were generally calculated by reference to quoted prices in
secondary markets for commitments to sell real estate loans to certain government-sponsored entities
and other parties. The fair valuations of commitments to sell real estate loans generally result in a
Level 2 classification. The estimated fair value of commitments to originate real estate loans for sale
is adjusted to reflect the Company’s anticipated commitment expirations. The estimated commitment
expirations are considered significant unobservable inputs contributing to the Level 3 classification
of commitments to originate real estate loans for sale. Significant unobservable inputs used in the
determination of estimated fair value of commitments to originate real estate loans for sale are
included in the accompanying table of significant unobservable inputs to Level 3 measurements.
Interest rate swap agreements used for interest rate risk management
The Company utilizes interest rate swap agreements as part of the management of interest rate risk to
modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-
bearing liabilities. The Company generally determines the fair value of its interest rate swap
agreements using externally developed pricing models based on market observable inputs and,
therefore, classifies such valuations as Level 2. The Company has considered counterparty credit risk
in the valuation of its interest rate swap agreement assets and has considered its own credit risk in the
valuation of its interest rate swap agreement liabilities.
167
The following tables present assets and liabilities at December 31, 2017 and 2016 measured at
estimated fair value on a recurring basis:
Fair Value
Measurements Level 1 (a)
Level 2 (a)
Level 3
(In thousands)
December 31, 2017
Trading account assets .......................................................... $
Investment securities available for sale:
132,909 $ 47,873 $
85,036 $
U.S. Treasury and federal agencies ................................. 1,947,487
Obligations of states and political subdivisions ..............
2,589
Mortgage-backed securities:
— 1,947,487
2,589
—
Government issued or guaranteed.............................. 8,716,392
28
Privately issued ..........................................................
128,832
Other debt securities........................................................
100,956
Equity securities ..............................................................
10,896,284
378,047
12,696
— 8,716,392
—
—
128,832
—
73,232
27,724
73,232 10,823,024
378,047
3,899
Total assets ...................................................................... $11,419,936 $ 121,105 $11,290,006 $
137,390 $
1,302
138,692 $
Trading account liabilities .................................................... $
Other liabilities (b)................................................................
Total liabilities................................................................. $
Real estate loans held for sale...............................................
Other assets (b) .....................................................................
137,390 $
1,796
139,186 $
— $
—
— $
—
—
December 31, 2016
Trading account assets .......................................................... $
Investment securities available for sale:
323,867 $ 46,135 $
277,732 $
U.S. Treasury and federal agencies ................................. 1,902,544
3,641
Obligations of states and political subdivisions ..............
Mortgage-backed securities:
— 1,902,544
3,641
—
— 10,954,861
Government issued or guaranteed.............................. 10,954,861
—
—
Privately issued ..........................................................
44
118,516
—
118,516
Other debt securities........................................................
50,755
352,466 301,711
Equity securities ..............................................................
13,332,072 301,711 13,030,317
— 1,056,180
50,291
—
Total assets ...................................................................... $14,770,470 $ 347,846 $14,414,520 $
174,376 $
1,746
176,122 $
Trading account liabilities .................................................... $
Other liabilities (b)................................................................
Total liabilities................................................................. $
Real estate loans held for sale............................................... 1,056,180
58,351
Other assets (b) .....................................................................
174,376 $
2,481
176,857 $
— $
—
— $
—
—
—
—
28
—
—
28
—
8,797
8,825
—
494
494
—
—
—
—
44
—
—
44
—
8,060
8,104
—
735
735
(a) There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy
during the years ended December 31, 2017 and 2016.
(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).
168
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring
basis during the years ended December 31, 2017, 2016 and 2015 were as follows:
2017
Balance — January 1, 2017..........................................
Total gains (losses) realized/unrealized:
Included in earnings................................................
Sales .............................................................................
Settlements ...................................................................
Transfers out of Level 3 (a)..........................................
Balance — December 31, 2017....................................
Changes in unrealized gains included in earnings
related to assets still held at December 31, 2017 ......
Investment
Securities
Available for Sale
Privately Issued
Mortgage-
Backed Securities
Other Assets and
Other Liabilities
(In thousands)
44
$
7,325
—
—
(16)
—
28
—
77,832 (b)
—
—
(76,854)(e)
8,303
7,978 (b)
$
$
$
Investment Securities Available for Sale
Privately Issued
Mortgage-
Backed Securities
Collateralized Debt
Obligations
(In thousands)
Other Assets and
Other Liabilities
2016
Balance — January 1, 2016.......................................... $
Total gains (losses) realized/unrealized:
Included in earnings................................................
Included in other comprehensive income ...............
Sales .............................................................................
Settlements ...................................................................
Transfers out of Level 3 (a)..........................................
Balance — December 31, 2016.................................... $
Changes in unrealized gains included in earnings
related to assets still held at December 31, 2016 ...... $
2015
Balance — January 1, 2015.......................................... $
Total gains realized/unrealized:
Included in earnings................................................
Included in other comprehensive income ...............
Settlements ...................................................................
Transfers out of Level 3 (a)..........................................
Balance — December 31, 2015.................................... $
Changes in unrealized gains included in earnings
related to assets still held at December 31, 2015 ...... $
74
—
—
—
(30)
—
44
—
103
—
—
(29)
—
74
—
47,393
9,879
30,041 (c)
(18,268)(d)
(58,296)
(870)
—
—
110,937 (b)
—
—
—
(113,491)(e)
7,325
—
7,256 (b)
50,316
17,347
—
3,254 (d)
(6,177)
—
47,393
87,061 (b)
—
—
(94,529)(e)
9,879
—
8,850 (b)
(a)
(b)
(c)
(d)
(e)
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.
Reported as mortgage banking revenues in the consolidated statement of income and includes the fair value of commitment
issuances and expirations.
Reported as gain on bank investment securities in the consolidated statement of income.
Reported as net unrealized gains (losses) on investment securities in the consolidated statement of comprehensive income.
Transfers out of Level 3 consist of interest rate locks transferred to closed loans.
169
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 85% at December 31,
2017. As these discounts are not readily observable and are considered significant, the valuations
have been classified as Level 3. Automobile collateral is typically valued by reference to independent
pricing sources based on recent sales transactions of similar vehicles, and the related non-recurring
fair value measurement adjustments have been classified as Level 2. Collateral values for other
consumer installment loans are generally estimated based on historical recovery rates for similar
types of loans. As these recovery rates are not readily observable by market participants, such
valuation adjustments have been classified as Level 3. Loans subject to nonrecurring fair value
measurement were $210 million at December 31, 2017, ($145 million and $65 million of which were
classified as Level 2 and Level 3, respectively), $293 million at December 31, 2016 ($153 million
and $140 million of which were classified as Level 2 and Level 3, respectively), and $210 million at
December 31, 2015 ($106 million and $104 million of which were classified as Level 2 and Level 3,
respectively). Changes in fair value recognized during the years ended December 31, 2017, 2016 and
2015 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 $56 million, $71 million and $75 million,
respectively.
Assets taken in foreclosure of defaulted loans
Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential
real property and are generally measured at the lower of cost or fair value less costs to sell. The fair
value of the real property is generally determined using appraisals or other indications of value based
on recent comparable sales of similar properties or assumptions generally observable in the
marketplace, and the related nonrecurring fair value measurement adjustments have generally been
classified as Level 2. Assets taken in foreclosure of defaulted loans subject to nonrecurring fair value
measurement were $53 million and $56 million at December 31, 2017 and December 31, 2016,
respectively. Changes in fair value recognized during the years ended December 31, 2017, 2016 and
2015 for foreclosed assets held by the Company at the end of each of those years were not material.
170
Significant unobservable inputs to level 3 measurements
The following tables present quantitative information about significant unobservable inputs used in
the fair value measurements for Level 3 assets and liabilities at December 31, 2017 and 2016:
Valuation
Technique
Unobservable
Inputs/Assumptions
Range
(Weighted-
Average)
Fair Value
(In thousands)
December 31, 2017
Recurring fair value measurements
Privately issued mortgage-backed
securities .............................................. $
Two independent
pricing quotes
28
Net other assets (liabilities) (a) ...............
8,303 Discounted cash flow
—
Commitment
expirations
—
0%-78%
(22%)
December 31, 2016
Recurring fair value measurements
Privately issued mortgage-backed
securities .............................................. $
Two independent
pricing quotes
44
Net other assets (liabilities) (a) ...............
7,325 Discounted cash flow
—
Commitment
expirations
—
0%-77%
(30%)
(a) Other Level 3 assets (liabilities) consist of commitments to originate real estate loans.
Sensitivity of fair value measurements to changes in unobservable inputs
An increase (decrease) in the 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.
171
Disclosures of fair value of financial instruments
The carrying amounts and estimated fair value for financial instrument assets (liabilities) are
presented in the following table:
Financial assets:
December 31, 2017
Carrying
Amount
Estimated
Fair Value
Level 1
(In thousands)
Level 2
Level 3
Cash and cash equivalents................................. $ 1,420,888 1,420,888 1,352,035
5,078,903 5,078,903
Interest-bearing deposits at banks .....................
132,909
Trading account assets ......................................
Investment securities ......................................... 14,664,525 14,653,074
Loans and leases:
68,853
— 5,078,903
85,036
47,873
73,232 14,469,127
132,909
—
—
—
110,715
Commercial loans and leases....................... 21,742,651 21,321,282
Commercial real estate loans ....................... 33,366,373 32,950,724
Residential real estate loans......................... 19,613,344 19,596,826
Consumer loans ........................................... 13,266,615 13,161,517
—
Allowance for credit losses..........................
Loans and leases, net.............................. 86,971,785 87,030,349
327,170
Accrued interest receivable ...............................
(1,017,198)
327,170
Financial liabilities:
Noninterest-bearing deposits............................. $(33,975,180) (33,975,180)
Savings and interest-checking deposits............. (51,698,008) (51,698,008)
(6,580,962) (6,635,048)
Time deposits ....................................................
(177,996)
Deposits at Cayman Islands office ....................
Short-term borrowings ......................................
(175,099)
(8,141,430) (8,193,783)
Long-term borrowings ......................................
(75,641)
Accrued interest payable ...................................
(137,390)
Trading account liabilities.................................
(177,996)
(175,099)
(75,641)
(137,390)
— 21,321,282
—
22,130 32,928,594
—
— 4,440,645 15,156,181
— 13,161,517
—
—
—
—
— 4,462,775 82,567,574
—
—
327,170
— (33,975,180)
— (51,698,008)
— (6,635,048)
(177,996)
—
—
(175,099)
— (8,193,783)
(75,641)
—
(137,390)
—
—
—
—
—
—
—
—
—
Other financial instruments:
Commitments to originate real estate
loans for sale .................................................. $
Commitments to sell real estate loans ...............
Other credit-related commitments.....................
Interest rate swap agreements used for interest
rate risk management .....................................
8,303
1,958
(125,281)
8,303
1,958
(125,281)
639
639
—
—
—
—
—
1,958
—
8,303
—
(125,281)
639
—
172
Financial assets:
December 31, 2016
Carrying
Amount
Estimated
Fair Value
Level 1
(In thousands)
Level 2
Level 3
70,895
Cash and cash equivalents................................. $ 1,320,549 1,320,549 1,249,654
Interest-bearing deposits at banks .....................
— 5,000,638
Trading account assets ......................................
277,732
Investment securities ......................................... 16,250,468 16,244,412 301,711 15,821,176
Loans and leases:
5,000,638 5,000,638
323,867
323,867
46,135
—
—
—
121,525
Commercial loans and leases....................... 22,610,047 22,239,428
Commercial real estate loans ....................... 33,506,394 33,129,428
Residential real estate loans......................... 22,590,912 22,638,167
Consumer loans ........................................... 12,146,063 12,061,590
Allowance for credit losses..........................
—
Loans and leases, net.............................. 89,864,419 90,068,613
308,805
Accrued interest receivable ...............................
(988,997)
308,805
Financial liabilities:
Noninterest-bearing deposits............................. $(32,813,896) (32,813,896)
Savings and interest-checking deposits............. (52,346,207) (52,346,207)
Time deposits .................................................... (10,131,846) (10,222,585)
(201,927)
Deposits at Cayman Islands office ....................
Short-term borrowings ......................................
(163,442)
(9,493,835) (9,473,844)
Long-term borrowings ......................................
(75,172)
Accrued interest payable ...................................
(174,376)
Trading account liabilities.................................
(201,927)
(163,442)
(75,172)
(174,376)
— 22,239,428
—
—
642,590 32,486,838
— 4,912,488 17,725,679
— 12,061,590
—
—
—
—
— 5,555,078 84,513,535
—
—
308,805
— (32,813,896)
— (52,346,207)
— (10,222,585)
(201,927)
—
—
(163,442)
— (9,473,844)
(75,172)
—
(174,376)
—
—
—
—
—
—
—
—
—
Other financial instruments:
Commitments to originate real estate
loans for sale .................................................. $
Commitments to sell real estate loans ...............
Other credit-related commitments.....................
Interest rate swap agreements used for interest
rate risk management .....................................
7,325
36,653
(136,295)
7,325
36,653
(136,295)
—
—
—
—
36,653
—
7,325
—
(136,295)
11,892
11,892
—
11,892
—
With the exception of marketable securities, certain off-balance sheet financial instruments and
mortgage loans originated for sale, the Company’s financial instruments are not readily marketable
and market prices do not exist. The Company, in attempting to comply with the provisions of GAAP
that require disclosures of fair value of financial instruments, has not attempted to market its
financial instruments to potential buyers, if any exist. Since negotiated prices in illiquid markets
depend greatly upon the then present motivations of the buyer and seller, it is reasonable to assume
that actual sales prices could vary widely from any estimate of fair value made without the benefit of
negotiations. Additionally, changes in market interest rates can dramatically impact the value of
financial instruments in a short period of time. The following assumptions, methods and calculations
were used in determining the estimated fair value of financial instruments not measured at fair value
in the consolidated balance sheet.
Cash and cash equivalents, interest-bearing deposits at banks, deposits at Cayman Islands office,
short-term borrowings, accrued interest receivable and accrued interest payable
Due to the nature of cash and cash equivalents and the near maturity of interest-bearing deposits at
banks, deposits at Cayman Islands office, short-term borrowings, accrued interest receivable and
173
accrued interest payable, the Company estimated that the carrying amount of such instruments
approximated estimated fair value.
Investment securities
Estimated fair values of investments in readily marketable securities were generally based on quoted
market prices. Investment securities that were not readily marketable were assigned amounts based
on estimates provided by outside parties or modeling techniques that relied upon discounted
calculations of projected cash flows or, in the case of other investment securities, which include
capital stock of the Federal Reserve Bank of New York and the Federal Home Loan Bank of New
York, at an amount equal to the carrying amount.
Loans and leases
In general, discount rates used to calculate values for loan products were based on the Company’s
pricing at the respective period end. A higher discount rate was assumed with respect to estimated
cash flows associated with nonaccrual loans. Projected loan cash flows were adjusted for estimated
credit losses. However, such estimates made by the Company may not be indicative of assumptions
and adjustments that a purchaser of the Company’s loans and leases would seek.
Deposits
Pursuant to GAAP, the estimated fair value ascribed to noninterest-bearing deposits, savings deposits
and 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-term borrowings
The amounts assigned to long-term borrowings were based on quoted market prices, when available,
or were based on discounted cash flow calculations using prevailing market interest rates for
borrowings of similar terms and credit risk.
Other commitments and contingencies
As described in note 21, in the normal course of business, various commitments and contingent
liabilities are outstanding, such as loan commitments, credit guarantees and letters of credit. The
Company’s pricing of such financial instruments is based largely on credit quality and relationship,
probability of funding and other requirements. Loan commitments often have fixed expiration dates
and contain termination and other clauses which provide for relief from funding in the event of
significant deterioration in the credit quality of the customer. The rates and terms of the Company’s
loan commitments, credit guarantees and letters of credit are competitive with other financial
institutions operating in markets served by the Company. The Company believes that the carrying
amounts, which are included in other liabilities, are reasonable estimates of the fair value of these
financial instruments.
174
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
2017
2016
(In thousands)
Commitments to extend credit
Home equity lines of credit ................................................................. $ 5,482,622
194,763
Commercial real estate loans to be sold ..............................................
6,050,569
Other commercial real estate ...............................................................
347,113
Residential real estate loans to be sold ................................................
201,426
Other residential real estate .................................................................
12,733,815
Commercial and other .........................................................................
2,497,844
Standby letters of credit............................................................................
46,739
Commercial letters of credit .....................................................................
3,434,381
Financial guarantees and indemnification contracts.................................
812,217
Commitments to sell real estate loans ......................................................
5,499,609
70,100
6,451,709
478,950
232,721
12,298,473
2,987,091
44,723
3,043,580
1,489,237
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
175
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 $3.3 billion and $2.8
billion at December 31, 2017 and 2016, respectively.
Since many loan commitments, standby letters of credit, and guarantees and indemnification
contracts expire without being funded in whole or in part, the contract amounts are not necessarily
indicative of future cash flows.
The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the
fair value of real estate loans held for sale. Such commitments are considered derivatives and along
with commitments to originate real estate loans to be held for sale are generally recorded in the
consolidated balance sheet at estimated fair market value.
The Company occupies certain banking offices and uses certain equipment under noncancelable
operating lease agreements expiring at various dates over the next 21 years. Minimum lease
payments under noncancelable operating leases are summarized in the following table:
Year ending December 31:
2018............................................................................................................................... $
2019...............................................................................................................................
2020...............................................................................................................................
2021...............................................................................................................................
2022...............................................................................................................................
Later years.....................................................................................................................
$
92,824
87,298
70,490
54,685
41,953
82,195
429,445
(In thousands)
The Company is contractually obligated to repurchase previously sold residential real estate
loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan
documentation. When required to do so, the Company may reimburse loan purchasers for losses
incurred or may repurchase certain loans. The Company reduces residential mortgage banking
revenues by an estimate for losses related to its obligations to loan purchasers. The amount of those
charges is based on the volume of loans sold, the level of reimbursement requests received from loan
purchasers and estimates of losses that may be associated with previously sold loans. At
December 31, 2017, the Company believes that its obligation to loan purchasers was not material to
the Company’s consolidated financial position.
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 (United States v. Wilmington Trust Corp., et al,
District of Delaware, Crim. No. 15-23-RGA). On October 9, 2017, Wilmington Trust Corporation
reached a civil settlement with the U.S. Attorney’s Office for the District of Delaware to resolve this
matter. Under the terms of the agreement, Wilmington Trust Corporation agreed to pay $60 million.
The settlement amount included $16 million previously paid by Wilmington Trust Corporation to the
U.S. Securities and Exchange Commission in a related action. Wilmington Trust Corporation did not
admit any liability, nor was there any finding of wrongdoing. All indictments and charges against
Wilmington Trust Corporation were dismissed by Court order on October 12, 2017.
176
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 existing
recorded liability, was between $0 and $50 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. 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. The net
effects of these allocations are recorded in the “All Other” category. 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).
177
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. During 2017, the Company revised its funds transfer pricing allocation related to
certain deposit categories. Accordingly, financial information presented herein for 2016 and 2015 has
been reclassified to provide segment information on a comparable basis, as noted in the following
tables.
For the Year Ended December 31, 2016
Net Interest
Income as
Previously
Reported
Impact
of
Changes
Net Interest
Income as
Reclassified
Net Income
(Loss) as
Previously
Reported
Impact
of
Changes
Net Income
(Loss) as
Reclassified
(In thousands)
93,346 10,412 103,758
Business Banking .................................................. $ 354,333 17,556 371,889 $
411,696
(317) 411,379
785,874
Commercial Banking ............................................
(535) 785,339
350,358 — 350,358
608,385 — 608,385
Commercial Real Estate........................................
163,538 — 163,538
345,926 — 345,926
Discretionary Portfolio..........................................
55,453
79,678 (24,225)
29,809
Residential Mortgage Banking..............................
274,646 19,727 294,373
Retail Banking....................................................... 1,074,125 33,263 1,107,388
All Other ...............................................................
(63,745)
(58,148) (5,597)
230,589 (9,438) 221,151
Total ...................................................................... $3,469,887 — 3,469,887 $1,315,114 — 1,315,114
70,655 (40,846)
For the Year Ended December 31, 2015
Net Interest
Income as
Previously
Reported
Impact
of
Changes
Net Interest
Income as
Reclassified
Net Income
(Loss) as
Previously
Reported
Impact
of
Changes
Net Income
(Loss) as
Reclassified
(In thousands)
98,758 10,986 109,744
Business Banking .................................................. $ 338,855 18,523 357,378 $
(144) 430,886
431,030
(242) 753,362
Commercial Banking ............................................
753,604
577,922 — 577,922
Commercial Real Estate........................................
340,641 — 340,641
59,272
59,272 —
97,626
97,626 —
Discretionary Portfolio..........................................
88,578 (14,216)
74,362
Residential Mortgage Banking..............................
39,969
63,939 (23,970)
267,518 20,579 288,097
917,041 34,699 951,740
Retail Banking.......................................................
All Other ...............................................................
(206,130) (17,205) (223,335)
64,590
93,600 (29,010)
Total ...................................................................... $2,842,587 — 2,842,587 $1,079,667 — 1,079,667
178
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.
For the Years Ended December 31, 2017, 2016 and 2015
Commercial Real Estate
2017
2015
2017
2016
2015
Business Banking
Commercial Banking
2016
Net interest income(a) ............... $ 393,948 $ 371,889 $ 357,378 $ 809,301 $ 785,339 $ 753,362 $ 649,378 $ 608,385 $ 577,922 $ 277,095 $ 345,926 $
26,075
Noninterest income.................... 112,512 108,783 108,195
372,001
32,925
290,142
506,460 480,672 465,573 1,092,748 1,060,262 1,043,504
25,089
Provision for credit losses.......... 15,598 12,709 15,513
Amortization of core deposit
and other intangible assets......
Depreciation and other
472
amortization ............................
407
95,300
Other noninterest expense ......... 294,493 292,124 264,163
243,304
Income (loss) before taxes......... 195,976 175,435 185,490
79,766
Income tax expense (benefit)..... 80,043 71,677 75,746
Net income (loss)....................... $ 115,933 $ 103,758 $ 109,744 $ 436,871 $ 411,379 $ 430,886 $ 364,135 $ 350,358 $ 340,641 $ 134,968 $ 163,538 $
19,247
20,120
24,410
207,493 204,965 169,688
593,905 566,453 539,938
229,770 216,095 199,297
169,966 179,706 142,948
819,344 788,091 720,870
(8,003 )
(3,447 )
509
339,936
740,427
303,556
566
288,303
729,546
298,660
520
327,616
697,223
285,844
279
76,021
193,527
58,559
23,851
300,946
31,119
283,447
274,923
2016
2015
(7,524 )
11,876
34,903
1,060
404
393
2017
2017
—
—
—
—
—
—
—
—
—
—
Discretionary Portfolio
2016
2015
97,626
28,114
125,740
7,599
—
679
49,839
67,623
8,351
59,272
Average total assets
(in millions) ............................ $
Capital expenditures
(in millions) ............................ $
5,602 $
5,456 $
5,339 $
26,573 $
25,592 $
24,143 $
22,741 $ 21,131 $ 18,827 $
37,203 $
40,867 $
26,648
— $
— $
— $
— $
— $
— $
1 $
— $
— $
— $
— $
—
Residential Mortgage
Banking
2017
2016
2015
2017
Retail Banking
2016
2015
2017
All Other
2016
2015
2017
Total
2016
2015
For the Years Ended December 31, 2017, 2016 and 2015
1,254
323,176
329,833
Net interest income(a) ............... $ 30,328 $ 29,809 $ 39,969 $ 1,210,066 $ 1,107,388 $ 951,740 $ 410,928 $ 221,151 $ 64,590 $ 3,781,044 $ 3,469,887 $ 2,842,587
609,945 570,475 594,586 1,851,143 1,825,996 1,825,037
Noninterest income.................... 321,589 342,858 336,099
351,917 372,667 376,068 1,539,899 1,430,564 1,276,693 1,020,873 791,626 659,176 5,632,187 5,295,883 4,667,624
170,000
Provision for credit losses..........
Amortization of core deposit
and other intangible assets......
Depreciation and other
35,291
148,925
64,852
amortization ............................ 32,011 30,264 27,883
682,594 1,019,465 892,625 959,345 2,943,200 2,846,894 2,647,583
Other noninterest expense ......... 247,639 258,141 233,651
(107,086 ) (208,243 ) (453,519 ) 2,323,862 2,058,398 1,674,692
485,855
Income (loss) before taxes......... 71,013 87,879 119,759
(40,752 ) (144,498 ) (230,184 )
Income tax expense (benefit)..... 25,446 32,426 45,397
595,025
197,758
(66,334 ) $ (63,745 ) $ (223,335 ) $ 1,408,306 $ 1,315,114 $ 1,079,667
Net income (loss)....................... $ 45,567 $ 55,453 $ 74,362 $ 377,166 $ 294,373 $ 288,097 $
38,234
758,153
636,100
258,934
37,657
776,123
496,347
201,974
743,284
107,412
190,000
157,978
324,953
120,437
168,000
165,759
915,556
62,074
30,306
42,613
26,424
69,923
68,541
(3,617 )
(5,225 )
(3,910 )
72,953
42,613
31,366
8,265
26,424
—
—
—
—
—
—
Average total assets
(in millions) ............................ $
Capital expenditures
(in millions) ............................ $
2,355 $
2,569 $
2,918 $
12,702 $
11,840 $
11,035 $
13,684 $ 16,885 $ 12,870 $ 120,860 $ 124,340 $ 101,780
— $
— $
— $
34 $
46 $
14 $
44 $
62 $
68 $
79 $
108 $
82
(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 $34,570,000 in 2017, $26,962,000 in 2016 and
$24,463,000 in 2015 and is eliminated in “All Other” net interest income and income tax expense (benefit).
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. Commercial
real estate loans held for sale are included in the Commercial Real Estate Segment. 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 are included in this segment. The
179
Residential Mortgage Banking segment originates and services residential real estate loans for
consumers and sells substantially all originated 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,
and telephone, mobile 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:
2017
Year Ended December 31
2016
(In thousands)
2015
Revenues ............................................................................. $
Expenses..............................................................................
Income taxes (benefit).........................................................
Net income (loss) ................................................................
(43,941) $
(32,623)
(4,606)
(6,712)
(48,625) $
(40,422)
(3,338)
(4,865)
(48,972)
(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.
180
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, 2017, approximately $397 million 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.
The bank subsidiaries are required to maintain reserves against certain deposit liabilities.
During the maintenance periods that included December 31, 2017 and 2016, cash and due from
banks and interest-earning deposits at banks included a daily average of $679,401,000 and
$594,831,000, respectively, for such purpose.
M&T and its subsidiary banks are required to comply with applicable capital adequacy
regulations established by the federal banking agencies. 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, 2017, the required minimum and well capitalized
capital ratios are as follows:
● Common equity Tier 1 ("CET1") to risk-weighted assets ........................
● Tier 1 capital to risk-weighted assets ........................................................
● Total capital to risk-weighted assets .........................................................
● Leverage — Tier 1 capital to average total assets, as defined ..................
Minimum Capitalized
6.5%
4.5%
6.0%
8.0%
8.0% 10.0%
5.0%
4.0%
Well
In addition, capital regulations provide for the phase-in of a “capital conservation buffer”
composed entirely of CET1 on top of these minimum risk-weighted asset ratios. When fully phased-
in on January 1, 2019 the capital conservation buffer will be 2.5%. For 2017 and 2016, the phase-in
transition portion of that buffer was 1.25% and .625%, respectively.
181
The capital ratios and amounts of the Company and its banking subsidiaries as of December 31,
2017 and 2016 are presented below:
M&T
(Consolidated)
M&T Bank
(Dollars in thousands)
Wilmington
Trust, N.A.
December 31, 2017:
Common equity Tier 1 capital
Amount ......................................................................... $10,675,735
Ratio(a) .........................................................................
10.99%
$ 9,978,163
$ 529,988
10.30%
48.16%
Tier 1 capital
Amount ......................................................................... 11,908,166
Ratio(a) .........................................................................
12.26%
9,978,163
529,988
10.30%
48.16%
Total capital
Amount ......................................................................... 14,328,467
Ratio(a) .........................................................................
14.75%
12,012,171
534,235
12.40%
48.54%
Leverage
Amount ......................................................................... 11,908,166
Ratio(b) .........................................................................
10.31%
9,978,163
529,988
8.68%
13.03%
December 31, 2016:
Common equity Tier 1 capital
Amount ......................................................................... $10,849,642
Ratio(a) .........................................................................
10.70%
$10,115,688
$ 496,801
10.02%
57.08%
Tier 1 capital
Amount ......................................................................... 12,083,948
Ratio(a) .........................................................................
11.92%
10,115,688
496,801
10.02%
57.08%
Total capital
Amount ......................................................................... 14,282,492
Ratio(a) .........................................................................
14.09%
11,812,114
501,111
11.70%
57.57%
Leverage
Amount ......................................................................... 12,083,948
Ratio(b) .........................................................................
9.99%
10,115,688
496,801
8.41%
15.31%
(a) The ratio of capital to risk-weighted assets, as defined by regulation.
(b) 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. That investment had no remaining carrying value at December 31, 2017 as a result of
cumulative losses recognized and cash distributions received.
Bayview Financial Holdings, L.P. (together with its affiliates, “Bayview Financial”), a privately-
held specialty financial 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 $3.0 billion and $3.5 billion at December 31, 2017 and 2016,
respectively. Revenues from those servicing rights were $17 million, $19 million and $23 million
182
during 2017, 2016 and 2015, respectively. The Company sub-services residential mortgage loans for
Bayview Financial having outstanding principal balances of $56.6 billion and $30.4 billion at
December 31, 2017 and 2016, respectively. Revenues earned for sub-servicing loans for Bayview
Financial were $103 million, $98 million and $115 million in 2017, 2016 and 2015, respectively. In
addition, the Company held $136 million and $158 million of mortgage-backed securities in its held-to-
maturity portfolio at December 31, 2017 and 2016, respectively, that were securitized by Bayview
Financial. In April 2017, the Company provided a loan to Bayview Financial for $100 million at terms
consistent with those offered to nonaffiliated customers. That loan was subsequently paid in full in June
2017. Also in June 2017, a new syndicated loan facility was entered into by Bayview Financial for
$750 million, of which the Company held $88 million at December 31, 2017.
25. Parent company financial statements
Condensed Balance Sheet
Assets
Cash in subsidiary bank ...................................................................... $
Due from consolidated bank subsidiaries
December 31
2017
2016
(In thousands)
13,379 $
15,003
Money-market savings...................................................................
Current income tax receivable .......................................................
Total due from consolidated bank subsidiaries .........................
1,616,147
4,437
1,620,584
1,767,184
3,061
1,770,245
Investments in consolidated subsidiaries
Banks.............................................................................................. 14,841,794 15,003,964
161,201
Other ..............................................................................................
23,643
Investments in unconsolidated subsidiaries (note 19) ........................
11,908
Investment in Bayview Lending Group LLC .....................................
71,687
Other assets .........................................................................................
Total assets ................................................................................ $ 16,819,137 $ 17,057,651
253,904
23,453
—
66,023
Liabilities
Accrued expenses and other liabilities................................................ $
Long-term borrowings ........................................................................
Total liabilities...........................................................................
54,487
516,542
571,029
Shareholders’ equity......................................................................... 16,250,819 16,486,622
Total liabilities and shareholders’ equity .................................. $ 16,819,137 $ 17,057,651
49,093 $
519,225
568,318
183
Condensed Statement of Income
2017
Year Ended December 31
2016
(In thousands, except per share)
2015
Income
Dividends from consolidated bank subsidiaries.................. $ 1,540,000 $ 1,930,000 $
(10,752)
Equity in earnings of Bayview Lending Group LLC..........
5,530
Other income.......................................................................
Total income................................................................... 1,549,845 1,924,778
352
9,493
480,000
(14,267)
2,364
468,097
Expense
Interest on long-term borrowings........................................
Other expense......................................................................
Total expense..................................................................
21,591
19,636
41,227
18,963
21,361
40,324
24,453
16,793
41,246
Income before income taxes and equity in undistributed
income of subsidiaries...................................................... 1,508,618 1,884,454
Income tax credits ...............................................................
17,247
Income before equity in undistributed income of
subsidiaries ...................................................................... 1,535,071 1,901,701
Equity in undistributed income of subsidiaries
Net income of subsidiaries .................................................. 1,413,235 1,343,413 1,112,851
Less: dividends received ..................................................... (1,540,000) (1,930,000)
(480,000)
632,851
(586,587)
Equity in undistributed income of subsidiaries...................
Net income........................................................................... $ 1,408,306 $ 1,315,114 $ 1,079,667
Net income per common share
426,851
19,965
(126,765)
26,453
446,816
Basic ............................................................................... $
Diluted ............................................................................
8.72 $
8.70
7.80 $
7.78
7.22
7.18
184
Condensed Statement of Cash Flows
2017
Year Ended December 31
2016
(In thousands)
2015
Cash flows from operating activities
Net income.......................................................................... $ 1,408,306 $ 1,315,114 $ 1,079,667
Adjustments to reconcile net income to net cash provided
by operating activities
586,587
Equity in undistributed income of subsidiaries .............
(3,157)
Benefit (provision) for deferred income taxes...............
12,898
Net change in accrued income and expense ..................
Loss (gain) on sale of assets ..........................................
(2,342)
Net cash provided by operating activities...................... 1,536,449 1,909,100
126,765
4,543
(170)
(2,995)
(632,851)
(3,655)
21,780
119
465,060
Cash flows from investing activities
Proceeds from sales or maturities of
investment securities .......................................................
Other, net ............................................................................
Net cash provided by investing activities ......................
—
12,407
12,407
51
13,619
13,670
755
14,038
14,793
Cash flows from financing activities
Payments on long-term borrowings....................................
—
Purchases of treasury stock ................................................ (1,205,905)
(457,402)
Dividends paid — common................................................
(72,734)
Dividends paid — preferred ...............................................
—
Redemption of Series D preferred stock ............................
—
Proceeds from issuance of Series F preferred stock...........
34,524
Other, net ............................................................................
(322,621)
—
—
(641,334)
(375,017)
(441,891)
(81,270)
(81,270)
—
(500,000)
—
495,000
76,364
143,764
(702,544)
Net cash used by financing activities............................. (1,701,517) (1,025,731)
897,039
(222,691)
885,148 1,107,839
885,148
Net increase (decrease) in cash and cash equivalents ........
(152,661)
Cash and cash equivalents at beginning of year................. 1,782,187
Cash and cash equivalents at end of year ........................... $ 1,629,526 $ 1,782,187 $
Supplemental disclosure of cash flow information
Interest received during the year ........................................ $
Interest paid during the year ...............................................
Income taxes received during the year ...............................
1,931 $
15,918
8,877
2,313 $
18,498
21,740
1,905
30,420
16,696
185
26. Recent accounting developments
The following table provides a description of accounting standards that were adopted by the
company in 2017 as well as standards that are not effective that could have an impact to M&T’s
consolidated financial statements upon adoption.
Standard
Standards Adopted in 2017
Description
Required date
of adoption
Effect on consolidated financial
statements
Improvements
to Employee
Share-Based
Payment
Accounting
The amended guidance requires that all excess tax benefits
and tax deficiencies related to share-based compensation
be recognized in income tax expense in the income
statement and that such amounts be recognized in the
period in which the tax deduction arises or in the period in
which an expiration of an award occurs.
January 1, 2017
The adoption of this guidance resulted in a
$22 million reduction of income tax
expense for the year ended December 31,
2017 that under previous accounting
guidance would have been recognized
directly in shareholders’ equity.
Simplifying the
Transition to
Equity Method
of Accounting
The amended guidance eliminates the requirement that an
investor retroactively apply the equity method of
accounting as a result of an increase in the level of
ownership interest or degree of influence. The amended
guidance instead requires the investor to adopt the equity
method of accounting as of the date the investment first
qualifies for such accounting.
Derivatives and
Hedging
Amendments
One amendment clarifies that a change in the counterparty
to a derivative instrument that has been designated as the
hedging instrument does not, in and of itself, require
dedesignation of that hedging relationship provided that all
other hedge accounting criteria continue to be met.
A second amendment clarifies the requirements for
assessing whether contingent call (put) options that can
accelerate the payment of principal on debt instruments are
clearly and closely related to their debt hosts.
Reclassification
of Certain Tax
Effects from
Accumulated
Other
Comprehensive
Income
The amended guidance allows a reclassification from
accumulated other comprehensive income to retained
earnings for stranded tax effects resulting from the newly
enacted federal corporate income tax rate. The amount of
reclassification would be the difference between the
historical corporate income tax and the new enacted 21
percent corporate income tax rate.
January 1, 2017
The adoption of this guidance did not have
a material effect on the Company’s
consolidated financial position or results of
operations.
January 1, 2017
The adoption of this guidance did not have
a material effect on the Company’s
consolidated financial position or results of
operations.
January 1, 2018
Early adoption
permitted
The Company early adopted the amended
guidance following enactment of the Tax
Act in 2017. The adoption of this guidance
resulted in a $64 million reclassification
from AOCI to retained earnings.
186
Standard
Description
Standards Not Yet Adopted as of December 31, 2017
Required date
of adoption
Effect on consolidated financial
statements
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.
January 1, 2018
January 1, 2018
Recognition
and
Measurement
of Financial
Assets and
Financial
Liabilities
The amended guidance requires equity investments
(excluding those accounted for under the equity method of
accounting or those that result in consolidation of the
investee) be measured at fair value with changes in fair
value recognized in net income, public entities to use the
exit price when measuring the fair value of financial
instruments for disclosure purposes, and 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.
The Company adopted the revenue
recognition guidance effective January 1,
2018, and expects to apply the modified
retrospective approach for reporting
purposes. A significant amount of the
Company’s revenues are derived from net
interest income on financial assets and
liabilities, which are excluded from the
scope of the amended guidance. With
respect to noninterest income, under the
new guidance credit card interchange
revenue will be presented net of rewards
expense in other revenues from operations.
For the years ended December 31, 2017
and 2016, M&T recognized $13 million
and $6 million, respectively, of credit card
rewards expense in other costs of
operations. The adjustment to beginning
retained earnings as well as the impact of
any changes in the timing of revenue
recognition of noninterest income items
within the scope of this guidance will not
be material to the Company’s financial
position or results of operations.
The Company held marketable equity
securities with a fair value of $101 million
in its available-for-sale portfolio at
December 31, 2017. Effective January 1,
2018, fair value changes in such equity
securities will be recognized in the
consolidated statement of income as
opposed to AOCI where they had been
recognized under previous accounting
guidance. Although those securities have
historically fluctuated in value, how those
securities could change in value in the
future is not predictable.
Improvements
to Accounting
for Hedging
Activities
The amended guidance expands and clarifies hedge
accounting for nonfinancial and financial risk components,
aligns the recognition and presentation of the effects of the
hedging instrument and hedged item in the financial
statements, and simplifies the requirements for assessing
effectiveness in a hedging relationship.
January 1, 2019
Early adoption
permitted
The Company adopted the amended
guidance on January 1, 2018 and does not
expect such adoption will have a material
impact on its consolidated financial
statements.
Improving the
Presentation of
Net Periodic
Pension Cost
and Net
Periodic
Postretirement
Benefit Cost
The amended guidance requires the service cost
component of the net periodic pension cost and net
periodic postretirement benefit cost to be reported in the
same line item in the income statement as other
compensation costs arising from services rendered by the
pertinent employees during the period. The amendments
also require that the other components of net benefit costs
be presented separately from the service cost component.
January 1, 2018
The amended guidance addresses which changes to the
terms and conditions of a share-based payment award
require an entity to apply modification accounting.
January 1, 2018
Scope of
Modification
Accounting for
Share-Based
Payment
Awards
The Company adopted the new reporting
requirements effective January 1, 2018.
The Company has previously reported all
of its net periodic pension and
postretirement benefit costs in salaries and
employee benefits within the consolidated
statement of income. Information about
net periodic pension and postretirement
benefit costs that were not service cost-
related is included in note 12.
The Company adopted the amended
guidance on January 1, 2018. The
guidance is to be applied on a prospective
basis for awards modified on or after the
adoption date.
187
Required date
of adoption
Effect on consolidated financial
statements
January 1, 2018
The guidance will be applied using a
retrospective transition method beginning
with first quarter 2018 reporting.
Standard
Description
Standards Not Yet Adopted as of December 31, 2017
The amended guidance requires that restricted cash and
restricted cash equivalents be included with cash and cash
equivalents when reconciling the beginning-of-period and
end-of-period total amounts shown on the statement of
cash flows. In addition, when cash, cash equivalents, and
restricted cash or restricted cash equivalents are presented
in more than one line item within the statement of financial
position, the line items and amounts must be presented on
the face of the statement of cash flows or disclosed in the
notes to the financial statements. Information about the
nature of restrictions on an entity’s cash and cash
equivalents must also be disclosed.
Restricted Cash
Classification
of Certain Cash
Receipts and
Cash Payments
Clarifying the
Definition of a
Business
Leases
This amendment provides clarifying guidance for
classifying cash inflows or outflows on the statement of
cash flows where current guidance is unclear or silent.
January 1, 2018
The guidance will be applied using a
retrospective transition method beginning
with first quarter 2018 reporting.
The amended guidance clarifies the definition of a business
for purposes of evaluating whether transactions would be
accounted for as acquisitions (or disposals) of assets or
businesses.
January 1, 2018
January 1, 2019
Early adoption
permitted
The new guidance requires lessees to record a right-of-use
asset and a lease liability for all leases with a term greater
than 12 months. While the guidance requires all leases to
be recognized in the balance sheet, there continues to be a
differentiation between finance leases and operating leases
for purposes of income statement recognition and cash
flow statement presentation. For finance leases, interest on
the lease liability and amortization of the right-of-use asset
will be recognized separately in the statement of income.
Repayments of principal on those lease liabilities will be
classified within financing activities and payments of
interest on the lease liability will be classified within
operating activities in the statement of cash flows. For
operating leases, a single lease cost is recognized in the
statement of income and allocated over the lease term,
generally on a straight-line basis. All cash payments are
presented within operating activities in the statement of
cash flows. The accounting applied by lessors is largely
unchanged from existing GAAP, however, the guidance
eliminates the accounting model for leveraged leases for
leases that commence after the effective date of the
guidance.
The guidance should be applied using a
prospective transition method. The
Company does not expect the guidance to
have a material impact on its consolidated
financial statements.
The Company occupies certain banking
offices and uses certain equipment under
noncancelable operating lease agreements
which currently are not reflected in its
consolidated balance sheet. Upon adoption
of the guidance, the Company expects to
report increased assets and increased
liabilities as a result of recognizing right-
of-use assets and lease liabilities on its
consolidated balance sheet. The Company
was committed to $429 million of
minimum lease payments under
noncancelable operating lease agreements
at December 31, 2017. The Company does
not expect the new guidance will have a
material impact to its consolidated
statement of income.
Premium
Amortization
on Purchased
Callable Debt
Securities
The amended guidance requires the premium on callable
debt securities to be amortized to the earliest call date. The
amendments do not require an accounting change for
securities held at a discount; the discount continues to be
amortized to maturity.
January 1, 2019
Early adoption
permitted
The amendments should be applied on a
modified retrospective basis through a
cumulative-effect adjustment directly to
retained earnings as of the beginning of the
period of adoption. The Company does not
expect the guidance to have a material
impact on its consolidated financial
statements.
188
Standard
Description
Standards Not Yet Adopted as of December 31, 2017
Required date
of adoption
Effect on consolidated financial
statements
January 1, 2020
Early adoption
permitted as of
January 1, 2019
The Company is assessing the new
guidance to determine what modifications
to existing credit estimation processes may
be required. The Company expects that the
new guidance will result in an increase in
its allowance for credit losses as a result of
considering credit losses over the expected
life of its loan portfolios. Increases in the
level of allowances will also reflect new
requirements to include the nonaccretable
principal difference on purchased credit
impaired loans and estimated credit losses
on investment securities classified as held-
to-maturity, if any. The Company is still
evaluating the extent of the increase to the
allowance for credit losses and the impact
to its financial statements.
Measurement
of Credit
Losses on
Financial
Instruments
The amended guidance replaces the current incurred loss
model for determining the allowance for credit losses. The
guidance requires financial assets measured at amortized
cost to be presented at the net amount expected to be
collected. The allowance for credit losses will represent a
valuation account that is deducted from the amortized cost
basis of the financial assets to present their net carrying
value at the amount expected to be collected. The income
statement will reflect the measurement of credit losses for
newly recognized financial assets as well as expected
increases or decreases of expected credit losses that have
taken place during the period. When determining the
allowance, expected credit losses over the contractual term
of the financial asset(s) (taking into account prepayments)
will be estimated considering relevant information about
past events, current conditions, and reasonable and
supportable forecasts that affect the collectibility of the
reported amount. The amended guidance also requires
recording an allowance for credit losses for purchased
financial assets with a more-than-insignificant amount of
credit deterioration since origination. The initial allowance
for these assets will be added to the purchase price at
acquisition rather than being reported as an
expense. Subsequent changes in the allowance will be
recorded through the income statement as an expense
adjustment. In addition, the amended guidance requires
credit losses relating to available-for-sale debt securities to
be recorded through an allowance for credit losses. The
calculation of credit losses for available-for-sale securities
will be similar to how it is determined under existing
guidance.
Simplifying the
Test for
Goodwill
Impairment
The amended guidance eliminates step 2 from the goodwill
impairment test.
January 1, 2020
Early adoption
permitted
The amendments should be applied using a
prospective transition method. The
Company does not expect the guidance will
have a material impact on its consolidated
financial statements, unless at some point
in the future one of its reporting units were
to fail step 1 of the goodwill impairment
test.
189
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the
effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-
15(e) and 15d-15(e)), René F. Jones, Chairman of the Board and Chief Executive Officer, and Darren
J. King, Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure
controls and procedures were effective as of December 31, 2017.
(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, 2017 that have materially affected,
or are reasonably likely to materially affect, M&T’s internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required to be furnished pursuant to Items 401, 405, 406 and 407(c)(3), (d)(4) and
(d)(5) of Regulation S-K will be included in M&T’s Proxy Statement for the 2018 Annual Meeting
of Shareholders, to be filed with the SEC pursuant to Regulation 14A on or about March 7, 2018 (the
“2018 Proxy Statement”). The information concerning M&T’s directors will appear under the
caption “NOMINEES FOR DIRECTOR” in the 2018 Proxy Statement. The information regarding
compliance with Section 16 of the Securities Exchange Act will appear under the caption “Section
16(a) Beneficial Ownership Reporting Compliance” in the 2018 Proxy Statement. The information
concerning M&T’s Code of Ethics for CEO and Senior Financial Officers will appear under the
caption “CORPORATE GOVERNANCE OF M&T BANK CORPORATION” in the 2018 Proxy
Statement. The information regarding M&T’s Audit Committee will appear under the caption
“CORPORATE GOVERNANCE OF M&T BANK CORPORATION.” Such information is
incorporated herein by reference.
The information concerning M&T’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.
190
Item 11. Executive Compensation.
The information required to be furnished pursuant to Items 402 and 407 of Regulation S-K will
appear under the captions “COMPENSATION DISCUSSION AND ANALYSIS,” “EXECUTIVE
COMPENSATION,” “DIRECTOR COMPENSATION,” “NOMINATION, COMPENSATION
AND GOVERNANCE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION,” and
“NOMINATION, COMPENSATION AND GOVERNANCE COMMITTEE REPORT” in the 2018
Proxy Statement. Such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The information required to be furnished pursuant to Item 403 of Regulation S-K will appear under
the caption “STOCK OWNERSHIP INFORMATION” in the 2018 Proxy Statement. Such
information is incorporated herein by reference.
The information required to be furnished pursuant to Item 201(d) concerning equity
compensation plans is presented under the caption “Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities” contained in Part II, Item 5 of this
Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required to be furnished pursuant to Items 404 and 407 of Regulation S-K will
appear under the caption “TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS”
and “CORPORATE GOVERNANCE OF M&T BANK CORPORATION” in the 2018 Proxy
Statement. Such information is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information required to be furnished by Item 9 of Schedule 14A will appear under 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, 2018” in the 2018 Proxy Statement.
Such information is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Financial statements and financial statement schedules filed as part of this Annual Report on
Form 10-K. See Part II, Item 8. “Financial Statements and Supplementary Data.” Financial statement
schedules are not required or are inapplicable, and therefore have been omitted.
(b) Exhibits required by Item 601 of Regulation S-K. The exhibits listed have been previously
filed, are filed herewith or are incorporated herein by reference to other filings.
3.1
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).
191
3.2
3.3
3.4
3.5
3.6
4.1
4.2
4.3
4.4
10.1
10.2
10.3
10.4
10.5
Amended and Restated Bylaws of M&T Bank Corporation, effective April 18, 2017.
Incorporated by reference to Exhibit 3.2 to the Form 10-Q for the quarter ended March 31,
2017 (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).
Certificate of Amendment to Certificate of Incorporation with respect to Perpetual Fixed-
to-Floating Rate Non-Cumulative Preferred Stock, Series F, dated October 27, 2016.
Incorporated by reference to Exhibit 3.1 of M&T Bank Corporation’s Form 8-K dated
October 28, 2016 (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).*
Supplemental Deferred Compensation Agreement between Manufacturers and Traders
Trust Company and Brian E. Hickey dated as of July 21, 1994, as amended. Incorporated
by reference to Exhibit 10.2 to the Form 10-K for the year ended December 31, 2016 (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 10-Q for the quarter ended March
31, 2016 (File No. 1-9861).*
M&T Bank Corporation Supplemental Retirement Savings Plan. Incorporated by
reference to Exhibit 10.2 to the Form 10-Q for the quarter ended March 31, 2016 (File No.
1-9861).*
M&T Bank Corporation Deferred Bonus Plan, as amended and restated. Incorporated by
reference to Exhibit 10.6 to the Form 10-K for the year ended December 31, 2016 (File
No. 1-9861).*
192
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
11.1
12.1
21.1
23.1
31.1
31.2
32.1
32.2
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).*
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).*
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.
Subsidiaries of the Registrant. Incorporated by reference to the caption “Subsidiaries”
contained in Part I, Item 1 hereof.
Consent of PricewaterhouseCoopers LLP re: Registration Statements on Form S-8 (Nos.
33-32044, 333-43175, 333-16077, 333-40640, 333-84384, 333-127406, 333-150122, 333-
164015, 333-163992, 333-160769, 333-159795, 333-170740, 333-189099, 333-184504,
333-189097 and 333-184411) and Form S-3 (Nos. 333-182348 and 333-207030). 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.
193
101.INS XBRL Instance Document. Filed herewith.
101.SCH XBRL Taxonomy Extension Schema. Filed herewith.
101.CAL XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.
101.LAB XBRL Taxonomy Extension Label Linkbase. Filed herewith.
101.PRE XBRL Taxonomy Extension Presentation Linkbase. Filed herewith.
101.DEF XBRL Taxonomy Definition Linkbase. Filed herewith.
* Management contract or compensatory plan or arrangement.
(c) Additional financial statement schedules. None.
Item 16. Form 10-K Summary.
None.
194
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 22nd day of February, 2018.
M&T BANK CORPORATION
By:
/S/ René F. Jones
René F. Jones
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/ René F. Jones
René F. Jones
Principal Financial Officer:
/S/ Darren J. King
Darren J. King
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
Chairman of the Board
and Chief Executive Officer
February 22, 2018
Executive Vice President
and Chief Financial Officer
February 22, 2018
Senior Vice President and
Controller
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
195
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
/S/ Gary N. Geisel
Gary N. Geisel
/S/ Richard S. Gold
Richard S. Gold
/S/ Richard A. Grossi
Richard A. Grossi
/S/ John D. Hawke, Jr.
John D. Hawke, Jr.
/S/ René F. Jones
René F. Jones
/S/ Richard H. Ledgett, Jr.
Richard H. Ledgett, Jr.
/S/ Newton P. S. Merrill
Newton P. S. Merrill
/S/ Melinda R. Rich
Melinda R. Rich
/S/ Robert E. Sadler, Jr.
Robert E. Sadler, Jr.
/S/ Denis J. Salamone
Denis J. Salamone
/S/ John R. Scannell
John R. Scannell
/S/ David S. Scharfstein
David S. Scharfstein
/S/ Herbert L. Washington
Herbert L. Washington
196
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 505000
Computershare
462 South 4th Street
Louisville, KY 40233-5000
Suite 1600
Louisville, KY 40202
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”).
Cover Art: Haymee Salas and her students from the DreamYard Project created the mural panels featured here, which appear
on the exterior of the M&T Bank branch located in the Bronx, NY. The mural celebrates the culture and diversity of the Bronx,
with each panel vibrantly showcasing the unique people and historic places that make up this community.
DreamYard is a nonprofit organization established in 1994 in the Bronx. Their mission is to cultivate the skills necessary for
local youth to achieve their goals and become leaders and innovators. Much like M&T Bank, DreamYard is committed to its
community and the arts. The organization is recognized and widely supported as a cultural force in the neighborhood.
The art project was commissioned in celebration of our branch’s opening and to beautify the community. DreamYard
students and M&T Bank employees collaborated with the artist to finish the polka-dot border of the mural.
This is the latest in the series of annual reports that features works from artists with strong connections to the communities
served by M&T Bank.
Haymee Salas and the DreamYard Project, 2017, Grand Concourse M&T Bank Branch, Bronx, NY.
INSIDE FRONT COVER: 4/C PROCESS + 376 GREEN
INSIDE BACK COVER: BLACK + 376 GREEN
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mtb.com
COVER & SEC 10-K:
10%
NARRATIVE:
80# MCCOY SILK COVER, PRINTING 4/C PROCESS + 341 GREEN + 433 GREY + UV SPOT GLOSS ON ARTWORK ONLY