M &T B A N K C O R P O R AT I O N
2 0 1 8 A N N U A L R E P O R T
A M E R I C A N V I S I O N A R Y A R T M U S E U M
B A LT I M O R E , M A R Y L A N D
AVAM is a congressionally designated national
museum opened in 1995 with a mission to display
intuitive works by self-taught artists. Situated
in the historic Federal Hill district of Baltimore’s
Inner Harbor, AVAM is devoted to inspiring
creative and compassionate acts of social justice
through intergenerational public programming
and meaningful exhibition themes.
Proud to promote the innovation and unique creativity
of artists who have set themselves apart, AVAM
is a premier Maryland art destination. M&T Bank
supports AVAM and its vision.
C O V E R A R T
Artist Andrew Logan was born in 1945 in Oxford,
England. He spent a year of his life in the United
States, and describes himself as an eccentric who
challenges convention. Logan incorporates themes
of plants, animals, outer space and mythology
into his work.
Commissioned for AVAM, Cosmic Galaxy Egg’s
shape symbolizes life. In addition, its mosaic mirrored
shell represents space and time, and even includes
Hubble Telescope images of dying galaxies and
newborn stars.
This is the latest in the series of annual reports
featuring works and artists with strong connections
to the communities served by M&T Bank.
Andrew Logan, Cosmic Galaxy Egg, 2004, polystyrene, resin,
glass and glitter, 244 cm x 122 cm, American Visionary Art
Museum, Baltimore, MD.
Photograph courtesy of Paul Burk / American Visionary
Art Museum.
M &T BA N K C O R P O R AT I O N
C O N T E N T S
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Message to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxiii
United States Securities and Exchange Commission (SEC) Form 10-K . . . . xxxvi
A N N U A L M E E T I N G
The annual meeting of shareholders will take place at 11:00 a.m. on
April 16, 2019 at One M&T Plaza in Buffalo.
P R O F I L E
M&T Bank Corporation is a bank holding company headquartered in
Buffalo, New York, which had assets of $120.1 billion at December 31, 2018.
M&T Bank Corporation’s subsidiaries include M&T Bank and Wilmington
Trust, National Association.
M&T Bank has banking offices in New York State, Maryland, New Jersey,
Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the
District of Columbia. Major subsidiaries include:
M&T Insurance Agency, Inc.
M&T Securities, Inc.
M&T Real Estate Trust
Wilmington Trust Company
M&T Realty Capital Corporation
Wilmington Trust Investment Advisors, Inc.
M & T B A N K C O R P O R AT I O N A N D S U B S I D I A R I E S
Financial Highlights
For the year
Performance
2018
2017
Change
Net income (thousands) . . . . . . . . . . . . . . . . $ 1,918,080
$ 1,408,306
Net income available to common
shareholders — diluted (thousands) . . . . $ 1,836,035
1,327,517
Return on
Average assets . . . . . . . . . . . . . . . . . . . . . . .
1.64%
Average common equity . . . . . . . . . . . . . .
12.82%
Net interest margin. . . . . . . . . . . . . . . . . . . . .
3.83%
Net charge-offs/average loans. . . . . . . . . . .
.15%
Per common share data
Basic earnings . . . . . . . . . . . . . . . . . . . . . . . . .
$ 12.75
Diluted earnings . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . .
12.74
3.55
1.17%
8.87%
3.47%
.16%
$ 8.72
8.70
3.00
Net operating
(tangible) results(a)
Net operating income (thousands) . . . . . . $ 1,936,155
$ 1,427,331
Diluted net operating earnings
+ 36%
+ 38%
+ 46%
+ 46%
+ 18%
+ 36%
per common share . . . . . . . . . . . . . . . . . . .
12.86
8.82
+ 46%
Net operating return on
Average tangible assets . . . . . . . . . . . . . . .
1.72%
Average tangible common equity . . . . . .
Efficiency ratio(b) . . . . . . . . . . . . . . . . . . . . . . .
19.09%
54.79%
1.23%
13.00%
55.07%
At December 31
Balance sheet data (millions) Loans and leases,
net of unearned discount . . . . . . . . . . . . . $ 88,466
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120,097
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . .
Common shareholders’ equity . . . . . . . . . .
Loan quality
Allowance for credit losses to total loans .
Nonaccrual loans ratio. . . . . . . . . . . . . . . . . .
90,157
15,460
14,225
1.15%
1.01%
Capital
Common equity Tier 1 ratio . . . . . . . . . . . . .
10.13%
Tier 1 risk-based capital ratio . . . . . . . . . . .
11.38%
Total risk-based capital ratio . . . . . . . . . . . .
13.68%
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
9.88%
Total equity/total assets . . . . . . . . . . . . . . . .
12.87%
Common equity (book value) per share . . $ 102.69
Tangible common equity per share . . . . . .
69.28
Market price per share
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
143.13
197.37
133.78
1%
+
+
1%
- 2%
- 5%
- 5%
+ 3%
—
- 16%
$ 87,989
118,593
92,432
16,251
15,016
1.16%
1.00%
10.99%
12.26%
14.75%
10.31%
13.70%
$ 100.03
69.08
170.99
176.62
141.12
(a) Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses
which, except in the calculation of the efficiency ratio, are net of applicable income tax effects. A reconciliation of net income and
net operating income appears in Item 7, Table 2 in Form 10-K.
(b) Excludes impact of merger-related expenses and net securities gains or losses.
ii
DILUTED EARNINGS
PER COMMON SHARE
SHAREHOLDERS’ EQUITY
PER COMMON SHARE AT YEAR-END
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
$7.57
$7.42
$7.74
$7.18
$8.08
$7.78
$8.82 $12.86
$8.70 $12.74
$83.88 $93.60 $97.64 $100.03 $102.69
$57.06 $64.28 $67.85 $ 69.08 $ 69.28
Diluted net operating earnings per
common share(a)
Diluted earnings per common share
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
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
$1,086.9 $1,156.6 $1,362.7 $1,427.3 $1,936.2
$1,066.2 $1,079.7 $1,315.1 $1,408.3 $1,918.1
13.76% 13.00% 12.25%
8.16%
8.32%
9.08%
13.00% 19.09%
8.87% 12.82%
Net operating income(a)
Net income
Net operating return on average tangible
common shareholders’ equity(a)
Return on average common shareholders’
equity
(a) Excludes merger-related gains and expenses and amortization of intangible assets, net of applicable
income tax effects. A reconciliation of net operating (tangible) results with net income is included
in Item 7, Table 2 in Form 10-K.
iii
M E S S A G E T O S H A R E H O L D E R S
iv
UV INK, 4/C PROCESS, PMS 540 + PMS 432
O
ur 2018 results reflect a confluence of events that produced
exceptional improvement in our operations, earnings and level of
return for shareholders.
After a long period of compression, caused by almost a decade of
near zero interest rates, margins expanded as the Federal Reserve continued
to raise interest rates. While rates rose, consumers and businesses alike
found value in retaining uncharacteristically high cash balances with banks.
In fact, last year our customers held 23 percent of deposits in transaction
accounts, 13 percentage points higher than before the financial crisis.
In 2018, net interest margin reached a level not seen since 2010.
The health of our customer base proved strong, leading to the
lowest level of net charge-offs that we have experienced in the last 31 years.
The cost of significant investments during the year in talent,
technology and marketing, which enhanced customer experience
and awareness, was masked to some extent by the elimination of the
FDIC large bank surcharge, as the Deposit Insurance Fund achieved its
statutorily required minimum reserve ratio of 1.35 percent.
The Tax Cuts and Jobs Act, implemented last year, dramatically
increased earnings available for reinvestment in our business or return
to our shareholders.
iv
v
UV INK, 4/C PROCESS, PMS 540 + PMS 432
All of these factors combined to produce a return on tangible
common equity not seen since 2012.
At the same time, loan growth was characterized as slow or
challenged relative to past cycles, due to strong competition from banks
and nonbanks alike for a limited pool of loans, particularly commercial and
industrial loans. While originations were healthy, they were offset by payoffs,
pay-downs or refinances, as customers took advantage of the lower pricing
or the most favorable terms and conditions available from new forms of
lenders. At times like these, our disciplined capital allocation philosophy
often results in tempered loan growth—as asset prices inflate and the
number of capital providers expands, making credit widely available.
The combination of higher revenues, lower credit costs and the
change in tax policy provided more capital than could effectively be put
to use by, or in the service of, customers and communities.
A hallmark of M&T has been the prudent deployment of capital
when and where it makes sense. Our first priority is to invest in our own
business and in the communities in which we operate by extending credit
to our customers or, periodically, in expansion through acquisition. When
returns offered in those areas appear inadequate, we prefer to return
excess capital to shareholders—hopefully enabling its deployment into
alternative, higher returning investments, perhaps outside the financial
services sector in which M&T operates.
Recently, there has been significant debate over the record
amount of capital distributions by banks and other financial institutions,
with estimates exceeding $150 billion being returned in the last year.
Some argue that it would be more reasonable for banks, like M&T, to
vi
hold onto excess capital or deploy it either in or outside our current
communities, even if the returns are less than ideal.
These arguments fail to recognize the fact that a fundamental
role of the banking system is to help customers finance their investment
needs, which enhances their communities and expands the economy.
When those opportunities are exhausted, the role of the banking system
is to avoid deploying capital in ways that could exacerbate the severity of
a boom and bust credit cycle, which could diminish long-term economic
growth. There are all too many examples throughout history where
capital, sub-optimally invested by banks and bankers, has resulted in
the destruction of shareholder resources that could have been utilized
more effectively.
Also, for institutions that hold onto capital beyond that which they
can productively deploy, the mere process of finding uses for that capital tends
to promote excessive risk taking, often times at the peril of those institutions.
Of the 50 largest banks in existence in 1989, the year when the longest tenured
members of M&T’s Executive Management Committee joined the bank, only
nine remain today. The rest were either acquired or failed.
Our own approach, carried out over those 30 years, has proven
central to keeping M&T safe and sound. Only 28 percent of the $17.8 billion
in total capital we generated through earnings over that period has been
retained to support loan growth or acquisitions.
2 0 1 8 —A N E XC E P T I O N A L Y E A R
With that landscape in mind, let’s examine the details behind M&T’s
financial results. Net income surpassed the previous high-water mark,
vii
recorded in 2017, rising 36 percent to $1.92 billion from $1.41 billion in the
prior year. Diluted earnings per common share tallied $12.74, a jump of
46 percent from $8.70 one year earlier. Last year’s results, expressed as rates
of return on average assets and average common equity, were 1.64 percent
and 12.82 percent, respectively, significantly improved from 2017.
As has been the case since 1998, M&T also reports results on a
“net operating” or “tangible” basis, which excludes expenses arising from
the amortization of intangible assets as well as merger-related gains or
expenses in years when they occur. Net operating income was $1.94 billion
in 2018, improved by 36 percent from the prior year. Diluted net operating
income per common share was up 46 percent to $12.86. Net operating income
expressed as a rate of return on average tangible assets was 1.72 percent.
Net operating return on average tangible common shareholders’ equity
was 19.09 percent.
The full-year improvement in GAAP and net operating earnings
included a sizable benefit from the reduction in the federal corporate
income tax rate approved in late 2017. The base federal rate declined
to 21 percent in 2018 compared with 35 percent in 2017.
The primary driver of M&T’s revenue is net interest income, that is,
interest collected on loans and investments less interest paid on deposits
and borrowings. Expressed on a taxable-equivalent basis, net interest
income grew by 7 percent to $4.09 billion in 2018. The higher interest rate
environment contributed to a 51 basis point (hundredths of one percent)
increase in the yield on earning assets with just a 23 basis point increase in
the rate paid on deposits and borrowings. Combined with the impact
viii
of a higher contribution from interest-free funds, the result was
expansion of the net interest margin, or taxable-equivalent net interest
income expressed as a percentage of average earning assets, to 3.83 percent
in 2018, compared with 3.47 percent in 2017.
The benefit of 2018’s wider net interest margin was somewhat
checked by a year-over-year decline in average loans. Total loans averaged
$87.4 billion last year, or some $1.4 billion lower than in 2017.
To look only at total loans would be to miss the intentional
balance sheet transformation underway since late 2015, when Hudson City
Bancorp, Inc. (“Hudson City”) merged with M&T. The average balance
of residential mortgage loans, most of which were acquired through the
Hudson City combination, declined by $2.7 billion during 2018, continuing
the planned runoff which has reduced their balance by nearly half
since the merger. Partially offsetting that contraction was an increase
in commercial and other consumer loans of more than $1.2 billion.
The improved rate of economic growth in the United States,
combined with a near-record low unemployment rate, continued to
bolster the financial health of our consumer and commercial customers.
Loans on which we no longer accrue interest due to concerns about their
ultimate collectibility were little changed, with the ratio of non-accrual
loans to total loans inching up by a scant one basis point to 1.01 percent.
Net charge-offs, that is, loans written off as uncollectible less the recovery
of loans previously written-off, expressed as a percentage of average loans,
were historically low at 15 basis points. That was an improvement from
the already low 16 basis points reported in 2017 and was the lowest level
ix
recorded by M&T since 1987. At 2018’s year end, the ratio of the allowance
for loan losses to loans outstanding stood at 1.15 percent.
Noninterest income totaled $1.86 billion last year, representing
merely a $5 million increase from the previous year. However, that modest
increase was significantly dampened by the impact of both realized gains
from sales of investment securities in 2017 and a change in accounting
rules for unrealized gains or losses on marketable equity securities. While
those unrealized amounts were recorded directly in shareholders’ equity
in prior years, beginning in 2018, they were recognized in the income
statement. In combination, these items account for $28 million of the
difference compared to the prior year. Additionally, implementation of
new revenue recognition accounting rules resulted in the classification of
$14 million of rewards provided to retail customers for using our credit
cards as a reduction of noninterest income. For years prior to 2018, those
rewards are classified as other expense in our financial statements. If not
for the impact of those changes, spurred, in large part, by new accounting
requirements, noninterest income would have increased by $46 million as
compared with 2017. Leading the way in that year-over-year improvement
was trust income, predominantly comprised of revenues from our Wealth
Advisory Services and Institutional Client Services businesses, which together
comprise our Wilmington Trust brand. Trust income totaled $538 million
for 2018, representing a 7 percent increase. Other fee categories, which
include residential and commercial mortgage banking revenues and
service charges on deposit accounts, were little changed from the prior
year. Residential mortgage banking in particular was challenged by
higher long-term interest rates, resulting in limited mortgage refinancing
x
opportunities. Lower housing inventories, particularly for starter homes,
have also impacted the market for mortgages.
Noninterest expenses totaled $3.29 billion in 2018 representing
a 5 percent, or $148 million, increase from 2017. Salaries and benefits
grew by $103 million, reflecting our determination to invest a portion of
tax-related savings into employee compensation. Last year we initiated
mid-cycle wage adjustments for some 8,960 employees in addition to
our practice of annual merit-based pay increases. Further, we added a
net of 473 new employees, largely in customer facing and information
technology-related roles. Coupled with increases of $17 million in
advertising and marketing and $14 million in outside data processing and
software, these initiatives represented significant investments in further
improving our customer experience and awareness, and our operating
systems and processes. As was the case in 2017, expenses in 2018 included
litigation-related charges relating to matters at Wilmington Trust
that predate its acquisition by M&T in 2011. Higher expenses for such
matters accounted for $85 million of the year-over-year increase in our
noninterest expenses.
Consistent with our long-standing philosophy, capital beyond that
necessary to support prudent lending to our customers and investment in
our businesses was returned to shareholders. For the full year of 2018, M&T
repurchased 12,295,817 shares of its common stock valued at $2.2 billion
and paid $510 million of common dividends to our shareholders in a year
when the quarterly dividend rate was increased twice. Those distributions
resulted in a payout ratio for the year that was equal to 147 percent of net
income available to common shareholders.
xi
By any financial measure, 2018 was a successful year for M&T
and we shared that success with our customers, our shareholders, our
employees and our communities.
T R E N D S I N BA N K I N G
The natural temptation after a year in which M&T’s earnings grew by
36 percent is to focus on that achievement, but to do so would gloss over
recent trends that affect our company, industry and economy.
Given the unevenness of the recovery from the financial crisis,
a prominent and deceptively alluring narrative about banking today
has emerged: that scale and location have conveyed insurmountable
competitive advantages to certain institutions, and that without such scale,
and outside those markets, other banks cannot compete. It is a story that
would, superficially, seem to consign M&T to the margin—not so.
Regional banks like M&T have played—and will continue to
play—a vital role in the communities they serve. Indeed, our performance,
both last year and over time, can be said to reflect the value we create
for our customers and our communities, and which has accrued to our
shareholders. What follows will examine broad trends in banking and in
the overall economy—and make clear how M&T will continue to prosper
notwithstanding both.
Often cited as evidence in this emerging narrative is the outsized
growth rate of low-cost deposits—long a key ingredient in successful banking—
realized by the largest U.S. financial institutions in the post-crisis era.
In 2017, three of the largest institutions grew deposits by
$120 billion—an amount greater than all of the deposits at the 12th largest
xii
commercial bank in the country. Those same three banks opened more
than 45 percent of all new checking accounts in the country in 2017,
according to one study. That caps a five-year period in which those
institutions increased deposit balances three times more than M&T and
the 11 regional bank peers of similar size and business model combined—
without paying above market rates.
Core deposits, money held by consumers and businesses in
checking, savings, money market and time accounts, are important funding
sources for financing new homes and small businesses, so the recent shifts
in deposit trends have been notable to industry observers.
What has helped these large banks attract new customers,
particularly millennials, is investment in new products and services in
today’s digital era. Those institutions with the most scale vastly outspend
their regional competitors in absolute dollars, while their overall size
enables them to maintain a ratio of technology and marketing expenses
to revenue that is similar to regional banks. In 2017 alone, according to a
recent research report, just one of the largest banking institutions spent
more on technology and marketing than the amount spent by M&T and
all of its peers combined.
However—and these facts are overlooked in the narrative—a shift
in demographic trends seems to have contributed a substantial portion of
this higher deposit growth.
More than half of total deposits are concentrated in the nation’s
20 largest markets—which are home to 38 percent of the country’s
population. The three largest financial institutions hold 45 percent of all
deposits in those markets, significantly exceeding their 36 percent share
xiii
nationally. In fact, at least one of the three institutions holds a leading
deposit share position in 18 of the top 20 markets.
Six out of every ten jobs created in the United States since the
crisis were added in those same 20 markets, where fewer than four of ten
Americans reside. Median household income in these markets exceeds
the national average by 20 percent. And nearly half of the country’s
total population growth since the crisis occurred in just these 20 large
metropolitan areas.
Historically, deposit growth itself is highly correlated to increased
employment, income and population. The banks with the most scale have
benefited from their outsized presence in the largest U.S. markets, which
unlike past recoveries, have experienced a disproportionate share of the
nation’s economic growth.
As bankers, we cannot dismiss the importance of demographics
and location—in addition to scale and the ability of some institutions to
invest more heavily in technology and marketing—at least as it relates to
success in gaining deposits. However, there are much broader implications
to the diverging demographic fortunes between the metropolitan markets
targeted by large institutions and the mid-tier cities, towns and rural
areas served predominantly by regional and community banks. These
trends affect families and businesses, too. Indeed, they affect our national
economy and our social fabric.
A N U N E V E N R EC OV E RY
On the surface, America is riding a wave of recovery and prosperity.
Nationwide employment has increased a record 100 consecutive months,
xiv
driving the unemployment rate to its lowest level since the 1960s.
Housing values are 14 percent above their pre-crisis peak, and stock
valuations have rarely been higher. If the economy continues to grow,
by mid-year this expansion will be the longest in U.S. recorded history.
M&T and its various business lines are intertwined with these
economic trends, which is why we understand that we must pay close
attention to them. We see that, although these numbers imply broad
gains across the country, not everyone is participating. Progress on
jobs and income over the past ten years has been uneven, and trends
in population growth and small business formation differ significantly
from prior recoveries.
The gap in prosperity between the largest 50 markets and the
rest of the country has widened over the past decade. Although these
large cities are home to only 54 percent of the U.S. population, they have
accrued 70 percent of the country’s population growth, two thirds of its
economic output and 80 percent of the employment gains over this period.
This is a marked difference from prior recoveries, when the population
and economies of the largest metropolitan areas grew at approximately
the same rate as the rest of the country.
At M&T, we see these geographic disparities firsthand. Our
proven operating model was developed in, and remains based on, serving
mid-tier cities like Harrisburg, Rochester, Syracuse and Wilmington, but
we also do business in larger cities like Baltimore, New York and Washington,
D.C. The diversity of our footprint provides a unique window into the
disparate rates of recovery in different size markets. For example, real
GDP in the Washington D.C. metro area increased by 14.4 percent since
xv
2007, slightly above the national average, while Upstate New York metro
areas, excluding Buffalo, grew 3.1 percent over the same period. Similarly,
the labor force in Northern Virginia grew by 13.8 percent compared to a
4.5 percent decline in the Upstate New York metro areas outside of Buffalo.
We see similar weaknesses in other mid-tier cities such as Altoona,
Scranton and Williamsport, Pennsylvania, and Cumberland, Maryland.
Even more troubling—small urban areas, towns and rural
communities with fewer than 50,000 people are at risk of being left behind
altogether. Home to 46 million Americans, or 15 percent of the population,
these communities have grown a scant three-tenths of one percent in
the last 10 years while the national population grew by 8 percent. Less
populous areas are still losing jobs, despite the 11 percent job growth
experienced in the rest of the country since 2007.
Not only are population and employment trends different in this
recovery, so too is the role of small business in job creation and economic
growth. Although the number of startups in 2016 was the highest since
the crisis, it was still lower than any year from 1980 to 2008. Consistent
with the other trends, formation of new small businesses has lagged the
most in small cities and towns, where such firms have historically served
as the backbone of the economy and workforce. The number of new
small businesses, which was essentially unchanged in the top twenty
metropolitan areas between 2007 and 2014, declined by nearly 13 percent
outside the 50 largest metropolitan areas.
Existing small businesses are ailing, too. As startup activity
slowed, the total number of small business establishments declined nearly
4 percent from 2007 to 2014, while the number of Americans they employ
xvi
fell 5 percent—a loss of more than one million jobs. Again, the decline
was especially stark outside the largest metropolitan areas. In those
years, small business establishments outside of the top 100 metropolitan
areas decreased by 122,674—this comprised nearly 70 percent of the total
decline nationally.
This widening gap between the prosperity of large metropolitan
areas and Middle America is evidenced not just in the differing rates of
job, income and population growth—it can even be seen in the rate of
broadband internet access. In large cities, 97 percent of the population has
broadband access, while in our nation’s smallest communities, 39 percent of
the population goes without access to this vital link to modern society and
the modern economy.
Ensuring that our economy becomes more inclusive, and
opportunity more equally available, is an important national priority.
The disparate economic and demographic trends evident in the current
recovery must be addressed. Doing so will require participation from
every sector, including banks of all size, and bankers like those of us
at M&T.
RO L E O F R EG I O N A L BA N KS
It is understandable that the trends described above—uneven economic
growth and the advantages it provides to larger banks in larger markets—
might to some seem problematic for a company like M&T, given our
history of serving small and mid-sized communities. Batavia has never
been mistaken for Baltimore, nor Newburgh for New York City. And yet
in each, we thrive.
xvii
There are ways of doing business, as demonstrated by banks like
M&T, which act as counterweights to the pressures of scale and population
shifts. The role traditionally served by regional and community banks
remains a source of immense value, for customers and communities, and
the demand for such services has only become more critical in light of
the uneven expansion.
Recently, in a small town not known for its mild winters, a
heating contractor needed a key piece of equipment to complete a job.
He contacted his local M&T Bank branch, in need of a loan that would
enable him to purchase the $40,000 piece of equipment that same day.
This contractor was a long-time client, well known to the branch manager.
Based on that deep relationship, and utilizing our digital lending capability,
the branch manager secured rapid approval of the loan—then drove to the
contractor’s job site personally to close the transaction. The funds were
deposited into the customer’s account, the equipment was purchased—and
the whole process took just four hours. Our client was delighted, and in
turn, so too were his customers, who were not left out in the cold.
So it is that being close to a community, and knowing its most
urgent needs, is a business model for which scale cannot substitute.
More broadly, though, it reflects the extent to which the interests
of regional banks and the interests of the communities they serve are
linked inextricably.
The fact is that across the country, regional and community banks
provide a significant majority of the small business loans, those less than
$1 million, accounting for 61 percent of all such loans in 2017. Regional banks
like M&T play an especially important role outside the largest metropolitan
xviii
areas. Overall, regional banks make 63 percent of their small business
loans in the vast sections of the country that exist outside of the top
20 metropolitan areas. By contrast, the largest three institutions make
59 percent of their small business loans in just the top 20 markets.
Not only do regional banks disproportionately support small
business outside the largest metros, they tend to provide larger loans.
The average small business loan made by all banks is $37,000—twenty
percent lower than the $48,000 average made by regional banks and well
below the $255,000 average small business loan made by M&T. For small
business loans between $100,000 and $1 million, which often finance
investments in plant and equipment or seasonal working capital, regional
banks collectively advance 30 percent more funds than the three largest
institutions combined.
Smaller banks are particularly indispensable to the agricultural
industry, where by one estimate, more than half of farm households
have lost money in recent years, challenged by continued declines in
commodity prices. Regional and community banks make 85 percent of
all farm loans and 90 percent of loans secured by farmland.
At M&T, we have long found success in serving mid-tier cities,
despite the slower growth profile of these markets, even during periods of
economic challenge. In fact, that stability—avoiding the booms and busts
seen in some markets—may be the most important element of long-term
success, as it certainly has been for M&T.
One might go so far as to assert that our approach to banking in
these markets, where every relationship with every customer matters—a
lot—has actually conferred certain advantages to us: higher deposit
xix
balances per branch, higher rates of customer retention, lower cost of
deposits, lower efficiency ratio and lower charge-offs, to name a few. Most
importantly, our approach in these markets produces low volatility in
earnings, allowing us to support our customers consistently and reliably,
especially in the difficult times, when they need our services the most.
These advantages transcend size and are relevant in all our
markets. What we learned by serving customers in smaller communities
and mid-sized markets laid the groundwork for successful growth in our
larger markets such as Baltimore, New York and Washington, D.C.
For M&T, however, the mission has never been solely to grow
assets or to achieve strong financial performance simply for their own sake.
Those are the outcomes of the way we work to fulfill our larger mission: to
enable, encourage and empower our customers and communities to thrive.
To begin to restore parity and inclusivity in our economy, and in
our society as a whole, more must be done to ignite economic activity
beyond the biggest cities and across Middle America. Regional banks will
continue to play a leading role in this effort, working with customers,
community partners and government.
R EG U L AT I O N — BA L A N C I N G G ROW T H A N D P ROT EC T I O N
In the years since the crisis, the level of financial regulation has garnered
significant attention from the public, legislators and even the industry
itself. Economic researchers, such as those at the Bank for International
Settlements, the Federal Reserve and others, have sought to define an
optimum level of regulation using models that assume a single lender,
single borrower and single geography. The real world is decidedly more
xx
complex, of course, with significant differences between communities
and the institutions that serve them.
Importantly, a number of studies concluded that the regulatory
system can be weakened by allowing certain parties to operate outside its
bounds. The existing regulatory framework must, therefore, continuously
be refined to account for differences in regional economic trends and new
entrants to the financial system.
M&T has long documented the impacts of these changes on its
regulatory costs, which have ebbed and flowed over time based on the
external environment. Twenty-five years ago, compliance costs were
calculated to be 10 percent of operating expense, or $33 million, consistent
with a 1992 study by the Federal Financial Institutions Examination
Council (FFIEC) pegging the cost of compliance for the entire industry
at between 6 percent and 14 percent of operating expenses. This past
year, M&T’s regulatory compliance cost was $407 million, or 12 percent
of operating expenses, down from $441 million and 16 percent at its peak
four years ago, back within the range identified by the FFIEC 26 years ago.
Regulation, like monetary policy, is a tool whose purpose is
simultaneously to promote the economy while protecting those who
operate within it. It is a difficult balance—especially so after significant
events such as the financial crisis. The practice of implementing and
adjusting regulation is both necessary and healthy, because its impacts are
felt by communities large and small. As the crisis receded and the banking
system stabilized, policymakers were able to focus on the economic
impacts of the regulations that were previously adopted, which might
have in fact been contributing to the uneven recovery.
xxi
Federal Reserve rule changes, stemming from the Economic
Growth, Regulatory Relief and Consumer Protection Act of 2018, which
better align regulation with the level of risk posed to the financial system,
are a welcome step forward. The proposed four-tiered approach might
well counterbalance the negative impacts, noted in a study by the Clearing
House Association, that the stress test process has had on small business
lending, and make it easier for regional banks to provide credit in the
smaller communities that need it most.
These recent changes, however, barely contemplate the effects
of another phenomenon that began at the same time as the crisis—the
introduction of the modern-day smartphone and the ensuing digital
revolution. These devices, and more importantly the software they run,
enabled enterprising developers to create applications, or “apps,” that
alleviate friction from everyday life. In banking, apps that did not exist
10 years ago now move billions of dollars between customers instantaneously,
and others have provided billions more in mortgages and small business
loans. By lowering costs and increasing accessibility, these new
technologies are reaching underserved customers in ways never
before possible.
However, consumers may not fully appreciate the distinctions
between banks and nonbanks, nor understand the risks they are assuming
by borrowing from or entrusting their savings to firms outside of the
regulated bank sector. Financial services companies that facilitate the
movement of money or offer credit, deposit services or advice using digital
solutions—but that do so outside the regulated banking system—are often
referred to as fintechs.
xxii
Take the example of a leading payments app, upon which millions
rely to transfer money or pay their household bills. As more customers
signed up, the balance of funds that they entrusted to this firm also grew.
At the end of the third quarter of 2018, these balances had grown to
$22 billion, exceeding the demand deposits at all but the largest 20 U.S.
commercial banks. Nominally designated as “amounts due to customers,”
it is difficult to discern how such accounts differ in practice from checking
accounts at a bank—with one notable difference: unlike bank deposits, the
funds entrusted to this firm are not covered by FDIC deposit insurance.
Today, the debate is whether to bring fintechs under the
regulatory umbrella, either in part or in full. An alternative could be
adapting the current regulatory framework for both traditional banks as
well as nonbank upstarts to support innovation—especially in the service
of underbanked and underperforming communities.
Last year’s Message to Shareholders devoted a full eight pages
to our concerns about the rise of nonbank lenders who are responsible
for a growing share of total credit provided to businesses. This trend
has continued, and our concerns have not abated. Total debt of U.S.
corporations outside the financial sector increased to 74 percent of gross
domestic product by the end of the second quarter of 2018, meaningfully
exceeding the 63 percent level in 2006, just prior to the last crisis.
Particularly notable has been the growth in so-called “leveraged lending,”
or loans to companies with high levels of debt relative to earnings, the
volume of which remained near the record level set in 2017. The large
and mid-sized companies in the Russell 3000® Index alone, more than
one-fifth of which do not earn a profit, have approximately $525 billion
xxiii
of debt maturing within the next two years that will likely need to be
replaced at a higher cost.
Thanks to relatively low interest rates, tax reform and a robust
economy, this debt does not seemingly pose an imminent threat. Total
interest payments on corporate debt consume only half as much of
businesses’ profits as in the early 1990s. However, circumstances may
change, and economic cycles have not been eliminated.
Today, more than half of investment grade debt is deemed to
reside at the lowest credit rating that many passive investment funds
are allowed to hold. Small changes in circumstances, like an economic
slowdown or reduction in corporate profits, could push much of that debt
over the precipice into non-investment grade status. The potential exists
for a selloff of the downgraded bonds that strains liquidity in the short-
term, and could potentially spill over into other asset classes and
the broader economy.
Ultimately, little is known about how these nonbank entities would
operate under stress. What is known, however, is that the relative growth
of nonbank lenders outside the purview of regulators not only reduces
their visibility into the risk of the broader financial system, but also their
ability to stem the damage should a crisis arise.
For these reasons and more, regulatory frameworks must
continuously be balanced and rebalanced. This work is hard, but necessary.
Ensuring the strong recovery not only continues, but becomes more
inclusive, will require concerted efforts by leaders in banking, government
and regulatory agencies.
xxiv
T H E WAY FO RWA R D : SA M E C U LT U R E , N E W C A PA B I L I T I E S
One should not get the impression from the preceding that M&T is
pursuing an unchanging business model. It is no accident, nor the result
of complacency, that M&T has enjoyed remarkable success over the past
40 years, growing from a small underperforming bank in Buffalo into a
high performing regional institution. As we have grown, we have worked
continuously to identify and perpetuate those elements of our culture
that have enabled our success over time. We have evolved and adapted to
the world around us, while remaining committed to our culture and to
providing a unique customer experience.
We remain confident that our brand of local banking will always
be in high demand, yet we know that, in today’s digital world, competitors
are for the first time able to reach our clients without necessarily residing
close to our markets. As this digital transformation accelerates, so must
we accelerate our efforts to deliver a customer experience that is not only
high-tech, but high-touch as well.
In the case of the heating contractor, we could make a loan
decision based on our personal relationship—and we could make it
quickly because of the investments we are making in our digital products
and programs. This is how we will maintain our unique advantage,
and it requires us to bring new thinking and a wider diversity of ideas,
perspectives and talent to add value and solve problems for our customers.
Our colleagues made substantial progress in 2018 on several
fronts. Last year, we developed a steady stream of upgrades to our digital
capabilities that are consistent with the expectations of our customers,
especially the younger generation that we identified last year as a priority.
xxv
Among the upgrades, customers can now manage and service their debit
cards from their mobile device. Existing customers can now open new
checking accounts through our online and mobile banking channels,
reducing the account opening time from over 20 minutes to less than
seven. Additional features include the ability to order a custom debit card
and add funding mechanisms to the account. As a result, last year we
increased the percentage of checking accounts opened online from
10.9 percent in the first quarter to 15 percent in the fourth quarter—and
that increased to 20 percent in January. Features like these make it easier
for customers to self-serve, while at the same time freeing our employees
to spend more time with clients providing advice and guidance on more
complex issues.
In late 2018, we launched MyWay Banking, a “checkless checking”
account that provides the convenient features of a transaction account
without the worry of over-spending or overdraft fees. Insights that led
to this product came through focus groups with parents in our Buffalo
Promise Neighborhood, where we have worked for 25 years to promote
educational outcomes and economic opportunity. MyWay was designed
to benefit unbanked and underserved consumers, and we are also making
it available to minors between the ages of 13 and 17, providing access to
the banking system, including usage of debit cards and web and mobile
banking. Within the first month of launch, we opened 2,010 MyWay
accounts, with approximately 52 percent of them including a minor. These
new customers are gaining an opportunity to develop financial literacy,
while forming an early relationship with M&T.
In 2019, we will continue to build out our banking capabilities with
mobile flash funds, offering immediate availability of deposited checks, as
xxvi
well as contactless technology for debit cards that will help consumers
breeze through checkout lines. Personal financial management tools
and more card self-service options will be coming as well. We also will
continue our program to modernize our branches, with an emphasis on
digital servicing and person-to-person consultation.
For small and medium-sized businesses, we launched in 2018 an
industry leading payment product, making it faster and easier for business
owners to move cash. We also introduced our proprietary M&T Business
Credit Card, giving them the ability to manage spending on business and
employee cards through the mobile app or online.
Additionally, we continue to build out our digital lending platform,
which we already used to help our aforementioned client, the heating
contractor. Business customers will be able to complete a loan, from
application to closing, entirely online and in a fraction of the time.
Middle market companies will experience a steady stream of
upgrades to M&T’s credit, treasury management and merchant services
platforms, with improved speed to decision on credit requests, faster
access to funds and better access to data and documents. Simultaneously,
our clients will experience even higher levels of service from our growing
number of commercial bankers—we added 114 last year—who will now
be free to focus less on paperwork and more on helping their clients
solve problems.
We continue to improve the services and solutions we offer to
our Wilmington Trust clients as well. The merger fundamentally changed
our bank: trust income now makes up 29 percent of total fees, up from
11 percent in 2010. To support this growing business segment, we added
xxvii
171 new employees last year. In wealth, we commenced a new program
that integrates our expertise on complex issues such as business valuation,
estate and tax planning, asset protection and retirement funding. In our
institutional business, we became the first to offer an online portal to
improve the speed and execution of M&A transactions. Clearly, the
merger brought a new source of fee income; more importantly, however,
it expanded our ability to meet clients’ needs.
While we are proud of the new capabilities introduced in 2018,
more fundamental to our future success was the rethinking of our approach
to product development itself. A 2017 self-examination revealed that too much
of our technology spend was absorbed in the project planning stages—and
not enough on execution. A new approach was needed to redirect that spend
toward capabilities that directly impact our clients.
We are leveraging modern development techniques—those that
emphasize human communication, feedback and adaptation to produce
working results when building new capabilities. Structured around the
idea that the final product must always meet changing client needs, it
focuses on the quick delivery of individual pieces or parts of the solution
rather than the entire application. Today, developers are working alongside
product owners, breaking work down into small chunks, meeting daily
to ensure they are on track and remaining open to changes at all stages of
development. Products and services can be designed and built in much less
time than previously possible, adding value to our customers more quickly,
continuously and at a lower cost.
To further enhance our capabilities, last year, we sent a team of
rising leaders to work with an external partner comprised of a diverse
xxviii
team of innovators, entrepreneurs, engineers, creatives, growth architects
and investors. Together, they are taking the best elements of fintech
startups (agility, responsiveness, entrepreneurship) and combining them
with our own distinct advantages (customers, experience) to develop and
deliver new, customer-focused products quickly and impactfully. We are
learning how to rapidly invent, launch and scale new products that have
been relentlessly vetted with our customers—all part of our goal to deliver
memorable customer experiences that are uniquely identifiable as M&T.
Last year marked a change in our approach to hiring highly skilled
professionals, bringing more talent on board on a full-time basis in order
to maintain the most critical skills inside our company. Last year, M&T
grew its technology team by 111 people.
Industry commentators place a great deal of focus on the size of
a bank’s technology budget as a measure of its strength. While it is clear
that increased investment to improve customer experience is an essential
ingredient for success, we believe that it is the teams of people—the
technologists, data scientists and customer experience engineers working
with product owners and relationship managers and others—who are
the real differentiators. Given the customer-driven transformation now
underway, talent is even more important than ever.
Indeed, what gives us confidence is our talent infrastructure,
which has been built, maintained and adapted over the last 40 years.
Today, 48 members of our senior management team ranked Group Vice
President and above were originally hired into one of our development
programs. We view these programs as a vital part of our culture and our
infrastructure, so we are enhancing these offerings with the new class that
xxix
begins this summer to include several new development programs directed
specifically at the new skills and capabilities we need—today and tomorrow.
Throughout 2018, we also continued to invest heavily in our
existing employees through several enhancements to our recognition
and reward structure. M&T increased the minimum wage to $14-$16 per
hour, based on geography. This change, along with other compensation
adjustments, resulted in salary adjustments for more than half of our
employee base. As a result of these investments, the average year-over-year
increase in total salary in 2018 was 13.8 percent for employees making less
than $50,000, and 5.9 percent for those making more than $50,000.
Additionally, we implemented enhancements to our retirement
savings program in 2018 and began auto-enrolling and auto-increasing
employees’ 401(k) contributions. In 2017, only 65 percent of employees
making less than $50,000 participated in the bank’s 401(k) program
and, after the changes made in 2018, the participation has increased
to 85 percent, so more of our colleagues benefit from the bank’s
matching program.
Even as we are working to grow our capabilities internally, we are
also working every day to share them with our communities. That’s why
in Buffalo, for example, we teamed with 43North, a startup competition
and incubator program, along with Facebook, Amazon Web Services,
Intuit, Woo Commerce and WordPress.com, to launch Ignite Buffalo. This
business grant, training and mentorship program promotes sustainable
growth, job creation and ongoing education to local small business owners.
More than 1,000 entrepreneurs attended a three-day e-commerce training
session last July, and over 500 small businesses applied to the grant
xxx
competition. Hundreds of those applicants received personalized help
on their applications from M&T Bankers. Ignite Buffalo awarded a total
of $1 million to 27 small business owners—81 percent of whom are women,
and 33 percent minorities—seed money that they are using to invest in
their businesses and communities.
Most importantly, every winning business has been partnered with
a handpicked mentor from M&T. We worked with 43North to identify the
unique needs of each business, and then matched them to an M&T Banker
with corresponding skills to help address their specific needs.
This year, we will be building on this momentum, as we join 43North
and others in a new initiative—helping to bring TechStars, a worldwide
network that helps grow start up ecosystems, to Buffalo for a multi-year
program to help innovative entrepreneurs and knowledge workers succeed
by connecting them with actively engaged mentors and supporters.
Through these endeavors, our colleagues have had the opportunity
to share their experience and expertise and, along the way, we all learned
something too: that when a community invests—not just its money, but its
people too—that community can grow to compete in today’s dynamic, digital
world. That is how to overcome the advantage of size and scale. That is what is
happening in Buffalo today, and it serves as a model for our other communities.
For its size, Buffalo is bucking the trend. It is diversifying its
economy—becoming a hub for financial services, health care, tourism,
energy, education and business services. Real GDP grew 9.2 percent over
the past decade, three times the Upstate New York mean. Overall population
has stabilized and the millennial population grew by 22 percent, outpacing
the 13 percent national average over the past decade.
xxxi
From our founding in Buffalo 163 years ago, through our expansion
into new states, cities and towns in the Northeast and Mid-Atlantic, the
role and responsibility of a community banker is not new to us at M&T.
We have actively engaged with the families and businesses, along with the
not-for-profit, civic and political entities that comprise our communities, to
support their economic vitality.
Despite the changes affecting our communities and our industry—
indeed, because of those very changes—my colleagues at M&T and I
believe that our mission and our operating model have never been more
relevant, or more important. Bankers provide financial services and
financial expertise that facilitate trade and commerce and fuel economic
growth, and in smaller communities across the country, where economic
growth is needed most, it is bankers like those of us at M&T who strive
to meet the particular needs of those communities.
It is with profound gratitude, therefore, that along with our entire
Executive Management Committee, I congratulate our 17,252 colleagues
for making 2018 our most successful year to date, for positioning us to
prevail in the future—and for working every day to help our customers and
communities participate fully in a changing economy and a changing world.
René F. Jones
Chairman of the Board
and Chief Executive Officer
February 22, 2019
xxxii
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 B A N K C O R P O R AT I O N
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
Kevin J. Pearson
Executive Vice President
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
Christopher E. Kay
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
Michael J. Todaro
Executive Vice President
Michele D. Trolli
Executive Vice President and
Chief Technology and
Operations 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.
Retired Partner
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
Kevin J. Pearson
Executive Vice President
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
xxxiii
Kevin J. Pearson
Vice Chairman
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
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 B A N K
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
Christopher E. Kay
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
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
Christopher R. Chandler
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.
Steven H. Epping
Thomas F. Esposito
xxxiv
Jeffrey A. Evershed
Eric B. Feldstein
James M. Frank
James J. Gifas
Mark D. Gould
Robert S. Graber
Carol N. Grosso
Thomas Hayes
Cecilia A. Hodges
Paul Hogan
Harish A. Holla
Gregory Imm
Glenn S. Jackson
Carl W. Jordan
Michael J. Keane
Michael T. Keegan
William T. LaFond
Nicholas P. Lambrow
Michele V. Langdon
Elizabeth P. Locke
Joseph A. Lombardo
Robert G. Loughrey
Alfred F. Luhr III
Susan F. MacDonald
Paula Mandell
Louis P. Mathews, Jr.
Matthew J. McAfee
Richard J. McCarthy
William P. McKenna
Frank P. Micalizzi
Christopher R. Morphew
Michael S. Murchie
Allen J. Naples
Peter G. Newman
Tracy C. Nickl
Laura P. O’Hara
Peter J. Olsen
Mark J. Perry
Anabel I. Pichler
Eileen M. Pirson
Paul T. Pitman
Christopher D. Randall
Rajiv Ranjan
Michael M. Reilly
Kirk J. Ringer
Daniel J. Ripienski
Paris F. Roselli
Anthony M. Roth
John P. Rumschik
Allison L. Sagraves
Kyle Samuel
D. Jack Sawyer
Jean-Christophe Schroeder
Douglas A. Sheline
William M. Shickluna
Sabeth Siddique
Ann Silverman
Glenn R. Small
Philip M. Smith
Sonny J. Sonnenstein
Sean P. Spiesz
Michael R. Spychala
David W. Stender
Douglas R. Stevens
Patrick J. Tadie
John R. Taylor
Christopher E. Tolomeo
Patrick M. Trainor
Julianne Urban
Scott B. Vahue
Leslie M. Wallace
Indy N. Weerasinghe
Linda J. Weinberg
Jeffrey A. Wellington
John J. Whalen
Michael A. Wisler
Tracy S. Woodrow
Brian R. Yoshida
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.
Retired Partner
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
M & T B A N K
Regional Management and Directors Advisory Councils
AREA EXECUTIVES
R. Joe Crosswhite
Peter G. D’Arcy
Michael T. Keegan
Paula Mandell
Michael S. Murchie
Peter J. Olsen
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
Cecilia A. Hodges
Greater Washington and
Central Virginia
Mark J. Stellwag
Albany/Hudson Valley
Blair Ridder
New York City
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. Marrello
Michael C. McPartlon
Lauren Van Dermark
Robert H. Linn
Joseph Mancuso
Melissa F. Zell
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
Thomas G. Struzzieri
Charles C. Tallardy III
Peter Van Kleeck
Jamestown Division
Sebastian A. Baggiano
John R. Churchill
Steven A. Godfrey
Joseph C. Johnson
Stan Lundine
Randall P. Manitta
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
Dan Chessin
Christopher J. Czarnecki
Oksana S. Dominach
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
Central New York Division
Carl V. Byrne
Mara Charlamb
James A. Fox
Karyn Korteling
Robert L. Lewis
Southern New York Division
George Akel, Jr.
Lee P. Bearsch
John M. Carrigg
Richard J. Cole
New Jersey Division
Michael W. Azzara
Dante Germano
Sally Glick
Bill Golderer
L. Robert Lieb
Paul Silverman
Robert Silverman
Northeast
Mid-Atlantic Division
Richard Alter
Stephanie Novak Hau
Thomas C. Mottley
Paul T. Muddiman
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
Steven P. Johnson
Kenneth R. Levitzky
Robert E. More
John D. Rinehart
J. David Smith
Donald E. Stringfellow
Philadelphia Division
Emily Bittenbender
Jonathan Brassington
Jeff Brown
Edward M. D’Alba
Linda Ann Galante
Ronald V. Jaworski
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
Joseph W. Donze
Albert Nocciolino
James Pennefeather
Robert R. Sprole III
Frank H. Suits, Jr.
Terry R. Wood
NEW JERSEY / PENNSYLVANIA /
DELAWARE / MARYLAND /
VIRGINIA /WEST VIRGINIA
Baltimore-Washington Division
Thomas S. Bozzuto
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
Robert J. Clark
Daniel Jon Loftis
Bart H. Mitchell
Brian R. Pitney
Debbie L. Sydow
Chesapeake Upper
Shore Division
Richard Bernstein
Hugh E. Grunden
William W. McAllister, Jr.
Lee McMahan
Chad J. Nagel
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
xxxv
S E C F O R M 1 0 - K
xxxvi
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, 2018
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
Name of Each Exchange on Which Registered
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 every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 (§ 229.405 of this chapter) 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, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
(cid:3)
(cid:4)
(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, 2018: $23,892,660,033.
Number of shares of the Common Stock, $0.50 par value, outstanding as of the close of business on January 31, 2019: 138,526,278 shares.
(1) Portions of the Proxy Statement for the 2019 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, 2018
CROSS-REFERENCE SHEET
Item 1. Business....................................................................................................
Statistical disclosure pursuant to Guide 3
I.
Distribution of assets, liabilities, and shareholders’ equity; interest
PART I
rates 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
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 ...........................................................................
IV.
Summary of loan loss experience
A. Analysis of the allowance for loan losses ..........................................
Factors influencing management’s judgment concerning the
II.
III.
Form 10-K
Page
4
58
58
27
25,124-125
92
25,128
90
73,129-132
130,136
119-120
82
70,134-138
shareholders’ equity.......................................................................
125
V.
adequacy of the allowance and provision ...................................... 70-82,121,134-138
B. Allocation of the allowance for loan losses........................................81,134-135,137-138
Deposits
A. Average balances and rates ................................................................
B. Maturity schedule of domestic time deposits with balances of
58
$100,000 or more ...........................................................................
93
VI. Return on equity and assets ...................................................................... 27,51-52,97,100
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 ........................................................
142-143
28-42
42
42
43
43
44-46
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 ......................................
47-49
47
107
25
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, 2018 and 2017 ..........
D. Consolidated Statement of Income — Years ended December 31,
2018, 2017 and 2016 ......................................................................
E. Consolidated Statement of Comprehensive Income — Years
ended December 31, 2018, 2017 and 2016 ....................................
F. Consolidated Statement of Cash Flows — Years ended
December 31, 2018, 2017 and 2016 ...................................................
G. Consolidated Statement of Changes in Shareholders’ Equity —
Years ended December 31, 2018, 2017 and 2016 ..........................
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
26-27,107,117
10
47-49
48
49
49
25
26
49-108
109
109
110
111-112
113
114
115
116
117
118-192
107
193
193
193
193
193
193
193
193
194
194
194
194
Item 15. Exhibits and Financial Statement Schedules............................................
Item 16. Form 10-K Summary ...............................................................................
SIGNATURES.........................................................................................................
194-197
197
198-199
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, 2018
the Company had consolidated total assets of $120.1 billion, deposits of $90.2 billion and
shareholders’ equity of $15.5 billion. The Company had 16,413 full-time and 854 part-time
employees as of December 31, 2018.
At December 31, 2018, 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, 2018, 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,
2018, M&T Bank had 750 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, 2018, M&T Bank had consolidated total assets of $119.6 billion,
deposits of $91.6 billion and shareholder’s equity of $14.9 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. Wilmington Trust, N.A. offered selected
deposit and loan products on a nationwide basis, through telephone, Internet and direct mail
marketing techniques. As of December 31, 2018, Wilmington Trust, N.A. had total assets of $4.3
billion, deposits of $3.7 billion and shareholder’s equity of $585 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, 2018, Wilmington Trust
Company had total assets of $1.1 billion and shareholder’s equity of $599 million. Revenues of
Wilmington Trust Company were $138 million in 2018. 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, 2018, M&T Insurance Agency had assets of $44 million and shareholder’s equity of
$24 million. M&T Insurance Agency recorded revenues of $36 million during 2018. 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, 2018, M&T Real Estate had assets of $25.9 billion, common shareholder’s equity of
$25.1 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
$1.2 billion of revenue in 2018. 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, 2018, M&T Realty Capital serviced or sub-serviced $18.2 billion of
commercial mortgage loans for non-affiliates and had assets of $1.1 billion and shareholder’s equity
of $176 million. M&T Realty Capital recorded revenues of $157 million in 2018. The headquarters
of M&T Realty Capital are located at One Light 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, 2018, M&T Securities had assets of $49 million and shareholder’s
equity of $36 million. M&T Securities recorded $93 million of revenue during 2018. The
headquarters of M&T Securities are located at 285 Delaware Avenue, Buffalo, New York 14202.
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, 2018, WT Investment Advisors had assets of $52 million
and shareholder’s equity of $45 million. WT Investment Advisors recorded revenues of $40 million
in 2018. 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 $50 million as of December 31, 2018. Wilmington Funds
Management recorded revenues of $23 million in 2018. 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, 2018, WTIM
has assets and shareholder’s equity of $24 million. WTIM recorded revenues of $1 million in 2018.
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,
2018.
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.
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, reporting, capital and other 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
as well as regulations requiring, among other things, maintenance of capital, record keeping, and
reporting.
M&T Bank is a New York chartered bank and a member of the Federal Reserve. As a result, it
is subject to extensive regulation, examination and oversight by the NYSDFS and the Federal
Reserve Bank of New York. 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
with respect to 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
7
and oversight by the OCC which governs many aspects of its 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.
Enhanced Prudential Standards
Under Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-
Frank Act”), as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act
of 2018 (“EGRRCPA”), which was signed into law on May 24, 2018, U.S. bank holding companies
with total consolidated assets of $100 billion or more but less than $250 billion, including M&T, are
currently subject to enhanced prudential standards. The enhanced prudential standards include risk-
based capital and leverage requirements, liquidity standards, risk management and risk committee
requirements, stress test requirements and a debt-to-equity limit for companies that the Financial
Stability Oversight Council has determined would pose a grave threat to systemic financial stability
were they to fail such limits. In general, EGRRCPA increased the statutory asset threshold above
which the Federal Reserve is required to apply these enhanced prudential standards from $50 billion
to $250 billion. Although EGRRCPA’s increased asset threshold took effect immediately for bank
holding companies with total consolidated assets less than $100 billion, the increased asset threshold
for bank holding companies with total consolidated assets of $100 billion or more but less than $250
billion, including M&T, generally will become effective 18 months after the date of enactment (that
is, November 2019). The Federal Reserve is authorized, however, during the 18-month period to
exempt, by order, any BHC with assets between $100 billion and $250 billion from any enhanced
prudential standard requirement. The Federal Reserve is also authorized to apply any enhanced
prudential standard requirement to any bank holding companies with between $100 billion and $250
billion in total consolidated assets that would otherwise be exempt under EGRRCPA, if the Federal
Reserve determines that such action is appropriate to address risks to financial stability and promote
safety and soundness, taking into consideration certain factors including the bank holding companies
capital structure, riskiness, complexity, financial activities (including financial activities of
subsidiaries), size, and any other risk-related factors that the Federal Reserve deems appropriate.
Bank holding companies with $250 billion or more in total consolidated assets remain fully subject to
the Dodd-Frank Act’s enhanced prudential standards requirements.
In October 2018, the Federal Reserve and the other Federal bank regulators adopted proposed
rules that would tailor the application of the enhanced prudential standards to bank holding
companies and depository institutions per the EGRRCPA amendments (the “Tailoring NPRs”). The
Tailoring NPRs would assign each U.S. BHC with $100 billion or more in total consolidated assets,
as well as its bank subsidiaries, to one of four categories based on its size and five risk-based
indicators: (1) cross-jurisdictional activity, (2) weighted short-term wholesale funding, (3) nonbank
assets, (4) off-balance sheet exposure, and (5) status as a U.S. global systemically important BHC
(“G-SIB”). Under the Tailoring NPRs, Category IV standards would apply to banking organizations
with at least $100 billion in total consolidated assets that do not meet any of the thresholds specified
for Categories I through III; Category I standards would be applicable to U.S. G-SIBs; Category II
standards would be applicable to non-G-SIBs with (a) $700 billion or more in total consolidated
assets or (b) at least $100 billion in total consolidated assets and $75 billion or more in cross-
jurisdictional activity; and Category III standards would be applicable to banking organizations that
are not subject to Category I or Category II standards and that have (a) at least $250 billion in total
consolidated assets or (b) at least $100 billion in total consolidated assets and $75 billion or more in
any of three indicators: (1) nonbank assets, (2) weighted short-term wholesale funding, or (3) off-
balance sheet exposures.
8
The Federal Reserve staff indicated in connection with the Tailoring NPRs the firms that would
fall into each of the four Categories based on data for the second quarter of 2018. According to the
Federal Reserve’s projections, M&T would be a “Category IV” firm under each of the Tailoring
NPRs, and would generally be subject to the same capital and liquidity requirements as firms with
less than $100 billion in total consolidated assets, but would also be required to monitor and report
certain risk-based indicators. Accordingly, under the Tailoring NPRs, Category IV firms would,
among other things, (1) no longer be subject to any Liquidity Coverage Ratio (“LCR”) or Net Stable
Funding Ratio (“NSFR”) requirement (if and when implemented), (2) remain eligible to opt-out of
the requirement to recognize most elements of Accumulated Other Comprehensive Income in
regulatory capital, (3) no longer be subject to company-run stress testing requirements and (4) be
subject to supervisory stress testing on a biennial basis rather than an annual basis. Category IV
firms would continue not to be subject to (1) advanced approaches capital requirements, (2) the
supplementary leverage ratio and (3) the countercyclical capital buffer. The Tailoring NPRs are
subject to modification through the federal rulemaking process in accordance with the Administrative
Procedures Act. Other elements of the Tailoring NPRs are discussed in further detail throughout this
section.
The ultimate benefits or consequences of EGRRCPA and the Tailoring NPRs on M&T, M&T
Bank, Wilmington Trust, N.A. and their respective subsidiaries and activities will be subject to the
final form of the Tailoring NPRs and additional rulemakings issued by the Federal Reserve and other
federal regulators. M&T cannot predict future changes in the applicable laws, regulations and
regulatory agency policies, yet such changes may have a material impact on M&T’s business,
financial condition or results of operations. M&T will continue to evaluate the impact of any changes
in law and any new regulations promulgated, including changes in regulatory costs and fees,
modifications to consumer products or disclosures required by the CFPB and the requirements of the
enhanced supervision provisions, among others.
Permissible Activities under the BHC Act
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
9
(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.
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 (the “Capital Rules”), which are based on the Basel
Committee’s December 2010 final capital framework for strengthening international capital
standards, referred to as “Basel III”.
Among other matters, the Capital Rules impose a capital measure called Common Equity Tier 1
Capital (“CET1”) to which most deductions/adjustments to regulatory capital measures must be
made. In addition, the Capital Rules specify that Tier 1 capital consists of CET1 and “Additional
Tier 1 capital” instruments meeting certain specified requirements. Pursuant to the Capital Rules, the
minimum capital ratios are as follows:
•
•
•
•
4.5% CET1 to risk-weighted assets;
6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;
8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and
4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial
statements (known as the “leverage ratio”).
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.
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The Capital Rules also impose a “capital conservation buffer” (“CCB”), composed entirely of
CET1, on top of the three minimum risk-weighted asset ratios listed above. The capital conservation
buffer is designed to absorb losses during periods of economic stress. As of January 1, 2019, the
CCB has been fully phased-in and is 2.5%. Thus, the effective minimum ratios applicable to M&T
are (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at
least 8.5% and (iii) total capital to risk-weighted assets of at least 10.5%. Banking institutions that
fail to meet the effective minimum ratios once the CCB is taken into account will be subject to
constraints on capital distributions, including dividends and share repurchases, and certain
discretionary executive compensation. The severity of the constraints depends on the amount of the
shortfall and the institution’s “eligible retained income” (that is, four quarter trailing net income, net
of distributions and tax effects not reflected in net income). On April 10, 2018, the Federal Reserve
issued a proposal designed to create a single, integrated capital requirement by combining the
quantitative assessment of firms’ capital plans with the CCB requirement. Details of this proposal are
discussed under “— Stress Testing and Capital Plan Review” herein. Although the proposal, if
adopted, would change the way in which the minimum ratios are calculated, firms would continue to
be subject to progressively more stringent constraints on capital actions as they approach the
minimum ratios.
CET1 consists of common stock instruments that meet the eligibility criteria in the Capital
Rules, including common stock and related surplus, net of treasury stock, retained earnings, certain
minority interests and, for certain firms, accumulated other comprehensive income (“AOCI”). As
permitted under the Capital Rules, M&T made a one-time permanent election to neutralize certain
AOCI components, with the result that those components are not recognized in M&T’s CET1. The
Capital Rules also preclude certain hybrid securities, such as trust preferred securities, from inclusion
in bank holding companies’ Tier 1 capital. Thus, 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 and irrespective of whether such securities otherwise meet the revised definition of Tier 2
capital set forth in the 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.”
The Capital Rules provide for a number of deductions from and adjustments to CET1. These
include, for example, the requirement that mortgage servicing rights, certain deferred tax assets, 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. The deductions and other adjustments to CET1 capital generally became fully phased-in on
January 1, 2018, although, as discussed below, the federal banking regulators have extended the
transitional treatment for certain items.
In September 2017, the U.S. banking regulators proposed to revise and simplify the deductions
for these items for banking organizations, such as M&T, that are not subject to the “advanced
approaches” under the Capital Rules. In November 2017, the U.S. banking regulators revised the
Capital Rules to extend the current transitional treatment of the deductions described above for non-
advanced approaches banking organizations until the September 2017 proposal is finalized.
In December 2017, the Basel Committee published standards that it described as the finalization
of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel
IV”). Among other things, these standards revise the Basel Committee’s standardized approach for
credit risk (including by recalibrating risk weights and introducing new capital requirements for
certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and
provides a new standardized approach for operational risk capital. Under the Basel framework, these
standards will generally be effective on January 1, 2022, with an aggregate output floor phasing in
through January 1, 2027. Under the current U.S. capital rules, operational risk capital requirements
11
and a capital floor apply only to advanced approaches institutions, and not to the Company. The
impact of Basel IV will depend on the manner in which it is implemented by the U.S. banking
regulators.
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
$100 billion in total consolidated 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
(although, in light of EGRRCPA’s eliminating the statutory requirement for the adverse scenario, on
January 8, 2019, the Federal Reserve proposed amendments to its stress testing rules that would,
among other things, eliminate the adverse scenario). M&T is also currently 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. Under the Tailoring NPRs, Category IV firms,
including M&T, would be subject to supervisory stress testing every other year, rather than annually,
and would no longer be subject to EGRRCPA mandated company-run stress testing requirements.
They would, however, remain subject to the quantitative review of their capital plans under CCAR,
to required capital plan submissions, and to the associated reporting requirements.
In addition, bank holding companies with total consolidated assets of $100 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. In connection with the release of the Tailoring NPRs, the Federal
Reserve noted that it expects to revise its guidance relating to capital planning to align with the
proposed categories of standards set forth in the Tailoring NPRs, and the impact of the future
proposal on M&T and its capital planning process will depend on the final form of the Federal
Reserve’s revised guidance.
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
12
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 Federal Reserve also
incorporates an assessment of the qualitative aspects of the firm’s capital planning process into
regular, ongoing supervisory activities and through targeted, horizontal assessments of particular
aspects of capital planning. M&T’s annual CCAR capital plan is currently due in April each year and
the Federal Reserve publishes the results of its supervisory CCAR review of M&T’s capital plan by
June 30 of each year.
In addition to other limitations, M&T’s ability to make any capital distributions is contingent on
the Federal Reserve’s non-objection to M&T’s capital plan. 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.
As noted above, on April 10, 2018, the Federal Reserve issued a proposal designed to create a
single, integrated capital requirement by combining the quantitative assessment of CCAR with the
CCB requirement. If adopted, the proposal would replace the current static 2.5% CCB with a stress
capital buffer (“SCB”) requirement. The SCB, subject to a minimum of 2.5%, would reflect stressed
losses in the supervisory severely adverse scenario of the Federal Reserve’s supervisory stress tests
and would also include four quarters of planned common stock dividends. The proposal would also
introduce a stress leverage buffer (“SLB”) requirement, similar to the SCB, which would apply to the
Tier 1 leverage ratio. In addition, the proposal would eliminate the quantitative objection provisions
of CCAR but would require a BHC to reduce its planned capital distributions if those distributions
would not be consistent with the applicable capital buffer constraints based on the BHC’s own
baseline scenario projections. The Federal Reserve has stated that it intends to propose revisions to
the stress buffer requirements that would be applicable to Category IV BHC to align with the
proposed two-year supervisory stress testing cycle for Category IV BHC.
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
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). The LCR rule, following the threshold amendments
13
under EGRRCPA, currently applies in a modified, less stringent, form to bank holding companies,
such as M&T, having $100 billion or more but less than $250 billion in total consolidated assets and
less than $10 billion in total on-balance sheet foreign exposure. As of January 1, 2017, the Final LCR
Rule has been fully phased-in, and M&T has been required to publicly disclose its LCR since
October 2018. As noted above, under the Tailoring NPRs, Category IV firms, including M&T,
would no longer be subject to any LCR requirement.
The Basel III framework also included a second standard, referred to as the 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 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 by its required stable
funding. 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. Originally proposed to take effect in January
2018, the rule has yet to be finalized. As noted above, under the Tailoring NPRs, Category IV firms,
including M&T, would no longer be subject to any NSFR requirement.
Under the Tailoring NPRs, Category IV firms, including M&T, would remain subject to
liquidity risk management requirements, but these requirements would be tailored such that these
firms would be required to: (i) calculate collateral positions monthly, as opposed to weekly as is
currently required; (ii) establish a more limited set of liquidity risk limits than are currently required;
and (iii) monitor fewer elements of intraday liquidity risk exposures than are currently monitored.
These firms would also be subject to liquidity stress testing quarterly, rather than monthly, and would
be required to report liquidity data on the FR 2052a on a monthly basis. The liquidity buffer
requirements for these firms would not change.
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.
Volcker Rule
On December 10, 2013, the federal banking regulators and the SEC adopted the so-called Volcker
Rule to implement the provisions of the Dodd-Frank Act limiting proprietary trading and investing in
and sponsoring certain hedge funds and private equity funds (defined as “covered funds” in the
Volcker Rule). The Company does not engage in any significant amount of proprietary trading as
defined in the Volcker Rule and implemented the required procedures for those areas in which
trading does occur. The covered funds limits are imposed through a conformance period that ended
14
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. In
July 2018, the Federal Reserve, OCC, FDIC, CFTC and SEC issued a notice of proposed rulemaking
intended to tailor the application of the Volcker Rule based on the size and scope of a banking
entity’s trading activities and to clarify and amend certain definitions, requirements and exemptions.
The ultimate impact of any amendments to the Volcker Rule will depend on, among other things,
further rulemaking and implementation guidance from the relevant U.S. federal regulatory agencies
and the development of market practices and standards.
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
15
provide appropriate assurances of performance. An undercapitalized institution is also generally
prohibited from increasing its average total assets, accepting brokered deposits or offering interest
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. “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 continued
through September 30, 2018, when the reserve ratio of the DIF first reached 1.36%, exceeding the
statutorily required minimum of 1.35%. Because the statutory minimum was reached, the surcharge
no longer applies. M&T Bank recognized $64 million of expense related to its FDIC assessment and
large bank surcharge and Wilmington Trust, N.A. recognized $493 thousand of FDIC insurance
16
expense in 2018. Beginning in 2018, amounts paid for FDIC deposit insurance are no longer
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 $4
million of expense related to its FICO assessments and Wilmington Trust, N.A. recognized $60
thousand of such expense in 2018.
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 institution,
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 institution; 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. EGRRCPA amended this requirement to apply only to bank holding
companies with consolidated assets exceeding $250 billion, effective November 24, 2019.
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,
17
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. In June
2016, the agencies proposed rules 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. Under the proposal, the general qualitative requirements
would 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
Pursuant to the Dodd-Frank Act, as amended by EGRRCPA, bank holding companies with
consolidated assets of $100 billion or more, such as M&T, are currently required to report
periodically to the Federal Reserve and the FDIC 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
18
other things, ensure that its depository institution subsidiaries are adequately protected from risks
arising from its other subsidiaries. The regulation adopted by the Federal Reserve and FDIC sets
specific standards for the resolution plans, including requiring a strategic analysis of the plan’s
components, a description of the range of specific actions the company proposes to take in resolution,
and a description of the company’s organizational structure, material entities, 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. If the Federal
Reserve and the FDIC determine that either of M&T’s or M&T Bank’s plans are not credible and
M&T and/or M&T Bank does not cure the deficiencies, the Federal Reserve and the FDIC may
jointly impose more stringent capital, leverage or liquidity requirements or restrictions on growth,
activities or operations of the Company or M&T Bank or may jointly order the Company or M&T
Bank to divest assets or operations to facilitate an orderly resolution in the event of failure. In
connection with the release of the Tailoring NPRs, the Federal Reserve noted that it expects to
release a proposal to amend, with the FDIC, their joint resolution plan rule to address the
applicability of resolution plan requirements for U.S. bank holding companies with between $100
billion and $250 billion in total consolidated assets, including M&T, and to adjust the scope and
applicability of resolution plan requirements for firms that remain subject to them.
The FDIC has separately implemented a resolution planning rule that currently requires insured
depository institutions with $50 billion or more in total assets, such as M&T Bank, 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 to the FDIC in June 2018. In August 2018, the FDIC announced that it
has extended the next filing due date for insured depository institution resolution plan submissions to
no sooner than July 1, 2020.
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:
•
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.
•
•
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
19
authority, the FDIC may be appointed as receiver for the systemically important institution, and its
failed subsidiaries, for purposes of liquidating the entity if, among other conditions, it is determined
at the time of the institution’s failure that it is in default or in danger of default and the failure poses a
risk to the stability of the U.S. financial system.
If the FDIC is appointed as receiver under the orderly liquidation authority, then the powers of
the receiver, and the rights and obligations of creditors and other parties who have dealt with the
institution, would be determined under the Dodd-Frank Act provisions, and not under the insolvency
law that would otherwise apply. The powers of the receiver under the orderly liquidation authority
were based on the powers of the FDIC as receiver for depository institutions under the FDIA.
However, the provisions governing the rights of creditors under the orderly liquidation authority
were modified in certain respects to reduce disparities with the treatment of creditors’ claims under
the U.S. Bankruptcy Code as compared to the treatment of those claims under the new authority.
Nonetheless, substantial differences in the rights of creditors exist as between these two regimes,
including the right of the FDIC to disregard the strict priority of creditor claims in some
circumstances, the use of an administrative claims procedure to determine creditors’ claims (as
opposed to the judicial procedure utilized in bankruptcy proceedings), and the right of the FDIC to
transfer claims to a “bridge” entity.
An orderly liquidation fund will fund such liquidation proceedings through borrowings from the
Treasury Department and risk-based assessments made, first, on entities that received more in the
resolution than they would have received in liquidation to the extent of such excess, and second, if
necessary, on bank holding companies with total consolidated assets of $50 billion or more, such as
M&T. If an orderly liquidation is triggered, M&T could face assessments for the orderly liquidation
fund.
The FDIC has developed a strategy under the orderly liquidation authority referred to as the
“single point of entry” strategy, under which the FDIC would resolve a failed financial holding
company by transferring its assets (including shares of its operating subsidiaries) and, potentially,
very limited liabilities to a “bridge” holding company; utilize the resources of the failed financial
holding company to recapitalize the operating subsidiaries; and satisfy the claims of unsecured
creditors of the failed financial holding company and other claimants in the receivership by
delivering securities of one or more new financial companies that would emerge from the bridge
holding company. Under this strategy, management of the failed financial holding company would be
replaced and shareholders and creditors of the failed financial holding company would bear the
losses resulting from the failure.
Depositor Preference
Under federal law, depositors and certain claims for administrative expenses and employee
compensation against an insured depository institution would be afforded a priority over other
general unsecured claims against such an institution in the “liquidation or other resolution” of such
an institution by any receiver. If an insured depository institution fails, insured and uninsured
depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit
creditors, including depositors whose deposits are payable only outside of the United States and the
parent BHC, with respect to any extensions of credit they have made to such insured depository
institution.
Financial Privacy 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
20
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. If established, the
enhanced cyber risk management standards would be designed to help 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, the NYSDFS implemented regulations requiring 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.
Many state regulators have been increasingly active in implementing privacy and cybersecurity
standards and regulations, including implementing or modifying their data breach notification and
data privacy 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.
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
21
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 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.
In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and standards
that are more stringent than those adopted at the federal level and, in certain circumstances, permits
state attorneys general to enforce compliance with both the state and federal laws and regulations.
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 current 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
currently has an “Outstanding” rating from the NYSDFS. Wilmington Trust, N.A. has been
designated a special purpose trust company since March 3, 2016, and is therefore exempt from the
requirements of the CRA. In April 2018, the U.S. Department of Treasury issued a memorandum to
the Federal banking regulators with recommended changes to the CRA’s implementing regulations to
reduce their complexity and associated burden on banks, and in August 2018, the OCC published an
advance notice of proposed rulemaking soliciting “ideas for building a new framework to transform
or modernize the regulations that implement the CRA,” without proposing any specific revisions to
present CRA requirements. The Company will continue to evaluate the impact of any changes to the
regulations implementing 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.
22
In May 2016, Financial Crimes Enforcement Network, which drafts regulations implementing
the USA PATRIOT Act and other anti-money laundering and bank secrecy act legislation, issued
final rules that require financial institutions to obtain beneficial ownership information with respect
to legal entities with which such institutions conduct business, subject to certain exclusions and
exemptions, and financial institutions that are subject to these final rules, including M&T, were
required to comply by May 2018. Bank regulators are focusing their examinations on anti-money
laundering compliance, and M&T continues to monitor and augment, where necessary, its anti-
money laundering compliance programs.
Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that affect transactions with designated foreign
countries, nationals and others. These are typically known as the “OFAC” rules based on their
administration by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”). The
OFAC-administered sanctions targeting countries take many different forms. Generally, however,
they contain one or more of the following elements: (i) restrictions on trade with or investment in a
sanctioned country, including prohibitions against direct or indirect imports from and exports to a
sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to
making investments in, or providing investment-related advice or assistance to, a sanctioned country;
and (ii) a blocking of assets in which the government or specially designated nationals of the
sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction
(including property in the possession or control of U.S. persons). Blocked assets (e.g. property and
bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license
from OFAC. Failure to comply with these sanctions could have serious legal and reputational
consequences.
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.
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,
23
Shareholder Relations Department, One M&T Plaza, 8th Floor, Buffalo, NY 14203-2399
(Telephone: (716) 842-5138).
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).
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.
24
Table 1
SELECTED CONSOLIDATED YEAR-END BALANCES
Interest-bearing deposits at banks............ $
Federal funds sold ....................................
Trading account .......................................
Investment securities
2018
2017
2016
(In thousands)
2015
2014
8,105,197 $
—
185,584
5,078,903 $
—
132,909
5,000,638 $
—
323,867
7,594,350 $ 6,470,867
83,392
308,175
—
273,783
U.S. Treasury and federal agencies .... 11,746,240 13,851,832 15,090,578 14,540,237 12,042,390
Obligations of states and political
subdivisions .....................................
Other ...................................................
157,159
793,993
Total investment securities ........... 12,692,813 14,664,525 16,250,468 15,656,439 12,993,542
64,499
1,095,391
124,459
991,743
9,153
937,420
27,151
785,542
Loans and leases
8,125,925
8,823,635
8,066,756
Commercial, financial, leasing, etc...... 23,136,913 21,900,258 22,770,629 20,576,737 19,617,253
Real estate — construction.................
5,716,994 5,061,269
Real estate — mortgage ..................... 42,816,858 44,965,038 48,134,198 49,841,156 31,250,968
Consumer............................................ 13,956,086 13,251,665 12,130,094 11,584,347 10,969,879
Total loans and leases ................... 88,733,492 88,242,886 91,101,677 87,719,234 66,899,369
(230,413)
Unearned discount ..............................
Loans and leases, net of unearned
discount ...................................... 88,466,477 87,988,983 90,853,416 87,489,499 66,668,956
(919,562)
Loans and leases, net..................... 87,447,033 86,971,785 89,864,419 86,533,507 65,749,394
Goodwill ..................................................
4,593,112 3,524,625
Core deposit and other intangible assets....
35,027
63,635
Real estate and other assets owned ..........
Total assets............................................... 120,097,403 118,593,487 123,449,206 122,787,884 96,685,535
4,593,112
71,589
111,910
4,593,112
47,067
78,375
4,593,112
97,655
139,206
Allowance for credit losses ................
140,268
195,085
(1,019,444)
(1,017,198)
(253,903)
(955,992)
(267,015)
(988,997)
(229,735)
(248,261)
Noninterest-bearing deposits ................... 32,256,668 33,975,180 32,813,896 29,110,635 26,947,880
Savings and interest-checking deposits ... 50,963,744 51,698,008 52,346,207 49,566,644 43,393,618
6,580,962 10,131,846 13,110,392 3,063,973
Time deposits ...........................................
176,582
Deposits at Cayman Islands office...........
Total deposits ................................ 90,156,572 92,432,146 95,493,876 91,957,841 73,582,053
192,676
Short-term borrowings .............................
Long-term borrowings .............................
9,493,835 10,653,858 9,006,959
Total liabilities ......................................... 104,637,212 102,342,668 106,962,584 106,614,595 84,349,639
Shareholders’ equity ................................ 15,460,191 16,250,819 16,486,622 16,173,289 12,335,896
4,398,378
8,444,914
6,124,254
811,906
175,099
8,141,430
2,132,182
177,996
163,442
170,170
201,927
Table 2
SHAREHOLDERS, EMPLOYEES AND OFFICES
Number at Year-End
2018
2017
2016
2015
2014
Shareholders.................................................... 18,099 18,864 19,802 20,693 14,551
Employees....................................................... 17,267 16,794 16,973 17,476 15,782
766
Offices.............................................................
794
855
833
863
25
Table 3
CONSOLIDATED EARNINGS
Interest income
Loans and leases, including fees......................................... $ 4,164,561 $ 3,742,867 $ 3,485,050 $ 2,778,151 $ 2,596,586
Investment securities
2018
2017
2016
(In thousands)
2015
2014
Fully taxable .................................................................
Exempt from federal taxes............................................
Deposits at banks ................................................................
Other ...................................................................................
340,391
5,356
13,361
1,183
Total interest income .................................................... 4,598,711 4,167,795 3,895,871 3,170,844 2,956,877
361,494
2,606
45,516
1,205
372,162
4,263
15,252
1,016
361,157
1,431
61,326
1,014
323,912
665
108,182
1,391
215,411
51,423
5,633
5,386
248,556
526,409
133,177
61,505
1,186
1,511
189,372
386,751
87,704
102,841
797
3,625
231,017
425,984
Interest expense
Savings and interest-checking deposits ..............................
Time deposits......................................................................
Deposits at Cayman Islands office......................................
Short-term borrowings........................................................
Long-term borrowings ........................................................
Total interest expense ...................................................
46,869
15,515
699
101
217,247
280,431
Net interest income ........................................................... 4,072,302 3,781,044 3,469,887 2,842,587 2,676,446
124,000
Provision for credit losses...................................................
Net interest income after provision for credit losses .......... 3,940,302 3,613,044 3,279,887 2,672,587 2,552,446
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..........................................
362,912
427,956
508,258
67,212
29,874
—
383,061
Total other income........................................................ 1,856,000 1,851,143 1,825,996 1,825,037 1,779,273
373,697
419,102
472,184
63,423
41,126
30,314
426,150
363,827
427,372
501,381
61,445
35,301
21,279
440,538
375,738
420,608
470,640
64,770
30,577
(130)
462,834
360,442
429,337
537,585
51,069
32,547
(6,301)
451,321
46,140
27,059
615
1,677
252,766
328,257
168,000
170,000
190,000
132,000
Other expense
Salaries and employee benefits........................................... 1,752,264 1,648,794 1,618,074 1,532,392 1,417,995
269,299
Equipment and net occupancy ............................................
151,568
Outside data processing and software.................................
55,531
FDIC assessments ...............................................................
47,111
Advertising and marketing..................................................
38,201
Printing, postage and supplies ............................................
33,824
Amortization of core deposit and other intangible assets ...
675,945
Other costs of operations ....................................................
Total other expense....................................................... 3,288,062 3,140,325 3,047,485 2,822,932 2,689,474
Income before income taxes ............................................... 2,508,240 2,323,862 2,058,398 1,674,692 1,642,245
575,999
Income taxes .......................................................................
Net income ......................................................................... $ 1,918,080 $ 1,408,306 $ 1,315,114 $ 1,079,667 $ 1,066,246
Dividends declared
295,084
184,670
101,871
69,203
35,960
31,366
773,377
295,141
172,389
105,045
87,137
39,546
42,613
687,540
272,539
164,133
52,113
59,227
38,491
26,424
677,613
298,828
199,025
68,526
85,710
35,658
24,522
823,529
595,025
915,556
743,284
590,160
Common ....................................................................... $ 510,458 $ 457,200 $ 441,765 $ 374,912 $ 371,137
75,878
Preferred .......................................................................
72,734
81,270
81,270
72,521
26
Table 4
Per share
Net income
COMMON SHAREHOLDER DATA
2018
2017
2016
2015
2014
Basic .......................................................................... $ 12.75
Diluted ....................................................................... 12.74
Cash dividends declared..................................................
3.55
Common shareholders’ equity at year-end...................... 102.69
Tangible common shareholders’ equity at
year-end........................................................................ 69.28
Dividend payout ratio...................................................... 27.66% 34.24% 35.81% 37.56% 37.49%
7.22
7.18
2.80
93.60
7.47
7.42
2.80
83.88
8.72
8.70
3.00
100.03
7.80
7.78
2.80
97.64
64.28
57.06
69.08
67.85
$
$
$
$
Table 5
CHANGES IN INTEREST INCOME AND EXPENSE(a)
2018 Compared with 2017
2017 Compared with 2016
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 ....................... $410,537 (61,159) 471,696 $265,542
Deposits at banks .............................................. 46,856
Federal funds sold and agreements to resell
securities.........................................................
Trading account.................................................
Investment securities
3
(240)
16
(246)
1
523
17
277
398
7,912 257,630
46,458 15,810 (21,398) 37,208
—
(232)
3
(8)
U.S. Treasury and federal agencies ............. (36,903) (41,271)
Obligations of states and political
(1,204)
subdivisions ..............................................
Other ............................................................
(1,337)
Total interest income ................................... $418,243
(1,187)
(1,021)
4,368
3,520 15,273 (11,753)
(17)
(316)
(1,888)
(3,215)
$279,532
(2,061)
(3,302)
173
87
Interest expense
Interest-bearing deposits
Savings and interest-checking deposits ....... $ 82,234
Time deposits............................................... (10,082) (17,490)
2,133
Deposits at Cayman Islands office ..............
Short-term borrowings ......................................
1,314
Long-term borrowings ...................................... 59,184 12,996
4,447
3,875
(3,240) 85,474 $ 45,473
2,132 43,341
7,408 (41,336) (31,283) (10,053)
450
2,314
1,809
2,561
3,017
(61)
(3,923)
46,188 (41,645) (44,662)
$ (39,233)
389
(2,114)
Total interest expense .................................. $139,658
(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.
27
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 adverse effects on the Company’s business including:
•
•
•
•
•
•
•
•
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 or other investments.
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, changes in interest rates or interest rate spreads may:
•
Affect the difference between the interest that the Company earns on assets and the
28
•
•
•
•
interest that the Company pays on liabilities, which impacts the Company’s overall net
interest income and profitability.
Adversely affect the ability of borrowers to meet obligations under variable or adjustable
rate loans and other debt instruments, which, in turn, affects the Company’s loss rates on
those assets.
Decrease the demand for interest rate based products and services, including loans and
deposits.
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.
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 organizations
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 influence, to a significant extent, the Company’s cost of such funding.
In addition, the Company is routinely subject to examinations from various governmental
taxing authorities. Such examinations may result in challenges to the tax return treatment applied by
the Company to specific transactions. Management believes that the assumptions and judgment used
to record tax-related assets or liabilities have been appropriate. Should tax laws change or the tax
authorities determine that management’s assumptions were inappropriate, the result and adjustments
required could have a material effect on the Company’s results of operations. M&T cannot predict
the nature or timing of future changes in monetary, tax and other policies or the effect that they may
have on the Company’s business activities, financial condition and results of operations.
Changes in the method pursuant to which LIBOR and other benchmark rates are determined could
adversely impact our business and results of operations.
Our floating-rate funding, certain hedging transactions and certain of the products that we offer, such
as floating-rate loans and mortgages, determine the applicable interest rate or payment amount by
reference to a benchmark rate, such as the London Interbank Offered Rate (“LIBOR”), or to an
index, currency, basket or other financial metric. LIBOR and certain other benchmark rates are the
subject of recent national, international, and other regulatory guidance and proposals for reform. In
July 2017, the Chief Executive of the Financial Conduct Authority (“FCA”) announced that the FCA
intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after
2021. This announcement indicates that the continuation of LIBOR on the current basis cannot and
will not be guaranteed after 2021. Consequently, at this time, it is not possible to predict whether and
to what extent banks will continue to provide submissions for the calculation of LIBOR. Similarly, it
is not possible to predict whether LIBOR will continue to be viewed as an acceptable market
benchmark, what rate or rates may become accepted alternatives to LIBOR, or what the effect of any
such changes in views or alternatives may be on the markets for LIBOR-linked financial instruments.
29
The discontinuation of LIBOR, changes in LIBOR or changes in market perceptions of the
acceptability of LIBOR as a benchmark could result in changes to the Company’s risk exposures (for
example, if the anticipated discontinuation of LIBOR adversely affects the availability or cost of
floating-rate funding and, therefore, the Company’s exposure to fluctuations in interest rates) or
otherwise result in losses on a product or having to pay more or receive less on securities that the
Company owns or has issued. A substantial portion of the Company’s on- and off-balance sheet
financial instruments (many of which have terms that extend beyond 2021) are indexed to LIBOR,
including interest rate swap agreements and other contracts used for hedging and trading account
purposes, loans to commercial customers and consumers (including mortgage loans and other loans),
and long-term borrowings. In addition, such uncertainty could result in pricing volatility and
increased capital requirements, loss of market share in certain products, adverse tax or accounting
impacts, and compliance, legal and operational costs and risks.
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
is 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 may:
•
•
•
•
•
Affect the value or liquidity of the Company’s on-balance sheet and off-balance sheet
financial instruments.
Affect the value of capitalized servicing assets.
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.
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.
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. In
addition, unfavorable or uncertain economic and market conditions can be caused by the imposition
of tariffs or other limitations on international trade and travel, which can result in market volatility,
negatively impact client activity, and adversely affect the Company’s financial condition and results
of operations.
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.
30
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. In general, the amounts paid by financial
institutions in settlement of proceedings or investigations have increased substantially and are likely
to remain elevated. In some cases, governmental authorities have required criminal pleas or other
extraordinary terms as part of such settlements, which could have significant collateral consequences
for a financial institution, including loss of customers, restrictions on the ability to access the capital
markets, and the inability to operate certain businesses or offer certain products for a period of time.
In addition, enforcement matters could impact the Company’s supervisory and CRA ratings, which
may in turn restrict or limit the Company’s activities.
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.
There have been significant revisions to the laws and regulations applicable to the Company
that have been enacted or proposed in recent months. These and other rules to implement the changes
have yet to be finalized, and the final timing, scope and impact of these changes to the regulatory
framework applicable to financial institutions remain uncertain. For more information on the
regulations to which we are subject and recent initiatives to reform financial institution regulation,
see Part I, Item 1 — Business in this report.
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 (as amended by EGRRCPA) 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.”
31
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 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.
Certain elements of these capital and liquidity standards may be eased in the future consistent
with recently issued and anticipated proposals by the Federal banking agencies following the
enactment of EGRRCPA. However, the ultimate timing and implementation of such relief is unclear
and therefore the Company expects to remain subject to these standards in the near term.
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
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 2018, the Federal Reserve
announced that it did not object to M&T’s revised capital plan; however, M&T cannot be certain that
the Federal Reserve will not object to future capital plans.
32
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. 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.
Certain elements of these stress testing and capital planning requirements may be eased in the
future consistent with recently issued and anticipated proposals by the Federal banking agencies
following the enactment of EGRRCPA. However, the ultimate timing and implementation of such
relief is unclear and therefore the Company expects to remain subject to these standards in the near
term.
The effect of resolution plan requirements may have a material adverse impact on M&T.
Bank holding companies with consolidated assets of $100 billion or more, such as M&T, are
currently required to submit 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 June 2018.
If the Federal Reserve and the FDIC jointly determine that the resolution plan of a BHC is not
credible, and the company fails to cure the deficiencies in a timely manner, then the Federal Reserve
and the FDIC may jointly impose on the company, or on any of its subsidiaries, more stringent
capital, leverage or liquidity requirements or restrictions on growth, activities or operations, or
require the divestment of certain assets or operations. If the Federal Reserve and the FDIC jointly
determine that M&T’s resolution plan is not credible or would not facilitate its orderly resolution
under the U.S. Bankruptcy Code, the Company could become subject to more stringent regulatory
requirements or business restrictions, or have to divest certain of its assets or businesses. Any such
measures could have a material adverse effect on the Company’s business, financial condition or
results of operations.
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
33
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.
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.
34
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 resulting 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. Negative news about the Company or the financial
services industry generally may reduce market or customer confidence in the Company, which could
in turn materially adversely affect the Company’s liquidity and funding. Such reputational damage
may result in the loss of customer deposits, the inability to sell or securitize loans or other assets, and
downgrades in one or more of the Company’s credit ratings, and may also negatively affect the
Company’ ability to access the capital markets. 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, including by raising the cost of
borrowings substantially, and could cause creditors and business counterparties to raise collateral
requirements or take other actions that could adversely affect M&T’s ability to raise capital. Many of
the above conditions and factors may be caused by events over which M&T has little or no control.
There can be no assurance that significant disruption and volatility in the financial markets will not
occur in the future.
Recent regulatory changes relating to liquidity and risk management have also 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.
35
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 M&T’s principal
source of funds to pay dividends on common and preferred stock, pay interest and principal on its
debt, and fund purchases of its common stock. 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, and ability
to fund purchases of its common stock.
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 is, 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 has 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 is changing the delivery channels for financial services. Financial technology providers,
who invest substantial resources in developing and designing new technology (in particular digital
and mobile technology), are beginning to offer more traditional banking products (either directly or
through bank partnerships) and may in the future be able to provide additional services by obtaining
a bank-like charter, such as the OCC’s fintech charter. As a result, 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. Further, 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
36
allow it to remain competitive or be successful in marketing these products and services to its
customers.
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.
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. 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.
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 in which the
Company engages 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. The Company is increasingly
competing for personnel with financial technology providers and other less regulated entities who
may not have the same limitations on compensation as the Company does. If the Company is not able
to hire or retain highly skilled and qualified individuals, it may be unable to execute its business
strategies and may suffer adverse consequences to its business, financial condition and results of
operations.
37
The Company’s compensation practices are subject to review and oversight by the Federal
Reserve, the OCC, the FDIC and other regulators. 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.
The Company’s information systems may experience interruptions or breaches in security.
The Company relies heavily on communications and information systems, including those of third-
party service providers, 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 by a variety of actors, 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.
Further, third parties with which the Company does business, as well as vendors and other third
parties with which the Company’s customers do business, can also be sources of information security
risk to the Company, particularly where activities of customers are beyond the Company’s security
and control systems, such as through the use of the Internet, personal computers, tablets, smart
phones and other mobile services. Security breaches affecting the Company’s customers, or systems
breakdowns or failures, security breaches or employee misconduct affecting such other third parties,
may require the Company to take steps to protect the integrity of its own systems or to safeguard
confidential information of the Company or its customers, thereby increasing the Company’s
operational costs and adversely affecting its business.
The occurrence of any failure, interruption or security breach of the Company’s systems or
those of third-party service providers (or, in turn, providers to such third-party providers),
38
particularly if widespread or resulting in financial losses to customers, could damage the Company’s
reputation, result in a loss of customer business, subject the Company to additional regulatory
scrutiny and potential sanctions, or expose it to civil litigation and financial liability.
The Company is also subject to laws and regulations relating to the privacy of the information
of clients, employees or others, and any failure to comply with these laws and regulations could
expose the Company to liability and/or reputational damage. As new privacy-related laws and
regulations, such as the cybersecurity regulation of the NYSDFS, are implemented, the time and
resources needed for the Company to comply with such laws and regulations, as well as its potential
liability for non-compliance and reporting obligations in the case of data breaches, may significantly
increase. In addition, the Company is increasingly subject to laws and regulations relating to privacy,
surveillance, encryption and data use in the jurisdictions in which it operates. Compliance with these
laws and regulations may require changes to policies, procedures and technology for information
security and segregation of data, which could, among other things, make the Company more
vulnerable to operational failures, and to monetary penalties for breach of such laws and regulations.
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.
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
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
39
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.
Business Risk
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. Information about recently adopted and not as yet adopted
accounting standards is included in note 26 of Notes to Financial Statements included in Part II, Item
8 – Financial Statements and Supplemental Data of this Form 10-K.
The Company’s reported financial condition and results of operations depend on management’s
selection of accounting methods and 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.
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.
40
The Company’s models used for business planning purposes could perform poorly or provide
inadequate information.
The Company uses quantitative models to assist in measuring risks and estimating or predicting
certain financial values. The models used may not accurately account for all variables and may fail to
predict outcomes accurately and/or may overstate or understate certain effects. Poorly designed,
implemented, or managed models present the risk that the Company’s business decisions that
consider information based on such models will be adversely affected due to inadequate or inaccurate
information. As a result, the Company may not adequately prepare for future events and may suffer
losses due to these failures. Also, information the Company provides to the public or to its regulators
based on poorly designed, implemented, or managed models could be inaccurate or misleading.
Decisions that regulators make, including those related to capital distributions to stockholders, could
be affected adversely due to the perception that the quality of the models used to generate the
relevant information is insufficient.
The Company is exposed to reputational risk.
A negative public opinion of the Company and its business can result from any number of activities,
including the Company’s lending practices, corporate governance and regulatory compliance,
acquisitions and actions taken by regulators or by community organizations in response to these
activities. Significant harm to the Company’s reputation could also arise as a result of regulatory or
governmental actions, litigation, employee misconduct or the activities of customers, other
participants in the financial services industry or the Company’s contractual counterparties, such as
service providers and vendors. In particular, a cyber security event impacting the Company’s or its
customers’ data could have a negative impact on the Company’s reputation and customer confidence
in the Company and its cyber security. Damage to the Company’s reputation could also adversely
affect its credit ratings and access to the capital markets.
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.
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.
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In addition, the market price of M&T common stock may fluctuate significantly in response to a
number of other factors, including changes in securities analysts’ estimates of financial performance,
volatility of stock market prices and volumes, rumors or erroneous information, changes in market
valuations of similar companies and changes in accounting policies or procedures as may be required
by the FASB or other regulatory agencies.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Properties.
Both M&T and M&T Bank maintain their executive offices at One M&T Plaza in Buffalo, New
York. This twenty-one story headquarters building, containing approximately 300,000 rentable
square feet of space, is owned in fee by M&T Bank and was completed in 1967. M&T, M&T Bank
and their subsidiaries occupy approximately 98% of the building and the remainder is leased to non-
affiliated tenants. At December 31, 2018, the cost of this property (including improvements
subsequent to the initial construction), net of accumulated depreciation, was $10.4 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, 2018, the cost
of this building (including improvements subsequent to acquisition), net of accumulated depreciation,
was $12.4 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 $28.9 million at December 31,
2018.
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, 2018,
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, 2018, the cost of these buildings (including improvements
subsequent to acquisition), net of accumulated depreciation, was $40.6 million and $12.2 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, 2018, the cost of
those buildings (including improvements subsequent to acquisition), net of accumulated depreciation,
was $9.4 million and $9.0 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 5 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial
Statements and Supplementary Data.”
Of the 752 domestic banking offices of M&T’s subsidiary banks at December 31, 2018, 297 are
owned in fee and 455 are leased.
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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
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.
DOL ESOP Investigations: Wilmington Trust, N.A. provides retirement services, including serving
in certain trustee roles relating to Employee Stock Ownership Plans (“ESOPs”). Beginning in 2010,
the U.S. Department of Labor (“DOL”) announced that it would increase its focus on ESOP
transactions, particularly with regard to valuation issues relating to ESOP transactions. Beginning in
late 2013, Wilmington Trust N.A. began receiving requests for information and subpoenas relating to
certain ESOP transactions for which it acted as trustee. In June 2016, Wilmington Trust N.A.
received a DOL subpoena seeking information on its global ESOP trustee business. In addition to
these DOL investigations, in August 2017, the DOL commenced two lawsuits against Wilmington
Trust N.A. relating to its role as trustee of two ESOP transactions. Wilmington Trust N.A. has also
been named as a defendant in four private party lawsuits relating to its role as trustee for four ESOP
transactions. Wilmington Trust N.A. is responding to these investigations and lawsuits. Under
applicable transaction documents, Wilmington Trust N.A. may be entitled to indemnification by the
ESOP Plan Sponsors.
The DOL investigations of Wilmington Trust N.A. could result in civil proceedings, damages,
resolutions or settlements, including, among other things, enforcement actions, which could seek
damages and/or fines, penalties, restitution, injunctions, enforcement efforts, reputational damage or
additional costs and expenses.
Due to their complex nature, it is difficult to estimate when litigation and investigatory matters
such as these may be resolved. As set forth in the introductory paragraph to this Item 3 — Legal
Proceedings, losses from current litigation and regulatory matters which the Company is subject to
that are not currently considered probable are within a range of reasonably possible losses for such
matters in the aggregate, beyond the existing recorded liability, and are included in the range of
reasonably possible losses set forth above.
Item 4. Mine Safety Disclosures.
Not applicable.
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Executive Officers of the Registrant
Information concerning M&T’s executive officers is presented below as of February 20, 2019. 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.
René F. Jones, age 54, 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 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 58, is president, chief operating officer and a director of M&T and M&T
Bank (2017). Mr. Gold oversees the Consumer Banking, Business Banking, Legal, Human
Resources and Enterprise Transformation 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 chairman,
president and chief executive officer (2018) and a director (2017) of Wilmington Trust, N.A.
Kevin J. Pearson, age 57, is an executive vice president (2002) and a director (2018) of M&T
and is a vice chairman (2014) and a director (2018) 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
has oversight of the Commercial Banking, Credit, Technology and Banking Operations, and Wealth
and Institutional Services 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 and a director (2018) of Wilmington Trust Company, an executive vice
president and a director of Wilmington Trust, N.A. (2014), and a director (2018) of Wilmington
Trust Investment Advisors.
Robert J. Bojdak, age 63, 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 55, 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.
44
John L. D’Angelo, age 56, is an executive vice president and chief risk officer (2017) of M&T
and M&T Bank. Mr. D’Angelo is responsible for overseeing the Company’s governance and
strategy for risk management, as well as relationships with key regulators and supervisory agencies.
Mr. D’Angelo is an executive vice president and chief risk officer (2018) of Wilmington Trust, N.A.
and an executive vice president and a director (2017) of Wilmington Trust Company. He served as a
senior vice president and general auditor of M&T Bank from 2005 to 2017 and has held a number of
positions since he began his career with M&T Bank in 1987.
William J. Farrell II, age 61, 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 (2013) of Wilmington Trust, N.A. and a director
(2016) of Wilmington Trust Investment Advisors.
Brian E. Hickey, age 66, 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.
Christopher E. Kay, age 53, is an executive vice president (2018) of M&T and M&T Bank, and
is responsible for all aspects of Consumer Banking, including the Mortgage, Consumer Lending and
Retail businesses, and Business Banking and Marketing. Prior to joining M&T in 2018, Mr. Kay
served as chief innovation officer at Humana from 2014 to 2018 and as managing director of Citi
Ventures from 2007 to 2013.
Darren J. King, age 49, 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 and oversees the
Finance and Treasury Divisions. 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. and is chairman of the board, president and a director (2018) of M&T Real
Estate.
Gino A. Martocci, age 53, 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 chairman of the board (2018) 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.
45
Doris P. Meister, age 63, 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 Wilmington Trust
Wealth Management, 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 chairman of the board, chief executive officer
and a director (2017) of Wilmington Trust Investment Advisors. Prior to joining M&T in 2016, Ms.
Meister served as President of U.S. Markets for BNY Mellon Wealth Management from 2009 to
2016 and prior to that was a Managing Director of the New York office of Bernstein Global Wealth
Management.
Michael J. Todaro, age 57, is an executive vice president (2015) of M&T and M&T Bank, and
is responsible for Enterprise Transformation, a Division of the Company dedicated to improving
business processes, removing impediments to progress and evaluating/integrating external
opportunities. Previously, Mr. Todaro was 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 57, is an executive vice president (2005) and chief technology and
operations officer (2018) of M&T and M&T Bank. Previously, she was 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 53, 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).
46
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 2018, 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, 2018 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, 2018, 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)
137,360 $
169.08
2,833,428
21,986
159,346 $
84.23
157.36
26,870
2,860,298
(1)
As of December 31, 2018, a total of 89,502 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 $134.37 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.
47
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, 2013 and ending on December 31, 2018. 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*
$250
$200
$150
$100
$50
$0
2013
2014
2015
2016
2017
2018
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
110
109
114
109
110
115
144
141
129
160
168
157
137
138
150
2013
2014
2015
2016
2017
2018
* Assumes a $100 investment on December 31, 2013 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.
48
Issuer Purchases of Equity Securities
On July 17, 2018, M&T announced that it had been authorized by its Board of Directors to purchase
up to $1.8 billion of shares of its common stock through June 30, 2019. Repurchase programs
authorized in July 2017 and February 2018 by M&T’s Board of Directors were completed during
2018. In total, M&T repurchased 12,295,817 common shares for $2.2 billion during 2018.
During the fourth quarter of 2018, 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)
(a)Total
Number
of Shares
(or Units)
Purchased (1)
(b)Average
Price Paid
per Share
(or Unit)
Period
October 1 - October 31, 2018 ......................................
November 1 - November 30, 2018 ..............................
December 1 - December 31, 2018...............................
Total.............................................................................
1,108,508 $ 159.02
167.47
1,360,000
161.97
591,666
3,060,174 $ 163.34
1,108,508 $1,125,229,000
897,474,000
1,360,000
591,492
801,666,000
3,060,000
(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 17, 2018, M&T announced a program to purchase up to $1.8 billion of its common
stock through June 30, 2019.
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 $120.1 billion at December 31, 2018. 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 $119.6 billion at December 31, 2018, is a New York-chartered
commercial bank with 750 domestic banking offices in New York State, Maryland, New Jersey,
Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia, a full-
service commercial banking office in Ontario, Canada, and an office in the Cayman Islands. M&T
Bank and its subsidiaries offer a broad range of financial services to a diverse base of consumers,
businesses, professional clients, governmental entities and financial institutions located in their
markets. Lending is largely focused on consumers residing in the states noted above and on small and
49
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 $4.3 billion at December 31,
2018. Wilmington Trust, N.A. and its subsidiaries offer various trust and wealth management
services. Wilmington Trust, N.A. offered selected deposit and loan products on a nationwide basis,
largely through telephone, Internet and direct mail marketing techniques.
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:
•
Accounting for credit losses — The allowance for credit losses represents the amount that
in management’s judgment appropriately reflects credit losses inherent in the loan and
lease portfolio as of the balance sheet date. A provision for credit losses is recorded to
adjust the level of the allowance as deemed necessary by management. In estimating
losses inherent in the loan and lease portfolio, assumptions and judgment are applied to
measure amounts and timing of expected future cash flows, collateral values and other
factors used to determine the borrowers’ abilities to repay obligations. Historical loss
trends are also considered, as are economic conditions, industry trends, portfolio trends
and borrower-specific financial data. In accounting for loans acquired at a discount that is,
in part, attributable to credit quality which are initially recorded at fair value with no carry-
over of an acquired entity’s previously established allowance for credit losses, the cash
flows expected at acquisition in excess of estimated fair value are recognized as interest
income over the remaining lives of the loans. Subsequent decreases in the expected
principal cash flows require the Company to evaluate the need for additions to the
Company’s allowance for credit losses. Subsequent improvements in expected cash flows
result first in the recovery of any applicable allowance for credit losses and then in the
recognition of additional interest income over the remaining lives of the loans. Changes in
the circumstances considered when determining management’s estimates and assumptions
could result in changes in those estimates and assumptions, which may result in
adjustment of the allowance or, in the case of loans acquired at a discount, increases in
interest income in future periods. A detailed discussion of facts and circumstances
considered by management in determining the allowance for credit losses is included
herein under the heading “Provision for Credit Losses” and in note 4 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
•
50
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, 2, 3, 6, 7, 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
accounting pronouncements or interpretations that require management to estimate and
assess the relative significance of the Company’s financial interests in those entities and
the degree to which the Company can influence the most important activities of the
entities. Information relating to the Company’s involvement in such entities and the
accounting treatment afforded each such involvement is included in note 19 of Notes to
Financial Statements.
•
Overview
The Company recorded net income during 2018 of $1.92 billion or $12.74 of diluted earnings per
common share, up 36% and 46%, respectively, from $1.41 billion or $8.70 of diluted earnings per
common share in 2017. Basic earnings per common share also increased 46% to $12.75 in 2018 from
$8.72 in 2017. Net income in 2016 aggregated $1.32 billion, while diluted and basic earnings per
common share were $7.78 and $7.80, respectively. Expressed as a rate of return on average assets,
51
net income in 2018 was 1.64%, compared with 1.17% in 2017 and 1.06% in 2016. The return on
average common shareholders’ equity was 12.82% in 2018, 8.87% in 2017 and 8.16% in 2016.
During 2018, there were several matters that were notable. The Company adopted amended
accounting guidance in the first quarter of 2018 to separately report equity securities at fair value on
the consolidated balance sheet (which were previously reported as investment securities available for
sale) with changes in fair value recognized in the consolidated statement of income rather than
through other comprehensive income. Net unrealized losses on investments in equity securities in
2018 were $6 million. As of March 31, 2018, the Company increased its reserve for legal matters by
$135 million in anticipation of the settlement of a civil litigation matter by a wholly-owned
subsidiary of M&T, Wilmington Trust Corporation (“WT Corp.”), that related to periods prior to the
acquisition of WT Corp. by M&T. The increase, on an after-tax basis, reduced net income by $102
million or $.71 of diluted earnings per common share in 2018. That matter received final court
approval and is now settled. Income tax expense in 2018 reflects the reduction of the corporate
Federal income tax rate from 35% to 21% by the Tax Cuts and Jobs Act (‘the Tax Act”) that was
enacted on December 22, 2017. In December 2018, M&T received approval from the Internal
Revenue Service to change its tax return treatment for certain loan fees retroactive to 2017. Given
the reduction in Federal income tax rates resulting from the Tax Act, that change in treatment
resulted in a $15 million reduction of income tax expense in 2018’s fourth quarter. Following receipt
of the approval, the Company increased its fourth quarter contribution to The M&T Charitable
Foundation to $20 million that, after applicable tax effect, reduced net income by $15 million.
There were also several notable items in 2017. M&T adopted new accounting guidance for
share-based transactions in 2017. 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
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. Similarly, income tax expense in
2018 was reduced by $9 million, or $.06 of diluted earnings per common share.
On October 9, 2017, WT Corp. 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 WT Corp. by M&T. The result was a payment of $44 million that was not deductible
for income tax purposes. WT Corp. 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. As noted, the Tax Act enacted in December 2017
reduced the Federal income tax rate 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 sales of
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. 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.
52
With regard to 2016, the Company incurred acquisition and integration-related expenses
(included herein as merger-related expenses) associated with the November 2015 acquisition of
Hudson City Bancorp, Inc. (“Hudson City”) that totaled $22 million after tax effect, or $.14 of
diluted earnings per common share.
Taxable-equivalent net interest income rose 7% to $4.09 billion in 2018 from $3.82 billion in
2017. That improvement resulted predominantly from a widening of the net interest margin, or
taxable-equivalent net interest income expressed as a percentage of average earning assets, from
3.47% in 2017 to 3.83% in 2018. Partially offsetting the impact of the expanded net interest margin
was a 3% decline in average earning assets to $106.8 billion in 2018 from $110.0 billion in 2017.
Taxable-equivalent net interest income in 2017 was 9% above $3.50 billion in 2016 due
predominantly to a widening of the net interest margin, from 3.11% in 2016, partially offset by a $2.6
billion or 2% decline in average earning assets.
The provision for credit losses declined 21% to $132 million in 2018 from $168 million in
2017. The provision in 2016 was $190 million.
Other income totaled $1.86 billion and $1.85 billion in 2018 and 2017, respectively, compared
with $1.83 billion in 2016. As compared with 2017, higher trust income and income from Bayview
Lending Group LLC ("BLG") in 2018 were partially offset by the impact of gains on investment
securities during 2017. Comparing 2017 to 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.
Other expense increased 5% to $3.29 billion in 2018 from $3.14 billion in 2017. Other expense
in 2016 aggregated $3.05 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
$25 million, $31 million and $43 million in 2018, 2017 and 2016, respectively, and merger-related
expenses of $36 million in 2016 associated with the acquisition of Hudson City. Exclusive of those
nonoperating expenses, noninterest operating expenses totaled $3.26 billion in 2018, compared with
$3.11 billion in 2017 and $2.97 billion in 2016. The increase in such expenses in 2018 as compared
with 2017 was largely due to higher costs for salaries and employee benefits, professional services,
and increases to the reserve for legal matters, partially offset by lower FDIC assessments and
charitable contributions. Contributing to the increase in noninterest operating expenses in 2017 as
compared with 2016 were higher costs for salaries and employee benefits, professional services and
charitable contributions, and increases to the reserve for legal matters.
The efficiency ratio measures the relationship of noninterest 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 54.8% in 2018, compared with 55.1% and 56.1% in
2017 and 2016, respectively. The calculations of the efficiency ratio are presented in table 2.
The Company’s effective tax rate was 23.5%, 39.4% and 36.1% in 2018, 2017 and 2016,
respectively. The lower rate in 2018 reflects the reduction of the corporate Federal income tax rate
from 35% to 21% as of January 1, 2018.
On June 28, 2018, M&T announced that the Federal Reserve did not object to M&T’s revised
2018 Capital Plan. That capital plan includes the repurchase of up to $1.8 billion of common shares
during the four-quarter period starting on July 1, 2018 and an increase in the quarterly common stock
dividend in the third quarter of 2018 of up to $.20 per share to $1.00 per share. 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 that were outstanding at
December 31, 2017, consistent with the contractual terms of those instruments. Dividends are
subject to declaration by M&T’s Board of Directors. In July 2018, M&T’s Board of Directors
authorized a new stock repurchase program to repurchase up to $1.8 billion of shares of M&T’s
53
common stock subject to all applicable regulatory limitations, including those set forth in M&T’s
revised 2018 Capital Plan. Also during 2018’s third quarter, M&T increased the quarterly common
stock cash dividend by $.20 to $1.00 per share after having increased the dividend from $.75 to $.80
per share during the second quarter of 2018.
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
was in addition to the previously announced $900 million of common stock authorized for
repurchase under M&T’s 2017 Capital Plan and approved by M&T’s Board of Directors. A new
stock repurchase program was approved by M&T’s Board of Directors on February 21, 2018
authorizing the repurchase of up to $745 million. In accordance with authorized stock repurchase
programs, M&T repurchased 12,295,817 shares of its common stock at a cost of $2.2 billion during
2018. The dollar amount and number of common shares repurchased were $1.2 billion and
7,369,105, respectively, in 2017 and $641 million and 5,607,595, respectively, in 2016.
Table 1
EARNINGS SUMMARY
Dollars in millions
Increase (Decrease)(a)
2017 to 2018 2016 to 2017
Amount % Amount %
2018 2017 2016 2015 2014 2013 to 2018
Compound
Growth Rate
5 Years
9%
$ 418.2 10 $ 279.6 7 Interest income(b)......................................... $4,620.6 $4,202.4 $3,922.8 $3,195.3 $2,980.5
13
(39.2) (9) Interest expense ............................................
280.4
9
318.8 9 Net interest income(b) .................................. 4,094.2 3,815.6 3,496.8 2,867.0 2,700.1
(7)
(22.0) (12) Less: provision for credit losses ...................
124.0
(9.0) (30) Gain (loss) on bank investment securities ....
— —
34.2 2 Other income ................................................ 1,862.3 1,829.9 1,795.7 1,825.1 1,779.3 —
139.6 36
278.6 7
(36.0) (21)
(27.6) —
32.4 2
170.0
—
190.0
30.3
168.0
21.3
132.0
(6.3)
328.3
426.0
386.8
526.4
Less:
103.5 6
44.3 3
171.6 7
Salaries and employee benefits.............. 1,752.3 1,648.8 1,618.1 1,532.4 1,418.0
30.7 2
62.2 5
Other expense ........................................ 1,535.8 1,491.5 1,429.3 1,290.5 1,271.5
273.1 13 Income before income taxes......................... 2,530.1 2,358.5 2,085.4 1,699.2 1,665.9
5
4
7
Less:
(12.7) (37)
(325.5) (36)
$ 509.8 36 $
23.7
7.6 28
172.3 23
576.0
93.2 7 Net income ................................................... $1,918.1 $1,408.3 $1,315.1 $1,079.7 $1,066.2
Taxable-equivalent adjustment(b) .........
Income taxes ..........................................
27.0
743.3
34.6
915.6
24.5
595.0
21.9
590.1
(3)
(1)
11%
(a)
(b)
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 26% in 2018 and 39% in prior years.
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 $4.6 billion and $4.7
billion at December 31, 2017 and 2016, respectively. 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 $18 million, $19 million and $26 million during 2018, 2017 and 2016,
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
54
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. Merger-related expenses associated with
M&T’s November 1, 2015 acquisition of Hudson City totaled $36 million ($22 million after-tax) in
2016. There were no merger-related expenses in 2018 or 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 $1.94 billion in 2018, compared with $1.43 billion in 2017 and $1.36
billion in 2016. Diluted net operating earnings per common share were $12.86 in 2018, $8.82 in 2017
and $8.08 in 2016.
Net operating income expressed as a rate of return on average tangible assets was 1.72% in
2018, compared with 1.23% in 2017 and 1.14% in 2016. Net operating income represented a return
on average tangible common equity of 19.09% in 2018, compared with 13.00% in 2017 and 12.25%
in 2016.
Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in
table 2.
55
Table 2
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
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 ............................................................................................................................................................
Total.................................................................................................................................................................................... $
2018
2017
2016
1,918,080
18,075
—
1,936,155
12.74
.12
—
12.86
$
$
$
$
1,408,306
19,025
—
1,427,331
8.70
.12
—
8.82
$
$
$
$
3,288,062
$
3,140,325
$
(24,522 )
(31,366 )
—
3,263,540
—
—
—
—
—
—
—
$
$
$
—
3,108,959
—
—
—
—
—
—
—
$
$
$
1,315,114
25,893
21,685
1,362,692
7.78
.16
.14
8.08
3,047,485
(42,613 )
(35,755 )
2,969,117
5,334
1,278
1,067
10,522
1,482
16,072
35,755
Efficiency ratio
Noninterest operating expense (numerator)................................................................................................................................ $
3,263,540
$
3,108,959
$
2,969,117
Taxable-equivalent net interest income ......................................................................................................................................
Other income...............................................................................................................................................................................
Less: Gain (loss) on bank investment securities.........................................................................................................................
Denominator ............................................................................................................................................................................... $
4,094,199
1,856,000
(6,301 )
5,956,500
$
3,815,614
1,851,143
21,279
5,645,478
$
3,496,849
1,825,996
30,314
5,292,531
Efficiency ratio ...........................................................................................................................................................................
54.79 %
55.07 %
56.10 %
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.
56
116,959
$
120,860
$
(4,593 )
(59 )
16
112,323
$
(4,593 )
(86 )
33
116,214
$
124,340
(4,593 )
(117 )
46
119,676
$
$
15,630
(1,232 )
14,398
(4,593 )
(59 )
16
9,762
16,295
(1,232 )
15,063
(4,593 )
(86 )
33
10,417
$
$
16,419
(1,297 )
15,122
(4,593 )
(117 )
46
10,458
120,097
$
118,593
$
(4,593 )
(47 )
13
115,470
$
(4,593 )
(72 )
19
113,947
$
123,449
(4,593 )
(98 )
39
118,797
$
15,460
(1,232 )
(3 )
14,225
(4,593 )
(47 )
13
9,598
$
$
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
Net Interest Income/Lending and Funding Activities
Net interest income expressed on a taxable-equivalent basis aggregated $4.09 billion in 2018, up 7%
from $3.82 billion in 2017. That growth resulted from a widening of the net interest margin to
3.83% in 2018 from 3.47% in 2017. The improvement in the net interest margin was predominantly
the result of higher yields on loans due to the higher interest rate environment in 2018. The Federal
Reserve raised its target Federal funds rate in .25% increments three times during 2017 and four
times during 2018. Partially offsetting the favorable impact of higher interest rates was a $3.2 billion,
or 3%, decline in average earning assets to $106.8 billion in 2018 from $110.0 billion in 2017 that
reflected decreases in average balances of investment securities of $1.8 billion and average loan and
lease balances of $1.4 billion.
Average loans and leases declined to $87.4 billion in 2018 from $88.8 billion in 2017.
Average balances of commercial loans and leases decreased $149 million or 1% to $21.8 billion in
2018 from $22.0 billion in 2017. Average balances of commercial real estate loans increased $485
million or 1% to $33.7 billion in 2018 from $33.2 billion in 2017. Consumer loans averaged $13.6
billion in 2018, up $930 million or 7% from $12.6 billion in 2017, due to growth in recreational
finance loans and automobile loans that was partially offset by declines in outstanding balances of
home equity loans and lines of credit. Recreational finance loans predominantly consisted of loans to
consumers that are secured by recreational vehicles and boats. Average residential real estate loans
declined $2.7 billion or 13% to $18.3 billion in 2018 from $21.0 billion in 2017, predominantly due
to ongoing repayments of loans obtained in the acquisition of Hudson City.
Taxable-equivalent net interest income in 2017 increased 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 finance 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.
57
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58
Table 4 summarizes average loans and leases outstanding in 2018 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)
Commercial, financial, etc. ........................................................................
Real estate — commercial..........................................................................
Real estate — consumer .............................................................................
Consumer
Home equity lines and loans.................................................................
Recreational finance .............................................................................
Automobile ...........................................................................................
Other .....................................................................................................
Total consumer ................................................................................
Total ...........................................................................................
Percent Increase
(Decrease) from
2017 to
2018
2016 to
2017
(1)%
1
(13)
(7)
30
10
14
7
(2)%
3 %
7
(14)
(6)
23
19
7
7
— %
2018
(In millions)
$ 21,832
33,682
18,330
5,051
3,693
3,583
1,228
13,555
$ 87,399
Commercial loans and leases, excluding loans secured by real estate, totaled $23.0 billion at
December 31, 2018, representing 26% of total loans and leases. Table 5 presents information on
commercial loans and leases as of December 31, 2018 relating to geographic area, size, borrower
industry and whether the loans are secured by collateral or unsecured. Of the $23.0 billion of
commercial loans and leases outstanding at the end of 2018, approximately $20.6 billion, or 90%,
were secured, while 39% were granted to businesses in New York State and 23% to businesses in
each of Pennsylvania and the Mid-Atlantic area (which includes Delaware, Maryland, New Jersey,
Virginia, West Virginia and the District of Columbia). The Company provides financing for leases to
commercial customers, primarily for equipment. Commercial leases included in total commercial
loans and leases at December 31, 2018 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
16% were secured by collateral in the Mid-Atlantic area.
59
Table 5
COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT
(Excludes Loans Secured by Real Estate)
December 31, 2018
New York Pennsylvania Atlantic(a)
Other
Total
Total
Mid-
Percent of
Automobile dealerships..................... $1,783
Services ............................................. 1,317
Manufacturing ................................... 1,449
828
Wholesale..........................................
660
Financial and insurance.....................
634
Health services ..................................
Real estate investors..........................
889
Transportation, communications,
390
utilities............................................
298
Retail .................................................
355
Construction ......................................
150
Public administration ........................
21
Agriculture, forestry, fishing, etc. .....
Other..................................................
81
Total .................................................. $8,855
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 ..................................................
39%
82%
11
7
100%
22%
22
15
17
9
7
8
100%
$ 1,032
639
856
645
302
259
182
348
329
319
60
60
218
$ 5,249
(Dollars in millions)
$ 680
1,140
588
468
439
649
224
379
349
338
24
45
54
$5,377
$1,284
348
428
137
391
131
144
296
186
91
12
—
49
$3,497
$ 4,779
3,444
3,321
2,078
1,792
1,673
1,439
1,413
1,162
1,103
246
126
402
$22,978
21%
15
14
9
8
7
6
6
5
5
1
1
2
100%
23%
23%
15%
100%
83%
13
4
100%
18%
22
22
19
9
6
4
100%
86%
10
4
89%
4
7
84%
10
6
100%
100%
100%
26%
21
16
16
9
3
9
10%
21
15
20
12
13
9
20%
22
17
17
9
7
8
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 $109 million and $77
million at December 31, 2018 and 2017, respectively. Included in such loans were $78 million and
$54 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 65% of the loan
60
and lease portfolio during 2018, compared with 67% and 69% in 2017 and 2016, respectively. At
December 31, 2018, the Company held approximately $34.4 billion of commercial real estate loans,
$17.2 billion of consumer real estate loans secured by one-to-four family residential properties
(including $205 million of loans originated for sale) and $4.9 billion of outstanding balances of home
equity loans and lines of credit, compared with $33.4 billion, $19.6 billion and $5.3 billion,
respectively, at December 31, 2017. The decrease in residential real estate loans reflects the
continued pay down of loans obtained in the Hudson City acquisition. Included in commercial real
estate loans at December 31, 2018 and 2017 were construction loans of $8.8 billion and $8.1 billion,
respectively, including amounts due from builders and developers of residential real estate
aggregating $1.7 billion and $1.6 billion at December 31, 2018 and 2017, respectively. Commercial
real estate loans also included loans held for sale totaling $347 million and $22 million at December
31, 2018 and 2017, respectively. International loans included in commercial real estate loans totaled
$49 million at December 31, 2018 and $65 million at December 31, 2017.
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 76% of the commercial real estate loan portfolio at the 2018 year-end. Table 6
presents commercial real estate loans by geographic area, type of collateral and size of the loans
outstanding at December 31, 2018. New York City area commercial real estate loans totaled $8.7
billion at December 31, 2018. The $7.8 billion of investor-owned commercial real estate loans in the
New York City area were largely secured by multifamily residential properties, retail space and
office space. The Company’s experience has been that office, retail and service-related properties
tend to demonstrate more volatile fluctuations in value through economic cycles and changing
economic conditions than do multifamily residential properties. Approximately 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 18% of the total.
61
Table 6
COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT
December 31, 2018
New York State
New York
City
Other
Penn-
sylvania
Mid-
Atlantic(a)
(Dollars in millions)
Other
Percent of
Total
Total
14%
11
11
8
7
4
1
56%
18%
2
3
1
24%
80%
4%
3
3
2
2
2
1
3
20%
100%
Investor-owned
Permanent finance by property
type
$
Office ............................................... $ 1,485
1,379
Retail/Service ...................................
1,410
Apartments/Multifamily...................
685
Hotel.................................................
426
Health facilities ................................
251
Industrial/Warehouse .......................
124
Other.................................................
5,760
Total permanent .........................
Construction/Development
Commercial
Construction..................................
Land/Land development ...............
1,387
276
Residential builder and
developer
Construction..................................
Land/Land development ...............
Total construction/
development............................
Total investor-owned ..............................
Owner-occupied by industry(b)
323
27
2,013
7,773
Other services...................................
Retail ................................................
Automobile dealerships....................
Health services .................................
Wholesale.........................................
Manufacturing..................................
Real estate investors.........................
Other.................................................
Total owner-occupied ................
177
151
163
124
95
80
34
126
950
Total commercial real estate ................... $ 8,723
946
604
826
408
455
215
30
3,484
607
27
9
19
$
$
461
341
432
308
369
278
12
2,201
$ 1,324
981
454
714
830
314
60
4,677
856
31
1,884
216
30
44
244
151
390
629
654
589
456
365
3
3,086
1,375
63
528
315
$ 4,606
3,934
3,776
2,704
2,536
1,423
229
19,208
6,109
613
1,134
556
662
4,146
961
3,162
2,495
7,172
2,281
5,367
8,412
27,620
384
136
202
341
90
209
35
186
1,583
$ 5,729
190
288
270
143
116
131
40
225
1,403
$ 4,565
582
394
178
213
332
150
40
341
2,230
$ 9,402
34
161
211
29
106
28
3
6
578
$ 5,945
1,367
1,130
1,024
850
739
598
152
884
6,744
$ 34,364
Percent of total ........................................
26%
17%
13%
27%
17%
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 ........................................................
4%
16
13
32
17
14
4
100%
15%
27
20
31
6
1
—
100%
13%
24
20
30
9
4
—
100%
10%
19
16
28
16
11
—
100%
10%
13
14
36
16
9
2
100%
10%
19
16
31
14
9
1
100%
(a)
(b)
Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia.
Includes $341 million of construction loans.
62
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 62% 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 57% and 45%,
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 17% of total commercial real estate loans as of
December 31, 2018.
Commercial real estate construction and development loans made to investors presented in
table 6 totaled $8.4 billion at December 31, 2018, or 10% of total loans and leases. Approximately
98% of those construction loans had adjustable interest rates. Included in such loans at the 2018 year-
end were $1.7 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 $3.4 billion
and $3.3 billion at December 31, 2018 and 2017, respectively. There have been no material losses
incurred as a result of those recourse arrangements. At December 31, 2018 and 2017, commercial
real estate loans serviced by the Company for other investors were $18.2 billion and $16.2 billion,
respectively. Reflected in commercial real estate loans serviced for others were loans sub-serviced
for others that had outstanding balances of $2.7 billion and $2.6 billion at December 31, 2018 and
2017, respectively.
Real estate loans secured by one-to-four family residential properties were $17.2 billion at
December 31, 2018, including approximately 36% secured by properties located in New York State,
8% secured by properties located in Pennsylvania, 27% secured by properties in New Jersey and
12% 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 totaled $2.5 billion at December 31, 2018, down from $3.0 billion at December 31,
2017. A portfolio of limited documentation loans acquired with the Hudson City transaction totaled
$2.4 billion and $2.8 billion at December 31, 2018 and 2017, 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 individuals to
finance the construction of one-to-four family residential properties totaled $41 million at
December 31, 2018 and $22 million at December 31, 2017, or less than .1% of total loans and leases
63
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 16% and 15% of total loans and leases at
December 31, 2018 and 2017, respectively. Outstanding balances of home equity loans and lines of
credit represent the largest component of the consumer loan portfolio. Such balances represented
approximately 5% and 6% of total loans and leases at December 31, 2018 and December 31, 2017,
respectively. Approximately 40% of home equity loans and lines of credit outstanding at
December 31, 2018 were secured by properties in New York State, 25% in Maryland, 21% in
Pennsylvania and 3% in New Jersey. Outstanding recreational finance loan balances increased to
$4.1 billion at December 31, 2018 from $3.3 billion at December 31, 2017. That growth was due
largely to new dealer relationships. Outstanding automobile loan balances rose to $3.7 billion at
December 31, 2018 from $3.5 billion at December 31, 2017. 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 2018,
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, 2018
Outstandings
(In millions)
Real estate
Residential ................................. $ 17,154
34,364
Commercial................................
51,518
Total real estate .....................
Commercial, financial, etc..............
21,715
Consumer
Home equity lines and loans......
Recreational finance ..................
Automobile ................................
Other secured or guaranteed ......
Other unsecured .........................
Total consumer......................
Total loans ........................
Commercial leases..........................
4,860
4,127
3,659
348
976
13,970
87,203
1,263
Total loans and leases....... $ 88,466
Percent of Dollars Outstanding
Mid-Atlantic
New
New Penn-
York
sylvania Maryland Jersey Other(a)
6%
36% 8%
42
13
9%
40% 11%
38% 23% 12%
11
10
11
25
40% 21% 25%
15 7
4
18
25
15
22
20
39
28% 16% 14%
38% 15% 11%
47% 18% 10%
38% 15% 11%
10
27% 6%
7
14% 8%
6% 6%
14
23
11
3% 9%
5 6
7
2
2
5% 10%
10% 8%
3% 3%
10% 8%
Other
17%
17
18%
15%
2%
63
26
27
3
27%
18%
19%
18%
(a)
Includes Delaware, Virginia, West Virginia and the District of Columbia.
The investment securities portfolio averaged $13.7 billion in 2018, compared with $15.5 billion
and $15.0 billion in 2017 and 2016, respectively. The lower average balances in 2018 as compared
with 2017 largely reflect maturities and pay downs of mortgage-backed securities offset, in part, by
64
purchases of approximately $450 million of U.S. Treasury notes. 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 available-
for-sale Fannie Mae and Freddie Mac mortgage-backed securities during 2017 largely due to the
limitations on the amount of those types 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”). Sales of investment securities were not significant in 2018.
The investment securities portfolio is largely comprised of residential mortgage-backed
securities 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 LCR requirements established by
regulators. 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.”
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 the investment securities portfolio in 2018, 2017 or 2016. Based
on management’s assessment of future cash flows associated with individual investment securities as
of December 31, 2018, 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 2 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 $5.7 billion in 2018, $5.6 billion in 2017 and $8.9 billion in 2016. Interest-
bearing deposits at banks averaged $5.6 billion in each of 2018 and 2017, compared with $8.8 billion
in 2016. 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
65
comparable maturities. Average core deposits totaled $87.3 billion in 2018, compared with $92.1
billion in 2017 and $92.2 billion in 2016. The decline in average core deposits in 2018 as compared
with 2017 reflected a $2.0 billion, or 27%, decrease in time deposits, predominantly related to
maturities of relatively high-rate time deposits, and lower balances of savings and interest-checking
deposits, largely money-market savings deposits, and noninterest-bearing deposits. 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 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. Funding provided by core deposits represented
82% of average earning assets in each of 2018 and 2016, compared with 84% in 2017. Table 8
summarizes average core deposits in 2018 and percentage changes in the components of such
deposits over the past two years. Core deposits totaled $85.5 billion and $90.4 billion at
December 31, 2018 and 2017, respectively.
Table 8
AVERAGE CORE DEPOSITS
Percent Increase
(Decrease) from
2017 to
2018
2016 to
2017
2018
(In millions)
Savings and interest-checking deposits ...................................................... $
Time deposits..............................................................................................
Noninterest-bearing deposits ......................................................................
Total............................................................................................................ $
50,131
5,324
31,893
87,348
(4) %
(27)
(2)
(5) %
2 %
(33)
8
— %
The Company also receives funding from other deposit sources, including branch-related time
deposits over $250,000, deposits associated with the Company’s Cayman Islands office, and
brokered deposits. Time deposits over $250,000, excluding brokered deposits, averaged $675 million
in 2018, $775 million in 2017 and $1.2 billion in 2016. The declines in such deposits in 2018 and
2017 from 2016 were predominantly the result of maturities of higher-rate time deposits. Cayman
Islands office deposits averaged $394 million in 2018, $185 million in 2017 and $199 million in
2016. Brokered time deposits averaged $25 million in 2018 and $59 million in each of 2017 and
2016. The Company also had brokered savings and interest-bearing transaction accounts that
averaged $2.0 billion in 2018, $1.2 billion in 2017 and $1.1 billion in 2016. 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 arrangements that at the time they were entered into had a contractual maturity
of one year or less. Average short-term borrowings were $331 million in 2018, $205 million in 2017
and $894 million in 2016. The higher levels in 2016 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. However, in
December 2018, the Company borrowed $4.2 billion from the FHLB of New York for LCR and
other liquidity purposes, $3.0 billion of which matured on the first business day of 2019 and $1.2
66
billion matured on February 1, 2019. Also included in short-term borrowings were unsecured federal
funds borrowings, which generally mature on the next business day, that averaged $206 million,
$132 million and $151 million in 2018, 2017 and 2016, respectively. Overnight federal funds
borrowings totaled $137 million at December 31, 2018 and $125 million at December 31, 2017.
Long-term borrowings averaged $8.8 billion in 2018, $8.3 billion in 2017 and $10.3 billion in
2016. Unsecured senior notes totaled $5.5 billion and $5.0 billion at December 31, 2018 and 2017,
respectively. Average balances of outstanding senior notes were $5.9 billion in 2018, compared with
$4.8 billion and $5.3 billion in 2017 and 2016, respectively. During January 2018, M&T Bank
issued $650 million of 2.625% fixed rate and $350 million of variable rate senior notes that pay
interest quarterly and are indexed to the three-month LIBOR. Those fixed and variable rate notes
mature in 2021. On December 31, 2018, M&T Bank redeemed $750 million of fixed rate senior
notes that were due to mature on January 31, 2019. In addition, in July 2018 M&T issued $750
million of senior notes that mature in July 2023, of which $500 million have a 3.55% fixed interest
rate and $250 million have a variable rate paid quarterly at rates that are indexed to the three-month
LIBOR. Also included in average long-term borrowings were amounts borrowed from the Federal
Home Loan Banks of New York and Pittsburgh of $577 million in 2018, compared with $820 million
and $1.2 billion in 2017 and 2016, respectively, and subordinated capital notes of $1.5 billion in
2018 and 2016, compared with $1.7 billion in 2017. During 2017, 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 $521 million
in 2018, $518 million in 2017 and $515 million in 2016. Also included in long-term borrowings were
agreements to repurchase securities, which averaged $415 million in 2018, $490 million in 2017 and
$1.8 billion during 2016. The repurchase agreements at December 31, 2018 totaled $409 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 8 of Notes to Financial Statements.
The Company has utilized interest rate swap agreements to modify the repricing characteristics
of certain components of its loans and long-term debt. As of December 31, 2018, interest rate swap
agreements were used as fair value hedges of approximately $4.4 billion of outstanding fixed rate
long-term borrowings. Additionally, interest rate swap agreements with a notional amount of $2.9
billion were used as cash flow hedges of interest payments associated with variable rate commercial
real estate loans. Further information on interest rate swap agreements is provided herein and 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 3.55% in 2018, compared with 3.27% in 2017 and 2.93% in
2016. The yield on the Company’s earning assets increased 51 basis points (hundredths of one
percent) to 4.33% in 2018 from 3.82% in 2017 and the rate paid on interest-bearing liabilities
increased 23 basis points to .78% in 2018 from .55% in 2017. During 2016, the yield on earning
assets was 3.49% and the rate paid on interest-bearing liabilities was .56%. The widening of the net
interest spread in each comparison predominantly reflects the effect of increases in short-term
interest rates initiated by the Federal Reserve during late 2016, 2017 and 2018 that contributed most
significantly to higher yields on loans and leases.
Net interest-free funds consist largely of noninterest-bearing demand deposits and shareholders’
equity, partially offset by bank owned life insurance and non-earning assets, including goodwill and
core deposit and other intangible assets. Net interest-free funds averaged $39.1 billion in 2018,
compared with $39.7 billion in 2017 and $36.8 billion in 2016. The decrease in average net interest-
67
free funds in 2018 from 2017 and the increase in such funds in 2017 as compared with 2016 reflected
changes in balances of noninterest-bearing deposits. Those deposits averaged $31.9 billion in 2018,
$32.5 billion in 2017 and $30.2 billion in 2016. The decline in such balances from 2017 to 2018 was
due to lower levels of deposits of commercial and trust customers. The growth in average
noninterest-bearing deposits in 2017 as compared with 2016 reflected higher levels of deposits of
trust customers. Shareholders’ equity averaged $15.6 billion, $16.3 billion and $16.4 billion in 2018,
2017 and 2016, respectively. The decline in shareholders’ equity from 2017 to 2018 was
predominantly due to repurchases of M&T common stock. Goodwill and core deposit and other
intangible assets averaged $4.7 billion in each of 2018, 2017 and 2016. The cash surrender value of
bank owned life insurance averaged $1.8 billion in each of 2018 and 2017, compared with $1.7
billion in 2016. 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 .28% in 2018, .20% in 2017 and .18% in 2016. The
increase in 2018 reflects the higher rates on interest-bearing liabilities used to value net interest-free
funds.
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 3.83% in 2018, 3.47% in 2017 and
3.11% in 2016. 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 $7.3 billion (excluding $12.6 billion of forward-starting swap
agreements) at December 31, 2018, $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. At December 31, 2018 and 2017, interest
rate swap agreements with notional amounts of $2.85 billion were serving as cash flow hedges of
interest payments associated with variable rate commercial real estate loans. There were no interest
rate swap agreements designated as cash flow hedges at December 31, 2016. At December 31, 2018,
2017 and 2016, interest swap agreements with notional amounts of $4.45 billion, $4.55 billion and
$900 million, respectively, were serving as fair value hedges of fixed rate long-term borrowings.
68
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 coincident with the Company’s adoption of amended hedge accounting guidance
on January 1, 2018 is recorded as an adjustment to the interest income or interest expense of the
respective hedged item. Prior to 2018, hedge ineffectiveness was recorded in “other revenues from
operations” in the Company’s consolidated statement of income. In a cash flow 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 derivative’s gain or loss on cash flow hedges is accounted for similar to
that associated with fair value hedges. The amounts of hedge ineffectiveness recognized in 2018,
2017 and 2016 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 average notional amounts of interest rate swap agreements entered
into for interest rate risk management purposes, the related effect on net interest income and margin,
and the weighted-average interest rates paid or received on those swap agreements are presented in
table 9.
Table 9
INTEREST RATE SWAP AGREEMENTS
.
2018
Year Ended December 31
2017
2016
Amount
Rate(a)
Amount
Rate(a)
Amount
Rate(a)
(Dollars in thousands)
Increase (decrease) in:
Interest income ...................................... $ (13,339)
Interest expense .....................................
11,418
Net interest income/margin ................... $ (24,757)
Average notional amount (c) ...................... $7,795,479
Rate received (b).........................................
Rate paid (b) ...............................................
(.01)% $
.02
(.03)% $
3,916
(20,966)
24,882
$4,766,575
— % $
(.03)
.02 % $
(36,866)
36,866
$1,357,650
—
— %
(.05)
.04 %
2.09 %
2.41 %
2.30 %
1.79 %
4.39 %
1.64 %
(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, 2018 and December 31, 2017, outstanding notional amounts of such agreements
totaled $15.6 billion and $6.3 billion, respectively. There were no similar agreements at December
31, 2016. The fair value of those interest rate floor agreements was $1.9 million at December 31,
2018 and $3.7 million at December 31, 2017 and was included in trading account assets in the
69
consolidated balance sheet. 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 $132 million in 2018, compared with $168 million in 2017 and $190 million in 2016. Net
charge-offs of loans were $130 million in 2018, $140 million in 2017 and $157 million in 2016. Net
charge-offs as a percentage of average loans and leases outstanding were .15% in 2018, compared
with .16% in 2017 and .18% in 2016. A summary of the Company’s loan charge-offs, provision and
allowance for credit losses is presented in table 10 and in note 4 of Notes to Financial Statements.
Table 10
LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES
2018
2017
2016
2015
2014
(Dollars in thousands)
Allowance for credit losses beginning
balance........................................................... $1,017,198
Charge-offs during year
Commercial, financial,
leasing, etc................................................
Real estate — construction .........................
Real estate — mortgage ..............................
Consumer ....................................................
Total charge-offs....................................
60,414
262
27,369
143,196
231,241
Recoveries during year
Commercial, financial,
leasing, etc................................................
Real estate — construction .........................
Real estate — mortgage ..............................
Consumer ....................................................
Total recoveries .....................................
Net charge-offs.................................................
Provision for credit losses ................................
Allowance for credit losses ending
balance........................................................... $1,019,444
Net charge-offs as a percent of:
27,903
19,379
8,322
45,883
101,487
129,754
132,000
$ 988,997
$955,992
$919,562
$916,676
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
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
$1,017,198
$988,997
$955,992
$919,562
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......................
98.30%
83.21%
82.63%
78.57%
97.67%
.15%
.16%
.18%
.19%
.19%
1.15%
1.16%
1.09%
1.09%
1.38%
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
70
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 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 $727 million and $1.0 billion at December 31, 2018 and 2017, respectively.
The nonaccretable balance related to remaining principal losses associated with loans acquired at a
discount as of December 31, 2018 and 2017 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 2018, estimated cash flows expected to be generated by
acquired loans increased by $55 million, or approximately 4%. That improvement reflected higher
estimated principal, interest and other recoveries, largely associated with commercial real estate
loans. 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. 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.
Table 11
NONACCRETABLE BALANCE — PRINCIPAL
Remaining balance
December 31,
2018
December 31,
2017
(In thousands)
Commercial, financial, leasing, etc............................................................................. $
Commercial real estate ...............................................................................................
Residential real estate .................................................................................................
Consumer....................................................................................................................
Total ...................................................................................................................... $
3,106
7,545
25,817
6,099
42,567
3,586
28,783
33,880
7,482
73,731
71
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 in 2015 at a premium totaled $9.3 billion
and $11.5 billion at December 31, 2018 and December 31, 2017, 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. Rather, 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 $894 million at December 31, 2018, compared with $883 million
and $920 million at December 31, 2017 and 2016, respectively. As a percentage of total loans and
leases outstanding, nonaccrual loans represented 1.01% at the end of each of 2018 and 2016 and
1.00% at December 31, 2017. 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.
Accruing loans past due 90 days or more (excluding loans acquired at a discount) were $223
million or .25% of total loans and leases at December 31, 2018, compared with $244 million or .28%
at December 31, 2017 and $301 million or .33% at December 31, 2016. Those amounts included
loans guaranteed by government-related entities of $192 million, $235 million and $283 million at
December 31, 2018, 2017 and 2016, 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
$165 million at December 31, 2018, $207 million at December 31, 2017 and $224 million at
December 31, 2016. 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.
72
Table 12
NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA
December 31
2018
2017
2016
(Dollars in thousands)
2015
2014
Nonaccrual loans .............................................................. $893,608
Real estate and other foreclosed assets ............................ 78,375
Total nonperforming assets .............................................. $971,983
Accruing loans past due 90 days or more(a) .................... $222,527
Government guaranteed loans included in totals above:
Nonaccrual loans......................................................... $ 34,667
Accruing loans past due 90 days or more ................... 192,443
Renegotiated loans ........................................................... $245,367
Acquired accruing loans past due 90 days or more(b) ..... $ 39,750
Purchased impaired loans(c):
882,598
111,910
994,508
244,405
920,015
139,206
1,059,221
300,659
799,409
195,085
994,494
317,441
799,151
63,635
862,786
245,020
35,677
235,489
221,513
47,418
40,610
282,659
190,374
61,144
47,052
276,285
182,865
68,473
69,095
217,822
202,633
110,367
Outstanding customer balance .................................... $529,520
Carrying amount ......................................................... 303,305
688,091
410,015
927,446
578,032
1,204,004
768,329
369,080
197,737
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....................
1.01%
1.00%
1.01%
.91%
1.20%
1.10%
1.13%
1.16%
1.13%
1.29%
.25%
.28%
.33%
.36%
.37%
(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 $303 million at December 31, 2018, or .3%
of total loans. Of that amount, $285 million was associated with the acquisition of Hudson City.
Purchased impaired loans totaled $410 million at December 31, 2017, of which $378 million was
associated with 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
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 3 of Notes to Financial
Statements.
73
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 $179 million and $189 million at
December 31, 2018 and December 31, 2017, respectively.
Charge-offs of commercial loans and leases, net of recoveries, aggregated $33 million in 2018,
$44 million in 2017 and $29 million in 2016. Commercial loans and leases in nonaccrual status were
$234 million at December 31, 2018, $241 million at December 31, 2017 and $261 million at
December 31, 2016.
Net recoveries of previously charged-off commercial real estate loans were $9 million during
2018, $5 million during 2017 and $2 million in 2016. Reflected in those amounts were a $13 million
recovery during 2018 associated with a hotel property and net recoveries of $2 million in 2018, $9
million in 2017 and $4 million in 2016 of loans to residential real estate builders and developers.
Commercial real estate loans classified as nonaccrual aggregated $231 million at December 31, 2018,
compared with $202 million at December 31, 2017 and $211 million at December 31, 2016.
Nonaccrual commercial real estate loans included construction-related loans of $27 million, $17
million and $35 million at the end of 2018, 2017 and 2016, respectively.
Net charge-offs of residential real estate loans totaled $9 million in 2018, $12 million in 2017
and $18 million in 2016. Residential real estate loans in nonaccrual status at December 31, 2018
were $318 million, compared with $332 million and $336 million at December 31, 2017 and 2016,
respectively. Nonaccrual limited documentation first mortgage loans were $85 million at
December 31, 2018, compared with $96 million and $107 million at December 31, 2017 and 2016,
respectively. Limited documentation first mortgage loans represent loans secured by residential real
estate that at origination typically included some form of limited borrower documentation
requirements as compared with more traditional loans. The Company discontinued its limited
documentation loan program in 2008 and Hudson City discontinued its program in 2014. Residential
real estate loans past due 90 days or more and accruing interest (excluding loans acquired at a
discount) totaled $190 million at December 31, 2018, $233 million at December 31, 2017 and $281
million at December 31, 2016. 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, 2018 is presented
in table 13.
74
Table 13
SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA
December 31, 2018
Nonaccrual
Year Ended
December 31, 2018
Net Charge-offs
(Recoveries)
Percent of
Average
Outstanding
Outstanding
Balances
Percent of
Outstanding
Balances
Balances
(Dollars in thousands)
Balances
Balances
Residential mortgages:
New York ........................................................................ $ 4,998,325 $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $14,588,233 $
1,245,243
1,064,581
3,623,703
944,464
2,711,917
75,342
14,444
12,199
61,638
8,839
60,463
232,925
Residential construction loans:
New York ........................................................................ $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $
14,145 $
4,097
5,111
5,798
8,989
2,953
41,093 $
Limited documentation first mortgages:
New York ........................................................................ $ 1,104,836 $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $ 2,525,120 $
52,347
30,410
959,848
12,066
365,613
First lien home equity loans and lines of credit:
New York ........................................................................ $ 1,203,136 $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $ 2,828,892 $
731,294
598,711
64,678
204,084
26,989
Junior lien home equity loans and lines of credit:
New York ........................................................................ $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $ 2,024,829 $
748,248 $
279,898
602,236
98,780
254,416
41,251
Limited documentation junior lien:
New York ........................................................................ $
Pennsylvania....................................................................
Maryland..........................................................................
New Jersey.......................................................................
Other Mid-Atlantic (a).....................................................
Other ................................................................................
Total................................................................................. $
616 $
280
1,265
385
599
3,388
6,533 $
109
295
—
—
—
23
427
34,601
5,946
2,384
24,484
880
16,390
84,685
15,418
7,225
7,664
523
5,146
909
36,885
16,406
2,916
8,735
1,281
2,720
1,915
33,973
—
—
52
171
—
211
434
(a)
Includes Delaware, Virginia, West Virginia and the District of Columbia.
1.51% $
1.16
1.15
1.70
.94
2.23
1.60% $
.77% $
7.20
—
—
—
.78
1.04% $
3.13% $
11.36
7.84
2.55
7.29
4.48
3.35% $
1.28% $
.99
1.28
.81
2.52
3.37
1.30% $
2.19% $
1.04
1.45
1.30
1.07
4.64
1.68% $
—% $
—
4.11
44.42
—
6.23
6.64% $
3,663
348
(309)
2,685
(379)
3,723
9,731
—
49
—
—
—
(41)
8
(779)
254
148
507
(261)
(908)
(1,039)
1,636
1,751
1,748
(4)
120
(33)
5,218
606
174
1,037
(3)
66
(7)
1,873
40
4
40
—
—
—
84
.07%
.03
(.03)
.07
(.04)
.13
.06%
—%
1.44
—
—
—
(.85)
.03%
(.06%)
.44
.44
.05
(1.01)
(.24)
(.04%)
.13%
.23
.28
(.01)
.06
(.13)
.18%
.08%
.06
.16
—
.02
(.02)
.09%
5.73%
1.51
3.09
—
—
—
1.21%
75
Net charge-offs of consumer loans during 2018 aggregated $97 million, compared with $89
million in 2017 and $112 million in 2016. Included in net charge-offs of consumer loans were:
automobile loans of $33 million in 2018, $34 million in 2017 and $32 million in 2016; recreational
finance loans of $17 million, $16 million and $24 million during 2018, 2017 and 2016, respectively;
and home equity loans and lines of credit secured by one-to-four family residential properties of $7
million in 2018, $11 million in 2017 and $17 million in 2016. Nonaccrual consumer loans were $110
million at December 31, 2018, compared with $108 million and $112 million at December 31, 2017
and 2016, respectively. Included in nonaccrual consumer loans at the 2018, 2017 and 2016 year-ends
were: automobile loans of $23 million, $24 million and $19 million, respectively; recreational
finance loans of $11 million, $6 million and $7 million, respectively; and outstanding balances of
home equity loans and lines of credit of $71 million, $75 million and $82 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, 2018 is presented in table 13. Information about past due and
nonaccrual loans as of December 31, 2018 and 2017 is also included in note 3 of Notes to Financial
Statements.
Real estate and other foreclosed assets totaled $78 million at December 31, 2018, compared
with $112 million at December 31, 2017 and $139 million at December 31, 2016. Net gains or losses
associated with real estate and other foreclosed assets were not material in 2018, 2017 or 2016. At
December 31, 2018, the Company’s holding of residential real estate-related properties comprised
approximately 99% 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; 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, 2018 in light of: (i) residential real estate values and the level of delinquencies of loans
secured by residential real estate; (ii) economic conditions in the markets served by the Company;
(iii) slower growth in private sector employment in upstate New York and central Pennsylvania than
in other regions served by the Company and nationally; (iv) the significant subjectivity involved in
commercial real estate valuations; and (v) the amount of loan growth experienced by the Company.
While there has been general improvement in economic conditions, concerns continue to exist about
the strength and sustainability of such improvements; the 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
76
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 4 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 $2.7 billion at December 31, 2018, compared with $2.5 billion at
December 31, 2017. The increase reflects loans to three customers, each operating in different
industries and geographic regions, that were added to criticized loans in the fourth quarter of 2018.
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 criticized 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
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
77
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, 2018, approximately 58% 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 68% (or approximately 28% 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. 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 at each of December 31, 2018 and December 31,
2017. 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, 2018, approximately 82% 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 27% 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 4 of Notes to Financial
Statements. For purposes of determining the level of the allowance for credit losses, the Company
segments its loan and lease portfolio by loan type. The amount of specific loss components in the
Company’s loan and lease portfolios is determined through a loan-by-loan analysis of commercial
loans and commercial real estate loans in nonaccrual status. Measurement of the specific loss
components is typically based on expected future cash flows, collateral values or other factors that may
impact the borrower’s ability to pay. Losses associated with residential real estate loans and consumer
loans are generally determined by reference to recent charge-off history and are evaluated (and adjusted
if deemed appropriate) through consideration of other factors including near-term forecasted loss
estimates developed by the Company’s credit department. These forecasts give consideration to overall
borrower repayment performance and current geographic region changes in collateral values using third
party published historical price indices or automated valuation methodologies. With regard to collateral
values, the realizability of such values by the Company contemplates repayment of any first lien
position prior to recovering amounts on a junior lien position. Approximately 42% of the Company’s
78
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 4 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
lesser 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 which generally have higher rates of loss than other types of collateralized loans.
The inherent base level loss components related to residential real estate loans and consumer
loans are generally determined by applying loss factors to portfolio balances after consideration of
payment performance and recent loss experience and trends, which are mainly driven by current
collateral values in the market place as well as the amount of loan defaults. Loss rates for loans
secured by residential real estate, including home equity loans and lines of credit, are determined by
reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through
consideration of other factors as previously described.
79
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 2018
that the U.S. labor market has continued to strengthen and that economic activity has been rising at a
strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has
remained low. Household spending has continued to grow strongly, while growth of business fixed
investment has moderated from its pace earlier in the year. Economic indicators in the most
significant market regions served by the Company also showed improvement in 2018. For example,
in 2018, average private sector employment in areas served by the Company was 1.4% above year-
ago levels, but still trailed the 1.9% U.S. average growth rate. Private sector employment increased
1.1% in upstate New York, 1.5% in areas of Pennsylvania served by the Company, 1.8% in New
Jersey, 1.2% in Maryland, 2.1% in Greater Washington D.C. and 1.4% in Delaware. In New York
City, private sector employment increased by 1.9% in 2018.
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. The unallocated
portion of the allowance for credit losses was equal to .09% of gross loans outstanding at each of
December 31, 2018 and December 31, 2017. Considering the inherent imprecision in the many
estimates used in the determination of the allocated portion of the allowance, management
deliberately remained cautious and conservative in establishing the overall allowance for credit
losses. Given the Company’s high concentration of real estate loans and considering the other factors
already discussed herein, management considers the allocated and unallocated portions of the
allowance for credit losses to be prudent and reasonable. Furthermore, the Company’s allowance is
general in nature and is available to absorb losses from any loan or lease category. Additional
information about the allowance for credit losses is included in note 4 of Notes to Financial
Statements.
80
Table 14
ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES
December 31
2018
2017
2016
2015
2014
(Dollars in thousands)
Commercial, financial, leasing, etc...... $ 330,055
410,780
Real estate..........................................
200,564
Consumer...........................................
78,045
Unallocated........................................
Total.............................................. $1,019,444
$ 328,599
439,490
170,809
78,300
$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
As a Percentage of Gross Loans
and Leases Outstanding
Commercial, financial, leasing, etc. .....
Real estate..........................................
Consumer...........................................
1.43%
.80
1.44
1.50%
.83
1.29
1.45%
.75
1.29
1.46%
.72
1.54
1.47%
1.02
1.70
Management believes that the allowance for credit losses at December 31, 2018 appropriately
reflected credit losses inherent in the portfolio as of that date. The allowance for credit losses totaled
$1.02 billion at each of December 31, 2018 and December 31, 2017 and $989 million at December
31, 2016. As a percentage of loans outstanding, the allowance was 1.15% and 1.16% at December
31, 2018 and 2017, respectively, and 1.09% at December 31, 2016. 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 portfolio 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 2018, 2017 and 2016 was 114%, 115% and 107%,
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 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:
•
•
•
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.
81
For possible improvement in credit quality factors, the scenarios assumed were:
•
•
•
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 $93 million that could be identifiable under the
assumptions for credit deterioration, whereas under the assumptions for credit improvement a $32
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, 2018, however residential real estate loans comprised
approximately 19% of the loan portfolio. Outstanding loans to foreign borrowers aggregated $172
million at December 31, 2018, or .2% of total loans and leases.
Other Income
Other income totaled $1.86 billion in 2018, compared with $1.85 billion and 1.83 billion in 2017 and
2016, respectively. The increase in other income from 2017 to 2018 was largely attributable to higher
levels of trust income and income from BLG that were tempered by lower brokerage services income
and income from bank owned life insurance. In addition, valuation losses on equity securities were
incurred during 2018, compared with gains on the sale of investment securities in 2017. As
compared with 2016, the rise in other income in 2017 was largely attributable to higher trust income,
merchant discount and credit card fees, service charges on deposit accounts, and lower losses
associated with M&T’s share of the operating losses of BLG. Partially offsetting those improvements
were a decline in mortgage banking revenues and lower gains on investment securities.
Mortgage banking revenues aggregated $360 million in 2018, $364 million in 2017 and $374
million in 2016. Mortgage banking revenues are comprised of both residential and commercial
mortgage banking activities. The Company’s involvement in commercial mortgage banking activities
includes the origination, sales and servicing of loans under the multifamily loan programs of Fannie
Mae, Freddie Mac and the U.S. Department of Housing and Urban Development.
Residential mortgage banking revenues, consisting of realized gains from sales of residential
real estate loans and loan servicing rights, unrealized gains and losses on residential real estate loans
held for sale and related commitments, residential real estate loan servicing fees, and other residential
real estate loan-related fees and income, were $239 million in 2018, compared with $245 million in
2017 and $255 million in 2016. The lower residential mortgage banking revenues in each of the last
two years as compared with the preceding year resulted from decreased gains from origination
activities, reflecting declines in origination volumes and a narrowing of the associated margins.
New commitments to originate residential real estate loans to be sold declined 25% to
approximately $2.2 billion in 2018 from $3.0 billion in 2017. Such commitments totaled $3.1 billion
in 2016. 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 $44
million in 2018, $60 million in 2017 and $71 million in 2016.
Loans held for sale that were secured by residential real estate aggregated $205 million and
$356 million at December 31, 2018 and 2017, respectively. Commitments to sell residential real
82
estate loans and commitments to originate residential real estate loans for sale at pre-determined rates
totaled $364 million and $245 million, respectively, at December 31, 2018, $595 million and $347
million, respectively, at December 31, 2017 and $777 million and $479 million, respectively, at
December 31, 2016. Net recognized unrealized gains on residential real estate loans held for sale,
commitments to sell loans and commitments to originate loans for sale were $7 million at December
31, 2018, $10 million at December 31, 2017 and $15 million at December 31, 2016. Changes in such
net unrealized gains are recorded in mortgage banking revenues and resulted in net decreases in
revenue of $3 million in 2018 and $5 million in 2017. 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 $195 million in 2018, $185
million in 2017 and $183 million in 2016. Residential real estate loans serviced for others aggregated
$79.1 billion at December 31, 2018, $79.2 billion a year earlier and $53.2 billion at December 31,
2016. Reflected in residential real estate loans serviced for others were loans sub-serviced for others
of $56.8 billion, $56.6 billion and $30.4 billion at December 31, 2018, 2017 and 2016, respectively.
Revenues earned for sub-servicing loans totaled $114 million in 2018, compared with $103 million
in 2017 and $98 million in 2016. The Company added $9 billion of residential real estate loans sub-
serviced for others during 2018. During 2017, the Company added sub-servicing of residential real
estate loans aggregating $35.6 billion of outstanding principal balances. On January 31, 2019, the
Company purchased servicing rights for residential real estate loans that had outstanding principal
balances at that date of approximately $13.3 billion. The purchase price of such servicing rights was
approximately $146 million, subject to certain final adjustments. Transfer of the loans to the
Company’s loan servicing system is expected to occur in the second quarter of 2019. 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 $121 million at December 31,
2018, compared with $115 million and $117 million at December 31, 2017 and 2016, 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 6 of Notes to
Financial Statements.
Commercial mortgage banking revenues totaled $121 million in 2018, compared with $119
million in each of 2017 and 2016. Included in such amounts were revenues from loan origination and
sales activities of $64 million in 2018, $66 million in 2017 and $76 million in 2016. The lower
revenues in 2018 as compared with 2017 were due to narrower margins on loans originated for sale.
The decline from 2016 to 2017 reflected lower loan origination volumes. Commercial real estate
loans originated for sale to other investors totaled approximately $2.4 billion in 2018, compared with
$2.5 billion in 2017 and $2.9 billion in 2016. Loan servicing revenues aggregated $57 million in
2018, $53 million in 2017 and $43 million in 2016. Capitalized commercial mortgage servicing
assets were $115 million at December 31, 2018, $114 million at December 31, 2017 and $104
million at December 31, 2016. Commercial real estate loans serviced for other investors totaled $18.2
billion at December 31, 2018, $16.2 billion at December 31, 2017 and $11.8 billion at December 31,
2016, and included $3.4 billion at December 31, 2018, $3.3 billion at December 31, 2017 and $2.8
billion at December 31, 2016, of loan balances for which investors had recourse to the Company if
such balances are ultimately uncollectible. Included in commercial real estate loans serviced for
others were loans sub-serviced for others of $2.7 billion at December 31, 2018 and $2.6 billion at
December 31, 2017. Commitments to sell commercial real estate loans and commitments to originate
commercial real estate loans for sale aggregated $577 million and $229 million, respectively, at
December 31, 2018, $217 million and $195 million, respectively, at December 31, 2017 and $713
83
million and $70 million, respectively, at December 31, 2016. Commercial real estate loans held for
sale were $347 million, $22 million and $643 million at December 31, 2018, 2017 and 2016,
respectively. The higher balances at December 31, 2018 and December 31, 2016 reflect loans
originated later in the year that had not yet been delivered to investors.
Service charges on deposit accounts totaled $429 million in 2018, compared with $427 million
in 2017 and $419 million in 2016. The increase in 2018 as compared with 2017 reflects higher
consumer service charges while the increase 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 $538 million in 2018, compared with $501 million in 2017 and
$472 million in 2016. Revenues associated with the ICS business were $275 million in 2018, $254
million in 2017 and $230 million in 2016. The increase in ICS revenue in 2018 as compared with
2017 was predominantly due to higher sales activities and increased retirement services income
resulting in growth in collective fund balances. The improved revenues associated with the ICS
business in 2017 compared with 2016 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 $237
million, $222 million and $212 million in 2018, 2017 and 2016, respectively. The increased
revenues in each of the last two years as compared with the preceding year reflect stronger sales
activities and improved equity market performance. Trust assets under management were $84.9
billion and $82.5 billion at December, 31 2018 and 2017, respectively. Trust assets under
management include the Company’s proprietary mutual funds’ assets of $10.8 billion at December
31, 2018 and $11.2 billion at December 31, 2017. Additional trust income from investment
management activities was $26 million, $25 million and $30 million in 2018, 2017 and 2016,
respectively, and includes fees earned from retail customer investment accounts and from an
affiliated investment manager. The decline in such revenues in 2017 as compared with 2016 reflects,
in part, lower balances managed. Assets managed by the affiliated manager totaled $4.2 billion and
$6.7 billion at December 31, 2018 and December 31, 2017, respectively. The Company’s trust
income from that affiliate was not material during 2018, 2017 or 2016.
84
Brokerage services income, which includes revenues from the sale of mutual funds and
annuities and securities brokerage fees, declined to $51 million in 2018 from $61 million in 2017 and
$63 million in 2016. The decline in brokerage services income from 2017 to 2018 was
predominantly due to lower income from sales of annuities and mutual funds. Trading account and
foreign exchange activity resulted in gains of $33 million in 2018, $35 million in 2017 and $41
million in 2016. Valuation losses on interest rate floor agreements in 2018 were largely offset by
income associated with increased activity related to interest rate swap agreements executed on behalf
of commercial customers. 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. 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.”
Net losses on investment securities totaled $6 million in 2018 and represented unrealized losses
on investments in equity securities. The Company realized net gains from sales of investment
securities of $21 million in 2017 and $30 million in 2016. 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.
Other revenues from operations aggregated $451 million in 2018, compared with $441 million
in 2017 and $426 million in 2016. The increase in other revenues from operations in 2018 as
compared with 2017 reflects income of $24 million from BLG, partially offset by lower income
earned from bank owned life insurance. The increase from 2016 to 2017 reflects lower losses from
BLG and higher merchant discount and credit card fees.
Included in other revenues from operations were the following significant components. Letter
of credit and other credit-related fees totaled $125 million, $123 million and $120 million in 2018,
2017 and 2016, respectively. Revenues from merchant discount and credit card fees were $117
million in 2018, $120 million in 2017 and $111 million in 2016. As discussed in note 10 of Notes to
Financial Statements, effective January 1, 2018 the Company began reporting credit card interchange
revenue net of rewards granted to consumers who use the Company’s credit cards. Those rewards
totaled $14 million in 2018. If that change had not taken place, revenues from merchant discount and
credit card fees would have aggregated $131 million in 2018, or 9% higher than in 2017 due to
increased usage of the Company’s credit card products. The higher revenues in 2017 as compared to
2016 were 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 $48 million in 2018, compared with $58 million in 2017 and $54 million in
2016. The decrease from 2017 to 2018 was due to lower death benefit proceeds. Insurance-related
sales commissions and other revenues totaled $47 million in 2018, compared with $43 million in
each of 2017 and 2016. Automated teller machine usage fees aggregated $14 million in each of 2018
85
and 2016, compared with $15 million in 2017. Gains from sales of equipment previously leased to
commercial customers were $7 million in 2018, $6 million in 2017 and $8 million in 2016.
M&T’s investment in BLG resulted in income of $24 million in 2018 and less than $1 million
in 2017, compared with losses of $11 million in 2016. 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 and in 2018, M&T received cash distributions 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. 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 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 $3.29 billion in 2018, compared to $3.14 billion in 2017 and $3.05 billion
in 2016. Included in those amounts are expenses considered to be “nonoperating” in nature consisting
of amortization of core deposit and other intangible assets of $25 million, $31 million and $43
million in 2018, 2017 and 2016, respectively, and merger-related expenses of $36 million in 2016.
There were no merger-related expenses in 2017 or 2018. Exclusive of those nonoperating expenses,
noninterest operating expenses aggregated $3.26 billion in 2018, $3.11 billion in 2017 and $2.97
billion in 2016. The most significant factors contributing to the increase in such expenses from 2017
to 2018 were a $135 million increase to the reserve for legal matters in 2018’s initial quarter
(compared with a $64 million increase to that reserve in 2017) and higher salaries and employee
benefits and professional services expenses. Those factors were partially offset by lower FDIC
assessments and charitable contributions. The rise in noninterest operating expenses in 2017 as
compared with 2016 was largely attributable to higher legal-related and professional services
expenses, increased salaries and employee benefit costs, and higher charitable contributions.
Salaries and employee benefits expense aggregated $1.75 billion in 2018, compared with $1.65
billion and $1.62 billion in 2017 and 2016, respectively. The higher level of expenses in 2018 reflects
increased head count, the impact of merit and other increases for employees and higher incentive and
stock-based compensation. The higher level of expenses in 2017 as compared to 2016 reflects the
impact of annual merit increases and higher incentive-based compensation costs. Stock-based
compensation totaled $66 million in 2018, compared with $61 million in 2017 and $65 million in
2016. The number of full-time equivalent employees were 16,938 and 16,456 at December 31, 2018
and 2017, respectively, compared with 16,593 at December 31, 2016.
The Company provides pension and other postretirement benefits (including a retirement
savings plan) for its employees. Expenses related to such benefits totaled $85 million in 2018, $92
million in 2017 and $94 million in 2016. The amounts recorded in salaries and employee benefits
expense and other costs of operations, respectively, from the preceding sentence were as follows:
$92 million and ($7) million in 2018; $90 million and $2 million in 2017; $88 million and $6 million
in 2016. The Company sponsors both defined benefit and defined contribution pension plans.
Pension benefit expense for those plans was $45 million in 2018, $51 million in 2017 and $52
million in 2016. Included in those amounts were $29 million in 2018, $30 million in 2017 and $25
million in 2016 for a defined contribution pension plan that the Company began on January 1, 2006.
The Company made $200 million of voluntary contributions to the qualified defined benefit pension
plan in 2017. No contributions were required or made in 2018 or 2016. Information about the
86
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 $43 million in 2018, $38 million in 2017 and $37 million in 2016.
Excluding the nonoperating expense items already noted, nonpersonnel operating expenses
were $1.51 billion in 2018, $1.46 billion in 2017 and $1.35 billion in 2016. The rise in such expenses
in 2018 as compared with 2017 was predominantly the result of higher legal-related and professional
services costs, partially offset by lower FDIC assessments and charitable contributions. The decline
in FDIC assessments from 2017 to 2018 was due, in part, to the elimination of the large bank
surcharge, effective October 1, 2018. The Deposit Insurance Fund Reserve Ratio exceeded the
statutorily required minimum reserve ratio of 1.35% on September 30, 2018, resulting in the
elimination of the surcharge. The increased operating expenses in 2017 as compared with 2016 were
predominantly the result of higher legal-related and professional services costs and charitable
contributions. As noted previously, during 2018 and 2017 WT Corp. reached agreements related to
alleged conduct of that subsidiary prior to its acquisition by M&T that led to the Company adding
$135 million and $50 million to its reserve for legal matters during 2018 and 2017, respectively. The
Company made contributions to The M&T Charitable Foundation of $29 million, $50 million and
$30 million in 2018, 2017 and 2016, respectively.
Income Taxes
The provision for income taxes was $590 million in 2018, $916 million in 2017 and $743 million in
2016. The effective tax rates were 23.5% in 2018, 39.4% in 2017 and 36.1% in 2016. The decrease in
the effective rate in 2018 from the prior years 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. If not for those changes, the Company estimates that its effective tax rate for 2018 would
have been 35.7%. In December 2018, M&T received approval from the Internal Revenue Service to
change its tax return treatment for certain loan fees retroactive to 2017, resulting in a $15 million
reduction of income tax expense in the final quarter of 2018. The Company also adopted new
accounting guidance for share-based transactions during the first quarter of 2017. That guidance
requires that excess tax benefits and tax deficiencies associated with share-based compensation be
recognized as a discrete 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. As a result, the Company recognized
a reduction of income tax expense of $9 million and $22 million during 2018 and 2017, respectively.
Furthermore, 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. Lastly, the 2017 settlement
between WT Corp. and the U.S. Attorney’s Office for the District of Delaware resulted in a $44
million payment by WT Corp. that was not deductible for income tax purposes, contributing to a
higher effective tax rate in 2017. If not for the impact of the Tax Act, the change in accounting for
excess tax benefits from share-based compensation, and the non-deductible nature of the payment
referred to above, the Company’s effective tax rate in 2017 would have been 36.0%.
87
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 discrete or 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 $172 million and $159 million of
loans to foreign borrowers at December 31, 2018 and 2017, respectively. Deposits in the Company’s
office in the Cayman Islands aggregated $812 million at December 31, 2018 and $178 million at
December 31, 2017. The Company uses such deposits to facilitate customer demand which increased
in 2018 largely due to the higher interest rate environment. Loans at M&T Bank’s commercial
banking office in Ontario, Canada included in international assets as of December 31, 2018 and 2017
totaled $122 million and $114 million, respectively. Deposits at that office were $22 million at
December 31, 2018 and $45 million at December 31, 2017. The Company also offers trust-related
services in Europe. Revenues from providing such services during 2018, 2017 and 2016 were
approximately $29 million, $24 million and $25 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 78% of the Company’s earning assets at
December 31, 2018, compared with 84% at December 31, 2017 and 83% at December 31, 2016.
The Company supplements funding provided through core deposits with various short-term and
long-term wholesale borrowings, including overnight federal funds purchased, short-term advances
from the FHLB of New York, brokered deposits, Cayman Islands office deposits and longer-term
borrowings. At December 31, 2018, M&T Bank had short-term and long-term credit facilities with
the FHLBs aggregating $18.8 billion. Outstanding borrowings under FHLB credit facilities totaled
$4.8 billion and $577 million at December 31, 2018 and 2017, respectively. Such borrowings were
secured by loans and investment securities. As previously noted, in December 2018 the Company
borrowed $4.2 billion from the FHLB of New York for LCR and other liquidity purposes. M&T
Bank had an available line of credit with the Federal Reserve Bank of New York that totaled
approximately $13.7 billion at December 31, 2018. The amount of that line is dependent upon the
balances of loans and securities pledged as collateral. There were no borrowings outstanding under
88
such line of credit at December 31, 2018 or December 31, 2017. Senior notes issued and outstanding
totaled $5.5 billion at December 31, 2018 and $5.0 billion at December 31, 2017. During 2018 M&T
Bank issued $1.0 billion of senior notes that mature in 2021 and M&T issued $750 million of senior
notes that mature in 2023. On December 31, 2018 M&T Bank redeemed $750 million of senior
notes that were due to mature in January 2019.
The Company has, from time to time, issued subordinated capital notes and junior subordinated
debentures associated with trust preferred securities to provide liquidity and enhance regulatory
capital ratios. 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 8 of Notes to
Financial Statements.
Short-term federal funds borrowings totaled $137 million and $125 million at December 31,
2018 and 2017, 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 $812 million and $178 million at December 31, 2018 and 2017, 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 $3.0 billion and $1.3 billion at
December 31, 2018 and 2017, 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 8 of Notes
to Financial Statements. In addition to deposits and borrowings, other sources of liquidity include
maturities of investment securities and other earning assets, repayments of loans and investment
securities, and cash generated from operations, such as fees collected for services.
Table 15
DEBT RATINGS
Moody’s
Standard
and Poor’s
Fitch
M&T Bank Corporation
Senior debt.................................................................................
Subordinated debt......................................................................
A–
A3
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–
89
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. The value of VRDBs in the
Company’s trading account was not material at December 31, 2018 or December 31, 2017. The total
amount of VRDBs outstanding backed by M&T Bank letters of credit was $793 million and $1.0
billion at December 31, 2018 and 2017, respectively. M&T Bank also serves as remarketing agent for
most of those bonds.
Table 16
MATURITY DISTRIBUTION OF SELECTED LOANS(a)
December 31, 2018
Demand
2019
2020 - 2023
After 2023
(In thousands)
Commercial, financial, etc...................................... $7,426,143 $3,388,513 $ 9,329,335 $1,390,006
617,721
Real estate — construction .....................................
Total ................................................................... $7,471,913 $7,310,073 $13,540,489 $2,007,727
45,770 3,921,560 4,211,154
Floating or adjustable interest rates ........................
Fixed or predetermined interest rates .....................
Total ...................................................................
(a) The data do not include nonaccrual loans.
$11,705,686 $1,210,385
797,342
1,834,803
$13,540,489 $2,007,727
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, 2018
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
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, 2018 and the timing of the expiration of such commitments.
90
Table 17
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
December 31, 2018
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 ....................... $ 3,667,839 $2,328,549 $ 123,719 $
Deposits at Cayman
811,906
Islands office .....................
811,906
4,398,378
Short-term borrowings ......... 4,398,378
8,444,914
Long-term borrowings.......... 1,525,057
438,430
89,547
Operating leases ...................
341,968
149,292
Other.....................................
Total ..................................... $10,642,019 $6,123,087 $1,899,491 $1,895,253 $20,559,850
—
—
1,647,441
94,082
34,249
—
—
3,517,246
150,521
126,771
—
—
1,755,170
104,280
31,656
4,147 $ 6,124,254
Other commitments
524,165
Commitments to extend
credit (a) ............................ $10,828,529 $6,495,649 $6,475,039 $4,299,468 $28,098,685
Standby letters of credit........ 1,394,255
2,326,991
Commercial letters of
credit .................................
Financial guarantees and
indemnification
contracts ............................
Commitments to sell real
estate loans ........................
940,692
Total ..................................... $13,326,923 $7,378,899 $7,199,153 $7,046,337 $34,951,312
3,529,136
2,642,994
304,782
418,994
929,424
103,789
299,325
167,823
48,492
11,268
55,808
6,892
338
—
—
86
(a)
Amounts exclude discretionary funding commitments to commercial customers of $8.6 billion that the
Company has the unconditional right to cancel prior to funding.
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, 2018 approximately
$669 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 8 of Notes to Financial
Statements.
91
Table 18
MATURITY AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES
December 31, 2018
Investment securities available for sale(a)
U.S. Treasury and federal agencies
One Year
or Less
One to Five
Years
Five to Ten
Years
(Dollars in thousands)
Over Ten
Years
Total
Carrying value......................................................................... $ 1,332,656
Yield........................................................................................
$
1.11%
4,275
$
1.54%
$
—
—
Obligations of states and political subdivisions
Carrying value.........................................................................
Yield........................................................................................
533
6.37%
497
4.53%
629
4.85%
—
—
—
—
$ 1,336,931
1.11%
1,659
5.24%
Mortgage-backed securities(b)
Government issued or guaranteed
Carrying value ..................................................................
Yield .................................................................................
476,668
2,050,866
2,636,481
2,052,976
7,216,991
2.46%
2.46%
2.46%
2.43%
2.45%
Privately issued
Carrying value ..................................................................
Yield .................................................................................
6
3.49%
1
5.00%
2
5.00%
13
5.00%
22
4.51%
Other debt securities
Carrying value.........................................................................
Yield........................................................................................
1,506
3.18%
4,547
2.81%
95,024
25,829
126,906
4.16%
4.95%
4.28%
Total investment securities available for sale
Carrying value......................................................................... 1,811,369
Yield........................................................................................
1.47%
2,060,186
2,732,136
2,078,818
8,682,509
2.46%
2.52%
2.47%
2.28%
Investment securities held to maturity
U.S. Treasury and federal agencies
Carrying value.........................................................................
Yield........................................................................................
446,542
2.51%
—
—
Obligations of states and political subdivisions
Carrying value.........................................................................
Yield........................................................................................
2,926
4.26%
4,568
4.66%
—
—
—
—
—
—
—
—
446,542
2.51%
7,494
4.51%
Mortgage-backed securities(b)
Government issued or guaranteed
Carrying value ..................................................................
Yield .................................................................................
123,243
534,826
670,864
1,416,843
2,745,776
2.77%
2.77%
2.77%
2.76%
2.76%
Privately issued
Carrying value ..................................................................
Yield .................................................................................
4,875
2.77%
20,036
26,554
61,695
113,160
2.77%
2.77%
2.77%
2.77%
Other debt securities
Carrying value.........................................................................
Yield........................................................................................
—
—
—
—
—
—
3,668
5.86%
3,668
5.86%
Total investment securities held to maturity
Carrying value.........................................................................
Yield........................................................................................
577,586
559,430
697,418
1,482,206
3,316,640
2.57%
2.78%
2.77%
2.77%
2.74%
Equity and other securities
Equity securities
Carrying Value........................................................................
Yield........................................................................................
Other investment securities
Carrying Value........................................................................
Yield........................................................................................
Total investment securities ............................................................
Carrying value......................................................................... $ 2,388,955
Yield........................................................................................
1.73%
93,917
1.57%
599,747
3.73%
$ 2,619,616
$ 3,429,554
$ 3,561,024
$12,692,813
2.53%
2.57%
2.59%
2.60%
(a)
(b)
Investment securities available for sale are presented at estimated fair value. Yields on such securities are based on amortized cost.
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.
92
Table 19
MATURITY OF DOMESTIC CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
WITH BALANCES OF $100,000 OR MORE
December 31,
2018
(In thousands)
Under 3 months ................................................................................................................. $ 517,362
565,560
3 to 6 months .....................................................................................................................
6 to 12 months ...................................................................................................................
452,965
Over 12 months ................................................................................................................. 1,167,761
Total.............................................................................................................................. $ 2,703,648
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, 2018, the aggregate
notional amount of interest rate swap agreements entered into for interest rate risk management
purposes that were currently in effect was $7.3 billion. In addition, the Company has entered into
$12.6 billion of forward-starting interest rate swap agreements that will become effective as pre-
existing 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
of a computer model that forecasts net interest income under different interest rate scenarios. In
93
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, market-implied forward interest rates over the
subsequent twelve months are generally used to determine a base interest rate scenario for the net
interest income simulation. That calculated base net interest income is then compared to the income
calculated under the varying interest rate scenarios. 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, 2018 and 2017 the estimated impact on net interest
income in the base scenario described above 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 in
December 31
2018
2017
(In thousands)
+200 basis points ....................................................................................
+100 basis points ....................................................................................
-100 basis points .....................................................................................
$
37,513
36,727
(114,307)
81,570
64,434
(94,014)
The Company utilized many assumptions to calculate the impact that changes in interest rates
may have on net interest income. The more significant of those assumptions included the rate of
prepayments of mortgage-related assets, cash flows from derivative and other financial instruments
held for non-trading purposes, loan and deposit volumes and pricing, and deposit maturities. In the
scenarios presented, the Company also assumed gradual changes in 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. 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. As noted herein, the
Company has used interest rate swap agreements designated as hedging instruments to mitigate the
Company’s exposure to such potential volatility. 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
94
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, 2018
Three Months
or Less
Four to Twelve
Months
One to
Five Years
(Dollars in thousands)
After
Five Years
Total
Loans and leases, net ............ $52,645,822
Investment securities ............
531,289
Other earning assets.............. 8,160,767
Total earning assets......... 61,337,878
Savings and interest-
checking deposits .............. 50,963,744
Time deposits ....................... 1,290,803
Deposits at Cayman Islands
office..................................
Total interest-bearing
deposits ......................... 53,066,453
Short-term borrowings ......... 4,398,378
Long-term borrowings.......... 2,230,859
811,906
Total interest-bearing
liabilities ....................... 59,695,690
Interest rate swap
agreements......................... (9,300,000)
Periodic gap .......................... $ (7,657,812)
Cumulative gap..................... (7,657,812)
Cumulative gap as a % of
total earning assets.............
(7.0)%
$ 5,562,898
1,749,368
778
7,313,044
$15,877,783
136,832
—
16,014,615
$14,379,974
10,275,324
—
24,655,298
$ 88,466,477
12,692,813
8,161,545
109,320,835
—
2,377,036
—
2,452,268
—
4,147
50,963,744
6,124,254
—
—
—
811,906
2,377,036
—
1,524,843
2,452,268
—
3,406,186
4,147
—
1,283,026
57,899,904
4,398,378
8,444,914
3,901,879
5,858,454
1,287,173
70,743,196
650,000
$ 4,061,165
(3,596,647)
8,150,000
$18,306,161
14,709,514
500,000
$23,868,125
38,577,639
—
(3.3)%
13.5%
35.3%
95
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 2 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
$42.9 billion at December 31, 2018 and $29.9 billion at December 31, 2017. The increase in such
notional amounts at December 31, 2018 as compared with the 2017 year end was predominantly due
to the additional $9.3 billion of interest rate floor agreements as previously noted. The notional
amounts of foreign currency and other option and futures contracts entered into for trading account
purposes were $763 million and $530 million at December 31, 2018 and 2017, 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 $186
million and $178 million, respectively, at December 31, 2018 and $133 million and $137 million,
respectively, at December 31, 2017. The fair value asset and liability amounts at December 31, 2018
have been reduced by contractual settlements of $171 million and $50 million, respectively, and at
December 31, 2017 by contractual settlements of $136 million and $12 million, respectively.
Included in trading account assets at December 31, 2018 and 2017 were $21 million and $23 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, 2018 and
2017 were $25 million and $27 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 $25 million and $24 million at December 31, 2018 and December
31, 2017, respectively.
Given the Company’s policies, limits and positions, management believes that the potential loss
exposure to the Company resulting from market risk associated with trading account activities was
not material, however, as previously noted, the Company is exposed to credit risk associated with
counterparties to transactions related to the Company’s trading account activities. Additional
information about the Company’s use of derivative financial instruments in its trading account
activities is included in note 18 of Notes to Financial Statements.
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Capital
Shareholders’ equity was $15.5 billion at December 31, 2018 and represented 12.87% of total assets,
compared with $16.3 billion or 13.70% at December 31, 2017 and $16.5 billion or 13.35% at
December 31, 2016.
Included in shareholders’ equity was preferred stock with financial statement carrying values of
$1.2 billion at each of December 31, 2018 and 2017. Further information concerning M&T’s
preferred stock can be found in note 9 of Notes to Financial Statements.
Reflecting the impact of repurchases of M&T’s common stock, common shareholders’ equity
was $14.2 billion, or $102.69 per share, at December 31, 2018, compared with $15.0 billion, or
$100.03 per share, at December 31, 2017 and $15.3 billion, or $97.64 per share, at December 31,
2016. Tangible equity per common share, which excludes goodwill and core deposit and other
intangible assets and applicable deferred tax balances, was $69.28 at December 31, 2018, compared
with $69.08 and $67.85 at December 31, 2017 and 2016, respectively. The Company’s ratio of
tangible common equity to tangible assets was 8.31% at December 31, 2018, compared with 9.10%
and 8.92% at December 31, 2017 and 2016, respectively. Reconciliations of total common
shareholders’ equity and tangible common equity and total assets and tangible assets as of
December 31, 2018, 2017 and 2016 are presented in table 2. During 2018, 2017 and 2016, the ratio
of average total shareholders’ equity to average total assets was 13.36%, 13.48% and 13.21%,
respectively. The ratio of average common shareholders’ equity to average total assets was 12.31%,
12.46% and 12.16% in 2018, 2017 and 2016, 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 $148
million, or $1.06 per common share, at December 31, 2018, $44 million, or $.29 per common share,
at December 31, 2017 and $16 million, or $.10 per common share, at December 31, 2016. 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, 2018 and 2017 is included in note 2 of Notes to Financial Statements.
Reflected in the carrying amount of available-for-sale investment securities at December 31,
2018 were pre-tax effect unrealized gains of $17 million on securities with an amortized cost of $1.2
billion and pre-tax effect unrealized losses of $204 million on securities with an amortized cost of
$7.7 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 debt securities, the Company analyzes the creditworthiness of the issuer or reviews
the credit performance of the underlying collateral supporting the bond. For debt securities backed by
pools of loans, such as privately issued mortgage-backed securities, the Company estimates the cash
flows of the underlying loan collateral using forward-looking assumptions for default rates, loss
severities and prepayment speeds. Estimated collateral cash flows are then utilized to estimate bond-
specific cash flows to determine the ultimate collectibility of the bond. If the present value of the
cash flows indicates that the Company should not expect to recover the entire amortized cost basis of
a bond or if the Company intends to sell the bond or it more likely than not will be required to sell
the bond before recovery of its amortized cost basis, an other-than-temporary impairment loss is
recognized. If an other-than-temporary impairment loss is deemed to have occurred, the investment
security’s cost basis is adjusted, as appropriate for the circumstances.
97
As of December 31, 2018, 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, 2018, 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 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, 2018 and 2017, the Company had in its held-to-maturity portfolio privately issued
mortgage-backed securities with an amortized cost basis of $113 million and $136 million,
respectively, and a fair value of $103 million and $111 million, respectively. At December 31, 2018,
82% of the mortgage-backed securities were in the most senior tranche of the securitization structure
with 17% 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 18% at December 31,
2018, 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 34% and 69%, 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, 2018 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.
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 $261
million, or $1.89 per common share, at December 31, 2018, $305 million, or $2.03 per common
share, at December 31, 2017 and $273 million, or $1.75 per common share, at December 31, 2016.
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, 2018 that the
Federal Reserve did not object to M&T’s revised 2018 Capital Plan, which included the repurchase
of up to $1.8 billion of common shares during the four-quarter period starting on July 1, 2018 and an
increase in the quarterly common stock dividend in the third quarter of 2018 of up to $.20 per share
98
to $1.00 per share. In addition, 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. That amount was in addition to the $900 million of common stock authorized for repurchase,
which was filed with the Federal Reserve in the 2017 Capital Plan. In the aggregate, during 2018
M&T repurchased 12,295,817 common shares for $2.2 billion. The remaining amount of authorized
common share repurchases pursuant to the revised 2018 Capital Plan at December 31, 2018 totaled
$802 million and it is expected that those repurchases will be made during the first two quarters of
2019. During 2017, M&T repurchased 7,369,105 common shares for $1.2 billion. In 2016, M&T
repurchased 5,607,595 common shares for $641 million.
During 2018, in accordance with the 2018 and 2017 Capital Plans, M&T’s Board of Directors
authorized increases in the quarterly common stock dividend to $.80 per common share in the second
quarter from the previous rate of $.75 per common share and to $1.00 per common share in the third
quarter. Cash dividends declared on M&T’s common stock totaled $511 million in 2018, compared
with $457 million and $442 million in 2017 and 2016, respectively. Dividends per common share
totaled $3.55 in 2018, compared with $3.00 and $2.80 in 2017 and 2016, respectively. Dividends of
$73 million in each of 2018 and 2017 and $81 million in 2016 were declared on preferred stock in
accordance with the terms of each series. The decline in preferred stock dividends in 2017 from the
immediately preceding year 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:
•
•
•
•
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 is 2.5%. For 2018, the phase-in transition
portion of that buffer was 1.875%. The regulatory capital amounts and ratios of M&T and its bank
subsidiaries as of December 31, 2018 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
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
99
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 in the fourth quarter of 2018 was $546 million, compared with $322 million in the year-
earlier quarter. Diluted and basic earnings per common share were each $3.76 in the final three
months of 2018, compared with diluted and basic earnings per common share of $2.01 in the
corresponding 2017 period. The annualized rates of return on average assets and average common
shareholders’ equity for the fourth quarter of 2018 were 1.84% and 14.80%, respectively, compared
with 1.06% and 8.03%, respectively, in the year-earlier quarter.
Net operating income during 2018’s final quarter was $550 million, compared with $327
million in the fourth quarter of 2017. Diluted net operating earnings per common share were $3.79
and $2.04 in the fourth quarters of 2018 and 2017, respectively. The annualized net operating returns
on average tangible assets and average tangible common equity in the final three months of 2018
were 1.93% and 22.16%, respectively, compared with 1.12% and 11.77%, respectively, in the
corresponding 2017 period. Reconciliations of GAAP results with non-GAAP results for the
quarterly periods of 2018 and 2017 are provided in table 23.
Taxable-equivalent net interest income totaled $1.06 billion in the final three months of 2018,
up 9% from $980 million recorded in the year-earlier period. That growth was predominantly
attributable to a 36 basis point widening of the net interest margin to 3.92% in the fourth quarter of
2018 from 3.56% in the year-earlier quarter. Partially offsetting the favorable impact of the higher
margin was a 1% decline in average earning assets, from $109.4 billion in 2017 to $107.8 billion in
2018. That decline was predominantly reflective of payments received during 2018 on investment
securities that lowered the average balance of such securities by $1.8 billion to $13.0 billion in the
recent quarter from $14.8 billion in 2017’s final quarter. Average balances of commercial loans and
leases were $22.4 billion in the recent quarter, up $814 million or 4% from $21.6 billion in the fourth
quarter of 2017 due, in part, to higher balances of automobile floor plan loans. Average commercial
real estate loan balances totaled $33.6 billion in the last quarter of 2018, up $448 million or 1% from
$33.1 billion in the year-earlier quarter. Included in those totals were average balances of loans held
for sale of $252 million in the final 2018 quarter, compared with $259 million in the year-earlier
period. Average residential real estate loan balances declined $2.6 billion to $17.4 billion in 2018’s
final quarter from $20.0 billion in the year-earlier quarter, reflecting ongoing repayments of loans
obtained in the acquisition of Hudson City. Included in the residential real estate loan portfolio were
loans held for sale that averaged $229 million and $372 million in the fourth quarters of 2018 and
2017, respectively. Consumer loans averaged $13.9 billion in the final three months of 2018, $754
million or 6% higher than in the similar 2017 quarter. That increase resulted from higher average
balances of automobile and recreational finance loans. Total loans and leases at December 31, 2018
rose $477 million to $88.5 billion from $88.0 billion at December 31, 2017. Higher commercial
loans, commercial real estate loans and consumer loans were partially 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 2018 to 3.57%, up 23 basis points from 3.34% in the
similar quarter of 2017. The yield on earning assets in the final three months of 2018 was 4.51%, up
58 basis points from the year-earlier quarter. That rise reflects the impact of increases in short-term
interest rates initiated by the Federal Reserve in 2017 and 2018 that contributed to higher yields on
loans and leases. The rate paid on interest-bearing liabilities in the 2018’s final quarter was .94%, up
35 basis points from .59% in the corresponding 2017 quarter. That increase was also largely due to
the higher interest rate environment. The contribution of net interest-free funds to the Company’s net
interest margin was .35% and .22% in the fourth quarters of 2018 and 2017, respectively. As a result,
100
the Company’s net interest margin expanded to 3.92% in the fourth quarter of 2018 from 3.56% in
the year-earlier period.
The provision for credit losses was $38 million for the three months ended December 31, 2018,
compared with $31 million in the corresponding 2017 period. Net loan charge-offs were $38 million
in the final quarter of 2018, representing an annualized .17% of average loans and leases outstanding,
compared with $27 million or .12% during the fourth quarter of 2017. Net charge-offs in the fourth
quarters of 2018 and 2017 included: net charge-offs of residential real estate loans of $2 million in
each quarter; net recoveries of previously charged-off commercial real estate loans of less than one
million dollars in 2018, compared with net recoveries of $4 million in 2017; net charge-offs of
commercial loans of $10 million in 2018 and $5 million in 2017; and net charge-offs of consumer
loans of $27 million and $25 million in 2018 and 2017, 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.
Other income aggregated $481 million in the fourth quarter of 2018, compared with $484
million in the similar 2017 period. That decrease predominantly resulted from lower gains on bank
investment securities, largely offset by higher trading account and foreign exchange gains and trust
income. During 2017’s final quarter, an $18 million gain was realized on the sale of a portion of the
Company’s Fannie Mae and Freddie Mac preferred stock holdings. The increased trading accounts
and foreign exchange gains resulted predominantly from increased activity related to interest rate
swap agreements executed on behalf of commercial customers. The higher trust income was largely
due to increased revenues from the ICS businesses.
Other expense totaled $802 million during the recent quarter, compared with $796 million in
the final quarter of 2017. Included in such amounts are expenses considered to be “nonoperating” in
nature consisting of amortization of core deposit and other intangible assets of $5 million and $7
million during the quarters ended December 31, 2018 and 2017, respectively. Exclusive of those
nonoperating expenses, noninterest operating expenses were $797 million in the fourth quarter of
2018 and $789 million in the corresponding 2017 quarter. Higher salaries and employee benefits
expenses in the recent quarter were largely offset by lower contributions to The M&T Charitable
Foundation and lower FDIC assessments as compared with the fourth quarter of 2017. The
Company’s efficiency ratio during the fourth quarters of 2018 and 2017 was 51.7% and 54.7%,
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 2018 and 2017.
The Company’s lower effective tax rate in 2018 reflects the impact of the Tax Act, which
lowered the Federal corporate income tax rate to 21% in 2018 from 35% in 2017. Additional items
impacting the effective tax rates in the fourth quarters of 2018 and 2017 are described herein under
the heading “Income Taxes.”
Segment Information
In accordance with GAAP, the Company’s reportable segments have been determined based upon its
internal profitability reporting system, which is organized by strategic business unit. Certain strategic
business units have been combined for segment information reporting purposes where the nature of
the products and services, the type of customer, and the distribution of those products and services
are similar. The reportable segments are Business Banking, Commercial Banking, Commercial Real
Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.
The financial information of the Company’s segments was compiled utilizing the accounting
policies described in note 22 of Notes to Financial Statements. The management accounting policies
and processes utilized in compiling segment financial information are highly subjective and, unlike
financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported
101
segments and the financial information of the reported segments are not necessarily comparable with
similar information reported by other financial institutions. Furthermore, changes in management
structure or allocation methodologies and procedures may result in changes in reported segment
financial data. Financial information about the Company’s segments is presented in note 22 of Notes
to Financial Statements. Each reportable segment benefited from a lower corporate Federal income
tax rate in 2018 due to the enactment of the Tax Act, as compared with prior years.
The Business Banking segment provides a wide range of services to small businesses and
professionals within markets served by the Company through the Company’s branch network,
business banking centers and other delivery channels such as telephone banking, Internet banking
and automated teller machines. Services and products offered by this segment include various
business loans and leases, including loans guaranteed by the Small Business Administration, business
credit cards, deposit products, and financial services such as cash management, payroll and direct
deposit, merchant credit card and letters of credit. The Business Banking segment recorded net
income of $168 million in 2018, compared with $116 million in 2017. That 45% rise in net income
resulted from a $41 million increase in net interest income, a $5 million decrease in the provision for
credit losses, due to lower net charge-offs, and the lower income tax rate in 2018. The growth in net
interest income reflected a widening of the net interest margin on deposits of 42 basis points, offset,
in part, by a 14 basis point narrowing of the net interest margin on loans. Those favorable factors
were partially offset by a $5 million increase in centrally-allocated costs, largely associated with data
processing, risk management and other support services provided to the Business Banking segment.
The Business Banking segment contributed net income of $104 million in 2016. The 12% rise in net
income from 2016 to 2017 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.
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
contributed net income of $539 million in 2018, compared with $437 million in 2017. The
improvement in net income from 2017 was predominantly driven by the lower income tax rate in
2018, a $13 million increase in net interest income, lower FDIC assessments of $8 million, and a $5
million increase in merchant discount and credit card fees. The increased net interest income
reflected a 59 basis point expansion of the net interest margin on deposits, partially offset by a seven
basis point narrowing of the net interest margin on loans and lower average deposit balances of $2.2
billion. Offsetting the favorable factors noted above were a $25 million increase in centrally-
allocated costs, largely associated with data processing, risk management and other support services
provided to the Commercial Banking segment, and higher personnel-related costs of $5 million. Net
income for the Commercial Banking segment totaled $411 million in 2016. The 6% improvement as
compared with 2016 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.
The Commercial Real Estate segment provides credit and deposit services to its customers. Real
estate securing loans in this segment is generally located in New York State, Maryland, New Jersey,
Pennsylvania, Delaware, Connecticut, Virginia, West Virginia, the District of Columbia and the
western portion of the United States. Commercial real estate loans may be secured by
apartment/multifamily buildings; office, retail and industrial space; or other types of collateral.
102
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 of the Commercial Real Estate segment aggregated
$453 million in 2018, up 24% from $364 million in 2017. That improvement resulted from: the
lower income tax rate in 2018, a rise in net interest income of $16 million; lower FDIC assessments
of $11 million; higher mortgage banking revenues of $5 million, resulting from increased servicing
income; and higher trading account and foreign exchange gains of $5 million, largely due to
increased activity related to interest rate swap transactions executed on behalf of commercial
customers. Those favorable factors were partially offset by an $11 million rise in the provision for
credit losses, mainly due to higher recoveries of previously charged-off loans in 2017, and $10
million increases in each of salaries and employee benefits and 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 largely attributable to a 52
basis point widening of the net interest margin on deposits, offset, in part, by a four basis point
narrowing of the net interest margin on loans. Net income for this segment was $350 million in
2016. The 4% increase in net income from 2016 to 2017 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 on behalf of 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.
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. The Discretionary Portfolio segment recorded net income of $116 million in 2018 and
$135 million in 2017. That 14% decline in net income reflected: a $49 million decrease in net interest
income; lower gains on investment securities of $24 million, reflecting valuation losses on
marketable equity securities of $6 million during 2018, compared with realized gains of $18 million
in 2017 on the sale of investment securities; and a $7 million decrease in income from bank owned
life insurance. The lower net interest income reflected a narrowing of the net interest margin on loans
of five basis points and lower average loan balances of $2.6 billion, reflecting ongoing repayments of
loans obtained in the acquisition of Hudson City. Favorable factors offsetting the declines noted
included: the lower income tax rate in 2018; a $24 million decline in the provision for credit losses,
primarily due to the favorable impact from the Company’s allocation methodologies for the provision
for credit losses associated with acquired loans that reflect lower loan balances and net charge-offs;
lower FDIC assessments of $6 million; and a decrease in other real estate-related servicing costs. Net
income of the Discretionary Portfolio segment aggregated $164 million in 2016. The 17% decline in
net income from 2016 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 Residential Mortgage Banking segment originates and services residential mortgage loans
and sells substantially all of those loans in the secondary market to investors or to the Discretionary
Portfolio segment. In addition to the geographic regions served by or contiguous with the
Company’s branch network, the Company maintains mortgage loan origination offices in several
states throughout the western United States. The Company periodically purchases the rights to
service loans and also sub-services residential real estate loans for others. Residential real estate
103
loans held for sale are included in this segment. The Residential Mortgage Banking segment’s net
income totaled $45 million in 2018, compared with $46 million in 2017. That slight decline resulted
from an $18 million decrease in revenues associated with mortgage origination and sales activities
(including intersegment revenues) and lower net interest income of $16 million, reflecting a
narrowing of the net interest margin on loans of 48 basis points and lower average deposit balances.
Offsetting those unfavorable factors were lower servicing-related costs (including intersegment
costs) of $14 million and the lower income tax rate in 2018. The Residential Mortgage Banking
segment’s net income was $55 million in 2016. The 18% decline in 2017 as compared with 2016
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.
The Retail Banking segment offers a variety of services to consumers through several delivery
channels which include branch offices, automated teller machines, telephone banking and Internet
banking. The Company has branch offices in New York State, Maryland, New Jersey, Pennsylvania,
Delaware, Connecticut, Virginia, West Virginia and the District of Columbia. Credit services offered
by this segment include consumer installment loans, automobile and recreational finance loans
(originated both directly and indirectly through dealers), home equity loans and lines of credit, and
credit cards. The segment also offers to its customers deposit products, including demand, savings
and time accounts; investment products, including mutual funds and annuities; and other services.
Net income for the Retail Banking segment was $541 million in 2018, up 44% from $377 million in
2017. That year-over-year increase was predominantly attributable to a $141 million rise in net
interest income that reflected a 49 basis point widening of the net interest margin on deposits,
partially offset by lower average deposit balances of $2.8 billion, and the lower income tax rate in
2018. Those favorable factors were offset, in part, by a $28 million increase in centrally-allocated
costs associated with data processing, risk management and other support services provided to the
Retail Banking Segment. This segment’s net income increased 28% in 2017 from $294 million in
2016. That improvement was predominantly 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.
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
income or loss from 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 income of $55 million in 2018, compared with net losses of $66
million and $64 million in 2017 and 2016, respectively. The significant improvement in 2018 as
compared with 2017 was driven by the favorable impact from the Company’s allocation
methodologies for income taxes and for internal transfers for funding charges and credits associated
with earning assets and interest-bearing liabilities of the Company’s reportable segments; higher trust
income of $36 million; $24 million of income from BLG in 2018; and lower charitable contributions
of $21 million in the recent year. Those favorable factors were partially offset by a higher expenses
related to the settlements of WT Corp pre-acquisition legal-related matters; a $21 million increase in
104
professional and other outside services expenses; and a $10 million decline in brokerage services
income. 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.
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
105
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.
106
Table 22
QUARTERLY TRENDS
2018 Quarters
2017 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
Earnings and dividends
Amounts in thousands, except per share
Interest income (taxable-equivalent basis) ......................... $ 1,226,239
Interest expense ..................................................................
161,321
Net interest income............................................................. 1,064,918
38,000
Less: provision for credit losses .........................................
480,596
Other income ......................................................................
802,162
Less: other expense.............................................................
705,352
Income before income taxes...............................................
153,175
Applicable income taxes.....................................................
Taxable-equivalent adjustment...........................................
5,958
Net income.......................................................................... $ 546,219
Net income available to common shareholders-diluted ..... $ 525,328
Per common share data
1,173,108
138,337
1,034,771
16,000
459,294
775,979
702,086
170,262
5,733
526,091
1,134,302
120,118
1,014,184
35,000
457,414
776,577
660,021
161,464
5,397
493,160
1,086,959
106,633
980,326
43,000
458,696
933,344
462,678
105,259
4,809
352,610
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
505,365
472,600
332,749
302,486
335,804
360,662
328,567
Basic earnings............................................................. $
Diluted earnings..........................................................
Cash dividends............................................................ $
3.76
3.76
1.00
3.54
3.53
1.00
3.26
3.26
.80
2.24
2.23
.75
2.01
2.01
.75
2.22
2.21
.75
2.36
2.35
.75
2.13
2.12
.75
Average common shares outstanding
Basic ...........................................................................
Diluted ........................................................................
139,744
139,838
142,822
142,976
144,825
144,998
148,688
148,905
150,063
150,348
151,347
151,691
152,857
153,276
154,427
154,949
Performance ratios, annualized
Return on
Average assets ............................................................
Average common shareholders’ equity ......................
1.84 %
14.80 %
1.80 %
14.08 %
1.70 %
13.32 %
1.22 %
9.15 %
1.06 %
8.03 %
1.18 %
8.89 %
1.27 %
9.67 %
1.15 %
8.89 %
Net interest margin on average earning assets (taxable-
equivalent basis) ............................................................
Nonaccrual loans to total loans and leases, net of
unearned discount...........................................................
3.92 %
3.88 %
3.83 %
3.71 %
3.56 %
3.53 %
3.45 %
3.34 %
1.01 %
1.00 %
.93 %
.99 %
1.00 %
.99 %
.98 %
1.04 %
Net operating (tangible) results (a)
Net operating income (in thousands).................................. $ 550,169
Diluted net operating income per common share............... $
3.79
Annualized return on
530,619
3.56
497,869
3.29
357,498
2.26
326,664
2.04
360,658
2.24
385,974
2.38
354,035
2.15
Average tangible assets ..............................................
Average tangible common shareholders’ equity ........
Efficiency ratio (b) .............................................................
1.93 %
22.16 %
51.70 %
1.89 %
21.00 %
51.41 %
1.79 %
19.91 %
52.42 %
1.28 %
13.51 %
63.98 %
1.12 %
11.77 %
54.65 %
1.25 %
13.03 %
56.00 %
1.33 %
14.18 %
52.74 %
1.21 %
13.05 %
56.93 %
Balance sheet data
In millions, except per share
Average balances
Total assets (c) ............................................................ $ 117,799
113,169
Total tangible assets (c) ..............................................
107,785
Earning assets .............................................................
13,034
Investment securities ..................................................
87,301
Loans and leases, net of unearned discount................
91,104
Deposits ......................................................................
14,157
Common shareholders’ equity (c) ..............................
9,527
Tangible common shareholders’ equity (c) ................
115,997
111,363
105,835
13,431
87,132
89,252
14,317
9,683
116,413
111,775
106,210
13,856
87,406
90,195
14,301
9,663
117,684
113,041
107,231
14,467
87,766
91,119
14,827
10,184
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
At end of quarter
Total assets (c) ............................................................ $ 120,097
115,470
Total tangible assets (c) ..............................................
109,321
Earning assets .............................................................
12,693
Investment securities ..................................................
88,466
Loans and leases, net of unearned discount................
Deposits ......................................................................
90,157
Common shareholders’ equity, net of undeclared
cumulative preferred dividends (c)........................
Tangible common shareholders’ equity (c) ................
Equity per common share ...........................................
Tangible equity per common share ............................
14,225
9,598
102.69
69.28
Market price per common share
High ............................................................................ $
Low .............................................................................
Closing........................................................................
171.01
133.78
143.13
116,828
112,197
106,331
13,074
86,680
89,140
118,426
113,790
107,819
13,283
87,797
89,273
118,623
113,982
107,976
14,067
87,711
90,947
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
14,201
9,570
100.38
67.64
180.77
164.28
164.54
14,343
9,707
99.43
67.29
188.80
167.32
170.15
14,475
9,834
98.60
66.99
197.37
170.00
184.36
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
173.72
149.51
154.73
(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.
107
Table 23
RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES
2018 Quarters
2017 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
Income statement data (in thousands,
except per share)
Net income
Net income ....................................................
Amortization of core deposit and other
intangible assets (a) ....................................
Net operating income ............................
Earnings per common share
Diluted earnings per common share..............
Amortization of core deposit and other
intangible assets (a) ....................................
Diluted net operating earnings per
common share.....................................
Other expense
Other expense ................................................
Amortization of core deposit and other
intangible assets..........................................
Noninterest operating expense ..............
Efficiency ratio
Noninterest operating expense (numerator) ....
Taxable-equivalent net interest income.........
Other income .................................................
Less: Gain (loss) on bank investment
securities.....................................................
Denominator..................................................
$ 546,219
526,091
493,160
352,610
322,403
355,923
381,053
348,927
3,950
$ 550,169
4,528
530,619
4,709
497,869
4,888
357,498
4,261
326,664
4,735
360,658
4,921
385,974
5,108
354,035
$
$
3.76
.03
3.79
3.53
.03
3.56
3.26
.03
3.29
2.23
.03
2.26
2.01
.03
2.04
2.21
.03
2.24
2.35
.03
2.38
2.12
.03
2.15
$ 802,162
775,979
776,577
933,344
795,813
806,025
750,635
787,852
(5,359 )
(6,143 )
(6,388 )
(6,632 )
(7,025 )
$ 796,803
769,836
770,189
926,712
788,788
(7,808 )
798,217
(8,113 )
742,522
(8,420 )
779,432
$ 796,803
769,836
770,189
926,712
788,788
798,217
742,522
779,432
1,064,918
480,596
1,034,771
459,294
1,014,184
457,414
980,326
458,696
980,457
484,053
965,962
459,429
946,936
460,816
922,259
446,845
4,219
$ 1,541,295
(3,415 )
2,326
1,469,272
1,497,480
(9,431 )
21,296
1,443,214
—
1,425,391
(17 )
1,407,769
—
1,369,104
1,448,453
Efficiency ratio ..............................................
51.70 %
51.41 %
52.42 %
63.98 %
54.65 %
56.00 %
52.74 %
56.93 %
$ 117,799
115,997
116,413
117,684
120,226
(4,593 )
(50 )
13
$ 113,169
(4,593 )
(55 )
14
111,363
(4,593 )
(62 )
17
111,775
(4,593 )
(68 )
18
113,041
(4,593 )
(75 )
26
115,584
119,515
(4,593 )
(82 )
32
114,872
120,765
(4,593 )
(90 )
35
116,117
122,978
(4,593 )
(98 )
39
118,326
$
$
15,389
(1,232 )
14,157
(4,593 )
(50 )
13
9,527
15,549
(1,232 )
14,317
(4,593 )
(55 )
14
9,683
15,533
(1,232 )
14,301
(4,593 )
(62 )
17
9,663
16,059
(1,232 )
14,827
(4,593 )
(68 )
18
10,184
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
$ 120,097
116,828
118,426
118,623
118,593
(4,593 )
(47 )
13
$ 115,470
(4,593 )
(52 )
14
112,197
(4,593 )
(59 )
16
113,790
(4,593 )
(65 )
17
113,982
(4,593 )
(72 )
19
113,947
120,402
(4,593 )
(79 )
31
115,761
120,897
(4,593 )
(86 )
33
116,251
123,223
(4,593 )
(95 )
38
118,573
$
15,460
(1,232 )
15,436
(1,232 )
15,578
(1,232 )
15,710
(1,232 )
16,251
(1,232 )
16,318
(1,232 )
16,284
(1,232 )
16,213
(1,232 )
(3 )
(3 )
(3 )
(3 )
(3 )
(3 )
(3 )
(3 )
14,225
(4,593 )
(47 )
13
9,598
14,201
(4,593 )
(52 )
14
9,570
14,343
(4,593 )
(59 )
16
9,707
14,475
(4,593 )
(65 )
17
9,834
15,016
(4,593 )
(72 )
19
10,370
15,083
(4,593 )
(79 )
31
10,442
$
15,049
(4,593 )
(86 )
33
10,403
14,978
(4,593 )
(95 )
38
10,328
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 quarter
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.
108
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, 2018 and 2017......................................................
Consolidated Statement of Income — Years ended December 31, 2018, 2017 and 2016 ............
Consolidated Statement of Comprehensive Income — Years ended December 31, 2018, 2017
and 2016 ....................................................................................................................................
Consolidated Statement of Cash Flows — Years ended December 31, 2018, 2017 and 2016.....
Consolidated Statement of Changes in Shareholders’ Equity — Years ended December 31,
2018, 2017 and 2016 .................................................................................................................
Notes to Financial Statements ........................................................................................................
110
111
113
114
115
116
117
118
109
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, 2018
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, 2018.
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
110
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 (the “Company”) as of December 31, 2018 and 2017, 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, 2018, 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 31,2018, 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, 2018 and 2017, and the results of
its operations and its cash flows for each of the three years in the period ended December 31, 2018 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, 2018, 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
111
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 20, 2019
We have served as the Company’s auditor since 1984.
112
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(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
$487,365 at December 31, 2018; $487,151 at December 31, 2017)
Available for sale (cost: $8,869,423 at December 31, 2018;
$10,938,796 at December 31, 2017)................................................................................
Held to maturity (fair value: $3,255,483 at December 31, 2018;
$3,341,762 at December 31, 2017)..................................................................................
Equity and other securities (cost: $677,187 at December 31, 2018;
$415,028 at December 31, 2017).....................................................................................
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 ..............................................................................................
Total assets ...................................................................................................................
Liabilities
Noninterest-bearing deposits.....................................................................................................
Savings and interest-checking deposits.....................................................................................
Time deposits ............................................................................................................................
Deposits at Cayman Islands office ............................................................................................
Total deposits ...............................................................................................................
Short-term borrowings ..............................................................................................................
Accrued interest and other liabilities.........................................................................................
Long-term borrowings ..............................................................................................................
Total liabilities..............................................................................................................
Shareholders' equity
Preferred stock, $1.00 par, 1,000,000 shares authorized;
Issued and outstanding: Liquidation preference of $1,000 per
share: 731,500 shares at December 31, 2018 and December 31, 2017;
Liquidation preference of $10,000 per share: 50,000
shares at December 31, 2018 and December 31, 2017 ..........................................................
Common stock, $.50 par, 250,000,000 shares authorized,
159,765,044 shares issued at December 31, 2018;
159,817,518 shares issued at December 31, 2017 .................................................................
Common stock issuable, 24,563 shares at December 31, 2018;
27,138 shares at December 31, 2017 .....................................................................................
Additional paid-in capital..........................................................................................................
Retained earnings ......................................................................................................................
Accumulated other comprehensive income (loss), net .............................................................
Treasury stock — common, at cost — 21,255,275 shares at December 31, 2018;
9,733,115 shares at December 31, 2017 ...............................................................................
Total shareholders’ equity ............................................................................................
Total liabilities and shareholders’ equity .....................................................................
December 31
2018
2017
$
$
1,605,439
8,105,197
185,584
1,420,888
5,078,903
132,909
8,682,509
10,896,284
3,316,640
3,353,213
693,664
12,692,813
88,733,492
(267,015)
88,466,477
(1,019,444)
87,447,033
647,408
4,593,112
47,067
4,773,750
$ 120,097,403
$
32,256,668
50,963,744
6,124,254
811,906
90,156,572
4,398,378
1,637,348
8,444,914
104,637,212
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
$ 118,593,487
$
33,975,180
51,698,008
6,580,962
177,996
92,432,146
175,099
1,593,993
8,141,430
102,342,668
1,231,500
1,231,500
79,883
79,909
1,726
6,579,342
11,516,672
(420,081)
1,847
6,590,855
10,164,804
(363,814)
(3,528,851)
15,460,191
120,097,403
$
(1,454,282)
16,250,819
118,593,487
$
See accompanying notes to financial statements.
113
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
(In thousands, except per share)
Interest income
Loans and leases, including fees ..........................................................
Investment securities
Fully taxable ...................................................................................
Exempt from federal taxes..............................................................
Deposits at banks..................................................................................
Other.....................................................................................................
Total interest income .................................................................
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.....................................................................
Other expense
Salaries and employee benefits ............................................................
Equipment and net occupancy..............................................................
Outside data processing and software ..................................................
FDIC assessments ................................................................................
Advertising and marketing ...................................................................
Printing, postage and supplies ..............................................................
Amortization of core deposit and other intangible assets ....................
Other costs of operations......................................................................
Total other expense ...................................................................
Income before taxes .............................................................................
Income taxes.........................................................................................
Net income............................................................................................
Net income available to common shareholders
Year Ended December 31
2017
2016
2018
$4,164,561 $3,742,867 $ 3,485,050
323,912
665
108,182
1,391
4,598,711
361,157
1,431
61,326
1,014
4,167,795
361,494
2,606
45,516
1,205
3,895,871
215,411
51,423
5,633
5,386
248,556
526,409
4,072,302
132,000
3,940,302
133,177
61,505
1,186
1,511
189,372
386,751
3,781,044
168,000
3,613,044
360,442
429,337
537,585
51,069
32,547
(6,301)
451,321
1,856,000
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
1,752,264
298,828
199,025
68,526
85,710
35,658
24,522
823,529
3,288,062
2,508,240
590,160
1,618,074
295,141
172,389
105,045
87,137
39,546
42,613
687,540
3,047,485
2,058,398
743,284
$1,918,080 $1,408,306 $ 1,315,114
1,648,794
295,084
184,670
101,871
69,203
35,960
31,366
773,377
3,140,325
2,323,862
915,556
Basic ..........................................................................................
Diluted .......................................................................................
$1,836,028 $1,327,503 $ 1,223,459
1,223,481
1,327,517
1,836,035
Net income per common share
Basic ..........................................................................................
Diluted .......................................................................................
$
12.75 $
12.74
8.72 $
8.70
7.80
7.78
See accompanying notes to financial statements.
114
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Comprehensive Income
(In thousands)
Year Ended December 31
2017
2016
2018
Net income ................................................................................................. $1,918,080
Other comprehensive income (loss), net of tax and
reclassification adjustments:
1,408,306 $1,315,114
(86,523)
Net unrealized losses on investment securities ....................................
6,091
Cash flow hedges adjustments .............................................................
(2,225)
Foreign currency translation adjustment ..............................................
43,243
Defined benefit plans liability adjustments ..........................................
Total other comprehensive loss ......................................................
(39,414)
Total comprehensive income .......................................................... $1,878,666
(19,766)
(9,912)
2,241
22,288
(5,149)
(64,406)
(94)
(2,614)
24,105
(43,009)
1,403,157 $1,272,105
See accompanying notes to financial statements.
115
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(In thousands)
Cash flows from operating activities
Net income ................................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities
Year Ended December 31
2017
2016
2018
$ 1,918,080
$ 1,408,306
$ 1,315,114
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 ...................................................................
132,000
104,864
49,619
24,522
15,857
24,774
(23,503)
(7,162)
13,436
(150,695)
(11,940)
2,089,852
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
Cash flows from investing activities
Proceeds from sales of investment securities
Available for sale ...............................................................................................................
Equity and other securities.................................................................................................
418
650,858
534,160
178,468
63,513
94,749
Proceeds from maturities of investment securities
Available for sale ...............................................................................................................
Held to maturity .................................................................................................................
1,997,263
478,172
2,131,118
528,585
2,309,208
609,080
Purchases of investment securities
Available for sale ...............................................................................................................
Held to maturity .................................................................................................................
Equity and other securities.................................................................................................
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...................................................................................
Other, net...................................................................................................................................
Net cash provided (used) by investing activities ...............................................................
Cash flows from financing activities
Net increase (decrease) in deposits ...........................................................................................
Net increase (decrease) in short-term borrowings ....................................................................
Proceeds from long-term borrowings .......................................................................................
Payments on long-term borrowings ..........................................................................................
Purchases of treasury stock.......................................................................................................
Dividends paid — common ......................................................................................................
Dividends paid — preferred......................................................................................................
Redemption of Series D preferred stock...................................................................................
Proceeds from issuance of Series F preferred stock .................................................................
Other, net...................................................................................................................................
Net cash used by financing activities.................................................................................
Net increase (decrease) in cash, cash equivalents and restricted cash......................................
Cash, cash equivalents and restricted cash at beginning of period ...........................................
Cash, cash equivalents and restricted cash at end of period .....................................................
Supplemental disclosure of cash flow information
Interest received during the period ...........................................................................................
Interest paid during the period ..................................................................................................
Income taxes paid during the period.........................................................................................
Supplemental schedule of noncash investing and financing activities
Real estate acquired in settlement of loans ...............................................................................
Securitization of residential mortgage loans allocated to
(12,494)
(444,703)
(834,856)
(475,895)
(3,026,294)
(97,676)
307,252
47,904
(1,410,051)
(2,272,505)
4,223,279
1,773,189
(1,459,081)
(2,194,396)
(510,382)
(72,521)
—
—
17,167
(495,250)
184,551
1,420,888
$ 1,605,439
(251,185)
(1,425,690)
(132,378)
1,931,492
(78,265)
(78,966)
37,761
19,825
3,394,925
(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
$ 1,420,888
(3,562,711)
(214,791)
(1,808)
(2,952,129)
2,593,712
(107,693)
170,141
277,961
(720,768)
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
$ 1,320,549
$ 4,568,991
516,230
375,116
$ 4,155,723
405,290
494,205
$ 3,903,374
498,951
276,866
$
72,408
$
121,292
$
124,033
Available-for-sale investment securities............................................................................
Capitalized servicing rights................................................................................................
22,448
365
36,747
422
24,233
248
See accompanying notes to financial statements.
116
M&T BANK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders’ Equity
Common Additional
Preferred Common Stock Paid-in Retained
Earnings
Stock
Stock Issuable Capital
Treasury
Stock
Total
Accumulated
Other
Comprehensive
Income
(Loss), Net
Dollars in thousands, except per share
2016
Balance — January 1, 2016.............................. $ 1,231,500 79,782
—
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 )
—
—
—
—
Common stock cash dividends —
$3.00 per share...............................................
—
Balance — December 31, 2017........................ $ 1,231,500 79,909
2018
Cumulative effect of change in
accounting principle — equity
securities ........................................................
Total comprehensive income............................
Preferred stock cash dividends .........................
Exercise of 257,630 Series A stock
warrants into 136,676 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...............
—
—
—
—
—
(26 )
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,364 6,680,768 8,430,502
— 1,315,114
(81,270 )
—
—
—
—
(5,000 )
—
—
—
—
(251,627 )
(43,009 )
—
—
—
— $16,173,289
— 1,272,105
(81,270 )
—
(500,000 )
—
495,000
—
—
—
—
—
—
—
(4,750 )
—
16,132
(12,190 )
275
535
2
—
(219 )
—
163
1,015
—
—
—
—
—
—
(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
—
(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
—
—
—
—
—
—
—
(298 )
(368 )
(85 )
—
(457,200 )
1,847 6,590,855 10,164,804
—
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
—
—
16,853
— 1,918,080
(72,521 )
—
(16,853 )
(39,414 )
—
—
—
— 1,878,666
(72,521 )
—
(22,394 )
—
12,421
(3,793 )
2,358
162
—
—
—
—
—
—
22,394
—
—
— (2,194,396 ) (2,194,396 )
—
—
—
—
—
22,513
63,559
8,766
2,175
34,908
59,766
11,124
2,337
420
(54 )
—
(510,458 )
(420,081 ) (3,528,851 ) $15,460,191
—
Common stock cash dividends —
—
$3.55 per share...............................................
Balance — December 31, 2018........................ $ 1,231,500 79,883
—
—
(510,458 )
1,726 6,579,342 11,516,672
—
—
(121 )
(267 )
(86 )
See accompanying notes to financial statements.
117
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 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
other debt securities are classified as available for sale and stated at estimated fair value with
unrealized changes in fair value included in “accumulated other comprehensive income (loss), net.”
118
Investments in equity securities having readily determinable fair values are stated at fair value and,
beginning in 2018, unrealized changes in fair value are included in earnings. Investments in equity
securities that do not have readily determinable fair values are stated at cost minus impairment, if
any, plus or minus changes resulting from observable price changes in orderly transactions for the
identical or a similar investment of the same issuer. Prior to 2018, equity securities with readily
determinable fair values were classified as available for sale. 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 debt 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
119
sources of repayment. A charge-off is recognized when, after such assessment, it becomes evident
that the loan balance is not fully collectible. For loans secured by residential real estate, the excess of
the loan balances over the net realizable value of the property collateralizing the loan is charged-off
when the loan becomes 150 days delinquent. Consumer loans are generally charged-off when the
loans are 91 to 180 days past due, depending on whether the loan is collateralized and the status of
repossession activities with respect to such collateral. Loan fees and certain direct loan origination
costs are deferred and recognized as an interest yield adjustment over the life of the loan. Net
deferred fees have been included in unearned discount as a reduction of loans outstanding.
Commitments to sell real estate loans are utilized by the Company to hedge the exposure to changes
in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for
sale recorded in the consolidated balance sheet includes changes in estimated fair market value
during the hedge period, typically from the date of close through the sale date. Valuation adjustments
made on these loans and commitments are included in “mortgage banking revenues.”
Except for consumer and residential mortgage loans that are considered smaller balance
homogenous loans and are evaluated collectively, the Company considers a loan to be impaired for
purposes of applying GAAP when, based on current information and events, it is probable that the
Company will be unable to collect all amounts according to the contractual terms of the loan
agreement or the loan is delinquent 90 days. Regardless of loan type, the Company considers a loan
to be impaired if it qualifies as a troubled debt restructuring. Impaired loans are classified as either
nonaccrual or as loans renegotiated at below market rates which continue to accrue interest, provided
that a credit assessment of the borrower’s financial condition results in an expectation of full
repayment under the modified contractual terms. Certain loans greater than 90 days delinquent are
not considered impaired if they are well-secured and in the process of collection. Loans less than 90
days delinquent are deemed to have an insignificant delay in payment and are generally not
considered impaired. Impairment of a loan is measured based on the present value of expected future
cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the
fair value of 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.
120
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.
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.
121
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, beginning in 2018, is recorded in the same
income statement line item that is used to present the earnings effect of the hedged item in the
consolidated statement of income. In a cash flow hedge, 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. Prior to 2018, hedge ineffectiveness for
fair value and cash flow hedges was recorded in “other revenues from operations” in the consolidated
statement of income. In addition, for cash flow hedges, the effective portion of the derivative’s
unrealized gain or loss was initially recorded as a component of other comprehensive income and
subsequently reclassified into earnings when the forecasted transaction affected earnings.
122
The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in
the fair value of real estate loans held for sale. Commitments to originate real estate loans to be held
for sale and commitments to sell real estate loans are generally recorded in the consolidated balance
sheet at estimated fair value.
Derivative instruments not related to mortgage banking activities, including financial futures
commitments and interest rate swap agreements, that do not satisfy the hedge accounting
requirements are recorded at fair value and are generally classified as trading account assets or
liabilities with resultant changes in fair value being recognized in “trading account and foreign
exchange gains” in the consolidated statement of income.
Stock-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. 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
123
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. Investment securities
On January 1, 2018, the Company adopted amended guidance requiring equity investments with
readily determinable fair values to be measured at fair value with changes in fair value recognized in
the consolidated statement of income. This amended guidance excludes equity method investments,
investments in consolidated subsidiaries, exchange membership ownership interests, and Federal
Home Loan Bank of New York and Federal Reserve Bank of New York capital stock. Upon adoption
the Company reclassified $17 million, after-tax effect, from accumulated other comprehensive
income to retained earnings, representing the difference between fair value and the cost basis of
equity investments with readily determinable fair values at January 1, 2018. Net unrealized losses
recorded as gain (loss) on bank investment securities in the consolidated statement of income during
the year ended December 31, 2018 were $6 million. 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, 2018
Investment securities available for sale:
U.S. Treasury and federal agencies.................................. $ 1,346,782 $
Obligations of states and political subdivisions...............
Mortgage-backed securities:
1,660
— $
4
9,851 $ 1,336,931
1,659
5
Government issued or guaranteed ..............................
Privately issued...........................................................
Other debt securities ........................................................
7,383,340
24
137,617
8,869,423
15,754
—
770
16,528
182,103
2
11,481
203,442
7,216,991
22
126,906
8,682,509
Investment securities held to maturity:
U.S. Treasury and federal agencies..................................
Obligations of states and political subdivisions...............
Mortgage-backed securities:
Government issued or guaranteed ..............................
Privately issued...........................................................
Other debt securities ........................................................
446,542
7,494
—
22
239
12
446,303
7,504
2,745,776
113,160
3,668
3,316,640
2,694,830
55,111
4,165
103,178
22,327
12,345
3,668
—
—
16,532
3,255,483
77,689
33,060 $ 281,131 $11,937,992
Total debt securities ......................................................... $12,186,063 $
Equity and other securities:
Readily marketable equity — at fair value................. $
Other — at cost...........................................................
Total equity and other securities ...................................... $
77,440 $
599,747
677,187 $
17,295 $
—
17,295 $
818 $
—
818 $
93,917
599,747
693,664
124
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
415,028
Other securities — at cost ................................................
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
—
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, 2018.
As of December 31, 2018, 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 ............................................ $
Privately issued mortgage-backed
securities ................................................. 113,184 103,200 17,055
— 34,180 51,949
— 34,889
Other debt securities .................................. 141,285 130,574 4,818 59,814 31,053
Total ........................................................... $263,623 $242,937 $30,510 $60,356 $31,053 $34,180 $86,838
526 $ — $ — $ —
9,163 $ 8,637 $
9,154 $
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 ............................................................................................... $115,171 $138,527
Estimated fair value ....................................................................................... 105,155 113,516
December 31
2018
2017
(In thousands)
125
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 gains or losses from sales
of investment securities in 2018. There were no significant gross realized losses from sales of
investment securities in 2017 or 2016.
At December 31, 2018, 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 ten years ......................................................................................................
Mortgage-backed securities held to maturity .............................................................
Amortized
Cost
Estimated
Fair Value
(In thousands)
$ 1,344,408
9,555
102,081
30,015
1,486,059
7,383,364
$ 8,869,423
1,334,695
9,319
95,653
25,829
1,465,496
7,217,013
8,682,509
$
449,468
4,568
3,668
457,704
2,858,936
$ 3,316,640
449,237
4,570
3,668
457,475
2,798,008
3,255,483
126
A summary of investment securities that as of December 31, 2018 and 2017 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:
December 31, 2018
Investment securities available for sale:
U.S. Treasury and federal agencies.............................................. $
Obligations of states and political subdivisions...........................
Mortgage-backed securities:
Government issued or guaranteed ..........................................
Privately issued.......................................................................
Other debt securities ....................................................................
Investment securities held to maturity:
U.S. Treasury and federal agencies..............................................
Obligations of states and political subdivisions...........................
Mortgage-backed securities:
Less Than 12 Months
Fair
Value
Unrealized
Losses
12 Months or More
Fair
Value
Unrealized
Losses
(In thousands)
273
629
(2) 1,335,559
—
(5)
(9,849)
—
405,558
22
53,478
459,960
(2,892) 5,646,773
—
(2)
(2,187)
66,014
(5,088) 7,048,346
(179,211)
—
(9,294)
(198,354)
446,303
—
(239)
—
—
3,126
—
(12)
Government issued or guaranteed ..........................................
Privately issued.......................................................................
179,354
—
625,657
Total ............................................................................................. $1,085,617
—
(989) 2,082,723
51,943
(1,228) 2,137,792
(6,316) 9,186,138
(54,122)
(22,327)
(76,461)
(274,815)
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:
(1,761) 1,669,355
474
—
(16,417)
(2)
Government issued or guaranteed ..........................................
Other debt securities ....................................................................
Equity securities (a) .....................................................................
2,106,142
3,067
—
2,387,341
(13,695) 3,138,841
61,159
18,162
(15,482) 4,887,991
(26)
—
(84,892)
(10,449)
(424)
(112,184)
Investment securities held to maturity:
Obligations of states and political subdivisions...........................
Mortgage-backed securities:
2,954
(4)
6,110
(45)
Government issued or guaranteed ..........................................
Privately issued.......................................................................
1,331,759
5,061
1,339,774
Total ............................................................................................. $3,727,115
(7,036) 265,695
(1,216)
55,255
(8,256) 327,060
(23,738) 5,215,051
(6,710)
(26,359)
(33,114)
(145,298)
(a)
Beginning January 1, 2018, equity securities with readily determinable fair values are required to be
measured at fair value with changes in fair value recognized in the consolidated statement of income. As a
result, subsequent to December 31, 2017 disclosing the time period for which these equity securities had been
in a continuous unrealized loss position is no longer relevant.
127
The Company owned 1,402 individual investment securities with aggregate gross unrealized
losses of $281 million at December 31, 2018. Based on a review of each of the securities in the
investment securities portfolio at December 31, 2018, the Company concluded that it expected to
recover the amortized cost basis of its investment. As of December 31, 2018, 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, 2018, the Company has not identified events or changes in
circumstances which may have a significant adverse effect on the fair value of the $600 million of
cost method investment securities.
At December 31, 2018, investment securities with a carrying value of $2,605,034,000,
including $2,040,362,000 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 8.
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 $487,365,000 at
December 31, 2018. The pledged securities included securities of the U.S. Treasury and federal
agencies and mortgage-backed securities.
3. Loans and leases
Total loans and leases outstanding were comprised of the following:
December 31
2018
2017
(In thousands)
Loans
Commercial, financial, etc....................................................................... $21,730,012 $20,474,696
Real estate:
Residential .......................................................................................... 17,150,658 19,619,259
Commercial......................................................................................... 25,666,200 25,345,779
Construction........................................................................................ 8,823,635 8,125,925
Consumer................................................................................................. 13,956,086 13,251,665
Total loans........................................................................................... 87,326,591 86,817,324
Leases
Commercial......................................................................................... 1,406,901 1,425,562
Total loans and leases .............................................................................. 88,733,492 88,242,886
Less: unearned discount...........................................................................
(253,903)
Total loans and leases, net of unearned discount..................................... $88,466,477 $87,988,983
(267,015)
One-to-four family residential mortgage loans held for sale were $205 million at December 31,
2018 and $356 million at December 31, 2017. Commercial real estate loans held for sale were $347
million at December 31, 2018 and $22 million at December 31, 2017.
As of December 31, 2018, approximately $3.4 billion of commercial real estate loan balances
serviced for others had been sold with recourse in conjunction with the Company’s participation in
the Fannie Mae Delegated Underwriting and Servicing (“DUS”) program. At December 31, 2018,
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.
128
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 were not material in 2018, 2017 or 2016.
A summary of current, past due and nonaccrual loans as of December 31, 2018 and 2017 follows:
Accruing
Loans Past
Due 90
Days or
More (a)
Accruing
Loans
Acquired at
a Discount
Past Due
90 days
or More (b)
(In thousands)
Current
30-89 Days
Past Due
Purchased
Impaired (c) Nonaccrual
Total
December 31, 2018
Commercial, financial, leasing, etc. ... $22,701,020
Real estate:
39,798
2,567
168
— 234,423 $22,977,976
Commercial ............................... 25,250,983 134,474 11,457
Residential builder and
20,333
—
developer ................................ 1,665,178
Other commercial construction ... 6,982,077
43,615 14,344
Residential ................................. 13,591,790 404,808 189,682
Residential — limited
documentation ........................ 2,278,040
72,544
—
Consumer:
Home equity lines and loans...... 4,758,513
Recreational finance .................. 4,085,781
Automobile ................................ 3,555,757
Other .......................................... 1,271,811
—
—
—
4,477
Total ................................................ $86,140,950 866,337 222,527
25,416
29,947
79,804
15,598
10
9,769 203,672 25,610,365
—
—
—
4,798 1,690,309
641 22,205 7,062,882
6,650 203,044 233,352 14,629,326
—
89,851 84,685 2,525,120
— 71,292 4,860,254
5,033
— 11,199 4,127,162
235
— 23,359 3,658,920
—
27,654
4,623 1,324,163
—
39,750 303,305 893,608 $88,466,477
December 31, 2017
Commercial, financial, leasing, etc. ... $21,332,234 167,756
Real estate:
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
Recreational finance .................. 3,229,570
Automobile ................................ 3,441,371
Other .......................................... 1,119,501
—
—
—
5,202
Total ................................................ $85,325,604 1,078,943 244,405
38,546
23,802
78,511
17,127
6,016
16,815 184,982 25,288,943
—
—
1,135
6,451 1,631,718
4,706 10,088 6,445,712
7,582 282,102 235,834 16,610,086
— 105,236 96,105 3,003,258
— 74,500 5,293,782
9,391
—
6,509 3,260,427
546
— 23,781 3,543,663
—
23,556
3,357 1,168,743
—
47,418 410,015 882,598 $87,988,983
(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.
129
If nonaccrual and renegotiated loans had been accruing interest at their originally contracted
terms, interest income on such loans would have amounted to $68,745,000 in 2018, $63,872,000 in
2017 and $68,371,000 in 2016. The actual amounts included in interest income during 2018, 2017
and 2016 on such loans were $32,983,000, $31,425,000 and $33,941,000, 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:
December 31
2018
2017
(In thousands)
Outstanding principal balance .................................................................................... $ 1,016,785 $ 1,394,188
Carrying amount:
Commercial, financial, leasing, etc. ......................................................................
Commercial real estate ..........................................................................................
Residential real estate............................................................................................
Consumer ..............................................................................................................
$
31,105
27,073
228,054
135,047
620,827
473,511
91,860
123,413
727,491 $ 1,003,399
Purchased impaired loans included in the table above totaled $303 million at December 31,
2018 and $410 million at December 31, 2017, 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, 2018, 2017 and 2016 follows:
For the Year Ended December 31,
2018
2017
2016
Purchased
Impaired
Other
Acquired
Purchased
Impaired
Other
Acquired
Purchased
Impaired
Other
Acquired
(In thousands)
Balance at beginning of period........................ $157,918 $133,162 $154,233 $201,153 $184,618 $ 296,434
Interest income ................................................ (37,819) (63,856) (47,452) (82,605) (52,769) (123,044)
Reclassifications from
22,677
nonaccretable balance................................... 27,111 22,849 51,137 16,437 22,384
Other (a) ..........................................................
5,086
—
—
Balance at end of period.................................. $147,210 $ 96,907 $157,918 $133,162 $154,233 $ 201,153
(1,823)
4,752
—
(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.
130
The tables that follow summarize the Company’s loan modification activities that were
considered troubled debt restructurings for the years ended December 31, 2018, 2017 and 2016:
Post-modification (a)
Year Ended December 31, 2018
Number
Pre-
modification
Recorded
Investment
Interest
Rate
Principal
Deferral
Reduction Other
Combination
of
Concession
Types
Total
Commercial, financial, leasing, etc. ................
Real estate:
203 $ 102,445 $50,490 $
803 $ 6,210 $
45,411 $102,914
(Dollars in thousands)
Commercial................................................
Other commercial construction..................
Residential..................................................
Residential — limited documentation........
83
1
134
9
Consumer:
752
30,217 16,870
746
34,798 19,962
827
1,887
175 4,686
—
—
—
—
—
—
—
9,000 30,731
746
18,110 38,072
2,250
1,423
Home equity lines and loans ......................
Recreational finance...................................
Automobile.................................................
Total.................................................................
3,952
202
224
47
202
7
73
1,330 1,318
557 $ 175,583 $90,639 $
—
—
—
—
—
—
978 $10,896 $
3,755
—
12
3,979
202
1,330
77,711 $180,224
Year Ended December 31, 2017
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
168
31,827 16,633
911
4,230
—
—
—
—
—
868
—
—
—
—
22,975 40,882
10,879 10,879
168
17,974 34,607
4,572
3,661
—
Consumer:
Home equity lines and loans ......................
Recreational finance...................................
Automobile.................................................
Total.................................................................
110
10,049 1,137
9
160
1,378 1,203
69
654 $ 216,063 $62,302 $
160
491
—
—
—
8,585 10,213
—
160
1,378
—
— $ 7,818 $ 121,402 $191,522
—
175
131
Post-modification (a)
Year Ended December 31, 2016
Pre-
modification
Recorded
Investment
Number
Principal
Deferral
Interest
Rate
Combination
of
Concession
Types
Reduction Other
Total
(Dollars in thousands)
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
39,660 22,958
250
3,113
20,057 11,771
1,047
3,560
— 4,576
— —
— —
— —
— —
15,603 43,737
15,123 38,081
2,782
3,032
9,367 21,138
3,964
2,917
Consumer:
Home equity lines and loans ......................
Recreational finance...................................
Automobile.................................................
Other...........................................................
Total.................................................................
761
11,870
103
270
318
10
1,124
1,264
163
69
698
891
739 $ 279,696 $164,883 $
— —
20
—
55
—
—
25
— $4,676 $
11,110 11,871
318
1,264
891
98,856 $268,415
28
85
168
(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, 2018, 2017 and 2016 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
$77,414,000 and $93,103,000 at December 31, 2018 and 2017, respectively. During 2018, new
borrowings by such persons amounted to $1,900,000 (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
$17,589,000.
At December 31, 2018, approximately $11.6 billion of commercial loans and leases, $13.2
billion of commercial real estate loans, $12.8 billion of one-to-four family residential real estate
loans, $2.4 billion of home equity loans and lines of credit and $6.1 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 8.
132
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
2018
2017
(In thousands)
Commercial leases:
Direct financings:
Lease payments receivable..................................................................... $1,155,464 $1,159,584
89,666
Estimated residual value of leased assets...............................................
(110,261)
Unearned income ...................................................................................
Investment in direct financings ......................................................... 1,130,175 1,138,989
85,169
(110,458)
Leveraged leases:
Lease payments receivable.....................................................................
Estimated residual value of leased assets...............................................
Unearned income ...................................................................................
Investment in leveraged leases ..........................................................
87,821
88,491
(35,792)
140,520
Total investment in leases................................................................................ $1,262,726 $1,279,509
81,359
Deferred taxes payable arising from leveraged leases..................................... $
85,007
81,261
(33,717)
132,551
74,995 $
Included within the estimated residual value of leased assets at December 31, 2018 and 2017
were $39 million and $37 million, respectively, in residual value associated with direct financing
leases that are guaranteed by the lessees or others.
At December 31, 2018, the minimum future lease payments to be received from lease
financings were as follows:
Year ending December 31:
(In thousands)
2019 .............................................................................................................................. $ 326,898
310,255
2020 ..............................................................................................................................
224,150
2021 ..............................................................................................................................
141,244
2022 ..............................................................................................................................
88,182
2023 ..............................................................................................................................
149,742
Later years ....................................................................................................................
$ 1,240,471
The amount of foreclosed residential real estate property held by the Company was $77 million
and $108 million at December 31, 2018 and 2017, respectively. There were $391 million and $497
million at December 31, 2018 and 2017, 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, 2018,
approximately 39% were classified as purchased impaired and 21% were government guaranteed.
133
4. Allowance for credit losses
Changes in the allowance for credit losses for the years ended December 31, 2018, 2017 and 2016
were as follows:
Commercial,
Financial,
Real Estate
Leasing, etc. Commercial Residential Consumer Unallocated
Total
(In thousands)
2018
Beginning balance ........................................... $ 328,599 374,085 65,405 170,809
Provision for credit losses ...............................
(41,181) 12,401 127,068
Net charge-offs
33,967
78,300 $1,017,198
132,000
(255)
(12,286) (15,345) (143,196)
Charge-offs.................................................
6,664 45,883
21,037
Recoveries..................................................
Net (charge-offs) recoveries ............................
(8,681) (97,313)
8,751
Ending balance ................................................ $ 330,055 341,655 69,125 200,564
(60,414)
27,903
(32,511)
—
—
—
(231,241)
101,487
(129,754)
78,045 $1,019,444
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
Despite the allocations in the preceding tables, 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 that 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-
134
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, 2018 and 2017 and for the years ended December 31, 2018, 2017 and
2016.
December 31, 2018
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
Recorded
Investment
December 31, 2017
Unpaid
Principal
Balance
Related
Allowance
With an allowance recorded:
(In thousands)
Commercial, financial, leasing, etc...................... $153,478 175,549 46,034 177,250 194,257 45,488
Real estate:
Commercial .................................................... 110,253 125,117 11,937 67,199 75,084
5,320 5,641
Residential builder and developer ..................
5,981 6,557
4,817 20,357
Other commercial construction ...................... 10,563 11,113
5,402 101,724 122,602
Residential...................................................... 124,974 147,817
3,000 77,277 92,439
Residential — limited documentation............ 74,156 90,066
462
640
9,140
308
647
4,000
3,900
Consumer:
Home equity lines and loans .......................... 47,982 53,248
6,138 9,163
Recreational finance.......................................
3,527 3,599
Automobile.....................................................
5,203 8,380
Other...............................................................
8,812
299
2,811
357
542,255 630,609 79,646 499,152 585,903 75,762
9,135 48,847 53,914
1,496 3,680
1,261
729 13,498 15,737
1,724 2,192
1,046
With no related allowance recorded:
Commercial, financial, leasing, etc...................... 105,507 136,128
Real estate:
Commercial .................................................... 113,376 124,657
2,593 2,602
Residential builder and developer ..................
Other commercial construction ...................... 11,710 11,880
Residential...................................................... 15,379 20,496
5,631 9,796
Residential — limited documentation............
254,196 305,559
— 89,126 115,327
— 138,356 149,716
5,057 5,296
—
—
5,456 9,130
— 13,574 18,980
—
9,588 16,138
— 261,157 314,587
—
—
—
—
—
—
—
Total:
Commercial, financial, leasing, etc...................... 258,985 311,677 46,034 266,376 309,584 45,488
Real estate:
Commercial .................................................... 223,629 249,774 11,937 205,555 224,800
462 10,377 10,937
Residential builder and developer ..................
8,574 9,159
640 10,273 29,487
Other commercial construction ...................... 22,273 22,993
5,402 115,298 141,582
Residential...................................................... 140,353 168,313
3,000 86,865 108,577
Residential — limited documentation............ 79,787 99,862
9,140
308
647
4,000
3,900
Consumer:
Home equity lines and loans .......................... 47,982 53,248
6,138 9,163
Recreational finance.......................................
3,527 3,599
Automobile.....................................................
5,203 8,380
Other...............................................................
8,812
299
2,811
357
Total .......................................................................... $796,451 936,168 79,646 760,309 900,490 75,762
9,135 48,847 53,914
1,496 3,680
1,261
729 13,498 15,737
1,724 2,192
1,046
135
Year Ended December 31, 2018
Interest Income
Recognized
Year Ended December 31, 2017
Interest Income
Recognized
Average
Recorded
Investment
Total
Cash
Basis
Average
Recorded
Investment
(In thousands)
Total
Cash
Basis
Commercial, financial, leasing, etc. ....................... $263,018
Real estate:
7,873 7,873 240,157 3,894 3,894
Commercial....................................................... 194,451
Residential builder and developer.....................
8,699
Other commercial construction......................... 11,467
Residential ........................................................ 129,593
Residential — limited documentation .............. 82,854
10,880 10,880 207,616 4,497 4,497
1,779 1,779 16,209 6,419 6,419
3,474 3,474 15,142 1,001 1,001
8,386 3,456 110,646 7,177 3,406
6,118 1,723 93,097 5,981 1,607
Consumer:
Home equity lines and loans............................. 48,591
1,849
Recreational finance .........................................
9,262
Automobile .......................................................
4,413
Other .................................................................
Total ....................................................................... $754,197
9
1,698
333
690
230
400
9
81
2
41,461 29,565 748,598 31,983 21,316
289 47,323 1,681
212
1,041
69 15,045 1,025
96
2,322
13
Year Ended December 31, 2016
Interest Income
Recognized
Average
Recorded
Investment
Total
Cash
Basis
(In thousands)
Commercial, financial, leasing, etc. .......................................................................... $277,647 8,342 8,342
Real estate:
Commercial ......................................................................................................... 175,877 4,878 4,878
Residential builder and developer ....................................................................... 29,237 2,300 2,300
Other commercial construction ........................................................................... 19,697
644
Residential ........................................................................................................... 98,394 6,227 3,154
Residential — limited documentation ................................................................. 103,060 5,999 1,975
Consumer:
410
Home equity lines and loans................................................................................ 36,493 1,325
49
Recreational finance ............................................................................................
147
99
Automobile .......................................................................................................... 19,636 1,242
34
293
Other ....................................................................................................................
Total........................................................................................................................... $769,259 31,397 21,885
6,669
2,549
644
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.
136
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, 2018
Pass .............................................................................................. $21,693,705 24,539,706 1,546,002 6,890,562
150,115
Criticized accrual......................................................................... 1,049,848
Criticized nonaccrual...................................................................
22,205
234,423
Total............................................................................................. $22,977,976 25,610,365 1,690,309 7,062,882
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
723,777 140,119
6,451
184,982
866,987 139,509
4,798
203,672
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 by 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 totaled $29 million and $23
million, respectively, at December 31, 2018 and $34 million and $25 million, respectively, at
December 31, 2017. 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 were $21 million and $31 million,
respectively, at December 31, 2018 and $20 million and $32 million, respectively, at December 31,
2017.
The Company also measures additional losses for purchased impaired loans when it is probable
that the Company will be unable to collect all cash flows expected at acquisition plus additional cash
flows expected to be collected arising from changes in estimates after acquisition. The determination
of the allocated portion of the allowance for credit losses is very subjective. Given that inherent
subjectivity and potential imprecision involved in determining the allocated portion of the allowance
for credit losses, the Company also provides an inherent unallocated portion of the allowance. The
unallocated portion of the allowance is intended to recognize probable losses that are not otherwise
identifiable and includes management’s subjective determination of amounts necessary to provide for
the possible use of imprecise estimates in determining the allocated portion of the allowance.
Therefore, the level of the unallocated portion of the allowance is primarily reflective of the inherent
137
imprecision in the various calculations used in determining the allocated portion of the allowance for
credit losses. Other factors that could also lead to changes in the unallocated portion include the
effects of expansion into new markets for which the Company does not have the same degree of
familiarity and experience regarding portfolio performance in changing market conditions, the
introduction of new loan and lease product types, and other risks associated with the Company’s loan
portfolio that may not be specifically identifiable.
The allocation of the allowance for credit losses summarized on the basis of the Company’s
impairment methodology was as follows:
Commercial,
Financial,
Real Estate
Leasing, etc. Commercial Residential Consumer
Total
(In thousands)
—
46,034
13,039
December 31, 2018
79,646
Individually evaluated for impairment ............................. $
8,402 12,171 $
849,356
Collectively evaluated for impairment ............................. 284,021 328,616 48,326 188,393
12,397
—
Purchased impaired...........................................................
Allocated........................................................................... $ 330,055 341,655 69,125 200,564 $ 941,399
Unallocated .......................................................................
78,045
Total..................................................................................
$1,019,444
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..................................................................................
75,762
853,276
9,860
938,898
78,300
$1,017,198
— 12,397
10,095
45,488
9,860
—
—
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)
258,985
December 31, 2018
796,451
Individually evaluated for impairment ........................ $
Collectively evaluated for impairment ....................... 22,718,991 34,098,670 16,641,411 13,907,649 87,366,721
Purchased impaired .....................................................
303,305
Total............................................................................. $22,977,976 34,363,556 17,154,446 13,970,499 $88,466,477
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
226,205
266,376
254,476
292,895
387,338
202,163
220,140
62,850 $
65,565 $
10,410
22,656
—
21
—
—
138
5. Premises and equipment
The detail of premises and equipment was as follows:
December 31
2018
2017
(In thousands)
Land .................................................................................................................. $
Buildings...........................................................................................................
Leasehold improvements ..................................................................................
Furniture and equipment — owned ..................................................................
Furniture and equipment — capital leases........................................................
97,082 $
465,482
240,731
669,782
18,582
98,077
454,610
239,956
676,665
18,039
1,491,659 1,487,347
Less: accumulated depreciation and amortization
Owned assets................................................................................................
Capital leases ...............................................................................................
830,832
10,064
840,896
Premises and equipment, net ............................................................................ $ 647,408 $ 646,451
835,218
9,033
844,251
Net lease expense for all operating leases totaled $110,703,000 in 2018, $114,362,000 in 2017
and $113,663,000 in 2016. Minimum lease payments under noncancelable operating leases are
presented in note 21. Minimum lease payments required under capital leases are not material.
6. Capitalized servicing assets
Changes in capitalized servicing assets were as follows:
For the Year Ended December 31,
Residential Mortgage Loans
2017
2016
2018
Commercial Mortgage Loans
2017
2016
2018
(In thousands)
Beginning balance ........................... $114,978 $117,351 $118,303 $114,076 $103,764 $ 83,692
Originations ..................................... 28,985 28,792 28,618 26,298 34,620 40,117
—
Purchases .........................................
Amortization .................................... (23,908) (31,864) (30,208) (25,711) (24,308) (20,045)
120,509 114,978 117,351 114,663 114,076 103,764
Valuation allowance ........................
—
—
Ending balance, net.......................... $120,509 $114,978 $117,351 $114,663 $114,076 $103,764
638
454
699
—
—
—
—
—
—
Residential mortgage loans serviced for others were $22.2 billion at December 31, 2018, $22.6
billion at December 31, 2017 and $22.8 billion at December 31, 2016. Excluded from residential
mortgage loans serviced for others were loans sub-serviced for others of $56.8 billion, $56.6 billion
and $30.4 billion at December 31, 2018, 2017, and 2016, respectively. On January 31, 2019, the
Company purchased servicing rights for residential real estate loans that had outstanding principal
balances at that date of approximately $13.3 billion. The purchase price of such servicing rights was
approximately $146 million, subject to certain final adjustments. Transfer of the loans to the
Company’s loan servicing system is expected to occur in the second quarter of 2019. Commercial
mortgage loans serviced for others were $15.5 billion at December 31, 2018, $13.6 billion at
December 31, 2017 and $11.8 billion at December 31, 2016. Excluded from commercial mortgage
loans serviced for others were loans sub-serviced for others of $2.7 billion at December 31, 2018 and
$2.6 billion at December 31, 2017.
139
The estimated fair value of capitalized residential mortgage loan servicing assets was
approximately $240 million at December 31, 2018 and $234 million at December 31, 2017. The fair
value of capitalized residential mortgage loan servicing assets was estimated using weighted-average
discount rates of 11.4% and 12.2% at December 31, 2018 and 2017, respectively, and
contemporaneous prepayment assumptions that vary by loan type. At December 31, 2018 and 2017,
the discount rate represented a weighted-average option-adjusted spread (“OAS”) of 963 basis points
(hundredths of one percent) and 1,067 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 $135 million and $132 million at December 31,
2018 and 2017, respectively. An 18% discount rate was used to estimate the fair value of capitalized
commercial mortgage loan servicing rights at December 31, 2018 and 2017 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, 2018 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.
Weighted-average prepayment speeds...............................................
Impact on fair value of 10% adverse change ................................ $
Impact on fair value of 20% adverse change ................................
Weighted-average OAS .....................................................................
Impact on fair value of 10% adverse change ................................ $
Impact on fair value of 20% adverse change ................................
Weighted-average discount rate.........................................................
Impact on fair value of 10% adverse change ................................
Impact on fair value of 20% adverse change ................................
Residential
Commercial
(Dollars in thousands)
10.99%
(9,327)
(17,925)
9.63%
(6,758)
(13,135)
$
18.00%
(6,029)
(11,626)
140
7. Goodwill and other intangible assets
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, 2018
Core deposit ....................................................... $
Other ..................................................................
Total ................................................................... $
887,459 $
182,568
1,070,027 $
843,572 $
179,388
1,022,960 $
December 31, 2017
Core deposit ....................................................... $
Other ..................................................................
Total ................................................................... $
887,459 $
182,568
1,070,027 $
820,110 $
178,328
998,438 $
43,887
3,180
47,067
67,349
4,240
71,589
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 $24,522,000, $31,366,000 and $42,613,000 for the years ended
December 31, 2018, 2017 and 2016, respectively. Estimated amortization expense in future years for
such intangible assets is as follows:
Year ending December 31:
2019 .............................................................................................................................. $
2020 ..............................................................................................................................
2021 ..............................................................................................................................
2022 ..............................................................................................................................
$
19,086
14,383
9,681
3,917
47,067
(In thousands)
The Company completed annual goodwill impairment tests as of October 1, 2018, 2017 and
2016. For purposes of testing for impairment, the Company assigned all recorded goodwill to the
reporting units originally intended to benefit from past business combinations, which has historically
been the Company’s core relationship business reporting units. Goodwill was generally assigned
based on the implied fair value of the acquired goodwill applicable to the benefited reporting units at
the time of each respective acquisition. The implied fair value of the goodwill was determined as the
difference between the estimated incremental overall fair value of the reporting unit and the
estimated fair value of the net assets assigned to the reporting unit as of each respective acquisition
date. To test for goodwill impairment at each evaluation date, the Company compared the estimated
fair value of each of its reporting units to their respective carrying amounts and certain other assets
and liabilities assigned to the reporting unit, including goodwill and core deposit and other intangible
assets. The methodologies used to estimate fair values of reporting units as of the acquisition dates
and as of the evaluation dates were similar. For the Company’s core customer relationship business
reporting units, fair value was estimated as the present value of the expected future cash flows of the
reporting unit. Based on the results of the goodwill impairment tests, the Company concluded that the
amount of recorded goodwill was not impaired at the respective testing dates.
141
A summary of goodwill assigned to each of the Company’s reportable segments as of
December 31, 2018 and 2017 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
363,293
All Other ..........................................................................................................................
Total................................................................................................................................. $ 4,593,112
8. Borrowings
The amounts and interest rates of short-term borrowings were as follows:
At December 31, 2018
Federal Funds
Purchased
and
Repurchase
Agreements
Other
Short-term
Borrowings
(Dollars in thousands)
Total
Amount outstanding ...................................................... $ 198,378
Weighted-average interest rate ......................................
1.68%
$ 4,200,000
$ 4,398,378
2.63%
2.58%
For the year ended December 31, 2018
Highest amount at a month-end..................................... $ 2,654,416
Daily-average amount outstanding ................................
261,200
Weighted-average interest rate ......................................
1.49%
$ 4,200,000
69,465
$ 330,665
2.16%
1.63%
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%
142
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, 2018 matured on the next business day following year-end. In addition,
of the short-term borrowings with the FHLB of New York at December 31, 2018, $3.0 billion
matured on the next business day and $1.2 billion matured on February 1, 2019.
At December 31, 2018, M&T Bank had lines of credit under formal agreements as follows:
(In thousands)
Outstanding borrowings ................................................................................................. $ 4,776,510
27,637,030
Unused............................................................................................................................
At December 31, 2018, M&T Bank had borrowing facilities available with the FHLBs whereby
M&T Bank could borrow up to approximately $18.8 billion. Additionally, M&T Bank had an
available line of credit with the Federal Reserve Bank of New York totaling approximately $13.7
billion at December 31, 2018. M&T Bank is required to pledge loans and investment securities as
collateral for these borrowing facilities.
143
Long-term borrowings were as follows:
December 31,
2018
2017
(In thousands)
Senior notes of M&T Bank Corporation:
Variable rate due 2023 ................................................................... $
3.55% due 2023 .............................................................................
249,688 $
506,021
—
—
Senior notes of M&T Bank:
Variable rate due 2021 ...................................................................
Variable rate due 2022 ...................................................................
1.45% due 2018 .............................................................................
2.25% due 2019 .............................................................................
2.30% due 2019 .............................................................................
2.05% due 2020 .............................................................................
2.10% due 2020 .............................................................................
2.625% due 2021 ...........................................................................
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):
349,794
249,658
—
645,801
—
737,793
741,965
646,301
634,525
749,488
—
249,558
499,907
644,977
746,919
739,961
743,788
—
638,872
749,404
576,446
409,154
576,876
421,771
8.50% due 2018 .............................................................................
—
200,000
Subordinated notes of M&T Bank:
Variable rate due 2020 ...................................................................
Variable rate due 2021 ...................................................................
3.40% due 2027 .............................................................................
409,361
500,000
481,692
409,361
500,000
491,176
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 ......
15,705
27,489
6,713
15,682
26,847
6,664
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 ...................................................................................................
$
147,333
149,280
96,785
15,464
55,143
8,141
35,174
8,444,914 $
146,794
148,617
96,640
15,464
54,466
8,051
9,635
8,141,430
144
The senior notes of M&T were issued in July 2018. The variable rate notes pay interest
quarterly at a rate that is indexed to the three-month LIBOR. The contractual interest rate for those
notes was 2.51% at December 31, 2018.
The variable rate senior notes of M&T Bank pay interest quarterly at rates that are indexed to the
three-month LIBOR. The contractual interest rates for those notes ranged from 2.76% to 3.25% at
December 31, 2018 and were 2.05% at December 31, 2017. The weighted-average contractual interest rate
was 2.96% at December 31, 2018.
Long-term fixed rate advances from the FHLB had contractual interest rates ranging from 1.97% to
5.98%. The weighted-average contractual interest rate was 2.06%. 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 each of December 31, 2018 and 2017. The weighted-average contractual interest rates
payable were 4.31% at December 31, 2018 and December 31, 2017. 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 $428 million and $442 million at December 31, 2018 and 2017,
respectively.
The subordinated notes of M&T Bank are unsecured and are subordinate to the claims of its other
creditors. The notes that mature in 2020 pay interest monthly at a rate that is indexed to the one-month
LIBOR. The contractual interest rate was 3.72% and 2.78% at December 31, 2018 and 2017, respectively.
The notes that mature in 2021 pay interest quarterly at a rate that is indexed to the three-month LIBOR.
The contractual interest rate was 3.38% at December 31, 2018 and 2.12% at December 31, 2017. The
subordinated notes of Wilmington Trust Corporation matured in April 2018.
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 3.39% to 5.69% at December 31, 2018 and from 2.23% to 4.71% at December 31, 2017. The
weighted-average variable rates payable on those Junior Subordinated Debentures were 3.94% at
December 31, 2018 and 2.83% at December 31, 2017.
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
145
are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity dates (ranging
from 2027 to 2033) of the Junior Subordinated Debentures or the earlier redemption of the Junior
Subordinated Debentures in whole upon the occurrence of one or more events set forth in the indentures
relating to the Capital Securities, and in whole or in part at any time after an optional redemption prior to
contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated
Debentures in whole or in part, subject to possible regulatory approval.
Long-term borrowings at December 31, 2018 mature as follows:
Year ending December 31:
2019 .............................................................................................................................. $ 1,525,057
2020 .............................................................................................................................. 1,994,450
2021 .............................................................................................................................. 1,522,796
891,731
2022 ..............................................................................................................................
2023 ..............................................................................................................................
755,710
Later years .................................................................................................................... 1,755,170
$ 8,444,914
(In thousands)
9. 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, 2018 and 2017 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)
(b)
(c)
Dividends, if declared, are paid at 6.375%. Warrants to purchase M&T common stock issued in connection with the Series A preferred
stock expired on December 23, 2018. During 2018 and 2017, 257,630 and 374,786, respectively, of the Series A warrants were exercised
in “cashless” exercises, resulting in the issuance of 136,676 and 204,133 common shares.
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.
146
10. Revenue from contracts with customers
Effective January 1, 2018 the Company adopted amended accounting and disclosure guidance for
revenue from contracts with customers under the modified retrospective approach. A significant
amount of the Company’s revenues are derived from net interest income on financial assets and
liabilities, mortgage banking revenues, trading account and foreign exchange gains, investment
securities gains, loan and letter of credit fees, operating lease income, income from bank-owned life
insurance, and certain other revenues that are generally excluded from the scope of the amended
guidance. As a result of the adoption, the Company began reporting credit card interchange revenue
net of $14 million of rewards in other revenues from operations for the year ended December 31,
2018. Credit card rewards expense of $13 million and $6 million for the years ended December 31,
2017 and 2016, respectively, was included in other costs of operations. The adjustment to beginning
retained earnings as well as the impact of any changes in timing of revenue recognition of noninterest
income items within the scope of the guidance was not material to the Company’s consolidated
financial position at December 31, 2017 or its consolidated results of operations for the year ended
December 31, 2018.
For noninterest income revenue streams within the scope of the amended guidance, the
Company recognizes the expected amount of consideration as revenue when the performance
obligations related to the services under the terms of a contract are satisfied. The Company’s
contracts generally do not contain terms that necessitate significant judgment to determine the
amount of revenue to recognize.
The Company generally charges customer accounts or otherwise bills customers upon
completion of its services. Typically the Company’s contracts with customers have a duration of one
year or less and payment for services is received at least annually, but oftentimes more frequently as
services are provided. At December 31, 2018, the Company had $56 million of uncollected amounts
receivable related to recognized revenue from the sources in the table that follows. Such amount is
classified in accrued interest and other assets in the Company’s consolidated balance sheet. In
certain situations the Company is paid in advance of providing services and defers the recognition of
revenue until its service obligation is satisfied. At December 31, 2018, the Company had deferred
revenue of $43 million related to the sources in the table that follows and recorded such amount in
accrued interest and other liabilities on its consolidated balance sheet. The following table
summarizes sources of the Company’s noninterest income during 2018 that are subject to the
amended guidance.
147
Year Ended December 31, 2018
Business
Banking
Commercial
Banking
Commercial
Real Estate
Discretionary
Portfolio
Residential
Mortgage
Banking
Retail
Banking All Other
Total
Classification in consolidated
statement of income
Service charges on deposit
accounts................................... $62,323
9
Trust income ..............................
—
Brokerage services income ........
Other revenues from
operations:
(In thousands)
96,407
917
—
9,870
—
—
—
—
—
10 254,590 6,137 $ 429,337
537,585
—
51,069
—
— 536,659
— 51,069
Merchant discount and
credit card fees.................. 34,557
—
Other .....................................
52,051
8,796
$96,889 158,171
2,213
7,259
19,342
—
1,738
1,738
105,953
— 14,924 2,208
3,814 38,529 30,233
90,369
3,824 308,043 626,306 $1,214,313
Service charges on deposit accounts include fees deducted directly from customer account balances,
such as account maintenance, insufficient funds and other transactional service charges, and also
include debit card interchange revenue resulting from customer initiated transactions. Account
maintenance charges are generally recognized as revenue on a monthly basis, whereas other fees are
recognized after the respective service is provided.
Trust income includes fees related to the Institutional Client Services (“ICS”) business and the
Wealth Advisory Services (“WAS”) business. Revenues from the ICS business are largely derived
from a variety of trustee, agency, investment, cash management and administrative services, whereas
revenues from the WAS business are mainly derived from asset management, fiduciary services, and
family office services. Trust fees may be billed in arrears or in advance and are recognized as
revenues as the Company’s performance obligations are satisfied. Certain fees are based on a
percentage of assets invested or under management and are recognized as the service is performed
and constraints regarding the uncertainty of the amount of fees are resolved.
Brokerage services income includes revenues from the sale of mutual funds and annuities and
securities brokerage fees. Such revenues are generally recognized at the time of transaction
execution. Mutual fund and other distribution fees are recognized upon initial placement of customer
funds as well as in future periods as such customers continue to hold amounts in those mutual funds.
Other revenues from operations include merchant discount and credit card fees such as interchange
fees and merchant discount fees that are generally recognized when the cardholder’s transaction is
approved and settled. Beginning in 2018, credit card rewards accrued to cardholders are recognized
as a reduction of interchange revenue. Also included in other revenues from operations are insurance
commissions, ATM surcharge fees, and advisory fees. Insurance commissions are recognized at the
time the insurance policy is executed with the customer. Insurance renewal commissions are
recognized upon subsequent renewal of the policy. ATM surcharge fees are included in revenue at
the time of the respective ATM transaction. Advisory fees are generally recognized at the conclusion
of the advisory engagement when the Company has satisfied its service obligation.
148
11. Stock-based compensation plans
Stock-based compensation expense was $66 million in 2018, $61 million in 2017 and $65 million in
2016. The Company recognized income tax benefits related to stock-based compensation of $24
million in 2018, $35 million in 2017 and $31 million in 2016.
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, 2018 and 2017, respectively, there were 2,833,428 and
3,278,036 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 $5 million as of December 31, 2018 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 and 218,341 in 2016, with a weighted-average grant date fair value of $29,557,000
in 2017 and $24,085,000 in 2016. There were no restricted shares issues in 2018. Unrecognized
compensation expense associated with restricted stock units was $18 million as of December 31,
2018 and is expected to be recognized over a weighted-average period of approximately one year.
The number of restricted stock units issued was 348,512 in 2018, 235,983 in 2017 and 348,297 in
2016, with a weighted-average grant date fair value of $66,050,000, $38,364,000 and $38,795,000,
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, 2018.................................... 482,557 $ 133.05 373,744 $ 135.41
Granted .................................................................... 348,512
—
126.60
Vested ...................................................................... (265,027)
138.52
(9,167)
Cancelled .................................................................
Unvested at December 31, 2018.............................. 556,875 $ 170.07 179,439 $ 144.18
189.52
—
127.39 (182,905)
(11,400)
194.45
Stock option awards
Stock options issued generally vest over three years and are exercisable over terms not exceeding ten
years and one day. Stock options issued prior to 2018 generally vested over four years. The
Company used an option pricing model to estimate the grant date present value of stock options
granted. The Company granted 116,852 stock options in 2018. Stock options granted in 2017 and
2016 were not significant.
149
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, 2018 ............................... 665,412 $ 152.23
190.78
Granted .................................................................... 116,852
154.91
Exercised ................................................................. (535,724)
Expired..................................................................... (25,949)
221.81
Outstanding at December 31, 2018 ......................... 220,591 $ 157.98
Exercisable at December 31, 2018 .......................... 103,725 $ 121.11
5.3 $
5.3 $
2,739
2,737
For 2018, 2017 and 2016, M&T received $60 million, $72 million and $172 million,
respectively, in cash and realized tax benefits from the exercise of stock options of $3 million, $10
million and $15 million, respectively. The intrinsic value of stock options exercised during those
periods was $16 million, $31 million and $42 million, respectively. As of December 31, 2018, the
amount of unrecognized compensation cost related to non-vested stock options was not material. The
total grant date fair value of stock options vested during 2018, 2017 and 2016 was not material. 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 58,167 shares issued in 2018, 66,504 shares
issued in 2017 and 97,880 shares issued in 2016. For 2018, 2017 and 2016, M&T received
$9,987,000, $9,730,000 and $9,528,000, respectively, in cash for shares purchased through the
employee stock purchase plan. Compensation expense recognized for the stock purchase plan was
not significant in 2018, 2017 or 2016.
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 18,292
and 19,633 at December 31, 2018 and 2017, 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, 2018, 269,373 shares
had been issued in connection with the directors’ stock plan.
150
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 6,271 and 7,505 at December 31, 2018 and 2017, 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:
2018
Year Ended December 31
2017
(In thousands)
2016
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.............................................. $
20,346 $
74,704
(123,127)
557
43,793
16,273 $
20,193 $
79,270
(108,524)
557
29,263
20,759 $
25,037
83,410
(108,473)
(3,228)
30,145
26,891
Net other postretirement benefits expense for defined benefit plans consisted of the following:
2018
Year Ended December 31
2017
(In thousands)
2016
Service cost ......................................................................... $
Interest cost on benefit obligation .......................................
Amortization of prior service credit....................................
Recognized net actuarial (gain) loss ...................................
Net other postretirement benefits expense .......................... $
938 $
2,293
(4,729)
(826)
(2,324) $
1,172 $
3,716
(1,359)
(988)
2,541 $
1,595
4,971
(1,359)
60
5,267
Service cost is reflected in salaries and employee benefits expense. The other components of
net periodic benefit expense are reflected in other costs of operations.
151
Data relating to the funding position of the defined benefit plans were as follows:
Change in benefit obligation:
Pension Benefits
2018
2017
Other
Postretirement Benefits
2018
2017
(In thousands)
Benefit obligation at beginning of year .............. $2,188,736 $2,007,158 $ 68,637 $ 109,922
20,193
1,172
Service cost.........................................................
79,270
3,716
Interest cost.........................................................
—
Plan participants’ contributions ..........................
2,929
—
(30,088)
Amendments and curtailments ...........................
172,180
(8,511)
Actuarial (gain) loss ...........................................
—
Medicare Part D reimbursement.........................
630
(11,133)
Benefits paid .......................................................
(90,065)
68,637
Benefit obligation at end of year ........................ 1,949,613 2,188,736
938
2,293
2,974
—
(4,758)
508
(10,601)
59,991
20,346
74,704
—
—
(228,897)
—
(105,276)
Change in plan assets:
Fair value of plan assets at beginning of year .... 2,014,891 1,642,131
251,381
Actual return on plan assets................................
211,444
Employer contributions ......................................
—
Plan participants’ contributions ..........................
Medicare Part D reimbursement.........................
—
(90,065)
Benefits paid .......................................................
Fair value of plan assets at end of year............... 1,833,833 2,014,891
—
—
7,574
2,929
630
(11,133)
—
Funded status........................................................... $ (115,780) $ (173,845) $ (59,991) $ (68,637)
Accrued liabilities recognized in the consolidated
balance sheet ........................................................ $ (115,780) $ (173,845) $ (59,991) $ (68,637)
Amounts recognized in accumulated other
comprehensive income (“AOCI”) were:
—
—
7,119
2,974
508
(10,601)
—
(90,657)
14,875
—
—
(105,276)
Net loss (gain)..................................................... $ 401,716 $ 460,622 $ (17,868) $ (13,936)
(36,466)
Net prior service cost (credit) .............................
(50,402)
Pre-tax adjustment to AOCI ...............................
Taxes...................................................................
13,251
Net adjustment to AOCI ..................................... $ 297,867 $ 341,697 $ (36,564) $ (37,151)
2,948
463,570
(121,873)
2,391
404,107
(106,240)
(31,737)
(49,605)
13,041
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 $143,406,000 as of December 31, 2018 and $165,210,000 as of
December 31, 2017.
The accumulated benefit obligation for all defined benefit pension plans was $1,925,741,000
and $2,158,601,000 at December 31, 2018 and 2017, respectively.
152
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, 2018 the Company recorded a minimum liability adjustment of $354,502,000
($404,107,000 related to pension plans and $(49,605,000) related to other postretirement benefits)
with a corresponding reduction of shareholders’ equity, net of applicable deferred taxes, of
$261,303,000. In aggregate, the benefit plans realized a net gain during 2018 that resulted in a
decrease to the minimum liability adjustment from that which was recorded at December 31, 2017 of
$58,666,000. The net gain was mainly the result of raising the discount rate used to measure the
benefit obligation of all plans to 4.25% at December 31, 2018 from 3.50% used at the prior year-end
and the amortization of actuarial losses during 2018, offset, in part, by losses on plan assets in
2018. 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
2018
Net loss (gain) ..................................................................... $
Amortization of prior service (cost) credit..........................
Amortization of actuarial (loss) gain...................................
Total recognized in other comprehensive income,
pre-tax .............................................................................. $
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 .............................................................................. $
(15,113) $
(557)
(43,793)
(4,758) $
4,729
826
(19,871)
4,172
(42,967)
(59,463) $
797 $
(58,666)
29,323 $
—
(557)
(29,263)
(8,511) $
(30,088)
1,359
988
20,812
(30,088)
802
(28,275)
(497) $
(36,252) $
(36,749)
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 2019:
Amortization of net prior service cost (credit).................................... $
Amortization of net loss (gain) ...........................................................
557 $
17,755
(4,730)
1,168
Pension Plans
Other
Postretirement
Benefit Plans
(In thousands)
153
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 2018, 2017 and 2016 associated with the
defined contribution pension plan was approximately $29 million, $30 million and $25 million,
respectively.
Assumptions
The assumed weighted-average rates used to determine benefit obligations at December 31 were:
Pension
Benefits
Other
Postretirement
Benefits
2018
2017
2018
2017
Discount rate .......................................................................... 4.25% 3.50% 4.25% 3.50%
Rate of increase in future compensation levels...................... 4.31% 4.33% —
—
The assumed weighted-average rates used to determine net benefit expense for the years ended
December 31 were:
Pension Benefits
2017
2018
2016
2018
Other
Postretirement Benefits
2017
2016
Discount rate......................................................... 3.50% 4.00% 4.25% 3.50% 4.00% 4.25%
Long-term rate of return on plan assets ................ 6.50% 6.50% 6.50% —
Rate of increase in future compensation
levels.................................................................. 4.33% 4.39% 4.37% —
—
—
—
—
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.
154
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 $5 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
$62 million and a decrease of 25 basis points in the discount rate would have increased the benefit
obligation by $65 million at December 31, 2018.
For measurement of other postretirement benefits, a 6.25% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2019. The rate was assumed to decrease
to 5.00% over ten 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.......................................................................................... $
(50)
Accumulated postretirement benefit obligation...................................................... 1,204 (1,094)
55 $
+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 $361,178,000 (20% of total assets) of real estate funds, private investments, hedge funds
and other investments at December 31, 2018. 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.
155
The fair values of the Company’s pension plan assets at December 31, 2018 and 2017, by asset
category, were as follows:
Fair Value Measurement of Plan Assets At December 31, 2018
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)...................................................
International ..................................................
23,049 $
10,794 $ 12,255 $
125,299
191,640
7,752
216,523
316,923
858,137
103,672
182,034
2,140
280,902
20,661
589,409
125,299
191,640
7,752
216,523
316,923
858,137
—
—
—
—
—
—
— 103,672
— 182,034
2,140
—
280,902
20,661
—
—
301,563 287,846
—
—
—
—
—
—
—
—
—
—
—
—
—
Other:
Diversified mutual fund .....................................
Real estate partnerships .....................................
Private equity .....................................................
Hedge funds .......................................................
Guaranteed deposit fund ....................................
74,446
11,807
63,699
200,811
10,415
361,178
Total(e) ................................................................... $1,831,773 $
74,446
2,791
—
125,309
—
202,546
—
—
9,016
—
63,699
—
75,502
—
—
10,415
— 158,632
1,373,040 $ 300,101 $ 158,632
156
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
(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, 2018 and December 31, 2017. The holdings within the
funds were spread across diverse industries.
(e) Excludes dividends and interest receivable totaling $2,060,000 and $1,774,000 at
December 31, 2018 and 2017, respectively.
Pension plan assets included common stock of M&T with a fair value of $125,299,000 (7% of
total plan assets) at December 31, 2018 and $154,818,000 (8% of total plan assets) at December 31,
2017. No investment in securities of a non-U.S. Government or government agency issuer exceeded
ten percent of plan assets at December 31, 2018.
157
The changes in Level 3 pension plan assets measured at estimated fair value on a recurring basis
during the year ended December 31, 2018 were as follows:
Balance –
January 1,
2018
Purchases
(Sales)
Total
Realized/
Unrealized
Gains
(Losses)
Balance –
December 31,
2018
(In thousands)
Other
Real estate partnerships ........................................... $
Private equity ...........................................................
Hedge funds .............................................................
Guaranteed deposit fund ..........................................
4,717 $
30,396
19,971
—
Total .................................................................... $ 97,428 $ 55,084 $
2,905 $
31,484
52,114
10,925
1,394 $
9,016
1,819
63,699
3,417
75,502
10,415
(510)
6,120 $ 158,632
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 2018 or 2016. The Company is not required to make contributions to the qualified defined
benefit plan in 2019, however, subject to the impact of actual events and circumstances that may
occur in 2019, 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
$14,875,000 and $11,444,000 in 2018 and 2017, respectively. Payments made by the Company for
postretirement benefits were $7,119,000 and $7,574,000 in 2018 and 2017, respectively. Payments
for supplemental pension and other postretirement benefits for 2019 are not expected to differ from
those made in 2018 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:
2019 ...................................................................................................... $
2020 ......................................................................................................
2021 ......................................................................................................
2022 ......................................................................................................
2023 ......................................................................................................
2024 through 2028................................................................................
94,427 $
99,361
103,502
106,270
110,753
600,961
7,108
6,975
4,284
4,196
4,108
19,065
The Company has a retirement savings plan (“RSP”) that is a defined contribution plan in
which eligible employees of the Company may defer up to 50% of qualified compensation via
contributions to the plan. The Company makes an employer matching contribution in an amount
equal to 75% of an employee’s contribution, up to 4.5% of the employee’s qualified compensation.
158
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 $42,897,000, $38,229,000
and $36,776,000 in 2018, 2017 and 2016, respectively.
13. Income taxes
The components of income tax expense were as follows:
2018
Year Ended December 31
2017
(In thousands)
2016
Current
Federal .................................................................................................. $408,428 $363,043 $428,750
State and local....................................................................................... 113,706 94,714 95,426
Total current .................................................................................... 522,134 457,757 524,176
Deferred
Federal .................................................................................................. (12,780) 367,308 147,662
State and local....................................................................................... 28,637 33,482 26,351
Total deferred .................................................................................. 15,857 400,790 174,013
Amortization of investments in qualified affordable housing projects ..... 52,169 57,009 45,095
Total income taxes applicable to pre-tax income ............................ $590,160 $915,556 $743,284
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, 2018, 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 a benefit of
$1,628,000 in 2018, and an expense of $7,195,000 in 2017 and $11,925,000 in 2016. No alternative
minimum tax expense was recognized in 2017 or 2016.
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, including eliminating the alternative minimum tax as of
January 1, 2018. 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. 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 2018 the Company received
approval from the Internal Revenue Service to change the timing of recognition of certain loan fees
retroactive to 2017. Given the reduction of the federal income tax rate, the change resulted in a $15
million reduction of income tax expense in 2018. 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
159
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 $9 million and $22 million reduction of income tax expense in 2018 and 2017, respectively.
Total income taxes differed from the amount computed by applying the statutory federal
income tax rate to pre-tax income as follows:
2018
Year Ended December 31
2017
(In thousands)
2016
Income taxes at statutory federal income tax rate................................ $526,730 $813,352 $720,439
Increase (decrease) in taxes:
Tax-exempt income......................................................................... (26,186) (40,778) (35,364)
State and local income taxes, net of federal income tax effect ....... 112,451 83,327 79,155
Qualified affordable housing project federal tax credits, net.......... (12,240) (16,015) (15,091)
—
Initial impact of enactment of Tax Act ...........................................
(5,855)
Other................................................................................................ (10,595)
$590,160 $915,556 $743,284
— 85,431
(9,761)
Deferred tax assets (liabilities) were comprised of the following at December 31:
2018
2017
(In thousands)
2016
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 ............................................
Interest on loans ..................................................................
Other....................................................................................
Gross deferred tax liabilities...........................................
Net deferred tax asset .......................................................... $
322,818 $
30,057
23,563
24,796
—
26,759
52,580
43,880
524,453
(186,787)
—
(54,894)
(61,881)
(18,920)
(28,350)
(350,832)
173,621 $
345,609 $
45,322
26,009
25,050
37,900
26,676
—
66,247
590,288
143,067
52,512
36,616
61,266
52,181
10,741
106,876
572,813 1,053,547
(266,268)
(181,159)
(94,285)
—
(71,108)
(51,781)
(63,959)
(52,733)
—
—
(87,200)
(21,599)
(488,535)
(401,557)
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.
160
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, 2016 .......................... $ 24,537 $ 7,969 $ 32,506
—
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 taken 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)
Decreases as a result of settlements with taxing authorities ...........
(168)
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
13,426
Increases as a result of tax positions taken during 2018 ................. 13,426
—
1,969
— 1,969
Increases as a result of tax positions taken in prior years ...............
(953)
(289)
(664)
Decreases as a result of settlements with taxing authorities ...........
Decreases as a result of tax positions taken in prior years .............. (1,920)
(2,622)
(702)
62,903
Gross unrecognized tax benefits at December 31, 2018 .................... $ 56,274 $ 6,629
Less: Federal, state and local income tax benefits .............................
(13,209)
Net unrecognized tax benefits at December 31, 2018 that,
if recognized, would impact the effective income tax rate..............
$ 49,694
(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, 2018 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 2017, although under statute the income tax returns from 2015 through 2017 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.
161
14. Earnings per common share
The computations of basic earnings per common share follow:
Income available to common shareholders:
2018
Year Ended December 31
2017
(In thousands, except per share)
2016
Net income ............................................................................................. $1,918,080 $1,408,306 $1,315,114
Less: Preferred stock dividends(a) .........................................................
(81,270)
1,845,559 1,335,572 1,233,844
Net income available to common equity ................................................
Less: Income attributable to unvested stock-based
compensation awards ..........................................................................
(10,385)
Net income available to common shareholders ........................................... $1,836,028 $1,327,503 $1,223,459
Weighted-average shares outstanding:
(72,734)
(72,521)
(8,069)
(9,531)
Common shares outstanding (including common stock
issuable) and unvested stock-based compensation awards .................
Less: Unvested stock-based compensation awards ................................
Weighted-average shares outstanding..........................................................
144,740
(748)
143,992
153,092
(933)
152,159
158,121
(1,341)
156,780
Basic earnings per common share................................................................ $
12.75 $
8.72 $
7.80
(a)
Including impact of not as yet declared cumulative dividends.
The computations of diluted earnings per common share follow:
2018
Year Ended December 31
2017
(In thousands, except per share)
2016
Net income available to common equity ..................................................... $1,845,559 $1,335,572 $1,233,844
Less: Income attributable to unvested stock-based
compensation awards ..........................................................................
(10,363)
Net income available to common shareholders ........................................... $1,836,035 $1,327,517 $1,223,481
Adjusted weighted-average shares outstanding:
(8,055)
(9,524)
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 ...........................................
144,740
(748)
153,092
(933)
158,121
(1,341)
159
144,151
392
152,551
524
157,304
Diluted earnings per common share ............................................................ $
12.74 $
8.70 $
7.78
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 194,000 in 2018, 401,000 in 2017 and 2,171,000 in 2016 were not
included in the computations of diluted earnings per common share because the effect on those years
would have been antidilutive.
162
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)
Defined
Investment
Securities (a) Plans
Benefit
Total
Amount
Other Before Tax
(In thousands)
Income
Tax
Net
Balance — January 1, 2018
Cumulative effect of change in accounting principle —
equity securities ..............................................................................
Other comprehensive income before reclassifications:
Unrealized holding losses, net .....................................................
Foreign currency translation adjustment......................................
Unrealized losses on cash flow hedges........................................
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
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 other comprehensive income (loss) ..........................................
Balance — December 31, 2018 .........................................................
$
(59,957) (413,168) (20,165) $ (493,290)
129,476 $(363,814)
(22,795)
—
—
(22,795)
5,942
(16,853)
(121,589)
—
—
— 19,871
—
— (2,817)
— (4,965)
—
— (121,589)
(2,817)
(4,965)
19,871
31,946
592
1,306
(5,224)
(89,643)
(2,225)
(3,659)
14,647
(121,589) 19,871 (7,782) (109,500)
28,620
(80,880)
4,252
(18)
—
—
—
—
4,252 (c)
(18) (d)
(1,118)
4
3,134
(14)
—
—
(111)
(111) (e)
29
(82)
—
(4,172)
—
— 42,967
9,832
(3,507)
13,339 (c)
— 13,339
(3,075)
1,097
(4,172) (f)
—
31,671
42,967 (f) (11,296)
—
13,829
(117,355) 58,666 5,446
(39,414)
(53,243)
149,247 $(420,081)
(200,107) (354,502) (14,719) $ (569,328)
$
163
Investment Securities
Defined
Benefit
Total
Amount
With OTTI (b) All Other Plans
Other Before Tax
Income
Tax
Net
(In thousands)
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
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 other comprehensive income (loss) ..........................
Reclassification of income tax effects to retained
earnings ...........................................................................
Balance — December 31, 2017 ......................................... $
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 other comprehensive income (loss) ..........................
Balance — December 31, 2016 ......................................... $
(8,746)
(6,259)
9,276 (7,844)
(13,573)
6,250
(7,323)
—
(18,351)
3,387
(2,928)
—
—
—
—
3,387 (c)
(21,279) (d)
(1,333)
7,195
2,054
(14,084)
—
—
—
(137)
(137) (e)
54
(83)
—
—
—
(27,097)
—
—
(802)
— 28,275
— (3,916)
—
—
(5,800) 36,749 (11,897)
(3,916) (c)
(802) (f)
1,541
315
28,275 (f) (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)
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 (c)
(1,572)
(30,314) (d) 11,925
2,424
(18,389)
—
—
—
—
—
—
(4,587)
— 30,205
(94)
61
(155) (e)
(155)
(2,782)
(4,587) (f)
1,805
—
18,319
30,205 (f) (11,886)
—
27,691
30,366 (136,634) 39,743 (4,175)
(43,009)
(70,700)
190,609 $(294,636)
46,725 (73,785) (449,917) (8,268) $ (485,245)
(a) Beginning January 1, 2018, equity securities with readily determinable market values are required to be
measured at fair value with changes in fair value recognized in the income statement. Separate presentation of
investment securities with an other-than-temporary impairment change is no longer required.
(b) Other-than-temporary impairment.
(c) Included in interest income.
(d) Included in gain (loss) on bank investment securities.
(e) Included in interest expense.
(f) Included in other costs of operations.
164
Accumulated other comprehensive income (loss), net consisted of the following:
Investment
Securities
Defined
Benefit
Plans
Other
Total
(In thousands)
(64,406)
48,087 $ (296,979) $
Balance at January 1, 2016....................................... $
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.................................
Cumulative effect of change in accounting
principle — equity securities.................................
Net gain (loss) during 2018 ......................................
Balance at December 31, 2018................................. $ (147,526) $ (261,303) $
(272,874)
(304,546)
(53,960)
(16,319)
(44,150)
(16,853)
(86,523)
(19,766)
24,105
22,288
43,243
(8,065)
—
(2,735) $ (251,627)
(43,009)
(2,708)
(294,636)
(5,149)
(7,671)
(5,443)
(2,004)
(15,118)
(64,029)
(363,814)
—
(16,853)
(39,414)
(11,252) $ (420,081)
3,866
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:
2018
Year Ended December 31
2017
(In thousands)
2016
Other income:
Credit-related fee income ................................................................ $ 82,614 $ 77,580 $ 70,424
Other expense:
Professional services ....................................................................... 312,998 289,862 268,060
Accrual for Wilmington Trust Corporation legal-related matters ..... 135,000
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 $172 million and $159 million of loans to foreign borrowers at December 31, 2018
and 2017, respectively. Deposits at M&T Bank’s Cayman Islands office were $812 million and $178
million at December 31, 2018 and 2017, 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 $22 million at
December 31, 2018 and $45 million at December 31, 2017. Revenues from providing international
trust-related services were approximately $29 million in 2018, $24 million in 2017 and $25 million
in 2016.
165
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
material as of December 31, 2018.
The net effect of interest rate swap agreements was to decrease net interest income by $25
million in 2018 and to increase net interest income by $25 million in 2017 and $37 million in 2016.
Information about interest rate swap agreements entered into for interest rate risk management
purposes summarized by type of financial instrument the swap agreements were intended to hedge
follows:
Notional
Amount
Average
Maturity
(In thousands)
(In years)
Weighted-
Average Rate
Fixed
Variable
Estimated
Fair Value
Gain (a)
(In thousands)
December 31, 2018
Fair value hedges:
Fixed rate long-term borrowings (b) ............... $ 4,450,000
2.8
2.47%
3.02% $
4,219
Cash flow hedges:
Interest payments on variable rate
commercial real estate loans (b)(c).............. 15,400,000
Total................................................................. $19,850,000
December 31, 2017
Fair value hedges:
1.3
1.7
1.52%
2.35%
$
1,311
5,530
Fixed rate long-term borrowings (b) ............... $ 4,550,000
2.9
2.27%
2.09% $
573
Cash flow hedges:
Interest payments on variable rate
commercial real estate loans (b)(d).............. 4,850,000
Total................................................................. $ 9,400,000
2.0
2.5
1.52%
1.36%
$
66
639
(a) Certain clearinghouse exchange rules provide that required payments by counterparties for variation margin
are treated as settlements of those positions. The impact of such settlements at December 31, 2018 and
December 31, 2017 was a reduction of the estimated fair value losses on interest rate swap agreements
designated as fair value hedges of $54.7 million and $41.1 million, respectively, and on interest rate swap
agreements designated as cash flow hedges of $9.1 million and $16.3 million, respectively.
(b) Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and pays at a
(c)
variable rate.
Includes notional amount and terms of $12.6 billion of forward-starting interest rate swap agreements that will
become effective in 2019 and 2020.
(d) Includes notional amount and terms of $2.0 billion of forward-starting interest rate swap agreements that
will become effective in 2019.
166
The notional amount of interest rate swap agreements entered into for risk management
purposes that were outstanding at December 31, 2018 mature as follows:
Year ending December 31:
2019.............................................................................................................................. $ 3,500,000
2020.............................................................................................................................. 11,200,000
2021.............................................................................................................................. 3,500,000
650,000
2022..............................................................................................................................
500,000
2023..............................................................................................................................
500,000
2027..............................................................................................................................
$19,850,000
(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 $42.9 billion and $29.9 billion at December 31, 2018 and 2017, respectively. The notional
amounts of foreign currency and other option and futures contracts entered into for trading account
purposes aggregated $763 million and $530 million at December 31, 2018 and 2017, 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
2018
2017
2018
2017
(In thousands)
5,530 $
1,090
6,620
639 $
734
1,373
— $
6,434
6,434
—
283
283
9,304
3,702
8,797
2,526
1,592
4,535
494
1,019
Interest rate contracts (b).................................................................... 118,687
Foreign exchange and other option and futures contracts (b)............
10,549
142,242
74,164 169,255 132,104
5,286
5,657
91,144 184,252 138,903
Total derivatives....................................................................................... $ 148,862 $ 92,517 $ 190,686 $ 139,186
8,870
(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 variation margin settlement payments at December 31, 2018 and December 31, 2017
was a reduction of the estimated fair value of interest rate contracts in the trading account in an asset position
of $170.7 million and $136.2 million, respectively, and in a liability position of $49.7 million and $12.2
million, respectively.
167
Year Ended
December 31, 2018
Amount of Gain (Loss) Recognized
Year Ended
December 31, 2017
Year Ended
December 31, 2016
Derivative
Item Derivative
Item Derivative
Hedged
Hedged
Hedged
Item
(In thousands)
Derivatives in fair value
hedging relationships
Interest rate swap agreements:
Fixed rate long-term borrowings (a).............. $(10,006) 10,969 $(52,392) 51,628 $(32,000) 30,906
Derivatives not designated as
hedging instruments
Trading:
Interest rate contracts (b) ............................... $ 4,506
Foreign exchange and other option and
futures contracts (b) ....................................
9,416
Total .................................................................... $ 13,922
$ 5,398
$ 14,042
6,821
$ 12,219
7,665
$ 21,707
(a)
(b)
Effective January 1, 2018, reported as an adjustment to interest expense. Prior to 2018, reported as other
revenues from operations.
Reported as trading account and foreign exchange gains.
Carrying Amount of the
Hedged Item
Cumulative Amount of
Fair Value Hedging
Adjustment Increasing
(Decreasing) the Carrying
Amount of the
Hedged Item
December 31
December 31
2018
2017
2018
2017
(In thousands)
Location in the Consolidated Balance Sheet of
the Hedged Items in Fair Value Hedges
Long-term debt .........................................................
$4,394,109
$4,504,029
$ (51,102)
$ (40,133)
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 $18 million and $16 million at December 31,
2018 and 2017, 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
168
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 $21 million and $13 million at
December 31, 2018 and 2017, respectively, for which the Company was required to post collateral
relating to those positions of $18 million and $12 million at December 31, 2018 and 2017,
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
position on December 31, 2018 was not significant. If the credit risk-related contingent features had
been triggered on December 31, 2018, 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 $18 million and $13 million at
December 31, 2018 and 2017, respectively. Counterparties posted collateral relating to those
positions of $16 million and $12 million at December 31, 2018 and 2017, 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 $65 million and $52 million at December 31, 2018 and 2017,
respectively. The fair value asset and liability amounts of derivative contracts have been reduced by
variation margin payments treated as settlements as described herein. Variation margin on derivative
contracts not treated as settlements continues to represent collateral posted or received by the
Company.
19. Variable interest entities
The Company’s securitization activity has consisted of securitizing loans originated for sale into
government issued or guaranteed mortgage-backed securities. The amounts of those securitizations in
2018, 2017 and 2016 are presented in the Company’s consolidated statement of cash flows. The
Company has not recognized any losses as a result of having securitized assets.
As described in note 8, 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 each of December 31,
2018 and 2017, the Company included the junior subordinated debentures as “long-term borrowings”
in its consolidated balance sheet and recognized $23 million in other assets for its “investment” in the
common securities of the trusts that will be concomitantly repaid to M&T by the respective trust
from the proceeds of M&T’s repayment of the junior subordinated debentures associated with
preferred capital securities described in note 8.
The Company has invested as a limited partner in various partnerships that collectively had total
assets of approximately $1.1 billion at of December 31, 2018 and $1.0 billion at December 31, 2017.
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
169
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 $523 million, including $280 million of
unfunded commitments, at December 31, 2018 and $420 million, including $201 million of unfunded
commitments, at December 31, 2017. Contingent commitments to provide additional capital
contributions to these partnerships were not material at December 31, 2018. The Company has not
provided financial or other support to the partnerships that was not contractually required.
Management currently estimates that no material losses are probable as a result of the Company’s
involvement with such entities. The Company, in its position as limited partner, does not direct the
activities that most significantly impact the economic performance of the partnerships and, therefore,
in accordance with the accounting provisions for variable interest entities, the partnership entities are
not included in the Company’s consolidated financial statements. The Company’s investment cost in
qualified affordable housing projects 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, 2018.
Pursuant to GAAP, fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement
date. A three-level hierarchy exists in GAAP for fair value measurements based upon the inputs to
the valuation of an asset or liability.
•
•
•
Level 1 — Valuation is based on quoted prices in active markets for identical assets and
liabilities.
Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar instruments in markets that are not
active or by model-based techniques in which all significant inputs are observable in the
market.
Level 3 — Valuation is derived from model-based and other techniques in which at least
one significant input is unobservable and which may be based on the Company’s own
estimates about the assumptions that market participants would use to value the asset or
liability.
When available, the Company attempts to use quoted market prices in active markets to
determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active
markets are not available, fair value is often determined using model-based techniques incorporating
various assumptions including interest rates, prepayment speeds and credit losses. Assets and
liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending
on the lowest level classification of an input that is considered significant to the overall valuation.
The following is a description of the valuation methodologies used for the Company’s assets and
liabilities that are measured on a recurring basis at estimated fair value.
170
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
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 and equity securities
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
171
in the valuation of its interest rate swap agreement assets and has considered its own credit risk in the
valuation of its interest rate swap agreement liabilities.
The following tables present assets and liabilities at December 31, 2018 and 2017 measured at
estimated fair value on a recurring basis:
Fair Value
Measurements Level 1 (a)
Level 2 (a)
Level 3
(In thousands)
December 31, 2018
Trading account assets ........................................................... $
Investment securities available for sale:
185,584 $ 46,018 $
139,566 $
U.S. Treasury and federal agencies .................................. 1,336,931
Obligations of states and political subdivisions ...............
1,659
Mortgage-backed securities:
— 1,336,931
1,659
—
Equity securities.....................................................................
Real estate loans held for sale................................................
Other assets (b) ......................................................................
Government issued or guaranteed............................... 7,216,991
Privately issued ...........................................................
22
126,906
Other debt securities .........................................................
8,682,509
93,917
551,697
19,626
— 7,216,991
—
—
—
126,906
— 8,682,487
21,928
551,697
10,322
Total assets ....................................................................... $ 9,533,333 $ 118,007 $ 9,406,000 $
178,125 $
10,969
189,094 $
Trading account liabilities...................................................... $
Other liabilities (b).................................................................
Total liabilities.................................................................. $
178,125 $
12,561
190,686 $
71,989
—
—
— $
—
— $
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 $
— $
—
— $
—
—
—
—
—
—
22
—
22
—
—
9,304
9,326
—
1,592
1,592
—
—
—
—
28
—
—
28
—
8,797
8,825
—
494
494
(a)
(b)
There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended December 31,
2018 and 2017.
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).
172
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring
basis during the years ended December 31, 2018, 2017 and 2016 were as follows:
Investment
Securities
Available for Sale
Privately Issued
Mortgage-
Backed Securities
Other Assets and
Other Liabilities
2018
Balance — January 1, 2018......................................................................
Total gains realized/unrealized:
Included in earnings ...........................................................................
Settlements ...............................................................................................
Transfers out of Level 3 (a) ......................................................................
Balance — December 31, 2018................................................................
Changes in unrealized gains included in earnings
related to assets still held at December 31, 2018...................................
2017
Balance — January 1, 2017......................................................................
Total gains realized/unrealized:
Included in earnings ...........................................................................
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...................................
$
$
$
$
$
$
(In thousands)
28
$
8,303
—
(6)
—
22
—
44
—
(16)
—
28
—
58,740 (b)
—
(59,331)(e)
7,712
7,386 (b)
7,325
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 ...... $
74
—
—
—
(30)
—
44
—
47,393
9,879
30,041 (c)
(18,268)(d)
(58,296)
(870)
—
—
110,937 (b)
—
—
—
(113,491)(e)
7,325
—
7,256 (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.
173
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,
2018. 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 $268 million at December 31, 2018, ($120 million and $148 million of which
were classified as Level 2 and Level 3, respectively), $210 million at December 31, 2017 ($145
million and $65 million of which were classified as Level 2 and Level 3, respectively), and $293
million at December 31, 2016 ($153 million and $140 million of which were classified as Level 2
and Level 3, respectively). Changes in fair value recognized during the years ended December 31,
2018, 2017 and 2016 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 $83 million, $56 million and $71
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 $28 million and $53 million at December 31, 2018 and December 31, 2017,
respectively. Changes in fair value recognized during the years ended December 31, 2018, 2017 and
2016 for foreclosed assets held by the Company at the end of each of those years were not material.
174
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, 2018 and 2017:
Valuation
Technique
Unobservable
Inputs/Assumptions
Range
(Weighted-
Average)
Fair Value
(In thousands)
December 31, 2018
Recurring fair value measurements
Privately issued mortgage-backed
securities.................................................. $
22
Net other assets (liabilities) (a)...................
7,712
December 31, 2017
Recurring fair value measurements
Privately issued mortgage-backed
securities.................................................. $
28
Net other assets (liabilities) (a)...................
8,303
Two
independent
pricing quotes
Discounted
cash flow
Two
independent
pricing quotes
Discounted
cash flow
—
Commitment
expirations
—
0%-95% (13%)
—
Commitment
expirations
—
0%-78% (22%)
(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.
175
Disclosures of fair value of financial instruments
The carrying amounts and estimated fair value for financial instrument assets (liabilities) are
presented in the following tables:
Financial assets:
December 31, 2018
Carrying
Amount
Estimated
Fair Value
Level 1
(In thousands)
Level 2
Level 3
Cash and cash equivalents................................. $ 1,605,439 1,605,439 1,528,302
8,105,197 8,105,197
Interest-bearing deposits at banks .....................
185,584
Trading account assets ......................................
Investment securities ......................................... 12,692,813 12,631,656
Loans and leases:
77,137
— 8,105,197
139,566
46,018
71,989 12,456,467
185,584
—
—
—
103,200
Commercial loans and leases....................... 22,977,976 22,587,387
Commercial real estate loans ....................... 34,363,556 33,832,558
Residential real estate loans......................... 17,154,446 16,974,545
Consumer loans ........................................... 13,970,499 13,819,545
—
Allowance for credit losses..........................
Loans and leases, net.............................. 87,447,033 87,214,035
353,965
Accrued interest receivable ...............................
(1,019,444)
353,965
Financial liabilities:
Noninterest-bearing deposits............................. $(32,256,668) (32,256,668)
Savings and interest-checking deposits............. (50,963,744) (50,963,744)
(6,124,254) (6,201,957)
Time deposits ....................................................
Deposits at Cayman Islands office ....................
(811,906)
(4,398,378) (4,398,378)
Short-term borrowings ......................................
(8,444,914) (8,385,289)
Long-term borrowings ......................................
(95,274)
Accrued interest payable ...................................
(178,125)
Trading account liabilities.................................
(95,274)
(178,125)
(811,906)
— 22,587,387
—
346,775 33,485,783
—
— 3,920,447 13,054,098
— 13,819,545
—
—
—
—
— 4,267,222 82,946,813
—
—
353,965
— (32,256,668)
— (50,963,744)
— (6,201,957)
—
(811,906)
— (4,398,378)
— (8,385,289)
(95,274)
—
(178,125)
—
—
—
—
—
—
—
—
—
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 .....................................
7,712
(6,177)
(131,688)
7,712
(6,177)
(131,688)
5,530
5,530
—
—
—
—
—
(6,177)
—
7,712
—
(131,688)
5,530
—
176
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 .....................
Trading account assets ......................................
132,909
Investment securities ......................................... 14,664,525 14,653,074
Loans and leases:
68,853
— 5,078,903
47,873
85,036
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
—
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 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
177
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
2018
2017
(In thousands)
Commitments to extend credit
Home equity lines of credit.............................................................................. $
Commercial real estate loans to be sold...........................................................
Other commercial real estate............................................................................
Residential real estate loans to be sold.............................................................
Other residential real estate..............................................................................
Commercial and other......................................................................................
Standby letters of credit.........................................................................................
Commercial letters of credit ..................................................................................
Financial guarantees and indemnification contracts..............................................
Commitments to sell real estate loans ...................................................................
5,484,197
229,401
7,556,722
245,211
219,351
14,363,803
2,326,991
55,808
3,529,136
940,692
5,482,622
194,763
6,050,569
347,113
201,426
12,733,815
2,497,844
46,739
3,434,381
812,217
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. In addition to the
amounts presented in the preceding table, the Company had discretionary funding commitments to
commercial customers of $8.6 billion and $8.1 billion at December 31, 2018 and 2017, respectively,
that the Company had the unconditional right to cancel prior to funding. Standby and commercial
letters of credit are conditional commitments issued to guarantee the performance of a customer to a
third party. Standby letters of credit generally are contingent upon the failure of the customer to
perform according to the terms of the underlying contract with the third party, whereas commercial
letters of credit are issued to facilitate commerce and typically result in the commitment being funded
when the underlying transaction is consummated between the customer and a third party. The credit
risk associated with commitments to extend credit and standby and commercial letters of credit is
essentially the same as that involved with extending loans to customers and is subject to normal
credit policies. Collateral may be obtained based on management’s assessment of the customer’s
creditworthiness.
Financial guarantees and indemnification contracts are oftentimes similar to standby letters of
credit and include mandatory purchase agreements issued to ensure that customer obligations are
fulfilled, recourse obligations associated with sold loans, and other guarantees of customer
performance or compliance with designated rules and regulations. Included in financial guarantees
and indemnification contracts are loan principal amounts sold with recourse in conjunction with the
Company’s involvement in the Fannie Mae DUS program. The Company’s maximum credit risk for
recourse associated with loans sold under this program totaled approximately $3.4 billion and $3.3
billion at December 31, 2018 and 2017, respectively.
Since many loan commitments, standby letters of credit, and guarantees and indemnification
contracts expire without being funded in whole or in part, the contract amounts are not necessarily
indicative of future cash flows.
178
The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the
fair value of real estate loans held for sale. Such commitments are considered derivatives and along
with commitments to originate real estate loans to be held for sale are recorded in the consolidated
balance sheet at estimated fair market value.
The Company occupies certain banking offices and uses certain equipment under noncancelable
operating lease agreements expiring at various dates over the next 23 years. Minimum lease
payments under noncancelable operating leases are summarized in the following table:
Year ending December 31:
2019.................................................................................................................................$
2020.................................................................................................................................
2021.................................................................................................................................
2022.................................................................................................................................
2023.................................................................................................................................
Later years.......................................................................................................................
$
89,547
82,536
67,985
54,504
39,578
104,280
438,430
(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, 2018, the Company believes that its obligation to loan purchasers was not material to
the Company’s consolidated financial position.
As previously disclosed, Wilmington Trust Corporation, a wholly-owned subsidiary of M&T,
was the subject of a class action lawsuit alleging that its financial reporting and securities filings
prior to its acquisition by M&T in 2011 were in violation of securities laws. In April 2018, the
parties reached an agreement in principle and a formal settlement was executed and filed with the
court later in the second quarter of 2018. The proposed settlement was preliminarily approved by the
court in July 2018. In the first quarter of 2018, the Company increased its reserve for litigation
matters by $135 million in anticipation of the settlement. The settlement amount of $200 million was
paid, pursuant to the settlement agreement, during the third quarter of 2018. The settlement
agreement was approved by the court in the fourth quarter of 2018.
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
179
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 4. 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).
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.
180
Information about the Company’s segments is presented in the accompanying table. Income
statement amounts are in thousands of dollars. Balance sheet amounts are in millions of dollars.
Business Banking
2018
2017
2016
For the Years Ended December 31, 2018, 2017 and 2016
Commercial Real Estate
2017
Commercial Banking
2017
2016
2018
2016
2018
Discretionary Portfolio
2017
2016
2018
288,908
283,447
Net interest income(a) ............. $ 434,579 $ 393,948 $ 371,889 $ 821,812 $ 809,301 $ 785,339 $ 665,220 $ 649,378 $ 608,385 $ 228,051 $ 277,095 $ 345,926
26,075
Noninterest income ................. 111,600 112,512 108,783
372,001
32,925
274,923
546,179 506,460 480,672 1,110,720 1,092,748 1,060,262
34,903
Provision for credit losses ....... 10,916 15,598 12,709
Amortization of core deposit
and other intangible assets......
Depreciation and other
amortization..........................
404
472
Other noninterest expense ....... 305,340 294,493 292,124
95,300
Income (loss) before taxes ...... 229,541 195,976 175,435
243,304
79,766
Income tax expense (benefit) .... 61,279 80,043 71,677
Net income (loss) .................... $ 168,262 $ 115,933 $ 103,758 $ 538,917 $ 436,871 $ 411,379 $ 452,910 $ 364,135 $ 350,358 $ 116,226 $ 134,968 $ 163,538
20,120
207,493 204,965
593,905 566,453
229,770 216,095
169,966 179,706
819,344 788,091
(3,447 )
187
65,393
146,098
29,872
25,852
217,387
601,717
148,807
279
76,021
193,527
58,559
520
327,616
697,223
285,844
496
364,102
737,146
198,229
509
339,936
740,427
303,556
183,955
849,175
3,159
(9,690 )
218,361
6,683
23,851
300,946
31,119
24,410
(7,524 )
11,876
1,060
1,060
8,976
382
393
—
—
—
—
—
—
—
—
—
—
Average total assets
(in millions).......................... $
Capital expenditures
(in millions).......................... $
5,631 $
5,602 $
5,456 $
26,626 $
26,573 $
25,592 $
22,885 $
22,741 $ 21,131 $
32,123 $
37,203 $
40,867
— $
— $
— $
— $
— $
— $
— $
1 $
— $
1 $
— $
—
Residential Mortgage
Banking
2018
2017
2016
2018
Retail Banking
2017
2016
2018
All Other
2017
2016
2018
Total
2017
2016
For the Years Ended December 31, 2018, 2017 and 2016
(2,178 )
324,228
329,833
Net interest income(a) ............. $ 13,933 $ 30,328 $ 29,809 $ 1,351,165 $ 1,210,066 $ 1,107,388 $ 557,542 $ 410,928 $ 221,151 $ 4,072,302 $ 3,781,044 $ 3,469,887
609,945 570,475 1,856,000 1,851,143 1,825,996
Noninterest income ................. 305,560 321,589 342,858
319,493 351,917 372,667 1,675,393 1,539,899 1,430,564 1,208,981 1,020,873 791,626 5,928,302 5,632,187 5,295,883
190,000
Provision for credit losses .......
Amortization of core deposit
and other intangible assets......
Depreciation and other
37,657
157,978
68,541
amortization.......................... 24,288 32,011 30,264
776,123 1,125,428 1,019,465 892,625 3,109,057 2,943,200 2,846,894
Other noninterest expense ....... 241,624 247,639 258,141
(107,086 ) (208,243 ) 2,508,240 2,323,862 2,058,398
496,347
Income (loss) before taxes ...... 55,759 71,013 87,879
(40,752 ) (144,498 )
Income tax expense (benefit) .... 10,272 25,446 32,426
743,284
590,160
201,974
(66,334 ) $ (63,745 ) $ 1,918,080 $ 1,408,306 $ 1,315,114
Net income (loss) .................... $ 45,487 $ 45,567 $ 55,453 $ 541,297 $ 377,166 $ 294,373 $
35,274
789,783
737,764
196,467
38,234
758,153
636,100
258,934
215
(54,766 )
54,981 $
154,483
651,439
132,000
112,572
168,000
915,556
165,759
323,176
107,412
120,437
30,306
23,462
42,613
24,522
68,004
69,923
(3,617 )
(8,128 )
(3,910 )
31,366
8,265
42,613
1,254
—
—
—
—
—
—
Average total assets
(in millions).......................... $
Capital expenditures
(in millions).......................... $
2,161 $
2,355 $
2,569 $
13,656 $
12,702 $
11,840 $
13,877 $
13,684 $ 16,885 $ 116,959 $ 120,860 $ 124,340
1 $
— $
— $
31 $
34 $
46 $
65 $
44 $
62 $
98 $
79 $
108
(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 $21,897,000 in 2018, $34,570,000 in 2017 and
$26,962,000 in 2016 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. The Residential Mortgage
Banking segment originates and services residential real estate loans for consumers and sells
181
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. 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:
2018
Year Ended December 31
2017
(In thousands)
2016
Revenues ............................................................................. $
Expenses..............................................................................
Income taxes (benefit).........................................................
Net income (loss) ................................................................
(41,285) $
(24,660)
(4,371)
(12,254)
(43,941) $
(32,623)
(4,606)
(6,712)
(48,625)
(40,422)
(3,338)
(4,865)
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.
182
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, 2018, approximately $669 million was available for payment of dividends to M&T
from banking subsidiaries. M&T 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, 2018 and 2017, cash and due from
banks and interest-earning deposits at banks included a daily average of $683,740,000 and
$679,401,000, 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, 2018, the required minimum and well capitalized
capital ratios are as follows:
(cid:3) Common equity Tier 1 ("CET1") to risk-weighted assets ........................
(cid:3) Tier 1 capital to risk-weighted assets ........................................................
(cid:3) Total capital to risk-weighted assets .........................................................
(cid:3) 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. The fully phased-in
capital conservation buffer as of January 1, 2019 is 2.5%. For 2018 and 2017, the phase-in transition
portion of that buffer was 1.875% and 1.25%, respectively.
183
The capital ratios and amounts of the Company and its banking subsidiaries as of December 31,
2018 and 2017 are presented below:
M&T
(Consolidated)
M&T Bank
(Dollars in thousands)
Wilmington
Trust, N.A.
December 31, 2018:
Common equity Tier 1 capital
Amount ......................................................................... $ 9,960,811
Ratio(a) .........................................................................
10.13%
$10,636,136
$ 585,767
10.84%
60.69%
Tier 1 capital
Amount ......................................................................... 11,193,770
Ratio(a) .........................................................................
11.38%
10,636,136
585,767
10.84%
60.69%
Total capital
Amount ......................................................................... 13,454,137
Ratio(a) .........................................................................
13.68%
12,475,296
589,671
12.72%
61.10%
Leverage
Amount ......................................................................... 11,193,770
Ratio(b) .........................................................................
9.88%
10,636,136
585,767
9.42%
12.51%
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%
(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, 2018 as a result of
cumulative losses recognized and cash distributions received in prior years. Income or losses
recognized by M&T are included in other revenues from operations and totaled $24 million of
income in 2018, compared with losses of $11 million in 2016. Income recognized in 2017 was not
significant.
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
184
Company has obtained loan servicing rights for mortgage loans from BLG and Bayview Financial
having outstanding principal balances of $2.5 billion and $3.0 billion at December 31, 2018 and 2017,
respectively. Revenues from those servicing rights were $14 million, $17 million and $19 million
during 2018, 2017 and 2016, respectively. The Company sub-services residential mortgage loans for
Bayview Financial having outstanding principal balances of $56.8 billion and $56.6 billion at
December 31, 2018 and 2017, respectively. Revenues earned for sub-servicing loans for Bayview
Financial were $114 million, $103 million and $98 million in 2018, 2017 and 2016, respectively. In
addition, the Company held $113 million and $136 million of mortgage-backed securities in its held-to-
maturity portfolio at December 31, 2018 and 2017, respectively, that were securitized by Bayview
Financial. At December 31, 2018, the Company held $127 million of Bayview Financial’s $900
million syndicated loan facility.
25. Parent company financial statements
Condensed Balance Sheet
Assets
Cash in subsidiary bank ...................................................................... $
Due from consolidated bank subsidiaries
December 31
2018
2017
(In thousands)
40,609 $
13,379
Money-market savings...................................................................
Current income tax receivable .......................................................
Total due from consolidated bank subsidiaries .........................
856,881
1,117
857,998
1,616,147
4,437
1,620,584
Investments in consolidated subsidiaries
Banks.............................................................................................. 15,491,277 14,841,794
253,904
Other ..............................................................................................
23,453
Investments in trust preferred entities (note 19) .................................
66,023
Other assets .........................................................................................
Total assets ................................................................................ $ 16,801,672 $ 16,819,137
324,360
23,241
64,187
Liabilities
Accrued expenses and other liabilities................................................ $
Long-term borrowings ........................................................................
Total liabilities...........................................................................
49,093
519,225
568,318
Shareholders’ equity......................................................................... 15,460,191 16,250,819
Total liabilities and shareholders’ equity .................................. $ 16,801,672 $ 16,819,137
63,719 $
1,277,762
1,341,481
185
Condensed Statement of Income
2018
Year Ended December 31
2017
(In thousands, except per share)
2016
Income
Dividends from consolidated bank subsidiaries.................. $ 1,250,000 $ 1,540,000 $ 1,930,000
(10,752)
Equity in earnings of Bayview Lending Group LLC..........
5,530
Other income.......................................................................
Total income................................................................... 1,275,917 1,549,845 1,924,778
23,500
2,417
352
9,493
Expense
Interest on long-term borrowings........................................
Other expense......................................................................
Total expense..................................................................
36,354
23,894
60,248
21,591
19,636
41,227
18,963
21,361
40,324
Income before income taxes and equity in undistributed
income of subsidiaries...................................................... 1,215,669 1,508,618 1,884,454
Income tax credits ...............................................................
17,247
Income before equity in undistributed income of
subsidiaries ...................................................................... 1,224,115 1,535,071 1,901,701
Equity in undistributed income of subsidiaries
Net income of subsidiaries .................................................. 1,943,965 1,413,235 1,343,413
Less: dividends received ..................................................... (1,250,000) (1,540,000) (1,930,000)
(586,587)
Equity in undistributed income of subsidiaries...................
Net income........................................................................... $ 1,918,080 $ 1,408,306 $ 1,315,114
Net income per common share
(126,765)
693,965
26,453
8,446
Basic ............................................................................... $
Diluted ............................................................................
12.75 $
12.74
8.72 $
8.70
7.80
7.78
186
Condensed Statement of Cash Flows
Cash flows from operating activities
Net income .......................................................................... $ 1,918,080 $ 1,408,306 $ 1,315,114
Adjustments to reconcile net income to net cash provided
by operating activities
2018
Year Ended December 31
2017
(In thousands)
2016
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...................
Gain on sale of assets .....................................................
(2,342)
Net cash provided by operating activities ...................... 1,220,822 1,536,449 1,909,100
(693,965)
4,949
(8,242)
—
126,765
4,543
(170)
(2,995)
Cash flows from investing activities
Proceeds from sales or maturities of
investment securities ........................................................
Other, net.............................................................................
Net cash provided by investing activities.......................
—
29,933
29,933
—
12,407
12,407
51
13,619
13,670
Cash flows from financing activities
Purchases of treasury stock ................................................. (2,194,396) (1,205,905)
(457,402)
Dividends paid — common ................................................
(72,734)
Dividends paid — preferred................................................
—
Proceeds from long-term borrowings..................................
—
Redemption of Series D preferred stock .............................
Proceeds from issuance of Series F preferred stock............
—
34,524
Other, net.............................................................................
(641,334)
(441,891)
(81,270)
—
(500,000)
495,000
143,764
Net cash used by financing activities ............................. (1,982,791) (1,701,517) (1,025,731)
897,039
885,148
897,490 $ 1,629,526 $ 1,782,187
Net increase (decrease) in cash and cash equivalents .........
(152,661)
Cash and cash equivalents at beginning of year.................. 1,629,526 1,782,187
Cash and cash equivalents at end of year............................ $
Supplemental disclosure of cash flow information
Interest received during the year ......................................... $
Interest paid during the year................................................
Income taxes received during the year................................
(510,382)
(72,521)
748,595
—
—
45,913
2,219 $
17,482
6,362
2,313 $
18,498
21,740
(732,036)
1,931
15,918
8,877
187
26. Recent accounting developments
The following table provides a description of accounting standards that were adopted by the
Company in 2018 as well as standards that are not effective that could have an impact to M&T’s
consolidated financial statements upon adoption.
Standard
Description
Standards Adopted in 2018
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.
Recognition and
Measurement of
Financial Assets
and Financial
Liabilities
Improvements to
Accounting for
Hedging
Activities
Improving the
Presentation of
Net Periodic
Pension Cost and
Net Periodic
Postretirement
Benefit Cost
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 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. In October 2018,
amended guidance was issued permitting the
use of the OIS rate based on SOFR as a U.S.
benchmark interest rate for hedge accounting
purposes in addition to the US Treasury, the
LIBOR swap rate, the OIS rate based on Fed
Funds Effective Rate, and the SIFMA
Municipal Swap Rate.
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.
Required date
of adoption
Effect on consolidated financial statements
January 1, 2018 As described in note 10 the Company adopted the
revenue recognition guidance effective January 1,
2018 and applied the modified retrospective
approach for reporting purposes. 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 did not have a material
effect on the Company’s financial position or
results of operations.
January 1, 2018 At January 1, 2018 the Company reclassified
marketable equity securities from investment
securities available for sale. Upon adoption, $17
million of fair value changes in those equity
securities, net of tax, were reclassified from
accumulated other comprehensive income to
retained earnings. See note 2 for information on
amounts recognized in gain (loss) on bank
investment securities in the consolidated statement
of income.
January 1, 2019
Early adoption
permitted
The Company early adopted the amended
guidance on January 1, 2018 and such adoption
did not have a material impact on its consolidated
financial statements. The amended guidance
issued in October 2018 also became effective on
January 1, 2018 for entities that early adopted the
previous improvements to hedge accounting
guidance. This amended guidance did not have a
material impact on the Company’s consolidated
financial statements.
January 1, 2018
The Company adopted the new reporting
requirements effective January 1, 2018. The
Company previously reported all of its net
periodic pension and postretirement benefit costs
in salaries and employee benefits expense 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 impact of
adopting the amended guidance was not material.
188
Required date
of adoption
January 1, 2018
Effect on consolidated financial statements
The Company adopted the amended guidance on
January 1, 2018. The guidance is being applied
on a prospective basis for awards modified on or
after the adoption date.
January 1, 2018
The guidance was adopted on January 1, 2018 and
did not have a material impact on the Company’s
consolidated financial statements.
Standard
Description
Standards Adopted in 2018
Scope of
Modification
Accounting for
Share-Based
Payment Awards
Restricted Cash
The amended guidance addresses which
changes to the terms and conditions of a share-
based payment award require an entity to apply
modification accounting.
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.
Classification of
Certain Cash
Receipts and
Cash Payments
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 was applied for 2018 reporting and
did not have a material impact on the Company’s
consolidated statement of cash flows.
Clarifying the
Definition of a
Business
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.
Standards Not Yet Adopted as of December 31, 2018
January 1, 2018
The guidance was adopted January 1, 2018 and
will be applied to future transactions. The
Company does not expect the guidance to have a
material impact on its consolidated financial
statements.
January 1, 2019
Early adoption
permitted
The Company occupies certain banking offices
and uses certain equipment under noncancelable
operating lease agreements which prior to the
adoption of the guidance are not reflected in its
consolidated balance sheet at December 31, 2018
and 2017. The Company adopted the guidance
effective January 1, 2019 and recognized a right
of use asset of $394 million and increased
liabilities by $399 million as a result of
recognizing lease liabilities on its consolidated
balance sheet. The Company does not expect the
new guidance will have a material impact on its
consolidated statement of income.
Leases
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.
189
Required date
of adoption
January 1, 2019
Early adoption
permitted
January 1, 2020
Early adoption
permitted as of
January 1, 2019
Effect on consolidated financial statements
The Company adopted the amended guidance
effective January 1, 2019 and applied the modified
retrospective approach for reporting purposes. The
adoption did not have a material effect on the
Company’s financial position and will not have a
material effect on its results of operations.
The Company is developing its approach for
determining expected credit losses under the new
guidance. The Company has a cross-functional
implementation team working on model
development, model validation, and development
of a qualitative framework, data sourcing, and
technology enhancements. 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 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 expected increase to
the allowance for credit losses and the impact to
the Company’s financial statements are still being
determined.
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.
Standard
Description
Standards Not Yet Adopted as of December 31, 2018
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.
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.
The amended guidance eliminates step 2
from the goodwill impairment test.
Measurement of
Credit Losses on
Financial
Instruments
Simplifying the
Test for
Goodwill
Impairment
190
Standard
Description
Standards Not Yet Adopted as of December 31, 2018
The amended guidance modifies the
disclosure requirements on fair value
measurements in Topic 820, Fair Value
Measurements. The amendments are a result
of the disclosure framework project that
focuses on improvements to the
effectiveness of disclosures in the notes to
financial statements. The amendments
remove, modify, and add certain disclosure
requirements. The disclosure requirements
being removed relating to public companies
are (1) the amount and reason for transfers
between Level 1 and Level 2 of the fair
value hierarchy, (2) the policy for timing of
transfers between levels, and (3) the
valuation process for Level 3 fair value
measurements. The disclosure requirements
being modified relating to public companies
are (1) for investments in certain entities that
calculate net asset value, an entity is required
to disclose the timing of liquidation of an
investee’s asset and the date when
restrictions from redemption might lapse
only if the investee has communicated the
timing to the entity or announced the timing
publicly, and (2) the measurement
uncertainty disclosure is to communicate
information about the uncertainty in
measurement as a result of the use of
unobservable inputs. The disclosure
requirements being added relating to public
companies are (1) to disclose the changes in
unrealized gains and losses for the period for
recurring Level 3 fair value measurements,
and (2) to disclose the range and weighted
average of significant unobservable inputs
used to develop Level 3 fair value
measurements.
The amended guidance requires a hosting
arrangement that is a service contract to
follow the guidance in Subtopic 350-40 to
determine which implementation costs to
capitalize and which costs to expense.
Changes to the
Disclosure
Requirements for
Fair Value
Measurements
Customer’s
Accounting for
Implementation
Costs Incurred in
a Cloud
Computing
Arrangement
That Is a Service
Contract
Required date
of adoption
January 1, 2020
Early adoption
permitted
Effect on consolidated financial statements
The amendments relating to changes in unrealized
gains and losses, the range and weighted average of
significant unobservable inputs used to develop
Level 3 fair value measurements, and the narrative
description of measurements uncertainty should be
applied prospectively. All other amendments
should be applied retrospectively. The Company
does not expect the guidance to have a material
impact on its consolidated financial statements.
January 1, 2020
Early adoption
permitted
The amendments should be applied either
retrospectively or prospectively to all
implementation costs incurred after the date of
adoption. The Company is evaluating the impact
that the guidance will have on its consolidated
financial statements.
191
Required date
of adoption
January 1, 2020
Early adoption
permitted
Effect on consolidated financial statements
The amendments should be applied retrospectively
with a cumulative-effect adjustment to retained
earnings at the beginning of the earliest period
presented. The Company does not expect the
guidance to have a material impact on its
consolidated financial statements.
January 1, 2021
Early adoption
permitted
The amendments should be applied retrospectively.
The Company does not expect the guidance to have
a material impact on its consolidated financial
statements.
Standard
Description
Standards Not Yet Adopted as of December 31, 2018
Improvements to
Related Party
Guidance for
VIEs
The amended guidance requires that indirect
interests held through related parties in
common control arrangements should be
considered on a proportional basis for
determining whether fees paid to decision
makers and service providers are variable
interests.
Changes to the
Disclosure
Requirements for
Defined Benefit
Plans
The amended guidance modifies the
disclosure requirements for employers that
sponsor defined benefit pension or other
postretirement plans. The amendments are a
result of the disclosure framework project
that focuses on improvements to the
effectiveness of disclosures in the notes to
financial statements. The amendments
remove and add certain disclosure
requirements. The disclosure requirements
being removed relating to public companies
are (1) the amounts in accumulated other
comprehensive income expected to be
recognized as components of net periodic
benefit cost over the next fiscal year, (2) the
amount and timing of plan assets expected to
be returned to the employer, (3) the 2001
disclosure requirement relating to Japanese
Welfare Pension Insurance Law, (4) related
party disclosures about the amount of future
annual benefits covered by insurance, and
(5) the effects of a one-percentage-point
change in assumed health care cost trends on
the benefit cost and obligation. The
disclosure requirements being added relating
to public companies are (1) the weighted-
average interest crediting rates for cash
balance plans , and (2) an explanation of the
reasons for significant gains and losses
related to changes in the benefit obligation
for the period.
192
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, 2018.
(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, 2018 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 2019 Annual Meeting
of Shareholders, to be filed with the SEC pursuant to Regulation 14A on or about March 7, 2019 (the
“2019 Proxy Statement”). The information concerning M&T’s directors will appear under the
caption “NOMINEES FOR DIRECTOR” in the 2019 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 2019 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 2019 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.
193
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 2019
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 2019 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 2019 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, 2019” in the 2019 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).
194
3.2
3.3
3.4
3.5
3.6
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Amended and Restated Bylaws of M&T Bank Corporation, effective April 17, 2018.
Incorporated by reference to Exhibit 3.2 to the Form 8-K dated April 20, 2018 (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.
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).*
Amendment No. 1 to M&T Bank Corporation Supplemental Pension Plan. Filed herewith.
Amendment No. 2 to M&T Bank Corporation Supplemental Pension Plan. Filed herewith.
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).*
Amendment No. 1 to M&T Bank Corporation Supplemental Retirement Plan. Filed
herewith.
Amendment No. 2 to M&T Bank Corporation Supplemental Retirement Plan. Filed
herewith.
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).*
195
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
11.1
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 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.”
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 (No. 333-227644). 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.
196
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.
197
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 20th day of February, 2019.
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
Chairman of the Board
and Chief Executive Officer
February 20, 2019
Executive Vice President
and Chief Financial Officer
February 20, 2019
Senior Vice President and
Controller
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
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
198
/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/ Kevin J. Pearson
Kevin J. Pearson
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
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
199
D I R E C T S T O C K P U R C H A S E
A plan is available to common shareholders and the general public whereby
A N D D I V I D E N D
shares of M&T Bank Corporation’s common stock may be purchased directly
R E I N V E S T M E N T P L A N
through the transfer agent noted below and common shareholders may also
invest their dividends and voluntary cash payments in additional shares of
M&T Bank Corporation’s common stock.
I N Q U I R I E S
Requests for information about the Direct Stock Purchase and Dividend
Reinvestment Plan and questions about stock certificates, dividend checks,
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/mbnk
Requests for additional copies of this publication or annual or quarterly
reports filed with the United States Securities and Exchange Commission
(SEC Forms 10-K and 10-Q), which are available at no charge, may be
directed to:
M&T Bank Corporation
Shareholder Relations Department
One M&T Plaza, 8th Floor
Buffalo, NY 14203-2399
716-842-5138
E-mail address: ir@mtb.com
All other general inquiries may be directed to: 716-635-4000
I N T E R N E T A D D R E S S
www.mtb.com
Q U O TAT I O N A N D T R A D I N G
M&T Bank Corporation’s common stock is traded under the
O F C O M M O N S T O C K
symbol MTB on the New York Stock Exchange (“NYSE”).
mtb.com
SEC 10-K
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COVER & NARRATIVE