M&T Bank Annual Report 2020

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FY2020 Annual Report · M&T Bank

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2020
or

☐☐ 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

ff
(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

Name of Each Exchange on Which Registered
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 ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ No ☐

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 ☒ No ☐

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
NNon-accelerated filer
Emerging growth company

☒
☐
☐

Accelerated filer
Smaller reporting company

☐
☐

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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒

Indicate by check mark whether the registrant is a shell companym

(as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

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, 2020: $12,939,363,542.

Number of shares of the Common Stock, $0.50 par value, outstanding as of the close of business on February 19, 2021: 128,636,592 shares.

(1) Portions of the Proxy Statement for the 2021 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, 2020
CROSS-REFERENCE SHEET

Item 1. Business....................................................................................................
Statistical disclosure pursuant to Guide 3

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

II.

III.

Form 10-K
Page

65
26

24,132
98

shareholders’ equity.......................................................................

133

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

24,135
96

80,136-141
137,144-145
126-128
89

79,143-149

adequacy of the allowance and provision ...................................... 77-89,128,143-149

B. Allocation of the allowance for loan losses........................................
Deposits
A. Average balances and rates ................................................................
B. Maturity schedule of domestic time deposits with balances of

$100,000 or more ...........................................................................

89,143-145

VI. Return on equity and assets ...................................................................... 26,58,102-103,105
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 ........................................................

155
27-48
49
49
50
50
50-52

Item 5. Market for Registrant’s Common Equity, Related Stockholder

Matters and Issuer Purchases of Equity Securities ..............................
A. Principal market..................................................................................
B. Approximate number of holders at year-end ......................................

53-55
53
24

PART II

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, 2020 and 2019 ..........
D. Consolidated Statement of Income — Years ended December 31,

2020, 2019 and 2018 ......................................................................

E. Consolidated Statement of Comprehensive Income — Years

ended December 31, 2020, 2019 and 2018 ....................................

F. Consolidated Statement of Cash Flows — Years ended

December 31, 2020, 2019 and 2018 ...................................................

G. Consolidated Statement of Changes in Shareholders’ Equity —

Years ended December 31, 2020, 2019 and 2018 ..........................
H. Notes to Financial Statements ............................................................
I. Quarterly Trends .................................................................................

Item 9. Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure ......................................................................
Item 9A. Controls and Procedures...........................................................................

A. Conclusions of principal executive officer and principal financial

officer regarding disclosure controls and procedures.....................

B. Management’s annual report on internal control over financial

reporting .............................................................................................
C. Attestation report of the registered public accounting firm................
D. Changes in internal control over financial reporting ..........................
Item 9B. Other Information.....................................................................................

PART III

Item 10. Directors, Executive Officers and Corporate Governance.......................
Item 11. Executive Compensation..........................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters .........................................................

Item 13. Certain Relationships and Related Transactions, and Director

Independence ...........................................................................................
Item 14. Principal Accountant Fees and Services ..................................................

PART IV

Form 10-K
Page
25-26,113,124
11-12

53-55
54
55
55
24
25

55-114
115
115
116
117-119
120

121

122

123

124
125-205
113

206
206

206

206
206
206
206

206
207

207

207
207

Item 15. Exhibits and Financial Statement Schedules............................................
Item 16. Form 10-K Summary ...............................................................................
SIGNATURES.........................................................................................................

207-210
210
211-213

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 Yorkr 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, 2020
the Companymm
had consolidated total assets of $142.6 billion, deposits of $119.8 billion and
shareholders’ equity of $16.2 billion. The Company had 16,718 full-time and 655 part-time
employees as of December 31, 2020.

At December 31, 2020, M&T had two wholly owned bank subsidiaries: Manufacturers and

Traders Trust Companymm
(“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, 2020, 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 diffeff
opportunities, including the possibility of majora

acquisitions, and intends to continue this practice.

rent

stock of M&T Bank in

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
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,
2020, M&T Bank had 716 domestic banking offices located in New Yorkr 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, 2020, M&T Bank had consolidated total assets of $142.2 billion,
deposits of $121.1 billion and shareholder’s equity of $15.9 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.

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. As of December 31, 2020, Wilmington
Trust, N.A. had total assets of $6.2 billion, deposits of $5.5 billion and shareholder’s equity of $630
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, 2020, Wilmington Trust
Company had total assets of $1.3 billion and shareholder’s equity of $654 million. Revenues of
Wilmington Trust Company were $126 million in 2020. 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, 2020, M&T Insurance Agency had assets of $43 million and shareholder’s equity of
$23 million. M&T Insurance Agency recorded revenues of $37 million during 2020. The
headquarters of M&T Insurance Agency are located at 285 Delaware Avenue, Buffalo, New York
14202.

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, 2020, M&T Realty Capital serviced or sub-serviced $22.2 billion of
commercial mortgage loans for non-affiliates and had assets of $725 million and shareholder’s equity
of $174 million. M&T Realty Capital recorded revenues of $160 million in 2020. 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 lifeff
and in a number of other states. It provides securities brokerage, investment advisory and insurance
services. As of December 31, 2020, M&T Securities had assets of $63 million and shareholder’s
equity of $41 million. M&T Securities recorded $89 million of revenue during 2020. The
headquarters of M&T Securities are located at 285 Delaware Avenue, Buffalo, New York 14202.
Wilmington Trust Investment Advisors, Inc. (“WT Investment Advisors”), a wholly owned

insurance agent in each state where M&T Bank operates branch offices

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, 2020, WT Investment Advisors had assets of $52 million
and shareholder’s equity of $46 million. WT Investment Advisors recorded revenues of $39 million
in 2020. The headquarters of WT Investment Advisors are located at 1100 North Market Street,
Wilmington, Delaware 19890.

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 Funduu s. Wilmington Funds Management had

assets and shareholder’s equity
Management recorded revenues of $22 million in 2020. The headquarters of Wilmington Funds
Management are located at 1100 North Market Street, Wilmington, Delaware 19890.

of $22 million as of December 31, 2020. Wilmington Funds

Wilmington Trust Investment Management, LLC (“WTIM”) is a wholly owned subsidiary of
company. WTIM is a

M&T and was incorporated in December 2001 as a Georgia limited liability
registered investment advisor under the Investment Advisors Act and provides investment
management services to clients, including certain private funds. As of December 31, 2020, WTIM
has assets of $12 million and shareholder’s equity of $10 million. WTIM recorded revenues of $4
million in 2020. 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,
2020.

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 Suppluu
ementary 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 sumuu

of consolidated interest
income and other income in any of the last thrt ee years was interest on loansaa . 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
mm
and financial holding companies and their subsidiaries. Regulation of financial institutions such as
M&T and its subsidiaries
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.

is intended primarily for the protection of depositors, the FDIC’s DIF and

regulatory framework applicable to bank

are subject to the comprehensive

Proposals to change the applicablea

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 all pending 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
to extensive regulation, examination and oversight by the NYSDFS and the Federal

u
is subject
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
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.

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 obligated by a Federal Reserve
policy 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 finff ancial in nature include securities underwriting and dealing, insurance
underwriting and merchant banking.

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 M&T’s ability to enter
into certain transactions, including acquisitions, or obtain necessary approvals in connection
therewith, as well as loss of financial holding company status. Additionally, if all of the Company’s
depository institution subsidiaries have not received at least a “satisfactory” rating on its most recent
examination under the Community Reinvestment Act of 1977 (the “CRA”), it would not be able to
commence any new financial activities or acquire a company that engages in such activities, although
it would still be allowed to engage in activities closely related to banking and make investments in
the ordinary course of conducting banking activities. For recent revisions to the CRA, see the section
captioned “Community Reinvestment Act” included herein.

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”), U.S. bank holding companies with total consolidated assets of $100 billion
or more, 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 October 2019, the Federal Reserve and the other Federal bank regulators adopted rules that
tailor the application of the enhanced prudential standards to bank holding companies and of capital
and liquidity requirements to bank holding companies and depository institutions (the “Tailoring
Rules”). The Tailoring Rules assign each U.S. bank holding company 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 other 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 bank holding companymm
pursuant to the Tailoring Rules, its depository institution subsidiaries) is subjeu
standards, which 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.

(“G-SIB”). Under the Tailoring Rules, M&T (and,

ct to Category IV

Under the Tailoring Rules, Category IV firms, among other things, (1) are not subject to any

Liquidity Coverage Ratio (“LCR”) or Net Stable Funding Ratio (“NSFR”) (or, in certain cases,
subject to reduced requirements), (2) remain eligible to opt-out of the requirement to recognize most
elements of Accumulated Other Comprehensive Income (“AOCI”) in regulatory capital, (3) are no

longer subject to company-run stress testing requirements, (4) are subject to supervisory stress testing
on a biennial basis rather than an annual basis, (5) are subject to requirements to develop and
maintain a capital plan on an annual basis and (6) are subjb ect to certain liquidity risk management
and risk committee requirements. Category IV firms continue not to be subject to (1) advanced
approaches capital requirements, (2) the supplementary leverage ratio and (3) the countercyclical
capital buffer. Other elements of the Tailoring Rules are discussed in further
section.

detail throughout this

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.

Capital Requirements
M&T and its subsidiary
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”.

banks are required to comply with applicable capital adequacy standards

Among other matters, the Capital Rules imposemm

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
1 capital” instruments meeting certain specified requirements. Pursuant to the Capital Rules, the
minimum capital ratios are as follows:

Rules specify that Tier 1 capital consists of CET1 and “Additional Tier

•
•
•
•

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.

In March 2020, the Federal Reserve and the other federal banking regulators adopted rules to
integrate the stress testing regime with ongoing supervisory capital requirements by introducing a
dynamic and bespoke stress capital buffer requirement (the “Stress Capital Buffer”) for firms subject
to CCAR supervisory stress tests. Under the final rule, the capital conservation buffer requirement
was amended by replacing the static 2.5% risk-weighted assets component of the buffer with the
Stress Capital Buffer, which will be based on a firm’s individual supervisory stress test and cannot be
less than 2.5% of risk-weighted assets. As applicable to Category IV firms, M&T’s Stress Capital
Buffer, which is 2.5%, remains effective for two years, commencing on October 1, 2020, unless the
firm’s Stress Capital Buffer is reset in connection with a resubmission of a capital plan. Accordingly,
it currerr ntly is subject to a CET1 capital requirement of 7.0% (a sum of the Stress Capital Buffer and
the minimum CET 1 capital ratio). During these two years, M&T is required to maintain its Stress
Capital Buffer above its minimum CET1 risk-based, Tier 1 risk-based and total risk-based capital
requirements in order to avoid restrictions on capital
compensation. The severity of the constraints depends on the amount of the shortfalff
institution’s “eligible retained income” since March 2020, defined as the greater of (i) net income for

distributions and discretionary executive
l and the

the four preceding quarters, net of distributions and associated tax effects not reflected in net income;
and (ii) the average of all net income over the preceding four quarters.

CET1 consists of common stock instruments that meet the eligibility criteria in the Capital

net of treasury stock, retained earnings, certain
Rules, including common stock and related surplus,
minority interests and, for certain firms, 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. The
deductions and other adjustments to CET1 capital generally became fully phased-in on January 1,
2018, except that in November 2017, the federal banking regulators revised the Capital Rules to
extend the then-current transitional treatment of these deductions for non-advanced approaches
banking organizations (the “Transition Rule”) until revisions to the deductions became effective.

In July 2019, the federal banking regulators adopted rules intended to 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 (the “Capital Simplification
Simplifications Rules and the rescission of the Transition Rule were adopted by the Company as of
January 1, 2020.

Rules”). The Capital

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
provide a new standardized approach for operational risk capital. Under the Basel framework, these
standards will generally be effective on January 1, 2023, with an aggregate output floor phasing in
through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements
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 federal 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 periodic analyses of bank holding companies with at least
$100 billion in total consolidated assets to determine whether the companies have sufficient capital
on a consolidated basis necessary to absorb losses in baseline and severely adverse economic and
financial scenarios generated by the Federal Reserve. For Category IV firms, such as M&T, these
supervisory stress tests occur on a biennial basis, including 2020. The Federal Reserve may also use
additional components in the severely adverse scenario or additional or more complexmm
scenarios
designed to capture salient risks to specific business groups. A summary of results of the Federal
Reserve’s analysis under the severely adverse stress scenario is publicly disclosed. Under the
Tailoring Rules, Category IV firms, including M&T, are no longer subject to company-run stress

testing requirements. However, they remain subject 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

planning processes that account for each company’s unique risks and

as M&T, must submit annual capital plans for approval as part of the Federal Reserve’s CCAR
process. 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 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
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 September 2020, the Federal Reserve
issued a proposal to align its CCAR process with the categories of standards set forth in the Tailoring
Rules and requested comment on all its capital
planning guidance. Under the proposal, for Category
IV firms, the portion of the Stress Capital Buffer based on the Federal Reserve’s supervisory stress
tests would be calculated every other year. During a year in which a Category IV firm does not
undergo a supervisory stress test, the firmff
Buffer that
reflects the firm’s updated planned common stock dividends. A Category IV firm would also be able
to elect to participate in the supervisory stress test in a year in which the firm would not normally be
subject to the supervisory stress test and consequently receive an updated Stress Capital Buffer. In
June 2020, all bank holding companies participating in CCAR 2020, including M&T, were required
by the Federal Reserve to resubmit their capital
plans in November 2020 in light of the ongoing
economic effects of the Coronavirus Disease 2019 (“COVID-19”) pandemic. As a result of this
resubmission requirement, M&T and the other bank holding companies participating in CCAR have
been subject to the limitations on distributions described below since the third quarter of 2020.

would receive an updated Stress Capital

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. The Federal Reserve publishes the results of its supervisory stress tests and
quantitative CCAR review of capital plans by June 30 of each year.

Under the Stress Capital Buffer Rule adopted in March 2020, a bank holding company’s
planned capital distributions must be consistent with any effective distribution limitations that would
apply under the firm’s own baseline projections, including its Stress Capital Buffer. Additionally, as
noted above, in March 2020, the Federal Reserve and the other federal banking regulators adopted
rules to integrate the stress testing regime with supervisory
capital requirements by introducing the
uu
Stress Capital Buffer for firms subject to CCAR supervisory stress tests. M&T’s ability to make
capital distributions may be impacted in the event that M&T fails to maintain its Stress Capital
Buffer above its minimum CET1 risk-based, Tier-1 risk-based and total risk-based capital
requirements.

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 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.

The final rule implementing the Stress Capital Buffer (See above, “Capital Requirements”) also
provides that a BHC must receive prior approval for any dividend, stock repurchase, or other capital
distribution other than a capital distribution on a newly issued capital instrument, if the BHC is
required to resubmit its capital plan. In connection with the November 2020 resubmission described
under “Stress Testing and Capital Plan Review,” the Federal Reserve required those BHCs to
suspend stock repurchases during the third and fourth quarters of 2020, and not to increase common
stock dividends or pay common stock dividends in excess of their average net income over the past
four quarters. In the first quarter of 2021, Federal Reserve rules permit BHCs to repurchase stock and
pay dividends at a combined aggregate value of the average of their net income from the previous
four quarters.

a U.S. version of the Basel Committee’s LCR

Liquidity
Under the Tailoring Rules, the Company is not subject to the Federal Reserve and other federal
banking regulators rules, which implement
requirement, which 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 or the Net Stable Funding Ratio, which is designed to promote more
medium- and long-term funding of the assets and activities of banks over a one-year time horizon.
The Federal Reserve’s enhanced prudential standards, however, require the Company,
as a bank
holding company with $100 billion or more in total consolidated assets to comply with enhanced
liquidity and overall risk management standards, which include maintaining a level of highly liquid
assets based on projected funding needs for 30 days, and increased involvement by boards of
directors in liquidity and overall risk management.

Under the Tailoring Rules, M&T also remains subject to liquidity risk management

requirements, that require the company to: (i) calculate collateral positions monthly, as opposed to
weekly; (ii) establish a more limited set of liquidity risk limits; and (iii) monitor fewer elements of
intraday liquidity risk exposures. M&T is also subject to liquidity stress testing quarterly, rather than
monthly, and is required to report liquidity data on the FR 2052a on a monthly basis. M&T remains
subject to the liquidity buffer requirements.

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
The so-called Volcker Rule limits 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. In addition, the
Company does not engage in any significant covered fund activities that are impacted by the Volcker
Rule.

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
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.

plan, the

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, a
depository institution that is not an advanced approaches institution is deemed to be “well
capitalized” if it has (i) a CET1 ratio of at least 6.5%, (ii) a Tier 1 capital ratio of at least 8%, (iii) a
Total capital ratio of at least 10%, and (iv) a Tier 1 leverage ratio of at least 5%.

An institution that is categorized as undercapitalized, significantly undercapitalized or critically
undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal
banking regulator. Under the FDIA, in order for the capital restoration plan to be accepted by the
appropriate federal banking agency, a BHC must guarantee that a subsidiary depository institution

will comply with its capital restoration plan, subject to certain limitations. The BHC must also
provide appropriate assurances of performance. An undercapitalized institution is also generally
prohibited from increasing its average total assets, accepting brokered deposits or offering interest
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
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.

restoration plan or

t, N.A. (or any of their respective subsidiaries) with an affiliate

Transactions with Affiliates
There are various legal restrictions on the extent to which M&T and its non-bank subsidiaries or
Corporation, M&T Securities, Inc.,
affiliates (M&T Insurance Agency, Inc., M&T Realty Capital
Wilmington Trust, N.A., Wilmington Trust Investment Advisors, Inc.) 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 Trusrr
must in certain cases be secured by designated amounts of specified collateral and must be limited as
follows: (i) 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 (ii) 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,
ff
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 termrr
including credit standards, (i) that are substantially the same, or at least as favorable to such bank or
its subsidiary, as those prevailing at the time for comparable transactions with or involving other
nonaffiliated companies, or in the absence of comparable transactions, or (ii) that in good faith would
be offered to, or would apply to, nonaffiliated companies.

certain derivative transactions that create a

s and under circumstances

t, N.A. deposits are insured by the DIF of the FDIC up to the limits

FDIC Insurance Assessments
M&T Bank and Wilmington Trusrr
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.

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 imposmm ed
by the FDIC.

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. Financial holding companies are required to obtain prior approval from the
Federal Reserve before acquiring certain nonbank financial companies with assets exceeding $10
billion.

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 attemptmm to monopolize the business of banking in any section of the United States, or
the effeff ct 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 and includes the parties’ performance under the CRA and compliance
with laws, especially consumer protection laws. When evaluating a transaction, the Federal Reserve
must also take into account the institutions’ effectiveness in combating money laundering and
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,
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 effeff ctively 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
under the Dodd-Frank Act noted 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
enforcement actions may be taken against a banking organization if its incentive compensation

Guidance provides that

regulations

arrangements or related risk-management control or governance processes pose a risk to the
organization’s safety and soundness and the organization is not taking prompt and effective measures
to correct the deficiencies.

The Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish

joint regulations or guidelines prohibiting incentive-based payment arrangements at specified
regulated entities having at least $1 billion in total assets, such as M&T and M&T Bank. The
agencies proposed rules to implement this requirement but these proposed rules have not been
finalized.

In addition, 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.

Resolution Planning
Pursuant to the Dodd-Frank Act, as amended by EGRRCPA, certain bank holding companies are
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. In late 2019, in connection
with the release of the Tailoring Rules, the Federal Reserve and FDIC finalized rules that, among
other things, adjusted the review cycles and applicability of the agencies’ resolution planning
requirements. Under these rules, Category IV firms such as M&T are no longer required to submit
resolution plans.

The FDIC has separately implemented a resolution planning rule that requires insured
depository institutions (“IDIs”) 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. In April
2019, the FDIC released an advance notice of proposed rulemaking about potential changes to its
resolution planning requirements for IDIs. In January 2021, the FDIC lifted its moratorium on
resolution plans required for IDIs with $100 billion or more in total assets. This resumption in
periodic engagement with IDIs and a minimum
resolution planning requirements contemplates
twelve-month advance notice prior to a required resolution plan submission.

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 without limitation,
the FDIC has the power:

•

holders;

to transfer any of the depository institution’s assets and liabilities to a new depository
institution, including a newly formed “bridge” bank without the approval of the insolvent
depository institution’s creditors or equity
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
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 satisfyff
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
replaced and shareholders and creditors of the failed financial holding company would bear the
losses resulting from the failure.

the claims of unsecured

financial holding company would be

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 and personally identifiable information about consumers to non-
affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in
some circumstances, allow consumers to prevent disclosure of certain personal information to a non-
affiliated third party. These regulations affect how consumer information is transmitted through
diversified financial companies and conveyed to outside vendors. In addition, consumers may also
prevent disclosure of certain information among affiliated companies that is assembled or used to
determine eligibility for a product or service, such as that shown on consumer credit reports and asset
and income information from applications. Consumers also have the option to direct banks and other
financial institutions not to share information about transactions and experiences with affiliated
companies for the purpose of marketing products or services. Federal law makes it a criminal
offense, except in limited circumstances, to obtain or attempt to obtain customer information of a
financial nature by fraudulent or deceptive means.

In October 2016, the federal banking regulators jointly issued an advance notice of proposed

rulemaking on enhanced cyber risk management standards that are intended to increase the
operational resilience of large and interconnected entities under their supervision. 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 May 2019, the Federal Reserve
announced that it would revisit the Advance Notice of Proposed Rulemaking in the future. In
December 2020, the federal banking agencies issued a Notice of Proposed Rulemaking that would
require banking organizations to notify their primary regulator within 36 hours of becoming aware of
a “computer-security incident” or a “notification incident.” The Notice of Proposed Rulemaking also
would require specific and immediate notifications by bank service providers that become aware of
similar incidents.

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.

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. One example is the California Consumer Privacy Act, which became
effective on January 1, 2020 and applies to for-profit businesses that conduct business in California
and meet certain revenue or data collection thresholds.

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 Military Lending 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

The CFPB has broad powers to supervise and enforce

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.
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.

In addition, federal law 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 the relevant depository institutions: the Federal Reserve Board, the FDIC
and the OCC. For purposes of the CRA, M&T is regulated by the Federal Reserve Board. 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. An unsatisfactory CRA evaluation could result in the delay or denial of acquisition
or merger applications, among other activities. M&T Bank has a current
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 a rating of 1, or “Outstanding” 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 May 2020, the OCC issued its final
CRA rule, effective October 1, 2020 without the other federal banking agencies. In September 2020,
the Federal Reserve released an Advance Notice of Proposed Rulemaking that seeks public comment
on ways to modernize the Federal Reserve’s CRA regulation. The effects on the Company of any
potential change to the CRA rules will depend on the final form of any Federal Reserve rulemaking
and cannot be predicted at this time. The Company will continue to evaluate the impact of any
changes to the regulations implementing the CRA.

rating of “Outstanding.”

Bank Secrecy Act Regulation and Anti-Money Laundering Obligations
Federal laws and regulations imposmm e 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. These provisions also 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, including the denial by federal regulators of proposed merger, acquisition, restructuring or
other expansionary activity.

The Financial Crimes Enforcement

Network, which drafts regulations implementing

the USA

PATRIOT Act and other anti-money laundering and Bank Secrecy Act legislation, has adopted rules
that require financial institutions to, among other things, obtain beneficial ownership information
with respect to legal entities with which such institutions conduct business, subject to certain
exclusions and exemptions. Bank regulators are focusing their examinations on anti-money
laundering compliance, and M&T continues to monitor and augment, where necessary, its Bank
Secrecy Act and Anti-Money Laundering (“BSA/AML”) Compliance Program.

The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted in

January as part of the National Defense Authorization Act for Fiscal Year 2021. The AMLA is
intended to be the most comprehensive reform and modernization to U.S. bank secrecy and anti-
money laundering laws since the BSA was enacted. Among other things, it codifies a risk-based
approach to anti-money laundering compliance for financial institutions; requires the development of
standards for evaluating technology and internal processes for BSA compliance; expands
enforcement and investigation-related authority, including increasing available sanctions for certain
BSA violations and instituting BSA whistleblower incentives and protections. M&T will modify its
anti-money laundering compliance program as necessary to comply with the changes refleff cted in the
AMLA and the regulations that will implement it.

Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that prohibit 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, including denial by federal regulators of proposed merger, acquisition, restructuring,
or other expansionary activity. The OFAC rules are included as part of M&T’s BSA/AML
Compliance Program, which M&T continues to monitor and augment, where necessary.

Regulation of Insurers and Insurance Brokers
The Company’s operations in the areas of insurance agency/brokerage and reinsurance of credit life
insurance are subject to regulation and supervision by various state insurance regulatory authorities.
Although the scope of regulation and form of supervision may vary from state to state, insurance
laws generally grant broad discretion to regulatory authorities in adopting regulations and
supervising regulated activities. This supervision generally includes the licensing of insurance
brokers and agents and the regulation of the handling of customer funds held in a fiduciary capacity.
Certain of M&T’s subsidiaries
regulatory supervision and to insurance laws and regulations requiring, among other things,
record keeping, reporting and examinations.
maintenance of capital,

that are engaged in insurance-related activities are subject to extensive

affected by the monetary and fiscal policies of

rr Among the instruments of monetary policy used

operations in U.S. Government securities and federal funds,

Federal Reserve Policies
The earnings of the Company are significantly
governmental authorities, including the Federal Reserve.
by the Federal Reserve are open-market
changes in the discount rate on member bank borrowings and changes in reserve requirements against
member banknn 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 frequentlynn
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 foff reign exchange
markets. The monetary policies of the Federal Reserve have had a significant effect on the operatiaa ng
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 natureuu of future
may have on the Company’s business and earnings.

in monetary and fiscal policies or the effect which they

uses these instruments of monetary policy,

aa
changes

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; and Employee Complaint Procedures for Accounting and Auditing Matters. Copies of
such governance documents are also available, free of charge, to any person who requests them. Such
requests may be directed to M&T Bank Corporation, Shareholder Relations Department, One M&T
NY 14203-2399 (Telephone: (716) 842-5138).
Plaza, 8th Floor, Buffff alo,

Human Capital Resources
M&T recognizes employees are the difference makers that drive success. The Company’s talent
strategy focuses on recruiting, developing, promoting and retaining high-performing individuals of
diverse backgrounds whose strengths align with M&T’s values, purpose and leadership competencies
to create and maintain a highly competitive workforce.

As of December 31, 2020, the Company employed 17,373 full-time and part-time employees.

The Company’s employee base is concentrated in the Northeast and Mid-Atlantic United States, with
approximately 58% of employees residing in New York, followed by 13% in Maryland, 11% in
Delaware and the remainder primarily concentrated in the other states where M&T Bank maintains a
retail bank branch presence. Approximately 4% of the Company’s employee base resides outside of
its retail banking footprint. Inclusive in the above, as of December 31, 2020, the Company employed
106 international employees

based in the UK, Ireland, Canada, Germany and France.

The Company’s employee base includes 4,028 employees that support customers in the retail
branch network.r Overall, the average tenure of the Company’s employees is 10 years and the average
tenure of the Executive Officers that comprisemm

M&T’s Management Committee is 23 years.

Diversity, Inclusion and Belonging
M&T strives to foster an inclusive environment through which the unique talents and perspectives of
each employee are understood, valued, respected and leveraged. The Company’s recruiting and
engagement efforts are focused on attracting, promoting and retaining diverse, talented employees at
all levels. As of December 31, 2020, the Company’s workforce consisted of approximately 60%
women and 23% people of color.

M&T supports several employee resource group charters and chapters that are voluntary,
employee-driven groups organized around a particular shared interest and characteristic, such as race,
ethnicity, gender, sexual orientation or differing abilities. Approximately 36% of the Company’s
employees and 50% of managers are involved in these groups. The Company’s diversity efforts are
led by the its Chief Diversity Officff er, who is a member of the senior leadership team, and the Senior
Leadership Diversity & Inclusion Council, both of which champion inclusion efforts throughout the
Company. M&T's Board of Directors also receives updates on the Company's diversity, inclusion
and belonging efforts. Additionally, the Company’s Rising Leadership Development Program
focuses on building a successful talent pipeline by strengthening the leadership skills and connections
of the Company’s high-performing, diverse employees.

Development and Engagement
The Company’s performance management philosophy is foundational to its employees’ success,
focusing on reinforcing values, providing continuous, transparent feedback and recognizing and
rewarding outstanding performance. The Company helps empower employee performance and
cultivate employee development through a variety of learning offerings on topics such as technical,
job-specific skills and professional development, including courses aligned with the Company’s
enterprise-wide leadership competencies. Training content is made available as synchronous,
asynchronous, and blended learning solutions to promote employee access. The Companymm
also
invests in creating its leaders of tomorrow through various internal programs, including but not
limited to its Manager Acceleration Program, Management Development Program, Executive
Associate Program and Technology Development Program.

M&T’s commitment to finding the best talent, creating a positive employee experience and

fostering development results in a highly engaged employee base that drives the Company’s
success.
Since 2001, the Company has conducted 15 “Engagement Surveys,” with average participation rates
above 90%, demonstrating a commitment to fostering candid, open and honest, two-way
communication with employees to create the best, possible workplace. All survey results are
reviewed with senior management and shared with individual managers, who identify and implement
improvements based on employees’ feedback, as well as presented to M&T's Board of Directors.
Employees also participate in action planning within individual work groups. Throughout 2020, the
Company issued 15 additional surveys to continuously monitor employee welfare during the
COVID-19 pandemic and prioritize any needed employee support initiatives.

Compensation, Healthll
and Wellness
The Company provides what it believes are comprehensive
mm
intended to attract, retain and incentivize its employees. In addition to salaries, these programs
(which vary by country and region) include annual bonuses, stock awards, an Employee
Stock
Purchase Plan, a 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending
accounts, paid time off, parental leave, family care resources, flexible work schedules, employee
assistance programs and tuition assistance, among others.

compensation and benefits programs

The Company’s wellness program provides employees and their families with resources that
may be helpful in navigating life events and are designed to provide support to help improve their
well-being. In addition to addressing employees’ physical needs through flexible and convenient
medical plan and telemedicine options, M&T endeavors to find ways to contribute to employees’
emotional health and social well-being through various programs offered to employees. The
Company partners with several of its medical partners to offer sponsored events and courses, led by
medical experts, and also works to help employees manage their financial
educational resources.

wellness through free

In response to the global COVID-19 pandemic, the Company implemented increased safety

measures, such as introducing social distancing guidelines and providing protective equipment and
increased sanitation at all work sites. The Company also implemented work from home practices for
employees capable of performing their duties remotely. M&T will continue to monitor the COVID-
19 pandemic and take appropriate measures to protect the safety and health of employees.

in offering commercial and personal financial and wealth services with other

Competition
The Company faces extensive and intensive competition in the products and services it offers. The
Company competes
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.

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.

Table 1

SELECTED CONSOLIDATED YEAR-END BALANCES

2020

2019

2018
(In thousands)

2017

2016

Interest-bearing deposits at banks ......... $ 23,663,810 $
Federal funds sold .................................
Trading account.....................................
Investment securities

—
1,068,581

U.S. Treasury and federal

7,190,154 $
3,500
470,129

8,105,197 $

5,078,903 $

—
185,584

—
132,909

5,000,638
—
323,867

agencies ........................................

6,360,218

8,746,749

11,746,240

13,851,832

15,090,578

Obligations of states and political

subdivisions ..................................
Other ................................................
Total investment securities.........

Loans and leases

Commercial, financial, leasing,

etc. ................................................
Real estate — construction ..............
Real estate — mortgage...................
Consumer.........................................
Total loans and leases ................
Unearned discount ...........................

Loans and leases, net of

unearned discount ...................
Allowance for credit losses .............
Loans and leases, net..................
Goodwill................................................
Core deposit and other intangible

assets ..................................................
Real estate and other assets owned .......
Total assets............................................

Noninterest-bearing deposits.................
Savings and interest-checking

deposits...............................................
Time deposits ........................................
Deposits at Cayman Islands office........
Total deposits .............................
Short-term borrowings ..........................
Long-term borrowings ..........................
Total liabilities ......................................
Shareholders’ equity .............................

Table 2

1,531
683,948
7,045,697

4,915
745,587
9,497,251

9,153
937,420
12,692,813

27,151
785,542
14,664,525

64,499
1,095,391
16,250,468

27,801,382
10,068,141
44,447,376
16,558,889
98,875,788
(339,921)

23,987,897
9,010,297
42,816,450
15,373,881
91,188,525
(265,656)

23,136,913
8,823,635
42,816,858
13,956,086
88,733,492
(267,015)

21,900,258
8,125,925
44,965,038
13,251,665
88,242,886
(253,903)

22,770,629
8,066,756
48,134,198
12,130,094
91,101,677
(248,261)

98,535,867
(1,736,387)
96,799,480
4,593,112

90,922,869
(1,051,071)
89,871,798
4,593,112

88,466,477
(1,019,444)
87,447,033
4,593,112

87,988,983
(1,017,198)
86,971,785
4,593,112

90,853,416
(988,997)
89,864,419
4,593,112

14,165
34,668
142,601,105

29,034
85,646
119,872,757

47,067
78,375
120,097,403

71,589
111,910
118,593,487

97,655
139,206
123,449,206

47,572,884

32,396,407

32,256,668

33,975,180

32,813,896

67,680,840
3,899,910
652,104
119,805,738
59,482
4,382,193
126,413,822
16,187,283

54,932,162
5,757,456
1,684,044
94,770,069
62,363
6,986,186
104,156,108
15,716,649

50,963,744
6,124,254
811,906
90,156,572
4,398,378
8,444,914
104,637,212
15,460,191

51,698,008
6,580,962
177,996
92,432,146
175,099
8,141,430
102,342,668
16,250,819

52,346,207
10,131,846
201,927
95,493,876
163,442
9,493,835
106,962,584
16,486,622

Number at Year-End

2020

2019

2018

2017

2016

SHAREHOLDERS, EMPLOYEES AND OFFICES

Shareholders...................................................................... 16,797 17,333 18,099 18,864 19,802
Employees......................................................................... 17,373 17,773 17,267 16,794 16,973
855
Offices...............................................................................

794

771

751

833

Table 3

CONSOLIDATED EARNINGS

Interest income
Loans and leases, including fees......................................... $ 3,975,053
Investment securities

$ 4,442,182

$ 4,164,561

$ 3,742,867

$ 3,485,050

2020

2019

2018
(In thousands)

2017

2016

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

176,469
183
32,956
8,051
4,192,712

146,701
66,280
4,054
28
109,332
326,395
3,866,317
800,000
3,066,317

566,641
370,788
601,884
47,428
40,536
(9,421)
470,588
2,088,444

1,950,692
322,037
258,480
53,803
61,904
39,869

288,532
321
141,397
7,161
4,879,593

368,003
95,426
21,917
24,741
239,242
749,329
4,130,264
176,000
3,954,264

457,770
432,978
572,608
48,922
62,044
18,037
469,320
2,061,679

1,900,797
324,079
229,731
41,535
93,472
39,893

323,912
665
108,182
1,391
4,598,711

215,411
51,423
5,633
5,386
248,556
526,409
4,072,302
132,000
3,940,302

360,442
429,337
537,585
51,069
32,547
(6,301)
451,321
1,856,000

1,752,264
298,828
199,025
68,256
85,710
35,658

361,157
1,431
61,326
1,014
4,167,795

133,177
61,505
1,186
1,511
189,372
386,751
3,781,044
168,000
3,613,044

363,827
427,372
501,381
61,445
35,301
21,279
440,538
1,851,143

1,648,794
295,084
184,670
101,871
69,203
35,960

361,494
2,606
45,516
1,205
3,895,871

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

1,618,074
295,141
172,389
105,045
87,137
39,546

14,869
assets ................................................................................
683,586
Other costs of operations ....................................................
3,385,240
Total other expense.......................................................
1,769,521
Income before income taxes ...............................................
Income taxes .......................................................................
416,369
Net income ......................................................................... $ 1,353,152
Dividends declared

19,490
819,685
3,468,682
2,547,261
618,112
$ 1,929,119

24,522
823,529
3,288,062
2,508,240
590,160
$ 1,918,080

31,366
773,377
3,140,325
2,323,862
915,556
$ 1,408,306

42,613
687,540
3,047,485
2,058,398
743,284
$ 1,315,114

Common ....................................................................... $ 569,076
68,228
Preferred .......................................................................

$ 552,216
72,482

$ 510,458
72,521

$ 457,200
72,734

$ 441,765
81,270

Table 4

Per share

Net income

COMMON SHAREHOLDER DATA

2020

2019

2018

2017

2016

Basic .......................................................................... $
Diluted .......................................................................
Cash dividends declared..................................................
Common shareholders’ equity at year-end......................
Tangible common shareholders’ equity at

9.94
9.94
4.40
116.39

$ 13.76
13.75
4.10
110.78

$ 12.75
12.74
3.55
102.69

8.72
8.70
3.00
100.03

7.80
7.78
2.80
97.64

year-end........................................................................
Dividend payout ratio......................................................

Table 5

69.28
80.52
44.32% 29.70% 27.66% 34.24% 35.81%

75.44

69.08

67.85

CHANGES IN INTEREST INCOME AND EXPENSE(a)

2020 Compared with 2019

2019 Compared with 2018

Resulting from
Changes in:

Total
Change

Volume

Rate

Total
Change

Volume

Rate

(Increase (decrease) in thousands)

Interest income
Loans and leases, including fees ....................... $(472,523) 336,371
Deposits at banks...............................................
85,334
Federal funds sold and agreements to resell

(108,441)

(808,894) $278,610
33,215
(193,775)

101,577
24,193

177,033
9,022

securities .........................................................
Trading account .................................................
Investment securities

U.S. Treasury and federal agencies..............
Obligations of states and political

1,478
(731)

9,526
(358)

(8,048)
(373)

5,484
363

5,487
259

(3)
104

(97,088)

(74,239)

(22,849)

(38,192)

(51,898)

13,706

(173)
subdivisions...............................................
Other.............................................................
(14,979)
Total interest income.................................... $(692,457)

(189)
(2,536)

16
(12,443)

(449)
2,818
$281,849

(433)
855

(16)
1,963

Interest expense
Interest-bearing deposits

Savings and interest-checking deposits........ $(221,304)
(29,146)
Time deposits ...............................................
(17,863)
Deposits at Cayman Islands office...............
(24,713)
Short-term borrowings.......................................
(129,909)
Long-term borrowings.......................................
Total interest expense................................... $(422,935)

51,927
(19,098)
(3,417)
(12,130)
(49,983)

(273,231) $152,593
44,003
(10,048)
16,284
(14,446)
19,355
(12,583)
(9,314)
(79,926)
$222,921

10,760
2,525
15,529
16,135
(34,168)

141,833
41,478
755
3,220
24,854

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 separatelyl determined volume and rate changes.

(a)

Item 1A. Risk Factors.

Risk Factors Summary
Risks Relating to COVID-19 Pandemic

• The Company’s business, financial condition, capital and results of operations have been, and

will likely continue to be, adversely affected

by the COVID-19 pandemic.

Market Risk

• Weakness in the economy has adversely affecff

ted the Company in the past and may adversely

affect the Company in the future.

• The Company’s business and financial performance is impacted significantly by market
interest rates and movements in those rates over which the Company has no control.
• The forecasted discontinuation of LIBOR and the emergence of one or more alternative

benchmark indices to replace LIBOR could adversely impact the Company’s business and
results of operations.

• The Company’s business and performance is vulnerablea

to the impact of volatility in debt and

equity markets.

• The Company’s regional concentrations expose it to adverse economic conditions in its

primary retail banking office footprint.

Risks Relating to Compliance and the Regulatory Environment

to extensive government regulation and supervision.

• The Company is subject
• The Company may be subject to more stringent capital and liquidity requirements.
• 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.
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”).

•

Credit Risk

• Deteriorating credit quality could adversely impact the Company.
•

If the Company is unable to maintain or grow its deposits, it may be subject to paying higher
funding costs.

• The Company may be adversely affeff cted by the soundness of other financial institutions.

Liquidityii Risk

• The Company must maintain adequate sources of funding and liquidity.
• M&T relies on dividends from its subsidiaries for its liquidity.

Strategic Riskii

• The financial services industry is highly competitive and creates competitive pressures that

could adversely affect the Company’s revenue and profitability.

• 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 could suffer if the Company fails to attract and retain skilled personnel.

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.

• The Company’s information systems may experience interruptions or breaches in security.
• The Company could incur higher costs, experience lower revenue, and suffer reputational
damage in the event of the theft, loss or misuse of information, including due to a cyber
security attack.

• The Company is 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 Companymm

to liability and/or reputational damage.
• M&T relies on other companies to provide key components of the Company’s business

infrastructure.

• 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.

Business Risk

• Changes in accounting standards could impact the Company’s financial condition and results

of operations.

• 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.

• The Company’s models used for business planning purposes could perform poorly or provide

inadequate information.

• The Company is exposed to reputational risk.
• The Company’s framework for managing risks may not be effective.
• Severe weather, natural disasters, pandemics, acts of war or terrorism and other external

events could significantly impact the Company’s business

Risk Factors
face a number of potential risks and uncertainties that are difficult to
M&T and its subsidiaries
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, finaff
ncial condition and results of operations, as well as on the values of
financial instruments and M&T’s common stock. The Company has developed a risk
mm
the Company’s
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.

Risks Relating to COVID-19 Pandemic

M&T’s business, financial condition, capital and results of operations have been, and will likely
continue to be, adversely affected by the COVID-19 pandemic.

The Coronavirus Disease 2019 (“COVID-19”) pandemic has caused severe disruption to the U.S. and
global economy and created significant volatility in the financial markets. The duration of this
disruption and impact cannot be reasonably estimated at this time.

The pandemic has created economic and financial disruptions that have adversely affected, and

mm
t, the Company’s

business, financial condition, capital and results of operations will depend on future

are likely to continue to adversely affecff
results of operations. The extent to which the COVID-19 pandemic will continue to negatively affect
the Company’s
mm
developments, including the scope and duration of the pandemic, the effectiveness and distribution of
vaccines and other public health measures, the continued effectiveness of M&T’s business continuity
plans, the direct and indirect impact of the pandemic on the Company’s
clients, counterparties, vendors, service providers and other market participants, and actions taken by

ncial condition, capital and

employees, customers,

business, finaff

governmental authorities and other third parties in response to the pandemic, all of which are highly
uncertain and cannot be reasonably predicted.
The COVID-19 pandemic contributed to:
•

closure of businesses and

Increased unemployment levels, interrupted income of consumers and decreased consumer
confidence generally, leading to an increased risk of delinquencies, defaults and
foreclosures;
Increased disruption to businesses, permanent or temporary
decreased business confidence generally, leading to increased risk of delinquencies,
defaults and bankruptcies;
A sudden and signififf cant reduction in the valuation of the equity, fixed-income and
commodity markets and the significant increase in the volatility of those markets;
A decrease in the rates and yields on U.S. Treasury securities, which has negatively
impacted the Company’s net interest income and margin;
Declines in collateral values;
Increased demands on capital and liquidity, leading M&T to cease repurchases of its
common stock in 2020;
A reduction
dd
or services for customers, affecting related fee income and demand for the Company’s
services;
Heightened cybersecurity, information security and operational risks to the Company,
including as a result of remote work arrangements for employees
mobile banking activities by customers;
Disruptuu ions to the business operations of the Company, including temporary branch
closures and disruptions to branch and office openings, supply chains and employee
and working arrangements; and
Disruptuu ions to business operations at counterparties, vendors and other service providers.

in the value of the assets that the Company manages or otherwise administers

and increased digital and

travel

•

•
•

•

The pandemic is likely to continue to contribute to these risks and impacts and could affect
r

geographic areas in which the Company operates diffeff
Risk” and “Credit Risk.” As a result, the Company’s credit, operational and other risks are generally
expected to remain elevated until the pandemic subsides. In addition, the Company’s business
operations continue to be at risk of adverse disruption if significant portions of the Company’s
workforce are unable to work effectively, including because of illness, quarantines, government
actions, failures in systems or technology that disrupt remote work arrangements or other effects of
the pandemic, or if the Company is unable to keep branches or offices open, including because of
risk of infection.

rently as further noted herein under “Market

Governmental authorities have taken unprecedented measures to provide economic assistance to

business, financial condition, liquidity, capital and results of operations. If such

individual households and businesses, stabilize the markets and support economic growth. The
success of these measures is not yet entirely known and those measures may not be sufficient to fully
mitigate the negative impact of the COVID-19 pandemic. Additionally, some measures, such as a
suspension of mortgage and other loan payments and foreclosures, may have a negative impact on
mm
the Company’s
measures are not effective in mitigating the effects
of the COVID-19 pandemic on the Company’s
borrowers, the Company may also experience higher rates of default and increased credit losses in
future periods. The Company also faces an increased risk of litigation and governmental and
regulatory scrutiny as a result of the effects of the COVID-19 pandemic on market and economic
conditions and actions governmental authorities take in response to those conditions. Furthermore,
various government programs such as the Paycheck Protection Program are complex and the

Company’s participation may lead to litigation and governmental, regulatory and third party scrutiny,
negative publicity and damage to its reputation.

The length of the pandemic and the efficff acy of the measures being put in place to address it are

unknown. It is unknown when there will be a return to normal business activity and a subsiding of
the economic stress associated with the pandemic. Prolonged continuation of the pandemic could
worsen these risks and impacts. Until the pandemic subsides, the Company expects the potential for
reduced revenues in many of its fee-related businesses and increased customer and client defaults,
including defaults in unsecured loans. Even after the pandemic subsides, the U.S. economy may
experience a prolonged economic slowdown or recession, and M&T anticipates the Company’s
businesses would be materially and adversely affected by a prolonged economic slowdown or
recession. To the extent the pandemic adversely affects the Company’s business, financial condition,
liquidity, capital or results of operations, it may also have the effect of heightening many of the other
risks described in this “Risk Factors” section and M&T’s other filings with the Securities and
Exchange Commission.

Market Risk

Weakness in the economy has adversely affected the Company
the Company in the future.

in the past and may adversely affect

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:

•

•
•
•

impairment of investment securities in the Company’s investment

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-tempormm aryrr
securities portfolio or other investments.
A decrease in fees from the Company’s brokerage, trusrr
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.

t, and investment management

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, including 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:

•

pays on liabilities, which impacts the Company’s overall net

the difference between the interest that the Company earns on assets and the

the ability of borrowers to meet obligations under variable or adjustable
ts the Company’s loss rates on

ff
Affect
interest that the Companymm
interest income and profitability.
Adversely affect
rate loans and other debt instruments, which, in turn, affecff
those assets.
Decrease the demand for interest rate-based products and services, including loans and
deposits.
Affect
ff
may decrease the profitability or protection or increase the risk or cost associated with
such hedges.
Affect
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.

ff mortgage prepayment speeds and could result in the impairment of capitalized

the Company’s ability to hedge various forms of market and interest rate risk and

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 Companymm
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.

charges on loans and that the Company pays on borrowings and interest-

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 Companymm
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 effecff
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.

results of operations. M&T cannot predict

t on the Company’s

The forecasted discontinuation of LIBOR and uncertainty related to the emergence of one or more
alternative benchmark indices to replace LIBOR could adversely impact the Company’s business and
results of operations.

The Company’s floating-rate funding, certain hedging transactions and a significant portion of the
Company’s products, 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 alternative index, currency, basket or other financial metric.

In July 2017, the Chief Executive of the Financial Conduct Authority (“FCA”), which regulates
LIBOR, announced that the FCA intends to stop persuading or compelling its panel banks to submit
rates for the calculation of LIBOR after 2021. This announcement created market uncertainty as to

whether and to what extent panel banks will continue to provide submissions for the calculation of
LIBOR after 2021 and as to the continued existence of LIBOR after 2021. In this context, it has been
impossible to predict whether and for how long LIBOR will continue to be viewed as an acceptablea
market benchmark, what new or existing benchmark rate or rates may become accepted alternatives
to LIBOR, or what the effect of any changes in industry views or alternatives may be on the
functioning of LIBOR or the markets for LIBOR-linked financial instruments.

Following the FCA announcement in 2017, regulators and various financial industry groups

sponsored or formed committees (e.g., the Federal Reserve-sponsored Alternative Reference Rates
Committee (“AARC”)) to, among other things, facilitate the identification of an alternative
benchmark index to replace LIBOR, and publish recommended practices for transitioning the market
away from LIBOR, including (i) the utilization of recommended fallback language for LIBOR-linked
financial instruments, and (ii) development of alternative pricing methodologies for recommended
alternative benchmarks such as the Secured Overnight Financing Rate (“SOFR”).

SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury
securities, and is based on directly observable U.S. Treasury-based repurchase transactions. The fact
that SOFR is a secured rate and considered a “risk free” rate, while LIBOR is an unsecured rate that
factors in credit risk, means that SOFR may perform differently than LIBOR, and those differences
may be material, particularly in times of economic stress, negatively impacting the Company’s
profitability.

Over the past few years, the AARC’s recommendations and proposals have evolved, and the

Company has continued to monitor both ARRC and general market
has maintained its recommendation that SOFR is the preferred replacement for LIBOR, some
industry participants are questioning whether a “risk free” SOFR rate is an ideal replacement for
LIBOR in the commercial lending market and suggesting that a credit-sensitive component or
alternative be considered and developed. Whether this or other alternatives develop and gain any
traction in the market are unknown and unpredictable, and this adds further uncertainty to the LIBOR
transition process, both with respect to amending existing LIBOR contracts and pricing new
contracts based on SOFR or an alternative reference rate going forward.

developments. While the ARRC

In October 2020, The International Swaps and Derivatives Association, Inc. (ISDA), published

the IBOR Fallbacks Supplement (Supplement) and IBOR Fallbacks Protocol (Protocol). The
Supplement, which becomes effeff ctive on January 25, 2021, amends existing standard definitions for
interest rate derivatives to incorporate robust fallbacks to the SOFR benchmark for derivatives linked
to LIBOR. The Protocol enables market participants to incorporate these revisions into their legacy
non-cleared derivatives trades with other counterparties that choose to adhere to the Protocol. The
fallbacks apply following a permanent cessation of LIBOR or following a determination by the FCA
that LIBOR is no longer representative of the its underlying market. M&T and M&T Bank adhered
to the Protocol on November 5, 2020, and the Company is in the process of remediating its interest
rate swap hedging transactions with its end user customers, i.e., borrowers who have hedged their
interest rate payment obligations. There is a possibility that the Company’s end-user customers may
not adhere to the Protocol, which would necessitate one-on-one negotiation with each such customer
to amend legacy interest rate derivatives. If the Companymm
is not able to agree to appropriate LIBOR
fallbacks with these customers, there will be uncertainty as to how to value and effect the Company’s
rights and obligations under legacy derivatives contracts. With respect to the Company’s cleared
interest rate derivatives that reference LIBOR, although the Supplement and Protocol do not apply to
such cleared derivatives, both the CME and LCH clearinghouses plan on adopting the same relevant
SOFR benchmark fallbacks of the Supplement and Protocol on the date that the Supplement and
Protocol become effective.

The Company has outstanding issuances across various maturities of securities referencing

LIBOR in which the underlying contracts do not contemplatemm

cessation or contemplate cessation but

do so in a manner that may create other risks. Some of the contracts provide for selecting
replacement rates in a manner that presents significant challenges or that gives the Company or
another party discretion to select a rate or provide for determination of a reference rate. In these
types of cases, there will likely be uncertainty surrounding the transition.

In November 2020, (i) public statements issued by the ICE Benchmark Administration (IBA),
the administrator of LIBOR, and the FCA, announced a proposal to, among other things, extend the
publication of the most commonly utilized tenors of LIBOR until June 30, 2023, and (ii) a joint-
statement of the Board of Governors of the Federal Reserve System, the Office of the Comptroller of
the Currency and the Federal Deposit Insurance Corporation, indicated support for the IBA proposal
and encouraged banks to (a) transition away from LIBOR as soon as practicable, (b) cease (with
limited exceptions) entering into new contracts that use LIBOR as a reference rate as soon as
practicable and no later than December 31, 2021, and (c) for new contracts entered into before
December 31, 2021, either utilize a reference rate other than LIBOR or include robust fallback
language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation,
noting that failure to do so would create safety and soundness risks.

The discontinuation of LIBOR or changes in market perceptions of the acceptability of LIBOR

risk exposures (for example, if the

as a benchmark could result in changes to the Company’s
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 has issued
or owns. A substantial portion of the Company’s on- and off-balance sheet financial instruments
(many of which have terms that extend beyond 2021, and others that extend beyond 2023) 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. Uncertainty as to the timing and impact of the
discontinuation of LIBOR, the replacement of LIBOR with an alternative index, and the operational
feasibility of amending existing contracts referencing LIBOR to reference a replacement index could
result in pricing volatility, loss of market share in certain products, adverse tax or accounting
impacts, and compliance, legal and operational costs and risks.

The market’s transition from LIBOR to an alternative reference rate will be complex and

unpredictable, giving rise to a variety of risks, including operational risks, risks of value transfer
between contract parties, the potential for customer disputes and litigation, as well as regulatory
scrutiny, as the most recent regulatory announcements indicate that there will be increased regulatory
focus on LIBOR transition in 2021 and beyond, which increases the Company’s risk related to
regulatory compliance.

The Company established an enterprise-wide

LIBOR transition program in 2019, which now

includes a LIBOR Transition Office with senior management level leadership and dedicated full-time
employee staffing. An impact assessment has been completed to identify on- and off-balance sheet
exposures, systems, processes, models, customers, and employees affected by the discontinuation of
LIBOR. The Company continues to develop and execute plans to transition products and contracts
associated with LIBOR to alternative reference rates.

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:

•

•
•

•

the value of capitalized servicing assets.

the value or liquidity of the Company’s on-balance sheet and off-balance sheet

ff
Affect
financial instruments.
ff
Affect
ff M&T’s ability to access capital markets to raise funds. Inability to access capital
Affect
markets if needed, at cost effeff ctive rates, could adversely affect the Company’s liquidity
and results of operations.
Affeff ct 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
Impact the nature, profitability
Company engages.

or risk profile of the financial transactions in which the

services.

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 bankingkk

office footprint.

retail banking

The Company’s core banking business is largely concentrated within the Company’s
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. The credit quality of the Company’s borrowers
may deteriorate for a number of reasons that are outside the Company’s control, including as a result
of prevailing economic and market conditions and asset valuations. The trends and risks affecff
borrower credit quality, particularly in the Northeast and Mid-Atlantic regions, have caused, and in
the future may cause, the Company to experience impairment charges, which are drastic reductions
in the recoverable value of an asset, increased purchase demands, wherein customers make
withdrawals with minimum notice, higher costs (e.g., servicing, foreclosure, property maintenance),
additional write-downs and losses and a potential impactmm
reduction of customer deposits, which could have a material adverse effect on the Company’s
business, financial condition and results of operations.

to engage in lending transactions based on a

ting

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 regue

latory reform initiatives.

mm
the Company’s

sale and
structure, amounts of capital, investment practices, dividend policy, growth

The Company is subju ect to extensive federal and state regulation and supervision. Banking
regulations are primarily intended to protect consumers, depositors and the financial system as a
whole, not stockholders. These regulations and supervisory guidance affect
lending practices, capital
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 reputational damage, which could have a material adverse effect
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
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
mm
the Company’s

the Company’s ability to enter into

on the Company’s

activities.

business,

Any new regulatory requirements, changes to existing requirements, or changes to

interpretations of requirements could require changes to the Company’s
increased compliance costs and affect the profitability of such businesses. Additionally, such activity
could affeff ct 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
condition and results of operations.

businesses, result in

ff
business, financial

on the Company’s

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 the Company is subject and recent initiatives to reform financial institution
regulation, see Part I, Item 1 — Business in this report.

M&T may be subject to more stritt ngent capital and liquiditytt requirements.

Bank holding companies, including M&T, are subject to capital and liquidity requirements and
standards imposed as a result of the Dodd-Frank Act (as amended by EGRRCPA) and the U.S. Basel
III-based capital rules. For additional information, see “Capital Requirements” under Part I, Item 1
— Business.

Regulators have and may, from time to time, implement changes to these regulatory capital
adequacy and liquidity requirements. If the Company fails to meet these minimum capital adequacy
and liquidity guidelines and other regulatory requirements, its business activities, including lending,

and its ability to expand, either organically or through acquisitions, could be limited. 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. In addition, the liquidity-related provisions of the Federal Reserve’s
liquidity-related enhanced prudential supervision requirements may reduce the Company’s ability to
invest in other longer-term assets even if deemed more desirable from a balance sheet management
perspective.

EGRRCPA, the Tailoring Rules and other rulemaking have in some cases reduced the capital or

liquidity requirements applicable to M&T (e.g., the Company is no longer subject to any LCR
requirement, and the same is true for the finalized NSFR). However, Basel IV significantly revises
the Basel capital framework, and the impact on the Company will depend on the manner in which the
revisions arising from Basel IV are implemented in the U.S. with respect to firms

such as M&T.

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,
review of its capital plan by the Federal Reserve.

in part, on a

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. 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.
M&T cannot be certain that the Federal Reserve will not object to future capital plans.

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
with its capital plan,
stock in accordance with its capital plan or to otherwise remain in compliance
which may be adversely affected by market and other factors outside of M&T’s control.

In August 2020, the Federal Reserve Board provided M&T with an indicative Stress Capital
Buffer of 2.5%. The indicative Stress Capital Buffer of 2.5% is the floor under the regulatory capital
rules. As a general matter, if M&T is unable to maintain capital in excess of these levels, it would be
subject to limitations on its ability to make capital distributions, including paying dividends and
repurchasing stock.

In addition, during 2020 the Federal Reserve implemented measures requiring all large bank

holding companies to preserve capital through the suspension of share repurchase programs and
capping common stock dividends at existing rates that do not exceed the average of the last four
quarters’ earnings. These capital preservation actions applied to the third and fourth quarters of 2020.

In December 2020, the Federal Reserve extended to the first half of 2021 modifieff d restrictions,
which limit dividends and repurchases to an amount based on income over the past year. These
actions may be further extended or modified by the Federal Reserve as economic conditions develop.
The COVID-19 pandemic may cause the Company to further extend the suspension of its share
repurchase program and limit capital distributions, including reducing or suspending its common
stock dividend. In addition, if, as in June 2020, the Company is required to resubmit its capital plan,
the Companymm
generally may not make capital distributions, such as share repurchases or dividends,
without the prior approval of the Federal Reserve.

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 created 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
mm
based on the FDIC’s bank resolution model. The Secretary of the U.S. Treasury may trigger a
liquidation under this authority after consultation with the President of the U.S. and after receiving a
recommendation from the boards of the FDIC and the Federal Reserve upon a two-thirds vote.
Liquidation proceedings will be funded by the OLF, which will borrow from the U.S. Treasury and
impose risk-based assessments on covered financial companies. Risk-based assessments would be
first made on entities that received more in the resolution than they would have received in the
liquidation to the extent of such excess, and second, if necessary, on, among others, bank holding
companies with total consolidated assets of $50 billion or more, such as M&T. Any such assessments
may adversely affect the Company’s business, financial condition or results of operations.

Credit Risk

Deteriorating credit qualitytt could adversely impact the Company.

As a lender, the Company is exposed to the risk that customers will be unable to repay their loans
and other obligations in accordance with the terms of the relevant agreements, and that any collateral
securing the loans and obligations may be insufficient to assure full repayment. Credit losses are
inherent in the business of making loans and entering into other financial arrangements.

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, including in the New York City area; (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. The Company’s credit risk and the performance of its lending
portfolios may be affected by concentration in an industry, geographyaa
described further in the risk factor above, the Company’s credit risks have been impacted by the
COVID-19 pandemic and are generally expected to remain elevated until the pandemic subsides. The

or asset type. Also, as

pandemic has created economic and financial disruprr
to continue to adversely affecff

t, customers, including businesses in the hotel and travel industry.

tions that have adversely affected, and are likely

In response to the COVID-19 pandemic and to support its customers, the Company has offered

payment deferrals and other expanded assistance to businesses and consumers, and, during 2020,
committed in certain states in which it operates to suspend mortgage payments and foreclosure sales
for financially impacted customers for certain periods of time. A significant number of the
Company’s customers sought to suspend their mortgage payments under these programs.
Suspensions of mortgage payments and foreclosures and reduced pricing under these programs may
adversely affect the Company’s
revenue and results of operations. In addition, if these programs are
not effective in mitigating the financial consequences of COVID-19 on customers, or if customers
are unable to pay their loans after these programs expire, the Company may experience higher rates
of default, increased credit losses and additional increases to the allowance for credit losses in future
periods.

Commercial real estate valuations can be highly subjective as they are based upon many
assumptions. Such valuations can be significantly affeff cted 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, including as impacted by the COVID-19 pandemic, as described above.

The Company maintains an allowance for credit losses which represents, in management’s
judgment, the amount of losses expected 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.
Management believes that the allowance for credit losses as of December 31, 2020 appropriately
reflects expected credit losses in the loan and lease portfolio. However, there is no assurance that the
allowance is sufficient to cover all credit losses that may occur.

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 Companymm
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 due to or derivative exposure of the Company.
adverse effect on the Company’s financial condition and results of operations.

Any resulting losses could have a material

Liquidityii 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,

markets on favorable terms. Negative news about the Company or the financial

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
services industry generally may reduce market or customer confidence in the Company,
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’s 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.

which could

Regulatory changes relating to liquidity and risk management may also negatively impact the

Company’s results of operations and competitive position. Various regulations have been adopted to
impose more stringent liquidity requirements for large financial institutions, including the Company.
These regulations address, among other matters, liquidity stress testing and minimum liquidity
requirements. The application of certain of these regulations to banking organizations, such as the
Company, have been modified, including in connection with the implementation of the tailoring rules
in the EGRRCPA. While marginal relief from certain capital and liquidity standards has been
afforded to the Company (such as relief from LCR compliance), overall capital and liquidity
management practices and expectations will remain unchanged for the foreseeable
aa
the Companymm
composition as a result of the final rules.

does not anticipate significant changes to its overall liquidity and capital

future. Moreover,
levels or

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
condition and results of operations may be materially adversely affected. The Company may also
need to raise additional capital and liquidity through the issuance of stock, which could dilute the
ownership of existing stockholders, or reduce or even eliminate common stock dividends or share
repurchases to preserve capital and liquidity.

tively, the Company’s liquidity, operating margins, financial

effecff

If the Company is unable to maintain or grow its deposits,tt
costs.

it may be subject to paying higher funding

pays for funding costs is dependent, in part, on the Company’s

The total amount that the Companymm
ability to maintain or grow its deposits. If the Companymm
is unable to sufficiently maintain or grow its
deposits to meet liquidity objectives, it may be subject to paying higher funding costs. The Company
competes with banks and other financial services companies for deposits. If competitors
rates they pay on deposits, the Company’s funding costs may increase, either because the Company
raises rates to avoid losing deposits or because the Company loses deposits and must rely on more

raise the

expensive sources of funding. Customers may also move noninterest-bearing deposits to interest
bearing accounts, increasing the cost of those deposits. Checking and savings account balances and
other forms of customer deposits may decrease when customers perceive alternative investments,
such as the stock market, as providing a better risk/return tradeoff. The Company’s bank customers
could withdraw their money and put it in alternative investments, causing the Company to lose a
lower cost source of funding. Higher funding costs could reduce the Company’s net interest margin
and net interest income.

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 Riskii

The financial services industry is highlyll competitive and creates competitive pressures that couldll
adversely affect the Company’s

revenue and profitability.

operates is highly competitive. The Company
The financial services industry in which the Companymm
competes not only with commercial and other banks and thrifts, but also with insurance companies,
mm
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
mm
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 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 fromT

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. Acquiring other entities
involves potential risks that could have a material adverse impact on the Company’s business,
financial condition and results of operations, including:

•

•
•
•
•
•
•

•

Inability to fully achieve the Company’s strategic objectives and planned operating
efficiencies in an acquisition.
Issues arising during transition and integration.
Disruptuu ion of the Company’s business and diversion of management’s time and attention.
Exposure to unknown or contingent liabilities of acquired institutions.
Loss of key employees and customers of acquired institutions.
Dilution in the ownership percentage of holders of M&T common stock.
Payment of a premium over book and market values that may dilute the Company’s
tangible book value and earnings per common share in the short and long-term.
Inability to 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).
Changes in banking or tax laws or regulations that could impair or eliminate the expected
benefits of merger and acquisition activities.

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 Companymm
to hire or retain highly skilled and qualified individuals, it may be unablea
to execute its business
strategies and may suffer adverse consequences to its business, financial condition and results of
operations.

is not able

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

risk taking and are consistent with the safety and
compensation policies do not encourage imprudent
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.

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 or misconduct, inadequate or failed internal processes and systems, and
external events, including the risk of loss resulting from fraud by employees or persons outside the
company, and breaches in data security. 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.

As described further in the risk factor above, the Company’s operational risks have been
impacted by the COVID-19 pandemic and are generally expected to remain elevated until the
pandemic subsides.

The Company’s
due to events beyond the Company’s

control.

information systems may experience interruptions or breaches in security, including

customer relationships. Disruption of operating systems caused by

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
events beyond the Company’s control may include computer viruses, electrical or
telecommunications outages, quality of vulnerability patches, cyber security attacks (including
Distributed Denial of Service attacks, which occur when legitimate users are unable to access
information systems, devices, or other network resources due to the actions of a malicious cyber
threat actor), damage to property or physical assets, or events arising from political protests or
terrorist acts. 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, disruption, interruption or
security breach will not occur or, if any does occur, that it can be suffff iff ciently 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 digital
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 security attacks, to breach
data security at financial institutions or with respect to financial transactions. There have been
numerous 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, or the freezing of
operating systems and databases making them inaccessible or unusable. There have also been several
highly publicized cases where hackers have requested “ransom” payments in exchange for not
disclosing customer information or for restoring access to, or the usage of, operating systems and
databases. Ransomware is a form of malicious software, known as “malware,” designed to block
access to, and often encrypt, computer systems or data. Once the victim’s computer system or data is
locked down and encrypted, rendering it essentially useless, the malicious cyber actor then extorts
the victim by demanding a ransom payment in exchange for providing a method to decrypt it. The
attacker may also copy the victim’s data in the course of the attack and threaten to sell or publish the
data if the ransom is not paid. Ransomware attacks can result in a loss of business functionality and
of sensitive data.

As cyber security 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
security 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 techniques
may include attempts to fraudulently induce employees, customers or others to disclose sensitive
information in order to gain access to data or 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
and control systems, such as through the use of the Internet, personal computers,
phones and other mobile services. Security breaches affeff cting 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. Additionally, successful cyber security attacks
at other large financial institutions, whether or not the Company is impacted, could lead to a general
loss of customer confidence in financial institutions that could negatively affect M&T, including
harming the market perception of the effectiveness of the Company’s security measures or the
financial system in general which could result in reduced use of the Company’s financial products.
Though the Company has insurance against some cyber security risks and attacks, it may not be
sufficient to offset the impact of a material loss event.

mm
tablets, smart

security

The Company continues to expand its use of cloud service providers, which providers could

experience system breakdowns or failures, outages, downtime, cyber security-attacks, negative
changes to financial condition, bankruptcy, or other adverse conditions, which could have a material
adverse effect on the Company’s business and reputation. Thus, increasing the amount of
infrastructure that the Company outsources to the cloud or to other third parties may increase M&T’s
risk exposure.

The Company could incur higher costs, experience lower revenue, and suffer reputational damage in
the event of the theft, loss or misuse of information, including due to a cyber security attack.kk

Like other financial services firms, the systems, networks and devices of the Company, its customers,
employees, service providers or other third parties with whom the Company interacts continue to be

the subject of attempted unauthorized access, denial-of-service attacks, computer viruses, hacking,
malware, ransomware, phishing or other forms of social engineering, and cyber security attacks
designed to obtain confidential information, destroy data, disrupt or degrade service, eliminate access
or cause other damage. These threats may arise from human error, fraud on the part of employees,
insiders or third parties or may result from accidental technology failure. Further, cyber security and
information security risks for financial institutions have generally increased because of, among other
things, the growth of new technologies, the use of the internet and telecommunications technologies
(including computers, smartphones, and other mobile devices outside the Company’s systems) by
customers to conduct financial transactions, and the increased sophistication and activities of
organized crime, fraudsters, hackers, terrorists, activists, instrumentalities of foreign governments
and other external

parties.

Although the Company believes that a robust suite of authentication and layered security

controls, data encryption and tokenization, threat intelligence, anti-malware defenses and
vulnerability management tools exits, the failure of any of these controls could result in a failure to
detect, mitigate or remediate these risks in a timely manner. Further, as the Company expands its
mobile and digital capabilities, the number of attempted cyber security attacks may increase.

A disruption or breach, including as a result of a cyber security attack, or media reports of
perceived security vulnerabilities at the Company or at third-party service providers, could result in
significant legal and financial exposure, regulatory intervention, remediation costs, damage to
reputation or loss of confidence in the security of systems, products and services that could adversely
affect the Company’s business. Like other U.S. financial services providers, M&T continues to be
targeted with evolving and adaptive cyber security threats from sophisticated third parties. Although
the Companymm
is not aware of any material losses relating to cyber security incidents, there can be no
assurance that unauthorized access or cyber security incidents will not become known or occur or
that the Company will not suffer such losses in the future.

The Company is 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

to liability and/or reputational damage. New customer privacy initiatives will impose

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 Companymm
additional operational burdens on the Company, may limit the Company’s ability to pursue desirable
business initiatives and increase the risks associated with any future use of customer data. Significant
examples include the General Data Protection Regulation and the California Consumer Privacy Act.
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 Companymm
regulatory enforcement actions for breach of such laws and regulations.

more vulnerable to operational failures, and to monetary penalties, litigation or

As privacy-related laws and regulations are implemented, they may also limit how companies
like M&T can use customer data and impose obligations on companies in their management of such
data. The time and resources needed for the Companymm
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. The impacts will be greater to the extent requirements vary
across jurisdictions.

M&T relies on other companies to provide key components of the Company’s business
infrastructure.

of the Company’s business infrastructure such as banking

Third parties provide key components
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 disrupt
ions. Failures in the
Company’s business infrastructure could interrupt the operations or increase the costs of doing
business.

Additionally, the Company is exposed to the risk that a service disruption at a common service

provider to our third-party service providers could impede their ability to provide services to the
Company. Notwithstanding any attempts to diversify its reliance on third parties, the Companymm
not be able to effectively mitigate operational risks relating to its vendors’ use of common service
providers.

may

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 with respect to its obligations to indemnify directors and
officers of it and its subsidiaries in connection with certain legal matters as well as in situations
where it has agreed to indemnify others for losses related to legal proceedings, including for
litigation and governmental investigations and inquiries, such as in connection with the purchase or
sale of a business or assets. The results of such proceedings could lead to significant civil or criminal
penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions,
restrictions on the way in which the Company conducts its business, or reputational harm.

Although the Company establishes accruals for legal proceedings when information related to
the loss contingencies represented by those matters indicates both that a loss is probable and that the
amount of loss can be reasonably estimated, the Company does not have accruals for all legal
proceedings where it faces a risk of loss. In addition, due to the inherent subjectivity of the
assessments and unpredictability of the outcome of legal proceedings, amounts accrued may not
represent the ultimate loss to the Company from the legal proceedings in question. Thus, the
Company’s ultimate losses may be higher, and possibly significantly so, than the amounts accrued
for legal loss contingencies, which could adversely affect the Company’s financial condition and
results of operations.

Many financial institutions, including the Company, have received inquiries from the United
States Congress, regulators and other government agencies regarding implementation of provisions
and programs under the CARES Act, and may also face the risk of litigation concerning
involvement in these and other programs
mm
participation in the PPP under that Act. The Company’s
created in response to the COVID-19 pandemic may lead to additional government and regulatory
inquiries and litigation in the future, any of which could negatively impactmm
reputation, financial condition and results of operations.

mm
the Company’s

their

business,

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. For example, Accounting Standards Update 2016-13,
Measurement of Credit Losses on Financial Instruments, became effective January 1, 2020, and
substantially changed the accounting for credit losses on loans and other financial assets. 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 resultstt 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
mm
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.

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, among other uses. The Company uses models throughout many of its
business lines, relying on them, along with its judgement, for many decision making processes.
Examples of areas where the Company uses models include determining the pricing of various
products, grading loans and extending credit, measuring interest rate and other market risks,
predicting or estimating losses, assessing capital adequacy, and calculating economic and regulatory
capital levels. The Company also uses models to estimate the value of financial instruments and
balance sheet items. Models generally evaluate the performance of various factors under anticipated
future conditions, relying on historical data to help build the model and in part on assumptions as to
the future, often with respect to macro-economic conditions, in order to generate the output. 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 or misused models, including in the choice of relevant historical data or future-looking
assumptions, 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 informati
damage the Company’s reputation and adversely affect its reported financial condition and results of
operations. Even if the underlying assumptions used in the Company’s models are adequate, the
models may be deficient due to errors in computer
code, use of bad data during development or input
into the model during model use, or the use of a model for a purpose outside the scope of the model’s
design. As a result, the Company’s models may not fully capture or express the risks the Company
faces, may suggest that the Companymm
Company to misjudge the business and economic environment in which it operates. If the models
fail to produce reliable results on an ongoing basis, the Company may not make appropriate risk
management, capital planning, or other business or financial decisions. Furthermore, strategies that
the Companymm
employs to manage and govern the risks associated with its use of models may not be
effective or fully reliable, and as a result, the Company may realize losses or other lapses. Finally,
information the Company provides to the public or to its regulators based on poorly designed,
implemented, or managed models or misused models could be inaccurate or misleading. Some of the
decisions that the Company’s regulators make, including those related to capital distributions to
M&T’s stockholders, could be affected adversely due to their perception that the quality of the
models used to generate the relevant information is insufficient.

has sufficient capital when it may not, or may lead the

on, which may

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. A service disruption of the Company’s technology platforms or an
impact to the Company’s branches could have a negative impact on a customer’s access to banking

services, and harm the Company’s reputation with customers. 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.
Additionally, whereas negative public opinion once was primarily driven by adverse news

coverage in traditional media, the increased use of social media platforms facilitates the rapid
dissemination of information or misinformation, which magnifies the potential harm to the
Company’s reputation.

The Company’s framework for managing risks maya not be effective.

The Company’s risk management framework is made up of various processes and strategies to
manage its risk exposure. The framework to manage risk, including the framework’s underlying
assumptions, may not be effective under all conditions and circumstances. If the risk management
framework proves ineffective, the Company could suffer unexpected losses and could be materially
adversely affected.

The Company has established processes and procedures intended to identify, measure, monitor,
ct, including liquidity risk, credit risk, market

report, and analyze the types of risk to which it is subjeu
risk, interest rate risk, compliance risk, strategic risk, reputation risk, and operational risk related to
systems and vendors, among others. There are inherent limitations to the Company’s
its employees,
risk management strategies as there may exist, or develop in the future, risks that it has not
appropriately anticipated or identified. In addition, the Company relies on both qualitative and
quantitative factors, including models, to monitor, measure and analyze certain risks and to estimate
certain financial values, which are subjeb ct to error. The Company must also develop and maintain a
culture of risk management among its employees,
parties, and could fail to do so effectively. If the Company’s risk management framework proves
ineffective, the Company could incur litigation and negative regulatory consequences, and suffer
unexpected losses that could affect its financial condition or results of operations.

as well as manage risks associated with third

Severe weather, natural disasters, pandemics, acts of war or terrorism and other external events
could significantly

impact the Company’s business.

Severe weather, natural disasters, pandemics, 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 affeff ct the stability of the Company’s
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.

deposit base, impair the ability of borrowers to repay

Discussions of the specific risks outlined above and other risks facing the Company are
included within this Annual Report on Form 10-K in Part I, Item 1 “Business,” and Part II, Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Furthermore, in Part II, Item 7 under the heading “Forward-Looking Statements” is included a
description of certain risks, uncertainties and assumptions identified by management that are difficult
to predict and that could materially affect the Company’s financial condition and results of
operations, as well as the value of the Company’s financial instruments in general, and M&T
common stock, in particular.

In addition, the market price of M&T common stock may fluctuate significantly in response to a
number of other factors, including changes in securities analysts’ estimates of financial performance,
volatility of stock market prices and volumes, rumors or erroneous information, changes in market
valuations of similar companies
by the FASB or other regulatory agencies.

and changes in accounting policies or procedures as may be required

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, 2020, the cost of this property (including improvements
subsequent to the initial construction), net of accumulated depreciation, was $26.6 million.

M&T Bank owns and occupies an additional facility in Buffalo, New York (known as M&T

Center) with approximately 395,000 rentable square feet of space. At December 31, 2020, the cost
of this building (including improvements subsequent to acquisition), net of accumulated depreciation,
was $12.8 million.

M&T Bank also owns and occupies three separate facilities in the Buffalo area which support

certain back-office and operations functions of the Company. The total square footage of these
facilities approximates 290,000 square feet and their combined cost (including improvements
subsequent to acquisition), net of accumulated depreciation, was $26.3 million at December 31,
2020.

M&T Bank owns a facility in Syracuse, New York with approximately 160,000 rentable square
feet of space. Approximately 65% of that facility is occupied by M&T Bank. At December 31, 2020,
the cost of that building (including improvements subsequent to acquisition), net of accumulated
depreciation, was less than $1 million. M&T Bank has agreed to sell this facility. The closing date is
expected to be the first half of 2021.

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 100% of Wilmington Center and 34% of
Wilmington Plaza. At December 31, 2020, the cost of these buildings (including improvements
subsequent to acquisition), net of accumulated depreciation, was $40.3 million and $14.4 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 46% and 100% of those facilities, respectively. At December 31, 2020, the cost of
those buildings (including improvements subsequent to acquisition), net of accumulated depreciation,
was $8.8 million and $14.9 million, respectively.

No other properties owned by M&T Bank have more than 100,000 square feet of space. The
cost and 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 716 domestic banking offices of M&T’s subsidiary banks at December 31, 2020, 281 are

owned in fee and 435 are leased.

Item 3.

Legal Proceedinii gs.

will incur losses and the amounts of the losses can be reasonably

are subject in the normal course of business to various pending and

M&T and its subsidiaries
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 Companymm
estimated, the Company records an expense and corresponding
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 $25 million. Although the Companymm
does not believe that the
outcome of pending legal matters 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.

liability in its consolidated financial

Item 4. Mine Safetyff Disclosures.

Not applicable.

Executive Offiff cers of the Registrant
Information concerning M&T’s executive officers is presented below. 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 56, 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 with responsibility for the Company’s Wealth and Institutional
Services Division, Treasury Division, and Mortgage and Consumer Lending Divisions. Previously,
Mr. Jones served as chairman of the board and a director (2014) of Wilmington Trust Investment
Advisors, a director (2007) of M&T Insurance Agency, 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 60, 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 chairman, president and chief executive officer (2018) of Wilmington Trusrr
t N.A., 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 a director (2017) of
Wilmington Trust, N.A and a director (2020) of Wilmington Trust Company.

Kevin J. Pearson, age 59, is a vice chairman (2020) 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 an executive vice president of

M&T and M&T Bank, and has held a number of management positions since he began his career
with M&T Bank in 1989. He is chairman of the board and a director (2018) of Wilmington Trust
Company, chairman of the board (2020) and a director (2014) of Wilmington Trusrr
t, N.A., and a
director (2018) of Wilmington Trust Investment Advisors.

Robert J. Bojdak, age 65, is an executive vice president and chief credit officer (2004) of M&T

and M&T Bank, and is responsible for the Company’s
Management Division. From April 2002 to April 2004, Mr. Bojdak served as senior vice president
and credit deputy for M&T Bank and as a director (2004) of Wilmington Trust, N.A.. He is an
executive vice president (2004) of Wilmington Trust, N.A.

Credit Division, including the Credit Risk

John L. D’Angelo, age 58, 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
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) and a director (2020) 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.

governance and

William J. Farrell II, age 63, 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, president and chief executive officer (2020) and a director (2013) of Wilmington Trust,
N.A. and a director (2016) of Wilmington Trust Investment Advisors.

Christopher E. Kay, age 55, 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 51, 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 a director of M&T Insurance Agency (2018).

Gino A. Martocci, age 55, is an executive vice president (2014) of M&T and M&T Bank, and is

responsible for managing M&T Bank’s commercial banking lines of business. Mr. Martocci is
responsible for directing strategic growth and business line development activities across the
Company’s footprint for commercial customers. Previously, Mr. Martocci co-managed M&T Bank’s
commercial banking lines of business. 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 and was a member of the Directors Advisory Council of the New Jersey Division (2015) of
M&T Bank. He is chairman of the board (2018) and a director (2009) of M&T Realty Capital, and a
member of the Directors Advisory Council of the New York City/Long Island Division (2013) of
M&T Bank and its Mortgage Investment Committee.

Doris P. Meister, age 65, 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 59, is an executive vice president (2015) of M&T and M&T Bank, and

Transformation, a division of the Company dedicated to improving

is responsible for Enterprise
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 59, 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 55, 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, including
asset/liability management, funding, investment and derivative portfolio management, capital
markets foreign exchange trading and sales. 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) and is an executive vice
president and treasurer of Wilmington Trust Company (2012).

Tracy S. Woodrow, age 47, is an executive vice president and chief human resources officer
(2020) of M&T and M&T Bank. Ms. Woodrow is responsible for managing the Company’s Human
Resources Division. She is an executive vice president (2020) of Wilmington Trusrr
t, N.A. and
Wilmington Trust Company. Ms. Woodrow previously served as the Bank Secrecy Act / Anti-
Money Laundering / Office of Foreign Assets Control Officer (2013) for M&T, M&T Bank and
Wilmington Trust, N.A.

PART II

Item 5. Market for Regisii trant’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
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 2020, 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
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 2019 Equity Incentive Compensation Plan,
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.

as of December 31, 2020 with respect to shares of common

The tablea

does not include information with respect to shares of common stock subject

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, 2020, 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)

462,724

17,089
479,813

174.47

84.21
171.25

3,100,665

1,970
3,102,635

(1)

As of December 31, 2020, a total of 6,508 shares of M&T common stock were issuable upon exercise of
outstanding options or rights assumed by M&T in connection withtt merger and acquisition transactions. The
weighted-average exercise price ofo those outstanding options or rights is $86.76 per common share.

Equity compensation plans adopted without the approval of shareholders are described below:

2008 Directors’ Stock Plan. M&T maintains a plan for non-employee members of the Board
of Directors of M&T and M&T Bank, which allows such directors to receive all or a portion of their
directorial compensation in shares of M&T common stock.

bonus plan which was frozen effective

Deferred Bonus Plan. M&T maintains a deferred

ff
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, 2015 and ending on December 31, 2020. The KBW
Nasdaq Bank Index is a modified market capitalization weighted 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

2015

2016

2017

2018

2019

2020

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

132
129
112

147
152
136

126
125
130

153
171
171

119
153
203

2015

2016

2017

2018

2019

2020

* Assumes a $100 investment on December 31, 2015 and reinvestment of all dividends.

In accordance with and to the extent permitted by applicable law or regulation, the information

set forth above under the heading “Performance Graph” shall not be incorporated by reference into
any future filing under the Securities Act of 1933, as amended (the “Securities Act”), or the
Exchange Act and shall not be deemed to be “soliciting material” or to be “filed” with the SEC under
the Securities Act or the Exchange Act.

Issuer Purchases of Equity Securities
During the fourth quarter of 2020, 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, 2020 ......................................
November 1 - November 30, 2020 ..............................
December 1 - December 31, 2020 ...............................
Total .............................................................................

— $
—
81
81

—
—
123.81
$ 123.81

— $
—
—
—

—
—
—

(1) TheTT

total number of shares purchased during the periods indicated includes shares purchased

ly announced programs and shares deemed to have been received from

as part of public
ff
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
under M&T’s stock-based compensation plans.

of applicable tax withholding obligations,

as is permitted

(2) TheTT

authorization by M&T’s Board of Directors on July 17, 2019 for a stock repurchase

program endedd d as of the end of the second quarter of 2020. On January 20, 2021, M&T’s
Board of Directors authorized a new stock repurchase program to repurchase up to $800
million of common shares.

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’ Discii ussion and Analysis of Financial Condition and Results of

Operations.

Corporate Profile and Significant Developments
M&T Bank Corporation (“M&T”) is a bank holding company headquartered in Buffalo, New York
with consolidated assets of $142.6 billion at December 31, 2020. The consolidated financial
information presented herein reflects M&T and all of its subsidiaries, which are referredrr
to
collectively as “the Company.” M&T’s wholly owned bank subsidiaries are Manufacturers and
Traders Trust Companymm
Trust, N.A.”).

(“M&T Bank”) and Wilmington Trust, National Association (“Wilmington

M&T Bank, with total assets of $142.2 billion at December 31, 2020, is a New York-chartered

commercial bank with 716 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. M&T Bank lends to consumers residing in the states noted above and to small and medium-
size businesses based in those areas, although loans are also 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
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 $6.2 billion at December 31,

2020. Wilmington Trust, N.A. and its subsidiaries offer various trust and wealth management
services.

The United States has been operating under a state of emergency related to the Coronavirus

Disease 2019 (“COVID-19”) pandemic since March 13, 2020. The direct and indirect effects of the
COVID-19 pandemic resulted in a dramatic reduction in economic activity that severely hampered
the ability for businesses and consumers to meet their repayment obligations. The effects of the
pandemic contributed to a significant increase in the Company’s provision for credit losses during
2020. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), in addition to
providing financial assistance to both businesses and consumers, creates a forbearance program for
federally-backed mortgage loans, protects borrowers from negative credit reporting due to loan
accommodations related to the national emergency, and provides financial institutions the option to
temporarily suspend certain requirements under GAAP related to troubled debt restructurings to
account for the effects of COVID-19. The bank regulatory agencies likewise issued guidance
encouraging financial institutions to work prudently with borrowers who are, or may be, unable to
meet their contractual payment obligations because of the effects of COVID-19. That guidance, with
concurrence of the Financial Accounting Standards Board, and provisions of the CARES Act allow
modifications made on a good faith basis in response to COVID-19 to borrowers who were generally
current with their payments prior to any relief, to not be treated as troubled debt restructurings nor be
reported as past due. Modifications may include payment deferrals (including maturity extensions),
fee waivers and covenant waivers. The Company has been working with its customers affected by
COVID-19 and has granted modifications across many of its loan portfolios. To the extent that such
modifications meet the criteria previously described, the modified loans have not been classified as
troubled debt restructurings nor reported as past due.

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. The more significant areas in which
management of the Company applies critical assumptions and estimates include the following:

•

Accounting for credit losses — Effective January 1, 2020 the Company adopted amended
accounting guidance that impacts how the allowance for credit losses is determined.
Under the new accounting guidance, the allowance for credit losses represents a valuation
account that is deducted from the amortized cost basis of certain financial assets, including
loans and leases, to present the net amount expected to be collected at 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 expected losses in the loan and lease
portfolio, borrower-specific financial data and macro-economic assumptions are utilized to
project losses over a reasonable and supportable forecast period. For certain loan pools

which often involve a significant degree of

that share similar risk characteristics, the Company utilizes statistically developed models
to estimate amounts and timing of expected future cash flows, collateral values and other
factors used to determine the borrowers’ abilities to repay obligations. Such models
consider historical correlations of credit losses with various macroeconomic assumptions
including unemployment, gross domestic product and real estate prices. These forecasts
may be adjusted for inherent limitations or biases of the models. Subsequent to the
forecast period, the Company utilizes longer-term historical loss experience to estimate
losses over the remaining contractual life of the loans. Prior to 2020, the allowance for
credit losses represented the amount that in management’s judgment reflected incurred
credit losses inherent in the loan and lease portfolio as of the balance sheet date. The
estimation of the allowance for credit losses prior to 2020 did not consider reasonable and
supportable forecasts that could have affected the collectability of the reported amounts.
Changes in the circumstances considered when determining management’s estimates and
assumptions could result in changes in those estimates and assumptions, which could
result in adjustment of the allowance for credit losses in future periods. A discussion of
facts and circumstances considered by management in determining the allowance for
credit losses, as well as the new accounting guidance, 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
judgment, particularly when liquid markets do not exist for the particular items being
valued. Quoted market prices are referred to when estimating fair values for certain assets,
such as trading assets, most investment securities, and residential real estate loans held for
sale and related commitments. However, for those items for which an observablea
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
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
require recognition of a loss in the consolidated statement of income. Examplesmm
certain investments, capitalized servicing assets, 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 Companymm
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

is routinely subject to examinations from various governmental taxing

include

liquid

results of operations, financial

•

inappropriate, the result and adjustments required could have a material effect on the
Company’s results of operations. Information regarding the Company’s income taxes is
presented in note 13 of Notes to Financial Statements. The recognition or de-recognition
in the Company’s consolidated financial statements of assets and liabilities held by so-
called variable interest entities is subject to the interpretation and application of complex
accounting pronouncements or interpretations that require management to estimate and
assess the relative significance of the Company’s financial interests in those entities and
the degree to which the Company can influence the most important
activities of the
entities. Information relating to the Company’s involvement in such entities and the
accounting treatment afforded each such involvement is included in note 19 of Notes to
Financial Statements.

Overview
Net income recorded by the Company in 2020 was $1.35 billion or $9.94 of diluted earnings per
common share, representing declines of 30% and 28%, respectively, from $1.93 billion or $13.75 of
diluted earnings per common share in 2019. Basic earnings
$9.94 in 2020 from $13.76 in 2019. Net income in 2018 totaled $1.92 billion, while diluted and basic
earnings per common share were $12.74 and $12.75, respectively. Expressed as a rate of return on
average assets, net income in 2020 was 1.00%, compared with 1.61% in 2019 and 1.64% in 2018.
The return on average common shareholders’ equity was 8.72% in 2020, 12.87% in 2019 and
12.82% in 2018.

per common share decreased 28% to

Effective January 1, 2020, M&T adopted amended accounting guidance for the measurement of

credit losses on financial instruments. That guidance requires an allowance for credit losses to be
value that is
deducted from the amortized cost basis of financial assets to present the net carrying
expected to be collected over the contractual term of the assets considering relevant information
about past events, current conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amount. The new accounting guidance replaced the previous incurred
loss model for determining the allowance for credit losses. The adoption of the amended guidance
resulted in a $132 million increase in the allowance for credit losses as of January 1, 2020.
Additional information on the new accounting guidance is provided under the heading “Provision for
Credit Losses” and in note 4 of Notes to Financial Statements.

Financial results for 2020 have been adversely impacted by the COVID-19 pandemic. Large

portions of the U.S. economy were substantially curtailed for extended periods of time and, as a
result, many commercial and consumer customers were adversely impacted. Specifically, those
adverse economic impacts, coupled with the accounting change noted previously, resulted in the
Company recognizing significantly higher provisions for credit losses during 2020 as compared with
previous years. For the years ended December 31, 2020, 2019 and 2018, the provision for credit
losses totaled $800 million, $176 million and $132 million, respectively. The 2020 period reflects the
new accounting guidance for the measurement of expected credit losses on financial instruments.
Prior to 2020, the provision for credit losses reflected incurred losses only. In response to the
pandemic, the Federal Reserve has taken action to lower interest rates that has negatively affected the
Company’s net interest income. Taxable-equivalent net interest income totaled $3.88 billion, $4.15
billion and $4.09 billion in 2020, 2019 and 2018, respectively.

The CARES Act and applicable extensions provide relief to borrowers, including the
opportunity to defer loan payments while not negatively affecting their credit standing, and also
provide funding opportunities for small businesses under the Paycheck Protection Program (“PPP”)
from approved Small Business Administration (“SBA”) lenders, including M&T Bank. For
commercial and consumer customers, the Companymm
has provided a host of relief options, including
payment deferrals (including maturity extensions), loan covenant waivers and low interest rate loan

products. M&T Bank funded approximately $7.0 billion of PPP loans during 2020, of which $5.4
billion remained outstanding at December 31, 2020.
ff

at the end of each of the quarters of 2020 resulted in higher

Updated economic forecasts

2019 periods. Specifically, the level of the provision in 2020 reflects the ongoing

estimates of expected credit losses in the Company’s loan portfolio than at January 1, 2020, resulting
in higher levels of the provision for credit losses in each of those quarters as compared with the
comparablea
impacts of the pandemic on economic activity in the hospitality and retail sectors, the uncertainty at
December 31, 2020 as to the sufficiency and effectiveness of economic stimulus provided by the
U.S. government to the economy, and concerns about ultimate collectability of real estate loans
where the borrowers are requesting re-payment forbearance. The Company expects that it will
continue to be impacted by the COVID-19 pandemic after December 31, 2020. Specifically, the
Company expects that the following balance sheet and income statement categories could be
affected:

• Net interest income and net interest margin – the low interest rate environment will continue

to negatively affect the Company’s net interest margin;

• Provision for credit losses – although the economy has seen some signs of recovery, it is
possible that deteriorating economic assumptions used to calculate the allowance for credit losses at
the end of future reporting periods could result in higher levels of the provision and allowance for
credit losses. In addition, the impact on borrowers’ ability to repay loans could be negatively
affected, potentially leading to increased charge-offs;

• Significant portions of noninterest income could be adversely affected. For example,
consumer deposit service charge fees may continue to be lower than historical levels due to lower
customer transaction activity; credit card interchange volumes may be lower than historical norms,
resulting in lower fees, until the economy returns to pre-pandemic activity levels; and portions of
trust income may be reduced due to fee waivers associated with proprietary money market mutual
fund management fees; and

• A resurgence of the pandemic in large parts of the country may result in government mandates

that could impact customer demand for many of the Company’s credit-related products and other
services.

The national effort to mitigate the pandemic has resulted in a challenging environment for
has taken actions designed to help provide a safe

businesses and their employees. The Companymm
environment for its customers and employees and to provide relief to customers in a variety of ways.
Examples of those actions include:

• The deployment of a Pandemic Response Plan to manage the pandemic’s effects on
operations, employees and customers, including seeking to ensure employee safety, maintaining
continuity of operations and service levels for customers, preserving the Company’s financial
strength, and complying with applicable laws and regulations. Actions have included placing
restrictions on travel, implementing social distancing, health screening, sanitation and other
protocols, and mandating for all employees whose jobs can be performed remotely to work from
home where possible. The Company continues to assess the appropriateness of employees returning
to the office while seeking to ensure a safe work environment;

• Nearly all M&T Bank branches remain open, with open lobbies and normal access to drive-

of the Company’s non-branch employees continue to work remotely;

through windows and ATMs;
• The vast majority
• Many loan customers are receiving COVID-19 related relief in various forms as noted herein.
• Commercial – balances of $1.7 billion, including $96 million of commercial loans and
$790 million of commercial real estate loans for which a payment deferral has been
requested;

• Residential real estate – balances of $2.8 billion for which a payment deferral has been
requested;
• Consumer – including automobile, recreational finance, home equity lines and loans,
credit cards and personal loans – balances of $97 million for which a payment deferral
has been requested;

• Paycheck Protection Program – At December 31, 2020 outstanding loans totaled $5.4 billion;

and

• Waiving certain types of transaction and maintenance fees for consumer and small business

deposit account relationships.

When comparing

mm
the Company’s

financial results in 2020 with 2019, there were several notable

that year’s results. In the first quarter of 2019, the Company

matters during 2019 that impacted
recognized an expense of $50 million (reflected in “other costs of operations”) to increase its reserve
for legal matters associated with a subsidiary’s role as trustee of Employee Stock Ownership Plans in
its Institutional Client Services business. That expense, on an after-tax basis, reduced net income by
$37 million, or $.27 of diluted earnings per common share. Also during that quarter, M&T received a
$37 million distribution from Bayview Lending Group LLC (“BLG”), increasing net income by $28
million, or $.20 of diluted earnings per common share. Similar distributions received in 2020 totaled
$53 million, increasing net income by $40 million, or $.31 of diluted earnings per common share.

In July 2019, M&T agreed to sell its non-controlling interest in an asset manager obtained in the

2011 acquisition of Wilmington Trust Corporation (“WT Corp.”) that had been accounted for using
the equity method of accounting and, as a result, as of June 30, 2019 recorded a $48 million charge
(reflected in “other costs of operations”) to reduce the carrying value of the investment to its
estimated net realizable value. Similar to other active investment managers, the investee entity had
experienced a decrease in assets under management and during the second quarter of 2019 the
entity’s chief executive and investment officer announced his retirement. Following that
announcement, successor management submitted a proposal to M&T to restructure the organization
in net income of $36 million, or $.27
of the entity. The after-tax impact of the charge was a reduction
of diluted earnings per common share. The sale of M&T’s interest in the asset manager was effective
September 30, 2019.

Effective January 1, 2019, the Company adopted new accounting guidance for leases. The new

guidance requires lessees to record a right-of-use asset and a lease liability for all operating leases
with a term greater than twelve months. The accounting applied by lessors is largely unchanged,
however, the guidance eliminates the accounting model for leveraged leases that commenced after
December 31, 2018. The Company occupies certain banking offices and uses certain equipment
under noncancelable operating lease agreements which, prior to January 1, 2019, were not reflected
in its consolidated balance sheet. As of January 1, 2019, the Company recorded right-of-use assets of
$394 million and increased lease liabilities
adoption of the new guidance did not have a material impact on the consolidated statement of income
during 2019. For additional information on leases, see notes 3 and 5 of Notes to Financial
Statements.

of $399 million in its consolidated balance sheet. The

There were also several notable items in 2018. 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 gains on investments in equity securities in
2019 totaled $18 million, compared with net unrealized losses of $9 million in 2020 and $6 million
in 2018. As of March 31, 2018, the Companymm
increased its reserve for legal matters by $135 million
in anticipation of the settlement of a civil litigation matter by 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 was settled in 2018.

Reflecting the matters discussed previously, taxable-equivalent net interest income was $3.88

billion in 2020, 6% lower than $4.15 billion in 2019. That decline resulted from a 68 basis point
(hundredths of one percent) narrowing of the net interest margin, or taxable-equivalent net interest
income expressed as an annualized percentage of average earning assets, to 3.16% in 2020 from
3.84% in 2019, partially offset by the impact of an increase in average earning assets to $122.9
billion in 2020 from $108.2 billion in 2019. Taxable-equivalent net interest income increased 1% in
2019 from $4.09 billion in 2018. That improvement resulted predominantly from an increase in
average earning assets in 2019 from $106.8 billion in 2018 and a slight expansion of the net interest
margin from 3.83% in 2018.

The provision for credit losses rose significantly to $800 million in 2020 from $176 million in
2019. The provision in 2018 was $132 million. Net charge-offs in 2020, 2019 and 2018 were $247
million, $144 million and $130 million, respectively.

Other income aggregated $2.09 billion and $2.06 billion in 2020 and 2019, respectively,
compared with $1.86 billion in 2018. Comparing 2020 with 2019, a 24% rise in mortgage banking
revenues, higher trust income and increased income from BLG in 2020 were partially offset by
declines in service charges on deposit accounts, trading account and foreign exchange gains and loan
syndication fees. As compared with 2018, growth in 2019 was experienced in most major sources of
noninterest income, led by higher residential and commercial mortgage banking revenues and trust
income.

Other expense decreased 2% to $3.39 billion in 2020 from $3.47 billion in 2019. Other expense

in 2018 totaled $3.29 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
$15 million, $19 million and $25 million in 2020, 2019 and 2018, respectively. Exclusive of those
nonoperating expenses, noninterest operating expenses totaled $3.37 billion in 2020, compared with
$3.45 billion in 2019 and $3.26 billion in 2018. Contributing to the lower level of such expenses in
2020 as compared with 2019 were decreased costs for professional and outside services, legal-related
matters, advertising and marketing, travel and entertainment, and a $48 million charge in the second
quarter of 2019 associated with the sale of an equity investment in an asset manager. Those factors
were partially offset by higher costs for salaries and employee benefits, outside data processing and
software, increases to the valuation allowance for capitalized residential mortgage servicing rights
and $14 million of expenses related to the planned transition of the support for the Company’s retail
brokerage and advisory business to the platform of LPL Financial. The higher level of noninterest
operating expenses in 2019 as compared with 2018 resulted from increased costs for salaries and
employee benefits, equipment and net occupancy, outside data processing and software, and
professional services, and the $48 million charge associated with the sale of the equity investment in
an asset manager. Those factors were partially offset by lower costs associated with legal-related
matters and contributions to The M&T Charitable Foundation, and a decline in FDIC assessments.
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 56.3% in 2020, compared with 55.7% and 54.8% in
2019 and 2018, respectively. The calculations of the efficiency ratio are presented in table 2.

The Company’s effective tax rate was 23.5% in each of 2020 and 2018 and 24.3% in 2019.

Table 1

Increase (Decrease)(a)
2019 to 2020 2018 to 2019
Amount % Amount %

EARNINGS SUMMARY
Dollars in millions

2020

2019

2018

2017

2016

$ (692.4) (14) $ 281.8

(422.9) (56)
(6)
(269.5)
624.0 355
(27.4) —
3
54.2

6 Interest income(b) .......................................... $4,210.0 $4,902.4 $4,620.6 $4,202.4 $3,922.8
426.0
3,496.8
190.0
30.3
1,795.7

222.9 42 Interest expense..............................................
58.9
1 Net interest income(b)....................................
44.0 33 Less: provision for credit losses.....................
24.3 — Gain (loss) on bank investment securities .....
181.4 10 Other income..................................................

526.4
4,094.2
132.0
(6.3)
1,862.3

326.4
3,883.6
800.0
(9.4)
2,097.9

386.8
3,815.6
168.0
21.3
1,829.9

749.3
4,153.1
176.0
18.0
2,043.7

Less:

3
49.9
(133.4)
(9)
(783.2) (30)

148.5
32.1
40.0

Salaries and employee benefits ...............
8
2
Other expense..........................................
2 Income before income taxes ..........................

1,950.7
1,434.5
1,786.9

1,900.8
1,567.9
2,570.1

1,752.3
1,535.8
2,530.1

1,648.8
1,491.5
2,358.5

1,618.1
1,429.3
2,085.4

Less:

(5.6) (24)
(201.7) (33)
$ (575.9) (30) $

1.0
28.0
11.0

Taxable-equivalent adjustment(b)...........
Income taxes ...........................................

27.0
5
5
743.3
1 Net income ..................................................... $1,353.2 $1,929.1 $1,918.1 $1,408.3 $1,315.1

22.9
618.1

17.3
416.4

21.9
590.1

34.6
915.6

Compound
Growth Rate
5 Years
2015 to 2020

—
6
36
—
3

5
2
1

(7)
(7)
5%

(a)
(b)

Changes were calculated from unrounded amounts.
Interest income datatt 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 2018-2020 and 39% in prior years.

Supplemental Reporting of Non-GAAP Results of Operations
As a result of business combinations and other acquisitions, the Companymm
consisting of goodwill and core deposit and other intangible assets totaling $4.6 billion at each of
December 31, 2020 and 2019, consisting predominantly of goodwill. Amortization of core deposit
and other intangible assets, after-tax effect, totaled $11 million, $14 million and $18 million during
2020, 2019 and 2018, respectively.

had intangible assets

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
ff
other intangible assets (and the related goodwill, core deposit intangible and other intangible asset
balances, net of applicable deferred tax amounts) and gains (when realized) and expenses (when
incurred) associated with merging acquired operations into the Company, since such items are
considered by management to be “nonoperating” in nature. There were no such merger-related gains
or expenses in 2020, 2019 or 2018. 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 $1.36 billion in 2020 and $1.94 billion in each of 2019 and 2018.
Diluted net operating earnings per common share were $10.02 in 2020, $13.86 in 2019 and $12.86 in
2018.

Net operating income expressed as a rate of return on average tangible assets was 1.04% in
2020, compared with 1.69% in 2019 and 1.72% in 2018. Net operating income represented a return
on average tangible common equity of 12.79% in 2020, compared with 19.08% in 2019 and 19.09%
in 2018.

Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in

table 2.

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).......................................................................................................
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 ...............................................................................................................................................................................

Efficiency ratio ...........................................................................................................................................................................

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 ....................................................................................................................................................

2020

2019

2018

1,353,152
10,993
1,364,145

9.94
.08
10.02

3,385,240
(14,869 )
3,370,371

3,370,371

3,883,605
2,088,444
(9,421 )
5,981,470

56.3 %

135,480
(4,593 )
(21 )
5
130,871

15,991
(1,250 )
14,741
(4,593 )
(21 )
5
10,132

142,601
(4,593 )
(14 )
4
137,998

16,187
(1,250 )
—
14,937
(4,593 )
(14 )
4
10,334

1,929,149
14,359
1,943,508

13.75
.11
13.86

3,468,682
(19,490 )
3,449,192

3,449,192

4,153,127
2,061,679
18,037
6,196,769

55.7 %

119,584
(4,593 )
(38 )
10
114,963

15,718
(1,272 )
14,446
(4,593 )
(38 )
10
9,825

119,873
(4,593 )
(29 )
7
115,258

15,717
(1,250 )
—
14,467
(4,593 )
(29 )
7
9,852

1,918,080
18,075
1,936,155

12.74
.12
12.86

3,288,062
(24,522 )
3,263,540

3,263,540

4,094,199
1,856,000
(6,301 )
5,956,500

54.8 %

116,959
(4,593 )
(59 )
16
112,323

15,630
(1,232 )
14,398
(4,593 )
(59 )
16
9,762

120,097
(4,593 )
(47 )
13
115,470

15,460
(1,232 )
(3 )
14,225
(4,593 )
(47 )
13
9,598

(a)

After any related tax effect.

Net Interest Income/Lending and Funding Activities
Net interest income expressed on a taxable-equivalent basis aggregated $3.88 billion in 2020, down
6% from $4.15 billion in 2019. That decline primarily resulted from a 68 basis point narrowing of
the net interest margin, largely the result of declines in yields on loans and balances held at the
Federal Reserve Bank of New York, reflecting the lower interest rate environment due to actions
initiated by the Federal Reserve to decrease its target Federal funds rate three times in the second half
of 2019 (each by a .25% increment) and twice in March of 2020 (first by .50%, then another by
1.0%). The lower net interest margin was partially offset by the impact of a $14.6 billion, or 14%,
increase in average earning assets to $122.9 billion in 2020 from $108.2 billion in 2019 that reflected
increases in average loan and lease balances of $7.1 billion and in interest-bearing deposits at banks
of $8.5 billion, partially offset by a decline in average balances of investment securities of $3.4
billion.

Average loans and leases rose 8% to $96.6 billion in 2020 from $89.5 billion in 2019. Average
balances of commercial loans and leases increased $4.2 billion or 18% to $27.5 billion in 2020 from
$23.3 billion in 2019. That increase was the result of average outstanding PPP loans of $4.4 billion
that were predominantly funded in the second quarter of 2020. Average commercial real estate loan
balances were up $2.1 billion or 6% to $37.0 billion in 2020 from $34.9 billion in 2019. Consumer
loans averaged $15.9 billion in 2020, up $1.2 billion or 9% from $14.6 billion in 2019, due to growth
in recreational finance loans (consisting predominantly of loans secured by recreational vehicles and
boats) and, to a lesser extent, automobile loans that was partially offset by declines in outstanding
balances of home equity loans and lines of credit. Average residential real estate loans were $16.2
billion and $16.7 billion in 2020 and 2019, respectively, reflecting the ongoing repayments of loans
by customers, partially offset by repurchases of government-guaranteed loans from Ginnie Mae pools
that are serviced by the Company. The Company repurchases government-guaranteed loans to reduce
associated servicing costs, namely a requirement to advance principal and interest payments that had
not been received from individual mortgagors, including payments deferred under COVID-19
forbearance arrangements. The loans repurchased from Ginnie Mae pools averaged $2.6 billion in
2020, up from $889 million in 2019.

Taxable-equivalent net interest income in 2019 was up 1% from $4.09 billion in 2018. That
growth resulted from a $1.5 billion or 1% increase in average earning assets to $108.2 billion in 2019
from $106.8 billion in 2018 that reflected increases in average loan and lease balances of $2.1 billion
and in interest-bearing deposits at banks of $1.2 billion, partially offset by a decline in average
balances of investment securities of $2.1 billion. Also contributing to the improvement was a
widening of the net interest margin to 3.84% in 2019 from 3.83% in 2018.

Average loans and leases rose $2.1 billion, or 2%, in 2019 from $87.4 billion in 2018. Average

balances of commercial loans and leases increased $1.5 billion or 7% to $23.3 billion in 2019 from
$21.8 billion in 2018. Average commercial real estate loan balances were up $1.2 billion or 4% to
$34.9 billion in 2019 from $33.7 billion in 2018. Consumer loans averaged $14.6 billion in 2019, up
$1.1 billion or 8% from $13.6 billion in 2018, 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. Average residential real estate loans declined $1.7 billion or 9% to $16.7 billion
in 2019 from $18.3 billion in 2018, predominantly due to ongoing repayments of loans obtained in
the 2015 acquisition of Hudson City Bancorp, Inc. (“Hudson City”).

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Table 4 summarizes average loans and leases outstanding in 2020 and percentage changes in the

major components of the portfolio over the past two years.

Table 4

AVERAGE LOANS AND LEASES
(Net of unearned discount)

Percent Increase
(Decrease) from

2019 to
2020

2018 to
2019

2020

(In millions)

Commercial, financial, etc........................................................................ $
Real estate — commercial ........................................................................
Real estate — consumer ...........................................................................
Consumer

Recreational finance............................................................................
Home equity lines and loans ...............................................................
Automobile..........................................................................................
Other....................................................................................................
Total consumer ..............................................................................

Total ......................................................................................... $

27,520
36,986
16,215

6,353
4,226
3,902
1,403
15,884
96,605

18 %
6
(3)

31
(9)
4
2
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8 %

7 %
4
(9)

31
(8)
5
12
8
2 %

Commercial loans and leases, excluding loans secured by real estate, totaled $27.6 billion at
December 31, 2020, representing 28% of total loans and leases. Table 5 presents information on
commercial loans and leases as of December 31, 2020 relating to geographic area, size, borrower
industry and whether the loans are secured by collateral or unsecured. Of the $27.6 billion of
commercial loans and leases outstanding at the end of 2020, approximately $19.9 billion, or 72%,
were secured, while 36%, 18% and 30% were granted to businesses in New York State, Pennsylvania
and in the Mid-Atlantic area (which includes Delaware, Maryland, New Jersey, Virginia, West
Virginia and the District of Columbia), respectively. The Company provides financing for leases to
commercial customers, primarily for equiqq pment. Commercial leases included in total commercial
loans and leases at December 31, 2020 aggregated $1.1 billion, of which 48% were secured by
collateral located in New York State, 14% were secured by collateral in Pennsylvania and another
18% were secured by collateral in the Mid-Atlantic area.

Table 5

COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT
(Excludes Loans Secured by Real Estate)

December 31, 2020

New York

Pennsylvania

Mid-
Atlantic(a)
(Dollars in millions)

Other

Total

Percent of
Total

Services ............................................. $1,810
Motor vehicle and recreational

finance dealers................................
Manufacturing ...................................
Financial and insurance.....................
Wholesale..........................................
Health services...................................
Construction ......................................
Retail .................................................
Transportation, communications,

1,621
1,508
576
638
866
717
556

utilities............................................
477
Real estate investors..........................
808
Public administration.........................
135
Agriculture, forestry, fishing, etc. .....
38
115
Other ..................................................
Total................................................... $9,865
Percent of total...................................
Percent of dollars outstanding
Secured ..............................................
Unsecured ..........................................
Leases ................................................
Total...................................................
Percent of dollars outstanding by

36%

62%
33
5
100%

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...................................................

30%
28
15
13
6
4
4
100%

799

$2,255

$ 532

$ 5,396

19%

880
817
187
541
246
425
322

269
201
55
65
202
$ 5,009

756
767
562
587
764
709
533

557
480
51
60
65
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1,409
444
887
334
91
93
260

306
80
29
15
75
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4,666
3,536
2,212
2,100
1,967
1,944
1,671

1,609
1,569
270
178
457
$27,575

18%

30%

16%

100%

17
13
8
8
7
7
6

6
6
1
1
1
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25
3
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29
19
15
9
2
3
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3
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24
13
11
7
7
8
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11
5
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12%
23
15
19
11
6
14
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68%
28
4
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26%
26
15
14
7
5
7
100%

(a)

Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and thett District of Columbia.

International loans included in commercial loans and leases totaled $100 million and $121
million at December 31, 2020 and 2019, respectively. Included in such loans were $94 million and
$93 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 59% of the loan
and lease portfolio during 2020, compared with 63% and 65% in 2019 and 2018, respectively. At
December 31, 2020, the Company held approximately $37.6 billion of commercial real estate loans
(including $278 million originated for sale), $16.8 billion of consumer real estate loans secured by
one-to-four family residential properties (including $777 million of loans originated for sale) and
$4.0 billion of outstanding balances of home equity loans and lines of credit, compared with $35.5
billion, $16.2 billion and $4.5 billion, respectively, at December 31, 2019. Included in commercial
real estate loans at December 31, 2020 and 2019 were construction loans of $10.0 billion and $8.9
billion, respectively, including amounts due from builders and developers of residential real estate
aggregating $1.3 billion and $1.5 billion at December 31, 2020 and 2019, respectively. Commercial
real estate loans included loans held for sale totaling $278 million and $28 million at December 31,
2020 and 2019, respectively. International loans included in commercial real estate loans totaled $60
million at December 31, 2020 and $54 million at December 31, 2019.

Commercial real estate loans originated by the Company include both fixed and variable rate

instruments with monthly payments and a balloon payment of the remaining unpaid principal at
maturity. Maturity dates generally range from five to ten years and, for borrowers in good standing,
the terms of such loans may be extended by the customer following maturity at the then-current
market rate of interest. Adjustable-rate commercial real estate loans represented approximately 74%
of the commercial real estate loan portfolio at the 2020 year-end. Table 6 presents commercial real
estate loans by geographic area, type of collateral and size of the loans outstanding at December 31,
2020. New York City area commercial real estate loans totaled $9.3 billion at December 31, 2020.
The $8.3 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 66% of the aggregate dollar amount of New York
City area loans were for loans with outstanding balances of $30 million or less, while loans of more
than $50 million made up approximately 19% of the total.

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 91% 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 $30 million or less. Of the outstanding balances of commercial
real estate loans in Pennsylvania and the Mid-Atlantic area, approximately 82% and 76%,
respectively, were for loans with outstanding balances of $30 million or less.

Commercial real estate loans secured by properties located outside of Pennsylvania, the Mid-

Atlantic area and New York State comprised 21% of total commercial real estate loans as of
December 31, 2020.

Table 6

COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT

December 31, 2020

New York State

New York
City

Other

Penn-
sylvania

Mid-
Atlantic(a)
(Dollars in millions)

Other

Total

Percent of
Total

Investor-owned

Permanent finance by property

type
Retail/Service ................................... $ 1,561
1,595
Apartments/Multifamily...................
1,179
Office ...............................................
636
Hotel.................................................
494
Health facilities ................................
225
Industrial/Warehouse .......................
216
Other.................................................
5,906
Total permanent .........................

Construction/Development

Commercial

Construction..................................
Land/Land development ...............

1,935
274

181
27

2,417
8,323

217

Residential builder and

developer
Construction..................................
Land/Land development ...............

Total construction/

development............................
Total investor-owned ..............................
Owner-occupied by industry(b)

Other services...................................
Motor vehicle and recreational
finance dealers................................
Retail ................................................
Health services .................................
Wholesale.........................................
Manufacturing..................................
Real estate investors.........................
Other.................................................
Total owner-occupied ................

172
151
134
108
88
23
127
1,020
Total commercial real estate ................... $ 9,343

646
1,169
954
377
446
237
27
3,856

625
27

15
11

678
4,534

426

440
526
487
263
387
265
18
2,386

687
15

52
43

797
3,183

170

214
153
343
72
202
51
185
1,646
$ 6,180

302
304
121
133
111
70
237
1,448
$ 4,631

$ 1,067
556
1,091
768
550
445
71
4,548

2,082
166

169
132

2,549
7,097

548

262
451
307
327
141
141
347
2,524
$ 9,621

978
768
644
633
653
296
27
3,999

2,410
136

427
193

3,166
7,165

$ 4,692
4,614
4,355
2,677
2,530
1,468
359
20,695

7,739
618

844
406

9,607
30,302

1,424

281
135
26
123
32
22
16
698
$ 7,863

1,231
1,194
931
763
574
307
912
7,336
$ 37,638

Percent of total ........................................

25%

16%

12%

26%

21%

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%
15
14
33
15
16
3
100%

13%
25
20
33
7
—
2
100%

11%
21
19
31
15
3
—
100%

10%
18
16
32
15
8
1
100%

6%
10
12
41
19
10
2
100%

8%
17
16
34
15
8
2
100%

Includes Delaware, Maryland, New Jersey, Virginia,
Includes $351 million of construction

loans.

(b)

West Virginia and the District of Columbia.

12%
12
12
7
7
4
1
55%

21%
2

2
1

26%
81%

3
3
2
2
2
1
2
19%
100%

Commercial real estate construction and development loans made to investors presented in

table 6 totaled $9.6 billion at December 31, 2020, or 10% of total loans and leases. Approximately
93% of those construction loans had adjustable interest rates. Included in such loans at the 2020 year-
end were $1.3 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 $4.0 billion
and $3.9 billion at December 31, 2020 and 2019, respectively. There have been no material losses
incurred as a result of those recourse arrangements. At December 31, 2020 and 2019, commercial
real estate loans serviced by the Company for other investors were $22.2 billion and $21.0 billion,
respectively. Reflected in commercial real estate loans serviced for others were loans sub-serviced
for others that had outstanding balances of $3.3 billion and $3.4 billion at December 31, 2020 and
2019, respectively.

Real estate loans secured by one-to-four family residential properties were $16.8 billion at
December 31, 2020, including approximately 36% secured by properties located in New York State,
7% secured by properties located in Pennsylvania, 20% secured by properties in New Jersey and
15% secured by properties located in other Mid-Atlantic areas. Included in residential real estate
loans were loans repurchased by the Company from Ginnie Mae pools as previously described.
Those repurchased loans totaled $2.7 billion at December 31, 2020 and $807 million at December
31, 2019. The Company’s portfolio of limited documentation residential real estate loans held for
investment totaled $1.6 billion at December 31, 2020, down from $2.1 billion at December 31, 2019.
That portfolio consisted predominantly of limited documentation loans acquired with the Hudson
City transaction. Such 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 to
individuals to finance the construction of one-to-four family residential properties totaled $77 million
at December 31, 2020 and $94 million at December 31, 2019, or approximately .1% of total loans
and leases at each of those dates. Information about the credit performance of the Company’s
residential real estate loans is included herein under the heading “Provision For Credit Losses.”

Consumer loans comprised

approximately 17% of total loans and leases at each of

December 31, 2020 and 2019. Outstanding balances of recreational finance loans represented the
largest component of the consumer loan portfolio at December 31, 2020 and totaled $7.1 billion or
approximately 7% of total loans, up from $5.5 billion or 6% at December 31, 2019. That growth
reflects increased consumer demand for such loans. Home equity loans and lines of credit
outstanding at December 31, 2020 and December 31, 2019 were $4.0 billion and $4.5 billion,
respectively. Approximately 40% of home equity loans and lines of credit outstanding at
December 31, 2020 were secured by properties in New York State, 23% in Maryland, 21% in
Pennsylvania and 4% in New Jersey. Outstanding automobile loan balances rose to $4.1 billion at

December 31, 2020 from $3.9 billion at December 31, 2019. 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 2020,

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, 2020

Outstandings
(In millions)

Real estate

Residential ................................ $ 16,753
37,638
Commercial...............................
54,391
Total real estate ....................
Commercial, financial, etc.............
26,440
Consumer

Recreational finance .................
Home equity lines and loans.....
Automobile ...............................
Other secured or guaranteed .....
Other unsecured ........................
Total consumer.....................
Total loans .......................
Commercial leases.........................

7,075
3,986
4,102
431
976
16,570
97,401
1,135
Total loans and leases...... $ 98,536

Percent of Dollars Outstanding

Mid-Atlantic

New
York

Penn-
sylvania Maryland

New
Jersey

Other(a)

Other

36%
41
40%
35%

11%
40
26
23
38
24%
36%
48%
36%

7%
12
11%
18%

6%
21
18
12
20
13%
13%
14%
13%

10
9%
15%

23
11
12
25
12%
11%
10%
11%

20%
7
11%
7%

4%
4
7
3
3
5%
9%
6%
9%

7%
9
8%
8%

5%
10
15
21
11
9%
8%
2%
8%

22%
21
21%
17%

71%
2
23
29
3
37%
23%
20%
23%

(a)((

Includes Delaware, Virginia, West Virginia and the Distritt ct of Columbia.

The investment securities portfolio averaged $8.2 billion in 2020, down from $11.6 billion and

$13.7 billion in 2019 and 2018, respectively. The decline in average balances of investment
securities in 2020 and 2019 was predominantly due to maturities and pay downs of mortgage-backed
securities and maturities of U.S. Treasury notes. There were no significant purchases of investment
securities during 2020. During 2019 and 2018, the Company purchased $500 million and $450
million, respectively, of U.S. Treasury notes. Sales of investment securities were not significant in
2020, 2019 or 2018. The Company routinely has increases and decreases in its holdings of capital
stock of the Federal Home Loan Bank (“FHLB”) of New York and the Federal Reserve Bank of New
York. Those holdings are accounted for at cost and are adjusted based on the amounts of outstanding
borrowings and available lines of credit with those entities.

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
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 available
yield in comparison with alternative investments, demand for loans, which generally yield more than
investment securities, ongoing repayments, the levels of deposits, and management of liquidity and
balance sheet size and resulting capital ratios.

Fair value changes in equity securities with readily determinable fair values are recognized in

the consolidated statement of income. Net unrealized losses on such equity securities were $9
million in 2020 and $6 million in 2018, compared with net unrealized gains of $18 million in 2019.
Those gains and losses were predominantly related to the Company’s holdings of Fannie Mae and
Freddie Mac preferred stock.

The Company regularly reviews its debt investment securities for declines in value below
amortized cost that might be indicative of credit-related losses. In light of such reviews, there were
no credit-related losses on debt investment securities recognized in 2020, 2019 or 2018. Based on
management’s assessment of future cash flows associated with individual investment securities as of
December 31, 2020, the Company did not expect to incur any material credit-related losses in its
portfolios of debt investment securities. 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 balances at the Federal Reserve Bank of New
York and other banks, trading account assets, federal funds sold and agreements to resell securities.
Those other earning
assets in the aggregate averaged $18.1 billion in 2020, $7.2 billion in 2019 and
$5.7 billion in 2018. Interest-bearing deposits at banks averaged $15.3 billion in 2020, compared
with $6.8 billion in 2019 and $5.6 billion in 2018. 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 higher amount in 2020 as compared
commercial and consumer deposit balances. Agreements to resell securities averaged $2.7 billion
and $327 million in 2020 and 2019, respectively. Holdings of agreements to resell securities were
insignificant during 2018. The higher average balance in 2020 reflects the temporary investment by
the Companymm

with 2019 and 2018 reflects increased

of increased customer deposit levels.

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
comparablea maturities. Average core deposits were $105.7 billion in 2020, compared with $87.9
billion in 2019 and $87.3 billion in 2018. Average balances of savings and interest-checking core
deposits rose $7.9 billion or 15% in 2020 to $59.8 billion from $51.9 billion in 2019. Average
noninterest-bearing deposits increased $10.9 billion or 35% to $41.7 billion in 2020 from $30.8
billion in 2019. Those increases were largely due to higher average deposits of commercial
customers, but also reflect higher levels of consumer deposits and deposits associated with residential
mortgage servicing activities. The higher commercial deposits reflect liquidity and economic
concerns of customers resulting in continued deposit retention. Average core deposits in 2019 were
up 1% as compared with 2018. Average savings and interest-checking core deposit balances rose
$1.7 billion or 3% in 2019 from $50.1 billion in 2018. That increase was predominantly due to higher
residential mortgage escrow deposits, resulting from additions to the Company’s servicing and sub-
servicing portfolios in 2019, and higher commercial and trust deposits. Average noninterest-bearing
deposits in 2019 declined $1.1 billion or 4% from $31.9 million in 2018. Contributing to that decline
were lower deposits associated with commercial and trust customers, partially offset by higher

mortgage escrow deposits. The lower commercial deposits were largely due to a shift of such
deposits from noninterest-bearing to interest-bearing products. Funding provided by core deposits
represented 86% of average earning assets in 2020, compared with 81% in 2019 and 82% in 2018.
Table 8 summarizes average core deposits in 2020 and percentage changes in the components of such
deposits over the past two years. Core deposits totaled $114.2 billion and $89.5 billion at
December 31, 2020 and 2019, respectively.

Table 8

AVERAGE CORE DEPOSITS

Percent Increase
(Decrease) from

2019 to
2020

2018 to
2019

2020

(In millions)

59,757
Savings and interest-checking deposits.................................................... $
4,277
Time deposits ...........................................................................................
Noninterest-bearing deposits....................................................................
41,683
Total ......................................................................................................... $ 105,717

15 %
(18)
35
20 %

3 %
(2)
(4)
1 %

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 $683 million
in 2020, $956 million in 2019 and $675 million in 2018. The decline in such deposits from 2019 to
2020 was predominantly the result of maturities of time deposits and, due to the low interest rate
environment, a reduced demand from customers for time deposit products. The increase in such
deposits from 2018 to 2019 was predominantly the result of the generally higher interest rate
environment in 2019 and customers’ desire to earn a higher return on their deposits. Cayman Islands
office deposits averaged $1.1 billion in 2020, $1.4 billion in 2019 and $394 million in 2018. The
decrease in such deposits in 2020 as compared with 2019 reflects customer reaction to the declines in
short-term interest rates that followed actions by the Federal Reserve in March 2020. The increase in
such deposits in 2019 from 2018 resulted from customers’ desire to sweep their deposit balances into
the then higher earning products. The Company had brokered savings and interest-bearing
transaction accounts that averaged $3.8 billion in 2020, $2.7 billion in 2019 and $2.0 billion in 2018.
Brokered time deposits were not a significant source of funding in any of the three years discussed
herein. 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.

Table 9 summarizes average total deposits for 2020, 2019 and 2018.

Table 9

AVERAGE DEPOSITS

Retail

Trust

Commercial
and Other

Total

(In millions)

2020
Savings and interest-checking deposits.................................... $ 29,072
4,657
Time deposits ...........................................................................
6,572
Noninterest-bearing deposits....................................................
Deposits at Cayman Islands office ...........................................
—
Total ......................................................................................... $ 40,301

2019
Savings and interest-checking deposits.................................... $ 26,814
5,739
Time deposits ...........................................................................
Noninterest-bearing deposits....................................................
5,352
—
Deposits at Cayman Islands office ...........................................
Total ......................................................................................... $ 37,905

2018
Savings and interest-checking deposits.................................... $ 28,381
5,656
Time deposits ...........................................................................
5,064
Noninterest-bearing deposits....................................................
Deposits at Cayman Islands office ...........................................
—
Total ......................................................................................... $ 39,101

5,631
50
5,406
—
$ 11,087

6,453
46
4,219
—
$ 10,718

5,445
34
4,363
—
9,842

28,887
253
29,705
1,117
59,962

$ 63,590
4,960
41,683
1,117
$111,350

21,343
524
21,192
1,367
44,426

$ 54,610
6,309
30,763
1,367
$ 93,049

18,276
335
22,466
394
41,471

$ 52,102
6,025
31,893
394
$ 90,414

Company also uses borrowings from banks, securities dealers, the FHLB of New York, 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 $62 million in 2020, $1.1 billion in 2019 and $331
million in 2018.

Long-term borrowings averaged $5.8 billion in 2020, $7.7 billion in 2019 and $8.8 billion in

2018. Average balances of outstanding senior notes were $3.8 billion in 2020, compared with $5.3
billion and $5.9 billion in 2019 and 2018, respectively. Unsecured senior notes totaled $2.8 billion
and $4.9 billion at December 31, 2020 and 2019, respectively. During 2020, M&T Bank redeemed
$2.1 billion of fixed rate senior notes that were within thirty days of scheduled maturity and, thereby,
eligible for redemption. 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. The variable rate notes mature in 2021 and the fixed rate notes that were due to
mature on January 25, 2021 were redeemed on December 28, 2020. 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 FHLBs of $2 million in 2020, compared
with $241 million and $577
million in 2019 and 2018, respectively, and subordinated capital notes of $1.4 billion in 2020 and

2019, compared with $1.5 billion in 2018. During December 2020, $409 million of subordinated
capital notes of M&T Bank matured. Junior subordinated debentures associated with trust preferred
securities that were included in average long-term borrowings were $527 million in 2020, $524
million in 2019 and $521 million in 2018. Also included in long-term borrowings were agreements to
repurchase securities, which averaged $58 million in 2020, $245 million in 2019 and $415 million
during 2018. The repurchase agreement held at December 31, 2019 totaled $102 million and matured
in 2020. There were no repurchase agreements outstanding at December 31, 2020. 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, 2020, interest rate swap
agreements were used as fair value hedges of approximately $1.65 billion of outstanding fixed rate
long-term borrowings. Additionally, interest rate swap agreements with a notional amount of $17.35
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 3.00% in 2020, compared with 3.48% in 2019 and 3.55% in
2018. The yield on the Company’s earning assets decreased 110 basis points to 3.43% in 2020 from
4.53% in 2019 and the rate paid on interest-bearing liabilities decreased 62 basis points to .43% in
2020 from 1.05% in 2019. The narrowing of the net interest spread in 2020 compared with 2019
reflects the impact of the decreases in short-term interest rates initiated by the Federal Reserve during
the second half of 2019 and in March 2020. During 2018, the yield on earning assets was 4.33% and
the rate paid on interest-bearing liabilities was .78%. The higher rates earned on assets and paid on
of increases in short-term
liabilities in 2019 as compared with 2018 predominantly reflect the effect
interest rates initiated by the Federal Reserve during 2018, partially offset in 2019 by decreases in
such rates initiated during 2019. The increase in rates paid in 2019 on interest-bearing liabilities also
reflects higher rates paid on mortgage escrow deposits associated with growth in the Company’s
residential mortgage servicing activities. The rates paid on those deposits are often indexed to the
federal funds rate or LIBOR, and are higher than the rates paid on most other savings and interest-
checking deposit accounts.

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 $47.3 billion in 2020, $37.2
billion in 2019 and $39.1 billion in 2018. The increase in net interest-free funds in 2020 compared
with 2019 reflects higher average balances of noninterest-bearing deposits. The decrease in average
net interest-free funds in 2019 as compared with 2018 reflects declines in balances of noninterest-
bearing deposits. Those deposits averaged $41.7 billion in 2020, $30.8 billion in 2019 and $31.9
billion in 2018. The increase in such balances from 2019 to 2020 was largely due to higher levels of
deposits of commercial customers. Shareholders’ equity averaged $16.0 billion, $15.7 billion and
$15.6 billion in 2020, 2019 and 2018, respectively. Goodwill and core deposit and other intangible
assets averaged $4.6 billion in each of 2020 and 2019 and $4.7 billion in 2018. The cash surrender
value of bank owned life insurance averaged $1.8 billion in each of 2020, 2019 and 2018. 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 .16% in 2020, .36% in 2019 and .28% in 2018. The reduced contribution of

net interest-free funds to net interest margin in 2020 reflects the lower 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 3.16% in 2020, 3.84% in 2019 and
3.83% in 2018. 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 liabilitie
s that result
in reductions in spreads, could adversely impact the Company’s net interest income and net interest
margin.

assets and interest-bearing liabilities.

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
Periodic settlement amounts arising from
a
portions of its earning
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 $19.0 billion (excluding $32.1 billion of forward-starting swap
agreements) at December 31, 2020, $17.2 billion (excluding $40.4 billion of forward-starting swap
agreements) at December 31, 2019 and $7.3 billion (excluding $12.6 billion of forward-starting swap
agreements) at December 31, 2018. 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, 2020, interest rate swap agreements with notional
amounts of $17.35 billion were serving as cash flow hedges of interest payments associated with
variable rate commercial real estate loans, compared with $13.35 billion at December 31, 2019 and
$2.85 billion at December 31, 2018. At December 31, 2020, 2019 and 2018, interest swap
agreements with notional amounts of $1.65 billion, $3.80 billion and $4.45 billion, respectively, were
serving as fair value hedges of fixed rate long-term borrowings. The Company has entered into the
forward-starting interest rate swapaa agreements predominantly to extend the term of its interest rate
swap agreements serving as cash flow hedges, and provide a hedge against changing interest rates on
certain of its variable rate loans.

In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and
changes in the fair value of the hedged item are recorded in the Company’s consolidated balance
sheet with the corresponding gain or loss recognized in current earnings. The difference between
changes in the fair value of the interest rate swap agreements and the hedged items represents hedge
ineffectiveness and is recorded as an adjustment to the interest income or interest expense of the
respective hedged item. 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 2020, 2019 and 2018 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
values of the interest rate swap agreements and the
Financial Statements. The changes in the fair
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 10.

Table 10

INTEREST RATE SWAP AGREEMENTS

2020

Year Ended December 31
2019

2018

Amount

Rate(a)

Amount

Rate(a)

Amount

Rate(a)

(Dollars in thousands)

Increase (decrease) in:

Interest income .................................... $
Interest expense ...................................
Net interest income/margin ................. $

271,971
(40,145)
312,116
Average notional amount (c)..................... $16,985,246
Rate received (b) .......................................
Rate paid (b)..............................................

.22 %$
(.05)
.25 %$

13,011
15,136
(2,125)
$16,248,356

.01 % $ (13,339)
.02
11,418
— % $ (24,757)
$7,795,479

2.51 %
.67 %

2.40 %
2.42 %

(.01)%
.02
(.03)%

2.09 %
2.41 %

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 the

year.

during the year.

In addition to interest rate swap agreements, the Company had entered into interest rate floor
agreements that were accounted for in the trading account rather than as hedging instruments but,
nevertheless, provided the Company with protection against the possibility of future declines in
interest rates on its earning assets. Outstanding notional amounts of such agreements totaled $15.6
billion at each of December 31, 2019 and December 31, 2018. The agreements outstanding at the
2019 year-end matured in January and February 2020. The fair value of the interest rate floor
agreements was not material at either December 31, 2019 or 2018.

tive January 1, 2020 the Company

Provision for Credit Losses
As described in note 4 of Notes to Financial Statements, effecff
adopted amended accounting guidance for the measurement of credit losses on financial instruments.
That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of
financial assets to present the net carrying value that is expected to be collected over the contractual
term of the assets considering relevant information about past events, current conditions, and
reasonable and supportable forecasts that affect the collectability of the reported amount. The new
guidance replaces the previous incurred loss model for determining the allowance for credit losses.
The adoption of the amended guidance resulted in a $132 million increase in the allowance for credit
losses at January 1, 2020. Increases in the allowance for residential real estate loans and consumer
loans, reflecting the longer-dated maturities of such portfolios, were offset somewhat by net
decreases in the allowance for commercial loans resulting from lower loss estimates on demand loan
products due to the assumption that the Company could require full repayment of such loans in the
near-term. Table 11 depicts the changes in the allowance forff
credit losses by loan category resulting
from the adoption of the amended guidance.

Table 11

IMPACT OF ADOPTION OF AMENDED ACCOUNTING GUIDANCE ON
ALLOWANCE FOR CREDIT LOSSES

Balance
December 31, 2019

Impact of Adoption
Increase (Decrease)
(In thousands)

Balance
January 1, 2020

Commercial, financial, leasing, etc. ..................... $
Commercial real estate .........................................
Residential real estate ...........................................
Consumer..............................................................
Unallocated...........................................................

Total ................................................................. $

366,094
322,201
56,033
229,118
77,625
1,051,071

(61,474) $
23,656
53,896
194,004
(77,625)
132,457

304,620
345,857
109,929
423,122
—
1,183,528

The amended guidance requires estimated credit losses on loans acquired at a discount to be

reflected in the allowance for credit losses. Previously, such losses were netted in the carrying value
of the loans unless there was an increased loss expectation subsequent to their acquisition. The gross-
up of the estimated losses on loans acquired at a discount that was previously not recognized in the
allowance for credit losses was $18 million on January 1, 2020. Prior to January 1, 2020, the
Company generally recognized interest income on loans acquired at a discount regardless of the
borrowers’ repayment status. Effective with the adoption of the new accounting guidance, the
Company’s nonaccrual loan policy now applies to loans acquired at a discount. Loans acquired at a
discount at December 31, 2019 included $171 million of loans that, effective with the adoption of the
new guidance, were classified as non-accrual loans on January 1, 2020.

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 $800 million in 2020, compared with $176
million in 2019 and $132 million in 2018. As noted earlier, the significant increase in the provision
in 2020 as compared with 2019 and 2018 follows the adoption of new accounting guidance on
January 1, 2020 and reflects economic assumptions and projections that considered the
macroeconomic outlook associated with the COVID-19 pandemic. The Company’s estimates of
expected losses reflect the ongoing impacts of the pandemic on economic activity, generally, and
concerns about commercial real estate values and the ultimate collectability of commercial real estate
loans where borrowers are requesting repayment forbearance. Net charge-offs of loans were $247
million in 2020, $144 million in 2019 and $130 million in 2018. Net charge-offs as a percentage of
average loans and leases outstanding were .26% in 2020, compared with .16% in 2019 and .15% in
2018. A summary of the Company’s loan charge-offs, provision and allowance for credit losses is
presented in table 12 and in note 4 of Notes to Financial Statements.

Table 12

LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES

2020

2019

2018
(Dollars in thousands)

2017

2016

Allowance for credit losses beginning

balance ................................................... $1,051,071
132,457

Adoption of new accounting standard ......
Charge-offs during year

$1,019,444
—

$1,017,198
—

$ 988,997
—

$955,992
—

Commercial, financial,

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

135,083
2,943
43,231
152,250
333,507

15,765
1,758
9,908
58,935
86,366
247,141
800,000

58,244
10,280
15,095
154,089
237,708

24,581
1,355
10,785
56,614
93,335
144,373
176,000

60,414
262
27,369
143,196
231,241

27,903
19,379
8,322
45,883
101,487
129,754
132,000

64,941
267
28,463
130,927
224,598

21,196
8,894
12,671
42,038
84,799
139,799
168,000

59,244
137
30,801
141,073
231,255

30,167
4,062
11,124
28,907
74,260
156,995
190,000

balance ................................................... $1,736,387

$1,051,071

$1,019,444

$1,017,198

$988,997

Net charge-offs as a percent of:

Provision for credit losses....................
Average loans and leases, net of

unearned discount .............................

Allowance for credit losses as a

percent of loans and leases, net of
unearned discount, at year-end...............

30.89%

82.03%

98.30%

83.21%

82.63%

.26%

.16%

.15%

.16%

.18%

1.76%

1.16%

1.15%

1.16%

1.09%

loans aggregated $1.89 billion at December 31, 2020, compared with $963 million

and $894 million at December 31, 2019 and 2018, respectively. As a percentage of total loans and
leases outstanding, nonaccrual loans represented 1.92% at December 31, 2020, compared with 1.06%
and 1.01% at December 31, 2019 and 2018, respectively. The higher level of nonaccrual loans at
December 31, 2020 as compared with December 31, 2019 reflects the addition of $530 million of
loans associated with hotels in 2020 as well as other additions that, in general, resulted from the
economic conditions in 2020.

Accruing loans past due 90 days or more were $859 million or .87% of total loans and leases at

December 31, 2020. Accruing loans past due 90 days or more (excluding loans acquired at a
discount) were $519 million or .57% at December 31, 2019 and $223 million or .25% at
December 31, 2018. Accruing loans past due 90 days or more included loans guaranteed by
government-related entities of $798 million, $480 million and $192 million at December 31, 2020,
2019 and 2018, 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 $764 million at
December 31, 2020, $452 million at December 31, 2019 and $165 million at December 31, 2018.
The increase in such loans at the end of 2020 as compared with the prior dates resulted from higher
levels of loans repurchased during 2020. 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. In addition to the past due loans, the Company has
also repurchased $1.6 billion of government-guaranteed residential mortgage loans during 2020 that
are not considered delinquent because the borrower has requested and received a COVID-19 related
payment deferral. Those loans were also repurchased to reduce associated servicing costs as
described above and also remain covered by the insurance or guarantee of the applicable
government-related entity. A summary of nonperforming assets and certain past due, renegotiated
and impaired
mm

loan data and credit quality ratios is presented in tablea

13.

Table 13

NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA

December 31

2020

2019

2018

2017

2016

(Dollars in thousands)

Nonaccrual loans.......................................................... $1,893,299
Real estate and other foreclosed assets ........................
34,668
Total nonperforming assets.......................................... $1,927,967
Accruing loans past due 90 days or more(a)................ $ 859,208
Government guaranteed loans included in totals

above:

Nonaccrual loans .................................................... $
Accruing loans past due 90 days or more...............

48,820
798,121
Renegotiated loans....................................................... $ 238,994
Acquired accruing loans past due 90 days or

963,112
85,646
1,048,758
518,728

893,608
78,375
971,983
222,527

882,598
111,910
994,508
244,405

920,015
139,206
1,059,221
300,659

50,891
479,829
234,424

34,667
192,443
245,367

35,677
235,489
221,513

40,610
282,659
190,374

more(b)......................................................................

N/A

39,632

39,750

47,418

61,144

Purchased impaired loans(c):

Outstanding customer balance................................
Carrying amount.....................................................

N/A
N/A

415,413
227,545

529,520
303,305

688,091
410,015

927,446
578,032

Nonaccrual loans to total loans and leases, net of

unearned discount .....................................................

1.92%

1.06%

1.01%

1.00%

1.01%

Nonperforming assets to total net loans and leases

and real estate and other foreclosed assets................

1.96%

1.15%

1.10%

1.13%

1.16%

Accruing loans past due 90 days or more(a) to total

loans and leases, net of unearned discount ...............

.87%

.57%

.25%

.28%

.33%

Predominantly residential real estate loans. Prior to 2020, excludes loans acquired at a discount
Prior to 2020, 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.
Prior to 2020, accruing loans acquired at a discount that were impaired at acquisition date and recorded at
fair value.

(a)
(b)

(c)

Loans that were 30-89 days past due were $662 million at December 31, 2020, compared with
$1.2 billion at December 31, 2019 and $866 million at December 31, 2018. The lower level of such
past due loans at the end of 2020 reflects the impactmm
of loan paydowns, many of which resulted in
return to current status, and migrations of loans to nonaccrual status. COVID-19 related payment
deferral modifications resulted in such loans being classified as current in accordance with regulatory
guidance and, as a result, did not contribute in incremental additions to loans categorized as 30-89
days past due. Information about delinquent loans at December 31, 2020 and 2019 is included in note
3 of Notes to Financial Statements.

Prior to the adoption of the new accounting standard on January 1, 2020, the Company reported

loans. Those loans were impaired at the date of acquisition, were recorded at

purchased impaired
estimated fair value and were generally delinquent in payments, but, in accordance with GAAP, the
Company continued to accrue interest income on such loans based on the estimated expected cash
flows associated with the loans. The amended accounting guidance requires estimated credit losses
on loans acquired at a discount to now be reflected in the allowance for credit losses and effective
with the adoption of the guidance, the Company’s nonaccrual loan policy now applies to such loans.
The carrying amount of purchased impaired loans was $228 million at December 31, 2019.

The United States has been operating under a state of emergency related to the COVID-19
pandemic since March 13, 2020. The direct and indirect effects of the COVID-19 pandemic resulted
in a dramatic reduction in economic activity that severely hampered the ability of some businesses
and consumers to meet their repayment obligations. The CARES Act, in addition to providing
financial assistance to both businesses and consumers, created a forbearance program for federally-
backed mortgage loans, protects borrowers from negative credit reporting due to loan
accommodations related to the national emergency, and provides financial institutions the option to
temporarily suspend certain requirements under GAAP related to troubled debt restructurings for a
limited period of time to account for the effects of COVID-19. The banking regulatory agencies
likewise issued guidance encouraging financial institutions to work prudently with borrowers who
are, or may be, unable to meet their contractual payment obligations because of the effects of
COVID-19. That guidance, with concurrence of the Financial Accounting Standards Board and
provisions of the CARES Act, allows modifications made on a good faith basis in response to
COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be
treated as delinquent or as troubled debt restructurings. Modifications may include payment deferrals
(including extensions of maturity dates), covenant waivers and fee waivers. The Company has
worked with its customers affected by COVID-19 and, as previously noted, has granted
modifications across many of its loan portfolios. To the extent that such modifications met the
criteria previously described, such modifications have not been classified as delinquent or as troubled
debt restructurings.

The Company also modified the terms of select loans in an effort to assist borrowers that were
not related to the COVID-19 pandemic. 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. Information about modifications of
loans that are considered troubled debt restructurings is included in note 3 of Notes to Financial
Statements.

Residential real estate loans modified under specified loss mitigation programs prescribed by
government guarantors that were not related to the COVID-19 pandemic 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 $342 million and $203 million at December 31, 2020 and December 31, 2019,
respectively.

Charge-offs of commercial loans and leases, net of recoveries, aggregated $119 million in 2020,

$34 million in 2019 and $33 million in 2018. The higher level of such charge-offs in 2020 was
largely experienced in the fourth quarter and related to the impactmm
borrower’s ability to repay loans associated with malls and transportation services. Commercial loans
and leases in nonaccrual status were $307 million at December 31, 2020, $347 million at
December 31, 2019 and $234 million at December 31, 2018.

of the COVID-19 pandemic on

Net charge-offs of commercial real estate loans totaled $31 million during 2020, compared with

$9 million during 2019 and net recoveries of previously charged-off commercial real estate loans of
$9 million in 2018. Reflected in the 2018 amount was a $13 million recovery associated with a hotel
property. Commercial real estate loans classified as nonaccrual were $891 million at December 31,
2020, $195 million at December 31, 2019 and $231 million at December 31, 2018. Nonaccrual
commercial real estate loans included construction-related loans of $115 million, $37 million and
$27 million at the end of 2020, 2019 and 2018, respectively. The increase in commercial real estate
loans in nonaccrual status at the 2020 year-end as compared with December 31, 2019 was largely due
to the addition of $530 million of hotel loans in 2020.

Net charge-offs of residential real estate loans totaled $3 million in 2020, $5 million in 2019
and $9 million in 2018. Residential real estate loans in nonaccrual status at December 31, 2020 were
$513 million, compared with $319 million and $318 million at December 31, 2019 and 2018,
respectively. The increase at the most recent year-end as compared with the prior year dates reflects
the impact of the adoption of the amended accounting guidance as noted earlier and the effect of
recent economic conditions on borrowers. Nonaccrual limited documentation first mortgage loans
aggregated $147 million at December 31, 2020, compared with $83 million and $85 million at
December 31, 2019 and 2018, 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 no
longer originates limited documentation loans. Residential real estate loans past due 90 days or more
and accruing interest (excluding loans acquired at a discount prior to 2020) totaled $793 million at
December 31, 2020, $487 million at December 31, 2019 and $190 million at December 31, 2018. A
substantial portion of such amounts related to guaranteed loans repurchased from government-related
entities, including the previously noted higher level of repurchases of loans associated with the
Company’s loan servicing portfolio. However, loans that have been granted forbearances related to
COVID-19 are not considered to be past due in accordance with the previously noted regulatory
guidance and provisions of the CARES Act. Information about the location of nonaccrual and
charged-off residential real estate loans as of and for the year ended December 31, 2020 is presented
in table 14.

Table 14

SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA

December 31, 2020

Nonaccrual

Year Ended
December 31, 2020
Net Charge-offs
(Recoveries)

Outstanding
Balances

Balances

Percent of
Outstanding
Balances
(Dollars in thousands)

Balances

Percent of
Average
Outstanding
Balances

Residential mortgages:

New York.............................................................................. $ 5,261,166
1,083,581
Pennsylvania .........................................................................
1,365,648
Maryland ...............................................................................
2,779,273
New Jersey ............................................................................
1,195,802
Other Mid-Atlantic (a) ..........................................................
Other......................................................................................
3,361,103
Total ...................................................................................... $ 15,046,573

Residential construction loans:

New York.............................................................................. $
Pennsylvania .........................................................................
Maryland ...............................................................................
New Jersey ............................................................................
Other Mid-Atlantic (a) ..........................................................
Other......................................................................................
Total ...................................................................................... $

21,892
7,470
8,087
12,248
21,045
6,544
77,286

Limited documentation first mortgages:

746,347
New York.............................................................................. $
32,993
Pennsylvania .........................................................................
18,916
Maryland ...............................................................................
597,714
New Jersey ............................................................................
8,455
Other Mid-Atlantic (a) ..........................................................
Other......................................................................................
224,709
Total ...................................................................................... $ 1,629,134

First lien home equity loans and lines of credit:

New York.............................................................................. $ 1,013,763
615,395
Pennsylvania .........................................................................
Maryland ...............................................................................
496,598
New Jersey ............................................................................
72,203
176,355
Other Mid-Atlantic (a) ..........................................................
Other......................................................................................
29,864
Total ...................................................................................... $ 2,404,178

Junior lien home equity loans and lines of credit:

597,402
New York.............................................................................. $
Pennsylvania .........................................................................
216,545
426,214
Maryland ...............................................................................
91,410
New Jersey ............................................................................
203,152
Other Mid-Atlantic (a) ..........................................................
Other......................................................................................
42,468
Total ...................................................................................... $ 1,577,191

Limited documentation junior lien:

402
197
811
120
481
2,226
4,237

134,885
14,419
17,329
90,469
18,122
89,782
365,006

147
576
—
—
—
—
723

64,944
6,200
2,416
45,962
1,344
26,304
147,170

17,232
9,932
11,377
890
2,681
1,780
43,892

16,437
2,895
9,934
1,470
3,668
882
35,286

21
34
25
—
32
102
214

(a)

Includes Delaware, Virginia, West Virginia and thett District of Columbia.

2.56%
1.33
1.27
3.26
1.52
2.67
2.43%

.67%

7.71
—
—
—
—
.94%

2,011
(87)
4,110
(1,579)
305
633
5,393

—
—
—
19
—
29
48

8.70%
18.79
12.77
7.69
15.90
11.71

9.03%

(641)
(36)
(2)
(54)
(113)
(1,428)
$ (2,274)

1.70%
1.61
2.29
1.23
1.52
5.96
1.83%

2.75%
1.34
2.33
1.61
1.81
2.08
2.24%

5.22%
17.26
3.08
—
6.65
4.58
5.05%

1,468
386
578
(1)
50
86
2,567

658
240
(309)
(190)
(318)
121
202

(64)
(19)
(7)
—
—
(7)
(97)

.04%
(.01)
.33
(.05)
.03
.02
.04%

—%
—
—
.14
—
.44
.06%

(.08%)
(.09)
(.01)
(.01)
(.75)
(.56)
(.12%)

.14%
.06
.11
—
.03
.27
.10%

.10%
.10
(.06)
(.20)
(.14)
.30
.01%

(12.72%)
(9.18)
(.69)
—
—
(.25)
(1.93%)

Net charge-offs of consumer loans aggregated $93 million in 2020, compared with $97 million
in each of 2019 and 2018. Included in net charge-offs of consumer loans were: automobile loans of
$22 million in 2020, $24 million in 2019 and $33 million in 2018; recreational finance loans of $27
million, $26 million and $17 million during 2020, 2019 and 2018, respectively; and home equity
loans and lines of credit secured by one-to-four family residential properties of $3 million in 2020, $6
million in 2019 and $7 million in 2018. Nonaccrual consumer loans were $183 million at
December 31, 2020, compared with $102 million and $110 million at December 31, 2019 and 2018,
respectively. Included in nonaccrual consumer loans at the 2020, 2019 and 2018 year-ends were:
automobile loans of $39 million, $21 million and $23 million, respectively; recreational finance loans
of $26 million, $14 million and $11 million, respectively; and outstanding balances of home equity
loans and lines of credit of $79 million, $63 million and $71 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, 2020 is presented in table 14. Information about past due and nonaccrual
loans as of December 31, 2020 and 2019 is also included in note 3 of Notes to Financial Statements.
Real estate and other foreclosed assets totaled $35 million at December 31, 2020, compared

with $86 million at December 31, 2019 and $78 million at December 31, 2018. The decline in 2020
is largely reflective of foreclosure moratoriums imposed by government authorities in numerous
jurisdictions. Net gains or losses associated with real estate and other foreclosed assets were not
material in 2020, 2019 or 2018. At December 31, 2020, the Company’s holding of residential real
estate-related properties comprised approximately 80% of foreclosed assets.

Beginning in 2020, management determines the allowance for credit losses under new
accounting guidance that requires estimating the amount of current expected credit losses over the
remaining contractual term of the loan and lease portfolio. Prior to 2020, the allowance for credit
losses represented the amount that in management’s judgment reflected incurred credit losses
inherent in the loan and lease portfolio as of the balance sheet date. A description of the
methodologies used by the Company to estimate its allowance for credit losses in 2020 can be found
in note 4 of Notes to Financial Statements.

In establishing the allowance for credit losses subsequent to December 31, 2019, the Company
to specific troubled credits identified through both normal and targeted

estimates losses attributablea
credit review processes and also estimates losses for other loans and leases with similar risk
characteristics 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 type. At the time of the Company’s
analysis regarding the determination of the allowance for credit losses as of December 31, 2020,
there existed substantial concerns about the national and regional economic decline related to the
COVID-19 pandemic; the ultimate effectiveness of economic stimulus being provided by the U.S.
government; the volatile nature of global markets, including the impact international economic
conditions could have on the U.S. economy; Federal Reserve positioning of monetary policy; the
extent to which additional repayment forbearance might be requested by borrowers, in particular
commercial real estate borrowers; and continued stagnant population and economic growth in the
upstate New York and central Pennsylvania regions (approximately 49% of the Company’s loans and
leases are to customers in New York State and Pennsylvania) that could see lingering effects of the
economic downturn. 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 through the loss estimation modeling and other
techniques used by the Company are generally considered to possess lower expected losses when
determining the allowance for credit losses. Loans with an elevated level of credit risk are classified
as “criticized” and are ascribed higher expected loss amounts when determining the allowance for
credit losses. A criticized loan 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. During 2020, the Company re-graded a significant portion of its commercial loans
and commercial real estate loans, particularly those that were modified as a result of COVID-19
impacts. Criticized commercial loans and commercial real estate loans totaled $7.2 billion at
December 31, 2020, compared with $2.5 billion at December 31, 2019 and $2.7 billion at December
31, 2018. The rise in criticized loans compared with the two prior year-ends reflects the impact of the
pandemic on borrowers’ financial condition and the re-grading of loans by the Company.

The COVID-19 pandemic and related governmental responses led to a significant reduction in

economic activity that has been detrimental to many borrowers across the Company’s geographic
regions. Borrowers have been and will likely continue to be adversely impacted by the economic
effects of the COVID-19 pandemic. Summaries of loans outstanding as of December 31, 2020 for
which borrowers have been granted a COVID-19 related forbearance and loans extended under the
PPP are provided in table 15. Of the COVID-19 related modifications with payment deferrals at
December 31, 2020, substantially all are scheduled to expire during the first half of 2021.

As commercial loans and commercial real estate loans were approved for modifications related
to COVID-19, loan officers and credit department personnel reviewed and reassigned loan grades, as
deemed appropriate. The Company assessed loans considering the credit worthiness of the borrower,
collateral values, the financial condition of any guarantors, and the expected collectability of
contractual principal and interest payments. Loan-to-collateral values on investor-owned loans are
generally relatively low and oftentimes the loans include some form of recourse. Loans secured by
residential real estate with a COVID-19 payment forbearance were evaluated for collectability based
on the borrower’s ability to repay considering past performance and estimated collateral values. If
collectability was considered doubtful, loans were classified as nonaccrual.

Loan officers in different geographic locations with the support of the Company’s credit

by COVID-19 in 2020 and expects that loans will continue to be re-

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. The Company re-assessed its loan grades for
those borrowers most impacted
graded in subsequent periods as more information becomes available. At least annually, however,
updated financial inforff mat
ion 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.

Table 15

COVID-19 RELATED LOANS AND LEASES DATA

Commercial, financial, leasing, etc.

Total

PPP

December 31, 2020

Payment
Deferrals(1)

COVID-19 Forbearance
Other
Forbearances(2)

Total

(Dollars in millions)

Industry

Services...............................................
Motor vehicle and recreational

finance dealers .................................
Manufacturing.....................................
Financial and insurance ......................
Wholesale ...........................................
Health services....................................
Construction........................................
Retail...................................................
Transportation, communications,

utilities .............................................
Real estate investors ...........................
Other ...................................................
Total commercial, financial, leasing, etc. .....
Commercial real estate

Investor-owned

Permanent finance by property type

Retail/Service......................................
Apartments/Multifamily .....................
Office ..................................................
Hotel ...................................................
Health facilities ...................................
Industrial/Warehouse ..........................
Other ...................................................
Total permanent ...........................
Total construction/development .........
Total investor-owned ...................

Owner-occupied by industry

Other services .....................................
Motor vehicle and recreational

finance dealers .................................
Retail...................................................
Health services....................................
Wholesale ...........................................
Manufacturing.....................................
Other ...................................................
Total owner-occupied ..................
Total commercial real estate .........................
Residential real estate....................................
Consumer

Recreational finance ...........................
Homes equity lines and loans .............
Automobile .........................................
Other ...................................................
Total consumer ...................................
Total ..............................................................

5,396

1,646

4,666
3,536
2,212
2,100
1,967
1,944
1,671

1,609
1,569
905
27,575

4,692
4,614
4,355
2,677
2,530
1,468
359
20,695
9,628
30,323

1,403

1,231
1,194
931
763
574
1,219
7,315
37,638
16,753

7,075
3,986
4,102
1,407
16,570
98,536

356
550
78
334
641
846
376

253
164
164
5,408

—
—
—
—
—
—
—
—
—
—

—

—
—
—
—
—
—
—
—
—

—
—
—
—
—
5,408

—
11
21
1
—
1
6

37
9
—
96

56
110
27
384
107
20
—
704
62
766

3
1
1
—
7
7
24
790

2,785 (3)

24
19
52
2
97
3,768

4
56
90
19
—
—
—

6
10
24
292

41
9
6
218
53
—
37
364
146
510

—

—
2
7
1
—
—
10
520
—

—
—
—
—
—
812

4
67
111
20
—
1
6

43
19
24
388

97
119
33
602
160
20
37
1,068
208
1,276

3
3
8
1
7
7
34
1,310
2,785

24
19
52
2
97
4,580

(1)

(2)
(3)

Represents accruing loans at December 31, 2020 for which a COVID-19 related payment deferral (including maturity
extensions) has been granted.
Consists predominantly of accruing loans for which a COVID-19 related covenant waiver has been granted.
Includes $1.7 billion of government-guaranteed loans.

With regard to residential real estate loans, the Company’s loss identification and estimation

techniques make reference to loan performance and house price data in specific areas of the country
where collateral securing the Company’s residential real estate loans is located. For residential real
estate-related loans, including home equity loans and lines of credit, the excess of the loan balance
over the net realizable value of the property collateralizing the loan is charged-off when the loan
becomes 150 days delinquent. That charge-off is based on recent indications of value from external
parties that are generally obtained shortly after a loan becomes nonaccrual. Loans to consumers that
file for bankruptcy are generally charged off to estimated net collateral value shortly after the
Company is notified of such filings. At December 31, 2020, approximately 60% 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 60% (or approximately 24% 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. 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 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, 2020, approximately 84% 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 6% were making contractually allowed payments that
do not include any repayment of principal.

The Company generally estimates current expected credit losses on loans with similar risk
characteristics on a collective basis. To estimate expected losses, the Company utilizes statistically
developed models to project principal balances over the remaining contractual lives of the loan
portfolios and determine estimated credit losses through a reasonable and supportable forecast
period. The Company’s approach for estimating current expected credit losses for loans and leases at
December 31, 2020 and January 1, 2020 included utilizing macro-economic assumptions to project
losses over a two-year reasonable and supportable forecast period. Subsequent to the forecast period,
the Companymm
reverted to longer-term historical loss experience, over a period of one year, to estimate
expected credit losses over the remaining contractual life. Forward-looking estimates of certain
macro-economic variables are determined by the M&T Scenario Development Group, which is
comprised of senior management business leaders and economists. Changes in the forecasted
economic assumptions from January 1, 2020 to December 31, 2020 primarily reflect the projected
impact of the COVID-19 pandemic. The assumptions utilized as of December 31, 2020 included the
national unemployment rate continuing at elevated levels, on average 6.9% through 2021, followed

also assumed

by a gradual return to long-term historical averages by the end of 2022. The forecast
gross domestic product to grow at a 4.1% annual rate during 2021 resulting in a return to pre-
pandemic levels by the end of 2022. Commercial real estate prices were assumed to decline by 6.8%
in 2021, followed by improvement. Residential real estate prices were not assumed to fluctuate
significantly. The forecast considered approved government stimulus at the end of 2020, but not any
further fiscal or monetary actions. The assumptions utilized as of January 1, 2020 at the time of
adoption of the expected credit loss accounting standard were significantly less severe. Those
assumptions anticipated unemployment rates that averaged under 4% and steady growth in gross
domestic product of 3.3% over the eight-quarter forecast period. Forecasted changes in real estate
prices as of that date were not significant. The assumptions utilized were based on information
available to the Company at or near December 31, and January 1, 2020 at the time it was preparing
its estimate of expected credit losses as of those dates.

In establishing the allowance for credit losses the Company also considers the impact of
portfolio concentrations, changes in underwriting practices, product expansions into new markets,
imprecision in its economic forecasts, geopolitical conditions and other risk factors that influence its
loss estimation process. Geopolitical conditions assessed at the end of 2020 included the potential
impact of COVID-19 on economic activity that could influence the ability of customers to repay loan
amounts in accordance with their contractual obligations. With respect to economic forecasts, the
Company assessed the likelihood of alternative economic scenarios during the two-year reasonable
and supportable time period and of more negative or positive outcomes on its allowance for credit
losses. Economic forecasts have changed rapidly in the recent past due to the uncertain impacts of
COVID-19. Generally, an increase in unemployment rate or a decrease in any of the rate of change in
gross domestic product, commercial real estate prices or home prices would have an adverse impact
on expected credit losses and would likely result in an increase in the allowance for credit losses.
Prior to 2020, the allowance for credit losses represented the amount that in management’s
judgment reflected incurred credit losses inherent in the loan and lease portfolio as of the balance
sheet date. The allowance was 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 currerr nt financial condition of specific borrowers, the current economic environment in which
borrowers operate, the level of delinquent loans, the value of any collateral and, where applicable,
existence of any guarantees or indemnifications. The estimation of the allowance for credit losses
prior to 2020 did not consider reasonable and supportable forecasts that could have affected the
collectability of the reported amounts.

the

A comparative allocation of the allowance for credit losses for each of the past five year-ends is

presented in table 16. Amounts were allocated to specific loan categories based on information
available to management at the time of each year-end assessment and using the methodologies
described herein. Variations in the allocation of the allowance by loan category as a percentage of
those loans reflect the impact of the new accounting rules effective January 1, 2020 as well as
changes in management’s estimate of credit losses in light of economic developments, specifically
the COVID-19 pandemic in 2020. 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.

Table 16

ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES

December 31

2020

2019

2018
(Dollars in thousands)

2017

2016

Commercial, financial, leasing, etc................... $ 405,846
774,309
Real estate .........................................................
556,232
Consumer ..........................................................
—
Unallocated .......................................................
Total............................................................. $1,736,387

$ 366,094
378,234
229,118
77,625
$1,051,071

$ 330,055
410,780
200,564
78,045
$1,019,444

$ 328,599
439,490
170,809
78,300
$1,017,198

$330,833
423,846
156,288
78,030
$988,997

As a Percentage of Gross Loans
and Leases Outstanding

Commercial, financial, leasing, etc...................
Real estate .........................................................
Consumer ..........................................................

1.46%
1.42
3.36

1.53%
.73
1.49

1.43%
.80
1.44

1.50%
.83
1.29

1.45%
.75
1.29

Management believes that the allowance for credit losses at December 31, 2020 appropriately

with $1.18 billion at January 1, 2020

reflected expected credit losses inherent in the portfolio as of that date. The allowance for credit
losses totaled $1.74 billion at December 31, 2020, compared
when the new pronouncement became effective. The allowance for credit losses totaled $1.05 billion
at December 31, 2019 and $1.02 billion at December 31, 2018. The increases in the allowance in
2020 as compared with the 2019 and 2018 year-ends reflected the $132 million addition attributable
the adoption of the new accounting standard as well as the expected impact of forecasted economic
conditions resulting from the COVID-19 pandemic on borrowers’ abilities to repay loans. As a
percentage of loans outstanding, the allowance was 1.76% at December 31, 2020, 1.16% at
December 31, 2019 and 1.15% at December 31, 2018. Excluding the impact of $5.4 billion of
government-guaranteed PPP loans originated by the Company in the second quarter of 2020, the
allowance as a percentage of total loans and leases at December 31, 2020 was 1.86%. 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 economic forecasts
and credit factors considered by management in establishing the allowance for credit losses change
and should management’s assessment of losses in the loan portfolio also change, the level of the
allowance as a percentage of loans could increase or decrease in future periods. The reported level of
the allowance reflects management’s evaluation of the loan and lease portfolio as of each respective
date.

The Company had no concentrations of credit extended to any specificff

industry that exceeded

10% of total loans at December 31, 2020, however residential real estate loans comprised
approximately 17% of the loan portfolio. Outstanding loans to foreign borrowers aggregated $170
million at Decembem r 31, 2020, or .2% of total loans and leases.

Other Income
Other income aggregated $2.09 billion in 2020, up from $2.06 billion and $1.86 billion in 2019 and
2018, respectively. The growth experienced from 2019 to 2020 reflected higher mortgage banking
revenues and trust income, partially offset by declines in service charges on deposit accounts, trading
account and foreign exchange gains and letter of credit and other credit-related fees. The 11% rise in
other income from 2018 to 2019 was largely attributable to higher mortgage banking revenues, trust
income, trading account and foreign exchange gains and valuation gains on investment securities.

Mortgage banking revenues aggregated $567 million in 2020, $458 million in 2019 and $360

million in 2018. Mortgage banking revenues are comprised of both residential and commercial
mortgage banking activities. The Company’s
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.

involvement in commercial mortgage banking activities

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 $424 million in 2020, up significantly from $317
million in 2019 and $239 million in 2018. The higher residential mortgage banking revenues in 2020
as compared with the two prior years resulted from higher gains associated with loans held for sale,
reflecting higher origination volumes and improved margins.

New commitments to originate residential real estate loans to be sold rose to approximately
$4.5 billion in 2020 from $2.7 billion in 2019 and $2.2 billion in 2018. 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 $191 million in 2020, $72 million in 2019 and $44
million in 2018.

Loans held for sale that were secured by residential real estate totaled $777 million and $414
million at December 31, 2020 and 2019, respectively. Commitments to sell residential real estate
loans and commitments to originate residential real estate loans for sale at pre-determined rates
totaled $1.47 billion and $1.03 billion, respectively, at December 31, 2020, $713 million and $423
million, respectively, at December 31, 2019 and $364 million and $245 million, respectively, at
December 31, 2018. Net recognized unrealized gains on residential real estate loans held for sale,
commitments to sell loans and commitments to originate loans for sale were $52 million at December
31, 2020, compared with $12 million at December 31, 2019 and $7 million at December 31, 2018.
Changes in such net unrealized gains are recorded in mortgage banking revenues and resulted in net
increases in revenue of $40 million and $5 million in 2020 and 2019, respectively, compared
with a
net decrease in revenue of $3 million in 2018.

Revenues from servicing residential real estate loans for others totaled $233 million in 2020,

compared with $245 million in 2019 and $195 million in 2018. Residential real estate loans serviced
for others aggregated $94.4 billion at December 31, 2020, $95.1 billion a year earlier and $79.1
billion at December 31, 2018. 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 $144 million. Reflected
in residential real estate loans serviced for others were loans sub-serviced for others of $68.1 billion,
$62.8 billion and $56.8 billion at December 31, 2020, 2019 and 2018, respectively. Revenues earned
with $125 million in 2019 and
for sub-servicing such loans totaled $129 million in 2020, compared
$114 million in 2018. The Company added approximately $21.1 billion to its residential real estate
loan sub-servicing portfolio during 2020. In 2019 and 2018, the Company added $17.6 billion and
$9.0 billion, respectively, of residential real estate loans sub-serviced for others. 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 residential mortgage servicing assets totaled $201 million at December 31, 2020
(net of a $30 million valuation allowance), compared with $237 million (net of a $7 million valuation
allowance) and $121 million at December 31, 2019 and 2018, respectively. Provisions for
impairment of capitalized residential mortgage servicing rights of $23 million and $7 million were
recorded in 2020 and 2019, respectively, resulting from changes in the estimated fair value of

capitalized mortgage servicing rights that reflected the impact of lower interest rates on the expected
rate of residential mortgage loan prepayments. 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.

with $141

Commercial mortgage banking revenues totaled $143 million in 2020, compared
million in 2019 and $121 million in 2018. Included in such amounts were revenues from loan
origination and sales activities of $84 million in 2020, $81 million in 2019 and $64 million in 2018.
The higher revenues in 2020 and 2019 as compared with 2018 were due to higher origination
volumes and wider margins on loans originated for sale. Commercial real estate loans originated for
sale to other investors totaled approximately $3.4 billion in 2020, compared with $4.0 billion in 2019
and $2.4 billion in 2018. Loan servicing revenues totaled $59 million in 2020, $60 million in 2019
and $57 million in 2018. Capitalized commercial mortgage servicing assets were $133 million at
December 31, 2020, $131 million at December 31, 2019 and $115 million at December 31, 2018.
Commercial real estate loans serviced for other investors totaled $22.2 billion at December 31, 2020,
$21.0 billion at December 31, 2019 and $18.2 billion at December 31, 2018, and included $4.0
billion at December 31, 2020, $3.9 billion at December 31, 2019 and $3.4 billion at December 31,
2018 of loan balances for which investors had recourse to the Company if such balances are
ultimately uncollectable. Included in commercial real estate loans serviced for others were loans sub-
serviced for others of $3.3 billion at December 31, 2020 and $3.4 billion at December 31, 2019.
Commitments to sell commercial real estate loans and commitments to originate commercial real
estate loans for sale aggregated $641 million and $364 million, respectively, at December 31, 2020,
$193 million and $164 million, respectively, at December 31, 2019 and $577 million and $229
million, respectively, at December 31, 2018. Commercial real estate loans held for sale were $278
million, $28 million and $347 million at December 31, 2020, 2019 and 2018, respectively. The
higher balances at December 31, 2020 and 2018 reflect loans originated later in each year that had
not been delivered to investors by year end.

Service charges on deposit accounts totaled $371 million in 2020, compared with $433 million

in 2019 and $429 million in 2018. The decline in such service charges in 2020 as compared with
2019 and 2018 reflects lower consumer service charges, predominantly resulting from COVID-19
related fee waivers and lower customer transaction activity, and decreased commercial service
charges, largely due to higher customer deposit levels that can be used by those customers to offset
transaction-related fees.

Trust income includes fees related to two significff ant 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 offers personal trust,
planning, fiduciary, asset management, family office and other services designed to help high net
worth individuals and families grow, preserve and transfer wealth. Trust income was $602 million in
2020, compared with $573 million in 2019 and $538 million in 2018. Revenues associated with the
ICS business were $342 million in 2020, $311 million in 2019 and $275 million in 2018. The
increases in ICS revenue in 2020 and 2019 reflect sales activities and increased retirement services
income resulting from growth in collective fund balances. Revenues attributable to WAS totaled
$233 million in each of 2020 and 2019 and $237 million in 2018. As compared with 2019, revenue
r
in 2020 reflected an increase related to equity market
money market
fee waivers as a result of the current interest rate environment. The decline in such
revenues in 2019 from 2018 reflects, in part, lower recurring fees due to product mix, competitive
factors and lower sales. Trust assets under management were $135.8 billion and $113.0 billion at

performance that was offset by proprietary fund

December 31, 2020 and 2019, respectively. Trust assets under management include the Company’s
proprietary mutual funds’ assets of $12.9 billion at December 31, 2020 and $12.5 billion at
December 31, 2019. Additional trust income frff om investment management activities was $27
million, $29 million and $26 million in 2020, 2019 and 2018, respectively, and includes fees earned
from retail customer investment accounts and in 2019 and 2018 also includes fees from an affiliated
asset manager. The Company’s trust income associated with the affiliated asset manager that was
sold in September 2019 was not material during 2019 or 2018.

Brokerage services income, which includes revenues from the sale of mutual funds and
annuities and securities brokerage fees, totaled $47 million in 2020, compared with $49 million in
2019 and $51 million in 2018. The decline in brokerage services income in each of the last two years
resulted largely from lower income frff om sales of annuities. Trading account and foreign exchange
activity resulted in gains of $41 million in 2020, $62 million in 2019 and $33 million in 2018.
Increased activity related to interest rate swap agreements executed on behalf of commercial
customers was the largest factor resulting in the higher gains in 2019 as compared with 2020 and
2018. The Company enters into interest rate and foreign exchange contracts with customers who
need such services and concomitantly enters into offsetting trading positions with third parties to
minimize the risks involved with these types of transactions. Information about the notional amount
of interest rate, foreign exchange and other contracts entered into by the Company for trading
account purposes is included in note 18 of Notes to Financial Statements and herein under the
heading “Liquidity, Market Risk, and Interest Rate Sensitivity.”

The Company recognized net losses on investment securities of $9 million in 2020 and $6
million in 2018, compared with net gains of $18 million in 2019. The gains and losses represented
unrealized gains and losses on investments in Fannie Mae and Freddie Mac preferred stock.

Other revenues from operations totaled $471 million in 2020, compared with $469 million in

2019 and $451 million in 2018. Higher income received from BLG during 2020 was offset by
declines in letter of credit and credit-related fees, predominantly loan syndication fees. The increase
from 2018 to 2019 largely reflects higher income from BLG.

Included in other revenues from operations were the following significant components. Letter
of credit and other credit-related fees totaled $109 million, $124 million and $125 million in 2020,
2019 and 2018, respectively. The decreased level of such fees in 2020 resulted from lower loan
syndication fees. Revenues from merchant discount and credit card fees were $111 million in 2020
and $117 million in each of 2019 and 2018. The lower level of such revenues in 2020 was the result
of lower customer transaction activity reflecting the impact of the pandemic. Tax-exempt income
earned from bank owned life insurance, which includes increases in the cash surrrr ender value of life
insurance policies and benefits received, aggregated $48 million in each of 2020 and 2018, compared
with $50 million in 2019. Insurance-related sales commissions and other revenues totaled $47
million in each of 2020, 2019 and 2018. Automated teller machine usage fees aggregated $9 million
in 2020, $13 million in 2019 and $14 million in 2018. The lower revenues in 2020 reflect waived
fees resulting from the COVID-19 pandemic.

M&T’s investment in BLG resulted in income of $53 million in 2020, $37 million in 2019 and

$24 million in 2018. The higher amount in 2020 reflects distributions from BLG of $23 million in the
first quarter and $30 million in December 2020. In 2019 and 2018, BLG made distributions in the
first quarter of those years. The Company believes that the distribution declared and paid by BLG in
December 2020 likely occurred in lieu of a 2021 first quarter distribution. During 2017, the operating
losses of BLG resulted in M&T reducing the carrying
rr
Subsequently, M&T has 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,

value of its investment in BLG to zero.

including M&T. 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 $3.39 billion in 2020, compared to $3.47 billion in 2019 and $3.29 billion
in 2018. Included in those amounts are expenses considered to be “nonoperating” in nature consisting
of amortization of core deposit and other intangible assets of $15 million, $19 million and $25
million in 2020, 2019 and 2018, respectively. Exclusive of those nonoperating expenses, noninterest
operating expenses aggregated $3.37 billion in 2020, $3.45 billion in 2019 and $3.26 billion in 2018.
Contributing to the lower level of noninterest operating expenses in 2020 as compared with the prior
year were decreased costs for professional and outside services, legal-related matters, advertising and
marketing, and travel and entertainment. Additionally, a $48 million charge was recorded in 2019 to
reduce the carrying value of an investment in an asset manager that had been accounted for using the
equity method of accounting to its estimated realizable value. Those factors were partially offset by
higher costs for salaries and employee benefits, outside data processing and software, increases to the
valuation allowance for capitalized residential mortgage servicing rights and $14 million of expenses
related to the planned transition of the support for the Company’s retail brokerage and advisory
business to the platform of LPL Financial. The rise in noninterest operating expenses in 2019 as
compared with 2018 was largely attributable to increased costs for salaries and employee benefits,
outside data processing and software, equipment and net occupancy, and the $48 million charge
associated with the sale of an equity
were lower costs associated with increases to the reserve for Wilmington Trust-related legal matters
($56 million in 2019 and $135 million in 2018), lower contributions to The M&T Charitable
Foundation of $29 million and a decline in FDIC assessments of $27 million.

investment in an asset manager. Partially offsetting those factors

Salaries and employee benefits expense aggregated $1.95 billion in 2020, compared with $1.90

billion and $1.75 billion in 2019 and 2018, respectively. The higher levels of expenses in 2020 as
compared with 2019 reflect the impact of merit and other increases for employees and higher
employee benefits expenses, partially offset by lower incentive compensation costs. The increase in
salaries and employee benefits from 2018 to 2019 reflects increased staffing levels, the impact of
merit and other increases for employees and higher incentive and stock-based compensation. Stock-
based compensation totaled $80 million in 2020, compared with $76 million in 2019 and $66 million
in 2018. The number of full-time equivalent employees were 17,076 and 17,503 at December 31,
2020 and 2019, respectively, compared with 16,938 at December 31, 2018.

The Company provides pension and other postretirement benefits for its employees, including

pension, retirement savings and post-retirement benefit plans. Expenses related to such benefits
totaled $118 million in 2020, $76 million in 2019 and $85 million in 2018. The amounts recorded in
salaries and employee benefits expense and other costs of operations, respectively, from the
preceding sentence were as follows: $118 million and ($329,000) in 2020; $98 million and ($22)
million in 2019; and $92 million and ($7) million in 2018. The Company sponsors both defined
benefit and defined contribution pension plans. Pension benefit expense for those plans was $60
million in 2020, $31 million in 2019 and $45 million in 2018. Information about the Company’s
pension plans, including significant assumptions utilized in completing actuarial calculations for the
plans, is included in note 12 of Notes to Financial Statements.

The Company’s retirement savings plan (“RSP”) 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. RSP expense reflecting the Company’s employer matching contribution totaled $62 million in
2020, $48 million in 2019 and $43 million in 2018.

Excluding the nonoperating expense items already noted, nonpersonnel operating expenses
were $1.42 billion in 2020, $1.55 billion in 2019 and $1.51 billion in 2018. The decrease in such
expenses in 2020 as compared
with 2019 reflects declines in expenditures for professional and
outside services, legal-related matters, advertising and marketing, and travel and entertainment.
Additionally, the $48 million charge from the 2019 sale of an investment in an asset manager
contributed to the higher expenses in 2019. Those factors were partially offset by higher costs for
outside data processing and software, increases to the valuation allowance for capitalized residential
mortgage servicing rights and $14 million of expenses related to the planned transition of the support
for the Company’s retail brokerage and advisory business to the platform of LPL Financial. The rise
in nonpersonnel operating expenses in 2019 as compared with 2018 was predominantly the result of
higher expenses for outside data processing and software, equipment and net occupancy, professional
services, and the $48 million charge in 2019 associated with the sale of an equity investment in an
asset manager. Those factors were partially offset by lower costs associated with legal-related
matters and contributions to The M&T Charitable Foundation, and a decline in FDIC assessments.
As noted previously, during 2019 the Company increased its reserve for legal matters, predominantly
related to a subsidiary’s role as trustee of Employee Stock Ownership Plans in its Institutional Client
Services business. In addition, during 2018 WT Corp. reached an agreement related to alleged
conduct of that subsidiary prior to its acquisition by M&T that led to the Company adding $135
million to its reserve for legal matters 2018. The Company made contributions to The M&T
Charitablea
similar contributions in 2019.

Foundation of $8 million and $29 million in 2020 and 2018, respectively. There were no

Income Taxes
The provision for income taxes was $416 million in 2020, $618 million in 2019 and $590 million in
2018. The effective tax rates were 23.5% in each of 2020 and 2018 and 24.3% in 2019. 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
income is provided in note 13 of Notes to Financial Statements.

by applying the statutory federal income tax rate to pre-tax

International Activities
Assets and revenues associated with international activities represent less than 1% of the Company’s
consolidated assets and revenues. International assets included $170 million and $186 million of
loans to foreign borrowers at December 31, 2020 and 2019, respectively. Deposits in the Company’s
office in the Cayman Islands aggregated $652 million at December 31, 2020 and $1.7 billion at
December 31, 2019. The Company uses such deposits to facilitate customer demand, which
decreased in 2020 largely due to customers’ reactions to the decline in interest rates. Loans at M&T
Bank’s commercial banking office in Ontario, Canada included in international assets as of
December 31, 2020 and 2019 totaled $149 million and $143 million, respectively. Deposits at that
office were $32 million at December 31, 2020 and $23 million at December 31, 2019. The Company

also offers trust-related services in Europe. Revenues from providing such services during 2020,
2019 and 2018 were approximately $36 million, $32 million and $29 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 signififf cant 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 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 88% of the Company’s earning assets at
December 31, 2020, compared with 83% at December 31, 2019 and 78% at December 31, 2018.

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, 2020, M&T Bank had short-term and long-term credit facilities with
the FHLBs aggregating $19.0 billion. Outstanding borrowings under FHLB credit facilities totaled
$2 million at each of December 31, 2020 and 2019. Such borrowings were secured by loans and
investment securities. M&T Bank had an available line of credit with the Federal Reserve Bank of
New York that totaled approximately $13.0 billion at December 31, 2020. The amount of that line is
dependent upon the balances of loans and securities pledged as collateral. There were no borrowings
outstanding under such line of credit at December 31, 2020 or December 31, 2019. Senior notes
issued and outstanding totaled $2.8 billion at December 31, 2020 and $4.9 billion at December 31,
2019. The decline at December 31, 2020 as compared with the 2019 year-end reflects redemptions
of borrowings during 2020. On January 7, 2020 M&T Bank redeemed $750 million of senior notes
that were due to mature in February 2020. In addition, M&T Bank redeemed $750 million of senior
notes on July 17, 2020 that were due to mature on August 17, 2020. Finally, M&T Bank redeemed
$650 million of senior notes on December 28, 2020 that were due to mature on January 21, 2021.

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
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.

preferred securities have been phased-out of the definition of Tier 1 capital but,

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 $652
million and $1.7 billion at December 31, 2020 and 2019, 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 $4.5 billion and $2.8 billion at December 31, 2020
and 2019, 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,

impactmm

liquiditytt

resulting fromff

a short-rr term ratings downgrade over various grading levels. Such

of short-term funding become restricted due to a disruption in the financial
attemptsmm to quantify such credit-event risk by modeling scenarios that estimate

or should the availability
markets. The Companyaa
thet
impact is estimated by attempting to measure the effect on available unsecured lines of credit, available
capacitytt
of M&T and M&T Bank is presented in table 17. Additional information regarding the terms and
maturities
to Financial Statements. In addition to deposits and borrowings, other sources of liquidity include
maturities
securities, and cash generated from operations, such as fees collected for services.

of all of thet Company’s short-term and long-term borrowings is provided in note 8 of Notes

of investment securities and other earning assets, repayments of loans and investment

from secured borrowing sources and securitizablea

assets. Information about the credit ratings

Table 17

DEBT RATINGS

Moody’s

Standard
and Poor’s

Fitch

M&T Bank Corporation

Senior debt.................................................................................
Subordinated debt......................................................................

A3
A3

A–
BBB+

M&T Bank

Short-term deposits....................................................................
Long-term deposits....................................................................
Senior debt.................................................................................
Subordinated debt......................................................................

Prime-1
Aa3
A3
A3

A-1
A
A
A–

A
A–

F1
A+
A
A–

Certain customers of the Company obtain financing through the issuance of variable rate demand

tt
by letters

of credit provided by M&T Bank.

bonds (“VRDBs”). The VRDBs are generally enhanced
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 instrumeuu
are classified as trading account assets in the Company’s
M&T Bank is not contractually
obligated to purchase the VRDBs.
Company’s trading account was not material at December 31, 2020 or December 31, 2019. The total
amount of VRDBs outstanding backed by M&T Bank letters of credit was $725 million and $857
million at Decemberm 31, 2020 and 2019, respectively. M&T Bank also serves as remarketing agent for
most of those bonds.

nts are remarketed. When this occurs, the VRDBs
consolidated balance sheet. Nevertheless,

The value of VRDBs in the

Table 18

MATURITY DISTRIBUTION OF SELECTED LOANS(a)

December 31, 2020

Demand

2021

2022 - 2025

After 2025

(In thousands)

Commercial, financial, etc...................................... $6,820,773 $6,274,185 $11,465,875 $1,692,339
586,099
Real estate — construction .....................................
Total ................................................................... $6,914,581 $9,982,308 $17,030,129 $2,278,438

93,808 3,708,123

5,564,254

Floating or adjustable
interest rates ........................
Fixed or predetermined interest rates .....................
Total ...................................................................

(a) TheTT

data do not include nonaccrual loans.

$11,889,610 $ 973,711
1,304,727
$17,030,129 $2,278,438

5,140,519

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, 2020
are summarized in table 19. 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
thet
se 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
in note 21 of Notes to Financial Statements. Table 19 summarizes the Company’
as of December 31, 2020 and the timing of the expiration of such commitments.

s other commitments

is provided

Table 19

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

December 31, 2020

Less Than One
Year

One to Three
Years

Three to Five
Years
(In thousands)

Over Five
Years

Total

Payments due for contractual

obligations
Time deposits.......................... $ 3,017,900 $
Deposits at Cayman

764,882 $ 117,128 $

— $ 3,899,910

652,104
Islands office........................
59,482
Short-term borrowings............
4,382,193
Long-term borrowings............
467,320
Operating leases......................
Other .......................................
500,635
Total........................................ $ 4,966,290 $ 2,797,165 $ 984,827 $1,213,362 $ 9,961,644

—
—
1,700,463
167,102
164,718

—
—
1,082,098
93,229
38,035

—
—
749,656
101,602
16,441

652,104
59,482
849,976
105,387
281,441

Other commitments

Commitments to extend

credit (a)............................... $15,957,654 $ 9,461,458 $5,187,704 $3,677,403 $34,284,219
2,241,417

1,240,080

178,081

635,809

187,447

Standby letters of credit..........
Commercial letters of

credit ....................................

25,829

135

1,368

—

27,332

Financial guarantees and

indemnification contracts.....

89,391

283,104

542,029

3,306,007

4,220,531

Commitments to sell real

estate loans...........................

— 2,108,823
Total........................................ $19,294,240 $10,382,755 $6,034,470 $7,170,857 $42,882,322

1,981,286

125,288

2,249

(a)((

Amounts exclude discretionary funding commitments to commercial customers of $10.4 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 bank subsidiary
to M&T are limited by the amount of earnings
preceding years. For purposes of that test, at December 31, 2020 approximately $1.3 billion was
available for payment of dividends to M&T from banking subsidiaries. M&T also may obtain
funding through long-term borrowings. Outstanding senior notes of M&T at December 31, 2020 and

of the subsidiary in the current year and the two

December 31, 2019 were $783 million and $770 million, respectively. Junior subordinated
debentures of M&T associated with trust
December 31, 2019 totaled $528 million and $525 million, respectively.

preferred securities outstanding at December 31, 2020 and

Table 20

MATURITY AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES

December 31, 2020

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.......................................................................... $
Yield.........................................................................................

4,194

.66%

5,144
2.10%

— $
—

9,338
1.44%

Mortgage-backed securities(b)

Government issued or guaranteed

Carrying value ...................................................................
Yield ..................................................................................

398,927

1,701,734

1,578,766

1,004,011

4,683,438

2.23%

2.24%

2.23%

2.20%

2.23%

Privately issued

Carrying value ...................................................................
Yield ..................................................................................

Other debt securities

Carrying value..........................................................................
Yield.........................................................................................

Total investment securities available for sale

—
—

751
2.77%

1
5.00%

7,441

2.58%

2
5.00%

13
5.00%

16
5.00%

97,301

1.99%

24,321

3.44%

129,814

2.35%

Carrying value..........................................................................
Yield.........................................................................................

403,872

1,714,320

1,676,069

1,028,345

4,822,606

2.22%

2.24%

2.22%

2.24%

2.23%

Investment securities held to maturity
U.S. Treasury and federal agencies

Carrying value..........................................................................
Yield.........................................................................................

Obligations of states and political subdivisions

Carrying value..........................................................................
Yield.........................................................................................

2,999

.11%

1,356
4.66%

—
—

175
4.93%

—
—

2,999

.11%

1,531
4.69%

Mortgage-backed securities(b)

Government issued or guaranteed

Carrying value ...................................................................
Yield ..................................................................................

93,512

2.61%

393,242

460,553

717,136

1,664,443

2.61%

Privately issued

Carrying value ...................................................................
Yield ..................................................................................

3,935
2.11%

16,167

1.94%

21,401

1.57%

35,652

1.52%

77,155

1.66%

Other debt securities

Carrying value..........................................................................
Yield.........................................................................................

—
—

2,861
4.41%

2,861

4.41%

Total investment securities held to maturity

Carrying value..........................................................................
Yield.........................................................................................

101,802

409,584

481,954

755,649

1,748,989

2.55%

2.59%

2.57%

Equity and other securities
Equity securities

Carrying Value.........................................................................
Yield.........................................................................................

Other investment securities

Carrying Value.........................................................................
Yield.........................................................................................

Total investment securities

92,985

.28%

381,117

2.29%

Carrying value.......................................................................... $
Yield.........................................................................................

505,674

$ 2,123,904

$ 2,158,023

$ 1,783,994

$ 7,045,697

2.29%

2.31%

2.30%

2.38%

2.29%

(a)
(b)

Investment securities available for sale are presented at estimated fair value. Yields on such securities are based on amortizedii
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.

cost.

Table 21

MATURITY OF DOMESTIC CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
WITH BALANCES OF $100,000 OR MORE

December 31,
2020
(In thousands)

Under 3 months ................................................................................................................. $ 486,838
378,769
3 to 6 months .....................................................................................................................
373,785
6 to 12 months ...................................................................................................................
351,088
Over 12 months .................................................................................................................
Total.............................................................................................................................. $ 1,590,480

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.

is subject to the effects of

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
mm
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 Companymm
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, 2020, the aggregate
notional amount of interest rate swap agreements entered into for interest rate risk management
purposes that were currently in effect was $19.0 billion. In addition, the Company has entered into
$32.1 billion of forward-starting interest rate swap agreements. Information about interest rate swap
agreements entered into for interest rate risk management purposes is included herein under the
heading “Net Interest Income/Lending and Funding Activities” and in note 18 of Notes to Financial
Statements.

The Company’s Asset-Liability Committee, which includes members of senior management,
monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid
of a computer model that forecasts net interest income under different interest rate scenarios. In
modeling changing interest rates, the Company considers different yield curve shapes that consider
both parallel (that is, simultaneous changes in interest rates at each point on the yield curve) and non-

parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts)
shifts in the yield curve. In utilizing the model, 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 effecff
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
liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other
financial instruments used for interest rate risk management purposes.

t of changing interest rates on expected

assets and interest-bearing

Table 22 displays as of December 31, 2020 and 2019 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 22

SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES

Changes in interest rates

Calculated Increase (Decrease)
in Projected Net Interest Income

December 31, 2020

December 31, 2019

(In thousands)

+200 basis points................................................................................
+100 basis points................................................................................
-100 basis points.................................................................................

324,684
182,661
(61,792)

45,345
35,838
(94,616)

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 at or above zero 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. The sensitivity of
net interest income to changes in interest rates increased as of December 31, 2020 as compared
with
December 31, 2019 due to the low interest rate environment and composition of the Company’s
portfolios of earning assets and interest-bearing liabilities, in particular the increased balance of
interest-bearing deposits at banks.

Table 23 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

100

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
mm
to implement.

Table 23

CONTRACTUAL REPRICING DATA

December 31, 2020

Three Months
or Less

Four to Twelve
Months

One to
Five Years
(Dollars in thousands)

After
Five Years

Total

Loans and leases, net ......... $ 51,699,270
252,983
Investment securities .........
23,713,088
Other earning assets...........
Total earning assets......
75,665,341

$ 7,045,316
112,961
783
7,159,060

$19,630,840
97,015
—
19,727,855

$20,160,441
6,582,738
—
26,743,179

$ 98,535,867
7,045,697
23,713,871
129,295,435

Savings and interest-

checking deposits............
Time deposits.....................
Deposits at Cayman

Islands office...................
Total interest-

bearing deposits.........
Short-term borrowings.......
Long-term borrowings.......

Total interest-

67,680,840
1,186,417

—
1,831,483

—
882,010

652,104

—

1,831,483

882,010

69,519,361
59,482
1,826,193

—

1,950,436

605,564

—
—

—

67,680,840
3,899,910

652,104

72,232,854
59,482
4,382,193

bearing liabilities.......

71,405,036

1,831,483

2,832,446

605,564

76,674,529

Interest rate swap

agreements ......................

4,000,000
Periodic gap ....................... $(14,739,695) $ 9,327,577
Cumulative gap..................
(5,412,118)
Cumulative gap as a %

(19,000,000)

(14,739,695)

14,500,000
$31,395,409
25,983,291

500,000
$26,637,615
52,620,906

—

of total earning assets .....

(11.4)%

(4.2)%

20.1%

40.7%

Changes in fair value of the Company’s financial instruments can also result from a lack of

trading activity for similar instruments in the financial markets. That impact is most notable on the
values assigned to some of the Company’s investment securities. Information about the fair valuation
of investment securities is presented 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

101

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.

trading account activities are recorded in the

The notional amounts of interest rate contracts entered into for trading account purposes totaled
$37.8 billion at December 31, 2020 and $48.6 billion at December 31, 2019. The notional amounts of
foreign currerr ncy and other option and futures contracts entered into for trading account purposes
were $776 million and $1.2 billion at December 31, 2020 and 2019, 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 forff
consolidated balance sheet. The fair values of all trading account assets and liabilities were $1.1
billion and $117 million, respectively, at December 31, 2020 and $470 million and $80 million,
respectively, at December 31, 2019. The fair value asset and liability amounts at December 31, 2020
have been reduced by contractual settlements of $6 million and $806 million, respectively, and at
December 31, 2019 by contractual settlements of $43 million and $281 million, respectively. The
higher balance of trading account assets at December 31, 2020 as compared with 2019 was largely
the result of increased values associated with interest rate swap agreements entered into with
commercial customers that are not subject to periodic variation margin settlement payments.
Included in trading account assets at each of December 31, 2020 and 2019 were $21 million 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, 2020 and 2019 were $24 million
and $25 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
$29 million and $28 million at December 31, 2020 and December 31, 2019, 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 Companymm
is exposed to credit risk associated with
counterparties to transactions related to the Company’s trading account activities. Additional
information about the Company’s use of derivative financial instruments in its trading account
activities is included in note 18 of Notes to Financial Statements.

Capital
Shareholders’ equity was $16.2 billion at December 31, 2020 and represented 11.35% of total assets,
compared with $15.7 billion or 13.11% at December 31, 2019 and $15.5 billion or 12.87% at
December 31, 2018.

Included in shareholders’ equity was preferred stock with financial statement carrying values of

$1.25 billion at each of December 31, 2020 and 2019 and $1.23 billion at December 31, 2018. On
July 30, 2019, M&T issued 40,000 shares of Series G Perpetual Fixed-Rate Reset Non-cumulative
Preferred Stock, par value $1.00 per share and liquidation preference of $10,000 per share. Through
July 31, 2024 holders of the Series G preferred stock are entitled to receive, only when, as and if
declared by M&T’s Board of Directors, non-cumulative cash dividends at an annual rate of 5.0%,
payable semiannually in arrears. Subsequent to July 31, 2024 holders will be entitled to receive, only
when, as and if declared by M&T’s Board of Directors, non-cumulative cash dividends at an annual
rate of the five-year
The Series G

U.S. Treasury Rate plus 3.174%, payable semiannually in arrears.

102

preferred stock may be redeemed at M&T’s option, in whole or in part, on any dividend payment
date on or after August 1, 2024 or, in whole but not in part, at any time within 90 days following a
regulatory capital treatment event whereby the full liquidation value of the shares no longer qualifies
as “additional Tier 1 capital.” On August 30, 2019 M&T redeemed the 230,000 shares of the Series
A and 151,500 shares of the Series C Fixed Rate Cumulative Perpetual Preferred Stock, $1,000
liquidation preference per share, having received the approval of the Federal Reserve to redeem such
shares after issuing the Series G preferred stock. Further information concerning M&T’s preferred
stock can be found in note 9 of Notes to Financial Statements.

Common shareholders’ equity totaled $14.9 billion, or $116.39 per share, at December 31,
2020, compared with $14.5 billion, or $110.78 per share, at December 31, 2019 and $14.2 billion, or
$102.69 per share, at December 31, 2018. Tangible equity per common share, which excludes
goodwill and core deposit and other intangible assets and applicable deferred tax balances, was
$80.52 at December 31, 2020, compared with $75.44 and $69.28 at December 31, 2019 and 2018,
respectively. The Company’s ratio of tangible common equity to tangible assets was 7.49% at
December 31, 2020, compared with 8.55% and 8.31% at December 31, 2019 and 2018, respectively.
Reconciliations of total common shareholders’ equity and tangible common equity and total assets
and tangible assets as of December 31, 2020, 2019 and 2018 are presented in table 2. During 2020,
2019 and 2018, the ratio of average total shareholders’ equity to average total assets was 11.80%,
13.14% and 13.36%, respectively. The ratio of average common shareholders’ equity to average total
assets was 10.88%, 12.08% and 12.31% in 2020, 2019 and 2018, 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, remaining unrealized losses on held-to-maturity securities transferred from available for sale
that have not yet been amortized, gains or losses associated with interest rate swap agreements
designated as cash flow hedges, foreign currency translation adjustments
and adjustments to reflect
the funded status of defined benefit pension and other postretirement plans. Net unrealized gains on
investment securities reflected in shareholders’ equity, net of applicablea
million, or $1.13 per common share, at December 31, 2020 and $37 million, or $.29 per common
share, at December 31, 2019, compared with net unrealized losses of $148 million, or $1.06 per
common share, at December 31, 2018. 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, 2020 and 2019 is
included in note 2 of Notes to Financial Statements.

tax effect, were $145

Reflected in the carrying amount of available-foff r-sale investment securities at December 31,
2020 were pre-tax effect unrealized gains of $211 million on securities with an amortized cost of
$4.5 billion and pre-tax effect unrealized losses of $9 million on securities with an amortized cost of
$125 million. 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 available-for-sale investment securities for

declines in value that might be indicative of credit-related losses through an analysis of the
creditworthiness of the issuer or the credit performance of the underlying collateral supporting the
bond. If the Company does not expect to recover the entire amortized cost basis of a debt security a
credit loss is recognized in the consolidated statement of income. A loss is also recognized if the
Company intends to sell a bond or it more likely than not will be required to sell a bond before
recovery of the amortized cost basis.

As of December 31, 2020, based on a review of each of the securities in the available-for-sale

investment securities portfolio, the Companymm
basis of each security. As of December 31, 2020, the Companymm
anticipated that it would be required to sell any securities for which fair value was less than the

concluded that it expected to realize the amortized cost

did not intend to sell nor is it

103

amortized 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 amortized cost basis of those securities to become uncollectable.

On January 1, 2020 the Company adopted amended accounting guidance that requires

investment securities held to maturity to be presented at their net carrying value that is expected to be
collected over their contractual term. The Company estimated no material allowance for credit losses
for its investment securities classified as held-to-maturity at January 1, 2020 and December 31, 2020
as the substantial majority of such investment securities were obligations backed by the U.S.
government or its agencies. The Company assessed the potential for expected credit 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, 2020 and 2019, the Company had in its held-to-
maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of $77
million and $93 million, respectively, and a fair value of $70 million and $87 million, respectively.
At December 31, 2020, 82% of the mortgage-backed securities were in the most senior tranche of the
securitization structure. The mortgage-backed securities are generally collateralized by residential
and small-balance commercial real estate loans originated between 2004 and 2008. Given 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 bond, the Company has concluded that as of December 31, 2020, it
expected to recover the amortized cost basis of those privately issued mortgage-backed securities.
Nevertheless, it is possible that adverse changes in the estimated 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 $481
million, or $3.75 per common share, at December 31, 2020, $342 million, or $2.62 per common
share, at December 31, 2019 and $261 million, or $1.89 per common share, at December 31, 2018.
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.

Pursuant to previously approved capital plans and authorizations by M&T’s Board of Directors,

M&T repurchased 2,577,000 common shares for $374 million in the first quarter of 2020. During
2019, M&T repurchased 8,257,000 common shares for $1.3 billion. In 2018, M&T repurchased
12,295,817 common shares for $2.2 billion. On January 20, 2021, M&T’s Board of Directors
authorized a new stock repurchase plan to repurchase up to $800 million of shares of M&T’s
common stock subjeb ct to all applicable regulatory limitations.

During the fourth quarter of 2019, M&T’s Board of Directors authorized an increase in the
quarterly common stock dividend to $1.10 per common share from the previous rate of $1.00 per
common share. During 2018, 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 $569 million in 2020, compared with $552 million and $511
million in 2019 and 2018, respectively. Dividends per common share totaled $4.40 in 2020,
compared with $4.10 and $3.55 in 2019 and 2018, respectively. Dividends of $68 million in 2020,
$72 million in 2019 and $73 million in 2018 were declared on preferred stock in accordance with the
terms of each series.

104

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 definff ed 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 require a “capital conservation buffer” of 2.5% composed
entirely of CET1 on top of these minimum risk-weighted asset ratios. The federal bank regulatory
agencies have issued rules that allow banks and bank holding companies to phase-in the impactmm
of
adopting the expected credit loss accounting model on regulatory capital. Those rules allow banks
and bank holding companies to delay for two years the day one impact on retained earnings of
adopting the expected loss accounting standard and 25% of the cumulative change in the reported
allowance for credit losses subsequent to the initial adoption, followed by a three-year transition
period. M&T and its subsidiary banks adopted these rules and the impact is reflected in regulatory
capital ratios as of December 31, 2020. The regulatory capital amounts and ratios of M&T and its
bank subsidiaries as of December 31, 2020 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 examinations by a number of
regulators. Regulation of financial institutions such as M&T and its subsidiaries is intended primarily
for the protection of depositors, the Deposit Insurance Funduu
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 expandaa
permissible activities or affff ect
which could have a material effect on the business, financial condition or results of operations of the
Company and in M&T’s ability to pay dividends. For additional information concerning
comprehensive regulatory framework, refer to Part I, Item 1 of this Formrr

the competitive environment in which the Company operates, all of

of the FDIC and the banking and financial

10-K.

this

Fourth Quarter Results
Net income in the fourth quarter of 2020 was $471 million, compared with $493 million in the year-
earlier quarter. Diluted and basic earnings per common share were each $3.52 in the final 2020
quarter, compared with diluted and basic earnings per common share of $3.60 in the corresponding
quarter of 2019. The annualized rates of return on average assets and average common shareholders’
equity for the final quarter of 2020 were 1.30% and 12.07%, respectively, compared with 1.60% and
12.95%, respectively, in the corresponding quarter of 2019.

Net operating income during 2020’s fourth quarter was $473 million, compared with $496
million in the year-earlier quarter. Diluted net operating earnings per common share were $3.54 and
$3.62 in the fourth quarters of 2020 and 2019, respectively. The annualized net operating returns on
average tangible assets and average tangible common equity
in the final three months of 2020 were
1.35% and 17.53%, respectively, compared with 1.67% and 19.08%, respectively, in the similar 2019

105

period. Reconciliations of GAAP results with non-GAAP results for the quarterly periods of 2020
and 2019 are provided in table 25.

Taxable-equivalent net interest income aggregated $993 million in the final quarter of 2020,
compared with $1.01 billion in the year-earlier period. That decline was predominantly attributable to
a 64 basis point narrowing of the net interest margin to 3.00% in the fourth quarter of 2020 from
3.64% in the final three months of 2019. Partially offsetting the impact of the lower net interest
margin was a 19% rise in average earning assets, from $110.6 billion in 2019 to $131.9 billion in
2020. The $21.3 billion rise in average earning assets was driven by a $13.3 billion increase in low-
yielding deposit balances at the Federal Reserve Bank of New York and other banks and an $8.4
billion increase in loans outstanding. The narrowing of the net interest margin reflects the lower
interest rate environment due to actions initiated by the Federal Reserve to decrease its target Federal
funds rate three times in the second half of 2019 (each by a .25% increment) and twice in March of
2020 (first by .50%, then another by 1.0%). Average balances of commercial loans and leases were
$27.7 billion in the recent quarter, up $4.2 billion or 18% from $23.5 billion in the fourth quarter of
2019. That increase was due to PPP loans originated in 2020 that averaged $6.2 billion in the final
2020 quarter. Average commercial real estate loan balances aggregated $37.7 billion in the final
quarter of 2020, up $2.7 billion or 8% from $35.0 billion in the year-earlier quarter. Included in those
totals were average balances of loans held for sale of $307 million in the final three months of 2020,
compared with $201 million in the corresponding period of 2019. Average residential real estate loan
balances increased $431 million to $16.8 billion in the fourth quarter of 2020 from $16.3 billion in
the year-earlier quarter, reflecting repurchases of government-guaranteed loans from Ginnie Mae
pools that are serviced by the Company that were partially offset by ongoing repayments of loans
obtained in the acquisition of Hudson City. Also contributing to the increase were loans held for sale
that averaged $645 million and $382 million in the final quarters of 2020 and 2019, respectively.
Consumer loans averaged $16.5 billion in the last three months of 2020, $1.2 billion or 8% higher
than in the year-earlier quarter. That increase resulted from higher average balances of recreational
finance loans of $1.6 billion and automobile loans of $145 million, offset, in part, by a $485 million
decline in average balances of home equity
narrowed in the fourth quarter of 2020 to 2.90%, down 40 basis points from 3.30% in the
corresponding quarter of 2019. The yield on earning assets in the last three months of 2020 was
of
3.15%, down 112 basis points from the year-earlier quarter. That decline reflects the impactmm
decreases in short-term interest rates initiated by the Federal Reserve in the second half of 2019 and
in March 2020 that contributed to lower yields on loans and leases. The rate paid on interest-bearing
liabilities in the 2020’s final quarter was .25%, down 72 basis points from .97% in the similar quarter
of 2019. That decrease reflects the low interest rate environment and its impact on rates paid on
deposits, as well as repayments of long-term borrowings. The contribution of net interest-free funds
to the Company’s net interest margin was .10% and .34% in the fourth quarters of 2020 and 2019,
respectively. As a result, the Company’s net interest margin narrowed to 3.00% in the fourth
of 2020 from 3.64% in the year-earlier period.

loans and lines of credit. The net interest spread

quarter

The provision for credit losses was $75 million for the quarter ended December 31, 2020,
compared with $54 million in the year-earlier period. Net loan charge-offs were $97 million in the
last three months of 2020, representing an annualized .39% of average loans and leases outstanding,
compared with $41 million or .18% during the similar 2019 period. Net charge-offs in the fourth
quarters of 2020 and 2019 included: net recoveries of residential real estate loans of $1 million in
2020 and net charge-offs of less than $1 million in 2019; net charge-offs of commercial real estate
loans of $12 million in 2020, compared with $1 million in 2019; net charge-offs of commercial loans
of $67 million in 2020 and $14 million in 2019; and net charge-offs of consumer loans of $19 million
in 2020 and $27 million in 2019.

106

Other income rose to $551 million in the fourth quarter of 2020 from $521 million in the similar

2019 period. That improvement reflects a $30 million distribution from BLG and higher mortgage
banking revenues, partially offset by declines in service charges on deposit accounts, loan
syndication fees and trading account and foreign exchange gains. The rise in mortgage banking
revenues predominantly reflects higher origination income from the residential and commercial
mortgage banking businesses.

Other expense totaled $845 million during the recent quarter, compared with $824 million in

the final quarter of 2019. Included in such amounts are expenses considered to be “nonoperating” in
nature consisting of amortization of core deposit and other intangible assets of $3 million and $4
million during the quarters ended December 31, 2020 and 2019, respectively. Exclusive of those
nonoperating expenses, noninterest operating expenses were $842 million in the fourth quarter of
2020 and $819 million in the corresponding 2019 quarter. The higher level of expenses in the recent
quarter as compared with the fourth quarter of 2019 was largely attributable to increased costs for
salaries and employee benefits, changes in the valuation allowance for capitaliz
mortgage servicing rights and $14 million of expenses related to the planned transition of the support
for the Company’s retail brokerage and advisory business to the platform of LPL Financial, partially
offset by lower costs for professional and outside services, advertising and marketing, and travel and
entertainment. The last two categories reflect reduced business activities stemming from the impactmm
of the COVID-19 pandemic. The Company’s efficiency ratio during the final quarters of 2020 and
2019 was 54.6% and 53.1%, respectively. Table 25 includes a reconciliation of other expense to
noninterest operating expense and the calculation of the efficiency ratio for each of the quarters of
2020 and 2019.

ed residential

Segment Information
In accordance with GAAP, the Company’s reportable segments have been determined based upon
its internal profitability reporting system, which is organized by strategic business unit. Certain
strategic business units have been combined for segment information reporting purposes where the
nature of the products and services, the type of customer, and the distribution of those products and
services are similar. The reportable segments are Business Banking, Commercial Banking,
Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.
The financial information of the Company’s segments was compiled utilizing the accounting

policies described in note 22 of Notes to Financial Statements. The management accounting policies
and processes utilized in compiling
segment financial information are highly subjective and, unlike
financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported
segments and the financial information of the reported segments are not necessarily comparable with
similar information reported by other financial institutions. Furthermore, changes in management
structure or allocation methodologies and procedures may result in changes in reported segment
financial data. Financial information about the Company’s segments is presented in note 22 of Notes
to Financial Statements.

The Business Banking segment provides a wide range of services to small businesses and
through the Company’s branch network,

professionals within markets served by the Companymm
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 $159 million in 2020, compared with $168 million in 2019. That 6% decline resulted
from a $10 million decrease in service charges on deposit accounts, a $9 million increase in the

107

transaction-related fees. The growth in net interest income reflected

provision for credit losses, due largely to higher net charge-offs, and higher personnel-related costs
of $7 million. Those unfavorable factors were partially offset by an $11 million increase in net
interest income. The decrease in service charges on deposit accounts reflected the impact of the
pandemic that has resulted in reduced customer transaction activity and higher customer deposit
levels that can be used to offset
an increase in average outstanding deposit and loan balances of $3.0 billion and $2.4 billion,
respectively, partially offset by a narrowing of the net interest margin on deposits and loans of 89
basis points and 17 basis points, respectively. The growth in average deposits reflects customers’
desire for liquidity given the low interest rate environment and the pandemic. The rise in average
loan balances reflects PPP loans originated during 2020, which averaged $2.4 billion in 2020 in this
segment. The Business Banking segment contributed net income of $168 million in 2018. Higher net
interest income of $17 million in 2019 was largely offset by increases of $11 million in centrally-
allocated costs associated with data processing, risk management and other support services provided
to the Business Banking segment and $6 million in the provision for credit losses, primarily due to
higher net charge-offs. The higher net interest income reflected a six basis point widening of the net
interest margin on deposits, higher average deposit balances of $192 million and higher average
outstanding loan balances of $151 million.

The Commercial Banking segment provides a wide range of credit products and banking
services for middle-market and large commercial customers, mainly within the markets served by the
Company. Services provided by this segment include commercial lending and leasing, letters of
credit, deposit products, and cash management services. The Commercial Banking segment
contributed net income of $508 million in 2020, down from $520 million in 2019. The decline in net
income from 2019 was predominantly driven by a $48 million increase in the provision for credit
losses, due to higher loan balances and net charge-offs. Also contributing to the lower net income
was a $9 million write-down of equipment in 2020 that was leased to customers. Offsetting the noted
unfavorable factors were a $35 million increase in net interest income and an $11 million decrease in
centrally-allocated costs associated with data processing, risk management and other support services
provided to the Commercial Banking segment. The increased net interest income reflected higher
average outstanding deposit and loan balances of $6.2 billion and $2.2 billion, respectively, partially
offset by an 84 basis point narrowing of the net interest margin on deposits. The increase in average
deposits reflects customers’ desire for liquidity given the low interest rate environment and the
pandemic. The rise in average loan balances reflects average PPP loans of $2.0 billion in this
segment in 2020. Net income for the Commercial Banking segment totaled $539 million in 2018.
The 3% decline in net income in 2019 as compared with 2018 resulted from an $18 million increase
in centrally-allocated costs, largely associated with data processing, risk management and other
support services provided to the Commercial Banking segment, a higher provision for credit losses of
$17 million primarily due to lower recoveries of previously charged-off loans, and higher personnel-
related costs of $6 million. Partially offsetting those unfavorable factors were lower FDIC
assessments of $11 million and a $7 million rise in net interest income. The increase in net interest
income reflected higher average outstanding loan balances of $1.4 billion and a five basis point
widening of the net interest margin on deposits offset, in part, by a narrowing of the net interest
margin on loans of seven basis points and lower average deposit balances of $612 million.

The Commercial Real Estate segment provides credit and deposit services to its customers.

Commercial real estate loans may be secured by apartment/multifamily buildings; office, retail and
industrial space; or other types of collateral. Activities of this segment also include the origination,
sales and servicing of commercial real estate loans through the Fannie Mae DUS program and other
programs. Commercial real estate loans held for sale are included in this segment. Net income of the
Commercial Real Estate segment aggregated $382 million in 2020, down 21% from $486 million in
2019. That decline resulted from a $106 million rise in the provision for credit losses, due to higher

108

loan balances and net charge-offs, a decrease in net interest income of $19 million, higher salaries
and employee benefits expense of $11 million, largely reflecting increased incentive compensation
costs, and lower trading account and foreign exchange gains of $9 million, resulting from decreased
activity related to interest rate swap agreements executed on behalf of commercial customers.
Partially offsetting those unfavorable factors was a $10 million rise in commercial mortgage banking
revenues, due in part to wider margins on loans originated for sale. The lower net interest income
was largely attributable to a narrowing of the net interest margin on deposits and loans of 76 basis
points and 14 basis points, respectively, partially offset by higher average outstanding loan balances
of $1.7 billion. Net income for this segment was $453 million in 2018. The 7% increase in net
income from 2018 to 2019 resulted from a $27 million increase in net interest income, reflecting
higher average outstanding loan balances of $914 million, higher mortgage banking revenues of $15
million, due largely to increased origination activities, higher trading account and foreign exchange
gains of $13 million, resulting from increased activity related to interest rate swap agreements
executed on behalf of commercial customers, and reduced FDIC assessments of $13 million. Those
favorable factors were partially offset by a $25 million increase in centrally-allocated costs
associated with data processing, risk management and other support services provided to the
Commercial Real Estate segment and an $11 million rise in personnel-related expenses, refleff cting
merit and other increases and higher incentive-based compensation.

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 $327 million in 2020 and
$144 million in 2019. That significant increase was driven by a $277 million rise in net interest
income, reflecting additional income from interest rate swap agreements utilized as part of the
Company’s management of interest rate risk. Partially offsetting that factor were valuation losses
associated with marketable equity securities (compared with gains in the 2019 period) representing a
change of $25 million. Net income of the Discretionary Portfolio segment aggregated $116 million in
2018. The 24% rise in the 2019’s net income as compared with 2018 was predominantly due to $18
million of unrealized valuation gains associated with marketable equity securities (compared with
unrealized losses of $6 million in 2018), higher trading account and foreign exchange gains of $7
million resulting from lower valuation losses on interest rate floor contracts and a $7 million decline
in FDIC assessments, partially offset by lower net interest income of $18 million, reflecting lower
average outstanding loan balances.

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. The Company periodically purchases the rights to service loans and also sub-
services residential real estate loans for others. Residential real estate loans held for sale are included
in this segment. The Residential Mortgage Banking segment’s net income rose 85% to $134 million
in 2020 from $72 million in 2019. That improvement resulted from a $131 million increase in
revenues associated with mortgage origination and sales activities (including intersegment revenues)
and higher net interest income of $33 million, reflecting increased average outstanding balances of
deposits and loans of $1.1 billion and $1.0 billion, respectively. Offsetting those favorable factors
were higher servicing-related costs (including intersegment costs and increases to the valuation
allowance for capitalized residential mortgage servicing rights) of $37 million, higher personnel-
related costs of $22 million, reflecting increased headcount and higher commissions, lower revenues
of $17 million associated with servicing and sub-servicing residential real estate loans (including
intersegment revenues), and a $14 million rise in centrally-allocated costs associated with data
processing, risk management and other support services provided to the Residential Mortgage
Banking segment. The Residential Mortgage Banking segment’s net income in 2019 was up 59%

109

from the $45 million earned in 2018. That improvement was attributable to higher revenues of $47
million associated with servicing and sub-servicing residential real estate loans (including
intersegment revenues), a $37 million rise in revenues from mortgage origination and sales activities
(including intersegment revenues), and higher net interest income of $6 million, reflecting a
widening of the net interest margin on deposits of 22 basis points and higher average deposit
balances of $751 million, offset, in part, by a narrowing of the net interest margin on loans of 73
basis points. Partially offsetting those favorable factors were a $24 million increase in servicing-
related costs (including intersegment costs and increases to the valuation allowance for capitalized
residential mortgage servicing rights), higher outside data processing and software expenses of $14
million, and an $8 million rise in personnel-related costs.

The Retail Banking segment offers a variety of services to consumers through several deliveryr

channels which include branch offices, automated teller machines, telephone banking and Internet
banking. The Company has branch offices in New Yorkr 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 $365 million in 2020, down 31% from $528 million
in 2019. That decrease was predominantly attributable to a $185 million decline in net interest
income, reflecting a 74 basis point narrowing of the net interest margin on deposits partially offset by
higher average outstanding deposit and loan balances of $2.4 billion and $1.4 billion, respectively,
and a $51 million decrease in consumer service charges on deposit accounts. The lower consumer
service charges reflect fee waivers and lower transaction activity as a result of the COVID-19
pandemic. Those unfavorable factors were offset, in part, by a $17 million decrease in advertising
and marketing expenses due to reduced business activities related to the pandemic and a $14 million
decline in the provision for credit losses. Net income for the Retail Banking segment totaled $541
million in 2018. Factors contributing to the decline in net income from 2018 to 2019 included a $20
million rise in personnel-related costs due largely to merit and other increases, higher professional
services and other operating expenses of $15 million, a $10 million rise in the provision for credit
losses, due to higher net charge-offs and loan balances, and a $9 million increase in centrally-
allocated costs, largely associated with data processing, risk management and other support services
provided to the Retail Banking segment. Those factors were partially offset by increases of $39
million in net interest income and $8 million in service charges on deposit accounts. The net interest
higher average outstanding loan balances of $1.2 billion and a widening of
income growth reflected
the net interest margin on deposits of 10 basis points, partially offset by lower average deposit
balances of $1.2 billion.

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, distributions from
BLG, merger-related expenses resulting from acquisitions (when incurred) 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 reportablea
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 a net loss of $523 million in 2020, compared with net income of $11 million and $55
million in 2019 and 2018, respectively. The net loss in 2020 as compared with 2019’s net income
resulted from a $476 million increase in the provision for credit losses, the unfavorable impact from
mm
the Company’s

allocation methodologies for internal transfers for funding charges and credits

110

associated with earning assets and interest-bearing liabilities of the Company’s reportable segments,
and a $29 million increase in outside data processing and software costs. Those unfavorable factors
were partially offset by a $112 million decrease in professional and outside services, a $49 million
decrease in accruals for legal matters, a $48 million charge in 2019 from the sale of an affiliated asset
manager, higher trust income of $29 million, and increased income from BLG during 2020 of $16
million. As compared with 2018, the lower net income in 2019 resulted from the $48 million charge
from the sale of the affiliated asset manager and higher expenses for salaries and employee benefits,
equipment and net occupancy, and professional services (net of allocations of centralized support
services to other segments). Those unfavorable factors were partially offset by lower accruals for
legal matters of $79 million ($56 million in 2019, compared with $135 million in 2018), higher trust
income of $35 million, the favorable impact from the Company’s allocation methodologies for
internal transfers for funding charges and credits associated with earning assets and interest-bearing
liabilities of the Company’s reportable segments, lower contributions to The M&T Charitable
Foundation of $29 million, and a $13 million increase in income from BLG.

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. Any statement that does not describe historical or current facts is
a forward-looking statement, including statements regarding the potential effects of the COVID-19
pandemic on the Company’s business, financial condition, liquidity and results of operations.
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 on 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; risks and uncertainties relating to the impact of the COVID-19
pandemic; the impact of changes in market values on trust-related
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 Financial Accounting Standards Board, regulatory agencies or
legislation; 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

revenues; legislation and/or

111

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, acquiqq sition and investment activities compared with M&T's initial expectations, including
the full realization of anticipated cost savings and revenue enhancements.

These are representative of the Future Factors that could affect the outcome of the forward-

looking statements. In addition, such statements could be affected by general industry
and market
conditions and growth rates, general economic and political conditions, either nationally or in the
states in which M&T and its subsidiaries do business, including interest rate and currency exchange
rate fluctuations, changes and trends in the securities markets, and other Future Factors.

Further, statements about the potential effects of the COVID-19 pandemic on the Company’s

business, financial condition, liquidity and results of operations may constitute forward-looking
statements and are subject to the risk that the actual effects may differ, possibly materially, from
what is reflected in those forward-looking statements due to factors and future developments that are
uncertain, unpredictable and in many cases beyond the Company’s control, including the scope and
duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and
the direct and indirect impact of the pandemic on customers, clients, third parties and the Company.

112

Table 24

QUARTERLY TRENDS
2020 Quarters

2019 Quarters

Fourth

Third

Second

First

Fourth

Third

Second

First

Earnings and dividends
per share
Amounts in thousands, excepte
Interest income (taxable-equivalent basis) ......................... $ 1,042,862
49,610
Interest expense ..................................................................
993,252
Net interest income.............................................................
75,000
Less: provision for credit losses .........................................
551,250
Other income ......................................................................
845,008
Less: other expense.............................................................
624,494
Income before income taxes...............................................
149,382
Applicable income taxes.....................................................
Taxable-equivalent adjustment...........................................
3,972
Net income.......................................................................... $ 471,140

Net income available to common shareholders-diluted ..... $ 451,869
Per common share data

1,005,180
58,066
947,114
150,000
520,561
826,774
490,901
114,746
4,019
372,136

1,036,476
75,105
961,371
325,000
487,273
807,042
316,602
71,314
4,234
241,054

1,125,482
143,614
981,868
250,000
529,360
906,416
354,812
80,927
5,063
268,822

1,191,295
177,070
1,014,225
54,000
521,040
823,683
657,582
159,124
5,392
493,066

1,235,048
199,579
1,035,469
45,000
527,779
877,619
640,629
154,969
5,579
480,081

1,243,838
196,432
1,047,406
55,000
512,095
873,032
631,469
152,284
5,925
473,260

1,232,276
176,249
1,056,027
22,000
500,765
894,348
640,444
151,735
5,967
482,742

353,400

223,099

250,701

473,372

461,410

452,633

462,086

Basic earnings............................................................. $
Diluted earnings..........................................................
Cash dividends............................................................ $

3.52
3.52
1.10

2.75
2.75
1.10

1.74
1.74
1.10

1.93
1.93
1.10

3.60
3.60
1.10

3.47
3.47
1.00

3.34
3.34
1.00

3.35
3.35
1.00

Average common shares outstanding

Basic ...........................................................................
Diluted ........................................................................

128,303
128,379

128,285
128,355

128,275
128,333

129,696
129,755

131,512
131,549

132,965
132,999

135,433
135,464

137,889
137,920

Performance ratios, annualized
Return on

Average assets ............................................................
Average common shareholders’ equity ......................

1.30 %
12.07 %

1.06 %
9.53 %

.71 %
6.13 %

.90 %
7.00 %

1.60 %
12.95 %

1.58 %
12.73 %

1.60 %
12.68 %

1.68 %
13.14 %

Net interest margin on average earning assets

(taxable-equivalent basis)................................................

3.00 %

2.95 %

3.13 %

3.65 %

3.64 %

3.78 %

3.91 %

4.04 %

Nonaccrual loans to total loans and leases, net of

unearned discount...........................................................

1.92 %

1.26 %

1.18 %

1.13 %

1.06 %

1.12 %

.96 %

.99 %

Net operating (tangible) results (a)
Net operating income (in thousands).................................. $ 473,453
Diluted net operating income per common share............... $
3.54
Annualized return on

375,029
2.77

243,958
1.76

271,705
1.95

496,237
3.62

483,830
3.50

477,001
3.37

486,440
3.38

Average tangible assets ..............................................
Average tangible common shareholders’ equity ........
Efficiency ratio (b) .............................................................

1.35 %
17.53 %
54.6 %

1.10 %
13.94 %
56.2 %

.74 %
9.04 %
55.7 %

.94 %
10.39 %
58.9 %

1.67 %
19.08 %
53.1 %

1.66 %
18.85 %
55.9 %

1.68 %
18.83 %
56.0 %

1.76 %
19.56 %
57.6 %

Balance sheet data
In millions, except per share
Average balances

Total assets (c) ............................................................ $ 144,563
139,958
Total tangible assets (c) ..............................................
131,916
Earning assets .............................................................
Investment securities ..................................................
7,195
98,666
Loans and leases, net of unearned discount................
120,976
Deposits ......................................................................
14,963
Common shareholders’ equity (c) ..............................
10,358
Tangible common shareholders’ equity (c) ................

At end of quarter

Total assets (c) ............................................................ $ 142,601
137,998
Total tangible assets (c) ..............................................
129,295
Earning assets .............................................................
7,046
Investment securities ..................................................
98,536
Loans and leases, net of unearned discount................
Deposits ......................................................................
119,806
Common shareholders’ equity, net of undeclared

cumulative preferred dividends (c)........................
Tangible common shareholders’ equity (c) ................
Equity per common share ...........................................
Tangible equity per common share ............................

14,937
10,334
116.39
80.52

140,181
135,574
127,689
7,876
98,210
116,306
14,823
10,216

138,627
134,021
126,418
7,723
98,447
115,163

14,851
10,245
115.75
79.85

136,446
131,836
123,492
8,500
97,797
111,795
14,703
10,093

139,537
134,928
127,149
8,454
97,758
114,968

14,695
10,086
114.54
78.62

120,585
115,972
108,226
9,102
91,706
96,166
14,470
9,857

124,578
119,966
112,046
8,957
94,142
100,183

14,566
9,954
113.54
77.60

122,554
117,938
110,581
10,044
90,244
96,903
14,582
9,966

119,873
115,258
107,673
9,497
90,923
94,770

14,467
9,852
110.78
75.44

120,388
115,769
108,643
11,075
90,078
94,095
14,464
9,845

125,501
120,883
113,067
10,678
89,823
95,114

14,530
9,912
109.84
74.93

118,487
113,864
107,511
12,170
89,150
91,371
14,398
9,775

121,555
116,934
110,323
11,580
89,878
91,681

14,457
9,836
107.73
73.29

116,839
112,213
106,096
12,949
88,477
89,733
14,337
9,711

120,025
115,400
108,849
12,537
88,640
90,470

14,353
9,728
105.04
71.19

(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 25.
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 25.

113

Table 25

RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES

2020 Quarters

2019 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 ............................................................

1,619
Denominator ................................................ $ 1,542,883

471,140

372,136

241,054

268,822

493,066

480,081

473,260

482,742

2,313
473,453

2,893
375,029

2,904
243,958

2,883
271,705

3,171
496,237

3,749
483,830

3,741
477,001

3,698
486,440

3.52

.02

3.54

2.75

.02

2.77

1.74

.02

1.76

1.93

.02

1.95

3.60

.02

3.62

3.47

.03

3.50

3.34

.03

3.37

3.35

.03

3.38

845,008

826,774

807,042

906,416

823,683

877,619

873,032

894,348

(3,129 )
841,879

(3,914 )
822,860

(3,913 )
803,129

(3,913 )
902,503

(4,305 )
819,378

(5,088 )
872,531

(5,077 )
867,955

(5,020 )
889,328

841,879

993,252
551,250

822,860

947,114
520,561

803,129

961,371
487,273

902,503

981,868
529,360

819,378

872,531

867,955

889,328

1,014,225
521,040

1,035,469
527,779

1,047,406
512,095

1,056,027
500,765

2,773
1,464,902

6,969
1,441,675

(20,782 )
1,532,010

(6,452 )
1,541,717

3,737
1,559,511

8,911
1,550,590

11,841
1,544,951

Efficiency ratio ....................................................

54.6 %

56.2 %

55.7 %

58.9 %

53.1 %

55.9 %

56.0 %

57.6 %

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.

144,563
(4,593 )
(16 )
4
139,958

16,213
(1,250 )
14,963
(4,593 )
(16 )
4
10,358

140,181
(4,593 )
(19 )
5
135,574

16,073
(1,250 )
14,823
(4,593 )
(19 )
5
10,216

142,601
(4,593 )
(14 )
4
137,998

138,627
(4,593 )
(17 )
4
134,021

136,446
(4,593 )
(23 )
6
131,836

15,953
(1,250 )
14,703
(4,593 )
(23 )
6
10,093

139,537
(4,593 )
(21 )
5
134,928

120,585
(4,593 )
(27 )
7
115,972

15,720
(1,250 )
14,470
(4,593 )
(27 )
7
9,857

124,578
(4,593 )
(25 )
6
119,966

122,554
(4,593 )
(31 )
8
117,938

15,832
(1,250 )
14,582
(4,593 )
(31 )
8
9,966

119,873
(4,593 )
(29 )
7
115,258

120,388
(4,593 )
(36 )
10
115,769

15,837
(1,373 )
14,464
(4,593 )
(36 )
10
9,845

125,501
(4,593 )
(33 )
8
120,883

118,487
(4,593 )
(41 )
11
113,864

15,630
(1,232 )
14,398
(4,593 )
(41 )
11
9,775

121,555
(4,593 )
(38 )
10
116,934

116,839
(4,593 )
(45 )
12
112,213

15,569
(1,232 )
14,337
(4,593 )
(45 )
12
9,711

120,025
(4,593 )
(44 )
12
115,400

16,187
(1,250 )

16,101
(1,250 )

15,945
(1,250 )

15,816
(1,250 )

15,717
(1,250 )

15,780
(1,250 )

15,692
(1,232 )

15,588
(1,232 )

—

(3 )

14,937
(4,593 )
(14 )
4
10,334

14,851
(4,593 )
(17 )
4
10,245

14,695
(4,593 )
(21 )
5
10,086

14,566
(4,593 )
(25 )
6
9,954

14,467
(4,593 )
(29 )
7
9,852

14,530
(4,593 )
(33 )
8
9,912

14,457
(4,593 )
(38 )
10
9,836

14,353
(4,593 )
(44 )
12
9,728

114

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 22) 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 24 “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, 2020 and 2019......................................................
Consolidated Statement of Income — Years ended December 31, 2020, 2019 and 2018 ............
Consolidated Statement of Comprehensive Income — Years ended Decemberm 31, 2020, 2019

and 2018 ....................................................................................................................................
Consolidated Statement of Cash Flows — Years ended December 31, 2020, 2019 and 2018.....
Consolidated Statement of Changes in Shareholders’ Equity — Years ended December 31,

2020, 2019 and 2018 .................................................................................................................
Notes to Financial Statements ........................................................................................................

116
117
120
121

122
123

124
125

115

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 effeff ctiveness of the Company’s
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, 2020.

internal control over financial reporting as of December 31, 2020

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
control over financial reporting. The report of PricewaterhouseCoopers LLP follows this report.

internal

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

116

Report of Independent Registered Public Accounting Firm

To the Boardaa
M&T Bank Corporation

of Directors and Shareholders of

Opinions on the Financial Statements and Internal Control over Financial

Reporting

We have audited the accompanying consolidated balance sheet of M&T Bank Corporation and its
subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated
statements of income, of comprehensive
for each of the three years in the period ended December 31, 2020, 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, 2020, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).

income, of changes in shareholders' equity and of cash flows

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, 2020 and 2019, and the results of
its operations and its cash flows for each of the three years in the period ended December 31, 2020 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, 2020, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the COSO.

Change in Accounting Principlell

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in
which it accounts for the allowance for credit losses as of January 1, 2020.

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
effect
iveness of internal control over financial reporting, included in the accompanying
ff
Management’s 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

117

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
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 Reportingii

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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the
audit committee and that (i) relates to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective, or complexmm
The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.

judgments.

Allowance for Credit Losses – Adjustments to model forecaststt

As described in Notes 1 and 4 to the consolidated financial statements, the Company’s allowance for
credit losses of $1.7 billion reflects management's expected credit losses in the portfolio of $98.5
billion as of December 31, 2020. For purposes of determining the level of the allowance for credit
losses, management evaluates the Company’s loan and lease portfolio by type. Management utilizes
statistically developed models to project principal balances over the remaining contractual lives of
the loan portfolios and to determine estimated credit losses through a reasonable and supportable
forecast period. Model forecasts may be adjusted for inherent limitations or biases that have been
identified through independent validation and back-testing of model performance to actual realized
results. Management also considered the impact of portfolio concentrations, changes in underwriting

118

practices, product expansions into new markets, imprecision in its economic forecasts, geopolitical
conditions and other risk factors that might influence the loss estimation process.

The principal considerations for our determination that performing procedures relating to the
allowance for credit losses, specifically adjustments
(i) the significant judgment by management in determining the adjustments to model forecasts, which
led to a high degree of auditor judgment and subjectivity in performing procedures related to
management’s determination of the adjustments to model forecasts, (ii) the significant audit effort in
evaluating the audit evidence related to the adjustments to model forecasts, and (iii) the audit effort
involved the use of professionals with specialized skill and knowledge.

to model forecasts, is a critical audit matter are

Addressing the matter involved performing procedures and evaluating audit evidence in connection
with forming our overall opinion on the consolidated financial statements. These procedures included
testing the effectiveness of controls relating to the Company’s allowance for credit losses estimation
process, including controls over adjustments to model forecasts. These procedures also included,
among others, testing management’s process for determining the allowance for credit losses and
adjustments to model forecasts, including evaluating the appropriateness of management’s
methodology, testing the data utilized by management and evaluating the reasonableness of
significant assumptions relating to the adjustments
assumptions relating to adjustments to model forecasts involved evaluating portfolio composition and
concentration, as well as relevant market data. Professionals with specialized skill and knowledge
were used to assist in evaluating the appropriateness of management’s methodology and the
reasonableness of significant assumptions relating to the adjustments to model forecasts.

to model forecasts. Evaluating significant

Buffalo, New York
February 22, 2021

We have served as the Company’s auditor since 1984.

119

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 .................................................................................................
Federal funds sold .........................................................................................................................
Trading account.............................................................................................................................
Investment securities (includes pledged securities that can be sold or repledged of

$105,136 at December 31, 2020; $200,339 at December 31, 2019)

Available for sale (cost: $4,621,027 at December 31, 2020;

December 31

2020

2019

1,552,743
23,663,810
—
1,068,581

1,432,805
7,190,154
3,500
470,129

$6,258,276 at December 31, 2019)......................................................................................

4,822,606

6,318,776

Held to maturity (fair value: $1,842,281 at December 31, 2020;

$2,699,206 at December 31, 2019)......................................................................................

1,748,989

2,656,917

Equity and other securities (cost: $449,008 at December 31, 2020;

$487,041 at December 31, 2019).........................................................................................
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: 350,000
shares at December 31, 2020 and December 31, 2019; Liquidation preference of
$10,000 per share: 90,000 shares at December 31, 2020 and December 31, 2019 ...................

Common stock, $.50 par, 250,000,000 shares authorized,

474,102
7,045,697
98,875,788
(339,921)
98,535,867
(1,736,387)
96,799,480
1,161,558
4,593,112
14,165
6,701,959
142,601,105

47,572,884
67,680,840
3,899,910
652,104
119,805,738
59,482
2,166,409
4,382,193
126,413,822

521,558
9,497,251
91,188,525
(265,656)
90,922,869
(1,051,071)
89,871,798
1,140,924
4,593,112
29,034
5,644,050
119,872,757

32,396,407
54,932,162
5,757,456
1,684,044
94,770,069
62,363
2,337,490
6,986,186
104,156,108

1,250,000

159,741,898 shares issued at December 31, 2020 and December 31, 2019 ..............................

79,871

Common stock issuable, 18,113 shares at December 31, 2020;

21,534 shares at December 31, 2019 .........................................................................................
Additional paid-in capital..............................................................................................................
Retained earnings..........................................................................................................................
Accumulated other comprehensive
income (loss), net .................................................................
Treasury stock — common, at cost — 31,426,742 shares at December 31, 2020;

1,344
6,617,404
13,444,428
(63,032)

1,566
6,593,539
12,820,916
(206,680)

29,174,402 shares at December 31, 2019 ..................................................................................
Total shareholders’ equity................................................................................................
Total liabilities and shareholders’ equity ......................................................................... $

(5,142,732)
16,187,283
142,601,105

(4,822,563)
15,716,649
119,872,757

See accompany

ing notes to financial statements.

120

M&T BANK CORPORATION AND SUBSIDIARIES

Consolidated Statement of Income

Year Ended December 31
2019

2018

(In thousands, except per share)
Interest income
Loans and leases, including fees ...................................................................... $ 3,975,053
Investment securities........................................................................................
Fully taxable...............................................................................................
Exempt from federal taxes .........................................................................
Deposits at banks .............................................................................................
Other ................................................................................................................
Total interest income ............................................................................

176,469
183
32,956
8,051
4,192,712

2020

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................................................................................

146,701
66,280
4,054
28
109,332
326,395
3,866,317
800,000
3,066,317

566,641
370,788
601,884
47,428
40,536
(9,421)
470,588
2,088,444

Other expense
1,950,692
Salaries and employee benefits ........................................................................
Equipment and net occupancy .........................................................................
322,037
258,480
Outside data processing and software..............................................................
FDIC assessments ............................................................................................
53,803
61,904
Advertising and marketing...............................................................................
Printing, postage and supplies..........................................................................
39,869
Amortization of core deposit and other intangible assets ................................
14,869
683,586
Other costs of operations..................................................................................
3,385,240
Total other expense...............................................................................
1,769,521
Income before taxes .........................................................................................
Income taxes ....................................................................................................
416,369
Net income........................................................................................................ $ 1,353,152
Net income available to common shareholders

$ 4,442,182

$ 4,164,561

288,532
321
141,397
7,161
4,879,593

368,003
95,426
21,917
24,741
239,242
749,329
4,130,264
176,000
3,954,264

457,770
432,978
572,608
48,922
62,044
18,037
469,320
2,061,679

323,912
665
108,182
1,391
4,598,711

215,411
51,423
5,633
5,386
248,556
526,409
4,072,302
132,000
3,940,302

360,442
429,337
537,585
51,069
32,547
(6,301)
451,321
1,856,000

1,900,797
324,079
229,731
41,535
93,472
39,893
19,490
819,685
3,468,682
2,547,261
618,112
$ 1,929,149

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
$ 1,918,080

Basic ..................................................................................................... $ 1,279,066
1,279,068
Diluted ..................................................................................................

$ 1,849,509
1,849,511

$ 1,836,028
1,836,035

Net income per common share

Basic ..................................................................................................... $
Diluted ..................................................................................................

9.94
9.94

13.76
13.75

12.75
12.74

See accompany

ing notes to financial statements.

121

M&T BANK CORPORATION AND SUBSIDIARIES

Consolidated Statement of Comprehensive Income

(In thousands)

Net income ...............................................................................................
Other comprehensive income (loss), net of tax and

reclassification adjustments:

Year Ended December 31
2019

2018

2020

$1,353,152

$1,929,149

$1,918,080

Net unrealized gains (losses) on investment securities ......................
Cash flow hedges adjustments ...........................................................
Foreign currency translation adjustments...........................................
Defined benefit plans liability adjustments ........................................
Total other comprehensive income (loss) .....................................
Total comprehensive income ........................................................

107,222
172,787
2,284
(138,645)
143,648
$1,496,800

184,906
108,520
1,091
(81,116)
213,401
$2,142,550

(86,523)
6,091
(2,225)
43,243
(39,414)
$1,878,666

See accompany

ing notes to financial statements.

122

M&T BANK CORPORATION AND SUBSIDIARIES

Consolidated Statement of Cash Flows

(In thousands)
Cash flows from operating activities
Net income.......................................................................................................................................... $ 1,353,152
Adjustments to reconcile net income to net cash provided by operating activities

2020

Year Ended December 31
2019

2018

1,929,149

1,918,080

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) loss 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 ............................................................................

800,000
220,598
84,821
14,869
(31,291)
21,014
(19,441)
(132,252)
(418,752)
(542,078)
(561,453)
789,187

Cash flows from investing activities
Proceeds from sales of investment securities

Available for sale.........................................................................................................................
Equity and other securities ..........................................................................................................

—
67,036

Proceeds from maturities of investment securities

1,614,557
911,555

Purchases of investment securities

Available for sale.........................................................................................................................
Held to maturity...........................................................................................................................
Equity and other securities ..........................................................................................................
Net increase in loans and leases..........................................................................................................
Net increase (decrease) in interest-bearing deposits at banks ............................................................
Capital expenditures, net ....................................................................................................................
Net (increase) decrease in loan servicing advances............................................................................
Other, net ............................................................................................................................................
Net cash provided (used) by investing activities.........................................................................

(7,581 )
(11,993 )
(29,004 )
(7,231,694)
(16,473,656)
(172,289)
(754,823)
67,411
(22,020,481)

Cash flows from financing activities
25,037,167
Net increase (decrease) in deposits.....................................................................................................
(2,881)
Net increase (decrease) in short-term borrowings ..............................................................................
—
Proceeds from long-term borrowings .................................................................................................
(2,665,023)
Payments on long-term borrowings....................................................................................................
(373,750)
Purchases of treasury stock.................................................................................................................
(568,112)
Dividends paid — common ................................................................................................................
(68,256)
Dividends paid — preferred ...............................................................................................................
—
Proceeds from issuance of Series G preferred stock ..........................................................................
—
Redemption of Series A and Series C preferred stock .......................................................................
(11,413)
Other, net ............................................................................................................................................
21,347,732
Net cash provided (used) by financing activities ........................................................................
116,438
Net increase (decrease) in cash, cash equivalents and restricted cash................................................
Cash, cash equivalents and restricted cash at beginning of period.....................................................
1,436,305
Cash, cash equivalents and restricted cash at end of period ............................................................... $ 1,552,743

Supplemental disclosure of cash flow information
Interest received during the period ..................................................................................................... $ 4,135,990
372,291
Interest paid during the period............................................................................................................
Income taxes paid during the period...................................................................................................
275,558
Supplemental schedule of noncash investing and financing activities
Real estate acquired in settlement of loans......................................................................................... $
Securitization of residential mortgage loans allocated to

20,646

Available-for-sale investment securities ..................................................................................... $
Capitalized servicing rights .........................................................................................................

—
—

Adoption of lease accounting standard

Right-of-use assets ...................................................................................................................... $
Other liabilities ............................................................................................................................
Additions to right-of-use assets under operating leases ..................................................................... $

—
—
70,754

See accompanying notes to financial statements.

176,000
209,937
71,888
19,490
57,548
7,701
31,526
30,923
75,930
130,230
(382,767)
2,357,555

107
1,169,876

2,621,603
1,162,820

(28,120)
(495,277 )
(979,734)
(2,795,263 )
915,043
(178,049)
(470,078)
(195,921)
727,007

4,616,082
(4,336,015)
—
(1,553,493)
(1,349,785)
(552,138)
(67,454)
396,000
(381,500)
(25,393)
(3,253,696)
(169,134)
1,605,439
1,436,305

4,892,301
735,787
320,513

90,072

5,379
83

393,877
398,810
132,219

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

418
650,858

1,997,263
478,172

(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

4,568,991
516,230
375,116

72,408

22,448
365

—
—
—

123

M&T BANK CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders’ Equity

Dollars in thousands, except per share
2018
Balance — January 1, 2018............................. $1,231,500
Cumulative effect of change in

Stock

Preferred Common

Stock

Common Additional

Stock
Issuable

Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income
(Loss), Net

Treasury
Stock

Total

79,909

1,847

6,590,855 10,164,804

(363,814 ) (1,454,282 ) $16,250,819

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 transactions, net ...
Common stock cash dividends —

—
—
—

—
—
(26 )

—
—
—

—
16,853
— 1,918,080
(72,521 )
—

(16,853 )
(39,414 )
—

—
—
— 1,878,666
(72,521 )
—

—
—
(121 )

(22,394 )
—
10,881

—
—
(86 )

—
22,394
— (2,194,396 )
97,433
—

—
(2,194,396 )
108,081

$3.55 per share..............................................

—
Balance — December 31, 2018....................... $1,231,500
2019
Total comprehensive income...........................
Preferred stock cash dividends ........................
Redemption of Series A and Series C

—
—

preferred stock ...............................................
Issuance of Series G preferred stock ...............
Purchases of treasury stock..............................
Stock-based compensation transactions, net ...
Common stock cash dividends —

(381,500 )
400,000
—
—

$4.10 per share..............................................

—
Balance — December 31, 2019....................... $1,250,000
2020
Cumulative effect of change in
accounting principle — credit
losses.............................................................
Total comprehensive income...........................
Preferred stock cash dividends ........................
Purchases of treasury stock..............................
Stock-based compensation transactions, net ...
Common stock cash dividends —

—
—
—
—
—

—
79,883

—
1,726

— (510,458 )
6,579,342 11,516,672

—

(510,458 )
(420,081 ) (3,528,851 ) $15,460,191

—

—
—

—
—
—
(12 )

—
—

—
—
—
(160 )

— 1,929,149
(72,482 )
—

213,401
—

— 2,142,550
(72,482 )
—

—
(4,000 )
—
18,197

—
—
—
(207 )

—
—
—
—
— (1,349,785 )
56,073
—

(381,500 )
396,000
(1,349,785 )
73,891

—
79,871

—
1,566

— (552,216 )
6,593,539 12,820,916

—

(552,216 )
(206,680 ) (4,822,563 ) $15,716,649

—

—
—
—
—
—

—
—
—
—
(222 )

—
(91,925 )
— 1,353,152
(68,228 )
—
—
—
(411 )
23,865

—
(91,925 )
—
— 1,496,800
143,648
(68,228 )
—
—
(373,750 )
— (373,750 )
76,813
53,581
—

—

(569,076 )
(63,032 ) (5,142,732 ) $16,187,283

—

$4.40 per share..............................................

—
Balance — December 31, 2020....................... $1,250,000

—
79,871

—
1,344

— (569,076 )
6,617,404 13,444,428

See accompanying notes to financial statements.

124

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 securitiei
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.

s sold under agreements to

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 securitiestt
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.”

125

securities having readily determinable fair values are stated at fair value and

Investments in equity
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. 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.

Effective January 1, 2020, the Company adopted amended accounting guidance that requires an

allowance for credit losses be deducted from the amortized cost basis of financial assets, including
investment securities held to maturity, to present the net carrying value at the amount that is expected
to be collected over the contractual term. In cases where fair value of an available for sale debt
security is less than its amortized cost basis and the Company does not intend to sell the available for
sale debt security and it is not more likely than not that the Company will be required to sell the
security before recovery of the amortized cost basis, the difference between the fair value and the
amortized cost basis is separated into (a) the amount representing the credit loss and (b) the amount
related to all other factors. The amount related to the credit loss is recognized as an allowance for
credit losses while the amount related to other factors is recognized in other comprehensive income,
net of applicable income taxes. If the Company intends to sell the security or it is more likely than
not to be required to sell the security before recovery of the amortized cost basis, the security is
written down to fair value with the entire amount recognized in earnings. Subsequently, the
Company accounts for the debt security as if the security had been purchased on the measurement
date of the write down at an amortized cost basis equal to the previous amortized cost basis less the
amount of the write down recognized in earnings. Prior to 2020 individual debt securities were
written down through a charge to earnings when declines in value below the cost basis of the security
were considered other than temporary. Realized gains and losses on the sales of investment
securities are determined using the specific identification method.

Loans and leases
The Company’s accounting methods for loans depends on whether the loans were originated or
acquired by the Company.

that the Company will be unable to collect all amounts according to the

Originated loans and leases
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. 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 it is probablea
contractual terms of the loan agreement or when principal or interest is delinquent 90 days. Certain
loans greater than 90 days delinquent continue to accrue interest 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 generally continue to accrue interest. Interest received on 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. 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. 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. Consumer loans not secured by residential real estate are returned to accrual status when

126

all past due principal and interest payments have been paid by the borrower. Loan balances are
charged off when it becomes evident that such balances are not fully collectable. For commercial
loans and commercial real estate loans, charge-offs are recognized after an assessment by credit
personnel of the capacity and willingness of the borrower to repay, the estimated value of any
collateral, and any other potential sources of repayment. A charge-off is recognized when, after such
assessment, it becomes evident that the loan balance is not fully collectible. For loans secured by
residential real estate, the excess of the loan balances over the net realizable value of the property
collateralizing the loan is charged-off when the loan becomes 150 days delinquent. Consumer loans
are generally charged-off when the loans are 91 to 180 days past due, depending on whether the loan
is collateralized and the status of repossession activities with respect to such collateral.

During the normal course of business, the Company modifies loans to maximize recovery

efforts. If a borrower is experiencing financial difficulty and a concession to the terms of the loan
agreement is granted that the Company would not otherwise consider, the modification is considered
a troubled debt restructuring and such loans are classified as either nonaccrual or renegotiated loans.
The United States has been operating under a state of emergency related to the Coronavirus Disease
2019 (“COVID-19”) pandemic since March 13, 2020. The direct and indirect effects of the COVID-
19 pandemic resulted in a dramatic reduction in the economic activity that severely hampered the
ability for businesses and consumers to meet their repayment obligations. The Coronavirus Aid,
Relief, and Economic Security Act and the Consolidated Appropriations Act, 2021 (collectively
“CARES Act”), in addition to providing financial assistance to both businesses and consumers,
creates a forbearance program for federally-backed mortgage loans, protects borrowers from negative
credit reporting due to loan accommodations related to the national emergency, and provides
financial institutions the option to temporarily suspend certain requirements under GAAP related to
troubled debt restructurings to account for the effecff
ts of COVID-19. The bank regulatory agencies
likewise issued guidance encouraging financial institutions to work prudently with borrowers who
are, or may be, unable to meet their contractual payment obligations because of the effects of
COVID-19. The guidance, with concurrence of the Financial Accounting Standards Board, and
provisions of the CARES Act allow modifications made on a good faith basis in response to COVID-
19 to borrowers who were current with their payments prior to any relief, to not be treated as troubled
debt restructurings nor be reported as past due. Modifications may include payment deferrals
(including maturity extensions), covenant waivers and fee waivers. The Company has been working
with its customers affected by COVID-19 and has granted modifications across many of its loan
portfolios. To the extent that such modifications meet the criteria described, the modified loans have
not been classified as troubled debt restructurings nor reported as past due.
Commitments to sell real estate loans are utilized by the Companymm

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 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.”

Acquired loans and leases
Effective January 1, 2020, expected credit losses for purchased loans with credit deterioration are
initially recognized as an allowance for credit losses and are added to the purchase price to determine
the amortized cost basis of the loans. Any non-credit discount or premium resulting from acquiring
such loans is recognized as an adjustment to interest income over the remaining lives of the loans.
Subsequent changes in the amount of expected credit losses on such loans are recognized in the
allowance for credit losses in the same manner as originated loans. Prior to January 1, 2020, loans
acquired in a business combination were initially recorded at fair value with no carry-over of an

127

acquired entity’s previously established allowance for credit losses. Purchased impaired loans
represented 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 was recognized as interest income over the remaining lives of the loans.
Subsequent decreases in the expected cash flows required the Company to evaluate the need for
additions to the Company’s allowance for credit losses. Subsequent improvements in expected cash
flows resulted 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. The Company generally
recognized the excess of cash flows expected at acquisition over the estimated fair value of the
acquired loans as interest income over the remaining lives of such loans regardless of the borrower’s
repayment status.

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 creditdd losses
Effective January 1, 2020 the Company adopted amended accounting guidance which requires an
allowance for credit losses be deducted from the amortized cost basis of financial assets to present
the net carrying value at the amount that is expected to be collected over the contractual term of the
asset considering relevant information about past events, current conditions, and reasonable and
supportable forecasts that affect the collectability of the reported amount. In estimating expected
losses in the loan and lease portfolio, borrower-specific financial data and macro-economic
assumptions are utilized to project losses over a reasonable and supportable forecast period.
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.
Subsequent to the forecast period, the Company utilizes longer-term historical loss experience to
estimate losses over the remaining contractual life of the loans. Prior to 2020, the allowance for
credit losses represented the amount that in management’s judgment reflected incurred credit losses
inherent in the loan and lease portfolio as of the balance sheet date.

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 satisfacff
tion 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.

128

servicing rights

Capitalized
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 floff ws 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 Companymm
predominant risk characteristics of the underlying financial instruments that are expected to have the
most impactmm
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.

stratifies such assets based on the

assets

Sales and securitizations of financial
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 initially 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 variablea
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.

interest entity is included in the consolidated financial statements

Goodwill and core deposit and othtt er 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 faff ir 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

129

exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-
for-sale security, or a foreign currency denominated forecasted transaction.

The Company utilizes interest rate swap agreements as part of the management of interest rate
risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and
interest-bearing liabilities. For such agreements, amounts receivable or payable are recognized as
accrued under the terms of the agreement and the net differential is recorded as an adjustment to
interest income or expense of the related asset or liability. Interest rate swap agreements may be
designated as either fair value hedges or cash flow hedges. In a fair value hedge, the fair values of the
interest rate swap agreements and changes in the fair values of the hedged items are recorded in the
Company’s consolidated balance sheet with the corresponding gain or loss recognized in current
earnings. The difference between changes in the fair values of interest rate swap agreements and the
hedged items represents hedge ineffectiveness and is recorded in 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.

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. Valuation adjustments made on these commitments are included in
“mortgage banking revenues.”

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 compensationtt
Compensation expense is recognized over the vesting period of stock-based awards based on
estimated grant date value, 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
for vesting at the time an employee retires.

plan allows

Income taxes
Deferred tax assets and liabilities are recognized for the future tax effects attributable to differences
l statement value of existing assets and liabilities and their respective tax bases
between the financia
Deferred tax assets and liabilities are measured using enacted tax rates and laws.
and carrrr yforwards.
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.

130

per common share exclude dilution and are computed

Earnings per common share
Basic earnings
by dividing income available to
common shareholders by the weighted-average number of common shares outstanding (exclusive of
shares represented by the unvested portion of restricted stock and restricted stock unit grants) and
common shares issuable under deferred compensation arrangements during the period. Diluted
earnings per common share reflect shares represented by the unvested portion of restricted stock and
restricted stock unit grants and the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in earnings. Proceeds assumed to have been received on such
exercise or conversion are assumed to be used to purchase shares of M&T common stock at the
average market price during the period, as required by the “treasury stock method” of accounting.

GAAP requires that unvested share-based payment awards that contain nonforfeitable rights to

dividends or dividend equivalents (whether paid or unpaid) shall be considered participating
securities and shall be included in the computation of earnings per common share pursuant to the
two-class method. The Company has issued stock-based compensation awards in the form of
restricted stock and restricted stock units that contain such rights and, accordingly, the Company’s
earnings per common share are calculated using the two-class method.

Treasury stock
Repurchases of shares of M&T common stock are recorded at cost as a reduction of shareholders’
equity. Reissuances of shares of treasury stock are recorded at average cost.

Investment securities

adopted amended guidance requiring equity investments with

2.
On January 1, 2018, the Companymm
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 Companymm
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.

131

The amortized cost and estimated fair value of investment securities were as follows:

December 31, 2020
Investment securities available for sale:
U.S. Treasury and federal agencies........................................
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:

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

(In thousands)

9,154 $

198 $

14 $

9,338

4,475,406
16
136,451
4,621,027

2,999
1,531

1,664,443
77,155
2,861
1,748,989

208,787
—
1,664
210,649

—
9

100,176
11,056
—
111,241

755
—
8,301
9,070

—
—

4,683,438
16
129,814
4,822,606

2,999
1,540

1,764,608
11
70,273
17,938
2,861
—
17,949
1,842,281
27,019 $6,664,887

Total debt securities...............................................................
Equity and other securities:

$6,370,016 $ 321,890 $

Readily marketable equity — at fair value.......................
Other — at cost ................................................................
Total equity and other securities............................................

67,891 $
381,117
$ 449,008 $

25,094 $
—
25,094 $

92,985
— $
—
381,117
— $ 474,102

r 31, 2019

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:

Total debt securities ..............................................................
Equity and other securities:

Readily marketable equity — at fair value......................
Other — at cost................................................................
Total equity and other securities ...........................................

9,742
776

41
2

16
3

9,767
775

6,113,913
16
133,829
6,258,276

249,862
4,140

88,634
—
2,046
90,723

286
16

21,607
—
8,597
30,223

6,180,940
16
127,278
6,318,776

—
—

250,148
4,156

2,306,180
93,496
3,239
2,656,917
$8,915,193

50,381
11,779
—
62,462
$ 153,185

1,992
18,181
—
20,173
$ 50,396

2,354,569
87,094
3,239
2,699,206
$9,017,982

$ 105,524
381,517
$ 487,041

$ 34,786
—
$ 34,786

269
—
269

$ 140,041
381,517
$ 521,558

132

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, 2020.

As of December 31, 2020, 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)

B or
Less

Not
Rated

Obligations of states and political

subdivisions ............................................ $

1,531 $

1,540 $ 1,540 $ — $ — $ — $

—

Privately issued mortgage-backed

securities .................................................

68,266
77,171
Other debt securities .................................. 139,312
32,054
Total ........................................................... $218,014 $204,504 $10,375 $62,016 $31,303 $ 490 $ 100,320

— 490
—

70,289
132,675

—
62,016

1,533
7,302

31,303

The amortized cost and estimated fair value of collateralized mortgage obligations included in

mortgage-backed securities were as follows:

December 31

2020

2019

(In thousands)

Collateralized mortgage obligations:

Amortized cost ............................................................................................... $ 77,964
71,099
Estimated fair value .......................................................................................

$ 94,817
88,410

There were no significant gross realized gains or losses from sales of investment securities in

2020, 2019 or 2018.

At December 31, 2020, the amortized cost and estimated fair value of debt securities by

contractual maturity were as follows:

Amortized
Cost

Estimated
Fair Value

(In thousands)

for sale:

Debt securities availablea
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 .............................................................

4,950
12,051
98,604
30,000
145,605
4,475,422
$ 4,621,027

4,355
175
2,861
7,391
1,741,598
$ 1,748,989

4,945
12,585
97,301
24,321
139,152
4,683,454
4,822,606

4,361
178
2,861
7,400
1,834,881
1,842,281

133

A summary of investment securities that as of December 31, 2020 and 2019 had been in a

continuous unrealized loss position for less than twelve months and those that had been in a
continuous unrealized loss position for twelve months or longer follows:

Less Than 12 Months
Fair
Value

Unrealized
Losses

12 Months or More
Fair
Value

Unrealized
Losses

(In thousands)

December 31, 2020
Investment securities available for sale:
U.S. Treasury and federal agencies ..................................... $
Mortgage-backed securities:

Government issued or guaranteed..................................
Other debt securities ............................................................

Investment securities held to maturity:
Mortgage-backed securities:

Government issued or guaranteed..................................
Privately issued ..............................................................

Total..................................................................................... $

December 31, 2019
Investment securities available for sale:
U.S. Treasury and federal agencies ..................................... $
Obligations of states and political subdivisions ..................
Mortgage-backed securities:

Government issued or guaranteed..................................
Other debt securities ............................................................

985

18,687
16,055
35,727

2,039
—
2,039
37,766

1,406
—

117,299
6,600
125,305

Investment securities held to maturity:
Mortgage-backed securities:

Government issued or guaranteed..................................
Privately issued ..............................................................

2,727
—
2,727
Total..................................................................................... $ 128,032

(14)

(356)
(181)
(551)

(11)
—
(11)
(562)

(7)
—

(222)
(354)
(583)

(5)
—
(5)
(588)

—

16,556
63,462
80,018

—
52,418
52,418
132,436

(399)
(8,120)
(8,519)

—
(17,938)
(17,938)
(26,457)

2,893
277

(9)
(3)

2,002,364
56,313
2,061,847

(21,385)
(8,243)
(29,640)

145,235
49,656
194,891
2,256,738

(1,987)
(18,181)
(20,168)
(49,808)

The Company owned 264 individual debt securities with aggregate gross unrealized losses of

$27 million at December 31, 2020. Based on a review of each of the securities in the investment
concluded that it expected to recover the
securities portfolio at December 31, 2020, the Companymm
amortized cost basis of its investment. As of December 31, 2020, the Company does not intend to
sell nor is it anticipated that it would be required to sell any of its impaired
loss. At December 31, 2020, the Company has not identified events or changes in circumstances
which may have a significant adverse effect on the fair value of the $381 million of cost method
investment securities.

investment securities at a

As described in notes 4 and 26, on January 1, 2020 the Company adopted amended accounting

guidance that requires an allowance for credit losses be deducted from the amortized cost basis of
financial assets, including investment securities held to maturity, to present the net carrying value at
the amount that is expected to be collected over the contractual term of the asset. The Company

134

estimated no material allowance for credit losses for its investment securities classified as held-to-
maturity at January 1, 2020 or December 31, 2020, as the substantial majority of such investment
securities are obligations backed by the U.S government or its agencies.

At December 31, 2020, investment securities with a carrying value of $4.2 billion, including

$2.9 billion of investment securities available for sale, were pledged to secure borrowings frff om
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 $105 million at
December 31, 2020. 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

2020

2019

(In thousands)

Loans
Commercial, financial, etc....................................................................... $26,554,486
Real estate:

Residential ..........................................................................................
Commercial.........................................................................................
Construction........................................................................................
Consumer.................................................................................................
Total loans...........................................................................................

16,708,644
27,738,732
10,068,141
16,558,889
97,628,892

$22,575,700

16,098,125
26,718,325
9,010,297
15,373,881
89,776,328

Leases

1,246,896
Commercial.........................................................................................
98,875,788
Total loans and leases ..............................................................................
(339,921)
Less: unearned discount...........................................................................
Total loans and leases, net of unearned discount..................................... $98,535,867

1,412,197
91,188,525
(265,656)
$90,922,869

One-to-four family residential mortgage loans held for sale were $777 million at December 31,
2020 and $414 million at December 31, 2019. Commercial real estate loans held for sale were $278
million at December 31, 2020 and $28 million at December 31, 2019.

As of December 31, 2020, approximately $4.0 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, 2020,
the Companymm
Company’s consolidated financial position. There have been no material losses incurred as a result of
those credit recourse arrangements.

estimated that the recourse obligations described above were not material to the

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 2020, 2019 or 2018.

The amount of foreclosed residential real estate property held by the Company was $28 million

and $76 million at December 31, 2020 and 2019, respectively. There were $214 million and $402

135

million at December 31, 2020 and 2019, 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, 2020,
approximately 41% were government guaranteed.

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 $72
million and $28 million at December 31, 2020 and 2019, respectively. During 2020, new borrowings
by such persons amounted to $46 million (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 $2 million.

At December 31, 2020, approximately $10.2 billion of commercial loans and leases, $13.7
billion of commercial real estate loans, $12.9 billion of one-to-four family residential real estate
loans, $2.1 billion of home equity loans and lines of credit and $8.5 billion of other consumer loans
were pledged to secure outstanding borrowings from the FHLB of New Yorkr and available lines of
credit as described in note 8.

A summary of current, past due and nonaccrual loans as of December 31, 2020 and 2019 follows:

Current

30-89 Days
Past Due

Accruing
Loans Past
Due 90
Days or
More

(In thousands)

Nonaccrual

Total

$27,196,862

60,822

10,053

306,827

$27,574,564

26,688,515
1,246,095
8,523,591
13,764,836

168,917
1,693
66,365
200,406

47,014
856
3,816
792,888

775,894
1,094
114,039
365,729

27,680,340
1,249,738
8,707,811
15,123,859

December 31, 2020
Commercial, financial, leasing, etc. ...........
Real estate:

Commercial...........................................
Residential builder and developer.........
Other commercial construction.............
Residential ............................................
Residential — limited

documentation....................................

1,462,277

19,687

—

147,170

1,629,134

Consumer:

Home equity lines and loans.................
Recreational finance .............................
Automobile ...........................................
Other .....................................................
Total ...........................................................

3,881,885
7,002,643
4,007,349
1,346,868
$95,120,921

24,329
47,161
55,498
17,561
662,439

—
—
—
4,581
859,208

79,392
25,519
39,404
38,231
1,893,299

3,985,606
7,075,323
4,102,251
1,407,241
$98,535,867

136

Accruing
Loans
Acquired at
a Discount
Past Due
90 days
or More (b)

Accruing
Loans Past
Due 90
Days or
More (a)

Current

30-89 Days
Past Due

Purchased
Impaired (c) Nonaccrual

Total

(In thousands)

December 31, 2019
Commercial, financial, leasing,
etc............................................. $23,290,797
Real estate:

184,011

16,776

Commercial ..........................
Residential builder and

26,311,414

165,579

6,740

developer ...........................

1,521,315

21,195

—

— 346,557 $23,838,168

15,601

158,474

26,657,808

753

3,982

1,547,245

Other commercial

construction .......................
Residential............................
Residential — limited

7,204,148
12,760,040

95,346
3,360
451,274 486,515

—
5,788

1,237
143,145

32,770
235,663

7,336,861
14,082,425

documentation ...................

1,858,037

65,215

181

—

66,809

83,427

2,073,669

Consumer:

Home equity lines and

loans ..................................
Recreational finance.............
Automobile...........................
Other.....................................

—
—
—
5,156
Total........................................... $87,999,720 1,174,132 518,728

4,386,511
5,484,997
3,787,221
1,395,240

30,229
36,827
78,478
45,978

1,662
99
—
32,056
39,632

— 63,215
— 14,219
— 21,293
—
3,512
227,545

4,481,617
5,536,142
3,886,992
1,481,942
963,112 $90,922,869

(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
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.

does not

If nonaccrual and renegotiated loans had been accruing interest at their originally contracted
terms, interest income on such loans would have amounted to $96 million in 2020, $68 million in
2019 and $69 million in 2018. The actual amounts included in interest income on such loans were
$44 million in 2020 and $33 million in each of 2019 and 2018.

137

A summary of outstanding loan balances for which COVID-19 related modifications were
granted as of December 31, 2020 is presented below. These loans meet the criteria described in note
1 and, as such, are not considered past due or otherwise in default of loan terms as of the dates
presented. Substantially all of modifications noted below expire during the first half of 2021.

December 31, 2020

Commercial, financial, leasing, etc. ................ $
Real estate:

Commercial ...............................................
Residential builder and developer .............
Other commercial construction .................
Residential .................................................
Residential — limited

documentation ........................................

Consumer:

Home equity lines and loans......................
Recreational finance ..................................
Automobile ................................................
Other ..........................................................
Total ................................................................ $

Payment
Deferrals(1)

COVID-19 Related Modifications
Other
Forbearances(2)
(In thousands)

Total

95,823

291,957

387,780

728,511
653
61,235
2,447,422 (3)

337,108

18,440
24,428
51,550
2,353
3,767,523

374,509
—
145,770
—

—

—
—
—
—
812,236

1,103,020
653
207,005
2,447,422

337,108

18,440
24,428
51,550
2,353
4,579,759

(1)

Represents accruing loans at December 31, 2020 for which a COVID-19 related payment deferral (including
maturity extensions) has been granted.

(2) Consists predominantly of accruing loans for which a COVID-19 related covenant waiver has been granted.
(3)

Includes $1.7 billion of government-guaranteed loans.

The outstanding principal balance and the carrying amount of loans acquired at a discount that

were recorded at fair value at the acquisition date for which interest income was recognized based on
expected future cash flows that were included in the consolidated balance sheet at December 31,
2019 were as follows:

Outstanding principal balance .................................................................................................................. $
Carrying amount:

Commercial, financial, leasing, etc.....................................................................................................
Commercial real estate........................................................................................................................
Residential real estate .........................................................................................................................
Consumer ............................................................................................................................................

769,414

21,114
94,890
341,807
77,785
535,596

(In thousands)

138

Purchased impaired

loans included in the tablea

above totaled $228 million at December 31,

2019, representing less than 1% of the Company’s assets. A summary of changes in the accretable
yield for loans acquired at a discount for the years ended December 31, 2019 and 2018 follows:

For the Year Ended December 31,

2019

2018

Purchased
Impaired

Other
Acquired

Purchased
Impaired

Other
Acquired

(In thousands)

Balance at beginning of period .................................................. $ 147,210
Interest income...........................................................................
(49,017)
Reclassifications from

96,907
(36,452)

$ 157,918
(37,819)

$ 133,162
(63,856)

36,718
nonaccretable balance .............................................................
Other (a) .....................................................................................
—
Balance at end of period ............................................................ $ 134,911

15,534
(3,909)
72,080

27,111
—
$ 147,210

22,849
4,752
$ 96,907

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.
ial diffiff culty and a concession is granted, the Companmm y considers
If the borrower is experiencing financaa
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.

139

a
The tables

that follow summarize the Company’s loan modification activities that were

considered troubled debt restructurings for the years ended December 31, 2020, 2019 and 2018:

Year Ended December 31, 2020

Number

Post-modification (a)

Pre-
modification
Recorded
Investment

Principal
Deferral

Interest
Rate

Reduction Other

(Dollars in thousands)

Combination
of
Concession
Types

Total

394 $ 246,479 $ 70,671 $

298 $31,605 $

97,344 $199,918

Commercial, financial, leasing, etc..............
Real estate:

Commercial ............................................
Residential builder and developer ..........
Other commercial construction ..............
Residential ..............................................
Residential — limited

161
1
2
631

310,578 204,591
—
13,573
202,985 183,878

91
13,602

documentation .....................................

7,413

7,100

Consumer:

Home equity lines and loans...................
Recreational finance ...............................
Automobile .............................................
Other .......................................................
Total .............................................................

259
17,228
428
16,392
2,249
39,951
7,788
1,095
5,250 $ 862,507 $545,415 $

5,882
16,388
39,949
3,383

505
—
—
—

—

4,874
—
—
—

85,261 295,231
90
90
— 13,573
23,639 207,517

—

1,232

8,332

—
17,254
—
16,392
—
39,951
7,788
—
803 $36,479 $ 223,349 $806,046

11,372
4
2
4,405

—
—
—
—

150 $

63,715 $ 10,485 $

— $ — $

52,871 $ 63,356

51
2
3
83

48,315
1,330
1,559
21,695

5,193
1,068
—
10,819

1,409

399

—
—
—
—

—

—
—
—
—

—

26,152

31,345
— 1,068
1,500
22,726

1,500
11,907

1,044

1,443

41
10
66
412 $ 143,556 $ 29,481 $

176
265
1,076

4,127
265
1,141

—
—
—

—
—
—
— $ — $

4,004
—
65

4,180
265
1,141
97,543 $127,024

Year Ended December 31, 2019

Commercial, financial, leasing, etc..............
Real estate:

documentation .....................................

Consumer:

Home equity lines and loans...................
Recreational finance ...............................
Automobile .............................................
Total .............................................................

140

Year Ended December 31, 2018

Number

Pre-
modification
Recorded
Investment

Principal
Deferral

Interest
Rate

Reduction Other
(Dollars in thousands)

Combination
of
Concession
Types

Total

Post-modification (a)

Commercial, financial, leasing, etc..................
Real estate:

Commercial ................................................
Other commercial construction ..................
Residential ..................................................
Residential — limited

203 $ 102,445 $50,490 $

803 $ 6,210 $

45,411 $102,914

83
1
134

30,217 16,870
746
34,798 19,962

752

175
—
—

—

4,686
—
—

9,000
—
18,110

30,731
746
38,072

—

1,423

2,250

documentation .........................................

1,887

827

Consumer:

Home equity lines and loans ......................
Recreational finance ...................................
Automobile .................................................
Total .................................................................

47
3,952
7
202
1,330
73
557 $ 175,583 $90,639 $

224
202
1,318

—
—
—
978 $10,896 $

—
—
—

3,755
—
12

3,979
202
1,330
77,711 $180,224

(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.

Loans that were modified as troubled debt restructurings during the twelve months ended
December 31, 2020, 2019 and 2018 and for which there was a subsequent payment default during the
respective year were not material.

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. Certain leases contain payment schedules that are tied to
variable interest rate indices. In general, early termination options are provided if the lessee is not in
default, returns the leased equipment and pays an early termination fee. Additionally, options to
purchase the underlying asset by the lessee are generally at the fair market value of the equipment. A
summary of lease financing receivables follows:

December 31,

2020

2019

(In thousands)

Commercial leases:

Direct financings:

Lease payments receivable.................................................................... $1,017,222 $1,164,567
84,540
Estimated residual value of leased assets..............................................
(106,780)
Unearned income ..................................................................................
1,142,327

79,621
(83,673)
Investment in direct financings ........................................................ 1,013,170

Leveraged leases:

Lease payments receivable....................................................................
Estimated residual value of leased assets..............................................
Unearned income ..................................................................................
Investment in leveraged leases .........................................................

82,065
81,025
(31,596)
131,494
Total investment in leases............................................................................... $1,134,835 $1,273,821
Deferred taxes payable arising from leveraged leases.................................... $
70,245

76,453
73,600
(28,388)
121,665

61,905 $

141

Included within the estimated residual value of leased assets at December 31, 2020 and 2019
were $34 million and $37 million, respectively, in residual value associated with direct financing
leases that are guaranteed by the lessees or others.

At December 31, 2020, the minimum future lease payments to be received from lease

financings were as follows:

Year ending December 31:

(In thousands)

2021 ............................................................................................................................ $
2022 ............................................................................................................................
2023 ............................................................................................................................
2024 ............................................................................................................................
2025 ............................................................................................................................
Later years ..................................................................................................................

320,428
288,322
187,740
122,735
70,400
104,050
$ 1,093,675

142

4. Allowance for credit losses
Effective January 1, 2020 the Company adopted amended accounting guidance which requires an
allowance for credit losses be deducted from the amortized cost basis of financial assets to present
the net carrying value at the amount that is expected to be collected over the contractual term of the
asset considering relevant information about past events, current conditions, and reasonable and
supportable forecasts that affect the collectability of the reported amount. The new guidance replaced
the previous incurred loss model for determining the allowance for credit losses.

Changes in the allowance for credit losses for the years ended December 31, 2020, 2019 and

2018 were as follows:

Commercial,
Financial,

Real Estate

Leasing, etc. Commercial Residential Consumer Unallocated

Total

(In thousands)

2020
Beginning balance.......................................... $ 366,094
(61,474)
Adoption of new accounting standard ...........
220,544
Provision for credit losses..............................
Net charge-offs

(135,083)
Charge-offs ...............................................
15,765
Recoveries ................................................
(119,318)
Net charge-offs...............................................
Ending balance............................................... $ 405,846

322,201
23,656
356,203

229,118
56,033
53,896
194,004
(3,172) 226,425

77,625 $1,051,071
132,457
(77,625)
— 800,000

(35,891)
4,550
(31,341)
670,719

(10,283) (152,250)
58,935
(93,315)
556,232

7,116
(3,167)
103,590

— (333,507)
—
86,366
— (247,141)
— $1,736,387

2019
Beginning balance.......................................... $ 330,055
Provision for credit losses..............................
69,702
Net charge-offs

341,655
(10,726)

200,564
69,125
(8,585) 126,029

78,045 $1,019,444
176,000

(420)

(58,244)
Charge-offs ...............................................
24,581
Recoveries ................................................
Net charge-offs...............................................
(33,663)
Ending balance............................................... $ 366,094

(12,664)
3,936
(8,728)
322,201

(12,711) (154,089)
56,614
(97,475)
229,118

8,204
(4,507)
56,033

— (237,708)
93,335
—
— (144,373)
77,625 $1,051,071

2018
Beginning balance.......................................... $ 328,599
Provision for credit losses..............................
33,967
Net charge-offs

374,085
(41,181)

65,405
12,401

170,809
127,068

78,300 $1,017,198
132,000

(255)

(60,414)
Charge-offs ...............................................
27,903
Recoveries ................................................
Net (charge-offs) recoveries ..........................
(32,511)
Ending balance............................................... $ 330,055

(12,286)
21,037
8,751
341,655

(15,345) (143,196)
45,883
(97,313)
200,564

6,664
(8,681)
69,125

— (231,241)
— 101,487
— (129,754)
78,045 $1,019,444

Despite the allocation 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 subsequent to December 31, 2019, the Company
estimates losses attributable to specific troubled credits identified through both normal and targeted
credit review processes and also estimates losses for loans and leases with similar risk characteristics
on a collective basis. The amounts of specific 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. Such loss estimates are typically based on
expected future cash flows, collateral values and other factors that may impactmm
the borrower’s ability
to pay. To the extent that those loans are collateral-dependent, they are evaluated based on the fair

143

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 values as
determined by line of business and/or loan workout personnel. Those adjustments
assessed for reasonableness by the Company’s credit department. Accordingly, for real estate
collateral securing larger nonaccruarr
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.

l commercial loans and commercial real estate loans, estimated

are reviewed and

For residential real estate loans, including home equity loans and lines of credit, the excess of
the loan balance over the net realizable value of the property collateralizing the loan is charged-off
when the loan becomes 150 days delinquent. That charge-off is based on recent indications of value
from external parties that are generally obtained shortly after a loan becomes nonaccrual. Loans to
consumers that file for bankruptcy are generally charged-off to estimated net collateral value shortly
after the Company is notified of such filings. When evaluating individual home equity loans and
lines of credit for charge off and for purposes of estimating 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. 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.

Information with respect to loans and leases that were considered nonaccrual at the beginning

and end of the reporting period and the interest income recognized on such loans for the years ended
December 31, 2020, 2019 and 2018 follows.

December 31, 2020

Amortized
Cost with
Allowance

Amortized
Cost without
Allowance

Total

(In thousands)

January 1,
2020

Amortized
Cost

Year Ended
December 31,
2020
Interest
Income
Recognized

79,930 $ 306,827 $ 346,743 $

11,269

Commercial, financial, leasing, etc. ................... $226,897 $
Real estate:

Commercial................................................... 364,110
1,094
Residential builder and developer.................
Other commercial construction.....................
20,992
Residential..................................................... 159,006
84,568
Residential — limited documentation ..........

Consumer:

Home equity lines and loans .........................
Recreational finance......................................
Automobile ...................................................
Other .............................................................

61,031
19,434
34,044
3,606

411,784
—
93,047
206,723
62,602

18,361
6,085
5,360
34,625

775,894
1,094
114,039
365,729
147,170

79,392
25,519
39,404
38,231

173,796
4,708
35,881
322,504
114,667

65,039
14,308
21,293
35,394

Total.................................................................... $974,782 $ 918,517 $1,893,299 $1,134,333 $

144

7,821
1,694
8,457
18,069
634

4,092
626
186
1,369
54,217

Amortized
Cost with
Allowance

December 31, 2019
Amortized
Cost without
Allowance

Total

(In thousands)

January 1,
2019

Amortized
Cost

Year Ended
December 31,
2019
Interest
Income
Recognized

$ 139,913

$346,557

$234,423

8,960

Commercial, financial, leasing, etc..................... $206,644
Real estate:

Commercial ...................................................
Residential builder and developer .................
Other commercial construction .....................
Residential .....................................................
Residential — limited documentation...........

40,847
604
12,425
59,982
26,710

Consumer:

117,627
3,378
20,345
175,681
56,717

158,474
3,982
32,770
235,663
83,427

203,672
4,798
22,205
233,352
84,685

Home equity lines and loans .........................
Recreational finance ......................................
Automobile....................................................
Other..............................................................

24,812
9,054
14,805
3,391
Total .................................................................... $399,274

38,403
5,165
6,488
121
$ 563,838

63,215
14,219
21,293
3,512
$963,112

71,292
11,199
23,359
4,623
$893,608

Amortized
Cost with
Allowance

December 31, 2018
Amortized
Cost without
Allowance

Total

(In thousands)

January 1,
2018

Amortized
Cost

Year Ended
December 31,
2018
Interest
Income
Recognized

$ 107,670

$234,423

$240,991

7,873

Commercial, financial, leasing, etc..................... $126,753
Real estate:

90,296
2,205
14,604
57,346
26,808

Consumer:

113,376
2,593
7,601
176,006
57,877

203,672
4,798
22,205
233,352
84,685

184,982
6,451
10,088
235,834
96,105

Home equity lines and loans .........................
Recreational finance ......................................
Automobile....................................................
Other..............................................................

30,819
6,016
16,271
4,591
Total .................................................................... $375,709

40,473
5,183
7,088
32
$ 517,899

71,292
11,199
23,359
4,623
$893,608

74,500
6,509
23,781
3,357
$882,598

5,850
357
634
12,630
1,092

5,987
575
214
508
36,807

10,880
1,779
3,474
14,065
1,980

5,535
333
689
230
46,838

For purposes of determining the level of the allowance for credit losses, the Company evaluates

its loan and lease portfolio by type. Accruing loans with similar risk characteristics are generally
evaluated collectively. The Company utilizes statistically developed models to project principal
balances over the remaining contractual lives of the loan portfolios and to determine estimated credit
losses through a reasonable and supportable forecast period. Individual loan credit quality indicators
including loan grade and borrower repayment performance inform the models, which have been
statistically developed based on historical correlations of credit losses with prevailing economic
metrics, including unemployment,
gross domestic product and real estate prices. Model forecasts
may be adjusted for inherent limitations or biases that have been identified through independent

145

validation and back-testing of model performance to actual realized results. At both January 1 and
December 31, 2020, the Company utilized a reasonable and supportable forecast period of two years.
Subsequent to this forecast period the Company reverted, ratably over a one-year period, to historical
loss experience to inform its estimate of losses for the remaining contractual life of each portfolio.
The Company also considered the impact of portfolio concentrations, changes in underwriting
practices, product expansions into new markets, imprecision in its economic forecasts, geopolitical
conditions and other risk factors that might influence its loss estimation process. Prior to 2020, the
allowance for credit losses was estimated for incurred credit losses inherent in the loan and lease
portfolio as of the balance sheet date, but did not consider reasonable and supportable forecasts that
could have affected the collectability of the reported amounts.

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.
Loan officers in different geographic locations with the support of the Company’s credit

146

The following table summarizes the loan grades applied at December 31, 2020 to the various
classes of the Company’s commercial loans and commercial real estate loans by origination year.

Term Loans by Origination Year

2020

2019

2018

2017

2016

Prior

(In thousands)

Revolving
Loans
Converted
to Term
Loans

Revolving
Loans

Total

Commercial, financial, leasing, etc.:

Loan grades:

Pass................................. $7,732,728 2,277,233 1,505,486
113,940
Criticized accrual............
56,227
Criticized nonaccrual......

388,326
7,720

84,358
27,309

930,834
41,587
16,808

719,796 1,387,695 11,352,416
584,751
73,401
39,930
125,893
45,471
19,681

21,286 $25,927,474
1,340,263
13,970
306,827
7,718

Total commercial,

financial, leasing, etc. ............ $8,128,774 2,388,900 1,675,653

989,229

779,407 1,506,567 12,063,060

42,974 $27,574,564

Real estate:
Commercial:

Loan grades:

Pass................................. $3,353,450 4,681,834 3,299,095 2,628,061 2,746,165 5,698,834
568,144 1,212,672
Criticized accrual............
248,949
197,319
Criticized nonaccrual......

579,507
47,144

290,885
99,293

526,037
26,876

400,154
121,899

875,348
44,260
34,414

— $23,282,787
— 3,621,659
775,894
—

Total commercial real

estate...................................... $3,906,363 5,203,887 3,925,746 3,018,239 3,511,628 7,160,455

954,022

— $27,680,340

Residential builder and developer:

Loan grades:

Pass................................. $ 506,295
3,690
Criticized accrual............
—
Criticized nonaccrual......

223,880
106,847
518

109,453
14,836
—

15,048
3,421
—

10,976
—
—

11,320
1,885
576

236,943
4,050
—

— $ 1,113,915
134,729
—
1,094
—

Total residential builder

and developer ........................ $ 509,985

331,245

124,289

18,469

10,976

13,781

240,993

— $ 1,249,738

Other commercial construction:

Loan grades:

Pass................................. $1,050,258 2,998,921 2,048,063
381,091
Criticized accrual............
13,522
Criticized nonaccrual......

148,492
65,592

37,192
335

945,339
225,949
4,213

233,127
144,665
12,097

294,030
12,034
12,873

74,611
—
5,407

— $ 7,644,349
949,423
—
114,039
—

Total other commercial

construction ........................... $1,087,785 3,213,005 2,442,676 1,175,501

389,889

318,937

80,018

— $ 8,707,811

Increases to criticized loans during 2020 were predominantly attributable to effects

of the

COVID-19 pandemic and the related re-grading of loans.

147

The Company considers repayment performance a significant indicator of credit quality for its

residential real estate loan and consumer loan portfolios. A summary of loans in accrual and
nonaccrual status at December 31, 2020 for the various classes of the Company’s residential real
estate loans and consumer loans by origination year is as follows.

Term Loans by Origination Year

Revolving

Revolving
Loans
Converted
to Term

2020

2019

2018

2017

2016

Prior

Loans

Total

(In thousands)

Residential:

Current .................................. $2,722,862 1,416,259 618,736 1,318,094 718,235 6,898,756
150,447
30-89 days past due ..............
Accruing loans past due 90
days or more .......................
Nonaccrual ............................

480,308
333,466
Total residential .............................. $2,740,070 1,453,713 669,322 1,550,797 774,886 7,862,977

212,818 45,804
2,900

15,234 38,145
5,183
14,439

579
3,133

13,477

13,496

6,408

7,258

7,781

7,947

71,894
—

—
200
72,094

—
—

—

— $13,764,836
200,406
—

792,888
—
—
365,729
— $15,123,859

— $ 1,462,277
19,687
—

—
—

—
147,170

— $ 1,629,134

—
—

—

—
—

—

—
—

—

— 1,462,277
— 19,687

—
—
— 147,170

— 1,629,134

Residential - limited documentation:

Current .................................. $
30-89 days past due ..............
Accruing loans past due 90
days or more .......................
Nonaccrual ............................

Total residential - limited

documentation.............................. $

Consumer:
Home equity lines and loans:

Current .................................. $
30-89 days past due ..............
Accruing loans past due 90
days or more .......................
Nonaccrual ............................

Total home equity lines and

—
—

—

773
—

—
—

3,983
—

1,591
—

2,016
—

—
—

162
—

—
—

51,554 2,569,621 1,252,185 $ 3,881,885
24,329
1,148

22,242

939

—
6,148

—
5,752

—
67,492

—
79,392

loans ............................................. $

773

3,983

1,591

2,016

162

58,850 2,576,312 1,341,919 $ 3,985,606

148

Term Loans by Origination Year

Revolving

Revolving
Loans
Converted
to Term

2020

2019

2018

2017

2016

Prior

Loans

Total

Recreational finance:

Current ................... $ 2,796,359 1,751,766
30-89 days past

(In thousands)

907,595

630,151

352,414

564,358

due.......................

9,548

11,255

8,519

6,638

2,938

8,263

Accruing loans

past due 90 days
or more................
Nonaccrual .............

Total recreational

—
1,854

—
3,883

—
4,072

—
4,194

—
2,733

—
8,783

finance........................... $ 2,807,761 1,766,904

920,186

640,983

358,085

581,404

Automobile:

Current ................... $ 1,595,636 1,106,782
30-89 days past

629,338

440,604

171,017

63,972

due.......................

6,461

14,140

12,542

12,899

6,373

3,083

Accruing loans

past due 90 days
or more................
Nonaccrual .............

—
7,144
Total automobile .............. $ 1,603,712 1,128,066

—
1,615

—
10,788
652,668

—
10,061
463,564

—
5,991
183,381

—
3,805
70,860

—

—
—

—

—
—
—

— $ 7,002,643

—

—
—

47,161

—
25,519

— $ 7,075,323

— $ 4,007,349

—

55,498

—
—
39,404
—
— $ 4,102,251

Other:

Current ................... $
30-89 days past

due.......................

Accruing loans

past due 90 days
or more................
Nonaccrual .............

Total other........................ $

Total loans and leases at

160,424

137,617

53,702

32,556

4,526

28,970

927,217

1,856 $ 1,346,868

1,879

1,130

577

2,301

557

10,594

481

17,561

—
1,493
163,796

—
492
139,239

—
339
54,618

—
183
35,040

—
31
4,599

374
501
30,402

4,207
35,044
977,062

—
148

4,581
38,231
2,485 $ 1,407,241

December 31, 2020 ....... $20,949,019 15,628,942 10,466,749 7,893,838 6,013,013 19,233,367 16,963,561 1,387,378 $98,535,867

The following table summarizes the loan grades applied at December 31, 2019 to the various

classes of the Company’s commercial loans and commercial real estate loans.

Commercial,
Financial,
Leasing, etc.

Commercial

Real Estate
Residential
Builder and
Developer

Other
Commercial
Construction

(In thousands)

December 31, 2019
Pass ...................................................................................
Criticized accrual ..............................................................
Criticized nonaccrual ........................................................
Total..................................................................................

$22,595,821
895,790
346,557
$23,838,168

25,728,725
770,609
158,474
26,657,808

1,419,162
124,101
3,982
1,547,245

7,092,799
211,292
32,770
7,336,861

The Company’s reserve for off-balance sheet credit exposures was not material at December 31,

2020 and December 31, 2019.

149

5. Premises and equipment
qq
The detail of premises and equipment

was as follows:

Land .................................................................................................................. $
Buildings ...........................................................................................................
Leasehold improvements ..................................................................................
Furniture and equipment — owned ..................................................................
leases........................................................
Furniture and equipment — capital

Less: accumulated depreciation and amortization

December 31

2020

2019

(In thousands)

94,929 $
513,290
302,246
807,701
8,630

96,118
482,182
262,438
739,724
14,232
1,726,796 1,594,694

Owned assets ................................................................................................
Capital leases................................................................................................

882,272
8,425
890,697
Right of use assets — operating leases .............................................................
436,927
Premises and equipment, net............................................................................. $1,161,558 $1,140,924

971,979
5,933
977,912
412,674

The right-of-use assets and lease liabilities relate to banking offices and other space occupied by

and use of certain equipment under noncancelable operating lease agreements. As of

the Companymm
December 31, 2020 and 2019, the Company recognized $467 million and $488 million respectively,
of operating lease liabilities as a component of “accrued interest and other liabilities” in the
consolidated balance sheet. In calculating the present value of lease payments, the Company utilized
its incremental secured borrowing rate based on lease term.

The Company’s noncancelable operating lease agreements expire at various dates over the next

21 years. Real estate leases generally consist of fixed monthly rental payments with certain leases
containing escalation clauses. Any variable lease payments or payments for nonlease components
are recognized in the consolidated statement of income as a component of “equipment and net
occupancy” expense based on actual costs incurred. Some leases contain lessee options to extend the
term. Those options are included in the lease term when it is determined that it is reasonably certain
the option will be exercised.

The Company has noncancelable operating lease agreements for certain equipment related to

ATMs, servers, printers and mail machines that are used in the normal course of operations. The
ATM leases are either based on the rights to a specific square footage or a license agreement
whereby the Companymm
generally contain both fixed payments and variable payments that are transaction-based. Given the
transaction-based nature of the variable payments, such payments are excluded from the
measurement of the right-of-use asset and lease liability and are recognized in the consolidated
statement of income as a component of “equipment and net occupancy” expense when incurred.

has the right to operate an ATM in a landlord's location. The lease terms

150

The following table presents information

about the Company’s lease costs for operating leases

recorded in the consolidated balance sheet, cash paid toward lease liabilities, and the weighted-
average remaining term and discount rates of the operating leases.

Lease cost
Operating lease cost........................................................ $
Short-term lease cost ......................................................
Variable lease cost ..........................................................

Total lease cost........................................................... $

Other information
Right-of-use assets obtained in exchange for

new operating lease liabilities.................................... $

Cash paid toward lease liabilities ...................................
Weighted-average remaining lease term ........................
Weighted-average discount rate .....................................

Year Ended December 31,

2020

2019

(Dollars in thousands)

104,158
198
1,565
105,921

70,754
104,396
7 years

100,669
105
2,332
103,106

132,219
101,869
7 years

2.74%

3.01%

Minimum lease payments under noncancelable operating leases are summarized in the

following table.

Year ending December 31:

(In thousands)

2021............................................................................................................. $
2022.............................................................................................................
2023.............................................................................................................
2024.............................................................................................................
2025.............................................................................................................
Later years...................................................................................................
Total lease payments........................................................................................
Less: imputed interest ......................................................................................
Total ................................................................................................................. $

105,445
93,621
75,698
61,412
46,023
130,475
512,674
45,354
467,320

Net lease expense for all operating leases totaled $111 million in 2018. All other operating

leasing activities were not material to the Company’s consolidated results of operations. Minimum
lease payments required under capital leases are not material.

151

6. Capitalized servicing assets
Changes in capitalized

servicing assets were as follows:

For the Year Ended December 31,

Residential Mortgage Loans
2019

2020

2018

Commercial Mortgage Loans
2019

2018

2020

(In thousands)

Beginning balance .......................... $244,411 $120,509 $114,978 $130,636 $114,663 $114,076
26,298
Originations ....................................
—
Purchases ........................................
(25,711)
Amortization...................................
114,663
—
Valuation allowance .......................
Ending balance, net ........................ $201,204 $237,411 $120,509 $133,429 $130,636 $114,663

26,067
— 144,326
(46,491)
244,411
(7,000)

41,370
—
(25,397)
130,636
—

28,985
454
(23,908)
120,509
—

29,306
—
(26,513)
133,429
—

(58,308)
231,204
(30,000)

45,101

Residential mortgage loans serviced for others were $26.3 billion at December 31, 2020, $32.3

billion at December 31, 2019 and $22.2 billion at December 31, 2018. Excluded from residential
mortgage loans serviced for others were loans sub-serviced for others of $68.1 billion, $62.8 billion
and $56.8 billion at December 31, 2020, 2019, and 2018, 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 $144 million. Commercial mortgage loans serviced for others were $18.9 billion at
December 31, 2020, $17.6 billion at December 31, 2019 and $15.5 billion at December 31, 2018.
Excluded from commercial mortgage loans serviced for others were loans sub-serviced for others of
$3.3 billion at December 31, 2020, $3.4 billion at December 31, 2019 and $2.7 billion at December
31, 2018.

The estimated fair value of capitalized residential mortgage loan servicing assets was

approximately $240 million at December 31, 2020 and $297 million at December 31, 2019. The fair
value of capitalized residential mortgage loan servicing assets was estimated using weighted-average
discount rates of 9.4% and 10.6% at December 31, 2020 and 2019, respectively, and
contemporaneous
prepayment assumptions that vary by loan type. At December 31, 2020 and 2019,
the discount rate represented a weighted-average option-adjusted spread (“OAS”) of 918 basis points
(hundredths of one percent) and 928 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 effeff ct thereof on prepayment speeds. The estimated fair value of capitalized commercial
mortgage loan servicing assets was approximately $160 million and $153 million at December 31,
2020 and 2019, respectively. An 18% discount rate was used to estimate the fair value of capitalized
commercial mortgage loan servicing rights at December 31, 2020 and 2019 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, 2020 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

152

reality, changes in one factor may result in changes in another which may magnify or counteract the
sensitivities. The changes in assumptions are presumed to be instantaneous.

Residential

Commercial

(Dollars in thousands)

Weighted-average prepayment speeds...............................................

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 ................................

14.50%
(15,279)
(29,189)
9.18%
(7,230)
(14,020)

18.00%
(7,024)
(13,556)

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, 2020

Core deposit ....................................................... $
Other ..................................................................
Total ................................................................... $

December 31, 2019

131,664
6,757
138,421

119,125
5,131
124,256

105,802
3,585
109,387

12,539
1,626
14,165

25,862
3,172
29,034

Amortization of core deposit and other intangible assets was generally computed using

accelerated methods over original amortization periods of three to seven years. The weighted-average
original amortization period was approximately seven years. Amortization expense for core deposit
and other intangible assets was $15 million, $19 million and $25 million for the years ended
December 31, 2020, 2019 and 2018, respectively. Estimated amortization expense in future years for
such intangible assets is as follows:

Year ending December 31:

2021.............................................................................................................................
2022.............................................................................................................................

(In thousands)

10,167
3,998
14,165

The Company completed annual goodwill impairment tests as of October 1, 2020, 2019 and
2018. 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

153

been the Company’s core relationship business reporting units. Goodwill was generally assigned
based on the implied fair value of the acquired goodwill applicable to the benefited reporting units at
the time of each respective acquisition. The implied fair value of the goodwill was determined as the
difference between the estimated incremental overall fair value of the reporting unit and the
estimated fair value of the net assets assigned to the reporting unit as of each respective acquisition
date. To test for goodwill impairment at each evaluation date, the Company compared
the estimated
fair value of each of its reporting units to their respective carrying amounts and certain other assets
and liabilities assigned to the reporting unit, including goodwill and core deposit and other intangible
assets. The methodologies used to estimate fair values of reporting units as of the acquisition dates
and as of the evaluation dates were similar. For the Company’s core customer relationship business
reporting units, fair value was estimated as the present value of the expected future cash flows of the
reporting unit. Based on the results of the goodwill impairment tests, the Company concluded that the
amount of recorded goodwill was not impaired

at the respective testing dates.

A summary of goodwill assigned to each of the Company’s reportable segments as of

December 31, 2020 and 2019 for purposes of testing for impairment is as follows:

(In thousands)

864,366
Business Banking ............................................................................................................ $
1,401,873
Commercial Banking .......................................................................................................
654,389
Commercial Real Estate ..................................................................................................
—
Discretionary Portfolio ....................................................................................................
—
Residential Mortgage Banking ........................................................................................
1,309,191
Retail Banking .................................................................................................................
All Other ..........................................................................................................................
363,293
Total................................................................................................................................. $ 4,593,112

154

8. Borrowings
The amounts and interest rates of short-term borrowings were as follows:

Federal Funds
Purchased
and
Repurchase
Agreements

Other
Short-term
Borrowings
(Dollars in thousands)

Total

At December 31, 2020

Amount outstanding........................................................ $
Weighted-average interest rate........................................

59,482

0.01%

— $
—

59,482

0.01%

For the year ended December 31, 2020

Highest amount at a month-end ...................................... $
Daily-average amount outstanding .................................
Weighted-average interest rate........................................

82,893
61,551

0.05%

—
— $
—

61,551

0.05%

At December 31, 2019

Amount outstanding........................................................ $
Weighted-average interest rate........................................

62,363

0.14%

— $
—

62,363

0.14%

For the year ended December 31, 2019

Highest amount at a month-end ...................................... $3,402,566
Daily-average amount outstanding .................................
260,322
Weighted-average interest rate........................................

1.86%

$5,000,000
799,068

$1,059,390

2.49%

2.34%

At December 31, 2018

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%

Short-term borrowings have a stated maturity of one year or less at the date the Company enters

into the obligation. In general, short-term repurchase agreements outstanding at December 31, 2020
matured on the next business day following year-end.

At December 31, 2020, M&T Bank had lines of credit under formal agreements as follows:

(In thousands)

Outstanding borrowings..................................................................................................... $
Unused ...............................................................................................................................

1,727
32,010,950

At December 31, 2020, M&T Bank had borrowing facilities available with the FHLBs whereby

M&T Bank could borrow up to approximately $19.0 billion. Additionally, M&T Bank had an
available line of credit with the Federal Reserve Bank of New York totaling approximately
$13.0 billion at December 31, 2020. M&T Bank is required to pledge loans and investment securities
as collateral for these borrowing facilities.

155

Long-term borrowings were as follows:

Senior notes of M&T:

Variable rate due 2023 ......................................................................... $
3.55% due 2023 ...................................................................................

249,824 $
533,369

249,756
520,454

December 31,

2020

2019

(In thousands)

Senior notes of M&T Bank:

Variable rate due 2021 .........................................................................
Variable rate due 2022 .........................................................................
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 M&T Bank:

Variable rate due 2020 .........................................................................
Variable rate due 2021 .........................................................................
3.40% due 2027 ...................................................................................

Junior subordinated debentures of M&T associated with

preferred capital securities:
Fixed rates:

349,992
249,858
—
—
—
664,400
749,656

1,683
—

—
500,000
552,194

349,893
249,758
749,254
749,864
654,136
652,714
749,572

1,815
101,679

409,361
500,000
514,353

BSB Capital Trust I — 8.125%, due 2028......................................
Provident Trust I — 8.29%, due 2028 ............................................
t I — 10.60%, due 2030............
Southern Financial Statutory Trusrr

15,752
29,099
6,836

15,728
28,235
6,770

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 .........................................................................................................

148,409
150,606
97,075
15,464
56,641
8,338
2,997

147,871
149,943
96,930
15,464
55,867
8,236
8,533
$ 4,382,193 $ 6,986,186

The variable rate notes of M&T pay interest quarterly at a rate that is indexed to the three-

month LIBOR. The contractual interest rates for those notes were .90% at December 31, 2020 and
2.62% at December 31, 2019.

156

The variable rate senior notes of M&T Bank pay interest quarterly at rates that are indexed to the

three-monthtt LIBOR. The contractual interest rates for those notes ranged from .49% to .83% at
December 31, 2020 and 2.21% to 2.54% at December 31, 2019. The weighted-average contractual
interest rate was 0.63% at December 31, 2020 and 2.34% at December 31, 2019.
tt

ces from the FHLB had weighted-average contractual

Long-term fixed rate advandd

interest rates of

5.82% at December 31, 2020 and December 31, 2019. Advances from the FHLB outstanding at
December 31, 2020 mature in 2029 and 2035 and are secured by residential real estate loans,
commercial real estate loans and investmen

t securities.

The agreement to repurchase securities outstanding at December 31, 2019 had a contractual
interest rate of 4.29%. The Company posted collateral consisting primarily of government guaranteed
mortgage-backed securities of $108 million at December 31, 2019.

The subordinated notes of M&T Bank are unsecured and are subordinate to the claims of its
other creditors. The notes that were repaid in 2020 paid interest monthly at a rate that was indexed to
the one-month LIBOR. The contractual interest rate was 3.02% at maturity and December 31, 2019.
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 0.87% at December 31, 2020 and 2.55% at December 31,
2019.

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
’s
Securities of each of those trusts are wholly owned by M&T and are the only class of each trust
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 1.06% to 3.59% at December 31, 2020 and from
2.76% to 5.34% at December 31, 2019. The weighted-average variable rates payable on those Junior
Subordinated Debentures were 1.65% at December 31, 2020 and 3.37% at December 31, 2019.

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
obligations under such guarantee and the Capital Securities are subordinate and junior in right of
payment to all senior indebtedness of M&T.

distribution with respect to the Capital Securities. The

The Capital Securities will remain outstanding until the Junior Subordinated Debentures
are
repaid at maturity, are redeemed prior to maturituu ytt or are distributed in liquidation to the trusts. The
Capital Securities are mandatorily redeemable in whole, but not in part, upon repayment at thet
maturity
dates (ranging from 2027 to 2033) of the Junior Subordinated Debentures or the earlier
tt
redemption of the Junior Subordinated Debenturtt es 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.

stated

157

Long-term borrowings at December 31, 2020 mature as follows:

Year ending December 31:

2021 .............................................................................................................................. $ 849,976
917,270
2022 ..............................................................................................................................
783,193
2023 ..............................................................................................................................
—
2024 ..............................................................................................................................
749,656
2025 ..............................................................................................................................
1,082,098
Later years ....................................................................................................................
$ 4,382,193

(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, 2020 and 2019 is presented

below:

Shares
Issued and
Outstanding

Carrying
Value
(Dollars in thousands)

Series E (a)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred

Stock, $1,000 liquidation preference per share.................................................................

350,000

$ 350,000

Series F (b)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred

Stock, $10,000 liquidation preference per share...............................................................

50,000

$ 500,000

Series G (c)
Fixed-Rate Reset Non-cumulative Perpetual Preferred Stock,

$10,000 liquidation preference per share ..........................................................................

40,000

$ 400,000

(a)

(b)

(c)

are paid semi-annually at a rate of 5.125% through October 31, 2026 and thereafter will be paid quarterly at a

are paid semi-annually at a rate of 6.45% through February 14, 2024 and thereafter will be paid quarterly at a

Dividends, if declared,
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. Declared dividends per share were $64.50 in each of 2020, 2019
and 2018.
Dividends, if declared,
rate of the three-month LIBOR plus 352 basis points. The shares are redeemable in whole or in part on or aftff er 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. Declared dividends per share were $512.50 in each of 2020, 2019
and 2018.
Dividends, if declared,
of the five-year U.S. Treasury rate plus 3.174%. The shares are redeemable in whole or in part on or after August 1, 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. Declared dividends per share were $500.694 in 2020 and $125.694 in
2019.

are paid semi-annually at a rate of 5.0% through July 31, 2024 and thereafter will be paid semiannually at a rate

10. Revenue from contracts with customers
A significant amount of the Company’s revenues are derived from net interest income on financial
assets and liabilities,
investment securities gains, loan and letter of credit fees, income from bank-owned life insurance,
and certain other revenues that are generally excluded from the scope of accounting guidance for
revenue from contracts with customers.

mortgage banking revenues, trading account and foreign exchange gains,

158

For noninterest income revenue streams, 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 satisfieff d. 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

tables. Such amounts are classified in accrued interest and other assets in the

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, 2020 and 2019, the Company had $67 million and $62
million, respectively, of amounts receivable related to recognized revenue from the sources in the
accompanying
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, 2020 and 2019, the Company had deferred revenue of $42 million and $43 million,
respectively, related to the sources in the accompanying tables and recorded such amounts in accrued
interest and other liabilities in the consolidated balance sheet. The following tables summarize
sources of the Company’s noninterest income during 2020, 2019, and 2018 that are subject to the
noted accounting guidance.

159

Business
Banking

Commercial
Banking

Commercial
Real Estate

Discretionary
Portfolio

Residential
Mortgage
Banking

Retail
Banking

All
Other

Total

(In thousands)

Year Ended December 31, 2020

Classification in consolidated

statement of income

Service charges on deposit accounts..... $50,119
18
Trust income .........................................
—
Brokerage services income ...................
Other revenues from operations:

92,720
442
—

Merchant discount and credit card

fees ..............................................
Other ...............................................

40,475
—
$90,612

45,528
9,408
148,098

10,252
—
—

2,221
6,218
18,691

Year Ended December 31, 2019

Classification in consolidated

statement of income

—
—
—

— 211,858
—
—

5,839 $ 370,788
601,884
47,428

— 601,424
— 47,428

—
1,625
1,625

— 13,481

102,472
767
84,611
4,732 20,813 41,815
4,732 246,152 697,273 $1,207,183

Service charges on deposit accounts..... $60,690
31
Trust income .........................................
Brokerage services income ...................
—
Other revenues from operations:

93,044
963
—

9,828
—
—

—
—
—

4 263,659
—
—

5,753 $ 432,978
572,608
48,922

— 571,614
— 48,922

Merchant discount and credit card

fees ..............................................
Other ...............................................

Year Ended December 31, 2018

Classification in consolidated

statement of income

36,844
—
$97,565

52,161
7,498
153,666

2,516
8,615
20,959

—
1,776
1,776

— 12,140

107,042
3,381
3,492 36,144 34,088
91,613
3,496 311,943 663,758 $1,253,163

Service charges on deposit accounts..... $62,323
9
Trust income .........................................
Brokerage services income ...................
—
Other revenues from operations:

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 ..............................................
Other ...............................................

34,557
—
$96,889

52,051
8,796
158,171

2,213
7,259
19,342

—
1,738
1,738

— 14,924

2,208
105,953
90,369
3,814 38,529 30,233
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.

160

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. 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 Companymm

has satisfied its service obligation.

11. Stock-based compensation plans
Stock-based compensation
2018. The Company recognized income tax benefits related to stock-based compensation of $17
million in 2020, $19 million in 2019 and $24 million in 2018.

expense was $80 million in 2020, $76 million in 2019 and $66 million in

The Company’s equity incentive compensation plan allows for the issuance of various forms of

stock-based compensation,
including performance-based awards. At December 31, 2020 and 2019, respectively, there were
3,100,665 and 3,742,478 shares available for future grant under the Company’s
equity incentive
compensation plan.

including stock options, restricted stock and restricted stock units,

Stock awards
Stock awards are comprised of restricted stock and restricted stock units. Stock awards granted since
2014 generally vest over three years. Stock awards granted prior to 2014 vested over four years. A
portion of stock awards granted after 2013 require a performance condition to be met before such
awards vest. The Companymm
may issue shares from treasury stock to the extent available or issue new
shares. There were no restricted shares issued in 2020, 2019 or 2018. The number of restricted stock
units issued was 480,949 in 2020, 448,487 in 2019 and 348,512 in 2018, with a weighted-average
grant date fair value of $81 million, $74 million and $66 million, respectively. Unrecognized
compensation expense associated with restricted stock units was $29 million as of December 31,
2020 and is expected to be recognized over a weighted-average period of approximately one year.

A summary of restricted stock and restricted stock unit activity follows:

Restricted
Stock Units
Outstanding

Weighted-
Average
Grant Price

Restricted
Stock
Outstanding

Weighted-
Average
Grant Price

Unvested at January 1, 2020....................................
Granted ....................................................................
Vested ......................................................................
Cancelled .................................................................
Unvested at December 31, 2020..............................

691,227 $ 171.72
168.71
480,949
172.56
(334,795)
(20,431)
171.91
816,950 $ 169.60

—
(49,468)
(573)

63,591 $ 162.45
—
162.48
158.02
13,550 $ 162.50

161

Stock option awards
Stock options issued generally vest over three years and are exercisable over terms not exceeding ten
years and one day. The Company granted 187,088, 164,244 and 116,852 stock options in 2020, 2019
and 2018, respectively. The Companymm
used an option pricing model to estimate the grant date present
value of stock options granted, which was not material in each of 2020, 2019 and 2018.

A summary of stock option activity follows:

Stock
Options
Outstanding

Weighted-Average

Exercise
Price

Life
(In Years)

Aggregate
Intrinsic Value
(In thousands)

Outstanding at January 1, 2020 ...............................
Granted ....................................................................
Exercised .................................................................
Expired.....................................................................
Outstanding at December 31, 2020 .........................
Exercisable at December 31, 2020 ..........................

305,452 $ 170.15
173.04
187,088
117.81
(25,047)
174.09
(2,070)
465,423 $ 174.11
133,098 $ 178.58

8.2 $
7.4 $

38
38

For 2020, 2019 and 2018, M&T received $3 million, $9 million and $60 million, respectively,

in cash from the exercise of stock options. The intrinsic value of stock options exercised during 2020
was $1 million, compared with $3 million and $16 million in 2019 and 2018, respectively, and the
related tax benefits realized by the Company were not material in any of those three years. As of
December 31, 2020, 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 2020, 2019
and 2018 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, shares of M&T common stock issued were 77,170 in 2020,
71,676 in 2019 and 58,167 in 2018. As of December 31, 2020, there were 2,233,581 shares available
for issuance under the plan. M&T received cash for shares purchased through the employee stock
purchase plan of $12 million, $11 million and $10 million in 2020, 2019 and 2018, respectively.
Compensation expense recognized for the stock purchase plan was not material in 2020, 2019 or
2018.

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 14,304
and 16,491 at December 31, 2020 and 2019, respectively. The obligation to issue shares is included
in “common stock issuable” in the consolidated balance sheet.

162

Directors’ stock plan
The Company maintains a compensation plan for non-employee members of the Company’s boards
of directors that allows such members to receive all or a portion of their compensation in shares of
M&T common stock. Through December 31, 2020, 295,182 shares had been issued in connection
with the directors’ stock plan.

Through acquisitions, the Company assumed obligations to issue shares of M&T common stock

related to deferred directors compensation plans. Shares of common stock issuable under such plans
were 3,809 and 5,043 at December 31, 2020 and 2019, 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 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:

2020

Year Ended December 31
2019
(In thousands)

2018

Service cost ......................................................................... $
Interest cost on benefit obligation .......................................
Expected return on plan assets ............................................
Amortization of prior service cost.......................................
Recognized net actuarial loss ..............................................
Net periodic pension cost (benefit) ..................................... $

19,944 $
71,421
(125,512)
557
58,096
24,506 $

17,294 $
81,579
(122,139)
557
21,992

(717) $

20,346
74,704
(123,127)
557
43,793
16,273

Net other postretirement benefits expense for defined benefit plans consisted of the following:

2020

Year Ended December 31
2019
(In thousands)

2018

Service cost .............................................................................
Interest cost on benefit obligation ...........................................
Amortization of prior service credit ........................................
Recognized net actuarial gain .................................................
Net other postretirement benefits ............................................

970 $

1,741
(4,738)
(1,236)
(3,263) $

859 $

2,344
(4,730)
(1,247)
(2,774) $

938
2,293
(4,729)
(826)
(2,324)

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.

163

Data relating to the funding

position of the defined benefit plans were as follows:

Change in benefit obligation:

Pension Benefits

2020

2019