M&T Bank
Annual Report 2021

Plain-text annual report

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, 2021 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 (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 Non-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 company (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, 2021: $18,124,066,420. Number of shares of the Common Stock, $0.50 par value, outstanding as of the close of business on February 11, 2022: 129,034,484 shares. (1) Portions of the Proxy Statement for the 2022 Annual Meeting of Shareholders of M&T Bank Corporation in Parts II and III. Auditor Firm Id: 238 Auditor Name: PricewaterhouseCoopers LLP Auditor Location: Buffalo, NY, United States Documents Incorporated By Reference: M&T BANK CORPORATION Form 10-K for the year ended December 31, 2021 CROSS-REFERENCE SHEET PART I Item 1. Business.................................................................................................... Disclosure pursuant to subpart 1400 of Regulation S-K I. Distribution of assets, liabilities, and shareholders’ equity; interest rates and interest differential A. Average balance sheets ....................................................................... B. Interest income/expense and resulting yield or rate on average interest-earning assets and interest-bearing liabilities .................... C. Rate/volume variances ........................................................................ Investments in debt securities A. Maturity schedule and weighted average yield.................................. Loan portfolio A. Maturity schedule ............................................................................... II. III. IV. Allowance for credit losses Form 10-K Page 4 69 69 26 102 100 A. Credit ratios ........................................................................................ 82, 83, 85, 87 Factors driving material changes in credit ratios or related V. components .................................................................................... B. Allocation of the allowance for credit losses ..................................... Deposits A. Average balances and rates ................................................................ B. Uninsured and time deposits over $250,000 ...................................... Item 1A. Risk Factors.............................................................................................. Item 1B. Unresolved Staff Comments .................................................................... Properties.................................................................................................. Item 2. Item 3. Legal Proceedings .................................................................................... Item 4. Mine Safety Disclosures .......................................................................... Executive Officers of the Registrant ........................................................ Item 5. Market for Registrant’s Common Equity, Related Stockholder PART II 80-92, 140-155 91, 146 69 78, 103 27 53 53 54 54 54 Matters and Issuer Purchases of Equity Securities .............................. A. Principal market.................................................................................. B. Approximate number of holders at year-end ...................................... C. Frequency and amount of dividends declared .................................... D. Restrictions on dividends.................................................................... E. Securities authorized for issuance under equity 57 57 24 25-26, 118, 129 11 compensation plans ........................................................................ F. Performance graph.............................................................................. G. Repurchases of common stock ........................................................... Selected Financial Data............................................................................ Item 6. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .................................................................... Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................. Financial Statements and Supplementary Data........................................ Item 8. A. Report on Internal Control Over Financial Reporting ........................ B. Report of Independent Registered Public Accounting Firm............... 57-59 58 59 59 59 120 120 121 122 2 C. Consolidated Balance Sheet — December 31, 2021 and 2020 .......... D. Consolidated Statement of Income — Years ended December 31, 2021, 2020 and 2019 ...................................................................... E. Consolidated Statement of Comprehensive Income — Years ended December 31, 2021, 2020 and 2019 .................................... F. Consolidated Statement of Cash Flows — Years ended December 31, 2021, 2020 and 2019 ................................................... G. Consolidated Statement of Changes in Shareholders’ Equity — Years ended December 31, 2021, 2020 and 2019 .......................... 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..................................................................................... Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ..... 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 Item 15. Exhibits and Financial Statement Schedules............................................ Item 16. Form 10-K Summary ............................................................................... SIGNATURES......................................................................................................... Form 10-K Page 125 126 127 128 129 130 118 208 208 208 208 208 208 208 208 208 209 209 209 209 210 213 214 3 Item 1. Business. PART I M&T Bank Corporation (“Registrant” or “M&T”) is a New York business corporation which is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”) and as a bank holding company (“BHC”) under Article III-A of the New York Banking Law (“Banking Law”). The principal executive offices of M&T are located at One M&T Plaza, Buffalo, New York 14203. M&T was incorporated in November 1969. M&T and its direct and indirect subsidiaries are collectively referred to herein as the “Company.” As of December 31, 2021 the Company had consolidated total assets of $155.1 billion, deposits of $131.5 billion and shareholders’ equity of $17.9 billion. The Company had 17,115 full-time and 454 part-time employees as of December 31, 2021. At December 31, 2021, M&T had two wholly owned bank subsidiaries: Manufacturers and Traders Trust Company (“M&T Bank”) and Wilmington Trust, National Association (“Wilmington Trust, N.A.”). The banks collectively offer a wide range of retail and commercial banking, trust and wealth management, and investment services to their customers. At December 31, 2021, M&T Bank represented 99% of consolidated assets of the Company. The Company from time to time considers acquiring banks, thrift institutions, branch offices of banks or thrift institutions, or other businesses within markets currently served by the Company or in other locations that would complement the Company’s business or its geographic reach. The Company has pursued acquisition opportunities in the past, continues to review different opportunities, including the possibility of major acquisitions, and intends to continue this practice. Subsidiaries M&T Bank is a banking corporation that is incorporated under the laws of the State of New York. M&T Bank is a member of the Federal Reserve System and the Federal Home Loan Bank System, and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits. M&T acquired all of the issued and outstanding shares of the capital stock of M&T Bank in December 1969. The stock of M&T Bank represents a major asset of M&T. M&T Bank operates under a charter granted by the State of New York in 1892, and the continuity of its banking business is traced to the organization of the Manufacturers and Traders Bank in 1856. The principal executive offices of M&T Bank are located at One M&T Plaza, Buffalo, New York 14203. As of December 31, 2021, M&T Bank had 688 domestic banking offices located in New York State, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia, and the District of Columbia and a full-service commercial banking office in Ontario, Canada. As of December 31, 2021, M&T Bank had consolidated total assets of $154.7 billion, deposits of $133.7 billion and shareholder’s equity of $16.8 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 4 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, 2021, Wilmington Trust, N.A. had total assets of $12.0 billion, deposits of $11.1 billion and shareholder’s equity of $779 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, 2021, Wilmington Trust Company had total assets of $1.2 billion and shareholder’s equity of $678 million. Revenues of Wilmington Trust Company were $135 million in 2021. 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, 2021, M&T Insurance Agency had assets of $41 million and shareholder’s equity of $26 million. M&T Insurance Agency recorded revenues of $37 million during 2021. 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, 2021, M&T Realty Capital serviced or sub-serviced $23.7 billion of commercial mortgage loans for non-affiliates and had assets of $944 million and shareholder’s equity of $179 million. M&T Realty Capital recorded revenues of $187 million in 2021. 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. It provides institutional brokerage and securities services. As of December 31, 2021, M&T Securities had assets of $48 million and shareholder’s equity of $46 million. M&T Securities recorded $50 million of revenue during 2021. The headquarters of M&T Securities are located at One Light Street, Baltimore, Maryland 21202. Wilmington Trust Investment Advisors, Inc. (“WT Investment Advisors”), a wholly owned subsidiary of M&T Bank, was incorporated as a Maryland corporation on June 30, 1995. WT Investment Advisors, a registered investment advisor under the Investment Advisors Act, serves as an investment advisor to the Wilmington Funds, a family of proprietary mutual funds, and institutional clients. As of December 31, 2021, WT Investment Advisors had assets of $57 million and shareholder’s equity of $50 million. WT Investment Advisors recorded revenues of $42 million in 2021. 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 Funds. Wilmington Funds Management had assets and shareholder’s equity of $23 million as of December 31, 2021. Wilmington Funds Management recorded revenues of $11 million in 2021. The headquarters of Wilmington Funds Management are located at 1100 North Market Street, Wilmington, Delaware 19890. Wilmington Trust Investment Management, LLC (“WTIM”) is a wholly owned subsidiary of M&T and was incorporated in December 2001 as a Georgia limited liability company. WTIM is a 5 registered investment advisor under the Investment Advisors Act and provides investment management services to clients, including certain private funds. As of December 31, 2021, WTIM has assets and shareholder’s equity of $8 million. WTIM recorded revenues of $2 million in 2021. 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, 2021. Segment Information, Principal Products/Services and Foreign Operations Information about the Registrant’s business segments is included in note 23 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data” and is further discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Registrant’s reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking. The Company’s international activities are discussed in note 18 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data.” The only activity that, as a class, contributed 10% or more of the sum of consolidated interest income and other income in any of the last three years was interest on loans and, in 2021, trust income. The amount of income from such sources during those years is recorded in various business segments and is set forth in the Company’s Consolidated Statement of Income and Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data.” Supervision and Regulation of the Company M&T and its subsidiaries are subject to the comprehensive regulatory framework applicable to bank and financial holding companies and their subsidiaries. Regulation of financial institutions such as M&T and its subsidiaries is intended primarily for the protection of depositors, the FDIC’s DIF and the banking and financial system as a whole, and generally is not intended for the protection of shareholders, investors or creditors other than insured depositors. Proposals to change the applicable regulatory framework may be introduced in the United States Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. A change in statutes, regulations or regulatory policies applicable to M&T or any of its subsidiaries could have a material effect on the business, financial condition or results of operations of the Company. Described hereafter are material elements of the significant federal and state laws and regulations applicable to M&T and its subsidiaries. 6 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 the form of supervision may vary from state to state, insurance laws generally grant broad discretion to regulatory authorities in adopting regulations and supervising regulated activities. This supervision generally includes the licensing of insurance brokers and agents and the regulation of the handling of customer funds held in a fiduciary capacity as well as regulations requiring, among other things, maintenance of capital, record keeping, and reporting. M&T Bank is a New York chartered bank and a member of the Federal Reserve. As a result, it is subject to extensive regulation, examination and oversight by the NYSDFS and the Federal Reserve Bank of New York. New York laws and regulations govern many aspects of M&T Bank’s operations, including branching, dividends, subsidiary activities, fiduciary activities, lending, and deposit taking. M&T Bank is also subject to Federal Reserve regulations and guidance, including with respect to capital levels. Its deposits are insured by the FDIC, subject to certain limitations, 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, subject to certain limitations, 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. 7 Bank holding companies that qualify and elect to be financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal Reserve, by regulation or order, in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the Federal Reserve). Activities that are financial in nature include securities underwriting and dealing, insurance underwriting and merchant banking. 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 with those transactions, as well as loss of financial holding company status. Additionally, if each of the Company’s depository institution subsidiaries has not received at least a “satisfactory” rating on its most recent examination under the Community Reinvestment Act of 1977 (the “CRA”), the Company 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 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. “Tailoring Rules” adopted by the Federal Reserve and other federal bank regulators in 2019 assign each U.S. BHC with $100 billion or more in total consolidated assets, as well as its bank subsidiaries, to one of four categories based on its size and five 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 BHC (“G-SIB”). Under the Tailoring Rules, M&T and its depository institution subsidiaries are subject to Category IV 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. The threshold for Category III is $250 billion or more in total consolidated assets, or $100 billion or more in total consolidated assets and at least $75 billion in weighted short-term wholesale funding, nonbank assets or off-balance sheet exposures. 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, are 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 subject 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 (“SLR”) and (3) the 8 countercyclical capital buffer (“CCyB”). Other elements of the Tailoring Rules are discussed in further detail throughout this section. Compared to Category IV firms, Category III firms are subject to the LCR and NSFR, company-run stress testing requirements, annual (instead of biennial) supervisory stress tests, the SLR and the CCyB. Capital Requirements M&T and its subsidiary banks are required to comply with applicable capital adequacy standards established by the federal banking agencies (the “Capital Rules”), which are based on the Basel Committee’s December 2010 final capital framework for strengthening international capital standards, referred to as “Basel III”. The Capital Rules include both risk-based requirements, which compare three measures of capital to risk-weighted assets (“RWAs”), as well as leverage requirements, which, in the case of Category IV bank holding companies such as M&T, consist of the Tier 1 leverage ratio described below. Pursuant to the Capital Rules, the minimum capital ratios are as follows: • • • • 4.5% Common Equity Tier 1 Capital (“CET1”) to RWAs; 6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to RWAs; 8.0% Total capital (that is, Tier 1 plus Tier 2 capital) to RWAs; and 4.0% Tier 1 capital to average consolidated assets (the “leverage ratio”). In calculating risk-based 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 these exposures that from time to time may affect how specific exposures are classified and could lead to increases or decreases of the regulatory risk weights assigned to such exposures. The Capital Rules also require firms to maintain a “buffer,” consisting solely of CET1 capital, in addition to the minimum risk-based requirements. Failure to satisfy the buffer requirement in full results in graduated constraints on capital distributions and discretionary executive compensation. The severity of the constraints depends on the amount of the shortfall and the firm’s “eligible retained income,” defined as the greater of (i) net income for the four preceding quarters, net of distributions and associated tax effects not reflected in net income; and (ii) the average of net income over the preceding four quarters. As a Category IV BHC, M&T’s buffer requirement, referred to as the “Stress Capital Buffer,” is determined through the Federal Reserve’s supervisory stress tests, discussed below. For M&T’s bank subsidiaries, the buffer requirement consists of the static capital conservation buffer equal to 2.5% of RWAs. CET1 consists of common stock instruments that meet the eligibility criteria in the Capital Rules, including common stock and related surplus, net of treasury stock, retained earnings, certain minority interests and, for certain firms, 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 provide for a number of deductions from and adjustments to CET1. As a “non-advanced approaches” firm under the Capital Rules, M&T is subject to rules that provide for simplified capital requirements relating to the threshold deductions for mortgage servicing assets, deferred tax assets arising from temporary differences that a banking organization could not realize through net operating loss carry backs, and investments in the capital of unconsolidated financial institutions, as well as the inclusion of minority interests in regulatory capital. M&T’s regulatory capital ratios are presented in note 24 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data.” 9 In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms. 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 these standards will depend on the manner in which they are implemented by the federal banking regulators. Stress Testing and Stress Capital Buffer 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 using 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, in even-numbered years. The Federal Reserve may also use additional components in the severely adverse scenario or additional or more complex 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. Bank holding companies with total consolidated assets of $100 billion or more, including Category IV bank holding companies such as M&T, must annually submit capital plans as part of the Federal Reserve’s 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 process is intended to help ensure that these bank holding companies have robust, forward-looking capital planning processes that account for each company’s unique risks and that permit continued operations during times of economic and financial stress. Each of the bank holding companies participating in the process is also required to collect and report certain related data to the Federal Reserve on a quarterly basis. The Stress Capital Buffer is based on a BHC’s stressed losses in the supervisory stress test, plus four quarters of planned common stock dividends, subject to a floor of 2.5% of RWAs. In August 2021, the Federal Reserve provided M&T with a Stress Capital Buffer of 2.5%, representing the floor under the regulatory capital rules, which became applicable to M&T on October 1, 2021. Accordingly, it currently is subject to a CET1 capital requirement of 7.0% (a sum of the Stress Capital Buffer and the minimum CET 1 capital ratio). In January 2021, the Federal Reserve issued a final rule to align its process with the categories set forth in the Tailoring Rules. Under the final rule, for Category IV firms, the portion of the Stress Capital Buffer based on the Federal Reserve’s supervisory stress tests will be calculated biennially, in even-numbered years. During a year in which a Category IV firm does not undergo a supervisory stress test, the firm will receive an updated Stress Capital Buffer that reflects the firm’s updated planned common stock dividends. A Category IV firm is also 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. 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 capital plan is currently due in 10 April each year. The Federal Reserve publishes the results of its supervisory stress tests by June 30 of each year. A BHC’s planned capital distributions in its annual capital plan submissions must be consistent with any effective distribution limitations that would apply under the firm’s own baseline projections, including its Stress Capital Buffer. 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 24 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. M&T’s ability to make capital distributions would likely 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. In addition, the Federal Reserve’s capital plan rule 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. Among other circumstances, a firm may be required to resubmit its capital plan in connection with certain acquisitions or dispositions. Liquidity Under the Tailoring Rules, the Company is not subject to the Federal Reserve and other federal banking regulators rules, which implement a U.S. version of the Basel Committee’s LCR 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 NSFR, which is designed to promote more medium- and long- term funding of the assets and activities of banks over a one-year time horizon. The Federal Reserve’s enhanced prudential standards, however, require the Company, as a BHC 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, the liquidity risk management and reporting requirements are less stringent for Category IV bank holding companies as compared to bank holding companies in a different Category. Cross Guaranty Provision The cross guaranty provisions in the Federal Deposit Insurance Act (“FDIA”) 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 11 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 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 plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized institution is subject. If an institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties. Limits on Undercapitalized Depository Institutions The FDIA establishes a system of regulatory remedies to resolve the problems of undercapitalized institutions, referred to as the prompt corrective action. The federal banking regulators have established five capital categories (“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) and must take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions which are undercapitalized, significantly undercapitalized or critically undercapitalized. The severity of these mandatory and discretionary supervisory actions depends upon the capital category in which the institution is placed. The federal banking regulators have 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 subject to Category IV standards 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%. 12 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 restoration plan or fail to implement an approved capital restoration plan may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions failing to submit or implement an acceptable capital restoration plan are subject to appointment of a receiver or conservator. Transactions with Affiliates There are various legal restrictions on the extent to which M&T and its non-bank subsidiaries or affiliates (M&T Insurance Agency, Inc., M&T Realty Capital Corporation, M&T Securities, Inc., 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 Trust, N.A. (or any of their respective subsidiaries) with an affiliate must in certain cases be secured by designated amounts of specified collateral and must be limited as follows: (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, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. All covered transactions, including certain additional transactions (such as transactions with a third party in which an affiliate has a financial interest), must be conducted on terms and under circumstances 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. FDIC Insurance Assessments M&T Bank and Wilmington Trust, N.A. deposits are insured by the DIF of the FDIC up to the limits set forth under applicable law. The FDIC imposes a risk-based premium assessment system that determines assessment rates for financial institutions. Deposit insurance assessments are based on average total assets minus average tangible equity. For larger institutions, such as M&T Bank, the FDIC uses a performance score and a loss-severity score that are used to calculate an initial assessment rate. In calculating these scores, the FDIC uses a bank’s capital level and supervisory 13 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 imposed by the FDIC. Acquisitions Federal and state laws impose notice and approval requirements for mergers and acquisitions involving depository institutions or bank holding companies. For example, 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. In addition, 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 attempt to monopolize the business of banking in any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the community to be served. Consideration of financial resources generally focuses on capital adequacy and consideration of convenience and needs issues 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. Refer to “Risk Factors—Risks Related to the Merger” below for discussion related to the Company’s pending application for the proposed merger with People’s United Financial, Inc. (“People’s United”). 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 14 encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act 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 Guidance states that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies. The Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities having at least $1 billion in total assets, such as M&T and M&T Bank. The agencies proposed rules to implement this requirement but these proposed rules have not been finalized. In addition, the SEC proposed in 2015, but has not finalized, rules directing national securities exchanges and associations to establish listing standards requiring companies to adopt policies that require executive officers to pay back incentive-based compensation that they were awarded erroneously. In October 2021, the SEC reopened the comment period on this proposal. 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, the Federal Reserve and FDIC issued modified 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 not required to submit resolution plans. The FDIC has separately required 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 January 2021, the FDIC lifted its existing moratorium on resolution plans, indicating it will resume the requirement for resolution plan submissions for IDIs with $100 billion or more in assets. The FDIC also announced its intention to engage in targeted engagement and capabilities testing related to resolution planning with select firms, for which M&T Bank participated in mid-2021. In June 2021, the FDIC issued a Statement on Resolution Plans for IDI’s, which, among other things, provides general information regarding the content that filers will be expected to prepare and extends the submission frequency for specified IDI’s to a three-year resolution plan filing cycle. The FDIC has notified M&T Bank that its next resolution plan is due by no later than December 1, 2022. 15 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: • • • 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 holders; 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 16 company by transferring its assets (including shares of its operating subsidiaries) and, potentially, very limited liabilities to a “bridge” holding company; utilize the resources of the failed financial holding company to recapitalize the operating subsidiaries; and satisfy the claims of unsecured creditors of the failed financial holding company and other claimants in the receivership by delivering securities of one or more new financial companies that would emerge from the bridge holding company. Under this strategy, management of the failed financial holding company would be replaced and shareholders and creditors of the failed financial holding company would bear the losses resulting from the failure. Depositor Preference Under federal law, depositors and certain claims for administrative expenses and employee compensation against an insured depository institution would be afforded a priority over other general unsecured claims against such an institution in the “liquidation or other resolution” of such an institution by any receiver. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including depositors whose deposits are payable only outside of the United States and the parent BHC, with respect to any extensions of credit they have made to such insured depository institution. Financial Privacy and Cyber Security The federal banking regulators have adopted rules that limit the ability of banks and other financial institutions to disclose non-public 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 November 2021, the federal banking agencies issued a final rule requiring banking organizations to notify their primary regulator as soon as possible and within 36 hours of determining that a “notification incident” has occurred. A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector. The final rule also requires specific and immediate notifications by bank service providers that become aware of similar incidents. The rule is effective April 1, 2022, with compliance required by May 1, 2022. Financial institutions regulated by the NYSDFS, including M&T Bank, are also subject to NYSDFS regulations on cybersecurity matters, including, among other things, requirements to (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. 17 Many states and 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 of recent state legislation is the California Consumer Privacy Act (“CCPA”), 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. November 2020 amendments expanding the scope of and requirements under the CCPA will generally become effective on January 1, 2023. 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 Settlement Procedures Act that relate to the provision of disclosures to borrowers. There are also consumer protection laws governing deposit taking activities (e.g. Truth in Savings Act), as well securities and insurance laws governing certain aspects of the Company’s consolidated operations. The CFPB has broad powers to supervise and enforce most federal consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets, including M&T Bank. 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, the FDIC and the OCC. For purposes of the CRA, M&T is regulated by the Federal Reserve. 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 rating of “Outstanding.” M&T Bank is also subject to New York State CRA examination and is assessed using a 1 to 4 scoring system. M&T Bank currently has 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 September 2020, the Federal Reserve released an Advance Notice of Proposed Rulemaking that sought public comment on ways to 18 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. Bank Secrecy Act Regulation and Anti-Money Laundering Obligations Federal laws and regulations impose obligations on U.S. financial institutions, including banks and broker/dealer subsidiaries, to implement and maintain appropriate policies, procedures and controls which are reasonably designed to prevent, detect and report instances of money laundering and the financing of terrorism and to verify the identity of their customers. 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 (“FinCEN”), 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 2021. The AMLA is intended to comprehensively reform and modernize U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy; requires the development of standards for testing technology and internal processes for BSA compliance; expands enforcement and investigation-related authority, including increasing available sanctions for certain BSA violations; and expands BSA whistleblower incentives and protections. In June 2021, FinCEN issued the priorities for anti-money laundering and countering the financing of terrorism policy required under AMLA. The priorities include: corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing. M&T reviews and monitors its anti-money laundering compliance program to ensure it complies with the changes reflected in the AMLA and the regulations that 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 19 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 that are engaged in insurance-related activities are subject to extensive regulatory supervision and to insurance laws and regulations requiring, among other things, maintenance of capital, record keeping, reporting and examinations. Federal Reserve Policies The earnings of the Company are significantly affected by the monetary and fiscal policies of governmental authorities, including the Federal Reserve. Among the instruments of monetary policy used by the Federal Reserve are open-market operations in U.S. Government securities and federal funds, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These instruments of monetary policy are used in varying combinations to influence the overall level of bank loans, investments and deposits, and the interest rates charged on loans and paid for deposits. The Federal Reserve frequently uses these instruments of monetary policy, especially its open-market operations and the discount rate, to influence the level of interest rates and to affect the strength of the economy, the level of inflation or the price of the dollar in foreign exchange markets. The monetary policies of the Federal Reserve have had a significant effect on the operating results of banking institutions in the past and are expected to continue to do so in the future. It is not possible to predict the nature of future changes in monetary and fiscal policies or the effect which they may have on the Company’s business and earnings. Corporate Governance M&T’s Corporate Governance Standards and the following corporate governance documents are also available on M&T’s website at the Investor Relations link: Disclosure and Regulation FD Policy; Executive Committee Charter; Nomination, Compensation and Governance Committee Charter; Audit Committee Charter; Risk Committee Charter; Financial Reporting and Disclosure Controls and Procedures Policy; Code of Ethics for CEO and Senior Financial Officers; Code of Business Conduct and Ethics; 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 Plaza, 8th Floor, Buffalo, NY 14203-2399 (Telephone: (716) 842-5138). Human Capital Resources M&T recognizes employees are the difference makers that drive its success. The Company’s talent strategy focuses on recruiting, developing, promoting and retaining high-performing, diverse individuals whose strengths align with M&T’s values, purpose and leadership competencies to create and maintain a highly competitive workforce. 20 As of December 31, 2021, the Company employed 17,569 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 12% in Maryland, 10% 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, 2021, the Company employed 115 international employees based in the UK, Ireland, Canada, Germany and France. The Company’s employee base includes 3,793 employees that support customers in the retail branch network. Overall, the average tenure of the Company’s employees is 10 years and the average tenure of the Company’s executive officers is 24 years. Talent Attraction and Diversity, Equity and Inclusion M&T leverages various channels to effectively identify, develop and recruit high-caliber talent throughout its footprint. Current employees are leveraged to supplement the Company’s normal recruiting processes. The Employee Referral Program typically serves as the primary tool for generating applicants, and it accounted for 29% of new hires in 2021. In addition, the Company’s Talent Acquisition Ambassador Program, which was implemented in 2020 and currently includes approximately 60 employees throughout different business lines, dedicated over 800 hours towards promoting awareness of M&T career opportunities within the Company’s communities. M&T’s recruitment team strives to create and maintain diverse representation at all levels and in all areas of the organization to promote a sense of belonging among employees and maintain a workforce that reflects the communities the Company serves. M&T employees attended 51 individual diversity-based recruiting events in 2021 with target audiences crossing many diversity dimensions, such as Black, LatinX, Veterans, LGBTQ+, individuals with disabilities and women. The Company also works with diversity-focused schools and organizations as part of its efforts to recruit and maintain a diverse workforce. In 2021, 41% of total corporate hires were people of color and 62% were women, 47% of summer interns were people of color, and 44% of the participants in the Company’s Technology Internship Program were people of color. As of December 31, 2021, the entire Company’s workforce consisted of approximately 60% women and 24% people of color. To further drive diversity within the company, M&T also supports several employee resource group charters and chapters, which are voluntary, employee-driven groups organized around a particular shared interest and characteristic, such as race, ethnicity, gender, sexual orientation or differing abilities. Approximately 34% of the Company’s employees and 53% of managers are involved in these groups. The Company’s diversity efforts are led by its Chief Diversity Officer, who is a member of senior leadership, and the Senior Leadership Diversity & Inclusion Council, both of which champion inclusion efforts throughout the Company. M&T’s Board of Directors also receives regular updates on the Company’s diversity, inclusion and belonging efforts. 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 Company also invests in creating its leaders of tomorrow through various internal programs including its Manager Acceleration Program, Management Development Program, Executive Associate Program, 21 Technology Development Program and two additional programs focused on the Company’s high- performing diverse employees – the Rising Leadership Development Program and Equity One. 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 16 “Engagement Surveys,” with average participation rates above 90%, demonstrating a commitment to fostering candid, open and honest, two-way communication with employees to enhance the 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. In addition, M&T conducts other surveys to monitor and guide the employee experience throughout an employee’s time with the Company. Surveys are conducted at various times, such as new hire onboarding as well as in connection with key events, such as acquisitions. M&T has also conducted numerous employee surveys during the COVID-19 pandemic. Employee engagement is also fostered through the Company’s allotment of 40 hours of volunteer time for each employee to make a difference in the communities in which they serve. Although volunteer opportunities recently have been limited by the pandemic, in 2021, M&T employees volunteered approximately 50,000 hours and served on the boards of over 170 non-profit organizations. Compensation, Health and Wellness The Company provides comprehensive compensation and benefits programs intended to attract, retain and incentivize its employees. In addition to base pay, these programs (which vary by country and region) include cash incentives, long term equity-based 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. 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 wellness through free educational resources. As part of its ongoing response to the global COVID-19 pandemic, the Company continues to educate employees on safety precautions through communications and webinars while maintaining safety measures including protective equipment and increased sanitation at all work sites. The Company also continued to support work from home practices for employees capable of performing their duties remotely throughout 2021. In 2022, M&T will continue to monitor the COVID-19 pandemic and take appropriate measures to protect the safety and health of employees with the goal of bringing many employees back to the office in a hybrid working model, balancing on-site collaboration with employee flexibility. Competition The Company faces extensive and intensive competition in the products and services it offers. The Company competes in offering commercial and personal financial and wealth services with other banking institutions and thrifts and with firms in a number of other industries, such as credit unions, personal loan companies, sales finance companies, leasing companies, securities brokerage firms, 22 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. Financial technology companies, using digital, mobile and other technologies, also are increasingly offering traditional banking products and services, which has resulted in the Company contending with a broader range of competitors, including many that are not located within the geographic footprint of the Company’s banking office network. 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). Disclosure Pursuant to Subpart 1400 of Regulation S-K See cross-reference sheet for disclosures incorporated elsewhere in this Annual Report on Form 10- K. 23 Table 1 SELECTED CONSOLIDATED YEAR-END BALANCES 2021 2020 2019 (In thousands) 2018 2017 Interest-bearing deposits at banks.......... $ 41,872,304 $ 23,663,810 $ Federal funds sold.................................. Trading account ..................................... Investment securities — 1,068,581 — 468,031 7,190,154 $ 3,500 470,129 8,105,197 $ — 185,584 5,078,903 — 132,909 U.S. Treasury and federal agencies ......................................... 6,504,382 6,360,218 8,746,749 11,746,240 13,851,832 Obligations of states and political subdivisions................................... Other................................................. Total investment securities ......... Loans and leases Commercial, financial, leasing, etc. ................................................. Commercial real estate ..................... Residential real estate....................... 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 177 651,301 7,155,860 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 23,621,188 35,473,884 16,077,275 17,964,331 93,136,678 (224,226) 27,801,382 37,728,844 16,786,673 16,558,889 98,875,788 (339,921) 23,987,897 35,633,593 16,193,154 15,373,881 91,188,525 (265,656) 23,136,913 34,448,927 17,191,566 13,956,086 88,733,492 (267,015) 21,900,258 33,450,133 19,640,830 13,251,665 88,242,886 (253,903) 92,912,452 (1,469,226) 91,443,226 4,593,112 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 3,998 assets ................................................... Real estate and other assets owned ........ 23,901 Total assets............................................. 155,107,160 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 Noninterest-bearing deposits ................. Savings and interest-checking deposits . Time deposits......................................... Deposits at Cayman Islands office ........ 60,131,480 68,603,966 2,807,963 — Total deposits.............................. 131,543,409 47,046 Short-term borrowings........................... Long-term borrowings ........................... 3,485,369 Total liabilities ....................................... 137,203,755 17,903,405 Shareholders’ equity .............................. 47,572,884 67,680,840 3,899,910 652,104 119,805,738 59,482 4,382,193 126,413,822 16,187,283 32,396,407 54,932,162 5,757,456 1,684,044 94,770,069 62,363 6,986,186 104,156,108 15,716,649 32,256,668 50,963,744 6,124,254 811,906 90,156,572 4,398,378 8,444,914 104,637,212 15,460,191 33,975,180 51,698,008 6,580,962 177,996 92,432,146 175,099 8,141,430 102,342,668 16,250,819 Table 2 Number at Year-End 2021 2020 2019 2018 2017 SHAREHOLDERS, EMPLOYEES AND OFFICES Shareholders...................................................................... 16,099 16,797 17,333 18,099 18,864 Employees......................................................................... 17,569 17,373 17,773 17,267 16,794 833 Offices............................................................................... 771 724 751 794 24 Table 3 CONSOLIDATED EARNINGS 2021 2020 2019 (In thousands) 2018 2017 Interest income Loans and leases, including fees......................................... $ 3,748,988 Investment securities Fully taxable ................................................................. Exempt from federal taxes............................................ Deposits at banks ................................................................ Other ................................................................................... Total interest income .................................................... Interest expense Savings and interest-checking deposits .............................. Time deposits...................................................................... Deposits at Cayman Islands office ..................................... Short-term borrowings........................................................ Long-term borrowings ........................................................ Total interest expense ................................................... Net interest income ........................................................... Provision for credit losses................................................... Net interest income after provision for credit losses .......... Other income Mortgage banking revenues................................................ Service charges on deposit accounts .................................. Trust income ....................................................................... Brokerage services income ................................................. Trading account and foreign exchange gains ..................... Gain (loss) on bank investment securities .......................... Other revenues from operations ......................................... Total other income........................................................ 141,046 116 47,491 1,143 3,938,784 32,998 18,635 201 7 62,165 114,006 3,824,778 (75,000) 3,899,778 571,329 402,113 644,716 62,791 24,376 (21,220) 482,889 2,166,994 Other expense 2,045,677 Salaries and employee benefits........................................... 326,698 Equipment and net occupancy ............................................ 291,839 Outside data processing and software ................................ 69,704 FDIC assessments............................................................... 64,428 Advertising and marketing ................................................. 36,507 Printing, postage and supplies ............................................ 10,167 Amortization of core deposit and other intangible assets... 766,603 Other costs of operations .................................................... 3,611,623 Total other expense....................................................... 2,455,149 Income before income taxes ............................................... 596,403 Income taxes ....................................................................... Net income ......................................................................... $ 1,858,746 Dividends declared $ 3,975,053 $ 4,442,182 $ 4,164,561 $ 3,742,867 176,469 183 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 2,088,444 288,532 321 141,397 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 1,856,000 361,157 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 1,950,692 322,037 258,480 53,803 61,904 39,869 14,869 683,586 3,385,240 1,769,521 416,369 $ 1,353,152 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 68,256 85,710 35,658 24,522 823,529 3,288,062 2,508,240 590,160 $ 1,918,080 1,648,794 295,084 184,670 101,871 69,203 35,960 31,366 773,377 3,140,325 2,323,862 915,556 $ 1,408,306 Common ....................................................................... $ 582,967 72,915 Preferred ....................................................................... $ 569,076 68,228 $ 552,216 72,482 $ 510,458 72,521 $ 457,200 72,734 25 Table 4 Per share Net income COMMON SHAREHOLDER DATA 2021 2020 2019 2018 2017 Basic .......................................................................... $ 13.81 13.80 Diluted ....................................................................... Cash dividends declared.................................................. 4.50 Common shareholders’ equity at year-end ..................... 125.51 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 year-end........................................................................ Dividend payout ratio...................................................... Table 5 75.44 89.80 32.69% 44.32% 29.70% 27.66% 34.24% 69.28 80.52 69.08 CHANGES IN INTEREST INCOME AND EXPENSE(a) 2021 Compared with 2020 2020 Compared with 2019 Resulting from Changes in: Resulting from Changes in: Total Change Volume Rate Total Change Volume Rate (Increase (decrease) in thousands) Interest income (a) Loans and leases, including fees ....................... $(228,557) Deposits at banks .............................................. 14,535 Federal funds sold and agreements to resell 313 30,322 (228,870) $(472,523) 336,371 85,334 (108,441) (15,787) (808,894) (193,775) securities......................................................... Trading account................................................. Investment securities U.S. Treasury and federal agencies ............. Obligations of states and political (6,783) (169) (4,294) (60) (2,489) (109) 1,478 (731) 9,526 (358) (8,048) (373) (35,670) (38,576) 2,906 (97,088) (74,239) (22,849) (95) subdivisions .............................................. Other ............................................................ 255 Total interest income ................................... $(256,484) (105) (642) 10 897 (173) (14,979) $(692,457) (189) (2,536) 16 (12,443) Interest expense Interest-bearing deposits Savings and interest-checking deposits ....... $(113,703) (47,645) Time deposits............................................... (3,853) Deposits at Cayman Islands office .............. (21) Short-term borrowings ...................................... (47,167) Long-term borrowings ...................................... Total interest expense .................................. $(212,389) 14,603 (17,823) (2,100) 4 (40,540) (128,306) $(221,304) (29,146) (29,822) (17,863) (1,753) (24,713) (25) (129,909) (6,627) $(422,935) 51,927 (19,098) (3,417) (12,130) (49,983) (273,231) (10,048) (14,446) (12,583) (79,926) (a) Interest income data are on a taxable-equivalent basis. The apportionment of changes resulting from the combined effect of both volume and rate was based on the separately determined volume and rate changes. 26 Item 1A. Risk Factors. Risk Factors Summary Risks Relating to the Merger with People’s United • M&T is expected to incur significant costs related to the merger and integration. • Combining M&T and People’s United may be more difficult, costly or time-consuming than expected, and M&T may fail to realize the anticipated benefits of the merger. • M&T may be unable to retain M&T and/or People’s United personnel successfully. • The COVID-19 pandemic may delay and adversely affect the completion of the merger. • Regulatory approval from the Federal Reserve Board may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on M&T following the merger. • Failure to complete the merger could negatively impact M&T. • M&T is subject to business uncertainties and contractual restrictions while the merger is pending. • Litigation related to the merger has been filed against People’s United, the People’s United board of directors and M&T, and additional litigation may be filed against People’s United, the People’s United board of directors, M&T and the M&T board of directors in the future, which could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact the business and operations of M&T. 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. Market Risk • Weakness in the economy has adversely affected 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. 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. • The discontinuation of LIBOR as a permissible rate index in new contracts after 2021, the formal announcement of LIBOR’s cessation date (June 30, 2023), and ongoing 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 business and performance is vulnerable 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 • The Company is subject to extensive government regulation and supervision and this regulatory environment can be and has been significantly impacted by financial regulatory reform initiatives. • The Company 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 the results of supervisory stress tests administered by the Federal Reserve. 27 • 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. • The Company may be adversely affected by the soundness of other financial institutions. Liquidity Risk • The Company must maintain adequate sources of funding and liquidity. • If the Company is unable to maintain or grow its deposits, it may be subject to paying higher funding costs. • M&T relies on dividends from its subsidiaries for its liquidity. Strategic Risk • The financial services industry is highly competitive and creates competitive pressures that could adversely affect the Company’s revenue and profitability. • Difficulties in obtaining regulatory approval for acquisitions and 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, including due to events beyond the Company’s control. • 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 Company 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. • Pandemics, acts of war or terrorism and other adverse external events could significantly impact the Company’s business. • The Company’s assets, communities, operations, reputation and customers could be adversely affected by the impacts of climate risk 28 Risk Factors M&T and its subsidiaries face a number of potential risks and uncertainties that are difficult to predict. As a financial institution, certain risk elements are inherent in the ordinary course of the Company’s business activities and adverse experience with those risks could have a material impact on the Company’s business, financial condition, liquidity and results of operations, as well as on the values of the Company’s financial instruments and M&T’s securities, including its common stock. 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. These risk factors include risks relating to M&T’s acquisition of People’s United pursuant to an agreement and plan of merger, dated February 21, 2021, by and among M&T, Bridge Merger Corp., a direct, wholly owned subsidiary of M&T, and People’s United (the “merger agreement” and, such transaction, the “merger”). Risks Related to the Merger with People’s United M&T is expected to incur significant costs related to the merger and integration. M&T has incurred and expects to incur significant, non-recurring costs in connection with negotiating the merger agreement and closing the merger. In addition, M&T will incur integration costs following the completion of the merger as M&T integrates the People’s United business, including facilities and systems consolidation costs and employment-related costs. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time. M&T may also incur additional costs to maintain employee morale and to retain key employees. M&T will also incur significant legal, financial advisory, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the merger. Some of these costs are payable regardless of whether the merger is completed. Combining M&T and People’s United may be more difficult, costly or time-consuming than expected, and M&T may fail to realize the anticipated benefits of the merger. The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of M&T and People’s United. To realize the anticipated benefits and cost savings from the merger M&T and People’s United must integrate and combine their businesses in a manner that permits cost savings to be realized, without adversely affecting revenues and future growth. If M&T and People’s United are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses. An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of M&T following the completion of the merger, which may adversely affect the value of M&T’s common stock following the completion of the merger. M&T and People’s United have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ abilities to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the two companies may also divert 29 management attention and resources. These integration matters could have an adverse effect on M&T during this transition period and for an undetermined period after completion of the merger. M&T may be unable to retain M&T and/or People’s United personnel successfully. The success of the merger will depend in part on M&T’s ability to retain the talents and dedication of key employees currently employed by M&T and People’s United. It is possible that these employees may decide not to remain with M&T or People’s United, as applicable, while the merger is pending or with M&T after the merger is completed. If M&T and People’s United are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, M&T and People’s United could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the merger, if key employees terminate their employment, M&T’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating M&T and People’s United to hiring suitable replacements, all of which may cause M&T’s business to suffer. In addition, M&T and People’s United may not be able to locate or retain suitable replacements for any key employees who leave either company. The COVID-19 pandemic may delay and adversely affect the completion of the merger. The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, the business, financial condition, liquidity, capital and results of operations of M&T and People’s United. If the effects of the COVID-19 pandemic cause a continued or extended decline in the economic environment and the financial results of M&T or People’s United, or the business operations of M&T or People’s United are further disrupted as a result of the COVID-19 pandemic, efforts to complete the merger and integrate the businesses of M&T and People’s United may also be delayed and adversely affected. Additional time may be required to obtain the requisite regulatory approval, and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) may impose additional requirements on M&T or People’s United that must be satisfied prior to completion of the merger, which could delay and adversely affect the completion of the merger. Regulatory approval from the Federal Reserve Board may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on M&T following the merger. Before the merger and the other transactions contemplated by the merger agreement may be completed, certain regulatory approvals must be obtained. Approvals from the New York State Department of Financial Services and the State of Connecticut Department of Banking, among other regulatory approvals, have been received but the transaction remains subject to approval from the Federal Reserve Board. That approval could be delayed or not obtained at all, including due to: an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approval, including factors not known at the present time and factors that may arise in the future; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment generally. The Federal Reserve Board has stated that if material weaknesses are identified by examiners before a banking organization applies to engage in expansionary activity, the Federal Reserve Board will expect the banking organization to resolve all such weaknesses before applying for such expansionary activity. The Federal Reserve Board has also stated that if issues arise during the processing of an application for expansionary activity, it will expect the applicant banking organization to withdraw its application pending resolution of any supervisory concerns. 30 Any Federal Reserve Board approval, if granted, may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of M&T’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that the regulator will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of M&T following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement. In addition, despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, M&T will not be required, and People’s United will not be permitted without M&T’s prior written consent, to take actions or agree to conditions in connection with obtaining the foregoing permits, consents, approvals and authorizations of governmental entities that would reasonably be expected to have a material adverse effect on M&T and its subsidiaries, taken as a whole, after giving effect to the merger. Failure to complete the merger could negatively impact M&T. If the merger is not completed for any reason, there may be various adverse consequences and M&T may experience negative reactions from the financial markets and from its customers and employees. For example, M&T’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of M&T common stock could decline to the extent that the current market price of M&T common stock reflects a market assumption that the merger will be beneficial to M&T and will be completed. M&T could be subject to litigation related to any failure to complete the merger or to proceedings commenced against M&T to perform its obligations under the merger agreement. If the merger agreement is terminated under certain circumstances, M&T may be required to pay a termination fee of $280 million to People’s United. Additionally, M&T has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing and mailing the joint proxy statement/prospectus for the merger, and all filing and other fees paid in connection with the merger. If the merger is not completed, M&T would have incurred these expenses without realizing the expected benefits of the merger. M&T is subject to business uncertainties and contractual restrictions while the merger is pending. Uncertainty about the effect of the merger on employees and customers may have an adverse effect on M&T. These uncertainties may impair M&T’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with M&T to seek to change existing business relationships with M&T. In addition, subject to certain exceptions, M&T has agreed to refrain from taking certain actions that may adversely affect its ability to consummate the merger on a timely basis without People’s United’s consent. These restrictions may prevent M&T from pursuing attractive business opportunities that may arise prior to the completion of the merger. 31 Litigation related to the merger has been filed against People’s United, the People’s United board of directors and M&T, and additional litigation may be filed against People’s United, the People’s United board of directors, M&T and the M&T board of directors in the future, which could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact the business and operations of M&T. Litigation related to the merger has been filed against People’s United, the People’s United board of directors and M&T, and additional litigation may be filed against People’s United, the People’s United board of directors, M&T and the M&T board of directors in the future. Among other remedies, litigation that has been filed seeks, and additional litigation by shareholders of M&T and/or stockholders of People’s United in the future may seek damages and/or to enjoin the merger or the other transactions contemplated by the merger agreement. The outcome of any litigation is uncertain. If any plaintiff were successful in obtaining an injunction prohibiting M&T or People’s United from completing the merger or any other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to M&T, including costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the merger. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of M&T. 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 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 are likely to continue to adversely affect, the Company’s business, financial condition, capital and results of operations. The extent to which the COVID-19 pandemic will continue to negatively affect the Company’s business, financial condition, capital and results of operations will depend on future developments, including the scope and duration of the pandemic, the emergence of new variants, 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 employees, customers, clients, counterparties, vendors, service providers and other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic, all of which are highly uncertain and cannot be reasonably predicted. Although economic and market conditions have generally improved during 2021, the COVID- 19 pandemic, including associated variants, has, at times, resulted in adverse economic and market conditions. Depending on the duration and severity of the pandemic on general economic and market conditions, consumer and corporate spending and investment and borrowing patterns, there is a risk that adverse conditions could occur, including the following: • • 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 closure of businesses and decreased business confidence generally, leading to increased risk of delinquencies, defaults and bankruptcies; 32 • • • • • • • • An initial sudden and significant 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 could negatively impact the Company’s net interest income and margin; Higher inflation and supply chain disruptions; Declines in collateral values; Increased demands on capital and liquidity; Heightened cybersecurity, information security and operational risks to the Company, including as a result of remote work arrangements for employees and increased digital and mobile banking activities by customers; Disruptions to the business operations of the Company, including temporary branch closures and disruptions to branch and office openings, supply chains and employee travel and working arrangements; and Disruptions to business operations at counterparties, vendors and other service providers. The pandemic is likely to continue to contribute to these risks and impacts and could affect geographic areas in which the Company operates differently as further noted herein under “Market Risk” and “Credit Risk.” As a result, the Company’s credit, liquidity, market, 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. The Company faces similar risks if its counterparties, vendors and other service providers are unable to maintain operations due to pandemic-related disruptions. The pandemic may also delay or adversely affect M&T’s efforts to complete the merger and integrate the businesses of the Company and People’s United, if the effects of the COVID-19 pandemic cause a continued or extended decline in the economic environment and the financial results of M&T or People’s United or cause further disruption to the business operations of the Company or People’s United. Governmental authorities have taken unprecedented measures to provide economic assistance to individual households and businesses, stabilize the markets and support economic growth. The success of those measures is not yet entirely known and those measures, or additional measures that may be introduced, 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 the Company’s business, financial condition, liquidity, capital and results of operations. If such 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. 33 The length of the pandemic and the efficacy 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 may experience reduced revenues in certain 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, including the Company’s business and operations following the completion of the merger with People’s United. Market Risk Weakness in the economy has adversely affected the Company in the past and may adversely affect the Company in the future. Poor business and economic conditions in general or specifically in markets served by the Company could have adverse effects on the Company’s business including: • • • • • • • A decrease in the demand for loans and other products and services offered by the Company. A decrease in net interest income derived from the Company’s lending and deposit gathering activities. A decrease in the value of the Company’s investment securities, loans held for sale or other assets secured by residential or commercial real estate. A decrease in fees from the Company’s brokerage, trust, and investment management 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 as well as impairment write-downs of certain investment securities and valuation adjustments on loans held for sale. Volatility and uncertainty related to inflation and the effects of inflation, which may lead to increased costs for businesses and consumers and potentially contribute to poor business and economic conditions generally, may also enhance or contribute to some of the risks discussed herein. For example, higher inflation, or volatility and uncertainty related to inflation, could reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers or result in lower values for the Company’s investment securities and other interest-earning assets. 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. 34 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, as well as changes linked to inflation, can have a material effect on the Company’s business and profitability and the value of the Company’s assets and liabilities. For example, changes in interest rates or interest rate spreads may: • Affect the difference between the interest that the Company earns on assets and the interest that the Company pays on liabilities, which impacts the Company’s overall net interest income and profitability. Adversely affect the ability of borrowers to meet obligations under variable or adjustable rate loans and other debt instruments, which, in turn, affects the Company’s loss rates on those assets. Decrease the demand for interest rate-based products and services, including loans and deposits. Affect the Company’s ability to hedge various forms of market and interest rate risk and may decrease the profitability or protection or increase the risk or cost associated with such hedges. Affect mortgage prepayment speeds and could result in the impairment of capitalized mortgage servicing assets, reduce the value of loans held for sale and increase the volatility of mortgage banking revenues, potentially adversely affecting the Company’s results of operations. • • • • The monetary, tax and other policies of the government and its agencies, including the Federal Reserve, have a significant impact on interest rates and overall financial market performance. These governmental policies can thus affect the activities and results of operations of banking organizations such as the Company. An important function of the Federal Reserve is to regulate the national supply of bank credit and certain interest rates. The actions of the Federal Reserve influence the rates of interest that the Company charges on loans and that the Company pays on borrowings and interest- bearing deposits and can also affect the value of the Company’s on-balance sheet and off-balance sheet financial instruments. Also, due to the impact on rates for short-term funding, the Federal Reserve’s policies influence, to a significant extent, the Company’s cost of such funding. In addition, the Company is routinely subject to examinations from various governmental taxing authorities. Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions. Management believes that the assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Should tax laws change or the tax authorities determine that management’s assumptions were inappropriate, the result and adjustments required could have a material effect on the Company’s results of operations. M&T cannot predict the nature or timing of future changes in monetary, tax and other policies or the effect that they may have on the Company’s business activities, financial condition and results of operations. The discontinuation of LIBOR as a permissible rate index in new contracts after 2021, the formal announcement of LIBOR’s cessation date (June 30, 2023), and ongoing 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. 35 In July 2017, the Chief Executive of the Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that the FCA intended 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 would continue to provide submissions for the calculation of LIBOR after 2021 and as to the continued existence of LIBOR after 2021. The uncertainty lessened in November 2020, when (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 USD LIBOR until June 30, 2023, and (ii) a joint-statement of the federal bank regulators, including the Federal Reserve, indicated support for the IBA proposal and encouraged banks to (a) transition away from USD LIBOR as soon as practicable, (b) cease (with limited exceptions) entering into new contracts that use USD 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 USD LIBOR or include robust fallback language that includes a clearly defined alternative reference rate after USD LIBOR’s discontinuation, noting that failure to do so would create safety and soundness risks. On March 5, 2021, public statements by the FCA and IBA confirmed the future cessation (or non- representativeness) of all USD LIBOR tenors, and specifically, the June 30, 2023 cessation date for the most commonly utilized USD LIBOR tenors, after which USD LIBOR will either no longer exist or no longer be representative of the underlying market it is intended to measure. Following the initial 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”). In 2020, the ARRC finalized and issued recommendations for the use of so-called “hardwired” LIBOR fallback language that, when incorporated into existing LIBOR-based loan documents, provides for, upon LIBOR’s permanent cessation (or an announcement from LIBOR’s administrator or certain governmental authorities that LIBOR is no longer representative of the underlying market), the replacement of LIBOR with SOFR as the benchmark index, with an appropriate spread adjustment that is representative of the historical difference between LIBOR and SOFR, which when added to SOFR would be intended to facilitate a value-neutral transition. In April 2021, M&T adopted hardwired fallback language modeled after the ARRC recommendations for use in all new LIBOR loans. 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 overnight rate and considered a “risk free” rate, while LIBOR is an unsecured term 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 developments. While the ARRC 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. One such credit sensitive alternative is the Bloomberg Short-Term Bank Yield Index (BSBY), which gained some increased attention and use in the business loan market in the latter half of 2021. Whether BSBY or other alternatives develop and gain any significant traction in the market are unknown and unpredictable at this time, and this adds 36 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. LIBOR cessation is also impacting the derivatives market. 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 became effective 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 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. If the Company 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, both the CME and LCH clearinghouses have adopted the same relevant SOFR benchmark fallbacks of the Supplement and Protocol which also became effective on January 25, 2021. The Company has outstanding issuances, or acts as an administrative (or calculation) agent or in other capacities, across various maturities of securities referencing LIBOR in which the underlying contracts do not contemplate cessation or contemplate cessation but do so in a manner that may create other risks (“Tough Legacy Contracts”). Some of these 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 April 2021, the New York State legislature passed Senate Bill 297B/Assembly Bill 164B which allows certain New York State law governed Tough Legacy Contracts to transition to SOFR, as the statutory benchmark replacement rate, by operation of law. Similarly, the United States Congress is currently considering the Adjustable Interest Rate (LIBOR) Act of 2021 (H.R. 4616) which, if enacted, would have an analogous effect on the transition of Tough Legacy Contracts, but would expand the applicability beyond the State of New York to contracts governed by the laws of any state, the District of Columbia, or any territory or possession of the United States. Notwithstanding the availability or potential availability of statutory frameworks to address Tough Legacy Contracts, there will likely be continued uncertainty surrounding the transition as these frameworks have not been tested and their effectiveness and ultimate impact is not certain. The discontinuation of LIBOR as a benchmark could result in changes to the Company’s risk exposures (for example, if the anticipated discontinuation of LIBOR adversely affects the availability or cost of floating-rate funding and, therefore, the Company’s exposure to fluctuations in interest rates) or otherwise result in losses on a product or having to pay more or receive less on securities that the Company 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 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 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 include hardwired LIBOR fallback language referencing a new 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 37 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 2022 and beyond. 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: • • • • • Affect the value or liquidity of the Company’s on-balance sheet and off-balance sheet financial instruments. Affect the value of capitalized servicing assets. Affect M&T’s ability to access capital markets to raise funds. Inability to access capital markets if needed, at cost effective rates, could adversely affect the Company’s liquidity and results of operations. Affect the value of the assets that the Company manages or otherwise administers or services for others. Although the Company is not directly impacted by changes in the value of such assets, decreases in the value of those assets would affect related fee income and could result in decreased demand for the Company’s services. Impact the nature, profitability or risk profile of the financial transactions in which the Company engages. Volatility in the markets for real estate and other assets commonly securing financial products has been and may continue to be a significant contributor to overall volatility in financial markets. In addition, unfavorable or uncertain economic and market conditions can be caused by the imposition of tariffs or other limitations on international trade and travel, as well as elevated inflation, which can result in market volatility, negatively impact client activity, and adversely affect the Company’s financial condition and results of operations. The Company’s regional concentrations expose it to adverse economic conditions in its primary retail banking office footprint. The Company’s core banking business is largely concentrated within the Company’s retail banking office network footprint, located principally in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia. Therefore, the Company is, or in the future may be, particularly vulnerable to adverse changes in economic conditions in the Northeast and Mid-Atlantic regions. 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 affecting 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 38 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 impact to engage in lending transactions based on a reduction of customer deposits, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Risks Relating to Compliance and the Regulatory Environment The Company is subject to extensive government regulation and supervision and this regulatory environment can be and has been significantly impacted by financial regulatory reform initiatives. The Company is subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect consumers, depositors and the financial system as a whole, not securities holders, including the holders of common stock. These regulations and supervisory guidance affect the Company’s sale and lending practices, capital structure, capital distributions and dividend policy, investment practices, growth and expansionary activity, among other things. Failure to comply with laws, regulations or policies, or to meet supervisory expectations, 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 on the Company’s business, financial condition and results of operations. In this regard, government authorities, including the bank regulatory agencies, can pursue aggressive enforcement actions with respect to compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived compliance failures and may also adversely affect the Company’s ability to enter into certain transactions or engage in certain activities, or obtain necessary regulatory approvals in connection therewith. In general, the amounts paid by financial institutions in settlement of proceedings or investigations have increased substantially and are likely to remain elevated. In some cases, governmental authorities have required criminal pleas or admissions of wrongdoing as part of such settlements, which could have significant collateral consequences for a financial institution, including loss of customers, restrictions on the ability to access the capital markets, and the inability to operate certain businesses or offer certain products for a period of time. In addition, enforcement matters could impact the Company’s supervisory and CRA ratings, which may in turn restrict or limit the Company’s activities. A prior enforcement action also increases the risk that regulators and governmental authorities pursue formal enforcement actions in connection with the resolution of an inquiry or investigation, even if unrelated to the prior enforcement action. Any new regulatory requirements, changes to existing requirements, or changes to interpretations of requirements could require changes to the Company’s businesses, result in increased compliance costs and affect the profitability of such businesses. Additionally, such activity could affect the behaviors of third parties with which the Company deals in the ordinary course of business, such as rating agencies, insurance companies and investors. Heightened regulatory scrutiny, requirements or expectations could affect the Company in substantial and unpredictable ways, and, in turn, could have a material adverse effect on the Company’s business, financial condition and results of operations. There have been significant revisions to the laws and regulations applicable to the Company that have been enacted or proposed in recent years, and additional proposed changes are anticipated. Many of 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. 39 M&T may be subject to more stringent capital and liquidity 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 requirements 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, which could adversely affect its net interest income and net interest margin. The federal bank regulators have not yet released a proposal to implement the significant revisions of the Basel capital framework announced by the Basel Committee in December 2017, and the impact on the Company of these revisions will depend on the manner in which they 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, in part, on the results of supervisory stress tests administered by the Federal Reserve. Any decision by M&T to return capital to shareholders, whether through a common stock dividend or a common stock share repurchase program, requires the approval of M&T’s Board of Directors and must comply with applicable capital regulations, including the maintenance of capital ratios exceeding specified minimum levels and applicable buffers. For bank holding companies designated as Category IV institutions under the Tailoring Rules, including M&T, the Federal Reserve conducts biennial supervisory stress tests required under the Dodd-Frank Act whereby the BHC’s financial position is tested under assumed severely adverse economic conditions. The results of those stress tests are incorporated in the determination of M&T’s Stress Capital Buffer. As a general matter, if M&T is unable to maintain capital in excess of regulatory minimum levels inclusive of its Stress Capital Buffer, it would be subject to limitations on its ability to make capital distributions, including paying dividends and repurchasing stock. In August 2021, the Federal Reserve Board provided M&T with a Stress Capital Buffer of 2.5%, representing the floor under the regulatory capital rules, which became applicable to M&T on October 1, 2021. The results of future supervisory stress tests are uncertain, and a more severe outcome may result in a higher Stress Capital Buffer and an increase in M&T’s effective capital requirements. An increased Stress Capital Buffer may restrict M&T’s ability to return capital to shareholders, including through paying dividends, entering into acquisitions or repurchasing its common stock, which in turn could negatively impact market and investor perceptions of M&T. In addition, during 2020 and the first half of 2021, the Federal Reserve implemented measures requiring all large bank holding companies to preserve capital through limitations on share repurchase programs and common stock dividends. While these restrictions are no longer applicable, the Federal Reserve may implement similar restrictions in the future, including in response to adverse or uncertain economic conditions. Also, if, as in June 2020, the Company is required to resubmit its capital plan, the Company generally may not make capital distributions, such as share repurchases or dividends, without the prior approval of the Federal Reserve. 40 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 based on the FDIC’s bank resolution model. The Secretary of the U.S. Treasury may trigger a liquidation under this authority after consultation with the President of the U.S. and after receiving a recommendation from the boards of the FDIC and the Federal Reserve upon a two-thirds vote. Liquidation proceedings will be funded by the OLF, which will borrow from the U.S. Treasury and impose risk-based assessments on covered financial companies. Risk-based assessments would be first made on entities that received more in the resolution than they would have received in the liquidation to the extent of such excess, and second, if necessary, on, among others, bank holding companies with total consolidated assets of $50 billion or more, such as M&T. Any such assessments may adversely affect the Company’s business, financial condition or results of operations. Credit Risk Deteriorating credit quality could adversely impact the Company. As a lender, the Company is exposed to the risk that customers will be unable to repay their loans 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, geography or asset type. Also, as 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 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, customers, including businesses in the hotel and travel industry. In response to the COVID-19 pandemic and to support its customers, the Company offered (primarily in 2020, but also in 2021) payment deferrals and other expanded assistance to businesses and consumers, and committed in certain states in which it operates to suspend residential 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 41 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 affected over relatively short periods of time by changes in business climate, economic conditions, interest rates and, in many cases, the results of operations of businesses and other occupants of the real property. Emerging and evolving factors such as the shift to work-from-home arrangements, changing consumer preferences (including for online shopping), COVID-19-related restrictions and resulting changes in occupancy rates as a result of these and other trends can also impact such valuations over relatively short periods. 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, 2021 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 Company to credit risk in the event of a default by a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized or is liquidated at prices not sufficient to recover the full amount of the credit due to or derivative exposure of the Company. Any resulting losses could have a material adverse effect on the Company’s financial condition and results of operations. Liquidity Risk The Company must maintain adequate sources of funding and liquidity. The Company must maintain adequate funding sources in the normal course of business to support its operations and fund outstanding liabilities, as well as meet regulatory requirements and supervisory expectations. The Company primarily relies on deposits to be a low cost and stable source of funding for the loans it makes and the operations of its business. Core customer deposits, which include noninterest-bearing deposits, interest-bearing transaction accounts, savings deposits and time deposits of $250,000 or less, have historically provided the Company with a sizeable source of relatively stable and low-cost funds. In addition to customer deposits, sources of liquidity include borrowings from securities dealers, various Federal Home Loan Banks and the Federal Reserve Bank of New York, as well as the debt and equity capital markets. 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, 42 which may result in a loss of customer deposits or outflows of cash or collateral and/or ability to access capital markets on favorable terms. Negative news about the Company or the financial services industry generally may reduce market or customer confidence in the Company, which could in turn materially adversely affect the Company’s liquidity and funding. Such reputational damage may result in the loss of customer deposits, the inability to sell or securitize loans or other assets, and downgrades in one or more of the Company’s credit ratings, and may also negatively affect the Company’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. 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 future. If the Company is unable to continue to fund assets through customer bank deposits or access funding sources on favorable terms or if the Company suffers an increase in borrowing costs or otherwise fails to manage liquidity effectively, the Company’s liquidity, operating margins, financial condition and results of operations may be materially adversely affected. The 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. If the Company is unable to maintain or grow its deposits, it may be subject to paying higher funding costs. The total amount that the Company pays for funding costs is dependent, in part, on the Company’s ability to maintain or grow its deposits. If the Company 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 raise the 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 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. 43 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, Supervision and Regulation of the Company, Distributions” for a discussion of regulatory and other restrictions on dividend declarations. Also, M&T’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors. Limitations on M&T’s ability to receive dividends from its subsidiaries could have a material adverse effect on its liquidity and ability to pay dividends on its stock or interest and principal on its debt, and ability to fund purchases of its common stock. Strategic Risk The financial services industry is highly competitive and creates competitive pressures that could adversely affect the Company’s revenue and profitability. The financial services industry in which the Company operates is highly competitive. The Company competes not only with commercial and other banks and thrifts, but also with insurance companies, mutual funds, hedge funds, securities brokerage firms, financial technology companies 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 have and could continue to 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 has and may continue to experience pricing pressures as a result of these factors and as some of its competitors seek to increase market share. 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 has had and will likely continue to 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 44 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 obtaining regulatory approval for acquisitions and in combining the operations of acquired entities with the Company’s own operations may prevent M&T from achieving the expected benefits from its acquisitions. M&T has expanded its business through past acquisitions and may do so in the future. The Company’s ability to complete acquisitions is in many instances subject to regulatory approval, and the Company cannot be certain when or if, or on what terms and conditions, any required regulatory approvals would be granted. Any requisite approval could be delayed or not obtained at all, including due to, among other factors, an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approval, including factors not known at the time of entering into the definitive agreement for the acquisition or submission of the related application for regulatory approval, and factors that may arise subsequently; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment more generally. In addition, 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. Disruption 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. The increase in remote work arrangements and opportunities in regional, national and global labor markets has also increased competition for the Company to attract and retain skilled personnel. The Company’s current or future approach to in-office and remote-work arrangements may not meet the needs or expectations of current or prospective employees or may not be perceived as favorable as compared to the arrangements offered by other companies, which could adversely affect the Company’s ability 45 to attract and retain employees. If the Company is not able to hire or retain highly skilled and qualified individuals, it may be unable to execute its business strategies and may suffer adverse consequences to its business, financial condition and results of operations. The Company’s compensation practices are subject to review and oversight by the Federal Reserve, the OCC, the FDIC and other regulators. The federal banking agencies have issued joint guidance on executive compensation designed to help ensure that a banking organization’s incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank Act required those agencies, along with the SEC, to adopt rules to require reporting of incentive compensation and to prohibit certain compensation arrangements. If as a result of complying with such rules the Company is unable to attract and retain qualified employees, or do so at rates necessary to maintain its competitive position, or if the compensation costs required to attract and retain employees become more significant, the Company’s performance, including its competitive position, could be materially adversely affected. 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 herein, 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 information systems may experience interruptions or breaches in security, including due to events beyond the Company’s control. The Company relies heavily on communications and information systems, including those of third- party service providers, to conduct its business. Any failure, interruption or breach in security of these systems could result in disruptions to its accounting, deposit, loan and other systems, and adversely affect the Company’s customer relationships. Disruption of operating systems caused by 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 46 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 sufficiently or timely remediated. Information security risks for large financial institutions such as M&T have increased significantly in recent years in part because of the proliferation of new technologies, such as 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 expects to continue to expend significant additional resources 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 security and control systems, such as through the use of the Internet, personal computers, tablets, smart phones and other mobile services. Security breaches affecting the Company’s customers, or systems breakdowns, 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. The Company, as well as third parties with which the Company does business, has expanded the 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 or its vendors and service providers outsource to the cloud or to other parties may increase M&T’s risk exposure. The failure to properly upgrade or maintain the computer systems could result in greater susceptibility to attacks, 47 particularly in light of the greater frequency and severity of attacks in recent years, as well as the growing prevalence of supply chain attacks affecting software and information technology service providers. Failures related to upgrades and maintenance also increase risks related to unauthorized access and misuse, as well as the Company’s ability to achieve its business continuity and resiliency objectives. 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. 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 or vulnerabilities of suppliers through supply chain attacks. 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 exist, 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, cyber security risks 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 Company 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 The Company is also subject to laws and regulations relating to the privacy of the information of clients, employees or others, and any failure to comply with these laws and regulations could expose the Company to liability and/or reputational damage. New customer privacy initiatives will impose 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 Company more vulnerable to operational failures, and to monetary penalties, litigation or regulatory enforcement actions for breach of such laws and regulations. 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 48 data. The time and resources needed for the Company to comply with such laws and regulations, as well as its potential liability for non-compliance and reporting obligations in the case of data breaches, may significantly increase. 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. Third parties provide key components of the Company’s business infrastructure such as banking services, processing, and Internet connections and network access. Any disruption in such services provided by these third parties or any failure of these third parties to handle current or higher volumes of use could adversely affect the Company’s ability to deliver products and services to clients and otherwise to conduct business. Technological or financial difficulties of a third party service provider could adversely affect the Company’s business to the extent those difficulties result in the interruption or discontinuation of services provided by that party. The Company may not be insured against all types of losses as a result of third party failures and insurance coverage may be inadequate to cover all losses resulting from system failures or other disruptions. Failures in the Company’s business infrastructure could interrupt the operations or increase the costs of doing business. Additionally, the Company is exposed to the risk that a service disruption at a common service provider to the Company’s 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 Company may not be able to effectively mitigate operational risks relating to its vendors’ use of common service providers. 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 49 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 authorities regarding implementation of provisions and programs under the CARES Act, and may also face the risk of litigation concerning their participation in the PPP under that Act. The Company’s involvement in these and other programs 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 impact the Company’s business, reputation, financial condition and results of operations. Business Risk Changes in accounting standards could impact the Company’s financial condition and results of operations. The accounting standard setters, including the Financial Accounting Standards Board (“FASB”), the SEC and other regulatory bodies, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes can be difficult to predict and can materially impact how the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a new or revised standard retroactively, which would result in the restating of the Company’s prior period financial statements. Information about recently adopted and not as yet adopted accounting standards is included in note 27 of Notes to Financial Statements included in Part II, Item 8 — Financial Statements and Supplemental Data of this Form 10-K. The Company’s reported financial condition and results of operations depend on management’s selection of accounting methods and require management to make estimates about matters that are uncertain. Accounting policies and processes are fundamental to the Company’s reported financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the reported amounts of assets or liabilities and financial results. Several of M&T’s accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Pursuant to generally accepted accounting principles, management is required to make certain assumptions and estimates in preparing the Company’s financial statements. If assumptions or estimates underlying the Company’s financial statements are incorrect, the Company may experience material losses. Management has identified certain accounting policies as being critical because they require management’s judgment to ascertain the valuations of assets, liabilities, commitments and contingencies. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset, valuing an asset or liability, or recognizing or reducing a liability. M&T has established detailed policies and control procedures that are intended to ensure these critical accounting estimates and judgments are well controlled and applied consistently. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. Because of the uncertainty surrounding judgments and the estimates pertaining to these matters, M&T could be required to adjust accounting policies or restate prior period financial statements if those judgments and estimates prove to be incorrect. For additional information, see Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Critical Accounting Estimates” and Note 1, “Significant Accounting Policies,” of Notes to Financial Statements in Part II, Item 8. 50 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 information, which may 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 Company has sufficient capital when it may not, or may lead the 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 Company 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. 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. 51 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 may 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, report, and analyze the types of risk to which it is subject, including liquidity risk, credit risk, market risk, interest rate risk, compliance risk, strategic risk, reputation risk, and operational risk related to its employees, systems and vendors, among others. There are inherent limitations to the Company’s 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 subject to error. The Company must also develop and maintain a culture of risk management among its employees, as well as manage risks associated with third 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. Pandemics, acts of war or terrorism and other adverse external events could significantly impact the Company’s business. Pandemics, acts of war or terrorism and other adverse external events, including severe weather and other natural disasters, could have a significant impact on the Company’s ability to conduct business. Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses. Although the Company has established disaster recovery plans and procedures, and monitors for significant environmental effects on its properties or its investments, the occurrence of any such event could have a material adverse effect on the Company. The Company’s assets, communities, operations, reputation and customers could be adversely affected by the impacts of climate risk. The Company operates in regions where its businesses and the activities of its customers could be negatively impacted by climate risk. This includes the physical risks resulting from chronic shifts in climate, such as rising average global temperatures and rising sea levels, and an increase in the frequency and severity of extreme weather events and natural disasters, including floods, wildfires, hurricanes and tornados. Such chronic shifts and events could damage or otherwise impact the value or productivity of customers’ assets and disrupt the Company’s operations and the operations of customers or third parties on which the Company relies. They could also result in market volatility, negatively impact the Company’s customers’ ability to repay outstanding loans, and damage or deteriorate the value of collateral. Over time such risks may result in both increasing premiums for and reduced availability of insurance and have a broader impact on the economy. 52 Further, climate risk may manifest from efforts to transition to a low-carbon economy. Transition risks may arise from changes in consumer and business preferences, legislation, regulation, policy, and technological advancement associated with the changes necessary to limit climate change. Such risks may result in increased expenses or otherwise adversely impact the Company and its customers, including the ability of customers to repay outstanding loans. The Company could experience increased expenses resulting from climate-related strategic planning and market changes, as well as litigation and reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced investor and stakeholder confidence due to its climate change strategy and responses. Ongoing legislative or regulatory uncertainties and changes regarding appropriate climate risk management and practices may also result in higher regulatory, compliance and other expenses. Discussions of the specific risks outlined above and other risks facing the Company are included within this Annual Report on Form 10-K in Part I, Item 1 “Business,” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Furthermore, in Part II, Item 7 under the heading “Forward-Looking Statements” is included a description of certain risks, uncertainties and assumptions identified by management that are difficult to predict and that could materially affect the Company’s financial condition and results of operations, as well as the value of the Company’s financial instruments in general, and M&T common stock, in particular. In addition, the market price of M&T common stock may fluctuate significantly in response to a number of other factors, including changes in securities analysts’ estimates of financial performance, volatility of stock market prices and volumes, rumors or erroneous information, changes in market valuations of similar companies and changes in accounting policies or procedures as may be required by the FASB or other regulatory agencies. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Both M&T and M&T Bank maintain their executive offices at One M&T Plaza in Buffalo, New York. This twenty-one story headquarters building, containing approximately 300,000 rentable square feet of space, is owned by M&T Bank. 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, 2021, the cost of this property (including improvements subsequent to the initial construction), net of accumulated depreciation, was $24.3 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, 2021, the cost of this building (including improvements subsequent to acquisition), net of accumulated depreciation, was $10.8 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 $25.5 million at December 31, 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 approximately 8% of Wilmington Plaza. At December 31, 2021, the cost of these buildings (including 53 improvements subsequent to acquisition), net of accumulated depreciation, was $40.3 million and $14.0 million, respectively. M&T Bank also owns facilities in Millsboro, Delaware and Harrisburg, Pennsylvania with approximately 325,000 and 220,000 rentable square feet of space, respectively. M&T Bank occupies approximately 100% and 29% of those facilities, respectively. At December 31, 2021, the cost of those buildings (including improvements subsequent to acquisition), net of accumulated depreciation, was $15.4 million and $8.4 million, respectively. M&T owns many other properties none which have more than 100,000 square feet of space. The Company also leases office space and other facilities to support its business operations. The cost and accumulated depreciation and amortization of the Company’s premises and equipment and information regarding the Company’s lease arrangements is detailed in note 6 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data.” Of the 688 domestic banking office locations of M&T’s subsidiary banks at December 31, 2021, 268 are owned and 420 are leased. Item 3. Legal Proceedings. M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and other matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was between $0 and $25 million. Although the Company 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. Item 4. Mine Safety Disclosures. Not applicable. Executive Officers 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 57, 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. 54 Richard S. Gold, age 61, 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 and Human Resources 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 Trust 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 60, is vice chairman (2020) and a director (2018) of M&T and is 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 Trust, N.A., and a director (2018) of Wilmington Trust Investment Advisors. Robert J. Bojdak, age 66, is an executive vice president and chief credit officer (2004) for M&T Bank where he is responsible for managing the overall risk involving the bank’s loan portfolio, monitoring portfolio metrics and workout activities. He is an executive vice president (2004) of Wilmington Trust, N.A. and an executive vice president (2020) of Wilmington Trust Company. Previously 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. John L. D’Angelo, age 59, is an executive vice president (2017) and director of environmental, social, and governance (“ESG”) (2021) of M&T and M&T Bank. Mr. D’Angelo is responsible for designing, implementing and measuring the formal strategy to establish M&T Bank as a leader in ESG and sustainable business practices. He served as chief risk officer (2017), senior vice president and general auditor of M&T and 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. Christopher E. Kay, age 56, 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 52, 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 56, 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 55 commercial banking lines of business. 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 66, 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 60, is an executive vice president (2015) and chief risk officer (2021) of M&T and M&T Bank. Mr. Todaro is responsible for overseeing the Company’s governance and strategy for risk management as well as relationships with the Company’s regulators and supervisory agencies. Previously, Mr. Todaro was responsible for the Mortgage, Consumer Lending and Customer Asset Management Divisions. Most recently he was responsible for Enterprise Transformation activities. Mr. Todaro previously served as senior vice president of M&T Bank and held a number of management positions within M&T Bank’s Mortgage Division since 1995. He is an executive vice president (2015), chief risk officer (2021) and a director (2021) of Wilmington Trust, N.A. and an executive vice president (2021) and a director (2021) of Wilmington Trust Company. Michele D. Trolli, age 60, is an executive vice president (2005) and head of corporate operations and enterprise initiatives (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 Banking Operations, which includes Banking Services, Corporate Services, Business Continuity and Enterprise Transformation and Change Management. D. Scott N. Warman, age 56, 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). Jennifer Warren, age 57, is an executive vice president (2022) of M&T and M&T Bank. Ms. Warren is responsible for managing administrative and business development functions of Institutional Client Services within the Wealth and Institutional Services Division. Prior to joining the Company, Ms. Warren was chief executive officer of Issuer Services, North America for Computershare from 2018 to 2021. Ms. Warren previously served as head of the U.S. region and president and chief executive officer of CIBC World Markets Corp., where she worked for nearly 12 years. Tracy S. Woodrow, age 48, 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 Trust, 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. 56 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. M&T’s common stock is traded under the symbol MTB on the New York Stock Exchange. See cross-reference sheet for disclosures incorporated elsewhere in this Annual Report on Form 10-K for 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 2021, M&T did not issue any shares of its common stock that were not registered under the Securities Act of 1933. Equity Compensation Plan Information The following table provides information as of December 31, 2021 with respect to shares of common stock that may be issued under M&T’s existing equity compensation plans. M&T’s existing equity compensation plans include the M&T Bank Corporation 2019 Equity Incentive Compensation Plan, which has been previously approved by shareholders and the M&T Bank Corporation Deferred Bonus Plan, which did not require shareholder approval. The table does not include information with respect to shares of common stock subject to outstanding options and rights assumed by M&T in connection with mergers and acquisitions of the companies that originally granted those options and rights. Footnote (1) to the table sets forth the total number of shares of common stock issuable upon the exercise of such assumed options and rights as of December 31, 2021, 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) 635,864 $ 13,319 649,183 $ 162.73 78.02 160.99 2,299,502 — 2,299,502 (1) As of December 31, 2021, a total of 2,450 shares of M&T common stock were issuable upon exercise of outstanding options or rights assumed by M&T in connection with merger and acquisition transactions. The weighted-average exercise price of those outstanding options or rights is $70.53 per common share. Deferred Bonus Plan. M&T maintains a deferred bonus plan which was frozen effective January 1, 2010 and did not allow any additional deferrals after that date. Prior to January 1, 2010, the plan allowed eligible officers of M&T and its subsidiaries to elect to defer all or a portion of their annual incentive compensation awards and allocate such awards to several investment options, including M&T common stock. At the time of the deferral election, participants also elected the timing of distributions from the plan. Such distributions are payable in cash, with the exception of balances allocated to M&T common stock which are distributable in the form of shares of common stock. 57 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, 2016 and ending on December 31, 2021. 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 $0 2016 2017 2018 2019 2020 2021 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 ........................................ 100 100 100 111 119 122 95 98 116 116 133 153 90 119 181 112 165 233 2016 2017 2018 2019 2020 2021 * Assumes a $100 investment on December 31, 2016 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. 58 Issuer Purchases of Equity Securities During the fourth quarter of 2021, 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, 2021 ...................................... November 1 - November 30, 2021 .............................. December 1 - December 31, 2021 ............................... Total ............................................................................. — $ — — — $ — — — — — $800,000,000 800,000,000 — — 800,000,000 — (1) The total number of shares purchased during the periods indicated includes shares purchased as part of publicly announced programs and shares deemed to have been received from employees who exercised stock options by attesting to previously acquired common shares in satisfaction of the exercise price or shares received from employees upon the vesting of restricted stock awards in satisfaction of applicable tax withholding obligations, as is permitted under M&T’s stock-based compensation plans. (2) On January 20, 2021, M&T’s Board of Directors authorized a stock repurchase program to repurchase up to $800 million of common shares, with the exact number, timing, price and terms of such repurchases to be determined at the discretion of management and subject to all regulatory limitations. No common shares were repurchased during 2021. Item 6. Selected Financial Data [Reserved]. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Corporate Profile and Significant Developments M&T Bank Corporation (“M&T”) is a bank holding company headquartered in Buffalo, New York with consolidated assets of $155.1 billion at December 31, 2021. The consolidated financial information presented herein reflects M&T and all of its subsidiaries, which are referred to collectively as “the Company.” M&T’s wholly owned bank subsidiaries are Manufacturers and Traders Trust Company (“M&T Bank”) and Wilmington Trust, National Association (“Wilmington Trust, N.A.”). M&T Bank, with total assets of $154.7 billion at December 31, 2021, is a New York-chartered commercial bank with 688 domestic banking offices in New York State, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia, and a full-service commercial banking office in Ontario, Canada. 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 59 Corporation, a multifamily commercial mortgage lender; M&T Securities, Inc., which provides institutional brokerage and securities 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 $12.0 billion at December 31, 2021. Wilmington Trust, N.A. and its subsidiaries offer various trust and wealth management services. Financial results during 2020 and 2021 were adversely impacted by the effects of the Coronavirus Disease 2019 (“COVID-19”) pandemic. Large portions of the U.S. economy were severely impacted throughout much of those two years and as a result, many commercial and consumer customers were negatively affected. The effects of the pandemic resulted in the Company recognizing an elevated provision for credit losses during 2020 that reflected projections of credit losses based on macroeconomic forecasts that were based on then existing economic conditions. As a result, the Company recorded a provision for credit losses of $800 million in 2020. Improvements in economic conditions and forecasts throughout 2021 led the Company to recognize a provision recapture of $75 million in that year. In response to the pandemic, the Federal Reserve took actions to lower interest rates that have negatively affected the Company’s net interest income since the beginning of the pandemic. On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. In addition to providing financial assistance to both businesses and consumers, the CARES Act created a forbearance program for federally-backed mortgage loans, protected borrowers from negative credit reporting due to loan accommodations resulting from the pandemic, and provided 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 that were 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 allowed 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. The CARES Act also provided 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 Company provided a host of relief options, such as 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 and another $2.9 billion in 2021, of which $1.2 billion remained outstanding at December 31, 2021. The national effort to mitigate the pandemic has resulted in a challenging environment for businesses and their employees. The Company has taken actions designed to help provide a safe 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. In accordance with changes in Federal guidelines (e.g. the Centers for Disease Control and Prevention) and state and local regulations, the Company has begun to roll back certain of these measures; 60 • The vast majority of the Company’s non-branch employees continued to work remotely during 2021; the Company is preparing to employ an operating model consisting of onsite, hybrid and fully remote employee work schedules when COVID-19 infections and hospitalizations stabilize; • M&T Bank branches remain open, with open lobbies and normal access to drive-through windows and ATMs; and • Some loan customers are still receiving COVID-19 related relief in various forms, including modification and forbearance requests as of December 31, 2021 as described herein and in note 4 of Notes to Financial Statements. On February 22, 2021 M&T announced that it had entered into a definitive agreement with People’s United Financial, Inc. (“People’s United”) under which People’s United will be acquired by M&T in an all-stock transaction. Pursuant to the terms of the agreement, People’s United shareholders will receive consideration valued at .118 of an M&T share in the form of M&T common stock. People’s United outstanding preferred stock will be converted to a new series of M&T preferred stock upon completion of the acquisition. The transaction is valued at approximately $7.8 billion (with the price based on M&T’s closing price of $153.58 per share as of December 31, 2021). As of December 31, 2021, People’s United reported $64.6 billion of assets, including $37.9 billion of loans and $10.8 billion of investment securities, $56.7 billion of liabilities, including $53.8 billion of deposits, and $7.9 billion of stockholders’ equity. The merger has been approved by the common shareholders of M&T and People’s United, the New York State Department of Financial Services and Connecticut Department of Banking but remains subject to approval by the Board of Governors of the Federal Reserve System. The merger is expected to be completed promptly after the parties have obtained approval and satisfied other customary closing conditions. 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 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 61 • • 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 is included herein under the heading “Provision for Credit Losses” and in note 5 of Notes to Financial Statements. Valuation methodologies — Management of the Company applies various valuation methodologies to assets and liabilities which often involve a significant degree of judgment, particularly when liquid markets do not exist for the particular items being valued. Quoted market prices are referred to when estimating fair values for certain assets, such as trading assets, most investment securities, and residential real estate loans held for sale and related commitments. However, for those items for which an observable liquid market does not exist, management utilizes significant estimates and assumptions to value such items. Examples of these items include loans, deposits, borrowings, goodwill, core deposit and other intangible assets, other assets and liabilities obtained or assumed in business combinations, capitalized servicing assets, pension and other postretirement benefit obligations, estimated residual values of property associated with leases, and certain derivative and other financial instruments. These valuations require the use of various assumptions, including, among others, discount rates, rates of return on assets, repayment rates, cash flows, default rates, costs of servicing and liquidation values. The use of different assumptions could produce significantly different results, which could have material positive or negative effects on the Company’s results of operations, financial condition or disclosures of fair value information. In addition to valuation, the Company must assess whether there are any declines in value below the carrying value of assets that require recognition of a loss in the consolidated statement of income. Examples include 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, 3, 4, 7, 8, 13, 19, 20 and 21 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 22 of Notes to Financial Statements. In addition, the Company is routinely subject to examinations from various governmental taxing authorities. Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions. Management believes that the assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Should tax laws change or the tax authorities determine that management’s assumptions were inappropriate, the result and adjustments required could have a material effect on the Company’s results of operations. Information regarding the Company’s income taxes is presented in note 14 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 62 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 20 of Notes to Financial Statements. Overview Net income recorded by the Company in 2021 was $1.86 billion or $13.80 of diluted earnings per common share, representing an increase of 37% and 39%, respectively, from $1.35 billion or $9.94 of diluted earnings per common share in 2020. Basic earnings per common share also increased 39% to $13.81 in 2021 from $9.94 in 2020. In connection with M&T’s pending acquisition of People’s United, the after-tax impact of merger-related expenses was $34 million ($44 million pre-tax), or $.25 of basic and diluted earnings per common share in 2021. Merger-related expenses largely consisted of professional services related to planned integration efforts associated with the merger. There were no merger-related expenses during 2020 and 2019. Net income in 2019 totaled $1.93 billion, while diluted and basic earnings per common share were $13.75 and $13.76, respectively. Expressed as a rate of return on average assets, net income in 2021 was 1.22%, compared with 1.00% in 2020 and 1.61% in 2019. The return on average common shareholders’ equity was 11.54% in 2021, 8.72% in 2020 and 12.87% in 2019. Table 1 Increase (Decrease)(a) 2020 to 2021 2019 to 2020 Amount % Amount % EARNINGS SUMMARY Dollars in millions 2021 2020 2019 2018 2017 (6) $ (692.4) (14) Interest income(b) ........................................... $3,953.5 $4,210.0 $4,902.4 $4,620.6 $4,202.4 $ (256.5) 386.8 (65) (212.4) 3,815.6 (44.1) (1) 168.0 (875.0) (109) 21.3 (11.8) — 1,829.9 4 90.3 114.0 (6) Net interest income(b)..................................... 3,839.5 (75.0) (21.2) 3 Other income ................................................... 2,188.2 (422.9) (56) Interest expense ............................................... (269.5) 624.0 355 Less: provision for credit losses ...................... (27.4) — Gain (loss) on bank investment securities....... 54.2 526.4 4,153.1 4,094.2 132.0 (6.3) 2,043.7 1,862.3 326.4 3,883.6 800.0 (9.4) 2,097.9 176.0 18.0 749.3 Compound Growth Rate 5 Years 2016 to 2021 — % (23) 2 — — 4 Less: 95.0 131.4 683.0 5 9 38 Salaries and employee benefits ................ 2,045.7 49.9 Other expense ........................................... 1,565.9 (133.4) (783.2) (30) Income before income taxes............................ 2,469.9 3 (9) 1,950.7 1,434.5 1,786.9 1,900.8 1,752.3 1,567.9 1,535.8 2,570.1 2,530.1 1,648.8 1,491.5 2,358.5 5 2 3 Less: (2.6) 180.0 $ 505.6 (5.6) (24) (201.7) (33) 34.6 (15) 43 915.6 37 $ (575.9) (30) Net income ...................................................... $1,858.8 $1,353.2 $1,929.1 $1,918.1 $1,408.3 Taxable-equivalent adjustment(b) ............ Income taxes............................................. 22.9 618.1 17.3 416.4 21.9 590.1 14.7 596.4 (11) (4) 7 % (a) (b) Changes were calculated from unrounded amounts. Interest income data are on a taxable-equivalent basis. The taxable-equivalent adjustment represents additional income taxes that would be due if all interest income were subject to income taxes. This adjustment, which is related to interest received on qualified municipal securities, industrial revenue financings and preferred equity securities, is based on a composite income tax rate of approximately 26% in 2018-2021 and 39% in prior years. Financial results for 2021 and 2020 were 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 63 adverse economic impacts, coupled with an accounting change noted herein, resulted in the Company recognizing significantly higher provisions for credit losses during 2020 as compared with previous years. An improvement in economic conditions during 2021 led the Company to recapture provision for credit losses of $75 million in 2021 compared with provisions for credit losses of $800 million in 2020 and $176 million in 2019. The 2020 and 2021 periods reflect the amended 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 took actions to lower interest rates that have negatively affected the Company’s net interest income since the beginning of the pandemic. Taxable-equivalent net interest income totaled $3.84 billion, $3.88 billion and $4.15 billion in 2021, 2020 and 2019, respectively. Economic forecasts improved in 2021 resulting in a recapture of provision for credit losses in 2021 compared with significant provision for credit losses recorded in the prior year. During 2020, economic forecasts utilized during each interim period resulted in higher 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 comparable 2019 periods. Specifically, the level of the provision in 2020 reflected the ongoing 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 requested re-payment forbearance. Concerns remain about large sectors of the economy, including the hotel, healthcare and office space sectors. The allowance for credit losses for commercial real estate loans remains elevated as a result. The Company expects that it will likely continue to be impacted by the COVID-19 pandemic after December 31, 2021. 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 until the level of general interest rates rises; • Provision for credit losses – although the economy has experienced a recovery in 2021, it is possible that economic assumptions used to calculate the allowance for credit losses at the end of future reporting periods could deteriorate, resulting 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; • A resurgence of the pandemic or emergence of COVID-19 variants in large parts of the country may impact customer demand for many of the Company’s products and services, in particular credit and deposit-related products and services. Effective January 1, 2020, M&T adopted amended accounting guidance for the measurement of credit losses on financial instruments. That guidance required 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 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 amended accounting guidance is provided under the heading “Provision for Credit Losses” and in note 5 of Notes to Financial Statements. There were several notable matters during 2019 that impacted that year’s results. In the first quarter of 2019, the Company 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. In 64 July 2019, M&T agreed to sell its non-controlling interest in an asset manager obtained in the 2011 acquisition of Wilmington Trust Corporation 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 of the entity. The after-tax impact of the charge was a reduction in net income of $36 million, or $.27 of diluted earnings per common share. The sale of M&T’s interest in the asset manager was effective September 30, 2019. Reflecting the matters discussed previously, taxable-equivalent net interest income was $3.84 billion in 2021, compared with $3.88 billion in 2020. That decline resulted from a 40 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 2.76% in 2021 from 3.16% in 2020, partially offset by the impact of an increase in average earning assets to $139.1 billion in 2021 from $122.9 billion in 2020. The increase in average earning assets resulted from higher amounts of low-yielding balances maintained by the Company at the Federal Reserve Bank (“FRB”) of New York. Taxable-equivalent net interest income decreased 6% in 2020 from $4.15 billion in 2019. That decrease resulted from a 68 basis point narrowing of the net interest margin from 3.84% in 2019, partially offset by the impact of an increase in average earning assets from $108.2 billion in 2019 that reflected higher balances of loans and amounts held at the FRB of New York. The provision for credit losses declined significantly in 2021 resulting in a recapture of previously recorded provisions of $75 million, compared with a provision for credit losses of $800 million recorded in 2020. The provision in 2019 was $176 million. Net charge-offs in 2021, 2020 and 2019 were $192 million, $247 million and $144 million, respectively. Other income totaled $2.17 billion in 2021, $2.09 billion in 2020 and $2.06 billion in 2019. As compared with 2020, higher amounts of trust income, service charges on deposit accounts, and brokerage services income in 2021 were partially offset by lower trading account and foreign exchange gains, a higher loss on bank investment securities and less in distributions from Bayview Lending Group LLC (“BLG”). Comparing 2020 with 2019, a 24% rise in mortgage banking revenues, higher trust income and increased income from BLG were partially offset by a declines in service charges on deposit accounts, trading account and foreign exchange gains and loan syndication fees. Other expense totaled $3.61 billion in 2021, compared with $3.39 billion in 2020 and $3.47 billion in 2019. 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 $10 million, $15 million and $19 million in 2021, 2020 and 2019, respectively, and merger-related expenses of $44 million in 2021. No merger-related expenses were recorded in 2020 and 2019. Exclusive of those nonoperating expenses, noninterest operating expenses totaled $3.56 billion in 2021, compared with $3.37 billion in 2020 and $3.45 billion in 2019. The higher level of such expenses in 2021 as compared with 2020 was due to increased costs for salaries and employee benefits, outside data processing and software, FDIC assessments, and professional services. Contributing to the lower level of noninterest operating expenses in 2020 as compared with 2019 were decreased costs for professional 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 65 the support for the Company’s retail brokerage and advisory business to the platform of LPL Financial. 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 59.0% in 2021, compared with 56.3% and 55.7% in 2020 and 2019, respectively. The calculations of the efficiency ratio are presented in table 2. The Company’s effective tax rate was 24.3% in 2021 and 2019, compared with 23.5% in 2020. Supplemental Reporting of Non-GAAP Results of Operations As a result of business combinations and other acquisitions, the Company had intangible assets consisting of goodwill and core deposit and other intangible assets totaling $4.6 billion at each of December 31, 2021 and 2020, consisting predominantly of goodwill. Amortization of core deposit and other intangible assets, after-tax effect, totaled $8 million, $11 million and $14 million during 2021, 2020 and 2019, respectively. M&T consistently provides supplemental reporting of its results on a “net operating” or “tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and gains (when realized) and expenses (when incurred) associated with merging acquired or to be acquired operations with and into the Company, since such items are considered by management to be “nonoperating” in nature. In 2021, those merger-related expenses generally consisted of professional services, reflecting legal expenses and technology-related efforts to prepare for the integration of People’s United’s systems with those of the Company, and printing costs associated with the production of the joint proxy statement/prospectus distributed to the shareholders of M&T and People’s United. Such expenses totaled $44 million ($34 million after-tax) in 2021. There were no merger-related gains or expenses in 2020 and 2019. 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 $1.90 billion in 2021, $1.36 million in 2020, and $1.94 billion in 2019. Diluted net operating earnings per common share were $14.11 in 2021, $10.02 in 2020 and $13.86 in 2019. Net operating income expressed as a rate of return on average tangible assets was 1.28% in 2021, compared with 1.04% in 2020 and 1.69% in 2019. Net operating income represented a return on average tangible common equity of 16.80% in 2021, compared with 12.79% in 2020 and 19.08% in 2019. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in table 2. 66 Table 2 RECONCILIATION OF GAAP TO NON-GAAP MEASURES Income statement data Dollars in thousands, except per share Net income Net income .................................................................................................................................................................................. Amortization of core deposit and other intangible assets(a) ....................................................................................................... Merger-related expenses(a) ......................................................................................................................................................... Net operating income .......................................................................................................................................................... Earnings per common share Diluted earnings per common share ............................................................................................................................................ Amortization of core deposit and other intangible assets(a) ....................................................................................................... Merger-related expenses(a) ......................................................................................................................................................... Diluted net operating earnings per common share.............................................................................................................. Other expense Other expense .............................................................................................................................................................................. Amortization of core deposit and other intangible assets............................................................................................................ Merger-related expenses.............................................................................................................................................................. Noninterest operating expense ............................................................................................................................................ Merger-related expenses Salaries and employee benefits ................................................................................................................................................... Equipment and net occupancy..................................................................................................................................................... Outside data processing and software ......................................................................................................................................... Advertising and marketing .......................................................................................................................................................... Printing, postage and supplies ..................................................................................................................................................... Other costs of operations ............................................................................................................................................................. Other 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............................................................................................................................................................................. Common equity................................................................................................................................................................... Goodwill ...................................................................................................................................................................................... Core deposit and other intangible assets ..................................................................................................................................... Deferred taxes.............................................................................................................................................................................. Total tangible common equity ............................................................................................................................................ (a) After any related tax effect. 2021 2020 2019 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,858,746 7,532 33,560 1,899,838 13.80 .06 .25 14.11 3,611,623 (10,167 ) (43,860 ) 3,557,596 176 341 1,119 866 2,965 38,393 43,860 3,557,596 3,839,509 2,166,994 (21,220 ) 6,027,723 59.0 % 152,669 (4,593 ) (8 ) 2 148,070 16,909 (1,438 ) 15,471 (4,593 ) (8 ) 2 10,872 155,107 (4,593 ) (4 ) 1 150,511 17,903 (1,750 ) 16,153 (4,593 ) (4 ) 1 11,557 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,353,152 10,993 — 1,364,145 9.94 .08 — 10.02 3,385,240 (14,869 ) — 3,370,371 $ $ $ $ $ $ 1,929,149 14,359 — 1,943,508 13.75 .11 — 13.86 3,468,682 (19,490 ) — 3,449,192 — $ — — — — — — $ — — — — — — — 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 $ $ $ $ $ $ $ $ $ $ $ 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 67 Net Interest Income/Lending and Funding Activities Taxable-equivalent net interest income was $3.84 billion in 2021, compared with $3.88 billion in 2020. The decrease in 2021 was primarily attributable to a 40 basis point narrowing of the net interest margin to 2.76% in 2021 from 3.16% in 2020 reflecting lower yields on loans offset, in part, by lower rates paid on deposits, and reduced balances of investment securities. Those net impacts were partially offset by increased deposits held at the FRB of New York that serve to increase net interest income, but, due to their low yield, reduce the reported net interest margin. Average earnings assets were $139.1 billion and $122.9 billion in 2021 and 2020, respectively. Average loans and leases were $96.6 billion in both 2021 and 2020. Average balances of commercial loans and leases decreased $2.3 billion or 8% to $25.2 billion in 2021 from $27.5 billion in 2020. That decrease was largely the result of a decline in average balances of PPP loans due to loan forgiveness by the SBA, lower dealer floor plan balances reflecting automobile production and inventory issues experienced by the industry and subdued loan demand by commercial customers, in general. PPP loans averaged $4.1 billion in 2021 compared with $4.4 billion in 2020. Average commercial real estate loan balances were up $336 million or 1% to $37.3 billion in 2021 from $37.0 billion in 2020. Consumer loans averaged $17.3 billion in 2021, an increase of $1.4 billion or 9% from $15.9 billion in 2020, 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 average outstanding balances of home equity loans and lines of credit. Average residential real estate loans were $16.8 billion and $16.2 billion in 2021 and 2020, respectively, reflecting 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 $3.3 billion in 2021, up from $2.6 billion in 2020. Additionally, late in the third quarter of 2021 the Company began to retain recently originated residential mortgage loans in portfolio rather than sell such loans. These increases were offset by the ongoing repayments of loans by customers. 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 FRB 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 $7.1 billion, or 8%, 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 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 were $16.2 billion in 2020 and $16.7 billion in 2019, reflecting ongoing payments by customers, partially offset by repurchases of government-guaranteed loan from Ginnie Mae pools. 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S U 5 2 1 3 9 2 , 2 1 1 8 6 , 6 7 1 3 8 0 7 5 6 1 , 8 0 0 0 , 0 1 2 , 4 9 6 8 , 2 2 1 7 8 . 5 7 8 . 1 0 2 . 2 4 8 . 2 6 1 5 , 3 5 9 , 3 8 6 0 , 9 3 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t e s s a g n i n r a e l a t o T 0 3 8 4 5 , 2 1 1 7 1 , 1 4 1 9 0 4 , 6 . . . . . . . . . . . . . . . . . s e i t i r u c e s t n e m t s e v n i l a t o T 1 2 7 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s n o i s i v i d b u s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . r e h t O l a c i t i l o p d n a s e t a t s f o s n o i t a g i l b O 4 5 0 , 4 0 8 2 , 6 6 0 0 7 , 6 4 1 4 3 0 , 7 1 2 8 2 3 3 3 , 9 0 1 5 9 3 , 6 2 3 ) 3 0 5 , 1 ( 7 2 3 , 1 7 8 7 , 2 1 0 8 4 , 5 3 1 0 6 9 , 4 7 1 1 , 1 0 9 5 , 3 6 7 6 6 , 9 6 2 6 3 0 8 , 5 2 3 5 , 5 7 3 8 6 , 1 4 4 7 2 , 2 1 9 9 , 5 1 9 8 4 , 9 1 1 0 8 4 , 5 3 1 5 0 . 7 5 . 1 1 . 7 0 . 1 0 . 4 1 . 6 7 . 1 6 0 . 0 7 . 2 7 1 0 2 9 9 9 , 2 3 5 3 6 8 1 , 5 3 8 , 1 5 5 6 1 , 2 6 7 0 0 , 4 1 1 9 6 6 , 2 5 1 $ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t e s s a l a t o T ) 0 2 6 , 1 ( . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e s s o l t i d e r c r o f e c n a w o l l A 6 4 4 , 1 5 7 7 , 3 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s k n a b m o r f e u d d n a h s a C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t e s s a r e h t O 3 2 3 , 4 7 . . . . . . . . . . . . s t i s o p e d g n i r a e b - t s e r e t n i l a t o T 9 7 8 , 0 7 $ . . . . . . s t i s o p e d g n i k c e h c - t s e r e t n i d n a s g n i v a S 1 8 1 3 6 2 , 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t i s o p e d e m T i . . . . . . . . . . . . . e c i f f o s d n a l s I n a m y a C t a s t i s o p e D 8 6 7 3 5 , 3 8 2 9 , 7 7 6 6 6 , 5 5 6 6 1 , 2 . . . . . . . . . s e i t i l i b a i l g n i r a e b - t s e r e t n i l a t o T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s g n i w o r r o b m r e t - t r o h S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s g n i w o r r o b m r e t - g n o L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t i s o p e d g n i r a e b - t s e r e t n i n o N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e i t i l i b a i l r e h t O 9 6 6 , 2 5 1 $ . . . . y t i u q e ’ s r e d l o h e r a h s d n a s e i t i l i b a i l l a t o T 0 6 7 , 5 3 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e i t i l i b a i l l a t o T 9 0 9 , 6 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y t i u q e ’ s r e d l o h e r a h S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a e r p s t s e r e t n i t e N . . . . . . . . . . . . . . . . . . . . . s d n u f e e r f - t s e r e t n i f o n o i t u b i r t n o C y t i u q E ’ s r e d l o h e r a h S d n a s e i t i l i b a i L s e i t i l i b a i l g n i r a e b - t s e r e t n I s t i s o p e d g n i r a e b - t s e r e t n I % 7 4 . 3 4 1 6 , 5 1 8 , 3 % 3 8 . 3 9 9 1 , 4 9 0 , 4 % 4 8 . 3 7 2 1 , 3 5 1 , 4 % 6 1 . 3 5 0 6 , 3 8 8 , 3 % 6 7 . 2 9 0 5 , 9 3 8 , 3 $ . . . . s t e s s a g n i n r a e n o n i g r a m / e m o c n i t s e r e t n i t e N . t s o c d e z i t r o m a t a s e i t i r u c e s t n e m t s e v n i e l a s - r o f - e l b a l i a v a s e d u l c n I . s n a o l l a u r c c a n o n s e d u l c n I ) a ( ) b ( 69 Table 4 summarizes average loans and leases outstanding in 2021 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 2020 to 2021 2019 to 2020 2021 (In millions) Commercial, financial, etc........................................................................ $ Real estate — commercial........................................................................ Real estate — consumer ........................................................................... Consumer Recreational finance ........................................................................... Automobile ......................................................................................... Home equity lines and loans............................................................... Other ................................................................................................... Total consumer .............................................................................. Total ......................................................................................... $ 25,191 37,321 16,770 7,680 4,449 3,725 1,477 17,331 96,613 (8) % 1 3 21 14 (12) 5 9 — % 18 % 6 (3) 31 4 (9) 2 9 8 % Commercial loans and leases, excluding loans secured by real estate, totaled $23.5 billion at December 31, 2021, representing 25% of total loans and leases. Table 5 presents information on commercial loans and leases as of December 31, 2021 relating to geographic area, size, borrower industry and whether the loans are secured by collateral or unsecured. Of the $23.5 billion of commercial loans and leases outstanding at the end of 2021, approximately $19.9 billion, or 85%, were secured, while 35%, 17% and 28% 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 equipment. Commercial leases included in total commercial loans and leases at December 31, 2021 aggregated $1.0 billion, of which 48% were secured by collateral located in New York State, 14% were secured by collateral in Pennsylvania and another 20% were secured by collateral in the Mid-Atlantic area. 70 Table 5 COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT (Excludes Loans Secured by Real Estate) December 31, 2021 New York Pennsylvania Mid- Atlantic(a) (Dollars in millions) Other Total Percent of Total Services ............................................. $1,390 1,284 Manufacturing ................................... Motor vehicle and recreational $ finance dealers................................ Financial and insurance..................... Wholesale.......................................... Retail ................................................. Construction ...................................... Real estate investors.......................... Transportation, communications, 859 1,197 642 384 478 736 674 711 507 257 546 254 351 172 $1,363 788 $ 524 627 $ 3,951 3,410 422 627 631 533 580 488 443 501 22 33 71 $6,502 1,233 913 418 329 84 56 335 60 14 10 93 $4,696 3,021 2,994 2,237 1,500 1,493 1,452 1,348 1,326 165 127 449 $23,473 17% 14% 13% 13% 9% 6% 6% 6% 6% 6% 1% 1% 2% 100% 227 183 38 56 144 $ 4,120 utilities............................................ 343 Health services .................................. 582 Public administration ........................ 91 Agriculture, forestry, fishing, etc. ..... 28 141 Other.................................................. Total .................................................. $8,155 Percent of total .................................. Percent of dollars outstanding Secured.............................................. Unsecured.......................................... Leases................................................ Total .................................................. Percent of dollars outstanding by 73% 21 6 100% 35% 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 .................................................. 26% 25 12 11 7 7 12 100% 17% 28% 20% 100% 83% 14 3 100% 21% 24 17 16 11 6 5 100% 81% 16 3 100% 25% 21 11 12 8 9 14 100% 91% 5 4 100% 12% 20 15 16 11 11 15 100% 81% 15 4 100% 22% 23 14 12 9 8 12 100% (a) Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia. International loans included in commercial loans and leases totaled $116 million and $100 million at December 31, 2021 and 2020, respectively. Included in such amounts at each of those dates were $94 million of loans at M&T Bank’s commercial banking office in Ontario, Canada. The remaining international loans were predominantly to domestic companies with foreign operations. 71 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 each of 2021 and 2020, compared with 63% in 2019. At December 31, 2021, the Company held approximately $35.4 billion of commercial real estate loans (including $425 million held for sale), $16.1 billion of consumer real estate loans secured by one-to-four family residential properties (including $474 million of loans held for sale) and $3.6 billion of outstanding balances of home equity loans and lines of credit, compared with $37.6 billion, $16.8 billion and $4.0 billion, respectively, at December 31, 2020. Included in commercial real estate loans at December 31, 2021 and 2020 were construction loans of $9.3 billion and $10.0 billion, respectively, including amounts due from builders and developers of residential real estate aggregating $1.4 billion and $1.3 billion at December 31, 2021 and 2020, respectively. Commercial real estate loans included loans held for sale totaling $425 million and $278 million at December 31, 2021 and 2020, respectively. International loans included in commercial real estate loans totaled $74 million at December 31, 2021 and $60 million at December 31, 2020. 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 69% of the commercial real estate loan portfolio at the 2021 year-end. Table 6 presents commercial real estate loans by geographic area, type of collateral and size of the loans outstanding at December 31, 2021. New York City area commercial real estate loans totaled $8.2 billion at December 31, 2021. The $7.1 billion of investor-owned commercial real estate loans in the New York City area were largely secured by multifamily residential properties, retail space and office space. The Company’s experience has been that office, retail and service-related properties tend to demonstrate more volatile fluctuations in value through economic cycles and changing economic conditions than do multifamily residential properties. Approximately 67% 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 18% 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 93% 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 81% and 77%, 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 22% of total commercial real estate loans as of December 31, 2021. Commercial real estate construction and development loans made to investors presented in table 6 totaled $8.9 billion at December 31, 2021, or 10% of total loans and leases. Approximately 82% of those construction loans had adjustable interest rates. Included in such loans at the 2021 year- end were $1.4 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. 72 Table 6 COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT December 31, 2021 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 ................................... $ 1,468 1,080 Apartments/Multifamily ................... 889 Office................................................ 512 Health facilities................................. 574 Hotel ................................................. 213 Industrial/Warehouse........................ 147 Other ................................................. 4,883 Total permanent ......................... Construction/Development Commercial Construction .................................. Land/Land development ............... 1,929 154 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 ................ 191 175 106 98 102 57 146 1,123 Total commercial real estate ................... $ 8,242 116 37 2,236 7,119 248 $ 632 1,115 896 472 369 217 25 3,726 460 25 18 11 514 4,240 393 $ 409 407 481 434 220 265 13 2,229 539 12 55 40 646 2,875 212 $ 906 532 1,023 638 765 426 70 4,360 2,001 164 179 96 2,440 6,800 568 233 172 280 73 204 88 190 1,633 $ 5,873 339 282 64 143 92 78 211 1,421 $ 4,296 331 415 170 243 135 216 348 2,426 $ 9,226 $ 912 779 567 638 653 306 — 3,855 2,011 151 588 266 3,016 6,871 $ 4,327 3,913 3,856 2,694 2,581 1,427 255 19,053 6,940 506 956 450 8,852 27,905 84 1,505 360 205 10 127 35 38 23 882 $ 7,753 1,454 1,249 630 684 568 477 918 7,485 $ 35,390 Percent of total ........................................ 23% 17% 12% 26% 22% 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 15 33 15 15 3 100% 14% 25 21 33 4 — 3 100% 11% 21 18 31 18 1 — 100% 10% 18 15 34 16 4 3 100% 8% 11 12 34 21 7 7 100% 9% 17 16 33 15 6 4 100% (a) (b) Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia. Includes $405 million of construction loans. 12% 11 11 8 7 4 1 54% 20% 1 3 1 25% 79% 4% 4 3 2 2 2 1 3 21% 100% 73 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 at each of December 31, 2021 and 2020. There have been no material losses incurred as a result of those recourse arrangements. At December 31, 2021 and 2020, commercial real estate loans serviced by the Company for other investors were $23.7 billion and $22.2 billion, respectively. Reflected in commercial real estate loans serviced for others were loans sub-serviced for others that had outstanding balances of $3.5 billion and $3.3 billion at December 31, 2021 and 2020, respectively. Real estate loans secured by one-to-four family residential properties were $16.1 billion at December 31, 2021, including approximately 36% secured by properties located in New York State, 7% secured by properties located in Pennsylvania, 17% secured by properties in New Jersey and 17% 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 $2.8 billion at December 31, 2021 and $2.7 billion at December 31, 2020. The Company’s portfolio of limited documentation residential real estate loans held for investment totaled $1.3 billion at December 31, 2021, compared with $1.6 billion at December 31, 2020. That portfolio consisted predominantly of limited documentation loans acquired in a prior business combination. 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. The acquired 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. Loans to individuals to finance the construction of one-to-four family residential properties totaled $57 million at December 31, 2021 and $77 million at December 31, 2020, 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 19% of total loans and leases at December 31, 2021 and 17% at December 31, 2020. Outstanding balances of recreational finance loans represented the largest component of the consumer loan portfolio at December 31, 2021 and totaled $8.1 billion or approximately 9% of total loans, up from $7.1 billion or 7% at December 31, 2020. That growth reflects continued consumer demand for such loans. Home equity loans and lines of credit outstanding at December 31, 2021 and December 31, 2020 were $3.6 billion and $4.0 billion, respectively. Approximately 41% of home equity loans and lines of credit outstanding at December 31, 2021 were secured by properties in New York State, 22% in Maryland, 21% in Pennsylvania and 5% in New Jersey. Outstanding automobile loan balances rose to $4.7 billion at December 31, 2021 from $4.1 billion at December 31, 2020. That increase also reflects continued consumer demand for motor vehicles despite recent supply chain disruptions. Table 7 presents the composition of the Company’s loan and lease portfolio at the end of 2021, including outstanding balances to businesses and consumers in New York State, Pennsylvania, the Mid-Atlantic area and other states. 74 Table 7 LOANS AND LEASES, NET OF UNEARNED DISCOUNT December 31, 2021 Outstandings (In millions) Real estate Residential ................................ $ 16,074 35,390 Commercial .............................. 51,464 Total real estate .................... Commercial, financial, etc............. 22,471 Consumer Recreational finance ................. Home equity lines and loans..... Automobile ............................... Other secured or guaranteed ..... Other unsecured........................ Total consumer .................... Total loans....................... Commercial leases......................... 8,053 3,563 4,679 677 1,003 17,975 91,910 1,002 Total loans and leases ..... $ 92,912 Percent of Dollars Outstanding Mid-Atlantic New York Penn- sylvania Maryland New Jersey Other(a) Other 36% 40 39% 34% 10% 41 27 27 38 23% 34% 48% 35% 7% 12 10% 18% 6% 21 18 8 19 13% 13% 14% 13% 9% 10 10% 13% 3% 22 12 9 26 11% 11% 12% 11% 17% 7 10% 7% 4% 5 7 3 3 4% 8% 6% 8% 8% 9 8% 8% 5% 9 15 19 11 9% 9% 2% 9% 23% 22 23% 20% 72% 2 21 34 3 40% 25% 18% 24% (a) Includes Delaware, Virginia, West Virginia and the District of Columbia. The investment securities portfolio averaged $6.4 billion in 2021, down from $8.2 billion and $11.6 billion in 2020 and 2019, respectively. The decline in average balances of investment securities in 2021 and 2020 was predominantly due to maturities and pay downs of mortgage-backed securities and maturities of U.S. Treasury notes. During 2021 the Company purchased approximately $1.6 billion of fixed rate residential mortgage-backed securities and approximately $680 million of U.S. Treasury notes. There were no significant purchases of investment securities during 2020. During 2019, the Company purchased $500 million of U.S. Treasury notes. Sales of investment securities were not significant in 2021, 2020 or 2019. 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 FRB 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 75 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 $21 million in 2021 and $9 million in 2020, 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 2021, 2020 or 2019. Based on management’s assessment of future cash flows associated with individual investment securities as of December 31, 2021, 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 3 and 21 of Notes to Financial Statements. Other earning assets include interest-bearing balances at the FRB 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 $36.0 billion in 2021, $18.1 billion in 2020 and $7.2 billion in 2019. Interest-bearing deposits at banks averaged $35.8 billion in 2021, compared with $15.3 billion in 2020 and $6.8 billion in 2019. The amounts of interest-bearing deposits at banks at the respective dates were predominantly comprised of deposits held at the FRB 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 2021 as compared with 2020 and 2019 reflects increased commercial and consumer deposit balances. Agreements to resell securities averaged $167 million, $2.7 billion, $327 million in 2021, 2020 and 2019, respectively. The higher average balance in 2020 reflects the temporary investment by the Company of increased customer deposit levels. Table 8 AVERAGE CORE DEPOSITS Percent Increase (Decrease) from 2020 to 2021 2019 to 2020 2021 (In millions) 67,048 Savings and interest-checking deposits.................................................... $ 2,861 Time deposits ........................................................................................... 55,666 Noninterest-bearing deposits.................................................................... Total ......................................................................................................... $ 125,575 12 % (33) 34 19 % 15 % (18) 35 20 % The most significant source of funding for the Company is core deposits. The Company considers noninterest-bearing deposits, interest-bearing transaction accounts, savings deposits and time deposits of $250,000 or less as core deposits. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Average core deposits were $125.6 billion in 2021, compared with $105.7 billion in 2020 and $87.9 billion in 2019. Average balances of savings and interest-checking core deposits rose $7.3 billion or 12% in 2021 to $67.0 billion from $59.8 billion in 2020. Average noninterest-bearing deposits increased $14.0 billion or 34% to $55.7 billion in 2021 from $41.7 billion in 2020. A continuance of the trend observed in 2020, those increases were largely due to 76 higher average deposits of commercial and consumer customers. Average core deposits in 2020 were up 20% as compared with 2019. Average savings and interest-checking core deposit balances rose $7.9 billion or 15% in 2020 from $51.9 billion in 2019. Average noninterest-bearing deposits in 2020 increased $10.9 billion or 35% from $30.8 million in 2019. Funding provided by core deposits represented 90% of average earning assets in 2021, compared with 86% in 2020 and 81% in 2019. Table 8 summarizes average core deposits in 2021 and percentage changes in the components of such deposits over the past two years. Core deposits totaled $128.0 billion and $114.2 billion at December 31, 2021 and 2020, respectively. Table 9 AVERAGE DEPOSITS Retail Trust Commercial and Other Total (In millions) 2021 Savings and interest-checking deposits.................................... $ 33,964 3,062 Time deposits ........................................................................... 8,379 Noninterest-bearing deposits.................................................... Deposits at Cayman Islands office ........................................... — Total ......................................................................................... $ 45,405 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 ........................................................................... 5,352 Noninterest-bearing deposits.................................................... Deposits at Cayman Islands office ........................................... — Total ......................................................................................... $ 37,905 $ 6,021 25 10,529 — $ 16,575 $ 5,631 50 5,406 — $ 11,087 $ 6,453 46 4,219 — $ 10,718 $ $ $ $ $ $ 30,894 176 36,758 181 68,009 $ 70,879 3,263 55,666 181 $129,989 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 The Company also receives funding from other deposit sources, including branch-related time deposits over $250,000, brokered deposits and, prior to June 30, 2021, deposits associated with the Company’s Cayman Islands office. Time deposits over $250,000 averaged $402 million in 2021, $683 million in 2020 and $956 million in 2019. The decline in such deposits from 2019 through 2021 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. Cayman Islands office deposits averaged $181 million in 2021, $1.1 billion in 2020 and $1.4 billion in 2019. Those deposits consisted predominantly of balances swept from lower-yielding commercial customer accounts. During the second quarter of 2021, the Company introduced a new interest-bearing sweep product (included in savings and interest-bearing deposits) that replaced the Eurodollar sweep product previously recorded as Cayman Islands office deposits. As a result, there were no outstanding deposits at the Cayman Islands office as of December 31, 2021 and the office is closed. The Company had brokered savings and interest-bearing transaction accounts that averaged $3.8 billion in each of 2021 and 2020, compared with $2.7 billion in 2019. Brokered time deposits were not a 77 significant source of funding in any of the three years discussed herein. Additional 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. Time deposits over $250,000 were $345 million and $454 million at December 31, 2021 and 2020, respectively. Total uninsured deposits were estimated to be $69.1 billion at December 31, 2021. The Company also uses borrowings from banks, the FHLB of New York, the FRB 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 $68 million in 2021, $62 million in 2020 and $1.1 billion in 2019. Long-term borrowings averaged $3.5 billion in 2021, $5.8 billion in 2020 and $7.7 billion in 2019. Average balances of outstanding senior notes were $2.4 billion in 2021, compared with $3.8 billion and $5.3 billion in 2020 and 2019, respectively. Unsecured senior notes totaled $2.4 billion and $2.8 billion at December 31, 2021 and 2020, respectively. In January 2021, $350 million of variable rate senior notes of M&T Bank matured. 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. Also included in average long-term borrowings were amounts borrowed from FHLBs of $2 million in 2021 and 2020, compared with $241 million in 2019 and subordinated capital notes of $581 million in 2021, compared with $1.4 billion in each of 2020 and 2019. In March 2021, M&T Bank redeemed $500 million of subordinated capital notes that were due to mature on December 1, 2021 and 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 $530 million in 2021, $527 million in 2020 and $524 million in 2019. Additional information regarding long-term borrowings, including information regarding contractual maturities of such borrowings, is provided in note 9 of Notes to Financial Statements. The Company has utilized interest rate swap agreements to modify the repricing characteristics of certain components of its loans and long-term debt. As of December 31, 2021, 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 $13.35 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 19 of Notes to Financial Statements. Changes in the composition of the Company’s earning assets and interest-bearing liabilities, as discussed herein, as well as changes in interest rates and spreads, can impact net interest income. Net interest spread, or the difference between the taxable-equivalent yield on earning assets and the rate paid on interest-bearing liabilities, was 2.70% in 2021, compared with 3.00% in 2020 and 3.48% in 2019. The yield on the Company’s earning assets decreased 59 basis points to 2.84% in 2021 from 3.43% in 2020 and the rate paid on interest-bearing liabilities decreased 29 basis points to .14% in 2021 from .43% in 2020. During 2019, the yield on earning assets was 4.53% and the rate paid on interest-bearing liabilities was 1.05%. The lower net interest spreads in 2021 and 2020 as compared with 2019 also reflect the effect of decreases in short-term interest rates initiated by the Federal Reserve and the impact of a higher proportion of low-yielding balances at the FRB of New York to total average earning assets. While those low-yielding balances add to net interest income, they have the effect of reducing the yield on total average earning assets and, as a result, the net interest spread. 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 $61.1 billion in 2021, $47.3 billion in 2020 and $37.2 billion in 2019. The increase in net interest-free funds in 2021 and in 2020 reflects higher average balances of noninterest-bearing deposits. Those deposits averaged $55.7 billion in 2021, $41.7 billion in 2020 and $30.8 billion in 2019. The increase in such balances since 78 2019 was largely due to higher levels of deposits of commercial customers. Shareholders’ equity averaged $16.9 billion, $16.0 billion and $15.7 billion in 2021, 2020 and 2019, respectively. Goodwill and core deposit and other intangible assets averaged $4.6 billion in each of 2021, 2020 and 2019. The cash surrender value of bank owned life insurance averaged $1.86 billion in 2021, $1.84 billion in 2020 and $1.81 billion in 2019. 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 .06% in 2021, .16% in 2020 and .36% in 2019. The reduced contribution of net interest-free funds to net interest margin in 2021 and 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 2.76% in 2021, 3.16% in 2020 and 3.84% in 2019. Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in reductions in spreads, could adversely impact the Company’s net interest income and net interest margin. Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company has utilized interest rate swap agreements to modify the repricing characteristics of certain portions of its earning assets and interest-bearing liabilities. Periodic settlement amounts arising from these agreements are reflected in either the yields on earning assets or the rates paid on interest- bearing liabilities. The notional amount of interest rate swap agreements entered into for interest rate risk management purposes was $15.0 billion (excluding $8.4 billion of forward-starting swap agreements) at December 31, 2021, $19.0 billion (excluding $32.1 billion of forward-starting swap agreements) at December 31, 2020 and $17.2 billion (excluding $40.4 billion of forward-starting swap agreements) at December 31, 2019. 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, 2021, interest rate swap agreements with notional amounts of $13.35 billion were serving as cash flow hedges of interest payments associated with variable rate commercial real estate loans, compared with $17.35 billion at December 31, 2020 and $13.35 billion at December 31, 2019. Interest rate swap agreements with notional amounts of $1.65 billion at each of December 31, 2021 and 2020, and $3.80 billion at December 31, 2019 were serving as fair value hedges of fixed rate long-term borrowings. The Company has entered into the forward- starting interest rate swap 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. The amounts of hedge ineffectiveness recognized in 2021, 2020 and 2019 were not material to the Company’s consolidated results of operations. In a cash flow hedge, 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. Information regarding cash flow hedges is presented in note 16 of Notes to Financial Statements. Information regarding the fair value of interest rate swap agreements and hedge ineffectiveness is presented in note 19 of Notes to Financial Statements. The changes in the fair values of the interest rate swap agreements and the hedged items primarily result from the effects of changing interest rates and 79 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 . 2021 Year Ended December 31 2020 2019 Amount Rate(a) Amount Rate(a) Amount Rate(a) (Dollars in thousands) Increase (decrease) in: Interest income .................................... $ Interest expense ................................... Net interest income/margin ................. $ 252,397 (34,810) 287,207 Average notional amount (c) .................... $18,282,192 Rate received (b)....................................... Rate paid (b).............................................. .18 %$ (.03) .20 %$ 271,971 (40,145) 312,116 $16,985,246 .22 %$ (.05) .25 %$ 13,011 15,136 (2,125) $16,248,356 1.75 % .18 % 2.51 % .67 % .01 % .02 — % 2.40 % 2.42 % (a) Computed as a percentage of average earning assets or interest-bearing liabilities. (b) Weighted-average rate paid or received on interest rate swap agreements in effect during the year. (c) Excludes forward-starting interest rate swap agreements not in effect during the year. Provision for Credit Losses As described in note 5 of Notes to Financial Statements, effective January 1, 2020 the Company 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 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 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 for credit losses by loan category resulting from the adoption of the amended guidance. 80 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 accounting guidance, the Company’s nonaccrual loan policy applied 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 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 to reflect expected credit losses that are based on economic forecasts as of each reporting date. A provision for credit loss recapture of $75 million was recorded in 2021, compared with provisions for credit losses of $800 million in 2020 and $176 million in 2019. As noted earlier, the recapture in 2021 and the significant increase in the provision in 2020 as compared with 2019 follows the adoption of accounting guidance on January 1, 2020 and reflects economic assumptions and projections that considered the macroeconomic outlook associated with the COVID-19 pandemic and subsequent recovery. 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 real estate loans for which borrowers had previously received forbearance as a result of the pandemic. Net charge-offs of loans were $192 million in 2021, $247 million in 2020 and $144 million in 2019. Net charge-offs as a percentage of average loans and leases outstanding were .20% in 2021, compared with .26% in 2020 and .16% in 2019. A summary of the Company’s loan charge- offs, provision and allowance for credit losses is presented in table 12 and in note 5 of Notes to Financial Statements. 81 Table 12 LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES 2021 2020 2019 (Dollars in thousands) 2018 2017 Allowance for credit losses beginning balance ................................................. $1,736,387 — Adoption of new accounting standard .... Charge-offs during year $1,051,071 132,457 $1,019,444 — $1,017,198 — $ 988,997 — Commercial, financial, leasing, etc. ..................................... Commercial real estate ...................... Residential real estate ........................ Consumer........................................... Total charge-offs .......................... Recoveries during year Commercial, financial, leasing, etc. ..................................... Commercial real estate ...................... Residential real estate ........................ Consumer........................................... Total recoveries ............................ Net charge-offs........................................ Provision for credit losses....................... Allowance for credit losses ending 122,651 101,306 10,904 103,293 338,154 41,082 30,651 8,857 65,403 145,993 192,161 (75,000) 135,083 35,891 10,283 152,250 333,507 15,765 4,550 7,116 58,935 86,366 247,141 800,000 58,244 12,664 12,711 154,089 237,708 24,581 3,936 8,204 56,614 93,335 144,373 176,000 60,414 12,286 15,345 143,196 231,241 27,903 21,037 6,664 45,883 101,487 129,754 132,000 64,941 7,931 20,799 130,927 224,598 21,196 12,582 8,983 42,038 84,799 139,799 168,000 balance ................................................. $1,469,226 $1,736,387 $1,051,071 $1,019,444 $1,017,198 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....................... Nonaccrual loans, at year-end............ (a) Not meaningful NM(a) 30.89% 82.03% 98.30% 83.21% .20% .26% .16% .15% .16% 1.58% 71.32% 1.76% 91.71% 1.16% 109.13% 1.15% 114.08% 1.16% 115.25% Nonaccrual loans aggregated $2.06 billion at December 31, 2021, compared with $1.89 billion and $963 million at December 31, 2020 and 2019, respectively. As a percentage of total loans and leases outstanding, nonaccrual loans represented 2.22% at December 31, 2021, compared with 1.92% and 1.06% at December 31, 2020 and 2019, respectively. The higher level of nonaccrual loans at December 31, 2021 as compared with December 31, 2020 reflects the continuing impact of the pandemic on borrowers’ ability to make contractual payments on their loans, most notably loans in the hospitality sector. The higher level at December 31, 2020 as compared with December 31, 2019 reflects the addition in 2020 of $530 million of loans associated with hotels as well as other additions that, in general, resulted from the economic conditions in 2020. A summary of nonperforming assets and certain past due, renegotiated and impaired loan data and credit quality ratios is presented in table 13. 82 Table 13 NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA December 31 2021 2020 2019 2018 2017 (Dollars in thousands) Nonaccrual loans........................................................... $2,060,083 Real estate and other foreclosed assets ......................... 23,901 Total nonperforming assets........................................... $2,083,984 Accruing loans past due 90 days or more(a)................. $ 963,399 Government guaranteed loans included in totals above: Nonaccrual loans ..................................................... $ Accruing loans past due 90 days or more(a) ........... 51,429 927,788 Renegotiated loans ........................................................ $ 230,408 Acquired accruing loans past due 90 days or more(b) .................................................................. Purchased impaired loans(c): Outstanding customer balance................................. Carrying amount ...................................................... N/A N/A N/A 1,893,299 34,668 1,927,967 859,208 963,112 85,646 1,048,758 518,728 893,608 78,375 971,983 222,527 882,598 111,910 994,508 244,405 48,820 798,121 238,994 50,891 479,829 234,424 34,667 192,443 245,367 35,677 235,489 221,513 N/A 39,632 39,750 47,418 N/A N/A 415,413 227,545 529,520 303,305 688,091 410,015 Nonaccrual loans to total loans and leases, net of unearned discount ...................................................... 2.22% 1.92% 1.06% 1.01% 1.00% Nonperforming assets to total net loans and leases and real estate and other foreclosed assets................. 2.24% 1.96% 1.15% 1.10% 1.13% Accruing loans past due 90 days or more(a) to total loans and leases, net of unearned discount ................ 1.04% .87% .57% .25% .28% (a) (b) (c) 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. Accruing loans past due 90 days or more were $963 million or 1.04% of total loans and leases at December 31, 2021 and $859 million or .87% 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. Accruing loans past due 90 days or more included loans guaranteed by government-related entities of $928 million, $798 million and $480 million at December 31, 2021, 2020 and 2019, 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 included in the amounts noted above that are guaranteed by government-related entities totaled $889 million at December 31, 2021, $764 million at December 31, 2020 and $452 million at December 31, 2019. The increase in such loans as compared with December 31, 2019 reflects loans repurchased during 2021 and 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 83 that were in the process of collection or renewal. In addition to the past due loans, the Company also has $974 million of government-guaranteed residential mortgage loans as of December 31, 2021 that are not considered delinquent because the borrower has requested and received a COVID-19 related payment deferral. In general, 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, but are not considered to be past due in accordance with the accounting treatment afforded under the CARES Act and related regulatory and financial accounting guidance as described below and in note 1 of Notes to Financial Statements. Loans that were 30-89 days past due were $846 million at December 31, 2021, compared with $662 million at December 31, 2020 and $1.2 billion at December 31, 2019. Loans that are still subject to a COVID-19 related payment deferral are classified as current in accordance with regulatory guidance and, as a result, did not contribute to incremental additions to loans categorized as 30-89 days past due. COVID-19 related modified loans that exit the deferral period and subsequently fail to make contractual payments in accordance with the modified terms are reported in the applicable delinquency classification per M&T Bank’s credit policy. Information about delinquent loans at December 31, 2021 and 2020 is included in note 4 of Notes to Financial Statements. Prior to the adoption of the new accounting standard on January 1, 2020, the Company reported purchased impaired loans. Those loans were impaired at the date of acquisition, were recorded at estimated fair value and were generally delinquent in payments, but, in accordance with GAAP, the Company 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 applies to such loans. The carrying amount of purchased impaired loans was $228 million at December 31, 2019. The direct and indirect effects of the COVID-19 pandemic resulted in a dramatic reduction in 2020 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, protected borrowers from negative credit reporting due to loan accommodations related to the pandemic, and provided 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, allowed 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 included payment deferrals (including extensions of maturity dates), covenant waivers and fee waivers. The Company worked with its customers affected by COVID-19 and 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. A summary of loans for which COVID-19 forbearances are still in effect and which are not considered past due is included in note 4 of Notes to the Financial Statements. 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 84 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 4 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 $425 million and $342 million at December 31, 2021 and December 31, 2020, respectively. Charge-offs of commercial loans and leases, net of recoveries, aggregated $82 million in 2021, $119 million in 2020 and $34 million in 2019. As a percentage of average commercial loans, those net charge-offs were .32%, .43%, and .14% in 2021, 2020 and 2019, respectively. Commercial loans and leases in nonaccrual status were $221 million at December 31, 2021, $307 million at December 31, 2020 and $347 million at December 31, 2019. Net charge-offs of commercial real estate loans totaled $71 million during 2021, compared with $31 million during 2020 and $9 million in 2019 or .19% in 2021, .08% in 2020 and .03% in 2019 of average commercial real estate loans. The higher levels of net charge-offs in 2021 and 2020 of commercial loans and commercial real estate loans reflect the impact of the pandemic on borrowers’ abilities to repay loans. In the commercial real estate portfolio, those charged-off loans were mostly associated with the retail, office building and hospitality sectors. Commercial real estate loans classified as nonaccrual were $1.2 billion at December 31, 2021, $891 million at December 31, 2020 and $195 million at December 31, 2019. Nonaccrual commercial real estate loans included construction-related loans of $114 million, $115 million and $37 million at the end of 2021, 2020 and 2019, respectively. The increase in commercial real estate loans in nonaccrual status since December 31, 2019 was largely reflective of loans in the hospitality sector. Hotel-related commercial real estate loans (including construction) in nonaccrual status at December 31, 2021 and 2020 were $696 million and $607 million, respectively. Net charge-offs of residential real estate loans were $2 million in 2021, $3 million in 2020 and $5 million in 2019 representing .01% of average residential real estate loans in 2021, compared with .02% in 2020 and .03% in 2019. Residential real estate loans in nonaccrual status at December 31, 2021 were $479 million, compared with $513 million and $319 million at December 31, 2020 and 2019, respectively. Nonaccrual limited documentation first mortgage loans aggregated $123 million at December 31, 2021, compared with $147 million and $83 million at December 31, 2020 and 2019, 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 $920 million at December 31, 2021, $793 million at December 31, 2020 and $487 million at December 31, 2019. 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 that are still in effect 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, 2021 is presented in table 14. 85 Table 14 SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA December 31, 2021 Nonaccrual Year Ended December 31, 2021 Net Charge-offs (Recoveries) Outstanding Balances Percent of Outstanding Balances (Dollars in thousands) Balances Balances Percent of Average Outstanding Balances Residential mortgages: New York.............................................................................. $ 5,198,808 1,036,187 Pennsylvania ......................................................................... 1,434,464 Maryland ............................................................................... 2,279,024 New Jersey ............................................................................ 1,202,368 Other Mid-Atlantic (a) .......................................................... Other ..................................................................................... 3,602,456 Total ...................................................................................... $ 14,753,307 Residential construction loans: New York.............................................................................. $ Pennsylvania ......................................................................... Maryland ............................................................................... New Jersey ............................................................................ Other Mid-Atlantic (a) .......................................................... Other ..................................................................................... Total ...................................................................................... $ 19,292 5,727 7,466 10,017 11,019 3,543 57,064 Limited documentation first mortgages: 579,421 New York.............................................................................. $ 23,098 Pennsylvania ......................................................................... 13,880 Maryland ............................................................................... 467,010 New Jersey ............................................................................ 11,681 Other Mid-Atlantic (a) .......................................................... Other ..................................................................................... 168,984 Total ...................................................................................... $ 1,264,074 First lien home equity loans and lines of credit: 910,565 New York.............................................................................. $ 550,228 Pennsylvania ......................................................................... 447,690 Maryland ............................................................................... 64,951 New Jersey ............................................................................ 160,577 Other Mid-Atlantic (a) .......................................................... Other ..................................................................................... 23,459 Total ...................................................................................... $ 2,157,470 Junior lien home equity loans and lines of credit: 553,611 New York.............................................................................. $ 189,189 Pennsylvania ......................................................................... 350,891 Maryland ............................................................................... 95,785 New Jersey ............................................................................ 173,894 Other Mid-Atlantic (a) .......................................................... Other ..................................................................................... 39,047 Total ...................................................................................... $ 1,402,417 Limited documentation junior lien: New York.............................................................................. $ Pennsylvania ......................................................................... Maryland ............................................................................... New Jersey ............................................................................ Other Mid-Atlantic (a) .......................................................... Other ..................................................................................... Total ...................................................................................... $ 372 149 515 115 248 1,305 2,704 $ $ $ $ $ $ $ $ $ $ $ $ 136,280 13,670 15,996 91,744 21,645 76,149 355,484 146 228 — — — — 374 54,636 3,471 1,970 37,523 1,393 23,895 122,888 16,600 9,372 9,358 621 2,610 1,228 39,789 13,676 2,616 9,388 1,105 3,271 459 30,515 21 24 25 — 32 82 184 (a) Includes Delaware, Virginia, West Virginia and the District of Columbia. 86 2.62% 1.32 1.12 4.03 1.80 2.11 2.41% .76% 3.98 — — — — .66% 9.43% 15.03 14.19 8.03 11.93 14.14 9.72% 1.82% 1.70 2.09 .96 1.63 5.23 1.84% 2.47% 1.38 2.68 1.15 1.88 1.18 2.18% 5.65% 16.11 4.85 — 12.90 6.28 6.80% $ $ $ $ $ $ $ $ 1,312 465 600 (60) (19) 583 2,881 — — — — — — — 53 21 (27) — (2) (879) (834) 372 428 305 (11) 25 41 1,160 $ (595) (599) (1,222) (1,485) 59 (416) $ (4,258) $ $ (7) 10 (1) — — (182) (180) .03% .04 .04 — — .02 .02% —% — — — — — —% .01% .07 (.16) — (.02) (.45) (.06%) .04% .07 .07 (.02) .01 .15 .05% (.10%) (.30) (.32) (1.59) .03 (1.04) (.29%) (1.85%) 6.08 (.16) — — (9.56) (4.95%) Net charge-offs of consumer loans aggregated $38 million in 2021, compared with $93 million in 2020 and $97 million in 2019. As a percentage of average consumer loans those net charge-offs were .22% in 2021, .59% in 2020 and .67% in 2019. Included in net charge-offs of consumer loans were: net recoveries of automobile loans of $2 million in 2021, compared with net charge-offs of $22 million in 2020 and $24 million in 2019; recreational finance loan net charge-offs of $13 million, $27 million and $26 million during 2021, 2020 and 2019, respectively; and net recoveries of home equity loans and lines of credit secured by one-to-four family residential properties of $3 million in 2021, compared with net charge-offs of $3 million in 2020 and $6 million in 2019. The reduced level of net charge-offs of consumer loans in 2021 reflects the improving economy, in general, and the level of prices associated with motor vehicles, recreational vehicles and residential real estate. Nonaccrual consumer loans were $177 million at December 31, 2021, compared with $183 million and $102 million at December 31, 2020 and 2019, respectively. Included in nonaccrual consumer loans at the 2021, 2020 and 2019 year-ends were: automobile loans of $34 million, $39 million and $21 million, respectively; recreational finance loans of $28 million, $26 million and $14 million, respectively; and outstanding balances of home equity loans and lines of credit of $70 million, $79 million and $63 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, 2021 is presented in table 14. Information about past due and nonaccrual loans as of December 31, 2021 and 2020 is also included in note 5 of Notes to Financial Statements. Real estate and other foreclosed assets totaled $24 million at December 31, 2021, compared with $35 million at December 31, 2020 and $86 million at December 31, 2019. The decline in 2020 and 2021 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 2021, 2020 or 2019. At December 31, 2021, foreclosed assets are comprised entirely of the Company’s holding of residential real estate-related properties. Beginning in 2020, management determined the allowance for credit losses under amended 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 can be found in note 5 of Notes to Financial Statements. 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 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. Despite recent improvements in macroeconomic forecasts, at the time of the Company’s analysis regarding the determination of the allowance for credit losses as of December 31, 2021, concerns persisted about the somewhat uneven and incomplete recovery evident in the economy, the emergence of new COVID-19 variants (including the recent emerging variant commonly referred to as Omicron) that may further disrupt a recovery, the ultimate effectiveness of economic stimulus being provided by the U.S. government that has contributed to increased deficit spending and raised inflation concerns; disruptions to supply chains and the related impacts to businesses and consumers; 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 borrowers, in particular commercial real estate borrowers may continue to be negatively affected by pandemic-related and general economic conditions; and continued stagnant population and economic growth in the upstate New York and central Pennsylvania regions (approximately 48% of the Company’s loans and leases are to customers in New York State and Pennsylvania) that could see lingering effects of the economic 87 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 while specific loans determined to have an elevated level of credit risk are classified as “criticized.” 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 2021 and 2020, the Company re-graded significant portions of its commercial loans and commercial real estate loans based on financial results and projections of specific borrowers, particularly those that were affected by COVID-19 impacts. Criticized commercial loans and commercial real estate loans totaled $9.0 billion at December 31, 2021, compared with $7.2 billion at December 31, 2020 and $2.5 billion at December 31, 2019. The rise in criticized loans reflects the impact of the pandemic on borrowers’ financial condition and the re-grading of loans by the Company, and is reflective of the provision for expected credit losses recorded by the Company in 2020 as the pandemic unfolded. The increases in such loans since December 31, 2020 were largely attributable to investor-owned permanent commercial real estate loans in the hotel, office and healthcare sectors and commercial real estate construction loans in the hotel and healthcare sectors. On the overall basis, weighted-average loan-to-stabilized value (“LTV”) ratios for investor-owned commercial real estate properties do not vary significantly by asset class or sector, and at December 31, 2021 were generally within the range of 55% to 65% with an overall weighted-average LTV ratio of approximately 57%. Investor-owned commercial real estate loans comprised $7.0 billion, or 78% of total criticized loans of $9.0 billion at December 31, 2021. The COVID-19 pandemic and related governmental responses led to a significant reduction in economic activity that was detrimental to many borrowers across the Company’s geographic regions, particularly commercial borrowers in the hotel, health care-related and office sectors and residential mortgage borrowers. Many of these borrowers have been and could likely continue to be adversely impacted by the economic effects of the COVID-19 pandemic. COVID-19 related modifications with payment deferrals at December 31, 2021 totaled $1.2 billion and consisted predominantly of residential real estate loans, including $974 million of government-guaranteed loans. Substantially all of those deferrals are scheduled to expire during 2022 and/or are in the process of formal modification of repayment terms for previously deferred payments. As commercial loans and commercial real estate loans were approved for modifications related to COVID-19, 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 department personnel 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 by COVID-19. The Company’s policy is that, at least annually, updated financial information is obtained from commercial borrowers associated with pass grade loans and additional analysis 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 88 timing and extent of potential losses, considering collateral valuation and other factors, and the Company’s potential courses of action are contemplated. 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, 2021, approximately 61% 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 56% (or approximately 22% 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 considers 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, 2021, approximately 85% of all outstanding balances of home equity lines of credit related to lines that were still in the draw period, the weighted-average remaining draw periods were approximately five years, and approximately 10% were making contractually allowed payments that do not include any repayment of principal. Factors that influence the Company’s credit loss experience include overall economic conditions affecting businesses and consumers, generally, but also residential and commercial real estate valuations, in particular, given the size of the Company’s real estate loan portfolios. Commercial real estate valuations can be highly subjective, as they are based upon many assumptions. Such valuations can be significantly affected over relatively short periods of time by changes in business climate, economic conditions, interest rates and, in many cases, the results of operations of businesses and other occupants of the real property. Similarly, residential real estate valuations can be impacted by housing trends, the availability of financing at reasonable interest rates, and general economic conditions affecting consumers. 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 has included utilizing macro-economic assumptions to project losses over a two-year reasonable and supportable forecast period. Subsequent to the forecast period, the Company 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. Among the assumptions utilized as of December 31, 2021 was that the national unemployment rate will average 4.6% through the first year of the reasonable and 89 supportable forecast period before gradually improving to 3.7% in the latter half of 2023. The forecast also assumed gross domestic product grows during 2022 at a 3.1% annual rate and during 2023 at a 2.7% average rate. Commercial real estate and residential real estate prices were assumed to cumulatively grow 11.1% and 5.9%, respectively, over the two-year reasonable and supportable forecast period. The assumptions utilized in estimating the allowance for credit losses as of December 31, 2020 included an estimated unemployment rate averaging 6.9% through 2021 followed by a gradual return to long-term historical averages by the end of 2022. Gross domestic product was assumed 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 approximately 6.8% in 2021, followed by improvement. Residential real estate prices were not assumed to fluctuate significantly. In most instances the actual macroeconomic conditions experienced in 2021 were favorable in comparison to the forecasts made at December 31, 2020. Such improvements contributed to the recapture of provision for credit losses during 2021 of $75 million. The assumptions utilized as of January 1, 2020 at the time of the 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, 2021, December 31, 2020 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, and other risk factors that influence its loss estimation process. With respect to economic forecasts, the Company assessed the likelihood of alternative economic scenarios during the two-year reasonable and supportable time period. 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. Forward looking economic forecasts are subject to inherent imprecision and future events may differ materially from actual events. In consideration of such uncertainty, the following alternative economic scenarios were considered to estimate the possible impact on modeled credit losses. • A potential downside economic scenario assumed the unemployment rate reaches 9.0% in 2022 before declining to 7.1% by the end of the reasonable and supportable forecast period. The scenario also assumed gross domestic product contracts 2.1% in 2022 before recovering to recently experienced levels by the third quarter of 2023, commercial real estate prices cumulatively decline 12.4% by the end of 2023, and residential real estate prices decline modestly in 2022 and remain flat during 2023. • A potential upside economic scenario assumed the unemployment rate declines to 3.0% in 2022’s fourth quarter where it stays for the remainder of the reasonable and supportable forecast period. The scenario also assumes gross domestic product grows 4.8% in 2022 and 1.5% in 2023, while commercial real estate and residential real estate prices cumulatively rise 16.9% and 7.6%, respectively, over the two-year reasonable and supportable forecast period. The scenario analyses resulted in an additional $222 million of modeled credit losses under the assumptions of the downside economic scenario, whereas under the assumptions of the upside economic scenario a $56 million reduction in modeled credit losses could occur. These examples are only a few of the numerous possible economic scenarios that could be utilized in assessing the sensitivity of expected credit losses. The estimated impacts on credit losses in such scenarios pertain 90 only to modeled credit losses and do not include consideration of other factors the Company may evaluate when determining its allowance for credit losses. As a result, it is possible that the Company may, at another point in time, reach different conclusions regarding credit loss estimates. The Company’s process for determining the allowance for credit losses undergoes quarterly and periodic evaluations by independent risk management personnel, which among many other considerations, evaluate the reasonableness of management’s methodology and significant assumptions. Further information about the Company’s methodology to estimate expected credit losses is included in note 5 of Notes to Financial Statements. 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 current 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, the 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. A comparative allocation of the allowance for credit losses for each of the past five year-ends is presented in table 15. Amounts were allocated to specific loan categories based on information available to management at the time of each year-end assessment and using the 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. Furthermore, the Company’s allowance is general in nature and is available to absorb losses from any loan or lease category. Additional information about the allowance for credit losses is included in note 5 of Notes to Financial Statements. Table 15 ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES December 31 2021 2020 2019 (Dollars in thousands) 2018 2017 Commercial, financial, leasing, etc. ................ $ 283,899 557,239 Commercial real estate .................................... 71,726 Residential real estate ...................................... 556,362 Consumer......................................................... — Unallocated...................................................... Total ........................................................... $1,469,226 $ 405,846 670,719 103,590 556,232 — $1,736,387 $ 366,094 322,201 56,033 229,118 77,625 $1,051,071 $ 330,055 341,655 69,125 200,564 78,045 $1,019,444 $ 328,599 374,085 65,405 170,809 78,300 $1,017,198 As a Percentage of Loans and Leases Outstanding, Net of Unearned Discount Commercial, financial, leasing, etc. ................ Commercial real estate .................................... Residential real estate ...................................... Consumer......................................................... Total................................................................. 1.21% 1.57 .45 3.10 1.58 1.47% 1.78 .62 3.36 1.76 1.54% .91 .35 1.49 1.16 1.44% .99 .40 1.44 1.15 1.51% 1.12 .33 1.29 1.16 91 Management believes that the allowance for credit losses at December 31, 2021 appropriately reflected expected credit losses inherent in the portfolio as of that date. The allowance for credit losses totaled $1.47 billion at December 31, 2021, $1.74 billion at December 31, 2020, and $1.18 billion at January 1, 2020 when amended guidance became effective. The allowance for credit losses was $1.05 billion at December 31, 2019. The decrease in the allowance in 2021 reflects improved financial forecasts as compared with those as of December 31, 2020. The increase in the allowance in 2020 as compared with 2019 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 1.58% at December 31, 2021, 1.76% at December 31, 2020 and 1.16% at December 31, 2019. Excluding the impact of $1.2 billion and $5.4 billion of government- guaranteed PPP loans outstanding at December 31, 2021 and December 31, 2020, respectively, the allowance as a percentage of total loans and leases was 1.60% and 1.86%, respectively. 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 ratio of the allowance for credit losses to total nonaccrual loans at the end of 2021, 2020 and 2019 was 71%, 92% and 109%, respectively. Given the Company’s general position as a secured lender and its practice of charging off loan balances when collection is deemed doubtful, that ratio and changes in the ratio are generally not an indicative measure of the adequacy of the Company’s allowance for credit losses, nor does management rely upon that ratio in assessing the adequacy of the Company’s allowance for credit losses. The Company had no concentrations of credit extended to any specific industry that exceeded 10% of total loans at December 31, 2021, however residential real estate loans comprised approximately 17% of the loan portfolio. Outstanding loans to foreign borrowers aggregated $197 million at December 31, 2021, or .2% of total loans and leases. Other Income Other income aggregated $2.17 billion in 2021, up from $2.09 billion and $2.06 billion in 2020 and 2019, respectively. The rise in other income from 2020 to 2021 was largely attributable to higher trust income, service charges on deposit accounts, brokerage services income, merchant discount and credit card fees and letter of credit and other credit-related fees, partially offset by lower trading account and foreign exchange gains, higher valuation losses on investment securities and a decline in the level of distributions from BLG. 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. Mortgage banking revenues aggregated $571 million in 2021, $567 million in 2020 and $458 million in 2019. Mortgage banking revenues are comprised of both residential and commercial mortgage banking activities. The Company’s involvement in commercial mortgage banking activities includes the origination, sales and servicing of loans under the multifamily loan programs of Fannie Mae, Freddie Mac and the U.S. Department of Housing and Urban Development. Residential mortgage banking revenues, consisting of realized gains from sales of residential real estate loans and loan servicing rights, unrealized gains and losses on residential real estate loans 92 held for sale and related commitments, residential real estate loan servicing fees, and other residential real estate loan-related fees and income, were $406 million in 2021, $424 million in 2020 and $317 million in 2019. The higher residential mortgage banking revenues in 2021 and 2020 as compared with 2019 resulted from higher gains associated with loans held for sale, reflecting higher origination volumes and improved margins. Late in the third quarter of 2021, the Company began to originate the majority of its residential real estate loans to retain in its loan portfolio rather than for sale, contributing to the reduction in residential mortgage banking revenues from 2020. New commitments to originate residential real estate loans to be sold were approximately $3.9 billion in 2021, compared with $4.5 billion in 2020 and $2.7 billion in 2019. The decrease in 2021 from 2020 reflects the retention of originated residential real estate loans beginning late in the third quarter of 2021. 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 $164 million in 2021, $191 million in 2020 and $72 million in 2019. Loans held for sale that were secured by residential real estate totaled $474 million and $777 million at December 31, 2021 and 2020, respectively. Commitments to sell residential real estate loans and commitments to originate residential real estate loans for sale at pre-determined rates totaled $617 million and $233 million, respectively, at December 31, 2021, $1.47 billion and $1.03 billion, respectively, at December 31, 2020 and $713 million and $423 million, respectively, at December 31, 2019. Net recognized unrealized gains on residential real estate loans held for sale, commitments to sell loans and commitments to originate loans for sale were $10 million at December 31, 2021, compared with $52 million at December 31, 2020 and $12 million at December 31, 2019. Changes in such net unrealized gains are recorded in mortgage banking revenues and resulted in a net decrease in revenue of $16 million in 2021, compared with net increases of $40 million and $5 million in 2020 and 2019, respectively. Revenues from servicing residential real estate loans for others totaled $242 million in 2021 compared with $233 million in 2020 and $245 million in 2019. Residential real estate loans serviced for others aggregated $97.9 billion at December 31, 2021, $94.4 billion a year earlier and $95.1 billion at December 31, 2019. Reflected in residential real estate loans serviced for others were loans sub-serviced for others of $74.7 billion, $68.1 billion and $62.8 billion at December 31, 2021, 2020 and 2019, respectively. Revenues earned for sub-servicing loans totaled $153 million in 2021, compared with $129 million in 2020 and $125 million in 2019. The contractual servicing rights associated with loans sub-serviced by the Company were predominantly held by affiliates of BLG. Information about the Company’s relationship with BLG and its affiliates is included in note 25 of Notes to Financial Statements. Capitalized residential mortgage servicing assets totaled $217 million at December 31, 2021 (net of a $24 million valuation allowance), compared with $201 million (net of a $30 million valuation allowance) and $237 million (net of a $7 million valuation allowance) at December 31, 2020 and 2019, respectively. Reflecting changes in fair value of some of the servicing rights in comparison to the amortized cost of such rights, a $6 million reversal of the valuation allowance for impairment of capitalized residential mortgage servicing rights was recorded in 2021, compared with provisions of $23 million and $7 million recorded in 2020 and 2019, respectively. Additional information about the Company’s capitalized residential mortgage servicing assets, including information about the calculation of estimated fair value, is presented in note 7 of Notes to Financial Statements. Commercial mortgage banking revenues totaled $165 million in 2021, compared with $143 million in 2020 and $141 million in 2019. Included in such amounts were revenues from loan origination and sales activities of $89 million in 2021, $84 million in 2020 and $81 million in 2019. Commercial real estate loans originated for sale to other investors totaled approximately $4.0 billion 93 in each of 2021 and 2019, compared with $3.4 billion in 2020. Loan servicing revenues totaled $76 million in 2021, $59 million in 2020 and $60 million in 2019. The higher servicing revenues in 2021 were reflective of fees received from customers who repaid loans prior to maturity. Capitalized commercial mortgage servicing assets were $133 million at each of December 31, 2021 and December 31, 2020 and $131 million at December 31, 2019. Commercial real estate loans serviced for other investors totaled $23.7 billion at December 31, 2021, $22.2 billion at December 31, 2020 and $21.0 billion at December 31, 2019, and included $4.0 billion at each of December 31, 2021 and December 31, 2020 and $3.9 billion at December 31, 2019 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 $3.5 billion at December 31, 2021, $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 $751 million and $325 million, respectively, at December 31, 2021, $641 million and $364 million, respectively, at December 31, 2020 and $193 million and $164 million, respectively, at December 31, 2019. Commercial real estate loans held for sale were $425 million, $278 million and $28 million at December 31, 2021, 2020 and 2019, respectively. The higher balances at December 31, 2021 and 2020, as compared with December 31, 2019, reflect loans originated later in each year that had not been delivered to investors by year end. Service charges on deposit accounts totaled $402 million in 2021, compared with $371 million in 2020 and $433 million in 2019. The lower service charges in 2020 as compared with 2021 and 2019 reflect reduced consumer service charges, predominantly resulting from COVID-19 related fee waivers and lower customer transaction activity. The decrease from 2019 to 2020 also reflected lower commercial service charges, largely due to higher customer deposit levels that could be used by those customers to offset transaction related fees. In February 2022, the Company announced it will be eliminating non-sufficient funds fees and overdraft protection transfer charges from linked deposit accounts as well as reducing overdraft fees and limiting daily fee assessments to once per day. The Company estimates these changes will reduce income from service charges on deposit accounts by approximately $40 million in 2022. Trust income includes fees related to two significant businesses. The Institutional Client Services (“ICS”) business provides a variety of trustee, agency, investment management and administrative services for corporations and institutions, investment bankers, corporate tax, finance and legal executives, and other institutional clients who: (i) use capital markets financing structures; (ii) use independent trustees to hold retirement plan and other assets; and (iii) need investment and cash management services. The Wealth Advisory Services (“WAS”) business 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 $645 million in 2021, compared with $602 million in 2020 and $573 million in 2019. Revenues associated with the ICS business were $375 million in 2021, $342 million in 2020 and $311 million in 2019. The increases in ICS revenue in 2021 and 2020 reflect sales activities and increased retirement services income resulting from growth in collective fund balances. Revenues attributable to WAS totaled $255 million in 2021 and $233 million in each of 2020 and 2019. As compared with the previous two years, revenue in 2021 reflected an increase related to equity market performance. Revenue in 2021 and 2020 was offset by proprietary fund money market fee waivers as a result of the low interest rate environment. Trust assets under management were $165.6 billion and $135.8 billion at December 31, 2021 and 2020, respectively. Trust assets under management include the Company’s proprietary mutual funds’ assets of $13.2 billion at December 31, 2021 and $12.9 billion at December 31, 2020. Additional trust income from investment management activities was $15 million, $27 million and $29 million in 2021, 2020 and 2019, respectively, and includes fees earned from retail customer investment accounts. 94 Brokerage services income, which includes revenues from the sale of mutual funds and annuities and securities brokerage fees and, since June 2021, sales of select investment products of LPL Financial (as described below), totaled $63 million in 2021, compared with $47 million in 2020 and $49 million in 2019. The increase in brokerage services income in 2021 reflects a change in June 2021 in product delivery to retail brokerage and certain trust customers related to the LPL Financial relationship. Revenues associated with the sale of investment products of LPL Financial, an independent financial services broker, are included in “brokerage services income.” Prior to the transition to LPL Financial’s product platform, revenues earned by the Company from providing those customers with proprietary trust products managed by the Company were reported as trust income. Trading account and foreign exchange activity resulted in gains of $24 million in 2021, $41 million in 2020 and $62 million in 2019. The decline in gains resulted predominantly from decreased activity related to interest rate swap agreements with commercial customers. The Company enters into interest rate swap agreements 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 19 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 $21 million and $9 million in 2021 and 2020, respectively, 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 $483 million in 2021, compared with $471 million in 2020 and $469 million in 2019. Comparing 2021 with 2020, higher merchant discount, credit card interchange and letter of credit and credit-related fees, largely loan syndication fees, were partially offset by lower income received from BLG during 2021. Comparing 2020 with 2019, higher income received from BLG during 2020 was offset by declines in letter of credit and credit-related fees, predominantly loan syndication fees. Included in other revenues from operations were the following significant components. Letter of credit and other credit-related fees totaled $128 million, $109 million and $124 million in 2021, 2020 and 2019, respectively. The increased level of such fees in 2021 and 2019 resulted largely from higher loan syndication fees as compared with 2020. Revenues from merchant discount and credit card fees were $140 million in 2021, $111 million in 2020 and $117 million in 2019. The higher level of such revenues in 2021 was the result of increased customer transaction activity reflecting lessened pandemic related restrictions on business and customer activity as compared with 2020. Tax-exempt income earned from bank owned life insurance, which includes increases in the cash surrender value of life insurance policies and benefits received, aggregated $47 million in 2021, $48 million in 2020 and $50 million in 2019. Insurance-related sales commissions and other revenues totaled $47 million in each of 2021, 2020 and 2019. Automated teller machine usage fees aggregated $11 million in 2021, $9 million in 2020 and $13 million in 2019. M&T’s investment in BLG resulted in cash distributions declared and paid by BLG that are included in “other revenues from operations” of $30 million in 2021, $53 million in 2020 and $37 million in 2019. During 2017, the operating losses of BLG resulted in M&T reducing the carrying value of its investment in BLG to zero. Subsequently, M&T has received cash distributions when declared by BLG that result 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 its affiliates that provide asset management and other services that are available for distribution to BLG’s owners, including M&T. Information about the 95 Company’s relationship with BLG and its affiliates is included in note 25 of Notes to Financial Statements. Other Expense Other expense aggregated $3.61 billion in 2021, compared with $3.39 billion in 2020 and $3.47 billion in 2019. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of $10 million, $15 million and $19 million in 2021, 2020 and 2019, respectively and merger-related expenses of $44 million in 2021. No merger-related expenses were incurred in 2020 and 2019. Exclusive of those nonoperating expenses, noninterest operating expenses aggregated $3.56 billion in 2021, $3.37 billion in 2020 and $3.45 billion in 2019. The higher level of noninterest operating expenses in 2021 as compared with the prior year reflected increased costs for salaries and employee benefits (predominantly incentive compensation), outside data processing and software, FDIC assessments, and professional services expenses, partially offset by a reduction in the valuation allowance for capitalized mortgage servicing rights as compared to an increase in 2020. Contributing to the lower level of noninterest operating expense in 2020 as compared with 2019 were decreased costs for professional 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. Salaries and employee benefits expense aggregated $2.05 billion in 2021, compared with $1.95 billion and $1.90 billion in 2020 and 2019, respectively. The higher levels of expenses in 2021 as compared with 2020 reflect the impact of higher incentive compensation, including commissions, as well as merit and other increases for employees. Stock-based compensation totaled $85 million in 2021, compared with $80 million in 2020 and $76 million in 2019. The number of full-time equivalent employees were 17,421 and 17,076 at December 31, 2021 and 2020, respectively, compared with 17,503 at December 31, 2019. 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 $128 million in 2021, $118 million in 2020 and $76 million in 2019. The amounts recorded in salaries and employee benefits expense and other costs of operations, respectively, from the preceding sentence were as follows: $125 million and $3 million in 2021; $118 million and ($329,000) in 2020; and $98 million and ($22) million in 2019. The Company sponsors both defined benefit and defined contribution pension plans. Pension benefit expense for those plans was $68 million in 2021, $60 million in 2020 and $31 million in 2019. Components of pension expense include the amortization of net unrecognized gains and losses included in accumulated other comprehensive income. Such net unrecognized gains and losses have generally been amortized over the average remaining service periods of active participants in the plan. If all or substantially all of the plan’s participants are inactive, GAAP provides for the average remaining life expectancy of the participants to be used instead of average remaining service periods. Substantially all of the participants in the Company’s qualified defined benefit pension plan were inactive and, beginning in 2022, the average remaining life expectancy will be utilized prospectively to amortize the net unrecognized gains and losses of the Plan existent at each measurement date. The change is expected to increase the amortization period by approximately sixteen years beginning in 2022 and, accordingly, reduce the amount of amortization of unrecognized losses recorded in the 2022 net periodic pension expense that otherwise would have been recorded by approximately $35 million. 96 Information about the Company’s pension plans, including significant assumptions utilized in completing actuarial calculations for the plans, is included in note 13 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 $63 million in 2021, $62 million in 2020 and $48 million in 2019. Excluding the nonoperating expense items already noted, nonpersonnel operating expenses were $1.51 billion in 2021, $1.42 billion in 2020 and $1.55 billion in 2019. The increase in such expenses in 2021 as compared with 2020 reflects a rise in expenditures for outside data processing and software, FDIC assessments and professional services, partially offset by a reduction in the valuation allowance for capitalized mortgage servicing rights as compared to an increase in 2020. The decrease in nonpersonnel operating expenses from 2019 to 2020 reflected lower expenditures for professional services, legal-related matters, advertising and marketing, and travel and entertainment. Additionally, a $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. 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. The Company made contributions to The M&T Charitable Foundation of $28 million and $8 million in 2021 and 2020, respectively. There were no similar contributions in 2019. Income Taxes The provision for income taxes was $596 million in 2021, $416 million in 2020 and $618 million in 2019. The effective tax rates were 24.3% in each of 2021 and 2019 and 23.5% in 2020. The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income, the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact of any large discrete or infrequently occurring items. The Company’s effective tax rate in future periods will also be affected by any change in income tax laws or regulations and interpretations of income tax regulations that differ from the Company’s interpretations by any of various tax authorities that may examine tax returns filed by M&T or any of its subsidiaries. Information about amounts accrued for uncertain tax positions and a reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to pre-tax income is provided in note 14 of Notes to Financial Statements. International Activities Assets and revenues associated with international activities represent less than 1% of the Company’s consolidated assets and revenues. International assets included $197 million and $170 million of loans to foreign borrowers at December 31, 2021 and 2020, respectively. During the second quarter of 2021, the Company introduced a new interest-bearing sweep product (included in savings and interest-bearing deposits) that replaced the Eurodollar sweep product previously recorded as Cayman Islands office deposits. As a result, there were no outstanding deposits at the Cayman Islands office at December 31, 2021 and the office is closed. Deposits in the Company’s office in the Cayman Islands aggregated $652 million at December 31, 2020. Loans at M&T Bank’s commercial banking office in Ontario, Canada included in international assets as of December 31, 2021 and 2020 totaled $153 million and $149 million, respectively. Deposits at that office were $32 million at each of 97 December 31, 2021 and December 31, 2020. The Company also offers trust-related services in Europe. Revenues from providing such services during 2021, 2020 and 2019 were approximately $38 million, $36 million and $32 million, respectively. Liquidity, Market Risk, and Interest Rate Sensitivity As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk. Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future obligations, including demands for loans and deposit withdrawals, funding operating costs, and other corporate purposes. Liquidity risk arises whenever the maturities of financial instruments included in assets and liabilities differ. The most significant source of funding for the Company is core deposits, which are generated from a large base of consumer, corporate and institutional customers. That customer base has, over the past several years, become more geographically diverse as a result of 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 90% of the Company’s earning assets at December 31, 2021, compared with 88% at December 31, 2020 and 83% at December 31, 2019. 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 and longer-term borrowings. At December 31, 2021, M&T Bank had short-term and long-term credit facilities with the FHLBs aggregating $16.2 billion. Outstanding borrowings under FHLB credit facilities totaled $2 million at each of December 31, 2021 and 2020. Such borrowings were secured by loans and investment securities. M&T Bank had an available line of credit with the FRB of New York that totaled approximately $13.8 billion at December 31, 2021. 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, 2021 and 2020. Senior notes issued and outstanding totaled $2.4 billion at December 31, 2021 and $2.8 billion at December 31, 2020. On January 25, 2021, $350 million of variable rate senior notes of M&T Bank matured. In addition, on March 1, 2021, M&T Bank redeemed $500 million of subordinated notes that were due to mature on December 1, 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 preferred securities have been removed from the definition of Tier 1 capital but, similar to other subordinated capital notes, are considered Tier 2 capital and are includable in total regulatory capital. Information about the Company’s borrowings is included in note 9 of Notes to Financial Statements. The Company has also benefited from the placement of brokered deposits. The Company has brokered savings and interest-bearing checking deposit accounts that aggregated $3.2 billion and $4.5 billion at December 31, 2021 and 2020, respectively. Brokered time deposits were not a significant source of funding as of those dates. The Company’s ability to obtain funding from these sources could be negatively impacted should the Company experience a substantial deterioration in its financial condition or its debt ratings, or should the availability of short-term funding become restricted due to a disruption in the financial markets. The Company attempts to quantify such credit-event risk by modeling scenarios that estimate the liquidity impact resulting from a short-term ratings downgrade over various grading levels. Such impact is estimated by attempting to measure the effect on available unsecured lines of credit, available capacity from secured borrowing sources and securitizable assets. Information about the credit ratings 98 of M&T and M&T Bank is presented in table 16. Additional information regarding the terms and maturities of all of the Company’s short-term and long-term borrowings is provided in note 9 of Notes to Financial Statements. In addition to deposits and borrowings, other sources of liquidity include maturities of investment securities and other earning assets, repayments of loans and investment securities, and cash generated from operations, such as fees collected for services. Table 16 DEBT RATINGS Moody’s Standard and Poor’s Fitch M&T Bank Corporation Senior debt.................................................................................. Subordinated debt....................................................................... A3 A3 M&T Bank Short-term deposits..................................................................... Long-term deposits..................................................................... Senior debt.................................................................................. Subordinated debt....................................................................... Prime-1 Aa3 A3 A3 BBB+ BBB A-2 A- A- BBB+ A A- F1 A+ A A- Certain customers of the Company obtain financing through the issuance of variable rate demand bonds (“VRDBs”). The VRDBs are generally enhanced by letters of credit provided by M&T Bank. M&T Bank oftentimes acts as remarketing agent for the VRDBs and, at its discretion, may from time- to-time own some of the VRDBs while such instruments are remarketed. When this occurs, the VRDBs are classified as trading account assets in the Company’s consolidated balance sheet. Nevertheless, M&T Bank is not contractually obligated to purchase the VRDBs. The value of VRDBs in the Company’s trading account was not material at December 31, 2021 or December 31, 2020. The total amount of VRDBs outstanding backed by M&T Bank letters of credit was $662 million and $725 million at December 31, 2021 and 2020, respectively. M&T Bank also serves as remarketing agent for most of those bonds. 99 Table 17 MATURITY DISTRIBUTION OF LOANS AND LEASES(a) December 31, 2021 Demand 2022 2023 - 2026 (In thousands) 2027 - 2036 After 2036 Commercial, financial, leasing, etc. ... $5,492,359 $ 4,219,626 $12,395,898 $ 1,170,961 $ 119,074 89,210 Commercial real estate....................... 2,960,580 5,987,321 6,008,251 Residential real estate......................... 6,120,006 3,377,688 Consumer ........................................... Total .............................................. $6,142,801 $19,777,966 $39,300,050 $16,238,868 $9,594,223 100,704 13,080,694 18,058,994 2,683,556 852,195 46,966 6,161,602 1,625,451 502,772 Floating or adjustable interest rates: Commercial, financial, leasing, etc.. Commercial real estate .................... Residential real estate ...................... Consumer......................................... Fixed or predetermined interest rates: Commercial, financial, leasing, etc.. Commercial real estate .................... Residential real estate ...................... Consumer......................................... Total .............................................. $ 7,377,411 $ 12,468,282 449,620 650,713 298,217 $ 2,127 36,038 1,580,905 1,109,820 1,348,893 312,697 2,535,347 5,018,487 5,590,712 2,233,936 5,510,889 116,947 872,744 1,379,675 53,172 4,877,501 4,659,358 842,341 5,807,309 $39,300,050 $16,238,868 $9,594,223 (a) The data do not include nonaccrual loans. 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, 2021 are summarized in table 18. Off-balance sheet commitments to customers may impact liquidity, including commitments to extend credit, standby letters of credit, commercial letters of credit, financial guarantees and indemnification contracts, and commitments to sell real estate loans. Because many of these commitments or contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. Further discussion of these commitments is provided in note 22 of Notes to Financial Statements. Table 18 summarizes the Company’s other commitments as of December 31, 2021 and the timing of the expiration of such commitments. 100 Table 18 CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS December 31, 2021 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................... $ 2,300,825 47,046 Short-term borrowings..... 903,864 Long-term borrowings ..... 94,566 Operating leases............... Other ................................ 279,570 Total ................................. $ 3,625,871 Other commitments Commitments to extend $ 376,848 — 775,636 145,692 109,568 $1,407,744 $ 130,290 — 749,740 91,454 17,005 $ 988,489 $ — $ 2,807,963 — 47,046 3,485,369 1,056,129 431,112 99,400 424,544 18,401 $ 7,196,034 $ 1,173,930 credit (a)........................ $17,060,039 $8,170,578 $5,459,006 $ 3,629,521 $34,319,144 Standby letters of credit ............................. 1,279,387 542,887 228,757 100,564 2,151,595 Commercial letters of credit ............................. 14,142 666 17,173 — 31,981 Financial guarantees and 41,988 282,282 734,726 3,152,801 4,211,797 indemnification contracts ........................ Commitments to sell real estate loans.................... 1,214,036 Total ................................. $19,609,592 153,487 $9,149,900 — $6,439,662 — $ 6,882,886 1,367,523 $42,082,040 (a) Amounts exclude discretionary funding commitments to commercial customers of $10.8 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 of the subsidiary in the current year and the two preceding years. For purposes of that test, at December 31, 2021 approximately $1.6 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, 2021 and December 31, 2020 were $766 million and $783 million, respectively. Junior subordinated debentures of M&T associated with trust preferred securities outstanding at December 31, 2021 and December 31, 2020 totaled $532 million and $528 million, respectively. 101 Table 19 MATURITY AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES December 31, 2021 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 ........................................................................................ 5,165 $ 673,525 $ 1.14% .82% — $ — — $ — 678,690 .83% Mortgage-backed securities(b) Government issued or guaranteed Carrying value .................................................................. Yield ................................................................................. 311,207 1,317,943 906,798 619,364 3,155,312 2.28% 2.28% 2.27% 2.23% 2.27% Other debt securities Carrying value ......................................................................... Yield ........................................................................................ 1,778 2.34% 7,302 3.39% 86,205 2.70% 26,517 4.00% 121,802 3.04% Total investment securities available for sale Carrying value ......................................................................... Yield ........................................................................................ 318,150 1,998,770 993,003 645,881 3,955,804 2.26% 1.78% 2.31% 2.31% 2.04% Investment securities held to maturity U.S. Treasury and federal agencies Carrying value ......................................................................... Yield ........................................................................................ Obligations of states and political subdivisions Carrying value ......................................................................... Yield ........................................................................................ 3,052 .12% 177 4.87% — — — — — — — — — — — — 3,052 .12% 177 4.87% Mortgage-backed securities(b) Government issued or guaranteed Carrying value .................................................................. Yield ................................................................................. 120,585 504,540 609,850 1,432,353 2,667,328 2.16% 2.16% 2.16% 2.16% 2.16% Privately issued Carrying value .................................................................. Yield ................................................................................. 3,813 2.72% 15,265 2.72% 19,079 2.72% 23,398 2.60% 61,555 2.66% Other debt securities Carrying value ......................................................................... Yield ........................................................................................ — — — — — — 2,562 4.32% 2,562 4.32% Total investment securities held to maturity Carrying value ......................................................................... Yield ........................................................................................ 127,627 519,805 628,929 1,458,313 2,734,674 2.13% 2.18% 2.18% 2.17% 2.17% Equity and other securities Equity securities Carrying Value ........................................................................ Yield ........................................................................................ Other investment securities Carrying Value ........................................................................ Yield ........................................................................................ Total investment securities 77,640 .50% 387,742 2.90% Carrying value ......................................................................... $ Yield ........................................................................................ 445,777 $ 2,518,575 $ 1,621,932 $ 2,104,194 $ 7,155,860 2.22% 1.86% 2.25% 2.21% 2.12% (a) (b) Investment securities available for sale are presented at estimated fair value. Yields on such securities are based on amortized cost. Maturities are reflected based upon contractual payments due. Actual maturities are expected to be significantly shorter as a result of loan repayments in the underlying mortgage pools. 102 Table 20 MATURITY OF TIME DEPOSITS WITH BALANCES OVER $250,000 December 31, 2021 (In thousands) 3 months or less................................................................................................................. $ 182,077 124,165 Over 3 through 6 months................................................................................................... 29,210 Over 6 through 12 months................................................................................................. 9,736 Over 12 months ................................................................................................................. Total.............................................................................................................................. $ 345,188 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. Market risk is the risk of loss from adverse changes in the market prices and/or interest rates of the Company’s financial instruments. The primary market risk the Company is exposed to is interest rate risk. Interest rate risk arises from the Company’s core banking activities of lending and deposit- taking, because assets and liabilities reprice at different times and by different amounts as interest rates change. As a result, net interest income earned by the Company is subject to the effects of changing interest rates. The Company measures interest rate risk by calculating the variability of net interest income in future periods under various interest rate scenarios using projected balances for earning assets, interest-bearing liabilities and derivatives used to hedge interest rate risk. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income. The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and investment securities, and expected maturities of investment securities, loans and deposits. Management uses a “value of equity” model to supplement the modeling technique described above. Those supplemental analyses are based on discounted cash flows associated with on- and off-balance sheet financial instruments. Such analyses are modeled to reflect changes in interest rates and provide management with a long-term interest rate risk metric. The Company has entered into interest rate swap agreements to help manage exposure to interest rate risk. At December 31, 2021, the aggregate notional amount of interest rate swap agreements entered into for interest rate risk management purposes that were currently in effect was $15.0 billion. In addition, the Company has entered into $8.4 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 19 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 103 subsequent twelve months are generally used to determine a base interest rate scenario for the net interest income simulation. That calculated base net interest income is then compared to the income calculated under the varying interest rate scenarios. The model considers the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk through the use of on- or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes. Table 21 displays as of December 31, 2021 and 2020 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 21 SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES Changes in interest rates Calculated Increase (Decrease) in Projected Net Interest Income December 31, 2021 December 31, 2020 (In thousands) +200 basis points ................................................................................. $ +100 basis points ................................................................................. -100 basis points .................................................................................. 533,317 297,573 (204,760) 324,684 182,661 (61,792) 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, 2021 as compared with December 31, 2020 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 22 presents cumulative totals of net assets (liabilities) repricing on a contractual basis within the specified time frames, as adjusted for the impact of interest rate swap agreements entered into for interest rate risk management purposes. Management believes that this measure does not appropriately depict interest rate risk since changes in interest rates do not necessarily affect all 104 categories of earning assets and interest-bearing liabilities equally nor, as assumed in the table, on the contractual maturity or repricing date. Furthermore, this static presentation of interest rate risk fails to consider the effect of ongoing lending and deposit gathering activities, projected changes in balance sheet composition or any subsequent interest rate risk management activities the Company is likely to implement. Table 22 CONTRACTUAL REPRICING DATA December 31, 2021 Three Months or Less Four to Twelve Months One to Five Years (Dollars in thousands) After Five Years Total Loans and leases, net ............ $ 47,499,655 212,554 Investment securities............. 41,921,266 Other earning assets .............. Total earning assets ......... 89,633,475 $ 6,871,241 92,732 783 6,964,756 $19,866,684 737,854 — 20,604,538 $18,674,872 6,112,720 — 24,787,592 $ 92,912,452 7,155,860 41,922,049 141,990,361 Savings and interest- checking deposits............... Time deposits........................ 68,603,966 1,071,254 — 1,229,571 — 507,138 — — 68,603,966 2,807,963 Total interest- bearing deposits............ Short-term borrowings.......... Long-term borrowings .......... 69,675,220 47,046 — 1,229,571 — 903,864 507,138 — 1,525,376 — — 1,056,129 71,411,929 47,046 3,485,369 Total interest- bearing liabilities.......... 69,722,266 2,133,435 2,032,514 1,056,129 74,944,344 Interest rate swap agreements ......................... (15,000,000) Periodic gap .......................... $ 4,911,209 Cumulative gap ..................... 4,911,209 Cumulative gap as a % 8,150,000 $12,981,321 17,892,530 6,350,000 $24,922,024 42,814,554 500,000 $24,231,463 67,046,017 — of total earning assets......... 3.5% 12.6% 30.2% 47.2% A significant amount of the Company’s interest-earning assets, interest-bearing liabilities, preferred equity instruments and interest rate swap agreements have contractual repricing terms that reference the London Interbank Offered Rate (“LIBOR”). Various regulatory bodies have encouraged banks to transition away from LIBOR as soon as practicable, generally cease entering new contracts that use LIBOR as a reference rate no later than December 31, 2021, and for new contracts entered into before December 31, 2021 to utilize a reference rate other than LIBOR or include robust language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation. Certain tenors of LIBOR have ceased publication at December 31, 2021 and complete cessation of LIBOR publication is expected by June 30, 2023. Effective December 31, 2021, the Company has essentially discontinued entering into new LIBOR-based contracts. The Company established an enterprise-wide LIBOR transition program in 2019, which includes a LIBOR Transition Office with senior management level leadership and dedicated full-time employee staffing. Progress on the LIBOR transition effort is monitored by executive management as well as the Risk Committee of the Board of Directors. At December 31, 2021 the Company had LIBOR-based commercial loans and leases and commercial real estate loans of $37.7 billion and residential mortgage and consumer loans of $1.9 billion outstanding. As of that date, approximately 105 half of such loans either mature before June 30, 2023 or have been amended to include appropriate alternative language to be effective upon cessation of LIBOR publication. Approximately $979 million of borrowings and $850 million of preferred equity instruments reference LIBOR. The Company’s interest rate swap agreements primarily reference LIBOR. In October 2020, the International Swaps and Derivatives Association, Inc. published the IBOR Fallbacks Supplement (“Supplement”) and the IBOR Fallback Protocol (“Protocol”). The Protocol enables market participants to incorporate certain revisions into their legacy non-cleared derivative trades with other counterparties that also choose to adhere to the Protocol. M&T adhered to the Protocol in November 2020 and is in the process of remediating its interest rate swap transactions with its end-user customers. With respect to the Company’s cleared interest rate swap agreements that reference LIBOR, clearinghouses have adopted the same relevant Secured Overnight Financing Rate (“SOFR”) benchmark alternatives of the Supplement and Protocol. As loans mature and new originations occur a larger percentage of the Company’s variable-rate loans are expected to reference SOFR or other indexes, including the Bloomberg Short Term Bank Yield Index (“BSBY”). At December 31, 2021, the Company had approximately $3.6 billion and $55 million of outstanding loan balances that reference SOFR and BSBY, respectively. Additionally, as of December 31, 2021 the Company had $5.0 billion of notional amount of interest rate swap agreements designated as cash flow hedges of commercial real estate loans, including $3.5 billion of forward-starting interest rate swap agreements that become effective in 2022 and 2023, and notional amounts of $1.0 billion of interest rate contracts in the trading account that are referenced to SOFR. The Company’s usage of interest rate swap agreements referenced to SOFR or BSBY is expected to increase in response to the discontinuation of LIBOR. The Company continues to work with its customers and other counterparties to remediate LIBOR-based agreements which expire after June 30, 2023 by incorporating alternative language, negotiating new agreements, or other means. The discontinuation of LIBOR and uncertainty relating to the emergence of one or more alternative benchmark indexes to replace LIBOR could materially impact the Company’s interest rate risk profile and its management thereof. In addition to the effect of interest rates, 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 3 and 21 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 19 of Notes to Financial Statements. The amounts of gross and net trading account positions, as well as the type of trading account activities conducted by the Company, are subject to a well-defined series of potential loss exposure limits established by management and approved by M&T’s Board of Directors. However, as with any non-government guaranteed financial instrument, the Company is exposed to credit risk associated with counterparties to the Company’s trading account activities. The notional amounts of interest rate contracts entered into for trading account purposes totaled $32.6 billion at December 31, 2021 and $37.8 billion at December 31, 2020. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes were $1.1 billion and $776 million at December 31, 2021 and 2020, respectively. Although the notional amounts of these contracts are not recorded in the consolidated balance sheet, the unsettled 106 fair values of all financial instruments used for trading account activities are recorded in the consolidated balance sheet. The fair values of all trading account assets and liabilities were $468 million and $83 million, respectively, at December 31, 2021 and $1.1 billion and $117 million, respectively, at December 31, 2020. The fair value asset and liability amounts at December 31, 2021 have been reduced by contractual settlements of $54 million and $305 million, respectively, and at December 31, 2020 by contractual settlements of $6 million and $806 million, respectively. The lower balance of trading account assets at December 31, 2021 as compared with 2020 was largely the result of decreased 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, 2021 and 2020 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 each of December 31, 2021 and 2020 were $24 million 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 at each of December 31, 2021 and December 31, 2020. Given the Company’s policies, limits and positions, management believes that the potential loss exposure to the Company resulting from market risk associated with trading account activities was not material, however, as previously noted, the Company is exposed to credit risk associated with counterparties to transactions related to the Company’s trading account activities. Additional information about the Company’s use of derivative financial instruments in its trading account activities is included in note 19 of Notes to Financial Statements. Capital Shareholders’ equity was $17.9 billion at December 31, 2021 and represented 11.54% of total assets, compared with $16.2 billion or 11.35% at December 31, 2020 and $15.7 billion or 13.11% at December 31, 2019. Included in shareholders’ equity was preferred stock with financial statement carrying values of $1.75 billion at December 31, 2021, compared with $1.25 billion at each of December 31, 2020 and December 31, 2019. On August 17, 2021, M&T issued 50,000 shares of Series I Perpetual Fixed- Rate Reset Non-cumulative Preferred Stock, par value $1.00 and liquidation preference of $10,000 per share. Through August 31, 2026 holders of the Series I 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 3.5%, payable semiannually in arrears. Subsequent to August 31, 2026 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 U.S. Treasury Rate plus 2.679%, payable semiannually in arrears. The Series I preferred stock may be redeemed at M&T’s option, in whole or in part, on any dividend payment date on or after September 1, 2026 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 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 U.S. 107 Treasury Rate plus 3.174%, payable semiannually in arrears. The Series G 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 10 of Notes to Financial Statements. Common shareholders’ equity totaled $16.2 billion, or $125.51 per share, at December 31, 2021, compared with $14.9 billion, or $116.39 per share, at December 31, 2020 and $14.5 billion, or $110.78 per share, at December 31, 2019. Tangible equity per common share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was $89.80 at December 31, 2021, compared with $80.52 and $75.44 at December 31, 2020 and 2019, respectively. The Company’s ratio of tangible common equity to tangible assets was 7.68% at December 31, 2021, compared with 7.49% and 8.55% at December 31, 2020 and 2019, respectively. Reconciliations of total common shareholders’ equity and tangible common equity and total assets and tangible assets as of December 31, 2021, 2020 and 2019 are presented in table 2. During 2021, 2020 and 2019, the ratio of average total shareholders’ equity to average total assets was 11.08%, 11.80% and 13.14%, respectively. The ratio of average common shareholders’ equity to average total assets was 10.13%, 10.88% and 12.08% in 2021, 2020 and 2019, 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 applicable tax effect, were $78 million, or $.60 per common share, at December 31, 2021, $145 million, or $1.13 per common share, at December 31, 2020, and $37 million, or $.29 per common share, at December 31, 2019. 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, 2021 and 2020 is included in note 3 of Notes to Financial Statements. Reflected in the carrying amount of available-for-sale investment securities at December 31, 2021 were pre-tax effect unrealized gains of $115 million on securities with an amortized cost of $3.1 billion and pre-tax effect unrealized losses of $9 million on securities with an amortized cost of $709 million. Information concerning the Company’s fair valuations of investment securities is provided in notes 3 and 21 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, 2021, based on a review of each of the securities in the available-for-sale investment securities portfolio, the Company concluded that it expected to realize the amortized cost basis of each security. As of December 31, 2021, the Company did not intend to sell nor is it anticipated that it would be required to sell any securities for which fair value was less than the 108 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 December 31, 2021 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, 2021 and 2020, the Company had in its held-to- maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of $62 million and $77 million, respectively, and a fair value of $57 million and $70 million, respectively. At December 31, 2021, 81% 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. After considering the repayment structure and estimated future collateral cash flows of each individual bond, the Company has concluded that as of December 31, 2021, 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 $267 million, or $2.08 per common share, at December 31, 2021, $481 million, or $3.75 per common share, at December 31, 2020 and $342 million, or $2.62 per common share, at December 31, 2019. Information about the funded status of the Company’s pension and other postretirement benefit plans is included in note 13 of Notes to Financial Statements. On January 20, 2021, M&T’s Board of Directors authorized a stock repurchase plan to repurchase up to $800 million of shares of M&T’s common stock subject to all applicable regulatory limitations. There were no repurchases pursuant to that authorization during 2021. 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 2020 and 8,257,000 common shares for $1.3 billion during 2019. During the fourth quarter of 2021, M&T’s Board of Directors authorized an increase in the quarterly common stock dividend to $1.20 per common share from the previous rate of $1.10 per common share. During 2019, M&T’s Board of Directors authorized an increase in the quarterly common stock dividend to $1.10 per common share in the fourth quarter from the previous rate of $1.00 per common share. Cash dividends declared on M&T’s common stock totaled $584 million in 2021, compared with $569 million and $552 million in 2020 and 2019, respectively. Dividends per common share totaled $4.50 in 2021, compared with $4.40 and $4.10 in 2020 and 2019, respectively. Dividends of $73 million in 2021, $68 million in 2020 and $72 million in 2019 were declared on preferred stock in accordance with the terms of each series. 109 M&T and its subsidiary banks are required to comply with applicable capital adequacy standards established by the federal banking agencies. Pursuant to those regulations, the minimum capital ratios are as follows: • • • • 4.5% Common Equity Tier 1 (“CET1”) to risk-weighted assets (each as defined in the capital regulations); 6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets (each as defined in the capital regulations); 8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets (each as defined in the capital regulations); and 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”), as defined in the capital regulations. Capital regulations require buffers in addition to the minimum risk-based capital ratios noted above. M&T is subject to a stress capital buffer requirement that is determined through the Federal Reserve’s supervisory stress tests and M&T’s bank subsidiaries are subject to a capital conservation buffer requirement. The buffer requirement for each entity is currently 2.5% of risk-weighted assets and must be composed entirely of CET1. The federal bank regulatory agencies have issued rules that allow banks and bank holding companies to phase-in the impact 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, 2021. The regulatory capital amounts and ratios of M&T and its bank subsidiaries as of December 31, 2021 are presented in note 24 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 Fund of the FDIC and the banking and financial system as a whole, and generally is not intended for the protection of shareholders, investors or creditors other than insured depositors. Changes in laws, regulations and regulatory policies applicable to the Company’s operations can increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive environment in which the Company operates, all of which could have a material effect on the business, financial condition or results of operations of the Company and in M&T’s ability to pay dividends. For additional information concerning this comprehensive regulatory framework, refer to Part I, Item 1 of this Form 10-K. Fourth Quarter Results Net income in the fourth quarter of 2021 was $458 million, compared with $471 million in the year- earlier quarter. Diluted and basic earnings per common share were each $3.37 in the final 2021 quarter, compared with diluted and basic earnings per common share of $3.52 in the corresponding quarter of 2020. The annualized rates of return on average assets and average common shareholders’ equity for the final quarter of 2021 were 1.15% and 10.91%, respectively, compared with 1.30% and 12.07%, respectively, in the corresponding quarter of 2020. Net operating income during 2021’s fourth quarter was $475 million, compared with $473 million in the year-earlier quarter. Diluted net operating earnings per common share were $3.50 and $3.54 in the fourth quarters of 2021 and 2020, respectively. The annualized net operating returns on 110 average tangible assets and average tangible common equity in the final three months of 2021 were 1.23% and 15.98%, respectively, compared with 1.35% and 17.53%, respectively, in the similar 2020 period. Reconciliations of GAAP results with non-GAAP results for the quarterly periods of 2021 and 2020 are provided in table 24. Taxable-equivalent net interest income aggregated $937 million in the final quarter of 2021, compared with $993 million in the year-earlier period. That decline was attributable to lower average outstanding loan balances and a reduced net interest margin. Reflecting the impact of persistently low market interest rates and increased holdings of low-yielding balances at the FRB of New York, the net interest margin narrowed 42 basis points to 2.58% in the fourth quarter of 2021 from 3.00% in the final three months of 2020. Average earning assets were $131.9 billion in the final quarter of 2020 and $144.4 billion in 2021’s fourth quarter. The $12.5 billion increase in average earning assets was driven by a $22.1 billion rise in low-yielding deposit balances at the FRB of New York and other banks, partially offset by a $5.4 billion reduction in average outstanding loans. Average balances of commercial loans and leases were $22.3 billion in the recent quarter, down $5.4 billion or 19% from $27.7 billion in the fourth quarter of 2020. That decline was largely the result of decreased average balances of PPP loans, due to loan forgiveness by the Small Business Administration, lower dealer floor plan balances, reflecting automobile production and inventory issues experienced by the industry, and subdued loan demand by commercial customers, in general. PPP loans averaged $1.6 billion in 2021’s final quarter, compared with $6.2 billion in the year-earlier quarter. Average commercial real estate loan balances aggregated $36.7 billion in the final quarter of 2021, down $990 million or 3% from $37.7 billion in the year-earlier quarter. Included in those totals were average balances of loans held for sale of $535 million in the final three months of 2021, compared with $307 million in the corresponding period of 2020. Average residential real estate loan balances decreased $471 million to $16.3 billion in the fourth quarter of 2021 from $16.8 billion in the year-earlier quarter, reflecting ongoing repayments of loans obtained in the acquisition of Hudson City. Also contributing to the decrease were loans held for sale that averaged $485 million and $645 million in the final quarters of 2021 and 2020, respectively. Consumer loans averaged $17.9 billion in the last three months of 2021, $1.4 billion or 9% higher than in the year-earlier quarter. That increase resulted from a rise in average balances of recreational finance loans of $1.0 billion and automobile loans of $624 million. The net interest spread narrowed in the fourth quarter of 2021 to 2.52%, down 38 basis points from 2.90% in the corresponding quarter of 2020. The yield on earning assets in the last three months of 2021 was 2.64%, down 51 basis points from the year-earlier quarter. The rate paid on interest-bearing liabilities in the 2021’s final quarter was .12%, down 13 basis points from .25% in the similar quarter of 2020. The contribution of net interest-free funds to the Company’s net interest margin was .06% and .10% in the fourth quarters of 2021 and 2020, respectively. As a result, the Company’s net interest margin narrowed to 2.58% in the fourth quarter of 2021 from 3.00% in the year-earlier period. A recapture of provision for credit losses of $15 million was recorded for the quarter ended December 31, 2021, compared with a $75 million provision for credit losses in the year-earlier period. Net loan charge-offs were $31 million in the last three months of 2021, representing an annualized .13% of average loans and leases outstanding, compared with $97 million or .39% during the similar 2020 period. Net charge-offs in the fourth quarters of 2021 and 2020 included: net charge- offs of commercial loans of $25 million in 2021 and $67 million in 2020; net recoveries of commercial real estate loans of $7 million in 2021 compared with net charge-offs of $12 million in 2020; net charge-offs of residential real estate loans of $2 million in 2021 and net recoveries of $1 million in 2020; and net charge-offs of consumer loans of $11 million in 2021 and $19 million in 2020. 111 Other income rose to $579 million in the fourth quarter of 2021 from $551 million in the similar 2020 period. The increased level in the recent quarter resulted largely from higher trust income, service charges on deposit accounts and brokerage services income. Other expense totaled $928 million during the recent quarter, compared with $845 million in the final quarter of 2020. Included in such amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of $2 million and $3 million during the quarters ended December 31, 2021 and 2020, respectively and merger-related expenses of $21 million in fourth quarter of 2021. No merger-related expenses were incurred in the year-earlier quarter. Exclusive of those nonoperating expenses, noninterest operating expenses were $904 million in the fourth quarter of 2021 and $842 million in the corresponding 2020 quarter. Factors contributing to the higher level of expenses in the recent quarter as compared with the fourth quarter of 2020 were predominantly related to increased costs for salaries and employee benefits (including higher incentive compensation), outside data processing and software, and professional services. The Company’s efficiency ratio during the final quarters of 2021 and 2020 was 59.7% and 54.6%, respectively. Table 24 includes a reconciliation of other expense to noninterest operating expense and the calculation of the efficiency ratio for each of the quarters of 2021 and 2020. 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 23 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 23 of Notes to Financial Statements. The Business Banking segment provides a wide range of services to small businesses and professionals within markets served by the Company through the Company’s branch network, business banking centers and other delivery channels such as telephone banking, Internet banking and automated teller machines. Services and products offered by this segment include various business loans and leases, including loans guaranteed by the Small Business Administration, business credit cards, deposit products, and financial services such as cash management, payroll and direct deposit, merchant credit card and letters of credit. Net income of the Business Banking segment aggregated $213 million in 2021, up 34% from $159 million in 2020. Higher net interest income of $56 million, a $15 million decline in the provision for credit losses and higher merchant discount and credit card fees of $12 million in 2021 were partially offset by higher personnel-related costs of $11 million. The higher net interest income reflected a 127 basis point widening of the net interest margin on loans and higher average deposit balances of $3.3 billion, partially offset by a 57 basis point narrowing of the net interest margin on deposits. The widening margin on loans resulted from a higher level of PPP fee income resulting from the forgiveness of loans by the SBA. The increase in average deposits resulted from a continued desire by the customers of the Business Banking segment 112 to maintain liquidity during the pandemic and amid the low interest rate environment. This segment recorded net income of $168 million in 2019. The 6% decline in 2020 as compared with 2019 resulted from a $10 million decrease in service charges on deposit accounts, a $9 million increase in the 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 growth in net interest income reflected 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 Commercial Banking segment provides a wide range of credit products and banking services for middle-market and large commercial customers, mainly within the markets served by the Company. Services provided by this segment include commercial lending and leasing, letters of credit, deposit products, and cash management services. The Commercial Banking segment recorded net income of $494 million in 2021, compared with $508 million in 2020. The most significant factors contributing to the 3% decline in net income from 2020 to 2021 included a higher provision for credit losses of $28 million, an increase of $13 million in centrally allocated costs associated with data processing, risk management and other support services provided to the Commercial Banking segment, and a $10 million decrease in net interest income. The impact of those items on net income was partially offset by higher letter of credit and other credit-related fees of $22 million and higher merchant discount and credit card fees of $13 million. The decrease in net interest income reflected lower average outstanding loan balances of $1.8 billion and a 52 basis point narrowing of the net interest margin on deposits offset, in part, by a widening of the net interest margin on loans of 22 basis points and higher average deposit balances of $5.4 billion. Net income for the Commercial Banking segment totaled $520 million in 2019. The decline in net income in 2020 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, and 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 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 for the Commercial Real Estate segment was $372 million in 2021, compared with $382 million in 2020. The $10 million, or 2%, decrease was primarily attributable to a $30 million decline in net interest income, reflecting a 58 basis point narrowing of the net interest margin on deposits and lower average loan balances of $237 million. Additionally, lower trading account and foreign exchange gains of $12 million, resulting from decreased activity related to interest rate swap agreements executed on behalf of commercial customers, a $7 million increase in the amortization of capitalized commercial mortgage servicing rights, a $7 million increase in centrally-allocated costs associated with data processing, risk management and other support services provided to the Commercial Real Estate segment and higher FDIC assessments and salaries and employee benefits of $6 million each were partially offset by a $40 million decrease in the provision for credit losses and a $17 million increase in commercial mortgage servicing income. Net income for this segment decreased 21% in 2020 from $486 million in 2019. That decline resulted from a $106 million rise in the provision for 113 credit losses, due to higher loan balances and net charge-offs, a decline 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 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. 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, through June 2021, Cayman Islands office deposits. This segment also provides foreign exchange services to customers. Net income of the Discretionary Portfolio segment aggregated $289 million in 2021 and $327 million in 2020. The 12% decline in the 2021’s net income as compared with 2020 reflects a $21 million increase in intersegment fees related to the transfer of residential mortgage loans to the Discretionary Portfolio segment from the Residential Mortgage Banking segment, a $12 million decrease in the value of marketable equity securities, and an $8 million increase in centrally-allocated costs associated with data processing, risk management and other support services provided to the Discretionary Portfolio segment. The Discretionary Portfolio segment recorded net income $144 million in 2019. The significant increase to $327 million in 2020 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. 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. Income for the Residential Mortgage Banking segment increased 29% to $173 million in 2021 from $134 million in 2020. That year-over-year increase was attributable to higher net interest income of $40 million, reflecting higher average loan balances of $1.3 billion, and increased revenues associated with servicing and sub-servicing residential real estate loans (including intersegment revenues) of $9 million. 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 higher 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 changes 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 Retail Banking segment offers a variety of services to consumers through several delivery channels which include branch offices, automated teller machines, telephone banking and Internet banking. The Company has branch offices in New York State, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia. Credit services offered by this segment include consumer installment loans, automobile and recreational finance loans 114 (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. Retail Banking segment net income aggregated $341 million in 2021 compared with $365 million in 2020. Factors contributing to the decline in net income in 2021 included a decrease of $78 million in net interest income and increased centrally-allocated costs, largely associated with data processing, risk management and other support services provided to the Retail Banking segment. The net interest income decline reflected a narrowing of the net interest margin on deposits of 49 basis points, partially offset by higher average outstanding balances of deposits and loans of $5.1 billion and $1.5 billion, respectively. The unfavorable factors were partially offset by a $53 million decrease in the provision for credit losses, a $22 million decrease in personnel-related costs (reflecting lower staffing levels), a $20 million rise in service charges on deposit accounts and an $8 million increase in merchant discount and credit card fees. 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 activities related to the pandemic and a $14 million decline in the provision for credit losses. 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 from the acquisitions of financial institutions, distributions from BLG, merger-related expenses related to 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 reportable segments and the provision for credit losses. The “All Other” category also includes trust income of the Company that reflects the ICS and WAS business activities. The various components of the “All Other” category resulted in a net loss of $24 million and $523 million in 2021 and 2020, respectively. As compared with 2020, the lower net loss in 2021 resulted from a $795 million decrease in the provision for credit losses, the favorable impact from the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments, and increased trust income. Those favorable factors were partially offset by higher professional services expenses and increased personnel-related costs. The net loss in 2020 as compared with 2019’s net income of $11 million resulted from a $476 million increase in the provision for credit losses, the unfavorable impact from the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments, and 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 other outside services, a $49 million decrease in accruals for legal matters, the impact of a $48 million charge from the sale of an affiliated asset manager during 2019, higher trust income of $29 million, and increased income from BLG of $16 million. Recent Accounting Developments A discussion of recent accounting developments is included in note 27 of Notes to Financial Statements. 115 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, within the meaning of the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement, including statements that are based on current expectations, estimates and projections about the Company’s business, management’s beliefs and assumptions made by management. Statements regarding 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. Statements regarding the Company’s expectations or predictions regarding the proposed transaction between M&T and People’s United also are forward-looking statements, including statements regarding the expected timing, completion and effects of the proposed transaction as well as M&T’s and People’s United’s expected financial results, prospects, targets, goals and outlook. M&T provides further detail regarding the risks and uncertainties related to the proposed transaction in its public filings, including in the “Risk Factors” section of this annual report. 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. Future factors include risks, predictions and uncertainties relating to: the proposed transaction between M&T and People’s United, including the factors that are described in the “Risk Factors” section of this annual report; the impact of the COVID-19 pandemic; 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; the impact of changes in market values on trust-related revenues; legislation and regulations affecting the financial services industry, and/or M&T and its subsidiaries individually or collectively, including tax policy; 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, product and 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 and services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support M&T and its subsidiaries' future businesses; and material differences in the actual financial results of merger, acquisition and investment activities compared with M&T's 116 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. Forward- looking statements speak only as of the date they are made and the Company assumes no duty to update forward-looking statements. 117 Table 23 Earnings and dividends Amounts in thousands, except per share Interest income (taxable-equivalent basis) ......................... Interest expense .................................................................. Net interest income............................................................. Less: provision for credit losses ......................................... Other income ...................................................................... Less: other expense............................................................. Income before income taxes............................................... Applicable income taxes..................................................... Taxable-equivalent adjustment........................................... Net income.......................................................................... Net income available to common shareholders-diluted ..... Per common share data QUARTERLY TRENDS 2021 Quarters 2020 Quarters Fourth Third Second First Fourth Third Second First $ 962,081 24,725 937,356 (15,000 ) 578,637 927,500 603,493 141,962 3,563 $ 457,968 996,649 25,696 970,953 (20,000 ) 569,126 899,334 660,745 161,582 3,703 495,460 974,090 28,018 946,072 (15,000 ) 513,633 865,345 609,360 147,559 3,732 458,069 1,020,695 35,567 985,128 (25,000 ) 505,598 919,444 596,282 145,300 3,733 447,249 1,042,862 49,610 993,252 75,000 551,250 845,008 624,494 149,382 3,972 471,140 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 $ 434,171 475,961 438,759 428,093 451,869 353,400 223,099 250,701 Basic earnings............................................................. Diluted earnings.......................................................... Cash dividends............................................................ $ $ 3.37 3.37 1.20 3.70 3.69 1.10 3.41 3.41 1.10 3.33 3.33 1.10 3.52 3.52 1.10 2.75 2.75 1.10 1.74 1.74 1.10 1.93 1.93 1.10 Average common shares outstanding Basic ........................................................................... Diluted ........................................................................ 128,698 128,888 128,689 128,844 128,671 128,842 128,537 128,669 128,303 128,379 128,285 128,355 128,275 128,333 129,696 129,755 Performance ratios, annualized Return on Average assets ............................................................ Average common shareholders’ equity ...................... 1.22 % 1.28 % 1.15 % 10.91 % 12.16 % 11.55 % 1.22 % 11.57 % 1.30 % 12.07 % 1.06 % 9.53 % .71 % 6.13 % .90 % 7.00 % Net interest margin on average earning assets (taxable-equivalent basis)................................................ 2.58 % 2.74 % 2.77 % 2.97 % 3.00 % 2.95 % 3.13 % 3.65 % Nonaccrual loans to total loans and leases, net of unearned discount........................................................... 2.22 % 2.40 % 2.31 % 1.97 % 1.92 % 1.26 % 1.18 % 1.13 % Net operating (tangible) results (a) Net operating income (in thousands).................................. Diluted net operating income per common share............... Annualized return on Average tangible assets .............................................. Average tangible common shareholders’ equity ........ Efficiency ratio (b) ............................................................. Balance sheet data In millions, except per share Average balances $ 475,477 3.50 $ 504,030 3.76 462,959 3.45 457,372 3.41 473,453 3.54 375,029 2.77 243,958 1.76 271,705 1.95 1.27 % 1.34 % 1.23 % 15.98 % 17.54 % 16.68 % 58.4 % 57.7 % 59.7 % 1.29 % 17.05 % 60.3 % 1.35 % 17.53 % 54.6 % 1.10 % 13.94 % 56.2 % .74 % 9.04 % 55.7 % .94 % 10.39 % 58.9 % Total assets (c) ............................................................ Total tangible assets (c) .............................................. Earning assets ............................................................. Investment securities .................................................. Loans and leases, net of unearned discount................ Deposits ...................................................................... Common shareholders’ equity (c) .............................. Tangible common shareholders’ equity (c) ................ At end of quarter Total assets (c) ............................................................ Total tangible assets (c) .............................................. Earning assets ............................................................. Investment securities .................................................. Loans and leases, net of unearned discount................ Deposits ...................................................................... Common shareholders’ equity (c) ............................... Tangible common shareholders’ equity (c) ................ Equity per common share ........................................... Tangible equity per common share ............................ $ 157,722 153,125 144,420 6,804 93,250 134,444 15,863 11,266 $ 155,107 150,511 141,990 7,156 92,912 131,543 16,153 11,557 125.51 89.80 154,037 149,439 140,420 6,019 95,314 131,255 15,614 11,016 151,901 147,304 138,257 6,448 93,583 128,701 15,779 11,182 122.60 86.88 150,641 146,041 136,951 6,211 98,610 128,413 15,321 10,721 150,623 146,023 137,171 6,143 97,113 128,269 15,470 10,870 120.22 84.47 148,157 143,554 134,355 6,605 99,356 125,733 15,077 10,474 150,481 145,879 137,367 6,611 99,299 128,476 15,197 10,595 118.12 82.35 144,563 139,958 131,916 7,195 98,666 120,976 14,963 10,358 142,601 137,998 129,295 7,046 98,536 119,806 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 (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 24. 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 24. 118 Table 24 RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES 2020 Quarters 2021 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) ............................................ Merger-related expenses (a) .................................. Net operating income.................................... Earnings per common share Diluted earnings per common share...................... Amortization of core deposit and other intangible assets (a) ............................................ Merger-related expenses (a) .................................. Diluted net operating earnings per common share ............................................. $ 3.50 $ 457,968 495,460 458,069 447,249 471,140 372,136 241,054 268,822 1,447 16,062 $ 475,477 $ 3.37 .01 .12 2,028 6,542 504,030 2,023 2,867 462,959 2,034 8,089 457,372 2,313 — 473,453 2,893 — 375,029 2,904 — 243,958 2,883 — 271,705 3.69 .02 .05 3.76 3.41 .02 .02 3.45 3.33 .02 .06 3.41 3.52 .02 — 3.54 2.75 .02 — 2.77 1.74 .02 — 1.76 1.93 .02 — 1.95 Other expense Other expense........................................................ Amortization of core deposit and other intangible assets.................................................. Merger-related expenses ....................................... Noninterest operating expense...................... Merger-related expenses Salaries and employee benefits ............................. Equipment and net occupancy............................... Outside data processing and software ................... Advertising and marketing .................................... Printing, postage and supplies............................... Other costs of operations....................................... Other expense ............................................... Efficiency ratio Noninterest operating expense (numerator) .......... Taxable-equivalent net interest income................. Other income ......................................................... Less: Gain (loss) on bank investment securities.............................................................. Denominator ................................................. $ 927,500 899,334 865,345 919,444 845,008 826,774 807,042 906,416 (1,954 ) (21,190 ) $ 904,356 (2,738 ) (8,826 ) 887,770 (2,737 ) (3,893 ) 858,715 (2,738 ) (9,951 ) 906,755 (3,129 ) — 841,879 (3,914 ) — 822,860 (3,913 ) — 803,129 (3,913 ) — 902,503 $ $ 112 340 250 337 186 19,965 21,190 60 1 625 505 730 6,905 8,826 4 — 244 24 2,049 1,572 3,893 — — — — — 9,951 9,951 — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 904,356 $ 937,356 578,637 887,770 970,953 569,126 858,715 946,072 513,633 906,755 985,128 505,598 841,879 993,252 551,250 822,860 947,114 520,561 803,129 961,371 487,273 902,503 981,868 529,360 1,426 $ 1,514,567 291 1,539,788 (10,655 ) 1,470,360 (12,282 ) 1,503,008 1,619 1,542,883 2,773 1,464,902 6,969 1,441,675 (20,782 ) 1,532,010 Efficiency ratio...................................................... 59.7 % 57.7 % 58.4 % 60.3 % 54.6 % 56.2 % 55.7 % 58.9 % 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....................................................... Common equity............................................. Goodwill................................................................ Core deposit and other intangible assets ............... Deferred taxes ....................................................... Total tangible common equity ...................... (a) After any related tax effect. $ 157,722 (4,593 ) (5 ) 1 $ 153,125 $ $ 17,613 (1,750 ) 15,863 (4,593 ) (5 ) 1 11,266 $ 155,107 (4,593 ) (4 ) 1 $ 150,511 $ $ 17,903 (1,750 ) 16,153 (4,593 ) (4 ) 1 11,557 154,037 (4,593 ) (7 ) 2 149,439 17,109 (1,495 ) 15,614 (4,593 ) (7 ) 2 11,016 151,901 (4,593 ) (6 ) 2 147,304 17,529 (1,750 ) 15,779 (4,593 ) (6 ) 2 11,182 150,641 (4,593 ) (10 ) 3 146,041 16,571 (1,250 ) 15,321 (4,593 ) (10 ) 3 10,721 150,623 (4,593 ) (9 ) 2 146,023 16,720 (1,250 ) 15,470 (4,593 ) (9 ) 2 10,870 148,157 (4,593 ) (13 ) 3 143,554 16,327 (1,250 ) 15,077 (4,593 ) (13 ) 3 10,474 150,481 (4,593 ) (12 ) 3 145,879 16,447 (1,250 ) 15,197 (4,593 ) (12 ) 3 10,595 144,563 (4,593 ) (16 ) 4 139,958 16,213 (1,250 ) 14,963 (4,593 ) (16 ) 4 10,358 142,601 (4,593 ) (14 ) 4 137,998 16,187 (1,250 ) 14,937 (4,593 ) (14 ) 4 10,334 140,181 (4,593 ) (19 ) 5 135,574 16,073 (1,250 ) 14,823 (4,593 ) (19 ) 5 10,216 138,627 (4,593 ) (17 ) 4 134,021 16,101 (1,250 ) 14,851 (4,593 ) (17 ) 4 10,245 136,446 (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 15,945 (1,250 ) 14,695 (4,593 ) (21 ) 5 10,086 120,585 (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 15,816 (1,250 ) 14,566 (4,593 ) (25 ) 6 9,954 119 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Incorporated by reference to the discussion contained in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the captions “Liquidity, Market Risk, and Interest Rate Sensitivity” (including Table 21) and “Capital.” Item 8. Financial Statements and Supplementary Data. Financial Statements and Supplementary Data consist of the financial statements as indexed and presented below and Table 23 “Quarterly Trends” presented in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Index to Financial Statements and Financial Statement Schedules Report on Internal Control Over Financial Reporting ................................................................... Report of Independent Registered Public Accounting Firm .......................................................... Consolidated Balance Sheet — December 31, 2021 and 2020...................................................... Consolidated Statement of Income — Years ended December 31, 2021, 2020 and 2019 ............ Consolidated Statement of Comprehensive Income — Years ended December 31, 2021, 2020 and 2019 .................................................................................................................................... Consolidated Statement of Cash Flows — Years ended December 31, 2021, 2020 and 2019 ..... Consolidated Statement of Changes in Shareholders’ Equity — Years ended December 31, 2021, 2020 and 2019.................................................................................................................. Notes to Financial Statements........................................................................................................ 121 122 125 126 127 128 129 130 120 Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting at M&T Bank Corporation and subsidiaries (“the Company”). Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 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, 2021. The consolidated financial statements of the Company have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, that was engaged to express an opinion as to the fairness of presentation of such financial statements. PricewaterhouseCoopers LLP was also engaged to assess the effectiveness of the Company’s internal control over financial reporting. The report of PricewaterhouseCoopers LLP follows this report. M&T BANK CORPORATION René F. Jones Chairman of the Board and Chief Executive Officer Darren J. King Executive Vice President and Chief Financial Officer 121 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of M&T Bank Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of M&T Bank Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of changes in shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 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, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle 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 effectiveness of internal control over financial reporting, included in the accompanying 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 122 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 Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 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 complex judgments. 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. Allowance for Credit Losses – Adjustments to model forecasts As described in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses of $1.5 billion reflects management's expected credit losses in the loan and lease portfolio of $92.9 billion as of December 31, 2021. 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 123 in underwriting 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 certain adjustments to model forecasts, is a critical audit matter are (i) the significant judgment by management in determining the adjustments to model forecasts, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures related to management’s determination of these adjustments to model forecasts, (ii) the significant audit effort in evaluating the audit evidence related to these adjustments to model forecasts, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 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 relating to the allowance for credit losses estimation process for certain adjustments to model forecasts. These procedures also included, among others, testing management’s process for determining the allowance for credit losses and these 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 these adjustments to model forecasts. Evaluating significant assumptions relating to these 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 these adjustments to model forecasts. Buffalo, New York February 16, 2022 We have served as the Company’s auditor since 1984. 124 M&T BANK CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet (Dollars in thousands, except per share) Assets Cash and due from banks ........................................................................................................................ Interest-bearing deposits at banks ........................................................................................................... Trading account....................................................................................................................................... Investment securities (includes pledged securities that can be sold or repledged of $96,128 at December 31, 2021; $105,136 at December 31, 2020) Available for sale (cost: $3,849,347 at December 31, 2021; December 31, 2021 2020 $ 1,337,577 41,872,304 468,031 $ 1,552,743 23,663,810 1,068,581 $4,621,027 at December 31, 2020)................................................................................................ 3,955,804 4,822,606 Held to maturity (fair value: $2,771,290 at December 31, 2021; $1,842,281 at December 31, 2020)................................................................................................ 2,734,674 1,748,989 Equity and other securities (cost: $461,516 at December 31, 2021; $449,008 at December 31, 2020)................................................................................................... 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, 2021 and December 31, 2020; Liquidation preference of $10,000 per share: 140,000 shares at December 31, 2021 and 90,000 shares at December 31, 2020 .............................................................................................................................. Common stock, $.50 par, 250,000,000 shares authorized, 465,382 7,155,860 93,136,678 (224,226) 92,912,452 (1,469,226) 91,443,226 1,144,765 4,593,112 3,998 7,088,287 $155,107,160 $ 60,131,480 68,603,966 2,807,963 — 131,543,409 47,046 2,127,931 3,485,369 137,203,755 474,102 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 1,750,000 1,250,000 159,741,898 shares issued at December 31, 2021 and December 31, 2020 ........................................ 79,871 79,871 Common stock issuable, 15,769 shares at December 31, 2021; 18,113 shares at December 31, 2020.................................................................................................... Additional paid-in capital........................................................................................................................ Retained earnings .................................................................................................................................... Accumulated other comprehensive income (loss), net............................................................................ Treasury stock — common, at cost — 31,052,845 shares at December 31, 2021; 1,212 6,635,000 14,646,448 (127,578) 1,344 6,617,404 13,444,428 (63,032) 31,426,742 shares at December 31, 2020............................................................................................. Total shareholders’ equity .......................................................................................................... Total liabilities and shareholders’ equity ................................................................................... (5,081,548) 17,903,405 $155,107,160 (5,142,732) 16,187,283 $142,601,105 See accompanying notes to financial statements. 125 M&T BANK CORPORATION AND SUBSIDIARIES Consolidated Statement of Income (In thousands, except per share) Interest income Loans and leases, including fees ............................................................... Investment securities Fully taxable ........................................................................................ Exempt from federal taxes .................................................................. Deposits at banks ...................................................................................... Other.......................................................................................................... Total interest income ..................................................................... Interest expense Savings and interest-checking deposits..................................................... Time deposits ............................................................................................ Deposits at Cayman Islands office............................................................ Short-term borrowings .............................................................................. Long-term borrowings .............................................................................. Total interest expense .................................................................... Net interest income.................................................................................... Provision for credit losses ......................................................................... Net interest income after provision for credit losses................................. Other income Mortgage banking revenues ...................................................................... Service charges on deposit accounts ......................................................... Trust income ............................................................................................. Brokerage services income ....................................................................... Trading account and foreign exchange gains............................................ Gain (loss) on bank investment securities................................................. Other revenues from operations ................................................................ Total other income......................................................................... Other expense Salaries and employee benefits ................................................................. Equipment and net occupancy .................................................................. Outside data processing and software ....................................................... FDIC assessments ..................................................................................... Advertising and marketing........................................................................ Printing, postage and supplies................................................................... Amortization of core deposit and other intangible assets ......................... Other costs of operations........................................................................... Total other expense........................................................................ Income before taxes .................................................................................. Income taxes ............................................................................................. Net income................................................................................................. Net income available to common shareholders Year Ended December 31 2020 2019 2021 $ 3,748,988 $ 3,975,053 $ 4,442,182 141,046 116 47,491 1,143 3,938,784 32,998 18,635 201 7 62,165 114,006 3,824,778 (75,000) 3,899,778 571,329 402,113 644,716 62,791 24,376 (21,220) 482,889 2,166,994 176,469 183 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 2,088,444 288,532 321 141,397 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 2,045,677 326,698 291,839 69,704 64,428 36,507 10,167 766,603 3,611,623 2,455,149 596,403 $ 1,858,746 1,950,692 322,037 258,480 53,803 61,904 39,869 14,869 683,586 3,385,240 1,769,521 416,369 $ 1,353,152 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 Basic .............................................................................................. Diluted ........................................................................................... $ 1,776,977 1,776,987 $ 1,279,066 1,279,068 $ 1,849,509 1,849,511 Net income per common share Basic .............................................................................................. Diluted ........................................................................................... $ 13.81 13.80 $ $ 9.94 9.94 13.76 13.75 See accompanying notes to financial statements. 126 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 2020 2019 2021 $1,858,746 $1,353,152 $1,929,149 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 ........................................................ (66,977) (210,626) (862) 213,919 (64,546) $1,794,200 107,222 172,787 2,284 (138,645) 143,648 $1,496,800 184,906 108,520 1,091 (81,116) 213,401 $2,142,550 See accompanying notes to financial statements. 127 M&T BANK CORPORATION AND SUBSIDIARIES Consolidated Statement of Cash Flows (In thousands) Cash flows from operating activities Net income........................................................................................................................................ Adjustments to reconcile net income to net cash provided by operating activities Year Ended December 31 2021 2020 2019 $ 1,858,746 $ 1,353,152 $ 1,929,149 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 .......................................................................... (75,000) 224,274 89,767 10,167 87,159 8,431 (10,308) 65,724 52,540 (163,623) 567,082 2,714,959 800,000 220,598 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 ........................................................................................................ — 17,654 — 67,036 Proceeds from maturities of investment securities Available for sale ...................................................................................................................... Held to maturity ........................................................................................................................ 1,433,793 615,201 1,614,557 911,555 (677,916) (1,601,698 ) (30,153) 5,676,670 (18,208,494 ) (149,213) (197,141) (510,302) (13,631,599 ) 11,737,671 (12,436) 9,500 (853,091) — (580,260) (68,200) 495,000 — (26,710) 10,701,474 (215,166) 1,552,743 1,337,577 (7,581) (11,993 ) (29,004 ) (7,231,694 ) (16,473,656 ) (172,289 ) (754,823) 67,411 (22,020,481 ) 25,037,167 (2,881) — (2,665,023 ) (373,750) (568,112 ) (68,256 ) — — (11,413 ) 21,347,732 116,438 1,436,305 $ 1,552,743 Purchases of investment securities Available for sale ...................................................................................................................... Held to maturity ........................................................................................................................ Equity and other securities ........................................................................................................ Net (increase) decrease in loans and leases ...................................................................................... Net (increase) decrease in interest-bearing deposits at banks .......................................................... Capital expenditures, net .................................................................................................................. Net increase in loan servicing advances ........................................................................................... Other, net .......................................................................................................................................... Net cash provided (used) by investing activities....................................................................... Cash flows from financing activities Net increase in deposits .................................................................................................................... Net decrease in short-term borrowings............................................................................................. Proceeds from long-term borrowings ............................................................................................... Payments on long-term borrowings.................................................................................................. Purchases of treasury stock .............................................................................................................. Dividends paid — common.............................................................................................................. Dividends paid — preferred ............................................................................................................. Proceeds from issuance of Series I and G preferred stock...................................................... Redemption of Series A and C preferred stock ...................................................................... Other, net .......................................................................................................................................... Net cash provided (used) by financing activities ...................................................................... Net increase (decrease) in cash, cash equivalents and restricted cash.............................................. Cash, cash equivalents and restricted cash at beginning of period................................................... Cash, cash equivalents and restricted cash at end of period............................................................. Supplemental disclosure of cash flow information Interest received during the period ................................................................................................... Interest paid during the period.......................................................................................................... Income taxes paid during the period ................................................................................................ Supplemental schedule of noncash investing and financing activities Real estate acquired in settlement of loans....................................................................................... Loans held for sale transferred to loans held for investment............................................................ Securitization of residential mortgage loans allocated to 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 ................................................................... $ $ $ $ $ $ See accompanying notes to financial statements. 128 3,976,804 139,164 314,295 $ 4,135,990 372,291 275,558 $ 4,892,301 735,787 320,513 8,851 330,188 — — — — 57,760 $ $ $ $ 20,646 — — — — — 70,754 $ $ $ $ 90,072 — 5,379 83 393,877 398,810 132,219 176,000 209,937 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 M&T BANK CORPORATION AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders’ Equity Common Additional Preferred Common Stock Stock Stock Issuable Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss), Net Treasury Stock Total $ 1,231,500 — — 79,883 — — 1,726 — — 6,579,342 11,516,672 — 1,929,149 (72,482) — (420,081) 213,401 — (3,528,851) $ 15,460,191 — 2,142,550 (72,482 ) — (381,500) 400,000 — — — — — — — — (4,000) — — — — — — — — — (1,349,785 ) (381,500) 396,000 (1,349,785 ) — (12) (160) 18,197 (207) — 56,073 73,891 — $ 1,250,000 — 79,871 — 1,566 — 6,593,539 (552,216) 12,820,916 — (206,680) — (552,216) (4,822,563) $ 15,716,649 — — — — — — — — — — — — — — — (91,925) — 1,353,152 (68,228) — — — — (91,925) — — 1,496,800 143,648 (68,228) — — (373,750) — (373,750) (222) 23,865 (411) — 53,581 76,813 — $ 1,250,000 — 79,871 — 1,344 — 6,617,404 (569,076) 13,444,428 — (63,032) — (569,076) (5,142,732) $ 16,187,283 — — 500,000 — — — — — — — — — 1,858,746 (72,915) — — (5,000) (64,546) — — — 1,794,200 (72,915) — 495,000 — (132) 22,596 (844) — 61,184 82,804 Dollars in thousands, except per share 2019 Balance — January 1, 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 — $4.10 per share .................................... Balance — December 31, 2019.............. 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 — $4.40 per share .................................... Balance — December 31, 2020.............. 2021 Total comprehensive income.................. Preferred stock cash dividends ............... Issuance of Series I preferred stock........ Stock-based compensation transactions, net ................................... Common stock cash dividends — $4.50 per share .................................... Balance — December 31, 2021.............. — $ 1,750,000 — 79,871 — 1,212 — 6,635,000 (582,967) 14,646,448 — (127,578) — (582,967) (5,081,548 ) $ 17,903,405 See accompanying notes to financial statements. 129 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 26 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 20. Consolidated Statement of Cash Flows For purposes of this statement, cash and due from banks and federal funds sold are considered cash and cash equivalents. Securities purchased under agreements to resell and securities sold under agreements to repurchase Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at amounts equal to the cash or other consideration exchanged. It is generally the Company’s policy to take possession of collateral pledged to secure agreements to resell. Trading account Financial instruments used for trading purposes are stated at fair value. Realized gains and losses and unrealized changes in fair value of financial instruments utilized in trading activities are included in “trading account and foreign exchange gains” in the consolidated statement of income. Investment securities Investments in debt securities are classified as held to maturity and stated at amortized cost when management has the positive intent and ability to hold such securities to maturity. Investments in other debt securities are classified as available for sale and stated at estimated fair value with unrealized changes in fair value included in “accumulated other comprehensive income (loss), net.” 130 Investments in equity securities having readily determinable fair values are stated at fair value and 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. Beginning in 2020 GAAP 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. 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 probable that the Company will be unable to collect all amounts according to the 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 collectable, 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 all past due principal and interest payments have been paid by the borrower. Loan balances are 131 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 collectable. 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. Due to the direct and indirect effects of the Coronavirus Disease 2019 (“COVID-19”) pandemic, a dramatic reduction in economic activity 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, created a forbearance program for federally- backed mortgage loans, protected borrowers from negative credit reporting due to loan accommodations related to the pandemic, and provided 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 were 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 allowed 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 included payment deferrals (including maturity extensions), covenant waivers and fee waivers. The Company worked with its customers affected by COVID-19 and granted modifications across many of its loan portfolios. To the extent that such modifications met the criteria described, the modified loans were not classified as troubled debt restructurings nor reported as past due. Commitments to sell real estate loans are utilized by the Company to hedge the exposure to changes in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale recorded in the consolidated balance sheet includes changes in estimated fair 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 Beginning in 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 2020, loans acquired in a business combination were initially recorded at fair value with no carry-over of an 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 132 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 credit losses On January 1, 2020, the Company adopted amended accounting guidance which requires an allowance for credit losses to 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 satisfaction of a defaulted loan, the excess of the remaining loan balance over the asset’s estimated fair value less costs to sell is charged-off against the allowance for credit losses. Subsequent declines in value of the assets are recognized as “other costs of operations” in the consolidated statement of income. Premises and equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed principally using the straight-line method over the estimated useful lives of the assets. Capitalized servicing rights Capitalized servicing assets are included in “other assets” in the consolidated balance sheet. Separately recognized servicing assets are initially measured at fair value. The Company uses the 133 amortization method to subsequently measure servicing assets. Under that method, capitalized servicing assets are charged to expense in proportion to and over the period of estimated net servicing income. To estimate the fair value of servicing rights, the Company considers market prices for similar assets and the present value of expected future cash flows associated with the servicing rights calculated using assumptions that market participants would use in estimating future servicing income and expense. Such assumptions include estimates of the cost of servicing loans, loan default rates, an appropriate discount rate, and prepayment speeds. For purposes of evaluating and measuring impairment of capitalized servicing rights, the Company stratifies such assets based on the predominant risk characteristics of the underlying financial instruments that are expected to have the most impact on projected prepayments, cost of servicing and other factors affecting future cash flows associated with the servicing rights. Such factors may include financial asset or loan type, note rate and term. The amount of impairment recognized is the amount by which the carrying value of the capitalized servicing rights for a stratum exceeds estimated fair value. Impairment is recognized through a valuation allowance. Sales and securitizations of financial assets Transfers of financial assets for which the Company has surrendered control of the financial assets are accounted for as sales. Interests in a sale of financial assets that continue to be held by the Company, including servicing rights, are 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 variable interest entity is included in the consolidated financial statements if the Company has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and has the obligation to absorb losses or the right to receive benefits of the variable interest entity that could potentially be significant to that entity. Goodwill and core deposit and other intangible assets Goodwill represents the excess of the cost of an acquired entity over the fair value of the identifiable net assets acquired. Goodwill is not amortized, but rather is tested for impairment at least annually at the reporting unit level, which is either at the same level or one level below an operating segment. Other acquired intangible assets with finite lives, such as core deposit intangibles, are initially recorded at estimated fair value and are amortized over their estimated lives. Core deposit and other intangible assets are generally amortized using accelerated methods over estimated useful lives of five to ten years. The Company periodically assesses whether events or changes in circumstances indicate that the carrying amounts of core deposit and other intangible assets may be impaired. Derivative financial instruments The Company accounts for derivative financial instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available- for-sale security, or a foreign currency denominated forecasted transaction. The Company utilizes interest rate swap agreements as part of the management of interest rate risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and 134 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. Revenue from contracts with customers A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, mortgage banking revenues, trading account and foreign exchange gains, investment securities gains, loan and letter of credit fees, 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. For other noninterest income revenue streams, the Company generally recognizes the expected amount of consideration as revenue when the performance obligations related to the services under the terms of a contract are satisfied. The Company’s contracts generally do not contain terms that necessitate significant judgment to determine the amount of revenue to recognize. Stock-based compensation 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 plan allows for vesting at the time an employee retires. Income taxes Deferred tax assets and liabilities are recognized for the future tax effects attributable to differences between the financial statement value of existing assets and liabilities and their respective tax bases and carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates and laws. The Company evaluates uncertain tax positions using the two-step process required by GAAP. The first step requires a determination of whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Under the second step, a tax position that meets the more- 135 likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company accounts for its investments in qualified affordable housing projects using the proportional amortization method. Under that method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. Earnings per common share Basic earnings per common share exclude dilution and are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding (exclusive of shares represented by the unvested portion of restricted stock and restricted stock unit grants) and common shares issuable under deferred compensation arrangements during the period. Diluted earnings per common share reflect shares represented by the unvested portion of restricted stock and restricted stock unit grants and the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings. Proceeds assumed to have been received on such exercise or conversion are assumed to be used to purchase shares of M&T common stock at the average market price during the period, as required by the “treasury stock method” of accounting. GAAP requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) shall be considered participating securities and shall be included in the computation of earnings per common share pursuant to the two-class method. The Company has issued stock-based compensation awards in the form of restricted stock and restricted stock units that contain such rights and, accordingly, the Company’s earnings per common share are calculated using the two-class method. Treasury stock Repurchases of shares of M&T common stock are recorded at cost as a reduction of shareholders’ equity. Reissuances of shares of treasury stock are recorded at average cost. 2. Acquisition On February 22, 2021, M&T announced that it had entered into a definitive agreement with People’s United Financial, Inc. ("People’s United"), headquartered in Bridgeport, Connecticut, under which People’s United will be acquired by M&T in an all-stock transaction. Pursuant to the terms of the agreement, People’s United shareholders will receive consideration valued at .118 of an M&T share in the form of M&T common stock. People’s United outstanding preferred stock will be converted into a new series of M&T preferred stock upon completion of the acquisition. The transaction is valued at approximately $7.8 billion (with the price based on M&T’s closing price of $153.58 per share as of December 31, 2021). The merger has been approved by the boards of directors and shareholders of each company. The merger is expected to close promptly after the parties have satisfied customary closing conditions, including the approval of the Board of Governors of the Federal Reserve System. As of December 31, 2021, People’s United disclosed that it had total assets of $64.6 billion, including $37.9 billion of loans, $56.7 billion of liabilities, including $53.8 billion of deposits, and $7.9 billion of stockholders’ equity. In connection with the acquisition, the Company incurred merger-related expenses consisting of professional services, including legal expenses and technology-related activities to prepare for planned integration efforts, and printing costs associated with communications with shareholders that totaled approximately $44 million for the year ended December 31, 2021. 136 Investment securities 3. The amortized cost and estimated fair value of investment securities were as follows: December 31, 2021 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: U.S. Treasury and federal agencies ...................................... Obligations of states and political subdivisions ................... Mortgage-backed securities: Government issued or guaranteed................................... Privately issued ............................................................... Other debt securities ............................................................. Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (In thousands) $ 682,267 $ 229 $ 3,806 $ 678,690 3,042,771 124,309 3,849,347 113,102 1,974 115,305 561 4,481 8,848 3,155,312 121,802 3,955,804 3,052 177 2,667,328 61,555 2,562 2,734,674 — 2 49,221 10,520 — 59,743 9 — 3,043 179 2,708,173 8,376 57,333 14,742 2,562 — 23,127 2,771,290 31,975 $6,727,094 Total debt securities.............................................................. Equity and other securities: $6,584,021 $ 175,048 $ Readily marketable equity — at fair value ..................... Other — at cost ............................................................... Total equity and other securities........................................... $ 73,774 $ 387,742 $ 461,516 $ 4,460 $ — 4,460 $ 77,640 594 $ — 387,742 594 $ 465,382 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: Government issued or guaranteed................................... Privately issued ............................................................... Other debt securities ............................................................. $ 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 — $ 474,102 137 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, 2021. As of December 31, 2021, the latest available investment ratings of all obligations of states and political subdivisions, privately issued mortgage-backed securities and other debt securities were: Amortized Cost Estimated Fair Value A or Better BBB BB B or Less Not Rated Average Credit Rating of Fair Value Amount (In thousands) Obligations of states and political subdivisions ............................................ $ 177 $ 179 $ 179 $ — $ — $ — $ — Privately issued mortgage-backed 61,555 securities ................................................. Other debt securities .................................. 126,871 Total ........................................................... $188,603 57,333 124,364 $181,876 — 6,526 — 51,349 $6,705 $51,349 — 32,593 $32,593 485 56,848 — 33,896 $90,744 $ 485 The amortized cost and estimated fair value of collateralized mortgage obligations included in mortgage-backed securities were as follows: December 31 2021 2020 (In thousands) Collateralized mortgage obligations: Amortized cost ............................................................................................... $ 61,980 57,763 Estimated fair value ....................................................................................... $ 77,964 71,099 There were no significant gross realized gains or losses from sales of investment securities in 2021, 2020 or 2019. At December 31, 2021, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows: Debt securities available for sale: Due in one year or less................................................................................................. Due after one year through five years.......................................................................... Due after five years through ten years ......................................................................... Due after ten years ....................................................................................................... Mortgage-backed securities available for sale............................................................. Debt securities held to maturity: Due in one year or less................................................................................................. Due after ten years ....................................................................................................... Mortgage-backed securities held to maturity............................................................... Amortized Cost Estimated Fair Value (In thousands) $ 6,912 683,983 85,681 30,000 806,576 3,042,771 $ 3,849,347 $ 3,229 2,562 5,791 2,728,883 $ 2,734,674 $ 6,943 680,827 86,205 26,517 800,492 3,155,312 $ 3,955,804 $ 3,222 2,562 5,784 2,765,506 $ 2,771,290 138 A summary of investment securities that as of December 31, 2021 and 2020 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, 2021 Investment securities available for sale: U.S. Treasury and federal agencies ....................................... $ 598,566 Mortgage-backed securities: $ 3,806 $ — $ — Government issued or guaranteed.................................... Other debt securities .............................................................. Investment securities held to maturity: U.S. Treasury and federal agencies ....................................... Mortgage-backed securities: 10,111 3,760 612,437 54 74 3,934 20,824 66,419 87,243 3,043 9 — Government issued or guaranteed.................................... Privately issued ................................................................ 1,372,236 — 1,375,279 Total....................................................................................... $1,987,716 8,356 — 8,365 12,299 $ 1,251 43,692 44,943 $ 132,186 $ 507 4,407 4,914 — 20 14,742 14,762 19,676 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....................................................................................... $ 985 $ 14 $ — $ — 18,687 16,055 35,727 2,039 — 2,039 37,766 $ 356 181 551 11 — 11 562 16,556 63,462 80,018 399 8,120 8,519 — 52,418 52,418 $ 132,436 — 17,938 17,938 26,457 $ The Company owned 371 individual debt securities with aggregate gross unrealized losses of $32 million at December 31, 2021. Based on a review of each of the securities in the investment securities portfolio at December 31, 2021, the Company concluded that it expected to recover the amortized cost basis of its investment. As of December 31, 2021, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its impaired investment securities at a loss. At December 31, 2021, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $388 million of cost method investment securities. The Company estimated no material allowance for credit losses for its investment securities classified as held-to-maturity at December 31, 2021 or December 31, 2020, as the substantial majority of such investment securities are obligations backed by the U.S government or its agencies. 139 At December 31, 2021, investment securities with a carrying value of $5.1 billion, including $2.4 billion of investment securities available for sale, were pledged to secure borrowings from various FHLBs, repurchase agreements, governmental deposits, interest rate swap agreements and available lines of credit as described in note 9. Investment securities pledged by the Company to secure obligations whereby the secured party is permitted by contract or custom to sell or repledge such collateral totaled $96 million at December 31, 2021. The pledged securities included securities of the U.S. Treasury and federal agencies and mortgage-backed securities. 4. Loans and leases Total loans and leases outstanding were comprised of the following: December 31 2021 2020 (In thousands) Loans Commercial, financial, etc........................................................................ $22,524,542 $26,554,486 37,728,844 Commercial real estate ............................................................................. 16,786,673 Residential real estate............................................................................... 16,558,889 Consumer ................................................................................................. 97,628,892 Total loans ........................................................................................... 35,473,884 16,077,275 17,964,331 92,040,032 Leases 1,246,896 Commercial ......................................................................................... 98,875,788 Total loans and leases............................................................................... Less: unearned discount ........................................................................... (339,921) Total loans and leases, net of unearned discount ..................................... $92,912,452 $98,535,867 1,096,646 93,136,678 (224,226) One-to-four family residential mortgage loans held for sale were $474 million at December 31, 2021 and $777 million at December 31, 2020. Commercial real estate loans held for sale were $425 million at December 31, 2021 and $278 million at December 31, 2020. The amount of foreclosed residential real estate property held by the Company was $24 million and $28 million at December 31, 2021 and 2020, respectively. There were $151 million and $214 million at December 31, 2021 and 2020, 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, 2021, approximately 44% 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 $113 million and $72 million at December 31, 2021 and 2020, respectively. During 2021, new borrowings by such persons amounted to $42 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 $1 million. At December 31, 2021, approximately $9.5 billion of commercial loans and leases, $11.9 billion of commercial real estate loans, $11.5 billion of one-to-four family residential real estate loans, $1.9 billion of home equity loans and lines of credit and $10.2 billion of other consumer loans were pledged to secure outstanding borrowings and available lines of credit from the FHLB and the Federal Reserve Bank of New York as described in note 9. 140 A summary of current, past due and nonaccrual loans as of December 31, 2021 and 2020 follows: Current 30-89 Days Past Due Accruing Loans Past Due 90 Days or More (In thousands) Nonaccrual Total $23,101,810 $ 142,208 $ 8,284 $ 221,022 $23,473,324 24,712,643 1,400,437 7,722,049 13,294,872 319,099 2,904 17,175 239,561 31,733 — — 920,080 1,069,280 3,005 111,405 355,858 26,132,755 1,406,346 7,850,629 14,810,371 December 31, 2021 Commercial, financial, leasing, etc............ Real estate: Commercial .......................................... Residential builder and developer ........ Other commercial construction ............ Residential ............................................ Residential — limited documentation ................................... 1,124,520 16,666 — 122,888 1,264,074 Consumer: Home equity lines and loans ................ Recreational finance ............................. Automobile........................................... Other..................................................... Total ........................................................... 3,476,617 7,985,173 4,604,772 1,620,147 $89,043,040 15,486 40,544 40,064 12,223 $ 845,930 — — — 3,302 $ 963,399 70,488 27,811 34,037 44,289 $2,060,083 3,562,591 8,053,528 4,678,873 1,679,961 $92,912,452 December 31, 2020 Commercial, financial, leasing, etc. .......... Real estate: Commercial ......................................... Residential builder and developer ....... Other commercial construction ........... Residential ........................................... Residential — limited $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 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 $98,535,867 141 A summary of outstanding loan balances for which COVID-19 related payment deferrals were in effect as of December 31, 2021 and 2020 is presented in the following table. 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 those deferrals are scheduled to expire during 2022 and/or are in the process of formal modification of repayment terms for previously deferred payments. COVID-19 Related Payment Deferrals (1) December 31 2021 2020 (In thousands) Commercial, financial, leasing, etc. ..................................................................................... $ Real estate: — $ 95,823 Commercial .................................................................................................................... Residential builder and developer .................................................................................. Other commercial construction ...................................................................................... Residential (2).................................................................................................................. Residential — limited — — — 1,126,734 728,511 653 61,235 2,447,422 documentation ............................................................................................................. 63,078 337,108 Consumer: Home equity lines and loans........................................................................................... Recreational finance ....................................................................................................... Automobile ..................................................................................................................... Other ............................................................................................................................... 3,419 3,286 7,365 139 Total ..................................................................................................................................... $1,204,021 18,440 24,428 51,550 2,353 $3,767,523 (1) (2) Represents accruing loans for which a COVID-19 related payment deferral (including maturity extensions) was in effect. Includes $974 million and $1.7 billion of government-guaranteed loans at December 31, 2021 and 2020, respectively. During the normal course of business, the Company modifies loans to maximize recovery efforts. If the borrower is experiencing financial difficulty and a concession is granted, the Company considers such modifications as troubled debt restructurings and classifies those loans as either nonaccrual loans or renegotiated loans. The types of concessions that the Company grants typically include principal deferrals and interest rate concessions, but may also include other types of concessions. 142 The tables that follow summarize the Company’s loan modification activities that were considered troubled debt restructurings for the years ended December 31, 2021, 2020 and 2019: Year Ended December 31, 2021 Number Post-modification (a) Pre- modification Recorded Investment Principal Deferral Interest Rate Reduction Other (Dollars in thousands) Combination of Concession Types Total Commercial, financial, leasing, etc.................. Real estate: Commercial ................................................ Residential builder and developer .............. Other commercial construction .................. Residential .................................................. Residential — limited 284 $ 185,458 $ 46,806 $ — $40,558 $ 95,516 $ 182,880 99 1 3 373 202,878 3 542 108,325 67,387 3 532 95,769 — 31,202 — — — — — — 102,248 200,837 3 532 12,866 108,635 — — documentation ......................................... 21 2,920 2,865 — — — 2,865 Consumer: Home equity lines and loans ...................... Recreational finance ................................... Automobile ................................................. Other ........................................................... Total ................................................................. Year Ended December 31, 2020 Commercial, financial, leasing, etc.................. Real estate: Commercial ................................................ Residential builder and developer .............. Other commercial construction .................. Residential .................................................. Residential — limited 89 281 807 362 6,430 9,931 14,668 2,597 2,320 $ 533,752 $246,598 $ 6,054 9,931 14,654 2,597 — — — — — 321 6,375 — — 9,931 — 14 14,668 — 2,597 — — $71,760 $ 210,965 $ 529,323 394 $ 246,479 $ 70,671 $ 298 $31,605 $ 97,344 $ 199,918 161 1 2 631 310,578 204,591 — 13,573 202,985 183,878 91 13,602 documentation ......................................... 30 7,413 7,100 Consumer: Home equity lines and loans ...................... Recreational finance ................................... Automobile ................................................. Other ........................................................... Total ................................................................. 17,228 259 16,392 428 39,951 2,249 1,095 7,788 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 — — — — 143 Year Ended December 31, 2019 Number Pre- modification Recorded Investment Post-modification (a) Interest Rate Principal Deferral Reduction Other (Dollars in thousands) Combination of Concession Types Total Commercial, financial, leasing, etc. ........................ Real estate: Commercial........................................................ Residential builder and developer...................... Other commercial construction.......................... Residential ......................................................... Residential — limited documentation................................................. Consumer: 150 $ 63,715 $10,485 $ — $ — $ 52,871 $ 63,356 51 2 3 83 6 48,315 1,330 1,559 5,193 1,068 — 21,695 10,819 — — — — — — — — 26,152 31,345 — 1,068 1,500 22,726 1,500 11,907 1,409 399 — — 1,044 1,443 Home equity lines and loans.............................. Recreational finance .......................................... Automobile ........................................................ Total ........................................................................ 4,127 41 265 10 66 1,141 412 $ 143,556 $29,481 $ 176 265 1,076 — — — — — — — $ — $ 4,004 — 65 4,180 265 1,141 97,543 $127,024 (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, 2021, 2020 and 2019 and for which there was a subsequent payment default during the respective year were not material. A summary of changes in the accretable yield for loans acquired at a discount for the year ended December 31, 2019 follows: 2019 Purchased Impaired Other Acquired (In thousands) Balance at beginning of period .............................................................................. $ Interest income....................................................................................................... Reclassifications from 147,210 (49,017) nonaccretable balance ......................................................................................... Other (a)................................................................................................................. Balance at end of period ........................................................................................ $ 36,718 — 134,911 $ $ 96,907 (36,452) 15,534 (3,909) 72,080 (a) Other changes in expected cash flows including changes in interest rates and prepayment assumptions. 144 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, 2021 2020 (In thousands) Commercial leases: Direct financings: Lease payments receivable.................................................................... $ 873,089 $1,017,222 79,621 Estimated residual value of leased assets .............................................. (83,673) Unearned income................................................................................... 1,013,170 Investment in direct financings......................................................... 75,140 (68,456) 879,773 Leveraged leases: Lease payments receivable.................................................................... Estimated residual value of leased assets .............................................. Unearned income................................................................................... Investment in leveraged leases ......................................................... 76,453 73,600 (28,388) 121,665 Total investment in leases............................................................................... $1,002,816 $1,134,835 61,905 Deferred taxes payable arising from leveraged leases.................................... $ 75,003 73,414 (25,374) 123,043 56,759 $ Included within the estimated residual value of leased assets at December 31, 2021 and 2020 were $29 million and $34 million, respectively, in residual value associated with direct financing leases that are guaranteed by the lessees or others. At December 31, 2021, the minimum future lease payments to be received from lease financings were as follows: Year ending December 31: (In thousands) 2022 ................................................................................................................................ $ 282,388 247,084 2023 ................................................................................................................................ 171,176 2024 ................................................................................................................................ 107,998 2025 ................................................................................................................................ 67,528 2026 ................................................................................................................................ 71,918 Later years ...................................................................................................................... $ 948,092 5. 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 145 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, 2021, 2020 and 2019 were as follows: 2021 Beginning balance................................. Provision for credit losses ..................... Net charge-offs Charge-offs ...................................... Recoveries ....................................... Net charge-offs...................................... Ending balance ...................................... 2020 Beginning balance................................. Adoption of new accounting standard .. Provision for credit losses ..................... Net charge-offs Charge-offs ...................................... Recoveries ....................................... Net charge-offs...................................... Ending balance ...................................... 2019 Beginning balance................................. Provision for credit losses ..................... Net charge-offs Charge-offs ...................................... Recoveries ....................................... Net charge-offs...................................... Ending balance ...................................... Commercial, Financial, Real Estate Leasing, etc. Commercial Residential Consumer Unallocated Total (In thousands) $ 405,846 $ 670,719 $103,590 $ 556,232 $ (40,378) (42,825) (29,817) 38,020 — $1,736,387 (75,000) — (122,651) 41,082 (81,569) (101,306) 30,651 (70,655) (10,904) 8,857 (2,047) (103,293) 65,403 (37,890) $ 283,899 $ 557,239 $ 71,726 $ 556,362 $ — (338,154) — 145,993 — (192,161) — $1,469,226 $ 366,094 $ 322,201 $ 56,033 $ 229,118 $ 77,625 $1,051,071 132,457 — 800,000 (61,474) 220,544 194,004 226,425 23,656 356,203 53,896 (3,172) (77,625) (135,083) 15,765 (119,318) (35,891) 4,550 (31,341) (10,283) 7,116 (3,167) (152,250) 58,935 (93,315) $ 405,846 $ 670,719 $103,590 $ 556,232 $ — (333,507) 86,366 — — (247,141) — $1,736,387 $ 330,055 $ 341,655 $ 69,125 $ 200,564 $ 78,045 $1,019,444 176,000 (10,726) 126,029 (8,585) 69,702 (420) (58,244) 24,581 (33,663) — (237,708) — 93,335 — (144,373) $ 366,094 $ 322,201 $ 56,033 $ 229,118 $ 77,625 $1,051,071 (154,089) 56,614 (97,475) (12,711) 8,204 (4,507) (12,664) 3,936 (8,728) 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. Changes in the amount of the allowance for credit losses reflect the outcome of the procedures described herein. 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. In establishing the allowance for credit losses subsequent to December 31, 2019, 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, can 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 validation and back-testing of model performance to actual realized results. At both December 31, 2021 and 2020, the Company utilized a reasonable and supportable forecast period of two years. Subsequent to 146 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 also estimates losses attributable to specific troubled credits. 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 impact the borrower’s ability to pay. To the extent that those loans are collateral-dependent, they are evaluated based on the fair value of the loan’s collateral as estimated at or near the financial statement date. As the quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation. In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines in values as determined by line of business and/or loan workout personnel. Those adjustments are reviewed and assessed for reasonableness by the Company’s credit department. Accordingly, for real estate collateral securing larger nonaccrual commercial loans and commercial real estate loans, estimated collateral values are based on current appraisals and estimates of value. For non-real estate loans, collateral is assigned a discounted estimated liquidation value and, depending on the nature of the collateral, is verified through field exams or other procedures. In assessing collateral, real estate and non-real estate values are reduced by an estimate of selling costs. 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. 147 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, 2021, 2020 and 2019 follows. Amortized Cost with Allowance December 31, 2021 Amortized Cost without Allowance Total (In thousands) Year Ended December 31, 2021 Interest Income Recognized January 1, 2021 Amortized Cost Commercial, financial, leasing, etc....................... $110,790 $ 110,232 Real estate: $ 221,022 $ 306,827 $ 11,865 Commercial ..................................................... 242,078 Residential builder and developer ................... 613 Other commercial construction ....................... 30,229 Residential....................................................... 198,560 79,777 Residential — limited documentation............. 827,202 2,392 81,176 157,298 43,111 1,069,280 3,005 111,405 355,858 122,888 775,894 1,094 114,039 365,729 147,170 15,872 973 596 23,772 528 Consumer: Home equity lines and loans ........................... Recreational finance........................................ Automobile...................................................... Other................................................................ 38,219 6,335 4,723 167 Total...................................................................... $789,228 $1,270,855 32,269 21,476 29,314 44,122 70,488 27,811 34,037 44,289 $2,060,083 79,392 25,519 39,404 38,231 3,780 637 186 531 $1,893,299 $ 58,740 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 $ 148 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 $ 5,850 357 634 12,630 1,092 5,987 575 214 508 36,807 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 department personnel 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. Factors considered in assigning loan grades include borrower- specific information related to expected future cash flows and operating results, collateral values, geographic location, financial condition and performance, payment status, and other information. The Company’s policy is that, at least annually, updated financial information be 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. 149 The following table summarizes the loan grades applied at December 31, 2021 to the various classes of the Company’s commercial loans and commercial real estate loans by origination year. Term Loans by Origination Year 2021 2020 2019 2018 2017 Prior (In thousands) Revolving Loans Converted to Term Loans Revolving Loans Total Commercial, financial, leasing, etc.: Loan grades: Pass.................................. $4,798,052 1,916,072 1,476,786 107,010 Criticized accrual ............ 17,114 Criticized nonaccrual ...... 196,680 19,462 98,595 23,229 951,881 73,126 39,908 500,615 1,398,775 10,993,461 484,755 185,935 36,232 60,175 33,698 20,927 18,699 $22,054,341 1,197,961 15,628 221,022 6,509 Total commercial, financial, leasing, etc.............. $5,014,194 2,037,896 1,600,910 1,064,915 557,774 1,618,408 11,538,391 40,836 $23,473,324 Real estate: Commercial: Loan grades: Pass.................................. $3,413,587 2,662,999 3,682,178 2,648,388 2,076,155 5,232,790 468,530 1,743,798 Criticized accrual ............ 520,473 Criticized nonaccrual ...... 685,701 1,068,552 83,857 195,084 480,146 133,560 133,133 21,587 76,628 728,948 38,570 38,091 — $20,445,045 — 4,618,430 — 1,069,280 Total commercial real estate....................................... $3,568,307 3,276,705 4,562,963 3,800,797 2,621,313 7,497,061 805,609 — $26,132,755 Residential builder and developer: Loan grades: Pass.................................. $ 786,983 2,055 Criticized accrual ............ — Criticized nonaccrual ...... 106,510 5,356 — 75,287 117,258 2,910 47,587 13,637 — 4,680 630 — 12,450 - 95 230,017 891 — — $ 1,263,514 139,827 — 3,005 — Total residential builder and developer ......................... $ 789,038 111,866 195,455 61,224 5,310 12,545 230,908 — $ 1,406,346 Other commercial construction: Loan grades: Pass.................................. $ 957,947 1,781,603 2,022,276 675,226 Criticized accrual ............ — 71,613 Criticized nonaccrual ...... 24,103 — 54,191 832,547 583,428 3,303 152,669 228,739 12,263 273,556 114,158 19,970 38,781 — 4,256 — $ 6,059,379 — 1,679,845 111,405 — Total other commercial construction ............................ $ 982,050 1,835,794 2,769,115 1,419,278 393,671 407,684 43,037 — $ 7,850,629 Increases to criticized loans during 2021 were predominantly attributable to effects of the COVID-19 pandemic and the related re-grading of loans. 150 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, 2021 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 2021 2020 2019 2018 2017 Prior Loans Loans Total (In thousands) Residential: Current ............................... $3,057,118 1,672,090 1,075,896 466,040 1,037,958 5,913,461 162,666 12,535 30-89 days past due ........... Accruing loans past due 90 days or more .................... Nonaccrual......................... 542,749 314,792 Total residential ........................... $3,086,646 1,805,064 1,121,413 508,745 1,282,263 6,933,668 28,512 31,996 4,577 7,119 100,581 19,858 205,318 5,890 10,924 3,359 15,245 33,097 6,132 9,886 72,309 — — 263 72,572 — — — — — — $13,294,872 239,561 — 920,080 — — 355,858 — $14,810,371 — $ 1,124,520 16,666 — — — — 122,888 — $ 1,264,074 — — — — — — — — — — — 1,124,520 — 16,666 — — — 122,888 — 1,264,074 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 loans............................................. $ — — — — — 304 — — — — — — — — 777 — — — 2,793 — 1,730 21 1,944 — 38,015 2,348,279 1,082,775 $ 3,476,617 15,486 14,421 346 698 — — — — — — — 5,750 — 4,951 — 59,787 — 70,488 304 777 2,793 1,751 1,944 44,463 2,353,576 1,156,983 $ 3,562,591 151 Term Loans by Origination Year Revolving Revolving Loans Converted to Term 2021 2020 2019 2018 2017 Prior Loans Loans Total Recreational finance: Current........................ $ 2,890,111 2,088,342 1,267,929 8,317 30-89 days past due..... Accruing loans past due 90 days or more ........ 5,929 8,912 — 1,341 — 4,646 — 4,871 Nonaccrual.................. (In thousands) 646,883 5,074 445,868 5,189 646,040 7,123 — 4,918 — 4,039 — 7,996 Total recreational finance ........................... $ 2,897,381 2,101,900 1,281,117 656,875 455,096 661,159 Automobile: Current........................ $ 2,220,061 1,097,684 30-89 days past due..... 6,615 Accruing loans past due 90 days or more ........ — 4,390 Total automobile ........... $ 2,230,157 1,108,689 Nonaccrual.................. — 1,588 8,508 662,000 8,936 341,655 7,161 211,774 5,715 — 7,847 678,783 — 7,867 356,683 — 6,882 224,371 71,598 3,129 — 5,463 80,190 — — — — — — — — — — — $ 7,985,173 40,544 — — — — 27,811 — $ 8,053,528 — $ 4,604,772 40,064 — — — — 34,037 — $ 4,678,873 Other: Current........................ $ 30-89 days past due..... Accruing loans past due 90 days or more...... Nonaccrual.................. Total other ..................... $ 244,346 2,937 — 2,051 249,334 96,945 404 — 326 97,675 73,586 472 24,424 255 16,924 101 14,321 1,148,096 1,908 5,712 1,505 $ 1,620,147 12,223 434 — 326 74,384 — 193 24,872 — 104 17,129 3,302 353 — 40,807 23,688 1,190,811 — 129 3,302 44,289 2,068 $ 1,679,961 Total loans and leases at December 31, 2021........ $18,817,411 12,376,366 12,286,933 7,895,140 5,558,871 18,542,940 16,234,904 1,199,887 $92,912,452 152 The following tables 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 47,144 400,154 121,899 290,885 99,293 526,037 26,876 875,348 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 — $ 8,707,811 153 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 follows. Term Loans by Origination Year Revolving Revolving Loans Converted to Term 2020 2019 2018 2017 2016 Prior Loans Loans Total (In thousands) Residential: Current......................................... $2,722,862 1,416,259 618,736 1,318,094 718,235 6,898,756 30-89 days past due....................... 150,447 Accruing loans past due 13,477 13,496 7,781 7,947 7,258 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 6,408 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 3,983 — 1,591 — — — 3,983 — — 1,591 2,016 — — — 2,016 162 — — — 162 51,554 2,569,621 1,252,185 $ 3,881,885 24,329 1,148 22,242 939 — 6,148 — 79,392 58,850 2,576,312 1,341,919 $ 3,985,606 — 67,492 — 5,752 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 loans... $ — — — — — 773 — — — 773 154 Term Loans by Origination Year Revolving Revolving Loans Converted to Term 2020 2019 2018 2017 2016 Prior Loans Loans Total Recreational finance: Current....................................... $ 2,796,359 1,751,766 30-89 days past due ................... 11,255 Accruing loans past due 9,548 90 days or more..................... Nonaccrual................................. — 3,883 Total recreational finance............ $ 2,807,761 1,766,904 — 1,854 Automobile: Current...................................... $ 1,595,636 1,106,782 30-89 days past due ................... 14,140 Accruing loans past due 6,461 90 days or more..................... Nonaccrual ............................... — 7,144 Total automobile ......................... $ 1,603,712 1,128,066 — 1,615 (In thousands) 907,595 8,519 630,151 6,638 352,414 2,938 564,358 8,263 — 4,072 920,186 — 4,194 640,983 — 2,733 358,085 — 8,783 581,404 629,338 12,542 440,604 12,899 171,017 6,373 — 10,788 652,668 — 10,061 463,564 — 5,991 183,381 63,972 3,083 — 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 160,424 1,879 137,617 1,130 53,702 577 32,556 2,301 90 days or more..................... Nonaccrual ............................... Total other ................................... $ — 1,493 163,796 — 492 139,239 — 339 54,618 — 183 35,040 4,526 42 — 31 4,599 28,970 557 927,217 10,594 1,856 $ 1,346,868 17,561 481 374 501 30,402 4,207 35,044 977,062 — 148 4,581 38,231 2,485 $ 1,407,241 Total loans and leases at 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 Company’s reserve for off-balance sheet credit exposures was not material at December 31, 2021 and December 31, 2020. 6. Premises and equipment The detail of premises and equipment was as follows: Land ................................................................................................................ $ Buildings ......................................................................................................... Leasehold improvements ................................................................................ Furniture and equipment — owned ................................................................ Furniture and equipment — capital leases...................................................... Less: accumulated depreciation and amortization December 31 2021 2020 (In thousands) 93,862 $ 512,988 304,825 880,153 115 94,929 513,290 302,246 807,701 8,630 1,791,943 1,726,796 Owned assets.............................................................................................. Capital leases.............................................................................................. 971,979 5,933 977,912 Right of use assets — operating leases ........................................................... 412,674 Premises and equipment, net........................................................................... $1,144,765 $1,161,558 1,026,842 38 1,026,880 379,702 155 The right-of-use assets and lease liabilities relate to banking offices and other space occupied by the Company and use of certain equipment under noncancelable operating lease agreements. As of December 31, 2021 and 2020, the Company recognized $431 million and $467 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 20 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 Company has the right to operate an ATM in a landlord's location. The lease terms 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. 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. 2021 Year Ended December 31, 2020 (Dollars in thousands) 2019 Lease cost Operating lease cost....................................... Short-term lease cost ..................................... Variable lease cost ......................................... Total lease cost.......................................... $ 101,353 111 4,103 $ 105,567 $ 104,158 198 1,565 $ 105,921 $ 100,669 105 2,332 $ 103,106 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 .................... $ 57,760 106,586 6 years $ 70,754 104,396 7 years $ 132,219 101,869 7 years 2.51% 2.74% 3.01% 156 Minimum lease payments under noncancelable operating leases are summarized in the following table. Year ending December 31: (In thousands) 2022 ..............................................................................................................$ 2023 .............................................................................................................. 2024 .............................................................................................................. 2025 .............................................................................................................. 2026 .............................................................................................................. Later years..................................................................................................... Total lease payments ......................................................................................... Less: imputed interest ........................................................................................ Total...................................................................................................................$ 102,417 86,467 71,321 56,413 42,634 107,652 466,904 35,792 431,112 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. 7. Capitalized servicing assets Changes in capitalized servicing assets were as follows: For the Year Ended December 31, Residential Mortgage Loans 2020 2021 2019 Commercial Mortgage Loans 2020 2019 2021 (In thousands) Beginning balance........................... $231,204 $244,411 $120,509 $133,429 $130,636 $114,663 41,370 Originations .................................... — Purchases ........................................ (25,397) Amortization ................................... 130,636 — Valuation allowance ....................... Ending balance, net......................... $217,053 $201,204 $237,411 $132,604 $133,429 $130,636 26,067 — 144,326 (46,491) 244,411 (7,000) 65,723 — (55,874) 241,053 (24,000) 33,068 — (33,893) 132,604 — 29,306 — (26,513) 133,429 — (58,308) 231,204 (30,000) 45,101 Residential mortgage loans serviced for others were $23.2 billion at December 31, 2021, $26.3 billion at December 31, 2020 and $32.3 billion at December 31, 2019. Excluded from residential mortgage loans serviced for others were loans sub-serviced for others of $74.7 billion, $68.1 billion and $62.8 billion at December 31, 2021, 2020, and 2019, respectively. In January 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 $20.2 billion at December 31, 2021, $18.9 billion at December 31, 2020 and $17.6 billion at December 31, 2019. Excluded from commercial mortgage loans serviced for others were loans sub-serviced for others of $3.5 billion at December 31, 2021, $3.3 billion at December 31, 2020 and $3.4 billion at December 31, 2019. The estimated fair value of capitalized residential mortgage loan servicing assets was approximately $257 million at December 31, 2021 and $240 million at December 31, 2020. The fair value of capitalized residential mortgage loan servicing assets was estimated using weighted-average discount rates of 9.8% and 9.4% at December 31, 2021 and 2020, respectively, and contemporaneous prepayment assumptions that vary by loan type. At December 31, 2021 and 2020, the discount rate 157 represented a weighted-average option-adjusted spread (“OAS”) of 894 basis points (hundredths of one percent) and 918 basis points, respectively, over market implied forward London Interbank Offered Rates (“LIBOR”). The estimated fair value of capitalized residential mortgage loan servicing rights may vary significantly in subsequent periods due to changing interest rates and the effect thereof on prepayment speeds. The estimated fair value of capitalized commercial mortgage loan servicing assets was approximately $160 million at each of December 31, 2021 and 2020. An 18% discount rate was used to estimate the fair value of capitalized commercial mortgage loan servicing rights at December 31, 2021 and 2020 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, 2021 and the sensitivity of such value to changes in those assumptions are summarized in the table that follows. Those calculated sensitivities are hypothetical and actual changes in the fair value of capitalized servicing rights may differ significantly from the amounts presented herein. The effect of a variation in a particular assumption on the fair value of the servicing rights is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another which may magnify or counteract the sensitivities. The changes in assumptions are presumed to be instantaneous. Residential Commercial (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 OAS ..................................................................... Impact on fair value of 10% adverse change ................................ $ Impact on fair value of 20% adverse change ................................ Weighted-average discount rate ........................................................ Impact on fair value of 10% adverse change ................................ Impact on fair value of 20% adverse change ................................ 12.92% (13,587) (26,047) 8.94% (7,621) (14,786) $ 18.00% (6,892) (13,306) 8. 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. A summary of total amortizing intangible assets follows. 158 Gross Carrying Amount Accumulated Amortization (In thousands) Net Carrying Amount December 31, 2021 Core deposit....................................................... $ Other .................................................................. Total................................................................... $ December 31, 2020 Core deposit....................................................... $ Other .................................................................. Total................................................................... $ 131,664 6,757 138,421 131,664 6,757 138,421 $ $ $ $ 127,746 6,677 134,423 119,125 5,131 124,256 $ $ $ $ 3,918 80 3,998 12,539 1,626 14,165 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 $10 million, $15 million and $19 million for the years ended December 31, 2021, 2020 and 2019, respectively. Estimated amortization expense in 2022 for such intangible assets is $4 million. The Company completed annual goodwill impairment tests as of October 1, 2021, 2020 and 2019. For purposes of testing for impairment, the Company assigned all recorded goodwill to the reporting units originally intended to benefit from past business combinations, which has historically been the Company’s core relationship business reporting units. Goodwill was generally assigned based on the implied fair value of the acquired goodwill applicable to the benefited reporting units at the time of each respective acquisition. The implied fair value of the goodwill was determined as the difference between the estimated incremental overall fair value of the reporting unit and the estimated fair value of the net assets assigned to the reporting unit as of each respective acquisition date. To test for goodwill impairment at each evaluation date, the Company compared the estimated fair value of each of its reporting units to their respective carrying amounts and certain other assets and liabilities assigned to the reporting unit, including goodwill and core deposit and other intangible assets. The methodologies used to estimate fair values of reporting units as of the acquisition dates and as of the evaluation dates were similar. For the Company’s core customer relationship business reporting units, fair value was estimated as the present value of the expected future cash flows of the reporting unit. Based on the results of the goodwill impairment tests, the Company concluded that the amount of recorded goodwill was not impaired at the respective testing dates. A summary of goodwill assigned to each of the Company’s reportable segments as of December 31, 2021 and 2020 for purposes of testing for impairment is as follows: (In thousands) Business Banking ............................................................................................................ $ 864,366 Commercial Banking....................................................................................................... 1,401,873 Commercial Real Estate .................................................................................................. 654,389 Discretionary Portfolio .................................................................................................... — Residential Mortgage Banking ........................................................................................ — Retail Banking ................................................................................................................. 1,309,191 363,293 All Other .......................................................................................................................... Total................................................................................................................................. $ 4,593,112 159 9. Borrowings The amounts and interest rates of short-term borrowings were as follows: Federal Funds Purchased and Repurchase Agreements Other Short-term Borrowings (Dollars in thousands) Total At December 31, 2021 Amount outstanding...................................................... $ Weighted-average interest rate ..................................... 47,046 $ 0.01% — $ — 47,046 0.01% For the year ended December 31, 2021 Highest amount at a month-end .................................... $ 103,548 Daily-average amount outstanding ............................... 68,073 Weighted-average interest rate ..................................... 0.01% $ — — $ — 68,073 0.01% 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% 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 borrowings outstanding at December 31, 2021 matured on the next business day following year-end. At December 31, 2021, M&T Bank had lines of credit under formal agreements as follows: (In thousands) Outstanding borrowings .................................................................................................. Unused ............................................................................................................................. $ 1,578 30,065,461 At December 31, 2021, M&T Bank had borrowing facilities available with the FHLBs whereby M&T Bank could borrow up to approximately $16.2 billion. Additionally, M&T Bank had an available line of credit with the Federal Reserve Bank of New York totaling approximately $13.8 billion at December 31, 2021. M&T Bank is required to pledge loans and investment securities as collateral for these borrowing facilities. 160 Long-term borrowings were as follows: December 31, 2021 2020 (In thousands) Senior notes of M&T: Variable rate due 2023........................................................................ $ 3.55% due 2023 .................................................................................. 249,893 $ 516,173 249,824 533,369 Senior notes of M&T Bank: Variable rate due 2021........................................................................ Variable rate due 2022........................................................................ 2.50% due 2022 .................................................................................. 2.90% due 2025 .................................................................................. — 249,961 653,903 749,740 349,992 249,858 664,400 749,656 Advances from FHLB: Fixed rates .......................................................................................... 1,578 1,683 Subordinated notes of M&T Bank: Variable rate due 2021........................................................................ 3.40% due 2027 .................................................................................. — 522,867 500,000 552,194 Junior subordinated debentures of M&T associated with preferred capital securities: Fixed rates: BSB Capital Trust I — 8.125%, due 2028 .................................... Provident Trust I — 8.29%, due 2028 ........................................... Southern Financial Statutory Trust I — 10.60%, due 2030........... 15,775 30,103 6,912 15,752 29,099 6,836 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........................................................................................................ 148,945 151,270 97,220 15,464 57,547 8,448 9,570 148,409 150,606 97,075 15,464 56,641 8,338 2,997 $ 3,485,369 $ 4,382,193 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 .81% at December 31, 2021 and .90% at December 31, 2020. 161 The variable rate senior notes of M&T Bank pay interest quarterly at rates that are indexed to the three-month LIBOR. The contractual interest rates for those notes ranged from .61% to .81% at December 31, 2021 and .49% to .83% at December 31, 2020. The weighted-average contractual interest rate was .71% at December 31, 2021 and .63% at December 31, 2020. Long-term fixed rate advances from the FHLB had weighted-average contractual interest rates of 5.82% at December 31, 2021 and December 31, 2020. Advances from the FHLB outstanding at December 31, 2021 mature in 2029 and 2035 and are secured by residential real estate loans, commercial real estate loans and investment securities. 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 2021 paid interest monthly at a rate that was indexed to the three-month LIBOR. The contractual interest rate was .87% at December 31, 2020. The fixed and variable rate junior subordinated deferrable interest debentures of M&T (“Junior Subordinated Debentures”) are held by various trusts and were issued in connection with the issuance by those trusts of preferred capital securities (“Capital Securities”) and common securities (“Common Securities”). The proceeds from the issuances of the Capital Securities and the Common Securities were used by the trusts to purchase the Junior Subordinated Debentures. The Common Securities of each of those trusts are wholly owned by M&T and are the only class of each trust’s securities possessing general voting powers. The Capital Securities represent preferred undivided interests in the assets of the corresponding trust. Under the Federal Reserve Board’s risk-based capital guidelines, the Capital Securities qualify for inclusion in Tier 2 regulatory capital. The variable rate Junior Subordinated Debentures pay interest quarterly at rates that are indexed to the three-month LIBOR. Those rates ranged from .98% to 3.47% at December 31, 2021 and from 1.06% to 3.59% at December 31, 2020. The weighted-average variable rates payable on those Junior Subordinated Debentures were 1.53% at December 31, 2021 and 1.65% at December 31, 2020. Holders of the Capital Securities receive preferential cumulative cash distributions unless M&T exercises its right to extend the payment of interest on the Junior Subordinated Debentures as allowed by the terms of each such debenture, in which case payment of distributions on the respective Capital Securities will be deferred for comparable periods. During an extended interest period, M&T may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock. In general, the agreements governing the Capital Securities, in the aggregate, provide a full, irrevocable and unconditional guarantee by M&T of the payment of distributions on, the redemption of, and any liquidation distribution with respect to the Capital Securities. The obligations under such guarantee and the Capital Securities are subordinate and junior in right of payment to all senior indebtedness of M&T. The Capital Securities will remain outstanding until the Junior Subordinated Debentures are repaid at maturity, are redeemed prior to maturity or are distributed in liquidation to the trusts. The Capital Securities are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity dates (ranging from 2027 to 2033) of the Junior Subordinated Debentures or the earlier redemption of the Junior Subordinated Debentures in whole upon the occurrence of one or more events set forth in the indentures relating to the Capital Securities, and in whole or in part at any time after an optional redemption prior to contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated Debentures in whole or in part, subject to possible regulatory approval. 162 Long-term borrowings at December 31, 2021 mature as follows: Year ending December 31: 2022 .............................................................................................................................. $ 903,864 766,136 2023 .............................................................................................................................. 2024 .............................................................................................................................. 9,500 749,740 2025 .............................................................................................................................. 2026 .............................................................................................................................. — 1,056,129 Later years..................................................................................................................... $3,485,369 (In thousands) 10. Shareholders’ equity M&T is authorized to issue 1,000,000 shares of preferred stock with a $1.00 par value per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference, but have no general voting rights. Issued and outstanding preferred stock of M&T as of December 31, 2021 and 2020 is presented below: December 31, 2021 Shares Issued and Outstanding Carrying Value December 31, 2020 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 $350,000 350,000 $350,000 Series F (b) Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock, $10,000 liquidation preference per share ................................ 50,000 $500,000 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 40,000 $400,000 Series I (d) Fixed-Rate Reset Non-cumulative Perpetual Preferred Stock, $10,000 liquidation preference per share ........................................... 50,000 $500,000 — $ — (a) (b) (c) (d) Dividends, if declared, are paid semi-annually at a rate of 6.45% through February 14, 2024 and thereafter will be paid quarterly at a rate of the three-month LIBOR plus 361 basis points. The shares are redeemable in whole or in part on or after February 15, 2024. Notwithstanding M&T’s option to redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days following that occurrence. Declared dividends per share were $64.50 in each of 2021, 2020 and 2019. Dividends, if declared, are paid semi-annually at a rate of 5.125% through October 31, 2026 and thereafter will be paid quarterly at a rate of the three-month LIBOR plus 352 basis points. The shares are redeemable in whole or in part on or after November 1, 2026. Notwithstanding M&T’s option to redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days following that occurrence. Declared dividends per share were $512.50 in each of 2021, 2020 and 2019. Dividends, if declared, are paid semi-annually at a rate of 5.0% through July 31, 2024 and thereafter will be paid semiannually at a rate 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 $500.00 in 2021, $500.694 in 2020 and $125.694 in 2019. Dividends, if declared, are paid semi-annually at a rate of 3.5% through August 31, 2026 and thereafter will be paid semiannually at a rate of the five-year U.S. Treasury rate plus 2.679%. The shares are redeemable in whole or in part on or after September 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. Dividends declared per share were $94.306 in 2021. 163 11. Revenue from contracts with customers The Company generally charges customer accounts or otherwise bills customers upon completion of its services. Typically the Company’s contracts with customers have a duration of one year or less and payment for services is received at least annually, but oftentimes more frequently as services are provided. At December 31, 2021 and 2020, the Company had $68 million and $67 million, respectively, of amounts receivable related to recognized revenue from the sources in the accompanying tables. Such amounts are classified in “accrued interest and other assets” in the 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, 2021 and 2020, the Company had deferred revenue of $45 million and $42 million, respectively, related to the sources in the accompanying tables recorded in “accrued interest and other liabilities” in the consolidated balance sheet. The following tables summarize sources of the Company’s noninterest income during 2021, 2020, and 2019 that are subject to the revenue recognition guidance. Business Banking Commercial Banking Commercial Real Estate Residential Mortgage Banking Discretionary Portfolio (In thousands) Retail Banking All Other Total Year Ended December 31, 2021 Classification in consolidated statement of income Service charges on deposit accounts ... $ 53,816 — Trust income ........................................ Brokerage services income.................. — Other revenues from operations: 98,880 — — Merchant discount and credit card fees............................................. Other .............................................. 52,343 — $106,159 55,164 5,968 160,012 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 11,853 — — 2,661 7,304 21,818 10,252 — — 2,221 6,218 18,691 Year Ended December 31, 2019 Classification in consolidated statement of income — — — — 232,279 — — 5,285 $ 402,113 644,716 62,791 — 644,716 — 62,791 — 1,359 1,359 — 20,850 131,405 387 6,166 22,878 39,973 83,648 6,166 276,007 753,152 $1,324,673 — — — — 211,858 — — 5,839 $ 370,788 601,884 47,428 — 601,424 — 47,428 — 1,625 1,625 — 13,481 102,472 767 4,732 20,813 41,815 84,611 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 .............................................. 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 $1,253,163 164 Service charges on deposit accounts include fees deducted directly from customer account balances, such as account maintenance, insufficient funds and other transactional service charges, and also include debit card interchange revenue resulting from customer initiated transactions. Account maintenance charges are generally recognized as revenue on a monthly basis, whereas other fees are recognized after the respective service is provided. Trust income includes fees related to the Institutional Client Services (“ICS”) business and the Wealth Advisory Services (“WAS”) business. Revenues from the ICS business are largely derived from a variety of trustee, agency, investment, cash management and administrative services, whereas revenues from the WAS business are mainly derived from asset management, fiduciary services, and family office services. Trust fees may be billed in arrears or in advance and are recognized as revenues as the Company’s performance obligations are satisfied. Certain fees are based on a percentage of assets invested or under management and are recognized as the service is performed and constraints regarding the uncertainty of the amount of fees are resolved. Brokerage services income includes revenues from the sale of mutual funds and annuities and securities brokerage fees. Such revenues are generally recognized at the time of transaction execution. Mutual fund and other distribution fees are recognized upon initial placement of customer funds as well as in future periods as such customers continue to hold amounts in those mutual funds. Other revenues from operations include merchant discount and credit card fees 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 Company has satisfied its service obligation. 12. Stock-based compensation plans Stock-based compensation expense was $85 million in 2021, $80 million in 2020 and $76 million in 2019. The Company recognized income tax benefits related to stock-based compensation of $16 million in 2021, $17 million in 2020 and $19 million in 2019. The Company’s equity incentive compensation plan allows for the issuance of various forms of stock-based compensation, including stock options, restricted stock and restricted stock units, including performance-based awards. At December 31, 2021 and 2020, respectively, there were 2,299,502 and 3,100,665 shares available for future grant under the Company’s equity incentive compensation plan. Stock awards Stock awards granted to employees are comprised of restricted stock and restricted stock units. Stock awards generally vest over three years. The Company may issue shares from treasury stock to the extent available or issue new shares. There were no restricted shares issued in 2021, 2020 or 2019. The number of restricted stock units issued was 636,956 in 2021, 480,949 in 2020 and 448,487 in 2019, with a weighted-average grant date fair value of $84 million, $81 million and $74 million, respectively. Unrecognized compensation expense associated with restricted stock units was $27 million as of December 31, 2021 and is expected to be recognized over a weighted-average period of approximately one year. 165 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, 2021 ................................... 816,950 $ 169.60 132.85 636,956 Granted .................................................................... 170.80 (379,155) Vested ...................................................................... Cancelled ................................................................. 149.61 (36,059) Unvested at December 31, 2021 ............................. 1,038,692 $ 147.32 13,550 $ 162.50 — 162.57 — 4,076 $ 162.35 — (9,474) — Stock option awards Stock options granted to employees generally vest over three years and are exercisable over terms not exceeding ten years and one day. The Company granted 178,441, 187,088 and 164,244 stock options in 2021, 2020 and 2019, respectively. The weighted-average grant date fair value of options granted was $5 million in each of 2021, 2020 and 2019. The Company used an option pricing model to estimate the grant date present value of stock options granted. 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, 2021 ............................... Granted .................................................................... Exercised ................................................................. Expired .................................................................... Outstanding at December 31, 2021 ......................... Exercisable at December 31, 2021 .......................... 465,423 $ 174.11 132.47 178,441 113.06 (2,699) 169.24 (5,301) 635,864 $ 162.73 282,081 $ 177.02 7.8 $ 6.9 $ 3,762 — For 2021, 2020 and 2019, M&T received $305,000, $3 million and $9 million, respectively, in cash from the exercise of stock options. The intrinsic value of stock options exercised and the related tax benefits realized by the Company were not material in any of those three years. As of December 31, 2021, 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 2021, 2020 and 2019 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 95,147 in 2021, 77,170 in 2020 and 71,676 in 2019. As of December 31, 2021, there were 2,138,434 shares available for issuance under the plan. M&T received cash for shares purchased through the employee stock purchase plan of $11 million in each of 2021 and 2019, and $12 million in 2020, Compensation expense recognized for the stock purchase plan was not material in 2021, 2020 or 2019. 166 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 13,319 and 14,304 at December 31, 2021 and 2020, respectively. The obligation to issue shares is included in “common stock issuable” in the consolidated balance sheet. Directors’ stock compensation programs The Company maintains compensation programs for members of the Company’s boards of directors and its regional director advisory councils that provides for a portion of their compensation to be received in shares or restricted stock units. In 2021, 28,646 shares were issued under such programs. 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 2,450 and 3,809 at December 31, 2021 and 2020, respectively. The obligation to issue shares is included in “common stock issuable” in the consolidated balance sheet. 13. 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: 2021 Year Ended December 31 2020 (In thousands) 2019 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) ..................................... $ 20,513 $ 61,873 (143,448) 553 89,017 28,508 $ 19,944 $ 71,421 (125,512) 557 58,096 24,506 $ 17,294 81,579 (122,139) 557 21,992 (717) Net other postretirement benefits expense for defined benefit plans consisted of the following: 2021 Year Ended December 31 2020 (In thousands) 2019 Service cost ............................................................................. Interest cost on benefit obligation ........................................... Amortization of prior service credit ........................................ Recognized net actuarial gain ................................................. Net other postretirement benefits ............................................ $ $ 1,014 $ 1,311 (4,738) (1,295) (3,708) $ 970 $ 1,741 (4,738) (1,236) (3,263) $ 859 2,344 (4,730) (1,247) (2,774) 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. 167 Data relating to the funding position of the defined benefit plans were as follows: Change in benefit obligation: Pension Benefits 2021 2020 Other Postretirement Benefits 2020 2021 (In thousands) Benefit obligation at beginning of year ....... $2,521,292 $2,247,329 $ Service cost.................................................. Interest cost.................................................. Plan participants’ contributions ................... Actuarial (gain) loss..................................... Medicare Part D reimbursement.................. Benefits paid ................................................ Benefit obligation at end of year ................. 20,513 61,873 — (69,230) — (114,235) 2,420,213 19,944 71,421 — 288,944 — (106,346) 2,521,292 Change in plan assets: Fair value of plan assets at beginning of year .............................................................. Actual return on plan assets......................... Employer contributions ............................... Plan participants’ contributions ................... Medicare Part D reimbursement.................. Benefits paid ................................................ Fair value of plan assets at end of year........ 2,420,582 278,260 11,231 — — (114,235) 2,595,838 2,037,940 178,610 310,378 — — (106,346) 2,420,582 Funded status.................................................... $ 175,625 $ (100,710) $ Prepaid asset recognized in the 55,281 $ 1,014 1,311 2,553 (2,232) 540 (6,621) 51,846 56,492 970 1,741 2,386 2,371 574 (9,253) 55,281 — — 3,528 2,553 540 (6,621) — (51,846) $ — — 6,293 2,386 574 (9,253) — (55,281) consolidated balance sheet ............................ 332,197 64,670 — — Accrued liability recognized in the consolidated balance sheet ............................ (156,572) (165,380) (51,846) (55,281) Net accrued asset (liability) recognized in the consolidated balance sheet.................................................. $ 175,625 $ (100,710) $ (51,846) $ (55,281) Amounts recognized in accumulated other comprehensive income (“AOCI”) were: Net loss (gain).............................................. $ 391,721 $ 684,780 $ Net prior service cost (credit) ...................... Pre-tax adjustment to AOCI ........................ Taxes............................................................ Net adjustment to AOCI .............................. $ 290,998 $ 507,682 $ 1,277 686,057 (178,375) 724 392,445 (101,447) (14,638) $ (17,531) (32,169) 8,316 (23,853) $ (13,701) (22,269) (35,970) 9,352 (26,618) The Company has an unfunded supplemental pension plan for certain key executives and others. The projected benefit obligation and accumulated benefit obligation included in the preceding data related to such plan were $157 million as of December 31, 2021 and $165 million as of December 31, 2020. The accumulated benefit obligation for all defined benefit pension plans was $2.4 billion and $2.5 billion at December 31, 2021 and 2020, respectively. 168 GAAP requires an employer to recognize in its balance sheet as an asset or liability the overfunded or underfunded status of a defined benefit postretirement plan, measured as the difference between the fair value of plan assets and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation. Gains or losses and prior service costs or credits that arise during the period, but are not included as components of net periodic benefit expense, are recognized as a component of other comprehensive income. Amortization of net gains and losses is included in annual net periodic benefit expense if, as of the beginning of the year, the net gain or loss exceeds 10% of the greater of the benefit obligation or the market-related fair value of the plan assets. As indicated in the preceding table, as of December 31, 2021 the Company recorded a minimum liability adjustment of $360 million ($392 million related to pension plans and $(32) million related to other postretirement benefits) with a corresponding reduction of shareholders’ equity, net of applicable deferred taxes, of $267 million. In aggregate, the benefit plans realized a net gain during 2021 that resulted in a decrease to the minimum liability adjustment from that which was recorded at December 31, 2020 of $290 million. The net gain in 2021 was mainly the result of increasing the discount rate used to measure the benefit obligation of all plans to 2.75% at December 31, 2021 from 2.50% used at the prior year-end and a return on plan assets that exceeded the assumed expected return, offset, in part, by the amortization of actuarial losses. The table below reflects the changes in plan assets and benefit obligations recognized in other comprehensive income related to the Company’s postretirement benefit plans. Pension Plans Other Postretirement Benefit Plans (In thousands) Total 2021 Net loss (gain) ........................................................................... $ (204,042) $ Amortization of prior service (cost) credit................................ Amortization of actuarial (loss) gain ........................................ Total recognized in other comprehensive income, (553) (89,017) (2,232) $ (206,274) 4,738 4,185 (87,722) 1,295 pre-tax .................................................................................... $ (293,612) $ 3,801 $ (289,811) 2020 Net loss (gain) ........................................................................... $ 235,847 $ Amortization of prior service (cost) credit................................ Amortization of actuarial (loss) gain ........................................ Total recognized in other comprehensive income, (557) (58,096) 2,371 $ 238,218 4,181 4,738 (56,860) 1,236 pre-tax .................................................................................... $ 177,194 $ 8,345 $ 185,539 The Company also provides a qualified defined contribution pension plan to eligible employees who were not participants in the defined benefit pension plan as of December 31, 2005 and to other employees who have elected to participate in the defined contribution plan. The Company makes contributions to the defined contribution plan each year in an amount that is based on an individual participant’s total compensation (generally defined as total wages, incentive compensation, commissions and bonuses) and years of service. Company contributions to the plan are discretionary for participants for which eligibility occurred after January 1, 2020. Participants do not contribute to the defined contribution pension plan. Pension expense recorded in 2021, 2020 and 2019 associated with the defined contribution pension plan was $40 million, $35 million and $32 million, respectively. 169 Assumptions The assumed weighted-average rates used to determine benefit obligations at December 31 were: Pension Benefits Other Postretirement Benefits 2021 2020 2021 2020 Discount rate............................................................................. Rate of increase in future compensation levels ........................ 2.75% 2.50% 2.75% 2.50% 3.35% 3.37% — — The assumed weighted-average rates used to determine net benefit expense for the years ended December 31 were: Pension Benefits 2020 2019 2021 Other Postretirement Benefits 2020 2019 2021 Discount rate ........................................................ 2.50% 3.25% 4.25% 2.50% 3.25% 4.25% Long-term rate of return on plan assets................ 6.25% 6.50% 6.50% — Rate of increase in future compensation — — levels.................................................................. 3.37% 4.29% 4.31% — — — The discount rate used by the Company to determine the present value of the Company’s future benefit obligations reflects specific market yields for a hypothetical portfolio of highly rated corporate bonds that would produce cash flows similar to the Company’s benefit plan obligations and the level of market interest rates in general as of the year-end. The expected long-term rate of return assumption as of each measurement date was developed through analysis of historical market returns, current market conditions, anticipated future asset allocations, the funds’ past experience, and expectations on potential future market returns. The expected rate of return assumption represents a long-term average view of the performance of the plan assets, a return that may or may not be achieved during any one calendar year. The Company’s defined benefit pension plan is sensitive to the long-term rate of return on plan assets and the discount rate. To demonstrate the sensitivity of pension expense to changes in these assumptions, with all other assumptions held constant, 25 basis point increases in: the rate of return on plan assets would have resulted in a decrease in pension expense of approximately $6 million; and the discount rate would have resulted in a decrease in pension expense of approximately $11 million. Decreases of 25 basis points in those assumptions would have resulted in similar changes in amount, but in the opposite direction from the changes presented in the preceding sentence. Additionally, an increase of 25 basis points in the discount rate would have decreased the benefit obligation by $79 million and a decrease of 25 basis points in the discount rate would have increased the benefit obligation by $84 million at December 31, 2021. For measurement of other postretirement benefits, a 6.00% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2021. The rate was assumed to decrease to 5.00% over seven years. 170 Plan assets The Company’s policy is to invest the pension plan assets in a prudent manner for the purpose of providing benefit payments to participants and mitigating reasonable expenses of administration. The Company’s investment strategy is designed to provide a total return that, over the long-term, places an emphasis on the preservation of capital. The strategy attempts to maximize investment returns on assets at a level of risk deemed appropriate by the Company while complying with applicable regulations and laws. The investment strategy utilizes asset diversification as a principal determinant for establishing an appropriate risk profile while emphasizing total return realized from capital appreciation, dividends and interest income. The target allocations for plan assets are generally 25 to 60 percent equity securities, 10 to 65 percent debt securities, and 5 to 60 percent money-market investments/cash equivalents and other investments, although holdings could be more or less than these general guidelines based on market conditions at the time and actions taken or recommended by the investment managers providing advice to the Company. Assets are managed by a combination of internal and external investment managers. Equity securities may include investments in domestic and international equities, through individual securities, mutual funds and exchange-traded funds. Debt securities may include investments in corporate bonds of companies from diversified industries, mortgage-backed securities guaranteed by government agencies and U.S. Treasury securities through individual securities and mutual funds. Additionally, the Company’s defined benefit pension plan held $537 million (21% of total assets) of real estate funds, private investments, hedge funds and other investments at December 31, 2021. Returns on invested assets are periodically compared with target market indices for each asset type to aid management in evaluating such returns. Furthermore, management regularly reviews the investment policy and may, if deemed appropriate, make changes to the target allocations noted above. 171 The fair values of the Company’s pension plan assets at December 31, 2021 and 2020, by asset category, were as follows: Fair Value Measurement of Plan Assets At December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Total Asset category: Money-market investments...................................... $ Equity securities: M&T.................................................................... Domestic(a) ......................................................... International(b).................................................... Mutual funds: Domestic(a) .................................................... International(b) ............................................... 82,751 $ 43,616 $ 39,135 $ 134,447 369,283 14,835 134,447 369,283 14,835 280,347 461,304 1,260,216 280,347 461,304 1,260,216 — — — — — — — — — — — — — — — — — — — 178,528 — 206,540 — 12,933 315,424 — 315,424 398,001 108,239 5,264 — 74,599 — 188,102 — — — 11,356 — 151,550 — 176,092 — 10,041 — 349,039 1,807,358 $437,136 $ 349,039 Debt securities: Corporate(c)......................................................... Government ......................................................... International......................................................... Mutual funds: Domestic(d) .................................................... Other: Diversified mutual fund....................................... Real estate partnerships ....................................... Private equity / debt............................................. Hedge funds......................................................... Guaranteed deposit fund...................................... 178,528 206,540 12,933 315,424 713,425 108,239 16,620 151,550 250,691 10,041 537,141 Total(e)..................................................................... $2,593,533 $ 172 Fair Value Measurement of Plan Assets At December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Total Asset category: Money-market investments...................................... $ Equity securities: M&T.................................................................... Domestic(a) ......................................................... International(b).................................................... Mutual funds: Domestic(a) .................................................... International(b)............................................... 65,263 $ 48,322 $ 16,941 $ 111,441 308,220 13,648 111,441 308,220 13,648 302,094 422,601 1,158,004 302,094 422,601 1,158,004 — — — — — — Debt securities: Corporate(c) ........................................................ Government......................................................... International ........................................................ Mutual funds: Domestic(d) .................................................... Other: Diversified mutual fund ...................................... Real estate partnerships....................................... Private equity / debt ............................................ Hedge funds ........................................................ Guaranteed deposit fund ..................................... 172,762 234,232 6,413 302,635 716,042 83,507 26,847 97,124 261,417 10,498 479,393 Total(e)..................................................................... $2,418,702 $ — 172,762 — 234,232 — 6,413 — 302,635 302,635 413,407 83,507 3,616 — 108,516 — 195,639 — — — 23,231 — 97,124 — 152,901 — 10,498 — 283,754 1,704,600 $430,348 $ 283,754 — — — — — — — — — — — — (a) This category is mainly comprised of equities of companies primarily within the small-cap, mid- cap and large-cap sectors of the U.S. economy and range across diverse industries. (b) This category is comprised of equities in companies primarily within the mid-cap and large-cap sectors of international markets mainly in developed and emerging markets in Europe and the Pacific Rim. (c) This category represents investment grade bonds of U.S. issuers from diverse industries. (d) Approximately 72% of the mutual funds were invested in investment grade bonds and 28% in high-yielding bonds at December 31, 2021. Approximately 78% of the mutual funds were invested in investment grade bonds and 22% in high-yielding bonds at December 31, 2020. The holdings within the funds were spread across diverse industries. (e) Excludes dividends and interest receivable totaling $2 million at each of December 31, 2021 and 2020. Pension plan assets included common stock of M&T with a fair value of $134 million (5% of total plan assets) at December 31, 2021 and $111 million (5% of total plan assets) at December 31, 173 2020. No investment in securities of a non-U.S. Government or government agency issuer exceeded ten percent of plan assets at December 31, 2021. The changes in Level 3 pension plan assets measured at estimated fair value on a recurring basis during the year ended December 31, 2021 were as follows: Balance – January 1, 2021 Purchases (Sales) Total Realized/ Unrealized Gains (Losses) Balance – December 31, 2021 (In thousands) Other Real estate partnerships ........................................... $ 23,231 $ (31,299) $ 19,424 $ 11,356 151,550 Private equity/debt................................................... 176,092 Hedge funds............................................................. 10,041 Guaranteed deposit fund.......................................... (6,451) $ 71,736 $ 349,039 Total.................................................................... $ 283,754 $ 97,124 152,901 10,498 27,256 25,513 (457) 27,170 (2,322) — The Company makes contributions to its funded qualified defined benefit pension plan as required by government regulation or as deemed appropriate by management after considering factors such as the fair value of plan assets, expected returns on such assets, and the present value of benefit obligations of the plan. The Company made a voluntary contribution of $300 million to the qualified defined benefit pension plan in 2020. The Company is not required to make contributions to the qualified defined benefit plan in 2022, however, subject to the impact of actual events and circumstances that may occur in 2022, the Company may make contributions, but the amount of any such contributions has not been determined. The Company regularly funds the payment of benefit obligations for the supplemental defined benefit pension and postretirement benefit plans because such plans do not hold assets for investment. Payments made by the Company for supplemental pension benefits were $11 million and $10 million in 2021 and 2020, respectively. Payments made by the Company for postretirement benefits were $4 million and $6 million in 2021 and 2020, respectively. Payments for supplemental pension and other postretirement benefits for 2022 are not expected to differ from those made in 2021 by an amount that will be material to the Company’s consolidated financial position. Estimated benefits expected to be paid in future years related to the Company’s defined benefit pension and other postretirement benefits plans are as follows: Pension Benefits Other Postretirement Benefits (In thousands) Year ending December 31: 2022...................................................................................................... $ 2023...................................................................................................... 2024...................................................................................................... 2025...................................................................................................... 2026...................................................................................................... 2027 through 2031 ............................................................................... 110,113 $ 114,022 118,641 121,602 125,469 649,845 3,219 3,112 2,983 2,829 2,656 11,534 The Company has a retirement savings plan (“RSP”) that is a defined contribution plan in which eligible employees of the Company may defer up to 50% of qualified compensation via contributions to the plan. The RSP was amended in 2020 to increase the employer matching 174 contribution to 100% from 75% in prior years and also to increase the employee's qualified compensation limits to 5% from 4.5%. Employees’ accounts, including employee contributions, employer matching contributions and accumulated earnings thereon, are at all times fully vested and nonforfeitable. Employee benefits expense resulting from the Company’s contributions to the RSP totaled $63 million, $62 million and $48 million in 2021, 2020 and 2019, respectively. Income taxes 14. The components of income tax expense were as follows: Current 2021 Year Ended December 31 2020 (In thousands) 2019 Federal .................................................................................................. $331,714 $267,550 $359,668 132,696 State and local ...................................................................................... 492,364 Total current .................................................................................... 85,354 417,068 98,431 365,981 Deferred Federal .................................................................................................. State and local ...................................................................................... Total deferred .................................................................................. 71,880 15,279 87,159 (22,894) (8,397) (31,291) 40,769 16,779 57,548 Amortization of investments in qualified affordable housing projects ................................................................................................... 68,200 Total income taxes applicable to pre-tax income............................ $596,403 $416,369 $618,112 81,679 92,176 The Company files a consolidated federal income tax return reflecting taxable income earned by all domestic subsidiaries. In prior years, applicable federal tax law allowed certain financial institutions the option of deducting as bad debt expense for tax purposes amounts in excess of actual losses. In accordance with GAAP, such financial institutions were not required to provide deferred income taxes on such excess. Recapture of the excess tax bad debt reserve established under the previously allowed method will result in taxable income if M&T Bank fails to maintain bank status as defined in the Internal Revenue Code or charges are made to the reserve for other than bad debt losses. At December 31, 2021, M&T Bank’s tax bad debt reserve for which no federal income taxes have been provided was $137 million. No actions are planned that would cause this reserve to become wholly or partially taxable. Income taxes attributable to gains or losses on bank investment securities were a benefit of $5 million in 2021 and $2 million in 2020 compared with an expense of $5 million in 2019. 175 Total income taxes differed from the amount computed by applying the statutory federal income tax rate to pre-tax income as follows: 2021 Year Ended December 31 2020 (In thousands) 2019 Income taxes at statutory federal income tax rate.............................. $515,581 $371,599 $534,925 Increase (decrease) in taxes: Tax-exempt income....................................................................... State and local income taxes, net of federal income tax effect........................................................................................... Qualified affordable housing project tax credits, net .................... Other.............................................................................................. (20,605) (22,806) (27,319) 101,046 (14,542) 14,923 118,085 (15,324) 7,745 $596,403 $416,369 $618,112 71,127 (14,826) 11,275 Deferred tax assets (liabilities) were comprised of the following at December 31: 2021 2020 (In thousands) 2019 Losses on loans and other assets ............................................... $ 395,784 $ 471,767 $ 309,523 128,178 Operating lease liabilities .......................................................... 55,048 Retirement benefits ................................................................... 24,023 Postretirement and other employee benefits ............................. 26,861 Incentive and other compensation plans ................................... 27,912 Stock-based compensation ........................................................ 69,863 Other.......................................................................................... 641,408 Gross deferred tax assets ...................................................... (326,626) Right of use assets and other leasing transactions..................... (13,322) Unrealized gains........................................................................ — Retirement benefits ................................................................... (56,649) Capitalized servicing rights....................................................... (66,925) Depreciation and amortization .................................................. (23,552) Interest on loans ........................................................................ (36,845) Gains on cash flow hedges ........................................................ (40,472) Other.......................................................................................... (564,391) Gross deferred tax liabilities................................................. 77,017 Net deferred tax asset ................................................................ $ 110,023 — 31,760 24,713 32,675 52,351 647,306 (249,209) (27,066) (45,402) (53,219) (93,103) (6,690) (22,820) (88,053) (585,562) 121,216 26,185 28,004 18,984 29,507 66,763 762,426 (285,311) (50,785) — (50,235) (95,684) (8,113) (97,004) (62,581) (649,713) 61,744 $ 112,713 $ The Company believes that it is more likely than not that the deferred tax assets will be realized through taxable earnings or alternative tax strategies. The income tax credits shown in the statement of income of M&T in note 26 arise principally from operating losses before dividends from subsidiaries. 176 A reconciliation of the beginning and ending amount of unrecognized tax benefits follows: Federal, State and Local Tax Unrecognized Income Tax Benefits Accrued Interest (In thousands) Increases as a result of tax positions taken during 2019 ............... Increases as a result of tax positions taken in prior years ............. Decreases as a result of tax positions taken in prior years ............ Gross unrecognized tax benefits at December 31, 2019 .................. Increases as a result of tax positions taken in prior years ............. Decreases as a result of tax positions taken in prior years ............ Gross unrecognized tax benefits at December 31, 2020 .................. Increases as a result of tax positions taken in prior years ............. Decreases as a result of tax positions taken in prior years ............ Gross unrecognized tax benefits at January 1, 2019 ........................ $ 56,274 $ 6,629 $ 62,903 6,996 6,520 (10,251) 66,168 2,800 (12,491) 56,477 2,560 (14,117) 44,920 (8,748) — 3,255 (2,685) 7,199 2,800 (2,384) 7,615 2,560 (2,766) Gross unrecognized tax benefits at December 31, 2021 .................. $ 37,511 $ 7,409 Less: Federal, state and local income tax benefits ........................... Net unrecognized tax benefits at December 31, 2021 that, 6,996 3,265 (7,566) 58,969 — (10,107) 48,862 — (11,351) if recognized, would impact the effective income tax rate............ $ 36,172 The Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax benefits in income taxes in the consolidated statement of income. The balance of accrued interest at December 31, 2021 is included in the table above. The Company’s federal, state and local income tax returns are routinely subject to examinations from various governmental taxing authorities. Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions. Management believes that the assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Should determinations rendered by tax authorities ultimately indicate that management’s assumptions were inappropriate, the result and adjustments required could have a material effect on the Company’s results of operations. Examinations by the Internal Revenue Service of the Company’s federal income tax returns have been largely concluded through 2020, although under statute the income tax returns from 2017 through 2020 could be adjusted. The Company also files income tax returns in over forty states and numerous local jurisdictions. Substantially all material state and local matters have been concluded for years through 2013. It is not reasonably possible to estimate when examinations for any subsequent years will be completed. 177 15. Earnings per common share The computations of basic earnings per common share follow: 2021 Year Ended December 31 2020 (In thousands, except per share) 2019 Income available to common shareholders: Net income ............................................................................................. $1,858,746 (72,915) Less: Preferred stock dividends(a) ......................................................... 1,785,831 Net income available to common equity................................................ Less: Income attributable to unvested stock-based compensation awards .......................................................................... (8,854) Net income available to common shareholders ........................................... $1,776,977 Weighted-average shares outstanding: $1,353,152 (68,228) 1,284,924 $1,929,149 (69,441) 1,859,708 (5,858) $1,279,066 (10,199) $1,849,509 Common shares outstanding (including common stock issuable) and unvested stock-based compensation awards ................. Less: Unvested stock-based compensation awards................................ Weighted-average shares outstanding ......................................................... 129,539 (890) 128,649 129,404 (766) 128,638 135,169 (741) 134,428 Basic earnings per common share ............................................................... $ 13.81 $ 9.94 $ 13.76 (a) Including impact of not as yet declared cumulative dividends in 2019. The computations of diluted earnings per common share follow: 2021 Year Ended December 31 2020 (In thousands, except per share) 2019 Net income available to common equity ..................................................... $1,785,831 $1,284,924 $1,859,708 Less: Income attributable to unvested stock-based compensation awards .......................................................................... (8,844) Net income available to common shareholders ........................................... $1,776,987 Adjusted weighted-average shares outstanding: (5,856) $1,279,068 (10,197) $1,849,511 Common and unvested stock-based compensation awards ................... Less: Unvested stock-based compensation awards................................ Plus: Incremental shares from assumed conversion of stock-based compensation awards and warrants to purchase common stock ...................................................................... Adjusted weighted-average shares outstanding........................................... 129,539 (890) 129,404 (766) 135,169 (741) 163 128,812 66 128,704 34 134,462 Diluted earnings per common share ............................................................ $ 13.80 $ 9.94 $ 13.75 GAAP defines unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities that shall be included in the computation of earnings per common share pursuant to the two-class method. The Company has issued stock-based compensation awards in the form of restricted stock and restricted stock units, which, in accordance with GAAP, are considered participating securities. Stock-based compensation awards and warrants to purchase common stock of M&T representing common shares of 461,000 in 2021, 474,000 in 2020 and 238,000 in 2019 were not included in the computations of diluted earnings per common share because the effect on those years would have been antidilutive. 178 16. Comprehensive income The following tables display the components of other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) to net income: Investment Securities Defined Benefit Plans Total Amount Before Tax Other (In thousands) Income Tax Net Balance — January 1, 2021............................................................ $ Other comprehensive income before reclassifications: Unrealized holding losses, net.................................................. Foreign currency translation adjustment .................................. Unrealized losses on cash flow hedges .................................... Current year benefit plans gains............................................... Total other comprehensive income (loss) before 195,386 $(650,087) $ 369,558 $ (85,143) $ 22,111 $ (63,032) (95,114) — — — 206,274 — — — (1,218) — (32,292) (95,114) (1,218) (32,292) — 206,274 24,870 356 8,410 (54,016) (70,244) (862) (23,882) 152,258 reclassifications .......................................................................... (95,114) 206,274 (33,510) 77,650 (20,380) 57,270 Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income: Amortization of unrealized holding losses on held-to-maturity securities ................................... Gains realized in net income .................................................. Accretion of net gain on terminated cash flow hedges ........................................................................... Net yield adjustment from cash flow hedges currently in effect ................................................................ Amortization of prior service credit ....................................... Amortization of actuarial losses ............................................. Total other comprehensive income (loss) ...................................... Balance — December 31, 2021...................................................... $ Balance — January 1, 2020............................................................ $ Other comprehensive income before reclassifications: Unrealized holding gains, net ................................................. Foreign currency translation adjustment ................................. Unrealized gains on cash flow hedges .................................... Current year benefit plans losses ............................................ Total other comprehensive income (loss) before 4,427 (8) — — — — — — 4,427 (a) (8)(b) (1,154) 2 3,273 (6) (120) (120) (c) 32 (88) (252,397) (a) — (4,185)(d) — 87,722 (d) — (86,911) (90,695) 104,691 $(360,276) $ 83,531 $ (172,054) — (252,397) — — (286,027) (4,185) 87,722 289,811 65,741 1,095 (22,971) 22,365 (186,656) (3,090) 64,751 (64,546) $ 44,476 $(127,578) 50,701 $(464,548) $ 133,888 $ (279,959) $ 73,279 $(206,680) 141,081 — — — (238,218) — 2,724 — — 505,042 — 141,081 2,724 505,042 — (238,218) (36,498) (440) (130,432) 60,208 104,583 2,284 374,610 (178,010) reclassifications .......................................................................... 141,081 (238,218) 507,766 410,629 (107,162) 303,467 Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income: Amortization of unrealized holding losses on held-to-maturity securities ................................... Gains realized in net income .................................................. Accretion of net gain on terminated cash flow hedges ........................................................................... Net yield adjustment from cash flow hedges currently in effect ................................................................ Amortization of prior service credit ....................................... Amortization of actuarial losses ............................................. Total other comprehensive income (loss) ...................................... Balance — December 31, 2020...................................................... $ 3,606 (2) — — — — — — 3,606 (a) (2)(b) (966) 1 2,640 (1) (125) (125) (c) 34 (91) (271,971) (a) — (4,181)(d) — 56,860 (d) — 144,685 194,816 195,386 $(650,087) $ 369,558 $ (85,143) — (271,971) — — 235,670 (4,181) 56,860 (185,539) 70,239 1,057 (14,371) (51,168) (201,732) (3,124) 42,489 143,648 $ 22,111 $ (63,032) 179 Balance — January 1, 2019............................................................ Other comprehensive income before reclassifications: Unrealized holding gains, net .................................................. Foreign currency translation adjustment ................................. Unrealized gains on cash flow hedges..................................... Current year benefit plans losses ............................................. Total other comprehensive income (loss) before Investment Securities Defined Benefit Plans Total Amount Before Tax Other Income Tax Net $ (200,107) $(354,502) $ (14,719) $ (569,328) $149,247 $(420,081) (In thousands) 247,411 — — — (126,618) — — 1,381 — 160,373 — 247,411 1,381 160,373 — (126,618) (65,009) (290) (42,163) 33,287 182,402 1,091 118,210 (93,331) reclassifications ........................................................................... 247,411 (126,618) 161,754 282,547 (74,175) 208,372 Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income: Amortization of unrealized holding losses on held-to-maturity securities .................................... Losses realized in net income.................................................. Accretion of net gain on terminated cash flow hedges............................................................................ Net yield adjustment from cash flow hedges currently in effect ................................................................. Amortization of prior service credit ........................................ Amortization of actuarial losses .............................................. Total other comprehensive income (loss) ...................................... Balance — December 31, 2019...................................................... $ (a) (b) (c) (d) Included in interest income. Included in gain (loss) on bank investment securities. Included in interest expense. Included in other costs of operations. 3,394 3 — — — — — — 3,394 (a) 3 (b) (892) (1) 2,502 2 (136) (136) (c) 36 (100) (13,011) (a) — (4,173)(d) — 20,745 (d) — 250,808 289,369 50,701 $(464,548) $133,888 $ (279,959) — (13,011) — — (110,046) 148,607 (4,173) 20,745 3,421 1,097 (5,454) (75,968) (9,590) (3,076) 15,291 213,401 $ 73,279 $(206,680) Accumulated other comprehensive income (loss), net consisted of the following: Investment Securities Defined Benefit Plans Other Total (In thousands) Balance at January 1, 2019.......................... Net gain (loss) during 2019 ......................... Balance at December 31, 2019.................... Net gain (loss) during 2020 ......................... Balance at December 31, 2020.................... Net gain (loss) during 2021 ......................... Balance at December 31, 2021.................... $ (147,526) $ (261,303) $ (11,252) $ (420,081) 184,906 37,380 107,222 144,602 (66,977) (81,116) (342,419) (138,645) (481,064) 213,919 109,611 98,359 175,071 273,430 (211,488) 213,401 (206,680) 143,648 (63,032) (64,546) $ 77,625 $ (267,145) $ 61,942 $ (127,578) 180 17. Other income and other expense The following items, which exceeded 1% of total interest income and other income in the respective period, were included in either “other revenues from operations” or “other costs of operations” in the consolidated statement of income: Year Ended December 31 2021 2020 (In thousands) 2019 Other income: Credit-related fee income...................................................................................... $ 90,816 $ 70,387 $ 86,792 Credit card interchange fee income ...................................................................... Merchant discount fee income.............................................................................. 69,963 61,442 Other expense: Professional services............................................................................................. Amortization of capitalized mortgage servicing rights......................................... 348,360 89,767 240,047 84,821 330,900 71,888 International activities 18. The Company engages in limited international activities including certain trust-related services in Europe, collecting Eurodollar deposits, engaging in foreign currency transactions associated with customer activity, providing credit to support the international activities of domestic companies and holding certain loans to foreign borrowers. Assets and revenues associated with international activities represent less than 1% of the Company’s consolidated assets and revenues. International assets included $197 million and $170 million of loans to foreign borrowers at December 31, 2021 and 2020, respectively. Deposits in the Company’s office in the Cayman Islands aggregated $652 million at December 31, 2020. There were no outstanding deposits at the Cayman Islands office at December 31, 2021 and the office is closed. Deposits at M&T Bank’s office in Ontario, Canada were $32 million at each of December 31, 2021 and December 31, 2020. Revenues from providing international trust-related services were approximately $38 million in 2021, $36 million in 2020 and $32 million in 2019. 19. Derivative financial instruments As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting, collateral and/or settlement provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material as of December 31, 2021. The net effect of interest rate swap agreements was to increase net interest income by $287 million 2021 and $312 million in 2020 , and to decrease net interest income by $2 million in 2019. 181 Information about interest rate swap agreements entered into for interest rate risk management purposes summarized by type of financial instrument the swap agreements were intended to hedge follows: Notional Average Weighted- Average Rate Estimated Fair Value Amount Maturity Fixed Variable Gain (Loss) (a) (In thousands) (In years) (In thousands) December 31, 2021 Fair value hedges: Fixed rate long-term borrowings (b).................................... $ 1,650,000 2.3 2.86% 0.74% $ 41 Cash flow hedges: Interest payments on variable rate commercial real estate loans (b)(c)................................... 21,700,000 Total...................................................................................... $23,350,000 0.6 1.24% 0.09% 0.7 $ (248) (207) December 31, 2020 Fair value hedges: Fixed rate long-term borrowings (b).................................... $ 1,650,000 3.3 2.86% 0.79% $ 651 Cash flow hedges: Interest payments on variable rate commercial real estate loans (b)(d) .................................. 49,400,000 Total...................................................................................... $51,050,000 0.9 2.22% 0.15% 1.0 $ 425 1,076 (a) Certain clearinghouse exchanges consider payments by counterparties for variation margin on derivative instruments to be settlements of those positions. The impact of such treatment at December 31, 2021 and December 31, 2020 was a reduction of the estimated fair value gains on interest rate swap agreements designated as fair value hedges of $43.5 million and $101.5 million, respectively, and on interest rate swap agreements designated as cash flow hedges of $88.2 million and $372.2 million, respectively. (b) Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and pays at a (c) variable rate. Includes notional amount and terms of $8.4 billion of forward-starting interest rate swap agreements that become effective in 2022. (d) Includes notional amount and terms of $32.1 billion of forward-starting interest rate swap agreement that become effective in 2021-2022. The notional amount of interest rate swap agreements entered into for risk management purposes that were outstanding at December 31, 2021 mature as follows: Year ending December 31: 2022................................................................................................................................................. 2023................................................................................................................................................. 2027................................................................................................................................................. (In thousands) $ 16,500,000 6,350,000 500,000 $ 23,350,000 The Company utilizes commitments to sell residential and commercial real estate loans to hedge the exposure to changes in the fair value of real estate loans held for sale. Such commitments have generally been designated as fair value hedges. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in fair value of certain commitments to originate real estate loans for sale. Derivative financial instruments used for trading account purposes included interest rate contracts, foreign exchange and other option contracts, foreign exchange forward and spot contracts, and financial futures. Interest rate contracts entered into for trading account purposes had notional 182 values of $32.6 billion and $37.8 billion at December 31, 2021 and 2020, respectively. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes aggregated $1.1 billion and $776 million at December 31, 2021 and 2020, respectively. Information about the fair values of derivative instruments in the Company’s consolidated balance sheet and consolidated statement of income follows: Derivatives designated and qualifying as hedging instruments Interest rate swap agreements (a)................................................ Commitments to sell real estate loans (a) ................................... Derivatives not designated and qualifying as hedging instruments Mortgage-related commitments to originate real estate loans for sale (a) ............................................................................... Commitments to sell real estate loans (a) ................................... Trading: Interest rate contracts (b) ...................................................... Foreign exchange and other option and futures contracts (b) ....................................................................... Total derivatives ......................................................................... Asset Derivatives Fair Value Liability Derivatives Fair Value December 31, December 31, December 31, December 31, 2021 2020 2021 (In thousands) 2020 $ 258 $ 4,044 4,302 1,968 $ 1,488 3,456 465 $ 548 1,013 892 8,458 9,350 11,728 8,137 43,599 2,409 5,288 4,108 365 13,868 410,056 1,008,913 76,278 105,768 8,230 438,151 442,453 $ 1,067,985 $ 9,608 1,064,529 $ 7,156 92,830 93,843 $ 11,134 131,135 140,485 (a) (b) Asset derivatives are reported in other assets and liability derivatives are reported in other liabilities. Asset derivatives are reported in trading account assets and liability derivatives are reported in other liabilities. The impact of variation margin payments at December 31, 2021 and December 31, 2020 was a reduction of the estimated fair value of interest rate contracts in the trading account in an asset position of $54.4 million and $5.6 million, respectively, and in a liability position of $305.1 million and $806.5 million, respectively. Year Ended December 31, 2021 Hedged Item Derivative Amount of Gain (Loss) Recognized Year Ended December 31, 2020 Hedged Item (In thousands) Derivative Year Ended December 31, 2019 Hedged Item Derivative Derivatives in fair value hedging relationships Interest rate swap agreements: Fixed rate long-term borrowings (a) .................. $(58,599) $57,716 $ 57,611 $(57,686) $ 95,006 $(94,742) Derivatives not designated as hedging instruments Trading: Interest rate contracts (b) .................................... Foreign exchange and other option and $(11,268) $ 6,344 $ 24,701 futures contracts (b)......................................... Total ......................................................................... 9,064 $ (2,204) 7,363 $ 13,707 8,511 $ 33,212 (a) (b) Reported as an adjustment to interest expense. Reported as trading account and foreign exchange gains. 183 Carrying Amount of the Hedged Item Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the Hedged Item December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 (In thousands) Location in the Consolidated Balance Sheet of the Hedged Items in Fair Value Hedges Long-term debt............................................................ $ 1,692,943 $ 1,750,048 $ 43,610 $ 101,326 The amount of interest income recognized in the consolidated statement of income associated with derivatives designated as cash flow hedges was $252 million and $272 million for 2021 and 2020, respectively. As of December 31, 2021, the unrealized gain recognized in other comprehensive income related to cash flow hedges was $88 million, of which $65 million and $23 million relate to interest rate swap agreements maturing in 2022 and 2023, respectively. The Company also has commitments to sell and commitments to originate residential and commercial real estate loans that are considered derivatives. The Company designates certain of the commitments to sell real estate loans as fair value hedges of real estate loans held for sale. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in the fair value of certain commitments to originate real estate loans for sale. As a result of these activities, net unrealized pre-tax gains related to hedged loans held for sale, commitments to originate loans for sale and commitments to sell loans were approximately $24 million and $64 million at December 31, 2021 and 2020, respectively. Changes in unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied. The Company does not offset derivative asset and liability positions in its consolidated financial statements. The Company’s exposure to credit risk by entering into derivative contracts is mitigated through master netting agreements and collateral posting or settlement requirements. Master netting agreements covering interest rate and foreign exchange contracts with the same party include a right to set-off that becomes enforceable in the event of default, early termination or under other specific conditions. The aggregate fair value of derivative financial instruments in a liability position, which are subject to enforceable master netting arrangements, was $35 million and $114 million at December 31, 2021 and 2020, respectively. The Company was required to post collateral relating to those positions of $33 million and $103 million at December 31, 2021 and 2020, respectively. Certain of the Company’s derivative financial instruments contain provisions that require the Company to maintain specific credit ratings from credit rating agencies to avoid higher collateral posting requirements. If the Company’s debt ratings were to fall below specified ratings, the counterparties of the derivative financial instruments could demand immediate incremental collateralization on those instruments in a net liability position. The aggregate fair value of all derivative financial instruments with such credit risk-related contingent features in a net liability position on December 31, 2021 was not material. The aggregate fair value of derivative financial instruments in an asset position with counterparties, which are subject to enforceable master netting arrangements, was $7 million and $3 million at December 31, 2021 and 2020, respectively. Counterparties posted collateral relating to those positions of $6 million and $3 million at December 31, 2021 and 2020, respectively. Trading 184 account interest rate swap agreements entered into with customers are subject to the Company’s credit risk standards and often contain collateral provisions. In addition to the derivative contracts noted above, the Company clears certain derivative transactions through a clearinghouse, rather than directly with counterparties. Those transactions cleared through a clearinghouse require initial margin collateral and variation margin payments depending on the contracts being in a net asset or liability position. The amount of initial margin collateral posted by the Company was $132 million and $135 million at December 31, 2021 and 2020, respectively. The fair value asset and liability amounts of derivative contracts have been reduced by variation margin payments treated as settlements as described herein. Variation margin on derivative contracts not treated as settlements continues to represent collateral posted or received by the Company. In conjunction with changes made by the clearinghouse to prepare for reference rate reform, the Company changed the discount rate index used to value interest rate swaps from the Federal Funds Overnight Index swap rate to the Secured Overnight Financial Rate in October 2020. The change did not have a material impact on the Company's consolidated financial statements. 20. Variable interest entities and asset securitizations The Company’s securitization activity has consisted of securitizing loans originated for sale into government issued or guaranteed mortgage-backed securities that are then retained by the Company. The amounts of those securitizations in 2021, 2020 and 2019 are presented in the Company’s consolidated statement of cash flows. The Company has not recognized any losses as a result of having securitized assets. As described in note 9, M&T has issued junior subordinated debentures payable to various trusts that have issued Capital Securities. M&T owns the common securities of those trust entities. The Company is not considered to be the primary beneficiary of those entities and, accordingly, the trusts are not included in the Company’s consolidated financial statements. At each of December 31, 2021 and 2020, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet and recognized $23 million in other assets for its “investment” in the common securities of the trusts that will be concomitantly repaid to M&T by the respective trust from the proceeds of M&T’s repayment of the junior subordinated debentures associated with preferred capital securities described in note 9. The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately $3.0 billion at December 31, 2021 and $2.3 billion at December 31, 2020. Those partnerships generally construct or acquire properties for which the investing partners are eligible to receive certain federal income tax credits in accordance with government guidelines. Such investments may also provide tax deductible losses to the partners. The partnership investments also assist the Company in achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company by creditors of the partnerships. However, the tax credits that result from the Company’s investments in such partnerships are generally subject to recapture should a partnership fail to comply with the respective government regulations. The Company’s carrying amount of its investments in such partnerships was $933 million, including $361 million of unfunded commitments, at December 31, 2021 and $861 million, including $406 million of unfunded commitments, at December 31, 2020. Contingent commitments to provide additional capital contributions to these partnerships were not material at December 31, 2021. The Company has not provided financial or other support to the partnerships that was not contractually required. The Company’s maximum exposure to loss from its investments in such partnerships as of December 31, 2021 was $1.2 billion, including possible recapture of certain tax credits. Management currently estimates that no material losses are probable as a result of the Company’s involvement with such entities. The Company, in its position as limited partner, does not direct the activities that most significantly impact the economic performance of the partnerships and, therefore, in accordance with 185 the accounting provisions for variable interest entities, the partnership entities are not included in the Company’s consolidated financial statements. The Company’s investment in qualified affordable housing projects is amortized to income taxes in the consolidated statement of income as tax credits and other tax benefits resulting from deductible losses associated with the projects are received. The Company serves as investment advisor for certain registered money-market funds. The Company has no explicit arrangement to provide support to those funds, but may waive portions of its allowable management fees as a result of market conditions. 21. Fair value measurements GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has not made any fair value elections at December 31, 2021. Pursuant to GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy exists in GAAP for fair value measurements based upon the inputs to the valuation of an asset or liability. • • • Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market. Level 3 — Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability. When available, the Company attempts to use quoted market prices in active markets to determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not available, fair value is often determined using model-based techniques incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation. The following is a description of the valuation methodologies used for the Company’s assets and liabilities that are measured on a recurring basis at estimated fair value. Trading account assets and liabilities Trading account assets and liabilities include interest rate contracts and foreign exchange contracts with customers who require such services with offsetting positions with third parties to minimize the Company’s risk with respect to such transactions. The Company generally determines the fair value of its derivative trading account assets and liabilities using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2. Mutual funds held in connection with deferred compensation and other arrangements have been classified as Level 1 valuations. Valuations of investments in municipal and other bonds can generally be obtained through reference to quoted prices in less active markets for the same or similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. 186 Investment securities available for sale and equity securities The majority of the Company’s available-for-sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. Certain investments in mutual funds and equity securities are actively traded and, therefore, have been classified as Level 1 valuations. Real estate loans held for sale The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale includes changes in estimated fair value during the hedge period. Typically, the Company attempts to hedge real estate loans held for sale from the date of close through the sale date. The fair value of hedged real estate loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans with similar characteristics and, accordingly, such loans have been classified as a Level 2 valuation. Commitments to originate real estate loans for sale and commitments to sell real estate loans The Company enters into various commitments to originate real estate loans for sale and commitments to sell real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value on the consolidated balance sheet. The estimated fair values of such commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans to certain government-sponsored entities and other parties. The fair valuations of commitments to sell real estate loans generally result in a Level 2 classification. The estimated fair value of commitments to originate real estate loans for sale is adjusted to reflect the Company’s anticipated commitment expirations. The estimated commitment expirations are considered significant unobservable inputs contributing to the Level 3 classification of commitments to originate real estate loans for sale. Significant unobservable inputs used in the determination of estimated fair value of commitments to originate real estate loans for sale are included in the accompanying table of significant unobservable inputs to Level 3 measurements. Interest rate swap agreements used for interest rate risk management The Company utilizes interest rate swap agreements as part of the management of interest rate risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and interest- bearing liabilities. The Company generally determines the fair value of its interest rate swap agreements using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2. The Company has considered counterparty credit risk in the valuation of its interest rate swap agreement assets and has considered its own credit risk in the valuation of its interest rate swap agreement liabilities. 187 The following tables present assets and liabilities at December 31, 2021 and 2020 measured at estimated fair value on a recurring basis: Fair Value Measurements Level 1 Level 2 Level 3 (In thousands) December 31, 2021 Trading account assets ............................................. Investment securities available for sale: U.S. Treasury and federal agencies .................... Mortgage-backed securities: Government issued or guaranteed ................. Other debt securities ........................................... Equity securities ....................................................... Real estate loans held for sale .................................. Other assets (a) ......................................................... Total assets.......................................................... Trading account liabilities ........................................ Other liabilities (a) ................................................... Total liabilities .................................................... December 31, 2020 Trading account assets ............................................. Investment securities available for sale: U.S. Treasury and federal agencies .................... Mortgage-backed securities: Government issued or guaranteed ................. Privately issued.............................................. Other debt securities ........................................... Equity securities ....................................................... Real estate loans held for sale .................................. Other assets (a) ......................................................... Total assets.......................................................... Trading account liabilities ........................................ Other liabilities (a) ................................................... Total liabilities .................................................... $ 468,031 $ 49,545 $ 418,486 $ 678,690 — 678,690 3,155,312 121,802 3,955,804 77,640 899,282 24,167 $ 5,424,924 83,434 $ 10,409 93,843 $ $ $ $ — — — 68,850 — — 118,395 3,155,312 121,802 3,955,804 8,790 899,282 12,439 $ 5,294,801 83,434 5,121 88,555 — $ — — $ $ 1,068,581 $ 50,060 $ 1,018,521 9,338 — 9,338 4,683,438 16 129,814 4,822,606 92,985 1,054,676 49,464 $ 7,088,312 116,902 $ 23,583 140,485 $ $ $ $ — — — — 63,129 — — 113,189 4,683,438 — 129,814 4,822,590 29,856 1,054,676 5,865 $ 6,931,508 116,902 23,218 140,120 — $ — — $ $ $ $ $ $ $ $ — — — — — — — 11,728 11,728 — 5,288 5,288 — — — 16 — 16 — — 43,599 43,615 — 365 365 (a) Comprised predominantly of interest rate swap agreements used for interest rate risk management (Level 2), commitments to sell real estate loans (Level 2) and commitments to originate real estate loans to be held for sale (Level 3). 188 The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the years ended December 31, 2021, 2020 and 2019 were as follows: 2021 Balance — January 1, 2021 ............................................. Total gains realized/unrealized: Included in earnings................................................... Settlements....................................................................... Transfers out of Level 3................................................... Balance — December 31, 2021 ....................................... Changes in unrealized gains included in earnings related to assets still held at December 31, 2021.......... 2020 Balance — January 1, 2020 ............................................. Total gains realized/unrealized: Included in earnings................................................... Transfers out of Level 3................................................... Balance — December 31, 2020 ....................................... Changes in unrealized gains included in earnings related to assets still held at December 31, 2020.......... 2019 Balance — January 1, 2019 ............................................. Total gains realized/unrealized: Included in earnings................................................... Settlements....................................................................... Transfers out of Level 3................................................... Balance — December 31, 2019 ....................................... Changes in unrealized gains included in earnings related to assets still held at December 31, 2019.......... Investment Securities Available for Sale Privately Issued Mortgage- Backed Securities Other Assets and Other Liabilities (In thousands) 16 $ 43,234 — (16) — — — 16 — — 16 — 22 — (6) — 16 — $ $ $ $ $ $ $ $ 126,223 (a) — (163,017)(b) 6,440 8,619 (a) 10,740 194,469 (a) (161,975)(b) 43,234 42,597 (a) 7,712 129,398 (a) — (126,370)(b) 10,740 11,146 (a) $ $ $ $ $ $ $ $ $ (a) (b) Reported as mortgage banking revenues in the consolidated statement of income and includes the fair value of commitment issuances and expirations. Transfers out of Level 3 consist of interest rate locks transferred to closed loans. The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements. The more significant of those assets follow. Loans Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectable portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the 189 loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2, unless significant adjustments have been made to the valuation that are not readily observable by market participants. Non-real estate collateral supporting commercial loans generally consists of business assets such as receivables, inventory and equipment. Fair value estimations are typically determined by discounting recorded values of those assets to reflect estimated net realizable value considering specific borrower facts and circumstances and the experience of credit personnel in their dealings with similar borrower collateral liquidations. Such discounts were generally in the range of 15% to 90% with a weighted- average of 31% at December 31, 2021. As these discounts are not readily observable and are considered significant, the valuations have been classified as Level 3. Automobile collateral is typically valued by reference to independent pricing sources based on recent sales transactions of similar vehicles, and the related non-recurring fair value measurement adjustments have been classified as Level 2. Collateral values for other consumer installment loans are generally estimated based on historical recovery rates for similar types of loans, which at December 31, 2021 was 66%. As these recovery rates are not readily observable by market participants, such valuation adjustments have been classified as Level 3. Loans subject to nonrecurring fair value measurement were $574 million at December 31, 2021 ($340 million and $234 million of which were classified as Level 2 and Level 3, respectively), $652 million at December 31, 2020 ($339 million and $313 million of which were classified as Level 2 and Level 3, respectively), and $305 million at December 31, 2019 ($115 million and $190 million of which were classified as Level 2 and Level 3, respectively). Changes in fair value recognized during the years ended December 31, 2021, 2020 and 2019 for partial charge-offs of loans and loan impairment reserves on loans held by the Company at the end of each of those years were decreases of $53 million, $222 million and $110 million, respectively. Assets taken in foreclosure of defaulted loans Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and are generally measured at the lower of cost or fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace, and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2. Assets taken in foreclosure of defaulted loans subject to nonrecurring fair value measurement were $3 million and $22 million at December 31, 2021 and December 31, 2020, respectively. Changes in fair value recognized during the years ended December 31, 2021, 2020 and 2019 for foreclosed assets held by the Company at the end of each of those years were not material. Capitalized servicing rights Capitalized servicing rights are initially measured at fair value in the Company’s consolidated balance sheet. The Company utilizes the amortization method to subsequently measure its capitalized servicing assets. In accordance with GAAP, the Company must record impairment charges, on a nonrecurring basis, when the carrying value of certain strata exceed their estimated fair value. To estimate the fair value of servicing rights, the Company considers market prices for similar assets, if available, and the present value of expected future cash flows associated with the servicing rights calculated using assumptions that market participants would use in estimating future servicing income and expense. Such assumptions include estimates of the cost of servicing loans, loan default rates, an appropriate discount rate, and prepayment speeds. For 190 purposes of evaluating and measuring impairment of capitalized servicing rights, the Company stratifies such assets based on the predominant risk characteristics of the underlying financial instruments that are expected to have the most impact on projected prepayments, cost of servicing and other factors affecting future cash flows associated with the servicing rights. Such factors may include financial asset or loan type, note rate and term. The amount of impairment recognized is the amount by which the carrying value of the capitalized servicing rights for a stratum exceed estimated fair value. Impairment is recognized through a valuation allowance. The determination of fair value of capitalized servicing rights is considered a Level 3 valuation. Capitalized servicing rights related to residential mortgage loans of $138 million and $159 million at December 31, 2021 and December 31, 2020, respectively, required a valuation allowance of $24 million and $30 million, respectively. Significant unobservable inputs used in this Level 3 valuation included weighted-average prepayment speeds of 14.64% and 16.01% at December 31, 2021 and December 31, 2020, respectively, and a weighted-average option- adjusted spread of 900 basis points at each date. Changes in fair value recognized for impairment of capitalized servicing rights were a decrease in the valuation allowance of $6 million in 2021 and an increase in the valuation allowance of $23 million and $7 million in 2020 and 2019, respectively. Significant unobservable inputs to level 3 measurements The following tables present quantitative information about significant unobservable inputs used in the fair value measurements for Level 3 assets and liabilities at December 31, 2021 and 2020: Valuation Technique Unobservable Inputs/Assumptions Range (Weighted- Average) Fair Value (In thousands) December 31, 2021 Recurring fair value measurements Net other assets (liabilities) (a) ..... 6,440 Discounted cash flow Commitment expirations 0% - 80% (10%) December 31, 2020 Recurring fair value measurements Privately issued mortgage- backed securities........................ $ 16 Net other assets (liabilities) (a) ..... 43,234 Two independent pricing quotes Discounted cash flow — Commitment expirations — 0% - 98% (16%) (a) Other Level 3 assets (liabilities) consist of commitments to originate real estate loans. Sensitivity of fair value measurements to changes in unobservable inputs An increase (decrease) in the estimate of expirations for commitments to originate real estate loans would generally result in a lower (higher) fair value measurement. Estimated commitment expirations are derived considering loan type, changes in interest rates and remaining length of time until closing. 191 Disclosures of fair value of financial instruments The carrying amounts and estimated fair value for financial instrument assets (liabilities) are presented in the following tables: December 31, 2021 Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 (In thousands) Financial assets: Cash and cash equivalents ............................ Interest-bearing deposits at banks................. Trading account assets .................................. Investment securities..................................... Loans and leases: Commercial loans and leases .................. Commercial real estate loans................... Residential real estate loans .................... Consumer loans ....................................... Allowance for credit losses ..................... Loans and leases, net ......................... Accrued interest receivable........................... Financial liabilities: $ 1,337,577 41,872,304 468,031 7,155,860 1,337,577 1,205,269 41,872,304 468,031 7,192,476 49,545 68,850 132,308 — 41,872,304 418,486 7,066,293 — — — 57,333 23,473,324 35,389,730 16,074,445 17,974,953 (1,469,226) 91,443,226 335,162 23,285,224 34,730,191 16,160,799 18,121,363 — 92,297,577 335,162 — — 23,285,224 — 425,010 34,305,181 — 4,524,018 11,636,781 — 18,121,363 — — — — — 4,949,028 87,348,549 — — 335,162 Noninterest-bearing deposits ........................ Savings and interest-checking deposits ........ Time deposits................................................ Short-term borrowings.................................. Long-term borrowings .................................. Accrued interest payable............................... Trading account liabilities ............................ $(60,131,480) (60,131,480) (68,603,966) (68,603,966) (2,810,143) (47,046) (3,562,223) (40,866) (83,434) (2,807,963) (47,046) (3,485,369) (40,866) (83,434) — (60,131,480) — (68,603,966) — (2,810,143) (47,046) — — (3,562,223) (40,866) — (83,434) — — — — — — — — Other financial instruments: Commitments to originate real estate loans for sale .............................................. Commitments to sell real estate loans........... Other credit-related commitments ................ Interest rate swap agreements used for interest rate risk management .................... $ 6,440 7,525 (123,032) 6,440 7,525 (123,032) (207) (207) — — — — — 7,525 6,440 — — (123,032) (207) — 192 Financial assets: Cash and cash equivalents........................... Interest-bearing deposits at banks ............... Trading account assets ................................ Investment securities................................... Loans and leases: Commercial loans and leases................. Commercial real estate loans ................. Residential real estate loans................... Consumer loans ..................................... Allowance for credit losses.................... Loans and leases, net........................ Accrued interest receivable ......................... Financial liabilities: December 31, 2020 Carrying Amount Estimated Fair Value Level 1 (In thousands) Level 2 Level 3 $ 1,552,743 23,663,810 1,068,581 7,045,697 1,552,743 1,497,457 23,663,810 1,068,581 7,138,989 50,060 63,129 55,286 — 23,663,810 1,018,521 7,005,571 — — — 70,289 27,574,564 37,637,889 16,752,993 16,570,421 (1,736,387) 96,799,480 419,936 27,220,699 36,816,580 17,089,141 16,554,050 — 97,680,470 419,936 — — 27,220,699 — 277,911 36,538,669 — 4,135,655 12,953,486 — 16,554,050 — — — — — 4,413,566 93,266,904 — — 419,936 Noninterest-bearing deposits....................... Savings and interest-checking deposits ....... Time deposits .............................................. Deposits at Cayman Islands office.............. Short-term borrowings ................................ Long-term borrowings ................................ Accrued interest payable ............................. Trading account liabilities........................... $(47,572,884) (47,572,884) (67,680,840) (67,680,840) (3,919,367) (652,104) (59,482) (4,490,433) (59,916) (116,902) (3,899,910) (652,104) (59,482) (4,382,193) (59,916) (116,902) — (47,572,884) — (67,680,840) — (3,919,367) — (652,104) — (59,482) — (4,490,433) — (59,916) — (116,902) — — — — — — — — Other financial instruments: Commitments to originate real estate loans for sale ............................................ Commitments to sell real estate loans ......... Other credit-related commitments .............. Interest rate swap agreements used for interest rate risk management............. $ 43,234 (18,429) (133,354) 43,234 (18,429) (133,354) 1,076 1,076 — — — — — (18,429) 43,234 — — (133,354) 1,076 — With the exception of marketable securities, certain off-balance sheet financial instruments and mortgage loans originated for sale, the Company’s financial instruments are not readily marketable and market prices do not exist. The Company, in attempting to comply with the provisions of GAAP that require disclosures of fair value of financial instruments, has not attempted to market its financial instruments to potential buyers, if any exist. Since negotiated prices in illiquid markets depend greatly upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. The Company does not believe that the estimated information presented herein is representative of the earnings power or value of the Company. The preceding analysis, which is inherently limited in depicting fair value, also does not consider any value associated with existing customer relationships nor the ability of the Company to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet 193 date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different. 22. Commitments and contingencies In the normal course of business, various commitments and contingent liabilities are outstanding. The following table presents the Company’s significant commitments. Certain of these commitments are not included in the Company’s consolidated balance sheet. December 31, 2021 December 31, 2020 (In thousands) Commitments to extend credit Home equity lines of credit ................................................................................. $ Commercial real estate loans to be sold .............................................................. Other commercial real estate ............................................................................... Residential real estate loans to be sold ................................................................ Other residential real estate ................................................................................. Commercial and other ......................................................................................... Standby letters of credit ............................................................................................ Commercial letters of credit...................................................................................... Financial guarantees and indemnification contracts ................................................. Commitments to sell real estate loans....................................................................... 5,693,045 324,943 4,998,631 233,257 924,211 22,145,057 2,151,595 31,981 4,211,797 1,367,523 $ 5,563,854 363,735 7,237,367 1,026,118 665,259 19,427,886 2,241,417 27,332 4,220,531 2,108,823 Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. In addition to the amounts presented in the preceding table, the Company had discretionary funding commitments to commercial customers of $10.8 billion and $10.4 billion at December 31, 2021 and 2020, respectively, that the Company had the unconditional right to cancel prior to funding. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, whereas commercial letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and a third party. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness. Financial guarantees and indemnification contracts are predominantly comprised of recourse obligations associated with sold loans and other guarantees and commitments. Included in financial guarantees and indemnification contracts are loan principal amounts sold with recourse in conjunction with the Company’s involvement in the Fannie Mae Delegated Underwriting and Servicing program. The Company’s maximum credit risk for recourse associated with loans sold under this program totaled approximately $4.0 billion at both December 31, 2021 and 2020. At December 31, 2021, the Company estimated that the recourse obligations described above were not material to the Company’s consolidated financial position. There have been no material losses incurred as a result of those credit recourse arrangements. Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. 194 The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the fair value of real estate loans held for sale. Such commitments are considered derivatives and along with commitments to originate real estate loans to be held for sale are recorded in the consolidated balance sheet at estimated fair market value. The Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for losses related to its obligations to loan purchasers. The amount of those charges is based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. At December 31, 2021, the Company believes that its obligation to loan purchasers was not material to the Company’s consolidated financial position. M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and other matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was between $0 and $25 million at December 31, 2021. Although the Company does not believe that the outcome of pending litigations will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future. 23. Segment information Reportable segments have been determined based upon the Company’s internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking. The financial information of the Company’s segments was compiled utilizing the accounting policies described in note 1 with certain exceptions. The more significant of these exceptions are described herein. The Company allocates interest income or interest expense using a methodology that charges users of funds (assets) interest expense and credits providers of funds (liabilities) with income based on the maturity, prepayment and/or repricing characteristics of the assets and liabilities. A provision for credit losses is allocated to segments in an amount based largely on actual net charge-offs incurred by the segment during the period plus or minus an amount necessary to adjust the segment’s allowance for credit losses due to changes in loan balances. In contrast, the level of the consolidated provision for credit losses is determined using the methodologies described in notes 1 and 5. The net effects of these allocations are recorded in the “All Other” category. Indirect fixed and variable expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expenses and bankwide expense accruals (including amortization of core deposit and other intangible assets associated with acquisitions of financial institutions) are generally not allocated to segments. Income 195 taxes are allocated to segments based on the Company’s marginal statutory tax rate adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk). The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. Information about the Company’s segments is presented in the accompanying table. Income statement amounts are in thousands of dollars. Balance sheet amounts are in millions of dollars. For the Years Ended December 31, 2021, 2020 and 2019 Business Banking 2020 2021 2019 Commercial Banking 2020 2019 2021 Commercial Real Estate 2020 2019 2021 Discretionary Portfolio 2020 2019 2021 Net interest income(a) ........... $ 518,940 $ 462,614 $ 451,307 $ 854,264 $ 864,149 $ 828,888 $ 643,415 $ 673,894 $ 692,526 $ 483,624 $ 486,831 $ 209,807 26,919 Noninterest income ............... 236,726 3,608 302,974 1,157,238 101,060 276,791 1,140,940 73,099 289,558 1,118,446 25,580 (38,638 ) 444,986 3,622 (1,735 ) 485,096 1,508 113,855 565,162 16,501 208,367 882,261 107,210 103,837 566,451 25,928 214,970 907,496 1,537 218,189 861,604 67,405 123,854 642,794 10,928 Provision for credit losses ..... Amortization of core deposit and other intangible assets................................... Depreciation and other amortization........................ Other noninterest expense ..... Income (loss) before taxes..... Income tax expense — — — — — — 1,060 1,060 1,060 — — — 1,106 341,751 289,009 1,482 322,868 216,173 2,066 317,482 229,113 2,362 384,505 669,311 2,421 375,769 689,651 2,353 382,214 708,299 35,623 276,791 480,725 28,187 256,428 489,376 26,963 239,333 638,603 194 64,122 377,048 285 54,339 428,964 279 52,885 179,954 (benefit) .............................. 36,342 Net income (loss) .................. $ 213,464 $ 159,220 $ 168,496 $ 493,723 $ 508,472 $ 520,464 $ 372,326 $ 381,828 $ 485,626 $ 288,766 $ 327,291 $ 143,612 175,588 152,977 101,673 181,179 108,399 107,548 187,835 75,545 60,617 88,282 56,953 Average total assets (in millions) ........................ $ 8,007 $ 8,152 $ 5,793 $ 28,559 $ 30,338 $ 28,142 $ 25,628 $ 25,792 $ 23,921 $ 22,262 $ 27,726 $ 29,081 Capital expenditures (in millions) ........................ $ 1 $ — $ 1 $ 1 $ — $ 2 $ — $ — $ — $ — $ — $ — Residential Mortgage Banking 2020 2021 2019 For the Years Ended December 31, 2021, 2020 and 2019 Retail Banking 2020 2021 2019 2021 All Other 2020 2019 2021 Total 2020 2019 Net interest income(a) ........... $ 92,706 $ 52,712 $ 20,008 $ 1,125,953 $ 1,204,309 $ 1,389,788 $ 105,876 $ 121,808 $ 537,940 $ 3,824,778 $ 3,866,317 $ 4,130,264 2,061,679 Noninterest income ............... 6,191,943 176,000 2,166,994 5,991,772 (75,000 ) 746,240 852,116 (313,145 ) 2,088,444 5,954,761 800,000 290,610 1,416,563 55,692 260,163 1,464,472 108,268 695,443 1,233,383 6,257 327,562 1,717,350 122,135 523,765 616,471 (562 ) 725,472 847,280 482,202 515,549 568,261 1,785 393,372 413,380 382 Provision for credit losses ..... Amortization of core deposit and other intangible assets................................... Depreciation and other amortization........................ Other noninterest expense ..... Income (loss) before taxes..... Income tax expense — — — — — — 9,107 13,809 18,430 10,167 14,869 19,490 57,716 332,491 226,826 60,129 332,028 174,319 48,248 273,067 91,683 93,159 804,762 462,950 95,936 764,262 496,006 93,312 784,718 717,185 123,881 1,082,993 (50,720 ) 116,979 959,258 (724,968 ) 108,604 1,117,668 314,041 3,287,415 (17,576 ) 2,455,149 305,419 3,064,952 1,769,521 281,825 3,167,367 2,547,261 (benefit) .............................. 53,866 40,667 19,355 121,464 130,745 189,611 Net income (loss) .................. $ 172,960 $ 133,652 $ 72,328 $ 341,486 $ 365,261 $ 527,574 $ (26,741 ) (23,979 ) $ (522,572 ) $ (202,396 ) (28,625 ) 618,112 11,049 $ 1,858,746 $ 1,353,152 $ 1,929,149 596,403 416,369 Average total assets (in millions) ........................ $ 6,463 $ 4,038 $ 2,611 $ 17,897 $ 16,438 $ 15,083 $ 43,853 $ 22,996 $ 14,953 $ 152,669 $ 135,480 $ 119,584 Capital expenditures (in millions) ........................ $ 1 $ — $ 1 $ 53 $ 34 $ 76 $ 93 $ 138 $ 98 $ 149 $ 172 $ 178 (a) Net interest income is the difference between actual taxable-equivalent interest earned on assets and interest paid on liabilities by a segment and a funding charge (credit) based on the Company’s internal funds transfer pricing methodology. Segments are charged a cost to fund any assets (e.g. loans) and are paid a funding credit for any funds provided (e.g. deposits). The taxable-equivalent adjustment aggregated $14,731,000 in 2021, $17,288,000 in 2020 and $22,863,000 in 2019 and is eliminated in “All Other” net interest income and income tax expense (benefit). The Business Banking segment provides deposit, lending, cash management and other financial services to small businesses and professionals through the Company’s banking office network and several other delivery channels, including business banking centers, telephone banking, Internet 196 banking and automated teller machines. The Commercial Banking segment provides a wide range of credit products and banking services to middle-market and large commercial customers, mainly within the markets the Company serves. Among the services provided by this segment are commercial lending and leasing, letters of credit, deposit products and cash management services. The Commercial Real Estate segment provides credit services which are secured by various types of multifamily residential and commercial real estate and deposit services to its customers. Activities of this segment include the origination, sales and servicing of commercial real estate loans. Commercial real estate loans held for sale are included in the Commercial Real Estate Segment. The Discretionary Portfolio segment includes securities; residential real estate loans and other assets; short-term and long-term borrowed funds; brokered deposits; and Cayman Islands branch deposits. This segment also provides foreign exchange services to customers. The Residential Mortgage Banking segment originates and services residential real estate loans for consumers and sells substantially all originated loans in the secondary market to investors or to the Discretionary Portfolio segment. The segment periodically purchases servicing rights to loans that have been originated by other entities. Residential real estate loans held for sale are included in the Residential Mortgage Banking segment. The Retail Banking segment offers a variety of services to consumers through several delivery channels that include banking offices, automated teller machines, and telephone, mobile and Internet banking. The “All Other” category includes other operating activities of the Company that are not directly attributable to the reported segments; the difference between the provision for credit losses and the calculated provision allocated to the reportable segments; goodwill and core deposit and other intangible assets resulting from acquisitions of financial institutions; merger-related gains and expenses resulting from acquisitions; the net impact of the Company’s internal funds transfer pricing methodology; eliminations of transactions between reportable segments; certain nonrecurring transactions; the residual effects of unallocated support systems and general and administrative expenses; and the impact of interest rate risk management strategies. The amount of intersegment activity eliminated in arriving at consolidated totals was included in the “All Other” category as follows: 2021 Year Ended December 31 2020 (In thousands) 2019 Revenues......................................................................................$ (55,556) $ (47,604) $ (48,559) (18,218) Expenses ...................................................................................... Income taxes ................................................................................ (7,976) (22,365) Net income................................................................................... (13,599) (10,846) (31,111) (14,038) (8,824) (24,742) The Company conducts substantially all of its operations in the United States. There are no transactions with a single customer that in the aggregate result in revenues that exceed ten percent of consolidated total revenues. 197 24. Regulatory matters Payment of dividends by M&T’s banking subsidiaries is restricted by various legal and regulatory limitations. Dividends from any banking subsidiary to M&T are limited by the amount of earnings of the banking subsidiary in the current year and the preceding two years. For purposes of this test, at December 31, 2021, approximately $1.6 billion was available for payment of dividends to M&T from banking subsidiaries. M&T may pay dividends and repurchase stock only in accordance with a capital plan that the Federal Reserve Board has not objected to. Banking regulations prohibit extensions of credit by the subsidiary banks to M&T unless appropriately secured by assets. Securities of affiliates are not eligible as collateral for this purpose. M&T and its subsidiary banks are required to comply with applicable capital adequacy regulations established by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements. Pursuant to the rules in effect as of December 31, 2021, the required minimum and well capitalized capital ratios are as follows: Well Minimum Capitalized M&T (Consolidated) Common equity Tier 1 ("CET1") to risk-weighted assets ..................................... Tier 1 capital to risk-weighted assets..................................................................... Total capital to risk-weighted assets ...................................................................... Leverage — Tier 1 capital to average total assets, as defined ............................... 4.5% 6.0% 8.0% 4.0% 6.0% 10.0% Bank Subsidiaries CET1 to risk-weighted assets................................................................................. Tier 1 capital to risk-weighted assets..................................................................... Total capital to risk-weighted assets ...................................................................... Leverage — Tier 1 capital to average total assets, as defined ............................... Minimum Well Capitalized 4.5% 6.0% 8.0% 4.0% 6.5% 8.0% 10.0% 5.0% In addition, pursuant to capital regulations M&T and its bank subsidiaries are each currently required to maintain a capital buffer of 2.5% composed entirely of CET1 on top of the minimum risk-weighted asset ratios. 198 The capital ratios and amounts of the Company and its banking subsidiaries as of December 31, 2021 and 2020 are presented below: M&T (Consolidated) M&T Bank (Dollars in thousands) Wilmington Trust, N.A. December 31, 2021: CET1 capital Amount ......................................................................... $11,844,833 Ratio(a) ......................................................................... 11.42% $12,378,354 $ 779,521 11.98% 31.22% Tier 1 capital Amount ......................................................................... 13,594,782 Ratio(a) ......................................................................... 13.11% 12,378,354 779,521 11.98% 31.22% Total capital Amount ......................................................................... 15,902,833 Ratio(a) ......................................................................... 15.33% 14,170,434 780,791 13.71% 31.27% Leverage Amount ......................................................................... 13,594,782 Ratio(b)......................................................................... 8.87% 12,378,354 779,521 8.11% 6.23% December 31, 2020: CET1 capital Amount ......................................................................... $10,623,368 Ratio(a) ......................................................................... 10.00% $11,550,462 $ 630,574 10.90% 46.57% Tier 1 capital Amount ......................................................................... 11,873,317 Ratio(a) ......................................................................... 11.17% 11,550,462 630,574 10.90% 46.57% Total capital Amount ......................................................................... 14,207,937 Ratio(a) ......................................................................... 13.37% 13,373,416 632,506 12.62% 46.72% Leverage Amount ......................................................................... 11,873,317 Ratio(b)......................................................................... 8.48% 11,550,462 630,574 8.27% 10.73% (a) The ratio of capital to risk-weighted assets, as defined by regulation. (b) The ratio of capital to average assets, as defined by regulation. 25. Relationship with Bayview Lending Group LLC and Bayview Financial Holdings, L.P. M&T holds a 20% minority interest in Bayview Lending Group LLC (“BLG”), a privately-held commercial mortgage company. That investment had no remaining carrying value at December 31, 2021 as a result of cumulative losses recognized and cash distributions received in prior years. Cash distributions now received from BLG are recognized as income by M&T and included in other revenues from operations. That income totaled $30 million in 2021, $53 million in 2020 and $37 million in 2019. Bayview Financial Holdings, L.P. (together with its affiliates, “Bayview Financial”), a privately- held specialty financial company, is BLG’s majority investor. In addition to their common investment in BLG, the Company and Bayview Financial conduct other business activities with each other. The Company has obtained loan servicing rights for mortgage loans from BLG and Bayview Financial 199 having outstanding principal balances of $1.6 billion and $1.9 billion at December 31, 2021 and 2020, respectively. Revenues from those servicing rights were $9 million, $10 million and $12 million during 2021, 2020 and 2019, respectively. The Company sub-services residential mortgage loans for Bayview Financial having outstanding principal balances of $74.7 billion and $68.1 billion at December 31, 2021 and 2020, respectively. Revenues earned for sub-servicing loans for Bayview Financial were $153 million, $129 million and $125 million in 2021, 2020 and 2019, respectively. In addition, the Company held $62 million and $77 million of mortgage-backed securities in its held-to-maturity portfolio at December 31, 2021 and 2020, respectively, that were securitized by Bayview Financial. At December 31, 2021, the Company held $210 million of Bayview Financial’s $1.4 billion syndicated loan facility. In early 2021 the Company purchased $965 million of delinquent FHA guaranteed mortgage loans, including past due accrued interest, from Bayview Financial for $1.0 billion. The servicing rights for such loans were retained by Bayview Financial, but the Company continues to sub- service the loans 26. Parent company financial statements Condensed Balance Sheet Assets Cash in subsidiary bank ............................................................................ Due from consolidated bank subsidiaries December 31 2021 2020 (In thousands) $ 92,836 $ 100,593 Money-market savings......................................................................... Current income tax receivable ............................................................. Total due from consolidated bank subsidiaries............................... 1,335,857 754 1,336,611 699,476 — 699,476 Investments in consolidated subsidiaries Banks.................................................................................................... Other .................................................................................................... Investments in trust preferred entities (note 20) ....................................... Other assets............................................................................................... Total assets ...................................................................................... 17,533,772 16,554,287 125,988 22,846 92,170 $19,304,397 $17,595,360 220,496 22,672 98,010 $ 103,242 $ 1,297,750 1,400,992 96,664 1,311,413 1,408,077 17,903,405 16,187,283 $19,304,397 $17,595,360 Liabilities Accrued expenses and other liabilities ..................................................... Long-term borrowings .............................................................................. Total liabilities ................................................................................ Shareholders’ equity............................................................................... Total liabilities and shareholders’ equity ........................................ 200 Condensed Statement of Income 2021 Year Ended December 31 2020 (In thousands, except per share) 2019 Income Dividends from consolidated subsidiaries ............................. $ 1,025,000 $ 708,500 $ 2,025,000 36,740 Income from Bayview Lending Group LLC ......................... 7,216 Other income ......................................................................... 2,068,956 Total income ..................................................................... 30,000 2,530 1,057,530 52,940 5,110 766,550 Expense Interest on long-term borrowings .......................................... Other expense ........................................................................ Total expense .................................................................... Income before income taxes and equity in undistributed income of subsidiaries ........................................................ Income tax credits.................................................................. Income before equity in undistributed income of 24,073 35,406 59,479 31,924 33,704 65,628 51,938 25,236 77,174 998,051 6,052 700,922 1,984 1,991,782 8,313 subsidiaries ......................................................................... 1,004,103 702,906 2,000,095 Equity in undistributed income of subsidiaries 1,954,054 Net income of subsidiaries .................................................... (2,025,000) Less: dividends received........................................................ (70,946) Equity in undistributed income of subsidiaries ..................... Net income ............................................................................. $ 1,858,746 $1,353,152 $ 1,929,149 Net income per common share 1,879,643 (1,025,000) 854,643 1,358,746 (708,500) 650,246 Basic.................................................................................. $ Diluted .............................................................................. 13.81 $ 13.80 9.94 $ 9.94 13.76 13.75 201 Condensed Statement of Cash Flows 2021 Year Ended December 31 2020 (In thousands) 2019 Cash flows from operating activities Net income .............................................................................. $1,858,746 $ 1,353,152 $ 1,929,149 Adjustments to reconcile net income to net cash provided by operating activities Equity in undistributed income of subsidiaries.................. Provision for deferred income taxes .................................. Net change in accrued income and expense....................... Net cash provided by operating activities .......................... Cash flows from investing activities Proceeds from sales or maturities of investment securities............................................................ Net investment in consolidated subsidiaries ........................... Other, net ................................................................................ Net cash provided (used) by investing activities................ Cash flows from financing activities Purchases of treasury stock..................................................... Dividends paid — common .................................................... Dividends paid — preferred.................................................... Redemption of Series A and Series C (854,643) 10,356 (23,047) 991,412 (650,246) 1,079 (24,206) 679,779 70,946 5,263 (34,525) 1,970,833 — (199,000) (2,777) (201,777) — 125,654 50,396 176,050 100 — 51,235 51,335 — (373,750) (568,112) (68,256) (580,260) (68,200) (1,349,785) (552,138) (67,454) preferred stock ..................................................................... — — (381,500) Proceeds from issuance of Series I and Series G preferred stock ..................................................................... Other, net ................................................................................ Net cash used by financing activities ................................. Net increase (decrease) in cash and cash equivalents............. Cash and cash equivalents at beginning of year ..................... Cash and cash equivalents at end of year................................ $1,428,693 $ Supplemental disclosure of cash flow information Interest received during the year............................................. $ Interest paid during the year ................................................... Income taxes received during the year.................................... 495,000 (7,551) (161,011) 628,624 800,069 1,165 $ 20,457 53,067 — (5,992) (1,016,110) (160,281) 960,350 800,069 $ 396,000 (4,431) (1,959,308) 62,860 897,490 960,350 1,493 $ 30,913 11,528 1,752 49,451 6,251 202 27. Recent accounting developments The following table provides a description of accounting standards that were adopted by the Company in 2021 as well as standards that are not effective that could have an impact to M&T’s consolidated financial statements upon adoption. Required date of adoption January 1, 2021 Effect on consolidated financial statements The Company adopted the amended guidance effective January 1, 2021 using a prospective transition method. The adoption did not have a material impact on the Company’s consolidated financial statements. Standard Description Standards Adopted in 2021 Clarifying the Interactions Between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging The amendments clarify the following guidance: 1. That an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in the equity securities investments guidance immediately before applying or upon discontinuing the equity method of accounting. 2. For the purpose of applying the derivatives and hedging guidance an entity should not consider whether, upon the settlement of a forward contract or exercise of a purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method of accounting or the fair value option in accordance with the financial instruments guidance. An entity also would evaluate the remaining characteristics in the derivatives and hedging guidance to determine the accounting for those forward contracts and purchased options. 203 Required date of adoption January 1, 2021 Effect on consolidated financial statements The amendments related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements. Standard Description Standards Adopted in 2021 Simplifying the Accounting for Income Taxes The amendments remove the following exceptions for accounting for income taxes: 1. Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income); 2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; 3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and 4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments also simplify the accounting for income taxes by doing the following: 1. Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income- based tax. 2. Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. 3. Specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority. 4. Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. 5. Making minor Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. 204 Required date of adoption Effect on consolidated financial statements January 1, 2022 Early adoption permitted At January 1, 2022 the Company did not have the types of instruments affected by the amended guidance and, therefore, the adoption had no impact on its consolidated financial statements. Standard Description Standards Not Yet Adopted as of December 31, 2021 Changes to Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity The amendments reduce the number of accounting models for convertible debt instruments and convertible preferred stock. The amendments also reduce form-over-substance-based guidance for the derivatives scope exception for contacts in an entity’s own equity. For convertible instruments, embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate on the instrument. The amendments also require certain changes to EPS calculations for convertible instruments as well as additional disclosures relating to conditions that cause conversion features to be met. For contacts in an entity’s own equity, the amendments revise the derivatives scope exception guidance as follows: 1. Remove the settlement in unregistered shares, collateral, and shareholder rights conditions from the settlement guidance. 2. Clarify that payment penalties for failure to timely file do not preclude equity classification. 3. Require instruments that are required to be classified as an asset or liability to be measured subsequently at fair value, with changes reported in earnings and disclosed in the financial statements. 4. Clarifiy that the scope of the disclosure requirements in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies only to freestanding instruments. 5. Clarify that the scope of the reassessment guidance in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies to both freestanding instruments and embedded features. 205 Required date of adoption Effect on consolidated financial statements January 1, 2022 Early adoption permitted At January 1, 2022 the Company did not have any of the types of instruments affected by the amended guidance and, therefore, the adoption had no impact on its consolidated financial statements. Standard Description Standards Not Yet Adopted of December 31, 2021 Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options The amendments clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments clarify that: 1. A modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be treated as an exchange of the original instrument for a new instrument. 2. The effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be measured as follows: a. For a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements, as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged. b. For all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. 3. The effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be recognized on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services should be recognized in accordance with the Stock Compensation guidance. In a multiple-element transaction (for example, one that includes both debt financing and equity financing), the total effect of the modification should be allocated to the respective elements in the transaction. 206 Standard Description Standards Not Yet Adopted of December 31, 2021 Lessor’s Accounting for Certain Leases with Variable Lease Payments Accounting for Contract Assets and Contract Liabilities from Contracts with Customers in a Business Combination The amendments update the classification guidance for lessors. Under the amended guidance lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1. The lease would have been classified as a sales-type lease or a direct financing lease. 2. The lessor would have otherwise recognized a day-one loss. When a lease is classified as operating, the lessor does not recognize a net investment in the lease, does not derecognize the underlying asset, and, therefore, does not recognize a selling profit or loss. The amendments require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with specified revenue recognition guidance. At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts and may assess how the acquiree applied the revenue guidance to determine what to record for such contracts. The guidance is generally expected to result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements Required date of adoption Effect on consolidated financial statements January 1, 2022 Early adoption permitted The Company adopted the amended guidance effective January 1, 2022 using a prospective transition method. The Company does not expect the guidance will have a material impact on its consolidated financial statements. January 1, 2023 Early adoption permitted The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. However, if early adoption is elected, the amendments should be applied (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company has not yet decided which transition method will be applied to the extent applicable. The Company does not expect the guidance will have a material impact on its consolidated financial statements. 207 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. (a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a- 15(e) and 15d-15(e)), René F. Jones, Chairman of the Board and Chief Executive Officer, and Darren J. King, Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of December 31, 2021. (b) Management’s annual report on internal control over financial reporting. Included under the heading “Report on Internal Control Over Financial Reporting” at Item 8 of this Annual Report on Form 10-K. (c) Attestation report of the registered public accounting firm. Included under the heading “Report of Independent Registered Public Accounting Firm” at Item 8 of this Annual Report on Form 10-K. (d) Changes in internal control over financial reporting. M&T regularly assesses the adequacy of its internal control over financial reporting and enhances its controls in response to internal control assessments and internal and external audit and regulatory recommendations. No changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required to be furnished pursuant to Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K will be included in M&T’s Proxy Statement for the 2022 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of 2021 (the “2022 Proxy Statement”). The information concerning M&T’s directors will appear under the caption “NOMINEES FOR DIRECTOR” in the 2022 Proxy Statement. The information concerning M&T’s Code of Ethics for CEO and Senior Financial Officers will appear under the caption “CORPORATE GOVERNANCE OF M&T BANK CORPORATION” in the 2022 Proxy Statement. The information regarding the procedures by which shareholders can recommend director nominees as well as M&T’s Audit Committee, including “audit committee financial experts,” will also appear under the caption “CORPORATE GOVERNANCE OF M&T BANK CORPORATION.” The information concerning compliance with Section 16(a) of the Exchange Act will appear, if necessary, under the caption “STOCK OWNERSHIP INFORMATION.” Such information is incorporated herein by reference. 208 The information concerning M&T’s executive officers is presented under the caption “Executive Officers of the Registrant” contained in Part I of this Annual Report on Form 10-K. Item 11. Executive Compensation. The information required to be furnished pursuant to Items 402 and 407(e)(4) and (e)(5) of Regulation S-K will appear under the captions “COMPENSATION DISCUSSION AND ANALYSIS,” “EXECUTIVE COMPENSATION,” “DIRECTOR COMPENSATION,” “NOMINATION, COMPENSATION AND GOVERNANCE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION,” and “NOMINATION, COMPENSATION AND GOVERNANCE COMMITTEE REPORT” in the 2022 Proxy Statement. Such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required to be furnished pursuant to Item 403 of Regulation S-K will appear under the caption “STOCK OWNERSHIP INFORMATION” in the 2022 Proxy Statement. Such information is incorporated herein by reference. The information required to be furnished pursuant to Item 201(d) concerning equity compensation plans is presented under the caption “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” contained in Part II, Item 5 of this Annual Report on Form 10-K. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required to be furnished pursuant to Items 404 and 407(a) of Regulation S-K will appear under the caption “TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS” and “CORPORATE GOVERNANCE OF M&T BANK CORPORATION” in the 2022 Proxy Statement. Such information is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. The information required to be furnished by Item 9(e) of Schedule 14A will appear under the caption “PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF M&T BANK CORPORATION FOR THE YEAR ENDING DECEMBER 31, 2022” in the 2022 Proxy Statement. Such information is incorporated herein by reference. 209 PART IV Item 15. Exhibits and Financial Statement Schedules. (a) Financial statements and financial statement schedules filed as part of this Annual Report on Form 10-K. See Part II, Item 8. “Financial Statements and Supplementary Data.” Financial statement schedules are not required or are inapplicable, and therefore have been omitted. (b) Exhibits required by Item 601 of Regulation S-K. The exhibits listed have been previously filed, are filed herewith or are incorporated herein by reference to other filings. Agreement and Plan of Merger dated as of February 21, 2021, by and between M&T Bank Corporation, Bridge Merger Corp. and People’s United Financial, Inc. Incorporated by reference to Exhibit 2.1 of M&T Bank Corporation’s Form 8-K dated February 25, 2021 (File No. 1-9861). Amended and Restated Bylaws of M&T Bank Corporation, effective April 17, 2018. Incorporated by reference to Exhibit 3.2 to the Form 8-K dated April 20, 2018 (File No. 1-9861). Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation with respect to Perpetual 6.875% Non-Cumulative Preferred Stock, Series D, dated May 26, 2011. Incorporated by reference to Exhibit 3.1 of M&T Bank Corporation’s Form 8-K dated May 31, 2011 (File No. 1-9861). Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation, dated April 19, 2013. Incorporated by reference to Exhibit 3.1 to the Form 8-K dated April 22, 2013 (File No. 1-9861). Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation with respect to Perpetual Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series E, dated February 11, 2014. Incorporated by reference to Exhibit 3.1 to the Form 8-K dated February 11, 2014 (File No. 1-9861). Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation with respect to Perpetual Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series F, dated October 27, 2016. Incorporated by reference to Exhibit 3.1 of M&T Bank Corporation’s Form 8-K dated October 28, 2016 (File No. 1-9861). Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation with respect to Perpetual 5.0% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series G, dated July 29, 2019. Incorporated by reference to Exhibit 3.1 of M&T Bank Corporation’s Form 8-K dated July 30, 2019 (File No. 1-9861). Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation with respect to Perpetual 3.500% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series I, dated August 12, 2021. Incorporated by reference to Exhibit 3.1 of M&T Bank Corporation’s Form 8-K dated August 17, 2021 (File No. 1-9861). There are no instruments with respect to long-term debt of M&T Bank Corporation and its subsidiaries that involve securities authorized under the instrument in an amount exceeding 10 percent of the total assets of M&T Bank Corporation and its subsidiaries on a consolidated basis. M&T Bank Corporation agrees to provide the SEC with a copy of instruments defining the rights of holders of long-term debt of M&T Bank Corporation and its subsidiaries on request. Description of Registrant’s Securities. Filed herewith. 2.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 4.1 4.2 210 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 M&T Bank Corporation Annual Executive Incentive Plan. Incorporated by reference to Exhibit No. 10.3 to the Form 10-Q for the quarter ended June 30, 1998 (File No. 1- 9861).* Supplemental Deferred Compensation Agreement between Manufacturers and Traders Trust Company and Brian E. Hickey dated as of July 21, 1994, as amended. Incorporated by reference to Exhibit 10.2 to the Form 10-K for the year ended December 31, 2016 (File No. 1-9861).* M&T Bank Corporation Supplemental Pension Plan, as amended and restated. Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended March 31, 2016 (File No. 1-9861).* Amendment No. 1 to M&T Bank Corporation Supplemental Pension Plan. Incorporated by reference to Exhibit 10.4 of M&T Bank Corporation’s Form 10-K for the year ended December 31, 2018 (File No. 1-9861).* Amendment No. 2 to M&T Bank Corporation Supplemental Pension Plan. Incorporated by reference to Exhibit 10.5 of M&T Bank Corporation’s Form 10-K for the year ended December 31, 2018 (File No. 1-9861).* M&T Bank Corporation Supplemental Retirement Savings Plan. Incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended March 31, 2016 (File No. 1-9861).* Amendment No. 1 to M&T Bank Corporation Supplemental Retirement Plan. Incorporated by reference to Exhibit 10.7 of M&T Bank Corporation’s Form 10-K for the year ended December 31, 2018 (File No. 1-9861).* Amendment No. 2 to M&T Bank Corporation Supplemental Retirement Plan. Incorporated by reference to Exhibit 10.8 of M&T Bank Corporation’s Form 10-K for the year ended December 31, 2018 (File No. 1-9861).* M&T Bank Corporation Deferred Bonus Plan, as amended and restated. Incorporated by reference to Exhibit 10.6 to the Form 10-K for the year ended December 31, 2016 (File No. 1-9861).* M&T Bank Corporation 2008 Directors’ Stock Plan, as amended. Incorporated by reference to Exhibit 4.1 to the Form S-8 dated October 19, 2012 (File No. 333-184504).* M&T Bank Corporation Employee Stock Purchase Plan. Incorporated by reference to Exhibit 10.22 to the Form 10-K for the year ended December 31, 2012 (File No. 1- 9861).* M&T Bank Corporation 2009 Equity Incentive Compensation Plan. Incorporated by reference to Appendix A to the Proxy Statement of M&T Bank Corporation dated March 5, 2015 (File No. 1-9861).* M&T Bank Corporation Form of Restricted Stock Award Agreement. Incorporated by reference to Exhibit 10.25 to the Form 10-K for the year ended December 31, 2013 (File No. 1-9861).* M&T Bank Corporation Form of Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.26 to the Form 10-K for the year ended December 31, 2013 (File No. 1-9861).* M&T Bank Corporation Form of Performance-Vested Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.27 to the Form 10-K for the year ended December 31, 2013 (File No. 1-9861).* M&T Bank Corporation Form of Performance-Vested Restricted Stock Unit Award Agreement (for named executive officers (“NEOs”) subject to Section 162 (m) of the Internal Revenue Code of 1986, as amended from time to time). Incorporated by 211 reference to Exhibit 10.1 to the Form 10-Q for the quarter ended March 31, 2014 (File No. 1-9861).* Hudson City Bancorp, Inc. Amended and Restated 2011 Stock Incentive Plan. Incorporated by reference to Exhibit 4.6 to the Form S-8 dated November 2, 2015 (File No. 333-184411).* Hudson City Bancorp, Inc. 2006 Stock Incentive Plan. Incorporated by reference to Exhibit 4.7 to the Form S-8 dated November 2, 2015 (File No. 333-184411).* M&T Bank Corporation 2019 Equity Incentive Compensation Plan. Incorporated by reference to Appendix A to the Proxy Statement of M&T Bank Corporation dated March 7, 2019 (File No. 1-9861).* M&T Bank Corporation Form of Performance Share Unit Award Agreement. Incorporated by reference to Exhibit 10.1 to M&T Bank Corporation’s Form 10-Q for the quarter ended March 31, 2019 (File No. 1-9861).* M&T Bank Corporation Form of Performance Share Unit Award Agreement. Incorporated by reference to Exhibit 10.1 to M&T Bank Corporation’s Form 10-Q for the quarter ended March 31, 2020 (File No. 1-9861).* Amendment No. 3 to M&T Bank Corporation Supplemental Pension Plan. Incorporated by reference to Exhibit 10.2 to M&T Bank Corporation’s Form 10-Q for the quarter ended March 31, 2020 (File No. 1-9861).* M&T Bank Corporation Leadership Retirement Savings Plan. Incorporated by reference to Exhibit 10.3 to M&T Bank Corporation’s Form 10-Q for the quarter ended March 31, 2020 (File No. 1-9861).* M&T Bank Corporation Form of Performance-Hurdled Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.24 to M&T Bank Corporation’s Form 10-K for the year ended December 31, 2020 (File No. 1-9861).* M&T Bank Corporation Form of Stock Option Agreement. Incorporated by reference to Exhibit 10.25 to M&T Bank Corporation’s Form 10-K for the year ended December 31, 2020 (File No. 1-9861).* M&T Bank Corporation 2008 Directors’ Stock Plan, as amended on February 19, 2021. Incorporated by reference to Exhibit 4.1 of M&T Bank Corporation’s Form S-8 dated March 26, 2021 (File No. 333-254786).* M&T Bank Corporation Form of Directors’ Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.1 to M&T Bank Corporation’s Form 10-Q for the quarter ended June 30, 2021 (File No. 1-9861).* M&T Bank Corporation Voluntary Deferred Compensation Plan for Directors. Filed herewith.* Statement re: Computation of Earnings Per Common Share. Incorporated by reference to note 15 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data.” Subsidiaries of the Registrant. Incorporated by reference to the caption “Subsidiaries” contained in Part I, Item 1 hereof. Consent of PricewaterhouseCoopers LLP re: Registration Statements on Form S-8 (Nos. 33-32044, 333-43175, 333-16077, 333-40640, 333-84384, 333-127406, 333-150122, 333-164015, 333-163992, 333-160769, 333-159795, 333-170740, 333-189099, 333- 184504, 333-189097, 333-184411, 333-231217 and 333-254786) and Form S-3 (No. 333-259888). Filed herewith. Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10.28 11.1 21.1 23.1 31.1 212 31.2 32.1 32.2 Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. Certification of Chief Executive Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. Certification of Chief Financial Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema. Filed herewith. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase. Filed herewith. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase. Filed herewith. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase. Filed herewith. 101.DEF Inline XBRL Taxonomy Definition Linkbase. Filed herewith. 104 The cover page from M&T Bank Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021 has been formatted in Inline XBRL. * Management contract or compensatory plan or arrangement. (c) Additional financial statement schedules. None. Item 16. Form 10-K Summary. None. 213 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 16th day of February, 2022. M&T BANK CORPORATION By: /S/ René F. Jones René F. Jones Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date Principal Executive Officer: /S/ René F. Jones René F. Jones Principal Financial Officer: /S/ Darren J. King Darren J. King Principal Accounting Officer: Chairman of the Board and Chief Executive Officer February 16, 2022 Executive Vice President and Chief Financial Officer February 16, 2022 /S/ Michael R. Spychala Michael R. Spychala Senior Vice President and Controller February 16, 2022 A majority of the board of directors: /S/ C. Angela Bontempo C. Angela Bontempo /s/ Robert T. Brady Robert T. Brady /s/ Calvin G. Butler, Jr. Calvin G. Butler, Jr. /S/ T. Jefferson Cunningham III T. Jefferson Cunningham III 214 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 /s/ Gary N. Geisel Gary N. Geisel /S/ Leslie V. Godridge Leslie V. Godridge /S/ Richard S. Gold Richard S. Gold /S/ Richard A. Grossi Richard A. Grossi /S/ Richard H. Ledgett, Jr Richard H. Ledgett, Jr. /S/ Newton P. S. Merrill Newton P. S. Merrill /S/ Kevin J. Pearson Kevin J. Pearson /S/ Melinda R. Rich Melinda R. Rich /S/ Robert E. Sadler, Jr. Robert E. Sadler, Jr. /S/ Denis J. Salamone Denis J. Salamone /S/ John R. Scannell John R. Scannell /S/ David S. Scharfstein David S. Scharfstein /S/ Rudina Seseri Rudina Seseri /S/ Herbert L. Washington Herbert L. Washington February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 February 16, 2022 215 

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