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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes~~ x NoYes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ~~Yes~~ x NoYes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~Yes~~ ¨ NoYes x No

Number of shares of the registrant’s Common Stock, $0.50 par value, outstanding as of the close of business on ~~October 23, 2015: 133,289,778~~July 29, 2016: 156,769,164 shares.


			September 30,			December 31,
Dollars in thousands, except per share	Dollars in thousands, except per share		2015			2014			Dollars in thousands, except per share		June 30, 2016			December 31, 2015

Assets		Cash and due from banks	$	1,249,704			1,289,965			Cash and due from banks	$	1,284,442			1,368,040
		Interest-bearing deposits at banks		4,713,266			6,470,867			Interest-bearing deposits at banks		8,474,839			7,594,350
		Federal funds sold		—			83,392			Trading account		506,131			273,783
		Trading account		340,710			308,175			Investment securities (includes pledged securities that can be sold or repledged of $2,119,744 at June 30, 2016; $2,136,712 at December 31, 2015)
		Investment securities (includes pledged securities that can be sold or repledged of $1,614,909 at September 30, 2015; $1,631,267 at December 31, 2014)								Available for sale (cost: $11,578,829 at June 30, 2016; $12,138,636 at December 31, 2015)		11,918,974			12,242,671
		Available for sale (cost: $10,923,234 at September 30, 2015; $8,919,324 at December 31, 2014)		11,159,509			9,156,932			Held to maturity (fair value: $2,623,259 at June 30, 2016; $2,864,147 at December 31, 2015)		2,574,421			2,859,709
		Held to maturity (fair value: $3,025,687 at September 30, 2015; $3,538,282 at December 31, 2014)		2,998,486			3,507,868			Other (fair value: $469,689 at June 30, 2016; $554,059 at December 31, 2015)		469,689			554,059
		Other (fair value: $336,544 at September 30, 2015; $328,742 at December 31, 2014)		336,544			328,742
										Total investment securities		14,963,084			15,656,439
		Total investment securities		14,494,539			12,993,542
										Loans and leases		88,754,824			87,719,234
		Loans and leases		68,766,144			66,899,369			Unearned discount		(232,826	)		(229,735	)
		Unearned discount		(225,896	)		(230,413	)
										Loans and leases, net of unearned discount		88,521,998			87,489,499
		Loans and leases, net of unearned discount		68,540,248			66,668,956			Allowance for credit losses		(970,496	)		(955,992	)
		Allowance for credit losses		(933,798	)		(919,562	)
										Loans and leases, net		87,551,502			86,533,507
		Loans and leases, net		67,606,450			65,749,394
										Premises and equipment		658,216			666,682
		Premises and equipment		581,976			612,984			Goodwill		4,593,112			4,593,112
		Goodwill		3,513,325			3,524,625			Core deposit and other intangible assets		116,531			140,268
		Core deposit and other intangible assets		18,179			35,027			Accrued interest and other assets		5,672,727			5,961,703
		Accrued interest and other assets		5,278,913			5,617,564
										Total assets	$	123,820,584			122,787,884
		Total assets	$	97,797,062			96,685,535

Liabilities		Noninterest-bearing deposits	$	28,189,330			26,947,880			Noninterest-bearing deposits	$	30,700,066			29,110,635
		NOW accounts		2,459,527			2,307,815			Interest-checking deposits		2,672,524			2,939,274
		Savings deposits		39,298,134			41,085,803			Savings deposits		48,453,713			46,627,370
		Time deposits		2,791,367			3,063,973			Time deposits		12,630,277			13,110,392
		Deposits at Cayman Islands office		206,185			176,582			Deposits at Cayman Islands office		193,523			170,170

		Total deposits		72,944,543			73,582,053			Total deposits		94,650,103			91,957,841

		Federal funds purchased and agreements to repurchase securities		173,783			192,676			Federal funds purchased and agreements to repurchase securities		206,943			150,546
		Accrued interest and other liabilities		1,582,513			1,567,951			Other short-term borrowings		200,180			1,981,636
		Long-term borrowings		10,174,289			9,006,959			Accrued interest and other liabilities		1,963,093			1,870,714
										Long-term borrowings		10,328,751			10,653,858
		Total liabilities		84,875,128			84,349,639
										Total liabilities		107,349,070			106,614,595

Shareholders’ equity		Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 731,500 shares at September 30, 2015 and December 31, 2014; Liquidation preference of $10,000 per share: 50,000 shares at September 30, 2015 and December 31, 2014		1,231,500			1,231,500			Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 731,500 shares at June 30, 2016 and December 31, 2015; Liquidation preference of $10,000 per share: 50,000 shares at June 30, 2016 and December 31, 2015		1,231,500			1,231,500
		Common stock, $.50 par, 250,000,000 shares authorized, 133,274,963 shares issued at September 30, 2015; 132,312,931 shares issued at December 31, 2014		66,637			66,157			Common stock, $.50 par, 250,000,000 shares authorized, 159,957,393 shares issued at June 30, 2016; 159,563,512 shares issued at December 31, 2015		79,979			79,782
		Common stock issuable, 36,462 shares at September 30, 2015; 41,330 shares at December 31, 2014		2,341			2,608			Common stock issuable, 33,546 shares at June 30, 2016; 36,644 shares at December 31, 2015		2,201			2,364
		Additional paid-in capital		3,511,182			3,409,506			Additional paid-in capital		6,690,671			6,680,768
		Retained earnings		8,273,747			7,807,119			Retained earnings		8,801,305			8,430,502
		Accumulated other comprehensive income (loss), net		(163,473	)		(180,994	)		Accumulated other comprehensive income (loss), net		(101,021	)		(251,627	)
										Treasury stock - common, at cost - 2,073,692 shares at June 30, 2016		(233,121	)		—
		Total shareholders’ equity		12,921,934			12,335,896
										Total shareholders’ equity		16,471,514			16,173,289
		Total liabilities and shareholders’ equity	$	97,797,062			96,685,535
										Total liabilities and shareholders’ equity	$	123,820,584			122,787,884


			Three months ended September 30						Nine months ended September 30								Three months ended June 30					Six months ended June 30
In thousands, except per share	In thousands, except per share		2015			2014			2015			2014			In thousands, except per share		2016		2015			2016		2015
Interest income		Loans and leases, including fees	$	672,092			647,280		$	1,981,904			1,937,531			Loans and leases, including fees	$	867,478		662,633		$	1,730,863		1,309,812
		Investment securities														Investment securities
		Fully taxable		93,062			91,036			272,163			250,145			Fully taxable		91,184		93,144			189,199		179,101
		Exempt from federal taxes		950			1,271			3,330			4,068			Exempt from federal taxes		663		1,062			1,458		2,380
		Deposits at banks		3,852			3,198			10,321			7,617			Deposits at banks		10,993		3,351			21,330		6,469
		Other		70			238			749			904			Other		303		164			605		679

		Total interest income		770,026			743,023			2,268,467			2,200,265			Total interest income		970,621		760,354			1,943,455		1,498,441

Interest expense		NOW accounts		360			394			1,020			1,021			Interest-checking deposits		400		349			814		660
		Savings deposits		10,937			11,532			31,517			34,314			Savings deposits		20,134		10,361			36,025		20,580
		Time deposits		3,643			3,805			11,073			11,600			Time deposits		26,867		3,690			51,189		7,430
		Deposits at Cayman Islands office		151			161			448			550			Deposits at Cayman Islands office		181		150			374		297
		Short-term borrowings		32			19			102			76			Short-term borrowings		1,143		36			3,305		70
		Long-term borrowings		62,076			58,053			188,764			158,098			Long-term borrowings		58,077		62,640			115,965		126,688

		Total interest expense		77,199			73,964			232,924			205,659			Total interest expense		106,802		77,226			207,672		155,725

		Net interest income		692,827			669,059			2,035,543			1,994,606			Net interest income		863,819		683,128			1,735,783		1,342,716
		Provision for credit losses		44,000			29,000			112,000			91,000			Provision for credit losses		32,000		30,000			81,000		68,000

		Net interest income after provision for credit losses		648,827			640,059			1,923,543			1,903,606			Net interest income after provision for credit losses		831,819		653,128			1,654,783		1,274,716

Other income		Mortgage banking revenues		84,035			93,532			288,238			269,237			Mortgage banking revenues		89,383		102,602			171,446		204,203
		Service charges on deposit accounts		107,259			110,071			314,860			321,637			Service charges on deposit accounts		103,872		105,257			206,277		207,601
		Trust income		113,744			128,671			356,076			379,816			Trust income		120,450		118,598			231,527		242,332
		Brokerage services income		16,902			17,416			49,224			51,403			Brokerage services income		16,272		16,861			32,276		32,322
		Trading account and foreign exchange gains		8,362			6,988			20,639			21,477			Trading account and foreign exchange gains		13,222		6,046			20,680		12,277
		Loss on bank investment securities		—			—			(108	)		—			Gain (loss) on bank investment securities		264		(10	)		268		(108	)
		Equity in earnings of Bayview Lending Group LLC		(3,721	)		(4,114	)		(11,043	)		(12,623	)		Other revenues from operations		104,791		147,673			206,713		238,603
		Other revenues from operations		113,118			98,547			359,043			296,683
																Total other income		448,254		497,027			869,187		937,230
		Total other income		439,699			451,111			1,376,929			1,327,630

Other expense		Salaries and employee benefits		363,567			348,776			1,115,117			1,059,815			Salaries and employee benefits		398,675		361,657			830,460		751,550
		Equipment and net occupancy		68,470			67,713			201,792			206,964			Equipment and net occupancy		75,724		66,852			149,902		133,322
		Printing, postage and supplies		8,691			9,184			27,586			29,320			Printing, postage and supplies		9,907		9,305			21,893		18,895
		Amortization of core deposit and other intangible assets		4,090			7,358			16,848			26,654			Amortization of core deposit and other intangible assets		11,418		5,965			23,737		12,758
		FDIC assessments		11,090			13,193			32,551			43,836			FDIC assessments		22,370		10,801			47,595		21,461
		Other costs of operations		197,908			219,135			642,925			656,664			Other costs of operations		231,801		242,048			452,403		445,017

		Total other expense		653,816			665,359			2,036,819			2,023,253			Total other expense		749,895		696,628			1,525,990		1,383,003

		Income before taxes		434,710			425,811			1,263,653			1,207,983			Income before taxes		530,178		453,527			997,980		828,943
		Income taxes		154,309			150,467			454,951			419,286			Income taxes		194,147		166,839			363,421		300,642

		Net income	$	280,401			275,344		$	808,702			788,697			Net income	$	336,031		286,688		$	634,559		528,301

		Net income available to common shareholders
		Basic	$	257,337			251,905		$	739,627			724,307			Net income available to common shareholders
		Diluted		257,346			251,917			739,656			724,344			Basic	$	312,968		263,471		$	588,697		482,295
		Net income per common share														Diluted		312,974		263,481			588,707		482,313
		Basic	$	1.94			1.92		$	5.59			5.54			Net income per common share
		Diluted		1.93			1.91			5.56			5.50			Basic	$	1.98		1.99		$	3.72		3.65
		Cash dividends per common share	$	.70			.70		$	2.10			2.10			Diluted		1.98		1.98			3.71		3.63
		Average common shares outstanding														Cash dividends per common share	$	.70		.70		$	1.40		1.40
		Basic		132,630			131,265			132,347			130,782			Average common shares outstanding
		Diluted		133,376			132,128			133,089			131,698			Basic		157,802		132,356			158,268		132,203
																Diluted		158,341		133,116			158,761		132,944


	Three months ended September 30						Nine months ended September 30						Three months ended June 30						Six months ended June 30
In thousands	2015			2014			2015			2014			2016			2015			2016			2015

Net income	$	280,401			275,344		$	808,702			788,697		$	336,031			286,688		$	634,559			528,301
Other comprehensive income (loss), net of tax and reclassification adjustments:
Net unrealized gains (losses) on investment securities		48,332			(27,637	)		1,053			75,229			47,270			(72,618	)		144,464			(47,279	)
Unrealized gains (losses) on cash flow hedges		(24	)		613			823			(98	)
Cash flow hedges adjustments														(23	)		(24	)		(47	)		847
Foreign currency translation adjustment		(3	)		(1,817	)		(521	)		(1,504	)		(1,565	)		1,866			(1,618	)		(518	)
Defined benefit plans liability adjustment		5,724			1,000			16,166			2,999
Defined benefit plans liability adjustments														3,486			5,765			7,807			10,442

Total other comprehensive income (loss)		54,029			(27,841	)		17,521			76,626			49,168			(65,011	)		150,606			(36,508	)

Total comprehensive income	$	334,430			247,503		$	826,223			865,323		$	385,199			221,677		$	785,165			491,793


		Nine months ended September 30							Six months ended June 30
In thousands		2015			2014				2016			2015
Cash flows from operating activities	Net income	$	808,702			788,697		Net income	$	634,559			528,301
	Adjustments to reconcile net income to net cash provided by operating activities							Adjustments to reconcile net income to net cash provided by operating activities
	Provision for credit losses		112,000			91,000		Provision for credit losses		81,000			68,000
	Depreciation and amortization of premises and equipment		73,916			74,516		Depreciation and amortization of premises and equipment		53,514			48,199
	Amortization of capitalized servicing rights		36,730			51,572		Amortization of capitalized servicing rights		24,648			24,572
	Amortization of core deposit and other intangible assets		16,848			26,654		Amortization of core deposit and other intangible assets		23,737			12,758
	Provision for deferred income taxes		20,141			33,777		Provision for deferred income taxes		94,458			29,884
	Asset write-downs		5,775			5,114		Asset write-downs		7,737			4,076
	Net gain on sales of assets		(61,969	)		(3,771	)	Net gain on sales of assets		(10,477	)		(48,637	)
	Net change in accrued interest receivable, payable		(5,484	)		9,638		Net change in accrued interest receivable, payable		2,358			7,912
	Net change in other accrued income and expense		11,200			(89,425	)	Net change in other accrued income and expense		(32,180	)		(39,503	)
	Net change in loans originated for sale		232,974			(224,425	)	Net change in loans originated for sale		(188,771	)		(77,677	)
	Net change in trading account assets and liabilities		(2,993	)		11,163		Net change in trading account assets and liabilities		(40,552	)		198

	Net cash provided by operating activities		1,247,840			774,510		Net cash provided by operating activities		650,031			558,083

Cash flows from investing activities	Proceeds from sales of investment securities							Proceeds from sales of investment securities
	Available for sale		2,579			16		Available for sale		4,970			2,539
	Other		377			23,309		Other		85,389			254
	Proceeds from maturities of investment securities							Proceeds from maturities of investment securities
	Available for sale		1,343,869			686,183		Available for sale		1,067,100			859,904
	Held to maturity		519,359			337,677		Held to maturity		291,917			351,110
	Purchases of investment securities							Purchases of investment securities
	Available for sale		(3,320,931	)		(5,310,246	)	Available for sale		(518,203	)		(3,013,384	)
	Held to maturity		(22,592	)		(15,202	)	Held to maturity		(10,456	)		(17,403	)
	Other		(8,179	)		(53,264	)	Other		(1,019	)		(7,686	)
	Net increase in loans and leases		(2,208,660	)		(1,420,572	)	Net increase in loans and leases		(930,426	)		(1,465,261	)
	Net (increase) decrease in interest-bearing deposits at banks		1,757,601			(6,024,926	)	Net (increase) decrease in interest-bearing deposits at banks		(880,489	)		2,425,015
	Capital expenditures, net		(42,744	)		(50,400	)	Capital expenditures, net		(36,619	)		(23,395	)
	Net (increase) decrease in loan servicing advances		461,700			(340,750	)	Net decrease in loan servicing advances		119,190			317,276
	Other, net		(75,449	)		38,707		Other, net		(98,452	)		16,450

	Net cash used by investing activities		(1,593,070	)		(12,129,468	)	Net cash used by investing activities		(907,098	)		(554,581	)

Cash flows from financing activities	Net increase (decrease) in deposits		(636,144	)		7,225,487		Net increase (decrease) in deposits		2,705,332			(951,347	)
	Net decrease in short-term borrowings		(18,893	)		(95,846	)	Net decrease in short-term borrowings		(1,693,603	)		(39,377	)
	Proceeds from long-term borrowings		1,500,000			4,345,478		Proceeds from long-term borrowings		—			1,500,000
	Payments on long-term borrowings		(324,308	)		(373,642	)	Payments on long-term borrowings		(322,591	)		(323,025	)
	Proceeds from issuance of preferred stock		—			346,500		Purchases of treasury stock		(254,000	)		—
	Dividends paid - common		(281,149	)		(278,118	)	Dividends paid - common		(223,179	)		(187,278	)
	Dividends paid - preferred		(58,003	)		(46,966	)	Dividends paid - preferred		(40,635	)		(40,635	)
	Other, net		40,074			82,774		Other, net		2,145			15,661

	Net cash provided by financing activities		221,577			11,205,667		Net cash provided (used) by financing activities		173,469			(26,001	)

	Net decrease in cash and cash equivalents		(123,653	)		(149,291	)	Net decrease in cash and cash equivalents		(83,598	)		(22,499	)
	Cash and cash equivalents at beginning of period		1,373,357			1,672,934		Cash and cash equivalents at beginning of period		1,368,040			1,373,357

	Cash and cash equivalents at end of period	$	1,249,704			1,523,643		Cash and cash equivalents at end of period	$	1,284,442			1,350,858

Supplemental disclosure of cash flow information	Interest received during the period	$	2,234,476			2,147,236		Interest received during the period	$	1,947,027			1,478,848
	Interest paid during the period		234,989			185,377		Interest paid during the period		257,222			149,255
	Income taxes paid during the period		373,016			329,621		Income taxes paid during the period		105,361			225,107

Supplemental schedule of noncash investing and financing activities	Securitization of residential mortgage loans allocated to							Real estate acquired in settlement of loans	$	66,286			23,273
	Available-for-sale investment securities	$	51,481			110,971		Securitization of residential mortgage loans allocated to
	Capitalized servicing rights		528			1,429		Available-for-sale investment securities		13,923			36,645
	Real estate acquired in settlement of loans		35,018			35,422		Capitalized servicing rights		143			368


														Accumulated																			Accumulated
														other																			other
					Common			Additional						comprehensive										Common			Additional						comprehensive
	Preferred		Common		stock			paid-in			Retained			income						Preferred		Common		stock			paid-in			Retained			income			Treasury
In thousands, except per share	stock		stock		issuable			capital			earnings			(loss), net			Total			stock		stock		issuable			capital			earnings			(loss), net			stock			Total
2014
Balance - January 1, 2014	$	881,500		65,258		2,915			3,232,014			7,188,004			(64,159	)		11,305,532
Total comprehensive income		—		—		—			—			788,697			76,626			865,323
Preferred stock cash dividends		—		—		—			—			(55,560	)		—			(55,560	)
Issuance of Series E preferred stock		350,000		—		—			(3,500	)		—			—			346,500
Exercise of 395,905 Series A stock warrants into 156,521 shares of common stock		—		78		—			(78	)		—			—			—
Stock-based compensation plans:
Compensation expense, net		—		128		—			34,117			—			—			34,245
Exercises of stock options, net		—		535		—			102,695			—			—			103,230
Stock purchase plan		—		43		—			9,545			—			—			9,588
Directors’ stock plan		—		5		—			1,266			—			—			1,271
Deferred compensation plans, net, including dividend equivalents		—		3		(325	)		335			(87	)		—			(74	)
Other		—		—		—			1,320			—			—			1,320
Common stock cash dividends - $2.10 per share		—		—		—			—			(278,059	)		—			(278,059	)

Balance - September 30, 2014	$	1,231,500		66,050		2,590			3,377,714			7,642,995			12,467			12,333,316

2015
Balance - January 1, 2015	$	1,231,500		66,157		2,608			3,409,506			7,807,119			(180,994	)		12,335,896		$	1,231,500		66,157		2,608			3,409,506			7,807,119			(180,994	)		—			12,335,896
Total comprehensive income		—		—		—			—			808,702			17,521			826,223			—		—		—			—			528,301			(36,508	)		—			491,793
Preferred stock cash dividends		—		—		—			—			(60,953	)		—			(60,953	)		—		—		—			—			(40,635	)		—			—			(40,635	)
Exercise of 2,315 Series A stock warrants into 904 shares of common stock		—		1		—			(1	)		—			—			—			—		1		—			(1	)		—			—			—			—
Stock-based compensation plans:
Compensation expense, net		—		143		—			31,416			—			—			31,559			—		144		—			20,966			—			—			—			21,110
Exercises of stock options, net		—		285		—			57,133			—			—			57,418			—		179		—			34,937			—			—			—			35,116
Stock purchase plan		—		45		—			10,301			—			—			10,346			—		45		—			10,301			—			—			—			10,346
Directors’ stock plan		—		4		—			1,346			—			—			1,350			—		3		—			827			—			—			—			830
Deferred compensation plans, net, including dividend equivalents		—		2		(267	)		290			(76	)		—			(51	)		—		2		(276	)		274			(51	)		—			—			(51	)
Other		—		—		—			1,191			—			—			1,191			—		—		—			801			—			—			—			801
Common stock cash dividends - $2.10 per share		—		—		—			—			(281,045	)		—			(281,045	)
Common stock cash dividends - $1.40 per share																					—		—		—			—			(187,209	)		—			—			(187,209	)

Balance - September 30, 2015	$	1,231,500		66,637		2,341			3,511,182			8,273,747			(163,473	)		12,921,934
Balance - June 30, 2015																				$	1,231,500		66,531		2,332			3,477,611			8,107,525			(217,502	)		—			12,667,997

2016
Balance - January 1, 2016																				$	1,231,500		79,782		2,364			6,680,768			8,430,502			(251,627	)		—			16,173,289
Total comprehensive income																					—		—		—			—			634,559			150,606			—			785,165
Preferred stock cash dividends																					—		—		—			—			(40,635	)		—			—			(40,635	)
Exercise of 5,320 Series A stock warrants into 1,983 shares of common stock																					—		—		—			(223	)		—			—			223			—
Purchases of treasury stock																					—		—		—			—			—			—			(254,000	)		(254,000	)
Stock-based compensation plans:
Compensation expense, net																					—		175		—			6,746			—			—			5,880			12,801
Exercises of stock options, net																					—		18		—			1,642			—			—			3,902			5,562
Stock purchase plan																					—		—		—			275			—			—			10,319			10,594
Directors’ stock plan																					—		2		—			500			—			—			551			1,053
Deferred compensation plans, net, including dividend equivalents																					—		2		(163	)		232			(47	)		—			4			28
Other																					—		—		—			731			—			—			—			731
Common stock cash dividends - $1.40 per share																					—		—		—			—			(223,074	)		—			—			(223,074	)

Balance - June 30, 2016																				$	1,231,500		79,979		2,201			6,690,671			8,801,305			(101,021	)		(233,121	)		16,471,514

The consolidated financial statements of M&T Bank Corporation (“M&T”) and subsidiaries (“the Company”) were compiled in accordance with generally accepted accounting principles (“GAAP”) using the accounting policies set forth in note 1 of Notes to Financial Statements included in the 2014 Annual Report. Additionally, effective January 1, 2015 the Company made an accounting policy election in accordance with amended accounting guidance issued by the Financial Accounting Standards Board in January 2014 to account for investments in qualified affordable housing projects using the proportional amortization method. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. The adoption of the amended guidance did not have a significant effect on the Company’s financial position or results of operations, but did result in the restatement of the consolidated statement of incomeForm 10-K for the ~~three months and nine months~~year ended September 30, 2014 to remove $14 million and $39 million, respectively, of losses associated with qualified affordable housing projects from “other costs of operations” and include the amortization of the initial cost of the investment in income tax expense. The cumulative effect adjustment associated with adopting the amended guidance was not material as of the beginning of any period presented in these consolidated financial statements. See note 11 for information regarding the Company’s investments in qualified affordable housing projects.

December 31, 2015 (“2015 Annual Report”). In the opinion of management, all adjustments necessary for a fair presentation have been made and ~~except as described above,~~ were all of a normal recurring nature.

On ~~August 27, 2012,~~November 1, 2015, M&T ~~announced that it had entered into a definitive agreement with~~completed the acquisition of Hudson City Bancorp, Inc. (“Hudson City”), headquartered in Paramus, New ~~Jersey, under which~~Jersey. On that date, Hudson City ~~would be acquired by M&T. Pursuant to~~Savings Bank, the ~~terms of the agreement, Hudson City shareholders will receive consideration for each common share~~banking subsidiary of Hudson City, ~~in an amount valued at ..08403 of an~~was merged into M&T ~~share~~Bank, a wholly owned banking subsidiary of M&T. Hudson City Savings Bank operated 135 banking offices in New Jersey, Connecticut and New York at the date of acquisition. The results of operations acquired in the ~~form~~Hudson City transaction have been included in the Company’s financial results since November 1, 2015. After application of ~~either M&T common stock or cash, based on~~ the election, ~~of each Hudson City shareholder, subject to~~allocation and proration ~~as specified~~procedures contained in the merger agreement ~~(which provides for an aggregate split~~with Hudson City, M&T paid $2.1 billion in cash and issued 25,953,950 shares of ~~total consideration of 60%~~M&T common stock in exchange for Hudson City shares outstanding at the time of the acquisition. The purchase price was approximately $5.2 billion based on the cash paid to Hudson City shareholders, the fair value of M&T stock exchanged and ~~40% cash). As~~the estimated fair value of ~~September 30, 2015, total consideration to be paid was valued at approximately $5.3 billion.~~Hudson City stock awards converted into M&T stock awards. The acquisition of Hudson City expanded the Company’s presence in New Jersey, Connecticut and New York, and management expects that the Company will benefit from greater geographic diversity and the advantages of scale associated with a larger company.

The ~~merger~~Hudson City transaction has ~~received~~been accounted for using the ~~approval~~acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. The consideration paid for Hudson City’s common equity and the amounts of identifiable assets acquired and liabilities assumed as of the common shareholders of M&T and Hudson City. M&T announced on September 30, 2015 that it had received the approval of the Federal Reserve to acquire Hudson City and on October 9, 2015 M&T received approval of the proposed acquisition from the New York State Department of Financial Services. The transaction is expected to be completed on or about November 1, 2015 pending the satisfaction of customary closing conditions. At September 30, 2015, Hudson City had $35.1 billion of assets, including $19.2 billion of loans and $8.3 billion of investment securities, and $30.3 billion of liabilities, including $17.9 billion of deposits.date were as follows:

In early November 2015, the Company sold $5.8 billion of investment securities obtained in the acquisition and repaid $10.6 billion of borrowings assumed in the transaction. In connection with the acquisition, the Company recorded approximately $1.1 billion of goodwill and $132 million of core deposit intangible. The core deposit intangible asset is being amortized over a period of 7 years using an accelerated method.

The following table presents certain pro forma information as if Hudson City had been included in the Company’s results of operations in the three-month and six-month periods ended June 30, 2015. These results combine the historical results of Hudson City into the Company’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place as indicated. In particular, no adjustments have been made to eliminate the impact of gains on securities transactions of $67 million during the three months ended June 30, 2015 and $74 million during the six months ended June 30, 2015 that may not have been recognized had the investment securities been recorded at fair value. Additionally, the Company expects to achieve operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts that follow.

In connection with the Hudson City acquisition, the Company incurred merger-related expenses related to systems conversions and other costs of integrating and conforming acquired operations with and into the Company. Those expenses consisted largely of professional services and other temporary help fees associated with preparing for systems conversions and/or integration of operations; costs related to termination of existing contractual arrangements for various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; severance (for former Hudson City employees); travel costs; and other costs of completing the transaction and commencing operations in new markets and offices. The Company does not expect additional merger-related expenses in 2016.

A summary of merger-related expenses included in the consolidated statement of income follows:

There were no merger-related expenses during the three-month and six-month periods ended June 30, 2015.

The amortized cost and estimated fair value of investment securities were as follows:


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	(in thousands)								(in thousands)
September 30, 2015
June 30, 2016
Investment securities available for sale:
U.S. Treasury and federal agencies	$	197,764		1,630		—	$	199,394	$	397,825		2,537		14	$	400,348
Obligations of states and political subdivisions		6,174		170		48		6,296		5,158		131		48		5,241
Mortgage-backed securities:
Government issued or guaranteed		10,504,756		228,333		19,041		10,714,048		10,944,676		323,828		1,226		11,267,278
Privately issued		82		2		2		82		58		—		1		57
Collateralized debt obligations		28,467		22,465		1,056		49,876		28,255		17,466		2,416		43,305
Other debt securities		136,793		1,650		17,975		120,468		135,170		1,271		21,670		114,771
Equity securities		49,198		20,360		213		69,345		67,687		20,448		161		87,974

		10,923,234		274,610		38,335		11,159,509		11,578,829		365,681		25,536		11,918,974

Investment securities held to maturity:
Obligations of states and political subdivisions		125,251		1,395		347		126,299		84,614		712		240		85,086
Mortgage-backed securities:
Government issued or guaranteed		2,679,546		69,486		4,787		2,744,245		2,315,012		88,526		350		2,403,188
Privately issued		186,883		1,628		40,174		148,337		168,784		927		40,737		128,974
Other debt securities		6,806		—		—		6,806		6,011		—		—		6,011

		2,998,486		72,509		45,308		3,025,687		2,574,421		90,165		41,327		2,623,259

Other securities		336,544		—		—		336,544		469,689		—		—		469,689

Total	$	14,258,264		347,119		83,643	$	14,521,740	$	14,622,939		455,846		66,863	$	15,011,922


December 31, 2015
Investment securities available for sale:
U.S. Treasury and federal agencies									$	299,890		294		187	$	299,997
Obligations of states and political subdivisions										5,924		146		42		6,028
Mortgage-backed securities:
Government issued or guaranteed										11,592,959		142,370		48,701		11,686,628
Privately issued										74		2		2		74
Collateralized debt obligations										28,438		20,143		1,188		47,393
Other debt securities										137,556		1,514		20,190		118,880
Equity securities										73,795		10,230		354		83,671

										12,138,636		174,699		70,664		12,242,671

Investment securities held to maturity:
Obligations of states and political subdivisions										118,431		1,003		421		119,013
Mortgage-backed securities:
Government issued or guaranteed										2,553,612		50,936		7,817		2,596,731
Privately issued										181,091		2,104		41,367		141,828
Other debt securities										6,575		—		—		6,575

										2,859,709		54,043		49,605		2,864,147

Other securities										554,059		—		—		554,059

Total									$	15,552,404		228,742		120,269	$	15,660,877

There were no significant gross realized gains or losses from ~~the sale~~sales of investment securities for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

At ~~September~~June 30, ~~2015,~~2016, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:


					Amortized cost		Estimated fair value
	Amortized cost		Estimated fair value		(in thousands)
	(in thousands)
Debt securities available for sale:
Due in one year or less	$	8,282		8,330	$	6,147		6,176
Due after one year through five years		197,796		199,712		399,312		402,100
Due after five years through ten years		3,296		3,495		3,425		3,822
Due after ten years		159,824		164,497		157,524		151,567

		369,198		376,034		566,408		563,665
Mortgage-backed securities available for sale		10,504,838		10,714,130		10,944,734		11,267,335

	$	10,874,036		11,090,164	$	11,511,142		11,831,000


Debt securities held to maturity:
Due in one year or less	$	30,523		30,706	$	28,259		28,430
Due after one year through five years		74,511		75,150		51,414		51,611
Due after five years through ten years		20,217		20,443		4,941		5,045
Due after ten years		6,806		6,806		6,011		6,011

		132,057		133,105		90,625		91,097
Mortgage-backed securities held to maturity		2,866,429		2,892,582		2,483,796		2,532,162

	$	2,998,486		3,025,687	$	2,574,421		2,623,259

A summary of investment securities that as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 had been in a continuous unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss position for twelve months or longer follows:


	Less than 12 months					12 months or more					Less than 12 months					12 months or more
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
	(in thousands)										(in thousands)
September 30, 2015
June 30, 2016
Investment securities available for sale:
U.S. Treasury and federal agencies											$	7,831		(14	)		—		—
Obligations of states and political subdivisions	$	516		(2	)		1,405		(46	)		—		—			1,703		(48	)
Mortgage-backed securities:
Government issued or guaranteed		1,942,135		(18,925	)		5,503		(116	)		245,977		(1,123	)		7,590		(103	)
Privately issued		—		—			48		(2	)		—		—			40		(1	)
Collateralized debt obligations		5,733		(324	)		2,155		(732	)		2,883		(1,078	)		4,285		(1,338	)
Other debt securities		19,335		(458	)		86,813		(17,517	)		11,275		(409	)		91,997		(21,261	)
Equity securities		—		—			212		(213	)		—		—			140		(161	)

												267,966		(2,624	)		105,755		(22,912	)


Investment securities held to maturity:
Obligations of states and political subdivisions												15,813		(89	)		12,057		(151	)
Mortgage-backed securities:
Government issued or guaranteed												—		—			125,116		(350	)
Privately issued												17,436		(3,075	)		94,454		(37,662	)


												33,249		(3,164	)		231,627		(38,163	)

Total											$	301,215		(5,788	)		337,382		(61,075	)


December 31, 2015
Investment securities available for sale:
U.S. Treasury and federal agencies											$	147,508		(187	)		—		—
Obligations of states and political subdivisions												865		(2	)		1,335		(40	)
Mortgage-backed securities:
Government issued or guaranteed												4,061,899		(48,534	)		7,216		(167	)
Privately issued												—		—			43		(2	)
Collateralized debt obligations												5,711		(335	)		2,063		(853	)
Other debt securities												12,935		(462	)		93,344		(19,728	)
Equity securities												18,073		(207	)		153		(147	)

												4,246,991		(49,727	)		104,154		(20,937	)
		1,967,719		(19,709	)		96,136		(18,626	)

Investment securities held to maturity:
Obligations of states and political subdivisions		37,336		(292	)		4,096		(55	)		42,913		(335	)		5,853		(86	)
Mortgage-backed securities:
Government issued or guaranteed		16,619		(129	)		240,730		(4,658	)		459,983		(1,801	)		228,867		(6,016	)
Privately issued		—		—			118,840		(40,174	)		—		—			112,155		(41,367	)

		53,955		(421	)		363,666		(44,887	)		502,896		(2,136	)		346,875		(47,469	)

Total	$	2,021,674		(20,130	)		459,802		(63,513	)	$	4,749,887		(51,863	)		451,029		(68,406	)

December 31, 2014
Investment securities available for sale:
U.S. Treasury and federal agencies	$	6,505		(5	)		—		—
Obligations of states and political subdivisions		1,785		(52	)		121		(1	)
Mortgage-backed securities:
Government issued or guaranteed		39,001		(186	)		5,555		(151	)
Privately issued		—		—			65		(3	)
Collateralized debt obligations		2,108		(696	)		5,512		(337	)
Other debt securities		14,017		(556	)		92,661		(18,092	)
Equity securities		2,138		(1,164	)		—		—

		65,554		(2,659	)		103,914		(18,584	)

Investment securities held to maturity:
Obligations of states and political subdivisions		29,886		(184	)		268		(5	)
Mortgage-backed securities:
Government issued or guaranteed		137,413		(361	)		446,780		(6,639	)
Privately issued		—		—			127,512		(44,576	)

		167,299		(545	)		574,560		(51,220	)

Total	$	232,853		(3,204	)		678,474		(69,804	)

The Company owned ~~320~~428 individual investment securities with aggregate gross unrealized losses of ~~$84~~$67 million at ~~September~~June 30, ~~2015.~~2016. Based on a review of each of the securities in the investment securities portfolio at ~~September~~June 30, ~~2015,~~2016, the Company concluded that it expected to recover the amortized cost basis of its investment. As of ~~September~~June 30, ~~2015,~~2016, 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 ~~September~~June 30, ~~2015,~~2016, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the ~~$337~~$470 million of cost method investment securities.

The outstanding principal balance and the carrying amount of loans acquired ~~loans~~at a discount that were recorded at fair value at the acquisition date ~~and~~that is included in the consolidated balance sheet ~~follow:~~were as follows:


	September 30,		December 31,			June 30, 2016		December 31, 2015
	2015		2014			(in thousands)
	(in thousands)
Outstanding principal balance	$	2,410,454		3,070,268		$	2,735,024		3,122,935
Carrying amount:
Commercial, financial, leasing, etc.		103,583		247,820			68,648		78,847
Commercial real estate		728,376		961,828			548,485		644,284
Residential real estate		385,885		453,360	��		903,891		1,016,129
Consumer		812,117		933,537			650,456		725,807

	$	2,029,961		2,596,545		$	2,171,480		2,465,067

Purchased impaired loans included in the table above totaled ~~$149~~$662 million at ~~September~~June 30, ~~2015~~2016 and ~~$198~~$768 million at December 31, ~~2014,~~2015, representing less than 1% of the Company’s assets as of each date. A summary of changes in the accretable yield for loans acquired ~~loans~~at a discount for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015 follows:


	Three months ended September 30												Three months ended June 30
	2015						2014						2016						2015
	Purchased			Other			Purchased			Other			Purchased impaired			Other acquired			Purchased impaired			Other acquired
	impaired			acquired			impaired			acquired			(in thousands)
	(in thousands)
Balance at beginning of period	$	77,624			344,989		$	26,082			450,970		$	171,185			269,017		$	71,422			357,895
Interest income		(5,865	)		(37,396	)		(4,149	)		(39,019	)		(14,060	)		(32,898	)		(5,772	)		(40,024	)
Reclassifications from nonaccretable balance		47			769			129			9,673
Reclassifications from nonaccretable balance, net														4,898			2,933			11,974			26,840
Other (a)		—			4,697			—			1,870			—			6,143			—			278

Balance at end of period	$	71,806			313,059		$	22,062			423,494		$	162,023			245,195		$	77,624			344,989


	Nine months ended September 30
	2015						2014
	Purchased			Other			Purchased			Other
	impaired			acquired			impaired			acquired
	(in thousands)
Balance at beginning of period	$	76,518			397,379		$	37,230			538,633
Interest income		(16,843	)		(118,697	)		(15,583	)		(135,105	)
Reclassifications from nonaccretable balance		12,131			27,792			415			10,448
Other (a)		—			6,585			—			9,518

Balance at end of period	$	71,806			313,059		$	22,062			423,494

A summary of current, past due and nonaccrual loans as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 follows:


			30-89 Days past due			90 Days or more past due and accruing				Purchased impaired (b)			Nonaccrual			Total				Current				30-89 Days past due				Accruing loans past due 90 days or more(a)			Accruing loans acquired at a discount past due 90 days or more(b)			Purchased impaired(c)			Nonaccrual			Total
	Current				Non- acquired			Acquired (a)
	(in thousands)
September 30, 2015			30-89 Days past due
June 30, 2016																				(in thousands)
Commercial, financial, leasing, etc.	$	19,965,307		29,451			5,882		3,477	Purchased impaired (b)		4,645	Nonaccrual			Total			224,415			$	20,233,177			$	21,157,606			63,069			6,665			452			766			240,684	$	21,469,242
Real estate:
Commercial		23,184,906		105,140			21,629		17,906		45,523			176,491			23,551,595				23,390,039				125,657				16,487			13,935			36,111			172,670			23,754,899
Residential builder and developer		1,479,659		15,951			—		7,488		65,102			46,022			1,614,222				1,819,984				14,892				—			4,847			19,972			24,263			1,883,958
Other commercial construction		3,493,349		28,433			1,373		1,769		17,484			12,312			3,554,720				4,993,493				41,297				—			280			16,009			21,294			5,072,373
Residential		7,323,813		206,044			194,280		16,295		14,392			153,354			7,908,178				19,208,724				470,646				270,845			13,087			433,192			202,949			20,599,443
Residential Alt-A		226,871		11,662			—		—		—			64,351			302,884
Residential-limited documentation																					3,584,715				112,743				—			—			154,320			79,028			3,930,806
Consumer:
Home equity lines and loans		5,710,632		38,506			—		15,454		2,275			78,126			5,844,993				5,658,417				34,735				—			14,608			1,689			86,870			5,796,319
Automobile		2,319,556		36,867			—		53		—			13,892			2,370,368				2,669,708				39,139				—			1			—			12,390			2,721,238
Other		3,084,080		31,210			8,301		18,385		—			18,135			3,160,111				3,232,679				26,501				4,452			21,381			—			8,707			3,293,720

Total	$	66,788,173		503,264			231,465		80,827		149,421			787,098		$	68,540,248			$	85,715,365				928,679				298,449			68,591			662,059			848,855		$	88,521,998


	Current		30-89 Days past due			90 Days or more past due and accruing				Purchased impaired (b)			Nonaccrual			Total
	Current				Non- acquired			Acquired (a)
	(in thousands)
December 31, 2014			30-89 Days past due							Purchased impaired (b)						Total
Commercial, financial, leasing, etc.	$	19,228,265		37,246			1,805		6,231		10,300		Nonaccrual		177,445		$	19,461,292
Real estate:
Commercial		22,208,491		118,704			22,170		14,662		51,312			141,600			22,556,939
Residential builder and developer		1,273,607		11,827			492		9,350		98,347			71,517			1,465,140
Other commercial construction		3,484,932		17,678			—		—		17,181			25,699			3,545,490
Residential		7,640,368		226,932			216,489		35,726		18,223			180,275			8,318,013
Residential Alt-A		249,810		11,774			—		—		—			77,704			339,288
Consumer:
Home equity lines and loans		5,859,378		42,945			—		27,896		2,374			89,291			6,021,884
Automobile		1,931,138		30,500			—		133		—			17,578			1,979,349
Other		2,909,791		33,295			4,064		16,369		—			18,042			2,981,561

Total	$	64,785,780		530,901			245,020		110,367		197,737			799,151		$	66,668,956

One-to-four family residential mortgage loans held for sale were ~~$422~~$374 million and ~~$435~~$353 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Commercial mortgage loans held for sale were ~~$71~~$228 million at ~~September~~June 30, ~~2015~~2016 and ~~$308~~$39 million at December 31, ~~2014.~~2015.

Changes in the allowance for credit losses for the three months ended ~~September~~June 30, ~~2015~~2016 were as follows:


																			Commercial, Financial, Leasing, etc.			Real Estate
	Commercial, Financial, Leasing, etc.			Real Estate															Commercial, Financial, Leasing, etc.			Commercial			Residential			Consumer			Unallocated		Total
	Commercial, Financial, Leasing, etc.			Commercial			Residential			Consumer			Unallocated			Total			(in thousands)
	(in thousands)
Beginning balance	$	286,750			311,294			60,294			194,238			77,411		$	929,987		$	323,866			331,985			68,371			160,819			77,711	$	962,752
Provision for credit losses		21,507			1,879			(3,155	)		24,448			(679	)		44,000			(10,919	)		15,823			4,404			22,681			11		32,000
Net charge-offs
Charge-offs		(26,912	)		(2,203	)		(3,268	)		(20,758	)		—			(53,141	)		(7,487	)		(733	)		(5,090	)		(33,560	)		—		(46,870	)
Recoveries		5,322			2,119			1,125			4,386			—			12,952			10,619			2,599			1,975			7,421			—		22,614

Net charge-offs		(21,590	)		(84	)		(2,143	)		(16,372	)		—			(40,189	)		3,132			1,866			(3,115	)		(26,139	)		—		(24,256	)

Ending balance	$	286,667			313,089			54,996			202,314			76,732		$	933,798		$	316,079			349,674			69,660			157,361			77,722	$	970,496

Changes in the allowance for credit losses for the three months ended ~~September~~June 30, ~~2014~~2015 were as follows:


																			Commercial, Financial, Leasing, etc.			Real Estate
	Commercial, Financial, Leasing, etc.			Real Estate															Commercial, Financial, Leasing, etc.			Commercial			Residential			Consumer			Unallocated		Total
	Commercial, Financial, Leasing, etc.			Commercial			Residential			Consumer			Unallocated			Total			(in thousands)
	(in thousands)
Beginning balance	$	292,251			311,254			72,404			165,871			75,886		$	917,666		$	281,069			317,375			60,741			186,052			76,136	$	921,373
Provision for credit losses		2,373			8,046			(3,187	)		21,815			(47	)		29,000			9,737			(3,652	)		1,624			21,016			1,275		30,000
Net charge-offs
Charge-offs		(15,921	)		(1,666	)		(4,193	)		(21,312	)		—			(43,092	)		(7,728	)		(3,470	)		(3,309	)		(18,455	)		—		(32,962	)
Recoveries		7,849			1,267			2,498			3,445			—			15,059			3,672			1,041			1,238			5,625			—		11,576

Net charge-offs		(8,072	)		(399	)		(1,695	)		(17,867	)		—			(28,033	)		(4,056	)		(2,429	)		(2,071	)		(12,830	)		—		(21,386	)

Ending balance	$	286,552			318,901			67,522			169,819			75,839		$	918,633		$	286,750			311,294			60,294			194,238			77,411	$	929,987

Changes in the allowance for credit losses for the ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 were as follows:

Changes in the allowance for credit losses for the ~~nine~~six months ended ~~September~~June 30, ~~2014~~2015 were as follows:


																		Commercial, Financial, Leasing, etc.			Real Estate
	Commercial, Financial, Leasing, etc.			Real Estate														Commercial, Financial, Leasing, etc.			Commercial			Residential			Consumer			Unallocated		Total
	Commercial, Financial, Leasing, etc.			Commercial			Residential			Consumer			Unallocated		Total			(in thousands)
	(in thousands)
Beginning balance	$	273,383			324,978			78,656			164,644			75,015	$	916,676		$	288,038			307,927			61,910			186,033			75,654	$	919,562
Provision for credit losses		40,527			(4,067	)		(916	)		54,632			824		91,000			11,179			11,890			2,584			40,590			1,757		68,000
Net charge-offs
Charge-offs		(44,872	)		(7,966	)		(17,124	)		(62,407	)		—		(132,369	)		(20,078	)		(10,149	)		(6,427	)		(43,784	)		—		(80,438	)
Recoveries		17,514			5,956			6,906			12,950			—		43,326			7,611			1,626			2,227			11,399			—		22,863

Net charge-offs		(27,358	)		(2,010	)		(10,218	)		(49,457	)		—		(89,043	)		(12,467	)		(8,523	)		(4,200	)		(32,385	)		—		(57,575	)

Ending balance	$	286,552			318,901			67,522			169,819			75,839	$	918,633		$	286,750			311,294			60,294			194,238			77,411	$	929,987

Despite the above allocation, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type.

In establishing the allowance for credit losses, the Company estimates losses attributable to specific troubled credits identified through both normal and detailed or intensified credit review processes and also estimates losses inherent in other loans and leases on a collective basis. For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type. The amounts of loss components in the Company’s loan and lease portfolios are determined through a loan-by-loan analysis of larger balance commercial loans and commercial real estate loans that are in nonaccrual status and by applying loss factors to groups of loan balances based on loan type and management’s classification of such loans under the Company’s loan grading system. Measurement of the specific loss components is typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to pay. In determining the allowance for credit losses, the Company utilizes a loan grading system which is applied to commercial and commercial real estate credits on an individual loan basis. Loan officers are responsible for continually assigning grades to these loans based on standards outlined in the Company’s Credit Policy. Internal loan grades are also monitored by the Company’s loan review department to ensure consistency and strict adherence to the prescribed standards. Loan grades are assigned loss component factors that reflect the Company’s loss estimate for each group of loans and leases. Factors considered in assigning loan grades and loss component factors include borrower-specific information related to expected future cash flows and operating results, collateral values, geographic location, financial condition and performance, payment status, and other information; levels of and trends in portfolio charge-offs and recoveries; levels of and trends in portfolio delinquencies and impaired loans; changes in the risk profile of specific portfolios; trends in volume and terms of loans; effects of changes in credit concentrations; and observed trends and practices in the banking industry. As updated appraisals are obtained on individual loans or other events in the market place indicate that collateral values have significantly changed, individual loan grades are adjusted as appropriate. Changes in other factors cited may also lead to loan grade changes at any time. Except for consumer ~~loans~~ and residential real estate loans that are considered smaller balance homogenous loans and acquired loans that are evaluated on an aggregated basis, the Company considers a loan to be impaired for purposes of applying GAAP when, based on current information and events, it is probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days. Regardless of loan type, the Company considers a loan to be impaired if it qualifies as a troubled debt restructuring. Modified loans, including smaller balance homogenous loans, that are considered to be troubled

debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows.

The following tables provide information with respect to loans and leases that were considered impaired ~~follows.~~as of June 30, 2016 and December 31, 2015 and for the three-month and six-month periods ended June 30, 2016 and 2015:


	September 30, 2015						December 31, 2014						June 30, 2016						December 31, 2015
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(in thousands)												(in thousands)
With an allowance recorded:
Commercial, financial, leasing, etc.	$	144,051		166,877		35,195		132,340		165,146		31,779	$	196,990		219,662		50,010		179,037		195,821		44,752
Real estate:
Commercial		105,561		122,369		18,932		83,955		96,209		14,121		79,748		89,051		16,562		85,974		95,855		18,764
Residential builder and developer		6,544		10,276		788		17,632		22,044		805		6,854		7,788		581		3,316		5,101		196
Other commercial construction		2,445		3,991		391		5,480		6,484		900		3,312		3,731		1,223		3,548		3,843		348
Residential		83,349		101,367		4,775		88,970		107,343		4,296		77,975		96,157		3,337		79,558		96,751		4,727
Residential Alt-A		93,168		107,075		8,500		101,137		114,565		11,000
Residential-limited documentation														85,201		98,607		6,700		90,356		104,251		8,000
Consumer:
Home equity lines and loans		23,257		24,239		3,541		19,771		20,806		6,213		40,004		40,914		7,421		25,220		26,195		3,777
Automobile		23,985		23,985		5,118		30,317		30,317		8,070		19,137		19,137		4,022		22,525		22,525		4,709
Other		18,870		18,870		5,486		18,973		18,973		5,459		4,426		4,426		940		17,620		17,620		4,820

		501,230		579,049		82,726		498,575		581,887		82,643		513,647		579,473		90,796		507,154		567,962		90,093

With no related allowance recorded:
Commercial, financial, leasing, etc.		111,023		133,100		—		73,978		81,493		—		74,409		83,632		—		93,190		110,735		—
Real estate:
Commercial		77,147		84,677		—		66,777		78,943		—		101,949		118,540		—		101,340		116,230		—
Residential builder and developer		42,800		68,906		—		58,820		96,722		—		21,619		30,837		—		27,651		47,246		—
Other commercial construction		10,307		28,480		—		20,738		41,035		—		18,334		37,278		—		13,221		31,477		—
Residential		16,232		26,626		—		16,815		26,750		—		18,945		27,933		—		19,621		30,940		—
Residential Alt-A		20,891		35,836		—		26,752		46,964		—
Residential-limited documentation														17,790		29,972		—		18,414		31,113		—

														253,046		328,192		—		273,437		367,741		—
		278,400		377,625		—		263,880		371,907		—

Total:
Commercial, financial, leasing, etc.		255,074		299,977		35,195		206,318		246,639		31,779		271,399		303,294		50,010		272,227		306,556		44,752
Real estate:
Commercial		182,708		207,046		18,932		150,732		175,152		14,121		181,697		207,591		16,562		187,314		212,085		18,764
Residential builder and developer		49,344		79,182		788		76,452		118,766		805		28,473		38,625		581		30,967		52,347		196
Other commercial construction		12,752		32,471		391		26,218		47,519		900		21,646		41,009		1,223		16,769		35,320		348
Residential		99,581		127,993		4,775		105,785		134,093		4,296		96,920		124,090		3,337		99,179		127,691		4,727
Residential Alt-A		114,059		142,911		8,500		127,889		161,529		11,000
Residential-limited documentation														102,991		128,579		6,700		108,770		135,364		8,000
Consumer:
Home equity lines and loans		23,257		24,239		3,541		19,771		20,806		6,213		40,004		40,914		7,421		25,220		26,195		3,777
Automobile		23,985		23,985		5,118		30,317		30,317		8,070		19,137		19,137		4,022		22,525		22,525		4,709
Other		18,870		18,870		5,486		18,973		18,973		5,459		4,426		4,426		940		17,620		17,620		4,820

Total	$	779,630		956,674		82,726		762,455		953,794		82,643	$	766,693		907,665		90,796		780,591		935,703		90,093

In determining the allowance for credit losses, residential real estate loans and consumer loans are generally evaluated collectively after considering such factors as payment performance and recent loss experience and trends, which are mainly driven by current collateral values in the market place as well as the amount of loan defaults. Loss rates on such loans are determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term forecasted loss estimates developed by the Company’s Credit Department. In arriving at such forecasts, the Company considers the current estimated fair value of its collateral based on geographical adjustments for home price depreciation/appreciation and overall borrower repayment performance. With regard to collateral values, the realizability of such values by the Company contemplates repayment of any first lien position prior to recovering amounts on a second lien position. However, residential real estate loans and outstanding balances of home equity loans and lines of credit that are more than 150 days past due are generally evaluated for collectibility on a loan-by-loan basis giving consideration to estimated collateral values. The carrying value of residential real estate loans and home equity loans and lines of credit for which a partial charge-off has been recognized aggregated $59 million and $20 million, respectively, at September 30, 2015 and $63 million and $18 million,

respectively, at December 31, 2014. Residential real estate loans and home equity loans and lines of credit that were more than 150 days past due but did not require a partial charge-off because the net realizable value of the collateral exceeded the outstanding customer balance totaled $20 million and $28 million, respectively, at September 30, 2015 and $27 million and $28 million, respectively, at December 31, 2014.

In accordance with the previously described policies, the Company utilizes a loan grading system that is applied to all commercial loans and commercial real estate loans. Loan grades are utilized to differentiate risk within the portfolio and consider the expectations of default for each loan. Commercial loans and commercial real estate loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. All larger balance criticized commercial loans and commercial real estate loans are individually reviewed by centralized loan review personnel each quarter to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing. Smaller balance criticized loans are analyzed by business line risk management areas to ensure proper loan grade classification. Furthermore, criticized nonaccrual commercial loans and commercial real estate loans are considered impaired and, as a result, specific loss allowances on such loans are established within the allowance for credit losses to the extent appropriate in each individual instance. The following table summarizes the loan grades applied to the various classes of the Company’s commercial loans and commercial real estate loans.


			Real Estate								Real Estate
	Commercial,				Residential		Other		Commercial, Financial, Leasing, etc.		Commercial		Residential Builder and Developer		Other Commercial Construction
	Financial,				Builder and		Commercial		(in thousands)
	Leasing, etc.		Commercial		Developer		Construction
	(in thousands)
September 30, 2015
June 30, 2016
Pass	$	19,223,102		22,479,501		1,507,057		3,447,841	$	20,409,928		22,785,132		1,704,457		4,847,810
Criticized accrual		785,660		895,603		61,143		94,567		818,630		797,097		155,238		203,269
Criticized nonaccrual		224,415		176,491		46,022		12,312		240,684		172,670		24,263		21,294

Total	$	20,233,177		23,551,595		1,614,222		3,554,720	$	21,469,242		23,754,899		1,883,958		5,072,373

December 31, 2014

December 31, 2015
Pass	$	18,695,440		21,837,022		1,347,778		3,347,522	$	19,442,183		22,697,398		1,497,465		3,834,137
Criticized accrual		588,407		578,317		45,845		172,269		738,238		655,257		59,779		228,877
Criticized nonaccrual		177,445		141,600		71,517		25,699		241,917		179,606		28,429		16,363

Total	$	19,461,292		22,556,939		1,465,140		3,545,490	$	20,422,338		23,532,261		1,585,673		4,079,377

In determining the allowance for credit losses, residential real estate loans and consumer loans are generally evaluated collectively after considering such factors as payment performance and recent loss experience and trends, which are mainly driven by current collateral values in the market place as well as the amount of loan defaults. Loss rates on such loans are determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term forecasted loss estimates developed by the Company’s Credit Department. In arriving at such forecasts, the Company considers the current estimated fair value of its collateral based on geographical adjustments for home price depreciation/appreciation and overall borrower repayment performance. With regard to collateral values, the realizability of such values by the Company contemplates repayment of any first lien position prior to recovering amounts on a second lien position. However, residential real estate loans and outstanding balances of home equity loans and lines of credit that are more than 150 days past due are generally evaluated for collectibility on a loan-by-loan basis giving consideration to estimated collateral values. The carrying value of residential real estate loans and home equity loans and lines of credit for which a partial charge-off has been recognized aggregated $52 million and $31 million, respectively, at June 30, 2016 and $55 million and $21 million,

respectively, at December 31, 2015. Residential real estate loans and home equity loans and lines of credit that were more than 150 days past due but did not require a partial charge-off because the net realizable value of the collateral exceeded the outstanding customer balance totaled $18 million and $39 million, respectively, at June 30, 2016 and $20 million and $28 million, respectively, at December 31, 2015.

The Company also measures additional losses for purchased impaired loans when it is probable that the Company will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. The determination of the allocated portion of the allowance for credit losses is very subjective. Given that inherent subjectivity and potential imprecision involved in determining the allocated portion of the allowance for credit losses, the Company also provides an inherent unallocated portion of the allowance. The unallocated portion of the allowance is intended to recognize probable losses that are not otherwise identifiable and includes management’s subjective determination of amounts necessary to provide for the possible use of imprecise estimates in determining

the allocated portion of the allowance. Therefore, the level of the unallocated portion of the allowance is primarily reflective of the inherent imprecision in the various calculations used in determining the allocated portion of the allowance for credit losses. Other factors that could also lead to changes in the unallocated portion include the effects of expansion into new markets for which the Company does not have the same degree of familiarity and experience regarding portfolio performance in changing market conditions, the introduction of new loan and lease product types, and other risks associated with the Company’s loan portfolio that may not be specifically identifiable.

The allocation of the allowance for credit losses summarized on the basis of the Company’s impairment methodology was as follows:


	Commercial, Financial,		Real Estate								Commercial, Financial, Leasing, etc.			Real Estate
	Leasing, etc.		Commercial		Residential		Consumer		Total				Commercial			Residential		Consumer		Total
	(in thousands)										Commercial, Financial, Leasing, etc.	(in thousands)
September 30, 2015
June 30, 2016
Individually evaluated for impairment	$	35,195		19,743		13,275		14,145	$	82,358	$	50,010			18,292		10,037		12,383		$	90,722
Collectively evaluated for impairment		250,271		292,214		39,804		186,706		768,995		266,069			328,919		57,666		143,891			796,545
Purchased impaired		1,201		1,132		1,917		1,463		5,713		—			2,463		1,957		1,087			5,507

Allocated	$	286,667		313,089		54,996		202,314		857,066	$	316,079			349,674		69,660		157,361			892,774

Unallocated										76,732												77,722


Total									$	933,798											$	970,496

December 31, 2014

December 31, 2015
Individually evaluated for impairment	$	31,779		15,490		14,703		19,742	$	81,714	$	44,752			19,175		12,727		13,306		$	89,960
Collectively evaluated for impairment		251,607		291,244		45,061		165,140		753,052		255,615			307,000		57,624		163,511			783,750
Purchased impaired		4,652		1,193		2,146		1,151		9,142		37			656		1,887		1,503			4,083

Allocated	$	288,038		307,927		61,910		186,033		843,908	$	300,404			326,831		72,238		178,320			877,793

Unallocated										75,654												78,199


Total									$	919,562											$	955,992

The recorded investment in loans and leases summarized on the basis of the Company’s impairment methodology was as follows:


	Commercial, Financial,		Real Estate								Commercial, Financial, Leasing, etc.			Real Estate
	Leasing, etc.		Commercial		Residential		Consumer		Total				Commercial			Residential		Consumer		Total
	(in thousands)										Commercial, Financial, Leasing, etc.	(in thousands)
September 30, 2015
June 30, 2016
Individually evaluated for impairment	$	255,074		243,743		213,640		66,112	$	778,569	$	271,399			230,960		199,911		63,567		$	765,837
Collectively evaluated for impairment		19,973,458		28,348,685		7,983,030		11,307,085		67,612,258		21,197,077			30,408,178		23,742,826		11,746,021			87,094,102
Purchased impaired		4,645		128,109		14,392		2,275		149,421		766			72,092		587,512		1,689			662,059


Total	$	20,233,177		28,720,537		8,211,062		11,375,472	$	68,540,248	$	21,469,242			30,711,230		24,530,249		11,811,277		$	88,521,998

December 31, 2014

December 31, 2015
Individually evaluated for impairment	$	206,318		252,347		232,398		69,061	$	760,124	$	272,227			234,132		207,949		65,365		$	779,673
Collectively evaluated for impairment		19,244,674		27,148,382		8,406,680		10,911,359		65,711,095		20,148,209			28,863,130		25,398,037		11,532,121			85,941,497
Purchased impaired		10,300		166,840		18,223		2,374		197,737		1,902			100,049		664,117		2,261			768,329


Total	$	19,461,292		27,567,569		8,657,301		10,982,794	$	66,668,956	$	20,422,338			29,197,311		26,270,103		11,599,747		$	87,489,499

During the normal course of business, the Company modifies loans to maximize recovery efforts. If the borrower is experiencing financial difficulty and a concession is granted, the Company considers such modifications as troubled debt restructurings and classifies those loans as either nonaccrual loans or renegotiated loans. The types of concessions that the Company grants typically include principal deferrals and interest rate concessions, but may also include other types of concessions.

The tables ~~below~~that follow summarize the Company’s loan modification activities that were considered troubled debt restructurings for the three months ended ~~September~~June 30, ~~2015~~2016 and ~~2014:~~2015:

~~The tables below summarize the Company’s loan modification activities that were considered troubled debt restructurings for the nine months ended September 30, 2015 and 2014:~~


			Recorded investment				Financial effects of modification								Recorded investment				Financial effects of modification
Nine months ended September 30, 2015	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
Three months ended June 30, 2016													Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
	(dollars in thousands)														(dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		87	$	25,483	$	24,331	$	(1,152	)	$	—			33	$	45,733	$	45,657	$	(76	)	$	—
Interest rate reduction		1		99		99		—			(19	)
Other		2		8,991		8,883		(108	)		—
Combination of concession types		6		25,075		24,884		(191	)		(245	)		5		15,257		14,217		(1,040	)		—
Real estate:
Commercial
Principal deferral		37		47,005		45,569		(1,436	)		—			10		2,726		2,710		(16	)		—
Interest rate reduction														1		129		129		—			(25	)
Other														1		4,723		4,447		(276	)		—
Combination of concession types		6		3,238		3,242		4			(159	)		4		7,065		7,008		(57	)		(31	)
Residential builder and developer
Principal deferral		2		10,650		10,598		(52	)		—			3		23,905		22,958		(947	)		—
Other commercial construction
Principal deferral		3		296		390		94			—			1		250		250		—			—
Combination of concession types														1		124		124		—			—
Residential
Principal deferral		50		4,954		5,239		285			—			8		963		1,040		77			—
Other		1		267		267		—			—
Combination of concession types		22		2,551		2,795		244			(356	)		8		1,043		1,122		79			—
Residential Alt-A
Residential-limited documentation
Principal deferral		2		426		437		11			—			2		151		195		44			—
Combination of concession types		7		1,239		1,298		59			(121	)
Consumer:
Home equity lines and loans
Principal deferral		6		1,946		1,946		—			—			1		69		69		—			—
Combination of concession types		41		3,555		3,555		—			(424	)		31		3,737		3,737		—			(280	)
Automobile
Principal deferral		133		1,234		1,234		—			—			44		158		158		—			—
Interest rate reduction		7		137		137		—			(10	)
Other		38		134		134		—			—			22		17		17		—			—
Combination of concession types		42		693		693		—			(28	)
Other
Principal deferral		73		1,418		1,418		—			—			29		551		551		—			—
Other		12		113		113		—			—			3		20		20		—			—
Combination of concession types		35		384		384		—			(44	)		9		49		49		—			(5	)

Total		613	$	139,888	$	137,646	$	(2,242	)	$	(1,406	)		216	$	106,670	$	104,458	$	(2,212	)	$	(341	)

The tables below summarize the Company’s loan modification activities that were considered troubled debt restructurings for the six months ended June 30, 2016 and 2015:

Troubled debt restructurings are considered to be impaired loans and for purposes of establishing the allowance for credit losses are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Impairment of troubled debt restructurings that have subsequently defaulted may also be measured based on the loan’s observable market price or the fair value of collateral if the loan is collateral-dependent. Charge-offs may also be recognized on troubled debt restructurings that have subsequently defaulted. Loans that were modified as troubled debt restructurings during the twelve months ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015 and for which there was a subsequent payment default during the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, were not material.

Effective January 1, 2015, the Company adopted amended accounting and disclosure guidance for reclassification of residential real estate collateralized consumer mortgage loans upon foreclosure. The amended guidance clarifies that an in-substance repossession or foreclosure occurs and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The adoption resulted in an insignificant increase in other real estate owned. The amount of foreclosed residential real estate property held by the Company was ~~$43~~$158 million and ~~$44~~$172 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. ~~At September~~There were $305 million and $315 million at June 30, 2016 and December 31, 2015, ~~there were $151 million~~respectively, in loans secured by residential real estate that were in the process of foreclosure.

During February 2015, M&T Bank issued $1.5 billion of fixed rate senior notes pursuant to a Bank Note Program, of which $750 million have a 2.10% interest rate and mature in 2020 and $750 million have a 2.90% interest rate and mature in 2025.-26-

M&T had ~~$513~~$515 million of fixed and ~~floating~~variable rate junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) outstanding at ~~September~~June 30, ~~2015 which~~2016 that are held by various trusts that 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, beginning in 2016 none of the securities are includable in M&T’s Tier 1 regulatory capital, but do qualify for inclusion in Tier 2 regulatory capital.

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.~~trusts. The Capital Securities are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity dates (ranging from 2027 to 2033) of the Junior Subordinated Debentures or the earlier redemption of the Junior Subordinated Debentures in whole upon the occurrence of one or more events set forth in the indentures relating to the Capital Securities, and in whole or in part at any time after an optional redemption prior to contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated Debentures in whole or in part, subject to possible regulatory approval.

On April 15, 2015, M&T redeemed all of the issued and outstanding Capital Securities issued by M&T Capital Trust I, M&T Capital Trust II and M&T Capital Trust III, and the related Junior Subordinated Debentures held by those respective trusts. In the aggregate, $323 million of Junior Subordinated Debentures were redeemed. In February 2014, M&T redeemed all of the issued and outstanding 8.5% $350 million Capital Securities issued by M&T Capital Trust IV and the related Junior Subordinated Debentures held by M&T Capital Trust IV.

Also included in long-term borrowings are agreements to repurchase securities of ~~$1.4~~$1.9 billion at each of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015. The agreements reflect various repurchase dates ~~in 2016 and 2017 and~~through 2020, however, the contractual maturities of the underlying investment securities extend beyond such repurchase dates. The agreements are subject to legally enforceable master netting arrangements, however, the Company has not offset any amounts related to these agreements in its consolidated financial statements. The Company posted collateral consisting primarily of government guaranteed mortgage-backed securities of ~~$1.5~~$2.0 billion at each of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015.

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 ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 is presented below:


	Shares issued and outstanding		Carrying value		Shares issued and outstanding		Carrying value
	(dollars in thousands)				(dollars in thousands)
Series A (a)
Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $1,000 liquidation preference per share		230,000	$	230,000
Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share						230,000	$	230,000

Series C (a)
Fixed Rate Cumulative Perpetual Preferred Stock, Series C, $1,000 liquidation preference per share		151,500	$	151,500
Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share						151,500	$	151,500

Series D (b)
Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series D, $10,000 liquidation preference per share		50,000	$	500,000
Fixed Rate Non-cumulative Perpetual Preferred Stock, $10,000 liquidation preference per share						50,000	$	500,000

Series E (c)
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock Series E, $1,000 liquidation preference per share		350,000	$	350,000
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock $1,000 liquidation preference per share						350,000	$	350,000

In addition to the Series A warrants mentioned in (a) above, a warrant to purchase 95,383 shares of M&T common stock at $518.96 per share was outstanding at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015. The obligation under that warrant was assumed by M&T in an acquisition.

The Company provides defined benefit pension and other postretirement benefits (including health care and life insurance benefits) to qualified retired employees. Net periodic defined benefit cost for defined benefit plans consisted of the following:

Expense incurred in connection with the Company’s defined contribution pension and retirement savings plans totaled ~~$14,281,000~~$15,274,000 and ~~$13,558,000~~$13,346,000 for the three months ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and ~~$44,377,000~~$32,964,000 and ~~$41,963,000~~$30,096,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.


	Three months ended September 30						Nine months ended September 30						Three months ended June 30						Six months ended June 30
	2015			2014			2015			2014			2016			2015			2016			2015
	(in thousands, except per share)												(in thousands, except per share)
Income available to common shareholders:

Net income	$	280,401			275,344		$	808,702			788,697		$	336,031			286,688			634,559			528,301
Less: Preferred stock dividends (a)		(20,318	)		(20,443	)		(60,953	)		(55,560	)		(20,317	)		(20,317	)		(40,635	)		(40,635	)

Net income available to common equity		260,083			254,901			747,749			733,137			315,714			266,371			593,924			487,666
Less: Income attributable to unvested stock-based compensation awards		(2,746	)		(2,996	)		(8,122	)		(8,830	)		(2,746	)		(2,900	)		(5,227	)		(5,371	)


Net income available to common shareholders	$	257,337			251,905		$	739,627			724,307		$	312,968			263,471			588,697			482,295

Weighted-average shares outstanding:

Common shares outstanding (including common stock issuable) and unvested stock-based compensation awards		134,049			132,832			133,805			132,372			159,164			133,818			159,692			133,680
Less: Unvested stock-based compensation awards		(1,419	)		(1,567	)		(1,458	)		(1,590	)		(1,362	)		(1,462	)		(1,424	)		(1,477	)


Weighted-average shares outstanding		132,630			131,265			132,347			130,782			157,802			132,356			158,268			132,203

Basic earnings per common share	$	1.94			1.92		$	5.59			5.54		$	1.98			1.99			3.72			3.65


													Three months ended June 30						Six months ended June 30
	Three months ended September 30						Nine months ended September 30						2016			2015			2016			2015
	2015			2014			2015			2014			(in thousands, except per share)
	(in thousands, except per share)
Net income available to common equity	$	260,083			254,901		$	747,749			733,137		$	315,714			266,371			593,924			487,666

Less: Income attributable to unvested stock-based compensation awards		(2,737	)		(2,984	)		(8,093	)		(8,793	)		(2,740	)		(2,890	)		(5,217	)		(5,353	)


Net income available to common shareholders	$	257,346			251,917		$	739,656			724,344		$	312,974			263,481			588,707			482,313

Adjusted weighted-average shares outstanding:

Common and unvested stock-based compensation awards		134,049			132,832			133,805			132,372			159,164			133,818			159,692			133,680
Less: Unvested stock-based compensation awards		(1,419	)		(1,567	)		(1,458	)		(1,590	)		(1,362	)		(1,462	)		(1,424	)		(1,477	)
Plus: Incremental shares from assumed conversion of stock-based compensation awards and warrants to purchase common stock		746			863			742			916			539			760			493			741


Adjusted weighted-average shares outstanding		133,376			132,128			133,089			131,698			158,341			133,116			158,761			132,944

Diluted earnings per common share	$	1.93			1.91		$	5.56			5.50		$	1.98			1.98			3.71			3.63

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 approximately ~~1.5~~2.7 million and ~~1.7~~1.6 million common shares during the three-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and ~~1.9~~2.8 million and 2.1 million common shares during the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.

The following ~~table displays~~tables display the components of other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) to net income:


	Investment Securities																				Investment securities
	With OTTI (a)		All other			Defined benefit plans			Other			Total amount before tax			Income tax			Net			With OTTI (a)		All other			Defined benefit plans			Other			Total amount before tax			Income tax			Net
	(in thousands)																				(in thousands)
Balance – January 1, 2015	$	7,438		201,828			(503,027	)		(4,082	)	$	(297,843	)		116,849		$	(180,994	)

Balance – January 1, 2016																					$	16,359		62,849			(489,660	)		(4,093	)	$	(414,545	)		162,918		$	(251,627	)

Other comprehensive income before reclassifications:
Unrealized holding gains (losses), net		9,699		(11,139	)		—			—			(1,440	)		952			(488	)
Unrealized holding gains, net																						9,260		227,118			—			—			236,378			(93,010	)		143,368
Foreign currency translation adjustment		—		—			—			(735	)		(735	)		214			(521	)		—		—			—			(2,489	)		(2,489	)		871			(1,618	)
Gains on cash flow hedges		—		—			—			1,453			1,453			(568	)		885

Total other comprehensive income before reclassifications		9,699		(11,139	)		—			718			(722	)		598			(124	)
Total other comprehensive income (loss) before reclassifications																						9,260		227,118			—			(2,489	)		233,889			(92,139	)		141,750


Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income:

Accretion of unrealized holding losses on held-to-maturity (“HTM”) securities		—		2,417			—			—			2,417	(b)		(944	)		1,473			—		2,081			—			—			2,081	(b)		(819	)		1,262
Losses realized in net income		—		108			—			—			108	(c)		(40	)		68
Gains realized in net income																						—		(268	)		—			—			(268	)(c)		102			(166	)
Accretion of net gain on terminated cash flow hedges		—		—			—			(102	)		(102	)(d)		40			(62	)		—		—			—			(77	)		(77	)(d)		30			(47	)
Amortization of prior service credit		—		—			(5,523	)		—			(5,523	)(e)		2,359			(3,164	)		—		—			(2,294	)		—			(2,294	)(e)		902			(1,392	)
Amortization of actuarial losses		—		—			33,698			—			33,698	(e)		(14,368	)		19,330			—		—			15,103			—			15,103	(e)		(5,904	)		9,199

Total reclassifications		—		2,525			28,175			(102	)		30,598			(12,953	)		17,645			—		1,813			12,809			(77	)		14,545			(5,689	)		8,856


Total gain (loss) during the period		9,699		(8,614	)		28,175			616			29,876			(12,355	)		17,521			9,260		228,931			12,809			(2,566	)		248,434			(97,828	)		150,606

Balance – September 30, 2015	$	17,137		193,214			(474,852	)		(3,466	)	$	(267,967	)		104,494		$	(163,473	)

Balance – June 30, 2016																					$	25,619		291,780			(476,851	)		(6,659	)	$	(166,111	)		65,090		$	(101,021	)


	Investment Securities																			Investment securities
	With OTTI (a)		All other		Defined benefit plans			Other			Total amount before tax			Income tax			Net			With OTTI (a)		All other			Defined benefit plans			Other			Total amount before tax			Income tax			Net
	(in thousands)																			(in thousands)
Balance – January 1, 2014	$	37,255		18,450		(161,617	)		115		$	(105,797	)		41,638		$	(64,159	)

Balance – January 1, 2015																				$	7,438		201,828			(503,027	)		(4,082	)	$	(297,843	)		116,849		$	(180,994	)

Other comprehensive income before reclassifications:
Unrealized holding gains, net		12,038		109,263		—			—			121,301			(47,615	)		73,686
Unrealized holding gains (losses), net																					5,670		(85,602	)		—			—			(79,932	)		31,617			(48,315	)
Foreign currency translation adjustment		—		—		—			(2,314	)		(2,314	)		810			(1,504	)		—		—			—			(779	)		(779	)		261			(518	)
Unrealized losses on cash flow hedges		—		—		—			(162	)		(162	)		64			(98	)
Gains on cash flow hedges																					—		—			—			1,453			1,453			(568	)		885

Total other comprehensive income before reclassifications		12,038		109,263		—			(2,476	)		118,825			(46,741	)		72,084
Total other comprehensive income (loss) before reclassifications																					5,670		(85,602	)		—			674			(79,258	)		31,310			(47,948	)


Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income:

Accretion of unrealized holding losses on HTM securities		1		2,539		—			—			2,540	(b)		(997	)		1,543			—		1,589			—			—			1,589	(b)		(621	)		968
Losses realized in net income																					—		108			—			—			108	(c)		(40	)		68
Accretion of net gain on terminated cash flow hedges																					—		—			—			(63	)		(63	)(d)		25			(38	)
Amortization of prior service credit		—		—		(5,933	)		—			(5,933	)(e)		2,328			(3,605	)		—		—			(3,682	)		—			(3,682	)(e)		1,640			(2,042	)
Amortization of actuarial losses		—		—		10,871			—			10,871	(e)		(4,267	)		6,604			—		—			22,465			—			22,465	(e)		(9,981	)		12,484

Total reclassifications		1		2,539		4,938			—			7,478			(2,936	)		4,542			—		1,697			18,783			(63	)		20,417			(8,977	)		11,440


Total gain (loss) during the period		12,039		111,802		4,938			(2,476	)		126,303			(49,677	)		76,626			5,670		(83,905	)		18,783			611			(58,841	)		22,333			(36,508	)

Balance – September 30, 2014	$	49,294		130,252		(156,679	)		(2,361	)	$	20,506			(8,039	)	$	12,467

Balance – June 30, 2015																				$	13,108		117,923			(484,244	)		(3,471	)	$	(356,684	)		139,182		$	(217,502	)

As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting and collateral provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not ~~significant~~material as of ~~September~~June 30, ~~2015.~~2016.

The net effect of interest rate swap agreements was to increase net interest income by $10 million and $11 million for ~~each of~~ thethree-month periods ended ~~September~~June 30, 2016 and 2015, respectively, and ~~2014 and $33~~$20 million and ~~$34~~$22 million for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

Information about interest rate swap agreements entered into for interest rate risk management purposes summarized by type of financial instrument the swap agreements were intended to hedge follows:


	Notional amount				Average maturity			Weighted- average rate					Notional			Average			Weighted- average rate
				Fixed					Variable		amount			maturity			Fixed			Variable
			(in thousands)				(in years)								(in thousands)			(in years)
September 30, 2015
June 30, 2016
Fair value hedges:
Fixed rate long-term borrowings (a)	$	1,400,000				1.9			4.42	%	1.29	%	$	1,400,000			1.2			4.42	%	1.63	%

December 31, 2014

December 31, 2015
Fair value hedges:
Fixed rate long-term borrowings (a)	$	1,400,000				2.7			4.42	%	1.19	%	$	1,400,000			1.7			4.42	%	1.39	%

The use of cash flow hedges to manage the variability of cash flows associated with the then-forecasted issuance of long-term debt did not have a significant impact on the Company’s consolidated financial position or results of operations.

The Company utilizes commitments to sell residential and commercial real estate loans to hedge the exposure to changes in the fair value of real estate loans held for sale. Such commitments have generally been designated as fair value hedges. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in fair value of certain commitments to originate real estate loans for sale.

Derivative financial instruments used for trading account purposes included interest rate contracts, foreign exchange and other option contracts, foreign exchange forward and spot contracts, and financial futures. Interest rate contracts entered into for trading account purposes had notional values of ~~$17.6~~$20.1 billion and $18.4 billion at ~~each of September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015, respectively. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes aggregated $826 million and $1.6 billion ~~and $1.3 billion~~ at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

Information about the fair values of derivative instruments in the Company’s consolidated balance sheet and consolidated statement of income follows:


	Asset derivatives				Liability derivatives				Asset derivatives				Liability derivatives
	Fair value				Fair value				Fair value				Fair value
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014		June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
	(in thousands)								(in thousands)
Derivatives designated and qualifying as hedging instruments
Fair value hedges:
Interest rate swap agreements (a)	$	60,782		73,251	$	—		—	$	33,648		43,892		—		—
Commitments to sell real estate loans (a)		899		728		5,142		4,217		71		1,844		8,545		656

		61,681		73,979		5,142		4,217		33,719		45,736		8,545		656

Derivatives not designated and qualifying as hedging instruments
Mortgage-related commitments to originate real estate loans for sale (a)		17,832		17,396		185		49		21,431		10,282		48		403
Commitments to sell real estate loans (a)		26		754		4,162		4,330		292		533		7,720		846
Trading:
Interest rate contracts (b)		268,332		215,614		221,626		173,513		401,512		203,517		345,681		153,723
Foreign exchange and other option and futures contracts (b)		13,404		31,112		11,380		29,950		7,975		8,569		6,860		7,022

		299,594		264,876		237,353		207,842		431,210		222,901		360,309		161,994


Total derivatives	$	361,275		338,855	$	242,495		212,059	$	464,929		268,637		368,854		162,650


	Amount of gain (loss) recognized										Amount of gain (loss) recognized
	Three months ended September 30, 2015					Three months ended September 30, 2014					Three months ended June 30, 2016					Three months ended June 30, 2015
	Derivative			Hedged item		Derivative			Hedged item		Derivative			Hedged item		Derivative			Hedged item
	(in thousands)										(in thousands)
Derivatives in fair value hedging relationships

Interest rate swap agreements:
Fixed rate long-term borrowings (a)	$	(2,719	)		2,382	$	(16,792	)		16,380	$	(7,611	)		7,146		(9,354	)		8,952


Derivatives not designated as hedging instruments

Trading:
Interest rate contracts (b)	$	4,120				$	132				$	5,782					1,772
Foreign exchange and other option and futures contracts (b)		2,441					(781	)				2,457					1,621


Total	$	6,561				$	(649	)			$	8,239					3,393


	Amount of gain (loss) recognized										Amount of gain (loss) recognized
	Nine months ended September 30, 2015					Nine months ended September 30, 2014					Six months ended June 30, 2016					Six months ended June 30, 2015
	Derivative			Hedged item		Derivative			Hedged item		Derivative			Hedged item		Derivative			Hedged item
	(in thousands)										(in thousands)
Derivatives in fair value hedging relationships

Interest rate swap agreements:
Fixed rate long-term borrowings (a)	$	(12,469	)		11,495	$	(26,627	)		25,658	$	(10,244	)		9,016		(9,750	)		9,113


Derivatives not designated as hedging instruments

Trading:
Interest rate contracts (b)	$	6,552				$	1,214				$	6,756					2,432
Foreign exchange and other option and futures contracts (b)		1,563					(6,597	)				3,669					4,410


Total	$	8,115				$	(5,383	)			$	10,425					6,842

~~In addition, the~~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 ~~$23~~$28 million and ~~$28~~$18 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Changes in unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied.

The Company does not offset derivative asset and liability positions in its consolidated financial statements. The Company’s exposure to credit risk by entering into derivative contracts is mitigated through master netting agreements and collateral posting requirements. Master netting agreements covering interest rate and foreign exchange contracts with the same party include a right to set-off that becomes enforceable in the event of default, early termination or under other specific conditions.

The aggregate fair value of derivative financial instruments in a liability position, which are subject to enforceable master netting arrangements, was ~~$96~~$113 million and ~~$161~~$59 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. After consideration of such netting arrangements, the net liability positions with counterparties aggregated ~~$91~~$108 million and ~~$103~~$55 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. The Company was required to post collateral relating to those positions of ~~$81~~$102 million and ~~$90~~$52 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, 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 rating were to fall below specified ratings, the counterparties toof 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 ~~September~~June 30, ~~2015~~2016 was ~~$17~~$21 million, for which the Company had posted collateral of ~~$11~~$17 million in the normal course of business. If the ~~credit-risk-related~~credit risk-related contingent features had been triggered on ~~September~~June 30, ~~2015,~~2016, the maximum amount of additional collateral the Company would have been required to post to counterparties was $6$4 million.

The aggregate fair value of derivative financial instruments in an asset position, which are subject to enforceable master netting arrangements, was ~~$40~~$14 million and ~~$104~~$23 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. After consideration of such netting arrangements, the net asset positions with counterparties aggregated ~~$35~~$9 million and ~~$46~~$19 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Counterparties posted collateral relating to those positions of ~~$35~~$9 million and ~~$46~~$22 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Trading account interest rate swap agreements entered into with customers are subject to the Company’s credit risk standards and often contain collateral provisions.

In addition to the derivative contracts noted above, the Company clears certain derivative transactions through a clearinghouse rather than directly with counterparties. Those transactions cleared through a clearinghouse require initial margin collateral and additional collateral for contracts in a net liability position. The net fair values of derivative ~~financial~~ instruments cleared through clearinghouses at June 30, 2016 was a net liability position of $212 million and at December 31, 2015 was a net liability position of $50 million.

~~cleared through clearinghouses was a net liability position of $96 million and $35 million at September 30, 2015 and December 31, 2014, respectively.~~ Collateral posted with clearinghouses was ~~$143~~$280 million and ~~$61~~$99 million at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

During the three and nine months ended September 30, 2015, the Company securitized approximately $15 million and $51 million, respectively, of one-to-four family residential real estate loans that had been originated for sale in guaranteed mortgage securitizations with the Government National Mortgage Association (“~~Ginnie Mae~~”) and retained the resulting securities in its investment securities portfolio. In similar transactions for the three months and nine months ended September 30, 2014, the Company securitized $35 million and $110 million, respectively, of one-to-four family residential real estate loans. Gains associated with those transactions were not significant.

In accordance with GAAP, at December 31, 2015 the Company determined that it was the primary beneficiary of a residential mortgage loan securitization trust considering its role as servicer and its retained subordinated interests in the trust. As a result, the Company ~~has~~had included the one-to-four family residential mortgage loans that were included in the trust in its consolidated financial statements. In the first quarter of 2016, the securitization trust was terminated as the Company exercised its right to purchase the underlying mortgage loans pursuant to the clean-up call provisions of the trust. At ~~September 30, 2015 and~~ December 31, ~~2014,~~2015, the carrying ~~values~~value of the loans in the securitization trust ~~were $84 million and $98 million, respectively.~~was $81 million. The outstanding principal amount of mortgage-backed securities issued by the qualified special purpose trust that was held by parties unrelated to ~~M&T~~the Company at ~~September 30, 2015 and~~ December 31, ~~2014~~2015 was $13 million and $15 million, respectively. Because the transaction was non-recourse, the Company’s maximum exposure to loss as a result of its association with the trust at September 30, 2015 is limited to realizing the carrying value of the loans less the amount of the mortgage-backed securities held by the third parties.million.

As described in note 5, 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 ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet and recognized $24 million ~~and $34 million, respectively,~~ in other assets for its ~~“investment”~~“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 5.

The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately ~~$1.2~~$1.1 billion at ~~September~~each of June 30, ~~2015~~2016 and December 31, ~~2014, respectively.~~2015. Those partnerships generally construct or acquire properties for which the investing partners are eligible to receive certain federal income tax credits in accordance with government guidelines. Such investments may also provide tax deductible losses to the partners. The partnership investments also assist the Company in achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company by creditors of the partnerships. However, the tax credits that result from the Company’s investments in such partnerships are generally subject to recapture should a partnership fail to comply with the respective government regulations. The Company’s maximum exposure to loss of its investments in such partnerships was ~~$301~~$279 million, including ~~$85~~$70 million of unfunded commitments, at ~~September~~June 30, ~~2015~~2016 and ~~$243~~$295 million, including ~~$56~~

$78 million of unfunded commitments, at December 31, ~~2014.~~2015. Contingent commitments to provide additional capital contributions to these partnerships were not material at ~~September~~June 30, ~~2015.~~2016. The Company has not provided financial or other support to the partnerships that was not contractually required. Management currently estimates that no material losses are probable as a result of the Company’s involvement with such entities. The Company, in its position as a limited partner, does not direct the activities that most significantly impact the economic performance of the partnerships and, therefore, in accordance with the accounting provisions for variable interest entities, the partnership entities are not included in the Company’s consolidated financial statements. As described in note 1, effective January 1, 2015 the Company retrospectively adopted for all periods presented amended accounting guidance on the accounting for investments in qualified affordable housing projects whereby theThe Company’s investment cost is amortized to income taxes in the consolidated statement of income as tax credits and other tax benefits resulting from deductible losses associated with the projects are received. The Company amortized ~~$10~~$11 million and ~~$31~~$22 million of its investments in qualified affordable housing projects to income tax expense during the three months and ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, respectively, and recognized ~~$15~~$14 million and ~~$44~~ $28

million of tax credits and other tax benefits during those respective periods. Similarly, for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2014,~~2015, the Company amortized ~~$14~~$11 million and ~~$39~~$21 million, respectively, of its investments in qualified affordable housing projects to income tax expense and recognized ~~$18~~$15 million and ~~$53~~$29 million of tax credits and other tax benefits during those respective periods.

~~12. Fair value measurements~~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.

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 ~~September~~June 30, ~~2015.~~2016.

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.

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 consist primarily of interest rate swap agreements and foreign exchange contracts with customers who require such services with offsetting positions with third parties to minimize the Company’s risk with respect to such transactions. The Company generally determines the fair value of its derivative trading account assets and liabilities using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2. Mutual funds held in connection with deferred compensation and other arrangements have been classified as Level 1 valuations. Valuations of investments in municipal and other bonds can generally be obtained through reference to quoted prices in less active markets for the

same or similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.

The majority of the Company’s available-for-sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. Certain investments in mutual funds and equity securities are actively traded and, therefore, have been classified as Level 1 valuations.

Included in collateralized debt obligations are securities backed by trust preferred securities issued by financial institutions and other entities. The Company could not obtain pricing indications for many of these securities from its two primary independent pricing sources. The Company, therefore, performed internal modeling to estimate the cash flows and fair value of its portfolio of securities backed by trust preferred securities at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015. The modeling techniques included estimating cash flows using bond-specific assumptions about future collateral defaults and related loss severities. The resulting cash flows were then discounted by reference to market yields observed in the single-name trust preferred securities market. In determining a market yield applicable to the estimated cash flows, a margin over LIBOR ranging from 4% to 10%, with a weighted-average of 8%, was used. Significant unobservable inputs used in the determination of estimated fair value of collateralized debt obligations are included in the accompanying table of significant unobservable inputs to Level 3 measurements. At ~~September~~June 30, ~~2015,~~2016, the total amortized cost and fair value of securities backed by trust preferred securities issued by financial institutions and other entities were $28 million and ~~$50~~$43 million, respectively, and at December 31, ~~2014~~2015 were ~~$30~~$28 million and ~~$50~~$47 million, respectively. ~~Securities~~Privately issued mortgage-backed securities and securities backed by trust preferred securities issued by financial institutions and other entities constituted all of the available-for-sale investment securities classified as Level 3 valuations.

The Company ensures an appropriate control framework is in place over the valuation processes and techniques used for significant Level 3 fair value measurements. Internal pricing models used for significant valuation measurements have generally been subjected to validation procedures including testing of mathematical constructs, review of valuation methodology and significant assumptions used.

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 ~~originated~~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 are adjusted to reflect the Company’s anticipated commitment expirations. The estimated commitment expirations are considered significant unobservable inputs contributing to the Level 3 classification of commitments to originate real estate loans for sale. Significant unobservable inputs used in the determination of estimated fair value of commitments to originate real estate loans for sale are included in the accompanying table of significant unobservable inputs to Level 3 measurements.

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.

The following tables present assets and liabilities at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 measured at estimated fair value on a recurring basis:


	Fair value measurements at September 30, 2015		Level 1 (a)		Level 2 (a)		Level 3
	(in thousands)
Trading account assets	$	340,710		48,006		292,704		—
Investment securities available for sale:
U.S. Treasury and federal agencies		199,394		—		199,394		—
Obligations of states and political subdivisions		6,296		—		6,296		—
Mortgage-backed securities:
Government issued or guaranteed		10,714,048		—		10,714,048		—
Privately issued		82		—		—		82
Collateralized debt obligations		49,876		—		—		49,876
Other debt securities		120,468		—		120,468		—
Equity securities		69,345		40,370		28,975		—

		11,159,509		40,370		11,069,181		49,958

Real estate loans held for sale		493,453		—		493,453		—
Other assets (b)		79,539		—		61,707		17,832

Total assets	$	12,073,211		88,376		11,917,045		67,790

Trading account liabilities	$	233,006		—		233,006		—
Other liabilities (b)		9,489		—		9,304		185

Total liabilities	$	242,495		—		242,310		185

									Fair value measurements at June 30, 2016		Level 1 (a)		Level 2 (a)		Level 3
	Fair value measurements at December 31, 2014		Level 1 (a)		Level 2 (a)		Level 3		(in thousands)
	(in thousands)
Trading account assets	$	308,175		51,416		256,759		—	$	506,131		62,167		443,964		—
Investment securities available for sale:
U.S. Treasury and federal agencies		161,947		—		161,947		—		400,348		—		400,348		—
Obligations of states and political subdivisions		8,198		—		8,198		—		5,241		—		5,241		—
Mortgage-backed securities:
Government issued or guaranteed		8,731,123		—		8,731,123		—		11,267,278		—		11,267,278		—
Privately issued		103		—		—		103		57		—		—		57
Collateralized debt obligations		50,316		—		—		50,316		43,305		—		—		43,305
Other debt securities		121,488		—		121,488		—		114,771		—		114,771		—
Equity securities		83,757		64,841		18,916		—		87,974		59,647		28,327		—

		9,156,932		64,841		9,041,672		50,419		11,918,974		59,647		11,815,965		43,362


Real estate loans held for sale		742,249		—		742,249		—		602,019		—		602,019		—
Other assets (b)		92,129		—		74,733		17,396		55,442		—		34,011		21,431

Total assets	$	10,299,485		116,257		10,115,413		67,815	$	13,082,566		121,814		12,895,959		64,793


Trading account liabilities	$	203,464		—		203,464		—	$	352,541		—		352,541		—
Other liabilities (b)		8,596		—		8,547		49		16,313		—		16,265		48

Total liabilities	$	212,060		—		212,011		49	$	368,854		—		368,806		48

~~The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended September 30, 2015 were as follows:~~

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended ~~September~~June 30, ~~2014~~2016 were as follows:


	Investment securities available for sale									Investment securities available for sale
	Privately issued mortgage-backed securities			Collateralized debt obligations			Other assets and other liabilities			Privately issued mortgage-backed securities			Collateralized debt obligations			Other assets and other liabilities
	(in thousands)									(in thousands)
Balance – June 30, 2014	$	119		$	56,200		$	22,023

Balance – March 31, 2016										$	65			45,040			16,885

Total gains (losses) realized/unrealized:
Included in earnings		—			—			9,657	(a)		—			—			35,430	(b)
Included in other comprehensive income		—			2,201	(d)		—			—			(1,070	)(c)		—
Sales											—			—			—
Settlements		(7	)		(3,593	)		—			(8	)		(665	)		—
Transfers in and/or out of Level 3 (b)		—			—			(15,188	)(c)
Transfers in and/or out of Level 3 (a)											—			—			(30,932	)(d)

Balance – September 30, 2014	$	112		$	54,808		$	16,492

Changes in unrealized gains included in earnings related to assets still held at September 30, 2014	$	—		$	—		$	12,421	(a)
Balance – June 30, 2016										$	57			43,305			21,383


Changes in unrealized gains included in earnings related to assets still held at June 30, 2016										$	—			—			19,882	(b)

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended June 30, 2015 were as follows:

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 were as follows:


	Investment securities available for sale									Investment securities available for sale
	Privately issued mortgage-backed securities			Collateralized debt obligations			Other assets and other liabilities			Privately issued mortgage-backed securities			Collateralized debt obligations			Other assets and other liabilities
	(in thousands)									(in thousands)
Balance – January 1, 2015	$	103		$	50,316		$	17,347

Balance – January 1, 2016										$	74			47,393			9,879

Total gains (losses) realized/unrealized:
Included in earnings		—			—			67,611	(a)		—			—			59,328	(b)
Included in other comprehensive income		—			5,153	(d)		—			—			(3,218	)(c)		—
Settlements		(21	)		(5,593	)		—			(17	)		(870	)		—
Transfers in and/or out of Level 3 (b)		—			—			(67,311	)(c)
Transfers in and/or out of Level 3 (a)											—			—			(47,824	)(d)

Balance – September 30, 2015	$	82		$	49,876		$	17,647

Changes in unrealized gains included in earnings related to assets still held at September 30, 2015	$	—		$	—		$	15,965	(a)
Balance – June 30, 2016										$	57			43,305			21,383


Changes in unrealized gains included in earnings related to assets still held at June 30, 2016										$	—			—			20,661	(b)

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the ~~nine~~six months ended ~~September~~June 30, ~~2014~~2015 were as follows:

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 are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2, unless significant adjustments have been made to the valuation that are not readily observable by market participants. Non-real estate collateral supporting commercial loans generally consists of business assets such as receivables, inventory and equipment. Fair value estimations are typically determined by discounting recorded values of those assets to reflect estimated net realizable value considering specific borrower facts and circumstances and the experience of credit personnel in their dealings with similar borrower collateral liquidations. Such discounts were generally in the range of ~~10%~~15% to 90% at ~~September~~June 30, ~~2015.~~2016. As these discounts are not readily observable and are considered significant, the valuations have been classified as Level 3. Automobile collateral is typically valued by reference to independent pricing sources based on recent sales transactions of similar vehicles, and the related non-recurring fair value measurement adjustments have been classified as Level 2. Collateral values for other consumer installment loans are generally estimated based on historical recovery rates for similar types of loans. As these recovery rates are not readily observable by market participants, such valuation adjustments have been classified as Level 3. Loans subject to nonrecurring fair value measurement were ~~$177~~$242 million at ~~September~~June 30, ~~2015~~2016 ($~~106~~141 million and ~~$71~~$101 million of which were classified as Level 2 and Level 3, respectively), ~~$173~~$210 million at December 31, ~~2014~~2015 ($94106 million and ~~$79~~$104 million of which were classified as Level 2 and Level 3, respectively) and ~~$196~~$147 million at ~~September~~June 30, ~~2014~~2015 ($~~112~~89 million and ~~$84~~$58 million of which were classified as Level 2 and Level 3, respectively). Changes in fair value recognized for partial charge-offs of loans and loan impairment reserves on loans held by the Company on ~~September~~June 30, ~~2015~~2016 were decreases of ~~$11~~$4 million and ~~$53~~$31 million for the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015,~~2016, respectively. Changes in fair value recognized for partial charge-offs of loans and loan impairment reserves on loans held by the Company on ~~September~~June 30, ~~2014~~2015 were decreases of ~~$23~~$34 million and ~~$46~~$42 million for the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2014,~~2015, respectively.

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 ~~$15~~$33 million and ~~$21~~$13 million at ~~September~~June 30, ~~2015~~2016 and ~~September 30, 2014,~~2015, respectively. Changes in fair value recognized for those foreclosed assets held by the Company were not material during the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014.~~2015.

The following tables present quantitative information about significant unobservable inputs used in the fair value measurements for Level 3 assets and liabilities at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014:~~2015:


	Fair value at September 30, 2015		Valuation technique		Unobservable input/assumptions		Range (weighted- average)		Fair value at June 30, 2016		Valuation technique		Unobservable input/assumptions		Range (weighted- average)
	(in thousands)								(in thousands)
Recurring fair value measurements

Privately issued mortgage–backed securities	$	82		Two independent pricing quotes		—		—	$	57		Two independent pricing quotes		—		—

Collateralized debt obligations		49,876		Discounted cash flow		Probability of default		12%-57% (33%)		43,305		Discounted cash flow		Probability of default		10%-55% (30%)
						Loss severity		100%						Loss severity		100%

Net other assets (liabilities)(a)		17,647		Discounted cash flow		Commitment expirations		0%-66% (38%)		21,383		Discounted cash flow		Commitment expirations		0%-93% (36%)

	Fair value at December 31, 2014		Valuation technique		Unobservable input/assumptions		Range (weighted- average)		Fair value at December 31, 2015		Valuation technique		Unobservable input/assumptions		Range (weighted- average)
	(in thousands)								(in thousands)
Recurring fair value measurements

Privately issued mortgage–backed securities	$	103		Two independent pricing quotes		—		—	$	74		Two independent pricing quotes		—		—

Collateralized debt obligations		50,316		Discounted cash flow		Probability of default		12%-57% (36%)		47,393		Discounted cash flow		Probability of default		10%-56% (31%)
						Loss severity		100%						Loss severity		100%

Net other assets (liabilities)(a)		17,347		Discounted cash flow		Commitment expirations		0%-96% (17%)
Net other assets (liabilities) (a)										9,879		Discounted cash flow		Commitment expirations		0%-60% (39%)

An increase (decrease) in the probability of default and loss severity for collateralized debt securities would generally result in a lower (higher) fair value measurement.

An increase (decrease) in the estimate of expirations for commitments to originate ~~real-estate~~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.

The carrying amounts and estimated fair value for financial instrument assets (liabilities) are presented in the following table:


	September 30, 2015														June 30, 2016
	Carrying amount			Estimated fair value			Level 1		Level 2			Level 3			Carrying amount				Estimated fair value			Level 1		Level 2			Level 3
	(in thousands)														(in thousands)
Financial assets:
Cash and cash equivalents	$	1,249,704		$	1,249,704		$	1,193,831	$	55,873		$	—		$	1,284,442				1,284,442			1,216,801		67,641			—
Interest-bearing deposits at banks		4,713,266			4,713,266			—		4,713,266			—			8,474,839				8,474,839			—		8,474,839			—
Trading account assets		340,710			340,710			48,006		292,704			—			506,131				506,131			62,167		443,964			—
Investment securities		14,494,539			14,521,740			40,370		14,283,075			198,295			14,963,084				15,011,922			59,647		14,779,939			172,336
Loans and leases:
Commercial loans and leases		20,233,177			19,920,031			—		—			19,920,031			21,469,242				21,119,041			—		—			21,119,041
Commercial real estate loans		28,720,537			28,633,973			—		71,357			28,562,616			30,711,230				30,553,720			—		227,929			30,325,791
Residential real estate loans		8,211,062			8,302,630			—		4,918,613			3,384,017			24,530,249				24,738,004			—		4,673,968			20,064,036
Consumer loans		11,375,472			11,280,973			—		—			11,280,973			11,811,277				11,713,181			—		—			11,713,181
Allowance for credit losses		(933,798	)		—			—		—			—			(970,496	)			—			—		—			—

Loans and leases, net		67,606,450			68,137,607			—		4,989,970			63,147,637			87,551,502				88,123,946			—		4,901,897			83,222,049
Accrued interest receivable		242,935			242,935			—		242,935			—			299,158				299,158			—		299,158			—

Financial liabilities:
Noninterest-bearing deposits	$	(28,189,330	)	$	(28,189,330	)	$	—	$	(28,189,330	)	$	—		$	(30,700,066	)			(30,700,066	)		—		(30,700,066	)		—
Savings deposits and NOW accounts		(41,757,661	)		(41,757,661	)		—		(41,757,661	)		—
Savings and interest-checking deposits																(51,126,237	)			(51,126,237	)		—		(51,126,237	)		—
Time deposits		(2,791,367	)		(2,810,224	)		—		(2,810,224	)		—			(12,630,277	)			(12,677,606	)		—		(12,677,606	)		—
Deposits at Cayman Islands office		(206,185	)		(206,185	)		—		(206,185	)		—			(193,523	)			(193,523	)		—		(193,523	)		—
Short-term borrowings		(173,783	)		(173,783	)		—		(173,783	)		—			(407,123	)			(407,123	)		—		(407,123	)		—
Long-term borrowings		(10,174,289	)		(10,219,180	)		—		(10,219,180	)		—			(10,328,751	)			(10,382,523	)		—		(10,382,523	)		—
Accrued interest payable		(73,475	)		(73,475	)		—		(73,475	)		—			(80,165	)			(80,165	)		—		(80,165	)		—
Trading account liabilities		(233,006	)		(233,006	)		—		(233,006	)		—			(352,541	)			(352,541	)		—		(352,541	)		—

Other financial instruments:
Commitments to originate real estate loans for sale	$	17,647		$	17,647		$	—	$	—		$	17,647		$	21,383		��		21,383			—		—			21,383
Commitments to sell real estate loans		(8,379	)		(8,379	)		—		(8,379	)		—			(15,902	)			(15,902	)		—		(15,902	)		—
Other credit-related commitments		(118,656	)		(118,656	)		—		—			(118,656	)		(125,630	)			(125,630	)		—		—			(125,630	)
Interest rate swap agreements used for interest rate risk management		60,782			60,782			—		60,782			—			33,648				33,648			—		33,648			—


	December 31, 2014														December 31, 2015
	Carrying amount			Estimated fair value			Level 1		Level 2			Level 3			Carrying amount			Estimated fair value			Level 1		Level 2			Level 3
	(in thousands)																	(in thousands)
Financial assets:
Cash and cash equivalents	$	1,373,357		$	1,373,357		$	1,296,923	$	76,434		$	—		$	1,368,040			1,368,040			1,276,678		91,362			—
Interest-bearing deposits at banks		6,470,867			6,470,867			—		6,470,867			—			7,594,350			7,594,350			—		7,594,350			—
Trading account assets		308,175			308,175			51,416		256,759			—			273,783			273,783			56,763		217,020			—
Investment securities		12,993,542			13,023,956			64,841		12,750,396			208,719			15,656,439			15,660,877			65,178		15,406,404			189,295
Loans and leases:
Commercial loans and leases		19,461,292			19,188,574			—		—			19,188,574			20,422,338			20,146,201			—		—			20,146,201
Commercial real estate loans		27,567,569			27,487,818			—		307,667			27,180,151			29,197,311			29,044,244			—		38,774			29,005,470
Residential real estate loans		8,657,301			8,729,056			—		5,189,086			3,539,970			26,270,103			26,267,771			—		4,727,816			21,539,955
Consumer loans		10,982,794			10,909,623			—		—			10,909,623			11,599,747			11,550,270			—		—			11,550,270
Allowance for credit losses		(919,562	)		—			—		—			—			(955,992	)		—			—		—			—

Loans and leases, net		65,749,394			66,315,071			—		5,496,753			60,818,318			86,533,507			87,008,486			—		4,766,590			82,241,896
Accrued interest receivable		227,348			227,348			—		227,348			—			306,496			306,496			—		306,496			—

Financial liabilities:
Noninterest-bearing deposits	$	(26,947,880	)	$	(26,947,880	)	$	—	$	(26,947,880	)	$	—		$	(29,110,635	)		(29,110,635	)		—		(29,110,635	)		—
Savings deposits and NOW accounts		(43,393,618	)		(43,393,618	)		—		(43,393,618	)		—
Savings and interest-checking deposits																(49,566,644	)		(49,566,644	)		—		(49,566,644	)		—
Time deposits		(3,063,973	)		(3,086,126	)		—		(3,086,126	)		—			(13,110,392	)		(13,135,042	)		—		(13,135,042	)		—
Deposits at Cayman Islands office		(176,582	)		(176,582	)		—		(176,582	)		—			(170,170	)		(170,170	)		—		(170,170	)		—
Short-term borrowings		(192,676	)		(192,676	)		—		(192,676	)		—			(2,132,182	)		(2,132,182	)		—		(2,132,182	)		—
Long-term borrowings		(9,006,959	)		(9,139,789	)		—		(9,139,789	)		—			(10,653,858	)		(10,639,556	)		—		(10,639,556	)		—
Accrued interest payable		(63,372	)		(63,372	)		—		(63,372	)		—			(85,145	)		(85,145	)		—		(85,145	)		—
Trading account liabilities		(203,464	)		(203,464	)		—		(203,464	)		—			(160,745	)		(160,745	)		—		(160,745	)		—

Other financial instruments:
Commitments to originate real estate loans for sale	$	17,347		$	17,347		$	—	$	—		$	17,347		$	9,879			9,879			—		—			9,879
Commitments to sell real estate loans		(7,065	)		(7,065	)		—		(7,065	)		—			875			875			—		875			—
Other credit-related commitments		(119,079	)		(119,079	)		—		—			(119,079	)		(122,334	)		(122,334	)		—		—			(122,334	)
Interest rate swap agreements used for interest rate risk management		73,251			73,251			—		73,251			—			43,892			43,892			—		43,892			—

With the exception of marketable securities, certain off-balance sheet financial instruments and one-to-four family residential mortgage loans originated for sale, the Company’s financial instruments are not readily marketable and market prices do not exist. The Company, in attempting to comply with the provisions of GAAP that require disclosures of fair value of financial instruments, has not attempted to market its financial instruments to potential buyers, if any exist. Since negotiated prices in illiquid markets depend greatly upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. The following assumptions, methods and calculations were used in determining the estimated fair value of financial instruments not measured at fair value in the consolidated balance sheet.

Cash and cash equivalents, interest-bearing deposits at banks, deposits at Cayman Islands office, short-term borrowings, accrued interest receivable and accrued interest payable

Due to the nature of cash and cash equivalents and the near maturity of interest-bearing deposits at banks, deposits at Cayman Islands office, short-term borrowings, accrued interest receivable and accrued interest payable, the Company estimated that the carrying amount of such instruments approximated estimated fair value.

Estimated fair values of investments in readily marketable securities were generally based on quoted market prices. Investment securities that were not readily marketable were assigned amounts based on estimates provided by outside parties or modeling techniques that relied upon discounted calculations of projected cash flows or, in the case of other investment securities, which include capital stock of the Federal Reserve Bank of New York and the Federal Home Loan Bank of New York, at an amount equal to the carrying amount.

In general, discount rates used to calculate values for loan products were based on the Company’s pricing at the respective period end. A higher discount rate was assumed with respect to estimated cash flows associated with nonaccrual loans. Projected loan cash flows were adjusted for estimated credit losses. However, such estimates made by the Company may not be indicative of assumptions and adjustments that a purchaser of the Company’s loans and leases would seek.

Pursuant to GAAP, the estimated fair value ascribed to noninterest-bearing deposits, savings deposits and ~~NOW accounts~~interest-checking deposits must be established at carrying value because of the customers’ ability to withdraw funds immediately. Time deposit accounts are required to be revalued based upon prevailing market interest rates for similar maturity instruments. As a result, amounts assigned to time deposits were based on discounted cash flow calculations using prevailing market interest rates based on the Company’s pricing at the respective date for deposits with comparable remaining terms to maturity.

The Company believes that deposit accounts have a value greater than that prescribed by GAAP. The Company feels, however, that the value associated with these deposits is greatly influenced by characteristics of the buyer, such as the ability to reduce the costs of servicing the deposits and deposit attrition which often occurs following an acquisition.

The amounts assigned to long-term borrowings were based on quoted market prices, when available, or were based on discounted cash flow calculations using prevailing market interest rates for borrowings of similar terms and credit risk.

As described in note 13, in the normal course of business, various commitments and contingent liabilities are outstanding, such as loan commitments, credit guarantees and letters of credit. The Company’s pricing of such financial instruments is based largely on credit quality and relationship, probability of funding and other requirements. Loan commitments often have fixed expiration dates and contain termination and other clauses which provide for relief from funding in the event of significant deterioration in the credit quality of the customer. The rates and terms of the Company’s loan commitments, credit guarantees and letters of credit are competitive with other financial institutions operating in markets served by the Company. The Company believes that the carrying amounts, which are included in other liabilities, are reasonable estimates of the fair value of these financial instruments.

The Company does not believe that the estimated information presented herein is representative of the earnings power or value of the Company. The preceding analysis, which is inherently limited in depicting fair value, also does not consider any value associated with existing customer relationships nor the ability of the Company to create value through loan origination, deposit gathering or fee generating activities.

Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be

precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

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.


	September 30,		December 31,
	2015		2014		June 30, 2016		December 31, 2015
	(in thousands)				(in thousands)
Commitments to extend credit
Home equity lines of credit	$	5,535,704		6,194,516	$	5,569,936		5,631,680
Commercial real estate loans to be sold		89,374		212,257		112,251		57,597
Other commercial real estate and construction		5,356,256		4,834,699
Other commercial real estate						6,325,178		5,949,933
Residential real estate loans to be sold		587,206		432,352		638,037		488,621
Other residential real estate		674,338		524,399		286,848		212,619
Commercial and other		12,144,962		11,080,856		11,898,046		11,802,850

Standby letters of credit		3,441,337		3,706,888		3,343,858		3,330,013

Commercial letters of credit		44,082		46,965		46,748		55,559

Financial guarantees and indemnification contracts		2,922,743		2,490,050		2,926,230		2,794,322

Commitments to sell real estate loans		977,822		1,237,294		1,155,969		782,885

Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, whereas commercial letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and a third party. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness.

Financial guarantees and indemnification contracts are oftentimes similar to standby letters of credit and include mandatory purchase agreements issued to ensure that customer obligations are fulfilled, recourse obligations associated with sold loans, and other guarantees of customer performance or compliance with designated rules and regulations. Included in financial guarantees and indemnification contracts are loan principal amounts sold with recourse in conjunction with the Company’s involvement in the Fannie Mae Delegated Underwriting and Servicing program. The Company’s maximum credit risk for

recourse associated with loans sold under ~~this~~that program totaled approximately $2.6 billion and $2.5 billion ~~and $2.4 billion~~ at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows.

The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the fair value of real estate loans held for sale. Such commitments are considered derivatives and along with commitments to originate real estate loans to be held for sale are generally recorded in the consolidated balance sheet at estimated fair market value.

The Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for losses related to its obligations to loan purchasers. The amount of those charges is based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. ~~Subject to~~Nevertheless, given the outcome of the matter discussed in the following paragraph, at ~~September~~June 30, ~~2015, management believes that any further liability arising out of~~2016, the Company’s obligation to loan purchasers iswas not considered material to the Company’s consolidated financial position.

The Company iswas the subject of an investigation by government agencies relating to the origination of Federal Housing Administration (“FHA”) insured residential home loans and residential home loans sold to ~~The Federal Home Loan Mortgage Corporation (“~~Freddie ~~Mac”)~~Mac and ~~The Federal National Mortgage Association (“~~Fannie ~~Mae”).~~Mae. A number of other U.S. financial institutions have announced similar investigations. Regarding FHA loans, the U.S. Department of Housing and Urban Development (“HUD”) Office of Inspector General and the U.S. Department of Justice (collectively, the “Government”) ~~are investigating~~investigated whether the Company complied with underwriting guidelines concerning certain loans where HUD paid FHA insurance claims. The Company is fully ~~cooperating~~cooperated with the investigation. The Government ~~has~~ advised the Company that based upon its review of a sample of loans for which an FHA insurance claim was paid by HUD, some of the loans dodid not meet underwriting guidelines. The Company, based on its own review of the sample, ~~does~~did not agree with the sampling methodology and loan analysis employed by the Government. Regarding loans originated by the Company and sold to Freddie Mac and Fannie Mae, the investigation ~~concerns~~concerned whether the mortgages sold to Freddie Mac and Fannie Mae ~~comply~~complied with applicable underwriting guidelines. The Company is also ~~cooperating~~cooperated with that portion of the investigation. ~~The investigation could lead~~In order to ~~claims by~~bring those investigations to a close, M&T Bank entered into a settlement agreement with the Government under which M&T Bank paid $64 million on May 12, 2016, without admitting liability. As a result, on May 20, 2016, a Joint Stipulation of Dismissal was filed with the ~~False Claims Act and~~United States District Court for the ~~Financial Institutions Reform, Recovery, and Enforcement Act~~Western District of ~~1989, which allow treble and other special damages substantially in excess~~New York. The settlement did not have a material impact on the Company’s consolidated financial condition or results of ~~actual losses. Remedies in these proceedings or settlements may include restitution, fines, penalties, or alterations~~operations in the three-month or six-month periods ended June 30, 2016.

~~Company’s business practices. The Company and the Government continue settlement discussions regarding the investigation.~~

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 $40 million. Although the Company does not believe that the outcome of pending litigations will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

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 22 of Notes to Financial Statements in the ~~Company’s consolidated financial statements as of and for the year ended December 31, 2014.~~2015 Annual Report. 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, ~~the financial information of the~~ reported ~~segments is~~segment results are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. ~~Effective January 1, 2015, the Company made certain changes to its methodology for measuring segment profit and loss. Those changes~~As disclosed in the measurement of segment profitability were largely the result of updated funds transfer pricing and various cost allocation reviews. The most significant changes to the funds transfer pricing resulted from ascribing a longer duration to non-maturity deposits, which significantly benefitted the Retail Banking segment. The cost allocation review having the largest impact related to a branch cost study. That study consisted of transaction reviews and time studies which resulted in a higher cost allocation from the Retail Banking segment to the Business Banking segment. In addition,2015 Annual Report, effective July 1, 2015, the Company changed its internal profitability reporting to move a builder and developer lending unit from the Residential Mortgage Banking segment to the Commercial Real Estate segment. Accordingly, financial information presented herein for the three-month and six-month periods ~~prior to July 1,~~ended June 30, 2015 ~~has~~have been reclassified to conform to the current presentation. ~~Total~~As a result, total revenues and net income decreased in the Residential Mortgage Banking segment and increased in the Commercial Real Estate segment ~~for the three months ended September 30, 2014~~ by ~~$5 million and $2 million, respectively, and for the nine months ended September 30, 2014 by $13 million and $5 million, respectively. The impact of the change~~

~~to total revenues and net income for the second quarter of 2015 was~~ $6 million and $3 million, respectively, ~~and~~ for the ~~first half of~~three-month period ended June 30, 2015 ~~was~~and by $12 million and $5 million, ~~respectively. Prior~~respectively, for the six-month period ended June 30, 2015 from that which was previously reported. During the second quarter of 2016, the Company revised its funds transfer pricing allocation related to the residential real estate loans obtained in the acquisition of Hudson City, retroactive to November 1, 2015. Accordingly, financial information for the three-month period ended March 31, 2016 has been ~~restated~~reclassified to ~~reflect~~conform to the ~~changes noted to provide segment information on~~current methodology. As a ~~comparable basis, as noted~~result, total revenues and net income increased in the ~~following tables.~~Discretionary Portfolio segment and decreased in the “All Other” category by $25 million and $15 million, respectively, for the three months ended March 31, 2016 from that which was previously reported.

As also described in note 22 toin the ~~Company’s 2014 consolidated financial statements,~~2015 Annual Report, neither goodwill nor core deposit and other intangible assets (and the amortization charges associated with such assets) resulting from acquisitions of financial institutions have been allocated to the Company’s reportable segments, but are included in the “All Other” category. The Company does, however, assign such intangible assets to business units for purposes of testing for impairment.


																	Three months ended June 30
	Nine months ended September 30																2016								2015
	2015								2014								Total revenues(a)		Inter- segment revenues			Net income (loss)			Total revenues(a)		Inter- segment revenues			Net income (loss)
	Total revenues (a)		Inter- segment revenues			Net income (loss)			Total revenues (a)		Inter- segment revenues			Net income (loss)			(in thousands)
	(in thousands)
Business Banking	$	332,341		3,334			74,160			337,929		3,359			73,763		$	114,360		1,197			22,747			111,131		1,122			25,354

Commercial Banking		774,392		3,281			312,926			748,978		3,834			303,637			265,481		911			105,392			257,257		1,099			108,081

Commercial Real Estate		535,909		978			250,501			500,814		1,315			230,254			192,175		449			84,088			185,410		427			82,598

Discretionary Portfolio		49,724		(16,184	)		21,823			79,404		(15,799	)		38,898			98,460		(14,608	)		46,225			20,477		(5,376	)		10,756

Residential Mortgage Banking		310,843		36,741			75,462			299,237		34,395			64,680			103,882		21,244			19,980			105,568		12,436			24,852

Retail Banking		914,484		9,688			202,415			934,386		11,137			214,064			345,665		3,132			71,497			305,573		3,259			68,806

All Other		494,779		(37,838	)		(128,585	)		421,488		(38,241	)		(136,599	)		192,050		(12,325	)		(13,898	)		194,739		(12,967	)		(33,759	)


Total	$	3,412,472		—			808,702			3,322,236		—			788,697		$	1,312,073		—			336,031			1,180,155		—			286,688


																	Six months ended June 30
																	2016								2015
																	Total revenues(a)		Inter- segment revenues			Net income (loss)			Total revenues(a)		Inter- segment revenues			Net income (loss)
																	(in thousands)

Business Banking																	$	228,049		2,188			48,195			219,691		2,167			50,165

Commercial Banking																		519,098		1,967			206,719			503,838		2,184			204,504

Commercial Real Estate																		369,555		836			164,617			354,431		509			165,189

Discretionary Portfolio																		209,804		(28,931	)		100,749			35,951		(10,819	)		16,710

Residential Mortgage Banking																		200,817		40,904			37,057			211,325		23,823			54,312

Retail Banking																		684,711		6,146			134,785			605,964		6,396			137,694

All Other																		392,936		(23,110	)		(57,563	)		348,746		(24,260	)		(100,273	)


Total																	$	2,604,970		—			634,559			2,279,946		—			528,301


							Average total assets
	Average total assets (b)						Six months ended June 30					Year ended December 31 2015
	Nine months ended September 30				Year ended December 31		2016		2015			Year ended December 31 2015
	2015		2014		2014		(in millions)
	(in millions)
Business Banking	$	5,321		5,287		5,281	$	5,440		5,313			5,339

Commercial Banking		24,041		22,805		22,892		25,195		23,997			24,143

Commercial Real Estate		18,632		17,187		17,370		20,116		18,514	(b)		18,827

Discretionary Portfolio		23,153		20,306		20,798		41,900		23,029			26,648

Residential Mortgage Banking		3,007		3,016		3,076		2,587		3,090	(b)		2,918

Retail Banking		10,912		10,348		10,449		11,640		10,830			11,035

All Other		12,279		11,003		12,277		16,601		11,977			12,870


Total	$	97,345		89,952		92,143	$	123,479		96,750			101,780

~~15. Relationship with Bayview Lending Group LLC and Bayview Financial Holdings, L.P.~~

M&T holds a 20% minority interest in Bayview Lending Group LLC (“BLG”), a privately-held commercial mortgage company. M&T recognizes income or loss from BLG using the equity method of accounting. The carrying value of that investment was ~~$33~~$17 million at ~~September~~June 30, ~~2015.~~2016.

Bayview Financial Holdings, L.P. (together with its affiliates, “Bayview Financial”), a privately-held specialty mortgage finance company, is BLG’s majority investor. In addition to their common investment in BLG, the Company and Bayview Financial conduct other business activities with each other. The Company has obtained loan servicing rights for mortgage loans from BLG and Bayview Financial having outstanding principal balances of ~~$4.3~~$3.8 billion and ~~$4.8~~$4.1 billion at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Revenues from those servicing rights were $5 million and $6 million ~~for each of~~during the ~~quarters~~three months ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and ~~$17~~$10 million and ~~$20~~$12 million for the ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. The Company sub-services residential ~~real estate~~mortgage loans for Bayview Financial having outstanding principal

~~15. Relationship with Bayview Lending Group LLC and Bayview Financial Holdings, L.P., continued~~

balances totaling ~~$39.5~~$34.5 billion and ~~$41.3~~$37.7 billion at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. Revenues earned for sub-servicing loans for Bayview Financial were ~~$26~~$25 million and ~~$29~~$30 million for the three-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and ~~$91~~$48 million and ~~$82~~$65 million for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. In addition, the Company held ~~$187~~$169 million and ~~$202~~$181 million of mortgage-backed securities in its held-to-maturity portfolio at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, that were securitized by Bayview Financial.

In April 2015, the Company sold the trade processing business within the retirement services division of its Institutional Client Services business. That sale resulted in an after-tax gain of $23 million ($45 million pre-tax) that reflected the allocation of approximately $11 million of previously recorded goodwill to the divested business. Revenues of the sold business had been included in “trust income” and were $9 million during the three months ended March 31, ~~2015; $8 million and $26 million~~2015. There were no revenues from the sold business recognized during the three months ~~and nine months~~ ended ~~September~~June 30, ~~2014, respectively; and $34 million during the year ended December 31, 2014.~~2015 or thereafter. After considering related expenses, net income attributable to the business that was sold was not material to the consolidated results of operations of the Company in any of those periods.

Net income for M&T Bank Corporation (“M&T”) in the ~~third~~second quarter of ~~2015~~2016 was ~~$280~~$336 million, ~~or $1.93 of diluted~~compared with $287 million in the year-earlier quarter. Diluted earnings per common share ~~compared with $275 million or $1.91~~for each of ~~diluted earnings per common share in the year-earlier quarter.~~those periods were $1.98. During the ~~second~~initial quarter of ~~2015,~~2016, net income totaled ~~$287~~$299 million or ~~$1.98~~$1.73 of diluted earnings per common share. Basic earnings per common share were ~~$1.94~~$1.98 in the recent quarter, ~~compared with $1.92 in the third quarter of 2014 and~~ $1.99 in the second quarter of ~~2015.~~2015 and $1.74 in the first quarter of 2016. For the first ~~nine months~~half of ~~2015,~~2016, net income ~~was $809~~totaled $635 million or ~~$5.56~~$3.71 of diluted earnings per common share, compared with ~~$789~~$528 million or ~~$5.50~~$3.63 of diluted earnings per common share ~~during~~in the ~~similar period of 2014.~~year-earlier period. Basic earnings per common share ~~were $5.59 and $5.54~~ for the ~~first nine months of~~six-month periods ended June 30, 2016 and 2015 were $3.72 and ~~2014,~~$3.65, respectively.

The annualized rate of return on average total assets for M&T and its consolidated subsidiaries (“the Company”) in the recent quarter was ~~1.13%~~1.09%, compared with ~~1.17% in the third quarter of 2014 and~~ 1.18% in the ~~second~~year-earlier quarter and .97% in the first quarter of ~~2015.~~2016. The annualized rate of return on average common shareholders’ equity was ~~8.93%~~8.38% in the ~~third~~second quarter of ~~2015,~~2016, compared with ~~9.18%~~9.37% and ~~9.37%~~7.44% in the ~~year-earlier quarter~~three-month periods ended June 30, 2015 and ~~in 2015’s second quarter,~~March 31, 2016, respectively. During the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2015,~~2016, the annualized rates of return on average assets and average common shareholders’ equity were ~~1.11%~~1.03% and ~~8.77%~~7.91%, respectively, compared with ~~1.17%~~1.10% and ~~9.07%~~8.69%, respectively, in the first ~~nine months~~half of ~~2014.~~

Results for the second quarter of 2015 reflected two noteworthy items. In early April 2015, the Company sold the trade processing business within the retirement services division of its Institutional Client Services business. That sale resulted in an after-tax gain of approximately $23 million ($45 million pre-tax). Also during the second quarter of 2015, the Company made $40 million of tax-deductible cash contributions to The M&T Charitable Foundation. The after-tax impact of those two items lowered net income and diluted earnings per common share during each of the second quarter of 2015 and the nine month period ended September 30, 2015 by approximately $1 million and $.01.2015.

On ~~August 27, 2012,~~June 29, 2016, M&T announced that ~~it had entered into~~the Federal Reserve did not object to M&T’s proposed 2016 Capital Plan. That capital plan includes the repurchase of up to $1.15 billion of common shares during the four-quarter period starting on July 1, 2016 and an increase in the quarterly common stock dividend in the first quarter of 2017 of up to $.05 per share to $.75 per share. M&T may also continue to pay dividends and interest on other equity and debt instruments included in regulatory capital, including preferred stock, trust preferred securities and subordinated debt that were outstanding at December 31, 2015, consistent with the contractual terms of those instruments. Dividends are subject to declaration by M&T’s Board of Directors. Furthermore, on July 19, 2016, M&T’s Board of Directors authorized a ~~definitive agreement with~~new stock repurchase program to repurchase up to $1.15 billion of shares of M&T’s common stock subject to all applicable regulatory limitations, including those set forth in M&T’s 2016 Capital Plan.

On November 1, 2015, M&T completed its acquisition of Hudson City Bancorp, Inc. (“Hudson City”)~~, headquartered in Paramus, New Jersey, under which~~. Immediately following completion of the merger, Hudson City ~~would be acquired by M&T. The merger has received the approval of the common shareholders of M&T~~Savings Bank merged with and Hudson City. M&T announced on September 30, 2015 that it had received the approval of the Federal Reserve to acquire Hudson City and on October 9, 2015 M&T announced that it had received the approval of the New York State Department of Financial Services. The transaction is expected to be completed on or about November 1, 2015, pending the satisfaction of customary closing conditions.

Pursuant to the terms of the agreement, Hudson City common shareholders will receive consideration for each common share of Hudson City in an amount valued at .08403 of an M&T share in the form of either M&T common stock or cash, based on the election of each Hudson City shareholder, subject to proration as specified in the merger agreement (which provides for an aggregate split of total consideration of 60% common stock of M&T and 40% cash). The estimated purchase price considering the closing price of M&T’s common stock of $121.95 on September 30, 2015 was $5.3 billion.

~~As of September 30, 2015, Hudson City had $35.1 billion of assets, including $19.2 billion of loans (predominantly residential real estate~~

~~loans) and $7.9 billion of investment securities, and $30.3 billion of liabilities, including $17.9 billion of deposits.~~

Effective January 1, 2015, the Company elected to account for its investments in qualified affordable housing projects using the proportional amortization method as allowed by the Financial Accounting Standards Board (“FASB”). Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. The adoption is required to be applied retrospectively. As a result, financial statements for periods prior to 2015 have been restated. The adoption did not have a significant effect on the Company’s consolidated financial position or results of operations, but the restatement of the consolidated statement of income for the three- and nine- month periods ended September 30, 2014 resulted in the removal of $14 million and $39 million, respectively, of losses associated with qualified affordable housing projects from “other costs of operations” and added the amortization of the initial cost of the investment of a similar amount to income tax expense. The similar restatement for the fourth quarter of 2014 also reflected approximately $14 million of amortization.

~~The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) that was signed~~ into law on July 21, 2010 has and will continue to significantly change the bank regulatory structure and affect the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies, and the system of regulatory oversight of the Company. In addition, other reforms have been adopted or are being considered by other regulators and policy makers. As required by the Dodd-Frank Act, various federal regulatory agencies have proposed or adopted a broad range of implementing rules and regulations and have prepared numerous studies and reports for Congress. However, given that many of the new and proposed rules are highly complex, the full impact of regulatory reform will not be known until the rules are implemented and market practices develop under the final regulations.

~~A discussion of the provisions of the Dodd-Frank Act is included in Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, 2014.~~

The Company is subject to the Federal Reserve’s revised comprehensive risk-based capital and leverage framework for U.S. banking organizations (the “New Capital Rules”), subject to certain transitional provisions. These rules went into effect as to M&T on January 1, 2015. The New Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries, including M&T and M&T Bank, as compared to the U.S. general risk-based capital rules that were applicable to M&T and M&T Bank through December 31, 2014.

The New Capital Rules also preclude certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies’ Tier 1 capital, subject to phase-out in the case of bank holding companies, such as M&T, that had $15 billion or more in total consolidated assets as of December 31, 2009. As a result, beginning in 2015 25% of M&T’s trust preferred securities are includable in Tier 1 capital, and in 2016 and thereafter, none of M&T’s trust preferred securities will be includable in Tier 1 capital. Trust preferred securities no longer included in M&T’s Tier 1 capital may nonetheless be included as a component of Tier 2 capital on a permanent basis without phase-out and irrespective of whether such securities otherwise meet the revised definition of Tier 2 capital set forth in the New Capital Rules. On April 15, 2015, in accordance with its 2015 capital plan, M&T redeemed the junior subordinated debentures associated with $310 million of trust

preferred securities of M&T Capital Trust I, II and III. A detailed discussion of the New Capital Rules is included in Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, 2014 under the heading “Capital Requirements.” A further discussion of the Company’s regulatory capital ratios is presented herein under the heading “Capital.”

The Company is also subject to the provisions of the Dodd-Frank Act commonly referred to as the “Volcker Rule” which became effective in July 2015 (subject to a conformance period, as applicable). Pursuant to the Volcker Rule, banking entities are generally prohibited from engaging in proprietary trading and owning or sponsoring private equity or hedge funds, which are “covered funds” under that rule. Under the Volcker Rule, the Company is now required to be in compliance with the prohibition on proprietary trading and covered funds established after December 31, 2013. The Federal Reserve extended the compliance period to July 21, 2016 for investments in and relationships with covered funds that existed prior to January 1, 2014. The Federal Reserve has indicated that it intends to further extend that compliance period to July 21, 2017.

The Company believes that it has not engaged in any significant amount of proprietary trading as defined in the Volcker Rule. A review of the Company’s investments was undertaken to determine if any meet the Volcker Rule’s definition of covered funds. Based on that review, the Company believes that any impact related to investments considered to be covered funds would not have a material effect on the Company’s consolidated financial condition or its results of operations. Nevertheless, the Company may be required to divest certain investments subject to the Volcker Rule by the end of the compliance period, as extended.

On September 3, 2014, various federal banking regulators adopted final rules (“Final LCR Rule”) implementing a U.S. version of the Basel Committee’s Liquidity Coverage Ratio requirement (“LCR”) including the modified version applicable to bank holding companies, including M&T, with $50 billion in total consolidated assets that are not “advanced approaches” institutions. The LCR is intended to ensure that banks hold a sufficient amount of “high quality liquid assets” (“HQLA”) to cover the anticipated net cash outflows during a hypothetical acute 30-day stress scenario. The LCR is the ratio of an institution’s amount of HQLA (the numerator) over projected net cash outflows over the 30-day period (the denominator), in each case, as calculated pursuant to the Final LCR Rule. Once fully phased-in, a subject institution must maintain an LCR equal to at least 100% in order to satisfy this regulatory requirement. Only specific classes of assets, including U.S. Treasury securities, other U.S. government obligations and agency mortgage-backed securities, qualify under the rule as HQLA, with classes of assets deemed relatively less liquid and/or subject to a greater degree of credit risk subject to certain haircuts and caps for purposes of calculating the numerator under the Final LCR Rule.

The initial compliance date for the modified LCR is January 1, 2016, with the requirement fully phased-in by January 1, 2017. The Company intends to comply with the LCR as it is phased in. A detailed discussion of the LCR and its requirements is included in Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, 2014 under the heading “Liquidity Ratios under Basel III.”

~~On June 17, 2013, M&T and~~ M&T Bank, the principal bank subsidiary of M&T. Pursuant to the merger agreement, M&T ~~entered into a written agreement~~paid cash consideration of $2.1 billion and issued 25,953,950 shares of M&T common stock in exchange for Hudson City shares outstanding at the time of acquisition. Assets acquired totaled approximately $36.7 billion, including $19.0 billion of loans and leases (including approximately $234 million of commercial real estate loans, $18.6 billion of residential real estate loans and $162 million of consumer loans). Liabilities assumed aggregated $31.5 billion, including $17.9 billion of deposits and $13.2 billion of borrowings. Immediately following the acquisition, the Company restructured its balance sheet by selling $5.8 billion of investment securities obtained in the acquisition and repaying $10.6 billion of borrowings assumed in the transaction. The common stock issued added $3.1 billion to M&T’s common shareholders’ equity. In connection with the ~~Federal Reserve Bank~~acquisition, the Company recorded $1.1 billion of ~~New York. Under the terms~~goodwill and $132 million of the agreement, M&T and M&T Bank were required to submit to the Federal Reserve Bank of New York a revised compliance risk management program designed to ensure compliance with the Bank Secrecy Act and anti-money-laundering laws and regulations (“BSA/AML”) and to take certain other steps to enhance their compliance practices. M&T and M&T Bankcore deposit intangible asset.

have made significant progress towards implementing a program commensurate with the expanded scale and scope of the combined organization as recognized by the Board of Governors of the Federal Reserve System in its Order approving M&T and M&T Bank’s applications to acquire Hudson City and Hudson City Savings Bank. M&T and M&T Bank will continue to resolve all outstanding issues in the written agreement.

M&T consistently provides supplemental reporting of its results on a “net operating” or “tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and ~~gains and~~ expenses ~~if any,~~ associated with merging acquired operations into the Company, since such items are considered by management to be “nonoperating” in nature. ~~As a result~~Those merger-related expenses generally consist of ~~business combinations~~professional services and other ~~acquisitions,~~temporary help fees associated with the ~~Company had intangible assets consisting~~actual or planned conversion of ~~goodwill~~systems and/or integration of operations; costs related to branch and ~~core deposit~~office consolidations; costs related to termination of existing contractual arrangements to purchase various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; severance; incentive compensation costs; travel costs; and printing, supplies and other ~~intangible assets totaling $3.5 billion at September 30, 2015~~costs of completing the transactions and ~~$3.6 billion at each of September 30, 2014~~commencing operations in new markets and ~~December 31, 2014. Included in such intangible assets was goodwill of $3.5 billion at each of those dates. Amortization of core deposit~~offices. Those acquisition and ~~other intangible assets, after tax effect,~~integration-related expenses (herein referred to as merger-related expenses) totaled $3$13 million ($~~.02 per diluted common share)~~8 million after-tax effect) in ~~the recent quarter and $4 million ($.03 per diluted common share) during each of the year-earlier quarter and~~ the second quarter of ~~2015. For the nine-month periods ended September 30, 2015 and 2014, amortization of core deposit and other intangible assets, after tax effect, totaled $10 million~~2016 ($~~.08 per diluted common share) and $16 million ($.12~~.05 per diluted common share), ~~respectively.~~compared with $23 million ($14 million after-tax effect) in the first quarter of 2016 ($.09 per diluted common share). There were no merger-related expenses ~~during~~in the first ~~nine months~~half of ~~2015 or 2014.~~2015. 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 $283~~during the second quarter of 2016 aggregated $351 million, compared with $290 million in the ~~recent~~second quarter ~~compared with $280~~of 2015 and $320 million in the ~~third quarter of 2014.~~initial 2016 quarter. Diluted net operating earnings per common share were $2.07 for the ~~third~~recent quarter, ~~of 2015 were $1.95,~~ compared with ~~$1.94~~$2.01 in the year-earlier ~~quarter. Net operating income~~quarter and ~~diluted net operating earnings per common share were $290 million and $2.01, respectively,~~$1.87 in the ~~second~~first quarter of ~~2015.~~2016. For the first ~~nine~~six months of ~~2015,~~2016, net operating income and diluted net operating earnings per common share were ~~$819~~$671 million and ~~$5.64,~~$3.94, respectively, compared with ~~$805~~$536 million and ~~$5.62,~~$3.69, respectively, in the ~~corresponding 2014~~similar 2015 period.

Net operating income in the ~~recent~~second quarter of 2016 expressed as an annualized rate of return on average tangible assets was 1.18%, compared with 1.24% and 1.09% in ~~each of~~ the ~~year-earlier quarter and~~ second quarter of ~~2015.~~2015 and the initial 2016 quarter, respectively. Net operating income represented an annualized return on average tangible common equity of ~~12.98%~~12.68% in the ~~recently completed~~recent quarter, compared with ~~13.80%~~13.76% and 11.62% in the ~~third quarter of 2014~~quarters ended June 30, 2015 and ~~13.76% in 2015’s second quarter.~~March 31, 2016, respectively. For the first ~~nine~~six months of ~~2015,~~2016, net operating income represented an annualized return on average tangible assets and average tangible common shareholders’ equity of ~~1.17%~~1.14% and ~~12.89%~~12.15%, respectively, compared with ~~1.25%~~1.16% and ~~13.84%~~12.85%, respectively, in the ~~similar period of 2014.~~corresponding 2015 period.

Reconciliations of GAAP amounts with corresponding non-GAAP amounts are ~~provided~~presented in table 2.

Taxable-equivalent net interest income ~~totaled $699~~was $870 million in the ~~third~~recent quarter, ~~of 2015, 4% higher than $675~~up 26% from $689 million in the ~~year-earlier quarter.~~second quarter of 2015. That ~~improvement reflects~~growth resulted predominantly from the impact of ~~a $5.7~~higher average earning assets, which rose $24.5 billion, or 7%28%, to $111.9 billion in the recent quarter from $87.3 billion in the second quarter of 2015. The higher level of average earning assets in the second quarter of 2016 reflected a $20.5 billion increase in average loans and leases (due predominantly to the Hudson City acquisition, which added $17.2 billion to average loans), a $3.4 billion increase in average interest-bearing deposits at the Federal Reserve Bank of New York and a $720 million rise in average ~~earning~~balances of investment securities. As compared with 2015’s second quarter, a 4 basis point

~~assets that was partially offset by a 9 basis point (hundredths~~(hundredths of one percent) narrowing in the recent quarter of the Company’s net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, was due, in part, to ~~3.14%~~higher rates paid on interest-bearing deposits that reflect time deposits obtained in the acquisition of Hudson City. Taxable-equivalent net interest income in the recent ~~quarter. The increase~~quarter declined $8 million from the $878 million recorded in ~~average earning assets was attributable~~the first quarter of 2016, largely due to higher average balances of loans and leases of $3.1 billion, investment securities of $1.7 billion and interest-bearing deposits at banks of $977 million. Lower yields on average investment securities and average loans and leases outstanding contributed to thea 5 basis point narrowing of the net interest margin. ~~Taxable-equivalent~~Contributing to that narrowing were lower yields earned on investment securities, higher rates paid on interest-bearing deposits, including the impact of time deposits in the former Hudson City markets, and increased balances on deposit at the Federal Reserve Bank of New York. While those low-yield deposits add to interest income, they have the impact of lowering the reported net interest income increased 1% in the recent quarter from $689 million in the second quarter of 2015, largely due to one additional day in the recent quarter and growth in average loans outstanding of $179 million. The benefit from that growth and, to a lesser extent, growth in other earning assets was mitigated by a narrowing of the net interest margin in the recent quarter to 3.14% from 3.17% in the second quarter of 2015.margin.

For the first ~~nine months~~half of ~~2015,~~2016, taxable-equivalent net interest income was ~~$2.05~~$1.75 billion, up 2%29% from ~~$2.01~~$1.35 billion in the ~~similar period~~first six months of ~~2014.~~2015. That increase was largely attributable to higher average earning assets, which rose ~~$7.4~~$25.3 billion, or 9%29%, to ~~$87.0~~$111.5 billion in the first ~~nine~~six months of ~~2015, offset~~2016 from $86.3 billion in ~~part by~~the first half of 2015. Loans obtained in the acquisition of Hudson City added $17.6 billion of average earning assets in the first half of 2016. Partially offsetting the rise in earning assets was a 222 basis point narrowing of the net interest margin to ~~3.16%~~3.15% in ~~2015~~2016 from ~~3.38%~~3.17% in ~~2014.~~2015. That narrowing reflected ~~lower yields~~higher rates paid on ~~average loans outstanding and~~interest-bearing time deposits, largely related to deposits obtained in the ~~impact~~acquisition of additions to the investment securities portfolio that were predominantly funded through the issuance of long-term borrowings. Those securities were added to facilitate compliance with upcoming Liquidity Coverage Ratio requirements.Hudson City.

Average loans and leases ~~totaled $67.8~~rose $20.5 billion or 30% to $88.2 billion in the recent quarter from $67.7 billion in the second quarter of 2015. Average commercial loans and leases were $21.4 billion in the second quarter of 2016, up $1.4 billion, or 7%, from $20.0 billion in the year-earlier quarter. Commercial real estate loans averaged $30.1 billion in the recent quarter, an increase of ~~5% as compared with $64.8~~$1.9 billion, or 7%, from $28.2 billion in the ~~third~~second quarter of ~~2014. Commercial~~2015. Reflecting average balances of $16.8 billion of loans ~~and leases averaged $19.9~~obtained in the Hudson City acquisition, average residential real estate loans increased to $24.9 billion in the ~~third~~second quarter of 2016 from $8.4 billion in the similar 2015 ~~up $1.0 billion or 6% from $18.9 billion~~quarter. Residential real estate loans held for sale averaged $308 million in the recent quarter and $437 million in the year-earlier quarter. Average ~~commercial real estate~~consumer loans ~~aggregated $28.3~~and leases totaled $11.7 billion in the recent quarter, ~~an increase of $1.8 billion,~~$671 million or ~~7%, from $26.5~~6% higher than $11.0 billion in the ~~third~~corresponding quarter of 2014. Average residential real estate loans outstanding declined $285 million to $8.3 billion in 2015’s third quarter from $8.6 billion in the year-earlier quarter. Included in that portfolio were loans originated for sale, which averaged $466 million in the recently completed quarter, compared with $424 million in the third quarter of 2014. Consumer loans averaged $11.3 billion in the recent quarter, $500 million or 5% higher than $10.8 billion in the third quarter of 2014.2015. That growth reflects a ~~$503~~$566 million increase in the average balance of automobile ~~loan balances.~~loans.

Average loan and lease balances in the recent quarter rose ~~$179~~$572 million from the ~~second~~first quarter of ~~2015.~~2016. Average commercial loan and lease balances increased $733 million, or 4%, average commercial real estate ~~loans~~loan balances increased ~~$101~~$709 million, ~~from 2015’s second quarter~~or 2% and average balances of consumer loans ~~rose $211~~increased $131 million, or 1%, while ~~average outstanding commercial loan and lease balances decreased $35 million and~~ average residential real estate loans declined ~~$98 million. Management has chosen not to replace run-off~~$1.0 billion, or 4%, from 2016’s first quarter. The decrease in ~~the~~average residential real estate ~~loan portfolio~~loans was attributable to paydowns of loans obtained in ~~advance of~~ the Hudson City merger, as its portfolio is almost entirely comprised of residential mortgage loans. The commercial loan and lease portfolio decrease reflected the usual seasonal slowdown in loans to automobile dealers to finance their floor plan inventory.acquisition. The accompanying table summarizes quarterly changes in the major components of the loan and lease portfolio.


											Percent increase
			Percent increase (decrease) from								(decrease) from
	3rd Qtr. 2015		3rd Qtr. 2014			2nd Qtr. 2015			2nd Qtr. 2016		2nd Qtr. 2015			1st Qtr. 2016
Commercial, financial, etc.	$	19,939		6	%		—	%	$	21,450		7	%		4	%
Real estate – commercial		28,309		7			—			30,134		7			2
Real estate – consumer		8,348		(3	)		(1	)		24,858		194			(4	)
Consumer
Automobile		2,271		28			8			2,676		27			4
Home equity lines		5,620		(2	)		(1	)
Home equity loans		234		(23	)		(6	)
Home equity lines and loans										5,823		(1	)		(1	)
Other		3,128		7			3			3,214		6			3

Total consumer		11,253		5			2			11,713		6			1

Total	$	67,849		5	%		—	%	$	88,155		30	%		1	%

For the first ~~nine~~six months of ~~2015,~~2016, average loans and leases ~~aggregated $67.4~~totaled $87.9 billion, ~~up $3.1~~$20.7 billion, or ~~5% from $64.3 billion~~31%, higher than in the ~~corresponding 2014~~year-earlier period. The most significant factors contributing to that increase were the residential real estate loans obtained in the Hudson City acquisition and growth in the commercial real estate loan and commercial loan and lease portfolios.

The investment securities portfolio averaged ~~$14.4~~$14.9 billion ~~in the recent quarter, up $1.7 billion or 13% from $12.8 billion in the third quarter of 2014 and $246 million or 2% above the $14.2 billion averaged~~ in the second quarter of ~~2015.~~2016, up $720 million, or 5%, from $14.2 billion in the year-earlier quarter. Average balances of investment securities declined $434 million, or 3%, from $15.3 billion averaged in the first quarter of 2016. For the first ~~nine~~six months of ~~2015~~2016 and ~~2014,~~2015, investment securities averaged ~~$14.0~~$15.1 billion and ~~$11.0~~$13.8 billion, respectively. ~~Each of those~~The increases from the ~~respective prior~~year-earlier periods ~~reflects~~reflect mortgage-backed securities retained from the acquisition of Hudson City and the net effect of purchases, partially offset by maturities and paydowns of mortgage-backed securities. The Company purchased approximately ~~$4.6~~$3.5 billion of Fannie Mae ~~securities~~ and ~~$602 million of~~ Ginnie Mae securities ~~that were added to the investment securities portfolio~~ during ~~2014, and another $2.7 billion of Fannie Mae securities and $548~~2015, $305 million of ~~Ginnie Mae~~similar securities ~~were purchased~~ during the first ~~nine months~~quarter of ~~2015.~~2016, and $200 million of U.S. Treasury notes during the second quarter of 2016. Those purchases reflect increased holdings of investment securities to satisfy the requirements of the ~~LCR~~U.S. version of the Basel Committee’s Liquidity Coverage Ratio requirements (“LCR”) that ~~will become~~became effective in January 2016.

The investment securities portfolio is largely comprised of residential mortgage-backed securities, debt securities issued by municipalities, trust preferred securities issued by certain financial institutions, and shorter-term U.S. Treasury and federal agency notes. When purchasing investment securities, the Company also considers its liquidity position and ~~its~~ overall interest-rate risk profile as well as the adequacy of expected returns relative to ~~the~~ risks assumed, including prepayments. In managing its investment securities portfolio, the Company occasionally sells investment securities as a result of changes in interest rates and spreads, actual or anticipated prepayments, credit risk associated with a particular security, or as a result of restructuring its investment securities portfolio in connection with a business combination. The Hudson City acquisition added approximately $7.9 billion to the investment securities portfolio on the November 1, 2015 acquisition date. As noted earlier, immediately following the acquisition of Hudson City, the Company restructured its balance sheet by selling $5.8 billion of those securities.

The Company regularly reviews its investment securities for declines in value below amortized cost that might be characterized as “other than temporary.” There were no other-than-temporary impairment charges recognized in either of the ~~first nine months of 2015~~six-month periods ended June 30, 2016 or ~~2014.~~2015. Additional information about the investment securities portfolio is included in notes 3 and 12 of Notes to Financial Statements.

Other earning assets include interest-bearing deposits at the Federal Reserve Bank of New York and other banks, trading account assets and federal funds ~~sold and agreements to resell securities.~~sold. Those other earning assets in the aggregate averaged ~~$6.2~~$8.8 billion in the ~~recent~~recently completed quarter, compared with ~~$5.2~~$5.5 billion and ~~$5.5~~$8.3 billion in ~~the third quarter of 2014 and~~ the second quarter of 2015 and the first quarter of 2016, respectively.

Interest-bearing deposits at banks ~~are the largest component of those other earning assets and~~ averaged ~~$6.1~~$8.7 billion in the ~~third~~second quarter of ~~2015, compared with $5.1~~2016, $5.3 billion in the year-earlier ~~quarter~~period and ~~$5.3~~$8.2 billion in ~~2015’s second quarter.~~the first quarter of 2016. For the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, average balances ~~of other earning assets were $5.6 billion and $4.3 billion, respectively, including $5.5 billion and $4.1 billion, respectively,~~ of interest-bearing deposits at ~~banks.~~banks were $8.5 billion and $5.2 billion, respectively. The amounts of investment securities and other earning assets held by the Company are influenced by such factors as demand for loans, which generally yield more than investment securities and other earning assets, ~~liquidity requirements,~~ ongoing repayments, the levels of deposits, and management of liquidity (including the LCR) and balance sheet size and resulting capital ratios.

As a result of the changes described herein, average earning assets aggregated ~~$88.4~~$111.9 billion in the ~~third~~recent quarter, ~~of 2015,~~ compared with ~~$82.8 billion in the year-earlier quarter and~~ $87.3 billion in the ~~second~~corresponding quarter of ~~2015.~~2015 and $111.2 billion in the initial quarter of 2016. Average earning assets totaled ~~$87.0~~$111.5 billion and ~~$79.6~~$86.3 billion during the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively.

The most significant source of funding for the Company is core deposits. The Company considers noninterest-bearing deposits, interest-bearing transaction accounts, savings deposits and time deposits of $250,000 or less as core deposits. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Average core deposits totaled ~~$72.0~~$91.5 billion in the ~~third~~second quarter of ~~2015,~~2016, up 4%28% from ~~$69.1~~$71.2 billion in the year-earlier quarter and 1%2% higher than ~~$71.2~~$89.7 billion in the ~~second~~first quarter of ~~2015.~~2016. The ~~low interest rate environment in recent years has resulted in a shift in customer savings trends, as average~~Hudson City acquisition added approximately $17.0 billion of core deposits on November 1, 2015, including $9.7 billion of time deposits, ~~have continued to decline.~~$6.6 billion of savings deposits and $691 million of noninterest-bearing deposits. The ~~growth in~~higher average core deposits ~~from~~in the ~~year-earlier quarter reflects increases of approximately $1.2 billion in each of commercial customer deposits and trust demand deposits. When~~two most recent quarters as compared with the second quarter of 2015 ~~average balances~~were predominantly reflective of ~~commercial customer deposits were $1.1 billion higher in~~ the ~~recent quarter and trust demand deposits increased by $469 million. Those increases were partially offset by a $578 million seasonal decline in municipal deposits during~~impact of the ~~third quarter of 2015.~~merger with Hudson City. The following table provides an analysis of quarterly changes in the components of average core deposits. For the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, core deposits averaged ~~$71.1~~$90.6 billion and ~~$67.5~~$70.7 billion, respectively.


			Percent increase (decrease) from								Percent increase (decrease) from
	3rd Qtr. 2015		3rd Qtr. 2014			2nd Qtr. 2015			2nd Qtr. 2016		2nd Qtr. 2015			1st Qtr. 2016
NOW accounts	$	1,289		27	%		(1	)%
Interest-checking deposits									$	1,308		—	%		(2	)%
Savings deposits		40,049		—			(1	)		49,508		22			4
Time deposits		2,449		(15	)		(5	)		11,419		345			(2	)
Noninterest-bearing deposits		28,251		12			6			29,249		9			1

Total	$	72,038		4	%		1	%	$	91,484		28	%		2	%

The Company ~~has additional~~also receives funding from other deposit sources, including branch-related time deposits over $250,000, deposits associated with the Company’s Cayman Islands office, and brokered deposits. Time deposits over $250,000, excluding brokered certificates of deposit, averaged ~~$350 million~~$1.3 billion in the ~~third~~second quarter of ~~2015,~~2016, compared with ~~$361~~$353 million and ~~$353 million~~$1.2 billion in the ~~third~~year-earlier quarter and the first quarter of ~~2014 and~~2016, respectively. The higher averages in the two most recent quarters as compared with the second quarter of 2015 ~~respectively.~~were predominantly due to deposits obtained in the acquisition of Hudson City. Cayman Islands office deposits averaged ~~$206~~$183 million, ~~$325~~$212 million and ~~$212~~$187 million for the three-month periods ended ~~September~~June 30, 2016, June 30, 2015 ~~September 30, 2014~~ and ~~June 30, 2015,~~March 31, 2016, respectively. Brokered time deposits ~~were not significant~~averaged $59 million in each of the two most recent quarters,

compared with $31 million in the ~~quarters ended September 30, 2015, September 30, 2014 or June 30,~~second quarter of 2015. The Company ~~has~~also had brokered ~~NOW~~interest-bearing transaction and brokered money-market deposit accounts, which in the aggregate averaged ~~$1.2~~approximately $1.0 billion ~~during~~in the recent quarter, ~~compared with $1.0~~$1.1 billion ~~and $1.1~~

~~billion during the third quarter of 2014 and~~in the second quarter of 2015 ~~respectively.~~and $1.2 billion in the first quarter of 2016. The levels of brokered deposit accounts reflect the demand for such deposits, largely resulting from the desire of brokerage firms to earn reasonable yields while ensuring that customer deposits are fully insured. The level of Cayman Islands office deposits isare also reflective of customer demand. Additional amounts of Cayman Islands office deposits ~~and~~or brokered deposits may be added in the future depending on market conditions, including demand by customers and other investors for those deposits, and the cost of funds available from alternative sources at the time.

The Company also uses borrowings from banks, securities dealers, various Federal Home Loan Banks, the Federal Reserve Bank of New York and others as sources of funding. Short-term borrowings represent borrowing arrangements that at the time they were entered into had a contractual maturity of less than one year. Average short-term borrowings totaled ~~$174 million~~$1.1 billion in the recent quarter, compared with ~~$181 million in the third quarter of 2014 and~~ $195 million in the second quarter of ~~2015. Short-term~~2015 and $2.1 billion in the initial 2016 quarter. The higher level of such borrowings in the two most recent quarters was predominantly due to short-term borrowings from the Federal Home Loan Bank of New York assumed in the Hudson City acquisition. Those short-term fixed-rate borrowings have various maturity dates throughout 2016. Included in short-term borrowings were ~~largely comprised of~~ unsecured federal funds borrowings, which generally mature on the next business ~~day.~~day, that averaged $161 million and $153 million in the second quarters of 2016 and 2015, respectively, and $137 million in the first quarter of 2016.

Long-term borrowings averaged ~~$10.1~~$10.3 billion in the recent quarter, compared with ~~$8.5 billion in the third quarter of 2014 and~~ $10.2 billion in the second quarter of ~~2015. During 2013,~~2015 and $10.5 billion in the initial 2016 quarter. M&T Bank ~~initiated~~has a Bank Note Program whereby M&T Bank may offer unsecured senior and subordinated notes. Average balances of ~~the unsecured senior~~ notes ~~issued~~outstanding under that program were $5.2 billion, $5.5 billion ~~during each of the two most recent quarters~~ and ~~$3.6~~$5.4 billion during the ~~third quarter of 2014. During February~~three-month periods ended June 30, 2016, June 30, 2015 ~~M&T Bank issued $1.5 billion of senior notes of which $750 million mature in 2020~~ and ~~$750 million mature in 2025.~~March 31, 2016, respectively. The proceeds ~~from~~of the issuances of borrowings under the Bank Note Program have been predominantly utilized to purchase high-quality liquid assets that ~~will~~ meet the requirements of the LCR. Also included in average long-term borrowings were amounts borrowed from ~~the~~various Federal Home Loan Banks ~~of New York, Atlanta and Pittsburgh~~ of $1.2 billion in each of the ~~recent quarter,~~second quarters of 2016 and 2015 and the ~~third~~first quarter of ~~2014 and the second quarter of 2015.~~2016. Subordinated capital notes included in long-term borrowings averaged $1.5 billion induring each of the ~~two most recent quarters~~three-month periods ended June 30, 2016, June 30, 2015 and ~~$1.6 billion in the quarter ended September 30, 2014.~~March 31, 2016. Junior subordinated debentures associated with trust preferred securities that were included in average long-term borrowings ~~were $513~~totaled $515 million in the ~~most~~ recent quarter, compared with ~~$834 million in the third quarter of 2014 and~~ $562 million in the second quarter of ~~2015.~~2015 and $514 million in the first quarter of 2016. In accordance with its 2015 ~~capital plan,~~Capital Plan, on April 15, 2015 M&T redeemed the junior subordinated debentures associated with the $310 million of trust preferred securities of M&T Capital Trusts I, II and III. Those borrowings had a weighted-average interest rate of 8.24%. ~~Further~~Additional information regarding junior subordinated debentures is provided in note 5 of Notes to Financial Statements. Also included in long-term borrowings were agreements to repurchase securities, which averaged $1.9 billion during the two most recent quarters and $1.4 billion ~~during each of the third quarters of 2015 and 2014 and~~in the second quarter of 2015. The increases from the second quarter of 2015 reflect agreements to repurchase securities assumed in connection with the Hudson City acquisition. The repurchase agreements held at June 30, 2016 have various repurchase dates through ~~2017,~~2020, however, the contractual maturities of the underlying securities extend beyond such repurchase dates. The Company has utilized interest rate swap agreements to modify the repricing characteristics of certain components of long-term debt. As of ~~September~~June 30, ~~2015,~~2016, interest rate swap agreements were used to hedge approximately $1.4 billion of outstanding fixed rate long-term borrowings. Further

information on interest rate swap agreements is provided in note 10 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 ~~2.93%~~2.95% in the ~~third~~second quarter of ~~2015,~~2016, compared with ~~3.05% in the third quarter of 2014 and~~ 2.97% in the second quarter of 2015. The yield on earning assets during the

recent quarter was ~~3.48%~~3.51%, down ~~11 basis points~~slightly from ~~3.59% in~~3.52% during the ~~year-earlier~~second quarter of 2015, while the rate paid on interest-bearing liabilities ~~increased 1 basis point to .55% from .54% in the third quarter of 2014. In~~during the second quarter of ~~2015,~~2016 was .56%, compared with .55% in the year-earlier quarter. In the initial 2016 quarter, the net interest spread was 3.01%, the yield on earning assets was ~~3.52%~~3.54% and the rate paid on interest-bearing liabilities was ~~.55%~~.53%. For the first ~~nine months~~half of ~~2015,~~2016, the net interest spread was ~~2.96%~~2.98%, ~~down 23~~up 1 basis ~~points~~point from the ~~year-earlier~~corresponding 2015 period. The yield on earning assets and the rate paid on interest-bearing liabilities ~~for the nine-month period ended September 30, 2015~~ were ~~3.51%~~3.53% and .55%, respectively, during the first six months of 2016, compared with ~~3.72%~~3.53% and ~~.53%~~.56%, respectively, in the ~~first nine months~~year-earlier period. As compared with the three-month and six-month periods of ~~2014.~~2015, the similar 2016 periods reflect the favorable impact of the increase in short-term interest rates initiated by the Federal Reserve in mid-December 2015 that contributed to higher yields on loans and leases. Largely offsetting that benefit were lower yields on investment securities and higher rates paid on interest-bearing deposits. The narrowing of the net interest spread in the ~~2015 periods~~recent quarter as compared with the ~~three months and nine months ended September 30, 2014~~first quarter of 2016 reflects the higher level of deposits held at the Federal Reserve Bank of New York, higher average balances of investment securities and long-term borrowings, and the ongoing impact of the low interest rate environment on thelower yields ~~earned~~ on investment securities and ~~loans.~~higher rates paid on interest-bearing deposits.

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 ~~$32.6~~$35.7 billion in the second quarter of 2016, compared with $30.8 billion in the year-earlier quarter and $35.1 billion in the initial quarter of 2016. The increases in average net interest-free funds in the two most recent quarters as compared with the second quarter of 2015 reflect higher average balances of noninterest-bearing deposits and shareholders’ equity. Those deposits averaged $29.2 billion in the recent quarter, compared with $28.4 billion in the third quarter of 2014 and $30.8 billion in the second quarter of 2015. The increase in average net interest-free funds in the recent quarter as compared with the third quarter of 2014 was predominantly the result of higher average balances of noninterest-bearing deposits. Such deposits averaged $28.3 billion, $25.1$26.8 billion and ~~$26.8~~$28.9 billion in the quarters ended ~~September 30, 2015, September 30, 2014 and~~ June 30, 2015 and March 31, 2016, respectively. ~~The~~During the first six months of 2016 and 2015, average net interest-free funds aggregated $35.4 billion and $30.0 billion, respectively. In connection with the acquisition of Hudson City, the Company added noninterest-bearing deposits of $691 million at the acquisition date. In addition to the impact of the merger, growth in ~~average~~ noninterest-bearing deposits ~~from the year-earlier quarter and~~since the second quarter of 2015 ~~reflects increases~~was due, in ~~commercial customer~~part, to higher deposits of ~~approximately $1.5 billion and $930 million, respectively,~~commercial and trust ~~demand deposits~~customers. The rise in average shareholders’ equity included $3.1 billion of ~~approximately $1.2 billion and $469 million, respectively. During~~common equity issued in connection with the ~~first nine months~~acquisition of ~~2015 and 2014, average~~Hudson City as well as net interest-free funds were $30.9 billion and $28.0 billion, respectively. That increase was also reflective of higher average balances of noninterest-bearing deposits, which totaled $26.9 billion and $24.9 billion during the first nine months of 2015 and 2014, respectively.retained earnings. Goodwill and core deposit and other intangible assets averaged ~~$3.5~~$4.7 billion ~~during~~in each of the two most recent quarters, compared with ~~$3.6~~$3.5 billion in ~~the quarter ended September 30, 2014. Goodwill was reduced by approximately $11 million during~~ the second quarter of ~~2015 as a result~~2015. Goodwill of $1.1 billion and core deposit intangible of $132 million resulted from the ~~previously noted sale of the Company’s trade processing business in that quarter.~~Hudson City acquisition. The cash surrender value of bank owned life insurance averaged $1.7 billion in each of the three-month periods ended ~~September~~June 30, 2016, June 30, 2015 ~~September 30, 2014~~ and ~~June 30, 2015.~~March 31, 2016. Increases in the cash surrender value of bank owned life insurance and benefits received 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 ~~.21%~~.18% in the most recent quarter, compared with ~~.18% in the third quarter of 2014 and~~ .20% in the second quarter of ~~2015.~~2015 and .17% in the first quarter of 2016. That contribution for the first ~~nine~~six months of 2016 and 2015 was .17% and ~~2014 was~~ .20% ~~and .19%~~, respectively.

Reflecting the changes to the net interest spread and the contribution of net interest-free funds as described herein, the Company’s net interest

margin was ~~3.14%~~3.13% in the recent quarter, ~~compared with 3.23% in the third quarter of 2014 and~~down from 3.17% in the ~~second~~year-earlier quarter and 3.18% in the first quarter of ~~2015.~~2016. During the ~~nine-month periods ended September 30,~~first six months of 2016 and 2015, ~~and 2014,~~ the net interest margin was ~~3.16%~~3.15% and ~~3.38%~~3.17%, respectively. 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. ~~In particular, the relatively low interest rate environment continues to exert downward pressure on yields on loans, investment~~

Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company has utilized interest rate swap agreements to modify the repricing characteristics of certain portions of its interest-bearing liabilities. Periodic settlement amounts arising from these agreements are reflected in the rates paid on interest-bearing liabilities. The notional amount of interest rate swap agreements entered into for interest rate risk management purposes was $1.4 billion at each of ~~September~~June 30, 2016, June 30, 2015 ~~September 30, 2014~~ and ~~June 30, 2015.~~March 31, 2016. Under the terms of those interest rate swap agreements, the Company received payments based on the outstanding notional amount at fixed rates and made payments at variable rates. Those interest rate swap agreements were designated as fair value hedges of certain fixed rate long-term borrowings. There were no interest rate swap agreements designated as cash flow hedges at those respective dates.

In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and changes in the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the corresponding gain or loss recognized in current earnings. The difference between changes in the fair value of the interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded in “other revenues from operations” in the Company’s consolidated statement of income. The amounts of hedge ineffectiveness recognized during each of the quarters ended ~~September~~June 30, 2016, June 30, 2015 and ~~2014 and the quarter ended June 30, 2015~~March 31, 2016 were not material to the Company’s ~~consolidated~~ results of operations. The estimated aggregate fair value of interest rate swap agreements designated as fair value hedges represented gains of approximately ~~$61~~$34 million at ~~September~~June 30, ~~2015, $76 million at September 30, 2014,~~2016, $64 million at June 30, 2015, $41 million at March 31, 2016 and ~~$73~~$44 million at December 31, ~~2014.~~2015. The fair values of such interest rate swap agreements were substantially offset by changes in the fair values of the hedged items. The changes in the fair values of the interest rate swap agreements and the hedged items primarily result from the effects of changing interest rates and spreads. The Company’s credit exposure as of ~~September~~June 30, ~~2015~~2016 with respect to the estimated fair value of interest rate swap agreements used for managing interest rate risk has been substantially mitigated through master netting arrangements with trading account interest rate contracts with the same counterparty as well as counterparty postings of ~~$35~~$9 million of collateral with the Company.

The weighted-average rates to be received and paid under interest rate swap agreements currently in effect were 4.42% and ~~1.29%~~1.63%, respectively, at ~~September~~June 30, ~~2015.~~2016. 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 the accompanying table. Additional information about the Company’s use of interest rate swap agreements and other derivatives is included in note 10 of Notes to Financial Statements.


	Three months ended September 30												Three months ended June 30
	2015						2014						2016						2015
	Amount			Rate(a)			Amount			Rate(a)			Amount			Rate(a)			Amount			Rate(a)
Increase (decrease) in:
Interest income	$	—			—	%	$	—			—	%	$	—			—	%	$	—			—	%
Interest expense		(10,999	)		(.08	)		(11,227	)		(.08	)		(9,798	)		(.05	)		(11,143	)		(.08	)

Net interest income/margin	$	10,999			.05	%	$	11,227			.05	%	$	9,798			.04	%	$	11,143			.06	%

Average notional amount	$	1,400,000					$	1,547,826					$	1,400,000					$	1,400,000

Rate received (b)					4.42	%					4.00	%
Rate paid (b)					1.25	%					1.07	%
Rate received(b)																	4.42	%					4.42	%
Rate paid(b)																	1.60	%					1.22	%


	Nine months ended September 30												Six months ended June 30
	2015						2014						2016						2015
	Amount			Rate(a)			Amount			Rate(a)			Amount			Rate(a)			Amount			Rate(a)
Increase (decrease) in:
Interest income	$	—			—	%	$	—			—	%	$	—			—	%	$	—			—	%
Interest expense		(33,419	)		(.08	)		(33,783	)		(.09	)		(20,131	)		(.05	)		(22,420	)		(.08	)

Net interest income/margin	$	33,419			.06	%	$	33,783			.06	%	$	20,131			.03	%	$	22,420			.06	%

Average notional amount	$	1,400,000					$	1,457,143					$	1,400,000					$	1,400,000

Rate received (b)					4.42	%					4.25	%
Rate paid (b)					1.22	%					1.14	%
Rate received(b)																	4.42	%					4.42	%
Rate paid(b)																	1.53	%					1.21	%

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. M&T’s banking subsidiaries have access to additional funding sources through borrowings from the FHLB of New York, lines of credit with the Federal Reserve Bank of New York, the previously noted Bank Note Program, and other available borrowing facilities. 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. ~~Such notes generally qualify under the Federal Reserve Board’s risk-based capital guidelines for inclusion in the Company’s capital.~~ However, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Company’s junior subordinated debentures associated with trust preferred securities ~~are being~~have been phased-out of the definition of Tier 1 capital. Effective January 1, 2015, 75% of such ~~junior subordinated debentures are~~securities were excluded from the Company’s Tier 1 capital, and beginning January 1, 2016, 100% ~~will be~~were excluded. The amounts excluded from Tier 1 capital are includable in total capital. In accordance with its 2015 Capital Plan, in April 2015 M&T redeemed the junior subordinated debentures associated with the trust preferred securities of M&T Capital Trusts I, II and III.

The Company has informal and sometimes reciprocal sources of funding available through various arrangements for unsecured short-term borrowings from a wide group of banks and other financial institutions. Short-term federal funds borrowings ~~totaled $122~~aggregated $156 million, ~~$114~~$111 million and ~~$135~~$99 million at ~~September~~June 30, ~~2015, September~~2016, June 30, ~~2014~~2015 and December 31, ~~2014,~~2015, respectively. In general, those borrowings were unsecured and matured on the

next business day. In addition to satisfying customer demand, Cayman Islands office deposits may be used by the Company as an alternative to short-term borrowings. Cayman Islands office deposits totaled ~~$206~~$194 million at ~~September~~June 30, 2016, $167 million at June 30, 2015, ~~$242 million at September 30, 2014~~ and ~~$177~~$170 million at December 31, ~~2014.~~ 2015.

The Company has also benefited from the placement of brokered deposits. The Company has brokered ~~NOW~~interest-bearing transaction and brokered money-market deposit accounts which aggregated ~~$1.2 billion at September 30, 2015,~~approximately $1.0 billion at ~~September~~June 30, ~~2014~~2016, $1.1 billion at June 30, 2015 and ~~$1.1~~$1.2 billion at December 31, ~~2014.~~2015. Brokered time deposits were not a significant source of funding as of those dates.

The Company’s ability to obtain funding from these or other sources could be negatively impacted should the Company experience a substantial deterioration in its financial condition or its debt ratings, or should the availability of short-term funding become restricted due to a disruption in the financial markets. The Company attempts to quantify such credit-event risk by modeling scenarios that estimate the liquidity impact resulting from a short-term ratings downgrade over various grading levels. Such impact is estimated by attempting to measure the effect on available unsecured lines of credit, available capacity from secured borrowing sources and securitizable assets. 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.

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 totaled $2$17 million at ~~September~~June 30, ~~2014,~~2016 and less than $1 million at December 31, 2015, while there were no ~~outstanding~~ VRDBs in the Company’s trading account at ~~September~~June 30, ~~2015 or December 31, 2014.~~2015. The total amount of VRDBs outstanding backed by M&T Bank letters of credit was $1.7 billion at each of June 30, 2016 and December 31, 2015, compared with $1.8 billion at ~~September~~June 30, ~~2015, compared with $1.7 billion at September 30, 2014 and $2.0 billion at December 31, 2014.~~2015. M&T Bank also serves as remarketing agent for most of those bonds.

The Company enters into contractual obligations in the normal course of business which require future cash payments. Such obligations include, among others, payments related to deposits, borrowings, leases and other contractual commitments. 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 13 of Notes to Financial Statements.

M&T’s primary source of funds to pay for operating expenses, shareholder dividends and treasury stock repurchases has historically been the receipt of dividends from its banking subsidiaries, which are subject to various regulatory limitations. Dividends from any banking subsidiary to M&T are limited by the amount of earnings of the banking subsidiary in the current year and the two preceding years. For purposes of that test, at ~~September~~June 30, ~~2015~~2016 approximately ~~$1.5~~$1.3 billion was available for payment of dividends to M&T from banking subsidiaries. Information regarding the long-term debt obligations of M&T is included in note 5 of Notes to Financial Statements.

Management closely monitors the Company’s liquidity position on an ongoing basis for compliance with internal policies and believes that available sources of liquidity are adequate to meet funding needs anticipated in the normal course of business. Management does not anticipate engaging in any activities, either currently or in the long-term, for which adequate funding would not be available and would therefore result in a significant

strain on liquidity at either M&T or its subsidiary banks. Banking regulators have finalized rules requiring a banking company to maintain a minimum amount of liquid assets to withstand a standardized supervisory liquidity stress scenario. The effective date for those rules for the Company iswas January 1, 2016, subject to a phase-in period. The Company has taken steps as noted herein to enhance its liquidity and ~~will take further action, as necessary, to comply~~is in compliance with the ~~final regulations when they take effect.~~phase-in requirements of the rules.

Market risk is the risk of loss from adverse changes in the market prices and/or interest rates of the Company’s financial instruments. The primary market risk the Company is exposed to is interest rate risk. Interest rate risk arises from the Company’s core banking activities of lending and deposit-taking, because assets and liabilities reprice at different times and by different amounts as interest rates change. As a result, net interest income earned by the Company is subject to the effects of changing interest rates. The Company measures interest rate risk by calculating the variability of net interest income in future periods under various interest rate scenarios using projected balances for earning assets, interest-bearing liabilities and derivatives used to hedge interest rate risk. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income. The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and investment securities, and expected maturities of investment securities, loans and deposits. Management uses a “value of equity” model to supplement the modeling technique described above. Those supplemental analyses are based on discounted cash flows associated with on- and off-balance sheet financial instruments. Such analyses are modeled to reflect changes in interest rates and provide management with a long-term interest rate risk metric.

The Company’s Asset-Liability Committee, which includes members of senior management, monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a computer model that forecasts net interest income under different interest rate scenarios. In modeling changing interest rates, the Company considers different yield curve shapes that consider both parallel (that is, simultaneous changes in interest rates at each point on the yield curve) and non-parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve. In utilizing the model, projections of net interest income calculated under the varying interest rate scenarios are compared to a base interest rate scenario that is reflective of current interest rates. The model considers the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. 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.

The accompanying table as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 displays the estimated impact on net interest income from non-trading

financial instruments in the base scenario described above resulting from parallel changes in interest rates across repricing categories during the first modeling year.

The Company utilized many assumptions to calculate the impact that changes in interest rates may have on net interest income. The more significant of those assumptions included the rate of prepayments of mortgage-related assets, cash flows from derivative and other financial instruments held for non-trading purposes, loan and deposit volumes and pricing, and deposit maturities. In the scenarios presented, the Company also assumed gradual increases in interest rates during a twelve-month period of 100 and 200 basis points, as compared with the assumed base scenario, as well as a gradual decrease of ~~100~~50 basis points. In the ~~second quarter of 2015,~~declining rate scenario, the rate changes may be limited to lesser amounts such that interest rates remain positive at all points on the yield curve. In 2016, the Company suspended the ~~-200~~-100 basis ~~points~~point scenario due to the persistent low level of interest rates. This scenario will be reinstated if and when interest rates rise sufficiently to make the analysis more meaningful. ~~In the declining rate scenario, the rate changes may be limited to lesser amounts such that interest rates remain positive on all points of the yield curve.~~ The assumptions used in interest rate sensitivity modeling are inherently uncertain and, as a result, the Company cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly from those presented due to the timing, magnitude and frequency of changes in interest rates and changes in market conditions and interest rate differentials (spreads) between maturity/repricing categories, as well as any actions, such as those previously described, which management may take to counter such changes.

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 ~~such~~investment securities is presented herein under the heading “Capital” and in notes 3 and 12 of Notes to Financial Statements.

The Company engages in limited trading account activities to meet the financial needs of customers and to fund the Company’s obligations under certain deferred compensation plans. Financial instruments utilized in trading account activities consist predominantly of interest rate contracts, such as swap agreements, and forward and futures contracts related to foreign currencies. The Company generally mitigates the foreign currency and interest rate risk associated with trading account activities by entering into offsetting trading positions that are also included in the trading account. The fair values of the offsetting trading account positions associated with interest rate contracts and foreign currency and other option and futures contracts are presented in note 10 of Notes to Financial Statements. The amounts of gross and net trading account positions, as well as the type of trading account activities conducted by the Company, are subject to a well-defined series of potential loss exposure limits established by management and approved by M&T’s Board of Directors. However, as with any non-government guaranteed financial instrument, the Company is exposed to credit risk associated with counterparties to the Company’s trading account activities.

The notional amounts of interest rate contracts entered into for trading account purposes ~~aggregated $17.6~~totaled $20.1 billion at ~~each of September~~June 30, ~~2015 and December 31, 2014,~~2016, compared with $17.2 billion at ~~September~~June 30, ~~2014.~~2015 and $18.4 billion at December 31, 2015. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes ~~totaled~~aggregated $826 million at June 30, 2016, compared with $1.6 billion ~~$1.0 billion and $1.3 billion~~ at ~~September~~each of June 30, 2015 ~~September 30, 2014~~ and December 31, ~~2014, respectively.~~2015. Although the notional amounts of these contracts are not recorded in the consolidated balance sheet, the fair values of all financial instruments used for trading account activities are recorded in the consolidated balance sheet. The fair values of all trading account assets and liabilities totaled ~~$341~~$506 million and ~~$233~~$353 million, respectively, at ~~September~~June 30, ~~2015, $297~~2016, $277 million and ~~$182~~$172 million, respectively, at ~~September~~June 30, ~~2014,~~2015, and ~~$308~~$274 million and ~~$203~~$161 million, respectively, at December 31, ~~2014.~~2015. Included in trading account assets ~~at September 30, 2015~~ were assets related to deferred compensation plans totaling ~~$23 million, compared with $26~~$22 million at ~~September~~June 30, ~~2014~~2016 and ~~$27~~$24 million at each of June 30, 2015 and December 31, ~~2014.~~2015. Changes in the fair ~~values~~value of such assets are recorded as “trading account and foreign exchange gains” in the consolidated statement of income. Included in “other liabilities” in the consolidated balance sheet at ~~September~~June 30, ~~2015~~2016 were ~~$27~~$26 million of liabilities related to deferred compensation plans, compared with ~~$30~~$28 million at each of ~~September~~June 30, ~~2014~~2015 and December 31, ~~2014.~~2015. 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 $40 million, $25 million and $33 million at June 30, 2016, June 30, 2015 and December 31, 2015, respectively.

Given the Company’s policies, limits and positions, management believes that the potential loss exposure to the Company resulting from market risk associated with trading account activities was not material, however, as previously noted, the Company is exposed to credit risk associated with counterparties to transactions related to the Company’s trading account activities. Additional information about the Company’s use of derivative financial instruments in its trading account activities is included in note 10 of Notes to Financial Statements.

The Company maintains an allowance for credit losses that in management’s judgment appropriately reflects losses inherent in the loan and lease portfolio. A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management. The provision for credit losses ~~in the third quarter of 2015~~ was ~~$44 million, compared with $29~~$32 million in the ~~year-earlier~~second quarter ~~and~~of 2016, compared with $30 million in the second quarter of ~~2015.~~2015 and $49 million in the initial 2016 quarter. For the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, the provision for credit losses was ~~$112~~$81 million and ~~$91~~$68 million, respectively. Net ~~loan~~ charge-offs of loans were ~~$40~~$24 million in the ~~recent~~recently completed quarter, ~~up from $28 million in the third quarter of 2014 and~~compared with $21 million in the second quarter of 2015. The higher level of net loan charge-offs in 2015’s third quarter reflected an increase in net commercial loan and lease charge-offs to $22 million from $8 million in last year’s thirdyear-earlier quarter and $4$42 million in the ~~second~~first quarter of 2015. The largest individual charge-off in the recent quarter was $6 million related to a loan with a general contractor in the greater New York City region. No other individual charge-offs were greater than $3 million and there was no concentration of charge-offs in any particular region or industry.2016. Net charge-offs as an annualized percentage of average loans and leases were ~~.24%~~.11% in the ~~third~~recent quarter, ~~of 2015,~~ compared with ~~.17% and~~ .13% in the ~~third~~year-earlier quarter ~~of 2014~~ and .19% in the ~~second quarter of 2015, respectively.~~initial 2016 quarter. Net charge-offs for the ~~nine-month~~six-month periods ended ~~September~~June 30 aggregated ~~$98~~$66 million in ~~2015~~2016 and ~~$89~~$58 million in ~~2014,~~2015, representing an annualized rate of ~~.19%~~.15% and .17% of average loans and leases in ~~each~~those respective ~~period.~~periods. A summary of net charge-offs by loan type is presented in the ~~accompanying table.~~table that follows.


	2015								2016
	1st Qtr.		2nd Qtr.		3rd Qtr.		Year to-date		1st Qtr.			2nd Qtr.			Year to-date
Commercial, financial, leasing, etc.	$	8,411		4,056		21,590		34,057	$	902			(3,132	)		(2,230	)
Real estate:
Commercial		6,094		2,429		84		8,607		(1,141	)		(1,866	)		(3,007	)
Residential		2,129		2,071		2,143		6,343		5,085			3,115			8,200
Consumer		19,555		12,830		16,372		48,757		37,394			26,139			63,533

	$	36,189		21,386		40,189		97,764	$	42,240			24,256			66,496


	2014								2015
	1st Qtr.		2nd Qtr.		3rd Qtr.		Year to-date		1st Qtr.			2nd Qtr.			Year to-date
Commercial, financial, leasing, etc.	$	9,146		10,140		8,072		27,358	$	8,411			4,056			12,467
Real estate:
Commercial		289		1,322		399		2,010		6,094			2,429			8,523
Residential		5,822		2,701		1,695		10,218		2,129			2,071			4,200
Consumer		16,651		14,939		17,867		49,457		19,555			12,830			32,385

	$	31,908		29,102		28,033		89,043	$	36,189			21,386			57,575

Reflected in net charge-offs of commercial loans and leases in the recent quarter was a $7 million recovery of a previously charged-off loan. Included in net charge-offs of consumer loans ~~and leases~~ were net charge-offs during the quarters ended ~~September~~June 30, 2016, June 30, 2015 ~~September 30, 2014~~ and ~~June 30, 2015,~~March 31, 2016, respectively, of: automobile loans of $6 million, $2 million ~~$3 million~~ and $2$11 million; recreational vehicle loans of $3 million, $2 million and $2$12 million; and home equity loans and lines of credit ~~including Alt-A second lien loans,~~ of $4 million, $3 million and $5 million. During the first two quarters of 2016, the Company charged off consumer loans associated with customers who were either deceased or had filed for bankruptcy that, in accordance with GAAP, had previously been considered when determining the level of the allowance for credit losses. Such charge-offs totaled $5 million and $3 million. Alt-A 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. Loans in the ~~Company’s Alt-A portfolio were originated by~~recent quarter and $14 million in the ~~Company prior to 2008.~~initial 2016 quarter and included $2 million and $11 million, respectively, of loan balances with a current payment status at the time of charge-off. In addition, reflected in consumer loan charge-offs in the recent quarter was a $6 million charge-off of a personal usage loan.

Loans acquired in connection with acquisition transactions subsequent to 2008 were recorded at fair value with no carry-over of any previously recorded allowance for credit losses. Determining the fair value of ~~the~~ acquired loans ~~required~~requires estimating cash flows expected to be collected on the loans and discounting those cash flows at then-current interest rates. ~~The~~For acquired loans where fair value was less than outstanding principal as of the acquisition date and the resulting discount was due, at least in part, to credit deterioration, the excess of expected cash flows over the carrying value of the loans is recognized as interest income over the lives of the loans. The difference between contractually required payments and the cash flows expected to be collected is referred to as the nonaccretable balance and is not recorded on the consolidated balance sheet. The nonaccretable balance reflects estimated future credit losses and other contractually required payments that the Company does not expect to collect. The Company regularly evaluates the reasonableness of its cash flow ~~projections.~~projections associated with such loans. Any decreases to the expected cash flows require the Company to evaluate the need for an additional allowance for credit losses and could lead to charge-offs of ~~acquired~~

loan balances. Any significant increases in expected cash flows result in additional interest income to be recognized over the then-remaining lives of the loans. The carrying amount of loans ~~obtained in acquisitions~~acquired at a discount subsequent to 2008 and accounted for based on expected cash flows was ~~$2.0 billion, $2.9 billion and $2.6~~$2.2 billion at ~~September~~each of June 30, 2016 and June 30, 2015 ~~September 30, 2014~~ and $2.5 billion at December 31, ~~2014, respectively.~~2015. The ~~portion of~~decrease in the recent quarter as compared with December 31, 2015 was largely attributable to payments received. The nonaccretable balance related to remaining principal losses ~~as well as life-to-date principal losses charged against the nonaccretable balance~~associated with loans acquired at a discount as of

~~September~~ June 30, ~~2015~~2016 and December 31, ~~2014 are~~2015 is presented in the accompanying table.

For acquired loans where the fair value exceeded the outstanding principal balance, the resulting premium is recognized as a reduction of interest income over the lives of the loans. Immediately following the acquisition date and thereafter, an allowance for credit losses is recorded for incurred losses inherent in the portfolio, consistent with the accounting for originated loans and leases. The carrying amount of Hudson City loans acquired at a premium was $16.1 billion and $17.8 billion at June 30, 2016 and December 31, 2015, respectively. A $21 million provision for credit losses was recorded in the fourth quarter of 2015 for incurred losses inherent in those loans. GAAP does not allow the credit loss component of the net premium associated with those loans to be bifurcated and accounted for as a nonaccreting balance as is the case with purchased impaired loans and other loans acquired at a discount. Despite the fact that the determination of aggregate fair value reflects the impact of expected credit losses, GAAP provides that incurred losses in a portfolio of loans acquired at a premium be recognized even though in a relatively homogenous portfolio of residential mortgage loans the specific loans to which the losses relate cannot be individually identified at the acquisition date.

Nonaccrual loans totaled ~~$787~~$849 million or ~~1.15%~~.96% of total loans and leases outstanding at ~~September~~June 30, ~~2015,~~2016, compared with ~~$848 million or 1.29% at September 30, 2014, $799 million or 1.20% at December 31, 2014 and~~ $797 million or 1.17% a year earlier, $799 million or .91% at ~~June 30, 2015.~~December 31, 2015 and $877 million or 1.00% at March 31, 2016. The ~~decline~~increase in nonaccrual loans at the two most recent ~~quarter-end~~quarter-ends as compared with ~~September~~June 30, ~~2014 was largely due to lower commercial real estate loans, including residential builder~~2015 and ~~developer and construction loans, and~~December 31, 2015 reflects the normal migration of $113 million of previously performing residential real estate loans ~~partially offset by an increase~~obtained in ~~commercial loans in nonaccrual status.~~the acquisition of Hudson City that became over 90 days past due during the first six months of 2016 and, as such, were not identifiable as purchased impaired as of the acquisition date.

Accruing loans past due 90 days or more (excluding loans acquired ~~loans) were $231~~at a discount) totaled $298 million or .34% of total loans and leases at ~~September~~June 30, ~~2015,~~2016, compared with ~~$313 million or .48% at September 30, 2014, $245 million or .37% at December 31, 2014 and~~ $239 million or .35% at June 30, ~~2015.~~2015, $317 million or .36% at December 31, 2015 and $336 million or .38% at March 31, 2016. Those loans included loans guaranteed by government-related entities of ~~$194~~$270 million, ~~at September 30, 2015, $265~~$207 million, ~~at September 30, 2014, $218~~$276 million ~~at December 31, 2014~~ and ~~$207~~$279 million at June 30, ~~2015.~~2016, June 30, 2015, December 31, 2015 and March 31, 2016, respectively. Such guaranteed loans obtained in the acquisition of Hudson City totaled $45 million at June 30, 2016 and $44 million at each of December 31, 2015 and

March 31, 2016. Guaranteed loans also included one-to-four family residential ~~real estate~~mortgage loans serviced by the Company that were repurchased to reduce associated servicing costs, including a requirement to advance principal and interest payments that had not been received from individual mortgagors. Despite the loans being purchased by the Company, the insurance or guarantee by the applicable government-related entity remains in force. The outstanding principal balances of the repurchased loans that are guaranteed by government-related entities totaled ~~$182~~$218 million at ~~September~~June 30, ~~2015, $237 million at September 30, 2014, $196 million at December 31, 2014 and~~2016, $195 million at June 30, ~~2015.~~2015, $221 million at December 31, 2015 and $226 million at March 31, 2016. The remaining accruing loans past due 90 days or more not guaranteed by government-related entities were loans considered to be with creditworthy borrowers that were in the process of collection or renewal. Acquired accruing loans past due 90 days or more are loans that could not be specifically identified as impaired as of the acquisition date, but were recorded at estimated fair value as of such date. Such loans totaled $81 million at September 30, 2015, compared with $132 million at September 30, 2014, $110 million at December 31, 2014 and $79 million at June 30, 2015.

Purchased impaired loans are loans obtained in acquisition transactions subsequent to 2008 that as of the acquisition date were specifically identified as displaying signs of credit deterioration and for which the Company did not expect to collect all outstanding principal and contractually required interest payments. Those loans were impaired at the date of acquisition, were recorded at estimated fair value and were generally delinquent in payments, but, in accordance with GAAP, the Company continues to accrue interest income on such loans based on the estimated expected cash flows associated with the loans. The carrying amount of such loans was ~~$149~~$662 million at ~~September~~June 30, ~~2015,~~2016, or ~~.22%~~approximately .7% of total loans. Of that amount, $582 million was related to the Hudson City acquisition. Purchased impaired loans totaled ~~$237~~$169 million and ~~$198~~$768 million at ~~September~~June 30 and December 31, ~~2014,~~2015, respectively. ~~The declines in~~

Accruing loans acquired at a discount past due 90 days or more are loans that could not be specifically identified as impaired as of the acquisition date, but were recorded at estimated fair value as of such date. Such loans ~~from the respective 2014 dates were predominantly the result of payments received from customers.~~totaled $69 million at June 30, 2016, compared with $79 million at June 30, 2015 and $68 million at December 31, 2015.

In an effort to assist borrowers, the Company modified the terms of select loans. If the borrower was experiencing financial difficulty and a concession was granted, the Company ~~considers~~considered such modifications as troubled debt restructurings. Loan modifications included such actions as the extension of loan maturity dates and the lowering of interest rates and monthly payments. The objective of the modifications was to increase loan repayments by customers and thereby reduce net charge-offs. In accordance with GAAP, the modified loans are included in impaired loans for purposes of determining the level of the allowance for credit losses. Information about modifications of loans that are considered troubled debt restructurings is included in note 4 of Notes to Financial Statements.

Residential real estate loans modified under specified loss mitigation programs prescribed by government guarantors have not been included in renegotiated loans because the loan guarantee remains in full force and, accordingly, the Company has not granted a concession with respect to the ultimate collection of the original loan balance. Such loans aggregated ~~$153~~$162 million, ~~$142~~$156 million and ~~$149~~$147 million at ~~September~~June 30, ~~2015, September~~2016, June 30, ~~2014~~2015 and December 31, ~~2014,~~2015, respectively.

Nonaccrual commercial loans and leases ~~totaled $224~~aggregated $241 million at ~~September~~June 30, ~~2015, $191 million at September 30, 2014, $177 million at December 31, 2014 and~~2016, $210 million at June 30, ~~2015.~~2015, $242 million at December 31, 2015 and $280 million at March 31, 2016. The largest ~~individual~~ commercial loans placed in nonaccrual status ~~during~~since June 30, 2015 were ~~$24~~a $21 million ~~with a multi-regional automobile rental agency and $19 million~~relationship with a commercial maintenance services provider with operations in New Jersey and ~~Pennsylvania.~~

Pennsylvania that was placed in nonaccrual status in the third quarter of 2015 and a $37 million relationship with a multi-regional manufacturer of refractory brick and other cast-able products placed in nonaccrual status in the first quarter of 2016. The decline in nonaccrual commercial loans from March 31 to June 30, 2016 was due largely to payments received on such loans.

Commercial real estate loans classified as nonaccrual ~~aggregated $235~~totaled $218 million at ~~September~~June 30, ~~2015, $274 million a year earlier, $239 million at December 31, 2014 and~~2016, $246 million at June 30, ~~2015. Included in those amounts were nonaccrual~~2015 and $224 million at each of December 31, 2015 and March 31, 2016. Nonaccrual commercial real estate loans ~~to residential homebuilders and developers~~included construction-related loans of $46 million, $78 million, $45 million and ~~$73 million at September 30, 2015 and September 30, 2014, respectively, $72 million at December 31, 2014 and $57~~$53 million at June 30, ~~2015.~~2016, June 30, 2015, December 31, 2015 and March 31, 2016, respectively. Those nonaccrual construction loans included loans to residential builders and developers of $24 million, $57 million, $28 million and $32 million at June 30, 2016, June 30, 2015, December 31, 2015 and March 31, 2016, respectively. Information about the location of nonaccrual and charged-off loans to residential real estate builders and developers as of and for the three-month period ended ~~September~~June 30, ~~2015~~2016 is presented in the accompanying table.


														June 30, 2016							Quarter ended June 30, 2016
	September 30, 2015							Quarter ended September 30, 2015								Nonaccrual					Net charge-offs (recoveries)
			Nonaccrual					Net charge-offs (recoveries)						Outstanding balances(b)		Balances		Percent of outstanding balances			Balances			Annualized percent of average outstanding balances
	Outstanding balances(a)		Balances		Percent of outstanding balances			Balances			Annualized percent of average outstanding balances			(dollars in thousands)
	(dollars in thousands)
New York	$	646,045	$	4,711		.73	%	$	1,439			.77	%	$	806,003	$	1,913		.24	%	$	690			.09	%
Pennsylvania		146,223		26,668		18.24			(71	)		(.20	)		124,102		19,643		15.83			(70	)		(.06	)
Mid-Atlantic		450,578		16,009		3.55			(135	)		(.12	)
Mid-Atlantic(a)															463,954		3,177		.68			(1,580	)		(.35	)
Other		393,454		1,411		.36			—			—			504,769		1,554		.31			—			—


Total	$	1,636,300	$	48,799		2.98	%	$	1,233			.29	%	$	1,898,828	$	26,287		1.38	%	$	(960	)		(.05	)%

Residential real estate loans ~~classified as~~in nonaccrual status at June 30, 2016 were ~~$218~~$282 million, ~~at September 30, 2015,~~ compared with ~~$264 million at September 30, 2014, $258 million at December 31, 2014, and~~ $233 million at June 30, ~~2015.~~2015, $215 million at December 31, 2015 and $263 million at March 31, 2016. The increase in residential real estate loans classified as nonaccrual at the two most recent quarter-ends as compared with December 31, 2015 reflects the normal migration of previously performing loans obtained with the acquisition of Hudson City that became more than 90 days delinquent during the first six months of 2016. Such loans increased nonaccrual residential real estate loans by $79 million at March 31, 2016 and by $113 million at June 30, 2016. Those loans could not be identified as purchased impaired loans at the acquisition date because the borrowers were making current loan payments at the time and the loans were not recorded at a discount. Included in

residential real estate loans classified as nonaccrual were ~~Alt-A~~limited documentation first mortgage loans of ~~$64~~$79 million, ~~at September 30, 2015, compared with $80~~$68 million, ~~at September 30, 2014, $78~~$62 million ~~at December 31, 2014~~ and ~~$68~~$76 million at June 30, ~~2015.~~2016, June 30, 2015, December 31, 2015 and March 31, 2016 respectively. Limited documentation first mortgage loans represent loans secured by residential real estate that at origination typically included some form of limited borrower documentation requirements as compared with more traditional loans.

Such loans in the Company’s portfolio prior to the Hudson City transaction were originated by the Company before 2008. Hudson City discontinued its limited documentation loan program in January 2014. Residential real estate loans past due 90 days or more and accruing interest (excluding loans acquired ~~loans)~~at a discount) totaled ~~$194~~$271 million (including $46 million obtained in the acquisition of Hudson City) at ~~September~~June 30, ~~2015,~~2016, compared with ~~$264 million at September 30, 2014, $216 million at December 31, 2014 and~~ $207 million at June 30, ~~2015.~~2015, $284 million at December 31, 2015 and $279 million at March 31, 2016. A substantial portion of such amounts related to guaranteed loans ~~guaranteed by~~repurchased from government-related entities. Information about the location of nonaccrual and charged-off residential real estate loans as of and for the quarter ended ~~September~~June 30, ~~2015~~2016 is presented in the accompanying table.

Nonaccrual consumer loans totaled ~~$110 million and $119~~$108 million at ~~September~~each of June 30, 2016 and June 30, 2015, ~~and 2014, respectively, compared with $125~~$118 million at December 31, ~~2014~~2015 and ~~$108~~$110 million at ~~June 30, 2015.~~March 31, 2016. Included in nonaccrual consumer loans ~~and leases~~ at ~~September~~June 30, ~~2015, September 30, 2014, December 31, 2014 and~~2016, June 30, 2015, ~~were~~December 31, 2015 and March 31, 2016 were: automobile loans of ~~$14~~$12 million, ~~$17~~$15 million, ~~$18~~$17 million and $15 million, respectively; recreational vehicle loans of $5 million, $8 million, ~~$10 million, $11~~$9 million and $8$10 million, respectively; and outstanding balances of home equity loans and lines of credit ~~including junior lien Alt-A loans,~~ of $87 million, $78 million, ~~$85 million, $89~~$84 million and ~~$78~~$79 million, respectively. Information about the location of nonaccrual and charged-off home equity loans and lines of credit as of and for the quarter ended ~~September~~June 30, ~~2015~~2016 is presented in the accompanying table.


	September 30, 2015							Quarter ended September 30, 2015						June 30, 2016							Quarter ended June 30, 2016
			Nonaccrual					Net charge-offs (recoveries)								Nonaccrual					Net charge-offs (recoveries)
	Outstanding balances		Balances		Percent of outstanding balances			Balances			Annualized percent of average outstanding balances			Outstanding balances		Balances		Percent of outstanding balances			Balances			Annualized percent of average outstanding balances
	(dollars in thousands)													(dollars in thousands)
Residential mortgages:
New York	$	3,399,963	$	57,685		1.70	%	$	987			.11	%	$	6,602,947	$	70,130		1.06	%	$	476			.03	%
Pennsylvania		1,071,686		16,266		1.52			512			.19			1,747,161		19,068		1.09			52			.01
Mid-Atlantic		1,979,162		31,579		1.60			502			.10
Maryland															1,302,399		15,293		1.17			(2	)		(.01	)
New Jersey															5,745,014		31,819		.55			1,678			.11
Other Mid-Atlantic(a)															1,104,550		13,698		1.24			(12	)		(.01	)
Other		1,424,201		46,243		3.25			196			.05			4,069,810		52,153		1.28			287			.03

Total	$	7,875,012	$	151,773		1.93	%	$	2,197			.11	%	$	20,571,881	$	202,161		.98	%	$	2,479			.05	%

Residential construction:
Residential construction loans:
New York	$	7,248	$	168		2.31	%	$	29			1.55	%	$	7,968	$	18		.23	%	$	(1	)		(.04	)%
Pennsylvania		3,734		776		20.79			2			.24			3,883		350		9.01			13			1.13
Mid-Atlantic		9,930		—		—			—			—
Maryland															4,119		—		—			—			—
New Jersey															1,019		—		—			—			—
Other Mid-Atlantic(a)															3,444		—		—			—			—
Other		12,254		637		5.20			13			.44			7,129		420		5.89			(2	)		(.09	)

Total	$	33,166	$	1,581		4.77	%	$	44			.54	%	$	27,562	$	788		2.86	%	$	10			.14	%

Alt-A first mortgages:
Limited documentation first mortgages:
New York	$	52,605	$	16,358		31.10	%	$	109			.82	%	$	1,655,680	$	25,693		1.55	%	$	349			.08	%
Pennsylvania		9,054		2,115		23.36			69			2.92			83,208		5,217		6.27			2			.01
Mid-Atlantic		61,469		7,825		12.73			(381	)		(2.42	)
Maryland															48,136		2,977		6.18			7			.06
New Jersey															1,536,823		16,139		1.05			187			.05
Other Mid-Atlantic(a)															42,993		2,810		6.54			(14	)		(.13	)
Other		179,756		38,053		21.17			105			.23			563,966		26,192		4.64			95			.07

Total	$	302,884	$	64,351		21.25	%	$	(98	)		(.13	)%	$	3,930,806	$	79,028		2.01	%	$	626			.06	%

Alt-A junior lien:
First lien home equity loans and lines of credit:
New York	$	941	$	19		1.98	%	$	—			—	%	$	1,323,782	$	16,866		1.27	%	$	969			.29	%
Pennsylvania		348		34		9.83			—			—			848,355		10,621		1.25			139			.07
Mid-Atlantic		2,492		113		4.52			—			—
Maryland															695,324		8,217		1.18			11			.01
New Jersey															40,230		388		.96			—			—
Other Mid-Atlantic(a)															210,089		1,662		.79			(9	)		(.02	)
Other		6,000		429		7.16			20			1.32			19,338		1,277		6.60			—			—

Total	$	9,781	$	595		6.08	%	$	20			.79	%	$	3,137,118	$	39,031		1.24	%	$	1,110			.14	%

First lien home equity loans:
Junior lien home equity loans and lines of credit:
New York	$	14,245	$	3,600		25.27	%	$	(3	)		(.09	)%	$	933,175	$	27,313		2.93	%	$	790			.33	%
Pennsylvania		46,369		3,006		6.48			98			.81			380,564		5,226		1.37			713			.75
Mid-Atlantic		64,513		1,418		2.20			25			.15
Maryland															848,125		9,786		1.15			951			.45
New Jersey															130,916		1,948		1.49			308			1.06
Other Mid-Atlantic(a)															315,860		1,511		.48			81			.10
Other		865		132		15.32			—			—			41,699		1,715		4.11			320			3.08

Total	$	125,992	$	8,156		6.47	%	$	120			.36	%	$	2,650,339	$	47,499		1.79	%	$	3,163			.48	%

First lien home equity lines:
Limited documentation junior lien:
New York	$	1,339,394	$	13,844		1.03	%	$	744			.22	%	$	836	$	29		3.48	%	$	—			—	%
Pennsylvania		839,265		6,320		.75			310			.15			340		—		—			—			—
Mid-Atlantic		862,510		4,472		.52			190			.09
Maryland															1,602		—		—			—			—
New Jersey															388		—		—			—			—
Other Mid-Atlantic(a)															709		—		—			—			—
Other		35,114		1,401		3.99			—			—			4,987		311		6.23			(3	)		(.25	)

Total	$	3,076,283	$	26,037		.85	%	$	1,244			.16	%	$	8,862	$	340		3.84	%	$	(3	)		(.13	)%

Junior lien home equity loans:
New York	$	12,750	$	3,291		25.81	%	$	36			1.10	%
Pennsylvania		16,141		748		4.63			29			.70
Mid-Atlantic		55,615		1,875		3.37			(9	)		(.07	)
Other		6,797		810		11.92			(6	)		(.32	)

Total	$	91,303	$	6,724		7.36	%	$	50			.21	%

Junior lien home equity lines:
New York	$	936,375	$	23,758		2.54	%	$	1,120			.47	%
Pennsylvania		381,831		3,703		.97			41			.04
Mid-Atlantic		1,156,670		7,283		.63			865			.30
Other		66,758		1,870		2.80			(87	)		(.52	)

Total	$	2,541,634	$	36,614		1.44	%	$	1,939			.30	%

Real estate and other foreclosed assets were $66 million at September 30, 2015, compared with $68 million at September 30, 2014, and $64 million at each of December 31, 2014 and June 30, 2015. At September 30, 2015, foreclosed assets included $43 million of residential real estate properties.

~~A comparative summary of nonperforming assets and certain past due loan data and credit quality ratios is presented in the accompanying table.~~


																2016 Quarters						2015 Quarters
	2015 Quarters									2014 Quarters						Second			First			Fourth			Third			Second
	Third			Second			First			Fourth			Third
Nonaccrual loans	$	787,098			797,146			790,586			799,151			847,784		$	848,855			876,691			799,409			787,098			797,146
Real estate and other foreclosed assets		66,144			63,734			62,578			63,635			67,629			172,473			188,004			195,085			66,144			63,734

Total nonperforming assets	$	853,242			860,880			853,164			862,786			915,413		$	1,021,328			1,064,695			994,494			853,242			860,880


Accruing loans past due 90 days or more(a)	$	231,465			238,568			236,621			245,020			312,990		$	298,449			336,170			317,441			231,465			238,568


Government guaranteed loans included in totals above:
Nonaccrual loans	$	48,955			58,259			60,508			69,095			68,586		$	52,486			49,688			47,052			48,955			58,259
Accruing loans past due 90 days or more		193,998			206,775			193,618			217,822			265,333			269,962			279,340			276,285			193,998			206,775


Renegotiated loans	$	189,639			197,145			198,911			202,633			209,099		$	211,159			200,771			182,865			189,639			197,145

Acquired accruing loans past due 90 days or more(b)	$	80,827			78,591			80,110			110,367			132,147		$	68,591			61,767			68,473			80,827			78,591


Purchased impaired loans(c):
Outstanding customer balance	$	278,979			312,507			335,079			369,080			429,915		$	1,040,678			1,124,776			1,204,004			278,979			312,507
Carrying amount		149,421			169,240			184,018			197,737			236,662			662,059			715,874			768,329			149,421			169,240

Nonaccrual loans to total loans and leases, net of unearned discount		1.15	%		1.17	%		1.18	%		1.20	%		1.29	%		.96	%		1.00	%		.91	%		1.15	%		1.17	%
Nonperforming assets to total net loans and leases and real estate and other foreclosed assets		1.24	%		1.26	%		1.27	%		1.29	%		1.39	%		1.15	%		1.21	%		1.13	%		1.24	%		1.26	%
Accruing loans past due 90 days or more (a) to total loans and leases, net of unearned discount		.34	%		.35	%		.35	%		.37	%		.48	%		.34	%		.38	%		.36	%		.34	%		.35	%

Real estate and other foreclosed assets totaled $172 million at June 30, 2016, compared with $64 million at June 30, 2015, $195 million at December 31, 2015 and $188 million at March 31, 2016. The higher levels of real estate and other foreclosed assets at June 30, 2016, December 31, 2015 and March 31, 2016 reflect residential real estate properties associated with the Hudson City acquisition, which totaled $109 million, $126 million and $121 million at those respective dates. Gains or losses resulting from the sales of real estate and other foreclosed assets were not material in the three-month periods ended June 30, 2016, June 30, 2015 or March 31, 2016. At June 30, 2016, the Company’s holding of residential real estate-related properties comprised approximately 92% of foreclosed assets.

A comparative summary of nonperforming assets and certain past due loan data and credit quality ratios as of the end of the periods indicated is presented in the accompanying table.

Management determined the allowance for credit losses by performing ongoing evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the economic environment in which borrowers

operate, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or indemnifications. Management evaluated the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet repayment obligations when quantifying the Company’s exposure to credit losses and the allowance for such losses as of each reporting date. Factors also considered by management when performing its assessment, in addition to general economic conditions and the other factors described above, included, but were not limited to: (i) the impact of residential real estate values on the Company’s portfolio of loans to residential real estate builders and developers and other loans secured by residential real estate; (ii) the concentrations of commercial real estate loans in the Company’s loan portfolio; (iii) the amount of commercial and industrial loans to businesses in areas of New York State outside of the New York City metropolitan area and in central Pennsylvania that have historically experienced less economic growth and vitality than the vast majority of other regions of the country; (iv) the expected repayment performance associated with the Company’s first and second lien loans secured by residential real ~~estate;~~estate, including loans obtained in the acquisition of Hudson City that were not classified as purchased impaired; and (v) the size of the Company’s portfolio of loans to individual consumers, which historically have experienced higher net charge-offs as a percentage of loans outstanding than other loan types. The level of the allowance is adjusted based on the results of management’s analysis.

Management cautiously and conservatively evaluated the allowance for credit losses as of ~~September~~June 30, ~~2015~~2016 in light of: (i) residential real estate values and the level of delinquencies of loans secured by residential real estate; (ii) economic conditions in the markets served by the Company; (iii) ~~continuing weakness~~slower growth in ~~industrial~~private sector employment in upstate New York and central ~~Pennsylvania;~~Pennsylvania than in other regions served by the Company and nationally; (iv) the significant subjectivity involved in commercial real estate valuations; and (v) the amount of loan growth experienced by the Company. While there has been general improvement in economic conditions, concerns continue to exist about the strength and sustainability of such improvements; the troubled state of ~~financial~~global commodity and ~~credit~~export markets, including the impact international economic conditions could have on the U.S. economy; Federal Reserve positioning of monetary policy; ~~low levels of workforce participation;~~ and continued stagnant population growth in the upstate New York and central Pennsylvania regions (approximately ~~60%~~55% of the Company’s loans are to customers in New York State and Pennsylvania).

The Company utilizes a loan grading system ~~which~~that is applied to all commercial loans and commercial real estate loans. Loan grades are utilized to differentiate risk within the portfolio and consider the expectations of

default for each loan. Commercial loans and commercial real estate loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. Criticized commercial loans and commercial real estate loans were $2.4 billion at June 30, 2016, compared with $2.3 billion at each of ~~September~~June 30, 2015 and ~~June 30, 2015, compared with $2.0 billion at September 30, 2014~~March 31, 2016 and ~~$1.8~~$2.1 billion at December 31, ~~2014. Increases~~2015. The increase in criticized loan balances since December 31, ~~2014 included approximately $251~~2015 reflected $206 million ~~categorized as~~related to commercial real estate loans, including a $63 million loan to a retail outlet and ~~$244~~a $56 million ~~as commercial loans.~~loan for condominium development, both in New York City. Approximately ~~98%~~97% of loan balances added to the criticized category during the ~~first nine months of 2015~~recent quarter were less than 90 days past due and ~~96%~~95% had a current payment status. Given payment performance, amount of supporting collateral, and, in certain instances, the existence of loan guarantees, the incremental impact to the allowance for credit losses resulting from the increase to the criticized loan category was not material. The borrower industries most significantly impacting the higher level of criticized loans were investment real estate, services and

~~manufacturing. The metropolitan New York City region was most affected by the increases.~~ Loan officers with the support of loan review personnel in different geographic locations are responsible to continuously review and reassign loan grades to pass and criticized loans based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective geographic regions. At least annually, updated financial information is obtained from commercial borrowers associated with pass grade loans and additional analysis is performed. On a quarterly basis, the Company’s centralized loan review department reviews all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing. For criticized nonaccrual loans, additional meetings are held with loan officers and their managers, workout specialists and senior management to discuss each of the relationships. In analyzing criticized loans, borrower-specific information is reviewed, including operating results, future cash flows, recent developments and the borrower’s outlook, and other pertinent data. The timing and extent of potential losses, considering collateral valuation and other factors, and the Company’s potential courses of action are reviewed. To the extent that these loans are collateral-dependent, they are evaluated based on the fair value of the loan’s collateral as estimated at or near the financial statement date. As the quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation. In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines in value as determined by line of business and/or loan workout personnel in the respective geographic regions. Those adjustments are reviewed and assessed for reasonableness by the Company’s loan review department. Accordingly, for real estate collateral securing larger commercial ~~loans~~ and commercial real estate loans, estimated collateral values are based on current appraisals and estimates of value. For non-real estate loans, collateral is assigned a discounted estimated liquidation value and, depending on the nature of the collateral, is verified through field exams or other procedures. In assessing collateral, real estate and non-real estate values are reduced by an estimate of selling costs. With regard to residential real estate loans, the Company’s loss identification and estimation techniques make reference to loan performance and house price data in specific areas of the country where collateral ~~that was~~ securing the Company’s residential real estate loans ~~was~~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 ~~classified as nonaccrual.~~notified of such filings. At ~~September~~June 30, ~~2015,~~2016, approximately ~~55%~~54% of the Company’s home equity portfolio consisted of first lien loans and lines of credit. Of the remaining junior lien loans in the portfolio, approximately ~~73%~~71% (or approximately 33% of the aggregate home equity portfolio) consisted of junior lien loans that were behind a first lien mortgage loan that was not owned or serviced by the Company. To the extent known by the Company, if a senior lien loan would be on nonaccrual status because of payment delinquency, even if such senior lien loan was not owned by the Company, the junior lien loan or line that is owned by the Company is placed on nonaccrual status. At ~~September~~June 30, ~~2015,~~2016, the balance of junior lien loans and lines that were in nonaccrual status solely as a result of first lien loan performance was ~~$22~~$16 million, compared with ~~$26 million at September 30, 2014, $24 million at December 31, 2014 and~~ $22 million at each of June 30, ~~2015.~~2015 and December 31, 2015 and $23 million at March 31, 2016. In monitoring the credit quality of its home equity portfolio for purposes of determining the allowance for credit losses, the Company reviews delinquency and nonaccrual information and considers recent charge-off experience. ~~Additionally, the Company generally~~

~~evaluates~~When evaluating individual home equity loans and lines of credit ~~that are more than 150 days past due~~ for collectibility on a loan-by-loan basis and the excess of the loan balance over the net realizable value of the property collateralizing the loan is charged-off at that time. In determining the amount of such charge-offs,charge off, if the Company does not know the amount of the remaining first lien mortgage loan (typically because the Company does not own or service the first lien loan), the Company assumes that the first lien mortgage loan has had no principal amortization since the origination of the junior lien loan. Similarly, data used in estimating incurred losses for purposes of determining the allowance for credit losses also assumes no reductions in outstanding principal of first lien loans since the origination of the junior lien loan. Home equity line of credit terms vary but such lines are generally originated with an open draw period of ten years followed by an amortization period of up to twenty years. At ~~September~~June 30, ~~2015,~~2016, approximately ~~88%~~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%~~9% were making contractually allowed payments that do not include ~~any~~ repayment of principal.

Factors that influence the Company’s credit loss experience include overall economic conditions affecting businesses and consumers, generally, but also residential and commercial real estate valuations, in particular, given the size of the Company’s real estate loan portfolios. Commercial real estate valuations can be highly subjective, as they are based upon many assumptions. Such valuations can be significantly affected over relatively short periods of time by changes in business climate, economic conditions, interest rates, and, in many cases, the results of operations of businesses and other occupants of the real property. Similarly, residential real estate valuations can be impacted by housing trends, the availability of financing at reasonable interest rates, and general economic conditions affecting consumers.

In determining the allowance for credit losses, the Company estimates losses attributable to specific troubled credits identified through both normal and detailed or intensified credit review processes and also estimates losses inherent in other loans and leases. In quantifying incurred losses, the Company considers the factors and uses the techniques described herein and in note 4 of Notes to Financial Statements. For purposes of determining the level of the allowance for credit losses, the Company segments its loan and lease portfolio by loan type. The amount of specific loss components in the Company’s loan and lease portfolios is determined through a loan-by-loan analysis of commercial loans and commercial real estate loans in nonaccrual status. Measurement of the specific loss components is typically based on expected future cash flows, collateral values or other factors that may impact the borrower’s ability to pay. Losses associated with residential real estate loans and consumer loans are generally determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term

forecasted loss estimates developed by the Company’s credit department. These forecasts give consideration to overall borrower repayment performance and current geographic region changes in collateral values using third party published historical price indices or automated valuation methodologies. With regard to collateral values, the realizability of such values by the Company contemplates repayment of any first lien position prior to recovering amounts on a junior lien position. Approximately ~~45%~~46% of the Company’s home equity portfolio consists of junior lien loans and lines of credit. Except for consumer loans and residential real estate loans that are considered smaller balance homogeneous loans and are evaluated collectively and loans obtained at a discount in acquisition transactions, the Company considers a loan to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more and has been placed in nonaccrual status. Those impaired loans are evaluated for specific loss components. Modified loans,

including smaller balance homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Loans less than 90 days delinquent are deemed to have a minimal delay in payment and are generally not considered to be impaired. Loans acquired in connection with acquisition transactions subsequent to 2008 were recorded at fair value with no carry-over of any previously recorded allowance for credit losses. Determining the fair value of the acquired loans required estimating cash flows expected to be collected on the loans and discounting those cash flows at then-current interest rates. ~~The~~For loans acquired at a discount, the impact of estimated future credit losses represents the predominant difference between contractually required payments ~~at acquisition~~ and the cash flows expected to be ~~collected at acquisition.~~collected. Subsequent decreases to those expected cash flows require the Company to evaluate the need for an additional allowance for credit losses and could lead to charge-offs of acquired loan balances. Additional information regarding the Company’s process for determining the allowance for credit losses is included in note 4 of Notes to Financial Statements.

Management believes that the allowance for credit losses at ~~September~~June 30, ~~2015~~2016 appropriately reflected credit losses inherent in the portfolio as of that date. The allowance for credit losses was ~~$934~~$970 million, or ~~1.36%~~1.10% of total loans and leases at ~~September~~June 30, ~~2015,~~2016, compared with ~~$919 million or 1.40% at September 30, 2014, $920 million or 1.38% at December 31, 2014 and~~ $930 million or 1.36% at June 30, 2015 and $956 million or 1.09% at December 31, 2015. The ratio of the allowance to total loans and leases at each respective date reflects the impact of loans obtained in acquisition transactions subsequent to 2008 that have been recorded at estimated fair ~~value based on estimated future cash flows expected to be received on those loans. Those cash flows reflect the impact of expected defaults on customer repayment performance.~~value. As noted earlier, GAAP prohibits any carry-over of an allowance for credit losses for acquired loans recorded at fair value. However, for loans acquired at a premium, GAAP provides that an allowance for credit losses be recognized for incurred losses inherent in the portfolio. The declines in the ratio of the allowance to total loans and leases at June 30, 2016 and December 31, 2015 as compared with June 30, 2015 reflects the impact of loans (predominantly residential real estate loans) obtained in the acquisition of Hudson City. The level of the allowance reflects management’s evaluation of the loan and lease portfolio using the methodology and considering the factors as described herein. Should the various credit factors considered by management in establishing the allowance for credit losses change and should management’s assessment of losses inherent in the loan ~~portfolio~~portfolios also change, the level of the allowance as a percentage of loans could increase or decrease in future periods. The ratio of the allowance ~~for credit losses~~ to nonaccrual loans at June 30, 2016 was ~~119% at September 30, 2015,~~114%, compared with ~~108% at September 30, 2014, 115%~~117% a year earlier and 120% at December 31, ~~2014 and 117% at June 30,~~ 2015. Given the Company’s general position as a secured lender and its practice of ~~charging off~~charging-off loan balances when collection is deemed doubtful, that ratio and changes in that ratio are generally not an indicative measure of the adequacy of the Company’s allowance for credit losses, nor does management rely upon that ratio in ~~determining~~assessing the adequacy of the allowance. The level of the allowance reflects management’s evaluation of the loan and lease portfolio as of each respective date.

Other income totaled ~~$440~~$448 million in the ~~third~~second quarter of ~~2015,~~2016, compared with ~~$451~~$497 million in the year-earlier quarter and ~~$497~~$421 million in the first quarter of 2016. The increase in other income in the recent quarter as compared with the first quarter of 2016 resulted from higher trust income, mortgage banking revenues, and trading account and foreign exchange gains. The decline in the recent quarter as compared with the year-earlier quarter reflects a $45 million gain in the second quarter of ~~2015. Reflected in other income in the second quarter of~~ 2015 ~~was a $45 million gain~~ from the divestiture of the trade processing business within the retirement services business of the ~~Company. Excluding that gain, other income totaled $452 million in the second quarter of 2015. The decline in the recent quarter as compared with the year-earlier quarter resulted predominantly from~~Company and lower mortgage banking revenues and trust income, partially offset by higher gains on the sale of previously leased equipment. The lower trust income reflects the impact of the divested trade processing business. As compared with the second quarter of 2015, lower mortgage banking revenues and loan syndication feesthat were partially offset by higher ~~gains on the sale of previously leased equipment.~~trading account and foreign exchange gains.

Mortgage banking revenues were ~~$84~~$89 million in the recently completed quarter, ~~compared with $94 million in the third quarter of 2014 and~~down from $103 million in the second quarter of ~~2015.~~2015 but improved from $82 million in the initial 2016 quarter. 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~~multi-family loan programs of Fannie Mae, Freddie Mac and the U.S. Department of Housing and Urban Development.

Residential mortgage banking revenues, consisting of realized gains from sales of residential real estate loans and loan servicing rights, unrealized gains and losses on residential real estate loans held for sale and related commitments, residential real estate loan servicing fees, and other residential real estate loan-related fees and income, were ~~$67~~$65 million in the ~~third~~second quarter of ~~2015,~~2016, compared with ~~$73 million in the third quarter of 2014 and~~ $75 million in the second quarter of ~~2015.~~2015 and $60 million in the initial quarter of 2016. The lower level of residential mortgage banking revenues in the recent quarter as compared with the year-earlier quarter ~~and 2015’s second quarter~~ reflects ~~a decline~~declines in revenues associated with servicing residential real estate loans for others and lower ~~realized and unrealized gains.~~gains from origination activities, while the increase from 2016’s first quarter was predominantly attributable to higher gains from origination activities, due primarily to increased volumes of loans originated for sale.

New commitments to originate residential real estate loans to be sold were approximately ~~$870~~$858 million in the recent quarter, compared with ~~$878~~$995 million and ~~$995~~$659 million in ~~the third quarter of 2014 and~~ the second quarter of 2015 and the first quarter of 2016, respectively. Realized gains from sales of residential real estate loans and loan servicing rights and recognized net unrealized gains and losses attributable to residential real estate loans held for sale, commitments to originate loans for sale and commitments to sell loans totaled to gains of ~~$18~~$19 million in the ~~recently completed~~recent quarter, compared with gains of ~~$19 million and~~ $21 million in ~~the third quarter of 2014 and~~ the second quarter of 2015 ~~respectively.~~and $14 million in the first quarter of 2016.

The Company is contractually obligated to repurchase previously sold loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues for losses related to its obligations to loan purchasers. The amount of those charges varies based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. Residential mortgage banking revenues ~~were reduced for such obligations by $1 million~~ during each of the ~~recent quarter, the third quarter~~three-month periods ended June 30, 2016, June 30, 2015 and March 31, 2016 were reduced by approximately $1 million related to actual or anticipated settlement of ~~2014 and the second quarter of 2015.~~repurchase obligations.

Loans held for sale that were secured by residential real estate totaled ~~$422~~$374 million at ~~September~~June 30, 2016, $479 million at June 30, 2015 ~~$466 million at September 30, 2014~~ and ~~$435~~$353 million at December 31, ~~2014.~~2015. Commitments to sell residential real estate loans and commitments to originate residential real estate loans for sale at

pre-determined rates were ~~$817~~$816 million and ~~$587~~$638 million, respectively, at ~~September~~June 30, ~~2015, $827~~2016, $930 million and ~~$557~~$672 million, respectively, at ~~September~~June 30, ~~2014~~2015, and ~~$717~~$687 million and ~~$432~~$489 million, respectively, at December 31, ~~2014.~~2015. Net recognized unrealized gains on residential real estate loans held for sale, commitments to sell loans, and commitments to originate loans for sale were ~~$18~~$19 million at ~~September~~each of June 30, 2016 and June 30, 2015, ~~$20 million at September 30, 2014 and $19~~compared with $16 million at December 31, ~~2014.~~2015. Changes in such net unrealized gains are recorded in mortgage banking revenues and resulted in net ~~decreases~~increases in ~~revenues~~revenue of ~~less than~~$3 million and $1 million in the recent quarter and the initial quarter of 2016, respectively, compared with a net decrease in revenue of $2 million in the second quarter of ~~2015, compared with a net increase in revenues of less than $1 million in the third quarter of 2014.~~2015.

Revenues from servicing residential real estate loans for others were ~~$49~~$46 million in the recent quarter, compared with ~~$54~~$53 million and $45 million during the quarters ended June 30, 2015 and March 31, 2016, respectively. The decline in the ~~third quarter of 2014 and $53 million in~~two most recent quarters as compared with the second quarter of ~~2015. The decline in the recent quarter as compared with the earlier quarters is largely reflective of~~2015 reflects lower revenues from sub-servicing activities. Revenues earned for sub-servicing loans were $26 million for the three-month period ended September 30, 2015, compared with $30 million for each of the three-month periods ended September 30, 2014 and June 30, 2015. Residential real estate loans serviced for others totaled ~~$64.3~~$57.8 billion at ~~September~~June 30, ~~2015, $69.7 billion at September 30, 2014, $67.2 billion at December 31, 2014 and~~2016, compared with $66.5 billion at June 30, ~~2015.~~2015, $61.7 billion at December 31, 2015 and $60.0 billion at March 31, 2016. Reflected in residential real estate loans serviced for others were loans sub-serviced for others of ~~$40.2~~$34.6 billion at ~~September~~June 30, ~~2015, $44.4 billion at September 30, 2014, $42.1 billion at December 31, 2014 and~~2016, $42.3 billion at June 30, ~~2015.~~2015, $37.8 billion at December 31, 2015 and $36.3 billion at March 31, 2016. Revenues earned for sub-servicing loans were $25 million and $30 million for the three-month periods ended June 30, 2016 and 2015, respectively, and $23 million for the three-month period ended March 31, 2016. The contractual servicing rights associated with loans sub-serviced by the Company were predominantly held by affiliates of Bayview Lending Group LLC (“BLG”).

Capitalized servicing rights consist largely of servicing associated with loans sold by the Company. Capitalized residential mortgage loan servicing assets totaled $117 million at ~~September~~June 30, ~~2015,~~2016, compared with $114 million ~~at September 30, 2014~~a year earlier and ~~$111~~$118 million at each of December 31, ~~2014.~~2015 and March 31, 2016.

Commercial mortgage banking revenues were ~~$18~~$24 million in the ~~third~~second quarter of ~~2015,~~2016, compared with ~~$20~~$28 million in the year-earlier period and ~~$28~~$22 million in the ~~second~~first quarter of ~~2015.~~2016. Included in such amounts were revenues from loan origination and sales activities of $8$14 million in the recent quarter, compared with ~~$11~~$17 million ~~in the third quarter of 2014~~ and ~~$17~~$12 million in the second quarter of ~~2015. The decline in such revenues was due to lower origination volume as commitments to purchase multi-family commercial real estate loans by Fannie Mae~~2015 and ~~Freddie Mac slowed from~~ the ~~first half of the year.~~initial 2016 quarter, respectively. Commercial real estate loans originated for sale to other investors totaled ~~$190~~$567 million in ~~the recent quarter, compared with $513 million and $890 million in the third quarter of 2014 and~~ the second quarter of ~~2015,~~2016, compared with $890 million and $355 million in the year-earlier quarter and the first quarter of 2016, respectively. Loan servicing revenues were $10 million in each of the ~~recent quarter,~~first two quarters of 2016, compared with ~~$9 million in the year-earlier quarter and~~ $11 million in the second quarter of 2015. Capitalized commercial mortgage servicing assets totaled ~~$81~~$86 million and $78 million at ~~September~~June 30, 2016 and 2015, respectively, and ~~$73~~$84 million at ~~each of September 30 and~~ December 31, ~~2014.~~2015. Commercial real estate loans serviced for other investors totaled ~~$11.6~~$11.1 billion, $11.3 billion and $11.0 billion at ~~September~~June 30, 2016, June 30, 2015 and ~~$11.3 billion at each of September 30, 2014 and~~ December 31, ~~2014,~~2015, respectively, and included $2.6 billion, $2.5 billion ~~$2.3 billion~~ and ~~$2.4~~$2.5 billion, respectively, of loan balances for which investors had recourse to the Company if such balances are ultimately uncollectible. Commitments to sell commercial real estate loans and commitments to originate commercial real estate loans for sale were ~~$161~~$340 million and ~~$89~~$112 million, respectively, at ~~September~~June 30, ~~2015, $300~~2016, $425 million and ~~$141~~$105 million, respectively, at ~~September~~June 30, ~~2014~~2015 and ~~$520~~$96 million and ~~$212~~$58 million, respectively, at December 31, ~~2014.~~2015. Commercial real estate loans held for sale at ~~September~~June 30, ~~2015, September~~2016, June 30, ~~2014~~2015 and December 31, ~~2014~~2015 were ~~$71~~$228 million, ~~$159~~$320 million and ~~$308~~$39 million, respectively.

Service charges on deposit accounts totaled ~~$107 million in the third quarter of 2015, compared with $110 million in the year-earlier quarter and $105~~$104 million in the second quarter of ~~2015.~~2016, compared with $105 million and $102 million in the second quarter of 2015 and the first quarter of 2016, respectively. The ~~lower levels~~higher

level of fees in the ~~two most~~ recent ~~quarters~~quarter as compared with the ~~third~~first quarter of ~~2014 were largely~~2016 was due to ~~lower~~higher consumer deposit service ~~fees, particularly overdraft~~ fees.

Trust income includes fees related to two significant businesses. The Institutional Client Services (“ICS”) business provides a variety of trustee, agency, investment management and administrative services for corporations and institutions, investment bankers, corporate tax, finance and legal executives, and other institutional clients who: (i) use capital markets

financing structures; (ii) use independent trustees to hold retirement plan and other assets; and (iii) need investment and cash management services. The Wealth Advisory Services (“WAS”) business helps high net worth clients grow their wealth, protect it, and transfer it to their heirs. A comprehensive array of wealth management services are offered, including asset management, fiduciary services and family office services. Trust income totaled $120 million in the second quarter of 2016, compared with $119 million in the second quarter of 2015 and $111 million in the first quarter of 2016. Revenues associated with the ICS business were approximately $53 million, $63 million and $52 million during the quarters ended September 30, 2015, September 30, 2014 and June 30, 2015, respectively. The ICS revenue decline in the two most recent quarters as compared with the third quarter of 2014 reflects the April 2015 divestiture of the trade processing business within the retirement services division. Revenues associated with the trade processing business totaled $8$58 million during the quarter ended ~~September~~June 30, ~~2014~~2016, compared with $52 million in each of the quarters ended June 30, 2015 and ~~$9 million during~~March 31, 2016. The higher ICS revenue in the most recent quarter as compared with the second quarter of 2015 and the first quarter of ~~2015. After consideration of operating expenses, the net income of the sold business was not material to the Company’s consolidated results of operations in any period noted herein.~~2016 reflects stronger sales activities and higher fees earned from money-market mutual funds. Revenues attributable to WAS were approximately ~~$53 million, $56~~$55 million and $58 million for the three-month periods ended ~~September 30, 2015, September 30, 2014 and~~ June 30, 2016 and 2015, ~~respectively. The second quarter of 2015 included $3~~respectively, and $51 million ~~of seasonal tax preparation fees.~~for the three-month period ended March 31, 2016. The decline in ~~revenue in the~~such recent quarter ~~when~~revenues as compared ~~to last year’s third quarter and the remainder of the decline from~~with the second quarter of 2015 was ~~attributable~~due largely to lower ~~values of managed assets,~~customer balances and market performance. The improvement in WAS revenues as compared with the initial 2016 quarter was largely due to annual tax preparation fees recognized in ~~part to~~ the recent ~~stock market decline. In total, trust income aggregated $114 million in the third quarter of 2015, compared with $129 million and $119 million in the year-earlier~~ quarter and ~~the second quarter of 2015, respectively.~~improved market performance impacting customer balances. Total trust assets, which include assets under management and assets under administration, aggregated ~~$200.0 billion at September 30, 2015, compared with $276.6 billion at September 30, 2014, $287.9 billion at December 31, 2014 and $205.0~~$203.6 billion at June 30, ~~2015. The decline in trust assets~~2016, compared with $205.0 billion and $199.2 billion at ~~the two most recent quarter-ends was predominantly due to the customer account balances included in the April~~June 30, 2015 ~~sale of the trade processing business.~~and December 31, 2015, respectively. Trust assets under management were ~~$65.7~~$67.0 billion, ~~$67.7~~$68.3 billion and ~~$68.2~~$66.7 billion at ~~September~~June 30, ~~2015, September~~2016, June 30, ~~2014~~2015 and December 31, ~~2014,~~2015, respectively. Additional trust income from investment management activities totaled $7 million in the recent quarter, $9 million in the second quarter of 2015 and $8 million in the first quarter of 2016. That income largely relates to fees earned from retail customer investment accounts and from an affiliated investment manager. Assets managed by that affiliated manager were $6.7 billion at June 30, 2016, $8.5 billion at June 30, 2015 and $7.1 billion at December 31, 2015. The Company’s trust income from that affiliate was not material for any of the quarters then-ended. The Company’s proprietary mutual funds had assets of ~~$11.7~~$11.2 billion, ~~$12.4~~$11.9 billion and ~~$13.3~~$12.2 billion at ~~September~~June 30, ~~2015, September~~2016, June 30, ~~2014~~2015 and December 31, ~~2014,~~2015, respectively.

Brokerage services income, which includes revenues from the sale of mutual funds and annuities and securities brokerage fees, totaled ~~$17~~$16 million in each of the ~~third~~two most recent quarters, ~~of 2015 and 2014 and~~little changed from $17 million in the second quarter of 2015. Gains from trading account and foreign exchange activity ~~were $8 million during the most recent quarter, $7 million during the year-earlier quarter and $6~~totaled $13 million in the second quarter of ~~2015.~~2016, compared with $6 million in the year-earlier quarter and $7 million in the first quarter of 2016. The recent quarter increase as compared with those earlier periods resulted predominantly from higher activity related to interest rate swap transactions executed on behalf of commercial customers. 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 10 of Notes to Financial Statements and herein under the heading “Taxable-equivalent Net Interest Income.”

~~M&T’s share of the operating losses of BLG was $4 million in each of the recent quarter and in 2014’s third quarter and $3~~Other revenues from operations totaled $105 million in the second quarter of ~~2015. The operating losses of BLG~~2016, compared with $148 million in the ~~respective quarters reflect provisions for losses associated with securitized loans~~year-earlier quarter and ~~other loans held by BLG and loan servicing and other administrative costs. Under GAAP, such losses are required to be recognized by BLG despite~~$102 million in the ~~fact that many~~first quarter of the securitized loan losses will ultimately be borne by the underlying third party bondholders. As these loan losses are realized through later foreclosure and still later sale of real estate collateral, the underlying bonds will be charged-down leading to BLG’s future recognition of debt extinguishment gains.2016. The ~~timing of such debt extinguishment is difficult to predict and given ongoing loan loss provisioning, it is not possible to project when BLG will return to profitability. As a result of~~

credit and liquidity disruptions, BLG ceased its originations of small-balance commercial real estate loans in 2008. However, as a result of past securitization activities, BLG is entitled to cash flows from mortgage assets that it owns or that are owned by its affiliates and is also entitled to receive distributions from affiliates that provide asset management and other services. Accordingly, the Company believes that BLG is capable of realizing positive cash flows that could be available for distribution to its owners, including M&T, despite a lack of positive GAAP-earnings from its core mortgage activities. Information about the Company’s relationship with BLG and its affiliates is included in note 15 of Notes to Financial Statements.

~~Other revenues from operations totaled $113 million~~decrease in the recent quarter ~~compared with $99 million in the third quarter of 2014 and $151 million in the second quarter of 2015. The increase in other revenues from operations in the recent quarter when~~as compared with the year-earlier quarter was primarily due to $14 million of gains on the sale of previously leased equipment in the third quarter of 2015. Similar gains in the year-earlier period were less than $1 million. The recent quarter decline in other revenues from operations as compared with the second quarter of 2015 was predominantly due toreflects the $45 million

gain associated with the April 2015 sale of the trade processing business in the retirement services division. Included in other revenues from operations were the following significant components. Letter of credit and other credit-related fees ~~(including loan syndication fees)~~ totaled ~~$29~~$30 million in ~~each of~~ the ~~third quarters of 2015 and 2014,~~recent quarter, compared with $37 million in the second quarter of ~~2015.~~2015 and $28 million in the first quarter of 2016. The higher revenues in 2015’s second quarter were largely attributable to fees for providing loan syndication services. Tax-exempt income from bank owned life insurance, which includes increases in the cash surrender value of life insurance policies and benefits received, ~~aggregated $12 million in the third quarter of 2015,~~totaled $13 million induring the ~~third~~recent quarter, ~~of 2014 and~~compared with $15 million in the second quarter of ~~2015.~~2015 and $16 million in the first quarter of 2016. Revenues from merchant discount and credit card fees were $27 million in the ~~recent~~ quarter ended June 30, 2016, compared with ~~$25 million in the year-earlier quarter and~~ $26 million in each of the ~~second quarter of 2015.~~quarters ended June 30, 2015 and March 31, 2016. Insurance-related sales commissions and other revenues totaled $9 million in the ~~third~~second quarter of ~~2015, $10 million in last year’s third quarter and~~2016, compared with $8 million in the ~~second~~year-earlier quarter and $12 million in the first quarter of ~~2015.~~2016. The 2016 initial quarter reflects seasonally higher revenues. M&T’s share of the operating losses of BLG recognized using the equity method of accounting was $3 million in each of the second quarters of 2016 and 2015 and $4 million in the first quarter of 2016. Information about the Company’s relationship with BLG and its affiliates is included in note 15 of Notes to Financial Statements. Other miscellaneous revenues and the changes in such revenues from period-to-period were not individually significant.

Other income totaled ~~$1.38 billion~~$869 million in the first ~~nine months~~half of ~~2015,~~2016, compared with ~~$1.33 billion~~$937 million in the ~~corresponding 2014~~year-earlier period. Excluding the gain on the divestiture of the trade processing business, other income aggregated ~~$1.33 billion~~$892 million in the first ~~nine~~six months of 2015. ~~On that basis, higher~~The most significant contributors to the decrease in other income during the 2016 period were lower mortgage banking revenues and ~~gains on the sale of previously leased equipment were predominantly offset by lower~~ trust income ~~reflecting the sale of the trade processing business,~~offset, in part, by higher gains from trading account and ~~lower service charges on deposit accounts.~~foreign exchange activity.

Mortgage banking revenues were ~~$288~~$171 million ~~for~~during the ~~nine-month period ended September 30, 2015, up 7% from $269~~first half of 2016, compared with $204 million in the year-earlier period. Residential mortgage banking revenues ~~rose 2% to $220 million during the first nine months of 2015 from $216~~totaled $124 million in the ~~similar 2014 period.~~first six months of 2016, down from $154 million in the first half of 2015. New commitments to originate residential real estate loans to be sold were ~~$2.8~~$1.5 billion and ~~$2.5~~$1.9 billion during the first ~~nine~~six months of ~~2015~~2016 and ~~2014,~~2015, respectively. Realized gains from sales of residential real estate loans and loan servicing rights ~~(net of the impact of costs associated with obligations to repurchase real estate loans originated for sale)~~ and recognized unrealized gains and losses on residential real estate loans held for sale, commitments to originate loans for sale and commitments to sell loans totaled to gains of ~~$60~~$33 million and ~~$61~~$42 million during the ~~nine-month~~six-month periods ended ~~September~~June 30, 2016 and 2015, ~~and 2014,~~ respectively. Residential mortgage banking revenues during the nine-month periods ended September 30, 2015 and 2014 were reduced by $4 million and $3 million, respectively, related to actual or anticipated settlements of repurchase obligations. Revenues from servicing residential mortgage loans for others were ~~$160~~$91 million and ~~$155~~$111 million for the first ~~nine~~six months of ~~2015~~2016 and ~~2014,~~2015, respectively. That ~~increase reflects~~

~~higher~~decline was attributable to lower sub-servicing revenues that totaled ~~$91~~$48 million and ~~$83~~$65 million in the ~~2015~~2016 and ~~2014~~2015 periods, respectively. The decline in servicing revenues resulted from lower balances of loans serviced for others. Commercial mortgage banking revenues totaled ~~$68~~$47 million and ~~$53~~$51 million during the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. That ~~increase reflects higher~~decrease resulted predominantly from revenues ~~from~~associated with loan origination and sales ~~activities of $11 million and from loan servicing of $4 million.~~activities. Commercial real estate loans originated for sale to ~~others~~other investors were ~~$1.5~~$922 million in the first half of 2016, compared with $1.3 billion in the ~~first nine months of~~similar 2015 ~~compared with $1.1 billion in the comparable 2014~~ period.

Service charges on deposit accounts totaled ~~$315~~$206 million and ~~$322~~$208 million during the ~~first nine months of~~six-month periods ended June 30, 2016 and 2015, ~~and 2014,~~ respectively. ~~That decline resulted predominantly from lower consumer service charges, largely overdraft fees.~~ Trust income aggregated ~~$356~~$232 million ~~during~~in the ~~nine-month period ended September 30, 2015,~~first half of 2016, compared with ~~$380~~$242 million ~~a year earlier.~~in the year-earlier period. That decline was largely attributable to ~~$26~~revenues of $9 million ~~of revenues in the first nine months of 2014~~ associated with the trade processing business ~~that was~~ sold in April 2015 ~~compared with $9 million of similar revenues~~that were recognized in the first quarter of 2015. Brokerage services income totaled ~~$49~~$32 million during each of the first ~~nine~~six months of ~~2015, compared with $51 million in the year-earlier period.~~2016 and 2015. Trading account and foreign exchange activity resulted in gains of $21 million ~~for each of the nine-month periods ended September 30, 2015~~ and ~~2014. M&T’s investment in BLG resulted in the recognition of losses of $11~~$12 million for the ~~nine months~~six-month

periods ended ~~September~~June 30, 2016 and 2015, ~~compared with losses~~respectively. That increase was predominantly the result of ~~$13 million in the year-earlier period.~~higher activity related to interest rate swap transactions executed on behalf of commercial customers.

Other revenues from operations were ~~$359~~$207 million in the ~~nine-month period ended September 30, 2015, compared with $297~~first half of 2016 and $239 million in the ~~similar~~ year-earlier period. ~~That increase reflects~~Excluding the $45 million gain ~~from the~~on sale of the trade processing business, ~~and $15~~other revenues from operations were $194 million ~~of gains from the sale of previously leased equipment. Similar gains were not significant during~~for the first ~~nine months~~half of ~~2014. Also included~~2015. Included in other revenues from operations ~~during the nine-month periods ended September 30, 2015 and 2014~~ were the following significant components. Letter of credit and other credit-related fees totaled ~~$92~~$58 million in ~~2015~~2016 and ~~$96~~$63 million in ~~2014.~~2015. Income from bank owned life insurance was ~~$38~~$29 million and ~~$37~~$26 million in ~~2015~~2016 and ~~2014,~~2015, respectively. Merchant discount and credit card fees aggregated ~~$77~~$53 million in ~~2015~~2016 and ~~$70~~$50 million in ~~2014.~~2015. Insurance-related sales commissions and other revenues ~~were $29~~totaled $22 million and ~~$33~~$19 million in the first ~~nine~~six months of 2016 and 2015, respectively. M&T’s investment in BLG resulted in losses of $6 million and ~~2014,~~$7 million for the first half of 2016 and 2015, respectively. Also contributing to the increase in other revenues from operations in the first half of 2016 as compared with the year-earlier period were higher corporate advisory fees of $4 million.

Effective January 1, 2015, M&T adopted amended guidance from the FASB for accounting for investments in qualified affordable housing projects under which the initial cost of such investments is amortized to income taxOther expense in proportion to the tax benefit received. The adoption of this accounting guidance did not have a significant effect on the Company’s consolidated financial position or results of operations, but did result in the restatement of the consolidated financial statements for 2014 and earlier years to remove net costs associated with qualified affordable housing projects from other expense and include the amortization of the investments in income tax expense. As a result, the amortization included in income tax expense was $10 million and $31totaled $750 million in the three- and nine-month periods ended September 30, 2015, respectively, and $14 million and $39 million in the three- and nine-month periods ended September 30, 2014, respectively. Similarly, losses removed from other costs of operations and amortization amounts now included in income tax expense were $14 million in the fourthsecond quarter of ~~2014.~~

~~Reflecting the application of the new accounting guidance, other expense aggregated $654 million in the third quarter of 2015, down from $665~~2016, compared with $697 million in the year-earlier ~~period~~quarter and ~~$697~~$776 million in ~~2015’s second quarter.~~

the first quarter of 2016. Included in those amounts are expenses considered by management to be “nonoperating” in nature consisting of (i) amortization of core deposit and other intangible assets of ~~$4 million and $7~~$11 million in the ~~third quarters of 2015 and 2014, respectively, and~~most recent quarter, $6 million in the second quarter of ~~2015.~~2015 and $12 million in the first quarter of 2016 and (ii) merger-related expenses of $13 million in the second quarter of 2016 and $23 million in the first quarter of 2016. There were no merger-related expenses during ~~those respective quarters.~~the second quarter of 2015. Exclusive of ~~these~~those nonoperating expenses, noninterest operating expenses ~~were $650~~totaled $726 million in the ~~most recent~~second quarter of 2016, compared with ~~$658~~$691 million in the year-earlier quarter and ~~$691~~$741 million in the ~~second~~first quarter of ~~2015. Reflected in~~2016. The most significant factors for the higher level of operating expenses were contributions to The M&T Charitable Foundation of $40 million in the second quarter of 2015. There were no similar contributions in the recent quarter. Also reflected in the decline in noninterest operating expense in the recent quarter as compared with the ~~year-earlier~~second quarter of 2015 was the impact of operations obtained in the Hudson City acquisition and increased Federal Deposit Insurance Corporation (“FDIC”) assessments, which were ~~lower costs for professional services,~~ partially offset by a $40 million cash contribution to The M&T Charitable Foundation in the second quarter of 2015. The recent quarter’s lower level of noninterest operating expenses as compared with 2016’s first quarter was due, in large part, to a decline in personnel costs, including stock-based compensation, which were seasonably higher ~~salaries and employee benefits expense.~~in the initial 2016 period, offset, in part, by higher professional services costs.

Other expense for the first ~~nine~~six months of ~~2015~~2016 aggregated ~~$2.04~~$1.53 billion, ~~up $14 million or 1% from $2.02~~compared with $1.38 billion in the year-earlier period. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of ~~$17~~$24 million and $13 million in the six-month periods ended June 30, 2016 and 2015, respectively, and ~~$27~~merger-related expenses of $36 million in ~~2014.~~the first half of 2016. There were no merger-related expenses during ~~those respective periods.~~the first half of 2015. Exclusive of ~~these~~those nonoperating expenses, noninterest operating expenses ~~through~~for the six-month period ended June 30, 2016 increased 7% to $1.47 billion from $1.37 billion in the first ~~nine~~six months of ~~2015 increased $23~~2015. That $96 million ~~or 1% from the corresponding 2014 period. The most significant factors contributing~~increase was attributable to ~~that increase were higher~~ costs ~~for salaries and employee benefits and charitable contributions, partially offset by lower professional services costs and FDIC assessments.~~associated with acquired operations of Hudson City. Table 2 provides a reconciliation of other expense to noninterest operating expense.

Salaries and employee benefits expense totaled ~~$364~~$399 million in the recent quarter, compared with ~~$349 million in the third quarter of 2014 and~~ $362 million in the second quarter of ~~2015. For~~2015 and $432 million in the initial 2016 quarter. During the first ~~three quarters~~six months of 2016 and 2015, salaries and employee benefits expense ~~totaled $1.12 billion, up 5% from $1.06 billion in the year-earlier period.~~aggregated $830 million and $752 million, respectively. As compared with the ~~2014~~2015 periods,

the increases during the three months and ~~nine~~six months ended ~~September~~June 30, ~~2015 reflect~~2016 were predominantly the ~~impact~~result of additional employees associated with the Company’s expanded operations and annual merit increases for ~~employees~~employees. The higher level of salaries and ~~higher pension expense. Higher incentive compensation costs also contributed to the increased salaries and~~employee benefits expense in ~~the nine-month period ended September 30, 2015~~2016’s initial quarter as compared with the ~~similar 2014 period. The increased pension expense~~recent quarter reflects the accelerated recognition of compensation costs in the ~~2015 periods was predominantly attributable~~earlier quarter for stock-based awards granted to ~~an increase in~~retirement-eligible employees as well as the ~~amortization of unrecognized actuarial losses. Cumulative unrecognized actuarial losses increased from $191 million at December 31, 2013~~seasonally higher unemployment insurance, payroll-related taxes and the Company’s contributions for retirement savings plan benefits related to $512 million at December 31, 2014 due predominantly to a 75 basis point reduction in the discount rate and revised mortality tables released in 2014 by the Society of Actuaries used to determine the pension benefit obligation. In accordance with GAAP, net unrecognized gains or losses that exceed ten percent of the greater of the projected benefit obligation or the market-related value of plan assets are required to be amortized over the expected service period of active employees, and are included as a component of net pension cost.annual incentive compensation payments. Stock-based compensation totaled ~~$11~~$17 million during each of ~~the~~ quarters ended ~~September~~June 30, 2016 and June 30, 2015 and ~~September 30, 2014, $17~~$29 million during the quarter ended ~~June 30, 2015~~March 31, 2016, and ~~$55~~$45 million and ~~$54~~$44 million for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. The number of full-time equivalent employees was ~~15,456~~16,814 at ~~September~~June 30, ~~2015, 15,260 at September 30, 2014, 15,312 at December 31, 2014 and~~2016, 15,380 at June 30, ~~2015.~~2015, 16,979 at December 31, 2015 and 16,718 at March 31, 2016.

Excluding the nonoperating ~~expense items~~expenses described earlier from each ~~period,~~quarter, nonpersonnel operating expenses were ~~$286 million in the third quarter of 2015, compared with $309~~$327 million and $329 million in the ~~year-earlier quarter~~quarters ended June 30, 2016 and June 30, 2015, respectively, and $314 million in the ~~second~~first quarter of ~~2015, respectively.~~2016. On the same basis, ~~those~~such expenses were ~~$905~~$641 million and ~~$937~~$619 million during the first ~~nine~~six months of ~~2015~~2016 and ~~2014,~~2015, respectively. The ~~decrease in such operating~~

expenses in the ~~recent quarter when compared with last year’s third quarter reflects lower professional services costs. The decrease in nonpersonnel operating expenses in the recent quarter~~2016 periods as compared with the ~~second quarter of~~ 2015 ~~was predominantly~~periods reflected higher equipment and net occupancy expenses and increased FDIC assessments, each due largely to the impact of the acquisition of Hudson City, partially offset by a $40 million ~~of charitable contributions~~cash contribution made in the second quarter of ~~2015.~~2015 to The ~~decline~~M&T Charitable Foundation. As compared with the initial 2016 quarter, the recent quarter increase in nonpersonnel operating expenses inwas largely the ~~first nine months~~result of ~~2015 as compared with the corresponding 2014 period was predominantly attributable to lower expenses~~higher costs for professional services, litigation-related costs and FDIC assessments, offset in part, by higher charitable contributions. Professional services costs related to BSA/AML compliance, capital planning and stress testing, risk management and other operational initiatives were elevated throughout 2014. The higher litigation-related charges in 2014 were associated with pre-acquisition activities of M&T’s Wilmington Trust entities.services.

The efficiency ratio or noninterest operating expenses (as defined above) divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment securities), measures the relationship of noninterest operating expenses to revenues. The Company’s efficiency ratio was ~~57.1%~~55.1% during the recent quarter, ~~improved from 58.4% and~~compared with 58.2% ~~in the year-earlier quarter and~~during the second quarter of 2015 ~~respectively.~~and 57.0% in the first quarter of 2016. The efficiency ratios for the ~~nine-month~~six-month periods ended ~~September~~June 30, 2016 and 2015 ~~and 2014~~ were ~~58.9%~~56.0% and 59.8%, respectively. The calculation of the efficiency ratio is presented in table 2.

The provision for income taxes for the ~~third~~second quarter of ~~2015~~2016 was ~~$154~~$194 million, compared with ~~$150 million and~~ $167 million in the year-earlier quarter and ~~second~~$169 million in the first quarter of ~~2015, respectively.~~2016. The effective tax rates were ~~35.5%~~36.6%, ~~35.3%~~36.8% and ~~36.8%~~36.2% for the quarters ended ~~September~~June 30, ~~2015, September 30, 2014 and~~2016, June 30, 2015 and March 31, 2016, respectively. For the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014, the provision for income taxes was $455 million and $419 million, respectively, and~~2015, the effective tax rates were ~~36.0%~~36.4% and ~~34.7%~~36.3%, respectively. As noted earlier, effective January 1, 2015 the Company adopted amended guidance from the FASB for accounting for investments in qualified affordable housing projects, which resulted in the restatement of the consolidated financial statements for 2014 and earlier years. The adoption of the guidance resulted in higher effective tax rates than existed prior to such adoption. The Company attributed $11 million of non-deductible goodwill to the basis of the trade processing business sold in April 2015, which reduced the recorded gain. Excluding the impact of the attribution of the non-deductible goodwill, the effective tax rate for the three-month period ended June 30, 2015 and the nine-month period ended September 30, 2015 would have been 35.9% and 35.7%, respectively. During the second quarter of 2014, the Company resolved with tax authorities previously uncertain tax positions associated with pre-acquisition activities of M&T’s Wilmington Trust entities, resulting in a reduction of the provision for income taxes of $8 million. Excluding that reduction of income tax expense, the effective tax rate would have been 35.4% for the nine-month period ended September 30, 2014. The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income, the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact of any large but infrequently occurring items.

The Company’s effective tax rate in future periods will be affected by the results of operations allocated to the various tax jurisdictions within which the Company operates, any change in income tax laws or regulations within those jurisdictions, and interpretations of income tax regulations that differ from the Company’s interpretations by any of various tax authorities that may examine tax returns filed by M&T or any of its subsidiaries.

Shareholders’ equity was ~~$12.9~~$16.5 billion at ~~September~~June 30, ~~2015,~~2016, representing ~~13.21%~~13.30% of total assets, compared with ~~$12.3~~$12.7 billion or ~~12.68% of total assets a year earlier~~13.05% at June 30, 2015 and ~~$12.3~~$16.2 billion or ~~12.76%~~13.17% at December 31, ~~2014.~~2015.

Included in shareholders’ equity was preferred stock with a financial statement carrying ~~values~~value of $1.2 billion at each of ~~September~~June 30, ~~2015, September~~2016, June 30, ~~2014~~2015 and December 31, ~~2014.~~2015. Further information concerning M&T’s preferred stock can be found in note 6 of Notes to Financial Statements.

Common shareholders’ equity ~~was $11.7~~aggregated $15.2 billion, or ~~$87.67~~$96.49 per share, at ~~September~~June 30, ~~2015,~~2016, compared with ~~$11.1~~$11.4 billion, or ~~$83.99~~$85.90 per share, ~~at September 30, 2014~~a year earlier and ~~$11.1~~$14.9 billion, or ~~$83.88~~$93.60 per share, at December 31, ~~2014.~~2015. In conjunction with the acquisition of Hudson City, M&T issued 25,953,950 common shares, which added $3.1 billion to common shareholders’ equity on November 1, 2015. Tangible equity per common share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was ~~$61.22~~$66.95 at ~~the end of the recent quarter, compared with $57.10 a year earlier~~June 30, 2016, $59.39 at June 30, 2015 and ~~$57.06~~$64.28 at December 31, ~~2014.~~2015. The Company’s ratio of tangible common equity to tangible assets was ~~8.66%~~8.87% at ~~September~~June 30, ~~2015,~~2016, compared with ~~8.05%~~8.45% a year earlier and ~~8.11%~~8.69% at December 31, ~~2014.~~2015. Reconciliations of total common shareholders’ equity and tangible common equity and total assets and tangible assets as of each of those respective dates are presented in table 2.

Shareholders’ equity reflects accumulated other comprehensive income or loss, which includes the net after-tax impact of unrealized gains or losses on investment securities classified as available for sale, unrealized losses on held-to-maturity securities for which an other-than-temporary impairment charge has been recognized, gains or losses associated with interest rate swap agreements designated as cash flow hedges, foreign currency translation adjustments and adjustments to reflect the funded status of defined benefit pension and other postretirement plans. Net unrealized gains on investment securities, ~~reflected in shareholders’ equity,~~ net of applicable tax effect, were ~~$128~~$193 million, or ~~$.96~~$1.22 per common share, at ~~September~~June 30, ~~2015,~~2016, compared with net unrealized gains of ~~$109~~$80 million, or ~~$.83~~$.60 per common share, at ~~September~~June 30, ~~2014~~2015 and ~~$127~~$48 million, or ~~$.96~~$.30 per common share, at December 31, ~~2014.~~2015. The higher unrealized gains at the recent quarter-end as compared with December 31, 2015 resulted largely from lower market yields on the securities in the investment portfolio. Information about unrealized gains and losses as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 is included in note 3 of Notes to Financial Statements.

Reflected in net unrealized gains at ~~September~~June 30, ~~2015~~2016 were pre-tax effect unrealized losses of ~~$38~~$26 million on available-for-sale investment securities with an amortized cost of ~~$2.1 billion~~$399 million and pre-tax effect unrealized gains of ~~$274~~$366 million on securities with an amortized cost of ~~$8.8~~$11.2 billion. The pre-tax effect unrealized losses reflect ~~$18~~$22 million of losses on trust preferred securities issued by financial institutions having an amortized cost of ~~$124~~$125 million and an estimated fair value of ~~$106~~$103 million (generally considered Level 2 valuations). Further information concerning the Company’s valuations of available-for-sale investment securities is provided in note 12 of Notes to Financial Statements.

generally collateralized by residential and small-balance commercial real estate loans originated between 2004 and 2008 and had a weighted-average credit enhancement of 16% at September 30, 2015, calculated by dividing the remaining unpaid principal balance of bonds subordinate to the bonds owned by the Company plus any overcollateralization remaining in the securitization structure by the remaining unpaid principal balance of all bonds in the securitization structure. All mortgage-backed securities in the held-to-maturity portfolio had a current payment status as of September 30, 2015. The weighted-average default percentage and loss severity assumptions utilized in the Company’s internal modeling were 34% and 85%, respectively. The Company has concluded that as of September 30, 2015, its privately issued mortgage-backed securities were not other-than-temporarily impaired. Nevertheless, it is possible that adverse changes in the future performance of mortgage loan collateral underlying such securities could impact the Company’s conclusions.

As of ~~September~~June 30, ~~2015,~~2016, based on a review of each of the ~~remaining~~ securities in the investment securities portfolio, the Company concluded that the declines in the values of any securities containing an unrealized loss were temporary and that any additional other-than-temporary impairment charges were not appropriate. It is likely that the Company will be required to sell certain of its collateralized debt obligations backed by trust preferred securities held in the available-for-sale portfolio to comply with the provisions of the ~~Volcker~~Dodd-Frank Act commonly referred to as the “Volcker Rule.” However, the amortized cost and fair value of those collateralized debt obligations were $24 million and ~~$30~~$29 million, respectively, at ~~September~~June 30, ~~2015~~2016 and the Company ~~did~~does not expect that it would realize any material losses if it ultimately

was required to sell such securities. As of that date, the Company did not intend to sell nor is it anticipated that it would be required to sell any of its other impaired securities, that is, where fair value is less than the cost basis of the security. The Company intends to continue to closely monitor the performance of its securities because changes in their underlying credit performance or other events could cause the cost basis of those securities to become other-than-temporarily impaired. However, because the unrealized losses on available-for-sale investment securities have generally already been reflected in the financial statement values for investment securities and shareholders’ equity, any recognition of an other-than-temporary decline in value of those investment securities would not have a material effect on the Company’s consolidated financial condition. Any other-than-temporary impairment charge related to held-to-maturity securities would result in reductions in the financial statement values for investment securities and shareholders’ equity. Additional information concerning fair value measurements and the Company’s approach to the classification of such measurements is included in note 12 of the Notes to Financial Statements.

The Company assesses impairment losses on privately issued mortgage-backed securities in the held-to-maturity portfolio by performing internal modeling to estimate bond-specific cash flows considering recent performance of the mortgage loan collateral and utilizing assumptions about future defaults and loss severity. These bond-specific cash flows also reflect the placement of the bond in the overall securitization structure and the remaining subordination levels. In total, at June 30, 2016 and December 31, 2015, the Company had in its held-to-maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of $169 million and $181 million, respectively, and a fair value of $129 million and $142 million, respectively. At June 30, 2016, 85% of the mortgage-backed securities were in the most senior tranche of the securitization structure with 26% being independently rated as investment grade. The mortgage-backed securities are generally collateralized by residential and small-balance commercial real estate loans originated between 2004 and 2008 and had a weighted-average credit enhancement of 16% at June 30, 2016, calculated by dividing the remaining unpaid principal balance of bonds subordinate to the bonds owned by the Company plus any overcollateralization remaining in the securitization structure by the remaining unpaid principal balance of all bonds in the securitization structure. All mortgage-backed securities in the held-to-maturity portfolio had a current payment status as of June 30, 2016. The weighted-average default percentage and loss severity assumptions utilized in the Company’s internal modeling were 31% and 80%, respectively. The Company has concluded that as of June 30, 2016, its privately issued mortgage-backed securities were not other-than-temporarily impaired. Nevertheless, it is possible that adverse changes in the future performance of mortgage loan collateral underlying such securities could impact the Company’s conclusions.

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 $289 million, or ~~$2.17~~$1.83 per common share, at ~~September~~June 30, ~~2015, $95~~2016, $295 million, or ~~$.72~~$2.22 per common share, at ~~September~~June 30, ~~2014~~2015 and ~~$306~~$297 million, or ~~$2.31~~$1.86 per common share, at December 31, ~~2014.~~2015.

Cash dividends declared on M&T’s common stock totaled $94 million in each of the two most recent quarters, compared with $93 million in the third quarter of 2014, and represented a quarterly dividend of $.70 per common share in each of those quarters. Common stock dividends during the nine-month periods ended September 30, 2015 and 2014 were $281 million and $278 million, respectively.

Cash dividends declared on preferred stock are detailed in the accompanying table. There were no cash dividends declared in the first quarter of 2014 on the Series E Preferred Stock issued in February 2014.

The Company did not repurchase any shares of its common stock during ~~2014 or~~2015. However, in accordance with its 2015 Capital Plan, M&T repurchased 948,545 common shares for $100 million in the first ~~nine months~~quarter of ~~2015.~~2016 and 1,319,487 common shares for $154 million in the second quarter of 2016.

On June 29, 2016, M&T announced that the Federal Reserve did not object to M&T’s 2016 Capital Plan. That plan includes the repurchase of up to $1.15 billion of common shares during the four-quarter period starting on July 1, 2016 and an increase in the quarterly common stock dividend in the first quarter of 2017 of up to $.05 per share to $.75 per share. M&T may also continue to pay dividends and interest on other equity and debt instruments

included in regulatory capital, including preferred stock, trust preferred securities and subordinated debt that were outstanding at December 31, 2015, consistent with the contractual terms of those instruments. Dividends are subject to declaration by M&T’s Board of Directors. Furthermore, on July 19, 2016, M&T’s Board of Directors authorized a new stock repurchase program to repurchase up to $1.15 billion of shares of its common stock subject to all applicable regulatory reporting limitations, including those set forth in M&T’s 2016 Capital Plan. During July 2016, M&T repurchased 1,150,000 shares for $132 million in accordance with that program.

Cash dividends declared on M&T’s common stock totaled $111 million in the recent quarter, compared with $94 million and $112 million in the quarters ended June 30, 2015 and March 31, 2016, respectively, and represented a quarterly dividend payment of $.70 per common share in each of those periods. Common stock dividends during the six-month periods ended June 30, 2016 and 2015 were $223 million and $187 million, respectively. Cash dividends declared on preferred stock aggregated $20 million in each of the second quarters of 2016 and 2015 and the first quarter of 2016.

M&T and its subsidiary banks are required to comply with applicable capital adequacy ~~standards~~regulations established by the federal banking agencies. In July 2013, the Federal Reserve Board, the OCC and the FDIC approved New Capital Rules establishing a new comprehensive capital framework for U.S. banking organizations. These rules went into effect as to M&T and its subsidiary banks on January 1, 2015, subject to phase-in periods for certain components and other provisions.

The New Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries, including M&T and its subsidiaries, M&T Bank and Wilmington Trust, N.A., as compared to the U.S. general risk-based capital rules that were applicable to the Company through December 31, 2014. The New Capital Rules revise the definitions and the components of regulatory capital, as well as address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The New Capital Rules also address asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios. In addition, the New Capital Rules implement certain provisions of the Dodd-Frank Act, including the requirements of Section 939A to remove references to credit ratings from the federal agencies’ rules.

Among other matters, the New Capital Rules: (i) introduce a new capital measure called “Common Equity Tier 1” (“CET1”) and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to the previous regulations. Under the New Capital Rules, for most banking organizations, including M&T, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common forms of Tier 2 capital are subordinated notes and a portion of the allowance for loan and lease losses, in each case, subject to the New Capital Rules’ specific requirements.

Pursuant to ~~the New Capital Rules,~~those regulations, the minimum capital ratios ~~as of January 1, 2015~~ are as follows:

Pursuant to the New Capital Rules, non-advanced approaches banking organizations, including M&T, may make a one-time permanent election to exclude the effects of certain accumulated other comprehensive income or loss items reflected in shareholders’ equity under U.S. GAAP. M&T made that election during the first quarter of 2015. The New Capital Rules also preclude certain hybrid securities, such, as ~~trust preferred securities, from inclusion in bank holding companies’ Tier 1 capital, subject to phase-out~~defined in the ~~case~~regulation.

In addition, capital regulations provide for the phase-in of ~~bank holding companies, such as M&T, that had $15 billion or more in total consolidated assets as~~a “capital conservation buffer” composed entirely of ~~December 31, 2009. As a result, beginning in 2015 25%~~CET1 on top of ~~M&T’s trust preferred securities became includable in Tier~~these minimum risk-weighted asset ratios. When fully phased-in on January 1, 2019 the capital ~~and in 2016, none of M&T’s trust preferred securities~~conservation buffer will be ~~includable in Tier 1 capital. Trust preferred securities no longer included in M&T’s Tier 1 capital may nonetheless be included as a component~~2.5%. For 2016, the phased-in transition portion of Tier 2 capital on a permanent basis without phase-out and irrespective of whether such securities otherwise meet the revised definition of Tier 2 capital set forth in the New Capital Rules. A detailed discussion of the new regulatory capital rulesthat buffer is ~~included in Part I, Item 1 of Form 10-K for the year ended December 31, 2014.~~.625%.

The regulatory capital ratios of the Company, M&T Bank and Wilmington Trust, N.A., as of ~~September~~June 30, ~~2015~~2016 are presented in the accompanying table.


	M&T			M&T			Wilmington			M&T (Consolidated)			M&T Bank			Wilmington Trust, N.A.
	(Consolidated)			Bank			Trust, N.A.
Common equity Tier 1		10.08	%		10.54	%		88.19	%		11.01	%		11.24	%		74.53	%
Tier 1 capital		11.94	%		10.54	%		88.19	%		12.29	%		11.24	%		74.53	%
Total capital		14.70	%		13.06	%		88.94	%		14.72	%		13.25	%		75.20	%
Tier 1 leverage		10.31	%		9.11	%		17.36	%		9.99	%		9.14	%		19.56	%

The Company is also subject to the comprehensive regulatory framework applicable to bank and financial holding companies and their subsidiaries, which includes regular examinations by a number of federal regulators. Regulation of financial institutions such as M&T and its subsidiaries is intended primarily for the protection of depositors, the Deposit Insurance Fund of the FDIC and the banking and financial system as a whole, and generally is

not intended for the protection of shareholders, investors or creditors other than insured depositors. Changes in laws, regulations and regulatory policies applicable to the Company’s operations can increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive environment in which the Company operates, all of which could have a material effect on the business, financial condition or results of operations of the 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 M&T’s Form 10-K for the year ended December 31, 2015 and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of that Form 10-K under the heading “Regulatory Oversight.”

On ~~March 12, 2015,~~June 17, 2013, M&T ~~announced that~~and M&T Bank entered into a written agreement with the Federal Reserve ~~did not object~~Bank of New York. Under the terms of the agreement, M&T and M&T Bank were required to ~~M&T’s proposed 2015 Capital Plan. Accordingly, M&T may maintain~~submit to the Federal Reserve Bank of New York a ~~quarterly common stock dividend of $.70 per share; continue~~revised compliance risk management program designed to pay dividends and interest on other equity and debt instruments included in regulatory capital, including preferred stock, trust preferred securities and subordinated debt that were outstanding at December 31, 2014, consistentensure compliance with the ~~contractual terms of those instruments; repurchase up~~Bank Secrecy Act and anti-money-laundering laws and regulations (“BSA/AML”) and to ~~$200 million of common shares during~~take certain other steps to enhance their compliance practices. M&T and M&T Bank have since made substantial progress in implementing a BSA/AML program with significantly expanded scale and scope, as recognized by the first half of 2016; and redeem or repurchase up to $310 million of trust preferred securities. As previously noted, those latter securities were redeemed in April 2015. Common and preferred dividends are subject to approval by M&T’s Board of ~~Directors~~Governors of the Federal Reserve System in its Order approving M&T and M&T Bank’s applications to acquire Hudson City and Hudson City Savings Bank. M&T and M&T Bank are continuing to work towards the resolution of all outstanding issues in the ~~ordinary course of business.~~written agreement.

As required by GAAP, the Company’s reportable segments have been determined based upon its internal profitability reporting system, which is organized by

strategic business unit. Financial information about the Company’s segments is presented in note 14 of Notes to Financial Statements. ~~During~~As disclosed in M&T’s Form 10-K for the year ended December 31, 2015, ~~certain methodology~~effective July 1, 2015, the Company changed its internal profitability reporting to move a builder and ~~organizational changes were made~~developer lending unit from the Residential Mortgage Banking segment to the Commercial Real Estate segment and, accordingly, the financial information for the Company’s reportable segments for ~~2014 has~~the three-month and six-month periods ended June 30, 2015 have been restated to ~~conform with~~provide segment information on a comparable basis. Additionally, during the ~~methods and assumptions used in 2015. As described in note 14~~second quarter of ~~Notes to Financial Statements,~~2016, the ~~methodology changes were largely the result of updated~~Company revised its funds transfer pricing allocation related to the residential real estate loans obtained in the acquisition of Hudson City, retroactive to November 1, 2015. Accordingly, financial information for the Discretionary Portfolio segment and ~~various cost allocations. Additionally,~~ the ~~segment financial data also reflect~~“All Other” category for the ~~Company’s adoption of amended guidance for accounting for investments in qualified affordable housing projects.~~three-month period ended March 31, 2016 has been reclassified to conform to the current allocation methodology.

The Business Banking segment earned ~~$24~~$23 million in the ~~third~~second quarter of ~~2015,~~2016, compared with $25 million in each of the three-month periods ended ~~September 30, 2014 and~~ June 30, ~~2015.~~2015 and March 31, 2016. As compared with the year-earlier quarter, higher branch network allocated costs largely associated with the acquired Hudson City operations were partially offset by a ~~decrease~~$3 million increase in net interest income. The higher net interest income resulted largely from an increase in average outstanding deposit balances of $950 million. The decline in net income from 2016’s first quarter reflected an increase in advertising and promotional expenses and other operating expenses. Net income recorded by the Business Banking segment totaled $48 million in the first six months of 2016, compared with $50 million in the year-earlier period. That 4% year-over-year decline was attributable to higher allocated costs primarily associated with the acquired Hudson City branches, largely offset by a $7 million increase in net interest income ~~of $2~~and a $4 million ~~was offset,~~decline in ~~part, by higher merchant discount and~~the provision for credit ~~card fees of $1 million.~~losses, due to lower net charge-offs. The ~~lower~~improvement in net interest income primarily reflected ~~a narrowing~~an increase in average outstanding deposit balances of $1.1 billion.

The Commercial Banking segment recorded net income of $105 million during the ~~net interest margin.~~quarter ended June 30, 2016, compared with $108 million in the year-earlier quarter and $101 million in the first quarter of 2016. The ~~modest~~2% decline in net income as compared with the second quarter of 2015 reflected ~~a $2 million increase in the provision for credit losses, due~~higher volume-related and other costs related to ~~higher net charge-offs,~~data processing, risk management and other services that were partially offset by an increase in merchant discount and credit card fees of $1 million. Net income recorded by the Business Banking segment totaled $74 million in each of the nine-month periods ended September 30, 2015 and 2014. As compared with the 2014 period, a $4 million decrease in the provision for credit losses, due to lower net charge-offs, a $3 million increase in merchant discount and credit card fees and lower costs for FDIC assessments of $1 million were offset by a decline in net interest income of $8 ~~million. The decline in net interest income resulted from a narrowing of the net interest margin offset, in part, by an increase in average outstanding deposit balances of $543 million.~~

The Commercial Banking segment contributed net income of $108 million in each of the two most recent quarters, compared with $101 million in the third quarter of 2014. The recent quarter’s 8% improvement as compared with the year-earlier quarter reflected increased gains on sales of previously leased equipment of $13 million and a $7 million increase in net interest income, partially offset by a $9 million rise in the provision for credit losses, due to higher net charge-offs. The higher net interest income was due predominantly to higher average outstanding loan balances of $1.2 billion. As compared with the second quarter of 2015, increased gains on sales of previously leased equipment of $12 million and a $6 million increase in net interest income were partially offset by an $11 million increase in the provision for credit losses, due to higher net charge-offs, and lower credit-related fees of $7 million. The higher net interest income reflected a widening of the net interest margin on loans and a $665 million increase in average outstanding deposit balances. Year-to-date net income for this segment totaled $313 million in 2015 and $304 million in 2014. The improved performance in 2015 resulted largely from increased gains on sales of previously leased equipment of $15 million and an $8 million rise in net interest income, partially offset by a $6 million increase in the provision for credit losses. The higher net interest income reflected growth in average outstanding loan and deposit balances of $1.3 billion and $680 million, respectively.

The Commercial Real Estate segment recorded net income of $85 million during the quarter ended September 30, 2015, compared with $79 million earned in the year-earlier quarter and $83 million in the second quarter of 2015. The recent quarter’s 8% rise in net income as compared with 2014’s third quarter was largely due to a $9 million increase in net interest income, predominantly resulting from higher average outstanding loan balances of $1.7 billion. The increase in net income as compared with the second quarter of

2015 reflected an increase in net interest income and a decrease in the provision for credit losses, partially offset by a decline in mortgage banking revenues, the result of lower origination and sales activities.income. The higher net interest income resulted from increases in average outstanding loan and deposit balances of ~~$177~~$1.2 billion and $831 million, respectively, and a widening of the net interest margin on deposits of 10 basis points, partially offset by a narrowing of the net interest margin on loans of 7 basis points. The recent quarter’s 4% rise in net income as compared with the first quarter of 2016 was largely due to $5 million increases in each of corporate customer advisory fees and net interest income and a decline in the provision for credit losses of $4 million, due to lower net charge-offs. The higher net interest income largely reflects an increase in average outstanding loan balances of $710 million. Those favorable factors were offset, in part, by increases in FDIC assessments, data processing expenses, and other miscellaneous operating expenses. Net income ~~for~~earned by the Commercial ~~Real Estate~~Banking segment ~~was $251 million and $230~~totaled $207 million for the first ~~nine months~~half of 2016, up slightly from $205 million earned in the similar 2015 ~~and 2014, respectively.~~period. That improvement ~~reflects an $18~~reflected a $15 million rise in net interest income ~~a $13~~and an $8 million ~~increase in mortgage banking revenues and a $3 million decrease~~decline in the provision for credit losses. The higher net interest income resulted ~~largely~~ from ~~increases in~~higher average outstanding ~~loan and deposit~~ balances of ~~$1.6~~loans and deposits of $1.2 billion and ~~$345~~$501 million, respectively, and a widening of the net interest margin on deposits of 11 basis points, partially offset by a narrowing of the net interest ~~margin.~~margin on loans of 8 basis points. Those factors were largely offset by an increase in FDIC assessments of $6 million and higher allocated operating expenses associated with data processing, risk management and other support services provided to the Commercial Banking segment.

The ~~Discretionary Portfolio~~Commercial Real Estate segment contributed net income of ~~$5 million in the third quarter of 2015, compared with $12 million in the year-earlier quarter and $11~~$84 million in the second quarter of ~~2015.~~2016, compared with $83 million in the year-earlier period and $81 million in the first quarter of 2016. The ~~decline~~modest improvement in net income as compared with the ~~year-earlier period was largely due to a $10~~second quarter of 2015 reflects $5 million ~~decline~~increases in each of net interest income ~~partially~~and trading account and foreign exchange gains, largely offset by higher FDIC assessments and a ~~$2 million~~ decrease in mortgage banking revenues, the ~~provision for credit losses.~~result of a decline in origination and sales activities. The ~~lower~~higher net interest income ~~reflected~~resulted from an increase in average outstanding loan balances of $1.7 billion and a ~~23 basis point narrowing~~widening of the net interest margin on ~~investment securities resulting from the Company’s allocation~~deposits of funding charges associated with those assets. The recent quarter’s unfavorable performance as compared with the immediately preceding quarter reflected a $3 million decrease in bank owned life insurance revenues and a $4 million decrease in net interest income, resulting from13 basis points, partially offset by a narrowing of the net interest margin on ~~investment securities and loans. Net~~loans of 19 basis points. Contributing to the 4% improvement in the recent quarter’s net income ~~recorded by the Discretionary Portfolio segment totaled $22 million for~~as compared with the first ~~nine months~~quarter of ~~2015, compared with $39~~2016 was a $6 million ~~earned~~rise in ~~the corresponding 2014 period. The decline was predominantly due to lower~~ net interest income and a $5 million increase in trading account and foreign exchange gains. The higher net interest income reflected an increase in average outstanding loan balances of ~~$30~~$568 million ~~that resulted from~~combined with a 316 basis point ~~narrowing~~widening of the net interest margin on ~~investment securities.~~

Net contribution from the Residential Mortgage Banking segment totaled $21 million in the recent quarter, compared with $23 million in the third quarter of 2014 and $25 million in the second quarter of 2015. The recent quarter’s decline in net income as compared with the year-earlier quarter reflected a $6 million decrease in revenues from servicing residential real estate loans, largely related to sub-servicing activities,loans. Those favorable factors were partially offset by ~~lower amortization of capitalized servicing rights of $4 million (reflecting lower prepayment trends). The decline in net~~higher FDIC assessment costs. Net income ~~in 2015’s third quarter as compared with~~for the immediately preceding quarter reflected decreases in revenues from servicing residential real estate loans of $5 million and in revenues from mortgage origination and sales activities (including intersegment revenues) of $3 million. Year-to-date net income recorded by the Residential Mortgage BankingCommercial Real Estate segment totaled ~~$75~~$165 million ~~in 2015~~during each of the six-month periods ended June 30, 2016 and $65 million in 2014. The improved performance in 2015 was attributable to: an $8 million increase in revenues from mortgage origination and sales activities (including intersegment revenues) due to higher origination volumes; a $4 million2015. A rise in revenues from servicing residential real estate loans, predominantly the result of increased sub-servicing activities; and lower amortization of capitalized servicing rights of $15 million. Partially offsetting those favorable factors were higher professional services and personnel-related costs of $2 million each and increased servicing costs.

Net income earned by the Retail Banking segment totaled $65 million in the quarter ended September 30, 2015, compared with $72 million in the year-earlier period and $69 million in the second quarter of 2015. The decline in net income as compared with the year-earlier quarter reflects a $3 million decrease in net interest income ~~a $2~~of $10 million ~~reduction in fees earned for providing deposit~~and higher trading account ~~services~~ and ~~an increase in centrally-allocated technology-related operating expenses. The lower net interest income resulted~~

~~from a narrowing~~foreign exchange gains of ~~the net interest margin, partially~~$7 million were offset by ~~an increase in average outstanding loans~~increased FDIC assessments of ~~$543 million. As compared with the immediately preceding quarter,~~$6 million, lower mortgage banking revenues of $3 million and a ~~$4 million increase in the~~higher provision for credit ~~losses, resulting from higher net charge-offs, and higher equipment and occupancy costs of $3 million were partially offset by a $2 million increase in net interest income.~~losses. The increase in net interest income resulted from higher average outstanding loan balances of ~~$209 million, partially~~$1.6 billion and a widening of the net interest margin on deposits of 14 basis points offset, in part, by ~~lower average outstanding deposit balances~~a narrowing of ~~$331 million. Year-to-date~~the net interest margin on loans of 19 basis points. The higher trading account and foreign exchange gains during the three-month and six-month periods ended June 30, 2016 resulted from increased activity related to interest rate swap transactions executed on behalf of customers.

The Discretionary Portfolio segment recorded net income ~~for this segment totaled $202~~of $46 million during the three-month period ended June 30, 2016, compared with $11 million

in the year-earlier period and $55 million in the first quarter of 2016. The significant improvement as compared with the second quarter of 2015 ~~and $214 million in 2014. The year-over-year decline~~ was predominantly due to the impact of residential real estate loans obtained in the acquisition of Hudson City. Partially offsetting that factor were increases in the provision for credit losses and FDIC assessments of $6 million each, and higher loan and other real estate-related servicing costs. The decline in net income in the recent quarter as compared with the immediately preceding quarter resulted from a $9 million decrease in net interest income, ~~a $5 million reduction in fees earned for providing deposit account services, a~~lower bank owned life insurance revenues of $4 million ~~reduction in servicing revenues related to securitized automobile loans,~~ and higher ~~allocated expenses, largely compliance and technology-related. Those factors were offset, in part, by~~FDIC assessments. The lower ~~personnel-related and equipment and occupancy costs. The decline in~~ net interest income ~~resulted from~~predominantly reflected lower average outstanding loan balances of $936 million and a narrowing of the net interest margin on investment securities of 8 basis points. Year-to-date net income for this segment totaled $101 million in 2016 and $17 million in 2015. That significant increase was predominantly the result of residential real estate loans obtained in the acquisition of Hudson City, partially offset by increases in the provision for credit losses and FDIC assessments of $9 million each and higher loan and other real-estate servicing costs.

Net income from the Residential Mortgage Banking segment was $20 million in the recent quarter, compared with $25 million in the second quarter of 2015 and $17 million in the first quarter of 2016. The decline as compared with the year-earlier period was predominantly attributable to lower revenues from subservicing residential real estate loans. The recent quarter’s improved performance as compared with the first quarter of 2016 reflected a ~~$594~~$6 million increase in ~~average outstanding loan balances.~~revenues associated with mortgage origination and sales activities (including intersegment revenues) due to higher origination volumes. The Residential Mortgage Banking segment contributed $37 million of net income in the first six months of 2016, compared with $54 million in the corresponding 2015 period. That decline reflected a $9 million decrease in revenues from mortgage origination and sales activities (including intersegment revenues), due to lower origination volumes, and a decline in revenues from subservicing residential real estate loans.

Net income earned by the Retail Banking segment totaled $71 million in the second quarter of 2016, compared with $69 million in the year-earlier quarter and $63 million in the first quarter of 2016. As compared with the second quarter of 2015, the recent quarter’s improved performance resulted from a $41 million rise in net interest income, predominantly due to the impact of deposits obtained in the acquisition of Hudson City, that was largely offset by: a $14 million increase in personnel-related expenses, resulting from the Hudson City acquisition; a $9 million increase in the provision for credit losses, reflecting a $6 million charge-off of a personal usage loan; increased FDIC assessments of $5 million; higher equipment and net occupancy costs of $4 million, reflecting the impact of the Hudson City acquisition, and a $3 million increase in advertising and promotional expenses. The recent quarter’s 13% improvement in net income as compared with the first quarter of 2016 reflected a $17 million decrease in the provision for credit losses, largely due to partial charge-offs recognized in the first quarter of 2016 on loans for which the Company identified that the customer was either bankrupt or deceased, partially offset by increased FDIC assessments. Net income recorded by the Retail Banking segment totaled $135 million in the first half of 2016 and $138 million in 2015. Factors contributing to that 2% decline were increases in: the provision for credit losses of $30 million, due to higher net charge-offs; personnel costs of $29 million, equipment and net occupancy expenses of $8 million and advertising and promotional expenses of $6 million, all predominantly due to the impact of the acquisition of Hudson City; and FDIC assessment costs of $5 million. Those unfavorable factors were largely offset by an $80 million increase in net interest income, predominantly due to the impact of deposits obtained in the acquisition of Hudson City.

The “All Other” category ~~encompasses~~reflects other activities of the Company that are not directly attributable to the reported segments. Reflected in this category are the amortization of core deposit and other intangible assets resulting from the acquisitions of financial institutions, including the November 2015 Hudson City transaction, M&T’s share of the operating losses of BLG, merger-related ~~gains and~~ expenses ~~related to~~resulting from acquisitions and the net impact of the Company’s allocation methodologies for internal transfers for funding charges and credits associated with the earning assets and interest-bearing liabilities of the Company’s reportable segments and the provision for credit losses. The “All Other” category also includes the trust income of the Company that reflects the ICS and WAS business activities. The various components of the “All Other” category resulted in net losses ~~of $28~~totaling $14 million infor the quarter ended ~~September~~June 30, ~~2015, $36 million in the third quarter of 2014 and~~2016, $34 million in the ~~second~~year-earlier quarter and $44 million in the first quarter of ~~2015. The most significant factors contributing to~~2016. As compared with the ~~reduced net loss in~~year-earlier quarter, the recent quarter as compared to the year-earlier period include a decrease in professional services expenses of $18 million and the favorable impact from the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments. Those favorable factors were largely offset by increases in personnel-related expenses of $13 million and a decline in trust income of $15 million, largely due to the impact of the sale of the trade processing business within the retirement services division of ICS in the second quarter of 2015. Results for the second quarter of 2015 reflected a $45 million pre-tax gain related to that sale, partially offset by $40 million of tax-deductible cash contributions to The M&T Charitable Foundation. The after-tax impact of those two items lowered net income by approximately $1 million. Furthermore, as compared with the second quarter of 2015, decreases during the recent quarter in personnel-related expenses of $3 million andreflects the favorable impact from the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments and the provision for credit losses, and a decrease in allocated FDIC assessments that were partially offset by ~~decreases~~higher personnel-related costs of $20 million and merger-related expenses aggregating $13 million (there were no such expenses in the second quarter of 2015). Results for the second quarter of 2015 reflected the $45 million pre-tax gain related to the sale of the trade processing business within the retirement services division that was mostly offset by $40 million of tax-deductible cash contributions to The M&T Charitable Foundation. The after-tax impact of those two items lowered net income by approximately $1 million. The reduced net loss in the second quarter of 2016 as compared with the immediately preceding quarter reflected a decrease in personnel-related costs of $29 million (resulting from seasonally higher stock-based incentive compensation, unemployment insurance, payroll-related taxes and other benefits in the initial 2016 quarter), a reduction of merger-related expenses of $11 million, an increase in trust income of $5$9 million ~~largely attributable to seasonal tax preparation fees in 2015’s second quarter.~~and lower allocated FDIC assessments, partially offset by higher professional services costs of $12 million and the 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. The “All Other” category had a net ~~loss~~losses of ~~$129~~$58 million and $100 million for the six months ended June 30, 2016 and 2015, respectively. The improved performance in 2016 was predominantly due to the ~~first nine months of 2015, compared with $137 million in 2014. The~~ favorable impact from ~~lower professional services costs and~~ the Company’s allocation methodologies ~~was offset, in part, by increased personnel-related expenses~~for internal transfers for funding charges and ~~a decline in trust income, largely due to the impact~~credits associated with earning assets and interest-bearing liabilities of the ~~sold trade processing business.~~Company’s reportable segments, partially offset by $36 million of merger-related expenses (there were no such expenses in the 2015 period).

~~As previously noted,~~Effective January 1, 2016, the Company adopted amended accounting guidance for investments in qualified affordable housing projects under which the initial cost of investments in qualified affordable housing projects is amortized in proportion to the tax credits and other tax benefits received from such projects and recognized in the income statement as a component of income tax expense. As required, the guidance was applied retrospectively to all periods presented. The adoption of this guidance did not have a significant effect on the Company’s consolidated financial position or results of operations, but did result in the restatement of the consolidated statement of income for the three-month and nine-month periods ended September 30, 2014 to remove $14 million and $39 million, respectively, of losses associated with qualified affordable housing projects from “other costs of operations” and include the amortization of the initial cost of the investment in income tax expense. The Company amortized $10 million and $31 million of its investments in qualified affordable housing projects to income tax expense during the three-month and nine-month periods ended September 30, 2015, respectively.

In the first quarter of 2015, the Company adopted amended accounting guidance from the FASB related to the classification of certain government-guaranteed mortgage loans upon foreclosure. This guidance requires that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based upon the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The adoption of this guidance did not have a significant effect on the Company’s consolidated financial position or results of operations.

Effective January 1, 2015, the Company adopted amended accounting guidance for repurchase-to-maturity transactions and repurchase financings. The adoption had no impact on the Company’s consolidated financial position or results of operations. The Company has made the required disclosures in note 5 of Notes to Financial Statements.

In January 2015, the Company also adopted amended accounting and disclosure guidance for reclassification of residential real estate collateralized consumer mortgage loans upon foreclosure. The amended guidance clarifies that an in-substance repossession or foreclosure occurs and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amended guidance also requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The Company’s adoption of this guidance on January 1, 2015 did not have a significant effect on the Company’s consolidated financial position or results of operations. The Company has made the required disclosures in note 4 of Notes to Financial Statements.

In September 2015, the FASB issued amended guidance for measurement-period adjustments related to business combinations. The amended guidance requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer will be required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. This guidance is effective for adjustments to provisional amounts that occur in annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company is still evaluating the impact the guidance could have on its consolidated financial statements.

In May 2015, the FASB issued amended disclosure guidance for investments in certain entities that calculate net asset value per share (or its equivalent). The amended guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Instead, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. This guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company does not expect the amended guidance to have a material impact on its consolidated financial statements.

In April 2015, the FASB issued amended accounting guidance for debt issuance costs. The amended guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company does not expect a material change in the presentation of its consolidated financial position upon adoption of this amended guidance.

~~In February 2015, the FASB issued~~ amended accounting guidance relating to the consolidation of variable interest entities to modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities and to eliminate the presumption that a general partner should consolidate a limited partnership. The amended guidance also eliminates certain conditions in the assessment of whether fees paid by a legal entity to a decision maker or a service provider represent a variable interest in the legal entity and reduces the extent to which related party arrangements cause an entity to be considered a primary beneficiary. The new guidance eliminates the indefinite deferral of existing consolidation guidance for certain investment funds, but provides a scope exception for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ~~This~~The adoption of this guidance ~~is effective for annual and interim periods within those annual periods beginning after December 15, 2015. The Company is still evaluating~~did not have a material effect on the ~~impact the guidance could have on its~~Company’s consolidated financial ~~statements.~~position or results of operations.

In January 2016, the Company also adopted amended accounting guidance for debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position at January 1, 2016.

In ~~June 2014,~~ the ~~FASB issued~~first quarter of 2016, the Company adopted amended accounting guidance for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The amended guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes

probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

Amended accounting guidance for measurement-period adjustments related to business combinations was also adopted by the Company in the first quarter of 2016. The amended guidance requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer is now required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued amended guidance for the measurement of credit losses on certain financial assets. The amended guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses will represent a valuation account that is deducted from the amortized cost basis of the financial assets to present their net carrying value at the amount expected to be collected. The income statement will reflect the measurement of credit losses for newly recognized financial assets as well as expected increases or decreases of expected credit losses that have taken place during the period. When determining the allowance, expected credit losses over the contractual term of the financial asset(s) (taking into account prepayments) will be estimated considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The amended guidance also requires recording an allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The initial allowance for these assets will be added to the purchase price at acquisition rather than being reported as an expense. Subsequent changes in the allowance will be recorded as an expense. In addition, the amended guidance requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The calculation of credit losses for available-

for-sale securities will be similar to how it is determined under existing guidance. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. The Company is evaluating the impact the amended guidance may have on its consolidated financial statements.

In March 2016, the FASB issued amended accounting guidance for share-based transactions. The amended guidance requires that all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement and that excess tax benefits should be recognized regardless of whether the benefit reduces taxes payable in the current period. The guidance allows an entity to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The guidance permits share-based awards that allow for the withholding of shares up to the maximum statutory tax ratio in applicable jurisdictions to qualify for equity classification. The previous GAAP threshold was restricted to the employer’s minimum statutory withholding requirements. The guidance also specifies certain changes to the reporting of share-based transactions on the statement of cash flows and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company expects adoption of the guidance will result in increased volatility to reported income tax expense related to excess tax benefits and tax deficiencies for share-based transactions, but the actual amounts recognized in tax expense will be dependent on the amount of share-based transactions entered into and the stock price at the time of vesting.

In March 2016, the FASB issued amended accounting guidance for the transition to the equity method of accounting. The amended guidance eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method has been in effect during all previous periods that the investment had been held. Instead, the amended guidance requires the investor to adopt the equity method of accounting as of the date the investment first qualifies for such accounting. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company does not expect the guidance to have a material impact on its consolidated financial statements.

In March 2016, the FASB issued two amendments to its rules on accounting for derivatives and hedging. The first amendment clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The second amendment clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence and no longer has to assess whether the event that triggers the ability to exercise the option is related to interest rates or credit risks. Both amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued guidance related to the accounting for leases. The core principle of the guidance is that all leases create an asset and a liability for the lessee and, therefore, lease assets and lease liabilities should be recognized in the balance sheet. Lease assets will be recognized as a right-of-use asset and lease liabilities will be recognized

as a liability to make lease payments. While the guidance requires all leases to be recognized in the balance sheet, there continues to be a differentiation between finance leases and operating leases for purposes of income statement recognition and cash flow statement presentation. For finance leases, interest on the lease liability and amortization of the right-of-use asset will be recognized separately in the statement of income. Repayments of principal on those lease liabilities will be classified within financing activities and payments of interest on the lease liability will be classified within operating activities in the statement of cash flows. For operating leases, a single lease cost is recognized in the statement of income and allocated over the lease term, generally on a straight-line basis. All cash payments are presented within operating activities in the statement of cash flows. The accounting applied by lessors is largely unchanged from existing GAAP, however, the guidance eliminates the accounting model for leveraged leases for leases that commence after the effective date of the guidance. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company occupies certain banking offices and uses certain equipment under noncancelable operating lease agreements, which currently are not reflected in its consolidated balance sheet. Such leases generally will be required to be presented in the Company’s consolidated balance sheet upon adoption of this guidance. The Company is evaluating the impact the guidance will have on its consolidated financial statements.

In January 2016, the FASB issued amended guidance related to recognition and measurement of financial assets and liabilities. The amended guidance requires that equity investments (excluding those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. An entity can elect to measure equity investments that do not have readily determinable fair values at cost less impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The impairment assessment of equity investments without readily determinable fair values is simplified by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates impairment exists, an entity is required to measure the investment at fair value. The guidance eliminates the requirement for public business entities to disclose the method and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. Further, the guidance requires public entities to use the exit price when measuring the fair value of financial instruments for disclosure purposes. The guidance also requires an entity to present separately in other comprehensive income, a change in the instrument-specific credit risk when the entity has elected to measure a liability at fair value in accordance with the fair value option. Separate presentation of financial assets and liabilities by measurement category and type of instrument on the balance sheet or accompanying notes to the financial statements is required. The guidance also clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. This guidance is effective for annual periods and interim periods within those annual periods beginning after December ~~31, 2015, with earlier adoption permitted.~~15, 2017. The Company ~~does not expect~~is evaluating the ~~amended~~impact the guidance tocould have ~~a material impact~~ on its consolidated financial ~~position or results of operations.~~statements.

In May 2014, the FASB issued amended accounting and disclosure guidance for revenue from contracts with customers. The core principle of the accounting guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the

performance obligations in the contract; (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. The amended disclosure guidance requires sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB deferred the effective date of this guidance by one year. The amended guidance is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The guidance should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. The Company is still evaluating the impact the guidance could have on its consolidated financial statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this quarterly report contain forward-looking statements that are based on current expectations, estimates and projections about the Company’s business, management’s beliefs and assumptions made by management. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could,” or “may,” or by variations of such words or by similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Forward-looking statements speak only as of the date they are made and the Company assumes no duty to update forward-looking statements.

Future Factors include changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values of loans, collateral securing loans and other assets; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and

number of stock-based compensation awards to be issued in future periods; the impact of changes in market values on trust-related revenues; legislation and/or regulation affecting the financial services industry as a whole, and M&T and its subsidiaries individually or collectively, including tax legislation or regulation; regulatory supervision and oversight, including monetary policy and capital requirements; changes in accounting policies or procedures as may be required by the FASB or regulatory agencies; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support M&T and its subsidiaries’ future businesses; and material differences in the actual financial results of merger, acquisition and investment activities compared with M&T’s initial expectations, including the full realization of anticipated cost savings and revenue enhancements.

These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general economic and political conditions, either nationally or in the states

in which M&T and its subsidiaries do business, including interest rate and currency exchange rate fluctuations, changes and trends in the securities markets, and other Future Factors.


	2015 Quarters									2014 Quarters												2016 Quarters						2015 Quarters
	Third			Second			First			Fourth			Third			Second			First			Second			First			Fourth			Third			Second			First
Earnings and dividends
Amounts in thousands, except per share
Interest income (taxable-equivalent basis)	$	776,274			766,374			743,925			762,619			748,864			740,139			728,897		$	977,143			979,166			908,734			776,274			766,374			743,925
Interest expense		77,199			77,226			78,499			74,772			73,964			65,176			66,519			106,802			100,870			95,333			77,199			77,226			78,499

Net interest income		699,075			689,148			665,426			687,847			674,900			674,963			662,378			870,341			878,296			813,401			699,075			689,148			665,426
Less: provision for credit losses		44,000			30,000			38,000			33,000			29,000			30,000			32,000			32,000			49,000			58,000			44,000			30,000			38,000
Other income		439,699			497,027			440,203			451,643			451,111			456,412			420,107			448,254			420,933			448,108			439,699			497,027			440,203
Less: other expense		653,816			696,628			686,375			666,221			665,359			667,660			690,234			749,895			776,095			786,113			653,816			696,628			686,375

Income before income taxes		440,958			459,547			381,254			440,269			431,652			433,715			360,251			536,700			474,134			417,396			440,958			459,547			381,254
Applicable income taxes		154,309			166,839			133,803			156,713			150,467			143,530			125,289			194,147			169,274			140,074			154,309			166,839			133,803
Taxable-equivalent adjustment		6,248			6,020			5,838			6,007			5,841			5,849			5,945			6,522			6,332			6,357			6,248			6,020			5,838

Net income	$	280,401			286,688			241,613			277,549			275,344			284,336			229,017		$	336,031			298,528			270,965			280,401			286,688			241,613

Net income available to common shareholders-diluted	$	257,346			263,481			218,837			254,239			251,917			260,695			211,731		$	312,974			275,748			248,059			257,346			263,481			218,837
Per common share data
Basic earnings	$	1.94			1.99			1.66			1.93			1.92			1.99			1.63		$	1.98			1.74			1.65			1.94			1.99			1.66
Diluted earnings		1.93			1.98			1.65			1.92			1.91			1.98			1.61			1.98			1.73			1.65			1.93			1.98			1.65
Cash dividends	$	.70			.70			.70			.70			.70			.70			.70		$	.70			.70			.70			.70			.70			.70
Average common shares outstanding
Basic		132,630			132,356			132,049			131,450			131,265			130,856			130,212			157,802			158,734			150,027			132,630			132,356			132,049
Diluted		133,376			133,116			132,769			132,278			132,128			131,828			131,126			158,341			159,181			150,718			133,376			133,116			132,769

Performance ratios, annualized
Return on
Average assets		1.13	%		1.18	%		1.02	%		1.12	%		1.17	%		1.27	%		1.07	%		1.09	%		.97	%		.93	%		1.13	%		1.18	%		1.02	%
Average common shareholders’ equity		8.93	%		9.37	%		7.99	%		9.10	%		9.18	%		9.79	%		8.22	%		8.38	%		7.44	%		7.22	%		8.93	%		9.37	%		7.99	%
Net interest margin on average earning assets (taxable-equivalent basis)		3.14	%		3.17	%		3.17	%		3.10	%		3.23	%		3.40	%		3.52	%		3.13	%		3.18	%		3.12	%		3.14	%		3.17	%		3.17	%
Nonaccrual loans to total loans and leases, net of unearned discount		1.15	%		1.17	%		1.18	%		1.20	%		1.29	%		1.36	%		1.39	%		.96	%		1.00	%		.91	%		1.15	%		1.17	%		1.18	%

Net operating (tangible) results (a)
Net operating income (in thousands)	$	282,907			290,341			245,776			281,929			279,838			289,974			235,162		$	350,604			320,064			337,613			282,907			290,341			245,776
Diluted net operating income per common share		1.95			2.01			1.68			1.95			1.94			2.02			1.66			2.07			1.87			2.09			1.95			2.01			1.68
Annualized return on
Average tangible assets		1.18	%		1.24	%		1.08	%		1.18	%		1.24	%		1.35	%		1.15	%		1.18	%		1.09	%		1.21	%		1.18	%		1.24	%		1.08	%
Average tangible common shareholders’ equity		12.98	%		13.76	%		11.90	%		13.55	%		13.80	%		14.92	%		12.76	%		12.68	%		11.62	%		13.26	%		12.98	%		13.76	%		11.90	%
Efficiency ratio (b)		57.05	%		58.23	%		61.46	%		57.84	%		58.44	%		58.20	%		62.83	%		55.06	%		57.00	%		55.53	%		57.05	%		58.23	%		61.46	%

Balance sheet data
In millions, except per share
Average balances
Total assets (c)	$	98,515			97,598			95,892			98,644			93,245			89,873			86,665		$	123,706			123,252			115,052			98,515			97,598			95,892
Total tangible assets (c)		94,989			94,067			92,346			95,093			89,689			86,311			83,096			119,039			118,577			110,772			94,989			94,067			92,346
Earning assets		88,446			87,333			85,212			87,965			82,776			79,556			76,288			111,872			111,211			103,587			88,446			87,333			85,212
Investment securities		14,441			14,195			13,376			12,978			12,780			10,959			9,265			14,914			15,348			15,786			14,441			14,195			13,376
Loans and leases, net of unearned discount		67,849			67,670			66,587			65,767			64,763			64,343			63,763			88,155			87,584			81,110			67,849			67,670			66,587
Deposits		73,821			72,958			71,698			75,515			70,772			69,659			67,327			94,033			92,391			85,657			73,821			72,958			71,698
Common shareholders’ equity (c)		11,555			11,404			11,227			11,211			11,015			10,808			10,576			15,145			15,047			13,775			11,555			11,404			11,227
Tangible common shareholders’ equity (c)		8,029			7,873			7,681			7,660			7,459			7,246			7,007			10,478			10,372			9,495			8,029			7,873			7,681

At end of quarter
Total assets (c)	$	97,797			97,080			98,378			96,686			97,228			90,835			88,530		$	123,821			124,626			122,788			97,797			97,080			98,378
Total tangible assets (c)		94,272			93,552			94,834			93,137			93,674			87,276			84,965			119,157			119,955			118,109			94,272			93,552			94,834
Earning assets		87,807			86,990			87,959			86,278			86,751			80,062			77,950			112,057			113,005			110,802			87,807			86,990			87,959
Investment securities		14,495			14,752			14,393			12,994			13,348			12,120			10,364			14,963			15,467			15,656			14,495			14,752			14,393
Loans and leases, net of unearned discount		68,540			68,131			67,099			66,669			65,572			64,748			64,135			88,522			87,872			87,489			68,540			68,131			67,099
Deposits		72,945			72,630			73,594			73,582			74,342			69,829			68,699			94,650			94,215			91,958			72,945			72,630			73,594
Common shareholders’ equity, net of undeclared cumulative preferred dividends (c)		11,687			11,433			11,294			11,102			11,099			10,934			10,652			15,237			15,120			14,939			11,687			11,433			11,294
Tangible common shareholders’ equity (c)		8,162			7,905			7,750			7,553			7,545			7,375			7,087			10,573			10,449			10,260			8,162			7,905			7,750
Equity per common share		87.67			85.90			84.95			83.88			83.99			82.86			81.05			96.49			95.00			93.60			87.67			85.90			84.95
Tangible equity per common share		61.22			59.39			58.29			57.06			57.10			55.89			53.92			66.95			65.65			64.28			61.22			59.39			58.29

Market price per common share
High	$	134.00			128.70			129.58			128.96			128.69			125.90			123.04		$	121.11			119.24			127.39			134.00			128.70			129.58
Low		111.86			117.86			111.78			112.42			118.51			116.10			109.16			107.01			100.08			111.50			111.86			117.86			111.78
Closing		121.95			124.93			127.00			125.62			123.29			124.05			121.30			118.23			111.00			121.18			121.95			124.93			127.00


	2015 Quarters									2014 Quarters												2016 Quarters						2015 Quarters
	Third			Second			First			Fourth			Third			Second			First			Second			First			Fourth			Third			Second			First
Income statement data
In thousands, except per share
Net income
Net income	$	280,401			286,688			241,613			277,549			275,344			284,336			229,017		$	336,031			298,528			270,965			280,401			286,688			241,613
Amortization of core deposit and other intangible assets (a)		2,506			3,653			4,163			4,380			4,494			5,638			6,145			6,936			7,488			5,828			2,506			3,653			4,163
Merger-related expenses (a)																							7,637			14,048			60,820			—			—			—

Net operating income	$	282,907			290,341			245,776			281,929			279,838			289,974			235,162		$	350,604			320,064			337,613			282,907			290,341			245,776

Earnings per common share
Diluted earnings per common share	$	1.93			1.98			1.65			1.92			1.91			1.98			1.61		$	1.98			1.73			1.65			1.93			1.98			1.65
Amortization of core deposit and other intangible assets (a)		.02			.03			.03			.03			.03			.04			.05			.04			.05			.04			.02			.03			.03
Merger-related expenses (a)																							.05			.09			.40			—			—			—

Diluted net operating earnings per common share	$	1.95			2.01			1.68			1.95			1.94			2.02			1.66		$	2.07			1.87			2.09			1.95			2.01			1.68

Other expense
Other expense	$	653,816			696,628			686,375			666,221			665,359			667,660			690,234		$	749,895			776,095			786,113			653,816			696,628			686,375
Amortization of core deposit and other intangible assets		(4,090	)		(5,965	)		(6,793	)		(7,170	)		(7,358	)		(9,234	)		(10,062	)		(11,418	)		(12,319	)		(9,576	)		(4,090	)		(5,965	)		(6,793	)
Merger-related expenses																							(12,593	)		(23,162	)		(75,976	)		—			—			—

Noninterest operating expense	$	649,726			690,663			679,582			659,051			658,001			658,426			680,172		$	725,884			740,614			700,561			649,726			690,663			679,582

Merger-related expenses
Salaries and employee benefits																						$	60			5,274			51,287			—			—			—
Equipment and net occupancy																							339			939			3			—			—			—
Printing, postage and supplies																							545			937			504			—			—			—
Other costs of operations																							11,649			16,012			24,182			—			—			—

Other expense																							12,593			23,162			75,976			—			—			—
Provision for credit losses																							—			—			21,000			—			—			—

Total																						$	12,593			23,162			96,976			—			—			—

Efficiency ratio
Noninterest operating expense (numerator)	$	649,726			690,663			679,582			659,051			658,001			658,426			680,172		$	725,884			740,614			700,561			649,726			690,663			679,582

Taxable-equivalent net interest income		699,075			689,148			665,426			687,847			674,900			674,963			662,378			870,341			878,296			813,401			699,075			689,148			665,426
Other income		439,699			497,027			440,203			451,643			451,111			456,412			420,107			448,254			420,933			448,108			439,699			497,027			440,203
Less: Loss on bank investment securities		—			(10	)		(98	)		—			—			—			—
Less: Gain (loss) on bank investment securities																							264			4			(22	)		—			(10	)		(98	)

Denominator	$	1,138,774			1,186,185			1,105,727			1,139,490			1,126,011			1,131,375			1,082,485		$	1,318,331			1,299,225			1,261,531			1,138,774			1,186,185			1,105,727

Efficiency ratio		57.05	%		58.23	%		61.46	%		57.84	%		58.44	%		58.20	%		62.83	%		55.06	%		57.00	%		55.53	%		57.05	%		58.23	%		61.46	%

Balance sheet data
In millions
Average assets
Average assets	$	98,515			97,598			95,892			98,644			93,245			89,873			86,665		$	123,706			123,252			115,052			98,515			97,598			95,892
Goodwill		(3,513	)		(3,514	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(4,593	)		(4,593	)		(4,218	)		(3,513	)		(3,514	)		(3,525	)
Core deposit and other intangible assets		(20	)		(25	)		(31	)		(38	)		(45	)		(53	)		(64	)		(122	)		(134	)		(101	)		(20	)		(25	)		(31	)
Deferred taxes		7			8			10			12			14			16			20			48			52			39			7			8			10

Average tangible assets	$	94,989			94,067			92,346			95,093			89,689			86,311			83,096		$	119,039			118,577			110,772			94,989			94,067			92,346

Average common equity
Average total equity	$	12,787			12,636			12,459			12,442			12,247			12,039			11,648		$	16,377			16,279			15,007			12,787			12,636			12,459
Preferred stock		(1,232	)		(1,232	)		(1,232	)		(1,231	)		(1,232	)		(1,231	)		(1,072	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)

Average common equity		11,555			11,404			11,227			11,211			11,015			10,808			10,576			15,145			15,047			13,775			11,555			11,404			11,227

Goodwill		(3,513	)		(3,514	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(4,593	)		(4,593	)		(4,218	)		(3,513	)		(3,514	)		(3,525	)
Core deposit and other intangible assets		(20	)		(25	)		(31	)		(38	)		(45	)		(53	)		(64	)		(122	)		(134	)		(101	)		(20	)		(25	)		(31	)
Deferred taxes		7			8			10			12			14			16			20			48			52			39			7			8			10

Average tangible common equity	$	8,029			7,873			7,681			7,660			7,459			7,246	��		7,007		$	10,478			10,372			9,495			8,029			7,873			7,681

At end of quarter
Total assets
Total assets	$	97,797			97,080			98,378			96,686			97,228			90,835			88,530		$	123,821			124,626			122,788			97,797			97,080			98,378
Goodwill		(3,513	)		(3,513	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(4,593	)		(4,593	)		(4,593	)		(3,513	)		(3,513	)		(3,525	)
Core deposit and other intangible assets		(18	)		(22	)		(28	)		(35	)		(42	)		(49	)		(59	)		(117	)		(128	)		(140	)		(18	)		(22	)		(28	)
Deferred taxes		6			7			9			11			13			15			19			46			50			54			6			7			9

Total tangible assets	$	94,272			93,552			94,834			93,137			93,674			87,276			84,965		$	119,157			119,955			118,109			94,272			93,552			94,834

Total common equity
Total equity	$	12,922			12,668			12,528			12,336			12,333			12,169			11,887		$	16,472			16,355			16,173			12,922			12,668			12,528
Preferred stock		(1,232	)		(1,232	)		(1,232	)		(1,231	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)
Undeclared dividends—cumulative preferred stock		(3	)		(3	)		(2	)		(3	)		(2	)		(3	)		(3	)
Undeclared dividends - cumulative preferred stock																							(3	)		(3	)		(2	)		(3	)		(3	)		(2	)

Common equity, net of undeclared cumulative preferred dividends		11,687			11,433			11,294			11,102			11,099			10,934			10,652			15,237			15,120			14,939			11,687			11,433			11,294

Goodwill		(3,513	)		(3,513	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(3,525	)		(4,593	)		(4,593	)		(4,593	)		(3,513	)		(3,513	)		(3,525	)
Core deposit and other intangible assets		(18	)		(22	)		(28	)		(35	)		(42	)		(49	)		(59	)		(117	)		(128	)		(140	)		(18	)		(22	)		(28	)
Deferred taxes		6			7			9			11			13			15			19			46			50			54			6			7			9

Total tangible common equity	$	8,162			7,905			7,750			7,553			7,545			7,375			7,087		$	10,573			10,449			10,260			8,162			7,905			7,750

(a) After any related tax effect.


	2015 Third Quarter								2015 Second Quarter								2015 First Quarter
	Average					Average			Average					Average			Average					Average			2016 Second Quarter								2016 First Quarter								2015 Fourth Quarter
Average balance in millions; interest in thousands	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate			Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc.	$	19,939		$	161,709		3.22	%		19,973			158,109		3.18	%		19,457			153,866		3.21	%	$	21,450		$	184,803		3.47	%		20,717			174,657		3.39	%		20,221			164,515		3.23	%
Real estate—commercial		28,309			302,626		4.18			28,208			298,565		4.19			27,596			288,121		4.18
Real estate—consumer		8,348			87,047		4.17			8,447			88,473		4.19			8,572			88,850		4.15
Real estate - commercial																										30,134			311,490		4.09			29,426			309,415		4.16			28,973			303,960		4.11
Real estate - consumer																										24,858			244,806		3.94			25,859			254,144		3.93			20,369			204,420		4.01
Consumer		11,253			126,369		4.46			11,042			122,812		4.46			10,962			121,366		4.49			11,713			132,437		4.55			11,582			130,971		4.55			11,547			129,103		4.44

Total loans and leases, net		67,849			677,751		3.96			67,670			667,959		3.96			66,587			652,203		3.97			88,155			873,536		3.99			87,584			869,187		3.99			81,110			801,998		3.92

Interest-bearing deposits at banks		6,060			3,852		.25			5,326			3,351		.25			5,073			3,118		.25			8,711			10,993		.51			8,193			10,337		.51			6,622			4,931		.30
Federal funds sold and agreements to resell securities		—			—		—			39			9		.10			97			24		.10
Federal funds																										—			—		—			1			1		.77			1			2		.54
Trading account		96			125		.52			103			239		.92			79			565		2.87			92			364		1.58			85			378		1.78			68			317		1.88
Investment securities**
U.S. Treasury and federal agencies		13,548			86,152		2.52			13,265			83,356		2.52			12,437			78,313		2.55			13,906			84,019		2.43			14,264			90,138		2.54			14,778			89,052		2.39
Obligations of states and political subdivisions		138			1,398		4.03			149			1,607		4.32			159			1,967		5.04			97			1,009		4.20			113			1,164		4.13			128			1,419		4.40
Other		755			6,996		3.68			781			9,853		5.06			780			7,735		4.02			911			7,222		3.19			971			7,961		3.30			880			11,015		4.96

Total investment securities		14,441			94,546		2.60			14,195			94,816		2.68			13,376			88,015		2.67			14,914			92,250		2.49			15,348			99,263		2.60			15,786			101,486		2.55

Total earning assets		88,446			776,274		3.48			87,333			766,374		3.52			85,212			743,925		3.54			111,872			977,143		3.51			111,211			979,166		3.54			103,587			908,734		3.48

Allowance for credit losses		(937	)							(929	)							(925	)							(976	)							(955	)							(947	)
Cash and due from banks		1,218								1,180								1,221								1,243								1,288								1,348
Other assets		9,788								10,014								10,384								11,567								11,708								11,064

Total assets	$	98,515								97,598								95,892							$	123,706								123,252								115,052

Liabilities and shareholders’ equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts	$	1,309			360		.11			1,333			349		.11			1,121			311		.11
Interest-checking deposits																									$	1,332			400		.12			1,359			414		.12			1,331			384		.11
Savings deposits		41,197			10,937		.11			41,712			10,361		.10			41,525			10,219		.10			50,515			20,134		.16			48,976			15,891		.13			45,974			13,219		.11
Time deposits		2,858			3,643		.51			2,948			3,690		.50			3,017			3,740		.50			12,755			26,867		.85			12,999			24,322		.75			9,686			15,986		.65
Deposits at Cayman Islands office		206			151		.29			212			150		.28			224			147		.27			182			181		.40			187			193		.42			224			167		.30

Total interest-bearing deposits		45,570			15,091		.13			46,205			14,550		.13			45,887			14,417		.13			64,784			47,582		.30			63,521			40,820		.26			57,215			29,756		.21

Short-term borrowings		174			32		.07			195			36		.07			196			34		.07			1,078			1,143		.43			2,082			2,162		.42			1,615			1,575		.39
Long-term borrowings		10,114			62,076		2.44			10,164			62,640		2.47			9,835			64,048		2.64			10,297			58,077		2.27			10,528			57,888		2.21			10,748			64,002		2.36

Total interest-bearing liabilities		55,858			77,199		.55			56,564			77,226		.55			55,918			78,499		.57			76,159			106,802		.56			76,131			100,870		.53			69,578			95,333		.54

Noninterest-bearing deposits		28,251								26,753								25,811								29,249								28,870								28,443
Other liabilities		1,619								1,645								1,704								1,921								1,972								2,024

Total liabilities		85,728								84,962								83,433								107,329								106,973								100,045

Shareholders’ equity		12,787								12,636								12,459								16,377								16,279								15,007

Total liabilities and shareholders’ equity	$	98,515								97,598								95,892							$	123,706								123,252								115,052

Net interest spread							2.93								2.97								2.97								2.95								3.01								2.94
Contribution of interest-free funds							.21								.20								.20								.18								.17								.18

Net interest income/margin on earning assets				$	699,075		3.14	%					689,148		3.17	%					665,426		3.17	%				$	870,341		3.13	%				$	878,296		3.18	%					813,401		3.12	%


	2014 Fourth Quarter								2014 Third Quarter
	Average					Average			Average					Average			2015 Third Quarter								2015 Second Quarter
Average balance in millions; interest in thousands	Balance			Interest		Rate			Balance			Interest		Rate			Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc.	$	19,117		$	156,627		3.25	%		18,889			156,440		3.29	%	$	19,939		$	161,709		3.22	%		19,973			158,109		3.18	%
Real estate—commercial		27,064			293,283		4.24			26,487			283,476		4.19
Real estate—consumer		8,654			90,637		4.19			8,634			90,023		4.17
Real estate - commercial																		28,309			302,626		4.18			28,208			298,565		4.19
Real estate - consumer																		8,348			87,047		4.17			8,447			88,473		4.19
Consumer		10,932			123,681		4.49			10,753			122,408		4.52			11,253			126,369		4.46			11,042			122,812		4.46

Total loans and leases, net		65,767			664,228		4.01			64,763			652,347		4.00			67,849			677,751		3.96			67,670			667,959		3.96

Interest-bearing deposits at banks		9,054			5,744		.25			5,083			3,198		.25			6,060			3,852		.25			5,326			3,351		.25
Federal funds sold and agreements to resell securities		86			18		.08			80			14		.07
Federal funds																		—			—		—			39			9		.10
Trading account		80			353		1.76			70			287		1.65			96			125		.52			103			239		.92
Investment securities**
U.S. Treasury and federal agencies		12,032			82,843		2.73			11,817			82,475		2.77			13,548			86,152		2.52			13,265			83,356		2.52
Obligations of states and political subdivisions		160			1,963		4.86			162			1,897		4.65			138			1,398		4.03			149			1,607		4.32
Other		786			7,470		3.77			801			8,646		4.28			755			6,996		3.68			781			9,853		5.06

Total investment securities		12,978			92,276		2.82			12,780			93,018		2.89			14,441			94,546		2.60			14,195			94,816		2.68

Total earning assets		87,965			762,619		3.44			82,776			748,864		3.59			88,446			776,274		3.48			87,333			766,374		3.52

Allowance for credit losses		(924	)							(924	)							(937	)							(929	)
Cash and due from banks		1,290								1,273								1,218								1,180
Other assets		10,313								10,120								9,788								10,014

Total assets	$	98,644								93,245							$	98,515								97,598

Liabilities and shareholders’ equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts	$	1,083			383		.14			1,037			394		.15
Interest-checking deposits																	$	1,309			360		.11			1,333			349		.11
Savings deposits		42,949			11,151		.10			41,056			11,532		.11			41,197			10,937		.11			41,712			10,361		.10
Time deposits		3,128			3,915		.50			3,227			3,805		.47			2,858			3,643		.51			2,948			3,690		.50
Deposits at Cayman Islands office		265			149		.22			325			161		.20			206			151		.29			212			150		.28

Total interest-bearing deposits		47,425			15,598		.13			45,645			15,892		.14			45,570			15,091		.13			46,205			14,550		.13

Short-term borrowings		195			25		.05			181			19		.04			174			32		.07			195			36		.07
Long-term borrowings		8,954			59,149		2.62			8,547			58,053		2.69			10,114			62,076		2.44			10,164			62,640		2.47

Total interest-bearing liabilities		56,574			74,772		.52			54,373			73,964		.54			55,858			77,199		.55			56,564			77,226		.55

Noninterest-bearing deposits		28,090								25,127								28,251								26,753
Other liabilities		1,538								1,498								1,619								1,645

Total liabilities		86,202								80,998								85,728								84,962

Shareholders’ equity		12,442								12,247								12,787								12,636

Total liabilities and shareholders’ equity	$	98,644								93,245							$	98,515								97,598

Net interest spread							2.92								3.05								2.93								2.97
Contribution of interest-free funds							.18								.18								.21								.20

Net interest income/margin on earning assets				$	687,847		3.10	%					674,900		3.23	%				$	699,075		3.14	%					689,148		3.17	%

Incorporated by reference to the discussion contained under the caption “Taxable-equivalent Net Interest Income” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), Robert G. Wilmers, Chairman of the Board and Chief Executive Officer, and ~~René F. Jones,~~Darren J. King, Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2015.~~2016.

(b) 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 ~~September~~June 30, ~~2015~~2016 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.

M&T’s Wilmington Trust Corporation ~~(“Wilmington Trust”)~~ subsidiary is the subject of certain governmental investigations arising from actions undertaken by Wilmington Trust Corporation prior to M&T’s acquisition of Wilmington Trust Corporation and its subsidiaries, as set forth below.

DOJ Investigation (United States v. Wilmington Trust Corp., et al, District of Delaware, Crim.No. 15-23-RGA):Prior to M&T’s acquisition of Wilmington Trust Corporation, the Department of Justice (“DOJ”) commenced an investigation of Wilmington Trust Corporation, relating to Wilmington ~~Trust’s~~Trust Corporation’s financial reporting and securities filings, as well as certain commercial real estate lending relationships involving its subsidiary bank, Wilmington Trust Company, all of which relate to filings and activities occurring prior to the acquisition of Wilmington Trust Corporation by M&T. ~~Counsel~~On January 6, 2016, the U.S. Attorney for the District of Delaware obtained an indictment against Wilmington Trust ~~has met with the DOJ~~Corporation relating to ~~discuss the DOJ investigation.~~ alleged conduct that occurred prior to M&T’s acquisition of Wilmington Trust Corporation in

May 2011. M&T strongly believes that this unprecedented action is unjustified and Wilmington Trust Corporation will vigorously defend itself. Trial in this matter is scheduled to begin on January 17, 2017. Wilmington Trust Corporation and its counsel are currently involved in pretrial discovery, motion practice and trial preparation.

~~This investigation~~indictment of Wilmington Trust Corporation could ~~lead to administrative or legal proceedings resulting~~result in potential ~~civil and/~~criminal remedies, or criminal ~~remedies,~~or non-criminal resolutions or settlements, including, among other things, enforcement actions, potential statutory or regulatory restrictions on the ability to conduct certain businesses (for which waivers may or may not be available), fines, penalties, restitution, reputational damage or additional costs and expenses.

In Re Wilmington Trust Securities Litigation (U.S. District Court, District of Delaware, Case No. 10-CV-0990-SLR) :: Beginning on November 18, 2010, a series of parties, purporting to be class representatives, commenced a putative class action lawsuit against Wilmington Trust Corporation, alleging that Wilmington ~~Trust’s~~Trust Corporation’s financial reporting and securities filings were in violation of securities laws. The cases were consolidated and Wilmington Trust Corporation moved to dismiss. The Court issued an order denying Wilmington ~~Trust’s~~Trust Corporation’s motion to dismiss on March 20, 2014. ~~The parties are currently engaged~~Fact discovery commenced. On April 13, 2016, the Court issued an order staying fact discovery in the ~~discovery phase~~case pending completion of the ~~lawsuit.~~trial inU.S. v. Wilmington Trust Corp., et al.

~~The~~As previously disclosed by the Company isin its public filings, including its report on Form 10-Q for the ~~subject of an investigation by government agencies relating to~~quarter ended March 31, 2016, the ~~origination of Federal Housing Administration (“FHA”) insured residential home loans~~Company had been cooperating with the DOJ and residential home loans sold to The Federal Home Loan Mortgage Corporation (“Freddie Mac”) and The Federal National Mortgage Association (“Fannie Mae”). A number of other U.S. financial institutions have announced similar investigations. Regarding FHA loans, the ~~U.S.~~ Department of Housing and Urban Development (“HUD”) ~~Office of Inspector General and~~, which had been reviewing M&T Bank’s participation in the DOJ (collectively, the “Government”) are investigating whether the Company complied with underwriting guidelines concerning certain loans where HUD paid FHA insurance claims. The Company is fully cooperating with the investigation. The Government has advised the Company that based upon its review of a sample of loans for which an FHA insurance claim was paid by HUD, some of the loans do not meet underwriting guidelines. The Company, based on its own review of the sample, does not agree with the sampling methodology andFederal Housing Administration loan analysis employed by the Government. Regarding loans originated by the Company and sold to Freddie Mac and Fannie Mae, the investigation concerns whether the mortgages sold to Freddie Mac and Fannie Mae comply with applicable underwriting guidelines. The Company is also cooperating with that portion of the investigation. The investigation could lead to claims by the Government under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which allow treble and other special damages substantially in excess of actual losses. Remedies in these proceedings or settlements may include restitution, fines, penalties, or alterationsprogram. Also, as previously disclosed in the Company’s ~~business practices. The Company and~~public filings, M&T Bank entered into a settlement agreement with the ~~Government continue~~DOJ on behalf of HUD. Management of M&T Bank determined to settle this matter for $64 million, without admitting liability, in order to avoid the expense of potential litigation. On May 20, 2016, the United States District Court for the Western District of New York entered an order dismissing the matter. As previously disclosed, this settlement ~~discussions regarding~~did not have a material impact on the ~~investigation.~~Company’s consolidated financial condition or results of operations.

Due to their complex nature, it is difficult to estimate when litigation and investigatory matters such as these may be resolved. As set forth in the introductory paragraph to this Item 1 — Legal Proceedings, losses from current litigation and regulatory matters which the Company is subject to that are not currently considered probable are within a range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, and are included in the range of reasonably possible losses set forth above.

There have been no material changes in risk factors relating to M&T to those disclosed in response to Item 1A. to Part I of Form 10-K for the year ended December 31, ~~2014.~~


Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities									Issuer Purchases of Equity Securities
Period											(a)Total Number of Shares (or Units) Purchased (1)		(b)Average Price Paid per Share (or Unit)		(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)
								(d)Maximum
April 1 – April 30, 2016												533,633	$	118.80		533,165	$	91,000,000
						(c)Total		Number (or
May 1 – May 31, 2016												786,572		115.30		786,322		—
						Number of		Approximate
June 1 – June 30, 2016												103		112.55		—		—
						Shares		Dollar Value)
						(or Units)		of Shares
						Purchased		(or Units)
		(a)Total				as Part of		that may yet
		Number		(b)Average		Publicly		be Purchased
		of Shares		Price Paid		Announced		Under the
		(or Units)		per Share		Plans or		Plans or
Period		Purchased(1)		(or Unit)		Programs		Programs (2)
July 1 – July 31, 2015			4,316	$	129.75		—		2,181,500
August 1 – August 31, 2015			1,288		128.98		—		2,181,500
September 1 – September 30, 2015			738		117.92		—		2,181,500

Total			6,342	$	128.22		—					1,320,308	$	116.71		1,319,487

On June 29, 2016, M&T announced that it had received a non-objection from the Federal Reserve to M&T’s 2016 Capital Plan and its proposed capital actions for the four-quarter period starting on July 1, 2016, which includes the repurchase of up to $1.15 billion of common shares. On July 19, 2016, M&T’s Board of Directors authorized a new stock repurchase program to repurchase up to $1.15 billion of shares of its common stock following all applicable regulatory limitations, including those set forth in M&T’s 2016 Capital Plan.

Pursuant to the requirements 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.


One M & T Plaza
Buffalo, New York		14203
(Address of principal executive offices)		(Zip Code)


		Table of Contents of Information Required in Report		Page

Part I. FINANCIAL INFORMATION

Item 1.	Financial ~~Statements~~Statements.

	CONSOLIDATED BALANCE SHEET - ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015		3

	CONSOLIDATED STATEMENT OF INCOME - Three and ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015		4

	CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME -– Three and ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015		5

	CONSOLIDATED STATEMENT OF CASH FLOWS - ~~Nine~~Six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015		6

	CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY - ~~Nine~~Six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015		7

	NOTES TO FINANCIAL STATEMENTS		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.		5557

Item 3.	Quantitative and Qualitative Disclosures About Market ~~Risk~~		~~102~~

~~Item 4.~~	~~Controls and Procedures~~		~~102~~

~~Part II. OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~		~~102~~

~~Item 1A.~~	~~Risk Factors~~Risk.		103

Item 4.	Controls and Procedures.		103

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings.		103

Item 1A.	Risk Factors.		105

Item 2.	Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.		~~104~~105

Item 3.	Defaults Upon Senior ~~Securities~~Securities.		~~104~~105

Item 4.	Mine Safety ~~Disclosures~~Disclosures.		~~104~~105

Item 5.	Other ~~Information~~Information.		~~104~~105

Item 6.	~~Exhibits~~Exhibits.		~~105~~106

SIGNATURES			~~105~~106

EXHIBIT INDEX			~~106~~107


	(in thousands)
Identifiable assets:
Cash and due from banks	$	131,688
Interest-bearing deposits at banks		7,568,934
Investment securities		7,929,014
Loans		19,015,013
Goodwill		1,079,787
Core deposit intangible		131,665
Other assets		843,219

Total identifiable assets		36,699,320


Liabilities:
Deposits		17,879,589
Borrowings		13,211,598
Other liabilities		405,025

Total liabilities		31,496,212

Total consideration	$	5,203,108


Cash paid	$	2,064,284
Common stock issued (25,953,950 shares)		3,110,581
Common stock awards converted		28,243

Total consideration	$	5,203,108


	Pro forma Three months ended June 30, 2015		Pro forma Six months ended June 30, 2015
	(in thousands)

Total revenues(a)	$	1,370,594		2,624,039
Net income		357,654		642,891


	Three months ended June 30, 2016		Six months ended June 30, 2016
	(in thousands)

Salaries and employee benefits	$	60		5,334
Equipment and net occupancy		339		1,278
Printing, postage and supplies		545		1,482
Other costs of operations		11,649		27,661

Total	$	12,593		35,755


	Three months ended September 30, 2015						Three months ended September 30, 2014
			Interest income recognized						Interest income recognized
	Average recorded investment		Total		Cash basis		Average recorded investment		Total		Cash basis
	(in thousands)
Commercial, financial, leasing, etc.	$	242,157		1,017		1,017		228,749		611		611
Real estate:
Commercial		179,327		2,327		2,327		189,952		821		821
Residential builder and developer		53,009		81		81		90,493		18		18
Other commercial construction		17,236		1,943		1,943		58,500		251		251
Residential		99,939		1,835		1,316		104,516		1,328		776
Residential Alt-A		116,191		1,539		618		131,574		1,643		681
Consumer:
Home equity lines and loans		21,952		231		66		19,268		219		81
Automobile		24,429		391		39		33,666		528		67
Other		19,238		188		23		18,677		177		44

Total	$	773,478		9,552		7,430		875,395		5,596		3,350


	Nine months ended September 30, 2015						Nine months ended September 30, 2014
			Interest income recognized						Interest income recognized
	Average recorded investment		Total		Cash basis		Average recorded investment		Total		Cash basis
	(in thousands)
Commercial, financial, leasing, etc.	$	226,243		2,123		2,123		171,227		1,379		1,379
Real estate:
Commercial		161,834		4,433		4,433		194,337		2,616		2,616
Residential builder and developer		64,165		275		275		94,453		131		131
Other commercial construction		22,130		2,166		2,166		74,531		1,694		1,694
Residential		101,997		4,639		3,011		132,606		7,784		6,146
Residential Alt-A		120,710		4,799		1,962		135,374		5,002		1,900
Consumer:
Home equity lines and loans		20,619		656		179		17,902		540		182
Automobile		26,521		1,257		136		36,560		1,742		228
Other		19,053		547		86		18,229		517		145

Total	$	763,272		20,895		14,371		875,219		21,405		14,421


			Recorded investment				Financial effects of modification
Three months ended September 30, 2015	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
	(dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		36	$	7,893	$	7,419	$	(474	)	$	—
Combination of concession types		1		31		31		—			(6	)
Real estate:
Commercial
Principal deferral		15		4,230		4,208		(22	)		—
Combination of concession types		1		1,156		1,169		13			(54	)
Other commercial construction
Principal deferral		3		296		390		94			—
Residential
Principal deferral		31		3,540		3,743		203			—
Other		1		267		267		—			—
Combination of concession types		10		1,296		1,380		84			(178	)
Residential Alt-A
Principal deferral		1		265		276		11			—
Combination of concession types		4		605		662		57			(91	)
Consumer:
Home equity lines and loans
Principal deferral		4		727		727		—			—
Combination of concession types		22		2,003		2,003		—			(199	)
Automobile
Principal deferral		35		316		316		—			—
Other		15		93		93		—			—
Combination of concession types		25		471		471		—			(17	)
Other
Principal deferral		24		352		352		—			—
Other		5		33		33		—			—
Combination of concession types		12		117		117		—			(12	)

Total		245	$	23,691	$	23,657	$	(34	)	$	(557	)


			Recorded investment				Financial effects of modification
Three months ended September 30, 2014	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
	(dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		15	$	1,305	$	1,300	$	(5	)	$	—
Real estate:
Commercial
Principal deferral		8		2,081		2,068		(13	)		—
Other		1		650		—		(650	)		—
Combination of concession types		4		483		478		(5	)		(95	)
Residential builder and developer
Principal deferral		1		241		241		—			—
Other commercial construction
Principal deferral		1		145		142		(3	)		—
Residential
Principal deferral		3		98		97		(1	)		—
Combination of concession types		8		1,100		1,136		36			(135	)
Residential Alt-A
Combination of concession types		3		349		369		20			(64	)
Consumer:
Home equity lines and loans
Combination of concession types		5		519		519		—			(67	)
Automobile
Principal deferral		45		1,003		1,003		—			—
Interest rate reduction		3		30		30		—			(2	)
Other		7		96		96		—			—
Combination of concession types		19		348		348		—			(21	)
Other
Principal deferral		6		48		48		—			—
Interest rate reduction		1		2		2		—			—
Combination of concession types		24		511		511		—			(121	)

Total		154	$	9,009	$	8,388	$	(621	)	$	(505	)


			Recorded investment				Financial effects of modification
Three months ended June 30, 2015	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
			(dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		30	$	16,018	$	15,355	$	(663	)	$	—
Other		2		8,991		8,883		(108	)		—
Combination of concession types		2		15,889		17,864		1,975			(239	)
Real estate:
Commercial
Principal deferral		15		38,983		37,585		(1,398	)		—
Combination of concession types		1		436		436		—			(53	)
Residential builder and developer
Principal deferral		1		9,252		9,200		(52	)		—
Residential
Principal deferral		12		693		754		61			—
Combination of concession types		9		961		1,066		105			(144	)
Residential-limited documentation
Principal deferral		1		161		161		—			—
Combination of concession types		2		424		426		2			(26	)
Consumer:
Home equity lines and loans
Principal deferral		1		1,198		1,198		—			—
Combination of concession types		14		1,356		1,356		—			(212	)
Automobile
Principal deferral		63		615		615		—			—
Interest rate reduction		4		95		95		—			(7	)
Other		13		21		21		—			—
Combination of concession types		9		138		138		—			(4	)
Other
Principal deferral		27		770		770		—			—
Other		2		21		21		—			—
Combination of concession types		10		43		43		—			(7	)

Total		218	$	96,065	$	95,987	$	(78	)	$	(692	)


			Recorded investment				Financial effects of modification
Nine months ended September 30, 2014	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
	(dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		66	$	20,673	$	20,499	$	(174	)	$	—
Other		1		19,593		19,593		—			—
Combination of concession types		5		9,836		9,766		(70	)		(14	)
Real estate:
Commercial
Principal deferral		32		17,452		17,384		(68	)		—
Other		1		650		—		(650	)		—
Interest rate reduction		1		255		252		(3	)		(48	)
Combination of concession types		6		892		940		48			(208	)
Residential builder and developer
Principal deferral		2		1,639		1,639		—			—
Other commercial construction
Principal deferral		4		6,703		6,611		(92	)		—
Residential
Principal deferral		19		1,842		1,926		84			—
Interest rate reduction		1		98		104		6			(32	)
Other		1		188		188		—			—
Combination of concession types		30		4,211		4,287		76			(483	)
Residential Alt-A
Principal deferral		5		828		900		72			—
Combination of concession types		19		3,101		3,134		33			(345	)
Consumer:
Home equity lines and loans
Principal deferral		3		280		280		—			—
Interest rate reduction		5		341		341		—			(76	)
Combination of concession types		41		4,147		4,147		—			(443	)
Automobile
Principal deferral		168		2,599		2,599		—			—
Interest rate reduction		6		90		90		—			(5	)
Other		26		204		204		—			—
Combination of concession types		65		939		939		—			(83	)
Other
Principal deferral		21		141		141		—			—
Interest rate reduction		4		293		293		—			(63	)
Other		1		45		45		—			—
Combination of concession types		57		1,883		1,883		—			(585	)

Total		590	$	98,923	$	98,185	$	(738	)	$	(2,385	)


			Recorded investment				Financial effects of modification
Six months ended June 30, 2016	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
			(dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		57	$	57,304	$	58,378	$	1,074		$	—
Combination of concession types		12		21,414		20,169		(1,245	)		—
Real estate:
Commercial
Principal deferral		26		6,209		6,158		(51	)		—
Interest rate reduction		1		129		129		—			(25	)
Other		1		4,723		4,447		(276	)		—
Combination of concession types		9		10,998		10,932		(66	)		(66	)
Residential builder and developer
Principal deferral		3		23,905		22,958		(947	)		—
Other commercial construction
Principal deferral		1		250		250		—			—
Combination of concession types		1		124		124		—			—
Residential
Principal deferral		25		2,944		3,231		287			—
Combination of concession types		18		3,364		3,491		127			—
Residential-limited documentation
Principal deferral		3		276		333		57			—
Combination of concession types		5		1,312		1,379		67			(339	)
Consumer:
Home equity lines and loans
Principal deferral		4		404		404		—			—
Combination of concession types		54		6,233		6,233		—			(563	)
Automobile
Principal deferral		92		679		679		—			—
Other		38		55		55		—			—
Combination of concession types		8		85		85		—			(3	)
Other
Principal deferral		55		925		925		—			—
Other		5		45		45		—			—
Combination of concession types		17		196		196		—			(32	)

Total		435	$	141,574	$	140,601	$	(973	)	$	(1,028	)


			Recorded investment				Financial effects of modification
Six months ended June 30, 2015	Number		Pre- modification		Post- modification		Recorded investment (a)			Interest (b)
	(dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		51	$	17,590	$	16,912	$	(678	)	$	—
Interest rate reduction		1		99		99		—			(19	)
Other		2		8,991		8,883		(108	)		—
Combination of concession types		5		25,044		24,853		(191	)		(239	)
Real estate:
Commercial
Principal deferral		22		42,775		41,361		(1,414	)		—
Combination of concession types		5		2,082		2,073		(9	)		(105	)
Residential builder and developer
Principal deferral		2		10,650		10,598		(52	)		—
Residential
Principal deferral		19		1,414		1,496		82			—
Combination of concession types		12		1,255		1,415		160			(178	)
Residential-limited documentation
Principal deferral		1		161		161		—			—
Combination of concession types		3		634		636		2			(30	)
Consumer:
Home equity lines and loans
Principal deferral		2		1,219		1,219		—			—
Combination of concession types		19		1,552		1,552		—			(225	)
Automobile
Principal deferral		98		918		918		—			—
Interest rate reduction		7		137		137		—			(10	)
Other		23		41		41		—			—
Combination of concession types		17		222		222		—			(11	)
Other
Principal deferral		49		1,066		1,066		—			—
Other		7		80		80		—			—
Combination of concession types		23		267		267		—			(32	)

Total		368	$	116,197	$	113,989	$	(2,208	)	$	(849	)


	Pension benefits						Other postretirement benefits
	Three months ended September 30
	2015			2014			2015			2014
	(in thousands)
Service cost	$	5,916			5,130			188			151
Interest cost on projected benefit obligation		17,754			17,290			651			695
Expected return on plan assets		(23,527	)		(22,892	)		—			—
Amortization of prior service credit		(1,501	)		(1,638	)		(340	)		(340	)
Amortization of net actuarial loss		11,207			3,624			26			—

Net periodic benefit cost	$	9,849			1,514			525			506


	Pension benefits						Other postretirement benefits
	Nine months ended September 30
	2015			2014			2015			2014
	(in thousands)
Service cost	$	17,748			15,390			562			453
Interest cost on projected benefit obligation		53,261			51,871			1,953			2,084
Expected return on plan assets		(70,578	)		(68,676	)		—			—
Amortization of prior service credit		(4,504	)		(4,914	)		(1,019	)		(1,019	)
Amortization of net actuarial loss		33,619			10,871			79			—

Net periodic benefit cost	$	29,546			4,542			1,575			1,518


	Pension benefits						Other postretirement benefits
	Three months ended June 30
	2016			2015			2016			2015
	(in thousands)

Service cost	$	6,137			5,832			340			174
Interest cost on projected benefit obligation		20,822			17,732			1,281			652
Expected return on plan assets		(26,423	)		(23,476	)		—			—
Amortization of prior service credit		(789	)		(1,478	)		(330	)		(329	)
Amortization of net actuarial loss		6,773			11,237			30			28


Net periodic benefit cost	$	6,520			9,847			1,321			525


	Pension benefits						Other postretirement benefits
	Six months ended June 30
	2016			2015			2016			2015
	(in thousands)

Service cost	$	12,519			11,832			798			374
Interest cost on projected benefit obligation		41,705			35,507			2,486			1,302
Expected return on plan assets		(54,237	)		(47,051	)		—			—
Amortization of prior service credit		(1,614	)		(3,003	)		(680	)		(679	)
Amortization of net actuarial loss		15,073			22,412			30			53


Net periodic benefit cost	$	13,446			19,697			2,634			1,050


	Investment securities					Defined benefit
	With OTTI		All other			plans			Other			Total
	(in thousands)
Balance – December 31, 2014	$	4,518		122,683			(305,589	)		(2,606	)	$	(180,994	)
Net gain (loss) during period		5,926		(4,873	)		16,166			302			17,521

Balance – September 30, 2015	$	10,444		117,810			(289,423	)		(2,304	)	$	(163,473	)


					Defined
	Investment securities				benefit
	With OTTI		All other		plans			Other			Total
	(in thousands)

Balance – December 31, 2015	$	9,921		38,166		(296,979	)		(2,735	)	$	(251,627	)

Net gain (loss) during period		5,616		138,848		7,807			(1,665	)		150,606


Balance – June 30, 2016	$	15,537		177,014		(289,172	)		(4,400	)	$	(101,021	)


	Fair value measurements at December 31, 2015		Level 1(a)		Level 2(a)		Level 3
	(in thousands)

Trading account assets	$	273,783		56,763		217,020		—
Investment securities available for sale:
U.S. Treasury and federal agencies		299,997		—		299,997		—
Obligations of states and political subdivisions		6,028		—		6,028		—
Mortgage-backed securities:
Government issued or guaranteed		11,686,628		—		11,686,628		—
Privately issued		74		—		—		74
Collateralized debt obligations		47,393		—		—		47,393
Other debt securities		118,880		—		118,880		—
Equity securities		83,671		65,178		18,493		—

		12,242,671		65,178		12,130,026		47,467


Real estate loans held for sale		392,036		—		392,036		—
Other assets (b)		56,551		—		46,269		10,282

Total assets	$	12,965,041		121,941		12,785,351		57,749


Trading account liabilities	$	160,745		—		160,745		—
Other liabilities (b)		1,905		—		1,502		403

Total liabilities	$	162,650		—		162,247		403


	Three months ended September 30, 2014
	Net income (loss) as previously reported			Impact of changes			Net income (loss) as restated
	(in thousands)
Business Banking	$	30,905			(5,867	)		25,038
Commercial Banking		101,740			(1,035	)		100,705
Commercial Real Estate		78,581			95			78,676
Discretionary Portfolio		8,279			4,216			12,495
Residential Mortgage Banking		25,021			(2,272	)		22,749
Retail Banking		32,901			39,156			72,057
All Other		(2,083	)		(34,293	)		(36,376	)

Total	$	275,344			—			275,344


	Nine months ended September 30, 2014
	Net income (loss) as previously reported			Impact of changes			Net income (loss) as restated
	(in thousands)
Business Banking	$	87,263			(13,500	)		73,763
Commercial Banking		306,863			(3,226	)		303,637
Commercial Real Estate		230,668			(414	)		230,254
Discretionary Portfolio		34,538			4,360			38,898
Residential Mortgage Banking		72,144			(7,464	)		64,680
Retail Banking		94,646			119,418			214,064
All Other		(37,425	)		(99,174	)		(136,599	)

Total	$	788,697			—			788,697


	Calculated increase (decrease) in projected net interest income
Changes in interest rates	September 30, 2015			December 31, 2014
+200 basis points	$	276,710			246,028
+100 basis points		159,469			134,393
-100 basis points		(85,404	)		(74,634	)


	Nonaccretable balance - principal
	Remaining balance				Life-to-date charges
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in thousands)
Commercial, financing, leasing, etc.	$	18,300		19,589		78,613		78,736
Commercial real estate		54,530		70,261		263,524		276,681
Residential real estate		13,742		15,958		60,824		59,552
Consumer		25,684		29,582		80,216		77,819

Total	$	112,256		135,390		483,177		492,788


Exhibit No.		.
Exhibit No.		.

10.1		Consulting Agreement, dated as of June 14, 2016, between M&T Bank Corporation and Robert E. Sadler, Jr. Filed herewith.

31.1		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1		Certification of Chief Executive Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.2		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		XBRL Instance Document. Filed herewith.

101.SCH		XBRL Taxonomy Extension Schema. Filed herewith.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.

101.LAB		XBRL Taxonomy Extension Label Linkbase. Filed herewith.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase. Filed herewith.

101.DEF		XBRL Taxonomy Definition Linkbase. Filed herewith.


			M&T BANK CORPORATION

Date: ~~October 30, 2015~~August 4, 2016	By:	/s/ ~~René F. Jones~~Darren J. King
		~~René F. Jones~~Darren J. King
		Executive Vice President
		and Chief Financial Officer

Large accelerated filer

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¨ (Do not check if a smaller reporting company)

Smaller reporting company