0000036270 us-gaap:LongTermDebtMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-12-31

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020March 31, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9861

 

M&T BANK CORPORATION

(Exact name of registrant as specified in its charter)

 

 

New York

 

16-0968385

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

One M & T Plaza

Buffalo, New York

 

14203

(Address of principal executive offices)

 

(Zip Code)

Registrant's telephone number, including area code:

(716) 635-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbols

Name of Each Exchange on Which Registered

Common Stock, $.50 par value

MTB

New York Stock Exchange

 

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      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       Yes      No

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

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

  

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

Number of shares of the registrant's Common Stock, $0.50 par value, outstanding as of the close of business on July 31, 2020: 128,280,043April 30, 2021: 128,653,702 shares.

 

 

 


M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended June 30, 2020March 31, 2021

 

Table of Contents of Information Required in Report

 

Page

 

 

 

 

 

Part I.  FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements.

 

 

 

 

 

 

 

 

 

CONSOLIDATED BALANCE SHEET – June 30, 2020March 31, 2021 and December 31, 20192020

 

3

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF INCOME – Three and six months ended June 30,March 31, 2021 and 2020 and 2019

 

4

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – Three and six months ended June 30,March 31, 2021 and 2020 and 2019

 

5

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS – SixThree months ended June 30,March 31, 2021 and 2020 and 2019

 

6

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY – Three and six months ended June 30,March 31, 2021 and 2020 and 2019

 

7

 

 

 

 

 

 

 

NOTES TO FINANCIAL STATEMENTS

 

8

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

5347

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk.

 

9280

 

 

 

 

 

Item 4.

 

Controls and Procedures.

 

9280

 

 

 

 

 

Part II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

9280

 

 

 

 

 

Item 1A.

 

Risk Factors.

 

9380

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

9584

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities.

 

9584

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures.

 

9584

 

 

 

 

 

Item 5.

 

Other Information.

 

9584

 

 

 

 

 

Item 6.

 

Exhibits.

 

9685

 

 

 

 

 

SIGNATURES

 

9686

 

 

 

 

 

 

 

 

- 2 -


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

 

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

(Dollars in thousands, except per share)

 

2020

 

 

2019

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

1,354,815

 

 

$

1,432,805

 

 

$

1,258,989

 

 

$

1,552,743

 

Interest-bearing deposits at banks

 

 

20,888,341

 

 

 

7,190,154

 

 

 

31,407,227

 

 

 

23,663,810

 

Federal funds sold

 

 

 

 

 

3,500

 

 

 

1,000

 

 

 

 

Trading account

 

 

1,293,534

 

 

 

470,129

 

 

 

687,359

 

 

 

1,068,581

 

Investment securities (includes pledged securities that can be sold or repledged of

$198,375 at June 30, 2020; $200,339 at December 31, 2019)

 

 

 

 

 

 

 

 

Available for sale (cost: $5,583,688 at June 30, 2020;

$6,258,276 at December 31, 2019)

 

 

5,821,274

 

 

 

6,318,776

 

Held to maturity (fair value: $2,266,087 at June 30, 2020;

$2,699,206 at December 31, 2019)

 

 

2,158,982

 

 

 

2,656,917

 

Equity and other securities (cost: $453,384 at June 30, 2020;

$487,041 at December 31, 2019)

 

 

474,088

 

 

 

521,558

 

Investment securities (includes pledged securities that can be sold or repledged of

$89,522 at March 31, 2021; $105,136 at December 31, 2020)

 

 

 

 

 

 

 

 

Available for sale (cost: $4,194,886 at March 31, 2021;

$4,621,027 at December 31, 2020

 

 

4,364,437

 

 

 

4,822,606

 

Held to maturity (fair value: $1,850,210 at March 31, 2021;

$1,842,281 at December 31, 2020)

 

 

1,778,135

 

 

 

1,748,989

 

Equity and other securities (cost: $455,286 at March 31, 2021;

$449,008 at December 31, 2020)

 

 

468,095

 

 

 

474,102

 

Total investment securities

 

 

8,454,344

 

 

 

9,497,251

 

 

 

6,610,667

 

 

 

7,045,697

 

Loans and leases

 

 

98,197,650

 

 

 

91,188,525

 

 

 

99,691,141

 

 

 

98,875,788

 

Unearned discount

 

 

(440,102

)

 

 

(265,656

)

 

 

(392,061

)

 

 

(339,921

)

Loans and leases, net of unearned discount

 

 

97,757,548

 

 

 

90,922,869

 

 

 

99,299,080

 

 

 

98,535,867

 

Allowance for credit losses

 

 

(1,638,236

)

 

 

(1,051,071

)

 

 

(1,636,206

)

 

 

(1,736,387

)

Loans and leases, net

 

 

96,119,312

 

 

 

89,871,798

 

 

 

97,662,874

 

 

 

96,799,480

 

Premises and equipment

 

 

1,155,281

 

 

 

1,140,924

 

 

 

1,148,941

 

 

 

1,161,558

 

Goodwill

 

 

4,593,112

 

 

 

4,593,112

 

 

 

4,593,112

 

 

 

4,593,112

 

Core deposit and other intangible assets

 

 

21,208

 

 

 

29,034

 

 

 

11,427

 

 

 

14,165

 

Accrued interest and other assets

 

 

5,657,022

 

 

 

5,644,050

 

 

 

7,099,464

 

 

 

6,701,959

 

Total assets

 

$

139,536,969

 

 

$

119,872,757

 

 

$

150,481,060

 

 

$

142,601,105

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

45,397,843

 

 

$

32,396,407

 

 

$

53,641,419

 

 

$

47,572,884

 

Savings and interest-checking deposits

 

 

63,623,406

 

 

 

54,932,162

 

 

 

70,679,036

 

 

 

67,680,840

 

Time deposits

 

 

5,078,426

 

 

 

5,757,456

 

 

 

3,514,219

 

 

 

3,899,910

 

Deposits at Cayman Islands office

 

 

868,284

 

 

 

1,684,044

 

 

 

641,691

 

 

 

652,104

 

Total deposits

 

 

114,967,959

 

 

 

94,770,069

 

 

 

128,476,365

 

 

 

119,805,738

 

Short-term borrowings

 

 

52,298

 

 

 

62,363

 

 

 

58,957

 

 

 

59,482

 

Accrued interest and other liabilities

 

 

2,250,316

 

 

 

2,337,490

 

 

 

2,000,727

 

 

 

2,166,409

 

Long-term borrowings

 

 

6,321,291

 

 

 

6,986,186

 

 

 

3,498,503

 

 

 

4,382,193

 

Total liabilities

 

 

123,591,864

 

 

 

104,156,108

 

 

 

134,034,552

 

 

 

126,413,822

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $1.00 par, 1,000,000 shares authorized;

Issued and outstanding: Liquidation preference of $1,000 per

share: 350,000 shares at June 30, 2020 and December 31, 2019; Liquidation preference of

$10,000 per share: 90,000 shares at June 30, 2020 and December 31, 2019

 

 

1,250,000

 

 

 

1,250,000

 

Common stock, $.50 par, 250,000,000 shares authorized,

159,741,898 shares issued at June 30, 2020 and December 31, 2019

 

 

79,871

 

 

 

79,871

 

Common stock issuable, 17,786 shares at June 30, 2020;

21,534 shares at December 31, 2019

 

 

1,308

 

 

 

1,566

 

Preferred stock, $1.00 par, 1,000,000 shares authorized;

Issued and outstanding: Liquidation preference of $1,000 per share: 350,000

shares at March 31, 2021 and December 31, 2020; Liquidation preference of

$10,000 per share: 90,000 shares at March 31, 2021 and December 31, 2020

 

 

1,250,000

 

 

 

1,250,000

 

Common stock, $.50 par, 250,000,000 shares authorized,

159,741,898 shares issued at March 31, 2021 and December 31, 2020

 

 

79,871

 

 

 

79,871

 

Common stock issuable, 15,492 shares at March 31, 2021;

18,113 shares at December 31, 2020

 

 

1,165

 

 

 

1,344

 

Additional paid-in capital

 

 

6,599,069

 

 

 

6,593,539

 

 

 

6,611,150

 

 

 

6,617,404

 

Retained earnings

 

 

12,919,345

 

 

 

12,820,916

 

 

 

13,731,893

 

 

 

13,444,428

 

Accumulated other comprehensive income (loss), net

 

 

244,630

 

 

 

(206,680

)

 

 

(138,478

)

 

 

(63,032

)

Treasury stock — common, at cost — 31,465,769 shares at June 30, 2020;

29,174,402 shares at December 31, 2019

 

 

(5,149,118

)

 

 

(4,822,563

)

Treasury stock — common, at cost — 31,098,951 shares at March 31, 2021;

31,426,742 shares at December 31, 2020

 

 

(5,089,093

)

 

 

(5,142,732

)

Total shareholders’ equity

 

 

15,945,105

 

 

 

15,716,649

 

 

 

16,446,508

 

 

 

16,187,283

 

Total liabilities and shareholders’ equity

 

$

139,536,969

 

 

$

119,872,757

 

 

$

150,481,060

 

 

$

142,601,105

 

See accompanying notes to financial statements.

- 3 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

 

 

Three Months Ended June 30

 

 

Six Months Ended June 30

 

 

Three Months Ended March 31

 

 

(In thousands, except per share)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases, including fees

 

$

980,372

 

 

$

1,125,577

 

 

$

2,027,193

 

 

$

2,243,490

 

 

$

972,582

 

 

$

1,046,821

 

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fully taxable

 

 

47,219

 

 

 

75,578

 

 

 

97,329

 

 

 

155,989

 

 

 

37,071

 

 

 

50,110

 

 

Exempt from federal taxes

 

 

29

 

 

 

77

 

 

 

104

 

 

 

172

 

 

 

55

 

 

 

75

 

 

Deposits at banks

 

 

4,179

 

 

 

36,325

 

 

 

23,145

 

 

 

63,732

 

 

 

6,874

 

 

 

18,966

 

 

Other

 

 

443

 

 

 

356

 

 

 

4,890

 

 

 

839

 

 

 

380

 

 

 

4,447

 

 

Total interest income

 

 

1,032,242

 

 

 

1,237,913

 

 

 

2,152,661

 

 

 

2,464,222

 

 

 

1,016,962

 

 

 

1,120,419

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-checking deposits

 

 

26,454

 

 

 

91,557

 

 

 

104,456

 

 

 

167,695

 

 

 

11,504

 

 

 

78,002

 

 

Time deposits

 

 

19,883

 

 

 

24,931

 

 

 

41,755

 

 

 

46,012

 

 

 

7,010

 

 

 

21,872

 

 

Deposits at Cayman Islands office

 

 

161

 

 

 

6,039

 

 

 

3,580

 

 

 

10,777

 

 

 

185

 

 

 

3,419

 

 

Short-term borrowings

 

 

2

 

 

 

7,893

 

 

 

25

 

 

 

14,606

 

 

 

2

 

 

 

23

 

 

Long-term borrowings

 

 

28,605

 

 

 

66,012

 

 

 

68,903

 

 

 

133,591

 

 

 

16,866

 

 

 

40,298

 

 

Total interest expense

 

 

75,105

 

 

 

196,432

 

 

 

218,719

 

 

 

372,681

 

 

 

35,567

 

 

 

143,614

 

 

Net interest income

 

 

957,137

 

 

 

1,041,481

 

 

 

1,933,942

 

 

 

2,091,541

 

 

 

981,395

 

 

 

976,805

 

 

Provision for credit losses

 

 

325,000

 

 

 

55,000

 

 

 

575,000

 

 

 

77,000

 

 

 

(25,000

)

 

 

250,000

 

 

Net interest income after provision for credit losses

 

 

632,137

 

 

 

986,481

 

 

 

1,358,942

 

 

 

2,014,541

 

 

 

1,006,395

 

 

 

726,805

 

 

Other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage banking revenues

 

 

145,024

 

 

 

107,321

 

 

 

272,933

 

 

 

202,632

 

 

 

138,754

 

 

 

127,909

 

 

Service charges on deposit accounts

 

 

77,455

 

 

 

107,787

 

 

 

183,616

 

 

 

210,899

 

 

 

92,777

 

 

 

106,161

 

 

Trust income

 

 

151,882

 

 

 

144,382

 

 

 

300,633

 

 

 

277,168

 

 

 

156,022

 

 

 

148,751

 

 

Brokerage services income

 

 

10,463

 

 

 

12,478

 

 

 

23,592

 

 

 

24,954

 

 

 

13,113

 

 

 

13,129

 

 

Trading account and foreign exchange gains

 

 

8,290

 

 

 

18,453

 

 

 

29,306

 

 

 

29,255

 

 

 

6,284

 

 

 

21,016

 

 

Gain (loss) on bank investment securities

 

 

6,969

 

 

 

8,911

 

 

 

(13,813

)

 

 

20,752

 

Loss on bank investment securities

 

 

(12,282

)

 

 

(20,782

)

 

Other revenues from operations

 

 

87,190

 

 

 

112,763

 

 

 

220,366

 

 

 

247,200

 

 

 

110,930

 

 

 

133,176

 

 

Total other income

 

 

487,273

 

 

 

512,095

 

 

 

1,016,633

 

 

 

1,012,860

 

 

 

505,598

 

 

 

529,360

 

 

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

458,842

 

 

 

455,737

 

 

 

995,685

 

 

 

954,937

 

 

 

541,078

 

 

 

536,843

 

 

Equipment and net occupancy

 

 

77,089

 

 

 

79,150

 

 

 

156,729

 

 

 

158,497

 

 

 

82,471

 

 

 

79,640

 

 

Outside data processing and software

 

 

61,376

 

 

 

55,234

 

 

 

125,786

 

 

 

107,651

 

 

 

65,751

 

 

 

64,410

 

 

FDIC assessments

 

 

14,207

 

 

 

9,772

 

 

 

26,478

 

 

 

19,198

 

 

 

14,188

 

 

 

12,271

 

 

Advertising and marketing

 

 

9,842

 

 

 

24,046

 

 

 

32,217

 

 

 

44,321

 

 

 

14,628

 

 

 

22,375

 

 

Printing, postage and supplies

 

 

11,260

 

 

 

10,324

 

 

 

22,112

 

 

 

20,179

 

 

 

9,317

 

 

 

10,852

 

 

Amortization of core deposit and other intangible assets

 

 

3,913

 

 

 

5,077

 

 

 

7,826

 

 

 

10,097

 

 

 

2,738

 

 

 

3,913

 

 

Other costs of operations

 

 

170,513

 

 

 

233,692

 

 

 

346,625

 

 

 

452,500

 

 

 

189,273

 

 

 

176,112

 

 

Total other expense

 

 

807,042

 

 

 

873,032

 

 

 

1,713,458

 

 

 

1,767,380

 

 

 

919,444

 

 

 

906,416

 

 

Income before taxes

 

 

312,368

 

 

 

625,544

 

 

 

662,117

 

 

 

1,260,021

 

 

 

592,549

 

 

 

349,749

 

 

Income taxes

 

 

71,314

 

 

 

152,284

 

 

 

152,241

 

 

 

304,019

 

 

 

145,300

 

 

 

80,927

 

 

Net income

 

$

241,054

 

 

$

473,260

 

 

$

509,876

 

 

$

956,002

 

 

$

447,249

 

 

$

268,822

 

 

Net income available to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

223,098

 

 

$

452,632

 

 

$

473,794

 

 

$

914,718

 

 

$

428,091

 

 

$

250,701

 

 

Diluted

 

 

223,099

 

 

 

452,633

 

 

 

473,795

 

 

 

914,719

 

 

 

428,093

 

 

 

250,701

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.74

 

 

$

3.34

 

 

$

3.67

 

 

$

6.69

 

 

$

3.33

 

 

$

1.93

 

 

Diluted

 

 

1.74

 

 

 

3.34

 

 

 

3.67

 

 

 

6.69

 

 

 

3.33

 

 

 

1.93

 

 

Average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

128,275

 

 

 

135,433

 

 

 

128,986

 

 

 

136,654

 

 

 

128,537

 

 

 

129,696

 

 

Diluted

 

 

128,333

 

 

 

135,464

 

 

 

129,044

 

 

 

136,685

 

 

 

128,669

 

 

 

129,755

 

 

See accompanying notes to financial statements.

- 4 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

 

 

Three Months Ended June 30

 

 

Six Months Ended June 30

 

 

Three Months Ended March 31

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

241,054

 

 

$

473,260

 

 

$

509,876

 

 

$

956,002

 

 

$

447,249

 

 

$

268,822

 

Other comprehensive income, net of tax and

reclassification adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains on investment securities

 

 

34,951

 

 

 

69,853

 

 

 

132,399

 

 

 

154,444

 

Other comprehensive income (loss), net of tax and

reclassification adjustments:

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on investment securities

 

 

(22,406

)

 

 

97,448

 

Cash flow hedges adjustments

 

 

(8,959

)

 

 

102,050

 

 

 

303,761

 

 

 

146,971

 

 

 

(66,777

)

 

 

312,720

 

Foreign currency translation adjustments

 

 

(51

)

 

 

(675

)

 

 

(2,994

)

 

 

(400

)

 

 

548

 

 

 

(2,943

)

Defined benefit plans liability adjustments

 

 

8,856

 

 

 

3,823

 

 

 

18,144

 

 

 

6,108

 

 

 

13,189

 

 

 

9,288

 

Total other comprehensive income

 

 

34,797

 

 

 

175,051

 

 

 

451,310

 

 

 

307,123

 

Total other comprehensive income (loss)

 

 

(75,446

)

 

 

416,513

 

Total comprehensive income

 

$

275,851

 

 

$

648,311

 

 

$

961,186

 

 

$

1,263,125

 

 

$

371,803

 

 

$

685,335

 

 

See accompanying notes to financial statements.

- 5 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

 

 

Six Months Ended June 30

 

 

Three Months Ended March 31

 

(In thousands)

 

2020

 

 

2019

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

509,876

 

 

$

956,002

 

 

$

447,249

 

 

$

268,822

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

575,000

 

 

 

77,000

 

 

 

(25,000

)

 

 

250,000

 

Depreciation and amortization of premises and equipment

 

 

108,748

 

 

 

101,983

 

 

 

57,116

 

 

 

54,756

 

Amortization of capitalized servicing rights

 

 

37,971

 

 

 

34,017

 

 

 

19,951

 

 

 

18,991

 

Amortization of core deposit and other intangible assets

 

 

7,826

 

 

 

10,097

 

 

 

2,738

 

 

 

3,913

 

Provision for deferred income taxes

 

 

(90,093

)

 

 

15,817

 

 

 

39,329

 

 

 

(36,243

)

Asset write-downs

 

 

15,626

 

 

 

52,324

 

 

 

1,217

 

 

 

2,990

 

Net gain on sales of assets

 

 

(5,808

)

 

 

(10,521

)

 

 

(2,106

)

 

 

(3,933

)

Net change in accrued interest receivable, payable

 

 

(48,790

)

 

 

5,650

 

 

 

(36,893

)

 

 

(13,863

)

Net change in other accrued income and expense

 

 

6,403

 

 

 

(144,714

)

 

 

(27,301

)

 

 

(73,363

)

Net change in loans originated for sale

 

 

(220,368

)

 

 

(218,925

)

 

 

158,878

 

 

 

(158,193

)

Net change in trading account assets and liabilities

 

 

(765,314

)

 

 

(398,552

)

 

 

359,559

 

 

 

(708,319

)

Net cash provided by operating activities

 

 

131,077

 

 

 

480,178

 

Net cash provided (used) by operating activities

 

 

994,737

 

 

 

(394,442

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and other securities

 

 

54,232

 

 

 

580,489

 

 

 

2,526

 

 

 

2,536

 

Proceeds from maturities of investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

662,253

 

 

 

1,506,273

 

 

 

422,171

 

 

 

303,994

 

Held to maturity

 

 

502,093

 

 

 

213,086

 

 

 

171,644

 

 

 

359,615

 

Purchases of investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

(4,052

)

 

 

(2,694

)

 

 

(1,002

)

 

 

(2,951

)

Held to maturity

 

 

(8,995

)

 

 

(495,277

)

 

 

(201,234

)

 

 

(5,996

)

Equity and other securities

 

 

(20,575

)

 

 

(461,749

)

 

 

(8,801

)

 

 

(17,728

)

Net increase in loans and leases

 

 

(6,713,727

)

 

 

(1,259,545

)

 

 

(988,654

)

 

 

(3,105,967

)

Net increase in interest-bearing deposits at banks

 

 

(13,698,187

)

 

 

(686,556

)

 

 

(7,743,417

)

 

 

(1,706,153

)

Capital expenditures, net

 

 

(93,651

)

 

 

(82,657

)

 

 

(31,016

)

 

 

(51,547

)

Net decrease in loan servicing advances

 

 

178,984

 

 

 

23,663

 

Net increase in loan servicing advances

 

 

(374,614

)

 

 

(48,866

)

Other, net

 

 

197,377

 

 

 

84,108

 

 

 

(179,350

)

 

 

420,700

 

Net cash used by investing activities

 

 

(18,944,248

)

 

 

(580,859

)

 

 

(8,931,747

)

 

 

(3,852,363

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in deposits

 

 

20,199,033

 

 

 

1,525,777

 

 

 

8,670,627

 

 

 

5,413,829

 

Net increase (decrease) in short-term borrowings

 

 

(10,065

)

 

 

213,012

 

Net decrease in short-term borrowings

 

 

(525

)

 

 

(3,183

)

Payments on long-term borrowings

 

 

(754,425

)

 

 

(876,581

)

 

 

(852,945

)

 

 

(753,123

)

Purchases of treasury stock

 

 

(373,750

)

 

 

(767,612

)

 

 

 

 

 

(373,750

)

Dividends paid — common

 

 

(284,690

)

 

 

(274,037

)

 

 

(142,044

)

 

 

(143,170

)

Dividends paid — preferred

 

 

(34,156

)

 

 

(36,260

)

 

 

(21,288

)

 

 

(21,344

)

Other, net

 

 

(10,266

)

 

 

(17,446

)

 

 

(9,569

)

 

 

(10,567

)

Net cash provided (used) by financing activities

 

 

18,731,681

 

 

 

(233,147

)

Net cash provided by financing activities

 

 

7,644,256

 

 

 

4,108,692

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(81,490

)

 

 

(333,828

)

 

 

(292,754

)

 

 

(138,113

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

1,436,305

 

 

 

1,605,439

 

 

 

1,552,743

 

 

 

1,436,305

 

Cash, cash equivalents and restricted cash at end of period

 

$

1,354,815

 

 

$

1,271,611

 

 

$

1,259,989

 

 

$

1,298,192

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest received during the period

 

$

2,156,881

 

 

$

2,444,623

 

 

$

971,142

 

 

$

1,159,094

 

Interest paid during the period

 

 

223,874

 

 

 

361,179

 

 

 

55,378

 

 

 

158,861

 

Income taxes paid during the period

 

 

61,759

 

 

 

243,404

 

 

 

24,220

 

 

 

44,660

 

Supplemental schedule of noncash investing and financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate acquired in settlement of loans

 

$

17,885

 

 

$

39,456

 

 

$

2,301

 

 

$

17,295

 

Securitization of residential mortgage loans allocated to

 

 

 

 

 

 

 

 

Available-for-sale investment securities

 

$

 

 

$

5,379

 

Capitalized servicing rights

 

 

 

 

 

83

 

Adoption of lease accounting standard

 

 

 

 

 

 

 

 

Right-of-use assets

 

$

 

 

$

393,877

 

Other liabilities

 

 

 

 

 

398,810

 

Additions to right-of-use assets under operating leases

 

$

30,585

 

 

$

44,928

 

 

$

13,020

 

 

$

17,421

 

 

See accompanying notes to financial statements.

 

 

- 6 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Additional

 

 

 

 

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

 

Common

 

 

Stock

 

 

Paid-in

 

 

Retained

 

 

Income

 

 

Treasury

 

 

 

 

 

Dollars in thousands, except per share

 

Stock

 

 

Stock

 

 

Issuable

 

 

Capital

 

 

Earnings

 

 

(Loss), Net

 

 

Stock

 

 

Total

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — April 1, 2020

 

$

1,250,000

 

 

 

79,871

 

 

 

1,292

 

 

 

6,588,407

 

 

 

12,837,390

 

 

 

209,833

 

 

 

(5,150,999

)

 

$

15,815,794

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

241,054

 

 

 

34,797

 

 

 

 

 

 

275,851

 

Preferred stock cash dividends (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,050

)

 

 

 

 

 

 

 

 

(17,050

)

Stock-based compensation transactions, net

 

 

 

 

 

 

 

 

16

 

 

 

10,662

 

 

 

(104

)

 

 

 

 

 

1,881

 

 

 

12,455

 

Common stock cash dividends —

   $1.10 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(141,945

)

 

 

 

 

 

 

 

 

(141,945

)

Balance — June 30, 2020

 

$

1,250,000

 

 

 

79,871

 

 

 

1,308

 

 

 

6,599,069

 

 

 

12,919,345

 

 

 

244,630

 

 

 

(5,149,118

)

 

$

15,945,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2020

 

$

1,250,000

 

 

 

79,871

 

 

 

1,566

 

 

 

6,593,539

 

 

 

12,820,916

 

 

 

(206,680

)

 

 

(4,822,563

)

 

$

15,716,649

 

Adoption of new accounting standard for

   credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(91,925

)

 

 

 

 

 

 

 

 

(91,925

)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

509,876

 

 

 

451,310

 

 

 

 

 

 

961,186

 

Preferred stock cash dividends (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,128

)

 

 

 

 

 

 

 

 

(34,128

)

Purchases of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(373,750

)

 

 

(373,750

)

Stock-based compensation transactions, net

 

 

 

 

 

 

 

 

(258

)

 

 

5,530

 

 

 

(206

)

 

 

 

 

 

47,195

 

 

 

52,261

 

Common stock cash dividends —

   $2.20 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(285,188

)

 

 

 

 

 

 

 

 

(285,188

)

Balance — June 30, 2020

 

$

1,250,000

 

 

 

79,871

 

 

 

1,308

 

 

 

6,599,069

 

 

 

12,919,345

 

 

 

244,630

 

 

 

(5,149,118

)

 

$

15,945,105

 

 

Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — April 1, 2019

 

$

1,231,500

 

 

 

79,871

 

 

 

1,514

 

 

 

6,568,480

 

 

 

11,842,371

 

 

 

(288,009

)

 

 

(3,848,198

)

 

$

15,587,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Additional

 

 

 

 

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

Preferred

 

 

Common

 

 

Stock

 

 

Paid-in

 

 

Retained

 

 

Income

 

 

Treasury

 

 

 

 

 

Dollars in thousands, except per share

 

Stock

 

 

Stock

 

 

Issuable

 

 

Capital

 

 

Earnings

 

 

(Loss), Net

 

 

Stock

 

 

Total

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2021

 

$

1,250,000

 

 

$

79,871

 

 

$

1,344

 

 

$

6,617,404

 

 

$

13,444,428

 

 

$

(63,032

)

 

$

(5,142,732

)

 

$

16,187,283

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

447,249

 

 

 

(75,446

)

 

 

 

 

 

371,803

 

Preferred stock cash dividends (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,050

)

 

 

 

 

 

 

 

 

(17,050

)

Stock-based compensation transactions, net

 

 

 

 

 

 

 

 

(179

)

 

 

(6,254

)

 

 

(208

)

 

 

 

 

 

53,639

 

 

 

46,998

 

Common stock cash dividends —

$1.10 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(142,526

)

 

 

 

 

 

 

 

 

(142,526

)

Balance — March 31, 2021

 

$

1,250,000

 

 

$

79,871

 

 

$

1,165

 

 

$

6,611,150

 

 

$

13,731,893

 

 

$

(138,478

)

 

$

(5,089,093

)

 

$

16,446,508

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2020

 

$

1,250,000

 

 

$

79,871

 

 

$

1,566

 

 

$

6,593,539

 

 

$

12,820,916

 

 

$

(206,680

)

 

$

(4,822,563

)

 

$

15,716,649

 

Adoption of new accounting standard for credit

losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(91,925

)

 

 

 

 

 

 

 

 

(91,925

)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

473,260

 

 

 

175,051

 

 

 

 

 

 

648,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

268,822

 

 

 

416,513

 

 

 

 

 

 

685,335

 

Preferred stock cash dividends (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,130

)

 

 

 

 

 

 

 

 

(18,130

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,078

)

 

 

 

 

 

 

 

 

(17,078

)

Purchases of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(401,984

)

 

 

(401,984

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(373,750

)

 

 

(373,750

)

Stock-based compensation transactions, net

 

 

 

 

 

 

 

 

12

 

 

 

9,123

 

 

 

(50

)

 

 

 

 

 

2,189

 

 

 

11,274

 

 

 

 

 

 

 

 

 

(274

)

 

 

(5,132

)

 

 

(102

)

 

 

 

 

 

45,314

 

 

 

39,806

 

Common stock cash dividends —

$1.00 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(135,173

)

 

 

 

 

 

 

 

 

(135,173

)

Balance — June 30, 2019

 

$

1,231,500

 

 

 

79,871

 

 

 

1,526

 

 

 

6,577,603

 

 

 

12,162,278

 

 

 

(112,958

)

 

 

(4,247,993

)

 

$

15,691,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2019

 

$

1,231,500

 

 

 

79,883

 

 

 

1,726

 

 

 

6,579,342

 

 

 

11,516,672

 

 

 

(420,081

)

 

 

(3,528,851

)

 

$

15,460,191

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

956,002

 

 

 

307,123

 

 

 

 

 

 

1,263,125

 

Preferred stock cash dividends (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,260

)

 

 

 

 

 

 

 

 

(36,260

)

Purchases of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(767,612

)

 

 

(767,612

)

Stock-based compensation transactions, net

 

 

 

 

 

(12

)

 

 

(200

)

 

 

(1,739

)

 

 

(101

)

 

 

 

 

 

48,470

 

 

 

46,418

 

Common stock cash dividends —

$2.00 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(274,035

)

 

 

 

 

 

 

 

 

(274,035

)

Balance — June 30, 2019

 

$

1,231,500

 

 

 

79,871

 

 

 

1,526

 

 

 

6,577,603

 

 

 

12,162,278

 

 

 

(112,958

)

 

 

(4,247,993

)

 

$

15,691,827

 

Common stock cash dividends —

$1.10 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(143,243

)

 

 

 

 

 

 

 

 

(143,243

)

Balance — March 31, 2020

 

$

1,250,000

 

 

$

79,871

 

 

$

1,292

 

 

$

6,588,407

 

 

$

12,837,390

 

 

$

209,833

 

 

$

(5,150,999

)

 

$

15,815,794

 

 

 

(a)

For the three-month and six-month periodsthree-months ended June 30, 2020,March 31, 2021, dividends per preferred share were: Preferred Series E - $16.125 and $32.25, respectively;$16.125; Preferred Series F - $128.125 and $256.25, respectively;$128.125; and Preferred Series G - $125.00 and $250.694, respectively.$125.00.  Dividends per preferred share for the three-month and six-month periodsthree-months ended June 30, 2019March 31, 2020 were:  Preferred Series A - $15.9375 and $31.875, respectively; Preferred Series C - $15.9375 and $31.875, respectively;  Preferred Series E - $16.125 and $32.25, respectively; and$16.125; Preferred Series F - $128.125$128.125; and $256.25, respectively.Preferred Series G - $125.694.

 

See accompanying notes to financial statements.

 

 

- 7 -


 

NOTES TO FINANCIAL STATEMENTS

 

1. Significant accounting policies and current environment

The consolidated interim 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 Form 10-K for the year ended December 31, 20192020 (“20192020 Annual Report”), except that effective January 1, 2020 the Company adopted accounting guidance related to the recognition of expected credit losses that is discussed in notes 2, 3 and 15 herein.. The financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the interim periods presented.

2. Acquisition

On February 22, 2021, M&T announced that it had entered into a definitive agreement with People’s United Financial, Inc.  ("People’s United"), headquartered in Bridgeport, Connecticut, under which People’s United will be acquired by M&T in an all-stock transaction. Pursuant to the terms of the agreement, People’s United shareholders will receive consideration valued at .118 of an M&T share in the form of M&T common stock. People’s United outstanding preferred stock will be converted into a new series of M&T preferred stock upon completion of the acquisition. The United Statestransaction is valued at approximately $7.7 billion (with the price based on M&T’s closing price of $151.61 per share as of March 31, 2021).  

The merger has been operating under a stateunanimously approved by the boards of emergency relateddirectors of each company. The merger is expected to close in the fourth quarter of 2021, subject to the Coronavirus Disease 2019 (“COVID-19”) pandemic sincesatisfaction of customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of M&T and People’s United. As of March 13, 2020.  The direct31, 2021, People’s United disclosed that it had total assets of $64.2 billion, including $42.8 billion of loans, $56.6 billion of liabilities, including $53.5 billion of deposits, and indirect effects$7.6 billion of stockholders’ equity.

In connection with the COVID-19 pandemic have resulted in a dramatic reduction in economic activityacquisition, the Company incurred merger-related expenses consisting predominantly of professional services for investment banking, legal and other services associated with the proposed transaction that has severely hampered the ability for businesses and consumers to meet their current repayment obligations. The effects of the pandemic contributed to a significant increasetotaled approximately $10 million in the provision for credit losses during the first two quartersquarter of 2020. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), in addition to providing financial assistance to both businesses and consumers, creates a forbearance program for federally-backed mortgage loans, protects borrowers from negative credit  reporting due to loan  accommodations related to the national  emergency, and provides financial  institutions the option to temporarily suspend certain requirements under GAAP related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19. The bank regulatory agencies have likewise issued guidance encouraging financial institutions to work prudently with borrowers who are, or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. That guidance, with concurrence of the Financial Accounting Standards Board, and provisions of the CARES Act allow modifications made on a good faith basis in response to COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be treated as troubled debt restructurings nor be reported as past due. Modifications may include payment deferrals, fee waivers, extensions of repayment term, or other delays in payment. The Company has been working with its customers affected by COVID-19 and has granted modifications across many of its loan portfolios. To the extent that such modifications meet the criteria previously described, the modified loans have not been classified as troubled debt restructurings nor reported as past due.2021.

- 8 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

2.3. Investment securities

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)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

$

9,653

 

 

$

246

 

 

$

6

 

 

$

9,893

 

 

$

6,851

 

 

$

163

 

 

$

1

 

 

$

7,013

 

Obligations of states and political subdivisions

 

 

513

 

 

 

1

 

 

 

3

 

 

 

511

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

5,439,071

 

 

 

252,007

 

 

 

917

 

 

 

5,690,161

 

 

 

4,051,580

 

 

 

174,154

 

 

 

645

 

 

 

4,225,089

 

Privately issued

 

 

16

 

 

 

 

 

 

 

 

 

16

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Other debt securities

 

 

134,435

 

 

 

914

 

 

 

14,656

 

 

 

120,693

 

 

 

136,439

 

 

 

2,295

 

 

 

6,415

 

 

 

132,319

 

 

 

5,583,688

 

 

 

253,168

 

 

 

15,582

 

 

 

5,821,274

 

 

 

4,194,886

 

 

 

176,612

 

 

 

7,061

 

 

 

4,364,437

 

Investment securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

 

2,999

 

 

 

 

 

 

 

 

 

2,999

 

 

 

3,000

 

 

 

 

 

 

 

 

 

3,000

 

Obligations of states and political subdivisions

 

 

2,220

 

 

 

13

 

 

 

 

 

 

2,233

 

 

 

851

 

 

 

4

 

 

 

 

 

 

855

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

2,064,946

 

 

 

117,092

 

 

 

41

 

 

 

2,181,997

 

 

 

1,697,992

 

 

 

79,650

 

 

 

1,623

 

 

 

1,776,019

 

Privately issued

 

 

85,780

 

 

 

9,410

 

 

 

19,369

 

 

 

75,821

 

 

 

73,496

 

 

 

11,288

 

 

 

17,244

 

 

 

67,540

 

Other debt securities

 

 

3,037

 

 

 

 

 

 

 

 

 

3,037

 

 

 

2,796

 

 

 

 

 

 

 

 

 

2,796

 

 

 

2,158,982

 

 

 

126,515

 

 

 

19,410

 

 

 

2,266,087

 

 

 

1,778,135

 

 

 

90,942

 

 

 

18,867

 

 

 

1,850,210

 

Total debt securities

 

$

7,742,670

 

 

$

379,683

 

 

$

34,992

 

 

$

8,087,361

 

 

$

5,973,021

 

 

$

267,554

 

 

$

25,928

 

 

$

6,214,647

 

Equity and other securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Readily marketable equity — at fair value

 

$

72,907

 

 

$

20,704

 

 

$

 

 

$

93,611

 

 

$

68,983

 

 

$

13,012

 

 

$

203

 

 

$

81,792

 

Other — at cost

 

 

380,477

 

 

 

 

 

 

 

 

 

380,477

 

 

 

386,303

 

 

 

 

 

 

 

 

 

386,303

 

Total equity and other securities

 

$

453,384

 

 

$

20,704

 

 

$

 

 

$

474,088

 

 

$

455,286

 

 

$

13,012

 

 

$

203

 

 

$

468,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

$

9,742

 

 

$

41

 

 

$

16

 

 

$

9,767

 

 

$

9,154

 

 

$

198

 

 

$

14

 

 

$

9,338

 

Obligations of states and political subdivisions

 

 

776

 

 

 

2

 

 

 

3

 

 

 

775

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

6,113,913

 

 

 

88,634

 

 

 

21,607

 

 

 

6,180,940

 

 

 

4,475,406

 

 

 

208,787

 

 

 

755

 

 

 

4,683,438

 

Privately issued

 

 

16

 

 

 

 

 

 

 

 

 

16

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Other debt securities

 

 

133,829

 

 

 

2,046

 

 

 

8,597

 

 

 

127,278

 

 

 

136,451

 

 

 

1,664

 

 

 

8,301

 

 

 

129,814

 

 

 

6,258,276

 

 

 

90,723

 

 

 

30,223

 

 

 

6,318,776

 

 

 

4,621,027

 

 

 

210,649

 

 

 

9,070

 

 

 

4,822,606

 

Investment securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

 

249,862

 

 

 

286

 

 

 

 

 

 

250,148

 

 

 

2,999

 

 

 

 

 

 

 

 

 

2,999

 

Obligations of states and political subdivisions

 

 

4,140

 

 

 

16

 

 

 

 

 

 

4,156

 

 

 

1,531

 

 

 

9

 

 

 

 

 

 

1,540

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

2,306,180

 

 

 

50,381

 

 

 

1,992

 

 

 

2,354,569

 

 

 

1,664,443

 

 

 

100,176

 

 

 

11

 

 

 

1,764,608

 

Privately issued

 

 

93,496

 

 

 

11,779

 

 

 

18,181

 

 

 

87,094

 

 

 

77,155

 

 

 

11,056

 

 

 

17,938

 

 

 

70,273

 

Other debt securities

 

 

3,239

 

 

 

 

 

 

 

 

 

3,239

 

 

 

2,861

 

 

 

 

 

 

 

 

 

2,861

 

 

 

2,656,917

 

 

 

62,462

 

 

 

20,173

 

 

 

2,699,206

 

 

 

1,748,989

 

 

 

111,241

 

 

 

17,949

 

 

 

1,842,281

 

Total debt securities

 

$

8,915,193

 

 

$

153,185

 

 

$

50,396

 

 

$

9,017,982

 

 

$

6,370,016

 

 

$

321,890

 

 

$

27,019

 

 

$

6,664,887

 

Equity and other securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Readily marketable equity — at fair value

 

$

105,524

 

 

$

34,786

 

 

$

269

 

 

$

140,041

 

 

$

67,891

 

 

$

25,094

 

 

$

 

 

$

92,985

 

Other — at cost

 

 

381,517

 

 

 

 

 

 

 

 

 

381,517

 

 

 

381,117

 

 

 

 

 

 

 

 

 

381,117

 

Total equity and other securities

 

$

487,041

 

 

$

34,786

 

 

$

269

 

 

$

521,558

 

 

$

449,008

 

 

$

25,094

 

 

$

 

 

$

474,102

 

 

- 9 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

2.3. Investment securities, continued

There were 0 significant gross realized gains or losses from sales of investment securities for the three-monthquarters ended March 31, 2021 and six-month periods ended June 30, 2020 and 2019.2020.  Unrealized gainslosses on equity securities during the three months ended June 30, 2020 were $7 million and unrealized losses during the six months ended June 30, 2020 were $14 million, compared with unrealized gains of $9$12 million and $21 million during the three months ended March 31, 2021 and six months ended June 30, 2019,2020, respectively.

At June 30, 2020,March 31, 2021, 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

 

$

6,067

 

 

 

6,089

 

 

$

2,482

 

 

 

2,501

 

Due after one year through five years

 

 

10,149

 

 

 

10,646

 

 

 

12,030

 

 

 

12,439

 

Due after five years through ten years

 

 

98,385

 

 

 

90,175

 

 

 

98,778

 

 

 

99,066

 

Due after ten years

 

 

30,000

 

 

 

24,187

 

 

 

30,000

 

 

 

25,326

 

 

 

144,601

 

 

 

131,097

 

 

 

143,290

 

 

 

139,332

 

Mortgage-backed securities available for sale

 

 

5,439,087

 

 

 

5,690,177

 

 

 

4,051,596

 

 

 

4,225,105

 

 

$

5,583,688

 

 

 

5,821,274

 

 

$

4,194,886

 

 

 

4,364,437

 

Debt securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

 

$

4,674

 

 

 

4,678

 

 

$

3,676

 

 

 

3,678

 

Due after one year through five years

 

 

545

 

 

 

554

 

 

 

175

 

 

 

177

 

Due after ten years

 

 

3,037

 

 

 

3,037

 

 

 

2,796

 

 

 

2,796

 

 

 

8,256

 

 

 

8,269

 

 

 

6,647

 

 

 

6,651

 

Mortgage-backed securities held to maturity

 

 

2,150,726

 

 

 

2,257,818

 

 

 

1,771,488

 

 

 

1,843,559

 

 

$

2,158,982

 

 

 

2,266,087

 

 

$

1,778,135

 

 

 

1,850,210

 

- 10 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

 2.3. Investment securities, continued

A summary of investment securities that as of June 30, 2020March 31, 2021 and December 31, 20192020 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)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

$

985

 

 

 

(6

)

 

 

 

 

 

 

 

$

299

 

 

 

(1

)

 

 

 

 

 

 

Obligations of states and political subdivisions

 

 

 

 

 

 

 

 

135

 

 

 

(3

)

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

23,855

 

 

 

(416

)

 

 

25,930

 

 

 

(501

)

 

 

1,825

 

 

 

(8

)

 

 

25,724

 

 

 

(637

)

Other debt securities

 

 

54,951

 

 

 

(4,385

)

 

 

54,318

 

 

 

(10,271

)

 

 

2,401

 

 

 

(23

)

 

 

65,209

 

 

 

(6,392

)

 

 

79,791

 

 

 

(4,807

)

 

 

80,383

 

 

 

(10,775

)

 

 

4,525

 

 

 

(32

)

 

 

90,933

 

 

 

(7,029

)

Investment securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

8,430

 

 

 

(41

)

 

 

 

 

 

 

 

 

199,549

 

 

 

(1,609

)

 

 

1,686

 

 

 

(14

)

Privately issued

 

 

7,916

 

 

 

(22

)

 

 

45,908

 

 

 

(19,347

)

 

 

 

 

 

 

 

 

51,443

 

 

 

(17,244

)

 

 

16,346

 

 

 

(63

)

 

 

45,908

 

 

 

(19,347

)

 

 

199,549

 

 

 

(1,609

)

 

 

53,129

 

 

 

(17,258

)

Total

 

$

96,137

 

 

 

(4,870

)

 

 

126,291

 

 

 

(30,122

)

 

$

204,074

 

 

 

(1,641

)

 

 

144,062

 

 

 

(24,287

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

��

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

$

1,406

 

 

 

(7

)

 

 

2,893

 

 

 

(9

)

 

$

985

 

 

 

(14

)

 

 

 

 

 

 

Obligations of states and political subdivisions

 

 

 

 

 

 

 

 

277

 

 

 

(3

)

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

117,299

 

 

 

(222

)

 

 

2,002,364

 

 

 

(21,385

)

 

 

18,687

 

 

 

(356

)

 

 

16,556

 

 

 

(399

)

Other debt securities

 

 

6,600

 

 

 

(354

)

 

 

56,313

 

 

 

(8,243

)

 

 

16,055

 

 

 

(181

)

 

 

63,462

 

 

 

(8,120

)

 

 

125,305

 

 

 

(583

)

 

 

2,061,847

 

 

 

(29,640

)

 

 

35,727

 

 

 

(551

)

 

 

80,018

 

 

 

(8,519

)

Investment securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

2,727

 

 

 

(5

)

 

 

145,235

 

 

 

(1,987

)

 

 

2,039

 

 

 

(11

)

 

 

 

 

 

 

Privately issued

 

 

 

 

 

 

 

 

49,656

 

 

 

(18,181

)

 

 

 

 

 

 

 

 

52,418

 

 

 

(17,938

)

 

 

2,727

 

 

 

(5

)

 

 

194,891

 

 

 

(20,168

)

 

 

2,039

 

 

 

(11

)

 

 

52,418

 

 

 

(17,938

)

Total

 

$

128,032

 

 

 

(588

)

 

 

2,256,738

 

 

 

(49,808

)

 

$

37,766

 

 

 

(562

)

 

 

132,436

 

 

 

(26,457

)

 

 

The Company owned 341281 individual debt securities with aggregate gross unrealized losses of $35$26 million at June 30, 2020.March 31, 2021. Based on a review of each of the securities in the investment securities portfolio at June 30, 2020,March 31, 2021, the Company concluded that it expected to recover the amortized cost basis of its investment.  As of June 30, 2020,March 31, 2021, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its impaired investment securities at a loss.  At June 30, 2020,March 31, 2021, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $380$386 million of cost method equity securities.

- 11 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Investment securities, continued

As described in notes 3 and 15, on January 1, 2020 the Company adopted amended accounting guidance that requires an allowance for credit losses be deducted from the amortized cost basis of financial assets, including investment securities held to maturity, to present the net carrying value at the amount that is expected to be collected over their contractual term.  The Company estimated no0 material allowance for credit losses for its investment securities classified as held-to-maturity at January 1, 2020March 31, 2021 or June 30,December 31, 2020, as the substantial majority of such investment securities are obligations backed by the U.S. government or its agencies.

3.- 11 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowance for credit losses

Effective January 1, 2020 the Company adopted amended accounting guidance which requires an allowance for credit losses be deducted from the amortized cost basis of financial assets to present the net carrying value at the amount that is expected to be collected over their contractual term 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 in the income statement as an adjustment to the provision for credit losses.  The new guidance replaced the previous incurred loss model for determining the allowance for credit losses.  The adoption resulted in a $132 million increase in the allowance for credit losses at January 1, 2020.  Prior to January 1, 2020, the Company generally recognized the excess of cash flows expected at acquisition over the estimated fair value of the acquired loans as interest income over the remaining lives of such loans regardless of the borrowers’ repayment status. Effective with the adoption of the new accounting standard, the Company’s nonaccrual loan policy now applies to loans acquired at a discount.  That change added $171 million to nonaccrual loans as of the January 1, 2020 adoption date.

Past due and nonaccrual loans

A summary of current, past due and nonaccrual loans as of  June 30, 2020March 31, 2021 and December 31, 20192020 follows:

 

 

Current

 

 

30-89 Days

Past Due

 

 

Accruing

Loans Past

Due 90

Days or

More

 

 

Nonaccrual

 

 

Total

 

 

Current

 

 

30-89 Days

Past Due

 

 

Accruing

Loans Past

Due 90

Days or

More

 

 

Nonaccrual

 

 

Total

 

 

(In thousands)

 

 

(In thousands)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

$

28,855,500

 

 

 

53,005

 

 

 

10,703

 

 

 

284,654

 

 

$

29,203,862

 

 

$

27,327,644

 

 

 

182,686

 

 

 

5,791

 

 

 

295,069

 

 

$

27,811,190

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

27,250,342

 

 

 

148,129

 

 

 

17,305

 

 

 

172,488

 

 

 

27,588,264

 

 

 

26,369,232

 

 

 

175,904

 

 

 

26,996

 

 

 

824,079

 

 

 

27,396,211

 

Residential builder and developer

 

 

1,418,354

 

 

 

33,752

 

 

 

 

 

 

1,748

 

 

 

1,453,854

 

 

 

1,269,858

 

 

 

7,909

 

 

 

 

 

 

1,224

 

 

 

1,278,991

 

Other commercial construction

 

 

7,983,195

 

 

 

23,911

 

 

 

24,801

 

 

 

85,426

 

 

 

8,117,333

 

 

 

8,580,462

 

 

 

37,986

 

 

 

6,099

 

 

 

126,225

 

 

 

8,750,772

 

Residential

 

 

12,746,530

 

 

 

218,870

 

 

 

479,027

 

 

 

306,907

 

 

 

13,751,334

 

 

 

14,198,898

 

 

 

191,860

 

 

 

1,041,873

 

 

 

385,508

 

 

 

15,818,139

 

Residential — limited documentation

 

 

1,715,896

 

 

 

25,537

 

 

 

 

 

 

118,695

 

 

 

1,860,128

 

 

 

1,372,339

 

 

 

16,136

 

 

 

 

 

 

143,069

 

 

 

1,531,544

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

4,107,387

 

 

 

34,341

 

 

 

 

 

 

77,094

 

 

 

4,218,822

 

 

 

3,720,689

 

 

 

15,926

 

 

 

 

 

 

79,188

 

 

 

3,815,803

 

Recreational finance

 

 

6,342,914

 

 

 

30,170

 

 

 

 

 

 

24,152

 

 

 

6,397,236

 

 

 

7,228,228

 

 

 

26,821

 

 

 

 

 

 

27,218

 

 

 

7,282,267

 

Automobile

 

 

3,680,749

 

 

 

41,375

 

 

 

 

 

 

42,736

 

 

 

3,764,860

 

 

 

4,178,258

 

 

 

28,970

 

 

 

 

 

 

38,219

 

 

 

4,245,447

 

Other

 

 

1,346,276

 

 

 

8,910

 

 

 

3,919

 

 

 

42,750

 

 

 

1,401,855

 

 

 

1,319,323

 

 

 

8,292

 

 

 

3,794

 

 

 

37,307

 

 

 

1,368,716

 

Total

 

$

95,447,143

 

 

 

618,000

 

 

 

535,755

 

 

 

1,156,650

 

 

$

97,757,548

 

 

$

95,564,931

 

 

 

692,490

 

 

 

1,084,553

 

 

 

1,957,106

 

 

$

99,299,080

 

December 31, 2020

 

 

 

Commercial, financial, leasing, etc.

 

$

27,196,862

 

 

 

60,822

 

 

 

10,053

 

 

 

306,827

 

 

$

27,574,564

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

26,688,515

 

 

 

168,917

 

 

 

47,014

 

 

 

775,894

 

 

 

27,680,340

 

Residential builder and developer

 

 

1,246,095

 

 

 

1,693

 

 

 

856

 

 

 

1,094

 

 

 

1,249,738

 

Other commercial construction

 

 

8,523,591

 

 

 

66,365

 

 

 

3,816

 

 

 

114,039

 

 

 

8,707,811

 

Residential

 

 

13,764,836

 

 

 

200,406

 

 

 

792,888

 

 

 

365,729

 

 

 

15,123,859

 

Residential — limited documentation

 

 

1,462,277

 

 

 

19,687

 

 

 

 

 

 

147,170

 

 

 

1,629,134

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

3,881,885

 

 

 

24,329

 

 

 

 

 

 

79,392

 

 

 

3,985,606

 

Recreational finance

 

 

7,002,643

 

 

 

47,161

 

 

 

 

 

 

25,519

 

 

 

7,075,323

 

Automobile

 

 

4,007,349

 

 

 

55,498

 

 

 

 

 

 

39,404

 

 

 

4,102,251

 

Other

 

 

1,346,868

 

 

 

17,561

 

 

 

4,581

 

 

 

38,231

 

 

 

1,407,241

 

Total

 

$

95,120,921

 

 

 

662,439

 

 

 

859,208

 

 

 

1,893,299

 

 

$

98,535,867

 

 

- 12 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

3.4. Loans and leases and the allowance for credit losses, continued

 

 

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

 

 

 

(In thousands)

 

December 31, 2019

 

 

 

Commercial, financial, leasing, etc.

 

$

23,290,797

 

 

 

184,011

 

 

 

16,776

 

 

 

27

 

 

 

 

 

 

346,557

 

 

$

23,838,168

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

26,311,414

 

 

 

165,579

 

 

 

6,740

 

 

 

 

 

 

15,601

 

 

 

158,474

 

 

 

26,657,808

 

Residential builder and developer

 

 

1,521,315

 

 

 

21,195

 

 

 

 

 

 

 

 

 

753

 

 

 

3,982

 

 

 

1,547,245

 

Other commercial construction

 

 

7,204,148

 

 

 

95,346

 

 

 

3,360

 

 

 

 

 

 

1,237

 

 

 

32,770

 

 

 

7,336,861

 

Residential

 

 

12,760,040

 

 

 

451,274

 

 

 

486,515

 

 

 

5,788

 

 

 

143,145

 

 

 

235,663

 

 

 

14,082,425

 

Residential — limited

   documentation

 

 

1,858,037

 

 

 

65,215

 

 

 

181

 

 

 

 

 

 

66,809

 

 

 

83,427

 

 

 

2,073,669

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

4,386,511

 

 

 

30,229

 

 

 

 

 

 

1,662

 

 

 

 

 

 

63,215

 

 

 

4,481,617

 

Recreational finance

 

 

5,484,997

 

 

 

36,827

 

 

 

 

 

 

99

 

 

 

 

 

 

14,219

 

 

 

5,536,142

 

Automobile

 

 

3,787,221

 

 

 

78,478

 

 

 

 

 

 

 

 

 

 

 

 

21,293

 

 

 

3,886,992

 

Other

 

 

1,395,240

 

 

 

45,978

 

 

 

5,156

 

 

 

32,056

 

 

 

 

 

 

3,512

 

 

 

1,481,942

 

Total

 

$

87,999,720

 

 

 

1,174,132

 

 

 

518,728

 

 

 

39,632

 

 

 

227,545

 

 

 

963,112

 

 

$

90,922,869

 

(a)

Excludes loans acquired at a discount.

(b)

Loans acquired at a discount that were recorded at fair value at acquisition date.  This category does not include purchased impaired loans that are presented separately.

(c)

Accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value.

A summary of outstanding loan balances for which COVID-19 related modifications were granted as of June 30, 2020March 31, 2021 is presented below. These loans meet the criteria described in note 1 of Notes to Financial Statements in the 2020 Annual Report and, as such,accordingly, are not considered past due or otherwise in default of loan terms. Loans to motor vehicle and recreational finance dealers comprised $3.3 billion and $823 millionterms as of the total COVID-19date presented. Substantially all of the modifications of commercial, financial, leasing and commercial real estate loans, respectively.noted below expire during 2021.

 

 

COVID-19 Related Modifications

 

March 31, 2021

 

Payment Deferrals(1)

 

 

Other Forbearances(2)

 

 

Total

 

 

(In thousands)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

$

5,302,196

 

 

$

60,819

 

 

$

156,491

 

 

$

217,310

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

7,802,006

 

 

 

507,491

 

 

 

361,664

 

 

 

869,155

 

Residential builder and developer

 

 

18,253

 

Other commercial construction

 

 

861,536

 

 

 

72,452

 

 

 

100,901

 

 

 

173,353

 

Residential

 

 

1,737,483

 

 

 

3,017,626

 

(3)

 

 

 

 

3,017,626

 

Residential — limited documentation

 

 

538,671

 

 

 

296,987

 

 

 

 

 

 

296,987

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

88,162

 

 

 

18,529

 

 

 

 

 

 

18,529

 

Recreational finance

 

 

254,205

 

 

 

14,161

 

 

 

 

 

 

14,161

 

Automobile

 

 

326,113

 

 

 

24,882

 

 

 

 

 

 

24,882

 

Other

 

 

16,611

 

 

 

994

 

 

 

 

 

 

994

 

Total

 

$

16,945,236

 

 

$

4,013,941

 

 

$

619,056

 

 

$

4,632,997

 

(1)

Represents accruing loans at March 31, 2021 for which a COVID-19 related payment deferral (including maturity extensions) has been granted.

(2)

Consists predominantly of accruing loans for which a COVID-19 related covenant waiver has been granted.

(3)

Includes $2.4 billion of government-guaranteed loans.

 

- 13 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Loans and leases and the allowance for credit losses, continued

One-to-four family residential mortgage loans held for sale were $440$773 million and $414$777 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.  Commercial real estate loans held for sale were $255$99 million at June 30, 2020March 31, 2021 and $28$278 million at December 31, 2019.2020.

The outstanding principal balance and the carrying amount of loans acquired at a discount that were recorded at fair value at the acquisition date for which interest income was recognized based on expected future cash flows that were included in the consolidated balance sheet at December 31, 2019 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

Outstanding principal balance

 

$

769,414

 

Carrying amount:

 

 

 

 

Commercial, financial, leasing, etc.

 

 

21,114

 

Commercial real estate

 

 

94,890

 

Residential real estate

 

 

341,807

 

Consumer

 

 

77,785

 

 

 

$

535,596

 

Purchased impaired loans included in the table above totaled$228 million at December 31, 2019, representing less than1% of the Company’s assets at that date.  A summary of changes in the accretable yield for loans acquired at a discount for the three months and six months ended June 30, 2019 follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

Six Months Ended

June 30, 2019

 

 

 

Purchased

 

 

Other

 

 

Purchased

 

 

Other

 

 

 

Impaired

 

 

Acquired

 

 

Impaired

 

 

Acquired

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

140,317

 

 

$

93,687

 

 

$

147,210

 

 

$

96,907

 

Interest income

 

 

(9,632

)

 

 

(9,666

)

 

 

(27,714

)

 

 

(19,383

)

Reclassifications from nonaccretable balance

 

 

16,419

 

 

 

3,457

 

 

 

27,608

 

 

 

8,322

 

Other (a)

 

 

 

 

 

3,433

 

 

 

 

 

 

5,065

 

Balance at end of period

 

$

147,104

 

 

$

90,911

 

 

$

147,104

 

 

$

90,911

 

(a)

Other changes in expected cash flows included changes in interest rates and prepayment assumptions.

Credit quality indicators

The Company utilizes a loan grading system to differentiate risk amongst its commercial loans and commercial real estate loans.  Loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more.

- 13 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowance for credit losses, continued

Loan officers in different geographic locations with the support of the Company’s credit department personnel continuously review and reassign loan grades based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective regions. Factors considered in assigning loan grades include borrower-specific information related to expected future cash flows and operating results, collateral values, geographic location, financial condition and performance, payment status, and other information. At least annually, updated financial information is obtained from commercial borrowers associated

- 14 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Loans and leases and the allowance for credit losses, continued

with pass grade loans and additional analysis is performed.  On a quarterly basis, the Company’s centralized credit department reviews all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing.

The following table summarizes the loan grades applied at June 30, 2020March 31, 2021 to the various classes of the Company’sCompany’s commercial loans and commercial real estate loans by origination year.

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

(In thousands)

 

 

(In thousands)

 

Commercial, financial, leasing, etc.:

Commercial, financial, leasing, etc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

7,944,081

 

 

 

2,571,703

 

 

 

1,744,756

 

 

 

1,074,677

 

 

 

878,129

 

 

 

1,579,718

 

 

 

11,451,339

 

 

 

32,192

 

 

$

27,276,595

 

 

$

3,124,732

 

 

 

5,923,267

 

 

 

2,096,560

 

 

 

1,384,745

 

 

 

690,770

 

 

 

1,959,774

 

 

 

10,864,179

 

 

 

18,253

 

 

$

26,062,280

 

Criticized accrual

 

 

313,697

 

 

 

88,164

 

 

 

164,361

 

 

 

64,980

 

 

 

50,254

 

 

 

82,987

 

 

 

868,964

 

 

 

9,206

 

 

 

1,642,613

 

 

 

182,972

 

 

 

335,409

 

 

 

107,197

 

 

 

109,828

 

 

 

54,978

 

 

 

112,406

 

 

 

536,752

 

 

 

14,299

 

 

 

1,453,841

 

Criticized nonaccrual

 

 

2,689

 

 

 

7,816

 

 

 

50,512

 

 

 

24,345

 

 

 

20,238

 

 

 

48,234

 

 

 

123,671

 

 

 

7,149

 

 

 

284,654

 

 

 

684

 

 

 

6,652

 

 

 

30,437

 

 

 

58,718

 

 

 

16,522

 

 

 

68,214

 

 

 

105,392

 

 

 

8,450

 

 

 

295,069

 

Total commercial, financial,

leasing, etc.

 

$

8,260,467

 

 

 

2,667,683

 

 

 

1,959,629

 

 

 

1,164,002

 

 

 

948,621

 

 

 

1,710,939

 

 

 

12,443,974

 

 

 

48,547

 

 

$

29,203,862

 

 

$

3,308,388

 

 

 

6,265,328

 

 

 

2,234,194

 

 

 

1,553,291

 

 

 

762,270

 

 

 

2,140,394

 

 

 

11,506,323

 

 

 

41,002

 

 

$

27,811,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

2,055,007

 

 

 

4,937,718

 

 

 

3,679,741

 

 

 

3,005,081

 

 

 

3,131,570

 

 

 

6,729,170

 

 

 

844,868

 

 

 

 

 

$

24,383,155

 

 

$

631,465

 

 

 

3,077,590

 

 

 

4,586,114

 

 

 

3,077,605

 

 

 

2,507,906

 

 

 

7,513,879

 

 

 

850,376

 

 

 

 

 

$

22,244,935

 

Criticized accrual

 

 

206,417

 

 

 

446,695

 

 

 

396,270

 

 

 

141,128

 

 

 

634,733

 

 

 

1,165,443

 

 

 

41,935

 

 

 

 

 

 

3,032,621

 

 

 

720

 

 

 

584,844

 

 

 

556,339

 

 

 

833,519

 

 

 

269,903

 

 

 

2,014,016

 

 

 

67,856

 

 

 

 

 

 

4,327,197

 

Criticized nonaccrual

 

 

 

 

 

3,527

 

 

 

6,089

 

 

 

21,882

 

 

 

29,149

 

 

 

111,409

 

 

 

432

 

 

 

 

 

 

172,488

 

 

 

 

 

 

33,509

 

 

 

123,364

 

 

 

46,519

 

 

 

141,610

 

 

 

469,332

 

 

 

9,745

 

 

 

 

 

 

824,079

 

Total commercial real estate

 

$

2,261,424

 

 

 

5,387,940

 

 

 

4,082,100

 

 

 

3,168,091

 

 

 

3,795,452

 

 

 

8,006,022

 

 

 

887,235

 

 

 

 

 

$

27,588,264

 

 

$

632,185

 

 

 

3,695,943

 

 

 

5,265,817

 

 

 

3,957,643

 

 

 

2,919,419

 

 

 

9,997,227

 

 

 

927,977

 

 

 

 

 

$

27,396,211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential builder and developer:

Residential builder and developer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

285,891

 

 

 

526,779

 

 

 

254,416

 

 

 

51,814

 

 

 

14,710

 

 

 

16,755

 

 

 

223,428

 

 

 

 

 

$

1,373,793

 

 

$

157,050

 

 

 

429,172

 

 

 

194,524

 

 

 

83,260

 

 

 

8,844

 

 

 

19,738

 

 

 

253,319

 

 

 

 

 

$

1,145,907

 

Criticized accrual

 

 

4,086

 

 

 

12,964

 

 

 

16,349

 

 

 

17,164

 

 

 

302

 

 

 

22,557

 

 

 

4,891

 

 

 

 

 

 

78,313

 

 

 

 

 

 

2,550

 

 

 

107,946

 

 

 

15,097

 

 

 

630

 

 

 

1,847

 

 

 

3,790

 

 

 

 

 

 

131,860

 

Criticized nonaccrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

302

 

 

 

1,446

 

 

 

 

 

 

 

 

 

1,748

 

 

 

 

 

 

 

 

 

518

 

 

 

 

 

 

 

 

 

706

 

 

 

 

 

 

 

 

 

1,224

 

Total residential builder and

developer

 

$

289,977

 

 

 

539,743

 

 

 

270,765

 

 

 

68,978

 

 

 

15,314

 

 

 

40,758

 

 

 

228,319

 

 

 

 

 

$

1,453,854

 

 

$

157,050

 

 

 

431,722

 

 

 

302,988

 

 

 

98,357

 

 

 

9,474

 

 

 

22,291

 

 

 

257,109

 

 

 

 

 

$

1,278,991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other commercial construction:

Other commercial construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

459,366

 

 

 

2,340,490

 

 

 

2,314,047

 

 

 

1,254,678

 

 

 

404,993

 

 

 

318,387

 

 

 

80,428

 

 

 

 

 

$

7,172,389

 

 

$

169,597

 

 

 

1,346,451

 

 

 

3,120,357

 

 

 

1,603,206

 

 

 

649,578

 

 

 

484,087

 

 

 

71,183

 

 

 

 

 

$

7,444,459

 

Criticized accrual

 

 

22,850

 

 

 

205,065

 

 

 

264,298

 

 

 

216,998

 

 

 

138,268

 

 

 

12,039

 

 

 

 

 

 

 

 

 

859,518

 

 

 

1,130

 

 

 

22,703

 

 

 

167,294

 

 

 

548,509

 

 

 

301,956

 

 

 

138,496

 

 

 

 

 

 

 

 

 

1,180,088

 

Criticized nonaccrual

 

 

 

 

 

 

 

 

 

 

 

350

 

 

 

57,773

 

 

 

22,171

 

 

 

5,132

 

 

 

 

 

 

85,426

 

 

 

 

 

 

336

 

 

 

78,901

 

 

 

13,435

 

 

 

4,130

 

 

 

24,032

 

 

 

5,391

 

 

 

 

 

 

126,225

 

Total other commercial

construction

 

$

482,216

 

 

 

2,545,555

 

 

 

2,578,345

 

 

 

1,472,026

 

 

 

601,034

 

 

 

352,597

 

 

 

85,560

 

 

 

 

 

$

8,117,333

 

 

$

170,727

 

 

 

1,369,490

 

 

 

3,366,552

 

 

 

2,165,150

 

 

 

955,664

 

 

 

646,615

 

 

 

76,574

 

 

 

 

 

$

8,750,772

 

 

Increases to criticized loans as of June 30, 2020 as compared with MarchDecember 31, 2020 were predominantly attributable to effects of the COVID-19 pandemic and the related regradingre-grading of loans totaled $3.7 billion, including $759 million of commercial loans, $2.3 billion of commercial real estate loans and $668 million of other commercial construction loans.

- 1514 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

3.4. Loans and leases and the allowance for credit losses, continued

The Company considers repayment performance a significant indicator of credit quality for its residential real estate loan and consumer loan portfolios.  A summary of loans in accrual and nonaccrual status at June 30,March 31, 2021 for the various classes of the Company’s residential real estate loans and consumer loans by origination year follows.

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

 

(In thousands)

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

1,125,233

 

 

 

1,889,481

 

 

 

1,331,314

 

 

 

599,352

 

 

 

1,496,417

 

 

 

7,701,525

 

 

 

55,576

 

 

 

 

 

$

14,198,898

 

          30-89 days past due

 

 

2,270

 

 

 

10,190

 

 

 

5,363

 

 

 

5,116

 

 

 

20,138

 

 

 

148,539

 

 

 

244

 

 

 

 

 

 

191,860

 

          Accruing loans past due 90

            days or more

 

 

 

 

 

97,784

 

 

 

28,810

 

 

 

40,613

 

 

 

248,186

 

 

 

626,480

 

 

 

 

 

 

 

 

 

1,041,873

 

          Nonaccrual

 

 

508

 

 

 

19,705

 

 

 

12,889

 

 

 

3,571

 

 

 

5,003

 

 

 

343,638

 

 

 

194

 

 

 

 

 

 

385,508

 

Total residential

 

$

1,128,011

 

 

 

2,017,160

 

 

 

1,378,376

 

 

 

648,652

 

 

 

1,769,744

 

 

 

8,820,182

 

 

 

56,014

 

 

 

 

 

$

15,818,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential - limited documentation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,372,339

 

 

 

 

 

 

 

 

$

1,372,339

 

          30-89 days past due

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,136

 

 

 

 

 

 

 

 

 

16,136

 

          Accruing loans past due 90

            days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

143,069

 

 

 

 

 

 

 

 

 

143,069

 

Total residential - limited

   documentation

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,531,544

 

 

 

 

 

 

 

 

$

1,531,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

74

 

 

 

953

 

 

 

3,777

 

 

 

2,316

 

 

 

2,281

 

 

 

50,886

 

 

 

2,458,179

 

 

 

1,202,223

 

 

$

3,720,689

 

          30-89 days past due

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

18

 

 

 

917

 

 

 

258

 

 

 

14,710

 

 

 

15,926

 

          Accruing loans past due 90

            days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,263

 

 

 

5,714

 

 

 

67,211

 

 

 

79,188

 

Total home equity lines and loans

 

$

74

 

 

 

953

 

 

 

3,800

 

 

 

2,316

 

 

 

2,299

 

 

 

58,066

 

 

 

2,464,151

 

 

 

1,284,144

 

 

$

3,815,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 15 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowance for credit losses, continued

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

 

(In thousands)

 

Recreational finance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

678,012

 

 

 

2,637,664

 

 

 

1,631,536

 

 

 

841,575

 

 

 

588,596

 

 

 

850,845

 

 

 

 

 

 

 

 

$

7,228,228

 

          30-89 days past due

 

 

459

 

 

 

5,467

 

 

 

5,584

 

 

 

4,372

 

 

 

4,709

 

 

 

6,230

 

 

 

 

 

 

 

 

 

26,821

 

          Accruing loans past due 90

            days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

147

 

 

 

2,217

 

 

 

4,494

 

 

 

4,741

 

 

 

4,697

 

 

 

10,922

 

 

 

 

 

 

 

 

 

27,218

 

Total recreational finance

 

$

678,618

 

 

 

2,645,348

 

 

 

1,641,614

 

 

 

850,688

 

 

 

598,002

 

 

 

867,997

 

 

 

 

 

 

 

 

$

7,282,267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automobile:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

569,198

 

 

 

1,499,937

 

 

 

996,107

 

 

 

553,269

 

 

 

377,492

 

 

 

182,255

 

 

 

 

 

 

 

 

$

4,178,258

 

          30-89 days past due

 

 

632

 

 

 

4,010

 

 

 

7,384

 

 

 

6,231

 

 

 

5,963

 

 

 

4,750

 

 

 

 

 

 

 

 

 

28,970

 

          Accruing loans past due 90

            days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

491

 

 

 

2,248

 

 

 

7,925

 

 

 

9,686

 

 

 

9,595

 

 

 

8,274

 

 

 

 

 

 

 

 

 

38,219

 

Total automobile

 

$

570,321

 

 

 

1,506,195

 

 

 

1,011,416

 

 

 

569,186

 

 

 

393,050

 

 

 

195,279

 

 

 

 

 

 

 

 

$

4,245,447

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

42,958

 

 

 

145,146

 

 

 

121,021

 

 

 

45,113

 

 

 

27,818

 

 

 

30,171

 

 

 

905,388

 

 

 

1,708

 

 

$

1,319,323

 

          30-89 days past due

 

 

1,224

 

 

 

455

 

 

 

630

 

 

 

256

 

 

 

114

 

 

 

533

 

 

 

4,823

 

 

 

257

 

 

 

8,292

 

          Accruing loans past due 90

            days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

336

 

 

 

3,458

 

 

 

 

 

 

3,794

 

          Nonaccrual

 

 

838

 

 

 

210

 

 

 

562

 

 

 

294

 

 

 

183

 

 

 

215

 

 

 

34,832

 

 

 

173

 

 

 

37,307

 

Total other

 

$

45,020

 

 

 

145,811

 

 

 

122,213

 

 

 

45,663

 

 

 

28,115

 

 

 

31,255

 

 

 

948,501

 

 

 

2,138

 

 

$

1,368,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases at

   March 31, 2021

 

$

6,690,394

 

 

 

18,077,950

 

 

 

15,326,970

 

 

 

9,890,946

 

 

 

7,438,037

 

 

 

24,310,850

 

 

 

16,236,649

 

 

 

1,327,284

 

 

$

99,299,080

 

- 16 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowance for credit losses, continued

The following table summarizes the loan grades applied at December 31, 2020 to the various classes of the Company’s commercial loans and commercial real estate loans by origination year.

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

 

(In thousands)

 

Commercial, financial, leasing, etc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Pass

 

$

7,732,728

 

 

 

2,277,233

 

 

 

1,505,486

 

 

 

930,834

 

 

 

719,796

 

 

 

1,387,695

 

 

 

11,352,416

 

 

 

21,286

 

 

$

25,927,474

 

          Criticized accrual

 

 

388,326

 

 

 

84,358

 

 

 

113,940

 

 

 

41,587

 

 

 

39,930

 

 

 

73,401

 

 

 

584,751

 

 

 

13,970

 

 

 

1,340,263

 

          Criticized nonaccrual

 

 

7,720

 

 

 

27,309

 

 

 

56,227

 

 

 

16,808

 

 

 

19,681

 

 

 

45,471

 

 

 

125,893

 

 

 

7,718

 

 

 

306,827

 

Total commercial,

   financial, leasing, etc.

 

$

8,128,774

 

 

 

2,388,900

 

 

 

1,675,653

 

 

 

989,229

 

 

 

779,407

 

 

 

1,506,567

 

 

 

12,063,060

 

 

 

42,974

 

 

$

27,574,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Pass

 

$

3,353,450

 

 

 

4,681,834

 

 

 

3,299,095

 

 

 

2,628,061

 

 

 

2,746,165

 

 

 

5,698,834

 

 

 

875,348

 

 

 

 

 

$

23,282,787

 

          Criticized accrual

 

 

526,037

 

 

 

400,154

 

 

 

579,507

 

 

 

290,885

 

 

 

568,144

 

 

 

1,212,672

 

 

 

44,260

 

 

 

 

 

 

3,621,659

 

          Criticized nonaccrual

 

 

26,876

 

 

 

121,899

 

 

 

47,144

 

 

 

99,293

 

 

 

197,319

 

 

 

248,949

 

 

 

34,414

 

 

 

 

 

 

775,894

 

Total commercial real

   estate

 

$

3,906,363

 

 

 

5,203,887

 

 

 

3,925,746

 

 

 

3,018,239

 

 

 

3,511,628

 

 

 

7,160,455

 

 

 

954,022

 

 

 

 

 

$

27,680,340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential builder and developer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Pass

 

$

506,295

 

 

 

223,880

 

 

 

109,453

 

 

 

15,048

 

 

 

10,976

 

 

 

11,320

 

 

 

236,943

 

 

 

 

 

$

1,113,915

 

          Criticized accrual

 

 

3,690

 

 

 

106,847

 

 

 

14,836

 

 

 

3,421

 

 

 

 

 

 

1,885

 

 

 

4,050

 

 

 

 

 

 

134,729

 

          Criticized nonaccrual

 

 

 

 

 

518

 

 

 

 

 

 

 

 

 

 

 

 

576

 

 

 

 

 

 

 

 

 

1,094

 

Total residential builder

   and developer

 

$

509,985

 

 

 

331,245

 

 

 

124,289

 

 

 

18,469

 

 

 

10,976

 

 

 

13,781

 

 

 

240,993

 

 

 

 

 

$

1,249,738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other commercial construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Loan grades:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Pass

 

$

1,050,258

 

 

 

2,998,921

 

 

 

2,048,063

 

 

 

945,339

 

 

 

233,127

 

 

 

294,030

 

 

 

74,611

 

 

 

 

 

$

7,644,349

 

          Criticized accrual

 

 

37,192

 

 

 

148,492

 

 

 

381,091

 

 

 

225,949

 

 

 

144,665

 

 

 

12,034

 

 

 

 

 

 

 

 

 

949,423

 

          Criticized nonaccrual

 

 

335

 

 

 

65,592

 

 

 

13,522

 

 

 

4,213

 

 

 

12,097

 

 

 

12,873

 

 

 

5,407

 

 

 

 

 

 

114,039

 

Total other commercial

   construction

 

$

1,087,785

 

 

 

3,213,005

 

 

 

2,442,676

 

 

 

1,175,501

 

 

 

389,889

 

 

 

318,937

 

 

 

80,018

 

 

 

 

 

$

8,707,811

 

- 17 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowance for credit losses, continued

A summary of loans in accrual and nonaccrual status at December 31, 2020 for the various classes of the Company’s residential real estate loans and consumer loans by origination year is as follows.

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

(In thousands)

 

 

(In thousands)

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

1,386,049

 

 

 

1,446,544

 

 

 

627,380

 

 

 

711,769

 

 

 

735,767

 

 

 

7,785,981

 

 

 

53,040

 

 

 

 

 

$

12,746,530

 

 

$

2,722,862

 

 

 

1,416,259

 

 

 

618,736

 

 

 

1,318,094

 

 

 

718,235

 

 

 

6,898,756

 

 

 

71,894

 

 

 

 

 

$

13,764,836

 

30-89 days past due

 

 

2,291

 

 

 

7,259

 

 

 

6,718

 

 

 

20,267

 

 

 

4,256

 

 

 

177,700

 

 

 

379

 

 

 

 

 

 

218,870

 

 

 

13,496

 

 

 

7,781

 

 

 

7,258

 

 

 

13,477

 

 

 

7,947

 

 

 

150,447

 

 

 

 

 

 

 

 

 

200,406

 

Accruing loans past due 90

days or more

 

 

117

 

 

 

8,995

 

 

 

26,337

 

 

 

118,899

 

 

 

25,353

 

 

 

299,326

 

 

 

 

 

 

 

 

 

479,027

 

 

 

579

 

 

 

15,234

 

 

 

38,145

 

 

 

212,818

 

 

 

45,804

 

 

 

480,308

 

 

 

 

 

 

 

 

 

792,888

 

Nonaccrual

 

 

29

 

 

 

4,223

 

 

 

2,930

 

 

 

5,696

 

 

 

950

 

 

 

292,859

 

 

 

220

 

 

 

 

 

 

306,907

 

 

 

3,133

 

 

 

14,439

 

 

 

5,183

 

 

 

6,408

 

 

 

2,900

 

 

 

333,466

 

 

 

200

 

 

 

 

 

 

365,729

 

Total residential

 

$

1,388,486

 

 

 

1,467,021

 

 

 

663,365

 

 

 

856,631

 

 

 

766,326

 

 

 

8,555,866

 

 

 

53,639

 

 

 

 

 

$

13,751,334

 

 

$

2,740,070

 

 

 

1,453,713

 

 

 

669,322

 

 

 

1,550,797

 

 

 

774,886

 

 

 

7,862,977

 

 

 

72,094

 

 

 

 

 

$

15,123,859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential - limited documentation:

Residential - limited documentation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential - limited documentation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,715,896

 

 

 

 

 

 

 

 

$

1,715,896

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,462,277

 

 

 

 

 

 

 

 

$

1,462,277

 

30-89 days past due

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,537

 

 

 

 

 

 

 

 

 

25,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,687

 

 

 

 

 

 

 

 

 

19,687

 

Accruing loans past due 90

days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118,695

 

 

 

 

 

 

 

 

 

118,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

147,170

 

 

 

 

 

 

 

 

 

147,170

 

Total residential - limited

documentation

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,860,128

 

 

 

 

 

 

 

 

$

1,860,128

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,629,134

 

 

 

 

 

 

 

 

$

1,629,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

852

 

 

 

4,931

 

 

 

2,550

 

 

 

2,731

 

 

 

155

 

 

 

60,569

 

 

 

2,687,506

 

 

 

1,348,093

 

 

$

4,107,387

 

 

$

773

 

 

 

3,983

 

 

 

1,591

 

 

 

2,016

 

 

 

162

 

 

 

51,554

 

 

 

2,569,621

 

 

 

1,252,185

 

 

$

3,881,885

 

30-89 days past due

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

1,770

 

 

 

 

 

 

32,551

 

 

 

34,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,148

 

 

 

939

 

 

 

22,242

 

 

 

24,329

 

Accruing loans past due 90

days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,895

 

 

 

1,196

 

 

 

70,003

 

 

 

77,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,148

 

 

 

5,752

 

 

 

67,492

 

 

 

79,392

 

Total home equity lines and loans

 

$

852

 

 

 

4,951

 

 

 

2,550

 

 

 

2,731

 

 

 

155

 

 

 

68,234

 

 

 

2,688,702

 

 

 

1,450,647

 

 

$

4,218,822

 

 

$

773

 

 

 

3,983

 

 

 

1,591

 

 

 

2,016

 

 

 

162

 

 

 

58,850

 

 

 

2,576,312

 

 

 

1,341,919

 

 

$

3,985,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 1618 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

3.4. Loans and leases and the allowance for credit losses, continued

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

 

(In thousands)

 

Recreational finance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

1,453,572

 

 

 

2,021,651

 

 

 

1,055,732

 

 

 

728,343

 

 

 

410,077

 

 

 

673,539

 

 

 

 

 

 

 

 

$

6,342,914

 

          30-89 days past due

 

 

2,415

 

 

 

7,557

 

 

 

5,208

 

 

 

5,096

 

 

 

2,815

 

 

 

7,079

 

 

 

 

 

 

 

 

 

30,170

 

          Accruing loans past due

             90 days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

783

 

 

 

3,479

 

 

 

4,229

 

 

 

4,844

 

 

 

2,666

 

 

 

8,151

 

 

 

 

 

 

 

 

 

24,152

 

Total recreational finance

 

$

1,456,770

 

 

 

2,032,687

 

 

 

1,065,169

 

 

 

738,283

 

 

 

415,558

 

 

 

688,769

 

 

 

 

 

 

 

 

$

6,397,236

 

Automobile:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

567,784

 

 

 

1,341,719

 

 

 

802,096

 

 

 

595,776

 

 

 

253,239

 

 

 

120,135

 

 

 

 

 

 

 

 

$

3,680,749

 

          30-89 days past due

 

 

1,495

 

 

 

9,879

 

 

 

10,557

 

 

 

10,642

 

 

 

5,590

 

 

 

3,212

 

 

 

 

 

 

 

 

 

41,375

 

          Accruing loans past due

             90 days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

1,125

 

 

 

7,176

 

 

 

10,987

 

 

 

11,054

 

 

 

7,058

 

 

 

5,336

 

 

 

 

 

 

 

 

 

42,736

 

Total automobile

 

$

570,404

 

 

 

1,358,774

 

 

 

823,640

 

 

 

617,472

 

 

 

265,887

 

 

 

128,683

 

 

 

 

 

 

 

 

$

3,764,860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

93,225

 

 

 

174,085

 

 

 

73,089

 

 

 

47,297

 

 

 

8,532

 

 

 

32,837

 

 

 

915,187

 

 

 

2,024

 

 

$

1,346,276

 

          30-89 days past due

 

 

1,246

 

 

 

778

 

 

 

557

 

 

 

311

 

 

 

56

 

 

 

389

 

 

 

5,016

 

 

 

557

 

 

 

8,910

 

          Accruing loans past due

             90 days or more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

291

 

 

 

3,628

 

 

 

 

 

 

3,919

 

          Nonaccrual

 

 

5,722

 

 

 

544

 

 

 

551

 

 

 

214

 

 

 

52

 

 

 

253

 

 

 

35,103

 

 

 

311

 

 

 

42,750

 

Total other

 

$

100,193

 

 

 

175,407

 

 

 

74,197

 

 

 

47,822

 

 

 

8,640

 

 

 

33,770

 

 

 

958,934

 

 

 

2,892

 

 

$

1,401,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases at

   June 30, 2020

 

$

14,810,789

 

 

 

16,179,761

 

 

 

11,519,760

 

 

 

8,136,036

 

 

 

6,816,987

 

 

 

21,445,766

 

 

 

17,346,363

 

 

 

1,502,086

 

 

$

97,757,548

 

 

The following table summarizes the loan grades applied at December 31, 2019 to the various classes of the Company’s commercial loans and commercial real estate loans.

 

 

 

 

 

 

Real Estate

 

 

 

Commercial,

 

 

 

 

 

 

Residential

 

 

Other

 

 

 

Financial,

 

 

 

 

 

 

Builder and

 

 

Commercial

 

 

 

Leasing, etc.

 

 

Commercial

 

 

Developer

 

 

Construction

 

 

 

(In thousands)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

22,595,821

 

 

 

25,728,725

 

 

 

1,419,162

 

 

 

7,092,799

 

Criticized accrual

 

 

895,790

 

 

 

770,609

 

 

 

124,101

 

 

 

211,292

 

Criticized nonaccrual

 

 

346,557

 

 

 

158,474

 

 

 

3,982

 

 

 

32,770

 

Total

 

$

23,838,168

 

 

 

26,657,808

 

 

 

1,547,245

 

 

 

7,336,861

 

 

 

Term Loans by Origination Year

 

 

Revolving

 

 

Revolving Loans Converted to Term

 

 

 

 

 

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Loans

 

 

Loans

 

 

Total

 

 

 

(In thousands)

 

Recreational finance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

2,796,359

 

 

 

1,751,766

 

 

 

907,595

 

 

 

630,151

 

 

 

352,414

 

 

 

564,358

 

 

 

 

 

 

 

 

$

7,002,643

 

          30-89 days past due

 

 

9,548

 

 

 

11,255

 

 

 

8,519

 

 

 

6,638

 

 

 

2,938

 

 

 

8,263

 

 

 

 

 

 

 

 

 

47,161

 

          Accruing loans past

               due 90 days or

               more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

1,854

 

 

 

3,883

 

 

 

4,072

 

 

 

4,194

 

 

 

2,733

 

 

 

8,783

 

 

 

 

 

 

 

 

 

25,519

 

Total recreational finance

 

$

2,807,761

 

 

 

1,766,904

 

 

 

920,186

 

 

 

640,983

 

 

 

358,085

 

 

 

581,404

 

 

 

 

 

 

 

 

$

7,075,323

 

Automobile:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

1,595,636

 

 

 

1,106,782

 

 

 

629,338

 

 

 

440,604

 

 

 

171,017

 

 

 

63,972

 

 

 

 

 

 

 

 

$

4,007,349

 

          30-89 days past due

 

 

6,461

 

 

 

14,140

 

 

 

12,542

 

 

 

12,899

 

 

 

6,373

 

 

 

3,083

 

 

 

 

 

 

 

 

 

55,498

 

          Accruing loans past

               due 90 days or

               more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Nonaccrual

 

 

1,615

 

 

 

7,144

 

 

 

10,788

 

 

 

10,061

 

 

 

5,991

 

 

 

3,805

 

 

 

 

 

 

 

 

 

39,404

 

Total automobile

 

$

1,603,712

 

 

 

1,128,066

 

 

 

652,668

 

 

 

463,564

 

 

 

183,381

 

 

 

70,860

 

 

 

 

 

 

 

 

$

4,102,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Current

 

$

160,424

 

 

 

137,617

 

 

 

53,702

 

 

 

32,556

 

 

 

4,526

 

 

 

28,970

 

 

 

927,217

 

 

 

1,856

 

 

$

1,346,868

 

          30-89 days past due

 

 

1,879

 

 

 

1,130

 

 

 

577

 

 

 

2,301

 

 

 

42

 

 

 

557

 

 

 

10,594

 

 

 

481

 

 

 

17,561

 

          Accruing loans past

               due 90 days or

               more

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

374

 

 

 

4,207

 

 

 

 

 

 

4,581

 

          Nonaccrual

 

 

1,493

 

 

 

492

 

 

 

339

 

 

 

183

 

 

 

31

 

 

 

501

 

 

 

35,044

 

 

 

148

 

 

 

38,231

 

Total other

 

$

163,796

 

 

 

139,239

 

 

 

54,618

 

 

 

35,040

 

 

 

4,599

 

 

 

30,402

 

 

 

977,062

 

 

 

2,485

 

 

$

1,407,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases at

   December 31, 2020

 

$

20,949,019

 

 

 

15,628,942

 

 

 

10,466,749

 

 

 

7,893,838

 

 

 

6,013,013

 

 

 

19,233,367

 

 

 

16,963,561

 

 

 

1,387,378

 

 

$

98,535,867

 

- 17 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Loans and leases and the allowance for credit losses, continued

Allowance for credit losses

For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type.  Changes in the allowance for credit losses for the three months ended June 30, 2020March 31, 2021 were as follows:

 

 

Commercial,

Financial,

 

 

Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial,

Financial,

 

 

Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing, etc.

 

 

Commercial

 

 

Residential

 

 

Consumer

 

 

Unallocated

 

 

Total

 

 

Leasing, etc.

 

 

Commercial

 

 

Residential

 

 

Consumer

 

 

Unallocated

 

 

Total

 

 

(In thousands)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

358,092

 

 

 

433,689

 

 

 

115,792

 

 

 

476,793

 

 

 

 

 

$

1,384,366

 

 

$

405,846

 

 

 

670,719

 

 

 

103,590

 

 

 

556,232

 

 

 

 

 

$

1,736,387

 

Provision for credit losses

 

 

69,400

 

 

 

159,090

 

 

 

2,850

 

 

 

93,660

 

 

 

 

 

 

325,000

 

 

 

(72,418

)

 

 

99,471

 

 

 

(13,435

)

 

 

(38,618

)

 

 

 

 

 

(25,000

)

Net charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs

 

 

(32,608

)

 

 

(17,472

)

 

 

(1,609

)

 

 

(39,708

)

 

 

 

 

 

(91,397

)

 

 

(26,945

)

 

 

(60,652

)

 

 

(2,399

)

 

 

(32,929

)

 

 

 

 

 

(122,925

)

Recoveries

 

 

3,373

 

 

 

1,014

 

 

 

1,888

 

 

 

13,992

 

 

 

 

 

 

20,267

 

 

 

22,511

 

 

 

6,560

 

 

 

2,033

 

 

 

16,640

 

 

 

 

 

 

47,744

 

Net (charge-offs) recoveries

 

 

(29,235

)

 

 

(16,458

)

 

 

279

 

 

 

(25,716

)

 

 

 

 

 

(71,130

)

Net charge-offs

 

 

(4,434

)

 

 

(54,092

)

 

 

(366

)

 

 

(16,289

)

 

 

 

 

 

(75,181

)

Ending balance

 

$

398,257

 

 

 

576,321

 

 

 

118,921

 

 

 

544,737

 

 

 

 

 

$

1,638,236

 

 

$

328,994

 

 

 

716,098

 

 

 

89,789

 

 

 

501,325

 

 

 

 

 

$

1,636,206

 

- 19 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowance for credit losses, continued

Changes in the allowance for credit losses for the three months ended June 30, 2019March 31, 2020 were as follows:

 

 

 

Commercial, Financial,

 

 

Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing, etc.

 

 

Commercial

 

 

Residential

 

 

Consumer

 

 

Unallocated

 

 

Total

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

335,620

 

 

 

337,995

 

 

 

65,136

 

 

 

203,045

 

 

 

77,541

 

 

$

1,019,337

 

Provision for credit losses

 

 

10,337

 

 

 

14,501

 

 

 

(2,376

)

 

 

31,594

 

 

 

944

 

 

 

55,000

 

Net charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs

 

 

(16,608

)

 

 

(10,165

)

 

 

(3,263

)

 

 

(39,370

)

 

 

 

 

 

(69,406

)

Recoveries

 

 

6,506

 

 

 

965

 

 

 

1,514

 

 

 

15,951

 

 

 

 

 

 

24,936

 

Net charge-offs

 

 

(10,102

)

 

 

(9,200

)

 

 

(1,749

)

 

 

(23,419

)

 

 

 

 

 

(44,470

)

Ending balance

 

$

335,855

 

 

 

343,296

 

 

 

61,011

 

 

 

211,220

 

 

 

78,485

 

 

$

1,029,867

 

Changes in the allowance for credit losses for the six months ended June 30, 2020 were as follows:

 

 

Commercial, Financial,

 

 

Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing, etc.

 

 

Commercial

 

 

Residential

 

 

Consumer

 

 

Unallocated

 

 

Total

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

366,094

 

 

 

322,201

 

 

 

56,033

 

 

 

229,118

 

 

 

77,625

 

 

$

1,051,071

 

Adoption of new accounting standard

 

 

(61,474

)

 

 

23,656

 

 

 

53,896

 

 

 

194,004

 

 

 

(77,625

)

 

 

132,457

 

Provision for credit losses

 

 

135,994

 

 

 

247,756

 

 

 

12,141

 

 

 

179,109

 

 

 

 

 

 

575,000

 

Net charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs

 

 

(48,991

)

 

 

(18,744

)

 

 

(6,711

)

 

 

(84,655

)

 

 

 

 

 

(159,101

)

Recoveries

 

 

6,634

 

 

 

1,452

 

 

 

3,562

 

 

 

27,161

 

 

 

 

 

 

38,809

 

Net charge-offs

 

 

(42,357

)

 

 

(17,292

)

 

 

(3,149

)

 

 

(57,494

)

 

 

 

 

 

(120,292

)

Ending balance

 

$

398,257

 

 

 

576,321

 

 

 

118,921

 

 

 

544,737

 

 

 

 

 

$

1,638,236

 

- 18 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Loans and leases and the allowance for credit losses, continued

Changes in the allowance for credit losses for the six months ended June 30, 2019 were as follows:

 

Commercial, Financial,

 

 

Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, Financial,

 

 

Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing, etc.

 

 

Commercial

 

 

Residential

 

 

Consumer

 

 

Unallocated

 

 

Total

 

 

Leasing, etc.

 

 

Commercial

 

 

Residential

 

 

Consumer

 

 

Unallocated

 

 

Total

 

 

(In thousands)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

330,055

 

 

 

341,655

 

 

 

69,125

 

 

 

200,564

 

 

 

78,045

 

 

$

1,019,444

 

 

$

366,094

 

 

 

322,201

 

 

 

56,033

 

 

 

229,118

 

 

 

77,625

 

 

$

1,051,071

 

Adoption of new accounting standard

 

 

(61,474

)

 

 

23,656

 

 

 

53,896

 

 

 

194,004

 

 

 

(77,625

)

 

 

132,457

 

Provision for credit losses

 

 

16,608

 

 

 

10,298

 

 

 

(4,823

)

 

 

54,477

 

 

 

440

 

 

 

77,000

 

 

 

66,594

 

 

 

88,666

 

 

 

9,291

 

 

 

85,449

 

 

 

 

 

 

250,000

 

Net charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs

 

 

(25,108

)

 

 

(10,448

)

 

 

(6,635

)

 

 

(72,315

)

 

 

 

 

 

(114,506

)

 

 

(16,383

)

 

 

(1,272

)

 

 

(5,102

)

 

 

(44,947

)

 

 

 

 

 

(67,704

)

Recoveries

 

 

14,300

 

 

 

1,791

 

 

 

3,344

 

 

 

28,494

 

 

 

 

 

 

47,929

 

 

 

3,261

 

 

 

438

 

 

 

1,674

 

 

 

13,169

 

 

 

 

 

 

18,542

 

Net charge-offs

 

 

(10,808

)

 

 

(8,657

)

 

 

(3,291

)

 

 

(43,821

)

 

 

 

 

 

(66,577

)

 

 

(13,122

)

 

 

(834

)

 

 

(3,428

)

 

 

(31,778

)

 

 

 

 

 

(49,162

)

Ending balance

 

$

335,855

 

 

 

343,296

 

 

 

61,011

 

 

 

211,220

 

 

 

78,485

 

 

$

1,029,867

 

 

$

358,092

 

 

 

433,689

 

 

 

115,792

 

 

 

476,793

 

 

 

 

 

$

1,384,366

 

 

Despite the allocation in the preceding tables, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type.  A description of the methodologies used by the Company to estimate its allowance for credit losses prior to January 1, 2020 is included in note 4 of Notes to Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

In establishing the allowance for credit losses, subsequent to December 31, 2019, the Company estimates losses attributable to specific troubled credits identified through both normal and targeted credit review processes and also estimates losses for loans and leases with similar risk characteristics on a collective basis. The amounts of specific loss components in the Company’s loan and lease portfolios are determined through a loan-by-loan analysis of larger balance commercial loans and commercial real estate loans that are in nonaccrual status. Such loss estimates are typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to pay. To the extent that those loans are collateral-dependent, they are evaluated based on the fair value of the loan’s collateral as estimated at or near the financial statement date.  As the quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation.  In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines  in values  as determined by line of  business and/or loan  workout personnel. Those adjustments are reviewed and assessed for reasonableness by the Company’s credit department.  Accordingly, for real estate collateral securing larger nonaccrual commercial loans and commercial real estate loans, estimated collateral values are based on current appraisals and estimates of value.  For non-real estate loans, collateral is assigned a discounted estimated liquidation value and, depending on the nature of the collateral, is verified through field exams or other procedures.  In assessing collateral, real estate and non-real estate values are reduced by an estimate of selling costs.

For residential real estate loans, including home equity loans and lines of credit, the excess of the loan balance over the net realizable value of the property collateralizing the loan is charged-off when the loan becomes 150 days delinquent.  That charge-off is based on recent indications of value from external parties that are generally obtained shortly after a loan becomes nonaccrual.  Loans to consumers that file for bankruptcy are generally charged-off to estimated net collateral value shortly after the Company is notified of such filings.  When evaluating individual home equity loans and lines of credit for charge off and for purposes of estimating losses in determining the allowance for credit losses, the Company gives consideration to the required repayment of any first lien positions related to collateral property. Modified loans, including smaller balance homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows.

- 1920 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

3.4. Loans and leases and the allowance for credit losses, continued

Information with respect to loans and leases that were considered nonaccrual at the beginning and end of the reporting period and the interest income recognized on such loans for the three-month and six-month periods ended June 30,March 31, 2021 and 2020 and 2019 follows.

 

March 31, 2021

 

 

January 1, 2021

 

 

Three Months Ended March 31,

2021

 

 

June 30, 2020

 

 

March 31, 2020

 

 

January 1, 2020

 

 

Three Months Ended June 30, 2020

 

Six

Months Ended June 30, 2020

 

 

Amortized Cost with Allowance

 

 

Amortized Cost without Allowance

 

 

Total

 

 

Amortized Cost

 

 

Interest Income Recognized

 

 

Amortized Cost with Allowance

 

 

Amortized Cost without Allowance

 

 

Total

 

 

Amortized Cost

 

 

Amortized Cost

 

 

Interest Income Recognized

 

Interest Income Recognized

 

 

(In thousands)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

$

138,556

 

 

 

146,098

 

 

 

284,654

 

 

 

286,647

 

 

 

346,743

 

 

 

1,298

 

3,036

 

 

$

211,894

 

 

$

83,175

 

 

$

295,069

 

 

$

306,827

 

 

$

3,085

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

57,675

 

 

 

114,813

 

 

 

172,488

 

 

 

188,469

 

 

 

173,796

 

 

 

4,697

 

5,789

 

 

 

337,036

 

 

 

487,043

 

 

 

824,079

 

 

 

775,894

 

 

 

1,658

 

Residential builder and developer

 

 

1,748

 

 

 

 

 

 

1,748

 

 

 

3,204

 

 

 

4,708

 

 

 

11

 

59

 

 

 

1,224

 

 

 

 

 

 

1,224

 

 

 

1,094

 

 

 

33

 

Other commercial construction

 

 

42,969

 

 

 

42,457

 

 

 

85,426

 

 

 

34,935

 

 

 

35,881

 

 

 

5,716

 

6,577

 

 

 

24,186

 

 

 

102,039

 

 

 

126,225

 

 

 

114,039

 

 

 

41

 

Residential

 

 

80,772

 

 

 

226,135

 

 

 

306,907

 

 

 

293,638

 

 

 

322,504

 

 

 

5,029

 

11,848

 

 

 

186,374

 

 

 

199,134

 

 

 

385,508

 

 

 

365,729

 

 

 

4,498

 

Residential — limited documentation

 

 

26,460

 

 

 

92,235

 

 

 

118,695

 

 

 

119,317

 

 

 

114,667

 

 

 

256

 

457

 

 

 

84,342

 

 

 

58,727

 

 

 

143,069

 

 

 

147,170

 

 

 

79

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

38,890

 

 

 

38,204

 

 

 

77,094

 

 

 

63,071

 

 

 

65,039

 

 

 

760

 

2,219

 

 

 

44,548

 

 

 

34,640

 

 

 

79,188

 

 

 

79,392

 

 

 

952

 

Recreational finance

 

 

16,264

 

 

 

7,888

 

 

 

24,152

 

 

 

13,405

 

 

 

14,308

 

 

 

154

 

306

 

 

 

19,657

 

 

 

7,561

 

 

 

27,218

 

 

 

25,519

 

 

 

155

 

Automobile

 

 

35,510

 

 

 

7,226

 

 

 

42,736

 

 

 

19,251

 

 

 

21,293

 

 

 

45

 

92

 

 

 

33,270

 

 

 

4,949

 

 

 

38,219

 

 

 

39,404

 

 

 

49

 

Other

 

 

7,747

 

 

 

35,003

 

 

 

42,750

 

 

 

39,811

 

 

 

35,394

 

 

 

161

 

 

315

 

 

 

2,864

 

 

 

34,443

 

 

 

37,307

 

 

 

38,231

 

 

 

180

 

Total

 

$

446,591

 

 

 

710,059

 

 

 

1,156,650

 

 

 

1,061,748

 

 

 

1,134,333

 

 

 

18,127

 

 

30,698

 

 

$

945,395

 

 

$

1,011,711

 

 

$

1,957,106

 

 

$

1,893,299

 

 

$

10,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

January 1, 2020

 

 

Three Months Ended March 31,

2020

 

 

 

Amortized Cost with Allowance

 

 

Amortized Cost without Allowance

 

 

Total

 

 

Amortized Cost

 

 

Interest Income Recognized

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

$

153,924

 

 

$

132,723

 

 

$

286,647

 

 

$

346,743

 

 

$

1,738

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

62,675

 

 

 

125,794

 

 

 

188,469

 

 

 

173,796

 

 

 

1,092

 

Residential builder and developer

 

 

3,204

 

 

 

 

 

 

3,204

 

 

 

4,708

 

 

 

48

 

Other commercial construction

 

 

12,039

 

 

 

22,896

 

 

 

34,935

 

 

 

35,881

 

 

 

861

 

Residential

 

 

67,221

 

 

 

226,417

 

 

 

293,638

 

 

 

322,504

 

 

 

6,819

 

Residential — limited documentation

 

 

26,444

 

 

 

92,873

 

 

 

119,317

 

 

 

114,667

 

 

 

201

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

26,230

 

 

 

36,841

 

 

 

63,071

 

 

 

65,039

 

 

 

1,459

 

Recreational finance

 

 

6,704

 

 

 

6,701

 

 

 

13,405

 

 

 

14,308

 

 

 

152

 

Automobile

 

 

9,802

 

 

 

9,449

 

 

 

19,251

 

 

 

21,293

 

 

 

47

 

Other

 

 

4,182

 

 

 

35,629

 

 

 

39,811

 

 

 

35,394

 

 

 

154

 

Total

 

$

372,425

 

 

$

689,323

 

 

$

1,061,748

 

 

$

1,134,333

 

 

$

12,571

 

- 2021 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

3.4. Loans and leases and the allowance for credit losses, continued

 

June 30, 2019

 

 

March 31, 2019

 

 

January 1, 2019

 

 

Three Months Ended June 30, 2019

 

Six

Months Ended June 30, 2019

 

 

 

Amortized Cost with Allowance

 

 

Amortized Cost without Allowance

 

 

Total

 

 

Amortized Cost

 

 

Amortized Cost

 

 

Interest Income Recognized

 

Interest Income Recognized

 

 

 

(In thousands)

 

Commercial, financial, leasing, etc.

 

$

150,974

 

 

 

72,759

 

 

 

223,733

 

 

 

245,819

 

 

 

234,423

 

 

 

3,635

 

 

6,716

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

52,443

 

 

 

150,673

 

 

 

203,116

 

 

 

207,709

 

 

 

203,672

 

 

 

2,314

 

 

3,410

 

Residential builder and developer

 

 

1,429

 

 

 

4,556

 

 

 

5,985

 

 

 

4,392

 

 

 

4,798

 

 

 

35

 

 

219

 

Other commercial construction

 

 

25,572

 

 

 

7,197

 

 

 

32,769

 

 

 

19,899

 

 

 

22,205

 

 

 

544

 

 

1,181

 

Residential

 

 

57,323

 

 

 

153,599

 

 

 

210,922

 

 

 

210,266

 

 

 

233,352

 

 

 

2,990

 

 

6,589

 

Residential — limited documentation

 

 

25,796

 

 

 

61,755

 

 

 

87,551

 

 

 

84,863

 

 

 

84,685

 

 

 

274

 

 

526

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

25,530

 

 

 

41,397

 

 

 

66,927

 

 

 

69,245

 

 

 

71,292

 

 

 

1,461

 

 

2,771

 

Recreational finance

 

 

6,493

 

 

 

4,660

 

 

 

11,153

 

 

 

10,972

 

 

 

11,199

 

 

 

142

 

 

284

 

Automobile

 

 

13,852

 

 

 

6,318

 

 

 

20,170

 

 

 

21,209

 

 

 

23,359

 

 

 

53

 

 

107

 

Other

 

 

2,757

 

 

 

301

 

 

 

3,058

 

 

 

7,237

 

 

 

4,623

 

 

 

125

 

 

247

 

Total

 

$

362,169

 

 

 

503,215

 

 

 

865,384

 

 

 

881,611

 

 

 

893,608

 

 

 

11,573

 

 

22,050

 

In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively.  The Company utilizes statistically developed models to project principal balances over the remaining contractual lives of the loan portfolios and to determine estimated credit losses through a reasonable and supportable forecast period.  Individual loan credit quality indicators including loan grade and borrower repayment performance inform the models, which have been statistically developed based on historical correlations of credit losses with prevailing economic metrics, including unemployment, gross domestic product and real estate prices. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At both January 1March 31, 2021 and June 30,December 31, 2020, the Company utilized a reasonable and supportable forecast period of two years.  Subsequent to this forecast period the Company reverted, ratably over a one-year period, to historical loss experience to inform its estimate of losses for the remaining contractual life of each portfolio.  The Company also consideredChanges in the amount of the allowance for credit losses reflect the outcome of the procedures described herein, including the impact of changes in macroeconomic forecasts as compared with previous forecasts, as well as the impact of portfolio concentrations, changes in underwriting practices, product expansions into new markets, imprecision in its economic forecasts, geopolitical conditions and other risk factors that might influence itsthe loss estimation process.

The Company’s reserve for off-balance sheet credit exposures was not material at June 30, 2020March 31, 2021 and December 31, 2019.2020.

Loan modifications

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.

- 2122 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

3.4. Loans and leases and the allowance for credit losses, continued

The table that follows summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three-month and six-month periods ended June 30, 2020March 31, 2021 and 2019:2020:  

 

 

 

 

 

 

 

 

 

 

Post-modification (a)

 

 

 

Number

 

 

Pre-

modification Recorded Investment

 

 

Principal Deferral

 

 

Interest Rate Reduction

 

 

Other

 

 

Combination of Concession Types

 

 

Total

 

Three Months Ended June 30, 2020

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

 

135

 

 

$

55,136

 

 

$

17,551

 

 

$

 

 

$

31,605

 

 

$

5,514

 

 

$

54,670

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

46

 

 

 

41,872

 

 

 

10,511

 

 

 

333

 

 

 

4,800

 

 

 

16,348

 

 

 

31,992

 

Residential builder and developer

 

 

1

 

 

 

91

 

 

 

 

 

 

 

 

 

 

 

 

90

 

 

 

90

 

Residential

 

 

25

 

 

 

8,872

 

 

 

3,101

 

 

 

 

 

 

 

 

 

6,533

 

 

 

9,634

 

Residential — limited documentation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

120

 

 

 

7,571

 

 

 

147

 

 

 

 

 

 

 

 

 

7,437

 

 

 

7,584

 

Recreational finance

 

 

271

 

 

 

10,795

 

 

 

10,795

 

 

 

 

 

 

 

 

 

 

 

 

10,795

 

Automobile

 

 

1,461

 

 

 

26,352

 

 

 

26,352

 

 

 

 

 

 

 

 

 

 

 

 

26,352

 

Other

 

 

335

 

 

 

2,183

 

 

 

682

 

 

 

 

 

 

 

 

 

1,501

 

 

 

2,183

 

Total

 

 

2,394

 

 

$

152,872

 

 

$

69,139

 

 

$

333

 

 

$

36,405

 

 

$

37,423

 

 

$

143,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

 

24

 

 

$

2,597

 

 

$

667

 

 

$

 

 

$

 

 

$

1,891

 

 

$

2,558

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

14

 

 

 

10,340

 

 

 

2,577

 

 

 

 

 

 

 

 

 

7,641

 

 

 

10,218

 

Other commercial construction

 

 

1

 

 

 

1,038

 

 

 

 

 

 

 

 

 

 

 

 

 

1,033

 

 

 

1,033

 

Residential

 

 

26

 

 

 

7,513

 

 

 

4,008

 

 

 

 

 

 

 

 

 

4,034

 

 

 

8,042

 

Residential — limited documentation

 

 

2

 

 

 

612

 

 

 

160

 

 

 

 

 

 

 

 

 

465

 

 

 

625

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

13

 

 

 

1,273

 

 

 

53

 

 

 

 

 

 

 

 

 

1,225

 

 

 

1,278

 

Recreational finance

 

 

1

 

 

 

15

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

15

 

Automobile

 

 

12

 

 

 

189

 

 

 

189

 

 

 

 

 

 

 

 

 

 

 

 

189

 

Total

 

 

93

 

 

$

23,577

 

 

$

7,669

 

 

$

 

 

$

 

 

$

16,289

 

 

$

23,958

 

- 22 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Loans and leases and the allowance for credit losses, continued

 

 

 

 

 

 

 

 

 

Post-modification (a)

 

 

 

 

 

 

 

 

 

 

Post-modification (a)

 

 

Number

 

 

Pre-

modification Recorded Investment

 

 

Principal Deferral

 

 

Interest Rate Reduction

 

 

Other

 

 

Combination of Concession Types

 

 

Total

 

 

Number

 

 

Pre-

modification Recorded Investment

 

 

Principal Deferral

 

 

Interest Rate Reduction

 

 

Other

 

 

Combination of Concession Types

 

 

Total

 

Six Months Ended June 30, 2020

 

(Dollars in thousands)

 

Three Months Ended March 31, 2021

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

 

167

 

 

$

67,828

 

 

$

22,617

 

 

$

 

 

$

31,605

 

 

$

12,501

 

 

$

66,723

 

 

 

93

 

 

$

53,733

 

 

$

24,653

 

 

$

 

 

$

 

 

$

28,504

 

 

$

53,157

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

56

 

 

 

81,514

 

 

 

11,866

 

 

 

333

 

 

 

4,800

 

 

 

52,316

 

 

 

69,315

 

 

 

33

 

 

 

26,870

 

 

 

11,160

 

 

 

 

 

 

2,214

 

 

 

12,422

 

 

 

25,796

 

Residential builder and developer

 

 

1

 

 

 

91

 

 

 

 

 

 

 

 

 

 

 

 

90

 

 

 

90

 

Residential

 

 

52

 

 

 

19,050

 

 

 

6,348

 

 

 

 

 

 

 

 

 

15,510

 

 

 

21,858

 

 

 

123

 

 

 

39,583

 

 

 

38,557

 

 

 

 

 

 

 

 

 

1,117

 

 

 

39,674

 

Residential — limited documentation

 

 

9

 

 

 

2,980

 

 

 

2,667

 

 

 

 

 

 

 

 

 

1,232

 

 

 

3,899

 

 

 

10

 

 

 

1,116

 

 

 

1,059

 

 

 

 

 

 

 

 

 

 

 

 

1,059

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

126

 

 

 

8,309

 

 

 

559

 

 

 

 

 

 

 

 

 

7,771

 

 

 

8,330

 

 

 

26

 

 

 

1,715

 

 

 

1,486

 

 

 

 

 

 

 

 

 

174

 

 

 

1,660

 

Recreational finance

 

 

274

 

 

 

10,885

 

 

 

10,885

 

 

 

 

 

 

 

 

 

 

 

 

10,885

 

 

 

72

 

 

 

2,212

 

 

 

2,212

 

 

 

 

 

 

 

 

 

 

 

 

2,212

 

Automobile

 

 

1,470

 

 

 

26,534

 

 

 

26,534

 

 

 

 

 

 

 

 

 

 

 

 

26,534

 

 

 

276

 

 

 

4,969

 

 

 

4,955

 

 

 

 

 

 

 

 

 

14

 

 

 

4,969

 

Other

 

 

335

 

 

 

2,183

 

 

 

682

 

 

 

 

 

 

 

 

 

1,501

 

 

 

2,183

 

 

 

222

 

 

 

1,434

 

 

 

1,434

 

 

 

 

 

 

 

 

 

 

 

 

1,434

 

Total

 

 

2,490

 

 

$

219,374

 

 

$

82,158

 

 

$

333

 

 

$

36,405

 

 

$

90,921

 

 

$

209,817

 

 

 

855

 

 

$

131,632

 

 

$

85,516

 

 

$

 

 

$

2,214

 

 

$

42,231

 

 

$

129,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

 

89

 

 

$

33,212

 

 

$

7,141

 

 

$

 

 

$

 

 

$

26,161

 

 

$

33,302

 

 

 

32

 

 

$

12,692

 

 

$

5,066

 

 

$

 

 

$

 

 

$

6,987

 

 

$

12,053

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

29

 

 

 

19,581

 

 

 

3,564

 

 

 

 

 

 

 

 

 

15,608

 

 

 

19,172

 

 

 

10

 

 

 

39,642

 

 

 

1,355

 

 

 

 

 

 

 

 

 

35,968

 

 

 

37,323

 

Residential builder and developer

 

 

2

 

 

 

1,330

 

 

 

1,068

 

 

 

 

 

 

 

 

 

 

 

 

1,068

 

Other commercial construction

 

 

2

 

 

 

1,456

 

 

 

 

 

 

 

 

 

 

 

 

 

1,399

 

 

 

1,399

 

Residential

 

 

43

 

 

 

11,329

 

 

 

5,759

 

 

 

 

 

 

 

 

 

6,307

 

 

 

12,066

 

 

 

27

 

 

 

10,178

 

 

 

3,247

 

 

 

 

 

 

 

 

 

8,977

 

 

 

12,224

 

Residential — limited documentation

 

 

3

 

 

 

848

 

 

 

399

 

 

 

 

 

 

 

 

 

465

 

 

 

864

 

 

 

9

 

 

 

2,980

 

 

 

2,667

 

 

 

 

 

 

 

 

 

1,232

 

 

 

3,899

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines and loans

 

 

20

 

 

 

1,749

 

 

 

90

 

 

 

 

 

 

 

 

 

1,679

 

 

 

1,769

 

 

 

6

 

 

 

738

 

 

 

412

 

 

 

 

 

 

 

 

 

334

 

 

 

746

 

Recreational finance

 

 

5

 

 

 

103

 

 

 

103

 

 

 

 

 

 

 

 

 

 

 

 

103

 

 

 

3

 

 

 

90

 

 

 

90

 

 

 

 

 

 

 

 

 

 

 

 

90

 

Automobile

 

 

32

 

 

 

506

 

 

 

469

 

 

 

 

 

 

 

 

 

37

 

 

 

506

 

 

 

9

 

 

 

182

 

 

 

182

 

 

 

 

 

 

 

 

 

 

 

 

182

 

Total

 

 

225

 

 

$

70,114

 

 

$

18,593

 

 

$

 

 

$

 

 

$

51,656

 

 

$

70,249

 

 

 

96

 

 

$

66,502

 

 

$

13,019

 

 

$

 

 

$

 

 

$

53,498

 

 

$

66,517

 

(a)

Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.  The present value of interest rate concessions, discounted at the effective rate of the original loan, was not material.

Troubled debt restructurings are 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 June 30,March 31, 2021 and 2020 and 2019 and for which there was a subsequent payment default during the six-monththree-month periods ended June 30,March 31, 2021 and 2020, and 2019, respectively, were not material.

The amount of foreclosed residential real estate property held by the Company was $59$24 million and $76$28 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. There were $273$206 million and $402$214 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, of loans secured by residential real estate that were in the process of foreclosure. Of all loans in the process of foreclosure at June 30, 2020,March 31, 2021, approximately 40%38% were government guaranteed.

- 23 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

4.5. Borrowings          

M&T had $527$529 million of fixed and variable rate junior subordinated deferrable interest debentures ("Junior Subordinated Debentures") outstanding at June 30, 2020March 31, 2021 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, the securities are includable in M&T’s 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. 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.

Also included in long-term borrowings was an agreementOn January 25, 2021,  $350 million of variable rate senior notes of M&T Bank, the principal bank subsidiary of M&T, matured.  In addition, on March 1, 2021, M&T Bank redeemed $500 million of subordinated notes that were due to repurchase securities that totaled $100 million and $102 million at June 30, 2020 andmature on December 31, 2019, respectively.  The outstanding agreement matured in July 2020.  The agreement was subject to legally enforceable master netting arrangements, however, the Company did not offset any amounts related to the agreement in its consolidated financial statements.  The Company posted collateral consisting primarily of government guaranteed mortgage-backed securities of $107 million and $108 million at June 30, 2020 and December 31, 2019, respectively.1, 2021.

5.6. Revenue from contracts with customers

A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, mortgage banking revenues, trading account and foreign exchange gains, investment securities gains, loan and letter of credit fees, income from bank-owned life insurance, and certain other revenues that are generally excluded from the scope of accounting guidance for revenue from contracts with customers.

For noninterest income revenue streams, the Company recognizes the expected amount of consideration as revenue when the performance obligations related to the services under the terms of a contract are satisfied. The Company’s contracts generally do not contain terms that necessitate significant judgment to determine the amount of revenue to recognize.

- 24 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

6. Revenue from contracts with customers, continued

The Company generally charges customer accounts or otherwise bills customers upon completion of its services.  Typically the Company’s contracts with customers have a duration of one year or less and payment for services is received at least annually, but oftentimes more frequently as services are provided.  At June 30, 2020March 31, 2021 and

- 24 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Revenue from contracts with customers, continued

December 31, 2019,2020, the Company had $60$61 million and $62$67 million, respectively, of amounts receivable related to recognized revenue from the sources in the accompanying tables.  Such amounts are classified in accrued interest and other assets in the Company’s consolidated balance sheet.  In certain situations the Company is paid in advance of providing services and defers the recognition of revenue until its service obligation is satisfied.  At June 30, 2020March 31, 2021 and December 31, 2019,2020, the Company had deferred revenue of $42$41 million and $43$42 million, respectively, related to the sources in the accompanying tables recorded in accrued interest and other liabilities in the consolidated balance sheet.

The following tables summarize sources of the Company’s noninterest income during the three-month and six-month periods ended June 30,March 31, 2021 and 2020 and 2019 that are subject to the noted accounting guidance.

 

Business Banking

 

 

Commercial Banking

 

 

Commercial Real Estate

 

 

Discretionary Portfolio

 

 

Residential Mortgage Banking

 

 

Retail Banking

 

 

All Other

 

 

Total

 

 

Business Banking

 

 

Commercial Banking

 

 

Commercial Real Estate

 

 

Discretionary Portfolio

 

 

Residential Mortgage Banking

 

 

Retail Banking

 

 

All Other

 

 

Total

 

Three Months Ended June 30, 2020

 

(In thousands)

 

Three Months Ended March 31, 2021

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classification in consolidated

statement of income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

11,271

 

 

 

22,514

 

 

 

2,565

 

 

 

 

 

 

 

 

 

40,024

 

 

 

1,081

 

 

$

77,455

 

 

$

12,497

 

 

 

24,295

 

 

 

2,893

 

 

 

 

 

 

 

 

 

51,452

 

 

 

1,640

 

 

$

92,777

 

Trust income

 

 

6

 

 

 

137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

151,739

 

 

 

151,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

156,022

 

 

 

156,022

 

Brokerage services income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,463

 

 

 

10,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,113

 

 

 

13,113

 

Other revenues from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchant discount and credit card fees

 

 

8,159

 

 

 

8,891

 

 

 

379

 

 

 

 

 

 

 

 

 

3,450

 

 

 

176

 

 

 

21,055

 

 

 

9,481

 

 

 

10,407

 

 

 

445

 

 

 

 

 

 

 

 

 

3,921

 

 

 

109

 

 

 

24,363

 

Other

 

 

 

 

 

787

 

 

 

1,188

 

 

 

150

 

 

 

1,052

 

 

 

3,166

 

 

 

9,421

 

 

 

15,764

 

 

 

 

 

 

958

 

 

 

1,091

 

 

 

384

 

 

 

1,722

 

 

 

5,807

 

 

 

12,948

 

 

 

22,910

 

 

$

19,436

 

 

 

32,329

 

 

 

4,132

 

 

 

150

 

 

 

1,052

 

 

 

46,640

 

 

 

172,880

 

 

$

276,619

 

 

$

21,978

 

 

 

35,660

 

 

 

4,429

 

 

 

384

 

 

 

1,722

 

 

 

61,180

 

 

 

183,832

 

 

$

309,185

 

Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classification in consolidated

statement of income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

15,175

 

 

 

23,094

 

 

 

2,362

 

 

 

 

 

 

2

 

 

 

65,661

 

 

 

1,493

 

 

$

107,787

 

 

$

15,250

 

 

 

24,157

 

 

 

2,812

 

 

 

 

 

 

 

 

 

61,670

 

 

 

2,272

 

 

$

106,161

 

Trust income

 

 

7

 

 

 

224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

144,151

 

 

 

144,382

 

 

 

12

 

 

 

304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

148,435

 

 

 

148,751

 

Brokerage services income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,478

 

 

 

12,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,129

 

 

 

13,129

 

Other revenues from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchant discount and credit card fees

 

 

9,895

 

 

 

13,129

 

 

 

496

 

 

 

 

 

 

 

 

 

4,566

 

 

 

602

 

 

 

28,688

 

 

 

10,331

 

 

 

13,316

 

 

 

849

 

 

 

 

 

 

 

 

 

2,271

 

 

 

400

 

 

 

27,167

 

Other

 

 

 

 

 

3,145

 

 

 

2,680

 

 

 

641

 

 

 

1,033

 

 

 

9,329

 

 

 

8,595

 

 

 

25,423

 

 

 

 

 

 

2,186

 

 

 

843

 

 

 

857

 

 

 

922

 

 

 

5,982

 

 

 

12,516

 

 

 

23,306

 

 

$

25,077

 

 

 

39,592

 

 

 

5,538

 

 

 

641

 

 

 

1,035

 

 

 

79,556

 

 

 

167,319

 

 

$

318,758

 

 

$

25,593

 

 

 

39,963

 

 

 

4,504

 

 

 

857

 

 

 

922

 

 

 

69,923

 

 

 

176,752

 

 

$

318,514

 

 

- 25 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

5. Revenue from contracts with customers, continued

 

 

Business Banking

 

 

Commercial Banking

 

 

Commercial Real Estate

 

 

Discretionary Portfolio

 

 

Residential Mortgage Banking

 

 

Retail Banking

 

 

All Other

 

 

Total

 

Six Months Ended June 30, 2020

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classification in consolidated

   statement  of income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

26,521

 

 

 

46,671

 

 

 

5,377

 

 

 

 

 

 

 

 

 

101,694

 

 

 

3,353

 

 

$

183,616

 

Trust income

 

 

18

 

 

 

441

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

300,174

 

 

 

300,633

 

Brokerage services income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,592

 

 

 

23,592

 

Other revenues from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchant discount and credit card fees

 

 

18,490

 

 

 

22,207

 

 

 

1,228

 

 

 

 

 

 

 

 

 

5,721

 

 

 

576

 

 

 

48,222

 

Other

 

 

 

 

 

2,973

 

 

 

2,031

 

 

 

1,007

 

 

 

1,974

 

 

 

9,148

 

 

 

21,937

 

 

 

39,070

 

 

 

$

45,029

 

 

 

72,292

 

 

 

8,636

 

 

 

1,007

 

 

 

1,974

 

 

 

116,563

 

 

 

349,632

 

 

$

595,133

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classification in consolidated

   statement of income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

$

30,284

 

 

 

46,304

 

 

 

4,888

 

 

 

 

 

 

4

 

 

 

126,812

 

 

 

2,607

 

 

$

210,899

 

Trust income

 

 

12

 

 

 

438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

276,718

 

 

 

277,168

 

Brokerage services income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,954

 

 

 

24,954

 

Other revenues from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchant discount and credit card fees

 

 

18,777

 

 

 

25,221

 

 

 

1,102

 

 

 

 

 

 

 

 

 

7,704

 

 

 

1,022

 

 

 

53,826

 

Other

 

 

 

 

 

4,147

 

 

 

4,468

 

 

 

1,042

 

 

 

2,097

 

 

 

17,823

 

 

 

19,083

 

 

 

48,660

 

 

 

$

49,073

 

 

 

76,110

 

 

 

10,458

 

 

 

1,042

 

 

 

2,101

 

 

 

152,339

 

 

 

324,384

 

 

$

615,507

 

- 26 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

6.7. Pension plans and other postretirement benefits

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

 

 

Pension

Benefits

 

 

Other

Postretirement

Benefits

 

 

Pension

Benefits

 

 

Other

Postretirement

Benefits

 

 

Three Months Ended June 30

 

 

Three Months Ended March 31

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

5,258

 

 

 

4,559

 

 

 

262

 

 

229

 

 

$

5,023

 

 

 

4,714

 

 

 

248

 

 

223

 

Interest cost on projected benefit obligation

 

 

17,824

 

 

 

20,590

 

 

 

451

 

 

 

569

 

 

 

15,434

 

 

 

17,886

 

 

 

327

 

 

 

419

 

Expected return on plan assets

 

 

(31,281

)

 

 

(30,470

)

 

 

 

 

 

 

 

 

(35,950

)

 

 

(31,475

)

 

 

 

 

 

 

Amortization of prior service cost (credit)

 

 

154

 

 

 

154

 

 

 

(1,194

)

 

 

(1,190

)

 

 

125

 

 

 

125

 

 

 

(1,175

)

 

 

(1,175

)

Amortization of net actuarial loss (gain)

 

 

15,098

 

 

 

6,546

 

 

 

(318

)

 

 

(323

)

 

 

22,150

 

 

 

13,950

 

 

 

(300

)

 

 

(300

)

Net periodic cost (benefit)

 

$

7,053

 

 

 

1,379

 

 

 

(799

)

 

 

(715

)

 

$

6,782

 

 

 

5,200

 

 

 

(900

)

 

 

(833

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension

Benefits

 

 

Other

Postretirement

Benefits

 

 

Six Months Ended June 30

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

9,972

 

 

 

8,646

 

 

 

485

 

 

 

429

 

Interest cost on projected benefit obligation

 

 

35,710

 

 

 

40,790

 

 

 

870

 

 

 

1,172

 

Expected return on plan assets

 

 

(62,756

)

 

 

(61,070

)

 

 

 

 

 

 

Amortization of prior service cost (credit)

 

 

279

 

 

 

279

 

 

 

(2,369

)

 

 

(2,365

)

Amortization of net actuarial loss (gain)

 

 

29,048

 

 

 

10,996

 

 

 

(618

)

 

 

(623

)

Net periodic cost (benefit)

 

$

12,253

 

 

 

(359

)

 

 

(1,632

)

 

 

(1,387

)

 

Service cost is reflected in salaries and employee benefits expense in the consolidated statement of income. The other components of net periodic benefit cost are reflected in other costs of operations. Expenses incurred in connection with the Company's defined contribution pension and retirement savings plans totaled $23$33 million and $19$27 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $51 million and $41 million for the six months ended June 30, 2020 and 2019, respectively, and are included in salaries and employee benefits expense.

- 27 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

7.8. Earnings per common share

The computations of basic earnings per common share follow:

 

Three Months Ended June 30

 

 

Six Months Ended June 30

 

 

Three Months Ended March 31

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

(In thousands, except per share)

 

 

(In thousands, except per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

241,054

 

 

 

473,260

 

 

 

509,876

 

 

 

956,002

 

 

$

447,249

 

 

$

268,822

 

Less: Preferred stock dividends

 

 

(17,050

)

 

 

(18,130

)

 

 

(34,128

)

 

 

(36,260

)

 

 

(17,050

)

 

 

(17,078

)

Net income available to common equity

 

 

224,004

 

 

 

455,130

 

 

 

475,748

 

 

 

919,742

 

 

 

430,199

 

 

 

251,744

 

Less: Income attributable to unvested stock-based

compensation awards

 

 

(906

)

 

 

(2,498

)

 

 

(1,954

)

 

 

(5,024

)

 

 

(2,108

)

 

 

(1,043

)

Net income available to common shareholders

 

$

223,098

 

 

 

452,632

 

 

 

473,794

 

 

 

914,718

 

 

$

428,091

 

 

$

250,701

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding (including common stock

issuable) and unvested stock-based compensation

awards

 

 

129,059

 

 

 

136,182

 

 

 

129,750

 

 

 

137,403

 

 

 

129,414

 

 

 

130,440

 

Less: Unvested stock-based compensation awards

 

 

(784

)

 

 

(749

)

 

 

(764

)

 

 

(749

)

 

 

(877

)

 

 

(744

)

Weighted-average shares outstanding

 

 

128,275

 

 

 

135,433

 

 

 

128,986

 

 

 

136,654

 

 

 

128,537

 

 

 

129,696

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

1.74

 

 

 

3.34

 

 

 

3.67

 

 

 

6.69

 

 

$

3.33

 

 

$

1.93

 

 

 

- 26 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

8. Earnings per common share, continued

The computations of diluted earnings per common share follow:

 

Three Months Ended June 30

 

 

Six Months Ended June 30

 

 

Three Months Ended March 31

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

(In thousands, except per share)

 

 

(In thousands, except per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common equity

 

$

224,004

 

 

 

455,130

 

 

 

475,748

 

 

 

919,742

 

 

$

430,199

 

 

$

251,744

 

Less: Income attributable to unvested stock-based

compensation awards

 

 

(905

)

 

 

(2,497

)

 

 

(1,953

)

 

 

(5,023

)

 

 

(2,106

)

 

 

(1,043

)

Net income available to common shareholders

 

$

223,099

 

 

 

452,633

 

 

 

473,795

 

 

 

914,719

 

 

$

428,093

 

 

$

250,701

 

Adjusted weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common and unvested stock-based compensation

awards

 

 

129,059

 

 

 

136,182

 

 

 

129,750

 

 

 

137,403

 

 

 

129,414

 

 

 

130,440

 

Less: Unvested stock-based compensation awards

 

 

(784

)

 

 

(749

)

 

 

(764

)

 

 

(749

)

 

 

(877

)

 

 

(744

)

Plus: Incremental shares from assumed conversion of

stock-based compensation awards and warrants to

purchase common stock

 

 

58

 

 

 

31

 

 

 

58

 

 

 

31

 

 

 

132

 

 

 

59

 

Adjusted weighted-average shares outstanding

 

 

128,333

 

 

 

135,464

 

 

 

129,044

 

 

 

136,685

 

 

 

128,669

 

 

 

129,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

1.74

 

 

 

3.34

 

 

 

3.67

 

 

 

6.69

 

 

$

3.33

 

 

$

1.93

 

 

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 483,491462,342 and 115,293464,694 common shares during the three-month periods ended June 30,March 31, 2021 and 2020, and 2019, respectively, and 474,093 and 197,598 common shares during the six-month periods ended June 30, 2020 and 2019, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.

- 2827 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

8.9. Comprehensive income

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

 

Investment

 

 

Defined Benefit

 

 

 

 

 

 

Total

Amount

 

 

 

Income

 

 

 

 

 

 

Investment

 

 

Defined Benefit

 

 

 

 

 

 

Total

Amount

 

 

 

Income

 

 

 

 

 

 

Securities

 

 

Plans

 

 

Other

 

 

Before Tax

 

 

 

Tax

 

 

Net

 

 

Securities

 

 

Plans

 

 

Other

 

 

Before Tax

 

 

 

Tax

 

 

Net

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2021

 

$

195,386

 

 

 

(650,087

)

 

 

369,558

 

 

$

(85,143

)

 

 

 

22,111

 

 

$

(63,032

)

Other comprehensive income before reclassifications:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding losses, net

 

 

(32,025

)

 

 

 

 

 

 

 

 

(32,025

)

 

 

 

8,907

 

 

 

(23,118

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

684

 

 

 

684

 

 

 

 

(136

)

 

 

548

 

Unrealized losses on cash flow hedges

 

 

 

 

 

 

 

 

(9,498

)

 

 

(9,498

)

 

 

 

2,571

 

 

 

(6,927

)

Total other comprehensive income before

reclassifications

 

 

(32,025

)

 

 

 

 

 

(8,814

)

 

 

(40,839

)

 

 

 

11,342

 

 

 

(29,497

)

Amounts reclassified from accumulated other

comprehensive income that (increase) decrease net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of unrealized holding losses on

held-to-maturity (“HTM”) securities

 

 

990

 

 

 

 

 

 

 

 

 

990

 

(a)

 

 

(276

)

 

 

714

 

Gains realized in net income

 

 

(3

)

 

 

 

 

 

 

 

 

(3

)

(b)

 

 

1

 

 

 

(2

)

Accretion of net gain on terminated cash flow hedges

 

 

 

 

 

 

 

 

(30

)

 

 

(30

)

(c)

 

 

9

 

 

 

(21

)

Net yield adjustment from cash flow hedges currently in effect

 

 

 

 

 

 

 

 

(82,044

)

 

 

(82,044

)

(a)

 

 

22,215

 

 

 

(59,829

)

Amortization of prior service credit

 

 

 

 

 

(1,050

)

 

 

 

 

 

(1,050

)

(d)

 

 

384

 

 

 

(666

)

Amortization of actuarial losses

 

 

 

 

 

21,850

 

 

 

 

 

 

21,850

 

(d)

 

 

(7,995

)

 

 

13,855

 

Total other comprehensive income (loss)

 

 

(31,038

)

 

 

20,800

 

 

 

(90,888

)

 

 

(101,126

)

 

 

 

25,680

 

 

 

(75,446

)

Balance — March 31, 2021

 

$

164,348

 

 

 

(629,287

)

 

 

278,670

 

 

$

(186,269

)

 

 

 

47,791

 

 

$

(138,478

)

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2020

 

$

50,701

 

 

 

(464,548

)

 

 

133,888

 

 

$

(279,959

)

 

 

 

73,279

 

 

$

(206,680

)

 

$

50,701

 

 

 

(464,548

)

 

 

133,888

 

 

$

(279,959

)

 

 

 

73,279

 

 

$

(206,680

)

Other comprehensive income before reclassifications:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains, net

 

 

177,086

 

 

 

 

 

 

 

 

 

177,086

 

 

 

 

(45,856

)

 

 

131,230

 

 

 

131,423

 

 

 

 

 

 

 

 

 

131,423

 

 

 

 

(34,544

)

 

 

96,879

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

(3,624

)

 

 

(3,624

)

 

 

 

630

 

 

 

(2,994

)

 

 

 

 

 

 

 

 

(3,225

)

 

 

(3,225

)

 

 

 

282

 

 

 

(2,943

)

Unrealized gains on cash flow hedges

 

 

 

 

 

 

 

 

511,195

 

 

 

511,195

 

 

 

 

(132,404

)

 

 

378,791

 

 

 

 

 

 

 

 

 

456,333

 

 

 

456,333

 

 

 

 

(119,970

)

 

 

336,363

 

Total other comprehensive income before

reclassifications

 

 

177,086

 

 

 

 

 

 

507,571

 

 

 

684,657

 

 

 

 

(177,630

)

 

 

507,027

 

 

 

131,423

 

 

 

 

 

 

453,108

 

 

 

584,531

 

 

 

 

(154,232

)

 

 

430,299

 

Amounts reclassified from accumulated other

comprehensive income that (increase) decrease net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of unrealized holding losses on

held-to-maturity (“HTM”) securities

 

 

1,619

 

 

 

 

 

 

 

 

 

1,619

 

(a)

 

 

(450

)

 

 

1,169

 

Amortization of unrealized holding losses on

HTM securities

 

 

772

 

 

 

 

 

 

 

 

 

772

 

(a)

 

 

(203

)

 

 

569

 

Accretion of net gain on terminated cash flow hedges

 

 

 

 

 

 

 

 

(64

)

 

 

(64

)

(c)

 

 

18

 

 

 

(46

)

 

 

 

 

 

 

 

 

(34

)

 

 

(34

)

(c)

 

 

9

 

 

 

(25

)

Net yield adjustment from cash flow hedges currently in effect

 

 

 

 

 

 

 

 

(101,194

)

 

 

(101,194

)

(a)

 

 

26,210

 

 

 

(74,984

)

 

 

 

 

 

 

 

 

(32,041

)

 

 

(32,041

)

(a)

 

 

8,423

 

 

 

(23,618

)

Amortization of prior service credit

 

 

 

 

 

(2,090

)

 

 

 

 

 

(2,090

)

(d)

 

 

650

 

 

 

(1,440

)

 

 

 

 

 

(1,050

)

 

 

 

 

 

(1,050

)

(d)

 

 

276

 

 

 

(774

)

Amortization of actuarial losses

 

 

 

 

 

28,430

 

 

 

 

 

 

28,430

 

(d)

 

 

(8,846

)

 

 

19,584

 

 

 

 

 

 

13,650

 

 

 

 

 

 

13,650

 

(d)

 

 

(3,588

)

 

 

10,062

 

Total other comprehensive income

 

 

178,705

 

 

 

26,340

 

 

 

406,313

 

 

 

611,358

 

 

 

 

(160,048

)

 

 

451,310

 

 

 

132,195

 

 

 

12,600

 

 

 

421,033

 

 

 

565,828

 

 

 

 

(149,315

)

 

 

416,513

 

Balance — June 30, 2020

 

$

229,406

 

 

 

(438,208

)

 

 

540,201

 

 

$

331,399

 

 

 

 

(86,769

)

 

$

244,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2019

 

$

(200,107

)

 

 

(354,502

)

 

 

(14,719

)

 

$

(569,328

)

 

 

 

149,247

 

 

$

(420,081

)

Other comprehensive income before reclassifications:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains, net

 

 

207,802

 

 

 

 

 

 

 

 

 

207,802

 

 

 

 

(54,609

)

 

 

153,193

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

(507

)

 

 

(507

)

 

 

 

107

 

 

 

(400

)

Unrealized gains on cash flow hedges

 

 

 

 

 

 

 

 

188,272

 

 

 

188,272

 

 

 

 

(49,497

)

 

 

138,775

 

Total other comprehensive income before

reclassifications

 

 

207,802

 

 

 

 

 

 

187,765

 

 

 

395,567

 

 

 

 

(103,999

)

 

 

291,568

 

Amounts reclassified from accumulated other

comprehensive income that (increase) decrease net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of unrealized holding losses on

HTM securities

 

 

1,691

 

 

 

 

 

 

 

 

 

1,691

 

(a)

 

 

(445

)

 

 

1,246

 

Losses realized in net income

 

 

7

 

 

 

 

 

 

 

 

 

7

 

(b)

 

 

(2

)

 

 

5

 

Accretion of net gain on terminated cash flow hedges

 

 

 

 

 

 

 

 

(56

)

 

 

(56

)

(c)

 

 

14

 

 

 

(42

)

Net yield adjustment from cash flow hedges currently in effect

 

 

 

 

 

 

 

 

11,176

 

 

 

11,176

 

(a)

 

 

(2,938

)

 

 

8,238

 

Amortization of prior service credit

 

 

 

 

 

(2,086

)

 

 

 

 

 

(2,086

)

(d)

 

 

548

 

 

 

(1,538

)

Amortization of actuarial losses

 

 

 

 

 

10,373

 

 

 

 

 

 

10,373

 

(d)

 

 

(2,727

)

 

 

7,646

 

Total other comprehensive income

 

 

209,500

 

 

 

8,287

 

 

 

198,885

 

 

 

416,672

 

 

 

 

(109,549

)

 

 

307,123

 

Balance — June 30, 2019

 

$

9,393

 

 

 

(346,215

)

 

 

184,166

 

 

$

(152,656

)

 

 

 

39,698

 

 

$

(112,958

)

Balance — March 31, 2020

 

$

182,896

 

 

 

(451,948

)

 

 

554,921

 

 

$

285,869

 

 

 

 

(76,036

)

 

$

209,833

 

(a)

Included in interest income.

(b)

Included in gain (loss) on bank investment securities.

(c)

Included in interest expense.

(d)

Included in other costs of operations.

 

- 2928 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

8.9. Comprehensive income, continued

Accumulated other comprehensive income (loss), net consisted of the following:

 

 

 

 

 

 

 

Defined

 

 

Cash Flow

 

 

 

 

 

 

 

Investment

 

 

Benefit

 

 

Hedges

 

 

 

 

 

 

 

Securities

 

 

Plans

 

 

and Other

 

 

Total

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — December 31, 2019

 

$

37,380

 

 

 

(342,419

)

 

 

98,359

 

 

$

(206,680

)

Net gain during period

 

 

132,399

 

 

 

18,144

 

 

 

300,767

 

 

 

451,310

 

Balance — June 30, 2020

 

$

169,779

 

 

 

(324,275

)

 

 

399,126

 

 

$

244,630

 

 

 

 

 

 

 

Defined

 

 

 

 

 

 

 

 

 

 

 

Investment

 

 

Benefit

 

 

 

 

 

 

 

 

 

 

 

Securities

 

 

Plans

 

 

Other

 

 

Total

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — December 31, 2020

 

$

144,602

 

 

$

(481,064

)

 

$

273,430

 

 

$

(63,032

)

Net gain (loss) during period

 

 

(22,406

)

 

 

13,189

 

 

 

(66,229

)

 

 

(75,446

)

Balance — March 31, 2021

 

$

122,196

 

 

$

(467,875

)

 

$

207,201

 

 

$

(138,478

)

 

9.10. Derivative financial instruments

As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities.  The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges.  Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting, collateral and/or settlement provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material as of June 30, 2020.March 31, 2021.

The net effect of interest rate swap agreements was to increase net interest income by $81$91 million and $117$36 million during the three-month and six-month periods ended June 30,March 31, 2021 and 2020, respectively, and to decrease net interest income by $11 million and $24 million during the three-month and six-month periods ended June 30, 2019, 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Estimated

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Estimated

 

 

Notional

 

 

Average

 

 

Average Rate

 

 

Fair Value

 

 

Notional

 

 

Average

 

 

Average Rate

 

 

Fair Value

 

 

Amount

 

 

Maturity

 

 

Fixed

 

 

Variable

 

 

Gain (Loss) (a)

 

 

Amount

 

 

Maturity

 

 

Fixed

 

 

Variable

 

 

Gain (Loss) (a)

 

 

(In thousands)

 

 

(In years)

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

(In thousands)

 

 

(In years)

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate long-term borrowings (b)

 

$

3,050,000

 

 

 

2.2

 

 

 

2.61

%

 

.72

%

 

$

(469

)

 

$

1,650,000

 

 

 

3.1

 

 

 

2.86

%

 

 

0.75

%

 

$

(1,117

)

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest payments on variable rate

commercial real estate loans (b)(c)

 

 

54,250,000

 

 

 

1.3

 

 

 

2.55

%

 

.18

%

 

 

220

 

 

 

36,050,000

 

 

 

0.9

 

 

 

1.80

%

 

 

0.11

%

 

 

(2,077

)

Total

 

$

57,300,000

 

 

 

1.3

 

 

 

 

 

 

 

 

 

 

$

(249

)

 

$

37,700,000

 

 

 

1.0

 

 

 

 

 

 

 

 

 

 

$

(3,194

)

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate long-term borrowings (b)

 

$

3,800,000

 

 

 

2.2

 

 

 

2.51

%

 

 

2.27

%

 

$

(567

)

 

$

1,650,000

 

 

 

3.3

 

 

 

2.86

%

 

 

0.79

%

 

$

651

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest payments on variable rate

commercial real estate loans (b)(d)

 

 

53,750,000

 

 

 

1.4

 

 

 

2.44

%

 

 

1.73

%

 

 

(1,195

)

 

 

49,400,000

 

 

 

0.9

 

 

 

2.22

%

 

 

0.15

%

 

 

425

 

Total

 

$

57,550,000

 

 

 

1.5

 

 

 

 

 

 

 

 

 

 

$

(1,762

)

 

$

51,050,000

 

 

 

1.0

 

 

 

 

 

 

 

 

 

 

$

1,076

 

 

(a)

Certain clearinghouse exchanges consider payments by counterparties for variation margin on derivative instruments to be settlements of those positions. The impact of such treatment at June 30, 2020March 31, 2021 and December 31, 20192020 was a reduction of the estimated fair value gains on interest rate swap agreements designated as fair value hedges of $133.8$70.6 million and $45.1$101.5 million, respectively, and on interest rate swap agreements designated as cash flow hedges of $549.3$283.1 million and $140.7$372.2 million, respectively.

(b)

Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and pays at a variable rate.

(c)

Includes notional amount and terms of $40.9$18.7 billion of forward-starting interest rate swap agreements that become effective in 20202021 - 2022.

(d)

Includes notional amount and terms of $40.4$32.1 billion of forward-starting interest rate swap agreements that become effective in  20202021 - 2022.

- 3029 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

9.10. Derivative financial instruments, continued

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 $37.1$36.2 billion and $48.6$37.8 billion at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.  The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes aggregated $1.0 billion$910 million and $1.2 billion$776 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, 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

 

 

June 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Derivatives designated and qualifying as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements (a)

 

$

818

 

 

$

232

 

 

$

1,067

 

 

$

1,994

 

 

$

172

 

 

$

1,968

 

 

$

3,366

 

 

$

892

 

Commitments to sell real estate loans (a)

 

 

2,473

 

 

 

1,195

 

 

 

7,763

 

 

 

421

 

 

 

6,270

 

 

 

1,488

 

 

 

146

 

 

 

8,458

 

 

 

3,291

 

 

 

1,427

 

 

 

8,830

 

 

 

2,415

 

 

 

6,442

 

 

 

3,456

 

 

 

3,512

 

 

 

9,350

 

Derivatives not designated and qualifying as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-related commitments to originate real estate loans

for sale (a)

 

 

40,727

 

 

 

11,965

 

 

 

621

 

 

 

1,225

 

 

 

22,921

 

 

 

43,599

 

 

 

9,164

 

 

 

365

 

Commitments to sell real estate loans (a)

 

 

2,253

 

 

 

3,074

 

 

 

7,526

 

 

 

3,548

 

 

 

36,179

 

 

 

2,409

 

 

 

5,605

 

 

 

13,868

 

Trading:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (b)

 

 

1,231,484

 

 

 

398,295

 

 

 

127,008

 

 

 

68,103

 

 

 

629,458

 

 

 

1,008,913

 

 

 

84,567

 

 

 

105,768

 

Foreign exchange and other option and futures contracts (b)

 

 

12,925

 

 

 

12,506

 

 

 

10,986

 

 

 

11,800

 

 

 

8,786

 

 

 

9,608

 

 

 

10,672

 

 

 

11,134

 

 

 

1,287,389

 

 

 

425,840

 

 

 

146,141

 

 

 

84,676

 

 

 

697,344

 

 

 

1,064,529

 

 

 

110,008

 

 

 

131,135

 

Total derivatives

 

$

1,290,680

 

 

$

427,267

 

 

$

154,971

 

 

$

87,091

 

 

$

703,786

 

 

$

1,067,985

 

 

$

113,520

 

 

$

140,485

 

(a)

Asset derivatives are reported in other assets and liability derivatives are reported in other liabilities.

(b)

Asset derivatives are reported in trading account assets and liability derivatives are reported in other liabilities.  The impact of variation margin payments at June 30, 2020March 31, 2021 and December 31, 20192020 was a reduction of the estimated fair value of interest rate contracts in the trading account in an asset position of $3.1$54.6 million and $43.3$5.6 million, respectively, and in a liability position of $1.0 billion$502.0 million and $281.3$806.5 million, respectively.

 

 

 

Amount of Gain (Loss) Recognized

 

 

 

Three Months Ended June 30, 2020

 

 

Three Months Ended June 30, 2019

 

 

 

Derivative

 

 

Hedged Item

 

 

Derivative

 

 

Hedged Item

 

 

 

(In thousands)

 

Derivatives in fair value hedging relationships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate long-term borrowings (a)

 

$

117

 

 

 

(605

)

 

$

56,679

 

 

 

(56,458

)

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (b)

 

$

978

 

 

 

 

 

 

$

8,493

 

 

 

 

 

Foreign exchange and other option and futures contracts (b)

 

 

717

 

 

 

 

 

 

 

2,479

 

 

 

 

 

Total

 

$

1,695

 

 

 

 

 

 

$

10,972

 

 

 

 

 

- 31 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

9. Derivative financial instruments, continued

 

Amount of Gain (Loss) Recognized

 

 

Amount of Gain (Loss) Recognized

 

 

Six Months Ended

June 30, 2020

 

 

Six Months Ended

June 30, 2019

 

 

Three Months Ended March 31, 2021

 

 

Three Months Ended March 31, 2020

 

 

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)

 

$

88,827

 

 

 

(88,429

)

 

$

90,859

 

 

 

(90,472

)

 

$

(32,658

)

 

 

31,898

 

 

$

88,710

 

 

 

(87,824

)

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (b)

 

$

13,764

 

 

 

 

 

 

$

11,204

 

 

 

 

 

 

$

(3,234

)

 

 

 

 

 

$

12,786

 

 

 

 

 

Foreign exchange and other option and futures contracts (b)

 

 

5,069

 

 

 

 

 

 

 

4,092

 

 

 

 

 

 

 

1,608

 

 

 

 

 

 

 

4,352

 

 

 

 

 

Total

 

$

18,833

 

 

 

 

 

 

$

15,296

 

 

 

 

 

 

$

(1,626

)

 

 

 

 

 

$

17,138

 

 

 

 

 

 

(a)

Reported as an adjustment to interest expense.

 

(b)

Reported as trading account and foreign exchange gains.  

- 30 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

10. Derivative financial instruments, continued

 

 

Carrying Amount of the Hedged Item

 

 

Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the

Hedged Item

 

 

Carrying Amount of the Hedged Item

 

 

Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the

Hedged Item

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

March 31, 2021

 

 

December 31, 2020

 

 

March 31, 2021

 

 

December 31, 2020

 

 

(In thousands)

 

 

(In thousands)

 

Location in the Consolidated Balance Sheet

of the Hedged Items in Fair Value Hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Location in the Consolidated Balance Sheet

of the Hedged Items in Fair Value Hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

3,180,022

 

 

$

3,840,775

 

 

$

132,069

 

 

$

43,640

 

 

$

1,718,238

 

 

$

1,750,048

 

 

$

69,428

 

 

$

101,326

 

The amount of gain (loss)interest income recognized in the consolidated statement of income associated with derivatives designated as cash flow hedges was not material.$82 million and $32 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 the unrealized gain recognized in other comprehensive income related to cash flow hedges was $281 million, of which $74 million, $165 million and $42 million related to interest rate swap agreements maturing in 2021, 2022, and 2023, respectively.

The Company also has commitments to sell and commitments to originate residential and commercial real estate loans that are considered derivatives.  The Company designates certain of the commitments to sell real estate loans as fair value hedges of real estate loans held for sale.  The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in the fair value of certain commitments to originate real estate loans for sale.  As a result of these activities, net unrealized pre-tax gains related to hedged loans held for sale, commitments to originate loans for sale and commitments to sell loans were approximately $57$55 million and $18$64 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.  Changes in unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied.

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

- 32 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

9. Derivative financial instruments, continued

The aggregate fair value of derivative financial instruments in a liability position and the net liability positions with counterparties which are subject to enforceable master netting arrangements was $143$50 million and $51$114 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.  The Company was required to post collateral relating to those positions of $139$50 million and $50$103 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.   Certain of the Company’s derivative financial instruments contain provisions that require the Company to maintain specific credit ratings from credit rating agencies to avoid higher collateral posting requirements.  If the Company’s debt rating were to fall below specified ratings, the counterparties of the derivative financial instruments could demand immediate incremental collateralization on those instruments in a net liability position.  The aggregate fair value of all derivative financial instruments with such credit risk-related contingent features in a net liability position on June 30, 2020March 31, 2021 was not significant.material.

The aggregate fair value of derivative financial instruments in an asset position and the net asset positions with counterparties which are subject to enforceable master netting arrangements was $1 million and $6$4 million at June 30, 2020March 31, 2021 and $3 million at December 31, 2019, respectively.2020.  Counterparties posted collateral relating to those positions of $81 thousand and $5$3 million at June 30, 2020each ofMarch 31, 2021 and December 31, 2019, respectively.2020. Trading account interest rate swap agreements entered into with customers are subject to the Company’s credit risk standards and often contain collateral provisions.

- 31 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

10. Derivative financial instruments, continued

In addition to the derivative contracts noted above, the Company clears certain derivative transactions through a clearinghouse, rather than directly with counterparties. Those transactions cleared through a clearinghouse require initial margin collateral and variation margin payments depending on the contracts being in a net asset or liability position. The amount of initial margin collateral posted by the Company was $124$150 million and $84$135 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. The fair value asset and liability amounts of derivative contracts have been reduced by variation margin payments treated as settlements as described herein.  Variation margin on derivative contracts not treated as settlements continues to represent collateral posted or received by the Company.

10.11. Variable interest entities and asset securitizations

The Company’s securitization activity has consisted of securitizing loans originated for sale into government issued or guaranteed mortgage-backed securities. The amounts of those securitizations during the six-month periods ended June 30, 2020 and 2019 are presented in the Company’s consolidated statement of cash flows. The Company has not recognized any losses as a result of having securitized assets.

As described in note 4,5, 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 each of June 30, 2020March 31, 2021 and December 31, 2019,2020, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet and recognized $23 million in other assets for its “investment” in the common securities of the trusts that will be concomitantly repaid to M&T by the respective trust from the proceeds of M&T’s repayment of the junior subordinated debentures associated with preferred capital securities described in note 4.

- 33 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

10. Variable interest entities and asset securitizations, continued5.

The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately $2.0$2.3 billion at June 30, 2020 each of March 31, 2021and $1.5 billion at December 31, 2019.2020. Those partnerships generally construct or acquire properties for which the investing partners are eligible to receive certain federal income tax credits in accordance with government guidelines. Such investments may also provide tax deductible losses to the partners. The partnership investments also assist the Company in achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company by creditors of the partnerships. However, the tax credits that result from the Company’s investments in such partnerships are generally subject to recapture should a partnership fail to comply with the respective government regulations. The Company’s carrying amount of its investments in such partnerships was $745$853 million, including $363$361 million of unfunded commitments, at June 30, 2020March 31, 2021 and $748$861 million, including $414$406 million of unfunded commitments, at December 31, 2019.2020.  Contingent commitments to provide additional capital contributions to these partnerships were not material at June 30, 2020.March 31, 2021. The Company has not provided financial or other support to the partnerships that was not contractually required. The Company’s maximum exposure to loss from its investments in such partnerships as of June 30, 2020March 31, 2021 was $957 million,$1.1 billion, including possible recapture of certain tax credits.  Management currently estimates that no material losses are probable as a result of the Company’s involvement with such entities.  The Company, in its position as limited partner, does not direct the activities that most significantly impact the economic performance of the partnerships and, therefore, in accordance with the accounting provisions for variable interest entities, the partnership entities are not included in the Company’s consolidated financial statements.  The Company’s investment in qualified affordable housing projects is amortized to income taxes in the consolidated statement of income as tax credits and other tax benefits resulting from deductible losses associated with the projects are received. The Company amortized $22$19 million and $43$21 million of its investments in qualified affordable housing projects to income tax expense during the three-month and six-month periods ended June 30,March 31, 2021 and 2020, respectively, and recognized $26 million and $52 million of tax credits and other tax benefits during those periods. Similarly, for the three-month and six-month periods ended June 30, 2019, the Company amortized $17 million and $34 million, respectively, of its investments in qualified affordable housing projects to income tax expense and recognized $21 million and $41$26 million of tax credits and other tax benefits during those respective periods.

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.

11.- 32 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements

GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value.  The Company has not made any fair value elections at June 30, 2020.March 31, 2021.

Pursuant to GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy exists in GAAP for fair value measurements based upon the inputs to the valuation of an asset or liability.

 

Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities.

 

Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

 

Level 3 — Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company's own estimates about the assumptions that market participants would use to value the asset or liability.

When available, the Company attempts to use quoted market prices in active markets to determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not available, fair value is often determined using model-based techniques incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall

- 34 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. Fair value measurements, continued

valuation. The following is a description of the valuation methodologies used for the Company's assets and liabilities that are measured on a recurring basis at estimated fair value.

Trading account assets and liabilities

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

Investment securities available for sale and equity securities

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

Real estate loans held for sale

The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale includes changes in estimated fair value during the hedge period.  Typically, the Company attempts to hedge real estate loans held for sale from the date of close through the sale date.  The fair value of hedged real estate loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans with similar characteristics and, accordingly, such loans have been classified as a Level 2 valuation.

- 33 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

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.

Interest rate swap agreements used for interest rate risk management

The Company utilizes interest rate swap agreements as part of the management of interest rate risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing liabilities. The Company generally determines the fair value of its interest rate swap agreements using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2. The Company has

- 35 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. Fair value measurements, continued

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.

- 34 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

The following tables present assets and liabilities at June 30, 2020March 31, 2021 and December 31, 20192020 measured at estimated fair value on a recurring basis:

 

 

Fair Value Measurements

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value Measurements

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

(In thousands)

 

 

(In thousands)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading account assets

 

$

1,293,534

 

 

$

48,741

 

 

$

1,244,793

 

 

$

 

 

$

687,359

 

 

$

49,115

 

 

$

638,244

 

 

$

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

 

9,893

 

 

 

 

 

 

9,893

 

 

 

 

 

 

7,013

 

 

 

 

 

 

7,013

 

 

 

 

Obligations of states and political subdivisions

 

 

511

 

 

 

 

 

 

511

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

5,690,161

 

 

 

 

 

 

5,690,161

 

 

 

 

 

 

4,225,089

 

 

 

 

 

 

4,225,089

 

 

 

 

Privately issued

 

 

16

 

 

 

 

 

 

 

 

 

16

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Other debt securities

 

 

120,693

 

 

 

 

 

 

120,693

 

 

 

 

 

 

132,319

 

 

 

 

 

 

132,319

 

 

 

 

 

 

5,821,274

 

 

 

 

 

 

5,821,258

 

 

 

16

 

 

 

4,364,437

 

 

 

 

 

 

4,364,421

 

 

 

16

 

Equity securities

 

 

93,611

 

 

 

67,888

 

 

 

25,723

 

 

 

 

 

 

81,792

 

 

 

64,150

 

 

 

17,642

 

 

 

 

Real estate loans held for sale

 

 

695,969

 

 

 

 

 

 

695,969

 

 

 

 

 

 

871,026

 

 

 

 

 

 

871,026

 

 

 

 

Other assets (a)

 

 

46,271

 

 

 

 

 

 

5,544

 

 

 

40,727

 

 

 

65,542

 

 

 

 

 

 

42,621

 

 

 

22,921

 

Total assets

 

$

7,950,659

 

 

$

116,629

 

 

$

7,793,287

 

 

$

40,743

 

 

$

6,070,156

 

 

$

113,265

 

 

$

5,933,954

 

 

$

22,937

 

Trading account liabilities

 

$

137,994

 

 

$

 

 

$

137,994

 

 

$

 

 

$

95,239

 

 

$

 

 

$

95,239

 

 

$

 

Other liabilities (a)

 

 

16,977

 

 

 

 

 

 

16,356

 

 

 

621

 

 

 

18,281

 

 

 

 

 

 

9,117

 

 

 

9,164

 

Total liabilities

 

$

154,971

 

 

$

 

 

$

154,350

 

 

$

621

 

 

$

113,520

 

 

$

 

 

$

104,356

 

 

$

9,164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading account assets

 

$

470,129

 

 

$

49,040

 

 

$

421,089

 

 

$

 

 

$

1,068,581

 

 

$

50,060

 

 

$

1,018,521

 

 

$

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

 

9,767

 

 

 

 

 

 

9,767

 

 

 

 

 

 

9,338

 

 

 

 

 

 

9,338

 

 

 

 

Obligations of states and political subdivisions

 

 

775

 

 

 

 

 

 

775

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government issued or guaranteed

 

 

6,180,940

 

 

 

 

 

 

6,180,940

 

 

 

 

 

 

4,683,438

 

 

 

 

 

 

4,683,438

 

 

 

 

Privately issued

 

 

16

 

 

 

 

 

 

 

 

 

16

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Other debt securities

 

 

127,278

 

 

 

 

 

 

127,278

 

 

 

 

 

 

129,814

 

 

 

 

 

 

129,814

 

 

 

 

 

 

6,318,776

 

 

 

 

 

 

6,318,760

 

 

 

16

 

 

 

4,822,606

 

 

 

 

 

 

4,822,590

 

 

 

16

 

Equity securities

 

 

140,041

 

 

 

100,637

 

 

 

39,404

 

 

 

 

 

 

92,985

 

 

 

63,129

 

 

 

29,856

 

 

 

 

Real estate loans held for sale

 

 

442,079

 

 

 

 

 

 

442,079

 

 

 

 

 

 

1,054,676

 

 

 

 

 

 

1,054,676

 

 

 

 

Other assets (a)

 

 

16,466

 

 

 

 

 

 

4,501

 

 

 

11,965

 

 

 

49,464

 

 

 

 

 

 

5,865

 

 

 

43,599

 

Total assets

 

$

7,387,491

 

 

$

149,677

 

 

$

7,225,833

 

 

$

11,981

 

 

$

7,088,312

 

 

$

113,189

 

 

$

6,931,508

 

 

$

43,615

 

Trading account liabilities

 

$

79,903

 

 

$

 

 

$

79,903

 

 

$

 

 

$

116,902

 

 

$

 

 

$

116,902

 

 

$

 

Other liabilities (a)

 

 

7,188

 

 

 

 

 

 

5,963

 

 

 

1,225

 

 

 

23,583

 

 

 

 

 

 

23,218

 

 

 

365

 

Total liabilities

 

$

87,091

 

 

$

 

 

$

85,866

 

 

$

1,225

 

 

$

140,485

 

 

$

 

 

$

140,120

 

 

$

365

 

 

 (a)

Comprised predominantly of interest rate swap agreements used for interest rate risk management (Level 2), commitments to sell real estate loans (Level 2) and commitments to originate real estate loans to be held for sale (Level 3).

- 3635 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

11.12. Fair value measurements, continued

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended June 30,March 31, 2021 and 2020 and 2019 were as follows:

 

 

Investment

Securities

Available for Sale

 

 

 

 

 

 

 

 

Privately Issued Mortgage-Backed Securities

 

 

Other Assets and Other Liabilities

 

 

2020

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Balance — March 31, 2020

 

$

16

 

 

 

35,027

 

 

Total gains realized/unrealized:

 

 

 

 

 

 

 

 

 

Included in earnings

 

 

 

 

 

48,732

 

(a)

Settlements

 

 

 

 

 

 

 

Transfers out of Level 3

 

 

 

 

 

(43,653

)

(b)

Balance — June 30, 2020

 

$

16

 

 

 

40,106

 

 

Changes in unrealized gains included in earnings

   related to assets still held at June 30, 2020

 

$

 

 

 

33,725

 

(a)

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — March 31, 2019

 

$

16

 

 

 

7,433

 

 

Total gains realized/unrealized:

 

 

 

 

 

 

 

 

 

Included in earnings

 

 

 

 

 

36,463

 

(a)

Settlements

 

 

 

 

 

 

 

Transfers out of Level 3

 

 

 

 

 

(26,696

)

(b)

Balance — June 30, 2019

 

$

16

 

 

 

17,200

 

 

Changes in unrealized gains included in earnings

   related to assets still held at June 30, 2019

 

$

 

 

 

17,464

 

(a)

- 37 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. Fair value measurements, continued

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the six months ended June 30, 2020 and 2019 were as follows:

 

 

Investment

Securities

Available for Sale

 

 

 

 

 

 

 

 

Privately Issued Mortgage-Backed Securities

 

 

Other Assets and Other Liabilities

 

 

2020

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2020

 

$

16

 

 

 

10,740

 

 

Total gains realized/unrealized:

 

 

 

 

 

 

 

 

 

Included in earnings

 

 

 

 

 

92,813

 

(a)

Settlements

 

 

 

 

 

 

 

Transfers out of Level 3

 

 

 

 

 

(63,447

)

(b)

Balance — June 30, 2020

 

$

16

 

 

 

40,106

 

 

Changes in unrealized gains included in earnings

   related to assets still held at June 30, 2020

 

$

 

 

 

38,514

 

(a)

 

 

Investment

Securities

Available for Sale

 

 

 

 

 

 

 

 

Privately Issued Mortgage-Backed Securities

 

 

Other Assets and Other Liabilities

 

 

2021

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2021

 

$

16

 

 

 

43,234

 

 

Total gains realized/unrealized:

 

 

 

 

 

 

 

 

 

Included in earnings

 

 

 

 

 

6,025

 

(a)

Transfers out of Level 3

 

 

 

 

 

(35,502

)

(b)

Balance — March 31, 2021

 

$

16

 

 

 

13,757

 

 

Changes in unrealized gains included in earnings

   related to assets still held at March 31, 2021

 

$

 

 

 

5,300

 

(a)

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2019

 

$

22

 

 

 

7,712

 

 

Total gains realized/unrealized:

 

 

 

 

 

 

 

 

 

Included in earnings

 

 

 

 

 

53,009

 

(a)

Settlements

 

 

(6

)

 

 

 

 

Transfers out of Level 3

 

 

 

 

 

(43,521

)

(b)

Balance — June 30, 2019

 

$

16

 

 

 

17,200

 

 

Changes in unrealized gains included in earnings

   related to assets still held at June 30, 2019

 

$

 

 

 

17,372

 

(a)

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2020

 

$

16

 

 

 

10,740

 

 

Total gains realized/unrealized:

 

 

 

 

 

 

 

 

 

Included in earnings

 

 

 

 

 

44,081

 

(a)

Transfers out of Level 3

 

 

 

 

 

(19,794

)

(b)

Balance — March 31, 2020

 

$

16

 

 

 

35,027

 

 

Changes in unrealized gains included in earnings

   related to assets still held at March 31, 2020

 

$

 

 

 

32,584

 

(a)

(a)

Reported as mortgage banking revenues in the consolidated statement of income and includes the fair value of commitment issuances and expirations.

(b)

Transfers out of Level 3 consist of interest rate locks transferred to closed loans.

  The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements.  The more significant of those assets follow.

Loans

Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectibleuncollectable 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 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 consideringspecific borrower facts and circumstances and the experience of credit personnel in their dealings with similar borrower collateral liquidations.  Such discounts were in the range of 15% to 90% with a weighted-average of 54%

- 3836 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

11.12. Fair value measurements, continued

the range of 15% to 90% with a weighted-average of 56% at June 30, 2020.March 31, 2021.  As these discounts are not readily observable and are considered significant, the valuations have been classified as Level 3.  Automobile collateral is typically valued by reference to independent pricing sources based on recent sales transactions of similar vehicles and, accordingly, the related nonrecurring fair value measurement adjustments have been classified as Level 2.  Collateral values for other consumer installment loans are generally estimated based on historical recovery rates for similar types of loans which at June 30,March 31, 2020 was 49%45%.  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 $248$658 million at June 30, 2020March 31, 2021 ($145357 million and $103$301 million of which were classified as Level 2 and Level 3, respectively), $305$652 million at December 31, 20192020 ($115339 million and $190$313 million of which were classified as Level 2 and Level 3, respectively) and $212$196 million at June 30, 2019March 31, 2020 ($155116 million and $57$80 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 June 30,March 31, 2021 and 2020 were decreases of $50$66 million and $21 million for the three-month and six-month periods ended June 30, 2020. Changes in fair value recognized for partial charge-offs of loansMarch 31, 2021 and loan impairment reserves on loans held by the Company on June 30, 2019 were decreases of $20 million and $36 million for the three-month and six-month periods ended June 30, 2019,2020, respectively.

Assets taken in foreclosure of defaulted loans

Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and are generally measured at the lower of cost or fair value less costs to sell.  The fair value of the real property is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and, accordingly, 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 $31$9 million and $17$14 million at June 30,March 31, 2021 and 2020, and 2019, respectively.  Changes in fair value recognized for those foreclosed assets held by the Company were not material during the three-month and six-month periods ended June 30, 2020March 31, 2021 and 2019.2020.

Capitalized servicing rights

Capitalized servicing rights are initially measured at fair value in the Company’s consolidated balance sheet. The Company utilizes the amortization method to subsequently measure its capitalized servicing assets. In accordance with GAAP, the Company must record impairment charges, on a nonrecurring basis, when the carrying value of certain strata exceed their estimated fair value. To estimate the fair value of servicing rights, the Company considers market prices for similar assets, if available, and the present value of expected future cash flows associated with the servicing rights calculated using assumptions that market participants would use in estimating future servicing income and expense. Such assumptions include estimates of the cost of servicing loans, loan default rates, an appropriate discount rate, and prepayment speeds. For purposes of evaluating and measuring impairment of capitalized servicing rights, the Company stratifies such assets based on the predominant risk characteristics of the underlying financial instruments that are expected to have the most impact on projected prepayments, cost of servicing and other factors affecting future cash flows associated with the servicing rights. Such factors may include financial asset or loan type, note rate and term. The amount of impairment recognized is the amount by which the carrying value of the capitalized servicing rights for a stratum exceed estimated fair value. Impairment is recognized through a valuation allowance. The determination of fair value of capitalized servicing rights is considered a Level 3 valuation. Capitalized servicing rights related to residential mortgage loans of $177$156 million and $188$159 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, required a valuation allowance of $27$21 million and $7$30 million, respectively. Significant unobservable inputs used in this Level 3 valuation included weighted-average prepayment speeds of 18.03%15.22% and 18.50%16.01% at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, and a weighted-average option-adjusted spread of 900 basis points at each date. Changes in fair valueThere was a recovery of previously recognized for impairment ofcharges for capitalized servicing rights were $10 million and $20 million during the three months and six months ended June 30, 2020, respetively. Changes in fair value recognized for impairment of capitalized servicing rights were $9 million during the three months ended March 31, 2021 and sixan impairment charge of $10 million during the three months ended June 30, 2019.March 31, 2020.  

- 3937 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

11.12. Fair value measurements, continued

Significant unobservable inputs to Level 3 measurements

 

The following tables present quantitative information about significant unobservable inputs used in the fair value measurements for certain Level 3 assets and liabilities at June 30, 2020March 31, 2021 and December 31, 2019:2020:

 

 

Fair Value

 

 

Valuation

Technique

 

Unobservable

Inputs/Assumptions

 

 

Range

(Weighted-

Average)

 

 

Fair Value

 

 

Valuation

Technique

 

Unobservable

Inputs/Assumptions

 

 

Range

(Weighted-

Average)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Privately issued mortgage-

backed securities

 

$

16

 

 

Two independent pricing quotes

 

 

 

 

 

 

 

$

16

 

 

Two independent pricing quotes

 

 

 

 

 

 

Net other assets (liabilities) (a)

 

 

40,106

 

 

Discounted cash flow

 

Commitment expirations

 

 

0%-100%(19%)

 

 

 

13,757

 

 

Discounted cash flow

 

Commitment expirations

 

 

0% - 98% (18%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Privately issued mortgage-

backed securities

 

$

16

 

 

Two independent pricing quotes

 

 

 

 

 

 

 

$

16

 

 

Two independent pricing quotes

 

 

 

 

 

 

Net other assets (liabilities) (a)

 

 

10,740

 

 

Discounted cash flow

 

Commitment expirations

 

 

0%-99% (13%)

 

 

 

43,234

 

 

Discounted cash flow

 

Commitment expirations

 

 

0% - 98% (16%)

 

(a)

Other Level 3 assets (liabilities) consist of commitments to originate real estate loans.

 

Sensitivity of fair value measurements to changes in unobservable inputs

 

An increase (decrease) in the estimate of expirations for commitments to originate real estate loans would generally result in a lower (higher) fair value measurement. Estimated commitment expirations are derived considering loan type, changes in interest rates and remaining length of time until closing.

 

- 4038 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

11.12. Fair value measurements, continued

Disclosures of fair value of financial instruments

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

 

 

June 30, 2020

 

 

March 31, 2021

 

 

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

 

$

1,354,815

 

 

 

1,354,815

 

 

 

1,307,683

 

 

 

47,132

 

 

 

 

 

$

1,258,989

 

 

 

1,258,989

 

 

 

1,213,877

 

 

 

45,112

 

 

 

 

Interest-bearing deposits at banks

 

 

20,888,341

 

 

 

20,888,341

 

 

 

 

 

 

20,888,341

 

 

 

 

 

 

31,407,227

 

 

 

31,407,227

 

 

 

 

 

 

31,407,227

 

 

 

 

Federal funds sold

 

 

1,000

 

 

 

1,000

 

 

 

 

 

 

1,000

 

 

 

 

Trading account assets

 

 

1,293,534

 

 

 

1,293,534

 

 

 

48,741

 

 

 

1,244,793

 

 

 

 

 

 

687,359

 

 

 

687,359

 

 

 

49,115

 

 

 

638,244

 

 

 

 

Investment securities

 

 

8,454,344

 

 

 

8,561,449

 

 

 

67,888

 

 

 

8,417,724

 

 

 

75,837

 

 

 

6,610,667

 

 

 

6,682,742

 

 

 

64,150

 

 

 

6,551,036

 

 

 

67,556

 

Loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases

 

 

29,203,862

 

 

 

28,736,876

 

 

 

 

 

 

 

 

 

28,736,876

 

 

 

27,811,190

 

 

 

27,509,182

 

 

 

 

 

 

 

 

 

27,509,182

 

Commercial real estate loans

 

 

37,159,451

 

 

 

35,781,888

 

 

 

 

 

 

255,442

 

 

 

35,526,446

 

 

 

37,425,974

 

 

 

36,661,758

 

 

 

 

 

 

98,513

 

 

 

36,563,245

 

Residential real estate loans

 

 

15,611,462

 

 

 

15,812,617

 

 

 

 

 

 

4,010,171

 

 

 

11,802,446

 

 

 

17,349,683

 

 

 

17,501,398

 

 

 

 

 

 

4,015,464

 

 

 

13,485,934

 

Consumer loans

 

 

15,782,773

 

 

 

15,207,433

 

 

 

 

 

 

 

 

 

15,207,433

 

 

 

16,712,233

 

 

 

16,781,406

 

 

 

 

 

 

 

 

 

16,781,406

 

Allowance for credit losses

 

 

(1,638,236

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,636,206

)

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases, net

 

 

96,119,312

 

 

 

95,538,814

 

 

 

 

 

 

4,265,613

 

 

 

91,273,201

 

 

 

97,662,874

 

 

 

98,453,744

 

 

 

 

 

 

4,113,977

 

 

 

94,339,767

 

Accrued interest receivable

 

 

380,859

 

 

 

380,859

 

 

 

 

 

 

380,859

 

 

 

 

 

 

440,658

 

 

 

440,658

 

 

 

 

 

 

440,658

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

(45,397,843

)

 

 

(45,397,843

)

 

 

 

 

 

(45,397,843

)

 

 

 

 

$

(53,641,419

)

 

 

(53,641,419

)

 

 

 

 

 

(53,641,419

)

 

 

 

Savings and interest-checking deposits

 

 

(63,623,406

)

 

 

(63,623,406

)

 

 

 

 

 

(63,623,406

)

 

 

 

 

 

(70,679,036

)

 

 

(70,679,036

)

 

 

 

 

 

(70,679,036

)

 

 

 

Time deposits

 

 

(5,078,426

)

 

 

(5,118,204

)

 

 

 

 

 

(5,118,204

)

 

 

 

 

 

(3,514,219

)

 

 

(3,526,947

)

 

 

 

 

 

(3,526,947

)

 

 

 

Deposits at Cayman Islands office

 

 

(868,284

)

 

 

(868,284

)

 

 

 

 

 

(868,284

)

 

 

 

 

 

(641,691

)

 

 

(641,691

)

 

 

 

 

 

(641,691

)

 

 

 

Short-term borrowings

 

 

(52,298

)

 

 

(52,298

)

 

 

 

 

 

(52,298

)

 

 

 

 

 

(58,957

)

 

 

(58,957

)

 

 

 

 

 

(58,957

)

 

 

 

Long-term borrowings

 

 

(6,321,291

)

 

 

(6,366,011

)

 

 

 

 

 

(6,366,011

)

 

 

 

 

 

(3,498,503

)

 

 

(3,609,625

)

 

 

 

 

 

(3,609,625

)

 

 

 

Accrued interest payable

 

 

(104,301

)

 

 

(104,301

)

 

 

 

 

 

(104,301

)

 

 

 

 

 

(43,745

)

 

 

(43,745

)

 

 

 

 

 

(43,745

)

 

 

 

Trading account liabilities

 

 

(137,994

)

 

 

(137,994

)

 

 

 

 

 

(137,994

)

 

 

 

 

 

(95,239

)

 

 

(95,239

)

 

 

 

 

 

(95,239

)

 

 

 

Other financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments to originate real estate

loans for sale

 

$

40,106

 

 

 

40,106

 

 

 

 

 

 

 

 

 

40,106

 

 

$

13,757

 

 

 

13,757

 

 

 

 

 

 

 

 

 

13,757

 

Commitments to sell real estate loans

 

 

(10,563

)

 

 

(10,563

)

 

 

 

 

 

(10,563

)

 

 

 

 

 

36,698

 

 

 

36,698

 

 

 

 

 

 

36,698

 

 

 

 

Other credit-related commitments

 

 

(136,840

)

 

 

(136,840

)

 

 

 

 

 

 

 

 

(136,840

)

 

 

(134,928

)

 

 

(134,928

)

 

 

 

 

 

 

 

 

(134,928

)

Interest rate swap agreements used for

interest rate risk management

 

 

(249

)

 

 

(249

)

 

 

 

 

 

(249

)

 

 

 

 

 

(3,194

)

 

 

(3,194

)

 

 

 

 

 

(3,194

)

 

 

 

- 4139 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

11.12. Fair value measurements, continued

 

 

December 31, 2019

 

 

December 31, 2020

 

 

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

 

$

1,432,805

 

 

 

1,432,805

 

 

 

1,394,984

 

 

 

37,821

 

 

 

 

 

$

1,552,743

 

 

 

1,552,743

 

 

 

1,497,457

 

 

 

55,286

 

 

 

 

Interest-bearing deposits at banks

 

 

7,190,154

 

 

 

7,190,154

 

 

 

 

 

 

7,190,154

 

 

 

 

 

 

23,663,810

 

 

 

23,663,810

 

 

 

 

 

 

23,663,810

 

 

 

 

Federal funds sold

 

 

3,500

 

 

 

3,500

 

 

 

 

 

 

3,500

 

 

 

 

Trading account assets

 

 

470,129

 

 

 

470,129

 

 

 

49,040

 

 

 

421,089

 

 

 

 

 

 

1,068,581

 

 

 

1,068,581

 

 

 

50,060

 

 

 

1,018,521

 

 

 

 

Investment securities

 

 

9,497,251

 

 

 

9,539,540

 

 

 

100,637

 

 

 

9,351,793

 

 

 

87,110

 

 

 

7,045,697

 

 

 

7,138,989

 

 

 

63,129

 

 

 

7,005,571

 

 

 

70,289

 

Loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases

 

 

23,838,168

 

 

 

23,510,908

 

 

 

 

 

 

 

 

 

23,510,908

 

 

 

27,574,564

 

 

 

27,220,699

 

 

 

 

 

 

 

 

 

27,220,699

 

Commercial real estate loans

 

 

35,541,914

 

 

 

35,517,180

 

 

 

 

 

 

28,338

 

 

 

35,488,842

 

 

 

37,637,889

 

 

 

36,816,580

 

 

 

 

 

 

277,911

 

 

 

36,538,669

 

Residential real estate loans

 

 

16,156,094

 

 

 

16,227,274

 

 

 

 

 

 

3,990,848

 

 

 

12,236,426

 

 

 

16,752,993

 

 

 

17,089,141

 

 

 

 

 

 

4,135,655

 

 

 

12,953,486

 

Consumer loans

 

 

15,386,693

 

 

 

15,413,262

 

 

 

 

 

 

 

 

 

15,413,262

 

 

 

16,570,421

 

 

 

16,554,050

 

 

 

 

 

 

 

 

 

16,554,050

 

Allowance for credit losses

 

 

(1,051,071

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,736,387

)

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases, net

 

 

89,871,798

 

 

 

90,668,624

 

 

 

 

 

 

4,019,186

 

 

 

86,649,438

 

 

 

96,799,480

 

 

 

97,680,470

 

 

 

 

 

 

4,413,566

 

 

 

93,266,904

 

Accrued interest receivable

 

 

333,142

 

 

 

333,142

 

 

 

 

 

 

333,142

 

 

 

 

 

 

419,936

 

 

 

419,936

 

 

 

 

 

 

419,936

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

(32,396,407

)

 

 

(32,396,407

)

 

 

 

 

 

(32,396,407

)

 

 

 

 

$

(47,572,884

)

 

 

(47,572,884

)

 

 

 

 

 

(47,572,884

)

 

 

 

Savings and interest-checking deposits

 

 

(54,932,162

)

 

 

(54,932,162

)

 

 

 

 

 

(54,932,162

)

 

 

 

 

 

(67,680,840

)

 

 

(67,680,840

)

 

 

 

 

 

(67,680,840

)

 

 

 

Time deposits

 

 

(5,757,456

)

 

 

(5,829,347

)

 

 

 

 

 

(5,829,347

)

 

 

 

 

 

(3,899,910

)

 

 

(3,919,367

)

 

 

 

 

 

(3,919,367

)

 

 

 

Deposits at Cayman Islands office

 

 

(1,684,044

)

 

 

(1,684,044

)

 

 

 

 

 

(1,684,044

)

 

 

 

 

 

(652,104

)

 

 

(652,104

)

 

 

 

 

 

(652,104

)

 

 

 

Short-term borrowings

 

 

(62,363

)

 

 

(62,363

)

 

 

 

 

 

(62,363

)

 

 

 

 

 

(59,482

)

 

 

(59,482

)

 

 

 

 

 

(59,482

)

 

 

 

Long-term borrowings

 

 

(6,986,186

)

 

 

(7,063,165

)

 

 

 

 

 

(7,063,165

)

 

 

 

 

 

(4,382,193

)

 

 

(4,490,433

)

 

 

 

 

 

(4,490,433

)

 

 

 

Accrued interest payable

 

 

(105,374

)

 

 

(105,374

)

 

 

 

 

 

(105,374

)

 

 

 

 

 

(59,916

)

 

 

(59,916

)

 

 

 

 

 

(59,916

)

 

 

 

Trading account liabilities

 

 

(79,903

)

 

 

(79,903

)

 

 

 

 

 

(79,903

)

 

 

 

 

 

(116,902

)

 

 

(116,902

)

 

 

 

 

 

(116,902

)

 

 

 

Other financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments to originate real estate

loans for sale

 

$

10,740

 

 

 

10,740

 

 

 

 

 

 

 

 

 

10,740

 

 

$

43,234

 

 

 

43,234

 

 

 

 

 

 

 

 

 

43,234

 

Commitments to sell real estate loans

 

 

300

 

 

 

300

 

 

 

 

 

 

300

 

 

 

 

 

 

(18,429

)

 

 

(18,429

)

 

 

 

 

 

(18,429

)

 

 

 

Other credit-related commitments

 

 

(136,470

)

 

 

(136,470

)

 

 

 

 

 

 

 

 

(136,470

)

 

 

(133,354

)

 

 

(133,354

)

 

 

 

 

 

 

 

 

(133,354

)

Interest rate swap agreements used for

interest rate risk management

 

 

(1,762

)

 

 

(1,762

)

 

 

 

 

 

(1,762

)

 

 

 

 

 

1,076

 

 

 

1,076

 

 

 

 

 

 

1,076

 

 

 

 

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

The Company does not believe that the estimated information presented herein is representative of the earnings power or value of the Company. The preceding analysis, which is inherently limited in depicting fair value, also does not consider any value associated with existing customer relationships nor the ability of the Company to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

- 4240 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

12.13. Commitments and contingencies

In the normal course of business, various commitments and contingent liabilities are outstanding.  The following table presents the Company's significant commitments.  Certain of these commitments are not included in the Company's consolidated balance sheet.

 

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Commitments to extend credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines of credit

 

$

5,556,034

 

 

$

5,442,160

 

 

$

5,626,965

 

 

$

5,563,854

 

Commercial real estate loans to be sold

 

 

236,832

 

 

 

164,076

 

 

 

249,514

 

 

 

363,735

 

Other commercial real estate

 

 

8,640,169

 

 

 

9,029,608

 

 

 

6,426,199

 

 

 

7,237,367

 

Residential real estate loans to be sold

 

 

1,030,144

 

 

 

423,056

 

 

 

1,081,889

 

 

 

1,026,118

 

Other residential real estate

 

 

713,200

 

 

 

448,375

 

 

 

600,212

 

 

 

665,259

 

Commercial and other

 

 

18,256,994

 

 

 

16,170,731

 

 

 

20,140,102

 

 

 

19,427,886

 

Standby letters of credit

 

 

2,394,261

 

 

 

2,441,432

 

 

 

2,231,893

 

 

 

2,241,417

 

Commercial letters of credit

 

 

37,859

 

 

 

41,059

 

 

 

13,260

 

 

 

27,332

 

Financial guarantees and indemnification contracts

 

 

4,306,209

 

 

 

4,108,572

 

 

 

4,365,308

 

 

 

4,220,531

 

Commitments to sell real estate loans

 

 

1,478,551

 

 

 

906,037

 

 

 

1,881,140

 

 

 

2,108,823

 

 

Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee.  In addition to the amounts in the preceding table, the Company had discretionary funding commitments to commercial customers of $10.0$10.5 billion and $9.1$10.4 billion at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, that the Company had the unconditional right to cancel prior to funding. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.   Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, whereas commercial letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and a third party.  The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies.  Collateral may be obtained based on management's assessment of the customer's creditworthiness.

Financial guarantees and indemnification contracts are 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 program totaled approximately $3.9$4.0 billion at each of June 30, 2020March 31, 2021 and December 31, 2019.2020.

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.  

- 4341 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

12.13. Commitments and contingencies, continued

The amount of those charges is based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. At June 30, 2020,March 31, 2021, the Company believes that its obligation to loan purchasers was not material to the Company’s consolidated financial position.

Wilmington Trust, N.A., a wholly owned subsidiary of M&T, provides retirement services, including serving in certain trustee roles relating to Employee Stock Ownership Plans (“ESOPs”). Beginning in 2010, the U.S. Department of Labor (“DOL”) announced that it would increase its focus on ESOP transactions, particularly with regard to valuation issues relating to ESOP transactions. Beginning in late 2013, Wilmington Trust, N.A. began receiving requests for information and subpoenas relating to certain ESOP transactions for which it acted as trustee.  In June 2016, Wilmington Trust, N.A. received a DOL subpoena seeking information on its global ESOP trustee business. In addition to these investigations, the DOL commenced three lawsuits against Wilmington Trust, N.A. relating to its role as trustee of three ESOP transactions. In July 2019, Wilmington Trust, N.A. reached a settlement in principle with the DOL to resolve certain pending DOL ESOP matters. On April 28, 2020, Wilmington Trust N.A. and the DOL executed a formal settlement agreement. The total amount of the settlement was $88 million, which included $80 million in payments to 21 ESOPs. The settlement amount was within the Company’s reserve for litigation matters and substantially all was paid in the second quarter of 2020.  Wilmington Trust, N.A. has also been named as a defendant in five private party lawsuits relating to its role as trustee for five ESOP transactions. Three of the five private party lawsuits relating to ESOP transactions have been resolved through settlements, two of which have been preliminarily approved by Courts, and are in the process of administration. The third settled ESOP private action was settled on an individual basis and, therefore, does not require Court approval. None of those three settlements are material. Under applicable transaction documents, Wilmington Trust, N.A. may be entitled to indemnification by the ESOP plan sponsors. These matters could result in damages, settlements, penalties, restitution, reputational damage or additional costs and expenses.

M&T and its subsidiaries are subject in the normal course of business to various other pending and threatened legal proceedings and 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 pending or threatened litigation could result in exposure in excess of the recorded 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 estimated to be between $0 and $25 million as of June 30, 2020.March 31, 2021.  Although the Company does not believe that the outcome of pending legal matters will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

13.14. Segment information

Reportable segments have been determined based upon the Company's internal profitability reporting system, which is organized by strategic business unit.  Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar.  The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.

The financial information of the Company's segments was compiled utilizing the accounting policies described in note 22 of Notes to Financial Statements in the 20192020 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 not necessarily comparable with similar information reported by other financial institutions.  

- 44 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Segment information, continued

Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.  

- 42 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

14. Segment information, continued

Information about the Company's segments is presented in the following table:

 

Three Months Ended June 30

 

 

Three Months Ended March 31

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

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

 

$

138,086

 

 

 

144

 

 

 

37,563

 

 

$

140,767

 

 

 

1,004

 

 

 

42,250

 

 

$

155,903

 

 

 

669

 

 

 

46,271

 

 

$

137,833

 

 

 

885

 

 

 

32,926

 

Commercial Banking

 

 

287,525

 

 

 

249

 

 

 

111,030

 

 

 

278,110

 

 

 

887

 

 

 

123,507

 

 

 

285,912

 

 

 

809

 

 

 

122,638

 

 

 

291,776

 

 

 

1,053

 

 

 

143,732

 

Commercial Real Estate

 

 

227,113

 

 

 

60

 

 

 

107,083

 

 

 

225,442

 

 

 

406

 

 

 

121,629

 

 

 

200,843

 

 

 

222

 

 

 

71,272

 

 

 

223,305

 

 

 

409

 

 

 

117,408

 

Discretionary Portfolio

 

 

138,827

 

 

 

(9,861

)

 

 

95,691

 

 

 

60,976

 

 

 

(9,291

)

 

 

38,040

 

 

 

134,544

 

 

 

(10,027

)

 

 

90,546

 

 

 

49,219

 

 

 

(13,037

)

 

 

25,668

 

Residential Mortgage Banking

 

 

142,045

 

 

 

21,016

 

 

 

37,400

 

 

 

96,449

 

 

 

17,150

 

 

 

7,642

 

 

 

153,760

 

 

 

22,183

 

 

 

49,611

 

 

 

125,561

 

 

 

21,417

 

 

 

24,616

 

Retail Banking

 

 

353,521

 

 

 

267

 

 

 

86,498

 

 

 

436,593

 

 

 

2,787

 

 

 

140,494

 

 

 

346,917

 

 

 

272

 

 

 

85,358

 

 

 

402,683

 

 

 

267

 

 

 

110,246

 

All Other

 

 

157,293

 

 

 

(11,875

)

 

 

(234,211

)

 

 

315,239

 

 

 

(12,943

)

 

 

(302

)

 

 

209,114

 

 

 

(14,128

)

 

 

(18,447

)

 

 

275,788

 

 

 

(10,994

)

 

 

(185,774

)

Total

 

$

1,444,410

 

 

 

 

 

 

241,054

 

 

$

1,553,576

 

 

 

 

 

 

473,260

 

 

$

1,486,993

 

 

 

 

 

 

447,249

 

 

$

1,506,165

 

 

 

 

 

 

268,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30

 

 

 

2020

 

 

2019

 

 

 

Total

Revenues(a)

 

 

Inter-

segment

Revenues

 

 

Net

Income

(Loss)

 

 

Total

Revenues(a)

 

 

Inter-

segment

Revenues

 

 

Net

Income

(Loss)

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Banking

 

$

275,919

 

 

 

1,029

 

 

 

70,489

 

 

$

280,089

 

 

 

1,860

 

 

 

85,521

 

Commercial Banking

 

 

579,301

 

 

 

1,302

 

 

 

254,762

 

 

 

545,600

 

 

 

1,727

 

 

 

255,725

 

Commercial Real Estate

 

 

450,418

 

 

 

469

 

 

 

224,491

 

 

 

444,615

 

 

 

760

 

 

 

239,127

 

Discretionary Portfolio

 

 

188,046

 

 

 

(22,898

)

 

 

121,359

 

 

 

124,893

 

 

 

(18,590

)

 

 

77,212

 

Residential Mortgage Banking

 

 

267,606

 

 

 

42,433

 

 

 

62,016

 

 

 

180,210

 

 

 

31,664

 

 

 

20,583

 

Retail Banking

 

 

756,204

 

 

 

534

 

 

 

196,744

 

 

 

867,484

 

 

 

5,298

 

 

 

285,560

 

All Other

 

 

433,081

 

 

 

(22,869

)

 

 

(419,985

)

 

 

661,510

 

 

 

(22,719

)

 

 

(7,726

)

Total

 

$

2,950,575

 

 

 

 

 

 

509,876

 

 

$

3,104,401

 

 

 

 

 

 

956,002

 

- 45 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Segment information, continued

 

Average Total Assets

 

 

Average Total Assets

 

 

Six Months Ended June 30

 

 

Year Ended

December 31

 

 

Three Months Ended March 31

 

 

Year Ended

December 31

 

 

2020

 

 

2019

 

 

2019

 

 

2021

 

 

2020

 

 

2020

 

 

(In millions)

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Banking

 

$

7,235

 

 

 

5,724

 

 

 

5,793

 

 

$

8,622

 

 

 

6,006

 

 

 

8,152

 

Commercial Banking

 

 

30,603

 

 

 

27,981

 

 

 

28,142

 

 

 

30,395

 

 

 

29,172

 

 

 

30,338

 

Commercial Real Estate

 

 

25,340

 

 

 

23,720

 

 

 

23,921

 

 

 

26,097

 

 

 

24,849

 

 

 

25,792

 

Discretionary Portfolio

 

 

26,821

 

 

 

29,888

 

 

 

29,081

 

 

 

23,650

 

 

 

27,143

 

 

 

27,726

 

Residential Mortgage Banking

 

 

3,113

 

 

 

2,173

 

 

 

2,611

 

 

 

6,506

 

 

 

3,218

 

 

 

4,038

 

Retail Banking

 

 

16,039

 

 

 

14,580

 

 

 

15,083

 

 

 

17,216

 

 

 

16,002

 

 

 

16,438

 

All Other

 

 

19,362

 

 

 

13,601

 

 

 

14,953

 

 

 

35,671

 

 

 

14,195

 

 

 

22,996

 

Total

 

$

128,513

 

 

 

117,667

 

 

 

119,584

 

 

$

148,157

 

 

 

120,585

 

 

 

135,480

 

(a)

Total revenues are comprised of net interest income and other income.  Net interest income is the difference between taxable-equivalent interest earned on assets and interest paid on liabilities owed by a segment and a funding charge (credit) based on the Company's internal funds transfer and allocation methodology.  Segments are charged a cost to fund any assets (e.g. loans) and are paid a funding credit for any funds provided (e.g. deposits).  The taxable-equivalent adjustment aggregated $4,234,000$3,733,000 and $5,925,000$5,063,000 for the three-month periods ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $9,297,000 and $11,892,000 for the six-month periods ended June 30, 2020 and 2019, respectively, and is eliminated in "All Other" total revenues.  Intersegment revenues are included in total revenues of the reportable segments.  The elimination of intersegment revenues is included in the determination of "All Other" total revenues.

14.- 43 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

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. That investment had 0 remaining carrying value at June 30, 2020March 31, 2021 as a result of cumulative losses recognized and cash distributions received in prior years.  IncomeCash distributions now received from BLG are recognized as income by M&T isand included in other revenues from operations andoperations.  That income totaled $23 million and $37 million for the three-month periodsperiod ended March 31, 2020 and 2019, respectively.2020. There was 0 similar income recognizedcash distribution during the three-month periodsperiod ended June 30, 2020 and 2019.March 31, 2021.

Bayview Financial Holdings, L.P. (together with its affiliates, "Bayview Financial"), a privately-held specialty 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 $2.1 billion and $2.2$1.9 billion at June 30, 2020March 31, 2021 and December 31, 2019, respectively.2020. Revenues from those servicing rights were $2 million and $3 million for the three-month periods ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $5 million and $6 million for the six-month periods ended June 30, 2020 and 2019, respectively. The Company sub-services residential mortgage loans for Bayview Financial having outstanding principal balances of $64.7$69.7 billion and $62.8$68.1 billion at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.  Revenues earned for sub-servicing loans for Bayview Financial were $34 million and $29$37 million for the three-month periods ended June 30,March 31, 2021 and 2020, and 2019, respectively and $71 million and $57 million for the six-month periods ended June 30, 2020 and 2019, respectively. In addition, the Company held $86$73 million and $93$77 million of mortgage-backed securities in its held-to-maturity portfolio at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, that were securitized by Bayview Financial. At June 30, 2020,March 31, 2021, the Company held $168$139 million of Bayview Financial’s $1.0$1.1 billion syndicated loan facility. Also, inIn the secondfirst quarter of 2021, the Company extended two $100purchased $965 million secured loan facilities to certain funds managedof delinquent FHA guaranteed mortgage loans, including past due accrued interest, from Bayview Financial for $1.0 billion. The servicing rights for such loans were retained by Bayview Financial, which had an outstanding balance of $199 million at June 30, 2020.  but the Company continues to sub-service the loans.

- 46 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

15.16. Recent accounting developments

The following table provides a description of accounting standards that were adopted by the Company in 20202021 as well as standards that are not effective that could have an impact to M&T’s consolidated financial statements upon adoption.

Standard

Description

Required date

of adoption

Effect on consolidated financial statements

Standards Adopted in 2020

Measurement of Credit Losses on Financial Instruments

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

January 1, 2020

The Company adopted the guidance on January 1, 2020.  The Company’s approach for estimating current expected credit losses for loans includes utilizing macro-economic assumptions to project losses over a two-year reasonable and supportable forecast period.  Subsequent to the forecast period, the Company reverts to longer term historical loss experience to estimate expected credit losses over the remaining contractual life.

Based on portfolio composition, then current economic conditions, and reasonable and supportable forecasts of future conditions, the Company recognized an increase to the allowance for credit losses of $132 million upon adoption of the standard as of January 1, 2020 as compared with the allowance for credit losses recognized on its consolidated balance sheet at December 31, 2019. The $132 million increase was recognized as a cumulative-effect adjustment to retained earnings as of January 1, 2020.

The effect on the allowance for credit losses was primarily attributable to increases in reserves for residential mortgage loans and consumer loans, which generally have longer estimated lives as compared with commercial and commercial real estate loans. The adoption did not have a material effect on the allowance for credit losses for debt securities.

Simplifying the Test for Goodwill Impairment

The amended guidance eliminates step 2 from the goodwill impairment test.

January 1, 2020

The Company adopted the amended guidance effective January 1, 2020 using a prospective transition method and will incorporate the guidance as necessary when circumstances arise for the guidance to be utilized. The Company does not expect the guidance will have a material impact on its consolidated financial statements, unless at some point in the future one of its reporting units were to fail step 1 of the goodwill impairment test.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

15. Recent accounting developments, continued

 

 

 

Standard

 

 

 

Description

 

 

Required date

of adoption

 

 

 

Effect on consolidated financial statements

 

 

 

Standards Adopted in 2020

Changes to the Disclosure Requirements for Fair Value Measurements

The amended guidance modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements.  The amendments are a result of the disclosure framework project that focuses on improvements to the effectiveness of disclosures in the notes to financial statements.  The amendments remove, modify, and add certain disclosure requirements.  The disclosure requirements removed relating to public companies are (1) the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation process for Level 3 fair value measurements.  The disclosure requirements modified relating to public companies are (1) for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s asset and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly, and (2) the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as a result of the use of unobservable inputs.  The disclosure requirements added relating to public companies are (1) to disclose the changes in unrealized gains and losses for the period for recurring Level 3 fair value measurements, and (2) to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

January 1, 2020

The Company adopted the amended guidance effective January 1, 2020.  A prospective transition method is being used for the amendments relating to disclosures being added under the guidance.  Such disclosures relate to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty.  All other amendments relating to removing or modifying certain disclosures are applied retrospectively.  The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

The amended guidance requires a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize and which costs to expense.

January 1, 2020

The Company adopted the amended guidance effective January 1, 2020 using a prospective transition method. The impact of the guidance on the Company’s consolidated financial statements is dependent on the nature and amount of actual expenditures, but is not expected to be material.

Improvements to Related Party Guidance for VIEs

The amended guidance requires that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.

January 1, 2020

The guidance did not have a material impact on the Company’s consolidated financial statements.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

15. Recent accounting developments, continued

Standard

Description

Required date

of adoption

Effect on consolidated financial statements

Standards Not Yet Adopted as of June 30, 2020

Changes to the Disclosure Requirements for Defined Benefit Plans

The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The disclosure requirements being removed relating to public companies are (1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, (2) the amount and timing of plan assets expected to be returned to the employer, (3) the 2001 disclosure requirement relating to Japanese Welfare Pension Insurance Law, (4) related party disclosures about the amount of future annual benefits covered by insurance, and (5) the effects of a one-percentage-point change in assumed health care cost trends on the benefit cost and obligation.  The disclosure requirements being added relating to public companies are (1) the weighted-average interest crediting rates for cash balance plans , and (2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

January 1, 2021

Early adoption permitted

The amendments should be applied retrospectively.  The Company does not expect the guidance to have a material impact on its consolidated financial statements.

 

 

 

Clarifying the Interactions Between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging

 

 

 

The amendments clarify the following guidance:

1. That an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in the equity securities investments guidance immediately before applying or upon discontinuing the equity method of accounting.

2. For the purpose of applying the derivatives and hedging guidance an entity should not consider whether, upon the settlement of a forward contract or exercise of a purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method of accounting or the fair value option in accordance with the financial instruments guidance. An entity also would evaluate the remaining characteristics in the derivatives and hedging guidance to determine the accounting for those forward contracts and purchased options.

 

 

 

January 1, 2021

 

Early adoption permitted

 

 

 

The amendments should be applied onCompany adopted the amended guidance effective January 1, 2021 using a prospective basis.transition method. The Company doesadoption did not expect the guidance will have a material impact on itsthe Company’s consolidated financial statements.

 

- 4944 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

15.16. Recent accounting developments, continued

 

 

 

Standard

 

 

 

Description

 

 

Required date

of adoption

 

 

 

Effect on consolidated financial statements

 

 

 

Standards Not Yet Adopted as of June 30, 2020in 2021

 

 

Simplifying the Accounting for Income Taxes

 

 

 

The amendments remove the following exceptions for accounting for income taxes:

1. Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income)

2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment

3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary

4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

 

The amendments also simplify the accounting for income taxes by doing the following:

1. Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax.  

2. Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction.

3. Specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority.

4. Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

5. Making minor Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.

 

 

January 1, 2021

 

Early adoption permitted

 

 

The amendments related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis.

EarlyThe adoption ofdid not have a material impact on the amendments in an interim period would require recognition of any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an early adoption election would require adoption of all the amendments in the same period. The Company is evaluating the impact that the guidance will have on itsCompany’s consolidated financial statements.

 

 


- 5045 -


NOTES TO FINANCIAL STATEMENTS, CONTINUED

 

15.16. Recent accounting developments, continued

 

 

 

Standard

 

 

 

Description

 

 

Required date

of adoption

 

 

 

Effect on consolidated financial statements

 

 

 

Standards Not Yet Adopted as of June 30, 2020March 31, 2021

 

 

Reference Rate ReformChanges to Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

 

 

The amendments provide optional expedientsreduce the number of accounting models for convertible debt instruments and exceptions for applying GAAP to contracts,hedging

relationships, and other transactions affected by reference rate reform.convertible preferred stock.  The amendments applyalso reduce form-over-substance-based guidance for the derivatives scope exception for contacts in an entity’s own equity. For convertible instruments, embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate on the instrument.  The amendments also require certain changes to EPS calculations for convertible instruments as well as additional disclosures relating to conditions that cause conversion features to be met.

For contacts in an entity’s own equity, the amendments  revise the derivatives scope exception guidance as follows:

1. Remove the settlement in unregistered shares, collateral, and shareholder rights conditions from the settlement guidance.

2. Clarify that payment penalties for failure to timely file do not preclude equity classification.

3. Require instruments that are required to be classified as an asset or liability to be measured subsequently at fair value, with changes reported in earnings and disclosed in the financial statements. 4. Clarifiy that the scope of the disclosure requirements in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies only to contracts, hedging relationships,freestanding instruments.

5. Clarify that the scope of the reassessment guidance in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies to both freestanding instruments and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments (1) apply to contract modifications that replace a reference rate affected by reference rate reform, (2)  provide exceptions to existing guidance related to changes to the critical terms of a hedging relationship due to reference rate reform (3) provide optional expedients for fair value hedging relationships, cash flow hedging relationships, and net investment hedging relationships, and (4) provide a onetime election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020.embedded features.

 

 

BeginningJanuary 1, 2022

March 12, 2020

Early adoption permitted

 

 

The amendments for contract modifications can be elected toapplied either on a modified retrospective method of transition or a fully retrospective method of transition. In applying the modified retrospective method, the guidance should be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. The amendments for existing hedging relationships can be elected to be appliedtransactions outstanding as of the beginning of the interim periodfiscal year in which the amendments are adopted. Transactions that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginningwere settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the interimchange should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption. If applying the fully retrospective method of transition, the cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented.

The fair value option is allowed to be irrevocably elected for any financial instrument that includes March 12, 2020. is a convertible security upon adoption of the amendments.

The Company is evaluatinghas not yet decided on which transition method will be applied to the impact thatextent applicable. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

 

 

 

 

- 5146 -


 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Net income for M&T Bank Corporation (“M&T”) recorded net income in the secondfirst quarter of 2021 was $447 million, compared with $269 million in the corresponding quarter of 2020 and $471 million in the fourth quarter of $241 million or $1.74 of diluted2020. Diluted and basic earnings per common share compared with $473were $3.33 in the recent quarter, $1.93 in the first quarter of 2020 and $3.52 in the fourth quarter of 2020.  The after-tax impact of merger-related expenses was $8 million ($10 million pre-tax), or $3.34$.06 of basic and diluted earnings per common share in the year-earlierrecent quarter.  Net income and diluted earnings per common share during the first quarterSuch expenses were associated with M&T’s pending acquisition of 2020People’s United Financial, Inc. (“People’s United”), headquartered in Bridgeport, Connecticut.  There were $269 million and $1.93, respectively.  Basic earnings per common share were $1.74 in the recent quarter, compared with $3.34 in the year earlier quarter and $1.93 in the initial quarter of 2020. Net income totaled $510 million or $3.67 of diluted and basic earnings per common shareno merger-related expenses in the first halfor fourth quarters of 2020, compared with $956 million or $6.69 of diluted and basic earnings per common share in the corresponding period of 2019.2020.

The annualized rate of return on average total assets for M&T and its consolidated subsidiaries (“the Company”) in the second2021’s first quarter of 2020 was .71%1.22%, compared with 1.60%.90% in the year-earlier quarter and .90%1.30% in the firstfourth quarter of 2020. The annualized rate of return on average common shareholders’ equity was 6.13%11.57% in the recent quarter,  compared with 12.68%7.00% in the secondfirst quarter of 20192020 and 7.00% in 2020’s initial quarter. During the six-month period ended June 30, 2020, the annualized rates of return on average assets and average common shareholders’ equity were .80% and 6.56%, respectively, compared with 1.64% and 12.91%, respectively,12.07% in the similar periodfourth 2020 quarter.

On February 22, 2021, M&T announced that it had entered into a definitive agreement with People’s United under which People’s United will be acquired by M&T in an all-stock transaction.  Pursuant to the terms of 2019.

Effective January 1, 2020,the agreement, People’s United shareholders will receive consideration valued at .118 of an M&T adopted amended accounting guidance forshare in the measurementform of credit lossesM&T common stock. People’s United outstanding preferred stock will be converted to a new series of M&T preferred stock upon completion of the acquisition. The transaction is valued at approximately $7.7 billion (with the price based on financial instruments.  That guidance requires an allowance for credit lossesM&T’s closing price of $151.61 per share as of March 31, 2021).

As of March 31, 2021, People’s United reported $64.2 billion of assets, including $42.8 billion of loans and $10.4 billion of investment securities, $56.6 billion of liabilities, including $53.5 billion of deposits, and $7.6 billion of stockholders’ equity. The merger is subject to be deducted from the amortized cost basisa number of financial assets to present the net carrying value thatconditions, including regulatory approvals and approval by common shareholders of M&T and People’s United, and is expected to be collected overcompleted during the contractual termfourth quarter of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount.  The new accounting guidance replaces the previous incurred loss model for determining the allowance for credit losses.  The adoption of the amended guidance resulted in a $132 million increase in the allowance for credit losses as of January 1, 2020.Additional information on the new accounting guidance is provided under the heading “Provision for Credit Losses” and in note 3 of Notes to Financial Statements.2021.

Financial results forsince the secondfirst quarter of 2020 were adversely impacted by the Coronavirus Disease 2019 (“COVID-19”) pandemic. Large portions of the U.S. economy were substantially curtailed for extended periods of time and, as a result, many commercial and consumer customers were adversely impacted. Specifically, those adverse economic impacts resulted in the Company recognizing elevated levels of  provisions for credit losses during 2020 that reflected projections of credit losses based on macroeconomic forecasts at the end of each quarter of that year.  The Company recorded provisions for credit losses of $250 million in the first 2020 quarter and $75 million in the fourth quarter of 2020.An improvement in economic outlookconditions and forecasts at June 30 deterioratedMarch 31, 2021 as compared with what had been assumed byprevious forecasts led the Company asto recognize a provision recapture of the end of$25 million in the first quarter of 2020, with considerable uncertainty existing about2021.  In response to the length and extentpandemic, the Federal Reserve took actions to lower interest rates that have negatively affected the Company’s net interest income since the beginning of the pandemic’s impact on the nation’s economy.  Due to higher expected credit losses that reflect the worsening outlook, the provision for credit lossespandemic. Taxable-equivalent net interest income totaled $985 million in the recent quarter rose to $325and $982 million from $250and $993 million in the initialfirst and fourth quarters of 2020, quarter and $55 million in the second quarter of 2019. The 2020 periods reflect the adoption of the new accounting guidance for the measurement of expected credit losses on financial instruments. Spurred by the COVID-19 pandemic, the low  interest rate environment has resulted in decreased taxable-equivalent net interest income in the recent quarter, while waivers and reduced customer transaction activity led to lower fees earned on deposit accounts.respectively.  

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Among other things, theThe CARES Act  providesand applicable extensions provide relief to borrowers, including the opportunity to defer loan payments while not negatively affecting their credit standing, and also providesprovide funding opportunities for small businesses under the Paycheck Protection Program (“PPP”) from approved Small Business Administration (“SBA”) lenders, including M&T Bank.Bank, the principal bank subsidiary of M&T. For commercial and consumer customers, the Company has provided a host of relief options, including loan maturity extensions, payment deferrals fee(including maturity extensions), loan covenant waivers and low interest rate loan products.  During the second quarter of 2020, M&T Bank funded approximately $7.0 billion of PPP loans thatduring 2020 and another $2.5 billion during the first quarter of 2021.  PPP loans outstanding at March 31, 2021 and December 31, 2020 totaled $6.5$6.2 billion at June 30, 2020.and $5.4 billion, respectively.

Updated economic forecasts at June 30, 2020 and at March 31,the end of each of the quarters of 2020 resulted in higher estimates of expected credit losses in the Company’s loan portfolio than at January 1, 2020, when the Company adopted amended

- 47 -


accounting guidance for the measurement of credit losses on financial instruments, resulting in significant increases inhistorically high levels of the provision for credit losseslosses. Specifically, the level of the provision in 2020 reflected the ongoing impacts of the pandemic on economic activity in the first two quartershospitality and retail sectors, the uncertainty at December 31, 2020 as to the sufficiency and effectiveness of 2020. Theeconomic stimulus provided by the U.S. government to the economy, and concerns about ultimate collectability of real estate loans where borrowers requested re-payment forbearance.  Improvement in the economic outlook at March 31, 2021 resulted in reduced estimates of expected credit losses.  However, the Company expects that it will continue to be negatively impacted by the COVID-19 pandemic after June 30, 2020 and believes that the  pandemic could have a material impact on its future financial results. Specifically, the Company expects the following balance sheet and income statement categories to be affected:

- 52 -


March 31, 2021.

M&T Bank is an approved lender in the Main Street Lending Program, a provision of the CARES Act. Customer demand for this borrowing opportunity is not fully known, so that potential impact is not determinable;

Net interest income and net interest margin –the low interest rate environment will continue to negatively affect the Company’s net interest margin;

Provision for credit losses – deteriorating economic assumptions used to calculate the allowance for credit losses at the end of future reporting periods could result in higher levels of the provision and allowance for credit losses than have been historically experienced.  In addition, the impact on borrowers’ ability to repay loans could be negatively affected, potentially leading to increased charge-offs;

Noninterest income will likely be lower as it relates to the trust businesses, as  it is likely that fee waivers will increase for proprietary money market mutual fund management fees, and some of trust income is derived from equity market performance, which could be volatile.  The potential for a prolonged slowdown in debt capital market activities also exists. Consumer deposit service charge fees may continue to be lower than historical levels due to fee waivers and lower debit card transactions. Credit card interchange volumes are also expected to be lower than historical norms, resulting in lower fees.  Residential mortgage applications are expected to continue to be strong given the low interest rate environment; and

The resurgence of the epidemic in many parts of the country has resulted in certain government mandates that will impact aspects of the Company’s expense base, such as the use of contractors, travel and entertainment costs, and other types of discretionary expenditures.  In addition, the Company has curtailed hiring and has redeployed employees to address the changing dynamics of the business given the current environment.

The national effort to mitigate the pandemic has resulted in a challenging environment for businesses and their employees.  The Company has taken actions designed to help provide a safe environment for its customers and employees and to provide relief to customers in a variety of ways.  Examples of those actions include:

 

The deployment of a Pandemic Response Plan to manage the pandemic’s effects on operations, employees and customers, including seeking to ensure employee safety, maintainmaintaining continuity of operations and service levels for customers, preservepreserving the Company’s financial strength, and complycomplying with applicable laws and regulations.  Actions have included placing restrictions on travel, implementing a modified branch service model, implementing social distancing, requirements,health screening, sanitation and other protocols, and mandating for all employees whose jobs can be performed remotely to work from home.home where possible.  The Company has formed a task forcecontinues to develop a plan forassess the appropriateness of employees to returnreturning to the office when deemed appropriate while ensuringseeking to ensure a safe work environment;

 

Nearly all M&T Bank branches remain open, with open lobbies or with in-person visits by appointment and normal access to drive-through windows and ATMs;

 

Nearly 90%The vast majority of the Company’s non-branch employees continue to work remotely;

 

LoanMany loan customers are still receiving COVID-19 related relief in various forms, including modification and forbearance requests as of June 30, 2020March 31, 2021 as follows:described herein and in note 4 of Notes to Financial Statements.

Commercial – 9,300 customers with balances of $14.0 billion, including $4.2 billion associated with automobile and recreation finance dealers;

Residential real estate – 85,000 customers with balances of $15.4 billion (including approximately 77,000 customers with balances of $13.2 billion that are serviced for others and, therefore not included in the Company’s assets);

Consumer – including automobile, recreational finance, home equity lines and loans, credit cards and personal loans – 22,200 customers with balances of $685 million.

Paycheck Protection Program – At June 30, 2020, 34,600 customers have outstanding loans totaling $6.5 billion; and

Waiving certain types of transaction and maintenance fees for consumer and small business deposit account relationships.

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

During the first quarter of 2019, the Company increased its reserve for legal matters by $50 million in conjunction with matters associated with a subsidiary’s role as trustee of Employee Stock Ownership Plans in its Institutional Client Services business. That increase, on an after-tax basis, reduced net income in that quarter by $37 million, or $.27 of diluted earnings per common share. Also during that quarter, M&T realized $37 million of distributed income from Bayview Lending Group LLC (“BLG”), increasing net income by $28 million, or $.20 of diluted earnings per common share. A similar distribution of $23 million was received in the first quarter of 2020, increasing net income by $17 million, or $.13 of diluted earnings per common share.

Supplemental Reporting of Non-GAAP Results of Operations

M&T consistently provides supplemental reporting of its results on a “net operating” or “tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and gains (when realized) and expenses (when incurred) associated with merging acquired operations (when incurred)  into the Company, since such items are considered by management to be “nonoperating” in nature.  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 totaled $244$457 million in the secondfirst quarter of 2020,2021, compared with $477 million in the year-earlier quarter and $272 million in the initial 2020year-earlier quarter.  Diluted net operating earnings per common share the recent quarter were $1.76, compared with $3.37 in the second quarter of 2019 and $1.95 in the first quarterquarters of 2020. For the first six months of2021 and 2020 netwere $3.41 and $1.95, respectively. Net operating income and diluted net operating earnings per common share were $516$473 million and $3.71, respectively, compared with $963 million and $6.74,$3.54, respectively, in the first halffourth quarter of 2019.2020.

Net operating income in the recent quarter expressed as an annualized rate of return on average tangible assets was .74%1.29%, compared with 1.68% in the similar quarter of 2019 and .94% in the initialfirst quarter of 2020 and 1.35% in the 2020’s fourth quarter. Net operating income represented an annualized return on average tangible common equity of 9.04%17.05% in the secondfirst quarter of 2020, compared with 18.83% and2021,  10.39% for the quarters ended June 30, 2019 and March 31, 2020, respectively. For the first half of 2020, net operating income represented an annualized return on average tanglibe assets and average tanglible common shareholders’ equity of .84% and 9.71%, respectively, compared with 1.72% and 19.19%, respectively, in the corresponding 2019 period.  year-earlier quarter and 17.53% in the fourth quarter of 2020.

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

Taxable-equivalent Net Interest Income

Taxable-equivalent net interest income was $961$985 million in the secondfirst quarter of 2020,2021, compared with $1.05 billion$982 million in the year-earlier quarter.first quarter of 2020. That declinemodest increase resulted predominantly from the impact of a 78$26.1 billion or 24% increase in average earning assets that was substantially offset by a 68 basis point (hundredths of one percent) narrowing of the net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, to 3.13%2.97% in the recent quarter from 3.91%3.65% in the second quarteryear-earlier quarter. The higher average earning assets

- 48 -


reflected growth in deposits at the Federal Reserve Bank of 2019.New York and loans, partially offset by a decline in average investment securities balances. The narrowing of the net interest margin was largely the result of declines in rates earned on loans and deposits at the Federal Reserve Bank of New York, reflecting the lower interest rate environment due to actions initiated by the Federal Reserve to decrease its target Federal funds rate three times in the second half of 2019 (each by a .25% increment) and twice in March of 2020 (first by .50%, than another by 1.0%). The impact of the recent quarter’s lower net interest margin on net interest income was partially offset by an increase in average earning assets of $16.0 billion from the year-earlier quarter.

- 54 -


Taxable-equivalent net interest income in the recent quarter declined $20$8 million or 2%, from the fourth quarter of 2020 reflecting the fewer number of days in the first quarter of 2020 primarily driven by a 522021.  A three basis point narrowing of the net interest margin in the recent quarter from 3.65%3.00% in the prior quarter partially offset by a $15.3 billion riselargely attributable to higher balances held in average earning assets. The increase in average earning assets in the recent quarter as compared with the second quarter of 2019 and the initial quarter of 2020 resulted from higher average balances of loans and leases and interest-bearing depositslow yielding accounts at the Federal Reserve Bank of New York partially offset by lower average investment securities balances.  

For the first six months of 2020, taxable-equivalent net interest income was $1.94 billion, down 8% from $2.10 billion in the corresponding 2019 period. That decrease was primarily attributable to a 60 basis point narrowing of the margin to 3.37% in the 2020 period from 3.97% in the year-earlier period, partiallypredominantly offset by a $9.1$2.4 billion increaseor 2% rise in average earning assets.

Average loans and leases totaled $97.8$99.4 billion in the secondfirst quarter of 2020,2021, up $8.6$7.7 billion or 10%8% from $89.2$91.7 billion in the similar quarter of 2019.2020.  Commercial loans and leases averaged $29.7$27.7 billion in the secondfirst quarter of 2020, $6.42021, $3.4 billion or 27%14% higher than in the year-earlier quarter.  That increase was predominantly the result of average outstanding PPP loans of $4.8$5.7 billion in the recent quarter that were predominantly funded in the recent quarter.second quarter of 2020 and in the first quarter of 2021. Average commercial real estate loans were $36.9$37.6 billion in the recent quarter, up $2.2$1.6 billion, or 6%4%, from $34.8$36.0 billion in the similar 2019corresponding 2020 quarter.  Included in average commercial real estate loans in the secondfirst quarters of 20202021 and 20192020 were loans held for sale of $287$258 million and $245$185 million, respectively.  Reflecting ongoing repaymentspurchases of government-guaranteed loans obtained in a 2015 acquisition,from Ginnie Mae pools that were serviced by the Company, average residential real estate loans declined $1.1rose $1.5 billion or 7%9% to $15.6$17.4 billion in the secondfirst quarter of 20202021 from $16.7$15.9 billion in the year-earlier quarter. IncludedThe loans purchased from Ginnie Mae pools averaged $3.8 billion in the recent quarter, compared with $800 million in the year-earlier quarter. Loans are purchased to reduce associated servicing costs, namely a requirement to advance principal and interest payments that had not been received from individual mortgagors, including payments deferred under COVID-19 forbearance arrangements. Loans purchased from Ginnie Mae pools totaled $1.3 billion in the recent quarter and $2.5 billion in the last three quarters of 2020. Also included in average residential real estate loans were loans held for sale of $406$663 million in the recent quarter and $227$409 million in the secondfirst quarter of 2019.2020.  Consumer loans averaged $15.5$16.6 billion in the secondfirst quarter of 2020,2021, up $1.2 billion, or 8%, from $14.3$15.5 billion in the year-earlier quarter, due to growth in average recreational finance loans (consisting predominantly of loans secured by recreational vehicles and boats) and, to a lesser extent, automobile loans that was partially offset by declines in outstanding balances of home equity loans and lines of credit.

Average loan and lease balances in the secondfirst quarter of 20202021 increased $6.1 billion, or 7%,$690 million from $91.7$98.7 billion in the firstfourth quarter of 2020.  Commercial loan and lease average balances in the recent quarter were up $5.4 billion, or 22%,little changed from $24.3 billion in the firstfourth quarter of 2020. That rise resulted predominantly from2020, as higher loans to motor vehicle and recreational finance dealers were offset by lower average loan balances associated with the PPP loans originated during 2020’s second quarter.loans. Average commercial real estate loans in the secondfirst quarter of 2020 increased $9142021 declined $98 million or 3%, from $36.0$37.7 billion in the firstfourth quarter of 2020.  Commercial real estate loans held for sale averaged $185$307 million in the firstfourth quarter of 2020.  Average balances of residential real estate loans in the recently completed quarter declined $332rose $643 million, or 2%4%, from $15.9$16.8 billion in 2020’s firstfourth quarter, predominantly reflecting the continued pay downa higher level of repurchases of government-guaranteed loans. Purchased government-guaranteed loans obtainedaveraged $2.6 billion in the 2015 acquisition.2020’s fourth quarter.  Residential real estate loans held for sale averaged $409$645 million in the firstfourth quarter of 2020.  Average consumer loans in the recent quarter increased $67$136 million, or 1%, from $15.5$16.5 billion in 2020’s first quarter.fourth quarter, reflecting growth in recreational finance and automobile loans.  The accompanying table summarizes quarterly changes in the major components of the loan and lease portfolio.

- 5549 -


 

AVERAGE LOANS AND LEASES

(net of unearned discount)

 

 

 

 

 

 

Percent Increase

 

 

 

 

 

 

 

Percent Increase

 

 

 

 

 

 

 

(Decrease) from

 

 

 

 

 

 

 

(Decrease) from

 

 

 

2nd Qtr.

 

 

2nd Qtr.

 

 

1st Qtr.

 

 

 

1st Qtr.

 

 

1st Qtr.

 

 

4th Qtr.

 

 

 

2020

 

 

2019

 

 

2020

 

 

 

2021

 

 

2020

 

 

2020

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, etc.

 

$

29,733

 

 

 

27

 

%

 

22

 

%

 

$

27,723

 

 

 

14

 

%

 

 

%

Real estate — commercial

 

 

36,947

 

 

 

6

 

 

 

3

 

 

 

 

37,609

 

 

 

4

 

 

 

 

 

Real estate — consumer

 

 

15,599

 

 

 

(7

)

 

 

(2

)

 

 

 

17,404

 

 

 

9

 

 

 

4

 

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recreational finance

 

 

6,014

 

 

 

31

 

 

 

6

 

 

 

 

7,176

 

 

 

27

 

 

 

2

 

 

Automobile

 

 

4,177

 

 

 

6

 

 

 

4

 

 

Home equity lines and loans

 

 

4,297

 

 

 

(9

)

 

 

(3

)

 

 

 

3,896

 

 

 

(12

)

 

 

(4

)

 

Automobile

 

 

3,813

 

 

 

3

 

 

 

(3

)

 

Other

 

 

1,394

 

 

 

4

 

 

 

(3

)

 

 

 

1,371

 

 

 

(5

)

 

 

(1

)

 

Total consumer

 

 

15,518

 

 

 

8

 

 

 

 

 

 

 

16,620

 

 

 

8

 

 

 

1

 

 

Total

 

$

97,797

 

 

 

10

 

%

 

7

 

%

 

$

99,356

 

 

 

8

 

%

 

1

 

%

For the first six months of 2020, average loans and leases totaled $94.8 billion, up 7%, from $88.8 billion in the corresponding 2019 period. Contributing to the rise were a $3.8 billion increase in average commercial loan and lease balances (due largely to PPP loans), a $1.8 billion increase in average commercial real eastate loans and a $1.3 billion increase in average consumer loan balances, partially offset by a $1.1 billion decline in average residential real estate loan balances.

The investment securities portfolio averaged $8.5$6.6 billion in the secondfirst quarter of 2020,2021, down $3.7$2.5 billion, or 30%27%, from $12.2$9.1 billion in the year-earlier quarter and $602$590 million lower than the $9.1$7.2 billion averaged in the firstfourth quarter of 2020.  For the first six months of 2020 and 2019, investment securities averaged $8.8 billion and $12.6 billion, respectively.The lower average balancesbalance in the recent periods reflect maturitiesquarter as compared with the first and fourth quarters of U.S. Treasury notes and2020 predominantly reflects pay downs of mortgage-backed securities.  The Company purchased $200 million of fixed rate residential mortgage-backed securities in March 2021.  There were no other significant purchases and there were no significant sales of investment securities during the first six months of 2020 or 2019. During the first quarter of 2019, the Company purchased $500 million of U.S. Treasury notes. There were no other significant purchases of investment securities during the first six months ofthree-month periods ended March 31, 2021, March 31, 2020 or 2019.December 31, 2020. The Company routinely has increases and decreases in its holdings of capital stock of the Federal Home Loan Bank (“FHLB”) of New York and the Federal Reserve Bank of New York.  Those holdings are accounted for at cost and are adjusted based on amounts of outstanding borrowings and available lines of credit with those entities.

The investment securities portfolio is predominantlylargely comprised of residential mortgage-backed securities short termand shorter-term U.S. Treasury and federal agency notes, and certain other debt and marketable equity securities. Investment securities also include capital stock of the Federal Home Loan Bank of New York and the Federal Reserve Bank of New York.notes.  When purchasing investment securities, the Company considers its liquidity position and its overall interest-rate risk profile as well as the adequacy of expected returns relative to risks assumed, including prepayments. The Company may occasionally sell investment securities as a result of changes in interest rates and spreads, actual or anticipated prepayments, credit risk associated with a particular security, or as a result of restructuring its investment securities portfolio in connection with a business combination. The amounts of investment securities held by the Company are influenced by such factors such as available yield in comparison with alternative investments, demand for loans, which generally yield more than investment securities, and other earning assets, ongoing repayments, the levels of deposits, and management of liquidity and balance sheet size and resulting capital ratios.

Fair value changes in equity securities with readily determinable fair values are recognized in the consolidated statement of income.  Net unrealized gainslosses on such equity securities were $7$12 million and $21 million in the recent quarter,first quarters of 2021 and 2020, respectively, compared with net unrealized gains of $9$2 million in the secondfinal quarter of 2019 and net unrealized losses of $21 million in the initial 2020 quarter. Net unrealized losses on equity securities were $14 million during the first six months of 2020, compared with net unrealized gains of $21 million in the prior year period.2020. Those gains and losses were predominantly related to the Company’s holdings of Fannie Mae and Freddie Mac preferred stock.  

- 56 -


The Company regularly reviews its debt investment securities for declines in value below amortized cost that might be indicative of credit-related losses. In light of such reviews, there were no credit-related losses on debt investment securities recognized in either of the six-month periods ended June 30,first quarters of 2021 or 2020 or 2019.in the final 2020 quarter. Based on management’s assessment of future cash flows associated with individual investment securities as of June 30, 2020,March 31, 2021, the Company did not expect to incur any material credit-related losses in its portfolios of debt investment securities. Additional information about the investment securities portfolio is included in notes 23 and 1112 of Notes to Financial Statements.

- 50 -


Other earning assets include interest-bearing deposits at the Federal Reserve Bank of New York and other banks, trading account assets, federal funds sold and agreements to resell securities.  Those other earning assets in the aggregate averaged $17.2$28.4 billion in the secondrecently completed quarter, of 2020, compared with $6.2 billion in the year-earlier quarter and $7.4 billion in the first quarter of 2020 and $26.1 billion in the final quarter of 2020.  Interest-bearing deposits at banks averaged $16.5$27.7 billion, for$6.1 billion and $22.2 billion during the three months ended June 30,March 31, 2021, March 31, 2020 and $6.1 billion for each of the three-month periods ended June 30, 2019 and MarchDecember 31, 2020.2020, respectively.  The amounts of interest-bearing deposits at banks at the respective dates were predominantly comprised of deposits held at the Federal Reserve Bank of New York.  The levels of those deposits often fluctuate due to changes in trust-related deposits and other deposits of commercial entities, purchases or maturities of investment securities, or borrowings to manage the Company’s liquidity.  The higher amount at June 30, 2020 asbalances in the two most recent quarters compared with the earlier dates noted reflects the impact ofyear-earlier period reflect increased commercial and consumer deposit balances.  Agreements to resell securities averaged $678 million, $1.2 billion and $3.8 billion for the quarters ended March 31, 2021, March 31, 2020 and December 31, 2020, respectively.

As a result of the changes described herein, average earning assets totaled $123.5$134.4 billion in the most recent quarter, compared with $107.5$108.2 billion and $131.9 billion in the second quarter of 2019first and $108.2 billion in the initial 2020 quarter. Average earning assets totaled $115.9 billion and $106.8 billion during the first six monthsfourth quarters of 2020, and 2019, 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 $106.1 billion in the second quarter of 2020, compared with $86.2 billion in the similar 2019 quarter and $90.9$120.2 billion in the first quarter of 2020.2021, up 32% from $90.9 billion in the similar 2020 quarter. The increase in average core deposits in the recent quarter as compared with the secondfirst quarter of 2019 and 2020’s initial quarter2020 reflected higher balances of noninterest-bearing deposits and savings and interest-checking deposits. Average balances of savings and interest-checking core deposits rose $8.2$12.4 billion or 16%23% to $59.0$66.0 billion in the second 2020first 2021 quarter from $50.8$53.6 billion in the year-earlier quarter.  Average noninterest-bearing deposits increased $12.4$18.4 billion or 41%57% to $42.5$50.9 billion in the recent quarter from $30.1$32.5 billion in the second 2019first 2020 quarter. Those increases were largely due to higher average deposits of commercial customers, but also reflect higher levels of consumer deposits and deposits associated with residential mortgage servicing activities. In late March 2020, commercial customers drew down available lines of credit for liquidity purposes.  A large portion of those funds were placed in customer deposit accounts at M&T Bank.  By the end of the second quarter, a significant portion of those line advances had been repaid by customers. Average core deposits were $90.9$115.2 billion in the firstfourth quarter of 2020. Average savings and interest-checking core deposits increased $5.3$1.4 billion or 10%2% in the second 2020first 2021 quarter from $53.6$64.7 billion in the immediately preceding quarter. Average noninterest-bearing deposits in the recent quarter were $10.0$4.0 billion or 31% above8% higher than the firstfourth quarter 2020 average of $32.5$46.9 billion, predominantly due toreflecting higher depositslevels of liquidity being maintained by many commercial and consumer customers. The following table provides an analysis of quarterly changes in the components of average core deposits.  

- 57 -


AVERAGE CORE DEPOSITS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent Increase

 

 

 

 

 

 

 

Percent Increase

 

 

 

 

 

 

 

(Decrease) from

 

 

 

 

 

 

 

(Decrease) from

 

 

 

2nd Qtr.

 

 

2nd Qtr.

 

 

1st Qtr.

 

 

 

1st Qtr.

 

 

1st Qtr.

 

 

4th Qtr.

 

 

 

2020

 

 

2019

 

 

2020

 

 

 

2021

 

 

2020

 

 

2020

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-checking deposits

 

$

58,955

 

 

 

16

 

%

 

10

 

%

 

$

66,036

 

 

 

23

 

%

 

2

 

%

Time deposits

 

 

4,621

 

 

 

(13

)

 

 

(4

)

 

 

 

3,256

 

 

 

(32

)

 

 

(9

)

 

Noninterest-bearing deposits

 

 

42,497

 

 

 

41

 

 

 

31

 

 

 

 

50,860

 

 

 

57

 

 

 

8

 

 

Total

 

$

106,073

 

 

 

23

 

%

 

17

 

%

 

$

120,152

 

 

 

32

 

%

 

4

 

%

The Company also receives funding from other deposit sources, including branch-related time deposits over $250,000, deposits associated with the Company’s Cayman Islands office and brokered deposits.  Time deposits over $250,000, excluding brokered deposits, averaged $733$477 million in the recent quarter, compared with $1.2 billion in the second quarter of 2019 and $872 million in the initialfirst quarter of 2020 and $521 million in the fourth 2020 quarter. The decreases in such deposits since the secondfirst quarter of 20192020 were predominantly the result of maturities of higher-rate time deposits. Cayman Islands office deposits averaged $1.0 billion, $1.2 billion and$683 million for the quarter ended March 31, 2021, compared with $1.7 billion for the quartersquarter ended June 30, 2020, June 30, 2019 and March 31, 2020 respectively.and $826 million for the quarter ended December 31, 2020. The decreasedecreases in such deposits in

- 51 -


the two most recent quarterquarters as compared with the second quarter of 2019 and the first quarter of 2020 reflectedreflect customer reaction to the declines in short-term interest rates that followed actions by the Federal Reserve in March 2020. The Company had brokered savings and interest-bearing transaction accounts, which in the aggregate averaged $4.0$4.4 billion during each of the recent quarter and the fourth quarter of 2020, compared with $2.7 billion in each of the second quarter of 2019 and the first quarter of 2020.  The amounts of Cayman Islands office deposits or brokered deposits is largely dependent on demand by customers and other investors for those types of deposit products.

- 58 -


The table below summarizes average total deposits for the quarters ended June 30, 2020, March 31, 2021, December 31, 2020 and June 30, 2019.March 31, 2020.

AVERAGE DEPOSITS

 

Retail

 

 

Trust

 

 

Commercial

and Other

 

 

Total

 

 

Retail

 

 

Trust

 

 

Commercial

and Other

 

 

Total

 

 

(In millions)

 

 

(In millions)

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-checking deposits

 

$

32,499

��

 

$

5,747

 

 

$

32,212

 

 

$

70,458

 

Time deposits

 

 

3,492

 

 

 

44

 

 

 

196

 

 

 

3,732

 

Noninterest-bearing deposits

 

 

7,845

 

 

 

7,032

 

 

 

35,983

 

 

 

50,860

 

Deposits at Cayman Islands office

 

 

 

 

 

 

 

 

683

 

 

 

683

 

Total

 

$

43,836

 

 

$

12,823

 

 

$

69,074

 

 

$

125,733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2020

 

 

 

Savings and interest-checking deposits

 

$

28,665

 

 

$

5,524

 

 

$

28,738

 

 

$

62,927

 

 

$

30,882

 

 

$

5,432

 

 

$

32,819

 

 

$

69,133

 

Time deposits

 

 

5,051

 

 

 

51

 

 

 

252

 

 

 

5,354

 

 

 

3,870

 

 

 

46

 

 

 

197

 

 

 

4,113

 

Noninterest-bearing deposits

 

 

6,570

 

 

 

5,369

 

 

 

30,558

 

 

 

42,497

 

 

 

7,165

 

 

 

6,442

 

 

 

33,297

 

 

 

46,904

 

Deposits at Cayman Islands office

 

 

 

 

 

 

 

 

1,017

 

 

 

1,017

 

 

 

 

 

 

 

 

 

826

 

 

 

826

 

Total

 

$

40,286

 

 

$

10,944

 

 

$

60,565

 

 

$

111,795

 

 

$

41,917

 

 

$

11,920

 

 

$

67,139

 

 

$

120,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-checking deposits

 

$

26,920

 

 

$

6,181

 

 

$

23,265

 

 

$

56,366

 

 

$

26,920

 

 

$

6,181

 

 

$

23,265

 

 

$

56,366

 

Time deposits

 

 

5,265

 

 

 

52

 

 

 

355

 

 

 

5,672

 

 

 

5,265

 

 

 

52

 

 

 

355

 

 

 

5,672

 

Noninterest-bearing deposits

 

 

5,661

 

 

 

5,080

 

 

 

21,715

 

 

 

32,456

 

 

 

5,661

 

 

 

5,080

 

 

 

21,715

 

 

 

32,456

 

Deposits at Cayman Islands office

 

 

 

 

 

 

 

 

1,672

 

 

 

1,672

 

 

 

 

 

 

 

 

 

1,672

 

 

 

1,672

 

Total

 

$

37,846

 

 

$

11,313

 

 

$

47,007

 

 

$

96,166

 

 

$

37,846

 

 

$

11,313

 

 

$

47,007

 

 

$

96,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-checking deposits

 

$

27,028

 

 

$

6,338

 

 

$

20,129

 

 

$

53,495

 

Time deposits

 

 

5,839

 

 

 

35

 

 

 

656

 

 

 

6,530

 

Noninterest-bearing deposits

 

 

5,416

 

 

 

4,139

 

 

 

20,544

 

 

 

30,099

 

Deposits at Cayman Islands office

 

 

 

 

 

 

 

 

1,247

 

 

 

1,247

 

Total

 

$

38,283

 

 

$

10,512

 

 

$

42,576

 

 

$

91,371

 

 

The Company also uses borrowings from banks, securities dealers, various Federal Home Loan Banks, the Federal Reserve Bank of New York and others as sources of funding.  Short-term borrowings represent borrowing arrangements that at the time they were entered into had a contractual maturity of one year or less. Average short-term borrowings totaled $63$62 million in the secondfirst quarter of 2020,2021, compared with $1.3 billion$58 million in the year-earlier quarter and $58$64 million in the initial 2020 quarter. In general, the higher short-term borrowings in the prior year period were entered into for liquidity management purposes.fourth quarter of 2020.

Long-term borrowings averaged $3.9 billion in the recent quarter, compared $6.2 billion in the two most recent quartersfirst quarter of 2020 and $8.3$5.3 billion in the secondfourth quarter of 2019.2020. Average balances of outstanding senior notes were $4.1$2.5 billion, $5.5$4.2 billion and $4.2$3.4 billion during the three months ended June 30, 2020, June 30, 2019 andMarch 31, 2021, March 31, 2020 and December 31, 2020, respectively. On January 7,In July 2020, M&T Bank the principal bank subsidiaryredeemed $750 million of M&T,fixed rate senior notes and in December  2020, redeemed $750$650 million of fixed rate senior notes that were due to mature on February 6, 2020.January 25, 2021.  In addition, M&T Bank redeemed $750in January 2021, $350 million of fixedvariable rate senior notes in July 2020 that were due to mature on August 17, 2020.matured.  Subordinated capital notes included in long-term borrowings averaged $828 million in the three-month period ended March 31, 2021 and $1.4 billion in each of the three-month periods ended June 30, 2020, June 30, 2019 and March 31, 2020 and December 31, 2020.  On March 1, 2021, M&T Bank redeemed $500 million of subordinated capital notes that were due to mature on December 1, 2021, and during December 2020, $409 million of subordinated capital notes matured. Junior subordinated debentures associated with trust preferred securities that were included in average long-term borrowings were $526$529 million, $523$525 million and $525$528 million during the secondfirst quarters of 2021 and 2020 and 2019 and the initialfinal 2020 quarter, respectively. Additional information regarding junior subordinated debentures is provided in note 45 of Notes to Financial Statements.  Long-term borrowings also included

The Company has utilized interest rate swap agreements to repurchase securities, which averaged $101 millionmodify the repricing characteristics of certain components of its loans and long-term debt.  As of March 31, 2021, interest rate swap agreements were used as fair

- 52 -


value hedges of approximately $1.65 billion of outstanding fixed rate long-term borrowings.  Additionally, interest rate swap agreements with a notional amount of $17.35 billion were used as cash flow hedges of interest payments associated with variable rate commercial real estate loans.  Further information on interest rate swap agreements is provided herein and in eachnote 10 of the first two quarters of 2020 and $373 million in the second quarter of 2019.  The repurchase agreement held at June 30, 2020 totaled $100 million and matured in July 2020.Notes to Financial Statements.  

Net interest income can be impacted by changesChanges 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.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 2.98%2.90% in the recent quarter, compared with 3.53%3.35% in the second quarter of 2019.initial 2020 quarter.  The yield on earning assets during the second quarterfirst three months of 20202021 was 3.38%3.08%, down 126110 basis points from 4.64%4.18% in the year-earliersimilar 2020 period, while the rate paid on interest-bearing liabilities declined 7165 basis points to .40%.18% in the recent quarter from 1.11%.83% in the year-earlier

- 59 -


period.  In the firstfourth quarter of 2020, the net interest spread was 3.35%also 2.90%, the yield on earning assets was 4.18%3.15% and the rate paid on interest-bearing liabilities was .83%.25%.The narrowing of the net interest spread in the two most recent quarterquarters as compared with the corresponding 2019 period and the initial quarter of 2020 period reflects the impact of the decreases in short-term interest rates initiated by the Federal Reserve during the second half of 2019 and in March 2020.  For the first six months of 2020, the net interest spread was 3.15%, down 45 basis points from 3.60% in the year-earlier period.  The yield on earning assets and the rate paid on interest-bearing liabilities for the first half of 2020 were 3.75% and .60%, respectively, compared with 4.68% and 1.08% respectively, in the initial six months of 2019.

Net interest-free funds consist largely of noninterest-bearing demand deposits and shareholders’ equity, partially offset by bank owned life insurance and non-earning assets, including goodwill and core deposit and other intangible assets.  Net interest-free funds averaged $47.9$55.6 billion in the secondfirst quarter of 2020,2021, compared with $36.7$38.2 billion in the year-earlier quarter and $38.2$52.5 billion in the initialfourth 2020 quarter.  The increase in average net interest-free funds in the two most recent quarterquarters as compared with the prior periodsinitial 2020 quarter reflects higher average balances of noninterest-bearing deposits. Those deposits averaged $42.5 billion, $30.1 billion and $32.5 billion in the quarters ended June 30, 2020, June 30, 2019 and March 31, 2020, respectively. The rise in such balances in the recent quarter as compared with the earlier periods was largely due to increased levels of deposits of commercial customers.  During the first six months of 2020 and 2019, average net interest-free funds aggregated $43.1 billion and $36.9 billion, respectively.  Shareholders’ equity averaged $16.0$16.3 billion during the three-month period ended June 30, 2020, $15.6March 31, 2021, $15.7 billion during the year-earlier period and $15.7$16.2 billion during the initial 2020 quarter.three-month period ended December 31, 2020.  Goodwill and core deposit and other intangible assets averaged $4.6 billion in each of the two most recent quarters and in the quarter ended June 30, 2019.noted herein. The cash surrender value of bank owned life insurance averaged $1.9 billion in the three-month period ended March 31, 2021 and $1.8 billion in each of the three-month periods ended June 30,March 31, 2020 June 30, 2019 and MarchDecember 31, 2020. 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 .15%.07% in the secondfirst quarter of 2021, compared with .30% and .10% in the first quarter of 2020 compared with .38% and .30% in the second quarter of 2019 and the firstfourth quarter of 2020, respectively. The reduced contribution of net interest-free funds to net interest margin in the two most recent quarters as compared with the secondfirst quarter of 20192020 reflects the lower rates on interest-bearing liabilities used to value net interest-free funds.  The contribution of net interest-free funds in the first half of 2020 and 2019 was .22% and .37%, 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 3.13%2.97% in the secondfirst quarter of 2020,2021, compared with 3.91%3.65% in the year-earlier period and 3.65%3.00% in the initialfourth quarter of 2020.  During the first six months of 2020 and 2019, the net interest margin was 3.37% and 3.97%, 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.

Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company has utilized interest rate swap agreements to modify the repricing characteristics of certain portions of its earning assets and interest-bearing liabilities.  Periodic settlement amounts arising from these agreements are reflected in either the yields on earning assets or the rates paid on interest-bearing liabilities.  The notional amount of interest rate swap agreements entered into for interest rate risk management purposes was $16.4$19.0 billion (excluding $40.9$18.7 billion of forward-starting swap agreements) at June 30, 2020, $17.8March 31, 2021, $16.4 billion (excluding $21.4$41.8 billion of forward-starting swap agreements) at June 30, 2019March 31, 2020 and $17.2$19.0 billion (excluding $40.4$32.1 billion of forward-starting swap agreements) at December 31, 2019.2020. 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. InterestAt each of March 31, 2021 and December 31, 2020, interest rate swap agreements with notional amounts of $13.35$17.35 billion that were in effect at each of June 30, 2020, June 30, 2019 and December 31, 2019 were serving as cash flow hedges of interest payments associated with variable rate commercial real estate loans.  At June 30, 2020, June 30, 2019 and Decemberloans, compared with $13.35 billion at March 31, 2019, interest2020.  Interest rate swap agreements with notional amounts of $1.65 billion at each of March 31, 2021 and December 31, 2020 and $3.05 billion $4.45 billion and $3.80 billion, respectively,at March 31, 2020 were serving as fair value hedges of fixed rate long-termlong-

- 53 -


term borrowings. The Company has entered into forward-starting interest rate swap agreements predominantly to extend the term of its interest rate swap agreements serving as cash flow hedges, and provide a hedge against changing interest rates on certain of its variable rate loans.

- 60 -


In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and changes in the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the corresponding gain or loss recognized in current earnings.  The difference between changes in the fair value of the interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded as an adjustment to the interest income or interest expense of the respective hedged item.  In a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings.  The ineffective portion of the derivative’s gain or loss on cash flow hedges is accounted for similar to that associated with fair value hedges.  The amounts of hedge ineffectiveness recognized during each of the quarters ended June 30,March 31, 2021, March 31, 2020 June 30, 2019 and MarchDecember 31, 2020 were not material to the Company’s consolidated results of operations.  Information regarding the fair value of interest rate swap agreements and hedge ineffectiveness is presented in note 10 of Notes to Financial Statements. Information regarding the effective portion of cash flow hedges is presented in note 9 of Notes to Financial Statements.  The changes in the fair values of the interest rate swap agreements and the hedged items primarily result from the effects of changing interest rates and spreads.  

The weighted-average rates to be received and paid under interest rate swap agreements currently in effect were 2.56%1.89% and .28%.17%, respectively, at June 30, 2020.March 31, 2021.  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 910 of Notes to Financial Statements.

INTEREST RATE SWAP AGREEMENTS

 

 

 

Three Months Ended June 30

.

 

2020

 

 

2019

 

 

 

 

Amount

 

 

Rate(a)

 

 

Amount

 

 

Rate(a)

 

 

 

 

(Dollars in thousands)

Increase (decrease) in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

69,153

 

 

 

.23

 

%

$

(4,551

)

 

 

(.02

)

%

Interest expense

 

 

(12,181

)

 

 

(.06

)

 

 

6,343

 

 

 

.04

 

 

Net interest income/margin

 

$

81,334

 

 

 

.26

 

%

$

(10,894

)

 

 

(.04

)

%

Average notional amount (c)

 

$

16,400,000

 

 

 

 

 

 

$

17,800,000

 

 

 

 

 

 

Rate received (b)

 

 

 

 

 

 

2.55

 

%

 

 

 

 

 

2.37

 

%

Rate paid (b)

 

 

 

 

 

.59

 

%

 

 

 

 

 

2.60

 

%

 

Six Months Ended June 30

 

 

 

Three Months Ended March 31

 

2020

 

 

2019

 

 

.

 

2021

 

 

2020

 

 

 

 

 

 

 

Rate(a)

 

 

Amount

 

 

Rate(a)

 

 

 

Amount

 

 

Rate(a)

 

 

Amount

 

 

Rate(a)

 

 

 

(Dollars in thousands)

 

 

 

(Dollars in thousands)

Increase (decrease) in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

101,194

 

 

 

.18

 

%

$

(11,176

)

 

 

(.02

)

%

 

$

82,044

 

 

 

.25

 

%

$

32,041

 

 

 

.12

 

%

Interest expense

 

$

(15,946

)

 

 

(.04

)

 

 

12,728

 

 

 

.04

 

 

 

 

(8,647

)

 

 

(.04

)

 

 

(3,765

)

 

 

(.02

)

 

Net interest income/margin

 

$

117,140

 

 

 

(.20

)

%

$

(23,904

)

 

 

(.05

)

%

 

$

90,691

 

 

 

.27

 

%

$

35,806

 

 

 

.13

 

%

Average notional amount (c)

 

$

16,525,275

 

 

 

 

 

 

$

15,245,580

 

 

 

 

 

 

 

$

18,822,222

 

 

 

 

 

 

$

16,650,549

 

 

 

 

 

 

Rate received (b)

 

 

 

 

 

 

2.53

 

%

 

 

 

 

 

2.33

 

%

 

 

 

 

 

 

2.14

 

%

 

 

 

 

 

2.51

 

%

Rate paid (b)

 

 

 

 

 

 

1.13

 

%

 

 

 

 

 

2.64

 

%

 

 

 

 

 

 

.21

 

%

 

 

 

 

 

1.66

 

%

(a)

Computed as an annualized percentage of average earning assets or interest-bearing liabilities.

(b)

Weighted-average rate paid or received on interest rate swap agreements in effect during the period.

(c)    

Excludes forward-starting interest rate swap agreements not in effect during the period.

- 61 -


In addition to interest rate swap agreements, the Company had entered into interest rate floor agreements that were accounted for in the trading account rather than as hedging instruments but, nevertheless, provided the Company with protection against the possibility of future declines in interest rates on earning assets.  At each of June 30, 2019 and December 31, 2019, outstanding notional amounts of such agreements totaled $15.6 billion. The interest rate floor agreements matured during the first quarter of 2020.

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. Core deposits represent the

The most significant source of funding for the Company andis core deposits, which are generated from a large base of consumer, corporate and institutional customers. That customer base has, over the past several years, become more geographically diverse as a result of expansion of the Company’s businesses. Nevertheless, the Company faces competition in offering products and services from a large array of financial market participants, including banks, thrifts, mutual funds, securities dealers and others.  The Company supplements funding provided through deposits

- 54 -


with various short-term and long-term wholesale borrowings, including overnight federal funds purchased, short-term advances from the FHLB of New York, brokered deposits, Cayman Islands office deposits and longer-term borrowings.borrowings.  M&T Bank has access to additional funding sources through borrowings from the FHLB of New York, lines of credit with the Federal Reserve Bank of New York, M&T Bank’s Bank Note Program, and other available borrowing facilities.  The Bank Note Program enables M&T Bank to offer unsecured senior and subordinated notes.  The Company has, from time to time, also issued subordinated capital notes and junior subordinated debentures associated with trust preferred securities to provide liquidity and enhance regulatory capital ratios.  The Company’s junior subordinated debentures associated with trust preferred securities and other subordinated capital notes are considered Tier 2 capital and are includable in total regulatory capital.  At June 30, 2020March 31, 2021 and December 31, 2019,2020, long-term borrowings aggregated $6.3$3.5 billion and $7.0$4.4 billion, respectively.

Short-term federal funds borrowings outstanding were $3.2 billion at June 30, 2019. There were no such borrowings outstanding at June 30, 2020 or December 31, 2019.  In general, those borrowings were unsecured, matured on the next business day and were entered into for liquidity management purposes.  While predominantly used to satisfy customer demand, Cayman Islands office deposits may also behave been used by some customers of the Company as an alternative to short-term borrowings.other deposit and investment products.  Cayman Islands office deposits totaled $868$642 million at June 30, 2020, $1.4March 31, 2021, $1.2 billion at June 30, 2019March 31, 2020 and $1.7 billion$652 million at December 31, 2019.2020. The Company has also benefited from the placement of brokered deposits.  The Company had brokered savings and interest-bearing checking deposit accounts which aggregated approximately $4.0$4.4 billion at June 30, 2020, $2.7March 31, 2021, $3.1 billion at June 30, 2019March 31, 2020 and $2.8$4.5 billion at December 31, 2019.2020.  Brokered time deposits were not a significant source of funding as of those dates.

The Company’s ability to obtain funding from these sources could be negatively impacted should the Company experience a substantial deterioration in its financial condition or its debt ratings, or should the availability of funding become restricted due to a disruption in the financial markets.  The Company attempts to quantify such impactcredit-event risk by performing stress testsmodeling scenarios that assessestimate the effect on liquidity impact resulting from a short-term ratings downgrade over various levels of internal and external stress factors. The liquiditygrading levels.  Such impact of such events 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.

- 62 -


Certain customers of the Company obtain financing through the issuance of variable rate demand bonds (“VRDBs”).  The VRDBs are generally enhanced by letters of credit provided by M&T Bank. M&T Bank oftentimes acts as remarketing agent for the VRDBs and, at its discretion, may from time-to-time own some of the VRDBs while such instruments are remarketed.  When this occurs, the VRDBs are classified as trading account assets in the Company’s consolidated balance sheet.  Nevertheless, M&T Bank is not contractually obligated to purchase the VRDBs.  The value of VRDBs in the Company’s trading account was not material at June 30, 2020March 31, 2021 or December 31, 2019.2020.  The total amounts of VRDBs outstanding backed by M&T Bank letters of credit were $861$725 million at June 30,each of March 31, 2021 and December 31, 2020, compared with $847$850 million at June 30, 2019 and $857 million at DecemberMarch 31, 2019.2020. 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 that 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 1213 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 bank subsidiaries, which are subject to various regulatory limitations.  Dividends from any bank subsidiary to M&T are limited by the amount of earnings of the subsidiary in the current year and the two preceding years.  For purposes of that test, at June 30, 2020March 31, 2021 approximately $634$969 million was available for payment of dividends to M&T from bank subsidiaries.  M&T also may obtain funding through long-term borrowings.  Outstanding senior notes of M&T at June 30, 2020March 31, 2021 and December 31, 20192020 were $790$779 million and $770$783 million, respectively.  Junior subordinated debentures of M&T associated with

- 55 -


trust preferred securities outstanding at June 30, 2020March 31, 2021 and December 31, 20192020 totaled $527$529 million and $525$528 million, respectively.  

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 funding needs.in the ordinary course of business.  Management does not anticipate engaging in any activities, either currently or in the long-term, for which adequate funding would not be available and would therefore result in a significant strain on liquidity at either M&T or its subsidiary banks.

Market risk is the risk of loss from adverse changes in the market prices and/or interest rates of the Company’s financial instruments.  The primary market risk the Company is exposed to is interest rate risk.  Interest rate risk arises from the Company’s core banking activities of lending and deposit-taking, because assets and liabilities reprice at different times and by different amounts as interest rates change.  As a result, net interest income earned by the Company is subject to the effects of changing interest rates.  The Company measures interest rate risk by calculating the variability of net interest income in future periods under various interest rate scenarios using projected balances for earning assets, interest-bearing liabilities and derivatives used to manage interest rate risk.  Management’s philosophy toward interest rate risk management is to limit the variability of net interest income.  The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and investment securities, and expected maturities of investment securities, loans and deposits.  Management uses a “value of equity” model to supplement the modeling technique described above.  Those supplemental analyses are based on discounted cash flows associated with on- and off-balance sheet financial instruments.  Such analyses are modeled to reflect changes in interest rates and provide management with a long-term interest rate risk metric.  The Company has entered into interest rate swap agreements to help manage exposure to interest rate risk.  At June 30, 2020,March 31, 2021, the aggregate notional amount of interest rate swap agreements entered into for risk management purposes that were currently in effect was $16.4$19.0 billion.  In addition, the Company has entered into $40.9$18.7 billion of forward-starting interest rate swap agreements.

- 63 -


The Company’s Asset-Liability Committee, which includes members of senior management, monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a computer model that forecasts net interest income under different interest rate scenarios.  In modeling changing interest rates, the Company considers different yield curve shapes that consider both parallel (that is, simultaneous changes in interest rates at each point on the yield curve) and non-parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve.  In utilizing the model, market-implied forward interest rates over the subsequent twelve months are generally used to determine a base interest rate scenario for the net interest income simulation.  That calculated base net interest income is then compared to the income calculated under the varying interest rate scenarios.  The model considers the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the 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 June 30, 2020March 31, 2021 and December 31, 20192020 displays the estimated impact on net interest income in the base scenario described above resulting from parallel changes in interest rates across repricing categories during the first modeling year.

- 56 -


SENSITIVITY OF NET INTEREST INCOME

TO CHANGES IN INTEREST RATES

 

Calculated Increase (Decrease)

in Projected Net Interest Income

 

 

 

Calculated Increase (Decrease)

in Projected Net Interest Income

 

 

Changes in interest rates

 

June 30, 2020

 

 

December 31, 2019

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(In thousands)

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

+200 basis points

 

$

104,628

 

 

 

45,345

 

 

 

$

355,300

 

 

 

324,684

 

 

+100 basis points

 

 

68,496

 

 

 

35,838

 

 

 

 

198,399

 

 

 

182,661

 

 

-100 basis points

 

 

(45,099

)

 

 

(94,616

)

 

 

 

(73,650

)

 

 

(61,792

)

 

The Company utilized many assumptions to calculate the impact that changes in interest rates may have on net interest income.  The more significant of those assumptions included the rate of prepayments of mortgage-related assets, cash flows from derivative and other financial instruments held for non-trading purposes, loan and deposit volumes and pricing, and deposit maturities.  In the scenarios presented, the Company also assumed gradual changes in interest rates during a twelve-month period as compared with the base scenario.  In the declining rate scenario, the rate changes may be limited to lesser amounts such that interest rates remain at or above zero on all points of the yield curve.  The assumptions used in interest rate sensitivity modeling are inherently uncertain and, as a result, the Company cannot precisely predict the impact of changes in interest rates on net interest income.  Actual results may differ significantly from those presented due to the timing, magnitude and frequency of changes in interest rates and changes in market conditions and interest rate differentials (spreads) between maturity/repricing categories, as well as any actions, such as those previously described, which management may take to counter such changes.

Changes in fair value of the Company’s financial instruments can also result from a lack of trading activity for similar instruments in the financial markets.  That impact is most notable on the values assigned to some of the Company’s investment securities.  Information about the fair valuation of investment securities is presented in notes 23 and 1112 of Notes to Financial Statements.

The Company engages in limited trading account activities to meet the financial needs of customers and to fund the Company’s obligations under certain deferred compensation plans.  Financial instruments utilized for trading account activities consist predominantly of interest rate contracts, such as interest rate swap agreements, and forward and futures contracts related to foreign currencies.  The Company generally mitigates the foreign currency and interest rate risk associated with trading account activities by entering into offsetting trading positions that are also included in the trading account.  The fair values of trading account positions associated with interest rate contracts and foreign currency and other option and futures contracts are presented in note 910 of Notes to Financial Statements.  The amounts

- 64 -


of gross and net trading account positions, as well as the type of trading account activities conducted by the Company, are subject to a well-defined series of potential loss exposure limits established by management and approved by M&T’s Board of Directors.  However, as with any non-government guaranteed financial instrument, the Company is exposed to credit risk associated with counterparties to the Company’s trading account activities.

The notional amounts of interest rate contracts entered into for trading account purposes totaled $37.1$36.2 billion at June 30, 2020, $44.4March 31, 2021, $36.7 billion at June 30, 2019March 31, 2020 and $48.6$37.8 billion at December 31, 2019.2020. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes were $1.0 billion$910 million at June 30, 2020,March 31, 2021, compared with $949$928 million at June 30, 2019March 31, 2020 and $1.2 billion$776 million at December 31, 2019.2020.  Although the notional amounts of these contracts are not recorded in the consolidated balance sheet, the unsettled fair values of all financial instruments used for trading account activities are recorded in the consolidated balance sheet.  The fair values of all trading account assets and liabilities recognized on the balance sheet were $1.3 billion$687 million and $138$95 million, respectively, at June 30, 2020March 31, 2021 and $470 million$1.1 billion and $80$117 million, respectively, at December 31, 2019.2020.  The fair value asset and liability amounts at June 30,March 31, 2021 have been reduced by contractual settlements of $55 million and $502 million, respectively, and at December 31, 2020 have been reduced by contractual settlements of $3$6 million and $1.0 billion, respectively, and at December 31, 2019 have been reduced by contractual settlements of $43 million and $281$806 million, respectively. The higherlower balance of trading account assets at June 30, 2020March 31, 2021 as compared with December 31, 20192020 was largely the result of increaseddecreased values associated with interest rate swap agreements entered into with commercial customers that are not subject to periodic variation margin settlement

- 57 -


payments. Included in trading account assets were assets related to deferred compensation plans aggregating $20 million at June 30,March 31, 2021, compared with $19 million March 31, 2020 and $21 million at each of June 30, 2019 and December 31, 2019.2020.  Changes in the fair values of such assets are recorded as “trading account and foreign exchange gains” in the consolidated statement of income.  Included in “other liabilities” in the consolidated balance sheet at June 30,each of March 31, 2021 and December 31, 2020 were $23$24 million of liabilities related to deferred compensation plans, compared with $24$22 million at June 30, 2019 and $25 million at DecemberMarch 31, 2019.2020.  Changes in the balances of such liabilities due to the valuation of allocated investment options to which the liabilities are indexed are recorded in “other costs of operations” in the consolidated statement of income.  Also included in trading account assets were investments in mutual funds and other assets that the Company was required to hold under terms of certain non-qualified supplemental retirement and other benefit plans that were assumed by the Company in various acquisitions.  Those assets totaled $29 million at June 30,each of March 31, 2021, March 31, 2020 $27 million at June 30, 2019 and $28 million at December 31, 2019.2020.

Given the Company’s policies, limits and positions, management believes that the potential loss exposure to the Company resulting from market risk associated with trading account activities was not material, however, as previously noted, the Company is exposed to credit risk associated with counterparties to transactions related to the Company’s trading account activities.  Additional information about the Company’s use of derivative financial instruments in its trading account activities is included in note 910 of Notes to Financial Statements.

Provision for Credit Losses

As described in note 3 of Notes to Financial Statements, effective January 1, 2020 the Company adopted amended accounting guidance for the measurement of credit losses on financial instruments.  That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount.  The new guidance replaces the previous incurred loss model for determining the allowance for credit losses.  The adoption of the amended guidance resulted in a $132 million increase in the allowance for credit losses at January 1, 2020.  Increases in the allowance for residential real estate loans and consumer loans, reflecting the longer-dated maturities of such portfolios, were offset somewhat by net decreases in the allowance for commercial loans resulting from lower loss estimates on demand loan products due to the assumption that the Company could require full repayment of such loans in the near-term.  The following table depicts the changes in the allowance for credit losses by loan category resulting from the adoption of the amended guidance.

- 65 -


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

December 31, 2019

 

 

Impact of Adoption

Increase (Decrease)

 

 

Balance

January 1, 2020

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

$

366,094

 

 

$

(61,474

)

 

$

304,620

 

Commercial real estate

 

 

322,201

 

 

 

23,656

 

 

 

345,857

 

Residential real estate

 

 

56,033

 

 

 

53,896

 

 

 

109,929

 

Consumer

 

 

229,118

 

 

 

194,004

 

 

 

423,122

 

Unallocated

 

 

77,625

 

 

 

(77,625

)

 

 

 

Total

 

$

1,051,071

 

 

$

132,457

 

 

$

1,183,528

 

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

A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management.  TheA provision for credit losses recapture was recorded in the secondfirst quarter of 2020 was $3252021 for $25 million, compared with $55provisions of $250 million in the year-earlier quarter and $250$75 million in the initialfourth quarter of 2020. As noted earlier, the significant increasesThe provision recapture in the provisionrecent quarter reflects improvements in the two most recent quartersmacroeconomic forecasts at March 31, 2021 as compared with previous forecasts.  Nevertheless, the second quarterimpact of 2019 followthose improvements was cautiously evaluated given the adoptionsomewhat uneven and incomplete recovery evident in the economy through the recent quarter-end.  The level of new accounting guidancethe provisions in the 2020 quarters reflected projections of expected credit losses that were based on January 1, 2020 andeconomic forecasts at those dates. The Company’s estimates of expected losses reflect updated economic assumptions and projections that considered the deteriorating macroeconomic outlook resulting fromongoing impacts of the COVID-19 pandemic ason economic activity, concerns about commercial real estate values in the hospitality and office building sectors, and the ultimate collectability of  the end of each of the first two quarters of 2020.real estate loans where borrowers requested repayment forbearance. Net charge-offs of loans were $71$75 millionin the recent quarter, compared with $44 million and $49 million in the second quarter of 2019 and the first quarter of 2020 respectively.and $97 million in the fourth quarter of 2020.  Net charge-offs as an annualized percentage of average loans and leases were .29% .31%in the secondfirst quarter of 2020, .20%2021, .22% in the year-earlier quarter and .22%.39% in the initial 2020 quarter.  Excluding loans associated with the PPP, which are guaranteed by the SBA, net charge-offs for the recentfinal quarter were .31% of average loans outstanding.  Net charge-offs for the six-month periods ended June 30, 2020 and 2019 were $120 million and $67 million, respectively, representing an annualized .26% and .15%, repectively, of average loans and leases.2020. A summary of net charge-offs by loan type is presented in the table that follows.

NET CHARGE-OFFS (RECOVERIES)

BY LOAN/LEASE TYPE

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

 

Second Quarter

 

 

Year-

to-date

 

 

First Quarter 2021

 

 

First

Quarter

2020

 

 

Fourth

Quarter

2020

 

 

(In thousands)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

$

13,122

 

 

 

29,235

 

 

 

42,357

 

 

$

4,434

 

 

 

13,122

 

 

 

67,002

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

834

 

 

 

16,458

 

 

 

17,292

 

 

 

54,092

 

 

 

834

 

 

 

12,105

 

Residential

 

 

3,428

 

 

 

(279

)

 

 

3,149

 

 

 

366

 

 

 

3,428

 

 

 

(538

)

Consumer

 

 

31,778

 

 

 

25,716

 

 

 

57,494

 

 

 

16,289

 

 

 

31,778

 

 

 

18,549

 

 

$

49,162

 

 

 

71,130

 

 

 

120,292

 

 

$

75,181

 

 

 

49,162

 

 

 

97,118

 

- 66 -


 

 

2019

 

 

 

First Quarter

 

 

Second Quarter

 

 

Year-

to-date

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, leasing, etc.

 

$

706

 

 

 

10,102

 

 

 

10,808

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

(543

)

 

 

9,200

 

 

 

8,657

 

Residential

 

 

1,542

 

 

 

1,749

 

 

 

3,291

 

Consumer

 

 

20,402

 

 

 

23,419

 

 

 

43,821

 

 

 

$

22,107

 

 

 

44,470

 

 

 

66,577

 

The higher levels of net charge-offs of commercial loans in the fourth quarter of 2020 and commercial real estate loans in the first quarter of 2021 reflect the impact of the COVID-19 pandemic on borrowers’ abilities to repay loans associated with the retail, office building and hospitality sectors.  Included in net charge-offs of consumer loans were net charge-offs of: automobile loans of $9$2 million in the recent quarter, $6 million in the second quarter of 2019 and $7 million in the first quarter of

- 58 -


2020 and $4 million in the final quarter of 2020; recreational finance loans of $5$7 million in the secondfirst quarter of 2020, $52021, $9 million in the year-earlier quarter and $9$8 million in the initialfourth 2020 quarter; and home equity loans and lines of credit secured by one-to-four family residential properties of $2 million in last year’s first quarter and less than $1 million in the recentfinal 2020 quarter, compared with net recoveries of less than $1 million in last year’s second quarter and $2 million in the first quarter of 2020.initial 2021 quarter.

Nonaccrual loans aggregated $1.16$1.96 billion or 1.18%1.97% of total loans and leases outstanding at June 30, 2020,March 31, 2021, compared with $1.06 billion or 1.13% at March 31, 2020 and $1.13$1.89 billion or 1.25%1.92% at January 1,December 31, 2020. The adoptionhigher level of nonaccrual loans at the past two quarter-ends as compared with March 31, 2020 reflects the continuing impact of the new accounting guidance resultedpandemic on borrowers’ ability to make contractual payments on their loans, most notably loans in an increase in nonaccrual loans on January 1, 2020 of approximately $171 million.  Previously such loans would have been classified as either purchased impaired loans or acquired accruing loans past due 90 days or more. Loans classified as nonaccrual at June 30, 2019 and December 31, 2019 totaled $865 million and $963 million, respectively, or .96% and 1.06% of total loans outstanding.the hospitality sector.

Accruing loans past due 90 days or more were $536 million$1.08 billion or .55%1.09% of loans and leases at June 30, 2020,March 31, 2021, compared with $530 million or .56% at March 31, 2020. Accruing loans past due 90 days or more (excluding loans acquired at a discount) were $3492020 and $859 million or .39% of total loans outstanding at June 30, 2019 and $519 million or  .57%.87% of outstanding loans at December 31, 2019.2020.  Accruing loans past due 90 days or more included loans guaranteed by government-related entities of $454 million, $320 million, $480$1.04 billion, $464 million and $464$798 million at June 30,March 31, 2021, March 31, 2020 June 30, 2019,and December 31, 2019 and March 31, 2020, respectively.  Guaranteed loans included one-to-four family residential mortgage loans serviced by the Company that were repurchasedpurchased 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 repurchasedthose purchased loans that are guaranteed by government-related entities totaled $428 million $1.01 billionat June 30, 2020, $300March 31, 2021, $439 million a year earlier $452and $764 million at December 31, 2019 and $439 million at March 31, 2020.  The increase in such loans since June 30, 2019 resulted largely from loans associated with servicing the Company added in 2019. The remaining accruing loans past due 90 days or more not guaranteed by government-related entities were loans considered to be with creditworthy borrowers that were in the process of collection or renewal. In addition to the past due loans, the Company also has $2.4 billion of government-guaranteed residential mortgage loans that are not considered delinquent because the borrower has requested and received a COVID-19 related payment deferral. In general, those loans were also purchased to reduce associated servicing costs as described above and also remain covered by the insurance or guarantee of the applicable government-related entity, but are not considered to be past due in accordance with the accounting treatment afforded under the CARES Act and related regulatory and financial accounting guidance as described below and in note 1 of Notes to Financial Statements in M&T’s 2020 Annual Report.

Loans that were 30-89 days past due were $618$692 million at June 30, 2020,March 31, 2021, compared with $1.2 billion at December 31, 2019 and $1.4 billion at March 31, 2020 and $662 million at December 31, 2020.  The lower levellevels of such past due loans at the recent quarter end wasMarch 31, 2021 and December 31, 2020 were a result of loan paydowns,payments received, many of which resulted in return to current status, and migrations of loans to nonaccrual status.  COVID-19 related payment deferral modifications which largely occurred in the second quarter of 2020, resulted in such loans being classified as current in accordance with regulatory guidance and, as a result, did not contribute in incremental additions to loans categorized as 30-89 days past due.

Prior to the adoption of the new accounting standard on January 1, 2020, the Company reported purchased impaired loans. Those loans were impaired at the date of acquisition, were recorded at estimated fair value and were generally delinquent in payments, but, in accordance with GAAP, the Company continued to accrue interest income on such loans based on the estimated expected cash flows associated with the loans.  The amended accounting guidance requires estimated credit losses on loans acquired at a discount to now be reflected in the allowance for credit losses and effective with the adoption of the guidance, the Company’s nonaccrual loan policy now applies to such loans.  The

- 67 -


carrying amount of purchased impaired loans was $263 million at June 30, 2019 and $228 million at December 31, 2019.

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

- 59 -


portfolios.  To the extent that such modifications met the criteria previously described, such modifications have not been classified as delinquent or as troubled debt restructurings. A summary of loans for which COVID-19 forbearances have been granted and which are not considered impaired or past due is presented herein and in note 4 of Notes to Financial Statements.

The Company also modified the terms of select loans in an effort to assist borrowers that were not related to the COVID-19 pandemic. If the borrower was experiencing financial difficulty and a concession was granted, the Company considered such modifications as troubled debt restructurings.  Loan modifications included such actions as the extension of loan maturity dates and the lowering of interest rates and monthly payments.  The objective of the modifications was to increase loan repayments by customers and thereby reduce net charge-offs. 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 34 of Notes to Financial Statements.

Residential real estate loans modified under specified loss mitigation programs prescribed by government guarantors that were not related to the COVID-19 pandemic have not been included in renegotiated loans because the loan guarantee remains in full force and, accordingly, the Company has not granted a concession with respect to the ultimate collection of the original loan balance. Such loans aggregated $188$417 million, $199$176 million and $203$342 million at June 30,March 31, 2021, March 31, 2020 June 30, 2019 and December 31, 2019,2020, respectively.

Commercial loans and leases classified as nonaccrual totaled $285$295 million, $224 million, $347$287 million and $287$307 million at June 30, 2020, June 30, 2019, DecemberMarch 31, 2019, and2021, March 31, 2020, respectively.  The decline in such loans fromand December 31, 2019 to March 31, 2020, predominantly resulted from payments received from borrowers.respectively. Commercial real estate loans in nonaccrual status aggregated $260$952 million, $242 million, $195$227 million and $227$891 million at June 30, 2020, June 30, 2019, DecemberMarch 31, 2019, and2021, March 31, 2020 and December 31, 2020, respectively.The increases in commercial real estate loans in nonaccrual status at the two most recent quarter-ends as compared with March 31, 2020 were largely due to the addition of $530 million of hotel loans in the second half of 2020.

Nonaccrual residential real estate loans totaled $426$529 million at June 30, 2020,March 31, 2021, compared with $298 million at June 30, 2019, $319 million at December 31, 2019 and $413 million at March 31, 2020, and $513 million at December 31, 2020. The increaseincreases at the end of the first two quarters of 2020most recent quarter-ends as compared with the prior year dates isyear-earlier date were largely reflective of the impacteffect of the adoption of the amended accounting guidance as noted earlier.recent economic conditions on borrowers. Included in residential real estate loans classified as nonaccrual were limited documentation first mortgage loans of $143 million at March 31, 2021, compared with $119 million at each of June 30, 2020 and March 31, 2020 compared with $88 million at June 30, 2019 and $83$147 million at December 31, 2019.2020.  Limited documentation first mortgage loans represent loans secured by residential real estate that at origination typically included some form of limited borrower documentation requirements as compared with more traditional loans. The Company no longer originates limited documentation loans.  Residential real estate loans past due 90 days or more and accruing interest (excluding loans acquiredaggregated $1.04 billion at a discount at the 2019 dates) aggregated $479 million at June 30, 2020,March 31, 2021, compared with $322 million at June 30, 2019, $487 million at December 31, 2019 and $474 million at March 31, 2020, and $793 million at December 31, 2020. A substantial portion of suchThose amounts related to repurchased government-guaranteed loans including theas previously noted

- 68 -


repurchases of loans associated with servicing that the Company added in 2019. Given the COVID-19 modifications, the Company expects that repurchases of loans associated with servicing could increase in the coming months of 2020.noted. Information about the location of nonaccrual and charged-off residential real estate loans as of and for the quarter ended June 30, 2020March 31, 2021 is presented in the accompanying table.

Nonaccrual consumer loans were $187$182 million at June 30, 2020,March 31, 2021, compared with $101 million at June 30, 2019, $102 million at December 31, 2019 and $135 million at March 31, 2020 and $183 million at December 31, 2020. Included in nonaccrual consumer loans at June 30,March 31, 2021, March 31, 2020 June 30, 2019,and December 31, 2019 and March 31, 2020 were: automobile loans of $43$38 million, $20 million, $21$19 million, and $19$39 million, respectively; recreational finance loans of $24$27 million, $11 million, $14$13 million, and $13$26 million,  respectively; and outstanding balances of home equity loans and lines of credit of $77 million, $67$79 million, $63 million, and $63$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 June 30, 2020March 31, 2021 is presented in the accompanying table.

Information about past due and nonaccrual loans as of June 30, 2020March 31, 2021 and December 31, 20192020 is also included in note 34 of Notes to Financial Statements.

- 6960 -


 

SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

June 30, 2020

 

 

June 30, 2020

 

 

March 31, 2021

 

 

 

March 31, 2021

 

 

 

 

 

 

Nonaccrual

 

 

Net Charge-offs (Recoveries)

 

 

 

 

 

 

Nonaccrual

 

 

 

Net Charge-offs (Recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

Average

 

 

Outstanding

 

 

 

 

 

 

Outstanding

 

 

 

 

 

 

Outstanding

 

 

Outstanding

 

 

 

 

 

 

Outstanding

 

 

 

 

 

 

Outstanding

 

 

Balances

 

 

Balances

 

 

Balances

 

 

Balances

 

 

Balances

 

 

Balances

 

 

Balances

 

 

Balances

 

 

Balances

 

 

Balances

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

Residential mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

$

4,776,913

 

 

$

110,673

 

 

 

2.32

%

 

$

(654

)

 

 

(.06

%)

 

$

5,200,203

 

 

$

141,164

 

 

 

2.71

%

 

$

479

 

 

 

.04

%

Pennsylvania

 

 

1,060,742

 

 

 

15,243

 

 

 

1.44

 

 

 

(393

)

 

 

(.15

)

 

 

1,086,503

 

 

 

14,167

 

 

 

1.30

 

 

 

37

 

 

 

.01

 

Maryland

 

 

1,227,110

 

 

 

14,555

 

 

 

1.19

 

 

 

4,017

 

 

 

1.37

 

 

 

1,431,249

 

 

 

18,677

 

 

 

1.30

 

 

 

166

 

 

 

.05

 

New Jersey

 

 

2,861,564

 

 

 

78,987

 

 

 

2.76

 

 

 

(2,561

)

 

 

(.35

)

 

 

2,693,751

 

 

 

98,043

 

 

 

3.64

 

 

 

(105

)

 

 

(.02

)

Other Mid-Atlantic (a)

 

 

1,105,043

 

 

 

12,860

 

 

 

1.16

 

 

 

(45

)

 

 

(.02

)

 

 

1,231,129

 

 

 

20,748

 

 

 

1.69

 

 

 

30

 

 

 

.01

 

Other

 

 

2,632,946

 

 

 

71,710

 

 

 

2.72

 

 

 

(153

)

 

 

(.02

)

 

 

4,100,034

 

 

 

92,329

 

 

 

2.25

 

 

 

117

 

 

 

.01

 

Total

 

$

13,664,318

 

 

$

304,028

 

 

 

2.22

%

 

$

211

 

 

 

.01

%

 

$

15,742,869

 

 

$

385,128

 

 

 

2.45

%

 

$

724

 

 

 

.02

%

Residential construction loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

$

27,786

 

 

$

706

 

 

 

2.54

%

 

$

 

 

 

%

 

$

20,716

 

 

$

146

 

 

 

.70

%

 

$

 

 

 

%

Pennsylvania

 

 

6,674

 

 

 

240

 

 

 

3.60

 

 

 

 

 

 

 

 

 

7,885

 

 

 

234

 

 

 

2.97

 

 

 

 

 

 

 

Maryland

 

 

9,413

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,865

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

 

14,938

 

 

 

537

 

 

 

3.59

 

 

 

19

 

 

 

.52

 

 

 

12,259

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Mid-Atlantic (a)

 

 

22,530

 

 

 

1,367

 

 

 

6.07

 

 

 

 

 

 

 

 

 

18,023

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

5,675

 

 

 

29

 

 

 

.51

 

 

 

 

 

 

 

 

 

5,522

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

87,016

 

 

$

2,879

 

 

 

3.31

%

 

$

19

 

 

 

.09

%

 

$

75,270

 

 

$

380

 

 

 

.50

%

 

$

 

 

 

%

Limited documentation first mortgages:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

$

841,038

 

 

$

50,644

 

 

 

6.02

%

 

$

(229

)

 

 

(.11

%)

 

$

700,474

 

 

$

62,940

 

 

 

8.99

%

 

$

3

 

 

 

%

Pennsylvania

 

 

38,026

 

 

 

5,697

 

 

 

14.98

 

 

 

(21

)

 

 

(.21

)

 

 

30,707

 

 

 

5,351

 

 

 

17.43

 

 

 

21

 

 

 

.26

 

Maryland

 

 

22,886

 

 

 

1,546

 

 

 

6.76

 

 

 

(26

)

 

 

(.46

)

 

 

17,787

 

 

 

2,606

 

 

 

14.65

 

 

 

 

 

 

 

New Jersey

 

 

685,109

 

 

 

37,259

 

 

 

5.44

 

 

 

(12

)

 

 

(.01

)

 

 

563,583

 

 

 

46,384

 

 

 

8.23

 

 

 

 

 

 

 

Other Mid-Atlantic (a)

 

 

19,124

 

 

 

1,212

 

 

 

6.34

 

 

 

(114

)

 

 

(2.33

)

 

 

16,025

 

 

 

1,522

 

 

 

9.50

 

 

 

(1

)

 

 

(.02

)

Other

 

 

253,945

 

 

 

22,337

 

 

 

8.80

 

 

 

(107

)

 

 

(.16

)

 

 

202,968

 

 

 

24,266

 

 

 

11.96

 

 

 

(381

)

 

 

(.72

)

Total

 

$

1,860,128

 

 

$

118,695

 

 

 

6.38

%

 

$

(509

)

 

 

(.11

%)

 

$

1,531,544

 

 

$

143,069

 

 

 

9.34

%

 

$

(358

)

 

 

(.09

%)

First lien home equity loans and lines of credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

$

1,061,036

 

 

$

17,995

 

 

 

1.70

%

 

$

115

 

 

 

.04

%

 

$

975,698

 

 

$

17,912

 

 

 

1.84

%

 

$

124

 

 

 

.05

%

Pennsylvania

 

 

643,239

 

 

 

9,788

 

 

 

1.52

 

 

 

88

 

 

 

.05

 

 

 

593,748

 

 

 

10,203

 

 

 

1.72

 

 

 

200

 

 

 

.13

 

Maryland

 

 

526,867

 

 

 

8,315

 

 

 

1.58

 

 

 

25

 

 

 

.02

 

 

 

477,952

 

 

 

11,422

 

 

 

2.39

 

 

 

274

 

 

 

.23

 

New Jersey

 

 

70,075

 

 

 

1,025

 

 

 

1.46

 

 

 

(2

)

 

 

(.01

)

 

 

72,202

 

 

 

1,360

 

 

 

1.88

 

 

 

(6

)

 

 

(.03

)

Other Mid-Atlantic (a)

 

 

181,222

 

 

 

2,395

 

 

 

1.32

 

 

 

1

 

 

 

 

 

 

166,160

 

 

 

2,778

 

 

 

1.67

 

 

 

8

 

 

 

.02

 

Other

 

 

33,233

 

 

 

1,587

 

 

 

4.78

 

 

 

(1

)

 

 

(.01

)

 

 

30,766

 

 

 

1,222

 

 

 

3.97

 

 

 

50

 

 

 

.68

 

Total

 

$

2,515,672

 

 

$

41,105

 

 

 

1.63

%

 

$

226

 

 

 

.04

%

 

$

2,316,526

 

 

$

44,897

 

 

 

1.94

%

 

$

650

 

 

 

.11

%

Junior lien home equity loans and lines of credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

$

634,113

 

 

$

15,359

 

 

 

2.42

%

 

$

(89

)

 

 

(.06

%)

 

$

577,053

 

 

$

15,194

 

 

 

2.63

%

 

$

46

 

 

 

.03

%

Pennsylvania

 

 

232,241

 

 

 

3,351

 

 

 

1.44

 

 

 

(189

)

 

 

(.32

)

 

 

204,839

 

 

 

2,550

 

 

 

1.24

 

 

 

(115

)

 

 

(.22

)

Maryland

 

 

479,329

 

 

 

10,378

 

 

 

2.17

 

 

 

(483

)

 

 

(.39

)

 

 

398,677

 

 

 

10,053

 

 

 

2.52

 

 

 

(86

)

 

 

(.08

)

New Jersey

 

 

94,544

 

 

 

1,329

 

 

 

1.41

 

 

 

27

 

 

 

.11

 

 

 

93,556

 

 

 

1,086

 

 

 

1.16

 

 

 

(1,168

)

 

 

(5.12

)

Other Mid-Atlantic (a)

 

 

217,326

 

 

 

4,044

 

 

 

1.86

 

 

 

173

 

 

 

.31

 

 

 

180,941

 

 

 

4,276

 

 

 

2.36

 

 

 

(43

)

 

 

(.09

)

Other

 

 

40,321

 

 

 

1,282

 

 

 

3.18

 

 

 

211

 

 

 

2.08

 

 

 

40,093

 

 

 

945

 

 

 

2.36

 

 

 

(94

)

 

 

(.93

)

Total

 

$

1,697,874

 

 

$

35,743

 

 

 

2.11

%

 

$

(350

)

 

 

(.08

%)

 

$

1,495,159

 

 

$

34,104

 

 

 

2.28

%

 

$

(1,460

)

 

 

(.39

%)

Limited documentation junior lien:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

$

562

 

 

$

55

 

 

 

9.79

%

 

$

(2

)

 

 

(1.06

%)

 

$

407

 

 

$

21

 

 

 

5.16

%

 

$

(2

)

 

 

(1.77

%)

Pennsylvania

 

 

202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

156

 

 

 

24

 

 

 

15.38

 

 

 

10

 

 

 

22.56

 

Maryland

 

 

1,064

 

 

 

25

 

 

 

2.35

 

 

 

 

 

 

 

 

 

803

 

 

 

25

 

 

 

3.11

 

 

 

(1

)

 

 

(.41

)

New Jersey

 

 

121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Mid-Atlantic (a)

 

 

532

 

 

 

32

 

 

 

6.02

 

 

 

 

 

 

 

 

 

477

 

 

 

32

 

 

 

6.71

 

 

 

 

 

 

 

Other

 

 

2,795

 

 

 

134

 

 

 

4.79

 

 

 

(1

)

 

 

(.08

)

 

 

2,157

 

 

 

85

 

 

 

3.94

 

 

 

8

 

 

 

1.43

 

Total

 

$

5,276

 

 

$

246

 

 

 

4.66

%

 

$

(3

)

 

 

(.16

%)

 

$

4,118

 

 

$

187

 

 

 

4.54

%

 

$

15

 

 

 

1.46

%

(a)Includes Delaware, Virginia, West Virginia and the District of Columbia.

- 7061 -


 

Real estate and other foreclosed assets totaled $67$30 million at June 30, 2020,March 31, 2021, compared with $73 million at June 30, 2019, $86 million at December 31, 2019 and $84 million at March 31, 2020 and $35 million at December 31, 2020.  The decline from March 31, 2020 is largely reflective of foreclosure moratoriums imposed by government authorities in numerous jurisdictions. Net gains or losses associated with real estate and other foreclosed assets were not material during the three-months ended June 30, 2020, June 30, 2019 or March 31, 2019.2021, March 31, 2020 and December 31, 2020. At June 30, 2020,March 31, 2021, the Company’s holdings of residential real estate-related properties comprised approximately 88%81% of foreclosed assets. During the COVID-19 pandemic, government authorities have restricted the ability of mortgage servicers to initiate foreclosure procedures.

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

NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA

 

 

2020 Quarters

 

 

2019 Quarters

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020 Quarters

 

 

Second

 

 

First

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

Quarter

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

 

 

(Dollars in thousands)

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans

 

$

1,156,650

 

 

 

1,061,748

 

 

 

963,112

 

 

 

1,005,249

 

 

 

865,384

 

 

$

1,957,106

 

 

 

1,893,299

 

 

 

1,239,972

 

 

 

1,156,650

 

 

 

1,061,748

 

Real estate and other foreclosed assets

 

 

66,763

 

 

 

83,605

 

 

 

85,646

 

 

 

79,735

 

 

 

72,907

 

 

 

29,797

 

 

 

34,668

 

 

 

49,872

 

 

 

66,763

 

 

 

83,605

 

Total nonperforming assets

 

$

1,223,413

 

 

 

1,145,353

 

 

 

1,048,758

 

 

 

1,084,984

 

 

 

938,291

 

 

$

1,986,903

 

 

 

1,927,967

 

 

 

1,289,844

 

 

 

1,223,413

 

 

 

1,145,353

 

Accruing loans past due 90 days or more(a)

 

$

535,755

 

 

 

530,317

 

 

 

518,728

 

 

 

461,162

 

 

 

348,725

 

 

$

1,084,553

 

 

 

859,208

 

 

 

527,258

 

 

 

535,755

 

 

 

530,317

 

Government guaranteed loans included in totals above:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans

 

$

51,165

 

 

 

50,561

 

 

 

50,891

 

 

 

43,144

 

 

 

36,765

 

 

$

51,668

 

 

 

48,820

 

 

 

45,975

 

 

 

51,165

 

 

 

50,561

 

Accruing loans past due 90 days or more

 

 

454,269

 

 

 

464,243

 

 

 

479,829

 

 

 

434,132

 

 

 

320,305

 

 

 

1,044,599

 

 

 

798,121

 

 

 

505,446

 

 

 

454,269

 

 

 

464,243

 

Renegotiated loans

 

$

234,768

 

 

 

232,439

 

 

 

234,424

 

 

 

240,781

 

 

 

254,332

 

 

$

242,121

 

 

 

238,994

 

 

 

242,581

 

 

 

234,768

 

 

 

232,439

 

Acquired accruing loans past due 90 days or more(b)

 

N/A

 

 

N/A

 

 

 

39,632

 

 

 

40,733

 

 

 

43,079

 

Purchased impaired loans(c):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding customer balance

 

N/A

 

 

N/A

 

 

 

415,413

 

 

 

453,382

 

 

 

473,834

 

Carrying amount

 

N/A

 

 

N/A

 

 

 

227,545

 

 

 

253,496

 

 

 

263,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans to total loans and leases, net of

unearned discount

 

 

1.18

%

 

 

1.13

%

 

 

1.06

%

 

 

1.12

%

 

 

.96

%

 

 

1.97

%

 

 

1.92

%

 

 

1.26

%

 

 

1.18

%

 

 

1.13

%

Nonperforming assets to total net loans and leases and

real estate and other foreclosed assets

 

 

1.25

%

 

 

1.22

%

 

 

1.15

%

 

 

1.21

%

 

 

1.04

%

 

 

2.00

%

 

 

1.96

%

 

 

1.31

%

 

 

1.25

%

 

 

1.22

%

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

loans and leases, net of unearned discount

 

 

.55

%

 

 

.56

%

 

 

.57

%

 

 

.51

%

 

 

.39

%

 

 

1.09

%

 

 

.87

%

 

 

.54

%

 

 

.55

%

 

 

.56

%

 

(a)Predominantly residential real estate loans. Prior to 2020, excludes loans acquired at a discount.

(b)

Prior to 2020, loans acquired at a discount that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(c)

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

Beginning in 2020, managementManagement determines the allowance for credit losses under new accounting guidance that requires estimating the amount of current expected credit losses over the remaining contractual term of the loan and leaseslease portfolio.  A description of the methodologies used by the Company to estimate its allowance for credit losses in 2020 can be found in note 34 of Notes to Financial Statements contained in this quarterly report on Form 10-Q. For periods prior to 2020, a description of the methodologies used by the Company for determining the allowance for credit losses may be found in the Provision for Credit Losses section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in M&T’s Annual Report on Form 10-K for the year ended December 31, 2019.Statements.  

- 71 -


In establishing the allowance for credit losses, subsequent to December 31, 2019, the Company estimates losses attributable to specific troubled credits identified through both normal and targeted credit review processes and also estimates losses for other loans and leases with similar risk characteristics on a collective basis.  For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type. At the time of the Company’s analysis regarding the determination of the allowance for credit losses as of June 30, 2020, thereMarch 31, 2021, concerns existed substantial concerns about the continued economic declinesomewhat uneven and incomplete recovery evident in the economy related to the COVID-19 pandemic;pandemic, despite recent improvements in macroeconomic forecasts; the ultimate effectiveness of economic stimulus being provided by the U.S. government; the volatile nature of global commodity and export markets, including the impact international economic conditions could have on the U.S. economy; Federal Reserve positioning of monetary policy; the extent to which additional repayment forbearance might be requested by borrowers, in particular commercial real estate borrowers; and continued stagnant population and economic growth in the upstate New York and central Pennsylvania regions (approximately 52%49% of the Company’s loans and leases are to customers in New York State and Pennsylvania). that could see lingering effects of the economic downturn. The Company utilizes a loan grading system to differentiate risk amongst its commercial loans and commercial real estate loans. Loans with a lower

- 62 -


expectation of default are assigned one of ten possible “pass” loan grades and through the loss estimation modeling and other techniques used by the Company are generally considered to possess lower expected losses when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed higher expected loss amounts when determining the allowance for credit losses. Criticized loansA criticized loan may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. During the second quarter of2021 and 2020, the Company re-graded a significant portionportions of its commercial loans and commercial real estate loans, particularly those that were modified as a result ofaffected by COVID-19 impacts. Criticized commercial loans and commercial real estate loans totaled $6.2$8.4 billion at June 30, 2020,March 31, 2021, compared with $2.8 billion at June 30, 2019, $2.5 billion at December 31, 2019, and $2.4 billion at March 31, 2020, and $7.2 billion at December 31, 2020. The rise in criticized loans at the two most recent quarter-endquarter-ends as compared to March 31, 2020 reflects the impact of the pandemic on borrowers’ financial condition and the continuing re-grading of loans by the Company.  The declines from the second quarter of 2019 to the end of 2019’s final quarter and the first quarter of 2020 reflect payments received on criticized loans during 2019 and early 2020 and the removal of loans to customers experiencing improved financial condition.

The COVID-19 pandemic and related governmental responses to COVID-19 have led to a significant reduction in economic activity that has been detrimental to many businessesborrowers across the Company’s geographic regions. As a result, borrowersBorrowers have been and will likely continue to be significantlyadversely impacted by the shut-downs caused by the March 13, 2020 nationwide stateeconomic effects of emergency resulting from the COVID-19 pandemic. Summaries of loans outstanding as of March 31, 2021 for which borrowers have been granted a COVID-19 related forbearance and loans extended under the PPP are provided in the accompanying table. Of the COVID-19 related modifications with payment deferrals at March 31, 2021, substantially all are scheduled to expire during 2021.

As commercial loan and leaseloans and commercial real estate loans were approved for modifications related to COVID-19, loan portfoliosofficers and credit department personnel reviewed and reassigned loan grades, as deemed appropriate. The Company assessed loans considering the creditworthiness of June 30, 2020the borrower, collateral values, the financial condition of any guarantors, and the expected collectability of contractual principal and interest payments. Loan-to-collateral values on investor-owned loans are provided below.generally relatively low and oftentimes the loans include some form of recourse. Loans secured by residential real estate with a COVID-19 payment forbearance were evaluated for collectability based on the borrower’s ability to repay considering past performance and estimated collateral values. If collectability was considered doubtful, loans were classified as nonaccrual.

 

 

June 30, 2020

 

 

Commercial, financial, leasing , etc.

 

Total

 

 

COVID-19 Related Modifications

 

 

PPP

 

 

 

 

(In millions)

 

 

Industry

 

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

$

5,946

 

 

$

425

 

 

$

2,023

 

 

Motor vehicle and recreational finance dealers

 

 

4,393

 

 

 

3,369

 

 

 

382

 

 

Manufacturing

 

 

3,869

 

 

 

202

 

 

 

689

 

 

Financial and insurance

 

 

2,498

 

 

 

197

 

 

 

104

 

 

Health services

 

 

2,234

 

 

 

220

 

 

 

756

 

 

Wholesale

 

 

2,159

 

 

 

101

 

 

 

434

 

 

Construction

 

 

2,023

 

 

 

78

 

 

 

975

 

 

Retail

 

 

1,807

 

 

 

318

 

 

 

449

 

 

Transportation, communications, utilities

 

 

1,654

 

 

 

243

 

 

 

302

 

 

Real estate investors

 

 

1,651

 

 

 

126

 

 

 

192

 

 

Other

 

 

970

 

 

 

23

 

 

 

209

 

 

Total

 

$

29,204

 

 

$

5,302

 

 

$

6,515

 

 

- 72 -


 

 

June 30, 2020

 

 

Commercial real estate

 

Total

 

 

COVID-19 Related Modifications

 

 

 

 

(In millions)

 

 

Investor-owned

 

 

 

 

 

 

 

 

 

Permanent finance by property type

 

 

 

 

 

 

 

 

 

Retail/Service

 

$

4,637

 

 

$

1,807

 

 

Apartments/Multifamily

 

 

4,601

 

 

 

718

 

 

Office

 

 

4,510

 

 

 

776

 

 

Hotel

 

 

2,687

 

 

 

2,096

 

 

Health facilities

 

 

2,523

 

 

 

163

 

 

Industrial/Warehouse

 

 

1,503

 

 

 

247

 

 

Other

 

 

363

 

 

 

46

 

 

Total permanent

 

$

20,824

 

 

$

5,853

 

 

Total construction/development

 

 

9,233

 

 

 

839

 

 

Total investor-owned

 

$

30,057

 

 

$

6,692

 

 

Owner-occupied by industry

 

 

 

 

 

 

 

 

 

Other services

 

 

1,419

 

 

 

342

 

 

Retail

 

 

1,190

 

 

 

243

 

 

Motor vehicle and recreational finance dealers

 

 

1,161

 

 

 

823

 

 

Health services

 

 

898

 

 

 

195

 

 

Wholesale

 

 

755

 

 

 

182

 

 

Manufacturing

 

 

588

 

 

 

41

 

 

Other

 

 

1,091

 

 

 

164

 

 

Total owner-occupied

 

 

7,102

 

 

 

1,990

 

 

Total

 

$

37,159

 

 

$

8,682

 

 

Loan officers in different geographic locations with the support of the Company’s credit department personnel review and reassign loan grades based on their detailed knowledge of individual borrowers and their judgment of the regionsimpact on such borrowers resulting from changing conditions in which they operate.their respective regions. The Company re-assessed its loan grades for those borrowers most impacted by COVID-19 in the second quarter of 2020 and expects that loans will continue to be re-gradedregraded in subsequent periodperiods as more information becomes available. At least annually, however, updated financial information is obtained from commercial borrowers associated with pass grade loans and additional analysis is performed. On a quarterly basis, the Company’s centralized credit department reviews all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing. For criticized nonaccrual loans, additional meetings are held with loan officers and their managers, workout specialists and senior management to discuss each of the relationships. In analyzing criticized loans, borrower-specific information is reviewed, including operating results, future cash flows, recent developments and the borrower’s outlook, and other pertinent data. The timing and extent of potential losses, considering collateral valuation and other factors, and the Company’s potential courses of action are contemplated.

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COVID-19 RELATED LOANS AND LEASES DATA

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

COVID-19 Forbearance

 

Commercial, financial, leasing, etc.

 

Total

 

 

PPP

 

 

Payment Deferrals(a)

 

 

Other Forbearances(b)

 

 

Total

 

 

 

(Dollars in millions)

 

Industry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

$

5,519

 

 

$

1,895

 

 

$

9

 

 

$

69

 

 

$

78

 

Motor vehicle and recreational

   finance dealers

 

 

4,319

 

 

 

323

 

 

 

 

 

 

3

 

 

 

3

 

Manufacturing

 

 

3,664

 

 

 

621

 

 

 

1

 

 

 

21

 

 

 

22

 

Wholesale

 

 

2,188

 

 

 

333

 

 

 

 

 

 

31

 

 

 

31

 

Construction

 

 

2,084

 

 

 

1,025

 

 

 

 

 

 

 

 

 

 

Financial and insurance

 

 

2,084

 

 

 

57

 

 

 

21

 

 

 

4

 

 

 

25

 

Health services

 

 

2,028

 

 

 

728

 

 

 

 

 

 

 

 

 

 

Retail

 

 

1,845

 

 

 

534

 

 

 

3

 

 

 

 

 

 

3

 

Real estate investors

 

 

1,623

 

 

 

189

 

 

 

10

 

 

 

 

 

 

10

 

Transportation, communications,

   utilities

 

 

1,590

 

 

 

286

 

 

 

17

 

 

 

3

 

 

 

20

 

Other

 

 

867

 

 

 

164

 

 

 

 

 

 

25

 

 

 

25

 

Total commercial, financial, leasing, etc.

 

 

27,811

 

 

 

6,155

 

 

 

61

 

 

 

156

 

 

 

217

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor-owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Permanent finance by property type

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail/Service

 

 

4,712

 

 

 

 

 

 

96

 

 

 

3

 

 

 

99

 

Apartments/Multifamily

 

 

4,452

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Office

 

 

4,265

 

 

 

 

 

 

2

 

 

 

2

 

 

 

4

 

Hotel

 

 

2,647

 

 

 

 

 

 

250

 

 

 

319

 

 

 

569

 

Health facilities

 

 

2,521

 

 

 

 

 

 

70

 

 

 

28

 

 

 

98

 

Industrial/Warehouse

 

 

1,422

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Other

 

 

304

 

 

 

 

 

 

37

 

 

 

 

 

 

37

 

Total permanent

 

 

20,323

 

 

 

 

 

 

473

 

 

 

352

 

 

 

825

 

Total construction/development

 

 

9,659

 

 

 

 

 

 

72

 

 

 

101

 

 

 

173

 

Total investor-owned

 

 

29,982

 

 

 

 

 

 

545

 

 

 

453

 

 

 

998

 

Owner-occupied by industry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other services

 

 

1,441

 

 

 

 

 

 

26

 

 

 

 

 

 

26

 

Motor vehicle and recreational

   finance dealers

 

 

1,307

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

Retail

 

 

1,182

 

 

 

 

 

 

2

 

 

 

2

 

 

 

4

 

Health services

 

 

920

 

 

 

 

 

 

1

 

 

 

7

 

 

 

8

 

Wholesale

 

 

767

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Manufacturing

 

 

594

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Other

 

 

1,233

 

 

 

 

 

 

 

 

 

 

 

 

 

Total owner-occupied

 

 

7,444

 

 

 

 

 

 

34

 

 

 

10

 

 

 

44

 

Total commercial real estate

 

 

37,426

 

 

 

 

 

 

579

 

 

 

463

 

 

 

1,042

 

Residential real estate

 

 

17,350

 

 

 

 

 

 

3,315

 

(c)

 

 

 

 

3,315

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recreational finance

 

 

7,282

 

 

 

 

 

 

14

 

 

 

 

 

 

14

 

Automobile

 

 

4,245

 

 

 

 

 

 

25

 

 

 

 

 

 

25

 

Homes equity lines and loans

 

 

3,816

 

 

 

 

 

 

19

 

 

 

 

 

 

19

 

Other

 

 

1,369

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Total consumer

 

 

16,712

 

 

 

 

 

 

59

 

 

 

 

 

 

59

 

Total

 

$

99,299

 

 

$

6,155

 

 

$

4,014

 

 

$

619

 

 

$

4,633

 

(a)

Represents accruing loans at March 31, 2021 for which a COVID-19 related payment deferral (including maturity extensions)   has been granted.

(b)

Consists predominantly of accruing loans for which a COVID-19 related covenant waiver has been granted.

(c)

Includes $2.4 billion of government-guaranteed loans.

With regard to residential real estate loans, the Company’s loss identification and estimation techniques make reference to loan performance and house price data in specific areas of the country where collateral securing the Company’s residential real estate loans is located. For residential real estate-related loans, including home equity

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loans and lines of credit, the excess of the loan balance over the net realizable value of the property collateralizing the loan is charged-off when the loan becomes 150 days delinquent.  That charge-off is based on recent indications of value from external parties that are generally obtained shortly after a loan becomes nonaccrual. Loans to consumers that file for bankruptcy are generally charged off to estimated net collateral value shortly after the Company is notified of such filings. At June 30, 2020,March 31, 2021, approximately 60%61% of the Company’s home equity portfolio consisted of first lien loans and lines of credit.  Of the remaining junior lien loans in the portfolio, approximately 60% (or approximately 23% 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

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loan or line that is owned by the Company is placed on nonaccrual status.  At June 30, 2020, the balance of junior lien loans and lines that were in nonaccrual status solely as a result of first lien loan performance was $4 million, compared with $5 million at June 30, 2019 and $6 million at each of December 31, 2019 and March 31, 2020. In monitoring the credit quality of its home equity portfolio for purposes of determining the allowance for credit losses, the Company reviews delinquency and nonaccrual information and considers recent charge-off experience. When evaluating individual home equity loans and lines of credit for charge off and for purposes of estimating incurred losses in determining the allowance for credit losses, the Company gives consideration to the required repayment of any first lien positions related to collateral property.  Home equity line of credit terms vary but such lines are generally originated with an open draw period of ten years followed by an amortization period of up to twenty years. At June 30, 2020,March 31, 2021 approximately 83%84% of all outstanding balances of home equity lines of credit related to lines that were still in the draw period, the weighted-average remaining draw periods were approximately sixfive years, and approximately 18% 22%were making contractually allowed payments that do not include any repayment of principal.

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

The Company generally estimates current expected credit losses on loans with similar risk characteristics on a collective basis. To estimate expected losses, the Company utilizes statistically developed models to project principal balances over the remaining contractual lives of the loan portfolios and determine estimated credit losses through a reasonable and supportable forecast period. The Company’s approach for estimating current expected credit losses for loans and leases at June 30, 2020,March 31, 2021, March 31, 2020 and January 1,December 31, 2020 included utilizing macro-economicmacroeconomic assumptions to project losses over a two-year reasonable and supportable forecast period. Subsequent to the forecast period, the Company reverted to longer-term historical loss experience, over a period of one year, to estimate expected credit losses over the remaining contractual life. Forward-looking estimates of certain macro-economicmacroeconomic variables are determined by the M&T Scenario Development Group, which is comprised of senior management business leaders and economists.  Changes in the forecasted economic assumptions from January 1, 2020 to June 30, 2020 primarily reflect the projected impact of the COVID-19 pandemic. The assumptions utilized as of June 30, 2020 reflected a longer period of economic recovery than previously assumed. Those assumptionsMarch 31, 2021 included a declinedecrease in the unemployment rate in the thirdfirst quarter of 20202021 to approximately 9%6.2% from a peak6.8% at the end of nearly 14% in the secondfourth quarter of 2020, followed by a sustained high single-digitgradual decrease of the unemployment rate through the first quarter of 2023 to 4.2%. The forecast assumes that GDP grows at a 6.3% annual rate during 2021 resulting in GDP returning to pre-pandemic levels during 2021.The commercial real estate price index was assumed to be flat from pre-pandemic levels over the next two years. Residential real estate prices were not assumed to fluctuate significantly. The forecast considered approved government stimulus through March 31, 2021, but not any further fiscal or monetary actions. The assumptions utilized as of December 31, 2020 included the national unemployment rate continuing at elevated levels, on average 6.9% through 2021, followed by a gradual return to long-term historical averages by the end of 2022. The forecast also assumed gross domestic product to contract nearly 7%grow at a 4.1% annual rate during 2021 resulting in 2020 and to then recovera return to pre-pandemic levels by the second quarterend of 2022. Commercial real estate prices were assumed to decline by 15%6.8% in the first forecast year,2021, followed by improvement. Residential real estate prices were not assumed to fluctuate significantly. The forecast considered approved government stimulus at the end of 2020, but not any further fiscal or monetary actions. The forecast at March 31, 2020 reflected a sharp contraction of economic activity in the second quarter of

- 65 -


2020 resulting in a projected unemployment rate of 9.3% and an annualized rate of decrease in gross domestic product as low as 26.1% with a decrease of 2.9% during 2020. Additionally, commercial real estate prices were anticipated to decline by an average of 15.6% in the first forecast year, followed by improvement of 9.8% in year 2. The forecast utilized as of March 31 contemplated a significant economic recovery beginning in the third quarter of 2020.  The assumptions utilized as of January 1, 2020 at the time of adoption of the expected credit loss accounting standard were significantly less severe. Those assumptions anticipated unemployment rates that averaged under 4% and steady growth in gross domestic product of 3.3% over the eight quarter forecast period. Forecasted changes in real estate prices as of that date were not significant.. The assumptions utilized were based on information available to the Company at or near June 30, 2020, March 31, 2021, December 31, 2020 and January 1,March 31, 2020 at the time it was preparing its estimate of expected credit losses as of those dates.

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In establishing the allowance for credit losses the Company also considers the impact of portfolio concentrations, changes in underwriting practices, product expansions into new markets, imprecision in its economic forecasts, geopolitical conditions and other risk factors that influence its loss estimation process.  Geopolitical conditions assessed at June 30, 2020 and March 31, 2020the end of the first quarter in 2021 included the potential impact of COVID-19 on economic activity that could influence the ability of customers to repay loan amounts in accordance with their contractual obligations.  With respect to economic forecasts the Company assessed the likelihood of alternative economic scenarios during the two-year reasonable and supportable time period and of more negative or positive outcomes on its allowance for credit losses. Economic forecasts have changed rapidly in the recent past due to the uncertain impacts of COVID-19.  Generally, an increase in unemployment rate or a decrease in any of the rate of positive change in gross domestic product, commercial real estate prices or home prices would have an adverse impact on expected credit losses and would likely result in an increase to the allowance for credit losses.

Further information about the Company’s methodology to estimate expected credit losses is included in note 34 of Notes to Financial Statements.

Management believes that the allowance for credit losses at June 30, 2020March 31, 2021 appropriately reflected expected credit losses inherent in the portfolio as of that date. The allowance for credit losses totaled $1.64 billion at June 30, 2020 andMarch 31, 2021, compared with $1.38 billion at March 31, 2020 compared with $1.18 billion on January 1, 2020 when the new accounting pronouncement became effective.  The increases in the allowance for credit losses during the first and second quarters of 2020 were primarily the result of deteriorating forecasted economic conditions as a result of the COVID-19 pandemic.  The allowance for credit losses totaled $1.03 billion at June 30, 2019, and $1.05$1.74 billion at December 31, 2019.2020. As a percentage of loans and leases outstanding, the allowance was 1.68%1.65% at June 30, 2020, compared withMarch 31, 2021, 1.47% at March 31, 2020 1.30% at January 1, 2020, 1.15% as of June 30, 2019 and 1.16%1.76% at December 31, 2019. Excluding the impact of government-guaranteed PPP loans originated by the Company in the second quarter of 2020, the allowance as a percentage of total loans and leases at June 30, 2020 was 1.79%.2020. The level of the allowance reflects management’s evaluation of the loan and lease portfolio using the methodology and considering the factors previously referred to.as described herein. Should the various economic forecasts and credit factors considered by management in establishing the allowance for credit losses change and should management’s assessment of losses in the loan portfolio also change, the level of the allowance as a percentage of loans could increase or decrease in future periods. The reported level of the allowance reflects management’s evaluation of the loan and lease portfolio as of each respective date.

Other Income

Other income totaled $487$506 million in the secondfirst quarter of 2020,2021, compared with $512$529 million in the year-earlier quarter and $529$551 million in the firstfinal quarter of 2020.  The lower level of suchother income in the most recent quarter as compared with the prior periods reflectsfirst quarter of 2020 resulted from declines in service charges on deposit accounts, trading account and foreign exchange gains merchant discount and credit card fees,service charges on deposit accounts, and loan syndication fees,a $23 million distribution from BLG in the initial quarter of 2020. Those factors were partially offset by higherincreased residential mortgage banking revenues and trust income. DuringThe decreased income in the firstrecent quarter as compared with the immediately preceding quarter predominantly reflects a fourth quarter 2020 distribution of 2020, $23$30 million of income was received from Bayview Lending Group LLC, offsetting the impact of $21 million ofBLG and unrealized losses on investment securities on total other income during that quarter.securities.

Mortgage banking revenues were $145$139 million in the recent quarter, compared with $107 million in the second quarter of 2019 and $128 million in the initialfirst quarter of 2020 and $140 million in the final 2020 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 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 $111$107 million in the secondinitial quarter of 2020, compared with $722021, $98 million in the similar quarter of 20192020 and $98 $95million in the first 2020 quarter.fourth quarter of 2020. As compared with the second quarter of 2019 and the immediately preceeding quarter,respective prior quarters, the higher residential mortgage banking revenues in the recent quarter resulted from increased gains associated with loans held for sale and related commitments, reflecting higher origination volumes and improved margins.

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New commitments to originate residential real estate loans to be sold were approximately $1.1$1.3 billion in the secondfirst quarter of 2020,2021, compared with $723$919 million in the year-earlier quarter and $919 million$1.2 billion in the initial 2020 quarter.fourth quarter of

- 66 -


2020. Realized gains from sales of residential real estate loans and loan servicing rights and recognized net unrealized gains or losses attributable to residential real estate loans held for sale, commitments to originate loans for sale and commitments to sell loans totaled to gains of  $52$50 million in the secondfirst quarter of 2020, $132021, $32 million in the corresponding period of 20192020 and $31$43 million in 2020’s firstfinal quarter.

Loans held for sale that were secured by residential real estate aggregated $440$773 million at June 30, 2020, $294March 31, 2021, $374 million at June 30, 2019March 31, 2020 and $414$777 million at December 31, 2019.2020.  Commitments to sell residential real estate loans and commitments to originate residential real estate loans for sale at pre-determined rates totaled $986$1.53 billion and $1.08 billion, respectively, at March 31, 2021, compared with $782 million and $712 million, respectively, at March 31, 2020 and $1.47 billion and $1.03 billion, respectively, at June 30, 2020, compared with $626 million and $473 million, respectively, at June 30, 2019 and $713 million and $423 million, respectively, at December 31, 2019.2020.  Net recognized unrealized gains on residential real estate loans held for sale, commitments to sell loans, and commitments to originate loans for sale were $43 million and $9$48 million at June 30,March 31, 2021, $17 million at March 31, 2020 and June 30, 2019, respectively, compared with $12$52 million at December 31, 2019.2020. Changes in net unrealized gains or losses are recorded in mortgage banking revenues and resulted in net increasesdecreases in revenues of $26$4 million in the recent quarter $2and $7 million in the secondfinal 2020 quarter, compared with net increases in revenues of 2019 and $5 million in the first quarter of 2020.

Revenues from servicing residential real estate loans for others were $59$57 million during each of the quartersquarter ended June 30, 2020 and 2019,March 31, 2021, compared with $67 million and $52 million during the three months ended March 31, 2020.2020 and December 31, 2020, respectively. Residential real estate loans serviced for others totaled $95.1$95.0 billion at June 30, 2020, $102.9 billion at June 30, 2019, $95.1 billion at DecemberMarch 31, 2019 and2021, $93.5 billion at March 31, 2020 and $94.4 billion at December 31, 2020. Reflected in residential real estate loans serviced for others were loans sub-serviced for others of $64.7$69.7 billion, $68.7 billion, $62.8$61.9 billion and $61.9$68.1 billion at June 30,March 31, 2021, March 31, 2020 June 30, 2019,and December 31, 2019 and March 31, 2020, respectively. Revenues earned for sub-servicing loans totaled $34 million during the recent quarter, compared with $29 million in the second quarter of 2019 and $37 million in the first quarter of 2020. During2020 and $28 million in the first and second quarters of 2020, the Company added approximately $2.0 billion and $6.9 billion, respectively, to its residential mortgage loan sub-servicing portfolio. The Company added approximately $16.6 billion to its residential mortgage loan sub-servicing portfolio during the secondfinal quarter of 2019 and another $1.0 billion was added during the fourth quarter of 2019.2020. The contractual servicing rights associated with loans sub-serviced by the Company were predominantly held by affiliates of BLG. Information about the Company’s relationship with BLG and its affiliates is included in note 1415 of Notes to Financial Statements.

Capitalized residential mortgage servicing assets totaled $211$218 million at June 30, 2020March 31, 2021 (net of a $27$21 million valuation allowance), $245 million at June 30, 2019 (net of a $9 million valuation allowance), $237 million at December 31, 2019 (net of a $7 million valuation allowance) and $224 million at March 31, 2020 (net of a $17 million valuation allowance) and $201 million at December 31, 2020 (net of a $30 million valuation allowance).  A provisionDuring the recent quarter, the valuation allowance for impairment of capitalized residential mortgage servicing rights was reduced by $9 million, compared with additions to the valuation allowance of $10 million was recordedand $3 million in each of the first and secondfourth quarters of 2020, respectively. Those increases and a similar charge of $9 million was recorded duringdecreases in the second quarter of 2019. Those provisionsvaluation allowance resulted from changes in the estimated fair value of capitalized mortgage servicing rights that reflected the impact of lowerchanges in interest rates on the expected rate of residential mortgage loan prepayments.

Commercial mortgage banking revenues totaled $34$32 million in the recentfirst quarter of 2021, compared with $35 million and $30 million in the second quarter of 2019 and first quarter of 2020 respectively.and $45 million in the fourth quarter of 2020.  Included in such amounts were revenues from loan origination and sales activities of $19$17 million in the second quarter of 2020, $21 million in the year-earlier quarter and $14 million in the first quarters of 2021 and 2020 respectively, and $31 million in the fourth quarter of 2020. Commercial real estate loans originated for sale to other investors were approximately $729$619 million in the recent quarter, compared with $1.1 billion in the second quarter of 2019 and $611 million in the first quarter of 2020 and $1.1 billion in the fourth quarter of 2020. Loan servicing revenues totaled $15 million andin the first quarter of 2021, compared with $16 million in the second and first quarters of 2020, respectively, compared with $14 million in the second 2019 quarter.first and fourth quarters of 2020, respectively. Capitalized commercial mortgage servicing assets were $128$136 million and $117$129 million at June 30,March 31, 2021 and 2020, and 2019, respectively, and $131$133 million at December 31, 2019.2020. Commercial real estate loans serviced for other investors totaled $21.4$22.6 billion at June 30, 2020, $19.6March 31, 2021, $21.0 billion at June 30, 2019March 31, 2020 and $21.0$22.2 billion at December 31, 2019.2020. Those servicing amounts included $3.9$4.0 billion at each of June 30, 2020March 31, 2021 and December 31, 20192020 and $3.6$3.8 billion at June 30, 2019,March 31, 2020 of loan balances for which investors had recourse to the Company if such balances are ultimately uncollectible.uncollectable. Included in commercial real estate loans serviced for others were loans sub-serviced for others of $3.3 billion at each of March 31, 2021, March 31, 2020 and December 31, 2020.  Commitments

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to sell commercial real estate loans and commitments to originate commercial real estate loans for sale were $492$348 million and $237$250 million, respectively, at June 30, 2020, $751March 31, 2021, $542 million and $247$291 million, respectively, at June 30, 2019March 31, 2020 and $193$641 million

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and $164$364 million, respectively, at December 31, 2019.2020. Commercial real estate loans held for sale at June 30,March 31, 2021, March 31, 2020 June 30, 2019 and December 31, 20192020 were $255$99 million, $504$250 million and $28$278 million, respectively.

Service charges on deposit accounts were $77$93 million and $108 million in the second quarters of 2020 and 2019, respectively, and $106 million in the first quarters of 2021 and 2020, respectively, and $96 million in the final quarter of 2020.  The decreasedeclines in such service charges in the two most recent quarterquarters as compared with the preceding quartersfirst quarter of 2020 resulted predominantly from lower consumer service charges, predominantlylargely resulting from COVID-19 related fee waivers and lower debit card and other customer transaction activity, and decreased commercial service charges, largely due to higher customer deposit levels that can be used by those customers to offset transaction-relatedbalances offsetting transaction-based fees, largely 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 helpsoffers personal trust, planning, fiduciary, asset management, family office and other services designed to help high net worth clientsindividuals and families grow, their wealth, protect it,preserve and transfer it to their heirs.  A comprehensive array of wealth management services are offered, including asset management, fiduciary services and family office services.wealth. Trust income aggregated $152$156 million in the secondfirst quarter of 2020,2021, compared with $144$149 million in the year-earlier quarter and $149$151 million in the firstfourth quarter of 2020.  Revenues associated with the ICS business were approximately $85 million during each of the two most recent quarters, compared with $77$89 million during the quarter ended June 30, 2019.March 31, 2021, compared with $85 million and $86 million during the quarters ended March 31, 2020 and December 31, 2020, respectively. The higher revenues in the most recent quarter as compared with the year-earlier quarter reflect the impact of higher sales activities andrespective 2020 quarters were largely attributable to increased retirement services income resulting from growth in collective fund balances. Revenues attributable to WAS totaled approximately $60$59 million duringin each of the three-month periods ended June 30,March 31, 2021 and December 31, 2020 and 2019 and $56 million forduring the three-month period ended March 31, 2020. The higher revenues in the recent quarter as compared with the firstinitial 2020 quarter were largely attributable to favorable equity market performance that was partially offset by proprietary fund money market fee waivers as a result of 2020 reflected annual tax service fees earned for assisting customers with their tax filings.the current interest rate environment.  Trust assets under management were $114.4 billion, $97.6$141.5 billion, $103.6 billion and $113.0$135.8 billion at June 30, 2020, June 30, 2019,March 31, 2021, March 31, 2020 and December 31, 2019,2020, respectively.  Trust assets under management include the Company’s proprietary mutual funds’ assets of $12.6 billion, $11.8$12.7 billion, $12.8 billion and $12.5$12.9 billion at June 30, 2020, June 30, 2019,March 31, 2021, March 31, 2020 and December 31, 2019,2020, respectively.  Additional trust income from investment management activities was $7$8 million in each of the secondfirst quarters of 2021 and 2020 and 2019, compared with $8$6 million in the initialfourth 2020 quarter, and is predominantly comprised of fees earned from retail customer investment accounts.

Brokerage services income, which includes revenues from the sale of mutual funds and annuities and securities brokerage fees, totaled $10$13 million in each of the recent quarter, compared withfirst quarters of 2021 and 2020 and $12 million in the second quarter of 2019 and $13 million in the firstfourth quarter of 2020.  Trading account and foreign exchange activity resulted in gains of $8$6 million, $18$21 million and $21$7 million during the quarters ended June 30,March 31, 2021, March 31, 2020 June 30, 2019 and MarchDecember 31, 2020, respectively.  The lower gains in the two most recent quarterquarters as compared with the prior quartersfirst quarter of 2020 were predominantly due to decreased activity related to interest rate swap agreements executed on behalf of commercial customers.  The Company enters into interest rate and foreign exchange contracts with customers who need such services and concomitantly enters into offsetting trading positions with third parties to minimize the risks involved with these types of transactions.  Information about the notional amount of interest rate, foreign exchange and other contracts entered into by the Company for trading account purposes is included in note 910 of Notes to Financial Statements and herein under the heading “Taxable-equivalent Net Interest Income.”

The Company recognized net gainslosses on investment securities of $7$12 million in the recent quarter and $9 million in the second quarter of 2019, compared with net losses of $21 million in the first quarter of 2020, compared with net gains of $2 million in the fourth quarter of 2020.  The gains and losses represented unrealized gains and losses on investments in Fannie Mae and Freddie Mac preferred stock.

Other revenues from operations were $87$111 million in the secondfirst quarter of 2020,2021, compared with $113$133 million in the corresponding 20192020 period and $133$143 million in the initialfourth quarter of 2020. Contributing toThe primary factor for the declinedecrease in such revenues in the recent quarter as compared with the prior quarters were the impact of reduced customer activity on

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merchant discountfirst and credit card fees and loan syndication fees. Additionally, during the first 2020 quarter, M&T received $23 million of income from BLG. There was no similar income in the secondfourth quarters of 2020 or 2019.was distributions from BLG in the 2020 periods. Included in other revenues from operations were the following significant components. Letter of credit and other credit-related fees aggregated $25$31 million in the recent quarter, compared with $29$32 million in the year-earlier quarter and $32$26 million in the firstfinal quarter of 2020.  Revenues from merchant discount and credit card fees

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were $23$26 million in the secondfirst quarter of 2020,2021, compared with $30 million in the year-earlier quarterand and $31 million in the year-earlierfourth quarter and $30 million in the initial 2020 quarter.of 2020. Tax-exempt income from bank owned life insurance, which includes increases in the cash surrender value of life insurance policies and benefits received, totaled $13$10 million in each of the recent quarter, compared with $14 million in the secondfirst quarter of 20192021 and fourth quarter of 2020 and $12 million in the first quarter of 2020. Insurance-related sales commissions and other revenues totaled $10$14 million in the quarter ended June 30, 2020,March 31, 2021, compared with $12 million and $15 million in 2019’s second quarter and 2020’s first quarter, respectively. M&T’s investment in BLG resulted in income in the first quarter of 2020 of $23 million. As previously noted, there was no such income in the second quarters of 2020 or 2019.

Other income totaled $1.02 billion during the first six months of 2020, up $4 million as compared with $1.01 billion in the year-earlier period.  Higher mortgage banking revenues and trust income in 2020 were largely offset by decreases in service charges on deposit accounts, income from BLG and merchant discount and credit card fees, and unrealized losses on investment securities.

Mortgage banking revenues totaled $273 million during the first six months of 2020, compared with $203 million during the similar period in 2019. Residential mortgage banking revenues aggregated $210 million and $138 million during the six-month periods ended June 30, 2020 and 2019, respectively. New commitments to originate residential real estate loans to be sold aggregated $2.1 billion and $1.1 billion in the initial six months of 2020 and 2019, respectively. Realized gains from sales of residential real estate loans and loan servicing rights 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 aggregated to gains of $84 million and $23$11 million in the six-month periods ended June 30, 2020 and 2019, respectively. Revenues from servicing residential real estate loans for others were $126 million in the first halffourth quarter of 2020 and $115 million in the corresponding 2019 period. Included in servicing revenues were sub-servicing revenues aggregating $71 million and $57 million in the first six months of 2020 and 2019, respectively. For the six months ended June 30, commercial mortgage banking revenues were $63 million and $65 million in 2020 and 2019, respectively. Commercial real estate loans originated for sale to other investors totaled $1.3 billion and $1.8 billion during the six-month periods ended June 30, 2020 and 2019, respectively.

Service charges on deposit accounts aggregated $184 million during the first half of 2020, compared with $211 million in the year-earlier period. That decline was predominantly due to lower consumer service charges resulting from the impact of the pandemic, reflecting waived fees and lower debit card and other customer transaction activity. Trust income totaled $301 million and $277 million during the first six months of 2020 and 2019, respectively. The increase in trust income in 2020 as compared with 2019 was largely due to higher revenues from the ICS business, reflecting both sales activities and higher retirement services income from growth in collective fund balances. Brokerage services income totaled $24 million in the first half of 2020, compared with $25 million in the six-month period ended June 30, 2019. Trading account and foreign exchange activity resulted in gains of $29 million during each of the first six months of 2020 and 2019.

Net unrealized losses on investment securities totaling $14 million were recognized during the first six months of 2020, compared with net unrealized gains of $21 million in the corresponding 2019 period.  

Other revenues from operations totaled $220 million in the first half of 2020, compared with $247 million in the year-earlier period. Other revenues from operations include the following significant components. Letter of credit and other credit-related fees aggregated $56 million and $53 million in 2020 and 2019, respectively. Income from bank owned life insurance totaled $25 million in the first six months of 2020, compared with $26 million in the corresponding 2019 period. Merchant discount and credit card fees were $52 million and $58 million in the first six months of 2020 and 2019, respectively. Insurance-related commissions and other revenues aggregated $25 million and $26 million in 2020 and 2019, respectively.2020.  M&T’s investment in BLG resulted in income of $23 million and $30 million in the first six monthsand fourth quarters of 2020, and $37 millionrespectively.  There was no similar income in the similar 2019 period.initial 2021 quarter.

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Other Expense

Other expense totaled $807$919 million in the secondfirst quarter of 2020,2021, compared with $873$906 million in the year-earlier quarter and $906$845 million in the first quarterfinal three months of 2020. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of $4$3 million in each of the two most recent quarters and $5$4 million in the secondfirst quarter of 2019.2020 and merger-related expenses of $10 million in the initial 2021 quarter. Exclusive of those nonoperating expenses, noninterest operating expenses were $803$907 million in the recent quarter, compared with $868 million in the second quarter of 2019 and $903 million in the initialyear-earlier quarter and $842 million in the final 2020 quarter. The lower level of expenses in the recent quarter as compared with the second quarter of 2019 was largely attributable to a $48 million charge recorded in the 2019 period to reduce the carrying value of an investment in an asset manager that had been accounted for using the equity method of accounting to its estimated realizable value. The sale of that investment was completed in September 2019. Also contributing to the decreased expenses were lower costs for professional services, advertising and marketing, and travel and entertainment. The last two categories reflect reduced business activities during the COVID-19 pandemic. The recent quarter’s decline in noninterest operating expenses asAs compared with the first quarter of 2020, was largely attributable to lowerhigher expenses for salaries and employee benefits and professional services in the initial 2021 quarter were partially offset by a recent quarter reduction of the valuation allowance for capitalized residential mortgage servicing rights of $9 million. When compared with the fourth quarter of 2020, the recent quarter increase in noninterest operating expenses resulted from higher costs for salaries and employee benefits, reflecting seasonally higher stock-based compensation and employee benefits expenses induring the initial 2020recent quarter, and reduced incentive compensation in 2020’s secondincreased professional services expenses, partially offset by the recent quarter resulting fromreduction of the pandemic-related slowdown in business activity, and decreases in advertising and marketing,  and travel and entertainment costs.valuation allowance for capitalized residential mortgage servicing rights. Table 2 provides a reconciliation of other expense to noninterest operating expense.

OtherSalaries and employee benefits expense fortotaled $541 million in the first halfquarter of 2020 totaled $1.71 billion,2021, compared with $1.77 billion$537 million in the year-earlier period. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core depositquarter and other intangible assets of $8 million and $10$476 million in the six-month periods ended June 30, 2020 and 2019, respectively. Exclusivefourth quarter of those nonoperating expenses, noninterest operating expenses for the first half of 2020 were $1.71 billion, compared with $1.76 billion in the first six months of 2019.2020. The decline in noninterest operating expenses was largely attributable to the $48 million charge associated with the asset manager investment in 2019 and lower costs for legal-related and professional and outside services, partially offset by higher salaries and employee benefits expenses in the 2020 period.

Salaries and employee benefits expense totaled $459 million in the second quarter of 2020, compared with $456 million in the year-earlier quarter and $537 million in the first quarter of 2020. In comparing the second quarter of 2020 with that of 2019, higher expenses for salaries resulting from merit and other increases were offset by reduced incentive compensation costs. The decrease in salaries and employee benefits expense in the recent quarter as compared with the firstfourth quarter of 2020 was attributable toreflect seasonally higher stock-based compensation, medical plan costs, payroll-related taxes, unemployment insurance and the Company’s contributions for retirement savings plan benefits related to annual incentive compensation paymentsthat aggregated approximately $69 million. Similar expenses in the first quarter of 2020 and decreased incentive compensation costs in the recent quarter. During the first six months of 2020 and 2019, salaries and employee benefits expense aggregated $996 million and $955 million, respectively. The higher expense level in 2020 largely reflects the impact of merit and other increases for employees and increased employee benefit costs, partially offset by lower incentive compensation costs.were approximately $67 million. The Company, in accordance with GAAP, has accelerated the recognition of compensation costs for stock-based awards granted to retirement-eligible employees and employees who will become retirement-eligible prior to full vesting of the award. As a result, stock-based compensation expense during the first quarterquarters of 2021 and 2020 included $34 million and $31 million, respectively, that would have been recognized over the normal vesting period if not for the accelerated recognition provisions of GAAP.That acceleration had no effect on the value of stock-based compensation awarded to employees. Salaries and employee benefits expense included stock-based compensation of $13$48 million and $12$43 million in the three-month periods ended June 30,March 31, 2021 and March 31, 2020, respectively, and June 30, 2019, respectively, $43$11 million in the three-month period ended MarchDecember 31, 2020, and $56 million and $53 million during the six-month periods ended June 30, 2020 and 2019, respectively.2020. The number of full-time equivalent employees was 17,09817,157 at June 30, 2020,March 31, 2021, compared with 17,51617,416 and 17,41617,076 at June 30, 2019March 31, 2020 and MarchDecember 31, 2020, respectively.

Excluding the nonoperating expense items described earlier from each quarter, nonpersonnel operating expenses were $344 million and $412 million in the quarters ended June 30, 2020 and June 30, 2019, respectively, and $366 million in the initial quartereach of 2020. On that same basis, such expenses were $710 million and $802 million in the six-month periodsquarters ended June 30,March 31, 2021, March 31, 2020 and 2019, respectively. The decline in nonpersonnel expenses in the recent quarter

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asDecember 31, 2020. As compared with the second quarterfirst and fourth quarters of 2019 reflects lower costs for2020, higher contributions made to The M&T Charitable Foundation and professional services and advertising and marketing, and the $48 million charge related to the asset manager investment in the second quarter of 2019. The lower level of nonpersonnel operating expensescosts in the recent quarter as comparedwere offset by a $9 million reduction of the valuation allowance for capitalized residential mortgage servicing rights in the initial 2021 quarter (compared with  the first 2020 quarter was predominantly attributableadditions to decreased costs for advertisingthat valuation allowance of $10 million and marketing and travel and entertainment.  The decline in nonpersonnel operating expenses$3 million in the first six monthsand fourth quarters of 2020, as compared with the similar 2019 period reflected the 2019 asset manager investment charge of $48 million and reduced costs for legal-related and professional services, advertising and marketing, and travel and entertainment.respectively).  

The efficiency ratio measures the relationship of noninterest operating expenses to revenues.  The Company’s efficiency ratio was 55.7%60.3% during the recent quarter, compared with 56.0%58.9% and 58.9%54.6% in the second quarter of 2019 and first quarter of 2020 respectively. The efficiency ratios for the six-month periods ended June 30,and fourth quarter of 2020, and 2019 were 57.4% and 56.8%, respectively. The calculation of the efficiency ratio is presented in Table 2.

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Income Taxes

The provision for income taxes was $71$145 million in the secondfirst quarter of 2020,2021, compared with $152$81 million in the year-earlier quarter and $81$149 million in the initial 2020 quarter.  For the six-month periods ended June 30, 2020 and 2019, the provisions for income taxes were $152 million and $304 million, respectively.final quarter of 2020. The effective tax rates were 22.8%24.5%, 24.3%23.1% and 23.1%24.1% for the quarters ended June 30, 2020, June 30, 2019 andMarch 31, 2021, March 31, 2020 respectively, and 23.0% and 24.1% for the six-month periods ended June 30,December 31, 2020, and 2019, respectively.

The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income, the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact of any large discrete or infrequently occurring items.  The Company’s effective tax rate in future periods will also be affected by any change in income tax laws or regulations and interpretations of income tax regulations that differ from the Company’s interpretations by any of various tax authorities that may examine tax returns filed by M&T or any of its subsidiaries.

Capital

Shareholders’ equity was $15.9$16.4 billion at June 30, 2020,March 31, 2021, representing 11.43%10.93% of total assets, compared with $15.7$15.8 billion or 12.91%12.70% a year earlier and $15.7$16.2 billion or 13.11%11.35% at December 31, 2019.2020.

Included in shareholders’ equity was preferred stock with financial statement carrying values of $1.25 billion at each of June 30,March 31, 2021, March 31, 2020 and December 31, 2019, compared with $1.23 billion at June 30, 2019.  2020.

Common shareholders’ equity was $14.7$15.2 billion or $114.54$118.12 per share, at June 30, 2020,March 31, 2021, compared with $14.5$14.6 billion or $107.73$113.54 per share, a year earlier and $14.5$14.9 billion or $110.78$116.39 per share at December 31, 2019.2020.  Tangible equity per common share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was $78.62$82.35 at the end of the recent quarter, compared with $73.29$77.60 at June 30, 2019March 31, 2020 and $75.44$80.52 at December 31, 2019.2020.  The Company’s ratio of tangible common equity to tangible assets was 7.48%7.26% at June 30, 2020,March 31, 2021, compared with 8.41%8.30% a year earlier and 8.55%7.49% at December 31, 2019.2020.  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, remaining unrealized losses on held-to-maturity securities transferred from available for sale that have not yet been amortized, gains or losses associated with interest rate swap agreements designated as cash flow hedges, foreign currency translation adjustments and adjustments to reflect the funded status of defined benefit pension and other postretirement plans.  Net unrealized gains on investment securities reflected in shareholders’ equity, net of applicable tax effect, were $170$122 million or $1.32$.95 per common share, at June 30, 2020, $7March 31, 2021, $135 million, or $.05$1.05 per common share, at June 30, 2019March 31, 2020 and $37$145 million, or $.29$1.13 per common share, at December 31, 2019.2020.  Changes in unrealized gains and losses on investment securities are predominantly reflective of the impact of changes in interest rates on the values of such securities.  

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Information about unrealized gains and losses as of June 30, 2020March 31, 2021 and December 31, 20192020 is included in note 23 of Notes to Financial Statements.

Reflected in the carrying amount of available-for-sale investment securities at June 30, 2020March 31, 2021 were pre-tax effect unrealized gains of $253$177 million on securities with an amortized cost of $5.4$4.1 billion and pre-tax effect unrealized losses of $16$7 million on securities with an amortized cost of $176$103 million.  Information concerning the Company’s fair valuations of investment securities is provided in notes 23 and 1112 of Notes to Financial Statements.

Each reporting period the Company reviews its available-for-sale investment securities for declines in value that might be indicative of credit-related losses through an analysis of the creditworthiness of the issuer or the credit performance of the underlying collateral supporting the bond.  If the Company does not expect to recover the entire amortized cost basis of a debt security a credit loss is recognized and such loss would be recognized in the consolidated statement of income.  Beginning January 1, 2020, an allowance for credit losses would reduce the carrying value of available-for-sale investment securities.  Previously if a credit-related loss was deemed to have occurred, the investment security’s cost basis was adjusted, as appropriate for the circumstances. A loss is also recognized in the consolidated statement of income if the Company intends to sell a bond or it more likely than not will be required to sell a bond before recovery of the amortized cost basis.

As of June 30, 2020,March 31, 2021, based on a review of each of the securities in the available-for-sale investment securities portfolio, the Company concluded that it expected to realize the amortized cost basis of each security. As of June 30, 2020,March

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31, 2021, the Company did not intend to sell nor is it anticipated that it would be required to sell any securities for which fair value was less than the amortized cost basis of the security. The Company intends to continue to closely monitor the performance of its securities because changes in their underlying credit performance or other events could cause the amortized cost basis of those securities to become uncollectible.uncollectable.

On January 1, 2020 the Company adopted amended accountingAccounting guidance that requires investment securities held to maturity to be presented at their net carrying value that is expected to be collected over their contractual term.  The Company estimated no material allowance for credit losses for its investment securities classified as held-to-maturity at January 1, 2020, March 31, 20202021 and June 30,December 31, 2020 as the substantial majority of such investment securities were obligations backed by the U.S. government or its agencies.  The Company assessed the potential for expected credit losses on privately issued mortgage-backed securities in the held-to-maturity portfolio by performing internal modeling to estimate bond-specific cash flows considering recent performance of the mortgage loan collateral and utilizing assumptions about future defaults and loss severity. These bond-specific cash flows also reflect the placement of the bond in the overall securitization structure and the remaining subordination levels.  In total, at June 30, 2020March 31, 2021 and December 31, 2019,2020, the Company had in its held-to-maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of $86$73 million and $93$77 million, respectively, and a fair value of $76$68 million and $87$70 million, respectively.  At June 30, 2020, 82%March 31, 2021, 81% of the mortgage-backed securities were in the most senior tranche of the securitization structure with 17% being independently rated as investment grade.structure. 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 9% at June 30, 2020, calculated by dividing the remaining unpaid principal balance of bonds subordinate to the bonds owned by the Company plus any overcollateralization remaining in the securitization structure by the remaining unpaid principal balance of all bonds in the securitization structure. The weighted-average default percentage and loss severity assumptions utilized in the Company’s internal modeling were 34% and 69% respectively. Given the securitization structure, some of the bonds held by the Company may defer interest payments in certain circumstances, but after2008. After considering the repayment structure and estimated future collateral cash flows of each individual senior and subordinate tranche bond, the Company has concluded that as of June 30, 2020,March 31, 2021, it expected to recover the amortized cost basis of those privately issued mortgage-backed securities.  Nevertheless, it is possible that adverse changes in the estimated future performance of mortgage loan collateral underlying such securities could impact the Company’s conclusions.

Adjustments to reflect the funded status of defined benefit pension and other postretirement plans, net of applicable tax effect, reduced accumulated other comprehensive income by $324$468 million, or $2.53$3.64 per common share, at June 30, 2020, $255March 31, 2021, $333 million or $1.90$2.60 per common share, at June 30, 2019March 31, 2020 and $342$481 million or $2.62$3.75 per common share, at December 31, 2019.2020. 

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On January 20, 2021, M&T’s Board of Directors authorized a stock repurchase plan to repurchase up to $800 million of shares of M&T’s common stock subject to all applicable regulatory limitations.  There were no repurchases pursuant to that repurchase plan in the first quarter of 2021, and M&T does not expect any repurchases while the acquisition of People’s United is pending. Pursuant to previously approved capital plans and authorizations by M&T’s Board of Directors, M&T repurchased 2,577,000 shares of its common stock for $374 million in the first quarter of 2020.  There were no repurchases of M&T common stock duringin the quarter-ended June 30, 2020. In light of the COVID-19 pandemic impact on overall economic conditions and consistent with regulatory guidance, M&T has ceased repurchasing its common stock for the time being and does not anticipate repurchasing any shares during the thirdfourth quarter of 2020.  M&T repurchased 2,450,000 shares of its common stock for $402 million in the second quarter of 2019 and 4,600,000 shares for $768 million during the first half of 2019.

Cash dividends declared on M&T’s common stock totaled $143 million in each of the first quarters of 2021 and 2020, compared with $142 million in the recent quarter, compared with $135 million and $143 million during the quarters ended June 30, 2019 and March 31, 2020, respectively.  During the fourthfinal quarter of 2019, M&T’s Board of Directors authorized an increase in the quarterly common stock dividend to $1.10 per common share from the previous rate of $1.00 per common share.2020.  Cash dividends declared on preferred stock aggregated $17 million in each of the first two most recent quarters of 2020, compared with $18 millionand in the secondfirst quarter of 2019.2020.

M&T and its subsidiary banks are required to comply with applicable capital adequacy standards established by the federal banking agencies. Pursuant to those regulations, the minimum capital ratios are as follows:

 

4.5% Common Equity Tier 1 (“CET1”) to risk-weighted assets (each as defined in the capital regulations);

 

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets (each as defined in the capital regulations);

 

8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets (each as defined in the capital regulations); and

 

4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”), as defined in the capital regulations.

In addition, capital regulations require a “capital conservation buffer” of 2.5% composed entirely of CET1 on top of the minimum risk-weighted asset ratios.

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The federal bank regulatory agencies have issued rules that allow banks and bank holding companies to phase -inphase-in the impact of adopting the expected credit loss accounting model on regulatory capital. Those rules allow banks and bank holding companies to delay for two years the day one impact on retained earnings of adopting the expected loss accounting standard and 25% of the cumulative change in the reported allowance for credit losses subsequent to the initial adoption, followed by a three yearthree-year transition period. M&T and its subsidiary banks have elected to adoptadopted these rules and the impact is reflected in the regulatory capital ratios presented below.

The regulatory capital ratios of the Company and its bank subsidiaries, M&T Bank and Wilmington Trust, N.A., as of June 30, 2020March 31, 2021 are presented in the accompanying table.

REGULATORY CAPITAL RATIOS

June 30, 2020

March 31, 2021

 

M&T

 

 

M&T

 

 

Wilmington

 

 

M&T

 

 

M&T

 

 

Wilmington

 

 

(Consolidated)

 

 

Bank

 

 

Trust, N.A.

 

 

(Consolidated)

 

 

Bank

 

 

Trust, N.A.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity Tier 1

 

 

9.50%

 

 

 

10.32%

 

 

 

49.49%

 

 

 

10.42%

 

 

 

11.29%

 

 

 

41.29%

 

Tier 1 capital

 

 

10.69%

 

 

 

10.32%

 

 

 

49.49%

 

 

 

11.61%

 

 

 

11.29%

 

 

 

41.29%

 

Total capital

 

 

12.98%

 

 

 

12.13%

 

 

 

49.66%

 

 

 

13.81%

 

 

 

13.01%

 

 

 

41.40%

 

Tier 1 leverage

 

 

8.56%

 

 

 

8.27%

 

 

 

11.58%

 

 

 

8.49%

 

 

 

8.26%

 

 

 

9.84%

 

 

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The Company is subject to the comprehensive regulatory framework applicable to bank and financial holding companies and their subsidiaries, which includes examinations by a number of regulators. Regulation of financial institutions such as M&T and its subsidiaries is intended primarily for the protection of depositors, the Deposit Insurance Fund of the FDIC and the banking and financial system as a whole, and generally is not intended for the protection of shareholders, investors or creditors other than insured depositors. Changes in laws, regulations and regulatory policies applicable to the Company’s operations can increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive environment in which the Company operates, all of which could have a material effect on the business, financial condition or results of operations of the Company and in M&T’s ability to pay dividends. For additional information concerning this comprehensive regulatory framework, refer to Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, 2019.2020.

Segment Information

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 1314 of Notes to Financial Statements. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.

The Business Banking segment earnedcontributed net income of $38$46 million induring the second quarter of 2020,three-month period ended March 31, 2021, compared with $42 million in the second quarter of 2019 and $33 million in the first quarter of 2020 and $53 million in the fourth quarter of 2020. As compared with the year-earlier quarter, a $22 million increase in net interest income and a $6 million reduction in the 11% recent quarter decline reflectedprovision for credit losses, due to lower net charge-offs, were partially offset by higher personnel-related costs of $4 million and a $4$3 million decrease in service charges on deposit accounts,accounts. The higher net interest income reflected higher average outstanding balances of deposits and loans of $5.0 billion and $2.6 billion, respectively, and a $376 basis point widening of the net interest margin on loans offset, in part, by a narrowing of the net interest margin on deposits of 111 basis points. The decline in net income in the initial 2021 quarter as compared with the immediately preceding quarter reflected a $5 million increase in personnel-related costs, lower merchant discount and credit card fees of $2 million, and $2 million of higher centrally-allocated costs associated with data processing, risk management and other support services provided to the Business Banking segment.

Net income of the Commercial Banking segment was $123 million in the recent quarter, compared with $144 million in the initial 2020 quarter and higher$122 million in the final 2020 quarter.  The recent quarter’s decline in net income as compared with the first quarter of 2020 included an increase in the provision for credit losses of $26 million that reflected the impact of portfolio composition and net charge-offs, and a $5 million decrease in trading account and foreign exchange gains that resulted from lower activity related to interest rate swap agreements

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executed on behalf of commercial customers. Those unfavorable factors were offset, in part, by a decline in personnel-related costs of $2$4 million. The slight increase in net income in the first quarter of 2021 quarter as compared with the fourth quarter of 2020 was due to higher fees for providing loan syndication services of $6 million and lower personnel-related costs of $6 million, partially offset by a $4$7 million increase in the provision for credit losses.

The Commercial Real Estate segment recorded net interest income.income of $71 million in the first quarter of 2021, compared with $117 million in the year-earlier period and $70 million in the fourth quarter of 2020.  The improvement39% decline in net income in the recent quarter as compared with the first quarter of 2020 reflected an increase in the provision for credit losses of $36 million, due to higher net charge-offs, a $13 million decline in net interest income, reflected higher average outstanding deposit and loan balanceslower trading account and foreign exchange gains of $3.4 billion and $2.7 billion, respectively, partially offset by$10 million, due largely to decreased activity related to interest rate swap transactions executed on behalf of commercial customers. The lower net interest income reflected a narrowing of the net interest margin on deposits and loans of 76105 basis points and 5419 basis points, respectively. The increase in average loan balances reflects PPP loans originated in 2020’s second quarter.  The recent quarter’s 14% increasemodest improvement in net income as compared with the firstimmediately preceding quarter of 2020 was largely due to an $8 million increase in net interest income and a $4 million decreasereflected decreases in the provision for credit losses (due to lower net charge-offs), partiallyand personnel-related expenses that were largely offset by declines of $4a decline in commercial mortgage banking revenues, reflecting lower gains on loans originated for sale, and a decrease in net interest income. The $9 million in service charges on deposit accounts and $2 million in merchant and credit card fee income, each reflecting the impact of the COVID-19 pandemic that has resulted in waived fees and reduced transaction activity. The improvementdecline in net interest income reflected higher average outstanding deposit and loan balances of $3.2 billion and $2.5 billion, respectively, partially offset by a narrowing of the net interest margin on deposits and loans of 42 and 6816 basis points respectively. Net income recorded by the Business Banking segment totaled $70 million in the first six months of 2020, compared with $86 million in the year-earlier period. That 18% year-over-year decrease was predominantly driven by a $9 million increase in the provision for credit losses, due to higher net charge-offs, higher personnel-related costs of $5 million and a $3 million decline in service charges on deposit accounts.

The Commercial Banking segment recorded net income of $111 million during the quarter ended June 30, 2020, down from $124 million in the year-earlier quarter and $144 million in the first quarter of 2020. The 10% decrease as compared with the second quarter of 2019 reflected an increase of $27 million in the provision for credit losses, due to higher net charge-offs, a $9 million write-down of equipment under operating leases and lower merchant discount and credit card fees and advisory fees of $4 million and $3 million, respectively. Those unfavorable factors were offset, in part, by higher net interest income of $23 million, reflecting increased average outstanding deposit and loan balances of $7.2 billion and $3.9 billion, respectively, partially offset by a narrowing of the net interest margin on deposits and loans of 65 and 143 basis points, respectively. The increased loan balances largely reflect PPP loans funded during the recent quarter,  The decrease in the recent quarter’s net income as compared with the immediately preceding quarter resulted from a $40 million increase in the provision for credit losses, due to higher net charge-offs, a $9 million write-down of operating lease equipment, a $7 million decrease in letter of credit and credit-related fees, predominantly due to lower loan syndication fees, and a $5 million decline in merchant discount and credit card fees. Partially offsetting those declines were higher net interest income of $16 million, reflecting a $5.9 billion increase in average outstanding deposit balances partially offset by a 38 basis point narrowing of the net interest margin on deposits, and a $6 million reduction in salaries and employee benefits expense.

Net income earned by the Commercial BankingDiscretionary Portfolio segment totaled

- 83 -


$255 $91 million forduring the first half of 2020, little changed from $256 million earned in the similar 2019 period. A higher provision for credit losses of $35 million, due to higher net charge-offs, was offset by a $30 million increase in net interest income, predominantly due to  increases in average outstanding deposit and loan balances of $4.1 billion and $2.6 billion, respectively, partially offset by a 29 basis point narrowing of the net interest margin on deposits, and a $7 million rise in letter of credit and credit-related fees, largely due to higher loan syndication fees.

The Commercial Real Estate segment recorded net income of $107 million in the second quarter of 2020,three-month period ended March 31, 2021, compared with $122$26 million in the year-earlier period and $117$108 million in the initial 2020 quarter. Contributing to the 12% decline in the recent quarter’s net income as compared with the year-earlier quarter was a $21 million increase in the provision for credit losses, largely due to higher net charge-offs, partially offset by a $7 million increase in net interest income, chiefly due to a $1.8 billion increase in average outstanding loan balances, partially offset by a 64 basis point narrowing of the net interest margin on deposits. The recent quarter decline in net income as compared with the initial 2020 quarter reflects a $20 million increase in the provision for credit losses and a $7 million decline in trading account and foreign exchange gains (reflecting reduced customer interest rate swap agreement activity). Partially offsetting those unfavorable factors were a $9 million increase in net interest income, predominantly due to a $974 million increase in average outstanding loan balances, a $4 million increase in mortgage banking revenues, and a $3 million decline in salaries and employee benefits. Net income for the Commercial Real Estate segment totaled $224 million and $239 million during the six-month periods ended June 30, 2020 and 2019, respectively. A $22 million increase in the provision for credit losses, mainly due to higher net charge-offs, was offset, in part, by higher trading account and foreign exchange gains of $5 million resulting from increased activity associated with interest rate swap agreements executed on behalf of commercial customers and a $3 million increase in net interest income, due primarily to an increase in average outstanding loan balances of $1.4 billion, partially offset by a 27 basis point narrowing of the net interest margin on deposits.

The Discretionary Portfolio segment contributed net income of $96 million during the three-month period ended June 30, 2020, up from $38 million in the year-earlier period and $26 million in the firstfourth quarter of 2020. The recent quarter improvement as compared with the second quarter of 2019 was largely driven by a $86 million increase in net interest income. This favorable factor was partially offset by a $3 million decrease in trading account and foreign exchange gains and a $2 million decline in valuation gains associated with marketable equity securities. Thesignificant improvement in the recent quarter’s net income as compared with the firstinitial 2020 quarter of 2020 was primarilypredominantly due to a $60 millionan increase in net interest income and higher valuations of marketable equity securities of $27 million. Year-to-date net income for this segment totaled $121 million in 2020 and $77 million in 2019. Contributing to the year-over-year improvement was a $105 million increase in net interest income, partially offset by valuation losses associated with marketable equity securities (compared with gains in the 2019 period) representing a change of $35 million. The increases in net interest income reflectthat reflected additional income from interest rate swap agreements utilized as part of the Company’s management of interest rate risk.

risk of $55 million. A 148 basis point and 55 basis point widening of the net interest margin on loans and deposits, respectively, also contributed to the higher net interest income. The 17% decline in net income in the initial 2021 quarter as compared with immediately preceding quarter reflected $12 million of valuation losses on marketable equity securities in the recent quarter (compared with valuation gains of $2 million in the fourth quarter of 2020) and lower net interest income of $7 million, largely reflecting a narrowing of the net interest margin on loans of 41 basis points.

Net income from the Residential Mortgage Banking segment was $37 million during the quarter ended June 30, 2020, up from $8$50 million in the year-earlier quarter andinitial three months of 2021, compared with $25 million in the first quarter of 2020.2020 and $27 million in 2020’s fourth quarter.  The increase in net income in the recent quarter as compared with the second 2019 quarter was driven byyear-earlier period reflected lower servicing-related costs (including intersegment costs and changes to the valuation allowance for capitalized residential mortgage servicing rights) of $21 million, higher net interest income of $18 million, reflecting increased average outstanding balances of loans and deposits of $2.3 billion and $1.6 billion, respectively, and higher revenues associated with mortgage origination and sales activities (including intersegment revenues) of $43 million, partially offset by higher personnel-related costs of $4$17 million. The increase in the recent quarter’s net income as compared with the immediately preceding quarter was due to higher revenues from mortgage origination and sales activities of $20 million, partially offset by a decrease of $8 million in servicing revenues (including intersegment revenues). The Residential Mortgage Banking segment had net income of $62 million in the first six months of 2020, up from $21 million in the corresponding 2019 period. That improvement reflected higher revenues from mortgage origination and sales activities (including intersegment revenues) of $70 million from the year-earlier period resulting from increased loan commitment volumes and improved margins, as well as a $9 million increase in servicing revenues (including intersegment revenues). Those favorable factors were partially offset in part, by higher additions to the valuation allowance for capitalized mortgage servicing rights ofan $11 million and increased salaries and employee benefits expense of $8 million.

- 84 -


Net income earned by the Retail Banking segment totaled $86 million in the second quarter of 2020, down from $140 million in the year-earlier quarter and $110 million in the initial 2020 quarter. The decline in the recently completed quarter as compared with the second quarter of 2019 was primarily driven by a $50 million decrease in net interest income, predominately due to the impactrevenues associated with servicing and sub-servicing residential real estate loans (including intersegment revenues) and $7 million of a narrowing of the net interest margin on deposits of 71 basis points, partially offset by higher average outstanding deposit and loan balances of $2.0 billion and $1.3 billion, respectively. Also contributing to the lower net income was a $25 million decreaseincreases in service charges on deposit accounts, reflective of fee waivers and lower customer transaction activity as a result of the COVID-19 pandemic. The 22% decrease in net income in the second quarter of 2020 as compared with the initial 2020 quarter reflected a $24 million decline in net interest income, mainly driven by a 35 basis point narrowing of the net interest margin on deposits, and a $22 million decrease in service charges on deposit accounts offset, in part, by a lower provision for credit losses of $9 million, mainly due to lower net charge-offs, and  decreased centrally-allocated expensescosts associated with data processing, risk management and other support services provided to the RetailResidential Mortgage Banking segmentsegment. As compared with the final quarter of $4 million. 2020, the improved performance in the recent quarter reflected lower servicing-related costs (including intersegment costs and changes to the valuation allowance for capitalized residential mortgage servicing rights) of $15 million, higher revenues associated with mortgage origination and sales activities (including intersegment revenues) of $6 million, and a $5 million increase in revenues associated with servicing and sub-servicing residential real estate loans (including intersegment revenues).

Net income recordedearned by the Retail Banking segment totaled $197$85 million in the first halfquarter of 2020 and $2862021, compared with $110 million in the similar periodyear-earlier quarter and $83 million in the final 2020 quarter. The 23% decline in net income in the recent quarter as compared with the first quarter of 2019. Factors contributing2020 resulted predominantly from a $46 million decline in net interest income, due largely to that 31% year-over-year declinean 85 basis point narrowing of the net interest margin on deposits, partially offset by an increase of average outstanding deposit balances of $6.0 billion, and a $10 million decrease in service charges on deposit accounts. Those factors were partially offset by a $17 million decrease in the provision for credit losses, due to lower net charge-offs, and lower personnel-related costs of $7 million. The recent quarter’s

- 73 -


slightly improved performance as compared with the fourth quarter of 2020 was due to decreases in the provision for credit losses and net occupancy expenses of $12 million. Those favorable factors were offset, in part, by $5 million decreases in each of service charges on deposit accounts and net interest income. The lower net interest income of $75 million, reflectingreflected a narrowing of the net interest margin on deposits of 299 basis points that was partially offset by a $1.5 billionan increase in average outstanding loandeposit balances a $24 million decline in service charges on deposit accounts, and higher personnel-related costs of $12 million.$2.1 billion.

The “All Other” category reflects other activities of the Company that are not directly attributable to the reported segments.  Reflected in this category are the amortization of core deposit and other intangible assets resulting from the acquisitions of financial institutions, distributed incomedistributions from BLG, merger-related expenses resulting from acquisitions, (when incurred) and the net impact of the Company’s allocation methodologies for internal transfers for funding charges and credits associated with the earning assets and interest-bearing liabilities of the Company’s reportable segments and the provision for credit losses.  The “All Other” category also includes trust income of the Company that reflects the ICS and WAS business activities.  The various components of the “All Other” category resulted in net losses totaling $234$18 million $302,000, and $186 million for the quarters ended June 30, 2020 and 2019 andin the first quarter of 2020, respectively. As2021 and $186 million in the year-earlier quarter, compared with net income of $7 million in the fourth quarter of 2020.  The significantly lower loss in the recent quarter as compared with the year-earlierinitial 2020 quarter the higher recent quarter net loss reflected an increaselargely reflected: a decrease to the provision for credit losses of $226$312 million; a $7 million increase in trust income; lower advertising and promotional expenses of $6 million; and the unfavorablefavorable 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 unfavorablefavorable factors were partially offset by a $73lower income from BLG of $23 million; $15 million decrease in higher professional servicesservices; and higher personnel-related expenses an $8of $6 million, increase in trust incomeincluding incentive-based compensation and a $7 million decline in advertising and marketingemployee benefits expenses. The declineAs compared with the immediately preceding quarter, factors contributing to the unfavorable performance in the recent quarter as compared withincluded: a $75 million rise in personnel-related costs that included the firstseasonally higher stock-based compensation and employee benefits expenses; $30 million of income received from BLG in the fourth quarter of 2020 was primarily due to an increase2020; and $18 million of higher professional services costs. Partially offsetting those unfavorable factors were a decrease to the provision for credit losses of $32$73 million, $23lower FDIC assessments of $6 million, higher trust income of income from BLG received$5 million in the first quarter of 2020,2021, and the unfavorablefavorable impact from the Company'sCompany’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 unfavorable factors were partially offset by decreases in salaries and employee benefits expenses of $75 million and in advertising and marketing expenses of $10 million. The “All Other” category had a net loss of $420 million for the six months ended June 30, 2020, compared with net loss of $8 million in the corresponding period of 2019. The unfavorable performance in 2020 as compared with 2019 was predominantly driven by: an increase in the provision for credit losses of $430 million, increased salaries and benefits of $19 million, a $13 million increase in outside data processing and software expense, and the unfavorable impact from the Company's allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company's reportable segments. Partially offsetting those unfavorable factors were: a $48 million charge in 2019 associated with the reduction of the carrying value of an investment in an asset manager, lower professional services costs of $39 million and higher trust income of $23 million.methodologies.

Recent Accounting Developments

A discussion of recent accounting developments is included in note 1516 of Notes to Financial Statements.

- 85 -


Forward-Looking 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.  Any statement that does not describe historical or current facts is a forward-looking statement, including statementsstatement.

Statements regarding the potential effects of the COVID-19 pandemic on the Company’sCompany's business, financial condition, liquidity and results of operations. operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company's control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on customers, clients, third parties and the Company.

Statements regarding the Company’s expectations or predictions regarding the proposed transaction between M&T and People’s United also are forward-looking statements, including statements regarding the expected timing, completion and effects of the proposed transaction as well as M&T’s and People’s United’s expected financial results, prospects, targets, goals and outlook.  

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

- 74 -


statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Forward-looking statements speak only as of the date they are made and the Company assumes no duty to update forward-looking statements.

Future Factors include changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values on loans, collateral securing loans, and other assets; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and number of stock-based compensation awards to be issued in future periods; risks, predictions and uncertainties relating to the impact of the COVID-19 pandemic;pandemic and the People’s United transaction; the impact of changes in market values on trust-related revenues; legislation and/or regulationregulations affecting the financial services industry as a whole, and M&T and its subsidiaries individually or collectively, including tax legislation or regulation; regulatory supervision and oversight, including monetary policy and capital requirements; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board, regulatory agencies or legislation; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual 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.

Further, statements about the potential effects of the COVID-19 pandemic on the Company’s business, financial condition, liquidityM&T provides further detail regarding these risks, uncertainties and results of operations may constitute forward-looking statementsother factors elsewhere in this quarterly report and are subject toin other public filings, including the risk thatfactors described in Form 10-K for the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factorsyear ended December 31, 2020 and future developments that are uncertain, unpredictable and in many cases beyond the Company’s control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on customers, clients, third parties and the Company.this quarterly report.

- 8675 -


 

M&T BANK CORPORATION AND SUBSIDIARIES

Table 1

QUARTERLY TRENDS

 

 

2020 Quarters

 

 

2019 Quarters

 

 

 

2021

 

 

2020 Quarters

 

 

 

Second

 

 

First

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

 

 

 

First Quarter

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

 

 

Earnings and dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts in thousands, except per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (taxable-equivalent basis)

 

$

1,036,476

 

 

 

1,125,482

 

 

 

1,191,295

 

 

 

1,235,048

 

 

 

1,243,838

 

 

 

1,232,276

 

 

 

$

1,020,695

 

 

 

1,042,862

 

 

 

1,005,180

 

 

 

1,036,476

 

 

 

1,125,482

 

 

Interest expense

 

 

75,105

 

 

 

143,614

 

 

 

177,070

 

 

 

199,579

 

 

 

196,432

 

 

 

176,249

 

 

 

 

35,567

 

 

 

49,610

 

 

 

58,066

 

 

 

75,105

 

 

 

143,614

 

 

Net interest income

 

 

961,371

 

 

 

981,868

 

 

 

1,014,225

 

 

 

1,035,469

 

 

 

1,047,406

 

 

 

1,056,027

 

 

 

 

985,128

 

 

 

993,252

 

 

 

947,114

 

 

 

961,371

 

 

 

981,868

 

 

Less: provision for credit losses

 

 

325,000

 

 

 

250,000

 

 

 

54,000

 

 

 

45,000

 

 

 

55,000

 

 

 

22,000

 

 

 

 

(25,000

)

 

 

75,000

 

 

 

150,000

 

 

 

325,000

 

 

 

250,000

 

 

Other income

 

 

487,273

 

 

 

529,360

 

 

 

521,040

 

 

 

527,779

 

 

 

512,095

 

 

 

500,765

 

 

 

 

505,598

 

 

 

551,250

 

 

 

520,561

 

 

 

487,273

 

 

 

529,360

 

 

Less: other expense

 

 

807,042

 

 

 

906,416

 

 

 

823,683

 

 

 

877,619

 

 

 

873,032

 

 

 

894,348

 

 

 

 

919,444

 

 

 

845,008

 

 

 

826,774

 

 

 

807,042

 

 

 

906,416

 

 

Income before income taxes

 

 

316,602

 

 

 

354,812

 

 

 

657,582

 

 

 

640,629

 

 

 

631,469

 

 

 

640,444

 

 

 

 

596,282

 

 

 

624,494

 

 

 

490,901

 

 

 

316,602

 

 

 

354,812

 

 

Applicable income taxes

 

 

71,314

 

 

 

80,927

 

 

 

159,124

 

 

 

154,969

 

 

 

152,284

 

 

 

151,735

 

 

 

 

145,300

 

 

 

149,382

 

 

 

114,746

 

 

 

71,314

 

 

 

80,927

 

 

Taxable-equivalent adjustment

 

 

4,234

 

 

 

5,063

 

 

 

5,392

 

 

 

5,579

 

 

 

5,925

 

 

 

5,967

 

 

 

 

3,733

 

 

 

3,972

 

 

 

4,019

 

 

 

4,234

 

 

 

5,063

 

 

Net income

 

$

241,054

 

 

 

268,822

 

 

 

493,066

 

 

 

480,081

 

 

 

473,260

 

 

 

482,742

 

 

 

$

447,249

 

 

 

471,140

 

 

 

372,136

 

 

 

241,054

 

 

 

268,822

 

 

Net income available to common shareholders-diluted

 

$

223,099

 

 

 

250,701

 

 

 

473,372

 

 

 

461,410

 

 

 

452,633

 

 

 

462,086

 

 

 

$

428,093

 

 

 

451,869

 

 

 

353,400

 

 

 

223,099

 

 

 

250,701

 

 

Per common share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

1.74

 

 

 

1.93

 

 

 

3.60

 

 

 

3.47

 

 

 

3.34

 

 

 

3.35

 

 

 

$

3.33

 

 

 

3.52

 

 

 

2.75

 

 

 

1.74

 

 

 

1.93

 

 

Diluted earnings

 

 

1.74

 

 

 

1.93

 

 

 

3.60

 

 

 

3.47

 

 

 

3.34

 

 

 

3.35

 

 

 

 

3.33

 

 

 

3.52

 

 

 

2.75

 

 

 

1.74

 

 

 

1.93

 

 

Cash dividends

 

$

1.10

 

 

 

1.10

 

 

 

1.10

 

 

 

1.00

 

 

 

1.00

 

 

 

1.00

 

 

 

$

1.10

 

 

 

1.10

 

 

 

1.10

 

 

 

1.10

 

 

 

1.10

 

 

Average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

128,275

 

 

 

129,696

 

 

 

131,512

 

 

 

132,965

 

 

 

135,433

 

 

 

137,889

 

 

 

 

128,537

 

 

 

128,303

 

 

 

128,285

 

 

 

128,275

 

 

 

129,696

 

 

Diluted

 

 

128,333

 

 

 

129,755

 

 

 

131,549

 

 

 

132,999

 

 

 

135,464

 

 

 

137,920

 

 

 

 

128,669

 

 

 

128,379

 

 

 

128,355

 

 

 

128,333

 

 

 

129,755

 

 

Performance ratios, annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average assets

 

 

.71

 

%

 

.90

 

%

 

1.60

 

%

 

1.58

 

%

 

1.60

 

%

 

1.68

 

%

 

 

1.22

 

%

 

1.30

 

%

 

1.06

 

%

 

.71

 

%

 

.90

 

%

Average common shareholders’ equity

 

 

6.13

 

%

 

7.00

 

%

 

12.95

 

%

 

12.73

 

%

 

12.68

 

%

 

13.14

 

%

 

 

11.57

 

%

 

12.07

 

%

 

9.53

 

%

 

6.13

 

%

 

7.00

 

%

Net interest margin on average earning assets

(taxable-equivalent basis)

 

 

3.13

 

%

 

3.65

 

%

 

3.64

 

%

 

3.78

 

%

 

3.91

 

%

 

4.04

 

%

 

 

2.97

 

%

 

3.00

 

%

 

2.95

 

%

 

3.13

 

%

 

3.65

 

%

Nonaccrual loans to total loans and leases, net of

unearned discount

 

 

1.18

 

%

 

1.13

 

%

 

1.06

 

%

 

1.12

 

%

 

.96

 

%

 

.99

 

%

 

 

1.97

 

%

 

1.92

 

%

 

1.26

 

%

 

1.18

 

%

 

1.13

 

%

Net operating (tangible) results (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income (in thousands)

 

$

243,958

 

 

 

271,705

 

 

 

496,237

 

 

 

483,830

 

 

 

477,001

 

 

 

486,440

 

 

 

$

457,372

 

 

 

473,453

 

 

 

375,029

 

 

 

243,958

 

 

 

271,705

 

 

Diluted net operating income per common share

 

$

1.76

 

 

 

1.95

 

 

 

3.62

 

 

 

3.50

 

 

 

3.37

 

 

 

3.38

 

 

 

$

3.41

 

 

 

3.54

 

 

 

2.77

 

 

 

1.76

 

 

 

1.95

 

 

Annualized return on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average tangible assets

 

 

.74

 

%

 

.94

 

%

 

1.67

 

%

 

1.66

 

%

 

1.68

 

%

 

1.76

 

%

 

 

1.29

 

%

 

1.35

 

%

 

1.10

 

%

 

.74

 

%

 

.94

 

%

Average tangible common shareholders’ equity

 

 

9.04

 

%

 

10.39

 

%

 

19.08

 

%

 

18.85

 

%

 

18.83

 

%

 

19.56

 

%

 

 

17.05

 

%

 

17.53

 

%

 

13.94

 

%

 

9.04

 

%

 

10.39

 

%

Efficiency ratio (b)

 

 

55.71

 

%

 

58.91

 

%

 

53.15

 

%

 

55.95

 

%

 

55.98

 

%

 

57.56

 

%

 

 

60.3

 

%

 

54.6

 

%

 

56.2

 

%

 

55.7

 

%

 

58.9

 

%

Balance sheet data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions, except per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets (c)

 

$

136,446

 

 

 

120,585

 

 

 

122,554

 

 

 

120,388

 

 

 

118,487

 

 

 

116,839

 

 

 

$

148,157

 

 

 

144,563

 

 

 

140,181

 

 

 

136,446

 

 

 

120,585

 

 

Total tangible assets (c)

 

 

131,836

 

 

 

115,972

 

 

 

117,938

 

 

 

115,769

 

 

 

113,864

 

 

 

112,213

 

 

 

 

143,554

 

 

 

139,958

 

 

 

135,574

 

 

 

131,836

 

 

 

115,972

 

 

Earning assets

 

 

123,492

 

 

 

108,226

 

 

 

110,581

 

 

 

108,643

 

 

 

107,511

 

 

 

106,096

 

 

 

 

134,355

 

 

 

131,916

 

 

 

127,689

 

 

 

123,492

 

 

 

108,226

 

 

Investment securities

 

 

8,500

 

 

 

9,102

 

 

 

10,044

 

 

 

11,075

 

 

 

12,170

 

 

 

12,949

 

 

 

 

6,605

 

 

 

7,195

 

 

 

7,876

 

 

 

8,500

 

 

 

9,102

 

 

Loans and leases, net of unearned discount

 

 

97,797

 

 

 

91,706

 

 

 

90,244

 

 

 

90,078

 

 

 

89,150

 

 

 

88,477

 

 

 

 

99,356

 

 

 

98,666

 

 

 

98,210

 

 

 

97,797

 

 

 

91,706

 

 

Deposits

 

 

111,795

 

 

 

96,166

 

 

 

96,903

 

 

 

94,095

 

 

 

91,371

 

 

 

89,733

 

 

 

 

125,733

 

 

 

120,976

 

 

 

116,306

 

 

 

111,795

 

 

 

96,166

 

 

Common shareholders’ equity (c)

 

 

14,703

 

 

 

14,470

 

 

 

14,582

 

 

 

14,464

 

 

 

14,398

 

 

 

14,337

 

 

 

 

15,077

 

 

 

14,963

 

 

 

14,823

 

 

 

14,703

 

 

 

14,470

 

 

Tangible common shareholders’ equity (c)

 

 

10,093

 

 

 

9,857

 

 

 

9,966

 

 

 

9,845

 

 

 

9,775

 

 

 

9,711

 

 

 

 

10,474

 

 

 

10,358

 

 

 

10,216

 

 

 

10,093

 

 

 

9,857

 

 

At end of quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets (c)

 

$

139,537

 

 

 

124,578

 

 

 

119,873

 

 

 

125,501

 

 

 

121,555

 

 

 

120,025

 

 

 

$

150,481

 

 

 

142,601

 

 

 

138,627

 

 

 

139,537

 

 

 

124,578

 

 

Total tangible assets (c)

 

 

134,928

 

 

 

119,966

 

 

 

115,258

 

 

 

120,883

 

 

 

116,934

 

 

 

115,400

 

 

 

 

145,879

 

 

 

137,998

 

 

 

134,021

 

 

 

134,928

 

 

 

119,966

 

 

Earning assets

 

 

127,149

 

 

 

112,046

 

 

 

107,673

 

 

 

113,067

 

 

 

110,323

 

 

 

108,849

 

 

 

 

137,367

 

 

 

129,295

 

 

 

126,418

 

 

 

127,149

 

 

 

112,046

 

 

Investment securities

 

 

8,454

 

 

 

8,957

 

 

 

9,497

 

 

 

10,678

 

 

 

11,580

 

 

 

12,537

 

 

 

 

6,611

 

 

 

7,046

 

 

 

7,723

 

 

 

8,454

 

 

 

8,957

 

 

Loans and leases, net of unearned discount

 

 

97,758

 

 

 

94,142

 

 

 

90,923

 

 

 

89,823

 

 

 

89,878

 

 

 

88,640

 

 

 

 

99,299

 

 

 

98,536

 

 

 

98,447

 

 

 

97,758

 

 

 

94,142

 

 

Deposits

 

 

114,968

 

 

 

100,183

 

 

 

94,770

 

 

 

95,114

 

 

 

91,681

 

 

 

90,470

 

 

 

 

128,476

 

 

 

119,806

 

 

 

115,163

 

 

 

114,968

 

 

 

100,183

 

 

Common shareholders’ equity, net of undeclared

cumulative preferred dividends (c)

 

 

14,695

 

 

 

14,566

 

 

 

14,467

 

 

 

14,530

 

 

 

14,457

 

 

 

14,353

 

 

Common shareholders’ equity (c)

 

 

15,197

 

 

 

14,937

 

 

 

14,851

 

 

 

14,695

 

 

 

14,566

 

 

Tangible common shareholders’ equity (c)

 

 

10,086

 

 

 

9,954

 

 

 

9,852

 

 

 

9,912

 

 

 

9,836

 

 

 

9,728

 

 

 

 

10,595

 

 

 

10,334

 

 

 

10,245

 

 

 

10,086

 

 

 

9,954

 

 

Equity per common share

 

 

114.54

 

 

 

113.54

 

 

 

110.78

 

 

 

109.84

 

 

 

107.73

 

 

 

105.04

 

 

 

 

118.12

 

 

 

116.39

 

 

 

115.75

 

 

 

114.54

 

 

 

113.54

 

 

Tangible equity per common share

 

 

78.62

 

 

 

77.60

 

 

 

75.44

 

 

 

74.93

 

 

 

73.29

 

 

 

71.19

 

 

 

 

82.35

 

 

 

80.52

 

 

 

79.85

 

 

 

78.62

 

 

 

77.60

 

 

(a)

Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses which, except in the calculation of the efficiency ratio, are net of applicable income tax effects. A reconciliation of net income and net operating income appears in Table 2.

(b)

Excludes impact of merger-related expenses and net securities transactions.

(c)

The difference between total assets and total tangible assets, and common shareholders’ equity and tangible common shareholders’ equity, represents goodwill, core deposit and other intangible assets, net of applicable deferred tax balances. A reconciliation of such balances appears in Table 2.

- 8776 -


 

M&T BANK CORPORATION AND SUBSIDIARIES

Table 2

RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES

 

 

2020

 

 

2019 Quarters

 

 

 

2021

 

 

2020 Quarters

 

 

 

Second

 

 

First

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

 

 

 

First Quarter

 

 

Fourth

 

 

Third

 

 

Second

 

 

First

 

 

Income statement data (in thousands, except per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

241,054

 

 

 

268,822

 

 

 

493,066

 

 

 

480,081

 

 

 

473,260

 

 

 

482,742

 

 

 

$

447,249

 

 

 

471,140

 

 

 

372,136

 

 

 

241,054

 

 

 

268,822

 

 

Amortization of core deposit and other

intangible assets (a)

 

 

2,904

 

 

 

2,883

 

 

 

3,171

 

 

 

3,749

 

 

 

3,741

 

 

 

3,698

 

 

 

 

2,034

 

 

 

2,313

 

 

 

2,893

 

 

 

2,904

 

 

 

2,883

 

 

Merger-related expenses (a)

 

 

8,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

243,958

 

 

 

271,705

 

 

 

496,237

 

 

 

483,830

 

 

 

477,001

 

 

 

486,440

 

 

 

$

457,372

 

 

 

473,453

 

 

 

375,029

 

 

 

243,958

 

 

 

271,705

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

1.74

 

 

 

1.93

 

 

 

3.60

 

 

 

3.47

 

 

 

3.34

 

 

 

3.35

 

 

 

$

3.33

 

 

 

3.52

 

 

 

2.75

 

 

 

1.74

 

 

 

1.93

 

 

Amortization of core deposit and other

intangible assets (a)

 

 

.02

 

 

 

.02

 

 

 

.02

 

 

 

.03

 

 

 

.03

 

 

 

.03

 

 

 

 

.02

 

 

 

.02

 

 

 

.02

 

 

 

.02

 

 

 

.02

 

 

Merger-related expenses (a)

 

 

.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net operating earnings per common share

 

$

1.76

 

 

 

1.95

 

 

 

3.62

 

 

 

3.50

 

 

 

3.37

 

 

 

3.38

 

 

 

$

3.41

 

 

 

3.54

 

 

 

2.77

 

 

 

1.76

 

 

 

1.95

 

 

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense

 

$

807,042

 

 

 

906,416

 

 

 

823,683

 

 

 

877,619

 

 

 

873,032

 

 

 

894,348

 

 

 

$

919,444

 

 

 

845,008

 

 

 

826,774

 

 

 

807,042

 

 

 

906,416

 

 

Amortization of core deposit and other

intangible assets

 

 

(3,913

)

 

 

(3,913

)

 

 

(4,305

)

 

 

(5,088

)

 

 

(5,077

)

 

 

(5,020

)

 

 

 

(2,738

)

 

 

(3,129

)

 

 

(3,914

)

 

 

(3,913

)

 

 

(3,913

)

 

Merger-related expenses

 

 

(9,951

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest operating expense

 

$

803,129

 

 

 

902,503

 

 

 

819,378

 

 

 

872,531

 

 

 

867,955

 

 

 

889,328

 

 

 

$

906,755

 

 

 

841,879

 

 

 

822,860

 

 

 

803,129

 

 

 

902,503

 

 

Efficiency ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest operating expense (numerator)

 

$

803,129

 

 

 

902,503

 

 

 

819,378

 

 

 

872,531

 

 

 

867,955

 

 

 

889,328

 

 

 

$

906,755

 

 

 

841,879

 

 

 

822,860

 

 

 

803,129

 

 

 

902,503

 

 

Taxable-equivalent net interest income

 

$

961,371

 

 

 

981,868

 

 

 

1,014,225

 

 

 

1,035,469

 

 

 

1,047,406

 

 

 

1,056,027

 

 

 

$

985,128

 

 

 

993,252

 

 

 

947,114

 

 

 

961,371

 

 

 

981,868

 

 

Other income

 

 

487,273

 

 

 

529,360

 

 

 

521,040

 

 

 

527,779

 

 

 

512,095

 

 

 

500,765

 

 

 

 

505,598

 

 

 

551,250

 

 

 

520,561

 

 

 

487,273

 

 

 

529,360

 

 

Less: Gain (loss) on bank investment securities

 

 

6,969

 

 

 

(20,782

)

 

 

(6,452

)

 

 

3,737

 

 

 

8,911

 

 

 

11,841

 

 

 

 

(12,282

)

 

 

1,619

 

 

 

2,773

 

 

 

6,969

 

 

 

(20,782

)

 

Denominator

 

$

1,441,675

 

 

 

1,532,010

 

 

 

1,541,717

 

 

 

1,559,511

 

 

 

1,550,590

 

 

 

1,544,951

 

 

 

$

1,503,008

 

 

 

1,542,883

 

 

 

1,464,902

 

 

 

1,441,675

 

 

 

1,532,010

 

 

Efficiency ratio

 

 

55.71

%

 

 

58.91

%

 

 

53.15

%

 

 

55.95

%

 

 

55.98

%

 

 

57.56

%

 

 

 

60.3

%

 

 

54.6

%

 

 

56.2

%

 

 

55.7

%

 

 

58.9

%

 

Balance sheet data (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average assets

 

$

136,446

 

 

 

120,585

 

 

 

122,554

 

 

 

120,388

 

 

 

118,487

 

 

 

116,839

 

 

 

$

148,157

 

 

 

144,563

 

 

 

140,181

 

 

 

136,446

 

 

 

120,585

 

 

Goodwill

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

Core deposit and other intangible assets

 

 

(23

)

 

 

(27

)

 

 

(31

)

 

 

(36

)

 

 

(41

)

 

 

(45

)

 

 

 

(13

)

 

 

(16

)

 

 

(19

)

 

 

(23

)

 

 

(27

)

 

Deferred taxes

 

 

6

 

 

 

7

 

 

 

8

 

 

 

10

 

 

 

11

 

 

 

12

 

 

 

 

3

 

 

 

4

 

 

 

5

 

 

 

6

 

 

 

7

 

 

Average tangible assets

 

$

131,836

 

 

 

115,972

 

 

 

117,938

 

 

 

115,769

 

 

 

113,864

 

 

 

112,213

 

 

 

$

143,554

 

 

 

139,958

 

 

 

135,574

 

 

 

131,836

 

 

 

115,972

 

 

Average common equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total equity

 

$

15,953

 

 

 

15,720

 

 

 

15,832

 

 

 

15,837

 

 

 

15,630

 

 

 

15,569

 

 

 

$

16,327

 

 

 

16,213

 

 

 

16,073

 

 

 

15,953

 

 

 

15,720

 

 

Preferred stock

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,373

)

 

 

(1,232

)

 

 

(1,232

)

 

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

Average common equity

 

 

14,703

 

 

 

14,470

 

 

 

14,582

 

 

 

14,464

 

 

 

14,398

 

 

 

14,337

 

 

 

 

15,077

 

 

 

14,963

 

 

 

14,823

 

 

 

14,703

 

 

 

14,470

 

 

Goodwill

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

Core deposit and other intangible assets

 

 

(23

)

 

 

(27

)

 

 

(31

)

 

 

(36

)

 

 

(41

)

 

 

(45

)

 

 

 

(13

)

 

 

(16

)

 

 

(19

)

 

 

(23

)

 

 

(27

)

 

Deferred taxes

 

 

6

 

 

 

7

 

 

 

8

 

 

 

10

 

 

 

11

 

 

 

12

 

 

 

 

3

 

 

 

4

 

 

 

5

 

 

 

6

 

 

 

7

 

 

Average tangible common equity

 

$

10,093

 

 

 

9,857

 

 

 

9,966

 

 

 

9,845

 

 

 

9,775

 

 

 

9,711

 

 

 

$

10,474

 

 

 

10,358

 

 

 

10,216

 

 

 

10,093

 

 

 

9,857

 

 

At end of quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

139,537

 

 

 

124,578

 

 

 

119,873

 

 

 

125,501

 

 

 

121,555

 

 

 

120,025

 

 

 

$

150,481

 

 

 

142,601

 

 

 

138,627

 

 

 

139,537

 

 

 

124,578

 

 

Goodwill

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

Core deposit and other intangible assets

 

 

(21

)

 

 

(25

)

 

 

(29

)

 

 

(33

)

 

 

(38

)

 

 

(44

)

 

 

 

(12

)

 

 

(14

)

 

 

(17

)

 

 

(21

)

 

 

(25

)

 

Deferred taxes

 

 

5

 

 

 

6

 

 

 

7

 

 

 

8

 

 

 

10

 

 

 

12

 

 

 

 

3

 

 

 

4

 

 

 

4

 

 

 

5

 

 

 

6

 

 

Total tangible assets

 

$

134,928

 

 

 

119,966

 

 

 

115,258

 

 

 

120,883

 

 

 

116,934

 

 

 

115,400

 

 

 

$

145,879

 

 

 

137,998

 

 

 

134,021

 

 

 

134,928

 

 

 

119,966

 

 

Total common equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

$

15,945

 

 

 

15,816

 

 

 

15,717

 

 

 

15,780

 

 

 

15,692

 

 

 

15,588

 

 

 

$

16,447

 

 

 

16,187

 

 

 

16,101

 

 

 

15,945

 

 

 

15,816

 

 

Preferred stock

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,232

)

 

 

(1,232

)

 

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

 

(1,250

)

 

Undeclared dividends - cumulative preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

 

Common equity, net of undeclared

cumulative preferred dividends

 

 

14,695

 

 

 

14,566

 

 

 

14,467

 

 

 

14,530

 

 

 

14,457

 

 

 

14,353

 

 

Common equity

Common equity

 

15,197

 

 

 

14,937

 

 

 

14,851

 

 

 

14,695

 

 

 

14,566

 

 

Goodwill

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

 

(4,593

)

 

Core deposit and other intangible assets

 

 

(21

)

 

 

(25

)

 

 

(29

)

 

 

(33

)

 

 

(38

)

 

 

(44

)

 

 

 

(12

)

 

 

(14

)

 

 

(17

)

 

 

(21

)

 

 

(25

)

 

Deferred taxes

 

 

5

 

 

 

6

 

 

 

7

 

 

 

8

 

 

 

10

 

 

 

12

 

 

 

 

3

 

 

 

4

 

 

 

4

 

 

 

5

 

 

 

6

 

 

Total tangible common equity

 

$

10,086

 

 

 

9,954

 

 

 

9,852

 

 

 

9,912

 

 

 

9,836

 

 

 

9,728

 

 

 

$

10,595

 

 

 

10,334

 

 

 

10,245

 

 

 

10,086

 

 

 

9,954

 

 

(a)

After any related tax effect.

- 8877 -


 

M&T BANK CORPORATION AND SUBSIDIARIES

Table 3

AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES

 

 

2020 Second Quarter

 

 

2020 First Quarter

 

 

2019 Fourth Quarter

 

 

 

2021 First Quarter

 

 

2020 Fourth Quarter

 

 

2020 Third Quarter

 

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average balance in millions; interest

in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases, net of unearned

discount (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, etc.

 

$

29,733

 

 

$

229,058

 

 

 

3.10

 

%

 

24,290

 

 

 

247,344

 

 

 

4.10

 

%

 

23,548

 

 

 

258,969

 

 

 

4.36

 

%

 

$

27,723

 

 

$

240,961

 

 

 

3.53

 

%

 

27,713

 

 

 

247,847

 

 

 

3.56

 

%

 

28,333

 

 

 

217,171

 

 

 

3.05

 

%

Real estate – commercial

 

 

36,947

 

 

 

412,362

 

 

 

4.42

 

 

 

36,034

 

 

 

440,291

 

 

 

4.83

 

 

 

35,039

 

 

 

452,752

 

 

 

5.06

 

 

 

 

37,609

 

 

 

391,094

 

 

 

4.16

 

 

 

37,707

 

 

 

400,176

 

 

 

4.15

 

 

 

37,243

 

 

 

398,619

 

 

 

4.19

 

 

Real estate – consumer

 

 

15,599

 

 

 

156,135

 

 

 

4.00

 

 

 

15,931

 

 

 

160,650

 

 

 

4.03

 

 

 

16,330

 

 

 

169,371

 

 

 

4.15

 

 

 

 

17,404

 

 

 

154,219

 

 

 

3.54

 

 

 

16,761

 

 

 

149,218

 

 

 

3.56

 

 

 

16,558

 

 

 

152,594

 

 

 

3.69

 

 

Consumer

 

 

15,518

 

 

 

187,041

 

 

 

4.85

 

 

 

15,451

 

 

 

203,546

 

 

 

5.30

 

 

 

15,327

 

 

 

203,205

 

 

 

5.26

 

 

 

 

16,620

 

 

 

190,038

 

 

 

4.64

 

 

 

16,485

 

 

 

197,992

 

 

 

4.78

 

 

 

16,076

 

 

 

192,223

 

 

 

4.76

 

 

Total loans and leases, net

 

 

97,797

 

 

 

984,596

 

 

 

4.05

 

 

 

91,706

 

 

 

1,051,831

 

 

 

4.61

 

 

 

90,244

 

 

 

1,084,297

 

 

 

4.77

 

 

 

 

99,356

 

 

 

976,312

 

 

 

3.99

 

 

 

98,666

 

 

 

995,233

 

 

 

4.01

 

 

 

98,210

 

 

 

960,607

 

 

 

3.89

 

 

Interest-bearing deposits at banks

 

 

16,454

 

 

 

4,179

 

 

 

.10

 

 

 

6,130

 

 

 

18,966

 

 

 

1.24

 

 

 

8,944

 

 

 

37,277

 

 

 

1.65

 

 

 

 

27,666

 

 

 

6,874

 

 

 

.10

 

 

 

22,206

 

 

 

5,648

 

 

 

.10

 

 

 

16,440

 

 

 

4,163

 

 

 

.10

 

 

Federal funds sold and agreements

to resell securities

 

 

692

 

 

 

197

 

 

 

.11

 

 

 

1,224

 

 

 

4,072

 

 

 

1.34

 

 

 

1,279

 

 

 

5,405

 

 

 

1.68

 

 

 

 

678

 

 

 

202

 

 

 

.12

 

 

 

3,799

 

 

 

1,101

 

 

 

.12

 

 

 

5,113

 

 

 

1,615

 

 

 

.13

 

 

Trading account

 

 

49

 

 

 

248

 

 

 

2.04

 

 

 

64

 

 

 

419

 

 

 

2.64

 

 

 

70

 

 

 

765

 

 

 

4.36

 

 

 

 

50

 

 

 

178

 

 

 

1.44

 

 

 

50

 

 

 

243

 

 

 

1.97

 

 

 

50

 

 

 

201

 

 

 

1.62

 

 

Investment securities (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

 

7,796

 

 

 

43,889

 

 

 

2.26

 

 

 

8,359

 

 

 

45,449

 

 

 

2.19

 

 

 

9,272

 

 

 

57,123

 

 

 

2.44

 

 

 

 

5,920

 

 

 

34,094

 

 

 

2.34

 

 

 

6,497

 

 

 

37,768

 

 

 

2.31

 

 

 

7,177

 

 

 

37,157

 

 

 

2.06

 

 

Obligations of states and political

subdivisions

 

 

3

 

 

 

37

 

 

 

5.11

 

 

 

3

 

 

 

41

 

 

 

5.01

 

 

 

5

 

 

 

64

 

 

 

4.96

 

 

 

 

1

 

 

 

14

 

 

 

5.66

 

 

 

2

 

 

 

24

 

 

 

5.25

 

 

 

2

 

 

 

23

 

 

 

4.51

 

 

Other

 

 

701

 

 

 

3,330

 

 

 

1.91

 

 

 

740

 

 

 

4,704

 

 

 

2.56

 

 

 

767

 

 

 

6,364

 

 

 

3.29

 

 

 

 

684

 

 

 

3,021

 

 

 

1.79

 

 

 

696

 

 

 

2,845

 

 

 

1.63

 

 

 

697

 

 

 

1,414

 

 

 

.81

 

 

Total investment securities

 

 

8,500

 

 

 

47,256

 

 

 

2.24

 

 

 

9,102

 

 

 

50,194

 

 

 

2.22

 

 

 

10,044

 

 

 

63,551

 

 

 

2.51

 

 

 

 

6,605

 

 

 

37,129

 

 

 

2.28

 

 

 

7,195

 

 

 

40,637

 

 

 

2.25

 

 

 

7,876

 

 

 

38,594

 

 

 

1.95

 

 

Total earning assets

 

 

123,492

 

 

 

1,036,476

 

 

 

3.38

 

 

 

108,226

 

 

 

1,125,482

 

 

 

4.18

 

 

 

110,581

 

 

 

1,191,295

 

 

 

4.27

 

 

 

 

134,355

 

 

 

1,020,695

 

 

 

3.08

 

 

 

131,916

 

 

��

1,042,862

 

 

 

3.15

 

 

 

127,689

 

 

 

1,005,180

 

 

 

3.13

 

 

Allowance for credit losses

 

 

(1,401

)

 

 

 

 

 

 

 

 

 

 

(1,191

)

 

 

 

 

 

 

 

 

 

 

(1,040

)

 

 

 

 

 

 

 

 

 

 

 

(1,744

)

 

 

 

 

 

 

 

 

 

 

(1,768

)

 

 

 

 

 

 

 

 

 

 

(1,649

)

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

1,245

 

 

 

 

 

 

 

 

 

 

 

1,298

 

 

 

 

 

 

 

 

 

 

 

1,298

 

 

 

 

 

 

 

 

 

 

 

 

1,408

 

 

 

 

 

 

 

 

 

 

 

1,372

 

 

 

 

 

 

 

 

 

 

 

1,390

 

 

 

 

 

 

 

 

 

 

Other assets

 

 

13,110

 

 

 

 

 

 

 

 

 

 

 

12,252

 

 

 

 

 

 

 

 

 

 

 

11,715

 

 

 

 

 

 

 

 

 

 

 

 

14,138

 

 

 

 

 

 

 

 

 

 

 

13,043

 

 

 

 

 

 

 

 

 

 

 

12,751

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

136,446

 

 

 

 

 

 

 

 

 

 

 

120,585

 

 

 

 

 

 

 

 

 

 

 

122,554

 

 

 

 

 

 

 

 

 

 

 

$

148,157

 

 

 

 

 

 

 

 

 

 

 

144,563

 

 

 

 

 

 

 

 

 

 

 

140,181

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-checking

deposits

 

$

62,927

 

 

 

26,454

 

 

 

.17

 

 

 

56,366

 

 

 

78,002

 

 

 

.56

 

 

 

57,103

 

 

 

95,585

 

 

 

.66

 

 

 

$

70,458

 

 

 

11,504

 

 

 

.07

 

 

 

69,133

 

 

 

19,841

 

 

 

.11

 

 

 

65,848

 

 

 

22,403

 

 

 

.14

 

 

Time deposits

 

 

5,354

 

 

 

19,883

 

 

 

1.49

 

 

 

5,672

 

 

 

21,872

 

 

 

1.55

 

 

 

6,015

 

 

 

23,958

 

 

 

1.58

 

 

 

 

3,732

 

 

 

7,010

 

 

 

.76

 

 

 

4,113

 

 

 

10,006

 

 

 

.97

 

 

 

4,715

 

 

 

14,519

 

 

 

1.22

 

 

Deposits at Cayman Islands office

 

 

1,017

 

 

 

161

 

 

 

.06

 

 

 

1,672

 

 

 

3,419

 

 

 

.82

 

 

 

1,716

 

 

 

4,922

 

 

 

1.14

 

 

 

 

683

 

 

 

185

 

 

 

.11

 

 

 

826

 

 

 

233

 

 

 

.11

 

 

 

957

 

 

 

241

 

 

 

.10

 

 

Total interest-bearing deposits

 

 

69,298

 

 

 

46,498

 

 

 

.27

 

 

 

63,710

 

 

 

103,293

 

 

 

.65

 

 

 

64,834

 

 

 

124,465

 

 

 

.76

 

 

 

 

74,873

 

 

 

18,699

 

 

 

.10

 

 

 

74,072

 

 

 

30,080

 

 

 

.16

 

 

 

71,520

 

 

 

37,163

 

 

 

.21

 

 

Short-term borrowings

 

 

63

 

 

 

2

 

 

 

.01

 

 

 

58

 

 

 

23

 

 

 

.16

 

 

 

675

 

 

 

3,168

 

 

 

1.86

 

 

 

 

62

 

 

 

2

 

 

 

.01

 

 

 

64

 

 

 

2

 

 

 

.01

 

 

 

62

 

 

 

1

 

 

 

.01

 

 

Long-term borrowings

 

 

6,189

 

 

 

28,605

 

 

 

1.86

 

 

 

6,240

 

 

 

40,298

 

 

 

2.60

 

 

 

6,941

 

 

 

49,437

 

 

 

2.83

 

 

 

 

3,851

 

 

 

16,866

 

 

 

1.78

 

 

 

5,294

 

 

 

19,528

 

 

 

1.47

 

 

 

5,499

 

 

 

20,902

 

 

 

1.51

 

 

Total interest-bearing liabilities

 

 

75,550

 

 

 

75,105

 

 

 

.40

 

 

 

70,008

 

 

 

143,614

 

 

 

.83

 

 

 

72,450

 

 

 

177,070

 

 

 

.97

 

 

 

 

78,786

 

 

 

35,567

 

 

 

.18

 

 

 

79,430

 

 

 

49,610

 

 

 

.25

 

 

 

77,081

 

 

 

58,066

 

 

 

.30

 

 

Noninterest-bearing deposits

 

 

42,497

 

 

 

 

 

 

 

 

 

 

 

32,456

 

 

 

 

 

 

 

 

 

 

 

32,069

 

 

 

 

 

 

 

 

 

 

 

 

50,860

 

 

 

 

 

 

 

 

 

 

 

46,904

 

 

 

 

 

 

 

 

 

 

 

44,786

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

2,446

 

 

 

 

 

 

 

 

 

 

 

2,401

 

 

 

 

 

 

 

 

 

 

 

2,203

 

 

 

 

 

 

 

 

 

 

 

 

2,184

 

 

 

 

 

 

 

 

 

 

 

2,016

 

 

 

 

 

 

 

 

 

 

 

2,241

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

120,493

 

 

 

 

 

 

 

 

 

 

 

104,865

 

 

 

 

 

 

 

 

 

 

 

106,722

 

 

 

 

 

 

 

 

 

 

 

 

131,830

 

 

 

 

 

 

 

 

 

 

 

128,350

 

 

 

 

 

 

 

 

 

 

 

124,108

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

15,953

 

 

 

 

 

 

 

 

 

 

 

15,720

 

 

 

 

 

 

 

 

 

 

 

15,832

 

 

 

 

 

 

 

 

 

 

 

 

16,327

 

 

 

 

 

 

 

 

 

 

 

16,213

 

 

 

 

 

 

 

 

 

 

 

16,073

 

 

 

 

 

 

 

 

 

 

Total liabilities and

shareholders’ equity

 

$

136,446

 

 

 

 

 

 

 

 

 

 

 

120,585

 

 

 

 

 

 

 

 

 

 

 

122,554

 

 

 

 

 

 

 

 

 

 

 

$

148,157

 

 

 

 

 

 

 

 

 

 

 

144,563

 

 

 

 

 

 

 

 

 

 

 

140,181

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

 

 

2.98

 

 

 

 

 

 

 

 

 

 

 

3.35

 

 

 

 

 

 

 

 

 

 

 

3.30

 

 

 

 

 

 

 

 

 

 

 

 

2.90

 

 

 

 

 

 

 

 

 

 

 

2.90

 

 

 

 

 

 

 

 

 

 

 

2.83

 

 

Contribution of interest-free funds

 

 

 

 

 

 

 

 

 

 

.15

 

 

 

 

 

 

 

 

 

 

 

.30

 

 

 

 

 

 

 

 

 

 

 

.34

 

 

 

 

 

 

 

 

 

 

 

 

.07

 

 

 

 

 

 

 

 

 

 

 

.10

 

 

 

 

 

 

 

 

 

 

 

.12

 

 

Net interest income/margin on

earning assets

 

 

 

 

 

$

961,371

 

 

 

3.13

 

%

 

 

 

 

 

981,868

 

 

 

3.65

 

%

 

 

 

 

 

1,014,225

 

 

 

3.64

 

%

 

 

 

 

 

$

985,128

 

 

 

2.97

 

%

 

 

 

 

 

993,252

 

 

 

3.00

 

%

 

 

 

 

 

947,114

 

 

 

2.95

 

%

 

(a)

Includes nonaccrual loans.

(b)

Includes available-for-sale securities at amortized cost.

(continued)

- 8978 -


 

M&T BANK CORPORATION AND SUBSIDIARIES

Table 3 (continued)

AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES (continued)

 

 

2019 Third Quarter

 

 

2019 Second Quarter

 

 

 

2020 Second Quarter

 

 

2020 First Quarter

 

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average

Balance

 

 

Interest

 

 

Average

Rate

 

 

Average balance in millions; interest in thousands

Average balance in millions; interest in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average balance in millions; interest in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases, net of unearned

discount (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial, etc.

 

$

23,326

 

 

$

283,291

 

 

 

4.82

 

%

 

23,335

 

 

 

288,914

 

 

 

4.97

 

%

 

$

29,733

 

 

$

229,058

 

 

 

3.10

 

%

 

24,290

 

 

 

247,344

 

 

 

4.10

 

%

Real estate – commercial

 

 

35,200

 

 

 

462,759

 

 

 

5.14

 

 

 

34,768

 

 

 

465,911

 

 

 

5.30

 

 

 

 

36,947

 

 

 

412,362

 

 

 

4.42

 

 

 

36,034

 

 

 

440,291

 

 

 

4.83

 

 

Real estate – consumer

 

 

16,673

 

 

 

175,098

 

 

 

4.20

 

 

 

16,723

 

 

 

179,218

 

 

 

4.29

 

 

 

 

15,599

 

 

 

156,135

 

 

 

4.00

 

 

 

15,931

 

 

 

160,650

 

 

 

4.03

 

 

Consumer

 

 

14,879

 

 

 

204,097

 

 

 

5.44

 

 

 

14,324

 

 

 

197,418

 

 

 

5.53

 

 

 

 

15,518

 

 

 

187,041

 

 

 

4.85

 

 

 

15,451

 

 

 

203,546

 

 

 

5.30

 

 

Total loans and leases, net

 

 

90,078

 

 

 

1,125,245

 

 

 

4.96

 

 

 

89,150

 

 

 

1,131,461

 

 

 

5.09

 

 

 

 

97,797

 

 

 

984,596

 

 

 

4.05

 

 

 

91,706

 

 

 

1,051,831

 

 

 

4.61

 

 

Interest-bearing deposits at banks

 

 

7,405

 

 

 

40,388

 

 

 

2.16

 

 

 

6,122

 

 

 

36,325

 

 

 

2.38

 

 

 

 

16,454

 

 

 

4,179

 

 

 

.10

 

 

 

6,130

 

 

 

18,966

 

 

 

1.24

 

 

Federal funds sold and agreements

to resell securities

 

 

18

 

 

 

93

 

 

 

2.01

 

 

 

1

 

 

 

5

 

 

 

2.83

 

 

 

 

692

 

 

 

197

 

 

 

.11

 

 

 

1,224

 

 

 

4,072

 

 

 

1.34

 

 

Trading account

 

 

67

 

 

 

149

 

 

 

.89

 

 

 

68

 

 

 

372

 

 

 

2.20

 

 

 

 

49

 

 

 

248

 

 

 

2.04

 

 

 

64

 

 

 

419

 

 

 

2.64

 

 

Investment securities (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and federal agencies

 

 

10,271

 

 

 

62,506

 

 

 

2.41

 

 

 

11,364

 

 

 

68,755

 

 

 

2.43

 

 

 

 

7,796

 

 

 

43,889

 

 

 

2.26

 

 

 

8,359

 

 

 

45,449

 

 

 

2.19

 

 

Obligations of states and political subdivisions

 

 

6

 

 

 

74

 

 

 

4.99

 

 

 

7

 

 

 

93

 

 

 

5.11

 

 

 

 

3

 

 

 

37

 

 

 

5.11

 

 

 

3

 

 

 

41

 

 

 

5.01

 

 

Other

 

 

798

 

 

 

6,593

 

 

 

3.28

 

 

 

799

 

 

 

6,827

 

 

 

3.43

 

 

 

 

701

 

 

 

3,330

 

 

 

1.91

 

 

 

740

 

 

 

4,704

 

 

 

2.56

 

 

Total investment securities

 

 

11,075

 

 

 

69,173

 

 

 

2.48

 

 

 

12,170

 

 

 

75,675

 

 

 

2.49

 

 

 

 

8,500

 

 

 

47,256

 

 

 

2.24

 

 

 

9,102

 

 

 

50,194

 

 

 

2.22

 

 

Total earning assets

 

 

108,643

 

 

 

1,235,048

 

 

 

4.51

 

 

 

107,511

 

 

 

1,243,838

 

 

 

4.64

 

 

 

 

123,492

 

 

 

1,036,476

 

 

 

3.38

 

 

 

108,226

 

 

 

1,125,482

 

 

 

4.18

 

 

Allowance for credit losses

 

 

(1,034

)

 

 

 

 

 

 

 

 

 

 

(1,024

)

 

 

 

 

 

 

 

 

 

 

 

(1,401

)

 

 

 

 

 

 

 

 

 

 

(1,191

)

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

1,303

 

 

 

 

 

 

 

 

 

 

 

1,260

 

 

 

 

 

 

 

 

 

 

 

 

1,245

 

 

 

 

 

 

 

 

 

 

 

1,298

 

 

 

 

 

 

 

 

 

 

Other assets

 

 

11,476

 

 

 

 

 

 

 

 

 

 

 

10,740

 

 

 

 

 

 

 

 

 

 

 

 

13,110

 

 

 

 

 

 

 

 

 

 

 

12,252

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

120,388

 

 

 

 

 

 

 

 

 

 

 

118,487

 

 

 

 

 

 

 

 

 

 

 

$

136,446

 

 

 

 

 

 

 

 

 

 

 

120,585

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-checking deposits

 

$

55,680

 

 

 

104,724

 

 

 

.75

 

 

 

53,495

 

 

 

91,556

 

 

 

.69

 

 

 

$

62,927

 

 

 

26,454

 

 

 

.17

 

 

 

56,366

 

 

 

78,002

 

 

 

.56

 

 

Time deposits

 

 

6,343

 

 

 

25,456

 

 

 

1.59

 

 

 

6,530

 

 

 

24,931

 

 

 

1.53

 

 

 

 

5,354

 

 

 

19,883

 

 

 

1.49

 

 

 

5,672

 

 

 

21,872

 

 

 

1.55

 

 

Deposits at Cayman Islands office

 

 

1,522

 

 

 

6,218

 

 

 

1.62

 

 

 

1,247

 

 

 

6,040

 

 

 

1.94

 

 

 

 

1,017

 

 

 

161

 

 

 

.06

 

 

 

1,672

 

 

 

3,419

 

 

 

.82

 

 

Total interest-bearing deposits

 

 

63,545

 

 

 

136,398

 

 

 

.85

 

 

 

61,272

 

 

 

122,527

 

 

 

.80

 

 

 

 

69,298

 

 

 

46,498

 

 

 

.27

 

 

 

63,710

 

 

 

103,293

 

 

 

.65

 

 

Short-term borrowings

 

 

1,212

 

 

 

6,967

 

 

 

2.28

 

 

 

1,263

 

 

 

7,893

 

 

 

2.51

 

 

 

 

63

 

 

 

2

 

 

 

.01

 

 

 

58

 

 

 

23

 

 

 

.16

 

 

Long-term borrowings

 

 

7,121

 

 

 

56,214

 

 

 

3.13

 

 

 

8,278

 

 

 

66,012

 

 

 

3.20

 

 

 

 

6,189

 

 

 

28,605

 

 

 

1.86

 

 

 

6,240

 

 

 

40,298

 

 

 

2.60

 

 

Total interest-bearing liabilities

 

 

71,878

 

 

 

199,579

 

 

 

1.10

 

 

 

70,813

 

 

 

196,432

 

 

 

1.11

 

 

 

 

75,550

 

 

 

75,105

 

 

 

.40

 

 

 

70,008

 

 

 

143,614

 

 

 

.83

 

 

Noninterest-bearing deposits

 

 

30,550

 

 

 

 

 

 

 

 

 

 

 

30,099

 

 

 

 

 

 

 

 

 

 

 

 

42,497

 

 

 

 

 

 

 

 

 

 

 

32,456

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

2,123

 

 

 

 

 

 

 

 

 

 

 

1,945

 

 

 

 

 

 

 

 

 

 

 

 

2,446

 

 

 

 

 

 

 

 

 

 

 

2,401

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

104,551

 

 

 

 

 

 

 

 

 

 

 

102,857

 

 

 

 

 

 

 

 

 

 

 

 

120,493

 

 

 

 

 

 

 

 

 

 

 

104,865

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

15,837

 

 

 

 

 

 

 

 

 

 

 

15,630

 

 

 

 

 

 

 

 

 

 

 

 

15,953

 

 

 

 

 

 

 

 

 

 

 

15,720

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

120,388

 

 

 

 

 

 

 

 

 

 

 

118,487

 

 

 

 

 

 

 

 

 

 

 

$

136,446

 

 

 

 

 

 

 

 

 

 

 

120,585

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

 

 

 

3.41

 

 

 

 

 

 

 

 

 

 

 

3.53

 

 

 

 

 

 

 

 

 

 

 

 

2.98

 

 

 

 

 

 

 

 

 

 

 

3.35

 

 

Contribution of interest-free funds

 

 

 

 

 

 

 

 

 

 

.37

 

 

 

 

 

 

 

 

 

 

 

.38

 

 

 

 

 

 

 

 

 

 

 

 

.15

 

 

 

 

 

 

 

 

 

 

 

.30

 

 

Net interest income/margin on earning assets

 

 

 

 

 

$

1,035,469

 

 

 

3.78

 

%

 

 

 

 

 

1,047,406

 

 

 

3.91

 

%

 

 

 

 

 

$

961,371

 

 

 

3.13

 

%

 

 

 

 

 

981,868

 

 

 

3.65

 

%

 

(a)

Includes nonaccrual loans.

(b)

Includes available-for-sale securities at amortized cost.

 

 

- 9079 -


 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

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.”

 

Item 4.

Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), René F. Jones, Chairman of the Board and Chief Executive Officer, and Darren J. King, Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of June 30, 2020.March 31, 2021.

 

(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. Effective January 1, 2020, M&T adopted a new accounting standard that significantly changed its process for calculating the allowance for credit losses and, as a result, modified many of its control activities associated with the determination of this critical accounting estimate.  The revised processes and controls reflect the incorporation of macro-economic forecasts into credit-loss forecasting models for purposes of estimating expected loss amounts over a reasonable and supportable forecast period.No other changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended June 30, 2020March 31, 2021 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.

 

The emergence of the COVID-19 pandemic during the first quarter of 2020 necessitated the execution of several M&T contingency plans.  Beginning in March 2020 and continuing through this filing date, the Company had a substantial number of its employees working remotely under such contingency plans.  

 

 

PART II. OTHER INFORMATION

 

Item 1.

M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and other matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was between $0 and $25 million. Although the Company does not believe that the outcome of pending legal matters will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

 

ESOP Matters:  Wilmington Trust, N.A. provides retirement services, including serving in certain trustee roles relating to Employee Stock Ownership Plans (“ESOPs”).  Beginning in 2010, the U.S. Department of Labor (“DOL”) announced that it would increase its focus on ESOP transactions, particularly with regard to valuation issues relating to ESOP transactions.  Beginning in late 2013, Wilmington Trust, N.A. began receiving requests for information and subpoenas relating to certain ESOP transactions for which it acted as trustee.  In June 2016, Wilmington Trust, N.A. received a DOL subpoena seeking information on its global ESOP trustee business. In addition to these investigations, the DOL commenced three lawsuits against Wilmington Trust, N.A. relating to its role as trustee of three ESOP transactions. In July 2019, Wilmington Trust, N.A. reached a settlement in principle with the DOL to resolve certain pending DOL ESOP matters. On April 28, 2020, Wilmington Trust N.A. and the DOL executed a formal settlement

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agreement. The total amount of the settlement was $88 million, which included $80 million in payments to 21 ESOPs.  The settlement amount was within the Company’s reserve for litigation matters and substantially all was paid in the second quarter of 2020.  Wilmington Trust, N.A. also was named as a defendant in five private party lawsuits relating to its role as trustee for five ESOP transactions. Three of the five private party lawsuits relating to ESOP transactions have been resolved through settlements, two of which have been preliminarily approved by Courts, and are in the process of administration. The third settled ESOP private action was settled on an individual basis and, therefore, does not require Court approval. None of those three settlements are material. Under applicable transaction documents, Wilmington Trust, N.A. may be entitled to indemnification by the ESOP plan sponsors. These matters could result in damages, settlements, penalties, restitution, reputational damage or additional costs and expenses.

Due to their complex nature, it is difficult to estimate when litigation and investigatory matters such as these may be resolved. As set forth in the introductory paragraph to this Item 3 — Legal Proceedings, losses from current litigation and regulatory matters which the Company is subject to that are not currently considered probable are within a range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, and are included in the range of reasonably possible losses set forth above.

Item 1A.

Risk Factors.

In addition to the risk factors relating to M&T as disclosed in response to Item 1A.1A to Part I of M&T’s Form 10-K for the year ended December 31, 2019, a2020, M&T has identified certain supplemental risk factorfactors relating to M&T’s acquisition of People’s United Financial, Inc. (“People’s United”) pursuant to an agreement and plan of merger, dated February 21, 2021, by and among M&T, Bridge Merger Corp., a direct, wholly owned subsidiary of M&T, and People’s United (the “merger agreement” and, such transaction, the “merger”). These risk factors and other risks associated with the merger are more fully discussed in the joint proxy statement/prospectus in connection with the merger that was filed by M&T with the Securities and Exchange Commission on April 23, 2021.

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Risks Related to the Merger

M&T is presented below.expected to incur significant costs related to the merger and integration.

M&T has incurred and expects to incur significant, non-recurring costs in connection with negotiating the merger agreement and closing the merger. In addition, M&T will incur integration costs following the completion of the merger as M&T integrates the People’s United business, including facilities and systems consolidation costs and employment-related costs.

There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time. M&T may also incur additional costs to maintain employee morale and to retain key employees. M&T will also incur significant legal, financial advisory, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the merger. Some of these costs are payable regardless of whether the merger is completed.

Combining M&T and People’s United may be more difficult, costly or time-consuming than expected, and M&T may fail to realize the anticipated benefits of the merger.

The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of M&T and People’s United. To realize the anticipated benefits and cost savings from the merger M&T and People’s United must integrate and combine their businesses in a manner that permits cost savings to be realized, without adversely affecting revenues and future growth. If M&T and People’s United are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.

An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of M&T following the completion of the merger, which may adversely affect the value of M&T’s common stock following the completion of the merger.

M&T and People’s United have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on M&T during this transition period and for an undetermined period after completion of the merger.

M&T may be unable to retain M&T and/or People’s United personnel successfully after the merger is completed.

The success of the merger will depend in part on M&T’s ability to retain the talents and dedication of key employees currently employed by M&T and People’s United. It is possible that these employees may decide not to remain with M&T or People’s United, as applicable, while the merger is pending or with M&T after the merger is completed. If M&T and People’s United are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, M&T and People’s United could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the merger, if key employees terminate their employment, M&T’s business financial condition, liquidity, capital and results of operations have been, and will likely continue toactivities may be adversely affected, byand management’s attention may be diverted from successfully integrating M&T and People’s United to hiring suitable replacements, all of which may cause M&T’s business to suffer. In addition, M&T and People’s United may not be able to locate or retain suitable replacements for any key employees who leave either company.

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The COVID-19 pandemic may delay and adversely affect the COVID-19 pandemic.completion of the merger.

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

The pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, the Company’s business, financial condition, liquidity, capital and results of operations. The extent to which the COVID-19 pandemic will continue to negatively affect the Company’s business, financial condition, liquidity, capital and results of operations of M&T and People’s United. If the effects of the COVID-19 pandemic cause a continued or extended decline in the economic environment and the financial results of M&T or People’s United, or the business operations of M&T or People’s United are further disrupted as a result of the COVID-19 pandemic, efforts to complete the merger and integrate the businesses of M&T and People’s United may also be delayed and adversely affected. Additional time may be required to obtain the requisite regulatory approvals, and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the New York Department of Financial Services (“NYDFS”), the Connecticut Department of Banking (“CTDOB”) and/or other regulators may impose additional requirements on M&T or People’s United that must be satisfied prior to completion of the merger, which could delay and adversely affect the completion of the merger.

Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on M&T following the merger.

Before the merger and the other transactions contemplated by the merger agreement may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve Board, the NYDFS, the CTDOB, and other regulatory authorities. In determining whether to grant these approvals, such regulatory authorities consider a variety of factors. These approvals could be delayed or not obtained at all, including due to: an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals, including factors not known at the present time and factors that may arise in the future; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment generally. The Federal Reserve Board has stated that if material weaknesses are identified by examiners before a banking organization applies to engage in expansionary activity, the Federal Reserve Board will expect the banking organization to resolve all such weaknesses before applying for such expansionary activity. The Federal Reserve Board has also stated that if issues arise during the processing of an application for expansionary activity, it will expect the applicant banking organization to withdraw its application pending resolution of any supervisory concerns.

The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of M&T’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of M&T following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.

In addition, despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, M&T will not be required, and People’s United will not be permitted without M&T’s prior written consent, to take actions or agree to conditions in connection with obtaining the foregoing permits, consents, approvals and authorizations of governmental entities that would reasonably be expected to have a material adverse effect on M&T and its subsidiaries, taken as a whole, after giving effect to the merger.

Failure to complete the merger could negatively impact M&T.

If the merger is not completed for any reason, including as a result of M&T shareholders failing to approve either the amendment to M&T’s restated certificate of incorporation to increase the number of authorized shares of M&T’s capital stock and preferred stock or the issuance of shares of M&T common stock to People’s United

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stockholders in the merger or People’s United stockholders failing to approve the merger, there may be various adverse consequences and M&T may experience negative reactions from the financial markets and from its customers and employees. For example, M&T’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of M&T common stock could decline to the extent that the current market price of M&T common stock reflects a market assumption that the merger will be beneficial to M&T and will be completed. M&T could be subject to litigation related to any failure to complete the merger or to proceedings commenced against M&T to perform its obligations under the merger agreement. If the merger agreement is terminated under certain circumstances, M&T may be required to pay a termination fee of $280 million to People’s United.

Additionally, M&T has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing and mailing the joint proxy statement/prospectus for the merger, and all filing and other fees paid in connection with the merger. If the merger is not completed, M&T would have to pay these expenses without realizing the expected benefits of the merger.

M&T will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on M&T. These uncertainties may impair M&T’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with M&T to seek to change existing business relationships with M&T. In addition, subject to certain exceptions, M&T has agreed to refrain from taking certain actions that may adversely affect its ability to consummate the merger on a timely basis without People United’s consent. These restrictions may prevent M&T from pursuing attractive business opportunities that may arise prior to the completion of the merger.

Litigation related to the merger has been filed against People’s United, the People’s United board of directors and M&T, and additional litigation may be filed against People’s United, the People’s United board of directors, M&T and the M&T board of directors in the future, which could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact the business and operations of M&T.

Litigation related to the merger has been filed against People’s United, the People’s United board of directors and M&T, and additional litigation may be filed against People’s United, the People’s United board of directors, M&T and the M&T board of directors in the future. Among other remedies, litigation that has been filed seeks, and additional litigation by shareholders of M&T and/or stockholders of People’s United in the future may seek, damages and/or to enjoin the merger or the other transactions contemplated by the merger agreement. The outcome of any litigation is uncertain. If any plaintiff were successful in obtaining an injunction prohibiting M&T or People’s United from completing the merger or any other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to M&T, including costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the merger. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of M&T.  

The COVID-19 pandemic’s impact on M&T’s business and operations following the completion of the merger is uncertain.

The extent to which the COVID-19 pandemic will negatively affect the business, financial condition, liquidity, capital and results of operations of M&T following the completion of the merger will depend on future developments, (includingwhich are highly uncertain and cannot be predicted, including the scope and duration of the COVID‑19 pandemic, the continued effectiveness of M&T’s business continuity plans, the direct and indirect impact of the COVID-19 pandemic on the Company’s employees, customers, clients, counterparties vendors,and service providers, andas well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic), which are highly uncertainCOVID-19 pandemic. Given the ongoing and cannot be reasonably predicted.

The COVID-19 pandemic contributed to:

Increased unemployment levels, interrupted income of consumers and decreased consumer confidence  generally, leading to an increased risk of delinquencies, defaults and foreclosures;

Increased disruption to businesses, permanent or temporary closure of businesses and decreased business confidence generally, leading to increased risk of delinquencies, defaults and bankruptcies;

A sudden and significant reduction in the valuation of the equity, fixed-income and commodity markets and the significant increase in the volatility of those markets;

A decrease in the rates and yields on U.S. Treasury securities, which has negatively impacted the Company’s net interest income and margin;

Declines in collateral values;

Increased demands on capital and liquidity, leading M&T to cease repurchases of its common stock for the time being;

A reduction in the value of the assets that the Company manages or otherwise administers or services for customers, affecting related fee income and demand for the Company’s services;

Heightened cybersecurity, information security and operational risks to the Company, including as a result of work-from-home arrangements;

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Disruptions to the business operations of the Company, including disruptions to branch and office openings, supply chains and employee travel and working arrangements; and

Disruptions to business operations at counterparties, vendors and other service providers.

The pandemic is likely to continue to contribute to these risks and impacts. As a result, the Company’s credit, operational and other risks are generally expected to increase until the pandemic subsides. In addition, the Company’s business operations continue to be at risk of adverse disruption if significant portionsdynamic nature of the Company’s workforce are unablecircumstances, it is difficult to work effectively, including because of illness, quarantines, government actions, failures in systems or technology that disrupt work-from-home arrangements or other effects ofpredict the pandemic, or if the Company is unable to keep branches or offices open, including because of risk of infection.

Governmental authorities have taken unprecedented measures to provide economic assistance to individual households and businesses, stabilize the markets and support economic growth. The success of these measures is not yet entirely known and those measures may not be sufficient to fully mitigate the negative impact of the COVID-19 pandemic. Additionally, some measures, such as a suspension of mortgage and other loan payments and foreclosures, may have a negative impact on the Company’s business, financial condition, liquidity, capital and results of operations. If such measures are not effective in mitigating the effects of the COVID-19 pandemic on M&T’s business, and there is no guarantee that efforts by M&T to address the Company’s borrowers,adverse impacts of the CompanyCOVID-19 pandemic will be effective.

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Even after the COVID-19 pandemic has subsided, M&T may alsocontinue to experience higher rates of default and increased credit losses in future periods. The Company also faces an increased risk of litigation and governmental and regulatory scrutinyadverse impacts to its business as a result of the effectsCOVID-19 pandemic’s global economic impact, including reduced availability of the COVID-19 pandemiccredit, adverse impacts on market and economic conditions and actions governmental authorities take in response to those conditions. Furthermore, various government programs such as the Paycheck Protection Program are complexliquidity and the Company’s participationnegative financial effects from any recession or depression that may lead to litigation and governmental, regulatory and third party scrutiny, negative publicity and damage to its reputation.

The length of the pandemic and the efficacy of the extraordinary measures being put in place to address it are unknown. It is unknown when there will be a return to normal business activity and a subsiding of the economic stress associated with the pandemic. Prolonged continuation of the pandemic could worsen these risks and impacts.   Until the pandemic subsides, the Company expects continued draws on lines of credit, reduced revenues in many of its fee-related businesses and increased customer and client defaults, including defaults in unsecured loans. Even after the pandemic subsides, the U.S. economy may experience a prolonged economic slowdown or recession, and M&T anticipates the Company’s businesses would be materially and adversely affected by a prolonged economic slowdown or recession. To the extent the pandemic adversely affects the Company’s business, financial condition, liquidity, capital or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled “Risk Factors” in M&T’s 2019 Annual Report on Form 10-K for the year ended December 31, 2019 and M&T’s other filings with the Securities and Exchange Commission.

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occur.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

(a) – (b) Not applicable.

(c)

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 1 - April 30, 2020

 

 

 

 

 

 

 

 

 

 

$

679,076,785

 

May 1 - May 31, 2020

 

 

 

 

 

 

 

 

 

 

 

679,076,785

 

June 1 - June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

679,076,785

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1 - January 31, 2021

 

 

1,922

 

 

$

132.47

 

 

 

 

 

$

800,000,000

 

February 1 - February 28, 2021

 

 

 

 

 

 

 

 

 

 

 

800,000,000

 

March 1 - March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

800,000,000

 

Total

 

 

1,922

 

 

$

132.47

 

 

 

 

 

 

 

 

 

(1)

The total number of shares purchased during the periods indicated includes shares purchased as part of publicly announced programs andand/or shares deemed to have been received from employees who exercised stock options by attesting to previously acquired common shares in satisfaction of the exercise price or shares received from employees upon the vesting of restricted stock awards in satisfaction of applicable tax withholding obligations, as is permitted under M&T’s stock-based compensation plans.

(2)

On July 17, 2019,January 20, 2021, M&T’s&T's Board of Directors authorized a new stock repurchase program to repurchase up to $1.635 billion$800 million of common shares, including the remaining shares not purchased related to M&T’s 2018 revised capital plan.shares.

 

Item 3.

Defaults Upon Senior Securities.

(Not applicable.)

 

 

Item 4.

Mine Safety Disclosures.

(None.)

 

 

Item 5.

Other Information.

(None.)

 

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Item 6.

Exhibits.

The following exhibits are filed as a part of this report.

  

Exhibit

No.

 

 

 

2.1

Agreement and Plan of Merger dated as of February 21, 2021, by and between M&T Bank Corporation, Bridge Merger Corp. and People’s United Financial, Inc.  Incorporated by reference to Exhibit 2.1 of M&T Bank Corporation’s Form 8-K dated February 25, 2021 (File No. 1-9861).

10.1

M&T Bank Corporation 2008 Directors’ Stock Plan, as amended on February 19, 2021.  Incorporated by reference to Exhibit 4.1 of M&T Bank Corporation’s Form S-8 dated March 26, 2021 (File No. 333-254786).

 

  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

  

Inline XBRL Instance Document. Filed herewith.

 

 

101.SCH

  

Inline XBRL Taxonomy Extension Schema. Filed herewith.

 

 

101.CAL

  

Inline XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase. Filed herewith.

 

 

101.LAB

  

Inline XBRL Taxonomy Extension Label Linkbase. Filed herewith.

 

 

101.PRE

  

Inline XBRL Taxonomy Extension Presentation Linkbase. Filed herewith.

 

 

104

  

The cover page from M&T Bank Corporation’s Quarterly Report on Form 10-Q for the quarter ended

June 30, 2020March 31, 2021 has been formatted in Inline XBRL.

 

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SIGNATURES

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.

 

 

 

M&T BANK CORPORATION

 

 

 

Date: August 5, 2020May 6, 2021

 

By:

 

/s/ Darren J. King

 

 

 

 

Darren J. King

 

 

 

 

Executive Vice President

and Chief Financial Officer

 

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