Item 1. Financial Statements.

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Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

	September 30,			December 31,
(Dollars in thousands, except per share)	2021			2020
Assets
Cash and due from banks	$	1,479,712		$	1,552,743
Interest-bearing deposits at banks		38,445,788			23,663,810
Trading account		624,556			1,068,581
Investment securities (includes pledged securities that can be sold or repledged of $118,178 at September 30, 2021; $105,136 at December 31, 2020)
Available for sale (cost: $3,473,923 at September 30, 2021; $4,621,027 at December 31, 2020		3,618,106			4,822,606
Held to maturity (fair value: $2,413,938 at September 30, 2021; $1,842,281 at December 31, 2020)		2,359,727			1,748,989
Equity and other securities (cost: $467,349 at September 30, 2021; $449,008 at December 31, 2020)		469,789			474,102
Total investment securities		6,447,622			7,045,697
Loans and leases		93,872,912			98,875,788
Unearned discount		(290,018	)		(339,921	)
Loans and leases, net of unearned discount		93,582,894			98,535,867
Allowance for credit losses		(1,515,024	)		(1,736,387	)
Loans and leases, net		92,067,870			96,799,480
Premises and equipment		1,117,903			1,161,558
Goodwill		4,593,112			4,593,112
Core deposit and other intangible assets		5,952			14,165
Accrued interest and other assets		7,118,679			6,701,959
Total assets	$	151,901,194		$	142,601,105
Liabilities
Noninterest-bearing deposits	$	56,542,309		$	47,572,884
Savings and interest-checking deposits		69,195,960			67,680,840
Time deposits		2,963,027			3,899,910
Deposits at Cayman Islands office		—			652,104
Total deposits		128,701,296			119,805,738
Short-term borrowings		103,548			59,482
Accrued interest and other liabilities		2,067,188			2,166,409
Long-term borrowings		3,500,391			4,382,193
Total liabilities		134,372,423			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 September 30, 2021 and December 31, 2020; Liquidation preference of $10,000 per share: 140,000 shares at September 30, 2021 and 90,000 shares at December 31, 2020		1,750,000			1,250,000
Common stock, $.50 par, 250,000,000 shares authorized, 159,741,898 shares issued at September 30, 2021 and December 31, 2020		79,871			79,871
Common stock issuable, 15,683 shares at September 30, 2021; 18,113 shares at December 31, 2020		1,196			1,344
Additional paid-in capital		6,624,656			6,617,404
Retained earnings		14,365,913			13,444,428
Accumulated other comprehensive income (loss), net		(210,419	)		(63,032	)
Treasury stock — common, at cost — 31,058,333 shares at September 30, 2021; 31,426,742 shares at December 31, 2020		(5,082,446	)		(5,142,732	)
Total shareholders’ equity		17,528,771			16,187,283
Total liabilities and shareholders’ equity	$	151,901,194		$	142,601,105

See accompanying notes to financial statements.

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M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

	Three Months Ended September 30					Nine Months Ended September 30
(In thousands, except per share)	2021			2020		2021			2020
Interest income
Loans and leases, including fees	$	944,422		$	956,594	$	2,843,969		$	2,983,787
Investment securities
Fully taxable		33,209			38,529		104,736			135,858
Exempt from federal taxes		48			59		113			163
Deposits at banks		14,923			4,163		30,507			27,308
Other		344			1,816		941			6,706
Total interest income		992,946			1,001,161		2,980,266			3,153,822
Interest expense
Savings and interest-checking deposits		7,000			22,403		26,556			126,859
Time deposits		3,573			14,519		15,667			56,274
Deposits at Cayman Islands office		—			241		201			3,821
Short-term borrowings		2			1		5			26
Long-term borrowings		15,121			20,902		46,852			89,805
Total interest expense		25,696			58,066		89,281			276,785
Net interest income		967,250			943,095		2,890,985			2,877,037
Provision for credit losses		(20,000	)		150,000		(60,000	)		725,000
Net interest income after provision for credit losses		987,250			793,095		2,950,985			2,152,037
Other income
Mortgage banking revenues		159,995			153,267		432,062			426,200
Service charges on deposit accounts		105,426			91,355		296,721			274,971
Trust income		156,876			149,937		475,889			450,570
Brokerage services income		20,490			11,602		43,868			35,194
Trading account and foreign exchange gains		5,563			4,026		18,349			33,332
Gain (loss) on bank investment securities		291			2,773		(22,646	)		(11,040	)
Other revenues from operations		120,485			107,601		344,114			327,967
Total other income		569,126			520,561		1,588,357			1,537,194
Other expense
Salaries and employee benefits		510,422			478,897		1,530,634			1,474,582
Equipment and net occupancy		80,738			81,080		244,057			237,809
Outside data processing and software		72,782			64,660		213,025			190,446
FDIC assessments		18,810			12,121		50,874			38,599
Advertising and marketing		15,208			11,855		43,200			44,072
Printing, postage and supplies		7,917			9,422		28,367			31,534
Amortization of core deposit and other intangible assets		2,738			3,914		8,213			11,740
Other costs of operations		190,719			164,825		565,753			511,450
Total other expense		899,334			826,774		2,684,123			2,540,232
Income before taxes		657,042			486,882		1,855,219			1,148,999
Income taxes		161,582			114,746		454,441			266,987
Net income	$	495,460		$	372,136	$	1,400,778		$	882,012
Net income available to common shareholders
Basic	$	475,958		$	353,399	$	1,342,805		$	827,203
Diluted		475,961			353,400		1,342,812			827,204
Net income per common share
Basic	$	3.70		$	2.75	$	10.44		$	6.42
Diluted		3.69			2.75		10.43			6.42
Average common shares outstanding
Basic		128,689			128,285		128,632			128,750
Diluted		128,844			128,355		128,786			128,813

See accompanying notes to financial statements.

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M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30
(In thousands)	2021			2020			2021			2020

Net income	$	495,460		$	372,136		$	1,400,778		$	882,012
Other comprehensive income (loss), net of tax and reclassification adjustments:
Net unrealized gains (losses) on investment securities		(9,314	)		(17,948	)		(39,808	)		114,451
Cash flow hedges adjustments		(38,038	)		(63,199	)		(152,175	)		240,562
Foreign currency translation adjustments		(1,579	)		2,733			(886	)		(261	)
Defined benefit plans liability adjustments		15,486			9,287			45,482			27,431
Total other comprehensive income (loss)		(33,445	)		(69,127	)		(147,387	)		382,183
Total comprehensive income	$	462,015		$	303,009		$	1,253,391		$	1,264,195

See accompanying notes to financial statements.

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M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

	Nine Months Ended September 30
(In thousands)	2021			2020
Cash flows from operating activities
Net income	$	1,400,778		$	882,012
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses		(60,000	)		725,000
Depreciation and amortization of premises and equipment		169,232			164,323
Amortization of capitalized servicing rights		66,000			63,992
Amortization of core deposit and other intangible assets		8,213			11,740
Provision for deferred income taxes		70,190			(119,913	)
Asset write-downs		5,046			17,692
Net gain on sales of assets		(15,260	)		(14,736	)
Net change in accrued interest receivable, payable		20,395			(135,825	)
Net change in other accrued income and expense		50,804			(344,085	)
Net change in loans originated for sale		(117,139	)		(422,773	)
Net change in trading account assets and liabilities		419,772			(702,362	)
Net cash provided by operating activities		2,018,031			125,065
Cash flows from investing activities
Proceeds from sales of investment securities
Equity and other securities		8,937			55,499
Proceeds from maturities of investment securities
Available for sale		1,139,203			1,149,281
Held to maturity		476,352			719,379
Purchases of investment securities
Available for sale		(5,389	)		(5,860	)
Held to maturity		(1,087,656	)		(8,995	)
Equity and other securities		(27,270	)		(26,955	)
Net (increase) decrease in loans and leases		4,977,272			(7,227,304	)
Net increase in interest-bearing deposits at banks		(14,781,978	)		(13,007,783	)
Capital expenditures, net		(87,165	)		(125,370	)
Net (increase) decrease in loan servicing advances		(402,175	)		149,838
Other, net		(388,305	)		351,278
Net cash used by investing activities		(10,178,174	)		(17,976,992	)
Cash flows from financing activities
Net increase in deposits		8,895,558			20,394,732
Net increase (decrease) in short-term borrowings		44,066			(16,240	)
Proceeds from long-term borrowings		9,500			—
Payments on long-term borrowings		(853,041	)		(1,605,041	)
Purchases of treasury stock		—			(373,750	)
Dividends paid — common		(425,541	)		(426,204	)
Dividends paid — preferred		(55,388	)		(55,444	)
Proceeds from issuance of Series I preferred stock		495,000			—
Other, net		(23,042	)		(13,199	)
Net cash provided by financing activities		8,087,112			17,904,854
Net increase (decrease) in cash, cash equivalents and restricted cash		(73,031	)		52,927
Cash, cash equivalents and restricted cash at beginning of period		1,552,743			1,436,305
Cash, cash equivalents and restricted cash at end of period	$	1,479,712		$	1,489,232
Supplemental disclosure of cash flow information
Interest received during the period	$	2,976,574		$	3,121,917
Interest paid during the period		116,402			319,079
Income taxes paid during the period		278,783			254,471
Supplemental schedule of noncash investing and financing activities
Real estate acquired in settlement of loans	$	6,822		$	20,047
Loans held for sale transferred to loans held for investment		330,188			—
Additions to right-of-use assets under operating leases		34,404			45,888

See accompanying notes to financial statements.

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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 September 30, 2021
Balance — July 1, 2021	$	1,250,000	$	79,871	$	1,179		$	6,620,528		$	14,030,215		$	(176,974	)	$	(5,084,515	)	$	16,720,304
Total comprehensive income		—		—		—			—			495,460			(33,445	)		—			462,015
Preferred stock cash dividends (a)		—		—		—			—			(17,050	)		—			—			(17,050	)
Issuance of Series I preferred stock		500,000		—		—			(5,000	)		—			—			—			495,000
Stock-based compensation transactions, net		—		—		17			9,128			(207	)		—			2,069			11,007
Common stock cash dividends — $1.10 per share		—		—		—			—			(142,505	)		—			—			(142,505	)
Balance — September 30, 2021	$	1,750,000	$	79,871	$	1,196		$	6,624,656		$	14,365,913		$	(210,419	)	$	(5,082,446	)	$	17,528,771

Nine Months Ended September 30, 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		—		—		—			—			1,400,778			(147,387	)		—			1,253,391
Preferred stock cash dividends (a)		—		—		—			—			(51,150	)		—			—			(51,150	)
Issuance of Series I preferred stock		500,000		—		—			(5,000	)		—			—			—			495,000
Stock-based compensation transactions, net		—		—		(148	)		12,252			(616	)		—			60,286			71,774
Common stock cash dividends — $3.30 per share		—		—		—			—			(427,527	)		—			—			(427,527	)
Balance — September 30, 2021	$	1,750,000	$	79,871	$	1,196		$	6,624,656		$	14,365,913		$	(210,419	)	$	(5,082,446	)	$	17,528,771

Three Months Ended September 30, 2020
Balance — July 1, 2020	$	1,250,000	$	79,871	$	1,308		$	6,599,069		$	12,919,345		$	244,630		$	(5,149,118	)	$	15,945,105
Total comprehensive income		—		—		—			—			372,136			(69,127	)		—			303,009
Preferred stock cash dividends (a)		—		—		—			—			(17,050	)		—			—			(17,050	)
Stock-based compensation transactions, net		—		—		19			10,504			(104	)		—			1,483			11,902
Common stock cash dividends — $1.10 per share		—		—		—			—			(141,953	)		—			—			(141,953	)
Balance — September 30, 2020	$	1,250,000	$	79,871	$	1,327		$	6,609,573		$	13,132,374		$	175,503		$	(5,147,635	)	$	16,101,013

Nine Months Ended September 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		—		—		—			—			882,012			382,183			—			1,264,195
Preferred stock cash dividends (a)		—		—		—			—			(51,178	)		—			—			(51,178	)
Purchases of treasury stock		—		—		—			—			—			—			(373,750	)		(373,750	)
Stock-based compensation transactions, net		—		—		(239	)		16,034			(310	)		—			48,678			64,163
Common stock cash dividends — $3.30 per share		—		—		—			—			(427,141	)		—			—			(427,141	)
Balance — September 30, 2020	$	1,250,000	$	79,871	$	1,327		$	6,609,573		$	13,132,374		$	175,503		$	(5,147,635	)	$	16,101,013

	(a)	For the three-month and nine-month periods ended September 30, 2021, dividends per preferred share were: Preferred Series E - $16.125 and $48.375, respectively; Preferred Series F - $128.125 and $384.375, respectively; and Preferred Series G - $125.00 and $375.00, respectively. Dividends per preferred share for the three-month and nine-month periods ended September 30, 2020 were: Preferred Series E - $16.125 and $48.375, respectively; Preferred Series F - $128.125 and $384.375, respectively; and Preferred Series G - $125.00 and $375.694, respectively.

See accompanying notes to financial statements.

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NOTES TO FINANCIAL STATEMENTS

Significant accounting policies

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, 2020 (“2020 Annual Report”). 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.

Acquisition

On February 22, 2021, M&T announced that it had entered into a definitive agreement with People’s United Financial, Inc. ("People’s United"), headquartered in Bridgeport, Connecticut, under which People’s United will be acquired by M&T in an all-stock transaction. Pursuant to the terms of the agreement, People’s United shareholders will receive consideration valued at .118 of an M&T share in the form of M&T common stock. People’s United outstanding preferred stock will be converted into a new series of M&T preferred stock upon completion of the acquisition. The transaction is valued at approximately $7.6 billion (with the price based on M&T’s closing price of $149.34 per share as of September 30, 2021).

The merger has been approved by the boards of directors and shareholders of each company. The merger is expected to close promptly after the parties have satisfied customary closing conditions, including the approval of the Board of Governors of the Federal Reserve System. As of September 30, 2021, People’s United disclosed that it had total assets of $63.7 billion, including $39.5 billion of loans, $55.9 billion of liabilities, including $52.9 billion of deposits, and $7.8 billion of stockholders’ equity.

In connection with the acquisition, the Company incurred merger-related expenses consisting predominantly of professional services related to planned integration efforts associated with the merger that totaled approximately $9 million and $23 million during the three months and nine months ended September 30, 2021, respectively.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

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
	(In thousands)
September 30, 2021
Investment securities available for sale:
U.S. Treasury and federal agencies	$	9,621	$	124	$	1	$	9,744
Mortgage-backed securities:
Government issued or guaranteed		3,328,080		147,942		543		3,475,479
Other debt securities		136,222		2,905		6,244		132,883
		3,473,923		150,971		6,788		3,618,106
Investment securities held to maturity:
U.S. Treasury and federal agencies		3,065		—		—		3,065
Obligations of states and political subdivisions		177		—		—		177
Mortgage-backed securities:
Government issued or guaranteed		2,288,934		63,523		6,312		2,346,145
Privately issued		64,929		10,901		13,901		61,929
Other debt securities		2,622		—		—		2,622
		2,359,727		74,424		20,213		2,413,938
Total debt securities	$	5,833,650	$	225,395	$	27,001	$	6,032,044
Equity and other securities:
Readily marketable equity — at fair value	$	80,016	$	3,341	$	901	$	82,456
Other — at cost		387,333		—		—		387,333
Total equity and other securities	$	467,349	$	3,341	$	901	$	469,789

December 31, 2020
Investment securities available for sale:
U.S. Treasury and federal agencies	$	9,154	$	198	$	14	$	9,338
Mortgage-backed securities:
Government issued or guaranteed		4,475,406		208,787		755		4,683,438
Privately issued		16		—		—		16
Other debt securities		136,451		1,664		8,301		129,814
		4,621,027		210,649		9,070		4,822,606
Investment securities held to maturity:
U.S. Treasury and federal agencies		2,999		—		—		2,999
Obligations of states and political subdivisions		1,531		9		—		1,540
Mortgage-backed securities:
Government issued or guaranteed		1,664,443		100,176		11		1,764,608
Privately issued		77,155		11,056		17,938		70,273
Other debt securities		2,861		—		—		2,861
		1,748,989		111,241		17,949		1,842,281
Total debt securities	$	6,370,016	$	321,890	$	27,019	$	6,664,887
Equity and other securities:
Readily marketable equity — at fair value	$	67,891	$	25,094	$	—	$	92,985
Other — at cost		381,117		—		—		381,117
Total equity and other securities	$	449,008	$	25,094	$	—	$	474,102

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

Investment securities, continued

There were no significant gross realized gains or losses from sales of investment securities for the three-month and nine-month periods ended September 30, 2021 and 2020. Unrealized gains on equity securities during the three months ended September 30, 2021 were less than $1 million and unrealized losses during the nine months ended September 30, 2021 were $23 million, compared with unrealized gains of $3 million and unrealized losses of $11 million during the three months and nine months ended September 30, 2020, respectively.

At September 30, 2021, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:

	Amortized Cost
	(In thousands)
Debt securities available for sale:
Due in one year or less	$	4,291	4,351
Due after one year through five years		13,974	14,616
Due after five years through ten years		97,578	98,981
Due after ten years		30,000	24,679
		145,843	142,627
Mortgage-backed securities available for sale		3,328,080	3,475,479
	$	3,473,923	3,618,106
Debt securities held to maturity:
Due in one year or less	$	176	177
Due after one year through five years		3,066	3,065
Due after ten years		2,622	2,622
		5,864	5,864
Mortgage-backed securities held to maturity		2,353,863	2,408,074
	$	2,359,727	2,413,938

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

A summary of investment securities that as of September 30, 2021 and December 31, 2020 had been in a continuous unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss position for twelve months or longer follows:

	Less Than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
September 30, 2021
Investment securities available for sale:
U.S. Treasury and federal agencies	$	1,424		(1	)		—		—
Mortgage-backed securities:
Government issued or guaranteed		981		(5	)		22,517		(538	)
Other debt securities		3,498		(37	)		64,437		(6,207	)
		5,903		(43	)		86,954		(6,745	)
Investment securities held to maturity:
Mortgage-backed securities:
Government issued or guaranteed		1,019,537		(6,301	)		1,400		(11	)
Privately issued		—		—			47,467		(13,901	)
		1,019,537		(6,301	)		48,867		(13,912	)
Total	$	1,025,440		(6,344	)		135,821		(20,657	)

December 31, 2020
Investment securities available for sale:
U.S. Treasury and federal agencies	$	985		(14	)		—		—
Mortgage-backed securities:
Government issued or guaranteed		18,687		(356	)		16,556		(399	)
Other debt securities		16,055		(181	)		63,462		(8,120	)
		35,727		(551	)		80,018		(8,519	)
Investment securities held to maturity:
Mortgage-backed securities:
Government issued or guaranteed		2,039		(11	)		—		—
Privately issued		—		—			52,418		(17,938	)
		2,039		(11	)		52,418		(17,938	)
Total	$	37,766		(562	)		132,436		(26,457	)

The Company owned 286 individual debt securities with aggregate gross unrealized losses of $27 million at September 30, 2021. Based on a review of each of the securities in the investment securities portfolio at September 30, 2021, the Company concluded that it expected to recover the amortized cost basis of its investment. As of September 30, 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 September 30, 2021, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $387 million of cost method equity securities.

The Company estimated no material allowance for credit losses for its investment securities classified as held-to-maturity at September 30, 2021 or December 31, 2020, as the substantial majority of such investment securities are obligations backed by the U.S. government or its agencies.

- 11 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Loans and leases and the allowance for credit losses

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

	Current					Total
	(In thousands)
September 30, 2021
Commercial, financial, leasing, etc.	$	22,100,813	121,993	11,945	280,189	$	22,514,940
Real estate:
Commercial		25,524,405	245,157	63,368	1,152,870		26,985,800
Residential builder and developer		1,336,884	16,453	2,392	594		1,356,323
Other commercial construction		8,429,031	93,978	121	158,699		8,681,829
Residential		13,314,202	255,187	945,148	353,426		14,867,963
Residential — limited documentation		1,199,172	15,690	—	126,529		1,341,391
Consumer:
Home equity lines and loans		3,548,820	14,712	—	71,474		3,635,006
Recreational finance		7,972,125	29,656	—	23,907		8,025,688
Automobile		4,553,306	34,349	—	31,002		4,618,657
Other		1,499,219	9,399	3,106	43,573		1,555,297
Total	$	89,477,977	836,574	1,026,080	2,242,263	$	93,582,894

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

Loans and leases and the allowance for credit losses, continued

A summary of outstanding loan balances for which COVID-19 related modifications were granted as of September 30, 2021 is presented below. These loans meet the criteria described in note 1 of Notes to Financial Statements in the 2020 Annual Report and, accordingly, are not considered past due or otherwise in default of loan terms as of the date presented. The vast majority of the modifications noted below expire during 2021.

	COVID-19 Related Modifications
September 30, 2021	Payment Deferrals(1)			Other Forbearances(2)		Total
	(In thousands)

Commercial, financial, leasing, etc.	$	—		$	53,876	$	53,876
Real estate:
Commercial		—			225,807		225,807
Other commercial construction		—			21,330		21,330
Residential		1,925,639	(3)		—		1,925,639
Residential — limited documentation		177,200			—		177,200
Consumer:
Home equity lines and loans		6,188			—		6,188
Recreational finance		2,252			—		2,252
Automobile		4,314			—		4,314
Other		197			—		197
Total	$	2,115,790		$	301,013	$	2,416,803

(1)	Represents accruing loans at September 30, 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 $1.6 billion of government-guaranteed loans.

One-to-four family residential mortgage loans held for sale were $279 million and $777 million at September 30, 2021 and December 31, 2020, respectively. Commercial real estate loans held for sale were $559 million at September 30, 2021 and $278 million at December 31, 2020.

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

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 review and reassign loan grades based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective regions. Factors considered in assigning loan grades include borrower-specific information related to expected future cash flows and operating results, collateral values, geographic location, financial condition and performance, payment status, and other information. The Company’s policy is that, at least annually, updated financial information be obtained from commercial borrowers associated with pass grade loans and additional analysis 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 September 30, 2021 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
	2021		2020		2019		2018		2017		Prior		Loans		Loans		Total
	(In thousands)
Commercial, financial, leasing, etc.:
Loan grades:
Pass	$	3,966,960		2,312,034		1,700,134		1,149,584		586,185		1,635,559		9,725,075		16,195	$	21,091,726
Criticized accrual		210,621		137,816		105,118		91,922		47,157		142,670		393,348		14,373		1,143,025
Criticized nonaccrual		5,615		20,345		30,067		52,890		25,688		39,674		98,241		7,669		280,189
Total commercial, financial, leasing, etc.	$	4,183,196		2,470,195		1,835,319		1,294,396		659,030		1,817,903		10,216,664		38,237	$	22,514,940

Real estate:
Commercial:
Loan grades:
Pass	$	2,259,468		2,835,919		4,069,520		2,765,720		2,176,210		6,007,272		729,377		—	$	20,843,486
Criticized accrual		22,831		553,477		661,516		1,042,329		566,644		2,092,456		50,191		—		4,989,444
Criticized nonaccrual		28,577		140,023		236,842		47,741		116,463		546,042		37,182		—		1,152,870
Total commercial real estate	$	2,310,876		3,529,419		4,967,878		3,855,790		2,859,317		8,645,770		816,750		—	$	26,985,800

Residential builder and developer:
Loan grades:
Pass	$	647,863		166,832		94,758		44,419		5,573		11,731		243,749		—	$	1,214,925
Criticized accrual		2,199		3,307		119,009		14,168		630		3		1,488		—		140,804
Criticized nonaccrual		—		—		518		—		—		76		—		—		594
Total residential builder and developer	$	650,062		170,139		214,285		58,587		6,203		11,810		245,237		—	$	1,356,323

Other commercial construction:
Loan grades:
Pass	$	661,068		1,817,753		2,445,555		1,108,676		270,054		407,500		38,391		—	$	6,748,997
Criticized accrual		655		42,578		589,790		700,577		320,718		119,815		—		—		1,774,133
Criticized nonaccrual		—		—		83,829		35,125		12,406		23,068		4,271		—		158,699
Total other commercial construction	$	661,723		1,860,331		3,119,174		1,844,378		603,178		550,383		42,662		—	$	8,681,829

Increases to criticized loans as compared with December 31, 2020 were predominantly attributable to the continued effects of the COVID-19 pandemic and the related re-grading of loans.

- 14 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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 September 30, 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	$	2,027,514		1,742,731		1,158,831		520,113		1,258,200		6,544,178		62,635		—	$	13,314,202
30-89 days past due		16,352		10,434		7,322		5,529		30,337		185,213		—		—		255,187
Accruing loans past due 90 days or more		3,204		104,612		28,394		35,993		211,521		561,424		—		—		945,148
Nonaccrual		1,831		21,837		5,988		4,488		4,184		314,825		273		—		353,426
Total residential	$	2,048,901		1,879,614		1,200,535		566,123		1,504,242		7,605,640		62,908		—	$	14,867,963

Residential - limited documentation:
Current	$	—		—		—		—		—		1,199,172		—		—	$	1,199,172
30-89 days past due		—		—		—		—		—		15,690		—		—		15,690
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		126,529		—		—		126,529
Total residential - limited documentation	$	—		—		—		—		—		1,341,391		—		—	$	1,341,391

Consumer:
Home equity lines and loans:
Current	$	354		863		3,087		1,935		2,055		41,791		2,384,309		1,114,426	$	3,548,820
30-89 days past due		16		—		—		—		—		681		—		14,015		14,712
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		6,126		768		64,580		71,474
Total home equity lines and loans	$	370		863		3,087		1,935		2,055		48,598		2,385,077		1,193,021	$	3,635,006

- 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	$	2,468,197		2,248,066		1,369,098		699,577		486,354		700,833		—		—	$	7,972,125
30-89 days past due		3,062		7,028		6,669		4,090		3,657		5,150		—		—		29,656
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		549		3,125		4,371		4,771		3,679		7,412		—		—		23,907
Total recreational finance	$	2,471,808		2,258,219		1,380,138		708,438		493,690		713,395		—		—	$	8,025,688

Automobile:
Current	$	1,803,922		1,224,901		762,820		402,919		258,317		100,427		—		—	$	4,553,306
30-89 days past due		4,356		5,700		7,755		6,921		5,954		3,663		—		—		34,349
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		1,182		2,673		6,036		8,289		7,046		5,776		—		—		31,002
Total automobile	$	1,809,460		1,233,274		776,611		418,129		271,317		109,866		—		—	$	4,618,657

Other:
Current	$	185,095		113,060		86,349		30,414		19,825		24,780		1,038,160		1,536	$	1,499,219
30-89 days past due		2,201		393		640		204		85		459		5,028		389		9,399
Accruing loans past due 90 days or more		—		—		—		—		—		228		2,878		—		3,106
Nonaccrual		1,625		241		236		206		111		229		40,811		114		43,573
Total other	$	188,921		113,694		87,225		30,824		20,021		25,696		1,086,877		2,039	$	1,555,297

Total loans and leases at September 30, 2021	$	14,325,317		13,515,748		13,584,252		8,778,600		6,419,053		20,870,452		14,856,175		1,233,297	$	93,582,894

- 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 follows.

	Term Loans by Origination Year												Revolving		Revolving Loans Converted to Term
	2020		2019		2018		2017		2016		Prior		Loans		Loans		Total
	(In thousands)
Residential:
Current	$	2,722,862		1,416,259		618,736		1,318,094		718,235		6,898,756		71,894		—	$	13,764,836
30-89 days past due		13,496		7,781		7,258		13,477		7,947		150,447		—		—		200,406
Accruing loans past due 90 days or more		579		15,234		38,145		212,818		45,804		480,308		—		—		792,888
Nonaccrual		3,133		14,439		5,183		6,408		2,900		333,466		200		—		365,729
Total residential	$	2,740,070		1,453,713		669,322		1,550,797		774,886		7,862,977		72,094		—	$	15,123,859

Residential - limited documentation:
Current	$	—		—		—		—		—		1,462,277		—		—	$	1,462,277
30-89 days past due		—		—		—		—		—		19,687		—		—		19,687
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		147,170		—		—		147,170
Total residential - limited documentation	$	—		—		—		—		—		1,629,134		—		—	$	1,629,134

Consumer:
Home equity lines and loans:
Current	$	773		3,983		1,591		2,016		162		51,554		2,569,621		1,252,185	$	3,881,885
30-89 days past due		—		—		—		—		—		1,148		939		22,242		24,329
Accruing loans past due 90 days or more		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		6,148		5,752		67,492		79,392
Total home equity lines and loans	$	773		3,983		1,591		2,016		162		58,850		2,576,312		1,341,919	$	3,985,606

- 18 -

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
	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

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 type. Changes in the allowance for credit losses for the three months ended September 30, 2021 were as follows:

	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Total
	(In thousands)

Beginning balance	$	314,852			679,963			77,869			502,444		$	1,575,128
Provision for credit losses		(292	)		(42,016	)		(3,522	)		25,830			(20,000	)
Net charge-offs
Charge-offs		(26,598	)		(14,242	)		(1,925	)		(21,508	)		(64,273	)
Recoveries		3,785			2,362			1,903			16,119			24,169
Net charge-offs		(22,813	)		(11,880	)		(22	)		(5,389	)		(40,104	)
Ending balance	$	291,747			626,067			74,325			522,885		$	1,515,024

- 19 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Loans and leases and the allowance for credit losses, continued

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

	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Total
	(In thousands)

Beginning balance	$	398,257			576,321			118,921			544,737		$	1,638,236
Provision for credit losses		25,450			87,403			(683	)		37,830			150,000
Net charge-offs
Charge-offs		(14,434	)		(4,522	)		(1,516	)		(31,754	)		(52,226	)
Recoveries		4,475			2,578			960			14,482			22,495
Net charge-offs		(9,959	)		(1,944	)		(556	)		(17,272	)		(29,731	)
Ending balance	$	413,748			661,780			117,682			565,295		$	1,758,505

Changes in the allowance for credit losses for the nine months ended September 30, 2021 were as follows:

	Commercial, Financial,			Real Estate
	Leasing, etc.			Commercial			Residential			Consumer			Total
	(In thousands)

Beginning balance	$	405,846			670,719			103,590			556,232		$	1,736,387
Provision for credit losses		(57,610	)		32,650			(29,026	)		(6,014	)		(60,000	)
Net charge-offs
Charge-offs		(93,638	)		(87,417	)		(6,586	)		(79,926	)		(267,567	)
Recoveries		37,149			10,115			6,347			52,593			106,204
Net charge-offs		(56,489	)		(77,302	)		(239	)		(27,333	)		(161,363	)
Ending balance	$	291,747			626,067			74,325			522,885		$	1,515,024

Changes in the allowance for credit losses for the nine months ended September 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		161,444			335,159			11,458			216,939			—			725,000
Net charge-offs
Charge-offs		(63,425	)		(23,266	)		(8,227	)		(116,409	)		—			(211,327	)
Recoveries		11,109			4,030			4,522			41,643			—			61,304
Net charge-offs		(52,316	)		(19,236	)		(3,705	)		(74,766	)		—			(150,023	)
Ending balance	$	413,748			661,780			117,682			565,295			—		$	1,758,505

- 20 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowan****ce for credit losses, continued

Despite the allocation in the preceding tables, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type. In 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 September 30, 2021 and December 31, 2020, the Company utilized a reasonable and supportable forecast period of two years. Subsequent to this forecast period the Company reverted, ratably over a one-year period, to historical loss experience to inform its estimate of losses for the remaining contractual life of each portfolio. The Company also estimates losses attributable to specific troubled credits identified through both normal and targeted credit review processes. 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.

Changes in the amount of the allowance for credit losses reflect the outcome of the procedures described herein. Improvement in the economic outlook at September 30, 2021 contributed to a reduced estimate of expected credit losses. Other factors considered included the impact of portfolio concentrations, changes in underwriting practices, product expansions into new markets, imprecision in economic forecasts and other risk factors that might influence the loss estimation process.

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

- 21 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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 nine-month periods ended September 30, 2021 and 2020 follows.

	September 30, 2021						June 30, 2021		January 1, 2021		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
	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.	$	171,040	$	109,149	$	280,189	$	330,040	$	306,827	$	4,646	$	10,661
Real estate:
Commercial		332,014		820,856		1,152,870		1,081,546		775,894		2,256		4,518
Residential builder and developer		594		-		594		14,552		1,094		206		239
Other commercial construction		36,750		121,949		158,699		133,758		114,039		255		570
Residential		196,918		156,508		353,426		372,144		365,729		6,809		17,603
Residential — limited documentation		81,538		44,991		126,529		136,683		147,170		100		336
Consumer:
Home equity lines and loans		38,582		32,892		71,474		76,711		79,392		979		2,924
Recreational finance		18,428		5,479		23,907		23,276		25,519		164		478
Automobile		27,258		3,744		31,002		31,090		39,404		46		143
Other		43,330		243		43,573		42,257		38,231		110		433
Total	$	946,452	$	1,295,811	$	2,242,263	$	2,242,057	$	1,893,299	$	15,571	$	37,905

	September 30, 2020						June 30, 2020		January 1, 2020		Three Months Ended September 30, 2020		Nine Months Ended September 31, 2020
	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.	$	264,515	$	86,113	$	350,628	$	284,654	$	346,743	$	5,999	$	9,035
Real estate:
Commercial		86,199		166,316		252,515		172,488		173,796		993		6,782
Residential builder and developer		1,833		—		1,833		1,748		4,708		114		173
Other commercial construction		15,441		22,186		37,627		85,426		35,881		232		6,809
Residential		66,302		231,334		297,636		306,907		322,504		3,410		15,258
Residential — limited documentation		29,824		85,959		115,783		118,695		114,667		114		571
Consumer:
Home equity lines and loans		36,134		42,686		78,820		77,094		65,039		1,017		3,236
Recreational finance		17,637		6,554		24,191		24,152		14,308		155		461
Automobile		37,355		5,019		42,374		42,736		21,293		47		139
Other		3,567		34,998		38,565		42,750		35,394		174		489
Total	$	558,807	$	681,165	$	1,239,972	$	1,156,650	$	1,134,333	$	12,255	$	42,953

- 22 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

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.

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

					Post-modification (a)
	Number		Pre- modification Recorded Investment		Principal Deferral		Interest Rate Reduction		Other		Combination of Concession Types		Total
Three Months Ended September 30, 2021	(Dollars in thousands)

Commercial, financial, leasing, etc.		62	$	49,884	$	6,051	$	—	$	40,242	$	3,479	$	49,772
Real estate:
Commercial		15		53,198		30,311		—		262		22,599		53,172
Residential		64		14,443		12,281		—		—		1,984		14,265
Residential — limited documentation		4		828		828		—		—		—		828
Consumer:
Home equity lines and loans		22		1,349		1,246		—		—		103		1,349
Recreational finance		67		2,565		2,565		—		—		—		2,565
Automobile		146		2,711		2,711		—		—		—		2,711
Other		15		123		123		—		—		—		123
Total		395	$	125,101	$	56,116	$	—	$	40,504	$	28,165	$	124,785


Three Months Ended September 30, 2020

Commercial, financial, leasing, etc.		112	$	35,037	$	7,145	$	298	$	—	$	27,512	$	34,955
Real estate:
Commercial		50		13,293		12,506		172		30		600		13,308
Residential		30		8,544		5,517		—		—		3,616		9,133
Consumer:
Home equity lines and loans		33		3,410		129		—		—		3,286		3,415
Recreational finance		74		2,734		2,734		—		—		—		2,734
Automobile		403		7,007		7,005		—		—		2		7,007
Other		383		3,046		142		—		—		2,904		3,046
Total		1,085	$	73,071	$	35,178	$	470	$	30	$	37,920	$	73,598

- 23 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and lease****s and the allowance for credit losses, continued

					Post-modification (a)
	Number		Pre- modification Recorded Investment		Principal Deferral		Interest Rate Reduction		Other		Combination of Concession Types		Total
Nine Months Ended September 30, 2021	(Dollars in thousands)

Commercial, financial, leasing, etc.		244	$	174,366	$	42,143	$	—	$	40,464	$	90,770	$	173,377
Real estate:
Commercial		83		223,209		48,841		—		30,832		141,456		221,129
Other commercial construction		3		542		532		—		—		—		532
Residential		304		88,067		80,411		—		—		7,391		87,802
Residential — limited documentation		17		2,349		2,292		—		—		—		2,292
Consumer:
Home equity lines and loans		64		5,034		4,702		—		—		277		4,979
Recreational finance		173		5,896		5,896		—		—		—		5,896
Automobile		516		9,182		9,168		—		—		14		9,182
Other		338		2,393		2,393		—		—		—		2,393
Total		1,742	$	511,038	$	196,378	$	—	$	71,296	$	239,908	$	507,582

Nine Months Ended September 30, 2020

Commercial, financial, leasing, etc.		279	$	102,865	$	29,762	$	298	$	31,605	$	40,013	$	101,678
Real estate:
Commercial		106		94,807		24,372		505		4,830		52,916		82,623
Residential builder and developer		1		91		—		—		—		90		90
Residential		82		27,594		11,865		—		—		19,126		30,991
Residential — limited documentation		9		2,980		2,667		—		—		1,232		3,899
Consumer:
Home equity lines and loans		159		11,719		688		—		—		11,057		11,745
Recreational finance		348		13,619		13,619		—		—		—		13,619
Automobile		1,873		33,541		33,539		—		—		2		33,541
Other		718		5,229		824		—		—		4,405		5,229
Total		3,575	$	292,445	$	117,336	$	803	$	36,435	$	128,841	$	283,415

(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 September 30, 2021 and 2020 and for which there was a subsequent payment default during the nine-month periods ended September 30, 2021 and 2020, respectively, were not material.

The amount of foreclosed residential real estate property held by the Company was $25 million and $28 million at September 30, 2021 and December 31, 2020, respectively. There were $156 million and $214 million at September 30, 2021 and December 31, 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 September 30, 2021, approximately 42% were government guaranteed.

- 24 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Borrowings

M&T had $531 million of fixed and variable rate junior subordinated deferrable interest debentures ("Junior Subordinated Debentures") outstanding at September 30, 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.

On 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 mature on December 1, 2021.

- 25 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Shareholders’ equity

M&T is authorized to issue 1,000,000 shares of preferred stock with a $1.00 par value per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference, but have no general voting rights.

Issued and outstanding preferred stock of M&T as of September 30, 2021 and December 31, 2020 is presented below:

	September 30, 2021				December 31, 2020
	Shares Issued and Outstanding		Carrying Value		Shares Issued and Outstanding		Carrying Value
	(Dollars in thousands)
Series E (a)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share		350,000	$	350,000		350,000	$	350,000
Series F (b)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock, $10,000 liquidation preference per share		50,000	$	500,000		50,000	$	500,000
Series G (c)
Fixed-Rate Reset Non-cumulative Perpetual Preferred Stock, $10,000 liquidation preference per share		40,000	$	400,000		40,000	$	400,000
Series I (d)
Fixed-Rate Reset Non-cumulative Perpetual Preferred Stock, $10,000 liquidation preference per share		50,000	$	500,000		—	$	—

(a)

Dividends, if declared, are paid semi-annually at a rate of 6.45% through February 14, 2024 and thereafter will be paid quarterly at a rate of the three-month LIBOR plus 361 basis points. The shares are redeemable in whole or in part on or after February 15, 2024. Notwithstanding M&T’s option to redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days following that occurrence.

(b)

Dividends, if declared, are paid semi-annually at a rate of 5.125% through October 31, 2026 and thereafter will be paid quarterly at a rate of the three-month LIBOR plus 352 basis points. The shares are redeemable in whole or in part on or after November 1, 2026. Notwithstanding M&T’s option to redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days following that occurrence.

(c)

Dividends, if declared, are paid semi-annually at a rate of 5.0% through July 31, 2024 and thereafter will be paid semiannually at a rate of the five-year U.S. Treasury rate plus 3.174%. The shares are redeemable in whole or in part on or after August 1, 2024. Notwithstanding M&T’s option to redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days following that occurrence.

(d)

Dividends, if declared, are paid semi-annually at a rate of 3.5% through August 31, 2026 and thereafter will be paid semiannually at a rate of the five-year U.S. Treasury rate plus 2.679%. The shares are redeemable in whole or in part on or after September 1, 2026. Notwithstanding M&T’s option to redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days following that occurrence.

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.

- 26 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. 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 September 30, 2021 and December 31, 2020, the Company had $65 million and $67 million, respectively, of amounts receivable related to recognized revenue from the sources in the accompanying tables. Such amounts are classified in accrued interest and other assets in the 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 September 30, 2021 and December 31, 2020, the Company had deferred revenue of $41 million and $42 million, respectively, related to the sources in the accompanying tables recorded in accrued interest and other liabilities in the consolidated balance sheet.

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

	Business Banking										Total
Three Months Ended September 30, 2021	(In thousands)

Classification in consolidated statement of income
Service charges on deposit accounts	$	14,205	25,054	2,977	—	—	61,696		1,494		$	105,426
Trust income		—	—	—	—	—	—		156,876			156,876
Brokerage services income		—	—	—	—	—	(20	)	20,510			20,490
Other revenues from operations:
Merchant discount and credit card fees		14,376	14,970	878	—	—	5,912		138			36,274
Other		—	1,879	2,180	283	1,501	5,674		8,311			19,828
	$	28,581	41,903	6,035	283	1,501	73,262		187,329		$	338,894
Three Months Ended September 30, 2020

Classification in consolidated statement of income
Service charges on deposit accounts	$	11,527	22,816	2,347	—	—	53,379		1,286		$	91,355
Trust income		—	1	—	—	—	—		149,936			149,937
Brokerage services income		—	—	—	—	—	—		11,602			11,602
Other revenues from operations:
Merchant discount and credit card fees		10,533	10,785	492	—	—	4,159		(315	)		25,654
Other		—	2,940	929	205	1,127	5,994		10,212			21,407
	$	22,060	36,542	3,768	205	1,127	63,532		172,721		$	299,955

- 27 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. Revenue from contracts with customers, continued

	Business Banking									Total
Nine Months Ended September 30, 2021	(In thousands)

Classification in consolidated statement of income
Service charges on deposit accounts	$	39,644	74,304	8,768	—	—	169,734	4,271		$	296,721
Trust income		—	—	—	—	—	—	475,889			475,889
Brokerage services income		—	—	—	—	—	—	43,868			43,868
Other revenues from operations:
Merchant discount and credit card fees		37,570	39,812	1,823	—	—	15,741	(207	)		94,739
Other		—	3,890	5,197	1,043	4,670	17,493	30,456			62,749
	$	77,214	118,006	15,788	1,043	4,670	202,968	554,277		$	973,966
Nine Months Ended September 30, 2020

Classification in consolidated statement of income

Service charges on deposit accounts	$	38,048	69,487	7,724	—	—	155,073	4,639		$	274,971
Trust income		18	442	—	—	—	—	450,110			450,570
Brokerage services income		—	—	—	—	—	—	35,194			35,194
Other revenues from operations:
Merchant discount and credit card fees		29,023	32,992	1,720	—	—	9,880	261			73,876
Other		—	5,913	2,960	1,212	3,101	15,142	32,149			60,477
	$	67,089	108,834	12,404	1,212	3,101	180,095	522,353		$	895,088

- 28 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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
	Three Months Ended September 30
	2021			2020			2021			2020
	(In thousands)

Service cost	$	5,128			4,986			254			242
Interest cost on projected benefit obligation		15,468			17,855			328			436
Expected return on plan assets		(35,862	)		(31,378	)		—			—
Amortization of prior service cost (credit)		139			125			(1,185	)		(1,175	)
Amortization of net actuarial loss (gain)		22,254			13,950			(324	)		(300	)
Net periodic cost (benefit)	$	7,127			5,538			(927	)		(797	)

	Pension Benefits						Other Postretirement Benefits
	Nine Months Ended September 30
	2021			2020			2021			2020
	(In thousands)

Service cost	$	15,385			14,958			760			727
Interest cost on projected benefit obligation		46,404			53,565			984			1,306
Expected return on plan assets		(107,586	)		(94,134	)		—			—
Amortization of prior service cost (credit)		415			404			(3,554	)		(3,544	)
Amortization of net actuarial loss (gain)		66,763			42,998			(971	)		(918	)
Net periodic cost (benefit)	$	21,381			17,791			(2,781	)		(2,429	)

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 million for each of the three-month periods ended September 30, 2021 and 2020 and $81 million and $73 million for the nine-month periods ended September 30, 2021 and 2020, respectively, and are included in salaries and employee benefits expense.

- 29 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Earnings per common share

The computations of basic earnings per common share follow:

	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020
	(In thousands, except per share)

Income available to common shareholders:
Net income	$	495,460			372,136			1,400,778			882,012
Less: Preferred stock dividends		(17,050	)		(17,050	)		(51,150	)		(51,178	)
Net income available to common equity		478,410			355,086			1,349,628			830,834
Less: Income attributable to unvested stock-based compensation awards		(2,452	)		(1,687	)		(6,823	)		(3,631	)
Net income available to common shareholders	$	475,958			353,399			1,342,805			827,203
Weighted-average shares outstanding:
Common shares outstanding (including common stock issuable) and unvested stock-based compensation awards		129,580			129,061			129,529			129,518
Less: Unvested stock-based compensation awards		(891	)		(776	)		(897	)		(768	)
Weighted-average shares outstanding		128,689			128,285			128,632			128,750

Basic earnings per common share	$	3.70			2.75			10.44		$	6.42

The computations of diluted earnings per common share follow:

	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020
	(In thousands, except per share)

Net income available to common equity	$	478,410			355,086			1,349,628			830,834
Less: Income attributable to unvested stock-based compensation awards		(2,449	)		(1,686	)		(6,816	)		(3,630	)
Net income available to common shareholders	$	475,961			353,400			1,342,812			827,204
Adjusted weighted-average shares outstanding:
Common and unvested stock-based compensation awards		129,580			129,061			129,529			129,518
Less: Unvested stock-based compensation awards		(891	)		(776	)		(897	)		(768	)
Plus: Incremental shares from assumed conversion of stock-based compensation awards and warrants to purchase common stock		155			70			154			63
Adjusted weighted-average shares outstanding		128,844			128,355			128,786			128,813

Diluted earnings per common share	$	3.69			2.75			10.43		$	6.42

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 to purchase common stock of M&T representing 460,710 and 483,182 common shares during the three-month periods ended September 30, 2021 and 2020, respectively, and 461,792 and 477,144 common shares during the nine-month periods ended September 30, 2021 and 2020, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

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
	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		(57,388	)		—			—			(57,388	)			15,124			(42,264	)
Foreign currency translation adjustment		—			—			(1,246	)		(1,246	)			360			(886	)
Unrealized gains on cash flow hedges		—			—			821			821				(214	)		607
Total other comprehensive income (loss) before reclassifications		(57,388	)		—			(425	)		(57,813	)			15,270			(42,543	)
Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income:
Amortization of unrealized holding losses on held-to-maturity (“HTM”) securities		3,333			—			—			3,333		(a)		(871	)		2,462
Gains realized in net income		(8	)		—			—			(8	)	(b)		2			(6	)
Accretion of net gain on terminated cash flow hedges					—			(90	)		(90	)	(c)		24			(66	)
Net yield adjustment from cash flow hedges currently in effect					—			(206,713	)		(206,713	)	(a)		53,997			(152,716	)
Amortization of prior service credit		—			(3,139	)		—			(3,139	)	(d)		860			(2,279	)
Amortization of actuarial losses		—			65,792			—			65,792		(d)		(18,031	)		47,761
Total other comprehensive income (loss)		(54,063	)		62,653			(207,228	)		(198,638	)			51,251			(147,387	)
Balance — September 30, 2021	$	141,323			(587,434	)		162,330		$	(283,781	)			73,362		$	(210,419	)


Balance — January 1, 2020	$	50,701			(464,548	)		133,888		$	(279,959	)			73,279		$	(206,680	)
Other comprehensive income before reclassifications:
Unrealized holding gains, net		151,777			—			—			151,777				(39,277	)		112,500
Foreign currency translation adjustment		—			—			(222	)		(222	)			(39	)		(261	)
Unrealized gains on cash flow hedges		—			—			508,226			508,226				(131,504	)		376,722
Total other comprehensive income before reclassifications		151,777			—			508,004			659,781				(170,820	)		488,961
Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income:
Amortization of unrealized holding losses on HTM securities		2,678			—			—			2,678		(a)		(725	)		1,953
Gains realized in net income		(3	)		—			—			(3	)	(b)		1			(2	)
Accretion of net gain on terminated cash flow hedges		—			—			(94	)		(94	)	(c)		26			(68	)
Net yield adjustment from cash flow hedges currently in effect		—			—			(183,598	)		(183,598	)	(a)		47,506			(136,092	)
Amortization of prior service credit		—			(3,140	)		—			(3,140	)	(d)		927			(2,213	)
Amortization of actuarial losses		—			42,080			—			42,080		(d)		(12,436	)		29,644
Total other comprehensive income		154,452			38,940			324,312			517,704				(135,521	)		382,183
Balance — September 30, 2020	$	205,153			(425,608	)		458,200		$	237,745				(62,242	)	$	175,503

(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.

- 31 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

10. Comprehensive income, continued

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

				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		(39,808	)		45,482			(153,061	)		(147,387	)
Balance — September 30, 2021	$	104,794		$	(435,582	)	$	120,369		$	(210,419	)

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 September 30, 2021.

The net effect of interest rate swap agreements was to increase net interest income by $67 million and $233 million during three-month and the nine-month periods ended September 30, 2021, respectively, and by $95 million and $212 million during the three-month and nine-month periods ended September 30, 2020, 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
	Notional		Average		Average Rate						Fair Value
	Amount		Maturity		Fixed			Variable			Gain (Loss) (a)
	(In thousands)		(In years)								(In thousands)
September 30, 2021
Fair value hedges:
Fixed rate long-term borrowings (b)	$	1,650,000		2.6		2.86	%		0.73	%	$	728
Cash flow hedges:
Interest payments on variable rate commercial real estate loans (b)(c)		25,700,000		0.7		1.28	%		0.08	%		656
Total	$	27,350,000		0.8							$	1,384
December 31, 2020
Fair value hedges:
Fixed rate long-term borrowings (b)	$	1,650,000		3.3		2.86	%		0.79	%	$	651
Cash flow hedges:
Interest payments on variable rate commercial real estate loans (b)(d)		49,400,000		0.9		2.22	%		0.15	%		425
Total	$	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 September 30, 2021 and December 31, 2020 was a reduction of the estimated fair value gains on interest rate swap agreements designated as fair value hedges of $59.2 million and $101.5 million, respectively, and on interest rate swap agreements designated as cash flow hedges of $166.1 million and $372.2 million, respectively.

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

(c)	Includes notional amount and terms of $8.4 billion of forward-starting interest rate swap agreements that become effective in 2021 - 2022.

(d)	Includes notional amount and terms of $32.1 billion of forward-starting interest rate swap agreements that become effective in 2021 - 2022.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. 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 $34.5 billion and $37.8 billion at September 30, 2021 and December 31, 2020, respectively. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes aggregated $815 million and $776 million at September 30, 2021 and December 31, 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
	Fair Value				Fair Value
	September 30,		December 31,		September 30,		December 31,
	2021		2020		2021		2020
	(In thousands)
Derivatives designated and qualifying as hedging instruments
Interest rate swap agreements (a)	$	1,608	$	1,968	$	224	$	892
Commitments to sell real estate loans (a)		6,712		1,488		769		8,458
		8,320		3,456		993		9,350
Derivatives not designated and qualifying as hedging instruments
Mortgage-related commitments to originate real estate loans for sale (a)		24,459		43,599		4,314		365
Commitments to sell real estate loans (a)		11,604		2,409		7,813		13,868
Trading:
Interest rate contracts (b)		565,332		1,008,913		84,909		105,768
Foreign exchange and other option and futures contracts (b)		8,304		9,608		7,740		11,134
		609,699		1,064,529		104,776		131,135
Total derivatives	$	618,019	$	1,067,985	$	105,769	$	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 September 30, 2021 and December 31, 2020 was a reduction of the estimated fair value of interest rate contracts in the trading account in an asset position of $41.7 million and $5.6 million, respectively, and in a liability position of $433.4 million and $806.5 million, respectively.

- 33 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Derivative financial instruments, continued

	Amount of Gain (Loss) Recognized
	Three Months Ended September 30, 2021					Three Months Ended September 30, 2020
	Derivative			Hedged Item		Derivative			Hedged Item
	(In thousands)
Derivatives in fair value hedging relationships
Interest rate swap agreements:
Fixed rate long-term borrowings (a)	$	(9,713	)		9,636	$	(13,067	)		12,822
Derivatives not designated as hedging instruments
Trading:
Interest rate contracts (b)	$	(3,456	)			$	(4,776	)
Foreign exchange and other option and futures contracts (b)		3,060					1,486
Total	$	(396	)			$	(3,290	)


	Amount of Gain (Loss) Recognized
	Nine Months Ended September 30, 2021					Nine Months Ended September 30, 2020
	Derivative			Hedged Item		Derivative			Hedged Item
	(In thousands)
Derivatives in fair value hedging relationships
Interest rate swap agreements:
Fixed rate long-term borrowings (a)	$	(42,217	)		41,456	$	75,760			(75,607	)
Derivatives not designated as hedging instruments
Trading:
Interest rate contracts (b)	$	(9,434	)			$	8,988
Foreign exchange and other option and futures contracts (b)		6,286					6,555
Total	$	(3,148	)			$	15,543

	(a)	Reported as an adjustment to interest expense.

	(b)	Reported as trading account and foreign exchange gains.

- 34 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. 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
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
	(In thousands)
Location in the Consolidated Balance Sheet of the Hedged Items in Fair Value Hedges

Long-term debt	$	1,708,872	$	1,750,048	$	59,714	$	101,326

The amount of interest income recognized in the consolidated statement of income associated with derivatives designated as cash flow hedges was $58 million and $82 million for the three months ended September 30, 2021 and 2020, respectively, and $207 million and $184 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021 the unrealized gain recognized in other comprehensive income related to cash flow hedges was $167 million, of which $4 million, $119 million and $44 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 $36 million and $64 million at September 30, 2021 and December 31, 2020, respectively. Changes in unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied.

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

The aggregate fair value of derivative financial instruments in a liability position and the net liability positions with counterparties which are subject to master netting arrangements was $53 million and $114 million at September 30, 2021 and December 31, 2020, respectively. The Company was required to post collateral relating to those positions of $52 million and $103 million at September 30, 2021 and December 31, 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 September 30, 2021 was not 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 $4 million at September 30, 2021 and $3 million at December 31, 2020. Counterparties posted collateral relating to those positions of $4 million and $3 million at those respective dates. Trading account interest rate swap agreements entered into with customers are subject to the Company’s credit risk standards and often contain collateral provisions.

- 35 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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 $136 million and $135 million at September 30, 2021 and December 31, 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.

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 Company has not recognized any losses as a result of having securitized assets.

As described in note 5, M&T has issued junior subordinated debentures payable to various trusts that have issued Capital Securities. M&T owns the common securities of those trust entities. The Company is not considered to be the primary beneficiary of those entities and, accordingly, the trusts are not included in the Company’s consolidated financial statements. At each of September 30, 2021 and December 31, 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 5.

The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately $2.9 billion at September 30, 2021 and $2.3 billion at December 31, 2020. Those partnerships generally construct or acquire properties for which the investing partners are eligible to receive certain federal income tax credits in accordance with government guidelines. Such investments may also provide tax deductible losses to the partners. The partnership investments also assist the Company in achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company by creditors of the partnerships. However, the tax credits that result from the Company’s investments in such partnerships are generally subject to recapture should a partnership fail to comply with the respective government regulations. The Company’s carrying amount of its investments in such partnerships was $858 million, including $341 million of unfunded commitments, at September 30, 2021 and $861 million, including $406 million of unfunded commitments, at December 31, 2020. Contingent commitments to provide additional capital contributions to these partnerships were not material at September 30, 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 September 30, 2021 was $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 $25 million and $63 million of its investments in qualified affordable housing projects to income tax expense during the three-month and nine-month periods ended September 30, 2021, respectively, and recognized $27 million and $70 million of tax credits and other tax benefits during those periods. Similarly, for the three-month and nine-month periods ended September 30, 2020, the Company amortized $22 million and $65 million of its investments in qualified affordable housing projects to income tax expense, respectively, and recognized $26 million and $78 million of tax credits and other tax benefits during those respective periods.

- 36 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Variable interest entities and asset securitizations, continued

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.

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 September 30, 2021.

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

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

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

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

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

Trading account assets and liabilities

Trading account assets and liabilities 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.

- 37 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Fair value measurements, continued

Real estate loans held for sale

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

Commitments to originate real estate loans for sale and commitments to sell real estate loans

The Company enters into various commitments to originate real estate loans for sale and commitments to sell real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value on the consolidated balance sheet. The estimated fair values of such commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans to certain government-sponsored entities and other parties. The fair valuations of commitments to sell real estate loans generally result in a Level 2 classification. The estimated fair value of commitments to originate real estate loans for sale 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 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.

- 38 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Fair value measurements, continued

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

	Fair Value Measurements		Level 1		Level 2		Level 3
	(In thousands)
September 30, 2021
Trading account assets	$	624,556	$	50,335	$	574,221	$	—
Investment securities available for sale:
U.S. Treasury and federal agencies		9,744		—		9,744		—
Mortgage-backed securities:
Government issued or guaranteed		3,475,479		—		3,475,479		—
Other debt securities		132,883		—		132,883		—
		3,618,106		—		3,618,106		—
Equity securities		82,456		75,169		7,287		—
Real estate loans held for sale		838,051		—		838,051		—
Other assets (a)		44,383		—		19,924		24,459
Total assets	$	5,207,552	$	125,504	$	5,057,589	$	24,459
Trading account liabilities	$	92,649	$	—	$	92,649	$	—
Other liabilities (a)		13,120		—		8,806		4,314
Total liabilities	$	105,769	$	—	$	101,455	$	4,314

December 31, 2020
Trading account assets	$	1,068,581	$	50,060	$	1,018,521	$	—
Investment securities available for sale:
U.S. Treasury and federal agencies		9,338		—		9,338		—
Mortgage-backed securities:
Government issued or guaranteed		4,683,438		—		4,683,438		—
Privately issued		16		—		—		16
Other debt securities		129,814		—		129,814		—
		4,822,606		—		4,822,590		16
Equity securities		92,985		63,129		29,856		—
Real estate loans held for sale		1,054,676		—		1,054,676		—
Other assets (a)		49,464		—		5,865		43,599
Total assets	$	7,088,312	$	113,189	$	6,931,508	$	43,615
Trading account liabilities	$	116,902	$	—	$	116,902	$	—
Other liabilities (a)		23,583		—		23,218		365
Total liabilities	$	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).

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. 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 September 30, 2021 and 2020 were as follows:

	Investment Securities Available for Sale
	Privately Issued Mortgage-Backed Securities		Other Assets and Other Liabilities
2021	(In thousands)

Balance — June 30, 2021	$	—		35,666
Total gains realized/unrealized:
Included in earnings		—		44,152		(a)
Settlements		—		—
Transfers out of Level 3		—		(59,673	)	(b)
Balance — September 30, 2021	$	—		20,145
Changes in unrealized gains included in earnings related to assets still held at September 30, 2021	$	—		18,196		(a)

2020

Balance — June 30, 2020	$	16	40,106
Total gains realized/unrealized:
Included in earnings		—	57,819		(a)
Transfers out of Level 3		—	(46,422	)	(b)
Balance — September 30, 2020	$	16	51,503
Changes in unrealized gains included in earnings related to assets still held at September 30, 2020	$	—	44,127		(a)

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Fair value measurements, continued

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

	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		—			102,489		(a)
Settlements		(16	)		—
Transfers out of Level 3		—			(125,578	)	(b)
Balance — September 30, 2021	$	—			20,145
Changes in unrealized gains included in earnings related to assets still held at September 30, 2021	$	—			21,722		(a)

2020

Balance — January 1, 2020	$	16	10,740
Total gains realized/unrealized:
Included in earnings		—	150,632		(a)
Transfers out of Level 3		—	(109,869	)	(b)
Balance — September 30, 2020	$	16	51,503
Changes in unrealized gains included in earnings related to assets still held at September 30, 2020	$	—	50,411		(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.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Fair value measurements, continued

Loans

Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectable portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the 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 considering specific 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 39% at September 30, 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 September 30, 2021 was 64%. 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 $591 million at September 30, 2021 ($330 million and $261 million of which were classified as Level 2 and Level 3, respectively), $652 million at December 31, 2020 ($339 million and $313 million of which were classified as Level 2 and Level 3, respectively) and $387 million at September 30, 2020 ($159 million and $228 million of which were classified as Level 2 and Level 3, respectively). Changes in fair value recognized for partial charge-offs of loans and loan impairment reserves on loans held by the Company on September 30, 2021 were decreases of $35 million and $125 million for the three-month and nine-month periods ended September 30, 2021, respectively. Changes in fair value recognized for partial charge-offs of loans and loan impairment reserves on loans held by the Company on September 30, 2020 were decreases of $82 million and $153 million for the three-month and nine-month periods ended September 30, 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 $4 million and $27 million at September 30, 2021 and 2020, respectively. Changes in fair value recognized for those foreclosed assets held by the Company were not material during the three-month and nine-month periods ended September 30, 2021 and 2020.

- 42 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Fair value measurements, continued

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 $147 million and $159 million at September 30, 2021 and December 31, 2020, respectively, required a valuation allowance of $29 million and $30 million, respectively. Significant unobservable inputs used in this Level 3 valuation included weighted-average prepayment speeds of 14.96% and 16.01% at September 30, 2021 and December 31, 2020, respectively, and a weighted-average option-adjusted spread of 900 basis points at each date. Changes in fair value recognized for impairment of capitalized servicing rights were a decrease in the valuation allowance of $1 million during the nine months ended September 30, 2021 and an increase in the valuation allowance of $20 million during the nine months ended September 30, 2020. There were no impairment charges for capitalized servicing rights during the three months ended September 30, 2021 or 2020.

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 September 30, 2021 and December 31, 2020:

	Fair Value		Valuation Technique	Unobservable Inputs/Assumptions		Range (Weighted- Average)
	(In thousands)
September 30, 2021
Recurring fair value measurements
Net other assets (liabilities) (a)		20,145	Discounted cash flow	Commitment expirations		0% - 93% (14%)

December 31, 2020
Recurring fair value measurements
Privately issued mortgage- backed securities	$	16	Two independent pricing quotes		—		—
Net other assets (liabilities) (a)		43,234	Discounted cash flow	Commitment expirations		0% - 98% (16%)

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

- 43 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Fair value measurements, continued

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.

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:

	September 30, 2021
	Carrying Amount			Estimated Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Financial assets:
Cash and cash equivalents	$	1,479,712			1,479,712			1,351,944		127,768			—
Interest-bearing deposits at banks		38,445,788			38,445,788			—		38,445,788			—
Trading account assets		624,556			624,556			50,335		574,221			—
Investment securities		6,447,622			6,501,833			75,169		6,364,735			61,929
Loans and leases:
Commercial loans and leases		22,514,940			22,315,530			—		—			22,315,530
Commercial real estate loans		37,023,952			36,312,089			—		558,970			35,753,119
Residential real estate loans		16,209,354			16,397,551			—		3,902,745			12,494,806
Consumer loans		17,834,648			17,935,068			—		—			17,935,068
Allowance for credit losses		(1,515,024	)		—			—		—			—
Loans and leases, net		92,067,870			92,960,238			—		4,461,715			88,498,523
Accrued interest receivable		378,433			378,433			—		378,433			—
Financial liabilities:
Noninterest-bearing deposits	$	(56,542,309	)		(56,542,309	)		—		(56,542,309	)		—
Savings and interest-checking deposits		(69,195,960	)		(69,195,960	)		—		(69,195,960	)		—
Time deposits		(2,963,027	)		(2,967,906	)		—		(2,967,906	)		—
Short-term borrowings		(103,548	)		(103,548	)		—		(103,548	)		—
Long-term borrowings		(3,500,391	)		(3,605,637	)		—		(3,605,637	)		—
Accrued interest payable		(38,808	)		(38,808	)		—		(38,808	)		—
Trading account liabilities		(92,649	)		(92,649	)		—		(92,649	)		—
Other financial instruments:
Commitments to originate real estate loans for sale	$	20,145			20,145			—		—			20,145
Commitments to sell real estate loans		9,734			9,734			—		9,734			—
Other credit-related commitments		(124,145	)		(124,145	)		—		—			(124,145	)
Interest rate swap agreements used for interest rate risk management		1,384			1,384			—		1,384			—

- 44 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Fair value measurements, continued

	December 31, 2020
	Carrying Amount			Estimated Fair Value			Level 1		Level 2			Level 3
				(In thousands)
Financial assets:
Cash and cash equivalents	$	1,552,743			1,552,743			1,497,457		55,286			—
Interest-bearing deposits at banks		23,663,810			23,663,810			—		23,663,810			—
Trading account assets		1,068,581			1,068,581			50,060		1,018,521			—
Investment securities		7,045,697			7,138,989			63,129		7,005,571			70,289
Loans and leases:
Commercial loans and leases		27,574,564			27,220,699			—		—			27,220,699
Commercial real estate loans		37,637,889			36,816,580			—		277,911			36,538,669
Residential real estate loans		16,752,993			17,089,141			—		4,135,655			12,953,486
Consumer loans		16,570,421			16,554,050			—		—			16,554,050
Allowance for credit losses		(1,736,387	)		—			—		—			—
Loans and leases, net		96,799,480			97,680,470			—		4,413,566			93,266,904
Accrued interest receivable		419,936			419,936			—		419,936			—
Financial liabilities:
Noninterest-bearing deposits	$	(47,572,884	)		(47,572,884	)		—		(47,572,884	)		—
Savings and interest-checking deposits		(67,680,840	)		(67,680,840	)		—		(67,680,840	)		—
Time deposits		(3,899,910	)		(3,919,367	)		—		(3,919,367	)		—
Deposits at Cayman Islands office		(652,104	)		(652,104	)		—		(652,104	)		—
Short-term borrowings		(59,482	)		(59,482	)		—		(59,482	)		—
Long-term borrowings		(4,382,193	)		(4,490,433	)		—		(4,490,433	)		—
Accrued interest payable		(59,916	)		(59,916	)		—		(59,916	)		—
Trading account liabilities		(116,902	)		(116,902	)		—		(116,902	)		—
Other financial instruments:
Commitments to originate real estate loans for sale	$	43,234			43,234			—		—			43,234
Commitments to sell real estate loans		(18,429	)		(18,429	)		—		(18,429	)		—
Other credit-related commitments		(133,354	)		(133,354	)		—		—			(133,354	)
Interest rate swap agreements used for interest rate risk management		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.

- 45 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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.

	September 30,		December 31,
	2021		2020
	(In thousands)
Commitments to extend credit
Home equity lines of credit	$	5,687,595	$	5,563,854
Commercial real estate loans to be sold		433,529		363,735
Other commercial real estate		5,747,541		7,237,367
Residential real estate loans to be sold		750,820		1,026,118
Other residential real estate		840,039		665,259
Commercial and other		21,685,356		19,427,886
Standby letters of credit		2,236,321		2,241,417
Commercial letters of credit		34,495		27,332
Financial guarantees and indemnification contracts		4,133,648		4,220,531
Commitments to sell real estate loans		1,788,113		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 $10.6 billion and $10.4 billion at September 30, 2021 and December 31, 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 billion and $4.0 billion at September 30, 2021 and December 31, 2020, respectively.

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

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

The Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for losses related to its obligations to loan purchasers.

- 46 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

14. 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 September 30, 2021, the Company believes that its obligation to loan purchasers was not material to the Company’s consolidated financial position.

M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and 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 September 30, 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.

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 2020 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. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

- 47 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

15. Segment information, continued

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

	Three Months Ended September 30
	2021								2020
	Total Revenues(a)		Inter- segment Revenues			Net Income (Loss)			Total Revenues(a)		Inter- segment Revenues			Net Income (Loss)
	(In thousands)

Business Banking	$	181,873		694			72,017		$	131,566		(1	)		35,614
Commercial Banking		295,209		1,009			144,367			276,125		117			131,414
Commercial Real Estate		228,317		227			84,663			202,987		(17	)		87,095
Discretionary Portfolio		112,529		(14,448	)		74,666			140,135		(10,748	)		97,399
Residential Mortgage Banking		159,213		25,150			46,077			161,151		22,190			45,318
Retail Banking		357,335		(53	)		88,004			351,312		268			85,229
All Other		201,900		(12,579	)		(14,334	)		200,380		(11,809	)		(109,933	)
Total	$	1,536,376		—			495,460		$	1,463,656		—			372,136

	Nine Months Ended September 30
	2021								2020
	Total Revenues(a)		Inter- segment Revenues			Net Income (Loss)			Total Revenues(a)		Inter- segment Revenues			Net Income (Loss)
	(In thousands)

Business Banking	$	482,874		2,157			159,895		$	407,485		1,028			106,103
Commercial Banking		865,780		2,830			378,040			855,426		1,419			386,176
Commercial Real Estate		629,719		679			242,625			653,405		452			311,586
Discretionary Portfolio		365,380		(34,554	)		243,744			328,181		(33,646	)		218,758
Residential Mortgage Banking		459,655		70,208			125,791			428,757		64,623			107,334
Retail Banking		1,055,240		500			262,562			1,107,516		802			281,973
All Other		620,694		(41,820	)		(11,879	)		633,461		(34,678	)		(529,918	)
Total	$	4,479,342		—			1,400,778		$	4,414,231		—			882,012

	Average Total Assets
	Nine Months Ended September 30				Year Ended December 31
	2021		2020		2020
	(In millions)

Business Banking	$	8,386		7,902		8,152
Commercial Banking		29,109		30,450		30,338
Commercial Real Estate		25,913		25,594		25,792
Discretionary Portfolio		22,317		27,878		27,726
Residential Mortgage Banking		6,582		3,530		4,038
Retail Banking		17,701		16,231		16,438
All Other		40,959		20,845		22,996
Total	$	150,967		132,430		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 $3,703,000 and $4,019,000 for the three-month periods ended September 30, 2021 and 2020, respectively, and $11,168,000 and $13,316,000 for the nine-month periods ended September 30, 2021 and 2020, 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.

- 48 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

M&T holds a 20% minority interest in Bayview Lending Group LLC ("BLG"), a privately-held commercial mortgage company. That investment had no remaining carrying value at September 30, 2021 as a result of cumulative losses recognized and cash distributions received in prior years. Cash distributions now received from BLG are recognized as income by M&T and included in other revenues from operations. That income totaled $23 million during the nine-month period ended September 30, 2020. There were no similar cash distributions during the nine-month period ended September 30, 2021 or in the three-month period ended September 30, 2020.

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 $1.7 billion and $1.9 billion at September 30, 2021 and December 31, 2020, respectively. Revenues from those servicing rights were $2 million in each of the three-month periods ended September 30, 2021 and 2020 and $7 million for each of the nine-month periods ended September 30, 2021 and 2020. The Company sub-services residential mortgage loans for Bayview Financial having outstanding principal balances of $73.2 billion and $68.1 billion at September 30, 2021 and December 31, 2020, respectively. Revenues earned for sub-servicing loans for Bayview Financial were $39 million and $30 million for the three-month periods ended September 30, 2021 and 2020, respectively, and $110 million and $101 million in the nine-month periods ended September 30, 2021 and 2020, respectively. In addition, the Company held $65 million and $77 million of mortgage-backed securities in its held-to-maturity portfolio at September 30, 2021 and December 31, 2020, respectively, that were securitized by Bayview Financial. At September 30, 2021, the Company held $130 million of Bayview Financial’s $1.1 billion syndicated loan facility. In the first three months of 2021, the Company purchased $965 million of delinquent FHA guaranteed mortgage loans, including past due accrued interest, from Bayview Financial for $1.0 billion. The servicing rights for such loans were retained by Bayview Financial, but the Company continues to sub-service the loans.

Recent accounting developments

The following table provides a description of accounting standards that were adopted by the Company in 2021 as well as standards that are not effective that could have an impact to M&T’s consolidated financial statements upon adoption.

	Standard			Description			Required date of adoption			Effect on consolidated financial statements
	Standards Adopted in 2021
	Clarifying the Interactions Between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging			The amendments clarify the following guidance: 1. That an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in the equity securities investments guidance immediately before applying or upon discontinuing the equity method of accounting. 2. For the purpose of applying the derivatives and hedging guidance an entity should not consider whether, upon the settlement of a forward contract or exercise of a purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method of accounting or the fair value option in accordance with the financial instruments guidance. An entity also would evaluate the remaining characteristics in the derivatives and hedging guidance to determine the accounting for those forward contracts and purchased options.			January 1, 2021			The Company adopted the amended guidance effective January 1, 2021 using a prospective transition method. The adoption did not have a material impact on the Company’s consolidated financial statements.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

17. Recent accounting developments, continued

	Standard			Description			Required date of adoption			Effect on consolidated financial statements
	Standards Adopted in 2021
	Simplifying the Accounting for Income Taxes			The amendments remove the following exceptions for accounting for income taxes: 1. Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income) 2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment 3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary 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			The amendments related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

17. Recent accounting developments, continued

	Standard			Description			Required date of adoption			Effect on consolidated financial statements
	Standards Not Yet Adopted as of September 30, 2021
	Changes to Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity			The amendments reduce the number of accounting models for convertible debt instruments and convertible preferred stock. The amendments also reduce form-over-substance-based guidance for the derivatives scope exception for contacts in an entity’s own equity. For convertible instruments, embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate on the instrument. The amendments also require certain changes to EPS calculations for convertible instruments as well as additional disclosures relating to conditions that cause conversion features to be met. For contacts in an entity’s own equity, the amendments revise the derivatives scope exception guidance as follows: 1. Remove the settlement in unregistered shares, collateral, and shareholder rights conditions from the settlement guidance. 2. Clarify that payment penalties for failure to timely file do not preclude equity classification. 3. Require instruments that are required to be classified as an asset or liability to be measured subsequently at fair value, with changes reported in earnings and disclosed in the financial statements. 4. Clarifiy that the scope of the disclosure requirements in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies only to freestanding instruments. 5. Clarify that the scope of the reassessment guidance in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies to both freestanding instruments and embedded features.			January 1, 2022 Early adoption permitted			The amendments can be applied 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 to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change 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 is a convertible security upon adoption of the amendments. The Company has not yet decided on which transition method will be applied to the extent applicable. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

17. Recent accounting developments, continued

	Standard			Description			Required date of adoption			Effect on consolidated financial statements
	Standards Not Yet Adopted of September 30, 2021
	Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options			The amendments clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments clarify that: 1. A modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be treated as an exchange of the original instrument for a new instrument. 2. The effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be measured as follows: a. For a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements, as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged. b. For all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. 3. The effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be recognized on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services should be recognized in accordance with the Stock Compensation guidance. In a multiple-element transaction (for example, one that includes both debt financing and equity financing), the total effect of the modification should be allocated to the respective elements in the transaction.			January 1, 2022 Early adoption permitted			The amendments should be applied on a prospective basis. The Company currently does not have any instruments that fall within the guidance and does not expect the guidance to have a material impact on its financial statements.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

17. Recent accounting developments, continued

Standard	Description	Required date of adoption	Effect on consolidated financial statements
Standards Not Yet Adopted as of September 30, 2021
Lessor’s Accounting for Certain Leases with Variable Lease Payments	The amendments update the classification guidance for lessors. Under the amended guidance lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1. The lease would have been classified as a sales-type lease or a direct financing lease. 2. The lessor would have otherwise recognized a day-one loss. When a lease is classified as operating, the lessor does not recognize a net investment in the lease, does not derecognize the underlying asset, and, therefore, does not recognize a selling profit or loss.	January 1, 2022 Early adoption permitted	The amendments can be applied either on a retrospective basis or on a prospective basis. The Company does not expect the guidance will have a material impact on its financial statements.
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers in a Business Combination	The amendments require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with revenue recognition guidance Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied the revenue guidance to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements	January 1, 2023 Early adoption permitted	The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. However, if early adoption is elected, the amendments should be applied (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company has not yet decided on which transition method will be applied to the extent applicable. The Company does not expect the guidance will have a material impact on its consolidated financial statements.

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