Item 1. Financial Statements.

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Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

March 31,December 31,
(Dollars in thousands, except per share)20232022
Assets
Cash and due from banks$1,817,740$1,517,244
Interest-bearing deposits at banks22,306,42524,958,719
Federal funds sold—3,000
Trading account165,216117,847
Investment securities
Available for sale (cost: $11,393,916 at March 31, 2023; $11,193,152 at December 31, 2022)11,038,92210,748,961
Held to maturity (fair value: $15,204,461 at March 31, 2023; $12,375,420 at December 31, 2022)16,201,57113,529,969
Equity and other securities (cost: $1,204,957 at March 31, 2023; $933,766 at December 31, 2022)1,202,716931,941
Total investment securities28,443,20925,210,871
Loans and leases133,531,052132,074,156
Unearned discount(593,360)(509,993)
Loans and leases, net of unearned discount132,937,692131,564,163
Allowance for credit losses(1,975,110)(1,925,331)
Loans and leases, net130,962,582129,638,832
Premises and equipment1,664,0211,653,628
Goodwill8,490,0898,490,089
Core deposit and other intangible assets192,166209,374
Accrued interest and other assets8,914,9598,930,237
Total assets$202,956,407$200,729,841
Liabilities
Noninterest-bearing deposits$59,955,033$65,501,860
Savings and interest-checking deposits86,282,68587,911,463
Time deposits12,837,52210,101,545
Total deposits159,075,240163,514,868
Short-term borrowings6,995,3023,554,951
Accrued interest and other liabilities4,045,8044,377,495
Long-term borrowings7,462,8903,964,537
Total liabilities177,579,236175,411,851
Shareholders' equity
Preferred stock, $1.00 par, 20,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 350,000 shares at March 31, 2023 and December 31, 2022; Liquidation preference of $10,000 per share: 140,000 shares at March 31, 2023 and December 31, 2022; Liquidation preference of $25 per share: 10,000,000 shares at March 31, 2023 and December 31, 20222,010,6002,010,600
Common stock, $.50 par, 250,000,000 shares authorized,179,436,779 shares issued at March 31, 2023 and December 31, 202289,71889,718
Common stock issuable, 11,998 shares at March 31, 2023;14,031 shares at December 31, 20229571,112
Additional paid-in capital9,986,32510,002,891
Retained earnings16,212,09515,753,978
Accumulated other comprehensive income (loss), net(645,005)(790,030)
Treasury stock — common, at cost — 13,583,874 shares at March 31, 2023;10,165,419 shares at December 31, 2022(2,277,519)(1,750,279)
Total shareholders’ equity25,377,17125,317,990
Total liabilities and shareholders’ equity$202,956,407$200,729,841

See accompanying notes to financial statements.

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M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

Three Months Ended March 31
(In thousands, except per share)20232022
Interest income
Loans and leases, including fees$1,849,656$870,600
Investment securities
Fully taxable181,58739,132
Exempt from federal taxes16,61150
Deposits at banks278,41718,280
Other714194
Total interest income2,326,985928,256
Interest expense
Savings and interest-checking deposits277,0686,747
Time deposits89,1971,397
Short-term borrowings57,7761
Long-term borrowings84,68015,937
Total interest expense508,72124,082
Net interest income1,818,264904,174
Provision for credit losses120,00010,000
Net interest income after provision for credit losses1,698,264894,174
Other income
Mortgage banking revenues84,985109,148
Service charges on deposit accounts113,546101,507
Trust income193,802169,213
Brokerage services income24,04120,190
Trading account and other non-hedging derivative gains11,6755,369
Gain (loss) on bank investment securities(416)(743)
Other revenues from operations159,500136,203
Total other income587,133540,887
Other expense
Salaries and employee benefits807,942577,520
Equipment and net occupancy126,90485,812
Outside data processing and software105,78079,719
FDIC assessments29,75815,576
Advertising and marketing31,06316,024
Printing, postage and supplies14,18310,150
Amortization of core deposit and other intangible assets17,2081,256
Other costs of operations226,392173,684
Total other expense1,359,230959,741
Income before taxes926,167475,320
Income taxes224,543113,146
Net income$701,624$362,174
Net income available to common shareholders
Basic$675,508$339,589
Diluted675,511339,590
Net income per common share
Basic$4.03$2.63
Diluted4.012.62
Average common shares outstanding
Basic167,732128,945
Diluted168,410129,416

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 March 31
(In thousands)20232022
Net income$701,624$362,174
Other comprehensive income (loss), net of tax and reclassification adjustments:
Net unrealized gains (losses) on investment securities65,140(136,367)
Cash flow hedges adjustments80,933(114,061)
Foreign currency translation adjustments1,194(1,648)
Defined benefit plans liability adjustments(2,242)2,269
Total other comprehensive income (loss)145,025(249,807)
Total comprehensive income$846,649$112,367

See accompanying notes to financial statements.

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M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

Three Months Ended March 31
(In thousands)20232022
Cash flows from operating activities
Net income$701,624$362,174
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses120,00010,000
Depreciation and amortization of premises and equipment75,50156,739
Amortization of capitalized servicing rights19,83225,316
Amortization of core deposit and other intangible assets17,2081,256
Provision for deferred income taxes11,3804,151
Asset write-downs780252
Net gain on sales of assets(11,515)(4,768)
Net change in accrued interest receivable, payable54,78915,748
Net change in other accrued income and expense(42,828)(99,163)
Net change in loans originated for sale(274,222)434,520
Net change in trading account and other non-hedging derivative assets and liabilities(244,736)489,545
Net cash provided by operating activities427,8131,295,770
Cash flows from investing activities
Proceeds from sales of investment securities
Equity and other securities521,2754,593
Proceeds from maturities of investment securities
Available for sale141,173220,320
Held to maturity281,245120,032
Purchases of investment securities
Available for sale(337,196)(2,156,662)
Held to maturity(2,947,627)(566,119)
Equity and other securities(792,465)(10,966)
Net (increase) decrease in loans and leases(1,166,228)637,624
Net decrease in interest-bearing deposits at banks2,652,2945,846,922
Capital expenditures, net(55,411)(27,910)
Net decrease in loan servicing advances206,668342,947
Other, net(251,440)(215,201)
Net cash provided (used) by investing activities(1,747,712)4,195,580
Cash flows from financing activities
Net decrease in deposits(4,440,810)(5,224,696)
Net increase in short-term borrowings3,440,3513,261
Proceeds from long-term borrowings3,485,675—
Payments on long-term borrowings(96)(49)
Purchases of treasury stock(594,000)—
Dividends paid — common(220,517)(156,657)
Dividends paid — preferred(33,554)(30,718)
Other, net(19,654)(8,608)
Net cash provided (used) by financing activities1,617,395(5,417,467)
Net increase in cash, cash equivalents and restricted cash297,49673,883
Cash, cash equivalents and restricted cash at beginning of period1,520,2441,337,577
Cash, cash equivalents and restricted cash at end of period$1,817,740$1,411,460
Supplemental disclosure of cash flow information
Interest received during the period$2,289,226$978,682
Interest paid during the period410,41940,683
Income taxes paid during the period22,47433,638
Supplemental schedule of noncash investing and financing activities
Real estate acquired in settlement of loans$7,088$4,598
Additions to right-of-use assets under operating leases30,53616,458

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
CommonAdditionalComprehensive
PreferredCommonStockPaid-inRetainedIncomeTreasury
Dollars in thousands, except per shareStockStockIssuableCapitalEarnings(Loss), NetStockTotal
2023
Balance — January 1, 2023$2,010,600$89,718$1,112$10,002,891$15,753,978$(790,030)$(1,750,279)$25,317,990
Total comprehensive income————701,624145,025—846,649
Preferred stock cash dividends (a)————(24,941)——(24,941)
Purchases of treasury stock (b)——————(599,940)(599,940)
Stock-based compensation transactions, net (b)——(155)(16,566)(471)—72,70055,508
Common stock cash dividends — $1.30 per share————(218,095)——(218,095)
Balance — March 31, 2023$2,010,600$89,718$957$9,986,325$16,212,095$(645,005)$(2,277,519)$25,377,171
2022
Balance — January 1, 2022$1,750,000$79,871$1,212$6,635,000$14,646,448$(127,578)$(5,081,548)$17,903,405
Total comprehensive income————362,174(249,807)—112,367
Preferred stock cash dividends (a)————(21,765)——(21,765)
Stock-based compensation transactions, net——(138)(23,341)(330)—61,67837,869
Common stock cash dividends — $1.20 per share————(155,856)——(155,856)
Balance — March 31, 2022$1,750,000$79,871$1,074$6,611,659$14,830,671$(377,385)$(5,019,870)$17,876,020

(a)

For the three-month period ended March 31, 2023*, dividends per preferred share were: Preferred Series E - $16.125; Preferred Series F - $128.125; Preferred Series Preferred Series G - $125.00; Preferred Series H - $0.3516; and Preferred Series I - $87.50. Dividends per preferred share for the three months ended March 31, 2022 were: Preferred Series E - $16.125; Preferred Series F - $128.125; Preferred Series Preferred Series G - $125.00; and Preferred Series I - $94.306.*

(b)

Effective January 1, 2023 amounts are inclusive of 1% U.S. government excise taxes receivable or payable.

See accompanying notes to financial statements.

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NOTES TO FINANCIAL STATEMENTS

1. 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, 2022 (“2022 Annual Report”), except as disclosed in note 16 of Notes to Financial Statements herein. The financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented.

2. Acquisition and divestiture

Acquisition

On April 1, 2022, M&T completed the acquisition of People's United Financial, Inc. ("People's United"). Through subsidiaries, People's United provided commercial banking, retail banking and wealth management services to individual, corporate and municipal customers through a network of branches located in Connecticut, southeastern New York, Massachusetts, Vermont, New Hampshire and Maine. Following the merger, People's United Bank, National Association, a national banking association and a wholly owned subsidiary of People's United, merged with and into Manufacturers and Traders Trust Company ("M&T Bank"), the principal banking subsidiary of M&T, with M&T Bank as the surviving entity. The results of operations acquired from People's United have been included in the Company's financial results since April 1, 2022.

Pursuant to the terms of the merger agreement dated February 22, 2021, People’s United shareholders received consideration valued at .118 of an M&T common share in exchange for each common share of People’s United. The purchase price totaled approximately $8.4 billion (with the price based on M&T’s closing price of $164.66 per share as of April 1, 2022). M&T issued 50,325,004 common shares in completing the transaction. Additionally, People’s United outstanding preferred stock was converted into new shares of Series H Preferred Stock of M&T. The acquisition of People's United expanded the Company's geographical footprint and management expects the Company will benefit from greater geographical diversity and the advantages of scale associated with a larger company.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisition and divestiture, continued

The People’s United transaction has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and preferred stock converted were recorded at estimated fair value on the acquisition date. The consideration paid for People’s United common equity and the amounts of identifiable assets acquired, liabilities assumed and preferred stock converted as of the acquisition date follows.

(In thousands)
Consideration:
Common stock issued (50,325,004 shares)$8,286,515
Common stock awards converted104,810
Cash1,824
Total consideration8,393,149
Net assets acquired:
Identifiable assets
Cash and due from banks395,747
Interest-bearing deposits at banks9,193,346
Investment securities11,574,689
Loans and leases35,840,648
Core deposit and other intangible assets261,000
Other assets2,979,388
Total identifiable assets acquired60,244,818
Liabilities and preferred stock
Deposits52,967,915
Borrowings1,389,012
Other liabilities1,142,387
Total liabilities assumed55,499,314
Preferred stock260,600
Total liabilities and preferred stock55,759,914
Net assets acquired4,484,904
Goodwill$3,908,245

GAAP requires loans and leases obtained through an acquisition that have experienced a more-than-insignificant deterioration in credit quality since origination be considered purchased credit deteriorated (“PCD”). The Company considered several factors in the determination of PCD loans, including loan grades assigned to acquired commercial loans and leases and commercial real estate loans utilizing the Company's loan grading system and delinquency status and history for acquired loans backed by residential real estate. For PCD loans and leases the initial estimate of expected credit losses of $99 million was established through an adjustment to increase both the initial carrying value and allowance for credit losses. GAAP also provides that an allowance for credit losses on loans acquired, but not classified as PCD, also be recognized above and beyond the impact of forecasted losses used in determining fair value. Accordingly, the Company recorded $242 million of provision for credit losses for non-PCD acquired loans and leases at the acquisition date. The following table reconciles the unpaid principal balance to the fair value of loans and leases at April 1, 2022:

PCDNon-PCD
(In thousands)
Unpaid principal balance$3,410,506(a)$32,896,454
Allowance for credit losses at acquisition(99,000)(a)—
Other discount(106,814)(260,498)(b)
Fair value$3,204,692$32,635,956

(a)

The unpaid principal balance and allowance for credit losses at acquisition is net of charge-offs of $33 million recognized on the PCD loans.

(b)

*Includes approximately $*242 million of principal balances not expected to be collected.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisition and divestiture, continued

In connection with the acquisition, the Company recorded approximately $3.9 billion of goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired, and $261 million of core deposit and other intangible assets. The core deposit and other intangible assets are being amortized over periods of three to seven years.

The following table presents certain pro forma information as if People’s United had been acquired on January 1, 2021. These results combine the historical results of People’s United into the Company’s consolidated statement of income and, while adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place as indicated. For example, merger-related expenses noted below are included in the periods where such expenses were incurred. Additionally, the Company expects to achieve operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts that follow:

Pro forma
Three months ended March 31, 2022
(In thousands)
Total revenues (a)$1,931,788
Net income369,404

(a)

Represents the total of net interest income and other income.

In connection with the People’s United acquisition, the Company incurred merger-related expenses related to systems conversions and other costs of integrating and conforming acquired operations with and into the Company. Those expenses consisted largely of professional services, temporary help fees and other costs associated with actual or planned systems conversions and/or integration of operations and the introduction of the Company to its new customers; costs related to termination of existing contractual arrangements for various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; severance (for former People’s United employees); travel costs; and other costs of completing the transaction and commencing operations in new markets and offices. The Company did not incur any People's United merger-related expenses during the first quarter of 2023. Merger-related expenses incurred in the three months ended March 31, 2022 totaled approximately $17 million and consisted predominantly of professional services, including legal expenses and technology-related activities to prepare for planned integration efforts.

Divestiture

On December 19, 2022 the Company announced that it had entered into a definitive agreement to sell its Collective Investment Trust ("CIT") business to a private equity firm. The transaction was completed in April 2023. The Company will recognize a pre-tax gain on the sale of approximately $225 million in the second quarter of 2023. Prior to the sale, the CIT business contributed $45 million and $42 million to trust income in the first three months of 2023 and 2022, respectively. After considering expenses, the results of operations from the CIT business were not material to the Company's consolidated results of operations in those periods.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities

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

Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(In thousands)
March 31, 2023
Investment securities available for sale:
U.S. Treasury and federal agencies$7,918,648$1,378$187,327$7,732,699
Mortgage-backed securities:
Government issued or guaranteed:
Commercial664,78846517,059648,194
Residential2,634,1421,011141,4482,493,705
Other debt securities176,33821612,230164,324
11,393,9163,070358,06411,038,922
Investment securities held to maturity:
U.S. Treasury and federal agencies1,056,675—35,4271,021,248
Obligations of states and political subdivisions2,564,0953672,2242,491,907
Mortgage-backed securities:
Government issued or guaranteed:
Commercial2,027,911—106,9701,920,941
Residential10,503,20811,462796,4799,718,191
Privately issued47,9569,4516,95950,448
Other debt securities1,726——1,726
16,201,57120,9491,018,05915,204,461
Total debt securities$27,595,487$24,019$1,376,123$26,243,383
Equity and other securities:
Readily marketable equity — at fair value$297,461$1,821$4,062$295,220
Other — at cost907,496——907,496
Total equity and other securities$1,204,957$1,821$4,062$1,202,716
December 31, 2022
Investment securities available for sale:
U.S. Treasury and federal agencies$7,913,932$200$243,172$7,670,960
Mortgage-backed securities:
Government issued or guaranteed:
Commercial594,779—20,480574,299
Residential2,501,33465171,2812,330,118
Other debt securities183,1072509,773173,584
11,193,152515444,70610,748,961
Investment securities held to maturity:
U.S. Treasury and federal agencies1,054,035—45,7471,008,288
Obligations of states and political subdivisions2,577,0784116,5122,460,570
Mortgage-backed securities:
Government issued or guaranteed:
Commercial912,431—103,528808,903
Residential8,934,9181,451891,0638,045,306
Privately issued49,7428,8337,98750,588
Other debt securities1,765——1,765
13,529,96910,2881,164,83712,375,420
Total debt securities$24,723,121$10,803$1,609,543$23,124,381
Equity and other securities:
Readily marketable equity — at fair value$153,283$2,120$3,945$151,458
Other — at cost780,483——780,483
Total equity and other securities$933,766$2,120$3,945$931,941

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

There were no significant gross realized gains or losses from sales of investment securities for the quarters ended March 31, 2023 and 2022. Unrealized losses on equity securities are included in gain (loss) on bank investment securities in the consolidated statement of income.

At March 31, 2023, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:

Amortized CostEstimated Fair Value
(In thousands)
Debt securities available for sale:
Due in one year or less$1,871,549$1,824,693
Due after one year through five years6,142,7355,999,076
Due after five years through ten years50,70247,804
Due after ten years30,00025,450
8,094,9867,897,023
Mortgage-backed securities available for sale3,298,9303,141,899
$11,393,916$11,038,922
Debt securities held to maturity:
Due in one year or less$86,180$85,572
Due after one year through five years1,120,6991,084,851
Due after five years through ten years1,143,8231,130,492
Due after ten years1,271,7941,213,966
3,622,4963,514,881
Mortgage-backed securities held to maturity12,579,07511,689,580
$16,201,571$15,204,461

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

A summary of investment securities that as of March 31, 2023 and December 31, 2022 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 Months12 Months or More
Fair ValueUnrealized LossesFair ValueUnrealized Losses
(In thousands)
March 31, 2023
Investment securities available for sale:
U.S. Treasury and federal agencies$4,257,631$75,505$3,251,259$111,822
Mortgage-backed securities:
Government issued or guaranteed:
Commercial615,02416,9852,12074
Residential660,25025,0551,704,875116,393
Other debt securities66,0723,26192,4178,969
5,598,977120,8065,050,671237,258
Investment securities held to maturity:
U.S. Treasury and federal agencies1,021,24835,427——
Obligations of states and political subdivisions576,7595,0411,867,53767,183
Mortgage-backed securities:
Government issued or guaranteed:
Commercial1,739,336106,970——
Residential5,613,759446,2672,464,780350,212
Privately issued2,03911035,3806,849
8,953,141593,8154,367,697424,244
Total$14,552,118$714,621$9,418,368$661,502
December 31, 2022
Investment securities available for sale:
U.S. Treasury and federal agencies$6,706,413$183,760$841,945$59,412
Mortgage-backed securities:
Government issued or guaranteed:
Commercial574,29920,480——
Residential2,295,873169,48928,3051,792
Other debt securities93,4583,60473,2806,169
9,670,043377,333943,53067,373
Investment securities held to maturity:
U.S. Treasury and federal agencies1,008,28845,747——
Obligations of states and political subdivisions2,449,420116,512——
Mortgage-backed securities:
Government issued or guaranteed:
Commercial808,903103,528——
Residential6,292,462619,4031,319,300271,660
Privately issued——35,6617,987
10,559,073885,1901,354,961279,647
Total$20,229,116$1,262,523$2,298,491$347,020

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

The Company owned 4,132 individual debt securities with aggregate gross unrealized losses of $1.4 billion at March 31, 2023. Based on a review of each of the securities in the investment securities portfolio at March 31, 2023, the Company concluded that it expected to recover the amortized cost basis of its investment. As of March 31, 2023, 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 March 31, 2023, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $907 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 March 31, 2023 or December 31, 2022.

At March 31, 2023 and December 31, 2022 investment securities with carrying values of $9.0 billion (including $1.2 billion related to repurchase transactions) and $7.9 billion (including $567 million related to repurchase transactions), respectively, were pledged to secure borrowings, lines of credit and governmental deposits.

4. Loans and leases and the allowance for credit losses

A summary of current, past due and nonaccrual loans as of March 31, 2023 and December 31, 2022 follows:

Current30-89 Days Past DueAccruing Loans Past Due 90 Days or MoreNonaccrualTotal
(In thousands)
March 31, 2023
Commercial, financial, leasing, etc.$42,825,221$489,322$61,550$382,268$43,758,361
Real estate:
Commercial35,250,019399,11437,1371,516,65537,202,925
Residential builder and developer1,126,693111,894—3,3031,241,890
Other commercial construction6,231,642242,22610,843143,0156,627,726
Residential21,726,963496,225292,950253,64622,769,784
Residential — limited documentation925,18026,046—68,9351,020,161
Consumer:
Home equity lines and loans4,751,82226,679—80,7664,859,267
Recreational finance9,066,58748,448—34,1869,149,221
Automobile4,249,03535,270—26,8424,311,147
Other1,928,36416,6864,97747,1831,997,210
Total$128,081,526$1,891,910$407,457$2,556,799$132,937,692
December 31, 2022
Commercial, financial, leasing, etc.$40,982,398$448,462$72,502$347,204$41,850,566
Real estate:
Commercial34,972,627311,18867,6961,396,66236,748,173
Residential builder and developer1,304,7988,703—1,2291,314,730
Other commercial construction6,936,661239,521549124,9377,301,668
Residential21,491,506595,897345,402272,09022,704,895
Residential — limited documentation950,78222,456—77,8141,051,052
Consumer:
Home equity lines and loans4,891,31130,787—84,7885,006,886
Recreational finance8,974,17154,593—44,6309,073,394
Automobile4,393,20644,486—39,5844,477,276
Other1,958,19622,9614,86949,4972,035,523
Total$126,855,656$1,779,054$491,018$2,438,435$131,564,163

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

One-to-four family residential mortgage loans held for sale were $152 million and $32 million at March 31, 2023 and December 31, 2022, respectively. Commercial real estate loans held for sale were $321 million at March 31, 2023 and $131 million at December 31, 2022.

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.

Line of business personnel in different geographic locations with support from and review by the Company’s credit risk 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 credit personnel review 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.

- 15 -

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 March 31, 2023 to the various classes of the Company’s commercial loans and commercial real estate loans and gross charge-offs for those types of loans for the three months ended March 31, 2023 by origination year.

Term Loans by Origination YearRevolvingRevolving Loans Converted to Term
20232022202120202019PriorLoansLoansTotal
(In thousands)
Commercial, financial, leasing, etc.:
Loan grades:
Pass$2,250,0048,170,2144,708,9111,809,4341,606,6222,562,97020,254,35242,666$41,405,173
Criticized accrual42,754280,361271,872190,293134,573305,353726,29619,4181,970,920
Criticized nonaccrual25824,49044,96032,39227,90392,676152,1147,475382,268
Total commercial, financial, leasing, etc.$2,293,0168,475,0655,025,7432,032,1191,769,0982,960,99921,132,76269,559$43,758,361
Gross charge-offs$1074,1043,4052,7532,3035,557773—$19,002
Real estate:
Commercial:
Loan grades:
Pass$1,325,6493,942,0903,262,2433,261,9364,618,33613,821,937765,232—$30,997,423
Criticized accrual2,491385,474463,714344,587800,8682,662,16129,552—4,688,847
Criticized nonaccrual—27,34026,015260,829247,845932,73621,890—1,516,655
Total commercial real estate$1,328,1404,354,9043,751,9723,867,3525,667,04917,416,834816,674—$37,202,925
Gross charge-offs$————26,3902,478——$28,868
Residential builder and developer:
Loan grades:
Pass$83,843602,093175,62411,34518,19814,911120,680—$1,026,694
Criticized accrual9878,38125,2254,161113,18630,92829,025—211,893
Criticized nonaccrual—1720—5182,064——3,303
Total residential builder and developer$84,830610,475201,56915,506131,90247,903149,705—$1,241,890
Gross charge-offs$—————111,506—$1,517
Other commercial construction:
Loan grades:
Pass$155,5871,193,7621,064,2421,125,568873,449370,72128,802—$4,812,131
Criticized accrual19626,116124,624325,712796,275399,657——1,672,580
Criticized nonaccrual——9,97643,19461,15426,2652,426—143,015
Total other commercial construction$155,7831,219,8781,198,8421,494,4741,730,878796,64331,228—$6,627,726
Gross charge-offs$————————$—

- 16 -

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 March 31, 2023 for the various classes of the Company’s residential real estate loans and consumer loans and gross charge-offs for those types of loans for the three months ended March 31, 2023 by origination year follows.

Term Loans by Origination YearRevolvingRevolving Loans Converted to Term
20232022202120202019PriorLoansLoansTotal
(In thousands)
Residential:
Current$497,1385,056,5993,968,0152,722,6701,360,0328,098,25824,251—$21,726,963
30-89 days past due1,40855,99550,48725,71019,711340,8522,062—496,225
Accruing loans past due 90 days or more—14,95728,43017,23111,726220,606——292,950
Nonaccrual—7,08712,2702,5288,859216,0146,888—253,646
Total residential$498,5465,134,6384,059,2022,768,1391,400,3288,875,73033,201—$22,769,784
Gross charge-offs$—7511521681,286——$1,565
Residential - limited documentation:
Current$—————925,180——$925,180
30-89 days past due—————26,046——26,046
Accruing loans past due 90 days or more—————————
Nonaccrual—————68,935——68,935
Total residential - limited documentation$—————1,020,161——$1,020,161
Gross charge-offs$—————136——$136
Consumer:
Home equity lines and loans:
Current$172332,0072,26515,068113,6053,138,5931,480,079$4,751,822
30-89 days past due——1055261,563—25,02526,679
Accruing loans past due 90 days or more—————————
Nonaccrual——15—658,1101,88070,69680,766
Total home equity lines and loans$172332,0322,32015,159123,2783,140,4731,575,800$4,859,267
Gross charge-offs$—————311,298704$2,033
Recreational finance:
Current$521,5202,711,4452,171,2001,511,470918,5841,232,368——$9,066,587
30-89 days past due2808,3789,8929,8337,47512,590——48,448
Accruing loans past due 90 days or more—————————
Nonaccrual—2,8756,4737,1125,25612,470——34,186
Total recreational finance$521,8002,722,6982,187,5651,528,415931,3151,257,428——$9,149,221
Gross charge-offs$—2,3693,0132,9852,4124,042——$14,821
Automobile:
Current$253,1101,414,1151,419,830625,620328,506207,854——$4,249,035
30-89 days past due3976,68810,8285,8445,3306,183——35,270
Accruing loans past due 90 days or more—————————
Nonaccrual—2,6698,4304,6744,4456,624——26,842
Total automobile$253,5071,423,4721,439,088636,138338,281220,661——$4,311,147
Gross charge-offs$—1,6362,0681,169957881——$6,711
Other:
Current72,524246,430156,65951,04031,55726,5671,337,7305,8571,928,364
30-89 days past due$2,1191,6171,33619827255510,045544$16,686
Accruing loans past due 90 days or more—————1984,779—4,977
Nonaccrual1,71158853519514925843,63111647,183
Total other$76,354248,635158,53051,43331,97827,5781,396,1856,517$1,997,210
Gross charge-offs$9128,6572,7351,3951,5814,98620—$20,286
Total loans and leases at March 31, 2023$5,212,14824,189,79818,024,54312,395,89612,015,98832,747,21526,700,2281,651,876$132,937,692
Total gross charge-offs for the three months ended March 31, 2023$1,01916,84111,3368,32333,71119,4083,597704$94,939

- 17 -

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, 2022 to the various classes of the Company’s commercial loans and commercial real estate loans by origination year.

Term Loans by Origination YearRevolvingRevolving Loans Converted to Term
20222021202020192018PriorLoansLoansTotal
(In thousands)
Commercial, financial, leasing, etc.:
Loan grades:
Pass$8,575,1304,952,7582,024,6031,796,047817,5691,970,94719,444,24740,471$39,621,772
Criticized accrual247,626222,861190,368116,88171,485246,846768,49717,0261,881,590
Criticized nonaccrual18,37952,06737,60836,24135,68959,146100,9727,102347,204
Total commercial, financial, leasing, etc.$8,841,1355,227,6862,252,5791,949,169924,7432,276,93920,313,71664,599$41,850,566
Real estate:
Commercial:
Loan grades:
Pass$4,136,8903,379,9003,388,5904,557,0653,293,38010,905,956869,981—$30,531,762
Criticized accrual324,652463,484467,557688,239937,4211,890,29748,099—4,819,749
Criticized nonaccrual11,54122,459183,986297,106170,382688,07923,109—1,396,662
Total commercial real estate$4,473,0833,865,8434,040,1335,542,4104,401,18313,484,332941,189—$36,748,173
Residential builder and developer:
Loan grades:
Pass$680,705230,07911,28022,11112,8129,865150,404—$1,117,256
Criticized accrual2,96928,4729,952108,96815,069—30,815—196,245
Criticized nonaccrual57654—518————1,229
Total residential builder and developer$683,731259,20521,232131,59727,8819,865181,219—$1,314,730
Other commercial construction:
Loan grades:
Pass$1,032,7741,080,1411,225,8451,185,685366,686297,35515,575—$5,204,061
Criticized accrual37,893145,199320,4631,025,371299,350144,394——1,972,670
Criticized nonaccrual—9,99244,03735,84110,54222,0992,426—124,937
Total other commercial construction$1,070,6671,235,3321,590,3452,246,897676,578463,84818,001—$7,301,668

- 18 -

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, 2022 for the various classes of the Company’s residential real estate loans and consumer loans by origination year follows.

Term Loans by Origination YearRevolvingRevolving Loans Converted to Term
20222021202020192018PriorLoansLoansTotal
(In thousands)
Residential:
Current$5,071,3794,001,6522,717,3711,392,866753,9087,523,89030,440—$21,491,506
30-89 days past due59,47751,30840,33721,84923,126399,301499—595,897
Accruing loans past due 90 days or more12,01239,93420,06714,05014,007245,332——345,402
Nonaccrual5,68610,8652,5839,8604,650231,0937,353—272,090
Total residential$5,148,5544,103,7592,780,3581,438,625795,6918,399,61638,292—$22,704,895
Residential - limited documentation:
Current$—————950,782——$950,782
30-89 days past due—————22,456——22,456
Accruing loans past due 90 days or more—————————
Nonaccrual—————77,814——77,814
Total residential - limited documentation$—————1,051,052——$1,051,052
Consumer:
Home equity lines and loans:
Current$9302,1092,44115,36123,32197,2823,262,5331,487,334$4,891,311
30-89 days past due———1711262,030—28,46030,787
Accruing loans past due 90 days or more—————————
Nonaccrual—15—5363346,4582,79974,64684,788
Total home equity lines and loans$9302,1242,44116,06823,781105,7703,265,3321,590,440$5,006,886
Recreational finance:
Current$2,842,0912,280,6271,587,629963,907486,964812,953——$8,974,171
30-89 days past due8,6489,52512,4128,3875,20210,419——54,593
Accruing loans past due 90 days or more—————————
Nonaccrual3,5337,4409,4277,6255,34411,261——44,630
Total recreational finance$2,854,2722,297,5921,609,468979,919497,510834,633——$9,073,394
Automobile:
Current$1,491,0761,557,676702,711378,962167,43895,343——$4,393,206
30-89 days past due6,92613,3247,2847,2395,4644,249——44,486
Accruing loans past due 90 days or more—————————
Nonaccrual2,49310,6987,3727,5205,6205,881——39,584
Total automobile$1,500,4951,581,698717,367393,721178,522105,473——$4,477,276
Other:
Current$274,530172,23858,33938,4398,21723,1631,375,0498,221$1,958,196
30-89 days past due3,7831,45032638614156915,65565122,961
Accruing loans past due 90 days or more—————2264,643—4,869
Nonaccrual2,74583033237112046544,44918549,497
Total other$281,058174,51858,99739,1968,47824,4231,439,7969,057$2,035,523
Total loans and leases at December 31, 2022$24,853,92518,747,75713,072,92012,737,6027,534,36726,755,95126,197,5451,664,096$131,564,163

- 19 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

Allowance for credit losses

For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by type. Changes in the allowance for credit losses for the three months ended March 31, 2023 and 2022 were as follows:

Commercial, Financial,Real Estate
Leasing, etc.CommercialResidentialConsumerTotal
(In thousands)
Three Months Ended March 31, 2023
Beginning balance$502,153676,684115,092631,402$1,925,331
Provision for credit losses12,18795,992(1,522)13,343120,000
Net charge-offs
Charge-offs(19,002)(30,385)(1,701)(43,851)(94,939)
Recoveries9,4411,3301,32312,62424,718
Net charge-offs(9,561)(29,055)(378)(31,227)(70,221)
Ending balance$504,779743,621113,192613,518$1,975,110
Commercial, Financial,Real Estate
Leasing, etc.CommercialResidentialConsumerTotal
(In thousands)
Three Months Ended March 31, 2022
Beginning balance$283,899557,23971,726556,362$1,469,226
Provision for credit losses28,725(30,938)1,72010,49310,000
Net charge-offs
Charge-offs(19,234)(1,800)(3,972)(26,032)(51,038)
Recoveries13,66514,9433,10712,45644,171
Net (charge-offs) recoveries(5,569)13,143(865)(13,576)(6,867)
Ending balance$307,055539,44472,581553,279$1,472,359

- 20 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Loans and leases and the allowance 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, can inform the models, which have been statistically developed based on historical correlations of credit losses with prevailing economic metrics, including unemployment, gross domestic product and real estate prices. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At each of March 31, 2023 and December 31, 2022, 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 risk personnel. 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.

Changes in the amount of the allowance for credit losses reflect the outcome of the procedures described herein, including the impact of changes in macroeconomic forecasts as compared with previous forecasts, as well as the impact of portfolio concentrations, imprecision in economic forecasts, geopolitical conditions 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 March 31, 2023 and December 31, 2022.

- 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 three-month periods ended March 31, 2023 and 2022 follows.

Amortized Cost with AllowanceAmortized Cost without AllowanceTotalAmortized CostInterest Income Recognized
March 31, 2023January 1, 2023Three Months Ended March 31, 2023
(In thousands)
Commercial, financial, leasing, etc.$185,867$196,401$382,268$347,204$2,279
Real estate:
Commercial404,5641,112,0911,516,6551,396,6625,501
Residential builder and developer3,303—3,3031,229366
Other commercial construction94,18848,827143,015124,9371,662
Residential124,574129,072253,646272,0904,376
Residential — limited documentation40,16528,77068,93577,814164
Consumer:
Home equity lines and loans39,13141,63580,76684,7882,221
Recreational finance24,4099,77734,18644,630171
Automobile22,9263,91626,84239,58435
Other47,1523147,18349,49788
Total$986,279$1,570,520$2,556,799$2,438,435$16,863
March 31, 2022January 1, 2022Three Months Ended March 31, 2022
(In thousands)
Commercial, financial, leasing, etc.$171,322$103,824$275,146$221,022$13,594
Real estate:
Commercial222,771934,9151,157,6861,069,2806,131
Residential builder and developer5242,3922,9163,0051,428
Other commercial construction29,91420,94150,855111,405626
Residential191,495150,176341,671355,8586,541
Residential — limited documentation80,59042,922123,512122,888196
Consumer:
Home equity lines and loans32,78338,70671,48970,488809
Recreational finance24,3507,19631,54627,811161
Automobile30,1295,22135,35034,03738
Other43,9649644,06044,28992
Total$827,842$1,306,389$2,134,231$2,060,083$29,616

Loan modifications

During the normal course of business, the Company modifies loans to maximize recovery efforts from borrowers experiencing financial difficulty. Such loan modifications typically include payment deferrals and interest rate reductions, but may also include other modified terms. Those modified loans may be considered nonaccrual if the Company does not expect to collect the contractual cash flows owed under the loan agreement. On January 1, 2023 the Company adopted amended guidance that eliminated the accounting guidance for troubled debt restructurings while expanding disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amended guidance also requires disclosure of current period gross charge-offs by year of origination.

- 22 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

The table that follows summarizes the Company’s loan modification activities to borrowers experiencing financial difficulty for the three-month period ended March 31, 2023:

Payment DeferralInterest Rate ReductionOtherCombination of Modification Types (a)Total (b)Percent of Total Loan Class
(Dollars in thousands)
Three Months Ended March 31, 2023
Commercial, financial, leasing, etc.$43,564$—$—$286$43,8500.10%
Real estate:
Commercial120,304———120,3040.32%
Residential builder and developer7,983———7,9830.64%
Other commercial construction91,811———91,8111.39%
Residential32,460——1,96334,4230.15%
Residential — limited documentation5,237———5,2370.51%
Consumer:
Home equity lines and loans———4424420.01%
Recreational finance136———1360.00%
Automobile45———450.00%
Other——————
Total$301,540$—$—$2,691$304,2310.23%

(a)

Predominantly payment deferrals combined with interest rate reductions.

(b)

*Includes approximately $*23 million of loans guaranteed by government-related entities (predominantly first lien residential mortgage loans).

The financial effects of the modifications in the previous table include an increase in the weighted-average remaining term for commercial loans of 1.1 years, commercial real estate loans of 1.2 years and residential real estate loans of 9.1 years.

Modified loans to borrowers experiencing financial difficulty are subject to the allowance for credit losses methodology described herein, including the use of models to inform credit loss estimates and, to the extent larger balance commercial and commercial real estate loans are in nonaccrual status, a loan-by-loan analysis of expected credit losses on those individual loans. Loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023 and for which there was a subsequent payment default during that period were not material.

- 23 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

Prior to January 1, 2023, if the borrower was experiencing financial difficulty such that the Company did not expect to collect the contractual cash flows owed under the original loan agreement and a concession in loan terms was granted, the Company considered the loan modification as a troubled debt restructuring. The table that follows summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three-month period ended March 31, 2022. The table is not comparative to the preceding table. The Company no longer designates modified loans as a troubled debt restructuring in conjunction with the adoption of amended accounting guidance on January 1, 2023.

Post-modification (a)
NumberPre- modification Recorded InvestmentPrincipal DeferralInterest Rate ReductionOtherCombination of Concession TypesTotal
(Dollars in thousands)
Three Months Ended March 31, 2022
Commercial, financial, leasing, etc.37$10,003$6,920$—$54$2,780$9,754
Real estate:
Commercial177,5824,376—2,1018557,332
Residential9724,05115,443——9,96125,404
Residential — limited documentation51,076894——1931,087
Consumer:
Home equity lines and loans352,1501,988——1722,160
Recreational finance1775,9975,990———5,990
Automobile53410,26310,233———10,233
Other33334334———334
Total935$61,456$46,178$—$2,155$13,961$62,294

_____________________________________________

(a)

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

The amount of foreclosed property held by the Company, predominantly consisting of residential real estate, was $45 million and $41 million at March 31, 2023 and December 31, 2022, respectively. There were $194 million and $201 million at March 31, 2023 and December 31, 2022, respectively, of loans secured by residential real estate that were in the process of foreclosure. Of all loans in the process of foreclosure at March 31, 2023, approximately 44% were government guaranteed.

The Company pledged certain loans to secure outstanding borrowings and available lines of credit. At March 31, 2023, the Company pledged approximately $11.6 billion of commercial loans and leases, $16.5 billion of commercial real estate loans, $19.5 billion of one-to-four family residential real estate loans, $2.4 billion of home equity loans and lines of credit and $11.1 billion of other consumer loans. At December 31, 2022, the Company pledged approximately $10.5 billion of commercial loans and leases, $16.3 billion of commercial real estate loans, $19.5 billion of one-to-four family residential real estate loans, $2.4 billion of homes equity loans and lines of credit and $10.7 billion of other consumer loans.

5. Borrowings

M&T had $537 million of fixed and variable rate junior subordinated deferrable interest debentures ("Junior Subordinated Debentures") outstanding at March 31, 2023 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.

- 24 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Borrowings, continued

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.

In January 2023, M&T issued $1.0 billion of senior notes that mature in January 2034 and pay a 5.053% fixed rate semi-annually until January 2033 after which the Secured Overnight Financing Rate ("SOFR") plus 1.85% will be paid quarterly until maturity. Additionally, in January 2023 M&T Bank issued $1.3 billion of senior notes that mature in January 2026 and pay a fixed rate of 4.65% semi-annually until maturity and $1.2 billion of senior notes that mature in January 2028 and pay a fixed rate of 4.70% semi-annually until maturity.

At March 31, 2023, M&T Bank had borrowing facilities available with the Federal Home Loan Bank of New York whereby M&T Bank could borrow an additional $17.1 billion. M&T Bank also had an available line of credit with the Federal Reserve Bank of New York totaling approximately $15.4 billion at March 31, 2023. M&T Bank is required to pledge loans and investment securities as collateral for these borrowing facilities and could increase the availability under such facilities by pledging additional assets.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

6. Revenue from contracts with customers

The Company generally charges customer accounts or otherwise bills customers upon completion of its services. Typically the Company’s contracts with customers have a duration of one year or less and payment for services is received at least annually, but oftentimes more frequently as services are provided. At March 31, 2023 and December 31, 2022, the Company had $68 million and $74 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 March 31, 2023 and December 31, 2022, the Company had deferred revenue of $45 million and $48 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 periods ended March 31, 2023 and 2022 that are subject to the revenue recognition accounting guidance.

Business BankingCommercial BankingCommercial Real EstateDiscretionary PortfolioResidential Mortgage BankingRetail BankingAll OtherTotal
Three Months Ended March 31, 2023(In thousands)
Classification in consolidated statement of income
Service charges on deposit accounts$19,47028,4734,186——59,4521,965$113,546
Trust income10—————193,792193,802
Brokerage services income——————24,04124,041
Other revenues from operations:
Merchant discount and credit card fees14,25815,7911,087——5,36130536,802
Other—4,6711,186213407,4061,03014,654
$33,73848,9356,4592134072,219221,133$382,845
Three Months Ended March 31, 2022
Classification in consolidated statement of income
Service charges on deposit accounts$14,68125,5713,478——56,3471,430$101,507
Trust income——————169,213169,213
Brokerage services income——————20,19020,190
Other revenues from operations:
Merchant discount and credit card fees12,80513,459874——4,51010731,755
Other—1,9032,4646931,7295,09912,89124,779
$27,48640,9336,8166931,72965,956203,831$347,444

7. Pension plans and other postretirement benefits

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

Pension BenefitsOther Postretirement Benefits
Three Months Ended March 31
2023202220232022
(In thousands)
Service cost$2,723$4,271$390$232
Interest cost on projected benefit obligation28,83516,267744355
Expected return on plan assets(50,400)(37,150)——
Amortization of prior service cost (credit)50125(525)(1,075)
Amortization of net actuarial loss (gain)(900)4,625(650)(325)
Net periodic cost (benefit)$(19,692)$(11,862)$(41)$(813)

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. Pension plans and other postretirement benefits, continued

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 $44 million and $31 million for the three months ended March 31, 2023 and 2022, respectively.

8. Earnings per common share

The computations of basic earnings per common share follow:

Three Months Ended March 31
20232022
(In thousands, except per share)
Income available to common shareholders:
Net income$701,624$362,174
Less: Preferred stock dividends(24,941)(21,765)
Net income available to common equity676,683340,409
Less: Income attributable to unvested stock-based compensation awards(1,175)(820)
Net income available to common shareholders$675,508$339,589
Weighted-average shares outstanding:
Common shares outstanding (including common stock issuable) and unvested stock-based compensation awards168,010129,274
Less: Unvested stock-based compensation awards(278)(329)
Weighted-average shares outstanding167,732128,945
Basic earnings per common share$4.03$2.63

The computations of diluted earnings per common share follow:

Three Months Ended March 31
20232022
(In thousands, except per share)
Net income available to common equity$676,683$340,409
Less: Income attributable to unvested stock-based compensation awards(1,172)(819)
Net income available to common shareholders$675,511$339,590
Adjusted weighted-average shares outstanding:
Common and unvested stock-based compensation awards168,010129,274
Less: Unvested stock-based compensation awards(278)(329)
Plus: Incremental shares from assumed conversion of stock-based compensation awards and warrants to purchase common stock678471
Adjusted weighted-average shares outstanding168,410129,416
Diluted earnings per common share$4.01$2.62

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.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

8. Earnings per common share, continued

Stock-based compensation awards to purchase common stock of M&T representing 1,367,054 common shares and 114,226 common shares during the three months ended March 31, 2023 and 2022, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.

9. Comprehensive income

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

InvestmentDefined BenefitTotal AmountIncome
SecuritiesPlansOtherBefore TaxTaxNet
(In thousands)
Balance — January 1, 2023$(444,192)(272,856)(349,129)$(1,066,177)276,147$(790,030)
Other comprehensive income (loss) before reclassifications:
Unrealized holding gains, net89,198——89,198(24,058)65,140
Foreign currency translation adjustment——1,8071,807(613)1,194
Unrealized gains on cash flow hedges——51,03851,038(13,503)37,535
Total other comprehensive income (loss) before reclassifications89,198—52,845142,043(38,174)103,869
Amounts reclassified from accumulated other comprehensive income (loss) that (increase) decrease net income:
Accretion of net gain on terminated cash flow hedges——(30)(30)(b)8(22)
Net yield adjustment from cash flow hedges currently in effect——59,03959,039(a)(15,619)43,420
Amortization of prior service credit—(475)—(475)(c)(51)(526)
Amortization of actuarial losses—(1,550)—(1,550)(c)(166)(1,716)
Total other comprehensive income (loss)89,198(2,025)111,854199,027(54,002)145,025
Balance — March 31, 2023$(354,994)(274,881)(237,275)$(867,150)222,145$(645,005)
Balance — January 1, 2022$104,691(360,276)83,531$(172,054)44,476$(127,578)
Other comprehensive income (loss) before reclassifications:
Unrealized holding losses, net(184,955)——(184,955)47,758(137,197)
Foreign currency translation adjustment——(2,123)(2,123)475(1,648)
Unrealized losses on cash flow hedges——(115,724)(115,724)29,885(85,839)
Total other comprehensive income (loss) before reclassifications(184,955)—(117,847)(302,802)78,118(224,684)
Amounts reclassified from accumulated other comprehensive income (loss) that (increase) decrease net income:
Amortization of unrealized holding losses on held-to-maturity securities1,119——1,119(a)(289)830
Accretion of net gain on terminated cash flow hedges——(30)(30)(b)9(21)
Net yield adjustment from cash flow hedges currently in effect——(38,019)(38,019)(a)9,818(28,201)
Amortization of prior service credit—(950)—(950)(c)305(645)
Amortization of actuarial losses—4,300—4,300(c)(1,386)2,914
Total other comprehensive income (loss)(183,836)3,350(155,896)(336,382)86,575(249,807)
Balance — March 31, 2022$(79,145)(356,926)(72,365)$(508,436)131,051$(377,385)

(a)

Included in interest income.

(b)

Included in interest expense.

(c)

Included in other costs of operations.

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

Defined
InvestmentBenefit
SecuritiesPlansOtherTotal
(In thousands)
Balance — December 31, 2022$(329,168)$(202,186)$(258,676)$(790,030)
Net gain (loss) during period65,140(2,242)82,127145,025
Balance — March 31, 2023$(264,028)$(204,428)$(176,549)$(645,005)

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

10. Derivative financial instruments

As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting, collateral and/or settlement provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material as of March 31, 2023.

The net effect of interest rate swap agreements was to decrease net interest income by $69 million and to increase net interest income by $47 million during the three-month periods ended March 31, 2023 and 2022, 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
NotionalAverageAverage RateFair Value
AmountMaturityFixedVariableGain (Loss) (a)
(In thousands)(In years)(In thousands)
March 31, 2023
Fair value hedges:
Fixed rate long-term borrowings (b)$2,500,0005.73.05%5.06%$5,360
Cash flow hedges:
Interest payments on variable rate commercial real estate loans (b) (c)12,700,0002.03.10%4.82%5,890
Total$15,200,0002.6$11,250
December 31, 2022
Fair value hedges:
Fixed rate long-term borrowings (b)$1,500,0003.32.98%4.52%$(833)
Cash flow hedges:
Interest payments on variable rate commercial real estate loans (b) (d)15,900,0001.41.91%4.38%(7,059)
Total$17,400,0001.6$(7,892)

(a)

*Certain clearinghouse exchanges consider payments by counterparties for variation margin on derivative instruments to be settlements of those positions. The impact of such payments for interest rate swap agreements designated as fair value hedges was a net settlement of losses of $*59.1 million at March 31, 2023 *and $65.0 million at December 31, 2022. The impact of such payments on interest rate swap agreements designated as cash flow hedges was a net settlement of losses of $*232.6 million at March 31, 2023 *and $*329.7 million at December 31, 2022.

(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 $*3.0 billion of forward-starting interest rate swap agreements that become effective in 2023.

(d)

*Includes notional amount and terms of $*4.7 billion of forward-starting interest rate swap agreements that become effective in 2023.

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.

Other derivative financial instruments not designated as hedging instruments included interest rate contracts, foreign exchange and other option and futures contracts. Interest rate contracts not designated as hedging instruments had notional values of $44.1 billion and $45.1 billion at March 31, 2023 and December 31, 2022, respectively. The notional amounts of foreign exchange and other option and futures contracts not designated as hedging instruments aggregated $1.6 billion and $1.7 billion at March 31, 2023 and December 31, 2022, respectively.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

10. Derivative financial instruments, continued

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

Asset DerivativesLiability Derivatives
Fair ValueFair Value
March 31,December 31,March 31,December 31,
2023202220232022
(In thousands)
Derivatives designated and qualifying as hedging instruments (a)
Interest rate swap agreements$11,354$1,202$104$9,094
Commitments to sell real estate loans2,8243,0372,0919
14,1784,2392,1959,103
Derivatives not designated and qualifying as hedging instruments (a)
Mortgage banking:
Mortgage-related commitments to originate real estate loans for sale6,86745235,00846,025
Commitments to sell real estate loans39,55051,4101,43914
46,41751,86236,44746,039
Other:
Interest rate contracts (b)280,283355,8061,006,2641,278,180
Foreign exchange and other option and futures contracts22,06724,06219,03522,004
302,350379,8681,025,2991,300,184
Total derivatives$362,945$435,969$1,063,941$1,355,326

(a)

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

(b)

The impact of variation margin payments at March 31, 2023 and December 31, 2022 *was a reduction of the estimated fair value of interest rate contracts not designated as hedging instruments in an asset position of $*861.5 *million and $*1.1 *billion, respectively, and in a liability position of $*19.6 *million and $*29.2 million, respectively.

Amount of Gain (Loss) Recognized
Three Months Ended March 31
20232022
DerivativeHedged ItemDerivativeHedged Item
(In thousands)
Derivatives in fair value hedging relationships
Interest rate swap agreements:
Fixed rate long-term borrowings (a)$12,037(12,019)$(43,273)42,998
Derivatives not designated as hedging instruments
Interest rate contracts (b)$7,563$5,153
Foreign exchange and other option and futures contracts (b)3,9851,746
Total$11,548$6,899

(a)

Reported as an adjustment to interest expense.

(b)

Reported as trading account and other non-hedging derivative gains.

Carrying Amount of the Hedged ItemCumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the Hedged Item
March 31, 2023December 31, 2022March 31, 2023December 31, 2022
(In thousands)
Location in the Consolidated Balance Sheet of the Hedged Items in Fair Value Hedges
Long-term debt$2,441,628$1,433,731$(53,291)$(65,310)

The amount of interest income recognized in the consolidated statement of income associated with derivatives designated as cash flow hedges was a decrease of $59 million and an increase of $38 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 the unrealized net loss recognized in other comprehensive income related to cash flow hedges was $227 million, of which losses of $3 million and $230 million and gains of $6 million related to interest rate swap agreements maturing in 2024, 2025 and 2026, respectively.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

10. Derivative financial instruments, continued

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 $15 million and $8 million at March 31, 2023 and December 31, 2022, respectively. Changes in unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied.

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

The aggregate fair value of derivative financial instruments in a liability position, which are subject to master netting arrangements, was $2 million and less than $1 million at March 31, 2023 and December 31, 2022, respectively. Collateral of $1 million was posted for the position at March 31, 2023 and no collateral was posted for the position at December 31, 2022. Certain of the Company’s derivative financial instruments contain provisions that require the Company to maintain specific credit ratings from credit rating agencies to avoid higher collateral posting requirements. If the Company’s debt ratings were to fall below specified ratings, the counterparties of the derivative financial instruments could demand immediate incremental collateralization on those instruments in a net liability position. The aggregate fair value of all derivative financial instruments with such credit risk-related contingent features in a net liability position on March 31, 2023 was not material.

The aggregate fair value of derivative financial instruments in an asset position with counterparties, which are subject to enforceable master netting arrangements, was $253 million at March 31, 2023 and $314 million at December 31, 2022. Counterparties posted collateral relating to those positions of $253 million at March 31, 2023 and $312 million at December 31, 2022, respectively. Interest rate swap agreements entered into with customers are subject to the Company’s credit risk standards and often contain collateral provisions.

In addition to the derivative contracts noted above, the Company clears certain derivative transactions through a clearinghouse, rather than directly with counterparties. Those transactions cleared through a clearinghouse require initial margin collateral and variation margin payments depending on the contracts being in a net asset or liability position. The amount of initial margin collateral posted by the Company was $202 million and $205 million at March 31, 2023 and December 31, 2022, 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.

11. Variable interest entities and asset securitizations

The Company’s securitization activity has consisted of securitizing loans originated for sale into government issued or guaranteed mortgage-backed securities. The 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 March 31, 2023 and December 31, 2022, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet and recognized $22 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.

- 31 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. Variable interest entities and asset securitizations, continued

The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately $9.2 billion at both March 31, 2023 and December 31, 2022. 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 $1.5 billion at both March 31, 2023 and December 31, 2022, including $547 million and $545 million of unfunded commitments, at each of those respective dates. Contingent commitments to provide additional capital contributions to these partnerships were not material at March 31, 2023. 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 March 31, 2023 was $2.0 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 $40 million and $20 million of its investments in qualified affordable housing projects to income tax expense during the three-month periods ended March 31, 2023 and 2022, respectively, and recognized $46 million and $23 million of tax credits and other tax benefits during those respective periods.

The Company serves as investment advisor for certain registered money-market funds. The Company has no explicit arrangement to provide support to those funds, but may waive portions of its allowable management fees as a result of market conditions.

12. Fair value measurements

GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has not made any fair value elections at March 31, 2023.

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.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

Trading account

Mutual funds held in connection with deferred compensation and other arrangements have been classified as Level 1 valuations. Valuations of investments in debt securities can generally be obtained through reference to quoted prices in less active markets for the same or similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.

Investment securities available for sale and equity securities

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

Real estate loans held for sale

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

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 accounted for as 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.

Other non-hedging derivatives

Other non-hedging derivatives 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 other non-hedging derivative assets and liabilities using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

The following tables present assets and liabilities at March 31, 2023 and December 31, 2022 measured at estimated fair value on a recurring basis:

Fair Value MeasurementsLevel 1Level 2Level 3
(In thousands)
March 31, 2023
Trading account$165,216$113,646$51,570$—
Investment securities available for sale:
U.S. Treasury and federal agencies7,732,699—7,732,699—
Mortgage-backed securities:
Government issued or guaranteed
Commercial648,194—648,194—
Residential2,493,705—2,493,705—
Other debt securities164,324—164,324—
11,038,922—11,038,922—
Equity securities295,220289,7885,432—
Real estate loans held for sale473,478—473,478—
Other assets (a)362,945—356,0786,867
Total assets$12,335,781$403,434$11,925,480$6,867
Other liabilities (a)1,063,941—1,028,93335,008
Total liabilities$1,063,941$—$1,028,933$35,008
December 31, 2022
Trading account$117,847$117,847$—$—
Investment securities available for sale:
U.S. Treasury and federal agencies7,670,960—7,670,960—
Mortgage-backed securities:
Government issued or guaranteed
Commercial574,299—574,299—
Residential2,330,118—2,330,118—
Other debt securities173,584—173,584—
10,748,961—10,748,961—
Equity securities151,458145,2896,169—
Real estate loans held for sale162,393—162,393—
Other assets (a)435,969—435,517452
Total assets$11,616,628$263,136$11,353,040$452
Other liabilities (a)1,355,326—1,309,30146,025
Total liabilities$1,355,326$—$1,309,301$46,025

(a)

Comprised predominantly of interest rate swap agreements used for interest rate risk management (Level 2), interest rate and foreign exchange contracts not designated as hedging instruments (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

12. Fair value measurements, continued

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended March 31, 2023 and 2022 were as follows:

Other Assets and Other Liabilities
2023(In thousands)
Balance — January 1, 2023$(45,573)
Total losses realized/unrealized:
Included in earnings17,351(a)
Transfers out of Level 381(b)
Balance — March 31, 2023$(28,141)
Changes in unrealized losses included in earnings related to instruments still held at March 31, 2023$17,386(a)
2022
Balance — January 1, 2022$6,440
Total gains realized/unrealized:
Included in earnings(18,700)(a)
Transfers out of Level 3(3,168)(b)
Balance — March 31, 2022$(15,428)
Changes in unrealized gains included in earnings related to instruments still held at March 31, 2022$(13,219)(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.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

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

Loans

Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectable portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the 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 34% at March 31, 2023. 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 March 31, 2023 was 57%. 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 $670 million at March 31, 2023 ($374 million and $296 million of which were classified as Level 2 and Level 3, respectively), $853 million at December 31, 2022 ($329 million and $524 million of which were classified as Level 2 and Level 3, respectively) and $392 million at March 31, 2022 ($260 million and $132 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 March 31, 2023 and 2022 were decreases of $69 million and $46 million for the three-month periods ended March 31, 2023 and 2022, respectively.

Assets taken in foreclosure of defaulted loans

Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and are generally measured at the lower of cost or fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2. Assets taken into foreclosure of defaulted loans subject to nonrecurring fair value measurement were not material at March 31, 2023 and 2022. Changes in fair value recognized for foreclosed assets held by the Company were not material during the three-month periods ended March 31, 2023 and 2022.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. 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 $133 million required a valuation allowance of $21 million at March 31, 2022. Significant unobservable inputs used in this Level 3 valuation included a weighted-average prepayment speed of 12.42% and a weighted-average option-adjusted spread of 900 basis points at March 31, 2022. There were no valuation allowances recorded at either March 31, 2023 or December 31, 2022. A reduction of the valuation allowance of $3 million was recognized in the three-month period ended March 31, 2022.

Significant unobservable inputs to Level 3 measurements

The following table presents quantitative information about significant unobservable inputs used in the fair value measurements for certain Level 3 assets and liabilities at March 31, 2023 and December 31, 2022:

Fair ValueValuation TechniqueUnobservable Inputs / AssumptionsRange (Weighted- Average)
(In thousands)
March 31, 2023
Recurring fair value measurements
Net other assets (liabilities) (a)$(28,141)Discounted cash flowCommitment expirations0% - 95% (7%)
December 31, 2022
Recurring fair value measurements
Net other assets (liabilities) (a)$(45,573)Discounted cash flowCommitment expirations0% - 97% (3%)

(a)

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

Sensitivity of fair value measurements to changes in unobservable inputs

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

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

Disclosures of fair value of financial instruments

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

March 31, 2023
Carrying AmountEstimated Fair ValueLevel 1Level 2Level 3
(In thousands)
Financial assets:
Cash and cash equivalents$1,817,7401,817,7401,742,64575,095—
Interest-bearing deposits at banks22,306,42522,306,425—22,306,425—
Trading account165,216165,216113,64651,570—
Investment securities28,443,20927,446,099289,78827,105,86350,448
Loans and leases:
Commercial loans and leases43,758,36142,992,625——42,992,625
Commercial real estate loans45,072,54142,870,814—321,47342,549,341
Residential real estate loans23,789,94522,004,511—7,169,80314,834,708
Consumer loans20,316,84519,514,964——19,514,964
Allowance for credit losses(1,975,110)————
Loans and leases, net130,962,582127,382,914—7,491,276119,891,638
Accrued interest receivable693,011693,011—693,011—
Financial liabilities:
Noninterest-bearing deposits$(59,955,033)(59,955,033)—(59,955,033)—
Savings and interest-checking deposits(86,282,685)(86,282,685)—(86,282,685)—
Time deposits(12,837,522)12,808,615—12,808,615—
Short-term borrowings(6,995,302)(6,995,302)—(6,995,302)—
Long-term borrowings(7,462,890)(7,070,243)—(7,070,243)—
Accrued interest payable(182,906)(182,906)—(182,906)—
Other financial instruments:
Commitments to originate real estate loans for sale$(28,141)(28,141)——(28,141)
Commitments to sell real estate loans38,84438,844—38,844—
Other credit-related commitments(152,513)(152,513)——(152,513)
Interest rate swap agreements used for interest rate risk management11,25011,250—11,250—
Interest rate and foreign exchange contracts not designated as hedging instruments(722,949)(722,949)—(722,949)—

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

December 31, 2022
Carrying AmountEstimated Fair ValueLevel 1Level 2Level 3
(In thousands)
Financial assets:
Cash and cash equivalents$1,517,2441,517,2441,371,688145,556—
Interest-bearing deposits at banks24,958,71924,958,719—24,958,719—
Federal funds sold3,0003,000—3,000—
Trading account117,847117,847117,847——
Investment securities25,210,87124,056,322145,28923,860,44550,588
Loans and leases:
Commercial loans and leases41,850,56641,139,985——41,139,985
Commercial real estate loans45,364,57143,214,646—130,65243,083,994
Residential real estate loans23,755,94721,780,214—7,049,54014,730,674
Consumer loans20,593,07920,093,523——20,093,523
Allowance for credit losses(1,925,331)————
Loans and leases, net129,638,832126,228,368—7,180,192119,048,176
Accrued interest receivable646,250646,250—646,250—
Financial liabilities:
Noninterest-bearing deposits$(65,501,860)(65,501,860)—(65,501,860)—
Savings and interest-checking deposits(87,911,463)(87,911,463)—(87,911,463)—
Time deposits(10,101,545)(10,143,110)—(10,143,110)—
Short-term borrowings(3,554,951)(3,554,951)—(3,554,951)—
Long-term borrowings(3,964,537)(3,926,489)—(3,926,489)—
Accrued interest payable(81,356)(81,356)—(81,356)—
Other financial instruments:
Commitments to originate real estate loans for sale$(45,573)(45,573)——(45,573)
Commitments to sell real estate loans54,42454,424—54,424—
Other credit-related commitments(148,772)(148,772)——(148,772)
Interest rate swap agreements used for interest rate risk management(7,892)(7,892)—(7,892)—
Interest rate and foreign exchange contracts not designated as hedging instruments(920,316)(920,316)—(920,316)—

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.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Commitments and contingencies

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

March 31,December 31,
20232022
(In thousands)
Commitments to extend credit
Home equity lines of credit$8,299,310$8,261,560
Commercial real estate loans to be sold587,996348,701
Other commercial real estate6,217,7205,776,116
Residential real estate loans to be sold198,61031,208
Other residential real estate427,954505,121
Commercial and other32,964,63732,625,840
Standby letters of credit2,433,7022,376,644
Commercial letters of credit35,03865,066
Financial guarantees and indemnification contracts3,936,6324,022,432
Commitments to sell real estate loans1,193,328533,458

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 $12.5 billion and $11.7 billion at March 31, 2023 and December 31, 2022, respectively, that the Company had the unconditional right to cancel prior to funding. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, whereas commercial letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and a third party. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management's assessment of the customer's creditworthiness.

Financial guarantees and indemnification contracts are predominantly comprised of recourse obligations associated with sold loans and other guarantees and commitments. Included in financial guarantees and indemnification contracts are loan principal amounts sold with recourse in conjunction with the Company's involvement in the Fannie Mae Delegated Underwriting and Servicing program. The Company's maximum credit risk for recourse associated with loans sold under this program totaled approximately $3.8 billion at March 31, 2023 and $3.9 billion at December 31, 2022. There have been no material losses incurred as a result of those credit recourse arrangements.

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

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 accounted for as 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.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Commitments and contingencies, continued

The Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for losses related to its obligations to loan purchasers. The amount of those charges is based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. At March 31, 2023, 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 that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was between $0 and $25 million as of March 31, 2023. 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.

14. Segment information

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

The financial information of the Company's segments was compiled utilizing the accounting policies described in note 23 of Notes to Financial Statements in the 2022 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. As described in the 2022 Annual Report, in the fourth quarter of 2022 the Company revised its segment reporting related to: allocations of certain incentive compensation; a refinement of consumption-driven services allocations including cybersecurity and modeling functions; an expanded allocation of franchise-type services such as risk management, data services and legal services; and a refinement in allocation of technology application costs in support of business activities. Additionally certain lending relationships within the hospitality sector that had previously received oversight within the Commercial Banking segment were realigned to the Commercial Real Estate segment. As a result, financial information for the three months ended March 31, 2022 has been reclassified to provide segment information on a comparable basis, as noted in the accompanying table.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

14. Segment information, continued

Three Months Ended March 31, 2022
Total Revenues as Previously ReportedImpact of ChangesTotal Revenues as ReclassifiedNet Income (Loss) as Previously ReportedImpact of ChangesNet Income (Loss) as Reclassified
(In thousands)
Business Banking$141,346—$141,346$41,111(1,579)$39,532
Commercial Banking289,372(10,437)278,935144,608(16,148)128,460
Commercial Real Estate202,08710,437212,52497,61013,636111,246
Discretionary Portfolio64,727—64,72735,385(700)34,685
Residential Mortgage Banking137,444—137,44428,964(1,850)27,114
Retail Banking355,148—355,14884,164(5,082)79,082
All Other254,937—254,937(69,668)11,723(57,945)
Total$1,445,061—$1,445,061$362,174—$362,174

Information about the Company's segments follows:

Three Months Ended March 31
20232022
Total Revenues(a)Inter- segment RevenuesNet Income (Loss)Total Revenues(a)Inter- segment RevenuesNet Income (Loss)
(In thousands)
Business Banking$273,551$877$113,251$141,346$671$39,532
Commercial Banking507,02010,226219,979278,935863128,460
Commercial Real Estate225,71928980,809212,524179111,246
Discretionary Portfolio(33,396)(15,205)(40,397)64,727(27,805)34,685
Residential Mortgage Banking77,65420,472(12,354)137,44437,46427,114
Retail Banking831,842(39)316,594355,148(3)79,082
All Other523,007(16,620)23,742254,937(11,369)(57,945)
Total$2,405,397$—$701,624$1,445,061$—$362,174
Average Total Assets
Three Months Ended March 31Year Ended December 31
202320222022
(In millions)
Business Banking$7,825$6,568$7,597
Commercial Banking (b)48,22226,32940,930
Commercial Real Estate (b)32,17123,93930,599
Discretionary Portfolio50,50122,89942,657
Residential Mortgage Banking2,6056,2503,986
Retail Banking21,42118,61020,312
All Other39,85447,05344,171
Total$202,599$151,648$190,252

(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 $*13,462,000 *and $*3,234,000 for the three-month periods ended March 31, 2023 and 2022, 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.

(b)

*Average total assets reclassified from the Commercial Banking segment to the Commercial Real Estate segment relating to lending relationships in the hospitality sector totaled $*1.29 billion for the three months ended March 31, 2022.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

M&T holds a 20% minority interest in Bayview Lending Group LLC ("BLG"), a privately-held commercial mortgage company. That investment had no remaining carrying value at March 31, 2023 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 $20 million and $30 million for the three-month periods ended March 31, 2023 and 2022, respectively.

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 $1.4 billion at each of March 31, 2023 and December 31, 2022. Revenues from those servicing rights were $2 million in each of the three-month periods ended March 31, 2023 and 2022. The Company sub-services residential mortgage loans for Bayview Financial having outstanding principal balances of $98.0 billion and $96.0 billion at March 31, 2023 and December 31, 2022, respectively. Revenues earned for sub-servicing loans for Bayview Financial were $32 million and $42 million for the three-month periods ended March 31, 2023 and 2022, respectively. In addition, the Company held $48 million and $50 million of mortgage-backed securities in its held-to-maturity portfolio at March 31, 2023 and December 31, 2022, respectively, that were securitized by Bayview Financial. At March 31, 2023, the Company held $523 million of Bayview Financial's $2.5 billion syndicated loan facility.

16. Recent accounting developments

The following table provides a description of accounting standards that were adopted by the Company in 2023 as well as standards that are not effective that could have an impact to M&T’s consolidated financial statements upon adoption.

StandardDescriptionRequired date of adoptionEffect on consolidated financial statements
Standards Adopted in 2023
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers in a Business CombinationThe amendments require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with specified revenue recognition guidance. At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts and may assess how the acquiree applied the revenue guidance to determine what to record for such contracts. The guidance is generally expected to result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements.January 1, 2023The Company adopted the amended guidance effective January 1, 2023 using a prospective transition method and the guidance will be applied, as applicable, to future acquisitions. The Company does not expect the guidance will have a material impact on its consolidated financial statements.
Fair Value Hedging of Multiple Hedge Layers under Portfolio Layer MethodThe amendments allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. If multiple hedged layers are designated, the amendments require an analysis to be performed to support the expectation that the aggregate amount of the hedged layers is anticipated to be outstanding for the designated hedge periods. Only closed portfolios may be hedged under the portfolio layer method (that is, no assets can be added to the closed portfolio once established), however designating new hedging relationships and dedesignating existing hedging relationships associated with the closed portfolio any time after the closed portfolio is established is permitted.January 1, 2023At January 1, 2023 the Company did not have any designated hedging relationships under the portfolio layer method and, therefore, the adoption had no impact on its consolidated financial statements.
Accounting for Troubled Debt Restructurings (TDRs) and Expansion of Vintage Disclosures Applicable to Credit LossesThe amendments (1) eliminate the accounting guidance for TDRs and require enhanced disclosure for certain loan refinancings by creditors when a borrower is experiencing financial difficulty and (2) require disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within credit loss disclosures.January 1, 2023The Company adopted the amended guidance effective January 1, 2023 using a prospective transition method and will no longer be required to identify TDRs and apply specialized accounting to such loans. The Company has complied with the modified disclosure requirements in note 4.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

16. Recent accounting developments, continued

StandardDescriptionRequired date of adoptionEffect on consolidated financial statements
Standards Not Yet Adopted as of March 31, 2023
Fair Value Measurement of Equity Securities Subject to Contractual Sale RestrictionsThe amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, the amendments require the following disclosures for equity securities subject to contractual sale restrictions: 1. The fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; 2. The nature and remaining duration of the restriction(s); and 3. The circumstances that could cause a lapse in the restriction(s).January 1, 2024 Early adoption permittedThe amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company does not expect the guidance will have a material impact on its consolidated financial statements.
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization MethodThe amendments permit an election to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and other income tax benefits received and the net amortization and income tax credits and other income tax benefits are recognized in the income statement as a component of income tax expense (benefit). All of the following conditions must be met to qualify for the proportional amortization method: 1. It is probable that the income tax credits allocable to the tax equity investor will be available. 2. The tax equity investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project. 3. Substantially all of the projected benefits are from income tax credits and other income tax benefits. Projected benefits include income tax credits, other income tax benefits, and other non-income-tax-related benefits. The projected benefits are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project. 4. The tax equity investor’s projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive. 5. The tax equity investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the tax equity investor’s liability is limited to its capital investment. To apply the proportional amortization method, an accounting policy election must be made on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. When applying the proportional amortization method to qualifying tax equity investments the receipt of the investment tax credits must be accounted for using the flow-through method as prescribed by GAAP, even if the deferral method is applied to other investment tax credits received. In addition, all tax equity investments accounted for using the proportional amortization method must use the delayed equity contribution guidance (which requires that a liability be recognized for delayed equity contributions that are unconditional and legally binding or for equity contributions that are contingent upon a future event when that contingent event becomes probable).January 1, 2024 Early adoption permittedThe amendments should be applied on either a modified retrospective or a retrospective basis. Under a modified retrospective transition, all investments for which income tax credits or other income tax benefits are still expected to be received must be evaluated as of the beginning of the period of adoption. The assessment of whether the investment qualifies for the proportional amortization method is performed as of the date the investment was entered into. A cumulative-effect adjustment reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into is recognized in the opening balance of retained earnings as of the beginning of the period of adoption. Under a retrospective transition, all investments for which income tax credits or other income tax benefits are still expected to be received must be evaluated as of the beginning of the earliest period presented. The assessment of whether the investment qualifies for the proportional amortization method is performed as of the date the investment was entered into. A cumulative-effect adjustment reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into is recognized in the opening balance of retained earnings as of the beginning of the earliest period presented. The Company is evaluating whether to early adopt the guidance as well as the impact that the guidance will have on its consolidated financial statements.

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