New York


~~New York~~		16-0968385
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

(716) ~~842-5445~~635-4000

(~~Registrant’s~~Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒ Yes ¨☐ No

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

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


Large accelerated filer		x ☒		Accelerated filer		¨ ☐

Non-accelerated filer		¨ ☐	(Do not check if a smaller reporting company)		Smaller reporting company	☐
Emerging growth company	¨	☐

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

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

Number of shares of the ~~registrant’s~~registrant's Common Stock, $0.50 par value, outstanding as of the close of business on April ~~22, 2016: 158,999,014~~28, 2017: 153,863,872 shares.

M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended March 31, ~~2016~~2017


Table of Contents of Information Required in Report		Page

Part I. FINANCIAL INFORMATION

	Item 1.	Financial Statements.

		CONSOLIDATED BALANCE SHEET - March 31, ~~2016~~2017 and December 31, ~~2015~~2016			3

		CONSOLIDATED STATEMENT OF INCOME - Three months ended March 31, ~~2016~~2017 and ~~2015~~2016			4

		CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - Three months ended March 31, ~~2016~~2017 and ~~2015~~2016			5

		CONSOLIDATED STATEMENT OF CASH FLOWS - Three months ended March 31, ~~2016~~2017 and ~~2015~~2016			6

		CONSOLIDATED STATEMENT OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS' EQUITY - Three months ended March 31, ~~2016~~2017 and ~~2015~~2016			7

		NOTES TO FINANCIAL STATEMENTS			8

	Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations.			51	47

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.			93	79

	Item 4.	Controls and Procedures.			93	79

Part II. OTHER INFORMATION

	Item 1.	Legal Proceedings.			93	79

	Item 1A.	Risk Factors.			94	81

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.			95	81

	Item 3.	Defaults Upon Senior Securities.			95	81

	Item 4.	Mine Safety Disclosures.			95	81

	Item 5.	Other Information.			95	81

	Item 6.	Exhibits.			96	82

SIGNATURES					97	82

EXHIBIT INDEX			97	83

- 2 -

PART I. ~~FINANCIAL~~FINANCIAL INFORMATION

Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

Dollars in thousands, except per share
   March 31,
2016 December 31,
2015
Assets

Cash and due from banks
   $ 1,178,175    1,368,040

Interest-bearing deposits at banks
   9,545,181    7,594,350

Trading account
   467,987    273,783

Investment securities (includes pledged securities that can be sold or repledged of $2,133,492 at March 31, 2016; $2,136,712 at December 31, 2015)


Available for sale (cost: $11,937,326 at March 31, 2016; $12,138,636 at December 31, 2015)
   12,200,647    12,242,671

Held to maturity (fair value: $2,769,343 at March 31, 2016; $2,864,147 at December 31, 2015)
   2,730,611    2,859,709

Other (fair value: $536,062 at March 31, 2016; $554,059 at December 31, 2015)
   536,062    554,059


Total investment securities
   15,467,320    15,656,439


Loans and leases
   88,104,830    87,719,234

Unearned discount
   (232,364 ) (229,735 )


Loans and leases, net of unearned discount
   87,872,466    87,489,499

Allowance for credit losses
   (962,752 ) (955,992 )


Loans and leases, net
   86,909,714    86,533,507


Premises and equipment
   662,891    666,682

Goodwill
   4,593,112    4,593,112

Core deposit and other intangible assets
   127,949    140,268

Accrued interest and other assets
   5,673,303    5,961,703


Total assets
   $ 124,625,632    122,787,884


Liabilities

Noninterest-bearing deposits
   $ 29,709,218    29,110,635

Interest-checking deposits
   2,848,126    2,939,274

Savings deposits
   48,649,114    46,627,370

Time deposits
   12,841,331    13,110,392

Deposits at Cayman Islands office
   166,787    170,170


Total deposits
   94,214,576    91,957,841


Federal funds purchased and agreements to repurchase securities
   206,709    150,546

Other short-term borrowings
   1,560,117    1,981,636

Accrued interest and other liabilities
   1,948,142    1,870,714

Long-term borrowings
   10,341,035    10,653,858


Total liabilities
   108,270,579    106,614,595


Shareholders’ equity

Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 731,500 shares at March 31, 2016 and December 31, 2015; Liquidation preference of $10,000 per share: 50,000 shares at March 31, 2016 and December 31, 2015
   1,231,500    1,231,500

Common stock, $.50 par, 250,000,000 shares authorized, 159,963,737 shares issued at March 31, 2016; 159,563,512 shares issued at December 31, 2015
   79,982    79,782

Common stock issuable, 33,391 shares at March 31, 2016; 36,644 shares at December 31, 2015
   2,180    2,364

Additional paid-in capital
   6,683,499    6,680,768

Retained earnings
   8,596,752    8,430,502

Accumulated other comprehensive income (loss), net
   (150,189 ) (251,627 )

Treasury stock - common, at cost - 841,082 shares at March 31, 2016
   (88,671 ) —


Total shareholders’ equity
   16,355,053    16,173,289


Total liabilities and shareholders’ equity
   $ 124,625,632    122,787,884

		March 31,			December 31,
Dollars in thousands, except per share		2017			2016

Assets	Cash and due from banks	$	1,286,962			1,320,549
	Interest-bearing deposits at banks		6,945,149			5,000,638
	Trading account		174,854			323,867
	Investment securities (includes pledged securities that can be sold or repledged of $519,063 at March 31, 2017; $1,203,473 at December 31, 2016)
	Available for sale (cost: $12,640,244 at March 31, 2017; $13,338,301 at December 31, 2016)		12,631,000			13,332,072
	Held to maturity (fair value: $2,865,885 at March 31, 2017; $2,451,222 at December 31, 2016)		2,876,119			2,457,278
	Other (fair value: $461,296 at March 31, 2017; $461,118 at December 31, 2016)		461,296			461,118
	Total investment securities		15,968,415			16,250,468
	Loans and leases		89,555,547			91,101,677
	Unearned discount		(242,545	)		(248,261	)
	Loans and leases, net of unearned discount		89,313,002			90,853,416
	Allowance for credit losses		(1,001,430	)		(988,997	)
	Loans and leases, net		88,311,572			89,864,419
	Premises and equipment		672,769			675,263
	Goodwill		4,593,112			4,593,112
	Core deposit and other intangible assets		94,535			97,655
	Accrued interest and other assets		5,175,883			5,323,235
	Total assets	$	123,223,251			123,449,206

Liabilities	Noninterest-bearing deposits	$	34,279,591			32,813,896
	Savings and interest-checking deposits		53,542,149			52,346,207
	Time deposits		9,028,018			10,131,846
	Deposits at Cayman Islands office		192,763			201,927
	Total deposits		97,042,521			95,493,876
	Federal funds purchased and agreements to repurchase securities		185,102			163,442
	Accrued interest and other liabilities		1,694,905			1,811,431
	Long-term borrowings		8,087,619			9,493,835
	Total liabilities		107,010,147			106,962,584
Shareholders' equity	Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 731,500 shares at March 31, 2017 and December 31, 2016; Liquidation preference of $10,000 per share: 50,000 shares at March 31, 2017 and December 31, 2016		1,231,500			1,231,500
	Common stock, $.50 par, 250,000,000 shares authorized, 159,825,445 shares issued at March 31, 2017; 159,945,678 shares issued at December 31, 2016		79,913			79,973
	Common stock issuable, 28,740 shares at March 31, 2017; 32,403 shares at December 31, 2016		1,921			2,145
	Additional paid-in capital		6,603,355			6,676,948
	Retained earnings		9,437,450			9,222,488
	Accumulated other comprehensive income (loss), net		(291,567	)		(294,636	)
	Treasury stock - common, at cost - 6,073,095 shares at March 31, 2017; 3,764,742 shares at December 31, 2016		(849,468	)		(431,796	)
	Total shareholders’ equity		16,213,104			16,486,622
	Total liabilities and shareholders’ equity	$	123,223,251			123,449,206

- 3 -

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)


			Three months ended March 31							Three Months Ended March 31
In thousands, except per share	In thousands, except per share		2016		2015			In thousands, except per share		2017		2016

Interest income		Loans and leases, including fees	$	863,385		647,179			Loans and leases, including fees	$	898,038		863,385
		Investment securities
		Fully taxable		98,015		85,957
		Exempt from federal taxes		795		1,318			Investment securities
		Deposits at banks		10,337		3,118			Fully taxable		95,124		98,015
		Other		302		515			Exempt from federal taxes		430		795
									Deposits at banks		12,162		10,337
		Total interest income		972,834		738,087			Other		279		302
									Total interest income		1,006,033		972,834
Interest expense		Interest-checking deposits		414		311			Savings and interest-checking deposits		25,634		16,305
		Savings deposits		15,891		10,219			Time deposits		18,998		24,322
		Time deposits		24,322		3,740			Deposits at Cayman Islands office		265		193
		Deposits at Cayman Islands office		193		147			Short-term borrowings		216		2,162
		Short-term borrowings		2,162		34			Long-term borrowings		46,660		57,888
		Long-term borrowings		57,888		64,048			Total interest expense		91,773		100,870
									Net interest income		914,260		871,964
		Total interest expense		100,870		78,499			Provision for credit losses		55,000		49,000
									Net interest income after provision for credit losses		859,260		822,964
		Net interest income		871,964		659,588
		Provision for credit losses		49,000		38,000

		Net interest income after provision for credit losses		822,964		621,588

Other income		Mortgage banking revenues		82,063		101,601			Mortgage banking revenues		84,692		82,063
		Service charges on deposit accounts		102,405		102,344
		Trust income		111,077		123,734
		Brokerage services income		16,004		15,461			Service charges on deposit accounts		104,176		102,405
		Trading account and foreign exchange gains		7,458		6,231			Trust income		120,015		111,077
		Gain (loss) on bank investment securities		4		(98	)		Brokerage services income		17,384		16,004
		Other revenues from operations		101,922		90,930			Trading account and foreign exchange gains		9,691		7,458
									Gain on bank investment securities		—		4
		Total other income		420,933		440,203			Other revenues from operations		110,887		101,922
									Total other income		446,845		420,933
Other expense		Salaries and employee benefits		431,785		389,893			Salaries and employee benefits		449,862		431,785
		Equipment and net occupancy		74,178		66,470			Equipment and net occupancy		74,366		74,178
		Printing, postage and supplies		11,986		9,590			Outside data processing and software		44,301		43,015
		Amortization of core deposit and other intangible assets		12,319		6,793			FDIC assessments		28,827		25,225
		FDIC assessments		25,225		10,660			Advertising and marketing		16,110		21,454
		Other costs of operations		220,602		202,969			Printing, postage and supplies		9,708		11,986
									Amortization of core deposit and other intangible assets		8,420		12,319
		Total other expense		776,095		686,375			Other costs of operations		156,258		156,133
									Total other expense		787,852		776,095
		Income before taxes		467,802		375,416			Income before taxes		518,253		467,802
		Income taxes		169,274		133,803			Income taxes		169,326		169,274
									Net income	$	348,927		298,528
		Net income	$	298,528		241,613			Net income available to common shareholders
									Basic	$	328,562		275,744
									Diluted		328,567		275,748
		Net income available to common shareholders							Net income per common share
		Basic	$	275,744		218,830			Basic	$	2.13		1.74
		Diluted		275,748		218,837			Diluted		2.12		1.73
		Net income per common share							Cash dividends per common share	$	.75		.70
		Basic	$	1.74		1.66			Average common shares outstanding
		Diluted		1.73		1.65			Basic		154,427		158,734
		Cash dividends per common share	$	.70		.70			Diluted		154,949		159,181
		Average common shares outstanding
		Basic		158,734		132,049
		Diluted		159,181		132,769

- 4 -

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)


	Three months ended March 31						Three Months Ended March 31
In thousands	2016			2015			2017			2016

Net income	$	298,528		$	241,613		$	348,927			298,528
Other comprehensive income, net of tax and reclassification adjustments:
Net unrealized gains on investment securities		97,194			25,339
Net unrealized gains (losses) on investment securities								(1,356	)		97,194
Cash flow hedges adjustments		(24	)		871			(23	)		(24	)
Foreign currency translation adjustment		(53	)		(2,384	)		476			(53	)
Defined benefit plans liability adjustments		4,321			4,677			3,972			4,321

Total other comprehensive income		101,438			28,503			3,069			101,438

Total comprehensive income	$	399,966		$	270,116		$	351,996			399,966

- 5 -

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

      Three months ended March 31
In thousands
   2016 2015
Cash flows from operating activities

Net income
   $ 298,528    241,613

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


Provision for credit losses
   49,000    38,000

Depreciation and amortization of premises and equipment
   27,141    24,178

Amortization of capitalized servicing rights
   12,249    12,199

Amortization of core deposit and other intangible assets
   12,319    6,793

Provision for deferred income taxes
   50,075    37,052

Asset write-downs
   8,940    2,379

Net gain on sales of assets
   (5,399 ) (1,066 )

Net change in accrued interest receivable, payable
   (16,530 ) (2,200 )

Net change in other accrued income and expense
   70,766    (80,084 )

Net change in loans originated for sale
   211    197,708

Net change in trading account assets and liabilities
   (59,080 ) (18,206 )



Net cash provided by operating activities
   448,220    458,366


Cash flows from investing activities

Proceeds from sales of investment securities


Available for sale
   518    693

Other
   18,121    132

Proceeds from maturities of investment securities


Available for sale
   511,549    369,649

Held to maturity
   132,636    148,708

Purchases of investment securities


Available for sale
   (311,302 ) (1,871,491 )

Held to maturity
   (5,343 ) (7,442 )

Other
   (124 ) (348 )

Net increase in loans and leases
   (439,712 ) (666,220 )

Net (increase) decrease in interest-bearing deposits at banks
   (1,950,831 ) 179,376

Capital expenditures, net
   (16,307 ) (9,598 )

Net decrease in loan servicing advances
   37,600    76,145

Other, net
   7,920    (21,940 )



Net cash used by investing activities
   (2,015,275 ) (1,802,336 )


Cash flows from financing activities

Net increase (decrease) in deposits
   2,264,623    (4,543 )

Net increase (decrease) in short-term borrowings
   (343,838 ) 819

Proceeds from long-term borrowings
   —      1,500,000

Payments on long-term borrowings
   (317,187 ) (1,797 )

Purchases of treasury stock
   (100,000 ) —

Dividends paid - common
   (112,000 ) (93,631 )

Dividends paid - preferred
   (17,368 ) (17,368 )

Other, net
   2,960    (46,014 )



Net cash provided by financing activities
   1,377,190    1,337,466



Net decrease in cash and cash equivalents
   (189,865 ) (6,504 )

Cash and cash equivalents at beginning of period
   1,368,040    1,373,357



Cash and cash equivalents at end of period
   $ 1,178,175    1,366,853


Supplemental disclosure of cash flow information

Interest received during the period
   $ 968,223    726,475

Interest paid during the period
   146,568    75,776

Income taxes paid (refunded) during the period
   (86,146 ) 88,578


Supplemental schedule of noncash investing and financing activities

Real estate acquired in settlement of loans
   $ 33,737    10,846

Securitization of residential mortgage loans allocated to


Available-for-sale investment securities
   8,452    12,920

Capitalized servicing rights
   92    143

		Three Months Ended March 31
In thousands		2017			2016

Cash flows from operating activities	Net income	$	348,927			298,528
	Adjustments to reconcile net income to net cash provided by operating activities
	Provision for credit losses		55,000			49,000
	Depreciation and amortization of premises and equipment		27,429			27,141
	Amortization of capitalized servicing rights		13,543			12,249
	Amortization of core deposit and other intangible assets		8,420			12,319
	Provision for deferred income taxes		36,731			50,075
	Asset write-downs		5,118			8,940
	Net gain on sales of assets		(11,647	)		(5,399	)
	Net change in accrued interest receivable, payable		(23,782	)		(16,530	)
	Net change in other accrued income and expense		(209	)		70,766
	Net change in loans originated for sale		712,954			211
	Net change in trading account assets and liabilities		113,332			(59,080	)
	Net cash provided by operating activities		1,285,816			448,220
Cash flows from investing activities	Proceeds from sales of investment securities
	Available for sale		—			518
	Other		100			18,121
	Proceeds from maturities of investment securities
	Available for sale		697,756			511,549
	Held to maturity		121,455			132,636
	Purchases of investment securities
	Available for sale		(5,143	)		(311,302	)
	Held to maturity		(539,516	)		(5,343	)
	Other		(278	)		(124	)
	Net decrease (increase) in loans and leases		797,351			(439,712	)
	Net increase in interest-bearing deposits at banks		(1,944,511	)		(1,950,831	)
	Capital expenditures, net		(21,521	)		(16,307	)
	Net decrease in loan servicing advances		56,437			37,600
	Other, net		11,863			7,920
	Net cash used by investing activities		(826,007	)		(2,015,275	)
Cash flows from financing activities	Net increase in deposits		1,550,297			2,264,623
	Net increase (decrease) in short-term borrowings		21,660			(343,838	)
	Payments on long-term borrowings		(1,401,410	)		(317,187	)
	Purchases of treasury stock		(532,073	)		(100,000	)
	Dividends paid — common		(116,566	)		(112,000	)
	Dividends paid — preferred		(17,368	)		(17,368	)
	Other, net		2,064			2,960
	Net cash provided (used) by financing activities		(493,396	)		1,377,190
	Net decrease in cash and cash equivalents		(33,587	)		(189,865	)
	Cash and cash equivalents at beginning of period		1,320,549			1,368,040
	Cash and cash equivalents at end of period	$	1,286,962			1,178,175
Supplemental disclosure of cash flow information	Interest received during the period	$	1,001,129			968,223
	Interest paid during the period		116,183			146,568
	Income taxes paid (refunded) during the period		29,272			(86,146	)
Supplemental schedule of noncash investing and financing activities	Real estate acquired in settlement of loans	$	23,607			33,737
	Securitization of residential mortgage loans allocated to
	Available-for-sale investment securities		3,684			8,452
	Capitalized servicing rights		36			92

- 6 -

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

In thousands, except per share
Preferred
stock Common
stock Common
stock
issuable Additional
paid-in
capital Retained
earnings Accumulated
other
comprehensive
income
(loss), net Treasury
stock Total
2015

Balance - January 1, 2015
$ 1,231,500    66,157    2,608    3,409,506    7,807,119    (180,994 ) —      12,335,896
Total comprehensive income
—      —      —      —      241,613    28,503    —      270,116
Preferred stock cash dividends
—      —      —      —      (20,318 ) —      —      (20,318 )
Exercise of 2,315 Series A stock warrants into 904 shares of common stock
—      1    —      (1 ) —      —      —      —
Stock-based compensation plans:

Compensation expense, net
—      147    —      5,425    —      —      —      5,572
Exercises of stock options, net
—      101    —      19,378    —      —      —      19,479
Stock purchase plan
—      45    —      10,301    —      —      —      10,346
Directors’ stock plan
—      2    —      423    —      —      —      425
Deferred compensation plans, net, including dividend equivalents
—      2    (298 ) 270    (25 ) —      —      (51 )
Other
—      —      —      405    —      —      —      405
Common stock cash dividends - $.70 per share
—      —      —      —      (93,569 ) —      —      (93,569 )

Balance - March 31, 2015
$ 1,231,500    66,455    2,310    3,445,707    7,934,820    (152,491 ) —      12,528,301

2016

Balance - January 1, 2016
$ 1,231,500    79,782    2,364    6,680,768    8,430,502    (251,627 ) —      16,173,289
Total comprehensive income
—      —      —      —      298,528    101,438    —      399,966
Preferred stock cash dividends
—      —      —      —      (20,318 ) —      —      (20,318 )
Purchases of treasury stock
—      —      —      —      —      —      (100,000 ) (100,000 )
Stock-based compensation plans:

Compensation expense, net
—      178    —      (978 ) —      —      745    (55 )
Exercises of stock options, net
—      18    —      2,335    —      —      265    2,618
Stock purchase plan
—      —      —      275    —      —      10,319    10,594
Directors’ stock plan
—      2    —      471    —      —      —      473
Deferred compensation plans, net, including dividend equivalents
—      2    (184 ) 234    (23 ) —      —      29
Other
—      —      —      394    —      —      —      394
Common stock cash dividends - $.70 per share
—      —      —      —      (111,937 ) —      —      (111,937 )

Balance - March 31, 2016
$ 1,231,500    79,982    2,180    6,683,499    8,596,752    (150,189 ) (88,671 ) 16,355,053

															Accumulated
															Other
						Common			Additional						Comprehensive
	Preferred		Common			Stock			Paid-in			Retained			Income			Treasury
In thousands, except per share	Stock		Stock			Issuable			Capital			Earnings			(Loss), Net			Stock			Total
2016
Balance — January 1, 2016	$	1,231,500		79,782			2,364			6,680,768			8,430,502			(251,627	)		—			16,173,289
Total comprehensive income		—		—			—			—			298,528			101,438			—			399,966
Preferred stock cash dividends		—		—			—			—			(20,318	)		—			—			(20,318	)
Purchases of treasury stock		—		—			—			—			—			—			(100,000	)		(100,000	)
Stock-based compensation plans:
Compensation expense, net		—		178			—			(978	)		—			—			745			(55	)
Exercises of stock options, net		—		18			—			2,335			—			—			265			2,618
Stock purchase plan		—		—			—			275			—			—			10,319			10,594
Directors’ stock plan		—		2			—			471			—			—			—			473
Deferred compensation plans, net, including dividend equivalents		—		2			(184	)		234			(23	)		—			—			29
Other		—		—			—			394			—			—			—			394
Common stock cash dividends — $.70 per share		—		—			—			—			(111,937	)		—			—			(111,937	)
Balance — March 31, 2016	$	1,231,500		79,982			2,180			6,683,499			8,596,752			(150,189	)		(88,671	)		16,355,053
2017
Balance — January 1, 2017	$	1,231,500		79,973			2,145			6,676,948			9,222,488			(294,636	)		(431,796	)		16,486,622
Total comprehensive income		—		—			—			—			348,927			3,069			—			351,996
Preferred stock cash dividends		—		—			—			—			(18,237	)		—			—			(18,237	)
Exercise of 87,515 Series A stock warrants into 47,954 shares of common stock		—		—			—			(5,934	)		—			—			5,934			—
Purchases of treasury stock		—		—			—			—			—			—			(532,073	)		(532,073	)
Stock-based compensation plans:
Compensation expense, net		—		(60	)		—			(67,016	)		—			—			55,667			(11,409	)
Exercises of stock options, net		—		—			—			(3,127	)		—			—			43,789			40,662
Stock purchase plan		—		—			—			2,563			—			—			8,268			10,831
Directors’ stock plan		—		—			—			126			—			—			347			473
Deferred compensation plans, net, including dividend equivalents		—		—			(224	)		(205	)		(21	)		—			396			(54	)
Common stock cash dividends — $.75 per share		—		—			—			—			(115,707	)		—			—			(115,707	)
Balance — March 31, 2017	$	1,231,500		79,913			1,921			6,603,355			9,437,450			(291,567	)		(849,468	)		16,213,104

- 7 -

NOTES TO ~~FINANCIAL~~FINANCIAL STATEMENTS

1.	~~Significant accounting policies~~

1. Significant accounting policies

The consolidated financial statements of M&T Bank Corporation (“M&T”) and subsidiaries (“the Company”) were compiled in accordance with generally accepted accounting principles (“GAAP”) using the accounting policies set forth in note 1 of Notes to Financial Statements included in Form 10-K for the year ended December 31, ~~2015~~2016 (“~~2015~~2016 Annual Report”)., except that effective January 2017 the Company adopted amended accounting guidance that is discussed in note 16 herein. The most significant of those changes related to the accounting for excess tax benefits or deficiencies associated with share-based compensation whereby beginning in 2017 those amounts are recognized in income tax expense. Previously, tax effects resulting from changes in M&T’s share price subsequent to the grant date were recorded through shareholders’ equity. The adoption of this new accounting guidance resulted in a reduction of income tax expense for the quarter ended March 31, 2017 of $18 million, or $.12 of diluted earnings per common share. In the opinion of management, all adjustments necessary for a fair presentation have been made and were all of a normal recurring nature.

2.	~~Acquisition~~

~~On November 1, 2015, M&T completed~~2. Acquisitions

In connection with the acquisition of Hudson City Bancorp, Inc. (“Hudson City”), headquartered in Paramus, New Jersey. On that date, Hudson City Savings Bank, the banking subsidiary of Hudson City, was merged into M&T Bank, a wholly owned banking subsidiary of M&T. Hudson City Savings Bank operated 135 banking offices in New Jersey, Connecticut and New York at the date of acquisition. The results of operations acquired in the Hudson City transaction have been included in the Company’s financial results since on November 1, 2015. After application of the election, allocation and proration procedures contained in the merger agreement with Hudson City, M&T paid $2.1 billion in cash and issued 25,953,950 shares of M&T common stock in exchange for Hudson City shares outstanding at the time of the acquisition. The purchase price was approximately $5.2 billion based on the cash paid to Hudson City shareholders, the fair value of M&T stock exchanged and the estimated fair value of Hudson City stock awards converted into M&T stock awards. The acquisition of Hudson City expanded the Company’s presence in New Jersey, Connecticut and New York, and management expects that the Company will benefit from greater geographic diversity and the advantages of scale associated with a larger company.

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

   (in thousands)
Identifiable assets:

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


Total identifiable assets
   36,699,320


Liabilities:

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


Total liabilities
   31,496,212


Total consideration
   $ 5,203,108


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


Total consideration
   $ 5,203,108

~~- 8 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

2.	~~Acquisitions, continued~~

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

The following table presents certain pro forma information as if Hudson City had been included in the Company’s results of operations in the first quarter of 2015. These results combine the historical results of Hudson City into the Company’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place as indicated. In particular, no adjustments have been made to eliminate the impact of gains on securities transactions of $7 million during the three months ended March 31, 2015 that may not have been recognized had the investment securities been recorded at fair value. Additionally, the Company expects to achieve operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts that follow.

   Pro forma
Three months
ended
March 31,
2015
   (in thousands)
Total revenues(a)
   $ 1,253,445
Net income
   285,237

~~(a)~~

~~Represents net interest income plus other income.~~

~~In connection with the Hudson City acquisition,~~ the Company incurred merger-related expenses related to systems conversions and other costs of integrating and conforming acquired operations with and into the Company. Those expenses consisted largely of professional services and other temporary help fees associated with preparing for systems conversions and/or integration of operations; costs related to termination of existing contractual arrangements for various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; severance (for former Hudson City employees); travel costs; and other costs of completing the transaction and commencing operations in new markets and offices. ~~The Company expects that there will be additional merger-related expenses in 2016.~~

~~- 9 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

2.	~~Acquisitions, continued~~

A summary of merger-related expenses included in the consolidated statement of income for the three-month period ended March 31, 2016 follows:


	Three months ended March 31, 2016
	(in thousands)		(In thousands)

Salaries and employee benefits	$	5,274	$	5,274
Equipment and net occupancy		939		939
Outside data processing and software				715
Advertising and marketing				4,195
Printing, postage and supplies		937		937
Other cost of operations		16,012		11,102

Total	$	23,162	$	23,162

There were no merger-related expenses during the ~~first quarter of 2015.~~three-month period ended March 31, 2017.

3.	~~Investment securities~~

- 8 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities

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

									Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		(In thousands)
	(in thousands)
March 31, 2016
March 31, 2017
Investment securities available for sale:
U.S. Treasury and federal agencies	$	201,002		1,197		7	$	202,192	$	1,907,573		181		9,504	$	1,898,250
Obligations of states and political subdivisions		5,356		138		46		5,448		3,051		77		4		3,124
Mortgage-backed securities:
Government issued or guaranteed		11,490,181		265,879		5,998		11,750,062		10,525,601		87,830		109,117		10,504,314
Privately issued		65		2		2		65		42		—		1		41
Collateralized debt obligations		28,483		18,170		1,613		45,040
Other debt securities		136,968		1,407		25,667		112,708		133,778		1,300		15,311		119,767
Equity securities		75,271		10,225		364		85,132		70,199		35,873		568		105,504

		11,937,326		297,018		33,697		12,200,647

										12,640,244		125,261		134,505		12,631,000
Investment securities held to maturity:
Obligations of states and political subdivisions		103,408		886		332		103,962		46,836		233		156		46,913
Mortgage-backed securities:
Government issued or guaranteed		2,445,563		78,448		2,070		2,521,941		2,670,966		34,777		10,577		2,695,166
Privately issued		175,467		1,848		40,048		137,267		153,036		1,191		35,702		118,525
Other debt securities		6,173		—		—		6,173		5,281		—		—		5,281
										2,876,119		36,201		46,435		2,865,885
		2,730,611		81,182		42,450		2,769,343

Other securities		536,062		—		—		536,062		461,296		—		—		461,296

Total	$	15,203,999		378,200		76,147	$	15,506,052	$	15,977,659		161,462		180,940	$	15,958,181

December 31, 2016
Investment securities available for sale:
U.S. Treasury and federal agencies	$	1,912,110	386	9,952	$	1,902,544
Obligations of states and political subdivisions		3,570	77	6		3,641
Mortgage-backed securities:
Government issued or guaranteed		10,980,507	88,343	113,989		10,954,861
Privately issued		45	—	1		44
Other debt securities		134,105	1,407	16,996		118,516
Equity securities		307,964	45,073	571		352,466
		13,338,301	135,286	141,515		13,332,072
Investment securities held to maturity:
Obligations of states and political subdivisions		60,858	267	224		60,901
Mortgage-backed securities:
Government issued or guaranteed		2,233,173	37,498	7,374		2,263,297
Privately issued		157,704	897	37,120		121,481
Other debt securities		5,543	—	—		5,543
		2,457,278	38,662	44,718		2,451,222
Other securities		461,118	—	—		461,118
Total	$	16,256,697	173,948	186,233	$	16,244,412

- 109 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

3.	~~Investment securities, continued~~

   Amortized
cost    Gross
unrealized
gains    Gross
unrealized
losses    Estimated
fair value
   (in thousands)
December 31, 2015

Investment securities available for sale:

U.S. Treasury and federal agencies
   $ 299,890       294       187       $ 299,997
Obligations of states and political subdivisions
   5,924       146       42       6,028
Mortgage-backed securities:

Government issued or guaranteed
   11,592,959       142,370       48,701       11,686,628
Privately issued
   74       2       2       74
Collateralized debt obligations
   28,438       20,143       1,188       47,393
Other debt securities
   137,556       1,514       20,190       118,880
Equity securities
   73,795       10,230       354       83,671








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








Investment securities held to maturity:

Obligations of states and political subdivisions
   118,431       1,003       421       119,013
Mortgage-backed securities:

Government issued or guaranteed
   2,553,612       50,936       7,817       2,596,731
Privately issued
   181,091       2,104       41,367       141,828
Other debt securities
   6,575       —         —         6,575








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








Other securities
   554,059       —         —         554,059








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

There were no significant gross realized gains or losses from sales of investment securities for the quarters ended March 31, ~~2016~~2017 and ~~2015.~~2016.

At March 31, ~~2016,~~2017, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:

   Amortized cost    Estimated
fair value
   (in thousands)
Debt securities available for sale:

Due in one year or less
   $ 7,504       7,551
Due after one year through five years
   201,714       203,128
Due after five years through ten years
   2,728       2,926
Due after ten years
   159,863       151,783




   371,809       365,388
Mortgage-backed securities available for sale
   11,490,246       11,750,127




   $ 11,862,055       12,115,515




Debt securities held to maturity:

Due in one year or less
   $ 32,387       32,542
Due after one year through five years
   64,484       64,760
Due after five years through ten years
   6,537       6,660
Due after ten years
   6,173       6,173




   109,581       110,135
Mortgage-backed securities held to maturity
   2,621,030       2,659,208




   $ 2,730,611       2,769,343

	Amortized Cost		Estimated Fair Value
	(In thousands)
Debt securities available for sale:
Due in one year or less	$	156,211		156,378
Due after one year through five years		1,756,628		1,747,311
Due after five years through ten years		56,297		54,094
Due after ten years		75,266		63,358
		2,044,402		2,021,141
Mortgage-backed securities available for sale		10,525,643		10,504,355
	$	12,570,045		12,525,496
Debt securities held to maturity:
Due in one year or less	$	21,613		21,711
Due after one year through five years		23,326		23,261
Due after five years through ten years		1,897		1,941
Due after ten years		5,281		5,281
		52,117		52,194
Mortgage-backed securities held to maturity		2,824,002		2,813,691
	$	2,876,119		2,865,885

- 1110 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3.	~~Investment securities, continued~~

3. Investment securities, continued

A summary of investment securities that as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 had been in a continuous unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss position for twelve months or longer follows:

   Less than 12 months    12 months or more
   Fair
value    Unrealized
losses    Fair
value    Unrealized
losses
      (in thousands)
March 31, 2016

Investment securities available for sale:

U.S. Treasury and federal agencies
   $ 4,051       (7 )    —         —
Obligations of states and political subdivisions
   —         —         1,706       (46 )
Mortgage-backed securities:

Government issued or guaranteed
   337,672       (1,959 )    1,233,329       (4,039 )
Privately issued
   —         —         34       (2 )
Collateralized debt obligations
   10,326       (527 )    1,858       (1,086 )
Other debt securities
   9,825       (1,203 )    88,715       (24,464 )
Equity securities
   2,115       (210 )    146       (154 )








   363,989       (3,906 )    1,325,788       (29,791 )








Investment securities held to maturity:

Obligations of states and political subdivisions
   28,707       (215 )    8,813       (117 )
Mortgage-backed securities:

Government issued or guaranteed
   812       (12 )    232,432       (2,058 )
Privately issued
   —         —         105,355       (40,048 )








   29,519       (227 )    346,600       (42,223 )








Total
   $ 393,508       (4,133 )    1,672,388       (72,014 )








December 31, 2015

Investment securities available for sale:

U.S. Treasury and federal agencies
   $ 147,508       (187 )    —         —
Obligations of states and political subdivisions
   865       (2 )    1,335       (40 )
Mortgage-backed securities:

Government issued or guaranteed
   4,061,899       (48,534 )    7,216       (167 )
Privately issued
   —         —         43       (2 )
Collateralized debt obligations
   5,711       (335 )    2,063       (853 )
Other debt securities
   12,935       (462 )    93,344       (19,728 )
Equity securities
   18,073       (207 )    153       (147 )








   4,246,991       (49,727 )    104,154       (20,937 )








Investment securities held to maturity:

Obligations of states and political subdivisions
   42,913       (335 )    5,853       (86 )
Mortgage-backed securities:

Government issued or guaranteed
   459,983       (1,801 )    228,867       (6,016 )
Privately issued
   —         —         112,155       (41,367 )








   502,896       (2,136 )    346,875       (47,469 )








Total
   $ 4,749,887       (51,863 )    451,029       (68,406 )

~~- 12 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

3.	~~Investment securities, continued~~

	Less Than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
March 31, 2017
Investment securities available for sale:
U.S. Treasury and federal agencies	$	1,745,277		(9,494	)		2,044		(10	)
Obligations of states and political subdivisions		—		—			472		(4	)
Mortgage-backed securities:
Government issued or guaranteed		5,549,268		(108,380	)		93,425		(737	)
Privately issued		—		—			25		(1	)
Other debt securities		19,052		(100	)		75,763		(15,211	)
Equity securities		17,869		(422	)		154		(146	)
		7,331,466		(118,396	)		171,883		(16,109	)

Investment securities held to maturity:
Obligations of states and political subdivisions		13,205		(87	)		9,909		(69	)
Mortgage-backed securities:
Government issued or guaranteed		896,556		(10,013	)		17,472		(564	)
Privately issued		7,161		(29	)		74,137		(35,673	)
		916,922		(10,129	)		101,518		(36,306	)
Total	$	8,248,388		(128,525	)		273,401		(52,415	)

December 31, 2016
Investment securities available for sale:
U.S. Treasury and federal agencies	$	1,710,241		(9,950	)		2,295		(2	)
Obligations of states and political subdivisions		—		—			593		(6	)
Mortgage-backed securities:
Government issued or guaranteed		6,730,829		(113,374	)		81,003		(615	)
Privately issued		—		—			27		(1	)
Other debt securities		100		(1	)		85,400		(16,995	)
Equity securities		17,776		(422	)		151		(149	)
		8,458,946		(123,747	)		169,469		(17,768	)

Investment securities held to maturity:
Obligations of states and political subdivisions		17,988		(126	)		11,891		(98	)
Mortgage-backed securities:
Government issued or guaranteed		618,832		(6,842	)		17,481		(532	)
Privately issued		17,911		(1,222	)		57,016		(35,898	)
		654,731		(8,190	)		86,388		(36,528	)
Total	$	9,113,677		(131,937	)		255,857		(54,296	)

The Company owned ~~538~~1,075 individual investment securities with aggregate gross unrealized losses of ~~$76~~$181 million at March 31, ~~2016.~~2017. Based on a review of each of the securities in the investment securities portfolio at March 31, ~~2016,~~2017, the Company concluded that it expected to recover the amortized cost basis of its investment. As of March 31, ~~2016,~~2017, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its impaired

- 11 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

investment securities at a loss. At March 31, ~~2016,~~2017, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the ~~$536~~$461 million of cost method investment securities.

4. Loans and leases and the allowance for credit losses

A summary of current, past due and nonaccrual loans as of March 31, 2017 and December 31, 2016 follows:

	Current		30-89 Days Past Due		Accruing Loans Past Due 90 Days or More (a)		Accruing Loans Acquired at a Discount Past Due 90 days or More (b)		Purchased Impaired (c)		Nonaccrual		Total
	(In thousands)
March 31, 2017
Commercial, financial, leasing, etc.	$	21,986,926		38,046		6,695		387		1,825		261,497	$	22,295,376
Real estate:
Commercial		25,088,525		185,331		17,322		13,618		26,391		183,113		25,514,300
Residential builder and developer		1,714,177		15,185		—		1,972		12,798		13,573		1,757,705
Other commercial construction		5,747,834		23,973		—		—		13,879		13,963		5,799,649
Residential		17,004,912		431,427		251,308		11,116		362,283		237,685		18,298,731
Residential — limited documentation		3,086,264		91,177		—		—		135,759		112,560		3,425,760
Consumer:
Home equity lines and loans		5,398,590		32,939		—		12,238		—		79,962		5,523,729
Automobile		3,049,712		48,751		—		—		—		16,109		3,114,572
Other		3,519,996		25,876		4,694		24,401		—		8,213		3,583,180
Total	$	86,596,936		892,705		280,019		63,732		552,935		926,675	$	89,313,002

December 31, 2016
Commercial, financial, leasing, etc.	$	22,287,857		53,503		6,195		417		641		261,434	$	22,610,047
Real estate:
Commercial		25,076,684		183,531		7,054		12,870		31,404		176,201		25,487,744
Residential builder and developer		1,884,989		4,667		5		1,952		14,006		16,707		1,922,326
Other commercial construction		5,985,118		77,701		922		198		14,274		18,111		6,096,324
Residential		17,631,377		485,468		281,298		11,537		378,549		229,242		19,017,471
Residential — limited documentation		3,239,344		88,366		—		—		139,158		106,573		3,573,441
Consumer:
Home equity lines and loans		5,502,091		44,565		—		12,678		—		81,815		5,641,149
Automobile		2,869,232		56,158		—		1		—		18,674		2,944,065
Other		3,491,629		31,286		5,185		21,491		—		11,258		3,560,849
Total	$	87,968,321		1,025,245		300,659		61,144		578,032		920,015	$	90,853,416

(a)

~~Loans and leases and the allowance for credit losses~~

Excludes loans acquired at a discount.

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

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

- 12 -

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 $297 million and $414 million at March 31, 2017 and December 31, 2016, respectively. Commercial real estate loans held for sale were $75 million at March 31, 2017 and $643 million at December 31, 2016.

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

					March 31,		December 31,
	March 31, 2016		December 31, 2015		2017		2016
	(in thousands)				(In thousands)

Outstanding principal balance	$	2,918,333		3,122,935	$	2,089,909		2,311,699
Carrying amount:
Commercial, financial, leasing, etc.		71,577		78,847		55,671		59,928
Commercial real estate		588,983		644,284		415,047		456,820
Residential real estate		964,893		1,016,129		765,986		799,802
Consumer		681,535		725,807		369,803		487,721
					$	1,606,507		1,804,271
	$	2,306,988		2,465,067

Purchased impaired loans included in the table above totaled ~~$716~~$553 million at March 31, ~~2016~~2017 and ~~$768~~$578 million at December 31, ~~2015,~~2016, representing less than 1% of the Company’s assets as of each date. A summary of changes in the accretable yield for loans acquired at a discount for the three-month periods ended March 31, ~~2016~~2017 and ~~2015~~2016 follows:


										Three Months Ended March 31, 2017						Three Months Ended March 31, 2016
	Three months ended March 31, 2016									Purchased			Other			Purchased			Other
	Purchased impaired			Other acquired			Total			Impaired			Acquired			Impaired			Acquired
	(in thousands)									(In thousands)

Balance at beginning of period	$	184,618			296,434			481,052		$	154,233			201,153		$	184,618			296,434
Interest income		(14,062	)		(37,862	)		(51,924	)		(10,925	)		(25,518	)		(14,062	)		(37,862	)
Reclassifications from nonaccretable balance, net		629			5,664			6,293
Reclassifications from nonaccretable balance											146			3,183			629			5,664
Other (a)		—			4,781			4,781			—			2,492			—			4,781

Balance at end of period	$	171,185			269,017			440,202		$	143,454			181,310		$	171,185			269,017

~~- 13 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

(a)

~~Loans and leases and the allowance for credit losses, continued~~

   Three months ended March 31, 2015
   Purchased
impaired    Other
acquired    Total
   (in thousands)
Balance at beginning of period
   $ 76,518       397,379       473,897
Interest income
   (5,206 )    (41,277 )    (46,483 )
Reclassifications from nonaccretable balance, net
   110       183       293
Other (a)
   —         1,610       1,610






Balance at end of period
   $ 71,422       357,895       429,317

~~(a)~~

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

~~A summary of current, past due and nonaccrual loans as of March 31, 2016 and December 31, 2015 were as follows:~~

   Current    30-89
Days
past due    Accruing
loans past
due 90
days or
more(a)    Accruing
loans
acquired at
a discount
past due
90 days
or more(b)    Purchased
impaired(c)    Nonaccrual    Total
March 31, 2016          (in thousands)
Commercial, financial, leasing, etc.
   $ 20,911,645       30,495       2,358       524       1,765       279,790       21,226,577
Real estate:

Commercial
   23,740,729       149,108       41,776       6,818       39,840       171,256       24,149,527
Residential builder and developer
   1,747,261       15,304       195       3,493       23,516       32,458       1,822,227
Other commercial construction
   3,663,835       28,336       9,068       280       19,239       20,781       3,741,539
Residential
   19,747,097       500,241       278,640       15,790       463,871       186,452       21,192,091
Residential-limited documentation
   3,757,924       107,679       275       —         165,404       76,265       4,107,547
Consumer:

Home equity lines and loans
   5,720,342       40,054       —         15,898       2,239       78,722       5,857,255
Automobile
   2,580,241       33,439       —         2       —         14,817       2,628,499
Other
   3,083,495       24,739       3,858       18,962       —         16,150       3,147,204














Total
   $ 84,952,569       929,395       336,170       61,767       715,874       876,691       87,872,466

- 1413 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

Changes in the allowance for credit losses for the three months ended March 31, 2017 were as follows:

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

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

Beginning balance	$	330,833			362,719			61,127			156,288			78,030	$	988,997
Provision for credit losses		28,823			1,262			5,637			18,832			446		55,000
Net charge-offs
Charge-offs		(16,357	)		(5,445	)		(6,259	)		(34,503	)		—		(62,564	)
Recoveries		4,461			1,474			1,507			12,555			—		19,997
Net charge-offs		(11,896	)		(3,971	)		(4,752	)		(21,948	)		—		(42,567	)
Ending balance	$	347,760			360,010			62,012			153,172			78,476	$	1,001,430

   Current    30-89 Days
past due    Accruing
loans past
due 90
days or
more(a)    Accruing
loans
acquired at
a discount
past due
90 days
or more(b)    Purchased
impaired(c)    Nonaccrual    Total
December 31, 2015          (in thousands)
Commercial, financial, leasing, etc.
   $ 20,122,648       52,868       2,310       693       1,902       241,917       20,422,338
Real estate:

Commercial
   23,645,354       172,439       12,963       8,790       46,790       179,606       24,065,942
Residential builder and developer
   1,507,856       7,969       5,760       6,925       28,734       28,429       1,585,673
Other commercial construction
   3,428,939       65,932       7,936       2,001       24,525       16,363       3,545,696
Residential
   20,507,551       560,312       284,451       16,079       488,599       153,281       22,010,273
Residential-limited documentation
   3,885,073       137,289       —         —         175,518       61,950       4,259,830
Consumer:

Home equity lines and loans
   5,805,222       45,604       —         15,222       2,261       84,467       5,952,776
Automobile
   2,446,473       56,181       —         6       —         16,597       2,519,257
Other
   3,051,435       36,702       4,021       18,757       —         16,799       3,127,714














Total
   $ 84,400,551       1,135,296       317,441       68,473       768,329       799,409       87,489,499

~~(a)~~

~~Excludes loans acquired at a discount.~~

~~(b)~~

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

~~(c)~~

~~Accruing loans that were impaired at acquisition date and were recorded at fair value.~~

One-to-four family residential mortgage loans held for sale were $269 million and $353 million at March 31, 2016 and December 31, 2015, respectively. Commercial mortgage loans held for sale were $128 million at March 31, 2016 and $39 million at December 31, 2015.

Changes in the allowance for credit losses for the three months ended March 31, 2016 were as follows:


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

Beginning balance	$	300,404			326,831			72,238			178,320			78,199			955,992		$	300,404			326,831			72,238			178,320			78,199		$	955,992
Provision for credit losses		24,364			4,013			1,218			19,893			(488	)		49,000			24,364			4,013			1,218			19,893			(488	)		49,000
Net charge-offs
Charge-offs		(6,149	)		(1,272	)		(6,972	)		(44,319	)		—			(58,712	)		(6,149	)		(1,272	)		(6,972	)		(44,319	)		—			(58,712	)
Recoveries		5,247			2,413			1,887			6,925			—			16,472			5,247			2,413			1,887			6,925			—			16,472

Net charge-offs		(902	)		1,141			(5,085	)		(37,394	)		—			(42,240	)

Net (charge-offs) recoveries																				(902	)		1,141			(5,085	)		(37,394	)		—			(42,240	)
Ending balance	$	323,866			331,985			68,371			160,819			77,711			962,752		$	323,866			331,985			68,371			160,819			77,711		$	962,752

- 1514 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

~~Changes in~~ the allowance for credit losses, ~~for the three months ended March 31, 2015 were as follows:~~continued

   Commercial,
   Financial, Real Estate
   Leasing, etc. Commercial Residential Consumer Unallocated    Total
   (in thousands)
Beginning balance
   $ 288,038    307,927    61,910    186,033    75,654       919,562
Provision for credit losses
   1,442    15,542    960    19,574    482       38,000
Net charge-offs

Charge-offs
   (12,350 ) (6,679 ) (3,118 ) (25,329 ) —         (47,476 )
Recoveries
   3,939    585    989    5,774    —         11,287




Net charge-offs
   (8,411 ) (6,094 ) (2,129 ) (19,555 ) —         (36,189 )




Ending balance
   $ 281,069    317,375    60,741    186,052    76,136       921,373

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

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

~~- 16 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

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

Company considers a loan to be impaired if it qualifies as a troubled debt restructuring. Modified loans, including smaller balance homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows.

- 15 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

The following tables provide information with respect to loans and leases that were considered impaired as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 and for the ~~three month~~three-month periods ended March 31, ~~2016~~2017 and ~~2015.~~2016.

   March 31, 2016    December 31, 2015
   Recorded
investment    Unpaid
principal
balance    Related
allowance    Recorded
investment    Unpaid
principal
balance    Related
allowance
   (in thousands)
With an allowance recorded:

Commercial, financial, leasing, etc.
   $ 204,786       223,269       58,714       179,037       195,821       44,752
Real estate:

Commercial
   86,612       97,912       19,600       85,974       95,855       18,764
Residential builder and developer
   6,581       8,296       839       3,316       5,101       196
Other commercial construction
   2,358       2,678       397       3,548       3,843       348
Residential
   77,579       95,679       4,348       79,558       96,751       4,727
Residential-limited documentation
   87,791       101,841       7,000       90,356       104,251       8,000
Consumer:

Home equity lines and loans
   27,544       28,540       3,904       25,220       26,195       3,777
Automobile
   21,289       21,289       4,867       22,525       22,525       4,709
Other
   17,876       17,876       4,844       17,620       17,620       4,820












   532,416       597,380       104,513       507,154       567,962       90,093












With no related allowance recorded:

Commercial, financial, leasing, etc.
   105,342       126,130       —         93,190       110,735       —
Real estate:

Commercial
   92,733       106,710       —         101,340       116,230       —
Residential builder and developer
   28,938       49,177       —         27,651       47,246       —
Other commercial construction
   18,811       37,498       —         13,221       31,477       —
Residential
   17,574       28,336       —         19,621       30,940       —
Residential-limited documentation
   17,362       29,544       —         18,414       31,113       —












   280,760       377,395       —         273,437       367,741       —












Total:

Commercial, financial, leasing, etc.
   310,128       349,399       58,714       272,227       306,556       44,752
Real estate:

Commercial
   179,345       204,622       19,600       187,314       212,085       18,764
Residential builder and developer
   35,519       57,473       839       30,967       52,347       196
Other commercial construction
   21,169       40,176       397       16,769       35,320       348
Residential
   95,153       124,015       4,348       99,179       127,691       4,727
Residential-limited documentation
   105,153       131,385       7,000       108,770       135,364       8,000
Consumer:

Home equity lines and loans
   27,544       28,540       3,904       25,220       26,195       3,777
Automobile
   21,289       21,289       4,867       22,525       22,525       4,709
Other
   17,876       17,876       4,844       17,620       17,620       4,820












Total
   $ 813,176       974,775       104,513       780,591       935,703       90,093

	March 31, 2017						December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With an allowance recorded:
Commercial, financial, leasing, etc.	$	177,001		196,338		64,056		168,072		184,432		48,480
Real estate:
Commercial		64,746		80,482		10,541		71,862		86,666		11,620
Residential builder and developer		6,870		7,031		403		7,396		8,361		506
Other commercial construction		2,203		2,673		398		2,475		2,731		448
Residential		91,077		111,477		3,738		86,680		105,944		3,457
Residential — limited documentation		81,922		97,658		5,000		82,547		97,718		6,000
Consumer:
Home equity lines and loans		46,132		50,262		8,389		44,693		48,965		8,027
Automobile		16,087		16,602		3,508		16,982		18,272		3,740
Other		3,522		3,670		725		3,791		5,296		776
		489,560		566,193		96,758		484,498		558,385		83,054
With no related allowance recorded:
Commercial, financial, leasing, etc.		92,546		127,252		—		100,805		124,786		—
Real estate:
Commercial		126,437		139,103		—		113,276		121,846		—
Residential builder and developer		11,748		18,863		—		14,368		21,124		—
Other commercial construction		12,029		31,072		—		15,933		35,281		—
Residential		14,946		22,209		—		16,823		24,161		—
Residential — limited documentation		14,466		22,941		—		15,429		24,590		—
		272,172		361,440		—		276,634		351,788		—
Total:
Commercial, financial, leasing, etc.		269,547		323,590		64,056		268,877		309,218		48,480
Real estate:
Commercial		191,183		219,585		10,541		185,138		208,512		11,620
Residential builder and developer		18,618		25,894		403		21,764		29,485		506
Other commercial construction		14,232		33,745		398		18,408		38,012		448
Residential		106,023		133,686		3,738		103,503		130,105		3,457
Residential — limited documentation		96,388		120,599		5,000		97,976		122,308		6,000
Consumer:
Home equity lines and loans		46,132		50,262		8,389		44,693		48,965		8,027
Automobile		16,087		16,602		3,508		16,982		18,272		3,740
Other		3,522		3,670		725		3,791		5,296		776
Total	$	761,732		927,633		96,758		761,132		910,173		83,054

- 1716 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

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

	Three Months Ended March 31, 2017						Three Months Ended March 31, 2016
			Interest Income Recognized						Interest Income Recognized
	Average Recorded Investment		Total		Cash Basis		Average Recorded Investment		Total		Cash Basis
	(In thousands)

Commercial, financial, leasing, etc.	$	271,825		478		478		296,584		611		611
Real estate:
Commercial		182,857		975		975		182,454		1,474		1,474
Residential builder and developer		20,051		429		429		33,750		42		42
Other commercial construction		16,328		847		847		16,868		38		38
Residential		103,875		1,636		774		96,788		1,372		882
Residential — limited documentation		97,121		1,500		384		107,473		1,472		630
Consumer:
Home equity lines and loans		45,542		399		100		26,019		246		85
Automobile		16,504		275		19		21,962		339		36
Other		3,598		72		3		17,717		178		27
Total	$	757,701		6,611		4,009		799,615		5,772		3,825

   Three months ended
March 31, 2016    Three months ended
March 31, 2015
      Interest income
recognized       Interest income
recognized
   Average
recorded
investment    Total    Cash
basis    Average
recorded
investment    Total    Cash
basis
   (in thousands)
Commercial, financial, leasing, etc.
   $ 296,584       611       611       214,618       604       604
Real estate:

Commercial
   182,454       1,474       1,474       153,070       1,102       1,102
Residential builder and developer
   33,750       42       42       73,151       63       63
Other commercial construction
   16,868       38       38       25,540       55       55
Residential
   96,788       1,372       882       104,490       1,446       910
Residential-limited documentation
   107,473       1,472       630       125,654       1,610       647
Consumer:

Home equity lines and loans
   26,019       246       85       19,683       201       48
Automobile
   21,962       339       36       29,013       450       54
Other
   17,717       178       27       18,861       174       33












Total
   $ 799,615       5,772       3,825       764,080       5,705       3,516

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

- 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 to the various classes of the Company’s commercial loans and commercial real estate loans.

~~- 18 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

			Real Estate
	Commercial,				Residential		Other
	Financial,				Builder and		Commercial
	Leasing, etc.		Commercial		Developer		Construction
	(In thousands)
March 31, 2017
Pass	$	21,036,982		24,589,201		1,660,537		5,609,985
Criticized accrual		996,897		741,986		83,595		175,701
Criticized nonaccrual		261,497		183,113		13,573		13,963
Total	$	22,295,376		25,514,300		1,757,705		5,799,649
December 31, 2016
Pass	$	21,398,581		24,570,269		1,789,071		5,912,351
Criticized accrual		950,032		741,274		116,548		165,862
Criticized nonaccrual		261,434		176,201		16,707		18,111
Total	$	22,610,047		25,487,744		1,922,326		6,096,324

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

      Real Estate
   Commercial,
Financial,
Leasing, etc.    Commercial    Residential
Builder and
Developer    Other
Commercial
Construction
   (in thousands)
March 31, 2016

Pass
   $ 20,155,277       23,138,987       1,700,088       3,631,947
Criticized accrual
   791,510       839,284       89,681       88,811
Criticized nonaccrual
   279,790       171,256       32,458       20,781








Total
   $ 21,226,577       24,149,527       1,822,227       3,741,539








December 31, 2015

Pass
   $ 19,442,183       23,098,856       1,497,465       3,432,679
Criticized accrual
   738,238       787,480       59,779       96,654
Criticized nonaccrual
   241,917       179,606       28,429       16,363








Total
   $ 20,422,338       24,065,942       1,585,673       3,545,696

In determining the allowance for credit losses, residential real estate loans and consumer loans are generally evaluated collectively after considering such factors as payment performance and recent loss experience and trends, which are mainly driven by current collateral values in the market place as well as the amount of loan defaults. Loss rates on such loans are determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term forecasted loss estimates developed by the Company’s ~~Credit Department.~~credit department. In arriving at such forecasts, the Company considers the current estimated fair value of its collateral based on geographical adjustments for home price depreciation/appreciation and overall borrower repayment performance. With regard to collateral values, the realizability of such values by the Company contemplates repayment of any first lien position prior to recovering amounts on a second lien position. However, residential real estate loans and outstanding balances of home equity loans and lines of credit that are more than 150 days past due are generally evaluated for collectibility on a loan-by-loan basis giving consideration to estimated collateral values. The carrying value of residential real estate loans and home equity loans and lines of credit for which a partial charge-off has been recognized ~~aggregated $52~~totaled $43 million and ~~$24~~$30 million, respectively, at March 31, ~~2016~~2017 and ~~$55~~$44 million and ~~$21~~$32 million, respectively, at December 31, ~~2015.~~2016. Residential real estate loans and home equity loans and lines of credit that were more than 150 days past due but did not require a partial charge-off because the net realizable value of the collateral exceeded the outstanding customer balance ~~totaled $20~~were $18 million and ~~$32~~$39 million, respectively, at March 31, ~~2016~~2017 and ~~$20~~$16 million and ~~$28~~$39 million, respectively, at December 31, ~~2015.~~2016.

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

~~- 19 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

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

that could also lead to changes in the unallocated portion include the effects of expansion into new markets for which the Company does not have the same degree of familiarity and experience regarding portfolio performance in changing market conditions, the introduction of new loan and lease product types, and other risks associated with the Company’s loan portfolio that may not be specifically identifiable.

- 18 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

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

														Commercial, Financial,		Real Estate
	Commercial, Financial, Leasing, etc.			Real Estate										Leasing, etc.		Commercial		Residential		Consumer		Total
			Commercial			Residential		Consumer		Total			(In thousands)
	Commercial, Financial, Leasing, etc.	(in thousands)
March 31, 2016
March 31, 2017
Individually evaluated for impairment	$	58,714			20,611		11,348		13,615		$	104,288		$	64,056		11,342		8,738		12,622	$	96,758
Collectively evaluated for impairment		264,652			308,897		55,970		145,841			775,360			283,704		346,795		49,902		140,550		820,951
Purchased impaired		500			2,477		1,053		1,363			5,393			—		1,873		3,372		—		5,245

Allocated	$	323,866			331,985		68,371		160,819			885,041		$	347,760		360,010		62,012		153,172		922,954

Unallocated												77,711											78,476


Total											$	962,752										$	1,001,430


December 31, 2015
December 31, 2016
Individually evaluated for impairment	$	44,752			19,175		12,727		13,306		$	89,960		$	48,480		12,500		9,457		12,543	$	82,980
Collectively evaluated for impairment		255,615			307,000		57,624		163,511			783,750			282,353		348,301		47,993		143,745		822,392
Purchased impaired		37			656		1,887		1,503			4,083			—		1,918		3,677		—		5,595

Allocated	$	300,404			326,831		72,238		178,320			877,793		$	330,833		362,719		61,127		156,288		910,967

Unallocated												78,199											78,030


Total											$	955,992										$	988,997

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

   Commercial,
Financial,
Leasing, etc.

Real Estate

      Commercial    Residential    Consumer    Total
   (in thousands)
March 31, 2016

Individually evaluated for impairment
   $ 310,128       235,039       200,306       66,709       $ 812,182
Collectively evaluated for impairment
   20,914,684       29,395,659       24,470,057       11,564,010       86,344,410
Purchased impaired
   1,765       82,595       629,275       2,239       715,874










Total
   $ 21,226,577       29,713,293       25,299,638       11,632,958       $ 87,872,466










December 31, 2015

Individually evaluated for impairment
   $ 272,227       234,132       207,949       65,365       $ 779,673
Collectively evaluated for impairment
   20,148,209       28,863,130       25,398,037       11,532,121       85,941,497
Purchased impaired
   1,902       100,049       664,117       2,261       768,329










Total
   $ 20,422,338       29,197,311       26,270,103       11,599,747       $ 87,489,499

~~- 20 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

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

	Commercial, Financial,		Real Estate
	Leasing, etc.		Commercial		Residential		Consumer		Total
	(In thousands)
March 31, 2017
Individually evaluated for impairment	$	269,547		224,033		202,411		65,741	$	761,732
Collectively evaluated for impairment		22,024,004		32,794,553		21,024,038		12,155,740		87,998,335
Purchased impaired		1,825		53,068		498,042		—		552,935
Total	$	22,295,376		33,071,654		21,724,491		12,221,481	$	89,313,002
December 31, 2016
Individually evaluated for impairment	$	268,877		224,630		201,479		65,466	$	760,452
Collectively evaluated for impairment		22,340,529		33,222,080		21,871,726		12,080,597		89,514,932
Purchased impaired		641		59,684		517,707		—		578,032
Total	$	22,610,047		33,506,394		22,590,912		12,146,063	$	90,853,416

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

- 19 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

The ~~tables below summarize~~table that follows summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three months ended March 31, ~~2016~~2017 and ~~2015:~~2016:

      Recorded investment    Financial effects of
modification
Three months ended March 31, 2016
   Number    Pre-
modification    Post-
modification    Recorded
investment
(a) Interest
(b)
      (dollars in thousands)
Commercial, financial, leasing, etc.

Principal deferral
   24       $ 11,571       $ 12,721       $ 1,150    $ —
Combination of concession types
   7       6,157       5,952       (205 ) —
Real estate:

Commercial

Principal deferral
   16       3,483       3,448       (35 ) —
Combination of concession types
   5       3,933       3,924       (9 ) (35 )
Residential

Principal deferral
   17       1,981       2,191       210    —
Combination of concession types
   10       2,321       2,369       48    —
Residential-limited documentation

Principal deferral
   1       125       138       13    —
Combination of concession types
   5       1,312       1,379       67    (339 )
Consumer:

Home equity lines and loans

Principal deferral
   3       335       335       —      —
Combination of concession types
   23       2,496       2,496       —      (283 )
Automobile

Principal deferral
   48       521       521       —      —
Other
   16       38       38       —      —
Combination of concession types
   8       85       85       —      (3 )
Other

Principal deferral
   26       374       374       —      —
Other
   2       25       25       —      —
Combination of concession types
   8       147       147       —      (27 )








Total
   219       $ 34,904       $ 36,143       $ 1,239    $ (687 )

					Post-modification (a)
	Number		Pre- modification recorded investment		Principal Deferral		Other		Combination of Concession Types		Total
Three Months Ended March 31, 2017	(Dollars in thousands)

Commercial, financial, leasing, etc.	50		$	11,921	$	4,389	$	806	$	2,728	$	7,923
Real estate:
Commercial	20			6,702		2,991		—		3,606		6,597
Residential builder and developer	3			12,291		—		—		10,879		10,879
Other commercial construction	1			102		102		—		—		102
Residential	41			9,380		5,593		—		4,355		9,948
Residential — limited documentation	6			1,378		-		—		1,525		1,525
Consumer:
Home equity lines and loans	25			2,502		163		491		1,848		2,502
Automobile	20			390		383		—		7		390
Other	2			26		26		—		—		26
Total		168	$	44,692	$	13,647	$	1,297	$	24,948	$	39,892

Three Months Ended March 31, 2016

Commercial, financial, leasing, etc.		31	$	17,728	$	12,721	$	—	$	5,952	$	18,673
Real estate:
Commercial		21		7,416		3,448		—		3,924		7,372
Residential		27		4,302		2,191		—		2,369		4,560
Residential — limited documentation		6		1,437		138		—		1,379		1,517
Consumer:
Home equity lines and loans		26		2,831		335		—		2,496		2,831
Automobile		72		644		521		38		85		644
Other		36		546		374		25		147		546
Total		219	$	34,904	$	19,728	$	63	$	16,352	$	36,143

(a)

Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.

~~(b)~~

~~Represents the~~ The present value of interest rate concessions, discounted at the effective rate of the original ~~loan.~~loan, was not material.

- 2120 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

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

      Recorded investment    Financial effects of
modification
Three months ended March 31, 2015
   Number    Pre-
modification    Post-
modification    Recorded
investment
(a) Interest
(b)
      (dollars in thousands)
Commercial, financial, leasing, etc.

Principal deferral
   21       $ 1,572       $ 1,557       $ (15 ) $ —
Interest rate reduction
   1       99       99       —      (19 )
Combination of concession types
   3       9,155       6,989       (2,166 ) —
Real estate:

Commercial

Principal deferral
   7       3,792       3,776       (16 ) —
Combination of concession types
   4       1,646       1,637       (9 ) (52 )
Residential builder and developer

Principal deferral
   1       1,398       1,398       —      —
Residential

Principal deferral
   7       721       742       21    —
Combination of concession types
   3       294       349       55    (34 )
Residential-limited documentation

Combination of concession types
   1       210       210       —      (4 )
Consumer:

Home equity lines and loans

Principal deferral
   1       21       21       —      —
Combination of concession types
   5       196       196       —      (13 )
Automobile

Principal deferral
   35       303       303       —      —
Interest rate reduction
   3       42       42       —      (3 )
Other
   10       20       20       —      —
Combination of concession types
   8       84       84       —      (7 )
Other

Principal deferral
   22       296       296       —      —
Other
   5       59       59       —      —
Combination of concession types
   13       224       224       —      (25 )








Total
   150       $ 20,132       $ 18,002       $ (2,130 ) $ (157 )

~~(a)~~

~~Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.~~

~~(b)~~

~~Represents the present value of interest rate concessions discounted at the effective rate of the original loan.~~

Troubled debt restructurings are considered to be impaired loans and for purposes of establishing the allowance for credit losses are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Impairment of troubled debt restructurings that have subsequently defaulted may also be measured based on the loan’s observable market price or the fair value of collateral if the loan is collateral-dependent. Charge-offs may also be recognized on troubled debt restructurings that have subsequently defaulted. Loans that were modified as troubled debt restructurings during the twelve months ended March 31, ~~2016~~2017 and ~~2015~~2016 and for which there was a subsequent payment default during the three-month periods ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, were not material.

The amount of foreclosed residential real estate property held by the Company ~~was $169~~totaled $112 million and ~~$172~~$129 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. There were ~~$309~~$538 million and ~~$315~~$506 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, ofin loans secured by residential real estate that were in the process of foreclosure. Of all loans in the process of foreclosure at March 31, 2017, approximately 53% were classified as purchased impaired and 20% were government guaranteed.

~~- 22 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~5. Borrowings

5.	~~Borrowings~~

M&T had ~~$515~~$517 million of fixed and variable rate junior subordinated deferrable interest debentures (“("Junior Subordinated ~~Debentures”~~Debentures") outstanding at March 31, ~~2016~~2017 that are held by various trusts that were issued in connection with the issuance by those trusts of preferred capital securities (“("Capital ~~Securities”~~Securities") and common securities (“("Common ~~Securities”~~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~~trust's securities possessing general voting powers. The Capital Securities represent preferred undivided interests in the assets of the corresponding trust. Under the Federal Reserve Board’s risk-based capital guidelines, ~~beginning in 2016 none of~~ the securities are includable in M&T’s ~~Tier 1 regulatory capital, but do qualify for inclusion in~~ Tier 2 regulatory capital.

Holders of the Capital Securities receive preferential cumulative cash distributions unless M&T exercises its right to extend the payment of interest on the Junior Subordinated Debentures as allowed by the terms of each such debenture, in which case payment of distributions on the respective Capital Securities will be deferred for comparable periods. During an extended interest period, M&T may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock. In general, the agreements governing the Capital Securities, in the aggregate, provide a full, irrevocable and unconditional guarantee by M&T of the payment of distributions on, the redemption of, and any liquidation distribution with respect to the Capital Securities. The obligations under such guarantee and the Capital Securities are subordinate and junior in right of payment to all senior indebtedness of M&T.

The Capital Securities will remain outstanding until the Junior Subordinated Debentures are repaid at maturity, are redeemed prior to maturity or are distributed in liquidation to the trusts. The Capital Securities are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity dates (ranging from 2027 to 2033) of the Junior Subordinated Debentures or the earlier redemption of the Junior Subordinated Debentures in whole upon the occurrence of one or more events set forth in the indentures relating to the Capital Securities, and in whole or in part at any time after an optional redemption prior to contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated Debentures in whole or in part, subject to possible regulatory approval. On April 15, 2015, M&T redeemed all of the issued and outstanding Capital Securities issued by M&T Capital Trust I, M&T Capital Trust II and M&T Capital Trust III, and the related Junior Subordinated Debentures held by those respective trusts. In the aggregate, $323 million of Junior Subordinated Debentures were redeemed.

- 21 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Borrowings, continued

Also included in long-term borrowings are agreements to repurchase securities of ~~$1.9~~$431 million and $1.1 billion at ~~each of~~ March 31, ~~2016~~2017 and December 31, ~~2015.~~2016, respectively. The agreements reflect various repurchase dates through 2020, however, the contractual maturities of the underlying investment securities extend beyond such repurchase dates. The agreements are subject to legally enforceable master netting arrangements, however, the Company has not offset any amounts related to these agreements in its consolidated financial statements. The Company posted collateral consisting primarily of government guaranteed mortgage-backed securities of ~~$2.1 billion~~$452 million and ~~$2.0~~$1.1 billion at March 31, ~~2016~~2017 and December 31, ~~2015, respectively.~~2016, respectively.

~~- 23 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~6. Shareholders' equity

6.	~~Shareholders’ equity~~

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

Issued and outstanding preferred stock of M&T as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 is presented below:

   Shares
issued and
outstanding    Carrying value
   (dollars in thousands)
Series A (a)

Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share
   230,000       $ 230,000
Series C (a)

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

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

Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share
   350,000       $ 350,000

	Shares Issued and Outstanding		Carrying Value
	(Dollars in thousands)
Series A (a)
Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share		230,000	$	230,000
Series C (a)
Fixed Rate Cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share		151,500	$	151,500
Series E (b)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock, $1,000 liquidation preference per share		350,000	$	350,000
Series F (c)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred Stock, $10,000 liquidation preference per share		50,000	$	500,000

(a)

Dividends, if declared, are paid at 6.375%. Warrants to purchase M&T common stock at ~~$73.86~~$73.84 per share issued in connection with the Series A preferred stock expire in 2018 and totaled ~~719,175~~544,279 at March 31, ~~2016 and December 31, 2015, respectively.~~2017.

(b)

Dividends, if declared, are paid semi-annually at a rate of 6.875% per year. The shares are redeemable in whole or in part on or after June 15, 2016. Notwithstanding M&T’s option to redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days following that occurrence.

~~(c)~~

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

(c)

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

In addition to the Series A warrants mentioned in (a) above, a warrant to purchase ~~95,383~~95,410 shares of M&T common stock at ~~$518.96~~$518.81 per share was outstanding at March 31, ~~2016 and December 31, 2015.~~2017. The obligation under that warrant was assumed by M&T in an ~~acquisition.~~acquisition and expires in 2018.

- 2422 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

7.	~~Pension plans and other postretirement benefits~~

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 ~~pension expense~~defined benefit cost for defined benefit plans consisted of the following:


	Pension benefits						Other postretirement benefits						Pension Benefits						Other Postretirement Benefits
	Three months ended March 31												Three Months Ended March 31
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(In thousands)

Service cost	$	6,382			6,000			458			200		$	4,908			6,382			383		458
Interest cost on projected benefit obligation		20,883			17,775			1,205			650			19,691			20,883			1,080			1,205
Expected return on plan assets		(27,814	)		(23,575	)		— ��			—			(27,200	)		(27,814	)		—			—
Amortization of prior service credit		(825	)		(1,525	)		(350	)		(350	)
Amortization of prior service cost (credit)														125			(825	)		(350	)		(350	)
Amortization of net actuarial loss		8,300			11,175			—			25			6,800			8,300			(25	)		—


Net periodic benefit cost	$	6,926			9,850			1,313			525		$	4,324			6,926			1,088			1,313

Expense incurred in connection with the ~~Company’s~~Company's defined contribution pension and retirement savings plans totaled ~~$17,690,000~~$19,419,000 and ~~$16,750,000~~$17,690,000 for the three months ended March 31, 2017 and 2016, ~~and 2015,~~ respectively.

~~- 25 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~8. Earnings per common share

8.	~~Earnings per common share~~

The computations of basic earnings per common share follow:

Three months ended
March 31

   2016    2015

(in thousands,
except per share)

Income available to common shareholders:

Net income
   $ 298,528       241,613
Less: Preferred stock dividends (a)
   (20,318 )    (20,318 )




Net income available to common equity
   278,210       221,295
Less: Income attributable to unvested stock-based compensation awards
   (2,466 )    (2,465 )




Net income available to common shareholders
   $ 275,744       218,830
Weighted-average shares outstanding:

Common shares outstanding (including common stock issuable) and unvested stock-based compensation awards
   160,220       133,542
Less: Unvested stock-based compensation awards
   (1,486 )    (1,493 )




Weighted-average shares outstanding
   158,734       132,049
Basic earnings per common share
   $ 1.74       1.66

~~(a)~~

~~Including impact of not as yet declared cumulative dividends.~~

	Three Months Ended March 31
	2017			2016
	(In thousands, except per share)
Income available to common shareholders:
Net income	$	348,927			298,528
Less: Preferred stock dividends (a)		(18,237	)		(20,318	)
Net income available to common equity		330,690			278,210
Less: Income attributable to unvested stock-based compensation awards		(2,128	)		(2,466	)
Net income available to common shareholders	$	328,562			275,744
Weighted-average shares outstanding:
Common shares outstanding (including common stock issuable) and unvested stock-based compensation awards		155,463			160,220
Less: Unvested stock-based compensation awards		(1,036	)		(1,486	)
Weighted-average shares outstanding		154,427			158,734

Basic earnings per common share	$	2.13			1.74

(a)Including impact of not as yet declared cumulative dividends.

- 2623 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

8.	~~Earnings per common share, continued~~

8. Earnings per common share, continued

The computations of diluted earnings per common share follow:


	Three months ended March 31						Three Months Ended March 31
	2016			2015			2017			2016
	(in thousands, except per share)						(In thousands, except per share)

Net income available to common equity	$	278,210			221,295		$	330,690			278,210
Less: Income attributable to unvested stock-based compensation awards		(2,462	)		(2,458	)		(2,123	)		(2,462	)


Net income available to common shareholders	$	275,748			218,837		$	328,567			275,748

Adjusted weighted-average shares outstanding:

Common and unvested stock-based compensation awards		160,220			133,542			155,463			160,220
Less: Unvested stock-based compensation awards		(1,486	)		(1,493	)		(1,036	)		(1,486	)
Plus: Incremental shares from assumed conversion of stock-based compensation awards and warrants to purchase common stock		447			720			522			447


Adjusted weighted-average shares outstanding		159,181			132,769			154,949			159,181

Diluted earnings per common share	$	1.73			1.65		$	2.12			1.73

GAAP defines unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities that shall be included in the computation of earnings per common share pursuant to the two-class method. The Company has issued stock-based compensation awards in the form of restricted stock and restricted stock units which, in accordance with GAAP, are considered participating securities.

Stock-based compensation awards and warrants to purchase common stock of M&T representing ~~approximately 2.8 million~~391,764 and ~~2.7 million~~2,840,575 common shares during the three-month periods ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.

- 2724 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

9.	~~Comprehensive income~~

9. Comprehensive income

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

																						Investment Securities						Defined Benefit						Total Amount				Income
	Investment Securities																					With OTTI (a)			All Other			Plans			Other			Before Tax				Tax			Net
	With OTTI (a)			All other			Defined benefit plans			Other			Total amount before tax			Income tax			Net			(In thousands)
	(in thousands)

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

Balance — January 1, 2017																						$	46,725			(73,785	)		(449,917	)		(8,268	)	$	(485,245	)			190,609		$	(294,636	)
Other comprehensive income before reclassifications:
Unrealized holding gains (losses), net		(370	)		159,660			—			—			159,290			(62,680	)		96,610			(8,628	)		5,613			—			—			(3,015	)			1,182			(1,833	)
Foreign currency translation adjustment		—			—			—			(83	)		(83	)		30			(53	)		—			—			—			732			732				(256	)		476
Total other comprehensive income (loss) before reclassifications																							(8,628	)		5,613			—			732			(2,283	)			926			(1,357	)
Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income:
Amortization of unrealized holding losses on held-to-maturity (“HTM”) securities																							—			787			—			—			787		(b)		(310	)		477
Accretion of net gain on terminated cash flow hedges																							—			—			—			(39	)		(39	)	(d)		16			(23	)
Amortization of prior service credit																							—			—			(225	)		—			(225	)	(e)		88			(137	)
Amortization of actuarial losses																							—			—			6,775			—			6,775		(e)		(2,666	)		4,109
Total reclassifications																							—			787			6,550			(39	)		7,298				(2,872	)		4,426
Total gain (loss) during the period																							(8,628	)		6,400			6,550			693			5,015				(1,946	)		3,069
Balance — March 31, 2017																						$	38,097			(67,385	)		(443,367	)		(7,575	)		(480,230	)			188,663		$	(291,567	)

Balance — January 1, 2016																						$	16,359			62,849			(489,660	)		(4,093	)	$	(414,545	)			162,918		$	(251,627	)
Other comprehensive income before reclassifications:
Unrealized holding gains (losses), net																							(370	)		159,660			—			—			159,290				(62,680	)		96,610
Foreign currency translation adjustment																							—			—			—			(83	)		(83	)			30			(53	)
Total other comprehensive income (loss) before reclassifications		(370	)		159,660			—			(83	)		159,207			(62,650	)		96,557			(370	)		159,660			—			(83	)		159,207				(62,650	)		96,557


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

Accretion of unrealized holding losses on held-to-maturity (“HTM”) securities		—			968			—			—			968	(b)		(381	)		587
Amortization of unrealized holding losses on HTM securities																							—			968			—			—			968		(b)		(381	)		587
Gains realized in net income		—			(4	)		—			—			(4	)(c)		1			(3	)		—			(4	)		—			—			(4	)	(c)		1			(3	)
Accretion of net gain on terminated cash flow hedges		—			—			—			(39	)		(39	)(d)		15			(24	)		—			—			—			(39	)		(39	)	(d)		15			(24	)
Amortization of prior service credit		—			—			(1,175	)		—			(1,175	)(e)		462			(713	)		—			—			(1,175	)		—			(1,175	)	(e)		462			(713	)
Amortization of actuarial losses		—			—			8,300			—			8,300	(e)		(3,266	)		5,034			—			—			8,300			—			8,300		(e)		(3,266	)		5,034
Total reclassifications																							—			964			7,125			(39	)		8,050				(3,169	)		4,881
Total gain (loss) during the period																							(370	)		160,624			7,125			(122	)		167,257				(65,819	)		101,438
Balance — March 31, 2016																						$	15,989			223,473			(482,535	)		(4,215	)	$	(247,288	)			97,099		$	(150,189	)

Total reclassifications		—			964			7,125			(39	)		8,050			(3,169	)		4,881


Total gain (loss) during the period		(370	)		160,624			7,125			(122	)		167,257			(65,819	)		101,438


Balance - March 31, 2016	$	15,989			223,473			(482,535	)		(4,215	)	$	(247,288	)		97,099		$	(150,189	)

~~- 28 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

(a)

~~Comprehensive income, continued~~

Other-than-temporary impairment

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

Unrealized holding gains, net
8,011    32,063    —      —      40,074    (15,247 ) 24,827
Foreign currency translation adjustment
—      —      —      (3,732 ) (3,732 ) 1,348    (2,384 )
Gains on cash flow hedges
—      —      —      1,453    1,453    (568 ) 885

Total other comprehensive income(loss) before reclassifications
8,011    32,063    —      (2,279 ) 37,795    (14,467 ) 23,328

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

Amortization of unrealized holding losses on HTM securities
—      739    —      —      739 (b) (289 ) 450
Losses realized in net income
—      98    —      —      98 (c) (36 ) 62
Accretion of net gain on terminated cash flow hedges
—      —      —      (24 ) (24 )(d) 10    (14 )
Amortization of prior service credit
—      —      (1,875 ) —      (1,875 )(e) 934    (941 )
Amortization of actuarial losses
—      —      11,200    —      11,200 (e) (5,582 ) 5,618

Total reclassifications
—      837    9,325    (24 ) 10,138    (4,963 ) 5,175

Total gain (loss) during the period
8,011    32,900    9,325    (2,303 ) 47,933    (19,430 ) 28,503

Balance - March 31, 2015
$ 15,449    234,728    (493,702 ) (6,385 ) $ (249,910 ) 97,419    $ (152,491 )

~~(a)~~

(b)

~~Other-than-temporary impairment~~

~~(b)~~

Included in interest income

(c)

Included in gain ~~(loss)~~ on bank investment securities

(d)

Included in interest expense

(e)

Included in salaries and employee benefits expense

- 25 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

9. Comprehensive income, continued

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

Investment securities
   Defined
benefit
plans
   With OTTI All other    Other Total
   (in thousands)
Balance - December 31, 2015
   $ 9,921    38,166       (296,979 ) (2,735 ) $ (251,627 )
Net gain (loss) during period
   (224 ) 97,418       4,321    (77 ) 101,438




Balance - March 31, 2016
   $ 9,697    135,584       (292,658 ) (2,812 ) $ (150,189 )

	Investment Securities						Defined Benefit
	With OTTI			All Other			Plans			Other			Total
	(In thousands)

Balance - December 31, 2016	$	28,338			(44,657	)		(272,874	)		(5,443	)	$	(294,636	)
Net gain (loss) during period		(5,232	)		3,876			3,972			453			3,069
Balance — March 31, 2017	$	23,106			(40,781	)		(268,902	)		(4,990	)	$	(291,567	)

~~- 29 -~~10. Derivative financial instruments

~~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, ~~and~~ 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, ~~and~~ collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not significant as of March 31, ~~2016.~~2017.

The net effect of interest rate swap agreements was to increase net interest income by ~~$10~~$4 million and ~~$11~~$10 million for the three-month periods ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively.

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

											Notional		Average		Weighted- Average Rate						Estimated Fair
					Weighted-						Amount		Maturity		Fixed			Variable			Value Gain
	Notional		Average		average rate						(In thousands)		(In years)								(In thousands)
	amount		maturity		Fixed			Variable
	(in thousands)		(in years)
March 31, 2016
March 31, 2017
Fair value hedges:
Fixed rate long-term borrowings (a)	$	1,400,000		1.4		4.42	%		1.59	%	$	900,000		.8		3.75	%		2.24	%	$	7,773


December 31, 2015
December 31, 2016
Fair value hedges:
Fixed rate long-term borrowings (a)	$	1,400,000		1.7		4.42	%		1.39	%	$	900,000		1.1		3.75	%		2.08	%	$	11,892

~~(a)~~

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

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

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

Derivative financial instruments used for trading account purposes included interest rate contracts, foreign exchange and other option contracts, foreign exchange forward and spot contracts, and financial futures. Interest rate contracts entered into for trading account purposes had notional values of ~~$18.9~~$22.3 billion and ~~$18.4~~$21.6 billion at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes aggregated ~~$2.8 billion~~$496 million and ~~$1.6 billion~~$471 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

- 3026 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

~~10.~~

~~Derivative financial instruments, 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 derivatives				Liability derivatives				Asset Derivatives				Liability Derivatives
	Fair value				Fair value				Fair Value				Fair Value
	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016
	(in thousands)								(In thousands)
Derivatives designated and qualifying as hedging instruments
Fair value hedges:
Interest rate swap agreements (a)	$	41,259		43,892	$	—		—	$	7,773		11,892	$	—		—
Commitments to sell real estate loans (a)		412		1,844		3,243		656		825		33,189		2,321		1,347
										8,598		45,081		2,321		1,347
		41,671		45,736		3,243		656

Derivatives not designated and qualifying as hedging instruments
Mortgage-related commitments to originate real estate loans for sale (a)		16,929		10,282		44		403		16,847		8,060		645		735
Commitments to sell real estate loans (a)		428		533		2,413		846		4,126		5,210		1,582		399
Trading:
Interest rate contracts (b)		329,739		203,517		278,981		153,723		109,996		228,810		134,919		167,737
Foreign exchange and other option and futures contracts (b)		17,807		8,569		16,888		7,022		4,632		7,908		3,776		6,639
										135,601		249,988		140,922		175,510
		364,903		222,901		298,326		161,994


Total derivatives	$	406,574		268,637	$	301,569		162,650	$	144,199		295,069	$	143,243		176,857

(a)

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

(b)

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

	Amount of Gain (Loss) Recognized
	Three Months Ended March 31, 2017					Three Months Ended March 31, 2016
	Derivative			Hedged Item		Derivative			Hedged Item
	(In thousands)
Derivatives in fair value hedging relationships
Interest rate swap agreements:
Fixed rate long-term borrowings (a)	$	(4,119	)		4,012	$	(2,633	)		1,870
Derivatives not designated as hedging instruments
Trading:
Interest rate contracts (b)	$	1,950				$	974
Foreign exchange and other option and futures contracts (b)		1,836					1,212
Total	$	3,786				$	2,186

~~- 31 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~10.~~

~~Derivative financial instruments, continued~~

(a)

   Amount of gain (loss) recognized
   Three months ended
March 31, 2016    Three months ended
March 31, 2015
   Derivative    Hedged item    Derivative    Hedged item
   (in thousands)
Derivatives in fair value hedging relationships

Interest rate swap agreements:

Fixed rate long-term borrowings (a)
   $ (2,633 )    1,870       $ (396 )    161








Derivatives not designated as hedging instruments

Trading:

Interest rate contracts (b)
   $ 974          $ 660
Foreign exchange and other option and futures contracts (b)
   1,212          2,789





Total
   $ 2,186          $ 3,449

~~(a)~~

Reported as other revenues from operations.

~~(b)~~

(b)

Reported as trading account and foreign exchange gains.

- 27 -

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 ~~$22~~$24 million and ~~$18~~$28 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Changes in unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied.

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

The aggregate fair value of derivative financial instruments in a liability position, which are subject to enforceable master netting arrangements, was ~~$98~~$26 million and ~~$59~~$34 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. After consideration of such netting arrangements, the net liability positions with counterparties aggregated ~~$95~~$25 million and ~~$55~~$30 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The Company was required to post collateral relating to those positions of ~~$84~~$23 million and ~~$52~~$27 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Certain of the Company’s derivative financial instruments contain provisions that require the Company to maintain specific credit ratings from credit rating agencies to avoid higher collateral posting requirements. If the Company’s debt rating were to fall below specified ratings,

~~- 32 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~10.~~

~~Derivative financial instruments, continued~~

the counterparties toof the derivative financial instruments could demand immediate incremental collateralization on those instruments in a net liability position. The aggregate fair value of all derivative financial instruments with such credit risk-related contingent features in a net liability position on March 31, ~~2016~~2017 was ~~$19~~less than $1 million, for which the Company ~~had posted~~was not required to post collateral ~~of $13 million~~ in the normal course of business. If the credit risk-related contingent features had been triggered on March 31, ~~2016, the maximum amount of additional collateral~~2017, the Company would not have been required to post ~~with counterparties was $6 million.~~any collateral to counterparties.

The aggregate fair value of derivative financial instruments in an asset position, which are subject to enforceable master netting arrangements, was ~~$24~~$14 million and ~~$23~~$15 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. After consideration of such netting arrangements, the net asset positions with counterparties aggregated ~~$21~~$13 million and ~~$19~~$11 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Counterparties posted collateral relating to those positions of ~~$21~~$12 million and ~~$22~~$9 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Trading account interest rate swap agreements entered into with customers are subject to the Company’s credit risk standards and often contain collateral provisions.

In addition to the derivative contracts noted above, the Company clears certain derivative transactions through a clearinghouse, rather than directly with counterparties. Those transactions cleared through a clearinghouse require initial margin collateral and additional collateral ~~for~~(“variation margin”) depending on the contracts being in a net asset or liability position. The amount of initial margin posted by the Company was $83 million and $111 million at March 31, 2017 and December 31, 2016, respectively. Effective January 2017, certain clearinghouse exchanges revised their rules to re-characterize required collateral postings for variation margin as legal settlements of those positions. As a result, the fair value asset and liability amounts of derivative contracts at March 31, 2017 have been reduced by contractual settlements of $112 million and $25 million, respectively. Variation margin on derivative contracts not affected by the rule changes continue to represent collateral posted or received by the Company. For those contracts, the net fair values of derivative financial instruments cleared through clearinghouses ~~at March 31, 2016~~for which variation margin is required was a net ~~liability~~asset position of ~~$156~~$1 million and ~~at December 31, 2015 was a net liability position of $50 million. Collateral posted with clearinghouses was $204 million and $99~~$63 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Collateral posted by the clearinghouses associated with that net asset position was $1 million and $81 million at March 31, 2017 and December 31, 2016, respectively.

~~11.~~

- 28 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

11. Variable interest entities ~~and asset securitizations~~

~~In accordance with GAAP, at December 31, 2015 the Company determined that it was the primary beneficiary of a residential mortgage loan securitization trust considering its role as servicer~~ and its retained subordinated interests in the trust. As a result, the Company had included the one-to-four family residential mortgage loans that were included in the trust in its consolidated financial statements. In the first quarter of 2016, the securitization trust was terminated as the Company exercised its right to purchase the underlying mortgage loans pursuant to the clean-up call provisions of the trust. At December 31, 2015, the carrying value of the loans in the securitization trust was $81 million. The outstanding principal amount of mortgage-backed securities issued by the qualified special purpose trust that was held by parties unrelated to the Company at December 31, 2015 was $13 million.asset securitizations

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, ~~2016~~2017 and December 31, ~~2015,~~2016, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet and recognized $24 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.

~~- 33 -~~

~~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 ~~$1.1~~$1.0 billion at each of March 31, ~~2016~~2017 and December 31, ~~2015.~~2016. Those partnerships generally construct or acquire properties for which the investing partners are eligible to receive certain federal income tax credits in accordance with government guidelines. Such investments may also provide tax deductible losses to the partners. The partnership investments also assist the Company in achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company by creditors of the partnerships. However, the tax credits that result from the Company’s investments in such partnerships are generally subject to recapture should a partnership fail to comply with the respective government regulations. The Company’s maximum exposure to loss of its investments in such partnerships was ~~$290~~$316 million, including ~~$80~~$114 million of unfunded commitments, at March 31, ~~2016~~2017 and ~~$295~~$294 million, including ~~$78~~$102 million of unfunded commitments, at December 31, ~~2015.~~2016. Contingent commitments to provide additional capital contributions to these partnerships were not material at March 31, ~~2016.~~2017. The Company has not provided financial or other support to the partnerships that was not contractually required. Management currently estimates that no material losses are probable as a result of the Company’s involvement with such entities. The Company, in its position as a limited partner, does not direct the activities that most significantly impact the economic performance of the partnerships and, therefore, in accordance with the accounting provisions for variable interest entities, the partnership entities are not included in the Company’s consolidated financial statements. The Company’s investment cost is amortized to income taxes in the consolidated statement of income as tax credits and other tax benefits resulting from deductible losses associated with the projects are received. The Company amortized ~~$11~~$13 million and ~~$10~~$11 million of its investments in qualified affordable housing projects to income tax expense during the three-month periods ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, and recognized $16 million and $14 million of tax credits and other tax benefits during ~~each of~~ 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. Such waivers were not material during the three months ended March 31, 2016 and 2015.~~fees as a result of market conditions.

~~12.~~

~~Fair value measurements~~

- 29 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements

GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has not made any fair value elections at March 31, ~~2016.~~2017.

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.

~~- 34 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~12.~~

~~Fair value measurements, continued~~

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~~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~~Company's assets and liabilities that are measured on a recurring basis at estimated fair value.

Trading account assets and liabilities

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

Investment securities available for sale

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

Included in collateralized debt obligations are securities backed by trust preferred securities issued by financial institutions and other entities. The Company could not obtain pricing indications for many of these securities from its two primary independent pricing sources. The Company, therefore, performed internal modeling to estimate the cash flows and fair value of its portfolio of securities backed by trust preferred securities at March 31, 2016 and December 31, 2015. The modeling techniques included estimating cash flows using bond-specific assumptions about future collateral defaults and related loss severities. The resulting cash flows were then discounted by reference to market yields observed in the single-name trust preferred securities market. In determining a market yield applicable to the estimated cash flows, a margin over LIBOR ranging from 4% to 10%, with a weighted-average of 8%, was used. Significant unobservable inputs used in the determination of estimated fair value of collateralized debt obligations are included in the accompanying table of significant unobservable inputs to Level 3 measurements. At March 31, 2016, the total amortized cost and fair value of securities backed by trust preferred securities issued by financial institutions and other entities were $28 million and $45 million, respectively, and at December 31, 2015 were $28 million and $47 million, respectively. Privately issued mortgage-backed securities and securities backed by trust preferred securities issued by financial institutions and other entities constituted all of the available-for-sale investment securities classified as Level 3 valuations.

- 3530 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

~~12.~~

~~Fair value measurements, continued~~

~~The Company ensures an appropriate control framework is in place over the valuation processes and techniques used for significant Level 3 fair~~12. Fair value ~~measurements. Internal pricing models used for significant valuation~~ measurements, ~~have generally been subjected to validation procedures including testing of mathematical constructs, review of valuation methodology and significant assumptions used.~~continued

Real estate loans held for sale

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

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

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

- 3631 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

~~12.~~

~~Fair value measurements, continued~~

12. Fair value measurements, continued

The following tables present assets and liabilities at March 31, ~~2016~~2017 and December 31, ~~2015~~2016 measured at estimated fair value on a recurring basis:

									Fair Value Measurements		Level 1 (a)		Level 2 (a)		Level 3
	Fair value measurements at March 31, 2016		Level 1(a)		Level 2(a)		Level 3		(In thousands)
	(in thousands)

March 31, 2017
Trading account assets	$	467,987		69,689		398,298		—	$	174,854		46,137		128,717		—
Investment securities available for sale:
U.S. Treasury and federal agencies		202,192		—		202,192		—		1,898,250		—		1,898,250		—
Obligations of states and political subdivisions		5,448		—		5,448		—		3,124		—		3,124		—
Mortgage-backed securities:
Government issued or guaranteed		11,750,062		—		11,750,062		—		10,504,314		—		10,504,314		—
Privately issued		65		—		—		65		41		—		—		41
Collateralized debt obligations		45,040		—		—		45,040
Other debt securities		112,708		—		112,708		—		119,767		—		119,767		—
Equity securities		85,132		67,150		17,982		—		105,504		63,698		41,806		—
										12,631,000		63,698		12,567,261		41
Real estate loans held for sale										372,023		—		372,023		—
Other assets (b)										29,571		—		12,724		16,847
Total assets									$	13,207,448		109,835		13,080,725		16,888
Trading account liabilities									$	138,695		—		138,695		—
Other liabilities (b)										4,548		—		3,903		645
Total liabilities									$	143,243		—		142,598		645
		12,200,647		67,150		12,088,392		45,105

December 31, 2016
Trading account assets									$	323,867		46,135		277,732		—
Investment securities available for sale:
U.S. Treasury and federal agencies										1,902,544		—		1,902,544		—
Obligations of states and political subdivisions										3,641		—		3,641		—
Mortgage-backed securities:
Government issued or guaranteed										10,954,861		—		10,954,861		—
Privately issued										44		—		—		44
Other debt securities										118,516		—		118,516		—
Equity securities										352,466		301,711		50,755		—
										13,332,072		301,711		13,030,317		44
Real estate loans held for sale		396,764		—		396,764		—		1,056,180		—		1,056,180		—
Other assets (b)		59,028		—		42,099		16,929		58,351		—		50,291		8,060

Total assets	$	13,124,426		136,839		12,925,553		62,034	$	14,770,470		347,846		14,414,520		8,104


Trading account liabilities	$	295,869		—		295,869		—	$	174,376		—		174,376		—
Other liabilities (b)		5,700		—		5,656		44		2,481		—		1,746		735

Total liabilities	$	301,569		—		301,525		44	$	176,857		—		176,122		735

~~- 37 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~12.~~

(a)

~~Fair value measurements, continued~~

   Fair value
measurements at
December 31,
2015    Level 1(a)    Level 2(a)    Level 3
   (in thousands)
Trading account assets
   $ 273,783       56,763       217,020       —
Investment securities available for sale:

U.S. Treasury and federal agencies
   299,997       —         299,997       —
Obligations of states and political subdivisions
   6,028       —         6,028       —
Mortgage-backed securities:

Government issued or guaranteed
   11,686,628       —         11,686,628       —
Privately issued
   74       —         —         74
Collateralized debt obligations
   47,393       —         —         47,393
Other debt securities
   118,880       —         118,880       —
Equity securities
   83,671       65,178       18,493       —








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








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








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








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








Total liabilities
   $ 162,650       —         162,247       403

~~(a)~~

There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, ~~2016~~2017 and the year ended December 31, ~~2015.~~2016.

(b)

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

- 3832 -

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, 2017 were as follows:

~~12.~~

~~Fair value measurements, continued~~

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

Balance — January 1, 2017	$	44			7,325
Total gains (losses) realized/unrealized:
Included in earnings		—			23,940		(b)
Included in other comprehensive income		—			—
Sales		—			—
Settlements		(3	)		—
Transfers in and/or out of Level 3 (a)		—			(15,063	)	(d)
Balance — March 31, 2017	$	41			16,202
Changes in unrealized gains included in earnings related to assets still held at March 31, 2017	$	—			15,094		(b)

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended March 31, 2016 were as follows:

										Investment Securities Available for Sale
	Investment securities available for sale									Privately Issued Mortgage-Backed Securities			Collateralized Debt Obligations				Other Assets and Other Liabilities
	Privately issued mortgage-backed securities			Collateralized debt obligations			Other assets and other liabilities						(In thousands)
	(in thousands)
Balance – January 1, 2016	$	74		$	47,393		$	9,879

Balance — January 1, 2016										$	74			47,393				9,879
Total gains (losses) realized/unrealized:
Included in earnings		—			—			23,898	(b)		—			—				23,898		(b)
Included in other comprehensive income		—			(2,148	)(c)		—			—			(2,148	)	(c)		—
Settlements		(9	)		(205	)		—			(9	)		(205	)			—
Transfers in and/or out of Level 3 (a)		—			—			(16,892	)(d)		—			—				(16,892	)	(d)


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


Balance — March 31, 2016										$	65			45,040				16,885
Changes in unrealized gains included in earnings related to assets still held at March 31, 2016	$	—		$	—		$	14,539	(b)	$	—			—				14,539		(b)

~~- 39 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~12.~~

(a)

~~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, 2015 were as follows:~~

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

Included in earnings
   —         —      29,770 (b)
Included in other comprehensive income
   —         (2,004 )(c) —
Settlements
   (8 )    (1,034 ) —
Transfers in and/or out of Level 3 (a)
   —         —      (20,887 )(d)




Balance – March 31, 2015
   $ 95       $ 47,278    $ 26,230




Changes in unrealized gains included in earnings related to assets still held at March 31, 2015
   $ —         $ —      $ 22,636 (b)

~~(a)~~

The Company’s policy for transfers between fair value levels is to recognize the transfer as of the actual date of the event or change in circumstances that caused the transfer.

(b)

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

(c)

Reported as net unrealized losses on investment securities in the consolidated statement of comprehensive income. The Company sold its collateralized debt obligations during the third and fourth quarters of 2016.

(d)

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

- 4033 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

~~12.~~

~~Fair value measurements, 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 uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2, unless significant adjustments have been made to the valuation that are not readily observable by market participants. Non-real estate collateral supporting commercial loans generally consists of business assets such as receivables, inventory and equipment. Fair value estimations are typically determined by discounting recorded values of those assets to reflect estimated net realizable value considering specific borrower facts and circumstances and the experience of credit personnel in their dealings with similar borrower collateral liquidations. Such discounts were generally in the range of ~~10%~~15% to 90% at March 31, ~~2016.~~2017. As these discounts are not readily observable and are considered significant, the valuations have been classified as Level 3. Automobile collateral is typically valued by reference to independent pricing sources based on recent sales transactions of similar vehicles, and the related ~~non-recurring~~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. 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 ~~$226~~$210 million at March 31, ~~2016~~2017 ($~~127~~88 million and ~~$99~~$122 million of which were classified as Level 2 and Level 3, respectively), ~~$210~~$293 million at December 31, ~~2015~~2016 ($~~106~~153 million and ~~$104~~$140 million of which were classified as Level 2 and Level 3, respectively) and ~~$101~~$226 million at March 31, ~~2015~~2016 ($67127 million and ~~$34~~$99 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, ~~2016~~2017 and ~~2015~~2016 were decreases of ~~$27~~$42 million and $8$27 million for the three-month periods ended March 31, ~~2016~~2017 and ~~2015,~~March 31, 2016, respectively.

Assets taken in foreclosure of defaulted loans

Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and are generally measured at the lower of cost or fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace, and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2. Assets taken in foreclosure of defaulted loans subject to nonrecurring fair value measurement were ~~$62~~$32 million and ~~$11~~$62 million at March 31, ~~2016~~2017 and ~~March 31, 2015,~~2016, respectively. Changes in fair value recognized for those foreclosed assets held by the Company were not material during the three-month periods ended March 31, ~~2016~~2017 and ~~2015.~~2016.

- 4134 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

~~12.~~

~~Fair value measurements, continued~~

Significant unobservable inputs to Level 3 measurements

The following tables present quantitative information about significant unobservable inputs used in the fair value measurements for certain Level 3 assets and liabilities at March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

Fair Value

Valuation

Technique

Unobservable

Inputs/Assumptions

Range

(Weighted-

Average)

Fair value at
March 31,
2016

Valuation

technique

Unobservable

input/assumptions

Range
(weighted-
average)

(In thousands)

(in thousands)

March 31, 2017

Recurring fair value measurements

Privately issued mortgage–backed securities

Two independent pricing quotes

—

Collateralized debt obligations

45,040

Discounted cash flow

Probability of default

10%-56% (31%)

Loss severity

100%

Privately issued mortgage-backed

securities

Two independent pricing quotes

—

Net other assets (liabilities) (a)

16,885

Discounted cash flow

Commitment expirations

0%-66% (31%)

16,202

Discounted cash flow

Commitment expirations

0%-80% (24%)

Fair value at
December 31,
2015

Valuation

technique

Unobservable

input/assumptions

Range
(weighted-
average)

(in thousands)

December 31, 2016

Recurring fair value measurements

Privately issued mortgage–backed securities

Two independent pricing quotes

—

Collateralized debt obligations

��

47,393

Discounted cash flow

Probability of default

10%-56% (31%)

Loss severity

100%

Privately issued mortgage-backed

securities

Two independent pricing quotes

—

Net other assets (liabilities) (a)

9,879

Discounted cash flow

Commitment expirations

0%-60% (39%)

7,325

Discounted cash flow

Commitment expirations

0%-77% (30%)

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

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

- 4235 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

~~12.~~

~~Fair value measurements, 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 table:

   March 31, 2016
   Carrying
amount Estimated
fair value Level 1    Level 2 Level 3
   (in thousands)
Financial assets:

Cash and cash equivalents
   $ 1,178,175    $ 1,178,175    $ 1,112,933       $ 65,242    $ —
Interest-bearing deposits at banks
   9,545,181    9,545,181    —         9,545,181    —
Trading account assets
   467,987    467,987    69,689       398,298    —
Investment securities
   15,467,320    15,506,052    67,150       15,256,530    182,372
Loans and leases:

Commercial loans and leases
   21,226,577    20,875,827    —         —      20,875,827
Commercial real estate loans
   29,713,293    29,569,740    —         127,736    29,442,004
Residential real estate loans
   25,299,638    25,386,240    —         4,590,667    20,795,573
Consumer loans
   11,632,958    11,553,135    —         —      11,553,135
Allowance for credit losses
   (962,752 ) —      —         —      —




Loans and leases, net
   86,909,714    87,384,942    —         4,718,403    82,666,539
Accrued interest receivable
   318,486    318,486    —         318,486    —
Financial liabilities:

Noninterest-bearing deposits
   $ (29,709,218 ) $ (29,709,218 ) —         $ (29,709,218 ) —
Savings and interest-checking deposits
   (51,497,240 ) (51,497,240 ) —         (51,497,240 ) —
Time deposits
   (12,841,331 ) (12,879,619 ) —         (12,879,619 ) —
Deposits at Cayman Islands office
   (166,787 ) (166,787 ) —         (166,787 ) —
Short-term borrowings
   (1,766,826 ) (1,766,826 ) —         (1,766,826 ) —
Long-term borrowings
   (10,341,035 ) (10,338,217 ) —         (10,338,217 ) —
Accrued interest payable
   (80,605 ) (80,605 ) —         (80,605 ) —
Trading account liabilities
   (295,869 ) (295,869 ) —         (295,869 ) —
Other financial instruments:

Commitments to originate real estate loans for sale
   $ 16,885    $ 16,885    —         $ —      $ 16,885
Commitments to sell real estate loans
   (4,816 ) (4,816 ) —         (4,816 ) —
Other credit-related commitments
   (118,521 ) (118,521 ) —         —      (118,521 )
Interest rate swap agreements used for interest rate risk management
   41,259    41,259    —         41,259    —

	March 31, 2017
	Carrying Amount			Estimated Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Financial assets:
Cash and cash equivalents	$	1,286,962			1,286,962			1,213,120		73,842			—
Interest-bearing deposits at banks		6,945,149			6,945,149			—		6,945,149			—
Trading account		174,854			174,854			46,137		128,717			—
Investment securities		15,968,415			15,958,181			63,698		15,775,917			118,566
Loans and leases:
Commercial loans and leases		22,295,376			21,882,456			—		—			21,882,456
Commercial real estate loans		33,071,654			32,607,794			—		74,563			32,533,231
Residential real estate loans		21,724,491			21,776,908			—		4,686,339			17,090,569
Consumer loans		12,221,481			12,083,513			—		—			12,083,513
Allowance for credit losses		(1,001,430	)		—			—		—			—
Loans and leases, net		88,311,572			88,350,671			—		4,760,902			83,589,769
Accrued interest receivable		318,152			318,152			—		318,152			—
Financial liabilities:
Noninterest-bearing deposits	$	(34,279,591	)		(34,279,591	)		—		(34,279,591	)		—
Savings and interest-checking deposits		(53,542,149	)		(53,542,149	)		—		(53,542,149	)		—
Time deposits		(9,028,018	)		(9,106,654	)		—		(9,106,654	)		—
Deposits at Cayman Islands office		(192,763	)		(192,763	)		—		(192,763	)		—
Short-term borrowings		(185,102	)		(185,102	)		—		(185,102	)		—
Long-term borrowings		(8,087,619	)		(8,104,055	)		—		(8,104,055	)		—
Accrued interest payable		(60,737	)		(60,737	)		—		(60,737	)		—
Trading account		(138,695	)		(138,695	)		—		(138,695	)		—
Other financial instruments:
Commitments to originate real estate loans for sale	$	16,202			16,202			—		—			16,202
Commitments to sell real estate loans		1,048			1,048			—		1,048			—
Other credit-related commitments		(129,968	)		(129,968	)		—		—			(129,968	)
Interest rate swap agreements used for interest rate risk management		7,773			7,773			—		7,773			—

- 4336 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

~~12.~~

~~Fair value measurements, continued~~

	December 31, 2016
	Carrying Amount			Estimated Fair Value			Level 1		Level 2			Level 3
				(In thousands)
Financial assets:
Cash and cash equivalents	$	1,320,549			1,320,549			1,249,654		70,895		—
Interest-bearing deposits at banks		5,000,638			5,000,638			—		5,000,638		—
Trading account		323,867			323,867			46,135		277,732		—
Investment securities		16,250,468			16,244,412			301,711		15,821,176			121,525
Loans and leases:
Commercial loans and leases		22,610,047			22,239,428		—		—				22,239,428
Commercial real estate loans		33,506,394			33,129,428		—			642,590			32,486,838
Residential real estate loans		22,590,912			22,638,167		—			4,912,488			17,725,679
Consumer loans		12,146,063			12,061,590		—			—			12,061,590
Allowance for credit losses		(988,997	)		—		—			—			—
Loans and leases, net		89,864,419			90,068,613		—			5,555,078			84,513,535
Accrued interest receivable		308,805			308,805		—			308,805		—
Financial liabilities:
Noninterest-bearing deposits	$	(32,813,896	)		(32,813,896	)	—			(32,813,896	)	—
Savings and interest-checking deposits		(52,346,207	)		(52,346,207	)	—			(52,346,207	)	—
Time deposits		(10,131,846	)		(10,222,585	)	—			(10,222,585	)	—
Deposits at Cayman Islands office		(201,927	)		(201,927	)	—			(201,927	)	—
Short-term borrowings		(163,442	)		(163,442	)	—			(163,442	)	—
Long-term borrowings		(9,493,835	)		(9,473,844	)	—			(9,473,844	)	—
Accrued interest payable		(75,172	)		(75,172	)	—			(75,172	)	—
Trading account		(174,376	)		(174,376	)	—			(174,376	)	—
Other financial instruments:
Commitments to originate real estate loans for sale	$	7,325			7,325		—			—			7,325
Commitments to sell real estate loans		36,653			36,653		—			36,653		—
Other credit-related commitments		(136,295	)		(136,295	)	—			—			(136,295	)
Interest rate swap agreements used for interest rate risk management		11,892			11,892		—			11,892		—

   December 31, 2015
   Carrying
amount Estimated
fair value Level 1    Level 2 Level 3
   (in thousands)
Financial assets:

Cash and cash equivalents
   $ 1,368,040    $ 1,368,040    $ 1,276,678       $ 91,362    $ —
Interest-bearing deposits at banks
   7,594,350    7,594,350    —         7,594,350    —
Trading account assets
   273,783    273,783    56,763       217,020    —
Investment securities
   15,656,439    15,660,877    65,178       15,406,404    189,295
Loans and leases:

Commercial loans and leases
   20,422,338    20,146,201    —         —      20,146,201
Commercial real estate loans
   29,197,311    29,044,244    —         38,774    29,005,470
Residential real estate loans
   26,270,103    26,267,771    —         4,727,816    21,539,955
Consumer loans
   11,599,747    11,550,270    —         —      11,550,270
Allowance for credit losses
   (955,992 ) —      —         —      —




Loans and leases, net
   86,533,507    87,008,486    —         4,766,590    82,241,896
Accrued interest receivable
   306,496    306,496    —         306,496    —
Financial liabilities:

Noninterest-bearing deposits
   $ (29,110,635 ) $ (29,110,635 ) —         $ (29,110,635 ) —
Savings and interest-checking deposits
   (49,566,644 ) (49,566,644 ) —         (49,566,644 ) —
Time deposits
   (13,110,392 ) (13,135,042 ) —         (13,135,042 ) —
Deposits at Cayman Islands office
   (170,170 ) (170,170 ) —         (170,170 ) —
Short-term borrowings
   (2,132,182 ) (2,132,182 ) —         (2,132,182 ) —
Long-term borrowings
   (10,653,858 ) (10,639,556 ) —         (10,639,556 ) —
Accrued interest payable
   (85,145 ) (85,145 ) —         (85,145 ) —
Trading account liabilities
   (160,745 ) (160,745 ) —         (160,745 ) —
Other financial instruments:

Commitments to originate real estate loans for sale
   $ 9,879    $ 9,879    —         $ —      $ 9,879
Commitments to sell real estate loans
   875    875    —         875    —
Other credit-related commitments
   (122,334 ) (122,334 ) —         —      (122,334 )
Interest rate swap agreements used for interest rate risk management
   43,892    43,892    —         43,892    —

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

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

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

- 4437 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

~~12.~~

~~Fair value measurements, continued~~

12. Fair value measurements, continued

Investment securities

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

Loans and leases

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

Deposits

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

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

Long-term borrowings

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

Other commitments and contingencies

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

- 38 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

12. Fair value measurements, continued

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.

~~- 45 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~12.~~

~~Fair value measurements, continued~~

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.

~~13.~~

~~Commitments and contingencies~~

13. Commitments and contingencies

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

					March 31,		December 31,
	March 31, 2016		December 31, 2015		2017		2016
	(in thousands)				(In thousands)
Commitments to extend credit
Home equity lines of credit	$	5,604,610		5,631,680	$	5,535,221		5,499,609
Commercial real estate loans to be sold		184,198		57,597		298,039		70,100
Other commercial real estate		5,727,946		5,949,933		6,166,511		6,451,709
Residential real estate loans to be sold		520,694		488,621		473,837		478,950
Other residential real estate		281,735		212,619		240,430		232,721
Commercial and other		12,077,612		11,802,850		12,134,803		12,298,473

Standby letters of credit		3,330,241		3,330,013		2,937,504		2,987,091

Commercial letters of credit		45,798		55,559		46,560		44,723

Financial guarantees and indemnification contracts		2,773,590		2,794,322		3,477,006		3,043,580

Commitments to sell real estate loans		958,337		782,885		1,013,409		1,489,237

Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, whereas commercial letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and a third party. The credit risk associated with commitments to extend credit and standby and commercial letters

of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on ~~management’s~~management's assessment of the ~~customer’s~~customer's creditworthiness.

Financial guarantees and indemnification contracts are oftentimes similar to standby letters of credit and include mandatory purchase agreements issued to ensure that customer obligations are fulfilled, recourse obligations associated with sold loans, and other guarantees of customer performance or compliance with designated rules and regulations. Included in financial guarantees and

~~- 46 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~13.~~

~~Commitments and contingencies, continued~~

indemnification contracts are loan principal amounts sold with recourse in conjunction with the ~~Company’s~~Company's involvement in the Fannie Mae Delegated Underwriting and Servicing program. The ~~Company’s~~Company's maximum credit risk for recourse associated with loans sold under this program totaled approximately ~~$2.6~~$3.0 billion and ~~$2.5~~$2.8 billion at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

- 39 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

13. Commitments and contingencies, continued

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

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

The Company also has commitments under long-term operating leases.

The Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for losses related to its obligations to loan purchasers. The amount of those charges is based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. ~~Subject to the outcome of the matter discussed in the following paragraph, at~~At March 31, ~~2016, management~~2017 the Company believes that ~~any further liability arising out of the Company’s~~its obligation to loan purchasers iswas not material to the Company’s consolidated financial position.

The Company is the subject of an investigation by government agencies relating to the origination of Federal Housing Administration (“FHA”) insured residential home loans and residential home loans sold to Freddie Mac and Fannie Mae. A number of other U.S. financial institutions have announced similar investigations. Regarding FHA loans, the U.S. Department of Housing and Urban Development (“HUD”) Office of Inspector General and the Department of Justice (collectively, the “Government”) are investigating whether the Company complied with underwriting guidelines concerning certain loans where HUD paid FHA insurance claims. The Company is fully cooperating with the investigation. The Government has advised the Company that based upon its review of a sample of loans for which an FHA insurance claim was paid by HUD, some of the loans do not meet underwriting guidelines. The Company, based on its own review of the sample, does not agree with the sampling methodology and loan analysis employed by the Government. Regarding loans originated by the Company and sold to Freddie Mac and Fannie Mae, the investigation concerns whether the mortgages sold to Freddie Mac and Fannie Mae comply with applicable underwriting guidelines. The Company is also cooperating with that portion of the investigation. The investigation could lead to claims by the Government under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which allow treble and other special damages substantially in excess of actual losses. Remedies in these proceedings or settlements may include restitution, fines, penalties, or alterations in the Company’s business practices. The Company and the Government continue settlement discussions regarding the investigation and although progress has been made, the parties have not yet reached a definitive agreement. Based upon the current status of these negotiations, management expects that this potential settlement should not have a material impact on the Company’s consolidated financial condition or results of operations in future periods.

~~- 47 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~13.~~

~~Commitments and contingencies, continued~~

M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and other matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was between $0 and $40 million. Although the Company does not believe that the outcome of pending litigations will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

~~14.~~

~~Segment information~~

14. Segment information

Reportable segments have been determined based upon the ~~Company’s~~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~~Company's segments was compiled utilizing the accounting policies described in note 22 of Notes to Financial Statements in the ~~2015~~2016 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 ~~segment results are~~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. ~~Effective July 1, 2015,~~As disclosed in the 2016 Annual Report, during 2016 the Company ~~changed~~revised its ~~internal profitability reporting~~funds transfer pricing allocation related to ~~move a builder~~borrowings and ~~developer lending unit from the Residential Mortgage Banking segment~~ to the ~~Commercial Real Estate segment.~~residential real estate loans obtained in the acquisition of Hudson City, retroactive to 2015. Accordingly, financial information ~~presented herein~~ for the three-month period

- 40 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

14. Segment information, continued

ended March 31, ~~2015~~2016 has been reclassified to conform to the current ~~presentation.~~methodology. As a result, total revenues and net income increased in the Discretionary Portfolio segment and decreased in the ~~Residential Mortgage Banking segment and increased in the Commercial Real Estate segment~~“All Other” category by $6$14 million and $3$8 million, respectively, for the ~~three-month period~~three months ended March 31, ~~2015~~2016 from that which was previously reported.

As also described in note 22 in the ~~2015~~2016 Annual Report, neither goodwill nor core deposit and other intangible assets (and the amortization charges associated with such assets) resulting from acquisitions of financial institutions have been allocated to the ~~Company’s~~Company's reportable segments, but are included in the “All Other” category. The Company does, however, assign such intangible assets to business units for purposes of testing for impairment.

~~- 48 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~14.~~

~~Segment information, continued~~

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

																	Three Months Ended March 31
	Three months ended March 31																2017								2016
	2016								2015								Total Revenues(a)		Inter- segment Revenues			Net Income (Loss)			Total Revenues(a)		Inter- segment Revenues			Net Income (Loss)
	Total revenues(a)		Inter- segment revenues			Net income (loss)			Total revenues(a)		Inter- segment revenues			Net income (loss)			(In thousands)
	(in thousands)
Business Banking	$	113,689		991			25,448		$	108,560		1,045			24,811		$	115,981		911			22,407		$	113,689		991			25,448
Commercial Banking		253,617		1,056			101,327			246,581		1,085			96,423			273,845		920			112,750			253,617		1,056			101,327
Commercial Real Estate		177,380		387			80,529			169,021		82			82,591			195,125		407			84,547			177,380		387			80,529
Discretionary Portfolio		86,835		(14,323	)		39,988			15,474		(5,443	)		5,954			78,946		(12,927	)		33,945			101,036		(14,323	)		48,410
Residential Mortgage Banking		96,935		19,660			17,077			105,757		11,387			29,460			93,708		18,211			14,844			96,935		19,660			17,077
Retail Banking		339,046		3,014			63,288			300,391		3,137			68,888			361,237		3,047			81,873			339,046		3,014			63,288
All Other		225,395		(10,785	)		(29,129	)		154,007		(11,293	)		(66,514	)		242,263		(10,569	)		(1,439	)		211,194		(10,785	)		(37,551	)

Total	$	1,292,897		—			298,528		$	1,099,791		—			241,613		$	1,361,105		—			348,927		$	1,292,897		—			298,528

   Average total assets
   Three months ended
March 31 Year ended
December 31
   2016    2015 2015
   (in millions)
Business Banking
   $ 5,424       5,300    5,339
Commercial Banking
   24,838       23,683    24,143
Commercial Real Estate
   19,839       18,334 (b) 18,827
Discretionary Portfolio
   42,509       22,714    26,648
Residential Mortgage Banking
   2,647       3,197 (b) 2,918
Retail Banking
   11,568       10,788    11,035
All Other
   16,427       11,876    12,870




Total
   $ 123,252       95,892    101,780

	Average total assets
	Three Months Ended March 31				Year Ended December 31
	2017		2016		2016
	(In millions)

Business Banking	$	5,596		5,424		5,456
Commercial Banking		26,723		24,838		25,592
Commercial Real Estate		22,977		19,839		21,131
Discretionary Portfolio		38,731		42,509		40,867
Residential Mortgage Banking		2,426		2,647		2,569
Retail Banking		12,204		11,568		11,840
All Other		14,321		16,427		16,885
Total	$	122,978		123,252		124,340

(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~~Company's internal funds transfer ~~pricing~~ 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

~~- 49 -~~

~~NOTES TO FINANCIAL STATEMENTS, CONTINUED~~

~~14.~~

~~Segment information, continued~~

~~(e.g.~~ (e.g. deposits). The taxable-equivalent adjustment aggregated ~~$6,332,000~~$7,999,000 and ~~$5,838,000~~$6,332,000 for the three-month periods ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, and is eliminated in ~~“All Other”~~"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”~~"All Other" total revenues.

~~(b)~~

Average assets of the Commercial Real Estate and Residential Mortgage Banking segments for the three-month period ended March 31, 2015 differ by approximately $315 million from the previously reported balances reflecting the noted change in the Company’s internal profitability reporting to move a builder and developer lending unit from the Residential Mortgage Banking segment to the Commercial Real Estate segment.

~~15.~~

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

- 41 -

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”~~("BLG"), a privately-held commercial mortgage company. M&T recognizes income or loss from BLG using the equity method of accounting. The carrying value of that investment was ~~$20 million~~$364 thousand at March 31, ~~2016.~~2017.

Bayview Financial Holdings, L.P. (together with its affiliates, ~~“Bayview Financial”~~"Bayview Financial"), a privately-held specialty mortgage finance company, is ~~BLG’s~~BLG's majority investor. In addition to their common investment in BLG, the Company and Bayview Financial conduct other business activities with each other. The Company has obtained loan servicing rights for mortgage loans from BLG and Bayview Financial having outstanding principal balances of ~~$4.0~~$3.4 billion and ~~$4.1~~$3.5 billion at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Revenues from those servicing rights were $4 million and $5 million ~~and $6 million during~~for the ~~three-month periods~~quarters ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively. The Company sub-services residential ~~real estate~~mortgage loans for Bayview Financial having outstanding principal balances ~~totaling $36.3~~of $40.8 billion and ~~$37.7~~$30.4 billion at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Revenues earned for sub-servicing loans for Bayview Financial were $23 million ~~and $35 million~~ for each of the three-month periods ended March 31, ~~2016~~2017 and ~~2015, respectively.~~2016. In addition, the Company held ~~$175~~$153 million and ~~$181~~$158 million of mortgage-backed securities in its held-to-maturity portfolio at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, that were securitized by Bayview Financial. In April 2017, the Company provided a loan to Bayview Financial for $100 million at terms consistent with those offered to non-affiliated customers.

~~16.~~

~~Sale of trust accounts~~

~~In April 2015,~~16. Recent accounting developments

Effective January 1, 2017, the Company ~~sold~~adopted amended accounting guidance for share-based transactions. The most significant aspect of the ~~trade processing business within~~amended guidance that affects the ~~retirement services division~~Company requires that all excess tax benefits and tax deficiencies be recognized in income tax expense in the income statement and that such amounts be recognized in the period in which the tax deduction arises or in the period in which an expiration of ~~its Institutional Client Services business. That sale~~an award occurs. The adoption of this guidance resulted in an ~~after-tax gain~~$18 million reduction of ~~$23 million ($45 million pre-tax) that reflected~~income tax expense for the allocation of approximately $11 million of previously recorded goodwill to the divested business. Revenues of the sold business had been included in “trust income” and were $9 million during the three monthsquarter ended March 31, ~~2015. After considering~~2017 that under previous accounting guidance would have been recognized directly in shareholders’ equity.

Effective January 2017, the Company also adopted amended accounting guidance for the transition to the equity method of accounting. The amended guidance eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method has been in effect during all previous periods that the investment had been held. Instead, the amended guidance requires the investor to adopt the equity method of accounting as of the date the investment first qualifies for such accounting. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

In January 2017, the Company adopted two amendments to the accounting guidance for derivatives and hedging. The first amendment clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The second amendment clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related ~~expenses,~~to their debt hosts. An entity performing the assessment is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence and no longer has to assess whether the event that triggers the ability to exercise the option is related to interest rates or credit risks. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

- 42 -

NOTES TO FINANCIAL STATEMENTS, CONTINUED

16. Recent accounting developments, continued

In March 2017, the Financial Accounting Standards Board (“FASB”) issued amended guidance requiring the premium on callable debt securities held at a premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, with early adoption permitted. If adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company does not expect the guidance to have a material impact on its consolidated financial statements.

In March 2017, the FASB issued amended guidance requiring the service cost component of the net periodic pension cost and net periodic postretirement benefit cost to be reported in the same line item or items in the income statement as other compensation costs arising from services rendered by the pertinent employees during the period (except for the amount being capitalized, if appropriate). The amendments also require disclosure of the line item(s) used in the income statement to present the components other than the service cost component if the other components are not presented in a separate line item or items in the income statement. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017, using a retrospective transition method for the presentation of the service cost and other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement. The capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit cost would be applied using a prospective transition method. The amendments allow for a practical expedient that permits the use of the amounts disclosed in the Company’s pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company is evaluating the impact the guidance may have on its consolidated financial statements.

In January 2017, the FASB issued amended guidance eliminating Step 2 from the goodwill impairment test. Under the amendments to the guidance, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized, however, should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The guidance is effective for annual periods or any interim goodwill impairment tests beginning after December 15, 2019 using a prospective transition method. Early adoption is permitted. The Company does not expect the guidance will have a material impact on its consolidated financial statements, unless at some point in the future one of its reporting units were to fail step 1 of the goodwill impairment test.

In January 2017, the FASB issued amended guidance clarifying the definition of a business for purposes of evaluating whether transactions would be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a screen to determine when a set of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar assets, the set is not a business. If the screen is not met, the amendments (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output, and (2) remove the evaluation of whether a market participant could replace missing elements. The guidance is effective for annual

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

16. Recent accounting developments, continued

periods and interim periods within those annual periods beginning after December 15, 2017 using a prospective transition method. The Company does not expect the guidance to have a material impact on its consolidated financial statements.

In November 2016, the FASB issued amended guidance for the presentation of restricted cash in the statement of cash flows. The guidance requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. In addition, when cash, cash equivalents, and restricted cash or restricted cash equivalents are presented in more than one line item within the statement of financial position, the line items and amounts must be presented on the face of the statement of cash flows or disclosed in the notes to the financial statements. Information about the nature of restrictions on an entity’s cash and cash equivalents must also be disclosed. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017, using a retrospective transition method. The Company is evaluating the impact the guidance may have on the presentation of its consolidated statement of cash flows.

In August 2016, the FASB issued amended guidance for how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance addresses the following eight specific cash flow issues: 1) cash payments for debt extinguishment costs should be classified as cash outflows for financing activities; 2) for zero-coupon debt instruments, the portion of the cash payment attributable to the accreted interest should be classified as a cash outflow for operating activities; 3) contingent consideration payments made after a business combination should be classified based on the timing of the payment; 4) cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage; 5) cash proceeds received from the settlement of corporate-owned and bank-owned life insurance policies should be classified as cash inflows from investing activities; 6) when the equity method is applied, an accounting policy election should be made to classify distributions received using either the cumulative earnings approach or the nature of the distribution approach; 7) cash receipts from payments on a transferor’s beneficial interests obtained in a securitization of financial assets should be classified as cash inflows from investing activities; and 8) the classification of cash receipts and payments that ~~was sold was not material~~have aspects of more than one class of cash flows should be determined by applying specific guidance in GAAP. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is evaluating the impact the guidance may have on the presentation within its consolidated statement of cash flows.

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

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

16. Recent accounting developments, continued

December 15, 2019. The Company is assessing the new guidance to determine what modifications to existing credit estimation processes may be required. The Company expects that the new guidance will result in an increase in its allowance for credit losses as a result of considering credit losses over the expected life of its loan portfolios. Increases in the level of the allowance for credit losses will also reflect new requirements to include the nonaccretable principal difference on purchased credit impaired loans and estimated credit losses on investment securities classified as held-to-maturity, if any. The Company ~~during~~is still evaluating the extent of the increase to the allowance for credit losses and the impact to its financial statements.

In February 2016, the FASB issued guidance related to the accounting for leases. The core principle of the guidance is that all leases create an asset and a liability for the lessee and, therefore, lease assets and lease liabilities should be recognized in the balance sheet. Lease assets will be recognized as a right-of-use asset and lease liabilities will be recognized as a liability to make lease payments. While the guidance requires all leases to be recognized in the balance sheet, there continues to be a differentiation between finance leases and operating leases for purposes of income statement recognition and cash flow statement presentation. For finance leases, interest on the lease liability and amortization of the right-of-use asset will be recognized separately in the statement of income. Repayments of principal on those lease liabilities will be classified within financing activities and payments of interest on the lease liability will be classified within operating activities in the statement of cash flows. For operating leases, a single lease cost is recognized in the statement of income and allocated over the lease term, generally on a straight-line basis. All cash payments are presented within operating activities in the statement of cash flows. The accounting applied by lessors is largely unchanged from existing GAAP, however, the guidance eliminates the accounting model for leveraged leases for leases that commence after the effective date of the guidance. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company occupies certain banking offices and uses certain equipment under noncancelable operating lease agreements, which currently are not reflected in its consolidated balance sheet. Upon adoption of the guidance, the Company expects to report increased assets and increased liabilities as a result of recognizing right-of-use assets and lease liabilities on its consolidated balance sheet. The Company was committed to $467 million of minimum lease payments under noncancelable operating lease agreements at December 31, 2016. The Company does not expect the new guidance will have a material impact to its consolidated statement of income.

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

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

16. Recent accounting developments, continued

have on its consolidated financial statements. The Company does hold certain equity securities in its available-for-sale portfolio. Upon adoption of this guidance, fair value changes in such equity securities will be recognized in the consolidated statement of income as opposed to accumulated other comprehensive income where they are recognized under current accounting guidance.

In May 2014, the FASB issued amended accounting and disclosure guidance for revenue from contracts with customers. The core principle of the accounting guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. The amended disclosure guidance requires sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amended guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The guidance should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application (the “modified retrospective approach”). At present, the Company expects to adopt the revenue recognition guidance in the first quarter of ~~2015.~~2018 using the modified retrospective approach. A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, which are excluded from the scope of the amended guidance. With respect to noninterest income, the Company has identified revenue streams within the scope of the guidance, and is performing an evaluation of the underlying revenue contracts. To date, the Company has not yet identified any material changes in the timing of revenue recognition when considering the amended accounting guidance, however, the Company’s implementation efforts are ongoing and such assessments may change prior to the January 1, 2018 implementation date.

- 5046 -

Item 2.

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

Overview

~~Net income for~~ M&T Bank Corporation (“M&T”) recorded net income in the first quarter of ~~2016 was~~2017 of $349 million or $2.12 of diluted earnings per common share, compared with $299 million or $1.73 of diluted earnings per common share ~~compared with $242 million or $1.65~~in the initial quarter of 2016. During the final 2016 quarter, net income and diluted earnings per common share ~~in the initial 2015 quarter. During the fourth quarter of 2015, net income totaled $271~~were $331 million ~~or $1.65 of diluted earnings per common share.~~and $1.98, respectively. Basic earnings per common share were ~~$1.74~~$2.13 in the recent quarter, compared with ~~$1.66~~$1.74 and ~~$1.65~~$1.98 in the first and fourth quarters of ~~2015,~~2016, respectively. The annualized rate of return on average total assets for M&T and its consolidated subsidiaries (“the Company”) in the initial ~~2016~~2017 quarter was ~~.97%~~1.15%, compared with ~~1.02%~~.97% in the ~~year-earlier~~corresponding quarter of 2016 and ~~.93%~~1.05% in the ~~fourth quarter of 2015.~~final 2016 quarter. The annualized rate of return on average common shareholders’ equity was 8.89% in the recent quarter, compared with 7.44% in the ~~first three months of 2016, compared with 7.99%~~year-earlier quarter and ~~7.22%~~8.13% in the fourth quarter of 2016.

During the first ~~and fourth quarters~~quarter of ~~2015, respectively.~~

~~On November 1, 2015,~~2017, M&T ~~completed its~~adopted new accounting guidance for share-based transactions. That guidance requires that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized in income tax expense in the income statement. Previously, tax effects resulting from changes in M&T’s share price subsequent to the grant date were recorded through shareholders’ equity at the time of vesting or exercise. The adoption of the amended accounting guidance resulted in an $18 million reduction of income tax expense in the initial 2017 quarter, or $.12 of diluted earnings per common share.

The Company’s results of operations during the initial 2016 quarter included $23 million ($14 million after-tax effect), or $.09 per diluted common share of merger-related expenses (as described below) associated with M&T’s acquisition of Hudson City Bancorp, Inc. (“Hudson City”)~~. Immediately following completion~~ on November 1, 2015, while during the fourth quarter of 2016, the ~~merger, Hudson City Savings Bank merged with and into~~Company made a $30 million tax-deductible cash contribution ($.12 per diluted common share) to The M&T ~~Bank,~~Charitable Foundation. As described herein under the ~~principal bank subsidiary~~heading “Other Expense” reflected in the first quarter of each year were seasonally higher stock-based compensation and employee benefits expenses.

In accordance with M~~&T. Pursuant to~~&T’s revised 2016 Capital Plan, during the ~~merger agreement,~~first quarter of 2017, M&T ~~paid cash consideration of $2.1 billion and issued 25,953,950~~repurchased 3,233,196 shares of ~~M&T~~its common stock at a total cost of $532 million and increased the quarterly common stock dividend from $.70 to $.75 per share. Repurchases of common stock in ~~exchange for Hudson City~~the final 2016 quarter totaled 300,000 shares ~~outstanding~~ at ~~the time~~a cost of ~~acquisition. Assets acquired totaled approximately $36.7 billion, including $19.0 billion of loans and leases (including approximately $234~~$37 million, of commercial real estate loans, $18.6 billion of residential real estate loans and $162 million of consumer loans). Liabilities assumed aggregated $31.5 billion, including $17.9 billion of deposits and $13.2 billion of borrowings. Immediately following the acquisition, the Company restructured its balance sheet by selling $5.8 billion of investment securities obtainedwhile in the ~~acquisition and repaying $10.6 billion of borrowings assumed~~initial 2016 quarter, M&T repurchased 948,545 shares for $100 million in ~~the transaction. The common stock issued added $3.1 billion to M&T’s common shareholders’ equity. In connection~~accordance with ~~the acquisition, the Company recorded $1.1 billion of goodwill and $132 million of core deposit intangible asset.~~its 2015 Capital Plan.

Supplemental Reporting of Non-GAAP Results of Operations

M&T consistently provides supplemental reporting of its results on a “net operating” or “tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and expenses associated with merging acquired operations into the Company, since such items are considered by management to be “nonoperating” in nature. Those merger-related expenses generally consist of professional services and other temporary help fees associated with the actual or planned conversion of systems and/or integration of operations; costs related to branch and office consolidations; costs related to termination of existing contractual arrangements to purchase various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; severance; incentive compensation costs; travel costs; and printing, supplies and other costs of completing the transactions and commencing operations in new markets and offices. ~~Those acquisition and integration-related~~As noted earlier, those expenses (herein referred to as merger-related expenses) totaled ~~$23 million ($14~~$14 million after-tax ~~effect)~~effect in the first quarter of ~~2016 ($.09 per diluted common share), compared with $97 million ($61 million after-tax effect) in the fourth quarter of 2015 ($.40 per diluted common share).~~2016. There were no merger-related expenses induring the first quarter of ~~2015. Reflected in merger-related expenses in~~2017 or the fourth quarter of ~~2015 was a provision for credit losses of $21 million. GAAP~~

~~- 51 -~~

provides that an allowance for credit losses associated with probable incurred losses on loans acquired at a premium be recognized. Given the recognition of such losses above and beyond the impact of forecasted losses used in determining the fair value of acquired loans, the Company considers that provision to be a merger-related expense.2016. Although “net operating income” as defined by M&T is not a GAAP measure, M&T’s management believes that this information helps investors understand the effect of acquisition activity in reported results.

Net operating income ~~aggregated $320~~totaled $354 million in the ~~initial~~recent quarter, ~~of 2016,~~ compared with ~~$246~~$320 million in the first quarter of ~~2015.~~2016. Diluted net operating earnings per common share for the ~~recent~~first quarter of 2017 were ~~$1.87,~~$2.15, compared with ~~$1.68~~

- 47 -

$1.87 in the year-earlier quarter. Net operating income and diluted net operating earnings per common share were ~~$338~~$336 million and ~~$2.09,~~$2.01, respectively, in the ~~final 2015 quarter.~~fourth quarter of 2016.

Net operating income in the ~~first~~initial 2017 quarter ~~of 2016~~ expressed as an annualized rate of return on average tangible assets was ~~1.09%~~1.21%, compared with ~~1.08%~~1.09% and ~~1.21%~~1.10% in the first and fourth quarters of ~~2015,~~2016, respectively. Net operating income represented an annualized return on average tangible common equity of ~~11.62%~~13.05% in the recent quarter, compared with ~~11.90%~~11.62% in the ~~year-earlier~~similar 2016 quarter and ~~13.26%~~11.93% in the ~~fourth~~final quarter of ~~2015.~~2016.

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

Taxable-equivalent Net Interest Income

Taxable-equivalent net interest income was $922 million in the initial quarter of 2017, up 5% from $878 million in the ~~first quarter of 2016, up 32% from $665 million in the~~ year-earlier ~~period.~~quarter. That growth resulted predominantly from the impact of higher average earning assets, which rose $26.0 billion, or 31%, to $111.2 billion in the recent quarter from $85.2 billion in the first quarter of 2015. The higher level of average earning assets in the initial 2016 quarter reflected a $21.0 billion increase in average loans and leases (due predominantly to the Hudson City acquisition, which added $18.1 billion to average loans), a $3.1 billion increase in average interest-bearing deposits at the Federal Reserve Bank of New York and a $2.0 billion rise in average balances of investment securities. As compared with 2015’s initial quarter, there was a one basis point (hundredth of one percent) widening of the ~~Company’s~~ net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, to 3.34% in the recent quarter from 3.18% in the corresponding 2016 period. The improvement in taxable-equivalent net interest income was largely the result of the higher interest rate environment due to ~~3.18%.~~actions initiated by the Federal Reserve in mid-December 2016 and mid-March 2017 to raise its target Federal funds rate by .25% at each of those dates and higher average loan balances of $2.2 billion. Taxable-equivalent net interest income in the recent quarter ~~rose $65~~increased 4% from $883 million in the final quarter of 2016, predominantly due to a 26 basis point (hundredths of one percent) widening of the net interest margin from ~~the $813 million recorded~~3.08% in the fourth quarter of ~~2015, largely due to~~2016. That widening also reflected the ~~full-quarter~~ impact of the ~~Hudson City transaction, and a 6 basis point widening of the net interest margin. Contributing to that widening was the full-quarter impact of the increase~~increases in interest rates initiated by the Federal Reserve ~~in mid-December 2015.~~as noted above.

Average loans and leases ~~rose $21.0~~aggregated $89.8 billion ~~or 32% to~~in the recent quarter, 3% higher than $87.6 billion in the initial ~~2016~~ quarter ~~from $66.6~~of 2016. Commercial loans and leases averaged $22.3 billion in the first quarter of ~~2015. Commercial loans and leases averaged~~2017, up $1.6 billion or 8% from $20.7 billion in the first quarter of ~~2016, up $1.3~~2016. Average commercial real estate loans were $33.2 billion in the recent quarter, an increase of $3.7 billion, or 6%13%, from ~~$19.5~~$29.4 billion in the year-earlier quarter. Reflecting ongoing repayments of loans obtained in the acquisition of Hudson City, average residential real estate loans declined $3.7 billion or 14% to $22.2 billion in the first quarter of ~~2015. Average commercial real estate loans increased 7% or $1.8 billion to $29.4 billion in the recent quarter~~2017 from ~~$27.6 billion in the initial 2015 quarter. Reflecting average balances of $17.7 billion of loans obtained in the Hudson City acquisition, average residential real estate loans increased to~~ $25.9 billion in the ~~initial quarter of 2016 from $8.6 billion in the first quarter of 2015.~~year-earlier quarter. Included in ~~those amounts~~that portfolio were ~~residential real estate~~ loans held for sale, which averaged ~~$323~~$366 million in the recent quarter and ~~$387~~$323 million in the ~~year-earlier~~similar 2016 quarter. ~~Average consumer~~Consumer loans ~~totaled~~averaged $12.2 billion in the recently completed quarter, an increase of $571 million or 5% from $11.6 billion in the first quarter of 2016, ~~up $620 million or 6% from $11.0 billion in the year-earlier quarter~~ predominantly due to growth in average automobile ~~loan balances.~~and recreational vehicle loans, partially offset by lower outstanding balances of home equity lines of credit.

~~- 52 -~~

Average loan and lease balances in the ~~first~~initial quarter of ~~2016 increased $6.5 billion~~2017 decreased $180 million from ~~$81.1~~$90.0 billion in the fourth quarter of ~~2015.~~2016. Average ~~outstanding~~ commercial loan and lease balances rose ~~$497~~$354 million, or 2%, in the recent quarter from $21.9 billion in the fourth quarter of 2016. Commercial real estate loan average balances ~~of commercial real estate loans~~in the initial 2017 quarter increased ~~$452~~$353 million, or 2%1%, from $32.8 billion in the final three months of 2016. Reflected in average ~~residential~~commercial real estate loan balances were ~~up $5.5 billion, or 27%,~~loans held for sale, which averaged $169 million and ~~average outstanding consumer loans increased $35~~$524 million ~~from~~in the ~~final 2015 quarter. The growth in~~first quarter of 2017 and the fourth quarter of 2016, respectively. Average residential real estate ~~loan category resulted~~loans in the first three months of 2017 declined $917 million, or 4%, from $23.1 billion in the ~~full-quarter impact~~final 2016 quarter, reflecting the continued pay down of loans obtained in the acquisition of Hudson City. Average consumer loans increased $30 million in the recent quarter from $12.1 billion in 2016’s final quarter. The accompanying table summarizes quarterly changes in the major components of the loan and lease portfolio.

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AVERAGE LOANS AND LEASES

(net of unearned discount)

~~Dollars in millions~~

			Percent Increase
			(Decrease) from
	1st Qtr.		1st Qtr.				4th Qtr.
	2017		2016				2016
	(In millions)

Commercial, financial, etc.	$	22,290		8		%		2		%
Real estate – commercial		33,175		13				1
Real estate – consumer		22,179		(14	)			(4	)
Consumer
Automobile		3,019		17				3
Home equity lines and loans		5,577		(6	)			(2	)
Other		3,557		15				1
Total consumer		12,153		5				—
Total	$	89,797		3		%		—		%

Percent increase
(decrease) from

   1st Qtr.
2016    1st Qtr.
2015 4th Qtr.
2015
Commercial, financial, etc.
   $ 20,717       6 % 2 %
Real estate - commercial
   29,426       7    2
Real estate - consumer
   25,859       202    27
Consumer

Automobile
   2,573       27    5
Home equity lines and loans
   5,903       (1 ) —
Other
   3,106       5    (2 )




Total consumer
   11,582       6    —




Total
   $ 87,584       32 % 8 %

The investment securities portfolio averaged $16.0 billion in 2017’s first quarter, $651 million or 4% above $15.3 billion in the ~~recent~~year-earlier quarter. Investment securities averaged $15.4 billion in the final quarter ~~up $2.0 billion or 15% from $13.4 billion~~of 2016. During the first quarter of 2017, the Company purchased $536 million of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities. Similar purchases of Fannie Mae and Ginnie Mae mortgage-backed securities in the initial quarter of ~~2015. Investment securities averaged $15.8 billion in~~2016 totaled $305 million. During the fourth quarter of ~~2015. The increase from~~2016, the year-earlier quarter reflects mortgage-backed securities retained from the acquisition of Hudson City and the net effect of purchases, partially offset by maturities and paydowns of mortgage-backed securities. The Company purchased ~~approximately $3.5~~$1.2 billion of U.S. Treasury notes and $1.2 billion of Fannie Mae and Ginnie Mae securities that were added to the investment securities portfolio during 2015, and another $305 million of Fannie Mae and Ginnie Mae securities that were purchased during the first quarter of 2016. Those purchases reflect increased holdings of investment securities to satisfy the requirements of the U.S. version of the Basel Committee’s Liquidity Coverage Ratio requirements (“LCR”) that became effective in January 2016.

mortgage-backed securities. The investment securities portfolio is largely comprised of residential mortgage-backed securities, debt securities issued by municipalities, trust preferred securities issued by certain financial institutions, and shorter-term U.S. Treasury and federal agency notes. When purchasing investment securities, the Company ~~also~~ considers its liquidity position and its overall interest-rate risk profile as well as the adequacy of expected returns relative to risks assumed, including prepayments. The Company manages its investment securities portfolio, in part, to satisfy the requirements of the Liquidity Coverage Ratio (“LCR”) that became effective in January 2016. The LCR is intended to ensure that banks hold a sufficient amount of “high quality liquid assets” to cover the anticipated net cash outflows during a hypothetical acute 30-day stress scenario. For additional information concerning the LCR rules, refer to Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, 2016 under the heading “Liquidity.”

In managing its investment securities portfolio, the Company occasionally sells investment securities as a result of changes in interest rates and spreads, actual or anticipated prepayments, credit risk associated with a particular security, or as a result of restructuring its investment securities portfolio in connection with a business combination. The ~~Hudson City acquisition added approximately $7.9 billion to the~~amounts of investment securities ~~portfolio on the November 1, 2015 acquisition date. As noted earlier, immediately following the acquisition of Hudson City,~~held by the Company ~~restructured its~~are influenced by such factors as demand for loans, which generally yield more than investment securities, ongoing repayments, the levels of deposits, and management of liquidity (including the LCR) and balance sheet ~~by selling $5.8 billion of those securities.~~size and resulting capital ratios.

The Company regularly reviews its investment securities for declines in value below amortized cost that might be characterized as “other than temporary.” There were no other-than-temporary impairment charges recognized in either of the first quarters of ~~2016~~2017 and ~~2015~~2016 or in the final ~~2015~~2016 quarter. Additional information about the investment securities portfolio is included in notes 3 and 12 of Notes to Financial Statements.

~~- 53 -~~

Other earning assets include interest-bearing deposits at the Federal Reserve Bank of New York and other banks, trading account assets and federal funds sold. Those other earning assets in the aggregate averaged ~~$8.3~~$6.2 billion in the recently completed quarter, compared with ~~$5.2~~$8.3 billion and ~~$6.7~~$8.9 billion in the first and ~~fourth~~final quarters of ~~2015,~~2016, respectively. Interest-bearing deposits at banks averaged $6.2 billion, $8.2 billion ~~$5.1 billion~~ and ~~$6.6~~$8.8 billion during the three-month periods ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. The rise in average interest-bearing deposits at banks in the recent quarter as compared with the year-earlier quarter and the fourth quarter of 2015 was due, in part, to the Company’s decision to maintain higher balances at the Federal Reserve Bank of New York rather than reinvesting in other highly liquid assets due to the current interest rate environment. The amounts of investment securities and other earning assets held by the Company are influenced by such factors as demand for

- 49 -

loans, which generally yield more than investment securities and other earning assets, ongoing repayments, the levels of deposits, and management of liquidity (including the LCR) and balance sheet size and resulting capital ratios.

As a result of the changes described herein, average earning assets ~~totaled $111.2~~were $112.0 billion in the first quarter of ~~2016,~~2017, compared with ~~$85.2~~$111.2 billion in the year-earlier quarter and ~~$103.6~~$114.3 billion in the fourth quarter of ~~2015.~~2016.

The most significant source of funding for the Company is core deposits. The Company considers noninterest-bearing deposits, interest-bearing transaction accounts, savings deposits and time deposits of $250,000 or less as core deposits. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Average core deposits totaled ~~$89.7~~$94.0 billion in the ~~first~~most recent quarter, ~~of 2016,~~ compared with ~~$70.1~~$89.7 billion in the year-earlier quarter, and ~~$83.3~~$94.4 billion in the final quarter of 2016. As compared with the fourth quarter of ~~2015. The Hudson City acquisition added approximately $17.0 billion~~2016, higher average balances of ~~core~~noninterest-bearing deposits ~~on November 1, 2015, including $9.7 billion of~~in 2017’s first quarter, largely due to increased trust customer deposits, were offset by declines in average time deposits, ~~$6.6 billion~~predominantly related to maturities of ~~savings~~relatively high-rate deposits ~~and $691 million~~obtained in the acquisition of ~~noninterest-bearing deposits.~~Hudson City. The ~~higher~~increase in average core deposits in the ~~two most recent quarters were predominantly reflective~~first quarter of 2017 from the ~~impact of the merger~~year-earlier quarter reflected higher noninterest-bearing deposits, largely associated with ~~Hudson City.~~trust customers. The following table provides an analysis of quarterly changes in the components of average core deposits.

AVERAGE CORE DEPOSITS

~~Dollars in millions~~

			Percent Increase
			(Decrease) from
	1st Qtr.		1st Qtr.				4th Qtr.
	2017		2016				2016
	(In millions)

Savings and interest-checking deposits	$	52,124		6		%		(2	)	%
Time deposits		8,567		(27	)			(12	)
Noninterest-bearing deposits		33,287		15				5
Total	$	93,978		5		%		—		%

      Percent increase from
   1st Qtr.
2016    1st Qtr.
2015 4th Qtr.
2015
Interest-checking deposits
   $ 1,333       21 % 2 %
Savings deposits
   47,805       18    7
Time deposits
   11,709       339    35
Noninterest-bearing deposits
   28,870       12    2




Total
   $ 89,717       28 % 8 %

The Company also receives funding from other deposit sources, including branch-related time deposits over $250,000, deposits associated with the Company’s Cayman Islands office, and brokered deposits. Time deposits over $250,000, excluding brokered ~~certificates~~deposits, averaged $935 million in the first quarter of ~~deposit, averaged~~2017, compared with $1.2 billion in ~~the recent quarter, compared with $347 million and $948 million in~~each of the first and fourth quarters of ~~2015, respectively. The higher averages in the two most recent quarters as compared with the initial 2015 quarter were predominantly due to deposits obtained in the acquisition of Hudson City.~~2016. Cayman Islands office deposits averaged $192 million, $187 million ~~$224 million~~ and ~~$223~~$206 million for the three-month periods ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. Brokered time deposits averaged $59 million in each of the ~~recent quarter~~quarters ended March 31, 2017, March 31, 2016 and ~~the fourth quarter of 2015. There were no brokered time deposits in the first quarter of 2015.~~December 31, 2016. The Company also had brokered savings and interest-bearing transaction ~~and brokered money-market deposit~~

~~- 54 -~~

accounts, which in the aggregate averaged ~~approximately~~$1.1 billion during each of the quarters ended March 31, 2017 and December 31, 2016, compared with $1.2 billion ~~in each of~~during the first quarter of ~~2016 and the fourth quarter of 2015, and $1.0 billion in the first quarter of 2015.~~2016. The levels of brokered deposit accounts reflect the demand for such deposits, largely resulting from the desire of brokerage firms to earn reasonable yields while ensuring that customer deposits are fully insured. The level of Cayman Islands office deposits ~~are~~is also reflective of customer demand. Additional amounts of Cayman Islands office deposits or brokered deposits may be added in the future depending on market conditions, including demand by customers and other investors for those deposits, and the cost of funds available from alternative sources at the time.

The Company also uses borrowings from banks, securities dealers, various Federal Home Loan Banks, the Federal Reserve Bank of New York and others as sources of funding. Short-term borrowings represent borrowing arrangements that at the time they were entered into had a contractual maturity of less than one year. Average short-term borrowings totaled ~~$2.1 billion~~$184 million in the first quarter of ~~2016,~~2017, compared with ~~$196 million~~$2.1 billion in the year-earlier quarter and ~~$1.6 billion~~$200 million in the final quarter of ~~2015.~~2016. The ~~higher level of~~decrease in such borrowings insince the ~~two most recent quarters~~first quarter of 2016 was predominantly due to the maturities of short-term borrowings from the Federal Home Loan Bank of New York

- 50 -

assumed in the Hudson City acquisition. ~~Those short-term fixed-rate borrowings have various maturity dates throughout 2016.~~ Included in short-term borrowings were unsecured federalfunds borrowings, which generally mature on the next business day, that averaged ~~$137~~$129 million and ~~$147~~$137 million in the first quarters of ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~$131~~$144 million in the final quarter of ~~2015.~~2016.

Long-term borrowings averaged ~~$10.5~~$8.4 billion in the ~~recent~~initial 2017 quarter, compared with ~~$9.8~~$10.5 billion in the year-earlier quarter and ~~$10.7~~$9.9 billion in the fourth quarter of ~~2015.~~2016. M&T Bank, M&T’s principal bank subsidiary, has a Bank Note Program whereby M&T Bank may offer unsecured senior and subordinated ~~notes.~~notes, however, only unsecured senior notes have been issued under that program. Average balances of notes outstanding under that program were $4.5 billion, $5.4 billion, ~~$4.9 billion~~ and ~~$5.5~~$5.2 billion during the three-month periods ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. The proceeds of the issuances of borrowings under the Bank Note Program ~~have been~~were predominantly utilized to purchase high-quality liquid assets that meet the requirements of the LCR. Outstanding balances of the senior unsecured notes totaled $4.4 billion at March 31, 2017 and $5.2 billion at December 31, 2016. Also included in average long-term borrowings were amounts borrowed from ~~various~~the Federal Home Loan Banks of New York, Atlanta and Pittsburgh of $1.2 billion in each of the initial quarters of 2017 and 2016 and ~~2015 and in~~ the ~~fourth~~final quarter of ~~2015.~~2016. Subordinated capital notes included in long-term borrowings averaged $1.5 billion ~~during~~in each of the three-month periods ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016, and December 31, ~~2015.~~2016. Junior subordinated debentures associated with trust preferred securities that were included in average long-term borrowings were ~~$514~~$517 million ~~during~~in the ~~two~~ most recent ~~quarters and $835~~quarter, compared with $514 million in the first quarter of ~~2015. In accordance with its 2015 capital plan, on April 15, 2015 M&T redeemed~~2016 and $516 million in the ~~junior subordinated debentures associated with the $310 million~~fourth quarter of ~~trust preferred securities of M&T Capital Trusts I, II and III. Those borrowings had a weighted-average interest rate of 8.24%.~~2016. Additional information regarding junior subordinated debentures is provided in note 5 of Notes to Financial Statements. Also included in long-term borrowings were agreements to repurchase securities, which averaged ~~$1.9 billion during~~$683 million in the ~~two most recent quarters and $1.4~~first quarter of 2017, $1.9 billion in the first quarter of ~~2015.~~2016 and $1.5 billion in the fourth quarter of 2016. The ~~increase from~~lower average balances of repurchase agreements in the recent quarter as compared with the first and fourth quarters of 2016 reflect maturities in the first quarter of ~~2015 reflects agreements to repurchase securities assumed in connection with the Hudson City acquisition.~~2017 and fourth quarter of 2016. The repurchase agreements held at March 31, ~~2016~~2017 totaled $431 million and have various repurchase dates through 2020, however, the contractual maturities of the underlying securities extend beyond such repurchase dates. The Company has utilized interest rate swap agreements to modify the repricing characteristics of certain components of long-term debt. As of March 31, ~~2016,~~2017, interest rate swap agreements were used to hedge approximately ~~$1.4 billion~~$900 million of outstanding fixed rate long-term borrowings. Further information on interest rate swap agreements is provided in note 10 of Notes to Financial Statements.

~~- 55 -~~

Changes in the composition of the Company’s earning assets and interest-bearing liabilities, as discussed herein, as well as changes in interest rates and spreads, can impact net interest income. Net interest spread, or the difference between the taxable-equivalent yield on earning assets and the rate paid on interest-bearing liabilities, was ~~3.01% in the recent quarter and 2.97%~~3.15% in the first quarter of ~~2015.~~2017, compared with 3.01% in the year-earlier quarter. The yield on earning assets during ~~each of~~the recent quarter was 3.67%, up 13 basis points from 3.54% in the initial ~~quarters of~~ 2016 ~~and 2015 was 3.54%,~~quarter, while the rate paid on interest-bearing liabilities decreased 4one basis ~~points~~point to ~~.53%~~.52% in the recent quarter from ~~.57%~~.53% in the year-earlier period. In the ~~fourth~~final quarter of ~~2015,~~2016, the net interest spread was ~~2.94%~~2.88%, the yield on earning assets was ~~3.48%~~3.45% and the rate paid on interest-bearing liabilities was ~~..54%~~.57%. The widening of the net interest spread in the recent quarter as compared with the first ~~quarter~~and final quarters of 2015 reflects a higher proportion of deposits and short-term borrowings as components of interest-bearing liabilities and lower rates paid on long-term borrowings. The 7 basis point improvement in the net interest spread as compared with the final 2015 quarter2016 was largely due to the ~~full-quarter~~ effect of ~~the increase~~increases in short-term interest rates initiated by the Federal Reserve in mid-December ~~2015~~2016 and mid-March 2017 that contributed to higher yields on loans and leases. Also contributing to the improved net interest spread in the initial 2017 quarter were lower average balances of long-term borrowings and of relatively low-yielding deposits held at the Federal Reserve Bank of New York.

- 51 -

Net interest-free funds consist largely of noninterest-bearing demand deposits and shareholders’ equity, partially offset by bank owned life insurance and non-earning assets, including goodwill and core deposit and other intangible assets. Net interest-free funds averaged ~~$35.1~~$40.4 billion in the first quarter of ~~2016,~~2017, compared with ~~$29.3~~$35.1 billion and ~~$34.0~~$39.0 billion in the first and fourth quarters of ~~2015,~~2016, respectively. The increases in average net interest-free funds in the two most recent quarters as compared with the first quarter of ~~2015~~2016 reflect higher average balances of noninterest-bearing ~~deposits and shareholders’ equity.~~deposits. Those deposits averaged $33.3 billion, $28.9 billion and $31.7 billion in the ~~recent quarter, compared with $25.8 billion~~quarters ended March 31, 2017, March 31, 2016 and ~~$28.4 billion~~December 31, 2016, respectively. The growth in the first and fourth quarters of 2015, respectively. In connection with the acquisition of Hudson City, the Company added noninterest-bearing deposits of $691 million at the acquisition date. In addition to the impact of the merger, growth inaverage noninterest-bearing deposits since the first quarter of ~~2015 was due, in part, to~~2016 largely reflects higher deposits of ~~commercial and~~ trust customers. ~~The rise~~Shareholders’ equity averaged $16.3 billion in ~~average shareholders’ equity included $3.1~~each of the three-month periods ended March 31, 2017 and March 31, 2016, compared with $16.7 billion ~~of common equity issued~~ in ~~connection with~~ the ~~acquisition of Hudson City as well as net retained earnings.~~three-month period ended December 31, 2016. Goodwill and core deposit and other intangible assets averaged $4.7 billion inand the recent quarter, compared with $3.6 billion in the first quarter of 2015 and $4.3 billion in the fourth quarter of 2015. Goodwill of $1.1 billion and core deposit intangible of $132 million resulted from the Hudson City acquisition. The cash surrender value of bank owned life insurance averaged $1.7 billion induring each of the ~~three-month periods~~quarters ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015.~~2016. Increases in the cash surrender value of bank owned life insurance and benefits received are not included in interest income, but rather are recorded in “other revenues from operations.” The contribution of net interest-free funds to net interest margin was .19% in the recent quarter, compared with .17% in the first quarter of 2016 ~~compared with~~and .20% ~~in the first quarter of 2015 and .18%~~ in the fourth quarter of ~~2015.~~2016.

Reflecting the changes to the net interest spread and the contribution of ~~net~~ interest-free funds as described herein, the Company’s net interest margin was 3.34% in the recent quarter, compared with 3.18% in the ~~first~~initial quarter of 2016 ~~compared with 3.17%~~and 3.08% in the ~~first~~final quarter of ~~2015 and 3.12% in the fourth quarter of 2015.~~2016. Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in reductions in spreads, could adversely impact the Company’s net interest income and net interest margin.

Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company has utilized

~~- 56 -~~

interest rate swap agreements to modify the repricing characteristics of certain portions of its interest-bearing liabilities. Periodic settlement amounts arising from these agreements are reflected in the rates paid on interest-bearing liabilities. The notional amount of interest rate swap agreements entered into for interest rate risk management purposes was ~~$1.4 billion~~$900 million at each of March 31, ~~2016, March 31, 2015~~2017 and December 31, ~~2015.~~2016, compared with $1.4 billion at March 31, 2016. Under the terms of those interest rate swap agreements, the Company received payments based on the outstanding notional amount at fixed rates and made payments at variable rates. Those interest rate swap agreements were designated as fair value hedges of certain fixed rate long-term borrowings. The $500 million decline in notional amount from March 31, 2016 reflects the expiration of a hedge transaction in December 2016 upon conversion of $500 million of fixed rate long-term borrowings to a floating rate. There were no interest rate swap agreements designated as cash flow hedges at those respective dates.

In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and changes in the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the corresponding gain or loss recognized in current earnings. The difference between changes in the fair value of the interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded in “other revenues from operations” in the Company’s consolidated statement of income. The amounts of hedge ineffectiveness recognized during each of the quarters ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015~~2016 were not material to the Company’s consolidated results of operations. The estimated aggregate fair value of interest rate swap agreements designated as fair value hedges represented gains of approximately $8 million at March 31, 2017, $41 million at March 31, 2016 ~~$73 million at March 31, 2015~~ and ~~$44~~$12 million at December 31, ~~2015.~~2016. The fair values of such interest rate swap agreements were substantially offset by changes in the fair values of the hedged items. The changes in the fair values of the interest rate swap agreements and the hedged items primarily result from the effects of changing interest rates and spreads. The Company’s credit exposure as of March 31, ~~2016~~2017 with respect to the estimated fair value of interest rate swap agreements used for managing interest rate risk has been substantially mitigated through master netting arrangements with trading account interest rate contracts with the same counterparty, ~~as well as~~periodic settlements and counterparty postings of ~~$21~~$11 million of collateral with the Company.

- 52 -

The weighted-average rates to be received and paid under interest rate swap agreements currently in effect were ~~4.42%~~3.75% and ~~1.59%~~2.24%, respectively, at March 31, ~~2016.~~2017. The average notional amounts of interest rate swap agreements entered into for interest rate risk management purposes, the related effect on net interest income and margin, and the weighted-average interest rates paid or received on those swap agreements are presented in the accompanying table. Additional information about the Company’s use of interest rate swap agreements and other derivatives is included in note 10 of Notes to Financial Statements.

~~- 57 -~~

INTEREST RATE SWAP AGREEMENTS

~~Dollars in thousands~~

	Three Months Ended March 31
.	2017							2016
	Amount			Rate(a)				Amount			Rate(a)
	(Dollars in thousands)
Increase (decrease) in:
Interest income	$	—			—		%	$	—			—		%
Interest expense		(3,648	)		(.02	)			(10,333	)		(.05	)
Net interest income/margin	$	3,648			.01		%	$	10,333			.04		%
Average notional amount	$	900,000						$	1,400,000
Rate received (b)					3.75		%					4.42		%
Rate paid (b)					2.13		%					1.45		%

   Three months ended March 31
   2016 2015
   Amount    Rate (a) Amount    Rate (a)
Increase (decrease) in:

Interest income
   $ —         —   % $ —         —   %
Interest expense
   (10,333 )    (.05 ) (11,277 )    (.08 )





Net interest income/margin
   $ 10,333       .04 % $ 11,277       .06 %






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





Rate received (b)
      4.42 %    4.42 %
Rate paid (b)
      1.45 %    1.20 %

(a)

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

(b)

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

As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk. Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future obligations, including demands for loans and deposit withdrawals, funding operating costs, and other corporate purposes. Liquidity risk arises whenever the maturities of financial instruments included in assets and liabilities differ. M&T’s bank subsidiaries have access to additional funding sources through borrowings from the FHLB of New York, lines of credit with the Federal Reserve Bank of New York, the previously noted Bank Note Program, and other available borrowing facilities. The Company has, from time to time, issued subordinated capital notes ~~and junior subordinated debentures associated with trust preferred securities~~ to provide liquidity and enhance regulatory capital ratios. Such notes generally qualify under the Federal Reserve Board’s risk-based capital guidelines for inclusion in the Company’s regulatory capital. However, pursuant to the Dodd-Frank ~~Wall Street Reform and Consumer Protection~~ Act, ~~(“Dodd-Frank Act”),~~ the Company’s junior subordinated debentures associated with trust preferred securities have been phased-out of the definition of Tier 1 capital. ~~Effective January 1, 2015, 75% of such securities were excluded from the Company’s Tier 1 capital, and beginning~~Beginning January 1, 2016 ~~100% were excluded. The amounts excluded from~~those instruments are considered Tier 12 capital and are only includable in total regulatory capital. ~~In accordance with its 2015 capital plan, in April 2015 M&T redeemed the junior subordinated debentures associated with the trust preferred securities of M&T Capital Trusts I, II and III.~~

The Company has informal and sometimes reciprocal sources of funding available through various arrangements for unsecured short-term borrowings from a wide group of banks and other financial institutions. Short-term federal funds borrowings were $128 million, $157 million and $112 million at March 31, ~~2016, $155 million at~~2017, March 31, ~~2015~~2016 and ~~$99 million at~~ December 31, ~~2015.~~2016, respectively. In general, those borrowings were unsecured and matured on the next business day. In addition to satisfying customer demand, Cayman Islands office deposits may be used by the Company as an alternative to short-term borrowings. Cayman Islands office deposits totaled ~~$167~~$193 million ~~$179 million and $170~~at March 31, 2017, $167 million at March 31, 2016 ~~March 31, 2015~~ and $202 million at December 31, ~~2015, respectively.~~2016. The Company has also benefited from the placement of brokered deposits. The Company ~~has~~had brokered savings and interest-bearing ~~transaction and brokered money-market~~checking deposit accounts which aggregated approximately ~~$1.1~~$1.2 billion at each of March 31, 2017 and December 31, 2016, ~~and~~compared with $1.1 billion at March 31, ~~2015, compared with $1.2 billion at December 31, 2015.~~2016. Brokered time deposits were not a significant source of funding as of those dates.

- 53 -

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

~~- 58 -~~

available capacity from secured borrowing sources and securitizable assets. In addition to deposits and borrowings, other sources of liquidity include maturities of investment securities and other earning assets, repayments of loans and investment securities, and cash generated from operations, such as fees collected for services.

Certain customers of the Company obtain financing through the issuance of variable rate demand bonds (“VRDBs”). The VRDBs are generally enhanced by letters of credit provided by M&T Bank. M&T Bank oftentimes acts as remarketing agent for the VRDBs and, at its discretion, may from time-to-time own some of the VRDBs while such instruments are remarketed. When this occurs, the VRDBs are classified as trading account assets in the Company’s consolidated balance sheet. Nevertheless, M&T Bank is not contractually obligated to purchase the VRDBs. The value of VRDBs in the Company’s trading account ~~totaled~~aggregated $1 million at March 31, 2017, $37 ~~million and $11~~ million at March 31, 2016 and ~~2015, respectively, while less than $1~~$30 million ~~were held~~ at December 31, ~~2015.~~2016. The total amount of VRDBs outstanding backed by M&T Bank letters of credit was ~~$1.7~~$1.3 billion at each of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, compared with ~~$1.9~~$1.7 billion at March 31, ~~2015.~~2016. M&T Bank also serves as remarketing agent for most of those bonds.

The Company enters into contractual obligations in the normal course of business ~~which~~that require future cash payments. Such obligations include, among others, payments related to deposits, borrowings, leases and other contractual commitments. Off-balance sheet commitments to customers may impact liquidity, including commitments to extend credit, standby letters of credit, commercial letters of credit, financial guarantees and indemnification contracts, and commitments to sell real estate loans. Because many of these commitments or contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. Further discussion of these commitments is provided in note 13 of Notes to Financial Statements.

M&T’s primary source of funds to pay for operating expenses, shareholder dividends and treasury stock repurchases has historically been the receipt of dividends from its ~~banking~~bank subsidiaries, which are subject to various regulatory limitations. Dividends from any ~~banking~~bank subsidiary to M&T are limited by the amount of earnings of the ~~banking~~ subsidiary in the current year and the two preceding years. For purposes of that test, at March 31, ~~2016~~2017 approximately ~~$1.3 billion~~$648 million was available for payment of dividends to M&T from ~~banking~~bank subsidiaries. Information regarding the long-term debt obligations of M&T is included in note 5 of Notes to Financial Statements.

Management closely monitors the Company’s liquidity position on an ongoing basis for compliance with internal policies and believes that available sources of liquidity are adequate to meet funding needs anticipated in the normal course of business. Management does not anticipate engaging in any activities, either currently or in the long-term, for which adequate funding would not be available and would therefore result in a significant strain on liquidity at either M&T or its subsidiary banks. Banking regulators have ~~finalized~~enacted the LCR rules requiring a banking company to maintain a minimum amount of liquid assets to withstand a standardized supervisory liquidity stress scenario. The ~~effective date for those rules for the Company was January 1, 2016, subject to a phase-in period. The~~ Company has taken steps ~~as noted herein~~ to ~~enhance its~~maintain appropriate liquidity and is in compliance with the ~~phase-in requirements of the~~LCR rules.

Market risk is the risk of loss from adverse changes in the market prices and/or interest rates of the Company’s financial instruments. The primary market risk the Company is exposed to is interest rate risk. Interest rate risk arises from the Company’s core banking activities of lending and deposit-taking, because assets and liabilities reprice at different times and by different amounts as interest rates change. As a result, net interest income earned by the Company is subject to the effects of changing interest rates. The Company measures interest rate risk by calculating the variability of net

~~- 59 -~~

interest income in future periods under various interest rate scenarios using projected balances for earning assets, interest-bearing liabilities and derivatives used to hedge interest rate risk. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income. The

- 54 -

balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and investment securities, and expected maturities of investment securities, loans and deposits. Management uses a “value of equity” model to supplement the modeling technique described above. Those supplemental analyses are based on discounted cash flows associated with on- and off-balance sheet financial instruments. Such analyses are modeled to reflect changes in interest rates and provide management with a long-term interest rate risk metric.

The Company’s Asset-Liability Committee, which includes members of senior management, monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a computer model that forecasts net interest income under different interest rate scenarios. In modeling changing interest rates, the Company considers different yield curve shapes that consider both parallel (that is, simultaneous changes in interest rates at each point on the yield curve) and non-parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve. In utilizing the model, projections of net interest income calculated under the varying interest rate scenarios are compared to a base interest rate scenario that is reflective of current interest rates. The model considers the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk through the use of on- or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.

The accompanying table as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 displays the estimated impact on net interest income from non-trading financial instruments in the base scenario described above resulting from parallel changes in interest rates across repricing categories during the first modeling year.

SENSITIVITY OF NET INTEREST INCOME

TO CHANGES IN INTEREST RATES

~~Dollars in thousands~~

	Calculated Increase (Decrease) in Projected Net Interest Income
Changes in interest rates	March 31, 2017			December 31, 2016
	(In thousands)

+200 basis points	$	204,102			227,283
+100 basis points		139,298			147,400
-50 basis points		(93,725	)		(98,945	)

Calculated increase (decrease)
in projected net interest income

Changes in interest rates
   March 31, 2016    December 31, 2015
+200 basis points
   $ 280,537       $ 243,958
+100 basis points
   163,692       145,169
-50 basis points
   (115,291 )    (99,603 )

The Company utilized many assumptions to calculate the impact that changes in interest rates may have on net interest income. The more significant of those assumptions included the rate of prepayments of mortgage-related assets, cash flows from derivative and other financial instruments held for non-trading purposes, loan and deposit volumes and pricing, and deposit maturities. In the scenarios presented, the Company also assumed gradual ~~increases~~changes in interest rates during a twelve-month period of 100 and 200 basis ~~points,~~point increases and a 50 basis point decrease, as compared with the ~~assumed~~ base ~~scenario, as well as a gradual decrease of 50 basis points.~~scenario. In the declining rate scenario, the rate changes may be limited to lesser amounts such that interest rates remain positive aton all points onof the yield curve. In 2016,

~~- 60 -~~

the Company suspended the -100 basis point scenario due to the persistent low level of interest rates. This scenario will be reinstated if and when interest rates rise sufficiently to make the analysis more meaningful. The assumptions used in interest rate sensitivity modeling are inherently uncertain and, as a result, the Company cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly from those presented due to the timing, magnitude and frequency of changes in interest rates and changes in market conditions and interest rate differentials (spreads) between maturity/repricing categories, as well as any actions, such as those previously described, which management may take to counter such changes. Given recent increases in short-term interest rates,

- 55 -

management believes that exposure to potential volatility of net interest income has recently increased. As a result, in 2017 management is adding interest rate swap agreements designated as hedging instruments to mitigate the Company’s exposure to such potential volatility.

Changes in fair value of the Company’s financial instruments can also result from a lack of trading activity for similar instruments in the financial markets. That impact is most notable on the values assigned to some of the Company’s investment securities. Information about the fair valuation of investment securities is presented herein under the heading “Capital” and in notes 3 and 12 of Notes to Financial Statements.

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

The notional amounts of interest rate contracts entered into for trading account purposes ~~aggregated~~totaled $22.3 billion at March 31, 2017, $18.9 billion at March 31, 2016 ~~$17.1 billion at March 31, 2015~~ and ~~$18.4~~$21.6 billion at December 31, ~~2015.~~2016. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes ~~totaled~~were $496 million at March 31, 2017, compared with $2.8 billion at March 31, 2016 ~~compared with $1.4 billion~~ and ~~$1.6 billion~~$471 million at ~~March 31 and~~ December 31, ~~2015, respectively.~~2016. Although the notional amounts of these contracts are not recorded in the consolidated balance sheet, the unsettled fair values of all financial instruments used for trading account activities are recorded in the consolidated balance sheet. The fair values of all trading account assets and liabilities recognized on the balance sheet aggregated $175 million and $139 million, respectively, at March 31, 2017. Effective January 2017, certain clearinghouse exchanges revised their rules to re-characterize required collateral postings for changes in fair value of exchange-traded derivatives as legal settlements of those positions. As a result, the fair value asset and liability amounts at March 31, 2017 have been reduced by contractual settlements of $112 million and $25 million, respectively. The fair values of trading account assets and liabilities were $468 million and $296 million, respectively, at March 31, 2016, ~~$363~~and $324 million and ~~$240 million, respectively, at March 31, 2015, and $274 million and $161~~$174 million, respectively, at December 31, ~~2015.~~2016. Included in trading account assets were assets related to deferred compensation plans ~~totaling~~aggregating $22 million at each of March 31, 2017, March 31, 2016 ~~compared with $25 million at March 31, 2015~~ and ~~$24 million at~~ December 31, ~~2015.~~2016. Changes in the fair ~~value~~values of such assets are recorded as “trading account and foreign exchange gains” in the consolidated statement of income. Included in “other liabilities” in the consolidated balance sheet at March 31, ~~2016~~2017 were ~~$26~~$25 million of liabilities related to deferred compensation plans, compared with ~~$29~~$26 million ~~and $28 million~~ at each of March 31 and December 31, ~~2015, respectively.~~2016. Changes in the balances of such liabilities due to the valuation of allocated investment options to which the liabilities are indexed are recorded in “other costs of operations” in the consolidated statement of income. Also included in trading account assets were investments in mutual funds and other assets that

~~- 61 -~~

the Company was required to hold under terms of certain non-qualified supplemental retirement and other benefit plans that were assumed by the Company in various acquisitions. Those assets totaled ~~$48 million,~~ $24 million at each of March 31, 2017 and ~~$33~~December 31, 2016, compared with $48 million at March 31, ~~2016, March 31, 2015 and December 31, 2015, respectively.~~2016.

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

- 56 -

Provision for Credit Losses

The Company maintains an allowance for credit losses that in management’s judgment appropriately reflects losses inherent in the loan and lease portfolio. A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management. The provision for credit losses in the ~~first~~initial quarter of ~~2016~~2017 was ~~$49~~$55 million, compared with ~~$38~~$49 million in the year-earlier quarter and ~~$58~~$62 million in the fourth quarter of ~~2015. A $21 million provision for credit losses was recorded in the fourth quarter~~2016. Net charge-offs of ~~2015, in accordance with GAAP, related to~~ loans obtained in the Hudson City acquisition that had a fair value in excess of outstanding principal. GAAP provides that an allowance for credit losses on such loans be recorded beyond the recognition of the fair value of the loans at the acquisition date. Net loan charge-offs were ~~$42~~$43 million in the recent quarter, compared with ~~$36~~$42 million and $49 million in ~~each of~~ the first and fourth quarters of ~~2015.~~2016, respectively. Net charge-offs as an annualized percentage of average loans and leases were .19% in the ~~initial~~first quarters of 2017 and 2016, ~~quarter,~~ compared with .22% in the ~~year-earlier quarter and .18% in the~~ final ~~2015~~2016 quarter. A summary of net charge-offs by loan type is presented in the table that follows.

NET CHARGE-OFFS (RECOVERIES)

BY LOAN/LEASE TYPE

~~In thousands~~

	First Quarter 2017		First Quarter 2016			Fourth Quarter 2016
	(In thousands)

Commercial, financial, leasing, etc.	$	11,896		902			17,190
Real estate:
Commercial		3,971		(1,141	)		886
Residential		4,752		5,085			4,978
Consumer		21,948		37,394			26,070
	$	42,567		42,240			49,124

   First Quarter
2016    First Quarter
2015    Fourth Quarter
2015
Commercial, financial, leasing, etc.
   $ 902       8,411       (3,358 )
Real estate:

Commercial
   (1,141 )    6,094       (1,743 )
Residential
   5,085       2,129       2,462
Consumer
   37,394       19,555       38,445






   $ 42,240       36,189       35,806

Net charge-offs of commercial loans and leases in the first quarter of 2017 included a $6 million charge-off associated with a producer of powdered cellulose and fiber filler products used for food and industrial applications, and in the final 2016 quarter included a $12 million charge-off associated with a multi-regional manufacturer of refractory brick and other castable products. Included in net charge-offs of consumer loans and leases were net charge-offs during the quarters ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively, of: automobile loans of $9 million, $11 million ~~$4 million~~ and $3$8 million; recreational vehicle loans of $5 million, $12 million ~~$3 million~~ and $3$5 million; and home equity loans and lines of credit secured by one-to-four family residential properties of $3 million, $5 million ~~$6 million~~ and $3$4 million. ~~During~~Beginning in the first quarter of 2016, the Company ~~charged~~accelerated the charge off of consumer loans associated with customers who were either deceased or had filed for bankruptcy that, in accordance with GAAP, had previously been considered when determining ~~the~~ level of the allowance for credit ~~losses. Such charge-offs~~losses and were charged-off following the Company’s normal charge-off procedures to the extent the loans subsequently became delinquent. Charge-offs of such loans totaled ~~$14~~$7 million in the recent quarter, $14 million in the first quarter of 2016 and $6 million in the final quarter of 2016 and included $5 million, $11 million and $4 million, respectively, of loan balances with a current payment ~~status. Net charge-offs~~status at the time of ~~consumer loans in the fourth quarter of 2015 included a $20 million charge-off of a single personal usage loan obtained in a previous acquisition.~~charge-off.

- 57 -

Loans acquired in connection with acquisition transactions subsequent to 2008 were recorded at fair value with no carry-over of any previously

~~- 62 -~~

recorded allowance for credit losses. Determining the fair value of the acquired loans ~~requires~~required estimating cash flows expected to be collected on the loans and discounting those cash flows at then-current interest rates. For acquired loans where fair value was less than outstanding principal as of the acquisition date and the resulting discount was due, at least in part, to credit deterioration, the excess of expected cash flows over the carrying value of the loans is recognized as interest income over the lives of ~~the~~ loans. The difference between contractually required payments and the cash flows expected to be collected is referred to as the nonaccretable balance and is not recorded on the consolidated balance sheet. The nonaccretable balance reflects estimated future credit losses and other contractually required payments that the Company does not expect to collect. The Company regularly evaluates the reasonableness of its cash flow projections associated with such ~~loans.~~loans, including its estimates of lifetime principal losses. Any decreases to the expected cash flows require the Company to evaluate the need for an additional allowance for credit losses and could lead to charge-offs of loan balances. Any significant increases in expected cash flows result in additional interest income to be recognized over the then-remaining lives of the loans. The carrying amount of loans acquired at a discount subsequent to 2008 and accounted for based on expected cash flows was $1.6 billion, $2.3 billion ~~$2.4 billion~~ and ~~$2.5~~$1.8 billion at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. The decrease in ~~the recent quarter as compared with December~~such loans since March 31, ~~2015~~2016 was largely attributable to payments received. The nonaccretable balance related to remaining principal losses associated with loans acquired at a discount as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 is presented in the accompanying table.

NONACCRETABLE BALANCE - PRINCIPAL


	Remaining balance				Remaining balance
	March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016
	(in thousands)				(In thousands)

Commercial, financial, leasing, etc.	$	6,565		10,806	$	5,886		4,794
Commercial real estate		49,640		48,173		39,096		39,867
Residential real estate		91,093		113,478		47,691		59,657
Consumer		15,207		17,952		11,170		11,275

Total	$	162,505		190,409	$	103,843		115,593

For acquired loans where the fair value exceeded the outstanding principal balance, the resulting premium is recognized as a reduction of interest income over the lives of the loans. Immediately following the acquisition date and thereafter, an allowance for credit losses is recorded for incurred losses inherent in the portfolio, consistent with the accounting for originated loans and leases. The carrying amount of Hudson City loans acquired at a premium was ~~$17.0~~$13.5 billion and ~~$17.8~~$14.2 billion at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. ~~As noted previously, a $21 million provision for credit losses was recorded in the fourth quarter of 2015 for incurred losses inherent in those loans.~~ GAAP does not allow the credit loss component of the net premium associated with those loans to be bifurcated and accounted for as a nonaccreting balance as is the case with purchased impaired loans and other loans acquired at a discount. ~~Despite~~Rather, subsequent to the ~~fact that the determination of aggregate fair value reflects the impact of expected credit losses, GAAP provides that~~acquisition date, incurred losses associated with those loans are evaluated using methods consistent with those applied to originated loans and such losses are considered by management in ~~a portfolio of loans acquired at a premium be recognized even though in a relatively homogenous portfolio of residential mortgage loans~~evaluating the ~~specific loans to which the losses relate cannot be individually identified at the acquisition date.~~Company’s allowance for credit losses.

Nonaccrual loans ~~totaled $877~~aggregated $927 million or ~~1.00%~~1.04% of total loans and leases outstanding at March 31, ~~2016,~~2017, compared with ~~$791~~$877 million or ~~1.18%~~1.00% a

~~- 63 -~~

year earlier and ~~$799~~$920 million or ~~.91%~~1.01% at December 31, ~~2015.~~2016. The ~~increase in~~higher levels of nonaccrual loans at the two most recent ~~quarter-end~~quarter-ends as compared with March 31, ~~and December 31, 2015 reflects~~2016 reflect the ~~normal~~expected migration of previously performing residential real estate loans obtained in the acquisition of Hudson City that became past due over 90 days ~~past due during the recent quarter~~after March 31, 2016. Nonaccrual Hudson City-related residential real estate loans totaled $207 million at March 31, 2017, $79 million at March 31, 2016 and ~~as such, were not identifiable as purchased impaired as of the acquisition date.~~$190 million at December 31, 2016.

- 58 -

Accruing loans past due 90 days or more (excluding loans acquired at a discount) ~~totaled $336~~were $280 million, or ~~.38%~~.31% of total loans and leases at March 31, ~~2016,~~2017, compared with ~~$237~~$336 million or ~~.35%~~.38% at March 31, ~~2015~~2016 and ~~$317~~$301 million or ~~.36%~~.33% at December 31, ~~2015.~~2016. Those ~~loans~~amounts included loans guaranteed by government-related entities of $253 million, $279 million ~~$194 million~~ and ~~$276~~$283 million at March 31, ~~2016, March 31, 2015 and December 31, 2015, respectively. Such guaranteed loans obtained in the acquisition of Hudson City totaled $44 million at each of~~2017, March 31, 2016 and December 31, ~~2015.~~2016, respectively. Guaranteed loans ~~also~~ included one-to-four family residential mortgage loans serviced by the Company that were repurchased to reduce associated servicing costs, including a requirement to advance principal and interest payments that had not been received from individual mortgagors. Despite the loans being purchased by the Company, the insurance or guarantee by the applicable government-related entity remains in force. The outstanding principal balances of the repurchased loans that are guaranteed by government-related entities totaled ~~$226~~$197 million ~~$178 million and $221~~at March 31, 2017, $226 million at March 31, 2016 ~~March 31, 2015~~ and $224 million at December 31, ~~2015, respectively.~~2016. The remaining accruing loans past due 90 days or more not guaranteed by government-related entities were loans considered to be with creditworthy borrowers that were in the process of collection or renewal.

Purchased impaired loans are loans obtained in acquisition transactions subsequent to 2008 that as of the acquisition date were specifically identified as displaying signs of credit deterioration and for which the Company did not expect to collect all ~~outstanding~~contractually required principal and ~~contractually required~~ interest payments. Those loans were impaired at the date of acquisition, were recorded at estimated fair value and were generally delinquent in payments, but, in accordance with GAAP, the Company continues to accrue interest income on such loans based on the estimated expected cash flows associated with the loans. The carrying amount of such loans was ~~$716~~$553 million at March 31, ~~2016,~~2017, or ~~approximately .8%~~.6% of total loans. Of that amount, ~~$624~~$488 million iswas related to the Hudson City acquisition. Purchased impaired loans totaled ~~$184~~$716 million and ~~$768~~$578 million at March 31, 2016 and December 31, ~~2015,~~2016, respectively.

Accruing loans acquired at a discount past due 90 days or more are loans that could not be specifically identified as impaired as of the acquisition date, but were recorded at estimated fair value as of such date. Such loans totaled $64 million at March 31, 2017, compared with $62 million at March 31, 2016 ~~compared with $80 million at March 31, 2015~~ and ~~$68~~$61 million at December 31, ~~2015.~~2016.

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

~~- 64 -~~

Residential real estate loans modified under specified loss mitigation programs prescribed by government guarantors have not been included in renegotiated loans because the loan guarantee remains in full force and, accordingly, the Company has not granted a concession with respect to the ultimate collection of the original loan balance. Such loans aggregated $174 million, $155 million ~~$153 million~~ and ~~$147~~$171 million at March 31, ~~2016, March 31, 2015 and December 31, 2015, respectively.~~

Nonaccrual commercial loans and leases aggregated $280 million at March 31, 2016, $195 million at March 31, 2015 and $242 million at December 31, 2015. The largest commercial loans placed in nonaccrual status since March 31, 2015 were a $24 million relationship with a commercial maintenance services provider with operations in New Jersey and Pennsylvania that was placed in nonaccrual status in the third quarter of 2015 and a $40 million relationship with a multi-regional manufacturer of refractory brick and other cast-able products placed in nonaccrual status in the first quarter of 2016. Commercial real estate loans classified as nonaccrual totaled $224 million at2017, March 31, 2016 and December 31, ~~2015,~~2016, respectively.

Commercial loans and ~~$232~~leases classified as nonaccrual totaled $261 million at each of March 31, 2017 and December 31, 2016, compared with $280 million at March 31, ~~2015.~~2016. Commercial real estate loans in nonaccrual status aggregated $211 million at each of March 31, 2017 and December 31, 2016, compared with $224 million at March 31, 2016. Nonaccrual commercial real estate loans included construction-related loans of $28 million, $53 million ~~$90 million~~ and ~~$45~~$35 million at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. Those nonaccrual construction loans included loans to residential builders and developers of $14 million, $32 million and ~~$65~~$17 million at March 31, 2017, March 31, 2016 and ~~2015, respectively, and $28 million at~~ December 31, ~~2015.~~2016, respectively. Information about the location of nonaccrual and charged-off loans to residential real estate builders and developers as of and for the three-month period ended March 31, ~~2016~~2017 is presented in the accompanying table.

- 59 -

RESIDENTIAL BUILDER AND DEVELOPER LOANS, NET OF UNEARNED DISCOUNT

																					Quarter Ended
	March 31, 2016							Quarter ended March 31, 2016						March 31, 2017							March 31, 2017
			Nonaccrual					Net charge-offs (recoveries)								Nonaccrual					Net Charge-offs (Recoveries)
	Outstanding balances (b)		Balances		Percent of outstanding balances			Balances			Annualized percent of average outstanding balances			Outstanding Balances(b)		Balances		Percent of Outstanding Balances			Balances			Annualized Percent of Average Outstanding Balances
	(dollars in thousands)													(Dollars in thousands)

New York	$	823,828	$	2,868		.35	%	$	71			.01	%	$	509,409	$	899		.18	%	$	(42	)		(.03	)	%
Pennsylvania		136,965		26,898		19.64			(18	)		(.01	)		160,333		10,843		6.76			(14	)		(.04	)
Mid-Atlantic(a)		428,913		3,740		.87			(952	)		(.22	)		498,604		2,304		.46			(120	)		(.10	)
Other		450,849		1,277		.28			—			—			603,505		1,188		.20			—			—


Total	$	1,840,555	$	34,783		1.89	%	$	(899	)		(.05	)%	$	1,771,851	$	15,234		.86	%	$	(176	)		(.04	)	%

(a)

Includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia.

(b)

Includes approximately ~~$18~~$14 million of loans not secured by real estate, of which approximately $2 million are in nonaccrual status.

~~Residential~~

Nonaccrual residential real estate loans ~~in nonaccrual status~~totaled $350 million at March 31, 2017, compared with $263 million at March 31, 2016 ~~were $263 million, compared with $246 million at March 31, 2015~~ and ~~$215~~$336 million at December 31, ~~2015.~~2016. The increase in residential real estate loans classified as nonaccrual at the two most recent quarter-ends as compared with March 31, 2016 ~~as compared with December 31, 2015~~ reflects the ~~normal~~expected migration ~~of $80 million~~ of previously performing loans obtained ~~with~~in the acquisition of Hudson City that became more than 90 days ~~delinquent during the recent quarter.~~delinquent. Such nonaccrual residential real estate loans aggregated $207 million at March 31, 2017, $79 million at March 31, 2016 and $190 million at December 31, 2016. Those loans could not be identified as purchased impaired loans at the acquisition date because the borrowers were making ~~current~~ loan payments at the time and the loans were not recorded at a

~~- 65 -~~

discount. ~~The decrease in residential real estate loans classified as nonaccrual from March 31, 2015 to December 31, 2015 reflects improved repayment performance by customers.~~ Included in residential real estate loans classified as nonaccrual were limited documentation first mortgage loans of $113 million, $76 million ~~$74 million~~ and ~~$62~~$107 million at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. Limited documentation first mortgage loans represent loans secured by residential real estate that at origination typically included some form of limited borrower documentation requirements as compared with more traditional loans. Such loans in the Company’s portfolio prior to the Hudson City transaction were originated by the Company before 2008. Hudson City discontinued its limited documentation loan program in January 2014. Residential real estate loans past due 90 days or more and accruing interest (excluding loans acquired at a discount) ~~totaled~~aggregated $251 million at March 31, 2017, compared with $279 million ~~(including $44 million obtained in the acquisition of Hudson City)~~ at March 31, 2016 ~~compared with $197 million a year earlier~~ and ~~$284~~$281 million at December 31, ~~2015.~~2016. A substantial portion of such amounts related to guaranteed loans repurchased from government-related entities. Information about the location of nonaccrual and charged-off residential real estate loans as of and for the quarter ended March 31, ~~2016~~2017 is presented in the accompanying table.

~~- 66 -~~

~~SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA~~

   March 31, 2016 Quarter ended
March 31, 2016
      Nonaccrual Net charge-offs
(recoveries)
   Outstanding
balances    Balances    Percent of
outstanding
balances Balances Annualized
percent of
average
outstanding
balances
   (dollars in thousands)
Residential mortgages:

New York
   $ 6,623,498       $ 68,450       1.03 % $ 1,740    .10 %
Pennsylvania
   1,800,458       16,332       .91    736    .16
Maryland
   1,309,386       13,567       1.04    483    .15
New Jersey
   6,058,466       27,216       .45    454    .03
Other Mid-Atlantic(a)
   1,127,285       12,800       1.14    217    .08
Other
   4,242,521       47,061       1.11    452    .04






Total
   $ 21,161,614       $ 185,426       .88 % $ 4,082    .08 %






Residential construction loans:

New York
   $ 6,019       $ 23       .38 % $ —      —   %
Pennsylvania
   4,678       482       10.31    13    1.15
Maryland
   4,269       —         —      —      —
New Jersey
   890       —         —      —      —
Other Mid-Atlantic(a)
   3,207       —         —      —      —
Other
   11,414       521       4.56    19    .62






Total
   $ 30,477       $ 1,026       3.37 % $ 32    .41 %






Limited documentation first mortgages:

New York
   $ 1,717,886       $ 23,091       1.34 % $ 574    .13 %
Pennsylvania
   86,663       4,858       5.61    25    .11
Maryland
   48,923       2,755       5.63    164    1.34
New Jersey
   1,612,316       13,541       .84    12    .01
Other Mid-Atlantic(a)
   43,947       3,180       7.24    (84 ) (.75 )
Other
   597,812       28,840       4.82    280    .19






Total
   $ 4,107,547       $ 76,265       1.86 % $ 971    .09 %






First lien home equity loans and lines of credit:

New York
   $ 1,333,557       $ 17,149       1.29 % $ 365    .11 %
Pennsylvania
   864,700       9,746       1.13    270    .13
Maryland
   702,543       6,675       .95    149    .08
New Jersey
   41,188       234       .57    —      —
Other Mid-Atlantic(a)
   211,391       498       .24    4    .01
Other
   19,789       1,368       6.91    1    .02






Total
   $ 3,173,168       $ 35,670       1.12 % $ 789    .10 %






Junior lien home equity loans and lines of credit:

New York
   $ 942,014       $ 26,558       2.82 % $ 2,021    .80 %
Pennsylvania
   382,366       3,464       .91    745    .72
Maryland
   855,594       7,004       .82    1,120    .49
New Jersey
   131,933       2,068       1.57    13    .04
Other Mid-Atlantic(a)
   321,220       1,226       .38    75    .09
Other
   41,868       2,281       5.45    (1 ) (.01 )






Total
   $ 2,674,995       $ 42,601       1.59 % $ 3,973    .56 %






Limited documentation junior lien:

New York
   $ 841       $ —         —   % $ 2    .73 %
Pennsylvania
   342       —         —      —      —
Maryland
   1,604       72       4.50    —      —
New Jersey
   389       —         —      —      —
Other Mid-Atlantic(a)
   745       —         —      —      —
Other
   5,171       379       7.32    60    4.61






Total
   $ 9,092       $ 451       4.96 % $ 62    2.71 %

~~(a)~~

~~Includes Delaware, Virginia, West Virginia and the District of Columbia.~~

~~- 67 -~~

Nonaccrual consumer loans ~~aggregated~~were $104 million at March 31, 2017, compared with $110 million at March 31, 2016 ~~compared with $118~~and $112 million at ~~each of March 31, 2015 and~~ December 31, ~~2015.~~2016. Included in nonaccrual consumer loans at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015~~2016 were: automobile loans of $16 million, $15 million, ~~$14 million~~ and ~~$17~~$19 million, respectively; recreational vehicle loans of ~~$16~~$5 million, $9$10 million and $9$7 million, respectively; and outstanding balances of home equity loans and lines of credit of $80 million, $79 million ~~$88 million~~ and ~~$84~~$82 million, respectively. Information about the location of nonaccrual and charged-off home equity loans and lines of credit as of and for the quarter ended March 31, ~~2016~~2017 is presented in the accompanying table.

Information about past due and nonaccrual loans as of March 31, 2017 and December 31, 2016 is also included in note 4 of Notes to Financial Statements.

- 60 -

SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA

	March 31, 2017							Quarter Ended March 31, 2017
			Nonaccrual					Net Charge-offs (Recoveries)
											Annualized Percent of
					Percent of						Average
	Outstanding				Outstanding						Outstanding
	Balances		Balances		Balances			Balances			Balances
	(Dollars in thousands)
Residential mortgages:
New York	$	6,032,744	$	72,668		1.20	%	$	1,647			.11	%
Pennsylvania		1,553,283		17,762		1.14			(43	)		(.01	)
Maryland		1,206,961		17,118		1.42			49			.02
New Jersey		4,907,675		48,178		.98			608			.05
Other Mid-Atlantic (a)		1,043,272		12,034		1.15			(42	)		(.02	)
Other		3,534,328		69,062		1.95			1,316			.15
Total	$	18,278,263	$	236,822		1.30	%	$	3,535			.08	%
Residential construction loans:
New York	$	4,327	$	—		—	%	$	—			—	%
Pennsylvania		1,937		371		19.16			5			.99
Maryland		1,828		—		—			—			—
New Jersey		1,821		—		—			—			—
Other Mid-Atlantic (a)		4,115		120		2.90			—			—
Other		6,440		372		5.78			(2	)		(.11	)
Total	$	20,468	$	863		4.22	%	$	3			.06	%
Limited documentation first mortgages:
New York	$	1,458,812	$	41,119		2.82	%	$	780			.21	%
Pennsylvania		73,449		7,987		10.87			(1	)		(.01	)
Maryland		41,949		3,441		8.20			36			.34
New Jersey		1,327,869		29,777		2.24			(15	)		(.01	)
Other Mid-Atlantic (a)		35,894		3,187		8.88			57			.62
Other		487,787		27,049		5.55			357			.29
Total	$	3,425,760	$	112,560		3.29	%	$	1,214			.14	%
First lien home equity loans and lines of credit:
New York	$	1,267,271	$	15,125		1.19	%	$	1,316			.42	%
Pennsylvania		811,212		8,824		1.09			202			.10
Maryland		667,613		6,632		.99			560			.34
New Jersey		44,534		564		1.27			(1	)		(.01	)
Other Mid-Atlantic (a)		204,081		1,723		.84			12			.02
Other		21,287		1,262		5.93			—			—
Total	$	3,015,998	$	34,130		1.13	%	$	2,089			.28	%
Junior lien home equity loans and lines of credit:
New York	$	891,927	$	23,339		2.62	%	$	352			.16	%
Pennsylvania		355,507		6,190		1.74			145			.16
Maryland		774,931		8,955		1.16			19			.01
New Jersey		128,078		1,352		1.06			21			.07
Other Mid-Atlantic (a)		307,238		3,420		1.11			16			.02
Other		41,883		2,060		4.92			(20	)		(.20	)
Total	$	2,499,564	$	45,316		1.81	%	$	533			.09	%
Limited documentation junior lien:
New York	$	821	$	—		—	%	$	(1	)		(.45	%)
Pennsylvania		331		—		—			—			—
Maryland		1,382		91		6.60			—			—
New Jersey		384		—		—			(36	)		(37.71	)
Other Mid-Atlantic (a)		648		—		—			—			—
Other		4,601		425		9.23			(12	)		(1.06	)
Total	$	8,167	$	516		6.32	%	$	(49	)		(2.41	%)

(a)

Includes Delaware, Virginia, West Virginia and the District of Columbia.

Real estate and other foreclosed assets totaled ~~$188~~$119 million ~~and $63~~at March 31, 2017, compared with $188 million at March 31, 2016 and ~~March 31, 2015, respectively, and $195~~$139 million at December 31, ~~2015.~~2016. The ~~higher levels of~~decline in real estate and other foreclosed assets at since

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March 31, 2016 ~~and December 31, 2015 reflect~~was attributable to lower levels of residential real estate properties associated with the Hudson City ~~acquisition, which totaled $121 million and $126 million at those respective dates.~~acquisition. Gains or losses resulting from ~~the~~ sales of real estate and other foreclosed assets were not material in the three-month periods ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 or December 31, ~~2015.~~2016. At March 31, ~~2016,~~2017, the Company’s holding of residential real estate-related properties comprised approximately ~~90%~~94% of foreclosed assets.

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

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NONPERFORMING ASSET AND PAST DUE, ~~RENEGOTIATED~~RENOGIATED AND IMPAIRED LOAN DATA

~~Dollars in thousands~~

	2017			2016 Quarters
	First Quarter			Fourth			Third			Second			First
	(Dollars in thousands)

Nonaccrual loans	$	926,675			920,015			837,362			848,855			876,691
Real estate and other foreclosed assets		119,155			139,206			159,881			172,473			188,004
Total nonperforming assets	$	1,045,830			1,059,221			997,243			1,021,328			1,064,695
Accruing loans past due 90 days or more(a)	$	280,019			300,659			317,282			298,449			336,170
Government guaranteed loans included in totals above:
Nonaccrual loans	$	39,610			40,610			47,130			52,486			49,688
Accruing loans past due 90 days or more		252,552			282,659			282,077			269,962			279,340
Renegotiated loans	$	191,343			190,374			217,559			211,159			200,771
Acquired accruing loans past due 90 days or more(b)	$	63,732			61,144			65,182			68,591			61,767
Purchased impaired loans(c):
Outstanding customer balance	$	890,431			927,446			981,105			1,040,678			1,124,776
Carrying amount		552,935			578,032			616,991			662,059			715,874

Nonaccrual loans to total loans and leases, net of unearned discount		1.04	%		1.01	%		.93	%		.96	%		1.00	%
Nonperforming assets to total net loans and leases and real estate and other foreclosed assets		1.17	%		1.16	%		1.11	%		1.15	%		1.21	%
Accruing loans past due 90 days or more (a) to total loans and leases, net of unearned discount		.31	%		.33	%		.35	%		.34	%		.38	%

   2016
First Quarter 2015 Quarters
   Fourth Third Second First
Nonaccrual loans
   $ 876,691    799,409    787,098    797,146    790,586
Real estate and other foreclosed assets
   188,004    195,085    66,144    63,734    62,578


Total nonperforming assets
   $ 1,064,695    994,494    853,242    860,880    853,164


Accruing loans past due 90 days or more(a)
   $ 336,170    317,441    231,465    238,568    236,621


Government guaranteed loans included in totals above:

Nonaccrual loans
   $ 49,688    47,052    48,955    58,259    60,508
Accruing loans past due 90 days or more
   279,340    276,285    193,998    206,775    193,618


Renegotiated loans
   $ 200,771    182,865    189,639    197,145    198,911


Accruing loans acquired at a discount past due 90 days or more(b)
   $ 61,767    68,473    80,827    78,591    80,110


Purchased impaired loans(c):

Outstanding customer balance
   $ 1,124,776    1,204,004    278,979    312,507    335,079
Carrying amount
   715,874    768,329    149,421    169,240    184,018
Nonaccrual loans to total loans and leases, net of unearned discount
   1.00 % .91 % 1.15 % 1.17 % 1.18 %
Nonperforming assets to total net loans and leases and real estate and other foreclosed assets
   1.21 % 1.13 % 1.24 % 1.26 % 1.27 %
Accruing loans past due 90 days or more (a) to total loans and leases, net of unearned discount
   .38 % .36 % .34 % .35 % .35 %

(a) Excludes loans acquired at a discount. Predominantly residential real estate loans.

~~(a)~~

(b)

~~Excludes loans acquired at a discount. Predominantly residential mortgage loans.~~

~~(b)~~

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

~~(c)~~

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

Management determined the allowance for credit losses by performing ongoing evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the economic environment in which borrowers operate, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or indemnifications. Management evaluated the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet repayment obligations when quantifying the Company’s exposure to credit losses and the allowance for such losses as of each reporting date. Factors also considered by management when performing its assessment, in addition to general economic conditions and the other factors described above, included, but were not limited to: (i) the impact of residential real estate values on the Company’s portfolio of loans to residential real estate builders and developers and

~~- 69 -~~

other loans secured by residential real estate; (ii) the concentrations of commercial real estate loans in the Company’s loan portfolio; (iii) the amount of commercial and industrial loans to businesses in areas of New York State outside of the New York City metropolitan area and in central Pennsylvania that have historically experienced less economic growth and vitality than the vast majority of other regions of the country; (iv) the expected repayment performance associated with the Company’s first and second lien loans secured by residential real estate, including loans obtained in the acquisition of Hudson City that

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were not classified as purchased impaired; and (v) the size of the Company’s portfolio of loans to individual consumers, which historically have experienced higher net charge-offs as a percentage of loans outstanding than other loan types. The level of the allowance is adjusted based on the results of management’s analysis.

Management cautiously and conservatively evaluated the allowance for credit losses as of March 31, ~~2016~~2017 in light of: (i) residential real estate values and the level of delinquencies of loans secured by residential real estate; (ii) economic conditions in the markets served by the Company; (iii) slower growth in private sector employment in upstate New York and central Pennsylvania than in other regions served by the Company and nationally; (iv) the significant subjectivity involved in commercial real estate valuations; and (v) the amount of loan growth experienced by the Company. While there has been general improvement in economic conditions, concerns continue to exist about the strength and sustainability of such improvements; the ~~troubled state~~volatile nature of global ~~commodity and export~~ markets, including the impact international economic conditions could have on the U.S. economy; Federal Reserve positioning of monetary policy; and continued stagnant population growth in the upstate New York and central Pennsylvania regions (approximately 55% of the Company’s loans and leases are to customers in New York State and Pennsylvania).

The Company utilizes a loan grading system which is applied to all commercial loans and commercial real estate loans. Loan grades are utilized to differentiate risk within the portfolio and consider the expectations of default for each loan. Commercial loans and commercial real estate loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. Criticized commercial loans and commercial real estate loans were $2.5 billion at March 31, 2017, compared with $2.3 billion at March 31, 2016 ~~compared with $2.1~~and $2.4 billion at December 31, ~~2015. The increase since December 31, 2015 included $74 million related to commercial real estate loans and $91 million related to commercial loans.~~2016. Approximately ~~94%~~99% of loan balances added to the criticized category during the recent quarter were less than 90 days past due and 91% had a current payment status. ~~The borrower industries~~Given payment performance, amount of supporting collateral, and, in certain instances, the existence of loan guarantees, the Company still expects to collect the full outstanding principal balance on most ~~significantly impacting the higher level~~ of ~~criticized loans were investment real estate, services and manufacturing.~~those loans.

Loan officers in different geographic locations with the support of ~~loan review~~the Company’s credit department personnel ~~in different geographic locations~~ are responsible to continuously review and reassign loan grades to pass and criticized loans based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective ~~geographic~~ regions. At least annually, updated financial information is obtained from commercial borrowers associated with pass grade loans and additional analysis is performed. On a quarterly basis, the Company’s centralized ~~loan review~~credit department reviews all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or

~~- 70 -~~

nonaccruing. For criticized nonaccrual loans, additional meetings are held with loan officers and their managers, workout specialists and senior management to discuss each of the relationships. In analyzing criticized loans, borrower-specific information is reviewed, including operating results, future cash flows, recent developments and the borrower’s outlook, and other pertinent data. The timing and extent of potential losses, considering collateral valuation and other factors, and the Company’s potential courses of action are reviewed. To the extent that these loans are collateral-dependent, they are evaluated based on the fair value of the loan’s collateral as estimated at or near the financial statement date. As the quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation. In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines in value as determined by line of business and/or loan workout personnel in the respective geographic regions. Those adjustments are reviewed and assessed for reasonableness by the Company’s ~~loan review~~credit department. Accordingly, for real estate collateral securing larger commercial loans and commercial real estate loans, estimated collateral values are based on current appraisals and estimates of value. For non-real estate loans, collateral is assigned a discounted estimated liquidation value and, depending on the nature of the collateral, is verified through field exams or other procedures. In assessing collateral,

- 63 -

real estate and non-real estate values are reduced by an estimate of selling costs. With regard to residential real estate loans, the Company’s loss identification and estimation techniques make reference to loan performance and house price data in specific areas of the country where collateral securing the Company’s residential real estate loans is located. For residential real estate-related loans, including home equity loans and lines of credit, the excess of the loan balance over the net realizable value of the property collateralizing the loan is charged-off when the loan becomes 150 days delinquent. That charge-off is based on recent indications of value from external parties that are generally obtained shortly after a loan becomes nonaccrual. Loans to consumers that file for bankruptcy are generally ~~charged-off~~charged off to estimated net collateral value shortly after the Company is notified of such filings. At March 31, ~~2016,~~2017, approximately ~~54%~~55% of the Company’s home equity portfolio consisted of first lien loans and lines of credit. Of the remaining junior lien loans in the portfolio, approximately ~~72%~~70% (or approximately ~~33%~~32% of the aggregate home equity portfolio)consisted of junior lien loans that were behind a first lien mortgage loan that was not owned or serviced by the Company. To the extent known by the Company, if a senior lien loan would be on nonaccrual status because of payment delinquency, even if such senior lien loan was not owned by the Company, the junior lien loan or line that is owned by the Company is placed on nonaccrual status. At March 31, ~~2016,~~2017, the balance of junior lien loans and lines that were in nonaccrual status solely as a result of first lien loan performance was ~~$23~~$13 million, compared with ~~$22~~$23 million at ~~each of~~ March 31, ~~2015~~2016 and $12 million at December 31, ~~2015.~~2016. In monitoring the credit quality of its home equity portfolio for purposes of determining the allowance for credit losses, the Company reviews delinquency and nonaccrual information and considers recent charge-off experience. When evaluating individual home equity loans and lines of credit for ~~charge off, if the Company does not know the amount~~charge-off and for purposes of the remaining first lien mortgage loan (typically because the Company does not own or service the first lien loan), the Company assumes that the first lien mortgage loan has had no principal amortization since the origination of the junior lien loan. Similarly, data used in estimating incurred losses ~~for purposes of~~in determining the allowance for credit losses, ~~also assumes no reductions in outstanding principal~~the Company gives consideration to the required repayment of any first lien ~~loans since the origination of the junior lien loan.~~positions related to collateral property. Home equity line of credit terms vary but such lines are generally originated with an open draw period of ten years followed by an amortization period of up to twenty years. At March 31, ~~2016,~~

~~- 71 -~~

2017, approximately ~~86%~~83% of all outstanding balances of home equity lines of credit related to lines that were still in the draw period, the weighted-average remaining draw periods were approximately five years, and approximately 21% were making contractually allowed payments that do not include any repayment of principal.

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

In determining the allowance for credit losses, the Company estimates losses attributable to specific troubled credits identified through both normal and detailed or intensified credit review processes and also estimates losses inherent in other loans and leases. In quantifying incurred losses, the Company considers the factors and uses the techniques described herein and in note 4 of Notes to Financial Statements. For purposes of determining the level of the allowance for credit losses, the Company segments its loan and lease portfolio by loan type. The amount of specific loss components in the Company’s loan and lease portfolios is determined through a loan-by-loan analysis of commercial loans and commercial real estate loans in nonaccrual status. Measurement of the specific loss components is typically based on expected future cash flows, collateral values or other factors that may impact the borrower’s ability to pay. Losses associated with residential real estate loans and consumer loans are generally determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term forecasted loss estimates developed by the Company’s credit department. These forecasts give consideration to overall borrower repayment performance and current geographic region changes in collateral values using third party published historical price indices or automated valuation methodologies. With regard to collateral values, the realizability of such values by the Company contemplates repayment of any first lien position prior to recovering amounts on a junior lien position. Approximately ~~46%~~45% of the Company’s home equity portfolio consists of junior lien loans and lines of credit. Except for consumer loans and

- 64 -

residential real estate loans that are considered smaller balance homogeneous loans and are evaluated collectively and loans obtained at a discount in acquisition transactions, the Company considers a loan to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more and has been placed in nonaccrual status. Those impaired loans are evaluated for specific loss components. Modified loans, including smaller balance homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Loans less than 90 days delinquent are deemed to have a minimal delay in payment and are generally not considered to be impaired. Loans acquired in connection with acquisition transactions subsequent to 2008 were recorded at fair value with no carry-over of any previously recorded allowance for credit losses. Determining the fair value of the acquired loans required estimating cash flows expected to be collected on the loans and discounting those cash flows at then-current interest rates. For loans acquired at a discount, the impact of estimated future credit losses represents the predominant difference between contractually required payments

~~- 72 -~~

and the cash flows expected to be collected. Subsequent decreases to those expected cash flows require the Company to evaluate the need for an additional allowance for credit losses and could lead to charge-offs of acquired loan balances. Additional information regarding the Company’s process for determining the allowance for credit losses is included in note 4 of Notes to Financial Statements.

Management believes that the allowance for credit losses at March 31, ~~2016~~2017 appropriately reflected credit losses inherent in the portfolio as of that date. The allowance for credit losses was ~~$963 million,~~$1.0 billion, or ~~1.10%~~1.12% of total loans and leases at March 31, ~~2016,~~2017, compared with ~~$921~~$963 million or ~~1.37%~~1.10% at March 31, ~~2015~~2016 and ~~$956~~$989 million or 1.09% at December 31, ~~2015.~~2016. The ratio of the allowance to total loans and leases at each respective date reflects the impact of loans obtained in acquisition transactions subsequent to 2008 that have been recorded at estimated fair value. As noted earlier, GAAP prohibits any carry-over of an allowance for credit losses for acquired loans recorded at fair value. However, for loans acquired at a premium, GAAP provides that an allowance for credit losses be recognized for incurred losses inherent in the portfolio. The declines in the ratio of the allowance to total loans and leases at March 31, 2016 and December 31, 2015 from March 31, 2015 reflects the impact of loans (predominantly residential real estate loans) obtained in the acquisition of Hudson City. The level of the allowance reflects management’s evaluation of the loan and lease portfolio using the methodology and considering the factors as described herein. Should the various credit factors considered by management in establishing the allowance for credit losses change and should management’s assessment of losses inherent in the loan ~~portfolios~~portfolio also change, the level of the allowance as a percentage of loans could increase or decrease in future periods. The ratio of the allowance for credit losses to nonaccrual loans was 108% at March 31, 2017, compared with 110% at March 31, 2016 ~~was 110%, compared with 117% a year earlier~~ and ~~120%~~107% at December 31, ~~2015.~~2016. Given the Company’s general position as a secured lender and its practice of ~~charging-off~~charging off loan balances when collection is deemed doubtful, that ratio and changes in that ratio are generally not an indicative measure of the adequacy of the Company’s allowance for credit losses, nor does management rely upon that ratio in assessing the adequacy of the ~~allowance.~~Company’s allowance for credit losses. The level of the allowance reflects management’s evaluation of the loan and lease portfolio as of each respective date.

Other Income

Other income totaled $447 million in the initial quarter of 2017, compared with $421 million in the first quarter of 2016 ~~compared with $440 million in the year-earlier quarter~~ and ~~$448~~$465 million in the fourth quarter of ~~2015.~~2016. The ~~most significant factors contributing to the decline~~rise in other income during the recent quarter as compared with the year-earlier quarter resulted largely from ~~the first quarter of 2015 were a $20 million decrease in mortgage banking revenues and a $13 million decrease in~~higher trust ~~income, partially offset by increases in bank-owned life insurance~~ income and credit-related fees. As compared with the fourth quarter of ~~2015,~~2016, the recent quarter decline in other income reflected lower ~~loan syndication fees and declines in commercial~~ mortgage banking ~~revenues, service charges on deposit accounts and trust income.~~revenues.

Mortgage banking revenues ~~totaled $82~~were $85 million in the recent quarter, compared with ~~$102~~$82 million in the ~~initial~~year-earlier quarter ~~of 2015~~ and ~~$88~~$99 million in the final ~~2015~~2016 quarter. Mortgage banking revenues are comprised of both residential and commercial mortgage banking activities. The Company’s involvement in commercial mortgage banking activities includes the origination, sales and servicing of loans under the multi-family loan programs of Fannie Mae, Freddie Mac and the U.S. Department of Housing and Urban Development.

Residential mortgage banking revenues, consisting of realized gains from sales of residential real estate loans and loan servicing rights, unrealized gains and losses on residential real estate loans held for sale and related

- 65 -

commitments, residential real estate loan servicing fees, and

~~- 73 -~~

other residential real estate loan-related fees and income, were ~~$60 million in each of the first quarter of 2016 and the final quarter of 2015, compared with $79~~$58 million in the first quarter of ~~2015. As~~2017, compared with $60 million in the ~~first~~year-earlier quarter and $63 million in the fourth quarter of ~~2015, the recent quarter decline in~~2016. The lower residential mortgage banking revenues ~~reflects a decline~~ in ~~revenues associated~~the recent quarter as compared with ~~servicing residential real estate loans for others and lower~~the final quarter of 2016 were largely the result of decreased gains from origination activities, due ~~largely~~ to ~~decreased~~lower volumes of loans originated for ~~sale.~~sale and narrower margins on those originations.

New commitments to originate residential real estate loans to be sold were approximately ~~$659~~$727 million in ~~2016’s initial~~2017’s first quarter, compared with ~~$936~~$659 million in the year-earlier quarter and ~~$667~~$760 million in the final quarter of ~~2015.~~2016. Realized gains from sales of residential real estate loans and loan servicing rights and recognized net unrealized gains ~~and~~or losses attributable to residential real estate loans held for sale, commitments to originate loans for sale and commitments to sell loans totaled to gains of $14 million in each of the first ~~quarter~~quarters of ~~2016~~2017 and ~~the final 2015 quarter,~~2016, compared with gains of ~~$21~~$17 million in the ~~first~~fourth quarter of ~~2015.~~

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

Loans held for sale that were secured by residential real estate ~~totaled $269~~aggregated $297 million and ~~$423~~$269 million at March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~$353~~$414 million at December 31, ~~2015.~~2016. Commitments to sell residential real estate loans and commitments to originate residential real estate loans for sale at pre-determined rates ~~were~~totaled $641 million and $474 million, respectively, at March 31, 2017, compared with $646 million and $521 million, respectively, at March 31, 2016, ~~compared with $859~~and $777 million and ~~$661 million, respectively, at March 31, 2015, and $687 million and $489~~$479 million, respectively, at December 31, ~~2015.~~2016. Net recognized unrealized gains on residential real estate loans held for sale, commitments to sell loans, and commitments to originate loans for sale were ~~$17~~$13 million and ~~$21~~$17 million at March 31, ~~2016~~2017 and March 31, ~~2015,~~2016, respectively, and ~~$16~~$15 million at December 31, ~~2015.~~2016. Changes in such net unrealized gains are recorded in mortgage banking revenues and resulted in net ~~increases~~decreases in ~~revenue~~revenues of $2 million and $8 million in the two most recent quarters, compared with a net increase in revenues of $1 million in the ~~most recent quarter and $2 million in the year-earlier quarter, compared with a net decrease in revenue of $3 million in the fourth~~first quarter of ~~2015.~~2016.

Revenues from servicing residential real estate loans for others were ~~$45~~$44 million in the ~~recent~~first quarter of 2017, compared with ~~$58~~$45 million and $46 million during the quarters ended March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. Residential real estate loans serviced for others totaled $63.7 billion at March 31, 2017, $60.0 billion at March 31, 2016, ~~$65.0 billion at March 31, 2015~~ and ~~$61.7~~$53.2 billion at December 31, ~~2015.~~2016. Reflected in residential real estate loans serviced for others were loans sub-serviced for others of $40.8 billion, $36.3 billion ~~$40.4 billion~~ and ~~$37.8~~$30.4 billion at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. Revenues earned for sub-servicing loans ~~were~~totaled $23 million in each of the quarters ended March 31, 2017 and March 31, 2016, compared with $25 million in the final quarter of 2016. During March 2017, the Company acquired additional sub-servicing of residential real estate loans having outstanding principal balances of approximately $12.4 billion. The additional sub-servicing portfolio did not have a significant impact on residential mortgage banking revenues in the first quarter of ~~2016, $35 million in the year-earlier quarter and $25 million in the fourth quarter of 2015.~~2017. The contractual servicing rights associated with loans sub-serviced by the Company were predominantly held by affiliates of Bayview Lending Group LLC (“BLG”). Information about the Company’s relationship with BLG and its affiliates is included in note 15 of Notes to Financial Statements.

Capitalized servicing rights consist largely of servicing associated with loans sold by the Company. Capitalized residential mortgage loan

~~- 74 -~~

servicing assets ~~totaled~~aggregated $118 million at each of March 31, 2017 and March 31, 2016 and $117 million at December 31, ~~2015, compared with $111 million at March 31, 2015.~~2016.

Commercial mortgage banking revenues ~~were~~aggregated $27 million in the first three months of 2017, compared with $22 million in the ~~most recent quarter, compared with $23 million in the first quarter of 2015~~similar 2016 period and ~~$27~~$36 million in the fourth quarter of ~~2015.~~2016. Included in such amounts were revenues from loan origination and sales activities of ~~$12~~$15 million in the first quarter of ~~2016, $13~~2017, $12 million in the ~~first~~year-earlier quarter ~~of 2015~~ and ~~$15~~$24 million in the ~~fourth~~final quarter of ~~2015.~~2016. Commercial real estate loans originated for sale to other investors ~~totaled~~were approximately ~~$355~~$308 million in the ~~first~~recent quarter, ~~of 2016,~~ compared with ~~$455~~$355 million and ~~$464 million~~$1.3 billion in the first and fourth quarters of ~~2015,~~2016, respectively. Loan servicing revenues ~~were $10 million in each of the first quarters of 2016 and 2015, compared with~~totaled $12 million in the ~~final~~two most recent quarters, compared with $10 million in the first quarter of ~~2015.~~2016. Capitalized commercial mortgage servicing assets ~~aggregated~~were $106 million and $84 ~~million at each of March 31, 2016 and December 31, 2015, compared with $74~~ million at March 31, ~~2015.~~2017 and March 31, 2016, respectively, and $104 million at December 31, 2016. Commercial real estate loans serviced for other investors totaled ~~$10.9 billion, $11.4 billion and $11.0~~$15.1 billion at March 31, ~~2016, March 31, 2015~~2017, $10.9 billion a year earlier and $11.8 billion at December 31, ~~2015, respectively,~~2016 and included $3.0 billion, $2.6 billion ~~$2.4 billion~~ and ~~$2.5~~

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$2.8 billion, respectively, of loan balances for which investors had recourse to the Company if such balances are ultimately uncollectible. In January 2017, the Company purchased commercial mortgage servicing rights and other assets which increased commercial real estate loans serviced for others by approximately $2.7 billion. The purchase price and assets acquired were not material to the Company’s consolidated financial position. Revenues associated with the acquired servicing rights and other assets were not significant in the first quarter of 2017. Commitments to sell commercial real estate loans and commitments to originate commercial real estate loans for sale were $373 million and $298 million, respectively, at March 31, 2017, $312 million and $184 million, respectively, at March 31, 2016 ~~$464~~and $713 million and ~~$347 million, respectively, at March 31, 2015 and $96 million and $58~~$70 million, respectively, at December 31, ~~2015.~~2016. Commercial real estate loans held for sale at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015~~2016 were $75 million, $128 million ~~$117~~and $643 million, ~~and $39 million,~~ respectively. The higher balance at December 31, 2016 reflected loans originated late in 2016 that were not delivered to investors until 2017.

Service charges on deposit accounts ~~totaled~~were $104 million in the recent quarter, compared with $102 million in ~~each~~the year-earlier quarter and $105 million in the fourth quarter of 2016. Brokerage services income, which includes revenues from the sale of mutual funds and annuities and securities brokerage fees, aggregated $17 million in the first ~~quarters~~quarter of 2017, compared with $16 million in the first quarter of 2016 and ~~2015,~~$15 million in the fourth quarter of 2016. Trading account and foreign exchange activity resulted in gains of $10 million during the most recent quarter, compared with ~~$106~~gains of $7 million in the first quarter of 2016 and $8 million in the final ~~2015 quarter. The recent quarter’s decline as compared with the fourth~~ quarter of ~~2015 was largely due~~2016. Information about the notional amount of interest rate, foreign exchange and other contracts entered into by the Company for trading account purposes is included in note 10 of Notes to ~~seasonally lower consumer deposit service charges, particularly overdraft fees.~~Financial Statements and herein under the heading “Taxable-equivalent Net Interest Income.”

Trust income includes fees related to two significant businesses. The Institutional Client Services (“ICS”) business provides a variety of trustee, agency, investment management and administrative services for corporations and institutions, investment bankers, corporate tax, finance and legal executives, and other institutional clients who: (i) use capital markets financing structures; (ii) use independent trustees to hold retirement plan and other assets; and (iii) need investment and cash management services. The Wealth Advisory Services (“WAS”) business helps high net worth clients grow their wealth, protect it, and transfer it to their heirs. A comprehensive array of wealth management services are offered, including asset management, fiduciary services and family office services. Trust income ~~totaled~~aggregated $120 million in the recent quarter, compared with $111 million in the ~~first~~year-earlier quarter ~~of 2016, compared with $124 million in the first quarter of 2015~~ and ~~$115~~$122 million in the fourth quarter of ~~2015.~~2016. Revenues associated with the ICS business were approximately $60 million, $52 million ~~$61 million~~ and ~~$54~~$61 million during the quarters ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. The ~~ICS revenue decline~~higher revenues in the two most recent quarters as compared with the first quarter of 2015 reflects the April 2015 divestiture of the trade processing business within the retirement services division of ICS. Revenues related to that business reflected in trust income (in the ICS business) during the first quarter of 2015 were approximately $9 million. After considering related expenses, including the portion of those revenues paid to sub-advisors, net income attributable to the sold business was not material to the consolidated results of operations of the Company in 2015’s initial quarter.2016 reflect increased fees earned from money-market funds and stronger sales activities. Revenues attributable to WAS ~~were~~totaled approximately $54 million, $51 million and ~~$56~~$53 million for the three-month periods ended March 31, 2017, March 31, 2016 and ~~2015, respectively, and $52 million for the three-month period ended~~ December 31, ~~2015. The decline in such recent quarter revenues as compared with the first and fourth quarters~~

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~~of 2015 was due largely to lower customer balances and market performance.~~2016, respectively. Total trust assets, which include assets under management and assets under administration, aggregated $219.0 billion at March 31, 2017, compared with $200.0 billion at March 31, 2016 ~~compared with $293.4 billion~~ and ~~$199.2~~$210.6 billion at ~~March 31, 2015 and~~ December 31, 2015, respectively. The declines in trust assets at the two most recent quarter-ends as compared with March 31, 2015 were predominantly due to the customer account balances included in the April 2015 sale of the trade processing business.2016. Trust assets under management were $73.6 billion, $66.2 billion ~~$69.4 billion~~ and ~~$66.7~~$70.7 billion at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. Additional trust income from investment management activities ~~totaled $8~~was $6 million in the recent quarter, $9compared with $8 million in ~~the fourth quarter~~each of ~~2015 and $7 million in~~ the first ~~quarter~~and fourth quarters of ~~2015.~~2016. That income largely relates to fees earned from retail customer investment accounts and from an affiliated investment manager. Assets managed by that affiliated manager were $6.9 billion at March 31, 2017, $6.7 billion at March 31, 2016 ~~$9.4 billion at March 31, 2015~~ and ~~$7.1~~$7.3 billion at December 31, ~~2015.~~2016. The Company’s trust income from that affiliate was not material ~~for~~during any of the quarters then-ended. The Company’s proprietary mutual funds had assets of $10.7 billion, $11.4 billion ~~$12.8 billion~~ and ~~$12.2~~$10.9 billion at March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively.

~~Brokerage services income, which includes~~Other revenues from ~~the sale of mutual funds and annuities and securities brokerage fees, totaled $16 million in each of the two most recent quarters, compared with $15~~operations were $111 million in the first quarter of ~~2015. Gains from trading account and foreign exchange activity totaled $7 million during the first quarter of 2016,~~2017, compared with $6 million in the first quarter of 2015 and $10 million in the final 2015 quarter. The recent quarter decline as compared with the immediately preceding quarter resulted from lower activity related to interest rate swap transactions executed on behalf of commercial customers. Information about the notional amount of interest rate, foreign exchange and other contracts entered into by the Company for trading account purposes is included in note 10 of Notes to Financial Statements and herein under the heading “Taxable-equivalent Net Interest Income.”

~~Other revenues from operations totaled~~ $102 ~~million in the first quarter of 2016, compared with $91~~ million in the year-earlier quarter and ~~$115~~$116 million in the fourth quarter of ~~2015. The increase in the recent quarter as~~2016. As compared with the ~~year-earlier~~initial 2016 quarter, ~~reflects~~the recent quarter’s revenues reflect higher ~~bank-owned life insurance income,~~letter of credit and other credit-related fees, ~~and merchant discount and credit card fees. The recent quarter’s decline as compared with the final 2015 quarter was largely attributable to lower fees for providing~~including loan syndication ~~and corporate advisory services.~~fees. Included in other revenues from operations were the following significant components. Letter of credit and other credit-related fees ~~totaled $28~~aggregated $34 million in the recent quarter, compared with ~~$26~~$28 million in the ~~first~~initial quarter

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of ~~2015~~2016 and ~~$42~~$31 million in the ~~fourth~~final quarter of ~~2015.~~2016. Tax-exempt income from bank owned life insurance, which includes increases in the cash surrender value of life insurance policies and benefits received, totaled ~~$16 million during the recent quarter, compared with $11 million in the initial quarter of 2015 and~~ $15 million in the ~~final~~first quarter of ~~2015.~~2017, compared with $16 million in the first quarter of 2016 and $13 million in the final 2016 quarter. Revenues from merchant discount and credit card fees were ~~$26~~$27 million in the recent quarter, ~~ended March 31, 2016,~~ compared with ~~$24~~$26 million and ~~$28~~$30 million in the first and fourth quarters ~~ended March 31, 2015 and December 31, 2015,~~of 2016, respectively. Insurance-related sales commissions and other revenues totaled $12 million in each of the ~~initial quarter~~first quarters of 2017 and 2016, compared with $11 million in the ~~year-earlier quarter and $10 million in the~~ fourth quarter of ~~2015.~~2016. M&T’s share of the operating losses of ~~BLG~~Bayview Lending Group LLC (“BLG”) recognized using the equity method of accounting was $4$2 million in each of the ~~first~~two most recent quarters, ~~of 2016 and 2015 and $3~~compared with $4 million in the ~~fourth~~first quarter of ~~2015.~~2016. Information about the Company’s relationship with BLG and its affiliates is included in note 15 of Notes to Financial Statements. ~~Other miscellaneous revenues and the changes in such revenues from period-to-period were not individually significant.~~

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Other Expense

Other expense ~~totaled $776~~aggregated $788 million in the first quarter of ~~2016,~~2017, compared with ~~$686~~$776 million in the year-earlier quarter and ~~$786~~$769 million in the ~~final~~fourth quarter of ~~2015.~~2016. Included in those amounts are expenses considered ~~by management~~ to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of ~~$12~~$8 million in ~~the most recent~~2017’s initial quarter, compared with $7$12 million in the first quarter of ~~2015~~2016 and ~~$10~~$9 million in the ~~fourth~~final 2016 quarter, ~~of 2015~~ and merger-related expenses of $23 million in the first quarter of ~~2016 and $76 million in the fourth quarter of 2015.~~2016. There were no merger-related expenses during the first quarter of ~~2015.~~2017 or the fourth quarter of 2016. Exclusive of those nonoperating expenses, noninterest operating expenses ~~totaled $741~~were $779 million in the first quarter of ~~2016,~~2017, compared with ~~$680~~$741 million in the ~~year-earlier~~corresponding 2016 quarter and ~~$701~~$760 million in the fourth quarter of ~~2015.~~2016. The most significant factors ~~contributing to~~for the ~~increase~~increased level of operating expenses in the recent quarter as compared with the year-earlier ~~period~~quarter were ~~costs associated with the operations obtained in the Hudson City acquisition,~~ higher ~~costs for~~ salaries and employee benefits ~~and increased Federal Deposit Insurance Corporation (“FDIC”) assessments.~~expenses. The recent quarter’s rise in noninterest operating expenses ~~from~~as compared with the fourth quarter of ~~2015~~2016 reflected ~~the full-quarter impact of the Hudson City acquisition, along with~~ seasonally higher stock-based compensation and employee benefits expenses offset, in part, by ~~lower professional services costs.~~the effect of a $30 million contribution to The M&T Charitable Foundation in the final 2016 quarter. Table 2 provides a reconciliation of other expense to noninterest operating expense.

Salaries and employee benefits expense ~~totaled $432~~aggregated $450 million in ~~2016’s initial~~2017’s first quarter, compared with ~~$390~~$432 million in the year-earlier quarter and ~~$434~~$393 million in the fourth quarter of ~~2015.~~2016. Merger-related salaries and employee benefits expenses were ~~$51 million (consisting predominantly of severance) in the fourth quarter of 2015 and~~ $5 million in the first quarter of 2016. AsThe increased salaries and employee benefits expense in the recent quarter as compared with the ~~year-earlier period, the recent~~first quarter ~~reflects the impact~~ of ~~the additional employees associated with the Company’s expanded operations and~~2016 largely reflects the impact of annual merit increases for ~~employees. Excluding merger-related~~employees and higher incentive-based compensation. The higher level of expenses ~~the higher expense level~~ in the recent quarter as compared with the final quarter of ~~2015~~2016 was ~~largely~~ attributable to seasonally higher stock-based compensation, medical plan costs, payroll-related taxes, unemployment insurance and the Company’s contributions for retirement savings plan benefits related to annual incentive compensation payments. The Company, in accordance with GAAP, has accelerated the recognition of compensation costs for stock-based awards granted to retirement-eligible employees and employees who will become retirement-eligible prior to full vesting of the award. As a result, stock-based compensation expense during the first quarters of 2017 and 2016 ~~and 2015~~ included ~~$16~~$20 million and ~~$14~~$16 million, respectively, that would have been recognized over the normal vesting period if not for the accelerated expense recognition provisions of GAAP. That acceleration had no effect on the value of stock-based compensation awarded to employees. Salaries and employee benefits expense included stock-based compensation of ~~$29~~$33 million and ~~$28~~$29 million in the ~~quarters~~three-month periods ended March 31, ~~2016~~2017 and March 31, ~~2015,~~2016, respectively, and ~~$11~~$9 million in the ~~quarter~~three-month period ended December 31, ~~2015.~~2016. The number of full-time equivalent employees was 16,409 at March 31, 2017, compared with 16,718 and 16,593 at March 31, 2016 ~~compared with 15,263 and 16,979 at March 31, 2015~~ and December 31, ~~2015,~~2016, respectively.

Excluding the nonoperating ~~expenses~~expense items described earlier from each quarter, nonpersonnel operating expenses were ~~$314~~$330 million and ~~$290~~$314 million in the quarters ended March 31, ~~2016~~2017 and March 31, ~~2015,~~2016, respectively, and ~~$317~~$367 million in the ~~fourth~~final quarter of ~~2015.~~2016. The increase in ~~such~~nonpersonnel operating expenses in the recent quarter as compared with the year-earlier quarter reflected increased Federal Deposit Insurance Corporation (“FDIC”) assessments and higher ~~equipment~~outside data processing and ~~net occupancy~~ software costs. Higher nonpersonnel operating

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expenses ~~and increased FDIC assessments~~in the fourth quarter of 2016 as compared with the recent quarter were predominately due ~~largely~~ to the ~~impact of~~$30 million cash contribution made in the ~~acquisition of Hudson City.~~ final 2016 quarter to The M&T Charitable Foundation.

The efficiency ratio measures the relationship of noninterest operating expenses to revenues. The Company’s efficiency ratio was 56.9% during the recent quarter, compared with 57.0% and 56.4% in the first ~~quarter~~and fourth quarters of 2016, ~~compared with 61.5% in the year-earlier period and 55.5% in the fourth~~

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~~quarter of 2015.~~respectively. The calculation of the efficiency ratio is presented in ~~table~~Table 2.

Income Taxes

The provision for income taxes for each of the first ~~quarter~~quarters of 2017 and 2016 was $169 million, compared with ~~$134 million in the year-earlier quarter and $140~~$180 million in the fourth quarter of ~~2015.~~2016. As noted earlier, M&T adopted new accounting guidance for share-based transactions during the first quarter of 2017. That guidance requires that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized as a component of income tax expense in the income statement. Previously, tax effects resulting from changes to M&T’s share price subsequent to the grant date were recorded through shareholders’ equity at the time of vesting or exercise. The adoption of the amended accounting guidance resulted in an $18 million reduction of income tax expense in the initial 2017 quarter. The effective tax rates were ~~36.2%~~32.7%, ~~35.6%~~36.2% and ~~34.1%~~35.2% for the quarters ended March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. ~~During~~Excluding the ~~fourth~~impact of the adoption of the amended accounting guidance, the effective tax rate would have been 36.2% in the first quarter of ~~2015, the provision for income taxes was reduced by $5 million to reflect technology research credits related to 2011 through 2014 that were accepted by the Internal Revenue Service in December 2015.~~2017. The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income, the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact of any large but infrequently occurring items.

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

Capital

Shareholders’ equity was ~~$16.4~~$16.2 billion at March 31, ~~2016,~~2017, representing ~~13.12%~~13.16% of total assets, compared with ~~$12.5~~$16.4 billion or ~~12.73% at March 31, 2015~~13.12% a year earlier and ~~$16.2~~$16.5 billion or ~~13.17%~~13.35% at December 31, ~~2015.~~2016.

Included in shareholders’ equity was preferred stock with a financial statement carrying ~~value~~values of $1.2 billion at each of March 31, ~~2016,~~2017, March 31, ~~2015~~2016 and December 31, ~~2015.~~2016. Further information concerning M&T’s preferred stock can be found in note 6 of Notes to Financial Statements.

~~Common~~Reflecting the impact of repurchases of M&T’s common stock, common shareholders’ equity ~~aggregated~~was $15.0 billion, or $97.40 per share, at March 31, 2017, compared with $15.1 billion, or $95.00 per share, ~~at March 31, 2016, compared with $11.3 billion, or $84.95 per share,~~ a year earlier and ~~$14.9~~$15.3 billion, or ~~$93.60~~$97.64 per share, at December 31, ~~2015. In conjunction with the acquisition of Hudson City, M&T issued 25,953,950 common shares, which added $3.1 billion to common shareholders’ equity on November 1, 2015.~~2016. Tangible equity per common share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was $67.16 at the end of the recent quarter, compared with $65.65 at March 31, 2016 ~~$58.29 at March 31, 2015~~ and ~~$64.28~~$67.85 at December 31, ~~2015.~~2016. The Company’s ratio of tangible common equity to tangible assets was 8.71% at each of March 31, 2017 and March 31, 2016, compared with ~~8.17% a year earlier and 8.69%~~8.92% at December 31, ~~2015.~~2016. Reconciliations of total common shareholders’ equity and tangible common equity and total assets and tangible assets as of each of those respective dates are presented in table 2.

Shareholders’ equity reflects accumulated other comprehensive income or loss, which includes the net after-tax impact of unrealized gains or losses on investment securities classified as available for sale, unrealized losses on held-to-maturity securities for which an other-than-temporary impairment charge has been recognized, gains or losses associated with interest rate swap agreements designated as cash flow hedges, foreign currency translation adjustments and adjustments to reflect the funded status of defined benefit pension and other postretirement plans. Net unrealized ~~gains~~losses on investment securities reflected in shareholders’ equity, net of applicable tax effect, were $18 million, or $.11 per common share, at March 31, 2017, compared with net unrealized gains of $145 million, or $.91

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per common share, at March 31, 2016 ~~compared with~~and net unrealized ~~gains~~losses of ~~$153~~$16 million, or ~~$1.15 per common share, at March 31, 2015 and $48 million, or $.30~~$.10 per common share, at December 31, ~~2015. The higher~~2016. Changes in unrealized gains ~~at the recent quarter-end as compared with December 31, 2015 resulted largely~~

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~~from a decline in yields~~and losses on ~~treasury~~investment securities ~~with comparable duration to the majority~~are predominantly reflective of the ~~Company’s government issued or guaranteed mortgage-backed securities portfolio.~~impact of changes in interest rates on the values of such securities. Information about unrealized gains and losses as of March, 31, ~~2016~~2017 and December 31, ~~2015~~2016 is included in note 3 of Notes to Financial Statements.

Reflected in net unrealized ~~gains~~losses at March 31, ~~2016~~2017 were pre-tax effect unrealized ~~losses~~gains of ~~$34~~$125 million on available-for-sale investment securities with an amortized cost of ~~$1.7~~$5.0 billion and pre-tax effect unrealized ~~gains~~losses of ~~$297~~$135 million on securities with an amortized cost of ~~$10.2~~$7.6 billion. The pre-tax effect unrealized losses reflect ~~$26~~$15 million of losses on trust preferred securities issued by financial institutions having an amortized cost of ~~$124~~$110 million and an estimated fair value of ~~$98~~$95 million (generally considered Level 2 valuations). Further information concerning the Company’s valuations of available-for-sale investment securities is provided in note 12 of Notes to Financial Statements.

As of March, 31, ~~2016,~~2017, based on a review of each of the securities in the investment securities portfolio, the Company concluded that the declines in the values of any securities containing an unrealized loss were temporary and that any ~~additional~~ other-than-temporary impairment charges were not appropriate. ~~It is likely that the Company will be required to sell certain~~As of its collateralized debt obligations backed by trust preferred securities held in the available-for-sale portfolio to comply with the provisions of the Dodd-Frank Act commonly referred to as the “Volcker Rule”. However, the amortized cost and fair value of those collateralized debt obligations were $24 million and $29 million, respectively, at March 31, ~~2016 and the Company does not expect that it would realize any material losses if it ultimately was required to sell such securities. As of that date,~~2017, the Company did not intend to sell nor is it anticipated that it would be required to sell any of its ~~other~~ impaired securities, that is, where fair value is less than the cost basis of the security. The Company intends to continue to closely monitor the performance of its securities because changes in their underlying credit performance or other events could cause the cost basis of those securities to become other-than-temporarily impaired. However, because the unrealized losses on available-for-sale investment securities have generally already been reflected in the financial statement values for investment securities and shareholders’ equity, any recognition of an other-than-temporary decline in value of those investment securities would not have a material effect on the Company’s consolidated financial condition. Any other-than-temporary impairment charge related to held-to-maturity securities would result in reductions in the financial statement values for investment securities and shareholders’ equity. Additional information concerning fair value measurements and the Company’s approach to the classification of such measurements is included in note 12 of the Notes to Financial Statements.

The Company ~~assesses~~assessed impairment losses on privately issued mortgage-backed securities in the held-to-maturity portfolio by performing internal modeling to estimate bond-specific cash flows considering recent performance of the mortgage loan collateral and utilizing assumptions about future defaults and loss severity. These bond-specific cash flows also reflect the placement of the bond in the overall securitization structure and the remaining subordination levels. In total, at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, the Company had in its held-to-maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of ~~$175~~$153 million and ~~$181~~$158 million, respectively, and a fair value of ~~$137~~$119 million and ~~$142~~$121 million, respectively. At March 31, ~~2016, 89%~~2017, 85% of the mortgage-backed securities were in the most senior tranche of the securitization structure with ~~28%~~24% being independently rated as investment grade. The mortgage-backed securities are generally collateralized by residential and small-balance commercial real estate loans originated between 2004 and 2008 and had a weighted-average credit enhancement of ~~15%~~16% at March 31, ~~2016,~~2017, calculated by dividing the remaining unpaid principal balance of bonds subordinate to the

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bonds owned by the Company plus any overcollateralization remaining in the securitization structure by the remaining unpaid principal balance of all bonds in the securitization structure. ~~All mortgage-backed securities in the held-to-maturity portfolio had a current payment status as of March 31, 2016.~~ The weighted-average default percentage and loss severity assumptions utilized in the Company’s internal modeling were ~~33%~~28% and ~~88%,~~71% respectively. ~~The~~Given the securitization structure, the bonds held by the Company may defer interest payments in certain circumstances, but after considering the repayment structure and estimated future collateral cash flows of each individual senior and subordinate tranche bond, the Company has concluded that as of March 31, ~~2016, its~~2017, those privately issued mortgage-backed securities were not other-than-temporarily impaired. Nevertheless, it is possible that adverse changes in the estimated future performance of mortgage loan collateral underlying such securities could impact the Company’s conclusions.

Adjustments to reflect the funded status of defined benefit pension and other postretirement plans, net of applicable tax effect, reduced accumulated other comprehensive income by $269 million, or $1.75 per common

- 70 -

share, at March 31, 2017, $293 million, or $1.84 per common share, at March 31, 2016 ~~$297~~and $273 million, or ~~$1.86~~$1.75 per common share, at December 31, ~~2015, and $301 million, or $2.26 per common share, at March 31, 2015.~~2016.

~~On March 12, 2015, M&T announced that~~

Consistent with its revised 2016 Capital Plan filed with the Federal Reserve, ~~did not object to M&T’s proposed 2015 Capital Plan. Accordingly,~~ M&T ~~was allowed to maintain a quarterly~~repurchased 3,233,196 common ~~stock dividend~~shares for $532 million during the first quarter of $.70 per share; continue to pay dividends and interest on other equity and debt instruments included in regulatory capital, including preferred stock, trust preferred securities and subordinated debt that were outstanding at December 31, 2014, consistent with the contractual terms of those instruments;2017. M&T may repurchase up to ~~$200~~$231 million of its common shares during the first half of 2016; and redeem or repurchase up to $310 million of trust preferred securities. Those latter securities were redeemed in April 2015. Common and preferred dividends are subject to approval by M&T’s Board of Directors in the ordinary course of business. As the Hudson City transaction occurred later than contemplated in that 2015 Capital Plan, common stock dividends paid in relation to the common stock issued as merger consideration were less than projected. With the concurrence of the Federal Reserve, the distribution of that capital, approximately $54 million, is being re-allocated into the common stock repurchase program for the second quarter of ~~2016.~~

~~The Company did not repurchase any~~2017. During the fourth quarter of 2016, M&T repurchased 300,000 shares of its common stock ~~during 2015. However,~~for $37 million. Pursuant to the 2015 Capital Plan, M&T ~~commenced a program to repurchase~~repurchased 948,545 shares of its common ~~shares~~stock for $100 million in the initial 2016 quarter.

Also in accordance with ~~its approved 2015~~the revised 2016 Capital Plan, ~~and in~~during the first quarter of ~~2016 repurchased 948,545 shares for $100 million.~~2017 M&T’s Board of Directors ~~has~~ authorized an increase in the ~~repurchase of up to $154 million of~~quarterly common stock individend to $.75 per common share from the ~~second quarter~~previous rate of ~~2016.~~

~~Cash~~$.70 per common share. As a result, cash dividends declared on M&T’s common stock ~~during~~totaled $116 million in the initial quarter of 2017, compared with $112 million and $110 million in the three-month periods ended March 31, 2016 ~~totaled $112 million, compared with $94 million in each of the quarters ended March 31~~ and December 31, ~~2015, respectively, and represented a quarterly dividend payment of $.70 per common share in each of those quarters.~~2016, respectively. Cash dividends declared on preferred stock aggregated $18 million in the first quarter of 2017, compared with $20 million in each of the first and fourth quarters of 2016. The decline in preferred stock dividends in the recent quarter from the 2016 ~~and 2015 and~~periods resulted from the ~~fourth quarter~~lower dividend rate for the $500 million of ~~2015.~~Series F preferred stock issued in October 2016 as compared with the like amount of Series D preferred stock that had been redeemed in December 2016.

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

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

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

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

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

In addition, capital regulations provide for the phase-in of a “capital conservation buffer” composed entirely of CET1 on top of these minimum risk-weighted asset ratios. When fully phased-in on January 1, 2019 the capital conservation buffer will be 2.5%. For ~~2016,~~2017, the ~~phased-in~~phase-in transition portion of that buffer is ~~.625%~~1.25%.

The regulatory capital ratios of the Company and its bank subsidiaries, M&T Bank and Wilmington Trust, N.A., as of March 31, ~~2016~~2017 are presented in the accompanying table.

REGULATORY CAPITAL RATIOS

March 31, ~~2016~~2017

										M&T	M&T		Wilmington
	M&T (Consolidated)			M&T Bank			Wilmington Trust, N.A.			(Consolidated)	Bank		Trust, N.A.
	M&T (Consolidated)						Wilmington Trust, N.A.
Common equity Tier 1		11.06	%		11.33	%		73.17	%	10.67%		10.29%	43.27%
Tier 1 capital		12.35	%		11.33	%		73.17	%	11.91%		10.29%	43.27%
Total capital		14.84	%		13.35	%		73.84	%	14.11%		12.01%	43.66%
Tier 1 leverage		9.96	%		9.15	%		20.72	%	9.98%		8.63%	9.61%

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

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Deposit Insurance Fund of the FDIC and the banking and financial system as a whole, and generally is not intended for the protection of shareholders, investors or creditors other than insureddepositors. Changes in laws, regulations and regulatory policies applicable to the Company’s operations can increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive environment in which the Company operates, all of which could have a material effect on the business, financial condition or results of operations of the Company and in M&T’s ability to pay dividends.

For additional information concerning this comprehensive regulatory framework, refer to Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, ~~2015 and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of that Form 10-K under the heading “Regulatory Oversight.”~~2016.

On June 17, 2013, M&T and M&T Bank entered into a written agreement with the Federal Reserve Bank of New York. Under the terms of the agreement, M&T and M&T Bank were required to submit to the Federal Reserve Bank of New York a revised compliance risk management program designed to ensure compliance with the Bank Secrecy Act and anti-money-laundering laws and regulations (“BSA/AML”) and to take certain other steps to enhance their compliance practices. M&T and M&T Bank have since made substantial progress in implementing a BSA/AML program with significantly expanded scale and ~~scope, as recognized by the Board of Governors of the Federal Reserve System in its Order approving M&T and M&T Bank’s applications to acquire Hudson City and Hudson City Savings Bank.~~scope. M&T and M&T Bank are continuing to work towards the resolution of all outstanding issues in the written agreement.

Segment Information

As required by GAAP, the ~~Company’s~~Company's reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Financial information about the ~~Company’s~~Company's segments is presented in note 14 of Notes to Financial Statements. ~~Effective July 1, 2015,~~As disclosed in M&T’s Form 10-K for the year ended December 31, 2016, in the fourth quarter of 2016, the Company ~~changed~~revised its ~~internal profitability reporting~~funds transfer pricing allocation related to ~~move a builder~~borrowings and ~~developer lending unit from the Residential Mortgage Banking~~

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~~segment~~ to the ~~Commercial Real Estate segment and, accordingly,~~residential real estate loans obtained in the acquisition of Hudson City, retroactive to 2015. Accordingly, financial information for the ~~Company’s reportable segments~~Discretionary Portfolio segment and the “All Other” category for the three-month period ended March 31, ~~2015~~2016 has been ~~restated~~reclassified to ~~reflect that change.~~conform to the current allocation methodology.

The Business Banking segment ~~earned~~contributed net income of $22 million during the quarter ended March 31, 2017, compared with $25 million in ~~each of~~ the ~~two most recent quarters~~year-earlier quarter and $24 million in the ~~first~~fourth quarter of ~~2015.~~2016. As compared with the year-earlier quarter, a $4recent quarter rise in the provision for credit losses of $5 million was partially offset by a $2 million increase in net interest income. The modest decline in net income in the initial 2017 quarter as compared with the immediately preceding quarter was largely due to a $2 million decrease in net interest income.

Net income of the Commercial Banking segment was $113 million in the recent quarter, compared with $101 million in the first quarter of 2016 and $102 million in the final 2016 quarter. The recent quarter’s 11% improvement as compared with the first quarter of 2016 reflected an increase in net interest income of $8 million, largely resulting from a $316 basis point widening of the net interest margin on deposits, higher letter of credit and other credit-related fees of $6 million, predominantly due to loan syndication fees, a decline in the provision for credit losses ~~due to lower net charge-offs,~~of $5 million and increased gains from the sale of previously leased equipment of $3 million. Those favorable factors were offset, in part, by higher ~~centrally-allocated~~ costs ~~largely associated with the acquired Hudson City operations.~~for FDIC assessments of $3 million. The higher net ~~interest~~ income ~~resulted predominantly from an increase~~ in ~~average outstanding deposit balances~~the first quarter of ~~$1.1 billion. As~~2017 as compared with ~~the immediately preceding~~2016’s fourth quarter was largely due to a decrease in the provision for credit losses of $16 million and increased letter of credit and other credit-related fees of $5 million, largely due to ~~lower net charge-offs, was~~loan syndication fees. Those favorable factors were offset, in part, by ~~lower revenues~~a $4 million decline in gains from ~~merchant discount and credit card fees and modestly higher centrally-allocated costs.~~the sale of previously leased equipment.

The Commercial ~~Banking~~Real Estate segment ~~contributed~~recorded net income of ~~$101~~$85 million ~~during~~in the first quarter ~~ended March 31, 2016,~~of 2017, compared with ~~$96~~$81 million in the year-earlier ~~quarter~~period and ~~$118~~$96 million in the fourth quarter of ~~2015.~~2016. The recent quarter’s 5% improvement in net income as compared with the first quarter of ~~2015~~2016 reflected ~~an $8 million decline in the provision for credit losses, primarily due to lower net charge-offs, and~~ a $7$13 million increase in net interest ~~income.~~income and higher mortgage banking revenues of $5 million. The higher net interest income ~~resulted from increases~~was largely attributable to an increase in average outstanding loan balances of ~~$1.1~~$3.1 billion ~~and a widening of the net interest margin on deposits of 13 basis points, partially~~ offset, in part, by a narrowing of the net interest margin on loans of 914 basis points. Those favorable factors were partially offset ~~in part,~~ by an increase in centrally-allocated technology-related costs and other operating expenses. The recent quarter’s decline in net income as compared with 2015’s fourth quarter was largely due to lower credit-related and other fees of $13a $4 million ~~and a $10 million increase~~rise in the provision for credit losses, increased FDIC assessments of $4 million and higher personnel-related expenses of $2 million.

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The decline in net income in the initial 2017 quarter as compared with the final 2016 quarter was largely due toto: decreased mortgage banking revenues of $9 million, reflecting lower origination volumes; a ~~$10~~$5 million ~~partial recovery~~rise in the ~~final 2015 quarter of~~provision for credit losses; a ~~previously charged-off loan related to a relationship with a motor vehicle-related parts wholesaler.~~

~~The Commercial Real Estate segment contributed~~$3 million decline in net interest income, ~~of $81 million~~reflecting two less days in the ~~first quarter~~recent quarter; and lower credit-related fees of ~~2016,~~$2 million.

Net income earned by the Discretionary Portfolio segment totaled $34 million during the three-month period ended March 31, 2017, compared with ~~$83~~$48 million in the year-earlier period and ~~$90~~$29 million in the fourth quarter of ~~2015.~~2016. The ~~modest~~recent quarter’s decline in net income as compared with the first quarter of 2015 reflects a $3 million increase in the provision for credit losses, due to lower recoveries of previously charged-off loans, and higher operating expenses that were largely offset by a $5 million increase in net interest income, reflecting increases in average outstanding loan and deposit balances of $1.5 billion and $371 million, respectively. The recent quarter decline in net income as compared with the final 2015 quarter was largely due to lower net interest income and trading account and foreign exchange gains of $2 million each, increases in personnel costs of $2 million and other higher operating expenses. The lower net interest income2016 was predominantly due to a ~~narrowing of the~~$21 million decrease in net interest ~~margin on loans of 10 basis points, partially offset by an increase in average outstanding loan balances of $439 million and a widening of the net interest margin on deposits of 16 basis points.~~

~~The Discretionary Portfolio segment recorded net~~ income, of $40 million during the three-month period ended March 31, 2016, compared with $6 million in the year-earlier period and $31 million in the fourth quarter of 2015. The significant improvement as compared with the first quarter of 2015 was predominantly due to the impact of residential real estate loans obtained in the acquisition of Hudson City. A $5 million increase in bank owned life insurance revenues also contributed to that improvement. Those favorable factors were offset, in part, by a $3 million increase in the provision for credit losses and ~~higher~~a $2 million decline in bank owned life insurance revenues. The decline in net interest income reflected lower average loan balances of $3.8 billion and ~~other real estate-related servicing costs.~~a narrowing of the net interest margin on loans of 12 basis points, each predominantly due to pay downs of loans obtained in the acquisition of Hudson City, partially offset by a 9 basis point widening of the net interest margin on investment securities. The recent quarter’s favorable performance as compared with the immediately preceding quarter ~~included the full-quarter impact of the~~reflected an increase in net interest income and declines in residential real ~~estate loans obtained in the acquisition of Hudson City, partially offset by~~

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~~a $4 million increase in~~estate-related servicing costs and the provision for credit ~~losses, primarily due to higher net charge-offs.~~losses.

Net income from the Residential Mortgage Banking segment was ~~$17~~$15 million in the recent quarter, compared with ~~$29~~$17 million in the first quarter of ~~2015~~2016 and ~~$13~~$20 million in ~~2015’s~~2016’s fourth quarter. The decline in net income in the recent quarter as compared with the year-earlier period ~~was largely attributable to a $7 million decrease~~reflected lower servicing revenues. As compared with the final quarter of 2016, the decreased net income in the recent quarter reflected lower revenues ~~from~~associated with mortgage origination and sales activities (including intersegment revenues) of $4 million, and a $3 million decline in net interest income, due largely to lower ~~origination volumes~~average deposit balances of $776 million.

Net income earned by the Retail Banking segment totaled $82 million in the first quarter of 2017, compared with $63 million in the year-earlier quarter and ~~a decline~~$70 million in ~~revenues from subservicing residential real estate loans. Contributing to~~the final 2016 quarter. The 29% improvement in net income in the recent ~~quarter’s improved results~~quarter as compared with the ~~final~~year-earlier period reflected a $16 million decrease in the provision for credit losses due, in part, to higher levels of partial charge-offs recognized in the first quarter of ~~2015 were~~2016 associated with loans for which the Company identified that the customer was either bankrupt or deceased, and a $2$21 million ~~improvement~~increase in net interest ~~income and decreased centrally-allocated loan servicing expenses.~~income. The improvement in net interest income reflected a widening of the net interest margin on ~~loans.~~

~~Net income earned~~deposits of 28 basis points offset, in part, by ~~the Retail Banking segment totaled $63 million~~a $2.4 billion decrease in the first quarter of 2016, compared with $69 million in the year-earlier quarter and $65 million in the final 2015 quarter. The primary contributors to the recent quarter decline in net income as compared with the year-earlier period were: a $21 million increase in the provision for credit losses, largely due to partial charge-offs recognized in the first quarter of 2016 on loans for which the Company identified that the customer was either bankrupt or deceased; a $15 million rise in personnel-related expenses and higher equipment and net occupancy costs of $4 million, reflecting the impact of the Hudson City acquisition; a $3 million increase in advertising and promotional expenses and higher centrally-allocated operating costs.average outstanding deposit balances. Those ~~unfavorable~~favorable factors were ~~largely~~partially offset by ~~an increase in net interest income of $39 million, predominantly due~~higher allocated operating expenses associated with data processing, risk management and other support services provided to ~~the impact of deposits obtained in the acquisition of Hudson City.~~this segment. The recent quarter’s ~~modest decline in~~improved net income as compared with the fourth quarter of ~~2015 reflected~~2016 was due to: a ~~$23 million increase~~decrease in ~~the provision for credit losses, largely due to the aforementioned partial charge-offs recognized in the first quarter of 2016, seasonally lower service charges on deposit accounts of $5 million~~advertising and ~~higher personnel-related~~marketing expenses of ~~$4 million due to the full-quarter impact of the Hudson City acquisition. Those unfavorable factors were largely offset by~~$7 million; a ~~$17~~$5 million rise in net interest income, reflecting a widening of the net interest margin on deposits of 11 basis points, partially offset by the impact of two less days in the 2017 quarter; a $3 million decline in the provision for credit losses; and ~~an $8~~reduced allocated operating expenses associated with data processing, risk management and other support services. Those favorable factors were offset, in part, by a $3 million decrease in ~~advertising and promotional expenses. The improvement in net interest income predominantly reflected the full-quarter impact of consumer deposits obtained in the acquisition of Hudson City.~~service charges on deposit accounts.

The “All Other” category reflects other activities of the Company that are not directly attributable to the reported segments. Reflected in this category are the amortization of core deposit and other intangible assets resulting from the acquisitions of financial institutions, ~~including the November 2015 Hudson City transaction,~~ M&T’s share of the operating losses of BLG, merger-related expenses resulting from acquisitions, and the net impact of the ~~Company��s~~Company’s allocation methodologies for internal transfers for funding charges and credits associated with the earning assets and interest-bearing liabilities of the Company’s reportable segments and the provision for credit losses. The “All Other” category also includes ~~the~~ trust income of the Company that reflects the ICS and WAS business activities. The various components of the “All Other” category resulted in net losses totaling ~~$29~~$1 million for the quarter ended March 31, ~~2016, $67~~2017, $38 million in the year-earlier quarter and ~~$71~~$10 million in the fourth quarter of ~~2015.~~2016. The reduced net loss in the first quarter of 2017 as compared with the year-earlier quarter largely reflected: merger-related expenses of $23 million in the first quarter of 2016 (there were no similar merger-related expenses in the recently completed quarter); tax benefits of $18 million recognized in the first quarter of 2017 resulting from the adoption of new accounting guidance requiring that excess tax benefits associated with share-based compensation be recognized in income tax expense in the income

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statement, and higher trust income of $9 million. Those favorable factors were offset, in part, by higher personnel-related expenses, including incentive-based compensation and the impact of annual merit increases for employees. As compared with the immediately preceding quarter, the improved performance in the recent quarter reflected the $18 million tax benefit recognized in the first quarter of ~~2015,~~2017 associated with share-based compensation, the impact of the $30 million contribution to The M&T Charitable Foundation in the final 2016 quarter, and the favorable impact from the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments and the provision for credit losses, and decreases in professional services costs of $7 millionmethodologies. Those favorable factors were largely offset ~~in part, by: merger-related expenses aggregating $23 million in the recent quarter (there were no such expenses in the first quarter of 2015);~~by higher personnel-related ~~expenses of $17 million; a decline in trust income of $13 million, in~~

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~~large part~~costs, reflecting ~~the impact of the sale of the trade processing business within the retirement services division of ICS in April 2015;~~seasonally higher stock-based compensation and increased FDIC assessments of $10 million. Merger-related costs in the fourth quarter of 2015 aggregated $97 million. Excluding merger-related costs in each of the two most recent quarters, the “All Other” category resulted in net losses for the quarters ended March 31, 2016 and December 31, 2015 of $15 million and $10 million, respectively. The increased net loss from the immediately preceding quarter was mostly due to an increase in personnel-related and other operating costs, offset, in part, by the favorable impact from the Company’s allocation methodologies and lower professional services costs.employee benefits expenses.

Recent Accounting Developments

~~Effective January 1, 2016, the Company adopted amended~~A discussion of recent accounting ~~guidance relating~~developments is included in note 16 of Notes to the consolidation of variable interest entities to modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities and to eliminate the presumption that a general partner should consolidate a limited partnership. The amended guidance also eliminates certain conditions in the assessment of whether fees paid by a legal entity to a decision maker or a service provider represent a variable interest in the legal entity and reduces the extent to which related party arrangements cause an entity to be considered a primary beneficiary. The new guidance eliminates the indefinite deferral of existing consolidation guidance for certain investment funds, but provides a scope exception for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

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

In the first quarter of 2016, the Company adopted amended accounting guidance for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The amended guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

Amended guidance for measurement-period adjustments related to business combinations was also adopted by the Company in the first quarter of 2016. The amended guidance requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the

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reporting period in which the adjustment amounts are determined. The acquirer is now required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

~~In March 2016, the~~ Financial Accounting Standards Board (“FASB”) issued amended guidance for share-based transactions. The amended guidance requires that all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement and that excess tax benefits should be recognized regardless of whether the benefit reduces taxes payable in the current period. The guidance allows an entity to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The guidance permits share-based awards that allow for the withholding of shares up to the maximum statutory tax ratio in applicable jurisdictions to qualify for equity classification. The previous GAAP threshold was restricted to the employer’s minimum statutory withholding requirements. The guidance also specifies certain changes to the reporting of share-based transactions on the statement of cash flows and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company is still evaluating the impact the amended guidance may have on its consolidated financial statements.

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

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

~~- 85 -~~

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

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

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(3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. The amended disclosure guidance requires sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB deferred the effective date of this guidance by one year. The amended guidance is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The guidance should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. The Company is still evaluating the impact the guidance could have on its consolidated financial statements.Statements.

Forward-Looking Statements

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

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

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

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general economic and political conditions, either nationally or in the states in which M&T and its subsidiaries do business, including interest rate and currency exchange rate fluctuations, changes and trends in the securities markets, and other Future Factors.

- 8874 -

M&T BANK CORPORATION AND SUBSIDIARIES

Table 1

QUARTERLY TRENDS


	2016			2015 Quarters												2017			2016 Quarters
	First Quarter			Fourth			Third			Second			First			First Quarter			Fourth			Third			Second			First
Earnings and dividends
Amounts in thousands, except per share
Interest income (taxable-equivalent basis)	$	979,166			908,734			776,274			766,374			743,925		$	1,014,032			990,284			976,240			977,143			979,166
Interest expense		100,870			95,333			77,199			77,226			78,499			91,773			107,137			111,175			106,802			100,870

Net interest income		878,296			813,401			699,075			689,148			665,426			922,259			883,147			865,065			870,341			878,296
Less: provision for credit losses		49,000			58,000			44,000			30,000			38,000			55,000			62,000			47,000			32,000			49,000
Other income		420,933			448,108			439,699			497,027			440,203			446,845			465,459			491,350			448,254			420,933
Less: other expense		776,095			786,113			653,816			696,628			686,375			787,852			769,103			752,392			749,895			776,095

Income before income taxes		474,134			417,396			440,958			459,547			381,254			526,252			517,503			557,023			536,700			474,134
Applicable income taxes		169,274			140,074			154,309			166,839			133,803			169,326			179,549			200,314			194,147			169,274
Taxable-equivalent adjustment		6,332			6,357			6,248			6,020			5,838			7,999			7,383			6,725			6,522			6,332

Net income	$	298,528			270,965			280,401			286,688			241,613		$	348,927			330,571			349,984			336,031			298,528

Net income available to common shareholders-diluted	$	275,748			248,059			257,346			263,481			218,837		$	328,567			307,797			326,998			312,974			275,748
Per common share data
Basic earnings	$	1.74			1.65			1.94			1.99			1.66		$	2.13			1.98			2.10			1.98			1.74
Diluted earnings		1.73			1.65			1.93			1.98			1.65			2.12			1.98			2.10			1.98			1.73
Cash dividends	$	.70			.70			.70			.70			.70		$	.75			.70			.70			.70			.70
Average common shares outstanding
Basic		158,734			150,027			132,630			132,356			132,049			154,427			155,123			155,493			157,802			158,734
Diluted		159,181			150,718			133,376			133,116			132,769			154,949			155,700			156,026			158,341			159,181

Performance ratios, annualized
Return on
Average assets		.97	%		.93	%		1.13	%		1.18	%		1.02	%		1.15	%		1.05	%		1.12	%		1.09	%		.97	%
Average common shareholders’ equity		7.44	%		7.22	%		8.93	%		9.37	%		7.99	%		8.89	%		8.13	%		8.68	%		8.38	%		7.44	%
Net interest margin on average earning assets (taxable-equivalent basis)		3.18	%		3.12	%		3.14	%		3.17	%		3.17	%		3.34	%		3.08	%		3.05	%		3.13	%		3.18	%
Nonaccrual loans to total loans and leases, net of unearned discount		1.00	%		.91	%		1.15	%		1.17	%		1.18	%		1.04	%		1.01	%		.93	%		.96	%		1.00	%

Net operating (tangible) results (a)
Net operating income (in thousands)	$	320,064			337,613			282,907			290,341			245,776		$	354,035			336,095			355,929			350,604			320,064
Diluted net operating income per common share		1.87			2.09			1.95			2.01			1.68			2.15			2.01			2.13			2.07			1.87
Annualized return on
Average tangible assets		1.09	%		1.21	%		1.18	%		1.24	%		1.08	%		1.21	%		1.10	%		1.18	%		1.18	%		1.09	%
Average tangible common shareholders’ equity		11.62	%		13.26	%		12.98	%		13.76	%		11.90	%		13.05	%		11.93	%		12.77	%		12.68	%		11.62	%
Efficiency ratio (b)		57.00	%		55.53	%		57.05	%		58.23	%		61.46	%		56.93	%		56.42	%		55.92	%		55.06	%		57.00	%

Balance sheet data
In millions, except per share
Average balances
Total assets (c)	$	123,252			115,052			98,515			97,598			95,892		$	122,978			125,734			124,725			123,706			123,252
Total tangible assets (c)		118,577			110,772			94,989			94,067			92,346			118,326			121,079			120,064			119,039			118,577
Earning assets		111,211			103,587			88,446			87,333			85,212			112,008			114,254			112,864			111,872			111,211
Investment securities		15,348			15,786			14,441			14,195			13,376			15,999			15,417			14,361			14,914			15,348
Loans and leases, net of unearned discount		87,584			81,110			67,849			67,670			66,587			89,797			89,977			88,732			88,155			87,584
Deposits		92,391			85,657			73,821			72,958			71,698			96,300			96,914			95,852			94,033			92,391
Common shareholders’ equity (c)		15,047			13,775			11,555			11,404			11,227			15,091			15,181			15,115			15,145			15,047
Tangible common shareholders’ equity (c)		10,372			9,495			8,029			7,873			7,681			10,439			10,526			10,454			10,478			10,372

At end of quarter
Total assets (c)	$	124,626			122,788			97,797			97,080			98,378		$	123,223			123,449			126,841			123,821			124,626
Total tangible assets (c)		119,955			118,109			94,272			93,552			94,834			118,573			118,797			122,183			119,157			119,955
Earning assets		113,005			110,802			87,807			86,990			87,959			112,287			112,192			115,293			112,057			113,005
Investment securities		15,467			15,656			14,495			14,752			14,393			15,968			16,250			14,734			14,963			15,467
Loans and leases, net of unearned discount		87,872			87,489			68,540			68,131			67,099			89,313			90,853			89,646			88,522			87,872
Deposits		94,215			91,958			72,945			72,630			73,594			97,043			95,494			98,137			94,650			94,215
Common shareholders’ equity, net of undeclared cumulative preferred dividends (c)		15,120			14,939			11,687			11,433			11,294			14,978			15,252			15,106			15,237			15,120
Tangible common shareholders’ equity (c)		10,449			10,260			8,162			7,905			7,750			10,328			10,600			10,448			10,573			10,449
Equity per common share		95.00			93.60			87.67			85.90			84.95			97.40			97.64			97.47			96.49			95.00
Tangible equity per common share		65.65			64.28			61.22			59.39			58.29			67.16			67.85			67.42			66.95			65.65

Market price per common share
High	$	119.24			127.39			134.00			128.70			129.58		$	173.72			158.35			120.40			121.11			119.24
Low		100.08			111.50			111.86			117.86			111.78			149.51			112.25			111.13			107.01			100.08
Closing		111.00			121.18			121.95			124.93			127.00			154.73			156.43			116.10			118.23			111.00

(a)

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

(b)

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

(c)

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

- 75 -

~~-89-~~

M&T BANK CORPORATION AND SUBSIDIARIES

Table 2

RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES

																2017			2016 Quarters
	2016			2015 Quarters												First Quarter			Fourth			Third			Second			First
	First Quarter			Fourth			Third			Second			First
Income statement data
In thousands, except per share
Income statement data (in thousands, except per share)
Net income
Net income	$	298,528			270,965			280,401			286,688			241,613		$	348,927			330,571			349,984			336,031			298,528
Amortization of core deposit and other intangible assets (a)		7,488			5,828			2,506			3,653			4,163			5,108			5,524			5,945			6,936			7,488
Merger-related expenses (a)		14,048			60,820			—			—			—			—			—			—			7,637			14,048

Net operating income	$	320,064			337,613			282,907			290,341			245,776		$	354,035			336,095			355,929			350,604			320,064

Earnings per common share
Diluted earnings per common share	$	1.73			1.65			1.93			1.98			1.65		$	2.12			1.98			2.10			1.98			1.73
Amortization of core deposit and other intangible assets (a)		.05			.04			.02			.03			.03			.03			.03			.03			.04			.05
Merger-related expenses (a)		.09			.40			—			—			—			—			—			—			.05			.09

Diluted net operating earnings per common share	$	1.87			2.09			1.95			2.01			1.68		$	2.15		$	2.01		$	2.13		$	2.07		$	1.87

Other expense
Other expense	$	776,095			786,113			653,816			696,628			686,375		$	787,852			769,103			752,392			749,895			776,095
Amortization of core deposit and other intangible assets		(12,319	)		(9,576	)		(4,090	)		(5,965	)		(6,793	)		(8,420	)		(9,089	)		(9,787	)		(11,418	)		(12,319	)
Merger-related expenses		(23,162	)		(75,976	)		—			—			—			-			—			—			(12,593	)		(23,162	)

Noninterest operating expense	$	740,614			700,561			649,726			690,663			679,582		$	779,432			760,014			742,605			725,884			740,614

Merger-related expenses
Salaries and employee benefits	$	5,274			51,287			—			—			—		$	—			—			—			60			5,274
Equipment and net occupancy		939			3			—			—			—			—			—			—			339			939
Outside data processing and software																	—			—			—			352			715
Advertising and marketing																	—			—			—			6,327			4,195
Printing, postage and supplies		937			504			—			—			—			—			—			—			545			937
Other costs of operations		16,012			24,182			—			—			—			—			—			—			4,970			11,102

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

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

Efficiency ratio
Noninterest operating expense (numerator)	$	740,614			700,561			649,726			690,663			679,582		$	779,432			760,014			742,605			725,884			740,614

Taxable-equivalent net interest income		878,296			813,401			699,075			689,148			665,426			922,259			883,147			865,065			870,341			878,296
Other income		420,933			448,108			439,699			497,027			440,203			446,845			465,459			491,350			448,254			420,933
Less: Gain (loss) on bank investment securities		4			(22	)		—			(10	)		(98	)

Less: Gain on bank investment securities																	—			1,566			28,480			264			4
Denominator	$	1,299,225			1,261,531			1,138,774			1,186,185			1,105,727		$	1,369,104			1,347,040			1,327,935			1,318,331			1,299,225

Efficiency ratio		57.00	%		55.53	%		57.05	%		58.23	%		61.46	%		56.93	%		56.42	%		55.92	%		55.06	%		57.00	%

Balance sheet data
In millions
Balance sheet data (in millions)
Average assets
Average assets	$	123,252			115,052			98,515			97,598			95,892		$	122,978			125,734			124,725			123,706			123,252
Goodwill		(4,593	)		(4,218	)		(3,513	)		(3,514	)		(3,525	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)
Core deposit and other intangible assets		(134	)		(101	)		(20	)		(25	)		(31	)		(98	)		(102	)		(112	)		(122	)		(134	)
Deferred taxes		52			39			7			8			10			39			40			44			48			52

Average tangible assets	$	118,577			110,772			94,989			94,067			92,346		$	118,326			121,079			120,064			119,039			118,577

Average common equity
Average total equity	$	16,279			15,007			12,787			12,636			12,459		$	16,323			16,673			16,347			16,377			16,279
Preferred stock		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,492	)		(1,232	)		(1,232	)		(1,232	)

Average common equity		15,047			13,775			11,555			11,404			11,227			15,091			15,181			15,115			15,145			15,047

Goodwill		(4,593	)		(4,218	)		(3,513	)		(3,514	)		(3,525	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)
Core deposit and other intangible assets		(134	)		(101	)		(20	)		(25	)		(31	)		(98	)		(102	)		(112	)		(122	)		(134	)
Deferred taxes		52			39			7			8			10			39			40			44			48			52

Average tangible common equity	$	10,372			9,495			8,029			7,873			7,681		$	10,439			10,526			10,454			10,478			10,372

At end of quarter
Total assets
Total assets	$	124,626			122,788			97,797			97,080			98,378			123,223			123,449			126,841			123,821			124,626
Goodwill		(4,593	)		(4,593	)		(3,513	)		(3,513	)		(3,525	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)
Core deposit and other intangible assets		(128	)		(140	)		(18	)		(22	)		(28	)		(95	)		(98	)		(107	)		(117	)		(128	)
Deferred taxes		50			54			6			7			9			38			39			42			46			50

Total tangible assets	$	119,955			118,109			94,272			93,552			94,834		$	118,573			118,797			122,183			119,157			119,955

Total common equity
Total equity	$	16,355			16,173			12,922			12,668			12,528		$	16,213			16,487			16,341			16,472			16,355
Preferred stock		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)		(1,232	)
Undeclared dividends - cumulative preferred stock		(3	)		(2	)		(3	)		(3	)		(2	)		(3	)		(3	)		(3	)		(3	)		(3	)

Common equity, net of undeclared cumulative preferred dividends		15,120			14,939			11,687			11,433			11,294			14,978			15,252			15,106			15,237			15,120

Goodwill		(4,593	)		(4,593	)		(3,513	)		(3,513	)		(3,525	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)		(4,593	)
Core deposit and other intangible assets		(128	)		(140	)		(18	)		(22	)		(28	)		(95	)		(98	)		(107	)		(117	)		(128	)
Deferred taxes		50			54			6			7			9			38			39			42			46			50

Total tangible common equity	$	10,449			10,260			8,162			7,905			7,750		$	10,328			10,600			10,448			10,573			10,449

~~(a)~~

(a)

After any related tax effect.

- 9076 -

M&T BANK CORPORATION AND SUBSIDIARIES

Table 3

AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES

   2016 First Quarter 2015 Fourth Quarter 2015 Third Quarter
Average balance in millions; interest in thousands
   Average
Balance Interest    Average
Rate Average
Balance Interest    Average
Rate Average
Balance Interest    Average
Rate
Assets

Earning assets

Loans and leases, net of unearned discount*

Commercial, financial, etc.
   $ 20,717    $ 174,657       3.39 % 20,221    164,515       3.23 % 19,939    161,709       3.22 %
Real estate - commercial
   29,426    309,415       4.16    28,973    303,960       4.11    28,309    302,626       4.18
Real estate - consumer
   25,859    254,144       3.93    20,369    204,420       4.01    8,348    87,047       4.17
Consumer
   11,582    130,971       4.55    11,547    129,103       4.44    11,253    126,369       4.46








Total loans and leases, net
   87,584    869,187       3.99    81,110    801,998       3.92    67,849    677,751       3.96








Interest-bearing deposits at banks
   8,193    10,337       .51    6,622    4,931       .30    6,060    3,852       .25
Federal funds
   1    1       .77    1    2       .54    —      —         —
Trading account
   85    378       1.78    68    317       1.88    96    125       .52
Investment securities**

U.S. Treasury and federal agencies
   14,264    90,138       2.54    14,778    89,052       2.39    13,548    86,152       2.52
Obligations of states and political subdivisions
   113    1,164       4.13    128    1,419       4.40    138    1,398       4.03
Other
   971    7,961       3.30    880    11,015       4.96    755    6,996       3.68








Total investment securities
   15,348    99,263       2.60    15,786    101,486       2.55    14,441    94,546       2.60








Total earning assets
   111,211    979,166       3.54    103,587    908,734       3.48    88,446    776,274       3.48








Allowance for credit losses
   (955 )    (947 )    (937 )
Cash and due from banks
   1,288       1,348       1,218
Other assets
   11,708       11,064       9,788








Total assets
   $ 123,252       115,052       98,515








Liabilities and shareholders’ equity

Interest-bearing liabilities

Interest-bearing deposits

Interest-checking deposits
   $ 1,359    414       .12    1,331    384       .11    1,309    360       .11
Savings deposits
   48,976    15,891       .13    45,974    13,219       .11    41,197    10,937       .11
Time deposits
   12,999    24,322       .75    9,686    15,986       .65    2,858    3,643       .51
Deposits at Cayman Islands office
   187    193       .42    224    167       .30    206    151       .29








Total interest-bearing deposits
   63,521    40,820       .26    57,215    29,756       .21    45,570    15,091       .13








Short-term borrowings
   2,082    2,162       .42    1,615    1,575       .39    174    32       .07
Long-term borrowings
   10,528    57,888       2.21    10,748    64,002       2.36    10,114    62,076       2.44








Total interest-bearing liabilities
   76,131    100,870       .53    69,578    95,333       .54    55,858    77,199       .55








Noninterest-bearing deposits
   28,870       28,443       28,251
Other liabilities
   1,972       2,024       1,619








Total liabilities
   106,973       100,045       85,728








Shareholders’ equity
   16,279       15,007       12,787








Total liabilities and shareholders’ equity
   $ 123,252       115,052       98,515








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








Net interest income/margin on earning assets
   $ 878,296       3.18 % 813,401       3.12 % 699,075       3.14 %

	2017 First Quarter								2016 Fourth Quarter								2016 Third Quarter
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Average balance in millions; interest in thousands
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc.	$	22,290		$	201,126		3.66	%		21,936			191,228		3.47	%		21,480			185,552		3.44	%
Real estate - commercial		33,175			347,010		4.18			32,822			336,597		4.01			31,252			319,694		4.00
Real estate - consumer		22,179			217,263		3.92			23,096			223,758		3.88			24,058			235,813		3.92
Consumer		12,153			140,170		4.68			12,123			138,144		4.53			11,942			136,592		4.55
Total loans and leases, net		89,797			905,569		4.09			89,977			889,727		3.93			88,732			877,651		3.93
Interest-bearing deposits at banks		6,152			12,162		.80			8,790			11,833		.54			9,681			12,355		.51
Federal funds sold		—			—		—			—			—		—			—			—		—
Trading account		60			328		2.20			70			358		2.05			90			342		1.52
Investment securities**
U.S. Treasury and federal agencies		15,113			88,573		2.38			14,511			80,510		2.21			13,418			78,259		2.32
Obligations of states and political subdivisions		56			578		4.17			71			778		4.38			82			888		4.32
Other		830			6,822		3.33			835			7,078		3.37			861			6,745		3.12
Total investment securities		15,999			95,973		2.43			15,417			88,366		2.28			14,361			85,892		2.38
Total earning assets		112,008			1,014,032		3.67			114,254			990,284		3.45			112,864			976,240		3.44
Allowance for credit losses		(1,003	)							(989	)							(982	)
Cash and due from banks		1,283								1,278								1,281
Other assets		10,690								11,191								11,562
Total assets	$	122,978								125,734								124,725
Liabilities and shareholders’ equity
Interest-bearing liabilities
Interest-bearing deposits
Savings and interest-checking deposits	$	53,260			25,634		.20			54,055			26,798		.20			52,516			24,067		.18
Time deposits		9,561			18,998		.81			10,936			23,766		.86			12,334			27,886		.90
Deposits at Cayman Islands office		192			265		.56			206			219		.42			220			204		.37
Total interest-bearing deposits		63,013			44,897		.29			65,197			50,783		.31			65,070			52,157		.32
Short-term borrowings		184			216		.48			200			151		.30			231			169		.29
Long-term borrowings		8,423			46,660		2.25			9,901			56,203		2.26			10,287			58,849		2.28
Total interest-bearing liabilities		71,620			91,773		.52			75,298			107,137		.57			75,588			111,175		.59
Noninterest-bearing deposits		33,287								31,717								30,782
Other liabilities		1,748								2,046								2,008
Total liabilities		106,655								109,061								108,378
Shareholders’ equity		16,323								16,673								16,347
Total liabilities and shareholders’ equity	$	122,978								125,734								124,725
Net interest spread							3.15								2.88								2.85
Contribution of interest-free funds							.19								.20								.20
Net interest income/margin on earning assets				$	922,259		3.34	%					883,147		3.08	%					865,065		3.05	%

*
* Includes nonaccrual loans.

**		~~(continued)~~
** Includes available-for-sale securities at amortized cost.

(continued)

~~-91-~~- 77 -

M&T BANK CORPORATION AND SUBSIDIARIES

Table 3 (continued)

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

																	2016 Second Quarter								2016 First Quarter
	2015 Second Quarter								2015 First Quarter								Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Average balance in millions; interest in thousands	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc.	$	19,973		$	158,109		3.18	%		19,457			153,866		3.21	%	$	21,450		$	184,803		3.47	%		20,717			174,657		3.39	%
Real estate - commercial		28,208			298,565		4.19			27,596			288,121		4.18			30,134			311,490		4.09			29,426			309,415		4.16
Real estate - consumer		8,447			88,473		4.19			8,572			88,850		4.15			24,858			244,806		3.94			25,859			254,144		3.93
Consumer		11,042			122,812		4.46			10,962			121,366		4.49			11,713			132,437		4.55			11,582			130,971		4.55

Total loans and leases, net		67,670			667,959		3.96			66,587			652,203		3.97			88,155			873,536		3.99			87,584			869,187		3.99

Interest-bearing deposits at banks		5,326			3,351		.25			5,073			3,118		.25			8,711			10,993		.51			8,193			10,337		.51
Federal funds		39			9		.10			97			24		.10
Federal funds sold																		—			—		—			1			1		.77
Trading account		103			239		.92			79			565		2.87			92			364		1.58			85			378		1.78
Investment securities**
U.S. Treasury and federal agencies		13,265			83,356		2.52			12,437			78,313		2.55			13,906			84,019		2.43			14,264			90,138		2.54
Obligations of states and political subdivisions		149			1,607		4.32			159			1,967		5.04			97			1,009		4.20			113			1,164		4.13
Other		781			9,853		5.06			780			7,735		4.02			911			7,222		3.19			971			7,961		3.30

Total investment securities		14,195			94,816		2.68			13,376			88,015		2.67			14,914			92,250		2.49			15,348			99,263		2.60

Total earning assets		87,333			766,374		3.52			85,212			743,925		3.54			111,872			977,143		3.51			111,211			979,166		3.54

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

Total assets	$	97,598								95,892							$	123,706								123,252

Liabilities and shareholders’ equity
Interest-bearing liabilities
Interest-bearing deposits
Interest-checking deposits	$	1,333			349		.11			1,121			311		.11
Savings deposits		41,712			10,361		.10			41,525			10,219		.10
Savings and interest-checking deposits																	$	51,847			20,534		.16			50,335			16,305		.13
Time deposits		2,948			3,690		.50			3,017			3,740		.50			12,755			26,867		.85			12,999			24,322		.75
Deposits at Cayman Islands office		212			150		.28			224			147		.27			182			181		.40			187			193		.42

Total interest-bearing deposits		46,205			14,550		.13			45,887			14,417		.13			64,784			47,582		.30			63,521			40,820		.26

Short-term borrowings		195			36		.07			196			34		.07			1,078			1,143		.43			2,082			2,162		.42
Long-term borrowings		10,164			62,640		2.47			9,835			64,048		2.64			10,297			58,077		2.27			10,528			57,888		2.21

Total interest-bearing liabilities		56,564			77,226		.55			55,918			78,499		.57			76,159			106,802		.56			76,131			100,870		.53

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

Total liabilities		84,962								83,433								107,329								106,973

Shareholders’ equity		12,636								12,459								16,377								16,279

Total liabilities and shareholders’ equity	$	97,598								95,892							$	123,706								123,252

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

Net interest income/margin on earning assets				$	689,148		3.17	%					665,426		3.17	%				$	870,341		3.13	%					878,296		3.18	%

*	Includes nonaccrual loans.

**	Includes available-for-sale securities at amortized cost.

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Item 3.

Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk.

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

Item 4.

Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), Robert G. Wilmers, Chairman of the Board and Chief Executive Officer, and ~~René F. Jones,~~Darren J. King, Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of March 31, ~~2016.~~2017.

(b) Changes in internal control over financial reporting. M&T regularly assesses the adequacy of its internal control over financial reporting and enhances its controls in response to internal control assessments and internal and external audit and regulatory recommendations. No changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended March 31, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Wilmington Trust Corporation Investigative and Litigation Matters

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

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

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May 2011. M&T strongly believes that this unprecedented action is unjustified and Wilmington Trust Corporation will vigorously defend itself. On August 26, 2016, the Court granted

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defendants joint motion for a continuance of the trial date. Trial in this matter is now scheduled to begin on October 2, 2017. Wilmington Trust Corporation and its counsel are currently involved in pretrial discovery, motion practice and trial preparation.

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

In Re Wilmington Trust Securities Litigation (U.S. District Court, District of Delaware, Case No. 10-CV-0990-SLR): Beginning on November 18, 2010, a series of parties, purporting to be class representatives, commenced a putative class action lawsuit against Wilmington Trust Corporation, alleging that Wilmington Trust Corporation’s financial reporting and securities filings were in violation of securities laws. The cases were consolidated and Wilmington Trust Corporation moved to dismiss. The Court issued an order denying Wilmington Trust Corporation’s motion to dismiss on March 20, 2014. Fact discovery commenced. On April 13, 2016, the Court issued an order staying fact discovery in the case pending completion of the trial inU.S. v. Wilmington Trust Corp., et al.On September 19, 2016, the plaintiffs filed a motion to modify the stay of discovery in this matter to allow for additional, limited discovery. On December 19, 2016, the Court issued an order lifting the existing stay in its entirety. Trial is scheduled to begin on June 18, 2018.

~~Other Matters~~

The Company is the subject of an investigation by government agencies relating to the origination of Federal Housing Administration (“FHA”) insured residential home loans and residential home loans sold to Freddie Mac and Fannie Mae. A number of other U.S. financial institutions have announced similar investigations. Regarding FHA loans, the U.S. Department of Housing and Urban Development (“HUD”) Office of Inspector General and the DOJ (collectively, the “Government”) are investigating whether the Company complied with underwriting guidelines concerning certain loans where HUD paid FHA insurance claims. The Company is fully cooperating with the investigation. The Government has advised the Company that based upon its review of a sample of loans for which an FHA insurance claim was paid by HUD, some of the loans do not meet underwriting guidelines. The Company, based on its own review of the sample, does not agree with the sampling methodology and loan analysis employed by the Government. Regarding loans originated by the Company and sold to Freddie Mac and Fannie Mae, the investigation concerns whether the mortgages sold to Freddie Mac and Fannie Mae comply with applicable underwriting guidelines. The Company is also cooperating with that portion of the investigation. The investigation could lead to claims by the Government under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which allow treble and other special damages substantially in excess of actual losses. Remedies in these proceedings or settlements may include restitution, fines, penalties, or alterations in the Company’s business practices. The Company and the Government continue settlement discussions regarding the investigation and although progress has been made, the parties have not yet reached a definitive agreement. Based upon the current status of these negotiations, management expects that this potential settlement should not have a material impact on the Company’s consolidated financial condition or results of operations in future periods.

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

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~~Item~~

Item 1A.

Risk Factors.

There have been no material changes in risk factors relating to M&T to those disclosed in response to Item 1A. to Part I of Form 10-K for the year ended December 31, ~~2015.~~

2016.

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~~Item~~

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

(a) – (b) Not applicable.

(c)

Issuer Purchases of Equity Securities

Period
   (a)Total
Number
of Shares
(or Units)
Purchased (1)    (b)Average
Price Paid
per Share
(or Unit)    (c)Total
Number of
Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs    (d)Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units)
that may yet
be Purchased
Under the
Plans or
Programs (2)
January 1 – January 31, 2016
   1,186,638       $ 106.38       948,545       $ 100,000,000
February 1 – February 29, 2016
   583       105.73       —         100,000,000
March 1 – March 31, 2016
   441       111.45       —         154,000,000








Total
   1,187,662       $ 106.38       948,545

	Issuer Purchases of Equity Securities
Period	(a)Total Number of Shares (or Units) Purchased (1)		(b)Average Price Paid per Share (or Unit)		(c)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d)Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs (2)

January 1 - January 31, 2017		1,025,996	$	161.47		900,000	$	617,531,000
February 1 - February 28, 2017		2,340,750		165.83		2,333,196		230,593,000
March 1 - March 31, 2017		468		155.56		—		230,593,000
Total		3,367,214	$	164.50		3,233,196

(1)

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

(2)

On ~~November 17, 2015,~~July 19, 2016, M&T announced a program to purchase up to ~~$200,000,000~~$1.15 billion of its common stock through June 30, ~~2016. On March 31, 2016, M&T’s Board of Directors authorized the repurchase of up to $54,000,000 of additional shares through June 30, 2016, as part of the repurchase program currently in effect.~~2017.

Item 3.

Defaults Upon Senior Securities.

(Not applicable.)

Item 4.

Mine Safety Disclosures.

(None.)

Item 5.

Other Information.

(None.)

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Item 6.

Exhibits.

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


Exhibit No.

~~10.1~~
3.2		Amended and Restated Bylaws of M&T Bank Corporation, ~~Supplemental Pension Plan,~~effective November 16, 2010, as ~~amended.~~amended on April 18, 2017. Filed herewith.

31.1
~~10.2~~		~~M&T Bank Corporation Supplemental Retirement Savings Plan, as amended. Filed herewith.~~
~~10.2~~

~~31.1~~		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
~~31.1~~
31.2
~~31.2~~		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
~~31.2~~
32.1
~~32.1~~		Certification of Chief Executive Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.


32.2
~~32.2~~		Certification of Chief Financial Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.


101.INS
~~101.INS~~		XBRL Instance Document. Filed herewith.

101.SCH		XBRL Taxonomy Extension Schema. Filed herewith.

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

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

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

101.DEF		XBRL Taxonomy Definition Linkbase. Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		M&T BANK CORPORATION

Date: ~~April 29, 2016~~May 5, 2017	By:	~~By:~~	/s/ ~~René F. Jones~~Darren J. King
			~~René F. Jones~~ Darren J. King
			Executive Vice President
			and Chief Financial Officer

~~EXHIBIT INDEX~~

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EXHIBIT INDEX


Exhibit No.

~~10.1~~
3.2		Amended and Restated Bylaws of M&T Bank Corporation, ~~Supplemental Pension Plan,~~effective November 16, 2010, as ~~amended.~~amended on April 18, 2017. Filed herewith.

31.1
~~10.2~~		~~M&T Bank Corporation Supplemental Retirement Savings Plan, as amended. Filed herewith.~~
~~10.2~~

~~31.1~~		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
~~31.1~~
31.2
~~31.2~~		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
~~31.2~~
32.1
~~32.1~~		Certification of Chief Executive Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
~~32.1~~
32.2
~~32.2~~		Certification of Chief Financial Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
~~32.2~~
101.INS
~~101.INS~~		XBRL Instance Document. Filed herewith.

101.SCH		XBRL Taxonomy Extension Schema. Filed herewith.

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

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

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

101.DEF		XBRL Taxonomy Definition Linkbase. Filed herewith.

~~-97-~~- 83 -