UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,September 30, 2020
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 1-9861
M&T BANK CORPORATION
(Exact name of registrant as specified in its charter)
New York |
| 16-0968385 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
One M & T Plaza Buffalo, New York |
| 14203 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant's telephone number, including area code:
(716) 635-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered |
Common Stock, $.50 par value | MTB | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☒ |
| Accelerated filer | ☐ |
Non-accelerated filer |
| ☐ |
| Smaller reporting company | ☐ |
Emerging growth company |
| ☐ |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Number of shares of the registrant's Common Stock, $0.50 par value, outstanding as of the close of business on AprilOctober 30, 2020: 128,272,673128,292,616 shares.
M&T BANK CORPORATION
FORM 10-Q
For the Quarterly Period Ended March 31,September 30, 2020
Table of Contents of Information Required in Report |
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Item 1. |
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| CONSOLIDATED BALANCE SHEET – |
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| CONSOLIDATED STATEMENT OF INCOME – Three and nine months ended |
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| CONSOLIDATED STATEMENT OF CASH FLOWS – |
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Item 2. |
| Management's Discussion and Analysis of Financial Condition and Results of Operations. |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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- 2 -
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(Dollars in thousands, except per share) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Assets |
|
|
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|
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|
Cash and due from banks |
| $ | 1,298,192 |
|
| $ | 1,432,805 |
|
| $ | 1,489,232 |
|
| $ | 1,432,805 |
|
Interest-bearing deposits at banks |
|
| 8,896,307 |
|
|
| 7,190,154 |
|
|
| 20,197,937 |
|
|
| 7,190,154 |
|
Federal funds sold |
|
| — |
|
|
| 3,500 |
|
|
| — |
|
|
| 3,500 |
|
Trading account |
|
| 1,224,291 |
|
|
| 470,129 |
|
|
| 1,215,573 |
|
|
| 470,129 |
|
Investment securities (includes pledged securities that can be sold or repledged of $195,217 at March 31, 2020; $200,339 at December 31, 2019) |
|
|
|
|
|
|
|
| ||||||||
Available for sale (cost: $5,948,056 at March 31, 2020; $6,258,276 at December 31, 2019) |
|
| 6,139,979 |
|
|
| 6,318,776 |
| ||||||||
Held to maturity (fair value: $2,397,849 at March 31, 2020; $2,699,206 at December 31, 2019) |
|
| 2,300,642 |
|
|
| 2,656,917 |
| ||||||||
Equity and other securities (cost: $502,234 at March 31, 2020; $487,041 at December 31, 2019) |
|
| 515,969 |
|
|
| 521,558 |
| ||||||||
Investment securities (includes pledged securities that can be sold or repledged of $89,351 at September 30, 2020; $200,339 at December 31, 2019) |
|
|
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| ||||||||
Available for sale (cost: $5,090,064 at September 30, 2020; $6,258,276 at December 31, 2019) |
|
| 5,302,338 |
|
|
| 6,318,776 |
| ||||||||
Held to maturity (fair value: $2,031,926 at September 30, 2020; $2,699,206 at December 31, 2019) |
|
| 1,938,694 |
|
|
| 2,656,917 |
| ||||||||
Equity and other securities (cost: $458,498 at September 30, 2020; $487,041 at December 31, 2019) |
|
| 481,972 |
|
|
| 521,558 |
| ||||||||
Total investment securities |
|
| 8,956,590 |
|
|
| 9,497,251 |
|
|
| 7,723,004 |
|
|
| 9,497,251 |
|
Loans and leases |
|
| 94,408,178 |
|
|
| 91,188,525 |
|
|
| 98,849,533 |
|
|
| 91,188,525 |
|
Unearned discount |
|
| (265,903 | ) |
|
| (265,656 | ) |
|
| (402,485 | ) |
|
| (265,656 | ) |
Loans and leases, net of unearned discount |
|
| 94,142,275 |
|
|
| 90,922,869 |
|
|
| 98,447,048 |
|
|
| 90,922,869 |
|
Allowance for credit losses |
|
| (1,384,366 | ) |
|
| (1,051,071 | ) |
|
| (1,758,505 | ) |
|
| (1,051,071 | ) |
Loans and leases, net |
|
| 92,757,909 |
|
|
| 89,871,798 |
|
|
| 96,688,543 |
|
|
| 89,871,798 |
|
Premises and equipment |
|
| 1,154,558 |
|
|
| 1,140,924 |
|
|
| 1,146,681 |
|
|
| 1,140,924 |
|
Goodwill |
|
| 4,593,112 |
|
|
| 4,593,112 |
|
|
| 4,593,112 |
|
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| 4,593,112 |
|
Core deposit and other intangible assets |
|
| 25,121 |
|
|
| 29,034 |
|
|
| 17,294 |
|
|
| 29,034 |
|
Accrued interest and other assets |
|
| 5,671,753 |
|
|
| 5,644,050 |
|
|
| 5,555,367 |
|
|
| 5,644,050 |
|
Total assets |
| $ | 124,577,833 |
|
| $ | 119,872,757 |
|
| $ | 138,626,743 |
|
| $ | 119,872,757 |
|
Liabilities |
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Noninterest-bearing deposits |
| $ | 35,554,715 |
|
| $ | 32,396,407 |
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| $ | 44,201,670 |
|
| $ | 32,396,407 |
|
Savings and interest-checking deposits |
|
| 57,956,331 |
|
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| 54,932,162 |
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| 65,732,130 |
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| 54,932,162 |
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Time deposits |
|
| 5,454,341 |
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| 5,757,456 |
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| 4,329,550 |
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| 5,757,456 |
|
Deposits at Cayman Islands office |
|
| 1,217,921 |
|
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| 1,684,044 |
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| 899,989 |
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| 1,684,044 |
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Total deposits |
|
| 100,183,308 |
|
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| 94,770,069 |
|
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| 115,163,339 |
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| 94,770,069 |
|
Short-term borrowings |
|
| 59,180 |
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| 62,363 |
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| 46,123 |
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| 62,363 |
|
Accrued interest and other liabilities |
|
| 2,198,116 |
|
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| 2,337,490 |
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| 1,857,383 |
|
|
| 2,337,490 |
|
Long-term borrowings |
|
| 6,321,435 |
|
|
| 6,986,186 |
|
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| 5,458,885 |
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| 6,986,186 |
|
Total liabilities |
|
| 108,762,039 |
|
|
| 104,156,108 |
|
|
| 122,525,730 |
|
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| 104,156,108 |
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Shareholders' equity |
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Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 350,000 shares at March 31, 2020 and December 31, 2019; Liquidation preference of $10,000 per share: 90,000 shares at March 31, 2020 and December 31, 2019 |
|
| 1,250,000 |
|
|
| 1,250,000 |
| ||||||||
Common stock, $.50 par, 250,000,000 shares authorized, 159,741,898 shares issued at March 31, 2020 and December 31, 2019 |
|
| 79,871 |
|
|
| 79,871 |
| ||||||||
Common stock issuable, 17,641 shares at March 31, 2020; 21,534 shares at December 31, 2019 |
|
| 1,292 |
|
|
| 1,566 |
| ||||||||
Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 350,000 shares at September 30, 2020 and December 31, 2019; Liquidation preference of $10,000 per share: 90,000 shares at September 30, 2020 and December 31, 2019 |
|
| 1,250,000 |
|
|
| 1,250,000 |
| ||||||||
Common stock, $.50 par, 250,000,000 shares authorized, 159,741,898 shares issued at September 30, 2020 and December 31, 2019 |
|
| 79,871 |
|
|
| 79,871 |
| ||||||||
Common stock issuable, 17,999 shares at September 30, 2020; 21,534 shares at December 31, 2019 |
|
| 1,327 |
|
|
| 1,566 |
| ||||||||
Additional paid-in capital |
|
| 6,588,407 |
|
|
| 6,593,539 |
|
|
| 6,609,573 |
|
|
| 6,593,539 |
|
Retained earnings |
|
| 12,837,390 |
|
|
| 12,820,916 |
|
|
| 13,132,374 |
|
|
| 12,820,916 |
|
Accumulated other comprehensive income (loss), net |
|
| 209,833 |
|
|
| (206,680 | ) |
|
| 175,503 |
|
|
| (206,680 | ) |
Treasury stock — common, at cost — 31,477,259 shares at March 31, 2020; 29,174,402 shares at December 31, 2019 |
|
| (5,150,999 | ) |
|
| (4,822,563 | ) | ||||||||
Treasury stock — common, at cost — 31,456,705 shares at September 30, 2020; 29,174,402 shares at December 31, 2019 |
|
| (5,147,635 | ) |
|
| (4,822,563 | ) | ||||||||
Total shareholders’ equity |
|
| 15,815,794 |
|
|
| 15,716,649 |
|
|
| 16,101,013 |
|
|
| 15,716,649 |
|
Total liabilities and shareholders’ equity |
| $ | 124,577,833 |
|
| $ | 119,872,757 |
|
| $ | 138,626,743 |
|
| $ | 119,872,757 |
|
See accompanying notes to financial statements.
- 3 -
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
|
| Three Months Ended March 31 |
|
| Three Months Ended September 30 |
|
| Nine Months Ended September 30 |
| |||||||||||||||
(In thousands, except per share) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Interest income |
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
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Loans and leases, including fees |
| $ | 1,046,821 |
|
| $ | 1,117,913 |
|
| $ | 956,594 |
|
| $ | 1,119,662 |
|
| $ | 2,983,787 |
|
| $ | 3,363,152 |
|
Investment securities |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Fully taxable |
|
| 50,110 |
|
|
| 80,411 |
|
|
| 38,529 |
|
|
| 69,059 |
|
|
| 135,858 |
|
|
| 225,048 |
|
Exempt from federal taxes |
|
| 75 |
|
|
| 95 |
|
|
| 59 |
|
|
| 98 |
|
|
| 163 |
|
|
| 270 |
|
Deposits at banks |
|
| 18,966 |
|
|
| 27,407 |
|
|
| 4,163 |
|
|
| 40,388 |
|
|
| 27,308 |
|
|
| 104,120 |
|
Other |
|
| 4,447 |
|
|
| 483 |
|
|
| 1,816 |
|
|
| 262 |
|
|
| 6,706 |
|
|
| 1,101 |
|
Total interest income |
|
| 1,120,419 |
|
|
| 1,226,309 |
|
|
| 1,001,161 |
|
|
| 1,229,469 |
|
|
| 3,153,822 |
|
|
| 3,693,691 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-checking deposits |
|
| 78,002 |
|
|
| 76,138 |
|
|
| 22,403 |
|
|
| 104,724 |
|
|
| 126,859 |
|
|
| 272,419 |
|
Time deposits |
|
| 21,872 |
|
|
| 21,081 |
|
|
| 14,519 |
|
|
| 25,456 |
|
|
| 56,274 |
|
|
| 71,468 |
|
Deposits at Cayman Islands office |
|
| 3,419 |
|
|
| 4,738 |
|
|
| 241 |
|
|
| 6,218 |
|
|
| 3,821 |
|
|
| 16,995 |
|
Short-term borrowings |
|
| 23 |
|
|
| 6,713 |
|
|
| 1 |
|
|
| 6,967 |
|
|
| 26 |
|
|
| 21,573 |
|
Long-term borrowings |
|
| 40,298 |
|
|
| 67,579 |
|
|
| 20,902 |
|
|
| 56,214 |
|
|
| 89,805 |
|
|
| 189,805 |
|
Total interest expense |
|
| 143,614 |
|
|
| 176,249 |
|
|
| 58,066 |
|
|
| 199,579 |
|
|
| 276,785 |
|
|
| 572,260 |
|
Net interest income |
|
| 976,805 |
|
|
| 1,050,060 |
|
|
| 943,095 |
|
|
| 1,029,890 |
|
|
| 2,877,037 |
|
|
| 3,121,431 |
|
Provision for credit losses |
|
| 250,000 |
|
|
| 22,000 |
|
|
| 150,000 |
|
|
| 45,000 |
|
|
| 725,000 |
|
|
| 122,000 |
|
Net interest income after provision for credit losses |
|
| 726,805 |
|
|
| 1,028,060 |
|
|
| 793,095 |
|
|
| 984,890 |
|
|
| 2,152,037 |
|
|
| 2,999,431 |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking revenues |
|
| 127,909 |
|
|
| 95,311 |
|
|
| 153,267 |
|
|
| 137,004 |
|
|
| 426,200 |
|
|
| 339,636 |
|
Service charges on deposit accounts |
|
| 106,161 |
|
|
| 103,112 |
|
|
| 91,355 |
|
|
| 111,092 |
|
|
| 274,971 |
|
|
| 321,991 |
|
Trust income |
|
| 148,751 |
|
|
| 132,786 |
|
|
| 149,937 |
|
|
| 143,915 |
|
|
| 450,570 |
|
|
| 421,083 |
|
Brokerage services income |
|
| 13,129 |
|
|
| 12,476 |
|
|
| 11,602 |
|
|
| 12,077 |
|
|
| 35,194 |
|
|
| 37,031 |
|
Trading account and foreign exchange gains |
|
| 21,016 |
|
|
| 10,802 |
|
|
| 4,026 |
|
|
| 16,072 |
|
|
| 33,332 |
|
|
| 45,327 |
|
Gain (loss) on bank investment securities |
|
| (20,782 | ) |
|
| 11,841 |
|
|
| 2,773 |
|
|
| 3,737 |
|
|
| (11,040 | ) |
|
| 24,489 |
|
Other revenues from operations |
|
| 133,176 |
|
|
| 134,437 |
|
|
| 107,601 |
|
|
| 103,882 |
|
|
| 327,967 |
|
|
| 351,082 |
|
Total other income |
|
| 529,360 |
|
|
| 500,765 |
|
|
| 520,561 |
|
|
| 527,779 |
|
|
| 1,537,194 |
|
|
| 1,540,639 |
|
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 536,843 |
|
|
| 499,200 |
|
|
| 478,897 |
|
|
| 476,780 |
|
|
| 1,474,582 |
|
|
| 1,431,717 |
|
Equipment and net occupancy |
|
| 79,640 |
|
|
| 79,347 |
|
|
| 81,080 |
|
|
| 82,690 |
|
|
| 237,809 |
|
|
| 241,187 |
|
Outside data processing and software |
|
| 64,410 |
|
|
| 52,417 |
|
|
| 64,660 |
|
|
| 60,360 |
|
|
| 190,446 |
|
|
| 168,011 |
|
FDIC assessments |
|
| 12,271 |
|
|
| 9,426 |
|
|
| 12,121 |
|
|
| 9,906 |
|
|
| 38,599 |
|
|
| 29,104 |
|
Advertising and marketing |
|
| 22,375 |
|
|
| 20,275 |
|
|
| 11,855 |
|
|
| 22,088 |
|
|
| 44,072 |
|
|
| 66,409 |
|
Printing, postage and supplies |
|
| 10,852 |
|
|
| 9,855 |
|
|
| 9,422 |
|
|
| 10,201 |
|
|
| 31,534 |
|
|
| 30,380 |
|
Amortization of core deposit and other intangible assets |
|
| 3,913 |
|
|
| 5,020 |
|
|
| 3,914 |
|
|
| 5,088 |
|
|
| 11,740 |
|
|
| 15,185 |
|
Other costs of operations |
|
| 176,112 |
|
|
| 218,808 |
|
|
| 164,825 |
|
|
| 210,506 |
|
|
| 511,450 |
|
|
| 663,006 |
|
Total other expense |
|
| 906,416 |
|
|
| 894,348 |
|
|
| 826,774 |
|
|
| 877,619 |
|
|
| 2,540,232 |
|
|
| 2,644,999 |
|
Income before taxes |
|
| 349,749 |
|
|
| 634,477 |
|
|
| 486,882 |
|
|
| 635,050 |
|
|
| 1,148,999 |
|
|
| 1,895,071 |
|
Income taxes |
|
| 80,927 |
|
|
| 151,735 |
|
|
| 114,746 |
|
|
| 154,969 |
|
|
| 266,987 |
|
|
| 458,988 |
|
Net income |
| $ | 268,822 |
|
| $ | 482,742 |
|
| $ | 372,136 |
|
| $ | 480,081 |
|
| $ | 882,012 |
|
| $ | 1,436,083 |
|
Net income available to common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 250,701 |
|
| $ | 462,086 |
|
| $ | 353,399 |
|
| $ | 461,410 |
|
| $ | 827,203 |
|
| $ | 1,376,128 |
|
Diluted |
|
| 250,701 |
|
|
| 462,086 |
|
|
| 353,400 |
|
|
| 461,410 |
|
|
| 827,204 |
|
|
| 1,376,129 |
|
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.93 |
|
| $ | 3.35 |
|
| $ | 2.75 |
|
| $ | 3.47 |
|
| $ | 6.42 |
|
| $ | 10.16 |
|
Diluted |
|
| 1.93 |
|
|
| 3.35 |
|
|
| 2.75 |
|
|
| 3.47 |
|
|
| 6.42 |
|
|
| 10.16 |
|
Average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 129,696 |
|
|
| 137,889 |
|
|
| 128,285 |
|
|
| 132,965 |
|
|
| 128,750 |
|
|
| 135,411 |
|
Diluted |
|
| 129,755 |
|
|
| 137,920 |
|
|
| 128,355 |
|
|
| 132,999 |
|
|
| 128,813 |
|
|
| 135,443 |
|
See accompanying notes to financial statements.
- 4 -
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
|
| Three Months Ended March 31 |
|
| Three Months Ended September 30 |
|
| Nine Months Ended September 30 |
| |||||||||||||||
(In thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 268,822 |
|
| $ | 482,742 |
|
| $ | 372,136 |
|
| $ | 480,081 |
|
| $ | 882,012 |
|
| $ | 1,436,083 |
|
Other comprehensive income (loss), net of tax and reclassification adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains on investment securities |
|
| 97,448 |
|
|
| 84,591 |
| ||||||||||||||||
Net unrealized gains (losses) on investment securities |
|
| (17,948 | ) |
|
| 22,605 |
|
|
| 114,451 |
|
|
| 177,049 |
| ||||||||
Cash flow hedges adjustments |
|
| 312,720 |
|
|
| 44,921 |
|
|
| (63,199 | ) |
|
| 8,695 |
|
|
| 240,562 |
|
|
| 155,666 |
|
Foreign currency translation adjustments |
|
| (2,943 | ) |
|
| 275 |
|
|
| 2,733 |
|
|
| (1,704 | ) |
|
| (261 | ) |
|
| (2,104 | ) |
Defined benefit plans liability adjustments |
|
| 9,288 |
|
|
| 2,285 |
|
|
| 9,287 |
|
|
| 3,054 |
|
|
| 27,431 |
|
|
| 9,162 |
|
Total other comprehensive income (loss) |
|
| 416,513 |
|
|
| 132,072 |
|
|
| (69,127 | ) |
|
| 32,650 |
|
|
| 382,183 |
|
|
| 339,773 |
|
Total comprehensive income |
| $ | 685,335 |
|
| $ | 614,814 |
|
| $ | 303,009 |
|
| $ | 512,731 |
|
| $ | 1,264,195 |
|
| $ | 1,775,856 |
|
See accompanying notes to financial statements.
- 5 -
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
|
| Three Months Ended March 31 |
|
| Nine Months Ended September 30 |
| ||||||||||
(In thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 268,822 |
|
|
| 482,742 |
|
| $ | 882,012 |
|
| $ | 1,436,083 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
| 250,000 |
|
|
| 22,000 |
|
|
| 725,000 |
|
|
| 122,000 |
|
Depreciation and amortization of premises and equipment |
|
| 54,756 |
|
|
| 50,982 |
|
|
| 164,323 |
|
|
| 155,721 |
|
Amortization of capitalized servicing rights |
|
| 18,991 |
|
|
| 16,170 |
|
|
| 63,992 |
|
|
| 53,137 |
|
Amortization of core deposit and other intangible assets |
|
| 3,913 |
|
|
| 5,020 |
|
|
| 11,740 |
|
|
| 15,185 |
|
Provision for deferred income taxes |
|
| (36,243 | ) |
|
| 13,441 |
|
|
| (119,913 | ) |
|
| 16,683 |
|
Asset write-downs |
|
| 2,990 |
|
|
| 1,919 |
|
|
| 17,692 |
|
|
| 53,850 |
|
Net gain on sales of assets |
|
| (3,933 | ) |
|
| (5,171 | ) |
|
| (14,736 | ) |
|
| (13,938 | ) |
Net change in accrued interest receivable, payable |
|
| (13,863 | ) |
|
| (35,071 | ) |
|
| (135,825 | ) |
|
| 8,771 |
|
Net change in other accrued income and expense |
|
| (73,363 | ) |
|
| (171,304 | ) |
|
| (344,085 | ) |
|
| (75,564 | ) |
Net change in loans originated for sale |
|
| (158,193 | ) |
|
| 202,670 |
|
|
| (422,773 | ) |
|
| (20,325 | ) |
Net change in trading account assets and liabilities |
|
| (708,319 | ) |
|
| (170,092 | ) |
|
| (702,362 | ) |
|
| (524,755 | ) |
Net cash provided (used) by operating activities |
|
| (394,442 | ) |
|
| 413,306 |
| ||||||||
Net cash provided by operating activities |
|
| 125,065 |
|
|
| 1,226,848 |
| ||||||||
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and other securities |
|
| 2,536 |
|
|
| 312,743 |
|
|
| 55,499 |
|
|
| 878,405 |
|
Proceeds from maturities of investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale |
|
| 303,994 |
|
|
| 371,714 |
|
|
| 1,149,281 |
|
|
| 1,932,168 |
|
Held to maturity |
|
| 359,615 |
|
|
| 99,960 |
|
|
| 719,379 |
|
|
| 787,655 |
|
Purchases of investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale |
|
| (2,951 | ) |
|
| (1,595 | ) |
|
| (5,860 | ) |
|
| (9,791 | ) |
Held to maturity |
|
| (5,996 | ) |
|
| (495,277 | ) |
|
| (8,995 | ) |
|
| (495,277 | ) |
Equity and other securities |
|
| (17,728 | ) |
|
| (103,795 | ) |
|
| (26,955 | ) |
|
| (821,120 | ) |
Net increase in loans and leases |
|
| (3,105,967 | ) |
|
| (412,670 | ) |
|
| (7,227,304 | ) |
|
| (1,484,135 | ) |
Net (increase) decrease in interest-bearing deposits at banks |
|
| (1,706,153 | ) |
|
| 502,300 |
| ||||||||
Net increase in interest-bearing deposits at banks |
|
| (13,007,783 | ) |
|
| (4,390,327 | ) | ||||||||
Capital expenditures, net |
|
| (51,547 | ) |
|
| (30,710 | ) |
|
| (125,370 | ) |
|
| (119,522 | ) |
Net (increase) decrease in loan servicing advances |
|
| (48,866 | ) |
|
| 22,891 |
|
|
| 149,838 |
|
|
| (333,079 | ) |
Other, net |
|
| 420,700 |
|
|
| 5,700 |
|
|
| 351,278 |
|
|
| 55,356 |
|
Net cash provided (used) by investing activities |
|
| (3,852,363 | ) |
|
| 271,261 |
| ||||||||
Net cash used by investing activities |
|
| (17,976,992 | ) |
|
| (3,999,667 | ) | ||||||||
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in deposits |
|
| 5,413,829 |
|
|
| 313,849 |
|
|
| 20,394,732 |
|
|
| 4,959,327 |
|
Net decrease in short-term borrowings |
|
| (3,183 | ) |
|
| (795,812 | ) | ||||||||
Net increase (decrease) in short-term borrowings |
|
| (16,240 | ) |
|
| 1,115,518 |
| ||||||||
Payments on long-term borrowings |
|
| (753,123 | ) |
|
| (1,139 | ) |
|
| (1,605,041 | ) |
|
| (1,552,533 | ) |
Purchases of treasury stock |
|
| (373,750 | ) |
|
| (365,628 | ) |
|
| (373,750 | ) |
|
| (1,067,575 | ) |
Dividends paid — common |
|
| (143,170 | ) |
|
| (139,595 | ) |
|
| (426,204 | ) |
|
| (406,967 | ) |
Dividends paid — preferred |
|
| (21,344 | ) |
|
| (17,368 | ) |
|
| (55,444 | ) |
|
| (54,642 | ) |
Proceeds from issuance of Series G preferred stock |
|
| — |
|
|
| 396,000 |
| ||||||||
Redemption of Series A and Series C preferred stock |
|
| — |
|
|
| (381,500 | ) | ||||||||
Other, net |
|
| (10,567 | ) |
|
| (17,053 | ) |
|
| (13,199 | ) |
|
| (21,187 | ) |
Net cash provided (used) by financing activities |
|
| 4,108,692 |
|
|
| (1,022,746 | ) | ||||||||
Net decrease in cash, cash equivalents and restricted cash |
|
| (138,113 | ) |
|
| (338,179 | ) | ||||||||
Net cash provided by financing activities |
|
| 17,904,854 |
|
|
| 2,986,441 |
| ||||||||
Net increase in cash, cash equivalents and restricted cash |
|
| 52,927 |
|
|
| 213,622 |
| ||||||||
Cash, cash equivalents and restricted cash at beginning of period |
|
| 1,436,305 |
|
|
| 1,605,439 |
|
|
| 1,436,305 |
|
|
| 1,605,439 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 1,298,192 |
|
| $ | 1,267,260 |
|
| $ | 1,489,232 |
|
| $ | 1,819,061 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received during the period |
| $ | 1,159,094 |
|
| $ | 1,194,023 |
|
| $ | 3,121,917 |
|
| $ | 3,700,206 |
|
Interest paid during the period |
|
| 158,861 |
|
|
| 191,309 |
|
|
| 319,079 |
|
|
| 577,291 |
|
Income taxes paid during the period |
|
| 44,660 |
|
|
| 149,548 |
|
|
| 254,471 |
|
|
| 302,441 |
|
Supplemental schedule of noncash investing and financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired in settlement of loans |
| $ | 17,295 |
|
| $ | 24,840 |
|
| $ | 20,047 |
|
| $ | 66,018 |
|
Securitization of residential mortgage loans allocated to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale investment securities |
| $ | — |
|
| $ | 5,379 |
|
| $ | — |
|
| $ | 5,379 |
|
Capitalized servicing rights |
|
| — |
|
|
| 83 |
|
|
| — |
|
|
| 83 |
|
Adoption of lease accounting standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets |
| $ | — |
|
|
| 393,877 |
|
| $ | — |
|
| $ | 393,877 |
|
Other liabilities |
|
| — |
|
|
| 398,810 |
|
|
| — |
|
|
| 398,810 |
|
Additions to right-of-use assets under operating leases |
| $ | 17,421 |
|
|
| 20,410 |
|
| $ | 45,888 |
|
| $ | 69,305 |
|
See accompanying notes to financial statements.
- 6 -
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Common |
|
| Additional |
|
|
|
|
|
| Comprehensive |
|
|
|
|
|
|
|
|
| |||
|
| Preferred |
|
| Common |
|
| Stock |
|
| Paid-in |
|
| Retained |
|
| Income |
|
| Treasury |
|
|
|
|
| |||||||
Dollars in thousands, except per share |
| Stock |
|
| Stock |
|
| Issuable |
|
| Capital |
|
| Earnings |
|
| (Loss), Net |
|
| Stock |
|
| Total |
| ||||||||
Three Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — July 1, 2020 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,308 |
|
|
| 6,599,069 |
|
|
| 12,919,345 |
|
|
| 244,630 |
|
|
| (5,149,118 | ) |
| $ | 15,945,105 |
|
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 372,136 |
|
|
| (69,127 | ) |
|
| — |
|
|
| 303,009 |
|
Preferred stock cash dividends (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17,050 | ) |
|
| — |
|
|
| — |
|
|
| (17,050 | ) |
Stock-based compensation transactions, net |
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 10,504 |
|
|
| (104 | ) |
|
| — |
|
|
| 1,483 |
|
|
| 11,902 |
|
Common stock cash dividends — $1.10 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (141,953 | ) |
|
| — |
|
|
| — |
|
|
| (141,953 | ) |
Balance — September 30, 2020 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,327 |
|
|
| 6,609,573 |
|
|
| 13,132,374 |
|
|
| 175,503 |
|
|
| (5,147,635 | ) |
| $ | 16,101,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2020 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,566 |
|
|
| 6,593,539 |
|
|
| 12,820,916 |
|
|
| (206,680 | ) |
|
| (4,822,563 | ) |
| $ | 15,716,649 |
|
Adoption of new accounting standard for credit losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,925 | ) |
|
| — |
|
|
| — |
|
|
| (91,925 | ) |
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 882,012 |
|
|
| 382,183 |
|
|
| — |
|
|
| 1,264,195 |
|
Preferred stock cash dividends (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (51,178 | ) |
|
| — |
|
|
| — |
|
|
| (51,178 | ) |
Purchases of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (373,750 | ) |
|
| (373,750 | ) |
Stock-based compensation transactions, net |
|
| — |
|
|
| — |
|
|
| (239 | ) |
|
| 16,034 |
|
|
| (310 | ) |
|
| — |
|
|
| 48,678 |
|
|
| 64,163 |
|
Common stock cash dividends — $3.30 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (427,141 | ) |
|
| — |
|
|
| — |
|
|
| (427,141 | ) |
Balance — September 30, 2020 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,327 |
|
|
| 6,609,573 |
|
|
| 13,132,374 |
|
|
| 175,503 |
|
|
| (5,147,635 | ) |
| $ | 16,101,013 |
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Balance — July 1, 2019 |
| $ | 1,231,500 |
|
|
| 79,871 |
|
|
| 1,526 |
|
|
| 6,577,603 |
|
|
| 12,162,278 |
|
|
| (112,958 | ) |
|
| (4,247,993 | ) |
| $ | 15,691,827 |
| ||||||||||||||||||||||||||||||||
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 480,081 |
|
|
| 32,650 |
|
|
| — |
|
|
| 512,731 |
| ||||||||||||||||||||||||||||||||
Preferred stock cash dividends (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19,144 | ) |
|
| — |
|
|
| — |
|
|
| (19,144 | ) | ||||||||||||||||||||||||||||||||
Redemption of Series A and Series C preferred stock |
|
| (381,500 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (381,500 | ) | ||||||||||||||||||||||||||||||||
Issuance of Series G preferred stock |
|
| 400,000 |
|
|
| — |
|
|
| — |
|
|
| (4,000 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 396,000 |
| ||||||||||||||||||||||||||||||||
Purchases of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (299,963 | ) |
|
| (299,963 | ) | ||||||||||||||||||||||||||||||||
Stock-based compensation transactions, net |
|
| — |
|
|
| — |
|
|
| 21 |
|
|
| 11,102 |
|
|
| (50 | ) |
|
| — |
|
|
| 1,719 |
|
|
| 12,792 |
| ||||||||||||||||||||||||||||||||
Common stock cash dividends — $1.00 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (132,932 | ) |
|
| — |
|
|
| — |
|
|
| (132,932 | ) | ||||||||||||||||||||||||||||||||
Balance — September 30, 2019 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,547 |
|
|
| 6,584,705 |
|
|
| 12,490,233 |
|
|
| (80,308 | ) |
|
| (4,546,237 | ) |
| $ | 15,779,811 |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Common |
|
| Additional |
|
|
|
|
|
| Comprehensive |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
|
| Preferred |
|
| Common |
|
| Stock |
|
| Paid-in |
|
| Retained |
|
| Income |
|
| Treasury |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Dollars in thousands, except per share |
| Stock |
|
| Stock |
|
| Issuable |
|
| Capital |
|
| Earnings |
|
| (Loss), Net |
|
| Stock |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Balance — January 1, 2019 |
| $ | 1,231,500 |
|
|
| 79,883 |
|
|
| 1,726 |
|
|
| 6,579,342 |
|
|
| 11,516,672 |
|
|
| (420,081 | ) |
|
| (3,528,851 | ) |
| $ | 15,460,191 |
|
| $ | 1,231,500 |
|
|
| 79,883 |
|
|
| 1,726 |
|
|
| 6,579,342 |
|
|
| 11,516,672 |
|
|
| (420,081 | ) |
|
| (3,528,851 | ) |
| $ | 15,460,191 |
|
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 482,742 |
|
|
| 132,072 |
|
|
| — |
|
|
| 614,814 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,436,083 |
|
|
| 339,773 |
|
|
| — |
|
|
| 1,775,856 |
|
Preferred stock cash dividends (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18,130 | ) |
|
| — |
|
|
| — |
|
|
| (18,130 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (55,404 | ) |
|
| — |
|
|
| — |
|
|
| (55,404 | ) |
Redemption of Series A and Series C preferred stock |
|
| (381,500 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (381,500 | ) | ||||||||||||||||||||||||||||||||
Issuance of Series G preferred stock |
|
| 400,000 |
|
|
| — |
|
|
| — |
|
|
| (4,000 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 396,000 |
| ||||||||||||||||||||||||||||||||
Purchases of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (365,628 | ) |
|
| (365,628 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,067,575 | ) |
|
| (1,067,575 | ) |
Stock-based compensation transactions, net |
|
| — |
|
|
| (12 | ) |
|
| (212 | ) |
|
| (10,862 | ) |
|
| (51 | ) |
|
| — |
|
|
| 46,281 |
|
|
| 35,144 |
|
|
| — |
|
|
| (12 | ) |
|
| (179 | ) |
|
| 9,363 |
|
|
| (151 | ) |
|
| — |
|
|
| 50,189 |
|
|
| 59,210 |
|
Common stock cash dividends — $1.00 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (138,862 | ) |
|
| — |
|
|
| — |
|
|
| (138,862 | ) | ||||||||||||||||||||||||||||||||
Balance — March 31, 2019 |
| $ | 1,231,500 |
|
|
| 79,871 |
|
|
| 1,514 |
|
|
| 6,568,480 |
|
|
| 11,842,371 |
|
|
| (288,009 | ) |
|
| (3,848,198 | ) |
| $ | 15,587,529 |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Balance — January 1, 2020 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,566 |
|
|
| 6,593,539 |
|
|
| 12,820,916 |
|
|
| (206,680 | ) |
|
| (4,822,563 | ) |
| $ | 15,716,649 |
| ||||||||||||||||||||||||||||||||
Adoption of new accounting standard for credit losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,925 | ) |
|
| — |
|
|
| — |
|
|
| (91,925 | ) | ||||||||||||||||||||||||||||||||
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 268,822 |
|
|
| 416,513 |
|
|
| — |
|
|
| 685,335 |
| ||||||||||||||||||||||||||||||||
Preferred stock cash dividends (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17,078 | ) |
|
| — |
|
|
| — |
|
|
| (17,078 | ) | ||||||||||||||||||||||||||||||||
Purchases of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (373,750 | ) |
|
| (373,750 | ) | ||||||||||||||||||||||||||||||||
Stock-based compensation transactions, net |
|
| — |
|
|
| — |
|
|
| (274 | ) |
|
| (5,132 | ) |
|
| (102 | ) |
|
| — |
|
|
| 45,314 |
|
|
| 39,806 |
| ||||||||||||||||||||||||||||||||
Common stock cash dividends — $1.10 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (143,243 | ) |
|
| — |
|
|
| — |
|
|
| (143,243 | ) | ||||||||||||||||||||||||||||||||
Balance — March 31, 2020 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,292 |
|
|
| 6,588,407 |
|
|
| 12,837,390 |
|
|
| 209,833 |
|
|
| (5,150,999 | ) |
| $ | 15,815,794 |
| ||||||||||||||||||||||||||||||||
Common stock cash dividends — $3.00 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (406,967 | ) |
|
| — |
|
|
| — |
|
|
| (406,967 | ) | ||||||||||||||||||||||||||||||||
Balance — September 30, 2019 |
| $ | 1,250,000 |
|
|
| 79,871 |
|
|
| 1,547 |
|
|
| 6,584,705 |
|
|
| 12,490,233 |
|
|
| (80,308 | ) |
|
| (4,546,237 | ) |
| $ | 15,779,811 |
|
| (a) | For the three-month and nine-month periods ended |
See accompanying notes to financial statements.
- 7 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies and current environment
The consolidated interim financial statements of M&T Bank Corporation (“M&T”) and subsidiaries (“the Company”) were compiled in accordance with generally accepted accounting principles (“GAAP”) using the accounting policies set forth in note 1 of Notes to Financial Statements included in Form 10-K for the year ended December 31, 2019 (“2019 Annual Report”), except that effective January 1, 2020 the Company adopted accounting guidance related to the recognition of expected credit losses that is discussed in notes 2, 3 and 15 herein. The financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the interim periods presented.
The United States has been operating under a state of emergency related to the Coronavirus Disease 2019 (“COVID-19”) pandemic since March 13, 2020. The direct and indirect effects of the COVID-19 pandemic have resulted in a dramatic reduction in economic activity that has severely hampered the ability for businesses and consumers to meet their current repayment obligations. The effects of the pandemic contributed to a significant increase in the provision for credit losses during the first quarternine months of 2020. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), in addition to providing financial assistance to both businesses and consumers, creates a forbearance program for federally-backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the national emergency, and provides financial institutions the option to temporarily suspend certain requirements under GAAP related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19. The bankingbank regulatory agencies have likewise issued guidance encouraging financial institutions to work prudently with borrowers who are, or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. That guidance, with concurrence of the Financial Accounting Standards Board, and provisions of the CARES Act allow modifications made on a good faith basis in response to COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be treated as troubled debt restructurings.restructurings nor be reported as past due. Modifications may include payment deferrals, fee waivers, extensions of repayment term, or other delays in payment. The Company has begunbeen working with its customers affected by COVID-19 and expects a significant amount ofhas granted modifications across many of its loan portfolios in the near term.portfolios. To the extent that such modifications meet the criteria previously described, such modifications arethe modified loans have not expected to bebeen classified as troubled debt restructurings.
restructurings nor reported as past due.
- 8 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. 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, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
| $ | 10,429 |
|
| $ | 147 |
|
| $ | 3 |
|
| $ | 10,573 |
|
| $ | 9,154 |
|
| $ | 226 |
|
| $ | 10 |
|
| $ | 9,370 |
|
Obligations of states and political subdivisions |
|
| 683 |
|
|
| 1 |
|
|
| 2 |
|
|
| 682 |
| ||||||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 5,802,064 |
|
|
| 210,850 |
|
|
| 1,850 |
|
|
| 6,011,064 |
|
|
| 4,944,979 |
|
|
| 221,561 |
|
|
| 839 |
|
|
| 5,165,701 |
|
Privately issued |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Other debt securities |
|
| 134,864 |
|
|
| 703 |
|
|
| 17,923 |
|
|
| 117,644 |
|
|
| 135,915 |
|
|
| 1,328 |
|
|
| 9,992 |
|
|
| 127,251 |
|
|
|
| 5,948,056 |
|
|
| 211,701 |
|
|
| 19,778 |
|
|
| 6,139,979 |
|
|
| 5,090,064 |
|
|
| 223,115 |
|
|
| 10,841 |
|
|
| 5,302,338 |
|
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
|
| 2,999 |
|
|
| 1 |
|
|
| — |
|
|
| 3,000 |
|
|
| 3,000 |
|
|
| — |
|
|
| — |
|
|
| 3,000 |
|
Obligations of states and political subdivisions |
|
| 2,445 |
|
|
| 10 |
|
|
| — |
|
|
| 2,455 |
|
|
| 1,855 |
|
|
| 10 |
|
|
| — |
|
|
| 1,865 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 2,202,453 |
|
|
| 108,412 |
|
|
| 2 |
|
|
| 2,310,863 |
|
|
| 1,850,864 |
|
|
| 100,104 |
|
|
| 92 |
|
|
| 1,950,876 |
|
Privately issued |
|
| 89,617 |
|
|
| 9,499 |
|
|
| 20,713 |
|
|
| 78,403 |
|
|
| 80,013 |
|
|
| 11,010 |
|
|
| 17,800 |
|
|
| 73,223 |
|
Other debt securities |
|
| 3,128 |
|
|
| — |
|
|
| — |
|
|
| 3,128 |
|
|
| 2,962 |
|
|
| — |
|
|
| — |
|
|
| 2,962 |
|
|
|
| 2,300,642 |
|
|
| 117,922 |
|
|
| 20,715 |
|
|
| 2,397,849 |
|
|
| 1,938,694 |
|
|
| 111,124 |
|
|
| 17,892 |
|
|
| 2,031,926 |
|
Total debt securities |
| $ | 8,248,698 |
|
| $ | 329,623 |
|
| $ | 40,493 |
|
| $ | 8,537,828 |
|
| $ | 7,028,758 |
|
| $ | 334,239 |
|
| $ | 28,733 |
|
| $ | 7,334,264 |
|
Equity and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Readily marketable equity — at fair value |
| $ | 120,425 |
|
| $ | 13,735 |
|
| $ | — |
|
| $ | 134,160 |
|
| $ | 77,708 |
|
| $ | 23,474 |
|
| $ | — |
|
| $ | 101,182 |
|
Other — at cost |
|
| 381,809 |
|
|
| — |
|
|
| — |
|
|
| 381,809 |
|
|
| 380,790 |
|
|
| — |
|
|
| — |
|
|
| 380,790 |
|
Total equity and other securities |
| $ | 502,234 |
|
| $ | 13,735 |
|
| $ | — |
|
| $ | 515,969 |
|
| $ | 458,498 |
|
| $ | 23,474 |
|
| $ | — |
|
| $ | 481,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
| $ | 9,742 |
|
| $ | 41 |
|
| $ | 16 |
|
| $ | 9,767 |
|
| $ | 9,742 |
|
| $ | 41 |
|
| $ | 16 |
|
| $ | 9,767 |
|
Obligations of states and political subdivisions |
|
| 776 |
|
|
| 2 |
|
|
| 3 |
|
|
| 775 |
|
|
| 776 |
|
|
| 2 |
|
|
| 3 |
|
|
| 775 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 6,113,913 |
|
|
| 88,634 |
|
|
| 21,607 |
|
|
| 6,180,940 |
|
|
| 6,113,913 |
|
|
| 88,634 |
|
|
| 21,607 |
|
|
| 6,180,940 |
|
Privately issued |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Other debt securities |
|
| 133,829 |
|
|
| 2,046 |
|
|
| 8,597 |
|
|
| 127,278 |
|
|
| 133,829 |
|
|
| 2,046 |
|
|
| 8,597 |
|
|
| 127,278 |
|
|
|
| 6,258,276 |
|
|
| 90,723 |
|
|
| 30,223 |
|
|
| 6,318,776 |
|
|
| 6,258,276 |
|
|
| 90,723 |
|
|
| 30,223 |
|
|
| 6,318,776 |
|
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
|
| 249,862 |
|
|
| 286 |
|
|
| — |
|
|
| 250,148 |
|
|
| 249,862 |
|
|
| 286 |
|
|
| — |
|
|
| 250,148 |
|
Obligations of states and political subdivisions |
|
| 4,140 |
|
|
| 16 |
|
|
| — |
|
|
| 4,156 |
|
|
| 4,140 |
|
|
| 16 |
|
|
| — |
|
|
| 4,156 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 2,306,180 |
|
|
| 50,381 |
|
|
| 1,992 |
|
|
| 2,354,569 |
|
|
| 2,306,180 |
|
|
| 50,381 |
|
|
| 1,992 |
|
|
| 2,354,569 |
|
Privately issued |
|
| 93,496 |
|
|
| 11,779 |
|
|
| 18,181 |
|
|
| 87,094 |
|
|
| 93,496 |
|
|
| 11,779 |
|
|
| 18,181 |
|
|
| 87,094 |
|
Other debt securities |
|
| 3,239 |
|
|
| — |
|
|
| — |
|
|
| 3,239 |
|
|
| 3,239 |
|
|
| — |
|
|
| — |
|
|
| 3,239 |
|
|
|
| 2,656,917 |
|
|
| 62,462 |
|
|
| 20,173 |
|
|
| 2,699,206 |
|
|
| 2,656,917 |
|
|
| 62,462 |
|
|
| 20,173 |
|
|
| 2,699,206 |
|
Total debt securities |
| $ | 8,915,193 |
|
| $ | 153,185 |
|
| $ | 50,396 |
|
| $ | 9,017,982 |
|
| $ | 8,915,193 |
|
| $ | 153,185 |
|
| $ | 50,396 |
|
| $ | 9,017,982 |
|
Equity and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Readily marketable equity — at fair value |
| $ | 105,524 |
|
| $ | 34,786 |
|
| $ | 269 |
|
| $ | 140,041 |
|
| $ | 105,524 |
|
| $ | 34,786 |
|
| $ | 269 |
|
| $ | 140,041 |
|
Other — at cost |
|
| 381,517 |
|
|
| — |
|
|
| — |
|
|
| 381,517 |
|
|
| 381,517 |
|
|
| — |
|
|
| — |
|
|
| 381,517 |
|
Total equity and other securities |
| $ | 487,041 |
|
| $ | 34,786 |
|
| $ | 269 |
|
| $ | 521,558 |
|
| $ | 487,041 |
|
| $ | 34,786 |
|
| $ | 269 |
|
| $ | 521,558 |
|
- 9 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Investment securities, continued
There were 0 significant gross realized gains or losses from sales of investment securities for the quartersthree-month and nine-month periods ended March 31,September 30, 2020 and 2019. Unrealized lossesgains on equity securities during the three months ended September 30, 2020 were $21$3 million and unrealized losses during the nine months ended September 30, 2020 were $11 million, compared with unrealized gains of $4 million and $24 million during the three months ended March 31, 2020, compared with unrealized gains of $12 million during the threeand nine months ended March 31, 2019.September 30, 2019, respectively.
At March 31,September 30, 2020, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:
|
| Amortized Cost |
|
| Estimated Fair Value |
|
| Amortized Cost |
|
| Estimated Fair Value |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Debt securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 7,559 |
|
|
| 7,576 |
|
| $ | 5,197 |
|
|
| 5,207 |
|
Due after one year through five years |
|
| 9,123 |
|
|
| 9,342 |
|
|
| 11,446 |
|
|
| 12,009 |
|
Due after five years through ten years |
|
| 99,294 |
|
|
| 87,831 |
|
|
| 98,426 |
|
|
| 95,033 |
|
Due after ten years |
|
| 30,000 |
|
|
| 24,150 |
|
|
| 30,000 |
|
|
| 24,372 |
|
|
|
| 145,976 |
|
|
| 128,899 |
|
|
| 145,069 |
|
|
| 136,621 |
|
Mortgage-backed securities available for sale |
|
| 5,802,080 |
|
|
| 6,011,080 |
|
|
| 4,944,995 |
|
|
| 5,165,717 |
|
|
| $ | 5,948,056 |
|
|
| 6,139,979 |
|
| $ | 5,090,064 |
|
|
| 5,302,338 |
|
Debt securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 4,594 |
|
|
| 4,600 |
|
| $ | 4,680 |
|
|
| 4,688 |
|
Due after one year through five years |
|
| 850 |
|
|
| 855 |
|
|
| 175 |
|
|
| 177 |
|
Due after ten years |
|
| 3,128 |
|
|
| 3,128 |
|
|
| 2,962 |
|
|
| 2,962 |
|
|
|
| 8,572 |
|
|
| 8,583 |
|
|
| 7,817 |
|
|
| 7,827 |
|
Mortgage-backed securities held to maturity |
|
| 2,292,070 |
|
|
| 2,389,266 |
|
|
| 1,930,877 |
|
|
| 2,024,099 |
|
|
| $ | 2,300,642 |
|
|
| 2,397,849 |
|
| $ | 1,938,694 |
|
|
| 2,031,926 |
|
- 10 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Investment securities, continued
A summary of investment securities that as of March 31,September 30, 2020 and December 31, 2019 had been in a continuous unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss position for twelve months or longer follows:
|
| Less Than 12 Months |
|
| 12 Months or More |
|
| Less Than 12 Months |
|
| 12 Months or More |
| ||||||||||||||||||||
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
|
| Fair Value |
|
| Unrealized Losses |
| ||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
| $ | 985 |
|
|
| (3 | ) |
|
| — |
|
|
| — |
|
| $ | 985 |
|
|
| (10 | ) |
|
| — |
|
|
| — |
|
Obligations of states and political subdivisions |
|
| — |
|
|
| — |
|
|
| 186 |
|
|
| (2 | ) | ||||||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 77,383 |
|
|
| (1,055 | ) |
|
| 40,838 |
|
|
| (795 | ) |
|
| 20,313 |
|
|
| (364 | ) |
|
| 21,735 |
|
|
| (475 | ) |
Other debt securities |
|
| 52,512 |
|
|
| (6,691 | ) |
|
| 53,341 |
|
|
| (11,232 | ) |
|
| 42,385 |
|
|
| (1,087 | ) |
|
| 62,659 |
|
|
| (8,905 | ) |
|
|
| 130,880 |
|
|
| (7,749 | ) |
|
| 94,365 |
|
|
| (12,029 | ) |
|
| 63,683 |
|
|
| (1,461 | ) |
|
| 84,394 |
|
|
| (9,380 | ) |
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| — |
|
|
| — |
|
|
| 136 |
|
|
| (2 | ) |
|
| 11,357 |
|
|
| (92 | ) |
|
| — |
|
|
| — |
|
Privately issued |
|
| 14,602 |
|
|
| (16 | ) |
|
| 46,103 |
|
|
| (20,697 | ) |
|
| 7,476 |
|
|
| (32 | ) |
|
| 46,048 |
|
|
| (17,768 | ) |
|
|
| 14,602 |
|
|
| (16 | ) |
|
| 46,239 |
|
|
| (20,699 | ) |
|
| 18,833 |
|
|
| (124 | ) |
|
| 46,048 |
|
|
| (17,768 | ) |
Total |
| $ | 145,482 |
|
|
| (7,765 | ) |
|
| 140,604 |
|
|
| (32,728 | ) |
| $ | 82,516 |
|
|
| (1,585 | ) |
|
| 130,442 |
|
|
| (27,148 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
| $ | 1,406 |
|
|
| (7 | ) |
|
| 2,893 |
|
|
| (9 | ) |
| $ | 1,406 |
|
|
| (7 | ) |
|
| 2,893 |
|
|
| (9 | ) |
Obligations of states and political subdivisions |
|
| — |
|
|
| — |
|
|
| 277 |
|
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| 277 |
|
|
| (3 | ) |
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 117,299 |
|
|
| (222 | ) |
|
| 2,002,364 |
|
|
| (21,385 | ) |
|
| 117,299 |
|
|
| (222 | ) |
|
| 2,002,364 |
|
|
| (21,385 | ) |
Other debt securities |
|
| 6,600 |
|
|
| (354 | ) |
|
| 56,313 |
|
|
| (8,243 | ) |
|
| 6,600 |
|
|
| (354 | ) |
|
| 56,313 |
|
|
| (8,243 | ) |
|
|
| 125,305 |
|
|
| (583 | ) |
|
| 2,061,847 |
|
|
| (29,640 | ) |
|
| 125,305 |
|
|
| (583 | ) |
|
| 2,061,847 |
|
|
| (29,640 | ) |
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 2,727 |
|
|
| (5 | ) |
|
| 145,235 |
|
|
| (1,987 | ) |
|
| 2,727 |
|
|
| (5 | ) |
|
| 145,235 |
|
|
| (1,987 | ) |
Privately issued |
|
| — |
|
|
| — |
|
|
| 49,656 |
|
|
| (18,181 | ) |
|
| — |
|
|
| — |
|
|
| 49,656 |
|
|
| (18,181 | ) |
|
|
| 2,727 |
|
|
| (5 | ) |
|
| 194,891 |
|
|
| (20,168 | ) |
|
| 2,727 |
|
|
| (5 | ) |
|
| 194,891 |
|
|
| (20,168 | ) |
Total |
| $ | 128,032 |
|
|
| (588 | ) |
|
| 2,256,738 |
|
|
| (49,808 | ) |
| $ | 128,032 |
|
|
| (588 | ) |
|
| 2,256,738 |
|
|
| (49,808 | ) |
The Company owned 364290 individual debt securities with aggregate gross unrealized losses of $40$29 million at March 31,September 30, 2020. Based on a review of each of the securities in the investment securities portfolio at March 31,September 30, 2020, the Company concluded that it expected to recover the amortized cost basis of its investment. As of March 31,September 30, 2020, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its impaired investment securities at a loss. At March 31,September 30, 2020, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $382$381 million of cost method equity securities.
- 11 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Investment securities, continued
As described in notes 3 and 15, on January 1, 2020 the Company adopted amended accounting guidance that requires an allowance for credit losses be deducted from the amortized cost basis of financial assets, including investment securities held to maturity, to present theirthe net carrying value at the amount that is expected to be collected over their contractual term. The Company estimated no material allowance for credit losses for its investment securities classified as held-to-maturity at January 1, 2020 or March 31,September 30, 2020, as the substantial majority of such investment securities are obligations backed by the U.S. government or its agencies.
3. Loans and leases and the allowance for credit losses
Effective January 1, 2020 the Company adopted amended accounting guidance which requires an allowance for credit losses be deducted from the amortized cost basis of financial assets to present the net carrying value at the amount that is expected to be collected over their contractual term considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The amended guidance also requires recording an allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The initial allowance for these assets will be added to the purchase price at acquisition rather than being reported as an expense. Subsequent changes in the allowance will be recorded in the income statement as an adjustment to the provision for credit losses. The new guidance replaced the previous incurred loss model for determining the allowance for credit losses. The adoption resulted in a $132 million increase in the allowance for credit losses at January 1, 2020. Prior to January 1, 2020, the Company generally recognized the excess of cash flows expected at acquisition over the estimated fair value of the acquired loans as interest income over the remaining lives of such loans regardless of the borrowers’ repayment status. Effective with the adoption of the new accounting standard, the Company’s nonaccrual loan policy now applies to loans acquired at a discount. That change added $171 million to nonaccrual loans as of the January 1, 2020 adoption date.
Past due and nonaccrual loans
A summary of current, past due and nonaccrual loans as of March 31,September 30, 2020 and December 31, 2019 follows:
|
| Current |
|
| 30-89 Days Past Due |
|
| Accruing Loans Past Due 90 Days or More |
|
| Nonaccrual |
|
| Total |
|
| Current |
|
| 30-89 Days Past Due |
|
| Accruing Loans Past Due 90 Days or More |
|
| Nonaccrual |
|
| Total |
| ||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Commercial, financial, leasing, etc. |
| $ | 25,727,500 |
|
|
| 219,577 |
|
|
| 9,924 |
|
|
| 286,647 |
|
| $ | 26,243,648 |
|
| $ | 27,249,552 |
|
|
| 282,917 |
|
|
| 8,551 |
|
|
| 350,628 |
|
| $ | 27,891,648 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 27,148,337 |
|
|
| 185,572 |
|
|
| 35,103 |
|
|
| 188,469 |
|
|
| 27,557,481 |
|
|
| 27,250,676 |
|
|
| 197,881 |
|
|
| 8,189 |
|
|
| 252,515 |
|
|
| 27,709,261 |
|
Residential builder and developer |
|
| 1,426,646 |
|
|
| 36,607 |
|
|
| 4,204 |
|
|
| 3,204 |
|
|
| 1,470,661 |
|
|
| 1,353,863 |
|
|
| 7,282 |
|
|
| — |
|
|
| 1,833 |
|
|
| 1,362,978 |
|
Other commercial construction |
|
| 7,427,735 |
|
|
| 191,193 |
|
|
| 2,101 |
|
|
| 34,935 |
|
|
| 7,655,964 |
|
|
| 8,405,525 |
|
|
| 66,599 |
|
|
| 94 |
|
|
| 37,627 |
|
|
| 8,509,845 |
|
Residential |
|
| 12,414,544 |
|
|
| 499,077 |
|
|
| 474,016 |
|
|
| 293,638 |
|
|
| 13,681,275 |
|
|
| 13,934,309 |
|
|
| 185,420 |
|
|
| 503,450 |
|
|
| 297,636 |
|
|
| 14,920,815 |
|
Residential — limited documentation |
|
| 1,755,197 |
|
|
| 87,225 |
|
|
| — |
|
|
| 119,317 |
|
|
| 1,961,739 |
|
|
| 1,606,130 |
|
|
| 20,980 |
|
|
| — |
|
|
| 115,783 |
|
|
| 1,742,893 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans |
|
| 4,287,438 |
|
|
| 30,396 |
|
|
| — |
|
|
| 63,071 |
|
|
| 4,380,905 |
|
|
| 4,000,829 |
|
|
| 22,209 |
|
|
| — |
|
|
| 78,820 |
|
|
| 4,101,858 |
|
Recreational finance |
|
| 5,778,723 |
|
|
| 35,559 |
|
|
| — |
|
|
| 13,405 |
|
|
| 5,827,687 |
|
|
| 6,838,126 |
|
|
| 36,003 |
|
|
| — |
|
|
| 24,191 |
|
|
| 6,898,320 |
|
Automobile |
|
| 3,843,504 |
|
|
| 65,585 |
|
|
| — |
|
|
| 19,251 |
|
|
| 3,928,340 |
|
|
| 3,829,968 |
|
|
| 42,906 |
|
|
| — |
|
|
| 42,374 |
|
|
| 3,915,248 |
|
Other |
|
| 1,374,200 |
|
|
| 15,595 |
|
|
| 4,969 |
|
|
| 39,811 |
|
|
| 1,434,575 |
|
|
| 1,337,042 |
|
|
| 11,601 |
|
|
| 6,974 |
|
|
| 38,565 |
|
|
| 1,394,182 |
|
Total |
| $ | 91,183,824 |
|
|
| 1,366,386 |
|
|
| 530,317 |
|
|
| 1,061,748 |
|
| $ | 94,142,275 |
|
| $ | 95,806,020 |
|
|
| 873,798 |
|
|
| 527,258 |
|
|
| 1,239,972 |
|
| $ | 98,447,048 |
|
- 12 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
|
| Current |
|
| 30-89 Days Past Due |
|
| Accruing Loans Past Due 90 Days or More (a) |
|
| Accruing Loans Acquired at a Discount Past Due 90 days or More (b) |
|
| Purchased Impaired (c) |
|
| Nonaccrual |
|
| Total |
| |||||||
|
| (In thousands) |
| |||||||||||||||||||||||||
December 31, 2019 |
|
|
| |||||||||||||||||||||||||
Commercial, financial, leasing, etc. |
| $ | 23,290,797 |
|
|
| 184,011 |
|
|
| 16,776 |
|
|
| 27 |
|
|
| — |
|
|
| 346,557 |
|
| $ | 23,838,168 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 26,311,414 |
|
|
| 165,579 |
|
|
| 6,740 |
|
|
| — |
|
|
| 15,601 |
|
|
| 158,474 |
|
|
| 26,657,808 |
|
Residential builder and developer |
|
| 1,521,315 |
|
|
| 21,195 |
|
|
| — |
|
|
| — |
|
|
| 753 |
|
|
| 3,982 |
|
|
| 1,547,245 |
|
Other commercial construction |
|
| 7,204,148 |
|
|
| 95,346 |
|
|
| 3,360 |
|
|
| — |
|
|
| 1,237 |
|
|
| 32,770 |
|
|
| 7,336,861 |
|
Residential |
|
| 12,760,040 |
|
|
| 451,274 |
|
|
| 486,515 |
|
|
| 5,788 |
|
|
| 143,145 |
|
|
| 235,663 |
|
|
| 14,082,425 |
|
Residential — limited documentation |
|
| 1,858,037 |
|
|
| 65,215 |
|
|
| 181 |
|
|
| — |
|
|
| 66,809 |
|
|
| 83,427 |
|
|
| 2,073,669 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans |
|
| 4,386,511 |
|
|
| 30,229 |
|
|
| — |
|
|
| 1,662 |
|
|
| — |
|
|
| 63,215 |
|
|
| 4,481,617 |
|
Recreational finance |
|
| 5,484,997 |
|
|
| 36,827 |
|
|
| — |
|
|
| 99 |
|
|
| — |
|
|
| 14,219 |
|
|
| 5,536,142 |
|
Automobile |
|
| 3,787,221 |
|
|
| 78,478 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,293 |
|
|
| 3,886,992 |
|
Other |
|
| 1,395,240 |
|
|
| 45,978 |
|
|
| 5,156 |
|
|
| 32,056 |
|
|
| — |
|
|
| 3,512 |
|
|
| 1,481,942 |
|
Total |
| $ | 87,999,720 |
|
|
| 1,174,132 |
|
|
| 518,728 |
|
|
| 39,632 |
|
|
| 227,545 |
|
|
| 963,112 |
|
| $ | 90,922,869 |
|
(a) | Excludes loans acquired at a discount. |
(b) | Loans acquired at a discount that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately. |
(c) | Accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value. |
A summary of outstanding loan balances for which COVID-19 related modifications were granted as of September 30, 2020 and June 30, 2020 is presented below. These loans meet the criteria described in note 1 and, as such, are not considered past due or otherwise in default of loan terms as of the dates presented.
|
|
|
|
|
|
|
|
|
|
| September 30, 2020 |
|
| June 30, 2020 |
| ||
|
| (In thousands) |
| |||||
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing, etc. |
| $ | 815,186 |
|
| $ | 5,302,196 |
|
Real estate: |
|
|
|
|
|
|
|
|
Commercial |
|
| 4,452,846 |
|
|
| 7,802,006 |
|
Residential builder and developer |
|
| 1,473 |
|
|
| 18,253 |
|
Other commercial construction |
|
| 671,378 |
|
|
| 861,536 |
|
Residential |
|
| 2,852,740 |
|
|
| 1,737,483 |
|
Residential — limited documentation |
|
| 454,378 |
|
|
| 538,671 |
|
Consumer: |
|
|
|
|
|
|
|
|
Home equity lines and loans |
|
| 25,658 |
|
|
| 88,162 |
|
Recreational finance |
|
| 39,754 |
|
|
| 254,205 |
|
Automobile |
|
| 62,871 |
|
|
| 326,113 |
|
Other |
|
| 2,336 |
|
|
| 16,611 |
|
Total |
| $ | 9,378,620 |
|
| $ | 16,945,236 |
|
Substantially all of the loan modifications outstanding at September 30, 2020 are scheduled to expire in the fourth quarter of 2020. Should borrowers request further forbearance, the credit quality of the loans and the ability and willingness of borrowers to repay such loans will be re-assessed to determine whether the Company expects to receive all principal and interest payments due.
- 13 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
One-to-four family residential mortgage loans held for sale were $374$571 million and $414 million at March 31,September 30, 2020 and December 31, 2019, respectively. Commercial real estate loans held for sale were $250$336 million at March 31,September 30, 2020 and $28 million at December 31, 2019.
The outstanding principal balance and the carrying amount of loans acquired at a discount that were recorded at fair value at the acquisition date for which interest income was recognized based on expected future cash flows that were included in the consolidated balance sheet at December 31, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
| |
|
|
|
|
|
Outstanding principal balance |
| $ | 769,414 |
|
Carrying amount: |
|
|
|
|
Commercial, financial, leasing, etc. |
|
| 21,114 |
|
Commercial real estate |
|
| 94,890 |
|
Residential real estate |
|
| 341,807 |
|
Consumer |
|
| 77,785 |
|
|
| $ | 535,596 |
|
- 13 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
Purchased impaired loans included in the table above totaled $228 million at December 31, 2019, representing less than 1% of the Company’s assets at that date. A summary of changes in the accretable yield for loans acquired at a discount for the three months and nine months ended March 31,September 30, 2019 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| |||||||||||||||
|
| Purchased |
|
| Other |
|
|
|
|
|
| Purchased |
|
| Other |
|
| Purchased |
|
| Other |
| ||||||
|
| Impaired |
|
| Acquired |
|
|
|
|
|
| Impaired |
|
| Acquired |
|
| Impaired |
|
| Acquired |
| ||||||
|
| (In thousands) |
|
|
|
|
|
| (In thousands) |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
| $ | 147,210 |
|
| $ | 96,907 |
|
|
|
|
|
| $ | 147,104 |
|
| $ | 90,911 |
|
| $ | 147,210 |
|
| $ | 96,907 |
|
Interest income |
|
| (18,082 | ) |
|
| (9,717 | ) |
|
|
|
|
|
| (9,564 | ) |
|
| (9,238 | ) |
|
| (37,278 | ) |
|
| (28,621 | ) |
Reclassifications from nonaccretable balance |
|
| 11,189 |
|
|
| 4,865 |
|
|
|
|
|
|
| 9,079 |
|
|
| 3,990 |
|
|
| 36,687 |
|
|
| 12,312 |
|
Other (a) |
|
| — |
|
|
| 1,632 |
|
|
|
|
|
|
| — |
|
|
| 41 |
|
|
| — |
|
|
| 5,106 |
|
Balance at end of period |
| $ | 140,317 |
|
| $ | 93,687 |
|
|
|
|
|
| $ | 146,619 |
|
| $ | 85,704 |
|
| $ | 146,619 |
|
| $ | 85,704 |
|
(a) | Other changes in expected cash flows |
Credit quality indicators
The Company utilizes a loan grading system to differentiate risk amongst its commercial loans and commercial real estate loans. Loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more.
Loan officers in different geographic locations with the support of the Company’s credit department personnel continuously review and reassign loan grades based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective regions. Factors considered in assigning loan grades include borrower-specific information related to expected future cash flows and
- 14 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
operating results, collateral values, geographic location, financial condition and performance, payment status, and other information. At least annually, updated financial information is obtained from commercial borrowers associated with pass grade loans and additional analysis is performed. On a quarterly basis, the Company’s centralized credit department reviews all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing.
- 14 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
The following table summarizes the loan grades applied at March 31,September 30, 2020 to the various classes of the Company’s commercial loans and commercial real estate loans by origination year.
|
| Term Loans by Origination Year |
|
| Revolving |
|
| Revolving Loans Converted to Term |
|
|
|
|
|
| Term Loans by Origination Year |
|
| Revolving |
|
| Revolving Loans Converted to Term |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| Prior |
|
| Loans |
|
| Loans |
|
| Total |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| Prior |
|
| Loans |
|
| Loans |
|
| Total |
| ||||||||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial, financial, leasing, etc.: | Commercial, financial, leasing, etc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial, financial, leasing, etc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 1,095,201 |
|
|
| 2,767,657 |
|
|
| 1,936,195 |
|
|
| 1,197,480 |
|
|
| 966,014 |
|
|
| 1,708,564 |
|
|
| 15,369,119 |
|
|
| 35,360 |
|
| $ | 25,075,590 |
|
| $ | 8,209,336 |
|
|
| 2,387,719 |
|
|
| 1,638,389 |
|
|
| 1,001,452 |
|
|
| 816,518 |
|
|
| 1,488,463 |
|
|
| 10,444,292 |
|
|
| 27,536 |
|
| $ | 26,013,705 |
|
Criticized accrual |
|
| 1,404 |
|
|
| 19,433 |
|
|
| 93,675 |
|
|
| 29,493 |
|
|
| 33,443 |
|
|
| 71,221 |
|
|
| 621,491 |
|
|
| 11,251 |
|
|
| 881,411 |
|
|
| 389,682 |
|
|
| 75,106 |
|
|
| 141,774 |
|
|
| 50,144 |
|
|
| 45,345 |
|
|
| 57,137 |
|
|
| 758,594 |
|
|
| 9,533 |
|
|
| 1,527,315 |
|
Criticized nonaccrual |
|
| 470 |
|
|
| 9,299 |
|
|
| 26,006 |
|
|
| 31,206 |
|
|
| 20,789 |
|
|
| 43,176 |
|
|
| 149,303 |
|
|
| 6,398 |
|
|
| 286,647 |
|
|
| 2,793 |
|
|
| 23,546 |
|
|
| 49,840 |
|
|
| 16,456 |
|
|
| 18,790 |
|
|
| 66,410 |
|
|
| 165,625 |
|
|
| 7,168 |
|
|
| 350,628 |
|
Total commercial, financial, leasing, etc. |
| $ | 1,097,075 |
|
|
| 2,796,389 |
|
|
| 2,055,876 |
|
|
| 1,258,179 |
|
|
| 1,020,246 |
|
|
| 1,822,961 |
|
|
| 16,139,913 |
|
|
| 53,009 |
|
| $ | 26,243,648 |
|
| $ | 8,601,811 |
|
|
| 2,486,371 |
|
|
| 1,830,003 |
|
|
| 1,068,052 |
|
|
| 880,653 |
|
|
| 1,612,010 |
|
|
| 11,368,511 |
|
|
| 44,237 |
|
| $ | 27,891,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 1,371,675 |
|
|
| 5,272,662 |
|
|
| 4,130,012 |
|
|
| 3,170,722 |
|
|
| 3,808,737 |
|
|
| 8,005,615 |
|
|
| 917,651 |
|
|
| — |
|
| $ | 26,677,074 |
|
| $ | 2,773,454 |
|
|
| 4,911,992 |
|
|
| 3,458,071 |
|
|
| 2,851,599 |
|
|
| 2,823,120 |
|
|
| 6,188,879 |
|
|
| 810,180 |
|
|
| — |
|
| $ | 23,817,295 |
|
Criticized accrual |
|
| 3,936 |
|
|
| 94,202 |
|
|
| 62,334 |
|
|
| 41,201 |
|
|
| 77,229 |
|
|
| 380,061 |
|
|
| 32,975 |
|
|
| — |
|
|
| 691,938 |
|
|
| 343,722 |
|
|
| 436,191 |
|
|
| 531,848 |
|
|
| 294,994 |
|
|
| 728,208 |
|
|
| 1,252,953 |
|
|
| 51,535 |
|
|
| — |
|
|
| 3,639,451 |
|
Criticized nonaccrual |
|
| — |
|
|
| 3,574 |
|
|
| 5,640 |
|
|
| 20,081 |
|
|
| 38,353 |
|
|
| 120,378 |
|
|
| 443 |
|
|
| — |
|
|
| 188,469 |
|
|
| 242 |
|
|
| 43,342 |
|
|
| 5,168 |
|
|
| 31,506 |
|
|
| 21,507 |
|
|
| 149,629 |
|
|
| 1,121 |
|
|
| — |
|
|
| 252,515 |
|
Total commercial real estate |
| $ | 1,375,611 |
|
|
| 5,370,438 |
|
|
| 4,197,986 |
|
|
| 3,232,004 |
|
|
| 3,924,319 |
|
|
| 8,506,054 |
|
|
| 951,069 |
|
|
| — |
|
| $ | 27,557,481 |
|
| $ | 3,117,418 |
|
|
| 5,391,525 |
|
|
| 3,995,087 |
|
|
| 3,178,099 |
|
|
| 3,572,835 |
|
|
| 7,591,461 |
|
|
| 862,836 |
|
|
| — |
|
| $ | 27,709,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential builder and developer: | Residential builder and developer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential builder and developer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 116,793 |
|
|
| 639,055 |
|
|
| 286,402 |
|
|
| 67,825 |
|
|
| 20,183 |
|
|
| 20,312 |
|
|
| 236,688 |
|
|
| — |
|
| $ | 1,387,258 |
|
| $ | 399,778 |
|
|
| 399,923 |
|
|
| 207,188 |
|
|
| 26,378 |
|
|
| 11,668 |
|
|
| 14,190 |
|
|
| 233,182 |
|
|
| — |
|
| $ | 1,292,307 |
|
Criticized accrual |
|
| 3,528 |
|
|
| 19,862 |
|
|
| 2,185 |
|
|
| 17,169 |
|
|
| — |
|
|
| 21,226 |
|
|
| 16,229 |
|
|
| — |
|
|
| 80,199 |
|
|
| 32,441 |
|
|
| 12,744 |
|
|
| 15,255 |
|
|
| 3,421 |
|
|
| — |
|
|
| 1,410 |
|
|
| 3,567 |
|
|
| — |
|
|
| 68,838 |
|
Criticized nonaccrual |
|
| — |
|
|
| — |
|
|
| 1,162 |
|
|
| — |
|
|
| 536 |
|
|
| 1,506 |
|
|
| — |
|
|
| — |
|
|
| 3,204 |
|
|
| — |
|
|
| 518 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,315 |
|
|
| — |
|
|
| — |
|
|
| 1,833 |
|
Total residential builder and developer |
| $ | 120,321 |
|
|
| 658,917 |
|
|
| 289,749 |
|
|
| 84,994 |
|
|
| 20,719 |
|
|
| 43,044 |
|
|
| 252,917 |
|
|
| — |
|
| $ | 1,470,661 |
|
| $ | 432,219 |
|
|
| 413,185 |
|
|
| 222,443 |
|
|
| 29,799 |
|
|
| 11,668 |
|
|
| 16,915 |
|
|
| 236,749 |
|
|
| — |
|
| $ | 1,362,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial construction: | Other commercial construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other commercial construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 265,269 |
|
|
| 2,103,938 |
|
|
| 2,461,589 |
|
|
| 1,503,162 |
|
|
| 569,710 |
|
|
| 395,373 |
|
|
| 79,664 |
|
|
| — |
|
| $ | 7,378,705 |
|
| $ | 721,942 |
|
|
| 2,613,554 |
|
|
| 2,229,748 |
|
|
| 1,137,823 |
|
|
| 352,930 |
|
|
| 299,184 |
|
|
| 77,873 |
|
|
| — |
|
| $ | 7,433,054 |
|
Criticized accrual |
|
| — |
|
|
| 26,780 |
|
|
| 35,264 |
|
|
| 28,020 |
|
|
| 143,403 |
|
|
| 8,857 |
|
|
| — |
|
|
| — |
|
|
| 242,324 |
|
|
| 26,338 |
|
|
| 223,956 |
|
|
| 365,284 |
|
|
| 243,108 |
|
|
| 166,048 |
|
|
| 14,430 |
|
|
| — |
|
|
| — |
|
|
| 1,039,164 |
|
Criticized nonaccrual |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 350 |
|
|
| 7,851 |
|
|
| 21,592 |
|
|
| 5,142 |
|
|
| — |
|
|
| 34,935 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,340 |
|
|
| 3,254 |
|
|
| 24,913 |
|
|
| 5,120 |
|
|
| — |
|
|
| 37,627 |
|
Total other commercial construction |
| $ | 265,269 |
|
|
| 2,130,718 |
|
|
| 2,496,853 |
|
|
| 1,531,532 |
|
|
| 720,964 |
|
|
| 425,822 |
|
|
| 84,806 |
|
|
| — |
|
| $ | 7,655,964 |
|
| $ | 748,280 |
|
|
| 2,837,510 |
|
|
| 2,595,032 |
|
|
| 1,385,271 |
|
|
| 522,232 |
|
|
| 338,527 |
|
|
| 82,993 |
|
|
| — |
|
| $ | 8,509,845 |
|
- 15 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leasesIncreases to criticized loans during 2020 were predominantly attributable to effects of the COVID-19 pandemic and the allowance for credit losses, continuedrelated re-grading of loans.
The Company considers repayment performance a significant indicator of credit quality for its residential real estate loan and consumer loan portfolios. A summary of loans in accrual and nonaccrual status at March 31,September 30, 2020 for the various classes of the Company’s residential real estate loans and consumer loans by origination year is as follows.
- 15 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
|
| Term Loans by Origination Year |
|
| Revolving |
|
| Revolving Loans Converted to Term |
|
|
|
|
|
| Term Loans by Origination Year |
|
| Revolving |
|
| Revolving Loans Converted to Term |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| Prior |
|
| Loans |
|
| Loans |
|
| Total |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| Prior |
|
| Loans |
|
| Loans |
|
| Total |
| ||||||||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
| $ | 704,732 |
|
|
| 1,520,330 |
|
|
| 650,458 |
|
|
| 641,908 |
|
|
| 756,672 |
|
|
| 8,094,685 |
|
|
| 45,759 |
|
|
| — |
|
| $ | 12,414,544 |
|
| $ | 2,089,095 |
|
|
| 1,489,244 |
|
|
| 664,588 |
|
|
| 1,282,631 |
|
|
| 756,137 |
|
|
| 7,583,780 |
|
|
| 68,834 |
|
|
| — |
|
| $ | 13,934,309 |
|
30-89 days past due |
|
| 1,029 |
|
|
| 6,951 |
|
|
| 13,882 |
|
|
| 38,945 |
|
|
| 16,851 |
|
|
| 419,583 |
|
|
| 1,836 |
|
|
| — |
|
|
| 499,077 |
|
|
| 4,319 |
|
|
| 8,534 |
|
|
| 5,234 |
|
|
| 17,517 |
|
|
| 6,758 |
|
|
| 143,058 |
|
|
| — |
|
|
| — |
|
|
| 185,420 |
|
Accruing loans past due 90 days or more |
|
| — |
|
|
| 4,496 |
|
|
| 22,933 |
|
|
| 113,273 |
|
|
| 25,993 |
|
|
| 307,321 |
|
|
| — |
|
|
| — |
|
|
| 474,016 |
|
|
| 387 |
|
|
| 9,213 |
|
|
| 26,596 |
|
|
| 124,510 |
|
|
| 30,048 |
|
|
| 312,696 |
|
|
| — |
|
|
| — |
|
|
| 503,450 |
|
Nonaccrual |
|
| — |
|
|
| — |
|
|
| 1,609 |
|
|
| 5,356 |
|
|
| 981 |
|
|
| 285,465 |
|
|
| 227 |
|
|
| — |
|
|
| 293,638 |
|
|
| 761 |
|
|
| 4,590 |
|
|
| 1,653 |
|
|
| 5,257 |
|
|
| 1,002 |
|
|
| 284,167 |
|
|
| 206 |
|
|
| — |
|
|
| 297,636 |
|
Total residential |
| $ | 705,761 |
|
|
| 1,531,777 |
|
|
| 688,882 |
|
|
| 799,482 |
|
|
| 800,497 |
|
|
| 9,107,054 |
|
|
| 47,822 |
|
|
| — |
|
| $ | 13,681,275 |
|
| $ | 2,094,562 |
|
|
| 1,511,581 |
|
|
| 698,071 |
|
|
| 1,429,915 |
|
|
| 793,945 |
|
|
| 8,323,701 |
|
|
| 69,040 |
|
|
| — |
|
| $ | 14,920,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential - limited documentation: | Residential - limited documentation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential - limited documentation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current |
| $ | — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,755,197 |
|
|
| — |
|
|
| — |
|
| $ | 1,755,197 |
|
| $ | — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,606,130 |
|
|
| — |
|
|
| — |
|
| $ | 1,606,130 |
|
30-89 days past due |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 87,225 |
|
|
| — |
|
|
| — |
|
|
| 87,225 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,980 |
|
|
| — |
|
|
| — |
|
|
| 20,980 |
|
Accruing loans past due 90 days or more |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Nonaccrual |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 119,317 |
|
|
| — |
|
|
| — |
|
|
| 119,317 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 115,783 |
|
|
| — |
|
|
| — |
|
|
| 115,783 |
|
Total residential - limited documentation |
| $ | — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,961,739 |
|
|
| — |
|
|
| — |
|
| $ | 1,961,739 |
|
| $ | — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,742,893 |
|
|
| — |
|
|
| — |
|
| $ | 1,742,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
| $ | 411 |
|
|
| 5,576 |
|
|
| 3,298 |
|
|
| 3,251 |
|
|
| 516 |
|
|
| 68,281 |
|
|
| 2,822,191 |
|
|
| 1,383,914 |
|
| $ | 4,287,438 |
|
| $ | 668 |
|
|
| 4,357 |
|
|
| 1,961 |
|
|
| 2,155 |
|
|
| 163 |
|
|
| 57,998 |
|
|
| 2,622,825 |
|
|
| 1,310,702 |
|
| $ | 4,000,829 |
|
30-89 days past due |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,129 |
|
|
| — |
|
|
| 26,267 |
|
|
| 30,396 |
|
|
| — |
|
|
| — |
|
|
| 72 |
|
|
| — |
|
|
| — |
|
|
| 1,809 |
|
|
| 1,374 |
|
|
| 18,954 |
|
|
| 22,209 |
|
Accruing loans past due 90 days or more |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Nonaccrual |
|
| — |
|
|
| — |
|
|
| 20 |
|
|
| — |
|
|
| — |
|
|
| 6,034 |
|
|
| 401 |
|
|
| 56,616 |
|
|
| 63,071 |
|
|
| — |
|
|
| 20 |
|
|
| — |
|
|
| 52 |
|
|
| — |
|
|
| 5,018 |
|
|
| 6,988 |
|
|
| 66,742 |
|
|
| 78,820 |
|
Total home equity lines and loans |
| $ | 411 |
|
|
| 5,576 |
|
|
| 3,318 |
|
|
| 3,251 |
|
|
| 516 |
|
|
| 78,444 |
|
|
| 2,822,592 |
|
|
| 1,466,797 |
|
| $ | 4,380,905 |
|
| $ | 668 |
|
|
| 4,377 |
|
|
| 2,033 |
|
|
| 2,207 |
|
|
| 163 |
|
|
| 64,825 |
|
|
| 2,631,187 |
|
|
| 1,396,398 |
|
| $ | 4,101,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 16 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
|
| Term Loans by Origination Year |
|
| Revolving |
|
| Revolving Loans Converted to Term |
|
|
|
|
|
| Term Loans by Origination Year |
|
| Revolving |
|
| Revolving Loans Converted to Term |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| Prior |
|
| Loans |
|
| Loans |
|
| Total |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
|
| Prior |
|
| Loans |
|
| Loans |
|
| Total |
| ||||||||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recreational finance: | Recreational finance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recreational finance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current |
| $ | 566,034 |
|
|
| 2,151,461 |
|
|
| 1,126,908 |
|
|
| 775,213 |
|
|
| 435,562 |
|
|
| 723,545 |
|
|
| — |
|
|
| — |
|
| $ | 5,778,723 |
|
| $ | 2,323,314 |
|
|
| 1,881,732 |
|
|
| 969,243 |
|
|
| 674,896 |
|
|
| 379,441 |
|
|
| 609,500 |
|
|
| — |
|
|
| — |
|
| $ | 6,838,126 |
|
30-89 days past due |
|
| 775 |
|
|
| 7,022 |
|
|
| 6,779 |
|
|
| 6,380 |
|
|
| 4,114 |
|
|
| 10,489 |
|
|
| — |
|
|
| — |
|
|
| 35,559 |
|
|
| 5,130 |
|
|
| 9,073 |
|
|
| 6,755 |
|
|
| 5,091 |
|
|
| 3,168 |
|
|
| 6,786 |
|
|
| — |
|
|
| — |
|
|
| 36,003 |
|
Accruing loans past due 90 days or more |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Nonaccrual |
|
| — |
|
|
| 1,810 |
|
|
| 2,470 |
|
|
| 4,297 |
|
|
| 1,517 |
|
|
| 3,311 |
|
|
| — |
|
|
| — |
|
|
| 13,405 |
|
|
| 1,314 |
|
|
| 3,961 |
|
|
| 3,790 |
|
|
| 4,175 |
|
|
| 2,379 |
|
|
| 8,572 |
|
|
| — |
|
|
| — |
|
|
| 24,191 |
|
Total recreational finance |
| $ | 566,809 |
|
|
| 2,160,293 |
|
|
| 1,136,157 |
|
|
| 785,890 |
|
|
| 441,193 |
|
|
| 737,345 |
|
|
| — |
|
|
| — |
|
| $ | 5,827,687 |
|
| $ | 2,329,758 |
|
|
| 1,894,766 |
|
|
| 979,788 |
|
|
| 684,162 |
|
|
| 384,988 |
|
|
| 624,858 |
|
|
| — |
|
|
| — |
|
| $ | 6,898,320 |
|
Automobile: | Automobile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Automobile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current |
| $ | 388,305 |
|
|
| 1,449,075 |
|
|
| 884,926 |
|
|
| 670,264 |
|
|
| 295,567 |
|
|
| 155,367 |
|
|
| — |
|
|
| — |
|
| $ | 3,843,504 |
|
| $ | 1,084,223 |
|
|
| 1,223,790 |
|
|
| 711,515 |
|
|
| 513,607 |
|
|
| 208,741 |
|
|
| 88,092 |
|
|
| — |
|
|
| — |
|
| $ | 3,829,968 |
|
30-89 days past due |
|
| 427 |
|
|
| 11,910 |
|
|
| 16,391 |
|
|
| 17,837 |
|
|
| 11,256 |
|
|
| 7,764 |
|
|
| — |
|
|
| — |
|
|
| 65,585 |
|
|
| 2,884 |
|
|
| 10,573 |
|
|
| 11,193 |
|
|
| 10,126 |
|
|
| 5,170 |
|
|
| 2,960 |
|
|
| — |
|
|
| — |
|
|
| 42,906 |
|
Accruing loans past due 90 days or more |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Nonaccrual |
|
| — |
|
|
| 2,930 |
|
|
| 5,418 |
|
|
| 4,854 |
|
|
| 3,219 |
|
|
| 2,830 |
|
|
| — |
|
|
| — |
|
|
| 19,251 |
|
|
| 1,244 |
|
|
| 7,754 |
|
|
| 11,224 |
|
|
| 11,010 |
|
|
| 6,461 |
|
|
| 4,681 |
|
|
| — |
|
|
| — |
|
|
| 42,374 |
|
Total automobile |
| $ | 388,732 |
|
|
| 1,463,915 |
|
|
| 906,735 |
|
|
| 692,955 |
|
|
| 310,042 |
|
|
| 165,961 |
|
|
| — |
|
|
| — |
|
| $ | 3,928,340 |
|
| $ | 1,088,351 |
|
|
| 1,242,117 |
|
|
| 733,932 |
|
|
| 534,743 |
|
|
| 220,372 |
|
|
| 95,733 |
|
|
| — |
|
|
| — |
|
| $ | 3,915,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: | Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current |
| $ | 60,112 |
|
|
| 191,347 |
|
|
| 83,549 |
|
|
| 54,055 |
|
|
| 11,047 |
|
|
| 40,868 |
|
|
| 931,015 |
|
|
| 2,207 |
|
| $ | 1,374,200 |
|
| $ | 132,769 |
|
|
| 154,094 |
|
|
| 62,966 |
|
|
| 39,231 |
|
|
| 6,252 |
|
|
| 31,356 |
|
|
| 908,567 |
|
|
| 1,807 |
|
| $ | 1,337,042 |
|
30-89 days past due |
|
| 24 |
|
|
| 4,025 |
|
|
| 932 |
|
|
| 466 |
|
|
| 135 |
|
|
| 1,207 |
|
|
| 7,773 |
|
|
| 1,033 |
|
|
| 15,595 |
|
|
| 1,874 |
|
|
| 890 |
|
|
| 537 |
|
|
| 243 |
|
|
| 29 |
|
|
| 570 |
|
|
| 6,954 |
|
|
| 504 |
|
|
| 11,601 |
|
Accruing loans past due 90 days or more |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 379 |
|
|
| 4,590 |
|
|
| — |
|
|
| 4,969 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 287 |
|
|
| 6,687 |
|
|
| — |
|
|
| 6,974 |
|
Nonaccrual |
|
| 2,032 |
|
|
| 262 |
|
|
| 450 |
|
|
| 222 |
|
|
| 48 |
|
|
| 928 |
|
|
| 35,560 |
|
|
| 309 |
|
|
| 39,811 |
|
|
| 1,540 |
|
|
| 446 |
|
|
| 442 |
|
|
| 226 |
|
|
| 43 |
|
|
| 383 |
|
|
| 35,186 |
|
|
| 299 |
|
|
| 38,565 |
|
Total other |
| $ | 62,168 |
|
|
| 195,634 |
|
|
| 84,931 |
|
|
| 54,743 |
|
|
| 11,230 |
|
|
| 43,382 |
|
|
| 978,938 |
|
|
| 3,549 |
|
| $ | 1,434,575 |
|
| $ | 136,183 |
|
|
| 155,430 |
|
|
| 63,945 |
|
|
| 39,700 |
|
|
| 6,324 |
|
|
| 32,596 |
|
|
| 957,394 |
|
|
| 2,610 |
|
| $ | 1,394,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases at March 31, 2020 |
| $ | 4,582,157 |
|
|
| 16,313,657 |
|
|
| 11,860,487 |
|
|
| 8,443,030 |
|
|
| 7,249,726 |
|
|
| 22,891,806 |
|
|
| 21,278,057 |
|
|
| 1,523,355 |
|
| $ | 94,142,275 |
| ||||||||||||||||||||||||||||||||||||
Total loans and leases at September 30, 2020 |
| $ | 18,549,250 |
|
|
| 15,936,862 |
|
|
| 11,120,334 |
|
|
| 8,351,948 |
|
|
| 6,393,180 |
|
|
| 20,443,519 |
|
|
| 16,208,710 |
|
|
| 1,443,245 |
|
| $ | 98,447,048 |
|
The following table summarizes the loan grades applied at December 31, 2019 to the various classes of the Company’s commercial loans and commercial real estate loans.
|
|
|
|
|
| Real Estate |
| |||||||||
|
| Commercial, |
|
|
|
|
|
| Residential |
|
| Other |
| |||
|
| Financial, |
|
|
|
|
|
| Builder and |
|
| Commercial |
| |||
|
| Leasing, etc. |
|
| Commercial |
|
| Developer |
|
| Construction |
| ||||
|
| (In thousands) |
| |||||||||||||
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 22,595,821 |
|
|
| 25,728,725 |
|
|
| 1,419,162 |
|
|
| 7,092,799 |
|
Criticized accrual |
|
| 895,790 |
|
|
| 770,609 |
|
|
| 124,101 |
|
|
| 211,292 |
|
Criticized nonaccrual |
|
| 346,557 |
|
|
| 158,474 |
|
|
| 3,982 |
|
|
| 32,770 |
|
Total |
| $ | 23,838,168 |
|
|
| 26,657,808 |
|
|
| 1,547,245 |
|
|
| 7,336,861 |
|
- 17 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
Allowance for credit losses
For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type. Changes in the allowance for credit losses for the three months ended March 31,September 30, 2020 were as follows:
|
| Commercial, Financial, |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial, Financial, |
|
| Real Estate |
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Leasing, etc. |
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Unallocated |
|
| Total |
|
| Leasing, etc. |
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| |||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 366,094 |
|
|
| 322,201 |
|
|
| 56,033 |
|
|
| 229,118 |
|
|
| 77,625 |
|
| $ | 1,051,071 |
|
| $ | 398,257 |
|
|
| 576,321 |
|
|
| 118,921 |
|
|
| 544,737 |
|
| $ | 1,638,236 |
|
Adoption of new accounting standard |
|
| (61,474 | ) |
|
| 23,656 |
|
|
| 53,896 |
|
|
| 194,004 |
|
|
| (77,625 | ) |
|
| 132,457 |
| ||||||||||||||||||||
Provision for credit losses |
|
| 66,594 |
|
|
| 88,666 |
|
|
| 9,291 |
|
|
| 85,449 |
|
|
| — |
|
|
| 250,000 |
|
|
| 25,450 |
|
|
| 87,403 |
|
|
| (683 | ) |
|
| 37,830 |
|
|
| 150,000 |
|
Net charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs |
|
| (16,383 | ) |
|
| (1,272 | ) |
|
| (5,102 | ) |
|
| (44,947 | ) |
|
| — |
|
|
| (67,704 | ) |
|
| (14,434 | ) |
|
| (4,522 | ) |
|
| (1,516 | ) |
|
| (31,754 | ) |
|
| (52,226 | ) |
Recoveries |
|
| 3,261 |
|
|
| 438 |
|
|
| 1,674 |
|
|
| 13,169 |
|
|
| — |
|
|
| 18,542 |
|
|
| 4,475 |
|
|
| 2,578 |
|
|
| 960 |
|
|
| 14,482 |
|
|
| 22,495 |
|
Net charge-offs |
|
| (13,122 | ) |
|
| (834 | ) |
|
| (3,428 | ) |
|
| (31,778 | ) |
|
| — |
|
|
| (49,162 | ) |
|
| (9,959 | ) |
|
| (1,944 | ) |
|
| (556 | ) |
|
| (17,272 | ) |
|
| (29,731 | ) |
Ending balance |
| $ | 358,092 |
|
|
| 433,689 |
|
|
| 115,792 |
|
|
| 476,793 |
|
|
| — |
|
| $ | 1,384,366 |
|
| $ | 413,748 |
|
|
| 661,780 |
|
|
| 117,682 |
|
|
| 565,295 |
|
| $ | 1,758,505 |
|
Changes in the allowance for credit losses for the three months ended March 31,September 30, 2019 were as follows:
|
| Commercial, Financial, |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial, Financial, |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Leasing, etc. |
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Unallocated |
|
| Total |
|
| Leasing, etc. |
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 330,055 |
|
|
| 341,655 |
|
|
| 69,125 |
|
|
| 200,564 |
|
|
| 78,045 |
|
| $ | 1,019,444 |
|
| $ | 335,855 |
|
|
| 343,296 |
|
|
| 61,011 |
|
|
| 211,220 |
|
|
| 78,485 |
|
| $ | 1,029,867 |
|
Provision for credit losses |
|
| 6,271 |
|
|
| (4,203 | ) |
|
| (2,447 | ) |
|
| 22,883 |
|
|
| (504 | ) |
|
| 22,000 |
|
|
| 24,538 |
|
|
| (16,713 | ) |
|
| (309 | ) |
|
| 37,735 |
|
|
| (251 | ) |
|
| 45,000 |
|
Net charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs |
|
| (8,500 | ) |
|
| (283 | ) |
|
| (3,372 | ) |
|
| (32,945 | ) |
|
| — |
|
|
| (45,100 | ) |
|
| (15,678 | ) |
|
| (1,107 | ) |
|
| (2,721 | ) |
|
| (40,735 | ) |
|
| — |
|
|
| (60,241 | ) |
Recoveries |
|
| 7,794 |
|
|
| 826 |
|
|
| 1,830 |
|
|
| 12,543 |
|
|
| — |
|
|
| 22,993 |
|
|
| 6,730 |
|
|
| 1,656 |
|
|
| 1,511 |
|
|
| 13,914 |
|
|
| — |
|
|
| 23,811 |
|
Net (charge-offs) recoveries |
|
| (706 | ) |
|
| 543 |
|
|
| (1,542 | ) |
|
| (20,402 | ) |
|
| — |
|
|
| (22,107 | ) |
|
| (8,948 | ) |
|
| 549 |
|
|
| (1,210 | ) |
|
| (26,821 | ) |
|
| — |
|
|
| (36,430 | ) |
Ending balance |
| $ | 335,620 |
|
|
| 337,995 |
|
|
| 65,136 |
|
|
| 203,045 |
|
|
| 77,541 |
|
| $ | 1,019,337 |
|
| $ | 351,445 |
|
|
| 327,132 |
|
|
| 59,492 |
|
|
| 222,134 |
|
|
| 78,234 |
|
| $ | 1,038,437 |
|
Changes in the allowance for credit losses for the nine months ended September 30, 2020 were as follows:
|
| Commercial, Financial, |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Leasing, etc. |
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||
|
| (In thousands) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 366,094 |
|
|
| 322,201 |
|
|
| 56,033 |
|
|
| 229,118 |
|
|
| 77,625 |
|
| $ | 1,051,071 |
|
Adoption of new accounting standard |
|
| (61,474 | ) |
|
| 23,656 |
|
|
| 53,896 |
|
|
| 194,004 |
|
|
| (77,625 | ) |
|
| 132,457 |
|
Provision for credit losses |
|
| 161,444 |
|
|
| 335,159 |
|
|
| 11,458 |
|
|
| 216,939 |
|
|
| — |
|
|
| 725,000 |
|
Net charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs |
|
| (63,425 | ) |
|
| (23,266 | ) |
|
| (8,227 | ) |
|
| (116,409 | ) |
|
| — |
|
|
| (211,327 | ) |
Recoveries |
|
| 11,109 |
|
|
| 4,030 |
|
|
| 4,522 |
|
|
| 41,643 |
|
|
| — |
|
|
| 61,304 |
|
Net charge-offs |
|
| (52,316 | ) |
|
| (19,236 | ) |
|
| (3,705 | ) |
|
| (74,766 | ) |
|
| — |
|
|
| (150,023 | ) |
Ending balance |
| $ | 413,748 |
|
|
| 661,780 |
|
|
| 117,682 |
|
|
| 565,295 |
|
|
| — |
|
| $ | 1,758,505 |
|
- 18 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
Changes in the allowance for credit losses for the nine months ended September 30, 2019 were as follows:
|
| Commercial, Financial, |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Leasing, etc. |
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||
|
| (In thousands) |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 330,055 |
|
|
| 341,655 |
|
|
| 69,125 |
|
|
| 200,564 |
|
|
| 78,045 |
|
| $ | 1,019,444 |
|
Provision for credit losses |
|
| 41,146 |
|
|
| (6,415 | ) |
|
| (5,132 | ) |
|
| 92,212 |
|
|
| 189 |
|
|
| 122,000 |
|
Net charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs |
|
| (40,786 | ) |
|
| (11,555 | ) |
|
| (9,356 | ) |
|
| (113,050 | ) |
|
| — |
|
|
| (174,747 | ) |
Recoveries |
|
| 21,030 |
|
|
| 3,447 |
|
|
| 4,855 |
|
|
| 42,408 |
|
|
| — |
|
|
| 71,740 |
|
Net charge-offs |
|
| (19,756 | ) |
|
| (8,108 | ) |
|
| (4,501 | ) |
|
| (70,642 | ) |
|
| — |
|
|
| (103,007 | ) |
Ending balance |
| $ | 351,445 |
|
|
| 327,132 |
|
|
| 59,492 |
|
|
| 222,134 |
|
|
| 78,234 |
|
| $ | 1,038,437 |
|
Despite the allocation in the preceding tables, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type. A description of the methodologies used by the Company to estimate its allowance for credit losses prior to January 1, 2020 is included in note 4 of Notes to Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
In establishing the allowance for credit losses subsequent to December 31, 2019, the Company estimates losses attributable to specific troubled credits identified through both normal and targeted credit review processes and also estimates losses for loans and leases with similar risk characteristics on a collective basis. The amounts of specific loss components in the Company’s loan and lease portfolios are determined through a loan-by-loan analysis of larger balance commercial loans and commercial real estate loans that are in nonaccrual status. Such loss estimates are typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to pay. To the extent that those loans are collateral-dependent, they are evaluated based on the fair value of the loan’s collateral as estimated at or near the financial statement date. As the quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation. In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines in values as determined by line of business and/or loan workout personnel. Those adjustments are
- 18 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
reviewed and assessed for reasonableness by the Company’s credit department. Accordingly, for real estate collateral securing larger nonaccrual commercial loans and commercial real estate loans, estimated collateral values are based on current appraisals and estimates of value. For non-real estate loans, collateral is assigned a discounted estimated liquidation value and, depending on the nature of the collateral, is verified through field exams or other procedures. In assessing collateral, real estate and non-real estate values are reduced by an estimate of selling costs.
For residential real estate loans, including home equity loans and lines of credit, the excess of the loan balance over the net realizable value of the property collateralizing the loan is charged-off when the loan becomes 150 days delinquent. That charge-off is based on recent indications of value from external parties that are generally obtained shortly after a loan becomes nonaccrual. Loans to consumers that file for bankruptcy are generally charged-off to estimated net collateral value shortly after the Company is notified of such filings. When evaluating individual home equity loans and lines of credit for charge off and for purposes of estimating losses in determining the allowance for credit losses, the Company gives consideration to the required repayment of any first lien positions related to collateral property. Modified loans, including smaller balance homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows.
- 19 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
Information with respect to loans and leases that were considered nonaccrual at the beginning and end of the reporting period and the interest income recognized on such loans for the three-month and nine-month periods ended March 31,September 30, 2020 and 2019 follows.
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| January 1, 2020 |
|
| Three Months Ended September 30, 2020 |
| Nine Months Ended September 30, 2020 |
| |||||||||||||||||||||||||||||||||
|
| March 31, 2020 |
|
| January 1, 2020 |
|
| Three Months Ended March 31, 2020 |
|
| Amortized Cost with Allowance |
|
| Amortized Cost without Allowance |
|
| Total |
|
| Amortized Cost |
|
| Amortized Cost |
|
| Interest Income Recognized |
| Interest Income Recognized |
| ||||||||||||||||||
|
| Amortized Cost with Allowance |
|
| Amortized Cost without Allowance |
|
| Total |
|
| Amortized Cost |
|
| Interest Income Recognized |
|
| (In thousands) |
| |||||||||||||||||||||||||||||
|
| (In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Commercial, financial, leasing, etc. |
| $ | 153,924 |
|
|
| 132,723 |
|
|
| 286,647 |
|
|
| 346,743 |
|
|
| 1,738 |
|
| $ | 264,515 |
|
|
| 86,113 |
|
|
| 350,628 |
|
|
| 284,654 |
|
|
| 346,743 |
|
|
| 5,999 |
| 9,035 |
| |
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Commercial |
|
| 62,675 |
|
|
| 125,794 |
|
|
| 188,469 |
|
|
| 173,796 |
|
|
| 1,092 |
|
|
| 86,199 |
|
|
| 166,316 |
|
|
| 252,515 |
|
|
| 172,488 |
|
|
| 173,796 |
|
|
| 993 |
| 6,782 |
| |
Residential builder and developer |
|
| 3,204 |
|
|
| — |
|
|
| 3,204 |
|
|
| 4,708 |
|
|
| 48 |
|
|
| 1,833 |
|
|
| — |
|
|
| 1,833 |
|
|
| 1,748 |
|
|
| 4,708 |
|
|
| 114 |
| 173 |
| |
Other commercial construction |
|
| 12,039 |
|
|
| 22,896 |
|
|
| 34,935 |
|
|
| 35,881 |
|
|
| 861 |
|
|
| 15,441 |
|
|
| 22,186 |
|
|
| 37,627 |
|
|
| 85,426 |
|
|
| 35,881 |
|
|
| 232 |
| 6,809 |
| |
Residential |
|
| 67,221 |
|
|
| 226,417 |
|
|
| 293,638 |
|
|
| 322,504 |
|
|
| 6,819 |
|
|
| 66,302 |
|
|
| 231,334 |
|
|
| 297,636 |
|
|
| 306,907 |
|
|
| 322,504 |
|
|
| 3,410 |
| 15,258 |
| |
Residential — limited documentation |
|
| 26,444 |
|
|
| 92,873 |
|
|
| 119,317 |
|
|
| 114,667 |
|
|
| 201 |
|
|
| 29,824 |
|
|
| 85,959 |
|
|
| 115,783 |
|
|
| 118,695 |
|
|
| 114,667 |
|
|
| 114 |
| 571 |
| |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Home equity lines and loans |
|
| 26,230 |
|
|
| 36,841 |
|
|
| 63,071 |
|
|
| 65,039 |
|
|
| 1,459 |
|
|
| 36,134 |
|
|
| 42,686 |
|
|
| 78,820 |
|
|
| 77,094 |
|
|
| 65,039 |
|
|
| 1,017 |
| 3,236 |
| |
Recreational finance |
|
| 6,704 |
|
|
| 6,701 |
|
|
| 13,405 |
|
|
| 14,308 |
|
|
| 152 |
|
|
| 17,637 |
|
|
| 6,554 |
|
|
| 24,191 |
|
|
| 24,152 |
|
|
| 14,308 |
|
|
| 155 |
| 461 |
| |
Automobile |
|
| 9,802 |
|
|
| 9,449 |
|
|
| 19,251 |
|
|
| 21,293 |
|
|
| 47 |
|
|
| 37,355 |
|
|
| 5,019 |
|
|
| 42,374 |
|
|
| 42,736 |
|
|
| 21,293 |
|
|
| 47 |
| 139 |
| |
Other |
|
| 4,182 |
|
|
| 35,629 |
|
|
| 39,811 |
|
|
| 35,394 |
|
|
| 154 |
|
|
| 3,567 |
|
|
| 34,998 |
|
|
| 38,565 |
|
|
| 42,750 |
|
|
| 35,394 |
|
|
| 174 |
|
| 489 |
|
Total |
| $ | 372,425 |
|
|
| 689,323 |
|
|
| 1,061,748 |
|
|
| 1,134,333 |
|
|
| 12,571 |
|
| $ | 558,807 |
|
|
| 681,165 |
|
|
| 1,239,972 |
|
|
| 1,156,650 |
|
|
| 1,134,333 |
|
|
| 12,255 |
|
| 42,953 |
|
- 1920 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| January 1, 2019 |
|
| Three Months Ended September 30, 2019 |
| Nine Months Ended September 30, 2019 |
| |||||||||||||||||||||||||||||||||
|
| March 31, 2019 |
|
| January 1, 2019 |
|
| Three Months Ended March 31, 2019 |
|
| Amortized Cost with Allowance |
|
| Amortized Cost without Allowance |
|
| Total |
|
| Amortized Cost |
|
| Amortized Cost |
|
| Interest Income Recognized |
| Interest Income Recognized |
| ||||||||||||||||||
|
| Amortized Cost with Allowance |
|
| Amortized Cost without Allowance |
|
| Total |
|
| Amortized Cost |
|
| Interest Income Recognized |
|
| (In thousands) |
| |||||||||||||||||||||||||||||
|
| (In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Commercial, financial, leasing, etc. |
| $ | 150,467 |
|
|
| 95,352 |
|
|
| 245,819 |
|
|
| 234,423 |
|
|
| 3,081 |
|
| $ | 223,183 |
|
|
| 159,626 |
|
|
| 382,809 |
|
|
| 223,733 |
|
|
| 234,423 |
|
|
| 836 |
| 7,552 |
| |
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Commercial |
|
| 82,538 |
|
|
| 125,171 |
|
|
| 207,709 |
|
|
| 203,672 |
|
|
| 1,096 |
|
|
| 40,203 |
|
|
| 144,429 |
|
|
| 184,632 |
|
|
| 203,116 |
|
|
| 203,672 |
|
|
| 1,802 |
| 5,212 |
| |
Residential builder and developer |
|
| 1,636 |
|
|
| 2,756 |
|
|
| 4,392 |
|
|
| 4,798 |
|
|
| 184 |
|
|
| 1,596 |
|
|
| 3,379 |
|
|
| 4,975 |
|
|
| 5,985 |
|
|
| 4,798 |
|
|
| 89 |
| 308 |
| |
Other commercial construction |
|
| 12,557 |
|
|
| 7,342 |
|
|
| 19,899 |
|
|
| 22,205 |
|
|
| 637 |
|
|
| 15,501 |
|
|
| 15,940 |
|
|
| 31,441 |
|
|
| 32,769 |
|
|
| 22,205 |
|
|
| 488 |
| 1,669 |
| |
Residential |
|
| 52,948 |
|
|
| 157,318 |
|
|
| 210,266 |
|
|
| 233,352 |
|
|
| 3,599 |
|
|
| 57,070 |
|
|
| 166,496 |
|
|
| 223,566 |
|
|
| 210,922 |
|
|
| 233,352 |
|
|
| 3,425 |
| 10,014 |
| |
Residential — limited documentation |
|
| 19,874 |
|
|
| 64,989 |
|
|
| 84,863 |
|
|
| 84,685 |
|
|
| 252 |
|
|
| 27,803 |
|
|
| 53,876 |
|
|
| 81,679 |
|
|
| 87,551 |
|
|
| 84,685 |
|
|
| 269 |
| 795 |
| |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Home equity lines and loans |
|
| 27,814 |
|
|
| 41,431 |
|
|
| 69,245 |
|
|
| 71,292 |
|
|
| 1,310 |
|
|
| 23,908 |
|
|
| 36,007 |
|
|
| 59,915 |
|
|
| 66,927 |
|
|
| 71,292 |
|
|
| 1,846 |
| 4,617 |
| |
Recreational finance |
|
| 6,112 |
|
|
| 4,860 |
|
|
| 10,972 |
|
|
| 11,199 |
|
|
| 142 |
|
|
| 6,577 |
|
|
| 5,275 |
|
|
| 11,852 |
|
|
| 11,153 |
|
|
| 11,199 |
|
|
| 147 |
| 431 |
| |
Automobile |
|
| 13,788 |
|
|
| 7,421 |
|
|
| 21,209 |
|
|
| 23,359 |
|
|
| 54 |
|
|
| 14,596 |
|
|
| 6,443 |
|
|
| 21,039 |
|
|
| 20,170 |
|
|
| 23,359 |
|
|
| 54 |
| 161 |
| |
Other |
|
| 6,884 |
|
|
| 353 |
|
|
| 7,237 |
|
|
| 4,623 |
|
|
| 122 |
|
|
| 3,066 |
|
|
| 275 |
|
|
| 3,341 |
|
|
| 3,058 |
|
|
| 4,623 |
|
|
| 145 |
|
| 392 |
|
Total |
| $ | 374,618 |
|
|
| 506,993 |
|
|
| 881,611 |
|
|
| 893,608 |
|
|
| 10,477 |
|
| $ | 413,503 |
|
|
| 591,746 |
|
|
| 1,005,249 |
|
|
| 865,384 |
|
|
| 893,608 |
|
|
| 9,101 |
|
| 31,151 |
|
In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. To estimate expected losses theThe Company generally utilizes statistically developed models to project principal balances over the remaining contractual lives of the loan portfolios and to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators including loan grade and borrower repayment performance inform the models, which have been statistically developed based on historical correlations of credit losses with prevailing economic metrics, including unemployment, gross domestic product and real estate prices. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At both January 1 and March 31,September 30, 2020, the Company utilized a reasonable and supportable forecast period of two years. Subsequent to this forecast period the Company reverted, ratably over a one-year period, to historical loss experience to inform its estimate of losses for the remaining contractual life of each portfolio. The Company also considered the impact of portfolio concentrations, changes in underwriting practices, product expansions into new markets, imprecision in its economic forecasts, geopolitical conditions and other risk factors that might influence its loss estimation process.
The Company’s reserve for off-balance sheet credit exposures was not material at March 31,September 30, 2020 and December 31, 2019.
Loan modifications
During the normal course of business, the Company modifies loans to maximize recovery efforts. If the borrower is experiencing financial difficulty and a concession is granted, the Company considers such modifications as troubled debt restructurings and classifies those loans as either nonaccrual loans or renegotiated loans. The types of concessions that the Company grants typically include principal deferrals and interest rate concessions, but may also include other types of concessions.
- 2021 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
The table that follows summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the three-month and nine-month periods ended March 31,September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
| Post-modification (a) |
|
|
|
|
|
|
|
|
|
| Post-modification (a) |
| ||||||||||||||||||||||||||||||
|
| Number |
|
| Pre- modification Recorded Investment |
|
| Principal Deferral |
|
| Interest Rate Reduction |
|
| Combination of Concession Types |
|
| Total |
|
| Number |
|
| Pre- modification Recorded Investment |
|
| Principal Deferral |
|
| Interest Rate Reduction |
|
| Other |
|
| Combination of Concession Types |
|
| Total |
| |||||||||||||
Three Months Ended March 31, 2020 |
| (Dollars in thousands) |
| |||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 |
| (Dollars in thousands) |
| |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Commercial, financial, leasing, etc. |
|
| 112 |
|
| $ | 35,037 |
|
| $ | 7,145 |
|
| $ | 298 |
|
| $ | — |
|
| $ | 27,512 |
|
| $ | 34,955 |
| ||||||||||||||||||||||||
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Commercial |
|
| 50 |
|
|
| 13,293 |
|
|
| 12,506 |
|
|
| 172 |
|
|
| 30 |
|
|
| 600 |
|
|
| 13,308 |
| ||||||||||||||||||||||||
Residential |
|
| 30 |
|
|
| 8,544 |
|
|
| 5,517 |
|
|
| — |
|
|
| — |
|
|
| 3,616 |
|
|
| 9,133 |
| ||||||||||||||||||||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Home equity lines and loans |
|
| 33 |
|
|
| 3,410 |
|
|
| 129 |
|
|
| — |
|
|
| — |
|
|
| 3,286 |
|
|
| 3,415 |
| ||||||||||||||||||||||||
Recreational finance |
|
| 74 |
|
|
| 2,734 |
|
|
| 2,734 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,734 |
| ||||||||||||||||||||||||
Automobile |
|
| 403 |
|
|
| 7,007 |
|
|
| 7,005 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 7,007 |
| ||||||||||||||||||||||||
Other |
|
| 383 |
|
|
| 3,046 |
|
|
| 142 |
|
|
| — |
|
|
| — |
|
|
| 2,904 |
|
|
| 3,046 |
| ||||||||||||||||||||||||
Total |
|
| 1,085 |
|
| $ | 73,071 |
|
| $ | 35,178 |
|
| $ | 470 |
|
| $ | 30 |
|
| $ | 37,920 |
|
| $ | 73,598 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing, etc. |
|
| 32 |
|
| $ | 12,692 |
|
| $ | 5,066 |
|
| $ | — |
|
| $ | 6,987 |
|
| $ | 12,053 |
|
|
| 26 |
|
| $ | 6,145 |
|
| $ | 1,441 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,666 |
|
| $ | 6,107 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 10 |
|
|
| 39,642 |
|
|
| 1,355 |
|
|
| — |
|
|
| 35,968 |
|
|
| 37,323 |
|
|
| 9 |
|
|
| 2,986 |
|
|
| 383 |
|
|
| — |
|
|
| — |
|
|
| 2,589 |
|
|
| 2,972 |
|
Residential |
|
| 27 |
|
|
| 10,178 |
|
|
| 3,247 |
|
|
| — |
|
|
| 8,977 |
|
|
| 12,224 |
|
|
| 20 |
|
|
| 5,161 |
|
|
| 3,046 |
|
|
| — |
|
|
| — |
|
|
| 2,535 |
|
|
| 5,581 |
|
Residential — limited documentation |
|
| 9 |
|
|
| 2,980 |
|
|
| 2,667 |
|
|
| — |
|
|
| 1,232 |
|
|
| 3,899 |
|
|
| 1 |
|
|
| 236 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 240 |
|
|
| 240 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans |
|
| 6 |
|
|
| 738 |
|
|
| 412 |
|
|
| — |
|
|
| 334 |
|
|
| 746 |
|
|
| 12 |
|
|
| 1,392 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,399 |
|
|
| 1,399 |
|
Recreational finance |
|
| 3 |
|
|
| 90 |
|
|
| 90 |
|
|
| — |
|
|
| — |
|
|
| 90 |
|
|
| 3 |
|
|
| 61 |
|
|
| 61 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61 |
|
Automobile |
|
| 9 |
|
|
| 182 |
|
|
| 182 |
|
|
| — |
|
|
| — |
|
|
| 182 |
|
|
| 26 |
|
|
| 485 |
|
|
| 457 |
|
|
| — |
|
|
| — |
|
|
| 28 |
|
|
| 485 |
|
Total |
|
| 96 |
|
| $ | 66,502 |
|
| $ | 13,019 |
|
| $ | — |
|
| $ | 53,498 |
|
| $ | 66,517 |
|
|
| 97 |
|
| $ | 16,466 |
|
| $ | 5,388 |
|
| $ | — |
|
| $ | — |
|
| $ | 11,457 |
|
| $ | 16,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Three Months Ended March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Commercial, financial, leasing, etc. |
|
| 65 |
|
| $ | 30,615 |
|
| $ | 6,474 |
|
| $ | — |
|
| $ | 24,270 |
|
| $ | 30,744 |
| ||||||||||||||||||||||||||||
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Commercial |
|
| 15 |
|
|
| 9,241 |
|
|
| 987 |
|
|
| — |
|
|
| 7,967 |
|
|
| 8,954 |
| ||||||||||||||||||||||||||||
Residential builder and developer |
|
| 2 |
|
|
| 1,330 |
|
|
| 1,068 |
|
|
| — |
|
|
| — |
|
|
| 1,068 |
| ||||||||||||||||||||||||||||
Other commercial construction |
|
| 1 |
|
|
| 418 |
|
|
| — |
|
|
| — |
|
|
| 366 |
|
|
| 366 |
| ||||||||||||||||||||||||||||
Residential |
|
| 17 |
|
|
| 3,816 |
|
|
| 1,751 |
|
|
| — |
|
|
| 2,273 |
|
|
| 4,024 |
| ||||||||||||||||||||||||||||
Residential — limited documentation |
|
| 1 |
|
|
| 236 |
|
|
| 239 |
|
|
| — |
|
|
| — |
|
|
| 239 |
| ||||||||||||||||||||||||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Home equity lines and loans |
|
| 7 |
|
|
| 476 |
|
|
| 37 |
|
|
| — |
|
|
| 454 |
|
|
| 491 |
| ||||||||||||||||||||||||||||
Recreational finance |
|
| 4 |
|
|
| 88 |
|
|
| 88 |
|
|
| — |
|
|
| — |
|
|
| 88 |
| ||||||||||||||||||||||||||||
Automobile |
|
| 20 |
|
|
| 317 |
|
|
| 280 |
|
|
| — |
|
|
| 37 |
|
|
| 317 |
| ||||||||||||||||||||||||||||
Total |
|
| 132 |
|
| $ | 46,537 |
|
| $ | 10,924 |
|
| $ | — |
|
| $ | 35,367 |
|
| $ | 46,291 |
|
- 22 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Loans and leases and the allowance for credit losses, continued
|
|
|
|
|
|
|
|
|
| Post-modification (a) |
| |||||||||||||||||
|
| Number |
|
| Pre- modification Recorded Investment |
|
| Principal Deferral |
|
| Interest Rate Reduction |
|
| Other |
|
| Combination of Concession Types |
|
| Total |
| |||||||
Nine Months Ended September 30, 2020 |
| (Dollars in thousands) |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing, etc. |
|
| 279 |
|
| $ | 102,865 |
|
| $ | 29,762 |
|
| $ | 298 |
|
| $ | 31,605 |
|
| $ | 40,013 |
|
| $ | 101,678 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 106 |
|
|
| 94,807 |
|
|
| 24,372 |
|
|
| 505 |
|
|
| 4,830 |
|
|
| 52,916 |
|
|
| 82,623 |
|
Residential builder and developer |
|
| 1 |
|
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 90 |
|
|
| 90 |
|
Residential |
|
| 82 |
|
|
| 27,594 |
|
|
| 11,865 |
|
|
| — |
|
|
| — |
|
|
| 19,126 |
|
|
| 30,991 |
|
Residential — limited documentation |
|
| 9 |
|
|
| 2,980 |
|
|
| 2,667 |
|
|
| — |
|
|
| — |
|
|
| 1,232 |
|
|
| 3,899 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans |
|
| 159 |
|
|
| 11,719 |
|
|
| 688 |
|
|
| — |
|
|
| — |
|
|
| 11,057 |
|
|
| 11,745 |
|
Recreational finance |
|
| 348 |
|
|
| 13,619 |
|
|
| 13,619 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,619 |
|
Automobile |
|
| 1,873 |
|
|
| 33,541 |
|
|
| 33,539 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 33,541 |
|
Other |
|
| 718 |
|
|
| 5,229 |
|
|
| 824 |
|
|
| — |
|
|
| — |
|
|
| 4,405 |
|
|
| 5,229 |
|
Total |
|
| 3,575 |
|
| $ | 292,445 |
|
| $ | 117,336 |
|
| $ | 803 |
|
| $ | 36,435 |
|
| $ | 128,841 |
|
| $ | 283,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing, etc. |
|
| 115 |
|
| $ | 39,357 |
|
| $ | 8,582 |
|
| $ | — |
|
| $ | — |
|
| $ | 30,827 |
|
| $ | 39,409 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 38 |
|
|
| 22,567 |
|
|
| 3,947 |
|
|
| — |
|
|
| — |
|
|
| 18,197 |
|
|
| 22,144 |
|
Residential builder and developer |
|
| 2 |
|
|
| 1,330 |
|
|
| 1,068 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,068 |
|
Other commercial construction |
|
| 2 |
|
|
| 1,456 |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| 1,399 |
|
|
| 1,399 |
|
Residential |
|
| 63 |
|
|
| 16,490 |
|
|
| 8,805 |
|
|
| — |
|
|
| — |
|
|
| 8,842 |
|
|
| 17,647 |
|
Residential — limited documentation |
|
| 4 |
|
|
| 1,084 |
|
|
| 399 |
|
|
| — |
|
|
| — |
|
|
| 705 |
|
|
| 1,104 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans |
|
| 32 |
|
|
| 3,141 |
|
|
| 90 |
|
|
| — |
|
|
| — |
|
|
| 3,078 |
|
|
| 3,168 |
|
Recreational finance |
|
| 8 |
|
|
| 164 |
|
|
| 164 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
Automobile |
|
| 58 |
|
|
| 991 |
|
|
| 926 |
|
|
| — |
|
|
| — |
|
|
| 65 |
|
|
| 991 |
|
Total |
|
| 322 |
|
| $ | 86,580 |
|
| $ | 23,981 |
|
| $ | — |
|
| $ | — |
|
| $ | 63,113 |
|
| $ | 87,094 |
|
(a) | Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages. The present value of interest rate concessions, discounted at the effective rate of the original loan, was not material. |
Troubled debt restructurings are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Impairment of troubled debt restructurings that have subsequently defaulted may also be measured based on the loan’s observable market price or the fair value of collateral if the loan is collateral-dependent. Charge-offs may also be recognized on troubled debt restructurings that have subsequently defaulted. Loans that were modified as troubled debt restructurings during the twelve months ended March 31,September 30, 2020 and 2019 and for which there was a subsequent payment default during the three-monthnine-month periods ended March 31,September 30, 2020 and 2019, respectively, were not material.
The amount of foreclosed residential real estate property held by the Company was $75$43 million and $76 million at March 31,September 30, 2020 and December 31, 2019, respectively. There were $345$231 million and $402 million at March 31,September 30, 2020 and December 31, 2019, respectively, inof loans secured by residential real estate that were in the process of foreclosure. Of all loans in the process of foreclosure at March 31,September 30, 2020, approximately 42% were government guaranteed.
- 2123 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Borrowings
M&T had $526$527 million of fixed and variable rate junior subordinated deferrable interest debentures ("Junior Subordinated Debentures") outstanding at March 31,September 30, 2020 that are held by various trusts that were issued in connection with the issuance by those trusts of preferred capital securities ("Capital Securities") and common securities ("Common Securities"). The proceeds from the issuances of the Capital Securities and the Common Securities were used by the trusts to purchase the Junior Subordinated Debentures. The Common Securities of each of those trusts are wholly owned by M&T and are the only class of each trust's securities possessing general voting powers. The Capital Securities represent preferred undivided interests in the assets of the corresponding trust. Under the Federal Reserve Board’s risk-based capital guidelines, the securities are includable in M&T’s Tier 2 regulatory capital.
Holders of the Capital Securities receive preferential cumulative cash distributions unless M&T exercises its right to extend the payment of interest on the Junior Subordinated Debentures as allowed by the terms of each such debenture, in which case payment of distributions on the respective Capital Securities will be deferred for comparable periods. During an extended interest period, M&T may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock. In general, the agreements governing the Capital Securities, in the aggregate, provide a full, irrevocable and unconditional guarantee by M&T of the payment of distributions on, the redemption of, and any liquidation distribution with respect to the Capital Securities. The obligations under such guarantee and the Capital Securities are subordinate and junior in right of payment to all senior indebtedness of M&T.
The Capital Securities will remain outstanding until the Junior Subordinated Debentures are repaid at maturity, are redeemed prior to maturity or are distributed in liquidation to the trusts. The Capital Securities are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity dates (ranging from 2027 to 2033) of the Junior Subordinated Debentures or the earlier redemption of the Junior Subordinated Debentures in whole upon the occurrence of one or more events set forth in the indentures relating to the Capital Securities, and in whole or in part at any time after an optional redemption prior to contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated Debentures in whole or in part, subject to possible regulatory approval.
On January 7, 2020, M&T Bank, the principal bank subsidiary of M&T, redeemed $750 million of fixed rate senior notes that were due to mature on February 6, 2020. In addition, M&T Bank redeemed $750 million of fixed rate senior notes on July 17, 2020 that were due to mature on August 17, 2020.
Also included in long-term borrowings iswas an agreement to repurchase securities that totaled $101 million and $102 million at March 31, 2020 and December 31, 2019, respectively.2019. The outstanding agreement has a repurchase datematured in 2020, however, the contractual maturities of the underlying investment securities extend beyond such repurchase date.July 2020. The agreement iswas subject to legally enforceable master netting arrangements, however, the Company hasdid not offset any amounts related to the agreement in its consolidated financial statements. The Company posted collateral consisting primarily of government guaranteed mortgage-backed securities of $107 million and $108 million at March 31, 2020 and December 31, 2019 respectively.
5. Revenue from contracts with customers
A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, mortgage banking revenues, trading account and foreign exchange gains, investment securities gains, loan and letter of credit fees, income from bank-owned life insurance, and certain other revenues that are generally excluded from the scope of accounting guidance for revenue from contracts with customers.
For noninterest income revenue streams, the Company recognizes the expected amount of consideration as revenue when the performance obligations related to the services under the terms of a contract are satisfied. The Company’s contracts generally do not contain terms that necessitate significant judgment to determine the amount of revenue to recognize.
- 24 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. Revenue from contracts with customers, continued
The Company generally charges customer accounts or otherwise bills customers upon completion of its services. Typically the Company’s contracts with customers have a duration of one year or less and payment for services is received at least annually, but oftentimes more frequently as services are provided. At March 31,September 30, 2020
- 22 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. Revenue from contracts with customers, continued
and December 31, 2019, the Company had $57$61 million and $62 million, respectively, of amounts receivable related to recognized revenue from the sources in the accompanying tables. Such amounts are classified in accrued interest and other assets in the Company’s consolidated balance sheet. In certain situations the Company is paid in advance of providing services and defers the recognition of revenue until its service obligation is satisfied. At March 31,September 30, 2020 and December 31, 2019, the Company had deferred revenue of $41 million and $43 million, respectively, related to the sources in the accompanying tables recorded in accrued interest and other liabilities in the consolidated balance sheet.
The following tables summarize sources of the Company’s noninterest income during the three-month and nine-month periods ended March 31,September 30, 2020 and 2019 that are subject to the noted accounting guidance.
|
| Business Banking |
|
| Commercial Banking |
|
| Commercial Real Estate |
|
| Discretionary Portfolio |
|
| Residential Mortgage Banking |
|
| Retail Banking |
|
| All Other |
|
| Total |
|
| Business Banking |
|
| Commercial Banking |
|
| Commercial Real Estate |
|
| Discretionary Portfolio |
|
| Residential Mortgage Banking |
|
| Retail Banking |
|
| All Other |
|
| Total |
| ||||||||||||||||
Three Months Ended March 31, 2020 |
| (In thousands) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 |
| (In thousands) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification in consolidated statement of income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
| $ | 15,250 |
|
|
| 24,157 |
|
|
| 2,812 |
|
|
| — |
|
|
| — |
|
|
| 61,670 |
|
|
| 2,272 |
|
| $ | 106,161 |
|
| $ | 11,527 |
|
|
| 22,816 |
|
|
| 2,347 |
|
|
| — |
|
|
| — |
|
|
| 53,379 |
|
|
| 1,286 |
|
| $ | 91,355 |
|
Trust income |
|
| 12 |
|
|
| 304 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 148,435 |
|
|
| 148,751 |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 149,936 |
|
|
| 149,937 |
|
Brokerage services income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,129 |
|
|
| 13,129 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,602 |
|
|
| 11,602 |
|
Other revenues from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchant discount and credit card fees |
|
| 10,331 |
|
|
| 13,316 |
|
|
| 849 |
|
|
| — |
|
|
| — |
|
|
| 2,271 |
|
|
| 400 |
|
|
| 27,167 |
|
|
| 10,533 |
|
|
| 10,785 |
|
|
| 492 |
|
|
| — |
|
|
| — |
|
|
| 4,159 |
|
|
| (315 | ) |
|
| 25,654 |
|
Other |
|
| — |
|
|
| 2,186 |
|
|
| 843 |
|
|
| 857 |
|
|
| 922 |
|
|
| 5,982 |
|
|
| 12,516 |
|
|
| 23,306 |
|
|
| — |
|
|
| 2,940 |
|
|
| 929 |
|
|
| 205 |
|
|
| 1,127 |
|
|
| 5,994 |
|
|
| 10,212 |
|
|
| 21,407 |
|
|
| $ | 25,593 |
|
|
| 39,963 |
|
|
| 4,504 |
|
|
| 857 |
|
|
| 922 |
|
|
| 69,923 |
|
|
| 176,752 |
|
| $ | 318,514 |
|
| $ | 22,060 |
|
|
| 36,542 |
|
|
| 3,768 |
|
|
| 205 |
|
|
| 1,127 |
|
|
| 63,532 |
|
|
| 172,721 |
|
| $ | 299,955 |
|
Three Months Ended March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification in consolidated statement of income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
| $ | 15,109 |
|
|
| 23,210 |
|
|
| 2,526 |
|
|
| — |
|
|
| 2 |
|
|
| 61,151 |
|
|
| 1,114 |
|
| $ | 103,112 |
|
| $ | 15,131 |
|
|
| 23,427 |
|
|
| 2,415 |
|
|
| — |
|
|
| — |
|
|
| 68,455 |
|
|
| 1,664 |
|
| $ | 111,092 |
|
Trust income |
|
| 5 |
|
|
| 214 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 132,567 |
|
|
| 132,786 |
|
|
| 9 |
|
|
| 242 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 143,664 |
|
|
| 143,915 |
|
Brokerage services income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,476 |
|
|
| 12,476 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,077 |
|
|
| 12,077 |
|
Other revenues from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchant discount and credit card fees |
|
| 8,882 |
|
|
| 12,092 |
|
|
| 606 |
|
|
| — |
|
|
| — |
|
|
| 3,138 |
|
|
| 420 |
|
|
| 25,138 |
|
|
| 9,692 |
|
|
| 13,409 |
|
|
| 670 |
|
|
| — |
|
|
| — |
|
|
| 4,150 |
|
|
| 269 |
|
|
| 28,190 |
|
Other |
|
| — |
|
|
| 1,002 |
|
|
| 1,788 |
|
|
| 401 |
|
|
| 1,064 |
|
|
| 8,494 |
|
|
| 10,488 |
|
|
| 23,237 |
|
|
| — |
|
|
| 1,239 |
|
|
| 1,372 |
|
|
| 503 |
|
|
| 816 |
|
|
| 9,347 |
|
|
| 7,076 |
|
|
| 20,353 |
|
|
| $ | 23,996 |
|
|
| 36,518 |
|
|
| 4,920 |
|
|
| 401 |
|
|
| 1,066 |
|
|
| 72,783 |
|
|
| 157,065 |
|
| $ | 296,749 |
|
| $ | 24,832 |
|
|
| 38,317 |
|
|
| 4,457 |
|
|
| 503 |
|
|
| 816 |
|
|
| 81,952 |
|
|
| 164,750 |
|
| $ | 315,627 |
|
- 25 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. Revenue from contracts with customers, continued
|
| Business Banking |
|
| Commercial Banking |
|
| Commercial Real Estate |
|
| Discretionary Portfolio |
|
| Residential Mortgage Banking |
|
| Retail Banking |
|
| All Other |
|
| Total |
| ||||||||
Nine Months Ended September 30, 2020 |
| (In thousands) |
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification in consolidated statement of income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
| $ | 38,048 |
|
|
| 69,487 |
|
|
| 7,724 |
|
|
| — |
|
|
| — |
|
|
| 155,073 |
|
|
| 4,639 |
|
| $ | 274,971 |
|
Trust income |
|
| 18 |
|
|
| 442 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 450,110 |
|
|
| 450,570 |
|
Brokerage services income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35,194 |
|
|
| 35,194 |
|
Other revenues from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchant discount and credit card fees |
|
| 29,023 |
|
|
| 32,992 |
|
|
| 1,720 |
|
|
| — |
|
|
| — |
|
|
| 9,880 |
|
|
| 261 |
|
|
| 73,876 |
|
Other |
|
| — |
|
|
| 5,913 |
|
|
| 2,960 |
|
|
| 1,212 |
|
|
| 3,101 |
|
|
| 15,142 |
|
|
| 32,149 |
|
|
| 60,477 |
|
|
| $ | 67,089 |
|
|
| 108,834 |
|
|
| 12,404 |
|
|
| 1,212 |
|
|
| 3,101 |
|
|
| 180,095 |
|
|
| 522,353 |
|
| $ | 895,088 |
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification in consolidated statement of income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
| $ | 45,415 |
|
|
| 69,731 |
|
|
| 7,303 |
|
|
| — |
|
|
| 4 |
|
|
| 195,267 |
|
|
| 4,271 |
|
| $ | 321,991 |
|
Trust income |
|
| 21 |
|
|
| 680 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 420,382 |
|
|
| 421,083 |
|
Brokerage services income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37,031 |
|
|
| 37,031 |
|
Other revenues from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchant discount and credit card fees |
|
| 28,469 |
|
|
| 38,630 |
|
|
| 1,772 |
|
|
| — |
|
|
| — |
|
|
| 11,854 |
|
|
| 1,291 |
|
|
| 82,016 |
|
Other |
|
| — |
|
|
| 5,386 |
|
|
| 5,840 |
|
|
| 1,545 |
|
|
| 2,913 |
|
|
| 27,170 |
|
|
| 26,159 |
|
|
| 69,013 |
|
|
| $ | 73,905 |
|
|
| 114,427 |
|
|
| 14,915 |
|
|
| 1,545 |
|
|
| 2,917 |
|
|
| 234,291 |
|
|
| 489,134 |
|
| $ | 931,134 |
|
- 26 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. Pension plans and other postretirement benefits
The Company provides defined benefit pension and other postretirement benefits (including health care and life insurance benefits) to qualified retired employees. Net periodic defined benefit cost for defined benefit plans consisted of the following:
|
| Pension Benefits |
|
| Other Postretirement Benefits |
|
| Pension Benefits |
|
| Other Postretirement Benefits |
| ||||||||||||||||||||
|
| Three Months Ended March 31 |
|
| Three Months Ended September 30 |
| ||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 4,714 |
|
|
| 4,087 |
|
|
| 223 |
|
| 200 |
|
| $ | 4,986 |
|
|
| 4,324 |
|
|
| 242 |
|
| 215 |
| ||
Interest cost on projected benefit obligation |
|
| 17,886 |
|
|
| 20,200 |
|
|
| 419 |
|
|
| 603 |
|
|
| 17,855 |
|
|
| 20,394 |
|
|
| 436 |
|
|
| 586 |
|
Expected return on plan assets |
|
| (31,475 | ) |
|
| (30,600 | ) |
|
| — |
|
|
| — |
|
|
| (31,378 | ) |
|
| (30,534 | ) |
|
| — |
|
|
| — |
|
Amortization of prior service cost (credit) |
|
| 125 |
|
|
| 125 |
|
|
| (1,175 | ) |
|
| (1,175 | ) |
|
| 125 |
|
|
| 139 |
|
|
| (1,175 | ) |
|
| (1,182 | ) |
Amortization of net actuarial loss (gain) |
|
| 13,950 |
|
|
| 4,450 |
|
|
| (300 | ) |
|
| (300 | ) |
|
| 13,950 |
|
|
| 5,498 |
|
|
| (300 | ) |
|
| (312 | ) |
Net periodic cost (benefit) |
| $ | 5,200 |
|
|
| (1,738 | ) |
|
| (833 | ) |
|
| (672 | ) |
| $ | 5,538 |
|
|
| (179 | ) |
|
| (797 | ) |
|
| (693 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| Pension Benefits |
|
| Other Postretirement Benefits |
| ||||||||||||||||||||||||||
|
| Nine Months Ended September 30 |
| |||||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
|
| (In thousands) |
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Service cost |
| $ | 14,958 |
|
|
| 12,970 |
|
|
| 727 |
|
|
| 644 |
| ||||||||||||||||
Interest cost on projected benefit obligation |
|
| 53,565 |
|
|
| 61,184 |
|
|
| 1,306 |
|
|
| 1,758 |
| ||||||||||||||||
Expected return on plan assets |
|
| (94,134 | ) |
|
| (91,604 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||
Amortization of prior service cost (credit) |
|
| 404 |
|
|
| 418 |
|
|
| (3,544 | ) |
|
| (3,547 | ) | ||||||||||||||||
Amortization of net actuarial loss (gain) |
|
| 42,998 |
|
|
| 16,494 |
|
|
| (918 | ) |
|
| (935 | ) | ||||||||||||||||
Net periodic cost (benefit) |
| $ | 17,791 |
|
|
| (538 | ) |
|
| (2,429 | ) |
|
| (2,080 | ) |
- 23 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. Pension plans and other postretirement benefits, continued
Service cost is reflected in salaries and employee benefits expense in the consolidated statement of income. The other components of net periodic benefit cost are reflected in other costs of operations. Expenses incurred in connection with the Company's defined contribution pension and retirement savings plans totaled $27$23 million and $22$21 million for the three months ended March 31,September 30, 2020 and 2019, respectively, and $73 million and $61 million for the nine months ended September 30, 2020 and 2019, respectively, and are included in salaries and employee benefits expense.
- 27 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. Earnings per common share
The computations of basic earnings per common share follow:
|
| Three Months Ended March 31 |
|
| Three Months Ended September 30 |
|
| Nine Months Ended September 30 |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
|
| (In thousands, except per share) |
|
| (In thousands, except per share) |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 268,822 |
|
|
| 482,742 |
|
| $ | 372,136 |
|
|
| 480,081 |
|
|
| 882,012 |
|
|
| 1,436,083 |
|
Less: Preferred stock dividends |
|
| (17,078 | ) |
|
| (18,130 | ) |
|
| (17,050 | ) |
|
| (16,103 | ) |
|
| (51,178 | ) |
|
| (52,364 | ) |
Net income available to common equity |
|
| 251,744 |
|
|
| 464,612 |
|
|
| 355,086 |
|
|
| 463,978 |
|
|
| 830,834 |
|
|
| 1,383,719 |
|
Less: Income attributable to unvested stock-based compensation awards |
|
| (1,043 | ) |
|
| (2,526 | ) |
|
| (1,687 | ) |
|
| (2,568 | ) |
|
| (3,631 | ) |
|
| (7,591 | ) |
Net income available to common shareholders |
| $ | 250,701 |
|
|
| 462,086 |
|
| $ | 353,399 |
|
|
| 461,410 |
|
|
| 827,203 |
|
|
| 1,376,128 |
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding (including common stock issuable) and unvested stock-based compensation awards |
|
| 130,440 |
|
|
| 138,637 |
|
|
| 129,061 |
|
|
| 133,703 |
|
|
| 129,518 |
|
|
| 136,156 |
|
Less: Unvested stock-based compensation awards |
|
| (744 | ) |
|
| (748 | ) |
|
| (776 | ) |
|
| (738 | ) |
|
| (768 | ) |
|
| (745 | ) |
Weighted-average shares outstanding |
|
| 129,696 |
|
|
| 137,889 |
|
|
| 128,285 |
|
|
| 132,965 |
|
|
| 128,750 |
|
|
| 135,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
| $ | 1.93 |
|
|
| 3.35 |
|
| $ | 2.75 |
|
|
| 3.47 |
|
|
| 6.42 |
|
|
| 10.16 |
|
(a)Including impact of not as yet declared cumulative dividends.
The computations of diluted earnings per common share follow:
|
| Three Months Ended March 31 |
|
| Three Months Ended September 30 |
|
| Nine Months Ended September 30 |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
|
| (In thousands, except per share) |
|
| (In thousands, except per share) |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common equity |
| $ | 251,744 |
|
|
| 464,612 |
|
| $ | 355,086 |
|
|
| 463,978 |
|
|
| 830,834 |
|
|
| 1,383,719 |
|
Less: Income attributable to unvested stock-based compensation awards |
|
| (1,043 | ) |
|
| (2,526 | ) |
|
| (1,686 | ) |
|
| (2,568 | ) |
|
| (3,630 | ) |
|
| (7,590 | ) |
Net income available to common shareholders |
| $ | 250,701 |
|
|
| 462,086 |
|
| $ | 353,400 |
|
|
| 461,410 |
|
|
| 827,204 |
|
|
| 1,376,129 |
|
Adjusted weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and unvested stock-based compensation awards |
|
| 130,440 |
|
|
| 138,637 |
|
|
| 129,061 |
|
|
| 133,703 |
|
|
| 129,518 |
|
|
| 136,156 |
|
Less: Unvested stock-based compensation awards |
|
| (744 | ) |
|
| (748 | ) |
|
| (776 | ) |
|
| (738 | ) |
|
| (768 | ) |
|
| (745 | ) |
Plus: Incremental shares from assumed conversion of stock-based compensation awards and warrants to purchase common stock |
|
| 59 |
|
|
| 31 |
|
|
| 70 |
|
|
| 34 |
|
|
| 63 |
|
|
| 32 |
|
Adjusted weighted-average shares outstanding |
|
| 129,755 |
|
|
| 137,920 |
|
|
| 128,355 |
|
|
| 132,999 |
|
|
| 128,813 |
|
|
| 135,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
| $ | 1.93 |
|
|
| 3.35 |
|
| $ | 2.75 |
|
|
| 3.47 |
|
|
| 6.42 |
|
|
| 10.16 |
|
- 24 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
|
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 464,694483,182 and 280,818277,840 common shares during the three-month periods ended March 31,September 30, 2020 and 2019, respectively, and 477,144 and 224,639 common shares during the nine-month periods ended September 30, 2020 and 2019, respectively, were not included in the computations of diluted earnings per common share because the effect on those periods would have been antidilutive.
- 28 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. Comprehensive income
The following tables display the components of other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) to net income:
|
| Investment |
|
| Defined Benefit |
|
|
|
|
|
| Total Amount |
|
|
| Income |
|
|
|
|
|
| Investment |
|
| Defined Benefit |
|
|
|
|
|
| Total Amount |
|
|
| Income |
|
|
|
|
| ||||||||
|
| Securities |
|
| Plans |
|
| Other |
|
| Before Tax |
|
|
| Tax |
|
| Net |
|
| Securities |
|
| Plans |
|
| Other |
|
| Before Tax |
|
|
| Tax |
|
| Net |
| ||||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2020 |
| $ | 50,701 |
|
|
| (464,548 | ) |
|
| 133,888 |
|
| $ | (279,959 | ) |
|
|
| 73,279 |
|
| $ | (206,680 | ) |
| $ | 50,701 |
|
|
| (464,548 | ) |
|
| 133,888 |
|
| $ | (279,959 | ) |
|
|
| 73,279 |
|
| $ | (206,680 | ) |
Other comprehensive income before reclassifications: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains, net |
|
| 131,423 |
|
|
| — |
|
|
| — |
|
|
| 131,423 |
|
|
|
| (34,544 | ) |
|
| 96,879 |
|
|
| 151,777 |
|
|
| — |
|
|
| — |
|
|
| 151,777 |
|
|
|
| (39,277 | ) |
|
| 112,500 |
|
Foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| (3,225 | ) |
|
| (3,225 | ) |
|
|
| 282 |
|
|
| (2,943 | ) |
|
| — |
|
|
| — |
|
|
| (222 | ) |
|
| (222 | ) |
|
|
| (39 | ) |
|
| (261 | ) |
Unrealized gains on cash flow hedges |
|
| — |
|
|
| — |
|
|
| 456,333 |
|
|
| 456,333 |
|
|
|
| (119,970 | ) |
|
| 336,363 |
|
|
| — |
|
|
| — |
|
|
| 508,226 |
|
|
| 508,226 |
|
|
|
| (131,504 | ) |
|
| 376,722 |
|
Total other comprehensive income before reclassifications |
|
| 131,423 |
|
|
| — |
|
|
| 453,108 |
|
|
| 584,531 |
|
|
|
| (154,232 | ) |
|
| 430,299 |
|
|
| 151,777 |
|
|
| — |
|
|
| 508,004 |
|
|
| 659,781 |
|
|
|
| (170,820 | ) |
|
| 488,961 |
|
Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrealized holding losses on held-to-maturity (“HTM”) securities |
|
| 772 |
|
|
| — |
|
|
| — |
|
|
| 772 |
| (a) |
|
| (203 | ) |
|
| 569 |
|
|
| 2,678 |
|
|
| — |
|
|
| — |
|
|
| 2,678 |
| (a) |
|
| (725 | ) |
|
| 1,953 |
|
Gains realized in net income |
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| (3 | ) | (b) |
|
| 1 |
|
|
| (2 | ) | |||||||||||||||||||||||||
Accretion of net gain on terminated cash flow hedges |
|
| — |
|
|
| — |
|
|
| (34 | ) |
|
| (34 | ) | (c) |
|
| 9 |
|
|
| (25 | ) |
|
|
|
|
|
| — |
|
|
| (94 | ) |
|
| (94 | ) | (c) |
|
| 26 |
|
|
| (68 | ) |
Net yield adjustment from cash flow hedges currently in effect |
|
| — |
|
|
| — |
|
|
| (32,041 | ) |
|
| (32,041 | ) | (a) |
|
| 8,423 |
|
|
| (23,618 | ) |
|
| — |
|
|
| — |
|
|
| (183,598 | ) |
|
| (183,598 | ) | (a) |
|
| 47,506 |
|
|
| (136,092 | ) |
Amortization of prior service credit |
|
| — |
|
|
| (1,050 | ) |
|
| — |
|
|
| (1,050 | ) | (d) |
|
| 276 |
|
|
| (774 | ) |
|
| — |
|
|
| (3,140 | ) |
|
| — |
|
|
| (3,140 | ) | (d) |
|
| 927 |
|
|
| (2,213 | ) |
Amortization of actuarial losses |
|
| — |
|
|
| 13,650 |
|
|
| — |
|
|
| 13,650 |
| (d) |
|
| (3,588 | ) |
|
| 10,062 |
|
|
| — |
|
|
| 42,080 |
|
|
| — |
|
|
| 42,080 |
| (d) |
|
| (12,436 | ) |
|
| 29,644 |
|
Total other comprehensive income |
|
| 132,195 |
|
|
| 12,600 |
|
|
| 421,033 |
|
|
| 565,828 |
|
|
|
| (149,315 | ) |
|
| 416,513 |
|
|
| 154,452 |
|
|
| 38,940 |
|
|
| 324,312 |
|
|
| 517,704 |
|
|
|
| (135,521 | ) |
|
| 382,183 |
|
Balance — March 31, 2020 |
| $ | 182,896 |
|
|
| (451,948 | ) |
|
| 554,921 |
|
| $ | 285,869 |
|
|
|
| (76,036 | ) |
| $ | 209,833 |
| |||||||||||||||||||||||||
Balance — September 30, 2020 |
| $ | 205,153 |
|
|
| (425,608 | ) |
|
| 458,200 |
|
| $ | 237,745 |
|
|
|
| (62,242 | ) |
| $ | 175,503 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2019 |
| $ | (200,107 | ) |
|
| (354,502 | ) |
|
| (14,719 | ) |
| $ | (569,328 | ) |
|
|
| 149,247 |
|
| $ | (420,081 | ) |
| $ | (200,107 | ) |
|
| (354,502 | ) |
|
| (14,719 | ) |
| $ | (569,328 | ) |
|
|
| 149,247 |
|
| $ | (420,081 | ) |
Other comprehensive income before reclassifications: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains, net |
|
| 113,805 |
|
|
| — |
|
|
| — |
|
|
| 113,805 |
|
|
|
| (29,902 | ) |
|
| 83,903 |
|
|
| 237,615 |
|
|
| — |
|
|
| — |
|
|
| 237,615 |
|
|
|
| (62,432 | ) |
|
| 175,183 |
|
Foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| 348 |
|
|
| 348 |
|
|
|
| (73 | ) |
|
| 275 |
|
|
| — |
|
|
| — |
|
|
| (2,663 | ) |
|
| (2,663 | ) |
|
|
| 559 |
|
|
| (2,104 | ) |
Unrealized gains on cash flow hedges |
|
| — |
|
|
| — |
|
|
| 54,347 |
|
|
| 54,347 |
|
|
|
| (14,288 | ) |
|
| 40,059 |
|
|
| — |
|
|
| — |
|
|
| 204,587 |
|
|
| 204,587 |
|
|
|
| (53,786 | ) |
|
| 150,801 |
|
Total other comprehensive income before reclassifications |
|
| 113,805 |
|
|
| — |
|
|
| 54,695 |
|
|
| 168,500 |
|
|
|
| (44,263 | ) |
|
| 124,237 |
|
|
| 237,615 |
|
|
| — |
|
|
| 201,924 |
|
|
| 439,539 |
|
|
|
| (115,659 | ) |
|
| 323,880 |
|
Amounts reclassified from accumulated other comprehensive income that (increase) decrease net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrealized holding losses on HTM securities |
|
| 928 |
|
|
| — |
|
|
| — |
|
|
| 928 |
| (a) |
|
| (245 | ) |
|
| 683 |
|
|
| 2,524 |
|
|
| — |
|
|
| — |
|
|
| 2,524 |
| (a) |
|
| (663 | ) |
|
| 1,861 |
|
Losses realized in net income |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 7 |
| (b) |
|
| (2 | ) |
|
| 5 |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 7 |
| (b) |
|
| (2 | ) |
|
| 5 |
|
Accretion of net gain on terminated cash flow hedges |
|
| — |
|
|
| — |
|
|
| (28 | ) |
|
| (28 | ) | (c) |
|
| 7 |
|
|
| (21 | ) |
|
| — |
|
|
| — |
|
|
| (93 | ) |
|
| (93 | ) | (c) |
|
| 25 |
|
|
| (68 | ) |
Net yield adjustment from cash flow hedges currently in effect |
|
| — |
|
|
| — |
|
|
| 6,625 |
|
|
| 6,625 |
| (a) |
|
| (1,742 | ) |
|
| 4,883 |
|
|
| — |
|
|
| — |
|
|
| 6,693 |
|
|
| 6,693 |
| (a) |
|
| (1,760 | ) |
|
| 4,933 |
|
Amortization of prior service credit |
|
| — |
|
|
| (1,050 | ) |
|
| — |
|
|
| (1,050 | ) | (d) |
|
| 276 |
|
|
| (774 | ) |
|
| — |
|
|
| (3,129 | ) |
|
| — |
|
|
| (3,129 | ) | (d) |
|
| 823 |
|
|
| (2,306 | ) |
Amortization of actuarial losses |
|
| — |
|
|
| 4,150 |
|
|
| — |
|
|
| 4,150 |
| (d) |
|
| (1,091 | ) |
|
| 3,059 |
|
|
| — |
|
|
| 15,559 |
|
|
| — |
|
|
| 15,559 |
| (d) |
|
| (4,091 | ) |
|
| 11,468 |
|
Total other comprehensive income |
|
| 114,740 |
|
|
| 3,100 |
|
|
| 61,292 |
|
|
| 179,132 |
|
|
|
| (47,060 | ) |
|
| 132,072 |
|
|
| 240,146 |
|
|
| 12,430 |
|
|
| 208,524 |
|
|
| 461,100 |
|
|
|
| (121,327 | ) |
|
| 339,773 |
|
Balance — March 31, 2019 |
| $ | (85,367 | ) |
|
| (351,402 | ) |
|
| 46,573 |
|
| $ | (390,196 | ) |
|
|
| 102,187 |
|
| $ | (288,009 | ) | |||||||||||||||||||||||||
Balance — September 30, 2019 |
| $ | 40,039 |
|
|
| (342,072 | ) |
|
| 193,805 |
|
| $ | (108,228 | ) |
|
|
| 27,920 |
|
| $ | (80,308 | ) |
(a) | Included in interest income. |
(b) | Included in gain (loss) on bank investment securities. |
(c) | Included in interest expense. |
(d) | Included in other costs of operations. |
- 2529 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. Comprehensive income, continued
Accumulated other comprehensive income (loss), net consisted of the following:
|
|
|
|
|
| Defined |
|
| Cash Flow |
|
|
|
|
|
|
|
|
|
| Defined |
|
| Cash Flow |
|
|
|
|
| ||||
|
| Investment |
|
| Benefit |
|
| Hedges |
|
|
|
|
|
| Investment |
|
| Benefit |
|
| Hedges |
|
|
|
|
| ||||||
|
| Securities |
|
| Plans |
|
| and Other |
|
| Total |
|
| Securities |
|
| Plans |
|
| and Other |
|
| Total |
| ||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — December 31, 2019 |
| $ | 37,380 |
|
|
| (342,419 | ) |
|
| 98,359 |
|
| $ | (206,680 | ) |
| $ | 37,380 |
|
|
| (342,419 | ) |
|
| 98,359 |
|
| $ | (206,680 | ) |
Net gain during period |
|
| 97,448 |
|
|
| 9,288 |
|
|
| 309,777 |
|
|
| 416,513 |
|
|
| 114,451 |
|
|
| 27,431 |
|
|
| 240,301 |
|
|
| 382,183 |
|
Balance — March 31, 2020 |
| $ | 134,828 |
|
|
| (333,131 | ) |
|
| 408,136 |
|
| $ | 209,833 |
| ||||||||||||||||
Balance — September 30, 2020 |
| $ | 151,831 |
|
|
| (314,988 | ) |
|
| 338,660 |
|
| $ | 175,503 |
|
9. Derivative financial instruments
As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting, collateral and/or settlement provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material as of March 31,September 30, 2020.
The net effect of interest rate swap agreements was to increase net interest income by $36$95 million and $212 million during the three monthsthree-month and nine-month periods ended March 31,September 30, 2020, respectively, and to increase net interest income by $1 million during the three-month period ended September 30, 2019 and decrease net interest income by $13$23 million during the three monthsnine-month period ended March 31,September 30, 2019.
Information about interest rate swap agreements entered into for interest rate risk management purposes summarized by type of financial instrument the swap agreements were intended to hedge follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted- |
|
| Estimated |
|
|
|
|
|
|
|
|
|
| Weighted- |
|
| Estimated |
| ||||||||||||
|
| Notional |
|
| Average |
|
| Average Rate |
|
| Fair Value |
|
| Notional |
|
| Average |
|
| Average Rate |
|
| Fair Value |
| ||||||||||||||||
|
| Amount |
|
| Maturity |
|
| Fixed |
|
| Variable |
|
| Gain (Loss) (a) |
|
| Amount |
|
| Maturity |
|
| Fixed |
|
| Variable |
|
| Gain (Loss) (a) |
| ||||||||||
|
| (In thousands) |
|
| (In years) |
|
|
|
|
|
|
|
|
|
| (In thousands) |
|
| (In thousands) |
|
| (In years) |
|
|
|
|
|
|
|
|
|
| (In thousands) |
| ||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate long-term borrowings (b) |
| $ | 3,050,000 |
|
|
| 2.5 |
|
|
| 2.61 | % |
|
| 1.34 | % |
| $ | (959 | ) |
| $ | 2,300,000 |
|
|
| 2.7 |
|
|
| 2.80 | % |
|
| 0.69 | % |
| $ | (513 | ) |
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments on variable rate commercial real estate loans (b)(c) |
|
| 55,100,000 |
|
|
| 1.5 |
|
|
| 2.53 | % |
|
| 1.09 | % |
|
| 3,942 |
|
|
| 52,250,000 |
|
|
| 1.1 |
|
|
| 2.40 | % |
|
| 0.15 | % |
|
| 890 |
|
Total |
| $ | 58,150,000 |
|
|
| 1.6 |
|
|
|
|
|
|
|
|
|
| $ | 2,983 |
|
| $ | 54,550,000 |
|
|
| 1.1 |
|
|
|
|
|
|
|
|
|
| $ | 377 |
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate long-term borrowings (b) |
| $ | 3,800,000 |
|
|
| 2.2 |
|
|
| 2.51 | % |
|
| 2.27 | % |
| $ | (567 | ) |
| $ | 3,800,000 |
|
|
| 2.2 |
|
|
| 2.51 | % |
|
| 2.27 | % |
| $ | (567 | ) |
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments on variable rate commercial real estate loans (b)(d) |
|
| 53,750,000 |
|
|
| 1.4 |
|
|
| 2.44 | % |
|
| 1.73 | % |
|
| (1,195 | ) |
|
| 53,750,000 |
|
|
| 1.4 |
|
|
| 2.44 | % |
|
| 1.73 | % |
|
| (1,195 | ) |
Total |
| $ | 57,550,000 |
|
|
| 1.5 |
|
|
|
|
|
|
|
|
|
| $ | (1,762 | ) |
| $ | 57,550,000 |
|
|
| 1.5 |
|
|
|
|
|
|
|
|
|
| $ | (1,762 | ) |
(a) | Certain clearinghouse exchanges consider payments by counterparties for variation margin on derivative instruments to be settlements of those positions. The impact of such treatment at |
(b) | Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and pays at a variable rate. |
(c) | Includes notional amount and terms of |
(d) | Includes notional amount and terms of $40.4 billion of forward-starting interest rate swap agreements that become effective in 2020 - 2022. |
- 2630 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. Derivative financial instruments, continued
The Company utilizes commitments to sell residential and commercial real estate loans to hedge the exposure to changes in the fair value of real estate loans held for sale. Such commitments have generally been designated as
fair value hedges. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in fair value of certain commitments to originate real estate loans for sale.
Derivative financial instruments used for trading account purposes included interest rate contracts, foreign exchange and other option contracts, foreign exchange forward and spot contracts, and financial futures. Interest rate contracts entered into for trading account purposes had notional values of $36.7$36.6 billion and $48.6 billion at March 31,September 30, 2020 and December 31, 2019, respectively. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes aggregated $928$877 million and $1.2 billion at March 31,September 30, 2020 and December 31, 2019, respectively.
Information about the fair values of derivative instruments in the Company’s consolidated balance sheet and consolidated statement of income follows:
|
| Asset Derivatives |
|
| Liability Derivatives |
|
| Asset Derivatives |
|
| Liability Derivatives |
| ||||||||||||||||||||
|
| Fair Value |
|
| Fair Value |
|
| Fair Value |
|
| Fair Value |
| ||||||||||||||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
Derivatives designated and qualifying as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements (a) |
| $ | 4,543 |
|
| $ | 232 |
|
| $ | 1,560 |
|
| $ | 1,994 |
|
| $ | 1,710 |
|
| $ | 232 |
|
| $ | 1,333 |
|
| $ | 1,994 |
|
Commitments to sell real estate loans (a) |
|
| 831 |
|
|
| 1,195 |
|
|
| 11,167 |
|
|
| 421 |
|
|
| 1,525 |
|
|
| 1,195 |
|
|
| 2,264 |
|
|
| 421 |
|
|
|
| 5,374 |
|
|
| 1,427 |
|
|
| 12,727 |
|
|
| 2,415 |
|
|
| 3,235 |
|
|
| 1,427 |
|
|
| 3,597 |
|
|
| 2,415 |
|
Derivatives not designated and qualifying as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related commitments to originate real estate loans for sale (a) |
|
| 35,063 |
|
|
| 11,965 |
|
|
| 36 |
|
|
| 1,225 |
|
|
| 51,786 |
|
|
| 11,965 |
|
|
| 283 |
|
|
| 1,225 |
|
Commitments to sell real estate loans (a) |
|
| 3,910 |
|
|
| 3,074 |
|
|
| 26,212 |
|
|
| 3,548 |
|
|
| 1,795 |
|
|
| 3,074 |
|
|
| 11,066 |
|
|
| 3,548 |
|
Trading: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts (b) |
|
| 1,153,277 |
|
|
| 398,295 |
|
|
| 108,345 |
|
|
| 68,103 |
|
|
| 1,157,856 |
|
|
| 398,295 |
|
|
| 115,361 |
|
|
| 68,103 |
|
Foreign exchange and other option and futures contracts (b) |
|
| 20,662 |
|
|
| 12,506 |
|
|
| 17,401 |
|
|
| 11,800 |
|
|
| 7,694 |
|
|
| 12,506 |
|
|
| 7,624 |
|
|
| 11,800 |
|
|
|
| 1,212,912 |
|
|
| 425,840 |
|
|
| 151,994 |
|
|
| 84,676 |
|
|
| 1,219,131 |
|
|
| 425,840 |
|
|
| 134,334 |
|
|
| 84,676 |
|
Total derivatives |
| $ | 1,218,286 |
|
| $ | 427,267 |
|
| $ | 164,721 |
|
| $ | 87,091 |
|
| $ | 1,222,366 |
|
| $ | 427,267 |
|
| $ | 137,931 |
|
| $ | 87,091 |
|
(a) | Asset derivatives are reported in other assets and liability derivatives are reported in other liabilities. |
(b) | Asset derivatives are reported in trading account assets and liability derivatives are reported in other liabilities. The impact of variation margin payments at |
|
| Amount of Gain (Loss) Recognized |
| |||||||||||||
|
| Three Months Ended September 30, 2020 |
|
| Three Months Ended September 30, 2019 |
| ||||||||||
|
| Derivative |
|
| Hedged Item |
|
| Derivative |
|
| Hedged Item |
| ||||
|
| (In thousands) |
| |||||||||||||
Derivatives in fair value hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate long-term borrowings (a) |
| $ | (13,067 | ) |
|
| 12,822 |
|
| $ | 22,582 |
|
|
| (22,412 | ) |
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts (b) |
| $ | (4,776 | ) |
|
|
|
|
| $ | 6,435 |
|
|
|
|
|
Foreign exchange and other option and futures contracts (b) |
|
| 1,486 |
|
|
|
|
|
|
| 2,598 |
|
|
|
|
|
Total |
| $ | (3,290 | ) |
|
|
|
|
| $ | 9,033 |
|
|
|
|
|
- 2731 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. Derivative financial instruments, continued
|
|
| Amount of Gain (Loss) Recognized |
|
| Amount of Gain (Loss) Recognized |
| ||||||||||||||||||||||||||
|
|
| Three Months Ended March 31, 2020 |
|
| Three Months Ended March 31, 2019 |
|
| Nine Months Ended September 30, 2020 |
|
| Nine Months Ended September 30, 2019 |
| ||||||||||||||||||||
|
|
| Derivative |
|
| Hedged Item |
|
| Derivative |
|
| Hedged Item |
|
| Derivative |
|
| Hedged Item |
|
| Derivative |
|
| Hedged Item |
| ||||||||
|
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
Derivatives in fair value hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate long-term borrowings (a) |
|
| $ | 88,710 |
|
|
| (87,824 | ) |
| $ | 34,180 |
|
|
| (34,014 | ) |
| $ | 75,760 |
|
|
| (75,607 | ) |
| $ | 113,441 |
|
|
| (112,884 | ) |
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts (b) |
|
| $ | 12,786 |
|
|
|
|
|
| $ | 2,711 |
|
|
|
|
|
| $ | 8,988 |
|
|
|
|
|
| $ | 17,639 |
|
|
|
|
|
Foreign exchange and other option and futures contracts (b) |
|
|
| 4,352 |
|
|
|
|
|
|
| 1,613 |
|
|
|
|
|
|
| 6,555 |
|
|
|
|
|
|
| 6,690 |
|
|
|
|
|
Total |
|
| $ | 17,138 |
|
|
|
|
|
| $ | 4,324 |
|
|
|
|
|
| $ | 15,543 |
|
|
|
|
|
| $ | 24,329 |
|
|
|
|
|
| (a) | Reported as an adjustment to interest expense. |
| (b) | Reported as trading account and foreign exchange gains. |
|
| Carrying Amount of the Hedged Item |
|
| Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the Hedged Item |
|
| Carrying Amount of the Hedged Item |
|
| Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the Hedged Item |
| ||||||||||||||||||||
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
Location in the Consolidated Balance Sheet of the Hedged Items in Fair Value Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
| $ | 3,179,012 |
|
| $ | 3,840,775 |
|
| $ | 131,464 |
|
| $ | 43,640 |
|
| $ | 2,417,559 |
|
| $ | 3,840,775 |
|
| $ | 119,247 |
|
| $ | 43,640 |
|
The amount of gain (loss) recognized in the consolidated statement of income associated with derivatives designated as cash flow hedges was not material.
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 $27$66 million and $18 million at March 31,September 30, 2020 and December 31, 2019, respectively. Changes in unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied.
The Company does not offset derivative asset and liability positions in its consolidated financial statements. The Company’s exposure to credit risk by entering into derivative contracts is mitigated through master netting agreements and collateral posting or settlement requirements. Master netting agreements covering interest rate and foreign exchange contracts with the same party include a right to set-off that becomes enforceable in the event of default, early termination or under other specific conditions.
- 32 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. Derivative financial instruments, continued
The aggregate fair value of derivative financial instruments in a liability position and the net liability positions with counterparties, which are subject to enforceable master netting arrangements, was $151$127 million and $51 million at March 31,September 30, 2020 and December 31, 2019, respectively. The Company was required to post collateral relating to those positions of $146$123 million and $50 million at March 31,September 30, 2020 and December 31, 2019, 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
- 28 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. Derivative financial instruments, continued
rating were to fall below specified ratings, the counterparties of the derivative financial instruments could demand immediate incremental collateralization on those instruments in a net liability position. The aggregate fair value of all derivative financial instruments with such credit risk-related contingent features in a net liability position on March 31,September 30, 2020 was not significant. If the credit risk-related contingent features had been triggered on March 31, 2020, the Company would not have been required to post any additional collateral to counterparties.
The aggregate fair value of derivative financial instruments in an asset position and the net asset positions with counterparties, which are subject to enforceable master netting arrangements, was $2 millionnil at September 30, 2020 and $6 million at March 31, 2020 and December 31, 2019, respectively.2019. Counterparties posted collateral relating to those positions of $81 thousand and $5 million at March 31, 2020 and December 31, 2019, respectively.2019. 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 variation margin payments depending on the contracts being in a net asset or liability position. The amount of initial margin collateral posted by the Company was $125 million and $84 million at March 31,September 30, 2020 and December 31, 2019, respectively. The fair value asset and liability amounts of derivative contracts have been reduced by variation margin payments treated as settlements as described herein. Variation margin on derivative contracts not treated as settlements continues to represent collateral posted or received by the Company.
10. Variable interest entities and asset securitizations
The Company’s securitization activity has consisted of securitizing loans originated for sale into government issued or guaranteed mortgage-backed securities.securities that are then retained by the Company. The amounts of those securitizations during the three-monthnine-month periods ended March 31,September 30, 2020 and 2019 are presented in the Company’s consolidated statement of cash flows. The Company has not recognized any losses as a result of having securitized assets.
As described in note 4, 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,September 30, 2020 and December 31, 2019, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet and recognized $23 million in other assets for its “investment” in the common securities of the trusts that will be concomitantly repaid to M&T by the respective trust from the proceeds of M&T’s repayment of the junior subordinated debentures associated with preferred capital securities described in note 4.
- 33 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. Variable interest entities and asset securitizations, continued
The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately $1.6$2.1 billion at March 31,September 30, 2020 and $1.5 billion at December 31, 2019. Those partnerships generally construct or acquire properties for which the investing partners are eligible to receive certain federal income tax credits in accordance with government guidelines. Such investments may also provide tax deductible losses to the partners. The partnership investments also assist the Company in achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company by creditors of the partnerships. However, the tax credits that result from the Company’s investments in such partnerships are generally subject to recapture should a partnership fail to comply with the respective government regulations. The Company’s carrying amount of its investments in such partnerships was $724$791 million, including $345$380 million of unfunded commitments, at March 31,September 30, 2020 and $748 million, including $414 million of unfunded commitments, at December 31, 2019. Contingent commitments to provide additional capital contributions to these partnerships were not material at March 31,September 30, 2020. The Company has not provided financial or other support to the partnerships that was not contractually required. The Company’s maximum exposure to loss from its investments in such partnerships as of March 31,September 30, 2020 was $953$978 million, including possible recapture of certain tax credits. Management currently estimates that no material losses are probable as a result of the Company’s involvement with such entities. The Company, in its position as limited partner, does not direct the activities that most significantly impact the economic performance of the partnerships and, therefore, in accordance with the accounting provisions for variable interest entities, the partnership entities are
- 29 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. Variable interest entities and asset securitizations, continued
not included in the Company’s consolidated financial statements. The Company’s investment in qualified affordable housing projects is amortized to income taxes in the consolidated statement of income as tax credits and other tax benefits resulting from deductible losses associated with the projects are received. The Company amortized $21$22 million and $17$65 million of its investments in qualified affordable housing projects to income tax expense during the three-month and nine-month periods ended March 31,September 30, 2020, and 2019, respectively, and recognized $26 million and $20$78 million of tax credits and other tax benefits during those periods. Similarly, for the three-month and nine-month periods ended September 30, 2019, the Company amortized $17 million and $51 million, respectively, of its investments in qualified affordable housing projects to income tax expense and recognized $21 million and $62 million of tax credits and other tax benefits during those respective periods.
The Company serves as investment advisor for certain registered money-market funds. The Company has no explicit arrangement to provide support to those funds, but may waive portions of its allowable management fees as a result of market conditions.
11. 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,September 30, 2020.
Pursuant to GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy exists in GAAP for fair value measurements based upon the inputs to the valuation of an asset or liability.
| • | Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities. |
| • | Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market. |
| • | Level 3 — Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company's own estimates about the assumptions that market participants would use to value the asset or liability. |
When available, the Company attempts to use quoted market prices in active markets to determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not available, fair value is often determined using model-based techniques incorporating various assumptions including interest rates,
- 34 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation. The following is a description of the valuation methodologies used for the Company's assets and liabilities that are measured on a recurring basis at estimated fair value.
Trading account assets and liabilities
Trading account assets and liabilities consist primarily of interest rate contracts and foreign exchange contracts with customers who require such services with offsetting positions with third parties to minimize the Company's risk with respect to such transactions. The Company generally determines the fair value of its derivative trading account assets and liabilities using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2. Mutual funds held in connection with deferred compensation and other arrangements have been classified as Level 1 valuations. Valuations of investments in municipal and other bonds can generally be obtained through reference to quoted prices in less active markets for the same or similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.
- 30 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
Investment securities available for sale and equity securities
The majority of the Company's available-for-sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. Certain investments in mutual funds and equity securities are actively traded and, therefore, have been classified as Level 1 valuations.
Real estate loans held for sale
The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale includes changes in estimated fair value during the hedge period. Typically, the Company attempts to hedge real estate loans held for sale from the date of close through the sale date. The fair value of hedged real estate loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans with similar characteristics and, accordingly, such loans have been classified as a Level 2 valuation.
Commitments to originate real estate loans for sale and commitments to sell real estate loans
The Company enters into various commitments to originate real estate loans for sale and commitments to sell real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value on the consolidated balance sheet. The estimated fair values of such commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans to certain government-sponsored entities and other parties. The fair valuations of commitments to sell real estate loans generally result in a Level 2 classification. The estimated fair value of commitments to originate real estate loans for sale are adjusted to reflect the Company's anticipated commitment expirations. The estimated commitment expirations are considered significant unobservable inputs contributing to the Level 3 classification of commitments to originate real estate loans for sale. Significant unobservable inputs used in the determination of estimated fair value of commitments to originate real estate loans for sale are included in the accompanying table of significant unobservable inputs to Level 3 measurements.
Interest rate swap agreements used for interest rate risk management
The Company utilizes interest rate swap agreements as part of the management of interest rate risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing liabilities. The Company generally determines the fair value of its interest rate swap agreements using externally developed pricing
- 35 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
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.
- 31 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
The following tables present assets and liabilities at March 31,September 30, 2020 and December 31, 2019 measured at estimated fair value on a recurring basis:
|
| Fair Value Measurements |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Fair Value Measurements |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Trading account assets |
| $ | 1,224,291 |
|
| $ | 47,497 |
|
| $ | 1,176,794 |
|
| $ | — |
|
| $ | 1,215,573 |
|
| $ | 50,023 |
|
| $ | 1,165,550 |
|
| $ | — |
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
|
| 10,573 |
|
|
| — |
|
|
| 10,573 |
|
|
| — |
|
|
| 9,370 |
|
|
| — |
|
|
| 9,370 |
|
|
| — |
|
Obligations of states and political subdivisions |
|
| 682 |
|
|
| — |
|
|
| 682 |
|
|
| — |
| ||||||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 6,011,064 |
|
|
| — |
|
|
| 6,011,064 |
|
|
| — |
|
|
| 5,165,701 |
|
|
| — |
|
|
| 5,165,701 |
|
|
| — |
|
Privately issued |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Other debt securities |
|
| 117,644 |
|
|
| — |
|
|
| 117,644 |
|
|
| — |
|
|
| 127,251 |
|
|
| — |
|
|
| 127,251 |
|
|
| — |
|
|
|
| 6,139,979 |
|
|
| — |
|
|
| 6,139,963 |
|
|
| 16 |
|
|
| 5,302,338 |
|
|
| — |
|
|
| 5,302,322 |
|
|
| 16 |
|
Equity securities |
|
| 134,160 |
|
|
| 115,206 |
|
|
| 18,954 |
|
|
| — |
|
|
| 101,182 |
|
|
| 72,856 |
|
|
| 28,326 |
|
|
| — |
|
Real estate loans held for sale |
|
| 625,236 |
|
|
| — |
|
|
| 625,236 |
|
|
| — |
|
|
| 909,335 |
|
|
| — |
|
|
| 909,335 |
|
|
| — |
|
Other assets (a) |
|
| 44,347 |
|
|
| — |
|
|
| 9,284 |
|
|
| 35,063 |
|
|
| 56,816 |
|
|
| — |
|
|
| 5,030 |
|
|
| 51,786 |
|
Total assets |
| $ | 8,168,013 |
|
| $ | 162,703 |
|
| $ | 7,970,231 |
|
| $ | 35,079 |
|
| $ | 7,585,244 |
|
| $ | 122,879 |
|
| $ | 7,410,563 |
|
| $ | 51,802 |
|
Trading account liabilities |
| $ | 125,746 |
|
| $ | — |
|
| $ | 125,746 |
|
| $ | — |
|
| $ | 122,985 |
|
| $ | — |
|
| $ | 122,985 |
|
| $ | — |
|
Other liabilities (a) |
|
| 38,975 |
|
|
| — |
|
|
| 38,939 |
|
|
| 36 |
|
|
| 14,946 |
|
|
| — |
|
|
| 14,663 |
|
|
| 283 |
|
Total liabilities |
| $ | 164,721 |
|
| $ | — |
|
| $ | 164,685 |
|
| $ | 36 |
|
| $ | 137,931 |
|
| $ | — |
|
| $ | 137,648 |
|
| $ | 283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account assets |
| $ | 470,129 |
|
| $ | 49,040 |
|
| $ | 421,089 |
|
| $ | — |
|
| $ | 470,129 |
|
| $ | 49,040 |
|
| $ | 421,089 |
|
| $ | — |
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
|
| 9,767 |
|
|
| — |
|
|
| 9,767 |
|
|
| — |
|
|
| 9,767 |
|
|
| — |
|
|
| 9,767 |
|
|
| — |
|
Obligations of states and political subdivisions |
|
| 775 |
|
|
| — |
|
|
| 775 |
|
|
| — |
|
|
| 775 |
|
|
| — |
|
|
| 775 |
|
|
| — |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed |
|
| 6,180,940 |
|
|
| — |
|
|
| 6,180,940 |
|
|
| — |
|
|
| 6,180,940 |
|
|
| — |
|
|
| 6,180,940 |
|
|
| — |
|
Privately issued |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Other debt securities |
|
| 127,278 |
|
|
| — |
|
|
| 127,278 |
|
|
| — |
|
|
| 127,278 |
|
|
| — |
|
|
| 127,278 |
|
|
| — |
|
|
|
| 6,318,776 |
|
|
| — |
|
|
| 6,318,760 |
|
|
| 16 |
|
|
| 6,318,776 |
|
|
| — |
|
|
| 6,318,760 |
|
|
| 16 |
|
Equity securities |
|
| 140,041 |
|
|
| 100,637 |
|
|
| 39,404 |
|
|
| — |
|
|
| 140,041 |
|
|
| 100,637 |
|
|
| 39,404 |
|
|
| — |
|
Real estate loans held for sale |
|
| 442,079 |
|
|
| — |
|
|
| 442,079 |
|
|
| — |
|
|
| 442,079 |
|
|
| — |
|
|
| 442,079 |
|
|
| — |
|
Other assets (a) |
|
| 16,466 |
|
|
| — |
|
|
| 4,501 |
|
|
| 11,965 |
|
|
| 16,466 |
|
|
| — |
|
|
| 4,501 |
|
|
| 11,965 |
|
Total assets |
| $ | 7,387,491 |
|
| $ | 149,677 |
|
| $ | 7,225,833 |
|
| $ | 11,981 |
|
| $ | 7,387,491 |
|
| $ | 149,677 |
|
| $ | 7,225,833 |
|
| $ | 11,981 |
|
Trading account liabilities |
| $ | 79,903 |
|
| $ | — |
|
| $ | 79,903 |
|
| $ | — |
|
| $ | 79,903 |
|
| $ | — |
|
| $ | 79,903 |
|
| $ | — |
|
Other liabilities (a) |
|
| 7,188 |
|
|
| — |
|
|
| 5,963 |
|
|
| 1,225 |
|
|
| 7,188 |
|
|
| — |
|
|
| 5,963 |
|
|
| 1,225 |
|
Total liabilities |
| $ | 87,091 |
|
| $ | — |
|
| $ | 85,866 |
|
| $ | 1,225 |
|
| $ | 87,091 |
|
| $ | — |
|
| $ | 85,866 |
|
| $ | 1,225 |
|
(a) | Comprised predominantly of interest rate swap agreements used for interest rate risk management (Level 2), commitments to sell real estate loans (Level 2) and commitments to originate real estate loans to be held for sale (Level 3). |
- 3236 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended March 31,September 30, 2020 and 2019 were as follows:
|
| Investment Securities Available for Sale |
|
|
|
|
|
|
| Investment Securities Available for Sale |
|
|
|
|
|
| ||
|
| Privately Issued Mortgage-Backed Securities |
|
| Other Assets and Other Liabilities |
|
|
| Privately Issued Mortgage-Backed Securities |
|
| Other Assets and Other Liabilities |
|
| ||||
2020 |
| (In thousands) |
|
|
| (In thousands) |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2020 |
| $ | 16 |
|
|
| 10,740 |
|
| |||||||||
Balance — June 30, 2020 |
| $ | 16 |
|
|
| 40,106 |
|
| |||||||||
Total gains realized/unrealized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings |
|
| — |
|
|
| 44,081 |
| (a) |
|
| — |
|
|
| 57,819 |
| (a) |
Settlements |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
Transfers out of Level 3 |
|
| — |
|
|
| (19,794 | ) | (b) |
|
| — |
|
|
| (46,422 | ) | (b) |
Balance — March 31, 2020 |
| $ | 16 |
|
|
| 35,027 |
|
| |||||||||
Changes in unrealized gains included in earnings related to assets still held at March 31, 2020 |
| $ | — |
|
|
| 32,584 |
| (a) | |||||||||
Balance — September 30, 2020 |
| $ | 16 |
|
|
| 51,503 |
|
| |||||||||
Changes in unrealized gains included in earnings related to assets still held at September 30, 2020 |
| $ | — |
|
|
| 44,127 |
| (a) |
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2019 |
| $ | 22 |
|
|
| 7,712 |
|
| |||||||||
Balance — June 30, 2019 |
| $ | 16 |
|
|
| 17,200 |
|
| |||||||||
Total gains realized/unrealized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings |
|
| — |
|
|
| 16,546 |
| (a) |
|
| — |
|
|
| 62,178 |
| (a) |
Settlements |
|
| (6 | ) |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
Transfers out of Level 3 |
|
| — |
|
|
| (16,825 | ) | (b) |
|
| — |
|
|
| (55,104 | ) | (b) |
Balance — March 31, 2019 |
| $ | 16 |
|
|
| 7,433 |
|
| |||||||||
Changes in unrealized gains included in earnings related to assets still held at March 31, 2019 |
| $ | — |
|
|
| 8,525 |
| (a) | |||||||||
Balance — September 30, 2019 |
| $ | 16 |
|
|
| 24,274 |
|
| |||||||||
Changes in unrealized gains included in earnings related to assets still held at September 30, 2019 |
| $ | — |
|
|
| 19,350 |
| (a) |
- 37 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the nine months ended September 30, 2020 and 2019 were as follows:
|
| Investment Securities Available for Sale |
|
|
|
|
|
| |
|
| Privately Issued Mortgage-Backed Securities |
|
| Other Assets and Other Liabilities |
|
| ||
2020 |
| (In thousands) |
|
| |||||
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2020 |
| $ | 16 |
|
|
| 10,740 |
|
|
Total gains realized/unrealized: |
|
|
|
|
|
|
|
|
|
Included in earnings |
|
| — |
|
|
| 150,632 |
| (a) |
Settlements |
|
| — |
|
|
| — |
|
|
Transfers out of Level 3 |
|
| — |
|
|
| (109,869 | ) | (b) |
Balance — September 30, 2020 |
| $ | 16 |
|
|
| 51,503 |
|
|
Changes in unrealized gains included in earnings related to assets still held at September 30, 2020 |
| $ | — |
|
|
| 50,411 |
| (a) |
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2019 |
| $ | 22 |
|
|
| 7,712 |
|
|
Total gains realized/unrealized: |
|
|
|
|
|
|
|
|
|
Included in earnings |
|
| — |
|
|
| 115,187 |
| (a) |
Settlements |
|
| (6 | ) |
|
| — |
|
|
Transfers out of Level 3 |
|
| — |
|
|
| (98,625 | ) | (b) |
Balance — September 30, 2019 |
| $ | 16 |
|
|
| 24,274 |
|
|
Changes in unrealized gains included in earnings related to assets still held at September 30, 2019 |
| $ | — |
|
|
| 24,981 |
| (a) |
(a) | Reported as mortgage banking revenues in the consolidated statement of income and includes the fair value of commitment issuances and expirations. |
(b) | Transfers out of Level 3 consist of interest rate locks transferred to closed loans. |
The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements. The more significant of those assets follow.
- 33 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
Loans
Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the 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 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
- 38 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
specific borrower facts and circumstances and the experience of credit personnel in their dealings with similar borrower collateral liquidations. Such discounts were in the range of 15% to 90% with a weighted-average of 43%59% at March 31,September 30, 2020. 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 nonrecurring fair value measurement adjustments have been classified as Level 2. Collateral values for other consumer installment loans are generally estimated based on historical recovery rates for similar types of loans, which at March 31,September 30, 2020 was 49%50%. 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 $196$387 million at March 31,September 30, 2020 ($116159 million and $80$228 million of which were classified as Level 2 and Level 3, respectively), $305 million at December 31, 2019 ($115 million and $190 million of which were classified as Level 2 and Level 3, respectively) and $199$302 million at March 31,September 30, 2019 ($121122 million and $78$180 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,September 30, 2020 were decreases of $82 million and $153 million for the three-month and nine-month periods ended September 30, 2020, respectively. Changes in fair value recognized for partial charge-offs of loans and loan impairment reserves on loans held by the Company on September 30, 2019 were decreases of $21$51 million and $20$85 million for the three-month and nine-month periods ended March 31, 2020 andSeptember 30, 2019, 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 $14$27 million and $9$17 million at March 31,September 30, 2020 and 2019, respectively. Changes in fair value recognized for those foreclosed assets held by the Company were not material during the three-month and nine-month periods ended March 31,September 30, 2020 and 2019.
Capitalized servicing rights
Capitalized servicing rights are initially measured at fair value in the Company’s consolidated balance sheet. The Company utilizes the amortization method to subsequently measure its capitalized servicing assets. In accordance with GAAP, the Company must record impairment charges, on a nonrecurring basis, when the carrying value of certain strata exceed their estimated fair value. To estimate the fair value of servicing rights, the Company considers market prices for similar assets, if available, and the present value of expected future cash flows associated with the servicing rights calculated using assumptions that market participants would use in estimating future servicing income and expense. Such assumptions include estimates of the cost of servicing loans, loan default rates, an appropriate discount rate, and prepayment speeds. For purposes of evaluating and measuring impairment of
- 34 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
capitalized servicing rights, the Company stratifies such assets based on the predominant risk characteristics of the underlying financial instruments that are expected to have the most impact on projected prepayments, cost of servicing and other factors affecting future cash flows associated with the servicing rights. Such factors may include financial asset or loan type, note rate and term. The amount of impairment recognized is the amount by which the carrying value of the capitalized servicing rights for a stratum exceed estimated fair value. Impairment is recognized through a valuation allowance. The determination of fair value of capitalized servicing rights is considered a Level 3 valuation. Capitalized servicing rights related to residential mortgage loans of $182$165 million and $188 million at March 31,September 30, 2020 and December 31, 2019, respectively, required a valuation allowance of $17$27 million and $7 million, respectively. NaN valuation allowance on capitalized servicing rights was required at March 31, 2019. Significant unobservable inputs used in this Level 3 valuation included weighted-average prepayment speeds of 18.65%17.19% and 18.50% at March 31,September 30, 2020 and December 31, 2019, respectively, and a weighted-average option-adjusted spread of 900 basis points at each date. There was 0 impairment charge for
- 39 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
capitalized servicing rights during the three months ended September 30, 2020, but a $20 million valuation charge was recognized during the nine months ended September 30, 2020. Changes in fair value recognized for impairment of capitalized servicing rights were $10$14 million duringand $23 million for the three months ended March 31, 2020. NaN impairment was recognized during the threeand nine months ended March 31,September 30, 2019,.
respectively.
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,September 30, 2020 and December 31, 2019:
|
| Fair Value |
|
| Valuation Technique |
| Unobservable Inputs/Assumptions |
|
| Range (Weighted- Average) |
|
| Fair Value |
|
| Valuation Technique |
| Unobservable Inputs/Assumptions |
|
| Range (Weighted- Average) |
| ||||||
|
| (In thousands) |
|
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
|
|
|
|
|
|
|
|
|
|
| ||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Recurring fair value measurements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately issued mortgage- backed securities |
| $ | 16 |
|
| Two independent pricing quotes |
|
| — |
|
|
| — |
|
| $ | 16 |
|
| Two independent pricing quotes |
|
| — |
|
|
| — |
|
Net other assets (liabilities) (a) |
|
| 35,027 |
|
| Discounted cash flow |
| Commitment expirations |
|
| 0%-100% (16%) |
|
|
| 51,503 |
|
| Discounted cash flow |
| Commitment expirations |
|
| 0% - 90%(18%) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring fair value measurements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately issued mortgage- backed securities |
| $ | 16 |
|
| Two independent pricing quotes |
|
| — |
|
|
| — |
|
| $ | 16 |
|
| Two independent pricing quotes |
|
| — |
|
|
| — |
|
Net other assets (liabilities) (a) |
|
| 10,740 |
|
| Discounted cash flow |
| Commitment expirations |
|
| 0%-99% (13%) |
|
|
| 10,740 |
|
| Discounted cash flow |
| Commitment expirations |
|
| 0% - 99% (13%) |
|
(a) | Other Level 3 assets (liabilities) consist of commitments to originate real estate loans. |
Sensitivity of fair value measurements to changes in unobservable inputs
An increase (decrease) in the estimate of expirations for commitments to originate real estate loans would generally result in a lower (higher) fair value measurement. Estimated commitment expirations are derived considering loan type, changes in interest rates and remaining length of time until closing.
- 3540 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. 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, 2020 |
|
| September 30, 2020 |
| ||||||||||||||||||||||||||||||||||
|
| Carrying Amount |
|
| Estimated Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Carrying Amount |
|
| Estimated Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 1,298,192 |
|
|
| 1,298,192 |
|
|
| 1,256,378 |
|
|
| 41,814 |
|
|
| — |
|
| $ | 1,489,232 |
|
|
| 1,489,232 |
|
|
| 1,437,569 |
|
|
| 51,663 |
|
|
| — |
|
Interest-bearing deposits at banks |
|
| 8,896,307 |
|
|
| 8,896,307 |
|
|
| — |
|
|
| 8,896,307 |
|
|
| — |
|
|
| 20,197,937 |
|
|
| 20,197,937 |
|
|
| — |
|
|
| 20,197,937 |
|
|
| — |
|
Trading account assets |
|
| 1,224,291 |
|
|
| 1,224,291 |
|
|
| 47,497 |
|
|
| 1,176,794 |
|
|
| — |
|
|
| 1,215,573 |
|
|
| 1,215,573 |
|
|
| 50,023 |
|
|
| 1,165,550 |
|
|
| — |
|
Investment securities |
|
| 8,956,590 |
|
|
| 9,053,797 |
|
|
| 115,206 |
|
|
| 8,860,172 |
|
|
| 78,419 |
|
|
| 7,723,004 |
|
|
| 7,816,236 |
|
|
| 72,856 |
|
|
| 7,670,141 |
|
|
| 73,239 |
|
Loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans and leases |
|
| 26,243,648 |
|
|
| 25,609,215 |
|
|
| — |
|
|
| — |
|
|
| 25,609,215 |
|
|
| 27,891,648 |
|
|
| 27,422,525 |
|
|
| — |
|
|
| — |
|
|
| 27,422,525 |
|
Commercial real estate loans |
|
| 36,684,106 |
|
|
| 35,576,538 |
|
|
| — |
|
|
| 250,414 |
|
|
| 35,326,124 |
|
|
| 37,582,084 |
|
|
| 36,343,024 |
|
|
| — |
|
|
| 336,039 |
|
|
| 36,006,985 |
|
Residential real estate loans |
|
| 15,643,014 |
|
|
| 15,824,640 |
|
|
| — |
|
|
| 3,957,633 |
|
|
| 11,867,007 |
|
|
| 16,663,708 |
|
|
| 16,935,950 |
|
|
| — |
|
|
| 4,070,917 |
|
|
| 12,865,033 |
|
Consumer loans |
|
| 15,571,507 |
|
|
| 15,100,531 |
|
|
| — |
|
|
| — |
|
|
| 15,100,531 |
|
|
| 16,309,608 |
|
|
| 16,149,710 |
|
|
| — |
|
|
| — |
|
|
| 16,149,710 |
|
Allowance for credit losses |
|
| (1,384,366 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,758,505 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loans and leases, net |
|
| 92,757,909 |
|
|
| 92,110,924 |
|
|
| — |
|
|
| 4,208,047 |
|
|
| 87,902,877 |
|
|
| 96,688,543 |
|
|
| 96,851,209 |
|
|
| — |
|
|
| 4,406,956 |
|
|
| 92,444,253 |
|
Accrued interest receivable |
|
| 329,898 |
|
|
| 329,898 |
|
|
| — |
|
|
| 329,898 |
|
|
| — |
|
|
| 429,751 |
|
|
| 429,751 |
|
|
| — |
|
|
| 429,751 |
|
|
| — |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
| $ | (35,554,715 | ) |
|
| (35,554,715 | ) |
|
| — |
|
|
| (35,554,715 | ) |
|
| — |
|
| $ | (44,201,670 | ) |
|
| (44,201,670 | ) |
|
| — |
|
|
| (44,201,670 | ) |
|
| — |
|
Savings and interest-checking deposits |
|
| (57,956,331 | ) |
|
| (57,956,331 | ) |
|
| — |
|
|
| (57,956,331 | ) |
|
| — |
|
|
| (65,732,130 | ) |
|
| (65,732,130 | ) |
|
| — |
|
|
| (65,732,130 | ) |
|
| — |
|
Time deposits |
|
| (5,454,341 | ) |
|
| (5,512,518 | ) |
|
| — |
|
|
| (5,512,518 | ) |
|
| — |
|
|
| (4,329,550 | ) |
|
| (4,357,963 | ) |
|
| — |
|
|
| (4,357,963 | ) |
|
| — |
|
Deposits at Cayman Islands office |
|
| (1,217,921 | ) |
|
| (1,217,921 | ) |
|
| — |
|
|
| (1,217,921 | ) |
|
| — |
|
|
| (899,989 | ) |
|
| (899,989 | ) |
|
| — |
|
|
| (899,989 | ) |
|
| — |
|
Short-term borrowings |
|
| (59,180 | ) |
|
| (59,180 | ) |
|
| — |
|
|
| (59,180 | ) |
|
| — |
|
|
| (46,123 | ) |
|
| (46,123 | ) |
|
| — |
|
|
| (46,123 | ) |
|
| — |
|
Long-term borrowings |
|
| (6,321,435 | ) |
|
| (6,233,069 | ) |
|
| — |
|
|
| (6,233,069 | ) |
|
| — |
|
|
| (5,458,885 | ) |
|
| (5,540,675 | ) |
|
| — |
|
|
| (5,540,675 | ) |
|
| — |
|
Accrued interest payable |
|
| (88,267 | ) |
|
| (88,267 | ) |
|
| — |
|
|
| (88,267 | ) |
|
| — |
|
|
| (66,158 | ) |
|
| (66,158 | ) |
|
| — |
|
|
| (66,158 | ) |
|
| — |
|
Trading account liabilities |
|
| (125,746 | ) |
|
| (125,746 | ) |
|
| — |
|
|
| (125,746 | ) |
|
| — |
|
|
| (122,985 | ) |
|
| (122,985 | ) |
|
| — |
|
|
| (122,985 | ) |
|
| — |
|
Other financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to originate real estate loans for sale |
| $ | 35,027 |
|
|
| 35,027 |
|
|
| — |
|
|
| — |
|
|
| 35,027 |
|
| $ | 51,503 |
|
|
| 51,503 |
|
|
| — |
|
|
| — |
|
|
| 51,503 |
|
Commitments to sell real estate loans |
|
| (32,638 | ) |
|
| (32,638 | ) |
|
| — |
|
|
| (32,638 | ) |
|
| — |
|
|
| (10,010 | ) |
|
| (10,010 | ) |
|
| — |
|
|
| (10,010 | ) |
|
| — |
|
Other credit-related commitments |
|
| (142,012 | ) |
|
| (142,012 | ) |
|
| — |
|
|
| — |
|
|
| (142,012 | ) |
|
| (135,416 | ) |
|
| (135,416 | ) |
|
| — |
|
|
| — |
|
|
| (135,416 | ) |
Interest rate swap agreements used for interest rate risk management |
|
| 2,983 |
|
|
| 2,983 |
|
|
| — |
|
|
| 2,983 |
|
|
| — |
|
|
| 377 |
|
|
| 377 |
|
|
| — |
|
|
| 377 |
|
|
| — |
|
- 3641 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Fair value measurements, continued
|
| December 31, 2019 |
| |||||||||||||||||
|
| Carrying Amount |
|
| Estimated Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
|
|
|
|
|
| (In thousands) |
|
|
|
|
| |||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 1,432,805 |
|
|
| 1,432,805 |
|
|
| 1,394,984 |
|
|
| 37,821 |
|
|
| — |
|
Interest-bearing deposits at banks |
|
| 7,190,154 |
|
|
| 7,190,154 |
|
|
| — |
|
|
| 7,190,154 |
|
|
| — |
|
Federal funds sold |
|
| 3,500 |
|
|
| 3,500 |
|
|
| — |
|
|
| 3,500 |
|
|
| — |
|
Trading account assets |
|
| 470,129 |
|
|
| 470,129 |
|
|
| 49,040 |
|
|
| 421,089 |
|
|
| — |
|
Investment securities |
|
| 9,497,251 |
|
|
| 9,539,540 |
|
|
| 100,637 |
|
|
| 9,351,793 |
|
|
| 87,110 |
|
Loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans and leases |
|
| 23,838,168 |
|
|
| 23,510,908 |
|
|
| — |
|
|
| — |
|
|
| 23,510,908 |
|
Commercial real estate loans |
|
| 35,541,914 |
|
|
| 35,517,180 |
|
|
| — |
|
|
| 28,338 |
|
|
| 35,488,842 |
|
Residential real estate loans |
|
| 16,156,094 |
|
|
| 16,227,274 |
|
|
| — |
|
|
| 3,990,848 |
|
|
| 12,236,426 |
|
Consumer loans |
|
| 15,386,693 |
|
|
| 15,413,262 |
|
|
| — |
|
|
| — |
|
|
| 15,413,262 |
|
Allowance for credit losses |
|
| (1,051,071 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loans and leases, net |
|
| 89,871,798 |
|
|
| 90,668,624 |
|
|
| — |
|
|
| 4,019,186 |
|
|
| 86,649,438 |
|
Accrued interest receivable |
|
| 333,142 |
|
|
| 333,142 |
|
|
| — |
|
|
| 333,142 |
|
|
| — |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
| $ | (32,396,407 | ) |
|
| (32,396,407 | ) |
|
| — |
|
|
| (32,396,407 | ) |
|
| — |
|
Savings and interest-checking deposits |
|
| (54,932,162 | ) |
|
| (54,932,162 | ) |
|
| — |
|
|
| (54,932,162 | ) |
|
| — |
|
Time deposits |
|
| (5,757,456 | ) |
|
| (5,829,347 | ) |
|
| — |
|
|
| (5,829,347 | ) |
|
| — |
|
Deposits at Cayman Islands office |
|
| (1,684,044 | ) |
|
| (1,684,044 | ) |
|
| — |
|
|
| (1,684,044 | ) |
|
| — |
|
Short-term borrowings |
|
| (62,363 | ) |
|
| (62,363 | ) |
|
| — |
|
|
| (62,363 | ) |
|
| — |
|
Long-term borrowings |
|
| (6,986,186 | ) |
|
| (7,063,165 | ) |
|
| — |
|
|
| (7,063,165 | ) |
|
| — |
|
Accrued interest payable |
|
| (105,374 | ) |
|
| (105,374 | ) |
|
| — |
|
|
| (105,374 | ) |
|
| — |
|
Trading account liabilities |
|
| (79,903 | ) |
|
| (79,903 | ) |
|
| — |
|
|
| (79,903 | ) |
|
| — |
|
Other financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to originate real estate loans for sale |
| $ | 10,740 |
|
|
| 10,740 |
|
|
| — |
|
|
| — |
|
|
| 10,740 |
|
Commitments to sell real estate loans |
|
| 300 |
|
|
| 300 |
|
|
| — |
|
|
| 300 |
|
|
| — |
|
Other credit-related commitments |
|
| (136,470 | ) |
|
| (136,470 | ) |
|
| — |
|
|
| — |
|
|
| (136,470 | ) |
Interest rate swap agreements used for interest rate risk management |
|
| (1,762 | ) |
|
| (1,762 | ) |
|
| — |
|
|
| (1,762 | ) |
|
| — |
|
With the exception of marketable securities, certain off-balance sheet financial instruments and mortgage loans originated for sale, the Company’s financial instruments are not readily marketable and market prices do not exist. The Company, in attempting to comply with the provisions of GAAP that require disclosures of fair value of financial instruments, has not attempted to market its financial instruments to potential buyers, if any exist. Since negotiated prices in illiquid markets depend greatly upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the
benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time.
The Company does not believe that the estimated information presented herein is representative of the earnings power or value of the Company. The preceding analysis, which is inherently limited in depicting fair value, also does not consider any value associated with existing customer relationships nor the ability of the Company to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.
- 3742 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Commitments and contingencies
In the normal course of business, various commitments and contingent liabilities are outstanding. The following table presents the Company's significant commitments. Certain of these commitments are not included in the Company's consolidated balance sheet.
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Commitments to extend credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
| $ | 5,480,697 |
|
| $ | 5,442,160 |
|
| $ | 5,557,722 |
|
| $ | 5,442,160 |
|
Commercial real estate loans to be sold |
|
| 291,459 |
|
|
| 164,076 |
|
|
| 216,353 |
|
|
| 164,076 |
|
Other commercial real estate |
|
| 9,021,342 |
|
|
| 9,029,608 |
|
|
| 8,031,403 |
|
|
| 9,029,608 |
|
Residential real estate loans to be sold |
|
| 711,970 |
|
|
| 423,056 |
|
|
| 1,134,097 |
|
|
| 423,056 |
|
Other residential real estate |
|
| 810,145 |
|
|
| 448,375 |
|
|
| 712,964 |
|
|
| 448,375 |
|
Commercial and other |
|
| 15,220,152 |
|
|
| 16,170,731 |
|
|
| 19,921,166 |
|
|
| 16,170,731 |
|
Standby letters of credit |
|
| 2,440,312 |
|
|
| 2,441,432 |
|
|
| 2,354,799 |
|
|
| 2,441,432 |
|
Commercial letters of credit |
|
| 34,841 |
|
|
| 41,059 |
|
|
| 32,422 |
|
|
| 41,059 |
|
Financial guarantees and indemnification contracts |
|
| 4,072,127 |
|
|
| 4,108,572 |
|
|
| 4,250,654 |
|
|
| 4,108,572 |
|
Commitments to sell real estate loans |
|
| 1,323,837 |
|
|
| 906,037 |
|
|
| 1,895,436 |
|
|
| 906,037 |
|
Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. In addition to the amounts in the preceding table, the Company had discretionary funding commitments to commercial customers of $8.9$10.1 billion and $9.1 billion at March 31,September 30, 2020 and December 31, 2019, respectively, that the Company had the unconditional right to cancel prior to funding. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, whereas commercial letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and a third party. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management's assessment of the customer's creditworthiness.
Financial guarantees and indemnification contracts are oftentimes similar to standby letters of credit and include mandatory purchase agreements issued to ensure that customer obligations are fulfilled, recourse obligations associated with sold loans, and other guarantees of customer performance or compliance with designated rules and regulations. Included in financial guarantees and indemnification contracts are loan principal amounts sold with recourse in conjunction with the Company's involvement in the Fannie Mae Delegated Underwriting and Servicing program. The Company's maximum credit risk for recourse associated with loans sold under this program totaled approximately $3.8 billion and $3.9 billion at March 31,each of September 30, 2020 and December 31, 2019, respectively.2019.
Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows.
The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the fair value of real estate loans held for sale. Such commitments are considered derivatives and along with commitments to originate real estate loans to be held for sale are generally recorded in the consolidated balance sheet at estimated fair market value.
The Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for losses related to its obligations to loan purchasers.
- 3843 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Commitments and contingencies, continued
The amount of those charges is based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. At March 31,September 30, 2020, the Company believes that its obligation to loan purchasers was not material to the Company’s consolidated financial position.
Wilmington Trust, N.A., a wholly owned subsidiary of M&T, provides retirement services, including serving in certain trustee roles relating to Employee Stock Ownership Plans (“ESOPs”). Beginning in 2010, the U.S. Department of Labor (“DOL”) announced that it would increase its focus on ESOP transactions, particularly with regard to valuation issues relating to ESOP transactions. Beginning in late 2013, Wilmington Trust, N.A. began receiving requests for information and subpoenas relating to certain ESOP transactions for which it acted as trustee. In June 2016, Wilmington Trust, N.A. received a DOL subpoena seeking information on its global ESOP trustee business. In addition to these investigations, the DOL has commenced three lawsuits against Wilmington Trust, N.A. relating to its role as trustee of three ESOP transactions. In July 2019, Wilmington Trust, N.A. reached a settlement in principle with the DOL to resolve certain pending DOL ESOP matters. On April 28, 2020, Wilmington Trust N.A. and the DOL executed a formal settlement agreement. The total amount of the settlement was $88 million, which included $80 million in payments to 21 ESOPs. The settlement amount is within the Company’s reserve for litigation matters as of March 31, 2020. Wilmington Trust, N.A. has also been named as a defendant in five private party lawsuits relating to its role as trustee for five ESOP transactions. Two of the five private party lawsuits relating to ESOP transactions have been resolved through settlements, which have been preliminarily approved by Courts, and are in the process of administration. Neither of the two settlements is material. Under applicable transaction documents, Wilmington Trust, N.A. may be entitled to indemnification by the ESOP plan sponsors. These matters could result in damages, settlements, penalties, restitution, reputational damage or additional costs and expenses.
M&T and its subsidiaries are subject in the normal course of business to various other pending and threatened legal proceedings and matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements. The Company increased its recorded liability for legal-related matters by $50 million during the three months ended March 31, 2019. To the extent pending or threatened litigation could result in exposure in excess of the recorded liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was estimated to be between $0 and $50$25 million as of March 31,September 30, 2020. Although the Company does not believe that the outcome of pending legal matters will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.
13. Segment information
Reportable segments have been determined based upon the Company's internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.
The financial information of the Company's segments was compiled utilizing the accounting policies described in note 22 of Notes to Financial Statements in the 2019 Annual Report. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, the financial information of the reported segments is not necessarily comparable with similar information reported by other financial institutions.
- 39 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
13. Segment information, continued
Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.
- 44 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
13. Segment information, continued
Information about the Company's segments is presented in the following table:
|
| Three Months Ended March 31 |
|
| Three Months Ended September 30 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||||||||||||||||||
|
| 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 |
| $ | 137,833 |
|
|
| 885 |
|
|
| 32,926 |
|
| $ | 139,322 |
|
|
| 856 |
|
|
| 43,271 |
|
| $ | 131,566 |
|
|
| (1 | ) |
|
| 35,614 |
|
| $ | 143,741 |
|
|
| 912 |
|
|
| 46,147 |
|
Commercial Banking |
|
| 291,776 |
|
|
| 1,053 |
|
|
| 143,732 |
|
|
| 267,490 |
|
|
| 840 |
|
|
| 132,218 |
|
|
| 276,125 |
|
|
| 117 |
|
|
| 131,414 |
|
|
| 282,757 |
|
|
| 980 |
|
|
| 132,668 |
|
Commercial Real Estate |
|
| 223,305 |
|
|
| 409 |
|
|
| 117,408 |
|
|
| 219,173 |
|
|
| 354 |
|
|
| 117,498 |
|
|
| 202,987 |
|
|
| (17 | ) |
|
| 87,095 |
|
|
| 238,364 |
|
|
| 458 |
|
|
| 131,161 |
|
Discretionary Portfolio |
|
| 49,219 |
|
|
| (13,037 | ) |
|
| 25,668 |
|
|
| 63,917 |
|
|
| (9,299 | ) |
|
| 39,172 |
|
|
| 140,135 |
|
|
| (10,748 | ) |
|
| 97,399 |
|
|
| 50,871 |
|
|
| (10,550 | ) |
|
| 29,604 |
|
Residential Mortgage Banking |
|
| 125,561 |
|
|
| 21,417 |
|
|
| 24,616 |
|
|
| 83,761 |
|
|
| 14,514 |
|
|
| 12,941 |
|
|
| 161,151 |
|
|
| 22,190 |
|
|
| 45,318 |
|
|
| 115,239 |
|
|
| 19,363 |
|
|
| 15,846 |
|
Retail Banking |
|
| 402,683 |
|
|
| 267 |
|
|
| 110,246 |
|
|
| 430,891 |
|
|
| 2,511 |
|
|
| 145,066 |
|
|
| 351,312 |
|
|
| 268 |
|
|
| 85,229 |
|
|
| 432,339 |
|
|
| 1,808 |
|
|
| 131,638 |
|
All Other |
|
| 275,788 |
|
|
| (10,994 | ) |
|
| (185,774 | ) |
|
| 346,271 |
|
|
| (9,776 | ) |
|
| (7,424 | ) |
|
| 200,380 |
|
|
| (11,809 | ) |
|
| (109,933 | ) |
|
| 294,358 |
|
|
| (12,971 | ) |
|
| (6,983 | ) |
Total |
| $ | 1,506,165 |
|
|
| — |
|
|
| 268,822 |
|
| $ | 1,550,825 |
|
|
| — |
|
|
| 482,742 |
|
| $ | 1,463,656 |
|
|
| — |
|
|
| 372,136 |
|
| $ | 1,557,669 |
|
|
| — |
|
|
| 480,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average Total Assets |
|
| Nine Months Ended September 30 |
| ||||||||||||||||||||||||||||||
|
| Three Months Ended March 31 |
|
| Year Ended December 31 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
| Total Revenues(a) |
|
| Inter- segment Revenues |
|
| Net Income (Loss) |
|
| Total Revenues(a) |
|
| Inter- segment Revenues |
|
| Net Income (Loss) |
| |||||||||
|
| (In millions) |
|
| (In thousands) |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Banking |
| $ | 6,006 |
|
|
| 5,702 |
|
|
| 5,793 |
|
| $ | 407,485 |
|
|
| 1,028 |
|
|
| 106,103 |
|
| $ | 423,830 |
|
|
| 2,772 |
|
|
| 131,668 |
|
Commercial Banking |
|
| 29,172 |
|
|
| 27,858 |
|
|
| 28,142 |
|
|
| 855,426 |
|
|
| 1,419 |
|
|
| 386,176 |
|
|
| 828,357 |
|
|
| 2,707 |
|
|
| 388,393 |
|
Commercial Real Estate |
|
| 24,849 |
|
|
| 23,572 |
|
|
| 23,921 |
|
|
| 653,405 |
|
|
| 452 |
|
|
| 311,586 |
|
|
| 682,979 |
|
|
| 1,218 |
|
|
| 370,288 |
|
Discretionary Portfolio |
|
| 27,143 |
|
|
| 30,341 |
|
|
| 29,081 |
|
|
| 328,181 |
|
|
| (33,646 | ) |
|
| 218,758 |
|
|
| 175,764 |
|
|
| (29,140 | ) |
|
| 106,816 |
|
Residential Mortgage Banking |
|
| 3,218 |
|
|
| 2,071 |
|
|
| 2,611 |
|
|
| 428,757 |
|
|
| 64,623 |
|
|
| 107,334 |
|
|
| 295,449 |
|
|
| 51,027 |
|
|
| 36,429 |
|
Retail Banking |
|
| 16,002 |
|
|
| 14,403 |
|
|
| 15,083 |
|
|
| 1,107,516 |
|
|
| 802 |
|
|
| 281,973 |
|
|
| 1,299,823 |
|
|
| 7,106 |
|
|
| 417,198 |
|
All Other |
|
| 14,195 |
|
|
| 12,892 |
|
|
| 14,953 |
|
|
| 633,461 |
|
|
| (34,678 | ) |
|
| (529,918 | ) |
|
| 955,868 |
|
|
| (35,690 | ) |
|
| (14,709 | ) |
Total |
| $ | 120,585 |
|
|
| 116,839 |
|
|
| 119,584 |
|
| $ | 4,414,231 |
|
|
| — |
|
|
| 882,012 |
|
| $ | 4,662,070 |
|
|
| — |
|
|
| 1,436,083 |
|
- 45 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
13. Segment information, continued
|
| Average Total Assets |
| |||||||||
|
| Nine Months Ended September 30 |
|
| Year Ended December 31 |
| ||||||
|
| 2020 |
|
| 2019 |
|
| 2019 |
| |||
|
| (In millions) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Banking |
| $ | 7,902 |
|
|
| 5,758 |
|
|
| 5,793 |
|
Commercial Banking |
|
| 30,450 |
|
|
| 28,089 |
|
|
| 28,142 |
|
Commercial Real Estate |
|
| 25,594 |
|
|
| 23,893 |
|
|
| 23,921 |
|
Discretionary Portfolio |
|
| 27,878 |
|
|
| 29,355 |
|
|
| 29,081 |
|
Residential Mortgage Banking |
|
| 3,530 |
|
|
| 2,444 |
|
|
| 2,611 |
|
Retail Banking |
|
| 16,231 |
|
|
| 14,839 |
|
|
| 15,083 |
|
All Other |
|
| 20,845 |
|
|
| 14,206 |
|
|
| 14,953 |
|
Total |
| $ | 132,430 |
|
|
| 118,584 |
|
|
| 119,584 |
|
(a) | Total revenues are comprised of net interest income and other income. Net interest income is the difference between taxable-equivalent interest earned on assets and interest paid on liabilities owed by a segment and a funding charge (credit) based on the Company's internal funds transfer and allocation methodology. Segments are charged a cost to fund any assets (e.g. loans) and are paid a funding credit for any funds provided (e.g. deposits). The taxable-equivalent adjustment aggregated |
14. Relationship with Bayview Lending Group LLC and Bayview Financial Holdings, L.P.
M&T holds a minority interest in Bayview Lending Group LLC ("BLG"), a privately-held commercial mortgage company. That investment had 0 remaining carrying value at March 31,September 30, 2020 as a result of cumulative losses recognized and cash distributions received in prior years. Income recognized by M&T is included in other revenues from operations and totaled $23 million and $37 million for the three-monthnine-month periods ended March 31,September 30, 2020 and 2019, respectively. There was 0 similar income recognized during the three-month periods ended September 30, 2020 and 2019.
Bayview Financial Holdings, L.P. (together with its affiliates, "Bayview Financial"), a privately-held specialty finance company, is BLG's majority investor. In addition to their common investment in BLG, the Company and Bayview Financial conduct other business activities with each other. The Company has obtained loan servicing rights for mortgage loans from BLG and Bayview Financial having outstanding principal balances of $2.1$2.0 billion and $2.2 billion at March 31,September 30, 2020 and December 31, 2019, respectively. Revenues from those servicing rights were
- 40 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
14. Relationship with Bayview Lending Group LLC $2 million and Bayview Financial Holdings, L.P., continued
$3$3 million for each of the three-month periods ended March 31,September 30, 2020 and 2019.2019, respectively, and $7 million and $9 million for the nine-month periods ended September 30, 2020 and 2019, respectively. The Company sub-services residential mortgage loans for Bayview Financial having outstanding principal balances of $61.9$67.0 billion and $62.8 billion at March 31,September 30, 2020 and December 31, 2019, respectively. Revenues earned for sub-servicing loans for Bayview Financial were $37$30 million and $28$33 million for the three-month periods ended March 31,September 30, 2020 and 2019, respectively and $101 million and $90 million for the nine-month periods ended September 30, 2020 and 2019, respectively. In addition, the Company held $90$80 million and $93 million of mortgage-backed securities in its held-to-maturity portfolio at March 31,September 30, 2020 and December 31, 2019, respectively, that were securitized by Bayview Financial. At March 31,September 30, 2020, the Company held $85$164 million of Bayview Financial’s $690 million$1.0 billion syndicated loan facility. Also, in the second quarter the Company extended two $100 million secured loan facilities to certain funds managed by Bayview Financial. One of the two loans was still outstanding as of September 30, 2020 with a remaining balance of $87 million.
- 46 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. Recent accounting developments
The following table provides a description of accounting standards that were adopted by the Company in 2020 as well as standards that are not effective that could have an impact to M&T’s consolidated financial statements upon adoption.
|
Standard |
|
|
Description |
|
| Required date of adoption |
|
|
Effect on consolidated financial statements |
|
|
Standards Adopted in 2020 | ||||||||||
|
Measurement of Credit Losses on Financial Instruments |
|
|
The amended guidance replaces the incurred loss model for determining the allowance for credit losses. The guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses will represent a valuation account that is deducted from the amortized cost basis of the financial assets to present their net carrying value at the amount expected to be collected. The income statement will reflect the measurement of credit losses for newly recognized financial assets as well as expected increases or decreases of expected credit losses that have taken place during the period. When determining the allowance, expected credit losses over the contractual term of the financial asset(s) (taking into account prepayments) will be estimated considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The amended guidance also requires recording an allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The initial allowance for these assets will be added to the purchase price at acquisition rather than being reported as an expense. Subsequent changes in the allowance will be recorded in the income statement as an adjustment the to the provision for credit losses. In addition, the amended guidance requires credit losses relating to debt securities to be recorded through an allowance for credit losses. |
|
|
January 1, 2020 |
|
|
The Company adopted the guidance on January 1, 2020. The Company’s approach for estimating current expected credit losses for loans includes utilizing macro-economic assumptions to project losses over a two-year reasonable and supportable forecast period. Subsequent to the forecast period, the Company reverts to longer term historical loss experience to estimate expected credit losses over the remaining contractual life.
Based on portfolio composition, then current economic conditions, and reasonable and supportable forecasts of future conditions, the Company recognized an increase to the allowance for credit losses of $132 million upon adoption of the standard as of January 1, 2020 as compared with the allowance for credit losses recognized on its consolidated balance sheet at December 31, 2019. The $132 million increase was recognized as a cumulative-effect adjustment to retained earnings as of January 1, 2020.
The effect on the allowance for credit losses was primarily attributable to increases in reserves for residential mortgage loans and consumer loans, which generally have longer estimated lives as compared with commercial and commercial real estate loans. The adoption did not have a material effect on the allowance for credit losses for debt securities. |
|
|
Simplifying the Test for Goodwill Impairment |
|
|
The amended guidance eliminates step 2 from the goodwill impairment test. |
|
|
January 1, 2020 |
|
|
The Company adopted the amended guidance effective January 1, 2020 using a prospective transition method and will incorporate the guidance as necessary when circumstances arise for the guidance to be utilized. The Company does not expect the guidance will have a material impact on its consolidated financial statements, unless at some point in the future one of its reporting units were to fail step 1 of the goodwill impairment test. |
|
- 4147 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. Recent accounting developments, continued
|
Standard |
|
|
Description |
|
| Required date of adoption |
|
|
Effect on consolidated financial statements |
| |
|
Standards Adopted in 2020 | |||||||||||
|
Changes to the Disclosure Requirements for Fair Value Measurements |
|
| The amended guidance modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements. The amendments are a result of the disclosure framework project that focuses on improvements to the effectiveness of disclosures in the notes to financial statements. The amendments remove, modify, and add certain disclosure requirements. The disclosure requirements |
|
|
January 1, 2020
|
|
|
The Company adopted the amended guidance effective January 1, 2020. A prospective transition method is being used for the amendments relating to disclosures being added under the guidance. Such disclosures relate to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty. All other amendments relating to removing or modifying certain disclosures |
| |
|
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
|
|
|
The amended guidance requires a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize and which costs to expense. |
|
|
January 1, 2020
|
|
|
The Company adopted the amended guidance effective January 1, 2020 using a prospective transition method. The impact of the guidance on the Company’s consolidated financial statements |
| |
| Improvements to Related Party Guidance for VIEs |
|
| The amended guidance requires that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. |
|
| January 1, 2020
|
|
| The guidance did not have a material impact on the Company’s consolidated financial statements. |
|
- 4248 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. Recent accounting developments, continued
|
Standard |
|
|
Description |
|
| Required date of adoption |
|
|
Effect on consolidated financial statements |
|
|
Standards Not Yet Adopted as of |
| |||||||||
|
Changes to the Disclosure Requirements for Defined Benefit Plans |
|
|
The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The disclosure requirements being removed relating to public companies are (1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, (2) the amount and timing of plan assets expected to be returned to the employer, (3) the 2001 disclosure requirement relating to Japanese Welfare Pension Insurance Law, (4) related party disclosures about the amount of future annual benefits covered by insurance, and (5) the effects of a one-percentage-point change in assumed health care cost trends on the benefit cost and obligation. The disclosure requirements being added relating to public companies are (1) the weighted-average interest crediting rates for cash balance plans , and (2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. |
|
|
January 1, 2021
Early adoption permitted |
|
|
The amendments should be applied retrospectively. The Company does not expect the guidance to have a material impact on its consolidated financial statements. |
|
|
Clarifying the Interactions Between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging |
|
|
The amendments clarify the following guidance: 1. That an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in the equity securities investments guidance immediately before applying or upon discontinuing the equity method of accounting. 2. For the purpose of applying the derivatives and hedging guidance an entity should not consider whether, upon the settlement of a forward contract or exercise of a purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method of accounting or the fair value option in accordance with the financial instruments guidance. An entity also would evaluate the remaining characteristics in the derivatives and hedging guidance to determine the accounting for those forward contracts and purchased options. |
|
|
January 1, 2021
Early adoption permitted |
|
|
The amendments should be applied on a prospective basis. The Company does not expect the guidance will have a material impact on its consolidated financial statements. |
|
- 4349 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. Recent accounting developments, continued
|
Standard |
|
|
Description |
|
| Required date of adoption |
|
|
Effect on consolidated financial statements |
|
|
Standards Not Yet Adopted as of |
| |||||||||
| Simplifying the Accounting for Income Taxes |
|
|
The amendments remove the following exceptions for accounting for income taxes: 1. Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income) 2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment 3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary 4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.
The amendments also simplify the accounting for income taxes by doing the following: 1. Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax. 2. Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. 3. Specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority. 4. Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. 5. Making minor Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. |
|
| January 1, 2021
Early adoption permitted |
|
| The amendments related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. Early adoption of the amendments in an interim period would require recognition of any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an early adoption election would require adoption of all the amendments in the same period. The Company |
|
- 4450 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. Recent accounting developments, continued
|
Standard |
|
|
Description |
|
| Required date of adoption |
|
|
Effect on consolidated financial statements |
|
|
Standards Not Yet Adopted as of |
| |||||||||
| Reference Rate Reform |
|
| The amendments provide optional expedients and exceptions for applying relationships, and other transactions affected by reference rate reform. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments (1) apply to contract modifications that replace a reference rate affected by reference rate reform, (2) provide exceptions to existing guidance related to changes to the critical terms of a hedging relationship due to reference rate reform (3) provide optional expedients for fair value hedging relationships, cash flow hedging relationships, and net investment hedging relationships, and (4) provide a onetime election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. |
|
| Beginning March 12, 2020 |
|
| The amendments for contract modifications can be elected to be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. The amendments for existing hedging relationships can be elected to be applied as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The Company
|
|
- 51 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. Recent accounting developments, continued
Standard | Description | Required date of adoption | Effect on consolidated financial statements | ||||||||
Standards Not Yet Adopted as of September 30, 2020 | |||||||||||
Changes to Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity | The amendments reduce the number of accounting models for convertible debt instruments and convertible preferred stock. The amendments also reduce form-over-substance-based guidance for the derivatives scope exception for contacts in an entity’s own equity. For convertible instruments, embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate on the instrument. The amendments also require certain changes to EPS calculations for convertible instruments as well as additional disclosures relating to conditions that cause conversion features to be met. For contacts in an entity’s own equity, the amendments revise the derivatives scope exception guidance as follows: 1. Remove the settlement in unregistered shares, collateral, and shareholder rights conditions from the settlement guidance. 2. Clarify that payment penalties for failure to timely file do not preclude equity classification. 3. Require instruments that are required to be classified as an asset or liability to be measured subsequently at fair value, with changes reported in earnings and disclosed in the financial statements. 4. Clarifiy that the scope of the disclosure requirements in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies only to freestanding instruments. 5. Clarify that the scope of the reassessment guidance in the Contracts in an Entity’s Own Equity section of the Derivatives guidance applies to both freestanding instruments and embedded features. | January 1, 2022 Early adoption permitted but no earlier than January 1, 2021 | The amendments can be applied either on a modified retrospective method of transition or a fully retrospective method of transition. In applying the modified retrospective method, the guidance should be applied to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption. If applying the fully retrospective method of transition, the cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented. The fair value option is allowed to be irrevocably elected for any financial instrument that is a convertible security upon adoption of the amendments. The Company has not yet decided on which transition method will be applied to the extent applicable. The Company does not expect the guidance will have a material impact on its consolidated financial statements. |
- 4552 -
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 firstthird quarter of 2020 was $372 million compared with $480 million in the corresponding quarter of $2692019 and $241 million or $1.93in the second quarter of diluted2020. Diluted and basic earnings per common share were $2.75 in the recent quarter, $3.47 in the third quarter of 2019 and $1.74 in the second quarter of 2020. Net income totaled $882 million or $6.42 of diluted and basic earnings per common share during the first nine months of 2020, compared with $483 million$1.44 billion or $3.35$10.16 of diluted and basic earnings per common share in the similar 2019 quarter. During the final quarterperiod of 2019, net income and diluted earnings per common share were $493 million and $3.60, respectively. Basic earnings per common share were $1.93 in the recent quarter, compared with $3.35 and $3.60 in the first and fourth quarters of 2019, respectively. 2019.
The annualized rate of return on average total assets for M&T and its consolidated subsidiaries (“the Company”) in the initial2020’s third quarter of 2020 was .90%1.06%, compared with 1.68%1.58% in the year-earlier quarter and 1.60%.71% in the finalsecond quarter of 2019.2020. The annualized rate of return on average common shareholders’ equity was 7.00%9.53% in the recent quarter, 12.73% in the third quarter of 2019 and 6.13% in the second 2020 quarter. During the nine-month period ended September 30, 2020, the annualized rates of return on average assets and average common shareholders’ equity were .89% and 7.57%, respectively, compared with 13.14%1.62% and 12.85%, respectively, in the corresponding 2019 quarter and 12.95% in 2019’s the fourth quarterfirst nine months of 2019.
Effective January 1, 2020, M&T adopted amended accounting guidance for the measurement of credit losses on financial instruments. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The new accounting guidance replacesreplaced the previous incurred loss model for determining the allowance for credit losses. The adoption of the amended guidance resulted in a $132 million increase in the allowance for credit losses as of January 1, 2020. Additional information on the new accounting guidance is provided under the heading “Provision for Credit Losses” and in note 3 of Notes to Financial Statements.
M&T’sFinancial results for the first quarterthree quarters of 2020 results werehave been adversely impacted by the Coronavirus Disease 2019 (“COVID-19”) pandemic, as the United States operates under a state of emergency. Economic forecastspandemic. Large portions of the impactU.S. economy were substantially curtailed for extended periods of COVID-19time and, as ofa result, many commercial and consumer customers were adversely impacted. Specifically, those adverse economic impacts, coupled with the end of the recent quarteraccounting change noted previously, resulted in the Company recognizing significantly higher estimates of expectedprovisions for credit losses in M&T’s loan portfolioduring the first three quarters of 2020 as compared with that estimated as of January 1, 2020. While the full impact of COVID-19 on M&T’s future financial results is uncertain and not currently estimable, M&T believes that impact could be material. Aprevious years. The provision for credit losses ofin the recent quarter was $150 million, compared with $325 million in the second 2020 quarter, $250 million was recorded in the first quarter of 2020.2020 and $45 million in the third quarter of 2019. For the nine-month periods ended September 30, 2020 and 2019, the provision totaled $725 million and $122 million, respectively. The 2020 periods reflect the new accounting guidance for the measurement of expected credit losses on financial instruments. Prior to 2020, the provision for credit losses reflected incurred losses only. In response to the pandemic, the Federal Reserve has taken action to lower interest rates that has negatively affected the Company’s net interest income. Taxable-equivalent net interest income totaled $947 million and $961 million in the third and second quarters of 2020, respectively, compared with $1.04 billion in the third quarter of 2019. For the first nine months of each year, taxable-equivalent net interest income was $2.89 billion in 2020 and $3.14 billion in 2019.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Among other things, the CARES Act provides relief to borrowers, including the opportunity to defer loan payments while not negatively affecting their credit standing, and also provides funding opportunities for small businesses under the Paycheck Protection Program (“PPP”) from approved Small Business Administration (“SBA”) lenders, including M&T Bank, which is one of the top ten SBA lenders in the country.Bank. For commercial and consumer customers, M&Tthe Company has provided a host of relief options, including loan maturity extensions, payment deferrals, fee waivers and low interest rate loan products. On April 6,M&T Bank funded PPP loans during 2020 M&T provided an online application solution for small business customers and began accepting loan applications under the PPP.that totaled $6.5 billion at September 30, 2020.
While the updatedUpdated economic forecasts at the end of each of the first quarterthree quarters of 2020 resulted in higher estimates of expected credit losses in the Company’s loan portfolio than at January 1, 2020, resulting in a significant increase inhigher levels of the provision for credit losses in each of those quarters as compared with the comparable 2019 periods. Specifically, for
- 53 -
the third quarter of 2020, the level of the provision reflects the ongoing impacts of the pandemic on economic activity in the hospitality and retail sectors, the uncertainty at September 30, 2020 coming from Washington, D.C. over providing additional stimulus to the economy, and concerns about ultimate collectibility of commercial real estate loans where the borrowers are requesting re-payment forbearance. The Company expects that it will continue to be negatively impacted by the COVID-19 pandemic after March 31, 2020. The CompanySeptember 30, 2020 and believes that the COVID-19 pandemic could have a material impact on its future financial results. Specifically, the Company expects the following balance sheet and income statement categories to be affected:
|
|
| • | Net interest income and net interest margin |
- 46 -
| • | Provision for credit losses – although the economy has seen some signs of recovery during the recent quarter, it is possible that deteriorating economic assumptions used to calculate the allowance for credit losses at the end of future reporting periods could result in continued higher levels of the provision and allowance for credit |
| • |
|
| • |
|
The national effort to mitigate the pandemic has resulted in a widespread and deep contraction of the economy, challenging environment for businesses and their employees. The Company has taken actions designed to help provide a safe environment for its customers and employees and to provide relief to customers in a variety of ways. Examples of those actions include:
| • | The deployment of a Pandemic Response Plan to manage the pandemic’s effects on operations, employees and customers, including seeking to ensure employee safety, |
| • | Nearly all M&T Bank branches remain open, with |
| • | Approximately 90% of the Company’s non-branch employees |
| • |
|
| • | Commercial – |
| • | Residential real estate – |
| • | Consumer – including automobile, recreational finance, home equity lines and loans, credit cards and personal loans – |
| • | Paycheck Protection Program – |
- 54 -
| • | Waiving |
DuringNotable events reflected in the Company’s financial results for the first quarternine months of 2019 included the Company increased its reserve for legal matters by $50 million in conjunction with matters associated with a subsidiary’s role as trustee of Employee Stock Ownership Plans in its Institutional Client Services business. That increase, on an after-tax basis, reduced net income in that quarter by $37 million, or $.27 of diluted earnings per common share. Also during that quarter, M&T realized $37 million of distributed income from Bayview Lending Group LLC (“BLG”), increasing net income by $28 million, or $.20 of diluted earnings per common share. A similar distribution of $23 million was received in the first quarter of 2020, increasing net income by $17 million, or $.13 of diluted earnings per common share.following:
- 47 -
| • | In July 2019, M&T agreed to sell its non-controlling interest in an asset manager obtained in the 2011 acquisition of Wilmington Trust Corporation that had been accounted for using the equity method of accounting and, as a result, as of June 30, 2019 recorded a $48 million charge (reflected in “other costs of operations”) to reduce the carrying value of the investment to its net realizable value. Similar to other active investment managers, the investee entity had experienced a decrease in assets under management and during the second quarter of 2019 the entity’s chief executive and investment officer announced his retirement. Following that announcement, successor management submitted a proposal to M&T to restructure the organization of the entity. The after-tax impact of the charge was a reduction in net income of $36 million, or $.27 of diluted earnings per common share in the second quarter of 2019. The sale of M&T’s interest in the asset manager was effective September 30, 2019. |
• | During the first quarter of 2019, the Company increased its reserve for legal matters by $50 million in conjunction with matters associated with a subsidiary’s role as trustee of Employee Stock Ownership Plans in its Institutional Client Services business. That increase, on an after-tax basis, reduced net income in that quarter by $37 million, or $.27 of diluted earnings per common share. Also during that quarter, M&T realized $37 million of distributed income from Bayview Lending Group LLC (“BLG”), increasing net income by $28 million, or $.20 of diluted earnings per common share. A similar distribution of $23 million was received in the first quarter of 2020, increasing net income by $17 million, or $.13 of diluted earnings per common share. |
Supplemental Reporting of Non-GAAP Results of Operations
M&T consistently provides supplemental reporting of its results on a “net operating” or “tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and expenses associated with merging acquired operations (when incurred) into the Company, since such items are considered by management to be “nonoperating” in nature. Although “net operating income” as defined by M&T is not a GAAP measure, M&T’s management believes that this information helps investors understand the effect of acquisition activity in reported results.
Net operating income aggregated $272totaled $375 million in the first three monthsthird quarter of 2020, compared with $486$484 million in the similar 2019 period.year-earlier quarter. Diluted net operating earnings per common share forin the third quarters of 2020 and 2019 were $2.77 and $3.50, respectively. Net operating income and diluted net operating earnings per share were $244 million and $1.76, respectively, in the second quarter of 2020.For the first quarternine months of 2020, were $1.95, compared with $3.38 in the initial 2019 quarter. Netnet operating income and diluted net operating earnings per common share were $496$891 million and $3.62,$6.49, respectively, compared with $1.45 billion and $10.24, respectively, in the fourth quarter of 2019.corresponding 2019 period.
Net operating income in the recent quarter expressed as an annualized rate of return on average tangible assets was 0.94%1.10%, compared with 1.76% and 1.67%1.66% in the first and fourth quartersthird quarter of 2019 respectively.and .74% in the 2020’s second quarter. Net operating income represented an annualized return on average tangible common equity of 10.39%13.94% in the recentthird quarter compared with 19.56%of 2020, 18.85% in the year-earlier quarter and 19.08%9.04% in the final 2019 quarter. second quarter of 2020. For the first three quarters of 2020, net operating income represented an annualized return on average tanglibe assets and average tanglible common shareholders’ equity of .93% and 11.15%, respectively, compared with 1.70% and 19.07%, respectively, in the first nine months of 2019.
Reconciliations of GAAP amounts with corresponding non-GAAP amounts are provided in table 2.
- 55 -
Taxable-equivalent Net Interest Income
Taxable-equivalent net interest income was $982$947 million in the initialthird quarter of 2020, compared with $1.06$1.04 billion in the first quarter of 2019.year-earlier quarter. That decline resulted predominantly from a 39an 83 basis point (hundredths of one percent) narrowing of the net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, to 3.65%2.95% in the recent quarter from 4.04%3.78% in the corresponding 2019 quarter.third quarter of 2019. The narrowing inof the net interest margin was largely the result of declines in rates earned on loans and deposits at the Federal Reserve Bank of New York, reflecting the lower interest rate environment due to actions initiated by the Federal Reserve to decrease its target Federal funds rate three times in the second half of 2019 (each by a .25% increment) and twice in March of 2020 (first by .50%, than another by 1.0%). The impact of the recent quarter’s lower net interest margin on net interest income was partially offset by an increase in average earning assets of $2.1$19.0 billion from the year-earlier quarter. The increase in average earning assets in the recent quarter reflecting growth inas compared with the third quarter of 2019 resulted from higher average balances of loans and leases and interest-bearing deposits at banks and short-term agreements to resell securities. Those increases werethe Federal Reserve Bank of New York, partially offset by a decline inlower average balances of investment securities.securities balances. Taxable-equivalent net interest income in the recent quarter declined $32$14 million, or 3%1%, from the fourthsecond quarter of 20192020 primarily due todriven by an 18 basis point narrowing of the net interest margin from 3.13% in the prior quarter, partially offset by a $2.4$4.2 billion or 2% decreaserise in average earning assets. The lower earning assets were predominantly due
For the first nine months of 2020, taxable-equivalent net interest income was $2.89 billion, down 8% from $3.14 billion in the corresponding 2019 period. That decrease was primarily attributable to declinesa 69 basis point narrowing of the margin to 3.22% in average balances of interest-bearing deposits at banks and investment securities,the 2020 period from 3.91% in the year-earlier period, partially offset by a rise$12.4 billion increase in average outstanding loans. The recent quarter’s net interest margin was little changed from 3.64% in the final 2019 quarter.earning assets.
Average loans and leases totaled $91.7$98.2 billion in the recentthird quarter of 2020, up $3.2$8.1 billion or 4%9% from $88.5$90.1 billion in the firstsimilar quarter of 2019. Commercial loans and leases averaged $24.3$28.3 billion in the firstthird quarter of 2020, $1.3$5.0 billion or 6%21% higher than in the year-earlier quarter. Commercial loan and lease balances at March 31, 2020 totaled $26.2That increase was the result of average outstanding PPP loans of $6.5 billion up 14% from $23.1 billion a year earlier. During late March, the Company’s commercial customers began drawing on available lines of credit for liquidity purposes as the pandemic was expanding in scope. Those draws, which totaled approximately $2 billion, are expected to have a more significant effect on average balancesthat were predominantly funded in the second quarter of 2020, to the extent such loans amounts remain outstanding.2020. Average commercial real estate loans were $36.0$37.2 billion in the recent quarter, up $1.5$2.0 billion, or 4%6%, from $34.5$35.2 billion in the initial quarter of 2019.similar 2019 quarter. Included in average commercial real estate loans in the firstthird quarters of 2020 and 2019 were loans held for sale of $185$260 million and $280$492 million, respectively. Reflecting the offsetting impacts of ongoing repayments of loans obtained inby customers and repurchases of government-guaranteed loans from Ginnie Mae pools that are serviced by the 2015 acquisition of Hudson City Bancorp, Inc. (“Hudson City”),Company, average residential real estate loans declined $1.0 billion$115 million or 6%1% to $15.9$16.6 billion in the first three monthsthird quarter of 2020 from $16.9$16.7 billion in the year-earlier quarter. IncludedThe Company repurchases government-guaranteed loans to reduce associated servicing costs, namely a requirement to advance principal and interest payments that had not been received from individual mortgagors, including payments deferred under COVID-19 forbearance arrangements. The loans repurchased from Ginnie Mae pools averaged $2.1 billion in the recent quarter, including $1.6 billion of repurchases during the quarter, up from $889 million in the year-earlier period. Also included in average residential real estate loans were loans held for sale of $409$494 million in the recent quarter and $166$327 million in the firstthird quarter of 2019. Consumer loans averaged $15.5$16.1 billion in the firstthird quarter of 2020, up $1.4$1.2 billion, or 10%8%, from $14.0$14.9 billion in the initial 2019year-earlier quarter, predominantly due to growth in average recreational finance
- 48 -
(consisting loans (consisting predominantly of loans secured by recreational vehicles and boats) and, to a lesser extent, automobile loans that was partially offset by declines in outstanding balances of home equity loans and lines of credit.
- 56 -
Average loan and lease balances in the firstthird quarter of 2020 increased $1.5 billion, or 2%,$413 million from $90.2$97.8 billion in the fourthsecond quarter of 2019. Average commercial2020. Commercial loan and lease average balances in the recent quarter were up $742 million,down $1.4 billion, or 3%5%, from $23.5$29.7 billion in the fourthsecond quarter of 2019.2020. That decline was due to lower outstanding balances of floor plan inventory loans to dealers that were largely seasonal in nature. Average commercial real estate loans in the firstthird quarter of 2020 increased $1.0 billion, or 3%,$296 million from $35.0$36.9 billion in the fourthsecond quarter of 2019.2020. Commercial real estate loans held for sale averaged $201$287 million in the fourthsecond quarter of 2019.2020. Average balances of residential real estate loans in the initial 2020recently completed quarter declined $399rose $958 million, or 2%6%, from $16.3$15.6 billion in the fourth2020’s second quarter, of 2019,predominantly reflecting the continued pay downrepurchases of government guaranteed loans obtainedof $1.6 billion. The repurchased loans averaged $2.1 billion in 2020’s third quarter, compared with $774 million in the acquisition of Hudson City.immediately preceding quarter. Residential real estate loans held for sale averaged $382$406 million in the final 2019 quarter.second quarter of 2020. Average consumer loans in the recent quarter increased $124$558 million, or 1%4%, from $15.3$15.5 billion in 2019’s fourth quarter.2020’s second quarter, reflecting growth in recreational finance loans. The accompanying table summarizes quarterly changes in the major components of the loan and lease portfolio.
AVERAGE LOANS AND LEASES
(net of unearned discount)
|
|
|
|
|
| Percent Increase |
|
|
|
|
|
|
| Percent Increase |
|
| ||||||||||
|
|
|
|
|
| (Decrease) from |
|
|
|
|
|
|
| (Decrease) from |
|
| ||||||||||
|
| 1st Qtr. |
|
| 1st Qtr. |
|
| 4th Qtr. |
|
|
| 3rd Qtr. |
|
| 3rd Qtr. |
|
| 2nd Qtr. |
|
| ||||||
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| ||||||
|
| (In millions) |
|
|
|
|
|
|
|
|
|
|
| (In millions) |
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, etc. |
| $ | 24,290 |
|
|
| 6 |
| % |
| 3 |
| % |
| $ | 28,333 |
|
|
| 21 |
| % |
| (5 | ) | % |
Real estate — commercial |
|
| 36,034 |
|
|
| 4 |
|
|
| 3 |
|
|
|
| 37,243 |
|
|
| 6 |
|
|
| 1 |
|
|
Real estate — consumer |
|
| 15,931 |
|
|
| (6 | ) |
|
| (2 | ) |
|
|
| 16,558 |
|
|
| (1 | ) |
|
| 6 |
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational finance |
|
| 5,661 |
|
|
| 34 |
|
|
| 4 |
|
|
|
| 6,696 |
|
|
| 32 |
|
|
| 11 |
|
|
Home equity lines and loans |
|
| 4,412 |
|
|
| (8 | ) |
|
| (3 | ) |
|
|
| 4,153 |
|
|
| (10 | ) |
|
| (3 | ) |
|
Automobile |
|
| 3,940 |
|
|
| 7 |
|
|
| 2 |
|
|
|
| 3,831 |
|
|
| 1 |
|
|
| — |
|
|
Other |
|
| 1,438 |
|
|
| 11 |
|
|
| (1 | ) |
|
|
| 1,396 |
|
|
| — |
|
|
| — |
|
|
Total consumer |
|
| 15,451 |
|
|
| 10 |
|
|
| 1 |
|
|
|
| 16,076 |
|
|
| 8 |
|
|
| 4 |
|
|
Total |
| $ | 91,706 |
|
|
| 4 |
| % |
| 2 |
| % |
| $ | 98,210 |
|
|
| 9 |
| % |
| — |
| % |
For the first nine months of 2020, average loans and leases totaled $95.9 billion, up 7%, from $89.2 billion in the corresponding 2019 period. Contributing to the rise were a $4.2 billion increase in average commercial loan and lease balances (due largely to PPP loans), a $1.9 billion increase in average commercial real estate loans and a $1.3 billion increase in average consumer loan balances, partially offset by a $746 million decline in average residential real estate loan balances.
The investment securities portfolio averaged $9.1$7.9 billion in the firstthird quarter of 2020, down $3.8$3.2 billion, or 30%29%, from $12.9$11.1 billion in the year-earlier quarter and $942$624 million lower than the $10.0$8.5 billion averaged in the fourthsecond quarter of 2019. The2020. For the first nine months of 2020 and 2019, investment securities averaged $8.5 billion and $12.1 billion, respectively. As compared with the 2019 periods, the lower average balances in the two most recent quarters as compared with the first quarter of 2019three-month and nine-month periods ended September 30, 2020 reflect maturities of U.S. Treasury notes and pay downs of mortgage-backed securities. The decline from the second to the third quarter of 2020 resulted from pay downs of mortgage-backed securities. There were no significant sales of investment securities during the first nine months of 2020 or 2019. During the first quarter of 2019, the Company purchased $500 million of U.S. Treasury notes. There were no other significant purchases of investment securities during the first quarternine months of 2020 or the fourth quarter of 2019. There were no significant sales of investment securities during the three-month periods ended March 31, 2020, March 31, 2019 or December 31, 2019. The Company routinely has increases and decreases in its holdings of capital stock of the Federal Home Loan Bank of New York and the Federal Reserve Bank of New York. Those holdings are accounted for at cost and are adjusted based on amounts of outstanding borrowings and available lines of credit with those entities.
The investment securities portfolio is predominantly comprised of residential mortgage-backed securities, short term U.S. Treasury and federal agency notes, and certain other debt and marketable equity securities. Investment
- 57 -
securities also include capital stock of the Federal Home Loan Bank of New York and the Federal Reserve Bank of New York. When purchasing investment securities, the Company considers its liquidity position and its overall interest-rate risk profile as well as the adequacy of expected returns relative to risks assumed, including prepayments. The Company may occasionally sell investment securities as a result of changes in interest rates and spreads, actual or anticipated prepayments, credit risk associated with a particular security, or as a result of restructuring its investment securities portfolio in connection with a business combination. The amounts of investment securities held by the Company are influenced by factors such as demand for loans, which generally yield
- 49 -
more than investment securities and other earning assets, ongoing repayments, the levels of deposits, and management of liquidity and balance sheet size and resulting capital ratios.
Fair value changes in equity securities with readily determinable fair values are recognized in the consolidated statement of income. Net unrealized lossesgains on such equity securities were $3 million in the recent quarter, compared with $4 million in the third quarter of 2019 and $7 million in the second 2020 quarter. Net unrealized losses on equity securities were $11 million during the first quarternine months of 2020, and final quarter of 2019 were $21 million and $6 million, respectively, compared with net unrealized gains of $12$24 million duringin the first quarter of 2019.prior year period. Those gains and losses were predominantly related to the Company’s holdings of Fannie Mae and Freddie Mac preferred stock.
The Company regularly reviews its debt investment securities for declines in value below amortized cost that might be indicative of credit-related losses. In light of such reviews, there were no credit-related losses on debt investment securities recognized in either of the first quarters ofnine-month periods ended September 30, 2020 or 2019 or in the final 2019 quarter.2019. Based on management’s assessment of future cash flows associated with individual investment securities as of March 31,September 30, 2020, the Company did not expect to incur any material credit-related losses in its portfolios of debt investment securities. A further discussion of fair values of investment securities is included herein under the heading “Capital.” Additional information about the investment securities portfolio is included in notes 2 and 11 of Notes to Financial Statements.
Other earning assets include interest-bearing deposits at the Federal Reserve Bank of New York and other banks, trading account assets, federal funds sold and agreements to resell securities. Those other earning assets in the aggregate averaged $7.4$21.6 billion in the recently completedthird quarter of 2020, compared with $4.7$7.5 billion in the firstyear-earlier quarter of 2019 and $10.3$17.2 billion in the finalsecond quarter of 2019.2020. Interest-bearing deposits at banks averaged $6.1$16.4 billion, $4.6$7.4 billion and $8.9$16.5 billion duringfor the three-month periodsthree months ended March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019,June 30, 2020, respectively. The amounts of interest-bearing deposits at banks at the respective dates were predominantly comprised of deposits held at the Federal Reserve Bank of New York. The levels of those deposits often fluctuate due to changes in trust-related deposits and other deposits of commercial entities, purchases or maturities of investment securities, or borrowings to manage the Company’s liquidity. The higher amount at September 30, 2020 and June 30, 2020 as compared with the prior year period reflects the impact of increased commercial and consumer deposit balances. Agreements to resell securities averaged $5.1 billion, $18 million and $692 million during the quarters ended September 30, 2020, September 30, 2019 and June 30, 2020, respectively.The higher average balance in the recent quarter also reflects the impact of increased customer deposit levels.
As a result of the changes described herein, average earning assets totaled $108.2$127.7 billion in the most recentthird quarter of 2020, compared with $106.1 billion and $110.6$108.6 billion in the year-earlier quarter and $123.5 billion in the second 2020 quarter. Average earning assets totaled $119.8 billion and $107.4 billion during the first nine months of 2020 and fourth quarter of 2019, respectively.
The most significant source of funding for the Company is core deposits. The Company considers noninterest-bearing deposits, interest-bearing transaction accounts, savings deposits and time deposits of $250,000 or less as core deposits. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Average core deposits totaled $90.9$110.6 billion in the firstthird quarter of 2020, $6.1 billion or 7% above $84.8compared with $88.8 billion in the year-earliersimilar 2019 quarter. The increase in average core deposits in the recent quarter as compared with the third quarter of 2019 reflected higher balances of noninterest-bearing deposits and savings and interest-checking deposits. Average balances of savings and interest-checking core deposits rose $4.4$8.7 billion or 9%16% to $53.6$61.7 billion in the initialthird 2020 quarter from $49.2$53.0 billion in the year-earlier quarter. That increase was predominantly due to higher residential mortgage escrow deposits resulting from additions to the Company’s servicing and sub-servicing portfolios in 2019 and higher commercial deposits. Average noninterest-bearing deposits increased $2.1$14.2 billion or 7%47% to $32.5$44.8 billion in the recent quarter from $30.3$30.6 billion in the firstthird 2019 quarter. The recent quarter rise in average noninterest-bearing deposits wasThose increases were largely due to higher trust andaverage deposits of commercial
- 58 -
customers, but also reflect higher levels of consumer deposits and deposits associated with residential mortgage escrow deposits. As noted earlier, in late March commercial customers drew down available lines of credit for liquidity purposes. A large portion of those fundsservicing activities. Average core deposits were deposited in customer deposit accounts at M&T Bank. The impact of those additional deposits is expected to have a more significant effect on average deposit account balances$106.1 billion in the second quarter of 2020, to the extent such amounts remain on deposit with the Company. Average core deposits were $91.5 billion in the fourth quarter of 2019.2020. Average savings and interest-checking core deposits declined $756 millionincreased $2.7 billion or 1%5% in the initialthird 2020 quarter from $54.4$59.0 billion in the immediately preceding quarter. That decline reflected lower average commercial and mortgage escrow deposits. Average noninterest-bearing deposits in the recent quarter were $387 million$2.3 billion or 1 % above5% higher than the fourthsecond quarter 2020 average of $32.1$42.5 billion predominantly due to higher trust-related deposits.deposits of commercial customers as liquidity and economic concerns result in continued deposit rentention by clients. The following table provides an analysis of quarterly changes in the components of average core deposits.
- 50 -
AVERAGE CORE DEPOSITS
|
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|
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|
|
|
|
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|
|
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|
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| Percent Increase |
|
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|
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|
|
| Percent Increase |
|
| ||||||||||
|
|
|
|
|
| (Decrease) from |
|
|
|
|
|
|
| (Decrease) from |
|
| ||||||||||
|
| 1st Qtr. |
|
| 1st Qtr. |
|
| 4th Qtr. |
|
|
| 3rd Qtr. |
|
| 3rd Qtr. |
|
| 2nd Qtr. |
|
| ||||||
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| ||||||
|
| (In millions) |
|
|
|
|
|
|
|
|
|
|
| (In millions) |
|
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Savings and interest-checking deposits |
| $ | 53,648 |
|
|
| 9 |
| % |
| (1 | ) | % |
| $ | 61,664 |
|
|
| 16 |
| % |
| 5 |
| % |
Time deposits |
|
| 4,800 |
|
|
| (9 | ) |
|
| (5 | ) |
|
|
| 4,103 |
|
|
| (22 | ) |
|
| (11 | ) |
|
Noninterest-bearing deposits |
|
| 32,456 |
|
|
| 7 |
|
|
| 1 |
|
|
|
| 44,786 |
|
|
| 47 |
|
|
| 5 |
|
|
Total |
| $ | 90,904 |
|
|
| 7 |
| % |
| (1 | ) | % |
| $ | 110,553 |
|
|
| 24 |
| % |
| 4 |
| % |
The Company also receives funding from other deposit sources, including branch-related time deposits over $250,000, deposits associated with the Company’s Cayman Islands office and brokered deposits. Time deposits over $250,000, excluding brokered deposits, averaged $872$612 million in the recent quarter, compared with $1.0$1.1 billion in the firstthird quarter of 2019 and $956$733 million in the final 2019second 2020 quarter. The decreases in such deposits since the firstthird quarter of 2019 were predominantly the result of maturities of higher-rate time deposits. Cayman Islands office deposits averaged $1.7$1.0 billion infor each of the first quarter ofquarters ended September 30 and June 30, 2020, and the final quarter of 2019, compared with $972 million in$1.5 billion for the initial 2019 quarter.quarter ended September 30, 2019. The increasesdecreases in such deposits in the two most recent quarters as compared with the firstthird quarter of 2019 were the result of customers’ desire to sweep their deposit balances into higher earning products. However, balances of Cayman Islands office deposits at March 31, 2020 declined to $1.2 billion from $1.7 billion at December 31, 2019, largely reflectingreflect customer reaction to the declines in short-term interest rates that followed actions by the Federal Reserve in March 2020. The Company had brokered savings and interest-bearing transaction accounts, which in the aggregate averaged $2.7$4.2 billion during each of the firstrecent quarter, of 2020 andcompared with $2.6 billion in the fourththird quarter of 2019 and $2.9$4.0 billion in the firstsecond quarter of 2019.2020. The amounts of Cayman Islands office deposits or brokered deposits is largely dependent on demand by customers and other investors for those types of deposit products.
- 5159 -
The table below summarizes average total deposits for the quarters ended March 31,September 30, 2020, December 31, 2019June 30, 2020 and March 31,September 30, 2019.
AVERAGE DEPOSITS
|
| Retail |
|
| Trust |
|
| Commercial and Other |
|
| Total |
|
| Retail |
|
| Trust |
|
| Commercial and Other |
|
| Total |
| ||||||||
|
| (In millions) |
|
| (In millions) |
| ||||||||||||||||||||||||||
Three Months Ended March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Three Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Savings and interest-checking deposits |
| $ | 26,920 |
|
| $ | 6,181 |
|
| $ | 23,265 |
|
| $ | 56,366 |
|
| $ | 29,902 |
|
| $ | 5,323 |
|
| $ | 30,623 |
|
| $ | 65,848 |
|
Time deposits |
|
| 5,265 |
|
|
| 52 |
|
|
| 355 |
|
|
| 5,672 |
|
|
| 4,452 |
|
|
| 49 |
|
|
| 214 |
|
|
| 4,715 |
|
Noninterest-bearing deposits |
|
| 5,661 |
|
|
| 5,080 |
|
|
| 21,715 |
|
|
| 32,456 |
|
|
| 6,977 |
|
|
| 5,408 |
|
|
| 32,401 |
|
|
| 44,786 |
|
Deposits at Cayman Islands office |
|
| — |
|
|
| — |
|
|
| 1,672 |
|
|
| 1,672 |
|
|
| — |
|
|
| — |
|
|
| 957 |
|
|
| 957 |
|
Total |
| $ | 37,846 |
|
| $ | 11,313 |
|
| $ | 47,007 |
|
| $ | 96,166 |
|
| $ | 41,331 |
|
| $ | 10,780 |
|
| $ | 64,195 |
|
| $ | 116,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2019 |
|
|
| |||||||||||||||||||||||||||||
Three Months Ended June 30, 2020 |
|
|
| |||||||||||||||||||||||||||||
Savings and interest-checking deposits |
| $ | 26,445 |
|
| $ | 6,532 |
|
| $ | 24,126 |
|
| $ | 57,103 |
|
| $ | 28,665 |
|
| $ | 5,524 |
|
| $ | 28,738 |
|
| $ | 62,927 |
|
Time deposits |
|
| 5,566 |
|
|
| 53 |
|
|
| 396 |
|
|
| 6,015 |
|
|
| 5,051 |
|
|
| 51 |
|
|
| 252 |
|
|
| 5,354 |
|
Noninterest-bearing deposits |
|
| 5,409 |
|
|
| 4,672 |
|
|
| 21,988 |
|
|
| 32,069 |
|
|
| 6,570 |
|
|
| 5,369 |
|
|
| 30,558 |
|
|
| 42,497 |
|
Deposits at Cayman Islands office |
|
| — |
|
|
| — |
|
|
| 1,716 |
|
|
| 1,716 |
|
|
| — |
|
|
| — |
|
|
| 1,017 |
|
|
| 1,017 |
|
Total |
| $ | 37,420 |
|
| $ | 11,257 |
|
| $ | 48,226 |
|
| $ | 96,903 |
|
| $ | 40,286 |
|
| $ | 10,944 |
|
| $ | 60,565 |
|
| $ | 111,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
| ||||||||||||||||
Savings and interest-checking deposits |
| $ | 27,279 |
|
| $ | 6,360 |
|
| $ | 18,456 |
|
| $ | 52,095 |
|
| $ | 26,535 |
|
| $ | 6,627 |
|
| $ | 22,518 |
|
| $ | 55,680 |
|
Time deposits |
|
| 5,792 |
|
|
| 42 |
|
|
| 517 |
|
|
| 6,351 |
|
|
| 5,762 |
|
|
| 52 |
|
|
| 529 |
|
|
| 6,343 |
|
Noninterest-bearing deposits |
|
| 5,214 |
|
|
| 3,979 |
|
|
| 21,122 |
|
|
| 30,315 |
|
|
| 5,370 |
|
|
| 4,016 |
|
|
| 21,164 |
|
|
| 30,550 |
|
Deposits at Cayman Islands office |
|
| — |
|
|
| — |
|
|
| 972 |
|
|
| 972 |
|
|
| — |
|
|
| — |
|
|
| 1,522 |
|
|
| 1,522 |
|
Total |
| $ | 38,285 |
|
| $ | 10,381 |
|
| $ | 41,067 |
|
| $ | 89,733 |
|
| $ | 37,667 |
|
| $ | 10,695 |
|
| $ | 45,733 |
|
| $ | 94,095 |
|
The Company also uses borrowings from banks, securities dealers, various Federal Home Loan Banks, the Federal Reserve Bank of New York and others as sources of funding. Short-term borrowings represent borrowing arrangements that at the time they were entered into had a contractual maturity of one year or less. Average short-term borrowings totaled $58$62 million in the initialthird quarter of 2020, quarter, compared with $1.1$1.2 billion in the year-earlier quarter and $675$63 million in the finalsecond quarter of 2019. Short-term2020. In general, the higher short-term borrowings from Federal Home Loan Banks averaged $718 million in the first quarter of 2019 and $548 million in the fourth quarter of 2019. Thereprior year period were no such borrowings outstanding in the initial 2020 quarter.entered into for liquidity management purposes.
Long-term borrowings averaged $6.2$5.5 billion in the recent quarter, compared with $8.5 billion and $6.9$7.1 billion in the first and fourth quartersthird quarter of 2019 respectively.and $6.2 billion in the second quarter of 2020. Average balances of outstanding senior notes were $4.2$3.5 billion, $5.5$5.1 billion and $4.9$4.1 billion during the three months ended March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019,June 30, 2020, respectively. On January 7, 2020, M&T Bank, the principal bank subsidiary of M&T, redeemed $750 million of fixed rate senior notes that were due to mature on February 6, 2020. Also included in average long-term borrowingsIn addition, M&T Bank redeemed $750 million of fixed rate senior notes on July 17, 2020 that were amounts borrowed from the Federal Home Loan Banks of New York and Pittsburgh of $2 million in each of the two most recent quarters and $576 million during the first quarter of 2019.due to mature on August 17, 2020. Subordinated capital notes included in long-term borrowings averaged $1.4 billion in each of the three-month periods ended March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019.June 30, 2020. Junior subordinated debentures associated with trust preferred securities that were included in average long-term borrowings were $525$527 million, in each of the three-month periods ended March 31, 2020$524 million and December 31, 2019 and $522$526 million during the initial three monthsthird quarters of 2019.2020 and 2019 and the second 2020 quarter, respectively. Additional information regarding junior subordinated debentures is provided in note 4 of Notes to Financial Statements. Long-term borrowings also included agreements to repurchase securities, which averaged $101 million in the first quarter of 2020, $408 million in the year-earlier quarter and $102 million in the fourth quarter of 2019. The repurchase agreement held at March 31, 2020 totaled $101 million and matures in July 2020, however, the contractual maturities of the underlying securities extend beyond such repurchase date.
- 52 -
Net interest income can be impacted by 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. Net interest spread, or the difference between the taxable-equivalent yield on earning assets and the rate paid on interest-bearing liabilities, was 3.35%2.83% in the recent quarter, compared with 3.67%3.41% in the initial 2019 quarter.third quarter of 2019. The yield on earning assets during the first three monthsthird quarter of 2020 was 4.18%3.13%, down 53138 basis points from 4.71%4.51% in the similar 2019year-earlier period, while the rate paid on interest-bearing liabilities declined 2180 basis points to .83%.30% in the recent quarter from 1.04%1.10% in the year-earlier period. In the second quarter of 2020, the net interest spread was 2.98%, the yield on earning assets
- 60 -
was 3.38% and the rate paid on interest-bearing liabilities was .40%. The narrowing of the net interest spread in the recent quarterquarters as compared with the corresponding 2019prior year period reflects the impact of the decreases in short-term interest rates initiated by the Federal Reserve during the second half of 2019 and to a lesser degree, in March 2020. InFor the fourth quarterfirst nine months of 2019,2020, the net interest spread was 3.30%3.03%, down 50 basis points from 3.53% in the year-earlier period. The yield on earning assets was 4.27% and the rate paid on interest-bearing liabilities was .97%.for the first nine months of 2020 were 3.53% and .50%, respectively, compared with 4.62% and 1.09% respectively, in the initial nine months of 2019.
Net interest-free funds consist largely of noninterest-bearing demand deposits and shareholders’ equity, partially offset by bank owned life insurance and non-earning assets, including goodwill and core deposit and other intangible assets. Net interest-free funds averaged $38.2$50.6 billion in the first three monthsthird quarter of 2020, compared with $37.1$36.8 billion in the initial 2019year-earlier quarter and $38.1$47.9 billion in the fourth quarter of 2019.second 2020 quarter. The increase in average net interest-free funds in the two most recent quarterquarters as compared with the first quarter of 2019prior year period reflects higher average balances of noninterest-bearing deposits. Those deposits averaged $32.5$44.8 billion, $30.3$30.6 billion and $32.1$42.5 billion in the quarters ended March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019,June 30, 2020, respectively. The rise in such balances in the most recent quarterquarters as compared with the initial quarter of 2019year-earlier period was largely due to increased levels of deposits of commercial customers. During the first nine months of 2020 and trust customers. Partially offsetting the higher2019, average balances of noninterest-bearing deposits in the initial 2020 quarter were increased average balances of mortgage servicing advances.net interest-free funds aggregated $45.6 billion and $36.9 billion, respectively. Shareholders’ equity averaged $15.7$16.1 billion during the three-month period ended March 31,September 30, 2020, $15.6$15.8 billion during the year-earlier period and $16.0 billion during the three-month period ended March 31, 2019 and $15.8 billion during the three-month period ended December 31, 2019.June 30, 2020. Goodwill and core deposit and other intangible assets averaged $4.6 billion in each of the two most recent quarters and in the quarter ended March 31,September 30, 2019. The cash surrender value of bank owned life insurance averaged $1.8 billion in each of the three-month periods ended March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019.June 30, 2020. Increases in the cash surrender value of bank owned life insurance and benefits received are not included in interest income, but rather are recorded in “other revenues from operations.” The contribution of net interest-free funds to net interest margin was .30%.12% in the firstthird quarter of 2020, compared with .37% and .34%.15% in the firstthird quarter of 2019 and fourththe second quarter of 2019,2020, respectively. The reduced contribution of net interest-free funds to net interest margin in the two most recent quarterquarters as compared with the first and fourth quartersthird quarter of 2019 reflects the lower rates on interest-bearing liabilities used to value net interest-free funds. The contribution of net interest-free funds for the first nine months of 2020 and 2019 was .19% and .38%, respectively.
Reflecting the changes to the net interest spread and the contribution of net interest-free funds as described herein, the Company’s net interest margin was 3.65%2.95% in the firstthird quarter of 2020, compared with 4.04%3.78% in the similar 2019year-earlier period and 3.64%3.13% in the fourthsecond quarter of 2019.2020. During the first nine months of 2020 and 2019, the net interest margin was 3.22% and 3.91%, respectively. Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in reductions in spreads, could adversely impact the Company’s net interest income and net interest margin.
Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company has utilized interest rate swap agreements to modify the repricing characteristics of certain portions of its earning assets and interest-bearing liabilities. Periodic settlement amounts arising from these agreements are reflected in either the yields on earning assets or the rates paid on interest-bearing liabilities. The notional amount of interest rate swap agreements entered into for interest rate risk management purposes was $16.4$15.7 billion (excluding $41.8$38.9 billion of forward-starting swap agreements) at March 31,September 30, 2020, $17.8$17.2 billion (excluding $16.4$30.3 billion of forward-starting swap agreements) at March 31,September 30, 2019 and $17.2 billion (excluding $40.4 billion of forward-starting swap agreements) at December 31, 2019. 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. Interest rate swap agreements with notional amounts of $13.35 billion that were in effect at each of March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019 were serving as cash flow hedges of interest payments associated with variable rate commercial real estate loans. At March 31, 2020, March 31, 2019 and December 31, 2019, interestInterest rate swap agreements with notional amounts of $3.05$2.30 billion $4.45 billionat September 30, 2020 and $3.80 billion respectively,at each of September 30, 2019 and December 31, 2019 were serving as fair
- 53 -
value hedges of fixed rate long-term borrowings. The Company has entered into forward-starting interest rate swap agreements predominantly to extend the term of its interest rate swap agreements serving as cash flow hedges, and provide a hedge against changing interest rates on certain of its variable rate loans.
- 61 -
In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and changes in the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the corresponding gain or loss recognized in current earnings. The difference between changes in the fair value of the interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded as an adjustment to the interest income or interest expense of the respective hedged item. In a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the derivative’s gain or loss on cash flow hedges is accounted for similar to that associated with fair value hedges. The amounts of hedge ineffectiveness recognized during each of the quarters ended March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019June 30, 2020 were not material to the Company’s consolidated results of operations. Information regarding the fair value of interest rate swap agreements and hedge ineffectiveness is presented in note 9 of Notes to Financial Statements. The changes in the fair values of the interest rate swap agreements and the hedged items primarily result from the effects of changing interest rates and spreads.
The weighted-average rates to be received and paid under interest rate swap agreements currently in effect were 2.54%2.46% and 1.14%.23%, respectively, at March 31,September 30, 2020. 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 9 of Notes to Financial Statements.
INTEREST RATE SWAP AGREEMENTS
|
| Three Months Ended March 31 |
| Three Months Ended September 30 |
|
| ||||||||||||||||||||||||||||
. |
| 2020 |
|
| 2019 |
|
|
| 2020 |
|
| 2019 |
|
| ||||||||||||||||||||
|
| Amount |
|
| Rate(a) |
|
| Amount |
|
| Rate(a) |
|
|
| Amount |
|
| Rate(a) |
|
| Amount |
|
| Rate(a) |
|
| ||||||||
|
| (Dollars in thousands) |
| (Dollars in thousands) | ||||||||||||||||||||||||||||||
Increase (decrease) in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 32,041 |
|
|
| .12 |
| % | $ | (6,625 | ) |
|
| (.03 | ) | % |
| $ | 82,404 |
|
|
| .26 |
| % | $ | 4,483 |
|
|
| .02 |
| % |
Interest expense |
|
| (3,765 | ) |
|
| (.02 | ) |
|
| 6,385 |
|
|
| .04 |
|
|
|
| (12,312 | ) |
|
| (.06 | ) |
|
| 3,340 |
|
|
| .02 |
|
|
Net interest income/margin |
| $ | 35,806 |
|
|
| .13 |
| % | $ | (13,010 | ) |
|
| (.05 | ) | % |
| $ | 94,716 |
|
|
| .29 |
| % | $ | 1,143 |
|
|
| — |
| % |
Average notional amount (c) |
| $ | 16,650,549 |
|
|
|
|
|
| $ | 12,662,778 |
|
|
|
|
|
|
| $ | 15,780,436 |
|
|
|
|
|
| $ | 17,319,565 |
|
|
|
|
|
|
Rate received (b) |
|
|
|
|
|
| 2.51 |
| % |
|
|
|
|
| 2.28 |
| % |
|
|
|
|
|
| 2.60 |
| % |
|
|
|
|
| 2.39 |
| % |
Rate paid (b) |
|
|
|
|
|
| 1.66 |
| % |
|
|
|
|
| 2.69 |
| % |
|
|
|
|
| .25 |
| % |
|
|
|
|
| 2.37 |
| % |
|
| Nine Months Ended September 30 |
|
| |||||||||||||
|
| 2020 |
|
| 2019 |
|
| ||||||||||
|
| Amount |
|
| Rate(a) |
|
| Amount |
|
| Rate(a) |
|
| ||||
|
| (Dollars in thousands) |
|
| |||||||||||||
Increase (decrease) in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 183,598 |
|
|
| .20 |
| % | $ | (6,693 | ) |
|
| (.01 | ) | % |
Interest expense |
|
| (28,258 | ) |
|
| (.05 | ) |
|
| 16,068 |
|
|
| .03 |
|
|
Net interest income/margin |
| $ | 211,856 |
|
|
| .23 |
| % | $ | (22,761 | ) |
|
| (.02 | ) | % |
Average notional amount (c) |
| $ | 16,275,182 |
|
|
|
|
|
| $ | 15,944,505 |
|
|
|
|
|
|
Rate received (b) |
|
|
|
|
|
| 2.55 |
| % |
|
|
|
|
| 2.35 |
| % |
Rate paid (b) |
|
|
|
|
| .84 |
| % |
|
|
|
|
| 2.54 |
| % |
(a) | Computed as an annualized percentage of average earning assets or interest-bearing liabilities. |
(b) | Weighted-average rate paid or received on interest rate swap agreements in effect during the period. |
(c) | Excludes forward-starting interest rate swap agreements not in effect during the period. |
- 62 -
In addition to interest rate swap agreements, the Company had entered into interest rate floor agreements that were accounted for in the trading account rather than as hedging instruments but, nevertheless, provided the Company with protection against the possibility of future declines in interest rates on earning assets. At each of March 31,September 30, 2019 and December 31, 2019, outstanding notional amounts of such agreements totaled $15.6 billion. The fair value of those interest rate floor agreements was $1.4 million at March 31, 2019 and $362 thousand at December 31, 2019 and was included in trading account assets in the consolidated balance sheet. Changes in the fair value of those agreements were recorded as “trading account and foreign exchange gains” in the consolidated statement of income. The interest rate floor agreements matured during the first quarter of 2020.
As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk. Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future obligations, including demands for loans and deposit withdrawals, funding operating costs, and
- 54 -
other corporate purposes. Liquidity risk arises whenever the maturities of financial instruments included in assets and liabilities differ. Core deposits represent the most significant source of funding for the Company and are generated from a large base of consumer, corporate and institutional customers. That customer base has, over the past several years, become more geographically diverse as a result of expansion of the Company’s businesses. Nevertheless, the Company faces competition in offering products and services from a large array of financial market participants, including banks, thrifts, mutual funds, securities dealers and others. The Company supplements funding provided through deposits with various short-term and long-term wholesale borrowings, including overnight federal funds purchased, short-term advances from the FHLB of New York, brokered deposits, Cayman Islands office deposits and longer-term borrowings.borrowings. M&T Bank has access to additional funding sources through borrowings from the FHLB of New York, lines of credit with the Federal Reserve Bank of New York, M&T Bank’s Bank Note Program, and other available borrowing facilities. The Bank Note Program enables M&T Bank to offer unsecured senior and subordinated notes. The Company has, from time to time, also issued subordinated capital notes and junior subordinated debentures associated with trust preferred securities to provide liquidity and enhance regulatory capital ratios. The Company’s junior subordinated debentures associated with trust preferred securities and other subordinated capital notes are considered Tier 2 capital and are includable in total regulatory capital. At March 31,September 30, 2020 and December 31, 2019, long-term borrowings aggregated $6.3$5.5 billion and $7.0 billion, respectively.
Short-term federal funds borrowings outstanding were $2.6 billion at March 31, 2019 were $3.4 billion, while thereSeptember 30, 2019. There were no such borrowings outstanding at March 31,September 30, 2020 or December 31, 2019. In general, those borrowings were unsecured, matured on the next business day and were entered into for liquidity management purposes. While predominantly used to enhance the Company’s overall liquidity position at the time. In addition to satisfyingsatisfy customer demand, Cayman Islands office deposits may also be used by the Company as an alternative to short-term borrowings. Cayman Islands office deposits totaled $1.2$900 million at September 30, 2020, $1.6 billion at March 31, 2020, $1.1 billion at March 31,September 30, 2019 and $1.7 billion at December 31, 2019. The Company has also benefited from the placement of brokered deposits. The Company had brokered savings and interest-bearing checking deposit accounts which aggregated approximately $3.1$4.2 billion at March 31,September 30, 2020, $2.7 billion at September 30, 2019 and $2.8 billion at each of March 31, 2019 and December 31, 2019. Brokered time deposits were not a significant source of funding as of those dates.
The Company’s ability to obtain funding from these sources could be negatively impacted should the Company experience a substantial deterioration in its financial condition or its debt ratings, or should the availability of funding become restricted due to a disruption in the financial markets. The Company attempts to quantify such credit-event riskimpact by modeling scenariosperforming stress tests that estimateassess the effect on liquidity resulting from various levels of internal and external stress factors. The liquidity impact resulting from a short-term ratings downgrade over various grading levels. Such impactof such events is estimated by attempting to measure the effect on deposit levels, available unsecured lines of credit, available capacity from secured borrowing sources and securitizable assets. In addition to deposits and borrowings, other sources of liquidity include maturities of investment securities and other earning assets, repayments of loans and investment securities, and cash generated from operations, such as fees collected for services.
- 63 -
Certain customers of the Company obtain financing through the issuance of variable rate demand bonds (“VRDBs”). The VRDBs are generally enhanced by letters of credit provided by M&T Bank. M&T Bank oftentimes acts as remarketing agent for the VRDBs and, at its discretion, may from time-to-time own some of the VRDBs while such instruments are remarketed. When this occurs, the VRDBs are classified as trading account assets in the Company’s consolidated balance sheet. Nevertheless, M&T Bank is not contractually obligated to purchase the VRDBs. The value of VRDBs in the Company’s trading account was not material at March 31,September 30, 2020 or December 31, 2019. The total amounts of VRDBs outstanding backed by M&T Bank letters of credit were $850$831 million at March 31,September 30, 2020, compared with $756$838 million at March 31,September 30, 2019 and $857 million at December 31, 2019. M&T Bank also serves as remarketing agent for most of those bonds.
- 55 -
The Company enters into contractual obligations in the normal course of business that require future cash payments. Such obligations include, among others, payments related to deposits, borrowings, leases and other contractual commitments. Off-balance sheet commitments to customers may impact liquidity, including commitments to extend credit, standby letters of credit, commercial letters of credit, financial guarantees and indemnification contracts, and commitments to sell real estate loans. Because many of these commitments or contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. Further discussion of these commitments is provided in note 12 of Notes to Financial Statements.
M&T’s primary source of funds to pay for operating expenses, shareholder dividends and treasury stock repurchases has historically been the receipt of dividends from its bank subsidiaries, which are subject to various regulatory limitations. Dividends from any bank subsidiary to M&T are limited by the amount of earnings of the subsidiary in the current year and the two preceding years. For purposes of that test, at March 31,September 30, 2020 approximately $384 million$1.0 billion was available for payment of dividends to M&T from bank subsidiaries. M&T also may obtain funding through long-term borrowings. Outstanding senior notes of M&T at March 31,September 30, 2020 and December 31, 2019 were $790$787 million and $770 million, respectively. Junior subordinated debentures of M&T associated with trust preferred securities outstanding at March 31,September 30, 2020 and December 31, 2019 totaled $526$527 million and $525 million, respectively.
Management closely monitors the Company’s liquidity position on an ongoing basis for compliance with internal policies and believes that available sources of liquidity are adequate to meet anticipated funding needs. Management does not anticipate engaging in any activities, either currently or in the long-term, for which adequate funding would not be available and would therefore result in a significant strain on liquidity at either M&T or its subsidiary banks.
Market risk is the risk of loss from adverse changes in the market prices and/or interest rates of the Company’s financial instruments. The primary market risk the Company is exposed to is interest rate risk. Interest rate risk arises from the Company’s core banking activities of lending and deposit-taking, because assets and liabilities reprice at different times and by different amounts as interest rates change. As a result, net interest income earned by the Company is subject to the effects of changing interest rates. The Company measures interest rate risk by calculating the variability of net interest income in future periods under various interest rate scenarios using projected balances for earning assets, interest-bearing liabilities and derivatives used to manage interest rate risk. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income. The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and investment securities, and expected maturities of investment securities, loans and deposits. Management uses a “value of equity” model to supplement the modeling technique described above. Those supplemental analyses are based on discounted cash flows associated with on- and off-balance sheet financial instruments. Such analyses are modeled to reflect changes in interest rates and provide management with a long-term interest rate risk metric. The Company has entered into interest rate swap agreements to help manage exposure to interest rate risk. At March 31,September 30, 2020, the aggregate notional amount of interest rate swap agreements entered into for risk management purposes that were currently in effect was $16.4$15.7 billion. In addition, the Company has entered into $41.8$38.9 billion of forward-starting interest rate swap agreements.
- 64 -
The Company’s Asset-Liability Committee, which includes members of senior management, monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a computer model that forecasts net interest income under different interest rate scenarios. In modeling changing interest rates, the Company considers different yield curve shapes that consider both parallel (that is, simultaneous changes in interest rates at each point on the yield curve) and non-parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve. In utilizing the model, market-implied forward interest rates over the subsequent twelve months are generally used to determine a base interest rate scenario for the net interest income simulation. That calculated base net interest income is then compared to the income calculated under the varying interest rate scenarios. The model considers the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, management has
- 56 -
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,September 30, 2020 and December 31, 2019 displays the estimated impact on net interest income in the base scenario described above resulting from parallel changes in interest rates across repricing categories during the first modeling year.
SENSITIVITY OF NET INTEREST INCOME
TO CHANGES IN INTEREST RATES
|
| Calculated Increase (Decrease) in Projected Net Interest Income |
|
|
| Calculated Increase (Decrease) in Projected Net Interest Income |
|
| ||||||||||
Changes in interest rates |
| March 31, 2020 |
|
| December 31, 2019 |
|
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| ||||
|
| (In thousands) |
|
|
| (In thousands) |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+200 basis points |
| $ | 99,883 |
|
|
| 45,345 |
|
|
| $ | 224,647 |
|
|
| 45,345 |
|
|
+100 basis points |
|
| 62,141 |
|
|
| 35,838 |
|
|
|
| 127,554 |
|
|
| 35,838 |
|
|
-100 basis points |
|
| (51,028 | ) |
|
| (94,616 | ) |
|
|
| (37,516 | ) |
|
| (94,616 | ) |
|
The Company utilized many assumptions to calculate the impact that changes in interest rates may have on net interest income. The more significant of those assumptions included the rate of prepayments of mortgage-related assets, cash flows from derivative and other financial instruments held for non-trading purposes, loan and deposit volumes and pricing, and deposit maturities. In the scenarios presented, the Company also assumed gradual changes in interest rates during a twelve-month period as compared with the base scenario. In the declining rate scenario, the rate changes may be limited to lesser amounts such that interest rates remain positiveat or above zero on all points of the yield curve. The assumptions used in interest rate sensitivity modeling are inherently uncertain and, as a result, the Company cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly from those presented due to the timing, magnitude and frequency of changes in interest rates and changes in market conditions and interest rate differentials (spreads) between maturity/repricing categories, as well as any actions, such as those previously described, which management may take to counter such changes. The sensitivity of net interest income to changes in interest rates has increased as of September 30, 2020 as compared with December 31, 2019 due to the lower interest rate environment and composition of the Company’s portfolios of earning assets and interest-bearing liabilities, in particular the increased balance of interest-bearing deposits at banks.
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 2 and 11 of Notes to Financial Statements.
The Company engages in limited trading account activities to meet the financial needs of customers and to fund the Company’s obligations under certain deferred compensation plans. Financial instruments utilized for trading account activities consist predominantly of interest rate contracts, such as interest rate swap agreements, and forward
- 65 -
and futures contracts related to foreign currencies. The Company generally mitigates the foreign currency and interest rate risk associated with trading account activities by entering into offsetting trading positions that are also included in the trading account. The fair values of trading account positions associated with interest rate contracts and foreign currency and other option and futures contracts are presented in note 9 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 totaled $36.7$36.6 billion at March 31,September 30, 2020, $43.3$47.6 billion at March 31,September 30, 2019 and $48.6 billion at December 31, 2019. The notional amounts of foreign currency and other option and futures contracts entered into for trading account purposes were $928$877 million at March 31,September 30, 2020, compared with $832$843 million at March 31,September 30, 2019 and $1.2 billion at December 31, 2019. 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
- 57 -
values of all trading account assets and liabilities recognized on the balance sheet were $1.2 billion and $126$123 million, respectively, at March 31,September 30, 2020 and $470 million and $80 million, respectively, at December 31, 2019. The fair value asset and liability amounts at March 31,September 30, 2020 have been reduced by contractual settlements of $3 million and $945 million, respectively, and at December 31, 2019 have been reduced by contractual settlements of $43 million and $281 million, respectively. The higher balance of trading account assets at March 31,September 30, 2020 as compared with December 31, 2019 was largely the result of increased values associated with interest rate swap agreements entered into with commercial customers that are not subject to periodic variation margin settlement payments. Included in trading account assets were assets related to deferred compensation plans aggregating $19 million at March 31, 2020 and $21 million at each of March 31,September 30, 2020, September 30, 2019 and December 31, 2019. Changes in the fair values of such assets are recorded as “trading account and foreign exchange gains” in the consolidated statement of income. Included in “other liabilities” in the consolidated balance sheet at March 31,September 30, 2020 were $22$24 million of liabilities related to deferred compensation plans, compared with $24$25 million at March 31,each of September 30, 2019 and $25 million at December 31, 2019. Changes in the balances of such liabilities due to the valuation of allocated investment options to which the liabilities are indexed are recorded in “other costs of operations” in the consolidated statement of income. Also included in trading account assets were investments in mutual funds and other assets that the Company was required to hold under terms of certain non-qualified supplemental retirement and other benefit plans that were assumed by the Company in various acquisitions. Those assets totaled $29 million at March 31,September 30, 2020 $26 million at March 31, 2019 and $28 million at each of September 30, 2019 and December 31, 2020.2019.
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 9 of Notes to Financial Statements.
Provision for Credit Losses
As described in note 3 of Notes to Financial Statements, effective January 1, 2020 the Company adopted amended accounting guidance for the measurement of credit losses on financial instruments. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The new guidance replaces the previous incurred loss model for determining the allowance for credit losses. The adoption of the amended guidance resulted in a $132 million increase in the allowance for credit losses at January 1, 2020. Increases in the allowance for residential real estate loans and consumer loans, reflecting the longer-dated maturities of such portfolios, were offset somewhat by net decreases in the allowance for commercial loans resulting from lower loss estimates on demand loan products due to the assumption that the Company could
- 66 -
require full repayment of such loans in the near-term. The following table depicts the changes in the allowance for credit losses by loan category resulting from the adoption of the amended guidance.
- 58 -
IMPACT OF ADOPTION OF AMENDED ACCOUNTING GUIDANCE ON ALLOWANCE FOR CREDIT LOSSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance December 31, 2019 |
|
| Impact of Adoption Increase (Decrease) |
|
| Balance January 1, 2020 |
| |||
|
| (In thousands) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing, etc. |
| $ | 366,094 |
|
| $ | (61,474 | ) |
| $ | 304,620 |
|
Commercial real estate |
|
| 322,201 |
|
|
| 23,656 |
|
|
| 345,857 |
|
Residential real estate |
|
| 56,033 |
|
|
| 53,896 |
|
|
| 109,929 |
|
Consumer |
|
| 229,118 |
|
|
| 194,004 |
|
|
| 423,122 |
|
Unallocated |
|
| 77,625 |
|
|
| (77,625 | ) |
|
| — |
|
Total |
| $ | 1,051,071 |
|
| $ | 132,457 |
|
| $ | 1,183,528 |
|
The amended guidance requires estimated credit losses on loans acquired at a discount to be reflected in the allowance for credit losses. Previously, such losses were netted in the carrying value of the loans unless there was an increased loss expectation subsequent to their acquisition. The gross-up of the estimated losses on loans acquired at a discount that was previously not recognized in the allowance for credit losses was $18 million on January 1, 2020. Prior to January 1, 2020, the Company generally recognized interest income on loans acquired at a discount regardless of the borrowers’ repayment status. Effective with the adoption of the new accounting guidance, the Company’s nonaccrual loan policy now applies to loans acquired at a discount. Loans acquired at a discount at December 31, 2019 included $171 million of loans that, effective with the adoption of the new guidance, were classified as non-accrual loans on January 1, 2020.
A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management. The provision for credit losses in the firstthird quarter of 2020 was $250$150 million, compared with $22$45 million in the year-earlier quarter and $54$325 million in the fourthsecond quarter of 2019.2020. As noted earlier, the significant increaseincreases in the provision in the recent quarter2020 as compared with the prior quarters followsthird quarter of 2019 follow the adoption of the new accounting guidance on January 1, 2020 and reflectsreflect updated economic assumptions and projections that considered the deteriorating macroeconomic outlook resulting fromassociated with the COVID-19 pandemic.pandemic as of the end of each quarter of 2020. The Company’s estimates of expected losses reflect the ongoing impacts of the COVID-19 pandemic on economic activity, generally, and in the hospitality and retail sectors, specifically, the uncertainty in Washington D.C. that existed at September 30, 2020 over providing additional stimulus to the economy, and concerns about commercial real estate values and the ultimate collectibility of commercial real estate loans where borrowers are requesting repayment forbearance. Net charge-offs of loans were $49$30 million in the recent quarter, compared with $22 million and $41$36 million in the first and fourth quartersthird quarter of 2019 respectively.and $71 million in the second quarter of 2020. Net charge-offs as an annualized percentage of average loans and leases were .22%.12% in the initialthird quarter of 2020, quarter, .10%.16% in the similaryear-earlier quarter of 2019 and .18%.29% in the final quartersecond 2020 quarter. Net charge-offs for the nine-month periods ended September 30, 2020 and 2019 were $150 million and $103 million, respectively, representing an annualized .21% and .15%, repectively, of 2019.average loans and leases. A summary of net charge-offs by loan type is presented in the table that follows.
- 67 -
NET CHARGE-OFFS (RECOVERIES)
BY LOAN/LEASE TYPE
|
| First Quarter |
|
| First Quarter |
|
| Fourth Quarter |
|
| 2020 |
| ||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
| First Quarter |
|
| Second Quarter |
|
| Third Quarter |
|
| Year- to-date |
| |||||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing, etc. |
| $ | 13,122 |
|
|
| 706 |
|
|
| 13,907 |
|
| $ | 13,122 |
|
|
| 29,235 |
|
|
| 9,959 |
|
|
| 52,316 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 834 |
|
|
| (543 | ) |
|
| 620 |
|
|
| 834 |
|
|
| 16,458 |
|
|
| 1,944 |
|
|
| 19,236 |
|
Residential |
|
| 3,428 |
|
|
| 1,542 |
|
|
| 6 |
|
|
| 3,428 |
|
|
| (279 | ) |
|
| 556 |
|
|
| 3,705 |
|
Consumer |
|
| 31,778 |
|
|
| 20,402 |
|
|
| 26,833 |
|
|
| 31,778 |
|
|
| 25,716 |
|
|
| 17,272 |
|
|
| 74,766 |
|
|
| $ | 49,162 |
|
|
| 22,107 |
|
|
| 41,366 |
|
| $ | 49,162 |
|
|
| 71,130 |
|
|
| 29,731 |
|
|
| 150,023 |
|
- 59 -
|
| 2019 |
| |||||||||||||
|
| First Quarter |
|
| Second Quarter |
|
| Third Quarter |
|
| Year- to-date |
| ||||
|
| (In thousands) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing, etc. |
| $ | 706 |
|
|
| 10,102 |
|
|
| 8,948 |
|
|
| 19,756 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| (543 | ) |
|
| 9,200 |
|
|
| (549 | ) |
|
| 8,108 |
|
Residential |
|
| 1,542 |
|
|
| 1,749 |
|
|
| 1,210 |
|
|
| 4,501 |
|
Consumer |
|
| 20,402 |
|
|
| 23,419 |
|
|
| 26,821 |
|
|
| 70,642 |
|
|
| $ | 22,107 |
|
|
| 44,470 |
|
|
| 36,430 |
|
|
| 103,007 |
|
Included in net charge-offs of consumer loans were net charge-offs of: automobile loans of $2 million in the recent quarter, $7 million in the eachthird quarter of the first quarters of 2020 and 2019 and $4$9 million in the fourthsecond quarter of 2019;2020; recreational finance loans of $9$5 million in the firstthird quarter of 2020, and $7 million in each of the year-earlier quarter and $5 million in the fourth quarter of 2019;second 2020 quarter; and home equity loans and lines of credit secured by one-to-four family residential properties of $2less than $1 million in each of the firsttwo most recent quarters of 2020 and the final 2019 quarter and $1$2 million in the first quarter of 2019.last year’s third quarter.
Nonaccrual loans aggregated $1.06$1.24 billion or 1.13%1.26% of total loans and leases outstanding at March 31,September 30, 2020, compared with $1.16 billion or 1.18% at June 30, 2020 and $1.13 billion or 1.25% at January 1, 2020. The adoption of the new accounting guidance resulted in an increase in nonaccrual loans on January 1, 2020 of approximately $171 million. Previously such loans would have been classified as either purchased impaired loans or acquired accruing loans past due 90 days or more. Nonaccrual loansLoans classified as nonaccrual at March 31,September 30, 2019 and December 31, 2019 totaled $882 million$1.01 billion and $963 million, respectively, or .99%1.12% and 1.06% of total loans outstanding.
Accruing loans past due 90 days or more were $530$527 million or .56%.54% of loans and leases at March 31,September 30, 2020, compared with $536 million or .55% at June 30, 2020. Accruing loans past due 90 days or more (excluding loans acquired at a discount) were $244$461 million or .28%.51% of total loans outstanding at March 31,September 30, 2019 and $519 million or .57% of outstanding loans at December 31, 2019. Accruing loans past due 90 days or more included loans guaranteed by government-related entities of $464$505 million, $195$434 million, $480 million and $480$454 million at March 31,September 30, 2020, MarchSeptember 30, 2019, December 31, 2019 and December 31, 2019,June 30, 2020, respectively. Guaranteed loans 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 $439$480 millionat March 31,September 30, 2020, $169$410 million at March 31, 2019 anda year earlier, $452 million at December 31, 2019.2019 and $428 million at June 30, 2020. The increase in such loans since March 31, 2019as compared with the prior dates resulted from higher levels of loans associated with servicingrepurchased during the Company added in 2019.recent quarter. The remaining accruing loans past due 90 days or more not guaranteed by government-related entities were loans considered to be with creditworthy borrowers that were in the process of collection or renewal. In addition to
- 68 -
the past due loans, the Company has also repurchased $1.4 billion of government guaranteed residential mortgage loans in the recent quarter that are not considered delinquent because the borrower has requested and received a COVID-19 related payment deferral. Those loans were also repurchased to reduce associated servicing costs as described above and also remain covered by the insurance or guarantee of the applicable government-related entity.
Loans that were 30-89 days past due were $874 million at September 30, 2020, compared with $1.2 billion at December 31, 2019 and $618 million at June 30, 2020. The lower levels of such past due loans at September 30 and June 30, 2020 were a result of loan paydowns, many of which resulted in return to current status, and migrations of loans to nonaccrual status. COVID-19 related payment deferral modifications resulted in such loans being classified as current in accordance with regulatory guidance and, as a result, did not contribute in incremental additions to loans categorized as 30-89 days past due.
Prior to the adoption of the new accounting standard on January 1, 2020, the Company reported purchased impaired loans. Those loans were impaired at the date of acquisition, were recorded at estimated fair value and were generally delinquent in payments, but, in accordance with GAAP, the Company continued to accrue interest income on such loans based on the estimated expected cash flows associated with the loans. The amended accounting guidance requires estimated credit losses on loans acquired at a discount to now be reflected in the allowance for credit losses and effective with the adoption of the guidance, the Company’s nonaccrual loan policy now applies to such loans. The carrying amount of purchased impaired loans was $279$253 million at March 31,September 30, 2019 and $228 million at December 31, 2019.
The United States has been operating under a state of emergency related to the COVID-19 pandemic since March 13, 2020. The direct and indirect effects of the COVID-19 pandemic have resulted in a dramatic reduction in economic activity that has severely hampered the ability of some businesses and consumers to meet their repayment obligations. The CARES Act, in addition to providing financial assistance to both businesses and consumers, created a forbearance program for federally-backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the national emergency, and provides financial institutions the option to temporarily suspend certain requirements under GAAP related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19. The banking regulatory agencies have likewise issued guidance encouraging financial institutions to work prudently with borrowers who are, or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. That guidance, with concurrence of the Financial Accounting Standards Board and provisions of the CARES Act, allow modifications made on a good faith basis in response to COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be treated as delinquent or as troubled debt restructurings. Modifications may include payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment. The Company has begun workingworked with its customers affected by COVID-19 and, expectsas previously noted, has granted a significant amount of modifications across many of its loan portfolios in the near term.portfolios. To
- 60 -
the extent that such modifications meetmet the criteria previously described, such modifications arehave not expected to bebeen classified as delinquent or as troubled debt restructurings.
The Company also modified the terms of select loans in an effort to assist borrowers that were not related to the COVID-19 pandemic. If the borrower was experiencing financial difficulty and a concession was granted, the Company considered such modifications as troubled debt restructurings. Loan modifications included such actions as the extension of loan maturity dates and the lowering of interest rates and monthly payments. The objective of the modifications was to increase loan repayments by customers and thereby reduce net charge-offs. The modified loans are included in impaired loans for purposes of determining the level of the allowance for credit losses. Information about modifications of loans that are considered troubled debt restructurings is included in note 3 of Notes to Financial Statements.
Residential real estate loans modified under specified loss mitigation programs prescribed by government guarantors that were not related to the COVID-19 pandemic have not been included in renegotiated loans because the loan guarantee remains in full force and, accordingly, the Company has not granted a concession with respect to the ultimate collection of the original loan balance. Such loans aggregated $176$267 million, $188$177 million, and $203 million at March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019, respectively.
- 69 -
Commercial loans and leases classified as nonaccrual totaled $287$351 million, $246$383 million, $347 million, and $347$285 million at March 31,September 30, 2020, MarchSeptember 30, 2019, December 31, 2019, and December 31, 2019,June 30, 2020, respectively. The decline in such loans from December 31, 2019 to March 31, 2020 predominantly resulted from payments received from borrowers. Commercial real estate loans in nonaccrual status aggregated $227$292 million, $232$221 million, $195 million and $195$260 million at March 31,September 30, 2020, MarchSeptember 30, 2019, December 31, 2019, and December 31, 2019,June 30, 2020, respectively.
Nonaccrual residential real estate loans totaled $413 million at March 31,September 30, 2020, compared with $295$305 million at March 31,September 30, 2019, and $319 million at December 31, 2019.2019 and $426 million at June 30, 2020. The increase at the end of the first quarter of 2020two most recent quarter-ends as compared with the prior year dates reflectsis largely reflective of the impact of the adoption of the amended accounting guidance as noted earlier. Included in residential real estate loans classified as nonaccrual were limited documentation first mortgage loans of $119$116 million at March 31,September 30, 2020, compared with $85$82 million at March 31,September 30, 2019, and $83 million at December 31, 2019.2019 and $119 million at June 30, 2020. Limited documentation first mortgage loans represent loans secured by residential real estate that at origination typically included some form of limited borrower documentation requirements as compared with more traditional loans. The Company no longer originates limited documentation loans. Residential real estate loans past due 90 days or more and accruing interest (excluding loans acquired at a discount at the 2019 dates) aggregated $474$503 million at March 31,September 30, 2020, compared with $200$440 million at March 31,September 30, 2019, and $487 million at December 31, 2019.2019 and $479 million at June 30, 2020. A substantial portion of such amounts related to repurchased government-guaranteed loans, including the previously noted higher level of repurchases of loans associated with the Company’s loan servicing portfolio. However, loans that have been modified under COVID-19 forbearance are not considered to be past due in accordance with the Company added in 2019.previously noted regulatory guidance and provisions of the CARES Act. Information about the location of nonaccrual and charged-off residential real estate loans as of and for the quarter ended March 31,September 30, 2020 is presented in the accompanying table.
Nonaccrual consumer loans were $135$184 million at March 31,September 30, 2020, compared with $109$96 million at March 31,September 30, 2019, and $102 million at December 31, 2019.2019 and $187 million at June 30, 2020. Included in nonaccrual consumer loans at March 31,September 30, 2020, MarchSeptember 30, 2019, December 31, 2019 and December 31, 2019June 30, 2020 were: automobile loans of $19$42 million, $21 million, $21 million and $21$43 million, respectively; recreational finance loans of $13$24 million, $11$12 million, $14 million and $14$24 million, respectively; and outstanding balances of home equity loans and lines of credit of $79 million, $60 million, $63 million $69 million and $63$77 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,September 30, 2020 is presented in the accompanying table.
Information about past due and nonaccrual loans as of March 31,September 30, 2020 and December 31, 2019 is also included in note 3 of Notes to Financial Statements.
- 6170 -
SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA
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| Net Charge-offs (Recoveries) |
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| Net Charge-offs (Recoveries) |
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| Outstanding |
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| Outstanding |
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| Outstanding |
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| Outstanding |
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| Balances |
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| Balances |
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| Balances |
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| (Dollars in thousands) |
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Residential mortgages: |
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New York |
| $ | 4,703,403 |
|
| $ | 101,335 |
|
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| 2.15 | % |
| $ | 2,635 |
|
|
| .22 | % |
| $ | 5,153,998 |
|
| $ | 112,001 |
|
|
| 2.17 | % |
| $ | (199 | ) |
|
| (.02 | %) |
Pennsylvania |
|
| 1,089,994 |
|
|
| 13,977 |
|
|
| 1.28 |
|
|
| 421 |
|
|
| .15 |
|
|
| 1,100,845 |
|
|
| 11,013 |
|
|
| 1.00 |
|
|
| (55 | ) |
|
| (.02 | ) |
Maryland |
|
| 1,138,757 |
|
|
| 15,563 |
|
|
| 1.37 |
|
|
| (1 | ) |
|
| — |
|
|
| 1,329,097 |
|
|
| 14,168 |
|
|
| 1.07 |
|
|
| 32 |
|
|
| .01 |
|
New Jersey |
|
| 2,956,288 |
|
|
| 75,402 |
|
|
| 2.55 |
|
|
| 689 |
|
|
| .09 |
|
|
| 2,879,628 |
|
|
| 76,381 |
|
|
| 2.65 |
|
|
| 195 |
|
|
| .03 |
|
Other Mid-Atlantic (a) |
|
| 1,044,795 |
|
|
| 14,676 |
|
|
| 1.40 |
|
|
| 67 |
|
|
| .03 |
|
|
| 1,171,572 |
|
|
| 11,914 |
|
|
| 1.02 |
|
|
| 163 |
|
|
| .06 |
|
Other |
|
| 2,661,585 |
|
|
| 71,713 |
|
|
| 2.69 |
|
|
| 43 |
|
|
| .01 |
|
|
| 3,200,975 |
|
|
| 71,744 |
|
|
| 2.24 |
|
|
| 433 |
|
|
| .06 |
|
Total |
| $ | 13,594,822 |
|
| $ | 292,666 |
|
|
| 2.15 | % |
| $ | 3,854 |
|
|
| .11 | % |
| $ | 14,836,115 |
|
| $ | 297,221 |
|
|
| 2.00 | % |
| $ | 569 |
|
|
| .02 | % |
Residential construction loans: |
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New York |
| $ | 27,556 |
|
| $ | 147 |
|
|
| .53 | % |
| $ | — |
|
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| — | % |
| $ | 24,376 |
|
| $ | 147 |
|
|
| .60 | % |
| $ | — |
|
|
| — | % |
Pennsylvania |
|
| 6,229 |
|
|
| 240 |
|
|
| 3.85 |
|
|
| — |
|
|
| — |
|
|
| 4,714 |
|
|
| 240 |
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|
| 5.09 |
|
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| — |
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| — |
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Maryland |
|
| 10,381 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,915 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
New Jersey |
|
| 14,744 |
|
|
| 556 |
|
|
| 3.77 |
|
|
| — |
|
|
| — |
|
|
| 14,418 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other Mid-Atlantic (a) |
|
| 22,197 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,916 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 5,346 |
|
|
| 29 |
|
|
| .54 |
|
|
| 29 |
|
|
| 1.71 |
|
|
| 7,361 |
|
|
| 28 |
|
|
| .38 |
|
|
| — |
|
|
| — |
|
Total |
| $ | 86,453 |
|
| $ | 972 |
|
|
| 1.12 | % |
| $ | 29 |
|
|
| 1.13 | % |
| $ | 84,700 |
|
| $ | 415 |
|
|
| .49 | % |
| $ | — |
|
|
| — | % |
Limited documentation first mortgages: |
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|
New York |
| $ | 880,900 |
|
| $ | 51,502 |
|
|
| 5.85 | % |
| $ | (76 | ) |
|
| (.03 | %) |
| $ | 794,475 |
|
| $ | 53,031 |
|
|
| 6.67 | % |
| $ | 4 |
|
|
| — | % |
Pennsylvania |
|
| 39,680 |
|
|
| 5,296 |
|
|
| 13.35 |
|
|
| (9 | ) |
|
| (.09 | ) |
|
| 36,048 |
|
|
| 4,783 |
|
|
| 13.27 |
|
|
| — |
|
|
| — |
|
Maryland |
|
| 23,681 |
|
|
| 3,045 |
|
|
| 12.86 |
|
|
| 21 |
|
|
| .35 |
|
|
| 20,580 |
|
|
| 1,296 |
|
|
| 6.30 |
|
|
| 4 |
|
|
| .08 |
|
New Jersey |
|
| 724,369 |
|
|
| 35,110 |
|
|
| 4.85 |
|
|
| 11 |
|
|
| .01 |
|
|
| 639,053 |
|
|
| 34,744 |
|
|
| 5.44 |
|
|
| — |
|
|
| — |
|
Other Mid-Atlantic (a) |
|
| 20,114 |
|
|
| 973 |
|
|
| 4.84 |
|
|
| 1 |
|
|
| .04 |
|
|
| 17,086 |
|
|
| 1,410 |
|
|
| 8.25 |
|
|
| — |
|
|
| — |
|
Other |
|
| 272,995 |
|
|
| 23,391 |
|
|
| 8.57 |
|
|
| (403 | ) |
|
| (.57 | ) |
|
| 235,651 |
|
|
| 20,519 |
|
|
| 8.71 |
|
|
| (21 | ) |
|
| (.03 | ) |
Total |
| $ | 1,961,739 |
|
| $ | 119,317 |
|
|
| 6.08 | % |
| $ | (455 | ) |
|
| (.09 | %) |
| $ | 1,742,893 |
|
| $ | 115,783 |
|
|
| 6.64 | % |
| $ | (13 | ) |
|
| — | % |
First lien home equity loans and lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
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|
|
|
|
|
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|
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|
New York |
| $ | 1,090,756 |
|
| $ | 13,259 |
|
|
| 1.22 | % |
| $ | 102 |
|
|
| .04 | % |
| $ | 1,035,060 |
|
| $ | 18,494 |
|
| 1,79 |
|
| $ | 41 |
|
|
| .02 | % | |
Pennsylvania |
|
| 659,319 |
|
|
| 8,224 |
|
|
| 1.25 |
|
|
| 63 |
|
|
| .04 |
|
|
| 628,542 |
|
|
| 10,269 |
|
|
| 1.63 |
|
|
| 78 |
|
|
| .05 |
|
Maryland |
|
| 543,700 |
|
|
| 7,277 |
|
|
| 1.34 |
|
|
| 161 |
|
|
| .12 |
|
|
| 506,866 |
|
|
| 9,474 |
|
|
| 1.87 |
|
|
| 138 |
|
|
| .11 |
|
New Jersey |
|
| 70,141 |
|
|
| 772 |
|
|
| 1.10 |
|
|
| 64 |
|
|
| .37 |
|
|
| 69,039 |
|
|
| 970 |
|
|
| 1.41 |
|
|
| (13 | ) |
|
| (.07 | ) |
Other Mid-Atlantic (a) |
|
| 180,954 |
|
|
| 2,014 |
|
|
| 1.11 |
|
|
| 23 |
|
|
| .05 |
|
|
| 177,886 |
|
|
| 1,994 |
|
|
| 1.12 |
|
|
| 25 |
|
|
| .06 |
|
Other |
|
| 31,735 |
|
|
| 1,546 |
|
|
| 4.87 |
|
|
| 63 |
|
|
| .79 |
|
|
| 31,539 |
|
|
| 1,598 |
|
|
| 5.07 |
|
|
| (1 | ) |
|
| (.02 | ) |
Total |
| $ | 2,576,605 |
|
| $ | 33,092 |
|
|
| 1.28 | % |
| $ | 476 |
|
|
| .07 | % |
| $ | 2,448,932 |
|
| $ | 42,799 |
|
|
| 1.75 | % |
| $ | 268 |
|
|
| .04 | % |
Junior lien home equity loans and lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York |
| $ | 667,536 |
|
| $ | 13,679 |
|
|
| 2.05 | % |
| $ | 21 |
|
|
| .01 | % |
| $ | 622,702 |
|
| $ | 16,490 |
|
|
| 2.65 | % |
| $ | 1,126 |
|
|
| .71 | % |
Pennsylvania |
|
| 245,463 |
|
|
| 3,035 |
|
|
| 1.24 |
|
|
| 833 |
|
|
| 1.35 |
|
|
| 223,789 |
|
|
| 3,363 |
|
|
| 1.50 |
|
|
| (405 | ) |
|
| (.71 | ) |
Maryland |
|
| 512,619 |
|
|
| 7,710 |
|
|
| 1.50 |
|
|
| 154 |
|
|
| .12 |
|
|
| 456,416 |
|
|
| 9,818 |
|
|
| 2.15 |
|
|
| (240 | ) |
|
| (.20 | ) |
New Jersey |
|
| 98,171 |
|
|
| 1,103 |
|
|
| 1.12 |
|
|
| 75 |
|
|
| .31 |
|
|
| 92,542 |
|
|
| 1,448 |
|
|
| 1.56 |
|
|
| (233 | ) |
|
| (.99 | ) |
Other Mid-Atlantic (a) |
|
| 233,746 |
|
|
| 2,889 |
|
|
| 1.24 |
|
|
| (55 | ) |
|
| (.09 | ) |
|
| 213,091 |
|
|
| 3,753 |
|
|
| 1.76 |
|
|
| (353 | ) |
|
| (.65 | ) |
Other |
|
| 41,439 |
|
|
| 1,152 |
|
|
| 2.78 |
|
|
| 16 |
|
|
| .16 |
|
|
| 39,754 |
|
|
| 957 |
|
|
| 2.41 |
|
|
| (139 | ) |
|
| (1.39 | ) |
Total |
| $ | 1,798,974 |
|
| $ | 29,568 |
|
|
| 1.64 | % |
| $ | 1,044 |
|
|
| .23 | % |
| $ | 1,648,294 |
|
| $ | 35,829 |
|
|
| 2.17 | % |
| $ | (244 | ) |
|
| (.06 | %) |
Limited documentation junior lien: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York |
| $ | 566 |
|
| $ | 56 |
|
|
| 9.89 | % |
| $ | (1 | ) |
|
| (.77 | %) |
| $ | 410 |
|
| $ | 55 |
|
|
| 13.41 | % |
| $ | (1 | ) |
|
| (.75 | %) |
Pennsylvania |
|
| 207 |
|
|
| — |
|
|
| — |
|
|
| (19 | ) |
|
| (35.94 | ) |
|
| 201 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Maryland |
|
| 1,068 |
|
|
| 75 |
|
|
| 7.02 |
|
|
| — |
|
|
| — |
|
|
| 928 |
|
|
| 25 |
|
|
| 2.69 |
|
|
| (6 | ) |
|
| (2.13 | ) |
New Jersey |
|
| 122 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 120 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other Mid-Atlantic (a) |
|
| 535 |
|
|
| 32 |
|
|
| 5.98 |
|
|
| — |
|
|
| — |
|
|
| 484 |
|
|
| 32 |
|
|
| 6.61 |
|
|
| — |
|
|
| — |
|
Other |
|
| 2,828 |
|
|
| 248 |
|
|
| 8.77 |
|
|
| 27 |
|
|
| 3.80 |
|
|
| 2,489 |
|
|
| 80 |
|
|
| 3.21 |
|
|
| (31 | ) |
|
| (4.62 | ) |
Total |
| $ | 5,326 |
|
| $ | 411 |
|
|
| 7.72 | % |
| $ | 7 |
|
|
| .53 | % |
| $ | 4,632 |
|
| $ | 192 |
|
|
| 4.14 | % |
| $ | (38 | ) |
|
| (2.97 | %) |
(a)Includes Delaware, Virginia, West Virginia and the District of Columbia.
- 6271 -
Real estate and other foreclosed assets totaled $84$50 million at March 31,September 30, 2020, compared with $81$80 million at March 31,September 30, 2019, and $86 million at December 31, 2019.2019 and $67 million at June 30, 2020. Net gains or losses associated with real estate and other foreclosed assets were not material during the three-months ended March 31,September 30, 2020, March 31,September 30, 2019 or December 31,and June 30, 2019. At March 31,September 30, 2020, the Company’s holdings of residential real estate-related properties comprised approximately 89%86% of foreclosed assets. During the COVID-19 pandemic, government authorities have restricted the ability of mortgage servicers to initiate foreclosure procedures.
A comparative summary of nonperforming assets and certain past due, renegotiated and impaired loan data and credit quality ratios is presented in the accompanying table.
NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA
|
| 2020 |
|
| 2019 Quarters |
|
| 2020 Quarters |
|
| 2019 Quarters |
| ||||||||||||||||||||||||||||
|
| First |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Quarter |
|
| Fourth |
|
| Third |
|
| Second |
|
| First |
|
| Third |
|
| Second |
|
| First |
|
| Fourth |
|
| Third |
| ||||||||||
|
| (Dollars in thousands) |
|
| (Dollars in thousands) |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans |
| $ | 1,061,748 |
|
|
| 963,112 |
|
|
| 1,005,249 |
|
|
| 865,384 |
|
|
| 881,611 |
|
| $ | 1,239,972 |
|
|
| 1,156,650 |
|
|
| 1,061,748 |
|
|
| 963,112 |
|
|
| 1,005,249 |
|
Real estate and other foreclosed assets |
|
| 83,605 |
|
|
| 85,646 |
|
|
| 79,735 |
|
|
| 72,907 |
|
|
| 81,335 |
|
|
| 49,872 |
|
|
| 66,763 |
|
|
| 83,605 |
|
|
| 85,646 |
|
|
| 79,735 |
|
Total nonperforming assets |
| $ | 1,145,353 |
|
|
| 1,048,758 |
|
|
| 1,084,984 |
|
|
| 938,291 |
|
|
| 962,946 |
|
| $ | 1,289,844 |
|
|
| 1,223,413 |
|
|
| 1,145,353 |
|
|
| 1,048,758 |
|
|
| 1,084,984 |
|
Accruing loans past due 90 days or more(a) |
| $ | 530,317 |
|
|
| 518,728 |
|
|
| 461,162 |
|
|
| 348,725 |
|
|
| 244,257 |
|
| $ | 527,258 |
|
|
| 535,755 |
|
|
| 530,317 |
|
|
| 518,728 |
|
|
| 461,162 |
|
Government guaranteed loans included in totals above: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans |
| $ | 50,561 |
|
|
| 50,891 |
|
|
| 43,144 |
|
|
| 36,765 |
|
|
| 35,481 |
|
| $ | 45,975 |
|
|
| 51,165 |
|
|
| 50,561 |
|
|
| 50,891 |
|
|
| 43,144 |
|
Accruing loans past due 90 days or more |
|
| 464,243 |
|
|
| 479,829 |
|
|
| 434,132 |
|
|
| 320,305 |
|
|
| 194,510 |
|
|
| 505,446 |
|
|
| 454,269 |
|
|
| 464,243 |
|
|
| 479,829 |
|
|
| 434,132 |
|
Renegotiated loans |
| $ | 232,439 |
|
|
| 234,424 |
|
|
| 240,781 |
|
|
| 254,332 |
|
|
| 267,952 |
|
| $ | 242,581 |
|
|
| 234,768 |
|
|
| 232,439 |
|
|
| 234,424 |
|
|
| 240,781 |
|
Acquired accruing loans past due 90 days or more(b) |
| N/A |
|
|
| 39,632 |
|
|
| 40,733 |
|
|
| 43,079 |
|
|
| 43,995 |
|
| N/A |
|
| N/A |
|
| N/A |
|
|
| 39,632 |
|
|
| 40,733 |
| ||||
Purchased impaired loans(c): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding customer balance |
| N/A |
|
|
| 415,413 |
|
|
| 453,382 |
|
|
| 473,834 |
|
|
| 495,163 |
|
| N/A |
|
| N/A |
|
| N/A |
|
|
| 415,413 |
|
|
| 453,382 |
| ||||
Carrying amount |
| N/A |
|
|
| 227,545 |
|
|
| 253,496 |
|
|
| 263,025 |
|
|
| 278,783 |
|
| N/A |
|
| N/A |
|
| N/A |
|
|
| 227,545 |
|
|
| 253,496 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans to total loans and leases, net of unearned discount |
|
| 1.13 | % |
|
| 1.06 | % |
|
| 1.12 | % |
|
| .96 | % |
|
| .99 | % |
|
| 1.26 | % |
|
| 1.18 | % |
|
| 1.13 | % |
|
| 1.06 | % |
|
| 1.12 | % |
Nonperforming assets to total net loans and leases and real estate and other foreclosed assets |
|
| 1.22 | % |
|
| 1.15 | % |
|
| 1.21 | % |
|
| 1.04 | % |
|
| 1.09 | % |
|
| 1.31 | % |
|
| 1.25 | % |
|
| 1.22 | % |
|
| 1.15 | % |
|
| 1.21 | % |
Accruing loans past due 90 days or more(a) to total loans and leases, net of unearned discount |
|
| .56 | % |
|
| .57 | % |
|
| .51 | % |
|
| .39 | % |
|
| .28 | % |
|
| .54 | % |
|
| .55 | % |
|
| .56 | % |
|
| .57 | % |
|
| .51 | % |
(a)Predominantly residential real estate loans. Prior to 2020, excludes loans acquired at a discount.
(b) | Prior to 2020, loans acquired at a discount that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately. |
(c) | Prior to 2020, accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value. |
Beginning in 2020, management determines the allowance for credit losses under new accounting guidance that requires estimating the amount of current expected credit losses over the remaining contractual term of the loan and leases portfolio. A description of the methodologies used by the Company to estimate its allowance for credit losses in 2020 can be found in note 3 of Notes to Financial Statements contained in this quarterly report on Form 10-Q. For periods prior to 2020, a description of the methodologies used by the Company for determining the allowance for credit losses may be found in the Provision for Credit Losses section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in M&T’s Annual Report on Form 10-K for the year ended December 31, 2019.
- 72 -
In establishing the allowance for credit losses subsequent to December 31, 2019, the Company estimates losses attributable to specific troubled credits identified through both normal and targeted credit review processes and also estimates losses for other loans and leases with similar risk characteristics on a collective basis. For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type. At the time of the Company’s analysis regarding the determination of the allowance for credit losses as of
- 63 -
March 31, September 30, 2020, there existed substantial concerns about the likelynational and regional economic decline related to the COVID-19 pandemic; the lack of additional economic stimulus being provided by the Federal government; the volatile nature of global commodity and export markets, including the impact international economic conditions could have on the U.S. economy; Federal Reserve positioning of monetary policy; the extent to which additional repayment forbearance might be requested by borrowers, in particular commercial real estate borrowers; and continued stagnant population and economic growth in the upstate New York and central Pennsylvania regions (approximately 52% of the Company’s loans and leases are to customers in New York State and Pennsylvania). that could see lingering effects of the economic downturn. The Company utilizes a loan grading system to differentiate risk amongst its commercial loans and commercial real estate loans. Loans with a lower expectation of default are assigned one of ten possible “pass” loan grades and through the loss estimation modeling and other techniques used by the Company are generally ascribedconsidered to possess lower loss factorsexpected losses when determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as “criticized” and are ascribed higher expected loss amounts when determining the allowance for credit losses. Criticized 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. During 2020, the Company re-graded a significant portion of its commercial loans and commercial real estate loans, particularly those that were modified as a result of COVID-19 impacts. Criticized commercial loans and commercial real estate loans totaled $2.4$6.9 billion at March 31,September 30, 2020, compared with $3.0$2.6 billion at March 31,September 30, 2019, and $2.5 billion at December 31, 2019.2019, and $6.2 billion at June 30, 2020. The declines from the first quarter of 2019 torise in criticized loans at the two most recent quarter-ends as compared to December 31, 2019 reflect payments receivedthe impact of the pandemic on criticized loans during 2019 and early 2020borrowers’ financial condition and the removalre-grading of loans to customers experiencing improved financial condition.by the Company.
The COVID-19 pandemic and related regulatory and governmental responses to COVID-19 have led to a significant reduction in economic activity that has been detrimental to many businesses across the Company’s geographic regions. As a result, borrowersBorrowers have been and will likely continue to be significantlyadversely impacted by the shut-downs caused by the March 13, 2020 nationwide stateeconomic effects of emergency resulting from the COVID-19 pandemic. Summaries of the commercial loan and lease and commercial real estate loan portfolios as of March 31,September 30, 2020 and December 31, 2019 are provided below. Of the COVID-19 related modifications outstanding at September 30, 2020 provided in the table below, substantially all are scheduled to expire during 2020’s fourth quarter. Should those borrowers request further forbearance, the credit quality of such loans will be re-assessed to determine whether the Company expects to receive all contractual principal and interest payments.
|
| March 31, |
|
| December 31, |
|
|
| September 30, 2020 |
| |||||||||||
Commercial, financial, leasing, etc. |
| 2020 |
|
| 2019 |
|
| ||||||||||||||
Commercial, financial, leasing , etc. |
| Total |
|
| PPP |
|
| COVID-19 Related Modifications |
| ||||||||||||
|
| (In millions) |
|
|
| (In millions) |
| ||||||||||||||
Industry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
| $ | 5,763 |
|
| $ | 2,029 |
|
| $ | 177 |
| |||||||||
Motor vehicle and recreational finance dealers |
| $ | 5,413 |
|
| $ | 5,089 |
|
|
|
| 3,739 |
|
|
| 383 |
|
|
| 62 |
|
Services |
|
| 4,212 |
|
|
| 3,769 |
|
| ||||||||||||
Manufacturing |
|
| 3,391 |
|
|
| 2,995 |
|
|
|
| 3,761 |
|
|
| 689 |
|
|
| 120 |
|
Wholesale |
|
| 2,231 |
|
|
| 2,296 |
|
| ||||||||||||
Financial and insurance |
|
| 2,688 |
|
|
| 1,816 |
|
|
|
| 2,295 |
|
|
| 104 |
|
|
| 82 |
|
Health services |
|
| 1,592 |
|
|
| 1,621 |
|
|
|
| 2,183 |
|
|
| 759 |
|
|
| 18 |
|
Wholesale |
|
| 2,091 |
|
|
| 432 |
|
|
| 85 |
| |||||||||
Construction |
|
| 2,029 |
|
|
| 980 |
|
|
| 46 |
| |||||||||
Retail |
|
| 1,744 |
|
|
| 450 |
|
|
| 57 |
| |||||||||
Transportation, communications, utilities |
|
| 1,476 |
|
|
| 1,450 |
|
|
|
| 1,693 |
|
|
| 303 |
|
|
| 71 |
|
Real estate investors |
|
| 1,646 |
|
|
| 1,507 |
|
|
|
| 1,652 |
|
|
| 193 |
|
|
| 81 |
|
Retail |
|
| 1,566 |
|
|
| 1,403 |
|
| ||||||||||||
Construction |
|
| 1,244 |
|
|
| 1,156 |
|
| ||||||||||||
Other |
|
| 785 |
|
|
| 736 |
|
|
|
| 942 |
|
|
| 213 |
|
|
| 16 |
|
Total |
| $ | 26,244 |
|
| $ | 23,838 |
|
|
| $ | 27,892 |
|
| $ | 6,535 |
|
| $ | 815 |
|
- 6473 -
|
| March 31, |
|
| December 31, |
|
|
| September 30, 2020 |
| |||||||
Commercial real estate |
| 2020 |
|
| 2019 |
|
|
| Total |
|
| COVID-19 Related Modifications |
| ||||
|
| (In millions) |
|
|
| (In millions) |
| ||||||||||
Investor-owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent finance by property type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail/Service |
| $ | 4,765 |
|
| $ | 1,135 |
| |||||||||
Apartments/Multifamily |
|
| 4,680 |
|
|
| 301 |
| |||||||||
Office |
| $ | 4,491 |
|
| $ | 4,468 |
|
|
|
| 4,390 |
|
|
| 344 |
|
Apartments/Multifamily |
|
| 4,634 |
|
|
| 4,226 |
|
| ||||||||
Retail/Service |
|
| 4,601 |
|
|
| 4,366 |
|
| ||||||||
Hotel |
|
| 2,672 |
|
|
| 2,629 |
|
|
|
| 2,689 |
|
|
| 2,035 |
|
Health facilities |
|
| 2,563 |
|
|
| 2,442 |
|
|
|
| 2,569 |
|
|
| 107 |
|
Industrial/Warehouse |
|
| 1,499 |
|
|
| 1,529 |
|
|
|
| 1,535 |
|
|
| 85 |
|
Other |
|
| 322 |
|
|
| 219 |
|
|
|
| 349 |
|
|
| - |
|
Total permanent |
| $ | 20,782 |
|
| $ | 19,879 |
|
|
| $ | 20,977 |
|
| $ | 4,007 |
|
Total construction/development |
|
| 8,761 |
|
|
| 8,501 |
|
|
|
| 9,524 |
|
|
| 666 |
|
Total investor-owned |
| $ | 29,543 |
|
| $ | 28,380 |
|
|
| $ | 30,501 |
|
| $ | 4,673 |
|
Owner-occupied by industry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other services |
|
| 1,445 |
|
|
| 1,467 |
|
|
|
| 1,416 |
|
|
| 169 |
|
Retail |
|
| 1,168 |
|
|
| 1,157 |
|
|
|
| 1,181 |
|
|
| 85 |
|
Motor vehicle and recreational finance dealers |
|
| 1,161 |
|
|
| 1,164 |
|
|
|
| 1,143 |
|
|
| 1 |
|
Health services |
|
| 899 |
|
|
| 903 |
|
|
|
| 859 |
|
|
| 51 |
|
Wholesale |
|
| 763 |
|
|
| 781 |
|
|
|
| 769 |
|
|
| 79 |
|
Manufacturing |
|
| 589 |
|
|
| 591 |
|
|
|
| 563 |
|
|
| 22 |
|
Other |
|
| 1,116 |
|
|
| 1,099 |
|
|
|
| 1,150 |
|
|
| 46 |
|
Total owner-occupied |
|
| 7,141 |
|
|
| 7,162 |
|
|
|
| 7,081 |
|
|
| 453 |
|
Total |
| $ | 36,684 |
|
| $ | 35,542 |
|
|
| $ | 37,582 |
|
| $ | 5,126 |
|
In preparing its financial statements as of March 31, 2020,The table below provides information on the Company did not attempt to re-grade itsresidential real estate and consumer loan portfolios and outstanding COVID-19 related modifications outstanding at September 30, 2020.
|
| September 30, 2020 |
| |||||
|
| Total |
|
| COVID-19 Related Modifications |
| ||
|
| (In millions) |
| |||||
|
|
|
|
|
|
|
|
|
Residential real estate |
| $ | 16,664 |
|
| $ | 3,307 |
|
Consumer |
|
|
|
|
|
|
|
|
Homes equity lines and loans |
| $ | 4,102 |
|
| $ | 26 |
|
Recreational finance |
|
| 6,899 |
|
|
| 40 |
|
Automobile |
|
| 3,915 |
|
|
| 63 |
|
Other |
|
| 1,394 |
|
|
| 2 |
|
Total consumer |
| $ | 16,310 |
|
| $ | 131 |
|
As commercial loans and commercial real estate loans are approved for modifications related to COVID-19, impacts unless it had individual borrower-specific information indicating it should do so.loan officers and credit department personnel review and reassign loan grades. Investor-owned commercial real estate loans in the hotel and retail sectors have been significantly affected by the pandemic, and borrowers may seek further payment deferrals during the fourth quarter of 2020 as their initial payment deferrals expire. The Company expectswill assess any further payment deferral requests considering collateral values, the financial condition of any guarantors, and the expected collectibility of contractual principal and interest payments. Loan-to-collateral values on these investor-owned loans are generally relatively low and oftentimes the loans include some form of recourse. To the extent borrowers with residential real estate loans begin to request COVID-19 related payment deferrals in the fourth quarter that will result in aggregate deferrals greater than 180 days, such loans will likelyalso be re-graded in subsequent periods as more information becomes available.reviewed for expected collectibility.
- 74 -
Loan officers in different geographic locations with the support of the Company’s credit department personnel review and reassign loan grades based on their detailed knowledge of individual borrowers and the regions in which they operate. The Company will be re-assessingre-assessed its loan grades for those borrowers most impacted by COVID-19 in the second quarter of 2020.2020 and expects that loans will continue to be re-graded in subsequent periods as more information becomes available. At least annually, however, updated financial information is obtained from commercial borrowers associated with pass grade loans and additional analysis is performed. On a quarterly basis, the Company’s centralized credit department reviews all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing. For criticized nonaccrual loans, additional meetings are held with loan officers and their managers, workout specialists and senior management to discuss each of the relationships. In analyzing criticized loans, borrower-specific information is reviewed, including operating results, future cash flows, recent developments and the borrower’s outlook, and other pertinent data. The timing and extent of potential losses, considering collateral valuation and other factors, and the Company’s potential courses of action are contemplated.
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 to estimated net collateral value shortly after the Company is notified of such filings. At March 31,September 30, 2020, approximately 59%60% 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,
- 65 -
approximately 61% (or approximately 24% 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, 2020, the balance of junior lien loans and lines that were in nonaccrual status solely as a result of first lien loan performance was $6 million, compared with $8 million at March 31, 2019 and $6 million at December 31, 2019. In monitoring the credit quality of its home equity portfolio for purposes of determining the allowance for credit losses, the Company reviews delinquency and nonaccrual information and considers recent charge-off experience. When evaluating individual home equity loans and lines of credit for charge off and for purposes of estimating incurred losses in determining the allowance for credit losses, the Company gives consideration to the required repayment of any first lien positions related to collateral property. Home equity line of credit terms vary but such lines are generally originated with an open draw period of ten years followed by an amortization period of up to twenty years. At March 31,September 30, 2020, approximately 83%84% of all outstanding balances of home equity lines of credit related to lines that were still in the draw period, the weighted-average remaining draw periods were approximately six years, and approximately 25%7% were making contractually allowed payments that do not include any repayment of principal.
Factors that influence the Company’s credit loss experience include overall economic conditions affecting businesses and consumers, generally, but also residential and commercial real estate valuations, in particular, given the size of the Company’s real estate loan portfolios. Commercial real estate valuations can be highly subjective, as they are based upon many assumptions. Such valuations can be significantly affected over relatively short periods of time by changes in business climate, economic conditions, interest rates and, in many cases, the results of operations of businesses and other occupants of the real property. Similarly, residential real estate valuations can be impacted by housing trends, the availability of financing at reasonable interest rates, and general economic conditions affecting consumers.
The Company generally estimates current expected credit losses on loans with similar risk characteristics on a collective basis. To estimate expected losses, the Company utilizes statistically developed models to project principal balances over the remaining contractual lives of the loan portfolios and determine estimated credit losses through a reasonable and supportable forecast period. The Company’s approach for estimating current expected credit losses for loans and leases at March 31,September 30, 2020, June 30, 2020 and January 1, 2020 included utilizing macro-economic assumptions to project losses over a two-year reasonable and supportable forecast period. Subsequent to the forecast period, the Company reverted to longer-term historical loss experience, over a period of
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one year, to estimate expected credit losses over the remaining contractual life. Forward-looking estimates of certain macro-economic variables are determined by the M&T Scenario Development Group, which is comprised of senior management business leaders and economists. Changes in the forecasted economic assumptions from January 1, 2020 to March 31,September 30, 2020 primarily reflect the projected impact of the COVID-19 pandemic. Specifically,The assumptions utilized as of September 30, 2020 included an increase in the unemployment rate in the fourth quarter of 2020 to approximately 10% from 8% at the end of the third quarter of 2020, followed by a sustained high single-digit unemployment rate through 2022. The forecast also assumed gross domestic product to contract nearly 5.1% in 2020 and to then recover to pre-pandemic levels by the third quarter of 2022. Commercial real estate prices were assumed to decline by 17% in 2020, followed by improvement. Residential real estate prices were not assumed to fluctuate significantly. The assumptions utilized at June 30, 2020 include a decline in the unemployment rate in the third quarter of 2020 to approximately 9% from a peak of nearly 14% in the second quarter of 2020, followed by a sustained high single-digit unemployment rate through 2022. The forecast also assumed gross domestic product to contract nearly 7% in 2020 and then to recover to pre-pandemic levels by the second quarter of 2022. Residential real estate prices were not assumed to fluctuate significantly. The forecast at March 31, 2020 reflected a sharp contraction of economic activity in the second quarter of 2020 resulting in a projected unemployment rate of 9.3% and an annualized rate of decrease in real gross domestic product as low as (26.1%). Additionally, commercial real estate prices were anticipated to decline by an average26.1% with a decrease of 15.6% in the first forecast year, followed by improvement of 9.8% in year 2.2.9% during 2020. The forecast utilized as of March 31 contemplated ana significant economic recovery beginning in the third quarter of 2020. The assumptions utilized as of January 1, 2020 at the time of adoption of the expected credit loss accounting standard were significantly less severe. Those assumptions anticipated unemployment rates that averaged under 4% and steady growth in real gross domestic product of 3.3% over the eight quarter forecast period. Forecasted changes in real estate prices as of that date were not significant. The assumptions utilized were based on information available to the Company at or near September 30, June 30, March 31 2020 and January 1, 2020 at the time it was preparing its estimate of expected credit losses as of those dates.
In establishing the allowance for credit losses the Company also considers the impact of portfolio concentrations, changes in underwriting practices, product expansions into new markets, imprecision in its economic forecasts, geopolitical conditions and other risk factors that influence its loss estimation process. Geopolitical conditions assessed at March 31,the end of each quarter in 2020 included the potential impact of COVID-19 on economic activity that could influence the ability of customers to repay loan amounts in accordance with their contractual obligations. With
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respect to economic forecasts the Company assessed the likelihood of alternative economic scenarios during the two-year reasonable and supportable time period and of more negative or positive outcomes on its allowance for credit losses. Economic forecasts have changed rapidly in the recent past due to the uncertain impacts of COVID-19. Generally, an increase in unemployment rate or a decrease in any of the rate of positive change in real gross domestic product, commercial real estate prices or home prices would have an adverse impact on expected credit losses and would likely result in an increase to the allowance for credit losses.
Further information about the Company’s methodology to estimate expected credit losses is included in note 3 of Notes to Financial Statements.
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Management believes that the allowance for credit losses at March 31,September 30, 2020 appropriately reflected expected credit losses inherent in the portfolio as of that date. The allowance for credit losses totaled $1.38$1.76 billion at March 31,September 30, 2020, compared with $1.18 billion on January 1, 2020 when the new accounting pronouncement became effective. The increaseincreases in the allowance for credit losses during each of the first quarter wasquarters of 2020 were primarily the result of deteriorated forecasted economic conditions as a result of the COVID-19 pandemic.pandemic and the expected impact of such conditions on borrowers’ abilities to repay loans. The allowance for credit losses totaled $1.02$1.04 billion at March 31,September 30, 2019, and $1.05 billion at December 31, 2019. As a percentage of loans and leases outstanding, the allowance was 1.47%1.79% at March 31,September 30, 2020, compared with 1.68% at June 30, 2020, 1.30% at January 1, 2020 1.15% as of March 31, 2019 and 1.16% at each of September 30, 2019 and December 31, 2019. Excluding the impact of $6.5 billion of government-guaranteed PPP loans originated by the Company in the second quarter of 2020, the allowance as a percentage of total loans and leases at September 30, 2020 was 1.91%. The level of the allowance reflects management’s evaluation of the loan and lease portfolio using the methodology and considering the factors previously referred to. Should the various economic forecasts and credit factors considered by management in establishing the allowance for credit losses change and should management’s assessment of losses in the loan portfolio also change, the level of the allowance as a percentage of loans could increase or decrease in future periods. The reported level of the allowance reflects management’s evaluation of the loan and lease portfolio as of each respective date.
Other Income
Other income totaled $529$521 million in the firstthird quarter of 2020, compared with $501$528 million in the corresponding 2019year-earlier quarter and $521$487 million in the finalsecond quarter of 2019.2020. As compared with the third quarter of 2019, the recent quarter’s higher residential mortgage banking revenues and trust income were more than offset by lower service charges on deposit accounts and trading account and foreign exchange gains. The recent quarter’s improvement as compared with the first three monthssecond quarter of 20192020 predominantly reflects higher service charges on deposit accounts, residential mortgage banking revenues trust income and trading accountmerchant discount and foreign exchange gains, partially offset by unrealized valuation losses on equity securities and a reduction in distributed income from BLG of $14 million. As compared with the fourth quarter of 2019, the recent quarter’s increase reflected higher levels of distributed income from BLG of $23 million in the initial 2020 quarter and increased mortgage banking revenues that were partially offset by unrealized valuation losses on equity securities and declines in loan syndication and other credit-related fees of $11 million.credit card fees.
Mortgage banking revenues were $128$153 million in the initial 2020recent quarter, compared with $95up from $137 million in the year-earlier periodthird quarter of 2019 and $118$145 million in the fourth quarter of 2019.second 2020 quarter. Mortgage banking revenues are comprised of both residential and commercial mortgage banking activities. The Company’s involvement in commercial mortgage banking activities includes the origination, sales and servicing of loans under the multi-family loan programs of Fannie Mae, Freddie Mac and the U.S. Department of Housing and Urban Development.
Residential mortgage banking revenues, consisting of realized gains from sales of residential real estate loans and loan servicing rights, unrealized gains and losses on residential real estate loans held for sale and related commitments, residential real estate loan servicing fees, and other residential real estate loan-related fees and income, were $98$119 million in the firstthird quarter of 2020, compared with $66$88 million in the correspondingsimilar quarter of 2019 and $91$111 million in the final 2019 quarter.second quarter of 2020. As compared with the first quarter of 2019,earlier quarters, the higher residential mortgage banking revenues in the recent quarter resulted from increased gains associated with loans held for sale and related commitments, reflecting higher origination volumes and improved margins, and higher servicing income. The recent quarter’s improvement from the last quarter of 2019 was predominantly due to higher gains associated with loans held for sale and related commitments.margins.
New commitments to originate residential real estate loans to be sold were approximately $919 million$1.2 billion in the initialthird quarter of 2020, compared with $422$835 million in the year-earlier quarter and $697 million$1.1 billion in the final 2019 quarter.second quarter of 2020. Realized gains from sales of residential real estate loans and loan servicing rights and recognized net unrealized gains or losses attributable to residential real estate loans held for sale, commitments to originate loans for
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sale and commitments to sell loans totaled to gains of $31$64 million in the first three monthsthird quarter of 2020, $10$23 million in the similarcorresponding period of 2019 and $26$52 million in 2019’s fourth2020’s second quarter.
Loans held for sale that were secured by residential real estate aggregated $374$571 million at March 31,September 30, 2020, $178$391 million at March 31,September 30, 2019 and $414 million at December 31, 2019. Commitments to sell residential real estate loans and commitments to originate residential real estate loans for sale at pre-determined rates totaled $782$1.34 billion and $1.13 billion, respectively, at September 30, 2020, compared with $759 million and $712$530 million, respectively, at March 31, 2020, compared with $380 million and $314 million, respectively, at March 31,September 30, 2019 and $713 million and $423 million, respectively, at December 31, 2019. 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 million and $8$59 million at March 31,September 30, 2020 and March 31, 2019, respectively, compared with $12 million at each of
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September 30, 2019 and December 31, 2019. Changes in net unrealized gains or losses are recorded in mortgage banking revenues and resulted in net increases in revenues of $5 million and $1$15 million in the first quarters of 2020 and 2019, respectively. The impact of such changesrecent quarter, $2 million in the fourththird quarter of 2019 was nil.and $26 million in the second quarter of 2020.
Revenues from servicing residential real estate loans for others were $67$55 million during the three-month periodquarter ended March 31,September 30, 2020, compared with $56$65 million and $65$59 million during the quartersthree months ended March 31,September 30, 2019 and December 31, 2019,June 30, 2020, respectively. Residential real estate loans serviced for others totaled $93.5$94.9 billion at March 31,September 30, 2020, $90.1$98.3 billion at March 31,September 30, 2019 and $95.1 billion at each of June 30, 2020 and December 31, 2019. Reflected in residential real estate loans serviced for others were loans sub-serviced for others of $61.9$67.0 billion, $54.9$65.1 billion, $62.8 billion and $62.8$64.7 billion at March 31,September 30, 2020, MarchSeptember 30, 2019, December 31, 2019 and December 31, 2019,June 30, 2020, respectively. Revenues earned for sub-servicing loans totaled $37$30 million during the recent quarter, compared with $28$33 million in the firstthird quarter of 2019 and $35$34 million in the finalsecond quarter of 2019. The2020. During 2020, the Company added approximately $16.6 billionloans to its residential mortgage loan sub-servicing portfolio duringtotaling approximately $2.0 billion in the first quarter, $6.9 billion in the second quarter of 2019 and another $1.0$7.0 billion was added duringin the fourth quarter of 2019.third quarter. The contractual servicing rights associated with loans sub-serviced by the Company were predominantly held by affiliates of BLG. Information about the Company’s relationship with BLG and its affiliates is included in note 14 of Notes to Financial Statements.
Capitalized residential mortgage servicing assets totaled $224$202 million at March 31,September 30, 2020 (net of a $17$27 million valuation allowance), $260$226 million at March 31,September 30, 2019 and(net of a $23 million valuation allowance), $237 million at December 31, 2019 (net of a $7 million valuation allowance) and $211 million at June 30, 2020 (net of a $27 million valuation allowance). A provisionProvisions for impairment of capitalized residential mortgage servicing rights of $10 million wasand $14 million were recorded in the initialsecond quarter of 2020 and the third quarter resultingof 2019, respectively. Those provisions resulted from changes in the estimated fair value of capitalized mortgage servicing rights that reflected the impact of lower interest rates on the expected rate of residential mortgage loan prepayments. DuringThere was no similar provision in the fourththird quarter of 2019, the Company reduced the valuation allowance for capitalized residential mortgage servicing rights by $16 million, reflecting the impact of higher interest rates at that time. 2020.
Commercial mortgage banking revenues totaled $30$34 million in each of the third and second quarters of 2020 and $49 million in the recentthird quarter compared with $29 million and $27 million in the first and fourth quarters of 2019, respectively.2019. Included in such amounts were revenues from loan origination and sales activities of $14$19 million in each of the first quarter of 2020, $15two most recent quarters and $32 million in the year-earlier quarter and $11 million in the final quarter of 2019.2019’s third quarter. Commercial real estate loans originated for sale to other investors were approximately $611$785 million in the recent quarter, compared with $777 million$1.5 billion in the firstthird quarter of 2019 and $709$729 million in the fourthsecond quarter of 2019.2020. Loan servicing revenues totaled $16$15 million in each of the two most recentthird and second quarters of 2020, compared with $14$17 million in the initial 2019 quarter.third quarter of 2019. Capitalized commercial mortgage servicing assets were $129 million and $117$128 million at March 31,September 30, 2020 and 2019, respectively, and $131 million at December 31, 2019. Commercial real estate loans serviced for other investors totaled $21.7 billion at September 30, 2020, $20.5 billion at September 30, 2019 and $21.0 billion at December 31, 2019. Those servicing amounts included $3.9 billion at each of March 31,September 30, 2020 and December 31, 2019 and $19.2 billion at March 31, 2019. Those servicing amounts included $3.8 billion at March 31, 2020, $3.5 billion at March 31, 2019 and $3.9 billion at December 31,September 30, 2019 of loan balances for which investors had recourse to the Company if such balances are ultimately uncollectible. Commitments to sell commercial real estate loans and commitments to originate commercial real estate loans for sale were $542$552 million and $291$216 million, respectively, at March 31,September 30, 2020, $366$591 million and $200$393 million, respectively, at March 31,September 30, 2019 and $193 million and $164 million, respectively, at December 31, 2019. Commercial real estate loans held for sale at March 31,September 30, 2020, March 31,September 30, 2019 and December 31, 2019 were $250$336 million, $166$197 million and $28 million, respectively.
Service charges on deposit accounts were $106$91 million and $103$111 million in the firstthird quarters of 2020 and 2019, respectively, and $111$77 million in the fourthsecond quarter of 2019.2020. The declinedeclines in such service charges in the two most recent quarters as compared with the third quarter of 2019 resulted from lower consumer service charges, predominantly resulting from COVID-19 related fee waivers and lower customer transaction activity, and decreased commercial service charges, largely due to higher customer deposit levels that can be used by those customers to offset transaction-related fees. The improvement from the second to the third quarter of 2020 reflects increased customer transaction activity and the re-establishment of ATM fees.
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quarter as compared with the immediately preceding quarter resulted largely from seasonally lower consumer service charges related to overdraft fees and debit card transactions.
Trust income includes fees related to two significant businesses. The Institutional Client Services (“ICS”) business provides a variety of trustee, agency, investment management and administrative services for corporations and institutions, investment bankers, corporate tax, finance and legal executives, and other institutional clients who: (i) use capital markets financing structures; (ii) use independent trustees to hold retirement plan and other assets; and (iii) need investment and cash management services. The Wealth Advisory Services (“WAS”) business helpsoffers personal trust, planning, fiduciary, asset management, family office and other services designed to help high net worth clientsindividuals and families grow, their wealth, protect it,preserve and transfer it to their heirs.wealth. A comprehensive array of wealth management services are offered, including asset management, fiduciary services and family office services. Trust income aggregated $149$150 million in the firstthird quarter of 2020, compared with $133$144 million in the year-earlier quarter and $151$152 million in the fourthsecond quarter of 2019.2020. Revenues associated with the ICS business were approximately $85$87 million $71during the quarter ended September 30, 2020, compared with $79 million and $84$85 million during the quarters ended March 31, 2020, March 31,September 30, 2019 and December 31, 2019,June 30, 2020, respectively. The higher revenues in the two most recent quarterquarters as compared with the year-earlierthird quarter of 2019 reflect the impact of higher sales activities and increased retirement services income resutingresulting from growth in collective fund balances. Revenues attributable to WAS totaled approximately $56$57 million $55 millionduring each of the three-month periods ended September 30, 2020 and 2019 and $60 million for the three-month periodsperiod ended March 31, 2020, March 31, 2019 and December 31, 2019, respectively.June 30, 2020. The lower revenues in the recent quarter as compared with the final 20192020 second quarter were largely reflect lower recurringattributable to annual tax service fees due to declining equity market performance, changing product mix and competitive factors.in the second quarter earned for assisting customers with their tax filings. Trust assets under management were $103.6$123.4 billion, $92.9$107.0 billion, $114.4 billion and $113.0 billion at March 31,September 30, 2020, March 31,September 30, 2019, June 30, 2020 and December 31, 2019, respectively. Trust assets under management include the Company’s proprietary mutual funds’ assets of $12.8$12.5 billion, $11.3$12.3 billion, $12.6 billion and $12.5 billion at March 31,September 30, 2020, March 31,September 30, 2019, June 30, 2020 and December 31, 2019, respectively. Additional trust income from investment management activities was $6 million and $8 million in the two most recentthird quarters compared withof 2020 and 2019, respectively, and $7 million in the firstsecond 2020 quarter, of 2019 and is predominantly comprised of fees earned from retail customer investment accounts.
Brokerage services income, which includes revenues from the sale of mutual funds and annuities and securities brokerage fees, totaled $13 million in the recent quarter, compared with $12 million in each of the first and fourththird quarters of 2019.2020 and 2019 and $10 million in the second quarter of 2020. Trading account and foreign exchange activity resulted in gains of $21$4 million, $16 million and $11$8 million during the quarters ended March 31,September 30, 2020, September 30, 2019 and 2019, respectively, compared with gains of $17 million in the fourth quarter of 2019.June 30, 2020, respectively. The higherlower gains in the two most recent quarterquarters as compared with the first and fourth quartersthird quarter of 2019 were predominantly due to increaseddecreased activity related to interest rate swap agreements executed on behalf of commercial customers. The Company enters into interest rate and foreign exchange contracts with customers who need such services and concomitantly enters into offsetting trading positions with third parties to minimize the risks involved with these types of transactions. Information about the notional amount of interest rate, foreign exchange and other contracts entered into by the Company for trading account purposes is included in note 9 of Notes to Financial Statements and herein under the heading “Taxable-equivalent Net Interest Income.”
The Company recognized net lossesgains on investment securities of $21$3 million in the recent quarter, and $6$4 million in the fourththird quarter of 2019 compared with net gains of $12and $7 million in the firstsecond quarter of 2019.2020. The gains and losses represented unrealized gains and losses on investments in Fannie Mae and Freddie Mac preferred stock holdings.stock.
Other revenues from operations were $133$108 million in the first three monthsthird quarter of 2020, compared with $134$104 million in the similarcorresponding 2019 period and $118$87 million in the fourthsecond quarter of 2019. The most significant contributor2020. Contributing to the higherincrease in such revenues in the initial 2020recent quarter as compared with the final three months of 2019 was a $23 million income distribution from BLG in 2020, partially offset by lower loan syndicationimmediately preceding quarter were higher transaction-based merchant discount and credit card fees, of $10 million.credit-related fees, and other miscellaneous income. Included in other revenues from operations were the following significant components. Letter of credit and other credit-related fees aggregated $32$27 million in the recent quarter, compared with $24$28 million in the year-earlier quarter and $43$25 million in the fourthsecond quarter of 2019.2020. Revenues from merchant discount and credit card fees were $30$28 million in the initialthird quarter of 2020, compared with $27$31 million in the year-earlier quarter and $28$23 million in the final 2019second 2020 quarter. Tax-exempt income from bank owned life insurance, which includes increases in the cash surrender value of life insurance policies and benefits received, totaled $12 million in each of the firstthird quarters of 2020 and 2019 and $13 million in
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the fourthsecond quarter of 2019.2020. Insurance-related sales commissions and other revenues totaled $15$11 million in the
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quarter ended March 31,September 30, 2020, compared with $14$10 million in each of 2019’s third quarter and the second quarter of 2020.
Other income totaled $1.54 billion during each of the first nine months of 2020 and 2019. Higher mortgage banking revenues and trust income in 2020 were offset by decreases in service charges on deposit accounts, trading account and foreign exchange gains, income from BLG and merchant discount and credit card fees, and unrealized losses on investment securities.
Mortgage banking revenues totaled $426 million during the first nine months of 2020, compared with $340 million during the similar period in 2019. Residential mortgage banking revenues aggregated $329 million and $226 million during the nine-month periods ended September 30, 2020 and 2019, respectively. New commitments to originate residential real estate loans to be sold aggregated $3.3 billion and $2.0 billion in the initial nine months of 2020 and 2019, respectively. Realized gains from sales of residential real estate loans and loan servicing rights and recognized unrealized gains and losses on residential real estate loans held for sale, commitments to originate loans for sale and commitments to sell loans aggregated to gains of $148 million and $46 million in the nine-month periods ended September 30, 2020 and 2019, respectively. Revenues from servicing residential real estate loans for others were $181 million in the first nine months of 2020 and $180 million in the corresponding 2019 period. Included in servicing revenues were sub-servicing revenues aggregating $101 million and $90 million in the first nine months of 2020 and 2019, respectively. For the nine months ended September 30, commercial mortgage banking revenues were $98 million and $114 million in 2020 and 2019, respectively. Commercial real estate loans originated for sale to other investors totaled $2.2 billion and $3.3 billion during the nine-month periods ended September 30, 2020 and 2019, respectively.
Service charges on deposit accounts aggregated $275 million during the first nine month of 2020, compared with $322 million in the year-earlier period. That decline was predominantly due to lower consumer service charges resulting from the impact of the pandemic, reflecting waived fees and lower customer transaction activity. Trust income totaled $451 million and $421 million during the first nine months of 2020 and 2019, respectively. The increase in trust income in 2020 as compared with 2019 was largely due to higher revenues from the ICS business, reflecting both sales activities and higher retirement services income from growth in collective fund balances. Brokerage services income totaled $35 million in the first nine months of 2020, compared with $37 million in the nine-month period ended September 30, 2019. Trading account and foreign exchange activity resulted in gains of $33 million and $45 million in the first nine months of 2020 and 2019, respectively. The lower gains in 2020 were predominantly due to decreased activity related to interest rate swap agreements executed on behalf of commercial customers.
Net unrealized losses on investment securities totaling $11 million were recognized during the first nine months of 2020, compared with net unrealized gains of $24 million in 2019’sthe corresponding 2019 period.
Other revenues from operations totaled $328 million in the first nine months of 2020, compared with $351 million in the year-earlier period. Other revenues from operations include the following significant components. Letter of credit and fourth quarters,other credit-related fees aggregated $83 million and $81 million in 2020 and 2019, respectively. Income from bank owned life insurance totaled $37 million in the first nine months of 2020, compared with $38 million in the corresponding 2019 period. Merchant discount and credit card fees were $80 million and $89 million in the first nine months of 2020 and 2019, respectively. Insurance-related commissions and other revenues aggregated $36 million in each of 2020 and 2019. M&T’s investment in BLG resulted in income of $23 million in the first quartersnine months of 2020 and 2019 of $23 million and $37 million respectively. There was no such income in the fourth quarter of 2019.similar 2019 period.
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Other Expense
Other expense totaled $906$827 million in the firstthird quarter of 2020, compared with $894$878 million in the correspondingyear-earlier quarter of 2019 and $824$807 million in the final three monthssecond quarter of 2019.2020. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of $4 million in each of the two most recent quarters compared withand $5 million in the firstthird quarter of 2019. Exclusive of those nonoperating expenses, noninterest operating expenses were $903$823 million in the recent quarter, compared with $889$873 million in the year-earlier periodthird quarter of 2019 and $819$803 million in the final quarter of 2019. Factors contributing to the highersecond 2020 quarter. The lower level of expenses in the recent quarter as compared with the year-earlier quarter were increased costs for salaries and employee benefits, outside data processing and software, and a $10 million increase to the valuation allowance for capitalized residential mortgage servicing rights, partially offset by lower costs of $60 million for legal-related matters and professional and outside services. The recent quarter’s rise in noninterest operating expenses as compared with the fourththird quarter of 2019 was largely attributable to lower costs for professional and outside services, advertising and marketing, and travel and entertainment. The last two categories reflect reduced business activities associated with the COVID-19 pandemic. Additionally, the third quarter of 2019 included a $14 million addition to the valuation allowance for capitalized mortgage servicing rights. There was no similar expense in the recent quarter. As compared with the second quarter of 2020, higher salaries and employee benefits in the recent quarter contributed to the increased expenses, reflecting seasonally higher stock-based compensation and employee benefits expenses, and changes inpartially offset by a $10 million addition to the valuation allowance for capitalized residential mortgage servicing rights. That allowance was increased by $10 million during the recent quarter, compared with a reduction of $16 millionrights recognized in the fourthsecond quarter of 2019.2020. Table 2 provides a reconciliation of other expense to noninterest operating expense.
SalariesOther expense for the first nine months of 2020 totaled $2.54 billion, compared with $2.64 billion in the year-earlier period. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and employee benefits expense totaled $537other intangible assets of $12 million and $15 million in the initial quarternine-month periods ended September 30, 2020 and 2019, respectively. Exclusive of those nonoperating expenses, noninterest operating expenses for the first three quarters of 2020 were $2.53 billion, compared with $499 million$2.63 billion in the similar 2019 quarter and $469period. The decline in noninterest operating expenses was largely attributable to a $48 million charge recorded in the fourthsecond quarter of 2019 to reduce the carrying value of an investment in an asset manager that had been accounted for using the equity method of accounting to its estimated realizable value. The sale of that investment was completed in September 2019. TheAlso contributing to the decline were lower costs for legal-related matters and professional and outside services, partially offset by higher salaries and employee benefits expenses in the recent2020 period.
Salaries and employee benefits expense totaled $479 million in the third quarter asof 2020, compared with $477 million in the year-earlier period reflectquarter and $459 million in the impactsecond quarter of higher staffing levels, as well as merit and other increases for employees, higher incentive-based compensation and increased employee benefit costs.2020. The increase in salaries and employee benefits expense in the recent quarter as compared with 2019’s fourththe second quarter reflects seasonallyof 2020 was predominantly due to 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,resulting in accordance with GAAP, has accelerated the recognition of compensation costs for stock-based awards granted to retirement-eligible employeespart from increased business activities and employees who will become retirement-eligible prior to full vesting of the award. As a result, stock-based compensation expense duringone more business day. During the first quartersnine months of 2020 and 2019, included $31 millionsalaries and $27 million, respectively, that would have been recognized overemployee benefits expense aggregated $1.47 billion and $1.43 billion, respectively. The higher expense level in 2020 largely reflects the normal vesting period if notimpact of merit and other increases for the accelerated recognition provisions of GAAP.That acceleration had no effect on the value of stock-basedemployees and increased employee benefit costs, partially offset by lower incentive compensation awarded to employees.costs. Salaries and employee benefits expense included stock-based compensation of $43$12 million and $40 million in each of the three-month periods ended March 31,September 30, 2020 and March 31,September 30, 2019 respectively, and $11$13 million in the three-month period ended December 31, 2019.June 30, 2020, and $69 million and $65 million during the nine-month periods ended September 30, 2020 and 2019, respectively. The number of full-time equivalent employees was 17,41616,980 at March 31,September 30, 2020, compared with 17,08017,536 and 17,50317,098 at March 31,September 30, 2019 and December 31, 2019,June 30, 2020, respectively.
Excluding the nonoperating expense items described earlier from each quarter, nonpersonnel operating expenses were $366$344 million in each of the quarters ended September 30, 2020 and $390June 30, 2020 and $396 million in the quartersquarter ended March 31,September 30, 2019. On that same basis, such expenses were $1.05 billion and $1.20 billion in the nine-month periods ended September 30, 2020 and March 31, 2019, respectively, and $350 million in the final quarter of 2019.respectively. The decline in nonpersonnel expenses in the recent quarter as compared with the firstthird quarter of 2019 reflects lower costs of $60 million for legal-related matters and professional and outside services, largely resulting from a first quarter 2019 addition to the reserve for legal matters of $50 million.advertising and marketing, and travel and entertainment. The higher level ofdecline in nonpersonnel operating expenses in the recent quarterfirst nine months of 2020 as compared with the finalsimilar 2019 quarter was predominantly attributableperiod reflected the $48 million charge related to the $10 million addition to the valuation allowance for capitalized residential mortgage servicing rightsasset manager investment in the initial 2020second quarter compared with a reduction in that valuation allowance of $16 million in the final three months of 2019. 2019 and reduced costs for legal-related matters, professional services, advertising and marketing, and travel and entertainment.
The efficiency ratio measures the relationship of noninterest operating expenses to revenues. The Company’s efficiency ratio was 58.9%56.2% during the recent quarter, compared with 57.6%56.0% and 53.1%55.7% in the first and fourth quartersthird quarter of 2019
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and second quarter of 2020, respectively. The efficiency ratios for the nine-month periods ended September 30, 2020 and 2019 were 57.0% and 56.5%, respectively. The calculation of the efficiency ratio is presented in Table 2.
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Income Taxes
The provision for income taxes was $81$115 million in the firstthird quarter of 2020, compared with $152$155 million and $71 million in the year-earlier quarter and $159the second quarter of 2020, respectively. For the nine-month periods ended September 30, 2020 and 2019, the provisions for income taxes were $267 million in the final 2019 quarter.and $459 million, respectively. The effective tax rates were 23.1%23.6%, 23.9%24.4% and 24.4%22.8% for the quarters ended March 31,September 30, 2020, March 31,September 30, 2019 and December 31,June 30, 2020, respectively, and 23.2% and 24.2% for the nine-month periods ended September 30, 2020 and 2019, respectively.
The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income, the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact of any large discrete or infrequently occurring items. The Company’s effective tax rate in future periods will also be affected by any change in income tax laws or regulations and interpretations of income tax regulations that differ from the Company’s interpretations by any of various tax authorities that may examine tax returns filed by M&T or any of its subsidiaries.
Capital
Shareholders’ equity was $15.8$16.1 billion at March 31,September 30, 2020, representing 12.70%11.61% of total assets, compared with $15.6$15.8 billion or 12.99%12.57% a year earlier and $15.7 billion or 13.11% at December 31, 2019.
Included in shareholders’ equity was preferred stock with financial statement carrying values of $1.25 billion at each of March 31,September 30, 2020, September 30, 2019 and December 31, 2019, compared with $1.23 billion at March 31, 2019.
Reflecting the impact of repurchases of M&T’s common stock, commonCommon shareholders’ equity was $14.6$14.9 billion, or $113.54$115.75 per share, at March 31,September 30, 2020, compared with $14.4$14.5 billion, or $105.04$109.84 per share, a year earlier and $14.5 billion, or $110.78 per share, at December 31, 2019. Tangible equity per common share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was $77.60$79.85 at the end of the recent quarter, compared with $71.19$74.93 at March 31,September 30, 2019 and $75.44 at December 31, 2019. The Company’s ratio of tangible common equity to tangible assets was 8.30%7.64% at March 31,September 30, 2020, compared with 8.43%8.20% a year earlier and 8.55% at December 31, 2019. Reconciliations of total common shareholders’ equity and tangible common equity and total assets and tangible assets as of each of those respective dates are presented in table 2.
Shareholders’ equity reflects accumulated other comprehensive income or loss, which includes the net after-tax impact of unrealized gains or losses on investment securities classified as available for sale, remaining unrealized losses on held-to-maturity securities transferred from available for sale that have not yet been amortized, gains or losses associated with interest rate swap agreements designated as cash flow hedges, foreign currency translation adjustments and adjustments to reflect the funded status of defined benefit pension and other postretirement plans. Net unrealized gains on investment securities reflected in shareholders’ equity, net of applicable tax effect, were $135$152 million, or $1.05$1.18 per common share, at March 31,September 30, 2020, $30 million, or $.22 per common share, at September 30, 2019 and $37 million, or $.29 per common share, at December 31, 2019, compared with net unrealized losses of $63 million, or $.46 per common share at March 31, 2019. Changes in unrealized gains and losses on investment securities are predominantly reflective of the impact of changes in interest rates on the values of such securities. Information about unrealized gains and losses as of March 31,September 30, 2020 and December 31, 2019 is included in note 2 of Notes to Financial Statements.
Reflected in the carrying amount of available-for-sale investment securities at March 31,September 30, 2020 were pre-tax effect unrealized gains of $212$223 million on securities with an amortized cost of $5.7$4.9 billion and pre-tax effect unrealized losses of $20$11 million on securities with an amortized cost of $245$159 million. Information concerning the Company’s fair valuations of investment securities is provided in notes 2 and 11 of Notes to Financial Statements.
Each reporting period the Company reviews its available-for-sale investment securities for declines in value that might be indicative of credit-related losses through an analysis of the creditworthiness of the issuer or the credit performance of the underlying collateral supporting the bond. If the Company does not expect to recover the entire
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amortized cost basis of a debt security a credit loss is recognized and such loss would be recognized in the consolidated statement of income. Beginning January 1, 2020, an allowance for credit losses would reduce the carrying value of available-for-sale investment securities. Previously if a credit-related loss was deemed to have occurred, the investment security’s cost basis was adjusted, as appropriate for the circumstances. A loss is also recognized in the consolidated statement of income if the Company intends to sell a bond or it more likely than not will be required to sell a bond before recovery of the amortized cost basis.
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As of March 31,September 30, 2020, based on a review of each of the securities in the available-for-sale investment securities portfolio, the Company concluded that it expected to realize the amortized cost basis of each security. As of March 31,September 30, 2020, the Company did not intend to sell nor is it anticipated that it would be required to sell any securities for which fair value was less than the amortized cost basis of the security. The Company intends to continue to closely monitor the performance of its securities because changes in their underlying credit performance or other events could cause the amortized cost basis of those securities to become uncollectible.
On January 1, 2020 the Company adopted amended accounting guidance that requires investment securities held to maturity to be presented at their net carrying value that is expected to be collected over their contractual term. The Company estimated no material allowance for credit losses for its investment securities classified as held-to-maturity at January 1, 2020 and March 31,September 30, 2020 as the substantial majority of such investment securities were obligations backed by the U.S. government or its agencies. The Company assessed the potential for expected credit losses on privately issued mortgage-backed securities in the held-to-maturity portfolio by performing internal modeling to estimate bond-specific cash flows considering recent performance of the mortgage loan collateral and utilizing assumptions about future defaults and loss severity. These bond-specific cash flows also reflect the placement of the bond in the overall securitization structure and the remaining subordination levels. In total, at March 31,September 30, 2020 and December 31, 2019, the Company had in its held-to-maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of $90$80 million and $93 million, respectively, and a fair value of $78$73 million and $87 million, respectively. At March 31,September 30, 2020, 82% of the mortgage-backed securities were in the most senior tranche of the securitization structure with 19%14% 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 10% at March 31, 2020, calculated by dividing the remaining unpaid principal balance of bonds subordinate to the bonds owned by the Company plus any overcollateralization remaining in the securitization structure by the remaining unpaid principal balance of all bonds in the securitization structure. The weighted-average default percentage and loss severity assumptions utilized in the Company’s internal modeling were 32% and 68% respectively.2008. Given the securitization structure, some of 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,September 30, 2020, it expected to recover the amortized cost basis of those privately issued mortgage-backed securities. Nevertheless, it is possible that adverse changes in the estimated future performance of mortgage loan collateral underlying such securities could impact the Company’s conclusions.
Adjustments to reflect the funded status of defined benefit pension and other postretirement plans, net of applicable tax effect, reduced accumulated other comprehensive income by $333$315 million, or $2.60$2.46 per common share, at March 31,September 30, 2020, $259$252 million, or $1.90$1.91 per common share, at March 31,September 30, 2019 and $342 million, or $2.62 per common share, at December 31, 2019.
Pursuant to previously approved capital plans and authorizations by M&T’s Board of Directors, M&T repurchased 2,577,000 shares of its common stock for $374 million in the first quarter of 2020. During the initial 2019 quarter, M&T repurchased 2,150,000 common shares at a total cost of $366 million. RepurchasesThere were no repurchases of common stock in either of the final 2019 quarter totaled 1,724,000 shares at a cost of $282 million.two most recent quarters. In light of the COVID-19 pandemic impact on overall economic conditions and consistent with regulatory guidance, M&T has ceased repurchasing its common stock for the time being.
Cash dividends declared on M&T’s common stock totaled $143 million in the initial quarter of 2020, compared with $139 millionbeing and $145 million in the three-month periods ended March 31, 2019 and December 31, 2019, respectively. Duringdoes not anticipate repurchasing any shares during the fourth quarter of 2020. M&T repurchased 1,933,000 shares of its common stock for $300 million in the third quarter of 2019 and 6,533,000 shares for $1.07 billion during the first nine months of 2019.
M&T’s Board of Directors authorized an increase in the quarterly common stock dividend to $1.10 per common share in the fourth quarter of 2019, up from the previous rate of $1.00 per common share. Cash dividends declared on M&T’s common stock totaled $142 million during each of the quarters ended September 30, 2020 and June 30, 2020 and $133 million in the third quarter of 2019. Common stock dividends during the nine-month periods ended September 30, 2020 and 2019 were $427 million and $407 million, respectively. Cash dividends declared on preferred stock aggregated $17 million in each of the first quarter of 2020two most recent quarters and fourth quarter of 2019, compared with $18$19 million in the initialthird quarter of 2019.
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2019. Cash dividends on preferred stock totaled $51 million and $55 million during the nine months ended September 30, 2020 and 2019, respectively.
M&T and its subsidiary banks are required to comply with applicable capital adequacy standards established by the federal banking agencies. Pursuant to those regulations, the minimum capital ratios are as follows:
| • | 4.5% Common Equity Tier 1 (“CET1”) to risk-weighted assets (each as defined in the capital regulations); |
| • | 6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets (each as defined in the capital regulations); |
| • | 8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets (each as defined in the capital regulations); and |
| • | 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”), as defined in the capital regulations. |
In addition, capital regulations require a “capital conservation buffer” of 2.5% composed entirely of CET1 on top of thesethe minimum risk-weighted asset ratios.
The federal bank regulatory agencies have issued rules that allow banks and bank holding companies to phase -in the impact of adopting the expected credit loss accounting model on regulatory capital. Those rules allow banks and bank holding companies to delay for two years the day one impact on retained earnings of adopting the expected loss accounting standard and 25% of the cumulative change in the reported allowance for credit losses subsequent to the initial adoption, followed by a three yearthree-year transition period. M&T and its subsidiary banks have elected to adopt these rules and the impact is reflected in the regulatory capital ratios presented below.
The regulatory capital ratios of the Company and its bank subsidiaries, M&T Bank and Wilmington Trust, N.A., as of March 31,September 30, 2020 are presented in the accompanying table.
REGULATORY CAPITAL RATIOS
March 31,September 30, 2020
|
| M&T |
|
| M&T |
|
| Wilmington |
|
| M&T |
|
| M&T |
|
| Wilmington |
| ||||||
|
| (Consolidated) |
|
| Bank |
|
| Trust, N.A. |
|
| (Consolidated) |
|
| Bank |
|
| Trust, N.A. |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 |
|
| 9.19% |
|
|
| 9.84% |
|
|
| 48.72% |
|
|
| 9.81% |
|
|
| 10.78% |
|
|
| 61.96% |
|
Tier 1 capital |
|
| 10.35% |
|
|
| 9.84% |
|
|
| 48.72% |
|
|
| 11.01% |
|
|
| 10.78% |
|
|
| 61.96% |
|
Total capital |
|
| 12.54% |
|
|
| 11.56% |
|
|
| 48.88% |
|
|
| 13.31% |
|
|
| 12.60% |
|
|
| 62.17% |
|
Tier 1 leverage |
|
| 9.59% |
|
|
| 9.13% |
|
|
| 11.98% |
|
|
| 8.51% |
|
|
| 8.34% |
|
|
| 12.48% |
|
The Company is subject to the comprehensive regulatory framework applicable to bank and financial holding companies and their subsidiaries, which includes regular examinations by a number of regulators. Regulation of financial institutions such as M&T and its subsidiaries is intended primarily for the protection of depositors, the Deposit Insurance Fund of the FDIC and the banking and financial system as a whole, and generally is not intended for the protection of shareholders, investors or creditors other than insured depositors. Changes in laws, regulations and regulatory policies applicable to the Company’s operations can increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive environment in which the Company operates, all of which could have a material effect on the business, financial condition or results of operations of the Company and in M&T’s ability to pay dividends. For additional information concerning this comprehensive regulatory framework, refer to Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, 2019.
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Segment Information
The Company's reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Financial information about the Company's segments is presented in note 13 of Notes to Financial Statements. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.
The Business Banking segment recorded net income of $36 million in the third quarter of 2020, down from $46 million in the third quarter of 2019 and $38 million in the second quarter of 2020. As compared with 2019’s third quarter, the recent quarter’s lower net income primarily reflected declines of $8 million in net interest income and $4 million in service charges on deposit accounts. The decrease in net interest income resulted largely from a narrowing of the net interest margin on deposits and loans of 111 basis points and 74 basis points, respectively, partially offset by higher average outstanding balances of deposits and loans of $4.1 billion and $3.4 billion, respectively. The lower service charges on deposit accounts reflect the impact of the COVID-19 pandemic that has resulted in waived fees and lower customer transaction activity. The modest decrease in net income in the recent quarter as compared with the second quarter of 2020 reflected a $9 million decline in net interest income, resulting largely from a 48 basis point narrowing of the net interest margin on deposits. Partially offsetting that unfavorable factor were a $4 million decrease in the provision for credit losses, due to lower net charge-offs, and higher merchant discount and credit card fees of $2 million. Net income offor the Business Banking segment was $33totaled $106 million during the quarter ended March 31,first nine months of 2020, compared with $43$132 million in the year-earlier quarter and $37 million in the fourth quarter of 2019. As compared
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with the initialcorresponding 2019 quarter, the recent quarter’s decline reflectedperiod. That 19% decrease was predominantly attributable to an $8$11 million increase in the provision for credit losses, due largely to higher net charge-offs, $7 million of declines in each of net interest income and service charges on deposit accounts, and a $4$6 million decreaseincrease in net interest income.salaries and employee benefits expenses. The lower net interest income reflected a narrowing of the net interest margin on deposits and loans of 4283 basis points and 43 basis points, respectively, partially offset by an increase in part,average outstanding deposit and loan balances of $2.6 billion and $2.1 billion, respectively. The decrease in service charges on deposit accounts reflected the impact of the pandemic that has resulted in waived fees and reduced customer transaction activity.
Net income earned by the Commercial Banking segment totaled $131 million during the recent quarter, down slightly from $133 million in the year-earlier quarter, but up from $111 million in the second quarter of 2020. As compared with the third quarter of 2019, unfavorable factors in the recent quarter included a 21$4 million decrease in net interest income that reflected a 101 basis point wideningnarrowing of the net interest margin on loans anddeposits, partially offset by higher average balances of loans of $300 million andoutstanding deposits of $304$7.8 billion, and a $4 million decline in trading account and foreign exchange gains that resulted from decreased activity related to interest rate swap agreements executed on behalf of commercial customers. Those unfavorable factors were partially offset by increased gains on the sale of equipment previously leased to customers of $5 million. The decrease18% rise in net income in the recent quarter as compared with the finalsecond quarter of 20192020 was predominantlydriven by a $38 million decrease in the provision for credit losses, due to anlower loan balances and net charge-offs, $5 million of gains on the sale of previously leased equipment in the recent quarter and a $9 million write-down of equipment leased to customers under operating leases during the second 2020 quarter. Partially offsetting those positive factors was a decrease in net interest income of $23 million, reflecting a 57 basis point narrowing of the net interest margin on deposits. Through the first nine months of the year, net income for the Commercial Banking segment totaled $386 million in 2020, little changed from $388 million in 2019. The largely offsetting factors contributing to the slight decline were a $34 million increase in the provision for credit losses, due to higher loan balances and net charge-offs, and a $9 million write-down of $6equipment in 2020 that was leased to customers, offset by a $26 million increase in net interest income, a $7 million increase in credit-related fees, and increased gains on the sale of equipment previously leased to customers of $5 million. The higher net interest income reflected higher average outstanding deposit and loan balances of $5.3 billion and $2.3 billion, respectively, partially offset by a 76 basis point narrowing of the net interest margin on deposits.
The Commercial Real Estate segment contributed net income of $87 million in the third quarter of 2020, down from $131 million in the similar 2019 period and $107 million in the second quarter of 2020. The 34% decline in net income as compared with the third quarter of 2019 reflected a $19 million increase in the provision for credit losses, due to higher net charge-offs and lowerloan growth, a $14 million decrease in net interest income, a $12 million decline in
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mortgage banking revenues reflecting decreased gains on loans originated for sale, and lower trading account and foreign exchange gains of $5 million, partially offset by a $5 million$7 million. The decrease in centrally-allocated costs, largely associated with data processing, risk management and other support services provided to the Business Banking segment. The decline in net interest income reflected a narrowing of the net interest margin on deposits and loans of 1099 basis points and lower26 basis points, respectively, partially offset by a $1.7 billion increase in average deposit balances of $452 million.
outstanding loan balances. The Commercial Banking segment contributed net income of $144$20 million decrease in the recent quarter, compared with $132 million in each of the first and fourth quarters of 2019. The 9% improvement in the first quarter of 2020quarter’s net income as compared with the correspondingimmediately preceding quarter of 2019 was primarilylargely the result of an increase in letter of credit and other credit-related fees of $8a $22 million a $7 million increasedecline in net interest income and a $5$7 million riseincrease in trading accountsalaries and foreign exchange gains, due largely to increased activity related to interest rate swap transactions executed on behalf of commercial customers. The higher net interest income reflected increases in average outstanding loan and deposit balances of $1.2 billion and $1.1 billion, respectively, and a seven basis point expansion of the net interest margin on loans,employee benefits, partially offset by a 40$4 million decrease in the provision for credit losses, mainly due to lower net charge-offs. The decrease in net interest income resulted from a 30 basis point narrowing of the net interest margin on deposits. Partially offsetting those favorable factorsloans. Net income for the Commercial Real Estate segment was an $8$312 million during the nine-month period ended September 30, 2020, down 16% from $370 million in the corresponding 2019 period. That decline resulted from a $41 million increase in the provision for credit losses, mainly resulting fromdue to higher net charge-offs (dueand loan growth, lower net interest income of $11 million, a $10 million decrease in mortgage banking revenues reflecting decreased gains on loans originated for sale, and higher FDIC assessments of $5 million. The decrease in net interest income resulted from a narrowing of the net interest margin on deposits and loans of 71 basis points and 13 basis points, respectively, partially offset by higher average outstanding loan balances of $1.5 billion.
Net income recorded by the Discretionary Portfolio segment aggregated $97 million during the three-month period ended September 30, 2020, compared with $30 million in the year-earlier period and $96 million in the second quarter of 2020. The significant rise in the recent quarter’s net income as compared with the third quarter of 2019 was due primarily to an $86 million increase in net recoveriesinterest income that reflects higher income from interest rate swap agreements. The slight improvement in net income in the recent quarter as compared with the immediately preceding quarter reflected an increase in net interest income of $5 million, partially offset by a $4 million decrease in valuation gains associated with marketable equity securities. Net income for this segment for the first nine months totaled $219 million in 2020 and $107 million in 2019. The primary factor contributing to that increase was a $191 million rise in net interest income, reflecting additional income from interest rate swap agreements utilized as part of the Company’s management of interest rate risk. Partially offsetting that factor were valuation losses associated with marketable equity securities (compared with gains in the 2019 period) representing a change of $35 million and higher centrally-allocated costs of $7 million associated with data processing, risk management and other support services provided to the Discretionary Portfolio segment.
The Residential Mortgage Banking segment contributed net income of $45 million in the recent quarter, compared with $16 million in the third quarter of 2019 and $37 million in the second quarter of 2020. The recent quarter improvement from the third quarter of 2019 was largely driven by a $43 million increase in revenues associated with mortgage origination and sales activities (including intersegment revenues) and a $12 million increase in net interest income, reflecting an increase in average outstanding loan balances of $1.4 billion that was predominantly the result of repurchases of previously charged-offsold government guaranteed loans in 2019’s initial quarter). As compared with 2019’s fourth quarter,of $1.6 billion during the higher recent quarter net income was primarily due to an $8third quarter. Offsetting those favorable factors were lower servicing-related fees (including intersegment costs) of $11 million decreaseand a $10 million rise in centrally-allocated costs associated with data processing, risk management and other support services provided to the CommercialResidential Mortgage Banking segment, a $7 million increase to net interest income and a $5 million decline in the provision for credit losses, mainly due to lower charge-offs, offset, in part, by a $8 million decline in letter of credit and other credit-related fees resulting from lower loan syndication fees. The higher net interest income reflected a widening of the net interest margin on loans of four basis points and an increase in average outstanding loan balances of $889 million.
Net income of the Commercial Real Estate segment was $117 million in each of the first quarters of 2020 and 2019, compared with $115 million in the fourth quarter of 2019. The results in the recent quarter as compared with the initial 2019 quarter reflected a $6 million increase in trading account and foreign exchange gains due largely to increased activity related to interest rate swap transactions executed on behalf of commercial customers, partially offset by a decrease of $4 million in net interest income. The lower net interest income was predominantly attributable to a narrowing of the net interest margin on deposits of 42 basis points. The increase in net income in the recent quarter as compared with the final quarter of 2019 resulted primarily from an increase of $5 million in commercial mortgage banking revenues, reflecting higher origination and servicing income, partially offset by a $3 million decline in net interest income, driven by a narrowing of the net interest margin on loans of 11 basis points offset, in part, by higher average outstanding loan balances of $750 million.
Net income earned by the Discretionary Portfolio segment totaled $26 million during the three-month period ended March 31, 2020, compared with $39 million in the year-earlier period and $37 million in the fourth quarter of 2019.segment. As compared with the firstsecond quarter of 2019,2020, the recent quarter’s decline in net income was primarily due to $21 million of unrealized valuation losses on marketable equity securities in 2020 (compared with unrealized valuation gains of $12 million in 2019), offset, in part, by a $19 million increase in net interest income. That increase reflected a widening of the net interest margin on average loan balances of 83 basis points. The decline in net income in the recent quarter as compared with the immediately preceding quarter reflected higher unrealized losses on equity securities of $14 million in the recent quarter and a $4 million increase in the provision for credit losses, due to higher net charge-offs, partially offset by an increase of $3 million in net interest income. The improvement in net interest income reflected a 32 basis point widening of the net interest margin on loans, partially offset by a 31 basis point narrowing of the margin on investment securities.
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The Residential Mortgage Banking segment contributed net income of $25 million in the initial 2020 quarter, compared with $13 million in the year-earlier quarter and $36 million in 2019’s fourth quarter. The higher net income in the recent quarter as compared with the first quarter of 2019 was due to higherreflected a $12 million increase in revenues of $27 million associated with mortgage origination and sales activities (including intersegment revenues) and a $10 million increase in servicing revenues (including intersegment revenues),net interest income that reflected an increase in average outstanding loan balances of $1.4 billion, partially offset by a $10 million addition to the valuation allowance for capitalized mortgage servicing rights, $7 million of higher servicing-related costs and a $4$6 million rise in personnel-related costs. As comparedcentrally-allocated costs associated with the final quarterdata processing, risk management and other support services provided to this segment and lower revenues from servicing residential real estate loans (including intersegment revenues) of 2019, lower net income in the recent quarter was primarily the result of changes in the valuation allowance for capitalized mortgage servicing rights. That allowance was increased by $10 million during the recent quarter, compared with a reduction of $16$4 million. The Residential Mortgage Banking segment earned $107 million in the fourth quarterfirst nine months of 2020, compared with $36 million in the similar period of 2019. Partially offsetting that unfavorable impact were higherHigher revenues of $7 million associated with mortgage origination and sales activities (including intersegment revenues). of $113 million and a $17 million increase in net interest income, reflecting an increase in average outstanding loan balances of $713 million, were partially offset by a $16 million increase in personnel-related costs largely associated with increased origination activities and a $10 million rise in centrally-allocated costs associated with data processing, risk management and other support services provided to the Residential Mortgage Banking segment.
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Net income offor the Retail Banking segment totaled $110$85 million in each of the firstthird quarter of 2020, andcompared with $132 million in the fourthcorresponding quarter of 2019 compared with $145and $86 million in the firstsecond quarter of 2019.2020. The 24% decline in net income in the recent quarter as compared with the year-earlier periodthird quarter of 2019 reflected a $25$62 million decrease in net interest income, a $6$15 million increasedecline in the provision for credit losses, due to higher net charge-offs, a $6 million increase in personnel-related costsservice charges on deposit accounts and a $6$10 million increase in centrally-allocated costs largely associated with data processing, risk management and other support services provided to the Retail Banking segment. The lower net interest income reflected a 92 basis point narrowing of the net interest margin on deposits, of 41 basis points, partially offset by an increase inhigher average outstanding loandeposit balances of $1.6 billion$3.7 billion. The decline in service charges reflected fee waivers and lower customer transaction activity as a wideningresult of the COVID-19 pandemic. Partially offsetting those factors were a $10 million decrease in the provision for credit losses, reflecting lower net interest margin on loans of 14 basis points. As compared with the fourth quarter of 2019, the recent quarter’s results reflected decreases of $9charge-offs, a $5 million decline in advertising and marketing expensesexpense, and $8lower salaries and employee benefits of $4 million. The modest decline in net income in the recent quarter as compared with the second quarter of 2020 reflected a decrease in net interest income of $20 million and a $6 million rise in centrally-allocated costs largely associated with data processing, risk management and other support services provided to the Retail Banking segment. Those favorable factors weresegment, partially offset in part, by $7 million decreases inincreased consumer service charges on deposit accounts due to seasonallyof $13 million and lower charges related to overdraft fees and debit card transactions, andpersonnel-related costs of $9 million. The decrease in net interest income reflectingreflected a narrowing of the net interest margin on deposits of 1433 basis points.points, partially offset by higher average deposit balances of $1.1 billion. The increased consumer service charges on deposit accounts reflect lower fee waivers and increased customer transaction activity. The Retail Banking segment recorded net income of $282 million and $417 million in the first nine months of 2020 and 2019, respectively. The decline from 2019 reflected lower net interest income of $137 million, a $39 million decrease in consumer service charges on deposit accounts, and an $8 million increase in salaries and employee benefits expenses. The decrease in net interest income reflected a 71 basis point narrowing of the net interest margin on deposits, offset, in part, by higher average outstanding deposit and loan balances of $1.7 billion and $1.4 billion, respectively. The lower consumer service charges on deposit accounts reflect fee waivers and lower customer transaction activity as a result of the COVID-19 pandemic. Lower advertising and promotional expenses of $8 million and a $7 million decrease in the provision for credit losses partially offset the unfavorable factors.
The “All Other” category reflects other activities of the Company that are not directly attributable to the reported segments. Reflected in this category are the amortization of core deposit and other intangible assets resulting from the acquisitions of financial institutions, distributed income from BLG, merger-related expenses resulting from acquisitions (when incurred) and the net impact of the Company’s allocation methodologies for internal transfers for funding charges and credits associated with the earning assets and interest-bearing liabilities of the Company’s reportable segments and the provision for credit losses. The “All Other” category also includes trust income of the Company that reflects the ICS and WAS business activities. The various components of the “All Other” category resulted in net losses totaling $186$110 million andfor the quarter ended September 30, 2020, $7 million in the first quarters of 2020year-earlier quarter and 2019, respectively, compared with net income of $26$234 million in the fourthsecond quarter of 2019. The2020. As compared with the third quarter of 2019, the increased net loss in the firstrecent quarter of 2020 as compared with the year-earlier quarter reflectedresulted from an increase toin the provision for credit losses of $204$96 million higher personnel-related expenses of $22 million, lower income from BLG (a $23 million income distribution in 2020, compared with a $37 million income distribution in 2019), and the unfavorable impact from the Company'sCompany’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company'sCompany’s reportable segments. Those unfavorable factors were partially offset by a $50 million addition to the reservedecreased costs for legal matters in the initial quarterand professional services of 2019 and higher trust income in the recent quarter of $16$36 million. As compared with the immediately precedingsecond quarter of 2020, a $130 million decrease in the provision for credit losses 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 were partially offset by higher personnel-related costs of $16 million. The “All Other” category had net losses of $530 million and $15 million for the nine-month periods ended September 30, 2020 and 2019, respectively. The increased net loss in the recent quartercurrent year reflected an increase toin the provision for credit losses of $190$526 million, the unfavorable impact from the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments, a $22 million increase in outside data processing and software expenses, and higher personnel-related expensescosts of $66$19 million. Partially offsetting those factors was a $77 million reflecting annual merit increases and seasonally higher incentive compensation, stock-based compensation and employee benefits expenses. Those unfavorable factors were offset,decrease in part, byprofessional services costs, a $23$48 million income distribution from BLGcharge in the firstsecond quarter of 2020.2019 to reduce the carrying value of an investment in an asset manager, and higher trust income of $30 million.
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Recent Accounting Developments
A discussion of recent accounting developments is included in note 15 of Notes to Financial Statements.
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Forward-Looking Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this quarterly report contain forward-looking statements that are based on current expectations, estimates and projections about the Company’s business, management’s beliefs and assumptions made by management. Any statement that does not describe historical or current facts is a forward-looking statement, including statements regarding the potential effects of the COVID-19 pandemic on the Company’s business, financial condition, liquidity and results of operations. 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 on loans, collateral securing loans, and other assets; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and number of stock-based compensation awards to be issued in future periods; risks and uncertainties relating to the impact of the COVID-19 pandemic; 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 Financial Accounting Standards Board, regulatory agencies or legislation; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support M&T and its subsidiaries' future businesses; and material differences in the actual financial results of merger, acquisition and investment activities compared with M&T's initial expectations, including the full realization of anticipated cost savings and revenue enhancements.
These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general economic and political conditions, either nationally or in the states in which M&T and its subsidiaries do business, including interest rate and currency exchange rate fluctuations, changes and trends in the securities markets, and other Future Factors.
Further, statements about the potential effects of the COVID-19 pandemic on the Company’s business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company’s control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on customers, clients, third parties and the Company.
M&T provides further detail regarding these risks, uncertainties and other factors elsewhere in this quarterly report and in other public filings, including the risk factors described in Form 10-K for the year ended December 31, 2019 and this quarterly report.
- 7688 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 1
QUARTERLY TRENDS
|
| 2020 |
|
| 2019 Quarters |
|
|
| 2020 Quarters |
|
| 2019 Quarters |
|
| ||||||||||||||||||||||||||||||||||||
|
| First Quarter |
|
| Fourth |
|
| Third |
|
| Second |
|
| First |
|
|
| Third |
|
| Second |
|
| First |
|
| Fourth |
|
| Third |
|
| Second |
|
| First |
|
| ||||||||||||
Earnings and dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands, except per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (taxable-equivalent basis) |
| $ | 1,125,482 |
|
|
| 1,191,295 |
|
|
| 1,235,048 |
|
|
| 1,243,838 |
|
|
| 1,232,276 |
|
|
| $ | 1,005,180 |
|
|
| 1,036,476 |
|
|
| 1,125,482 |
|
|
| 1,191,295 |
|
|
| 1,235,048 |
|
|
| 1,243,838 |
|
|
| 1,232,276 |
|
|
Interest expense |
|
| 143,614 |
|
|
| 177,070 |
|
|
| 199,579 |
|
|
| 196,432 |
|
|
| 176,249 |
|
|
|
| 58,066 |
|
|
| 75,105 |
|
|
| 143,614 |
|
|
| 177,070 |
|
|
| 199,579 |
|
|
| 196,432 |
|
|
| 176,249 |
|
|
Net interest income |
|
| 981,868 |
|
|
| 1,014,225 |
|
|
| 1,035,469 |
|
|
| 1,047,406 |
|
|
| 1,056,027 |
|
|
|
| 947,114 |
|
|
| 961,371 |
|
|
| 981,868 |
|
|
| 1,014,225 |
|
|
| 1,035,469 |
|
|
| 1,047,406 |
|
|
| 1,056,027 |
|
|
Less: provision for credit losses |
|
| 250,000 |
|
|
| 54,000 |
|
|
| 45,000 |
|
|
| 55,000 |
|
|
| 22,000 |
|
|
|
| 150,000 |
|
|
| 325,000 |
|
|
| 250,000 |
|
|
| 54,000 |
|
|
| 45,000 |
|
|
| 55,000 |
|
|
| 22,000 |
|
|
Other income |
|
| 529,360 |
|
|
| 521,040 |
|
|
| 527,779 |
|
|
| 512,095 |
|
|
| 500,765 |
|
|
|
| 520,561 |
|
|
| 487,273 |
|
|
| 529,360 |
|
|
| 521,040 |
|
|
| 527,779 |
|
|
| 512,095 |
|
|
| 500,765 |
|
|
Less: other expense |
|
| 906,416 |
|
|
| 823,683 |
|
|
| 877,619 |
|
|
| 873,032 |
|
|
| 894,348 |
|
|
|
| 826,774 |
|
|
| 807,042 |
|
|
| 906,416 |
|
|
| 823,683 |
|
|
| 877,619 |
|
|
| 873,032 |
|
|
| 894,348 |
|
|
Income before income taxes |
|
| 354,812 |
|
|
| 657,582 |
|
|
| 640,629 |
|
|
| 631,469 |
|
|
| 640,444 |
|
|
|
| 490,901 |
|
|
| 316,602 |
|
|
| 354,812 |
|
|
| 657,582 |
|
|
| 640,629 |
|
|
| 631,469 |
|
|
| 640,444 |
|
|
Applicable income taxes |
|
| 80,927 |
|
|
| 159,124 |
|
|
| 154,969 |
|
|
| 152,284 |
|
|
| 151,735 |
|
|
|
| 114,746 |
|
|
| 71,314 |
|
|
| 80,927 |
|
|
| 159,124 |
|
|
| 154,969 |
|
|
| 152,284 |
|
|
| 151,735 |
|
|
Taxable-equivalent adjustment |
|
| 5,063 |
|
|
| 5,392 |
|
|
| 5,579 |
|
|
| 5,925 |
|
|
| 5,967 |
|
|
|
| 4,019 |
|
|
| 4,234 |
|
|
| 5,063 |
|
|
| 5,392 |
|
|
| 5,579 |
|
|
| 5,925 |
|
|
| 5,967 |
|
|
Net income |
| $ | 268,822 |
|
|
| 493,066 |
|
|
| 480,081 |
|
|
| 473,260 |
|
|
| 482,742 |
|
|
| $ | 372,136 |
|
|
| 241,054 |
|
|
| 268,822 |
|
|
| 493,066 |
|
|
| 480,081 |
|
|
| 473,260 |
|
|
| 482,742 |
|
|
Net income available to common shareholders-diluted |
| $ | 250,701 |
|
|
| 473,372 |
|
|
| 461,410 |
|
|
| 452,633 |
|
|
| 462,086 |
|
|
| $ | 353,400 |
|
|
| 223,099 |
|
|
| 250,701 |
|
|
| 473,372 |
|
|
| 461,410 |
|
|
| 452,633 |
|
|
| 462,086 |
|
|
Per common share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings |
| $ | 1.93 |
|
|
| 3.60 |
|
|
| 3.47 |
|
|
| 3.34 |
|
|
| 3.35 |
|
|
| $ | 2.75 |
|
|
| 1.74 |
|
|
| 1.93 |
|
|
| 3.60 |
|
|
| 3.47 |
|
|
| 3.34 |
|
|
| 3.35 |
|
|
Diluted earnings |
|
| 1.93 |
|
|
| 3.60 |
|
|
| 3.47 |
|
|
| 3.34 |
|
|
| 3.35 |
|
|
|
| 2.75 |
|
|
| 1.74 |
|
|
| 1.93 |
|
|
| 3.60 |
|
|
| 3.47 |
|
|
| 3.34 |
|
|
| 3.35 |
|
|
Cash dividends |
| $ | 1.10 |
|
|
| 1.10 |
|
|
| 1.00 |
|
|
| 1.00 |
|
|
| 1.00 |
|
|
| $ | 1.10 |
|
|
| 1.10 |
|
|
| 1.10 |
|
|
| 1.10 |
|
|
| 1.00 |
|
|
| 1.00 |
|
|
| 1.00 |
|
|
Average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 129,696 |
|
|
| 131,512 |
|
|
| 132,965 |
|
|
| 135,433 |
|
|
| 137,889 |
|
|
|
| 128,285 |
|
|
| 128,275 |
|
|
| 129,696 |
|
|
| 131,512 |
|
|
| 132,965 |
|
|
| 135,433 |
|
|
| 137,889 |
|
|
Diluted |
|
| 129,755 |
|
|
| 131,549 |
|
|
| 132,999 |
|
|
| 135,464 |
|
|
| 137,920 |
|
|
|
| 128,355 |
|
|
| 128,333 |
|
|
| 129,755 |
|
|
| 131,549 |
|
|
| 132,999 |
|
|
| 135,464 |
|
|
| 137,920 |
|
|
Performance ratios, annualized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets |
|
| .90 |
| % |
| 1.60 |
| % |
| 1.58 |
| % |
| 1.60 |
| % |
| 1.68 |
| % |
|
| 1.06 |
| % |
| .71 |
| % |
| .90 |
| % |
| 1.60 |
| % |
| 1.58 |
| % |
| 1.60 |
| % |
| 1.68 |
| % |
Average common shareholders’ equity |
|
| 7.00 |
| % |
| 12.95 |
| % |
| 12.73 |
| % |
| 12.68 |
| % |
| 13.14 |
| % |
|
| 9.53 |
| % |
| 6.13 |
| % |
| 7.00 |
| % |
| 12.95 |
| % |
| 12.73 |
| % |
| 12.68 |
| % |
| 13.14 |
| % |
Net interest margin on average earning assets (taxable-equivalent basis) |
|
| 3.65 |
| % |
| 3.64 |
| % |
| 3.78 |
| % |
| 3.91 |
| % |
| 4.04 |
| % |
|
| 2.95 |
| % |
| 3.13 |
| % |
| 3.65 |
| % |
| 3.64 |
| % |
| 3.78 |
| % |
| 3.91 |
| % |
| 4.04 |
| % |
Nonaccrual loans to total loans and leases, net of unearned discount |
|
| 1.13 |
| % |
| 1.06 |
| % |
| 1.12 |
| % |
| .96 |
| % |
| 0.99 |
| % |
|
| 1.26 |
| % |
| 1.18 |
| % |
| 1.13 |
| % |
| 1.06 |
| % |
| 1.12 |
| % |
| .96 |
| % |
| .99 |
| % |
Net operating (tangible) results (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (in thousands) |
| $ | 271,705 |
|
|
| 496,237 |
|
|
| 483,830 |
|
|
| 477,001 |
|
|
| 486,440 |
|
|
| $ | 375,029 |
|
|
| 243,958 |
|
|
| 271,705 |
|
|
| 496,237 |
|
|
| 483,830 |
|
|
| 477,001 |
|
|
| 486,440 |
|
|
Diluted net operating income per common share |
| $ | 1.95 |
|
|
| 3.62 |
|
|
| 3.50 |
|
|
| 3.37 |
|
|
| 3.38 |
|
|
| $ | 2.77 |
|
|
| 1.76 |
|
|
| 1.95 |
|
|
| 3.62 |
|
|
| 3.50 |
|
|
| 3.37 |
|
|
| 3.38 |
|
|
Annualized return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average tangible assets |
|
| .94 |
| % |
| 1.67 |
| % |
| 1.66 |
| % |
| 1.68 |
| % |
| 1.76 |
| % |
|
| 1.10 |
| % |
| .74 |
| % |
| .94 |
| % |
| 1.67 |
| % |
| 1.66 |
| % |
| 1.68 |
| % |
| 1.76 |
| % |
Average tangible common shareholders’ equity |
|
| 10.39 |
| % |
| 19.08 |
| % |
| 18.85 |
| % |
| 18.83 |
| % |
| 19.56 |
| % |
|
| 13.94 |
| % |
| 9.04 |
| % |
| 10.39 |
| % |
| 19.08 |
| % |
| 18.85 |
| % |
| 18.83 |
| % |
| 19.56 |
| % |
Efficiency ratio (b) |
|
| 58.91 |
| % |
| 53.15 |
| % |
| 55.95 |
| % |
| 55.98 |
| % |
| 57.56 |
| % |
|
| 56.17 |
| % |
| 55.71 |
| % |
| 58.91 |
| % |
| 53.15 |
| % |
| 55.95 |
| % |
| 55.98 |
| % |
| 57.56 |
| % |
Balance sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions, except per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (c) |
| $ | 120,585 |
|
|
| 122,554 |
|
|
| 120,388 |
|
|
| 118,487 |
|
|
| 116,839 |
|
|
| $ | 140,181 |
|
|
| 136,446 |
|
|
| 120,585 |
|
|
| 122,554 |
|
|
| 120,388 |
|
|
| 118,487 |
|
|
| 116,839 |
|
|
Total tangible assets (c) |
|
| 115,972 |
|
|
| 117,938 |
|
|
| 115,769 |
|
|
| 113,864 |
|
|
| 112,213 |
|
|
|
| 135,574 |
|
|
| 131,836 |
|
|
| 115,972 |
|
|
| 117,938 |
|
|
| 115,769 |
|
|
| 113,864 |
|
|
| 112,213 |
|
|
Earning assets |
|
| 108,226 |
|
|
| 110,581 |
|
|
| 108,643 |
|
|
| 107,511 |
|
|
| 106,096 |
|
|
|
| 127,689 |
|
|
| 123,492 |
|
|
| 108,226 |
|
|
| 110,581 |
|
|
| 108,643 |
|
|
| 107,511 |
|
|
| 106,096 |
|
|
Investment securities |
|
| 9,102 |
|
|
| 10,044 |
|
|
| 11,075 |
|
|
| 12,170 |
|
|
| 12,949 |
|
|
|
| 7,876 |
|
|
| 8,500 |
|
|
| 9,102 |
|
|
| 10,044 |
|
|
| 11,075 |
|
|
| 12,170 |
|
|
| 12,949 |
|
|
Loans and leases, net of unearned discount |
|
| 91,706 |
|
|
| 90,244 |
|
|
| 90,078 |
|
|
| 89,150 |
|
|
| 88,477 |
|
|
|
| 98,210 |
|
|
| 97,797 |
|
|
| 91,706 |
|
|
| 90,244 |
|
|
| 90,078 |
|
|
| 89,150 |
|
|
| 88,477 |
|
|
Deposits |
|
| 96,166 |
|
|
| 96,903 |
|
|
| 94,095 |
|
|
| 91,371 |
|
|
| 89,733 |
|
|
|
| 116,306 |
|
|
| 111,795 |
|
|
| 96,166 |
|
|
| 96,903 |
|
|
| 94,095 |
|
|
| 91,371 |
|
|
| 89,733 |
|
|
Common shareholders’ equity (c) |
|
| 14,470 |
|
|
| 14,582 |
|
|
| 14,464 |
|
|
| 14,398 |
|
|
| 14,337 |
|
|
|
| 14,823 |
|
|
| 14,703 |
|
|
| 14,470 |
|
|
| 14,582 |
|
|
| 14,464 |
|
|
| 14,398 |
|
|
| 14,337 |
|
|
Tangible common shareholders’ equity (c) |
|
| 9,857 |
|
|
| 9,966 |
|
|
| 9,845 |
|
|
| 9,775 |
|
|
| 9,711 |
|
|
|
| 10,216 |
|
|
| 10,093 |
|
|
| 9,857 |
|
|
| 9,966 |
|
|
| 9,845 |
|
|
| 9,775 |
|
|
| 9,711 |
|
|
At end of quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (c) |
| $ | 124,578 |
|
|
| 119,873 |
|
|
| 125,501 |
|
|
| 121,555 |
|
|
| 120,025 |
|
|
| $ | 138,627 |
|
|
| 139,537 |
|
|
| 124,578 |
|
|
| 119,873 |
|
|
| 125,501 |
|
|
| 121,555 |
|
|
| 120,025 |
|
|
Total tangible assets (c) |
|
| 119,966 |
|
|
| 115,258 |
|
|
| 120,883 |
|
|
| 116,934 |
|
|
| 115,400 |
|
|
|
| 134,021 |
|
|
| 134,928 |
|
|
| 119,966 |
|
|
| 115,258 |
|
|
| 120,883 |
|
|
| 116,934 |
|
|
| 115,400 |
|
|
Earning assets |
|
| 112,046 |
|
|
| 107,673 |
|
|
| 113,067 |
|
|
| 110,323 |
|
|
| 108,849 |
|
|
|
| 126,418 |
|
|
| 127,149 |
|
|
| 112,046 |
|
|
| 107,673 |
|
|
| 113,067 |
|
|
| 110,323 |
|
|
| 108,849 |
|
|
Investment securities |
|
| 8,957 |
|
|
| 9,497 |
|
|
| 10,678 |
|
|
| 11,580 |
|
|
| 12,537 |
|
|
|
| 7,723 |
|
|
| 8,454 |
|
|
| 8,957 |
|
|
| 9,497 |
|
|
| 10,678 |
|
|
| 11,580 |
|
|
| 12,537 |
|
|
Loans and leases, net of unearned discount |
|
| 94,142 |
|
|
| 90,923 |
|
|
| 89,823 |
|
|
| 89,878 |
|
|
| 88,640 |
|
|
|
| 98,447 |
|
|
| 97,758 |
|
|
| 94,142 |
|
|
| 90,923 |
|
|
| 89,823 |
|
|
| 89,878 |
|
|
| 88,640 |
|
|
Deposits |
|
| 100,183 |
|
|
| 94,770 |
|
|
| 95,114 |
|
|
| 91,681 |
|
|
| 90,470 |
|
|
|
| 115,163 |
|
|
| 114,968 |
|
|
| 100,183 |
|
|
| 94,770 |
|
|
| 95,114 |
|
|
| 91,681 |
|
|
| 90,470 |
|
|
Common shareholders’ equity, net of undeclared cumulative preferred dividends (c) |
|
| 14,566 |
|
|
| 14,467 |
|
|
| 14,530 |
|
|
| 14,457 |
|
|
| 14,353 |
|
|
|
| 14,851 |
|
|
| 14,695 |
|
|
| 14,566 |
|
|
| 14,467 |
|
|
| 14,530 |
|
|
| 14,457 |
|
|
| 14,353 |
|
|
Tangible common shareholders’ equity (c) |
|
| 9,954 |
|
|
| 9,852 |
|
|
| 9,912 |
|
|
| 9,836 |
|
|
| 9,728 |
|
|
|
| 10,245 |
|
|
| 10,086 |
|
|
| 9,954 |
|
|
| 9,852 |
|
|
| 9,912 |
|
|
| 9,836 |
|
|
| 9,728 |
|
|
Equity per common share |
|
| 113.54 |
|
|
| 110.78 |
|
|
| 109.84 |
|
|
| 107.73 |
|
|
| 105.04 |
|
|
|
| 115.75 |
|
|
| 114.54 |
|
|
| 113.54 |
|
|
| 110.78 |
|
|
| 109.84 |
|
|
| 107.73 |
|
|
| 105.04 |
|
|
Tangible equity per common share |
|
| 77.60 |
|
|
| 75.44 |
|
|
| 74.93 |
|
|
| 73.29 |
|
|
| 71.19 |
|
|
|
| 79.85 |
|
|
| 78.62 |
|
|
| 77.60 |
|
|
| 75.44 |
|
|
| 74.93 |
|
|
| 73.29 |
|
|
| 71.19 |
|
|
(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. |
- 7789 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 2
RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES
|
| 2020 |
|
| 2019 Quarters |
|
|
| 2020 Quarters |
|
| 2019 Quarters |
|
| ||||||||||||||||||||||||||||||||||||
|
| First Quarter |
|
| Fourth |
|
| Third |
|
| Second |
|
| First |
|
|
| Third |
|
| Second |
|
| First |
|
| Fourth |
|
| Third |
|
| Second |
|
| First |
|
| ||||||||||||
Income statement data (in thousands, except per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 268,822 |
|
|
| 493,066 |
|
|
| 480,081 |
|
|
| 473,260 |
|
|
| 482,742 |
|
|
| $ | 372,136 |
|
|
| 241,054 |
|
|
| 268,822 |
|
|
| 493,066 |
|
|
| 480,081 |
|
|
| 473,260 |
|
|
| 482,742 |
|
|
Amortization of core deposit and other intangible assets (a) |
|
| 2,883 |
|
|
| 3,171 |
|
|
| 3,749 |
|
|
| 3,741 |
|
|
| 3,698 |
|
|
|
| 2,893 |
|
|
| 2,904 |
|
|
| 2,883 |
|
|
| 3,171 |
|
|
| 3,749 |
|
|
| 3,741 |
|
|
| 3,698 |
|
|
Net operating income |
| $ | 271,705 |
|
|
| 496,237 |
|
|
| 483,830 |
|
|
| 477,001 |
|
|
| 486,440 |
|
|
| $ | 375,029 |
|
|
| 243,958 |
|
|
| 271,705 |
|
|
| 496,237 |
|
|
| 483,830 |
|
|
| 477,001 |
|
|
| 486,440 |
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
| $ | 1.93 |
|
|
| 3.60 |
|
|
| 3.47 |
|
|
| 3.34 |
|
|
| 3.35 |
|
|
| $ | 2.75 |
|
|
| 1.74 |
|
|
| 1.93 |
|
|
| 3.60 |
|
|
| 3.47 |
|
|
| 3.34 |
|
|
| 3.35 |
|
|
Amortization of core deposit and other intangible assets (a) |
|
| .02 |
|
|
| .02 |
|
|
| .03 |
|
|
| .03 |
|
|
| .03 |
|
|
|
| .02 |
|
|
| .02 |
|
|
| .02 |
|
|
| .02 |
|
|
| .03 |
|
|
| .03 |
|
|
| .03 |
|
|
Diluted net operating earnings per common share |
| $ | 1.95 |
|
|
| 3.62 |
|
|
| 3.50 |
|
|
| 3.37 |
|
|
| 3.38 |
|
|
| $ | 2.77 |
|
|
| 1.76 |
|
|
| 1.95 |
|
|
| 3.62 |
|
|
| 3.50 |
|
|
| 3.37 |
|
|
| 3.38 |
|
|
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense |
| $ | 906,416 |
|
|
| 823,683 |
|
|
| 877,619 |
|
|
| 873,032 |
|
|
| 894,348 |
|
|
| $ | 826,774 |
|
|
| 807,042 |
|
|
| 906,416 |
|
|
| 823,683 |
|
|
| 877,619 |
|
|
| 873,032 |
|
|
| 894,348 |
|
|
Amortization of core deposit and other intangible assets |
|
| (3,913 | ) |
|
| (4,305 | ) |
|
| (5,088 | ) |
|
| (5,077 | ) |
|
| (5,020 | ) |
|
|
| (3,914 | ) |
|
| (3,913 | ) |
|
| (3,913 | ) |
|
| (4,305 | ) |
|
| (5,088 | ) |
|
| (5,077 | ) |
|
| (5,020 | ) |
|
Noninterest operating expense |
| $ | 902,503 |
|
|
| 819,378 |
|
|
| 872,531 |
|
|
| 867,955 |
|
|
| 889,328 |
|
|
| $ | 822,860 |
|
|
| 803,129 |
|
|
| 902,503 |
|
|
| 819,378 |
|
|
| 872,531 |
|
|
| 867,955 |
|
|
| 889,328 |
|
|
Efficiency ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest operating expense (numerator) |
| $ | 902,503 |
|
|
| 819,378 |
|
|
| 872,531 |
|
|
| 867,955 |
|
|
| 889,328 |
|
|
| $ | 822,860 |
|
|
| 803,129 |
|
|
| 902,503 |
|
|
| 819,378 |
|
|
| 872,531 |
|
|
| 867,955 |
|
|
| 889,328 |
|
|
Taxable-equivalent net interest income |
| $ | 981,868 |
|
|
| 1,014,225 |
|
|
| 1,035,469 |
|
|
| 1,047,406 |
|
|
| 1,056,027 |
|
|
| $ | 947,114 |
|
|
| 961,371 |
|
|
| 981,868 |
|
|
| 1,014,225 |
|
|
| 1,035,469 |
|
|
| 1,047,406 |
|
|
| 1,056,027 |
|
|
Other income |
|
| 529,360 |
|
|
| 521,040 |
|
|
| 527,779 |
|
|
| 512,095 |
|
|
| 500,765 |
|
|
|
| 520,561 |
|
|
| 487,273 |
|
|
| 529,360 |
|
|
| 521,040 |
|
|
| 527,779 |
|
|
| 512,095 |
|
|
| 500,765 |
|
|
Less: Gain (loss) on bank investment securities |
|
| (20,782 | ) |
|
| (6,452 | ) |
|
| 3,737 |
|
|
| 8,911 |
|
|
| 11,841 |
|
|
|
| 2,773 |
|
|
| 6,969 |
|
|
| (20,782 | ) |
|
| (6,452 | ) |
|
| 3,737 |
|
|
| 8,911 |
|
|
| 11,841 |
|
|
Denominator |
| $ | 1,532,010 |
|
|
| 1,541,717 |
|
|
| 1,559,511 |
|
|
| 1,550,590 |
|
|
| 1,544,951 |
|
|
| $ | 1,464,902 |
|
|
| 1,441,675 |
|
|
| 1,532,010 |
|
|
| 1,541,717 |
|
|
| 1,559,511 |
|
|
| 1,550,590 |
|
|
| 1,544,951 |
|
|
Efficiency ratio |
|
| 58.91 | % |
|
| 53.15 | % |
|
| 55.95 | % |
|
| 55.98 | % |
|
| 57.56 | % |
|
|
| 56.17 | % |
|
| 55.71 | % |
|
| 58.91 | % |
|
| 53.15 | % |
|
| 55.95 | % |
|
| 55.98 | % |
|
| 57.56 | % |
|
Balance sheet data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets |
| $ | 120,585 |
|
|
| 122,554 |
|
|
| 120,388 |
|
|
| 118,487 |
|
|
| 116,839 |
|
|
| $ | 140,181 |
|
|
| 136,446 |
|
|
| 120,585 |
|
|
| 122,554 |
|
|
| 120,388 |
|
|
| 118,487 |
|
|
| 116,839 |
|
|
Goodwill |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
Core deposit and other intangible assets |
|
| (27 | ) |
|
| (31 | ) |
|
| (36 | ) |
|
| (41 | ) |
|
| (45 | ) |
|
|
| (19 | ) |
|
| (23 | ) |
|
| (27 | ) |
|
| (31 | ) |
|
| (36 | ) |
|
| (41 | ) |
|
| (45 | ) |
|
Deferred taxes |
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 11 |
|
|
| 12 |
|
|
|
| 5 |
|
|
| 6 |
|
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 11 |
|
|
| 12 |
|
|
Average tangible assets |
| $ | 115,972 |
|
|
| 117,938 |
|
|
| 115,769 |
|
|
| 113,864 |
|
|
| 112,213 |
|
|
| $ | 135,574 |
|
|
| 131,836 |
|
|
| 115,972 |
|
|
| 117,938 |
|
|
| 115,769 |
|
|
| 113,864 |
|
|
| 112,213 |
|
|
Average common equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total equity |
| $ | 15,720 |
|
|
| 15,832 |
|
|
| 15,837 |
|
|
| 15,630 |
|
|
| 15,569 |
|
|
| $ | 16,073 |
|
|
| 15,953 |
|
|
| 15,720 |
|
|
| 15,832 |
|
|
| 15,837 |
|
|
| 15,630 |
|
|
| 15,569 |
|
|
Preferred stock |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,373 | ) |
|
| (1,232 | ) |
|
| (1,232 | ) |
|
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,373 | ) |
|
| (1,232 | ) |
|
| (1,232 | ) |
|
Average common equity |
|
| 14,470 |
|
|
| 14,582 |
|
|
| 14,464 |
|
|
| 14,398 |
|
|
| 14,337 |
|
|
|
| 14,823 |
|
|
| 14,703 |
|
|
| 14,470 |
|
|
| 14,582 |
|
|
| 14,464 |
|
|
| 14,398 |
|
|
| 14,337 |
|
|
Goodwill |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
Core deposit and other intangible assets |
|
| (27 | ) |
|
| (31 | ) |
|
| (36 | ) |
|
| (41 | ) |
|
| (45 | ) |
|
|
| (19 | ) |
|
| (23 | ) |
|
| (27 | ) |
|
| (31 | ) |
|
| (36 | ) |
|
| (41 | ) |
|
| (45 | ) |
|
Deferred taxes |
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 11 |
|
|
| 12 |
|
|
|
| 5 |
|
|
| 6 |
|
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 11 |
|
|
| 12 |
|
|
Average tangible common equity |
| $ | 9,857 |
|
|
| 9,966 |
|
|
| 9,845 |
|
|
| 9,775 |
|
|
| 9,711 |
|
|
| $ | 10,216 |
|
|
| 10,093 |
|
|
| 9,857 |
|
|
| 9,966 |
|
|
| 9,845 |
|
|
| 9,775 |
|
|
| 9,711 |
|
|
At end of quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 124,578 |
|
|
| 119,873 |
|
|
| 125,501 |
|
|
| 121,555 |
|
|
| 120,025 |
|
|
| $ | 138,627 |
|
|
| 139,537 |
|
|
| 124,578 |
|
|
| 119,873 |
|
|
| 125,501 |
|
|
| 121,555 |
|
|
| 120,025 |
|
|
Goodwill |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
Core deposit and other intangible assets |
|
| (25 | ) |
|
| (29 | ) |
|
| (33 | ) |
|
| (38 | ) |
|
| (44 | ) |
|
|
| (17 | ) |
|
| (21 | ) |
|
| (25 | ) |
|
| (29 | ) |
|
| (33 | ) |
|
| (38 | ) |
|
| (44 | ) |
|
Deferred taxes |
|
| 6 |
|
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 12 |
|
|
|
| 4 |
|
|
| 5 |
|
|
| 6 |
|
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 12 |
|
|
Total tangible assets |
| $ | 119,966 |
|
|
| 115,258 |
|
|
| 120,883 |
|
|
| 116,934 |
|
|
| 115,400 |
|
|
| $ | 134,021 |
|
|
| 134,928 |
|
|
| 119,966 |
|
|
| 115,258 |
|
|
| 120,883 |
|
|
| 116,934 |
|
|
| 115,400 |
|
|
Total common equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
| $ | 15,816 |
|
|
| 15,717 |
|
|
| 15,780 |
|
|
| 15,692 |
|
|
| 15,588 |
|
|
| $ | 16,101 |
|
|
| 15,945 |
|
|
| 15,816 |
|
|
| 15,717 |
|
|
| 15,780 |
|
|
| 15,692 |
|
|
| 15,588 |
|
|
Preferred stock |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,232 | ) |
|
| (1,232 | ) |
|
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,250 | ) |
|
| (1,232 | ) |
|
| (1,232 | ) |
|
Undeclared dividends - cumulative preferred stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
Common equity, net of undeclared cumulative preferred dividends |
|
| 14,566 |
|
|
| 14,467 |
|
|
| 14,530 |
|
|
| 14,457 |
|
|
| 14,353 |
|
|
|
| 14,851 |
|
|
| 14,695 |
|
|
| 14,566 |
|
|
| 14,467 |
|
|
| 14,530 |
|
|
| 14,457 |
|
|
| 14,353 |
|
|
Goodwill |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
| (4,593 | ) |
|
Core deposit and other intangible assets |
|
| (25 | ) |
|
| (29 | ) |
|
| (33 | ) |
|
| (38 | ) |
|
| (44 | ) |
|
|
| (17 | ) |
|
| (21 | ) |
|
| (25 | ) |
|
| (29 | ) |
|
| (33 | ) |
|
| (38 | ) |
|
| (44 | ) |
|
Deferred taxes |
|
| 6 |
|
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 12 |
|
|
|
| 4 |
|
|
| 5 |
|
|
| 6 |
|
|
| 7 |
|
|
| 8 |
|
|
| 10 |
|
|
| 12 |
|
|
Total tangible common equity |
| $ | 9,954 |
|
|
| 9,852 |
|
|
| 9,912 |
|
|
| 9,836 |
|
|
| 9,728 |
|
|
| $ | 10,245 |
|
|
| 10,086 |
|
|
| 9,954 |
|
|
| 9,852 |
|
|
| 9,912 |
|
|
| 9,836 |
|
|
| 9,728 |
|
|
(a) | After any related tax effect. |
- 7890 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 3
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES
|
| 2020 First Quarter |
|
| 2019 Fourth Quarter |
|
| 2019 Third Quarter |
|
|
| 2020 Third Quarter |
|
| 2020 Second Quarter |
|
| 2020 First Quarter |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| ||||||||||||||||||
Average balance in millions; interest in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, net of unearned discount (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, etc. |
| $ | 24,290 |
|
| $ | 247,344 |
|
|
| 4.10 |
| % |
| 23,548 |
|
|
| 258,969 |
|
|
| 4.36 |
| % |
| 23,326 |
|
|
| 283,291 |
|
|
| 4.82 |
| % |
| $ | 28,333 |
|
| $ | 217,171 |
|
|
| 3.05 |
| % |
| 29,733 |
|
|
| 229,058 |
|
|
| 3.10 |
| % |
| 24,290 |
|
|
| 247,344 |
|
|
| 4.10 |
| % |
Real estate – commercial |
|
| 36,034 |
|
|
| 440,291 |
|
|
| 4.83 |
|
|
| 35,039 |
|
|
| 452,752 |
|
|
| 5.06 |
|
|
| 35,200 |
|
|
| 462,759 |
|
|
| 5.14 |
|
|
|
| 37,243 |
|
|
| 398,619 |
|
|
| 4.19 |
|
|
| 36,947 |
|
|
| 412,362 |
|
|
| 4.42 |
|
|
| 36,034 |
|
|
| 440,291 |
|
|
| 4.83 |
|
|
Real estate – consumer |
|
| 15,931 |
|
|
| 160,650 |
|
|
| 4.03 |
|
|
| 16,330 |
|
|
| 169,371 |
|
|
| 4.15 |
|
|
| 16,673 |
|
|
| 175,098 |
|
|
| 4.20 |
|
|
|
| 16,558 |
|
|
| 152,594 |
|
|
| 3.69 |
|
|
| 15,599 |
|
|
| 156,135 |
|
|
| 4.00 |
|
|
| 15,931 |
|
|
| 160,650 |
|
|
| 4.03 |
|
|
Consumer |
|
| 15,451 |
|
|
| 203,546 |
|
|
| 5.30 |
|
|
| 15,327 |
|
|
| 203,205 |
|
|
| 5.26 |
|
|
| 14,879 |
|
|
| 204,097 |
|
|
| 5.44 |
|
|
|
| 16,076 |
|
|
| 192,223 |
|
|
| 4.76 |
|
|
| 15,518 |
|
|
| 187,041 |
|
|
| 4.85 |
|
|
| 15,451 |
|
|
| 203,546 |
|
|
| 5.30 |
|
|
Total loans and leases, net |
|
| 91,706 |
|
|
| 1,051,831 |
|
|
| 4.61 |
|
|
| 90,244 |
|
|
| 1,084,297 |
|
|
| 4.77 |
|
|
| 90,078 |
|
|
| 1,125,245 |
|
|
| 4.96 |
|
|
|
| 98,210 |
|
|
| 960,607 |
|
|
| 3.89 |
|
|
| 97,797 |
|
|
| 984,596 |
|
|
| 4.05 |
|
|
| 91,706 |
|
|
| 1,051,831 |
|
|
| 4.61 |
|
|
Interest-bearing deposits at banks |
|
| 6,130 |
|
|
| 18,966 |
|
|
| 1.24 |
|
|
| 8,944 |
|
|
| 37,277 |
|
|
| 1.65 |
|
|
| 7,405 |
|
|
| 40,388 |
|
|
| 2.16 |
|
|
|
| 16,440 |
|
|
| 4,163 |
|
|
| .10 |
|
|
| 16,454 |
|
|
| 4,179 |
|
|
| .10 |
|
|
| 6,130 |
|
|
| 18,966 |
|
|
| 1.24 |
|
|
Federal funds sold and agreements to resell securities |
|
| 1,224 |
|
|
| 4,072 |
|
|
| 1.34 |
|
|
| 1,279 |
|
|
| 5,405 |
|
|
| 1.68 |
|
|
| 18 |
|
|
| 93 |
|
|
| 2.01 |
|
|
|
| 5,113 |
|
|
| 1,615 |
|
|
| .13 |
|
|
| 692 |
|
|
| 197 |
|
|
| .11 |
|
|
| 1,224 |
|
|
| 4,072 |
|
|
| 1.34 |
|
|
Trading account |
|
| 64 |
|
|
| 419 |
|
|
| 2.64 |
|
|
| 70 |
|
|
| 765 |
|
|
| 4.36 |
|
|
| 67 |
|
|
| 149 |
|
|
| 0.89 |
|
|
|
| 50 |
|
|
| 201 |
|
|
| 1.62 |
|
|
| 49 |
|
|
| 248 |
|
|
| 2.04 |
|
|
| 64 |
|
|
| 419 |
|
|
| 2.64 |
|
|
Investment securities (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
|
| 8,359 |
|
|
| 45,449 |
|
|
| 2.19 |
|
|
| 9,272 |
|
|
| 57,123 |
|
|
| 2.44 |
|
|
| 10,271 |
|
|
| 62,506 |
|
|
| 2.41 |
|
|
|
| 7,177 |
|
|
| 37,157 |
|
|
| 2.06 |
|
|
| 7,796 |
|
|
| 43,889 |
|
|
| 2.26 |
|
|
| 8,359 |
|
|
| 45,449 |
|
|
| 2.19 |
|
|
Obligations of states and political subdivisions |
|
| 3 |
|
|
| 41 |
|
|
| 5.01 |
|
|
| 5 |
|
|
| 64 |
|
|
| 4.96 |
|
|
| 6 |
|
|
| 74 |
|
|
| 4.99 |
|
|
|
| 2 |
|
|
| 23 |
|
|
| 4.51 |
|
|
| 3 |
|
|
| 37 |
|
|
| 5.11 |
|
|
| 3 |
|
|
| 41 |
|
|
| 5.01 |
|
|
Other |
|
| 740 |
|
|
| 4,704 |
|
|
| 2.56 |
|
|
| 767 |
|
|
| 6,364 |
|
|
| 3.29 |
|
|
| 798 |
|
|
| 6,593 |
|
|
| 3.28 |
|
|
|
| 697 |
|
|
| 1,414 |
|
|
| .81 |
|
|
| 701 |
|
|
| 3,330 |
|
|
| 1.91 |
|
|
| 740 |
|
|
| 4,704 |
|
|
| 2.56 |
|
|
Total investment securities |
|
| 9,102 |
|
|
| 50,194 |
|
|
| 2.22 |
|
|
| 10,044 |
|
|
| 63,551 |
|
|
| 2.51 |
|
|
| 11,075 |
|
|
| 69,173 |
|
|
| 2.48 |
|
|
|
| 7,876 |
|
|
| 38,594 |
|
|
| 1.95 |
|
|
| 8,500 |
|
|
| 47,256 |
|
|
| 2.24 |
|
|
| 9,102 |
|
|
| 50,194 |
|
|
| 2.22 |
|
|
Total earning assets |
|
| 108,226 |
|
|
| 1,125,482 |
|
|
| 4.18 |
|
|
| 110,581 |
|
|
| 1,191,295 |
|
|
| 4.27 |
|
|
| 108,643 |
|
|
| 1,235,048 |
|
|
| 4.51 |
|
|
|
| 127,689 |
|
|
| 1,005,180 |
|
|
| 3.13 |
|
|
| 123,492 |
|
|
| 1,036,476 |
|
|
| 3.38 |
|
|
| 108,226 |
|
|
| 1,125,482 |
|
|
| 4.18 |
|
|
Allowance for credit losses |
|
| (1,191 | ) |
|
|
|
|
|
|
|
|
|
| (1,040 | ) |
|
|
|
|
|
|
|
|
|
| (1,034 | ) |
|
|
|
|
|
|
|
|
|
|
| (1,649 | ) |
|
|
|
|
|
|
|
|
|
| (1,401 | ) |
|
|
|
|
|
|
|
|
|
| (1,191 | ) |
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
| 1,298 |
|
|
|
|
|
|
|
|
|
|
| 1,298 |
|
|
|
|
|
|
|
|
|
|
| 1,303 |
|
|
|
|
|
|
|
|
|
|
|
| 1,390 |
|
|
|
|
|
|
|
|
|
|
| 1,245 |
|
|
|
|
|
|
|
|
|
|
| 1,298 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
| 12,252 |
|
|
|
|
|
|
|
|
|
|
| 11,715 |
|
|
|
|
|
|
|
|
|
|
| 11,476 |
|
|
|
|
|
|
|
|
|
|
|
| 12,751 |
|
|
|
|
|
|
|
|
|
|
| 13,110 |
|
|
|
|
|
|
|
|
|
|
| 12,252 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 120,585 |
|
|
|
|
|
|
|
|
|
|
| 122,554 |
|
|
|
|
|
|
|
|
|
|
| 120,388 |
|
|
|
|
|
|
|
|
|
|
| $ | 140,181 |
|
|
|
|
|
|
|
|
|
|
| 136,446 |
|
|
|
|
|
|
|
|
|
|
| 120,585 |
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-checking deposits |
| $ | 56,366 |
|
|
| 78,002 |
|
|
| .56 |
|
|
| 57,103 |
|
|
| 95,585 |
|
|
| .66 |
|
|
| 55,680 |
|
|
| 104,724 |
|
|
| .75 |
|
|
| $ | 65,848 |
|
|
| 22,403 |
|
|
| .14 |
|
|
| 62,927 |
|
|
| 26,454 |
|
|
| .17 |
|
|
| 56,366 |
|
|
| 78,002 |
|
|
| .56 |
|
|
Time deposits |
|
| 5,672 |
|
|
| 21,872 |
|
|
| 1.55 |
|
|
| 6,015 |
|
|
| 23,958 |
|
|
| 1.58 |
|
|
| 6,343 |
|
|
| 25,456 |
|
|
| 1.59 |
|
|
|
| 4,715 |
|
|
| 14,519 |
|
|
| 1.22 |
|
|
| 5,354 |
|
|
| 19,883 |
|
|
| 1.49 |
|
|
| 5,672 |
|
|
| 21,872 |
|
|
| 1.55 |
|
|
Deposits at Cayman Islands office |
|
| 1,672 |
|
|
| 3,419 |
|
|
| .82 |
|
|
| 1,716 |
|
|
| 4,922 |
|
|
| 1.14 |
|
|
| 1,522 |
|
|
| 6,218 |
|
|
| 1.62 |
|
|
|
| 957 |
|
|
| 241 |
|
|
| .10 |
|
|
| 1,017 |
|
|
| 161 |
|
|
| .06 |
|
|
| 1,672 |
|
|
| 3,419 |
|
|
| .82 |
|
|
Total interest-bearing deposits |
|
| 63,710 |
|
|
| 103,293 |
|
|
| .65 |
|
|
| 64,834 |
|
|
| 124,465 |
|
|
| .76 |
|
|
| 63,545 |
|
|
| 136,398 |
|
|
| .85 |
|
|
|
| 71,520 |
|
|
| 37,163 |
|
|
| .21 |
|
|
| 69,298 |
|
|
| 46,498 |
|
|
| .27 |
|
|
| 63,710 |
|
|
| 103,293 |
|
|
| .65 |
|
|
Short-term borrowings |
|
| 58 |
|
|
| 23 |
|
|
| .16 |
|
|
| 675 |
|
|
| 3,168 |
|
|
| 1.86 |
|
|
| 1,212 |
|
|
| 6,967 |
|
|
| 2.28 |
|
|
|
| 62 |
|
|
| 1 |
|
|
| .01 |
|
|
| 63 |
|
|
| 2 |
|
|
| .01 |
|
|
| 58 |
|
|
| 23 |
|
|
| .16 |
|
|
Long-term borrowings |
|
| 6,240 |
|
|
| 40,298 |
|
|
| 2.60 |
|
|
| 6,941 |
|
|
| 49,437 |
|
|
| 2.83 |
|
|
| 7,121 |
|
|
| 56,214 |
|
|
| 3.13 |
|
|
|
| 5,499 |
|
|
| 20,902 |
|
|
| 1.51 |
|
|
| 6,189 |
|
|
| 28,605 |
|
|
| 1.86 |
|
|
| 6,240 |
|
|
| 40,298 |
|
|
| 2.60 |
|
|
Total interest-bearing liabilities |
|
| 70,008 |
|
|
| 143,614 |
|
|
| 0.83 |
|
|
| 72,450 |
|
|
| 177,070 |
|
|
| .97 |
|
|
| 71,878 |
|
|
| 199,579 |
|
|
| 1.10 |
|
|
|
| 77,081 |
|
|
| 58,066 |
|
|
| .30 |
|
|
| 75,550 |
|
|
| 75,105 |
|
|
| .40 |
|
|
| 70,008 |
|
|
| 143,614 |
|
|
| .83 |
|
|
Noninterest-bearing deposits |
|
| 32,456 |
|
|
|
|
|
|
|
|
|
|
| 32,069 |
|
|
|
|
|
|
|
|
|
|
| 30,550 |
|
|
|
|
|
|
|
|
|
|
|
| 44,786 |
|
|
|
|
|
|
|
|
|
|
| 42,497 |
|
|
|
|
|
|
|
|
|
|
| 32,456 |
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
| 2,401 |
|
|
|
|
|
|
|
|
|
|
| 2,203 |
|
|
|
|
|
|
|
|
|
|
| 2,123 |
|
|
|
|
|
|
|
|
|
|
|
| 2,241 |
|
|
|
|
|
|
|
|
|
|
| 2,446 |
|
|
|
|
|
|
|
|
|
|
| 2,401 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 104,865 |
|
|
|
|
|
|
|
|
|
|
| 106,722 |
|
|
|
|
|
|
|
|
|
|
| 104,551 |
|
|
|
|
|
|
|
|
|
|
|
| 124,108 |
|
|
|
|
|
|
|
|
|
|
| 120,493 |
|
|
|
|
|
|
|
|
|
|
| 104,865 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
| 15,720 |
|
|
|
|
|
|
|
|
|
|
| 15,832 |
|
|
|
|
|
|
|
|
|
|
| 15,837 |
|
|
|
|
|
|
|
|
|
|
|
| 16,073 |
|
|
|
|
|
|
|
|
|
|
| 15,953 |
|
|
|
|
|
|
|
|
|
|
| 15,720 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
| $ | 120,585 |
|
|
|
|
|
|
|
|
|
|
| 122,554 |
|
|
|
|
|
|
|
|
|
|
| 120,388 |
|
|
|
|
|
|
|
|
|
|
| $ | 140,181 |
|
|
|
|
|
|
|
|
|
|
| 136,446 |
|
|
|
|
|
|
|
|
|
|
| 120,585 |
|
|
|
|
|
|
|
|
|
|
Net interest spread |
|
|
|
|
|
|
|
|
|
| 3.35 |
|
|
|
|
|
|
|
|
|
|
| 3.30 |
|
|
|
|
|
|
|
|
|
|
| 3.41 |
|
|
|
|
|
|
|
|
|
|
|
| 2.83 |
|
|
|
|
|
|
|
|
|
|
| 2.98 |
|
|
|
|
|
|
|
|
|
|
| 3.35 |
|
|
Contribution of interest-free funds |
|
|
|
|
|
|
|
|
|
| .30 |
|
|
|
|
|
|
|
|
|
|
| .34 |
|
|
|
|
|
|
|
|
|
|
| .37 |
|
|
|
|
|
|
|
|
|
|
|
| .12 |
|
|
|
|
|
|
|
|
|
|
| .15 |
|
|
|
|
|
|
|
|
|
|
| .30 |
|
|
Net interest income/margin on earning assets |
|
|
|
|
| $ | 981,868 |
|
|
| 3.65 |
| % |
|
|
|
|
| 1,014,225 |
|
|
| 3.64 |
| % |
|
|
|
|
| 1,035,469 |
|
|
| 3.78 |
| % |
|
|
|
|
| $ | 947,114 |
|
|
| 2.95 |
| % |
|
|
|
|
| 961,371 |
|
|
| 3.13 |
| % |
|
|
|
|
| 981,868 |
|
|
| 3.65 |
| % |
(a) | Includes nonaccrual loans. |
(b) | Includes available-for-sale securities at amortized cost. |
(continued)
- 7991 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 3 (continued)
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES (continued)
|
| 2019 Second Quarter |
|
| 2019 First Quarter |
|
|
| 2019 Fourth Quarter |
|
| 2019 Third Quarter |
|
| ||||||||||||||||||||||||||||||||||||
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| Average Balance |
|
| Interest |
|
| Average Rate |
|
| ||||||||||||
Average balance in millions; interest in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average balance in millions; interest in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, net of unearned discount (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, etc. |
| $ | 23,335 |
|
| $ | 288,914 |
|
|
| 4.97 |
| % |
| 23,010 |
|
|
| 287,676 |
|
|
| 5.07 |
| % |
| $ | 23,548 |
|
| $ | 258,969 |
|
|
| 4.36 |
| % |
| 23,326 |
|
|
| 283,291 |
|
|
| 4.82 |
| % |
Real estate – commercial |
|
| 34,768 |
|
|
| 465,911 |
|
|
| 5.30 |
|
|
| 34,524 |
|
|
| 461,050 |
|
|
| 5.34 |
|
|
|
| 35,039 |
|
|
| 452,752 |
|
|
| 5.06 |
|
|
| 35,200 |
|
|
| 462,759 |
|
|
| 5.14 |
|
|
Real estate – consumer |
|
| 16,723 |
|
|
| 179,218 |
|
|
| 4.29 |
|
|
| 16,939 |
|
|
| 184,868 |
|
|
| 4.37 |
|
|
|
| 16,330 |
|
|
| 169,371 |
|
|
| 4.15 |
|
|
| 16,673 |
|
|
| 175,098 |
|
|
| 4.20 |
|
|
Consumer |
|
| 14,324 |
|
|
| 197,418 |
|
|
| 5.53 |
|
|
| 14,004 |
|
|
| 190,193 |
|
|
| 5.51 |
|
|
|
| 15,327 |
|
|
| 203,205 |
|
|
| 5.26 |
|
|
| 14,879 |
|
|
| 204,097 |
|
|
| 5.44 |
|
|
Total loans and leases, net |
|
| 89,150 |
|
|
| 1,131,461 |
|
|
| 5.09 |
|
|
| 88,477 |
|
|
| 1,123,787 |
|
|
| 5.15 |
|
|
|
| 90,244 |
|
|
| 1,084,297 |
|
|
| 4.77 |
|
|
| 90,078 |
|
|
| 1,125,245 |
|
|
| 4.96 |
|
|
Interest-bearing deposits at banks |
|
| 6,122 |
|
|
| 36,325 |
|
|
| 2.38 |
|
|
| 4,605 |
|
|
| 27,407 |
|
|
| 2.41 |
|
|
|
| 8,944 |
|
|
| 37,277 |
|
|
| 1.65 |
|
|
| 7,405 |
|
|
| 40,388 |
|
|
| 2.16 |
|
|
Federal funds sold and agreements to resell securities |
|
| 1 |
|
|
| 5 |
|
|
| 2.83 |
|
|
| — |
|
|
| 4 |
|
|
| 2.84 |
|
|
|
| 1,279 |
|
|
| 5,405 |
|
|
| 1.68 |
|
|
| 18 |
|
|
| 93 |
|
|
| 2.01 |
|
|
Trading account |
|
| 68 |
|
|
| 372 |
|
|
| 2.20 |
|
|
| 65 |
|
|
| 556 |
|
|
| 3.40 |
|
|
|
| 70 |
|
|
| 765 |
|
|
| 4.36 |
|
|
| 67 |
|
|
| 149 |
|
|
| .89 |
|
|
Investment securities (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies |
|
| 11,364 |
|
|
| 68,755 |
|
|
| 2.43 |
|
|
| 12,151 |
|
|
| 72,967 |
|
|
| 2.44 |
|
|
|
| 9,272 |
|
|
| 57,123 |
|
|
| 2.44 |
|
|
| 10,271 |
|
|
| 62,506 |
|
|
| 2.41 |
|
|
Obligations of states and political subdivisions |
|
| 7 |
|
|
| 93 |
|
|
| 5.11 |
|
|
| 8 |
|
|
| 67 |
|
|
| 3.25 |
|
|
|
| 5 |
|
|
| 64 |
|
|
| 4.96 |
|
|
| 6 |
|
|
| 74 |
|
|
| 4.99 |
|
|
Other |
|
| 799 |
|
|
| 6,827 |
|
|
| 3.43 |
|
|
| 790 |
|
|
| 7,488 |
|
|
| 3.84 |
|
|
|
| 767 |
|
|
| 6,364 |
|
|
| 3.29 |
|
|
| 798 |
|
|
| 6,593 |
|
|
| 3.28 |
|
|
Total investment securities |
|
| 12,170 |
|
|
| 75,675 |
|
|
| 2.49 |
|
|
| 12,949 |
|
|
| 80,522 |
|
|
| 2.52 |
|
|
|
| 10,044 |
|
|
| 63,551 |
|
|
| 2.51 |
|
|
| 11,075 |
|
|
| 69,173 |
|
|
| 2.48 |
|
|
Total earning assets |
|
| 107,511 |
|
|
| 1,243,838 |
|
|
| 4.64 |
|
|
| 106,096 |
|
|
| 1,232,276 |
|
|
| 4.71 |
|
|
|
| 110,581 |
|
|
| 1,191,295 |
|
|
| 4.27 |
|
|
| 108,643 |
|
|
| 1,235,048 |
|
|
| 4.51 |
|
|
Allowance for credit losses |
|
| (1,024 | ) |
|
|
|
|
|
|
|
|
|
| (1,021 | ) |
|
|
|
|
|
|
|
|
|
|
| (1,040 | ) |
|
|
|
|
|
|
|
|
|
| (1,034 | ) |
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
| 1,260 |
|
|
|
|
|
|
|
|
|
|
| 1,317 |
|
|
|
|
|
|
|
|
|
|
|
| 1,298 |
|
|
|
|
|
|
|
|
|
|
| 1,303 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
| 10,740 |
|
|
|
|
|
|
|
|
|
|
| 10,447 |
|
|
|
|
|
|
|
|
|
|
|
| 11,715 |
|
|
|
|
|
|
|
|
|
|
| 11,476 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 118,487 |
|
|
|
|
|
|
|
|
|
|
| 116,839 |
|
|
|
|
|
|
|
|
|
|
| $ | 122,554 |
|
|
|
|
|
|
|
|
|
|
| 120,388 |
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-checking deposits |
| $ | 53,495 |
|
|
| 91,556 |
|
|
| .69 |
|
|
| 52,095 |
|
|
| 76,139 |
|
|
| .59 |
|
|
| $ | 57,103 |
|
|
| 95,585 |
|
|
| .66 |
|
|
| 55,680 |
|
|
| 104,724 |
|
|
| .75 |
|
|
Time deposits |
|
| 6,530 |
|
|
| 24,931 |
|
|
| 1.53 |
|
|
| 6,351 |
|
|
| 21,081 |
|
|
| 1.35 |
|
|
|
| 6,015 |
|
|
| 23,958 |
|
|
| 1.58 |
|
|
| 6,343 |
|
|
| 25,456 |
|
|
| 1.59 |
|
|
Deposits at Cayman Islands office |
|
| 1,247 |
|
|
| 6,040 |
|
|
| 1.94 |
|
|
| 972 |
|
|
| 4,737 |
|
|
| 1.98 |
|
|
|
| 1,716 |
|
|
| 4,922 |
|
|
| 1.14 |
|
|
| 1,522 |
|
|
| 6,218 |
|
|
| 1.62 |
|
|
Total interest-bearing deposits |
|
| 61,272 |
|
|
| 122,527 |
|
|
| .80 |
|
|
| 59,418 |
|
|
| 101,957 |
|
|
| .70 |
|
|
|
| 64,834 |
|
|
| 124,465 |
|
|
| .76 |
|
|
| 63,545 |
|
|
| 136,398 |
|
|
| .85 |
|
|
Short-term borrowings |
|
| 1,263 |
|
|
| 7,893 |
|
|
| 2.51 |
|
|
| 1,091 |
|
|
| 6,713 |
|
|
| 2.49 |
|
|
|
| 675 |
|
|
| 3,168 |
|
|
| 1.86 |
|
|
| 1,212 |
|
|
| 6,967 |
|
|
| 2.28 |
|
|
Long-term borrowings |
|
| 8,278 |
|
|
| 66,012 |
|
|
| 3.20 |
|
|
| 8,494 |
|
|
| 67,579 |
|
|
| 3.23 |
|
|
|
| 6,941 |
|
|
| 49,437 |
|
|
| 2.83 |
|
|
| 7,121 |
|
|
| 56,214 |
|
|
| 3.13 |
|
|
Total interest-bearing liabilities |
|
| 70,813 |
|
|
| 196,432 |
|
|
| 1.11 |
|
|
| 69,003 |
|
|
| 176,249 |
|
|
| 1.04 |
|
|
|
| 72,450 |
|
|
| 177,070 |
|
|
| .97 |
|
|
| 71,878 |
|
|
| 199,579 |
|
|
| 1.10 |
|
|
Noninterest-bearing deposits |
|
| 30,099 |
|
|
|
|
|
|
|
|
|
|
| 30,315 |
|
|
|
|
|
|
|
|
|
|
|
| 32,069 |
|
|
|
|
|
|
|
|
|
|
| 30,550 |
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
| 1,945 |
|
|
|
|
|
|
|
|
|
|
| 1,952 |
|
|
|
|
|
|
|
|
|
|
|
| 2,203 |
|
|
|
|
|
|
|
|
|
|
| 2,123 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 102,857 |
|
|
|
|
|
|
|
|
|
|
| 101,270 |
|
|
|
|
|
|
|
|
|
|
|
| 106,722 |
|
|
|
|
|
|
|
|
|
|
| 104,551 | �� |
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
| 15,630 |
|
|
|
|
|
|
|
|
|
|
| 15,569 |
|
|
|
|
|
|
|
|
|
|
|
| 15,832 |
|
|
|
|
|
|
|
|
|
|
| 15,837 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
| $ | 118,487 |
|
|
|
|
|
|
|
|
|
|
| 116,839 |
|
|
|
|
|
|
|
|
|
|
| $ | 122,554 |
|
|
|
|
|
|
|
|
|
|
| 120,388 |
|
|
|
|
|
|
|
|
|
|
Net interest spread |
|
|
|
|
|
|
|
|
|
| 3.53 |
|
|
|
|
|
|
|
|
|
|
| 3.67 |
|
|
|
|
|
|
|
|
|
|
|
| 3.30 |
|
|
|
|
|
|
|
|
|
|
| 3.41 |
|
|
Contribution of interest-free funds |
|
|
|
|
|
|
|
|
|
| .38 |
|
|
|
|
|
|
|
|
|
|
| .37 |
|
|
|
|
|
|
|
|
|
|
|
| .34 |
|
|
|
|
|
|
|
|
|
|
| .37 |
|
|
Net interest income/margin on earning assets |
|
|
|
|
| $ | 1,047,406 |
|
|
| 3.91 |
| % |
|
|
|
|
| 1,056,027 |
|
|
| 4.04 |
| % |
|
|
|
|
| $ | 1,014,225 |
|
|
| 3.64 |
| % |
|
|
|
|
| 1,035,469 |
|
|
| 3.78 |
| % |
(a) | Includes nonaccrual loans. |
(b) | Includes available-for-sale securities at amortized cost. |
- 8092 -
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Incorporated by reference to the discussion contained under the caption “Taxable-equivalent Net Interest Income” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Item 4. | Controls and Procedures. |
(a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), René F. Jones, Chairman of the Board and Chief Executive Officer, and Darren J. King, Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of March 31,September 30, 2020.
(b) Changes in internal control over financial reporting. M&T regularly assesses the adequacy of its internal control over financial reporting and enhances its controls in response to internal control assessments and internal and external audit and regulatory recommendations. Effective January 1, 2020, M&T adopted a new accounting standard that significantly changed its process for calculating the allowance for credit losses and, as a result, modified many of its control activities associated with the determination of this critical accounting estimate. The revised processes and controls reflect the incorporation of macro-economic forecasts into credit-loss forecasting models for purposes of estimating expected loss amounts over a reasonable and supportable forecast period.No other changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended March 31,September 30, 2020 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.
The emergence of the COVID-19 pandemic during the first quarter of 2020 necessitated the execution of several M&T contingency plans. Beginning in March 2020 and continuing through this filing date, the Company had a substantial number of its employees working remotely under such contingency plans.
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings. |
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 $50$25 million. Although the Company does not believe that the outcome of pending legal matters will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.
ESOP Matters: Wilmington Trust, N.A. provides retirement services, including serving in certain trustee roles relating to Employee Stock Ownership Plans (“ESOPs”). Beginning in 2010, the U.S. Department of Labor (“DOL”) announced that it would increase its focus on ESOP transactions, particularly with regard to valuation issues relating to ESOP transactions. Beginning in late 2013, Wilmington Trust, N.A. began receiving requests for information and subpoenas relating to certain ESOP transactions for which it acted as trustee. In June 2016, Wilmington Trust, N.A. received a DOL subpoena seeking information on its global ESOP trustee business. In addition to these investigations, the DOL has commenced three lawsuits against Wilmington Trust, N.A. relating to its role as trustee of three ESOP transactions. In July 2019, Wilmington Trust, N.A. reached a settlement in principle
- 81 -
with the DOL to resolve certain pending DOL ESOP matters. On April 28, 2020, Wilmington Trust N.A. and the DOL executed a formal settlement agreement. The total amount of the settlement was $88 million, which included $80 million in payments to 21 ESOPs. The settlement amount is within the Company’s reserve for litigation matters as of March 31, 2020. Wilmington Trust, N.A. has also been named as a defendant in five private party lawsuits relating to its role as trustee for five ESOP transactions. Two of the five private party lawsuits relating to ESOP transactions have been resolved through settlements, which have been preliminarily approved by Courts, and are in the process of administration. Neither of the two settlements is material. Under applicable transaction documents, Wilmington Trust, N.A. may be entitled to indemnification by the ESOP plan sponsors. These matters could result in damages, settlements, penalties, restitution, reputational damage or additional costs and expenses.
Due to their complex nature, it is difficult to estimate when litigation and investigatory matters such as these may be resolved. As set forth in the introductory paragraph to this Item 3 — Legal Proceedings, losses from current litigation and regulatory matters which the Company is subject to that are not currently considered probable are within a range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, and are included in the range of reasonably possible losses set forth above.
Item 1A. | Risk Factors. |
In addition to the risk factors relating to M&T as disclosed in response to Item 1A. to Part I of Form 10-K for the year ended December 31, 2019, a supplemental risk factor is presented below.
M&T’s business, financial condition, liquidity, capital and results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic.
The Coronavirus Disease 2019 (“COVID-19”) pandemic has caused severe disruption to the U.S. and global economy and created significant volatility in the financial markets. The duration of this disruption and impact cannot be reasonably estimated at this time.
- 93 -
The pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, the Company’s business, financial condition, liquidity, capital and results of operations. The extent to which the COVID-19 pandemic will continue to negatively affect the Company’s business, financial condition, liquidity, capital and results of operations will depend on future developments which are highly uncertain and cannot be predicted, including(including the scope and duration of the pandemic, the continued effectiveness of M&T’s business continuity plans, the direct and indirect impact of the pandemic on the Company’s employees, customers, clients, counterparties, andvendors, service providers as well asand other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.pandemic), which are highly uncertain and cannot be reasonably predicted.
The COVID-19 pandemic has contributed to:
| • | Increased unemployment levels, interrupted income of consumers and decreased consumer confidence |
| • | Increased disruption to businesses, permanent or temporary closure of businesses and decreased business confidence generally, leading to increased risk of delinquencies, defaults and bankruptcies; |
• | A sudden and significant reduction in the valuation of the equity, fixed-income and commodity markets and the significant increase in the volatility of those markets; |
| • | A decrease in the rates and yields on U.S. Treasury securities, which |
| • | Declines in collateral values; |
| • | Increased demands on capital and liquidity, leading M&T to cease repurchases of its common stock for the time being; |
| • | A reduction in the value of the assets that the Company manages or otherwise administers or services for |
| • | Heightened cybersecurity, information security and operational risks to the Company, including as a result of work-from-home arrangements; |
| • | Disruptions to the business operations of the Company, including disruptions to branch and office openings, supply chains and employee travel and working arrangements; and |
• | Disruptions to business operations at counterparties, vendors and other service providers. |
- 82 -
The pandemic is likely to continue to contribute to these risks and impacts. As a result, the Company’s credit, operational and other risks are generally expected to increase until the pandemic subsides.
In addition, the Company’s business operations arecontinue to be at risk of adverse disruption if significant portions of itsthe Company’s workforce are unable to work effectively, including because of illness, quarantines, government actions, failures in systems or technology that disrupt work-from-home arrangements or other effects of the pandemic, or if the Company is unable to keep branches or offices open, including because of risk of infection. The Company has already taken action to implement a limited branch service model, with in-person visits by appointment only.
Governmental authorities have taken unprecedented measures to provide economic assistance to individual households and businesses, stabilize the markets and support economic growth. The success of these measures is unknownnot yet entirely known and theythose measures may not be sufficient to fully mitigate the negative impact of the COVID-19 pandemic. Additionally, some measures, such as a suspension of mortgage and other loan payments and foreclosures, may have a negative impact on the Company’s business, financial condition, liquidity, capital and results of operations. If such measures are not effective in mitigating the effects of the COVID-19 pandemic on the Company’s borrowers, itthe Company may also experience higher rates of default and increased credit losses in future periods. The Company also faces an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the COVID-19 pandemic on market and economic conditions and actions governmental authorities take in response to those conditions. Furthermore, various government programs such as the Paycheck Protection Program are complex and the Company’s participation may lead to litigation and governmental, regulatory and third party scrutiny, negative publicity and damage to its reputation.
The length of the pandemic and the efficacy of the extraordinary measures being put in place to address it are unknown. It is unknown when there will be a return to normal business activity and a subsiding of the economic
- 94 -
stress associated with the pandemic. Prolonged continuation of the pandemic could worsen these risks and impacts. Until the pandemic subsides, the Company expects continued draws on lines of credit, reduced revenues in Trust and othermany of its fee-related businesses and increased customer and client defaults, including defaults in unsecured loans. Even after the pandemic subsides, the U.S. economy may experience a prolonged economic slowdown or recession, and M&T anticipates the Company’s businesses would be materially and adversely affected by a prolonged economic slowdown or recession. To the extent the pandemic adversely affects the Company’s business, financial condition, liquidity, capital or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled “Risk Factors” in M&T’s 2019 Annual Report on Form 10-K for the year ended December 31, 2019 and M&T’s other filings with the Securities and Exchange Commission.
- 83 -
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, 2020 |
|
| 327,603 |
|
| $ | 168.84 |
|
|
| 310,000 |
|
| $ | 1,000,481,698 |
|
February 1 - February 29, 2020 |
|
| 1,217,000 |
|
|
| 161.91 |
|
|
| 1,217,000 |
|
|
| 803,431,182 |
|
March 1 - March 31, 2020 |
|
| 1,050,000 |
|
|
| 118.43 |
|
|
| 1,050,000 |
|
|
| 679,076,785 |
|
Total |
|
| 2,594,603 |
|
| $ | 145.19 |
|
|
| 2,577,000 |
|
|
|
|
|
|
| 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) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1 - July 31, 2020 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | — |
|
August 1 - August 31, 2020 |
|
| 300 |
|
|
| 105.95 |
|
|
| — |
|
|
| — |
|
September 1 - September 30, 2020 |
|
| 230 |
|
|
| 103.26 |
|
|
| — |
|
|
| — |
|
Total |
|
| 530 |
|
|
| 104.78 |
|
|
| — |
|
|
|
|
|
(1) | The total number of shares purchased during the periods indicated includes shares purchased as part of publicly announced programs |
(2) |
|
Item 3. | Defaults Upon Senior Securities. |
(Not applicable.)
Item 4. | Mine Safety Disclosures. |
(None.)
Item 5. | Other Information. |
(None.)
- 8495 -
Item 6. | Exhibits. |
The following exhibits are filed as a part of this report.
Exhibit No. |
|
| |
| |||
| |||
| |||
|
| ||
| Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. | ||
|
| ||
| Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. | ||
|
| ||
| Certification of Chief Executive Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. | ||
|
| ||
| Certification of Chief Financial Officer under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. | ||
|
| ||
101.INS |
| Inline XBRL Instance Document. Filed herewith. | |
|
| ||
101.SCH |
| Inline XBRL Taxonomy Extension Schema. Filed herewith. | |
|
| ||
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase. Filed herewith. | |
|
|
| |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase. Filed herewith. | |
|
| ||
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase. Filed herewith. | |
|
| ||
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase. Filed herewith. | |
|
| ||
104 |
| The cover page from M&T Bank Corporation’s Quarterly Report on Form 10-Q for the quarter ended
|
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: |
| By: |
| /s/ Darren J. King |
|
|
|
| Darren J. King |
|
|
|
| Executive Vice President and Chief Financial Officer |
- 8596 -