UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant's telephone number, including area code:
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Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
Trading Symbols |
Name of Each Exchange on Which Registered |
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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. ☒
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).
☒
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.
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☒ |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
Number of shares of the registrant's Common Stock, $0.50 par value, outstanding as of the close of business on May 1, 2023:
- 1 -
M&T BANK CORPORATION
FORM 10-Q
For the Quarterly Period Ended March 31, 2023
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Table of Contents of Information Required in Report |
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Item 1. |
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CONSOLIDATED BALANCE SHEET – March 31, 2023 and December 31, 2022 |
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3 |
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CONSOLIDATED STATEMENT OF INCOME – Three months ended March 31, 2023 and 2022 |
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – Three months ended March 31, 2023 and 2022 |
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CONSOLIDATED STATEMENT OF CASH FLOWS – Three months ended March 31, 2023 and 2022 |
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7 |
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8 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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45 |
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Item 3. |
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80 |
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Item 4. |
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80 |
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Item 1. |
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81 |
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Item 1A. |
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81 |
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Item 2. |
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81 |
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Item 3. |
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81 |
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Item 4. |
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81 |
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Item 5. |
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81 |
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Item 6. |
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81 |
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83 |
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- 2 -
PART I. FINANCI AL INFORMATION
Item 1. Financi al Statements.
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANC E SHEET (Unaudited)
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March 31, |
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December 31, |
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(Dollars in thousands, except per share) |
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2023 |
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2022 |
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Assets |
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Cash and due from banks |
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$ |
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$ |
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Interest-bearing deposits at banks |
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Federal funds sold |
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— |
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Trading account |
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Investment securities |
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Available for sale (cost: $
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Held to maturity (fair value: $
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Equity and other securities (cost: $
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Total investment securities |
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Loans and leases |
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Unearned discount |
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Loans and leases, net of unearned discount |
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Allowance for credit losses |
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Loans and leases, net |
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Premises and equipment |
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Goodwill |
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Core deposit and other intangible assets |
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Accrued interest and other assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Noninterest-bearing deposits |
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$ |
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$ |
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Savings and interest-checking deposits |
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Time deposits |
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Total deposits |
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Short-term borrowings |
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Accrued interest and other liabilities |
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Long-term borrowings |
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Total liabilities |
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Shareholders' equity |
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Preferred stock, $
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Common stock, $
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Common stock issuable,
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive income (loss), net |
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Treasury stock — common, at cost —
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(
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(
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See accompanying notes to financial statements.
- 3 -
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
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Three Months Ended March 31 |
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(In thousands, except per share) |
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2023 |
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2022 |
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Interest income |
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Loans and leases, including fees |
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$ |
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$ |
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Investment securities |
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Fully taxable |
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Exempt from federal taxes |
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Deposits at banks |
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Other |
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Total interest income |
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Interest expense |
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Savings and interest-checking deposits |
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Time deposits |
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Short-term borrowings |
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Long-term borrowings |
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Total interest expense |
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Net interest income |
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Provision for credit losses |
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Net interest income after provision for credit losses |
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Other income |
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Mortgage banking revenues |
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Service charges on deposit accounts |
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Trust income |
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Brokerage services income |
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Trading account and other non-hedging derivative gains |
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Gain (loss) on bank investment securities |
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Other revenues from operations |
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Total other income |
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Other expense |
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Salaries and employee benefits |
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Equipment and net occupancy |
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Outside data processing and software |
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FDIC assessments |
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Advertising and marketing |
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Printing, postage and supplies |
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Amortization of core deposit and other intangible assets |
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Other costs of operations |
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Total other expense |
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Income before taxes |
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Income taxes |
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Net income |
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$ |
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$ |
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Net income available to common shareholders |
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Basic |
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$ |
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$ |
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Diluted |
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Net income per common share |
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Basic |
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$ |
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$ |
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Diluted |
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Average common shares outstanding |
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Basic |
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Diluted |
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See accompanying notes to financial statements.
- 4 -
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COM PREHENSIVE INCOME (Unaudited)
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Three Months Ended March 31 |
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(In thousands) |
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2023 |
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2022 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss), net of tax and
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Net unrealized gains (losses) on investment securities |
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(
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Cash flow hedges adjustments |
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(
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Foreign currency translation adjustments |
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(
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Defined benefit plans liability adjustments |
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(
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Total other comprehensive income (loss) |
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(
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Total comprehensive income |
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$ |
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$ |
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See accompanying notes to financial statements.
- 5 -
M&T BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT O F CASH FLOWS (Unaudited)
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Three Months Ended March 31 |
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(In thousands) |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities |
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Provision for credit losses |
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Depreciation and amortization of premises and equipment |
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Amortization of capitalized servicing rights |
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Amortization of core deposit and other intangible assets |
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Provision for deferred income taxes |
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Asset write-downs |
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Net gain on sales of assets |
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(
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(
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Net change in accrued interest receivable, payable |
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Net change in other accrued income and expense |
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(
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Net change in loans originated for sale |
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(
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Net change in trading account and other non-hedging derivative assets and liabilities |
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(
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Proceeds from sales of investment securities |
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Equity and other securities |
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Proceeds from maturities of investment securities |
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Available for sale |
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Held to maturity |
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Purchases of investment securities |
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Available for sale |
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(
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(
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Held to maturity |
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(
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(
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Equity and other securities |
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(
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(
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Net (increase) decrease in loans and leases |
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(
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Net decrease in interest-bearing deposits at banks |
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Capital expenditures, net |
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(
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(
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Net decrease in loan servicing advances |
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Other, net |
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(
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(
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Net cash provided (used) by investing activities |
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(
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Cash flows from financing activities |
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Net decrease in deposits |
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(
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Net increase in short-term borrowings |
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Proceeds from long-term borrowings |
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— |
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Payments on long-term borrowings |
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(
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(
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Purchases of treasury stock |
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(
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— |
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Dividends paid — common |
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(
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(
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Dividends paid — preferred |
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(
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(
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Other, net |
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(
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(
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Net cash provided (used) by financing activities |
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(
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Net increase in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information |
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Interest received during the period |
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$ |
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$ |
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Interest paid during the period |
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Income taxes paid during the period |
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Supplemental schedule of noncash investing and financing activities |
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Real estate acquired in settlement of loans |
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$ |
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$ |
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Additions to right-of-use assets under operating leases |
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See accompanying notes to financial statements.
- 6 -
M&T BANK CORPORATION AND SUBSIDIARIES
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Accumulated |
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Other |
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Common |
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Additional |
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Comprehensive |
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Preferred |
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Common |
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Stock |
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Paid-in |
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Retained |
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Income |
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Treasury |
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Dollars in thousands, except per share |
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Stock |
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Stock |
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Issuable |
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Capital |
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Earnings |
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(Loss), Net |
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Stock |
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Total |
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2023 |
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Balance — January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
(
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) |
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$ |
(
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) |
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$ |
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|
Total comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Preferred stock cash dividends (a) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Purchases of treasury stock (b) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
Stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Common stock cash dividends —
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance — March 31, 2023 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Balance — January 1, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Total comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(
|
) |
|
|
— |
|
|
|
|
|
|
Preferred stock cash dividends (a) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Common stock cash dividends —
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance — March 31, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
See accompanying notes to financial statements.
- 7 -
NOTES TO FINANC IAL STATEMENTS
1. Significant accounting policies
The consolidated interim financial statements of M&T Bank Corporation (“M&T”) and subsidiaries (“the Company”) were compiled in accordance with generally accepted accounting principles (“GAAP”) using the accounting policies set forth in note 1 of Notes to Financial Statements included in Form 10-K for the year ended December 31, 2022 (“2022 Annual Report”), except as disclosed in note 16 of Notes to Financial Statements herein. The financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented.
2. Acquisition and divestiture
Acquisition
On April 1, 2022, M&T completed the acquisition of People's United Financial, Inc. ("People's United"). Through subsidiaries, People's United provided commercial banking, retail banking and wealth management services to individual, corporate and municipal customers through a network of branches located in Connecticut, southeastern New York, Massachusetts, Vermont, New Hampshire and Maine. Following the merger, People's United Bank, National Association, a national banking association and a wholly owned subsidiary of People's United, merged with and into Manufacturers and Traders Trust Company ("M&T Bank"), the principal banking subsidiary of M&T, with M&T Bank as the surviving entity. The results of operations acquired from People's United have been included in the Company's financial results since April 1, 2022.
Pursuant to the terms of the merger agreement dated February 22, 2021, People’s United shareholders received consideration valued at
- 8 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Acquisition and divestiture, continued
The People’s United transaction has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and preferred stock converted were recorded at estimated fair value on the acquisition date.
|
|
|
(In thousands) |
|
|
|
Consideration: |
|
|
|
|
|
Common stock issued (
|
|
$ |
|
|
|
Common stock awards converted |
|
|
|
|
|
Cash |
|
|
|
|
|
Total consideration |
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired: |
|
|
|
|
|
Identifiable assets |
|
|
|
|
|
Cash and due from banks |
|
|
|
|
|
Interest-bearing deposits at banks |
|
|
|
|
|
Investment securities |
|
|
|
|
|
Loans and leases |
|
|
|
|
|
Core deposit and other intangible assets |
|
|
|
|
|
Other assets |
|
|
|
|
|
Total identifiable assets acquired |
|
|
|
|
|
Liabilities and preferred stock |
|
|
|
|
|
Deposits |
|
|
|
|
|
Borrowings |
|
|
|
|
|
Other liabilities |
|
|
|
|
|
Total liabilities assumed |
|
|
|
|
|
Preferred stock |
|
|
|
|
|
Total liabilities and preferred stock |
|
|
|
|
|
Net assets acquired |
|
|
|
|
|
Goodwill |
|
$ |
|
|
GAAP requires loans and leases obtained through an acquisition that have experienced a more-than-insignificant deterioration in credit quality since origination be considered purchased credit deteriorated (“PCD”). The Company considered several factors in the determination of PCD loans, including loan grades assigned to acquired commercial loans and leases and commercial real estate loans utilizing the Company's loan grading system and delinquency status and history for acquired loans backed by residential real estate. For PCD loans and leases the initial estimate of expected credit losses of $
|
|
PCD |
|
|
Non-PCD |
|
|
||
|
|
(In thousands) |
|
|
|||||
|
Unpaid principal balance |
$ |
|
|
(a) |
$ |
|
|
|
|
Allowance for credit losses at acquisition |
|
(
|
) |
(a) |
|
— |
|
|
|
Other discount |
|
(
|
) |
|
|
(
|
) |
(b) |
|
Fair value |
$ |
|
|
|
$ |
|
|
|
- 9 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Acquisition and divestiture, continued
In connection with the acquisition, the Company recorded approximately $
|
|
|
Pro forma |
|
|
|
|
|
Three months ended March 31, 2022 |
|
|
|
|
|
(In thousands) |
|
|
|
Total revenues (a) |
|
$ |
|
|
|
Net income |
|
|
|
|
In connection with the People’s United acquisition, the Company incurred merger-related expenses related to systems conversions and other costs of integrating and conforming acquired operations with and into the Company. Those expenses consisted largely of professional services, temporary help fees and other costs associated with actual or planned systems conversions and/or integration of operations and the introduction of the Company to its new customers; costs related to termination of existing contractual arrangements for various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; severance (for former People’s United employees); travel costs; and other costs of completing the transaction and commencing operations in new markets and offices. The Company did not incur any People's United merger-related expenses during the first quarter of 2023. Merger-related expenses incurred in the three months ended March 31, 2022
totaled approximately $
Divestiture
On December 19, 2022 the Company announced that it had entered into a definitive agreement to sell its Collective Investment Trust ("CIT") business to a private equity firm. The transaction was completed in April 2023. The Company will recognize a pre-tax gain on the sale of approximately $
- 10 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Investment securities
The amortized cost and estimated fair value of investment securities were as follows:
|
|
|
Amortized
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt securities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Equity and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Readily marketable equity — at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other — at cost |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total equity and other securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt securities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Equity and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Readily marketable equity — at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other — at cost |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total equity and other securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
- 11 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Investment securities, continued
There were
At March 31, 2023, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:
|
|
|
Amortized
|
|
|
Estimated
|
|
||
|
|
|
(In thousands) |
|
|||||
|
Debt securities available for sale: |
|
|
|
|
|
|
||
|
Due in one year or less |
|
$ |
|
|
|
$ |
|
|
|
Due after one year through five years |
|
|
|
|
|
|
|
|
|
Due after five years through ten years |
|
|
|
|
|
|
|
|
|
Due after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Debt securities held to maturity: |
|
|
|
|
|
|
||
|
Due in one year or less |
|
$ |
|
|
|
$ |
|
|
|
Due after one year through five years |
|
|
|
|
|
|
|
|
|
Due after five years through ten years |
|
|
|
|
|
|
|
|
|
Due after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities held to maturity |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
- 12 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Investment securities, continued
A summary of investment securities that as of March 31, 2023 and December 31, 2022 had been in a continuous unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss position for twelve months or longer follows:
|
|
|
Less Than 12 Months |
|
|
12 Months or More |
|
||||||||||
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately issued |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
- 13 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Investment securities, continued
The Company owned
The Company estimated
At March 31, 2023 and December 31, 2022
investment securities with carrying values of $
4. Loans and leases and the allowance for credit losses
A summary of current, past due and nonaccrual loans as of March 31, 2023 and December 31, 2022 follows:
|
|
|
Current |
|
|
30-89 Days
|
|
|
Accruing
|
|
|
Nonaccrual |
|
|
Total |
|
|||||
|
|
|
(In thousands) |
|
|||||||||||||||||
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial, financial, leasing, etc. |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential builder and developer |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Other commercial construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential — limited documentation |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Home equity lines and loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Recreational finance |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
December 31, 2022 |
|
|
|
|||||||||||||||||
|
Commercial, financial, leasing, etc. |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential builder and developer |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Other commercial construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential — limited documentation |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Home equity lines and loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Recreational finance |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
- 14 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
One-to-four family residential mortgage loans held for sale were
$
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
Line of business personnel in different geographic locations with support from and review by the Company’s credit risk personnel review and reassign loan grades based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective regions. Factors considered in assigning loan grades include borrower-specific information related to expected future cash flows and operating results, collateral values, geographic location, financial condition and performance, payment status, and other information. The Company’s policy is that at least annually, updated financial information be obtained from commercial borrowers associated with pass grade loans and additional analysis performed. On a quarterly basis, the Company’s credit personnel review all criticized commercial loans and commercial real estate loans greater than $
- 15 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
The following table summarizes the loan grades applied at March 31, 2023 to the various classes of the Company’s commercial loans and commercial real estate loans and gross charge-offs for those types of loans for the three months ended March 31, 2023 by origination year.
|
|
|
Term Loans by Origination Year |
|
|
Revolving |
|
|
Revolving Loans Converted to Term |
|
|
|
|
||||||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Loans |
|
|
Loans |
|
|
Total |
|
|||||||||
|
|
|
(In thousands) |
|
|||||||||||||||||||||||||||||||||
|
Commercial, financial, leasing, etc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criticized nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial,
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Criticized nonaccrual |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial real
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential builder and developer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Criticized nonaccrual |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total residential builder
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Other commercial construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Criticized nonaccrual |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total other commercial
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
- 16 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
The Company considers repayment performance a significant indicator of credit quality for its residential real estate loan and consumer loan portfolios.
|
|
|
Term Loans by Origination Year |
|
|
Revolving |
|
|
Revolving Loans Converted to Term |
|
|
|
|
||||||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Loans |
|
|
Loans |
|
|
Total |
|
|||||||||
|
|
|
(In thousands) |
|
|||||||||||||||||||||||||||||||||
|
Residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Nonaccrual |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total residential |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential - limited documentation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total residential - limited
|
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Home equity lines and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
30-89 days past due |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home equity lines and
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Recreational finance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total recreational finance |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Automobile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total automobile |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days past due |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Gross charge-offs |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Total loans and leases at
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Total gross charge-offs for
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
- 17 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
The following table summarizes the loan grades applied at December 31, 2022 to the various classes of the Company’s commercial loans and commercial real estate loans by origination year.
|
|
|
Term Loans by Origination Year |
|
|
Revolving |
|
|
Revolving Loans Converted to Term |
|
|
|
|
||||||||||||||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
Prior |
|
|
Loans |
|
|
Loans |
|
|
Total |
|
|||||||||
|
|
|
(In thousands) |
|
|||||||||||||||||||||||||||||||||
|
Commercial, financial, leasing, etc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criticized nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial,
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Criticized nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total commercial real
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential builder and developer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Criticized nonaccrual |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total residential builder
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Other commercial construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loan grades: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Pass |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
Criticized accrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Criticized nonaccrual |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total other commercial
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
- 18 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
A summary of loans in accrual and nonaccrual status at December 31, 2022 for the various classes of the Company’s residential real estate loans and consumer loans by origination year follows.
|
|
|
Term Loans by Origination Year |
|
|
Revolving |
|
|
Revolving Loans Converted to Term |
|
|
|
|
||||||||||||||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
Prior |
|
|
Loans |
|
|
Loans |
|
|
Total |
|
|||||||||
|
|
|
(In thousands) |
|
|||||||||||||||||||||||||||||||||
|
Residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total residential |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential - limited documentation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total residential - limited
|
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Home equity lines and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
30-89 days past due |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home equity lines and
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Recreational finance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total recreational finance |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Automobile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total automobile |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing loans past due
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Total loans and leases at
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
- 19 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
Allowance for credit losses
For purposes of determining the level of the allowance for credit losses, the Company evaluates its loan and lease portfolio by type.
|
|
|
Commercial,
|
|
|
Real Estate |
|
|
|
|
|
|
|
||||||||
|
|
|
Leasing, etc. |
|
|
Commercial |
|
|
Residential |
|
|
Consumer |
|
|
Total |
|
|||||
|
|
|
(In thousands) |
|
|||||||||||||||||
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Beginning balance |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Charge-offs |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Ending balance |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
Commercial, Financial, |
|
|
Real Estate |
|
|
|
|
|
|
|
||||||||
|
|
|
Leasing, etc. |
|
|
Commercial |
|
|
Residential |
|
|
Consumer |
|
|
Total |
|
|||||
|
|
|
(In thousands) |
|
|||||||||||||||||
|
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Beginning balance |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Provision for credit losses |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Charge-offs |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (charge-offs) recoveries |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Ending balance |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
- 20 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
Despite the allocation in the preceding tables, the allowance for credit losses is general in nature and is available to absorb losses from any loan or lease type. In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company utilizes statistically developed models to project principal balances over the remaining contractual lives of the loan portfolios and to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators, including loan grade and borrower repayment performance, can inform the models, which have been statistically developed based on historical correlations of credit losses with prevailing economic metrics, including unemployment, gross domestic product and real estate prices. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At each of March 31, 2023 and December 31, 2022, the Company utilized a reasonable and supportable forecast period of two years. Subsequent to this forecast period the Company reverted, ratably over a one-year period, to historical loss experience to inform its estimate of losses for the remaining contractual life of each portfolio. The Company also estimates losses attributable to specific troubled credits identified through both normal and targeted credit review processes. The amounts of specific loss components in the Company’s loan and lease portfolios are determined through a loan-by-loan analysis of larger balance commercial loans and commercial real estate loans that are in nonaccrual status. Such loss estimates are typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to pay. To the extent that those loans are collateral-dependent, they are evaluated based on the fair value of the loan’s collateral as estimated at or near the financial statement date. As the quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation. In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines in values as determined by line of business and/or loan workout personnel. Those adjustments are reviewed and assessed for reasonableness by the Company’s credit risk personnel. Accordingly, for real estate collateral securing larger nonaccrual commercial loans and commercial real estate loans, estimated collateral values are based on current appraisals and estimates of value. For non-real estate loans, collateral is assigned a discounted estimated liquidation value and, depending on the nature of the collateral, is verified through field exams or other procedures. In assessing collateral, real estate and non-real estate values are reduced by an estimate of selling costs.
For residential real estate loans, including home equity loans and lines of credit, the excess of the loan balance over the net realizable value of the property collateralizing the loan is charged-off when the loan becomes
Changes in the amount of the allowance for credit losses reflect the outcome of the procedures described herein, including the impact of changes in macroeconomic forecasts as compared with previous forecasts, as well as the impact of portfolio concentrations, imprecision in economic forecasts, geopolitical conditions and other risk factors that might influence the loss estimation process.
The Company’s reserve for off-balance sheet credit exposures was not material at March 31, 2023 and December 31, 2022.
- 21 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
Information with respect to loans and leases that were considered nonaccrual at the beginning and end of the reporting period and the interest income recognized on such loans for three-month periods ended March 31, 2023 and 2022 follows.
|
|
|
Amortized Cost with Allowance |
|
|
Amortized Cost without Allowance |
|
|
Total |
|
|
Amortized Cost |
|
|
Interest Income Recognized |
|
|||||
|
|
|
March 31, 2023 |
|
|
January 1, 2023 |
|
|
Three Months Ended March 31, 2023 |
|
|||||||||||
|
|
|
(In thousands) |
|
|||||||||||||||||
|
Commercial, financial, leasing, etc. |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential builder and developer |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential — limited documentation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Home equity lines and loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
March 31, 2022 |
|
|
January 1, 2022 |
|
|
Three Months Ended March 31, 2022 |
|
|||||||||||
|
|
|
(In thousands) |
|
|||||||||||||||||
|
Commercial, financial, leasing, etc. |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential builder and developer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential — limited documentation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Home equity lines and loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loan modifications
During the normal course of business, the Company modifies loans to maximize recovery efforts from borrowers experiencing financial difficulty. Such loan modifications typically include payment deferrals and interest rate reductions, but may also include other modified terms. Those modified loans may be considered nonaccrual if the Company does not expect to collect the contractual cash flows owed under the loan agreement. On January 1, 2023 the Company adopted amended guidance that eliminated the accounting guidance for troubled debt restructurings while expanding disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amended guidance also requires disclosure of current period gross charge-offs by year of origination.
- 22 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
The table that follows summarizes the Company’s loan modification activities to borrowers experiencing financial difficulty for the three-month period ended March 31, 2023:
|
|
|
Payment Deferral |
|
|
Interest Rate Reduction |
|
|
Other |
|
|
Combination of Modification Types (a) |
|
|
Total (b) |
|
|
Percent of Total Loan Class |
|
||||||
|
|
|
(Dollars in thousands) |
|
|||||||||||||||||||||
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Commercial, financial, leasing, etc. |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Commercial |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Residential builder and developer |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Other commercial construction |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Residential |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
Residential — limited documentation |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Home equity lines and loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
Recreational finance |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Automobile |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
The financial effects of the modifications in the previous table include an increase in the weighted-average remaining term for commercial loans of
Modified loans to borrowers experiencing financial difficulty are subject to the allowance for credit losses methodology described herein, including the use of models to inform credit loss estimates and, to the extent larger balance commercial and commercial real estate loans are in nonaccrual status, a loan-by-loan analysis of expected credit losses on those individual loans. Loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023 and for which there was a subsequent payment default during that period were not material.
- 23 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Loans and leases and the allowance for credit losses, continued
Prior to January 1, 2023, if the borrower was experiencing financial difficulty such that the Company did not expect to collect the contractual cash flows owed under the original loan agreement and a concession in loan terms was granted, the Company considered the loan modification as a troubled debt restructuring.
|
|
|
|
|
|
|
|
|
Post-modification (a) |
|
|||||||||||||||||||
|
|
|
Number |
|
|
Pre-
|
|
|
Principal Deferral |
|
|
Interest Rate Reduction |
|
|
Other |
|
|
Combination of Concession Types |
|
|
Total |
|
|||||||
|
|
|
(Dollars in thousands) |
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Commercial, financial, leasing, etc. |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Residential — limited documentation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Home equity lines and loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Recreational finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
_____________________________________________
The amount of foreclosed property held by the Company, predominantly consisting of residential real estate, was
$
The Company pledged certain loans to secure outstanding borrowings and available lines of credit. At March 31, 2023
, the Company pledged approximately $
5. Borrowings
M&T had
$
- 24 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. Borrowings, continued
Holders of the Capital Securities receive preferential cumulative cash distributions unless M&T exercises its right to extend the payment of interest on the Junior Subordinated Debentures as allowed by the terms of each such debenture, in which case payment of distributions on the respective Capital Securities will be deferred for comparable periods. During an extended interest period, M&T may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock. In general, the agreements governing the Capital Securities, in the aggregate, provide a full, irrevocable and unconditional guarantee by M&T of the payment of distributions on, the redemption of, and any liquidation distribution with respect to the Capital Securities. The obligations under such guarantee and the Capital Securities are subordinate and junior in right of payment to all senior indebtedness of M&T.
The Capital Securities will remain outstanding until the Junior Subordinated Debentures are repaid at maturity, are redeemed prior to maturity or are distributed in liquidation to the trusts. The Capital Securities are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity dates (ranging from to ) of the Junior Subordinated Debentures or the earlier redemption of the Junior Subordinated Debentures in whole upon the occurrence of one or more events set forth in the indentures relating to the Capital Securities, and in whole or in part at any time after an optional redemption prior to contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated Debentures in whole or in part, subject to possible regulatory approval.
In January 2023, M&T issued $
At March 31, 2023, M&T Bank had borrowing facilities available with the Federal Home Loan Bank of New York whereby M&T Bank could borrow an additional $
- 25 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. Revenue from contracts with customers
The Company generally charges customer accounts or otherwise bills customers upon completion of its services. Typically the Company’s contracts with customers have a duration of
The following tables summarize sources of the Company’s noninterest income during the three-month periods ended March 31, 2023 and 2022 that are subject to the revenue recognition accounting guidance.
|
|
Business Banking |
|
|
Commercial Banking |
|
|
Commercial Real Estate |
|
|
Discretionary Portfolio |
|
|
Residential Mortgage Banking |
|
|
Retail Banking |
|
|
All Other |
|
|
Total |
|
||||||||
|
Three Months Ended March 31, 2023 |
(In thousands) |
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Classification in consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Service charges on deposit accounts |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Trust income |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Brokerage services income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Other revenues from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Merchant discount and credit card fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Classification in consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Service charges on deposit accounts |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Trust income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Brokerage services income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Other revenues from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Merchant discount and credit card fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
7. Pension plans and other postretirement benefits
The Company provides defined benefit pension and other postretirement benefits (including health care and life insurance benefits) to qualified retired employees. Net periodic defined benefit cost for defined benefit plans consisted of the following:
|
|
|
Pension
|
|
|
Other
|
|
||||||||||
|
|
|
Three Months Ended March 31 |
|
|||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
Net periodic cost (benefit) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
- 26 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. Pension plans and other postretirement benefits, continued
Service cost is reflected in salaries and employee benefits expense in the consolidated statement of income. The other components of net periodic benefit cost are reflected in other costs of operations. Expenses incurred in connection with the Company's defined contribution pension and retirement savings plans totaled
$
8. Earnings per common share
The computations of basic earnings per common share follow:
|
|
|
Three Months Ended March 31 |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
|
|
(In thousands, except per share) |
|
|||||
|
|
|
|
|
|
|
|
||
|
Income available to common shareholders: |
|
|
|
|
|
|
||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Less: Preferred stock dividends |
|
|
(
|
) |
|
|
(
|
) |
|
Net income available to common equity |
|
|
|
|
|
|
|
|
|
Less: Income attributable to unvested stock-based
|
|
|
(
|
) |
|
|
(
|
) |
|
Net income available to common shareholders |
|
$ |
|
|
|
$ |
|
|
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
||
|
Common shares outstanding (including common
|
|
|
|
|
|
|
|
|
|
Less: Unvested stock-based compensation awards |
|
|
(
|
) |
|
|
(
|
) |
|
Weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Basic earnings per common share |
|
$ |
|
|
|
$ |
|
|
The computations of diluted earnings per common share follow:
|
|
|
Three Months Ended March 31 |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
|
|
(In thousands, except per share) |
|
|||||
|
|
|
|
|
|
|
|
||
|
Net income available to common equity |
|
$ |
|
|
|
$ |
|
|
|
Less: Income attributable to unvested stock-based
|
|
|
(
|
) |
|
|
(
|
) |
|
Net income available to common shareholders |
|
$ |
|
|
|
$ |
|
|
|
Adjusted weighted-average shares outstanding: |
|
|
|
|
|
|
||
|
Common and unvested stock-based compensation
|
|
|
|
|
|
|
|
|
|
Less: Unvested stock-based compensation awards |
|
|
(
|
) |
|
|
(
|
) |
|
Plus: Incremental shares from assumed conversion
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Diluted earnings per common share |
|
$ |
|
|
|
$ |
|
|
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.
- 27 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. Earnings per common share, continued
Stock-based compensation awards to purchase common stock of M&T representing
9. Comprehensive income
The following tables display the components of other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) to net income:
|
|
Investment |
|
|
Defined Benefit |
|
|
|
|
|
Total
|
|
|
|
Income |
|
|
|
|
||||||
|
|
Securities |
|
|
Plans |
|
|
Other |
|
|
Before Tax |
|
|
|
Tax |
|
|
Net |
|
||||||
|
|
(In thousands) |
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Balance — January 1, 2023 |
$ |
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
$ |
(
|
) |
|
|
|
|
|
|
$ |
(
|
) |
|
Other comprehensive income (loss) before reclassifications: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Unrealized holding gains, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Foreign currency translation adjustment |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Unrealized gains on cash flow hedges |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Total other comprehensive income (loss) before
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Accretion of net gain on terminated cash flow hedges |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
(b) |
|
|
|
|
|
|
(
|
) |
|
Net yield adjustment from cash flow hedges
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
(a) |
|
|
(
|
) |
|
|
|
|
|
Amortization of prior service credit |
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
(c) |
|
|
(
|
) |
|
|
(
|
) |
|
Amortization of actuarial losses |
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
(c) |
|
|
(
|
) |
|
|
(
|
) |
|
Total other comprehensive income (loss) |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Balance — March 31, 2023 |
$ |
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
$ |
(
|
) |
|
|
|
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Balance — January 1, 2022 |
$ |
|
|
|
|
(
|
) |
|
|
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
$ |
(
|
) |
|
Other comprehensive income (loss) before reclassifications: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Unrealized holding losses, net |
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Foreign currency translation adjustment |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Unrealized losses on cash flow hedges |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Total other comprehensive income (loss) before
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Amounts reclassified from accumulated other comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Amortization of unrealized holding losses on
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
(a) |
|
|
(
|
) |
|
|
|
|
|
Accretion of net gain on terminated cash flow hedges |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
(b) |
|
|
|
|
|
|
(
|
) |
|
Net yield adjustment from cash flow hedges
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
(a) |
|
|
|
|
|
|
(
|
) |
|
Amortization of prior service credit |
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
(c) |
|
|
|
|
|
|
(
|
) |
|
Amortization of actuarial losses |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
(c) |
|
|
(
|
) |
|
|
|
|
|
Total other comprehensive income (loss) |
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Balance — March 31, 2022 |
$ |
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
$ |
(
|
) |
|
|
|
|
|
|
$ |
(
|
) |
Accumulated other comprehensive income (loss), net consisted of the following:
|
|
|
|
|
|
Defined |
|
|
|
|
|
|
|
||||
|
|
|
Investment |
|
|
Benefit |
|
|
|
|
|
|
|
||||
|
|
|
Securities |
|
|
Plans |
|
|
Other |
|
|
Total |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Balance — December 31, 2022 |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Net gain (loss) during period |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Balance — March 31, 2023 |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
- 28 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. Derivative financial instruments
As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting, collateral and/or settlement provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material as of March 31, 2023.
The net effect of interest rate swap agreements was to decrease net interest income by $
Information about interest rate swap agreements entered into for interest rate risk management purposes summarized by type of financial instrument the swap agreements were intended to hedge follows:
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Estimated |
|
||||||||
|
|
|
Notional |
|
|
Average |
|
|
Average Rate |
|
|
Fair Value |
|
||||||||
|
|
|
Amount |
|
|
Maturity |
|
|
Fixed |
|
|
Variable |
|
|
Gain (Loss) (a) |
|
|||||
|
|
|
(In thousands) |
|
|
(In years) |
|
|
|
|
|
|
|
|
(In thousands) |
|
|||||
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fixed rate long-term borrowings (b) |
|
$ |
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
$ |
|
|
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Interest payments on variable rate commercial real estate loans (b) (c) |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
Total |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
||
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fixed rate long-term borrowings (b) |
|
$ |
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
$ |
(
|
) |
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Interest payments on variable rate commercial real estate loans (b) (d) |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
(
|
) |
|
Total |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(
|
) |
||
The Company utilizes commitments to sell residential and commercial real estate loans to hedge the exposure to changes in the fair value of real estate loans held for sale. Such commitments have generally been designated as fair value hedges. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in fair value of certain commitments to originate real estate loans for sale.
Other derivative financial instruments not designated as hedging instruments included interest rate contracts, foreign exchange and other option and futures contracts. Interest rate contracts not designated as hedging instruments had notional values of $
- 29 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. Derivative financial instruments, continued
Information about the fair values of derivative instruments in the Company’s consolidated balance sheet and consolidated statement of income follows:
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||||||
|
|
|
Fair Value |
|
|
Fair Value |
|
||||||||||
|
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
December 31, |
|
||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
Derivatives designated and qualifying as hedging instruments (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest rate swap agreements |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commitments to sell real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated and qualifying as hedging instruments (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Mortgage banking: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Mortgage-related commitments to originate real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to sell real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest rate contracts (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange and other option and futures contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Amount of Gain (Loss) Recognized |
|
|||||||||||||
|
|
|
Three Months Ended March 31 |
|
|||||||||||||
|
|
|
2023 |
|
|
2022 |
|
||||||||||
|
|
|
|
|
|
Hedged Item |
|
|
|
|
|
Hedged Item |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
Derivatives in fair value hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest rate swap agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed rate long-term borrowings (a) |
|
$ |
|
|
|
|
(
|
) |
|
$ |
(
|
) |
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest rate contracts (b) |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
||
|
Foreign exchange and other option and futures contracts (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Total |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
||
|
|
|
Carrying Amount of the Hedged Item |
|
|
Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the
|
|
||||||||||
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
Location in the
Consolidated
Balance
Sheet
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Long-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
The amount of interest income recognized in the consolidated statement of income associated with derivatives designated as cash flow hedges was a
of $
- 30 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. Derivative financial instruments, continued
The Company also has commitments to sell and commitments to originate residential and commercial real estate loans that are considered derivatives. The Company designates certain of the commitments to sell real estate loans as fair value hedges of real estate loans held for sale. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in the fair value of certain commitments to originate real estate loans for sale. As a result of these activities,
net unrealized pre-tax gains related to hedged loans held for sale, commitments to originate loans for sale and commitments to sell loans were approximately $
The Company does not offset derivative asset and liability positions in its consolidated financial statements. The Company’s exposure to credit risk by entering into derivative contracts is mitigated through master netting agreements and collateral posting or settlement requirements. Master netting agreements covering interest rate and foreign exchange contracts with the same party include a right to set-off that becomes enforceable in the event of default, early termination or under other specific conditions.
The aggregate fair value of derivative financial instruments in a liability position, which are subject to master netting arrangements, was $
The aggregate fair value of derivative financial instruments in an asset position with counterparties, which are subject to enforceable master netting arrangements, was $
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 $
11. Variable interest entities and asset securitizations
The Company’s securitization activity has consisted of securitizing loans originated for sale into government issued or guaranteed mortgage-backed securities. The Company has
As described in note 5, M&T has issued junior subordinated debentures payable to various trusts that have issued Capital Securities. M&T owns the common securities of those trust entities. The Company is not considered to be the primary beneficiary of those entities and, accordingly, the trusts are not included in the Company’s consolidated financial statements. At each of March 31, 2023 and December 31, 2022, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet and recognized
$
- 31 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. Variable interest entities and asset securitizations, continued
The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately $
The Company serves as investment advisor for certain registered money-market funds. The Company has no explicit arrangement to provide support to those funds, but may waive portions of its allowable management fees as a result of market conditions.
12. Fair value measurements
GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has not made any fair value elections at March 31, 2023.
Pursuant to GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy exists in GAAP for fair value measurements based upon the inputs to the valuation of an asset or liability.
When available, the Company attempts to use quoted market prices in active markets to determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not available, fair value is often determined using model-based techniques incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation. The following is a description of the valuation methodologies used for the Company's assets and liabilities that are measured on a recurring basis at estimated fair value.
- 32 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Fair value measurements, continued
Trading account
Mutual funds held in connection with deferred compensation and other arrangements have been classified as Level 1 valuations. Valuations of investments in debt securities can generally be obtained through reference to quoted prices in less active markets for the same or similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.
Investment securities available for sale and equity securities
The majority of the Company's available-for-sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. Certain investments in mutual funds and equity securities are actively traded and, therefore, have been classified as Level 1 valuations.
Real estate loans held for sale
The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale includes changes in estimated fair value during the hedge period. Typically, the Company attempts to hedge real estate loans held for sale from the date of close through the sale date. The fair value of hedged real estate loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans with similar characteristics and, accordingly, such loans have been classified as a Level 2 valuation.
Commitments to originate real estate loans for sale and commitments to sell real estate loans
The Company enters into various commitments to originate real estate loans for sale and commitments to sell real estate loans. Such commitments are accounted for as derivative financial instruments and, therefore, are carried at estimated fair value on the consolidated balance sheet. The estimated fair values of such commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans to certain government-sponsored entities and other parties. The fair valuations of commitments to sell real estate loans generally result in a Level 2 classification. The estimated fair value of commitments to originate real estate loans for sale are adjusted to reflect the Company's anticipated commitment expirations. The estimated commitment expirations are considered significant unobservable inputs contributing to the Level 3 classification of commitments to originate real estate loans for sale. Significant unobservable inputs used in the determination of estimated fair value of commitments to originate real estate loans for sale are included in the accompanying table of significant unobservable inputs to Level 3 measurements.
Interest rate swap agreements used for interest rate risk management
The Company utilizes interest rate swap agreements as part of the management of interest rate risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing liabilities. The Company generally determines the fair value of its interest rate swap agreements using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2. The Company has considered counterparty credit risk in the valuation of its interest rate swap agreement assets and has considered its own credit risk in the valuation of its interest rate swap agreement liabilities.
Other non-hedging derivatives
Other non-hedging derivatives consist primarily of interest rate contracts and foreign exchange contracts with customers who require such services with offsetting positions with third parties to minimize the Company's risk with respect to such transactions. The Company generally determines the fair value of its other non-hedging derivative assets and liabilities using externally developed pricing models based on market observable inputs and, therefore, classifies such valuations as Level 2.
- 33 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Fair value measurements, continued
The following tables present assets and liabilities at March 31, 2023 and December 31, 2022 measured at estimated fair value on a recurring basis:
|
|
|
Fair Value Measurements |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
|
(In thousands) |
|
|||||||||||||
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Trading account |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Residential |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Other debt securities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Real estate loans held for sale |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Other assets (a) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other liabilities (a) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Trading account |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and federal agencies |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Government issued or guaranteed |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Residential |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Other debt securities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Real estate loans held for sale |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Other assets (a) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other liabilities (a) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
- 34 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Fair value measurements, continued
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended March 31, 2023 and 2022 were as follows:
|
|
|
Other Assets and Other Liabilities |
|
|
|
|
2023 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2023 |
|
$ |
(
|
) |
|
|
Total losses realized/unrealized: |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Transfers out of Level 3 |
|
|
|
|
(b) |
|
Balance — March 31, 2023 |
|
$ |
(
|
) |
|
|
Changes in unrealized losses included in earnings related to instruments still held at March 31, 2023 |
|
$ |
|
|
(a) |
|
|
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — January 1, 2022 |
|
$ |
|
|
|
|
Total gains realized/unrealized: |
|
|
|
|
|
|
|
|
|
(
|
) |
(a) |
|
Transfers out of Level 3 |
|
|
(
|
) |
(b) |
|
Balance — March 31, 2022 |
|
$ |
(
|
) |
|
|
Changes in unrealized gains included in earnings related to instruments still held at March 31, 2022 |
|
$ |
(
|
) |
(a) |
- 35 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Fair value measurements, continued
The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements. The more significant of those assets follow.
Loans
Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectable portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have been classified as Level 2, unless significant adjustments have been made to the valuation that are not readily observable by market participants. Non-real estate collateral supporting commercial loans generally consists of business assets such as receivables, inventory and equipment. Fair value estimations are typically determined by discounting recorded values of those assets to reflect estimated net realizable value considering
specific borrower facts and circumstances and the experience of credit personnel in their dealings with similar borrower collateral liquidations. Such discounts were in the range of
Assets taken in foreclosure of defaulted loans
Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and are generally measured at the lower of cost or fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2. Assets taken into foreclosure of defaulted loans subject to nonrecurring fair value measurement were not material at March 31, 2023 and 2022. Changes in fair value recognized for foreclosed assets held by the Company were not material during the three-month periods ended March 31, 2023 and 2022.
- 36 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Fair value measurements, continued
Capitalized servicing rights
Capitalized servicing rights are initially measured at fair value in the Company’s consolidated balance sheet. The Company utilizes the amortization method to subsequently measure its capitalized servicing assets. In accordance with GAAP, the Company must record impairment charges, on a nonrecurring basis, when the carrying value of certain strata exceed their estimated fair value. To estimate the fair value of servicing rights, the Company considers market prices for similar assets, if available, and the present value of expected future cash flows associated with the servicing rights calculated using assumptions that market participants would use in estimating future servicing income and expense. Such assumptions include estimates of the cost of servicing loans, loan default rates, an appropriate discount rate, and prepayment speeds. For purposes of evaluating and measuring impairment of capitalized servicing rights, the Company stratifies such assets based on the predominant risk characteristics of the underlying financial instruments that are expected to have the most impact on projected prepayments, cost of servicing and other factors affecting future cash flows associated with the servicing rights. Such factors may include financial asset or loan type, note rate and term. The amount of impairment recognized is the amount by which the carrying value of the capitalized servicing rights for a stratum exceed estimated fair value. Impairment is recognized through a valuation allowance. The determination of fair value of capitalized servicing rights is considered a Level 3 valuation. Capitalized servicing rights related to residential mortgage loans of $
Significant unobservable inputs to Level 3 measurements
The following table presents quantitative information about significant unobservable inputs used in the fair value measurements for certain Level 3 assets and liabilities at March 31, 2023 and December 31, 2022:
|
|
|
Fair Value |
|
|
Valuation
|
|
Unobservable
|
|
Range
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
Recurring fair value measurements |
|
|
|
|
|
|
|
|
|
|
|
Net other assets (liabilities) (a) |
|
$ |
(
|
) |
|
Discounted cash flow |
|
Commitment expirations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
Recurring fair value measurements |
|
|
|
|
|
|
|
|
|
|
|
Net other assets (liabilities) (a) |
|
$ |
(
|
) |
|
Discounted cash flow |
|
Commitment expirations |
|
|
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.
- 37 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Fair value measurements, continued
Disclosures of fair value of financial instruments
The carrying amounts and estimated fair value for financial instrument assets (liabilities) are presented in the following tables:
|
|
|
March 31, 2023 |
|
|||||||||||||||||
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
|
|
|
(In thousands) |
|
|||||||||||||||||
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Cash and cash equivalents |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Interest-bearing deposits at banks |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Trading account |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial loans and leases |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Commercial real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Allowance for credit losses |
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Loans and leases, net |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Noninterest-bearing deposits |
|
$ |
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Savings and interest-checking deposits |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Time deposits |
|
|
(
|
) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Short-term borrowings |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Long-term borrowings |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Accrued interest payable |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Other financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commitments to originate real estate
|
|
$ |
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Commitments to sell real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Other credit-related commitments |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Interest rate swap agreements used
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Interest rate and foreign exchange
|
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
- 38 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. Fair value measurements, continued
|
|
|
December 31, 2022 |
|
|||||||||||||||||
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|||||||||||
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Cash and cash equivalents |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Interest-bearing deposits at banks |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Federal funds sold |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Trading account |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial loans and leases |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Commercial real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Allowance for credit losses |
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Loans and leases, net |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Noninterest-bearing deposits |
|
$ |
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Savings and interest-checking deposits |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Time deposits |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Short-term borrowings |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Long-term borrowings |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Accrued interest payable |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Other financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commitments to originate real estate
|
|
$ |
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Commitments to sell real estate loans |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Other credit-related commitments |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Interest rate swap agreements used
|
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Interest rate and foreign exchange contracts
|
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
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.
- 39 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
13. Commitments and contingencies
In the normal course of business, various commitments and contingent liabilities are outstanding.
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(In thousands) |
|
|||||
|
Commitments to extend credit |
|
|
|
|
|
||
|
Home equity lines of credit |
$ |
|
|
|
$ |
|
|
|
Commercial real estate loans to be sold |
|
|
|
|
|
|
|
|
Other commercial real estate |
|
|
|
|
|
|
|
|
Residential real estate loans to be sold |
|
|
|
|
|
|
|
|
Other residential real estate |
|
|
|
|
|
|
|
|
Commercial and other |
|
|
|
|
|
|
|
|
Standby letters of credit |
|
|
|
|
|
|
|
|
Commercial letters of credit |
|
|
|
|
|
|
|
|
Financial guarantees and indemnification contracts |
|
|
|
|
|
|
|
|
Commitments to sell real estate loans |
|
|
|
|
|
|
|
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 $
Financial guarantees and indemnification contracts are predominantly comprised of recourse obligations associated with sold loans and other guarantees and commitments. Included in financial guarantees and indemnification contracts are loan principal amounts sold with recourse in conjunction with the Company's involvement in the Fannie Mae Delegated Underwriting and Servicing program. The Company's maximum credit risk for recourse associated with loans sold under this program totaled approximately $
Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows.
The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the fair value of real estate loans held for sale. Such commitments are accounted for as derivatives and along with commitments to originate real estate loans to be held for sale are generally recorded in the consolidated balance sheet at estimated fair market value.
- 40 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
13. Commitments and contingencies, continued
The Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for losses related to its obligations to loan purchasers. The amount of those charges is based on the volume of loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that may be associated with previously sold loans. At March 31, 2023, the Company believes that its obligation to loan purchasers was not material to the Company’s consolidated financial position.
M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was between
$
14. Segment information
Reportable segments have been determined based upon the Company's internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.
The financial information of the Company's segments was compiled utilizing the accounting policies described in note 23 of Notes to Financial Statements in the 2022 Annual Report. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, the financial information of the reported segments is not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. As described in the 2022 Annual Report, in the fourth quarter of 2022 the Company revised its segment reporting related to: allocations of certain incentive compensation; a refinement of consumption-driven services allocations including cybersecurity and modeling functions; an expanded allocation of franchise-type services such as risk management, data services and legal services; and a refinement in allocation of technology application costs in support of business activities. Additionally certain lending relationships within the hospitality sector that had previously received oversight within the Commercial Banking segment were realigned to the Commercial Real Estate segment. As a result, financial information for the three months ended March 31, 2022 has been reclassified to provide segment information on a comparable basis, as noted in the accompanying table.
- 41 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
14. Segment information, continued
|
|
|
Three Months Ended March 31, 2022 |
|
|||||||||||||||||||||
|
|
|
Total Revenues as Previously Reported |
|
|
Impact of Changes |
|
|
Total Revenues as Reclassified |
|
|
Net Income (Loss) as Previously Reported |
|
|
Impact of Changes |
|
|
Net Income (Loss) as Reclassified |
|
||||||
|
|
|
(In thousands) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Business Banking |
|
$ |
|
|
|
|
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
(
|
) |
|
$ |
|
|
|
Commercial Banking |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discretionary Portfolio |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Residential Mortgage Banking |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Retail Banking |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
All Other |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Total |
|
$ |
|
|
|
|
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
— |
|
|
$ |
|
|
Information about the Company's segments follows:
|
|
|
Three Months Ended March 31 |
|
|||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||
|
|
|
Total
|
|
|
Inter-
|
|
|
Net
|
|
|
Total
|
|
|
Inter-
|
|
|
Net
|
|
||||||
|
|
|
(In thousands) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Business Banking |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial Banking |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discretionary Portfolio |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Residential Mortgage Banking |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Banking |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
All Other |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
Total |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
Average Total Assets |
|
|||||||||
|
|
|
Three Months Ended March 31 |
|
|
Year Ended
|
|
||||||
|
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
|||
|
|
|
(In millions) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Business Banking |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial Banking (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discretionary Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgage Banking |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Banking |
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
- 42 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
15. Relationship with Bayview Lending Group LLC and Bayview Financial Holdings, L.P.
M&T holds a
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 $
16. Recent accounting developments
The following table provides a description of accounting standards that were adopted by the Company in 2023 as well as standards that are not effective that could have an impact to M&T’s consolidated financial statements upon adoption.
|
|
Standard |
|
|
Description |
|
|
Required date of adoption |
|
|
Effect on consolidated financial statements |
|
|
|
Standards Adopted in 2023 |
|
|||||||||
|
|
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers in a Business Combination |
|
|
The amendments require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with specified revenue recognition guidance. At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts and may assess how the acquiree applied the revenue guidance to determine what to record for such contracts. The guidance is generally expected to result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. |
|
|
January 1, 2023 |
|
|
The Company adopted the amended guidance effective January 1, 2023 using a prospective transition method and the guidance will be applied, as applicable, to future acquisitions. The Company does not expect the guidance will have a material impact on its consolidated financial statements. |
|
|
|
Fair Value Hedging of Multiple Hedge Layers under Portfolio Layer Method |
|
|
The amendments allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. If multiple hedged layers are designated, the amendments require an analysis to be performed to support the expectation that the aggregate amount of the hedged layers is anticipated to be outstanding for the designated hedge periods. Only closed portfolios may be hedged under the portfolio layer method (that is, no assets can be added to the closed portfolio once established), however designating new hedging relationships and dedesignating existing hedging relationships associated with the closed portfolio any time after the closed portfolio is established is permitted. |
|
|
January 1, 2023 |
|
|
At January 1, 2023 the Company did not have any designated hedging relationships under the portfolio layer method and, therefore, the adoption had no impact on its consolidated financial statements. |
|
|
|
Accounting for Troubled Debt Restructurings (TDRs) and Expansion of Vintage Disclosures Applicable to Credit Losses |
|
|
The amendments (1) eliminate the accounting guidance for TDRs and require enhanced disclosure for certain loan refinancings by creditors when a borrower is experiencing financial difficulty and (2) require disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within credit loss disclosures.
|
|
|
January 1, 2023 |
|
|
The Company adopted the amended guidance effective January 1, 2023 using a prospective transition method and will no longer be required to identify TDRs and apply specialized accounting to such loans. The Company has complied with the modified disclosure requirements in note 4. |
|
- 43 -
NOTES TO FINANCIAL STATEMENTS, CONTINUED
16. Recent accounting developments, continued
|
|
Standard |
|
|
Description |
|
|
Required date of adoption |
|
|
Effect on consolidated financial statements |
|
|
|
Standards Not Yet Adopted as of March 31, 2023 |
|
|||||||||
|
|
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions |
|
|
The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, the amendments require the following disclosures for equity securities subject to contractual sale restrictions: 1. The fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; 2. The nature and remaining duration of the restriction(s); and 3. The circumstances that could cause a lapse in the restriction(s). |
|
|
January 1, 2024
Early adoption permitted |
|
|
The amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.
The Company does not expect the guidance will have a material impact on its consolidated financial statements. |
|
|
|
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method |
|
|
The amendments permit an election to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and other income tax benefits received and the net amortization and income tax credits and other income tax benefits are recognized in the income statement as a component of income tax expense (benefit). All of the following conditions must be met to qualify for the proportional amortization method: 1. It is probable that the income tax credits allocable to the tax equity investor will be available. 2. The tax equity investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project. 3. Substantially all of the projected benefits are from income tax credits and other income tax benefits. Projected benefits include income tax credits, other income tax benefits, and other non-income-tax-related benefits. The projected benefits are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project. 4. The tax equity investor’s projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive. 5. The tax equity investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the tax equity investor’s liability is limited to its capital investment. To apply the proportional amortization method, an accounting policy election must be made on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. When applying the proportional amortization method to qualifying tax equity investments the receipt of the investment tax credits must be accounted for using the flow-through method as prescribed by GAAP, even if the deferral method is applied to other investment tax credits received. In addition, all tax equity investments accounted for using the proportional amortization method must use the delayed equity contribution guidance (which requires that a liability be recognized for delayed equity contributions that are unconditional and legally binding or for equity contributions that are contingent upon a future event when that contingent event becomes probable). |
|
|
January 1, 2024
Early adoption permitted |
|
|
The amendments should be applied on either a modified retrospective or a retrospective basis. Under a modified retrospective transition, all investments for which income tax credits or other income tax benefits are still expected to be received must be evaluated as of the beginning of the period of adoption. The assessment of whether the investment qualifies for the proportional amortization method is performed as of the date the investment was entered into. A cumulative-effect adjustment reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into is recognized in the opening balance of retained earnings as of the beginning of the period of adoption.
Under a retrospective transition, all investments for which income tax credits or other income tax benefits are still expected to be received must be evaluated as of the beginning of the earliest period presented. The assessment of whether the investment qualifies for the proportional amortization method is performed as of the date the investment was entered into. A cumulative-effect adjustment reflecting the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into is recognized in the opening balance of retained earnings as of the beginning of the earliest period presented.
The Company is evaluating whether to early adopt the guidance as well as the impact that the guidance will have on its consolidated financial statements. |
|
- 44 -
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
M&T Bank Corporation (“M&T”) recorded net income of $702 million in the first quarter of 2023, compared with $362 million in the corresponding quarter of 2022 and $765 million in the fourth quarter of 2022. Diluted and basic earnings per common share were $4.01 and $4.03, respectively, in the recent quarter, $2.62 and $2.63, respectively, in the first quarter of 2022 and $4.29 and $4.32, respectively, in the fourth quarter of 2022. M&T's first quarter 2023 and fourth quarter 2022 results each reflect a full-quarter impact of its April 1, 2022 acquisition of People's United Financial, Inc. ("People's United"). The after-tax impact of merger-related expenses was $13 million ($17 million pre-tax) or $.10 of basic and diluted earnings per common share in the year-earlier quarter and $33 million ($45 million pre-tax) or $.20 of basic and diluted earnings per common share in the fourth quarter of 2022. Merger-related expenses incurred in 2022 and associated with the People's United acquisition generally consisted of professional services, temporary help fees and other costs associated with actual or planned conversions of systems and/or integration of operations and the introduction of M&T to its new customers, costs related to terminations of existing contractual arrangements to purchase various services, severance, travel costs, and, in the second quarter of 2022, an initial provision for credit losses on loans deemed to be purchased credit deteriorated ("PCD") on the April 1, 2022 acquisition date of People's United. M&T and its consolidated subsidiaries (“the Company”) did not incur merger-related expenses in the first quarter of 2023.
Net income expressed as an annualized rate of return on average total assets for the Company in 2023's first quarter was 1.40%, compared with 0.97% in the year-earlier quarter and 1.53% in the fourth quarter of 2022. The annualized rate of return on average common shareholders’ equity was 11.74% in the recent quarter, compared with 8.55% in the first quarter of 2022 and 12.59% in the fourth quarter of 2022.
On April 1, 2022, M&T closed the acquisition of People's United resulting in the issuance of 50,325,004 common shares. Pursuant to the terms of the merger agreement, People’s United shareholders received consideration valued at .118 of an M&T common share in exchange for each common share of People’s United. The purchase price totaled approximately $8.4 billion (with the price based on M&T’s closing price of $164.66 per share as of April 1, 2022). Additionally, People’s United outstanding preferred stock was converted into new shares of Series H preferred stock of M&T.
The People's United transaction has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. The Company recorded assets acquired of $64.2 billion, including $35.8 billion of loans and leases and $11.6 billion of investment securities, and liabilities assumed totaling $55.5 billion, including $53.0 billion of deposits. The transaction added $8.4 billion to M&T's common shareholders' equity and $261 million to preferred equity. In connection with the acquisition the Company recorded $3.9 billion of goodwill and $261 million of core deposit and other intangible assets. The acquisition of People's United formed a banking franchise with approximately $200 billion in assets serving communities in the Northeast and Mid-Atlantic from Maine to Virginia, including Washington, D.C.
In December 2022 the Company announced it had entered into an agreement to sell its Collective Investment Trust ("CIT") business to a private equity firm. The transaction was completed in April 2023. The Company will recognize a pre-tax gain on the sale of approximately $225 million in the second quarter of 2023. In the fourth quarter of 2022, M&T completed the sale of M&T Insurance Agency, Inc. ("MTIA"), a wholly owned insurance subsidiary of M&T Bank (M&T's principal bank subsidiary), resulting in a gain of $136 million recorded in other revenues from operations. Also in the fourth quarter, the Company made a $135 million contribution to The M&T Charitable Foundation, recorded in other costs of operations. The operations of those businesses did not have a material impact on M&T's net income.
M&T repurchased 3,838,157 shares of its common stock in accordance with its capital plan during the recent quarter at an average cost per share of $154.76 resulting in a total cost, including the share repurchase excise tax, of
- 45 -
$600 million, compared with the repurchase of 3,664,887 shares at an average cost per share of $163.72 and total cost of $600 million in the previous three months. No share repurchases occurred in the first quarter of 2022.
Supplemental Reporting of Non-GAAP Results of Operations
M&T consistently provides supplemental reporting of its results on a “net operating” or “tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and gains (when realized) and expenses (when incurred) associated with merging acquired operations 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 $715 million in the first quarter of 2023, compared with $376 million in the year-earlier quarter. Diluted net operating earnings per common share for the first three months of 2023 and 2022 were $4.09 and $2.73, respectively. Net operating income and diluted net operating earnings per common share were $812 million and $4.57, respectively, in the fourth 2022 quarter.
Net operating income in the recent quarter expressed as an annualized rate of return on average tangible assets was 1.49%, compared with 1.04% in the first quarter of 2022 and 1.70% in 2022’s fourth quarter. Net operating income represented an annualized return on average tangible common equity of 19.00% in the first quarter of 2023, 12.44% in the year-earlier quarter and 21.29% in the fourth quarter of 2022.
Reconciliations of GAAP amounts with corresponding non-GAAP amounts are provided in table 2.
Taxable-equivalent Net Interest Income
Net interest income expressed on a taxable-equivalent basis was $1.83 billion in the first quarter of 2023, more than double the $907 million recorded in the year-earlier quarter. That increase reflects the impact of $45.4 billion in additional average earning assets, including assets obtained in the People's United transaction, and a 139 basis point (hundredths of one percent) expansion of the net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, to 4.04% in the recent quarter from 2.65% in the year-earlier quarter. That increase reflected a rising interest rate environment resulting from actions taken by the Federal Reserve to mitigate inflationary pressures on the U.S. economy. The Federal Reserve raised its target Federal funds rate through multiple hikes totaling 4.50% since the end of the first quarter of 2022 that led to higher yields on loans, deposits at the Federal Reserve Bank ("FRB") of New York and investment securities, partially offset by higher rates paid on interest-bearing deposits and borrowings. Taxable-equivalent net interest income in the recent quarter was little changed from $1.84 billion in the fourth quarter of 2022. The modest decline reflects two fewer days in the first quarter of 2023 as compared with 2022's final quarter while the impact of a slightly lower net interest margin was offset by a $4.2 billion increase in average earnings assets to $184.1 billion in the recent quarter, compared with $179.9 billion in 2022's fourth quarter. The net interest margin was 4.06% in the fourth quarter of 2022.
Average loans and leases totaled $132.0 billion in the first quarter of 2023, up $39.9 billion or 43% from $92.2 billion in the similar quarter of 2022. Included in average loans and leases in the recent quarter were loans obtained in the People's United acquisition. Loans acquired from People's United totaled $35.8 billion on the April 1, 2022 acquisition date and consisted of approximately $13.6 billion of commercial loans and leases, $13.5 billion of commercial real estate loans, $7.1 billion of residential real estate loans and $1.6 billion of consumer loans. Including the impact of the acquired loan balances, commercial loans and leases averaged $42.4 billion in the recent quarter, up $19.1 billion or 82% from $23.3 billion in the year-earlier quarter. That increase included the impact of loans obtained in the acquisition of People's United and loan growth, partially offset by a reduction in average balances of Paycheck Protection Program (“PPP”) loans reflecting loan repayments by the Small Business Administration. PPP loans averaged $77 million in the first quarter of 2023, compared with $870 million in the first quarter of 2022. Average commercial real estate loans increased $10.4 billion or 30% to $45.3 billion in the first quarter of 2023 from $35.0 billion in the year-earlier quarter. That increase also reflects the impact of loans obtained in the acquisition of People's United, partially offset by a reduction in average balances of legacy loans reflecting repayments by customers.
- 46 -
Average residential real estate loans increased $7.9 billion or 50% to $23.8 billion in the first quarter of 2023 from $15.9 billion in the year-earlier quarter. The growth in residential real estate loans was largely attributable to the acquisition of loans from People's United and M&T's decision in the third quarter of 2021 to retain rather than sell most originated residential mortgage loans. M&T returned to originating for sale the majority of its newly committed residential mortgage loans in the first quarter of 2023. Consumer loans averaged $20.5 billion in the first quarter of 2023, up $2.5 billion or 14% from $18.0 billion in the year-earlier quarter. Consumer loans obtained in the acquisition of People's United consisted predominantly of outstanding balances of home equity lines of credit. Additional average growth of $1.0 billion in M&T's portfolio of recreational finance loans (consisting predominantly of loans secured by recreational vehicles and boats) was partially offset by a decline of $328 million in average balances of automobile loans.
Average loan and lease balances in the first quarter of 2023 increased $2.6 billion from $129.4 billion in the fourth quarter of 2022. The higher balances resulted predominantly from growth in commercial loans and leases which increased $2.4 billion from $40.0 billion in the fourth quarter of 2022. That growth resulted from a broad-based increase in commercial loans and leases of $1.9 billion and average dealer floor plan balances of $453 million. Average commercial real estate loans in the first quarter of 2023 declined $363 million from $45.7 billion in the fourth quarter of 2022. Average balances of residential real estate loans in the recently completed quarter increased $436 million from $23.3 billion in 2022’s fourth quarter. Average consumer loans in the recent quarter increased $143 million from $20.3 billion in the fourth quarter of 2022. 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 |
|
|
||||||
|
|
|
|
|
|
(Decrease) from |
|
|
||||||
|
|
|
1st Qtr. |
|
|
1st Qtr. |
|
|
4th Qtr. |
|
|
|||
|
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
|
|||
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Commercial, financial, etc. |
|
$ |
42,428 |
|
|
|
82 |
|
% |
|
6 |
|
% |
|
Real estate — commercial |
|
|
45,327 |
|
|
|
30 |
|
|
|
(1 |
) |
|
|
Real estate — consumer |
|
|
23,770 |
|
|
|
50 |
|
|
|
2 |
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|||
|
Recreational finance |
|
|
9,128 |
|
|
|
13 |
|
|
|
2 |
|
|
|
Automobile |
|
|
4,430 |
|
|
|
(7 |
) |
|
|
2 |
|
|
|
Home equity lines and loans |
|
|
4,929 |
|
|
|
40 |
|
|
|
(2 |
) |
|
|
Other |
|
|
2,000 |
|
|
|
20 |
|
|
|
— |
|
|
|
Total consumer |
|
|
20,487 |
|
|
|
14 |
|
|
|
1 |
|
|
|
Total |
|
$ |
132,012 |
|
|
|
43 |
|
% |
|
2 |
|
% |
The investment securities portfolio averaged $27.6 billion in the first quarter of 2023, up $19.9 billion from $7.7 billion in the year-earlier quarter and $2.3 billion higher than the $25.3 billion averaged in the fourth quarter of 2022. The higher average balance when compared with the year-earlier quarter reflects the acquisition of People’s United, which added approximately $11.6 billion to the investment securities portfolio on April 1, 2022, and the purchase of $9.7 billion of investment securities during the twelve-month period ended March 31, 2023. Those purchases were predominantly U.S. Treasury notes and fixed rate mortgage-backed securities. When compared with the fourth quarter of 2022 the increase relates to purchases of approximately $3.3 billion of investment securities during the recent quarter, consisting predominantly of fixed rate mortgage-backed securities. There were no significant sales of investment securities during the three months ended March 31, 2023, March 31, 2022 or December 31, 2022. The Company routinely has increases and decreases in its holdings of capital stock of the Federal Home Loan Bank (“FHLB”) of New York and the FRB 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 largely comprised of residential mortgage-backed securities and shorter-term U.S. Treasury and federal agency notes, but also includes municipal securities and commercial real estate mortgage-backed securities. When purchasing investment securities, the Company considers its liquidity position and
- 47 -
its overall interest-rate risk profile as well as the adequacy of expected returns relative to risks assumed, including prepayments. The Company may occasionally sell investment securities as a result of changes in interest rates and spreads, actual or anticipated prepayments, credit risk associated with a particular security, or as a result of restructuring its investment securities portfolio in connection with a business combination. The amounts of investment securities held by the Company are influenced by such factors as available yield in comparison with alternative investments, demand for loans, which generally yield more than investment securities, 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 losses on such equity securities were less than $1 million in the first quarters of 2023 and 2022, compared with $4 million in the fourth quarter of 2022. Those losses include changes in the value of 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 of 2023 or 2022 or in the final 2022 quarter. Based on management’s assessment of future cash flows associated with individual investment securities as of March 31, 2023, the Company did not expect to incur any material credit-related losses in its portfolios of debt investment securities. Additional information about the investment securities portfolio is included in notes 3 and 12 of Notes to Financial Statements.
Other earning assets include interest-bearing deposits at the FRB 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 $24.4 billion in the recently completed quarter, compared with $38.7 billion in the year-earlier quarter and $25.2 billion in the fourth quarter of 2022. Interest-bearing deposits at banks averaged $24.3 billion, $38.7 billion and $25.1 billion during the three months ended March 31, 2023, March 31, 2022 and December 31, 2022, respectively. The amounts of interest-bearing deposits at banks at the respective dates were predominantly comprised of deposits held at the FRB of New York. The lower balances in the recent quarter and the fourth quarter of 2022, compared with the year-earlier quarter reflect actions taken by the Company including the purchases of investment securities and treasury stock and the management of select deposit relationships designed to reduce the balances of higher-cost deposit accounts, partially offset by the issuance of debt and other short-term borrowings. In general, the level of deposits held at the FRB of New York also fluctuates due to changes in deposits of commercial entities, trust-related deposits and additions to or maturities of investment securities or borrowings.
As a result of the changes described herein, average earning assets totaled $184.1 billion in the most recent quarter, compared with $138.6 billion in the first quarter of 2022 and $179.9 billion in the fourth quarter of 2022.
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 $152.0 billion in the first quarter of 2023, up 22% from $124.6 billion in the similar 2022 quarter, but down 4% from $158.4 billion in the fourth quarter of 2022. The People's United acquisition added approximately $50.8 billion of core deposits on April 1, 2022, including $30.8 billion of savings and interest-checking deposits, $2.6 billion of time deposits and $17.4 billion of noninterest-bearing deposits. The increase in core deposits resulting from the acquisition of People's United in 2022 was partially offset by the Company's efforts in 2022 to reduce historically higher-cost deposits as well as customer reactions to the generally rising interest rate environment. The decline in average core deposits in the recent quarter as compared with the fourth quarter of 2022 includes the impact of seasonal decreases, customer use of off-balance sheet investment products, and lower levels of activity in the capital markets resulting in a reduction of trust demand and other deposits. Additionally, the Company experienced a shift of commercial customer deposits out of operating demand accounts into on- and off-balance sheet sweep accounts to earn higher returns amid rising rates. Similarly certain retail customers moved balances from savings and interest-checking accounts to time deposits in response to rising interest rates. The following table provides an analysis of quarterly changes in the components of average core deposits.
- 48 -
AVERAGE CORE DEPOSITS
|
|
|
|
|
|
Percent Increase |
|
|
||||||
|
|
|
|
|
|
(Decrease) from |
|
|
||||||
|
|
|
1st Qtr. |
|
|
1st Qtr. |
|
|
4th Qtr. |
|
|
|||
|
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
|
|||
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Savings and interest-checking deposits |
|
$ |
84,617 |
|
|
|
32 |
|
% |
|
1 |
|
% |
|
Time deposits |
|
|
5,534 |
|
|
|
137 |
|
|
|
26 |
|
|
|
Noninterest-bearing deposits |
|
|
61,854 |
|
|
|
6 |
|
|
|
(12 |
) |
|
|
Total |
|
$ |
152,005 |
|
|
|
22 |
|
% |
|
(4 |
) |
% |
The Company also receives funding from other deposit sources, including branch-related time deposits over $250,000 and brokered deposits. Time deposits over $250,000 averaged $1.5 billion in the recent quarter, compared with $313 million in the first quarter of 2022 and $903 million in the fourth quarter of 2022. The increase in such deposits in the two most recent quarters as compared with the first quarter of 2022 included the impact of the acquisition of People's United and higher demand for time deposit products as interest rates rose since the first quarter of 2022. The Company had brokered savings and interest-bearing transaction accounts that averaged $3.4 billion during the recent quarter, $3.2 billion in the year-earlier quarter and $3.3 billion in the fourth quarter of 2022. Brokered time deposits averaged $4.6 billion in the first quarter of 2023 compared with $877 million in the fourth quarter of 2022. The increase was predominantly due to deposits added late in the fourth quarter of 2022. There were no brokered time deposits in the year-earlier quarter. Additional brokered deposits may be added in the future depending on market conditions, including demand by customers and other investors for those deposits, and the cost of funds available from alternative sources at the time. Total uninsured deposits were estimated to be $67.7 billion at March 31, 2023, compared with $74.2 billion at December 31, 2022 and $63.6 billion at March 31, 2022.
The accompanying table summarizes average total deposits for the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022.
AVERAGE DEPOSITS
|
|
|
Retail |
|
|
Trust |
|
|
Commercial
|
|
|
Total |
|
||||
|
|
|
(In millions) |
|
|||||||||||||
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Savings and interest-checking deposits |
|
$ |
45,996 |
|
|
$ |
7,172 |
|
|
$ |
34,885 |
|
|
$ |
88,053 |
|
|
Time deposits |
|
|
6,483 |
|
|
|
13 |
|
|
|
5,134 |
|
|
|
11,630 |
|
|
Noninterest-bearing deposits |
|
|
15,071 |
|
|
|
10,348 |
|
|
|
36,435 |
|
|
|
61,854 |
|
|
Total |
|
$ |
67,550 |
|
|
$ |
17,533 |
|
|
$ |
76,454 |
|
|
$ |
161,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three Months Ended December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Savings and interest-checking deposits |
|
$ |
48,000 |
|
|
$ |
7,002 |
|
|
$ |
32,066 |
|
|
$ |
87,068 |
|
|
Time deposits |
|
|
4,901 |
|
|
|
12 |
|
|
|
1,269 |
|
|
|
6,182 |
|
|
Noninterest-bearing deposits |
|
|
15,477 |
|
|
|
11,868 |
|
|
|
42,873 |
|
|
|
70,218 |
|
|
Total |
|
$ |
68,378 |
|
|
$ |
18,882 |
|
|
$ |
76,208 |
|
|
$ |
163,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Savings and interest-checking deposits |
|
$ |
35,957 |
|
|
$ |
6,529 |
|
|
$ |
24,781 |
|
|
$ |
67,267 |
|
|
Time deposits |
|
|
2,487 |
|
|
|
9 |
|
|
|
151 |
|
|
|
2,647 |
|
|
Noninterest-bearing deposits |
|
|
8,920 |
|
|
|
12,178 |
|
|
|
37,043 |
|
|
|
58,141 |
|
|
Total |
|
$ |
47,364 |
|
|
$ |
18,716 |
|
|
$ |
61,975 |
|
|
$ |
128,055 |
|
The Company also uses borrowings from banks, the FHLB of New York, the FRB 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 $5.0 billion in the first quarter
- 49 -
of 2023, compared with $56 million in the year-earlier quarter and $1.6 billion in the fourth quarter of 2022. Short-term borrowings from the FHLB averaged $4.6 billion in the first quarter of 2023 compared with $1.2 billion in the fourth quarter of 2022. There were no such borrowings outstanding in the initial quarter of 2022. Short-term borrowings assumed in connection with the People's United acquisition totaled $895 million on April 1, 2022. In October 2022 M&T redeemed $500 million of unsecured senior notes due to mature in December 2022 that had been assumed in the acquisition of People's United and included in short-term borrowings. In general, the increase in short-term borrowings reflects the Company's liquidity ratio management.
Long-term borrowings averaged $6.5 billion in the first quarter of 2023, compared with $3.4 billion in the year-earlier quarter and $3.8 billion in the fourth quarter of 2022. As of April 1, 2022, long-term borrowings assumed in the People's United acquisition totaled $494 million and included $483 million of fixed-rate subordinated notes and $11 million of FHLB advances. Average balances of the Company’s outstanding senior notes were $5.0 billion, $2.4 billion and $2.2 billion during the three months ended March 31, 2023, March 31, 2022 and December 31, 2022, respectively. In January 2023, M&T issued $1.0 billion of senior notes that mature in January 2034 and pay a 5.053% fixed rate semi-annually until January 2033 after which the Secured Overnight Financing Rate ("SOFR") plus 1.85% will be paid quarterly until maturity. Additionally, in January 2023 M&T Bank issued $1.3 billion of senior notes that mature in January 2026 and pay a fixed rate of 4.65% semi-annually until maturity and $1.2 billion of senior notes that mature in January 2028 and pay a fixed rate of 4.70% semi-annually until maturity. In November 2022 M&T Bank issued $500 million of fixed rate senior notes that pay a rate of 5.4% semi-annually and mature in November 2025. In August 2022 M&T issued $500 million of senior notes that mature in August 2028 and pay a fixed rate of 4.553% semi-annually until August 2027 after which the SOFR plus 1.78% will be paid quarterly until maturity. In April 2022, M&T Bank redeemed $650 million of fixed rate senior notes that were due to mature on May 18, 2022. During May 2022, $250 million of variable rate senior notes of M&T Bank matured. Subordinated capital notes included in long-term borrowings averaged $980 million in the first quarter of 2023, $981 million in the three-month period ended December 31, 2022 and $500 million in the first quarter of 2022. Junior subordinated debentures associated with trust preferred securities that were included in average long-term borrowings were $537 million, $532 million and $535 million during the first quarters of 2023 and 2022 and the fourth quarter of 2022, respectively. Additional information regarding junior subordinated debentures is provided in note 5 of Notes to Financial Statements.
The Company has utilized interest rate swap agreements to modify the repricing characteristics of certain components of its loans and long-term debt. As of March 31, 2023, interest rate swap agreements were used as fair value hedges of approximately $2.5 billion of outstanding fixed rate long-term borrowings. Additionally, interest rate swap agreements with a notional amount of $9.75 billion (exclusive of forward-starting swap agreements) were used as cash flow hedges of interest payments associated with variable rate commercial real estate loans. Further information on interest rate swap agreements is provided herein and in note 10 of Notes to Financial Statements.
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 3.30% in the recent quarter, up 71 basis points from 2.59% in the first quarter of 2022. The yield on earning assets during the first quarter of 2023 was 5.16%, up 244 basis points from 2.72% in the similar 2022 period, while the rate paid on interest-bearing liabilities increased 173 basis points to 1.86% in the recent quarter from .13% in the year-earlier period. In the fourth quarter of 2022, the net interest spread was 3.62%, the yield on earning assets was 4.60% and the rate paid on interest-bearing liabilities was .98%. The increases in the net interest spread since the first quarter of 2022 reflect the impact of generally rising interest rates that resulted in higher yields on loans and leases, deposits at the FRB of New York and investment securities, partially offset by higher rates on interest-bearing liabilities. The Federal Reserve raised its target Federal funds rate 4.50% since March 31, 2022, including various increases totaling .50% and 1.25% in the first quarter of 2023 and fourth quarter of 2022, respectively. The decline in the net interest spread in the recent quarter as compared with the fourth quarter of 2022 reflected higher levels of average time deposits, reflecting customer demand, and borrowings and the impact of competitive pricing and rising rates associated with interest-bearing instruments.
- 50 -
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 $72.9 billion in the first three months of 2023, compared with $65.2 billion in the year-earlier quarter and $81.3 billion in the fourth quarter of 2022. The increases in average net interest-free funds in the recent quarter and the fourth quarter of 2022 as compared with first quarter of 2022 reflect higher average balances of noninterest-bearing deposits and shareholders’ equity that include the impact of the acquisition of People's United. In connection with the People's United acquisition, the Company added noninterest-bearing deposits of $17.4 billion at the acquisition date. Noninterest-bearing deposits averaged $61.9 billion in the first quarter of 2023 and $70.2 billion in the fourth quarter of 2022, compared with $58.1 billion in the first quarter of 2022. The increase in noninterest-bearing deposits resulting from the acquisition of People's United was partially offset by the impact of seasonal decreases, customer use of off-balance sheet investment products and a shift in deposits to interest-bearing accounts as interest rates rose. Shareholders’ equity averaged $25.4 billion during the three-month period ended March 31, 2023, compared with $17.9 billion during the year-earlier period and $25.3 billion during the fourth quarter of 2022. The higher amounts of shareholders' equity in the two most recent quarters as compared with 2022's first quarter reflect retained earnings and additional equity issued in connection with the People's United acquisition, partially offset by share repurchase activity. M&T issued $8.4 billion of common equity and $261 million of preferred equity in completing the acquisition of People's United on April 1, 2022. Repurchases of common stock totaled approximately $600 million in the first quarter of 2023 and $1.8 billion in the last three quarters of 2022. There were no common stock repurchases in the first quarter of 2022. Goodwill and core deposit and other intangible assets averaged $8.7 billion in both the first quarter of 2023 and fourth quarter of 2022 and $4.6 billion in the year-earlier quarter. The Company recorded $3.9 billion of goodwill on April 1, 2022 which represents excess consideration over the fair value of net assets acquired in the People's United transaction. As part of the transaction, intangible assets were identified and recorded at fair value, thereby increasing the balance of core deposit and other intangible assets on the Company's balance sheet by $261 million on April 1, 2022. The cash surrender value of bank owned life insurance averaged $2.6 billion in each of the first quarter of 2023 and the fourth quarter of 2022, compared with $1.9 billion in the year-earlier quarter. The increase since March 31, 2022 is predominantly reflective of the impact of the People's United Acquisition. Other changes 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 .74% in the first quarter of 2023, compared with .06% and .44% in the first quarter of 2022 and the fourth quarter of 2022, respectively. The increased contribution of net interest-free funds to net interest margin in the recent quarter and fourth quarter of 2022 as compared with the initial 2022 quarter reflects higher rates on interest-bearing liabilities used to value net interest-free funds.
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 4.04% in the first quarter of 2023, compared with 2.65% in the year-earlier period. 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 changes to spreads, could impact the Company’s net interest income and net interest margin. The Federal Open Market Committee has conducted a series of basis point increases in short-term interest rates since March 31, 2022 totaling 4.50%. Those actions have led to generally higher interest rates overall and, accordingly, have contributed to the Company's higher net interest margin in the recent quarter as compared with the year-earlier quarter. The recent quarter's net interest margin decreased modestly from 4.06% in the fourth quarter of 2022. That decrease reflects a 32 basis point compression of the net interest spread largely offset by a 30 basis point increase in the contribution of interest-free funds.
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 $12.25 billion (excluding $2.95 billion of forward-starting swap agreements) at March 31, 2023, $15.0 billion (excluding $5.7 billion of forward-starting swap agreements) at March 31, 2022 and $12.75 billion (excluding $4.65 billion of forward-starting swap agreements) at December 31,
- 51 -
2022. 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. At March 31, 2023 interest rate swap agreements with notional amounts of $9.75 billion were serving as cash flow hedges of interest payments associated with variable rate commercial real estate loans, compared with $13.35 billion at March 31, 2022 and $11.25 billion at December 31, 2022. Interest rate swap agreements with notional amounts of $2.5 billion at March 31, 2023, $1.65 billion at March 31, 2022 and $1.5 billion at December 31, 2022 were serving as fair value hedges of fixed rate long-term borrowings. The Company enters 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.
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 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 amounts of hedge ineffectiveness recognized during each of the quarters ended March 31, 2023, March 31, 2022 and December 31, 2022 were not material to the Company’s consolidated results of operations. Information regarding the fair value of interest rate swap agreements and hedge ineffectiveness is presented in note 10 of Notes to Financial Statements. Information regarding the valuation of cash flow hedges included in other comprehensive income 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 average notional amounts of interest rate swap agreements entered into for interest rate risk management purposes, the related effect on net interest income and margin, and the weighted-average interest rates paid or received on those swap agreements are presented in the accompanying table. Additional information about the Company’s use of interest rate swap agreements and other derivatives is included in note 10 of Notes to Financial Statements.
INTEREST RATE SWAP AGREEMENTS
|
|
|
Three Months Ended March 31 |
|||||||||||||||
|
. |
|
2023 |
|
|
2022 |
|
|
||||||||||
|
|
|
Amount |
|
|
Rate (a) |
|
|
Amount |
|
|
Rate (a) |
|
|
||||
|
|
|
(Dollars in thousands) |
|||||||||||||||
|
Increase (decrease) in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest income |
|
$ |
(59,039 |
) |
|
|
(.13 |
) |
% |
$ |
38,019 |
|
|
|
.11 |
|
% |
|
Interest expense |
|
|
9,920 |
|
|
|
.04 |
|
|
|
(8,488 |
) |
|
|
(.05 |
) |
|
|
Net interest income/margin |
|
$ |
(68,959 |
) |
|
|
(.15 |
) |
% |
$ |
46,507 |
|
|
|
.16 |
|
% |
|
Average notional amount (c) |
|
$ |
11,069,444 |
|
|
|
|
|
$ |
14,972,222 |
|
|
|
|
|
||
|
Rate received (b) |
|
|
|
|
|
2.68 |
|
% |
|
|
|
|
1.46 |
|
% |
||
|
Rate paid (b) |
|
|
|
|
|
5.17 |
|
% |
|
|
|
|
.22 |
|
% |
||
As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk. Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future obligations, including demands for loans and deposit withdrawals, funding operating costs and other corporate purposes. Liquidity risk arises whenever cash flows associated with financial instruments included in assets and liabilities differ.
The most significant source of funding for the Company is core deposits, which are generated from a large base of consumer, corporate and institutional customers. That customer base has, over the past several years, become more geographically diverse as a result of expansion of the Company’s businesses. Nevertheless, the Company faces competition in offering products and services from a large array of financial market participants, including banks, thrifts, mutual funds, securities dealers and others. The Company supplements funding provided through deposits with various short-term and long-term wholesale borrowings, including overnight federal funds purchased, short-term
- 52 -
advances from the FHLB of New York, brokered deposits, and longer-term borrowings. M&T Bank has access to additional funding sources through borrowings from the FHLB of New York, lines of credit with the FRB 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, 2023 and December 31, 2022, long-term borrowings aggregated $7.5 billion and $4.0 billion, respectively and short-term borrowings aggregated $7.0 billion and $3.6 billion, respectively.
The Company has benefited from the placement of brokered deposits. The Company had brokered savings and interest-checking deposit accounts which aggregated approximately $3.5 billion at March 31, 2023, $3.8 billion at December 31, 2022 and $3.2 billion at March 31, 2022. Brokered time deposits totaled $4.9 billion and $4.1 billion at March 31, 2023 and December 31, 2022, respectively. Brokered time deposits were not a significant source of funding at March 31, 2022.
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 risk by modeling scenarios that estimate the liquidity impact resulting from a short-term ratings downgrade over various grading levels. Such impact is estimated by attempting to measure the effect on available unsecured lines of credit, available capacity from secured borrowing sources and securitizable assets. In addition to deposits and borrowings, other sources of liquidity include maturities of investment securities and other earning assets, repayments of loans and investment securities, and cash generated from operations, such as fees collected for services.
Certain customers of the Company obtain financing through the issuance of variable rate demand bonds (“VRDBs”). The VRDBs are generally enhanced by letters of credit provided by M&T Bank. M&T Bank oftentimes acts as remarketing agent for the VRDBs and, at its discretion, may from time-to-time own some of the VRDBs while such instruments are remarketed. When this occurs, the VRDBs are classified as trading account assets in the Company’s consolidated balance sheet. Nevertheless, M&T Bank is not contractually obligated to purchase the VRDBs. The value of VRDBs in the Company’s trading account was $52 million at March 31, 2023. The majority of those securities were remarketed in April 2023. There were no such securities in the trading account at December 31, 2022. The total amounts of VRDBs outstanding backed by M&T Bank letters of credit were $582 million at March 31, 2023, $604 million at December 31, 2022 and $681 million at March 31, 2022. M&T Bank also serves as remarketing agent for most of those bonds.
The Company enters into contractual obligations in the normal course of business that require future cash payments. Such obligations include, among others, payments related to deposits, borrowings, leases and other contractual commitments. Off-balance sheet commitments to customers may impact liquidity, including commitments to extend credit, standby letters of credit, commercial letters of credit, financial guarantees and indemnification contracts, and commitments to sell real estate loans. Because many of these commitments or contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. Further discussion of these commitments is provided in note 13 of Notes to Financial Statements.
M&T’s primary source of funds to pay for operating expenses, shareholder dividends and treasury stock repurchases has historically been the receipt of dividends from its 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, 2023 approximately $1.12 billion was available for payment of dividends to M&T from bank subsidiaries. M&T also may obtain funding through long-term borrowings. As previously described, in January 2023 M&T issued $1.0 billion of senior notes that mature in January 2034. Outstanding senior notes of M&T at March 31, 2023 and December 31, 2022 were $2.22 billion and $1.22 billion, respectively. Junior subordinated debentures of M&T associated with trust preferred securities outstanding at March 31, 2023 and December 31, 2022 totaled $537 million and $536 million, respectively.
- 53 -
Management closely monitors the Company’s liquidity position on an ongoing basis for compliance with internal policies and regulatory expectations and believes that available sources of liquidity are adequate to meet funding needs anticipated in the ordinary course of business. Available liquidity at March 31, 2023 included cash on deposit at the FRB of New York of $22.3 billion, unused lines of credit of $32.5 billion and unencumbered investment securities (after estimated haircut) of approximately $16.8 billion. 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, 2023, the aggregate notional amount of interest rate swap agreements entered into for interest rate risk management purposes that were currently in effect was $12.25 billion. In addition, the Company has entered into $2.95 billion of forward-starting interest rate swap agreements.
The Company’s Asset-Liability Committee, which includes members of executive management, monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a computer model that forecasts net interest income under different interest rate scenarios. In modeling changing interest rates, the Company considers different yield curve shapes that consider both parallel (that is, simultaneous changes in interest rates at each point on the yield curve) and non-parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve. In utilizing the model, market-implied forward interest rates over the subsequent twelve months are generally used to determine a base interest rate scenario for the net interest income simulation. That calculated base net interest income is then compared to the income calculated under the varying interest rate scenarios. The model considers the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk through the use of on- or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.
The accompanying table as of March 31, 2023 and December 31, 2022 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.
- 54 -
SENSITIVITY OF NET INTEREST INCOME
TO CHANGES IN INTEREST RATES
|
|
|
Calculated Increase (Decrease)
|
|
|
|||||
|
Changes in interest rates |
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
||
|
|
|
(In thousands) |
|
|
|||||
|
|
|
|
|
|
|
|
|
||
|
+200 basis points |
|
$ |
175,411 |
|
|
|
224,555 |
|
|
|
+100 basis points |
|
|
126,189 |
|
|
|
158,020 |
|
|
|
-100 basis points |
|
|
(182,662 |
) |
|
|
(216,202 |
) |
|
|
-200 basis points |
|
|
(373,589 |
) |
|
|
(439,512 |
) |
|
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, loan and deposit volumes, mix and pricing, and deposit maturities. In the scenarios presented, the Company also assumed gradual changes in interest rates during a twelve-month period as compared with the base scenario. In the declining rate scenario, the rate changes may be limited to lesser amounts such that interest rates remain at or above zero on all points of the yield curve. Changes in amounts presented since December 31, 2022 reflect changes in portfolio composition (including shifts between noninterest-bearing and interest-bearing deposits and higher levels of borrowings), the level of market-implied forward interest rates and hedging actions taken by the Company. Amidst the rising rate environment since the first quarter of 2022, M&T's deposit pricing beta, that is the change in deposit pricing in response to a change in market interest rates, averaged between 30 to 35 percent. The deposit pricing beta is assumed to be approximately 40 to 45 percent in the scenarios presented. 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.
A significant amount of the Company’s earning assets, interest-bearing liabilities, preferred equity instruments and interest rate swap agreements have contractual repricing terms that reference the London Interbank Offered Rate (“LIBOR”). Publication of certain tenors of LIBOR has already ceased and complete cessation of LIBOR publication is expected by June 30, 2023. Effective December 31, 2021, the Company essentially discontinued entering into new LIBOR-based contracts.
The Company's enterprise-wide LIBOR transition program is monitored by executive management as well as the Risk Committee of the Board of Directors. At March 31, 2023 the Company had LIBOR-based commercial loans and leases and commercial real estate loans of $28.0 billion and residential mortgage and consumer loans of $4.0 billion outstanding. Approximately 91% of the loans either mature before June 30, 2023 or have been amended to include appropriate alternative language to be effective upon cessation of LIBOR publication. Approximately $733 million of borrowings and $1.1 billion of preferred equity instruments reference LIBOR as of March 31, 2023. Upon cessation of LIBOR after June 30, 2023 dividends on M&T's preferred stock and interest payments on variable rate preferred capital securities will be paid based on SOFR plus a pre-determined static spread (dependent on the tenor of LIBOR for each series of preferred stock and each preferred capital security). Refer to note 10 of Notes to the Financial Statements in the Company's Form 10-K for information on the anticipated rates for dividends on each series of preferred stock that reference LIBOR upon its cessation. Many of the Company’s interest rate swap agreements primarily reference LIBOR. In October 2020, the International Swaps and Derivatives Association, Inc. published the IBOR Fallbacks Supplement (“Supplement”) and the IBOR Fallback Protocol (“Protocol”). The Protocol enables market participants to incorporate certain revisions into their legacy non-cleared derivative trades with other counterparties that also choose to adhere to the Protocol. M&T adhered to the Protocol in November 2020. With respect to the Company’s cleared interest rate swap agreements that reference LIBOR, clearinghouses have adopted the same SOFR benchmark alternatives of the Supplement and Protocol.
As loans have matured and new originations occurred a larger percentage of the Company’s variable-rate loans reference SOFR or other indexes, including the Bloomberg Short Term Bank Yield Index (“BSBY”). At March 31,
- 55 -
2023 the Company had approximately $34.9 billion and $267 million of outstanding loan balances that reference SOFR and BSBY, respectively. Additionally, as of March 31, 2023, the Company had $14.2 billion of notional amounts of interest rate swap agreements entered into for hedging purposes, including $3.0 billion of forward-starting interest rate swap agreements, and notional amounts of $7.3 billion of non-hedging derivative interest rate contracts that are referenced to SOFR. The Company’s usage of interest rate swap agreements referenced to SOFR or BSBY is expected to increase in response to the discontinuation of LIBOR. By the end of the second quarter of 2023, the Company expects to substantially complete its work engaging with customers and other counterparties to remediate LIBOR-based agreements which expire after June 30, 2023 by incorporating alternative language, negotiating new agreements, or other means. The discontinuation of LIBOR and uncertainty relating to the emergence of one or more alternative benchmark indexes to replace LIBOR could materially impact the Company’s interest rate risk profile and its management thereof.
In addition to the effect of interest rates, changes in fair value of the Company’s financial instruments can also result from a lack of trading activity for similar instruments in the financial markets. That impact is most notable on the values assigned to some of the Company’s investment securities. Information about the fair valuation of investment securities is presented in notes 3 and 12 of Notes to Financial Statements.
The Company enters into interest rate and foreign exchange contracts to meet the financial needs of customers that it includes in its financial statements as other non-hedging derivatives within other assets and other liabilities. Financial instruments utilized for such activities consist predominantly of interest rate swap agreements and forward and futures contracts related to foreign currencies. The Company generally mitigates the foreign currency and interest rate risk associated with customer activities by entering into offsetting positions with third parties that are also included in other assets and other liabilities. The fair values of non-hedging derivative positions associated with interest rate contracts and foreign currency and other option and futures contracts are presented in note 10 of Notes to Financial Statements. As with any non-government guaranteed financial instrument, the Company is exposed to credit risk associated with counterparties to the Company’s non-hedging derivative activities. Although the notional amounts of these contracts are not recorded in the consolidated balance sheet, the unsettled fair values of such financial instruments are recorded in the consolidated balance sheet. The fair values of such non-hedging derivative assets and liabilities recognized on the balance sheet were $302 million and $1.0 billion, respectively, at March 31, 2023 and $380 million and $1.3 billion, respectively, at December 31, 2022. The fair value asset and liability amounts at March 31, 2023 have been reduced by contractual settlements of $862 million and $20 million, respectively, and at December 31, 2022 have been reduced by contractual settlements of $1.1 billion and $29 million, respectively. The values associated with the Company's non-hedging derivative activities at March 31, 2023 as compared with December 31, 2022 reflect changes in values associated with interest rate swap agreements entered into with commercial customers that are not subject to periodic variation margin settlement payments.
Trading account assets were $165 million at March 31, 2023, $118 million at December 31, 2022 and $47 million at March 31, 2022. Included in trading account assets were assets related to deferred compensation plans of $22 million at March 31, 2023, $23 million at December 31, 2022 and $19 million at March 31, 2022. Changes in the fair values of such assets are recorded as “trading account and other non-hedging derivative gains” in the consolidated statement of income. Included in “other liabilities” in the consolidated balance sheet at March 31, 2023 was $27 million of liabilities related to deferred compensation plans, compared with $29 million at December 31, 2022 and $22 million at March 31, 2022. 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 $92 million at March 31, 2023, $95 million at December 31, 2022 and $28 million at March 31, 2022. The increase at March 31, 2023 and December 31, 2022 as compared with March 31, 2022 reflects assets obtained in the acquisition of the People's United non-qualified supplemental retirement and other benefit plans.
Given the Company’s policies and positions, management believes that the potential loss exposure to the Company resulting from market risk associated with trading account and other non-hedging derivative activities was
- 56 -
not material, however, as previously noted, the Company is exposed to credit risk associated with counterparties to transactions related to the Company’s actions to mitigate foreign currency and interest rate risk associated with customer activities. Additional information about the Company’s use of derivative financial instruments is included in note 10 of Notes to Financial Statements.
Provision for Credit Losses
A provision for credit losses is recorded to adjust the level of the allowance to reflect expected credit losses that are based on economic forecasts as of each reporting date. A provision for credit losses of $120 million was recorded in the first quarter of 2023, compared with $10 million in the year-earlier quarter and $90 million in the fourth quarter of 2022. The Company's estimates of expected credit losses at March 31, 2023 reflect an expected rise in the unemployment rate, a brief retraction of economic activity measured by gross domestic product followed by growth, a continuation of a decline in residential real estate prices and concerns about commercial real estate values in the health care and office building sectors. The allowance for credit losses at March 31, 2023 and December 31, 2022 also reflects a provision recorded in the second quarter of 2022 that included $242 million on loans obtained in the acquisition of People's United not deemed to be purchased credit deteriorated ("PCD"). GAAP requires a provision for credit losses to be recorded related to those loans beyond the recognition of credit losses utilized in the determination of the estimated fair value of the loans at the acquisition date. In addition to the recorded provision, the allowance for credit losses was also increased by $99 million in the second quarter of 2022 to reflect the expected credit losses on loans obtained in the acquisition of People's United deemed to be PCD. That addition represented an increase of the carrying values of loans identified as PCD at the time of the acquisition.
Charge-offs of loans, net of recoveries of previously charged-off loans, were $70 million in the recent quarter, compared with $7 million in the first quarter of 2022 and $40 million in the fourth quarter of 2022. Net charge-offs as an annualized percentage of average loans and leases were .22% in the first quarter of 2023, .03% in the year-earlier quarter and .12% in the fourth quarter of 2022. As an annualized percentage by loan type, net charge-offs (recoveries) for the first quarter of 2023, first quarter of 2022 and the fourth quarter of 2022 were .09%, .10% and .08% for commercial loans and leases, .26%, (.15%) and .07% for commercial real estate loans, .62%, .31% and .46% for consumer loans, and .01%, .02%, and .01% for residential real estate loans, respectively. A summary of net charge-offs by loan type is presented in the table that follows.
NET CHARGE-OFFS (RECOVERIES)
BY LOAN/LEASE TYPE
|
|
|
|
|
|||||||||
|
|
|
First Quarter 2023 |
|
|
First Quarter 2022 |
|
|
Fourth Quarter 2022 |
|
|||
|
|
|
(In thousands) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Commercial, financial, leasing, etc. |
|
$ |
9,561 |
|
|
|
5,569 |
|
|
|
8,006 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|||
|
Commercial |
|
|
29,055 |
|
|
|
(13,143 |
) |
|
|
8,003 |
|
|
Residential |
|
|
378 |
|
|
|
865 |
|
|
|
582 |
|
|
Consumer |
|
|
31,227 |
|
|
|
13,576 |
|
|
|
23,669 |
|
|
|
|
$ |
70,221 |
|
|
|
6,867 |
|
|
|
40,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|||
There were no individually notable commercial loan charge-offs or recoveries in the first quarter of 2023. Net charge-offs of commercial loans in the first quarter of 2022 reflected a $10 million charge-off of a loan to a skilled nursing facility partially offset by a $7 million recovery of a previously charged off loan to a manufacturing entity. Net charge-offs of commercial loans in the fourth quarter of 2022 included an $8 million charge-off of a loan to a consumer products manufacturer. The net charge-offs of commercial real estate loans in the first quarter of 2023 reflect an $18 million net charge-off of a loan to a multi-tenant office and retail building in New York City and a $9 million charge-off to a real estate development and management company in the mid-Atlantic region. Net recoveries of commercial real estate loans in last year's first quarter included a $9 million recovery of a previously charged-off loan to a hotel in the New York City area. Net charge-offs of commercial real estate loans in the fourth quarter of 2022 included a $7 million charge-off to a real estate development and management company. Included in net charge-offs
- 57 -
of consumer loans were: net charge-offs of automobile loans of $2 million in the recent quarter and $3 million in the fourth quarter of 2022, compared with net recoveries of $1 million in the first quarter of 2022; net charge-offs of recreational finance loans of $11 million in the first quarter of 2023, $4 million in the year-earlier quarter and $5 million in the fourth quarter of 2022; and net charge-offs of home equity loans and lines of credit secured by one-to-four family residential properties of less than $1 million in the recent quarter and fourth quarter of 2022, compared with net recoveries of less than $1 million in the first quarter of 2022. Net charge-offs associated with other consumer loans including credit cards and installment loans totaled $17 million in the recent quarter, $11 million in the year-earlier quarter and $16 million in the fourth quarter of 2022.
Nonaccrual loans aggregated $2.56 billion or 1.92% of total loans and leases outstanding at March 31, 2023, compared with $2.13 billion or 2.32% at March 31, 2022 and $2.44 billion or 1.85% at December 31, 2022. Loans obtained in the acquisition of People's United that have been classified as nonaccrual totaled $605 million at March 31, 2023 and $572 million at December 31, 2022. The level of nonaccrual loans reflects the continuing impact of economic conditions on borrowers’ abilities to make contractual payments on their loans, most notably commercial real estate loans in the hospitality, office, retail and health care-related sectors.
Accruing loans past due 90 days or more were $407 million or .31% of loans and leases at March 31, 2023, compared with $777 million or .85% at March 31, 2022 and $491 million or .37% at December 31, 2022. Approximately 72% of accruing loans past due 90 days or more were residential real estate loans and included in that population were loans guaranteed by government-related entities of $306 million, $690 million and $363 million at March 31, 2023, March 31, 2022 and December 31, 2022, respectively. The lower balance at March 31, 2023 and December 31, 2022 compared with March 31, 2022 reflects residential real estate loans guaranteed by government-related entities receiving payment deferrals during the COVID-19 pandemic, but ineligible for treatment under the CARES Act, that subsequently exited those arrangements and became less than 90 days past due. 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 included in the amounts noted above that are guaranteed by government-related entities totaled $242 million at March 31, 2023, $652 million at March 31, 2022 and $294 million at December 31, 2022. 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.
Loans that were 30-89 days past due were $1.9 billion at March 31, 2023, or 1.42% of total loans outstanding, $1.8 billion at December 31, 2022, or 1.35% of total loans outstanding, and $793 million at March 31, 2022, or .86% of total loans outstanding. At March 31, 2023, 85% of loans 30-89 days past due were less than 60 days delinquent. Loans subject to COVID-19 related payment deferrals were classified as current in accordance with regulatory guidance and, as a result, did not contribute to past due loan categories in earlier periods. Information about delinquent loans at March 31, 2023 and December 31, 2022 is included in note 4 of Notes to Financial Statements.
During the normal course of business, the Company modifies loans to maximize recovery efforts. The types of modifications that the Company grants typically include principal deferrals and interest rate reductions, but may also include other types of modifications. The Company may offer such modified terms to borrowers experiencing financial difficulty. Such modified loans may be considered nonaccrual if the Company does not expect to collect the contractual cash flows owed under the loan agreement. Information about modifications of loans to borrowers experiencing financial difficulty is included in note 4 of Notes to Financial Statements.
Commercial loans and leases classified as nonaccrual totaled $382 million, $275 million and $347 million at March 31, 2023, March 31, 2022, and December 31, 2022, respectively. Commercial real estate loans in nonaccrual status aggregated $1.7 billion, $1.2 billion and $1.5 billion at March 31, 2023, March 31, 2022, December 31, 2022, respectively. Commercial real estate loans in nonaccrual status were largely reflective of loans in the retail, office building, healthcare and hospitality sectors. Commercial loans and leases and commercial real estate loans acquired from People's United and classified as nonaccrual totaled $96 million and $456 million, respectively, at March 31, 2023 and $118 million and $401 million, respectively, at December 31, 2022.
- 58 -
Nonaccrual residential real estate loans totaled $323 million at March 31, 2023, compared with $465 million at March 31, 2022 and $350 million at December 31, 2022. The lower balance of nonaccrual residential real estate loans at the two most recent quarter-ends as compared with March 31, 2022 were largely reflective of improving economic conditions, partially offset by $37 million and $36 million of residential real estate loans acquired from People's United and classified as nonaccrual at March 31, 2023 and December 31, 2022, respectively. Included in residential real estate loans classified as nonaccrual were limited documentation first mortgage loans of $69 million at March 31, 2023, compared with $124 million at March 31, 2022 and $78 million at December 31, 2022. 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 aggregated $293 million at March 31, 2023, compared with $687 million at March 31, 2022, and $345 million at December 31, 2022. Those amounts related predominantly to government-guaranteed loans. The lower balances at the two most recent quarter-ends as compared with March 31, 2022 reflect improved borrower repayment performance. Information about the location of nonaccrual and charged-off residential real estate loans as of and for the quarter ended March 31, 2023 is presented in the accompanying table.
Nonaccrual consumer loans were $189 million at March 31, 2023, $182 million at March 31, 2022, and $218 million at December 31, 2022. Included in nonaccrual consumer loans at March 31, 2023, March 31, 2022, and December 31, 2022 were: automobile loans of $27 million, $35 million and $40 million, respectively; recreational finance loans of $34 million, $32 million and $45 million, respectively; and outstanding balances of home equity loans and lines of credit of $81 million, $71 million and $85 million, respectively. Consumer loans acquired from People's United and classified as nonaccrual at March 31, 2023 and December 31, 2022 totaled $16 million and $17 million, respectively, and consisted predominantly of home equity loans and lines of credit. 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, 2023 is presented in the accompanying table.
Information about past due and nonaccrual loans as of March 31, 2023 and December 31, 2022 is also included in note 4 of Notes to Financial Statements.
- 59 -
SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
||||||||
|
|
|
March 31, 2023 |
|
|
|
March 31, 2023 |
|
||||||||||||||
|
|
|
|
|
|
Nonaccrual |
|
|
|
Net Charge-offs (Recoveries) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|||||
|
|
|
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Average |
|
|||||
|
|
|
Outstanding |
|
|
|
|
|
Outstanding |
|
|
|
|
|
|
Outstanding |
|
|||||
|
|
|
Balances |
|
|
Balances |
|
|
Balances |
|
|
|
Balances |
|
|
Balances |
|
|||||
|
|
|
(Dollars in thousands) |
|
||||||||||||||||||
|
Residential mortgages: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
New York |
|
$ |
6,783,811 |
|
|
$ |
96,856 |
|
|
|
1.43 |
% |
|
|
$ |
285 |
|
|
|
.02 |
% |
|
Mid-Atlantic (a) |
|
|
6,797,651 |
|
|
|
83,508 |
|
|
|
1.23 |
|
|
|
|
94 |
|
|
|
.01 |
|
|
New England (b) |
|
|
6,210,935 |
|
|
|
51,351 |
|
|
|
.83 |
|
|
|
|
(13 |
) |
|
|
— |
|
|
Other |
|
|
2,924,723 |
|
|
|
18,319 |
|
|
|
.63 |
|
|
|
|
24 |
|
|
|
— |
|
|
Total |
|
$ |
22,717,120 |
|
|
$ |
250,034 |
|
|
|
1.10 |
% |
|
|
$ |
390 |
|
|
|
.01 |
% |
|
Residential construction loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
New York |
|
$ |
21,361 |
|
|
$ |
3,137 |
|
|
|
14.69 |
% |
|
|
$ |
— |
|
|
|
— |
% |
|
Mid-Atlantic (a) |
|
|
14,464 |
|
|
|
475 |
|
|
|
3.28 |
|
|
|
|
— |
|
|
|
— |
|
|
New England (b) |
|
|
12,368 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
4,471 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
52,664 |
|
|
$ |
3,612 |
|
|
|
6.86 |
% |
|
|
$ |
— |
|
|
|
— |
% |
|
Limited documentation first lien mortgages: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
New York |
|
$ |
467,901 |
|
|
$ |
30,350 |
|
|
|
6.49 |
% |
|
|
$ |
(6 |
) |
|
|
(.01 |
%) |
|
Mid-Atlantic (a) |
|
|
416,394 |
|
|
|
25,224 |
|
|
|
6.06 |
|
|
|
|
(7 |
) |
|
|
(.01 |
) |
|
New England (b) |
|
|
94,084 |
|
|
|
8,752 |
|
|
|
9.30 |
|
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
41,782 |
|
|
|
4,609 |
|
|
|
11.03 |
|
|
|
|
1 |
|
|
|
.02 |
|
|
Total |
|
$ |
1,020,161 |
|
|
$ |
68,935 |
|
|
|
6.76 |
% |
|
|
$ |
(12 |
) |
|
|
— |
% |
|
First lien home equity loans and lines of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
New York |
|
$ |
949,404 |
|
|
$ |
15,922 |
|
|
|
1.68 |
% |
|
|
$ |
137 |
|
|
|
.06 |
% |
|
Mid-Atlantic (a) |
|
|
1,102,024 |
|
|
|
21,435 |
|
|
|
1.95 |
|
|
|
|
(18 |
) |
|
|
(.01 |
) |
|
New England (b) |
|
|
531,103 |
|
|
|
3,986 |
|
|
|
.75 |
|
|
|
|
(1 |
) |
|
|
— |
|
|
Other |
|
|
15,656 |
|
|
|
1,095 |
|
|
|
6.99 |
|
|
|
|
12 |
|
|
|
.32 |
|
|
Total |
|
$ |
2,598,187 |
|
|
$ |
42,438 |
|
|
|
1.63 |
% |
|
|
$ |
130 |
|
|
|
.02 |
% |
|
Junior lien home equity loans and lines of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
New York |
|
$ |
737,665 |
|
|
$ |
16,805 |
|
|
|
2.28 |
% |
|
|
$ |
261 |
|
|
|
.14 |
% |
|
Mid-Atlantic (a) |
|
|
885,658 |
|
|
|
15,886 |
|
|
|
1.79 |
|
|
|
|
113 |
|
|
|
.05 |
|
|
New England (b) |
|
|
618,543 |
|
|
|
5,271 |
|
|
|
.85 |
|
|
|
|
7 |
|
|
|
— |
|
|
Other |
|
|
19,214 |
|
|
|
366 |
|
|
|
1.90 |
|
|
|
|
(16 |
) |
|
|
(.32 |
) |
|
Total |
|
$ |
2,261,080 |
|
|
$ |
38,328 |
|
|
|
1.70 |
% |
|
|
$ |
365 |
|
|
|
.07 |
% |
Real estate and other foreclosed assets totaled $45 million at March 31, 2023, compared with $24 million at March 31, 2022, and $41 million at December 31, 2022. Net gains or losses associated with real estate and other foreclosed assets were not material during the three months ended March 31, 2023, March 31, 2022 and December 31, 2022. At March 31, 2023, foreclosed assets are comprised predominantly of residential real estate-related properties.
- 60 -
A comparative summary of nonperforming assets and certain past due loan data and credit quality ratios is presented in the accompanying table.
NONPERFORMING ASSET AND PAST DUE LOAN DATA
|
|
|
2023 |
|
|
2022 Quarters |
|
||||||||||||||
|
December 31 |
|
First Quarter |
|
|
Fourth |
|
|
Third |
|
|
Second |
|
|
First |
|
|||||
|
|
|
(Dollars in thousands) |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Nonaccrual loans |
|
$ |
2,556,799 |
|
|
|
2,438,435 |
|
|
|
2,429,326 |
|
|
|
2,633,005 |
|
|
|
2,134,231 |
|
|
Real estate and other foreclosed assets |
|
|
44,567 |
|
|
|
41,375 |
|
|
|
37,031 |
|
|
|
28,692 |
|
|
|
23,524 |
|
|
Total nonperforming assets |
|
$ |
2,601,366 |
|
|
|
2,479,810 |
|
|
|
2,466,357 |
|
|
|
2,661,697 |
|
|
|
2,157,755 |
|
|
Accruing loans past due 90 days or more |
|
$ |
407,457 |
|
|
|
491,018 |
|
|
|
476,503 |
|
|
|
523,662 |
|
|
|
776,751 |
|
|
Government guaranteed loans included in totals above: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Nonaccrual loans |
|
$ |
42,102 |
|
|
|
43,536 |
|
|
|
44,797 |
|
|
|
46,937 |
|
|
|
46,151 |
|
|
Accruing loans past due 90 days or more (a) |
|
|
306,049 |
|
|
|
363,409 |
|
|
|
423,371 |
|
|
|
467,834 |
|
|
|
689,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Nonaccrual loans to total loans and leases, net of
|
|
|
1.92 |
% |
|
|
1.85 |
% |
|
|
1.89 |
% |
|
|
2.05 |
% |
|
|
2.32 |
% |
|
Nonperforming assets to total net loans and
|
|
|
1.96 |
% |
|
|
1.88 |
% |
|
|
1.92 |
% |
|
|
2.07 |
% |
|
|
2.35 |
% |
|
Accruing loans past due 90 days or more to
|
|
|
.31 |
% |
|
|
.37 |
% |
|
|
.37 |
% |
|
|
.41 |
% |
|
|
.85 |
% |
Management determines the allowance for credit losses under accounting guidance that requires estimating the amount of current expected credit losses over the remaining contractual term of the loan and lease portfolio. A description of the methodologies used by the Company to estimate its allowance for credit losses can be found in note 4 of Notes to Financial Statements.
In establishing the allowance for credit losses, 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 type. At the time of the Company’s analysis regarding the determination of the allowance for credit losses as of March 31, 2023 concerns existed about elevated levels of inflation; fears of liquidity shortages in the financial services markets and a slowing economy or possible recession in coming quarters; the volatile nature of global markets and international economic conditions that could impact the U.S. economy; Federal Reserve positioning of monetary policy; downward pressures on commercial and residential real estate values especially in the office and health care related sectors; ongoing supply chain issues and wage pressures impacting commercial borrowers; the extent to which borrowers, in particular commercial real estate borrowers, may be negatively affected by general economic conditions; and continued stagnant population and economic growth in the upstate New York and central Pennsylvania regions (approximately 37% of the Company’s loans and leases are to customers in New York State and Pennsylvania) that historically lag other regions of the country. 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 while specific loans determined to have an elevated level of credit risk are classified as “criticized.” A criticized loan may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. Criticized commercial loans and commercial real estate loans totaled $10.6 billion, including $2.5 billion of loans acquired from People's United, at March 31, 2023, compared with $8.7 billion at March 31, 2022, and $10.7 billion, including $2.5 billion of loans acquired from People's United, at December 31, 2022. Despite improved economic conditions during 2022 as pandemic-related restrictions were lifted and consumer spending increased, the business climate through the first quarter of 2023 continues to be subjected to inflationary pressures, supply chain constraints, rising interest rates and liquidity concerns. The level of criticized loans remains reflective of the impact of current conditions on many borrowers, particularly those with investor-owned commercial real estate loans in the hotel, office, retail and healthcare
- 61 -
sectors. Investor-owned commercial real estate loans comprised $7.6 billion or 72% of total criticized loans at March 31, 2023. The weighted-average loan-to-value (“LTV”) ratio for investor-owned commercial real estate properties was approximately 57%. Criticized loans secured by investor-owned commercial real estate had a weighted-average LTV ratio of approximately 63%.
The accompanying tables summarize the outstanding balances of commercial loans and leases and commercial real estate loans by industry or property type at March 31, 2023 and December 31, 2022.
COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT
(Excludes Loans Secured by Real Estate)
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||||||||||
|
|
|
|
Outstanding |
|
|
Criticized Accrual |
|
|
Criticized Nonaccrual |
|
|
Total Criticized |
|
|
Outstanding |
|
|
Criticized Accrual |
|
|
Criticized Nonaccrual |
|
|
Total Criticized |
|
||||||||
|
|
|
|
(In millions) |
|
|||||||||||||||||||||||||||||
|
Financial and insurance |
|
|
$ |
8,235 |
|
|
$ |
42 |
|
|
$ |
1 |
|
|
$ |
43 |
|
|
$ |
7,428 |
|
|
$ |
139 |
|
|
$ |
1 |
|
|
$ |
140 |
|
|
Services |
|
|
|
6,568 |
|
|
|
304 |
|
|
|
33 |
|
|
|
337 |
|
|
|
6,494 |
|
|
|
333 |
|
|
|
35 |
|
|
|
368 |
|
|
Manufacturing |
|
|
|
6,094 |
|
|
|
313 |
|
|
|
87 |
|
|
|
400 |
|
|
|
5,524 |
|
|
|
299 |
|
|
|
72 |
|
|
|
371 |
|
|
Motor vehicle and recreational
|
|
|
|
4,823 |
|
|
|
— |
|
|
|
5 |
|
|
|
5 |
|
|
|
4,797 |
|
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
|
Wholesale |
|
|
|
3,983 |
|
|
|
248 |
|
|
|
10 |
|
|
|
258 |
|
|
|
4,140 |
|
|
|
183 |
|
|
|
8 |
|
|
|
191 |
|
|
Transportation, communications, utilities |
|
|
|
3,358 |
|
|
|
203 |
|
|
|
57 |
|
|
|
260 |
|
|
|
3,078 |
|
|
|
217 |
|
|
|
73 |
|
|
|
290 |
|
|
Retail |
|
|
|
2,714 |
|
|
|
194 |
|
|
|
33 |
|
|
|
227 |
|
|
|
2,525 |
|
|
|
175 |
|
|
|
34 |
|
|
|
209 |
|
|
Construction |
|
|
|
2,244 |
|
|
|
253 |
|
|
|
56 |
|
|
|
309 |
|
|
|
2,324 |
|
|
|
248 |
|
|
|
46 |
|
|
|
294 |
|
|
Real estate investors |
|
|
|
1,981 |
|
|
|
32 |
|
|
|
3 |
|
|
|
35 |
|
|
|
1,882 |
|
|
|
35 |
|
|
|
3 |
|
|
|
38 |
|
|
Health services |
|
|
|
1,963 |
|
|
|
322 |
|
|
|
36 |
|
|
|
358 |
|
|
|
1,972 |
|
|
|
171 |
|
|
|
39 |
|
|
|
210 |
|
|
Other |
|
|
|
1,795 |
|
|
|
60 |
|
|
|
61 |
|
|
|
121 |
|
|
|
1,686 |
|
|
|
75 |
|
|
|
36 |
|
|
|
111 |
|
|
Total |
|
|
$ |
43,758 |
|
|
$ |
1,971 |
|
|
$ |
382 |
|
|
$ |
2,353 |
|
|
$ |
41,850 |
|
|
$ |
1,882 |
|
|
$ |
347 |
|
|
$ |
2,229 |
|
COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||||||||||
|
|
|
|
Outstanding |
|
|
Criticized Accrual |
|
|
Criticized Nonaccrual |
|
|
Total Criticized |
|
|
Outstanding |
|
|
Criticized Accrual |
|
|
Criticized Nonaccrual |
|
|
Total Criticized |
|
||||||||
|
|
|
|
(In millions) |
|
|||||||||||||||||||||||||||||
|
Investor-owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Permanent finance by property type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Apartments/Multifamily |
|
|
$ |
6,262 |
|
|
$ |
724 |
|
|
$ |
73 |
|
|
$ |
797 |
|
|
$ |
5,888 |
|
|
$ |
684 |
|
|
$ |
78 |
|
|
$ |
762 |
|
|
Retail/Service |
|
|
|
6,190 |
|
|
|
799 |
|
|
|
267 |
|
|
|
1,066 |
|
|
|
6,296 |
|
|
|
971 |
|
|
|
182 |
|
|
|
1,153 |
|
|
Office |
|
|
|
5,150 |
|
|
|
895 |
|
|
|
240 |
|
|
|
1,135 |
|
|
|
5,186 |
|
|
|
863 |
|
|
|
208 |
|
|
|
1,071 |
|
|
Health services |
|
|
|
3,892 |
|
|
|
1,021 |
|
|
|
219 |
|
|
|
1,240 |
|
|
|
3,667 |
|
|
|
1,052 |
|
|
|
222 |
|
|
|
1,274 |
|
|
Hotel |
|
|
|
2,880 |
|
|
|
679 |
|
|
|
509 |
|
|
|
1,188 |
|
|
|
2,810 |
|
|
|
676 |
|
|
|
512 |
|
|
|
1,188 |
|
|
Industrial/Warehouse |
|
|
|
2,184 |
|
|
|
136 |
|
|
|
11 |
|
|
|
147 |
|
|
|
2,238 |
|
|
|
98 |
|
|
|
12 |
|
|
|
110 |
|
|
Other |
|
|
|
399 |
|
|
|
31 |
|
|
|
10 |
|
|
|
41 |
|
|
|
527 |
|
|
|
42 |
|
|
|
24 |
|
|
|
66 |
|
|
Total permanent |
|
|
|
26,957 |
|
|
|
4,285 |
|
|
|
1,329 |
|
|
|
5,614 |
|
|
|
26,612 |
|
|
|
4,386 |
|
|
|
1,238 |
|
|
|
5,624 |
|
|
Construction/development |
|
|
|
7,541 |
|
|
|
1,884 |
|
|
|
146 |
|
|
|
2,030 |
|
|
|
8,257 |
|
|
|
2,169 |
|
|
|
126 |
|
|
|
2,295 |
|
|
Total investor-owned |
|
|
|
34,498 |
|
|
|
6,169 |
|
|
|
1,475 |
|
|
|
7,644 |
|
|
|
34,869 |
|
|
|
6,555 |
|
|
|
1,364 |
|
|
|
7,919 |
|
|
Owner-occupied by industry (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other services |
|
|
|
2,249 |
|
|
|
157 |
|
|
|
68 |
|
|
|
225 |
|
|
|
2,253 |
|
|
|
168 |
|
|
|
69 |
|
|
|
237 |
|
|
Motor vehicle and recreational
|
|
|
|
1,921 |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
|
1,848 |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
Retail |
|
|
|
1,687 |
|
|
|
52 |
|
|
|
32 |
|
|
|
84 |
|
|
|
1,688 |
|
|
|
66 |
|
|
|
11 |
|
|
|
77 |
|
|
Health services |
|
|
|
828 |
|
|
|
54 |
|
|
|
13 |
|
|
|
67 |
|
|
|
989 |
|
|
|
30 |
|
|
|
6 |
|
|
|
36 |
|
|
Wholesale |
|
|
|
959 |
|
|
|
23 |
|
|
|
1 |
|
|
|
24 |
|
|
|
978 |
|
|
|
19 |
|
|
|
2 |
|
|
|
21 |
|
|
Real estate investors |
|
|
|
912 |
|
|
|
39 |
|
|
|
22 |
|
|
|
61 |
|
|
|
732 |
|
|
|
50 |
|
|
|
23 |
|
|
|
73 |
|
|
Manufacturing |
|
|
|
867 |
|
|
|
40 |
|
|
|
22 |
|
|
|
62 |
|
|
|
841 |
|
|
|
52 |
|
|
|
23 |
|
|
|
75 |
|
|
Other |
|
|
|
1,152 |
|
|
|
39 |
|
|
|
28 |
|
|
|
67 |
|
|
|
1,167 |
|
|
|
49 |
|
|
|
23 |
|
|
|
72 |
|
|
Total owner-occupied |
|
|
|
10,575 |
|
|
|
404 |
|
|
|
188 |
|
|
|
592 |
|
|
|
10,496 |
|
|
|
434 |
|
|
|
159 |
|
|
|
593 |
|
|
Total commercial real estate |
|
|
$ |
45,073 |
|
|
$ |
6,573 |
|
|
$ |
1,663 |
|
|
$ |
8,236 |
|
|
$ |
45,365 |
|
|
$ |
6,989 |
|
|
$ |
1,523 |
|
|
$ |
8,512 |
|
Line of business personnel in different geographic locations with support from and review by the Company’s credit risk personnel review and reassign loan grades based on their detailed knowledge of individual borrowers and their judgment of the impact on such borrowers resulting from changing conditions in their respective regions. The Company’s policy is that, at least annually, updated financial information is obtained from commercial borrowers associated with pass grade loans and additional analysis performed. On a quarterly basis, the Company’s credit personnel review all criticized commercial loans and commercial real estate loans greater than $1 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or
- 62 -
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, 2023, approximately 53% of the Company’s home equity portfolio consisted of first lien loans and lines of credit and 47% were junior liens. With respect to junior lien loans, to the extent known by the Company, if a related 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. 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 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, 2023 approximately 86% of all outstanding balances of home equity lines of credit related to lines that were still in the draw period, the weighted-average remaining draw periods were approximately five years, and approximately 16% 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, 2023, December 31, 2022 and March 31, 2022 included utilizing macroeconomic assumptions to project losses over a two-year reasonable and supportable forecast period. Subsequent to the forecast period, the Company reverted to longer-term historical loss experience, over a period of one year, to estimate expected credit losses over the remaining contractual life. Forward-looking estimates of certain macroeconomic variables are determined by the M&T Scenario Development Group, which is comprised of senior management business leaders and economists. Events posing emerging risks to the macroeconomic environment, such as international conflicts and other events, liquidity concerns, inflation and supply chain issues, are considered when developing economic forecasts even if the events do not directly and materially impact the Company’s financial results. Supply chain disruptions, inflationary pressures, liquidity trends or other peripheral impacts of global events may alter economic forecasts and the Company monitors this activity as part of its risk management procedures in assessing the allowance for credit losses. Among the assumptions utilized as of March 31, 2023 was that the national unemployment rate will average 4.4% through the reasonable and supportable forecast period. The forecast also assumed gross domestic product grows at a 1.0% average rate during the first year of the reasonable and supportable forecast period and at a 2.4% average
- 63 -
rate in the second year. Commercial real estate prices were assumed to cumulatively contract 5.5% and residential real estate prices were assumed to contract 6.7% over the two-year reasonable and supportable forecast period. The assumptions utilized as of December 31, 2022 included an average national unemployment rate of 4.0% through the reasonable and supportable forecast period. The forecast also assumed gross domestic product would grow during the first year of the reasonable and supportable period at a 1.0% average annual rate followed by a 2.5% average rate in the second year. Commercial real estate prices were assumed to cumulatively grow 1.9% and residential real estate prices were assumed to contract 6.2% over the two-year reasonable and supportable forecast period. Among the assumptions utilized as of March 31, 2022 was that the national unemployment rate would average 3.6% through the reasonable and supportable forecast period. The forecast also assumed gross domestic product would grow at a 3.6% average rate during the first year of the reasonable and supportable forecast period and at a 3.0% average rate in the second year. Commercial real estate and residential real estate prices were assumed to cumulatively grow 11.0% and 4.3%, respectively, over the two-year reasonable and supportable forecast period. The assumptions utilized were based on the information available to the Company at or near March 31, 2023, December 31, 2022 and March 31, 2022 (at the time the Company 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, imprecision in economic forecasts, geopolitical conditions and other risk factors that might influence the loss estimation process. With respect to economic forecasts, the Company assessed the likelihood of alternative economic scenarios during the two-year reasonable and supportable time period. Generally, an increase in unemployment rate or a decrease in any of the rate of change in gross domestic product, commercial real estate prices or home prices could have an adverse impact on expected credit losses and may result in an increase to the allowance for credit losses. Forward looking economic forecasts are subject to inherent imprecision and future events may differ materially from forecasted events. In consideration of such uncertainty, the following alternative economic scenarios were considered to estimate the possible impact on modeled credit losses.
A potential downside economic scenario assumed the unemployment rate averages 7.0% in the reasonable and supportable forecast period. The scenario also assumed gross domestic product contracts 1.9% in the first year of the reasonable and supportable forecast period before recovering to 1.9% growth in the second year and commercial real estate and residential real estate prices cumulatively decline 22.9% and 14.6%, respectively, by the end of the reasonable and supportable forecast period.
A potential upside economic scenario assumed the unemployment rate averages approximately 3.2% for the duration of the reasonable and supportable forecast period. The scenario also assumes gross domestic product grows 3.5% in the initial year of the reasonable and supportable forecast period and 2.6% in the second year while commercial real estate and residential real estate prices cumulatively rise 2.9% and .3%, respectively, over the two-year reasonable and supportable forecast period.
The scenario analyses resulted in an additional $478 million of modeled credit losses under the assumptions of the downside economic scenario, whereas under the assumptions of the upside economic scenario a $217 million reduction in modeled credit losses could occur. These examples are only a few of the numerous possible economic scenarios that could be utilized in assessing the sensitivity of expected credit losses. The estimated impacts on credit losses in such scenarios pertain only to modeled credit losses and do not include consideration of other factors the Company may evaluate when determining its allowance for credit losses.
As a result, it is possible that the Company may, at another point in time, reach different conclusions regarding credit loss estimates. The Company’s process for determining the allowance for credit losses undergoes quarterly and periodic evaluations by independent risk management personnel, which among many other considerations, evaluate the reasonableness of management’s methodology and significant assumptions. Further information about the Company’s methodology to estimate expected credit losses is included in note 4 of Notes to Financial Statements.
Management believes that the allowance for credit losses at March 31, 2023 appropriately reflected expected credit losses inherent in the portfolio as of that date. The allowance for credit losses totaled $1.98 billion at March 31, 2023, compared with $1.47 billion at March 31, 2022 and $1.93 billion at December 31, 2022. As a percentage of loans outstanding, the allowance was 1.49% at March 31, 2023, 1.60% at March 31, 2022 and 1.46% at December 31, 2022. Using the same methodology described herein, the Company added $341 million to the allowance for credit
- 64 -
losses related to the $35.8 billion of loans and leases obtained in the acquisition of People's United on April 1, 2022. Macroeconomic assumptions used to estimate credit losses on loans acquired from People's United were consistent with those used by the Company to estimate credit losses at March 31, 2022. The combined Company allowance for credit losses at April 1, 2022 as a percentage of loans outstanding was 1.42%. The level of the allowance reflects management’s evaluation of the loan and lease portfolio using the methodology and considering the factors as described herein. Should the various 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.
The ratio of the allowance for credit losses to total nonaccrual loans at March 31, 2023, March 31, 2022 and December 31, 2022 was 77%, 69% and 79%, respectively. Given the Company’s general position as a secured lender and its practice of charging off loan balances when collection is deemed doubtful, that ratio and changes in the ratio are generally not an indicative measure of the adequacy of the Company’s allowance for credit losses, nor does management rely upon that ratio in assessing the adequacy of the Company’s allowance for credit losses.
Other Income
Other income totaled $587 million in the first quarter of 2023, up from $541 million in the year-earlier quarter. That increase reflects the impact from the acquisition of People's United (including service charges on deposit accounts, credit-related fees and trust income) and higher trust income from legacy operations, offset, in part, by a decline in mortgage banking revenues resulting from lower gains on residential mortgage loans originated for sale and a decrease in residential mortgage servicing income, lower insurance revenues reflecting the sale of MTIA in last year's fourth quarter and a reduced distribution from Bayview Lending Group LLC ("BLG") as compared with the year-earlier quarter. Other income was $682 million in the fourth quarter of 2022. The comparative decrease in the recent quarter was driven by the $136 million gain recorded on the sale of MTIA in the fourth quarter of 2022, partially offset by a $20 million distribution from BLG received in the first quarter of 2023.
Mortgage banking revenues were $85 million in the first quarter of 2023, compared with $109 million in the first quarter of 2022 and $82 million in the fourth quarter of 2022. 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 multifamily 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 and losses 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 $55 million in the first quarter of 2023, $76 million in the similar quarter of 2022 and $54 million in the fourth quarter of 2022. That income reflects gains associated with residential mortgage loans originated for sale and loan servicing of $3 million and $52 million, respectively, in the recent quarter; $14 million and $62 million, respectively, in the year earlier quarter; and nil and $54 million, respectively in the fourth quarter of 2022.
Throughout 2022, the Company originated the majority of its residential real estate loans for retention in its loan portfolio rather than for sale. However, in the first quarter of 2023 the Company returned to originating for sale the majority of its newly originated mortgage loans. New commitments to originate residential real estate loans to be sold were approximately $276 million in the first quarter of 2023, compared with $161 million in the year-earlier quarter and $28 million in the fourth quarter of 2022. Loans held for sale that were secured by residential real estate aggregated $152 million at March 31, 2023, $238 million at March 31, 2022 and $32 million at December 31, 2022. Commitments to sell residential real estate loans and commitments to originate residential real estate loans for sale at pre-determined rates totaled $284 million and $199 million, respectively, at March 31, 2023, compared with $324 million and $146 million, respectively, at March 31, 2022 and $53 million and $31 million, respectively, at December 31, 2022. Net recognized unrealized gains on residential real estate loans held for sale, commitments to sell loans, and commitments to originate loans for sale were $3 million at each of March 31, 2023 and 2022, compared with net recognized unrealized losses of $1 million at December 31, 2022. Changes in net unrealized gains or losses are recorded in
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mortgage banking revenues and resulted in a net increase in revenues of $2 million in the recent quarter compared to net decreases of $7 million in the first quarter of 2022 and less than $1 million in the fourth quarter of 2022.
Revenues from servicing residential real estate loans for others were $52 million during the quarter ended March 31, 2023, compared with $62 million and $54 million during the three months ended March 31, 2022 and December 31, 2022, respectively. Residential real estate loans serviced for others totaled $139.5 billion at March 31, 2023, $99.6 billion at March 31, 2022 and $118.4 billion at December 31, 2022. Loans sub-serviced for others that were included in residential real estate loans serviced for others were $98.0 billion, $76.6 billion and $96.0 billion at March 31, 2023, March 31, 2022 and December 31, 2022, respectively. Revenues earned for sub-servicing loans totaled $32 million during the recent quarter, $42 million in the first quarter of 2022 and $33 million in the fourth quarter of 2022. The decrease in sub-servicing fees in the two most recent quarters reflects lower fees associated with modifying and selling reperforming loans previously repurchased by the holder of the contractual servicing rights. 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 15 of Notes to Financial Statements. Capitalized residential mortgage servicing assets totaled $532 million at March 31, 2023, $208 million at March 31, 2022 and $194 million at December 31, 2022. The increase in capitalized mortgage servicing rights at March 31, 2023 as compared with March 31, 2022 and December 31, 2022 reflects a $350 million purchase of mortgage servicing rights associated with $19.5 billion of residential real estate loans on March 31, 2023. That purchase had no impact on mortgage servicing revenues in the recent quarter.
Commercial mortgage banking revenues totaled $30 million in the first quarter of 2023 compared to $33 million in the first quarter of 2022 and $27 million in the fourth quarter of 2022. Included in such amounts were revenues from loan origination and sales activities of $15 million in each of the first quarters of 2023 and 2022, compared with $11 million in the fourth quarter of 2022. Commercial real estate loans originated for sale to other investors were $672 million in the recent quarter, compared with $606 million in the first quarter of 2022 and $925 million in the fourth quarter of 2022. Loan servicing revenues totaled $15 million and $18 million in the first quarters of 2023 and 2022, respectively, compared with $16 million in the fourth quarter of 2022. Capitalized commercial mortgage servicing assets were $124 million and $133 million at March 31, 2023 and March 31, 2022, respectively, and $126 million at December 31, 2022. Commercial real estate loans serviced for other investors totaled $26.2 billion at March 31, 2023, $24.0 billion at March 31, 2022 and $26.0 billion at December 31, 2022. Those servicing amounts included $3.8 billion at March 31, 2023, $4.0 billion at March 31, 2022 and $3.9 billion at December 31, 2022 of loan balances for which investors had recourse to the Company if such balances are ultimately uncollectable. Included in commercial real estate loans serviced for others were loans sub-serviced for others of $3.8 billion at each of March 31, 2023 and December 31, 2022, compared with $3.4 billion at March 31, 2022. Commitments to sell commercial real estate loans and commitments to originate commercial real estate loans for sale were $909 million and $588 million, respectively, at March 31, 2023, $538 million and $322 million, respectively, at March 31, 2022 and $480 million and $349 million, respectively, at December 31, 2022. Commercial real estate loans held for sale at March 31, 2023, March 31, 2022 and December 31, 2022 were $321 million, $216 million and $131 million, respectively.
Service charges on deposit accounts were $114 million and $102 million in the first quarters of 2023 and 2022, respectively, compared with $106 million in the fourth quarter of 2022. The People's United acquisition contributed approximately $23 million to service charges on deposit accounts in the recent quarter and $16 million in the fourth quarter of 2022. The lower fees associated with People's United in the fourth quarter of 2022 reflect waivers of certain fees in that quarter following the conversion of customer deposit accounts to the Company's deposit servicing system in September 2022. Excluding the contribution associated with the People's United acquisition, the decrease in the recent quarter as compared with the year-earlier quarter reflects the Company's planned elimination of certain non-sufficient funds fees and overdraft protection transfer charges from linked deposit accounts beginning in the second quarter of 2022.
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
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(iii) need investment and cash management services. The Wealth Advisory Services (“WAS”) business offers personal trust, planning, fiduciary, asset management, family office and other services designed to help high net worth individuals and families grow, preserve and transfer wealth. Trust income aggregated $194 million in the first quarter of 2023, compared with $169 million in the year-earlier quarter and $195 million in the fourth quarter of 2022. Trust income contributed from the acquisition of People's United totaled approximately $10 million in each of the recent quarter and the fourth quarter of 2022. Revenues associated with the ICS business were $120 million during the quarter ended March 31, 2023 and $119 million during the quarter ended December 31, 2022, compared with $100 million during the quarter ended March 31, 2022. The higher revenues in the recent quarter as compared with the prior year first quarter were predominantly attributable to reduced fee waivers of $12 million resulting from higher rates on money market fund accounts, incremental fees from sales and People's United-related revenues. Revenues attributable to WAS totaled approximately $73 million in each of the three-month periods ended March 31, 2023 and December 31, 2022, including $8 million and $9 million of People's United-related fees, respectively, compared with $68 million during the quarter ended March 31, 2022. Trust assets under management were $175.6 billion, $160.1 billion and $165.2 billion at March 31, 2023, March 31, 2022 and December 31, 2022, respectively. Trust assets under management include the Company’s proprietary mutual funds’ assets of $14.1 billion, $12.3 billion and $13.0 billion at March 31, 2023, March 31, 2022 and December 31, 2022, respectively. Additional trust income from investment management activities comprised of fees earned from retail customer investment accounts was $1 million in each of the first quarter of 2023 and the corresponding quarter of 2022, compared with $3 million in the fourth quarter of 2022.
In April 2023 the Company sold its Collective Investment Trust business to a private equity firm. That sale will result in the recognition of a pre-tax gain of approximately $225 million in the second quarter of 2023. Revenues associated with the sold business and included in ICS trust income revenues described herein totaled approximately $45 million in the first quarter of 2023 and $42 million in each of the first and fourth quarters of 2022. After considering expenses, the results of operations of that business were not material to M&T's net income in each of those periods.
Brokerage services income, which includes revenues from the sale of mutual funds and annuities, securities brokerage fees and select investment products of LPL Financial totaled $24 million in the first quarter of 2023, $20 million in the first quarter of 2022 and $22 million in the fourth quarter of 2022. The acquisition of People's United contributed approximately $4 million and $3 million to brokerage services income in the first quarter of 2023 and fourth quarter of 2022, respectively. Trading account and other non-hedging derivative gains were $12 million, $5 million and $14 million during the quarters ended March 31, 2023, March 31, 2022 and December 31, 2022, respectively. Information about the notional amount of interest rate, foreign exchange and other contracts entered into by the Company is included in note 10 of Notes to Financial Statements and herein under the heading “Taxable-equivalent Net Interest Income.”
The Company recognized net losses on investment securities of less than $1 million in each of the first quarters of 2023 and 2022, compared with net losses of $4 million in the fourth quarter of 2022. The net losses in each period included unrealized gains or losses on investments in Fannie Mae and Freddie Mac preferred stock and other equity securities.
Other revenues from operations were $160 million in the first quarter of 2023, compared with $136 million in the corresponding 2022 period and $267 million in the fourth quarter of 2022. Other revenues from operations associated with the People's United acquisition totaled $31 million in each of the first quarter of 2023 and fourth quarter of 2022. A $136 million gain on the sale of MTIA was recorded in the fourth quarter of 2022. Also included in other revenues from operations were the following significant components. Letter of credit and other credit-related fees aggregated $43 million in the recent quarter, compared with $27 million in the year-earlier quarter and $46 million in the fourth quarter of 2022. The higher revenues in the two most recent quarters as compared with 2022's first quarter reflect both higher loan syndication fees and People's United-related revenues. Reflecting increased customer activity and incremental revenues associated with the People's United acquisition, revenues from merchant discount and credit card fees were $39 million in the recent quarter, $45 million in the fourth quarter of 2022 and $34 million in the year-earlier quarter. The recent quarter decline in merchant discount and credit card fees from the fourth quarter of 2022 is reflective of seasonal declines in customer activity. Tax-exempt income from bank owned life insurance, which includes changes in the cash surrender value of life insurance policies and benefits received, totaled $13 million in the
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first quarter of 2023, $10 million in the first quarter of 2022 and $8 million in the fourth quarter of 2022. Insurance-related sales commissions and other revenues declined to $4 million in the quarter ended March 31, 2023 and $6 million in the fourth quarter of 2022 from $15 million in the first quarter of 2022 due to the sale of MTIA. M&T received distributions as a result of its investment in BLG of $20 million and $30 million in the first quarters of 2023 and 2022, respectively. There was no similar distribution in the fourth quarter of 2022.
Other Expense
Other expense totaled $1.359 billion in the first quarter of 2023, compared with $960 million in the year-earlier quarter and $1.408 billion in the fourth quarter of 2022. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of $17 million in the recent quarter, $1 million in the first quarter of 2022 and $18 million in the final 2022 quarter, and merger-related expenses of $17 million and $45 million in the first and fourth quarters of 2022, respectively. There were no merger-related expenses during the first quarter of 2023. Exclusive of those nonoperating expenses, noninterest operating expenses were $1.342 billion in the recent quarter, compared with $941 million in the year-earlier quarter and $1.346 billion in the fourth quarter of 2022. Operations acquired from People's United were the largest contributor to the rise in noninterest operating expenses in the first quarter of 2023 and fourth quarter of 2022 as compared with the first quarter of 2022. Other factors contributing to the higher level of operating expenses in 2023’s first quarter as compared with the year-earlier quarter were higher salaries and employee benefits expense, including incentive compensation, a rise in outside data processing and software costs, advertising and marketing expenses, FDIC assessments and professional services. As compared with the fourth quarter of 2022, the decline in the recent quarter was predominantly attributed to a $135 million contribution to The M&T Charitable Foundation recorded in the fourth quarter of 2022, partially offset by higher salaries and employee benefits expense, including seasonally higher stock-based compensation, payroll-related taxes and other employee benefits expense. Table 2 provides a reconciliation of other expense to noninterest operating expense.
Salaries and employee benefits expense totaled $808 million in the first quarter of 2023, compared with $578 million in the year-earlier quarter and $697 million in the fourth quarter of 2022. Excluding the nonoperating expense items described earlier, salaries and employee benefits expense totaled $694 million in the fourth quarter of 2022. The higher operating expense in the recent quarter as compared with the first quarter of 2022 reflects higher employee staffing levels, including the addition of People's United employees, as well as higher salaries from market-rate adjustments and merit increases, and includes approximately $99 million of seasonally higher stock-based compensation, medical plan costs, payroll-related taxes and unemployment insurance. Those seasonally higher expenses were approximately $74 million in the year-earlier quarter. In addition to the aforementioned seasonal costs, higher salaries and employee benefits expenses in the recent quarter as compared with the fourth quarter of 2022 reflect merit increases and a higher employee staffing level, partially offset by lower incentive compensation. The Company, in accordance with GAAP, has accelerated the recognition of compensation costs for stock-based awards. As a result, stock-based compensation expense during the first quarters of 2023 and 2022 included $41 million and $36 million, respectively, that would have been recognized over the normal vesting period if not for the accelerated recognition provisions of GAAP. That acceleration had no effect on the value of stock-based compensation awarded to employees. Salaries and employee benefits expense included stock-based compensation of $62 million and $50 million in the three-month periods ended March 31, 2023 and March 31, 2022, respectively, and $17 million in the three-month period ended December 31, 2022. The number of full-time equivalent employees was 23,004 at March 31, 2023, compared with 17,457 and 22,509 at March 31, 2022 and December 31, 2022, respectively. The increase in staffing levels since March 31, 2022 was predominantly the result of the acquisition of People's United.
Excluding the nonoperating expense items described earlier from each quarter, nonpersonnel operating expenses were $534 million, $364 million and $652 million in the quarters ended March 31, 2023, March 31, 2022 and December 31, 2022, respectively. The majority of the increase in the recent quarter as compared to the first quarter of 2022 can be attributed to People's United-related nonpersonnel operating expenses. Other factors contributing to the year-over-year increase were higher costs for professional services, outside data processing and software, advertising and marketing expenses, FDIC assessments applicable to the banking industry, and check fraud losses. The decline in
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non-personnel operating expenses in 2023’s first quarter as compared with 2022’s fourth quarter primarily reflects a $135 million contribution to The M&T Charitable Foundation recorded in the final quarter of 2022.
The efficiency ratio, or noninterest operating expenses divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment securities), measures the relationship of noninterest operating expenses to revenues. The Company’s efficiency ratio was 55.5% during the recent quarter, compared with 64.9% and 53.3% in the first and fourth quarters of 2022, respectively.
Income Taxes
Income tax expense was $225 million in the first quarter of 2023, compared with $113 million in the year-earlier quarter and $245 million in the fourth quarter of 2022. The effective tax rates were 24.2%, 23.8% and 24.3% for the quarters ended March 31, 2023, March 31, 2022 and December 31, 2022, 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 amount 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 $25.4 billion at March 31, 2023, representing 12.50% of total assets, compared with $17.9 billion or 11.93% a year earlier and $25.3 billion or 12.61% at December 31, 2022. The increase in shareholders' equity at the two most recent quarter ends as compared with March 31, 2022 reflects the issuance of 50,325,004 M&T common shares and other common equity consideration totaling $8.4 billion for the acquisition of People's United and the conversion of People's United preferred stock into 10,000,000 shares of Series H Perpetual Fixed-to-Floating Rate Non-cumulative Preferred Stock of M&T ("Series H Preferred Stock") amounting to $261 million. Included in shareholders’ equity was preferred stock with financial statement carrying values of $2.01 billion at March 31, 2023 and December 31, 2022, compared with $1.75 billion at March 31, 2022.
Common shareholders’ equity was $23.4 billion, or $140.88 per share, at March 31, 2023, compared with $16.1 billion, or $124.93 per share, a year earlier and $23.3 billion, or $137.68 per share, at December 31, 2022. Tangible equity per common share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was $88.81 at the end of the recent quarter, compared with $89.33 at March 31, 2022 and $86.59 at December 31, 2022. The Company’s ratio of tangible common equity to tangible assets was 7.58% at March 31, 2023, compared with 7.94% a year earlier and 7.63% at December 31, 2022. Reconciliations of total common shareholders’ equity and tangible common equity and total assets and tangible assets as of each of those 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 losses on investment securities reflected in shareholders’ equity, net of applicable tax effect, were $264 million or $1.59 per common share at March 31, 2023, $59 million or $.46 per common share at March 31, 2022 and $329 million, or $1.94 per common share, at December 31, 2022. 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, 2023 and December 31, 2022 is included in note 3 of Notes to Financial Statements.
Reflected in the carrying amount of available-for-sale investment securities at March 31, 2023 were pre-tax effect unrealized gains of $3 million on securities with an amortized cost of $386 million and pre-tax effect unrealized losses
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of $358 million on securities with an amortized cost of $11.0 billion. Information concerning the Company’s fair valuations of investment securities is provided in notes 3 and 12 of Notes to Financial Statements.
Each reporting period the Company reviews its available-for-sale investment securities for declines in value that might be indicative of credit-related losses through an analysis of the creditworthiness of the issuer or the credit performance of the underlying collateral supporting the bond. If the Company does not expect to recover the entire amortized cost basis of a debt security a credit loss is recognized in the consolidated statement of income. A loss is also recognized if the Company intends to sell a bond or it more likely than not will be required to sell a bond before recovery of the amortized cost basis. As of March 31, 2023, 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, 2023, 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 uncollectable.
Accounting guidance 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 credit losses for its investment securities classified as held-to-maturity at March 31, 2023 and December 31, 2022. The amortized cost basis of obligations of states and political subdivisions in the held-to-maturity portfolio totaled $2.6 billion at each of the two most recent quarters. At March 31, 2023 and December 31, 2022, the Company had in its held-to-maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of $48 million and $50 million, respectively, and a fair value of $50 million and $51 million, respectively. At March 31, 2023, 81% of those mortgage-backed securities were in the most senior tranche of the securitization structure. The mortgage-backed securities are generally collateralized by residential and small-balance commercial real estate loans originated between 2004 and 2008. After considering the repayment structure and estimated future collateral cash flows of each individual bond, the Company concluded that as of March 31, 2023, 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 $204 million, or $1.23 per common share, at March 31, 2023, $265 million or $2.05 per common share, at March 31, 2022 and $202 million or $1.19 per common share, at December 31, 2022.
On July 19, 2022, M&T's Board of Directors authorized a stock purchase program to repurchase up to $3.0 billion of common shares subject to all applicable regulatory reporting limitations. M&T repurchased 3,838,157 shares of its common stock for a total cost of $600 million, including the share repurchase excise tax, under the program in the first quarter of 2023 and 3,664,887 shares for $600 million in the fourth quarter of 2022. No share repurchases occurred in the first quarter of 2022.
Cash dividends declared on M&T's common stock totaled $219 million in the recent quarter, compared with $206 million and $156 million in the quarters ended December 31, 2022 and March 31, 2022, respectively. During the first quarter of 2023, M&T's Board of Directors authorized an increase in the quarterly common stock dividend to $1.30 per common share from the previous rate of $1.20 per common share. Cash dividends declared on preferred stock aggregated $25 million in each of the two most recent quarters and $22 million in the first quarter of 2022.
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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:
Capital regulations require buffers in addition to the minimum risk-based capital ratios noted above. M&T is subject to a stress capital buffer requirement that is determined through the Federal Reserve’s supervisory stress tests and M&T’s bank subsidiaries are subject to a 2.5% capital conservation buffer requirement. The buffer requirement must be composed entirely of CET1. Based on the Federal Reserve's most recent supervisory stress tests M&T's stress capital buffer is 4.7%.
The regulatory capital ratios of the Company and its bank subsidiaries, M&T Bank and Wilmington Trust, N.A., as of March 31, 2023 are presented in the accompanying table.
REGULATORY CAPITAL RATIOS
March 31, 2023
|
|
M&T |
|
|
M&T |
|
|
Wilmington |
|
|
|||
|
|
(Consolidated) |
|
|
Bank |
|
|
Trust, N.A. |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Common equity Tier 1 |
|
10.16 |
% |
|
|
11.50 |
% |
|
|
228.02 |
% |
|
|
Tier 1 capital |
|
11.48 |
% |
|
|
11.50 |
% |
|
|
228.02 |
% |
|
|
Total capital |
|
13.28 |
% |
|
|
13.04 |
% |
|
|
228.39 |
% |
|
|
Tier 1 leverage |
|
8.98 |
% |
|
|
8.98 |
% |
|
|
83.52 |
% |
|
The Company is subject to the comprehensive regulatory framework applicable to bank and financial holding companies and their subsidiaries, which includes examinations by a number of regulators. Regulation of financial institutions such as M&T and its subsidiaries is intended primarily for the protection of depositors, the Deposit Insurance Fund of the FDIC and the banking and financial system as a whole, and generally is not intended for the protection of shareholders, investors or creditors other than insured depositors. Changes in laws, regulations and regulatory policies applicable to the Company’s operations can increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive environment in which the Company operates, all of which could have a material effect on the business, financial condition or results of operations of the Company and in M&T’s ability to pay dividends. For additional information concerning this comprehensive regulatory framework, refer to Part I, Item 1 of M&T’s Form 10-K for the year ended December 31, 2022.
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 14 of Notes to Financial Statements. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking. As described in the Company’s Form 10-K for the year ended December 31, 2022, certain expenses were reallocated from the All Other segment to various reportable segments in the fourth quarter of 2022. Additionally, certain lending relationships within the hospitality sector were realigned from the Commercial Banking segment to the Commercial Real Estate segment. The financial information provided herein reflects those changes.
The Business Banking segment contributed net income of $113 million in each of the three-month periods ended March 31, 2023 and December 31, 2022, compared with $40 million in the first quarter of 2022. The rise in net income in the current quarter as compared with the year-earlier quarter, reflecting the impact of the People’s United acquisition,
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was predominantly due to a $126 million increase in net interest income. The higher net interest income reflected higher average outstanding balances of deposits and loans of $3.1 billion and $1.3 billion, respectively, and a 127 basis point widening of the segment’s net interest margin. Factors partially offsetting those increases included $16 million of additional centrally-allocated costs associated with data processing, risk management and other support services provided to the Business Banking segment, higher personnel-related costs of $7 million and a $6 million increase in the provision for credit losses, due to higher net charge-offs. Net income in the initial 2023 quarter as compared with the immediately preceding quarter reflected lower net interest income resulting from fewer days in the recent quarter and a decline in deposits, largely offset by a decline in centrally-allocated costs associated with data processing, risk management and other support services provided to the Business Banking segment.
Net income of the Commercial Banking segment was $220 million in the recent quarter, compared with $128 million in the initial 2022 quarter. Reflecting the impact of the People’s United acquisition, the recent quarter’s rise in net income as compared with the first quarter of 2022 was the result of an increase in net interest income of $177 million, higher credit-related fees of $25 million and a $20 million increase in other revenues from operations, including gains on sales of previously leased equipment. The growth in net interest income resulted from higher average outstanding loan balances of $21.3 billion and a 186 basis point widening of the net interest margin on deposits, partially offset by a 42 basis point tightening of the net interest margin on loans. Those factors were offset, in part, by a $40 million increase in centrally-allocated costs associated with data processing, risk management and other support services provided to the Commercial Banking segment, higher personnel-related costs of $37 million, a $10 million rise in other costs of operations reflecting higher professional services and other expenses, and an $8 million increase in the provision for credit losses. The Commercial Banking segment recorded net income of $228 million in the final 2022 quarter. The comparative $8 million decrease in net income in the recent quarter was primarily due to lower net interest income of $11 million reflecting two fewer days in the first quarter of 2023, a $6 million rise in the provision for credit losses and $4 million decline in merchant discount and credit card fees, partially offset by $9 million of higher gains recognized on the sale of previously leased equipment.
Net income earned by the Commercial Real Estate segment was $81 million in the first quarter of 2023, compared with $111 million in the year-earlier quarter and $107 million in the fourth quarter of 2022. The decline in net income in the recent quarter as compared with the first quarter of 2022 reflected an increase in the provision for credit losses of $38 million, resulting from higher net charge-offs, and $19 million in higher centrally-allocated costs associated with data processing, risk management and other support services provided to the Commercial Real Estate segment, partially offset by higher net interest income of $10 million. The rise in net interest income was attributable to higher average outstanding loan balances of $6.6 billion reflecting loans obtained in the acquisition of People’s United and a 191 basis point widening of the net interest margin on deposits, partially offset by a 73 basis point narrowing of the net interest margin on loans. The decrease in net income in the recent quarter as compared with the immediately preceding quarter reflected a $26 million increase in the provision for credit losses and an $11 million decrease in net interest income. The lower net interest income reflected a decline in average balances of deposits of $1.0 billion, as well as the impact of two fewer days in the recent quarter.
The Discretionary Portfolio segment recorded net losses totaling $40 million and $56 million during the three-month periods ended March 31, 2023 and December 31, 2022, respectively, compared with net income of $35 million in the three-month period ended March 31, 2022. As compared with the initial 2022 quarter’s net income, the net loss in the first quarter of 2023 was predominantly due to a decrease in net interest income of $109 million driven by reduced income from interest rate swap agreements utilized as part of the Company’s management of interest rate risk, partially offset by an increase in average balances of investment securities, loans and deposits of $19.8 billion, $8.7 billion and $5.6 billion, respectively, reflecting the purchase of investment securities, the retention of newly originated residential mortgages throughout 2022, and additions of brokered deposits. Also offsetting the unfavorable decline in net interest income was a $13 million decrease in intersegment fees paid to the Residential Mortgage Banking segment reflecting the Company’s return in the first quarter of 2023 to originating for sale the majority of its newly originated residential mortgage loans. The reduction in net loss in the initial 2023 quarter as compared with the immediately preceding quarter reflected an increase in net interest income of $9 million, a $5 million rise in bank owned life insurance revenue and a $5 million decrease in intersegment fees paid to the Residential Mortgage Banking segment.
- 72 -
The Residential Mortgage Banking segment recorded a net loss of $12 million in each of the two most recent quarters, compared with net income of $27 million in the first quarter of 2022. The decline in the recent quarter as compared with the year-earlier period reflected lower revenues associated with mortgage origination and sales activities (including intersegment revenues) of $28 million, a decline in net interest income of $19 million and lower revenues associated with servicing and sub-servicing residential real estate loans (including intersegment revenues) of $8 million. These factors were offset, in part, by decreases of $4 million in personnel-related costs and $3 million in centrally-allocated costs associated with data processing, risk management and other support services provided to the Residential Mortgage Banking segment. As compared with the final quarter of 2022, the little changed performance in the recent quarter reflected lower revenues associated with mortgage origination and sales activities (including intersegment revenues) of $5 million and a $2 million decline in revenues associated with servicing and sub-servicing residential real estate loans (including intersegment revenues), offset by declines of $3 million in personnel-related costs and $2 million in each of professional services and outside data processing and software expenses.
Net income earned by the Retail Banking segment totaled $317 million in the first quarter of 2023, compared with $79 million in the year-earlier quarter and $264 million in the final 2022 quarter. The rise in net income in the recent quarter as compared with the first quarter of 2022 resulted predominantly from a $471 million increase in net interest income, due largely to a 240 basis point widening of the net interest margin on deposits and higher average outstanding balances in deposits and loans of $20.2 billion and $2.4 billion, respectively. Those beneficial results for the segment were partially offset by an increase in personnel-related costs of $63 million, higher equipment and net occupancy costs of $26 million, a $20 million increase in the provision for credit losses, a $16 million rise in centrally-allocated expenses associated with support services provided to the Retail Banking segment and increases in other costs of operations. Each of these factors include the impact of the acquired operations of People’s United. The higher net income recorded in the recent quarter as compared with the fourth quarter of 2022 was due to a $50 million increase in net interest income driven by a 40 basis point expansion of the net interest margin on deposits, which was partially offset by the impact of two less days in 2023’s first quarter. Also contributing to the growth in net income were declines of $10 million in equipment and net occupancy costs as well as centrally-allocated expenses associated with support services provided to the Retail Banking segment, and lower advertising and marketing expenses of $4 million.
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, distributions from BLG, merger-related expenses resulting from acquisitions, 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 income of $24 million in the first quarter of 2023 and $121 million in the fourth quarter of 2022, compared with a net loss totaling $58 million in the first quarter of 2022. The net income recorded in the recent quarter as compared with the net loss in the initial 2022 quarter was largely due to: higher net interest income of $257 million reflecting the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments and a $25 million increase in trust income, offset by higher costs associated with the acquired operations of People’s United, including higher personnel costs and an increase in amortization of core deposits and other intangible assets; an increase in provision for credit losses of $39 million reflecting the Company’s most recent estimate of expected credit losses; lower insurance revenues of $12 million reflecting the sale of MTIA in the fourth quarter of 2022; and lower income received from BLG of $10 million. As compared with the immediately preceding quarter, factors contributing to the decline in net income in the recent quarter included: a $136 million gain on sale of MTIA recorded in the fourth quarter of 2022; a $110 million rise in personnel-related costs, reflecting seasonally higher stock-based compensation and employee benefits expenses and merit increases; and lower net interest income of $46 million reflecting the Company’s allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments. Partially offsetting those unfavorable factors was the impact of the $135 million contribution to The M&T Charitable Foundation recorded in the fourth quarter of 2022, a $20 million distribution received from BLG in the first quarter of 2023 and a reduction in professional services expenses.
- 73 -
Recent Accounting Developments
A discussion of recent accounting developments is included in note 16 of Notes to Financial Statements.
Forward-Looking Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this quarterly report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the rules and regulations of the SEC. Any statement that does not describe historical or current facts is a forward-looking statement, including statements based on current expectations, estimates and projections about the Company’s business, management's beliefs and assumptions made by management.
Statements regarding the potential effects of events or factors specific to the Company and/or the financial industry as a whole, as well as national and global events generally, including economic conditions, on the Company's business, financial condition, liquidity and results of operations may constitute forward-looking statements. Such statements 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. As described further below, statements regarding the Company's expectations or predictions regarding the acquisition of People's United are also forward-looking statements, including statements regarding the expected financial results, prospects, targets, goals and outlook.
Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "target," "estimate," "continue," 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.
Examples of Future Factors include: the impact of the People's United transaction (as described in the next paragraph); economic conditions, including inflation and market volatility; events and developments in the financial services industry, including legislation, regulations and other governmental actions affecting the industry and/or M&T or its subsidiaries individually or collectively; domestic or international political developments and other geopolitical events, including international conflicts; the impact of the COVID-19 pandemic; 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; the impact of changes in market values on trust-related revenues; regulatory supervision and oversight, including monetary policy and capital requirements; governmental and public policy changes, including tax policy; the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board, regulatory agencies or legislation; increasing price, product and 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 and services; containing costs and expenses; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; 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, divestment and investment activities compared with M&T's initial expectations, including the full realization of anticipated cost savings and revenue enhancements.
In addition, Future Factors related to the acquisition of People's United include, among others: the possibility that the anticipated benefits of the transaction will not be realized when expected or at all; potential adverse reactions or changes to business, customer or employee relationships; the Company's success in executing its business plans and strategies and managing the risks involved in the foregoing; the results and costs of integration efforts; the business, economic and political conditions in the markets in which the Company operates; the outcome of any legal proceedings
- 74 -
that may be instituted against M&T or its subsidiaries; and other factors related to the acquisition that may affect future results of the Company.
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.
M&T provides further detail regarding these risks and uncertainties in its Form 10-K for the year ended December 31, 2022, including in the Risk Factors section of such report, as well as in other SEC filings. Forward-looking statements speak only as of the date made, and M&T does not assume any duty and does not undertake to update forward-looking statements.
- 75 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 1
QUARTERLY TRENDS
|
|
2023 |
|
|
2022 Quarters |
|
|
||||||||||||||
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
Second |
|
|
First |
|
|
|||||
|
Earnings and dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Amounts in thousands, except per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Interest income (taxable-equivalent basis) |
$ |
2,340,447 |
|
|
|
2,085,594 |
|
|
|
1,793,340 |
|
|
|
1,475,868 |
|
|
|
931,490 |
|
|
|
Interest expense |
|
508,721 |
|
|
|
244,835 |
|
|
|
102,822 |
|
|
|
53,425 |
|
|
|
24,082 |
|
|
|
Net interest income |
|
1,831,726 |
|
|
|
1,840,759 |
|
|
|
1,690,518 |
|
|
|
1,422,443 |
|
|
|
907,408 |
|
|
|
Less: provision for credit losses |
|
120,000 |
|
|
|
90,000 |
|
|
|
115,000 |
|
|
|
302,000 |
|
|
|
10,000 |
|
|
|
Other income |
|
587,133 |
|
|
|
681,537 |
|
|
|
563,079 |
|
|
|
571,100 |
|
|
|
540,887 |
|
|
|
Less: other expense |
|
1,359,230 |
|
|
|
1,408,288 |
|
|
|
1,279,253 |
|
|
|
1,403,154 |
|
|
|
959,741 |
|
|
|
Income before income taxes |
|
939,629 |
|
|
|
1,024,008 |
|
|
|
859,344 |
|
|
|
288,389 |
|
|
|
478,554 |
|
|
|
Applicable income taxes |
|
224,543 |
|
|
|
245,252 |
|
|
|
200,921 |
|
|
|
60,141 |
|
|
|
113,146 |
|
|
|
Taxable-equivalent adjustment |
|
13,462 |
|
|
|
13,385 |
|
|
|
11,827 |
|
|
|
10,726 |
|
|
|
3,234 |
|
|
|
Net income |
$ |
701,624 |
|
|
|
765,371 |
|
|
|
646,596 |
|
|
|
217,522 |
|
|
|
362,174 |
|
|
|
Net income available to common
|
$ |
675,511 |
|
|
|
739,126 |
|
|
|
620,554 |
|
|
|
192,236 |
|
|
|
339,590 |
|
|
|
Per common share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Basic earnings |
$ |
4.03 |
|
|
|
4.32 |
|
|
|
3.55 |
|
|
|
1.08 |
|
|
|
2.63 |
|
|
|
Diluted earnings |
|
4.01 |
|
|
|
4.29 |
|
|
|
3.53 |
|
|
|
1.08 |
|
|
|
2.62 |
|
|
|
Cash dividends |
$ |
1.30 |
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
Average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Basic |
|
167,732 |
|
|
|
171,187 |
|
|
|
174,609 |
|
|
|
177,367 |
|
|
|
128,945 |
|
|
|
Diluted |
|
168,410 |
|
|
|
172,149 |
|
|
|
175,682 |
|
|
|
178,277 |
|
|
|
129,416 |
|
|
|
Performance ratios, annualized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Average assets |
|
1.40 |
% |
|
|
1.53 |
% |
|
|
1.28 |
% |
|
|
.42 |
% |
|
|
.97 |
% |
|
|
Average common shareholders’ equity |
|
11.74 |
% |
|
|
12.59 |
% |
|
|
10.43 |
% |
|
|
3.21 |
% |
|
|
8.55 |
% |
|
|
Net interest margin on average earning
|
|
4.04 |
% |
|
|
4.06 |
% |
|
|
3.68 |
% |
|
|
3.01 |
% |
|
|
2.65 |
% |
|
|
Nonaccrual loans to total loans and
|
|
1.92 |
% |
|
|
1.85 |
% |
|
|
1.89 |
% |
|
|
2.05 |
% |
|
|
2.32 |
% |
|
|
Net operating (tangible) results (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net operating income (in thousands) |
$ |
714,935 |
|
|
|
812,359 |
|
|
|
700,030 |
|
|
|
577,622 |
|
|
|
375,999 |
|
|
|
Diluted net operating income per common share |
$ |
4.09 |
|
|
|
4.57 |
|
|
|
3.83 |
|
|
|
3.10 |
|
|
|
2.73 |
|
|
|
Annualized return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Average tangible assets |
|
1.49 |
% |
|
|
1.70 |
% |
|
|
1.44 |
% |
|
|
1.16 |
% |
|
|
1.04 |
% |
|
|
Average tangible common shareholders’ equity |
|
19.00 |
% |
|
|
21.29 |
% |
|
|
17.89 |
% |
|
|
14.41 |
% |
|
|
12.44 |
% |
|
|
Efficiency ratio (b) |
|
55.5 |
% |
|
|
53.3 |
% |
|
|
53.6 |
% |
|
|
58.3 |
% |
|
|
64.9 |
% |
|
|
Balance sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
In millions, except per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Average balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets (c) |
$ |
202,599 |
|
|
|
198,592 |
|
|
|
201,131 |
|
|
|
208,865 |
|
|
|
151,648 |
|
|
|
Total tangible assets (c) |
|
193,957 |
|
|
|
189,934 |
|
|
|
192,450 |
|
|
|
200,170 |
|
|
|
147,053 |
|
|
|
Earning assets |
|
184,069 |
|
|
|
179,914 |
|
|
|
182,382 |
|
|
|
189,755 |
|
|
|
138,624 |
|
|
|
Investment securities |
|
27,622 |
|
|
|
25,297 |
|
|
|
23,945 |
|
|
|
22,384 |
|
|
|
7,724 |
|
|
|
Loans and leases, net of unearned discount |
|
132,012 |
|
|
|
129,406 |
|
|
|
127,525 |
|
|
|
127,599 |
|
|
|
92,159 |
|
|
|
Deposits |
|
161,537 |
|
|
|
163,468 |
|
|
|
167,271 |
|
|
|
174,683 |
|
|
|
128,055 |
|
|
|
Common shareholders’ equity (c) |
|
23,366 |
|
|
|
23,335 |
|
|
|
23,654 |
|
|
|
24,079 |
|
|
|
16,144 |
|
|
|
Tangible common shareholders’ equity (c) |
|
14,724 |
|
|
|
14,677 |
|
|
|
14,973 |
|
|
|
15,384 |
|
|
|
11,549 |
|
|
|
At end of quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets (c) |
$ |
202,956 |
|
|
|
200,730 |
|
|
|
197,955 |
|
|
|
204,033 |
|
|
|
149,864 |
|
|
|
Total tangible assets (c) |
|
194,321 |
|
|
|
192,082 |
|
|
|
189,281 |
|
|
|
195,344 |
|
|
|
145,269 |
|
|
|
Earning assets |
|
183,853 |
|
|
|
181,855 |
|
|
|
178,351 |
|
|
|
185,109 |
|
|
|
137,237 |
|
|
|
Investment securities |
|
28,443 |
|
|
|
25,211 |
|
|
|
24,604 |
|
|
|
22,802 |
|
|
|
9,357 |
|
|
|
Loans and leases, net of unearned discount |
|
132,938 |
|
|
|
131,564 |
|
|
|
128,226 |
|
|
|
128,486 |
|
|
|
91,808 |
|
|
|
Deposits |
|
159,075 |
|
|
|
163,515 |
|
|
|
163,845 |
|
|
|
170,358 |
|
|
|
126,319 |
|
|
|
Common shareholders’ equity (c) |
|
23,366 |
|
|
|
23,307 |
|
|
|
23,245 |
|
|
|
23,784 |
|
|
|
16,126 |
|
|
|
Tangible common shareholders’ equity (c) |
|
14,731 |
|
|
|
14,659 |
|
|
|
14,571 |
|
|
|
15,095 |
|
|
|
11,531 |
|
|
|
Equity per common share |
|
140.88 |
|
|
|
137.68 |
|
|
|
134.45 |
|
|
|
135.16 |
|
|
|
124.93 |
|
|
|
Tangible equity per common share |
|
88.81 |
|
|
|
86.59 |
|
|
|
84.28 |
|
|
|
85.78 |
|
|
|
89.33 |
|
|
- 76 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 2
RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES
|
|
|
2023 |
|
|
2022 Quarters |
|
||||||||||||||
|
|
|
First Quarter |
|
|
Fourth |
|
|
Third |
|
|
Second |
|
|
First |
|
|||||
|
Income statement data (in thousands,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net income |
|
$ |
701,624 |
|
|
|
765,371 |
|
|
|
646,596 |
|
|
|
217,522 |
|
|
|
362,174 |
|
|
Amortization of core deposit and other
|
|
|
13,311 |
|
|
|
13,559 |
|
|
|
14,141 |
|
|
|
14,138 |
|
|
|
933 |
|
|
Merger-related expenses (a) |
|
|
— |
|
|
|
33,429 |
|
|
|
39,293 |
|
|
|
345,962 |
|
|
|
12,892 |
|
|
Net operating income |
|
$ |
714,935 |
|
|
|
812,359 |
|
|
|
700,030 |
|
|
|
577,622 |
|
|
|
375,999 |
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Diluted earnings per common share |
|
$ |
4.01 |
|
|
|
4.29 |
|
|
|
3.53 |
|
|
|
1.08 |
|
|
|
2.62 |
|
|
Amortization of core deposit and other
|
|
|
0.08 |
|
|
|
.08 |
|
|
|
.08 |
|
|
|
.08 |
|
|
|
.01 |
|
|
Merger-related expenses (a) |
|
|
— |
|
|
|
.20 |
|
|
|
.22 |
|
|
|
1.94 |
|
|
|
.10 |
|
|
Diluted net operating earnings per
|
|
$ |
4.09 |
|
|
|
4.57 |
|
|
|
3.83 |
|
|
|
3.10 |
|
|
|
2.73 |
|
|
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Other expense |
|
$ |
1,359,230 |
|
|
|
1,408,288 |
|
|
|
1,279,253 |
|
|
|
1,403,154 |
|
|
|
959,741 |
|
|
Amortization of core deposit and other
|
|
|
(17,208 |
) |
|
|
(17,600 |
) |
|
|
(18,384 |
) |
|
|
(18,384 |
) |
|
|
(1,256 |
) |
|
Merger-related expenses |
|
|
— |
|
|
|
(45,113 |
) |
|
|
(53,027 |
) |
|
|
(222,809 |
) |
|
|
(17,372 |
) |
|
Noninterest operating expense |
|
$ |
1,342,022 |
|
|
|
1,345,575 |
|
|
|
1,207,842 |
|
|
|
1,161,961 |
|
|
|
941,113 |
|
|
Merger-related expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Salaries and employee benefits |
|
$ |
— |
|
|
|
3,670 |
|
|
|
13,094 |
|
|
|
85,299 |
|
|
|
87 |
|
|
Equipment and net occupancy |
|
|
— |
|
|
|
2,294 |
|
|
|
2,106 |
|
|
|
502 |
|
|
|
1,807 |
|
|
Outside data processing and software |
|
|
— |
|
|
|
2,193 |
|
|
|
2,277 |
|
|
|
716 |
|
|
|
252 |
|
|
Advertising and marketing |
|
|
— |
|
|
|
5,258 |
|
|
|
2,177 |
|
|
|
1,199 |
|
|
|
628 |
|
|
Printing, postage and supplies |
|
|
— |
|
|
|
2,953 |
|
|
|
651 |
|
|
|
2,460 |
|
|
|
722 |
|
|
Other costs of operations |
|
|
— |
|
|
|
28,745 |
|
|
|
32,722 |
|
|
|
132,633 |
|
|
|
13,876 |
|
|
Other expense |
|
|
— |
|
|
|
45,113 |
|
|
|
53,027 |
|
|
|
222,809 |
|
|
|
17,372 |
|
|
Provision for credit losses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
242,000 |
|
|
|
— |
|
|
Total |
|
$ |
— |
|
|
|
45,113 |
|
|
|
53,027 |
|
|
|
464,809 |
|
|
|
17,372 |
|
|
Efficiency ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Noninterest operating expense (numerator) |
|
$ |
1,342,022 |
|
|
|
1,345,575 |
|
|
|
1,207,842 |
|
|
|
1,161,961 |
|
|
|
941,113 |
|
|
Taxable-equivalent net interest income |
|
$ |
1,831,726 |
|
|
|
1,840,759 |
|
|
|
1,690,518 |
|
|
|
1,422,443 |
|
|
|
907,408 |
|
|
Other income |
|
|
587,133 |
|
|
|
681,537 |
|
|
|
563,079 |
|
|
|
571,100 |
|
|
|
540,887 |
|
|
Less: Gain (loss) on bank investment securities |
|
|
(416 |
) |
|
|
(3,773 |
) |
|
|
(1,108 |
) |
|
|
(62 |
) |
|
|
(743 |
) |
|
Denominator |
|
$ |
2,419,275 |
|
|
|
2,526,069 |
|
|
|
2,254,705 |
|
|
|
1,993,605 |
|
|
|
1,449,038 |
|
|
Efficiency ratio |
|
|
55.5 |
% |
|
|
53.3 |
% |
|
|
53.6 |
% |
|
|
58.3 |
% |
|
|
64.9 |
% |
|
Balance sheet data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Average assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Average assets |
|
$ |
202,599 |
|
|
|
198,592 |
|
|
|
201,131 |
|
|
|
208,865 |
|
|
|
151,648 |
|
|
Goodwill |
|
|
(8,490 |
) |
|
|
(8,494 |
) |
|
|
(8,501 |
) |
|
|
(8,501 |
) |
|
|
(4,593 |
) |
|
Core deposit and other intangible assets |
|
|
(201 |
) |
|
|
(218 |
) |
|
|
(236 |
) |
|
|
(254 |
) |
|
|
(3 |
) |
|
Deferred taxes |
|
|
49 |
|
|
|
54 |
|
|
|
56 |
|
|
|
60 |
|
|
|
1 |
|
|
Average tangible assets |
|
$ |
193,957 |
|
|
|
189,934 |
|
|
|
192,450 |
|
|
|
200,170 |
|
|
|
147,053 |
|
|
Average common equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Average total equity |
|
$ |
25,377 |
|
|
|
25,346 |
|
|
|
25,665 |
|
|
|
26,090 |
|
|
|
17,894 |
|
|
Preferred stock |
|
|
(2,011 |
) |
|
|
(2,011 |
) |
|
|
(2,011 |
) |
|
|
(2,011 |
) |
|
|
(1,750 |
) |
|
Average common equity |
|
|
23,366 |
|
|
|
23,335 |
|
|
|
23,654 |
|
|
|
24,079 |
|
|
|
16,144 |
|
|
Goodwill |
|
|
(8,490 |
) |
|
|
(8,494 |
) |
|
|
(8,501 |
) |
|
|
(8,501 |
) |
|
|
(4,593 |
) |
|
Core deposit and other intangible assets |
|
|
(201 |
) |
|
|
(218 |
) |
|
|
(236 |
) |
|
|
(254 |
) |
|
|
(3 |
) |
|
Deferred taxes |
|
|
49 |
|
|
|
54 |
|
|
|
56 |
|
|
|
60 |
|
|
|
1 |
|
|
Average tangible common equity |
|
$ |
14,724 |
|
|
|
14,677 |
|
|
|
14,973 |
|
|
|
15,384 |
|
|
|
11,549 |
|
|
At end of quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets |
|
$ |
202,956 |
|
|
|
200,730 |
|
|
|
197,955 |
|
|
|
204,033 |
|
|
|
149,864 |
|
|
Goodwill |
|
|
(8,490 |
) |
|
|
(8,490 |
) |
|
|
(8,501 |
) |
|
|
(8,501 |
) |
|
|
(4,593 |
) |
|
Core deposit and other intangible assets |
|
|
(192 |
) |
|
|
(209 |
) |
|
|
(227 |
) |
|
|
(245 |
) |
|
|
(3 |
) |
|
Deferred taxes |
|
|
47 |
|
|
|
51 |
|
|
|
54 |
|
|
|
57 |
|
|
|
1 |
|
|
Total tangible assets |
|
$ |
194,321 |
|
|
|
192,082 |
|
|
|
189,281 |
|
|
|
195,344 |
|
|
|
145,269 |
|
|
Total common equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total equity |
|
$ |
25,377 |
|
|
|
25,318 |
|
|
|
25,256 |
|
|
|
25,795 |
|
|
|
17,876 |
|
|
Preferred stock |
|
|
(2,011 |
) |
|
|
(2,011 |
) |
|
|
(2,011 |
) |
|
|
(2,011 |
) |
|
|
(1,750 |
) |
|
Common equity |
|
|
23,366 |
|
|
|
23,307 |
|
|
|
23,245 |
|
|
|
23,784 |
|
|
|
16,126 |
|
|
Goodwill |
|
|
(8,490 |
) |
|
|
(8,490 |
) |
|
|
(8,501 |
) |
|
|
(8,501 |
) |
|
|
(4,593 |
) |
|
Core deposit and other intangible assets |
|
|
(192 |
) |
|
|
(209 |
) |
|
|
(227 |
) |
|
|
(245 |
) |
|
|
(3 |
) |
|
Deferred taxes |
|
|
47 |
|
|
|
51 |
|
|
|
54 |
|
|
|
57 |
|
|
|
1 |
|
|
Total tangible common equity |
|
$ |
14,731 |
|
|
|
14,659 |
|
|
|
14,571 |
|
|
|
15,095 |
|
|
|
11,531 |
|
- 77 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 3
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES
|
|
|
2023 First Quarter |
|
|
2022 Fourth Quarter |
|
|
2022 Third Quarter |
|
|
|||||||||||||||||||||||||||
|
|
|
Average
|
|
|
Interest |
|
|
Average
|
|
|
Average
|
|
|
Interest |
|
|
Average
|
|
|
Average
|
|
|
Interest |
|
|
Average
|
|
|
|||||||||
|
Average balance in millions; interest in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loans and leases, net of unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Commercial, financial, etc. |
|
$ |
42,428 |
|
|
$ |
676,194 |
|
|
|
6.46 |
% |
|
$ |
40,038 |
|
|
$ |
581,161 |
|
|
|
5.76 |
% |
|
$ |
38,321 |
|
|
$ |
470,738 |
|
|
|
4.87 |
% |
|
|
Real estate – commercial |
|
|
45,327 |
|
|
|
659,099 |
|
|
|
5.82 |
|
|
|
45,690 |
|
|
|
591,290 |
|
|
|
5.06 |
|
|
|
46,282 |
|
|
|
531,225 |
|
|
|
4.49 |
|
|
|
Real estate – consumer |
|
|
23,770 |
|
|
|
235,141 |
|
|
|
3.96 |
|
|
|
23,334 |
|
|
|
228,391 |
|
|
|
3.92 |
|
|
|
22,962 |
|
|
|
220,464 |
|
|
|
3.84 |
|
|
|
Consumer |
|
|
20,487 |
|
|
|
286,596 |
|
|
|
5.67 |
|
|
|
20,344 |
|
|
|
270,590 |
|
|
|
5.28 |
|
|
|
19,960 |
|
|
|
239,471 |
|
|
|
4.76 |
|
|
|
Total loans and leases, net |
|
|
132,012 |
|
|
|
1,857,030 |
|
|
|
5.70 |
|
|
|
129,406 |
|
|
|
1,671,432 |
|
|
|
5.12 |
|
|
|
127,525 |
|
|
|
1,461,898 |
|
|
|
4.55 |
|
|
|
Interest-bearing deposits at banks |
|
|
24,312 |
|
|
|
278,417 |
|
|
|
4.64 |
|
|
|
25,089 |
|
|
|
237,021 |
|
|
|
3.75 |
|
|
|
30,752 |
|
|
|
172,956 |
|
|
|
2.23 |
|
|
|
Federal funds sold and agreements
|
|
|
— |
|
|
|
2 |
|
|
|
4.89 |
|
|
|
— |
|
|
|
4 |
|
|
|
4.32 |
|
|
|
29 |
|
|
|
41 |
|
|
|
.55 |
|
|
|
Trading account |
|
|
123 |
|
|
|
712 |
|
|
|
2.32 |
|
|
|
122 |
|
|
|
652 |
|
|
|
2.13 |
|
|
|
131 |
|
|
|
583 |
|
|
|
1.78 |
|
|
|
Investment securities (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
U.S. Treasury and federal agencies |
|
|
23,795 |
|
|
|
166,978 |
|
|
|
2.85 |
|
|
|
21,590 |
|
|
|
140,315 |
|
|
|
2.58 |
|
|
|
20,227 |
|
|
|
124,084 |
|
|
|
2.43 |
|
|
|
Obligations of states and political subdivisions |
|
|
2,570 |
|
|
|
23,751 |
|
|
|
3.75 |
|
|
|
2,607 |
|
|
|
24,228 |
|
|
|
3.67 |
|
|
|
2,688 |
|
|
|
23,626 |
|
|
|
3.49 |
|
|
|
Other |
|
|
1,257 |
|
|
|
13,557 |
|
|
|
4.38 |
|
|
|
1,100 |
|
|
|
11,942 |
|
|
|
4.31 |
|
|
|
1,030 |
|
|
|
10,152 |
|
|
|
3.91 |
|
|
|
Total investment securities |
|
|
27,622 |
|
|
|
204,286 |
|
|
|
3.00 |
|
|
|
25,297 |
|
|
|
176,485 |
|
|
|
2.77 |
|
|
|
23,945 |
|
|
|
157,862 |
|
|
|
2.62 |
|
|
|
Total earning assets |
|
|
184,069 |
|
|
|
2,340,447 |
|
|
|
5.16 |
|
|
|
179,914 |
|
|
|
2,085,594 |
|
|
|
4.60 |
|
|
|
182,382 |
|
|
|
1,793,340 |
|
|
|
3.90 |
|
|
|
Allowance for credit losses |
|
|
(1,938 |
) |
|
|
|
|
|
|
|
|
(1,888 |
) |
|
|
|
|
|
|
|
|
(1,822 |
) |
|
|
|
|
|
|
|
||||||
|
Cash and due from banks |
|
|
1,952 |
|
|
|
|
|
|
|
|
|
1,989 |
|
|
|
|
|
|
|
|
|
1,962 |
|
|
|
|
|
|
|
|
||||||
|
Other assets |
|
|
18,516 |
|
|
|
|
|
|
|
|
|
18,577 |
|
|
|
|
|
|
|
|
|
18,609 |
|
|
|
|
|
|
|
|
||||||
|
Total assets |
|
$ |
202,599 |
|
|
|
|
|
|
|
|
$ |
198,592 |
|
|
|
|
|
|
|
|
$ |
201,131 |
|
|
|
|
|
|
|
|
||||||
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Savings and interest-checking deposits |
|
$ |
88,053 |
|
|
$ |
277,068 |
|
|
|
1.28 |
|
|
$ |
87,068 |
|
|
$ |
167,421 |
|
|
|
.76 |
|
|
$ |
89,360 |
|
|
$ |
68,690 |
|
|
|
.31 |
|
|
|
Time deposits |
|
|
11,630 |
|
|
|
89,197 |
|
|
|
3.11 |
|
|
|
6,182 |
|
|
|
20,119 |
|
|
|
1.29 |
|
|
|
5,050 |
|
|
|
1,124 |
|
|
|
.09 |
|
|
|
Total interest-bearing deposits |
|
|
99,683 |
|
|
|
366,265 |
|
|
|
1.49 |
|
|
|
93,250 |
|
|
|
187,540 |
|
|
|
.80 |
|
|
|
94,410 |
|
|
|
69,814 |
|
|
|
.29 |
|
|
|
Short-term borrowings |
|
|
4,994 |
|
|
|
57,776 |
|
|
|
4.69 |
|
|
|
1,632 |
|
|
|
13,336 |
|
|
|
3.24 |
|
|
|
913 |
|
|
|
2,670 |
|
|
|
1.16 |
|
|
|
Long-term borrowings |
|
|
6,511 |
|
|
|
84,680 |
|
|
|
5.27 |
|
|
|
3,753 |
|
|
|
43,959 |
|
|
|
4.65 |
|
|
|
3,281 |
|
|
|
30,338 |
|
|
|
3.67 |
|
|
|
Total interest-bearing liabilities |
|
|
111,188 |
|
|
|
508,721 |
|
|
|
1.86 |
|
|
|
98,635 |
|
|
|
244,835 |
|
|
|
.98 |
|
|
|
98,604 |
|
|
|
102,822 |
|
|
|
.41 |
|
|
|
Noninterest-bearing deposits |
|
|
61,854 |
|
|
|
|
|
|
|
|
|
70,218 |
|
|
|
|
|
|
|
|
|
72,861 |
|
|
|
|
|
|
|
|
||||||
|
Other liabilities |
|
|
4,180 |
|
|
|
|
|
|
|
|
|
4,393 |
|
|
|
|
|
|
|
|
|
4,001 |
|
|
|
|
|
|
|
|
||||||
|
Total liabilities |
|
|
177,222 |
|
|
|
|
|
|
|
|
|
173,246 |
|
|
|
|
|
|
|
|
|
175,466 |
|
|
|
|
|
|
|
|
||||||
|
Shareholders’ equity |
|
|
25,377 |
|
|
|
|
|
|
|
|
|
25,346 |
|
|
|
|
|
|
|
|
|
25,665 |
|
|
|
|
|
|
|
|
||||||
|
Total liabilities and shareholders’ equity |
|
$ |
202,599 |
|
|
|
|
|
|
|
|
$ |
198,592 |
|
|
|
|
|
|
|
|
$ |
201,131 |
|
|
|
|
|
|
|
|
||||||
|
Net interest spread |
|
|
|
|
|
|
|
|
3.30 |
|
|
|
|
|
|
|
|
|
3.62 |
|
|
|
|
|
|
|
|
|
3.49 |
|
|
||||||
|
Contribution of interest-free funds |
|
|
|
|
|
|
|
|
.74 |
|
|
|
|
|
|
|
|
|
.44 |
|
|
|
|
|
|
|
|
|
.19 |
|
|
||||||
|
Net interest income/margin on earning assets |
|
|
|
|
$ |
1,831,726 |
|
|
|
4.04 |
% |
|
|
|
|
$ |
1,840,759 |
|
|
|
4.06 |
% |
|
|
|
|
$ |
1,690,518 |
|
|
|
3.68 |
% |
|
|||
(continued)
- 78 -
M&T BANK CORPORATION AND SUBSIDIARIES
Table 3 (continued)
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES (continued)
|
|
|
2022 Second Quarter |
|
|
2022 First Quarter |
|
|
||||||||||||||||||
|
|
|
Average
|
|
|
Interest |
|
|
Average
|
|
|
Average
|
|
|
Interest |
|
|
Average
|
|
|
||||||
|
Average balance in millions; interest in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loans and leases, net of unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Commercial, financial, etc. |
|
$ |
37,818 |
|
|
$ |
373,543 |
|
|
|
3.96 |
% |
|
$ |
23,305 |
|
|
$ |
207,715 |
|
|
|
3.61 |
% |
|
|
Real estate – commercial |
|
|
47,227 |
|
|
|
461,594 |
|
|
|
3.87 |
|
|
|
34,957 |
|
|
|
337,100 |
|
|
|
3.86 |
|
|
|
Real estate – consumer |
|
|
22,761 |
|
|
|
207,080 |
|
|
|
3.64 |
|
|
|
15,870 |
|
|
|
141,001 |
|
|
|
3.55 |
|
|
|
Consumer |
|
|
19,793 |
|
|
|
210,290 |
|
|
|
4.26 |
|
|
|
18,027 |
|
|
|
188,017 |
|
|
|
4.23 |
|
|
|
Total loans and leases, net |
|
|
127,599 |
|
|
|
1,252,507 |
|
|
|
3.94 |
|
|
|
92,159 |
|
|
|
873,833 |
|
|
|
3.85 |
|
|
|
Interest-bearing deposits at banks |
|
|
39,386 |
|
|
|
80,773 |
|
|
|
.82 |
|
|
|
38,693 |
|
|
|
18,280 |
|
|
|
.19 |
|
|
|
Federal funds sold and agreements
|
|
|
250 |
|
|
|
253 |
|
|
|
.41 |
|
|
|
— |
|
|
|
— |
|
|
|
.71 |
|
|
|
Trading account |
|
|
136 |
|
|
|
199 |
|
|
|
.59 |
|
|
|
48 |
|
|
|
194 |
|
|
|
1.61 |
|
|
|
Investment securities (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
U.S. Treasury and federal agencies |
|
|
18,644 |
|
|
|
109,755 |
|
|
|
2.36 |
|
|
|
7,077 |
|
|
|
35,911 |
|
|
|
2.06 |
|
|
|
Obligations of states and political
|
|
|
2,768 |
|
|
|
23,344 |
|
|
|
3.38 |
|
|
|
— |
|
|
|
3 |
|
|
|
6.99 |
|
|
|
Other |
|
|
972 |
|
|
|
9,037 |
|
|
|
3.73 |
|
|
|
647 |
|
|
|
3,269 |
|
|
|
2.05 |
|
|
|
Total investment securities |
|
|
22,384 |
|
|
|
142,136 |
|
|
|
2.55 |
|
|
|
7,724 |
|
|
|
39,183 |
|
|
|
2.06 |
|
|
|
Total earning assets |
|
|
189,755 |
|
|
|
1,475,868 |
|
|
|
3.12 |
|
|
|
138,624 |
|
|
|
931,490 |
|
|
|
2.72 |
|
|
|
Allowance for credit losses |
|
|
(1,814 |
) |
|
|
|
|
|
|
|
|
(1,475 |
) |
|
|
|
|
|
|
|
||||
|
Cash and due from banks |
|
|
1,690 |
|
|
|
|
|
|
|
|
|
1,448 |
|
|
|
|
|
|
|
|
||||
|
Other assets |
|
|
19,234 |
|
|
|
|
|
|
|
|
|
13,051 |
|
|
|
|
|
|
|
|
||||
|
Total assets |
|
$ |
208,865 |
|
|
|
|
|
|
|
|
$ |
151,648 |
|
|
|
|
|
|
|
|
||||
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Savings and interest-checking deposits |
|
$ |
95,149 |
|
|
$ |
27,907 |
|
|
|
.12 |
|
|
$ |
67,267 |
|
|
$ |
6,747 |
|
|
|
.04 |
|
|
|
Time deposits |
|
|
5,480 |
|
|
|
1,227 |
|
|
|
.09 |
|
|
|
2,647 |
|
|
|
1,397 |
|
|
|
.21 |
|
|
|
Total interest-bearing deposits |
|
|
100,629 |
|
|
|
29,134 |
|
|
|
.12 |
|
|
|
69,914 |
|
|
|
8,144 |
|
|
|
.05 |
|
|
|
Short-term borrowings |
|
|
1,126 |
|
|
|
3,419 |
|
|
|
1.22 |
|
|
|
56 |
|
|
|
1 |
|
|
|
.01 |
|
|
|
Long-term borrowings |
|
|
3,282 |
|
|
|
20,872 |
|
|
|
2.55 |
|
|
|
3,442 |
|
|
|
15,937 |
|
|
|
1.88 |
|
|
|
Total interest-bearing liabilities |
|
|
105,037 |
|
|
|
53,425 |
|
|
|
.20 |
|
|
|
73,412 |
|
|
|
24,082 |
|
|
|
.13 |
|
|
|
Noninterest-bearing deposits |
|
|
74,054 |
|
|
|
|
|
|
|
|
|
58,141 |
|
|
|
|
|
|
|
|
||||
|
Other liabilities |
|
|
3,684 |
|
|
|
|
|
|
|
|
|
2,201 |
|
|
|
|
|
|
|
|
||||
|
Total liabilities |
|
|
182,775 |
|
|
|
|
|
|
|
|
|
133,754 |
|
|
|
|
|
|
|
|
||||
|
Shareholders’ equity |
|
|
26,090 |
|
|
|
|
|
|
|
|
|
17,894 |
|
|
|
|
|
|
|
|
||||
|
Total liabilities and shareholders’ equity |
|
$ |
208,865 |
|
|
|
|
|
|
|
|
$ |
151,648 |
|
|
|
|
|
|
|
|
||||
|
Net interest spread |
|
|
|
|
|
|
|
|
2.92 |
|
|
|
|
|
|
|
|
|
2.59 |
|
|
||||
|
Contribution of interest-free funds |
|
|
|
|
|
|
|
|
.09 |
|
|
|
|
|
|
|
|
|
.06 |
|
|
||||
|
Net interest income/margin on earning assets |
|
|
|
|
$ |
1,422,443 |
|
|
|
3.01 |
% |
|
|
|
|
$ |
907,408 |
|
|
|
2.65 |
% |
|
||
- 79 -
Item 3. Quantitative and Qualitati ve 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, Senior Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of March 31, 2023.
(b) Changes in internal control over financial reporting. M&T regularly assesses the adequacy of its internal control over financial reporting and enhances its controls in response to internal control assessments and internal and external audit and regulatory recommendations. No changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting. Management has excluded processes and controls of People’s United that have not yet been converted to M&T's systems or processes from its assessment of internal control over financial reporting for the quarter ended March 31, 2023. Assets and liabilities associated with the People's United transaction that have not yet been converted to M&T's systems or processes as of March 31, 2023 include loans and leases of $3.2 billion, other assets of $12 million and other liabilities of $59 million. Approximately $56 million of total revenues for the three months ended March 31, 2023 was contributed from business activities of People's United that have not yet been converted to M&T's systems or processes.
- 80 -
PART II. OTHE R 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 $25 million as of March 31, 2023. Although the Company does not believe that the outcome of pending legal matters will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.
Item 1A. Risk F actors.
There have been no material changes in risk factors relating to M&T to those disclosed in response to Item 1A. to Part I of Form 10-K for the year ended December 31, 2022.
Item 2. Unregistered Sal es of Equity Securities and Use of Proceeds.
(a) – (b) Not applicable.
(c)
|
|
|
Issuer Purchases of Equity Securities |
|
|||||||||||||
|
Period |
|
(a) Total
|
|
|
(b) Average
|
|
|
(c) Total
|
|
|
(d) Maximum
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
January 1 - January 31, 2023 |
|
|
250,420 |
|
|
$ |
156.04 |
|
|
|
250,000 |
|
|
$ |
1,760,987,000 |
|
|
February 1 - February 28, 2023 |
|
|
2,500,000 |
|
|
|
159.42 |
|
|
|
2,500,000 |
|
|
|
1,362,447,000 |
|
|
March 1 - March 31, 2023 |
|
|
1,097,105 |
|
|
|
149.27 |
|
|
|
1,088,157 |
|
|
|
1,200,060,000 |
|
|
Total |
|
|
3,847,525 |
|
|
$ |
156.30 |
|
|
|
3,838,157 |
|
|
|
|
|
Item 3. Defaults Upo n Senior Securities.
(None.)
Item 4. Mine Safe ty Disclosures.
(Not applicable.)
Item 5. Other Information.
(None.)
Item 6. Exhibits.
The following exhibits are filed as a part of this report.
- 81 -
|
Exhibit No. |
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
32.2 |
|
|
|
|
|
|
|
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 March 31, 2023 has been formatted in Inline XBRL. |
- 82 -
SIGNAT URES
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: May 5, 2023 |
|
By: |
|
/s/ Darren J. King |
|
|
|
|
|
Darren J. King |
|
|
|
|
|
Senior Executive Vice President and Chief Financial Officer |
- 83 -