M&T BANK CORP (MTB) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Corporate Profile and Significant Developments

M&T Bank Corporation (“M&T”) is a bank holding company headquartered in Buffalo, New York with consolidated assets of $155.1 billion at December 31, 2021. The consolidated financial information presented herein reflects M&T and all of its subsidiaries, which are referred to collectively as “the Company.” M&T’s wholly owned bank subsidiaries are Manufacturers and Traders Trust Company (“M&T Bank”) and Wilmington Trust, National Association (“Wilmington Trust, N.A.”).

M&T Bank, with total assets of $154.7 billion at December 31, 2021, is a New York-chartered commercial bank with 688 domestic banking offices in New York State, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia, and a full-service commercial banking office in Ontario, Canada. M&T Bank and its subsidiaries offer a broad range of financial services to a diverse base of consumers, businesses, professional clients, governmental entities and financial institutions located in their markets. M&T Bank lends to consumers residing in the states noted above and to small and medium-size businesses based in those areas, although loans are also originated through offices in other states and in Ontario, Canada. Certain lending activities are also conducted in other states through various subsidiaries. Trust and other fiduciary services are offered by M&T Bank and through its wholly owned subsidiary, Wilmington Trust Company. Other subsidiaries of M&T Bank include: M&T Realty Capital

59

Corporation, a multifamily commercial mortgage lender; M&T Securities, Inc., which provides institutional brokerage and securities services; Wilmington Trust Investment Advisors, Inc., which serves as an investment advisor to the Wilmington Funds, a family of proprietary mutual funds, and other funds and institutional clients; and M&T Insurance Agency, Inc., an insurance agency.

Wilmington Trust, N.A. is a national bank with total assets of $12.0 billion at December 31, 2021. Wilmington Trust, N.A. and its subsidiaries offer various trust and wealth management services.

Financial results during 2020 and 2021 were adversely impacted by the effects of the Coronavirus Disease 2019 (“COVID-19”) pandemic. Large portions of the U.S. economy were severely impacted throughout much of those two years and as a result, many commercial and consumer customers were negatively affected. The effects of the pandemic resulted in the Company recognizing an elevated provision for credit losses during 2020 that reflected projections of credit losses based on macroeconomic forecasts that were based on then existing economic conditions. As a result, the Company recorded a provision for credit losses of $800 million in 2020. Improvements in economic conditions and forecasts throughout 2021 led the Company to recognize a provision recapture of $75 million in that year. In response to the pandemic, the Federal Reserve took actions to lower interest rates that have negatively affected the Company’s net interest income since the beginning of the pandemic.

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. In addition to providing financial assistance to both businesses and consumers, the CARES Act created a forbearance program for federally-backed mortgage loans, protected borrowers from negative credit reporting due to loan accommodations resulting from the pandemic, and provided financial institutions the option to temporarily suspend certain requirements under GAAP related to troubled debt restructurings to account for the effects of COVID-19. The bank regulatory agencies likewise issued guidance encouraging financial institutions to work prudently with borrowers that were unable to meet their contractual payment obligations because of the effects of COVID-19. That guidance, with concurrence of the Financial Accounting Standards Board, and provisions of the CARES Act allowed modifications made on a good faith basis in response to COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be treated as troubled debt restructurings nor be reported as past due.

The CARES Act also provided funding opportunities for small businesses under the Paycheck Protection Program (“PPP”) from approved Small Business Administration (“SBA”) lenders, including M&T Bank. For commercial and consumer customers, the Company provided a host of relief options, such as payment deferrals (including maturity extensions), loan covenant waivers and low interest rate loan products. M&T Bank funded approximately $7.0 billion of PPP loans during 2020 and another $2.9 billion in 2021, of which $1.2 billion remained outstanding at December 31, 2021.

The national effort to mitigate the pandemic has resulted in a challenging environment for businesses and their employees. The Company has taken actions designed to help provide a safe environment for its customers and employees and to provide relief to customers in a variety of ways. Examples of those actions include:

• The deployment of a Pandemic Response Plan to manage the pandemic’s effects on operations, employees and customers, including seeking to ensure employee safety, maintaining continuity of operations and service levels for customers, preserving the Company’s financial strength, and complying with applicable laws and regulations. Actions have included placing restrictions on travel, implementing social distancing, health screening, sanitation and other protocols, and mandating for all employees whose jobs can be performed remotely to work from home where possible. In accordance with changes in Federal guidelines (e.g. the Centers for Disease Control and Prevention) and state and local regulations, the Company has begun to roll back certain of these measures;

60

• The vast majority of the Company’s non-branch employees continued to work remotely during 2021; the Company is preparing to employ an operating model consisting of onsite, hybrid and fully remote employee work schedules when COVID-19 infections and hospitalizations stabilize;

• M&T Bank branches remain open, with open lobbies and normal access to drive-through windows and ATMs; and

• Some loan customers are still receiving COVID-19 related relief in various forms, including modification and forbearance requests as of December 31, 2021 as described herein and in note 4 of Notes to Financial Statements.

On February 22, 2021 M&T announced that it had entered into a definitive agreement with People’s United Financial, Inc. (“People’s United”) under which People’s United will be acquired by M&T in an all-stock transaction.  Pursuant to the terms of the agreement, People’s United shareholders will receive consideration valued at .118 of an M&T share in the form of M&T common stock.  People’s United outstanding preferred stock will be converted to a new series of M&T preferred stock upon completion of the acquisition.  The transaction is valued at approximately $7.8 billion (with the price based on M&T’s closing price of $153.58 per share as of December 31, 2021).

As of December 31, 2021, People’s United reported $64.6 billion of assets, including $37.9 billion of loans and $10.8 billion of investment securities, $56.7 billion of liabilities, including $53.8 billion of deposits, and $7.9 billion of stockholders’ equity.  The merger has been approved by the common shareholders of M&T and People’s United, the New York State Department of Financial Services and Connecticut Department of Banking but remains subject to approval by the Board of Governors of the Federal Reserve System.  The merger is expected to be completed promptly after the parties have obtained approval and satisfied other customary closing conditions.

Critical Accounting Estimates

The Company’s significant accounting policies conform with generally accepted accounting principles (“GAAP”) and are described in note 1 of Notes to Financial Statements. In applying those accounting policies, management of the Company is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized. Certain of the critical accounting estimates are more dependent on such judgment and in some cases may contribute to volatility in the Company’s reported financial performance should the assumptions and estimates used change over time due to changes in circumstances. The more significant areas in which management of the Company applies critical assumptions and estimates include the following:

61

62

Overview

Net income recorded by the Company in 2021 was $1.86 billion or $13.80 of diluted earnings per common share, representing an increase of 37% and 39%, respectively, from $1.35 billion or $9.94 of diluted earnings per common share in 2020. Basic earnings per common share also increased 39% to $13.81 in 2021 from $9.94 in 2020. In connection with M&T’s pending acquisition of People’s United, the after-tax impact of merger-related expenses was $34 million ($44 million pre-tax), or $.25 of basic and diluted earnings per common share in 2021.  Merger-related expenses largely consisted of professional services related to planned integration efforts associated with the merger. There were no merger-related expenses during 2020 and 2019. Net income in 2019 totaled $1.93 billion, while diluted and basic earnings per common share were $13.75 and $13.76, respectively. Expressed as a rate of return on average assets, net income in 2021 was 1.22%, compared with 1.00% in 2020 and 1.61% in 2019. The return on average common shareholders’ equity was 11.54% in 2021, 8.72% in 2020 and 12.87% in 2019.

Table 1

EARNINGS SUMMARY

Dollars in millions

Financial results for 2021 and 2020 were adversely impacted by the COVID-19 pandemic. Large portions of the U.S. economy were substantially curtailed for extended periods of time and, as a result, many commercial and consumer customers were adversely impacted. Specifically, those

63

adverse economic impacts, coupled with an accounting change noted herein, resulted in the Company recognizing significantly higher provisions for credit losses during 2020 as compared with previous years.  An improvement in economic conditions during 2021 led the Company to recapture provision for credit losses of $75 million in 2021 compared with provisions for credit losses of $800 million in 2020 and $176 million in 2019.  The 2020 and 2021 periods reflect the amended accounting guidance for the measurement of expected credit losses on financial instruments. Prior to 2020, the provision for credit losses reflected incurred losses only.  In response to the pandemic, the Federal Reserve took actions to lower interest rates that have negatively affected the Company’s net interest income since the beginning of the pandemic.  Taxable-equivalent net interest income totaled $3.84 billion, $3.88 billion and $4.15 billion in 2021, 2020 and 2019, respectively.

Economic forecasts improved in 2021 resulting in a recapture of provision for credit losses in 2021 compared with significant provision for credit losses recorded in the prior year. During 2020, economic forecasts utilized during each interim period resulted in higher estimates of expected credit losses in the Company’s loan portfolio than at January 1, 2020, resulting in higher levels of the provision for credit losses in each of those quarters as compared with the comparable 2019 periods. Specifically, the level of the provision in 2020 reflected the ongoing impacts of the pandemic on economic activity in the hospitality and retail sectors, the uncertainty at December 31, 2020 as to the sufficiency and effectiveness of economic stimulus provided by the U.S. government to the economy, and concerns about ultimate collectability of real estate loans where the borrowers requested re-payment forbearance. Concerns remain about large sectors of the economy, including the hotel, healthcare and office space sectors. The allowance for credit losses for commercial real estate loans remains elevated as a result. The Company expects that it will likely continue to be impacted by the COVID-19 pandemic after December 31, 2021. Specifically, the Company expects that the following balance sheet and income statement categories could be affected:

• Net interest income and net interest margin – the low interest rate environment will continue to negatively affect the Company’s net interest margin until the level of general interest rates rises;

• Provision for credit losses – although the economy has experienced a recovery in 2021, it is possible that economic assumptions used to calculate the allowance for credit losses at the end of future reporting periods could deteriorate, resulting in higher levels of the provision and allowance for credit losses. In addition, the impact on borrowers’ ability to repay loans could be negatively affected, potentially leading to increased charge-offs;

• A resurgence of the pandemic or emergence of COVID-19 variants in large parts of the country may impact customer demand for many of the Company’s products and services, in particular credit and deposit-related products and services.

Effective January 1, 2020, M&T adopted amended accounting guidance for the measurement of credit losses on financial instruments. That guidance required an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The accounting guidance replaced the previous incurred loss model for determining the allowance for credit losses. The adoption of the amended guidance resulted in a $132 million increase in the allowance for credit losses as of January 1, 2020. Additional information on the amended accounting guidance is provided under the heading “Provision for Credit Losses” and in note 5 of Notes to Financial Statements.

There were several notable matters during 2019 that impacted that year’s results. In the first quarter of 2019, the Company recognized an expense of $50 million (reflected in “other costs of operations”) to increase its reserve for legal matters associated with a subsidiary’s role as trustee of Employee Stock Ownership Plans in its Institutional Client Services business. That expense, on an after-tax basis, reduced net income by $37 million, or $.27 of diluted earnings per common share. In

64

July 2019, M&T agreed to sell its non-controlling interest in an asset manager obtained in the 2011 acquisition of Wilmington Trust Corporation that had been accounted for using the equity method of accounting and, as a result, as of June 30, 2019 recorded a $48 million charge (reflected in “other costs of operations”) to reduce the carrying value of the investment to its estimated net realizable value. Similar to other active investment managers, the investee entity had experienced a decrease in assets under management and during the second quarter of 2019 the entity’s chief executive and investment officer announced his retirement.  Following that announcement, successor management submitted a proposal to M&T to restructure the organization of the entity. The after-tax impact of the charge was a reduction in net income of $36 million, or $.27 of diluted earnings per common share. The sale of M&T’s interest in the asset manager was effective September 30, 2019.

Reflecting the matters discussed previously, taxable-equivalent net interest income was $3.84 billion in 2021, compared with $3.88 billion in 2020. That decline resulted from a 40 basis point (hundredths of one percent) narrowing of the net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, to 2.76% in 2021 from 3.16% in 2020, partially offset by the impact of an increase in average earning assets to $139.1 billion in 2021 from $122.9 billion in 2020. The increase in average earning assets resulted from higher amounts of low-yielding balances maintained by the Company at the Federal Reserve Bank (“FRB”) of New York. Taxable-equivalent net interest income decreased 6% in 2020 from $4.15 billion in 2019.  That decrease resulted from a 68 basis point narrowing of the net interest margin from 3.84% in 2019, partially offset by the impact of an increase in average earning assets from $108.2 billion in 2019 that reflected higher balances of loans and amounts held at the FRB of New York.

The provision for credit losses declined significantly in 2021 resulting in a recapture of previously recorded provisions of $75 million, compared with a provision for credit losses of $800 million recorded in 2020. The provision in 2019 was $176 million. Net charge-offs in 2021, 2020 and 2019 were $192 million, $247 million and $144 million, respectively.

Other income totaled $2.17 billion in 2021, $2.09 billion in 2020 and $2.06 billion in 2019.  As compared with 2020, higher amounts of trust income, service charges on deposit accounts, and brokerage services income in 2021 were partially offset by lower trading account and foreign exchange gains, a higher loss on bank investment securities and less in distributions from Bayview Lending Group LLC (“BLG”).  Comparing 2020 with 2019, a 24% rise in mortgage banking revenues, higher trust income and increased income from BLG were partially offset by a declines in service charges on deposit accounts, trading account and foreign exchange gains and loan syndication fees.

Other expense totaled $3.61 billion in 2021, compared with $3.39 billion in 2020 and $3.47 billion in 2019. Included in those amounts are expenses considered by M&T to be “nonoperating” in nature, consisting of amortization of core deposit and other intangible assets of $10 million, $15 million and $19 million in 2021, 2020 and 2019, respectively, and merger-related expenses of $44 million in 2021. No merger-related expenses were recorded in 2020 and 2019. Exclusive of those nonoperating expenses, noninterest operating expenses totaled $3.56 billion in 2021, compared with $3.37 billion in 2020 and $3.45 billion in 2019. The higher level of such expenses in 2021 as compared with 2020 was due to increased costs for salaries and employee benefits, outside data processing and software, FDIC assessments, and professional services. Contributing to the lower level of noninterest operating expenses in 2020 as compared with 2019 were decreased costs for professional services, legal-related matters, advertising and marketing, travel and entertainment, and a $48 million charge in the second quarter of 2019 associated with the sale of an equity investment in an asset manager.  Those factors were partially offset by higher costs for salaries and employee benefits, outside data processing and software, increases to the valuation allowance for capitalized residential mortgage servicing rights and $14 million of expenses related to the planned transition of

65

the support for the Company’s retail brokerage and advisory business to the platform of LPL Financial.

The efficiency ratio measures the relationship of noninterest operating expenses to revenues. The Company’s efficiency ratio, or noninterest operating expenses (as previously defined) divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment securities), was 59.0% in 2021, compared with 56.3% and 55.7% in 2020 and 2019, respectively. The calculations of the efficiency ratio are presented in table 2.

The Company’s effective tax rate was 24.3% in 2021 and 2019, compared with 23.5% in 2020.

Supplemental Reporting of Non-GAAP Results of Operations

As a result of business combinations and other acquisitions, the Company had intangible assets consisting of goodwill and core deposit and other intangible assets totaling $4.6 billion at each of December 31, 2021 and 2020, consisting predominantly of goodwill. Amortization of core deposit and other intangible assets, after-tax effect, totaled $8 million, $11 million and $14 million during 2021, 2020 and 2019, respectively.

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 or to be acquired operations with and into the Company, since such items are considered by management to be “nonoperating” in nature. In 2021, those merger-related expenses generally consisted of professional services, reflecting legal expenses and technology-related efforts to prepare for the integration of People’s United’s systems with those of the Company, and printing costs associated with the production of the joint proxy statement/prospectus distributed to the shareholders of M&T and People’s United. Such expenses totaled $44 million ($34 million after-tax) in 2021. There were no merger-related gains or expenses in 2020 and 2019. 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 was $1.90 billion in 2021, $1.36 million in 2020, and $1.94 billion in 2019. Diluted net operating earnings per common share were $14.11 in 2021, $10.02 in 2020 and $13.86 in 2019.

Net operating income expressed as a rate of return on average tangible assets was 1.28% in 2021, compared with 1.04% in 2020 and 1.69% in 2019. Net operating income represented a return on average tangible common equity of 16.80% in 2021, compared with 12.79% in 2020 and 19.08% in 2019.

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

66

Table 2

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

67

Net Interest Income/Lending and Funding Activities

Taxable-equivalent net interest income was $3.84 billion in 2021, compared with $3.88 billion in 2020.  The decrease in 2021 was primarily attributable to a 40 basis point narrowing of the net interest margin to 2.76% in 2021 from 3.16% in 2020 reflecting lower yields on loans offset, in part, by lower rates paid on deposits, and reduced balances of investment securities. Those net impacts were partially offset by increased deposits held at the FRB of New York that serve to increase net interest income, but, due to their low yield, reduce the reported net interest margin.

Average earnings assets were $139.1 billion and $122.9 billion in 2021 and 2020, respectively. Average loans and leases were $96.6 billion in both 2021 and 2020. Average balances of commercial loans and leases decreased $2.3 billion or 8% to $25.2 billion in 2021 from $27.5 billion in 2020. That decrease was largely the result of a decline in average balances of PPP loans due to loan forgiveness by the SBA, lower dealer floor plan balances reflecting automobile production and inventory issues experienced by the industry and subdued loan demand by commercial customers, in general. PPP loans averaged $4.1 billion in 2021 compared with $4.4 billion in 2020. Average commercial real estate loan balances were up $336 million or 1% to $37.3 billion in 2021 from $37.0 billion in 2020. Consumer loans averaged $17.3 billion in 2021, an increase of $1.4 billion or 9% from $15.9 billion in 2020, due to growth in recreational finance loans (consisting predominantly of loans secured by recreational vehicles and boats) and, to a lesser extent, automobile loans that was partially offset by declines in average outstanding balances of home equity loans and lines of credit. Average residential real estate loans were $16.8 billion and $16.2 billion in 2021 and 2020, respectively, reflecting repurchases of government-guaranteed loans from Ginnie Mae pools that are serviced by the Company. The Company repurchases government-guaranteed loans to reduce associated servicing costs, namely a requirement to advance principal and interest payments that had not been received from individual mortgagors, including payments deferred under COVID-19 forbearance arrangements. The loans repurchased from Ginnie Mae pools averaged $3.3 billion in 2021, up from $2.6 billion in 2020. Additionally, late in the third quarter of 2021 the Company began to retain recently originated residential mortgage loans in portfolio rather than sell such loans. These increases were offset by the ongoing repayments of loans by customers.

Net interest income expressed on a taxable-equivalent basis aggregated $3.88 billion in 2020, down 6% from $4.15 billion in 2019. That decline primarily resulted from a 68 basis point narrowing of the net interest margin, largely the result of declines in yields on loans and balances held at the FRB of New York, reflecting the lower interest rate environment due to actions initiated by the Federal Reserve to decrease its target Federal funds rate three times in the second half of 2019 (each by a .25% increment) and twice in March of 2020 (first by .50%, then another by 1.0%). The lower net interest margin was partially offset by the impact of a $14.6 billion, or 14%, increase in average earning assets to $122.9 billion in 2020 from $108.2 billion in 2019 that reflected increases in average loan and lease balances of $7.1 billion and in interest-bearing deposits at banks of $8.5 billion, partially offset by a decline in average balances of investment securities of $3.4 billion.

Average loans and leases rose $7.1 billion, or 8%, in 2020 from $89.5 billion in 2019. Average balances of commercial loans and leases increased $4.2 billion or 18% to $27.5 billion in 2020 from $23.3 billion in 2019. That increase was the result of average outstanding PPP loans of $4.4 billion that were predominantly funded in the second quarter of 2020. Average commercial real estate loan balances were up $2.1 billion or 6% to $37.0 billion in 2020 from $34.9 billion in 2019. Consumer loans averaged $15.9 billion in 2020, up $1.2 billion or 9% from $14.6 billion in 2019, due to growth in recreational finance loans and automobile loans that was partially offset by declines in outstanding balances of home equity loans and lines of credit. Average residential real estate loans were $16.2 billion in 2020 and $16.7 billion in 2019, reflecting ongoing payments by customers, partially offset by repurchases of government-guaranteed loan from Ginnie Mae pools. These repurchased loans averaged $2.6 billion in 2020, up from $889 million in 2019.

68

Table 3

AVERAGE BALANCE SHEETS AND TAXABLE-EQUIVALENT RATES

69

Table 4 summarizes average loans and leases outstanding in 2021 and percentage changes in the major components of the portfolio over the past two years.

Table 4

AVERAGE LOANS AND LEASES

(Net of unearned discount)

Commercial loans and leases, excluding loans secured by real estate, totaled $23.5 billion at December 31, 2021, representing 25% of total loans and leases. Table 5 presents information on commercial loans and leases as of December 31, 2021 relating to geographic area, size, borrower industry and whether the loans are secured by collateral or unsecured. Of the $23.5 billion of commercial loans and leases outstanding at the end of 2021, approximately $19.9 billion, or 85%, were secured, while 35%, 17% and 28% were granted to businesses in New York State, Pennsylvania and in the Mid-Atlantic area (which includes Delaware, Maryland, New Jersey, Virginia, West Virginia and the District of Columbia), respectively. The Company provides financing for leases to commercial customers, primarily for equipment. Commercial leases included in total commercial loans and leases at December 31, 2021 aggregated $1.0 billion, of which 48% were secured by collateral located in New York State, 14% were secured by collateral in Pennsylvania and another 20% were secured by collateral in the Mid-Atlantic area.

70

Table 5

COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT

(Excludes Loans Secured by Real Estate)

December 31, 2021

International loans included in commercial loans and leases totaled $116 million and $100 million at December 31, 2021 and 2020, respectively. Included in such amounts at each of those dates were $94 million of loans at M&T Bank’s commercial banking office in Ontario, Canada. The remaining international loans were predominantly to domestic companies with foreign operations.

71

Loans secured by real estate, including outstanding balances of home equity loans and lines of credit which the Company classifies as consumer loans, represented approximately 59% of the loan and lease portfolio during each of 2021 and 2020, compared with 63% in 2019. At December 31, 2021, the Company held approximately $35.4 billion of commercial real estate loans (including $425 million held for sale), $16.1 billion of consumer real estate loans secured by one-to-four family residential properties (including $474 million of loans held for sale) and $3.6 billion of outstanding balances of home equity loans and lines of credit, compared with $37.6 billion, $16.8 billion and $4.0 billion, respectively, at December 31, 2020.  Included in commercial real estate loans at December 31, 2021 and 2020 were construction loans of $9.3 billion and $10.0 billion, respectively, including amounts due from builders and developers of residential real estate aggregating $1.4 billion and $1.3 billion at December 31, 2021 and 2020, respectively. Commercial real estate loans included loans held for sale totaling $425 million and $278 million at December 31, 2021 and 2020, respectively. International loans included in commercial real estate loans totaled $74 million at December 31, 2021 and $60 million at December 31, 2020.

Commercial real estate loans originated by the Company include both fixed and variable rate instruments with monthly payments and a balloon payment of the remaining unpaid principal at maturity. Maturity dates generally range from five to ten years and, for borrowers in good standing, the terms of such loans may be extended by the customer following maturity at the then-current market rate of interest. Adjustable-rate commercial real estate loans represented approximately 69% of the commercial real estate loan portfolio at the 2021 year-end. Table 6 presents commercial real estate loans by geographic area, type of collateral and size of the loans outstanding at December 31, 2021. New York City area commercial real estate loans totaled $8.2 billion at December 31, 2021. The $7.1 billion of investor-owned commercial real estate loans in the New York City area were largely secured by multifamily residential properties, retail space and office space. The Company’s experience has been that office, retail and service-related properties tend to demonstrate more volatile fluctuations in value through economic cycles and changing economic conditions than do multifamily residential properties. Approximately 67% of the aggregate dollar amount of New York City area loans were for loans with outstanding balances of $30 million or less, while loans of more than $50 million made up approximately 18% of the total.

Commercial real estate loans secured by properties located in other parts of New York State, Pennsylvania and the Mid-Atlantic area tend to have a greater diversity of collateral types and include a significant amount of lending to customers who use the mortgaged property in their trade or business (owner-occupied). Approximately 93% of the aggregate dollar amount of commercial real estate loans in New York State secured by properties located outside of the New York City area were for loans with outstanding balances of $30 million or less. Of the outstanding balances of commercial real estate loans in Pennsylvania and the Mid-Atlantic area, approximately 81% and 77%, respectively, were for loans with outstanding balances of $30 million or less.

Commercial real estate loans secured by properties located outside of Pennsylvania, the Mid-Atlantic area and New York State comprised 22% of total commercial real estate loans as of December 31, 2021.

Commercial real estate construction and development loans made to investors presented in table 6 totaled $8.9 billion at December 31, 2021, or 10% of total loans and leases. Approximately 82% of those construction loans had adjustable interest rates. Included in such loans at the 2021 year-end were $1.4 billion of loans to builders and developers of residential real estate properties.  The remainder of the commercial real estate construction loan portfolio was comprised of loans made for various purposes, including the construction of office buildings, multifamily residential housing, retail space and other commercial development.

72

Table 6

COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT

December 31, 2021

73

M&T Realty Capital Corporation, a commercial real estate lending subsidiary of M&T Bank, participates in the Delegated Underwriting and Servicing (“DUS”) program of Fannie Mae, pursuant to which commercial real estate loans are originated in accordance with terms and conditions specified by Fannie Mae and sold. Under this program, loans are sold with partial credit recourse to M&T Realty Capital Corporation. The amount of recourse is generally limited to one-third of any credit loss incurred by the purchaser on an individual loan, although in some cases the recourse amount is less than one-third of the outstanding principal balance. The Company’s maximum credit risk for recourse associated with sold commercial real estate loans was approximately $4.0 billion at each of December 31, 2021 and 2020. There have been no material losses incurred as a result of those recourse arrangements. At December 31, 2021 and 2020, commercial real estate loans serviced by the Company for other investors were $23.7 billion and $22.2 billion, respectively. Reflected in commercial real estate loans serviced for others were loans sub-serviced for others that had outstanding balances of $3.5 billion and $3.3 billion at December 31, 2021 and 2020, respectively.

Real estate loans secured by one-to-four family residential properties were $16.1 billion at December 31, 2021, including approximately 36% secured by properties located in New York State, 7% secured by properties located in Pennsylvania, 17% secured by properties in New Jersey and 17% secured by properties located in other Mid-Atlantic areas. Included in residential real estate loans were loans repurchased by the Company from Ginnie Mae pools as previously described. Those repurchased loans totaled $2.8 billion at December 31, 2021 and $2.7 billion at December 31, 2020. The Company’s portfolio of limited documentation residential real estate loans held for investment totaled $1.3 billion at December 31, 2021, compared with $1.6 billion at December 31, 2020. That portfolio consisted predominantly of limited documentation loans acquired in a prior business combination. Such loans represent loans that at origination typically included some form of limited borrower documentation requirements as compared with more traditional residential real estate loans. The acquired loans that were eligible for limited documentation processing were available in amounts up to 65% of the lower of the appraised value or purchase price of the property. Loans to individuals to finance the construction of one-to-four family residential properties totaled $57 million at December 31, 2021 and $77 million at December 31, 2020, or approximately .1% of total loans and leases at each of those dates. Information about the credit performance of the Company’s residential real estate loans is included herein under the heading “Provision For Credit Losses.”

Consumer loans comprised approximately 19% of total loans and leases at December 31, 2021 and 17% at December 31, 2020. Outstanding balances of recreational finance loans represented the largest component of the consumer loan portfolio at December 31, 2021 and totaled $8.1 billion or approximately 9% of total loans, up from $7.1 billion or 7% at December 31, 2020.  That growth reflects continued consumer demand for such loans. Home equity loans and lines of credit outstanding at December 31, 2021 and December 31, 2020 were $3.6 billion and $4.0 billion, respectively.  Approximately 41% of home equity loans and lines of credit outstanding at December 31, 2021 were secured by properties in New York State, 22% in Maryland, 21% in Pennsylvania and 5% in New Jersey. Outstanding automobile loan balances rose to $4.7 billion at December 31, 2021 from $4.1 billion at December 31, 2020. That increase also reflects continued consumer demand for motor vehicles despite recent supply chain disruptions.

Table 7 presents the composition of the Company’s loan and lease portfolio at the end of 2021, including outstanding balances to businesses and consumers in New York State, Pennsylvania, the Mid-Atlantic area and other states.

74

Table 7

LOANS AND LEASES, NET OF UNEARNED DISCOUNT

December 31, 2021