M&T BANK CORP (MTB) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from M&T BANK CORP's 10-K for fiscal year 2023. Filing date: 2024-02-21. Report date: 2023-12-31. Accession: 0000950170-24-017990.

This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high.

Company profile: MTB · All MD&A years: index · Previous year: FY 2022 · Next year: FY 2024

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

Corporate Profile and Significant Developments

M&T is a BHC headquartered in Buffalo, New York with consolidated assets of $208.3 billion at December 31, 2023. M&T’s wholly owned bank subsidiaries are M&T Bank and Wilmington Trust, N.A. Among other subsidiaries of M&T is M&T Securities which provides institutional brokerage and securities services and had total assets of $56 million at December 31, 2023.

M&T Bank, with total assets of $207.8 billion at December 31, 2023, is a New York-chartered commercial bank with 961 domestic banking offices in New York State, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Massachusetts, Maine, Vermont, New Hampshire, 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, a multifamily commercial mortgage lender; WT Investment Advisors, which serves as an investment advisor to the Wilmington Funds, a family of proprietary mutual funds, and other funds and institutional clients; and entities obtained in the People's United acquisition including LEAF Commercial Capital, Inc., M&T Capital and Leasing Corp. (formerly known as People's Capital and Leasing Corp.) and M&T Equipment Finance Corp. (formerly known as People's United Equipment Finance Corp.) that provide equipment leasing and financing services.

Wilmington Trust, N.A. is a national bank with total assets of $683 million at December 31, 2023. Wilmington Trust, N.A. and its subsidiaries offer various trust and wealth management services.

On April 1, 2022, M&T completed the acquisition of 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 M&T Bank 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.

In connection with the acquisition of People's United, M&T issued 50,325,004 common shares on April 1, 2022. 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 was 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. M&T 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 over $200 billion in assets serving communities in the Northeast and Mid-Atlantic from Maine to Virginia, including Washington D.C.

Net acquisition and integration-related expenses (included herein as merger-related expenses) associated with the People's United acquisition totaled $432 million after-tax effect, or $2.63 of diluted earnings per common share in 2022 and $34 million after-tax effect, or $0.25 of diluted earnings per common share in 2021. 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 not deemed to be PCD on the April 1, 2022 acquisition date of People's United. M&T completed the transfer of most financial records of People’s United to M&T’s core operating systems in the third quarter of 2022. The Company did not incur any merger-related expenses during 2023.

On April 29, 2023 Wilmington Trust, N.A. sold its CIT business to a private equity firm, resulting in a pre-tax gain of $225 million. On October 31, 2022 M&T Bank sold MTIA, a wholly owned insurance agency subsidiary of M&T Bank to Arthur J. Gallagher & Co. resulting in a pre-tax gain of $136 million.

Financial Reporting Matters

Included within this Management's Discussion and Analysis of Financial Condition and Results of Operations are certain financial reporting changes described in note 1 of Notes to Financial Statements that were effective in the fourth quarter of 2023 including:

•
Reclassification of the substantial majority of loans secured by commercial real estate that were considered owner-occupied from commercial real estate loans to commercial and industrial loans;

•
Presentation of "professional and other services" as an individual component of "other expense" while combining the presentation of "printing, postage and supplies" into "other costs of operations" within the Consolidated Statement of Income; and

•
Revisions to the Company's reportable segments to now comprise of Commercial Bank, Retail Bank and Institutional Services and Wealth Management.

Prior periods have been presented in conformity with the new classifications.

Overview

The results of the Company’s operations for the year ended December 31, 2023 continued to be impacted by multiple hikes by the FOMC of its federal funds target rate that totaled 5.25% from March of 2022 through July of 2023 in response to inflationary pressures. The higher interest rate environment has resulted in increased yields on the Company’s earning assets, higher costs of interest-bearing liabilities and a shift in the mix of those liabilities, including from noninterest-bearing deposits to higher cost deposit products. The provision for credit losses reflects declines in commercial real estate values and higher interest rates contributing to a deterioration in the performance of loans to commercial borrowers as well as a $2.5 billion increase in loans and leases since December 31, 2022. In the second quarter of 2023, M&T completed the divestiture of its CIT business to a private equity firm. The sale of that business resulted in a pre-tax gain of $225 million ($157 million after-tax effect, or $0.94 of diluted earnings per common share) in the 2023 results of operations. In the fourth quarter of 2023, the FDIC issued a final rule on special assessment pursuant to systemic risk determination resulting from the closures of certain failed banks earlier in the year. As a result, the Company recorded an expense of $197 million ($146 million after-tax effect, or $0.88 of diluted earnings per common share) for the special assessment in the 2023 results of operations. A comparative summary of financial results for the Company is provided in Table 1.

Table 1

SUMMARY OF FINANCIAL RESULTS

									Change from
									2022 to 2023		2021 to 2022
(Dollars in millions, except per share)	2023			2022			2021		Amount		%		Amount		%
Net interest income	$	7,115			$	5,822		$	3,825		$	1,293		22	%	$	1,997		52	%
Taxable-equivalent adjustment (a)		54				39			15			15		40			25		166
Net interest income (taxable-equivalent basis) (a)		7,169				5,861			3,840			1,308		22			2,022		53
Provision for credit losses		645				517			(75	)		128		25			592		—
Other income		2,528				2,357			2,167			172		7			190		9
Other expense		5,379				5,050			3,612			329		7			1,439		40
Net income		2,741				1,992			1,859			749		38			133		7
Per common share data:
Basic earnings		15.85				11.59			13.81			4.26		37			(2.22	)	-16
Diluted earnings		15.79				11.53			13.80			4.26		37			(2.27	)	-16
Performance ratios
Return on:
Average assets		1.33	%			1.05	%		1.22	%
Average common shareholders' equity		11.06				8.67			11.54
Net interest margin		3.83				3.39			2.76

(a)
Net interest income data are presented on a taxable-equivalent basis which is a non-GAAP measure. The taxable-equivalent adjustment represents additional income taxes that would be due if all interest income were subject to income taxes. This adjustment, which is related to interest received on qualified municipal securities, industrial revenue financings and preferred equity securities, is based on a composite income tax rate of approximately 26%.

The increase in net income in 2023 as compared with 2022 included one additional quarter of operations acquired from People's United.

•
Taxable-equivalent net interest income was $7.17 billion in 2023, an increase of $1.31 billion, or 22% from $5.86 billion in 2022. That increase reflects a 44 basis point (hundredth of one percent) widening of the net interest margin to 3.83% in 2023 from 3.39% in 2022.

•
The provision for credit losses was $645 million in 2023, compared with $517 million in 2022. Included in the second quarter of 2022 was the $242 million provision related to loans obtained in the People's United acquisition that were considered non-PCD. The comparatively higher provision for credit losses in the most recent year as compared with 2022 reflects declines in commercial real estate values and higher interest rates contributing to a deterioration in the performance of loans to commercial borrowers as well as commercial and industrial loan growth.

•
Noninterest income rose $172 million, or 7%, to $2.53 billion in 2023 as compared with $2.36 billion in 2022, reflecting the sale of the CIT business in the second quarter of 2023, the sale of MTIA in the fourth quarter of 2022 and one additional quarter of revenues in 2023 from operations acquired from People's United. Other favorable factors contributing to the rise in noninterest income included higher mortgage banking revenues and trading account and other non-hedging derivatives gains.

•
Exclusive of $338 million of merger-related expenses incurred in 2022 associated with the People's United acquisition, noninterest expense increased $667 million reflecting one additional quarter of operations acquired from People's United, higher salaries and employee benefits expenses from merit and other salary increases, a rise in incentive compensation and increases in employee benefit costs, including severance, and higher FDIC assessments inclusive of the special assessment in 2023's final quarter.

The increase in net income in 2022 as compared with 2021 included the impact of the acquisition of People's United on April 1, 2022.

•
Taxable-equivalent net interest income was $3.84 billion in 2021. The $2.02 billion increase in such income from 2021 to 2022 resulted from a 63 basis point widening of the net interest margin from 2.76% in 2021 and an increase in average earning assets and interest-bearing liabilities in 2022, primarily from the People's United acquisition.

•
The higher provision for credit losses in 2022 as compared with 2021 reflects the $242 million People's United-related provision for non-PCD loans obtained in the acquisition and a forecasted weakening of macroeconomic conditions as of December 31, 2022, as compared with forecasts in 2021 during which a recapture of previously recorded provisions of $75 million was recorded.

•
The increase in other income in 2022 as compared with 2021 reflected increases related to the acquired operations associated with the People's United acquisition (predominantly reflected in trust income, service charges on deposit accounts and other revenues from operations, including credit-related fees), higher trust income from legacy operations and the $136 million gain on sale of MTIA. Those increases were partially offset by lower mortgage banking revenues reflecting the Company's decision late in the third quarter of 2021 to retain the substantial majority of recently originated mortgage loans in portfolio rather than sell such loans, and a planned reduction of insufficient funds fees reflected in service charges on deposit accounts.

•
As compared with 2021, the predominant factor for increased noninterest expenses in 2022 was acquired operations from People's United and associated merger-related expenses. Merger-related noninterest expenses totaled $338 million and $44 million in 2022 and 2021, respectively. In addition to the People's United acquisition, factors contributing to the higher level of noninterest expenses included higher costs for salaries and employee benefits, outside data processing and software, equipment and net occupancy, professional and other services expenses and (in the fourth quarter of 2022) a $135 million contribution to The M&T Charitable Foundation. Those higher expenses were partially offset by lower defined benefit pension-related expenses included in other costs of operations.

The Company’s effective tax rate was 24.3% in each of 2023 and 2021, as compared with 23.7% in 2022.

Under approved capital plans and programs authorized by M&T's Board of Directors, M&T repurchased a total of 3,838,157 shares of its common stock in 2023 at an average cost per share of $154.76 resulting in a total cost, including the share repurchase excise tax, of $600 million. In 2022, M&T repurchased a total of 10,453,282 shares of its common stock at an average cost per share of $172.19 resulting in a total cost of $1.8 billion. No common shares were repurchased in 2021.

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 $8.6 billion at December 31, 2023, $8.7 billion at December 31, 2022 and $4.6 billion at December 31, 2021, consisting predominantly of goodwill. Amortization of core deposit and other intangible assets, after-tax effect, totaled $48 million, $43 million and $8 million during 2023, 2022 and 2021, 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 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 2022 and 2021, those merger-related expenses totaled $580 million ($432 million after-tax effect) in 2022 and $44 million ($34 million after-tax effect) in 2021. There were no merger-related expenses in 2023. 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.

Table 2

SUPPLEMENTAL REPORTING OF NON-GAAP RESULTS OF OPERATIONS

	Year ended December 31,			Percent Change from
(Dollars in millions, except per share data)	2023			2022			2021		2022 to 2023		2021 to 2022
Net operating income	$	2,789			$	2,466		$	1,900			13	%	30	%
Diluted net operating earnings per share		16.08				14.42			14.11			12		2
Return on:
Average tangible assets		1.42	%			1.35	%		1.28	%
Average tangible common equity		17.60				16.70			16.80
Efficiency ratio		54.9				56.6			59.0
Tangible equity per common share (a)	$	98.54			$	86.59		$	89.80			14	%	-4	%

(a)
At the period end.

The efficiency ratio measures the relationship of noninterest operating expenses, which exclude expenses M&T considers to be "nonoperating" in nature consisting of amortization of core deposit and other intangible assets and merger-related expenses, to revenues. The calculations of the Company’s 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), and reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 3.

Table 3

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Dollars in millions, except per share)	2023					2021
Income statement data
Net income
Net income	$	2,741		$	1,992		$	1,859
Amortization of core deposit and other intangible assets (a)		48			43			7
Merger-related expenses (a)		—			431			34
Net operating income	$	2,789		$	2,466		$	1,900
Earnings per common share
Diluted earnings per common share	$	15.79		$	11.53		$	13.80
Amortization of core deposit and other intangible assets (a)		.29			.26			.06
Merger-related expenses (a)		—			2.63			.25
Diluted net operating earnings per common share	$	16.08		$	14.42		$	14.11
Other expense
Other expense	$	5,379		$	5,050		$	3,612
Amortization of core deposit and other intangible assets		(62	)		(56	)		(10	)
Merger-related expenses		—			(338	)		(44	)
Noninterest operating expense	$	5,317		$	4,656		$	3,558
Merger-related expenses
Salaries and employee benefits	$	—		$	102		$	—
Equipment and net occupancy		—			7			—
Outside data processing and software		—			5			1
Professional and other services		—			72			37
Advertising and marketing		—			9			1
Other costs of operations		—			143			5
Other expense		—			338			44
Provision for credit losses		—			242			—
Total	$	—		$	580		$	44
Efficiency ratio
Noninterest operating expense (numerator)	$	5,317		$	4,656		$	3,558
Taxable-equivalent net interest income	$	7,169		$	5,861		$	3,840
Other income		2,528			2,357			2,167
Less: Gain (loss) on bank investment securities		4			(6	)		(21	)
Denominator	$	9,693		$	8,224		$	6,028
Efficiency ratio		54.9	%		56.6	%		59.0	%
Balance sheet data
Average assets
Average assets	$	205,397		$	190,252		$	152,669
Goodwill		(8,473	)		(7,537	)		(4,593	)
Core deposit and other intangible assets		(177	)		(179	)		(8	)
Deferred taxes		44			43			2
Average tangible assets	$	196,791		$	182,579		$	148,070
Average common equity
Average total equity	$	25,899		$	23,810		$	16,909
Preferred stock		(2,011	)		(1,946	)		(1,438	)
Average common equity		23,888			21,864			15,471
Goodwill		(8,473	)		(7,537	)		(4,593	)
Core deposit and other intangible assets		(177	)		(179	)		(8	)
Deferred taxes		44			43			2
Average tangible common equity	$	15,282		$	14,191		$	10,872
At end of year
Total assets
Total assets	$	208,264		$	200,730		$	155,107
Goodwill		(8,465	)		(8,490	)		(4,593	)
Core deposit and other intangible assets		(147	)		(209	)		(4	)
Deferred taxes		37			51			1
Total tangible assets	$	199,689		$	192,082		$	150,511
Total common equity
Total equity	$	26,957		$	25,318		$	17,903
Preferred stock		(2,011	)		(2,011	)		(1,750	)
Common equity		24,946			23,307			16,153
Goodwill		(8,465	)		(8,490	)		(4,593	)
Core deposit and other intangible assets		(147	)		(209	)		(4	)
Deferred taxes		37			51			1
Total tangible common equity	$	16,371		$	14,659		$	11,557

(a)
After any related tax effect.

Net Interest Income/Lending, Investing and Funding Activities

Interest income earned on certain of the Company's assets is exempt from federal income tax. Taxable-equivalent net interest income is a non-GAAP measure that adjusts income earned on a tax-exempt asset to present it on an equivalent basis to interest income earned on a fully taxable asset.

Taxable-equivalent net interest income was $7.17 billion in 2023, a 22% increase from 2022. That increase reflects one additional quarter of earning assets acquired and interest-bearing liabilities assumed from the acquisition of People's United in 2023 as compared with 2022 and a 44 basis point widening of the net interest margin to 3.83% in 2023 from 3.39% in 2022. The increased net interest margin in 2023 is generally reflective of a higher interest rate environment resulting from actions taken by the Federal Reserve to temper inflationary pressures on the U.S. economy. The FOMC raised its target federal funds rate through multiple hikes that totaled 5.25% from March 2022 through July 2023, which led to higher yields on loans, deposits at the FRB of New York and investment securities, partially offset by higher rates paid on interest-bearing liabilities, including deposits and borrowings. Average earning assets increased $14.2 billion to $187.0 billion in 2023 from $172.8 billion in 2022 and average interest-bearing liabilities increased $25.7 billion to $119.7 billion in 2023 from $94.0 billion in 2022.

Net interest income expressed on a taxable-equivalent basis aggregated $5.86 billion in 2022 compared with $3.84 billion in 2021. The increase in 2022 reflected the impact of $33.7 billion in additional average earning assets predominantly resulting from the People's United transaction and a 63 basis point widening of the net interest margin to 3.39% in 2022 from 2.76% in 2021. The higher net interest margin was generally reflective of a rising interest rate environment described herein. Average earning assets were $172.8 billion in 2022 and $139.1 billion in 2021.

Table 4

AVERAGE BALANCE SHEETS AND TAXABLE-EQUIVALENT RATES

	2023			2022			2021
(Dollars in millions)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate			Average Balance			Interest		Average Rate
Assets
Earning assets:
Loans and leases, net of unearned discount (a):
Commercial and industrial	$	54,271			$	3,640				6.71	%		$	44,127			$	2,037				4.62	%	$	32,100			$	1,170			3.64	%
Commercial real estate		34,473				2,211				6.33				34,375				1,517				4.35			30,412				1,232			3.99
Residential real estate		23,614				971				4.11				21,257				797				3.75			16,770				595			3.55
Consumer		20,380				1,229				6.03				19,538				908				4.65			17,331				767			4.43
Total loans and leases, net		132,738				8,051				6.07				119,297				5,259				4.41			96,613				3,764			3.90
Interest-bearing deposits at banks		26,202				1,360				5.19				33,435				509				1.52			35,829				48			.13
Federal funds sold and agreements to resell securities		—				—				5.39				70				—				.43			167				—			.12
Trading account		133				4				3.20				109				2				1.49			50				1			1.89
Investment securities (b):
U.S. Treasury and federal agencies		24,067				696				2.89				16,933				410				2.42			5,736				129			2.24
Obligations of states and political subdivisions		2,539				95				3.72				2,025				71				3.52			1				—			5.87
Other		1,326				72				5.44				939				35				3.66			672				12			1.87
Total investment securities		27,932				863				3.09				19,897				516				2.59			6,409				141			2.20
Total earning assets		187,005				10,278				5.50				172,808				6,286				3.64			139,068				3,954			2.84
Allowance for credit losses		(1,999	)									(1,751	)									(1,620	)
Cash and due from banks		1,765										1,776										1,446
Other assets		18,626										17,419										13,775
Total assets	$	205,397									$	190,252									$	152,669
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and interest-checking deposits	$	89,489			$	1,746				1.95	%		$	84,753			$	271				.32	%	$	70,879			$	33			.05	%
Time deposits		17,131				671				3.92				4,850				24				.49			3,263				19			.57
Deposits at Cayman Islands office		—				—				—				—				—				—			181				—			.11
Total interest-bearing deposits		106,620				2,417				2.27				89,603				295				.33			74,323				52			.07
Short-term borrowings		5,758				292				5.07				936				19				2.08			68				—			.01
Long-term borrowings		7,296				400				5.49				3,440				111				3.23			3,537				62			1.76
Total interest-bearing liabilities		119,674				3,109				2.60				93,979				425				.45			77,928				114			.14
Noninterest-bearing deposits		55,474										68,888										55,666
Other liabilities		4,350										3,575										2,166
Total liabilities		179,498										166,442										135,760
Shareholders’ equity		25,899										23,810										16,909
Total liabilities and shareholders’ equity	$	205,397									$	190,252									$	152,669
Net interest spread								2.90										3.19									2.70
Contribution of interest-free funds								.93										.20									.06
Net interest income/margin on earning assets				$	7,169				3.83	%					$	5,861				3.39	%				$	3,840				2.76	%

(a)
Includes nonaccrual loans.

(b)
Includes available-for-sale investment securities at amortized cost.

Table 5

CHANGES IN INTEREST INCOME AND EXPENSE (a)

	2023 Compared with 2022		2022 Compared with 2021
			Resulting from Changes in:					Resulting from Changes in:
(Dollars in millions)	Total Change		Volume			Rate		Total Change			Volume		Rate
Interest income (b):
Loans and leases, including fees	$	2,792		$	643		$	2,149			$	1,495		$	961		$	535
Deposits at banks		851			(131	)		982				461			(4	)		465
Trading account		2			1			1				1			1			—
Investment securities:
U.S. Treasury and federal agencies		286			196			90				281			270			11
Obligations of states and political subdivisions		24			20			4				71			71			—
Other		37			16			21				23			7			16
Total interest income	$	3,992							$	2,332
Interest expense:
Interest-bearing deposits:
Savings and interest-checking deposits	$	1,475		$	16		$	1,459			$	238		$	8		$	230
Time deposits		647			174			473				5			8			(3	)
Short-term borrowings		273			213			60				19			1			18
Long-term borrowings		289			178			111				49			(2	)		51
Total interest expense	$	2,684							$	311

(a)
The apportionment of changes resulting from the combined effect of both volume and rate was based on the separately determined volume and rate changes.

(b)
Interest income data are on a taxable-equivalent basis.

Lending Activities

Average loans and leases were $132.7 billion in 2023, up from $119.3 billion in 2022. Included in average loans and leases in the recent year as compared with a year earlier was the impact of one additional quarter of 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 $16.1 billion of commercial and industrial loans, $11.0 billion of commercial real estate loans, $7.1 billion of residential real estate loans and $1.6 billion of consumer loans. Table 6 summarizes average loans and leases outstanding in 2023 and percentage changes in the major components of the portfolio over the past two years.

•
Average balances of commercial and industrial loans increased $10.1 billion or 23% to $54.3 billion in 2023 from $44.1 billion in 2022. In addition to the acquisition of People's United, that increase also reflects growth in loans to financial and insurance industry customers and loans to motor vehicle and recreational finance dealers.

•
Average commercial real estate loan balances in 2023 were largely unchanged from the year earlier. Partially offsetting the impact of one additional quarter of commercial real estate loans obtained in the acquisition of People's United was a reduction in average balances as the Company sought to reduce its relative concentration of commercial real estate lending in 2023.

•
Average residential real estate loans were $23.6 billion and $21.3 billion in 2023 and 2022, respectively. The growth in residential real estate loans was largely attributable to the impact of one additional quarter of loans acquired from People's United. Throughout 2022, M&T retained rather than sold most originated residential mortgage loans. In the first quarter of 2023, M&T returned to originating for sale the majority of its newly committed residential mortgage loans.

•
Consumer loans averaged $20.4 billion in 2023, an increase of $0.8 billion or 4% from $19.5 billion in 2022, reflecting growth in average recreational finance loans, partially offset by declines in average automobile loans.

Table 6

AVERAGE LOANS AND LEASES

(Net of Unearned Discount)

			Percent Change from
(Dollars in millions)	2023		2022 to 2023		2021 to 2022
Commercial and industrial	$	54,271		23		%	37	%
Commercial real estate		34,473		—			13
Residential real estate		23,614		11			27
Consumer:
Recreational finance		9,386		10			11
Automobile		4,134		-9			2
Home equity lines and loans		4,782		2			25
Other		2,078		13			25
Total consumer		20,380		4			13
Total	$	132,738		11		%	23	%

Average loans and leases increased 23% in 2022, up from $96.6 billion in 2021.

•
Inclusive of the three-quarter impact of the acquired loan balances, average balances of commercial and industrial loans increased $12.0 billion or 37% to $44.1 billion in 2022 from $32.1 billion in 2021. Partially offsetting the increase from acquired loans was a reduction in average balances of PPP loans, reflecting loan repayments by the SBA. PPP loans averaged $446 million in 2022, compared with $4.1 billion in 2021.

•
Average commercial real estate loans increased $4.0 billion or 13% to $34.4 billion in 2022 from $30.4 billion in 2021. That increase was predominantly due to the impact of loans obtained in the acquisition of People's United, partially offset by a reduction in average balances of legacy construction and permanent mortgage loans, reflecting repayments by customers.

•
Average residential real estate loans were $21.3 billion and $16.8 billion in 2022 and 2021, respectively. The growth in residential real estate loans was largely attributable to loans obtained in the acquisition of People's United and the Company's decision in the third quarter of 2021 (and continuing throughout 2022) to retain rather than sell most originated residential mortgage loans. Partially offsetting those increases was the impact of ongoing repayments of loans by customers.

•
Consumer loans averaged $19.5 billion in 2022, an increase of $2.2 billion or 13% from $17.3 billion in 2021, reflecting the impact of loans obtained in the acquisition of People's United (that consisted predominantly of outstanding balances of home equity lines of credit) and growth in average recreational finance loans.

Table 7 presents the composition of the Company’s loan and lease portfolio at the end of 2023, including outstanding balances to businesses and consumers in New York State, the Mid-Atlantic area, the New England region and other states.

Table 7

LOANS AND LEASES

(Net of Unearned Discount)

December 31, 2023


			New	Mid-		New
(Dollars in millions)	Outstanding		York	Atlantic (a)		England (b)	Other
Real estate:
Residential	$	23,264			31	%			30	%		26	%		13	%
Commercial		33,003			34				27			21			18
Total real estate		56,267		32				29			23			16
Commercial and industrial		54,459		25				33			14			28
Consumer:
Recreational finance		10,058		9				16			7			68
Home equity lines and loans		4,649			35				41			23			1
Automobile		3,992			24				50			6			20
Other secured or guaranteed		694			29				38			9			24
Other unsecured		1,398			36				55			7			2
Total consumer		20,791		20				31			11			38
Total loans		131,517		27				31			18			24
Commercial leases		2,551		22				24			7			47
Total loans and leases	$	134,068			27	%			31	%		17	%		25	%

(a)
Includes Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia and the District of Columbia.

(b)
Includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

Commercial and industrial loans, including leases, totaled $57.0 billion at December 31, 2023, representing 43% of total loans. Table 8 presents information on commercial and industrial loans as of December 31, 2023 relating to geographic area, size, borrower industry and whether the loans are secured by collateral or unsecured. Owner-occupied loans secured by real estate included in commercial and industrial loans at December 31, 2023 totaled $9.9 billion. The real estate securing such loans is typically used in the primary business operations of the borrower and is not predominantly dependent on rental income from tenants. The Company also provides financing for leases to commercial customers. Commercial leases included in total commercial and industrial loans at December 31, 2023 aggregated $2.6 billion.

Table 8

COMMERCIAL AND INDUSTRIAL LOANS

(Includes Owner-Occupied Loans Secured by Real Estate)

December 31, 2023

						Mid-					New											Percent of
(Dollars in millions)	New York		Atlantic (a)		England (b)	Other		Total		Total
Commercial and industrial excluding owner-occupied real restate by industry:
Financial and insurance		$	2,761				$	1,913					$	1,148				$	4,857			$	10,679		19	%
Services			1,418					2,700						1,323					1,274				6,715		12
Motor vehicle and recreational finance dealers			1,484					1,916						629					2,213				6,242		11
Manufacturing			1,459					2,089						834					1,599				5,981		10
Wholesale			897					1,552						615					739				3,803		7
Transportation, communications, utilities			376					914						362					1,690				3,342		6
Retail			590					861						273					1,003				2,727		5
Construction			476					793						188					635				2,092		4
Health services			691					665						300					294				1,950		3
Real estate investors			732					629						65					258				1,684		3
Other			362					600						164					763				1,889		3
Total commercial and industrial excluding owner-occupied real estate			11,246					14,632						5,901					15,325				47,104		83
Owner-occupied real estate by industry:
Services			829					791						485					57				2,162		4
Motor vehicle and recreational finance dealers			397					693						266					511				1,867		3
Retail			364					693						334					150				1,541		3
Wholesale			211					465						176					88				940		2
Manufacturing			281					265						239					57				842		1
Real estate investors			261					336						194					27				818		1
Health services			351					198						98					9				656		1
Other			383					499						162					36				1,080		2
Total owner-occupied real estate			3,077					3,940						1,954					935				9,906		17
Total		$	14,323				$	18,572					$	7,855				$	16,260			$	57,010		100	%
Percent of total			25	%				33	%					14	%				28	%			100	%
Percent of dollars outstanding:
Secured			85	%				87	%					92	%				86	%			87	%
Unsecured		11				10					6					6				8
Leases		4				3					2					8				5
Total			100	%				100	%					100	%				100	%			100	%
Percent of dollars outstanding by loan size:
Less than $1 million			20	%				21	%					16	%				26	%			22	%
$1 million to $10 million		36				34					39					21				31
$10 million to $30 million		25				24					29					16				23
$30 million to $50 million		8				9					9					9				9
$50 million to $100 million		5				8					7					15				9
Greater than $100 million		6				4						—					13				6
Total			100	%				100	%					100	%				100	%			100	%

(a)
Includes Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia and the District of Columbia.

(b)
Includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

Loans secured by real estate, including outstanding balances of owner-occupied loans and home equity loans and lines of credit which the Company classifies as commercial and industrial loans and consumer loans, respectively, represented approximately 53% of the loan and lease portfolio at December 31, 2023, compared with 56% and 59% at December 31, 2022 and 2021, respectively.

Commercial real estate loans originated by the Company are typically secured by investor-owned real estate and 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 85% of the commercial real estate loan portfolio at the 2023 year end. Table 9 presents commercial real estate loans by geographic area, type of collateral and size of the loans outstanding at December 31, 2023. The $25.3 billion of permanent finance commercial real estate loans at December 31, 2023 were largely secured by multifamily residential, retail, service and office properties. 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. New York City commercial real estate loans totaled $4.8 billion at December 31, 2023 as compared with $5.3 billion at December 31, 2022. Commercial real estate loans secured by properties located outside of the New England area, the Mid-Atlantic area and New York State comprised 18% of total commercial real estate loans as of December 31, 2023.

Commercial real estate construction and development loans presented in Table 9 totaled $7.7 billion at December 31, 2023, or 6% of total loans and leases. Approximately 97% of those construction loans had adjustable interest rates. Included in such loans at the 2023 year end were loans made for various purposes, including the construction of office buildings, multifamily residential housing, retail space and other commercial development. The remainder of the commercial real estate construction portfolio was comprised of loans to builders and developers of residential real estate properties.

M&T Realty Capital, a commercial real estate lending subsidiary of M&T Bank, participates in the 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. 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 $3.9 billion at each of December 31, 2023 and 2022. There have been no material losses incurred as a result of those recourse arrangements.

Table 9

COMMERCIAL REAL ESTATE LOANS

December 31, 2023

		New York State
	New York						Mid-		New											Percent of
(Dollars in millions)	City		Other		Atlantic (a)	England (b)		Other		Total		Total
Permanent finance by property type:
Apartments/Multifamily		$	1,160				$	1,246					$	1,007				$	1,618			$	1,134			$	6,165			19	%
Retail/Service			1,128					1,300						1,479					1,404				601				5,912			18
Office			688					1,057						1,190					1,318				474				4,727			14
Health facilities			187					811						1,317					594				706				3,615			11
Hotel			143					469						776					623				499				2,510			8
Industrial/Warehouse			140					369						600					413				512				2,034			6
Other			108					88						73					45				—				314			1
Total permanent			3,554					5,340						6,442					6,015				3,926				25,277			77
Construction/Development:
Commercial:
Construction			1,010					802						2,327					877				1,195				6,211		19
Land/Land development			151					26						143					23				99				442			1
Residential builder and developer:
Construction			73					10						75					14				493				665		2
Land/Land development			—					13						66					11				318				408		1
Total construction/ development (c)			1,234					851						2,611					925				2,105				7,726			23
Total commercial real estate		$	4,788				$	6,191					$	9,053				$	6,940			$	6,031			$	33,003			100	%
Percent of total			15	%				19	%					27	%				21	%			18	%			100	%
Percent of dollars outstanding by loan size:
Less than $1 million			2	%				8	%					4	%				6	%			8	%			6	%
$1 million to $10 million		24				42					27					39				21			31
$10 million to $30 million		35				36					39					40				27			36
$30 million to $50 million		14				11					21					13				28			17
$50 million to $100 million		18				3					8					2				14			8
Greater than $100 million		7					—					1					—				2				2
Total			100	%				100	%					100	%				100	%			100	%			100	%

(a)
Includes Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia and the District of Columbia.

(b)
Includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

Real estate loans secured by one-to-four family residential properties were $23.3 billion at December 31, 2023, including approximately 31% secured by properties located in New York State, 30% secured by properties in the Mid-Atlantic area and 26% secured by properties located in New England. The Company’s portfolio of limited documentation residential real estate loans totaled $911 million at December 31, 2023, compared with $1.1 billion at December 31, 2022. That portfolio consisted predominantly of limited documentation loans acquired in a prior business combination. At origination such loans 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. 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 16% of total loans and leases at each of December 31, 2023 and 2022. Outstanding balances of recreational finance loans represented the largest component of the consumer loan portfolio at December 31, 2023 and totaled $10.1 billion or approximately 8% of total loans, compared with $9.1 billion or 7% at December 31, 2022. Outstanding automobile loan balances were $4.0 billion at December 31, 2023, compared with $4.5 billion at December 31, 2022. Home equity loans and lines of credit outstanding at December 31, 2023 and December 31, 2022 were $4.6 billion and $5.0 billion, respectively.

Investing Activities

The investment securities portfolio averaged $27.9 billion in 2023, up from $19.9 billion and $6.4 billion in 2022 and 2021, respectively. The higher average balance in 2023 as compared with 2022 reflects the impact of one additional quarter of investment securities acquired in the acquisition of People's United, which added approximately $11.6 billion to the investment securities portfolio on April 1, 2022, and purchases of approximately $3.3 billion of investment securities in 2023. The higher average balance in 2022 as compared with 2021, reflects the investment securities acquired from People's United and purchases of approximately $9.1 billion of investment securities in 2022. During 2023 and 2022 the Company purchased approximately $3.2 billion and $1.9 billion of fixed rate residential mortgage-backed securities, respectively, and approximately $50 million and $7.3 billion of U.S. Treasury notes, respectively. There were no significant sales of investment securities in 2023 and 2022. The Company routinely has increases and decreases in its holdings of capital stock of the FHLB of New York and the FRB of New York. Those holdings are accounted for at cost and are adjusted based on the 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 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 movements in interest rates and spreads, changes in liquidity needs, 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 gains on such equity securities were $4 million in 2023, compared with net unrealized losses of $6 million in 2022 and $21 million in 2021. Those gains and losses include changes in 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 2023, 2022 or 2021. A further discussion of fair values of investment securities is included herein under the heading “Capital.” Additional information about the investment securities portfolio is included in notes 3 and 21 of Notes to Financial Statements.

Other earning assets include interest-bearing balances 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 $26.3 billion in 2023, $33.6 billion in 2022 and $36.0 billion in 2021. Interest-bearing deposits at banks averaged $26.2 billion in 2023, compared with $33.4 billion in 2022 and $35.8 billion in 2021. The amounts of interest-bearing deposits at banks at the respective dates were predominantly comprised of deposits held at the FRB of New York. In general, the levels of those deposits often fluctuate due to changes in deposits of retail and commercial customers, trust-related deposits and additions to or maturities of investment securities or borrowings.

Funding Activities - Deposits

Table 10 summarizes average deposits in 2023 and percentage changes in the components of such deposits over the past two years.

Table 10

AVERAGE DEPOSITS

			Percent Change from
(Dollars in millions)	2023		2022 to 2023		2021 to 2022
Noninterest-bearing deposits	$	55,474		-19	%	24	%
Savings and interest-checking deposits		84,868		5		21
Time deposits of $250,000 or less		8,055		110		34
Total core deposits		148,397		-4		23
Time deposits greater than $250,000		2,280		199		90
Brokered deposits		11,417		194		1
Cayman Islands deposits		—		—		-100
Total deposits	$	162,094		2	%	22	%

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. The decline in average core deposits in 2023 as compared with 2022 reflects continued monetary tightening that influenced customers to seek higher rate alternatives, including a shift from operating demand accounts to off-balance sheet sweep accounts for commercial customers. Lower levels of activity in the capital markets also resulted in a reduction of trust demand deposits. Partially offsetting the decline was the impact of one additional quarter of core deposits obtained in the acquisition of People's United in 2023 as compared with 2022. The People's United acquisition added approximately $50.8 billion of core deposits on April 1, 2022, including $17.4 billion of noninterest-bearing deposits, $30.8 billion of savings and interest-checking deposits and $2.6 billion of time deposits. As compared with 2021, the increase in core deposits resulting from the acquisition of People's United was partially offset by the Company's initiative to reduce certain historically higher-cost deposits as well as customer reactions to the generally rising interest rate environment. Funding provided by core deposits represented 79% of average earning assets in 2023, compared with 89% in 2022 and 90% in 2021. Core deposits totaled $146.5 billion, $154.6 billion and $128.0 billion at December 31, 2023, 2022 and 2021, respectively.

Table 11

AVERAGE DEPOSITS BY SEGMENT

(Dollars in millions)	Commercial Bank					All Other	Total
2023
Noninterest-bearing deposits	$	17,173	$	28,399	$	9,224	$	678	$	55,474
Savings and interest-checking deposits		24,908		53,097		7,116		4,368		89,489
Time deposits		338		9,970		21		6,802		17,131
Total	$	42,419	$	91,466	$	16,361	$	11,848	$	162,094
2022
Noninterest-bearing deposits	$	26,084	$	30,274	$	11,676	$	854	$	68,888
Savings and interest-checking deposits		17,555		56,182		7,668		3,348		84,753
Time deposits		189		4,399		12		250		4,850
Total	$	43,828	$	90,855	$	19,356	$	4,452	$	158,491
2021
Noninterest-bearing deposits	$	22,468	$	21,865	$	10,534	$	799	$	55,666
Savings and interest-checking deposits		14,067		46,553		6,592		3,667		70,879
Time deposits		85		3,152		25		1		3,263
Deposits at Cayman Islands office		181		—		—		—		181
Total	$	36,801	$	71,570	$	17,151	$	4,467	$	129,989

The Company also receives funding from other deposit sources, including branch-related time deposits over $250,000, brokered deposits and, prior to June 30, 2021, deposits associated with the Company’s Cayman Islands office. Time deposits over $250,000 averaged $2.3 billion in 2023, $762 million in 2022 and $402 million in 2021. The increase in such deposits in 2023 as compared with 2022 predominantly reflects higher demand for time deposit products amidst a rising rate environment. The increase in average time deposits over $250,000 in 2022 as compared with 2021 reflected the impact of the acquisition of People's United and similarly higher demand for time deposit products as interest rates rose in 2022. The Company had brokered savings and interest-bearing transaction accounts that averaged $4.6 billion in 2023, compared with $3.6 billion in 2022 and $3.8 billion in 2021. Brokered time deposits averaged $6.8 billion in 2023, compared with $250 million in 2022. Brokered time deposits were not a significant source of funding in 2021. The increase in average brokered deposits in 2023 as compared with 2022 and 2021 reflects the Company's liquidity management and funding strategies during a period of rising interest rates and was predominantly due to brokered deposits added late in the fourth quarter of 2022 and throughout 2023. 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.

Funding Activities - Borrowings

Table 12 summarizes the average balances utilized from the Company's short-term and long-term borrowing facilities and note programs.

Table 12

AVERAGE BORROWINGS

(Dollars in millions)	2023
Short-term borrowings:
Federal funds purchased and repurchase agreements	$	430	$	368	$	68
FHLB advances		5,328		309		—
Other short-term borrowings		—		259		—
Total short-term borrowings	$	5,758	$	936	$	68
Long-term borrowings:
Senior notes	$	5,569	$	2,027	$	2,422
Subordinated notes		982		863		581
Junior subordinated debentures		538		534		530
Asset-backed notes		192		—		—
Other		15		16		4
Total long-term borrowings		7,296		3,440		3,537
Total borrowed funds	$	13,054	$	4,376	$	3,605

The Company also uses borrowing capacity from banks, the FHLBs, the FRB of New York and others as sources of funding. Short-term borrowings represent arrangements that at the time they were entered into had a contractual maturity of one year or less. The higher levels of short-term borrowings in 2023 as compared with 2022 and 2021 reflect the Company's management of liquidity. 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.

Long-term borrowings averaged $7.3 billion in 2023, $3.4 billion in 2022 and $3.5 billion in 2021.

•
During 2023, M&T issued $2.0 billion of fixed-to-floating senior notes at interest rates between 5.05% and 7.41% maturing from October 2029 to January 2034 and M&T Bank issued $2.5 billion of fixed rate senior notes at interest rates between 4.65% and 4.70% maturing from January 2026 to January 2028. In 2023, $500 million of fixed rate and $250 million of variable rate senior notes of M&T matured. In August 2023, a subsidiary of M&T Bank that specializes in equipment financing issued $550 million of asset-backed notes secured by equipment finance loans and leases at a weighted-average interest rate of 5.84% at the time of the securitization.

•
In 2022, M&T issued $500 million of fixed-to-floating senior notes at an interest rate of 4.55% maturing in August 2028 and M&T Bank issued $500 million of fixed rate senior notes at an interest rate of 5.40% maturing in November 2025. During 2022, M&T Bank redeemed $650 million of fixed rate senior notes and $250 million of variable rate senior notes of M&T Bank matured. 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.

•
In 2021, $350 million of variable rate senior notes of M&T Bank matured and M&T Bank redeemed $500 million of subordinated capital notes.

Additional information regarding long-term borrowings, including information regarding contractual maturities of such borrowings, is provided in note 9 of Notes to Financial Statements.

Net Interest Margin

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 2.90% in 2023, compared with 3.19% in 2022 and 2.70% in 2021. The yield on the Company’s earning assets increased 186 basis points to 5.50% in 2023 from 3.64% in 2022 and the rate paid on interest-bearing liabilities increased 215 basis points to 2.60% in 2023 from .45% in 2022. The decline in the net interest spread in 2023 as compared with 2022 reflects the impact of higher rates on interest-bearing liabilities (predominantly interest-bearing deposits) resulting from a general rise in interest rates and increased competition for deposits, partially offset by higher yields on loans and leases, deposits at the FRB of New York and investment securities. The increase in the net interest spread in 2022 as compared with 2021 reflects the impact of generally rising interest rates as increases in yields on loans and leases, deposits at the FRB of New York and investment securities outpaced the rise in rates paid on interest-bearing liabilities. The FOMC raised its target federal funds rate with a series of rate hikes that totaled 5.25% from March of 2022 through July of 2023.

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 $67.3 billion in 2023, $78.8 billion in 2022 and $61.1 billion in 2021. The decrease in average net interest-free funds in 2023 as compared with 2022 reflects a decline in the average balance of noninterest-bearing deposits. Noninterest-bearing deposits averaged $55.5 billion in 2023, $68.9 billion in 2022 and $55.7 billion in 2021. The decline in average noninterest-bearing deposits in 2023 as compared with 2022 reflects customer use of off-balance sheet investment products and a shift in deposits to interest-bearing accounts as interest rates rose. The growth in noninterest-bearing deposits from 2021 to 2022 reflects the impact of the People's United acquisition. In connection with the People's United acquisition, the Company assumed $17.4 billion of noninterest-bearing deposits at the acquisition date. Shareholders’ equity averaged $25.9 billion in 2023, compared with $23.8 billion and $16.9 billion in 2022 and 2021, respectively. The higher amounts of shareholders' equity in 2023 and 2022 as compared with 2021 reflects 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. M&T repurchased $600 million of its common stock (inclusive of the share repurchase excise tax) in 2023 and $1.8 billion in 2022. Goodwill and core deposit and other intangible assets averaged $8.7 billion in 2023, $7.7 billion in 2022 and $4.6 billion in 2021. The Company recorded $3.9 billion of goodwill on April 1, 2022 which represents consideration paid over the fair value of net assets acquired in the People's United transaction. As part of the transaction, intangible assets were identified, thereby increasing the balance of core deposit and other intangible assets on the Company's balance sheet by $261 million on April 1, 2022. Reflecting the impact of the People's United acquisition, the cash surrender value of bank owned life insurance averaged $2.6 billion in 2023 and $2.4 billion in 2022, compared with $1.9 billion in 2021. Increases in the cash surrender value of bank owned life insurance 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 .93% in 2023, .20% in 2022 and .06%

in 2021. The increased contribution of net-interest free funds in 2023 as compared with 2022 and 2021 reflects the 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 3.83% in 2023, 3.39% in 2022 and 2.76% in 2021. Actions taken by the FOMC have led to generally higher interest rates overall and, accordingly, have contributed to the Company's higher net interest margin in 2023 and 2022 as compared with 2021. Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in reductions in spreads, could impact the Company’s net interest income and net interest margin.

Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company has utilized interest rate swap agreements to modify the repricing characteristics of certain portions of its earning assets and interest-bearing liabilities. 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. 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 Company enters into forward-starting interest rate swap agreements predominantly to hedge interest rate exposures expected in future periods. Table 13 summarizes information about interest rate swap agreements entered into for interest rate risk management purposes at December 31, 2023 and 2022.

Table 13

INTEREST RATE SWAP AGREEMENTS - DESIGNATED AS HEDGES

	Notional Amount		Average			Weighted-
			Forward-					Maturity	Average Rate
(Dollars in millions)	Active		Starting			Total		(In years)	Fixed		Variable
December 31, 2023
Fair value hedges:
Fixed rate long-term borrowings	$	2,000		$	1,000		$	3,000		5.8			3.45	%		5.62	%
Cash flow hedges:
Interest payments on variable rate commercial real estate loans		14,977			9,000			23,977		1.7		3.45			5.36
Total	$	16,977		$	10,000		$	26,977		2.2
December 31, 2022
Fair value hedges:
Fixed rate long-term borrowings	$	1,500		$	—		$	1,500		3.3			2.98	%		4.52	%
Cash flow hedges:
Interest payments on variable rate commercial real estate loans		11,250			4,650			15,900		1.4		1.91			4.38
Total	$	12,750		$	4,650		$	17,400		1.6

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. Information regarding the valuation of cash flow hedges included in other comprehensive income is presented in note 16 of Notes to Financial Statements. 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 expense of the respective hedged item. The amounts of hedge ineffectiveness recognized in 2023, 2022 and 2021 were not material to the Company’s consolidated results of operations. Additional information about the Company's use of interest rate swap agreements and other derivatives is included in note 19 of Notes to Financial Statements. The average notional amounts of

interest rate swap agreements entered into for interest rate risk management purposes (excluding forward-starting interest rate swap agreements not in effect during the year), 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 Table 14.

Table 14

INTEREST RATE SWAP AGREEMENTS - EFFECT ON NET INTEREST INCOME

	Year Ended December 31,
.	2023			2022			2021
(Dollars in millions)	Amount			Rate (a)			Amount			Rate (a)			Amount			Rate (a)
Increase (decrease) in:
Interest income (cash flow hedges)	$	(250	)			-.13		%	$	(36	)			-.02		%	$	252			.18	%
Interest expense (fair value hedges)		52				.04				(10	)			-.01				(35	)		-.03
Net interest income/margin	$	(302	)			-.16		%	$	(26	)			-.02		%	$	287			.20	%
Average notional amount (b)	$	14,027						$	15,487						$	18,282
Rate received (c)					3.12		%					1.73		%					1.75	%
Rate paid (c)					5.24							1.90							.18

(a)
Computed as a percentage of average earning assets or interest-bearing liabilities.

(b)
Excludes forward-starting interest rate swap agreements not in effect during the year.

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 $645 million and $517 million was recorded in 2023 and 2022, respectively, compared with a recapture of previously recorded provision of $75 million in 2021. The Company's estimates of expected credit losses at December 31, 2023, include projections of a modest rise in the unemployment rate, a reduction in the growth rate of GDP from recent experience and declining residential real estate and commercial real estate values. The higher provision for credit losses in 2023 as compared with 2022 reflects declines in commercial real estate values and higher interest rates contributing to a deterioration in the performance of loans to commercial borrowers as well as a $2.5 billion increase in loans and leases since December 31, 2022. The provision recorded in 2022 included $242 million on loans obtained in the acquisition of People's United not deemed to be 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 represents an increase of the carrying values of loans identified as PCD at the time of the acquisition. The provision for credit losses in 2022 reflected assumptions spurred by Federal Reserve initiatives to curb high rates of inflation that could have led to overall deterioration of economic conditions and, thus, credit quality during an eight-quarter forecast period. The recapture of provision for credit losses in 2021 reflected economic assumptions and projections that considered the macroeconomic outlook associated with a period of recovery after the COVID-19 pandemic.

A summary of the Company’s loan charge-offs, provision and allowance for credit losses is presented in Tables 15 and 21, and in note 5 of Notes to Financial Statements.

Table 15

LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES

(Dollars in millions)	2023			2022			2021
Allowance for credit losses beginning balance	$	1,925			$	1,469		$	1,736
Charge-offs:
Commercial and industrial		132				119			124
Commercial real estate		253				60			100
Residential real estate		10				12			11
Consumer		175				112			103
Total charge-offs		570				303			338
Recoveries:
Commercial and industrial		52				60			48
Commercial real estate		12				23			24
Residential real estate		7				10			9
Consumer		58				50			65
Total recoveries		129				143			146
Net charge-offs (a)		441				160			192
Allowance on acquired PCD loans		—				99			—
Provision for credit losses (b)		645				517			(75	)
Allowance for credit losses ending balance	$	2,129			$	1,925		$	1,469
Net charge-offs as a percent of:
Provision for credit losses		68.45	%			30.93	%	NM (c)
Average loans and leases, net of unearned discount		.33				.13			.20	%
Allowance for credit losses as a percent of:
Loans and leases, net of unearned discount, at year-end	1.59			1.46			1.58
Nonaccrual loans, at year-end	98.28			78.96			71.32

(a)
For the year ended December 31, 2022 net charge-offs do not reflect $33 million of charge-offs related to PCD loans acquired on April 1, 2022.

(b)
For the year ended December 31, 2022, provision for credit losses includes $242 million related to non-PCD acquired loans recorded on April 1, 2022.

Asset Quality

A summary of nonperforming assets and certain past due loan data and credit quality ratios is presented in Table 16.

Table 16

NONPERFORMING ASSET AND PAST DUE LOAN DATA

	December 31,
(Dollars in millions)	2023			2022			2021
Nonaccrual loans	$	2,166			$	2,439		$	2,060
Real estate and other foreclosed assets		39				41			24
Total nonperforming assets	$	2,205			$	2,480		$	2,084
Accruing loans past due 90 days or more (a)	$	339			$	491		$	963
Government guaranteed loans included in totals above:
Nonaccrual loans	$	53			$	44		$	51
Accruing loans past due 90 days or more (a)		298				363			928
Nonaccrual loans to total loans and leases, net of unearned discount		1.62	%			1.85	%		2.22	%
Nonperforming assets to total net loans and leases and real estate and other foreclosed assets	1.64			1.88			2.24
Accruing loans past due 90 days or more to total loans and leases, net of unearned discount		.25				.37		1.04

(a)
Predominantly residential real estate loans.

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 retail, office, healthcare and hospitality sectors. Loans obtained in the acquisition of People's United that have been classified as nonaccrual totaled $492 million and $572 million at December 31, 2023 and 2022, respectively.

At December 31, 2023, foreclosed assets were comprised predominantly of the Company’s holding of residential real estate-related properties. Net gains or losses associated with real estate and other foreclosed assets were not material in 2023, 2022 or 2021.

Residential real estate loans past due 90 days or more and accruing interest totaled $295 million at December 31, 2023, $345 million at December 31, 2022 and $920 million at December 31, 2021. Those amounts related predominantly to government-guaranteed loans. The lower balances at December 31, 2023 and 2022 as compared with December 31, 2021 reflect improved borrower repayment performance. Government guaranteed loans classified as accruing loans past due 90 days or more 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 $228 million at December 31, 2023, $294 million at December 31, 2022 and $889 million at December 31, 2021. 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 to 89 days past due were $1.7 billion at December 31, 2023, or 1.29% of total loans outstanding, compared with $1.8 billion or 1.35% at December 31, 2022 and $846 million or .91% at December 31, 2021. At December 31, 2023, 73% of loans 30 to 89 days past due were less

than 60 days delinquent. Information about delinquent loans at December 31, 2023 and 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.

The Company utilizes a loan grading system to differentiate risk amongst its commercial and industrial 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.

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 centralized credit risk department reviews all criticized commercial and industrial loans and commercial real estate loans greater than $5 million to determine the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or nonaccruing. For criticized nonaccrual loans, additional meetings are held with loan officers and their managers, workout specialists and senior management to discuss each of the relationships. In analyzing criticized loans, borrower-specific information is reviewed, including operating results, future cash flows, recent developments and the borrower’s outlook, and other pertinent data. The timing and extent of potential losses, considering collateral valuation and other factors, and the Company’s potential courses of action are contemplated.

Targeted loan reviews may be periodically performed over segments of loan portfolios that are experiencing heightened credit risk due to current or anticipated economic conditions. The intention of such reviews is to identify trends across such portfolios and inform portfolio risk limits and loss mitigation strategies. The business climate in 2023 has continued to be subjected to inflationary pressures, rising interest rates and liquidity concerns. These conditions have impacted many borrowers, particularly those with investor-owned commercial real estate loans in the hotel, office, retail, multifamily and healthcare sectors, including construction-related financing. In 2023, the Company completed targeted loan reviews covering the majority of its investor-owned commercial real estate portfolio, inclusive of construction loans, with a focus on criticized loans and loans with maturities in the next twelve months. The primary source of repayment of these loans is typically tenant lease payments to the investor/borrower. Vacancies, which have been influenced by certain demographic changes, and higher interest rates have contributed to lower current and anticipated future debt service coverage ratios, which has and could continue to influence the ability of borrowers to make existing loan payments. Lower debt service coverage ratios and reduced commercial real estate values also impact the ability of borrowers to refinance their obligations at loan maturity. As a result, criticized investor-owned commercial real estate loans have increased to $8.8 billion or 27% of such loans at December 31, 2023 from $7.9 billion or 22% of such loans at December 31, 2022. Criticized investor-owned commercial real estate loans were $7.0 billion or 25% of such loans at December 31, 2021. Investor-owned commercial real estate loans comprised 70% of total criticized loans at December 31, 2023. The weighted-average LTV ratios for investor-owned commercial real estate loans at the end of

2023 was approximately 56%. Criticized loans secured by investor-owned commercial real estate had a weighted-average LTV ratio of approximately 61% at December 31, 2023. In conjunction with the activities described herein, the Company has reduced its relative concentration of investor-owned commercial real estate loans in 2023.

Criticized commercial and industrial loans and commercial real estate loans acquired from People's United totaled $2.0 billion at December 31, 2023, compared with $2.5 billion at December 31, 2022. The accompanying Tables 17 and 18 summarize the outstanding balances, and associated criticized balances, of commercial and industrial loans and leases by industry and commercial real estate loans by property type, respectively, at December 31, 2023 and 2022.

Table 17

CRITICIZED COMMERCIAL AND INDUSTRIAL LOANS

(Includes Owner-Occupied Loans Secured by Real Estate)

	December 31, 2023		December 31, 2022
(Dollars in millions)	Outstanding		Criticized Accrual			Criticized Nonaccrual		Total Criticized	Outstanding		Criticized Accrual			Criticized Nonaccrual		Total Criticized
Commercial and industrial excluding owner-occupied real estate by industry:
Financial and insurance	$	10,679		$	346		$	3	$	349		$	7,428		$	139	$	1	$	140
Services		6,715			295			100		395			6,494			333		35		368
Motor vehicle and recreational finance dealers		6,242			164			51		215			4,797			7		—		7
Manufacturing		5,981			549			65		614			5,524			299		72		371
Wholesale		3,803			180			45		225			4,140			183		8		191
Transportation, communications, utilities		3,342			195			71		266			3,078			217		73		290
Retail		2,727			102			35		137			2,525			175		34		209
Construction		2,092			173			62		235			2,324			248		46		294
Health services		1,950			297			28		325			1,972			171		39		210
Real estate investors		1,684			189			4		193			1,882			35		3		38
Other		1,889			123			50		173			1,686			75		36		111
Total commercial and industrial excluding owner-occupied real estate	$	47,104		$	2,613		$	514	$	3,127		$	41,850		$	1,882	$	347	$	2,229
Owner-occupied real estate by industry:
Services	$	2,162		$	154		$	51	$	205		$	2,126		$	168	$	69	$	237
Motor vehicle and recreational finance dealers		1,867			10			7		17			1,794			—		2		2
Retail		1,541			107			13		120			1,619			66		11		77
Wholesale		940			28			2		30			976			19		2		21
Manufacturing		842			64			24		88			809			52		23		75
Real estate investors		818			26			12		38			691			50		23		73
Health services		656			55			26		81			955			30		6		36
Other		1,080			32			21		53			1,100			49		21		70
Total owner-occupied real estate		9,906			476			156		632			10,070			434		157		591
Total	$	57,010		$	3,089		$	670	$	3,759		$	51,920		$	2,316	$	504	$	2,820

Table 18

CRITICIZED COMMERCIAL REAL ESTATE LOANS

	December 31, 2023		December 31, 2022
(Dollars in millions)	Outstanding		Criticized Accrual			Criticized Nonaccrual		Total Criticized	Outstanding		Criticized Accrual			Criticized Nonaccrual		Total Criticized
Permanent finance by property type:
Apartments/Multifamily	$	6,165		$	1,184		$	115	$	1,299		$	5,888		$	684	$	78	$	762
Retail/Service		5,912			1,075			227		1,302			6,296			971		182		1,153
Office		4,727			879			185		1,064			5,186			863		208		1,071
Health services		3,615			1,364			117		1,481			3,667			1,052		222		1,274
Hotel		2,510			496			210		706			2,810			676		512		1,188
Industrial/Warehouse		2,034			224			13		237			2,238			98		12		110
Other		314			28			2		30			594			40		26		66
Total permanent		25,277			5,250			869		6,119			26,679			4,384		1,240		5,624
Construction/Development		7,726			2,527			174		2,701			8,617			2,169		126		2,295
Total	$	33,003		$	7,777		$	1,043	$	8,820		$	35,296		$	6,553	$	1,366	$	7,919

Total criticized commercial and industrial and commercial real estate loans were $12.6 billion at the end of 2023, as compared with $10.7 billion at December 31, 2022. Criticized loans represented 14.0% of the total commercial and industrial and commercial real estate loans at December 31, 2023, up from 12.3% a year earlier, reflective of increases of $939 million in commercial and industrial loans, $495 million in permanent finance commercial real estate loans and $406 million in construction loans. At December 31, 2023, permanent finance commercial real estate loans comprised 49% of total criticized loans whereas commercial and industrial loans and construction loans represented 30% and 21% of those criticized loans, respectively. Criticized commercial real estate loans secured by multifamily, retail and healthcare properties as well as construction loans mainly contributed to the increase in criticized commercial real estate loans from end of year 2022 to December 31, 2023. Borrowers in the financial and insurance, manufacturing and motor vehicle and recreational finance dealer industries were the largest contributors to the $939 million increase in criticized commercial and industrial loans from December 31, 2022 to 2023's year end. At December 31, 2023, approximately 96% of criticized accrual loans and 53% of criticized nonaccrual loans were considered current with respect to their payment status.

The Company’s loss identification and estimation techniques with respect to loans secured by residential real estate 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. Limited documentation first lien 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. At December 31, 2023, approximately 50% of the Company’s home equity portfolio consisted of first lien loans and lines of credit and the remaining 50% were junior liens. With respect to junior lien loans, to the extent known by the Company, if a senior lien loan would be on nonaccrual status because of payment delinquency, even if such senior lien loan was not owned by the Company, the junior lien loan or line that is owned by the Company is placed on nonaccrual status. 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

considers 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 December 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. Information about the location of nonaccrual loans secured by residential real estate at December 31, 2023 is presented in Table 19.

Table 19

NONACCRUAL LOANS SECURED BY RESIDENTIAL REAL ESTATE

	December 31, 2023
			Nonaccrual
						Percent of
	Outstanding					Outstanding
(Dollars in millions)	Balances		Balances			Balances
Residential mortgage loans:
New York	$	6,695		$	91		1.36	%
Mid-Atlantic (a)		6,659			65		.97
New England (b)		6,033			43		.71
Other		2,966			16		.55
Total	$	22,353		$	215		.96	%
Limited documentation first lien mortgage loans:
New York	$	413		$	23		5.65	%
Mid-Atlantic (a)		374			22		5.74
New England (b)		86			8		9.12
Other		38			2		6.31
Total	$	911		$	55		6.04	%
First lien home equity loans and lines of credit:
New York	$	849		$	16		1.85	%
Mid-Atlantic (a)		995			21		2.13
New England (b)		473			5		1.07
Other		15			—		1.22
Total	$	2,332		$	42		1.81	%
Junior lien home equity loans and lines of credit:
New York	$	773		$	16		2.08	%
Mid-Atlantic (a)		911			16		1.74
New England (b)		609			7		1.11
Other		24			—		.39
Total	$	2,317		$	39		1.68	%

(a)
Includes Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia and the District of Columbia.

(b)
Includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

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.

A comparative summary of consumer loans in nonaccrual status by product is presented in Table 20.

Table 20

NONACCRUAL CONSUMER LOANS

	December 31,
(Dollars in millions)	2023		2022			2021
Home equity lines and loans	$	81		$	85		$	70
Recreational finance		36			45			28
Automobile		14			40			34
Other		52			49			45
Total	$	183		$	219		$	177

A summary of net charge-offs by loan type and as a percentage of such average loans is presented in Table 21.

Table 21

NET CHARGE-OFF (RECOVERY) INFORMATION

	2023		2022		2021
(Dollars in millions)	Net Charge-Offs (Recoveries)		Percentage of Average Loans		Net Charge-Offs (Recoveries)		Percentage of Average Loans		Net Charge-Offs (Recoveries)			Percentage of Average Loans
Commercial and industrial	$	80		.15	%	$	59			.13	%		$	76		.24	%
Real estate:
Commercial		231		.88			47			.18				71		.35
Residential builder and developer		2		.21			(3	)		-.21				(2	)	-.14
Other commercial construction		8		.11			(7	)		-.09				7		.08
Residential		3		.01			3			.01				3		.02
Residential - limited documentation		—		.01			(1	)		-.05				(1	)	-.06
Consumer:
Home equity lines and loans		—		.01			(1	)		-.02				(3	)	-.07
Recreational finance		51		.55			21			.25				13		.17
Automobile		7		.18			1			.02				(2	)	-.05
Other		59		2.82			41			2.23				30		2.03
Total	$	441		.33	%	$	160			.13	%		$	192		.20	%

The Company monitors its concentration of commercial real estate lending as a percentage of its Tier 1 capital plus its allowable allowance for credit losses, consistent with a metric utilized to differentiate such concentrations amongst regulated financial institutions. This metric, as prescribed in supervisory guidance, excludes loans secured by commercial real estate considered to be owner-occupied, but includes certain other loans, such as loans to real estate investment trusts, that are classified as commercial and industrial loans. The Company's commercial real estate loan concentration approximated 183% of Tier 1 capital plus its allowable allowance for credit losses at December 31, 2023 as compared with 208% at December 31, 2022 and 212% at December 31, 2021. The Company had no concentrations of credit extended to any specific industry that exceeded 10% of total loans at December 31, 2023.

Allowance for Credit Losses

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 5 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 December 31, 2023, concerns existed about inflation levels; potential liquidity shortages and tightening credit in the financial services markets; a slowing economy and possible recession in 2024; 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 residential and commercial real estate values, especially in the office, retail and healthcare sectors; higher interest rates 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 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 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 December 31, 2023, 2022 and 2021 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 Review Committee, which is comprised of senior management business leaders and economists. The assumptions utilized as of December 31, 2023, 2022 and 2021 are presented in Table 22 and were based on information available at or near the time the Company was preparing its estimate of expected credit losses as of those dates.

Table 22

ALLOWANCE FOR CREDIT LOSSES MACROECONOMIC ASSUMPTIONS

	December 31, 2023		December 31, 2022		December 31, 2021
	Year 1		Year 2		Cumulative		Year 1		Year 2		Cumulative		Year 1		Year 2		Cumulative
National unemployment rate	4.4	%	4.7	%			4.0	%	4.1	%			4.6	%	3.7	%
Real GDP growth rate	.9		1.9		2.8	%	1.0		2.5		3.5	%	3.1		2.7		5.9	%
Commercial real estate price index growth/decline rate	-9.1		4.8		-4.5		-1.3		3.3		1.9		5.3		5.5		11.1
Home price index growth/ decline rate	-3.2		-.1		-3.3		-3.2		-3.1		-6.2		4.7		1.1		5.9

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 influence its 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 GDP, commercial real estate prices or home prices could have an adverse impact on expected credit losses and may result in an increase in 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 alternative economic scenarios shown in Table 23 were considered to estimate the possible impact on modeled credit losses.

Table 23

ALLOWANCE FOR CREDIT LOSSES SENSITIVITIES

	December 31, 2023
	Year 1			Year 2			Cumulative
Potential downside economic scenario:
National unemployment rate		6.5	%			7.4	%
Real GDP growth rate	-2.3			1.5				-.8	%
Commercial real estate price index decline rate		-20.0			-2.7			-22.1
Home price index growth/decline rate		-10.0			.1				-10.0
Potential upside economic scenario:
National unemployment rate	3.2			3.2
Real GDP growth rate	3.5			2.3			5.9
Commercial real estate price index growth/decline rate	-4.1			8.5				4.0
Home price index growth rate	1.1			1.6			2.7

(Dollars in millions)		Impact to Modeled Credit Losses Increase (Decrease)
Potential downside economic scenario		$	369
Potential upside economic scenario			(164	)

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 5 of Notes to Financial Statements.

A comparative allocation of the allowance for credit losses for each of the past three year-ends is presented in Table 24. Amounts were allocated to specific loan categories based on information available to management at the time of each year-end assessment and using the methodologies described herein. Variations in the allocation of the allowance by loan category as a percentage of those loans reflect changes in management’s estimate of credit losses in light of economic developments. Furthermore, the Company’s allowance is general in nature and is available to absorb losses from any loan or lease category. Additional information about the allowance for credit losses is included in note 5 of Notes to Financial Statements.

Table 24

ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES

	December 31,
(Dollars in millions)	2023			2022			2021
Commercial and industrial	$	620			$	568			$	335
Commercial real estate		764				611				506
Residential real estate		116				115				72
Consumer		629				631				556
Total	$	2,129			$	1,925			$	1,469
As a percentage of loans and leases, net:
Commercial and industrial		1.09	%			1.09	%			1.10	%
Commercial real estate	2.31			1.73			1.79
Residential real estate		.50				.48			.45
Consumer		3.03			3.07			3.10
Total	1.59			1.46			1.58

Management has assessed that the allowance for credit losses at December 31, 2023 appropriately reflected expected credit losses inherent in the portfolio as of that date. Using the same methodology as described herein, the Company added $341 million to the allowance for credit losses related to the $35.8 billion of loans and leases obtained in the acquisition of People's United on April 1, 2022. The combined Company allowance for credit losses at April 1, 2022 as a percentage of loans and leases outstanding was 1.42%. The increase in the allowance for credit losses as a percentage of loan and leases at December 31, 2023 as compared with December 31, 2022 reflects a higher amount of credit losses expected on the Company's outstanding commercial real estate loans. Included in the allocation of the allowance for credit losses were reserves for such loans secured by office properties of 4.37% at December 31, 2023. 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 the end of 2023, 2022 and 2021 was 98%, 79% and 71%, 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

The components of other income are presented in Table 25.

Table 25

OTHER INCOME

	Year Ended December 31,		Percent Change from
(Dollars in millions)	2023		2022			2021		2022 to 2023		2021 to 2022
Mortgage banking revenues	$	409		$	357		$	571			15	%	-38	%
Service charges on deposit accounts		475			447			402			6		11
Trust income		680			741			645			-8		15
Brokerage services income		102			88			63			17		40
Trading account and other non-hedging derivative gains		49			27			24			84		10
Gain (loss) on bank investment securities		4			(6	)		(21	)		—		—
Other revenues from operations		809			703			483			15		46
Total other income	$	2,528		$	2,357		$	2,167			7	%	9	%

Mortgage banking revenues

Mortgage banking revenues are comprised of both residential and commercial mortgage banking activities, which consist of realized gains and losses from sales of real estate loans and loan servicing rights, unrealized gains and losses on real estate loans held for sale and related commitments, real estate loan servicing fees, and other real estate loan related fees and income. 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.

Table 26

RESIDENTIAL MORTGAGE BANKING ACTIVITIES

	Year Ended December 31,
(Dollars in millions)	2023		2022			2021
Residential mortgage banking revenues
Gains (losses) on loans originated for sale	$	25		$	(2	)	$	164
Loan servicing fees		132			83			89
Loan sub-servicing and other fees		125			154			153
Total loan servicing revenues		257			237			242
Total residential mortgage banking revenues	$	282		$	235		$	406
New commitments to originate loans for sale	$	1,255		$	314		$	3,853

(Dollars in millions)	December 31, 2023
Balances at period end
Loans held for sale	$	190	$	32
Commitments to originate loans for sale		163		31
Commitments to sell loans		295		53
Capitalized mortgage loan servicing assets (a)		456		194
Loans serviced for others		40,021		22,365
Loans sub-serviced for others (b)		115,321		96,027
Total loans serviced for others	$	155,342	$	118,392

(a)
Additional information about the Company's capitalized residential mortgage loan servicing assets, including information about the calculation of estimated fair value, is presented in note 7 of Notes to Financial Statements.

(b)
The contractual servicing rights associated with residential mortgage 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 25 of Notes to Financial Statements.

•
Throughout late 2021 and all of 2022, the Company originated the majority of its residential real estate loans for retention in its loan portfolio rather than for sale. In the first quarter of 2023, the Company returned to originating for sale the majority of its newly originated residential mortgage loans. Gains associated with residential mortgage loans originated for sale increased $27 million in 2023 as compared with 2022 and conversely declined $166 million in 2022 as compared with 2021.

•
The increase in residential mortgage loan servicing fees in 2023 as compared with 2022 and 2021 primarily reflects a $350 million bulk purchase of residential mortgage loan servicing rights associated with $19.5 billion of residential real estate loans on March 31, 2023. The decline in residential mortgage loan sub-servicing and other fees in 2023 as compared with 2022 reflects lower fees on reduced loan modification activity.

•
The higher balances of capitalized residential mortgage servicing assets and outstanding balances of residential mortgage loans serviced for others at December 31, 2023 as compared with December 31, 2022 reflects the bulk purchase of residential mortgage loan servicing rights in the first quarter of 2023.

Table 27

COMMERCIAL MORTGAGE BANKING ACTIVITIES

	Year Ended December 31,
(Dollars in millions)	2023		2022			2021
Commercial mortgage banking revenues
Gains on loans originated for sale	$	58		$	51		$	87
Loan servicing fees and other		69			71			78
Total commercial mortgage banking revenues	$	127		$	122		$	165
Loans originated for sale to other investors	$	3,053		$	3,129		$	3,963

(Dollars in millions)	December 31, 2023
Balances at period end
Loans held for sale	$	189	$	131
Commitments to originate loans for sale		916		349
Commitments to sell loans		1,105		480
Capitalized mortgage loan servicing assets (a)		123		126
Loans serviced for others (b)		24,157		22,166
Loans sub-serviced for others		3,873		3,841
Total loans serviced for others	$	28,030	$	26,007

(a)
Additional information about the Company's capitalized commercial mortgage loan servicing assets, including information about the calculation of estimated fair value, is presented in note 7 of Notes to Financial Statements.

(b)
Includes $3.9 billion of loan balances at each of December 31, 2023 and 2022 for which investors had recourse to the Company if such balances are ultimately uncollectable.

•
As compared with 2021, the decline in gains on loans originated for sale in 2022 and 2023 reflects lower volumes of commercial real estate loans originated for sale, which were influenced by a higher interest rate environment.

•
The higher servicing revenues in 2021 as compared with 2022 and 2023 were reflective of fees received from customers who repaid loans prior to maturity.

Service charges on deposit accounts

The increase in service charges on deposit accounts in 2023 as compared with 2022 reflects one additional quarter of revenues associated with the acquisition of People's United, partially offset by a full year impact in 2023 of the Company's elimination of certain non-sufficient fund fees and overdraft protection transfer charges from linked deposit accounts beginning in the second quarter of 2022. The Company also waived certain fees in the third and fourth quarters of 2022 following the conversion to the Company's deposit servicing system of People's United acquired customer deposit accounts in early September 2022. The impact of the temporary waivers associated with the People's United acquired customers was not material in 2022. Service charges on deposit accounts increased $45 million in 2022 as compared with 2021 reflecting fees associated with the acquisition of People's United of $70 million and increased consumer activity, reduced by lower overdraft-related fees of approximately $40 million that reflected the Company's elimination of certain non-sufficient fund fees and overdraft protection charges from linked deposit accounts.

Trust Income

Trust income includes fees from two significant businesses managed within the Company's Institutional Services and Wealth Management segment. The Institutional Services 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 assets (including retirement plan assets prior to the sale of CIT); and (iii) need investment and cash management services. The Wealth Management 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.

Table 28

TRUST INCOME AND ASSETS UNDER MANAGEMENT

	Year Ended December 31,
(Dollars in millions)	2023		2022			2021
Trust income
Institutional Services	$	369		$	442		$	375
Wealth Management		309			299			270
Commercial		2			—			—
Total trust income	$	680		$	741		$	645

(Dollars in millions)	December 31, 2023
Assets under management at period end
Trust assets under management (excluding proprietary funds)	$	63,963	$	152,228
Proprietary mutual funds		14,772		12,992
Total assets under management	$	78,735	$	165,220

•
In April 2023, M&T completed the divestiture of its CIT business to a private equity firm. Revenues associated with that business and included in Institutional Services trust income totaled $60 million, $165 million and $151 million during 2023, 2022 and 2021, respectively. After considering expenses, the results of operations of that business were not material to M&T's net income in any of those years.

•
Institutional Services trust income not related to the CIT business increased $32 million in 2023 as compared with 2022 reflecting new business growth and higher money market fees. The higher non-CIT related trust income in 2022 as compared with 2021 was largely attributable to reduced fee waivers of $31 million resulting from higher rates on money market fund accounts and incremental fees from sales.

•
The increase in Wealth Management revenues in 2023 as compared with 2022 reflected one additional quarter of operations acquired from People's United. The increase in Wealth Management revenues in 2022 as compared with 2021 reflected $31 million associated with acquired operations of People's United, reduced money market fee waivers of $6 million and sales activity, partially offset by adverse market conditions in the equity markets. Also contributing to a decline were investment management activities, including fees earned from retail customer investment accounts that reflected a full-year impact of a change in June 2021 of product delivery to retail brokerage and certain trust customers related to the LPL Financial relationship resulting in revenues previously recognized in trust income to be recorded as brokerage services income.

•
The lower assets under management at December 31, 2023 as compared with December 31, 2022 reflect the sale of the CIT business in the second quarter of 2023.

Brokerage services income

Brokerage services income, which includes revenues from the sale of mutual funds and annuities, securities brokerage fees and, since June 2021, sales of select investment products of LPL Financial, an independent financial services broker, increased $14 million in 2023 as compared with 2022 reflecting one additional quarter of operations acquired from People's United. The increase in brokerage services income in 2022 as compared with 2021 reflects the acquisition of People's United and the full-year impact of a change in June 2021 in product delivery to retail brokerage and certain trust customers related to the LPL Financial relationship.

Trading account and other non-hedging derivative gains

The Company enters into interest rate swap agreements and foreign exchange contracts with customers who need such services and concomitantly enters into offsetting trading positions with third parties to minimize the risks involved with these types of transactions. Information about the notional amount of interest rate, foreign exchange and other non-hedging contracts entered into by the Company is included in note 19 of Notes to Financial Statements and herein under the heading "Market Risk and Interest Rate Sensitivity." The increase in income from trading account and other non-hedging derivative gains in 2023 as compared with 2022 reflects favorable changes in market conditions impacting the value of assets held in connection with deferred compensation and other non-qualified benefit plans as well as higher revenues from interest rate swap agreements and foreign exchange transactions with commercial customers. The modest increase in such gains in 2022 as compared with 2021 reflects higher revenues from interest rate swap agreements and foreign exchange transactions with commercial customers, partially offset by declines in the value of assets held in connection with deferred compensation and other non-qualified benefit plans.

Gain (loss) on investment securities

The Company recognized a net gain on investment securities of $4 million in 2023, compared with net losses of $6 million and $21 million in 2022 and 2021, respectively. The losses in 2022 and 2021 reflect unrealized losses on investments in Fannie Mae and Freddie Mac preferred stock and other equity securities.

Other revenues from operations

Included in other revenues from operations were a $225 million gain on the sale of the CIT business in the second quarter of 2023 and a $136 million gain on sale of MTIA in the fourth quarter of 2022. The components of other revenues from operations are presented in Table 29.

Table 29

OTHER REVENUES FROM OPERATIONS

	Year Ended December 31,
(Dollars in millions)	2023		2022			2021
Letter of credit and other credit-related fees	$	187		$	165		$	128
Merchant discount and credit card fees		172			169			140
Bank owned life insurance revenue (a)		63			44			47
Equipment operating lease income		56			43			27
BLG income (b)		20			30			30
Insurance income		18			48			47
Gain on divestiture of CIT		225			—			—
Gain on divestiture of MTIA		—			136			—
Other		68			68			64
Total other revenues from operations	$	809		$	703		$	483

(a)
Tax-exempt income earned from bank owned life insurance includes increases in the cash surrender value of life insurance policies and benefits received. The Company owns both general account and separate account life insurance policies. To the extent market conditions change such that the market value of assets in a separate account bank owned life insurance policy becomes less than the previously recorded cash surrender value, an adjustment is recorded as a reduction to other revenues from operations.

(b)
During 2017, the operating losses of BLG resulted in M&T reducing the carrying value of its investment in BLG to zero. Subsequently, M&T has received cash distributions when declared by BLG that result in the recognition of income by M&T. M&T expects cash distributions from BLG in the future, but the timing and amount of those distributions are not within M&T's control. BLG is entitled to receive distributions from its affiliates that provide asset management and other services that are available for distribution to BLG’s owners, including M&T. Information about the Company’s relationship with BLG and its affiliates is included in note 25 of Notes to Financial Statements.

•
Increases in letter of credit and other credit-related fees, merchant discount and credit card fees and equipment operating lease income in 2023 and 2022 as compared with 2021 largely reflect additional revenues from operations acquired from People's United, including one additional quarter of such revenues in 2023 as compared with 2022.

•
Increases in tax-exempt income earned from bank owned life insurance in 2023 was primarily due to the increase in interest rates during 2022 which led to reductions in that year of the market values of assets in some separate account bank owned life insurance policies below previously recorded cash surrender value. Those reductions in recognized cash surrender value were not material, but were, nevertheless, recognized as a reduction of revenues in 2022.

•
The decline in insurance income in 2023 as compared with 2022 and 2021 reflects the sale of MTIA in the fourth quarter of 2022.

Other Expense

The components of other expense are presented in Table 30.

Table 30

OTHER EXPENSE

	Year Ended December 31,		Percent Change from
(Dollars in millions)	2023		2022 (a)			2021 (a)		2022 to 2023	2021 to 2022
Salaries and employee benefits	$	2,997		$	2,787		$	2,046		8	%	36	%
Equipment and net occupancy		520			474			327		10		45
Outside data processing and software		437			376			292		16		29
Professional and other services		413			509			379		-19		34
FDIC assessments		315			90			70		249		30
Advertising and marketing		108			90			64		19		41
Amortization of core deposit and other intangible assets		62			56			10		12		447
Other costs of operations		527			668			424		-21		58
Total other expense	$	5,379		$	5,050		$	3,612		7	%	40	%

(a)
Includes merger-related expenses considered "nonoperating" in nature totaling $338 million and $44 million in 2022 and 2021, respectively. Table 3 provides a summary of merger-related expenses in the reconciliation of annual GAAP amounts to non-GAAP measures. No merger-related expenses were incurred in 2023.

Other expense totaled $5.38 billion in 2023, compared with $5.05 billion in 2022 and $3.61 billion in 2021. Included in those amounts are expenses considered to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets and merger-related expenses. Exclusive of those nonoperating expenses, noninterest operating expenses aggregated $5.32 billion in 2023, $4.66 billion in 2022 and $3.56 billion in 2021. Changes in operating expenses for the years presented are described as follows:

Salaries and employee benefits

Merger-related salaries and employee benefits expenses were $102 million and less than $1 million, respectively, for the years ended December 31, 2022 and 2021. There were no merger-related salaries and employee benefits expenses in 2023.

•
The number of full time equivalent employees was 21,980 and 22,509 at December 31, 2023 and 2022, respectively, compared with 17,421 at December 31, 2021. The increase in staffing levels since December 31, 2021 was predominantly the result of the acquisition of People's United.

•
Salaries and employee benefits operating expenses increased $312 million in 2023 as compared with 2022 reflecting the additional quarter of People's United employees, higher salaries from increased average legacy staffing levels, annual merit increases, and higher employee benefits costs, including severance expenses and medical-related benefits expenses. The higher level of operating expenses in 2022 as compared with 2021 reflected higher staffing levels, including the addition of People's United employees, higher salaries resulting from merit increases and a rise in incentive compensation. Stock-based compensation totaled $118 million in 2023, compared with $111 million in 2022 and $85 million in 2021.

•
The Company provides pension and other postretirement benefits for its employees, including pension, retirement savings and post-retirement benefit plans. Expenses related to such benefits totaled $74 million in 2023, $62 million in 2022 and $128 million in 2021. The amounts recorded in salaries and employee benefits expense and other costs of operations, respectively, from the preceding sentence were as follows: $164 million and ($90 million) in 2023; $149 million and ($87 million) in 2022; $125 million and $3 million

in 2021. The Company sponsors both defined benefit and defined contribution pension plans. Pension expense for those plans was a net benefit of $21 million in 2023 and $23 million in 2022, compared with expense of $68 million in 2021. Components of pension expense included in other costs of operations reflect the amortization of net unrecognized gains and losses included in accumulated other comprehensive income. Prior to 2022, such net unrecognized gains and losses were amortized over the average remaining service periods of active participants in the plan. If all or substantially all of the plan’s participants are inactive, GAAP provides for the average remaining life expectancy of the participants to be used instead of average remaining service periods. Substantially all of the participants in the Company’s qualified defined benefit pension plan were inactive and, beginning in 2022, the average remaining life expectancy was utilized to amortize the net unrecognized gains and losses of the Plan. The change increased the amortization period by approximately sixteen years beginning in 2022 and, accordingly, reduced the amount of amortization of unrecognized losses recorded in 2022 net periodic pension expense that otherwise would have been recorded by approximately $36 million. Information about the Company’s pension plans, including significant assumptions utilized in completing actuarial calculations for the plans, is included in note 13 of Notes to Financial Statements. The Company’s retirement savings plan is a defined contribution plan in which eligible employees of the Company may defer up to 50% of qualified compensation via contributions to the plan. Including the impact of employees associated with the People's United acquisition, retirement savings plan expense reflecting the Company’s employer matching contribution was $96 million in 2023 and $84 million in 2022, compared with $63 million in 2021.

Nonpersonnel operating expenses

Nonpersonnel merger-related expenses aggregated $236 million in 2022 and $44 million in 2021. There were no nonpersonnel merger-related expenses in 2023. Excluding such expenses as well as the amortization of core deposit and other intangible assets, nonpersonnel operating expenses were $2.32 billion in 2023, $1.97 billion in 2022 and $1.51 billion in 2021.

•
As described herein within Part I Item 1, "Business", on November 16, 2023, the FDIC finalized a rule that imposes a special assessment to recover the costs to the DIF resulting from the FDIC’s use in 2023 of the systemic risk exception to the least-cost resolution test under the FDIA in connection with the receiverships of certain failed banks. The total of the special assessments for M&T is estimated at $197 million and such amount was recorded in the Consolidated Statement of Income in the fourth quarter of 2023. In October 2022, the FDIC finalized a rule that increased the initial base deposit insurance assessment rates by 2 basis points, beginning with the first quarterly assessment period of 2023.

•
After considering the increase in FDIC assessments, the remaining $124 million increase in nonpersonnel operating expenses in 2023 as compared with 2022 reflects one additional quarter of operations associated with the acquisition of People's United, higher amortization of capitalized servicing assets of $34 million predominately due to the bulk purchase of residential mortgage loan servicing rights in the first quarter of 2023, a $24 million reduction in the valuation allowance for capitalized servicing assets in 2022, increased outside data processing and software expenses of $66 million and losses associated with certain retail banking activities. Partially offsetting those unfavorable factors were lower professional and other services expenses of $24 million, reflecting a decrease in sub-advisory fees as a result of the sale of CIT in the second quarter of 2023, partially offset by higher management

consulting fees, and lower contributions to The M&T Charitable Foundation as compared with 2022.

•
Approximately 70% of the increase in nonpersonnel operating expenses in 2022 as compared with 2021 can be attributed to the acquired operations of People's United. Other factors contributing to the year-over-year increase were higher charitable contributions and outside data processing and software expenses, partially offset by lower defined benefit pension-related expenses included in other costs of operations.

Income Taxes

The provision for income taxes was $878 million in 2023, $620 million in 2022 and $596 million in 2021. The effective tax rates were 24.3% in 2023 and 2021, as compared with 23.7% in 2022. The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income, the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact of any large discrete or infrequently occurring items. The Company’s effective tax rate in future periods will also be affected by any change in income tax laws or regulations and interpretations of income tax regulations that differ from the Company’s interpretations by any of the various tax authorities that may examine tax returns filed by M&T or any of its subsidiaries. Information about amounts accrued for uncertain tax positions and a reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to pre-tax income is provided in note 14 of Notes to Financial Statements.

International Activities

A discussion of the Company's international activities is included in note 18 of Notes to Financial Statements.

Liquidity Risk

As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk. Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future obligations, including demands for loans and deposit withdrawals, funding operating costs, and other corporate purposes. Liquidity risk arises whenever the 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. Reflective of a decline in core deposits and an increase in liquid earning assets, core deposits financed 77% of the Company’s earning assets at December 31, 2023, compared with 85% at December 31, 2022. Core deposits financed 90% of the Company's earning assets at December 31, 2021.

The Company supplements funding provided through core deposits with various short-term and long-term wholesale borrowings, including overnight federal funds purchased, advances from the FHLBs, brokered deposits and longer-term borrowings. M&T Bank has access to additional funding sources through secured borrowings from the FHLB of New York and the FRB of New York. The Company has, in the past, issued subordinated capital notes and junior subordinated debentures associated with trust preferred securities to provide liquidity and enhance regulatory capital ratios. Those borrowings are generally considered Tier 2 capital and are includable in total regulatory capital.

At December 31, 2023 and 2022, long-term borrowings aggregated $8.2 billion and $4.0 billion, respectively, and short-term borrowings aggregated $5.3 billion and $3.6 billion, respectively. Information about the Company’s borrowings is included in note 9 of Notes to Financial Statements.

The Company has also benefited from the placement of brokered deposits. The Company had brokered savings and interest-bearing checking deposit accounts that aggregated $7.8 billion and $3.8 billion at December 31, 2023 and 2022, respectively. Brokered time deposits totaled $6.1 billion and $4.1 billion at December 31, 2023 and 2022, respectively. Approximately 84% of brokered time deposits at December 31, 2023 have a contractual maturity date in 2024.

Total uninsured deposits were estimated to be $67.0 billion at December 31, 2023 and $74.2 billion at December 31, 2022 and included $10.7 billion and $11.4 billion, respectively, that were collateralized by the Company. The Company maintains available liquidity sources, as presented in Table 36, which represent approximately 139% of uninsured deposits that are not collateralized at December 31, 2023.

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 short-term funding become restricted due to a disruption in the financial markets. The Company attempts to assess such risks by conducting scenario analyses that estimate the liquidity impact resulting from a debt ratings downgrade over various grading levels and other market events. 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. Information about the credit ratings of M&T and M&T Bank is presented in Table 31.

Table 31

DEBT RATINGS

	Moody’s	Standard and Poor’s	Fitch	Morningstar DBRS
M&T Bank Corporation:
Senior debt	Baa1	BBB+	A	A (high)
Subordinated debt	Baa1	BBB	A-	A
M&T Bank:
Short-term deposits	Prime-1	A-2	F1	R-1 (middle)
Long-term deposits	A1	A-	A+	AA (low)
Senior debt	Baa1	A-	A	AA (low)
Subordinated debt	Baa1	BBB+	A-	A (high)

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 December 31, 2023 approximately $1.7 billion was available for payment of dividends to M&T from bank subsidiaries. M&T also may obtain funding through long-term borrowings. Further information about the long-term outstanding borrowings of M&T is provided in note 9 of Notes to Financial Statements. As a BHC, M&T is obligated to serve as a managerial and financial source of strength to its bank subsidiaries as described in Part I, Item 1, "Business". As its ability to access the capital markets may be affected by market disruptions, M&T maintains sufficient cash resources at its parent company to satisfy projected cash outflows for an extended period without reliance on dividends from subsidiaries or external financing. As of December 31, 2023, M&T's parent company liquidity covered projected cash outflows for more than 24 months, including dividends on common and preferred stock, debt service and scheduled debt maturities.

In addition to deposits and borrowings, other sources of liquidity include maturities and repayments of investment securities, loans and other earning assets, as well as cash generated from operations, such as fees collected for services. The Company also has the ability to securitize or sell certain financial assets, including various loan types, to provide other liquidity alternatives. U.S. Treasury and federal agency securities and government issued or guaranteed mortgage-backed securities comprised 89% of the Company's debt securities portfolio at December 31, 2023. The weighted average durations of debt investment securities available for sale and held to maturity at December 31, 2023 were 1.3 years and 5.4 years, respectively. Table 32 provides the contractual maturity schedule and taxable-equivalent yields of debt securities as of December 31, 2023.

Table 32

MATURITY AND TAXABLE-EQUIVALENT YIELD OF DEBT SECURITIES

(Dollars in millions)	One Year or Less					Five to Ten Years		Over Ten Years		Total
December 31, 2023
Investment securities available for sale (a):
U.S. Treasury and federal agencies:
Carrying value	$	4,968		$	2,737		$	—		$	—		$	7,705
Yield		2.33	%		3.01	%		—			—			2.58	%
Mortgage-backed securities (b):
Government issued or guaranteed:
Carrying value	$	519		$	1,042		$	454		$	555		$	2,570
Yield		2.88	%		2.81	%		2.86	%		2.89	%		2.85	%
Other debt securities:
Carrying value	$	2		$	119		$	44		$	—		$	165
Yield		2.99	%		4.35	%		1.70	%		—			3.58	%
Total investment securities available for sale:
Carrying value	$	5,489		$	3,898		$	498		$	555		$	10,440
Yield		2.39	%		3.00	%		2.75	%		2.89	%		2.66	%
Investment securities held to maturity:
U.S. Treasury and federal agencies:
Carrying value	$	—		$	1,005		$	—		$	—		$	1,005
Yield		—			2.54	%		—			—			2.54	%
Obligations of states and political subdivisions:
Carrying value	$	15		$	174		$	1,351		$	961		$	2,501
Yield		2.48	%		2.81	%		3.50	%		4.19	%		3.71	%
Mortgage-backed securities (b):
Government issued or guaranteed:
Carrying value	$	435		$	1,815		$	4,095		$	5,435		$	11,780
Yield		3.18	%		3.18	%		3.29	%		3.25	%		3.25	%
Privately issued:
Carrying value	$	3		$	12		$	15		$	12		$	42
Yield		8.98	%		8.98	%		8.98	%		8.44	%		8.82	%
Other debt securities:
Carrying value	$	—		$	—		$	—		$	2		$	2
Yield		—			—			—			4.97	%		4.97	%
Total investment securities held to maturity:
Carrying value	$	453		$	3,006		$	5,461		$	6,410		$	15,330
Yield		3.19	%		2.97	%		3.36	%		3.40	%		3.30	%
Total debt investment securities:
Carrying value	$	5,942		$	6,904		$	5,959		$	6,965		$	25,770
Yield		2.45	%		2.98	%		3.31	%		3.36	%		3.04	%

(a)
Investment securities available for sale are presented at estimated fair value. Yields on such securities are based on amortized cost.

(b)
Maturities are reflected based upon contractual payments due. Actual maturities are expected to be significantly shorter as a result of loan repayments in the underlying mortgage pools.

Table 33 provides the maturity schedule of loans and leases as of December 31, 2023.

Table 33

MATURITY DISTRIBUTION OF LOANS AND LEASES (a)

(Dollars in millions)	Demand				2025 - 2028			2029 - 2038			After 2038
December 31, 2023
Commercial and industrial	$	8,260	$	11,822			$	31,255			$	5,568			$	239
Commercial real estate		52		8,640				17,696				5,416				218
Residential real estate		8		918				3,745				8,514				9,804
Consumer		482		1,754				6,492				7,247				4,622
Total	$	8,802	$	23,134			$	59,188			$	26,745			$	14,883
Floating or adjustable interest rates:
Commercial and industrial					$	21,211			$	2,438			$	53
Commercial real estate						14,663				4,182				186
Residential real estate						1,173				2,740				3,780
Consumer						935				200				3,322
Fixed or predetermined interest rates:
Commercial and industrial						10,044				3,130				186
Commercial real estate						3,033				1,234				32
Residential real estate						2,572				5,774				6,024
Consumer						5,557				7,047				1,300
Total					$	59,188			$	26,745			$	14,883

(a)
The data reflects contractual paydowns, but excludes nonaccrual loans.

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. The contractual amounts and timing of those payments as of December 31, 2023 are summarized in Table 34. 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 22 of Notes to Financial Statements. Table 34 summarizes the Company's other commitments as of December 31, 2023 and the timing of the expiration of such commitments. Table 35 provides the maturity of time deposits over $250,000 as of December 31, 2023.

Table 34

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

(Dollars in millions)	Less Than One Year					Over Five Years	Total
December 31, 2023
Payments due for contractual obligations:
Time deposits	$	18,207	$	2,306	$	245	$	1	$	20,759
Short-term borrowings		5,316		—		—		—		5,316
Long-term borrowings		527		2,548		2,503		2,623		8,201
Operating leases		162		267		176		208		813
Other		323		173		33		113		642
Total	$	24,535	$	5,294	$	2,957	$	2,945	$	35,731
Other commitments:
Commitments to extend credit (a)	$	21,702	$	13,683	$	8,890	$	4,820	$	49,095
Standby letters of credit (b)		1,486		562		150		91		2,289
Commercial letters of credit		12		41		9		—		62
Financial guarantees and indemnification contracts		78		619		706		2,633		4,036
Commitments to sell real estate loans		1,245		113		42		—		1,400
Total	$	24,523	$	15,018	$	9,797	$	7,544	$	56,882

(a)
Amounts exclude discretionary funding commitments to commercial customers of $12.3 billion that the Company has the unconditional right to cancel prior to funding.

(b)
Certain customers of the Company obtain financing through the issuance of VRDBs, which 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. Nevertheless, M&T Bank is not contractually obligated to purchase the VRDBs. The total amount of VRDBs outstanding for which M&T Bank acts as remarketing agent was $461 million at December 31, 2023.

Table 35

MATURITY OF TIME DEPOSITS WITH BALANCES OVER $250,000

	December 31,
(Dollars in millions)	2023
3 months or less	$	539
Over 3 through 6 months		952
Over 6 through 12 months		1,127
Over 12 months		266
Total	$	2,884

The Company's MLCR Committee, which includes members of executive management, closely monitors the Company’s liquidity position on an ongoing basis for compliance with internal policies and regulatory expectations. As a Category IV institution, the Company adheres to enhanced liquidity standards which require the performance of internal liquidity stress testing. The stress testing is designed to ensure the Company has sufficient liquidity in both institution-specific and general market-wide stress scenarios. For each scenario, the Company applies liquidity stress which may include deposit run-off, increased draws on unfunded loan commitments, increased collateral need for margin calls, increased haircuts on investment security-based funding and reductions in unsecured and secured borrowing capacity. Stress scenarios are measured over various time frames ranging from overnight to

twelve months. As required by regulation, the Company maintains a liquidity buffer comprised of cash and highly liquid unencumbered securities to cover a 30-day stress horizon. Liquidity stress events occurring over longer time horizons can be mitigated by the availability of secured funding sources at the FHLB of New York and FRB of New York. Presented in Table 36 is a summary of the Company's available sources of liquidity at December 31, 2023.

Table 36

AVAILABLE LIQUIDITY SOURCES

	December 31,
(Dollars in millions)	2023
Deposits at the FRB of New York	$	27,957
Unused secured borrowing facilities:
FRB of New York		17,106
FHLB of New York		16,765
Unencumbered investment securities (after estimated haircuts)		16,480
Total	$	78,308

Management continuously evaluates the use and mix of its various available funding alternatives, including short-term borrowings, issuances of long-term debt, the placement of brokered deposits and the securitization of certain loan products. 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. In accordance with liquidity regulations, the Company maintains a contingency funding plan to facilitate on-going liquidity management in times of liquidity stress. The plan outlines various funding options available during a liquidity stress event and establishes a clear escalation protocol to be followed within the Company's risk management framework. The plan sets forth funding strategies and procedures that management can quickly leverage to assist in decision-making and specifies roles and responsibilities for departments impacted by a potential liquidity stress event.

Market Risk and Interest Rate Sensitivity

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 hedge 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. The Company has entered into interest rate swap agreements to help manage exposure to interest rate risk. At December 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 $17.0 billion. In addition, the Company has entered into $10.0 billion of forward-starting interest rate swap agreements predominantly related to cash flow hedges. Information about interest rate swap agreements entered into for interest rate risk management purposes is included herein under the heading “Net Interest Income/Lending, Investing and Funding Activities” and in note 19 of Notes to Financial Statements.

The Company’s MLCR Committee 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 with 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.

Table 37 displays as of December 31, 2023 and 2022 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.

Table 37

SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES

Changes in interest rates	Calculated Change in Projected Net Interest Income
(Dollars in millions)	December 31, 2023			December 31, 2022
+200 basis points	$	(18	)		$	225
+100 basis points		20				158
-100 basis points		(46	)			(216	)
-200 basis points		(83	)			(440	)

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. Changes in the amounts and the reduction in net interest income sensitivity 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 the deployment of cash into fixed rate investment securities. The Company has also entered into additional interest rate swap agreements whereby it receives settlement amounts at a fixed rate and pays at a variable rate. Amidst the rising rate environment since the first quarter of 2022, M&T's cumulative deposit pricing beta, which is the change in deposit pricing in response to a change in market interest rates, approximated 54 percent. Excluding brokered deposits, that cumulative pricing beta approximated 49 percent. The cumulative deposit pricing beta (including and excluding brokered deposits) is assumed to approximate 50 to 55 percent in the interest rate 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. Management also uses an “economic value of equity” model to supplement the modeling technique described above and provide a long-term interest rate risk metric. Economic value of equity is a point-in-time analysis of the economic sensitivity of assets, liabilities and off-balance sheet positions that incorporates all cash flows over their estimated remaining lives. Management measures the impact of changes in market values due to interest rates under a number of scenarios, including immediate shifts of the yield curve.

Table 38 presents cumulative totals of net assets (liabilities) repricing on a contractual basis within the specified time frames, as adjusted for the impact of interest rate swap agreements entered into for interest rate risk management purposes. Management believes that this measure does not appropriately depict interest rate risk since changes in interest rates do not necessarily affect all categories of earning assets and interest-bearing liabilities equally nor, as assumed in the table, on the contractual maturity or repricing date. Furthermore, this static presentation of interest rate risk fails to consider the effect of ongoing lending and deposit gathering activities, projected changes in balance sheet composition or any subsequent interest rate risk management activities the Company is likely to implement.

Table 38

CONTRACTUAL REPRICING DATA

(Dollars in millions)	Three Months or Less					One to Five Years		After Five Years		Total
December 31, 2023
Loans and leases, net	$	75,826		$	5,765		$	27,545		$	24,932		$	134,068
Investment securities		2,828			3,502			6,760			13,807			26,897
Other earning assets		28,174			1			—			—			28,175
Total earning assets		106,828			9,268			34,305			38,739			189,140
Savings and interest- checking deposits		93,221			—			—			—			93,221
Time deposits		3,499			14,708			2,551			1			20,759
Total interest- bearing deposits		96,720			14,708			2,551			1			113,980
Short-term borrowings		5,316			—			—			—			5,316
Long-term borrowings		485			527			5,775			1,414			8,201
Total interest- bearing liabilities		102,521			15,235			8,326			1,415			127,497
Interest rate swap agreements		(19,477	)		(3,342	)		21,819			1,000			—
Periodic gap		(15,170	)		(9,309	)		47,798			38,324
Cumulative gap		(15,170	)		(24,479	)		23,319			61,643
Cumulative gap as a % of total earning assets		-8.0	%		-12.9	%		12.3	%		32.6	%

Certain of the Company's earning assets, interest-bearing liabilities, preferred equity instruments and interest rate swap agreements had historically referenced LIBOR. The determination of LIBOR has effectively ceased after its final publication on June 30, 2023. In preparation for the elimination of LIBOR as a reference rate, the Company essentially had discontinued entering into LIBOR-based contracts at the end of 2021. At December 31, 2023, substantially all customer and other counterparty financial instruments have been transitioned to a new index (generally SOFR) through the amendment of pre-existing agreements to include appropriate alternative language effective upon cessation of LIBOR publication, negotiating new agreements, or other means. The outstanding amount of loans and leases that continue to reference LIBOR at December 31, 2023 was not significant. Prior to its cessation, many of the Company's interest rate swap agreements referenced LIBOR. In October 2020, the International Swaps and Derivatives Association, Inc. published the Supplement and the Protocol.

The Protocol enabled market participants to incorporate certain revisions into their legacy non-cleared derivative trades with other counterparties that also chose 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 referenced LIBOR, clearinghouses have adopted the same SOFR benchmark alternatives of the Supplement and the Protocol. All of the Company's LIBOR-based interest rate swap agreements at December 31, 2023 have reset to a suitable alternative index, primarily SOFR.

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. Information about the fair valuation of financial instruments is presented in note 21 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 19 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 those financial instruments are recorded in the Consolidated Balance Sheet. The fair values of such non-hedging derivative assets and liabilities recognized on the Consolidated Balance Sheet were $256 million and $898 million, respectively, at December 31, 2023 and $380 million and $1.3 billion, respectively, at December 31, 2022. The fair value of asset and liability amounts at December 31, 2023 have been reduced by contractual settlements of $783 million and $32 million, respectively, and at December 31, 2022 have been reduced by contractual settlements of $1.1 billion and $29 million, respectively. The amounts associated with the Company's non-hedging derivative activities at December 31, 2023 and December 31, 2022 reflect changes in values associated with the interest rate swap agreements entered into with commercial customers that are not subject to periodic variation margin settlement payments.

Trading account assets were $106 million at December 31, 2023 and $118 million at December 31, 2022. Included in trading account assets were assets related to deferred compensation plans aggregating $22 million and $23 million at December 31, 2023 and 2022, respectively. 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 December 31, 2023 and 2022 were $27 million and $29 million, respectively, of liabilities related to deferred compensation plans. 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 $80 million at December 31, 2023 and $95 million at December 31, 2022.

Given the Company’s policies and positions, management believes that the potential loss exposure resulting from market risk associated with trading account and other non-hedging derivative activities was not material, however, as previously noted, the Company is exposed to credit risk associated with counterparties to transactions related to the Company’s actions to mitigate foreign currency and interest rate risk associated with customer activities. Information about the Company’s use of derivative financial instruments is included in note 19 of Notes to Financial Statements.

100

Capital

Shareholders’ equity was $27.0 billion at December 31, 2023 and represented 12.94% of total assets, compared with $25.3 billion or 12.61% at December 31, 2022 and $17.9 billion or 11.54% at December 31, 2021. The higher amount of shareholders' equity at December 31, 2023 and 2022, as compared with December 31, 2021 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 Preferred Stock amounting to $261 million on April 1, 2022.

Included in shareholders’ equity was preferred stock with financial statement carrying values of $2.0 billion at each of December 31, 2023 and 2022, compared with $1.7 billion at December 31, 2021. On April 1, 2022, the Company closed the acquisition of People's United resulting in the issuance of 10,000,000 shares of Series H Preferred Stock, par value $1.00 per share and liquidation preference of $25.00 per share, valued at $261 million. On August 17, 2021, M&T issued 50,000 shares of Series I Preferred Stock, par value $1.00 and liquidation preference of $10,000 per share. Information concerning the terms of M&T's issued and outstanding preferred stock, including Series H Preferred Stock and Series I Preferred Stock, is included in note 10 of Notes to Financial Statements.

Common shareholders’ equity totaled $24.9 billion, or $150.15 per share, at December 31, 2023, compared with $23.3 billion, or $137.68 per share, at December 31, 2022 and $16.2 billion, or $125.51 per share, at December 31, 2021. Tangible equity per common share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was $98.54 at December 31, 2023, compared with $86.59 and $89.80 at December 31, 2022 and 2021, respectively. The Company’s ratio of tangible common equity to tangible assets was 8.20% at December 31, 2023, compared with 7.63% and 7.68% at December 31, 2022 and 2021, respectively. Reconciliations of total common shareholders’ equity and tangible common equity and total assets and tangible assets as of December 31, 2023, 2022 and 2021 are presented in Table 3. During 2023, 2022 and 2021, the ratio of average total shareholders’ equity to average total assets was 12.61%, 12.51% and 11.08%, respectively. The ratio of average common shareholders’ equity to average total assets was 11.63%, 11.49% and 10.13% in 2023, 2022 and 2021, respectively.

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. The components of accumulated other comprehensive income (loss) are presented in Table 39.

Table 39

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - NET OF INCOME TAX

	December 31,
(Dollars in millions, except per share amount)	2023			2022			2021
Investment securities unrealized gains (losses), net (a)	$	(187	)		$	(329	)	$	78
Defined benefit plans adjustments, net (b)		(115	)			(202	)		(267	)
Cash flow hedges unrealized gains (losses) and other, net (c)		(157	)			(259	)		62
Total	$	(459	)		$	(790	)	$	(127	)
Accumulated other comprehensive income (loss), net, per common share	$	(2.76	)		$	(4.67	)	$	(0.99	)

(a)
Refer to note 3 of Notes to Financial Statements.

(b)
Refer to note 13 of Notes to Financial Statements.

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Reflected in the carrying amount of available-for-sale investment securities at December 31, 2023 were pre-tax effect unrealized gains of less than $1 million on securities with an amortized cost of $63 million and pre-tax effect unrealized losses of $251 million on securities with an amortized cost of $10.6 billion. Information concerning the Company’s fair valuations of investment securities is provided in notes 3 and 21 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 December 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 December 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 investment 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 December 31, 2023 and 2022. The amortized cost basis and fair value of obligations of states and political subdivisions in the held-to-maturity portfolio totaled $2.5 billion and $2.4 billion, respectively, at December 31, 2023 and $2.6 billion and $2.5 billion, respectively, at December 31, 2022. At December 31, 2023 and 2022, the Company had in its held-to-maturity portfolio privately issued mortgage-backed securities with an amortized cost basis of $42 million and $50 million, respectively, and a fair value of $46 million and $51 million, respectively. At December 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 has concluded that as of December 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.

Pursuant to previously approved capital plans and authorizations by M&T's Board of Directors, M&T repurchased 3,838,157 shares of its common stock for a total cost of $600 million, including the share repurchase excise tax, in 2023 and 10,453,282 shares of its common stock for $1.8 billion in 2022. There were no shares of common stock repurchased during 2021.

Cash dividends declared on M&T’s common stock totaled $871 million in 2023, compared with $788 million and $584 million in 2022 and 2021, respectively. Dividends per common share totaled $5.20 in 2023, compared with $4.80 and $4.50 in 2022 and 2021, respectively. M&T's common share dividend payout ratio was 32.97%, 41.56% and 32.69% in 2023, 2022 and 2021, respectively. Dividends of $100 million in 2023, $97 million in 2022 and $73 million in 2021 were declared on preferred stock in accordance with the terms of each series.

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M&T and its subsidiary banks are required to comply with applicable Capital Rules. Pursuant to those regulations, the minimum capital ratios are as follows:

•
4.5% CET1 to RWA (each as defined in the Capital Rules);

•
6.0% Tier 1 capital (that is, CET1 plus additional Tier 1 capital) to RWA (each as defined in the Capital Rules);

•
8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to RWA (each as defined in the Capital Rules); and

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

Capital Rules require buffers in addition to the minimum risk-based capital ratios noted above. M&T is subject to a SCB 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. In June 2023, the Federal Reserve released the results of its most recent supervisory stress tests. Based on those results, on October 1, 2023, M&T's SCB declined from 4.7% to 4.0%.

The federal bank regulatory agencies have issued rules that allow banks and BHCs to phase-in the impact of adopting the expected credit loss accounting model on regulatory capital. Those rules allow banks and BHCs to delay for two years the day one impact on retained earnings of adopting the expected loss accounting standard and 25% of the cumulative change in the reported allowance for credit losses subsequent to the initial adoption through the end of 2021, followed by a three-year transition period. The regulatory capital amounts and ratios of M&T and its bank subsidiaries as of December 31, 2023 are presented in note 24 of Notes to Financial Statements. A detailed discussion of the Capital Rules is included in Part I, Item 1 of this Form 10-K under the heading “Capital Requirements.”

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 DIF 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 on M&T’s ability to pay dividends. For additional information concerning this comprehensive regulatory framework, refer to Part I, Item 1, "Supervision and Regulation of the Company" of this Form 10-K.

On July 27, 2023, the federal banking agencies issued a notice of proposed rulemaking to modify the regulatory capital requirements applicable to large banking organizations with over $100 billion of total assets and their depository institution subsidiaries. The proposed rule would generally require banking organizations subject to Category III and IV standards, like the Company, to compute their regulatory capital consistent with Category I and II standards. Management is in the process of evaluating the impact of the proposed rule on the regulatory capital requirements of M&T and its subsidiary banks and currently estimates the proposed rules would increase the Company's RWA by a percentage in the mid-single digits.

Segment Information

Reportable segments have been determined based upon the Company’s organizational structure and its internal profitability reporting system. As described in note 23 of Notes to Financial Statements, in the fourth quarter of 2023 the Company completed modifications to its internal profitability reporting

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system to conform its internal management reporting with certain organizational changes that resulted in the realignment of its business operations into three reportable segments: Commercial Bank, Retail Bank and Institutional Services and Wealth Management. All other business activities that are not included in the three reportable segment results have been included in the "All Other" category. Certain changes to allocation methodologies for internal transfers for funding charges and credits associated with earning assets and interest-bearing liabilities and other revenues and expenses were also made in conjunction with these reportable segment revisions. Prior period reportable segment results disclosed herein have been presented in conformity with the new segment reporting structure.

The financial information of the Company’s segments was compiled utilizing the accounting policies described in note 23 of Notes to Financial Statements. 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, reported segments and the financial information of the reported segments are 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. Financial information about the Company’s segments is presented in note 23 of Notes to Financial Statements.

Commercial Bank

Net income for the Commercial Bank segment was $1.04 billion in 2023, compared with $1.24 billion in 2022.

•
Net interest income rose $107 million reflecting a widening of the net interest margin on deposits of 49 basis points and higher average outstanding loan balances of $9.9 billion, partially offset by a narrowing of the net interest margin on loans of 36 basis points and lower average outstanding deposit balances of $1.4 billion.

•
The provision for credit losses increased by $231 million reflecting higher net charge-offs predominantly on loans secured by commercial real estate.

•
Noninterest income increased $70 million reflecting the impact of one additional quarter of acquired operations of People’s United in 2023 as compared with 2022. Favorable factors included higher letter of credit and other credit-related fees of $23 million and service charges on deposit accounts of $14 million, an increase in equipment operating lease income of $13 million, higher underwriting fees of $7 million and comparatively higher gains on sale of commercial mortgage loans.

•
Noninterest expense increased $222 million also reflecting the impact of one additional quarter of operations acquired from People’s United and included increases in personnel-related costs of $93 million, centrally-allocated costs associated with data processing, risk management and other support services provided to the Commercial Bank segment of $66 million, FDIC assessments of $15 million, professional and other services of $12 million and advertising and marketing of $9 million.

The Commercial Bank segment’s net income increased $429 million in 2022 from $813 million in 2021, predominantly reflecting a nine-month impact of the People’s United acquisition in 2022.

•
Net interest income rose $744 million, reflecting a widening of net interest margin on deposits of 97 basis points and higher average outstanding loan and deposit balances of $16.5 billion and $7.0 billion, respectively, reflecting the nine-month impact of the People’s United acquisition on April 1, 2022, partially offset by a narrowing of the net interest margin on loans of 18 basis points.

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•
The provision for credit losses declined $103 million reflecting lower net charge-offs on both commercial and industrial loans and commercial real estate loans.

•
Largely reflecting the nine-month impact of the People’s United acquisition, noninterest income increased $79 million, mainly attributable to an increase of $37 million in letter of credit and other credit-related fees, a $15 million rise in each of merchant discount and credit card interchange fees and service charges on deposit accounts, and an increase of $13 million in other non-hedging derivative gains. Partially offsetting those favorable factors was a decline in commercial mortgage banking revenues reflecting lower commercial real estate loan origination and sales activity.

•
Also largely resulting from the nine-month impact of the People’s United acquisition in 2022, noninterest expense increased $337 million reflecting a rise in personnel-related costs of $152 million, higher centrally-allocated costs associated with data processing, risk management and other support services provided to the Commercial Bank segment of $137 million and an increase in equipment and net occupancy costs, FDIC assessments and other costs of operations.

Retail Bank

Net income for the Retail Bank segment was $1.84 billion in 2023, an increase of $799 million compared with 2022.

•
Net interest income rose $1.34 billion, reflecting a widening of the net interest margin on deposits of 152 basis points and higher average outstanding loan balances of $3.3 billion, partially offset by a narrowing of the net interest margin on loans of 30 basis points.

•
The provision for credit losses was $72 million higher driven by a rise in net charge-offs of consumer loans.

•
Noninterest income increased $59 million predominantly driven by an increase of $47 million in residential mortgage banking revenues. In the first quarter of 2023, the Company returned to originating for sale the majority of its newly committed residential mortgage loans rather than retain the loans resulting in higher gains associated with residential mortgage loans originated for sale. Residential mortgage loan servicing income increased reflecting the bulk purchase of residential mortgage servicing rights in the first quarter of 2023. Also contributing to the increase in noninterest income was a rise in service charges on deposit accounts of $13 million reflecting an additional three months of operations acquired from People’s United mitigated, somewhat, by fee waivers granted to People’s United customers following the conversion to the Company’s deposit servicing system in early September 2022. The impact of those waivers, however, was not material.

•
Noninterest expense rose $250 million reflecting the impact of one additional quarter of operations acquired from People’s United and included an increase in personnel-related costs of $86 million, higher equipment and net occupancy costs of $30 million, and a rise in centrally-allocated costs associated with data processing, risk management, and other support services provided to the Retail Bank segment of $34 million. Other unfavorable factors included an increase in expenses associated with the bulk purchase of residential mortgage loan servicing rights in the first quarter of 2023, higher check fraud and other losses and a reduction in the valuation allowance for capitalized servicing rights in 2022. Partially offsetting those increases was a $26 million decline in professional and other services expenses.

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The Retail Bank segment’s net income increased $274 million in 2022 from $765 million in 2021, predominantly reflecting the nine-month impact of the People’s United acquisition in 2022.

•
Net interest income rose $1.08 billion reflecting a widening of the net interest margin on deposits of 99 basis points and higher average outstanding balances of deposits and loans of $19.3 billion and $6.1 billion, respectively, partially offset by a narrowing of the net interest margin on loans of 41 basis points that reflected a lower level of PPP fee income resulting from repayment of loans by the SBA.

•
The provision for credit losses was $32 million higher driven by a rise in net charge-offs of consumer loans.

•
Noninterest income decreased $128 million reflecting a $171 million decline in residential mortgage banking revenues resulting from lower mortgage origination and sales activities. That decrease was partially offset by higher service charges on deposit accounts of $30 million and an increase in merchant discount and credit card interchange fees of $13 million, each reflecting the impact of the acquisition of People’s United.

•
Noninterest expense rose $547 million predominantly due to a rise in centrally-allocated costs associated with data processing, risk management, and other support services provided to the Retail Bank segment of $213 million, higher personnel-related costs of $198 million, an increase in equipment and net occupancy costs of $86 million and an increase in professional and other services of $27 million (all reflecting the nine-month impact of the People’s United acquisition).

Institutional Services & Wealth Management

Net income for the Institutional Services and Wealth Management segment was $620 million in 2023, an increase of $218 million from 2022.

•
Net interest income increased $297 million reflecting a widening of the net interest margin on deposits of 217 basis points, partially offset by a $3.0 billion decline in average outstanding deposit balances.

•
Noninterest income decreased $2 million reflecting a decline in trust income of $63 million. The divestiture of the CIT business in April 2023 resulted in a decline in trust income of approximately $105 million as compared with 2022. That decline in trust income was partially offset by the impact of one additional quarter of operations acquired from People’s United, improved sales activity and money market fees. Also impacting the decline in noninterest income was a $136 million gain on sale of MTIA recorded in the fourth quarter of 2022 and lower insurance income in 2023 as a result of that sale. Largely offsetting those unfavorable factors was a $225 million gain on sale of CIT in the second quarter of 2023 and a rise in brokerage services income.

•
Noninterest expense remained flat as higher personnel-related costs of $28 million, an increase in centrally-allocated costs associated with data processing, risk management and other support services provided to the Institutional Services and Wealth Management segment of $26 million and higher other costs of operations of $17 million were essentially offset by a $68 million decline in professional and other services reflecting lower sub-advisory fees due to the sale of the CIT business.

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The Institutional Services and Wealth Management segment's net income increased $295 million in 2022 from $107 million in 2021.

•
Net interest income increased by $247 million reflecting a widening of the net interest margin on deposits of 122 basis points and higher average outstanding deposit balances of $2.2 billion.

•
Noninterest income increased $241 million predominantly due to the $136 million gain on sale of MTIA in the fourth quarter of 2022. Other favorable factors included higher trust income of $96 million and a rise in brokerage services income of $22 million, each reflecting the nine-month impact of the People’s United acquisition in 2022.

•
Noninterest expense rose $90 million, mainly attributable to higher personnel-related costs of $47 million and an increase in centrally-allocated costs associated with data processing, risk management and other support services provided to the Institutional Services and Wealth Management segment of $38 million.

All Other

The “All Other” category recorded a net loss of $756 million in 2023, compared with a net loss of $691 million in 2022.

•
Net interest income decreased $455 million reflecting higher net interest expense from interest rate swap agreements entered into for interest rate risk management purposes as well as the unfavorable impact from the Company’s allocation methodologies for internal transfers related to funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments.

•
The $176 million decline in the provision for credit losses reflects the $242 million of provision recorded on April 1, 2022 related to loans obtained in the People's United acquisition that were considered non-PCD and the net impact of the allocation of provision to reportable segments.

•
Noninterest income increased $44 million reflecting an increase in trading and other non-hedging derivative gains of $27 million due to favorable changes in market conditions impacting the value of assets held in connection with deferred compensation and other non-qualified benefit plans and higher revenues from interest rate swap agreements and foreign exchange transactions with customers. Other favorable factors included an increase in tax-exempt income earned from bank owned life insurance revenue of $19 million and net gains on investment securities in 2023 as compared with a net loss in 2022, partially offset by a $10 million decrease in BLG distributions.

•
Noninterest expense decreased $143 million reflecting merger-related expenses incurred in 2022 as a result of the acquisition of People’s United and lower contributions to The M&T Charitable Foundation, partially offset by higher FDIC assessments, including the $197 million FDIC special assessment recorded in the fourth quarter of 2023, an increase in personnel costs, and a rise in outside data processing and software expense as well as equipment and net occupancy costs.

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The ”All Other” category recorded a net loss of $691 million in 2022 as compared with net income of $174 million in 2021.

•
Net interest income decreased $73 million reflecting reduced income from interest rate swap agreements entered into for interest rate risk management purposes, offset partially by the impact from the Company’s allocation methodologies for internal transfers related to funding charges and credits associated with earning assets and interest-bearing liabilities of the Company’s reportable segments.

•
The provision for credit losses increased $664 million and included a $242 million provision related to People’s United non-PCD acquired loans recorded on April 1, 2022. Also contributing to that increase was a comparative recapture of provision for credit losses in 2021 reflecting an improvement in economic assumptions and projections at that time.

•
Noninterest income declined $2 million due to a decrease in trading and other non-hedging derivative gains of $13 million reflecting unfavorable market conditions impacting the value of assets held in connection with deferred compensation and other non-qualified benefit plans and a decline in other revenues from operations of $11 million, largely offset by comparatively lower net losses on bank investment securities.

•
Noninterest expense increased $465 million predominantly due to expenses associated with the acquisition of People’s United (including merger-related expenses), higher contributions to The M&T Charitable Foundation and increased amortization of core deposit and other intangible assets.

Critical Accounting Estimates

The Company’s significant accounting policies conform with 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:

•
Accounting for credit losses — The allowance for credit losses represents a valuation account that is deducted from the amortized cost basis of certain financial assets, including loans and leases, to present the net amount expected to be collected at the balance sheet date. A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management. In estimating expected losses in the loan and lease portfolio, borrower-specific financial data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. For certain loan pools that share similar risk characteristics, the Company utilizes statistically developed models to estimate amounts and timing of expected future cash flows, collateral values and other factors used to determine the borrowers’ abilities to repay obligations. Such models consider historical correlations of credit losses with various macroeconomic assumptions including unemployment, GDP and real estate prices. These forecasts may be adjusted for inherent limitations or biases of the models. Subsequent to the forecast period, the Company utilizes longer-term historical loss experience to estimate losses over the remaining contractual life of the loans. Changes in the circumstances considered when determining management’s estimates and assumptions could result in changes in those estimates and assumptions, which could result in adjustment of the allowance for credit losses in future periods. A

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discussion of facts and circumstances considered by management in determining the allowance for credit losses is included herein under the heading “Provision for Credit Losses” and in note 5 of Notes to Financial Statements.

•
Valuation methodologies — Management of the Company applies various valuation methodologies to assets and liabilities which often involve a significant degree of judgment, particularly when liquid markets do not exist for the particular items being valued. Quoted market prices are referred to when estimating fair values for certain assets, such as investment securities and residential real estate loans held for sale and related commitments. However, for those items for which an observable liquid market does not exist, management utilizes significant estimates and assumptions to value such items. Examples of these items include loans, deposits, borrowings, goodwill, core deposit and other intangible assets, other assets and liabilities obtained or assumed in business combinations, capitalized servicing assets, pension benefit obligations and certain derivative and other financial instruments. These valuations require the use of various assumptions, including, among others, discount rates, rates of return on assets, repayment rates, cash flows, default rates, costs of servicing and liquidation values. The use of different assumptions could produce significantly different results, which could have material positive or negative effects on the Company’s results of operations, financial condition or disclosures of fair value information. In addition to valuation, the Company must assess whether there are any declines in value below the carrying value of assets that require recognition of a loss in the Consolidated Statement of Income. Examples include certain investments, capitalized servicing assets, goodwill and core deposit and other intangible assets, among others. Specific assumptions and estimates utilized by management are discussed in detail herein in Management's Discussion and Analysis of Financial Condition and Results of Operations and in notes 1, 2, 3, 7, 8, 13, 19 and 21 of Notes to Financial Statements.

•
Commitments, contingencies and off-balance sheet arrangements — Information regarding the Company’s commitments and contingencies, including guarantees and contingent liabilities arising from litigation, and their potential effects on the Company’s results of operations is included in note 22 of Notes to Financial Statements. In addition, the Company is routinely subject to examinations from various governmental taxing authorities. Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions. Management believes that the assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Should tax laws change or the tax authorities determine that management’s assumptions were inappropriate, the result and adjustments required could have a material effect on the Company’s results of operations. Information regarding the Company’s income taxes is presented in note 14 of Notes to Financial Statements.

Recent Accounting Developments

A discussion of recent accounting developments is included in note 27 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 Annual Report on Form 10-K contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, and management’s beliefs and assumptions.

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, on the Company’s

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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.

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 which are difficult to predict and may cause actual outcomes to differ materially from what is expressed or forecasted.

While there can be no assurance that any list of risks and uncertainties is complete, important factors that could cause actual outcomes and results to differ materially from those contemplated by forward-looking statements include the following, without limitation, as well as the risks more fully discussed in Part I, Item 1A, “Risk Factors” of this Form 10-K: economic conditions and growth rates, including inflation and market volatility; events and developments in the financial services industry, including industry conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, loan concentrations by type and industry, credit losses and market values on loans, collateral securing loans, and other assets; sources of liquidity; levels of client deposits; ability to contain costs and expenses; changes in the Company’s credit ratings; the impact of the People's United acquisition; domestic or international political developments and other geopolitical events, including international conflicts and hostilities; changes and trends in the securities markets; 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; federal, state or local legislation and/or regulations affecting the financial services industry, or M&T and its subsidiaries individually or collectively, including tax policy; regulatory supervision and oversight, including monetary policy and capital requirements; governmental and public policy changes; political conditions, either nationally or in the states in which M&T and its subsidiaries do business; 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 FASB, regulatory agencies or legislation; increasing price, product and service competition by competitors, including new entrants; 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; 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.

These are representative of the factors that could affect the outcome of the forward-looking statements. In addition, as noted, 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, and other factors. Further details regarding such factors, risks and uncertainties related to the Company are described in the “Risk Factors” section of this Form 10-K.

Forward-looking statements speak only as of the date they are made, and the Company assumes no duty and does not undertake to update forward-looking statements.

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Table 40

QUARTERLY TRENDS

	2023 Quarters			2022 Quarters
(Dollars in millions, except per share, shares in thousands)	Fourth			Third			Second			First			Fourth			Third			Second		First
Earnings and dividends
Interest income (taxable-equivalent basis)	$	2,753			$	2,656			$	2,530			$	2,341			$	2,086		$	1,794			$	1,475		$	931
Interest expense		1,018				866				717				509				245			103				53			24
Net interest income		1,735				1,790				1,813				1,832				1,841			1,691				1,422			907
Less: provision for credit losses		225				150				150				120				90			115				302			10
Other income		578				560				803				587				682			563				571			541
Less: other expense		1,450				1,278				1,293				1,359				1,408			1,279				1,403			960
Income before income taxes		638				922				1,173				940				1,025			860				288			478
Applicable income taxes		143				217				292				224				246			201				60			113
Taxable-equivalent adjustment		13				15				14				14				14			12				10			3
Net income	$	482			$	690			$	867			$	702			$	765		$	647			$	218		$	362
Net income available to common shareholders-diluted	$	457			$	664			$	841			$	676			$	739		$	621			$	192		$	340
Per common share data
Basic earnings		2.75				4.00				5.07				4.03				4.32			3.55				1.08			2.63
Diluted earnings		2.74				3.98				5.05				4.01				4.29			3.53				1.08			2.62
Cash dividends		1.30				1.30				1.30				1.30				1.20			1.20				1.20			1.20
Average common shares outstanding
Basic		165,985				165,909				165,842				167,732				171,187			174,609				177,367			128,945
Diluted		166,731				166,570				166,320				168,410				172,149			175,682				178,277			129,416
Performance ratios, annualized
Return on
Average assets		.92	%			1.33	%			1.70	%			1.40	%			1.53	%		1.28	%			.42	%		.97	%
Average common shareholders’ equity		7.41				10.99				14.27				11.74				12.59			10.43				3.21			8.55
Net interest margin on average earning assets (taxable-equivalent basis)		3.61				3.79				3.91				4.04				4.06			3.68				3.01			2.65
Nonaccrual loans to total loans and leases, net of unearned discount		1.62				1.77				1.83				1.92				1.85			1.89				2.05			2.32
Net operating (tangible) results (a)
Net operating income	$	494			$	702			$	879			$	715			$	812		$	700			$	578		$	376
Diluted net operating income per common share	2.81				4.05				5.12				4.09				4.57			3.83				3.10			2.73
Annualized return on
Average tangible assets		.98	%			1.41	%			1.80	%			1.49	%			1.70	%		1.44	%			1.16	%		1.04	%
Average tangible common shareholders’ equity		11.70			17.41			22.73				19.00			21.29			17.89		14.41			12.44
Efficiency ratio (b)		62.1				53.7				48.9				55.5				53.3			53.6				58.3			64.9
Balance sheet data
Average balances
Total assets (c)	$	208,752			$	205,791			$	204,376			$	202,599			$	198,592		$	201,131			$	208,865		$	151,648
Total tangible assets (c)		200,172				197,199				195,764				193,957				189,934			192,450				200,170			147,053
Earning assets		190,536				187,403				185,936				184,069				179,914			182,382				189,755			138,624
Investment securities		27,490				27,993				28,623				27,622				25,297			23,945				22,384			7,724
Loans and leases, net of unearned discount		132,770				132,617				133,545				132,012				129,406			127,525				127,599			92,159
Deposits		164,713				162,688				159,399				161,537				163,468			167,271				174,683			128,055
Borrowings		13,057				12,585				15,055				11,505				5,385			4,194				4,408			3,498
Common shareholders’ equity (c)		24,489				24,009				23,674				23,366				23,335			23,654				24,079			16,144
Tangible common shareholders’ equity (c)		15,909				15,417				15,062				14,724				14,677			14,973				15,384			11,549
At end of quarter
Total assets (c)		208,264				209,124				207,672				202,956				200,730			197,955				204,033			149,864
Total tangible assets (c)		199,689				200,538				199,074				194,321				192,082			189,281				195,344			145,269
Earning assets		189,140				189,942				188,504				183,853				181,855			178,351				185,109			137,237
Investment securities		26,897				27,336				27,916				28,443				25,211			24,604				22,802			9,357
Loans and leases, net of unearned discount		134,068				132,355				133,344				132,938				131,564			128,226				128,486			91,808
Deposits		163,274				164,128				162,058				159,075				163,515			163,845				170,358			126,319
Borrowings		13,517				13,854				15,325				14,458				7,519			4,377				4,137			3,494
Common shareholders’ equity (c)		24,946				24,186				23,790				23,366				23,307			23,245				23,784			16,126
Tangible common shareholders’ equity (c)		16,371				15,600				15,192				14,731				14,659			14,571				15,095			11,531
Equity per common share		150.15				145.72				143.41				140.88				137.68			134.45				135.16			124.93
Tangible equity per common share		98.54				93.99				91.58				88.81				86.59			84.28				85.78			89.33

(a)
Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses which, except in the calculation of the efficiency ratio, are net of applicable income tax effects. A reconciliation of net income and net operating income appears in Table 41.

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

(c)
The difference between total assets and total tangible assets, and common shareholders’ equity and tangible common shareholders’ equity, represents goodwill, core deposit and other intangible assets, net of applicable deferred tax balances. A reconciliation of such balances appears in Table 41.

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Table 41

RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES

	2023 Quarters			2022 Quarters
(Dollars in millions, except per share)	Fourth			Third			Second		First		Fourth			Third			Second		First
Income statement data
Net income
Net income	$	482			$	690		$	867		$	702			$	765		$	647		$	218		$	362
Amortization of core deposit and other intangible assets (a)		12				12			12			13				14			14			14			1
Merger-related expenses (a)		—				—			—			—				33			39			346			13
Net operating income	$	494			$	702		$	879		$	715			$	812		$	700		$	578		$	376
Earnings per common share
Diluted earnings per common share	$	2.74			$	3.98		$	5.05		$	4.01			$	4.29		$	3.53		$	1.08		$	2.62
Amortization of core deposit and other intangible assets (a)		.07				.07			.07			.08				.08			.08			.08			.01
Merger-related expenses (a)		—				—			—			—				.20			.22			1.94			.10
Diluted net operating earnings per common share	$	2.81			$	4.05		$	5.12		$	4.09			$	4.57		$	3.83		$	3.10		$	2.73
Other expense
Other expense	$	1,450			$	1,278		$	1,293		$	1,359			$	1,408		$	1,279		$	1,403		$	960
Amortization of core deposit and other intangible assets		(15	)			(15	)		(15	)		(17	)			(18	)		(18	)		(19	)		(1	)
Merger-related expenses		—				—			—			—				(45	)		(53	)		(223	)		(17	)
Noninterest operating expense	$	1,435			$	1,263		$	1,278		$	1,342			$	1,345		$	1,208		$	1,161		$	942
Merger-related expenses
Salaries and employee benefits	$	—			$	—		$	—		$	—			$	4		$	13		$	85		$	—
Equipment and net occupancy		—				—			—			—				2			2			1			2
Outside data processing and software		—				—			—			—				2			2			1			—
Professional and other services		—				—			—			—				16			11			31			14
Advertising and marketing		—				—			—			—				5			2			1			1
Other costs of operations		—				—			—			—				16			23			104			—
Other expense		—				—			—			—				45			53			223			17
Provision for credit losses		—				—			—			—				—			—			242			—
Total	$	—			$	—		$	—		$	—			$	45		$	53		$	465		$	17
Efficiency ratio
Noninterest operating expense (numerator)	$	1,435			$	1,263		$	1,278		$	1,342			$	1,345		$	1,208		$	1,161		$	942
Taxable-equivalent net interest income	$	1,735			$	1,790		$	1,813		$	1,832			$	1,841		$	1,691		$	1,422		$	907
Other income		578				560			803			587				682			563			571			541
Less: Gain (loss) on bank investment securities		4				—			1			—				(4	)		(1	)		—			(1	)
Denominator	$	2,309			$	2,350		$	2,615		$	2,419			$	(2,527	)	$	2,255		$	1,993		$	1,449
Efficiency ratio		62.1	%			53.7	%		48.9	%		55.5	%			53.3	%		53.6	%		58.3	%		64.9	%
Balance sheet data
Average assets
Average assets	$	208,752			$	205,791		$	204,376		$	202,599			$	198,592		$	201,131		$	208,865		$	151,648
Goodwill		(8,465	)			(8,465	)		(8,473	)		(8,490	)			(8,494	)		(8,501	)		(8,501	)		(4,593	)
Core deposit and other intangible assets		(154	)			(170	)		(185	)		(201	)			(218	)		(236	)		(254	)		(3	)
Deferred taxes		39				43			46			49				54			56			60			1
Average tangible assets	$	200,172			$	197,199		$	195,764		$	193,957			$	189,934		$	192,450		$	200,170		$	147,053
Average common equity
Average total equity	$	26,500			$	26,020		$	25,685		$	25,377			$	25,346		$	25,665		$	26,090		$	17,894
Preferred stock		(2,011	)			(2,011	)		(2,011	)		(2,011	)			(2,011	)		(2,011	)		(2,011	)		(1,750	)
Average common equity		24,489				24,009			23,674			23,366				23,335			23,654			24,079			16,144
Goodwill		(8,465	)			(8,465	)		(8,473	)		(8,490	)			(8,494	)		(8,501	)		(8,501	)		(4,593	)
Core deposit and other intangible assets		(154	)			(170	)		(185	)		(201	)			(218	)		(236	)		(254	)		(3	)
Deferred taxes		39				43			46			49				54			56			60			1
Average tangible common equity	$	15,909			$	15,417		$	15,062		$	14,724			$	14,677		$	14,973		$	15,384		$	11,549
At end of quarter
Total assets
Total assets	$	208,264			$	209,124		$	207,672		$	202,956			$	200,730		$	197,955		$	204,033		$	149,864
Goodwill		(8,465	)			(8,465	)		(8,465	)		(8,490	)			(8,490	)		(8,501	)		(8,501	)		(4,593	)
Core deposit and other intangible assets		(147	)			(162	)		(177	)		(192	)			(209	)		(227	)		(245	)		(3	)
Deferred taxes		37				41			44			47				51			54			57			1
Total tangible assets	$	199,689			$	200,538		$	199,074		$	194,321			$	192,082		$	189,281		$	195,344		$	145,269
Total common equity
Total equity	$	26,957			$	26,197		$	25,801		$	25,377			$	25,318		$	25,256		$	25,795		$	17,876
Preferred stock		(2,011	)			(2,011	)		(2,011	)		(2,011	)			(2,011	)		(2,011	)		(2,011	)		(1,750	)
Common equity		24,946				24,186			23,790			23,366				23,307			23,245			23,784			16,126
Goodwill		(8,465	)			(8,465	)		(8,465	)		(8,490	)			(8,490	)		(8,501	)		(8,501	)		(4,593	)
Core deposit and other intangible assets		(147	)			(162	)		(177	)		(192	)			(209	)		(227	)		(245	)		(3	)
Deferred taxes		37				41			44			47				51			54			57			1
Total tangible common equity	$	16,371			$	15,600		$	15,192		$	14,731			$	14,659		$	14,571		$	15,095		$	11,531

(a)
After any related tax effect.

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