M&T BANK CORP

17. Derivative financial instruments

As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting, collateral and/or settlement provisions protecting the at-risk party.

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

(a)Certain clearinghouse exchanges consider payments by counterparties for variation margin on derivative instruments to be settlements of those positions. The impact of such payments for interest rate swap agreements designated as fair value hedges was a net settlement of losses of $6 million and $153 million at December 31, 2025 and 2024, respectively. The impact of such payments on interest rate swap agreements designated as cash flow hedges was a net settlement of gains of $96 million and of losses of $136 million at December 31, 2025 and 2024, respectively.

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

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

(d)Includes notional amount and terms of $1.8 billion of forward-starting interest rate swap agreements that become effective in 2026.

(e)Includes notional amount and terms of $9.7 billion of forward-starting interest rate swap agreements that become effective in 2026 and 2027.

(f)Includes notional amount and terms of $3.4 billion of forward-starting interest rate swap agreements that become effective in 2025 and 2026.

(g)Includes notional amount and terms of $10.0 billion of forward-starting interest rate swap agreements that become effective in 2025 and 2026.

The notional amount of interest rate swap agreements entered into for risk management purposes that were outstanding at December 31, 2025 mature as follows:

The Company utilizes commitments to sell residential and commercial real estate loans to hedge the exposure to changes in fair value of real estate loans held for sale. Such commitments have generally been designated as fair value hedges. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in the fair value of certain commitments to originate real estate loans for sale. Changes in unrealized gains and losses as a result of such activities are included in Mortgage banking revenues in the Company's Consolidated Statement of Income and, in general, are realized in subsequent periods as the related loans are sold and commitments satisfied.

As described in note 6, effective January 1, 2026 the Company elected to prospectively measure its residential mortgage loan servicing right assets at fair value. In preparation for this election, on December 31, 2025 the Company began economically hedging the risk of fair value changes in those residential mortgage loan servicing right assets through the use of various interest rate derivative contracts with a total notional value of $1.6 billion.

Other derivative financial instruments not designated as hedging instruments included interest rate contracts, foreign exchange and other option and futures contracts. Interest rate contracts not designated as hedging instruments had notional values of $43.0 billion and $40.5 billion at December 31, 2025 and 2024, respectively. The notional amounts of foreign currency and other option and futures contracts not designated as hedging instruments aggregated $2.4 billion and $1.6 billion at December 31, 2025 and 2024, respectively.

Information about the fair values of derivative instruments in the Company’s Consolidated Balance Sheet and Consolidated Statement of Income follows:

(a)Asset derivatives are included in Accrued interest and other assets and liability derivatives are included in Accrued interest and other liabilities in the Consolidated Balance Sheet.

(b)The impact of variation margin payments at December 31, 2025 and 2024 was a reduction of the estimated fair value of interest rate contracts not designated as hedging instruments in an asset position of $341 million and $686 million, respectively, and in a liability position of $32 million and $15 million, respectively.

(a)Reported as an adjustment to Interest expense in the Company's Consolidated Statement of Income.

(b)Reported as an adjustment to Interest income in the Company's Consolidated Statement of Income.

(c)Included in Trading account and other non-hedging derivative gains in the Company's Consolidated Statement of Income.

The net effect of interest rate swap agreements was to decrease net interest income by $154 million in 2025, $414 million in 2024 and $302 million in 2023. The amount of interest income recognized in the Company's Consolidated Statement of Income associated with derivatives designated as cash flow hedges was a decrease of $115 million for 2025, $364 million for 2024 and $250 million for 2023. As of December 31, 2025, the unrealized gain recognized in other comprehensive income related to cash flow hedges was $90 million, of which gains of $12 million, $54 million and $24 million relate to interest rate swap agreements maturing in 2026, 2027 and 2028, respectively.

The Company predominantly clears non-customer derivative transactions through a clearinghouse, rather than directly with counterparties. The transactions cleared through a clearinghouse require initial margin collateral and variation margin payments depending on the contracts being in a net asset or liability position. The amount of initial margin collateral posted by the Company was $224 million and $257 million at December 31, 2025 and 2024, respectively. The fair value asset and liability amounts of derivative contracts have been reduced by variation margin payments treated as settlements as described herein. Variation margin on derivative contracts not treated as settlements continues to represent collateral posted or received by the Company.

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

Information about master netting agreements and collateral postings related to the derivative instruments in the Company's Consolidated Balance Sheet follows:

(a)Collateral column only includes posting of cash and investment securities and excludes initial margin amounts posted to clearinghouses.

(b)The fair value of derivative assets and derivative liabilities subject to clearinghouse settlements are presented net of the variation margin payments in the Consolidated Balance Sheet.