M&T BANK CORP

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 $6.90 billion in 2024, compared with $7.17 billion in 2023. That decrease reflects a 25 basis-point narrowing of the net interest margin to 3.58% in 2024 from 3.83% in 2023 as higher rates paid on interest-bearing liabilities outpaced an increase in yields on earnings assets. The FOMC raised its federal funds target interest rate through multiple hikes that totaled 5.25% from March 2022 through July 2023 in response to inflationary pressures, before reducing that rate by a total of 1.00% in the last four months of 2024. During the recent year, the Company continued to adjust its funding sources in consideration of the changing interest rate environment as well as the competitive landscape for customer deposits. An increase in average interest-bearing liabilities in 2024 as compared with 2023 reflected a shift in customer deposits toward higher cost interest-bearing products and higher average levels of borrowings. Average interest-bearing deposits rose $9.5 billion, or 9%, and average borrowings rose $2.5 billion, or 19%, in 2024 as compared with 2023. The rates paid on average interest-bearing liabilities increased 57 basis points over the same period. The increase in average earning assets in 2024 reflects higher average interest-bearing deposits at the FRB of New York, purchases of investment securities and loan growth. The yield received on earning assets in 2024 increased by 24 basis points from 2023. The Company's average balance sheets accompanied by the taxable-equivalent interest income and expense and the average rate on the Company's earning assets and interest-bearing liabilities are presented in Table 4.

Table 4

AVERAGE BALANCE SHEETS AND TAXABLE-EQUIVALENT RATES

(a)Includes nonaccrual loans.

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

(c)Primarily government issued or guaranteed.

The total changes in interest income and expense, including the changes attributable to volume and rate are presented in Table 5.

Table 5

CHANGES IN INTEREST INCOME AND EXPENSE (a)

(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.

(c)Primarily government issued or guaranteed.

Lending activities

The Company's lending activities in 2024 and 2023 reflect its execution of various strategies to reduce its relative concentration of commercial real estate loans. The following table summarizes average loans and leases for 2024 and percentage changes in the major components of the loan and lease portfolio over the past two years.

Table 6

AVERAGE LOANS AND LEASES

Average loans and leases totaled $134.7 billion in 2024, up 1% from 2023.

•Average commercial and industrial loans and leases were $58.9 billion in 2024, up $4.6 billion from 2023, reflecting growth that spanned most industry types.

•Commercial real estate loans averaged $30.3 billion in 2024, down $4.2 billion from 2023, reflecting decreases of $3.0 billion in average permanent commercial real estate loans and $1.2 billion in average construction loans.

•Average consumer loans increased $2.1 billion from 2023 to $22.5 billion in 2024. That growth predominantly reflects an increase in average balances of recreational finance loans of $2.0 billion.

Table 7 presents the composition of the Company’s loan and lease portfolio at the end of 2024, 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

Commercial and industrial loans, including leases, totaled $61.5 billion at December 31, 2024, representing 45% of total loans. Owner-occupied loans secured by real estate included in commercial and industrial loans at December 31, 2024 totaled $11.0 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, 2024 aggregated $2.7 billion.

Commercial and industrial loans and leases increased $4.5 billion from December 31, 2023 to December 31, 2024 reflecting growth that spanned most industry types. Contributing to that increase was strong demand for credit from motor vehicle and recreational finance dealers. Loans to customers in that industry grew $1.4 billion, or 17%, from the end of 2023. Additionally, loans to customers in the services and the financial and insurance industries increased $877 million, or 10%, and $800 million, or 7%, respectively, in that same period. Borrowers in the financial and insurance industry include real estate investment trusts and other specialty lending businesses including fund banking companies and mortgage warehouse lending businesses. Table 8 presents information on commercial and industrial loans as of December 31, 2024 relating to borrower industry, geographic area, size and whether the loans are secured by collateral or unsecured.

Table 8

COMMERCIAL AND INDUSTRIAL LOANS AND LEASES

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 48% of the loan and lease portfolio at December 31, 2024, compared with 53% at December 31, 2023.

Commercial real estate loans originated by the Company are generally 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 balance 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 82% of the commercial real estate loan portfolio at the 2024 year end. Table 9 presents commercial real estate loans by type of collateral, geographic area and size of the loans outstanding at December 31, 2024. The $20.8 billion of permanent finance commercial real estate loans at December 31, 2024 were largely secured by multifamily residential, retail, service and office properties. New York City commercial real estate loans totaled $3.8 billion at December 31, 2024, compared with $4.8 billion at December 31, 2023. Commercial real estate loans secured by properties located outside of the New England area, the Mid-Atlantic area and New York State comprised 19% of total commercial real estate loans as of December 31, 2024.

Commercial real estate construction and development loans presented in Table 9 totaled $6.0 billion at December 31, 2024, or 4% of total loans and leases. Approximately 96% of those construction loans had adjustable interest rates. Included in such loans at the 2024 year end were loans made for various purposes, including the construction of multifamily residential housing, office buildings, health services facilities 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 $4.2 billion at December 31, 2024, compared with $3.9 billion at December 31, 2023. There have been no material losses incurred as a result of those recourse arrangements.

Table 9

COMMERCIAL REAL ESTATE LOANS

(c)Total includes $299 million of owner-occupied construction loans.

Real estate loans secured by one-to-four family residential properties were $23.2 billion at December 31, 2024, including approximately 30% secured by properties located in New York State, 31% secured by properties in the Mid-Atlantic area and 26% secured by properties located in the New England region. The Company’s portfolio of limited documentation residential real estate loans totaled $791 million at December 31, 2024, compared with $911 million at December 31, 2023. 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.

Consumer loans comprised approximately 18% and 16% of total loans and leases at December 31, 2024 and 2023, respectively. Outstanding balances of recreational finance loans represented the largest component of the consumer loan portfolio at December 31, 2024 and totaled $12.6 billion or 9% of total loans, compared with $10.1 billion or 8% at December 31, 2023. Outstanding automobile loan balances were $4.8 billion at December 31, 2024, compared with $4.0 billion at December 31, 2023. Home equity loans and lines of credit outstanding were $4.6 billion at each of December 31, 2024 and 2023.

Investing activities

The Company's investment securities portfolio is largely comprised of government-issued or guaranteed commercial and residential mortgage-backed securities and U.S. Treasury securities, but also includes municipal and other 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.

Information about the Company's average investment securities portfolio is presented in the following table.

Table 10

AVERAGE INVESTMENT SECURITIES

(a)Primarily government issued or guaranteed.

The investment securities portfolio averaged $30.8 billion in 2024, up $2.8 billion from 2023. That increase reflects the Company's deployment of liquidity in 2024 and 2023 into primarily fixed-rate investment securities, including the purchase of $5.1 billion of U.S. Treasury securities and $9.3 billion of government-issued or guaranteed commercial and residential mortgage-backed securities into its available-for-sale investment securities portfolio. As a result of the elevated interest rate environment and the maturity and paydown of lower-yielding securities, the weighted-average current yield for total investment securities available for sale increased from 2.66% at December 31, 2023 to 4.30% at December 31, 2024, while the weighted-average duration of that portfolio increased from 1.3 years to 2.6 years at each of those respective dates. The Company sold $181 million of non-agency investment securities from its available-for-sale portfolio and its remaining equity investments in Fannie Mae and Freddie Mac preferred securities in 2024. The Company routinely adjusts its holdings of capital stock of the FHLB of New York and the FRB of New York based on amounts of outstanding borrowings and available lines of credit with those entities.

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 2024, 2023 and 2022. 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 19 of Notes to Financial Statements.

Other earning assets include interest-bearing deposits at banks and trading account assets. Those other earning assets in the aggregate averaged $27.3 billion in 2024 and $26.3 billion in 2023 and were primarily 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, brokered deposits and additions to or maturities of investment securities or borrowings.

Funding activities - deposits

The most significant source of funding for the Company is core deposits. The Company considers noninterest-bearing deposits, savings and interest-checking deposits and time deposits of $250,000 or less as core deposits. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Average core deposits represented 77% of average earning assets in 2024, compared with 79% in 2023. The Company also includes brokered deposits as a component of its wholesale funding strategy. Depending on market conditions, including demand by customers and other investors, and the cost of funds available from alternative sources, the Company may change the amount or composition of brokered deposits in the future. Table 11 summarizes average deposits in 2024 and percentage changes in the components of such deposits over the past two years.

Table 11

AVERAGE DEPOSITS

Deposits averaged $163.4 billion in 2024, a $1.3 billion increase from $162.1 billion in 2023.

•Average core deposits remained flat in 2024 as compared with 2023 reflecting a stable customer deposit base amidst an elevated interest rate environment and a shift in customer deposits from noninterest-bearing accounts to interest-bearing products, including time deposits.

•The increase in average brokered deposits in 2024 as compared with 2023 reflects the Company's liquidity management and funding strategies during a period of rising interest rates, partially offset by the maturity of some brokered time deposits in the recent year. Average brokered savings and interest-checking accounts were $8.7 billion in 2024, compared with $4.6 billion in 2023, and the rates paid on those deposits averaged 4.59% and 4.20%, respectively. Brokered time deposits averaged $3.2 billion in 2024, compared with $6.8 billion in 2023, and the rates paid on those deposits averaged 4.96% and 4.95%, respectively. The rate paid on total non-brokered interest-bearing deposits was 2.62% in 2024, compared with 1.98% in 2023. The increase in average rates paid on non-brokered interest-bearing deposits in the recent year reflected repricing of certain deposit products as customers sought higher yields in an elevated interest rate environment.

Table 12 summarizes the components of average total deposits by reportable segment for the years ended December 31, 2024, 2023 and 2022.

Table 12

AVERAGE DEPOSITS BY REPORTABLE SEGMENT

Funding activities - borrowings

Table 13 summarizes the average balances utilized from the Company's short-term and long-term borrowing facilities and note programs.

Table 13

AVERAGE BORROWINGS

The Company 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 lower levels of short-term borrowings in 2024 as compared with 2023 reflect the Company's management of liquidity.

Long-term borrowings averaged $11.1 billion in 2024 and $7.3 billion in 2023. The increased usage of borrowing facilities in 2024 reflects the Company's strategies to diversify its wholesale funding sources to provide long-term funding stabilization and prepare for proposed regulations enumerating certain long-term debt requirements as described herein in Part I, Item 1 of this Form 10-K under the heading "Resolution Planning and Resolution-Related Requirements." Table 14 provides a summary of the Company's issuances, maturities and redemptions of long-term borrowings in 2024.

Table 14

LONG-TERM BORROWING ISSUANCES, MATURITIES AND REDEMPTIONS

(a)Redemption resulted in a $20 million loss, which was recognized in Other costs of operations in the Consolidated Statement of Income.

Additional information regarding outstanding borrowings is provided in notes 8 and 18 of Notes to Financial Statements.

Net interest margin

Taxable-equivalent 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 yield on earning assets and the rate paid on interest-bearing liabilities, was 2.57% in 2024, compared with 2.90% in 2023. The decline in the net interest spread in 2024 as compared with 2023 reflects the impact of higher rates paid on interest-bearing deposits and borrowings that outpaced higher yields earned on investment securities, loans and other earning assets. The yield received on earning assets during 2024 was 5.74%, up from 5.50% in 2023. The yield received on investment securities increased 55 basis points to 3.64% in 2024 reflecting purchases of investment securities in 2024 and 2023 with higher yields than maturing securities. The yield received on loans rose 24 basis points to 6.31% in 2024 primarily reflecting the benefit of variable interest rate resets and loan originations at generally higher yields than offsetting loan maturities. The rate paid on interest-bearing liabilities was 3.17%, up 57 basis points from 2023 reflecting an increase in the rate paid on interest-bearing deposits of 57 basis points as customers sought higher yields in an elevated interest rate environment and an increase in average long-term borrowings which are generally higher-cost funding sources.

Net interest-free funds consist largely of noninterest-bearing demand deposits and other liabilities 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 $61.1 billion in 2024 and $67.3 billion in 2023. Noninterest-bearing deposits averaged $47.3 billion in 2024 and $55.5 billion in 2023. The decline in average noninterest-bearing deposits in 2024 as compared with 2023 reflects a shift in deposits to interest-bearing accounts in an elevated interest rate environment. The contribution of net interest-free funds to net interest margin was 1.01% in 2024 and .93% in 2023. The increased contribution of net-interest free funds in 2024 as compared with 2023 reflects the higher rates paid 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 3.58% in 2024 and 3.83% in 2023. That 25 basis-point narrowing of the net interest margin reflects an increase in the rates paid on the Company's sources of funding which outpaced the rise in yields on earning assets. Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in changes to spreads, could impact the Company’s net interest income and net interest margin. Future changes in the levels of net interest-free funds and the interest rates used to value such funds could also impact the Company's 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 generally 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 15 summarizes information about interest rate swap agreements entered into for interest rate risk management purposes at December 31, 2024 and 2023.

Table 15

INTEREST RATE SWAP AGREEMENTS - DESIGNATED AS HEDGES

Information regarding the fair value of interest rate swap agreements designated as fair value hedges and cash flow hedges is presented in note 17 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 16.

Table 16

INTEREST RATE SWAP AGREEMENTS - EFFECT ON NET INTEREST INCOME

(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.

(c)Weighted-average rate paid or received on interest rate swap agreements in effect during the year.