M&T BANK CORP

Previous wording

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and other information included in this Quarterly Report on Form 10-Q as well as with M&T's 2023 Annual Report. Information regarding the Company's business, its supervision and regulation and potential risks and uncertainties that may affect the Company's business, financial condition, liquidity and results of operations are also included in M&T's 2023 Annual Report.

Current wording

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and other information included in this Quarterly Report on Form 10-Q as well as with M&T's 2024 Annual Report. Information regarding the Company's business, its supervision and regulation and potential risks and uncertainties that may affect the Company's business, financial condition, liquidity and results of operations are also included in the 2024 Annual Report.

Previous wording

The increase in net income in the recent quarter as compared with the second quarter of 2024 resulted from the following:

Current wording

The decrease in net income in the recent quarter as compared with the fourth quarter of 2024 resulted from the following:

Previous wording

The decline in net income for the nine months ended September 30, 2024 as compared with the same 2023 period reflects the following:

Current wording

The increase in net income in the first quarter of 2025 as compared with 2024's initial quarter reflects the following:

Previous wording

•Net interest income on a taxable-equivalent basis declined $272 million reflecting a narrowing of the net interest margin by 33 basis points as higher deposit and borrowing costs outpaced increased yields on the Company's earning assets.

Current wording

•Net interest income on a taxable-equivalent basis increased $15 million reflecting a widening of the net interest margin by 14 basis points as reductions in deposit and borrowing costs outpaced a decline in the yield received on average interest-bearing deposits at banks and average loans and leases.

Previous wording

•Other expense in the first nine months of 2024, excluding $34 million of FDIC special assessment expense, rose $32 million from the similar 2023 period. Those higher expenses included an increase in salaries and employee benefits expense and outside data processing and software costs, partially offset by lower professional and other services expense and other costs of operations.

Current wording

•Noninterest expense rose $19 million from 2024's initial quarter reflecting higher levels of salaries and employee benefits expense and outside data processing and software costs, partially offset by a $29 million FDIC special assessment expense in the first quarter of 2024.

Previous wording

The Company's effective income tax rates were 20.7% and 23.4% for the quarters ended September 30, 2024 and June 30, 2024, respectively, and 21.5% and 24.5% for the nine-month periods ended September 30, 2024 and 2023, respectively. The recent quarter income tax expense reflects a $14 million discrete tax benefit related to certain tax credits claimed on a prior year income tax return. The first quarter of 2024 income tax expense reflects a $17 million net discrete tax benefit related to the resolution of an income tax matter inherited from the acquisition of People's United. Each of the discrete income tax benefits noted herein contributed to the lower effective income tax rate for the nine-month period ended September 30, 2024 as compared with the nine-month period ended September 30, 2023.

Current wording

The Company's effective income tax rates were 23.2%, 22.8% and 20.0% for the quarters ended March 31, 2025, December 31, 2024 and March 31, 2024, respectively. The first quarter of 2024 income tax expense reflected a $17 million net discrete tax benefit related to the resolution of an income tax matter inherited from the acquisition of People's United.

Previous wording

M&T repurchased 1,190,054 shares of its common stock in accordance with its capital plan during the recent quarter at an average cost per share of $166.40 resulting in a total cost, including the share repurchase excise tax, of $200 million. No share repurchases occurred in the first or second quarter of 2024. During the first nine months of 2023, M&T repurchased 3,838,157 shares of its common stock at an average cost per share of $154.76 resulting in a total cost, including the share repurchase excise tax, of $600 million.

Current wording

Under approved capital plans and programs authorized by the Board of Directors, M&T repurchased 3,415,303 shares of its common stock during the recent quarter at an average cost per share of $192.06 resulting in a total cost, including the share repurchase excise tax, of $662 million, compared with 957,988 shares at an average price of $206.70 resulting in a total cost, including the share repurchase excise tax, of $200 million in the fourth quarter of 2024. No share repurchases occurred in the first quarter of 2024. On January 22, 2025, M&T's Board of Directors authorized a program under which $4.0 billion of common shares may be repurchased. That authorization replaced and terminated the previous authorized share repurchase program effective as of the same date.

Previous wording

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. The Company's average balance sheets accompanied by the annualized taxable-equivalent interest income and expense and the average rate on the Company's earning assets and interest-bearing liabilities are presented as follows.

Current wording

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.

Previous wording

The Company's lending activities in 2023 and for the first nine months of 2024 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 the three-month and nine-month periods ended September 30, 2024 and percentage changes in the major components of the portfolio.

Current wording

The Company's lending activities reflect a portfolio composition shift as the Company executed various strategies to reduce its relative concentration of commercial real estate loans throughout 2024. The following table summarizes changes in the components of average loans and leases.

Previous wording

Average loans and leases totaled $134.8 billion in the third quarter of 2024, up nominally from the second quarter of 2024.

Current wording

Average loans and leases totaled $134.8 billion in the first quarter of 2025, down $879 million or 1% from the fourth quarter of 2024.

Previous wording

•Average consumer loans in the third quarter of 2024 increased $931 million from the second quarter of 2024 to $22.9 billion. That growth reflects an increase in average balances of recreational finance loans and automobile loans of $633 million and $255 million, respectively.

Current wording

•Average consumer loans in the first quarter of 2025 increased $318 million from the fourth quarter of 2024 to $24.4 billion reflecting higher average balances of recreational finance loans and automobile loans of $181 million and $103 million, respectively.

Previous wording

•Average commercial and industrial loans and leases were $59.8 billion in the recent quarter, up $1.6 billion from the second quarter of 2024, reflecting growth that spanned most industry types.

Current wording

•Average commercial and industrial loans and leases increased $4.2 billion from the year-earlier first quarter, reflecting growth that spanned most industry types.

Previous wording

•Commercial real estate loans averaged $29.1 billion in the third quarter of 2024, down $2.4 billion from the second quarter of 2024, reflecting decreases of $1.9 billion and $472 million of average permanent and construction commercial real estate loans, respectively.

Current wording

•Average commercial real estate loans decreased $6.4 billion in the recent quarter as compared with the first quarter of 2024, reflecting decreases of $4.8 billion and $1.6 billion of average permanent and construction commercial real estate loans, respectively.

Previous wording

The 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.

Current wording

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. 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.

Previous wording

The investment securities portfolio averaged $31.0 billion in the third quarter of 2024, up $1.3 billion from the second quarter of 2024. That increase reflects the purchase of $4.0 billion of U.S. Treasury securities and government issued or guaranteed commercial and residential mortgage-backed securities in the recent quarter. In the first nine months of 2024 and 2023, investment securities averaged $29.8 billion and $28.1 billion, respectively. The rise in average balances in the first nine months of 2024 as compared with the similar 2023 period reflects purchases of U.S Treasury securities and government issued or guaranteed commercial and residential mortgage-backed securities of $11.2 billion during the first nine months of 2024. The Company sold $71 million of non-agency investment securities from its available-for-sale portfolio during the first nine months of 2024. There were no significant sales of investment securities during the nine months ended September 30, 2023. 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.

Current wording

The investment securities portfolio averaged $34.5 billion in the first quarter of 2025, up $801 million and $5.9 billion from the fourth and first quarters of 2024, respectively. Those increases each reflect the deployment of liquidity into primarily fixed rate investment securities, including purchases of fixed rate agency mortgage-backed securities and U.S. Treasury securities of $1.9 billion and $667 million, respectively, in the recent quarter and $9.3 billion and $5.1 billion, respectively, in 2024 into the Company's available-for-sale investment securities portfolio. As a result of the elevated interest rate environment throughout much of 2024 and the maturities of lower-yielding securities, the weighted-average current yield for total investment securities available for sale increased to 4.42% at March 31, 2025 and 4.30% at December 31, 2024, as compared with 3.45% at March 31, 2024. The weighted-average duration of the available-for-sale investment securities portfolio was 2.5 years and 2.6 years at March 31, 2025 and December 31, 2024, respectively, compared with 2.0 years at March 31, 2024. There were no significant sales of investment securities during the three months ended March 31, 2025. In 2024, 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. 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.

Previous wording

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 each of the nine months ended September 30, 2024 and 2023. 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 13 of Notes to Financial Statements.

Current wording

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 each of the three months ended March 31, 2025, December 31, 2024 and March 31, 2024. A

Previous wording

Other earning assets include interest-bearing deposits at banks and trading account assets. Those other earning assets in the aggregate averaged $25.6 billion in the recent quarter, compared with $29.4 billion during the three months ended June 30, 2024, and $28.6 billion in the nine months ended September 30, 2024, compared with $25.0 billion in the nine months ended September 30, 2023. The amounts of other earning assets at those 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, brokered deposits and additions to or maturities of investment securities or borrowings.

Current wording

Other earning assets include interest-bearing deposits at banks and trading account assets. Those other earning assets in the aggregate averaged $19.8 billion in the recent quarter, compared with $23.7 billion and $30.8 billion during the three months ended December 31, 2024 and March 31, 2024, respectively. The amounts of other earning assets at those respective dates 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.

Previous wording

The most significant source of funding for the Company is core deposits. The Company considers noninterest-bearing deposits, interest-bearing transaction accounts, savings deposits and time deposits of $250,000 or less as core deposits. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Average core deposits represented 77% and 76% of average earning assets for the quarters ended September 30, 2024 and June 30, 2024, respectively, and 77% and 80% for the nine months ended September 30, 2024 and 2023, respectively. 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. The following table provides an analysis of changes in the components of average deposits.

Current wording

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 78% of average earning assets for each of the quarters ended March 31, 2025 and December 31, 2024, compared with 76% for the quarter ended March 31, 2024. 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. The following table provides an analysis of changes in the components of average deposits.

Previous wording

The accompanying table summarizes the components of average total deposits by reportable segment for the three months ended September 30, 2024 and June 30, 2024 and the nine months ended September 30, 2024 and 2023.

Current wording

The accompanying table summarizes the components of average total deposits by reportable segment for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024.

Previous wording

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 the third quarter of 2024 as compared with the second quarter of 2024 as well as for the nine months ended September 30, 2024 as compared with the similar 2023 period reflect the Company's management of liquidity.

Current wording

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 average short-term borrowings in the first quarter of 2025 as compared with the first quarter of 2024 reflect the Company's management of liquidity, including reductions in short-term wholesale funding sources. Average short-term borrowings in the first quarter of 2025 were modestly higher as compared with the fourth quarter of 2024.

Previous wording

Long-term borrowings averaged $11.4 billion and $11.5 billion in the three-month periods ended September 30, 2024 and June 30, 2024, respectively. In the recent quarter the Company issued $650 million of asset-backed notes secured by equipment finance loans and leases and $400 million of fixed-rate subordinated notes matured. For the nine-month periods ended September 30, 2024 and 2023, long-term borrowings averaged $10.9 billion and $7.1 billion, respectively. The increased usage of borrowing facilities in the 2024 period 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 in Part I, Item 1 of M&T's 2023 Annual Report.

Current wording

Long-term borrowings averaged $11.3 billion, $11.7 billion and $9.8 billion during the three-month periods ended March 31, 2025, December 31, 2024 and March 31, 2024, respectively. The increased usage of borrowing facilities in the first quarter of 2025 and fourth quarter of 2024 as compared with the first quarter of 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 in Part I, Item 1 "Resolution Planning and Resolution-Related Requirements" of M&T's 2024 Annual Report. The lower levels of average long-term borrowings in the first quarter of 2025 as compared with the final quarter of 2024 reflect maturities of long-term debt that outpaced issuances in the recent quarter. The following table provides a summary of the Company's issuances, maturities and redemptions of long-term borrowings in the recent quarter.

Previous wording

Additional information regarding borrowings is provided in notes 5 and 12 of Notes to Financial Statements.

Current wording

Additional information regarding borrowings is provided in notes 4 and 11 of Notes to Financial Statements.

Previous wording

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 2.60% in the recent quarter, up 4 basis points from 2.56% in the second quarter of 2024. The increase in the net interest spread from the second quarter of 2024 reflected stable yields on average earning assets and a decrease in the cost of interest-bearing liabilities. The yield on earning assets during the third quarter of 2024 was 5.82%, unchanged from the second quarter of 2024. The yield on investment securities increased 9 basis points reflecting purchases of investment securities in the recent quarter with a higher yield than maturing securities. That increase was offset by a decline in the yield on interest-bearing deposits at the FRB of New York. The yield on loans was unchanged from 2024's second quarter. The rate paid on interest-bearing liabilities was 3.22%, down 4 basis points from the second quarter of 2024 reflecting reduced funding from short-term borrowings and brokered time deposits. For the first nine months of 2024, the net interest spread was 2.55%, down from 3.02% in the corresponding year-earlier period.

Current wording

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 2.82% in the recent quarter, up from 2.66% and 2.48% in the fourth and first quarters of 2024, respectively. Those increases in the net interest spread reflect a decrease in the rates paid on the Company's interest-bearing liabilities, partially offset by a decline in the yield on earning assets. The yield on earning assets during the first quarter of 2025 was 5.52%, down 8 and 22 basis points from the fourth and first quarters of 2024, respectively, reflecting lower yields on interest-bearing deposits at the FRB of New York and loans and leases. That decrease was partially offset by a rise in yields received on investment securities which reflected purchases of investment securities since the beginning of 2024, inclusive of the recent quarter, with a higher yield than those that matured during those same periods. The rate paid on interest-bearing liabilities was 2.70%, down 24 and 56 basis points from the fourth and first quarters of 2024, respectively, reflecting a reduction in the cost of interest-bearing deposits and funding from short-term borrowings during each of those comparative periods. That reduction in the cost of interest-bearing liabilities reflects a lower FOMC federal funds target interest rate which was reduced by a total of 1.00% in the last four months of 2024.

Previous wording

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 $60.6 billion in the third quarter of 2024, down from $61.5 billion in the second quarter of 2024. Net interest-free funds averaged $61.2 billion and $68.8 billion in the first nine months of 2024 and 2023, respectively. Noninterest-bearing deposits averaged $46.2 billion in the third quarter of 2024, compared with $47.7 billion in the second quarter of 2024, and $47.5 billion in the first nine months of 2024 as compared with $57.3 billion in the first nine months of 2023. The declines in average noninterest-bearing deposits in the respective comparative periods reflect customer use of off-balance sheet investment products and a shift in deposits to interest-bearing accounts in an environment of elevated interest rates. The contribution of net interest-free funds to net interest margin was 1.02% in the third quarter of 2024, compared with 1.03% in the second quarter of 2024. In the first nine months of 2024 and 2023, the contribution of net interest-free funds to net interest margin was 1.03% and .89%, respectively. The increased contribution of net interest-free funds to net interest margin in the first nine months of 2024 as compared with the first nine months of 2023 reflects higher rates paid on interest-bearing liabilities used to value net interest-free funds.

Current wording

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 $59.2 billion in the first quarter of 2025, down from $60.8 billion and $61.7 billion in the fourth and first quarters of 2024, respectively. Noninterest-bearing deposits averaged $45.4 billion in the first quarter of 2025, compared with $46.6 billion in the fourth quarter of 2024, and $48.6 billion in 2024's initial quarter. The decline in average noninterest-bearing deposits in the recent quarter from the fourth quarter of 2024 reflects a seasonal decline in commercial customer deposits whereas the decline from the first quarter of 2024 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 .84% in the first quarter of 2025, compared with .92% and 1.04% in the fourth and first quarters of 2024, respectively. The decreased contribution of net interest-free funds to the net interest margin in the first quarter of 2025 as compared with the fourth and first quarters of 2024 reflects lower rates paid on interest-bearing liabilities used to value net interest-free funds.

Previous wording

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 3.62% in the third quarter of 2024, compared with 3.59% in the second quarter of 2024. During the first nine months of 2024 and 2023, the net interest margin was 3.58% and 3.91%, respectively. That 33 basis-point narrowing of the net interest margin reflects an increase in the rates paid on the Company's sources of funding which has 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.

Current wording

49 - of 2024 and 3.52% in the year-earlier period. Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in changes to spreads, could impact the Company’s net interest income and net interest margin. 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.

Previous wording

Information regarding the fair value of interest rate swap agreements is presented in note 11 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 quarter), the related effect on net interest income and margin and the weighted-average interest rates paid or received on those swap agreements are presented in the table that follows.

Current wording

Information regarding the fair value of interest rate swap agreements designated as fair value hedges and cash flow hedges is presented in note 10 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 quarter), the related effect on net interest income and margin, and the weighted-average interest rates paid or received on those swap agreements are presented in the table that follows.

Previous wording

A provision for credit losses is recorded to adjust the level of the allowance to reflect expected credit losses that are based on economic forecasts as of each reporting date. A provision for credit losses of $120 million was recorded in the third quarter of 2024, compared with $150 million in the second quarter of 2024. The lower provision for credit losses in the recent quarter as compared with the second quarter of 2024 reflects a decline in commercial and industrial and commercial real estate criticized loans, partially offset by growth in commercial and industrial and consumer loan portfolios. For the nine months ended September 30, 2024 and 2023, the Company recorded a provision for credit losses of $470 million and $420 million, respectively. The higher provision for credit losses in the first nine months of 2024 as compared with the similar 2023 period reflects declines in commercial real estate values, including office properties, and higher interest rates contributing to a deterioration in the performance of loans to certain commercial borrowers, including nonautomotive dealers and health services facilities, as well as growth in certain sectors of M&T's commercial and industrial and consumer loan portfolios.

Current wording

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 $130 million and $140 million was recorded in the first quarter of 2025 and fourth quarter of 2024, respectively, compared with $200 million in the year-earlier quarter. The lower provision for credit losses in the most recent two quarters as compared with the first quarter of 2024 reflects improved performance of loans to commercial real estate borrowers, partially offset by commercial and industrial and consumer loan growth and, in the recent quarter, a modest deterioration of macroeconomic forecasts.

Previous wording

A summary of net charge-offs by loan type and as an annualized percentage of such average loans is presented in the table that follows.

Current wording

A summary of the Company's net loan charge-offs by loan type and as an annualized percent of such average loans is presented in the table that follows.

Previous wording

The $98 million decline in nonaccrual loans from June 30, 2024 to September 30, 2024 reflects lower commercial real estate nonaccrual loans of $122 million. As compared with December 31, 2023, the $240 million decline in nonaccrual loans at September 30, 2024 reflects a $379 million reduction in commercial real estate nonaccrual loans, partially offset by a $140 million increase in commercial and industrial nonaccrual loans. At September 30, 2024, approximately 57% of nonaccrual commercial and industrial and commercial real estate loans were considered current with respect to their payment status.

Current wording

Nonaccrual loans declined $150 million from December 31, 2024 to March 31, 2025 reflecting a $113 million reduction in commercial real estate nonaccrual loans and a $34 million reduction in commercial and industrial nonaccrual loans. As compared with March 31, 2024, the $762 million decline in nonaccrual loans at March 31, 2025 reflects a $576 million reduction in commercial real estate nonaccrual loans and a $202 million reduction in commercial and industrial nonaccrual loans. Approximately 55% of nonaccrual commercial and industrial and commercial real estate loans were considered current with respect to their payment status at March 31, 2025.

Previous wording

Government-guaranteed loans designated 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 herein that are guaranteed by government-related entities totaled $204 million at September 30, 2024, $170 million at June 30, 2024, $228 million at December 31, 2023 and $202 million at September 30, 2023. 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.

Current wording

Government-guaranteed loans designated 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 herein that are guaranteed by government-related entities totaled $240 million at March 31, 2025, $224 million at December 31, 2024 and $195 million at March 31, 2024. 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.

Previous wording

Approximately 72% of loans 30 to 89 days past due were less than 60 days delinquent at September 30, 2024, compared with 74% at June 30, 2024 and 73% at December 31, 2023. Additional information about past due and nonaccrual loans at September 30, 2024 and December 31, 2023 is included in note 4 of Notes to Financial Statements.

Current wording

Approximately 76% of loans 30 to 89 days past due were less than 60 days delinquent at March 31, 2025, compared with 73% at December 31, 2024. Additional information about past due and nonaccrual loans at March 31, 2025 and December 31, 2024 is included in note 3 of Notes to Financial Statements.

Previous wording

During the normal course of business, the Company modifies loans to maximize recovery efforts. The modifications that the Company grants are typically comprised of maturity extensions, payment deferrals and interest rate reductions but may also include other modification types. 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.

Current wording

During the normal course of business, the Company modifies loans to maximize recovery efforts. The modifications that the Company grants are typically comprised of maturity extensions, payment deferrals and interest rate reductions, but may also include other modification types. 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 all amounts owed under the terms of the loan agreement. Information about modifications of loans to borrowers experiencing financial difficulty is included in note 3 of Notes to Financial Statements.

Previous wording

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 designated as “criticized.” A criticized loan may be designated 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.

Current wording

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 designated as “criticized.” A

Previous wording

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 personnel review 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.

Current wording

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 greater than $1 million and additional analysis performed. On a quarterly basis, the Company’s centralized credit risk department personnel review 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 are periodically performed over segments of loan portfolios that may be 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. In the recent quarter, the Company began assessing loans to certain not-for-profit borrowers, government contractors and other commercial borrowers that may be impacted by changes to government funding and reductions in the federal workforce. The Company is also monitoring commercial borrowers in certain industry sectors that may be impacted by international trade policy changes, such as tariffs, including retail and wholesale trade, manufacturing and construction companies.

Previous wording

Targeted loan reviews have periodically been 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. In 2023 and 2024, 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. Elevated vacancies and higher interest rates have contributed to lower current and anticipated future debt service coverage ratios, which have and may 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, in particular those borrowers with loans secured by office properties, to refinance their obligations at loan maturity. Despite these challenges, the ability of borrowers to service loans secured by certain investor-owned real estate, including health services, retail and multifamily properties has modestly improved in recent quarters. Criticized investor-owned commercial real estate loans totaled $6.7 billion or 23% of such loans at September 30, 2024, improved from $7.6 billion or 26% at June 30, 2024 and $8.8 billion or 27% of such loans at December 31, 2023. Investor-owned commercial real estate loans comprised 62%, 63% and 70% of total criticized loans at September 30, 2024, June 30, 2024 and December 31, 2023, respectively. The weighted-average LTV ratio for investor-owned commercial real estate loans was approximately 56% at each of September 30, 2024, June 30, 2024 and December 31, 2023. Criticized loans secured by investor-owned commercial real estate had a weighted-average LTV ratio of approximately 63%, 62% and 61% at September 30, 2024, June 30, 2024 and December 31, 2023, respectively.

Current wording

The Company continues to monitor its commercial real estate loan portfolio. Criticized investor-owned commercial real estate loans totaled $5.4 billion or 21% of such loans at March 31, 2025, improved from $6.0 billion or 23% at December 31, 2024. Investor-owned commercial real estate loans comprised 57% of total criticized loans at March 31, 2025, compared with 61% at December 31, 2024. The primary source of repayment of these loans is typically tenant lease payments to the investor/borrower. Elevated vacancies impacting some property types and higher interest rates have contributed to lower current and anticipated future debt service coverage ratios, which have and may 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, in particular those borrowers with loans secured by office properties, to refinance their obligations at loan maturity. Despite these challenges, the ability of borrowers to service loans secured by certain investor-owned real estate, including health services, hotel and multifamily properties, has improved in recent quarters. The LTV ratio is one of many factors considered in assessing overall portfolio risks and loss mitigation strategies for the investor-owned commercial real estate portfolio. The weighted-average LTV ratio for investor-owned commercial real estate loans was approximately 57% at March 31, 2025 and 56% at each of December 31, 2024 and March 31, 2024. Criticized loans secured by investor-owned commercial real estate had a weighted-average LTV ratio of approximately 66%, 63% and 62% at March 31, 2025, December 31, 2024 and March 31, 2024, respectively. In determining the LTV ratio, the Company considers cross-collateralization of all exposures secured by the supporting collateral and the estimated value of such collateral. Subsequent to the origination of commercial real estate loans, updated appraisals are obtained in the normal course of business for renewals, extensions and modifications to commitment levels. As the quality of a loan deteriorates to the point of designating the loan as "criticized nonaccrual," the process of obtaining updated collateral valuation information is usually initiated, unless it is not considered warranted given factors such as the relative size of the loan or the age of the last valuation. In those cases where current appraisals may not yet be available, prior appraisals are utilized with adjustments, as deemed necessary, for estimates of subsequent declines in values as determined by line of business and/or loan workout personnel. Those adjustments are reviewed and assessed for reasonableness by the Company’s credit risk personnel. Accordingly, for real estate collateral securing larger nonaccrual commercial and industrial loans and commercial real estate loans, estimated collateral values are generally based on current appraisals and estim…

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Previous wording

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 148% of Tier 1 capital plus its allowable allowance for credit losses at September 30, 2024, compared with 151% at June 30, 2024 and 183% at December 31, 2023. The Company has intentionally reduced its relative concentration of investor-owned commercial real estate loans throughout 2023 and the first nine months of 2024.

Current wording

The Company monitors its concentration of commercial real estate lending as a percent 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 133% of Tier 1 capital plus its allowable allowance for credit losses at March 31, 2025 and 136% at December 31, 2024, compared with 176% at March 31, 2024. The Company intentionally reduced its relative concentration of investor-owned commercial real estate loans throughout 2024.

Previous wording

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. With respect to junior lien loans, to the extent known by the Company, if a related senior lien loan would be on nonaccrual status because of payment delinquency, even if such senior lien loan was not owned by the Company, the junior lien loan or line that is owned by the Company is placed on nonaccrual status. In monitoring the credit quality of its home equity portfolio for purposes of determining the allowance for credit losses, the Company reviews delinquency and nonaccrual information and considers recent charge-off experience. When evaluating individual home equity loans and lines of credit for charge-off and for purposes of determining the allowance for credit losses, the Company considers the required repayment of any first lien positions related to collateral property. Information about the location of loans secured by residential real estate is presented in the following table.

Current wording

For loans secured by residential real estate the Company’s loss identification and estimation techniques make reference to loan performance and house price data in specific areas of the country where collateral securing those 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. With respect to junior lien loans, to the extent known by the Company, if a related senior lien loan would be on nonaccrual status because of payment delinquency, even if such senior lien loan was not owned by the Company, the junior lien loan or line that is owned by the Company is placed on nonaccrual status. In monitoring the credit quality of its home equity portfolio for purposes of determining the allowance for credit losses, the Company reviews delinquency and nonaccrual information and considers recent charge-off experience. When evaluating individual home equity loans and lines of credit for charge-off and for purposes of determining the allowance for credit losses, the Company considers the required repayment of any first lien positions related to collateral property. Information about the location of nonaccrual loans secured by residential real estate at March 31, 2025 is presented in the following table.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

A comparative summary of consumer loans in nonaccrual status by product is presented in the following table.

Current wording

Consumer loans not secured by residential real estate are generally charged-off when the loans are 91 to 180 days past due, depending on whether the loan is collateralized and the status of repossession activities with respect to such collateral. A comparative summary of consumer loans in nonaccrual status by product is presented in the following table.