4. Loans and leases

Total loans and leases outstanding were comprised of the following:


	December 31
	2014			2013
	(In thousands)
Loans
Commercial, financial, etc.	$	18,280,049		$	17,477,238
Real estate:
Residential		8,636,794			8,911,554
Commercial		22,614,174			21,799,886
Construction		5,061,269			4,457,650
Consumer		10,969,879			10,280,527

Total loans		65,562,165			62,926,855
Leases
Commercial		1,337,204			1,398,928

Total loans and leases		66,899,369			64,325,783
Less: unearned discount		(230,413	)		(252,624	)

Total loans and leases, net of unearned discount	$	66,668,956		$	64,073,159

One-to-four family residential mortgage loans held for sale were $435 million at December 31, 2014 and $401 million at December 31, 2013. Commercial real estate loans held for sale were $308 million at December 31, 2014 and $68 million at December 31, 2013.

During 2013, the Company securitized approximately $1.3 billion of one-to-four family residential real estate loans previously held in the Company’s loan portfolio into guaranteed mortgage-backed securities with the Government National Mortgage Association (“Ginnie Mae”) and recognized gains of $42,382,000. In addition, the Company securitized and sold in 2013 approximately $1.4 billion of automobile loans held in its loan portfolio, resulting in a gain of $20,683,000.

As of December 31, 2014, approximately $2.4 billion of commercial real estate loan balances serviced for others had been sold with recourse in conjunction with the Company’s participation in the Fannie Mae Delegated Underwriting and Servicing (“DUS”) program. At December 31, 2014, the Company estimated that the recourse obligations described above were not material to the Company’s consolidated financial position. There have been no material losses incurred as a result of those credit recourse arrangements.

In addition to recourse obligations, as described in note 21, the Company is contractually obligated to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation. When required to do so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. Charges incurred for such obligation, which are recorded as a reduction of mortgage banking revenues, were $4 million, $17 million and $28 million in 2014, 2013 and 2012, respectively.

The outstanding principal balance and the carrying amount of acquired loans that were recorded at fair value at the acquisition date that is included in the consolidated balance sheet were as follows:


	December 31
	2014		2013
	(In thousands)
Outstanding principal balance	$	3,070,268	$	4,656,811
Carrying amount:
Commercial, financial, leasing, etc.		247,820		580,685
Commercial real estate		961,828		1,541,368
Residential real estate		453,360		576,473
Consumer		933,537		1,308,926

	$	2,596,545	$	4,007,452

Purchased impaired loans included in the table above totaled $198 million at December 31, 2014 and $331 million at December 31, 2013, representing less than 1% of the Company’s assets as of each date. A summary of changes in the accretable yield for acquired loans for the years ended December 31, 2014, 2013 and 2012 follows:


For Year Ended December 31,	2014						2013						2012
	Purchased			Other			Purchased			Other			Purchased			Other
	Impaired			Acquired			Impaired			Acquired			Impaired			Acquired
	(In thousands)
Balance at beginning of period	$	37,230		$	538,633		$	42,252		$	638,272		$	30,805		$	807,960
Interest income		(21,263	)		(178,670	)		(36,727	)		(247,295	)		(40,551	)		(295,654	)
Reclassifications from nonaccretable balance, net		60,551			24,907			31,705			149,595			51,998			148,490
Other(a)		—			12,509			—			(1,939	)		—			(22,524	)

Balance at end of period	$	76,518		$	397,379		$	37,230		$	538,633		$	42,252		$	638,272

(a)

Other changes in expected cash flows including changes in interest rates and prepayment assumptions.

A summary of current, past due and nonaccrual loans as of December 31, 2014 and 2013 follows:


					90 Days or More Past Due and Accruing
	Current		30-89 Days Past Due		Non- acquired		Acquired(a)		Purchased Impaired(b)		Nonaccrual		Total
	(In thousands)
December 31, 2014
Commercial, financial, leasing, etc.	$	19,228,265	$	37,246	$	1,805	$	6,231	$	10,300	$	177,445	$	19,461,292
Real estate:
Commercial		22,208,491		118,704		22,170		14,662		51,312		141,600		22,556,939
Residential builder and developer		1,273,607		11,827		492		9,350		98,347		71,517		1,465,140
Other commercial construction		3,484,932		17,678		—		—		17,181		25,699		3,545,490
Residential		7,640,368		226,932		216,489		35,726		18,223		180,275		8,318,013
Residential Alt-A		249,810		11,774		—		—		—		77,704		339,288
Consumer:
Home equity lines and loans		5,859,378		42,945		—		27,896		2,374		89,291		6,021,884
Automobile		1,931,138		30,500		—		133		—		17,578		1,979,349
Other		2,909,791		33,295		4,064		16,369		—		18,042		2,981,561

Total	$	64,785,780	$	530,901	$	245,020	$	110,367	$	197,737	$	799,151	$	66,668,956

December 31, 2013
Commercial, financial, leasing, etc.	$	18,489,474	$	77,538	$	4,981	$	6,778	$	15,706	$	110,739	$	18,705,216
Real estate:
Commercial		21,236,071		145,749		63,353		35,603		88,034		173,048		21,741,858
Residential builder and developer		1,025,984		8,486		141		7,930		137,544		96,427		1,276,512
Other commercial construction		2,986,598		42,234		—		8,031		57,707		35,268		3,129,838
Residential		7,630,368		295,131		294,649		43,700		29,184		252,805		8,545,837
Residential Alt-A		283,253		18,009		—		—		—		81,122		382,384
Consumer:
Home equity lines and loans		5,972,365		40,537		—		27,754		2,617		78,516		6,121,789
Automobile		1,314,246		29,144		—		366		—		21,144		1,364,900
Other		2,726,522		47,830		5,386		—		—		25,087		2,804,825

Total	$	61,664,881	$	704,658	$	368,510	$	130,162	$	330,792	$	874,156	$	64,073,159

(a)

Acquired loans that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(b)

Accruing loans that were impaired at acquisition date and were recorded at fair value.

If nonaccrual and renegotiated loans had been accruing interest at their originally contracted terms, interest income on such loans would have amounted to $58,314,000 in 2014, $62,010,000 in 2013 and $69,054,000 in 2012. The actual amounts included in interest income during 2014, 2013 and 2012 on such loans were $28,492,000, $31,987,000 and $30,484,000, respectively.

During the normal course of business, the Company modifies loans to maximize recovery efforts. If the borrower is experiencing financial difficulty and a concession is granted, the Company considers such modifications as troubled debt restructurings and classifies those loans as either nonaccrual loans or renegotiated loans. The types of concessions that the Company grants typically include principal deferrals and interest rate concessions, but may also include other types of concessions.

The table below summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the year ended December 31, 2014:


			Recorded Investment				Financial Effects of Modification
	Number		Pre- modifica- tion		Post- modifica- tion		Recorded Investment (a)			Interest (b)
	(Dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		95	$	29,035	$	23,628	$	(5,407	)	$	—
Other		3		29,912		31,604		1,692			—
Combination of concession types		7		19,167		19,030		(137	)		(20	)
Real estate:
Commercial
Principal deferral		39		19,077		18,997		(80	)		—
Interest rate reduction		1		255		252		(3	)		(48	)
Other		1		650		—		(650	)		—
Combination of concession types		7		1,152		1,198		46			(264	)
Residential builder and developer
Principal deferral		2		1,639		1,639		—			—
Other commercial construction
Principal deferral		4		6,703		6,611		(92	)		—
Residential
Principal deferral		28		2,710		2,905		195			—
Interest rate reduction		11		1,146		1,222		76			(152	)
Other		1		188		188		—			—
Combination of concession types		30		4,211		4,287		76			(483	)
Residential Alt-A
Principal deferral		6		880		963		83			—
Combination of concession types		21		3,806		3,846		40			(386	)
Consumer:
Home equity lines and loans
Principal deferral		3		280		280		—			—
Interest rate reduction		6		535		535		—			(120	)
Combination of concession types		47		5,031		5,031		—			(560	)
Automobile
Principal deferral		208		3,293		3,293		—			—
Interest rate reduction		9		152		152		—			(12	)
Other		42		255		255		—			—
Combination of concession types		81		1,189		1,189		—			(100	)
Other
Principal deferral		33		245		245		—			—
Interest rate reduction		4		293		293		—			(63	)
Other		1		45		45		—			—
Combination of concession types		70		2,502		2,502		—			(761	)

Total		760	$	134,351	$	130,190	$	(4,161	)	$	(2,969	)

(a)

Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.

(b)

Represents the present value of interest rate concessions discounted at the effective rate of the original loan.

The table below summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the year ended December 31, 2013:


			Recorded Investment				Financial Effects of Modification
	Number		Pre- modifica- tion		Post- modifica- tion		Recorded Investment (a)			Interest (b)
	(Dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		79	$	16,389	$	16,002	$	(387	)	$	—
Interest rate reduction		1		104		335		231			(54	)
Other		4		50,433		50,924		491			—
Combination of concession types		11		6,229		5,578		(651	)		(458	)
Real estate:
Commercial
Principal deferral		27		40,639		40,464		(175	)		—
Other		2		449		475		26			—
Combination of concession types		9		2,649		3,040		391			(250	)
Residential builder and developer
Principal deferral		18		21,423		20,577		(846	)		—
Other		1		4,039		3,888		(151	)		—
Combination of concession types		3		15,580		15,514		(66	)		(535	)
Other commercial construction
Principal deferral		3		590		521		(69	)		—
Residential
Principal deferral		32		3,556		3,821		265			—
Other		1		195		195		—			—
Combination of concession types		61		73,940		70,854		(3,086	)		(924	)
Residential Alt-A
Principal deferral		10		1,900		1,880		(20	)		—
Combination of concession types		19		2,826		3,148		322			(790	)
Consumer:
Home equity lines and loans
Principal deferral		10		859		861		2			—
Interest rate reduction		1		99		99		—			(8	)
Other		1		106		106		—			—
Combination of concession types		28		2,190		2,190		—			(270	)
Automobile
Principal deferral		460		6,148		6,148		—			—
Interest rate reduction		15		235		235		—			(22	)
Other		78		339		339		—			—
Combination of concession types		225		2,552		2,552		—			(191	)
Other
Principal deferral		36		332		332		—			—
Interest rate reduction		1		12		12		—			(2	)
Other		2		14		14		—			—
Combination of concession types		120		4,248		4,248		—			(1,187	)

Total		1,258	$	258,075	$	254,352	$	(3,723	)	$	(4,691	)

(a)

Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.

(b)

Represents the present value of interest rate concessions discounted at the effective rate of the original loan.

The table below summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the year ended December 31, 2012:


			Recorded Investment				Financial Effects of Modification
	Number		Pre- modifica- tion		Post- modifica- tion		Recorded Investment (a)			Interest (b)
	(Dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral		61	$	23,888	$	22,456	$	(1,432	)	$	—
Other		3		2,967		3,052		85			—
Combination of concession types		5		628		740		112			(102	)
Real estate:
Commercial
Principal deferral		24		22,855		23,059		204			—
Interest rate reduction		2		665		708		43			(129	)
Combination of concession types		7		1,637		1,656		19			(351	)
Residential builder and developer
Principal deferral		23		36,868		34,740		(2,128	)		—
Combination of concession types		7		37,602		36,148		(1,454	)		—
Other commercial construction
Principal deferral		6		81,062		79,312		(1,750	)		—
Residential
Principal deferral		36		4,643		4,808		165			—
Interest rate reduction		1		109		109		—			(20	)
Combination of concession types		62		12,886		13,146		260			(657	)
Residential Alt-A
Principal deferral		7		968		989		21			—
Combination of concession types		38		8,525		8,717		192			(159	)
Consumer:
Home equity lines and loans
Principal deferral		15		1,285		1,285		—			—
Interest rate reduction		1		144		144		—			(6	)
Combination of concession types		29		2,332		2,332		—			(368	)
Automobile
Principal deferral		618		8,347		8,347		—			—
Interest rate reduction		22		328		328		—			(24	)
Other		67		300		300		—			—
Combination of concession types		375		5,857		5,857		—			(684	)
Other
Principal deferral		80		1,201		1,201		—			—
Interest rate reduction		22		515		515		—			(85	)
Other		13		54		54		—			—
Combination of concession types		84		1,015		1,015		—			(268	)

Total		1,608	$	256,681	$	251,018	$	(5,663	)	$	(2,853	)

(a)

Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages.

(b)

Represents the present value of interest rate concessions discounted at the effective rate of the original loan.

Troubled debt restructurings are considered to be impaired loans and for purposes of establishing the allowance for credit losses are evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of the loan’s expected cash flows. Impairment of troubled debt restructurings that have subsequently defaulted may also be measured based on the loan’s observable market price or the fair value of collateral if the loan is collateral-dependent. Charge-offs may also be recognized on troubled debt restructurings that have subsequently defaulted. Loans that were modified as troubled debt restructurings during the twelve months ended December 31, 2014, 2013 and 2012 and for which there was a subsequent payment default during the respective period were not material.

Borrowings by directors and certain officers of M&T and its banking subsidiaries, and by associates of such persons, exclusive of loans aggregating less than $120,000, amounted to $49,799,000 and $135,512,000 at December 31, 2014 and 2013, respectively. During 2014, new borrowings by such persons amounted to $12,327,000 (including any borrowings of new directors or officers that were outstanding at the time of their election) and repayments and other reductions (including reductions resulting from retirements) were $98,040,000.

At December 31, 2014, approximately $10.4 billion of commercial loans and leases, $9.7 billion of commercial real estate loans, $5.3 billion of one-to-four family residential real estate loans, $4.3 billion of home equity loans and lines of credit and $2.9 billion of other consumer loans were pledged to secure outstanding borrowings from the FHLB of New York and available lines of credit as described in note 9.

The Company’s loan and lease portfolio includes commercial lease financing receivables consisting of direct financing and leveraged leases for machinery and equipment, railroad equipment, commercial trucks and trailers, and aircraft. A summary of lease financing receivables follows:


	December 31
	2014			2013
	(In thousands)
Commercial leases:
Direct financings:
Lease payments receivable	$	1,022,133		$	1,052,214
Estimated residual value of leased assets		79,525			85,595
Unearned income		(103,777	)		(114,101	)

Investment in direct financings		997,881			1,023,708
Leveraged leases:
Lease payments receivable		102,457			127,821
Estimated residual value of leased assets		133,089			133,298
Unearned income		(44,288	)		(47,188	)

Investment in leveraged leases		191,258			213,931

Total investment in leases.	$	1,189,139		$	1,237,639

Deferred taxes payable arising from leveraged leases	$	169,101		$	172,296

Included within the estimated residual value of leased assets at December 31, 2014 and 2013 were $48 million and $54 million, respectively, in residual value associated with direct financing leases that are guaranteed by the lessees or others.

At December 31, 2014, the minimum future lease payments to be received from lease financings were as follows:


	(In thousands)
Year ending December 31:
2015	$	268,086
2016		242,248
2017		177,539
2018		127,985
2019		92,205
Later years		216,527

	$	1,124,590