Loans and leases

12 Months Ended

Dec. 31, 2018

3. Loans and leases

Total loans and leases outstanding were comprised of the following:

	December 31
	2018			2017
	(In thousands)
Loans
Commercial, financial, etc.	$	21,730,012		$	20,474,696
Real estate:
Residential		17,150,658			19,619,259
Commercial		25,666,200			25,345,779
Construction		8,823,635			8,125,925
Consumer		13,956,086			13,251,665
Total loans		87,326,591			86,817,324
Leases
Commercial		1,406,901			1,425,562
Total loans and leases		88,733,492			88,242,886
Less: unearned discount		(267,015	)		(253,903	)
Total loans and leases, net of unearned discount	$	88,466,477		$	87,988,983

One-to-four family residential mortgage loans held for sale were $205 million at December 31, 2018 and $356 million at December 31, 2017. Commercial real estate loans held for sale were $347 million at December 31, 2018 and $22 million at December 31, 2017.

As of December 31, 2018, approximately $3.4 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, 2018, 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 were not material in 2018, 2017 or 2016.

A summary of current, past due and nonaccrual loans as of December 31, 2018 and 2017 follows:

	Current		30-89 Days Past Due		Accruing Loans Past Due 90 Days or More (a)		Accruing Loans Acquired at a Discount Past Due 90 days or More (b)		Purchased Impaired (c)		Nonaccrual		Total
	(In thousands)
December 31, 2018
Commercial, financial, leasing, etc.	$	22,701,020		39,798		2,567		168		—		234,423	$	22,977,976
Real estate:
Commercial		25,250,983		134,474		11,457		10		9,769		203,672		25,610,365
Residential builder and developer		1,665,178		20,333		—		—		—		4,798		1,690,309
Other commercial construction		6,982,077		43,615		14,344		—		641		22,205		7,062,882
Residential		13,591,790		404,808		189,682		6,650		203,044		233,352		14,629,326
Residential — limited documentation		2,278,040		72,544		—		—		89,851		84,685		2,525,120
Consumer:
Home equity lines and loans		4,758,513		25,416		—		5,033		—		71,292		4,860,254
Recreational finance		4,085,781		29,947		—		235		—		11,199		4,127,162
Automobile		3,555,757		79,804		—		—		—		23,359		3,658,920
Other		1,271,811		15,598		4,477		27,654		—		4,623		1,324,163
Total	$	86,140,950		866,337		222,527		39,750		303,305		893,608	$	88,466,477

December 31, 2017
Commercial, financial, leasing, etc.	$	21,332,234		167,756		1,322		327		21		240,991	$	21,742,651
Real estate:
Commercial		24,910,381		166,305		4,444		6,016		16,815		184,982		25,288,943
Residential builder and developer		1,618,973		5,159		—		—		1,135		6,451		1,631,718
Other commercial construction		6,407,451		23,467		—		—		4,706		10,088		6,445,712
Residential		15,376,759		474,372		233,437		7,582		282,102		235,834		16,610,086
Residential — limited documentation		2,718,019		83,898		—		—		105,236		96,105		3,003,258
Consumer:
Home equity lines and loans		5,171,345		38,546		—		9,391		—		74,500		5,293,782
Recreational finance		3,229,570		23,802		—		546		—		6,509		3,260,427
Automobile		3,441,371		78,511		—		—		—		23,781		3,543,663
Other		1,119,501		17,127		5,202		23,556		—		3,357		1,168,743
Total	$	85,325,604		1,078,943		244,405		47,418		410,015		882,598	$	87,988,983

(a)	Excludes loans acquired at a discount.

(b)	Loans acquired at a discount that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(c)	Accruing loans acquired at a discount that were impaired at acquisition date and 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 $68,745,000 in 2018, $63,872,000 in 2017 and $68,371,000 in 2016. The actual amounts included in interest income during 2018, 2017 and 2016 on such loans were $32,983,000, $31,425,000 and $33,941,000, respectively.

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

	December 31
	2018		2017
	(In thousands)

Outstanding principal balance	$	1,016,785	$	1,394,188
Carrying amount:
Commercial, financial, leasing, etc.		27,073		31,105
Commercial real estate		135,047		228,054
Residential real estate		473,511		620,827
Consumer		91,860		123,413
	$	727,491	$	1,003,399

Purchased impaired loans included in the table above totaled $303 million at December 31, 2018 and $410 million at December 31, 2017, representing less than 1% of the Company’s assets as of each date. A summary of changes in the accretable yield for loans acquired at a discount for the years ended December 31, 2018, 2017 and 2016 follows:

For the Year Ended December 31,	2018						2017						2016
	Purchased Impaired			Other Acquired			Purchased Impaired			Other Acquired			Purchased Impaired			Other Acquired
	(In thousands)

Balance at beginning of period	$	157,918		$	133,162		$	154,233		$	201,153		$	184,618		$	296,434
Interest income		(37,819	)		(63,856	)		(47,452	)		(82,605	)		(52,769	)		(123,044	)
Reclassifications from nonaccretable balance		27,111			22,849			51,137			16,437			22,384			22,677
Other (a)		—			4,752			—			(1,823	)		—			5,086
Balance at end of period	$	147,210		$	96,907		$	157,918		$	133,162		$	154,233		$	201,153

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

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 tables that follow summarize the Company’s loan modification activities that were considered troubled debt restructurings for the years ended December 31, 2018, 2017 and 2016:

					Post-modification (a)
Year Ended December 31, 2018	Number		Pre- modification Recorded Investment		Principal Deferral		Interest Rate Reduction		Other		Combination of Concession Types		Total
	(Dollars in thousands)

Commercial, financial, leasing, etc.		203	$	102,445	$	50,490	$	803	$	6,210	$	45,411	$	102,914
Real estate:
Commercial		83		30,217		16,870		175		4,686		9,000		30,731
Other commercial construction		1		752		746		—		—		—		746
Residential		134		34,798		19,962		—		—		18,110		38,072
Residential — limited documentation		9		1,887		827		—		—		1,423		2,250
Consumer:
Home equity lines and loans		47		3,952		224		—		—		3,755		3,979
Recreational finance		7		202		202		—		—		—		202
Automobile		73		1,330		1,318		—		—		12		1,330
Total		557	$	175,583	$	90,639	$	978	$	10,896	$	77,711	$	180,224

Year Ended December 31, 2017

Commercial, financial, leasing, etc.		217	$	111,036	$	25,051	$	—	$	6,459	$	57,153	$	88,663
Real estate:
Commercial		83		44,924		17,039		—		868		22,975		40,882
Residential builder and developer		3		12,291		—		—		—		10,879		10,879
Other commercial construction		2		168		168		—		—		—		168
Residential		141		31,827		16,633		—		—		17,974		34,607
Residential — limited documentation		20		4,230		911		—		—		3,661		4,572
Consumer:
Home equity lines and loans		110		10,049		1,137		—		491		8,585		10,213
Recreational finance		9		160		160		—		—		—		160
Automobile		69		1,378		1,203		—		—		175		1,378
Total		654	$	216,063	$	62,302	$	—	$	7,818	$	121,402	$	191,522

					Post-modification (a)
Year Ended December 31, 2016	Number		Pre- modification Recorded Investment		Principal Deferral		Interest Rate Reduction		Other		Combination of Concession Types		Total
	(Dollars in thousands)

Commercial, financial, leasing, etc.		164	$	154,093	$	102,446	$	—	$	—	$	41,673	$	144,119
Real estate:
Commercial		81		44,870		23,558		—		4,576		15,603		43,737
Residential builder and developer		6		39,660		22,958		—		—		15,123		38,081
Other commercial construction		3		3,113		250		—		—		2,782		3,032
Residential		119		20,057		11,771		—		—		9,367		21,138
Residential — limited documentation		21		3,560		1,047		—		—		2,917		3,964
Consumer:
Home equity lines and loans		103		11,870		761		—		—		11,110		11,871
Recreational finance		10		318		270		—		20		28		318
Automobile		163		1,264		1,124		—		55		85		1,264
Other		69		891		698		—		25		168		891
Total		739	$	279,696	$	164,883	$	—	$	4,676	$	98,856	$	268,415

(a)	Financial effects impacting the recorded investment included principal payments or advances, charge-offs and capitalized escrow arrearages. The present value of interest rate concessions, discounted at the effective rate of the original loan, was not material.

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, 2018, 2017 and 2016 and for which there was a subsequent payment default during the respective year 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 $60,000, amounted to $77,414,000 and $93,103,000 at December 31, 2018 and 2017, respectively. During 2018, new borrowings by such persons amounted to $1,900,000 (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 individuals ceasing to be directors or officers) were $17,589,000.

At December 31, 2018, approximately $11.6 billion of commercial loans and leases, $13.2 billion of commercial real estate loans, $12.8 billion of one-to-four family residential real estate loans, $2.4 billion of home equity loans and lines of credit and $6.1 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 8.

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
	2018			2017
	(In thousands)
Commercial leases:
Direct financings:
Lease payments receivable	$	1,155,464		$	1,159,584
Estimated residual value of leased assets		85,169			89,666
Unearned income		(110,458	)		(110,261	)
Investment in direct financings		1,130,175			1,138,989
Leveraged leases:
Lease payments receivable		85,007			87,821
Estimated residual value of leased assets		81,261			88,491
Unearned income		(33,717	)		(35,792	)
Investment in leveraged leases		132,551			140,520
Total investment in leases	$	1,262,726		$	1,279,509
Deferred taxes payable arising from leveraged leases	$	74,995		$	81,359

Included within the estimated residual value of leased assets at December 31, 2018 and 2017 were $39 million and $37 million, respectively, in residual value associated with direct financing leases that are guaranteed by the lessees or others.

At December 31, 2018, the minimum future lease payments to be received from lease financings were as follows:

	(In thousands)
Year ending December 31:
2019	$	326,898
2020		310,255
2021		224,150
2022		141,244
2023		88,182
Later years		149,742
	$	1,240,471

The amount of foreclosed residential real estate property held by the Company was $77 million and $108 million at December 31, 2018 and 2017, respectively. There were $391 million and $497 million at December 31, 2018 and 2017, respectively, in loans secured by residential real estate that were in the process of foreclosure. Of all loans in the process of foreclosure at December 31, 2018, approximately 39% were classified as purchased impaired and 21% were government guaranteed.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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