4. Loans and leases

Total loans and leases outstanding were comprised of the following:


	December 31
	2012			2011
	(In thousands)
Loans
Commercial, financial, etc	$	16,500,202		$	14,419,490
Real estate:
Residential		11,161,323			7,889,569
Commercial		22,333,036			20,312,648
Construction		3,772,413			4,203,324
Consumer		11,550,274			12,020,229

Total loans		65,317,248			58,845,260
Leases
Commercial		1,472,938			1,532,615

Total loans and leases		66,790,186			60,377,875
Less: unearned discount		(219,229	)		(281,870	)

Total loans and leases, net of unearned discount	$	66,570,957		$	60,096,005

One-to-four family residential mortgage loans held for sale were $1.2 billion at December 31, 2012 and $210 million at December 31, 2011. Commercial mortgage loans held for sale were $200 million at December 31, 2012 and $161 million at December 31, 2011.

As of December 31, 2012, approximately $2.0 billion of commercial mortgage 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, 2012, 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 $28 million, $23 million and $30 million in 2012, 2011 and 2010, 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
	2012		2011
	(In thousands)
Outstanding principal balance	$	6,705,120	$	9,203,366
Carrying amount:
Commercial, financial, leasing, etc		928,107		1,331,198
Commercial real estate		2,567,050		3,879,518
Residential real estate		707,309		915,371
Consumer		1,637,887		2,033,700

	$	5,840,353	$	8,159,787

Purchased impaired loans included in the table above totaled $447 million at December 31, 2012 and $653 million at December 31, 2011, 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, 2012, 2011 and 2010 follows:


For Year Ended December 31,	2012						2011						2010
	Purchased			Other			Purchased			Other			Purchased			Other
	Impaired			Acquired			Impaired			Acquired			Impaired			Acquired
							(In thousands)
Balance at beginning of period	$	30,805		$	807,960		$	9,245		$	447,505		$	4,318		$	531,546
Additions		—			—			39,358			648,631			4,922			13,747
Interest income		(40,551	)		(295,654	)		(26,221	)		(268,315	)		(5,826	)		(171,207	)
Reclassifications from (to) nonaccretable balance, net		51,998			148,490			8,629			1,800			5,831			34,000
Other (a)		—			(22,524	)		(206	)		(21,661	)		—			39,419

Balance at end of period	$	42,252		$	638,272		$	30,805		$	807,960		$	9,245		$	447,505

(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, 2012 and 2011 were as 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, 2012
Commercial, financial, leasing, etc.	$	17,511,052	$	62,479	$	23,490	$	10,587	$	17,437	$	151,908	$	17,776,953
Real estate:
Commercial		21,759,997		118,249		13,111		54,995		132,962		193,859		22,273,173
Residential builder and developer		757,311		35,419		3,258		23,909		187,764		181,865		1,189,526
Other commercial construction		2,379,953		35,274		509		9,572		68,971		36,812		2,531,091
Residential		9,811,956		337,969		313,184		45,124		36,769		249,314		10,794,316
Residential Alt-A		331,021		19,692		—		—		—		95,808		446,521
Consumer:
Home equity lines and loans		6,199,591		40,759		—		20,318		3,211		58,071		6,321,950
Automobile		2,442,502		40,461		—		251		—		25,107		2,508,321
Other		2,661,432		40,599		4,845		1,798		—		20,432		2,729,106

Total	$	63,854,815	$	730,901	$	358,397	$	166,554	$	447,114	$	1,013,176	$	66,570,957

December 31, 2011
Commercial, financial, leasing, etc.	$	15,493,803	$	37,112	$	7,601	$	8,560	$	23,762	$	163,598	$	15,734,436
Real estate:
Commercial		19,658,761		172,641		9,983		54,148		192,804		171,111		20,259,448
Residential builder and developer		845,680		49,353		13,603		21,116		297,005		281,576		1,508,333
Other commercial construction		2,393,304		41,049		968		23,582		78,105		106,325		2,643,333
Residential		6,626,182		256,017		250,472		37,982		56,741		172,681		7,400,075
Residential Alt-A		383,834		34,077		—		—		—		105,179		523,090
Consumer:
Home equity lines and loans		6,570,675		43,516		—		15,409		4,635		47,150		6,681,385
Automobile		2,644,330		48,342		—		601		—		26,835		2,720,108
Other		2,551,225		43,547		5,249		2,340		310		23,126		2,625,797

Total	$	57,167,794	$	725,654	$	287,876	$	163,738	$	653,362	$	1,097,581	$	60,096,005

(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 $69,054,000 in 2012 $80,278,000 in 2011 and $90,351,000 in 2010. The actual amounts included in interest income during 2012, 2011 and 2010 on such loans were $30,484,000, $31,301,000 and $40,139,000, 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, 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.

The table below summarizes the Company’s loan modification activities that were considered troubled debt restructurings for the year ended December 31, 2011:


			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		53	$	10,703	$	10,778	$	75		$	—
Combination of concession types		3		2,049		2,046		(3	)		(654	)
Real estate:
Commercial
Principal deferral		29		16,804		16,704		(100	)		—
Combination of concession types		3		15,778		15,777		(1	)		(1,463	)
Residential builder and developer
Principal deferral		9		33,208		26,811		(6,397	)		—
Other		6		118,114		110,156		(7,958	)		—
Combination of concession types		5		2,540		2,561		21			—
Other commercial construction
Principal deferral		3		8,436		8,553		117			—
Combination of concession types		3		65,813		60,973		(4,840	)		—
Residential
Principal deferral		37		8,175		8,235		60			—
Interest rate reduction		14		1,926		1,991		65			(318	)
Combination of concession types		111		19,508		19,934		426			(1,559	)
Residential Alt-A
Principal deferral		3		800		835		35			—
Combination of concession types		34		6,813		6,978		165			(889	)
Consumer:
Home equity lines and loans
Principal deferral		3		259		259		—			—
Other		3		86		86		—			—
Combination of concession types		26		2,156		2,158		2			(444	)
Automobile
Principal deferral		746		10,053		10,053		—			—
Interest rate reduction		17		183		183		—			(13	)
Other		111		739		739		—			—
Combination of concession types		431		6,703		6,703		—			(808	)
Other
Principal deferral		23		400		400		—			—
Interest rate reduction		1		8		8		—			(1	)
Other		4		103		103		—			—
Combination of concession types		102		803		803		—			(189	)

Total		1,780	$	332,160	$	313,827	$	(18,333	)	$	(6,338	)

(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, 2012 and 2011 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 $99,532,000 and $96,523,000 at December 31, 2012 and 2011, respectively. During 2012, new borrowings by such persons amounted to $16,026,000 (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 $13,017,000.

At December 31, 2012, approximately $8.0 billion of commercial loans and leases, $9.6 billion of commercial real estate loans, $5.9 billion of one-to-four family residential real estate loans, $4.2 billion of home equity loans and lines of credit and $3.1 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 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
	2012			2011
	(In thousands)
Commercial leases:
Direct financings:
Lease payments receivable	$	1,106,434		$	1,137,310
Estimated residual value of leased assets		96,468			96,479
Unearned income		(134,428	)		(153,704	)

Investment in direct financings		1,068,474			1,080,085
Leveraged leases:
Lease payments receivable		132,466			154,551
Estimated residual value of leased assets		137,570			144,275
Unearned income		(50,378	)		(53,847	)

Investment in leveraged leases		219,658			244,979

Total investment in leases.	$	1,288,132		$	1,325,064

Deferred taxes payable arising from leveraged leases	$	172,026		$	180,731

Included within the estimated residual value of leased assets at December 31, 2012 and 2011 were $54 million and $52 million, respectively, in residual value associated with direct financing leases that are guaranteed by the lessees. The Company is indemnified from loss by AIB on a portion of leveraged leases obtained in the acquisition of a former subsidiary of AIB on April 1, 2003. Amounts in the leveraged lease section of the table subject to such indemnification included estimated residual value of leased assets of $7 million and $13 million as of December 31, 2012 and 2011, respectively.

At December 31, 2012, the minimum future lease payments to be received from lease financings were as follows:


	Total
	(In thousands)
Year ending December 31:
2013	$	279,758
2014		243,227
2015		190,000
2016		148,341
2017		85,699
Later years		291,875

	$	1,238,900