11.

Variable interest entities and asset securitizations

In the third quarter of 2013, the Company securitized approximately $1.8 billion of one-to-four family residential mortgage loans in guaranteed mortgage securitizations with the Government National Mortgage Association (“Ginnie Mae”). Approximately $1.0 billion of such loans were formerly held in the Company’s loan portfolio, whereas the remaining $811 million of the loans were newly originated. The Company recognized gains of $35 million related to loans previously held for investment, which has been recorded in “other revenues from operations,” and gains of $15 million on newly originated loans, which has been reflected in “mortgage banking revenues.” In total, the Company securitized approximately $2.8 billion of one-to-four family residential mortgage loans in guaranteed mortgage securitizations with Ginnie Mae during the nine months ended September 30, 2013. Approximately $1.4 billion of such loans were formerly held in the Company’s loan portfolio, whereas the remaining $1.4 billion were newly originated. For the nine months ended September 30, 2013, the Company recognized pre-tax gains of $42 million related to loans previously held for investment, which have been recorded in “other revenues from operations,” and pre-tax gains of $25 million on newly originated loans, which have been reflected in “mortgage banking revenues.” As a result of the securitization structure, the Company does not have effective control over the underlying loans and expects no material credit-related losses on the retained securities as a result of the guarantees by Ginnie Mae. In the third quarter of 2013, the Company securitized and sold approximately $1.4 billion of automobile loans held in its loan portfolio. The Company recognized gains of $21 million related to the sale, which has been recorded in “other revenues from operations.” The Company has securitized loans to improve its regulatory capital ratios and strengthen its liquidity and risk profile as a result of changing regulatory liquidity and capital requirements.

In accordance with GAAP, the Company determined that it was the primary beneficiary of a residential mortgage loan securitization trust considering its role as servicer and its retained subordinated interests in the trust. As a result, the Company has included the one-to-four family residential mortgage loans that were included in the trust in its consolidated financial statements. At September 30, 2013 and December 31, 2012, the carrying values of the loans in the securitization trust were $126 million and $151 million, respectively. The outstanding principal amount of mortgage-backed securities issued by the qualified special purpose trust that was held by parties unrelated to M&T at September 30, 2013 and December 31, 2012 was $19 million and $23 million, respectively. Because the transaction was non-recourse, the Company’s maximum exposure to loss as a result of its association with the trust at September 30, 2013 is limited to realizing the carrying value of the loans less the amount of the mortgage-backed securities held by the third parties.

As described in note 5, M&T has issued junior subordinated debentures payable to various trusts that have issued Capital Securities. M&T owns the common securities of those trust entities. The Company is not considered to be the primary beneficiary of those entities and, accordingly, the trusts are not included in the Company’s consolidated financial statements. At September 30, 2013 and December 31, 2012, the Company included the junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet. The Company has recognized $34 million in other assets for its “investment” in the common securities of the trusts that will be concomitantly repaid to M&T by the respective trust from the proceeds of M&T’s repayment of the junior subordinated debentures associated with preferred capital securities described in note 5.

The Company has invested as a limited partner in various partnerships that collectively had total assets of approximately $1.4 billion and $1.5 billion at September 30, 2013 and December 31, 2012, respectively. Those partnerships generally construct or acquire properties for which the investing partners are eligible to receive certain federal income tax credits in accordance with government guidelines. Such investments may also provide tax deductible losses to the partners. The partnership investments also assist the Company in achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company by creditors of the partnerships. However, the tax credits that result from the Company’s investments in such partnerships are generally subject to recapture should a partnership fail to comply with the respective government regulations. The Company’s maximum exposure to loss of its investments in such partnerships was $250 million, including $57 million of unfunded commitments, at September 30, 2013 and $270 million, including $71 million of unfunded commitments, at December 31, 2012. The Company has not provided financial or other support to the partnerships that was not contractually required. Management currently estimates that no material losses are probable as a result of the Company’s involvement with such entities. The Company, in its position as limited partner, does not direct the activities that most significantly impact the economic performance of the partnerships and, therefore, in accordance with the accounting provisions for variable interest entities, the partnership entities are not included in the Company’s consolidated financial statements.