15. Revenue from contracts with customers

Effective January 1, 2018 the Company adopted amended accounting and disclosure guidance for revenue from contracts with customers under the modified retrospective approach. A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, mortgage banking revenues, trading account and foreign exchange gains, investment securities gains, loan and letter of credit fees, operating lease income, income from bank-owned life insurance, and certain other revenues that are generally excluded from the scope of the amended guidance. As of result of the adoption, the Company began reporting credit card interchange revenue net of $3 million and $9 million of rewards in other revenue from operations for the three-month and nine-month periods ended September 30, 2018, respectively. For the three-month and nine-month periods ended September 30, 2017, credit card rewards expense of $3 million and $8 million, respectively, was included in other costs of operations. The adjustment to beginning retained earnings as well as the impact of any changes in timing of revenue recognition of noninterest income items within the scope of the guidance was not material to the Company’s consolidated financial position at December 31, 2017 or its consolidated results of operations for the nine months ended September 30, 2018.

For noninterest income revenue streams within the scope of the amended guidance, the Company recognizes the expected amount of consideration as revenue when the performance obligations related to the services under the terms of a contract are satisfied. The Company’s contracts generally do not contain terms that necessitate significant judgment to determine the amount of revenue to recognize.

The Company generally charges customer accounts or otherwise bills customers upon completion of its services. Typically the Company’s contracts with customers have a duration of one year or less and payment for services is received at least annually, but oftentimes more frequently as services are provided. At September 30, 2018, the Company had $52 million of uncollected amounts receivable related to recognized revenue from the sources in the table below. Such amount is classified in accrued interest and other assets in the Company’s consolidated balance sheet. In certain situations the Company is paid in advance of providing services and defers the recognition of revenue until its service obligation is satisfied. At September 30, 2018, the Company had deferred revenue of $43 million related to the sources in the table below recorded in accrued interest and other liabilities on its consolidated balance sheet. The following tables summarize sources of M&T’s noninterest income during 2018 that are subject to the amended guidance.

	Three Months Ended September 30, 2018
	Business Banking		Commercial Banking		Commercial Real Estate		Discretionary Portfolio		Residential Mortgage Banking		Retail Banking		All Other		Total
	(In thousands)

Classification in consolidated statement of income

Service charges on deposit accounts	$	15,767		24,167		2,374		—		2		64,709		1,628	$	108,647
Trust income		—		—		—		—		—		—		133,545		133,545
Brokerage services income		—		—		—		—		—		—		12,267		12,267
Other revenues from operations:
Merchant discount and credit card fees		9,238		13,520		643		—		—		3,908		462		27,771
Other		—		1,662		1,822		386		916		9,397		6,723		20,906
	$	25,005		39,349		4,839		386		918		78,014		154,625	$	303,136

15. Revenue from contracts with customers, continued

	Nine Months Ended September 30, 2018
	Business Banking		Commercial Banking		Commercial Real Estate		Discretionary Portfolio		Residential Mortgage Banking		Retail Banking		All Other		Total
	(In thousands)

Classification in consolidated statement of income

Service charges on deposit accounts	$	46,782		73,091		7,589		—		8		188,325		4,751	$	320,546
Trust income		—		—		—		—		—		—		402,561		402,561
Brokerage services income		—		—		—		—		—		—		38,288		38,288
Other revenues from operations:
Merchant discount and credit card fees		25,075		38,774		1,625		—		—		11,436		1,695		78,605
Other		—		6,871		4,896		1,251		2,886		28,875		23,429		68,208
	$	71,857		118,736		14,110		1,251		2,894		228,636		470,724	$	908,208

Service charges on deposit accounts are generally deducted directly from customer account balances and include account maintenance charges as well as fees for insufficient funds, debit card usage, and other transactional services. Account maintenance charges are generally recognized as revenue on a monthly basis, whereas transactional fees are recognized after M&T provides the respective service.

Trust income includes fees related to the Institutional Client Services (“ICS”) business and the Wealth Advisory Services (“WAS”) business. Revenues from the ICS business are largely derived from a variety of trustee, agency,

investment, cash management and administrative services, whereas revenues from the WAS business are mainly derived from asset management, fiduciary services, and family office services. Trust fees may be billed in arrears or in advance and are recognized as revenues as M&T’s performance obligations are satisfied. Certain fees are based on a percentage of assets invested or under management and are recognized as the service is performed and constraints regarding the uncertainty of the amount of fees are resolved.

Brokerage service income includes revenues from the sale of mutual funds and annuities and securities brokerage fees. Such revenues are generally recognized at the time of transaction execution. Mutual fund and other distribution fees are recognized upon initial placement of customer funds as well as in future periods as such customers continue to hold amounts in those mutual funds.

Other revenues from operations include merchant discount and credit card fees such as interchange fees and merchant discount fees that are generally recognized when the cardholder’s transaction is approved and settled. Beginning in 2018, credit card rewards accrued to cardholders are recognized as a reduction of interchange revenue. Also included in other revenues from operations are insurance commissions, ATM surcharge fees, and advisory fees. Insurance commissions are recognized at the time the insurance policy is executed with the customer. Insurance renewal commissions are recognized upon subsequent renewal of the policy. ATM surcharge fees are included in revenue at the time of the respective ATM transaction. Advisory fees are generally recognized at the conclusion of the advisory engagement when the Company has satisfied its service obligation.