Provision for Credit Losses/Asset Quality. The provision for credit losses totaled $150 million in the third quarter of 2020, up from $45 million in the year-earlier quarter, but down from $325 million in 2020's second quarter. The significantly higher level of the provision in the 2020 quarters reflected projections of expected credit losses under the provisions of new accounting guidance that became effective on January 1, 2020. Those projections included estimates of the impact of the COVID-19 pandemic. Prior to 2020, the provision for credit losses reflected incurred losses only. Net loan charge-offs were $30 million during the recent quarter, compared with $36 million in the similar quarter of 2019 and $71 million in the second quarter of 2020. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .12% and .16% during the three-month periods ended September 30, 2020 and 2019, respectively, and .29% in the second quarter of 2020.

Loans classified as nonaccrual totaled $1.24 billion or 1.26% of total loans outstanding at September 30, 2020, compared with $1.16 billion or 1.18% of total loans at June 30, 2020. Nonaccrual loans outstanding at September 30, 2019 were $1.01 billion or 1.12% of total loans. The adoption of the new accounting guidance previously mentioned resulted in an increase in nonaccrual loans on January 1, 2020 of $171 million. Assets taken in foreclosure of defaulted loans were $50 million at September 30, 2020, compared with $80 million and $67 million at September 30, 2019 and June 30, 2020, respectively.

Allowance for Credit Losses. M&T regularly performs detailed analyses of individual borrowers and portfolios for purposes of assessing the adequacy of the allowance for credit losses. As a result of those analyses, the allowance for credit losses totaled $1.76 billion or 1.79% of loans outstanding at September 30, 2020, compared with $1.04 billion or 1.16% at September 30, 2019, $1.64 billion or 1.68% at June 30, 2020 and $1.18 billion or 1.30% as of January 1, 2020 following adoption of the current expected credit loss accounting rules. The adoption of the amended accounting guidance resulted in an increase to the allowance of $132 million on January 1, 2020. The allowance at September 30, 2020 and June 30, 2020 represented 1.91% and 1.79%, respectively, of total loans on those dates, excluding outstanding balances of PPP loans.

Noninterest Income and Expense. Noninterest income was $521 million in the recent quarter, $528 million in the year-earlier quarter and $487 million in the second quarter of 2020. As compared with the third quarter of 2019, the recent quarter's higher residential mortgage banking revenues and trust income were more than offset by lower service charges on deposit accounts and trading account and foreign exchange gains. The recent quarter's improvement as compared with the second quarter of 2020 predominantly reflects higher service charges on deposit accounts, residential mortgage banking revenues and merchant discount and credit card fees.

Noninterest expense totaled $827 million in the third quarter of 2020, compared with $878 million in the corresponding quarter of 2019 and $807 million in the second quarter of 2020. Excluding expenses considered to be nonoperating in nature, such as amortization of core deposit and other intangible assets, noninterest operating expenses were $823 million in the recent quarter, $873 million in the third quarter of 2019 and $803 million in 2020's second quarter. Contributing to the decreased level of noninterest expenses in the recent quarter as compared with the year-earlier quarter were lower costs for professional and outside services, advertising and marketing, and travel and entertainment. Additionally, the third quarter of 2019 included a $14 million addition to the valuation allowance for capitalized mortgage servicing rights, reflecting the impact of lower interest rates at that time on the valuation of such servicing rights. There was no similar increase to the valuation allowance in the recent quarter. As compared with the second 2020 quarter, higher costs for salaries and employee benefits in the recent quarter, reflective of improving business activity and one additional day, were partially offset by the impact of a $10 million addition to the valuation allowance for capitalized mortgage servicing rights recognized in the second quarter of 2020.

The efficiency ratio, or noninterest operating expenses divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment securities), measures the relationship of operating expenses to revenues. M&T's efficiency ratio was 56.2% in the third quarter of 2020, 56.0% in the year-earlier quarter and 55.7% in the second quarter of 2020.

Balance Sheet. M&T had total assets of $138.6 billion at September 30, 2020, compared with $125.5 billion and $139.5 billion at September 30, 2019 and June 30, 2020, respectively. Loans and leases, net of unearned discount, were $98.4 billion at September 30, 2020, up from $89.8 billion at September 30, 2019 and $97.8 billion at June 30, 2020. The increase in total loans and leases at the recent quarter-end as compared with the third quarter of 2019 was driven largely by growth in commercial loans of $4.7 billion and commercial real estate loans of $2.6 billion. The commercial loan growth reflects loans originated as part of the PPP, which totaled $6.5 billion at September 30, 2020. Total deposits rose to $115.2 billion at the recent quarter-end, compared with $95.1 billion at September 30, 2019 and $115.0 billion at June 30, 2020. The higher levels of deposits at the two most recent quarter-ends as compared with September 30, 2019 reflect both increased commercial and consumer deposits, as well as higher deposits associated with residential mortgage servicing activities.

Total shareholders' equity was $16.1 billion, or 11.61% of total assets at September 30, 2020, compared with $15.8 billion, or 12.57% at September 30, 2019 and $15.9 billion, or 11.43% at June 30, 2020. Common shareholders' equity was $14.9 billion, or $115.75 per share, at September 30, 2020, up from $14.5 billion, or $109.84 per share, a year-earlier and $14.7 billion, or $114.54 per share, at June 30, 2020. Tangible equity per common share was $79.85 at September 30, 2020, $74.93 at September 30, 2019 and $78.62 at June 30, 2020. In the calculation of tangible equity per common share, common shareholders' equity is reduced by the carrying values of goodwill and core deposit and other intangible assets, net of applicable deferred tax balances. M&T estimates that the ratio of Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was approximately 9.81% at September 30, 2020, up from 9.50% three months earlier.

M&T is a financial holding company headquartered in Buffalo, New York. M&T's principal banking subsidiary, M&T Bank, operates banking offices in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia. Trust-related services are provided by M&T's Wilmington Trust-affiliated companies and by M&T Bank.