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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

     
[x]
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

or

     
[ ]
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9861

M&T BANK CORPORATION

(Exact name of registrant as specified in its charter)
     
New York
(State or other jurisdiction of
incorporation or organization)
  16-0968385
(I.R.S. Employer
Identification No.)
     
One M & T Plaza
Buffalo, New York
(Address of principal
executive offices)
  14203
(Zip Code)

(716) 842-5445
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [  ].

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [x] No [  ].

Number of shares of the registrant’s Common Stock, $0.50 par value, outstanding as of the close of business on April 30, 2005: 113,672,505 shares.

 


 

M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended March 31, 2005

         
Table of Contents of Information Required in Report
  Page
       
       
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    41  
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- 2 -


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

                 
    March 31,   December 31,
Dollars in thousands, except per share
  2005
  2004
Assets
               
Cash and due from banks
  $ 1,348,725       1,334,628  
Money-market assets
               
Interest-bearing deposits at banks
    9,339       10,242  
Federal funds sold and agreements to resell securities
    22,385       29,176  
Trading account
    152,637       159,946  
 
   
 
     
 
 
Total money-market assets
    184,361       199,364  
 
   
 
     
 
 
Investment securities
               
Available for sale (cost: $8,316,598 at March 31, 2005; $8,047,681 at December 31, 2004)
    8,252,223       8,054,717  
Held to maturity (market value: $98,925 at March 31, 2005; $100,275 at December 31, 2004)
    96,957       98,050  
Other (market value: $329,710 at March 31, 2005; $321,852 at December 31, 2004)
    329,710       321,852  
 
   
 
     
 
 
Total investment securities
    8,678,890       8,474,619  
 
   
 
     
 
 
Loans and leases
    39,320,465       38,644,622  
Unearned discount
    (247,122 )     (246,145 )
Allowance for credit losses
    (631,993 )     (626,864 )
 
   
 
     
 
 
Loans and leases, net
    38,441,350       37,771,613  
 
   
 
     
 
 
Premises and equipment
    356,623       367,204  
Goodwill
    2,904,081       2,904,081  
Core deposit and other intangible assets
    149,386       165,507  
Accrued interest and other assets
    1,823,802       1,721,705  
 
   
 
     
 
 
Total assets
  $ 53,887,218       52,938,721  
 
   
 
     
 
 
Liabilities
               
Noninterest-bearing deposits
  $ 8,392,193       8,417,365  
NOW accounts
    810,737       828,999  
Savings deposits
    14,785,924       14,721,663  
Time deposits
    8,085,637       7,228,514  
Deposits at foreign office
    4,218,916       4,232,932  
 
   
 
     
 
 
Total deposits
    36,293,407       35,429,473  
 
   
 
     
 
 
Federal funds purchased and agreements to repurchase securities
    4,339,007       3,924,576  
Other short-term borrowings
    542,589       779,088  
Accrued interest and other liabilities
    756,224       727,411  
Long-term borrowings
    6,282,386       6,348,559  
 
   
 
     
 
 
Total liabilities
    48,213,613       47,209,107  
 
   
 
     
 
 
Stockholders’ equity
               
Preferred stock, $1 par, 1,000,000 shares authorized, none outstanding
           
Common stock, $.50 par, 250,000,000 shares authorized, 120,396,611 shares issued at March 31, 2005 and at December 31, 2004
    60,198       60,198  
Common stock issuable, 102,388 shares at March 31, 2005; 107,517 shares at December 31, 2004
    5,496       5,779  
Additional paid-in capital
    2,883,593       2,897,912  
Retained earnings
    3,414,395       3,270,887  
Accumulated other comprehensive income (loss), net
    (61,490 )     (17,209 )
Treasury stock – common, at cost - 6,520,701 shares at March 31, 2005; 5,168,896 shares at December 31, 2004
    (628,587 )     (487,953 )
 
   
 
     
 
 
Total stockholders’ equity
    5,673,605       5,729,614  
 
   
 
     
 
 
Total liabilities and stockholders’ equity
  $ 53,887,218       52,938,721  
 
   
 
     
 
 

- 3 -


 

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

                 
    Three months ended March 31
In thousands, except per share
  2005
  2004
Interest income
               
Loans and leases, including fees
  $ 548,689       471,639  
Money-market assets
               
Deposits at banks
    28       15  
Federal funds sold and agreements to resell securities
    169       28  
Trading account
    99       150  
Investment securities
               
Fully taxable
    85,987       70,810  
Exempt from federal taxes
    3,349       3,490  
 
   
 
     
 
 
Total interest income
    638,321       546,132  
 
   
 
     
 
 
Interest expense
               
NOW accounts
    318       994  
Savings deposits
    27,889       22,921  
Time deposits
    48,754       36,389  
Deposits at foreign office
    25,380       6,882  
Short-term borrowings
    31,991       12,058  
Long-term borrowings
    61,934       47,585  
 
   
 
     
 
 
Total interest expense
    196,266       126,829  
 
   
 
     
 
 
Net interest income
    442,055       419,303  
Provision for credit losses
    24,000       20,000  
 
   
 
     
 
 
Net interest income after provision for credit losses
    418,055       399,303  
 
   
 
     
 
 
Other income
               
Mortgage banking revenues
    33,426       28,258  
Service charges on deposit accounts
    88,353       88,325  
Trust income
    33,523       33,586  
Brokerage services income
    14,181       13,853  
Trading account and foreign exchange gains
    4,869       5,123  
Gain on sales of bank investment securities
    216       2,512  
Other revenues from operations
    59,690       56,494  
 
   
 
     
 
 
Total other income
    234,258       228,151  
 
   
 
     
 
 
Other expense
               
Salaries and employee benefits
    206,610       200,750  
Equipment and net occupancy
    44,006       47,372  
Printing, postage and supplies
    8,831       9,892  
Amortization of core deposit and other intangible assets
    16,121       21,148  
Other costs of operations
    91,769       110,805  
 
   
 
     
 
 
Total other expense
    367,337       389,967  
 
   
 
     
 
 
Income before taxes
    284,976       237,487  
Income taxes
    95,686       77,997  
 
   
 
     
 
 
Net income
  $ 189,290       159,490  
 
   
 
     
 
 
Net income per common share
               
Basic
  $ 1.65       1.33  
Diluted
    1.62       1.30  
Cash dividends per common share
  $ .40       .40  
Average common shares outstanding
               
Basic
    114,773       119,738  
Diluted
    117,184       122,316  

- 4 -


 

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

                 
    Three months ended March 31
In thousands
  2005
  2004
Cash flows from operating activities
               
Net income
  $ 189,290       159,490  
Adjustments to reconcile net income to net cash provided by operating
               
activities
               
Provision for credit losses
    24,000       20,000  
Depreciation and amortization of premises and equipment
    15,257       16,378  
Amortization of capitalized servicing rights
    14,577       14,118  
Amortization of core deposit and other intangible assets
    16,121       21,148  
Provision for deferred income taxes
    (32,478 )     (27,367 )
Asset write-downs
    131       186  
Net gain on sales of assets
    (1,231 )     (3,040 )
Net change in accrued interest receivable, payable
    (4,913 )     (4,880 )
Net change in other accrued income and expense
    69,479       81,302  
Net change in loans held for sale
    37,191       (5,377 )
Net change in trading account assets and liabilities
    (13,113 )     7,138  
 
   
 
     
 
 
Net cash provided by operating activities
    314,311       279,096  
 
   
 
     
 
 
Cash flows from investing activities
               
Proceeds from sales of investment securities
               
Available for sale
    10,022       212,983  
Other
    12,503       5,013  
Proceeds from maturities of investment securities
               
Available for sale
    501,463       514,077  
Held to maturity
    34,582       45,074  
Purchases of investment securities
               
Available for sale
    (780,440 )     (1,068,881 )
Held to maturity
    (33,493 )     (47,194 )
Other
    (20,361 )     (412 )
Additions to capitalized servicing rights
    (9,566 )     (14,163 )
Net increase in loans and leases
    (735,672 )     (760,185 )
Capital expenditures, net
    (3,349 )     (4,813 )
Other, net
    (63,804 )     67,223  
 
   
 
     
 
 
Net cash used by investing activities
    (1,088,115 )     (1,051,278 )
 
   
 
     
 
 
Cash flows from financing activities
               
Net increase in deposits
    867,720       229,488  
Net increase in short-term borrowings
    178,955       513,365  
Proceeds from long-term borrowings
    400,000       300,110  
Payments on long-term borrowings
    (450,813 )     (100,766 )
Purchases of treasury stock
    (188,772 )     (162,178 )
Dividends paid – common
    (45,743 )     (47,644 )
Other, net
    19,763       58,001  
 
   
 
     
 
 
Net cash provided by financing activities
    781,110       790,376  
 
   
 
     
 
 
Net increase in cash and cash equivalents
  $ 7,306       18,194  
Cash and cash equivalents at beginning of period
    1,363,804       1,899,782  
 
   
 
     
 
 
Cash and cash equivalents at end of period
  $ 1,371,110       1,917,976  
 
   
 
     
 
 
Supplemental disclosure of cash flow information
               
Interest received during the period
  $ 623,405       535,853  
Interest paid during the period
    194,860       131,645  
Income taxes paid during the period
    25,162       9,718  
 
   
 
     
 
 
Supplemental schedule of noncash investing and financing activities
               
Real estate acquired in settlement of loans
  $ 3,026       4,607  
 
   
 
     
 
 

- 5 -


 

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

                                                                 
                                            Accumulated        
                    Common   Additional           other        
    Preferred   Common   stock   paid-in   Retained   comprehensive   Treasury    
In thousands, except per share
  stock
  stock
  issuable
  capital
  earnings
  income (loss), net
  stock
  Total
2004
                                                               
Balance – January 1, 2004
  $       60,053       6,326       2,888,963       2,736,215       25,653             5,717,210  
Comprehensive income:
                                                               
Net income
                            159,490                   159,490  
Other comprehensive income, net of tax and reclassification adjustments:
                                                               
Unrealized gains on investment securities
                                  31,782             31,782  
 
                                                           
 
 
 
                                                            191,272  
Purchases of treasury stock
                                        (162,178 )     (162,178 )
Stock-based compensation plans:
                                                               
Stock option and purchase plans:
                                                               
Compensation expense
                      11,644                         11,644  
Exercises
          144             (1,909 )                 25,005       23,240  
Directors’ stock plan
          1             165                         166  
Deferred compensation plans, net, including dividend equivalents
                236       (364 )     (47 )           606       431  
Common stock cash dividends - $.40 per share
                            (47,644 )                 (47,644 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Balance – March 31, 2004
  $       60,198       6,562       2,898,499       2,848,014       57,435       (136,567 )     5,734,141  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
2005
                                                               
Balance – January 1, 2005
  $       60,198       5,779       2,897,912       3,270,887       (17,209 )     (487,953 )     5,729,614  
Comprehensive income:
                                                               
Net income
                            189,290                   189,290  
Other comprehensive income, net of tax and reclassification adjustments:
                                                               
Unrealized losses on investment securities
                                  (44,281 )           (44,281 )
 
                                                           
 
 
 
                                                            145,009  
Purchases of treasury stock
                                        (188,772 )     (188,772 )
Repayment of management stock ownership program receivable
                      94                         94  
Stock-based compensation plans:
                                                               
Stock option and purchase plans:
                                                               
Compensation expense
                      11,596                         11,596  
Exercises
                      (25,873 )                 47,126       21,253  
Directors’ stock plan
                      32                   224       256  
Deferred compensation plans, net, including dividend equivalents
                (283 )     (168 )     (39 )           788       298  
Common stock cash dividends - $.40 per share
                            (45,743 )                 (45,743 )
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 
Balance – March 31, 2005
  $       60,198       5,496       2,883,593       3,414,395       (61,490 )     (628,587 )     5,673,605  
 
   
 
     
 
     
 
     
 
     
 
     
 
     
 
     
 
 

CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR CREDIT LOSSES (Unaudited)
                 
    Three months ended March 31
In thousands
  2005
  2004
Beginning balance
  $ 626,864       614,058  
Provision for credit losses
    24,000       20,000  
Allowance related to loans sold or securitized
          (501 )
Net charge-offs
               
Charge-offs
    (26,783 )     (29,401 )
Recoveries
    7,912       11,484  
 
   
 
     
 
 
Total net charge-offs
    (18,871 )     (17,917 )
 
   
 
     
 
 
Ending balance
  $ 631,993       615,640  
 
   
 
     
 
 

- 6 -


 

NOTES TO FINANCIAL STATEMENTS

1. Significant accounting policies

The consolidated financial statements of M&T Bank Corporation (“M&T”) and subsidiaries (“the Company”) were compiled in accordance with the accounting policies set forth in note 1 of Notes to Financial Statements included in the Company’s 2004 Annual Report. In the opinion of management, all adjustments necessary for a fair presentation have been made and were all of a normal recurring nature.

2. Earnings per share

The computations of basic earnings per share follow:

                 
    Three months ended
    March 31
    2005
  2004
    (in thousands, except per share)
Income available to common stockholders
               
Net income
  $ 189,290       159,490  
Weighted-average shares outstanding (including common stock issuable)
    114,773       119,738  
Basic earnings per share
  $ 1.65       1.33  

The computations of diluted earnings per share follow:

                 
    Three months ended
    March 31
    2005
  2004
    (in thousands, except per share)
Income available to common stockholders
  $ 189,290       159,490  
Weighted-average shares outstanding
    114,773       119,738  
Plus: incremental shares from assumed conversion of stock options
    2,411       2,578  
 
   
 
     
 
 
Adjusted weighted-average shares outstanding
    117,184       122,316  
Diluted earnings per share
  $ 1.62       1.30  

- 7 -


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Comprehensive income

The following table displays the components of other comprehensive income:

                         
    Three months ended March 31, 2005
    Before-tax   Income    
    amount
  taxes
  Net
    (in thousands)
Unrealized losses on investment securities:
                       
Unrealized holding losses during period
  $ (71,195 )     27,046       (44,149 )
Less: reclassification adjustment for gains realized in net income
    216       (84 )     132  
 
   
 
     
 
     
 
 
Net unrealized losses
  $ (71,411 )     27,130       (44,281 )
 
   
 
     
 
     
 
 
                         
    Three months ended March 31, 2004
    Before-tax   Income    
    amount
  taxes
  Net
    (in thousands)
Unrealized gains on investment securities:
                       
Unrealized holding gains during period
  $ 54,777       (21,463 )     33,314  
Less: reclassification adjustment for gains realized in net income
    2,512       (980 )     1,532  
 
   
 
     
 
     
 
 
Net unrealized gains
  $ 52,265       (20,483 )     31,782  
 
   
 
     
 
     
 
 

Accumulated other comprehensive income (loss), net consisted of unrealized gains (losses) as follows:

                         
            Minimum    
            pension    
    Investment   liability    
    securities
  adjustment
  Total
    (in thousands)
Balance – January 1, 2005
  $ (4,712 )     (12,497 )     (17,209 )
Net loss during period
    (44,281 )           (44,281 )
 
   
 
     
 
     
 
 
Balance – March 31, 2005
  $ (48,993 )     (12,497 )     (61,490 )
 
   
 
     
 
     
 
 
Balance – January 1, 2004
  $ 38,111       (12,458 )     25,653  
Net gain during period
    31,782             31,782  
 
   
 
     
 
     
 
 
Balance – March 31, 2004
  $ 69,893       (12,458 )     57,435  
 
   
 
     
 
     
 
 

- 8 -


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings

In 1997, M&T Capital Trust I (“Trust I”), M&T Capital Trust II (“Trust II”), and M&T Capital Trust III (“Trust III”) issued $310 million of fixed rate preferred capital securities. In 1996, $150 million of floating rate preferred capital securities were issued by First Maryland Capital I (“Trust IV”) and in 1997, $150 million of floating rate preferred capital securities were issued by First Maryland Capital II (“Trust V”). The distribution rates on the preferred capital securities of Trust IV and Trust V adjust quarterly based on changes in the three-month London Interbank Offered Rate (“LIBOR”) and were 3.66% and 3.59%, respectively, at March 31, 2005 and 3.07% and 3.01%, respectively, at December 31, 2004. Trust I, Trust II, Trust III, Trust IV and Trust V are referred to herein collectively as the “Trusts.”

Other than the following payment terms (and the redemption terms described below), the preferred capital securities issued by the Trusts (“Capital Securities”) are substantially identical in all material respects:

             
    Distribution   Distribution
Trust
  rate
  dates
Trust I
    8.234 %   February 1 and August 1
 
           
Trust II
    8.277 %   June 1 and December 1
 
           
Trust III
    9.25 %   February 1 and August 1
 
           
Trust IV
  LIBOR plus 1.00%   January 15, April 15, July 15 and
October 15
 
           
Trust V
  LIBOR plus .85%   February 1, May 1, August 1 and
November 1

The common securities of each Trust (“Common Securities”) are wholly owned by M&T and are the only class of each Trust’s securities possessing general voting powers. The Capital Securities represent preferred undivided interests in the assets of the corresponding Trust. Under the Federal Reserve Board’s current risk-based capital guidelines, the Capital Securities are includable in M&T’s Tier 1 (core) capital.

The proceeds from the issuances of the Capital Securities and Common Securities were used by the Trusts to purchase junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) of M&T as follows:

             
    Capital   Common   Junior Subordinated
Trust
  Securities
  Securities
  Debentures
Trust I
  $150 million   $4.64 million   $154.64 million aggregate liquidation amount of 8.234% Junior Subordinated Debentures due February 1, 2027.
 
           
Trust II
  $100 million   $3.09 million   $103.09 million aggregate liquidation amount of 8.277% Junior Subordinated Debentures due June 1, 2027.
 
           
Trust III
  $60 million   $1.856 million   $61.856 million aggregate liquidation amount of 9.25% Junior Subordinated Debentures due February 1, 2027.

-9-


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings, continued

             
    Capital   Common   Junior Subordinated
Trust
  Securities
  Securities
  Debentures
Trust IV
  $150 million   $4.64 million   $154.64 million aggregate liquidation amount of Floating Rate Junior Subordinated Debentures due January 15, 2027.
 
           
Trust V
  $150 million   $4.64 million   $154.64 million aggregate liquidation amount of Floating Rate Junior Subordinated Debentures due February 1, 2027.

The Junior Subordinated Debentures represent the sole assets of each Trust and payments under the Junior Subordinated Debentures are the sole source of cash flow for each Trust. The financial statement carrying values of junior subordinated debentures associated with preferred capital securities of Trust III, Trust IV and Trust V at March 31, 2005 and December 31, 2004 include the unamortized portions of purchase accounting adjustments to reflect estimated fair value as of the date of M&T’s acquisition of the common securities of each respective trust. The interest rates payable on the Junior Subordinated Debentures of Trust IV and Trust V were 3.66% and 3.59%, respectively, at March 31, 2005 and 3.07% and 3.01%, respectively, at December 31, 2004.

Holders of the Capital Securities receive preferential cumulative cash distributions on each distribution date at the stated distribution rate unless M&T exercises its right to extend the payment of interest on the Junior Subordinated Debentures for up to ten semi-annual periods (in the case of Trust I, Trust II and Trust III) or twenty quarterly periods (in the case of Trust IV and Trust V), in which case payment of distributions on the respective Capital Securities will be deferred for comparable periods. During an extended interest period, M&T may not pay dividends or distributions on, or repurchase, redeem or acquire any shares of its capital stock. The agreements governing the Capital Securities, in the aggregate, provide a full, irrevocable and unconditional guarantee by M&T of the payment of distributions on, the redemption of, and any liquidation distribution with respect to the Capital Securities. The obligations under such guarantee and the Capital Securities are subordinate and junior in right of payment to all senior indebtedness of M&T.

The Capital Securities will remain outstanding until the Junior Subordinated Debentures are repaid at maturity, are redeemed prior to maturity or are distributed in liquidation to the Trusts. The Capital Securities are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity dates of the Junior Subordinated Debentures or the earlier redemption of the Junior Subordinated Debentures in whole upon the occurrence of one or more events (“Events”) set forth in the indentures relating to the Capital Securities, and in whole or in part at any time after the stated optional redemption dates (January 15, 2007 in the case of Trust IV, February 1, 2007 in the case of Trust I, Trust III and Trust V, and June 1, 2007 in the case of Trust II) contemporaneously with the optional redemption of the related Junior Subordinated Debentures in whole or in part. The Junior Subordinated Debentures are redeemable prior to their stated maturity dates at M&T’s option (i) on or after the stated optional redemption dates, in whole at any time or in part from time to time, or (ii) in whole, but not in part, at any time within 90 days following the occurrence and during the continuation of one or more of the Events, in each case subject to possible regulatory approval. The redemption price of the Capital Securities and the

-10-


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings, continued

related Junior Subordinated Debentures upon early redemption will be expressed as a percentage of the liquidation amount plus accumulated but unpaid distributions. In the case of Trust I, such percentage adjusts annually and ranges from 104.117% at February 1, 2007 to 100.412% for the annual period ending January 31, 2017, after which the percentage is 100%, subject to a make-whole amount if the early redemption occurs prior to February 1, 2007. In the case of Trust II, such percentage adjusts annually and ranges from 104.139% at June 1, 2007 to 100.414% for the annual period ending May 31, 2017, after which the percentage is 100%, subject to a make-whole amount if the early redemption occurs prior to June 1, 2007. In the case of Trust III, such percentage adjusts annually and ranges from 104.625% at February 1, 2007 to 100.463% for the annual period ending January 31, 2017, after which the percentage is 100%, subject to a make-whole amount if the early redemption occurs prior to February 1, 2007. In the case of Trust IV and Trust V, the redemption price upon early redemption will be equal to 100% of the principal amount to be redeemed plus any accrued but unpaid distributions to the redemption date.

In 1999, Allfirst Preferred Capital Trust (“Allfirst Capital Trust”) issued $100 million of Floating Rate Non-Cumulative Subordinated Trust Enhanced Securities (“SKATES”). Allfirst Capital Trust is a Delaware business trust that was formed in June 1999 for the exclusive purposes of (i) issuing the SKATES and common securities, (ii) purchasing Asset Preferred Securities issued by Allfirst Preferred Asset Trust (“Allfirst Asset Trust”) and (iii) engaging in only those other activities necessary or incidental thereto. M&T holds 100% of the common securities of Allfirst Capital Trust. Allfirst Asset Trust is a Delaware business trust that was formed in June 1999 for the exclusive purposes of (i) issuing Asset Preferred Securities and common securities, (ii) investing the gross proceeds of the Asset Preferred Securities in junior subordinated debentures assumed by M&T in an acquisition and other permitted investments and (iii) engaging in only those other activities necessary or incidental thereto. M&T holds 100% of the common securities of Allfirst Asset Trust and Allfirst Capital Trust holds 100% of the Asset Preferred Securities of Allfirst Asset Trust. M&T currently has outstanding $105.3 million aggregate liquidation amount Floating Rate Junior Subordinated Debentures due July 15, 2029 that are payable to Allfirst Asset Trust. The interest rates payable on such debentures were 4.09% at March 31, 2005 and 3.50% at December 31, 2004.

Distributions on the SKATES are non-cumulative. The distribution rate on the SKATES and on the Floating Rate Junior Subordinated Debentures is a rate per annum of three month LIBOR plus 1.50% reset quarterly two business days prior to the distribution dates of January 15, April 15, July 15, and October 15 in each year. Distributions on the SKATES will be paid if, as and when Allfirst Capital Trust has funds available for payment. The SKATES are subject to mandatory redemption if the Asset Preferred Securities of Allfirst Asset Trust are redeemed. Allfirst Asset Trust will redeem the Asset Preferred Securities if the junior subordinated debentures of M&T held by Allfirst Asset Trust are redeemed. M&T may redeem such junior subordinated debentures, in whole or in part, at any time on or after July 15, 2009, subject to regulatory approval. Allfirst Asset Trust will redeem the Asset Preferred Securities at par plus accrued and unpaid distributions from the last distribution payment date. M&T has guaranteed, on a subordinated basis, the payment in full of all distributions and other payments on the SKATES and on the Asset Preferred Securities to the extent that Allfirst Capital Trust and Allfirst Asset Trust, respectively, have funds legally available. Under the Federal Reserve Board’s current risk-based capital guidelines, the SKATES are includable in M&T’s Tier 1 Capital.

-11-


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings, continued

Including the unamortized portions of purchase accounting adjustments to reflect estimated fair value at the acquisition dates of the common securities of Trust III, Trust IV, Trust V and Allfirst Asset Trust, the junior subordinated debentures associated with preferred capital securities had financial statement carrying values as follows:

                         
    March 31   December 31        
    2005
  2004
       
    (in thousands)        
Trust I
  $ 154,640       154,640          
Trust II
    103,093       103,093          
Trust III
    68,953       69,034          
Trust IV
    142,690       142,553          
Trust V
    140,162       139,997          
Allfirst Asset Trust
    101,523       101,483          
 
   
 
     
 
         
 
  $ 711,061       710,800          
 
   
 
     
 
         

5. Segment information

Reportable segments have been determined based upon the Company’s internal profitability reporting system, which is organized by strategic business units. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reportable segments are Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.

The financial information of the Company’s segments was compiled utilizing the accounting policies described in note 21 to the Company’s consolidated financial statements as of and for the year ended December 31, 2004. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to generally accepted accounting principles. As a result, the financial information of the reported segments is not necessarily comparable with similar information reported by other financial institutions. As also described in note 21 to the Company’s 2004 consolidated financial statements, neither goodwill nor core deposit and other intangible assets (and the amortization charges associated with such assets) resulting from acquisitions of financial institutions have been allocated to the Company’s reportable segments, but are included in the “All Other” category. The Company has, however, assigned such intangible assets to business units for purposes of

-12-


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Segment information, continued

testing for impairment. Information about the Company’s segments is presented in the following table:

                                                 
    Three months ended March 31
    2005
  2004
            Inter-   Net           Inter-   Net
    Total   segment   income   Total   segment   income
    revenues(a)
  revenues
  (loss)
  revenues(a)
  revenues
  (loss)(a)
    (in thousands)
Commercial Banking
  $ 127,413       173       51,714       122,186       161       52,174  
Commercial Real Estate(b)
    65,528       203       32,763       58,233       278       28,327  
Discretionary Portfolio
    47,260       155       29,640       43,011       1,335       24,874  
Residential Mortgage Banking
    57,615       8,993       10,893       53,454       9,002       258  
Retail Banking
    313,982       4,501       75,297       297,171       4,935       53,277  
All Other(b)
    64,515       (14,025 )     (11,017 )     73,399       (15,711 )     580
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total
  $ 676,313             189,290       647,454             159,490  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
                         
    Average total assets
    Three months ended   Year ended
    March 31   December 31
    2005
  2004
  2004
    (in millions)
Commercial Banking
  $ 11,356       10,601       10,946  
Commercial Real Estate(b)
    8,475       7,489       7,868  
Discretionary Portfolio
    11,711       10,454       10,936  
Residential Mortgage Banking
    2,037       1,669       1,801  
Retail Banking
    14,799       14,551       14,739  
All Other(b)
    4,928       5,151       5,227  
 
   
 
     
 
     
 
 
Total
  $ 53,306       49,915       51,517  
 
   
 
     
 
     
 
 

(a)   Total revenues are comprised of net interest income and other income. Net interest income is the difference between taxable-equivalent interest earned on assets owned, interest paid on liabilities owed by a segment and a funding charge (credit) based on the Company’s internal funds transfer methodology. Segments are charged a cost to fund any assets (e.g. loans) and are paid a funding credit for any funds provided (e.g. deposits). Total revenues and net income (loss) for the first quarter of 2004 have been adjusted to reflect modifications to the internal funds transfer

-13-


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Segment information, continued

    methodology effective January 1, 2005. The net effect of the change was to increase previously reported net income for the quarter ended March 31, 2004 in the Retail Banking segment by $4 million and to decrease previously reported net income for each of the Commercial Banking and Discretionary Portfolio segments by $1 million and the Commercial Real Estate segment by $2 million. The taxable-equivalent adjustment aggregated $4,120,000 and $4,230,000 for the three-month periods ended March 31, 2005 and 2004, respectively, and is eliminated in “All Other” total revenues. Intersegment revenues are included in total revenues of the reportable segments. The elimination of intersegment revenues is included in the determination of “All Other” total revenues.
 
(b)   During the second quarter of 2004, a business unit that had been previously included in the “All Other” category was moved to the Commercial Real Estate segment for internal profitability reporting purposes. As a result, approximately $64 million of assets were transferred from the “All Other” category to the Commercial Real Estate segment. This business unit contributed net income of approximately $1 million in the first quarter of 2004. Information for 2004 has been reclassified to conform to current period presentations.

6. Commitments and contingencies

In the normal course of business, various commitments and contingent liabilities are outstanding. The following table presents the Company’s significant commitments. Certain of these commitments are not included in the Company’s consolidated balance sheet.

                 
    March 31   December 31
    2005
  2004
    (in thousands)
Commitments to extend credit
               
Home equity lines of credit
  $ 4,506,145       4,283,371  
Commercial real estate loans to be sold
    106,703       105,660  
Other commercial real estate and construction
    1,852,764       1,809,382  
Residential real estate loans to be sold
    462,044       422,159  
Other residential real estate
    563,916       449,564  
Commercial and other
    6,809,582       6,645,878  
               
Standby letters of credit
    3,353,159       3,162,901  
               
Commercial letters of credit
    47,457       57,455  
               
Financial guarantees and indemnification contracts
    1,194,985       1,168,517  
               
Commitments to sell real estate loans
    996,718       931,924  

Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of

-14-


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

6. Commitments and contingencies, continued

the customer to perform according to the terms of the underlying contract with the third party, whereas commercial letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and third party. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness.

Financial guarantees and indemnification contracts are oftentimes similar to standby letters of credit and include mandatory purchase agreements issued to ensure that customer obligations are fulfilled, recourse obligations associated with sold loans, and other guarantees of customer performance or compliance with designated rules and regulations. Included in financial guarantees and indemnification contracts are loan principal amounts sold with recourse in conjunction with the Company’s involvement in the Federal National Mortgage Association Delegated Underwriting and Servicing program. Under this program, the Company’s maximum credit risk associated with loans sold with recourse totaled $932 million and $926 million at March 31, 2005 and December 31, 2004, respectively.

Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows.

The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the fair value of real estate loans held for sale. Such commitments are considered derivatives in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, and along with commitments to originate real estate loans to be held for sale and hedged real estate loans held for sale are generally recorded in the consolidated balance sheet at estimated fair market value. However, in accordance with Staff Accounting Bulletin (“SAB”) No. 105, “Application of Accounting Principles to Loan Commitments,” issued by the United States Securities and Exchange Commission, effective April 1, 2004, value ascribable to cash flows that will be realized in connection with loan servicing activities has not been included in the determination of fair value of loans held for sale or commitments to originate loans for sale. Value ascribable to that portion of cash flows is now recognized at the time the underlying mortgage loans are sold. As a result of implementing SAB No. 105, there was a deferral of approximately $6 million of mortgage banking revenues as of March 31, 2005 that will be recognized when the underlying mortgage loans are sold.

The Company has an agreement with the Baltimore Ravens of the National Football League whereby the Company obtained the naming rights to a football stadium in Baltimore, Maryland for a fifteen year term. Under the agreement, the Company paid $3 million in both 2003 and 2004, and is obligated to pay $5 million per year from 2005 through 2013 and $6 million per year from 2014 through 2017.

The Company also has commitments under long-term operating leases.

M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending against M&T or its subsidiaries will be material to the Company’s consolidated financial position, but at the present time is not in a position to determine whether such litigation will have a material adverse effect on the Company’s consolidated results of operations in any future reporting period.

-15-


 

NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. Pension plans and other postretirement benefits

The Company provides defined benefit pension and other postretirement benefits (including health care and life insurance benefits) to qualified retired employees. Net periodic benefit cost consisted of the following:

                                 
    Pension   Postretirement
    benefits
  benefits
    Three months ended March 31
    2005
  2004
  2005
  2004
    (in thousands)
Service cost
  $ 8,000       7,850       250       225  
Interest cost on projected benefit obligation
    9,925       9,303       1,350       1,225  
Expected return on plan assets
    (9,575 )     (9,376 )            
Amortization of net actuarial loss
    1,200       699       300       175  
     
     
     
     
 
Net periodic benefit cost
  $ 9,550       8,476       1,900       1,625  
     
     
     
     
 

-16-


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Net income of M&T Bank Corporation (“M&T”) was $189 million or $1.62 of diluted earnings per common share in the first quarter of 2005, increases of 19% and 25%, respectively, from $159 million or $1.30 of diluted earnings per common share in the first quarter of 2004. During the fourth quarter of 2004, net income was $192 million or $1.62 of diluted earnings per common share. Basic earnings per common share were $1.65 in the recently completed quarter, compared with $1.33 in the first quarter of 2004 and $1.66 in 2004’s final quarter.

     The annualized rate of return on average total assets for M&T and its consolidated subsidiaries (“the Company”) in 2005’s first quarter was 1.44%, compared with 1.29% in the year-earlier quarter and 1.45% in the fourth quarter of 2004. The annualized rate of return on average common stockholders’ equity was 13.41% in the recent quarter, compared with 11.19% and 13.37% in the first and fourth quarters of 2004, respectively.

Supplemental Reporting of Non-GAAP Results of Operations

As a result of accounting for business combinations using the purchase method of accounting, the Company had recorded intangible assets consisting of goodwill and core deposit and other intangible assets totaling $3.1 billion at each of March 31, 2005, March 31, 2004 and December 31, 2004. Included in such intangible assets at each of those dates was goodwill of $2.9 billion. Amortization of core deposit and other intangible assets, after tax effect, was $10 million ($.08 per diluted share) during each of the first quarter of 2005 and fourth quarter of 2004, compared with $13 million ($.11 per diluted share) in the first quarter of 2004.

     Since 1998, M&T has consistently provided supplemental reporting of its results on a “net operating” or “tangible” basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and expenses associated with merging acquired operations into the Company, since such expenses are considered by management to be “nonoperating” in nature. Although “net operating income” as defined by M&T is not a GAAP measure, M&T’s management believes that this information helps investors understand the effect of acquisition activity in reported results.

     Net operating income rose 15% to $199 million in the first quarter of 2005 from $172 million in the corresponding quarter of 2004. Diluted net operating earnings per share for the recent quarter were $1.70, an increase of 21% from $1.41 in the first quarter of 2004. Net operating income and diluted net operating earnings per share were $202 million and $1.70, respectively, in the fourth quarter of 2004.

     Net operating income in 2005’s initial quarter represented an annualized rate of return on average tangible assets of 1.61%, compared with 1.48% and 1.62% in the first and fourth quarters of 2004, respectively. Net operating income expressed as an annualized return on average tangible common equity was 29.67% in the recently completed quarter, compared with 26.02% in the year-earlier quarter and 29.69% in the fourth quarter of 2004.

     Reconciliations of GAAP results with non-GAAP results are provided in table 2.

-17-


 

Taxable-equivalent Net Interest Income

Taxable-equivalent net interest income rose 5% to $446 million in the first quarter of 2005 from $424 million in the year-earlier quarter, but was equal to the fourth quarter of 2004. The improvement in the recent quarter as compared with 2004’s initial quarter reflects a $3.8 billion, or 9%, increase in average earning assets, partially offset by a narrowing of the Company’s net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets.

     Average loans and leases rose $2.7 billion, or 8%, to $38.6 billion in the recently completed quarter from $35.8 billion in the first quarter of 2004, and were up 1% from the $38.1 billion average in 2004’s fourth quarter. Leading the recent quarter’s growth in average loans from a year earlier were higher average outstanding commercial loans and commercial real estate loans which increased $1.0 billion or 11% and $1.7 billion or 13%, respectively. Average residential real estate loans increased $162 million or 5% from the first quarter of 2004, due, in part, to higher average balances of loans held for sale by the Company’s residential mortgage banking subsidiary, M&T Mortgage Corporation. Reflecting mixed results, the consumer loan portfolio declined in the first quarter of 2005 by $92 million or 1% as compared with the first quarter of 2004. Growth in the outstanding balances of home equity lines of credit was offset by a decline in automobile loans and leases and planned run-off of other second-mortgage loans. The Company experienced growth of 2% in the average balance of the commercial loan and commercial real estate loan portfolios in the recent quarter as compared with 2004’s final quarter, while average consumer loans declined by 1%. In dollar amount, average commercial loans and commercial real estate loans increased in 2005’s initial quarter by $175 million and $299 million, respectively, and the average balance of consumer loans decreased by $121 million as compared with the final quarter of 2004. The decline in consumer loans reflected a $183 million decrease in the average balance of automobile loans and leases, offset in part, by an increase of $85 million in average outstanding balances under home equity lines of credit. Average residential real estate loans in the recent quarter increased by $84 million or 3% from 2004’s fourth quarter. The accompanying table summarizes quarterly changes in the major components of the loan and lease portfolio.

AVERAGE LOANS AND LEASES
(net of unearned discount)
Dollars in millions

                         
            Percent increase
            (decrease) from
    1st Qtr.   1st Qtr.   4th Qtr.
    2005
  2004
  2004 .
Commercial, financial, etc.
  $ 10,094       11 %     2 %
Real estate – commercial
    14,193       13       2  
Real estate – consumer
    3,246       5       3  
Consumer
                       
Automobile
    4,071       (9 )     (4 )
Home equity lines
    3,863       18       2  
Home equity loans
    1,335       (21 )     (4 )
Other
    1,778       5       2  
 
   
 
     
 
     
 
 
Total consumer
    11,047       (1 )     (1 )
 
   
 
     
 
     
 
 
Total
  $ 38,580       8 %     1 %
 
   
 
     
 
     
 
 

     Investment securities averaged $8.6 billion during 2005’s initial quarter, compared with $7.5 billion in the year-earlier quarter and $8.3 billion in the fourth quarter of 2004. The higher level of investment securities in the recently completed quarter as compared with a year earlier reflected net purchases of securities in 2004 and 2005, consisting largely of collateralized residential mortgage obligations. The investment securities portfolio is largely comprised of residential and commercial mortgage-backed securities and collateralized mortgage obligations, debt securities issued by

-18-


 

municipalities, debt and preferred equity securities issued by government-sponsored agencies and certain financial institutions, and shorter-term U.S. Treasury notes. When purchasing investment securities, the Company considers its overall interest-rate risk profile as well as the adequacy of expected returns relative to risks assumed, including prepayments. In managing its investment securities portfolio, the Company occasionally sells investment securities as a result of changes in interest rates and spreads, actual or anticipated prepayments, or credit risk associated with a particular security, or as a result of restructuring its investment securities portfolio following completion of a business combination.

     Money-market assets, which are comprised of interest-earning deposits at banks, interest-earning trading account assets, federal funds sold and agreements to resell securities, averaged $87 million in the recently completed quarter, compared with $85 million and $67 million in the first and fourth quarters of 2004, respectively. The amount of investment securities and money-market assets held by the Company are influenced by such factors as demand for loans, which generally yield more than investment securities and money-market assets, ongoing repayments, the levels of deposits, and management of balance sheet size and resulting capital ratios.

     As a result of the changes described herein, average earning assets rose 9% to $47.2 billion in the initial quarter of 2005 from $43.4 billion in the year-earlier quarter. Average earning assets were $46.5 billion in the final 2004 quarter.

     The most significant source of funding for the Company is core deposits, which are comprised of noninterest-bearing deposits, interest-bearing transaction accounts, nonbrokered savings deposits and nonbrokered domestic time deposits under $100,000. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Certificates of deposit under $100,000 generated on a nationwide basis by M&T Bank, National Association (“M&T Bank, N.A.”), a wholly owned bank subsidiary of M&T, are also included in core deposits. Average core deposits were $27.6 billion in the first quarter of 2005, compared with $27.9 billion in the year earlier quarter and $28.1 billion in the fourth quarter of 2004. The following table provides an analysis of quarterly changes in the components of average core deposits. The decline in average NOW account balances in the recent quarter compared with the first quarter of 2004 reflects product modifications that resulted in additional customer balances being swept into savings deposit accounts.

AVERAGE CORE DEPOSITS

                         
            Percent increase
            (decrease) from
    1st Qtr.   1st Qtr.   4th Qtr.
Dollars in millions
  2005
  2004
  2004
NOW accounts
  $ 376       (66 )%     %
Savings deposits
    15,022       2       (2 )
Time deposits less than $100,000
    4,046       (11 )      
Noninterest-bearing deposits
    8,202       8       (2 )
 
   
 
     
 
     
 
 
Total
  $ 27,646       (1 )%     (2 )%
 
   
 
     
 
     
 
 

     Additional sources of funding for the Company include domestic time deposits of $100,000 or more, deposits originated through the Company’s offshore branch office, and brokered deposits. Domestic time deposits over $100,000, excluding brokered certificates of deposit, averaged $1.4 billion in the quarter ended March 31, 2005, compared with $1.2 billion during the first quarter of 2004 and $1.3 billion in 2004’s final quarter. Offshore branch deposits, primarily comprised of accounts with balances of $100,000 or more, averaged $4.2 billion, $2.8 billion and $3.5 billion for the three-month periods ended March 31, 2005, March 31, 2004 and December 31, 2004, respectively. Average brokered time deposits totaled $1.9 billion during the

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recent quarter, compared with $854 million and $1.7 billion in the first and fourth quarters of 2004, respectively. At March 31, 2005, brokered time deposits totaled $2.5 billion and the weighted-average remaining term to maturity of such deposits was 14 months. Certain of these brokered time deposits have provisions that allow early redemption. In connection with the Company’s management of interest rate risk, interest rate swap agreements have been entered into under which the Company receives a fixed rate of interest and pays a variable rate and that have notional amounts and terms substantially similar to the amounts and terms of $160 million of brokered time deposits. The Company also had brokered money-market deposit accounts which averaged $60 million during the first quarter of 2005, compared with $59 million in the corresponding quarter of 2004 and $57 million in the fourth quarter of 2004. Offshore branch deposits and brokered deposits have been used by the Company as alternatives to short-term borrowings. Additional amounts of offshore branch deposits or brokered deposits may be solicited in the future depending on market conditions, including demand by customers and other investors for those deposits, and the cost of funds available from alternative sources at the time.

     The Company also uses borrowings from banks, securities dealers, the Federal Home Loan Banks of New York, Pittsburgh and Atlanta (together, the “FHLB”), and others as sources of funding. Short-term borrowings averaged $5.2 billion in the first 2005 quarter, compared with $4.8 billion and $5.4 billion in the first and fourth quarters of 2004, respectively. Unsecured federal funds borrowings, which generally mature daily, included in short-term borrowings averaged $4.4 billion, $3.9 billion and $4.5 billion in the first quarters of 2005 and 2004, and the fourth quarter of 2004, respectively. Overnight federal funds borrowings represent the largest component of short-term borrowings and are obtained daily from a wide variety of banks and other financial institutions. Also included in short-term borrowings is a $500 million revolving asset-backed structured borrowing secured by automobile loans that were transferred to M&T Auto Receivables I, LLC, a special purpose subsidiary of M&T Bank (the principal bank subsidiary of M&T) formed in November 2002. The special purpose subsidiary, the loans and the borrowings are included in the consolidated financial statements of the Company.

     Long-term borrowings averaged $6.4 billion in the initial quarter of 2005, compared with $5.6 billion in the year-earlier quarter and $6.1 billion in the fourth quarter of 2004. Included in average long-term borrowings were amounts borrowed from the FHLB of $3.9 billion in the first quarter of 2005, and $3.1 billion and $3.5 billion in the first and fourth quarters of 2004, respectively, and subordinated capital notes of $1.3 billion in each of those quarters. Junior subordinated debentures associated with trust preferred securities that were included in average long-term borrowings were $711 million in the first quarter of 2005 and in the fourth quarter of 2004, and $710 million in the initial 2004 quarter. Information regarding trust preferred securities and the related junior subordinated debentures is provided in note 4 of Notes to Financial Statements. As described later, certain interest rate swap agreements have been entered into by the Company as part of its management of interest rate risk relating to long-term borrowings.

     Changes in the composition of the Company’s earning assets and interest-bearing liabilities as described herein, as well as changes in interest rates and spreads, can impact net interest income. Net interest spread, or the difference between the taxable-equivalent yield on earning assets and the rate paid on interest-bearing liabilities, was 3.46% in the first quarter of 2005 and 3.67% in the year-earlier quarter. The yield on earning assets during the recent quarter was 5.52%, up 42 basis points (hundredths of one percent) from 5.10% in the first quarter of 2004, while the rate paid on interest-bearing liabilities increased 63 basis points to 2.06% from 1.43%. In the final quarter of 2004, the net interest spread was 3.49%, the yield on earning assets

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was 5.24% and the rate paid on interest-bearing liabilities was 1.75%. The contraction of the net interest spread from the prior periods reflects the impact of rising short-term interest rates since June 2004 and the fact that, in general, rates paid on interest-bearing liabilities, including short-term borrowings and foreign office deposits, tend to reprice more rapidly than yields on many earning assets. During the period from June 30, 2004 through March 31, 2005, the Federal Reserve raised its benchmark overnight federal funds target rate seven times, each increase representing a 25 basis point increment over the previous effective target rate.

     Net interest-free funds consist largely of noninterest-bearing demand deposits and stockholders’ equity, partially offset by bank owned life insurance and non-earning assets, including goodwill and core deposit and other intangible assets. Average net interest-free funds totaled $8.6 billion in the recent quarter, compared with $7.8 billion and $8.7 billion in the first and fourth quarters of 2004, respectively. The increase in average net interest-free funds in the first 2005 quarter as compared with the initial 2004 quarter were largely due to higher non-interest bearing deposit balances. Goodwill and core deposit and other intangible assets averaged $3.1 billion during each of the quarters ended March 31, 2005, March 31, 2004 and December 31, 2004. The cash surrender value of bank owned life insurance averaged $1.0 billion in each of the first quarter of 2005 and 2004 and in the fourth quarter of 2004. Increases in the cash surrender value of bank owned life insurance are not included in interest income, but rather are recorded in “other revenues from operations.”

     The contribution of net interest-free funds to net interest margin was .37% in the recent quarter, compared with .25% in the year-earlier quarter and .33% in 2004’s fourth quarter. The increase in the contribution to net interest margin ascribed to net interest-free funds in the recent quarter as compared with the first quarter of 2004 and the fourth quarter of 2004 resulted largely from the impact of higher interest rates on interest-bearing liabilities used to value such contribution.

     Reflecting the changes to the net interest spread and the contribution of interest-free funds as described herein, the Company’s net interest margin was 3.83% in 2005’s initial quarter, down from 3.92% in the comparable quarter of 2004, but little changed from 3.82% in the fourth quarter of 2004. Until the recent quarter, net interest margin had declined in each quarter subsequent to the first quarter of 2003, and net interest margin for the fourth quarter of 2004 was the lowest earned by the Company since the fourth quarter of 1998.

     Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in reductions in spreads, could adversely impact the Company’s net interest income and net interest margin. Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company utilizes interest rate swap agreements to modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing liabilities. Periodic settlement amounts arising from these agreements are generally reflected in either the yields earned on assets or the rates paid on interest-bearing liabilities. The notional amount of interest rate swap agreements entered into for interest rate risk management purposes was $735 million as of March 31, 2005, $725 million as of December 31, 2004 and $675 million as of March 31, 2004. In general, under the terms of these swap agreements, the Company receives payments based on the outstanding notional amount of the swaps at fixed rates of interest and makes payments at variable rates.

     As of March 31, 2005, all of the Company’s interest rate swap agreements entered into for risk management purposes had been designated as fair value

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hedges. In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and changes in the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the corresponding gain or loss recognized in current earnings. The difference between changes in the fair value of the interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded in “other revenues from operations” in the Company’s consolidated statement of income. In a cash flow hedge, unlike in a fair value hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in “other revenues from operations” immediately. The amounts of hedge ineffectiveness recognized during the quarters ended March 31, 2005 and 2004 and the quarter ended December 31, 2004 were not material to the Company’s results of operations. The estimated aggregate fair value of interest rate swap agreements designated as fair value hedges was a loss of approximately $18 million at March 31, 2005, compared with a gain of $15 million at March 31, 2004 and a loss of $4 million at December 31, 2004. The fair values of such swap agreements were substantially offset by changes in the fair values of the hedged items. The changes in the fair values of the interest rate swap agreements and the hedged items result from the effects of changing interest rates.

     The weighted-average rates to be received and paid under interest rate swap agreements currently in effect were 6.72% and 5.27%, respectively, at March 31, 2005. The average notional amounts of interest rate swap agreements and the related effect on net interest income and margin, and the weighted-average rate paid or received on those swaps are presented in the accompanying table.

INTEREST RATE SWAP AGREEMENTS

                                 
    Three months ended March 31
    2005
  2004
Dollar in thousands   Amount
  Rate*
  Amount
  Rate*
Increase (decrease) in:
                               
Interest income
  $       %   $       %
Interest expense
    (2,816 )     (.03 )     (5,241 )     (.06 )
 
   
 
             
 
         
Net interest income/margin
  $ 2,816       .02 %   $ 5,241       .05 %
 
   
 
     
 
     
 
     
 
 
Average notional amount
  $ 733,778             $ 675,659          
 
   
 
             
 
         
Rate received **
            6.83 %             7.23 %
Rate paid **
            5.28 %             4.11 %
 
           
 
             
 
 

*   Computed as an annualized percentage of average earning assets or interest-bearing liabilities.
 
**   Weighted-average rate paid or received on interest rate swap agreements in effect during the period.

     As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk. Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future obligations, including demands for loans and deposit withdrawals, funding operating costs, and other corporate purposes. Liquidity risk arises whenever the maturities of financial instruments included in assets and liabilities differ. M&T’s banking subsidiaries have access to additional funding sources through FHLB borrowings, lines of credit with the Federal Reserve Bank of New York, and other available borrowing facilities. The Company has, from time to time, issued subordinated capital notes to provide liquidity and enhance regulatory capital ratios. As an additional source of funding, the Company entered into a $500 million revolving asset-backed structured borrowing, as noted earlier.

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     The Company has informal and sometimes reciprocal sources of funding available through various arrangements for unsecured short-term borrowings from a wide group of banks and other financial institutions. Short-term federal funds borrowings aggregated $4.1 billion, $3.7 billion and $4.0 billion at March 31, 2005, December 31, 2004 and March 31, 2004, respectively. In general, these borrowings were unsecured and matured on the following business day.

     Should the Company experience a substantial deterioration in its financial condition or its debt ratings, or should the availability of short-term funding become restricted due to a disruption in the financial markets, the Company’s ability to obtain funding from these or other sources could be negatively impacted. The Company attempts to quantify such credit-event risk by modeling scenarios that estimate the liquidity impact resulting from a short-term ratings downgrade over various grading levels. The Company estimates such impact by attempting to measure the effect on available unsecured lines of credit, available capacity from secured borrowing sources and securitizable assets. In addition to deposits and borrowings, other sources of liquidity include maturities of money-market assets and investment securities, repayments of loans and investment securities, and cash generated from operations, such as fees collected for services.

     The Company serves in the capacity of remarketing agent for variable rate demand bonds (“VRDBs”), issued by customers of the Company for the purpose of obtaining financing. The VRDBs are enhanced by a direct-pay letter of credit provided by M&T Bank. Holders of the VRDBs generally have the right to sell the bonds to the remarketing agent with seven days notice, which could result in M&T Bank owning the VRDBs for some period of time until such instruments are remarketed. When this occurs, the VRDBs are classified as trading assets in the Company’s consolidated balance sheet. The value of VRDBs in the Company’s trading account totaled $25 million at March 31, 2005, $10 million at March 31, 2004 and $14 million at December 31, 2004. As of March 31, 2005 and 2004, the total amount of VRDBs outstanding backed by an M&T Bank letter of credit was $1.6 billion, compared with $1.5 billion at December 31, 2004. M&T Bank also serves as remarketing agent for most of those bonds.

     The Company enters into contractual obligations in the normal course of business which require future cash payments. Such obligations include, among others, payments related to deposits, borrowings, leases, and other contractual commitments. The Company also enters into various other off-balance sheet commitments to customers that may impact liquidity, including commitments to extend credit, standby letters of credit, commercial letters of credit, financial guarantees and indemnification contracts, and commitments to sell real estate loans. Since many of these commitments or contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. Further information related to these commitments is provided in note 6 of Notes to Financial Statements.

     M&T’s primary source of funds to pay for operating expenses, shareholder dividends and treasury stock repurchases has historically been the receipt of dividends from its banking subsidiaries, which are subject to various regulatory limitations. Dividends from any banking subsidiary to M&T are limited by the amount of earnings of the banking subsidiary in the current year and the two preceding years. Under that limitation, at March 31, 2005 approximately $467 million was available for payment of dividends to M&T from banking subsidiaries without prior regulatory approval. These historic sources of cash flow have been augmented in the past by the issuance of trust preferred securities. Information regarding trust preferred securities and the related junior subordinated debentures is included in note 4 of Notes to Financial Statements. M&T also maintains a $30 million line of

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credit with an unaffiliated commercial bank, of which there were no borrowings outstanding at March 31, 2005 or at December 31, 2004.

     On an ongoing basis, management closely monitors the Company’s liquidity position for compliance with internal policies and believes that available sources of liquidity are adequate to meet funding needs anticipated in the normal course of business. Management does not currently anticipate engaging in any activities, either currently or in the long-term, for which adequate funding would not be available and would therefore result in a significant strain on liquidity at either M&T or its subsidiary banks.

     Market risk is the risk of loss from adverse changes in market prices and/or interest rates of the Company’s financial instruments. The primary market risk the Company is exposed to is interest rate risk. The core banking activities of lending and deposit-taking expose the Company to interest rate risk, since assets and liabilities reprice at different times and by different amounts as interest rates change. As a result, net interest income earned by the Company is subject to the effects of changing interest rates. The Company measures interest rate risk by calculating the variability of net interest income in future periods under various interest rate scenarios using projected balances for earning assets, interest-bearing liabilities and derivatives used to hedge interest rate risk. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income. The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and investment securities, and expected maturities of investment securities, loans and deposits. Management uses a “value of equity” model to supplement the modeling technique described above. Those supplemental analyses are based on discounted cash flows associated with on- and off-balance sheet financial instruments. Such analyses are modeled to reflect changes in interest rates and shifts in the maturity curve of interest rates and provide management with a long-term interest rate risk metric.

     The Company’s Risk Forum Committee, which includes members of senior management, monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a computer model that forecasts net interest income under different interest rate scenarios. In modeling changing interest rates, the Company considers different yield curve shapes that consider both parallel (that is, simultaneous changes in interest rates at each point on the yield curve) and non-parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve. Non-parallel changes in rates result in either a flattening or a steepening of the yield curve. In utilizing the model, market implied forward interest rates over the subsequent twelve months are generally used to determine a base interest rate scenario for the net interest income simulation. That calculated base net interest income is then compared to the income calculated under the varying interest rate scenarios. The model considers the impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, management has taken actions, and intends to do so in the future, to mitigate exposure to interest rate risk through the use of on- or off-balance sheet financial instruments. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.

     The accompanying table as of March 31, 2005 and December 31, 2004 displays the estimated impact on net interest income from non-trading financial instruments in the base scenario described above resulting from parallel changes in interest rates across repricing categories during the first modeling year.

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SENSITIVITY OF NET INTEREST INCOME
TO CHANGES IN INTEREST RATES
(dollars in thousands)

                 
    Calculated increase(decrease)
    in projected net interest income
Changes in interest rates
  March 31, 2005
  December 31, 2004
+200 basis points
  $ (21,677 )     (20,848 )
+100 basis points
    (9,676 )     (8,228 )
-100 basis points
    6,826       12,386  
-200 basis points
    12,622       4,900  

     Many assumptions were utilized by the Company to calculate the impact that changes in interest rates may have on net interest income. The more significant assumptions included the rate of prepayments of mortgage-related assets, cash flows from derivative and other financial instruments held for non-trading purposes, loan and deposit volumes and pricing, and deposit maturities. In the scenario presented, the Company also assumed gradual changes in rates during a twelve-month period of 100 and 200 basis points as compared with the assumed base scenario. In the event that a 100 or 200 basis point rate change cannot be achieved, the applicable rate changes are limited to lesser amounts such that interest rates cannot be less than zero. The assumptions used in interest rate sensitivity modeling are inherently uncertain and, as a result, the Company cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly due to the timing, magnitude and frequency of changes in interest rates, market conditions, and interest rate differentials (spreads) between maturity/repricing categories, as well as any actions, such as those previously described, which management may take to counter such changes. In light of the uncertainties and assumptions associated with the process, the amounts presented in the table and changes in such amounts are not considered significant to the Company’s past or projected net interest income.

     The Company engages in trading activities to meet the financial needs of customers, to fund the Company’s obligations under certain deferred compensation plans and, to a limited extent, to profit from perceived market opportunities. Financial instruments utilized in trading activities have included forward and futures contracts related to foreign currencies and mortgage-backed securities, U.S. Treasury and other government securities, mortgage-backed securities, mutual funds and interest rate contracts, such as swap agreements. The Company generally mitigates the foreign currency and interest rate risk associated with trading activities by entering into offsetting trading positions. The amounts of gross and net trading positions, as well as the type of trading activities conducted by the Company, are subject to a well-defined series of potential loss exposure limits established by the Risk Forum Committee. However, as with any non-government guaranteed financial instrument, the Company is exposed to credit risk associated with counterparties to the Company’s trading activities.

     The notional amounts of interest rate contracts entered into for trading purposes totaled $6.2 billion at March 31, 2005, compared with $5.3 billion at March 31, 2004 and $5.9 billion at December 31, 2004. The notional amounts of foreign currency and other option and futures contracts entered into for trading purposes were $470 million, $605 million and $512 million at March 31, 2005, March 31, 2004 and December 31, 2004, respectively. Although the notional amounts of these trading contracts are not recorded in the consolidated balance sheet, the fair values of all financial instruments used for trading activities are recorded in the consolidated balance sheet. The fair values of all trading account assets and liabilities were $153 million and $74 million, respectively, at March 31, 2005, $213 million and $144 million, respectively, at March 31, 2004, and $160 million and $94 million, respectively, at December 31, 2004. Included in trading account assets at March 31, 2005, December 31, 2004 and March 31, 2004 were $41 million, $40 million and $43 million, respectively, related to deferred compensation plans. Changes in the fair value of such assets are recorded in

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trading account and foreign exchange gains in the consolidated statement of income. Included in other liabilities in the consolidated balance sheet at March 31, 2005, December 31, 2004 and March 31, 2004 were $48 million, $49 million and $51 million, respectively, of liabilities related to deferred compensation plans. Changes in the balances of such liabilities due to the valuation of allocated investment options to which the liabilities are indexed are recorded in “other costs of operations” in the consolidated statement of income.

     Given the Company’s policies, limits and positions, management believes that the potential loss exposure to the Company resulting from market risk associated with trading activities was not material.

Provision for Credit Losses

The Company maintains an allowance for credit losses that in management’s judgment is adequate to absorb losses inherent in the loan and lease portfolio. A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management. The provision for credit losses in the first quarter of 2005 was $24 million, compared with $20 million in the year-earlier quarter and $28 million in 2004’s fourth quarter. Net loan charge-offs were $19 million in the recent quarter, compared with $18 million during the first quarter of 2004 and $27 million during the final quarter of 2004. Net charge-offs as an annualized percentage of average loans and leases were .20% in the first quarter of each of 2005 and 2004, compared with .29% in the fourth quarter of 2004. A summary of net charge-offs by loan type follows:

NET CHARGE-OFFS
BY LOAN/LEASE TYPE

                         
    First Quarter   First Quarter   Fourth Quarter
In thousands
  2005
  2004
  2004
Commercial, financial, etc.
  $ 6,070       3,450       9,427  
Real estate:
                       
Commercial
    (769 )     (878 )     1,786  
Residential
    492       1,241       644  
Consumer
    13,078       14,104       15,623  
 
   
 
     
 
     
 
 
 
  $ 18,871       17,917       27,480  
 
   
 
     
 
     
 
 

     Nonperforming loans consist of nonaccrual and restructured loans, and totaled $180 million or ..46% of total loans and leases outstanding at March 31, 2005, compared with $256 million or .70% a year earlier and $172 million or .45% at December 31, 2004. The significant decrease in nonperforming loans at the two most recent quarter-ends as compared with March 31, 2004 reflects both a general improvement in repayment performance by borrowers and the sale of two large commercial loans during the second quarter of 2004.

     Accruing loans past due 90 days or more totaled $125 million or .32% of total loans and leases at March 31, 2005, compared with $144 million or .40% at March 31, 2004 and $155 million or .40% at December 31, 2004. Accruing loans past due 90 days or more included $102 million, $117 million and $121 million at March 31, 2005, March 31, 2004 and December 31, 2004, respectively, of loans guaranteed by government-related entities. Such guaranteed loans included one-to-four family residential mortgage loans serviced by the Company that were repurchased to reduce servicing costs associated with them, including a requirement to advance principal and interest payments that had not been received from individual mortgagors. The outstanding principal balances of the repurchased loans are guaranteed by government-related entities and totaled $84 million and $110 million as of March 31, 2005 and 2004, respectively, and $104 million at December 31, 2004. Other accruing loans past due 90 days or more that were guaranteed by government-related entities

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included foreign commercial and industrial loans supported by the Export-Import Bank of the United States totaling $17 million at each of March 31, 2005 and December 31, 2004, and $4 million at March 31, 2004.

     Commercial loans and leases classified as nonperforming aggregated $45 million at March 31, 2005 and December 31, 2004, and $128 million at March 31, 2004. The March 31, 2005 and December 31, 2004 totals when compared with the March 31, 2004 total reflected both a general improvement in repayment performance by borrowers and the sale of two large commercial loans during 2004’s second quarter.

     Nonperforming commercial real estate loans totaled $59 million at March 31, 2005, $44 million at March 31, 2004 and $45 million at December 31, 2004.

     Residential real estate loans classified as nonperforming were $39 million at March 31, 2005, compared with $48 million at March 31, 2004 and $44 million at December 31, 2004. Residential real estate loans past due 90 days or more and accruing interest totaled $100 million at March 31, 2005, compared with $130 million a year earlier and $127 million at December 31, 2004. As already discussed, a substantial portion of such amounts relate to repurchased loans that are guaranteed by government-related entities.

     Nonperforming consumer loans and leases totaled $37 million at March 31, 2005, compared with $36 million at March 31, 2004 and $38 million at December 31, 2004. As a percentage of consumer loan balances outstanding, nonperforming consumer loans and leases were .33% at March 31, 2005, compared with .32% at March 31, 2004 and .35% at December 31, 2004.

     Assets acquired in settlement of defaulted loans were $11 million at March 31, 2005, compared with $19 million at March 31, 2004 and $13 million at December 31, 2004.

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     A comparative summary of nonperforming assets and certain past due loan data and credit quality ratios as of the end of the periods indicated is presented in the accompanying table.

NONPERFORMING ASSET AND PAST DUE LOAN DATA

                                         
    2005           2004 Quarters
   
Dollars in thousands
  First Quarter
  Fourth
  Third
  Second
  First
Nonaccrual loans
  $ 169,648       162,013       171,807       181,974       248,188  
Renegotiated loans
    10,501       10,437       9,051       8,163       7,637  
 
   
 
     
 
     
 
     
 
     
 
 
Total nonperforming loans
    180,149       172,450       180,858       190,137       255,825  
Real estate and other assets owned
    11,038       12,504       16,143       19,026       19,189  
 
   
 
     
 
     
 
     
 
     
 
 
Total nonperforming assets
  $ 191,187       184,954       197,001       209,163       275,014  
 
   
 
     
 
     
 
     
 
     
 
 
Accruing loans past due 90 days or more*
  $ 124,550       154,590       139,541       134,757       144,345  
 
   
 
     
 
     
 
     
 
     
 
 
Government guaranteed loans included in totals above
                                       
Nonperforming loans
  $ 14,451       15,273       15,676       16,400       19,044  
Accruing loans past due 90 days or more
    102,210       120,700       111,443       111,635       116,826  
 
   
 
     
 
     
 
     
 
     
 
 
Nonperforming loans to total loans and leases, net of unearned discount
    .46 %     .45 %     .48 %     .51 %     .70 %
Nonperforming assets to total net loans and leases and real estate and other assets owned
    .49 %     .48 %     .52 %     .56 %     .75 %
Accruing loans past due 90 days or more to total loans and leases, net of unearned discount
    .32 %     .40 %     .37 %     .36 %     .40 %
 
   
 
     
 
     
 
     
 
     
 
 

*   Predominately residential mortgage loans.

     Management regularly assesses the adequacy of the allowance for credit losses by performing ongoing evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the economic environment in which borrowers operate, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or indemnifications. Management evaluated the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet repayment obligations when quantifying the Company’s exposure to credit losses and assessing the adequacy of the Company’s allowance for such losses as of each reporting date. Factors also considered by management when performing its assessment, in addition to general economic conditions and the other factors described above, included, but were not limited to: (i) the concentration of commercial real estate loans in the Company’s loan portfolio, particularly the large concentration of loans secured by properties in New York State, in general, and in the New York City metropolitan area, in particular; (ii) the amount of commercial and industrial loans to businesses in areas of New York State outside of the New York City metropolitan area and in central Pennsylvania that have historically experienced less economic growth and vitality than the vast majority of other regions of the country; and (iii) significant growth in recent years in loans to individual consumers,

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which historically have experienced higher net charge-offs as a percentage of loans outstanding than other loan types. The level of the allowance is adjusted based on the results of management’s analysis.

     Management cautiously and conservatively evaluated the allowance for credit losses as of March 31, 2005 in light of (i) the uncertain status of the overall economic recovery in many of the markets served by the Company; (ii) continuing weakness in industrial employment in upstate New York and central Pennsylvania; and (iii) the significant subjectivity involved in commercial real estate valuations for properties located in areas with stagnant or little growth economies. Although the 2005 economic outlook predicts improved growth nationally, concerns exist about sluggish job creation, which could cause consumer spending to slow; higher interest rates, which, could adversely impact the housing market; continued stagnant population growth in the upstate New York and central Pennsylvania regions; and sluggish commercial loan demand. In particular, economic growth in two of the Company’s largest market areas, upstate New York and central Pennsylvania, is expected to significantly lag national averages. Factors that influence the Company’s credit loss experience include overall economic conditions affecting businesses and consumers generally, such as those described above, but also real estate valuations, in particular, given the size of the commercial real estate loan portfolio. Commercial real estate valuations can be highly subjective, as they are based upon many assumptions. Such valuations can be significantly affected over relatively short periods of time by changes in business climate, economic conditions, interest rates and, in many cases, the results of operations of businesses and other occupants of the real property.

     Management believes that the allowance for credit losses at March 31, 2005 was adequate to absorb credit losses inherent in the portfolio as of that date. The allowance for credit losses was $632 million, or 1.62% of total loans and leases at March 31, 2005, compared with $616 million or 1.69% a year earlier and $627 million or 1.63% at December 31, 2004. The ratio of the allowance for credit losses to nonperforming loans was 351% at the most recent quarter-end, compared with 241% a year earlier and 364% at December 31, 2004. The level of the allowance reflects management’s evaluation of the loan and lease portfolio as of each respective date.

Other Income

Other income was $234 million in the first quarter of 2005, 3% higher than $228 million in the year-earlier quarter, but down 1% from $238 million in the fourth quarter of 2004. The increase in the recent quarter as compared with the first quarter of 2004 reflects a $5 million rise in mortgage banking revenues. The slight decline as compared with 2004’s fourth quarter reflects lower service charges on consumer deposit accounts.

     Mortgage banking revenues totaled $33 million in the first quarter of 2005, up from $28 million in the year-earlier quarter, but down slightly from $34 million in the final quarter of 2004. Mortgage banking revenues are comprised of both residential and commercial mortgage banking activities. The Company’s involvement in commercial mortgage banking activities is largely comprised of the origination, sales and servicing of loans in conjunction with the Federal National Mortgage Association Delegated Underwriting and Servicing program.

     Residential mortgage banking revenues, which consist of gains from sales of residential mortgage loans and loan servicing rights, residential mortgage loan servicing fees, and other residential mortgage loan-related fees and income, totaled $27 million in the two most recent quarters, compared with $24 million in the first quarter of 2004. The higher revenue in the two most recent quarters as compared with 2004’s initial quarter was largely

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due to higher levels of loan originations. Residential mortgage loans originated for sale to other investors were approximately $1.2 billion during the recent quarter, compared with $1.0 billion in the first quarter of 2004 and $1.3 billion in the fourth quarter of 2004. Realized gains from sales of residential mortgage loans and loan servicing rights and recognized net unrealized gains attributable to residential mortgage loans held for sale, commitments to originate loans for sale and commitments to sell loans totaled $10 million in the first quarter of 2005 and in 2004’s fourth quarter, compared with $8 million in the first quarter of 2004. Revenues from servicing residential mortgage loans for others were $15 million in the quarters ended March 31, 2005 and December 31, 2004, and $14 million in the first quarter of 2004. Included in the two most recent quarters’ servicing revenues were amounts related to purchased servicing rights associated with small balance commercial mortgage loans of $2 million, compared with $1 million in the first quarter of 2004. Residential mortgage loans serviced for others totaled $14.5 billion at March 31, 2005, compared with $13.7 billion at March 31, 2004 and $14.9 billion at December 31, 2004, including the small balance commercial mortgage loans noted above of approximately $1.6 billion each at March 31, 2005 and December 31, 2004, and $1.0 billion at March 31, 2004. Capitalized residential mortgage servicing assets, net of a valuation allowance for impairment, were $131 million at March 31, 2005, compared with $119 million at March 31, 2004 and $133 million at December 31, 2004. Included in capitalized residential mortgage servicing assets were $12 million at March 31, 2005, $7 million at March 31, 2004 and $13 million at December 31, 2004 of purchased servicing rights associated with the small balance commercial mortgage loans noted above. Residential mortgage loans held for sale totaled $794 million and $707 million at March 31, 2005 and 2004, respectively, and $790 million at December 31, 2004. Commitments to sell loans and commitments to originate loans for sale at pre-determined rates were $875 million and $462 million, respectively, at March 31, 2005, $1.0 billion and $698 million, respectively, at March 31, 2004, and $764 million and $422 million, respectively, at December 31, 2004. Net unrealized gains on residential mortgage loans held for sale, commitments to sell loans, and commitments to originate loans for sale were $1 million and $9 million at March 31, 2005 and 2004, respectively, and $3 million at December 31, 2004. Changes in such net unrealized gains are recorded in mortgage banking revenues and resulted in a net decrease in revenues of $2 million in the first quarter of 2005, compared with increases in revenues of $2 million and $1 million in the first quarter of 2004 and fourth quarter of 2004, respectively.

     Commercial mortgage banking revenues were $7 million in each of the first quarter of 2005 and the fourth quarter of 2004, and were $4 million in the first quarter of 2004. Included in such amounts were revenues from loan origination and sales activities of $3 million in 2005’s initial quarter, $4 million in the fourth quarter of 2004 and $2 million in the first quarter of 2004. Commercial mortgage loan servicing revenues were $3 million in each of the first quarter of 2005 and the fourth quarter of 2004, compared with $2 million in the first quarter of 2004. Capitalized commercial mortgage servicing assets totaled $22 million at March 31, 2005, March 31, 2004 and December 31, 2004. Commercial mortgage loans held for sale at March 31, 2005 and 2004 were $14 million and $21 million, respectively, and $61 million at December 31, 2004.

     Service charges on deposit accounts were $88 million in the first quarters of 2005 and 2004, compared with $93 million in the fourth quarter of 2004. The lower first quarter revenues when compared with 2004’s fourth quarter were largely due to traditional fourth quarter seasonality. Trust income totaled $34 million in the initial quarters of 2005 and 2004 and in the fourth quarter of 2004. Brokerage services income, which includes securities brokerage fees and revenues from the sale of mutual funds and annuities, totaled $14 million in each of the first quarters of 2005 and 2004, compared with $13 million in the fourth quarter of 2004. Trading account and foreign exchange activity resulted in gains of $5 million during the quarters ended March 31, 2005 and 2004, compared with gains of $7 million in 2004’s fourth quarter. Contributing

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to the higher gains in the final 2004 quarter were market value increases in trading assets held in connection with deferred compensation plans.

     Other revenues from operations totaled $60 million in the recent quarter, compared with $56 million in the corresponding quarter of 2004 and $55 million in the fourth quarter of 2004. The higher level of such revenues in the recent quarter as compared with the prior quarters was due to net gains realized from venture capital investments, most of which were obtained via acquisitions of other financial institutions in prior years. Included in other revenues from operations were the following significant components. Letter of credit and other credit-related fees totaled $17 million in the two most recent quarters and $18 million in the first quarter of 2004. Tax-exempt income from bank owned life insurance, which includes increases in the cash surrender value of life insurance policies and benefits received, totaled $11 million during the first quarter of 2005 and in 2004’s fourth quarter, and $13 million in the first quarter of 2004. Revenues from merchant discount and credit card fees were $7 million in the quarters ended March 31, 2005 and 2004, compared with $8 million in the fourth quarter of 2004. Insurance-related sales commissions and other revenues totaled $6 million in the first quarters of 2005 and 2004 and in the fourth quarter of 2004.

Other Expense

Other expense totaled $367 million in the first quarter of 2005, 6% lower than $390 million in the year-earlier period, but up 1% from $362 million in the fourth quarter of 2004. Included in the amounts noted above are expenses considered by management to be “nonoperating” in nature consisting of amortization of core deposit and other intangible assets of $16 million in 2005’s initial quarter and in the fourth quarter of 2004, and $21 million in the first quarter of 2004. Exclusive of these nonoperating expenses, noninterest operating expenses aggregated $351 million in the first 2005 quarter, compared with $369 million and $346 million in the first and fourth quarters of 2004, respectively. Contributing to the lower expense level in the recent quarter was a $4 million partial reversal of the valuation allowance for the impairment of capitalized residential mortgage servicing rights, reflecting changes in the estimated fair value of such rights since December 31, 2004. An $11 million provision for the impairment of capitalized residential mortgage servicing rights was recorded in the first quarter of 2004, largely the result of the lower interest rate environment that existed at the end of that quarter. There was an impairment reversal that resulted in an expense reduction of $222 thousand in 2004’s fourth quarter. Table 2 provides a reconciliation of other expense to noninterest operating expense.

     Salaries and employee benefits expense totaled $207 million in the most recent quarter, compared with $201 million in the first quarter of 2004 and $198 million in the fourth quarter of 2004. Higher costs associated with providing employee benefits were the largest contributor to the increased level of expenses in the recently completed quarter. Salaries and benefits expense included stock-based compensation of $12 million in each of the quarters noted.

     Excluding the nonoperating amortization expense previously noted, nonpersonnel operating expenses totaled $145 million in the first quarter of 2005, compared with $168 million in the year-earlier quarter and $147 million in 2004’s final quarter. Contributing to the lower expense level in 2005’s first quarter was the already noted $4 million partial reversal of the valuation allowance for the impairment of capitalized residential mortgage servicing rights. Such servicing rights were valued at the recent quarter-end when mortgage interest rates had increased from the end of 2004. As a result, the quarter-end valuation reflected the impact on customer refinancings of outstanding mortgage loans that the higher interest rates were expected to have on residential mortgage loan prepayment speeds. There was a provision

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of $11 million for the impairment of capitalized residential mortgage servicing rights in the first quarter of 2004, reflecting the decrease in the value of such servicing rights resulting from lower residential mortgage loan interest rates at March 31, 2004, while there was a reduction of expense of $222 thousand in the fourth quarter of 2004 resulting from a partial reversal of the valuation allowance for possible impairment of capitalized mortgage servicing rights.

     The efficiency ratio, or noninterest operating expenses (as defined above) divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from sales of bank investment securities) measures the relationship of noninterest operating expenses to revenues. The Company’s efficiency ratio was 51.6% in the first quarter of 2005, compared with 56.8% in the year-earlier period and 50.6% in the fourth quarter of 2004. The provision for capitalized servicing rights impairment in the first quarter of 2004 adversely impacted that quarter’s efficiency ratio as compared with the two most recent quarters. Noninterest operating expenses used in calculating the efficiency ratio do not include the amortization of core deposit and other intangible assets, as noted earlier. If charges for amortization of core deposit and other intangible assets were included, the efficiency ratio for the three-month periods ended March 31, 2005, March 31, 2004 and December 31, 2004 would have been 54.0%, 60.1% and 52.9%, respectively.

Capital

Stockholders’ equity was $5.7 billion at March 31, 2005, March 31, 2004 and December 31, 2004, representing 10.53%, 11.28% and 10.82%, respectively, of total assets. On a per share basis, stockholders’ equity was $49.78 at March 31, 2005, compared with $48.17 and $49.68 at March 31 and December 31, 2004, respectively. Tangible equity per share, which excludes goodwill and core deposit and other intangible assets and applicable deferred tax balances, was $23.49 at March 31, 2005, compared with $22.47 a year earlier and $23.62 at December 31, 2004.

     In December 2004, M&T announced that it had been authorized by its Board of Directors to purchase up to 5,000,000 shares of its common stock. During the quarter ended March 31, 2005, 1,866,400 shares of common stock were repurchased by M&T pursuant to such plan at an average cost of $101.14 per share. Through March 31, 2005, M&T had repurchased 2,019,300 shares of common stock pursuant to such plan at an average cost of $101.58 per share.

     Stockholders’ equity reflects accumulated other comprehensive income or loss, which includes the net after-tax impact of unrealized gains or losses on investment securities classified as available for sale and minimum pension liability adjustments. Net unrealized losses on available-for-sale investment securities were $49 million, or $.43 per common share, at March 31, 2005, compared with unrealized gains of $70 million, or $.59 per share, at March 31, 2004 and unrealized losses of $5 million, or $.04 per share, at December 31, 2004. Such unrealized gains or losses are generally due to changes in interest rates and represent the difference, net of applicable income tax effect, between the estimated fair value and amortized cost of investment securities classified as available for sale. The minimum pension liability adjustment, net of applicable tax effect, reduced accumulated other comprehensive income by $12 million at March 31, 2005, March 31, 2004 and December 31, 2004, or by $.11 per share at March 31, 2005 and December 31, 2004 and $.10 per share at March 31, 2004.

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     Federal regulators generally require banking institutions to maintain “core capital” and “total capital” ratios of at least 4% and 8%, respectively, of risk-adjusted total assets. In addition to the risk-based measures, Federal bank regulators have also implemented a minimum “leverage” ratio guideline of 3% of the quarterly average of total assets. Core capital includes $687 million of trust preferred securities described in note 4 of Notes to Financial Statements. As of March 31, 2005, total capital further included $1.1 billion of subordinated notes.

     The Company generates significant amounts of regulatory capital. The rate of regulatory core capital generation, or net operating income (as previously defined) less the sum of dividends paid and the after-tax effect of merger-related expenses expressed as an annualized percentage of regulatory “core capital” at the beginning of each period, was 18.62% during the first quarter of 2005, compared with 15.65% and 18.88% in the first and fourth quarters of 2004, respectively.

     The regulatory capital ratios of the Company, M&T Bank and M&T Bank, N.A. as of March 31, 2005 are presented in the accompanying table.

REGULATORY CAPITAL RATIOS
March 31, 2005

                         
    M&T   M&T   M&T
    (Consolidated)
  Bank
  Bank, N.A.
Core capital
    7.19 %     6.95 %     30.70 %
Total capital
    10.74 %     10.41 %     31.74 %
Leverage
    6.65 %     6.44 %     22.28 %

Segment Information

In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures About Segments of an Enterprise and Related Information,” the Company’s reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Financial information about the Company’s segments is presented in note 5 of Notes to Financial Statements.

     In the first quarter of 2005, the Company revised the internal transfer of funds allocation among the Company’s segments. As a result, net interest income and net income for 2004 for all reportable segments was adjusted to reflect that revision. The net effect of the revision was to increase the previously reported net income for the quarter ended March 31, 2004 in the Retail Banking segment by $4 million and to decrease previously reported net income for each of the Commercial Banking and Discretionary Portfolio segments by $1 million and the Commercial Real Estate segment by $2 million.

     The Commercial Banking segment contributed net income of $52 million in both the first quarter of 2005 and 2004, and $47 million in the fourth quarter of 2004. As compared with last year’s first quarter, a $3 million increase in net charge-offs, a $2 million decrease in deposit service charges, and a $2 million increase in expenses were offset by higher net interest income of $7 million. A major factor in the higher net interest income was the impact of rising market interest rates and a 7% increase in average loan balances outstanding. The increase in net income from the fourth quarter of 2004 was due to higher net interest income of $4 million and a $4 million decline in noninterest expenses.

     Net income earned by the Commercial Real Estate segment totaled $33 million in the first quarter of 2005, 16% higher than $28 million in 2004’s first quarter, but down 4% from $34 million in last year’s fourth quarter.

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The increase from the initial quarter of 2004 was predominantly due to higher net interest income of $5 million, primarily the result of a 13% increase in average loan balances outstanding. A $2 million increase in commercial mortgage banking revenues also contributed to the favorable performance. Lower net interest income of $1 million, due mainly to an 11 basis point decrease in loan net interest margin, and a $1 million decline in commercial mortgage banking revenues were the major factors contributing to the decrease in net income in the recent quarter from the fourth quarter of 2004.

     The Discretionary Portfolio segment’s net income for the first three months of 2005 was $30 million, up 19% from $25 million in the year-earlier quarter, but down 3% from $31 million in the final quarter of 2004. The favorable variance over the first quarter of last year was due predominantly to higher net interest income of $7 million, resulting from a 15% increase in the average balances of investment securities, and a widening of the segment’s net interest margin. Also contributing to the favorable performance was the impact of a $2 million reduction to the valuation allowance for the possible impairment of capitalized residential mortgage servicing rights during the first quarter of 2005, while a $2 million addition to such allowance was made in the first quarter of 2004. Partially offsetting these favorable factors was a $2 million decline in gains from the sales of bank investment securities. Contributing to the slight decrease in net income from the fourth quarter of 2004 were lower gains from trading activities and the sales of bank investment securities.

     Net income for the Residential Mortgage Banking segment increased to $11 million during the first quarter of 2005 from $300 thousand and $7 million in the first and fourth quarters of 2004, respectively. The favorable variance in comparison to the prior year’s first quarter was primarily due to a reduction to the capitalized mortgage servicing rights valuation allowance of $2 million, while a $9 million addition to such allowance was made during the similar period in 2004. Higher revenues from loan origination, sales and servicing activities of $4 million further contributed to the favorable performance during the first quarter of 2005. The increase in net income when compared to the fourth quarter of 2004 was largely the result of the above mentioned $2 million reduction to the capitalized mortgage servicing rights valuation allowance, while a small addition to such allowance was made during the fourth quarter of 2004. A $2 million decrease in salaries and benefits also contributed to the favorable performance when compared to the prior year’s fourth quarter. Revenues from originations, sales and servicing activities in the first quarter of 2005 were little changed from the preceding quarter.

     The Retail Banking segment contributed $75 million to the Company’s net income in the first quarter of 2005, up 41% from $53 million in the first quarter of 2004 and 2% higher than $74 million in the fourth quarter of 2004. The increase from the first quarter of last year was due to higher revenues of $17 million, including increases in net interest income of $14 million and noninterest income of $3 million, a $4 million decrease in the provision for credit losses, and a $17 million decrease in noninterest expenses. The slight increase in the recent quarter’s net income as compared with the fourth quarter of 2004 was primarily the result of a $7 million decrease in the provision for credit losses, due to lower net charge-offs, offset, in part, by a $4 million decline in noninterest revenues resulting from seasonal fluctuations in deposit service charges.

     The “All Other” category reflects other activities of the Company that are not directly attributable to the reported segments as determined in accordance with SFAS No. 131, such as the M&T Investment Group, which includes the Company’s trust, brokerage and insurance businesses. Also reflected in this category are the amortization of core deposit and other intangible assets, merger-related expenses resulting from acquisitions, and the net impact of the Company’s allocation methodologies for internal funds

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transfers and the provision for credit losses. The various components of the “All Other” category resulted in net losses of $11 million in the first quarter of 2005 and $300 thousand in the prior year’s fourth quarter, and net income of $1 million in the first quarter of 2004. The net loss in the first quarter of 2005 resulted from the Company’s allocation methodologies for internal funds transfers and noninterest expenses.

Recent Accounting Developments

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123R”), an amendment of SFAS No. 123 which supercedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS No. 123R also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is to be recognized over the period during which an employee is required to provide services in exchange for the award. Additionally, in March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB No. 107”). SAB No. 107 expresses the SEC staff’s views regarding the valuation of share-based payment arrangements for public companies and the interaction between SFAS No. 123R and certain SEC rules and regulations.

     SFAS No. 123R is effective for annual reporting periods that begin after June 15, 2005. Effective January 1, 2003, the Company began recognizing expense for stock-based compensation using the fair value method of accounting described in SFAS No. 123. Using the retroactive restatement method described in SFAS No. 148, which amended SFAS No. 123, financial information for prior periods was restated to reflect the impact of recognizing expense for stock-based compensation in those years as well. The Company believes that the provisions of SFAS No. 123R will not have a material impact on the Company’s consolidated financial statements.

Forward-Looking Statements

Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this quarterly report contain forward-looking statements that are based on current expectations, estimates and projections about the Company’s business, management’s beliefs and assumptions made by management. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

     Future Factors include changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; credit losses; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and number of stock options to be issued in future periods; legislation affecting the financial services industry as a whole, and/or M&T and its subsidiaries individually or collectively; regulatory supervision and oversight, including required capital levels; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely,

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cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes, including environmental regulations; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support the Company’s future businesses; and material differences in the actual financial results of merger and acquisition activities compared to the Company’s expectations, including the full realization of anticipated cost savings and revenue enhancements. These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general economic and political conditions, including interest rate and currency exchange rate fluctuations, and other Future Factors.

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M&T BANK CORPORATION AND SUBSIDIARIES

Table 1

QUARTERLY TRENDS

                                         
    2005
          2004 Quarters
   
    First Quarter
  Fourth
  Third
  Second
  First
Earnings and dividends
                                       
Amounts in thousands, except per share
                                       
Interest income (taxable-equivalent basis)
  $ 642,441       613,012       587,598       565,090       550,362  
Interest expense
    196,266       166,755       143,771       126,805       126,829  
 
   
 
     
 
     
 
     
 
     
 
 
Net interest income
    446,175       446,257       433,827       438,285       423,533  
Less: provision for credit losses
    24,000       28,000       17,000       30,000       20,000  
Other income
    234,258       237,559       244,925       232,334       228,151  
Less: other expense
    367,337       361,922       406,922       357,207       389,967  
 
   
 
     
 
     
 
     
 
     
 
 
Income before income taxes
    289,096       293,894       264,830       283,412       241,717  
Applicable income taxes
    95,686       97,624       73,843       94,538       77,997  
Taxable-equivalent adjustment
    4,120       4,065       4,546       4,489       4,230  
 
   
 
     
 
     
 
     
 
     
 
 
Net income
  $ 189,290       192,205       186,441       184,385       159,490  
 
   
 
     
 
     
 
     
 
     
 
 
Per common share data
                                       
Basic earnings
  $ 1.65       1.66       1.59       1.56       1.33  
Diluted earnings
    1.62       1.62       1.56       1.53       1.30  
Cash dividends
  $ .40       .40       .40       .40       .40  
Average common shares outstanding
                                       
Basic
    114,773       115,953       116,897       118,224       119,738  
Diluted
    117,184       119,010       119,665       120,655       122,316  
 
   
 
     
 
     
 
     
 
     
 
 
Performance ratios, annualized
                                       
Return on
                                       
Average assets
    1.44 %     1.45 %     1.42 %     1.45 %     1.29 %
Average common stockholders’ equity
    13.41 %     13.37 %     13.02 %     13.12 %     11.19 %
Net interest margin on average earning assets (taxable-equivalent basis)
    3.83 %     3.82 %     3.85 %     3.92 %     3.92 %
Nonperforming loans to total loans and leases, net of unearned discount
    .46 %     .45 %     .48 %     .51 %     .70 %
Efficiency ratio (a)
    54.00 %     52.95 %     59.08 %     53.27 %     60.07 %
 
   
 
     
 
     
 
     
 
     
 
 
Net operating (tangible) results (b)
                                       
Net income (in thousands)
  $ 199,135       202,215       197,822       196,158       172,423  
Diluted net income per common share
    1.70       1.70       1.65       1.63       1.41  
Annualized return on
                                       
Average tangible assets
    1.61 %     1.62 %     1.60 %     1.64 %     1.48 %
Average tangible common stockholders’ equity
    29.67 %     29.69 %     29.42 %     30.12 %     26.02 %
Efficiency ratio (a)
    51.63 %     50.56 %     56.38 %     50.39 %     56.81 %
 
   
 
     
 
     
 
     
 
     
 
 
Balance sheet data
                                       
In millions, except per share
                                       
Average balances
                                       
Total assets (c)
  $ 53,306       52,725       52,170       51,251       49,915  
Total tangible assets (c)
    50,305       49,647       49,075       48,137       46,781  
Earning assets
    47,240       46,535       45,874       44,923       43,444  
Investment securities
    8,573       8,326       8,195       7,943       7,516  
Loans and leases, net of unearned discount
    38,580       38,142       37,611       36,904       35,843  
Deposits
    35,282       34,768       34,569       33,702       32,856  
Stockholders’ equity (c)
    5,723       5,721       5,697       5,654       5,732  
Tangible stockholders’ equity (c)
    2,722       2,710       2,675       2,619       2,665  
 
   
 
     
 
     
 
     
 
     
 
 
At end of quarter
                                       
Total assets (c)
  $ 53,887       52,939       52,887       52,094       50,832  
Total tangible assets (c)
    50,891       49,869       49,801       48,990       47,708  
Earning assets
    47,853       46,970       46,454       45,757       44,335  
Investment securities
    8,679       8,475       8,437       8,161       7,656  
Loans and leases, net of unearned discount
    39,073       38,398       37,950       37,522       36,515  
Deposits
    36,293       35,429       34,976       34,954       33,341  
Stockholders’ equity (c)
    5,674       5,730       5,710       5,657       5,734  
Tangible stockholders’ equity (c)
    2,678       2,724       2,694       2,629       2,674  
Equity per common share
    49.78       49.68       49.11       48.21       48.17  
Tangible equity per common share
    23.49       23.62       23.17       22.40       22.47  
 
   
 
     
 
     
 
     
 
     
 
 
Market price per common share
                                       
High
  $ 108.04       108.75       98.66       92.70       98.65  
Low
    96.71       95.40       86.80       82.90       88.08  
Closing
    102.06       107.84       95.70       87.30       89.85  
 
   
 
     
 
     
 
     
 
     
 
 

(a)   Excludes impact of merger-related expenses and net securities transactions.
 
(b)   Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses which, except in the calculation of the efficiency ratio, are net of applicable income tax effects. A reconciliation of net income and net operating income appears on table 2.
 
(c)   The difference between total assets and total tangible assets, and stockholders’ equity and tangible stockholders’ equity, represents goodwill, core deposit and other intangible assets, net of applicable deferred tax balances. A reconciliation of such balances appears on table 2.

-37-


 

M&T BANK CORPORATION AND SUBSIDIARIES

Table 2

RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES

                                         
    2005
          2004 Quarters
   
    First Quarter
  Fourth
  Third
  Second
  First
Income statement data
                                       
In thousands, except per share
                                       
Net income
                                       
Net income
  $ 189,290       192,205       186,441       184,385       159,490  
Amortization of core deposit and other intangible assets (1)
    9,845       10,010       11,381       11,773       12,933  
 
   
 
     
 
     
 
     
 
     
 
 
Net operating income
  $ 199,135       202,215       197,822       196,158       172,423  
 
   
 
     
 
     
 
     
 
     
 
 
Earnings per share
                                       
Diluted earnings per common share
  $ 1.62       1.62       1.56       1.53       1.30  
Amortization of core deposit and other intangible assets (1)
    .08       .08       .09       .10       .11  
 
   
 
     
 
     
 
     
 
     
 
 
Diluted net operating earnings per share
  $ 1.70       1.70       1.65       1.63       1.41  
 
   
 
     
 
     
 
     
 
     
 
 
Other expense
                                       
Other expense
  $ 367,337       361,922       406,922       357,207       389,967  
Amortization of core deposit and other intangible assets
    (16,121 )     (16,393 )     (18,619 )     (19,250 )     (21,148 )
 
   
 
     
 
     
 
     
 
     
 
 
Noninterest operating expense
  $ 351,216       345,529       388,303       337,957       368,819  
 
   
 
     
 
     
 
     
 
     
 
 
Balance sheet data
                                       
In millions
                                       
Average assets
                                       
Average assets
  $ 53,306       52,725       52,170       51,251       49,915  
Goodwill
    (2,904 )     (2,904 )     (2,904 )     (2,904 )     (2,904 )
Core deposit and other intangible assets
    (157 )     (174 )     (191 )     (210 )     (230 )
Deferred taxes
    60                          
 
   
 
     
 
     
 
     
 
     
 
 
Average tangible assets
  $ 50,305       49,647       49,075       48,137       46,781  
 
   
 
     
 
     
 
     
 
     
 
 
Average equity
                                       
Average equity
  $ 5,723       5,721       5,697       5,654       5,732  
Goodwill
    (2,904 )     (2,904 )     (2,904 )     (2,904 )     (2,904 )
Core deposit and other intangible assets
    (157 )     (174 )     (191 )     (210 )     (230 )
Deferred taxes
    60       67       73       79       67  
 
   
 
     
 
     
 
     
 
     
 
 
Average tangible equity
  $ 2,722       2,710       2,675       2,619       2,665  
 
   
 
     
 
     
 
     
 
     
 
 
At end of quarter
                                       
Total assets
                                       
Total assets
  $ 53,887       52,939       52,887       52,094       50,832  
Goodwill
    (2,904 )     (2,904 )     (2,904 )     (2,904 )     (2,904 )
Core deposit and other intangible assets
    (149 )     (166 )     (182 )     (200 )     (220 )
Deferred taxes
    57                          
 
   
 
     
 
     
 
     
 
     
 
 
Total tangible assets
  $ 50,891       49,869       49,801       48,990       47,708  
 
   
 
     
 
     
 
     
 
     
 
 
Total equity
                                       
Total equity
  $ 5,674       5,730       5,710       5,657       5,734  
Goodwill
    (2,904 )     (2,904 )     (2,904 )     (2,904 )     (2,904 )
Core deposit and other intangible assets
    (149 )     (166 )     (182 )     (200 )     (220 )
Deferred taxes
    57       64       70       76       64  
 
   
 
     
 
     
 
     
 
     
 
 
Total tangible equity
  $ 2,678       2,724       2,694       2,629       2,674  
 
   
 
     
 
     
 
     
 
     
 
 

(1)   After any related tax effect.

-38-


 

M&T BANK CORPORATION AND SUBSIDIARIES

Table 3

AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES

                                                   
    2005 First Quarter   2004 Fourth Quarter  
    Average           Average   Average           Average  
Average balance in millions; interest in thousands
  balance
  Interest
  rate
  balance
  Interest
  rate
 
Assets
                                                 
Earning assets
                                                 
Loans and leases, net of unearned discount*
                                                 
Commercial, financial, etc.
  $ 10,094     $ 127,148       5.11 %     9,919       112,823       4.52 %  
Real estate - - commercial
    14,193       216,519       6.10       13,894       205,802       5.93    
Real estate - - consumer
    3,246       48,467       5.97       3,161       46,564       5.89    
Consumer
    11,047       158,907       5.83       11,168       160,246       5.71    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Total loans and leases, net
    38,580       551,041       5.79       38,142       525,435       5.48    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Money-market assets
                                                 
Interest-bearing deposits at banks
    10       28       1.15       9       20       .89    
Federal funds sold and agreements to resell securities
    24       169       2.86       10       51       2.11    
Trading account
    53       100       .75       48       76       .62    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Total money-market assets
    87       297       1.38       67       147       .87    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Investment securities**
                                                 
U.S. Treasury and federal agencies
    3,859       36,891       3.88       4,165       39,940       3.82    
Obligations of states and political subdivisions
    193       2,904       6.02       197       3,816       7.74    
Other
    4,521       51,308       4.60       3,964       43,674       4.38    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Total investment securities
    8,573       91,103       4.31       8,326       87,430       4.18    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Total earning assets
    47,240       642,441       5.52       46,535       613,012       5.24    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Allowance for credit losses
    (633 )                     (630 )                  
Cash and due from banks
    1,420                       1,527                    
Other assets
    5,279                       5,293                    
 
   
 
                     
 
                   
Total assets
  $ 53,306                       52,725                    
 
   
 
                     
 
                   
Liabilities and stockholders’ equity
                                                 
Interest-bearing liabilities
                                                 
Interest-bearing deposits
                                                 
NOW accounts
  $ 376       318       .34       375       287       .30    
Savings deposits
    15,082       27,889       .75       15,363       25,032       .65    
Time deposits
    7,419       48,754       2.67       7,089       41,970       2.36    
Deposits at foreign office
    4,203       25,380       2.45       3,539       17,267       1.94    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Total interest-bearing deposits
    27,080       102,341       1.53       26,366       84,556       1.28    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Short-term borrowings
    5,194       31,991       2.50       5,370       26,679       1.98    
Long-term borrowings
    6,403       61,934       3.92       6,104       55,520       3.62    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Total interest-bearing liabilities
    38,677       196,266       2.06       37,840       166,755       1.75    
 
   
 
     
 
     
 
     
 
     
 
     
 
   
Noninterest-bearing deposits
    8,202                       8,402                    
Other liabilities
    704                       762                    
 
   
 
                     
 
                   
Total liabilities
    47,583                       47,004                    
 
   
 
                     
 
                   
Stockholders’ equity
    5,723                       5,721                    
 
   
 
                     
 
                   
Total liabilities and stockholders’ equity
  $ 53,306                       52,725                    
 
   
 
                     
 
                   
Net interest spread
                    3.46                       3.49    
Contribution of interest-free funds
                    .37                       .33    
 
           
 
     
 
             
 
     
 
   
Net interest income/margin on earning assets
          $ 446,175       3.83 %             446,257       3.82 %  
 
           
 
     
 
             
 
     
 
   

[Additional columns below]

[Continued from above table, first column(s) repeated]

                         
    2004 Third Quarter
    Average   Average   Average
Average balance in millions; interest in thousands
  balance
  Interest
  rate
Assets
                       
Earning assets
                       
Loans and leases, net of unearned discount*
                       
Commercial, financial, etc.
    9,648       104,076       4.29 %
Real estate - - commercial
    13,669       197,180       5.77  
Real estate - - consumer
    2,980       44,303       5.95  
Consumer
    11,314       156,287       5.50  
 
   
 
     
 
     
 
 
Total loans and leases, net
    37,611       501,846       5.31  
 
   
 
     
 
     
 
 
Money-market assets
                       
Interest-bearing deposits at banks
    11       14       .50  
Federal funds sold and agreements to resell securities
    6       27       1.75  
Trading account
    51       81       .64  
 
   
 
     
 
     
 
 
Total money-market assets
    68       122       .72  
 
   
 
     
 
     
 
 
Investment securities**
                       
U.S. Treasury and federal agencies
    4,561       44,018       3.84  
Obligations of states and political subdivisions
    206       3,609       7.03  
Other
    3,428       38,003       4.41  
 
   
 
     
 
     
 
 
Total investment securities
    8,195       85,630       4.16  
 
   
 
     
 
     
 
 
Total earning assets
    45,874       587,598       5.10  
 
   
 
     
 
     
 
 
Allowance for credit losses
    (629 )                
Cash and due from banks
    1,627                  
Other assets
    5,298                  
 
   
 
                 
Total assets
    52,170                  
 
   
 
                 
Liabilities and stockholders’ equity
                       
Interest-bearing liabilities
                       
Interest-bearing deposits
                       
NOW accounts
    349       242       .28  
Savings deposits
    15,432       22,037       .57  
Time deposits
    7,265       40,121       2.20  
Deposits at foreign office
    3,334       11,940       1.42  
 
   
 
     
 
     
 
 
Total interest-bearing deposits
    26,380       74,340       1.12  
 
   
 
     
 
     
 
 
Short-term borrowings
    5,281       19,338       1.46  
Long-term borrowings
    5,789       50,093       3.44  
 
   
 
     
 
     
 
 
Total interest-bearing liabilities
    37,450       143,771       1.53  
 
   
 
     
 
     
 
 
Noninterest-bearing deposits
    8,189                  
Other liabilities
    834                  
 
   
 
                 
Total liabilities
    46,473                  
 
   
 
                 
Stockholders’ equity
    5,697                  
 
   
 
                 
Total liabilities and stockholders’ equity
    52,170                  
 
   
 
                 
Net interest spread
                    3.57  
Contribution of interest-free funds
                    .28  
 
           
 
     
 
 
Net interest income/margin on earning assets
            443,827       3.85 %
 
           
 
     
 
 

*   Includes nonaccrual loans.
 
**   Includes available for sale securities at amortized cost. (continued)

-39-


 

M&T BANK CORPORATION AND SUBSIDIARIES

Table 3 (continued)

AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES (continued)

                                                 
    2004 Second Quarter   2004 First Quarter
    Average           Average   Average           Average
Average balance in millions; interest in thousands
  balance
  Interest
  rate
  balance
  Interest
  rate
Assets
                                               
Earning assets
                                               
Loans and leases, net of unearned discount*
                                               
Commercial, financial, etc.
  $ 9,464     $ 101,169       4.30 %     9,100       92,190       4.07 %
Real estate – commercial
    12,962       181,307       5.60       12,521       178,845       5.71  
Real estate – consumer
    3,218       47,366       5.89       3,083       45,892       5.95  
Consumer
    11,260       152,884       5.46       11,139       156,838       5.66  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total loans and leases, net
    36,904       482,726       5.26       35,843       473,765       5.32  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Money-market assets
                                               
Interest-bearing deposits at banks
    16       16       .40       15       15       .41  
Federal funds sold and agreements to resell securities
    9       28       1.26       9       28       1.27  
Trading account
    51       97       .75       61       164       1.07  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total money-market assets
    76       141       .74       85       207       .98  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Investment securities**
                                               
U.S. Treasury and federal agencies
    4,308       40,953       3.82       3,640       34,042       3.76  
Obligations of states and political subdivisions
    228       4,038       7.10       240       3,554       5.92  
Other
    3,407       37,232       4.40       3,636       38,794       4.29  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total investment securities
    7,943       82,223       4.16       7,516       76,390       4.09  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total earning assets
    44,923       565,090       5.06       43,444       550,362       5.10  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Allowance for credit losses
    (624 )                     (620 )                
Cash and due from banks
    1,633                       1,610                  
Other assets
    5,319                       5,481                  
 
   
 
                     
 
                 
Total assets
  $ 51,251                       49,915                  
 
   
 
                     
 
                 
Liabilities and stockholders’ equity
                                               
Interest-bearing liabilities
                                               
Interest-bearing deposits
                                               
NOW accounts
  $ 368       279       .30       1,114       994       .36  
Savings deposits
    15,667       22,074       .57       14,755       22,921       .62  
Time deposits
    6,842       36,242       2.13       6,591       36,389       2.22  
Deposits at foreign office
    2,829       6,945       .99       2,833       6,882       .98  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total interest-bearing deposits
    25,706       65,540       1.03       25,293       67,186       1.07  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Short-term borrowings
    5,141       13,097       1.02       4,771       12,058       1.02  
Long-term borrowings
    5,869       48,168       3.30       5,566       47,585       3.44  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total interest-bearing liabilities
    36,716       126,805       1.39       35,630       126,829       1.43  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Noninterest-bearing deposits
    7,996                       7,563                  
Other liabilities
    885                       990                  
 
   
 
                     
 
                 
Total liabilities
    45,597                       44,183                  
 
   
 
                     
 
                 
Stockholders’ equity
    5,654                       5,732                  
 
   
 
                     
 
                 
Total liabilities and stockholders’ equity
  $ 51,251                       49,915                  
 
   
 
                     
 
                 
Net interest spread
                    3.67                       3.67  
Contribution of interest-free funds
                    .25                       .25  
 
           
 
     
 
             
 
     
 
 
Net interest income/margin on earning assets
          $ 438,285       3.92 %             423,533       3.92 %
 
           
 
     
 
             
 
     
 
 

*   Includes nonaccrual loans.
 
**   Includes available for sale securities at amortized cost.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     Incorporated by reference to the discussion contained under the caption “Taxable-equivalent Net Interest Income” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4. Controls and Procedures.

     (a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), Robert G. Wilmers, Chairman of the Board, President and Chief Executive Officer, and Michael P. Pinto, Executive Vice President and Chief Financial Officer, believe that M&T’s disclosure controls and procedures were effective as of March 31, 2005.

     (b) Changes in internal control over financial reporting. M&T continually assesses the adequacy of its internal control over financial reporting and enhances its controls in response to internal control assessments and internal and external audit and regulatory recommendations. No changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended March 31, 2005 or through the date of this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

     M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending against M&T or its subsidiaries will be material to M&T’s consolidated financial position, but at the present time is not in a position to determine whether such litigation will have a material adverse effect on M&T’s consolidated results of operations in any future reporting period.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     (a) – (b) Not applicable.

     (c)

                                 
Issuer Purchases of Equity Securities
                            (d) Maximum
                    (c) Total   Number (or
                    Number of   Approximate
                    Shares   Dollar Value)
                    (or Units)   of Shares
                    Purchased   (or Units)
    (a) Total           as Part of   that may yet
    Number   (b) Average   Publicly   be Purchased
    of Shares   Price Paid   Announced   Under the
    (or Units)   per Share   Plans or   Plans or
Period
  Purchased (1)
  (or Unit)
  Programs
  Programs (2)
January 1 - January 31, 2005
    556,342     $ 102.52       525,000       4,322,100  
February 1 - February 28, 2005
    767,198       100.94       766,400       3,555,700  
March 1 - March 31, 2005
    575,296       100.11       575,000       2,980,700  
 
   
 
     
 
     
 
         
Total
    1,898,836     $ 101.15       1,866,400          
 
   
 
     
 
     
 
         

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(1)   The total number of shares purchased during the periods indicated includes shares purchased as part of publicly announced programs and shares deemed to have been received from employees who exercised stock options by attesting to previously acquired common shares in satisfaction of the exercise price, as is permitted under M&T’s stock option plans.
 
(2)   In December 2004, M&T announced a program to purchase up to 5 million of its common shares.

Item 3. Defaults Upon Senior Securities.

     (Not applicable.)

Item 4. Submission of Matters to a Vote of Security Holders.

     The 2005 Annual Meeting of Stockholders of M&T was held on April 19, 2005. At the 2005 Annual Meeting, stockholders elected twenty-four (24) directors, all of whom were then serving as directors of M&T, for terms of one (1) year and until their successors are elected and qualified. The following table reflects the tabulation of the votes with respect to each director who was elected at the 2005 Annual Meeting.

                 
    Number of Votes
Nominee
  For
  Withheld
William F. Allyn
    106,293,296       349,628  
Brent D. Baird
    105,583,679       1,059,245  
Robert J. Bennett
    106,160,887       482,037  
C. Angela Bontempo
    106,105,867       537,057  
Robert T. Brady
    98,921,412       7,721,512  
Emerson L. Brumback
    105,930,798       712,126  
Michael D. Buckley
    105,233,896       1,409,028  
Patrick J. Callan
    106,149,954       492,970  
R. Carlos Carballada
    105,255,559       1,387,365  
T. Jefferson Cunningham III
    105,264,967       1,377,957  
Richard E. Garman
    105,032,512       1,610,412  
Derek C. Hathaway
    105,813,541       829,383  
Daniel R. Hawbaker
    106,302,647       340,277  
Patrick W.E. Hodgson
    106,103,851       539,073  
Gary Kennedy
    106,093,533       549,391  
Richard G. King
    106,319,967       322,957  
Reginald B. Newman, II
    106,306,296       336,628  
Jorge G. Pereira
    104,993,527       1,649,397  
Michael P. Pinto
    105,332,945       1,309,979  
Robert E. Sadler, Jr.
    105,986,751       656,173  
Eugene J. Sheehy
    105,876,438       766,486  
Stephen G. Sheetz
    106,273,071       369,853  
Herbert L. Washington
    106,363,806       279,118  
Robert G. Wilmers
    106,001,219       641,705  

     At the 2005 Annual Meeting, stockholders approved the M&T Bank Corporation 2005 Incentive Compensation Plan. The following table presents the tabulation of the votes with respect to such approval.

                         
Number of Votes
                    Broker
For
  Against
  Abstain
  Non-Votes
77,511,191
    16,915,884       684,814       11,531,035  

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     At the 2005 Annual Meeting, stockholders also ratified the appointment of PricewaterhouseCoopers LLP as the independent public accountant of M&T Bank Corporation for the year ending December 31, 2005. The following table presents the tabulation of the votes with respect to such ratification.

                 
Number of Votes
For
  Against
  Abstain
105,688,332
    813,396       141,196  

Item 5. Other Information.

     (a)   On April 21, 2005, M&T filed a Current Report on Form 8-K dated April 19, 2005 to disclose that Michael P. Pinto, Executive Vice President and Chief Financial Officer, had been appointed Chairman and Chief Executive Officer of the Mid-Atlantic Division of M&T Bank, and that Rene F. Jones, Senior Vice President of M&T Bank, would succeed Mr. Pinto as Chief Financial Officer of M&T and M&T Bank. The effective date of the appointment of Mr. Jones as Chief Financial Officer of M&T and M&T Bank to succeed Mr. Pinto was not indicated in the Current Report on Form 8-K dated April 19, 2005, but such appointment will become effective as of May 15, 2005.

     M&T’s Board of Directors approved the M&T Bank Corporation Employee Severance Pay Plan on April 19, 2005 and such plan became effective as of May 1, 2005. The M&T Bank Corporation Employee Severance Pay Plan, which is intended to meet the definition of a “severance pay plan” under Department of Labor Regulation §2510.3-2(b), covers all full-time and part-time employees and provides for the payment of a severance benefit to any such employee that is involuntarily terminated for certain qualifying reasons, such as a reduction in force, restructuring, outsourcing or elimination of positions, in an amount that is based upon the employee’s level and length of service.

Item 6. Exhibits.

     The following exhibits are filed as a part of this report.

     
Exhibit    
No.
   
10.1
  M&T Bank Corporation 2005 Incentive Compensation Plan. Incorporated by reference to Exhibit No. 10 to the Form 8-K dated April 19, 2005 (File No. 1-9861).
 
   
10.2
  M&T Bank Corporation Employee Severance Pay Plan. Filed herewith.
 
   
31.1
  Certificate of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
   
31.2
  Certificate of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
   
32.1
  Certification of Chief Executive Officer Under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
   
32.2
  Certification of Chief Financial Officer Under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  M&T BANK CORPORATION
 
 
Date: May 9, 2005  By:   /s/ Michael P. Pinto    
    Michael P. Pinto   
    Executive Vice President
and Chief Financial Officer 
 
 

EXHIBIT INDEX

     
Exhibit    
No.
   
10.1
  M&T Bank Corporation 2005 Incentive Compensation Plan. Incorporated by reference to Exhibit No. 10 to the Form 8-K dated April 19, 2005 (File No. 1-9861).
 
   
10.2
  M&T Bank Corporation Employee Severance Pay Plan. Filed herewith.
 
   
31.1
  Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
   
31.2
  Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
   
32.1
  Certification of Chief Executive Officer Under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
   
32.2
  Certification of Chief Financial Officer Under 18 U.S.C. §1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

-44-