M & T Bank 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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þ
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2006
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or
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o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number
1-9861
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M&T
BANK CORPORATION
(Exact name of registrant as
specified in its charter)
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New York
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16-0968385
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(State of
incorporation)
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(I.R.S. Employer Identification No.)
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One M&T Plaza, Buffalo, New
York
(Address of principal
executive offices)
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14203
(Zip
Code)
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Registrants telephone number, including area code:
716-842-5445
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which
Registered
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Common Stock, $.50 par value
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
8.234% Capital Securities of M&T Capital Trust I
(and the Guarantee of M&T Bank Corporation with respect
thereto)
(Title of class)
8.234% Junior Subordinated Debentures of
M&T Bank Corporation
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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, and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
Aggregate market value of the Common Stock, $0.50 par
value, held by non-affiliates of the registrant, computed by
reference to the closing price as of the close of business on
June 30, 2006: $8,297,538,556.
Number of shares of the Common Stock, $0.50 par value,
outstanding as of the close of business on January 31,
2007: 109,748,465 shares.
Documents Incorporated By
Reference:
(1) Portions of the Proxy Statement for the 2007 Annual
Meeting of Stockholders of M&T Bank Corporation in
Parts II and III.
M&T
BANK CORPORATION
Form 10-K
for the year ended December 31, 2006
CROSS-REFERENCE SHEET
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Form 10-K
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Page
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4
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Statistical disclosure pursuant to
Guide 3
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I.
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Distribution of assets,
liabilities, and stockholders equity; interest rates and
interest differential
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A. Average balance sheets
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36
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B. Interest income/expense
and resulting yield or rate on average interest-earning assets
(including non-accrual loans) and interest-bearing liabilities
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36
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C. Rate/volume variances
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22
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II.
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Investment portfolio
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A. Year-end balances
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20
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B. Maturity schedule and
weighted average yield
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63
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C. Aggregate carrying value
of securities that exceed ten percent of stockholders
equity
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90
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III.
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Loan portfolio
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A. Year-end balances
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20, 93
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B. Maturities and
sensitivities to changes in interest rates
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61
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C. Risk elements
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Nonaccrual,
past due and renegotiated loans
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48
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Actual and
pro forma interest on certain loans
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93-94
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Nonaccrual
policy
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86
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Loan
concentrations
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53
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IV.
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Summary of loan loss experience
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A. Analysis of the allowance
for loan losses
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47
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Factors
influencing managements judgment concerning the adequacy
of the allowance and provision
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47-53, 86
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B. Allocation of the
allowance for loan losses
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52
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V.
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Deposits
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A. Average balances and rates
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36
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B. Maturity schedule of
domestic time deposits with balances of $100,000 or more
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64
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VI.
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Return on equity and assets
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22, 31, 67
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VII.
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Short-term borrowings
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99
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22-24
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24
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24-25, 95-96
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25
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25
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25-26
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26-29
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A. Principal market
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26
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Market
prices
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75
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B. Approximate number of
holders at year-end
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20
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2
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Form 10-K
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Page
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C. Frequency and amount of
dividends declared
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21-22, 75, 84
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D. Restrictions on dividends
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6, 14-17, 102, 125, 127
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E. Securities
authorized for issuance under equity compensation plans
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27-28
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F. Performance graph
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28
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G. Repurchases of common stock
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28-29
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29
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A. Selected consolidated
year-end balances
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20
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B. Consolidated earnings, etc
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21-22
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29-76
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77
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77
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A. Report on Internal Control
Over Financial Reporting
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78
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B. Report of Independent
Registered Public Accounting Firm
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79-80
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C. Consolidated Balance
Sheet December 31, 2006 and 2005
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81
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D. Consolidated Statement of
Income Years ended December 31, 2006, 2005 and
2004
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82
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E. Consolidated
Statement of Cash Flows Years ended
December 31, 2006, 2005 and 2004
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83
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F. Consolidated
Statement of Changes in Stockholders Equity
Years ended December 31, 2006, 2005 and 2004
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84
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G. Notes to Financial
Statements
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85-130
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H. Quarterly Trends
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75
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131
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131
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A. Conclusions of principal
executive officer and principal financial officer regarding
disclosure controls and procedures
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131
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B. Managements annual
report on internal control over financial reporting
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131
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C. Attestation report of the
registered public accounting firm
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131
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D. Changes in internal
control over financial reporting
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131
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131
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131
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132
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132
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132
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132
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132
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133-134
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135-139
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EX-23.1 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
EX-32.2 |
3
M&T Bank Corporation
(Registrant or
M&T) is a
New York business corporation which is registered as a bank
holding company under the Bank Holding Company Act of 1956, as
amended (BHCA) and under
Article III-A
of the New York Banking Law (Banking Law). The
principal executive offices of the Registrant are located at One
M&T Plaza, Buffalo, New
York 14203. The Registrant was incorporated in November 1969.
The Registrant and its direct and indirect subsidiaries are
collectively referred to herein as the Company. As
of December 31, 2006 the Company had consolidated total
assets of $57.1 billion, deposits of $39.9 billion and
stockholders equity of $6.3 billion. The Company had
11,904 full-time and 1,448 part-time employees as of
December 31, 2006.
At December 31, 2006, the Registrant had two wholly owned
bank subsidiaries: M&T
Bank and M&T Bank,
National Association
(M&T Bank,
N.A.). The banks collectively offer a wide range of
commercial banking, trust and investment services to their
customers. At December 31, 2006,
M&T Bank represented
99% of consolidated assets of the Company.
M&T Bank operates
branch offices in New York, Maryland, Pennsylvania, Virginia,
West Virginia, Delaware and the District of Columbia.
The Company from time to time considers acquiring banks, thrift
institutions, branch offices of banks or thrift institutions, or
other businesses within markets currently served by the Company
or in other locations that would complement the Companys
business or its geographic reach. The Company has pursued
acquisition opportunities in the past, continues to review
different opportunities, including the possibility of major
acquisitions, and intends to continue this practice.
Relationship
With Allied Irish Banks, p.l.c.
On April 1, 2003,
M&T completed the
acquisition of Allfirst Financial Inc. (Allfirst), a
bank holding company headquartered in Baltimore, Maryland from
Allied Irish Banks, p.l.c. (AIB). Under the terms of
the Agreement and Plan of Reorganization dated
September 26, 2002 by and among AIB, Allfirst and
M&T (the
Reorganization Agreement),
M&T combined with
Allfirst through the acquisition of all of the issued and
outstanding Allfirst stock in exchange for
26,700,000 shares of
M&T common stock and
$886,107,000 in cash paid to AIB. In addition, there were
several M&T corporate
governance changes that resulted from the transaction. While it
maintains a significant ownership in
M&T, AIB will have
representation on the
M&T board, the
M&T Bank board and key
M&T board committees
and will have certain protections of its rights as a substantial
M&T shareholder. In
addition, AIB will have rights that will facilitate its ability
to maintain its proportionate ownership position in
M&T.
M&T will also have
representation on the AIB board while AIB remains a significant
shareholder. The following is a description of the ongoing
relationship between
M&T and AIB. The
following description is qualified in its entirety by the terms
of the Reorganization Agreement. The Reorganization Agreement
was filed with the Securities Exchange Commission on
October 3, 2002 as Exhibit 2 to the Current Report on
Form 8-K
of M&T dated
September 26, 2002.
Board of
Directors; Management
At December 31, 2006, AIB held approximately 24.2% of the
issued and outstanding shares of
M&T common stock. In
defining their relationship after the acquisition,
M&T and AIB negotiated
certain agreements regarding share ownership and corporate
governance issues such as board representation, with the number
of AIBs representatives on the
M&T and
M&T Bank boards of
directors being dependent upon the amount of
M&T common stock held
by AIB. M&T has the
right to one seat on the AIB board of directors until AIB no
longer holds at least 15% of the outstanding shares of
M&T common stock.
Pursuant to the Reorganization Agreement, AIB has the right to
name four members to serve on the Boards of Directors of
M&T and
M&T Bank, each of whom
must be reasonably acceptable to
M&T (collectively, the
AIB Designees). Further, one of the AIB Designees
will serve on each of the Executive Committee, Nomination,
Compensation and Governance Committee, and Audit and Risk
Committee (or any committee or committees performing comparable
functions) of the M&T
board of directors. In order to serve, the AIB Designees must
meet the requisite independence and expertise requirements
prescribed under applicable law or stock exchange rules. In
addition, the Reorganization Agreement provides that the board
of directors of M&T
Bank will include four members designated by AIB, each of whom
must be reasonably acceptable to
M&T.
4
As long as AIB remains a significant shareholder of
M&T, AIB will have
representation on the boards of directors of both
M&T and
M&T Bank as follows:
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As long as AIB holds at least 15% of the outstanding shares of
M&T common stock, AIB
will be entitled to designate four persons on both the
M&T and
M&T Bank boards of
directors and representation on the committees of the
M&T board described
above.
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If AIB holds at least 10%, but less than 15%, of the outstanding
shares of M&T common
stock, AIB will be entitled to designate at least two people on
both the M&T and
M&T Bank boards of
directors.
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If AIBs ownership interest in
M&T is at least 5%, but
less than 10%, of the outstanding shares of
M&T common stock, AIB
will be entitled to designate at least one person on both the
M&T and
M&T Bank boards of
directors.
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As long as AIB holds at least 15% of the outstanding shares of
M&T common stock,
neither M&Ts
board of directors nor
M&T Banks board
of directors will consist of more than twenty-eight directors
without the consent of the AIB Designees.
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If AIBs holdings of
M&T common stock fall
below 15%, but not lower than 12% of the outstanding shares of
M&T common stock, AIB
will continue to have the same rights that it would have had if
it owned 15% of the outstanding shares of
M&T common stock, as
long as AIB restores its ownership percentage to 15% within one
year. Additionally, as described in more detail below,
M&T has agreed to
repurchase shares of
M&T common stock in
order to offset dilution to AIBs ownership interests that
may otherwise be caused by issuances of
M&T common stock under
M&T employee and
director benefit or stock purchase plans. Dilution of AIBs
ownership position caused by such issuances will not be counted
in determining whether the Sunset Date has occurred
or whether any of AIBs other rights under the
Reorganization Agreement have terminated. The Sunset
Date is the date on which AIB no longer holds at least 15%
of the M&T common
stock, calculated as described in this paragraph.
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The AIB Designees at December 31, 2006 were Michael D.
Buckley, Colm E. Doherty, Richard G. King and Eugene J. Sheehy.
Mr. Buckley serves as a member of the Executive Committee
and the Nomination, Compensation and Governance Committee, and
Mr. King serves as a member of the Audit and Risk
Committee. Robert G. Wilmers, Chairman of the Board and Chief
Executive Officer of
M&T, is a member of the
AIB board of directors.
Amendments
to
M&Ts
Bylaws
Pursuant to the Reorganization Agreement,
M&T amended and
restated its bylaws. The following is a description of the
amended bylaws:
The amended bylaws provide that until the Sunset Date, the
M&T board of directors
may not take or make any recommendation to
M&Ts shareholders
regarding the following actions without the approval of the
Executive Committee, including the approval of the AIB Designee
serving on the committee:
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Any amendment of
M&Ts Certificate
of Incorporation or bylaws that would be inconsistent with the
rights described herein or that would otherwise have an adverse
effect on the board representation, committee representation or
other rights of AIB contemplated by the Reorganization Agreement;
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Any activity not permissible for a U.S. bank holding
company;
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The adoption of any shareholder rights plan or other measures
having the purpose or effect of preventing or materially
delaying completion of any transaction involving a change in
control of M&T; and
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Any public announcement disclosing
M&Ts desire or
intention to take any of the foregoing actions.
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The amended bylaws also provide that until the Sunset Date, the
M&T board of directors
may only take or make any recommendation to
M&Ts shareholders
regarding the following actions if the action has been approved
by the Executive Committee (in the case of the first four items
and sixth item below) or Nomination, Compensation and Governance
Committee (in the case of the fifth item below)
5
and the members of such committee not voting in favor of the
action do not include the AIB Designee serving on such committee
and at least one other member of the committee who is not an AIB
Designee:
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Any reduction in
M&Ts cash
dividend policy such that the ratio of cash dividends to net
income is less than 15%, or any extraordinary dividends or
distributions to holders of
M&T common stock;
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Any acquisition of any assets or businesses, (1) if the
consideration is in M&T
common stock, where the stock consideration paid by
M&T exceeds 10% of the
aggregate voting power of
M&T common stock and
(2) if the consideration is cash,
M&T stock or other
consideration, where the fair market value of the consideration
paid by M&T exceeds 10%
of the market capitalization of
M&T, as determined
under the Reorganization Agreement;
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Any sale of any assets or businesses in which the value of the
aggregate consideration to be received exceeds 10% of the market
capitalization of M&T,
as determined under the Reorganization Agreement;
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Any liquidation or dissolution of
M&T;
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The appointment or election of the Chairman of the board of
directors or the Chief Executive Officer of
M&T; and
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Any public announcement disclosing
M&Ts desire or
intention to take any of the foregoing actions prior to
obtaining the requisite committee approval.
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The provisions of the bylaws described above may not be amended
or repealed without the unanimous approval of the entire
M&T board of directors
or the approval of the holders of not less than 80% of the
outstanding shares of
M&T common stock. The
provisions of the bylaws described above will automatically
terminate when AIB holds less than 5% of the outstanding shares
of M&T common stock.
Investment
Parameters
The Reorganization Agreement provides that through the second
anniversary of the Sunset Date, without prior written consent of
the M&T board of
directors, AIB will not, directly or indirectly, acquire or
offer to acquire (except by way of stock dividends, offerings
made available to M&T
shareholders generally, or pursuant to compensation plans) more
than 25% of the then outstanding shares of
M&T common stock.
Further, during this period, AIB and AIBs subsidiaries
have agreed not to participate in any proxy solicitation or to
otherwise seek to influence any
M&T shareholder with
respect to the voting of any shares of
M&T common stock for
the approval of any shareholder proposals.
The Reorganization Agreement also provides that, during this
period, AIB will not make any public announcement with respect
to any proposal or offer by AIB or any AIB subsidiary with
respect to certain transactions (such as mergers, business
combinations, tender or exchange offers, the sale or purchase of
securities or similar transactions) involving
M&T or any of the
M&T subsidiaries. The
Reorganization Agreement also provides that, during this period,
AIB may not subject any shares of
M&T common stock to any
voting trust or voting arrangement or agreement and will not
execute any written consent as a shareholder with respect to the
M&T common stock.
The Reorganization Agreement also provides that, during this
period, AIB will not seek to control or influence the
management, the board of directors or policies of
M&T, including through
communications with shareholders of
M&T or otherwise,
except through non-public communications with the directors of
M&T, including the AIB
Designees.
These restrictions on AIB will no longer apply if a third party
commences or announces its intention to commence a tender offer
or an exchange offer and, within a reasonable time, the
M&T board of directors
either does not recommend that shareholders not accept the offer
or fails to adopt a shareholders rights plan, or if
M&T or
M&T Bank becomes
subject to any regulatory capital directive or becomes an
institution in troubled condition under applicable
banking regulations. However, in the event the tender offer or
exchange offer is not commenced or consummated in accordance
with its terms, the restrictions on AIB described above will
thereafter continue to apply.
Anti-Dilution
Protections
M&T has agreed that
until the Sunset Date, in the event
M&T issues shares of
M&T stock (other than
certain issuances to employees pursuant to option and benefit
plans), subject to applicable law and
6
regulatory requirements, AIB will have the right to purchase at
fair market value up to the number of shares of
M&T common stock
required to increase or maintain its equity interest in
M&T to 22.5% of the
then outstanding M&T
common stock.
M&T has also agreed
that until the Sunset Date, in connection with any issuance of
M&T stock pursuant to
employee option or benefit plans,
M&T will as soon as
reasonably practicable, taking into account applicable law,
regulatory capital requirements, capital planning and risk
management, take such necessary actions so that AIBs
proportionate ownership of
M&T common stock is not
reduced as a result of such issuances, including by funding such
issuances through purchases of
M&T common stock in the
open market or by undertaking share repurchase programs.
Sale of
M&T
Common Stock; Right of First Refusal in Certain
Circumstances
The M&T common stock
issued to AIB was not registered under the Securities Act of
1933 (the Securities Act) and may only be
disposed of by AIB pursuant to an effective registration
statement or pursuant to an exemption from registration under
the Securities Act and subject to the provisions of the
Reorganization Agreement.
M&T and AIB have
entered into a registration rights agreement that provides that
upon AIBs request,
M&T will file a
registration statement relating to all or a portion of
AIBs shares of
M&T common stock
providing for the sale of such shares by AIB from time to time
on a continuous basis pursuant to Rule 415 under the
Securities Act, provided that
M&T need only effect
one such shelf registration in any
12-month
period. In addition, the registration rights agreement provides
that AIB is entitled to demand registration under the Securities
Act of all or part of its shares of
M&T stock, provided
that M&T is not
obligated to effect two such demand registrations in
any 12-month
period. Any demand or shelf registration must cover no less than
one million shares.
The registration rights agreement further provides that in the
event M&T proposes to
file a registration statement other than pursuant to a shelf
registration or demand registration or
Forms S-8
or S-4, for
an offering and sale of shares by
M&T in an underwritten
offering or an offering and sale of shares on behalf of one or
more selling shareholders,
M&T must give AIB
notice at least 15 days prior to the anticipated filing
date, and AIB may request that all or a portion of its
M&T common shares be
included in the registration statement.
M&T will honor the
request, unless the managing underwriter advises
M&T in writing that in
its opinion the inclusion of all shares requested to be included
by M&T, the other
selling shareholders, if any, and AIB would materially and
adversely affect the offering, in which case
M&T may limit the
number of shares included in the offering to a number that would
not reasonably be expected to have such an effect. In such
event, the number of shares to be included in the registration
statement shall first include the number of shares requested to
be included by M&T and
then the shares requested by other selling shareholders,
including AIB, on a pro rata basis according to the number of
shares requested to be included in the registration statement by
each shareholder.
As long as AIB holds 5% or more of the outstanding shares of
M&T common stock, AIB
will not dispose of any of its shares of
M&T common stock
except, subject to the terms and conditions of the
Reorganization Agreement and applicable law, in a widely
dispersed public distribution; a private placement in which no
one party acquires the right to purchase more than 2% of the
outstanding shares of
M&T common stock; an
assignment to a single party (such as a broker or investment
banker) for the purpose of conducting a widely dispersed public
distribution on AIBs behalf; pursuant to Rule 144
under the Securities Act; pursuant to a tender or exchange offer
to M&Ts
shareholders not opposed by
M&Ts board of
directors, or open market purchase programs made by
M&T; with the consent
of M&T, which consent
will not be unreasonably withheld, to a controlled subsidiary of
AIB; or pursuant to
M&Ts right of
first refusal as described below.
The Reorganization Agreement provides that until AIB no longer
holds at least 5% of the outstanding shares of
M&T common stock, if
AIB wishes to sell or otherwise transfer any of its shares of
M&T common stock other
than as described in the preceding paragraph, AIB must first
submit an offer notice to
M&T identifying the
proposed transferee and setting forth the proposed terms of the
transaction, which shall be limited to sales for cash, cash
equivalents or marketable securities.
M&T will have the
right, for 20 days following receipt of an offer notice
from AIB, to purchase all (but not less than all) of the shares
of M&T common stock
that AIB wishes to sell, on the proposed terms specified in
7
the offer notice. If
M&T declines or fails
to respond to the offer notice within 20 days, AIB may sell
all or a portion of the
M&T shares specified in
the offer notice to the proposed transferee at a purchase price
equal to or greater than the price specified in the offer
notice, at any time during the three months following the date
of the offer notice, or, if prior notification to or approval of
the sale by the Federal Reserve Board or another regulatory
agency is required, AIB shall pursue regulatory approval
expeditiously and the sale may occur on the first date permitted
under applicable law.
Certain
Post-Closing Bank Regulatory Matters
The Board of Governors of the Federal Reserve System
(Federal Reserve Board) deems AIB to be
M&Ts bank holding
company for purposes of the BHCA. In addition, the New York
Banking Superintendent (Banking Superintendent)
deems AIB to be
M&Ts bank holding
company for purposes of
Article III-A
of the Banking Law. Among other things, this means that, should
M&T propose to make an
acquisition or engage in a new type of activity that requires
the submission of an application or notice to the Federal
Reserve Board or the Banking Superintendent, AIB, as well as
M&T, may also be
required to file an application or notice. The Reorganization
Agreement generally provides that AIB will make any
applications, notices or filings that
M&T determines to be
necessary or desirable. The Reorganization Agreement also
requires AIB not to take any action that would have a material
adverse effect on M&T
and to advise M&T prior
to entering into any material transaction or activity. These
provisions of the Reorganization Agreement would no longer apply
if AIB ceased to be
M&Ts bank holding
company and also was not otherwise considered to control
M&T for purposes of the
BHCA.
Pursuant to the Reorganization Agreement, if, as a result of any
administrative enforcement action under Section 8 of the
Federal Deposit Insurance Act (the FDI Act),
memorandum of understanding, written agreement, supervisory
letter or any other action or determination of any regulatory
agency relating to the status of AIB (but not relating to the
conduct of M&T or any
subsidiary of M&T),
M&T or
M&T Bank also becomes
subject to such an action, memorandum, agreement or letter that
relates to M&T or any
M&T subsidiary, or
experiences any fact, event or circumstance that affects
M&Ts regulatory
status or compliance, and that in either case would be
reasonably likely to create a material burden on
M&T or to cause any
material adverse economic or operating consequences to
M&T or an
M&T subsidiary (a
Material Regulatory Event), then
M&T will notify AIB
thereof in writing as promptly as practicable. Should AIB fail
to cure the Material Regulatory Event within 90 days
following the receipt of such notice, AIB will, as promptly as
practicable but in no event later than 30 days from the end
of the cure period, take any and all such actions (with the
reasonable cooperation of
M&T as requested by
AIB) as may be necessary or advisable in order that it no longer
has control of
M&T for purposes of the
BHCA, including, if necessary, by selling some or all of its
shares of M&T common
stock (subject to the right of first refusal provisions of the
Reorganization Agreement) and divesting itself as required of
its board and committee representation and governance rights as
set forth in the Reorganization Agreement. If, at the end of
such 30-day
period, the Material Regulatory Event is continuing and AIB has
not terminated its control of
M&T, then
M&T will have the right
to repurchase, at fair market value, such amount of the
M&T common stock owned
by AIB as would result in AIB holding no less than 4.9% of the
outstanding shares of
M&T common stock,
pursuant to the procedures detailed in the Reorganization
Agreement.
As long as AIB is considered to control
M&T for purposes of the
BHCA or the federal Change in Bank Control Act, if AIB acquires
any insured depository institution with total assets greater
than 25% of the assets of
M&Ts largest
insured depository institution subsidiary, then within two years
AIB must terminate its affiliation with the insured depository
institution or take such steps as may be necessary so that none
of M&Ts bank
subsidiaries would be subject to cross guarantee
liability for losses incurred if the institution AIB acquired
potentially were to fail. This liability applies under the FDI
Act to insured depository institutions that are commonly
controlled. The actions AIB would take could include disposing
of shares of M&T common
stock and/or
surrendering its representation or governance rights. Also, if
such an insured depository institution that is controlled by AIB
and of the size described in the first sentence of this
paragraph that would be considered to be commonly controlled
with M&Ts insured
depository institution subsidiaries fails to meet applicable
requirements to be adequately capitalized under
applicable U.S. banking laws, then AIB will have to take
the actions described in the previous
8
sentence no later than
180 days after the date that the institution failed to meet
those requirements, unless the institution is sooner returned to
adequately capitalized status.
Subsidiaries
M&T Bank is a banking
corporation that is incorporated under the laws of the State of
New York. M&T Bank
is a member of the Federal Reserve System and the Federal Home
Loan Bank System, and its deposits are insured by the
Federal Deposit Insurance Corporation (FDIC) up to
applicable limits. M&T
acquired all of the issued and outstanding shares of the capital
stock of M&T Bank in
December 1969. The stock of
M&T Bank represents a
major asset of M&T.
M&T Bank operates under
a charter granted by the State of New York in 1892, and the
continuity of its banking business is traced to the organization
of the Manufacturers and Traders Bank in 1856. The principal
executive offices of
M&T Bank are
located at One M&T
Plaza, Buffalo, New York 14203. As of December 31, 2006,
M&T Bank had 671
banking offices located throughout New York State, Pennsylvania,
Maryland, Delaware, Virginia, West Virginia and the District of
Columbia, plus a branch in George Town, Cayman Islands. As of
December 31, 2006,
M&T Bank had
consolidated total assets of $56.4 billion, deposits of
$39.9 billion and stockholders equity of
$6.5 billion. The deposit liabilities of
M&T Bank are insured by
the FDIC through its Deposit Insurance Fund (DIF) of
which, at December 31, 2006, $35.2 billion were
assessable. As a commercial bank,
M&T Bank offers a broad
range of financial services to a diverse base of consumers,
businesses, professional clients, governmental entities and
financial institutions located in its markets. Lending is
largely focused on consumers residing in New York State,
Pennsylvania, Maryland, northern Virginia and
Washington, D.C., and on small and medium-size businesses
based in those areas, although residential real estate loans are
originated through lending offices in 22 states. In addition,
the Company conducts lending activities in various states
through other subsidiaries.
M&T Bank and
certain of its subsidiaries also offer commercial mortgage loans
secured by income producing properties or properties used by
borrowers in a trade or business. Additional financial services
are provided through other operating subsidiaries of the Company.
M&T Bank, N.A., a
national banking association and a member of the Federal Reserve
System and the FDIC, commenced operations on October 2,
1995. The deposit liabilities of
M&T Bank, N.A. are
insured by the FDIC through the DIF. The main office of
M&T Bank, N.A. is
located at 48 Main Street, Oakfield, New York 14125.
M&T Bank, N.A. offers
selected deposit and loan products on a nationwide basis,
primarily through direct mail and telephone marketing
techniques. As of December 31, 2006,
M&T Bank, N.A. had
total assets of $511 million, deposits of $405 million
and stockholders equity of $95 million.
M&T Life Insurance
Company (M&T Life
Insurance), a wholly owned subsidiary of
M&T, was incorporated
as an Arizona business corporation in January 1984.
M&T Life Insurance is a
captive credit reinsurer which reinsures credit life and
accident and health insurance purchased by the Companys
consumer loan customers. As of December 31, 2006,
M&T Life Insurance had
assets of $33 million and stockholders equity of
$27 million. M&T
Life Insurance recorded revenues of $2 million during 2006.
Headquarters of M&T
Life Insurance are located at 101 North First Avenue, Phoenix,
Arizona 85003.
M&T Credit Services,
LLC (M&T
Credit), a wholly owned subsidiary of
M&T Bank, is a
New York limited liability company formed in June 2004, but
its operations can be traced to a predecessor company that was a
wholly owned subsidiary of
M&T Bank formed in
1994. M&T Credit is a
credit and leasing company offering consumer loans and
commercial loans and leases. Its headquarters are located at
M&T Center, One
Fountain Plaza, Buffalo, New York 14203, and it has offices in
Delaware, Massachusetts and Pennsylvania. As of
December 31, 2006,
M&T Credit had assets
of $3.5 billion and stockholders equity of
$477 million. M&T
Credit recorded $193 million of revenue during 2006.
M&T Investment Company
of Delaware, Inc.
(M&T
Investment), is a subsidiary of
M&T Bank that was
formed on November 17, 2004.
M&T Investment owns all
of the outstanding common stock and 88% of the preferred stock
of M&T Real Estate
Trust. As of December 31, 2006,
M&T Investment had
assets and stockholders equity of approximately
$13.8 billion. Excluding dividends from
M&T Real Estate Trust,
M&T Investment realized
$17 million of revenue in 2006. The headquarters of
M&T Investment are
located at 501 Silverside Road, Wilmington, Delaware 19809.
Prior to January 17, 2007,
M&T Investment had been
a wholly owned subsidiary of
M&T Investment Company,
Inc., which had
9
been a wholly owned subsidiary of
M&T Bank.
M&T Investment Company,
Inc. owned 100% of the common stock of
M&T Investment at
December 31, 2006. Except for that investment holding,
M&T Investment Company,
Inc. was largely inactive during 2006. Effective
January 17, 2007,
M&T Investment Company,
Inc. was dissolved. As a result,
M&T Investment became a
direct subsidiary of
M&T Bank on that date.
M&T Lease, LLC
(M&T
Lease), a wholly owned subsidiary of
M&T Bank, is a Delaware
limited liability company formed in June 2004, but its
operations can be traced to a predecessor company that was a
wholly owned subsidiary of
M&T Bank formed in
1994. M&T Lease is a
consumer leasing company with headquarters at One
M&T Plaza, Buffalo, New
York 14203. As of December 31, 2006,
M&T Lease had assets of
$68 million and stockholders equity of
$44 million. M&T
Lease recorded $7 million of revenue during 2006.
M&T Mortgage
Corporation (M&T
Mortgage) was a wholly owned mortgage banking subsidiary
of M&T Bank that was
incorporated as a New York business corporation in November
1991. M&T Mortgage was
merged into M&T Bank
effective January 1, 2007.
M&T Mortgages
principal activities were comprised of the origination of
residential mortgage loans and providing residential mortgage
loan servicing to M&T
Bank, M&T Bank, N.A.
and others. M&T
Mortgage operated throughout New York State, Maryland and
Pennsylvania, and maintained offices in 19 other states.
M&T Mortgage had assets
of $2.8 billion and stockholders equity of
$388 million as of December 31, 2006, and recorded
approximately $347 million of revenue during 2006. Mortgage
loans serviced by M&T
Mortgage for non-affiliates totaled $16.7 billion at
December 31, 2006.
M&T Mortgage
Reinsurance Company, Inc.
(M&T
Reinsurance), a wholly owned subsidiary of
M&T Bank, was
incorporated as a Vermont business corporation in July 1999.
M&T Reinsurance enters
into reinsurance contracts with insurance companies who insure
against the risk of a mortgage borrowers payment default
in connection with M&T
Mortgage-related mortgage loans.
M&T Reinsurance
receives a share of the premium for those policies in exchange
for accepting a portion of the insurers risk of borrower
default. M&T
Reinsurance had assets of approximately $21 million and
stockholders equity of approximately $20 million as
of December 31, 2006, and recorded approximately
$4 million of revenue during 2006.
M&T Reinsurances
principal and registered office is at 148 College Street,
Burlington, Vermont 05401.
M&T Real Estate Trust
(M&T Real
Estate) is a Maryland Real Estate Investment Trust and is
a subsidiary of M&T
Investment. M&T Real
Estate was formed through the merger of two separate
subsidiaries, but traces its origin to
M&T Real Estate, Inc.,
a New York business corporation incorporated in July 1995.
M&T Real Estate engages
in commercial real estate lending and provides loan servicing to
M&T Bank. As of
December 31, 2006,
M&T Real Estate had
assets of $13.5 billion, common stockholders equity
of $13.2 billion, and preferred stockholders equity,
consisting of 9% fixed-rate preferred stock (par value $1,000),
of $1 million. All of the outstanding common stock and 88%
of the preferred stock of
M&T Real Estate is
owned by M&T
Investment. The remaining 12% of
M&T Real Estates
outstanding preferred stock is owned by officers or former
officers of the Company.
M&T Real Estate
recorded $864 million of revenue in 2006. The headquarters
of M&T Real Estate are
located at M&T Center,
One Fountain Plaza, Buffalo, New York 14203.
M&T Realty Capital
Corporation (M&T
Realty Capital), a wholly owned subsidiary of
M&T Bank, was
incorporated as a Maryland corporation in October 1973.
M&T Realty Capital
engages in multi-family commercial real estate lending and
provides loan servicing to purchasers of the loans it
originates. As of December 31, 2006
M&T Realty Capital
serviced $4.9 billion of commercial mortgage loans for
non-affiliates and had assets of $111 million and
stockholders equity of $37 million.
M&T Realty Capital
recorded revenues of $35 million in 2006. The headquarters
of M&T Realty Capital
are located at 25 South Charles Street, Baltimore, Maryland
21202.
M&T Securities, Inc.
(M&T
Securities) is a wholly owned subsidiary of
M&T Bank that was
incorporated as a New York business corporation in November
1985. M&T Securities is
registered as a broker/dealer under the Securities Exchange Act
of 1934, as amended, and as an investment advisor under the
Investment Advisors Act of 1940, as amended.
M&T Securities is
licensed as a life insurance agent in each state where
M&T Bank operates
branch offices and in a number of other states. It provides
securities brokerage, investment advisory and insurance
services. As of December 31, 2006,
M&T
10
Securities had assets of $43 million and stockholders
equity of $28 million.
M&T Securities recorded
$83 million of revenue during 2006. The headquarters of
M&T Securities are
located at One M&T
Plaza, Buffalo, New York 14203.
M&T Insurance Agency,
Inc. (M&T
Insurance Agency), a wholly owned insurance agency
subsidiary of M&T Bank,
was incorporated as a New York corporation in March 1955.
M&T Insurance Agency
provides insurance agency services principally to the commercial
market. As of December 31, 2006,
M&T Insurance Agency
had assets of $28 million and stockholders equity of
$22 million.
M&T Insurance
Agency recorded revenues of $10 million during 2006. The
headquarters of M&T
Insurance Agency are located at 334 Delaware Avenue, Buffalo,
New York 14202. On February 1, 2006,
M&T Insurance
Agency acquired Hess Egan Hagerty & LHommedieu,
Inc. (Hess Egan), a commercial insurance and surety
brokerage agency based in Chevy Chase, Maryland with additional
offices in Pennsylvania and New Jersey. As of December 31,
2006, Hess Egan had assets of $26 million,
stockholders equity of $13 million, and recorded
revenues of $8 million during the eleven months ended
December 31, 2006. Hess Egan was merged into
M&T Insurance Agency
effective January 1, 2007.
M&T Auto
Receivables I, LLC
(M&T Auto
Receivables), a wholly owned subsidiary of
M&T Bank, was
formed as a Delaware limited liability company in May 2002.
M&T Auto Receivables is
a special purpose entity whose activities are generally
restricted to purchasing and owning automobile loans for the
purpose of securing a revolving asset-backed structured
borrowing. M&T Auto
Receivables had assets of $565 million and
stockholders equity of $64 million as of
December 31, 2006, and recorded approximately
$32 million of revenue during 2006.
M&T Auto
Receivables registered office is at 1209 Orange
Street, Wilmington, Delaware 19801.
MTB Investment Advisors, Inc. (MTB Investment
Advisors), a wholly owned subsidiary of
M&T Bank, was
incorporated as a Maryland corporation on June 30, 1995.
MTB Investment Advisors serves as investment advisor to the MTB
Group of Funds, a family of proprietary mutual funds, and
institutional clients. As of December 31, 2006, MTB
Investment Advisors had assets of $33 million and
stockholders equity of $29 million. MTB Investment
Advisors recorded revenues of $43 million in 2006. The
headquarters of MTB Investment Advisors are located at 100 East
Pratt Street, Baltimore, Maryland 21202.
The Registrant and its banking subsidiaries have a number of
other special-purpose or inactive subsidiaries. These other
subsidiaries did not represent, individually and collectively, a
significant portion of the Companys consolidated assets,
net income and stockholders equity at December 31,
2006.
Segment
Information, Principal Products/Services and Foreign
Operations
Information about the Registrants business segments is
included in note 21 of Notes to Financial Statements filed
herewith in Part II, Item 8, Financial
Statements and Supplementary Data and is further discussed
in Part II, Item 7, Managements Discussion
and Analysis of Financial Condition and Results of
Operations. The Registrants reportable segments have
been determined based upon its internal profitability reporting
system, which is organized by strategic business unit. 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
Companys international activities are discussed in
note 16 of Notes to Financial Statements filed herewith in
Part II, Item 8, Financial Statements and
Supplementary Data.
The only activities that, as a class, contributed 10% or more of
the sum of consolidated interest income and other income in any
of the last three years were lending transactions and service
charges on deposit accounts. The amount of income from such
sources during those years is set forth on the Companys
Consolidated Statement of Income filed herewith in Part II,
Item 8, Financial Statements and Supplementary
Data.
Supervision
and Regulation of the Company
The banking industry is subject to extensive state and federal
regulation and continues to undergo significant change. The
following discussion summarizes certain aspects of the banking
laws and
11
regulations that affect the Company. Proposals to change the
laws and regulations governing the banking industry are
frequently raised in Congress, in state legislatures, and before
the various bank regulatory agencies. The likelihood and timing
of any changes and the impact such changes might have on the
Company are impossible to determine with any certainty. A change
in applicable laws or regulations, or a change in the way such
laws or regulations are interpreted by regulatory agencies or
courts, may have a material impact on the business, operations
and earnings of the Company. To the extent that the following
information describes statutory or regulatory provisions, it is
qualified entirely by reference to the particular statutory or
regulatory provision.
Financial
Services Modernization
The Gramm-Leach-Bliley Act of 1999 (Gramm-Leach)
enables combinations among banks, securities firms and insurance
companies. Under Gramm-Leach, bank holding companies are
permitted to offer their customers virtually any type of
financial service that is financial in nature or incidental
thereto, including banking, securities underwriting, insurance
(both underwriting and agency), and merchant banking.
In order to engage in these financial activities, a bank holding
company must qualify and register with the Federal Reserve Board
as a financial holding company by demonstrating that
each of its bank subsidiaries is well capitalized,
well managed, and has at least a
satisfactory rating under the Community Reinvestment
Act of 1977 (CRA).
M&T currently satisfies
the qualifications for registering as a financial holding
company, but has not elected to do so to date. For as long as
AIB owns at least 15% of
M&Ts outstanding
common stock, M&T may
not become a financial holding company without the approval of
the Executive Committee of the
M&T board of directors,
which must also include the affirmative approval of the AIB
Designee on such committee, as described above under the caption
Amendments to
M&Ts Bylaws.
The financial activities authorized by Gramm-Leach may also be
engaged in by a financial subsidiary of a national
or state bank, except for insurance or annuity underwriting,
insurance company portfolio investments, real estate investment
and development, and merchant banking, which must be conducted
in a financial holding company. In order for these financial
activities to be engaged in by a financial subsidiary of a
national or state bank, Gramm-Leach requires each of the parent
bank (and its sister-bank affiliates) to be well capitalized and
well managed; the aggregate consolidated assets of all of that
banks financial subsidiaries may not exceed the lesser of
45% of its consolidated total assets or $50 billion; the
bank must have at least a satisfactory CRA rating; and, if that
bank is one of the 100 largest national banks, it must meet
certain financial rating or other comparable requirements.
M&T Bank and
M&T Bank, N.A.
currently satisfy the qualifications for engaging in financial
activities through financial subsidiaries, but neither has
elected to do so to date. Gramm-Leach also establishes a system
of functional regulation under which the federal banking
agencies will regulate the banking activities of financial
holding companies and banks financial subsidiaries, the
U.S. Securities and Exchange Commission will regulate their
securities activities, and state insurance regulators will
regulate their insurance activities. Rules developed by the
federal financial institutions regulators under Gramm-Leach
require disclosure of privacy policies to consumers and, in some
circumstances, allow consumers to prevent the disclosure of
certain personal information to nonaffiliated third parties. The
foregoing discussion is qualified in its entirety by reference
to the statutory provisions of Gramm-Leach and the implementing
regulations which have been adopted by various government
agencies pursuant to
Gramm-Leach.
Bank
Holding Company Regulation
As a registered bank holding company, the Registrant and its
nonbank subsidiaries are subject to supervision and regulation
under the BHCA by the Federal Reserve Board and under the
Banking Law by the Banking Superintendent. The Federal Reserve
Board requires regular reports from the Registrant and is
authorized by the BHCA to make regular examinations of the
Registrant and its subsidiaries.
The Registrant may not acquire direct or indirect ownership or
control of more than 5% of the voting shares of any company,
including a bank, without the prior approval of the Federal
Reserve Board, except as specifically authorized under the BHCA.
The Registrant is also subject to regulation under the
12
Banking Law with respect to certain acquisitions of domestic
banks. Under the BHCA, the Registrant, subject to the approval
of the Federal Reserve Board, may acquire shares of non-banking
corporations the activities of which are deemed by the Federal
Reserve Board to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
The Federal Reserve Board has enforcement powers over bank
holding companies and their non-banking subsidiaries, among
other things, to interdict activities that represent unsafe or
unsound practices or constitute violations of law, rule,
regulation, administrative orders or written agreements with a
federal bank regulator. These powers may be exercised through
the issuance of
cease-and-desist
orders, civil money penalties or other actions.
Under the Federal Reserve Boards statement of policy with
respect to bank holding company operations, a bank holding
company is required to serve as a source of financial strength
to its subsidiary depository institutions and to commit all
available resources to support such institutions in
circumstances where it might not do so absent such policy.
Although this source of strength policy has been
challenged in litigation, the Federal Reserve Board continues to
take the position that it has authority to enforce it. For a
discussion of circumstances under which a bank holding company
may be required to guarantee the capital levels or performance
of its subsidiary banks, see Capital Adequacy,
below. Consistent with this source of strength
policy, the Federal Reserve Board takes the position that a bank
holding company generally should not maintain a rate of cash
dividends unless its net income available to common shareholders
has been sufficient to fully fund the dividends and the
prospective rate of earnings retention appears to be consistent
with the companys capital needs, asset quality and overall
financial condition. The Federal Reserve also has the authority
to terminate any activity of a bank holding company that
constitutes a serious risk to the financial soundness or
stability of any subsidiary depository institution or to
terminate its control of any bank or nonbank subsidiaries.
The Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, as amended (the Interstate Banking
Act) generally permits bank holding companies to acquire
banks in any state, and preempts all state laws restricting the
ownership by a bank holding company of banks in more than one
state. The Interstate Banking Act also permits a bank to merge
with an
out-of-state
bank and convert any offices into branches of the resulting bank
if both states have not opted out of interstate branching;
permits a bank to acquire branches from an
out-of-state
bank if the law of the state where the branches are located
permits the interstate branch acquisition; and permits banks to
establish and operate de novo interstate branches whenever the
host state opts-in to de novo branching. Bank holding companies
and banks seeking to engage in transactions authorized by the
Interstate Banking Act must be adequately capitalized and
managed.
The Banking Law authorizes interstate branching by merger or
acquisition on a reciprocal basis, and permits the acquisition
of a single branch without restriction, but does not provide for
de novo interstate branching.
Bank holding companies and their subsidiary banks are also
subject to the provisions of the CRA. Under the terms of the
CRA, the Federal Reserve Board (or other appropriate bank
regulatory agency) is required, in connection with its
examination of a bank, to assess such banks record in
meeting the credit needs of the communities served by that bank,
including low- and moderate-income neighborhoods. During these
examinations, the Federal Reserve Board (or other appropriate
bank regulatory agency) rates such banks compliance with
the CRA as Outstanding, Satisfactory,
Needs to Improve or Substantial
Noncompliance. The failure of a bank to receive at least a
Satisfactory rating could inhibit such bank or its
bank holding company from undertaking certain activities,
including acquisitions of other financial institutions or
opening or relocating a branch office, as further discussed
below. M&T Bank
has a CRA rating of Outstanding and
M&T Bank, N.A. has
a CRA rating of Satisfactory. Furthermore, such
assessment is also required of any bank that has applied, among
other things, to merge or consolidate with or acquire the assets
or assume the liabilities of a federally-regulated financial
institution, or to open or relocate a branch office. In the case
of a bank holding company applying for approval to acquire a
bank or bank holding company, the Federal Reserve Board will
assess the record of each subsidiary bank of the applicant bank
holding company in considering the application. The Banking Law
contains provisions similar to the CRA which are applicable to
New York-chartered banks.
M&T Bank has a CRA
rating of Outstanding as determined by the New York
State Banking Department.
13
Supervision
and Regulation of Bank Subsidiaries
The Registrants bank subsidiaries are subject to
supervision and regulation, and are examined regularly, by
various bank regulatory agencies:
M&T Bank by the
Federal Reserve Board and the Banking Superintendent; and
M&T Bank, N.A. by
the Comptroller of the Currency (OCC). The
Registrant and its direct non-banking subsidiaries are
affiliates, within the meaning of the Federal Reserve Act, of
the Registrants subsidiary banks and their subsidiaries.
As a result, the Registrants subsidiary banks and their
subsidiaries are subject to restrictions on loans or extensions
of credit to, purchases of assets from, investments in, and
transactions with the Registrant and its direct non-banking
subsidiaries and on certain other transactions with them or
involving their securities. Gramm-Leach places similar
restrictions on the Registrants subsidiary banks making
loans or extending credit to, purchasing assets from, investing
in, or entering into transactions with, their financial
subsidiaries.
Under the cross-guarantee provisions of the FDI Act,
insured depository institutions under common control are
required to reimburse the FDIC for any loss suffered by the DIF
of the FDIC as a result of the default of a commonly controlled
insured depository institution or for any assistance provided by
the FDIC to a commonly controlled insured depository institution
in danger of default. Thus, any insured depository institution
subsidiary of M&T could
incur liability to the FDIC in the event of a default of another
insured depository institution owned or controlled by
M&T. The FDICs
claim under the cross-guarantee provisions is superior to claims
of stockholders of the insured depository institution or its
holding company and to most claims arising out of obligations or
liabilities owed to affiliates of the institution, but is
subordinate to claims of depositors, secured creditors and
holders of subordinated debt (other than affiliates) of the
commonly controlled insured depository institution. The FDIC may
decline to enforce the cross-guarantee provisions if it
determines that a waiver is in the best interest of the DIF.
Dividends
from Bank Subsidiaries
The Registrant is a legal entity separate and distinct from its
banking and other subsidiaries. The majority of the
Registrants revenue is from dividends paid to the
Registrant by its subsidiary banks.
M&T Bank and
M&T Bank, N.A. are
subject, under one or more of the banking laws, to restrictions
on the amount and frequency (no more often than quarterly) of
dividend declarations. Future dividend payments to the
Registrant by its subsidiary banks will be dependent on a number
of factors, including the earnings and financial condition of
each such bank, and are subject to the limitations referred to
in note 22 of Notes to Financial Statements filed herewith
in Part II, Item 8, Financial Statements and
Supplementary Data, and to other statutory powers of bank
regulatory agencies.
An insured depository institution is prohibited from making any
capital distribution to its owner, including any dividend, if,
after making such distribution, the depository institution fails
to meet the required minimum level for any relevant capital
measure, including the risk-based capital adequacy and leverage
standards discussed herein.
Supervision
and Regulation of
M&T Banks
Subsidiaries
M&T Bank has a
number of subsidiaries. These subsidiaries are subject to the
laws and regulations of both the federal government and the
various states in which they conduct business. For example,
M&T Securities is
regulated by the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc. and state
securities regulators.
Capital
Adequacy
The Federal Reserve Board, the FDIC and the OCC have adopted
risk-based capital adequacy guidelines for bank holding
companies and banks under their supervision. Under these
guidelines, the so-called Tier 1 capital and
Total capital as a percentage of risk-weighted
assets and certain off-balance sheet instruments must be at
least 4% and 8%, respectively.
The Federal Reserve Board, the FDIC and the OCC have also
imposed a leverage standard to supplement their risk-based
ratios. This leverage standard focuses on a banking
institutions ratio of Tier 1 capital to average total
assets, adjusted for goodwill and certain other items. Under
these guidelines, banking institutions that meet certain
criteria, including excellent asset quality, high liquidity, low
interest
14
rate exposure and good earnings, and that have received the
highest regulatory rating must maintain a ratio of Tier 1
capital to total adjusted average assets of at least 3%.
Institutions not meeting these criteria, as well as institutions
with supervisory, financial or operational weaknesses, along
with those experiencing or anticipating significant growth are
expected to maintain a Tier 1 capital to total adjusted
average assets ratio equal to at least 4% to 5%. As reflected in
the table in note 22 of Notes to Financial Statements filed
herewith in Part II, Item 8, Financial
Statements and Supplementary Data, the risk-based capital
ratios and leverage ratios of the Registrant,
M&T Bank and
M&T Bank, N.A. as
of December 31, 2006 exceeded the required capital ratios
for classification as well capitalized, the highest
classification under the regulatory capital guidelines.
The federal banking agencies, including the Federal Reserve
Board and the OCC, maintain risk-based capital standards in
order to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk, the risk of
nontraditional activities and equity investments in nonfinancial
companies, as well as reflect the actual performance and
expected risk of loss on certain multifamily housing loans. Bank
regulators periodically propose amendments to the risk-based
capital guidelines and related regulatory framework, and
consider changes to the risk-based capital standards that could
significantly increase the amount of capital needed to meet the
requirements for the capital tiers described below. While the
Companys management studies such proposals, the timing of
adoption, ultimate form and effect of any such proposed
amendments on
M&Ts capital
requirements and operations cannot be predicted.
The federal banking agencies are required to take prompt
corrective action in respect of depository institutions
and their bank holding companies that do not meet minimum
capital requirements. The Federal Deposit Insurance Corporation
Improvement Act established five capital tiers: well
capitalized, adequately capitalized,
undercapitalized, significantly
undercapitalized and critically
undercapitalized. A depository institutions capital
tier, or that of its bank holding company, depends upon where
its capital levels are in relation to various relevant capital
measures, including a risk-based capital measure and a leverage
ratio capital measure, and certain other factors.
Under the implementing regulations adopted by the federal
banking agencies, a bank holding company or bank is considered
well capitalized if it has (i) a total
risk-based capital ratio of 10% or greater, (ii) a
Tier 1 risk-based capital ratio of 6% or greater,
(iii) a leverage ratio of 5% or greater and (iv) is
not subject to any order or written directive to meet and
maintain a specific capital level for any capital measure. An
adequately capitalized bank holding company or bank
is defined as one that has (i) a total risk-based capital
ratio of 8% or greater, (ii) a Tier 1 risk-based
capital ratio of 4% or greater and (iii) a leverage ratio
of 4% or greater (or 3% or greater in the case of a bank with a
composite CAMELS rating of 1). A bank holding company or bank is
considered (A) undercapitalized if it has
(i) a total risk-based capital ratio of less than 8%,
(ii) a Tier 1 risk-based capital ratio of less than 4%
or (iii) a leverage ratio of less than 4% (or 3% in the
case of a bank with a composite CAMELS rating of 1);
(B) significantly undercapitalized if the bank
has (i) a total risk-based capital ratio of less than 6%,
or (ii) a Tier 1 risk-based capital ratio of less than
3% or (iii) a leverage ratio of less than 3% and
(C) critically undercapitalized if the bank has
a ratio of tangible equity to total assets equal to or less than
2%. The Federal Reserve Board may reclassify a well
capitalized bank holding company or bank as
adequately capitalized or subject an
adequately capitalized or
undercapitalized institution to the supervisory
actions applicable to the next lower capital category if it
determines that the bank holding company or bank is in an unsafe
or unsound condition or deems the bank holding company or bank
to be engaged in an unsafe or unsound practice and not to have
corrected the deficiency.
M&T,
M&T Bank and
M&T Bank, N.A.
currently meet the definition of well capitalized
institutions.
Undercapitalized depository institutions, among
other things, are subject to growth limitations, are prohibited,
with certain exceptions, from making capital distributions, are
limited in their ability to obtain funding from a Federal
Reserve Bank and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan
without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring
the depository institutions capital. In addition, for a
capital restoration plan to be acceptable, the depository
institutions parent holding company must guarantee that
the institution will comply with such capital restoration plan
and provide appropriate assurances of performance. If a
depository institution fails to submit an acceptable
15
plan, including if the holding company refuses or is unable to
make the guarantee described in the previous sentence, it is
treated as if it is significantly undercapitalized.
Failure to submit or implement an acceptable capital plan also
is grounds for the appointment of a conservator or a receiver.
Significantly undercapitalized depository
institutions may be subject to a number of additional
requirements and restrictions, including orders to sell
sufficient voting stock to become adequately
capitalized, requirements to reduce total assets and
cessation of receipt of deposits from correspondent banks.
Moreover, the parent holding company of a significantly
undercapitalized depository institution may be ordered to
divest itself of the institution or of nonbank subsidiaries of
the holding company. Critically undercapitalized
institutions, among other things, are prohibited from making any
payments of principal and interest on subordinated debt, and are
subject to the appointment of a receiver or conservator.
Each federal banking agency prescribes standards for depository
institutions and depository institution holding companies
relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest
rate exposure, asset growth, compensation, a maximum ratio of
classified assets to capital, minimum earnings sufficient to
absorb losses, a minimum ratio of market value to book value for
publicly traded shares and other standards as they deem
appropriate. The Federal Reserve Board and OCC have adopted such
standards.
Depository institutions that are not well
capitalized or adequately capitalized and have
not received a waiver from the FDIC are prohibited from
accepting or renewing brokered deposits. As of December 31,
2006, M&T Bank had
approximately $2.8 billion of brokered deposits, while
M&T Bank, N.A. did
not have any brokered deposits at that date.
Although M&T has issued
shares of common stock in connection with acquisitions or at
other times, the Company has generally maintained capital ratios
in excess of minimum regulatory guidelines largely through
internal capital generation (i.e. net income less dividends
paid). Historically,
M&Ts dividend
payout ratio and dividend yield, when compared with other bank
holding companies, has been relatively low, thereby allowing for
capital retention to support growth or to facilitate purchases
of M&Ts common
stock to be held as treasury stock. Managements policy of
reinvestment of earnings and repurchase of shares of common
stock is intended to enhance
M&Ts earnings per
share prospects and thereby reward stockholders over time with
capital gains in the form of increased stock price rather than
high dividend income.
FDIC
Deposit Insurance Assessments
In February 2006, The Federal Deposit Insurance Reform Act of
2005 and The Federal Deposit Insurance Reform Conforming
Amendments Act of 2005 (collectively the Reform Act)
were signed into law. The Reform Act provided for the merging of
the Bank Insurance Fund and Savings Association Insurance Fund
into the new DIF, effective March 31, 2006.
As institutions with deposits insured by the DIF,
M&T Bank and
M&T Bank, N.A. are
subject to FDIC deposit insurance assessments. Under the
provisions of the Reform Act, the regular insurance assessments
to be paid by insured institutions are specified in schedules
issued by the FDIC that specify a target reserve ratio designed
to maintain the reserve ratio of between 1.15% and 1.50% of
estimated insured deposits.
Under the Reform Act, the FDIC has modified its risk-based
deposit premium assessment system under which each depository
institution is placed in one of four assessment categories based
on the institutions capital classification under the
prompt corrective action provisions described above, and an
institutions long-term debt issuer ratings. Effective
January 1, 2007, the adjusted assessment rates for insured
institutions under the modified system range from .05% to .43%
depending upon the assessment category into which the insured
institution is placed. Under the previous assessment system, the
adjusted assessment rates ranged from .00% to .27%. Neither of
the Companys bank subsidiaries paid regular insurance
assessments to the FDIC in 2006.
The Reform Act provides for a one-time assessment credit for
eligible insured depository institutions (those institutions
that were in existence on December 31, 1996 and paid a
deposit insurance assessment prior to that date, or are a
successor to any such institution). The credit is determined
based on the assessment base of the institution as of
December 31, 1996 as compared with the combined
16
aggregate assessment base of all
eligible institutions as of that date. The credit may be used to
offset up to 100% of the 2007 DIF assessment, and if not
completely used in 2007, may be applied to not more than 90% of
each of the aggregate 2008, 2009 and 2010 DIF assessments.
In addition to insurance fund assessments, beginning in 1997 the
FDIC assessed deposits to fund the repayment of debt obligations
of the Financing Corporation (FICO). FICO is a
government agency-sponsored entity that was formed to borrow the
money necessary to carry out the closing and ultimate
disposition of failed thrift institutions by the Resolution
Trust Corporation. The current annualized rate established by
the FDIC is 1.22 basis points (hundredths of one percent).
The insurance assessments under the Reform Act are not expected
to have a significant adverse impact on the results of
operations and capital of
M&T Bank or
M&T Bank, N.A. in
2007 or 2008. However, any significant increases in assessment
rates or additional special assessments by the FDIC could have
an adverse impact on the results of operations and capital of
M&T Bank or
M&T Bank, N.A.
Consumer
Protection Laws
In connection with their respective lending and leasing
activities,
M&T Bank, certain
of its subsidiaries, and
M&T Bank, N.A. are
each subject to a number of federal and state laws designed to
protect borrowers and promote lending to various sectors of the
economy population. These laws include the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Fair and
Accurate Credit Transactions Act, the Truth in Lending Act, the
Home Mortgage Disclosure Act, and the Real Estate Settlement
Procedures Act, and various state law counterparts.
In addition, federal law currently contains extensive customer
privacy protection provisions. Under these provisions, a
financial institution must provide to its customers, at the
inception of the customer relationship and annually thereafter,
the institutions policies and procedures regarding the
handling of customers nonpublic personal financial
information. These provisions also provide that, except for
certain limited exceptions, a financial institution may not
provide such personal information to unaffiliated third parties
unless the institution discloses to the customer that such
information may be so provided and the customer is given the
opportunity to opt out of such disclosure. Federal law makes it
a criminal offense, except in limited circumstances, to obtain
or attempt to obtain customer information of a financial nature
by fraudulent or deceptive means.
Sarbanes-Oxley
Act of 2002
The Sarbanes-Oxley Act of 2002 implemented a broad range of
corporate governance, accounting and reporting measures for
companies that have securities registered under the Exchange
Act, including publicly-held bank holding companies such as
M&T. Specifically, the
Sarbanes-Oxley Act of 2002 and the various regulations
promulgated thereunder, established, among other things:
(i) new requirements for audit committees, including
independence, expertise, and responsibilities;
(ii) additional responsibilities regarding financial
statements for the Chief Executive Officer and Chief Financial
Officer of the reporting company; (iii) the forfeiture of
bonuses or other incentive-based compensation and profits from
the sale of the reporting companys securities by the Chief
Executive Officer and Chief Financial Officer in the
twelve-month period following the initial publication of any
financial statements that later require restatement;
(iv) the creation of an independent accounting oversight
board; (v) new standards for auditors and regulation of
audits, including independence provisions that restrict
non-audit services that accountants may provide to their audit
clients; (vi) increased disclosure and reporting
obligations for the reporting company and their directors and
executive officers, including accelerated reporting of stock
transactions and a prohibition on trading during pension
blackout periods; (vii) a prohibition on personal loans to
directors and officers, except certain loans made by insured
financial institutions on nonpreferential terms and in
compliance with other bank regulatory requirements; and
(viii) a range of new and increased civil and criminal
penalties for fraud and other violations of the securities laws.
USA
Patriot Act
The Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001
(the USA Patriot Act) imposes additional obligations
on U.S. financial institutions, including banks and broker
dealer subsidiaries, to implement policies, procedures and
17
controls which are reasonably designed to detect and report
instances of money laundering and the financing of terrorism. In
addition, provisions of the USA Patriot Act require the federal
financial institution regulatory agencies to consider the
effectiveness of a financial institutions anti-money
laundering activities when reviewing bank mergers and bank
holding company acquisitions. The Registrant and its impacted
subsidiaries have approved policies and procedures that are
believed to be compliant with the USA Patriot Act.
Regulatory
Impact of
M&Ts
Relationship With AIB
As described above under the caption Relationship With
Allied Irish Banks, p.l.c., AIB owns approximately 24.2%
of the issued and outstanding shares of
M&T common stock and
has representation on the
M&T and
M&T Bank boards of
directors. As a result, AIB has become
M&Ts bank holding
company under the BHCA and the Banking Law and AIBs
relationship with M&T
is subject to the statutes and regulations governing bank
holding companies described above. Among other things, AIB will
have to join M&T in
applications by M&T for
acquisitions and new activities. The Reorganization Agreement
requires AIB to join in such applications at
M&Ts request,
subject to certain limitations. In addition, because AIB is
regulated by the Central Bank of Ireland (the CBI),
the CBI may assert jurisdiction over
M&T as a company
controlled by AIB. Additional discussion of the regulatory
implications of the Allfirst acquisition for
M&T is set forth above
under the caption Certain Post-Closing Bank Regulatory
Matters.
Governmental
Policies
The earnings of the Company are significantly affected by the
monetary and fiscal policies of governmental authorities,
including the Federal Reserve Board. Among the instruments of
monetary policy used by the Federal Reserve Board to implement
these objectives are open-market operations in
U.S. Government securities and federal funds, changes in
the discount rate on member bank borrowings and changes in
reserve requirements against member bank deposits. These
instruments of monetary policy are used in varying combinations
to influence the overall level of bank loans, investments and
deposits, and the interest rates charged on loans and paid for
deposits. The Federal Reserve Board frequently uses these
instruments of monetary policy, especially its open-market
operations and the discount rate, to influence the level of
interest rates and to affect the strength of the economy, the
level of inflation or the price of the dollar in foreign
exchange markets. The monetary policies of the Federal Reserve
Board have had a significant effect on the operating results of
banking institutions in the past and are expected to continue to
do so in the future. It is not possible to predict the nature of
future changes in monetary and fiscal policies, or the effect
which they may have on the Companys business and earnings.
Competition
The Company competes in offering commercial and personal
financial services with other banking institutions and with
firms in a number of other industries, such as thrift
institutions, credit unions, personal loan companies, sales
finance companies, leasing companies, securities firms and
insurance companies. Furthermore, diversified financial services
companies are able to offer a combination of these services to
their customers on a nationwide basis. The Companys
operations are significantly impacted by state and federal
regulations applicable to the banking industry. Moreover, the
provisions of Gramm-Leach have allowed for increased competition
among diversified financial services providers, and the
Interstate Banking Act and the Banking Law may be considered to
have eased entry into New York State by
out-of-state
banking institutions. As a result, the number of financial
services providers and banking institutions with which the
Company competes may grow in the future.
Other
Legislative Initiatives
Proposals may be introduced in the United States Congress and in
the New York State Legislature and before various bank
regulatory authorities which would alter the powers of, and
restrictions on, different types of banking organizations and
which would restructure part or all of the existing regulatory
framework for banks, bank holding companies and other providers
of financial services. Moreover, other bills may be introduced
in Congress which would further regulate, deregulate or
restructure the financial
18
services industry. It is not possible to predict whether these
or any other proposals will be enacted into law or, even if
enacted, the effect which they may have on the Companys
business and earnings.
Other
Information
Through a link on the Investor Relations section of
M&Ts website at
www.mandtbank.com, copies of
M&Ts Annual
Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, are made
available, free of charge, as soon as reasonably practicable
after electronically filing such material with, or furnishing it
to, the Securities and Exchange Commission. Copies of such
reports and other information are also available at no charge to
any person who requests them or at www.sec.gov. Such requests
may be directed to
M&T Bank
Corporation, Shareholder Relations Department, One
M&T Plaza,
13th Floor, Buffalo, NY
14203-2399
(Telephone:
(716) 842-5445).
Corporate
Governance
M&Ts Corporate
Governance Standards and the following corporate governance
documents are also available on
M&Ts website at
the Investor Relations link: Disclosure Policy; Executive
Committee Charter; Nomination, Compensation and Governance
Committee Charter; Audit Committee Charter; Financial Reporting
and Disclosure Controls and Procedures Policy; Code of Ethics
for CEO and Senior Financial Officers; Code of Business Conduct
and Ethics; and Employee Complaint Procedures for Accounting and
Auditing Matters. Copies of such governance documents are also
available, free of charge, to any person who requests them. Such
requests may be directed to
M&T Bank
Corporation, Shareholder Relations Department, One
M&T Plaza,
13th Floor, Buffalo, NY
14203-2399
(Telephone:
(716) 842-5445).
19
Statistical
Disclosure Pursuant to Guide 3
See cross-reference sheet for disclosures incorporated elsewhere
in this Annual Report on
Form 10-K.
Additional information is included in the following tables.
Table
1
SELECTED
CONSOLIDATED YEAR-END BALANCES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands)
|
|
|
Interest-bearing deposits at banks
|
|
$
|
6,639
|
|
|
$
|
8,408
|
|
|
$
|
10,242
|
|
|
$
|
13,194
|
|
|
$
|
7,856
|
|
Federal funds sold
|
|
|
19,458
|
|
|
|
11,220
|
|
|
|
28,150
|
|
|
|
21,220
|
|
|
|
9,290
|
|
Resell agreements
|
|
|
100,000
|
|
|
|
|
|
|
|
1,026
|
|
|
|
1,068
|
|
|
|
311,069
|
|
Trading account
|
|
|
136,752
|
|
|
|
191,617
|
|
|
|
159,946
|
|
|
|
214,833
|
|
|
|
51,628
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
|
2,381,584
|
|
|
|
3,016,374
|
|
|
|
3,965,110
|
|
|
|
3,398,547
|
|
|
|
1,209,180
|
|
Obligations of states and
political subdivisions
|
|
|
130,207
|
|
|
|
181,938
|
|
|
|
204,792
|
|
|
|
249,193
|
|
|
|
256,023
|
|
Other
|
|
|
4,739,807
|
|
|
|
5,201,852
|
|
|
|
4,304,717
|
|
|
|
3,611,410
|
|
|
|
2,489,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
7,251,598
|
|
|
|
8,400,164
|
|
|
|
8,474,619
|
|
|
|
7,259,150
|
|
|
|
3,955,150
|
|
Loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, leasing,
etc.
|
|
|
11,896,556
|
|
|
|
11,105,827
|
|
|
|
10,169,695
|
|
|
|
9,406,399
|
|
|
|
5,399,738
|
|
Real estate
construction
|
|
|
3,453,981
|
|
|
|
2,335,498
|
|
|
|
1,797,106
|
|
|
|
1,537,880
|
|
|
|
1,001,553
|
|
Real estate mortgage
|
|
|
17,940,083
|
|
|
|
16,636,557
|
|
|
|
15,538,227
|
|
|
|
13,932,731
|
|
|
|
12,010,464
|
|
Consumer
|
|
|
9,916,334
|
|
|
|
10,475,809
|
|
|
|
11,139,594
|
|
|
|
11,160,588
|
|
|
|
7,525,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
43,206,954
|
|
|
|
40,553,691
|
|
|
|
38,644,622
|
|
|
|
36,037,598
|
|
|
|
25,936,942
|
|
Unearned discount
|
|
|
(259,657
|
)
|
|
|
(223,046
|
)
|
|
|
(246,145
|
)
|
|
|
(265,163
|
)
|
|
|
(209,158
|
)
|
Allowance for credit losses
|
|
|
(649,948
|
)
|
|
|
(637,663
|
)
|
|
|
(626,864
|
)
|
|
|
(614,058
|
)
|
|
|
(436,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, net
|
|
|
42,297,349
|
|
|
|
39,692,982
|
|
|
|
37,771,613
|
|
|
|
35,158,377
|
|
|
|
25,291,312
|
|
Goodwill
|
|
|
2,908,849
|
|
|
|
2,904,081
|
|
|
|
2,904,081
|
|
|
|
2,904,081
|
|
|
|
1,097,553
|
|
Core deposit and other intangible
assets
|
|
|
250,233
|
|
|
|
108,260
|
|
|
|
165,507
|
|
|
|
240,830
|
|
|
|
118,790
|
|
Real estate and other assets owned
|
|
|
12,141
|
|
|
|
9,486
|
|
|
|
12,504
|
|
|
|
19,629
|
|
|
|
17,380
|
|
Total assets
|
|
|
57,064,905
|
|
|
|
55,146,406
|
|
|
|
52,938,721
|
|
|
|
49,826,081
|
|
|
|
33,201,181
|
|
Noninterest-bearing deposits
|
|
|
7,879,977
|
|
|
|
8,141,928
|
|
|
|
8,417,365
|
|
|
|
8,411,296
|
|
|
|
4,072,085
|
|
NOW accounts
|
|
|
940,439
|
|
|
|
901,938
|
|
|
|
828,999
|
|
|
|
1,738,427
|
|
|
|
1,029,060
|
|
Savings deposits
|
|
|
14,169,790
|
|
|
|
13,839,150
|
|
|
|
14,721,663
|
|
|
|
14,118,521
|
|
|
|
9,156,678
|
|
Time deposits
|
|
|
11,490,629
|
|
|
|
11,407,626
|
|
|
|
7,228,514
|
|
|
|
6,637,249
|
|
|
|
6,246,384
|
|
Deposits at foreign office
|
|
|
5,429,668
|
|
|
|
2,809,532
|
|
|
|
4,232,932
|
|
|
|
2,209,451
|
|
|
|
1,160,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
39,910,503
|
|
|
|
37,100,174
|
|
|
|
35,429,473
|
|
|
|
33,114,944
|
|
|
|
21,664,923
|
|
Short-term borrowings
|
|
|
3,094,214
|
|
|
|
5,152,872
|
|
|
|
4,703,664
|
|
|
|
4,442,246
|
|
|
|
3,429,414
|
|
Long-term borrowings
|
|
|
6,890,741
|
|
|
|
6,196,994
|
|
|
|
6,348,559
|
|
|
|
5,535,425
|
|
|
|
4,497,374
|
|
Total liabilities
|
|
|
50,783,810
|
|
|
|
49,270,020
|
|
|
|
47,209,107
|
|
|
|
44,108,871
|
|
|
|
29,992,702
|
|
Stockholders equity
|
|
|
6,281,095
|
|
|
|
5,876,386
|
|
|
|
5,729,614
|
|
|
|
5,717,210
|
|
|
|
3,208,479
|
|
Table
2
STOCKHOLDERS,
EMPLOYEES AND OFFICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number at Year-End
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Stockholders
|
|
|
10,084
|
|
|
|
10,437
|
|
|
|
10,857
|
|
|
|
11,258
|
|
|
|
11,587
|
|
Employees
|
|
|
13,352
|
|
|
|
13,525
|
|
|
|
13,371
|
|
|
|
14,000
|
|
|
|
9,197
|
|
Offices
|
|
|
736
|
|
|
|
724
|
|
|
|
713
|
|
|
|
735
|
|
|
|
493
|
|
20
Table
3
CONSOLIDATED
EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands)
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, including fees
|
|
$
|
2,927,411
|
|
|
$
|
2,420,660
|
|
|
$
|
1,974,469
|
|
|
$
|
1,897,701
|
|
|
$
|
1,670,412
|
|
Deposits at banks
|
|
|
372
|
|
|
|
169
|
|
|
|
65
|
|
|
|
147
|
|
|
|
76
|
|
Federal funds sold
|
|
|
1,670
|
|
|
|
807
|
|
|
|
123
|
|
|
|
122
|
|
|
|
81
|
|
Resell agreements
|
|
|
3,927
|
|
|
|
1
|
|
|
|
11
|
|
|
|
1,753
|
|
|
|
4,374
|
|
Trading account
|
|
|
2,446
|
|
|
|
1,544
|
|
|
|
375
|
|
|
|
592
|
|
|
|
202
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully taxable
|
|
|
363,401
|
|
|
|
351,423
|
|
|
|
309,141
|
|
|
|
210,968
|
|
|
|
148,221
|
|
Exempt from federal taxes
|
|
|
14,866
|
|
|
|
14,090
|
|
|
|
14,548
|
|
|
|
15,282
|
|
|
|
18,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
3,314,093
|
|
|
|
2,788,694
|
|
|
|
2,298,732
|
|
|
|
2,126,565
|
|
|
|
1,842,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
|
3,461
|
|
|
|
2,182
|
|
|
|
1,802
|
|
|
|
3,613
|
|
|
|
3,900
|
|
Savings deposits
|
|
|
201,543
|
|
|
|
139,445
|
|
|
|
92,064
|
|
|
|
102,190
|
|
|
|
107,281
|
|
Time deposits
|
|
|
551,514
|
|
|
|
294,782
|
|
|
|
154,722
|
|
|
|
159,700
|
|
|
|
237,001
|
|
Deposits at foreign office
|
|
|
178,348
|
|
|
|
120,122
|
|
|
|
43,034
|
|
|
|
14,991
|
|
|
|
8,460
|
|
Short-term borrowings
|
|
|
227,850
|
|
|
|
157,853
|
|
|
|
71,172
|
|
|
|
49,064
|
|
|
|
52,723
|
|
Long-term borrowings
|
|
|
333,836
|
|
|
|
279,967
|
|
|
|
201,366
|
|
|
|
198,252
|
|
|
|
185,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
1,496,552
|
|
|
|
994,351
|
|
|
|
564,160
|
|
|
|
527,810
|
|
|
|
594,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
1,817,541
|
|
|
|
1,794,343
|
|
|
|
1,734,572
|
|
|
|
1,598,755
|
|
|
|
1,247,585
|
|
Provision for credit losses
|
|
|
80,000
|
|
|
|
88,000
|
|
|
|
95,000
|
|
|
|
131,000
|
|
|
|
122,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for credit losses
|
|
|
1,737,541
|
|
|
|
1,706,343
|
|
|
|
1,639,572
|
|
|
|
1,467,755
|
|
|
|
1,125,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking revenues
|
|
|
143,181
|
|
|
|
136,114
|
|
|
|
124,353
|
|
|
|
149,105
|
|
|
|
116,408
|
|
Service charges on deposit accounts
|
|
|
380,950
|
|
|
|
369,918
|
|
|
|
366,301
|
|
|
|
309,749
|
|
|
|
167,531
|
|
Trust income
|
|
|
140,781
|
|
|
|
134,679
|
|
|
|
136,296
|
|
|
|
114,620
|
|
|
|
60,030
|
|
Brokerage services income
|
|
|
60,295
|
|
|
|
55,572
|
|
|
|
53,740
|
|
|
|
51,184
|
|
|
|
43,261
|
|
Trading account and foreign
exchange gains
|
|
|
24,761
|
|
|
|
22,857
|
|
|
|
19,435
|
|
|
|
15,989
|
|
|
|
2,860
|
|
Gain (loss) on bank investment
securities
|
|
|
2,566
|
|
|
|
(28,133
|
)
|
|
|
2,874
|
|
|
|
2,487
|
|
|
|
(608
|
)
|
Other revenues from operations
|
|
|
293,318
|
|
|
|
258,711
|
|
|
|
239,970
|
|
|
|
187,961
|
|
|
|
122,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
1,045,852
|
|
|
|
949,718
|
|
|
|
942,969
|
|
|
|
831,095
|
|
|
|
511,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
873,353
|
|
|
|
822,239
|
|
|
|
806,552
|
|
|
|
740,324
|
|
|
|
496,990
|
|
Equipment and net occupancy
|
|
|
168,776
|
|
|
|
173,689
|
|
|
|
179,595
|
|
|
|
170,623
|
|
|
|
107,822
|
|
Printing, postage and supplies
|
|
|
33,956
|
|
|
|
33,743
|
|
|
|
34,476
|
|
|
|
36,985
|
|
|
|
25,378
|
|
Amortization of core deposit and
other intangible assets
|
|
|
63,008
|
|
|
|
56,805
|
|
|
|
75,410
|
|
|
|
78,152
|
|
|
|
51,484
|
|
Other costs of operations
|
|
|
412,658
|
|
|
|
398,666
|
|
|
|
419,985
|
|
|
|
422,096
|
|
|
|
279,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
1,551,751
|
|
|
|
1,485,142
|
|
|
|
1,516,018
|
|
|
|
1,448,180
|
|
|
|
961,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,231,642
|
|
|
|
1,170,919
|
|
|
|
1,066,523
|
|
|
|
850,670
|
|
|
|
675,905
|
|
Income taxes
|
|
|
392,453
|
|
|
|
388,736
|
|
|
|
344,002
|
|
|
|
276,728
|
|
|
|
219,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
|
$
|
573,942
|
|
|
$
|
456,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
Common
|
|
$
|
249,817
|
|
|
$
|
198,619
|
|
|
$
|
187,669
|
|
|
$
|
135,423
|
|
|
$
|
96,858
|
|
21
Table
4
COMMON
SHAREHOLDER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
7.55
|
|
|
$
|
6.88
|
|
|
$
|
6.14
|
|
|
$
|
5.08
|
|
|
$
|
4.94
|
|
Diluted
|
|
|
7.37
|
|
|
|
6.73
|
|
|
|
6.00
|
|
|
|
4.95
|
|
|
|
4.78
|
|
Cash dividends declared
|
|
|
2.25
|
|
|
|
1.75
|
|
|
|
1.60
|
|
|
|
1.20
|
|
|
|
1.05
|
|
Stockholders equity at
year-end
|
|
|
56.94
|
|
|
|
52.39
|
|
|
|
49.68
|
|
|
|
47.55
|
|
|
|
34.82
|
|
Tangible stockholders equity
at year-end
|
|
|
28.57
|
|
|
|
25.91
|
|
|
|
23.62
|
|
|
|
21.97
|
|
|
|
22.04
|
|
Dividend payout ratio
|
|
|
29.79
|
%
|
|
|
25.42
|
%
|
|
|
26.00
|
%
|
|
|
23.62
|
%
|
|
|
21.24
|
%
|
Table
5
CHANGES
IN INTEREST INCOME AND EXPENSE(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Compared with 2005
|
|
|
2005 Compared with 2004
|
|
|
|
Total
|
|
|
Resulting from Changes in:
|
|
|
Total
|
|
|
Resulting from Changes in:
|
|
|
|
Change
|
|
|
Volume
|
|
|
Rate
|
|
|
Change
|
|
|
Volume
|
|
|
Rate
|
|
|
|
(Increase (decrease) in thousands)
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, including fees
|
|
$
|
508,777
|
|
|
|
121,931
|
|
|
|
386,846
|
|
|
$
|
446,762
|
|
|
|
133,491
|
|
|
|
313,271
|
|
Deposits at banks
|
|
|
203
|
|
|
|
39
|
|
|
|
164
|
|
|
|
104
|
|
|
|
(15
|
)
|
|
|
119
|
|
Federal funds sold and agreements
to resell securities
|
|
|
4,789
|
|
|
|
3,495
|
|
|
|
1,294
|
|
|
|
674
|
|
|
|
392
|
|
|
|
282
|
|
Trading account
|
|
|
902
|
|
|
|
204
|
|
|
|
698
|
|
|
|
1,126
|
|
|
|
301
|
|
|
|
825
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
|
(12,859
|
)
|
|
|
(24,339
|
)
|
|
|
11,480
|
|
|
|
(24,425
|
)
|
|
|
(26,869
|
)
|
|
|
2,444
|
|
Obligations of states and
political subdivisions
|
|
|
(637
|
)
|
|
|
(1,479
|
)
|
|
|
842
|
|
|
|
(4,157
|
)
|
|
|
(2,415
|
)
|
|
|
(1,742
|
)
|
Other
|
|
|
26,580
|
|
|
|
8,545
|
|
|
|
18,035
|
|
|
|
69,859
|
|
|
|
56,376
|
|
|
|
13,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
527,755
|
|
|
|
|
|
|
|
|
|
|
$
|
489,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
1,279
|
|
|
|
216
|
|
|
|
1,063
|
|
|
$
|
380
|
|
|
|
(594
|
)
|
|
|
974
|
|
Savings deposits
|
|
|
62,098
|
|
|
|
(4,684
|
)
|
|
|
66,782
|
|
|
|
47,381
|
|
|
|
(2,601
|
)
|
|
|
49,982
|
|
Time deposits
|
|
|
256,732
|
|
|
|
124,211
|
|
|
|
132,521
|
|
|
|
140,060
|
|
|
|
58,514
|
|
|
|
81,546
|
|
Deposits at foreign office
|
|
|
58,226
|
|
|
|
(6,908
|
)
|
|
|
65,134
|
|
|
|
77,088
|
|
|
|
11,031
|
|
|
|
66,057
|
|
Short-term borrowings
|
|
|
69,997
|
|
|
|
(12,406
|
)
|
|
|
82,403
|
|
|
|
86,681
|
|
|
|
(3,668
|
)
|
|
|
90,349
|
|
Long-term borrowings
|
|
|
53,869
|
|
|
|
(18,229
|
)
|
|
|
72,098
|
|
|
|
78,601
|
|
|
|
21,319
|
|
|
|
57,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
502,201
|
|
|
|
|
|
|
|
|
|
|
$
|
430,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Interest income data are on a
taxable-equivalent basis. The apportionment of changes resulting
from the combined effect of both volume and rate was based on
the separately determined volume and rate changes. |
M&T and its
subsidiaries could be adversely impacted by various risks and
uncertainties which are difficult to predict. As a financial
institution, the Company has significant exposure to market
risk, including interest-rate risk, liquidity risk and credit
risk, among others. Adverse experience with these or other risks
could have a material impact on the Companys financial
condition and results of operations, as well as on the value of
the Companys financial instruments in general, and
M&Ts common
stock, in particular.
22
Interest Rate Risk The Company is exposed to
interest rate risk in its core banking activities of lending and
deposit-taking since assets and liabilities reprice at different
times and by different amounts as interest rates change. As a
result, net interest income, which represents the largest
revenue source for the Company, is subject to the effects of
changing interest rates. The Company closely monitors the
sensitivity of net interest income to changes in interest rates
and attempts to limit the variability of net interest income as
interest rates change. The Company makes use of both on- and
off-balance sheet financial instruments to mitigate exposure to
interest rate risk. Possible actions to mitigate such risk
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 adding to,
modifying or terminating interest rate swap agreements or other
financial instruments used for interest rate risk management
purposes.
Liquidity Risk Liquidity refers to the
Companys ability to ensure that sufficient cash flow and
liquid assets are available to satisfy current and future
financial obligations, including demands for loans and deposit
withdrawals, funding operating costs, and for other corporate
purposes. Liquidity risk arises whenever the maturities of
financial instruments included in assets and liabilities differ.
The Company obtains funding through deposits and various
short-term and long-term wholesale borrowings, including federal
funds purchased and securities sold under agreements to
repurchase, brokered certificates of deposit, offshore branch
deposits and borrowings from the Federal Home Loan Bank of
New York and others. Should the Company experience a substantial
deterioration in its financial condition or its debt ratings, or
should the availability of funding become restricted due to
disruption in the financial markets, the Companys 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. To mitigate such risk, the Company
maintains available lines of credit with the Federal Reserve
Bank of New York and the Federal Home Loan Bank of New York
that are secured by loans and investment securities. On an
ongoing basis, management closely monitors the Companys
liquidity position for compliance with internal policies and
believes that available sources of liquidity are adequate to
meet funding needs in the normal course of business.
Credit Risk Factors that influence the
Companys credit loss experience include overall economic
conditions affecting businesses and consumers, in general, and,
due to the size of the Companys commercial real estate
loan portfolio, real estate valuations, in particular. Other
factors that can influence the Companys credit loss
experience, in addition to general economic conditions and
borrowers specific abilities to repay loans, include:
(i) the concentration of commercial real estate loans in
the Companys 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) the size of the Companys portfolio of loans to
individual consumers, which historically have experienced higher
net charge-offs as a percentage of loans outstanding than other
loan types. Although the national economy experienced moderate
growth in 2006 with inflation being reasonably well contained,
concerns exist about the level and volatility of energy prices;
a weakening housing market, particularly concerns about
over-valued real estate; Federal Reserve positioning of monetary
policy; the underlying impact on businesses operations and
abilities to repay loans resulting from a higher level of
interest rates; sluggish job creation, which could cause
consumer spending to slow; continued stagnant population growth
in the upstate New York and central Pennsylvania regions;
continued slowing of domestic automobile sales; and modest loan
demand in many market areas served by the Company. All of these
factors can affect the Companys credit loss experience. To
help manage credit risk, the Company maintains a detailed credit
policy and utilizes various committees that include members of
senior management to approve significant extensions of credit.
The Company also maintains a credit review department that
regularly reviews the Companys loan and lease portfolios
to ensure compliance with established credit policy. The Company
maintains an allowance for
23
credit losses that in managements judgment is adequate to
absorb losses inherent in the loan and lease portfolio.
Supervision and Regulation The Company is subject to
extensive state and federal laws and regulations governing the
banking industry, in particular, and public companies, in
general. Many of those laws and regulations are described in
Part I, Item 1 Business. Changes in those
laws and regulations, or the degree of the Companys
compliance with those laws and regulations as judged by any of
several regulators that oversee the Company, could have a
significant effect on the Companys operations and its
financial results.
Detailed discussions of the specific risks outlined above and
other risks facing the Company are included within this Annual
Report on
Form 10-K
in Part I, Item 1 Business, and
Part II, Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations.
Furthermore, in Part II, Item 7 under the heading
Forward-Looking Statements is included a description
of certain risks, uncertainties and assumptions identified by
management that are difficult to predict and that could
materially affect the Companys financial condition and
results of operations, as well as the value of the
Companys financial instruments in general, and
M&T common stock, in
particular.
In addition, the market price of
M&T common stock may
fluctuate significantly in response to a number of other
factors, including changes in securities analysts
estimates of financial performance, volatility of stock market
prices and volumes, rumors or erroneous information, changes in
market valuations of similar companies and changes in accounting
policies or procedures as may be required by the Financial
Accounting Standards Board or other regulatory agencies.
|
|
Item 1B.
|
Unresolved
Staff Comments.
|
None
Both M&T and
M&T Bank maintain
their executive offices at One
M&T Plaza in Buffalo,
New York. This twenty-one story headquarters building,
containing approximately 278,000 rentable square feet of
space, is owned in fee by
M&T Bank and was
completed in 1967. M&T,
M&T Bank and their
subsidiaries occupy approximately 78% of the building and the
remainder is leased to non-affiliated tenants. At
December 31, 2006, the cost of this property (including
improvements subsequent to the initial construction), net of
accumulated depreciation, was $5.2 million.
In September 1992,
M&T Bank acquired
an additional facility in Buffalo, New York with approximately
365,000 rentable square feet of space at a cost of
approximately $12 million. Approximately 89% of this
facility, known as M&T
Center, is occupied by
M&T Bank and its
subsidiaries, with the remainder leased to non-affiliated
tenants. At December 31, 2006, the cost of this building
(including improvements subsequent to acquisition), net of
accumulated depreciation, was $12.0 million.
M&T Bank also owns
and occupies two separate facilities in the Buffalo area which
support certain back-office and operations functions of the
Company. The total square footage of these facilities
approximates 215,000 square feet and their combined cost
(including improvements subsequent to acquisition), net of
accumulated depreciation, was $17.6 million at
December 31, 2006.
M&T Bank also owns
a facility in Syracuse, New York with approximately
150,000 rentable square feet of space. Approximately 41% of
this facility is occupied by
M&T Bank. At
December 31, 2006, the cost of this building (including
improvements subsequent to acquisition), net of accumulated
depreciation, was $7.7 million.
M&T Bank also owns
facilities in Harrisburg, Pennsylvania and Millsboro, Delaware
with approximately 206,000 and 322,000 rentable square feet
of space, respectively.
M&T Bank occupies
approximately 38% and 84% of these respective facilities. At
December 31, 2006, the cost of these buildings (including
improvements subsequent to acquisition), net of accumulated
depreciation, was $13.0 million and $7.9 million,
respectively.
No other properties owned by
M&T Bank have more
than 100,000 square feet of space. The cost, net of
accumulated depreciation and amortization, of the Companys
premises and equipment is detailed in note 6 of Notes to
Financial Statements filed herewith in Part II,
Item 8, Financial Statements and
24
Supplementary Data. Of the 672 domestic banking offices of
the Registrants subsidiary banks at December 31,
2006, 281 are owned in fee and 391 are leased.
|
|
Item 3.
|
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, if any, arising out of litigation
pending against M&T or
its subsidiaries will be material to
M&Ts 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&Ts consolidated
results of operations in any future reporting period.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders.
|
No matters were submitted to a vote of
M&Ts security
holders during the fourth quarter of 2006.
Executive
Officers of the Registrant
Information concerning the Registrants executive officers
is presented below as of February 20, 2007. The year the
officer was first appointed to the indicated position with the
Registrant or its subsidiaries is shown parenthetically. In the
case of each corporation noted below, officers terms run
until the first meeting of the board of directors after such
corporations annual meeting, which in the case of the
Registrant takes place immediately following the Annual Meeting
of Stockholders, and until their successors are elected and
qualified.
Robert G. Wilmers, age 72, is chief executive officer
(2007), chairman of the board (2000) and a director
(1982) of the Registrant. From April 1998 until July 2000,
he served as president and chief executive officer of the
Registrant, and from July 2000 until June 2005, he served as
chairman, president (1988) and chief executive officer
(1983) of the Registrant. He is chief executive officer
(2007), chairman of the board (2005) and a director
(1982) of
M&T Bank, and
previously served as chairman of the board of
M&T Bank from
March 1983 to July 2003 and as president of
M&T Bank from
March 1984 to June 1996.
Michael P. Pinto, age 51, is a vice chairman (2007) and a
director (2003) of the Registrant. Previously, he was an
executive vice president of the Registrant (1997). He is a vice
chairman and a director (2003) of
M&T Bank and is
the chairman and chief executive officer of
M&T Banks
Mid-Atlantic Division (2005). Prior to April 2005,
Mr. Pinto was the chief financial officer of the Registrant
(1997) and
M&T Bank (1996),
and he oversaw the Companys Finance Division, Technology
and Banking Operations Division, Corporate Services Group,
Treasury Division and General Counsels Office.
Mr. Pinto is a director of
M&T Investment
(2004) and a trustee of
M&T Real Estate (1996).
He is an executive vice president (1996) and a director
(1998) of
M&T Bank, N.A.
Mr. Pinto is also responsible for managing the operations
of MTB Investment Advisors and the MTB Group of Funds.
Mark J. Czarnecki, age 51, is president and a director
(2007) of the Registrant and president and a director
(2007) of
M&T Bank.
Previously, he was an executive vice president of the Registrant
(1999) and
M&T Bank (1997).
He is in charge of the
M&T Investment Group,
which is comprised of
M&T Securities,
M&T Insurance Agency
and the Trust and Investment Services Division of
M&T Bank. He is
also in charge of the Companys Retail Banking network
which includes branches, automated teller machines, web-banking
and telephone banking systems. Mr. Czarnecki is a director
of M&T Securities
(1999) and an executive vice president (1997) and a
director (2005) of
M&T Bank, N.A. He
is chairman of the board and a director of
M&T Insurance Agency
(2000) and MTB Investment Advisors (2003).
James J. Beardi, age 60, is an executive vice president
(2003) of the Registrant and
M&T Bank, and is
responsible for managing the Companys Residential Mortgage
business and the General Counsels Office. He was president
and a director of M&T
Mortgage (1991) until its merger into
M&T Bank on
January 1, 2007. Mr. Beardi served as senior vice
president of
M&T Bank from 1989
to 2003.
Robert J. Bojdak, age 51, is an executive vice president
and chief credit officer (2004) of the Registrant and
M&T Bank. From
April 2002 to April 2004, Mr. Bojdak served as senior vice
president and credit deputy for
M&T Bank. Previous
to joining
M&T Bank in 2002,
Mr. Bojdak served in several
25
senior management positions at KeyCorp., most recently as
executive vice president and regional credit executive. He is an
executive vice president and a director of
M&T Bank, N.A.
(2004) and M&T
Credit (2004).
Stephen J. Braunscheidel, age 50, is an executive vice
president (2004) of the Registrant and
M&T Bank, and is
in charge of the Companys Human Resources Division.
Previously, he was a senior vice president in the
M&T Investment Services
Group, where he managed the Private Client Services and Employee
Benefits departments. Mr. Braunscheidel has held a number
of management positions with
M&T Bank since
1978.
Atwood Collins, III, age 60, is an executive vice
president of the Registrant (1997) and
M&T Bank (1996),
and is the president and chief operating officer of
M&T Banks
Mid-Atlantic Division. Mr. Collins is a trustee of
M&T Real Estate
(1995) and a director of
M&T Realty Capital
(2003).
Gregory L. Ford, age 47, is an executive vice president of
the Registrant (2006) and
M&T Bank (2004),
and is responsible for managing the Companys Consumer
Lending department, as well as its Automobile Floor Plan
department. He is president and a director of
M&T Credit
(1999) and is an executive vice president of
M&T Bank, N.A.
(2004). Mr. Ford served as a senior vice president of
M&T Bank from 1998
to 2004.
Brian E. Hickey, age 54, is an executive vice president of
the Registrant (1997) and
M&T Bank (1996).
He is a member of the Directors Advisory Council (1994) of
the Rochester Division of
M&T Bank.
Mr. Hickey is responsible for managing all of the
non-retail segments in the Albany, Hudson Valley, Rochester,
Syracuse and Southern Divisions of
M&T Bank, and he
also has responsibility for managing the Companys middle
market commercial banking, health care and government banking
businesses.
René F. Jones, age 42, is an executive vice president
(2006) and chief financial officer (2005) of the
Registrant and
M&T Bank.
Previously, Mr. Jones was a senior vice president in charge
of the Financial Performance Measurement department within
M&T Banks
Finance Division. Mr. Jones has held a number of management
positions within
M&T Banks
Finance Division since 1992. Mr. Jones is an executive vice
president and chief financial officer of
M&T Bank, N.A.
(2005), and he is a trustee of
M&T Real Estate (2005).
He is a director of M&T
Investment (2005).
Adam C. Kugler, age 49, is an executive vice president and
treasurer (1997) of the Registrant and
M&T Bank, and is
in charge of the Companys Treasury Division.
Mr. Kugler is chairman of the board and a director of
M&T Investment (2004),
a director of M&T
Securities (1997) and
M&T Realty Capital
(2003), and is an executive vice president, treasurer and a
director of M&T Bank,
N.A. (1997).
Kevin J. Pearson, age 45, is an executive vice president
(2002) of the Registrant and
M&T Bank. He is
responsible for managing all of the non-retail segments in the
New York City and Philadelphia Divisions of
M&T Bank, as well
as the Companys commercial real estate business.
Mr. Pearson is an executive vice president of
M&T Real Estate
(2003) and a director of
M&T Realty Capital
(2003). He served as senior vice president of
M&T Bank from 2000
to 2002.
Michele D. Trolli, age 45, is an executive vice president
(2005) of the Registrant and
M&T Bank. She is
chief information officer and is in charge of the Technology and
Banking Operations Division and the Corporate Services Group of
M&T Bank.
Ms. Trolli served as senior director, global systems
support, with Franklin Resources, Inc., a worldwide investment
management company, from May 2000 through December 2004.
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
|
The Registrants common stock is traded under the symbol
MTB on the New York Stock Exchange. See cross-reference sheet
for disclosures incorporated elsewhere in this Annual Report on
Form 10-K
for market prices of the Registrants common stock,
approximate number of common stockholders at
year-end,
frequency and amounts of dividends on common stock and
restrictions on the payment of dividends.
26
During the fourth quarter of 2006,
M&T did not issue any
shares of its common stock that were not registered under the
Securities Act of 1933.
Equity
Compensation Plan Information
The following table provides information as of December 31,
2006 with respect to shares of common stock that may be issued
under M&T Bank
Corporations existing equity compensation plans.
M&T Bank
Corporations existing equity compensation plans are the
M&T Bank
Corporation 1983 Stock Option Plan (the 1983 Stock Option
Plan); the
M&T Bank
Corporation 2001 Stock Option Plan (the 2001 Stock Option
Plan); the
M&T Bank
Corporation 2005 Incentive Compensation Plan (the 2005
Incentive Compensation Plan), which replaced the 2001
Stock Option Plan; and the
M&T Bank
Corporation Employee Stock Purchase Plan (the Employee
Stock Purchase Plan), each of which has been previously
approved by stockholders, and the
M&T Bank
Corporation Directors Stock Plan
(the Directors Stock Plan) and the
M&T Bank
Corporation Deferred Bonus Plan (the Deferred Bonus
Plan), each of which did not require stockholder approval.
The table does not include information with respect to shares of
common stock subject to outstanding options and rights assumed
by M&T Bank
Corporation in connection with mergers and acquisitions of the
companies that originally granted those options and rights.
Footnote (1) to the table sets forth the total number of
shares of common stock issuable upon the exercise of such
assumed options and rights as of December 31, 2006, and
their weighted-average exercise price.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of
|
|
|
|
|
|
Remaining Available
|
|
|
|
Securities
|
|
|
|
|
|
for Future Issuance
|
|
|
|
to be Issued Upon
|
|
|
Weighted-Average
|
|
|
Under Equity
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
Options or Rights
|
|
|
Options or Rights
|
|
|
Reflected in Column A)
|
|
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
|
Equity compensation plans approved
by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1983 Stock Option Plan
|
|
|
2,809,613
|
|
|
$
|
52.01
|
|
|
|
|
|
2001 Stock Option Plan
|
|
|
5,996,070
|
|
|
|
88.24
|
|
|
|
|
|
2005 Incentive Compensation Plan
|
|
|
1,695,366
|
|
|
|
109.01
|
|
|
|
7,199,903
|
|
Employee Stock Purchase Plan
|
|
|
105,218
|
|
|
|
110.26
|
|
|
|
501,827
|
|
Equity compensation plans not
approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors Stock Plan
|
|
|
2,678
|
|
|
|
122.16
|
|
|
|
15,719
|
|
Deferred Bonus Plan
|
|
|
61,757
|
|
|
|
58.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,670,702
|
|
|
$
|
81.64
|
|
|
|
7,717,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of December 31, 2006, a
total of 185,603 shares of M&T common stock were
issuable upon exercise of outstanding options or rights assumed
by M&T Bank
Corporation in connection with merger and acquisition
transactions. The weighted-average exercise price of those
outstanding options or rights is $65.42 per share. |
Equity compensation plans adopted without the approval of
stockholders are described below:
Directors Stock
Plan. M&T Bank
Corporation maintains a plan for non-employee members of the
Board of Directors of
M&T Bank
Corporation and the members of its Directors Advisory Council,
and the non-employee members of the Board of Directors of
M&T Bank and the
members of its regional Directors Advisory Councils, which
allows such directors, advisory directors and members of
regional Directors Advisory Councils to receive all or a portion
of their directorial compensation in shares of
M&T common stock.
Deferred Bonus
Plan. M&T Bank
Corporation maintains a deferred bonus plan pursuant to which
its eligible officers and those of its subsidiaries may elect to
defer all or a portion of their current annual incentive
compensation awards and allocate such awards to several
investment options, including
27
M&T common stock.
Participants may elect the timing of distributions from the
plan. Such distributions are payable in cash, with the exception
of balances allocated to
M&T common stock, which
are distributable in the form of shares of common stock.
Performance
Graph
The following graph contains a comparison of the cumulative
stockholder return on
M&T common stock
against the cumulative total returns of the KBW 50 Index,
compiled by Keefe, Bruyette & Woods Inc. and the
S&P 500 Index, compiled by Standard & Poors
Corporation, for the five-year period beginning on
December 31, 2001 and ending on December 31, 2006. The
KBW 50 Index is comprised of the top fifty American banking
companies, including all money-center and most major regional
banks.
Comparison
of Five-Year Cumulative Return*
Stockholder
Value at Year End*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
M&T Bank
Corporation
|
|
|
$
|
100
|
|
|
|
|
110
|
|
|
|
|
139
|
|
|
|
|
155
|
|
|
|
|
159
|
|
|
|
|
181
|
|
KBW 50 Index
|
|
|
$
|
100
|
|
|
|
|
93
|
|
|
|
|
125
|
|
|
|
|
137
|
|
|
|
|
139
|
|
|
|
|
166
|
|
S&P 500 Index
|
|
|
$
|
100
|
|
|
|
|
78
|
|
|
|
|
100
|
|
|
|
|
111
|
|
|
|
|
117
|
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Assumes a $100 investment on
December 31, 2001 and reinvestment of all dividends.
|
In accordance with and to the extent permitted by applicable law
or regulation, the information set forth above under the heading
Performance Graph shall not be incorporated by
reference into any future filing under the Securities Act of
1933, as amended (the Securities Act), or the
Exchange Act and shall not be deemed to be soliciting
material or to be filed with the SEC under the
Securities Act or the Exchange Act.
Issuer
Purchases of Equity Securities
In November 2005, 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.
Pursuant to such plan,
M&T repurchased
3,259,000 shares during 2006 at an average per share cost
of $114.72. Through December 31, 2006,
M&T had repurchased
3,303,700 shares of common stock pursuant to the repurchase
plan at an average cost of $114.66 per share.
28
During the fourth quarter of 2006,
M&T purchased shares of
its common stock as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)Maximum
|
|
|
|
|
|
|
|
|
|
(c)Total
|
|
|
Number (or
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
of 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)
|
|
|
October 1 - October 31,
2006
|
|
|
3,660
|
|
|
$
|
121.46
|
|
|
|
|
|
|
|
2,318,600
|
|
November 1 -
November 30, 2006
|
|
|
51,445
|
|
|
|
117.90
|
|
|
|
|
|
|
|
2,318,600
|
|
December 1 -
December 31, 2006
|
|
|
623,038
|
|
|
|
120.46
|
|
|
|
622,300
|
|
|
|
1,696,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
678,143
|
|
|
$
|
120.27
|
|
|
|
622,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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&Ts
stock option plans. |
(2) |
|
On November 21, 2005, M&T announced a program to purchase up to
5,000,000 shares of its common stock. |
|
|
Item 6.
|
Selected
Financial Data.
|
See cross-reference sheet for disclosures incorporated elsewhere
in this Annual Report on
Form 10-K.
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Corporate
Profile and Significant Developments
M&T Bank
Corporation
(M&T) is a
bank holding company headquartered in Buffalo, New York with
consolidated assets of $57.1 billion at December 31,
2006. The consolidated financial information presented herein
reflects M&T and all of
its subsidiaries, which are referred to collectively as
the Company.
M&Ts wholly owned
bank subsidiaries are
M&T Bank and
M&T Bank, National
Association
(M&T Bank,
N.A.).
M&T Bank, with
total assets of $56.4 billion at December 31, 2006, is
a New York-chartered commercial bank with 671 banking offices in
New York State, Pennsylvania, Maryland, Delaware, Virginia, West
Virginia and the District of Columbia, and an office in the
Cayman Islands. On January 2, 2007,
M&T Bank opened
its first banking office in New Jersey.
M&T Bank and its
subsidiaries offer a broad range of financial services to a
diverse base of consumers, businesses, professional clients,
governmental entities and financial institutions located in its
markets. Lending is largely focused on consumers residing in New
York State, Pennsylvania, Maryland, northern Virginia and
Washington, D.C., and on small and medium size businesses
based in those areas, although residential real estate loans are
originated through lending offices in 22 states. Certain
lending activities are also conducted in other states through
various subsidiaries.
M&T Banks
subsidiaries include:
M&T Credit Services,
LLC, a consumer lending and commercial leasing and lending
company; M&T Real
Estate Trust, a commercial mortgage lender;
M&T Realty Capital
Corporation, a multi-family commercial mortgage lender;
M&T Securities,
Inc., which provides brokerage, investment advisory and
insurance services; MTB Investment Advisors, Inc., which serves
as investment advisor to the MTB Group of Funds, a family of
proprietary mutual funds, and other funds and institutional
clients; and M&T
Insurance Agency, Inc., an insurance agency. Effective
January 1, 2007,
M&T Mortgage
Corporation, a residential mortgage banking company wholly owned
by M&T Bank, was
merged into
M&T Bank.
M&T Bank, N.A.,
with total assets of $511 million at December 31,
2006, is a national bank with an office in Oakfield, New York.
M&T Bank, N.A.
offers selected deposit and loan products on a nationwide basis,
largely through telephone and direct mail marketing techniques.
29
On June 30, 2006,
M&T Bank completed the
acquisition of 21 branch offices in Buffalo and Rochester, New
York from Citibank, N.A., including approximately
$269 million in loans, mostly to consumers, small
businesses and middle market customers, and approximately
$1.0 billion of deposits.
M&Ts financial
results for 2006 reflect the impact of that transaction from the
acquisition date through December 31, 2006. Expenses
associated with integrating the acquired branches into
M&T Bank and
introducing the customers associated with those branches to
M&T Banks
products and services aggregated $3 million, after
applicable tax effect, or $.03 of diluted earnings per share
during the year ended December 31, 2006. The Company does
not expect that any significant additional acquisition and
integration-related expenses will be incurred. Including the
impact of acquisition-related expenses and the amortization of
core deposit intangible resulting from the transaction, net
income and diluted earnings per share of the Company in 2006
were reduced by approximately $10 million and $.09,
respectively, as a result of the transaction. As of
December 31, 2006, there were no significant amounts of
unpaid acquisition-related expenses.
Critical
Accounting Estimates
The Companys significant accounting policies conform with
generally accepted accounting principles (GAAP) and
are described in note 1 of Notes to Financial Statements.
In applying those accounting policies, management of the Company
is required to exercise judgment in determining many of the
methodologies, assumptions and estimates to be utilized. Certain
of the critical accounting estimates are more dependent on such
judgment and in some cases may contribute to volatility in the
Companys reported financial performance should the
assumptions and estimates used change over time due to changes
in circumstances. Some of the more significant areas in which
management of the Company applies critical assumptions and
estimates include the following:
|
|
|
|
|
Allowance for credit losses The allowance for credit
losses represents the amount which, in managements
judgment, will be adequate to absorb credit losses inherent in
the loan and lease portfolio as of the balance sheet date. A
provision for credit losses is recorded to adjust the level of
the allowance as deemed necessary by management. In estimating
losses inherent in the loan and lease portfolio, assumptions and
judgment are applied to measure amounts and timing of expected
future cash flows, collateral values and other factors used to
determine the borrowers abilities to repay obligations.
Historical loss trends are also considered, as are economic
conditions, industry trends, portfolio trends and
borrower-specific financial data. Changes in the circumstances
considered when determining managements estimates and
assumptions could result in changes in those estimates and
assumptions, which may result in adjustment of the allowance. A
detailed discussion of facts and circumstances considered by
management in assessing the adequacy of the allowance for credit
losses is included herein under the heading Provision for
Credit Losses.
|
|
|
Valuation methodologies Management of the Company
applies various valuation methodologies to assets and
liabilities which often involve a significant degree of
judgment, particularly when liquid markets do not exist for the
particular items being valued. Quoted market prices are referred
to when estimating fair values for certain assets, such as
trading assets, most investment securities, and residential real
estate loans held for sale and related commitments. However, for
those items for which an observable liquid market does not
exist, management utilizes significant estimates and assumptions
to value such items. Examples of these items include capitalized
servicing assets, goodwill, core deposit and other intangible
assets, pension and other postretirement benefit obligations,
value ascribed to stock-based compensation, estimated residual
values of property associated with commercial and consumer
leases, and certain derivative and other financial instruments.
These valuations require the use of various assumptions,
including, among others, discount rates, rates of return on
assets, repayment rates, cash flows, default rates, costs of
servicing and liquidation values. The use of different
assumptions could produce significantly different results, which
could have material positive or negative effects on the
Companys results of operations. Specific assumptions and
estimates utilized by management are discussed in detail herein
in managements discussion and analysis of financial
condition and results of operations and in notes 1, 3,
4, 7, 8, 10, 11, 17, 18 and 19 of Notes to
Financial Statements.
|
30
|
|
|
|
|
Commitments, contingencies and off-balance sheet
arrangements Information regarding the
Companys commitments and contingencies, including
guarantees and contingent liabilities arising from litigation,
and their potential effects on the Companys results of
operations is included in note 20 of Notes to Financial
Statements. In addition, the Company is routinely subject to
examinations from various governmental taxing authorities. Such
examinations may result in challenges to the tax return
treatment applied by the Company to specific transactions.
Management believes that the assumptions and judgment used to
record tax-related assets or liabilities have been appropriate.
Should tax laws change or the tax authorities determine that
managements assumptions were inappropriate, the result and
adjustments required could have a material effect on the
Companys results of operations. Information regarding
permanent and temporary income tax differences is presented in
note 12 of Notes to Financial Statements. The recognition
or
de-recognition
in the Companys consolidated financial statements of
assets and liabilities held by so-called variable interest
entities is subject to the interpretation and application of
complex accounting pronouncements or interpretations that
require management to estimate and assess the probability of
financial outcomes in future periods. Information relating to
the Companys involvement in such entities and the
accounting treatment afforded each such involvement is included
in note 18 of Notes to Financial Statements.
|
Overview
Net income for the Company in 2006 was $839 million or
$7.37 of diluted earnings per common share, up 7% and 10%,
respectively, from $782 million or $6.73 of diluted
earnings per share in 2005. Basic earnings per common share rose
10% to $7.55 in 2006 from $6.88 in 2005. Net income in 2004
totaled $723 million, while diluted and basic earnings per
share were $6.00 and $6.14, respectively. The after-tax impact
of acquisition and integration-related expenses (included herein
as merger-related expenses) associated with the June 30
branch acquisition already discussed was $3 million
($5 million pre-tax) or $.03 of basic and diluted earnings
per share in 2006. There were no similar expenses in either 2005
or 2004. Net income expressed as a rate of return on average
assets in 2006 was 1.50%, compared with 1.44% in 2005 and 1.40%
in 2004. The return on average common stockholders equity
was 13.89% in 2006, 13.49% in 2005 and 12.67% in 2004.
Net interest income recorded on a taxable-equivalent basis
increased 1% to $1.84 billion in 2006 from
$1.81 billion in 2005. The impact of a higher level of
average earning assets was largely offset by a decline in the
Companys net interest margin, or taxable-equivalent net
interest income expressed as a percentage of average earning
assets. Average earning assets rose 3% to $49.7 billion in
2006 from $48.1 billion in 2005, the result of increased
balances of loans and leases, offset, in part, by a decline in
average outstanding balances of investment securities. Average
loans and leases of $41.4 billion in 2006 were
$1.9 billion or 5% higher than $39.5 billion in 2005,
due to growth in commercial loans and leases of
$863 million, or 8%, commercial real estate loans of
$755 million, or 5%, and consumer real estate loans of
$1.1 billion, or 28%, partially offset by an
$804 million, or 7% decline in consumer loans and leases.
Average balances of investment securities decreased 5% to
$8.0 billion in 2006 from $8.5 billion in 2005. The
net interest margin declined 7 basis points (hundredths of one
percent) to 3.70% in 2006 from 3.77% in 2005, largely due to
higher short-term interest rates resulting from the Federal
Reserve raising its benchmark overnight federal funds target
rate 100 basis points during the first six months of 2006,
continuing a trend of rate increases that began in June 2004.
Such interest rate increases had the effect of increasing rates
paid on interest-bearing liabilities more rapidly than yields on
earning assets during 2005 and the first half of 2006. During
the last six months of 2006, the Companys net interest
margin stabilized as compared to the first half of the year. As
a result of higher average earning assets, taxable-equivalent
net interest income in 2005 was 3% higher than
$1.75 billion in 2004. Average earning assets in 2005 rose
6% from $45.2 billion in 2004. Average loans and leases
outstanding in 2005 were up $2.4 billion, or 6%, from
$37.1 billion in 2004, largely due to growth in commercial
loans and leases, commercial real estate loans and consumer real
estate loans, partially offset by a decline in consumer loans
and leases. Net interest margin in 2005 declined 11 basis
points from 3.88% in 2004, largely due to the rising interest
rate environment which resulted in the rates paid on
interest-bearing liabilities rising more rapidly than yields on
earning assets.
31
The provision for credit losses declined to $80 million in
2006 from $88 million in 2005 and $95 million in 2004.
The reduced levels of the provision during the past two years as
compared with 2004 were reflective of generally favorable credit
quality. Net charge-offs were $68 million in 2006, down
from $77 million in 2005 and $82 million in 2004. Net
charge-offs as a percentage of average loans and leases
outstanding decreased to .16% in 2006 from .19% in 2005 and .22%
in 2004. The provision in each year represents the result of
managements analysis of the composition of the loan and
lease portfolio and other factors, including concern regarding
uncertainty about economic conditions, both nationally and in
many of the markets served by the Company, and the impact of
such conditions and prospects on the abilities of borrowers to
repay loans. While most credit quality measures improved from
2004 to 2005, the Company did experience an increase in
nonperforming loans during the second half of 2006, due largely
to the addition of four relationships with automobile dealers.
Noninterest income rose 10% to $1.05 billion in 2006 from
$950 million in 2005. Higher mortgage banking revenues,
service charges on deposit accounts, trust income, brokerage
services income, and other revenues contributed to that
improvement. Included in noninterest income in 2006 was a
$13 million gain resulting from the accelerated recognition
of a purchase accounting premium related to the call of a
$200 million Federal Home Loan Bank (FHLB)
of Atlanta borrowing assumed in a previous acquisition. Losses
from bank investment securities in 2005 included a
$29 million non-cash,
other-than-temporary
impairment charge in the third quarter related to preferred
stock issuances of the Federal National Mortgage Association
(FNMA) and the Federal Home Loan Mortgage
Corporation (FHLMC). Excluding the impact of
securities gains and losses in both years and the
$13 million gain on the called borrowing in 2006,
noninterest income rose 5% from 2005 to 2006. Noninterest income
totaled $943 million in 2004. Comparing 2005 with 2004,
higher mortgage banking revenues, corporate financing advisory
fees, gains on sales of commercial lease equipment and other
property, and other revenues were largely offset by the
$29 million impairment charge in 2005. Excluding gains and
losses from investment securities, noninterest income in 2005
rose $38 million or 4% from 2004.
Noninterest expense in 2006 aggregated $1.55 billion, up 4%
from $1.49 billion in 2005. Noninterest expense in 2004 was
$1.52 billion. Included in such amounts are expenses
considered by M&T to be
nonoperating in nature, consisting of amortization
of core deposit and other intangible assets of $63 million,
$57 million and $75 million in 2006, 2005 and 2004,
respectively, and merger-related expenses of $5 million in
2006. As already noted, there were no merger-related expenses in
2005 or 2004. Exclusive of these nonoperating expenses,
noninterest operating expenses aggregated $1.48 billion in
2006, $1.43 billion in 2005 and $1.44 billion in 2004.
Included in operating expenses in 2006 and 2004 were
tax-deductible contributions made to The
M&T Charitable
Foundation, a tax-exempt private charitable foundation, of
$18 million and $25 million, respectively. There was
no similar contribution made in 2005. Excluding the impact of
the charitable contribution, operating expenses in 2006
increased $37 million, or 3%, from 2005. The most
significant contributor to that increase was a higher level of
salaries expense, reflecting the impact of merit pay increases
and higher stock-based compensation costs and other incentive
pay. Excluding the impact of the $25 million charitable
contribution in 2004, noninterest operating expenses in 2005
increased $13 million, or less than 1%, from 2004. That
slight increase reflects higher costs of providing health care
and retirement benefits to employees and higher professional
services expenses offset, in part, by a reversal of a portion of
the valuation allowance for the impairment of capitalized
residential mortgage servicing rights, due to higher residential
mortgage loan interest rates.
The efficiency ratio expresses the relationship of operating
expenses to revenues. The Companys efficiency ratio, or
noninterest operating expenses divided by the sum of
taxable-equivalent net interest income and noninterest income
(exclusive of gains and losses from bank investment securities),
was 51.5% in 2006, compared with 51.2% in 2005 and 53.5% in 2004.
32
Table
1
EARNINGS
SUMMARY
Dollars in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compound
|
Increase (Decrease)(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth Rate
|
2005 to 2006
|
|
|
2004 to 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 Years
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001 to 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
527.8
|
|
|
|
19
|
|
|
$
|
489.9
|
|
|
|
21
|
|
|
Interest income(b)
|
|
$
|
3,333.8
|
|
|
|
2,806.0
|
|
|
|
2,316.1
|
|
|
|
2,142.9
|
|
|
|
1,856.1
|
|
|
|
9
|
%
|
|
502.2
|
|
|
|
51
|
|
|
|
430.2
|
|
|
|
76
|
|
|
Interest expense
|
|
|
1,496.6
|
|
|
|
994.4
|
|
|
|
564.2
|
|
|
|
527.8
|
|
|
|
594.5
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.6
|
|
|
|
1
|
|
|
|
59.7
|
|
|
|
3
|
|
|
Net interest income(b)
|
|
|
1,837.2
|
|
|
|
1,811.6
|
|
|
|
1,751.9
|
|
|
|
1,615.1
|
|
|
|
1,261.6
|
|
|
|
9
|
|
|
(8.0
|
)
|
|
|
(9
|
)
|
|
|
(7.0
|
)
|
|
|
(7
|
)
|
|
Less: provision for credit losses
|
|
|
80.0
|
|
|
|
88.0
|
|
|
|
95.0
|
|
|
|
131.0
|
|
|
|
122.0
|
|
|
|
(5
|
)
|
|
30.7
|
|
|
|
|
|
|
|
(31.0
|
)
|
|
|
|
|
|
Gain (loss) on bank investment
securities
|
|
|
2.6
|
|
|
|
(28.1
|
)
|
|
|
2.9
|
|
|
|
2.5
|
|
|
|
(.6
|
)
|
|
|
|
|
|
65.4
|
|
|
|
7
|
|
|
|
37.7
|
|
|
|
4
|
|
|
Other income
|
|
|
1,043.2
|
|
|
|
977.8
|
|
|
|
940.1
|
|
|
|
828.6
|
|
|
|
512.5
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51.1
|
|
|
|
6
|
|
|
|
15.6
|
|
|
|
2
|
|
|
Salaries and employee
benefits
|
|
|
873.3
|
|
|
|
822.2
|
|
|
|
806.6
|
|
|
|
740.3
|
|
|
|
497.0
|
|
|
|
13
|
|
|
15.5
|
|
|
|
2
|
|
|
|
(46.6
|
)
|
|
|
(7
|
)
|
|
Other expense
|
|
|
678.4
|
|
|
|
662.9
|
|
|
|
709.5
|
|
|
|
708.0
|
|
|
|
464.6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63.1
|
|
|
|
5
|
|
|
|
104.4
|
|
|
|
10
|
|
|
Income before income taxes
|
|
|
1,251.3
|
|
|
|
1,188.2
|
|
|
|
1,083.8
|
|
|
|
866.9
|
|
|
|
689.9
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Taxable-equivalent
adjustment(b)
|
|
|
19.7
|
|
|
|
17.3
|
|
|
|
17.3
|
|
|
|
16.3
|
|
|
|
14.0
|
|
|
|
2
|
|
|
3.7
|
|
|
|
1
|
|
|
|
44.7
|
|
|
|
13
|
|
|
Income taxes
|
|
|
392.4
|
|
|
|
388.7
|
|
|
|
344.0
|
|
|
|
276.7
|
|
|
|
219.1
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57.0
|
|
|
|
7
|
|
|
$
|
59.7
|
|
|
|
8
|
|
|
Net income
|
|
$
|
839.2
|
|
|
|
782.2
|
|
|
|
722.5
|
|
|
|
573.9
|
|
|
|
456.8
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Changes were calculated from
unrounded amounts. |
(b) |
|
Interest income data are on a
taxable-equivalent basis. The taxable-equivalent adjustment
represents additional income taxes that would be due if all
interest income were subject to income taxes. This adjustment,
which is related to interest received on qualified municipal
securities, industrial revenue financings and preferred equity
securities, is based on a composite income tax rate of
approximately 39% for 2006, 2005, 2004 and 2002, and 36% for
2003. |
Supplemental
Reporting of Non-GAAP Results of Operations
As a result of business combinations and other acquisitions, the
Company had intangible assets consisting of goodwill and core
deposit and other intangible assets totaling $3.2 billion
at December 31, 2006, $3.0 billion at
December 31, 2005 and $3.1 billion at
December 31, 2004. Included in such intangible assets was
goodwill of $2.9 billion at December 31, 2006, 2005
and 2004. Amortization of core deposit and other intangible
assets, after tax effect, totaled $38 million,
$35 million and $46 million during 2006, 2005 and
2004, respectively.
Since 1998, M&T has
consistently provided supplemental reporting of its results on a
net operating or tangible basis, in
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, when calculating certain
performance ratios) and expenses associated with integrating
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&Ts
management believes that this information helps investors
understand the effect of acquisition activity in reported
results.
Net operating income increased 8% to $881 million in 2006
from $817 million in 2005. Diluted net operating earnings
per share in 2006 rose 10% to $7.73 from $7.03 in 2005. Net
operating income and diluted net operating earnings per share
were $769 million and $6.38, respectively, during 2004.
Reconciliations of net income and diluted earnings per share
with net operating income and diluted net operating earnings per
share are presented in table 2.
Net operating income expressed as a rate of return on average
tangible assets was 1.67% in 2006, compared with 1.60% in 2005
and 1.59% in 2004. Net operating return on average tangible
common equity was 29.55% in 2006, improved from 29.06% and
28.76% in 2005 and 2004, respectively.
33
Reconciliations of average assets and equity with average
tangible assets and average tangible equity are also presented
in table 2.
Table
2
RECONCILIATION
OF GAAP TO NON-GAAP MEASURES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Income statement data
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands, except per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
Amortization of core deposit and
other intangible assets(a)
|
|
|
38,418
|
|
|
|
34,682
|
|
|
|
46,097
|
|
Merger-related expenses(a)
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
|
$
|
880,655
|
|
|
$
|
816,865
|
|
|
$
|
768,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
7.37
|
|
|
$
|
6.73
|
|
|
$
|
6.00
|
|
Amortization of core deposit and
other intangible assets(a)
|
|
|
.33
|
|
|
|
.30
|
|
|
|
.38
|
|
Merger-related expenses(a)
|
|
|
.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net operating earnings per
share
|
|
$
|
7.73
|
|
|
$
|
7.03
|
|
|
$
|
6.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
$
|
1,551,751
|
|
|
$
|
1,485,142
|
|
|
$
|
1,516,018
|
|
Amortization of core deposit and
other intangible assets
|
|
|
(63,008
|
)
|
|
|
(56,805
|
)
|
|
|
(75,410
|
)
|
Merger-related expenses
|
|
|
(4,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest operating expense
|
|
$
|
1,483,746
|
|
|
$
|
1,428,337
|
|
|
$
|
1,440,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
815
|
|
|
$
|
|
|
|
$
|
|
|
Equipment and net occupancy
|
|
|
224
|
|
|
|
|
|
|
|
|
|
Printing, postage and supplies
|
|
|
155
|
|
|
|
|
|
|
|
|
|
Other costs of operations
|
|
|
3,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,997
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
55,839
|
|
|
$
|
54,135
|
|
|
$
|
51,517
|
|
Goodwill
|
|
|
(2,908
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(191
|
)
|
|
|
(135
|
)
|
|
|
(201
|
)
|
Deferred taxes
|
|
|
38
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average tangible assets
|
|
$
|
52,778
|
|
|
$
|
51,148
|
|
|
$
|
48,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity
|
|
$
|
6,041
|
|
|
$
|
5,798
|
|
|
$
|
5,701
|
|
Goodwill
|
|
|
(2,908
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(191
|
)
|
|
|
(135
|
)
|
|
|
(201
|
)
|
Deferred taxes
|
|
|
38
|
|
|
|
52
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average tangible equity
|
|
$
|
2,980
|
|
|
$
|
2,811
|
|
|
$
|
2,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
57,065
|
|
|
$
|
55,146
|
|
|
$
|
52,939
|
|
Goodwill
|
|
|
(2,909
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(250
|
)
|
|
|
(108
|
)
|
|
|
(166
|
)
|
Deferred taxes
|
|
|
30
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tangible assets
|
|
$
|
53,936
|
|
|
$
|
52,176
|
|
|
$
|
49,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
$
|
6,281
|
|
|
$
|
5,876
|
|
|
$
|
5,730
|
|
Goodwill
|
|
|
(2,909
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(250
|
)
|
|
|
(108
|
)
|
|
|
(166
|
)
|
Deferred taxes
|
|
|
30
|
|
|
|
42
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tangible equity
|
|
$
|
3,152
|
|
|
$
|
2,906
|
|
|
$
|
2,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
After any related tax
effect. |
34
Net
Interest Income/Lending and Funding Activities
Reflecting growth in average earning assets that was largely
offset by a narrowing of the net interest margin,
taxable-equivalent net interest income increased 1% to
$1.84 billion in 2006 from $1.81 billion in 2005.
Average earning assets increased 3% to $49.7 billion in
2006 from $48.1 billion in 2005. That growth resulted from
a 5% increase in average outstanding balances of loans and
leases of $1.9 billion, offset in part by a 5% decline in
average outstanding balances of investment securities of $441
million. The positive impact of higher average earning assets on
taxable-equivalent net interest income was largely offset by a
narrowing of the Companys net interest margin, which
declined to 3.70% in 2006 from 3.77% in 2005.
Average loans and leases outstanding aggregated
$41.4 billion in 2006, up 5% from $39.5 billion in
2005. The higher average outstanding loan balances were the
result of growth in commercial loans and leases, commercial real
estate loans and residential real estate loans. Average
commercial loans and leases rose 8% to $11.3 billion in
2006 from $10.5 billion in 2005. Commercial real estate
loans averaged $15.1 billion during 2006, 5% higher than
$14.3 billion in 2005, reflecting a $336 million rise
in construction loans to developers of residential real estate
properties. The Companys residential real estate loan
portfolio averaged $5.0 billion in 2006, up 28% from
$3.9 billion in 2005. Included in that portfolio were loans
held for sale, which averaged $1.5 billion in 2006, 19%
above the $1.2 billion averaged in 2005. Excluding such
loans, average residential real estate loans increased
$861 million from 2005 to 2006. That increase was largely
the result of the Companys decision to retain higher
levels of residential real estate loans having certain
characteristics, due to narrowing margins available in the
marketplace when selling such loans and the lack of availability
of investment securities to acquire that met the Companys
desired characteristics and provided suitable returns. Consumer
loans and leases averaged $10.0 billion in 2006, down 7%
from $10.8 billion in 2005. That decline was the result of
lower average balances of automobile loans and leases, which
decreased 22% to $2.9 billion in 2006 from
$3.7 billion in 2005, reflecting the Companys
decision to allow such balances to decline rather than matching
interest rates offered by competitors. During late 2006, the
interest rate environment relating to the Companys
automobile lending business improved and from September 30
to December 31, outstanding balances of such loans
increased slightly.
35
Table
3
AVERAGE
BALANCE SHEETS AND TAXABLE-EQUIVALENT RATES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
|
(Average balance in millions; interest in thousands)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, net of unearned
discount(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, etc.
|
|
$
|
11,319
|
|
|
$
|
802,451
|
|
|
|
7.09
|
%
|
|
|
10,455
|
|
|
|
589,644
|
|
|
|
5.64
|
%
|
|
|
9,534
|
|
|
|
410,258
|
|
|
|
4.30
|
%
|
|
|
8,523
|
|
|
|
358,629
|
|
|
|
4.21
|
%
|
|
|
5,146
|
|
|
|
261,867
|
|
|
|
5.09
|
%
|
Real estate commercial
|
|
|
15,096
|
|
|
|
1,104,518
|
|
|
|
7.32
|
|
|
|
14,341
|
|
|
|
941,017
|
|
|
|
6.56
|
|
|
|
13,264
|
|
|
|
763,134
|
|
|
|
5.75
|
|
|
|
11,573
|
|
|
|
706,022
|
|
|
|
6.10
|
|
|
|
9,498
|
|
|
|
661,382
|
|
|
|
6.96
|
|
Real estate consumer
|
|
|
5,015
|
|
|
|
319,858
|
|
|
|
6.38
|
|
|
|
3,925
|
|
|
|
235,364
|
|
|
|
6.00
|
|
|
|
3,111
|
|
|
|
184,125
|
|
|
|
5.92
|
|
|
|
3,777
|
|
|
|
232,454
|
|
|
|
6.15
|
|
|
|
4,087
|
|
|
|
285,055
|
|
|
|
6.98
|
|
Consumer
|
|
|
10,003
|
|
|
|
712,484
|
|
|
|
7.12
|
|
|
|
10,808
|
|
|
|
664,509
|
|
|
|
6.15
|
|
|
|
11,220
|
|
|
|
626,255
|
|
|
|
5.58
|
|
|
|
10,098
|
|
|
|
607,909
|
|
|
|
6.02
|
|
|
|
6,776
|
|
|
|
467,167
|
|
|
|
6.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases, net
|
|
|
41,433
|
|
|
|
2,939,311
|
|
|
|
7.09
|
|
|
|
39,529
|
|
|
|
2,430,534
|
|
|
|
6.15
|
|
|
|
37,129
|
|
|
|
1,983,772
|
|
|
|
5.34
|
|
|
|
33,971
|
|
|
|
1,905,014
|
|
|
|
5.61
|
|
|
|
25,507
|
|
|
|
1,675,471
|
|
|
|
6.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits at banks
|
|
|
12
|
|
|
|
372
|
|
|
|
3.01
|
|
|
|
10
|
|
|
|
169
|
|
|
|
1.64
|
|
|
|
13
|
|
|
|
65
|
|
|
|
.51
|
|
|
|
14
|
|
|
|
147
|
|
|
|
1.03
|
|
|
|
6
|
|
|
|
76
|
|
|
|
1.32
|
|
Federal funds sold and agreements
to resell securities
|
|
|
81
|
|
|
|
5,597
|
|
|
|
6.91
|
|
|
|
23
|
|
|
|
808
|
|
|
|
3.55
|
|
|
|
8
|
|
|
|
134
|
|
|
|
1.60
|
|
|
|
147
|
|
|
|
1,875
|
|
|
|
1.28
|
|
|
|
272
|
|
|
|
4,455
|
|
|
|
1.63
|
|
Trading account
|
|
|
90
|
|
|
|
2,446
|
|
|
|
2.71
|
|
|
|
80
|
|
|
|
1,544
|
|
|
|
1.92
|
|
|
|
53
|
|
|
|
418
|
|
|
|
.79
|
|
|
|
55
|
|
|
|
647
|
|
|
|
1.18
|
|
|
|
13
|
|
|
|
247
|
|
|
|
1.86
|
|
Investment securities(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
|
2,884
|
|
|
|
121,669
|
|
|
|
4.22
|
|
|
|
3,479
|
|
|
|
134,528
|
|
|
|
3.87
|
|
|
|
4,169
|
|
|
|
158,953
|
|
|
|
3.81
|
|
|
|
2,599
|
|
|
|
106,209
|
|
|
|
4.09
|
|
|
|
1,292
|
|
|
|
81,412
|
|
|
|
6.30
|
|
Obligations of states and political
subdivisions
|
|
|
157
|
|
|
|
10,223
|
|
|
|
6.53
|
|
|
|
180
|
|
|
|
10,860
|
|
|
|
6.04
|
|
|
|
218
|
|
|
|
15,017
|
|
|
|
6.90
|
|
|
|
251
|
|
|
|
15,827
|
|
|
|
6.30
|
|
|
|
279
|
|
|
|
17,828
|
|
|
|
6.40
|
|
Other
|
|
|
4,995
|
|
|
|
254,142
|
|
|
|
5.09
|
|
|
|
4,817
|
|
|
|
227,562
|
|
|
|
4.72
|
|
|
|
3,610
|
|
|
|
157,703
|
|
|
|
4.37
|
|
|
|
2,494
|
|
|
|
113,159
|
|
|
|
4.54
|
|
|
|
1,552
|
|
|
|
76,659
|
|
|
|
4.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
8,036
|
|
|
|
386,034
|
|
|
|
4.80
|
|
|
|
8,476
|
|
|
|
372,950
|
|
|
|
4.40
|
|
|
|
7,997
|
|
|
|
331,673
|
|
|
|
4.15
|
|
|
|
5,344
|
|
|
|
235,195
|
|
|
|
4.40
|
|
|
|
3,123
|
|
|
|
175,899
|
|
|
|
5.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
49,652
|
|
|
|
3,333,760
|
|
|
|
6.71
|
|
|
|
48,118
|
|
|
|
2,806,005
|
|
|
|
5.83
|
|
|
|
45,200
|
|
|
|
2,316,062
|
|
|
|
5.13
|
|
|
|
39,531
|
|
|
|
2,142,878
|
|
|
|
5.42
|
|
|
|
28,921
|
|
|
|
1,856,148
|
|
|
|
6.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
|
(646
|
)
|
|
|
|
|
|
|
|
|
|
|
(638
|
)
|
|
|
|
|
|
|
|
|
|
|
(626
|
)
|
|
|
|
|
|
|
|
|
|
|
(574
|
)
|
|
|
|
|
|
|
|
|
|
|
(438
|
)
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
1,346
|
|
|
|
|
|
|
|
|
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
1,599
|
|
|
|
|
|
|
|
|
|
|
|
1,542
|
|
|
|
|
|
|
|
|
|
|
|
732
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
5,487
|
|
|
|
|
|
|
|
|
|
|
|
5,255
|
|
|
|
|
|
|
|
|
|
|
|
5,344
|
|
|
|
|
|
|
|
|
|
|
|
4,850
|
|
|
|
|
|
|
|
|
|
|
|
2,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
55,839
|
|
|
|
|
|
|
|
|
|
|
|
54,135
|
|
|
|
|
|
|
|
|
|
|
|
51,517
|
|
|
|
|
|
|
|
|
|
|
|
45,349
|
|
|
|
|
|
|
|
|
|
|
|
31,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
435
|
|
|
|
3,461
|
|
|
|
.79
|
|
|
|
400
|
|
|
|
2,182
|
|
|
|
.55
|
|
|
|
550
|
|
|
|
1,802
|
|
|
|
.33
|
|
|
|
1,021
|
|
|
|
3,613
|
|
|
|
.35
|
|
|
|
761
|
|
|
|
3,900
|
|
|
|
.51
|
|
Savings deposits
|
|
|
14,401
|
|
|
|
201,543
|
|
|
|
1.40
|
|
|
|
14,889
|
|
|
|
139,445
|
|
|
|
.94
|
|
|
|
15,305
|
|
|
|
92,064
|
|
|
|
.60
|
|
|
|
13,278
|
|
|
|
102,190
|
|
|
|
.77
|
|
|
|
8,899
|
|
|
|
107,281
|
|
|
|
1.21
|
|
Time deposits
|
|
|
12,420
|
|
|
|
551,514
|
|
|
|
4.44
|
|
|
|
9,158
|
|
|
|
294,782
|
|
|
|
3.22
|
|
|
|
6,948
|
|
|
|
154,722
|
|
|
|
2.23
|
|
|
|
6,638
|
|
|
|
159,700
|
|
|
|
2.41
|
|
|
|
7,398
|
|
|
|
237,001
|
|
|
|
3.20
|
|
Deposits at foreign office
|
|
|
3,610
|
|
|
|
178,348
|
|
|
|
4.94
|
|
|
|
3,819
|
|
|
|
120,122
|
|
|
|
3.15
|
|
|
|
3,136
|
|
|
|
43,034
|
|
|
|
1.37
|
|
|
|
1,445
|
|
|
|
14,991
|
|
|
|
1.04
|
|
|
|
569
|
|
|
|
8,460
|
|
|
|
1.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
30,866
|
|
|
|
934,866
|
|
|
|
3.03
|
|
|
|
28,266
|
|
|
|
556,531
|
|
|
|
1.97
|
|
|
|
25,939
|
|
|
|
291,622
|
|
|
|
1.12
|
|
|
|
22,382
|
|
|
|
280,494
|
|
|
|
1.25
|
|
|
|
17,627
|
|
|
|
356,642
|
|
|
|
2.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
4,530
|
|
|
|
227,850
|
|
|
|
5.03
|
|
|
|
4,890
|
|
|
|
157,853
|
|
|
|
3.23
|
|
|
|
5,142
|
|
|
|
71,172
|
|
|
|
1.38
|
|
|
|
4,331
|
|
|
|
49,064
|
|
|
|
1.13
|
|
|
|
3,125
|
|
|
|
52,723
|
|
|
|
1.69
|
|
Long-term borrowings
|
|
|
6,013
|
|
|
|
333,836
|
|
|
|
5.55
|
|
|
|
6,411
|
|
|
|
279,967
|
|
|
|
4.37
|
|
|
|
5,832
|
|
|
|
201,366
|
|
|
|
3.45
|
|
|
|
6,018
|
|
|
|
198,252
|
|
|
|
3.29
|
|
|
|
4,162
|
|
|
|
185,149
|
|
|
|
4.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
liabilities
|
|
|
41,409
|
|
|
|
1,496,552
|
|
|
|
3.61
|
|
|
|
39,567
|
|
|
|
994,351
|
|
|
|
2.51
|
|
|
|
36,913
|
|
|
|
564,160
|
|
|
|
1.53
|
|
|
|
32,731
|
|
|
|
527,810
|
|
|
|
1.61
|
|
|
|
24,914
|
|
|
|
594,514
|
|
|
|
2.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
7,555
|
|
|
|
|
|
|
|
|
|
|
|
8,050
|
|
|
|
|
|
|
|
|
|
|
|
8,039
|
|
|
|
|
|
|
|
|
|
|
|
6,801
|
|
|
|
|
|
|
|
|
|
|
|
3,618
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
834
|
|
|
|
|
|
|
|
|
|
|
|
720
|
|
|
|
|
|
|
|
|
|
|
|
864
|
|
|
|
|
|
|
|
|
|
|
|
876
|
|
|
|
|
|
|
|
|
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
49,798
|
|
|
|
|
|
|
|
|
|
|
|
48,337
|
|
|
|
|
|
|
|
|
|
|
|
45,816
|
|
|
|
|
|
|
|
|
|
|
|
40,408
|
|
|
|
|
|
|
|
|
|
|
|
28,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
6,041
|
|
|
|
|
|
|
|
|
|
|
|
5,798
|
|
|
|
|
|
|
|
|
|
|
|
5,701
|
|
|
|
|
|
|
|
|
|
|
|
4,941
|
|
|
|
|
|
|
|
|
|
|
|
3,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
55,839
|
|
|
|
|
|
|
|
|
|
|
|
54,135
|
|
|
|
|
|
|
|
|
|
|
|
51,517
|
|
|
|
|
|
|
|
|
|
|
|
45,349
|
|
|
|
|
|
|
|
|
|
|
|
31,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
|
|
3.32
|
|
|
|
|
|
|
|
|
|
|
|
3.60
|
|
|
|
|
|
|
|
|
|
|
|
3.81
|
|
|
|
|
|
|
|
|
|
|
|
4.03
|
|
Contribution of interest-free funds
|
|
|
|
|
|
|
|
|
|
|
.60
|
|
|
|
|
|
|
|
|
|
|
|
.45
|
|
|
|
|
|
|
|
|
|
|
|
.28
|
|
|
|
|
|
|
|
|
|
|
|
.28
|
|
|
|
|
|
|
|
|
|
|
|
.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/margin on
earning assets
|
|
|
|
|
|
$
|
1,837,208
|
|
|
|
3.70
|
%
|
|
|
|
|
|
|
1,811,654
|
|
|
|
3.77
|
%
|
|
|
|
|
|
|
1,751,902
|
|
|
|
3.88
|
%
|
|
|
|
|
|
|
1,615,068
|
|
|
|
4.09
|
%
|
|
|
|
|
|
|
1,261,634
|
|
|
|
4.36
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes nonaccrual
loans. |
(b) |
|
Includes available for sale
securities at amortized cost. |
36
Taxable-equivalent net interest income rose 3% to
$1.81 billion in 2005 from $1.75 billion in 2004. That
improvement reflected a 6% increase in average earning assets to
$48.1 billion in 2005 from $45.2 billion in 2004,
partially offset by a narrowing of the Companys net
interest margin, which declined to 3.77% in 2005 from 3.88% in
2004. The growth in average earning assets reflects higher
average loans and leases outstanding, which rose 6% to
$39.5 billion in 2005 from 2004s average of
$37.1 billion, and higher average investment securities
balances, which also increased 6% to $8.5 billion in 2005
from $8.0 billion in 2004. The Company experienced growth
in most major loan categories during 2005 as compared with 2004.
Average commercial loans and leases rose 10% to
$10.5 billion in 2005 from $9.5 billion in 2004,
reflecting, in part, a $212 million rise in average
automobile floor plan loans outstanding. Commercial real estate
loans averaged $14.3 billion during 2005, 8% higher than
$13.3 billion in 2004. Contributing to that increase were
$467 million of higher average balances of construction
loans to developers of residential real estate properties.
Average residential real estate loan balances rose 26% to
$3.9 billion in 2005 from $3.1 billion in 2004. A
higher level of loans held for sale was the most significant
contributor to that increase. Consumer loans and leases averaged
$10.8 billion during 2005, down 4% from $11.2 billion
in 2004. Average balances of automobile loans and leases
decreased 16% to $3.7 billion in 2005 from
$4.4 billion in 2004, largely due to unfavorable rates
being offered by competitors. Partially offsetting the drop in
automobile loan and lease balances was a 13% rise in average
outstanding balances of home equity lines of credit to
$4.0 billion in 2005 from $3.5 billion in 2004.
Table 4 summarizes average loans and leases outstanding in 2006
and percentage changes in the major components of the portfolio
over the past two years.
Table
4
AVERAGE
LOANS AND LEASES
(Net of unearned discount)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent Increase
|
|
|
|
|
|
|
(Decrease) from
|
|
|
|
2006
|
|
|
2005 to 2006
|
|
|
2004 to 2005
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
Commercial, financial, etc
|
|
$
|
11,319
|
|
|
|
8
|
%
|
|
|
10
|
%
|
Real estate commercial
|
|
|
15,096
|
|
|
|
5
|
|
|
|
8
|
|
Real estate consumer
|
|
|
5,015
|
|
|
|
28
|
|
|
|
26
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile
|
|
|
2,885
|
|
|
|
(22
|
)
|
|
|
(16
|
)
|
Home equity lines
|
|
|
4,202
|
|
|
|
5
|
|
|
|
13
|
|
Home equity loans
|
|
|
1,208
|
|
|
|
(5
|
)
|
|
|
(17
|
)
|
Other
|
|
|
1,708
|
|
|
|
(6
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
10,003
|
|
|
|
(7
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,433
|
|
|
|
5
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans and leases, excluding loans secured by real
estate, were $11.7 billion at December 31, 2006,
representing 27% of total loans and leases. Table 5 presents
information on such commercial loans and leases as of
December 31, 2006 relating to geographic area, size, and
whether the loans are secured by collateral or unsecured. Of the
$11.7 billion of commercial loans and leases outstanding at
the end of 2006, approximately $9.7 billion, or 83%, were
secured, while 49%, 26% and 13% were granted to businesses in
New York State, Pennsylvania and Maryland, respectively. The
Company provides financing for leases to commercial customers,
primarily for equipment. Commercial leases included in total
commercial loans and leases at December 31, 2006 aggregated
$1.2 billion, of which 41% were secured by collateral
located in New York State, 13% were secured by collateral in
Maryland and another 13% were secured by collateral in
Pennsylvania.
37
International loans included in commercial loans and leases
totaled $176 million and $217 million at
December 31, 2006 and 2005, respectively. The Company
participates in the insurance and guarantee programs of the
Export-Import Bank of the United States. These programs provide
U.S. government repayment coverage of 90% to 100% on loans
supporting foreign borrowers purchases of U.S. goods
and services. The loans generally range from $500 thousand to
$10 million. The outstanding balances of loans under these
programs at December 31, 2006 and 2005 were
$143 million and $200 million, respectively.
Table
5
COMMERCIAL
LOANS AND LEASES, NET OF UNEARNED DISCOUNT
(Excluding Loans Secured by Real Estate)
December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Dollars Outstanding by Loan Size
|
|
|
|
Outstandings
|
|
|
$0-1
|
|
|
$1-5
|
|
|
$5-10
|
|
|
$10-15
|
|
|
$15+
|
|
|
|
(Dollars in millions)
|
|
|
New York State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
$
|
4,250
|
|
|
|
23
|
%
|
|
|
25
|
%
|
|
|
12
|
%
|
|
|
6
|
%
|
|
|
8
|
%
|
Unsecured
|
|
|
956
|
|
|
|
5
|
|
|
|
6
|
|
|
|
3
|
|
|
|
1
|
|
|
|
2
|
|
Leases
|
|
|
494
|
|
|
|
4
|
|
|
|
3
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total New York State
|
|
|
5,700
|
|
|
|
32
|
%
|
|
|
34
|
%
|
|
|
16
|
%
|
|
|
8
|
%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pennsylvania
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
2,443
|
|
|
|
25
|
%
|
|
|
26
|
%
|
|
|
15
|
%
|
|
|
5
|
%
|
|
|
8
|
%
|
Unsecured
|
|
|
486
|
|
|
|
5
|
|
|
|
6
|
|
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
Leases
|
|
|
161
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pennsylvania
|
|
|
3,090
|
|
|
|
33
|
%
|
|
|
33
|
%
|
|
|
17
|
%
|
|
|
6
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maryland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
999
|
|
|
|
30
|
%
|
|
|
21
|
%
|
|
|
7
|
%
|
|
|
3
|
%
|
|
|
7
|
%
|
Unsecured
|
|
|
325
|
|
|
|
4
|
|
|
|
5
|
|
|
|
3
|
|
|
|
|
|
|
|
10
|
|
Leases
|
|
|
153
|
|
|
|
5
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Maryland
|
|
|
1,477
|
|
|
|
39
|
%
|
|
|
29
|
%
|
|
|
11
|
%
|
|
|
3
|
%
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
839
|
|
|
|
12
|
%
|
|
|
19
|
%
|
|
|
16
|
%
|
|
|
3
|
%
|
|
|
10
|
%
|
Unsecured
|
|
|
167
|
|
|
|
5
|
|
|
|
3
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
Leases
|
|
|
393
|
|
|
|
6
|
|
|
|
9
|
|
|
|
7
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other
|
|
|
1,399
|
|
|
|
23
|
%
|
|
|
31
|
%
|
|
|
25
|
%
|
|
|
9
|
%
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans and leases
|
|
$
|
11,666
|
|
|
|
32
|
%
|
|
|
33
|
%
|
|
|
17
|
%
|
|
|
7
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans secured by real estate, including outstanding balances of
home equity loans and lines of credit which the Company
classifies as consumer loans, represented approximately 62% of
the loan and lease portfolio during 2006, compared with 60% in
2005 and 58% in 2004. At December 31, 2006, the Company
held approximately $15.4 billion of commercial real estate
loans, $6.0 billion of consumer real estate loans secured
by
one-to-four
family residential properties (including $1.9 billion of
loans held for sale) and $5.4 billion of outstanding
balances of home equity loans and lines of credit, compared with
$14.5 billion, $4.4 billion and $5.3 billion,
respectively, at December 31, 2005.
A significant portion of commercial real estate loans originated
by the Company are secured by properties in the New York City
metropolitan area, including areas in neighboring states
generally
38
considered to be within commuting distance of New York City, and
other areas of New York State where the Company operates.
Commercial real estate loans are also originated through the
Companys offices in Pennsylvania, Maryland, Virginia,
Washington, D.C., Oregon and West Virginia. Commercial real
estate loans originated by the Company include fixed-rate
instruments with monthly payments and a balloon payment of the
remaining unpaid principal at maturity, in many cases five years
after origination. For borrowers in good standing, the terms of
such loans may be extended by the customer for an additional
five years at the then current market rate of interest. The
Company also originates fixed-rate commercial real estate loans
with maturities of greater than five years, generally having
original maturity terms of approximately ten years, and
adjustable-rate commercial real estate loans. Excluding
construction loans, adjustable-rate commercial real estate loans
represented approximately 41% of the commercial real estate loan
portfolio as of December 31, 2006. Table 6 presents
commercial real estate loans by geographic area, type of
collateral and size of the loans outstanding at
December 31, 2006. Of the $5.1 billion of commercial
real estate loans in the New York City metropolitan area,
approximately 31% were secured by multifamily residential
properties, 40% by retail space and 8% by office space. The
Companys experience has been that office space and retail
properties tend to demonstrate more volatile fluctuations in
value through economic cycles and changing economic conditions
than do multifamily residential properties. Approximately 45% of
the aggregate dollar amount of New York City-area loans were for
loans with outstanding balances of $5 million or less,
while loans of more than $15 million made up approximately
24% of the total.
39
Table
6
COMMERCIAL
REAL ESTATE LOANS
(Net of unearned discount)
December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Dollars Outstanding by Loan Size |
|
|
|
Outstandings |
|
|
$0-1 |
|
|
$1-5 |
|
|
$5-10 |
|
|
$10-15 |
|
|
$15+ |
|
|
|
(Dollars in millions) |
|
|
Metropolitan New York City
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments/Multifamily
|
|
$
|
1,602
|
|
|
|
3
|
%
|
|
|
14
|
%
|
|
|
6
|
%
|
|
|
3
|
%
|
|
|
5
|
%
|
Office
|
|
|
402
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
Retail/Services
|
|
|
2,020
|
|
|
|
3
|
|
|
|
14
|
|
|
|
8
|
|
|
|
4
|
|
|
|
11
|
|
Construction
|
|
|
315
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Industrial
|
|
|
213
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Other
|
|
|
561
|
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Metropolitan New York City
|
|
|
5,113
|
|
|
|
9
|
%
|
|
|
36
|
%
|
|
|
21
|
%
|
|
|
10
|
%
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other New York State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments/Multifamily
|
|
|
281
|
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
%
|
Office
|
|
|
893
|
|
|
|
7
|
|
|
|
9
|
|
|
|
4
|
|
|
|
1
|
|
|
|
3
|
|
Retail/Services
|
|
|
935
|
|
|
|
9
|
|
|
|
10
|
|
|
|
4
|
|
|
|
1
|
|
|
|
1
|
|
Construction
|
|
|
614
|
|
|
|
2
|
|
|
|
5
|
|
|
|
3
|
|
|
|
1
|
|
|
|
5
|
|
Industrial
|
|
|
408
|
|
|
|
5
|
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
651
|
|
|
|
6
|
|
|
|
6
|
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other New York State
|
|
|
3,782
|
|
|
|
31
|
%
|
|
|
38
|
%
|
|
|
15
|
%
|
|
|
6
|
%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pennsylvania
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments/Multifamily
|
|
|
265
|
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
1
|
%
|
Office
|
|
|
397
|
|
|
|
6
|
|
|
|
5
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
Retail/Services
|
|
|
547
|
|
|
|
7
|
|
|
|
9
|
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
Construction
|
|
|
286
|
|
|
|
1
|
|
|
|
5
|
|
|
|
3
|
|
|
|
1
|
|
|
|
1
|
|
Industrial
|
|
|
366
|
|
|
|
4
|
|
|
|
6
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Other
|
|
|
746
|
|
|
|
16
|
|
|
|
11
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pennsylvania
|
|
|
2,607
|
|
|
|
37
|
%
|
|
|
39
|
%
|
|
|
12
|
%
|
|
|
7
|
%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maryland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments/Multifamily
|
|
|
31
|
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
Office
|
|
|
390
|
|
|
|
8
|
|
|
|
7
|
|
|
|
4
|
|
|
|
|
|
|
|
3
|
|
Retail/Services
|
|
|
219
|
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
|
1
|
|
|
|
1
|
|
Construction
|
|
|
585
|
|
|
|
1
|
|
|
|
8
|
|
|
|
10
|
|
|
|
3
|
|
|
|
10
|
|
Industrial
|
|
|
190
|
|
|
|
3
|
|
|
|
5
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
Other
|
|
|
401
|
|
|
|
9
|
|
|
|
7
|
|
|
|
2
|
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Maryland
|
|
|
1,816
|
|
|
|
26
|
%
|
|
|
31
|
%
|
|
|
20
|
%
|
|
|
6
|
%
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments/Multifamily
|
|
|
141
|
|
|
|
1
|
%
|
|
|
3
|
%
|
|
|
2
|
%
|
|
|
1
|
%
|
|
|
|
%
|
Office
|
|
|
122
|
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
Retail/Services
|
|
|
503
|
|
|
|
2
|
|
|
|
6
|
|
|
|
7
|
|
|
|
4
|
|
|
|
5
|
|
Construction
|
|
|
956
|
|
|
|
10
|
|
|
|
11
|
|
|
|
8
|
|
|
|
4
|
|
|
|
12
|
|
Industrial
|
|
|
149
|
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
Other
|
|
|
228
|
|
|
|
2
|
|
|
|
4
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other
|
|
|
2,099
|
|
|
|
17
|
%
|
|
|
28
|
%
|
|
|
24
|
%
|
|
|
13
|
%
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate loans
|
|
$
|
15,417
|
|
|
|
22
|
%
|
|
|
35
|
%
|
|
|
18
|
%
|
|
|
9
|
%
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Commercial real estate loans secured by properties located in
other parts of New York State, Pennsylvania, Maryland and other
areas tend to have a greater diversity of collateral types and
include a significant amount of lending to customers who use the
mortgaged property in their trade or business. Approximately 69%
of the aggregate dollar amount of commercial real estate loans
in New York State secured by properties located outside of the
metropolitan New York City area were for loans with outstanding
balances of $5 million or less. Of the outstanding balances
of commercial real estate loans in Pennsylvania and Maryland,
approximately 76% and 57%, respectively, were for loans with
outstanding balances of $5 million or less.
Commercial real estate loans secured by properties located
outside of Pennsylvania, Maryland, New York State and areas of
states neighboring New York considered to be part of the New
York City metropolitan area, comprised 14% of total commercial
real estate loans as of December 31, 2006.
Commercial real estate construction loans presented in table 6
totaled $2.8 billion at December 31, 2006, or 6% of
total loans and leases. Approximately 97% of those construction
loans had adjustable interest rates. Included in such loans at
December 31, 2006 were $1.1 billion of loans to
developers of residential real estate properties. The remainder
of the commercial real estate construction loan portfolio was
comprised of loans made for various purposes, including the
construction of office buildings, multi-family residential
housing, retail space and other commercial development.
M&T Realty Capital
Corporation, one of the Companys commercial real estate
lending subsidiaries, participates in the FNMA Delegated
Underwriting and Servicing (DUS) program, pursuant
to which commercial real estate loans are originated in
accordance with terms and conditions specified by FNMA and sold.
Under this program, loans are sold with partial credit recourse
to M&T Realty Capital
Corporation. The amount of recourse is generally limited to
one-third of any credit loss incurred by the purchaser on an
individual loan, although in some cases the recourse amount is
less than one-third of the outstanding principal balance. At
December 31, 2006 and 2005, approximately $939 million
and $941 million, respectively, of commercial real estate
loan balances serviced for others had been sold with recourse.
There have been no material losses incurred as a result of those
recourse arrangements. Commercial real estate loans held for
sale at December 31, 2006 and 2005 aggregated
$49 million and $199 million, respectively. At
December 31, 2006 and 2005, commercial real estate loans
serviced for other investors by the Company were
$4.9 billion and $4.3 billion, respectively. Those
serviced loans are not included in the Companys
consolidated balance sheet.
Real estate loans secured by
one-to-four
family residential properties were $6.0 billion at
December 31, 2006, including approximately 31% secured by
properties located in New York State, 13% secured by properties
located in Pennsylvania and 9% secured by properties located in
Maryland. At December 31, 2006, $1.9 billion of
residential real estate loans were held for sale, compared with
$1.2 billion at December 31, 2005. Loans to finance
the construction of
one-to-four
family residential properties totaled $693 million at
December 31, 2006, or approximately 2% of total loans and
leases, compared with $583 million or 1% at
December 31, 2005.
Consumer loans and leases comprised approximately 24% of the
average loan portfolio during 2006, down from 27% in 2005 and
30% in 2004. The two largest components of the consumer loan
portfolio are outstanding balances of home equity lines of
credit and automobile loans and leases. Average balances of home
equity lines of credit outstanding represented approximately 10%
of average loans outstanding in 2006 and 2005. Automobile loans
and leases represented approximately 7% of the Companys
average loan portfolio during 2006, down from 9% in 2005. No
other consumer loan product represented more than 4% of average
loans outstanding in 2006. Approximately 54% of home equity
lines of credit outstanding at December 31, 2006 were
secured by properties in New York State, and 18% and 22% were
secured by properties in Pennsylvania and Maryland,
respectively. Average outstanding balances on home equity lines
of credit were $4.2 billion in 2006, up 5% from
$4.0 billion in 2005. The Company continues to pursue
growing the home equity portfolio, which has historically
experienced a lower level of credit losses than other types of
consumer loans. However, the rate of growth from 2005 to 2006
slowed, reflecting the impact of rising interest rates on this
portfolio of predominantly variable interest rate loans. At
December 31, 2006, 30% and 32% of the automobile loan and
lease portfolio were to customers residing in New York State and
Pennsylvania, respectively. Although automobile loans and leases
have generally been originated through dealers, all applications
submitted through dealers are
41
subject to the Companys normal underwriting and loan
approval procedures. Since mid-2004, the Company has experienced
a general slowdown in its automobile loan origination business,
resulting from increased competition from other lenders,
including financing incentives offered by automobile
manufacturers. Throughout that period, the Company chose not to
match the pricing being offered by many competitors. During late
2006 the interest rate environment as it relates to these loans
improved such that the outstanding balances in this portfolio
increased by $42 million to $2.7 billion at
December 31, 2006 from September 30, 2006.
Automobile leases outstanding averaged approximately
$53 million in 2006, compared with $137 million in
2005 and $308 million in 2004. The Company ceased
origination of automobile leases during 2003. That decision did
not have a significant impact on the Companys results of
operations. At December 31, 2006 and 2005, outstanding
automobile leases totaled $29 million and $85 million,
respectively.
Table 7 presents the composition of the Companys loan and
lease portfolio at the end of 2006, including outstanding
balances to businesses and consumers in New York State,
Pennsylvania, Maryland and other states. Approximately 48% of
total loans and leases at December 31, 2006 were to New
York State customers, while 21% and 12% were to Pennsylvania and
Maryland customers, respectively.
Table
7
LOANS AND
LEASES, NET OF UNEARNED DISCOUNT
December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Dollars Outstanding
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstandings
|
|
|
State
|
|
|
Pennsylvania
|
|
|
Maryland
|
|
|
Other
|
|
|
|
(Dollars in millions)
|
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
5,956
|
|
|
|
31
|
%
|
|
|
13
|
%
|
|
|
9
|
%
|
|
|
47
|
%
|
Commercial
|
|
|
15,417
|
|
|
|
58
|
(a)
|
|
|
17
|
|
|
|
12
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
21,373
|
|
|
|
50
|
%
|
|
|
16
|
%
|
|
|
11
|
%
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, etc
|
|
|
10,465
|
|
|
|
50
|
%
|
|
|
28
|
%
|
|
|
13
|
%
|
|
|
9
|
%
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured or guaranteed
|
|
|
9,636
|
|
|
|
41
|
%
|
|
|
26
|
%
|
|
|
15
|
%
|
|
|
18
|
%
|
Unsecured
|
|
|
243
|
|
|
|
45
|
|
|
|
26
|
|
|
|
24
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
9,879
|
|
|
|
41
|
%
|
|
|
26
|
%
|
|
|
15
|
%
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
41,717
|
|
|
|
48
|
%
|
|
|
21
|
%
|
|
|
13
|
%
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1,201
|
|
|
|
41
|
%
|
|
|
13
|
%
|
|
|
13
|
%
|
|
|
33
|
%
|
Consumer
|
|
|
29
|
|
|
|
18
|
|
|
|
50
|
|
|
|
1
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total leases
|
|
|
1,230
|
|
|
|
41
|
%
|
|
|
14
|
%
|
|
|
12
|
%
|
|
|
33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
42,947
|
|
|
|
48
|
%
|
|
|
21
|
%
|
|
|
12
|
%
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes loans secured by
properties located in neighboring states generally considered to
be within commuting distance of New York City. |
Balances of investment securities averaged $8.0 billion in
2006 and 2004, compared with $8.5 billion in 2005. The
decline in such securities from 2005 to 2006 reflects net
paydowns of mortgage-backed securities and collateralized
mortgage obligations. The Company has allowed the investment
securities portfolio to decline as the opportunity to purchase
securities at favorable spreads, that is, the difference
42
between the yield earned on a security and the rate paid on
funds used to purchase it, has been limited. The increase in
average balances of investment securities from 2004 to 2005 was
the result of net purchases in late 2004 and in 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
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. The Company regularly reviews its investment
securities for declines in value below amortized cost that might
be characterized as other than temporary. As of
December 31, 2006 and 2005, the Company concluded that such
declines were temporary in nature. Events occurring during
2005s third quarter resulted in the Company recognizing an
other-than-temporary
impairment charge of $29 million related to preferred
securities of FNMA and FHLMC. Additional information about the
investment securities portfolio is included in note 3 of
Notes to Financial Statements.
Other earning assets include deposits at banks, trading account
assets, federal funds sold and agreements to resell securities.
Those other earning assets in the aggregate averaged
$183 million in 2006, $113 million in 2005 and
$74 million in 2004. The amounts of investment securities
and other earning assets held by the Company are influenced by
such factors as demand for loans, which generally yield more
than investment securities and other earning assets, ongoing
repayments, the level of deposits, and management of balance
sheet size and resulting capital ratios.
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 Companys branch network is its principal source of
core deposits, which generally carry lower interest rates than
wholesale funds of comparable maturities. Also included in core
deposits are certificates of deposit under $100,000 generated on
a nationwide basis by
M&T Bank, N.A. Core
deposits averaged $28.3 billion in 2006, $27.9 billion
in 2005 and $28.1 billion in 2004. The previously discussed
June 30, 2006 branch acquisition added approximately
$880 million to average core deposits during the second
half of 2006, or approximately $443 million for the full year.
The rise in average balances of time deposits less than $100,000
in 2006 compared with 2005 and in 2005 as compared with 2004 was
partially due to customer response to higher interest rates
offered on those products, resulting in a shift of funds from
savings and non-interest bearing deposit accounts to time
deposits. Average core deposits of
M&T Bank, N.A. were
$387 million in 2006, $216 million in 2005 and
$223 million in 2004. Funding provided by core deposits
represented 57% of average earning assets in 2006, compared with
58% in 2005 and 62% in 2004. Table 8 summarizes average core
deposits in 2006 and percentage changes in the components of
such deposits over the past two years.
Table
8
AVERAGE
CORE DEPOSITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Increase
|
|
|
|
|
|
|
(Decrease) from
|
|
|
|
2006
|
|
|
2005 to 2006
|
|
|
2004 to 2005
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
435
|
|
|
|
9
|
%
|
|
|
(27
|
)%
|
Savings deposits
|
|
|
14,332
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Time deposits under $100,000
|
|
|
5,983
|
|
|
|
29
|
|
|
|
8
|
|
Noninterest-bearing deposits
|
|
|
7,555
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
28,305
|
|
|
|
1
|
%
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Additional sources of funding for the Company include domestic
time deposits of $100,000 or more, deposits originated through
the Companys offshore branch office, and brokered
deposits. Domestic time deposits over $100,000, excluding
brokered certificates of deposit, averaged $2.9 billion in
2006, $1.8 billion in 2005 and $1.2 billion in 2004.
Offshore branch deposits, primarily comprised of accounts with
balances of $100,000 or more, averaged $3.6 billion in
2006, $3.8 billion in 2005 and $3.1 billion in 2004.
Average brokered time deposits totaled $3.5 billion in
2006, compared with $2.7 billion in 2005 and
$1.4 billion in 2004, and at December 31, 2006 and
2005 totaled $2.7 billion and $3.7 billion,
respectively. At December 31, 2006, the weighted-average
remaining term to maturity of brokered time deposits was
11 months. Certain of these brokered deposits have
provisions that allow for early redemption. In connection with
the Companys 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 $390 million of
brokered time deposits. The Company also had brokered
money-market deposit accounts, which averaged $69 million,
$62 million and $57 million in 2006, 2005 and 2004,
respectively. Offshore branch deposits and brokered deposits
have been used by the Company as an alternative 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 such deposits, and the cost of funds available
from alternative sources at the time.
The Company also uses borrowings from banks, securities dealers,
various Federal Home Loan Banks (FHLBs), and
others as sources of funding. Short-term borrowings averaged
$4.5 billion in 2006, $4.9 billion in 2005 and
$5.1 billion in 2004. Included in short-term borrowings
were unsecured federal funds borrowings, which generally mature
daily, and averaged $3.7 billion, $4.1 billion and
$4.3 billion in 2006, 2005 and 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
subsidiary, the loans and the borrowings are included in the
consolidated financial statements of the Company. Additional
information about M&T
Auto Receivables I, LLC and the revolving borrowing
agreement is included in note 18 of Notes to Financial
Statements.
The average balance of long-term borrowings was
$6.0 billion in 2006, $6.4 billion in 2005 and
$5.8 billion in 2004. Included in average long-term
borrowings were amounts borrowed from the FHLBs of
$3.8 billion in each of 2006 and 2005, and
$3.3 billion in 2004, and subordinated capital notes of
$1.2 billion in 2006 and $1.3 billion in 2005 and
2004. M&T Bank issued
$500 million of subordinated notes in December 2006, in
part to maintain appropriate regulatory capital ratios. The
notes bear a fixed rate of interest of 5.629% until December
2016 and a floating rate thereafter until maturity in December
2021, at a rate equal to the three-month London Interbank
Offered Rate (LIBOR) plus .64%. Beginning December
2016, M&T Bank may, at
its option and subject to prior regulatory approval, redeem some
or all of the notes on any interest payment date. In December
2005, M&T Bank
exchanged $363 million of 8.0% subordinated notes due
2010 for $409 million of subordinated notes bearing a fixed
coupon rate of interest of 5.585% through December 2015 and a
variable rate of interest equal to one-month LIBOR plus 1.215%
from December 2015 to the maturity date in December 2020.
Beginning December 2015,
M&T Bank may, at its
option and subject to prior regulatory approval, redeem some or
all of the new notes on any interest payment date. In accordance
with GAAP, the Company accounted for the exchange as a
modification of debt terms and not as an extinguishment of debt
because, among other factors, the present value of the cash
flows under the terms of the new subordinated notes was not at
least ten percent different from the present value of the
remaining cash flows under the original terms of the exchanged
subordinated notes. Coincident with the exchange,
M&T Bank terminated
$363 million out of a total notional amount of
$500 million of interest rate swap agreements that were
used to hedge the 8.0% subordinated notes. Under the terms of
the swap agreements, the Company pays a variable rate of
interest and receives a fixed rate. The Company paid
$15 million to terminate the $363 million notional
amount of the interest rate swap agreements. A hedge valuation
adjustment of $15 million related to the $363 million
of exchanged subordinated notes became part of the carrying
value of the new subordinated
44
notes. The remaining portion of that valuation adjustment, which
is being amortized to interest expense over the period to
expected maturity of the new notes, was $14 million at
December 31, 2006. Including the impact of such
amortization, the new subordinated notes have an effective rate
of 7.76%. The $137 million notional amount of the interest
rate swap agreement that was not terminated continues to hedge
the remaining $137 million of 8.0% subordinated notes.
Further information on interest rate swap agreements is provided
in note 17 of Notes to Financial Statements. Junior
subordinated debentures associated with trust preferred
securities that were included in average long-term borrowings
were $712 million, $711 million and $710 million
in 2006, 2005 and 2004, respectively. Additional information
regarding junior subordinated debentures, as well as information
regarding contractual maturities of long-term borrowings, is
provided in note 9 of Notes to Financial Statements.
Changes in the composition of the Companys earning assets
and interest-bearing liabilities as described herein, as well as
changes in interest rates and spreads, can impact net interest
income. From June 30, 2004 to June 30, 2006, the
Federal Reserve raised its benchmark overnight federal funds
target rate seventeen times, each increase representing a
25 basis point increment over the previously effective
target rate. Specifically, during the first half of 2006, four
increases were initiated; during 2005, eight increases occurred;
and in the second half of 2004, the target federal funds rate
was raised five times. In such a rising interest rate
environment, rates paid on interest-bearing liabilities, most
notably short-term borrowings, have risen more rapidly than have
the yields on earning assets. The result of these conditions was
a contraction of the net interest spread, or the difference
between the yield on earning assets and the rate paid on
interest-bearing liabilities, which declined 22 basis
points from 3.32% in 2005 to 3.10% in 2006. The yield on earning
assets during 2006 was 6.71%, 88 basis points higher than
5.83% in 2005, while the rate paid on interest-bearing
liabilities increased 110 basis points to 3.61% from 2.51%
in 2005. The yield on the Companys earning assets rose
70 basis points in 2005 from 5.13% in 2004, while the rate
paid on interest-bearing liabilities in 2005 was up
98 basis points from 1.53% in 2004. As a result, the
Companys net interest spread decreased from 3.60% in 2004
to 3.32% in 2005.
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. Net
interest-free funds averaged $8.2 billion in 2006, compared
with $8.6 billion in 2005 and $8.3 billion in 2004.
Goodwill and core deposit and other intangible assets averaged
$3.1 billion in 2006 and 2004, and $3.0 billion in
2005. The cash surrender value of bank owned life insurance
averaged $1.1 billion in 2006, $1.0 billion in 2005
and $974 million in 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 .60% in 2006, .45% in 2005 and .28% in
2004. The rise in the contribution to net interest margin
ascribed to net interest-free funds in 2006 and 2005 as compared
with the immediately preceding years 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
Companys net interest margin was 3.70% in 2006, compared
with 3.77% in 2005 and 3.88% in 2004. Future changes in market
interest rates or spreads, as well as changes in the composition
of the Companys portfolios of earning assets and
interest-bearing liabilities that result in reductions in
spreads, could adversely impact the Companys net interest
income and net interest margin. Through the second quarter of
2006, the Companys net interest margin had been declining
since the Federal Reserve began raising interest rates in June
2004. During the last half of 2006, the Federal Reserve held
interest rates steady and the Companys net interest margin
stabilized.
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 at December 31, 2006 was
$1.0 billion. Under the terms of these swap
45
agreements, the Company receives payments based on the
outstanding notional amount of the swaps at fixed rates and
makes payments at variable rates.
As of December 31, 2006, all of the Companys interest
rate swap agreements entered into for risk management purposes
had been designated as fair value hedges. Additional information
about those swap agreements and the items being hedged is
included in note 17 of Notes to Financial Statements. 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 Companys 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 Companys
consolidated statement of income. In a cash flow hedge, unlike
in a fair value hedge, the effective portion of the
derivatives 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 in
2006, 2005 and 2004 were not material to the Companys
results of operations. The estimated aggregate fair value of
interest rate swap agreements designated as fair value hedges
represented a loss of approximately $15 million and
$9 million at December 31, 2006 and 2005,
respectively. 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 average notional amounts of
interest rate swap agreements entered into for interest rate
risk management purposes, the related effect on net interest
income and margin, and the weighted-average interest rates paid
or received on those swap agreements are presented in table 9.
Table
9
INTEREST
RATE SWAP AGREEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Amount
|
|
|
Rate(a)
|
|
|
Amount
|
|
|
Rate(a)
|
|
|
Amount
|
|
|
Rate(a)
|
|
|
|
(Dollars in thousands)
|
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
Interest expense
|
|
|
4,281
|
|
|
|
.01
|
|
|
|
(5,526
|
)
|
|
|
(.01
|
)
|
|
|
(18,276
|
)
|
|
|
(.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/margin
|
|
$
|
(4,281
|
)
|
|
|
(.01
|
)%
|
|
$
|
5,526
|
|
|
|
.01
|
%
|
|
$
|
18,276
|
|
|
|
.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average notional amount(b)
|
|
$
|
774,268
|
|
|
|
|
|
|
$
|
767,175
|
|
|
|
|
|
|
$
|
696,284
|
|
|
|
|
|
Rate received(b)
|
|
|
|
|
|
|
5.19
|
%
|
|
|
|
|
|
|
6.62
|
%
|
|
|
|
|
|
|
6.98
|
%
|
Rate paid(b)
|
|
|
|
|
|
|
5.74
|
%
|
|
|
|
|
|
|
5.90 |
% |
|
|
|
|
|
|
4.35 |
% |
|
|
|
(a) |
|
Computed as a percentage of
average earning assets or interest-bearing
liabilities. |
(b) |
|
Weighted-average rate paid or
received on interest rate swap agreements in effect during
year. |
46
Provision
For Credit Losses
The Company maintains an allowance for credit losses that in
managements 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 was
$80 million in 2006, down from $88 million in 2005 and
$95 million in 2004. Net loan charge-offs declined to
$68 million in 2006 from $77 million and
$82 million in 2005 and 2004, respectively. Net loan
charge-offs as a percentage of average loans outstanding were
.16% in 2006, compared with .19% in 2005 and .22% in 2004. A
summary of the Companys loan charge-offs, provision and
allowance for credit losses is presented in table 10.
Table
10
LOAN
CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Dollars in thousands)
|
|
|
Allowance for credit losses
beginning balance
|
|
$
|
637,663
|
|
|
$
|
626,864
|
|
|
$
|
614,058
|
|
|
$
|
436,472
|
|
|
$
|
425,008
|
|
Charge-offs during year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial,
agricultural, etc.
|
|
|
23,949
|
|
|
|
32,210
|
|
|
|
33,340
|
|
|
|
44,782
|
|
|
|
57,401
|
|
Real estate
construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
88
|
|
Real estate mortgage
|
|
|
6,406
|
|
|
|
4,708
|
|
|
|
10,829
|
|
|
|
13,999
|
|
|
|
13,969
|
|
Consumer
|
|
|
65,251
|
|
|
|
70,699
|
|
|
|
74,856
|
|
|
|
68,737
|
|
|
|
53,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
95,606
|
|
|
|
107,617
|
|
|
|
119,025
|
|
|
|
127,520
|
|
|
|
124,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries during year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial,
agricultural, etc.
|
|
|
4,119
|
|
|
|
6,513
|
|
|
|
13,581
|
|
|
|
12,517
|
|
|
|
3,129
|
|
Real estate
construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Real estate mortgage
|
|
|
1,784
|
|
|
|
3,887
|
|
|
|
4,051
|
|
|
|
3,436
|
|
|
|
2,333
|
|
Consumer
|
|
|
21,988
|
|
|
|
20,330
|
|
|
|
19,700
|
|
|
|
15,047
|
|
|
|
11,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
27,891
|
|
|
|
30,730
|
|
|
|
37,332
|
|
|
|
31,004
|
|
|
|
16,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
67,715
|
|
|
|
76,887
|
|
|
|
81,693
|
|
|
|
96,516
|
|
|
|
107,750
|
|
Provision for credit losses
|
|
|
80,000
|
|
|
|
88,000
|
|
|
|
95,000
|
|
|
|
131,000
|
|
|
|
122,000
|
|
Allowance for credit losses
acquired during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,300
|
|
|
|
|
|
Allowance related to loans sold or
securitized
|
|
|
|
|
|
|
(314
|
)
|
|
|
(501
|
)
|
|
|
(3,198
|
)
|
|
|
(2,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses ending
balance
|
|
$
|
649,948
|
|
|
$
|
637,663
|
|
|
$
|
626,864
|
|
|
$
|
614,058
|
|
|
$
|
436,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs as a percent of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
84.64
|
%
|
|
|
87.37
|
%
|
|
|
85.99
|
%
|
|
|
73.68
|
%
|
|
|
88.32
|
%
|
Average loans and leases, net of
unearned discount
|
|
|
.16
|
%
|
|
|
.19
|
%
|
|
|
.22
|
%
|
|
|
.28
|
%
|
|
|
.42
|
%
|
Allowance for credit losses as a
percent of loans and leases, net of unearned discount, at
year-end
|
|
|
1.51
|
%
|
|
|
1.58
|
%
|
|
|
1.63
|
%
|
|
|
1.72
|
%
|
|
|
1.70
|
%
|
Nonperforming loans, consisting of nonaccrual and restructured
loans, aggregated $224 million or .52% of outstanding loans
and leases at December 31, 2006, compared with
$156 million or .39% at December 31, 2005 and
$172 million or .45% at December 31, 2004. The
increase in nonperforming loans at December 31, 2006 from a
year earlier was largely due to the addition of four
relationships with automobile dealers totaling approximately
$41 million. The lower level of nonperforming loans at the
47
2005 year-end as compared with a year earlier reflects an
overall improvement in borrower repayment performance.
Accruing loans past due 90 days or more were
$111 million or .26% of total loans and leases at
December 31, 2006, compared with $129 million or .32%
at December 31, 2005 and $155 million or .40% at
December 31, 2004. Those loans included loans guaranteed by
government-related entities of $77 million,
$106 million and $121 million at December 31,
2006, 2005 and 2004, respectively. Such guaranteed loans
included
one-to-four
family residential mortgage loans serviced by the Company that
were repurchased to reduce associated servicing costs, 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
fully guaranteed by government-related entities and totaled
$65 million at December 31, 2006, $79 million at
December 31, 2005 and $104 million at
December 31, 2004. Loans past due 90 days or more and
accruing interest that were guaranteed by government-related
entities also included foreign commercial and industrial loans
supported by the Export-Import Bank of the United States that
totaled $11 million at December 31, 2006, compared
with $26 million and $17 million at December 31,
2005 and 2004, respectively. A summary of nonperforming assets
and certain past due loan data and credit quality ratios is
presented in table 11.
Table
11
NONPERFORMING
ASSETS AND PAST DUE LOAN DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Dollars in thousands)
|
|
|
Nonaccrual loans
|
|
$
|
209,272
|
|
|
$
|
141,067
|
|
|
$
|
162,013
|
|
|
$
|
232,983
|
|
|
$
|
207,038
|
|
Renegotiated loans
|
|
|
14,956
|
|
|
|
15,384
|
|
|
|
10,437
|
|
|
|
7,309
|
|
|
|
8,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
|
224,228
|
|
|
|
156,451
|
|
|
|
172,450
|
|
|
|
240,292
|
|
|
|
215,290
|
|
Real estate and other assets owned
|
|
|
12,141
|
|
|
|
9,486
|
|
|
|
12,504
|
|
|
|
19,629
|
|
|
|
17,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
236,369
|
|
|
$
|
165,937
|
|
|
$
|
184,954
|
|
|
$
|
259,921
|
|
|
$
|
232,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing loans past due
90 days or more(a)
|
|
$
|
111,307
|
|
|
$
|
129,403
|
|
|
$
|
154,590
|
|
|
$
|
154,759
|
|
|
$
|
153,803
|
|
Government guaranteed loans
included in totals above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
$
|
17,586
|
|
|
$
|
13,845
|
|
|
$
|
15,273
|
|
|
$
|
19,355
|
|
|
$
|
11,885
|
|
Accruing loans past due
90 days or more
|
|
|
76,622
|
|
|
|
105,508
|
|
|
|
120,700
|
|
|
|
124,585
|
|
|
|
129,114
|
|
Nonperforming loans to total loans
and leases, net of unearned discount
|
|
|
.52
|
%
|
|
|
.39
|
%
|
|
|
.45
|
%
|
|
|
.67
|
%
|
|
|
.84
|
%
|
Nonperforming assets to total net
loans and leases and real estate and other assets owned
|
|
|
.55
|
%
|
|
|
.41
|
%
|
|
|
.48
|
%
|
|
|
.73
|
%
|
|
|
.90
|
%
|
Accruing loans past due
90 days or more to total loans and leases, net of unearned
discount
|
|
|
.26
|
%
|
|
|
.32
|
%
|
|
|
.40
|
%
|
|
|
.43
|
%
|
|
|
.60
|
%
|
|
|
|
(a) |
|
Predominately residential
mortgage loans. |
Factors that influence the Companys credit loss experience
include overall economic conditions affecting businesses and
consumers, in general, and, due to the size of the
Companys commercial real estate loan portfolio, real
estate valuations, in particular. 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.
Net charge-offs of commercial loans and leases totaled
$20 million in each of 2006 and 2004, compared with
$26 million in 2005. Nonperforming commercial loans and
leases were $79 million at December 31, 2006,
$39 million a year earlier and $45 million at
December 31, 2004. As noted earlier,
48
the increase in such loans from the 2005 year-end to
December 31, 2006 largely reflects the addition of four
relationships with automobile dealers aggregating
$41 million. Continued slowing of domestic automobile sales
in 2006 has resulted in a difficult operating environment for
certain automobile dealers, leading to deteriorating financial
results.
Net charge-offs of commercial real estate loans during 2006 were
$1 million, compared with net recoveries of $1 million
in 2005 and net charge-offs of $3 million in 2004.
Commercial real estate loans classified as nonperforming totaled
$57 million at December 31, 2006, compared with
$44 million at December 31, 2005 and $45 million
at December 31, 2004. The increase from the end of 2005 to
the 2006 year-end was largely due to the addition of a
$10 million loan to an assisted living facility.
Residential real estate loans charged off, net of recoveries,
were $4 million in each of 2006 and 2004, compared with
$2 million in 2005. Nonperforming residential real estate
loans at the 2006 year-end totaled $42 million,
compared with $29 million and $44 million at
December 31, 2005 and 2004, respectively. Residential real
estate loans past due 90 days or more and accruing interest
totaled $92 million, $96 million and $127 million
at December 31, 2006, 2005 and 2004, respectively. A
substantial portion of such amounts related to guaranteed loans
repurchased from government-related entities.
Net charge-offs of consumer loans and leases during 2006 totaled
$43 million, representing .43% of average consumer loans
and leases outstanding, compared with $50 million or .47%
in 2005 and $55 million or .49% in 2004. Indirect
automobile loans and leases represented the most significant
category of consumer loan charge-offs in each of the past three
years. Net charge-offs of indirect automobile loans and leases
were $24 million during 2006, and $37 million during
each of 2005 and 2004. Nonperforming consumer loans and leases
were $46 million at December 31, 2006, representing
.46% of outstanding consumer loans and leases, compared with
$44 million or .42% at December 31, 2005 and
$38 million or .35% at December 31, 2004. Consumer
loans and leases past due 90 days or more and accruing
interest totaled $3 million at December 31, 2006,
$1 million at December 31, 2005 and $2 million at
December 31, 2004.
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 Companys exposure to
credit losses and assessing the adequacy of the Companys
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
Companys 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) the size of the Companys portfolio of loans to
individual consumers, 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 managements analysis.
Management cautiously and conservatively evaluated the allowance
for credit losses as of December 31, 2006 in light of
(i) the sluggish pace of economic growth 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 low growth economies. Although
the national economy experienced moderate growth in 2006 with
inflation being reasonably well contained, concerns exist about
the level and volatility of energy prices; a weakening housing
market, particularly concerns about possible over-valued real
estate; Federal Reserve positioning of monetary policy; the
underlying impact on businesses operations and abilities
to repay loans resulting from a higher level of interest rates;
49
sluggish job creation, which could cause consumer spending to
slow; continued stagnant population growth in the upstate New
York and central Pennsylvania regions; continued slowing of
domestic automobile sales; and modest loan demand in many market
areas served by the Company.
In ascertaining the adequacy of the allowance for credit losses,
the Company estimates losses attributable to specific troubled
credits and also estimates losses inherent in other loans and
leases. The total allowance for credit losses, therefore,
includes both specific and inherent base level loss components,
as well as inherent unallocated loss components. The following
paragraphs describe these components.
For purposes of determining the level of the allowance for
credit losses, the Company segments its loan and lease portfolio
by loan type. The amount of specific loss components in the
Companys loan and lease portfolios is determined through a
loan by loan analysis of commercial and commercial real estate
loans greater than $350,000 which are in nonaccrual status.
Measurement of the specific loss components is typically based
on expected future cash flows, collateral values and other
factors that may impact the borrowers ability to pay.
Impaired loans, as defined in Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, as amended, are
evaluated for specific loss components. Except for consumer
loans and leases and residential real estate loans that are
considered smaller balance homogeneous loans and are evaluated
collectively, the Company considers a loan to be impaired for
purposes of applying SFAS No. 114 when, based on
current information and events, it is probable that the Company
will be unable to collect all amounts according to the
contractual terms of the loan agreement or the loan is
delinquent 90 days or more. Loans less than 90 days
delinquent are deemed to have a minimal delay in payment and are
generally not considered to be impaired for purposes of applying
SFAS No. 114.
The inherent base level loss components are generally determined
by applying loss factors to specific loan balances based on loan
type and managements classification of such loans under
the Companys loan grading system. The Company utilizes an
extensive loan grading system which is applied to all commercial
and commercial real estate credits. Loan officers are
responsible for continually assigning grades to these loans
based on standards outlined in the Companys Credit Policy.
Internal loan grades are also extensively monitored by the
Companys loan review department to ensure consistency and
strict adherence to the prescribed standards.
Loan balances utilized in the inherent base level loss component
computations exclude loans and leases for which specific
allocations are maintained. Loan grades are assigned loss
component factors that reflect the Companys loss estimate
for each group of loans and leases. Factors considered in
assigning loan grades and loss component factors include
borrower-specific information related to expected future cash
flows and operating results, collateral value, financial
condition, payment status, and other information; levels of and
trends in portfolio charge-offs and recoveries; levels of and
trends in portfolio delinquencies and impaired loans; changes in
the risk profile of specific portfolios; trends in volume and
terms of loans; effects of changes in credit concentrations; and
observed trends and practices in the banking industry.
To better classify inherent losses by specific loan categories,
beginning in 2006 amounts previously included in the inherent
unallocated portion of the allowance for such things as
customer, industry and geographic concentrations as well as for
certain national and local economic conditions have been
included in the inherent base level loss component. As a result,
probable losses resulting from (i) comparatively poorer
economic conditions and an unfavorable business climate in many
market regions served by the Company, specifically upstate New
York and central Pennsylvania, that resulted in such regions
experiencing significantly poorer economic growth and vitality
as compared with much of the rest of the country;
(ii) portfolio concentrations regarding loan type,
collateral type and geographic location, in particular the large
concentration of commercial real estate loans secured by
properties in the New York City metropolitan area and other
areas of New York State; and (iii) additional risk
associated with the Companys portfolio of consumer loans,
in particular automobile loans and leases, which generally have
higher rates of loss than other types of collateralized loans,
have been included in the inherent base level loss components at
December 31, 2006.
In evaluating collateral value, the Company relies extensively
on internally and externally prepared valuations. Such
valuations, in particular commercial real estate valuations,
utilize many assumptions and, as a result, can be highly
subjective. Specifically, commercial real estate values in the
New York City
50
metropolitan area can be significantly affected over relatively
short periods of time by changes in business climate, economic
conditions and interest rates, and, in many cases, the results
of operations of businesses and other occupants of the real
property. Additionally, management is aware that there is
oftentimes a delay in the recognition of credit quality changes
in assigned loan grades due to the elapse of time between the
manifestation and reporting of underlying events that impact
credit quality and, accordingly, loss estimates derived from the
inherent base level loss component computation are adjusted for
current national and local economic conditions and trends.
Economic indicators in the most significant market regions
served by the Company were mixed during 2006. Private sector job
growth in the upstate New York market was 0.2%, or well below
the 1.5% national average. The manufacturing-oriented
metropolitan areas of Buffalo, Rochester and Binghamton
continued to experience weakness, including continued industrial
downsizing. Job growth in areas of Pennsylvania served by the
Company and in Maryland matched the national average. The
results for the Pennsylvania markets are particularly noteworthy
since job growth in that region had significantly lagged
national averages for several years prior to 2006. Job growth in
New York City (1.8%) and the Greater Washington D.C. region
(3.0%), particularly northern Virginia (3.6%), was higher than
the national average in 2006. These mixed signals on private
sector job growth, combined with concerns about inflation,
higher interest rates, high levels of consumer indebtedness,
high and volatile energy prices, weak population growth in the
upstate New York and central Pennsylvania regions that lagged
national population growth trends and other factors, continue to
indicate to management an environment of economic uncertainty,
particularly in the markets served by the Company in New York
and Pennsylvania where more than two-thirds of its lending
business is conducted.
The specific loss components and the inherent base level loss
components together comprise the total base level or
allocated allowance for credit losses. Such
allocated portion of the allowance represents managements
assessment of losses existing in specific larger balance loans
that are reviewed in detail by management and pools of other
loans that are not individually analyzed. The inherent
unallocated portion of the allowance is intended to provide for
probable losses that are not otherwise identifiable. The
inherent unallocated allowance includes managements
subjective determination of amounts necessary for such things
as; (i) the effect of expansion into new markets, including
market areas entered through acquisitions, for which the Company
does not have the same degree of familiarity and experience
regarding portfolio performance in changing market conditions;
(ii) the introduction of new loan and lease product types,
including loans and leases to foreign and domestic borrowers
obtained through acquisitions; and (iii) the possible use
of imprecise estimates in determining the allocated portion of
the allowance.
A comparative allocation of the allowance for credit losses for
each of the past five year-ends is presented in table 12.
Amounts were allocated to specific loan categories based on
information available to management at the time of each year-end
assessment and using the methodology described herein.
Variations in the allocation of the allowance by loan category
as a percentage of those loans reflect changes in
managements estimate of specific loss components and
inherent base level loss components, including in 2006, the
allocation of losses that were previously unallocated for such
things as customer, industry and geographic concentrations,
certain national and local economic conditions, and other
factors. As described in note 4 of Notes to Financial
Statements, loans considered impaired pursuant to the
requirements of SFAS No. 114 were $153 million at
December 31, 2006 and $93 million at December 31,
2005. The allocated portion of the allowance for credit losses
related to impaired loans totaled $23 million at
December 31, 2006 and $15 million at December 31,
2005. The unallocated portion of the allowance for credit losses
was equal to .21% and .51% of gross loans outstanding at
December 31, 2006 and 2005, respectively. The decrease in
the unallocated portion of the allowance for credit losses from
year-end 2005 to December 31, 2006 was largely attributable
to the factors described herein. Given the inherent imprecision
in the many estimates used in the determination of the allocated
portion of the allowance, management deliberately remained
cautious and conservative in establishing the unallocated
portion of the allowance for credit losses. Given the
Companys high concentration of commercial loans and
commercial real estate loans in New York State, including the
upstate New York region, and central Pennsylvania, and
considering the other factors already discussed herein,
management considers the allocated and unallocated portions of
the allowance for credit losses to be prudent and
51
reasonable. Nevertheless, the Companys allowance is
general in nature and is available to absorb losses from any
loan or lease category.
Table
12
ALLOCATION
OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Dollars in thousands)
|
|
|
Commercial, financial,
agricultural, etc
|
|
$
|
212,945
|
|
|
$
|
136,852
|
|
|
$
|
147,550
|
|
|
$
|
186,902
|
|
|
$
|
120,627
|
|
Real estate
|
|
|
221,747
|
|
|
|
161,003
|
|
|
|
166,910
|
|
|
|
170,493
|
|
|
|
152,758
|
|
Consumer
|
|
|
124,675
|
|
|
|
133,541
|
|
|
|
148,591
|
|
|
|
152,759
|
|
|
|
113,711
|
|
Unallocated
|
|
|
90,581
|
|
|
|
206,267
|
|
|
|
163,813
|
|
|
|
103,904
|
|
|
|
49,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
649,948
|
|
|
$
|
637,663
|
|
|
$
|
626,864
|
|
|
$
|
614,058
|
|
|
$
|
436,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Gross Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Leases Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial,
agricultural, etc
|
|
|
1.79
|
%
|
|
|
1.23
|
%
|
|
|
1.45
|
%
|
|
|
1.99
|
%
|
|
|
2.23
|
%
|
Real estate
|
|
|
1.04
|
|
|
|
.85
|
|
|
|
.96
|
|
|
|
1.10
|
|
|
|
1.17
|
|
Consumer
|
|
|
1.26
|
|
|
|
1.27
|
|
|
|
1.33
|
|
|
|
1.37
|
|
|
|
1.51
|
|
Management believes that the allowance for credit losses at
December 31, 2006 was adequate to absorb credit losses
inherent in the portfolio as of that date. The allowance for
credit losses was $650 million or 1.51% of total loans and
leases at December 31, 2006, compared with
$638 million or 1.58% at December 31, 2005 and
$627 million or 1.63% at December 31, 2004. The
decline in the level of the allowance as a percentage of
outstanding loans and leases from the 2005 year end to
December 31, 2006 reflects managements evaluation of
the loan portfolio as described herein, including a change in
portfolio mix resulting from higher balances of residential real
estate loans and lower balances of consumer loans. In general,
the Company experiences significantly lower charge-off rates on
residential real estate loans than on consumer loans. The
decline in the level of the allowance as a percentage of
outstanding loans and leases from December 31, 2004 to
December 31, 2005 also reflects improvement in certain
credit factors, including decreases in net charge-offs and
nonperforming loans. Should the various credit factors
considered by management in establishing the allowance for
credit losses change and should managements assessment of
losses inherent in the loan portfolios also change, the level of
the allowance as a percentage of loans could increase or
decrease in future periods. The ratio of the allowance to
nonperforming loans at the end of 2006, 2005 and 2004 was 290%,
408% and 364%, respectively. The level of the allowance reflects
managements evaluation of the loan and lease portfolio as
of each respective date.
In establishing the allowance for credit losses, management
follows the methodology described herein, including taking a
conservative view of borrowers abilities to repay loans.
The establishment of the allowance is extremely subjective and
requires management to make many judgments about borrower,
industry, regional and national economic health and performance.
In order to present examples of the possible impact on the
allowance from certain changes in credit quality factors, the
Company assumed the following scenarios for possible
deterioration of credit quality:
|
|
|
|
|
For consumer loans and leases considered smaller balance
homogenous loans and evaluated collectively, a 20 basis
point increase in loss factors;
|
|
|
|
For residential real estate loans and home equity loans and
lines of credit, also considered smaller balance homogenous
loans and evaluated collectively, a 10 basis point increase
in loss factors; and
|
|
|
|
For commercial loans and commercial real estate loans, which are
not similar in nature, a migration of loans to lower-ranked risk
grades resulting in a 30% increase in the balance of classified
credits in each risk grade.
|
52
For possible improvement in credit quality factors, the
scenarios assumed were:
|
|
|
|
|
For consumer loans and leases, a 10 basis point decrease in
loss factors;
|
|
|
|
For residential real estate loans and home equity loans and
lines of credit, a 5 basis point decrease in loss
factors; and
|
|
|
|
For commercial loans and commercial real estate loans, a
migration of loans to higher-ranked risk grades resulting in a
5% decrease in the balance of classified credits in each risk
grade.
|
The scenario analyses resulted in an additional $48 million
in losses that could be identifiable under the assumptions for
credit deterioration, whereas under the assumptions for credit
improvement an $18 million reduction in such losses could
occur. These examples are only a few of numerous reasonably
possible scenarios that could be utilized in assessing the
sensitivity of the allowance for credit losses based on changes
in assumptions and other factors.
Commercial real estate loans secured by multifamily properties
and properties used in providing retail goods and services in
the New York City metropolitan area represented 4% and 5%,
respectively, of loans outstanding at December 31, 2006.
The Company had no concentrations of credit extended to any
specific industry that exceeded 10% of total loans at
December 31, 2006. Outstanding loans to foreign borrowers
were $176 million at December 31, 2006, or .4% of
total loans and leases.
Assets acquired in settlement of defaulted loans totaled
$12 million at December 31, 2006, compared with
$9 million and $13 million at December 31, 2005
and 2004, respectively.
Other
Income
Other income rose 10% to $1.05 billion in 2006 from
$950 million in 2005. Higher levels of mortgage banking
revenues, service charges on deposit accounts, trust income,
brokerage services income, and other revenues contributed to
that improvement. As discussed previously, included in other
income for 2006 was a $13 million gain from the accelerated
recognition of a purchase accounting premium related to the call
of a $200 million borrowing from the FHLB of Atlanta. In
addition, other income in 2005 reflects the already discussed
$29 million other-than-temporary impairment charge related
to the Companys investment in certain preferred stock
issuances of FNMA and FHLMC. Excluding gains and losses from
investment securities from both years and the $13 million
gain on the called borrowing in 2006, other income increased 5%
from 2005 to 2006. Other income in 2005 was 1% above the
$943 million earned in 2004. Higher mortgage banking
revenues, corporate financing advisory fees, gains on sales of
commercial lease equipment and other property, and other
revenues were offset by losses from investment securities, which
reflect the $29 million impairment charge. Excluding gains
and losses from investment securities, other income in 2005 rose
$38 million or 4% from 2004.
Mortgage banking revenues were $143 million in 2006,
compared with $136 million in 2005 and $124 million in
2004. Mortgage banking revenues are comprised of both
residential and commercial mortgage banking activities. The
Companys involvement in commercial mortgage banking
activities is largely comprised of the origination, sales and
servicing of loans in conjunction with the FNMA DUS 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, increased 7%
to $114 million in 2006 from $107 million in 2005.
Higher revenue from servicing residential mortgage loans for
others was the leading factor in the improvement. Residential
mortgage banking revenues in 2005 were 7% higher than the
$100 million earned in 2004. Higher origination activity
was the most significant factor contributing to that increase.
Residential mortgage loans originated for sale to other
investors totaled approximately $6.4 billion in 2006,
compared with $6.5 billion in 2005 and $4.8 billion in
2004. Realized gains from sales of residential mortgage loans
and loan servicing rights and recognized net unrealized gains or
losses attributable to residential mortgage loans held for sale,
commitments to originate loans for sale and commitments to sell
loans totaled $41 million in 2006, compared with
$42 million in 2005, and $32 million in 2004. On
May 1, 2005, the Company assumed the operations of Regions
Financial Corporations wholesale residential mortgage
business. Those operations added 13 locations and
53
approximately 140 employees to the
Companys residential mortgage banking business.
Approximately $1.9 billion and $1.7 billion of
residential mortgage loans originated in 2006 and 2005,
respectively, for sale to other investors were related to the
assumed operations.
Revenues from servicing residential mortgage loans for others
rose to $66 million in 2006 from $58 million in 2005
and $57 million in 2004. Included in such servicing
revenues were amounts related to purchased servicing rights
associated with small balance commercial mortgage loans totaling
$14 million, $10 million and $6 million in 2006,
2005 and 2004, respectively. Residential mortgage loans serviced
for others totaled $16.7 billion at December 31, 2006,
$15.6 billion a year earlier and $14.9 billion at
December 31, 2004, including the small balance commercial
mortgage loans noted above of approximately $3.3 billion,
$2.4 billion and $1.6 billion at December 31,
2006, 2005 and 2004, respectively. Capitalized residential
mortgage loan servicing assets, net of a valuation allowance for
possible impairment, totaled $153 million at
December 31, 2006, compared with $140 million and
$133 million at December 31, 2005 and 2004,
respectively. Included in capitalized residential mortgage
servicing assets were purchased servicing rights associated with
the small balance commercial mortgage loans noted above of
$36 million, $23 million and $13 million at
December 31, 2006, 2005 and 2004, respectively. Additional
information about the Companys capitalized residential
mortgage loan servicing assets, including information about the
calculation of estimated fair value, is presented herein under
the heading Other Expense and in note 7 of
Notes to Financial Statements. Commitments to sell residential
mortgage loans and commitments to originate residential mortgage
loans for sale at pre-determined rates were $1.8 billion
and $680 million, respectively, at December 31, 2006,
$923 million and $352 million, respectively, at
December 31, 2005 and $764 million and
$422 million, respectively, at December 31, 2004. Net
unrealized gains on hedged residential mortgage loans held for
sale, commitments to sell loans, and commitments to originate
loans for sale were $4 million and $3 million at
December 31, 2006 and 2004, respectively, compared with net
unrealized losses of $5 million at December 31, 2005.
Changes in such net unrealized gains and losses are recorded in
mortgage banking revenues and resulted in a net increase in
revenue of $2 million in 2006, and net decreases in revenue
of $8 million in 2005 and $4 million in 2004.
Commercial mortgage banking revenues totaled $29 million in
each of 2006 and 2005, compared with $25 million in 2004.
Revenues from loan origination and sales activities were
$15 million in 2006, compared with $14 million during
2005 and $13 million in 2004. Loan servicing revenues
totaled $14 million in 2006, $15 million in 2005 and
$12 million in 2004. Capitalized commercial mortgage loan
servicing assets totaled $21 million at each of
December 31, 2006 and 2005, and $22 million at
December 31, 2004. Commercial mortgage loans serviced for
other investors totaled $4.9 billion, $4.3 billion and
$4.1 billion at December 31, 2006, 2005 and 2004,
respectively, and included $939 million, $941 million
and $926 million, respectively, of loan balances for which
investors had recourse to the Company if such balances are
ultimately uncollectible. Commitments to sell commercial
mortgage loans and commitments to originate commercial mortgage
loans for sale were $115 million and $66 million,
respectively, at December 31, 2006, $241 million and
$42 million, respectively, at December 31, 2005 and
$167 million and $106 million, respectively, at
December 31, 2004. Commercial mortgage loans held for sale
totaled $49 million, $199 million and $61 million
at December 31, 2006, 2005 and 2004, respectively.
Service charges on deposit accounts increased 3% to
$381 million in 2006 from $370 million in 2005.
Deposit account service charges in 2004 were $366 million.
The higher levels of such revenues in 2006 and 2005 as compared
with the immediately preceding years resulted from increased
consumer service charges, largely resulting from higher debit
card transaction volumes and overdraft fees, partially offset by
lower commercial service charges.
Trust income includes fees for trust and custody services
provided to personal, corporate and institutional customers, and
investment management and advisory fees that are often based on
a percentage of the market value of assets under management.
Trust income rose 5% to $141 million in 2006 from
$135 million in 2005, due in part to higher personal trust
revenues. Trust income totaled $136 million in 2004. The
impact of lower balances in proprietary mutual funds caused the
decline in revenues from 2004 to 2005. Total trust assets, which
include assets under management and assets under administration,
aggregated $142.4 billion at December 31, 2006,
compared with $134.0 billion at December 31, 2005.
Trust assets under management were $14.8 billion and
$13.2 billion at December 31,
54
2006 and 2005, respectively. The Companys proprietary
mutual funds, the MTB Group of Funds, had assets of
$8.9 billion and $8.4 billion at December 31,
2006 and 2005, respectively. Brokerage services income, which
includes revenues from the sale of mutual funds and annuities
and securities brokerage fees, aggregated $60 million in
2006, up 8% from $56 million in 2005, primarily the result
of increased revenues from the sale of annuities. Brokerage
services income was $54 million in 2004. The increase from
2004 to 2005 was due largely to increased revenues earned from
the sale of mutual funds.
Trading account and foreign exchange activity resulted in gains
of $25 million in 2006, $23 million in 2005 and
$19 million in 2004. The higher gains in 2006 as compared
with 2005 resulted largely from net increases in the market
values of trading assets held in connection with deferred
compensation plans. The increased gains in 2005 as compared with
2004 were due in part to higher volumes of trading assets and
liabilities and reflected fees and market value changes related
to interest rate swap agreements and foreign exchange contracts
executed. The Company enters into interest rate and foreign
exchange contracts with customers who need such services and
concomitantly enters into offsetting trading positions with
third parties to minimize the risks involved with these types of
transactions. Information about the notional amount of interest
rate, foreign exchange and other contracts entered into by the
Company for trading account purposes is included in note 17
of Notes to Financial Statements and herein under the heading
Liquidity, Market Risk, and Interest Rate
Sensitivity. Trading account revenues related to interest
rate and foreign exchange contracts totaled $15 million in
each of 2006 and 2005, and were $11 million in 2004.
Trading account assets held in connection with deferred
compensation plans were $45 million and $41 million at
December 31, 2006 and 2005, respectively. Trading account
revenues resulting from net increases in the market values of
such assets were $5 million in 2006, $3 million in
2005 and $4 million in 2004. A largely offsetting expense
resulting from corresponding increases in liabilities related to
deferred compensation is included in other costs of operations.
Gains on investment securities were $3 million in each of
2006 and 2004, while as a result of the previously described
charge for the
other-than-temporary
impairment in value of the FNMA and FHLMC preferred stock,
losses on investment securities aggregated $28 million
during 2005.
Other revenues from operations were $293 million in 2006,
up from $259 million in 2005 and $240 million in 2004.
Significant contributors to the 13% rise in such revenues from
2005 to 2006 were the previously noted $13 million gain
from the call of an FHLB borrowing and an increase of
$9 million in insurance-related revenues, largely the
result of the February 1, 2006 acquisition by
M&T Bank of a
commercial insurance and surety brokerage agency based in
Maryland. Also contributing to the increase from 2005 to 2006
were higher income from educational lending services of
$8 million and income from bank owned life insurance of
$6 million. An increase of $5 million in revenues from
providing corporate financing advisory services and a
$7 million increase in gains on sales of commercial lease
equipment and other property contributed to the higher revenues
in 2005 as compared with 2004.
Included in other revenues from operations were the following
significant components. Letter of credit and other
credit-related fees totaled $77 million, $75 million
and $74 million in 2006, 2005 and 2004, respectively.
Tax-exempt income earned from bank owned life insurance
aggregated $53 million, $47 million and
$48 million in 2006, 2005 and 2004, respectively. Such
income includes increases in cash surrender value of life
insurance policies and benefits received. Revenues from merchant
discount and credit card fees were $32 million in 2006,
$30 million in 2005 and $28 million in 2004.
Insurance-related sales commissions and other revenues totaled
$32 million in 2006, compared with $22 million in each
of 2005 and 2004. The higher revenues in 2006 as compared with
the preceding two years was primarily the result of the already
noted insurance agency acquisition in February 2006. Automated
teller machine (ATM) usage fees aggregated
$15 million in 2006, compared with $22 million in 2005
and in 2004. The decrease in such fees in 2006 was largely the
result of the reduction or elimination of fees charged for use
of ATMs at certain non-branch locations.
Other
Expense
Other expense totaled $1.55 billion in 2006, compared with
$1.49 billion in 2005 and $1.52 billion in 2004.
Included in such amounts are expenses considered to be
nonoperating in nature consisting of amortization of
core deposit and other intangible assets of $63 million,
$57 million and $75 million in 2006, 2005 and 2004,
respectively, and merger-related integration expenses of
$5 million in 2006. There
55
were no merger-related expenses in either 2005 or 2004.
Exclusive of these nonoperating expenses, noninterest operating
expenses were $1.48 billion in 2006, up 4% from
$1.43 billion in 2005. Included in 2006s operating
expenses was the $18 million charitable contribution
already discussed. Excluding the impact of the charitable
contribution, operating expenses in 2006 increased
$37 million, or less than 3% from 2005, due primarily to
higher salaries costs, including merit pay increases and
incentive compensation. Noninterest operating expenses were
$1.44 billion in 2004. As previously noted, such expenses
reflect a $25 million charitable contribution. Excluding
that contribution, operating expenses in 2005 increased
$13 million, or less than 1%, from 2004. That increase from
2004 resulted from higher costs of providing health care and
retirement benefits to employees and increased professional
services expenses, partially offset by a higher reversal of a
portion of the valuation allowance for the impairment of
capitalized residential mortgage servicing rights, due to higher
residential mortgage loan interest rates. Table 2 provides a
reconciliation of other expense to noninterest operating expense.
Salaries and employee benefits expense totaled $873 million
in 2006, up 6% from $822 million in 2005. The most
significant contributor to the increase was a higher level of
salaries expense in 2006, reflecting the impact of merit pay
increases and higher stock-based compensation costs and other
incentive pay. Salaries and employee benefits expense was
$807 million in 2004. Expenses related to providing
employee health care and retirement benefits were the most
significant contributors to the rise in salaries and benefits
from 2004 to 2005. The Company recognizes expense for
stock-based compensation using the fair value method of
accounting for all stock-based compensation granted to employees
after January 1, 1995. As a result, salaries and employee
benefits expense in 2006, 2005 and 2004 included
$51 million, $45 million and $48 million,
respectively, of stock-based compensation. The higher level of
stock-based compensation in 2006 was largely due to the adoption
of SFAS No. 123 (revised 2004), Share-Based
Payment, (SFAS No. 123R), effective
January 1, 2006. As required, coincident with the adoption
of SFAS No. 123R, the Company began accelerating the
recognition of compensation costs for stock-based awards granted
to retirement-eligible employees and employees who will become
retirement-eligible prior to full vesting of the award. As a
result, stock-based compensation expense during 2006 included
$4 million that would otherwise have been recognized over
the normal four year vesting period if not for the required
adoption of SFAS No. 123R. That acceleration had no
effect on the value of stock-based compensation awarded to
employees. The number of full-time equivalent employees was
12,721 at December 31, 2006, compared with 12,780 and
12,678 at December 31, 2005 and 2004, respectively.
Pension benefit expense is a significant cost to the Company and
totaled $28 million in 2006, $38 million in 2005 and
$30 million in 2004. The Company sponsors both defined
benefit and defined contribution pension plans. The expense for
2006 includes $7 million related to a new qualified defined
contribution plan introduced on January 1, 2006. The
determination of pension expense and the recognition of net
pension assets and liabilities for defined benefit pension plans
requires management to make various assumptions that can
significantly impact the actuarial calculations related thereto.
Those assumptions include the expected long-term rate of return
on plan assets, the rate of increase in future compensation
levels and the discount rate. Changes in any of those
assumptions will impact the Companys pension expense. The
expected long-term rate of return assumption is determined by
taking into consideration asset allocations, historical returns
on the types of assets held and current economic factors.
Returns on invested assets are periodically compared with target
market indices for each asset type to aid management in
evaluating such returns. The discount rate used by the Company
to determine the present value of the Companys future
benefit obligations reflects specific market yields for a
hypothetical portfolio of highly rated corporate bonds that
would produce cash flows similar to the Companys benefit
plan obligations and the level of market interest rates in
general. Other factors used to estimate the projected benefit
obligations include actuarial assumptions for mortality rate,
turnover rate, retirement rate and disability rate. Those other
factors do not tend to change significantly over time. The
Company reviews its pension plan assumptions annually to ensure
that such assumptions are reasonable and adjusts those
assumptions, as necessary, to reflect changes in future
expectations. The Company utilizes actuaries and others to aid
in that assessment.
The Companys 2006 pension expense for its defined benefit
plans was determined using the following assumptions: a
long-term rate of return on assets of 8.50%; a rate of future
compensation increase of 4.90%; and a discount rate of 5.50%. To
demonstrate the sensitivity of pension expense to
56
changes in the Companys
pension plan assumptions, 25 basis point increases in: the
rate of return on plan assets would have resulted in a decrease
in pension expense of $1 million; the rate of increase in
compensation would have resulted in an increase in pension
expense of $.5 million; and the discount rate would have
resulted in a decrease in pension expense of $3 million.
Decreases of 25 basis points in those assumptions would have
resulted in similar changes in amount, but in the opposite
direction from the changes presented in the preceding sentence.
The accounting guidance for defined benefit pension plans
reflects the long-term nature of benefit obligations and the
investment horizon of plan assets, and has the effect of
reducing earnings volatility related to short-term changes in
interest rates and market valuations. Actuarial gains and losses
include the impact of plan amendments and various unrecognized
gains and losses resulting from changes in assumptions and
investment returns which are different from that which is
assumed. As of December 31, 2006, the Company had
cumulative unrecognized actuarial losses of approximately
$101 million that could result in an increase in the
Companys future pension expense depending on several
factors, including whether such losses at each measurement date
exceed ten percent of the greater of the projected benefit
obligation or the market-related value of plan assets. In
accordance with GAAP, net unrecognized gains or losses that
exceed that threshold are required to be amortized over the
expected service period of active employees, and are included as
a component of net pension cost. Amortization of these net
unrealized losses had the effect of increasing the
Companys pension expense by approximately $8 million
in 2006, $5 million in 2005 and $2 million in 2004.
In September 2006, the Financial Accounting Standards Board
(FASB) issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, which requires an employer to
recognize in its balance sheet as an asset or liability the
overfunded or underfunded status of a defined benefit
postretirement plan, measured as the difference between the fair
value of plan assets and the benefit obligation. For a pension
plan, the benefit obligation is the projected benefit
obligation; for any other postretirement benefit plan, such as a
retiree health care plan, the benefit obligation is the
accumulated postretirement benefit obligation.
SFAS No. 158 requires that gains or losses and prior
service costs or credits that arise during the period, but are
not included as components of net periodic benefit cost pursuant
to SFAS No. 87 or SFAS No. 106, be
recognized as a component of other comprehensive income. An
employer with publicly-traded equity securities is required to
initially recognize the funded status of a defined benefit
postretirement plan as of the end of the fiscal year ending
after December 15, 2006. As of December 31, 2006, the
combined benefit obligations (as defined under
SFAS No. 158) of the Companys defined
benefit postretirement plans exceeded the fair value of the
assets of such plans by approximately $205 million. Of that
amount, $96 million was related to qualified defined
benefit plans that are periodically funded by the Company and
$109 million related to non-qualified pension and other
postretirement plans that are generally not funded until
benefits are paid. As a result of the adoption of
SFAS No. 158, the Company was required to have a net
pension and postretirement benefit liability for those plans
that was at least equal to $205 million at
December 31, 2006. Accordingly, as of December 31, 2006 the
Company recorded an additional postretirement benefit liability
of $46 million. After applicable tax effect, that liability
reduced accumulated other comprehensive income (and thereby
stockholders equity) by $28 million. Because the
recognition requirements of SFAS No. 158 were required
to be applied at the end of the year of adoption, the Company
had to first recognize the additional minimum liability amounts
required under the provisions of SFAS No. 87. As a
result, as of December 31, 2006 the Company decreased its
previously recorded minimum pension liability by
$51 million with a corresponding increase to other
comprehensive income that, net of applicable deferred taxes, was
approximately $31 million. A combination of better than
expected investment returns on plan assets during 2006 and a 25
basis point increase in the discount rate assumption to 5.75% at
December 31, 2006 from 5.50% at December 31, 2005 were
the significant factors contributing to the increase to other
comprehensive income recorded in 2006 under the provisions of
SFAS No. 87. In order to recognize the funded status
of the Companys other combined defined benefit
postretirement plans under the provisions of
SFAS No. 158, the Company then recorded an incremental
minimum liability of approximately $16 million with a
corresponding reduction of stockholders equity that, net
of applicable deferred taxes, was approximately
$10 million. As a result, including the effects of adopting
SFAS No. 158, the Company decreased its minimum
liability from that which was recorded at December 31, 2005
by approximately $35 million with a corresponding increase
to
57
stockholders equity that, net of applicable deferred
taxes, was approximately $21 million. Under the provisions
of SFAS No. 158, a 25 basis point decrease in the
assumed discount rate as of December 31, 2006 to 5.50%
would have resulted in increases in the combined benefit
obligations of all defined benefit postretirement plans
(including pension and other plans) of $25 million. Under
that scenario, the minimum postretirement liability adjustment
at December 31, 2006 would have been $71 million,
rather than the $46 million that was actually recorded, and
the corresponding after tax-effect charge to accumulated other
comprehensive income at December 31, 2006 would have been
$44 million, rather than the $28 million that was
actually recorded. A 25 basis point increase in the assumed
discount rate to 6.00% would have decreased the combined benefit
obligations of all defined benefit postretirement plans by
$24 million. Under this latter scenario, the aggregate
liability adjustment at December 31, 2006 would have been
$22 million rather than the $46 million actually
recorded and the corresponding after tax-effect charge to
accumulated other comprehensive income would have been
$14 million rather than $28 million. The Company made
contributions to its qualified defined benefit pension plans in
2006 totaling approximately $36 million. Information about
the Companys pension plans, including significant
assumptions utilized in completing actuarial calculations for
the plans, is included in note 11 of Notes to
Financial Statements.
Effective January 1, 2006, the Company amended certain
provisions of its defined benefit pension plans. Such amendments
had the effect of reducing future benefits earned under the
plans. The formula was changed to reduce the future accrual of
benefits by lowering the accrual percentage and through use of a
career-average-pay formula as opposed to the previous
final-average-pay formula. The amendments affected benefits
earned for service periods beginning after December 31,
2005. Active participants at that time had the choice of
electing to remain in the defined benefit plan under the reduced
benefit formula or electing to participate in a new qualified
defined contribution pension plan. Under the new defined
contribution pension plan, the Company makes contributions to
the plan each year in an amount that is based on an individual
participants total compensation (generally defined as
total wages, incentive compensation, commissions and bonuses)
and years of service. Participants do not contribute to the
defined contribution pension plan. New employees are not
eligible to participate in the defined benefit plan, but do
participate in the defined contribution pension plan. The
amendment caused the projected benefit obligation associated
with the defined benefit plans to decrease by approximately
$98 million as of December 31, 2005. Certain gains
associated with the $98 million in pension benefit
obligation reduction attributable to employees who remained in
the plan are not subject to the ten percent corridor previously
noted. Guidance contained in SFAS No. 87 requires that
these gains be amortized and recognized as a component of net
periodic benefit cost over the remaining expected service period
for active employees. Amortization of these gains had the effect
of reducing the Companys pension expense for 2006 by
approximately $7 million.
In addition to the changes described above, the Company also
amended its retirement savings plan (RSP), effective
January 1, 2006, to allow for greater amounts of employee
compensation to be eligible for contribution to the RSP. The RSP
is a defined contribution plan in which eligible employees of
the Company may defer up to 50% of qualified compensation via
contributions to the plan. The Company makes an employer
matching contribution in an amount equal to 75% of an
employees contribution, up to 4.5% of the employees
qualified compensation. RSP expense totaled $21 million in
2006, $17 million in 2005 and $16 million in 2004.
As a result of the amendments to the defined benefit pension
plans and the RSP and the introduction of the defined
contribution pension plan, the Company hoped to limit increases
in future period expenses associated with these plans.
Reflecting the impact of these changes, expenses associated with
the defined benefit and defined contribution pension plans and
the RSP totaled $49 million in 2006, compared with
$55 million in 2005 and $46 million in 2004.
Excluding the nonoperating expense items already noted,
nonpersonnel operating expenses aggregated $611 million in
2006, up 1% from $606 million in 2005. That increase
reflects the $18 million charitable contribution made in
2006. Exclusive of the contribution, nonpersonnel operating
expenses decreased $13 million or 2% from 2005, due largely
to lower costs for professional services, furniture and
equipment. Nonpersonnel operating expenses were
$634 million in 2004 and included a $25 million
charitable contribution. Excluding the impact of that
contribution, other nonpersonnel operating
58
expenses in 2005 decreased $3 million from 2004. As
compared with 2004, a $7 million higher reversal in 2005 of
a portion of the valuation allowance for the impairment of
capitalized residential mortgage servicing rights, and lower
equipment, net occupancy and other operating expenses were
partially offset by higher professional services costs. The
higher expenses incurred for professional services in 2005 were
due in part to several initiatives of the Company, including
projects focused on procurement practices, consolidation of loan
application systems, revenue enhancement opportunities and
operational efficiencies, as well as costs related to the
already discussed subordinated note exchange.
Income
Taxes
The provision for income taxes was $392 million in 2006,
compared with $389 million in 2005 and $344 million in
2004. The effective tax rates were 31.9%, 33.2% and 32.3% in
2006, 2005 and 2004, respectively. The decline in the
Companys effective tax rate from 2005 to 2006 reflects
higher levels of income that were exempt from tax in certain
jurisdictions and a $3 million favorable impact from
settlement of refund claims originally filed by Allfirst
Financial Inc. prior to its April 1, 2003 acquisition by
M&T. The refunds
received, consisting of income taxes and taxable interest,
exceeded the amounts previously accrued for such items by
$5 million (pre-tax). The increase in the effective tax
rate from 2004 to 2005 was largely due to the impact of the
third quarter 2004 reorganization of two of the Companys
subsidiaries that altered the taxable status of such
subsidiaries in certain jurisdictions thereby decreasing the
Companys effective state income tax rate for 2004. As a
result of the reorganizations, both income tax expense and
deferred tax liabilities at September 30, 2004 were reduced
by $12 million.
The effective tax rate in future periods will be affected by the
results of operations attributable to the various tax
jurisdictions within which the Company operates, any changes in
income tax regulations or interpretations of such regulations
that differ from the Companys interpretations by tax
authorities within those jurisdictions, and the impact of
changes in the accounting for income taxes resulting from the
required adoption on January 1, 2007 of FASB Interpretation
(FIN) No. 48, Accounting for Uncertainty
in Income Taxes. The projected impact of that adoption is
included herein under the heading Recent Accounting
Developments. A reconciliation of income tax expense to
the amount computed by applying the statutory federal income tax
rate to pre-tax income is provided in note 12 of Notes to
Financial Statements.
International
Activities
The Companys net investment in international assets
totaled $185 million at December 31, 2006 and
$230 million at December 31, 2005. Such assets
included $176 million and $217 million, respectively,
of loans to foreign borrowers. Offshore deposits totaled
$5.4 billion at December 31, 2006 and
$2.8 billion at December 31, 2005. The Company uses
such deposits to facilitate customer demand and as an
alternative to short-term borrowings when the costs of such
deposits seem reasonable.
Liquidity,
Market Risk, and Interest Rate Sensitivity
As a financial intermediary, the Company is exposed to various
risks, including liquidity and market risk. Liquidity refers to
the Companys ability to ensure that sufficient cash flow
and liquid assets are available to satisfy current and future
financial obligations, including demands for loans and deposit
withdrawals, funding operating costs, and for other corporate
purposes. Liquidity risk arises whenever the maturities of
financial instruments included in assets and liabilities differ.
Core deposits have historically been the most significant
funding source for the Company, and are generated from a large
base of consumer, corporate and institutional customers. That
customer base has, over the past several years, become more
geographically diverse as a result of acquisitions and expansion
of the Companys businesses. Nevertheless, in recent years
the Company has faced increased competition in offering products
and services from a large array of financial market
participants, including banks, thrifts, mutual funds, securities
dealers and others. Core deposits financed 57% of the
Companys earning assets at each of December 31, 2006
and December 31, 2005, compared with 59% at
December 31, 2004.
The Company supplements funding provided through core deposits
with various short-term and long-term wholesale borrowings,
including federal funds purchased and securities sold under
agreements to repurchase, brokered certificates of deposit,
offshore branch deposits and borrowings from the FHLBs
59
and others. At December 31, 2006,
M&T Bank had short-term
and long-term credit facilities with the FHLBs aggregating
$6.8 billion. Outstanding borrowings under these credit
facilities totaled $3.4 billion and $3.9 billion at
December 31, 2006 and 2005, respectively. Such borrowings
are secured by loans and investment securities.
M&T Bank and
M&T Bank, N.A. had
available lines of credit with the Federal Reserve Bank of
New York of approximately $4.3 billion at December 31,
2006. The amounts of these lines are dependent upon the balances
of loans and securities pledged as collateral. There were no
borrowings outstanding under these lines of credit at either
December 31, 2006 or 2005.
The Company has issued subordinated capital notes from time to
time to provide liquidity and enhance regulatory capital ratios.
Such notes qualify for inclusion in the Companys total
capital as defined by federal regulators.
M&T Bank issued
$500 million of subordinated notes in December 2006. The
notes bear a fixed rate of interest of 5.629% for ten years and
a floating rate thereafter, at a rate equal to three-month LIBOR
plus .64%. The notes are redeemable at the Companys option
after the fixed-rate period ends, subject to prior regulatory
approval. In December 2005,
M&T Bank exchanged
$363 million of its 8.0% subordinated notes due 2010
for new fixed rate/floating rate subordinated notes with a par
value of $409 million due 2020. The notes bear interest at
a fixed rate of 5.585% for ten years, while thereafter such
notes will bear interest at a floating rate that resets monthly
at a rate equal to one-month LIBOR plus 1.215%. The notes are
redeemable after the fixed-rate period ends at the
Companys option, subject to regulatory approval. No new
funding was received as a result of the exchange. A more
detailed description of the 2006 and 2005 subordinated note
transactions is included herein under the heading Net
Interest Income/Lending and Funding Activities and in
note 9 of Notes to Financial Statements. As an additional
source of funding, in November 2002, the Company entered into a
$500 million revolving asset-backed structured borrowing
which is collateralized by approximately $565 million of
automobile loans and related assets. The automobile loans and
related assets have been transferred to a special purpose
consolidated subsidiary of
M&T Bank. As existing
automobile loans of the subsidiary pay down, monthly proceeds,
after payment of certain fees and debt service costs, are used
by the subsidiary to obtain additional automobile loans from
M&T Bank or another of
its subsidiaries to replenish the collateral and maintain the
existing borrowing base. Additional information about this
borrowing is included in note 18 of Notes to Financial
Statements.
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 were
$2.3 billion and $4.0 billion at December 31,
2006 and 2005, respectively. In general, those borrowings were
unsecured and matured on the next business day. As already
noted, offshore branch deposits and brokered certificates of
deposit have been used by the Company as an alternative to
short-term borrowings. Offshore branch deposits also generally
mature on the next business day and totaled $5.4 billion
and $2.8 billion at December 31, 2006 and 2005,
respectively. Brokered certificates of deposit have longer
maturity terms. Information regarding such deposits is included
under the heading Net Interest Income/Lending and Funding
Activities.
The Companys ability to obtain funding from these or other
sources could be negatively impacted 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 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. Such impact is estimated by
attempting to measure the effect on available unsecured lines of
credit, available capacity from secured borrowing sources and
securitizable assets. Information about the credit ratings of
M&T and
M&T Bank is presented
in table 13. Additional information regarding the terms and
maturities of all of the Companys short-term and long-term
borrowings is provided in note 9 of Notes to Financial
Statements. In addition to deposits and borrowings, other
sources of liquidity include maturities of investment securities
and other earning assets, repayments of loans and investment
securities, and cash generated from operations, such as fees
collected for services.
60
Table 13
DEBT
RATINGS
|
|
|
|
|
|
|
|
|
|
|
Standard
|
|
|
|
|
Moodys
|
|
and Poors
|
|
Fitch
|
|
M&T Bank
Corporation
|
|
|
|
|
|
|
Senior debt
|
|
A3
|
|
A−
|
|
A−
|
Subordinated debt
|
|
Baa1
|
|
BBB+
|
|
BBB+
|
M&T
Bank
|
|
|
|
|
|
|
Short-term deposits
|
|
Prime-1
|
|
A-1
|
|
F1
|
Long-term deposits
|
|
A2
|
|
A
|
|
A
|
Senior debt
|
|
A2
|
|
A
|
|
A−
|
Subordinated debt
|
|
A3
|
|
A−
|
|
BBB+
|
Certain customers of the Company obtain financing through the
issuance of variable rate demand bonds (VRDBs). The
VRDBs are generally enhanced by direct-pay letters of credit
provided by
M&T Bank.
M&T Bank oftentimes
acts as remarketing agent for the VRDBs and, at its discretion,
may from
time-to-time
own some of the VRDBs while such instruments are remarketed.
When this occurs, the VRDBs are classified as trading assets in
the Companys consolidated balance sheet. Nevertheless,
M&T Bank is not
contractually obligated to purchase the VRDBs. The value of
VRDBs in the Companys trading account totaled
$6 million and $58 million at December 31, 2006
and 2005, respectively. At both December 31, 2006 and 2005,
the VRDBs outstanding backed by
M&T Bank letters of
credit totaled $1.7 billion.
M&T Bank also serves as
remarketing agent for most of those bonds.
Table
14
MATURITY
DISTRIBUTION OF SELECTED LOANS(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
Demand
|
|
|
2007
|
|
|
2008-2011
|
|
|
After 2011
|
|
|
|
(In thousands)
|
|
|
Commercial, financial,
agricultural, etc
|
|
$
|
5,040,099
|
|
|
$
|
1,132,361
|
|
|
$
|
3,610,454
|
|
|
$
|
615,443
|
|
Real estate
construction
|
|
|
565,845
|
|
|
|
1,623,072
|
|
|
|
1,170,550
|
|
|
|
74,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,605,944
|
|
|
$
|
2,755,433
|
|
|
$
|
4,781,004
|
|
|
$
|
690,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating or adjustable interest
rates
|
|
|
|
|
|
|
|
|
|
$
|
3,855,531
|
|
|
$
|
478,330
|
|
Fixed or predetermined interest
rates
|
|
|
|
|
|
|
|
|
|
|
925,473
|
|
|
|
212,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
4,781,004
|
|
|
$
|
690,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The data do not include
nonaccrual loans. |
In the normal course of business, the Company enters into
contractual obligations which require future cash payments. The
contractual amounts and timing of those payments as of
December 31, 2006 are summarized in table 15. Off-balance
sheet commitments to customers 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. Because 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
discussion of these commitments is provided in note 20 of
Notes to Financial Statements. Table 15 summarizes the
Companys other commitments as of December 31, 2006
and the timing of the expiration of such commitments.
61
Table
15
CONTRACTUAL
OBLIGATIONS AND OTHER COMMITMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than One
|
|
|
One to Three
|
|
|
Three to Five
|
|
|
Over Five
|
|
|
|
|
December 31, 2006
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Payments due for contractual
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
9,426,681
|
|
|
$
|
1,642,369
|
|
|
$
|
331,423
|
|
|
$
|
90,156
|
|
|
$
|
11,490,629
|
|
Deposits at foreign office
|
|
|
5,429,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,429,668
|
|
Federal funds purchased and
agreements to repurchase securities
|
|
|
2,531,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,531,684
|
|
Other short-term borrowings
|
|
|
562,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
562,530
|
|
Long-term borrowings
|
|
|
518,543
|
|
|
|
2,806,147
|
|
|
|
532,807
|
|
|
|
3,033,244
|
|
|
|
6,890,741
|
|
Operating leases
|
|
|
43,931
|
|
|
|
74,784
|
|
|
|
48,829
|
|
|
|
66,757
|
|
|
|
234,301
|
|
Other
|
|
|
18,968
|
|
|
|
19,131
|
|
|
|
11,139
|
|
|
|
34,328
|
|
|
|
83,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,532,005
|
|
|
$
|
4,542,431
|
|
|
$
|
924,198
|
|
|
$
|
3,224,485
|
|
|
$
|
27,223,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
$
|
6,820,835
|
|
|
$
|
4,317,118
|
|
|
$
|
4,220,081
|
|
|
$
|
1,683,461
|
|
|
$
|
17,041,495
|
|
Standby letters of credit
|
|
|
1,471,079
|
|
|
|
1,192,282
|
|
|
|
752,319
|
|
|
|
207,180
|
|
|
|
3,622,860
|
|
Commercial letters of credit
|
|
|
25,626
|
|
|
|
1,110
|
|
|
|
3,473
|
|
|
|
|
|
|
|
30,209
|
|
Financial guarantees and
indemnification contracts
|
|
|
19,194
|
|
|
|
78,762
|
|
|
|
159,882
|
|
|
|
778,279
|
|
|
|
1,036,117
|
|
Commitments to sell real estate
loans
|
|
|
1,932,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,932,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,269,040
|
|
|
$
|
5,589,272
|
|
|
$
|
5,135,755
|
|
|
$
|
2,668,920
|
|
|
$
|
23,662,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M&Ts primary
source of funds to pay for operating expenses, shareholder
dividends and common 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. For purposes of the test,
approximately $108 million at December 31, 2006 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 9 of Notes to Financial
Statements. M&T also
maintains a $30 million line of credit with an unaffiliated
commercial bank, of which there were no borrowings outstanding
at December 31, 2006. A similar $30 million line of
credit was entirely available for borrowing at December 31,
2005.
62
Table
16
MATURITY
AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
One to Five
|
|
|
Five to Ten
|
|
|
Over Ten
|
|
|
|
|
December 31, 2006
|
|
or Less
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Investment securities available
for sale(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
$
|
29,524
|
|
|
$
|
236,351
|
|
|
$
|
206,489
|
|
|
$
|
1,512
|
|
|
$
|
473,876
|
|
Yield
|
|
|
3.17
|
%
|
|
|
3.72
|
%
|
|
|
6.11
|
%
|
|
|
4.48
|
%
|
|
|
4.73
|
%
|
Obligations of states and political
subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
13,131
|
|
|
|
16,855
|
|
|
|
33,669
|
|
|
|
7,116
|
|
|
|
70,771
|
|
Yield
|
|
|
5.70
|
%
|
|
|
6.14
|
%
|
|
|
4.77
|
%
|
|
|
7.94
|
%
|
|
|
5.59
|
%
|
Mortgage-backed securities(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
142,696
|
|
|
|
523,737
|
|
|
|
528,114
|
|
|
|
713,161
|
|
|
|
1,907,708
|
|
Yield
|
|
|
3.70
|
%
|
|
|
3.82
|
%
|
|
|
3.94
|
%
|
|
|
4.78
|
%
|
|
|
4.20
|
%
|
Privately issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
88,152
|
|
|
|
374,667
|
|
|
|
373,319
|
|
|
|
2,960,392
|
|
|
|
3,796,530
|
|
Yield
|
|
|
4.23
|
%
|
|
|
4.96
|
%
|
|
|
5.15
|
%
|
|
|
4.92
|
%
|
|
|
4.93
|
%
|
Other debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
3,991
|
|
|
|
10,154
|
|
|
|
3,504
|
|
|
|
132,258
|
|
|
|
149,907
|
|
Yield
|
|
|
4.92
|
%
|
|
|
4.78
|
%
|
|
|
5.27
|
%
|
|
|
7.03
|
%
|
|
|
6.78
|
%
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
431,056
|
|
Yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
277,494
|
|
|
|
1,161,764
|
|
|
|
1,145,095
|
|
|
|
3,814,439
|
|
|
|
6,829,848
|
|
Yield
|
|
|
3.92
|
%
|
|
|
4.21
|
%
|
|
|
4.75
|
%
|
|
|
4.97
|
%
|
|
|
4.79
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities held to
maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political
subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
42,166
|
|
|
|
6,815
|
|
|
|
9,319
|
|
|
|
1,136
|
|
|
|
59,436
|
|
Yield
|
|
|
5.64
|
%
|
|
|
7.08
|
%
|
|
|
9.63
|
%
|
|
|
7.79
|
%
|
|
|
6.47
|
%
|
Other debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
|
|
|
|
|
|
|
|
467
|
|
|
|
4,996
|
|
|
|
5,463
|
|
Yield
|
|
|
|
|
|
|
|
|
|
|
8.30
|
%
|
|
|
5.59
|
%
|
|
|
5.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities held to
maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
42,166
|
|
|
|
6,815
|
|
|
|
9,786
|
|
|
|
6,132
|
|
|
|
64,899
|
|
Yield
|
|
|
5.64
|
%
|
|
|
7.08
|
%
|
|
|
9.57
|
%
|
|
|
6.00
|
%
|
|
|
6.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
356,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
$
|
319,660
|
|
|
$
|
1,168,579
|
|
|
$
|
1,154,881
|
|
|
$
|
3,820,571
|
|
|
$
|
7,251,598
|
|
Yield
|
|
|
4.15
|
%
|
|
|
4.23
|
%
|
|
|
4.79
|
%
|
|
|
4.97
|
%
|
|
|
4.57
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Investment securities available
for sale are presented at estimated fair value. Yields on such
securities are based on amortized cost. |
(b) |
|
Maturities are reflected based
upon contractual payments due. Actual maturities are expected to
be significantly shorter as a result of loan repayments in the
underlying mortgage pools. |
Management closely monitors the Companys liquidity
position for compliance with internal policies and believes that
available sources of liquidity are adequate to meet funding
needs in the normal course of business. Management does not
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.
63
Market risk is the risk of loss from adverse changes in the
market prices
and/or
interest rates of the Companys financial instruments.
Interest rate risk is the primary market risk to which the
Company is exposed. Interest rate risk arises from the
Companys core banking activities of lending and
deposit-taking, because 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. Managements 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 non-parallel shifts in the
maturity curve of interest rates and provide management with a
long-term interest rate risk metric. The Company has entered
into interest rate swap agreements to help manage exposure to
interest rate risk. At December 31, 2006, the aggregate
notional amount of interest rate swap agreements entered into
for interest rate risk management purposes was
$1.0 billion. Information about interest rate swap
agreements entered into for interest rate risk management
purposes is included herein under Net Interest
Income/Lending and Funding Activities and in note 17
of Notes to Financial Statements.
Table
17
MATURITY
OF DOMESTIC CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
WITH BALANCES OF $100,000 OR MORE
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
(In thousands)
|
|
|
Under 3 months
|
|
$
|
2,478,317
|
|
3 to 6 months
|
|
|
1,561,755
|
|
6 to 12 months
|
|
|
634,145
|
|
Over 12 months
|
|
|
863,789
|
|
|
|
|
|
|
Total
|
|
$
|
5,538,006
|
|
|
|
|
|
|
The Companys Risk Management Committee, which includes
members of senior management, monitors the sensitivity of the
Companys 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. 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 to mitigate
exposure to interest rate risk through the use of on-or
off-balance sheet financial instruments and intends to do so in
the future. 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 adding to, modifying or terminating existing
interest rate swap agreements or other financial instruments
used for interest rate risk management purposes.
64
Table 18 displays as of December 31, 2006 and 2005 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.
Table
18
SENSITIVITY
OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculated Increase
|
|
|
|
|
|
(Decrease) in Projected
|
|
|
|
|
|
Net Interest Income
|
|
|
|
|
|
December 31
|
|
Changes in Interest Rates
|
|
2006
|
|
|
2005
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
+
|
|
200 basis points
|
|
$
|
15,098
|
|
|
$
|
(7,178
|
)
|
+
|
|
100 basis points
|
|
|
13,260
|
|
|
|
(4,096
|
)
|
−
|
|
100 basis points
|
|
|
(12,759
|
)
|
|
|
(5,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
−
|
|
200 basis points
|
|
|
(26,546
|
)
|
|
|
(16,184
|
)
|
The Company utilized many assumptions to calculate the impact
that changes in interest rates may have on net interest income.
The more significant of those 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 scenarios 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
interest rate changes and changes in 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 Companys
past or projected net interest income.
In accordance with industry practice, table 19 presents
cumulative totals of net assets (liabilities) repricing on a
contractual basis within the specified time frames, as adjusted
for the impact of interest rate swap agreements entered into for
interest rate risk management purposes. Management believes that
this measure does not appropriately depict interest rate risk
since changes in interest rates do not necessarily affect all
categories of earning assets and interest-bearing liabilities
equally nor, as assumed in the table, on the contractual
maturity or repricing date. Furthermore, this static
presentation of interest rate risk fails to consider the effect
of ongoing lending and deposit gathering activities, projected
changes in balance sheet composition or any subsequent interest
rate risk management activities the Company is likely to
implement.
65
Table
19
CONTRACTUAL REPRICING DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Four to Twelve
|
|
|
One to
|
|
|
After
|
|
|
|
|
December 31, 2006
|
|
or Less
|
|
|
Months
|
|
|
Five Years
|
|
|
Five Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Loans and leases, net
|
|
$
|
20,521,055
|
|
|
$
|
3,684,677
|
|
|
$
|
10,330,431
|
|
|
$
|
8,411,134
|
|
|
$
|
42,947,297
|
|
Investment securities
|
|
|
624,657
|
|
|
|
593,873
|
|
|
|
3,702,936
|
|
|
|
2,330,132
|
|
|
|
7,251,598
|
|
Other earning assets
|
|
|
179,135
|
|
|
|
850
|
|
|
|
|
|
|
|
|
|
|
|
179,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
21,324,847
|
|
|
|
4,279,400
|
|
|
|
14,033,367
|
|
|
|
10,741,266
|
|
|
|
50,378,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
|
940,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
940,439
|
|
Savings deposits
|
|
|
14,169,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,169,790
|
|
Time deposits
|
|
|
5,817,393
|
|
|
|
4,375,761
|
|
|
|
1,246,242
|
|
|
|
51,233
|
|
|
|
11,490,629
|
|
Deposits at foreign office
|
|
|
5,428,596
|
|
|
|
1,072
|
|
|
|
|
|
|
|
|
|
|
|
5,429,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
deposits
|
|
|
26,356,218
|
|
|
|
4,376,833
|
|
|
|
1,246,242
|
|
|
|
51,233
|
|
|
|
32,030,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
3,094,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,094,214
|
|
Long-term borrowings
|
|
|
3,215,107
|
|
|
|
198,353
|
|
|
|
837,359
|
|
|
|
2,639,922
|
|
|
|
6,890,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
liabilities
|
|
|
32,665,539
|
|
|
|
4,575,186
|
|
|
|
2,083,601
|
|
|
|
2,691,155
|
|
|
|
42,015,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
(922,241
|
)
|
|
|
205,000
|
|
|
|
177,241
|
|
|
|
540,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic gap
|
|
$
|
(12,262,933
|
)
|
|
$
|
(90,786
|
)
|
|
$
|
12,127,007
|
|
|
$
|
8,590,111
|
|
|
|
|
|
Cumulative gap
|
|
|
(12,262,933
|
)
|
|
|
(12,353,719
|
)
|
|
|
(226,712
|
)
|
|
|
8,363,399
|
|
|
|
|
|
Cumulative gap as a % of total
earning assets
|
|
|
(24.3
|
)%
|
|
|
(24.5
|
)%
|
|
|
(0.5
|
)%
|
|
|
16.6
|
%
|
|
|
|
|
The Company engages in trading activities to meet the financial
needs of customers, to fund the Companys 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 management and
approved by M&Ts
Board of Directors. However, as with any non-government
guaranteed financial instrument, the Company is exposed to
credit risk associated with counterparties to the Companys
trading activities.
The notional amounts of interest rate contracts entered into for
trading purposes aggregated $7.6 billion at
December 31, 2006 and $6.7 billion at
December 31, 2005. The notional amounts of foreign currency
and other option and futures contracts entered into for trading
purposes totaled $613 million and $679 million at
December 31, 2006 and 2005, 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 trading account
assets and liabilities were $137 million and
$65 million, respectively, at December 31, 2006 and
$192 million and $77 million, respectively, at
December 31, 2005. Included in trading account assets at
December 31, 2006 and 2005 were $45 million and
$41 million, respectively, of assets related to deferred
compensation plans. Changes in the fair value of such assets are
recorded as trading account and foreign exchange gains in the
consolidated statement of income. Included in other liabilities
in the consolidated balance sheet at December 31, 2006 and
2005 were $49 million and $48 million, respectively,
of liabilities related to deferred compensation plans. Changes
in the balances of
66
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 Companys 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, however, as previously noted, the
Company is exposed to credit risk associated with counterparties
to transactions associated with the Companys trading
activities. Additional information related to trading derivative
contracts is included in note 17 of Notes to Financial
Statements.
Capital
Stockholders equity at December 31, 2006 totaled
$6.3 billion and represented 11.01% of total assets,
compared with $5.9 billion or 10.66% at December 31,
2005 and $5.7 billion or 10.82% at December 31, 2004.
On a per share basis, stockholders equity was $56.94 at
December 31, 2006, up 9% from $52.39 at the
2005 year-end and 15% higher than $49.68 at
December 31, 2004. Tangible equity per share was $28.57 at
December 31, 2006, compared with $25.91 and $23.62 at
December 31, 2005 and 2004, respectively. In the
calculation of tangible equity per common share,
stockholders equity is reduced by the carrying values of
goodwill and core deposit and other intangible assets, net of
applicable deferred tax balances. A reconciliation of total
stockholders equity and tangible equity as of
December 31, 2006, 2005 and 2004 is presented in table 2.
The ratio of average total stockholders equity to average
total assets was 10.82%, 10.71% and 11.07% in 2006, 2005 and
2004, respectively.
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; unrealized fair value gains or
losses associated with interest rate swap agreements designated
as cash flow hedges; minimum pension liability adjustments; and
the impact of applying SFAS No. 158. Net unrealized
losses on
available-for-sale
investment securities were $25 million, or $.23 per
common share, at December 31, 2006, compared with losses of
$49 million, or $.43 per common share, at
December 31, 2005 and $5 million, or $.04 per
common share, at December 31, 2004. Such unrealized 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. There were no outstanding
interest rate swap agreements designated as cash flow hedges at
December 31, 2006, 2005 or 2004. Adjustments to reflect the
funded status of defined benefit pension and other
postretirement plans, net of applicable tax effect, included in
accumulated other comprehensive income reduced
stockholders equity by $28 million at
December 31, 2006, or $.26 per share. Similar
adjustments to recognize minimum pension liabilities as then
required by SFAS No. 87, net of applicable tax effect,
reduced stockholders equity by $49 million or
$.44 per share at December 31, 2005 and
$12 million or $.11 per share at December 31,
2004. Information about the funded status of the Companys
pension and other postretirement benefit plans is included in
note 11 of Notes to Financial Statements.
Cash dividends paid in 2006 on
M&Ts common stock
totaled $250 million, compared with $199 million and
$188 million in 2005 and 2004, respectively.
M&T increased the
quarterly dividend on its common stock in the second quarter of
2005 from $.40 to $.45 per share, and again in the second
quarter of 2006 to $.60 per share. Dividends per common
share totaled $2.25 in 2006, up 29% from $1.75 in 2005 and 41%
above $1.60 in 2004.
M&T repurchased
3,259,000 shares of its common stock in 2006,
4,891,800 shares in 2005 and 6,520,800 shares in 2004,
at a cost of $374 million, $510 million and
$610 million, respectively. In December 2004,
M&T had announced a
plan to purchase up to 5,000,000 shares of its common
stock. That repurchase plan was completed in December 2005. In
November 2005, M&T
announced that it had been authorized by its Board of Directors
to purchase up to an additional 5,000,000 shares of its
common stock. Through December 31, 2006,
M&T had repurchased a
total of 3,303,700 shares of common stock pursuant to such
plan at an average cost of $114.66 per share.
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
67
3% of the quarterly average of total assets. As of
December 31, 2006, core capital included $689 million
of the trust preferred securities described in note 9 of
Notes to Financial Statements and total capital further included
$1.4 billion of subordinated capital notes. As previously
noted, in December 2006,
M&T Bank issued
$500 million of fixed rate/floating rate subordinated notes
due 2021. The new notes bear interest at a fixed coupon rate of
5.629% for ten years, while thereafter such notes will bear
interest at a floating rate that resets monthly at a rate equal
to three-month LIBOR plus .64%. The notes are redeemable after
the fixed-rate period ends at
M&Ts option,
subject to regulatory approval.
The capital ratios of the Company and its banking subsidiaries
as of December 31, 2006 and 2005 are presented in
note 22 of Notes to Financial Statements.
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
a percentage of regulatory core capital at the
beginning of each year, was 17.52% in 2006, 18.50% in 2005 and
18.12% in 2004.
Fourth
Quarter Results
Net income increased 4% to $213 million during the fourth
quarter of 2006 from $205 million in the year-earlier
quarter. Diluted and basic earnings per share were $1.88 and
$1.93, respectively, in the final quarter of 2006, compared with
$1.78 and $1.82, respectively, in the fourth quarter of 2005.
The annualized rates of return on average assets and average
common stockholders equity for the fourth quarter of 2006
were 1.50% and 13.55%, respectively, compared with 1.48% and
13.85%, respectively, in the year-earlier period.
Net operating income rose 6% to $225 million in the fourth
quarter of 2006 from $213 million in 2005s final
quarter. Diluted net operating earnings per share increased 7%
to $1.98 in the recently completed quarter from $1.85 in the
fourth quarter of 2005. The annualized net operating returns on
average tangible assets and average tangible common equity were
1.67% and 28.71%, respectively, in the fourth quarter of 2006,
compared with 1.63% and 29.12%, respectively, in the
corresponding 2005 quarter. Core deposit and other intangible
asset amortization, after tax effect, totaled $11 million
($.10 per diluted share) and $8 million ($.07 per
diluted share) in the fourth quarters of 2006 and 2005,
respectively. Reconciliations of GAAP results with non-GAAP
results for the quarterly periods of 2006 and 2005 are provided
in table 21.
Taxable-equivalent net interest income rose 4% to
$472 million in the final quarter of 2006 from
$454 million in the year-earlier quarter. That growth was
the result of a 3% increase in average earning assets and a
widening of the Companys net interest margin. Average
earning assets totaled $50.2 billion in the last quarter of
2006, compared with $48.8 billion in the year-earlier
period. Average loans and leases for the recently completed
quarter totaled $42.5 billion, up 5% from
$40.4 billion during the final quarter of 2005. A
$1.1 billion increase in commercial real estate loans, an
$863 million rise in residential real estate loans, and a
$786 million increase in commercial loans were the leading
contributors to the growth in average loans outstanding. The
yield on earning assets was 6.92% in the fourth quarter of 2006,
up 76 basis points from 6.16% in the fourth quarter of
2005. The rate paid on interest-bearing liabilities was 3.83% in
the last quarter of 2006, 85 basis points higher than 2.98% in
the corresponding period in 2005. The resulting net interest
spread was 3.09% in the recent quarter, down 9 basis points from
3.18% in the fourth quarter of 2005. That decline reflects the
impact of higher interest rates in 2006 that resulted in
short-term interest rates associated with borrowings and many
deposits rising more than longer-term interest rates associated
with many loan products. However, the contribution of net
interest free funds to the Companys net interest margin
rose to .64% in the final 2006 quarter from .51% in the
year-earlier quarter. That rise reflects the impact of higher
interest rates on interest-bearing liabilities used to value
such contribution. As a result, the Companys net interest
margin improved to 3.73% in the recent quarter from 3.69% in the
final quarter of 2005.
The provision for credit losses was $28 million during the
three-month period ended December 31, 2006, compared with
$23 million in the year-earlier period. Net charge-offs of
loans were $24 million in 2006s fourth quarter,
representing an annualized .23% of average loans and leases
outstanding, compared with $23 million or .22% during the
final three months of 2005.
68
Other income totaled $256 million in the final quarter of
2006, up 3% from $249 million in the year-earlier quarter,
due in part to higher revenues from trust and brokerage services
activities, service charges on deposit accounts and income from
bank owned life insurance, partially offset by a decline in
mortgage banking revenues.
Other expense in the fourth quarter of 2006 increased 4% to
$384 million from $369 million in the fourth quarter
of 2005. Included in such amounts are expenses considered to be
nonoperating in nature consisting of amortization of
core deposit and other intangible assets of $19 million and
$13 million in the final quarter of 2006 and 2005,
respectively. Exclusive of these nonoperating expenses,
noninterest operating expenses were $365 million in the
recently completed quarter, up 2% from $356 million in the
last three months of 2005. Higher costs for salaries and a
$1 million increase to the valuation allowance for the
impairment of capitalized residential mortgage servicing rights
in the fourth quarter of 2006, compared with a reversal of a
portion of such valuation allowance of $6 million in the
year-earlier quarter, were the leading contributors to that rise
in operating expense. The Companys efficiency ratio during
the fourth quarter of 2006 and 2005 was 50.2% and 50.7%,
respectively. Table 21 includes a reconciliation of other
expense to noninterest operating expense for each of the
quarters of 2006 and 2005.
Segment
Information
In accordance with the provisions of SFAS No. 131,
Disclosures About Segments of an Enterprise and Related
Information, the Companys reportable segments have
been determined based upon its internal profitability reporting
system, which is organized by strategic business unit. 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 Companys segments was
compiled utilizing the accounting policies described in
note 21 of Notes to Financial Statements. 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 GAAP. As a result, reported segments and the
financial information of the reported segments are not
necessarily comparable with similar information reported by
other financial institutions. Furthermore, changes in management
structure or allocation methodologies and procedures may result
in changes in reported segment financial data. Financial
information about the Companys segments is presented in
note 21 of Notes to Financial Statements.
The Commercial Banking segment provides a wide range of credit
products and banking services for middle-market and large
commercial customers, largely within the markets served by the
Company. Services provided by this segment include commercial
lending and leasing, deposit products, and cash management
services. Net income earned by the Commercial Banking segment
rose 3% to $226 million in 2006 from $219 million in
2005. That improvement was primarily the result of a
$25 million rise in net interest income, partially offset
by increased noninterest expenses, most significantly higher
personnel costs of $7 million. The higher net interest
income was predominantly due to a widening of the net interest
margin and an 8% increase in average loan balances outstanding,
offset, in part, by a 17% decrease in average demand deposit
balances. In 2004, this segments net income aggregated
$213 million. The favorable performance in 2005 as compared
to 2004 was due largely to an increase in net interest income of
$21 million, mainly the result of a 7% increase in loan
balances outstanding, partially offset by a $9 million
increase in noninterest expenses, due predominantly to higher
personnel costs.
The Commercial Real Estate segment provides credit and deposit
services to its customers. Real estate securing loans in this
segment is generally located in the New York City metropolitan
area, upstate New York, Pennsylvania, Maryland, the District of
Columbia, Delaware, Virginia, West Virginia and the northwestern
portion of the United States. Commercial real estate loans may
be secured by
apartment/multifamily
buildings; office, retail and industrial space; or other types
of collateral. Activities of this segment also include the
origination, sales and servicing of commercial real estate loans
through the FNMA DUS program and other programs. This segment
contributed net income of $135 million in 2006, down 6%
from the $143 million earned in 2005. The decline was the
result of an $8 million
69
decrease in net interest income, predominantly due to a
narrowing of net interest margin on loans outstanding, higher
noninterest expenses of $6 million and lower commercial
mortgage credit-related fees and other revenues of
$4 million. Net income in 2005 for the Commercial Real
Estate segment was 13% above the $126 million earned in
2004. That improvement was due to an increase in net interest
income of $19 million that resulted from higher average
loan balances and a wider margin associated with deposits, a
$4 million rise in commercial mortgage banking revenues and
a lower provision for credit losses of $5 million.
The Discretionary Portfolio segment includes investment and
trading securities, residential mortgage loans and other assets;
short-term and long-term borrowed funds; brokered certificates
of deposit and interest rate swap agreements related thereto;
and offshore branch deposits. This segment also provides foreign
exchange services to customers. Included in the assets of the
Discretionary Portfolio segment are the preferred stock
issuances of FNMA and FHLMC owned by the Company. The
Discretionary Portfolio segment recorded net income of
$96 million in 2006, 3% higher than $93 million in
2005. Contributing to that increase were the $29 million
other-than-temporary
impairment charge related to preferred stock issuances of FNMA
and FHLMC reflected in 2005s results and the
$13 million gain in 2006 resulting from the accelerated
recognition of a purchase accounting premium related to the call
of an FHLB borrowing assumed in a previous acquisition.
Partially offsetting these favorable factors was a
$39 million decrease in net interest income resulting from
a 58 basis point narrowing of the net interest margin on
investment securities and a $470 million decline in the
average balance of the segments portfolio of investment
securities. Net income contributed by the Discretionary
Portfolio segment was $112 million in 2004. The 17% decline
in 2005 as compared with 2004 was predominantly the result of
the previously mentioned other-than temporary impairment charge
reflected in 2005s results.
The Residential Mortgage Banking segment originates and services
residential mortgage loans for consumers and sells substantially
all of those loans in the secondary market to investors or to
bank subsidiaries of
M&T. This segment also
originates and services loans to developers of residential real
estate properties. In addition to the geographic regions served
by or contiguous with the Companys branch network, the
Company maintains mortgage loan origination offices in several
states throughout the southern and western United States. The
Company also periodically purchases the rights to service
mortgage loans. Residential mortgage loans held for sale are
included in this segment. The Residential Mortgage Banking
segments net income rose 21% to $52 million in 2006
from $43 million in 2005. The improved performance was
predominantly due to an 11% increase in noninterest revenues
resulting from higher income from servicing mortgage loans of
$10 million and increased gains from the sales of loans to
the Discretionary Portfolio segment of $9 million. Also
contributing to the improvement was an $8 million increase
in net interest income, mainly due to a 30% increase in balances
of loans held for sale, net of a 52 basis point decline in
net interest margin associated with such loan balances.
Partially offsetting these favorable factors were higher
salaries and benefits expenses of $8 million and other
noninterest expenses of $4 million. Included in noninterest
expenses were partial reversals of the capitalized mortgage
servicing rights valuation allowance of $10 million and
$8 million in 2006 and 2005, respectively. Net income for
the Residential Mortgage Banking segment totaled
$29 million in 2004. The 50% increase in net income from
2004 to 2005 was due predominantly to higher noninterest
revenues of $20 million, resulting from loan origination,
sales and servicing activities, and higher net interest income
of $10 million, attributable primarily to an increase in
average loan balances outstanding. Also contributing to the
segments improved performance from 2004 to 2005 was the
effect of an $8 million partial reversal of the capitalized
mortgage servicing rights valuation allowance recognized during
2005, compared with a $2 million partial reversal of such
allowance recognized during 2004. Partially offsetting revenue
growth was a $14 million increase in salaries and benefits
expenses. Gains from the sales of loans to the Companys
Discretionary Portfolio segment were $19 million,
$10 million and $9 million in 2006, 2005 and 2004,
respectively.
The Retail Banking segment offers a variety of services to
consumers and small businesses through several delivery channels
which include banking offices, automated teller machines,
telephone banking and Internet banking. The Company has banking
offices in New York State, Pennsylvania, Maryland, Virginia, the
District of Columbia, West Virginia and Delaware. Effective
January 2, 2007,
M&T Bank
70
opened its first banking office in New Jersey. The Retail
Banking segment also offers certain deposit and loan products on
a nationwide basis through
M&T Bank, N.A. Credit
services offered by this segment include consumer installment
loans, student loans, automobile loans (originated both directly
and indirectly through dealers), home equity loans and lines of
credit, and loans and leases to small businesses. The segment
also offers to its customers deposit products, including demand,
savings and time accounts; investment products, including mutual
funds and annuities; and other services. Net income for the
Retail Banking segment aggregated $410 million in 2006, up
26% from $325 million in 2005. The favorable performance
was primarily due to an increase in net interest income of
$119 million, largely resulting from a widening net
interest margin on deposit products. Also contributing to the
improvement were higher service charges on deposit accounts of
$16 million. The Retail Banking segment recorded net income
of $251 million in 2004. The 30% increase from 2004 to 2005
was due predominantly to increases in net interest income of
$81 million, largely attributable to an increase in net
interest margin on deposit products. Higher service charges on
deposit accounts and other fee income of $21 million, lower
noninterest expenses of $13 million, and a $10 million
decline in the provision for credit losses also contributed to
the rise in net income from 2004 to 2005.
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 Companys trust, brokerage and insurance
businesses. Also reflected in this category are the amortization
of core deposit and other intangible assets resulting from
acquisitions of financial institutions, the net impact of the
Companys allocation methodologies for internal funds
transfer pricing and the provision for credit losses, and, in
2006, acquisition and integration-related expenses resulting
from the branch acquisition completed by
M&T Bank on
June 30, 2006. The various components of the All
Other category resulted in net losses of $80 million,
$41 million and $9 million in 2006, 2005 and 2004,
respectively. The Companys allocation methodologies for
internal transfers for funding charges and credits associated
with earning assets and interest-bearing liabilities of the
Companys reportable segments was the main factor for the
increased net loss in 2006. Also contributing to the net loss
were the previously mentioned $18 million charitable
contribution made to The
M&T Charitable
Foundation and higher charges for amortization of core deposit
and other intangible assets and merger-related expenses incurred
as a result of the branch acquisition of $17 million and
$5 million, respectively. The higher net loss incurred
during 2005 as compared with 2004 resulted largely from the
Companys allocation methodologies for internal transfers
for funding charges and credits associated with earning assets
and interest-bearing liabilities of the Companys
reportable segments and the provision for credit losses.
Noninterest expenses in 2004 were $44 million higher than
in 2005, reflecting 2004s $25 million contribution to
The M&T Charitable
Foundation and a $19 million higher charge for amortization
of core deposit and other intangible assets. The 2004 net
loss also reflected the $12 million reduction in income tax
expense resulting from the reorganization of certain of
M&Ts subsidiaries.
Recent
Accounting Developments
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial
Instruments an amendment to FASB Statements
No. 133 and 140. SFAS No. 155 permits fair
value remeasurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require
bifurcation. As a result, such instruments would be accounted
for in one of two ways. Under the first allowable method, an
entity would bifurcate the embedded derivative feature and
record the bifurcated derivative at fair value. Subsequent
changes in fair value of the bifurcated derivative would be
reported in earnings. As an alternative, an entity could elect
not to bifurcate the embedded derivative but instead record the
entire financial instrument at fair value with subsequent
changes in fair value of the security being reported in
earnings. SFAS No. 155 also clarifies which
interest-only strips and principal-only strips are not subject
to the requirements of SFAS No. 133 and establishes a
requirement to evaluate interests in securitized financial
assets to identify interests that contain an embedded derivative
requiring bifurcation. SFAS No. 155 is effective for
all financial instruments acquired or issued after the beginning
of an entitys first fiscal year that begins after
September 15, 2006. Earlier adoption is permitted as of the
beginning of an entitys fiscal year, provided the entity
has not yet issued financial statements, including financial
statements for any interim period for that fiscal year. The
Company
71
adopted the provisions of SFAS No. 155 as of
January 1, 2007 and does not anticipate that the impact of
such adoption will be material to its financial position or
results of operations.
In March 2006, the FASB issued SFAS No. 156,
Accounting for Servicing of Financial Assets
an amendment of FASB Statement No. 140.
SFAS No. 156 defines the situations in which an entity
should recognize a servicing asset or servicing liability when
it undertakes an obligation to service a financial asset by
entering into a servicing contract. SFAS No. 156
requires all separately recognized servicing assets and
servicing liabilities to be initially measured at fair value and
permits an entity to choose its subsequent measurement method
for each class of separately recognized servicing assets and
servicing liabilities as either the amortization method or fair
value measurement method. The amortization method requires that
servicing assets and servicing liabilities be amortized in
proportion to and over the period of estimated net servicing
income or net servicing loss and assessed for impairment or
increased obligation based on fair value at each reporting date.
The fair value measurement method requires servicing assets and
servicing liabilities to be measured at fair value at each
reporting date and requires entities to report changes in fair
value of servicing assets and liabilities in earnings in the
period in which the changes occur. SFAS No. 156
requires prospective adoption as of the beginning of an
entitys first fiscal year that begins after
September 15, 2006. Earlier adoption is permitted as of the
beginning of an entitys fiscal year, provided the entity
has not yet issued financial statements, including interim
financial statements, for any period of that fiscal year. An
entity may elect to subsequently measure a class of separately
recognized servicing assets and servicing liabilities at fair
value as of the beginning of any fiscal year, beginning with the
fiscal year in which the entity adopts this statement. Upon such
election, which is irrevocable, the effect of remeasuring an
existing class of separately recognized servicing assets and
servicing liabilities at fair value should be reported as a
cumulative-effect adjustment to retained earnings as of the
beginning of the fiscal year. Currently, the Company initially
measures servicing assets retained in sales and securitization
transactions for which it is the transferor under the relative
fair value method prescribed in SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, and subsequently
measures its servicing assets under the amortization method. The
Company has not early-adopted the provisions of
SFAS No. 156 and currently does not intend to adopt
the fair value measurement method for any classes of separately
recognized servicing assets in 2007. The adoption of
SFAS No. 156 on January 1, 2007, therefore, is
not expected to have a material effect on the Companys
financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair
value in GAAP, and expands disclosures about fair value
measurements. SFAS No. 157 applies to fair value
measurements required or permitted under other accounting
pronouncements, but does not require any new fair value
measurements. The definition of fair value is clarified by
SFAS No. 157 to be the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
SFAS No. 157 expands disclosures about the use of fair
value to measure assets and liabilities in interim and annual
periods subsequent to initial recognition. The disclosures focus
on the inputs used to measure fair value and the effect of the
measurements on earnings for the period. SFAS No. 157
is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. The provisions generally should be
applied prospectively as of the beginning of the fiscal year in
which SFAS No. 157 is applied, with certain provisions
required to be applied retrospectively. Many of the
Companys assets, liabilities and off-balance sheet
positions are required to either be accounted for or disclosed
using fair value as their relevant measurement attribute. Given
the pervasiveness of fair value measurements throughout the
Companys financial statements, the Company has not yet
determined the impact that the adoption of
SFAS No. 157 will have on its financial statements.
In July 2006, the FASB issued FIN No. 48, Accounting
for Uncertainty in Income Taxes. FIN No. 48
prescribes the accounting method to be applied to measure
uncertainty in income taxes recognized under
SFAS No. 109, Accounting for Income Taxes.
FIN No. 48 establishes a recognition threshold and
measurement attribute for the financial statement recognition
and measurement of an uncertain tax position taken or expected
to be taken in a tax return. The evaluation of an uncertain tax
position in accordance with FIN No. 48 is a two-step
process. The first step is recognition, which requires
72
a determination whether it is more likely than not that a tax
position will be sustained upon examination, including
resolution of any related appeals or litigation processes, based
on the technical merits of the position. The second step is
measurement. Under the measurement step, a tax position that
meets the more-likely-than-not recognition threshold is measured
at the largest amount of benefit that is greater than fifty
percent likely of being realized upon ultimate settlement. Tax
positions that previously failed to meet the
more-likely-than-not recognition threshold should be recognized
in the first subsequent financial reporting period in which that
threshold is met. Previously recognized tax positions that no
longer meet the more-likely-than-not recognition threshold
should be derecognized in the first subsequent financial
reporting period in which that threshold is no longer met. FIN
No. 48 is effective for fiscal years beginning after
December 15, 2006. The cumulative effect of applying the
provisions of FIN No. 48 shall be reported as an adjustment
to the opening balance of retained earnings (or other
appropriate components of equity or net assets) for that fiscal
year. The adoption of FIN No. 48 on January 1, 2007
will not have a material impact on the Companys financial
position, but will likely increase the Companys effective
income tax rate by approximately .75% to 1.0% from what it
otherwise would have been.
In July 2006, the FASB adopted FASB Staff Position
No. 13-2,
Accounting for a Change or Projected Change in the Timing
of Cash Flows Relating to Income Taxes Generated by a Leveraged
Lease Transaction (FSP
13-2).
FSP 13-2
requires that a change or projected change in the timing of cash
flows relating to income taxes generated by a leveraged lease
shall be accounted for in accordance with the guidance in
paragraph 46 of SFAS No. 13, Accounting for
Leases. That is, the projected timing of income tax cash
flows generated by a leveraged lease transaction shall be
reviewed annually or more frequently if events or changes in
circumstances indicate that a change in timing has occurred or
is projected to occur. If, during the lease term, the projected
timing of income tax cash flows generated by a leveraged lease
is revised, the rate of return and the allocation of income to
positive investment years shall be recalculated from inception
of the lease following the method described in paragraph 44
of SFAS No. 13. The guidance in FSP
13-2 shall
be applied to fiscal years beginning after December 15,
2006. The cumulative effect of applying the provisions of FSP
13-2 shall
be reported as an adjustment to the opening balance of retained
earnings as of the beginning of the period of adoption. The
Company does not expect that the adoption of FSP
13-2 on
January 1, 2007 will have a material effect on its
financial position or results of operations.
At its September 2006 meeting, the Emerging Issues Task Force
(EITF) reached a final consensus on Issue
06-04,
Accounting for Deferred Compensation and Postretirement
Benefit Aspects of Endorsement Split-Dollar Life Insurance
Arrangements. The consensus stipulates that an agreement
by an employer to share a portion of the proceeds of a life
insurance policy with an employee during the postretirement
period is a postretirement benefit arrangement required to be
accounted for under SFAS No. 106 or Accounting
Principles Board Opinion (APB) No. 12,
Omnibus Opinion 1967. The consensus
concludes that the purchase of a split-dollar life insurance
policy does not constitute a settlement under
SFAS No. 106 and, therefore, a liability for the
postretirement obligation must be recognized under
SFAS No. 106 if the benefit is offered under an
arrangement that constitutes a plan or under APB No. 12 if
it is not part of a plan. Issue
06-04 is
effective for annual or interim reporting periods beginning
after December 15, 2007. The provisions of Issue
06-04 should
be applied through either a cumulative-effect adjustment to
retained earnings as of the beginning of the year of adoption or
retrospective application. The Company has endorsement
split-dollar life insurance policies that it inherited through
certain acquisitions that are associated with employees who are
no longer active. The Company does not anticipate that the
adoption of the provisions of Issue
06-04 will
have a material effect on the Companys financial position
or results of operations.
Also at its September 2006 meeting, the EITF reached a final
consensus on Issue
06-05,
Accounting for Purchases of Life Insurance
Determining the Amount That Could be Realized in Accordance with
FASB Technical
Bulletin No. 85-4.
The consensus concludes that in determining the amount that
could be realized under an insurance contract accounted for
under FASB Technical
Bulletin No. 85-4,
Accounting for Purchases of Life Insurance, the
policyholder should (1) consider any additional amounts
included in the contractual terms of the policy; (2) assume
the surrender value on a individual-life by individual-life
policy basis; and (3) not discount the cash surrender value
component
73
of the amount that could be realized when contractual
restrictions on the ability to surrender a policy exist. Issue
06-05 is
effective for fiscal years beginning after December 15,
2006. The consensus in Issue
06-05 should
be adopted through either (1) a change in accounting
principle through a cumulative-effect adjustment to retained
earning as of the beginning of the year of adoption or
(2) a change in accounting principle through retrospective
application to all prior periods. At December 31, 2006, the
Company had bank owned life insurance policies with a carrying
value of $1.1 billion. The Company does not anticipate that
the adoption of the provisions of Issue
06-05 on
January 1, 2007 will have a material effect on the
Companys financial position or results of operations.
Forward-Looking
Statements
Managements Discussion and Analysis of Financial Condition
and Results of Operations and other sections of the
Companys Annual Report contain forward-looking statements
that are based on current expectations, estimates and
projections about the Companys business, managements
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; prepayment speeds, loan originations and
credit losses; sources of liquidity; common shares outstanding;
common stock price volatility; fair value of and number of
stock-based compensation awards 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, cost-effective basis; the mix
of products/services; containing costs and expenses;
governmental and public policy changes; 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 Companys future
businesses; and material differences in the actual financial
results of merger and acquisition activities compared with the
Companys 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, either nationally or in the states in which the
Company conducts business, including interest rate and currency
exchange rate fluctuations, changes and trends in the securities
markets, and other Future Factors.
74
Table
20
QUARTERLY
TRENDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Quarters
|
|
|
2005 Quarters
|
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Earnings and dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands, except per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (taxable-equivalent
basis)
|
|
$
|
876,197
|
|
|
$
|
858,008
|
|
|
$
|
817,552
|
|
|
$
|
782,003
|
|
|
$
|
757,654
|
|
|
$
|
725,129
|
|
|
$
|
680,781
|
|
|
$
|
642,441
|
|
Interest expense
|
|
|
404,356
|
|
|
|
395,652
|
|
|
|
366,298
|
|
|
|
330,246
|
|
|
|
303,493
|
|
|
|
265,576
|
|
|
|
229,016
|
|
|
|
196,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
471,841
|
|
|
|
462,356
|
|
|
|
451,254
|
|
|
|
451,757
|
|
|
|
454,161
|
|
|
|
459,553
|
|
|
|
451,765
|
|
|
|
446,175
|
|
Less: provision for credit losses
|
|
|
28,000
|
|
|
|
17,000
|
|
|
|
17,000
|
|
|
|
18,000
|
|
|
|
23,000
|
|
|
|
22,000
|
|
|
|
19,000
|
|
|
|
24,000
|
|
Other income
|
|
|
256,417
|
|
|
|
273,902
|
|
|
|
262,602
|
|
|
|
252,931
|
|
|
|
248,604
|
|
|
|
221,494
|
|
|
|
245,362
|
|
|
|
234,258
|
|
Less: other expense
|
|
|
383,810
|
|
|
|
408,941
|
|
|
|
376,997
|
|
|
|
382,003
|
|
|
|
369,114
|
|
|
|
368,250
|
|
|
|
380,441
|
|
|
|
367,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
316,448
|
|
|
|
310,317
|
|
|
|
319,859
|
|
|
|
304,685
|
|
|
|
310,651
|
|
|
|
290,797
|
|
|
|
297,686
|
|
|
|
289,096
|
|
Applicable income taxes
|
|
|
97,996
|
|
|
|
94,775
|
|
|
|
102,645
|
|
|
|
97,037
|
|
|
|
101,113
|
|
|
|
95,348
|
|
|
|
96,589
|
|
|
|
95,686
|
|
Taxable-equivalent adjustment
|
|
|
5,123
|
|
|
|
5,172
|
|
|
|
4,641
|
|
|
|
4,731
|
|
|
|
4,553
|
|
|
|
4,375
|
|
|
|
4,263
|
|
|
|
4,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
213,329
|
|
|
$
|
210,370
|
|
|
$
|
212,573
|
|
|
$
|
202,917
|
|
|
$
|
204,985
|
|
|
$
|
191,074
|
|
|
$
|
196,834
|
|
|
$
|
189,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
|
|
$
|
1.93
|
|
|
$
|
1.89
|
|
|
$
|
1.91
|
|
|
$
|
1.82
|
|
|
$
|
1.82
|
|
|
$
|
1.68
|
|
|
$
|
1.73
|
|
|
$
|
1.65
|
|
Diluted earnings
|
|
|
1.88
|
|
|
|
1.85
|
|
|
|
1.87
|
|
|
|
1.77
|
|
|
|
1.78
|
|
|
|
1.64
|
|
|
|
1.69
|
|
|
|
1.62
|
|
Cash dividends
|
|
$
|
.60
|
|
|
$
|
.60
|
|
|
$
|
.60
|
|
|
$
|
.45
|
|
|
$
|
.45
|
|
|
$
|
.45
|
|
|
$
|
.45
|
|
|
$
|
.40
|
|
Average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
110,705
|
|
|
|
111,047
|
|
|
|
111,259
|
|
|
|
111,693
|
|
|
|
112,529
|
|
|
|
113,530
|
|
|
|
113,949
|
|
|
|
114,773
|
|
Diluted
|
|
|
113,468
|
|
|
|
113,897
|
|
|
|
113,968
|
|
|
|
114,347
|
|
|
|
115,147
|
|
|
|
116,200
|
|
|
|
116,422
|
|
|
|
117,184
|
|
Performance ratios,
annualized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
|
1.50
|
%
|
|
|
1.49
|
%
|
|
|
1.54
|
%
|
|
|
1.49
|
%
|
|
|
1.48
|
%
|
|
|
1.39
|
%
|
|
|
1.46
|
%
|
|
|
1.44
|
%
|
Average common stockholders
equity
|
|
|
13.55
|
%
|
|
|
13.72
|
%
|
|
|
14.35
|
%
|
|
|
13.97
|
%
|
|
|
13.85
|
%
|
|
|
12.97
|
%
|
|
|
13.73
|
%
|
|
|
13.41
|
%
|
Net interest margin on average
earning assets (taxable-equivalent basis)
|
|
|
3.73
|
%
|
|
|
3.68
|
%
|
|
|
3.66
|
%
|
|
|
3.73
|
%
|
|
|
3.69
|
%
|
|
|
3.76
|
%
|
|
|
3.78
|
%
|
|
|
3.83
|
%
|
Nonperforming loans to total loans
and leases, net of unearned discount
|
|
|
.52
|
%
|
|
|
.43
|
%
|
|
|
.38
|
%
|
|
|
.35
|
%
|
|
|
.39
|
%
|
|
|
.41
|
%
|
|
|
.46
|
%
|
|
|
.46
|
%
|
Efficiency ratio(a)
|
|
|
52.79
|
%
|
|
|
55.47
|
%
|
|
|
52.29
|
%
|
|
|
54.21
|
%
|
|
|
52.49
|
%
|
|
|
51.94
|
%
|
|
|
54.58
|
%
|
|
|
54.00
|
%
|
Net operating (tangible)
results(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (in thousands)
|
|
$
|
224,733
|
|
|
$
|
223,228
|
|
|
$
|
221,838
|
|
|
$
|
210,856
|
|
|
$
|
212,738
|
|
|
$
|
199,577
|
|
|
$
|
205,415
|
|
|
$
|
199,135
|
|
Diluted net operating income per
common share
|
|
|
1.98
|
|
|
|
1.96
|
|
|
|
1.95
|
|
|
|
1.84
|
|
|
|
1.85
|
|
|
|
1.72
|
|
|
|
1.76
|
|
|
|
1.70
|
|
Annualized return on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average tangible assets
|
|
|
1.67
|
%
|
|
|
1.67
|
%
|
|
|
1.69
|
%
|
|
|
1.64
|
%
|
|
|
1.63
|
%
|
|
|
1.54
|
%
|
|
|
1.62
|
%
|
|
|
1.61
|
%
|
Average tangible common
stockholders equity
|
|
|
28.71
|
%
|
|
|
30.22
|
%
|
|
|
30.02
|
%
|
|
|
29.31
|
%
|
|
|
29.12
|
%
|
|
|
27.67
|
%
|
|
|
29.88
|
%
|
|
|
29.67
|
%
|
Efficiency ratio(a)
|
|
|
50.22
|
%
|
|
|
52.76
|
%
|
|
|
50.70
|
%
|
|
|
52.36
|
%
|
|
|
50.69
|
%
|
|
|
49.97
|
%
|
|
|
52.56
|
%
|
|
|
51.63
|
%
|
Balance sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions, except per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets(c)
|
|
$
|
56,575
|
|
|
$
|
56,158
|
|
|
$
|
55,498
|
|
|
$
|
55,106
|
|
|
$
|
54,835
|
|
|
$
|
54,444
|
|
|
$
|
53,935
|
|
|
$
|
53,306
|
|
Total tangible assets(c)
|
|
|
53,437
|
|
|
|
53,004
|
|
|
|
52,522
|
|
|
|
52,130
|
|
|
|
51,860
|
|
|
|
51,461
|
|
|
|
50,944
|
|
|
|
50,305
|
|
Earning assets
|
|
|
50,235
|
|
|
|
49,849
|
|
|
|
49,443
|
|
|
|
49,066
|
|
|
|
48,833
|
|
|
|
48,447
|
|
|
|
47,931
|
|
|
|
47,240
|
|
Investment securities
|
|
|
7,556
|
|
|
|
7,898
|
|
|
|
8,314
|
|
|
|
8,383
|
|
|
|
8,302
|
|
|
|
8,439
|
|
|
|
8,593
|
|
|
|
8,573
|
|
Loans and leases, net of unearned
discount
|
|
|
42,474
|
|
|
|
41,710
|
|
|
|
40,980
|
|
|
|
40,544
|
|
|
|
40,403
|
|
|
|
39,879
|
|
|
|
39,229
|
|
|
|
38,580
|
|
Deposits
|
|
|
38,504
|
|
|
|
39,158
|
|
|
|
38,435
|
|
|
|
37,569
|
|
|
|
37,006
|
|
|
|
36,708
|
|
|
|
36,245
|
|
|
|
35,282
|
|
Stockholders equity(c)
|
|
|
6,244
|
|
|
|
6,085
|
|
|
|
5,940
|
|
|
|
5,893
|
|
|
|
5,873
|
|
|
|
5,845
|
|
|
|
5,749
|
|
|
|
5,723
|
|
Tangible stockholders
equity(c)
|
|
|
3,106
|
|
|
|
2,931
|
|
|
|
2,964
|
|
|
|
2,917
|
|
|
|
2,898
|
|
|
|
2,862
|
|
|
|
2,758
|
|
|
|
2,722
|
|
At end of quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets(c)
|
|
$
|
57,065
|
|
|
$
|
56,373
|
|
|
$
|
56,507
|
|
|
$
|
55,420
|
|
|
$
|
55,146
|
|
|
$
|
54,841
|
|
|
$
|
54,482
|
|
|
$
|
53,887
|
|
Total tangible assets(c)
|
|
|
53,936
|
|
|
|
53,227
|
|
|
|
53,345
|
|
|
|
52,443
|
|
|
|
52,176
|
|
|
|
51,863
|
|
|
|
51,495
|
|
|
|
50,891
|
|
Earning assets
|
|
|
50,379
|
|
|
|
49,950
|
|
|
|
49,628
|
|
|
|
49,281
|
|
|
|
48,852
|
|
|
|
48,691
|
|
|
|
48,341
|
|
|
|
47,853
|
|
Investment securities
|
|
|
7,252
|
|
|
|
7,626
|
|
|
|
7,903
|
|
|
|
8,294
|
|
|
|
8,400
|
|
|
|
8,230
|
|
|
|
8,320
|
|
|
|
8,679
|
|
Loans and leases, net of unearned
discount
|
|
|
42,947
|
|
|
|
42,098
|
|
|
|
41,599
|
|
|
|
40,859
|
|
|
|
40,331
|
|
|
|
40,335
|
|
|
|
39,911
|
|
|
|
39,073
|
|
Deposits
|
|
|
39,911
|
|
|
|
39,079
|
|
|
|
38,514
|
|
|
|
38,171
|
|
|
|
37,100
|
|
|
|
37,199
|
|
|
|
37,306
|
|
|
|
36,293
|
|
Stockholders equity(c)
|
|
|
6,281
|
|
|
|
6,151
|
|
|
|
6,000
|
|
|
|
5,919
|
|
|
|
5,876
|
|
|
|
5,847
|
|
|
|
5,838
|
|
|
|
5,674
|
|
Tangible stockholders
equity(c)
|
|
|
3,152
|
|
|
|
3,005
|
|
|
|
2,838
|
|
|
|
2,942
|
|
|
|
2,906
|
|
|
|
2,869
|
|
|
|
2,851
|
|
|
|
2,678
|
|
Equity per common share
|
|
|
56.94
|
|
|
|
55.58
|
|
|
|
54.01
|
|
|
|
53.11
|
|
|
|
52.39
|
|
|
|
51.81
|
|
|
|
51.20
|
|
|
|
49.78
|
|
Tangible equity per common share
|
|
|
28.57
|
|
|
|
27.15
|
|
|
|
25.55
|
|
|
|
26.41
|
|
|
|
25.91
|
|
|
|
25.42
|
|
|
|
25.00
|
|
|
|
23.49
|
|
Market price per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
124.98
|
|
|
$
|
124.94
|
|
|
$
|
119.93
|
|
|
$
|
117.39
|
|
|
$
|
111.86
|
|
|
$
|
112.50
|
|
|
$
|
107.28
|
|
|
$
|
108.04
|
|
Low
|
|
|
117.31
|
|
|
|
116.00
|
|
|
|
112.90
|
|
|
|
105.72
|
|
|
|
101.31
|
|
|
|
103.50
|
|
|
|
98.75
|
|
|
|
96.71
|
|
Closing
|
|
|
122.16
|
|
|
|
119.96
|
|
|
|
117.92
|
|
|
|
114.14
|
|
|
|
109.05
|
|
|
|
105.71
|
|
|
|
105.16
|
|
|
|
102.06
|
|
|
|
|
(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 in Table 21. |
(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
in Table 21. |
75
Table
21
RECONCILIATION
OF QUARTERLY GAAP TO NON-GAAP MEASURES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Quarters
|
|
|
2005 Quarters
|
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
Income statement data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands, except per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
213,329
|
|
|
$
|
210,370
|
|
|
$
|
212,573
|
|
|
$
|
202,917
|
|
|
$
|
204,985
|
|
|
$
|
191,074
|
|
|
$
|
196,834
|
|
|
$
|
189,290
|
|
Amortization of core deposit and
other intangible assets(a)
|
|
|
11,404
|
|
|
|
12,154
|
|
|
|
6,921
|
|
|
|
7,939
|
|
|
|
7,753
|
|
|
|
8,503
|
|
|
|
8,581
|
|
|
|
9,845
|
|
Merger-related expenses(a)
|
|
|
|
|
|
|
704
|
|
|
|
2,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
|
$
|
224,733
|
|
|
$
|
223,228
|
|
|
$
|
221,838
|
|
|
$
|
210,856
|
|
|
$
|
212,738
|
|
|
$
|
199,577
|
|
|
$
|
205,415
|
|
|
$
|
199,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
1.88
|
|
|
$
|
1.85
|
|
|
$
|
1.87
|
|
|
$
|
1.77
|
|
|
$
|
1.78
|
|
|
$
|
1.64
|
|
|
$
|
1.69
|
|
|
$
|
1.62
|
|
Amortization of core deposit and
other intangible assets(a)
|
|
|
.10
|
|
|
|
.10
|
|
|
|
.06
|
|
|
|
.07
|
|
|
|
.07
|
|
|
|
.08
|
|
|
|
.07
|
|
|
|
.08
|
|
Merger-related expenses(a)
|
|
|
|
|
|
|
.01
|
|
|
|
.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net operating earnings per
share
|
|
$
|
1.98
|
|
|
$
|
1.96
|
|
|
$
|
1.95
|
|
|
$
|
1.84
|
|
|
$
|
1.85
|
|
|
$
|
1.72
|
|
|
$
|
1.76
|
|
|
$
|
1.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
$
|
383,810
|
|
|
$
|
408,941
|
|
|
$
|
376,997
|
|
|
$
|
382,003
|
|
|
$
|
369,114
|
|
|
$
|
368,250
|
|
|
$
|
380,441
|
|
|
$
|
367,337
|
|
Amortization of core deposit and
other intangible assets
|
|
|
(18,687
|
)
|
|
|
(19,936
|
)
|
|
|
(11,357
|
)
|
|
|
(13,028
|
)
|
|
|
(12,703
|
)
|
|
|
(13,926
|
)
|
|
|
(14,055
|
)
|
|
|
(16,121
|
)
|
Merger-related expenses
|
|
|
|
|
|
|
(1,155
|
)
|
|
|
(3,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest operating expense
|
|
$
|
365,123
|
|
|
$
|
387,850
|
|
|
$
|
361,798
|
|
|
$
|
368,975
|
|
|
$
|
356,411
|
|
|
$
|
354,324
|
|
|
$
|
366,386
|
|
|
$
|
351,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
|
|
|
$
|
305
|
|
|
$
|
510
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Equipment and net occupancy
|
|
|
|
|
|
|
12
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Printing, postage and supplies
|
|
|
|
|
|
|
141
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other costs of operations
|
|
|
|
|
|
|
697
|
|
|
|
3,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
1,155
|
|
|
$
|
3,842
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
56,575
|
|
|
$
|
56,158
|
|
|
$
|
55,498
|
|
|
$
|
55,106
|
|
|
$
|
54,835
|
|
|
$
|
54,444
|
|
|
$
|
53,935
|
|
|
$
|
53,306
|
|
Goodwill
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,907
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(261
|
)
|
|
|
(281
|
)
|
|
|
(107
|
)
|
|
|
(112
|
)
|
|
|
(115
|
)
|
|
|
(128
|
)
|
|
|
(142
|
)
|
|
|
(157
|
)
|
Deferred taxes
|
|
|
32
|
|
|
|
36
|
|
|
|
40
|
|
|
|
43
|
|
|
|
44
|
|
|
|
49
|
|
|
|
55
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average tangible assets
|
|
$
|
53,437
|
|
|
$
|
53,004
|
|
|
$
|
52,522
|
|
|
$
|
52,130
|
|
|
$
|
51,860
|
|
|
$
|
51,461
|
|
|
$
|
50,944
|
|
|
$
|
50,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity
|
|
$
|
6,244
|
|
|
$
|
6,085
|
|
|
$
|
5,940
|
|
|
$
|
5,893
|
|
|
$
|
5,873
|
|
|
$
|
5,845
|
|
|
$
|
5,749
|
|
|
$
|
5,723
|
|
Goodwill
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,907
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(261
|
)
|
|
|
(281
|
)
|
|
|
(107
|
)
|
|
|
(112
|
)
|
|
|
(115
|
)
|
|
|
(128
|
)
|
|
|
(142
|
)
|
|
|
(157
|
)
|
Deferred taxes
|
|
|
32
|
|
|
|
36
|
|
|
|
40
|
|
|
|
43
|
|
|
|
44
|
|
|
|
49
|
|
|
|
55
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average tangible equity
|
|
$
|
3,106
|
|
|
$
|
2,931
|
|
|
$
|
2,964
|
|
|
$
|
2,917
|
|
|
$
|
2,898
|
|
|
$
|
2,862
|
|
|
$
|
2,758
|
|
|
$
|
2,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
57,065
|
|
|
$
|
56,373
|
|
|
$
|
56,507
|
|
|
$
|
55,420
|
|
|
$
|
55,146
|
|
|
$
|
54,841
|
|
|
$
|
54,482
|
|
|
$
|
53,887
|
|
Goodwill
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(250
|
)
|
|
|
(271
|
)
|
|
|
(291
|
)
|
|
|
(111
|
)
|
|
|
(108
|
)
|
|
|
(121
|
)
|
|
|
(135
|
)
|
|
|
(149
|
)
|
Deferred taxes
|
|
|
30
|
|
|
|
34
|
|
|
|
38
|
|
|
|
43
|
|
|
|
42
|
|
|
|
47
|
|
|
|
52
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tangible assets
|
|
$
|
53,936
|
|
|
$
|
53,227
|
|
|
$
|
53,345
|
|
|
$
|
52,443
|
|
|
$
|
52,176
|
|
|
$
|
51,863
|
|
|
$
|
51,495
|
|
|
$
|
50,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
$
|
6,281
|
|
|
$
|
6,151
|
|
|
$
|
6,000
|
|
|
$
|
5,919
|
|
|
$
|
5,876
|
|
|
$
|
5,847
|
|
|
$
|
5,838
|
|
|
$
|
5,674
|
|
Goodwill
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,909
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
|
|
(2,904
|
)
|
Core deposit and other intangible
assets
|
|
|
(250
|
)
|
|
|
(271
|
)
|
|
|
(291
|
)
|
|
|
(111
|
)
|
|
|
(108
|
)
|
|
|
(121
|
)
|
|
|
(135
|
)
|
|
|
(149
|
)
|
Deferred taxes
|
|
|
30
|
|
|
|
34
|
|
|
|
38
|
|
|
|
43
|
|
|
|
42
|
|
|
|
47
|
|
|
|
52
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tangible equity
|
|
$
|
3,152
|
|
|
$
|
3,005
|
|
|
$
|
2,838
|
|
|
$
|
2,942
|
|
|
$
|
2,906
|
|
|
$
|
2,869
|
|
|
$
|
2,851
|
|
|
$
|
2,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
After any related tax
effect. |
76
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
Incorporated by reference to the discussion contained in
Part II, Item 7, Managements Discussion
and Analysis of Financial Condition and Results of
Operations, under the captions Liquidity, Market
Risk, and Interest Rate Sensitivity (including Table
18) and Capital.
|
|
Item 8.
|
Financial
Statements and Supplementary Data.
|
Financial Statements and Supplementary Data consist of the
financial statements as indexed and presented below and Table 20
Quarterly Trends presented in Part II,
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations.
|
|
|
|
|
Index to Financial Statements
and Financial Statement Schedules
|
|
|
|
|
|
|
78
|
|
|
|
|
79
|
|
|
|
|
81
|
|
|
|
|
82
|
|
|
|
|
83
|
|
|
|
|
84
|
|
|
|
|
85
|
|
77
Report on
Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting at
M&T Bank Corporation
and subsidiaries (the Company). Management has
assessed the effectiveness of the Companys internal
control over financial reporting as of December 31, 2006
based on criteria described in Internal Control-Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that
assessment, management concluded that the Company maintained
effective internal control over financial reporting as of
December 31, 2006.
The consolidated financial statements of the Company have been
audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, that was engaged to express
an opinion as to the fairness of presentation of such financial
statements. PricewaterhouseCoopers LLP was also engaged to audit
managements assessment of the effectiveness of the
Companys internal control over financial reporting. The
report of PricewaterhouseCoopers LLP follows this report.
M&T BANK CORPORATION
Chairman of the Board and Chief Executive Officer
Executive Vice President and Chief Financial Officer
78
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and
Stockholders of
M&T Bank Corporation:
We have completed integrated audits of
M&T Bank
Corporations consolidated financial statements and of its
internal control over financial reporting as of
December 31, 2006 in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our
opinions, based on our audits, are presented below.
Consolidated
financial statements
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of
M&T Bank Corporation
and subsidiaries (the Company) at December 31,
2006 and 2005, and the results of its operations and its cash
flows for each of the three years in the period ended
December 31, 2006 in conformity with accounting principles
generally accepted in the United States of America. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Internal
control over financial reporting
Also, in our opinion, managements assessment, included in
the Report on Internal Control Over Financial Reporting
appearing under Item 8, that the Company maintained
effective internal control over financial reporting as of
December 31, 2006 based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material
respects, based on those criteria. Furthermore, in our opinion,
the Company maintained, in all material respects, effective
internal control over financial reporting as of
December 31, 2006, based on criteria established in
Internal Control Integrated Framework issued
by the COSO. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express
opinions on managements assessment and on the
effectiveness of the Companys internal control over
financial reporting based on our audit. We conducted our audit
of internal control over financial reporting in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was
maintained in all material respects. An audit of internal
control over financial reporting includes obtaining an
understanding of internal control over financial reporting,
evaluating managements assessment, testing and evaluating
the design and operating effectiveness of internal control, and
performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
79
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Buffalo, New York
February 23, 2007
80
M&T
BANK CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per share)
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
Assets
|
Cash and due from banks
|
|
$
|
1,605,506
|
|
|
$
|
1,479,239
|
|
Interest-bearing deposits at banks
|
|
|
6,639
|
|
|
|
8,408
|
|
Federal funds sold
|
|
|
19,458
|
|
|
|
11,220
|
|
Agreements to resell securities
|
|
|
100,000
|
|
|
|
|
|
Trading account
|
|
|
136,752
|
|
|
|
191,617
|
|
Investment securities
|
|
|
|
|
|
|
|
|
Available for sale (cost:
$6,878,332 in 2006; $8,011,560 in 2005)
|
|
|
6,829,848
|
|
|
|
7,931,703
|
|
Held to maturity (market value:
$66,729 in 2006; $102,880 in 2005)
|
|
|
64,899
|
|
|
|
101,059
|
|
Other (market value: $356,851 in
2006; $367,402 in 2005)
|
|
|
356,851
|
|
|
|
367,402
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
7,251,598
|
|
|
|
8,400,164
|
|
|
|
|
|
|
|
|
|
|
Loans and leases
|
|
|
43,206,954
|
|
|
|
40,553,691
|
|
Unearned discount
|
|
|
(259,657
|
)
|
|
|
(223,046
|
)
|
Allowance for credit losses
|
|
|
(649,948
|
)
|
|
|
(637,663
|
)
|
|
|
|
|
|
|
|
|
|
Loans and leases, net
|
|
|
42,297,349
|
|
|
|
39,692,982
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment
|
|
|
335,008
|
|
|
|
337,115
|
|
Goodwill
|
|
|
2,908,849
|
|
|
|
2,904,081
|
|
Core deposit and other intangible
assets
|
|
|
250,233
|
|
|
|
108,260
|
|
Accrued interest and other assets
|
|
|
2,153,513
|
|
|
|
2,013,320
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
57,064,905
|
|
|
$
|
55,146,406
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
Noninterest-bearing deposits
|
|
$
|
7,879,977
|
|
|
$
|
8,141,928
|
|
NOW accounts
|
|
|
940,439
|
|
|
|
901,938
|
|
Savings deposits
|
|
|
14,169,790
|
|
|
|
13,839,150
|
|
Time deposits
|
|
|
11,490,629
|
|
|
|
11,407,626
|
|
Deposits at foreign office
|
|
|
5,429,668
|
|
|
|
2,809,532
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
39,910,503
|
|
|
|
37,100,174
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and
agreements to repurchase securities
|
|
|
2,531,684
|
|
|
|
4,211,978
|
|
Other short-term borrowings
|
|
|
562,530
|
|
|
|
940,894
|
|
Accrued interest and other
liabilities
|
|
|
888,352
|
|
|
|
819,980
|
|
Long-term borrowings
|
|
|
6,890,741
|
|
|
|
6,196,994
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
50,783,810
|
|
|
|
49,270,020
|
|
|
|
|
|
|
|
|
|
|
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 in 2006 and 2005
|
|
|
60,198
|
|
|
|
60,198
|
|
Common stock issuable,
90,949 shares in 2006; 100,298 shares in 2005
|
|
|
5,060
|
|
|
|
5,363
|
|
Additional paid-in capital
|
|
|
2,889,449
|
|
|
|
2,886,153
|
|
Retained earnings
|
|
|
4,443,441
|
|
|
|
3,854,275
|
|
Accumulated other comprehensive
income (loss), net
|
|
|
(53,574
|
)
|
|
|
(97,930
|
)
|
Treasury stock common,
at cost 10,179,802 shares in 2006;
8,336,907 shares in 2005
|
|
|
(1,063,479
|
)
|
|
|
(831,673
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
6,281,095
|
|
|
|
5,876,386
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
57,064,905
|
|
|
$
|
55,146,406
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
financial statements.
81
M&T
BANK CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share)
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, including fees
|
|
$
|
2,927,411
|
|
|
$
|
2,420,660
|
|
|
$
|
1,974,469
|
|
Deposits at banks
|
|
|
372
|
|
|
|
169
|
|
|
|
65
|
|
Federal funds sold
|
|
|
1,670
|
|
|
|
807
|
|
|
|
123
|
|
Agreements to resell securities
|
|
|
3,927
|
|
|
|
1
|
|
|
|
11
|
|
Trading account
|
|
|
2,446
|
|
|
|
1,544
|
|
|
|
375
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully taxable
|
|
|
363,401
|
|
|
|
351,423
|
|
|
|
309,141
|
|
Exempt from federal taxes
|
|
|
14,866
|
|
|
|
14,090
|
|
|
|
14,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
3,314,093
|
|
|
|
2,788,694
|
|
|
|
2,298,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
|
3,461
|
|
|
|
2,182
|
|
|
|
1,802
|
|
Savings deposits
|
|
|
201,543
|
|
|
|
139,445
|
|
|
|
92,064
|
|
Time deposits
|
|
|
551,514
|
|
|
|
294,782
|
|
|
|
154,722
|
|
Deposits at foreign office
|
|
|
178,348
|
|
|
|
120,122
|
|
|
|
43,034
|
|
Short-term borrowings
|
|
|
227,850
|
|
|
|
157,853
|
|
|
|
71,172
|
|
Long-term borrowings
|
|
|
333,836
|
|
|
|
279,967
|
|
|
|
201,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
1,496,552
|
|
|
|
994,351
|
|
|
|
564,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
1,817,541
|
|
|
|
1,794,343
|
|
|
|
1,734,572
|
|
Provision for credit losses
|
|
|
80,000
|
|
|
|
88,000
|
|
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for credit losses
|
|
|
1,737,541
|
|
|
|
1,706,343
|
|
|
|
1,639,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking revenues
|
|
|
143,181
|
|
|
|
136,114
|
|
|
|
124,353
|
|
Service charges on deposit accounts
|
|
|
380,950
|
|
|
|
369,918
|
|
|
|
366,301
|
|
Trust income
|
|
|
140,781
|
|
|
|
134,679
|
|
|
|
136,296
|
|
Brokerage services income
|
|
|
60,295
|
|
|
|
55,572
|
|
|
|
53,740
|
|
Trading account and foreign
exchange gains
|
|
|
24,761
|
|
|
|
22,857
|
|
|
|
19,435
|
|
Gain (loss) on bank investment
securities
|
|
|
2,566
|
|
|
|
(28,133
|
)
|
|
|
2,874
|
|
Other revenues from operations
|
|
|
293,318
|
|
|
|
258,711
|
|
|
|
239,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
1,045,852
|
|
|
|
949,718
|
|
|
|
942,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
873,353
|
|
|
|
822,239
|
|
|
|
806,552
|
|
Equipment and net occupancy
|
|
|
168,776
|
|
|
|
173,689
|
|
|
|
179,595
|
|
Printing, postage and supplies
|
|
|
33,956
|
|
|
|
33,743
|
|
|
|
34,476
|
|
Amortization of core deposit and
other intangible assets
|
|
|
63,008
|
|
|
|
56,805
|
|
|
|
75,410
|
|
Other costs of operations
|
|
|
412,658
|
|
|
|
398,666
|
|
|
|
419,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
1,551,751
|
|
|
|
1,485,142
|
|
|
|
1,516,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
1,231,642
|
|
|
|
1,170,919
|
|
|
|
1,066,523
|
|
Income taxes
|
|
|
392,453
|
|
|
|
388,736
|
|
|
|
344,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
7.55
|
|
|
$
|
6.88
|
|
|
$
|
6.14
|
|
Diluted
|
|
|
7.37
|
|
|
|
6.73
|
|
|
|
6.00
|
|
See accompanying notes to
financial statements.
82
M&T
BANK CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
Adjustments to reconcile net income
to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
80,000
|
|
|
|
88,000
|
|
|
|
95,000
|
|
Depreciation and amortization of
premises and equipment
|
|
|
51,916
|
|
|
|
58,477
|
|
|
|
62,779
|
|
Amortization of capitalized
servicing rights
|
|
|
61,007
|
|
|
|
58,466
|
|
|
|
57,885
|
|
Amortization of core deposit and
other intangible assets
|
|
|
63,008
|
|
|
|
56,805
|
|
|
|
75,410
|
|
Provision for deferred income taxes
|
|
|
(68,249
|
)
|
|
|
(88,071
|
)
|
|
|
(137,596
|
)
|
Asset write-downs
|
|
|
7,713
|
|
|
|
32,765
|
|
|
|
737
|
|
Net gain on sales of assets
|
|
|
(12,915
|
)
|
|
|
(9,694
|
)
|
|
|
(7,127
|
)
|
Net change in accrued interest
receivable, payable
|
|
|
21,493
|
|
|
|
3,099
|
|
|
|
(26,438
|
)
|
Net change in other accrued income
and expense
|
|
|
58,707
|
|
|
|
(25,017
|
)
|
|
|
4,528
|
|
Net change in loans held for sale
|
|
|
(605,240
|
)
|
|
|
(609,433
|
)
|
|
|
(133,925
|
)
|
Net change in trading account
assets and liabilities
|
|
|
43,234
|
|
|
|
(49,208
|
)
|
|
|
10,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
539,863
|
|
|
|
298,372
|
|
|
|
724,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
|
|
|
110,501
|
|
|
|
20,673
|
|
|
|
727,229
|
|
Other
|
|
|
42,300
|
|
|
|
62,047
|
|
|
|
20,510
|
|
Proceeds from maturities of
investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
|
|
|
1,701,402
|
|
|
|
2,158,675
|
|
|
|
2,902,255
|
|
Held to maturity
|
|
|
95,951
|
|
|
|
104,500
|
|
|
|
142,799
|
|
Purchases of investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
|
|
|
(675,737
|
)
|
|
|
(2,047,939
|
)
|
|
|
(4,874,927
|
)
|
Held to maturity
|
|
|
(59,814
|
)
|
|
|
(107,540
|
)
|
|
|
(136,018
|
)
|
Other
|
|
|
(31,749
|
)
|
|
|
(107,597
|
)
|
|
|
(51,021
|
)
|
Other investments
|
|
|
(100,000
|
)
|
|
|
1,026
|
|
|
|
41
|
|
Additions to capitalized servicing
rights
|
|
|
(49,984
|
)
|
|
|
(50,367
|
)
|
|
|
(57,778
|
)
|
Net increase in loans and leases
|
|
|
(1,827,918
|
)
|
|
|
(1,509,896
|
)
|
|
|
(2,583,862
|
)
|
Capital expenditures, net
|
|
|
(41,988
|
)
|
|
|
(26,546
|
)
|
|
|
(31,785
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits and banking offices
|
|
|
494,990
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(11,272
|
)
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
(13,387
|
)
|
|
|
(73,262
|
)
|
|
|
(15,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing
activities
|
|
|
(366,705
|
)
|
|
|
(1,576,226
|
)
|
|
|
(3,958,002
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
1,847,505
|
|
|
|
1,680,945
|
|
|
|
2,329,792
|
|
Net increase (decrease) in
short-term borrowings
|
|
|
(2,058,658
|
)
|
|
|
450,230
|
|
|
|
261,454
|
|
Proceeds from long-term borrowings
|
|
|
2,000,000
|
|
|
|
1,801,657
|
|
|
|
1,400,660
|
|
Payments on long-term borrowings
|
|
|
(1,294,857
|
)
|
|
|
(1,927,070
|
)
|
|
|
(575,779
|
)
|
Purchases of treasury stock
|
|
|
(373,860
|
)
|
|
|
(509,609
|
)
|
|
|
(610,261
|
)
|
Dividends paid common
|
|
|
(249,817
|
)
|
|
|
(198,619
|
)
|
|
|
(187,669
|
)
|
Other, net
|
|
|
91,034
|
|
|
|
106,975
|
|
|
|
79,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by
financing activities
|
|
|
(38,653
|
)
|
|
|
1,404,509
|
|
|
|
2,697,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
134,505
|
|
|
|
126,655
|
|
|
|
(535,978
|
)
|
Cash and cash equivalents at
beginning of year
|
|
|
1,490,459
|
|
|
|
1,363,804
|
|
|
|
1,899,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of
year
|
|
$
|
1,624,964
|
|
|
$
|
1,490,459
|
|
|
$
|
1,363,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received during the year
|
|
$
|
3,298,620
|
|
|
$
|
2,721,155
|
|
|
$
|
2,266,601
|
|
Interest paid during the year
|
|
|
1,443,335
|
|
|
|
964,548
|
|
|
|
589,799
|
|
Income taxes paid during the year
|
|
|
345,763
|
|
|
|
472,773
|
|
|
|
453,006
|
|
Supplemental schedule of noncash
investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired in settlement
of loans
|
|
$
|
15,973
|
|
|
$
|
10,417
|
|
|
$
|
17,167
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired (noncash)
|
|
|
514,955
|
|
|
|
|
|
|
|
|
|
Liabilities assumed
|
|
|
998,673
|
|
|
|
|
|
|
|
|
|
Securitization of residential
mortgage loans allocated to
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale investment
securities
|
|
|
|
|
|
|
124,600
|
|
|
|
|
|
Capitalized servicing rights
|
|
|
|
|
|
|
1,410
|
|
|
|
|
|
See accompanying notes to
financial statements.
83
M&T
BANK CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
(In thousands, except per share)
|
|
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Income (Loss),
|
|
|
Treasury
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Issuable
|
|
|
Capital
|
|
|
Earnings
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
722,521
|
|
|
|
|
|
|
|
|
|
|
|
722,521
|
|
Other comprehensive income, net of
tax and reclassification adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,823
|
)
|
|
|
|
|
|
|
(42,823
|
)
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
679,659
|
|
Purchases of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(610,261
|
)
|
|
|
(610,261
|
)
|
Stock-based compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option and purchase plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,103
|
|
Exercises
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
(38,361
|
)
|
|
|
|
|
|
|
|
|
|
|
119,444
|
|
|
|
81,227
|
|
Directors stock plan
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
817
|
|
|
|
985
|
|
Deferred compensation plans, net,
including dividend equivalents
|
|
|
|
|
|
|
|
|
|
|
(547
|
)
|
|
|
(960
|
)
|
|
|
(180
|
)
|
|
|
|
|
|
|
2,047
|
|
|
|
360
|
|
Common stock cash
dividends $1.60 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(187,669
|
)
|
|
|
|
|
|
|
|
|
|
|
(187,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2004
|
|
$
|
|
|
|
|
60,198
|
|
|
|
5,779
|
|
|
|
2,897,912
|
|
|
|
3,270,887
|
|
|
|
(17,209 |
) |
|
|
(487,953
|
)
|
|
|
5,729,614
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
782,183
|
|
|
|
|
|
|
|
|
|
|
|
782,183
|
|
Other comprehensive income, net of
tax and reclassification adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,864
|
)
|
|
|
|
|
|
|
(43,864
|
)
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,857
|
)
|
|
|
|
|
|
|
(36,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
701,462
|
|
Purchases of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(509,609
|
)
|
|
|
(509,609
|
)
|
Repayment of management stock
ownership program receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
304
|
|
Stock-based compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option and purchase plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,191
|
|
Exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,112
|
)
|
|
|
|
|
|
|
|
|
|
|
163,864
|
|
|
|
106,752
|
|
Directors stock plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
1,009
|
|
|
|
1,096
|
|
Deferred compensation plans, net,
including dividend equivalents
|
|
|
|
|
|
|
|
|
|
|
(416
|
)
|
|
|
(229
|
)
|
|
|
(176
|
)
|
|
|
|
|
|
|
1,016
|
|
|
|
195
|
|
Common stock cash
dividends $1.75 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(198,619
|
)
|
|
|
|
|
|
|
|
|
|
|
(198,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2005
|
|
$
|
|
|
|
|
60,198
|
|
|
|
5,363
|
|
|
|
2,886,153
|
|
|
|
3,854,275
|
|
|
|
(97,930
|
)
|
|
|
(831,673
|
)
|
|
|
5,876,386
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
839,189
|
|
|
|
|
|
|
|
|
|
|
|
839,189
|
|
Other comprehensive income, net of
tax and reclassification adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,265
|
|
|
|
|
|
|
|
23,265
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,932
|
|
|
|
|
|
|
|
30,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
893,386
|
|
Change in accounting for defined
benefit plans (note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,841
|
)
|
|
|
|
|
|
|
(9,841
|
)
|
Purchases of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(373,860
|
)
|
|
|
(373,860
|
)
|
Repayment of management stock
ownership program receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225
|
|
Stock-based compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option and purchase plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,237
|
|
Exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,742
|
)
|
|
|
|
|
|
|
|
|
|
|
140,053
|
|
|
|
92,311
|
|
Directors stock plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133
|
|
|
|
|
|
|
|
|
|
|
|
977
|
|
|
|
1,110
|
|
Deferred compensation plans, net,
including dividend equivalents
|
|
|
|
|
|
|
|
|
|
|
(303
|
)
|
|
|
(557
|
)
|
|
|
(206
|
)
|
|
|
|
|
|
|
1,024
|
|
|
|
(42
|
)
|
Common stock cash
dividends $2.25 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(249,817
|
)
|
|
|
|
|
|
|
|
|
|
|
(249,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2006
|
|
$
|
|
|
|
|
60,198
|
|
|
|
5,060
|
|
|
|
2,889,449
|
|
|
|
4,443,441
|
|
|
|
(53,574
|
)
|
|
|
(1,063,479
|
)
|
|
|
6,281,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
financial statements
84
M&T
BANK CORPORATION AND SUBSIDIARIES
|
|
1.
|
Significant
accounting policies
|
M&T Bank Corporation
(M&T)is a
bank holding company headquartered in Buffalo, New York. Through
subsidiaries, M&T
provides individuals, corporations and other businesses, and
institutions with commercial and retail banking services,
including loans and deposits, trust, mortgage banking, asset
management, insurance and other financial services. Banking
activities are largely focused on consumers residing in New York
State, Pennsylvania, Maryland and the District of Columbia and
on small and medium-size businesses based in those areas.
Banking services are also provided in Delaware, Virginia, West
Virginia and New Jersey (effective January 2, 2007), while
certain subsidiaries also conduct activities in other states.
The accounting and reporting policies of
M&T and subsidiaries
(the Company) conform to generally accepted
accounting principles and to general practices within the
banking industry. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. The more significant accounting
policies are as follows:
Consolidation
Except as described in note 18, the consolidated financial
statements include M&T
and all of its subsidiaries. All significant intercompany
accounts and transactions of consolidated subsidiaries have been
eliminated in consolidation. The financial statements of
M&T included in
note 24 report investments in subsidiaries under the equity
method. Information about some limited purpose entities that are
affiliates of the Company but are not included in the
consolidated financial statements appears in note 18.
Consolidated
Statement of Cash Flows
For purposes of this statement, cash and due from banks and
federal funds sold are considered cash and cash equivalents.
Securities
purchased under agreements to resell and securities sold under
agreements to repurchase
Securities purchased under agreements to resell and securities
sold under agreements to repurchase are treated as
collateralized financing transactions and are recorded at
amounts equal to the cash or other consideration exchanged. It
is generally the Companys policy to take possession of
collateral pledged to secure agreements to resell.
Trading
account
Financial instruments used for trading purposes are stated at
fair value. Realized gains and losses and unrealized changes in
fair value of financial instruments utilized in trading
activities are included in trading account and foreign exchange
gains in the consolidated statement of income.
Investment
securities
Investments in debt securities are classified as held to
maturity and stated at amortized cost when management has the
positive intent and ability to hold such securities to maturity.
Investments in other debt securities and equity securities
having readily determinable fair values are classified as
available for sale and stated at estimated fair value. Except
for investment securities for which the Company has entered into
a related fair value hedge, unrealized gains or losses on
investment securities available for sale are reflected in
accumulated other comprehensive income (loss), net of applicable
income taxes.
Other securities are stated at cost and include stock of the
Federal Reserve Bank of New York and the Federal Home
Loan Bank of New York.
Amortization of premiums and accretion of discounts for
investment securities available for sale and held to maturity
are included in interest income. The cost basis of individual
securities is written down to estimated fair value through a
charge to earnings when declines in value below amortized cost
85
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
are considered to be other than
temporary. Realized gains and losses on the sales of investment
securities are determined using the specific identification
method.
Loans
and leases
Interest income on loans is accrued on a level yield method.
Loans are placed on nonaccrual status and previously accrued
interest thereon is charged against income when principal or
interest is delinquent 90 days, unless management
determines that the loan status clearly warrants other
treatment. Loan balances are charged off when it becomes evident
that such balances are not fully collectible. Loan fees and
certain direct loan origination costs are deferred and
recognized as an interest yield adjustment over the life of the
loan. Net deferred fees have been included in unearned discount
as a reduction of loans outstanding. Commitments to sell real
estate loans are utilized by the Company to hedge the exposure
to changes in fair value of real estate loans held for sale. The
carrying value of hedged real estate loans held for sale
recorded in the consolidated balance sheet includes changes in
estimated fair market value during the hedge period, typically
from the date of close through the sale date. Valuation
adjustments made on these loans and commitments are included in
mortgage banking revenues.
Except for consumer and residential mortgage loans that are
considered smaller balance homogenous loans and are evaluated
collectively, the Company considers a loan to be impaired for
purposes of applying Statement of Financial Accounting Standards
(SFAS) No. 114, Accounting by Creditors
for Impairment of a Loan, as amended, when, based on
current information and events, it is probable that the Company
will be unable to collect all amounts according to the
contractual terms of the loan agreement or the loan is
delinquent 90 days. Impaired loans are classified as either
nonaccrual or as loans renegotiated at below market rates. Loans
less than 90 days delinquent are deemed to have an
insignificant delay in payment and are generally not considered
impaired for purposes of applying SFAS No. 114.
Impairment of a loan is measured based on the present value of
expected future cash flows discounted at the loans
effective interest rate, the loans observable market
price, or the fair value of collateral if the loan is collateral
dependent. Interest received on impaired loans placed on
nonaccrual status is applied to reduce the carrying value of the
loan or, if principal is considered fully collectible,
recognized as interest income.
Residual value estimates for commercial leases are generally
determined through internal or external reviews of the leased
property. The Company reviews commercial lease residual values
at least annually and recognizes residual value impairments
deemed to be other than temporary. Initial estimates of residual
value for automobile leases are recorded based on published
industry standards and historical residual value losses incurred
relative to the published industry standards. Automobile leases
are considered small homogenous leases and, as such, impairments
to residual value are determined based on projected residual
value losses relative to the initially recorded residual values.
Allowance
for credit losses
The allowance for credit losses represents the amount which, in
managements judgment, will be adequate to absorb credit
losses inherent in the loan and lease portfolio as of the
balance sheet date. The adequacy of the allowance is determined
by managements evaluation of the loan and lease portfolio
based on such factors as the differing economic risks associated
with each loan category, the current 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.
Premises
and equipment
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation expense is computed principally using
the straight-line method over the estimated useful lives of the
assets.
Sales
and securitizations of financial assets
Transfers of financial assets for which the Company has
surrendered control of the financial assets are accounted for as
sales to the extent that consideration other than beneficial
interests in the transferred assets is received in exchange.
Retained interests in a sale or securitization of financial
assets are measured
86
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
at the date of transfer by allocating the previous carrying
amount between the assets transferred and any retained interests
based on their relative estimated fair values. The fair values
of retained debt securities are generally determined through
reference to independent pricing information. The fair values of
retained servicing rights and any other retained interests are
determined based on the present value of expected future cash
flows associated with those interests and by reference to market
prices for similar assets.
Capitalized
servicing rights
Servicing assets purchased or servicing liabilities assumed that
are not recognized in connection with the sale or securitization
of financial assets are initially measured at fair value.
Capitalized servicing assets are included in other assets and
are amortized in proportion to and over the period of estimated
net servicing income.
To estimate the fair value of servicing rights, the Company
considers market prices for similar assets and the present value
of expected future cash flows associated with the servicing
rights calculated using assumptions that market participants
would use in estimating future servicing income and expense.
Such assumptions include estimates of the cost of servicing
loans, loan default rates, an appropriate discount rate, and
prepayment speeds. For purposes of evaluating and measuring
impairment of capitalized servicing rights, the Company
stratifies such assets based on the predominant risk
characteristics of the underlying financial instruments that are
expected to have the most impact on projected prepayments, cost
of servicing and other factors affecting future cash flows
associated with the servicing rights. Such factors may include
financial asset or loan type, note rate and term. The amount of
impairment recognized is the amount by which the carrying value
of the capitalized servicing rights for a stratum exceeds
estimated fair value. Impairment is recognized through a
valuation allowance.
Goodwill
and core deposit and other intangible assets
Goodwill represents the excess of the cost of an acquired entity
over the fair value of the identifiable net assets acquired.
Similar to goodwill, other intangible assets, which include core
deposit intangibles, also lack physical substance but, as
required by SFAS No. 141, Business
Combinations, portions of the cost of an acquired entity
have been assigned to such assets. The Company accounts for
goodwill and other intangible assets in accordance with
SFAS No. 142, Goodwill and Other Intangible
Assets, which, in general, requires that goodwill not be
amortized, but rather that it be tested for impairment at least
annually at the reporting unit level, which is either at the
same level or one level below an operating segment. Other
acquired intangible assets with finite lives, such as core
deposit intangibles, are required to be amortized over their
estimated lives. Core deposit and other intangible assets are
amortized using accelerated methods over estimated useful lives
of five to ten years. The Company periodically assesses whether
events or changes in circumstances indicate that the carrying
amounts of core deposit and other intangible assets may be
impaired.
Derivative
financial instruments
The Company accounts for derivative financial instruments in
accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended.
SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated
as (a) a hedge of the exposure to changes in the fair value
of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction or (c) a hedge of the
foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available for
sale security, or a foreign currency denominated forecasted
transaction. Pursuant to SFAS No. 133, the accounting
for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. An
entity that elects to apply hedge accounting is required to
establish at the inception of the hedge the method it will use
for assessing the effectiveness of the hedging derivative and
the measurement approach for determining the ineffective aspect
of the hedge. Those methods must be consistent with the
entitys approach to managing risk.
87
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
The Company utilizes interest rate swap agreements as part of
the management of interest rate risk to modify the repricing
characteristics of certain portions of its portfolios of earning
assets and interest-bearing liabilities. For such agreements,
amounts receivable or payable are recognized as accrued under
the terms of the agreement and the net differential is recorded
as an adjustment to interest income or expense of the related
asset or liability. Interest rate swap agreements may be
designated as either fair value hedges or cash flow hedges. In a
fair value hedge, the fair values of the interest rate swap
agreements and changes in the fair values of the hedged items
are recorded in the Companys consolidated balance sheet
with the corresponding gain or loss recognized in current
earnings. The difference between changes in the fair values of
interest rate swap agreements and the hedged items represents
hedge ineffectiveness and is recorded in other revenues
from operations in the Companys consolidated
statement of income. In a cash flow hedge, the effective portion
of the derivatives unrealized gain or loss is initially
recorded as a component of other comprehensive income and
subsequently reclassified into earnings when the forecasted
transaction affects earnings. The ineffective portion of the
unrealized gain or loss is reported in other revenues from
operations immediately.
The Company utilizes commitments to sell real estate loans to
hedge the exposure to changes in the fair value of real estate
loans held for sale. Commitments to originate real estate loans
to be held for sale and commitments to sell real estate loans
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, 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 commitments to originate loans for sale. Value
ascribable to that portion of cash flows is recognized at the
time the underlying mortgage loans are sold.
Derivative instruments not related to mortgage banking
activities, including financial futures commitments and interest
rate swap agreements, that do not satisfy the hedge accounting
requirements noted above are recorded at fair value and are
generally classified as trading account assets or liabilities
with resultant changes in fair value being recognized in trading
account and foreign exchange gains in the Companys
consolidated statement of income.
Stock-based
compensation
Effective January 1, 2006, the Company adopted
SFAS No. 123 (revised 2004), Share Based
Payment, (SFAS No. 123R), an
amendment of SFAS No. 123, Accounting for
Stock-Based Compensation. Prior to that date, the Company
recognized expense for stock-based compensation using the fair
value method of accounting described in SFAS No. 123.
Stock-based compensation expense is recognized over the vesting
period of the stock-based grant based on the estimated grant
date value of the stock-based compensation that is expected to
vest, except that coincident with the adoption of
SFAS No. 123R, the Company began accelerating the
recognition of compensation costs for stock-based awards granted
to retirement-eligible employees and employees who will become
retirement-eligible prior to full vesting of the award because
the Companys incentive compensation plan allows for
vesting at the time an employee retires. Through
December 31, 2005, stock-based compensation granted to such
individuals was expensed over the normal vesting period and any
remaining unrecognized compensation cost was recognized at the
time an individual employee actually retired. Information on the
determination of the estimated value of stock-based awards used
to calculate stock-based compensation expense is included in
note 10.
Income
taxes
Deferred tax assets and liabilities are recognized for the
future tax effects attributable to differences between the
financial statement value of existing assets and liabilities and
their respective tax bases and carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates and
laws.
Earnings
per common share
Basic earnings per share exclude dilution and are computed by
dividing income available to common stockholders by the
weighted-average number of common shares outstanding and common
shares issuable under deferred compensation arrangements during
the period. Diluted earnings per share reflect
88
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that
then shared in earnings. Proceeds assumed to have been received
on such exercise or conversion are assumed to be used to
purchase shares of M&T
common stock at the average market price during the period, as
required by the treasury stock method of accounting.
Treasury
stock
Repurchases of shares of
M&T common stock are
recorded at cost as a reduction of stockholders equity.
Reissuances of shares of treasury stock are recorded at average
cost.
|
|
2.
|
Acquisition
of deposits and banking offices
|
On June 30, 2006,
M&T Bank,
M&Ts principal
banking subsidiary, acquired 21 banking offices in Buffalo and
Rochester, New York from Citibank, N.A. in a cash transaction.
The offices had approximately $269 million in loans, mostly
to consumers, small businesses and middle market customers, and
approximately $1.0 billion of deposits. The transaction did
not have a significant effect on the Companys results of
operations during 2006. Expenses associated with systems
conversions and other costs of integrating the acquired offices
with and into M&T Bank
aggregated $5 million ($3 million net of applicable
income taxes) in 2006.
89
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
The amortized cost and estimated fair value of investment
securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for
sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
$
|
479,655
|
|
|
$
|
|
|
|
$
|
5,779
|
|
|
$
|
473,876
|
|
Obligations of states and political
subdivisions
|
|
|
67,804
|
|
|
|
2,967
|
|
|
|
|
|
|
|
70,771
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed
|
|
|
1,943,407
|
|
|
|
4,477
|
|
|
|
40,176
|
|
|
|
1,907,708
|
|
Privately issued
|
|
|
3,830,965
|
|
|
|
7,603
|
|
|
|
42,038
|
|
|
|
3,796,530
|
|
Other debt securities
|
|
|
145,034
|
|
|
|
5,423
|
|
|
|
550
|
|
|
|
149,907
|
|
Equity securities
|
|
|
411,467
|
|
|
|
20,016
|
|
|
|
427
|
|
|
|
431,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,878,332
|
|
|
|
40,486
|
|
|
|
88,970
|
|
|
|
6,829,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities held to
maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political
subdivisions
|
|
|
59,436
|
|
|
|
1,845
|
|
|
|
15
|
|
|
|
61,266
|
|
Other debt securities
|
|
|
5,463
|
|
|
|
|
|
|
|
|
|
|
|
5,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,899
|
|
|
|
1,845
|
|
|
|
15
|
|
|
|
66,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
|
|
356,851
|
|
|
|
|
|
|
|
|
|
|
|
356,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,300,082
|
|
|
$
|
42,331
|
|
|
$
|
88,985
|
|
|
$
|
7,253,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for
sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
$
|
330,945
|
|
|
$
|
40
|
|
|
$
|
7,779
|
|
|
$
|
323,206
|
|
Obligations of states and political
subdivisions
|
|
|
81,024
|
|
|
|
3,912
|
|
|
|
1
|
|
|
|
84,935
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed
|
|
|
2,740,503
|
|
|
|
8,047
|
|
|
|
55,382
|
|
|
|
2,693,168
|
|
Privately issued
|
|
|
4,318,988
|
|
|
|
8,423
|
|
|
|
52,399
|
|
|
|
4,275,012
|
|
Other debt securities
|
|
|
144,967
|
|
|
|
6,904
|
|
|
|
1,133
|
|
|
|
150,738
|
|
Equity securities
|
|
|
395,134
|
|
|
|
11,512
|
|
|
|
2,002
|
|
|
|
404,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,011,561
|
|
|
|
38,838
|
|
|
|
118,696
|
|
|
|
7,931,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities held to
maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political
subdivisions
|
|
|
97,003
|
|
|
|
1,955
|
|
|
|
134
|
|
|
|
98,824
|
|
Other debt securities
|
|
|
4,056
|
|
|
|
|
|
|
|
|
|
|
|
4,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,059
|
|
|
|
1,955
|
|
|
|
134
|
|
|
|
102,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
|
|
367,402
|
|
|
|
|
|
|
|
|
|
|
|
367,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,480,022
|
|
|
$
|
40,793
|
|
|
$
|
118,830
|
|
|
$
|
8,401,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No investment in securities of a single
non-U.S. Government
or government agency issuer exceeded ten percent of
stockholders equity at December 31, 2006.
As of December 31, 2006, the latest available investment
ratings of all privately issued mortgage-backed securities were
A or better, with the exception of 17 securities with an
aggregate amortized cost and estimated fair value of $74,646,000
and $76,384,000, respectively.
The amortized cost and estimated fair value of collateralized
mortgage obligations included in mortgage-backed securities were
as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Amortized cost
|
|
$
|
4,837,695
|
|
|
$
|
5,837,340
|
|
Estimated fair value
|
|
|
4,774,812
|
|
|
|
5,753,823
|
|
90
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Gross realized gains on the sale of investment securities were
$2,735,000 in 2006, $1,464,000 in 2005 and $6,084,000 in 2004.
Gross realized losses on investment securities were $169,000 in
2006, $414,000 in 2005 and $3,210,000 in 2004. During 2005, the
Company recognized a $29,183,000
other-than-temporary
impairment charge related to $132,900,000 of variable rate
preferred stock issuances of the Federal National Mortgage
Association (FNMA) and the Federal Home Loan
Mortgage Corporation (FHLMC). Although the
securities were rated as investment grade, the Company
recognized the impairment charge, in accordance with generally
accepted accounting principles, in light of changing
circumstances during 2005 that included an announced further
delay in FNMAs ability to provide restated financial
information about its results of operations and a further
decline in the market value of certain of FHLMCs preferred
stock issuances despite its release of operating results. As of
December 31, 2006, the fair value of those securities
exceeded their adjusted amortized cost by $10,513,000.
At December 31, 2006, the amortized cost and estimated fair
value of debt securities by contractual maturity were as follows:
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
Debt securities available for sale:
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
46,692
|
|
|
$
|
46,646
|
|
Due after one year through five
years
|
|
|
268,389
|
|
|
|
263,360
|
|
Due after five years through ten
years
|
|
|
242,284
|
|
|
|
243,662
|
|
Due after ten years
|
|
|
135,128
|
|
|
|
140,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692,493
|
|
|
|
694,554
|
|
Mortgage-backed securities
available for sale
|
|
|
5,774,372
|
|
|
|
5,704,238
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,466,865
|
|
|
$
|
6,398,792
|
|
|
|
|
|
|
|
|
|
|
Debt securities held to maturity:
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
42,166
|
|
|
$
|
42,228
|
|
Due after one year through five
years
|
|
|
6,815
|
|
|
|
6,997
|
|
Due after five years through ten
years
|
|
|
9,786
|
|
|
|
11,281
|
|
Due after ten years
|
|
|
6,132
|
|
|
|
6,223
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
64,899
|
|
|
$
|
66,729
|
|
|
|
|
|
|
|
|
|
|
91
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
A summary of investment securities that as of December 31,
2006 and 2005 had been in a continuous unrealized loss position
for less than twelve months and those that had been in a
continuous unrealized loss position for twelve months or longer
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(In thousands)
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
$
|
207,522
|
|
|
$
|
(397
|
)
|
|
$
|
266,354
|
|
|
$
|
(5,382
|
)
|
Obligations of states and
political subdivisions
|
|
|
5,348
|
|
|
|
(2
|
)
|
|
|
1,462
|
|
|
|
(13
|
)
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed
|
|
|
68,832
|
|
|
|
(112
|
)
|
|
|
1,467,818
|
|
|
|
(40,064
|
)
|
Privately issued
|
|
|
564,993
|
|
|
|
(3,754
|
)
|
|
|
2,413,828
|
|
|
|
(38,284
|
)
|
Other debt securities
|
|
|
3,425
|
|
|
|
(77
|
)
|
|
|
53,353
|
|
|
|
(473
|
)
|
Equity securities
|
|
|
29,826
|
|
|
|
(423
|
)
|
|
|
41
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
879,946
|
|
|
$
|
(4,765
|
)
|
|
$
|
4,202,856
|
|
|
$
|
(84,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
$
|
17,111
|
|
|
$
|
(141
|
)
|
|
$
|
302,942
|
|
|
$
|
(7,638
|
)
|
Obligations of states and
political subdivisions
|
|
|
55,830
|
|
|
|
(112
|
)
|
|
|
4,788
|
|
|
|
(23
|
)
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government issued or guaranteed
|
|
|
408,924
|
|
|
|
(7,754
|
)
|
|
|
1,693,319
|
|
|
|
(47,628
|
)
|
Privately issued
|
|
|
2,209,915
|
|
|
|
(23,252
|
)
|
|
|
1,121,380
|
|
|
|
(29,147
|
)
|
Other debt securities
|
|
|
16,587
|
|
|
|
(230
|
)
|
|
|
57,684
|
|
|
|
(903
|
)
|
Equity securities
|
|
|
134,266
|
|
|
|
(1,991
|
)
|
|
|
32
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,842,633
|
|
|
$
|
(33,480
|
)
|
|
$
|
3,180,145
|
|
|
$
|
(85,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company owned approximately five hundred individual
investment securities with aggregate gross unrealized losses of
$88,985,000 at December 31, 2006. Those investment
securities consisted predominantly of mortgage-backed securities
classified as available for sale. The unrealized losses at
December 31, 2006 were generally attributable to the level
of interest rates and, accordingly, were considered to be
temporary in nature. At December 31, 2006, the Company had
not identified events or changes in circumstance which may have
a significant adverse effect on the fair value of the
$356,851,000 of cost method investment securities.
At December 31, 2006, investment securities with a carrying
value of $4,422,316,000, including $4,158,346,000 of investment
securities available for sale, were pledged to secure demand
notes issued to the U.S. Treasury, borrowings from various
Federal Home Loan Banks (FHLB), repurchase
agreements, governmental deposits and interest rate swap
agreements.
Investment securities pledged by the Company to secure
obligations whereby the secured party is permitted by contract
or custom to sell or repledge such collateral totaled
$1,300,322,000 at December 31, 2006. The pledged securities
are included in mortgage-backed securities available for sale.
At December 31, 2006, collateral accepted by the Company
which by contract or custom can be sold or repledged consisted
of securities with a fair value of $104,205,000 purchased under
agreements to resell. Those securities have been pledged at
December 31, 2006 to secure governmental deposits.
92
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Total gross loans and leases outstanding were comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Loans
|
|
|
|
|
|
|
|
|
Commercial, financial,
agricultural, etc
|
|
$
|
10,472,919
|
|
|
$
|
9,818,897
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Residential
|
|
|
5,248,119
|
|
|
|
3,802,645
|
|
Commercial
|
|
|
12,691,964
|
|
|
|
12,833,912
|
|
Construction
|
|
|
3,453,981
|
|
|
|
2,335,498
|
|
Consumer
|
|
|
9,885,883
|
|
|
|
10,385,740
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
41,752,866
|
|
|
|
39,176,692
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1,423,637
|
|
|
|
1,286,930
|
|
Consumer
|
|
|
30,451
|
|
|
|
90,069
|
|
|
|
|
|
|
|
|
|
|
Total leases
|
|
|
1,454,088
|
|
|
|
1,376,999
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
43,206,954
|
|
|
$
|
40,553,691
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family residential mortgage loans held for sale were
$1.9 billion at December 31, 2006 and
$1.2 billion at December 31, 2005.
One-to-four
family residential mortgage loans and smaller balance commercial
mortgage loans with many repayment characteristics similar to
residential mortgage loans that are serviced for others totaled
approximately $16.7 billion and $15.6 billion at
December 31, 2006 and 2005, respectively. As of
December 31, 2006, approximately $7 million of
one-to-four
family residential mortgage loans serviced for others had been
sold with credit recourse. Commercial mortgage loans held for
sale were $49 million at December 31, 2006 and
$199 million at December 31, 2005. Commercial mortgage
loans serviced for others totaled approximately
$4.9 billion and $4.3 billion at December 31,
2006 and 2005, respectively. As of December 31, 2006,
approximately $939 million of commercial mortgage loan
balances serviced for others had been sold with recourse in
conjunction with the Companys participation in the FNMA
Delegated Underwriting and Servicing (DUS) program.
At December 31, 2006, the Company estimated that the
recourse obligations described above were not material to the
Companys consolidated financial position. There have been
no material losses incurred as a result of those recourse
arrangements. Included in consumer loans were home equity loans
held for sale of $65 million at December 31, 2006 and
$38 million at December 31, 2005.
Nonperforming loans (loans on which interest was not being
accrued or had been renegotiated at below-market interest rates)
totaled $224,228,000 at December 31, 2006 and $156,451,000
at December 31, 2005. If nonaccrual and renegotiated loans
had been accruing interest at their originally contracted terms,
interest income on such loans would have amounted to $17,173,000
in 2006 and $12,144,000 in 2005. The actual amounts included in
interest income during 2006 and 2005 on such loans were
$6,770,000 and $3,279,000, respectively.
The recorded investment in loans considered impaired for
purposes of applying SFAS No. 114 was $152,676,000 and
$92,528,000 at December 31, 2006 and 2005, respectively.
The recorded investment in loans considered impaired for which
there was a related valuation allowance for impairment included
in the allowance for credit losses and the amount of such
impairment allowance were $139,021,000 and $23,388,000,
respectively, at December 31, 2006 and $65,244,000 and
$15,343,000, respectively, at December 31, 2005. The
recorded investment in loans considered impaired for which there
was no related valuation allowance for impairment was
$13,655,000 and $27,284,000 at December 31, 2006 and 2005,
respectively. The average recorded investment in impaired loans
during 2006, 2005 and 2004 was $97,263,000, $106,603,000 and
$135,431,000, respectively. Interest income recognized on
impaired loans
93
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
totaled $4,866,000, $4,522,000 and $10,546,000 for the years
ended December 31, 2006, 2005 and 2004, respectively.
Borrowings by directors and certain officers of
M&T and its banking
subsidiaries, and by associates of such persons, exclusive of
loans aggregating less than $120,000, amounted to $158,032,000
and $172,610,000 at December 31, 2006 and 2005,
respectively. During 2006, new borrowings by such persons
amounted to $61,061,000 (including borrowings of new directors
or officers that were outstanding at the time of their election)
and repayments and other reductions (including reductions
resulting from retirements) were $75,639,000.
At December 31, 2006, approximately $948 million of
commercial mortgage loans and $2.3 billion of
one-to-four
family residential mortgage loans were pledged to secure
outstanding borrowings. As described in note 18, as of
December 31, 2006, $565 million of automobile loans
and related assets were effectively pledged to secure a
$500 million revolving structured borrowing.
The Companys loan and lease portfolio includes
(i) commercial lease financing receivables consisting of
direct financing and leveraged leases for machinery and
equipment, railroad equipment, commercial trucks and trailers,
and commercial aircraft, and (ii) consumer leases for
automobiles and light trucks. A summary of lease financing
receivables follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Commercial leases:
|
|
|
|
|
|
|
|
|
Direct financings:
|
|
|
|
|
|
|
|
|
Lease payments receivable
|
|
$
|
992,016
|
|
|
$
|
875,869
|
|
Estimated residual value of leased
assets
|
|
|
99,564
|
|
|
|
117,927
|
|
Unearned income
|
|
|
(162,897
|
)
|
|
|
(135,789
|
)
|
|
|
|
|
|
|
|
|
|
Investment in direct financings
|
|
|
928,683
|
|
|
|
858,007
|
|
Leveraged leases:
|
|
|
|
|
|
|
|
|
Lease payments receivable
|
|
|
157,377
|
|
|
|
135,469
|
|
Estimated residual value of leased
assets
|
|
|
174,680
|
|
|
|
157,665
|
|
Unearned income
|
|
|
(59,738
|
)
|
|
|
(43,374
|
)
|
|
|
|
|
|
|
|
|
|
Investment in leveraged leases
|
|
|
272,319
|
|
|
|
249,760
|
|
|
|
|
|
|
|
|
|
|
Investment in commercial leases
|
|
|
1,201,002
|
|
|
|
1,107,767
|
|
Consumer automobile leases:
|
|
|
|
|
|
|
|
|
Lease payments receivable
|
|
|
6,527
|
|
|
|
27,649
|
|
Estimated residual value of leased
assets
|
|
|
23,924
|
|
|
|
62,420
|
|
Unearned income
|
|
|
(1,038
|
)
|
|
|
(4,867
|
)
|
|
|
|
|
|
|
|
|
|
Investment in consumer automobile
leases
|
|
|
29,413
|
|
|
|
85,202
|
|
|
|
|
|
|
|
|
|
|
Total investment in leases
|
|
$
|
1,230,415
|
|
|
$
|
1,192,969
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes payable arising
from leveraged leases
|
|
$
|
205,619
|
|
|
$
|
211,980
|
|
Included within the estimated residual value of leased assets at
December 31, 2006 and 2005 were $51 million and
$31 million, respectively, in residual value associated
with direct financing leases that are guaranteed by the lessees.
The Company is indemnified from loss by Allied Irish Banks,
p.l.c. (AIB) on a portion of leveraged leases
obtained in the acquisition of a former subsidiary of AIB on
April 1, 2003. Amounts as of December 31, 2006 and
2005 in the leveraged lease section of the table subject to such
indemnification included at each respective date lease payments
receivable of $9 million, estimated residual value of
leased assets of $31 million, and unearned income of
$8 million. For consumer automobile leases, substantially
all residual values were insured by third parties for declines
in published industry-standard residual values.
94
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
At December 31, 2006, the minimum future lease payments to
be received from lease financings were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Consumer
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
264,701
|
|
|
$
|
5,986
|
|
|
$
|
270,687
|
|
2008
|
|
|
218,167
|
|
|
|
541
|
|
|
|
218,708
|
|
2009
|
|
|
153,614
|
|
|
|
|
|
|
|
153,614
|
|
2010
|
|
|
108,880
|
|
|
|
|
|
|
|
108,880
|
|
2011
|
|
|
72,651
|
|
|
|
|
|
|
|
72,651
|
|
Later years
|
|
|
331,380
|
|
|
|
|
|
|
|
331,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,149,393
|
|
|
$
|
6,527
|
|
|
$
|
1,155,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Allowance
for credit losses
|
Changes in the allowance for credit losses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Beginning balance
|
|
$
|
637,663
|
|
|
$
|
626,864
|
|
|
$
|
614,058
|
|
Provision for credit losses
|
|
|
80,000
|
|
|
|
88,000
|
|
|
|
95,000
|
|
Allowance related to loans sold or
securitized
|
|
|
|
|
|
|
(314
|
)
|
|
|
(501
|
)
|
Net charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
|
|
(95,606
|
)
|
|
|
(107,617
|
)
|
|
|
(119,025
|
)
|
Recoveries
|
|
|
27,891
|
|
|
|
30,730
|
|
|
|
37,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
(67,715
|
)
|
|
|
(76,887
|
)
|
|
|
(81,693
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
649,948
|
|
|
$
|
637,663
|
|
|
$
|
626,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Premises
and equipment
|
The detail of premises and equipment was as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
48,833
|
|
|
$
|
49,191
|
|
Buildings owned
|
|
|
230,562
|
|
|
|
225,828
|
|
Buildings capital
leases
|
|
|
1,598
|
|
|
|
1,598
|
|
Leasehold improvements
|
|
|
101,453
|
|
|
|
92,741
|
|
Furniture and
equipment owned
|
|
|
292,141
|
|
|
|
301,138
|
|
Furniture and
equipment capital leases
|
|
|
2,514
|
|
|
|
2,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
677,101
|
|
|
|
673,010
|
|
Less: accumulated depreciation and
amortization
|
|
|
|
|
|
|
|
|
Owned assets
|
|
|
339,643
|
|
|
|
334,024
|
|
Capital leases
|
|
|
2,450
|
|
|
|
1,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
342,093
|
|
|
|
335,895
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
$
|
335,008
|
|
|
$
|
337,115
|
|
|
|
|
|
|
|
|
|
|
95
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Net lease expense for all operating leases totaled $60,680,000
in 2006, $57,641,000 in 2005 and $58,318,000 in 2004. Minimum
lease payments under noncancelable operating leases are
presented in note 20. Minimum lease payments required under
capital leases are not material.
|
|
7.
|
Capitalized
servicing assets
|
Changes in capitalized servicing assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Beginning balance
|
|
$
|
181,233
|
|
|
$
|
186,225
|
|
|
$
|
185,816
|
|
Originations
|
|
|
12,446
|
|
|
|
16,928
|
|
|
|
26,285
|
|
Purchases
|
|
|
50,841
|
|
|
|
35,135
|
|
|
|
32,009
|
|
Assumed in loan securitizations
(note 18)
|
|
|
|
|
|
|
1,411
|
|
|
|
|
|
Amortization
|
|
|
(61,007
|
)
|
|
|
(58,466
|
)
|
|
|
(57,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183,513
|
|
|
|
181,233
|
|
|
|
186,225
|
|
Valuation allowance
|
|
|
(10,050
|
)
|
|
|
(19,800
|
)
|
|
|
(30,878
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net
|
|
$
|
173,463
|
|
|
$
|
161,433
|
|
|
$
|
155,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized servicing assets at December 31, 2006 and 2005
included $153 million and $140 million, respectively,
of capitalized residential mortgage loan servicing rights, net
of the valuation allowance for impairment, and $21 million
of capitalized commercial mortgage loan servicing rights at each
of those dates. During 2006, 2005 and 2004, $9,750,000,
$11,078,000 and $3,622,000, respectively, of the valuation
allowance was reversed because of increases in the market value
of certain strata of servicing assets relative to the amortized
cost basis of the servicing assets in such strata. The estimated
fair value of capitalized servicing assets was approximately
$214 million at December 31, 2006 and
$191 million at December 31, 2005. The fair value of
capitalized residential mortgage loan servicing assets was
estimated using weighted-average discount rates of 17.8% and
16.6% at December 31, 2006 and 2005, respectively, and
contemporaneous prepayment assumptions that vary by loan type.
At December 31, 2006 and 2005, the discount rate
represented a weighted-average option-adjusted spread
(OAS) of 1,227 basis points (hundredths of one
percent) and 1,073 basis points, respectively, over market
implied forward London Interbank Offered Rates. The estimated
market value of capitalized servicing rights may vary
significantly in subsequent periods due to changing interest
rates and the effect thereof on prepayment speeds. An 18%
discount rate was used to estimate the fair value of capitalized
commercial mortgage loan servicing rights at December 31,
2006 and 2005 with no prepayment assumptions because, in
general, the servicing agreements allow the Company to share in
customer loan prepayment fees and thereby recover the remaining
carrying value of the capitalized servicing rights associated
with such loan. The Companys ability to realize the
carrying value of capitalized commercial mortgage servicing
rights is more dependent on the borrowers abilities to
repay the underlying loans than on prepayments or changes in
interest rates.
The key economic assumptions used to determine the fair value of
capitalized servicing rights at December 31, 2006 and the
sensitivity of such value to changes in those assumptions are
summarized in the table that follows. Those calculated
sensitivities are hypothetical and actual changes in the fair
value of capitalized servicing rights may differ significantly
from the amounts presented herein. The effect of a variation in
a particular assumption on the fair value of the servicing
rights is calculated without changing any other assumption. In
reality, changes in one factor may result in changes in another
which may magnify or counteract the sensitivities. The changes
in assumptions are presumed to be instantaneous.
96
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
|
|
|
|
|
Weighted-average prepayment
speeds residential (constant prepayment rate)
|
|
|
19.43
|
%
|
Impact on fair value of 10%
adverse change
|
|
$
|
(7,628,000
|
)
|
Impact on fair value of 20%
adverse change
|
|
|
(14,552,000
|
)
|
Weighted-average OAS
residential
|
|
|
12.27
|
%
|
Impact on fair value of 10%
adverse change
|
|
$
|
(4,242,000
|
)
|
Impact on fair value of 20%
adverse change
|
|
|
(8,246,000
|
)
|
Weighted-average discount
rate commercial
|
|
|
18.00
|
%
|
Impact on fair value of 10%
adverse change
|
|
$
|
(1,085,000
|
)
|
Impact on fair value of 20%
adverse change
|
|
|
(2,094,000
|
)
|
|
|
8.
|
Goodwill
and other intangible assets
|
In accordance with SFAS No. 142, the Company does not
amortize goodwill associated with corporate acquisitions,
however, core deposit and other intangible assets are amortized
over the estimated life of each respective asset. Total
amortizing intangible assets were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit
|
|
$
|
574,544
|
|
|
$
|
354,287
|
|
|
$
|
220,257
|
|
Other
|
|
|
115,250
|
|
|
|
85,274
|
|
|
|
29,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
689,794
|
|
|
$
|
439,561
|
|
|
$
|
250,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit
|
|
$
|
385,725
|
|
|
$
|
303,694
|
|
|
$
|
82,031
|
|
Other
|
|
|
99,088
|
|
|
|
72,859
|
|
|
|
26,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
484,813
|
|
|
$
|
376,553
|
|
|
$
|
108,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of core deposit and other intangible assets was
generally computed using accelerated methods over original
amortization periods of five to ten years. The weighted-average
original amortization period was approximately eight years. The
remaining weighted-average amortization period as of
December 31, 2006 was also approximately eight years.
Amortization expense for core deposit and other intangible
assets was $63,008,000, $56,805,000, and $75,410,000 for the
years ended December 31, 2006, 2005 and 2004, respectively.
Estimated amortization expense in future years for such
intangible assets is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Year ending December 31:
|
|
|
|
|
2007
|
|
$
|
65,002
|
|
2008
|
|
|
50,145
|
|
2009
|
|
|
40,477
|
|
2010
|
|
|
31,225
|
|
2011
|
|
|
20,397
|
|
Later years
|
|
|
42,987
|
|
|
|
|
|
|
|
|
$
|
250,233
|
|
|
|
|
|
|
Also in accordance with the provisions of
SFAS No. 142, the Company completed annual goodwill
impairment tests as of October 1, 2004, 2005 and 2006. For
purposes of testing for impairment, the Company assigned all
recorded goodwill to the reporting units originally intended to
benefit from past business combinations. Goodwill was generally
assigned based on the implied fair value of the acquired
goodwill applicable to the benefited reporting units at the time
of each respective acquisition. The
97
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
implied fair value of the goodwill was determined as the
difference between the estimated incremental overall fair value
of the reporting unit and the estimated fair value of the net
assets assigned to the reporting unit as of each respective
acquisition date. To test for goodwill impairment at each
evaluation date, the Company compared the estimated fair value
of each of its reporting units to their respective carrying
amounts and certain other assets and liabilities assigned to the
reporting unit, including goodwill and core deposit and other
intangible assets. The methodologies used to estimate fair
values of reporting units as of the acquisition dates and as of
the evaluation dates were similar. For the Companys core
customer relationship business reporting units, fair value was
estimated as the present value of the expected future cash flows
of the reporting unit. The Companys non-relationship
business reporting units were individually analyzed and fair
value was largely determined by comparisons to market
transactions for similar businesses. Based on the results of the
goodwill impairment tests, the Company concluded that the amount
of recorded goodwill was not impaired at the respective testing
dates.
A summary of goodwill assigned to each of the Companys
reportable segments for purposes of testing for impairment was
as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Commercial Banking
|
|
$
|
838,165
|
|
|
$
|
838,165
|
|
Commercial Real Estate
|
|
|
255,166
|
|
|
|
255,166
|
|
Discretionary Portfolio
|
|
|
|
|
|
|
|
|
Residential Mortgage Banking
|
|
|
|
|
|
|
|
|
Retail Banking
|
|
|
1,440,925
|
|
|
|
1,440,925
|
|
All Other
|
|
|
374,593
|
|
|
|
369,825
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,908,849
|
|
|
$
|
2,904,081
|
|
|
|
|
|
|
|
|
|
|
98
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
The amounts and interest rates of short-term borrowings were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
and
|
|
|
Other
|
|
|
|
|
|
|
Repurchase
|
|
|
Short-term
|
|
|
|
|
|
|
Agreements
|
|
|
Borrowings
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
At December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount outstanding
|
|
$
|
2,531,684
|
|
|
$
|
562,530
|
|
|
$
|
3,094,214
|
|
Weighted-average interest rate
|
|
|
5.14
|
%
|
|
|
5.30
|
%
|
|
|
5.17
|
%
|
For the year ended
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Highest amount at a month-end
|
|
$
|
4,533,796
|
|
|
$
|
980,361
|
|
|
|
|
|
Daily-average amount outstanding
|
|
|
3,888,739
|
|
|
|
640,893
|
|
|
$
|
4,529,632
|
|
Weighted-average interest rate
|
|
|
5.01
|
%
|
|
|
5.18
|
%
|
|
|
5.03
|
%
|
At December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount outstanding
|
|
$
|
4,211,978
|
|
|
$
|
940,894
|
|
|
$
|
5,152,872
|
|
Weighted-average interest rate
|
|
|
4.07
|
%
|
|
|
4.26
|
%
|
|
|
4.10
|
%
|
For the year ended
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Highest amount at a month-end
|
|
$
|
4,547,239
|
|
|
$
|
1,136,923
|
|
|
|
|
|
Daily-average amount outstanding
|
|
|
4,232,002
|
|
|
|
658,229
|
|
|
$
|
4,890,231
|
|
Weighted-average interest rate
|
|
|
3.20
|
%
|
|
|
3.40
|
%
|
|
|
3.23
|
%
|
At December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount outstanding
|
|
$
|
3,924,576
|
|
|
$
|
779,088
|
|
|
$
|
4,703,664
|
|
Weighted-average interest rate
|
|
|
2.08
|
%
|
|
|
2.16
|
%
|
|
|
2.09
|
%
|
For the year ended
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Highest amount at a month-end
|
|
$
|
5,039,431
|
|
|
$
|
779,088
|
|
|
|
|
|
Daily-average amount outstanding
|
|
|
4,575,951
|
|
|
|
565,685
|
|
|
$
|
5,141,636
|
|
Weighted-average interest rate
|
|
|
1.36
|
%
|
|
|
1.59
|
%
|
|
|
1.38
|
%
|
In general, federal funds purchased and short-term repurchase
agreements outstanding at December 31, 2006 matured on the
next business day following year-end. Other short-term
borrowings included a $500 million revolving asset-backed
structured borrowing with an unaffiliated conduit lender.
Further information related to the revolving asset-backed
structured borrowing is provided in note 18. The remaining
balance of other short-term borrowings included borrowings from
the U.S. Treasury and have original maturities of one year
or less.
At December 31, 2006, the Company had lines of credit under
formal agreements as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M&T
|
|
|
|
M&T
|
|
|
M&T Bank
|
|
|
Bank, N.A.
|
|
|
|
(In thousands)
|
|
|
Outstanding borrowings
|
|
$
|
|
|
|
$
|
3,431,129
|
|
|
$
|
|
|
Unused
|
|
|
30,000
|
|
|
|
7,634,299
|
|
|
|
73,212
|
|
M&T has a revolving
credit agreement with an unaffiliated commercial bank whereby
M&T may borrow up to
$30 million at its discretion through December 7,
2007. At December 31, 2006,
M&T Bank had borrowing
facilities available with the FHLB whereby
M&T Bank could borrow
up to approximately $6.8 billion. Additionally,
M&T Bank and
M&T Bank, National
Association (M&T
Bank, N.A.), a wholly owned subsidiary of
M&T, had available
lines of credit with the Federal Reserve Bank of New York
totaling approximately $4.3 billion, under which there were
no borrowings outstanding at December 31, 2006 or 2005.
M&T Bank and
M&T Bank, N.A. are
required to pledge loans or investment securities as collateral
for these borrowing facilities.
99
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Long-term borrowings were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Subordinated notes of
M&T Bank:
|
|
|
|
|
|
|
|
|
8% due 2010
|
|
$
|
131,957
|
|
|
$
|
132,118
|
|
3.85% due 2013
|
|
|
399,892
|
|
|
|
399,806
|
|
5.585% due 2020, variable rate
commencing 2015
|
|
|
351,987
|
|
|
|
347,742
|
|
5.629% due 2021, variable rate
commencing 2016
|
|
|
492,945
|
|
|
|
|
|
Subordinated notes of
M&T:
|
|
|
|
|
|
|
|
|
7.2% due 2007
|
|
|
203,193
|
|
|
|
209,579
|
|
6.875% due 2009
|
|
|
103,916
|
|
|
|
105,594
|
|
Senior medium term
notes 6.5% due 2008
|
|
|
29,368
|
|
|
|
28,921
|
|
Advances from FHLB:
|
|
|
|
|
|
|
|
|
Variable rates
|
|
|
2,800,000
|
|
|
|
2,850,000
|
|
Fixed rates
|
|
|
629,438
|
|
|
|
1,025,145
|
|
Junior subordinated debentures
associated with preferred capital securities of:
|
|
|
|
|
|
|
|
|
M&T
Capital Trust I 8.234%
|
|
|
154,640
|
|
|
|
154,640
|
|
M&T
Capital Trust II 8.277%
|
|
|
103,093
|
|
|
|
103,093
|
|
M&T
Capital Trust III 9.25%
|
|
|
68,384
|
|
|
|
68,709
|
|
First Maryland Capital
I Variable rate
|
|
|
143,652
|
|
|
|
143,102
|
|
First Maryland
Capital II Variable rate
|
|
|
141,322
|
|
|
|
140,660
|
|
Allfirst Asset Trust
Variable rate
|
|
|
101,796
|
|
|
|
101,640
|
|
Agreements to repurchase securities
|
|
|
1,025,001
|
|
|
|
375,001
|
|
Other
|
|
|
10,157
|
|
|
|
11,244
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,890,741
|
|
|
$
|
6,196,994
|
|
|
|
|
|
|
|
|
|
|
The subordinated notes of
M&T Bank are unsecured
and are subordinate to the claims of depositors and other
creditors of M&T Bank.
In December 2006, M&T
Bank issued $500 million of subordinated notes which bear a
fixed rate of interest of 5.629% until December 2016 and a
floating rate thereafter until maturity in December 2021, at a
rate equal to the three-month London Interbank Offered Rate
(LIBOR) plus .64%. Beginning December 2016,
M&T Bank may, at its
option and subject to prior regulatory approval, redeem some or
all of the notes on any interest payment date. In December 2005,
M&T Bank completed an
offer to the holders of its 8% subordinated notes due
October 2010 to exchange their notes for fixed rate/floating
rate subordinated notes due December 2020. Approximately
$363 million of the 8% notes with a carrying value of
$348 million were exchanged for new subordinated notes with
a face value of $409 million. The new subordinated notes
bear a fixed rate of interest of 5.585% until December 2015 and
a floating rate of interest thereafter until maturity in
December 2020, at a rate equal to the one-month LIBOR plus
1.215%. Beginning December 2015,
M&T Bank may, at its
option and subject to prior regulatory approval, redeem some or
all of the new notes on any interest payment date. In accordance
with generally accepted accounting principles, the Company
accounted for the exchange as a modification of debt terms and
not as an extinguishment of debt because, among other factors,
the present value of the cash flows under the terms of the new
subordinated notes was not at least ten percent different from
the present value of the cash flows under the original terms of
the exchanged subordinated notes. Coincident with the exchange,
M&T Bank terminated
$363 million of interest rate swap agreements that were
used to hedge the 8.0% subordinated notes that were
exchanged. A $15 million valuation adjustment on the
previously hedged notes was included in the carrying value of
the new subordinated notes. That valuation adjustment is being
amortized to interest expense over the period to expected
maturity of the new notes. The unamortized balance of such
valuation adjustment was
100
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
$14 million and $15 million at December 31, 2006
and 2005, respectively. The new subordinated notes have an
effective rate of 7.76%.
The subordinated notes of
M&T are unsecured and
subordinate to the general creditors of
M&T. The senior medium
term notes were issued in 1998 by Keystone Financial
Mid-Atlantic Funding Corp., a wholly owned subsidiary of
M&T that was acquired
in 2000. The notes provide for semi-annual interest payments at
fixed rates of interest and are guaranteed by
M&T.
Long-term variable rate advances from the FHLB had contractual
interest rates that ranged from 5.31% to 5.37% at
December 31, 2006 and from 4.16% to 4.45% at
December 31, 2005. The weighted-average contractual
interest rates were 5.35% and 4.32% at December 31, 2006
and 2005, respectively. Long-term fixed-rate advances from the
FHLB had contractual interest rates ranging from 4.05% to 7.32%
at December 31, 2006 and from 4.05% to 8.29% at
December 31, 2005. The weighted-average contractual
interest rates payable were 5.52% and 5.28% at December 31,
2006 and 2005, respectively. Advances from the FHLB mature at
various dates through 2029 and are secured by residential real
estate loans, commercial real estate loans and investment
securities.
Long-term agreements to repurchase securities had contractual
interest rates that ranged from 3.91% to 5.14% at
December 31, 2006 and from 3.37% to 4.80% at
December 31, 2005. The weighted-average contractual
interest rates were 4.24% and 3.75% at December 31, 2006
and 2005, respectively. The agreements outstanding at
December 31, 2006 reflect various repurchase dates through
2016, however, the contractual maturities of the underlying
investment securities extend beyond such repurchase dates.
M&T Capital
Trust I (Trust I),
M&T Capital
Trust II (Trust II), and
M&T Capital
Trust III (Trust III) have issued fixed
rate preferred capital securities aggregating $310 million.
First Maryland Capital I (Trust IV) and First
Maryland Capital II (Trust V) have issued
floating rate preferred capital securities aggregating
$300 million. The distribution rates on the preferred
capital securities of Trust IV and Trust V adjust
quarterly based on changes in the three-month LIBOR and were
6.37% and 6.22%, respectively, at December 31, 2006 and
5.15% and 5.10%, respectively, at December 31, 2005.
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:
|
|
|
|
|
|
|
Trust
|
|
Distribution Rate
|
|
Distribution 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 Trusts securities possessing general voting
powers. The Capital Securities represent preferred undivided
interests in the assets of the corresponding Trust. Under the
Federal Reserve Boards current risk-based capital
guidelines, the Capital Securities are includable in
M&Ts Tier 1
(core) capital.
101
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
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
|
|
|
Trust
|
|
Securities
|
|
Securities
|
|
Junior Subordinated 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.
|
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 at
December 31, 2006 and 2005 of Trust III, Trust IV
and Trust V include the unamortized portions of purchase
accounting adjustments to reflect estimated fair value as of the
date of M&Ts
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 6.37% and 6.22%,
respectively, at December 31, 2006 and 5.15% and 5.10%,
respectively, at December 31, 2005.
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
102
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Debentures are redeemable prior to their stated maturity dates
at M&Ts 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
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.
Allfirst Preferred Capital Trust (Allfirst Capital
Trust) has issued $100 million of Floating Rate
Non-Cumulative Subordinated Trust Enhanced Securities
(SKATES). Allfirst Capital Trust is a Delaware
business trust that was formed 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 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 of
M&T 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 6.80% and
5.58% at December 31, 2006 and 2005, respectively.
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%
and three-month LIBOR plus 1.43%, respectively, 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 Boards current
risk-based capital guidelines, the SKATES are includable in
M&Ts Tier 1
Capital.
103
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Long-term borrowings at December 31, 2006 mature as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Year ending December 31:
|
|
|
|
|
2007
|
|
$
|
518,543
|
|
2008
|
|
|
2,171,347
|
|
2009
|
|
|
634,800
|
|
2010
|
|
|
532,807
|
|
2011
|
|
|
|
|
Later years
|
|
|
3,033,244
|
|
|
|
|
|
|
|
|
$
|
6,890,741
|
|
|
|
|
|
|
|
|
10.
|
Stock-based
compensation plans
|
The Company recognizes expense for stock-based compensation
using the fair value method of accounting. For 2006, 2005 and
2004, the Company recognized $51 million, $45 million
and $48 million, respectively, of stock-based compensation
expense and $13 million, $11 million and
$13 million, respectively, of related income tax benefits.
As required, coincident with the adoption of
SFAS No. 123R, the Company began accelerating the
recognition of compensation costs for stock-based awards granted
to retirement-eligible employees and employees who become
retirement-eligible prior to full vesting of the award because
the Companys incentive compensation plans allow for
vesting at the time an employee retires. Stock-based
compensation granted to retirement-eligible individuals through
December 31, 2005 was expensed over the normal vesting
period with any remaining unrecognized compensation cost
recognized at the time of retirement. This change affected the
timing of stock-based compensation expense recognition in the
Companys consolidated financial statements for 2006, but
did not affect the value ascribed to stock-based compensation
granted to employees nor the aggregate amount of stock-based
compensation expense to be recognized by the Company. The
acceleration of such expense increased stock-based compensation
expense for 2006 by $4 million ($3 million after
taxes), and reduced basic and diluted earnings per share by $.03
from what would otherwise have been recognized in that period
had the expense recognition not been accelerated. If not for
this required change, the additional $4 million of
stock-based compensation expense recognized in 2006 would have
been recognized throughout 2007, 2008 and 2009 following the
normal vesting schedule for stock options granted by the Company.
Stock
option plans
The Companys 2005 Incentive Compensation Plan allows for
the issuance of various forms of stock-based compensation,
including stock options, restricted stock and performance-based
awards. Through December 31, 2006, only stock options that
vest with the passage of time as service is provided have been
issued. Stock options issued generally vest over four years and
are exercisable over terms not exceeding ten years and one day.
In 2005, the Company granted 125,600 options to substantially
all employees who had not been previously receiving awards. The
options granted under that award vest three years after grant
date and are exercisable for a period of seven years thereafter.
The 2005 Incentive Compensation Plan allows for share grants not
to exceed 6,000,000 shares of stock plus the shares that
remained available for grant under a prior plan. At
December 31, 2006 and 2005, respectively, there were
7,199,903 and 8,810,196 shares available for future grant.
The Company used an option pricing model to estimate the grant
date present value of stock options granted. The
weighted-average estimated grant date value per option was
$28.10 in 2006, $22.96 in 2005 and $22.64 in 2004. The values
were calculated using the following weighted-average
assumptions; an option term of 6.5 years (representing the
estimated period between grant date and exercise date based on
historical data); a risk-free interest rate of 4.28% in 2006,
3.95% in 2005 and 3.53% in 2004 (representing the yield on a
U.S. Treasury security with a remaining term equal to the
expected option term); expected volatility of 24% in 2006, 21%
in 2005 and 24% in 2004 (based on historical volatility of
M&Ts common stock
price); and estimated dividend yields of 1.65% in 2006, 1.57% in
2005
104
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
and 1.31% in 2004 (representing
the approximate annualized cash dividend rate paid with respect
to a share of common stock at or near the grant date). Based on
historical data and projected employee turnover rates, the
Company reduced the estimated value of stock options for
purposes of recognizing stock-based compensation expense by 7%
in 2006 and 8% in 2005 and 2004 to reflect the probability of
forfeiture prior to vesting. Aggregate fair value of options
expected to vest that were granted in 2006, 2005 and 2004 were
$49 million, $41 million and $47 million,
respectively.
A summary of stock option activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Weighted-Average
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic Value
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
(In Years)
|
|
|
(In Thousands)
|
|
|
Outstanding at January 1, 2006
|
|
|
10,454,663
|
|
|
$
|
73.81
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,726,458
|
|
|
|
109.02
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,407,496
|
)
|
|
|
55.13
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(116,165
|
)
|
|
|
98.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2006
|
|
|
10,657,460
|
|
|
$
|
81.71
|
|
|
|
6.0
|
|
|
$
|
431,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31,
2006
|
|
|
5,674,317
|
|
|
$
|
66.33
|
|
|
|
4.3
|
|
|
$
|
316,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2006, 2005 and 2004,
M&T received
$68 million, $85 million and $60 million,
respectively, in cash and realized $27 million,
$31 million and $30 million, respectively, in tax
benefits from the exercise of stock options. The intrinsic value
of stock options exercised during those periods was
$86 million, $92 million and $93 million,
respectively. As of December 31, 2006, there was
$42 million of total unrecognized compensation cost related
to non-vested stock options. That cost is expected to be
recognized over a weighted-average period of 1.5 years. The
total grant date fair value of stock options vested during 2006,
2005 and 2004 was $37 million, $41 million and
$36 million, respectively. Upon the exercise of stock
options, the Company generally issues shares from treasury stock
to the extent available, but may also issue new shares.
Stock
purchase plan
The stock purchase plan provides eligible employees of the
Company with the right to purchase shares of
M&T common stock
through accumulated payroll deductions. Shares of
M&T common stock will
be issued at the end of an option period, typically one year or
six months. In connection with the employee stock purchase plan,
1,000,000 shares of
M&T common stock were
authorized for issuance, of which 392,955 shares have been
issued, including 102,400 shares in 2006,
103,694 shares in 2005 and 104,378 shares in 2004. For
2006, 2005 and 2004,
M&T received
$10 million, $9 million and $8 million,
respectively, in cash for shares purchased through the employee
stock purchase plan.
Similar to the stock option plans, the Company used an option
pricing model to estimate the grant date present value of
purchase rights under the stock purchase plan. The estimated
weighted-average grant date value per right was $16.43 in 2006,
$14.44 in 2005 and $11.93 in 2004. Such values were calculated
using the following weighted-average assumptions: a term of six
months to one year (representing the period between grant date
and exercise date); a risk-free interest rate of 4.95% in 2006,
3.64% in 2005 and 1.84% in 2004 (representing the yield on a
U.S. Treasury security with a like term); expected
volatility of 14% in 2006, 16% in 2005 and 17% in 2004 (based on
historical volatility of
M&Ts common stock
price); and an estimated dividend yield of 1.96% in 2006, 1.67%
in 2005 and 1.68% in 2004 (representing the approximate
annualized cash dividend rate paid with respect to a share of
common stock at or near the grant date).
Deferred
bonus plan
The Company provides a deferred bonus plan pursuant to which
eligible employees may elect to defer all or a portion of their
current annual incentive compensation awards and allocate such
awards to several investment options, including
M&T common stock.
Participants may elect the timing of distributions from the
plan. Such distributions are payable in cash with the exception
of balances allocated to
M&T
105
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
common stock which are
distributable in the form of M&T common stock. Shares
of M&T common stock
distributable pursuant to the terms of the deferred bonus plan
were 61,757 and 70,132 at December 31, 2006 and 2005,
respectively. The obligation to issue shares is included in
common stock issuable in the consolidated balance sheet. Through
December 31, 2006, 91,407 shares have been issued in
connection with the deferred bonus plan.
Directors
stock plan
The Company maintains a compensation plan for non-employee
members of the Companys boards of directors and directors
advisory councils that allows such members to receive all or a
portion of their compensation in shares of
M&T common stock.
Through December 31, 2006, 81,603 shares have been
issued in connection with the directors stock plan.
Through an acquisition, the Company assumed an obligation to
issue shares of M&T
common stock related to a deferred directors compensation plan.
Shares of common stock issuable under such plan were 29,192 and
30,166 at December 31, 2006 and 2005, respectively. The
obligation to issue shares is included in common stock issuable
in the consolidated balance sheet.
Management
stock ownership program
Through an acquisition,
M&T obtained loans that
are secured by M&T
common stock purchased by former executives of the acquired
entity. At December 31, 2006 and 2005, the loan amounts
owed M&T were less than
the fair value of the financed stock purchased and totaled
$4 million. Such loans are classified as a reduction of
additional paid-in capital in the consolidated balance sheet.
The amounts are due to
M&T no later than
October 5, 2010.
|
|
11.
|
Pension
plans and other postretirement benefits
|
The Company provides pension (defined benefit and defined
contribution plans) and other postretirement benefits (including
defined benefit health care and life insurance plans) to
qualified retired employees. The Company uses a December 31
measurement date for all of its plans.
Net periodic pension expense for defined benefit plans consisted
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Service cost
|
|
$
|
22,224
|
|
|
$
|
31,240
|
|
|
$
|
28,505
|
|
Interest cost on benefit obligation
|
|
|
35,315
|
|
|
|
39,041
|
|
|
|
36,704
|
|
Expected return on plan assets
|
|
|
(38,784
|
)
|
|
|
(37,579
|
)
|
|
|
(37,642
|
)
|
Amortization of prior service cost
|
|
|
(6,559
|
)
|
|
|
245
|
|
|
|
57
|
|
Recognized net actuarial loss
|
|
|
8,045
|
|
|
|
5,190
|
|
|
|
2,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense
|
|
$
|
20,241
|
|
|
$
|
38,137
|
|
|
$
|
29,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other postretirement benefits expense for defined benefit
plans consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
573
|
|
|
$
|
490
|
|
|
$
|
879
|
|
Interest cost on benefit obligation
|
|
|
3,770
|
|
|
|
3,721
|
|
|
|
5,426
|
|
Amortization of prior service cost
|
|
|
170
|
|
|
|
170
|
|
|
|
170
|
|
Recognized net actuarial loss
|
|
|
270
|
|
|
|
12
|
|
|
|
889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other postretirement benefits
expense
|
|
$
|
4,783
|
|
|
$
|
4,393
|
|
|
$
|
7,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Data relating to the funding position of the defined benefit
plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
year
|
|
$
|
659,728
|
|
|
$
|
654,886
|
|
|
$
|
66,941
|
|
|
$
|
87,338
|
|
Service cost
|
|
|
22,224
|
|
|
|
31,240
|
|
|
|
573
|
|
|
|
490
|
|
Interest cost
|
|
|
35,315
|
|
|
|
39,041
|
|
|
|
3,770
|
|
|
|
3,721
|
|
Plan participants
contributions
|
|
|
|
|
|
|
|
|
|
|
2,427
|
|
|
|
2,291
|
|
Amendments
|
|
|
|
|
|
|
(69,623
|
)
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss
|
|
|
(27,382
|
)
|
|
|
66,794
|
|
|
|
1,225
|
|
|
|
(14,926
|
)
|
Curtailments
|
|
|
|
|
|
|
(27,891
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(35,173
|
)
|
|
|
(34,719
|
)
|
|
|
(10,613
|
)
|
|
|
(11,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
654,712
|
|
|
|
659,728
|
|
|
|
64,323
|
|
|
|
66,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of year
|
|
|
452,271
|
|
|
|
465,462
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
56,522
|
|
|
|
15,750
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
40,495
|
|
|
|
5,778
|
|
|
|
8,186
|
|
|
|
9,682
|
|
Plan participants
contributions
|
|
|
|
|
|
|
|
|
|
|
2,427
|
|
|
|
2,291
|
|
Benefits and other payments
|
|
|
(35,173
|
)
|
|
|
(34,719
|
)
|
|
|
(10,613
|
)
|
|
|
(11,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end
of year
|
|
|
514,115
|
|
|
|
452,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(140,597
|
)
|
|
$
|
(207,457
|
)
|
|
$
|
(64,323
|
)
|
|
$
|
(66,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities recognized
in the consolidated balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sheet were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net prepaid asset
|
|
$
|
1,017
|
|
|
$
|
4,575
|
|
|
$
|
|
|
|
$
|
|
|
Intangible asset
|
|
|
|
|
|
|
121
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
$
|
(141,614
|
)
|
|
$
|
(207,875
|
)
|
|
$
|
(64,323
|
)
|
|
$
|
(59,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated
other comprehensive income (AOCI) were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
101,389
|
|
|
|
|
|
|
$
|
6,821
|
|
|
|
|
|
Net prior service cost
|
|
|
(62,807
|
)
|
|
|
|
|
|
|
931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax adjustment to AOCI
|
|
|
38,582
|
|
|
$
|
80,909
|
|
|
|
7,752
|
|
|
$
|
|
|
Taxes
|
|
|
(15,048
|
)
|
|
|
(31,555
|
)
|
|
|
(3,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net adjustment to AOCI
|
|
$
|
23,534
|
|
|
$
|
49,354
|
|
|
$
|
4,729
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has an unfunded supplemental pension plan for
certain key executives. The projected benefit obligation and
accumulated benefit obligation included in the preceding data
related to such plan were $44,125,000 and $43,413,000,
respectively, as of December 31, 2006 and were each
$46,923,000 as of December 31, 2005.
The accumulated benefit obligation for all defined benefit
pension plans was $649,925,000 and $659,728,000 at
December 31, 2006 and 2005, respectively.
In September 2006, the Financial Accounting Standards Board
issued SFAS No. 158, Employers Accounting
for Defined Benefit Pension and Other Postretirement
Plans, which requires an employer to recognize in its
balance sheet as an asset or liability the overfunded or
underfunded status of a defined benefit postretirement plan,
measured as the difference between the fair value of plan assets
and the
107
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
benefit obligation. For a pension
plan, the benefit obligation is the projected benefit
obligation; for any other postretirement benefit plan, such as a
retiree health care plan, the benefit obligation is the
accumulated postretirement benefit obligation.
SFAS No. 158 requires that gains or losses and prior
service costs or credits that arise during the period, but are
not included as components of net periodic benefit expense
pursuant to SFAS No. 87 or SFAS No. 106, be
recognized as a component of other comprehensive income. An
employer with publicly-traded equity securities is required to
initially recognize the funded status of a defined benefit
postretirement plan as of the end of the fiscal year ending
after December 15, 2006. The Company adopted the provisions
of SFAS No. 158 as of December 31, 2006. As indicated in
the preceding table, the Company recorded an additional minimum
liability totaling $46,334,000 ($38,582,000 related to pension
plans and $7,752,000 related to other postretirement benefits)
with a corresponding reduction of stockholders equity, net
of applicable deferred taxes, of $28,263,000. Of the $38,582,000
related to pension plans, $7,955,000 was related to unfunded
nonqualified defined benefit plans. Because the recognition
requirements of SFAS No. 158 were required to be
applied at the end of the year of adoption, the Company had to
first recognize the minimum liability amounts required under the
provisions of SFAS No. 87. As a result, as of
December 31, 2006 the Company decreased its previously
recorded minimum pension liability by $50,708,000 with a
corresponding increase to other comprehensive income that, net
of applicable deferred taxes, was $30,932,000. In order to
recognize the funded status of the Companys combined
postretirement defined benefit plans under the provisions of
SFAS No. 158, the Company then recorded an incremental
minimum liability of $16,166,000 with a corresponding reduction
of stockholders equity that, net of applicable deferred
taxes, was $9,841,000. In total, the Company decreased its
minimum liability from that which was recorded at
December 31, 2005 by $34,542,000 with a corresponding
increase to stockholders equity that, net of applicable
deferred taxes, was $21,091,000. The following table reflects
the amortization of amounts in accumulated other comprehensive
income expected to be recognized as components of net periodic
benefit expense during 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Postretirement
|
|
|
|
Pension Plans
|
|
|
Benefit Plans
|
|
|
|
(In thousands)
|
|
|
Amortization of net prior service
cost (credit)
|
|
$
|
(6,559
|
)
|
|
$
|
170
|
|
Amortization of net loss
|
|
|
3,954
|
|
|
|
29
|
|
Effective January 1, 2006, the Company amended certain
provisions of its defined benefit pension plans. The formula was
changed to reduce the future accrual of benefits by lowering the
accrual percentage and through use of a career-average-pay
formula as opposed to the previous final-average-pay formula.
The amendments affected benefits earned for service periods
beginning after December 31, 2005. The amendments caused
the projected benefit obligation associated with the defined
benefit plans to decrease by approximately $98 million as
of December 31, 2005. There was no corresponding effect on
the accumulated benefit obligation. Amortization of prior
service credits lowered pension expense in 2006 by approximately
$7 million. Also effective January 1, 2006, the
Company began to provide a new qualified defined contribution
pension plan. Active participants in the old defined benefit
plan had the choice of electing to remain in the defined benefit
plan under the reduced benefit formula, or electing to
participate in the new qualified defined contribution plan.
Under the new defined contribution pension plan, the Company
makes contributions to the plan each year in an amount that is
based on an individual participants total compensation
(generally defined as total wages, incentive compensation,
commissions and bonuses) and years of service. Participants do
not contribute to the defined contribution pension plan.
Employees who were not participants in the defined benefit plan
at December 31, 2005 can no longer participate in that
plan, but are eligible to participate in the defined
contribution plan. Pension expense recorded in 2006 associated
with the defined contribution pension plan was approximately
$7 million.
As of December 31, 2006, the accumulated benefit obligation
and fair value of plan assets for pension plans with accumulated
benefit obligations in excess of plan assets were $643,095,000
(including $43,413,000 related to the unfunded supplemental
pension plan) and $506,268,000, respectively. As of
December 31, 2005, the accumulated benefit obligation and
fair value of plan assets for pension plans
108
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
with accumulated benefit obligations in excess of plan assets
were $652,758,000 (including $46,923,000 related to the unfunded
supplemental pension plan) and $444,883,000, respectively.
The assumed weighted-average rates used to determine benefit
obligations at December 31 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
Rate of increase in future
compensation levels
|
|
|
4.70
|
%
|
|
|
4.90
|
%
|
|
|
|
|
|
|
|
|
The assumed weighted-average rates used to determine net benefit
expense for the years ended December 31 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
|
|
6.25
|
%
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
|
|
6.25
|
%
|
Long-term rate of return on plan
assets
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate of increase in future
compensation levels
|
|
|
4.90
|
%
|
|
|
4.91
|
%
|
|
|
4.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average pension plan asset allocations based on the
fair value of such assets at December 31, 2006 and 2005,
and target allocations for 2007, by asset category, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
Target
|
|
|
|
2006
|
|
|
2005
|
|
|
Allocation 2007
|
|
|
Equity securities
|
|
|
66
|
%
|
|
|
63
|
%
|
|
|
55-75
|
%
|
Debt securities
|
|
|
31
|
|
|
|
33
|
|
|
|
25-40
|
|
Other
|
|
|
3
|
|
|
|
4
|
|
|
|
0-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The expected long-term rate of return assumption as of each
measurement date was determined by taking into consideration
asset allocations as of each such date, target allocations of
assets, historical returns on the types of assets held and
current economic factors. The Companys investment policy
for determining the asset allocation targets was developed based
on the desire to maximize total return while placing a strong
emphasis on preservation of capital. In general, it is hoped
that, in the aggregate, changes in the fair value of plan assets
will be less volatile than similar changes in appropriate market
indices. Returns on invested assets are periodically compared
with target market indices for each asset type to aid management
in evaluating such returns. Furthermore, management regularly
reviews the investment policy and may, if deemed appropriate,
make changes to the target allocations presented above.
Pension plan assets included common stock of
M&T with a fair value
of $40,059,000 (8% of total plan assets) at December 31,
2006 and $35,760,000 (8% of total plan assets) at
December 31, 2005.
The Company makes contributions to its funded qualified defined
benefit pension plans as required by government regulation or as
deemed appropriate by management after considering the fair
value of plan assets, expected returns on such assets, and the
present value of benefit obligations of the plans. Subject to
the impact of actual events and circumstances that may occur in
2007, the Company may make contributions to the qualified
defined benefit pension plans in 2007, but the amount of any
such contribution has not yet been determined. No minimum
contribution is required in 2007 under government regulations
for qualified defined benefit pension plans. The Company
contributed $36 million to the qualified defined benefit
pension plans in 2006. There were no contributions to such plans
in 2005. The Company regularly funds the payment of benefit
obligations for the supplemental defined benefit pension and
postretirement benefit plans because such plans do not hold
assets for investment. Payments made by the Company for
supplemental pension benefits were $4,835,000 and $5,778,000 in
2006 and 2005, respectively. Payments made by the Company for
postretirement benefits were $8,186,000
109
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
and $9,682,000 in 2006 and 2005, respectively. Payments for
supplemental pension and other postretirement benefits for 2007
are not expected to differ from those made in 2006 by an amount
that will be material to the Companys consolidated
financial position.
Estimated benefits expected to be paid in future years related
to the Companys defined benefit pension and other
postretirement benefits plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
|
(In thousands)
|
|
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
26,609
|
|
|
$
|
7,483
|
|
2008
|
|
|
26,866
|
|
|
|
7,022
|
|
2009
|
|
|
25,660
|
|
|
|
6,823
|
|
2010
|
|
|
30,062
|
|
|
|
6,641
|
|
2011
|
|
|
35,227
|
|
|
|
6,431
|
|
2012 through 2016
|
|
|
205,596
|
|
|
|
29,250
|
|
For measurement of other postretirement benefits, a 9% annual
rate of increase in the per capita cost of covered health care
benefits was assumed for 2007. The rate was assumed to decrease
gradually to 5% over 5 years and remain constant
thereafter. Assumed health care cost trend rates have a
significant effect on the amounts reported for health care
plans. A one-percentage point change in assumed health care cost
trend rates would have had the following effects:
|
|
|
|
|
|
|
|
|
|
|
+1%
|
|
|
-1%
|
|
|
|
(In thousands)
|
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
Service and interest cost
|
|
$
|
202
|
|
|
$
|
(180
|
)
|
Accumulated postretirement benefit
obligation
|
|
|
3,572
|
|
|
|
(3,179
|
)
|
The Company has a retirement savings plan (Savings
Plan) that is a defined contribution plan in which
eligible employees of the Company may defer up to 50% of
qualified compensation via contributions to the plan. The
Company makes an employer matching contribution in an amount
equal to 75% of an employees contribution, up to 4.5% of
the employees qualified compensation. Employees
accounts, including employee contributions, employer matching
contributions and accumulated earnings thereon, are at all times
fully vested and nonforfeitable. Employee benefits expense
resulting from the Companys contributions to the Savings
Plan totaled $21,152,000, $16,507,000 and $16,215,000 in 2006,
2005 and 2004, respectively.
110
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
The components of income tax expense (benefit) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
439,632
|
|
|
$
|
453,425
|
|
|
$
|
427,568
|
|
State and city
|
|
|
21,070
|
|
|
|
23,382
|
|
|
|
54,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
460,702
|
|
|
|
476,807
|
|
|
|
481,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(56,981
|
)
|
|
|
(79,383
|
)
|
|
|
(88,904
|
)
|
State and city
|
|
|
(11,268
|
)
|
|
|
(8,688
|
)
|
|
|
(48,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(68,249
|
)
|
|
|
(88,071
|
)
|
|
|
(137,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes applicable to
pre-tax income
|
|
$
|
392,453
|
|
|
$
|
388,736
|
|
|
$
|
344,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company files a consolidated federal income tax return
reflecting taxable income earned by all subsidiaries. In prior
years, applicable federal tax law allowed certain financial
institutions the option of deducting as bad debt expense for tax
purposes amounts in excess of actual losses. In accordance with
generally accepted accounting principles, such financial
institutions were not required to provide deferred income taxes
on such excess. Recapture of the excess tax bad debt reserve
established under the previously allowed method will result in
taxable income if M&T
Bank fails to maintain bank status as defined in the Internal
Revenue Code or charges are made to the reserve for other than
bad debt losses. At December 31, 2006,
M&T Banks tax bad
debt reserve for which no federal income taxes have been
provided was $74,021,000. No actions are planned that would
cause this reserve to become wholly or partially taxable.
The portion of income taxes attributable to gains or losses on
bank investment securities was an expense of $976,000 in 2006, a
benefit of $5,434,000 in 2005, and an expense of $1,121,000 in
2004. No alternative minimum tax expense was recognized in 2006,
2005 or 2004.
Total income taxes differed from the amount computed by applying
the statutory federal income tax rate to pre-tax income as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Income taxes at statutory rate
|
|
$
|
431,075
|
|
|
$
|
409,822
|
|
|
$
|
373,283
|
|
Increase (decrease) in taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt income
|
|
|
(31,222
|
)
|
|
|
(27,548
|
)
|
|
|
(26,920
|
)
|
State and city income taxes, net
of federal income tax effect, applicable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income
|
|
|
6,371
|
|
|
|
9,551
|
|
|
|
15,969
|
|
Reorganization of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
(12,499
|
)
|
Other
|
|
|
(13,771
|
)
|
|
|
(3,089
|
)
|
|
|
(5,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
392,453
|
|
|
$
|
388,736
|
|
|
$
|
344,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2004 the Company reorganized two of its subsidiaries
which altered the taxable status of such subsidiaries in certain
jurisdictions thereby decreasing the Companys effective
state income tax rate. As a result of the reorganizations, both
income tax expense and deferred tax liabilities were reduced by
$12,499,000 in 2004.
111
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Deferred tax assets (liabilities) were comprised of the
following at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Losses on loans and other assets
|
|
$
|
302,061
|
|
|
$
|
296,920
|
|
|
$
|
293,664
|
|
Postretirement and other employee
benefits
|
|
|
42,348
|
|
|
|
39,926
|
|
|
|
43,900
|
|
Incentive compensation plans
|
|
|
28,737
|
|
|
|
28,786
|
|
|
|
28,172
|
|
Interest on loans
|
|
|
23,399
|
|
|
|
21,871
|
|
|
|
19,895
|
|
Retirement benefits
|
|
|
40,600
|
|
|
|
64,215
|
|
|
|
28,048
|
|
Stock-based compensation
|
|
|
45,729
|
|
|
|
41,379
|
|
|
|
39,899
|
|
Unrealized investment losses
|
|
|
23,173
|
|
|
|
31,281
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,324
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
20,526
|
|
|
|
20,324
|
|
|
|
26,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
534,897
|
|
|
|
544,702
|
|
|
|
479,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing transactions
|
|
|
(317,854
|
)
|
|
|
(366,549
|
)
|
|
|
(444,467
|
)
|
Capitalized servicing rights
|
|
|
(6,031
|
)
|
|
|
(16,964
|
)
|
|
|
(16,199
|
)
|
Interest on subordinated note
exchange
|
|
|
(21,093
|
)
|
|
|
(22,961
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
(342
|
)
|
|
|
(17,975
|
)
|
Unrealized investment gains
|
|
|
|
|
|
|
|
|
|
|
(11,748
|
)
|
Other
|
|
|
(12,191
|
)
|
|
|
(1,784
|
)
|
|
|
(8,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liabilities
|
|
|
(357,169
|
)
|
|
|
(408,600
|
)
|
|
|
(498,475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
177,728
|
|
|
$
|
136,102
|
|
|
$
|
(18,563
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company believes that it is more likely than not that the
deferred tax assets will be realized through taxable earnings or
alternative tax strategies.
The income tax credits shown in the statement of income of
M&T in note 24
arise principally from operating losses before dividends from
subsidiaries.
The computations of basic earnings per share follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share)
|
|
|
Income available to common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
Weighted-average shares
outstanding (including common stock issuable)
|
|
|
111,173
|
|
|
|
113,689
|
|
|
|
117,696
|
|
Basic earnings per share
|
|
$
|
7.55
|
|
|
$
|
6.88
|
|
|
$
|
6.14
|
|
The computations of diluted earnings per share follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share)
|
|
|
Income available to common
stockholders
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
Weighted-average shares outstanding
|
|
|
111,173
|
|
|
|
113,689
|
|
|
|
117,696
|
|
Plus: incremental shares from
assumed conversion of stock options
|
|
|
2,745
|
|
|
|
2,543
|
|
|
|
2,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average shares
outstanding
|
|
|
113,918
|
|
|
|
116,232
|
|
|
|
120,406
|
|
Diluted earnings per share
|
|
$
|
7.37
|
|
|
$
|
6.73
|
|
|
$
|
6.00
|
|
112
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
The following table displays the components of other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before-tax
|
|
|
Income
|
|
|
|
|
|
|
Amount
|
|
|
Taxes
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
For the year ended
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains
|
|
$
|
33,939
|
|
|
$
|
(9,084
|
)
|
|
$
|
24,855
|
|
Less: reclassification adjustment
for gains realized in net income
|
|
|
2,566
|
|
|
|
(976
|
)
|
|
|
1,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,373
|
|
|
|
(8,108
|
)
|
|
|
23,265
|
|
Minimum pension liability
adjustment
|
|
|
50,708
|
|
|
|
(19,776
|
)
|
|
|
30,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains
|
|
$
|
82,081
|
|
|
$
|
(27,884
|
)
|
|
$
|
54,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses
|
|
$
|
(115,026
|
)
|
|
$
|
42,623
|
|
|
$
|
(72,403
|
)
|
Less: reclassification adjustment
for losses recognized in net income
|
|
|
(28,133
|
)
|
|
|
(406
|
)
|
|
|
(28,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,893
|
)
|
|
|
43,029
|
|
|
|
(43,864
|
)
|
Minimum pension liability
adjustment
|
|
|
(60,422
|
)
|
|
|
23,565
|
|
|
|
(36,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized losses
|
|
$
|
(147,315
|
)
|
|
$
|
66,594
|
|
|
$
|
(80,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses
|
|
$
|
(52,686
|
)
|
|
$
|
11,616
|
|
|
$
|
(41,070
|
)
|
Less: reclassification adjustment
for gains realized in net income
|
|
|
2,874
|
|
|
|
(1,121
|
)
|
|
|
1,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,560
|
)
|
|
|
12,737
|
|
|
|
(42,823
|
)
|
Minimum pension liability
adjustment
|
|
|
(64
|
)
|
|
|
25
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized losses
|
|
$
|
(55,624
|
)
|
|
$
|
12,762
|
|
|
$
|
(42,862
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net consisted of
unrealized gains (losses) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
|
|
|
|
|
|
|
Investment
|
|
|
Benefit
|
|
|
|
|
|
|
Securities
|
|
|
Plans
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Balance at January 1, 2004
|
|
$
|
38,111
|
|
|
$
|
(12,458
|
)
|
|
$
|
25,653
|
|
Net gain (loss) during 2004
|
|
|
(42,823
|
)
|
|
|
(39
|
)
|
|
|
(42,862
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
(4,712
|
)
|
|
|
(12,497
|
)
|
|
|
(17,209
|
)
|
Net gain (loss) during 2005
|
|
|
(43,864
|
)
|
|
|
(36,857
|
)
|
|
|
(80,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
(48,576
|
)
|
|
|
(49,354
|
)
|
|
|
(97,930
|
)
|
Net gain (loss) during 2006
|
|
|
23,265
|
|
|
|
30,932
|
|
|
|
54,197
|
|
Change in accounting for defined
benefit plans (note 11)
|
|
|
|
|
|
|
(9,841
|
)
|
|
|
(9,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
(25,311
|
)
|
|
$
|
(28,263
|
)
|
|
$
|
(53,574
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
|
|
15.
|
Other
income and other expense
|
The following items, which exceeded 1% of total interest income
and other income in the respective period, were included in
either other revenues from operations or other
costs of operations in the consolidated statement of
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank owned life insurance
|
|
$
|
52,690
|
|
|
$
|
46,695
|
|
|
$
|
48,010
|
|
Letter of credit fees
|
|
|
|
|
|
|
38,600
|
|
|
|
33,579
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services
|
|
|
85,421
|
|
|
|
101,096
|
|
|
|
76,868
|
|
Amortization of capitalized
servicing rights
|
|
|
61,007
|
|
|
|
58,467
|
|
|
|
57,885
|
|
Advertising and promotion
|
|
|
|
|
|
|
|
|
|
|
32,742
|
|
|
|
16.
|
International
activities
|
The Company engages in certain international activities
consisting largely of collecting Eurodollar deposits, engaging
in foreign currency trading, providing credit to support the
international activities of domestic companies and holding
certain loans to foreign borrowers. Net assets identified with
international activities amounted to $185,175,000 and
$230,021,000 at December 31, 2006 and 2005, respectively.
Such assets included $175,528,000 and $216,798,000,
respectively, of loans to foreign borrowers. Deposits at
M&T Banks
offshore branch office were $5,429,668,000 and $2,809,532,000 at
December 31, 2006 and 2005, respectively. The Company uses
such deposits to facilitate customer demand and as an
alternative to short-term borrowings when the costs of such
deposits seem reasonable.
|
|
17.
|
Derivative
financial instruments
|
As part of managing interest rate risk, the Company has entered
into several interest rate swap agreements. The agreements
modify the repricing characteristics of certain portions of the
Companys portfolios of earning assets and interest-bearing
liabilities. Interest rate swap agreements are generally entered
into with counterparties that meet established credit standards
and most contain collateral provisions protecting the at-risk
party. The Company believes that the credit risk inherent in
these contracts is not significant.
The Company designates interest rate swap agreements utilized in
the management of interest rate risk as either fair value hedges
or cash flow hedges as defined in SFAS No. 133. Fair
value hedges are intended to protect against exposure to changes
in the fair value of designated assets or liabilities. Cash flow
hedges are intended to protect against the variability of cash
flows associated with designated assets or liabilities.
114
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Information about interest rate swap agreements entered into for
interest rate risk management purposes summarized by type of
financial instrument the swap agreements were intended to hedge
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Estimated Fair
|
|
|
|
Notional
|
|
|
Average
|
|
|
Average Rate
|
|
|
Value Gain
|
|
|
|
Amount
|
|
|
Maturity
|
|
|
Fixed
|
|
|
Variable
|
|
|
(Loss)
|
|
|
|
(In thousands)
|
|
|
(In years)
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate time deposits(a)
|
|
$
|
390,000
|
|
|
|
2.9
|
|
|
|
4.58
|
%
|
|
|
5.24
|
%
|
|
$
|
(2,380
|
)
|
Fixed rate long-term borrowings(a)
|
|
|
637,241
|
|
|
|
8.6
|
|
|
|
6.14
|
%
|
|
|
6.71
|
%
|
|
|
(12,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,027,241
|
|
|
|
6.4
|
|
|
|
5.55
|
%
|
|
|
6.15
|
%
|
|
$
|
(15,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate time deposits(a)
|
|
$
|
515,000
|
|
|
|
2.9
|
|
|
|
4.15
|
%
|
|
|
4.14
|
%
|
|
$
|
(3,851
|
)
|
Fixed rate long-term borrowings(a)
|
|
|
137,241
|
|
|
|
4.8
|
|
|
|
8.00
|
%
|
|
|
7.97
|
%
|
|
|
(4,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
652,241
|
|
|
|
3.3
|
|
|
|
4.96
|
%
|
|
|
4.95
|
%
|
|
$
|
(8,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Under the terms of these
agreements, the Company receives settlement amounts at a fixed
rate and pays at a variable rate. |
The estimated fair value of interest rate swap agreements
represents the amount the Company would have expected to receive
(pay) to terminate such contracts. The estimated fair value of
such swap agreements at December 31, 2006 and 2005 included
gross unrealized gains of $115,000 and $81,000, respectively,
and gross unrealized losses of $15,120,000 and $8,929,000,
respectively. At December 31, 2006 and 2005, the estimated
fair values of interest rate swap agreements designated as fair
value hedges were substantially offset by unrealized gains and
losses resulting from changes in the fair values of the hedged
items.
The notional amount of interest rate swap agreements entered
into for risk management purposes that were outstanding at
December 31, 2006 mature as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Year ending December 31:
|
|
|
|
|
2007
|
|
$
|
150,000
|
|
2008
|
|
|
20,000
|
|
2009
|
|
|
|
|
2010
|
|
|
207,241
|
|
2011
|
|
|
70,000
|
|
Later years
|
|
|
580,000
|
|
|
|
|
|
|
|
|
$
|
1,027,241
|
|
|
|
|
|
|
The net effect of interest rate swap agreements was to decrease
net interest income by $4,281,000 in 2006, and to increase net
interest income by $5,526,000 in 2005 and $18,276,000 in 2004.
The average notional amounts of interest rate swap agreements
impacting net interest income that were entered into for
interest rate risk management purposes were $774,268,000 in
2006, $767,175,000 in 2005 and $696,284,000 in 2004. The amount
of hedge ineffectiveness recognized in 2006, 2005 and 2004 was
not material to the Companys results of operations.
The Company utilizes commitments to sell residential and
commercial real estate loans to hedge the exposure to changes in
the fair value of real estate loans held for sale. Such
commitments have been designated as fair value hedges. The
Company also utilizes commitments to sell real estate loans to
offset
115
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
the exposure to changes in the
fair value of certain commitments to originate real estate loans
for sale. As a result of these activities, net unrealized
pre-tax gains related to hedged loans held for sale, commitments
to originate loans for sale, and commitments to sell loans were
approximately $4 million at December 31, 2006,
compared with unrealized pre-tax losses of $5 million at
December 31, 2005. Changes in unrealized gains or losses
are included in mortgage banking revenues and, in general, are
realized in subsequent periods as the related loans are sold and
commitments satisfied.
Derivative financial instruments used for trading purposes
included interest rate contracts, foreign exchange and other
option contracts, foreign exchange forward and spot contracts,
and financial futures. Interest rate contracts entered into for
trading purposes had notional values and estimated fair value
gains of $7.6 billion and $17,122,000, respectively, at
December 31, 2006 and notional values and estimated fair
value gains of $6.7 billion and $12,486,000, respectively,
at December 31, 2005. Foreign exchange and other option and
futures contracts totaled approximately $613 million and
$679 million at December 31, 2006 and 2005,
respectively. Such contracts were valued at gains of $477,000
and $428,000 at December 31, 2006 and 2005, respectively.
Trading account assets and liabilities are recorded in the
consolidated balance sheet at estimated fair value. The
following table includes information about the estimated fair
value of derivative financial instruments used for trading
purposes:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
December 31:
|
|
|
|
|
|
|
|
|
Gross unrealized gains
|
|
$
|
82,864
|
|
|
$
|
89,810
|
|
Gross unrealized losses
|
|
|
65,265
|
|
|
|
76,896
|
|
Year ended December 31:
|
|
|
|
|
|
|
|
|
Average gross unrealized gains
|
|
$
|
96,041
|
|
|
$
|
93,465
|
|
Average gross unrealized losses
|
|
|
80,626
|
|
|
|
82,389
|
|
Net gains realized from derivative financial instruments used
for trading purposes were $14,800,000, $14,380,000 and
$11,144,000 in 2006, 2005 and 2004, respectively.
|
|
18.
|
Variable
interest entities and asset securitizations
|
Variable
interest entities
Variable interest entities in which the Company holds a
significant variable interest are described below.
M&T Auto
Receivables I, LLC is a special purpose subsidiary of
M&T Bank formed in 2002
for the purpose of borrowing $500 million in a revolving
asset-backed structured borrowing with an unaffiliated conduit
lender. The revolving asset-backed structured borrowing is
secured by automobile loans and other assets transferred to the
special purpose subsidiary by
M&T Bank or other of
its subsidiaries that totaled $565 million and
$572 million at December 31, 2006 and 2005,
respectively. The activities of
M&T Auto
Receivables I, LLC are generally restricted to purchasing
and owning automobile loans for the purpose of securing this
revolving borrowing arrangement. Proceeds from payments on the
automobile loans are required to be applied in priority order
for fees, principal and interest on the borrowing, and funding
the monthly replenishment of loans. Any remaining proceeds are
available for distribution to
M&T Bank. The secured
borrowing is prepayable, in whole or in part, at any time and is
non-recourse to M&T
Bank and the Company. However, 80% of the borrowing can be put
back to M&T Bank upon
demand. The Companys maximum incremental exposure to loss
resulting from the structure of this borrowing arrangement is
generally restricted to the amount that such borrowing is
overcollateralized. Management currently estimates no material
losses as a result of the pledging of assets and the terms of
the borrowing arrangement. The assets and liabilities of
M&T Auto
Receivables I, LLC have been included in the Companys
consolidated financial statements.
M&T has a variable
interest in a trust that holds American Depositary Shares of AIB
(AIB ADSs) for the purpose of satisfying options to
purchase such shares for certain employees. The trust purchased
the AIB ADSs with the proceeds of a loan from an entity
subsequently acquired by
M&T. Proceeds from
option exercises and any dividends and other earnings on the
trust assets are used to repay the loan plus
116
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
interest. Option holders have no
preferential right with respect to the trust assets and the
trust assets are subject to the claims of M&Ts
creditors. The trust has been included in the Companys
consolidated financial statements. As a result, included in
investment securities available for sale were 651,688 AIB ADSs
with a carrying value of approximately $15 million at
December 31, 2006, compared with 797,438 AIB ADSs with a
carrying value of approximately $18 million at
December 31, 2005. Outstanding options granted to employees
who have continued service with
M&T totaled 381,460 and
529,410 at December 31, 2006 and 2005, respectively. All
outstanding options were fully vested and exercisable at both
December 31, 2006 and 2005. The options expire at various
dates through June 2012.
M&Ts maximum
exposure to loss is $15 million at December 31, 2006.
As described in note 9,
M&T has issued junior
subordinated debentures payable to the Trusts and the Allfirst
Asset Trust and owns the common securities of those entities.
The Trusts and the Allfirst Asset Trust are not included in the
Companys consolidated financial statements because the
Company is not considered to be the primary beneficiary of those
entities. Accordingly, at December 31, 2006 and 2005, the
Company included the Junior Subordinated Debentures payable to
the Trusts and the Floating Rate Junior Subordinated Debentures
payable to the Allfirst Asset Trust as long-term borrowings in
its consolidated balance sheet. The Company has recognized
$30 million in other assets for its investment
in the common securities of the Trusts and Allfirst Asset Trust
that will be concomitantly repaid to
M&T by the respective
trust from the proceeds of
M&Ts repayment of
the junior subordinated debentures associated with preferred
capital securities described in note 9.
The Company has invested as a limited partner in various real
estate partnerships that collectively had total assets of
approximately $339 million and $331 million at
December 31, 2006 and 2005, respectively. Those
partnerships generally construct or acquire properties for which
the investing partners are eligible to receive certain federal
income tax credits in accordance with government guidelines.
Such investments may also provide tax deductible losses to the
partners. The partnership investments also assist the Company in
achieving its community reinvestment initiatives. As a limited
partner, there is no recourse to the Company by creditors of the
partnerships. However, the tax credits that result from the
Companys investments in such partnerships are generally
subject to recapture should a partnership fail to comply with
the respective government regulations. The Companys
maximum exposure to loss of its investments in such partnerships
was $142 million, including $25 million of unfunded
commitments, at December 31, 2006 and $143 million,
including $27 million of unfunded commitments, at
December 31, 2005. Management currently estimates that no
material losses are probable as a result of the Companys
involvement with such entities. In accordance with the
accounting provisions for variable interest entities, the
partnership entities are not included in the Companys
consolidated financial statements.
Securitizations
In December 2005, the Company securitized approximately
$126 million, of
one-to-four
family residential mortgage loans in a guaranteed mortgage
securitization with FNMA. The Company recognized no gain or loss
on the transaction as it retained all of the resulting
securities. Such securities were classified as investment
securities available for sale. The Company expects no material
credit-related losses on the retained securities as a result of
the guarantees by FNMA.
In prior years, the Company transferred approximately
$1.9 billion
one-to-four
family residential mortgage loans to qualified special purpose
trusts in non-recourse securitization transactions. In exchange
for the loans, the Company received cash, no more than 88% of
the resulting securities, and the servicing rights to the loans.
All of the retained securities were classified as investment
securities available for sale. The qualified special purpose
trusts are not included in the Companys consolidated
financial statements. Because the transactions were
non-recourse, the Companys maximum exposure to loss as a
result of its association with the trusts is limited to
realizing the carrying value of the retained securities and
servicing rights. The combined outstanding principal amount of
mortgage-backed securities issued by the qualified special
purpose trusts was $732 million at December 31, 2006
and $877 million at December 31, 2005. The principal
amount of such securities held by the Company was
$627 million and $757 million at December 31,
2006 and 2005, respectively. At December 31, 2006 and 2005,
loans of the trusts that were 30 or more days delinquent totaled
$14 million and $16 million, respectively. Credit
losses, net of recoveries, for the trusts in 2006 and 2005 were
insignificant. There were no significant repurchases of
117
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
delinquent or foreclosed loans from the trusts by the Company in
2006 or 2005. Certain cash flows between the Company and the
trusts were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Principal and interest payments on
retained securities
|
|
$
|
173,207
|
|
|
$
|
240,211
|
|
Servicing fees received
|
|
|
2,223
|
|
|
|
2,735
|
|
A summary of the fair values of retained subordinated interests
resulting from the Companys residential mortgage loan
securitization activities follows. Although the estimated fair
values of the retained subordinated interests were obtained from
independent pricing sources, the Company has modeled the
sensitivity of such fair values to changes in certain
assumptions as summarized in the table below. These calculated
sensitivities are hypothetical and actual changes in the fair
value may differ significantly from the amounts presented
herein. The effect of a variation in a particular assumption on
the fair values is calculated without changing any other
assumption. In reality, changes in one factor may result in
changes in another which may magnify or counteract the
sensitivities. The changes in assumptions are presumed to be
instantaneous. The hypothetical effect of adverse changes on the
Companys retained capitalized servicing assets at
December 31, 2006 is included in note 7.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Annual
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Expected
|
|
|
|
Fair
|
|
|
Prepayment
|
|
|
Discount
|
|
|
Credit
|
|
|
|
Value
|
|
|
Speed
|
|
|
Rate
|
|
|
Defaults
|
|
|
|
(Dollars in thousands)
|
|
|
Retained subordinated interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of securitization date
|
|
$
|
91,705
|
|
|
|
23.81
|
%
|
|
|
7.68
|
%
|
|
|
.09
|
%
|
As of December 31, 2006
|
|
|
60,529
|
|
|
|
11.51
|
%
|
|
|
7.52
|
%
|
|
|
.11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on fair value of 10%
adverse change
|
|
|
|
|
|
$
|
(122
|
)
|
|
$
|
(1,967
|
)
|
|
$
|
(201
|
)
|
Impact on fair value of 20%
adverse change
|
|
|
|
|
|
|
(250
|
)
|
|
|
(3,821
|
)
|
|
|
(391
|
)
|
The subordinated retained securities do not have pro rata
participation in loan principal prepayments for the first seven
years of each securitization. The assumed weighted-average
discount rate is 140 basis points higher than the
weighted-average coupon of the underlying mortgage loans at
December 31, 2006.
|
|
19.
|
Fair
value of financial instruments
|
SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, requires disclosure of the
estimated fair value of financial instruments. Fair value is
generally defined as the price a willing buyer and a willing
seller would exchange for a financial instrument in other than a
distressed sale situation.
With the exception of marketable securities, certain off-balance
sheet financial instruments and
one-to-four
family residential mortgage loans originated for sale, the
Companys financial instruments are not readily marketable
and market prices do not exist. The Company, in attempting to
comply with the provisions of SFAS No. 107, has not
attempted to market its financial instruments to potential
buyers, if any exist. Since negotiated prices in illiquid
markets depend greatly upon the then present motivations of the
buyer and seller, it is reasonable to assume that actual sales
prices could vary widely from any estimate of fair value made
without the benefit of negotiations. Additionally, changes in
market interest rates can dramatically impact the value of
financial instruments in a short period of time.
The estimated fair values of investments in readily marketable
debt and equity securities were calculated based on quoted
market prices at the respective year-end. In determining amounts
to present for other financial instruments, the Company
generally used calculations based upon discounted cash flows of
the related financial instruments or assigned some other amount
as required by SFAS No. 107. Additional information
about the assumptions and calculations utilized is presented
below.
118
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
The carrying amounts and calculated estimates for financial
instrument assets (liabilities) are presented in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
December 31, 2005
|
|
|
|
Carrying
|
|
|
Calculated
|
|
|
Carrying
|
|
|
Calculated
|
|
|
|
Amount
|
|
|
Estimate
|
|
|
Amount
|
|
|
Estimate
|
|
|
|
(In thousands)
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,624,964
|
|
|
$
|
1,624,964
|
|
|
$
|
1,490,459
|
|
|
$
|
1,490,459
|
|
Interest-bearing deposits at banks
|
|
|
6,639
|
|
|
|
6,639
|
|
|
|
8,408
|
|
|
|
8,408
|
|
Trading account assets
|
|
|
136,752
|
|
|
|
136,752
|
|
|
|
191,617
|
|
|
|
191,617
|
|
Agreements to resell securities
|
|
|
100,000
|
|
|
|
100,076
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
7,251,598
|
|
|
|
7,253,428
|
|
|
|
8,400,164
|
|
|
|
8,401,985
|
|
Commercial loans and leases
|
|
|
11,666,299
|
|
|
|
11,634,244
|
|
|
|
10,920,152
|
|
|
|
10,901,618
|
|
Commercial real estate loans
|
|
|
15,416,791
|
|
|
|
15,404,747
|
|
|
|
14,549,217
|
|
|
|
14,549,353
|
|
Residential real estate loans
|
|
|
5,956,043
|
|
|
|
5,903,091
|
|
|
|
4,396,197
|
|
|
|
4,370,325
|
|
Consumer loans and leases
|
|
|
9,908,164
|
|
|
|
9,835,625
|
|
|
|
10,465,079
|
|
|
|
10,371,249
|
|
Allowance for credit losses
|
|
|
(649,948
|
)
|
|
|
(649,948
|
)
|
|
|
(637,663
|
)
|
|
|
(637,663
|
)
|
Accrued interest receivable
|
|
|
282,056
|
|
|
|
282,056
|
|
|
|
240,484
|
|
|
|
240,484
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
$
|
(7,879,977
|
)
|
|
$
|
(7,879,977
|
)
|
|
$
|
(8,141,928
|
)
|
|
$
|
(8,141,928
|
)
|
Savings deposits and NOW accounts
|
|
|
(15,110,229
|
)
|
|
|
(15,110,229
|
)
|
|
|
(14,741,088
|
)
|
|
|
(14,741,088
|
)
|
Time deposits
|
|
|
(11,490,629
|
)
|
|
|
(11,512,421
|
)
|
|
|
(11,407,626
|
)
|
|
|
(11,425,903
|
)
|
Deposits at foreign office
|
|
|
(5,429,668
|
)
|
|
|
(5,429,668
|
)
|
|
|
(2,809,532
|
)
|
|
|
(2,809,532
|
)
|
Short-term borrowings
|
|
|
(3,094,214
|
)
|
|
|
(3,094,214
|
)
|
|
|
(5,152,872
|
)
|
|
|
(5,152,872
|
)
|
Long-term borrowings
|
|
|
(6,890,741
|
)
|
|
|
(6,939,549
|
)
|
|
|
(6,196,994
|
)
|
|
|
(6,251,924
|
)
|
Accrued interest payable
|
|
|
(193,009
|
)
|
|
|
(193,009
|
)
|
|
|
(132,027
|
)
|
|
|
(132,027
|
)
|
Trading account liabilities
|
|
|
(65,265
|
)
|
|
|
(65,265
|
)
|
|
|
(76,896
|
)
|
|
|
(76,896
|
)
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to originate real
estate loans for sale
|
|
$
|
3,095
|
|
|
$
|
3,095
|
|
|
$
|
1,813
|
|
|
$
|
1,813
|
|
Commitments to sell real estate
loans
|
|
|
(16,293
|
)
|
|
|
(16,293
|
)
|
|
|
(6,274
|
)
|
|
|
(6,274
|
)
|
Other credit-related commitments
|
|
|
(44,189
|
)
|
|
|
(44,189
|
)
|
|
|
(43,249
|
)
|
|
|
(43,249
|
)
|
Interest rate swap agreements used
for interest rate risk management
|
|
|
(15,005
|
)
|
|
|
(15,005
|
)
|
|
|
(8,848
|
)
|
|
|
(8,848
|
)
|
The following assumptions and methods or calculations were used
in determining the disclosed value of financial instruments.
Cash
and cash equivalents, interest-bearing deposits at banks,
short-term borrowings, accrued interest receivable and accrued
interest payable
Due to the nature of cash and cash equivalents and the near
maturity of interest-bearing deposits at banks, short-term
borrowings, accrued interest receivable and accrued interest
payable, the Company estimated that the carrying amount of such
instruments approximated estimated fair value.
Trading
account assets and liabilities
Trading account assets and liabilities are carried in the
consolidated balance sheet at estimated fair value which, in
general, is based on quoted market prices. Trading account
liabilities are included in other liabilities in the
consolidated balance sheet.
119
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Agreements
to resell securities
The amounts assigned to agreements to resell securities were
based on discounted calculations of projected cash flows.
Investment
securities
Estimated fair values of investments in readily marketable debt
and equity securities were based on quoted market prices.
Investment securities that were not readily marketable were
assigned amounts based on estimates provided by brokers,
discounted calculations of projected cash flows or, in the case
of other investment securities, which include capital stock of
the Federal Reserve Bank of New York and the Federal Home
Loan Bank of New York, at an amount equal to the carrying
amount.
Loans
and leases
In general, discount rates used to calculate values for loan
products were based on the Companys pricing at the
respective year end. A higher discount rate was assumed with
respect to estimated cash flows associated with nonaccrual
loans. The allowance for credit losses represents the
Companys assessment of the overall level of credit losses
inherent in the portfolio as of the respective year end and may
not be indicative of the credit-related discount that a
purchaser of the Companys loans and leases would seek.
Deposits
SFAS No. 107 requires that the estimated fair value
ascribed to noninterest-bearing deposits, savings deposits and
NOW accounts be established at carrying value because of the
customers ability to withdraw funds immediately. Time
deposit accounts are required to be revalued based upon
prevailing market interest rates for similar maturity
instruments. As a result, amounts assigned to time deposits were
based on discounted cash flow calculations using prevailing
market interest rates for deposits with comparable remaining
terms to maturity.
The Company believes that deposit accounts have a value greater
than that prescribed by SFAS No. 107. The Company
feels, however, that the value associated with these deposits is
greatly influenced by characteristics of the buyer, such as the
ability to reduce the costs of servicing the deposits and
deposit attrition which often occurs following an acquisition.
Accordingly, estimating the fair value of deposits with any
degree of certainty is not practical.
Long-term
borrowings
The amounts assigned to long-term borrowings were based on
quoted market prices, when available, or were based on
discounted cash flow calculations using prevailing market
interest rates for borrowings of similar terms.
Commitments
to originate real estate loans for sale and commitments to sell
real estate loans
As described in note 17, the Company enters into various
commitments to originate real estate loans for sale and
commitments to sell real estate loans. Such commitments are
considered to be derivative financial instruments and,
therefore, are carried at estimated fair value on the
consolidated balance sheet. The estimated fair values of such
commitments were generally calculated by reference to quoted
market prices for commitments to sell real estate loans to
certain government-sponsored entities and other parties.
Interest
rate swap agreements used for interest rate risk
management
The estimated fair value of interest rate swap agreements used
for interest rate risk management represents the amount the
Company would have expected to receive or pay to terminate such
agreements.
Other
commitments and contingencies
As described in note 20, in the normal course of business,
various commitments and contingent liabilities are outstanding,
such as loan commitments, credit guarantees and letters of
credit. The Companys pricing of such financial instruments
is based largely on credit quality and relationship, probability
of
120
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
funding and other requirements. Loan commitments often have
fixed expiration dates and contain termination and other clauses
which provide for relief from funding in the event of
significant deterioration in the credit quality of the customer.
The rates and terms of the Companys loan commitments,
credit guarantees and letters of credit are competitive with
other financial institutions operating in markets served by the
Company. The Company believes that the carrying amounts, which
are included in other liabilities, are reasonable estimates of
the fair value of these financial instruments.
The Company does not believe that the estimated information
presented herein is representative of the earnings power or
value of the Company. The preceding analysis, which is
inherently limited in depicting fair value, also does not
consider any value associated with existing customer
relationships nor the ability of the Company to create value
through loan origination, deposit gathering or fee generating
activities.
Many of the estimates presented herein are based upon the use of
highly subjective information and assumptions and, accordingly,
the results may not be precise. Management believes that fair
value estimates may not be comparable between financial
institutions due to the wide range of permitted valuation
techniques and numerous estimates which must be made.
Furthermore, because the disclosed fair value amounts were
estimated as of the balance sheet date, the amounts actually
realized or paid upon maturity or settlement of the various
financial instruments could be significantly different.
|
|
20.
|
Commitments
and contingencies
|
In the normal course of business, various commitments and
contingent liabilities are outstanding. The following table
presents the Companys significant commitments. Certain of
these commitments are not included in the Companys
consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Commitments to extend credit
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
$
|
5,450,382
|
|
|
$
|
4,903,834
|
|
Commercial real estate loans to be
sold
|
|
|
65,784
|
|
|
|
41,662
|
|
Other commercial real estate and
construction
|
|
|
3,008,353
|
|
|
|
2,249,805
|
|
Residential real estate loans to
be sold
|
|
|
679,591
|
|
|
|
351,898
|
|
Other residential real estate
|
|
|
493,122
|
|
|
|
848,015
|
|
Commercial and other
|
|
|
7,344,263
|
|
|
|
6,843,170
|
|
Standby letters of credit
|
|
|
3,622,860
|
|
|
|
3,523,234
|
|
Commercial letters of credit
|
|
|
30,209
|
|
|
|
47,360
|
|
Financial guarantees and
indemnification contracts
|
|
|
1,036,117
|
|
|
|
1,186,385
|
|
Commitments to sell real estate
loans
|
|
|
1,932,306
|
|
|
|
1,164,360
|
|
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 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 managements assessment of the
customers 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
Companys
121
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
involvement in the FNMA DUS program. Under this program, the
Companys maximum credit risk associated with loans sold
with recourse at December 31, 2006 and 2005 totaled
$939 million and $941 million, respectively. Those
recourse amounts were approximately equal to one-third of each
sold loans outstanding principal balance.
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 SFAS No. 133 and along with
commitments to originate real estate loans to be held for sale
are generally recorded in the consolidated balance sheet at
estimated fair market value. However, in estimating that fair
value for commitments to originate loans for sale, value
ascribable to cash flows that will be realized in connection
with loan servicing activities has not been included. Value
ascribable to that portion of cash flows is recognized at the
time the underlying mortgage loans are sold. Additional
information about such derivative financial instruments is
included in note 17.
The Company occupies certain banking offices and uses certain
equipment under noncancellable operating lease agreements
expiring at various dates over the next 32 years. Minimum
lease payments under noncancellable operating leases are
summarized in the following table:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Year ending December 31:
|
|
|
|
|
2007
|
|
$
|
43,931
|
|
2008
|
|
|
41,007
|
|
2009
|
|
|
33,777
|
|
2010
|
|
|
27,209
|
|
2011
|
|
|
21,620
|
|
Later years
|
|
|
66,757
|
|
|
|
|
|
|
|
|
$
|
234,301
|
|
|
|
|
|
|
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 through
2017. Under the agreement, the Company is obligated to pay
$5 million per year from 2007 through 2013 and
$6 million per year from 2014 through 2017.
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 Companys 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 Companys consolidated results of
operations in any future reporting period.
In accordance with the provisions of SFAS No. 131,
Disclosures About Segments of an Enterprise and Related
Information, reportable segments have been determined
based upon the Companys 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 Companys segments has
been compiled utilizing the accounting policies described in
note 1 with certain exceptions. The more significant of
these exceptions are described herein. The Company allocates
interest income or interest expense using a methodology that
122
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
charges users of funds (assets) interest expense and credits
providers of funds (liabilities) with income based on the
maturity, prepayment
and/or
repricing characteristics of the assets and liabilities. The net
effect of this allocation is recorded in the All
Other category. A provision for credit losses is allocated
to segments in an amount based largely on actual net charge-offs
incurred by the segment during the period plus or minus an
amount necessary to adjust the segments allowance for
credit losses due to changes in loan balances. In contrast, the
level of the consolidated provision for credit losses is
determined using the methodologies described in note 1 to
assess the overall adequacy of the allowance for credit losses.
Indirect fixed and variable expenses incurred by certain
centralized support areas are allocated to segments based on
actual usage (for example, volume measurements) and other
criteria. Certain types of administrative expenses and bankwide
expense accruals (including amortization of core deposit and
other intangible assets associated with acquisitions of
financial institutions) are generally not allocated to segments.
Income taxes are allocated to segments based on the
Companys marginal statutory tax rate adjusted for any
tax-exempt income or non-deductible expenses. Equity is
allocated to the segments based on regulatory capital
requirements and in proportion to an assessment of the inherent
risks associated with the business of the segment (including
interest, credit and operating risk).
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, reported segment results are not necessarily
comparable with similar information reported by other financial
institutions. Furthermore, changes in management structure or
allocation methodologies and procedures may result in changes in
reported segment financial data. Information about the
Companys segments is presented in the accompanying table.
123
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Discretionary
|
|
|
Mortgage
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
Banking
|
|
|
Real Estate
|
|
|
Portfolio
|
|
|
Banking
|
|
|
Banking
|
|
|
All Other
|
|
|
Total
|
|
|
|
(In thousands, except asset data)
|
|
|
For the year ended
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income(a)
|
|
$
|
392,378
|
|
|
$
|
228,975
|
|
|
$
|
90,204
|
|
|
$
|
100,144
|
|
|
$
|
1,063,897
|
|
|
$
|
(58,057
|
)
|
|
$
|
1,817,541
|
|
Noninterest income
|
|
|
157,293
|
|
|
|
42,716
|
|
|
|
63,922
|
|
|
|
183,677
|
|
|
|
403,369
|
|
|
|
194,875
|
|
|
|
1,045,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
549,671
|
|
|
|
271,691
|
|
|
|
154,126
|
|
|
|
283,821
|
|
|
|
1,467,266
|
|
|
|
136,818
|
|
|
|
2,863,393
|
|
Provision for credit losses
|
|
|
5,649
|
|
|
|
(172
|
)
|
|
|
1,608
|
|
|
|
953
|
|
|
|
55,282
|
|
|
|
16,680
|
|
|
|
80,000
|
|
Amortization of core deposit and
other intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,008
|
|
|
|
63,008
|
|
Depreciation and other amortization
|
|
|
513
|
|
|
|
5,804
|
|
|
|
4,073
|
|
|
|
52,649
|
|
|
|
25,960
|
|
|
|
23,924
|
|
|
|
112,923
|
|
Other noninterest expense
|
|
|
159,998
|
|
|
|
65,316
|
|
|
|
19,837
|
|
|
|
148,432
|
|
|
|
692,907
|
|
|
|
289,330
|
|
|
|
1,375,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
383,511
|
|
|
|
200,743
|
|
|
|
128,608
|
|
|
|
81,787
|
|
|
|
693,117
|
|
|
|
(256,124
|
)
|
|
|
1,231,642
|
|
Income tax expense (benefit)
|
|
|
157,742
|
|
|
|
65,892
|
|
|
|
32,795
|
|
|
|
29,611
|
|
|
|
282,716
|
|
|
|
(176,303
|
)
|
|
|
392,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
225,769
|
|
|
$
|
134,851
|
|
|
$
|
95,813
|
|
|
$
|
52,176
|
|
|
$
|
410,401
|
|
|
$
|
(79,821
|
)
|
|
$
|
839,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total assets (in millions)
|
|
$
|
12,688
|
|
|
$
|
8,448
|
|
|
$
|
12,136
|
|
|
$
|
3,462
|
|
|
$
|
14,107
|
|
|
$
|
4,998
|
|
|
$
|
55,839
|
|
Capital expenditures (in millions)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
29
|
|
|
$
|
12
|
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income(a)
|
|
$
|
366,894
|
|
|
$
|
236,937
|
|
|
$
|
128,794
|
|
|
$
|
92,071
|
|
|
$
|
945,273
|
|
|
$
|
24,374
|
|
|
$
|
1,794,343
|
|
Noninterest income
|
|
|
161,170
|
|
|
|
46,514
|
|
|
|
16,076
|
|
|
|
166,179
|
|
|
|
384,924
|
|
|
|
174,855
|
|
|
|
949,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
528,064
|
|
|
|
283,451
|
|
|
|
144,870
|
|
|
|
258,250
|
|
|
|
1,330,197
|
|
|
|
199,229
|
|
|
|
2,744,061
|
|
Provision for credit losses
|
|
|
8,081
|
|
|
|
(1,651
|
)
|
|
|
1,392
|
|
|
|
1,372
|
|
|
|
57,627
|
|
|
|
21,179
|
|
|
|
88,000
|
|
Amortization of core deposit and
other intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,805
|
|
|
|
56,805
|
|
Depreciation and other amortization
|
|
|
415
|
|
|
|
6,024
|
|
|
|
5,385
|
|
|
|
48,719
|
|
|
|
26,165
|
|
|
|
30,235
|
|
|
|
116,943
|
|
Other noninterest expense
|
|
|
148,454
|
|
|
|
59,261
|
|
|
|
13,073
|
|
|
|
141,640
|
|
|
|
696,667
|
|
|
|
252,299
|
|
|
|
1,311,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
371,114
|
|
|
|
219,817
|
|
|
|
125,020
|
|
|
|
66,519
|
|
|
|
549,738
|
|
|
|
(161,289
|
)
|
|
|
1,170,919
|
|
Income tax expense (benefit)
|
|
|
152,449
|
|
|
|
76,880
|
|
|
|
32,394
|
|
|
|
23,426
|
|
|
|
224,267
|
|
|
|
(120,680
|
)
|
|
|
388,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
218,665
|
|
|
$
|
142,937
|
|
|
$
|
92,626
|
|
|
$
|
43,093
|
|
|
$
|
325,471
|
|
|
$
|
(40,609
|
)
|
|
$
|
782,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total assets (in millions)
|
|
$
|
11,723
|
|
|
$
|
8,335
|
|
|
$
|
11,810
|
|
|
$
|
2,712
|
|
|
$
|
14,639
|
|
|
$
|
4,916
|
|
|
$
|
54,135
|
|
Capital expenditures (in millions)
|
|
$
|
1
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
17
|
|
|
$
|
7
|
|
|
$
|
27
|
|
For the year ended
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income(a)
|
|
$
|
345,399
|
|
|
$
|
217,708
|
|
|
$
|
130,739
|
|
|
$
|
81,580
|
|
|
$
|
863,991
|
|
|
$
|
95,155
|
|
|
$
|
1,734,572
|
|
Noninterest income
|
|
|
161,558
|
|
|
|
38,098
|
|
|
|
50,386
|
|
|
|
145,764
|
|
|
|
363,893
|
|
|
|
183,270
|
|
|
|
942,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
506,957
|
|
|
|
255,806
|
|
|
|
181,125
|
|
|
|
227,344
|
|
|
|
1,227,884
|
|
|
|
278,425
|
|
|
|
2,677,541
|
|
Provision for credit losses
|
|
|
6,468
|
|
|
|
3,353
|
|
|
|
2,682
|
|
|
|
1,714
|
|
|
|
67,871
|
|
|
|
12,912
|
|
|
|
95,000
|
|
Amortization of core deposit and
other intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,410
|
|
|
|
75,410
|
|
Depreciation and other amortization
|
|
|
380
|
|
|
|
5,008
|
|
|
|
7,012
|
|
|
|
47,558
|
|
|
|
26,870
|
|
|
|
33,836
|
|
|
|
120,664
|
|
Other noninterest expense
|
|
|
139,101
|
|
|
|
53,635
|
|
|
|
12,641
|
|
|
|
131,977
|
|
|
|
708,924
|
|
|
|
273,666
|
|
|
|
1,319,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
361,008
|
|
|
|
193,810
|
|
|
|
158,790
|
|
|
|
46,095
|
|
|
|
424,219
|
|
|
|
(117,399
|
)
|
|
|
1,066,523
|
|
Income tax expense (benefit)
|
|
|
148,083
|
|
|
|
67,872
|
|
|
|
46,583
|
|
|
|
17,301
|
|
|
|
172,912
|
|
|
|
(108,749
|
)
|
|
|
344,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
212,925
|
|
|
$
|
125,938
|
|
|
$
|
112,207
|
|
|
$
|
28,794
|
|
|
$
|
251,307
|
|
|
$
|
(8,650
|
)
|
|
$
|
722,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total assets (in millions)
|
|
$
|
10,946
|
|
|
$
|
7,868
|
|
|
$
|
10,936
|
|
|
$
|
1,801
|
|
|
$
|
14,739
|
|
|
$
|
5,227
|
|
|
$
|
51,517
|
|
Capital expenditures (in millions)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
25
|
|
|
$
|
5
|
|
|
$
|
32
|
|
|
|
|
(a) |
|
Net interest income is the
difference between actual taxable-equivalent interest earned on
assets and interest paid on liabilities by a segment and a
funding charge (credit) based on the Companys internal
funds transfer pricing 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). The taxable-equivalent
adjustment aggregated $19,667,000 in 2006, $17,311,000 in 2005
and $17,330,000 in 2004 and is eliminated in All
Other net interest income and income tax expense
(benefit). |
The Commercial Banking segment provides a wide range of credit
products and banking services to middle-market and large
commercial customers, largely within the markets the Company
serves. Among the services provided by this segment are
commercial lending and leasing, letters of credit, deposit
products and cash management services. The Commercial Real
Estate segment provides credit
124
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
services which are secured by
various types of multifamily residential and commercial real
estate and deposit services to its customers. Activities of this
segment include the origination, sales and servicing of
commercial real estate loans. The Discretionary Portfolio
segment includes securities, residential mortgage loans and
other assets; short-term and long-term borrowed funds; brokered
certificates of deposit and interest rate swap agreements
related thereto; and offshore branch deposits. This segment also
provides foreign exchange services to customers. The Residential
Mortgage Banking segment originates and services residential
mortgage loans for consumers and sells substantially all of
those loans in the secondary market to investors or to bank
subsidiaries of M&T. The segment periodically
purchases servicing rights to loans that have been originated by
other entities. This segment also originates and services loans
to developers of residential real estate properties. Residential
mortgage loans held for sale are included in the Residential
Mortgage Banking segment. The Retail Banking segment offers a
variety of services to consumers and small businesses through
several delivery channels that include banking offices,
automated teller machines, telephone banking and Internet
banking. The All Other category includes other
operating activities of the Company that are not directly
attributable to the reported segments as determined in
accordance with SFAS No. 131, the difference between
the provision for credit losses and the calculated provision
allocated to the reportable segments, goodwill and core deposit
and other intangible assets resulting from acquisitions of
financial institutions, the net impact of the Companys
internal funds transfer pricing methodology, eliminations of
transactions between reportable segments, certain nonrecurring
transactions, the residual effects of unallocated support
systems and general and administrative expenses, and the impact
of interest rate risk management strategies. The amount of
intersegment activity eliminated in arriving at consolidated
totals was included in the All Other category as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
(70,789
|
)
|
|
$
|
(70,698
|
)
|
|
$
|
(60,195
|
)
|
Expenses
|
|
|
(20,760
|
)
|
|
|
(18,445
|
)
|
|
|
(16,950
|
)
|
Income taxes (benefit)
|
|
|
(20,357
|
)
|
|
|
(21,262
|
)
|
|
|
(17,596
|
)
|
Net income (loss)
|
|
|
(29,672
|
)
|
|
|
(30,991
|
)
|
|
|
(25,649
|
)
|
The Company conducts substantially all of its operations in the
United States. There are no transactions with a single customer
that in the aggregate result in revenues that exceed ten percent
of consolidated total revenues.
Payment of dividends by
M&Ts banking
subsidiaries is restricted by various legal and 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 preceding two years. For purposes of this test, at
December 31, 2006, approximately $108,084,000 was available
for payment of dividends to
M&T from banking
subsidiaries without prior regulatory approval.
Banking regulations prohibit extensions of credit by the
subsidiary banks to M&T
unless appropriately secured by assets. Securities of affiliates
are not eligible as collateral for this purpose.
The bank subsidiaries are required to maintain
noninterest-earning reserves against certain deposit
liabilities. During the maintenance periods that included
December 31, 2006 and 2005, cash and due from banks
included a daily average of $182,953,000 and $388,697,000,
respectively, for such purpose.
Federal regulators have adopted capital adequacy guidelines for
bank holding companies and banks. Failure to meet minimum
capital requirements can result in certain mandatory, and
possibly additional discretionary, actions by regulators that,
if undertaken, could have a material effect on the
Companys financial statements. Under the capital adequacy
guidelines, the so-called Tier 1 capital and
Total capital as a percentage of risk-weighted
assets and certain off-balance sheet financial instruments must
be at least 4% and 8%, respectively. In addition to these
risk-based measures, regulators also require banking
institutions that meet certain qualitative criteria to maintain
a minimum leverage ratio of Tier 1
capital to average total assets, adjusted for goodwill and
certain other items, of at least 3% to be
125
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
considered adequately capitalized.
As of December 31, 2006, M&T and each of its
banking subsidiaries exceeded all applicable capital adequacy
requirements. As of December 31, 2006 and 2005, the most
recent notifications from federal regulators categorized each of
M&Ts bank
subsidiaries as well capitalized under the
regulatory framework for prompt corrective action. To be
considered well capitalized, a banking institution
must maintain Tier 1 risk-based capital, total risk-based
capital and leverage ratios of at least 6%, 10% and 5%,
respectively. Management is unaware of any conditions or events
since the latest notifications from federal regulators that have
changed the capital adequacy category of
M&Ts bank
subsidiaries.
The capital ratios and amounts of the Company and its banking
subsidiaries as of December 31, 2006 and 2005 are presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M&T
|
|
|
|
|
|
M&T
|
|
|
|
(Consolidated)
|
|
|
M&T Bank
|
|
|
Bank, N.A.
|
|
|
|
(Dollars in thousands)
|
|
|
December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
$
|
3,844,322
|
|
|
$
|
3,355,935
|
|
|
$
|
93,024
|
|
Ratio(a)
|
|
|
7.74
|
%
|
|
|
6.81
|
%
|
|
|
35.62
|
%
|
Minimum required amount(b)
|
|
|
1,985,987
|
|
|
|
1,970,212
|
|
|
|
10,446
|
|
Total capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
5,849,969
|
|
|
|
5,391,656
|
|
|
|
95,480
|
|
Ratio(a)
|
|
|
11.78
|
%
|
|
|
10.95
|
%
|
|
|
36.56
|
%
|
Minimum required amount(b)
|
|
|
3,971,974
|
|
|
|
3,940,424
|
|
|
|
20,892
|
|
Leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
3,844,322
|
|
|
|
3,355,935
|
|
|
|
93,024
|
|
Ratio(c)
|
|
|
7.20
|
%
|
|
|
6.36
|
%
|
|
|
16.12
|
%
|
Minimum required amount(b)
|
|
|
1,602,673
|
|
|
|
1,582,573
|
|
|
|
17,307
|
|
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
$
|
3,598,829
|
|
|
$
|
3,313,343
|
|
|
$
|
84,355
|
|
Ratio(a)
|
|
|
7.56
|
%
|
|
|
7.02
|
%
|
|
|
27.99
|
%
|
Minimum required amount(b)
|
|
|
1,903,593
|
|
|
|
1,886,707
|
|
|
|
12,054
|
|
Total capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
5,161,173
|
|
|
|
4,882,057
|
|
|
|
86,920
|
|
Ratio(a)
|
|
|
10.85
|
%
|
|
|
10.35
|
%
|
|
|
28.84
|
%
|
Minimum required amount(b)
|
|
|
3,807,186
|
|
|
|
3,773,414
|
|
|
|
24,108
|
|
Leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
3,598,829
|
|
|
|
3,313,343
|
|
|
|
84,355
|
|
Ratio(c)
|
|
|
6.94
|
%
|
|
|
6.46
|
%
|
|
|
15.34
|
%
|
Minimum required amount(b)
|
|
|
1,556,213
|
|
|
|
1,539,784
|
|
|
|
16,501
|
|
|
|
|
(a) |
|
The ratio of capital to
risk-weighted assets, as defined by regulation. |
(b) |
|
Minimum amount of capital to be
considered adequately capitalized, as defined by
regulation. |
(c) |
|
The ratio of capital to average
assets, as defined by regulation. |
126
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
|
|
23.
|
Relationship
of
M&T
and AIB
|
AIB received 26,700,000 shares of
M&T common stock on
April 1, 2003 as a result of
M&Ts acquisition
of a subsidiary of AIB on that date. Those shares of common
stock owned by AIB represented 24.2% of the issued and
outstanding shares of
M&T common stock on
December 31, 2006. While AIB maintains a significant
ownership in M&T, the
Agreement and Plan of Reorganization between
M&T and AIB
(Reorganization Agreement) includes several
provisions related to the corporate governance of
M&T that provide AIB
with representation on the
M&T and
M&T Bank boards of
directors and key board committees and certain protections of
its rights as a substantial
M&T shareholder. In
addition, AIB has rights that will facilitate its ability to
maintain its proportionate ownership position in
M&T.
With respect to AIBs right to have representation on the
M&T and
M&T Bank boards of
directors and key board committees, for as long as AIB holds at
least 15% of M&Ts
outstanding common stock, AIB is entitled to designate four
individuals, reasonably acceptable to
M&T, on both the
M&T and
M&T Bank boards of
directors. In addition, one of the AIB designees to the
M&T board of directors
will serve on each of the Executive; Nomination, Compensation
and Governance; and Audit and Risk committees. Also, as long as
AIB holds at least 15% of
M&Ts outstanding
common stock, neither the
M&T nor the
M&T Bank board of
directors may consist of more than 28 directors without the
consent of the M&T
directors designated by AIB. AIB will continue to enjoy these
rights if its holdings of
M&T common stock drop
below 15%, but not below 12%, so long as AIB restores its
ownership percentage to 15% within one year. In the event that
AIB holds at least 10%, but less than 15%, of
M&Ts outstanding
common stock, AIB will be entitled to designate at least two
individuals on both the
M&T and
M&T Bank boards of
directors and, in the event that AIB holds at least 5%, but less
than 10%, of M&Ts
outstanding common stock, AIB will be entitled to designate one
individual on both the
M&T and
M&T Bank boards of
directors. M&T also has
the right to appoint one representative to the AIB board while
AIB remains a significant shareholder.
There are several other corporate governance provisions that
serve to protect AIBs rights as a substantial
M&T shareholder and are
embodied in M&Ts
certificate of incorporation and bylaws. These protections
include an effective consent right in connection with certain
actions by M&T, such as
amending M&Ts
certificate of incorporation or bylaws in a manner inconsistent
with AIBs rights, engaging in activities not permissible
for a bank holding company or adopting any shareholder rights
plan or other measures intended to prevent or delay any
transaction involving a change in control of
M&T. AIB has the right
to limit, with the agreement of at least one non-AIB designee on
the M&T board of
directors, other actions by
M&T, such as reducing
M&Ts cash
dividend policy such that the ratio of cash dividends to net
income is less than 15%, acquisitions and dispositions of
significant amounts of assets, and the appointment or election
of the chairman of the board of directors or the chief executive
officer of M&T. The
protective provisions described above will cease to be
applicable when AIB no longer owns at least 15% of
M&Ts outstanding
common stock, calculated as described in the Reorganization
Agreement.
127
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
|
|
24.
|
Parent
company financial statements
|
Condensed
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Assets
|
Cash
|
|
|
|
|
|
|
|
|
In subsidiary bank
|
|
$
|
7,465
|
|
|
$
|
5,045
|
|
Other
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total cash
|
|
|
7,465
|
|
|
|
5,046
|
|
Due from consolidated bank
subsidiaries
|
|
|
|
|
|
|
|
|
Money-market savings
|
|
|
414,343
|
|
|
|
214,572
|
|
Note receivable
|
|
|
200,000
|
|
|
|
200,000
|
|
Current income tax receivable
|
|
|
2,433
|
|
|
|
3,639
|
|
Other
|
|
|
1,604
|
|
|
|
1,315
|
|
|
|
|
|
|
|
|
|
|
Total due from consolidated bank
subsidiaries
|
|
|
618,380
|
|
|
|
419,526
|
|
Investments in consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
Banks
|
|
|
6,569,224
|
|
|
|
6,358,416
|
|
Other
|
|
|
20,166
|
|
|
|
32,358
|
|
Investments in unconsolidated
subsidiaries (note 18)
|
|
|
29,718
|
|
|
|
29,897
|
|
Other assets
|
|
|
140,189
|
|
|
|
132,014
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,385,142
|
|
|
$
|
6,977,257
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
Due to consolidated subsidiaries
|
|
|
|
|
|
|
|
|
Banks
|
|
$
|
1,914
|
|
|
$
|
2
|
|
Other
|
|
|
914
|
|
|
|
2,377
|
|
|
|
|
|
|
|
|
|
|
Total due to consolidated
subsidiaries
|
|
|
2,828
|
|
|
|
2,379
|
|
Accrued expenses and other
liabilities
|
|
|
60,562
|
|
|
|
50,815
|
|
Long-term borrowings
|
|
|
1,040,657
|
|
|
|
1,047,677
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,104,047
|
|
|
|
1,100,871
|
|
Stockholders
equity
|
|
|
6,281,095
|
|
|
|
5,876,386
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
7,385,142
|
|
|
$
|
6,977,257
|
|
|
|
|
|
|
|
|
|
|
128
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Condensed
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share)
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks
|
|
$
|
755,000
|
|
|
$
|
700,000
|
|
|
$
|
864,000
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
3,650
|
|
Other income
|
|
|
28,822
|
|
|
|
22,291
|
|
|
|
16,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
783,822
|
|
|
|
722,291
|
|
|
|
884,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on long-term borrowings
|
|
|
69,651
|
|
|
|
62,090
|
|
|
|
56,091
|
|
Other expense
|
|
|
7,339
|
|
|
|
7,072
|
|
|
|
6,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
|
76,990
|
|
|
|
69,162
|
|
|
|
62,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and
equity in undistributed income of subsidiaries
|
|
|
706,832
|
|
|
|
653,129
|
|
|
|
822,245
|
|
Income tax credits
|
|
|
16,937
|
|
|
|
18,334
|
|
|
|
17,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in
undistributed income of subsidiaries
|
|
|
723,769
|
|
|
|
671,463
|
|
|
|
840,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income
of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income of subsidiaries
|
|
|
870,420
|
|
|
|
810,720
|
|
|
|
750,149
|
|
Less: dividends received
|
|
|
(755,000
|
)
|
|
|
(700,000
|
)
|
|
|
(867,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income of
subsidiaries
|
|
|
115,420
|
|
|
|
110,720
|
|
|
|
(117,501
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
7.55
|
|
|
$
|
6.88
|
|
|
$
|
6.14
|
|
Diluted
|
|
|
7.37
|
|
|
|
6.73
|
|
|
|
6.00
|
|
129
M&T
BANK CORPORATION AND SUBSIDIARIES
Notes to Financial Statements (Continued)
Condensed
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
839,189
|
|
|
$
|
782,183
|
|
|
$
|
722,521
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income of
subsidiaries
|
|
|
(115,420
|
)
|
|
|
(110,720
|
)
|
|
|
117,501
|
|
Provision for deferred income taxes
|
|
|
7,629
|
|
|
|
1,726
|
|
|
|
3,436
|
|
Net change in accrued income and
expense
|
|
|
(9,787
|
)
|
|
|
(4,378
|
)
|
|
|
(15,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
721,611
|
|
|
|
668,811
|
|
|
|
827,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investment
securities
|
|
|
5,922
|
|
|
|
12,848
|
|
|
|
16,755
|
|
Proceeds from maturities of
investment securities
|
|
|
17,505
|
|
|
|
15,975
|
|
|
|
27,418
|
|
Purchases of investment securities
|
|
|
(18,967
|
)
|
|
|
(19,893
|
)
|
|
|
(12,380
|
)
|
Other, net
|
|
|
5,949
|
|
|
|
(2,221
|
)
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing
activities
|
|
|
10,409
|
|
|
|
6,709
|
|
|
|
34,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on long-term borrowings
|
|
|
|
|
|
|
|
|
|
|
(63,435
|
)
|
Purchases of treasury stock
|
|
|
(373,860
|
)
|
|
|
(509,609
|
)
|
|
|
(610,261
|
)
|
Dividends paid common
|
|
|
(249,817
|
)
|
|
|
(198,619
|
)
|
|
|
(187,669
|
)
|
Other, net
|
|
|
93,847
|
|
|
|
108,454
|
|
|
|
81,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing
activities
|
|
|
(529,830
|
)
|
|
|
(599,774
|
)
|
|
|
(780,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
202,190
|
|
|
|
75,746
|
|
|
|
82,103
|
|
Cash and cash equivalents at
beginning of year
|
|
|
219,618
|
|
|
|
143,872
|
|
|
|
61,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of year
|
|
$
|
421,808
|
|
|
$
|
219,618
|
|
|
$
|
143,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received during the year
|
|
$
|
15,538
|
|
|
$
|
10,434
|
|
|
$
|
6,805
|
|
Interest paid during the year
|
|
|
75,932
|
|
|
|
65,376
|
|
|
|
60,294
|
|
Income taxes received during the
year
|
|
|
43,920
|
|
|
|
40,691
|
|
|
|
42,946
|
|
130
|
|
Item 9.
|
Changes
In and Disagreements With Accountants on Accounting and
Financial Disclosure.
|
None.
|
|
Item 9A.
|
Controls
and Procedures.
|
(a) Evaluation of disclosure controls and procedures. Based
upon their evaluation of the effectiveness of
M&Ts disclosure
controls and procedures (as defined in Exchange Act
rules 13a-15(e)
and
15d-15(e)),
Robert G. Wilmers, Chairman of the Board and Chief Executive
Officer, and René F. Jones, Executive Vice President and
Chief Financial Officer, believe that
M&Ts disclosure
controls and procedures were effective as of December 31,
2006.
(b) Managements annual report on internal control
over financial reporting. Included under the heading
Report on Internal Control Over Financial Reporting
at Item 8 of this Annual Report on
Form 10-K.
(c) Attestation report of the registered public accounting
firm. Included under the heading Report of Independent
Registered Public Accounting Firm at Item 8 of this
Annual Report on
Form 10-K.
(d) Changes in internal control over financial reporting.
M&T regularly 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
December 31, 2006 that have materially affected, or are
reasonably likely to materially affect,
M&Ts internal
control over financial reporting.
|
|
Item 9B.
|
Other
Information.
|
None.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance.
|
The identification of the Registrants directors is
incorporated by reference to the caption NOMINEES FOR
DIRECTOR contained in the Registrants definitive
Proxy Statement for its 2007 Annual Meeting of Stockholders,
which will be filed with the Securities and Exchange Commission
on or about March 5, 2007.
The identification of the Registrants executive officers
is presented under the caption Executive Officers of the
Registrant contained in Part I of this Annual Report
on
Form 10-K.
Disclosure of compliance with Section 16(a) of the
Securities Exchange Act of 1934, as amended, by the
Registrants directors and executive officers, and persons
who are the beneficial owners of more than 10% of the
Registrants common stock, is incorporated by reference to
the caption Section 16(a) Beneficial Ownership
Reporting Compliance contained in the Registrants
definitive Proxy Statement for its 2007 Annual Meeting of
Stockholders which will be filed with the Securities and
Exchange Commission on or about March 5, 2007.
The other information required by Item 10 is incorporated
by reference to the captions CORPORATE GOVERNANCE OF
M&T BANK
CORPORATION, BOARD OF DIRECTORS, COMMITTEES OF THE
BOARD AND ATTENDANCE and CODES OF BUSINESS CONDUCT
AND ETHICS contained in the Registrants definitive
Proxy Statement for its 2007 Annual Meeting of Stockholders,
which will be filed with the Securities and Exchange Commission
on or about March 5, 2007.
131
|
|
Item 11.
|
Executive
Compensation.
|
Incorporated by reference to the caption COMPENSATION OF
EXECUTIVE OFFICERS AND DIRECTORS contained in the
Registrants definitive Proxy Statement for its 2007 Annual
Meeting of Stockholders, which will be filed with the Securities
and Exchange Commission on or about March 5, 2007.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
Incorporated by reference to the captions PRINCIPAL
BENEFICIAL OWNERS OF SHARES and STOCK OWNERSHIP BY
DIRECTORS AND EXECUTIVE OFFICERS contained in the
Registrants definitive Proxy Statement for its 2007 Annual
Meeting of Stockholders, which will be filed with the Securities
and Exchange Commission on or about March 5, 2007.
The information required by this item concerning Equity
Compensation Plan information is presented under the caption
EQUITY COMPENSATION PLAN INFORMATION contained in
Part II, Item 5. Market for Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
Incorporated by reference to the captions TRANSACTIONS
WITH DIRECTORS AND EXECUTIVE OFFICERS and BOARD OF
DIRECTORS, COMMITTEES OF THE BOARD AND ATTENDANCE
contained in the Registrants definitive Proxy Statement
for its 2007 Annual Meeting of Stockholders, which will be filed
with the Securities and Exchange Commission on or about
March 5, 2007.
|
|
Item 14.
|
Principal
Accountant Fees and Services.
|
Incorporated by reference to the caption PROPOSAL TO
RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANT OF
M&T BANK
CORPORATION contained in the Registrants definitive
Proxy Statement for its 2007 Annual Meeting of Stockholders,
which will be filed with the Securities and Exchange Commission
on or about March 5, 2007.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules.
|
(a) Financial statements and financial statement schedules
filed as part of this Annual Report on
Form 10-K.
See Part II, Item 8. Financial Statements and
Supplementary Data. Financial statement schedules are not
required or are inapplicable, and therefore have been omitted.
(b) Exhibits required by Item 601 of
Regulation S-K.
The exhibits listed on the Exhibit Index of this Annual
Report on
Form 10-K
have been previously filed, are filed herewith or are
incorporated herein by reference to other filings.
(c) Additional financial statement schedules. None.
132
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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, on the 23rd day of February,
2007.
M&T BANK CORPORATION
|
|
|
|
By:
|
/s/ Robert
G. Wilmers
|
Robert G. Wilmers
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
Principal Executive Officer:
|
|
|
|
|
|
|
|
|
|
/s/ Robert
G. Wilmers
Robert
G. Wilmers
|
|
Chairman of the Board and
Chief Executive Officer
|
|
February 23, 2007
|
|
|
|
|
|
Principal Financial Officer:
|
|
|
|
|
|
|
|
|
|
/s/ René
F. Jones
René
F. Jones
|
|
Executive Vice President and
Chief Financial Officer
|
|
February 23, 2007
|
|
|
|
|
|
Principal Accounting Officer:
|
|
|
|
|
|
|
|
|
|
/s/ Michael
R. Spychala
Michael
R. Spychala
|
|
Senior Vice President and
Controller
|
|
February 23, 2007
|
|
|
|
|
|
|
|
A majority of the board of
directors:
|
|
|
|
|
|
|
|
|
|
/s/ Brent
D. Baird
Brent
D. Baird
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Robert
J. Bennett
Robert
J. Bennett
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ C.
Angela
Bontempo
C.
Angela Bontempo
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Robert
T. Brady
Robert
T. Brady
|
|
|
|
February 23, 2007
|
133
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael
D. Buckley
Michael
D. Buckley
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ T.
Jefferson
Cunningham III
T.
Jefferson Cunningham III
|
|
|
|
February 23, 2007
|
|
|
|
|
|
Mark
J. Czarnecki
|
|
|
|
|
|
|
|
|
|
/s/ Colm
E. Doherty
Colm
E. Doherty
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Richard
E. Garman
Richard
E. Garman
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Daniel
R. Hawbaker
Daniel
R. Hawbaker
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Patrick
W.E.
Hodgson
Patrick
W.E. Hodgson
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Richard
G. King
Richard
G. King
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Reginald
B.
Newman, II
Reginald
B. Newman, II
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Jorge
G. Pereira
Jorge
G. Pereira
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Michael
P. Pinto
Michael
P. Pinto
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Robert
E.
Sadler, Jr.
Robert
E. Sadler, Jr.
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Eugene
J. Sheehy
Eugene
J. Sheehy
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Stephen
G. Sheetz
Stephen
G. Sheetz
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Herbert
L.
Washington
Herbert
L. Washington
|
|
|
|
February 23, 2007
|
|
|
|
|
|
/s/ Robert
G. Wilmers
Robert
G. Wilmers
|
|
|
|
February 23, 2007
|
134
EXHIBIT INDEX
|
|
|
|
|
|
2
|
.1
|
|
Agreement and Plan of
Reorganization, dated as of September 26, 2002, by and
among M&T Bank
Corporation, Allied Irish Banks, p.l.c. and Allfirst Financial
Inc. Incorporated by reference to Exhibit 2 to the
Form 8-K
dated September 26, 2002 (File
No. 1-9861).
|
|
3
|
.1
|
|
Restated Certificate of
Incorporation of M&T
Bank Corporation dated May 29, 1998. Incorporated by
reference to Exhibit 3.1 to the
Form 10-Q
for the quarter ended June 30, 1998 (File
No. 1-9861).
|
|
3
|
.2
|
|
Certificate of Amendment of the
Certificate of Incorporation of
M&T Bank Corporation
dated October 2, 2000. Incorporated by reference to
Exhibit 3.2 to the
Form 10-K
for the year ended December 31, 2000 (File
No. 1-9861).
|
|
3
|
.3
|
|
Certificate of Amendment to the
Certificate of Incorporation of
M&T Bank Corporation
dated March 4, 2003, effective as of March 25, 2003.
Incorporated by reference to Exhibit 3.3 to the
Form 10-Q
for the quarter ended March 31, 2003 (File
No. 1-9861).
|
|
3
|
.4
|
|
Certificate of Amendment to the
Certificate of Incorporation of
M&T Bank Corporation
dated March 28, 2003, effective as of April 1, 2003.
Incorporated by reference to Exhibit 3.4 to the
Form 10-Q
for the quarter ended March 31, 2003 (File
No. 1-9861).
|
|
3
|
.5
|
|
Amended and Restated Bylaws of
M&T Bank Corporation,
effective February 20, 2007. Incorporated by reference to
Exhibit 3.5 to the
Form 8-K
dated February 20, 2007 (File
No. 1-9861).
|
|
4
|
.1
|
|
Instruments defining the rights of
security holders, including indentures. Incorporated by
reference to Exhibits 3.1 through 3.5, 10.1 through 10.5 and
10.15 through 10.29 hereof. Except as set forth in
Exhibits 4.2 through 4.33 below, the instruments defining
the rights of holders of long-term debt securities of
M&T Bank Corporation
are omitted pursuant to section (b)(4)(iii) of
Item 601 of
Regulation S-K.
M&T Bank Corporation hereby agrees to furnish copies of
these instruments to the S.E.C. upon request.
|
|
4
|
.2
|
|
Amended and Restated
Trust Agreement dated as of January 31, 1997 by and
among M&T Bank
Corporation, Bankers Trust Company, Bankers Trust (Delaware),
and the Administrators named therein. Incorporated by reference
to Exhibit 4.1 to the
Form 8-K
dated January 31, 1997
(File No. 1-9861).
|
|
4
|
.3
|
|
Amendment to Amended and Restated
Trust Agreement dated as of January 31, 1997 by and
among M&T Bank
Corporation, Bankers Trust Company, Bankers Trust (Delaware),
and the Administrators named therein. Incorporated by reference
to Exhibit 4.3 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
|
4
|
.4
|
|
Junior Subordinated Indenture
dated as of January 31, 1997 by and between
M&T Bank Corporation
and Bankers Trust Company. Incorporated by reference to
Exhibit 4.2 to the
Form 8-K
dated January 31, 1997 (File
No. 1-9861).
|
|
4
|
.5
|
|
Supplemental Indenture dated
December 23, 1999 by and between
M&T Bank Corporation
and Bankers Trust Company. Incorporated by reference to
Exhibit 4.5 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
|
4
|
.6
|
|
Amended and Restated
Trust Agreement dated as of June 6, 1997 by and among
M&T Bank Corporation,
Bankers Trust Company, Bankers Trust (Delaware), and the
Administrators named therein. Incorporated by reference to
Exhibit 4.1 to the
Form 8-K
dated June 6, 1997 (File
No. 1-9861).
|
|
4
|
.7
|
|
Amendment to Amended and Restated
Trust Agreement dated as of June 6, 1997 by and among
M&T Bank Corporation,
Bankers Trust Company, Bankers Trust (Delaware), and the
Administrators named therein. Incorporated by reference to
Exhibit 4.9 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
|
4
|
.8
|
|
Junior Subordinated Indenture
dated as of June 6, 1997 by and between
M&T Bank Corporation
and Bankers Trust Company. Incorporated by reference to
Exhibit 4.2 to the
Form 8-K
dated June 6, 1997 (File
No. 1-9861).
|
|
4
|
.9
|
|
Supplemental Indenture dated
December 23, 1999 by and between
M&T Bank Corporation
and Bankers Trust Company. Incorporated by reference to
Exhibit 4.11 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
135
|
|
|
|
|
|
4
|
.10
|
|
Amended and Restated Declaration
of Trust dated as of February 4, 1997 by and among Olympia
Financial Corp., The Bank of New York, The Bank of New York
(Delaware), and the administrative trustees named therein.
Incorporated by reference to Exhibit 4.14 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
|
4
|
.11
|
|
Amendment to Amended and Restated
Declaration of Trust dated as of February 4, 1997 by and
among Olympia Financial Corp., The Bank of New York, The Bank of
New York (Delaware), and the administrative trustees named
therein. Incorporated by reference to Exhibit 4.15 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
|
4
|
.12
|
|
Indenture dated as of
February 4, 1997 by and between Olympia Financial Corp. and
The Bank of New York. Incorporated by reference to
Exhibit 4.16 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
|
4
|
.13
|
|
Supplemental Indenture dated as of
December 17, 1999 by and between Olympia Financial Corp.
and The Bank of New York. Incorporated by reference to
Exhibit 4.17 to the
Form 10-K
for the year ended December 31, 1999 (File
No. 1-9861).
|
|
4
|
.14
|
|
Second Supplemental Indenture
dated as of February 28, 2003 by and between
M&T Bank Corporation
(as successor by merger to Olympia Financial Corp.) and The Bank
of New York. Incorporated by reference to Exhibit 4.18 to
the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
4
|
.15
|
|
Senior Indenture dated as of
May 1, 1997 by and among Keystone Financial Mid-Atlantic
Funding Corp., Olympia Financial Corp. (as successor by merger
to Keystone Financial, Inc.), and Bankers Trust Company.
Incorporated by reference to Exhibit 4.1 to the
Registration Statement on
Form S-3
of Keystone Financial Mid-Atlantic Funding Corp. and Keystone
Financial, Inc. dated April 17, 1997 (File
No. 333-25393).
|
|
4
|
.16
|
|
First Supplemental Indenture,
dated as of October 6, 2000, by and between Olympia
Financial Corp. and Bankers Trust Company. Incorporated by
reference to Exhibit 4.24 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
4
|
.17
|
|
Second Supplemental Indenture,
dated as of February 28, 2003, by and between
M&T Bank Corporation
(as successor by merger to Olympia Financial Corp.) and Deutsche
Bank Trust Company Americas (formerly known as Bankers Trust
Company). Incorporated by reference to Exhibit 4.25 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
4
|
.18
|
|
Indenture, dated as of
December 30, 1996, by and between First Maryland Bancorp
and The Bank of New York. Incorporated by reference to
Exhibit 4.1 to the Registration Statement on
Form S-4
of First Maryland Bancorp, First Maryland Capital I and First
Maryland Capital II dated March 6, 1997
(File No. 333-22871).
|
|
4
|
.19
|
|
Supplemental Indenture No. 1,
dated as of September 15, 1999, by and between Allfirst
Financial Inc. (successor by merger to First Maryland Bancorp)
and The Bank of New York. Incorporated by reference to
Exhibit 4.2 to the
Form 8-K
of Allfirst Financial Inc. dated September 15, 1999
(File No. 2-50235).
|
|
4
|
.20
|
|
Supplemental Indenture No. 2,
dated as of April 1, 2003, by and between
M&T Bank Corporation
(successor by merger to Allfirst Financial Inc.) and The Bank of
New York. Incorporated by reference to Exhibit 4.28 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
4
|
.21
|
|
Amended and Restated Declaration
of Trust, dated as of December 30, 1996, by and among First
Maryland Bancorp, The Bank of New York, The Bank of New York
(Delaware) and the Regular Trustees named therein. Incorporated
by reference to Exhibit 4.4 to the Registration Statement
on
Form S-4
of First Maryland Bancorp, First Maryland Capital I and First
Maryland Capital II dated March 6, 1997
(File No. 333-22871).
|
|
4
|
.22
|
|
Indenture, dated as of
February 4, 1997, by and between First Maryland Bancorp and
The Bank of New York. Incorporated by reference to
Exhibit 4.2 to the Registration Statement on
Form S-4
of First Maryland Bancorp, First Maryland Capital I and First
Maryland Capital II dated March 6, 1997
(File No. 333-22871).
|
|
4
|
.23
|
|
Supplemental Indenture No. 1,
dated as of September 15, 1999, by and between Allfirst
Financial Inc. (successor by merger to First Maryland Bancorp)
and The Bank of New York. Incorporated by reference to
Exhibit 4.3 to the
Form 8-K
of Allfirst Financial Inc. dated September 15, 1999
(File No. 2-50235).
|
136
|
|
|
|
|
|
4
|
.24
|
|
Supplemental Indenture No. 2,
dated as of April 1, 2003, by and between
M&T Bank Corporation
(successor by merger to Allfirst Financial Inc.) and The Bank of
New York. Incorporated by reference to Exhibit 4.34 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
4
|
.25
|
|
Amended and Restated Declaration
of Trust, dated as of February 4, 1997, by and among First
Maryland Bancorp, The Bank of New York, The Bank of New York
(Delaware) and the Regular Trustees named therein. Incorporated
by reference to Exhibit 4.3 to the Registration Statement
on
Form S-4
of First Maryland Bancorp, First Maryland Capital I and First
Maryland Capital II dated March 6, 1997 (File
No. 333-22871).
|
|
4
|
.26
|
|
Indenture, dated as of
July 13, 1999, by and between First Maryland Bancorp and
The Bank of New York. Incorporated by reference to
Exhibit 4.2 to the Registration Statement on
Form S-4
of Allfirst Financial Inc., Allfirst Preferred Capital Trust and
Allfirst Preferred Asset Trust dated October 5, 1999 (File
No. 333-88484).
|
|
4
|
.27
|
|
Supplemental Indenture No. 1,
dated as of September 15, 1999, by and between Allfirst
Financial Inc. (successor by merger to First Maryland Bancorp)
and The Bank of New York. Incorporated by reference to
Exhibit 4.1 to the Registration Statement on
Form S-4
of Allfirst Financial Inc., Allfirst Preferred Capital Trust and
Allfirst Preferred Asset Trust dated October 5, 1999 (File
No. 333-88484).
|
|
4
|
.28
|
|
Supplemental Indenture No. 2,
dated as of April 1, 2003, by and between
M&T Bank Corporation
(successor by merger to Allfirst Financial Inc.) and The Bank of
New York. Incorporated by reference to Exhibit 4.40 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
4
|
.29
|
|
Amended and Restated Declaration
of Trust of Allfirst Preferred Capital Trust, dated as of
July 13, 1999, by and among First Maryland Bancorp, The
Bank of New York, The Bank of New York (Delaware) and the
Administrators named therein. Incorporated by reference to
Exhibit 4.3 to the Registration Statement on
Form S-4
of Allfirst Financial Inc., Allfirst Preferred Capital Trust and
Allfirst Preferred Asset Trust dated October 5, 1999 (File
No. 333-88484).
|
|
4
|
.30
|
|
Amended and Restated Declaration
of Trust of Allfirst Preferred Asset Trust, dated as of
July 13, 1999, by and among First Maryland Bancorp, The
Bank of New York, The Bank of New York (Delaware) and the
Administrators named therein. Incorporated by reference to
Exhibit 4.4 to the Registration Statement on
Form S-4
of Allfirst Financial Inc., Allfirst Preferred Capital Trust and
Allfirst Preferred Asset Trust dated October 5, 1999 (File
No. 333-88484).
|
|
4
|
.31
|
|
Indenture, dated as of
May 15, 1992, by and between First Maryland Bancorp and
Bankers Trust Company. Incorporated by reference to
Exhibit 4.2 to the Registration Statement on
Form S-1
of First Maryland Bancorp (File
No. 33-46277).
|
|
4
|
.32
|
|
Supplemental Indenture No. 1,
dated as of September 15, 1999, by and between Allfirst
Financial Inc. (successor by merger to First Maryland Bancorp)
and Bankers Trust Company. Incorporated by reference to
Exhibit 4.1 to the
Form 8-K
of Allfirst Financial Inc. dated September 15, 1999
(File No. 2-50235).
|
|
4
|
.33
|
|
Supplemental Indenture No. 2,
dated as of April 1, 2003, by and between
M&T Bank Corporation
(successor by merger to Allfirst Financial Inc.) and Deutsche
Bank Trust Company Americas (formerly known as Bankers Trust
Company). Incorporated by reference to Exhibit 4.48 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
4
|
.34
|
|
Registration Rights Agreement,
dated April 1, 2003, between
M&T Bank Corporation
and Allied Irish Banks, p.l.c. Incorporated by reference to
Exhibit 4.23 to the
Form 10-Q
for the quarter ended March 31, 2003 (File
No. 1-9861).
|
|
10
|
.1
|
|
Credit Agreement, dated as of
December 15, 2000, between
M&T Bank Corporation
and Citibank, N.A. Incorporated by reference to
Exhibit 10.1 to the
Form 10-K
for the year ended December 31, 2000 (File
No. 1-9861).
|
|
10
|
.2
|
|
Waiver, dated as of
January 15, 2003, to Credit Agreement dated as of
December 15, 2000, between
M&T Bank Corporation
and Citibank, N.A. Incorporated by reference to
Exhibit 10.2 to the
Form 10-K
for the year ended December 31, 2002 (File
No. 1-9861).
|
|
10
|
.3
|
|
Amendment No. 1, dated
December 9, 2003, to the Credit Agreement, dated as of
December 15, 2000, between
M&T Bank Corporation
and Citibank, N.A. Incorporated by reference to
Exhibit 10.3 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
137
|
|
|
|
|
|
10
|
.4
|
|
M&T
Bank Corporation 1983 Stock Option Plan as last amended on
April 20, 1999. Incorporated by reference to
Exhibit 10.3 to the
Form 10-Q
for the quarter ended March 31, 1999 (File
No. 1-9861).*
|
|
10
|
.5
|
|
M&T
Bank Corporation 2001 Stock Option Plan. Incorporated by
reference to Appendix A to the Proxy Statement of M&T
Bank Corporation dated March 6, 2001 (File
No. 1-9861).*
|
|
10
|
.6
|
|
M&T
Bank Corporation Annual Executive Incentive Plan. Incorporated
by reference to Exhibit No. 10.3 to the
Form 10-Q
for the quarter ended June 30, 1998 (File
No. 1-9861).*
|
|
10
|
.7
|
|
Supplemental Deferred Compensation
Agreement between Manufacturers and Traders Trust Company and
Robert E. Sadler, Jr. dated as of March 7, 1985.
Incorporated by reference to Exhibit (10)(d)(A) to the
Form 10-K
for the year ended December 31, 1984 (File
No. 0-4561).*
|
|
10
|
.8
|
|
First amendment, dated as of
August 1, 2006, to the Supplemental Deferred Compensation
Agreement between Manufacturers and Traders Trust Company and
Robert E. Sadler, Jr. dated as of March 7, 1985.
Incorporated by reference to Exhibit 10.1 to the
Form 10-Q
for the quarter ended September 30, 2006 (File
No. 1-9861).*
|
|
10
|
.9
|
|
Supplemental Deferred Compensation
Agreement between Manufacturers and Traders Trust Company and
Brian E. Hickey dated as of July 21, 1994. Incorporated by
reference to Exhibit 10.8 to the
Form 10-K
for the year ended December 31, 1995 (File
No. 1-9861).*
|
|
10
|
.10
|
|
First amendment, dated as of
August 1, 2006, to the Supplemental Deferred Compensation
Agreement between Manufacturers and Traders Trust Company and
Brian E. Hickey dated as of July 21, 1994. Incorporated by
reference to Exhibit 10.2 to the
Form 10-Q
for the quarter ended September 30, 2006 (File
No. 1-9861).*
|
|
10
|
.11
|
|
Supplemental Deferred Compensation
Agreement, dated July 17, 1989, between The East New York
Savings Bank and Atwood Collins, III. Incorporated by
reference to Exhibit 10.11 to the
Form 10-K
for the year ended December 31, 1991 (File
No. 1-9861).*
|
|
10
|
.12
|
|
First amendment, dated as of
August 1, 2006, to the Supplemental Deferred Compensation
Agreement, dated July 17, 1989, between The East New York
Savings Bank and Atwood Collins, III. Incorporated by
reference to Exhibit 10.3 to the
Form 10-Q
for the quarter ended September 30, 2006 (File
No. 1-9861).*
|
|
10
|
.13
|
|
M&T
Bank Corporation Supplemental Pension Plan, as amended and
restated. Incorporated by reference to Exhibit 10.1 to the
Form 8-K
dated November 15, 2005 (File
No. 1-9861).*
|
|
10
|
.14
|
|
M&T
Bank Corporation Supplemental Retirement Savings Plan.
Incorporated by reference to Exhibit 10.2 to the
Form 8-K
dated November 15, 2005 (File
No. 1-9861).*
|
|
10
|
.15
|
|
M&T
Bank Corporation Deferred Bonus Plan, as amended and restated.
Incorporated by reference to Exhibit 10.12 to the
Form 10-K
for the year ended December 31, 2004 (File
No. 1-9861).*
|
|
10
|
.16
|
|
M&T
Bank Corporation Directors Stock Plan, as amended and
restated. Incorporated by reference to Exhibit 10.1 to the
Form 10-Q
for the quarter ended June 30, 2006 (File
No. 1-9361).*
|
|
10
|
.17
|
|
Restated 1987 Stock Option and
Appreciation Rights Plan of ONBANCorp, Inc. Incorporated by
reference to Exhibit 10.11 to the
Form 10-Q
for the quarter ended June 30, 1998 (File
No. 1-9861).*
|
|
10
|
.18
|
|
1992 ONBANCorp Directors
Stock Option Plan. Incorporated by reference to
Exhibit 10.12 to the
Form 10-Q
for the quarter ended June 30, 1998 (File
No. 1-9861).*
|
|
10
|
.19
|
|
Keystone Financial, Inc. 1997
Stock Incentive Plan, as amended November 19, 1998.
Incorporated by reference to Exhibit 10.16 to the
Form 10-K
of Keystone Financial, Inc. for the year ended December 31,
1998 (File
No. 000-11460).*
|
|
10
|
.20
|
|
Keystone Financial, Inc. 1992
Stock Incentive Plan. Incorporated by reference to
Exhibit 10.10 to the
Form 10-K
of Keystone Financial, Inc. for the year ended December 31,
1997 (File
No. 000-11460).*
|
|
10
|
.21
|
|
Keystone Financial, Inc. 1988
Stock Incentive Plan. Incorporated by reference to
Exhibit 10.2 to the
Form 10-K
of Keystone Financial, Inc. for the year ended December 31,
1998 (File
No. 000-11460).*
|
|
10
|
.22
|
|
Keystone Financial, Inc. 1995
Non-Employee Directors Stock Option Plan. Incorporated by
reference to Exhibit B to the Proxy Statement of Keystone
Financial, Inc. dated April 7, 1995 (File
No. 000-11460).*
|
|
10
|
.23
|
|
Keystone Financial, Inc. 1990
Non-Employee Directors Stock Option Plan, as amended.
Incorporated by reference to Exhibit 10.9 to the
Form 10-K
of Keystone Financial, Inc. for the year ended December 31,
1998 (File
No. 000-11460).*
|
138
|
|
|
|
|
|
10
|
.24
|
|
Keystone Financial, Inc.
1992 Director Fee Plan. Incorporated by reference to
Exhibit 10.11 to the
Form 10-K
of Keystone Financial, Inc. for the year ended December 31,
1999 (File
No. 000-11460).*
|
|
10
|
.25
|
|
Financial Trust Corp Non-Employee
Director Stock Option Plan of 1994. Incorporated by reference to
Exhibit 4.1 to the Registration Statement on
Form S-8
of Financial Trust Corp, dated March 26, 1996 (File
No. 333-01989).*
|
|
10
|
.26
|
|
Progressive Bank, Inc. 1993
Non-Qualified Stock Option Plan for Directors. Incorporated by
reference to Exhibit 10.9 to the Progressive Bank, Inc.
Form 10-K
for the year ended December 31, 1993 (File
No. 0-15025).*
|
|
10
|
.27
|
|
Premier National Bancorp, Inc.
1995 Incentive Stock Plan (as amended and restated effective
May 13, 1999). Incorporated by reference to
Exhibit 10.4 to the Premier National Bancorp, Inc.
Form 10-K
for the year ended December 31, 1999 (File
No. 1-13213).*
|
|
10
|
.28
|
|
M&T
Bank Corporation Employee Stock Purchase Plan. Incorporated by
reference to Exhibit 10.28 to the
Form 10-Q
for the quarter ended September 30, 2002 (File
No. 1-9861).*
|
|
10
|
.29
|
|
M&T
Bank Corporation 2005 Incentive Compensation Plan. Incorporated
by reference to Exhibit 10 to the
Form 8-K
dated April 19, 2005 (File
No. 1-9861).*
|
|
10
|
.30
|
|
M&T
Bank Corporation Employee Severance Plan. Incorporated by
reference to Exhibit 10.2 to the
Form 10-Q
for the quarter ended March 31, 2005 (File
No. 1-9861).*
|
|
11
|
.1
|
|
Statement re: Computation of
Earnings Per Common Share. Incorporated by reference to
note 13 of Notes to Financial Statements filed herewith in
Part II, Item 8, Financial Statements and
Supplementary Data.
|
|
14
|
.1
|
|
M&T
Bank Corporation Code of Ethics for CEO and Senior Financial
Officers. Incorporated by reference to Exhibit 14.1 to the
Form 10-K
for the year ended December 31, 2003 (File
No. 1-9861).
|
|
21
|
.1
|
|
Subsidiaries of the Registrant.
Incorporated by reference to the caption
Subsidiaries contained in Part I, Item 1
hereof.
|
|
23
|
.1
|
|
Consent of PricewaterhouseCoopers
LLP re: Registration Statement Nos.
333-57330,
333-63660,
33-12207,
33-58500,
33-63917,
333-43171,
333-43175,
333-63985,
333-97031,
33-32044,
333-16077,
333-84384,
333-127406
and
333-122147.
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.
|
|
|
|
* |
|
Management contract or
compensatory plan or arrangement. |
139