M&T BANK CORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9861

M&T BANK CORPORATION

(Exact name of registrant as specified in its charter)


New York (State or other jurisdiction of incorporation or organization)		16-0968385 (I.R.S. Employer Identification No.)


One M & T Plaza Buffalo, New York (Address of principal executive offices)		14203 (Zip Code)

(716) 842-5445

(Registrant’s telephone number, including area code)

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

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

Number of shares of the registrant’s Common Stock, $.50 par value, outstanding as of the close of business on July 23, 2004: 117,078,908 shares.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)


		June 30,			December 31,
Dollars in thousands, except per share		2004			2003
Assets	Cash and due from banks	$	1,697,173			1,877,494
	Money-market assets
	Interest-bearing deposits at banks		14,995			13,194
	Federal funds sold and agreements to resell securities		8,346			22,288
	Trading account		144,476			214,833

	Total money-market assets		167,817			250,315

	Investment securities
	Available for sale (cost: $7,765,186 at June 30, 2004; $6,800,341 at December 31, 2003)		7,760,220			6,862,937
	Held to maturity (market value: $102,024 at June 30, 2004; $108,053 at December 31, 2003)		99,987			104,872
	Other (market value: $300,833 at June 30, 2004; $291,341 at December 31, 2003)		300,833			291,341

	Total investment securities		8,161,040			7,259,150

	Loans and leases		37,772,000			36,037,598
	Unearned discount		(249,599	)		(265,163	)
	Allowance for credit losses		(624,516	)		(614,058	)

	Loans and leases, net		36,897,885			35,158,377

	Premises and equipment		378,437			398,971
	Goodwill		2,904,081			2,904,081
	Core deposit and other intangible assets		200,433			240,830
	Accrued interest and other assets		1,687,592			1,736,863

	Total assets	$	52,094,458			49,826,081

Liabilities	Noninterest-bearing deposits	$	8,204,704			8,411,296
	NOW accounts		722,918			1,738,427
	Savings deposits		15,113,436			14,118,521
	Time deposits		7,193,963			6,637,249
	Deposits at foreign office		3,718,490			2,209,451

	Total deposits		34,953,511			33,114,944

	Federal funds purchased and agreements to repurchase securities		4,251,641			3,832,182
	Other short-term borrowings		610,721			610,064
	Accrued interest and other liabilities		794,719			1,016,256
	Long-term borrowings		5,827,180			5,535,425

	Total liabilities		46,437,772			44,108,871

Stockholders’ equity	Preferred stock, $1 par, 1,000,000 shares authorized, none outstanding		—			—
	Common stock, $.50 par, 250,000,000 shares authorized, 120,396,611 shares issued at June 30, 2004; 120,106,490 shares issued at December 31, 2003		60,198			60,053
	Common stock issuable, 114,283 shares at June 30, 2004; 124,303 shares at December 31, 2003		6,191			6,326
	Additional paid-in capital		2,904,989			2,888,963
	Retained earnings		2,985,266			2,736,215
	Accumulated other comprehensive income, net		(15,723	)		25,653
	Treasury stock — common, at cost - 3,187,351 shares at June 30, 2004; none at December 31, 2003		(284,235	)		—

	Total stockholders’ equity		5,656,686			5,717,210

	Total liabilities and stockholders’ equity	$	52,094,458			49,826,081

-3-

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)


		Three months ended June 30				Six months ended June 30
In thousands, except per share		2004		2003		2004		2003
Interest income	Loans and leases, including fees	$	480,530		516,396	$	952,169		903,761
	Money-market assets
	Deposits at banks		16		41		31		55
	Federal funds sold and agreements to resell securities		28		46		56		1,790
	Trading account		84		200		234		248
	Investment securities
	Fully taxable		76,594		55,662		147,404		98,031
	Exempt from federal taxes		3,349		4,051		6,839		8,070

	Total interest income		560,601		576,396		1,106,733		1,011,955

Interest expense	NOW accounts		279		905		1,273		1,613
	Savings deposits		22,074		28,584		44,995		51,268
	Time deposits		36,242		44,825		72,631		82,936
	Deposits at foreign office		6,945		2,882		13,827		6,005
	Short-term borrowings		13,097		14,581		25,155		25,733
	Long-term borrowings		48,168		53,729		95,753		97,543

	Total interest expense		126,805		145,506		253,634		265,098

	Net interest income		433,796		430,890		853,099		746,857
	Provision for credit losses		30,000		36,000		50,000		69,000

	Net interest income after provision for credit losses		403,796		394,890		803,099		677,857

Other income	Mortgage banking revenues		30,134		43,915		58,392		78,379
	Service charges on deposit accounts		91,104		85,882		179,429		129,231
	Trust income		34,576		33,640		68,162		47,839
	Brokerage services income		13,245		14,361		27,098		24,409
	Trading account and foreign exchange gains		3,844		5,689		8,967		6,330
	Gain on sales of bank investment securities		—		250		2,512		483
	Other revenues from operations		59,431		49,160		115,925		79,073

	Total other income		232,334		232,897		460,485		365,744

Other expense	Salaries and employee benefits		202,647		205,481		403,397		329,555
	Equipment and net occupancy		44,811		47,896		92,183		75,047
	Printing, postage and supplies		8,494		10,926		18,386		17,939
	Amortization of core deposit and other intangible assets		19,250		22,671		40,398		34,269
	Other costs of operations		82,005		144,173		192,810		216,615

	Total other expense		357,207		431,147		747,174		673,425

	Income before taxes		278,923		196,640		516,410		370,176
	Income taxes		94,538		62,600		172,535		119,598

	Net income	$	184,385		134,040	$	343,875		250,578

	Net income per common share
	Basic	$	1.56		1.12	$	2.89		2.36
	Diluted		1.53		1.10		2.83		2.30
	Cash dividends per common share	$	.40		.30	$	.80		.60
	Average common shares outstanding
	Basic		118,224		119,393		118,981		105,971
	Diluted		120,655		122,366		121,486		108,789

-4-

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)


		Six months ended June 30
In thousands		2004			2003
Cash flows from operating activities	Net income	$	343,875			250,578
	Adjustments to reconcile net income to net cash provided by operating activities
	Provision for credit losses		50,000			69,000
	Depreciation and amortization of premises and equipment		32,353			28,460
	Amortization of capitalized servicing rights		28,844			24,131
	Amortization of core deposit and other intangible assets		40,398			34,269
	Provision for deferred income taxes		(51,317	)		9,400
	Asset write-downs		331			241
	Net gain on sales of assets		(6,191	)		(187	)
	Net change in accrued interest receivable, payable		(3,202	)		1,908
	Net change in other accrued income and expense		(7,615	)		(19,727	)
	Net change in loans held for sale		19,562			55,046
	Net change in trading account assets and liabilities		19,454			(19,255	)

	Net cash provided by operating activities		466,492			433,864

Cash flows from investing activities	Proceeds from sales of investment securities
	Available for sale		233,252			68,272
	Other		11,265			78,934
	Proceeds from maturities of investment securities
	Available for sale		1,565,538			1,220,610
	Held to maturity		78,238			35,043
	Purchases of investment securities
	Available for sale		(2,751,914	)		(1,941,511	)
	Held to maturity		(73,375	)		(58,860	)
	Other		(20,757	)		(72,308	)
	Additions to capitalized servicing rights		(30,128	)		(30,972	)
	Net increase in loans and leases		(1,822,122	)		(1,125,021	)
	Acquisitions, net of cash and cash equivalents acquired:
	Banks and bank holding companies		—			2,133,823
	Capital expenditures, net		(11,841	)		(12,242	)
	Other, net		(13,995	)		50,909

	Net cash provided (used) by investing activities		(2,835,839	)		346,677

Cash flows from financing activities	Net increase (decrease) in deposits		1,848,082			(53,223	)
	Net increase (decrease) in short-term borrowings		420,138			(408,856	)
	Proceeds from long-term borrowings		700,110			1,299,568
	Payments on long-term borrowings		(390,415	)		(282,388	)
	Purchases of treasury stock		(323,385	)		—
	Dividends paid - common		(94,731	)		(63,488	)
	Other, net		15,285			21,122

	Net cash provided by financing activities		2,175,084			512,735

	Net increase (decrease) in cash and cash equivalents		(194,263	)		1,293,276
	Cash and cash equivalents at beginning of period		1,899,782			1,284,131
	Cash and cash equivalents at end of period	$	1,705,519			2,577,407

Supplemental disclosure of cash flow information	Interest received during the period	$	1,091,406			1,022,218
	Interest paid during the period		265,001			281,725
	Income taxes paid during the period		213,934			154,127

Supplemental schedule of noncash investing and financing activities	Real estate acquired in settlement of loans	$	9,093			10,970
	Acquisition of banks and bank holding companies:
	Common stock issued		—			1,993,956
	Fair value of:
	Assets acquired (noncash)		—			14,355,837
	Liabilities assumed		—			14,496,703

-5-

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)


													Accumulated
					Common		Additional						other
	Preferred		Common		stock		paid-in			Retained			comprehensive			Treasury
In thousands, except per share	stock		stock		issuable		capital			earnings			income, net			stock			Total
2003
Balance - January 1, 2003	$	—		48,570		6,190		1,192,998			2,297,848			54,772			(391,899	)		3,208,479
Comprehensive income:
Net income		—		—		—		—			250,578			—			—			250,578
Other comprehensive income, net of tax:
Unrealized losses on investment securities, net of reclassification adjustment		—		—		—		—			—			(2,857	)		—			(2,857	)
Unrealized gains on cash flow hedges, net of reclassification adjustment		—		—		—		—			—			451			—			451

																				248,172
Acquisition of Allfirst Financial Inc.-common stock issued		—		10,969		—		1,617,034			—			—			365,953			1,993,956
Repayment of management stock ownership program receivable		—		—		—		22			—			—			—			22
Stock-based compensation plans:
Stock option and purchase plans:
Compensation expense		—		—		—		20,204			—			—			—			20,204
Exercises		—		156		—		(222	)		—			—			25,288			25,222
Directors’ stock plan		—		2		—		274			—			—			175			451
Deferred compensation plans, net, including dividend equivalents		—		—		188		(175	)		(77	)		—			483			419
Common stock cash dividends - $.60 per share		—		—


	Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED BALANCE SHEET - June 30, 2004 and December 31, 2003		3
CONSOLIDATED STATEMENT OF INCOME - Three and six months ended June 30, 2004 and 2003		4
CONSOLIDATED STATEMENT OF CASH FLOWS - Six months ended June 30, 2004 and 2003		5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - Six months ended June 30, 2004 and 2003		6
CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR CREDIT LOSSES - Six months ended June 30, 2004 and 2003		6
NOTES TO FINANCIAL STATEMENTS		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		44
Item 4. Controls and Procedures.		44
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.		44
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.		44
Item 3. Defaults Upon Senior Securities.		45
Item 4. Submission of Matters to a Vote of Security Holders.		45
Item 5. Other Information.		45
Item 6. Exhibits and Reports on Form 8-K.		45
SIGNATURES		46
EXHIBIT INDEX		46
EX-31.1 302 CEO Certification
EX-31.2 302 CFO Certification
EX-32.1 906 CEO Certification
EX-32.2 906 CFO Certification

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