M&T BANK CORP - FORM 8-K - EX-99.1

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8-K - FORM 8-K - M&T BANK CORP	d664576d8k.htm

Exhibit 99.1

UNAUDITED PRO FORMA

COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma combined condensed consolidated financial statements are based on the separate historical financial statements of M&T and Hudson City after giving effect to the merger and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined condensed consolidated financial statements. The unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2013 is presented as if the merger had occurred on September 30, 2013. The unaudited pro forma combined condensed consolidated statements of income for the year ended December 31, 2012 and the nine months ended September 30, 2013 are presented as if the merger had occurred on January 1, 2012. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations. The pro forma information is not necessarily indicative of what would have occurred had the acquisition taken place on the indicated dates. In particular, no adjustments have been made to the amounts of Hudson City’s provisions for credit losses or gain on bank investment securities that may not have been necessary had the acquired loans and investment securities been recorded at fair value as of January 1, 2012.

The unaudited pro forma combined condensed consolidated financial statements have been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States. M&T is the acquirer for accounting purposes. The unaudited pro forma adjustments, including the allocations of the purchase price, are preliminary and have been made solely for the purpose of providing unaudited pro forma combined condensed consolidated financial information. Certain reclassifications have been made to the historical financial statements of Hudson City to conform to the presentation in M&T’s financial statements.

A final determination of the acquisition consideration and fair values of Hudson City’s assets and liabilities, which cannot be made prior to the completion of the merger, will be based on the actual net tangible and intangible assets of Hudson City that exist as of the date of completion of the transaction. Consequently, amounts preliminarily allocated to acquired assets and assumed liabilities could change significantly from those allocations used in the unaudited pro forma combined condensed consolidated financial statements presented below.

In connection with the plan to integrate the operations of M&T and Hudson City following the completion of the merger, M&T anticipates that nonrecurring charges, such as costs associated with systems implementation, severance, and other costs related to exit or disposal activities, could be incurred. M&T is not able to determine the timing, nature and amount of these charges as of the date hereof. However, these charges could affect the results of operations of M&T and Hudson City, as well as those of the combined company following the completion of the merger, in the period in which they are recorded. The unaudited pro forma combined condensed consolidated financial statements do not include the effects of the costs associated with any restructuring or integration activities resulting from the transaction, as they are nonrecurring in nature and not factually supportable at the time that the unaudited pro forma combined condensed consolidated financial statements were prepared. Additionally, the unaudited pro forma adjustments do not give effect to any nonrecurring or unusual restructuring charges that may be incurred as a result of the integration of the two companies or any anticipated disposition of assets that may result from such integration.

The actual amounts recorded as of the completion of the merger may differ materially from the information presented in these unaudited pro forma combined condensed consolidated financial statements as a result of:

•

changes in the trading price for M&T’s common stock;

•

net cash used or generated in Hudson City’s operations between the signing of the merger agreement and completion of the merger;

•

other changes in Hudson City’s net assets that occur prior to the completion of the merger, which could cause material changes in the information presented below; and

•

changes in the financial results of the consolidated company, which could change the future discounted cash flow projections.

The unaudited pro forma combined condensed consolidated financial statements are provided for informational purposes only. The unaudited pro forma combined condensed consolidated financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined condensed consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed consolidated financial statements should be read together with:

•

the accompanying notes to the unaudited pro forma combined condensed consolidated financial statements;

•

M&T’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2012, included in M&T’s Annual Report on Form 10-K for the year ended December 31, 2012;

•

Hudson City’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2012, included in Hudson City’s Annual Report on Form 10-K for the year ended December 31, 2012;

•

M&T’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three and nine months ended September 30, 2013 included in M&T’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013; and

•

Hudson City’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three and nine months ended September 30, 2013, included in Hudson City’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.

M&T BANK CORPORATION

PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET

(in thousands)

(Unaudited)

The following unaudited pro forma combined condensed consolidated balance sheet gives effect to the acquisition by M&T of Hudson City using the acquisition method of accounting assuming the acquisition was consummated on September 30, 2013.


	September 30, 2013
	M&T			Hudson City			Pro Forma Adjustments(1)			Pro Forma
Assets
Cash and due from banks	$	1,941,944		$	121,336		$	—		$	2,063,280
Interest-bearing deposits and federal funds sold		2,043,620			3,600,607			(1,991,418	)(2),(12)		3,652,809	(13)
Investment securities		8,309,773			10,371,388			114,037	(3)		18,795,198	(13)
Loans and leases		63,659,042			24,653,968			169,333	(4)		88,482,343
Allowance for credit losses		(916,370	)		(291,007	)		291,007	(4)		(916,370	)

Loans and leases, net		62,742,672			24,362,961			460,340			87,565,973
Goodwill		3,524,625			152,109			1,137,255	(5),(12)		4,813,989
Core deposits and other intangibles assets		79,290			1,360			(1,360	)(6)		79,290
Other assets		5,785,561			576,799			455,970	(7)		6,818,330	(13)

Total assets	$	84,427,485		$	39,186,560		$	174,824		$	123,788,869

Liabilities and Shareholders’ Equity
Interest-bearing deposits	$	42,401,370		$	21,427,531		$	111,139	(8)	$	63,940,040
Total borrowings		5,367,345			12,175,000			1,741,804	(9)		19,284,149	(13)

Total interest-bearing liabilities		47,768,715			33,602,531			1,852,943			83,224,189
Non interest-bearing deposits		24,150,771			652,200			—			24,802,971
Other liabilities		1,491,797			242,724			40,651	(10)		1,775,172

Total liabilities		73,411,283			34,497,455			1,893,594			109,802,332

Preferred equity		879,010			—			—			879,010
Common equity		10,137,192			4,689,105			(1,718,770	)(11),(12)		13,107,527

Total shareholders’ equity		11,016,202			4,689,105			(1,718,770	)		13,986,537

Total liabilities and shareholders’ equity	$	84,427,485		$	39,186,560		$	174,824		$	123,788,869

See accompanying notes to pro forma combined condensed consolidated financial statements.

M&T BANK CORPORATION

PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME

(in thousands, except per share data)

(Unaudited)

The following unaudited pro forma combined condensed consolidated statement of income for the nine months ended September 30, 2013 gives effect to M&T’s acquisition of Hudson City using the acquisition method of accounting assuming the acquisition was consummated on January 1, 2012.


	For the nine months ended September 30, 2013
	M&T			Hudson City		Pro Forma Adjustments(1)			Pro Forma
Interest income
Loans and leases, including fees	$	2,071,332		$	852,264	$	(24,644	)(14)	$	2,898,952
Investment securities		147,022			182,932		(56,911	)(15)		273,043
Other interest income		4,514			4,676		—			9,190

Total interest income		2,222,868			1,039,872		(81,555	)		3,181,185

Interest expense
Deposits		65,146			139,764		(27,781	)(16)		177,129
Borrowings		150,977			423,459		(307,200	)(17)		267,236

Total interest expense		216,123			563,223		(334,981	)		444,365

Net interest income		2,006,745			476,649		253,426			2,736,820
Provision for credit losses		143,000			36,500		—			179,500

Net interest income after provision for credit losses		1,863,745			440,149		253,426			2,557,320

Other income
Mortgage banking revenues		249,096			—		—			249,096
Service charges on deposit accounts		336,505			7,753		—			344,258
Trust income		370,132			—		—			370,132
Gain on investment securities		56,457			17,824		—			74,281
Net other than temporary impairment losses recognized in earnings		(9,800	)		—		—			(9,800	)
Other revenues from operations		416,569			—		—			416,569

Total other income		1,418,959			25,577		—			1,444,536

Other expense
Salaries and employee benefits		1,019,019			99,016		—			1,118,035
Equipment and net occupancy		195,657			27,916		—			223,573
Amortization of core deposit and other intangible assets		36,473			748		(748	)(18)		36,473
FDIC assessments		52,010			62,525		—			114,535
Other costs of operations		589,654			46,159		—			635,813

Total other expense		1,892,813			236,364		(748	)		2,128,429

Income before taxes		1,389,891			229,362		254,174			1,873,427
Income taxes		472,833			89,975		99,763	(20)		662,571

Net income		917,058			139,387		154,411			1,210,856
Dividends and amortization on preferred stock and income attributable to unvested stock-based compensation awards		(58,058	)		—		—			(58,058	)

Net income available to common shareholders	$	859,000		$	139,387	$	154,411		$	1,152,798

Net income per common share
Basic	$	6.69		$	0.28	$	—		$	7.47
Diluted	$	6.64		$	0.28	$	—		$	7.43
Average common shares outstanding
Basic		128,369			497,669		25,874			154,243
Diluted		129,312			497,865		25,874			155,186

See accompanying notes to pro forma combined condensed consolidated financial statements.

M&T BANK CORPORATION

PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME

(in thousands, except per share data)

(Unaudited)

The following unaudited pro forma combined condensed consolidated statement of income for the year ended December 31, 2012 gives effect to M&T’s acquisition of Hudson City using the acquisition method of accounting assuming the acquisition was consummated on January 1, 2012.


	For the year ended December 31, 2012
	M&T			Hudson City		Pro Forma Adjustments(1)			Pro Forma
Interest income
Loans and leases, including fees	$	2,704,156		$	1,322,455	$	(40,713	)(14)	$	3,985,898
Investment securities		235,161			349,141		(86,499	)(15)		497,803
Other interest income		2,368			1,443		—			3,811

Total interest income		2,941,685			1,673,039		(127,212	)		4,487,512

Interest expense
Deposits		116,586			238,684		(66,230	)(16)		289,040
Borrowings		226,583			580,432		(409,599	)(17)		397,416

Total interest expense		343,169			819,116		(475,829	)		686,456

Net interest income		2,598,516			853,923		348,617			3,801,056
Provision for credit losses		204,000			95,000		—			299,000

Net interest income after provision for credit losses		2,394,516			758,923		348,617			3,502,056

Other income
Mortgage banking revenues		349,064			—		—			349,064
Service charges on deposit accounts		446,698			11,461		—			458,159
Trust income		471,852			—		—			471,852
Gain on investment securities		9			—		—			9
Net other than temporary impairment losses recognized in earnings		(47,822	)		—		—			(47,822	)
Other revenues from operations		447,469			—		—			447,469

Total other income		1,667,270			11,461		—			1,678,731

Other expense
Salaries and employee benefits		1,314,540			129,644		—			1,444,184
Equipment and net occupancy		257,551			34,270		—			291,821
Amortization of core deposit and other intangible assets		60,631			982		(982	)(18)		60,631
FDIC assessments		101,110			123,695		—			224,805
Other costs of operations		775,428			68,011		6,500	(19)		849,939

Total other expense		2,509,260			356,602		5,518			2,871,380

Income before taxes		1,552,526			413,782		343,099			2,309,407
Income taxes		523,028			164,639		134,666	(20)		822,333

Net income		1,029,498			249,143		208,433			1,487,074
Dividends and amortization on preferred stock and income attributable to unvested stock-based compensation awards		(76,069	)		—		—			(76,069	)

Net income available to common shareholders	$	953,429		$	249,143	$	208,433		$	1,411,005

Net income per common share
Basic	$	7.57		$	0.50	$	—		$	9.30
Diluted	$	7.54		$	0.50	$	—		$	9.27
Average common shares outstanding
Basic		125,864			496,570		25,874			151,738
Diluted		126,405			496,605		25,874			152,279

See accompanying notes to pro forma combined condensed consolidated financial statements.

Notes to Pro Forma Combined Condensed Financial Statements (Unaudited)

(1)	Pro forma adjustments reflect increases (decreases) resulting from the use of the acquisition method of accounting.

(2)	Reflects the payment of cash consideration to Hudson City shareholders based on a 10-day average price for M&T common stock from December 31, 2013 to January 14, 2014.

(3)	Adjustment to reflect preliminary estimate of fair value of acquired investment securities.

(4)	Adjustment to reflect acquired loans at their preliminary estimate of fair value.

(5)	Adjustment to reflect $1,289,364,000 of preliminary estimated goodwill from this business combination.

(6)

Adjustment to eliminate Hudson City’s intangible assets. A significant portion of Hudson City’s core deposit base consists of fixed maturity time deposits and interest rate sensitive money market accounts. This fact, combined with Hudson City’s above average market pricing has led M&T to conclude that there is no significant core deposit intangible resulting from this transaction.

(7)	Reflects preliminary estimate to increase deferred tax assets by $473,742,000 for the effects of acquisition accounting adjustments and to reflect other miscellaneous adjustments of ($17,772,000).

(8)	Adjustment to reflect the preliminary estimate of fair value on interest-bearing deposits.

(9)	Reflects the preliminary estimate of the adjustment of $1,741,804,000 to record borrowings at fair value.

(10)	Reflects the preliminary estimate of adjustments to record the estimated liability for change-in-control agreements with former Hudson City employees of $37,151,000 and other miscellaneous adjustments of $3,500,000.

(11)	Reflects the issuance of 25,874,000 shares of M&T common stock using the January 14, 2014 closing price of $114.80 and the elimination of Hudson City’s September 30, 2013 equity.

(12)	The following table depicts the sensitivity of the purchase price and resulting goodwill to changes in M&T’s common stock price.


	Equity Consideration		Cash Consideration		Total Purchase Price		Estimated Goodwill
(in thousands)
As presented in pro forma	$	2,970,335	$	1,991,418	$	4,961,753	$	1,289,364
Up 10%		3,267,369		2,190,560		5,457,929		1,785,540
Down 10%		2,673,302		1,792,276		4,465,578		793,189

(13)

Subsequent to the acquisition of Hudson City, and dependent on market conditions, M&T expects to restructure the consolidated entity’s balance sheet by extinguishing a portion or all of Hudson City’s borrowings with a fair value of $13,916,804,000 using proceeds from the liquidation of a substantial portion of Hudson City’s investment securities, the realization of related deferred tax assets and the use of interest-bearing deposits and federal funds sold. As a result total assets and total liabilities could decrease by as much as $13,916,804,000.


	Nine Months Ended September 30, 2013			Year Ended December 31, 2012
	(in thousands)
(14) Reflects the estimated net amortization of premiums and discounts on acquired loans using a level-yield method over the estimated remaining terms to maturity of the loans and leases.	$	(24,644	)	$	(40,713	)
(15) Reflects the estimated net amortization of premiums and discounts on acquired investment securities.		(56,911	)		(86,499	)
(16) Reflects the estimated amortization of the related fair value adjustments to interest-bearing deposits using the effective interest method over the remaining terms to maturity.		(27,781	)		(66,230	)
(17) Reflects the estimated amortization of net premiums on acquired borrowings.		(307,200	)		(409,599	)
(18) Reflects the reversal of Hudson City’s amortization of intangible assets.		(748	)		(982	)
(19) Reflects estimated investment banking and other professional expenses directly associated with the acquisition.		—			6,500
(20) Income tax expense on pro forma adjustment using a 39.25% tax rate.		99,763			134,666
(21) The estimated decreases resulting from the net amortization of acquisition accounting adjustments for each of the five twelve-month periods subsequent to the acquisition date are as follows:


	Year 1			Year 2			Year 3			Year 4			Year 5
	(in thousands)
Interest income
Loans	$	(40,713	)	$	(32,476	)	$	(31,056	)	$	(25,395	)	$	(23,056	)
Investment securities		(86,499	)		(74,364	)		(62,229	)		(50,095	)		(37,960	)
Interest expense
Deposits		(66,230	)		(32,073	)		(9,565	)		(2,769	)		(502	)
Borrowings		(409,599	)		(409,599	)		(367,369	)		(223,946	)		(148,604	)

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