UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9861
FIRST EMPIRE STATE CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0968385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One M & T Plaza
Buffalo, New York 14240
(Address of principal (Zip Code)
executive offices)
(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
--- ---
Number of shares of the registrant's Common Stock, $5 par value, outstanding
as of the close of business on May 1, 1996: 6,843,169 shares.
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FIRST EMPIRE STATE CORPORATION
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FORM 10-Q
For the Quarterly Period Ended March 31, 1996
Table of Contents of Information Required in Report Page
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1996 and December 31, 1995 3
Consolidated Statement of Income -
Three months ended March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Three months ended March 31, 1996 and 1995 5
Consolidated Statement of Changes in
Stockholders' Equity - Three months ended
March 31, 1996 and 1995 6
Consolidated Summary of Changes in
Allowance for Possible Credit Losses -
Three months ended March 31, 1996 and 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Part II. Other Information 19
Signatures 21
Exhibit Index 22
Exhibit No. 11 23
Exhibit No. 27 24
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET (unaudited)
March 31, December 31,
Dollars in thousands, except per share 1996 1995
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Assets Cash and due from banks $ 415,689 363,119
Money-market assets
Interest-bearing deposits at banks 58,309 125,500
Federal funds sold and agreements to resell securities 10,087 1,000
Trading account 40,550 9,709
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Total money-market assets 108,946 136,209
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Investment securities
Available for sale (cost: $1,878,073 at March 31, 1996;
$1,537,393 at December 31, 1995) 1,865,181 1,531,893
Held to maturity (market value: $189,037 at March 31, 1996;
$187,476 at December 31, 1995) 187,993 185,834
Other (market value: $54,344 at March 31, 1996;
$51,568 at December 31, 1995) 54,344 51,568
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Total investment securities 2,107,518 1,769,295
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Loans and leases 10,245,064 9,873,723
Unearned discount (332,781) (317,874)
Allowance for possible credit losses (266,915) (262,344)
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Loans and leases, net 9,645,368 9,293,505
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Premises and equipment 127,370 128,516
Accrued interest and other assets 266,092 265,258
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Total assets $12,670,983 11,955,902
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Liabilities Noninterest-bearing deposits $ 1,168,133 1,184,359
NOW accounts 766,893 768,559
Savings deposits 2,842,365 2,765,301
Time deposits 4,771,180 4,596,053
Deposits at foreign office 170,113 155,303
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Total deposits 9,718,684 9,469,575
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Federal funds purchased and agreements
to repurchase securities 1,403,352 1,213,372
Other short-term borrowings 337,168 59,834
Accrued interest and other liabilities 174,184 174,077
Long-term borrowings 190,444 192,791
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Total liabilities 11,823,832 11,109,649
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Stockholders' equity Preferred stock, $1 par, 1,000,000 shares
authorized, 40,000 shares outstanding at December 31,
1995, stated at aggregate liquidation value -- 40,000
Common stock, $5 par, 15,000,000 shares
authorized, 8,097,472 shares issued 40,487 40,487
Surplus 92,786 98,657
Undivided profits 836,293 805,486
Unrealized investment losses, net (7,435) (3,155)
Treasury stock - common, at cost - 1,252,549 shares at
March 31, 1996; 1,664,306 shares at December 31, 1995 (114,980) (135,222)
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Total stockholders' equity 847,151 846,253
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Total liabilities and stockholders' equity $12,670,983 11,955,902
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-3-
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FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF INCOME (unaudited)
Three months ended March 31
Amounts in thousands, except per share 1996 1995
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Interest income Loans and leases, including fees $213,206 185,016
Money-market assets
Deposits at banks 1,031 1,294
Federal funds sold and agreements
to resell securities 1,403 200
Trading account 273 172
Investment securities
Fully taxable 27,419 27,577
Exempt from federal taxes 445 827
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Total interest income 243,777 215,086
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Interest expense NOW accounts 2,773 2,765
Savings deposits 20,521 22,312
Time deposits 65,456 51,573
Deposits at foreign office 2,129 2,336
Short-term borrowings 19,689 15,663
Long-term borrowings 3,617 1,930
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Total interest expense 114,185 96,579
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Net interest income 129,592 118,507
Provision for possible credit losses 9,675 8,500
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Net interest income after provision
for possible credit losses 119,917 110,007
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Other income Mortgage banking revenues 10,391 2,872
Trust income 6,173 5,737
Service charges on deposit accounts 9,905 9,219
Merchant discount and other credit card fees 3,055 2,273
Trading account and foreign exchange gain (loss) (704) 860
Gain on sales of bank investment securities 318 --
Other revenues from operations 7,113 5,441
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Total other income 36,251 26,402
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Other expense Salaries and employee benefits 52,128 46,227
Equipment and net occupancy 13,416 12,706
Printing, postage and supplies 3,819 3,595
Deposit insurance 780 4,264
Other costs of operations 26,174 22,702
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Total other expense 96,317 89,494
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Income before income taxes 59,851 46,915
Income taxes 23,698 19,747
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Net income $ 36,153 27,168
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Net income per common share
Primary $5.20 3.85
Fully diluted 4.96 3.68
Cash dividends per common share .70 .60
Average common shares outstanding
Primary 6,778 6,820
Fully diluted 7,295 7,384
-4-
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FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Three months ended March 31
Dollars in thousands 1996 1995
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Cash flows from Net income $ 36,153 27,168
operating activities Adjustments to reconcile net income to net cash
provided by operating activities
Provision for possible credit losses 9,675 8,500
Depreciation and amortization of premises
and equipment 4,938 4,762
Amortization of capitalized mortgage servicing rights 2,507 1,241
Provision for deferred income taxes (4,479) (5,026)
Asset write-downs 250 2,355
Net gain on sales of assets (418) (195)
Net change in accrued interest receivable, payable 1,190 3,303
Net change in other accrued income and expense 18,283 48,052
Net change in loans held for sale (15,359) (40,030)
Net change in trading account assets and liabilities (27,777) (31,286)
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Net cash provided by operating activities 24,963 18,844
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Cash flows from Proceeds from sales of investment securities
investing activities Available for sale 20,531 --
Proceeds from maturities of investment securities
Available for sale 81,547 79,797
Held to maturity 5,069 9,327
Purchases of investment securities
Available for sale (443,763) (202,651)
Held to maturity (7,230) (109,144)
Other (2,776) (2,641)
Net (increase) decrease in interest-bearing
deposits at banks 67,191 (70,301)
Net increase in loans and leases (346,107) (276,645)
Capital expenditures, net (3,744) (2,720)
Acquisitions, net of cash acquired -- (18,691)
Other, net 1,987 (1,619)
----------------------------------------------------------------------------------
Net cash used by investing activities (627,295) (595,288)
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Cash flows from Net increase in deposits 248,515 800,396
financing activities Net increase (decrease) in short-term borrowings 461,090 (154,190)
Payments on long-term borrowings (2,382) (28)
Purchases of treasury stock (28,360) (12,003)
Dividends paid - common (4,446) (3,951)
Dividends paid - preferred (900) (900)
Other, net (9,528) 978
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Net cash provided by financing activities 663,989 630,302
----------------------------------------------------------------------------------
Net increase in cash and cash equivalents $ 61,657 53,858
Cash and cash equivalents at beginning of period 364,119 380,861
Cash and cash equivalents at end of period $ 425,776 434,719
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Supplemental Interest received during the period $ 244,530 203,963
disclosure of cash Interest paid during the period 114,943 79,061
flow information Income taxes paid (received) during the period 3,224 (18,345)
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Supplemental schedule of
noncash investing and Real estate acquired in settlement of loans $ 1,945 1,329
financing activities Conversion of preferred stock to common stock 40,000 --
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-5-
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FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
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Unrealized
investment
gains
Dollars in thousands, Preferred Common Undivided (losses), Treasury
except per share stock stock Surplus profits net stock Total
- -----------------------------------------------------------------------------------------------------------------------------
1995
Balance - January 1, 1995 $ 40,000 40,487 98,014 694,274 (50,555) (101,224) $720,996
Net income -- -- -- 27,168 -- -- 27,168
Preferred stock cash dividends -- -- -- (900) -- -- (900)
Common stock cash dividends -
$.60 per share -- -- -- (3,951) -- -- (3,951)
Exercise of stock options -- -- 334 -- -- 963 1,297
Purchases of treasury stock -- -- -- -- -- (13,159) (13,159)
Unrealized gains on investment
securities available for sale, net -- -- -- -- 19,139 -- 19,139
- -----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 1995 $ 40,000 40,487 98,348 716,591 (31,416) (113,420) $750,590
- -----------------------------------------------------------------------------------------------------------------------------
1996
Balance - January 1, 1996 $ 40,000 40,487 98,657 805,486 (3,155) (135,222) $846,253
Net income -- -- -- 36,153 -- -- 36,153
Preferred stock cash dividends -- -- -- (900) -- -- (900)
Common stock cash dividends -
$.70 per share -- -- -- (4,446) -- -- (4,446)
Exercise of stock options -- -- 663 -- -- 2,068 2,731
Purchases of treasury stock -- -- -- -- -- (28,360) (28,360)
Conversion of preferred stock into
506,930 shares of common stock (40,000) -- (6,534) -- -- 46,534 --
Unrealized losses on investment
securities available for sale, net -- -- -- -- (4,280) -- (4,280)
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Balance - March 31,1996 $ -- 40,487 92,786 836,293 (7,435) (114,980) $847,151
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CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR POSSIBLE CREDIT LOSSES
(unaudited)
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Three months ended March 31
Dollars in thousands 1996 1995
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Beginning balance $262,344 243,332
Provision for possible credit losses 9,675 8,500
Net charge-offs
Charge-offs (8,162) (5,441)
Recoveries 3,058 2,350
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Total net charge-offs (5,104) (3,091)
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Ending balance $266,915 248,741
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-6-
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
The consolidated financial statements of First Empire State Corporation and
subsidiaries ("the Company") were compiled in accordance with the accounting
policies set forth on pages 42 and 43 of the Company's 1995 Annual Report. In
the opinion of management, all adjustments necessary for a fair presentation
have been made and were all of a normal recurring nature.
2. Stock-based compensation
During the first quarter of 1996, Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation", became effective.
SFAS No. 123 establishes a fair value based method of accounting for stock-
based compensation plans and encourages, but does not require, entities to
adopt that method of accounting for all arrangements under which employees
receive shares of stock or other equity instruments of the employer or the
employer incurs liabilities to employees in amounts based on the price of the
stock. However, SFAS No. 123 allows entities to continue to measure
compensation cost for employee stock options or similar equity instruments
using the method prescribed by Accounting Principles Board Opinion ("APBO")
No. 25, "Accounting for Stock Issued to Employees." The Company has elected to
continue measuring compensation cost for employee stock compensation
arrangements in accordance with the provisions of APBO No. 25. Accordingly,
SFAS No. 123 had no impact on the Company's results of operations for the
three months ended March 31, 1996.
-7-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
First Empire State Corporation ("First Empire") earned $36.2 million or $5.20
per common share in the first quarter of 1996, increases of 33% and 35%,
respectively, from the first quarter of 1995 when net income was $27.2 million
or $3.85 per common share. Net income was $36.8 million or $5.29 per common
share in the fourth quarter of 1995. The rate of return on average assets for
First Empire and its consolidated subsidiaries ("the Company") in the first
quarter of 1996 was 1.20%, compared with 1.03% in the year-earlier quarter and
1.23% in 1995's last quarter. The return on average common stockholders'
equity was 17.50% in the initial quarter of 1996, compared with 15.29% and
18.14% in the first and fourth quarters of 1995, respectively.
The Company purchased Statewide Funding Corporation ("Statewide") on
March 6, 1995 and substantially all of the operating assets and liabilities of
Exchange Mortgage Corporation ("Exchange") on October 2, 1995. Statewide and
Exchange were mortgage banking companies that serviced residential mortgage
loans for others of approximately $1.0 billion and $370 million, respectively.
The acquired businesses have been merged into the Company's mortgage banking
subsidiary and the results of their operations are included in the Company's
consolidated results of operations since the respective acquisition dates.
The initial 1995 quarter's results were impacted by one-time items
relating to costs of the March 1995 acquisition of Statewide and the write-off
to expense of First Empire's investment in non-marketable securities of
Nationar, a bank that provided services to financial institutions which was
seized by regulators. The after-tax impact of these items on 1995's first
quarter net income was approximately $2.1 million, or $.31 per common share.
On March 29, 1996, National Indemnity Company, a subsidiary of
Berkshire Hathaway Inc., the holder of all of the outstanding shares of First
Empire's 9% convertible preferred stock, converted such shares into 506,930
shares of First Empire common stock. The 40,000 shares of preferred stock had
been issued on March 15, 1991 for $40 million and were converted into shares
of common stock at a contractual conversion price of $78.90625 per share.
Immediately following the conversion, National Indemnity Company was the
holder of 7.41% of the common shares of First Empire outstanding on March 29,
1996. As of March 31, 1996, common shares outstanding totaled 6,844,923, up
from 6,540,481 and 6,433,166 at March 31 and December 31, 1995, respectively.
Taxable-equivalent Net Interest Income
Taxable-equivalent net interest income rose $10.9 million, or 9%, to $130.5
million in the first quarter of 1996 from $119.7 million in the year-earlier
quarter. Growth in average earning assets, primarily in loans, was the most
significant factor contributing to such rise. Average earning assets increased
$1.4 billion, or 13%, to $11.7 billion in the initial 1996 quarter from $10.3
billion in the first quarter of 1995. Due largely to strong loan demand,
resulting from improved economic conditions in many market areas served by the
Company and expansion of the Company's residential mortgage banking and
indirect automobile lending businesses, average loans and leases grew $1.4
billion, or 16%, to $9.7 billion in the first quarter of 1996 from $8.3
billion in the year-earlier quarter. Average loans and leases were $9.4
billion in 1995's final quarter. The accompanying table summarizes quarterly
changes in the major components of the loan and lease portfolio.
-8-
AVERAGE LOANS AND LEASES
(net of unearned discount)
Dollars in millions
Percent increase from
1st Qtr. 1st Qtr. 4th Qtr.
1996 1995 1995
-------- --------- --------
Commercial, financial, etc. $1,995 19% 5%
Real estate - commercial 3,649 7 2
Real estate - consumer 2,023 23 2
Consumer
Automobile 893 52 7
Home equity 600 1 1
Credit cards 222 49 6
Other 290 11 3
------ --- ---
Total consumer 2,005 26 4
------ --- ---
Total $9,672 16% 3%
====== === ===
The impact of the growth in average earning assets was partially offset
by a reduction in the net interest margin, or taxable-equivalent net interest
income expressed as an annualized percentage of average earning assets, to
4.49% in 1996's initial quarter from 4.70% in the comparable quarter of 1995.
Taxable-equivalent net interest income was $126.0 million in the fourth
quarter of 1995 when average earning assets and net interest margin were $11.5
billion and 4.36%, respectively.
The reduction in the net interest margin in the first quarter of 1996
from the first quarter of 1995 was due to a narrowing of the net interest
spread, or the difference between the yield on earning assets and the rate
paid on interest-bearing liabilities, to 3.85% in the recent quarter from
4.06% in the initial quarter of 1995. The 21 basis point (hundredths of one
percent) narrowing of the net interest spread reflects a 7 basis point decline
in the yield on earning assets to 8.42% in the first quarter of 1996 from
8.49% in the similar quarter in 1995, coupled with a 14 basis point increase
in the cost of interest-bearing liabilities to 4.57% from 4.43%. The net
interest spread was 3.67% in the fourth quarter of 1995 when the yield on
earning assets was 8.41% and the rate paid on interest-bearing liabilities was
4.74%.
The contribution to net interest margin of interest-free funds in the
first quarter of 1996 was .64%, equal to the comparable quarter of 1995, but
down from .69% in 1995's final quarter. The decline from the fourth quarter of
1995 resulted largely from the 17 basis point decrease in the rate paid on
interest-bearing liabilities used to value these funds and a 2% decrease in
average interest-free funds. Average interest-free funds, consisting largely
of non-interest bearing demand deposits and stockholders' equity, totaled $1.6
billion in the first quarter of 1996, up from $1.5 billion a year earlier, but
down slightly from the fourth quarter of 1995.
Management assesses the potential impact of future changes in interest
rates and spreads by projecting net interest income under a number of possible
interest rate scenarios. Management's philosophy toward positioning the
Company for interest rate movements is to attempt to limit the variability of
projected net interest income. As part of the management of interest rate
risk, the Company utilizes interest rate swap agreements to modify the
repricing characteristics of certain portions of the loan and deposit
portfolios. Revenue and expense arising from these agreements are reflected in
either the yields earned on loans or, as appropriate, rates paid on
interest-bearing deposits. The aggregate notional amount of interest rate swap
agreements used as part of the Company's management of interest rate
-9-
risk in effect at March 31, 1996 and 1995 was $2.3 billion and $2.6 billion,
respectively. In general, under the terms of these swaps, the Company receives
payments based on the outstanding notional amount of the swaps at a fixed rate
of interest and makes payments at a variable rate. At March 31, 1996 the
weighted average rates to be received and paid under these interest rate swap
agreements were 6.27% and 5.30%, respectively. As of March 31, 1996, the
Company had also entered into forward-starting swaps with an aggregate
notional amount of $35 million. The effect of interest rate swaps on the
Company's net interest income and margin as well as average notional amounts
are presented in the accompanying table.
INTEREST RATE SWAPS
Dollars in thousands
Three months ended March 31
-------------------------------------------------------
1996 1995
------------------------- --------------------------
Amount Rate(1) Amount Rate(1)
----------- ------- ----------- -------
Increase (decrease) in:
Interest income $ (39) --% $(1,525) (.06)%
Interest expense (3,153) (.13) (1,076) (.05)
------- -------
Net interest
income/margin $ 3,114 .11% $ (449) (.02)%
======= ==== ======= ====
Average notional
amount (2) $2,232,907 $2,536,134
========== ==========
(1) Computed as an annualized percentage of average earning assets or
interest-bearing liabilities.
(2) Excludes forward-starting interest rate swaps.
The Company estimates that as of March 31, 1996 it would have received
approximately $3.9 million if all interest rate swap agreements entered into
for interest rate risk management purposes were terminated. This estimated
fair value of the interest rate swap portfolio results from the effects of
changing interest rates and should be considered in the context of the entire
balance sheet and the Company's overall interest rate risk profile. Changes in
the estimated fair value of interest rate swaps entered into for interest rate
risk management purposes are not reflected in the consolidated financial
statements.
Average holdings of investment securities and money-market assets in
the first quarter of 1996 did not vary significantly from either the first or
fourth quarters of 1995. Average investment securities totaled $1.8 billion in
the recent quarter, down from $1.9 billion in both the first and fourth
quarters of 1995. In general, the average balance of the investment securities
portfolio is influenced by such factors as demand for loans, which generally
yield more than investment securities, ongoing repayments, the level of
deposits, and management of balance sheet size and resulting capital ratios.
Money-market assets averaged $193 million in 1996's initial quarter, compared
with $94 million in the year earlier quarter and $172 million in the final
1995 quarter.
Core deposits represent a significant source of funding to the
Company and include noninterest-bearing demand deposits, interest-bearing
transaction accounts, savings deposits and nonbrokered domestic time deposits
under $100,000. The Company's New York State branch network is the principal
source of core deposits, which generally carry lower interest rates than
wholesale funds of comparable maturities. Core deposits include certificates
of deposit under $100,000 generated on a nationwide basis by M&T Bank,
National Association ("M&T Bank, N.A."), a wholly owned commercial bank
subsidiary of First Empire. Average core deposits increased to $7.7 billion
-10-
in 1996's initial quarter, up from $7.2 billion in the year earlier quarter
and $7.6 billion in the fourth quarter of 1995. Average core deposits of M&T
Bank, N.A. were $87 million in the recently completed quarter. M&T Bank, N.A.
began operations in the fourth quarter of 1995 and, as a result, its average
deposits during that quarter were not significant. The accompanying table
provides an analysis of quarterly changes in the components of average core
deposits.
AVERAGE CORE DEPOSITS
Dollars in millions
Percent increase
(decrease) from
1st Qtr. 1st Qtr. 4th Qtr.
1996 1995 1995
-------- -------- --------
NOW accounts $ 759 3 % (1)%
Savings deposits 2,803 (8) (1)
Time deposits less than $100,000 2,996 24 6
Demand deposits 1,126 8 (2)
------ --- ---
Total $7,684 6 % 1 %
====== === ===
In addition to core deposits, the Company obtains funding through
domestic time deposits of $100,000 or more, offshore deposits originated
through the Company's international office, and brokered certificates of
deposit. Brokered deposits are used to reduce short-term borrowings and
lengthen the average maturity of interest-bearing liabilities. Brokered
deposits averaged $830 million during the recent quarter and totaled $879
million at March 31, 1996, compared with an average balance of $775 million
during the comparable 1995 period and a total balance of $888 million at March
31, 1995. Brokered deposits averaged $913 million in the fourth quarter of
1995. The weighted average remaining term to maturity of brokered deposits at
March 31, 1996 was 1.6 years.
In addition to deposits, the Company uses short-term borrowings from
banks, securities dealers, the Federal Home Loan Bank of New York ("FHLB") and
others as sources of funding. Short-term borrowings averaged $1.5 billion in
the recent quarter, up from $1.1 billion and $1.3 billion in the first and
fourth quarters of 1995, respectively.
Maturities of money-market assets, repayments of loans and investment
securities, and cash generated from operations provide the Company with other
sources of liquidity. Through membership in the FHLB, as well as other
available borrowing facilities, First Empire's banking subsidiaries have
access to funding aggregating several times anticipated needs. First Empire's
ability to pay dividends, repurchase treasury stock and fund operating
expenses is primarily dependent on the receipt of dividend payments from its
banking subsidiaries, which are subject to various regulatory limitations.
First Empire also maintains a line of credit with an unaffiliated commercial
bank. Management does not anticipate engaging in any activity, either
currently or in the long-term, which would cause a significant strain on
liquidity at either First Empire or its subsidiary banks. Furthermore,
management believes that available sources of liquidity are more than adequate
to meet anticipated funding needs.
Provision for Possible Credit Losses
The provision for possible credit losses in the first quarter of 1996 was $9.7
million, up from $8.5 million in the first quarter of 1995, but down
-11-
from $12.0 million in 1995's fourth quarter. Net loan charge-offs in the first
three months of 1996 totaled $5.1 million, up from $3.1 million in 1995's
first quarter, but down from $8.8 million in last year's fourth quarter. Net
charge-offs as an annualized percentage of average loans and leases were .21%
in the first quarter of 1996, compared with .15% in the corresponding 1995
quarter and .37% in the fourth quarter of 1995.
Nonperforming loans were $82.6 million or .83% of total loans and leases
outstanding at March 31, 1996, compared with $79.8 million or .93% at March
31, 1995 and $93.1 million or .97% at December 31, 1995. Nonperforming loans
secured by commercial real estate properties totaled $33.7 million at March
31, 1996, $47.7 million at March 31, 1995 and $42.3 million at December 31,
1995. Included in these totals were loans secured by properties located in the
New York City metropolitan area of $10.4 million at March 31, 1996, $26.3
million at March 31, 1995 and $16.8 million at December 31, 1995.
Nonperforming consumer loans and leases totaled $13.7 million at March 31,
1996, compared with $7.8 million at March 31, 1995 and $13.7 million at
December 31, 1995. The increase in nonperforming consumer loans from March 31,
1995 is generally consistent with current industry trends and also reflects
growth in the Company's consumer loan portfolio. Although the Company's
delinquency rates have historically been below reported industry averages,
management continues to closely monitor repayment performance of consumer
loans. Assets taken in foreclosure of defaulted loans were $7.5 million at
March 31, 1996, $8.8 million at March 31, 1995 and $7.3 million at December
31, 1995.
A comparative summary of nonperforming assets and certain credit quality
ratios is presented in the accompanying table.
NONPERFORMING ASSETS
Dollars in thousands
1996 1995 Quarters
First Quarter Fourth Third Second First
------------- ------- ------ ------ ------
Nonaccrual loans $67,098 75,224 59,720 60,889 64,941
Loans past due
90 days or more 15,513 17,842 16,516 14,530 12,275
Renegotiated loans -- -- -- -- 2,600
------- ------- ------ ------ ------
Total nonperforming loans 82,611 93,066 76,236 75,419 79,816
------- ------- ------ ------ ------
Other real estate owned 7,508 7,295 8,520 8,390 8,824
------- ------- ------ ------ ------
Total nonperforming assets $90,119 100,361 84,756 83,809 88,640
======= ======= ====== ====== ======
Nonperforming loans
to total loans and leases,
net of unearned discount .83% .97% .83% .85% .93%
Nonperforming assets
to total net loans and
other real estate owned .91% 1.05% .92% .94% 1.03%
==== ==== ==== ==== ====
The allowance for possible credit losses at March 31, 1996 was $266.9
million, or 2.69% of total loans and leases, compared with $248.7 million or
2.91% a year earlier and $262.3 million or 2.75% at December 31, 1995. The
ratio of the allowance for possible credit losses to nonperforming loans was
323% at the most recent quarter-end, compared with 312% at March 31, 1995, and
282% at December 31, 1995.
In assessing the adequacy of the allowance for possible credit
losses, management performs an ongoing evaluation of the loan portfolio and
other credit commitments, including such factors as the differing economic
risks
-12-
associated with each loan category, the current financial condition of
specific borrowers, the economic environment in which borrowers operate, the
level of delinquent loans and the value of any collateral. Based upon the
results of such review, management believes that the allowance for possible
credit losses at March 31, 1996 was adequate to absorb credit losses from
existing loans, leases and credit commitments.
Other Income
Other income totaled $36.3 million in the first quarter of 1996, compared with
$26.4 million in the year-earlier quarter and $44.9 million in the fourth
quarter of 1995.
Reflecting higher loan origination volume, improved pricing margins,
and the results of the 1995 acquisitions of Statewide and Exchange, mortgage
banking revenues totaled $10.4 million in the recently completed quarter,
compared with $2.9 million in the year-earlier quarter and $15.1 million in
the final quarter of 1995. Residential mortgage loan servicing fees totaled
$5.2 million in the initial quarter of 1996 and the fourth quarter of 1995, up
from $4.1 million in the first quarter of 1995. Gains from sales of
residential mortgage loans and loan servicing rights were $4.7 million in the
recently completed quarter, compared with a loss of $1.5 million in the year
earlier quarter and a gain of $9.4 million in 1995's final quarter. During the
fourth quarter of 1995, the Company completed a bulk sale of servicing rights
related to $330 million of loans originated and sold in prior quarters
resulting in a gain of $3.4 million. Residential mortgage loans serviced for
others totaled $5.5 billion and $5.1 billion at March 31, 1996 and 1995,
respectively. Capitalized mortgage servicing rights and excess servicing
receivables were $35.0 million and $7.0 million, respectively, at March 31,
1996, compared with $23.7 million and $7.1 million, respectively, at March 31,
1995.
Service charges on deposit accounts totaled $9.9 million in the
first quarter of 1996, an increase of 7% from $9.2 million in the
corresponding quarter of the previous year and slightly higher than the $9.8
million in the fourth quarter of 1995. Trust income of $6.2 million in the
first quarter of 1996 increased 8% from $5.7 million in last year's first
quarter, but decreased from $7.4 million in the fourth quarter of 1995 due, in
part, to lower revenues from personal and estate trust business. Merchant
discount and credit card fees were $3.1 million in the recent quarter,
compared with $2.3 million and $3.2 million in the first and fourth quarters
of 1995, respectively. Trading account and foreign exchange losses totaled
$704 thousand in the first quarter of 1996, compared with gains of $860
thousand in the corresponding 1995 quarter and $1.5 million in the fourth
quarter of 1995. Other revenue from operations totaled $7.1 million in 1996's
initial quarter, up $1.7 million from the comparable quarter of 1995, due
largely to increased fees earned from the sales of mutual funds and annuities.
Other revenue from operations was $8.3 million in the fourth quarter of 1995
when a $1.2 million gain was realized from sales of investments by the
Company's small business investment subsidiary.
Other Expense
Other expense totaled $96.3 million in the first quarter of 1996, compared
with $89.5 million in the first quarter of 1995 and $97.0 million in the
fourth quarter of 1995.
Salaries and employee benefits expense was $52.1 million in the recent
quarter, an increase of 13% from $46.2 million in the corresponding 1995
quarter and 8% from $48.2 million in the fourth quarter of 1995. Factors
-13-
contributing to the higher expenses were the expansion of subsidiaries
providing residential mortgage banking services, indirect automobile lending
and sales of mutual funds and annuities, along with merit salary increases and
higher costs associated with certain incentive-based compensation arrangements
and employee benefits.
Nonpersonnel expense totaled $44.2 million in the first quarter of
1996, compared with $43.3 million in the year-earlier quarter. Higher expenses
since the first quarter of 1995 associated with expansion of the Company's
mortgage banking and credit card businesses, as well as general expense
increases, were largely offset by lower deposit insurance expense and $3.6
million of non-recurring expenses incurred in the first quarter of last year.
Such non-recurring expenses included $1.3 million of costs associated with the
acquisition of Statewide and the write-off of $2.3 million of non- marketable
securities of Nationar. The decline in deposit insurance expense reflects the
substantial elimination by the Federal Deposit Insurance Corporation ("FDIC")
as of January 1, 1996 of deposit insurance premiums payable to the Bank
Insurance Fund ("BIF"). Although First Empire's banking subsidiaries are
BIF-insured institutions, the Company has approximately $1.4 billion of
deposits obtained in so-called "Oakar" acquisitions for which deposit
insurance premiums are paid to the Savings Association Insurance Fund ("SAIF")
of the FDIC. The FDIC has not reduced the assessment rate for SAIF- insured
deposits. Furthermore, congressional committees continue to consider proposals
that would require a one-time special assessment related to deposits insured
by the SAIF. Although final legislation has yet to be enacted, management
believes that it is likely that a special assessment will ultimately be levied
against the Company on its SAIF-insured Oakar deposits. The amount of any such
special assessment cannot be precisely predicted at this time. Nonpersonnel
expense in the recent quarter declined $4.6 million from $48.8 million in the
fourth quarter of 1995. The decline was due, in part, to a reduction in
expenses for professional services and advertising, as well as the recording
of a $1.1 million provision in the fourth quarter of 1995 to establish a
valuation allowance for capitalized mortgage servicing rights. There was no
similar provision in the first quarter of 1996.
Capital
Total stockholders' equity at March 31, 1996 of $847.2 million was equal to
6.69% of total assets, compared with $750.6 million or 6.66% of total assets a
year earlier and $846.3 million or 7.08% of total assets at December 31, 1995.
Common stockholders' equity also totaled $847.2 million at March 31, 1996, up
from $710.6 million a year earlier and $806.3 million at December 31, 1995. As
previously noted, on March 29, 1996, the Company's preferred stockholder
converted the 9% convertible preferred stock into 506,930 shares of First
Empire's common stock at a conversion price of $78.90625 per share. On a per
share basis, common stockholders' equity was $123.76 at March 31, 1996,
compared with $108.64 at March 31, 1995 and $125.33 at December 31, 1995.
Stockholders' equity at March 31, 1996 was reduced by $7.4 million,
or $1.09 per common share, for the net after-tax impact of unrealized losses
on investment securities classified as available for sale, compared with $31.4
million or $4.80 per common share at March 31, 1995 and $3.2 million or $.49
per common share at December 31, 1995. Such unrealized losses represent the
amount by which amortized cost exceeded the fair value of investment
securities classified as available for sale, net of applicable income taxes.
The market valuation of investment securities should be considered in the
context of the entire balance sheet of the Company. With the exception of
investment securities classified as available for sale, trading account assets
and liabilities, and residential mortgage loans held for sale by the Company's
mortgage banking subsidiary, the carrying values of financial instruments in
the balance sheet are generally not adjusted for appreciation
-14-
or depreciation in market value resulting from changes in interest rates.
Federal regulators generally require banking institutions to
maintain "core capital" and "total capital" ratios of at least 4% and 8%,
respectively, of risk-adjusted total assets. In addition to the risk-based
measures, Federal bank regulators have also implemented a minimum "leverage"
ratio guideline of 3% of the quarterly average of total assets. Under
regulatory guidelines, unrealized gains or losses on investment securities
classified as available for sale are not recognized in determining regulatory
capital. The capital ratios of the Company and its banking subsidiaries,
Manufacturers and Traders Trust Company ("M&T Bank"), The East New York
Savings Bank ("East New York") and M&T Bank, N.A., as of March 31, 1996 are
presented in the accompanying table.
REGULATORY CAPITAL RATIOS
March 31, 1996
First Empire M&T East M&T
(Consolidated) Bank New York Bank, N.A.
------------ ------ -------- ----------
Core capital 8.36% 7.62% 11.69% 13.32%
Total capital 11.39% 10.94% 12.95% 14.61%
Leverage 6.83% 6.36% 7.48% 13.02%
The Company has historically maintained capital ratios well in excess
of minimum regulatory guidelines largely through a high rate of internal
capital generation. The rate of internal capital generation, or net income
less dividends paid expressed as an annualized percentage of average total
stockholders' equity, was 14.60% during the first quarter of 1996, compared
with 12.29% and 15.09% in the first and fourth quarters of 1995, respectively.
In November 1995, First Empire announced a plan to repurchase and
hold as treasury stock up to 380,582 shares of common stock for reissuance
upon the possible future exercise of outstanding stock options. As of March
31, 1996, First Empire had repurchased 139,583 common shares pursuant to such
plan at an average cost of $226.34 per share.
-15-
- -----------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Three months ended March 31
Amounts in thousands, except per share 1996 1995 Change
- -----------------------------------------------------------------------------------------
For the period
- -----------------------------------------------------------------------------------------
Net income $36,153 27,168 +33%
Per common share
Net income
Primary $5.20 3.85 +35
Fully diluted 4.96 3.68 +35
Cash dividends .70 .60 +17
Average common shares outstanding
Primary 6,778 6,820 - 1
Fully diluted 7,295 7,384 - 1
Annualized return on
Average total assets 1.20% 1.03%
Average common stockholders' equity 17.50% 15.29%
Market price per common share
Closing $246.00 171.00 +44
High 247.75 171.00
Low 209.00 136.50
- -----------------------------------------------------------------------------------------
At March 31
- -----------------------------------------------------------------------------------------
Loans and leases,
net of unearned discount $ 9,912,283 8,559,185 +16%
Total assets 12,670,983 11,276,959 +12
Total deposits 9,718,684 9,044,098 + 7
Total stockholders' equity 847,151 750,590 +13
Stockholders' equity per common share $123.76 108.64 +14
- -----------------------------------------------------------------------------------------
-16-
- ---------------------------------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES
1996 First quarter 1995 Fourth quarter 1995 Third quarter
Average balance in millions; Average Average Average Average Average Average
interest in thousands balance Interest rate balance Interest rate balance Interest rate
- ---------------------------------------------------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of
unearned discount*
Commercial, financial, etc $ 1,995 $ 40,538 8.17% 1,900 40,747 8.51% 1,838 39,821 8.59%
Real estate 5,672 124,924 8.81 5,562 123,158 8.86 5,401 120,430 8.92
Consumer 2,005 48,285 9.68 1,922 46,222 9.54 1,799 44,029 9.71
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans and leases, net 9,672 213,747 8.89 9,384 210,127 8.88 9,038 204,280 8.97
- ---------------------------------------------------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 62 1,031 6.68 126 2,331 7.37 126 2,331 7.37
Federal funds sold and agreements
to resell securities 102 1,403 5.53 26 391 5.93 12 189 6.05
Trading account 29 306 4.34 20 175 3.43 49 600 4.90
- ---------------------------------------------------------------------------------------------------------------------------------
Total money-market assets 193 2,740 5.73 172 2,897 6.68 187 3,120 6.64
- ---------------------------------------------------------------------------------------------------------------------------------
Investment securities**
U.S. Treasury and federal agencies 1,173 17,987 6.17 1,192 18,387 6.12 1,336 20,532 6.10
Obligations of states and political
subdivisions 36 617 6.85 40 698 7.00 46 809 6.96
Other 621 9,623 6.23 666 10,595 6.31 797 12,633 6.29
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment securities 1,830 28,227 6.20 1,898 29,680 6.20 2,179 33,974 6.18
- ---------------------------------------------------------------------------------------------------------------------------------
Total earning assets 11,695 244,714 8.42 11,454 242,704 8.41 11,404 241,374 8.40
- ---------------------------------------------------------------------------------------------------------------------------------
Allowance for possible credit losses (266) (263) (256)
Cash and due from banks 335 339 336
Other assets 377 368 364
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $12,141 11,898 11,848
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $ 759 2,773 1.47 767 3,060 1.58 784 3,129 1.58
Savings deposits 2,803 20,521 2.94 2,831 21,610 3.03 2,869 21,770 3.01
Time deposits 4,642 65,456 5.67 4,541 67,358 5.88 4,119 60,943 5.87
Deposits at foreign office 166 2,129 5.16 136 1,815 5.31 96 1,297 5.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 8,370 90,879 4.37 8,275 93,843 4.50 7,868 87,139 4.39
- ---------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,484 19,689 5.34 1,305 19,216 5.84 1,719 25,559 5.90
Long-term borrowings 192 3,617 7.57 196 3,667 7.43 194 3,631 7.42
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 10,046 114,185 4.57 9,776 116,726 4.74 9,781 116,329 4.72
- ---------------------------------------------------------------------------------------------------------------------------------
Demand deposits 1,126 1,148 1,143
Other liabilities 120 149 123
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 11,292 11,073 11,047
- ---------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 849 825 801
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $12,141 11,898 11,848
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest spread 3.85 3.67 3.68
Contribution of interest-free funds .64 .69 .67
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin on
earning assets $130,529 4.49% 125,978 4.36% 125,045 4.35%
- ---------------------------------------------------------------------------------------------------------------------------------
*Includes nonaccrual loans.
**Includes available for sale securities at amortized cost.
-17-
- -------------------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES (continued)
1995 Second quarter 1995 First quarter
Average Average Average Average
Average balance in millions; interest in thousands balance Interest rate balance Interest rate
- -------------------------------------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc $ 1,805 $ 39,410 8.76% 1,671 35,772 8.68%
Real estate 5,187 116,067 8.95 5,048 112,059 8.88
Consumer 1,690 41,110 9.75 1,592 37,788 9.62
- -------------------------------------------------------------------------------------------------------------------
Total loans and leases, net 8,682 196,587 9.08 8,311 185,619 9.06
- -------------------------------------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 121 2,225 7.39 67 1,294 7.82
Federal funds sold and agreements
to resell securities 139 2,227 6.44 14 200 5.75
Trading account 29 371 5.02 13 193 5.94
- -------------------------------------------------------------------------------------------------------------------
Total money-market assets 289 4,823 6.69 94 1,687 7.25
- -------------------------------------------------------------------------------------------------------------------
Investment securities**
U.S. Treasury and federal agencies 1,340 19,658 5.88 1,100 15,671 5.78
Obligations of states and political subdivisions 57 965 6.84 56 948 6.86
Other 740 10,435 5.65 769 12,325 6.50
- -------------------------------------------------------------------------------------------------------------------
Total investment securities 2,137 31,058 5.83 1,925 28,944 6.10
- -------------------------------------------------------------------------------------------------------------------
Total earning assets 11,108 232,468 8.39 10,330 216,250 8.49
- -------------------------------------------------------------------------------------------------------------------
Allowance for possible credit losses (251) (247)
Cash and due from banks 317 313
Other assets 332 285
- -------------------------------------------------------------------------------------------------------------------
Total assets $11,506 10,681
- -------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $ 760 2,948 1.55 734 2,765 1.53
Savings deposits 2,950 21,920 2.98 3,040 22,312 2.98
Time deposits 4,075 60,008 5.91 3,702 51,573 5.65
Deposits at foreign office 117 1,504 5.16 184 2,336 5.14
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 7,902 86,380 4.38 7,660 78,986 4.18
- -------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,588 23,787 6.01 1,076 15,663 5.90
Long-term borrowings 96 1,929 8.04 96 1,930 8.13
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 9,586 112,096 4.69 8,832 96,579 4.43
- -------------------------------------------------------------------------------------------------------------------
Demand deposits 1,043 1,038
Other liabilities 111 74
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 10,740 9,944
- -------------------------------------------------------------------------------------------------------------------
Stockholders' equity 766 737
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $11,506 10,681
- -------------------------------------------------------------------------------------------------------------------
Net interest spread 3.70 4.06
Contribution of interest-free funds .65 .64
- -------------------------------------------------------------------------------------------------------------------
Net interest income/margin on earning assets $120,372 4.35% 119,671 4.70%
- -------------------------------------------------------------------------------------------------------------------
*Includes nonaccrual loans.
**Includes available for sale securities at amortized cost.
-18-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
A number of lawsuits were pending against First Empire and its
subsidiaries at March 31, 1996. In the opinion of management, the potential
liabilities, if any, arising from such litigation will not have a materially
adverse impact on the Company's consolidated financial condition. Moreover,
management believes that First Empire and its subsidiaries have substantial
defenses in such litigation, but that there can be no assurance that the
potential liabilities, if any, arising from such litigation will not have a
materially adverse impact on the Company's consolidated results of operations
in the future.
Item 2. Changes in Securities.
(Not applicable.)
Item 3. Defaults Upon Senior Securities.
(Not applicable.)
Item 4. Submission of Matters to a Vote of Security Holders.
The 1996 Annual Meeting of Stockholders of First Empire was held on
April 16, 1996. At the 1996 Annual Meeting, stockholders elected nineteen (19)
directors, all of whom were then serving as directors of First Empire, for
terms of one (1) year and until their successors are elected and qualified.
The following table reflects the tabulation of the votes with respect to each
director who was elected at the 1996 Annual Meeting.
Number of Votes
---------------------------------
Nominee For Withheld
- -------------- --------- --------
Brent D. Baird 5,791,057 10,392
John H. Benisch 5,796,056 5,393
C. Angela Bontempo 5,784,166 17,283
Robert T. Brady 5,785,952 15,497
Patrick J. Callan 5,796,057 5,392
James A. Carrigg 5,792,057 9,392
Barber B. Conable, Jr. 5,782,407 19,041
Richard E. Garman 5,796,057 5,392
James V. Glynn 5,792,056 9,393
Roy M. Goodman 5,602,158 199,290
Patrick W.E. Hodgson 5,796,057 5,392
Samuel T. Hubbard, Jr. 5,786,153 15,296
Lambros J. Lambros 5,796,082 5,367
Wilfred J. Larson 5,793,417 8,032
Jorge G. Pereira 5,796,083 5,366
Raymond D. Stevens, Jr. 5,791,591 9,858
Herbert L. Washington 5,789,439 12,010
John L. Wehle, Jr. 5,786,153 15,296
Robert G. Wilmers 5,795,825 5,624
Item 5. Other Information.
On April 3, 1996, First Empire filed a Current Report on Form 8-K
dated March 29, 1996, in order to report that the National Indemnity Company,
a subsidiary of Berkshire Hathaway Inc., the former holder of all of the
outstanding shares of First Empire's 9% convertible preferred stock, had
converted those shares into 506,930 shares of First Empire common stock, par
value $5.00 per share, as of the close of business on March 29, 1996.
-19-
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of this report:
Exhibit
No.
-------
11 Statement re: Computation of Earnings Per
Common Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K. (None.)
-20-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST EMPIRE STATE CORPORATION
Date: May 13, 1996 By: /s/ James L. Vardon
----------------------------------
James L. Vardon
Executive Vice President
and Chief Financial Officer
-21-
EXHIBIT INDEX
Exhibit
No.
- -------
11 Statement re: Computation of Earnings Per Common Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
-22-
- --------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------
COMPUTATION OF EARNINGS PER COMMON SHARE
Amounts in thousands, except per share Three months ended
March 31
1996 1995
- --------------------------------------------------------------------------------------------
Primary Average common shares outstanding 6,399 6,589
Common stock equivalents* 379 231
- --------------------------------------------------------------------------------------------
Primary common shares outstanding 6,778 6,820
- --------------------------------------------------------------------------------------------
Net income $36,153 27,168
Less: Cash dividends on preferred stock 900 900
- --------------------------------------------------------------------------------------------
Net income available to common shareholders $35,253 26,268
- --------------------------------------------------------------------------------------------
Earnings per common share - primary $5.20 3.85
- --------------------------------------------------------------------------------------------
Fully diluted Average common shares outstanding 6,399 6,589
Common stock equivalents* 406 288
Assumed conversion of 9% convertible
preferred stock 490 507
- --------------------------------------------------------------------------------------------
Fully diluted average common shares outstanding 7,295 7,384
- --------------------------------------------------------------------------------------------
Net income $36,153 27,168
- --------------------------------------------------------------------------------------------
Earnings per common share - fully diluted $4.96 3.68
- --------------------------------------------------------------------------------------------
* Represents shares of First Empire's common stock issuable upon the
assumed exercise of outstanding stock options granted pursuant to the
First Empire State Corporation 1983 Stock Option Plan under the
"treasury stock" method of accounting.
-23-
9
1000
3-MOS
DEC-31-1996
MAR-31-1996
415,689
58,309
10,087
40,550
1,865,181
242,337
243,381
10,245,064
266,915
12,670,983
9,718,684
1,740,520
174,184
190,444
0
0
40,487
806,664
12,670,983
213,206
27,864
2,434
243,777
90,879
114,185
129,592
9,675
318
96,317
59,851
36,153
0
0
36,153
5.20
4.96
4.49
67,098
15,513
0
0
262,344
8,162
3,058
266,915
137,828
0
129,087
