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, 2006

or

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

Commission File Number 1-9861

M&T BANK CORPORATION

(Exact name of registrant as specified in its charter)

New York (State or other jurisdiction of incorporation or organization)		16-0968385 (I.R.S. Employer Identification No.)
One M & T Plaza
Buffalo, New York		14203
(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 [  ]

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 [x] Accelerated filer [  ] Non-accelerated filer [  ]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [  ] No [x]

Number of shares of the registrant’s Common Stock, $0.50 par value, outstanding as of the close of business on April 28, 2006: 111,162,691 shares.

M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended March 31, 2006

Table of Contents of Information Required in Report		Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED BALANCE SHEET - March 31, 2006 and December 31, 2005			3
CONSOLIDATED STATEMENT OF INCOME - Three months ended March 31, 2006 and 2005			4
CONSOLIDATED STATEMENT OF CASH FLOWS - Three months ended March 31, 2006 and 2005			5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - Three months ended March 31, 2006 and 2005			6
CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR CREDIT LOSSES - Three months ended March 31, 2006 and 2005			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.			42
Item 4. Controls and Procedures.			42
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.			42
Item 1A. Risk Factors.			42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			43
Item 3. Defaults Upon Senior Securities.			43
Item 4. Submission of Matters to a Vote of Security Holders.			43
Item 5. Other Information.			44
Item 6. Exhibits.			44
SIGNATURES			45
EXHIBIT INDEX			45
EX-31.1 Certification
EX-31.2 Certification
EX-32.1 Certification
EX-32.2 Certification

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

		March 31,				December 31,
Dollars in thousands, except per share		2006				2005
Assets
Cash and due from banks		$	1,277,809				1,479,239
Money-market assets
Interest-bearing deposits at banks			14,271				8,408
Federal funds sold and agreements to resell securities			8,670				11,220
Trading account			201,268				191,617
Total money-market assets			224,209				211,245
Investment securities
Available for sale (cost: $7,941,851 at March 31, 2006; $8,011,560 at December 31, 2005)			7,816,428				7,931,703
Held to maturity (market value: $104,090 at March 31, 2006; $102,880 at December 31, 2005)			102,395				101,059
Other (market value: $375,244 at March 31, 2006; $367,402 at December 31, 2005)			375,244				367,402
Total investment securities			8,294,067				8,400,164
Loans and leases			41,071,732				40,553,691
Unearned discount			(213,134	)			(223,046	)
Allowance for credit losses			(638,831	)			(637,663	)
Loans and leases, net			40,219,767				39,692,982
Premises and equipment			329,212				337,115
Goodwill			2,908,849				2,904,081
Core deposit and other intangible assets			110,614				108,260
Accrued interest and other assets			2,055,335				2,013,320
Total assets		$	55,419,862				55,146,406
Liabilities
Noninterest-bearing deposits		$	7,697,855				8,141,928
NOW accounts			927,862				901,938
Savings deposits			14,046,604				13,839,150
Time deposits			12,331,549				11,407,626
Deposits at foreign office			3,167,515				2,809,532
Total deposits			38,171,385				37,100,174
Federal funds purchased and agreements to repurchase securities			3,822,695				4,211,978
Other short-term borrowings			528,652				940,894
Accrued interest and other liabilities			885,091				819,980
Long-term borrowings			6,092,570				6,196,994
Total liabilities			49,500,393				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 at March 31, 2006 and at December 31, 2005			60,198				60,198
Common stock issuable, 93,464 shares at March 31, 2006; 100,298 shares at December 31, 2005			5,096				5,363
Additional paid-in capital			2,883,068				2,886,153
Retained earnings			4,007,075				3,854,275
Accumulated other comprehensive income (loss), net			(122,887	)			(97,930	)
Treasury stock - common, at cost - 9,043,345 shares at March 31, 2006; 8,336,907 shares at December 31, 2005			(913,081	)			(831,673	)
Total stockholders’ equity			5,919,469				5,876,386
Total liabilities and stockholders’ equity		$	55,419,862				55,146,406

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

		Three months ended March 31
In thousands, except per share		2006				2005
Interest income
Loans and leases, including fees		$	680,717				548,689
Money-market assets
Deposits at banks			72				28
Federal funds sold and agreements to resell securities			378				169
Trading account			671				99
Investment securities
Fully taxable			91,688				85,987
Exempt from federal taxes			3,746				3,349
Total interest income			777,272				638,321
Interest expense
NOW accounts			659				318
Savings deposits			43,557				27,889
Time deposits			118,058				48,754
Deposits at foreign office			36,803				25,380
Short-term borrowings			50,567				31,991
Long-term borrowings			80,602				61,934
Total interest expense			330,246				196,266
Net interest income			447,026				442,055
Provision for credit losses			18,000				24,000
Net interest income after provision for credit losses			429,026				418,055
Other income
Mortgage banking revenues			34,511				33,426
Service charges on deposit accounts			88,876				88,353
Trust income			33,796				33,523
Brokerage services income			14,724				14,181
Trading account and foreign exchange gains			6,506				4,869
Gain on bank investment securities			58				216
Other revenues from operations			74,460				59,690
Total other income			252,931				234,258
Other expense
Salaries and employee benefits			224,082				206,610
Equipment and net occupancy			43,402				44,006
Printing, postage and supplies			8,567				8,831
Amortization of core deposit and other intangible assets			13,028				16,121
Other costs of operations			92,924				91,769
Total other expense			382,003				367,337
Income before taxes			299,954				284,976
Income taxes			97,037				95,686
Net income		$	202,917				189,290
Net income per common share
Basic		$	1.82				1.65
Diluted			1.77				1.62
Cash dividends per common share		$	.45				.40
Average common shares outstanding
Basic			111,693				114,773
Diluted			114,347				117,184

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

		Three months ended March 31
In thousands		2006				2005
Cash flows from operating activities
Net income		$	202,917				189,290
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses			18,000				24,000
Depreciation and amortization of premises and equipment			14,089				15,257
Amortization of capitalized servicing rights			15,137				14,577
Amortization of core deposit and other intangible assets			13,028				16,121
Provision for deferred income taxes			(34,973	)			(32,478	)
Asset write-downs			47				131
Net gain on sales of assets			(6,720	)			(1,231	)
Net change in accrued interest receivable, payable			28,957				(4,913	)
Net change in other accrued income and expense			64,711				69,479
Net change in loans held for sale			(202,464	)			37,191
Net change in trading account assets and liabilities			(4,764	)			(13,113	)
Net cash provided by operating activities			107,965				314,311
Cash flows from investing activities
Proceeds from sales of investment securities
Available for sale			1,392				10,022
Other			15,800				12,503
Proceeds from maturities of investment securities
Available for sale			400,731				501,463
Held to maturity			12,743				34,582
Purchases of investment securities
Available for sale			(332,345	)			(780,440	)
Held to maturity			(14,082	)			(33,493	)
Other			(23,642	)			(20,361	)
Additions to capitalized servicing rights			(17,358	)			(9,566	)
Net increase in loans and leases			(345,528	)			(735,672	)
Capital expenditures, net			(5,865	)			(3,349	)
Acquisitions, net of cash acquired			(12,172	)			—
Other, net			(11,104	)			(63,804	)
Net cash used by investing activities			(331,430	)			(1,088,115	)
Cash flows from financing activities
Net increase in deposits			1,074,770				867,720
Net increase (decrease) in short-term borrowings			(801,525	)			178,955
Proceeds from long-term borrowings			500,000				400,000
Payments on long-term borrowings			(600,896	)			(450,813	)
Purchases of treasury stock			(137,701	)			(188,772	)
Dividends paid – common			(50,075	)			(45,743	)
Other, net			34,912				19,763
Net cash provided by financing activities			19,485				781,110
Net increase (decrease) in cash and cash equivalents		$	(203,980	)			7,306
Cash and cash equivalents at beginning of period			1,490,459				1,363,804
Cash and cash equivalents at end of period		$	1,286,479				1,371,110
Supplemental disclosure of cash flow information
Interest received during the period		$	781,058				623,405
Interest paid during the period			300,557				194,860
Income taxes paid during the period			12,123				25,162
Supplemental schedule of noncash investing and financing activities
Real estate acquired in settlement of loans		$	3,121				3,026
Acquisitions:
Fair value of:
Assets acquired (noncash)			26,052				—
Liabilities assumed			16,029				—

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

																						Accumulated
										Common				Additional								other
		Preferred				Common				stock				paid-in				Retained				comprehensive				Treasury
In thousands, except per share		stock				stock				issuable				capital				earnings				income (loss), net				stock				Total
2005
Balance – January 1, 2005		$	—				60,198				5,779				2,897,912				3,270,887				(17,209	)			(487,953	)			5,729,614
Comprehensive income:
Net income			—				—				—				—				189,290				—				—				189,290
Other comprehensive income, net of tax and reclassification adjustments:
Unrealized losses on investment securities			—				—				—				—				—				(44,281	)			—				(44,281	)
																															145,009
Purchases of treasury stock			—				—				—				—				—				—				(188,772	)			(188,772	)
Repayment of management stock ownership program receivable			—				—				—				94				—				—				—				94
Stock-based compensation plans:
Stock option and purchase plans:
Compensation expense			—				—				—				11,596				—				—				—				11,596
Exercises			—				—				—				(25,873	)			—				—				47,126				21,253
Directors’ stock plan			—				—				—				32				—				—				224				256
Deferred compensation plans, net, including dividend equivalents			—				—				(283	)			(168	)			(39	)			—				788				298
Common stock cash dividends - $0.40 per share			—				—				—				—				(45,743	)			—				—				(45,743	)
Balance - March 31, 2005		$	—				60,198				5,496				2,883,593				3,414,395				(61,490	)			(628,587	)			5,673,605
2006
Balance - January 1, 2006		$	—				60,198				5,363				2,886,153				3,854,275				(97,930	)			(831,673	)			5,876,386
Comprehensive income:
Net income			—				—				—				—				202,917				—				—				202,917
Other comprehensive income, net of tax and reclassification adjustments:
Unrealized losses on investment securities			—				—				—				—				—				(24,957	)			—				(24,957	)
																															177,960
Purchases of treasury stock			—				—				—				—				—				—				(137,701	)			(137,701	)
Repayment of management stock ownership program receivable			—				—				—				225				—				—				—				225
Stock-based compensation plans:
Stock option and purchase plans:
Compensation expense			—				—				—				17,682				—				—				—				17,682
Exercises			—				—				—				(20,649	)			—				—				55,385				34,736
Directors’ stock plan			—				—				—				22				—				—				231				253
Deferred compensation plans, net, including dividend equivalents			—				—				(267	)			(365	)			(42	)			—				677				3
Common stock cash dividends - $0.45 per share			—				—				—				—				(50,075	)			—				—				(50,075	)
Balance - March 31, 2006		$	—				60,198				5,096				2,883,068				4,007,075				(122,887	)			(913,081	)			5,919,469

NOTES TO FINANCIAL STATEMENTS

1. Significant accounting policies

The consolidated financial statements of M&T Bank Corporation (“M&T”) and subsidiaries (“the Company”) were compiled in accordance with the accounting policies set forth in note 1 of Notes to Financial Statements included in the Company’s 2005 Annual Report, except as described below. In the opinion of management, all adjustments necessary for a fair presentation have been made and were all of a normal recurring nature.

2. Earnings per share

The computations of basic earnings per share follow:

		Three months ended
		March 31
		2006				2005
		(in thousands, except per share)
Income available to common stockholders
Net income		$	202,917				189,290
Weighted-average shares outstanding (including common stock issuable)			111,693				114,773
Basic earnings per share		$	1.82				1.65

The computations of diluted earnings per share follow:

		Three months ended
		March 31
		2006				2005
		(in thousands, except per share)
Income available to common stockholders		$	202,917				189,290
Weighted-average shares outstanding			111,693				114,773
Plus: incremental shares from assumed conversion of stock options			2,654				2,411
Adjusted weighted-average shares outstanding			114,347				117,184
Diluted earnings per share		$	1.77				1.62

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Comprehensive income

The following table displays the components of other comprehensive income:

		Three months ended March 31, 2006
		Before-tax				Income
		amount				taxes				Net
		(in thousands)
Unrealized losses on investment securities:
Unrealized holding losses during period		$	(45,508	)			20,586				(24,922	)
Less: reclassification adjustment for gains realized in net income			58				(23	)			35
Net unrealized losses		$	(45,566	)			20,609				(24,957	)

		Three months ended March 31, 2005
		Before-tax				Income
		amount				taxes				Net
		(in thousands)
Unrealized losses on investment securities:
Unrealized holding losses during period		$	(71,195	)			27,046				(44,149	)
Less: reclassification adjustment for gains realized in net income			216				(84	)			132
Net unrealized losses		$	(71,411	)			27,130				(44,281	)

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

						Minimum
						pension
		Investment				liability
		securities				adjustment				Total
		(in thousands)
Balance - January 1, 2006		$	(48,576	)			(49,354	)			(97,930	)
Net loss during period			(24,957	)			—				(24,957	)
Balance - March 31, 2006		$	(73,533	)			(49,354	)			(122,887	)
Balance - January 1, 2005		$	(4,712	)			(12,497	)			(17,209	)
Net loss during period			(44,281	)			—				(44,281	)
Balance - March 31, 2005		$	(48,993	)			(12,497	)			(61,490	)

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings

In 1997, M&T Capital Trust I (“Trust I”), M&T Capital Trust II (“Trust II”), and M&T Capital Trust III (“Trust III”) issued $310 million of fixed rate preferred capital securities. In 1996, $150 million of floating rate preferred capital securities were issued by First Maryland Capital I (“Trust IV”) and in 1997, $150 million of floating rate preferred capital securities were issued by First Maryland Capital II (“Trust V”). The distribution rates on the preferred capital securities of Trust IV and Trust V adjust quarterly based on changes in the three-month London Interbank Offered Rate (“LIBOR”) and were 5.60% and 5.53%, respectively, at March 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:

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

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

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

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

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings, continued

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

The Junior Subordinated Debentures represent the sole assets of each Trust and payments under the Junior Subordinated Debentures are the sole source of cash flow for each Trust. The financial statement carrying values of junior subordinated debentures associated with preferred capital securities of Trust III, Trust IV and Trust V at March 31, 2006 and December 31, 2005 include the unamortized portions of purchase accounting adjustments to reflect estimated fair value as of the date of M&T’s acquisition of the common securities of each respective trust. The interest rates payable on the Junior Subordinated Debentures of Trust IV and Trust V were 5.60% and 5.53%, respectively, at March 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 Debentures are redeemable prior to their stated maturity dates at M&T’s option (i) on or after the stated optional redemption dates, in whole at any time or in part from time to time, or (ii) in whole, but not in part, at any time within 90 days following the occurrence and during the continuation of one or more of the Events, in each case subject to possible regulatory approval. The redemption price of the Capital Securities and the

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings, continued

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

In 1999, Allfirst Preferred Capital Trust (“Allfirst Capital Trust”) issued $100 million of Floating Rate Non-Cumulative Subordinated Trust Enhanced Securities (“SKATES”). Allfirst Capital Trust is a Delaware business trust that was formed in June 1999 for the exclusive purposes of (i) issuing the SKATES and common securities, (ii) purchasing Asset Preferred Securities issued by Allfirst Preferred Asset Trust (“Allfirst Asset Trust”) and (iii) engaging in only those other activities necessary or incidental thereto. M&T holds 100% of the common securities of Allfirst Capital Trust. Allfirst Asset Trust is a Delaware business trust that was formed in June 1999 for the exclusive purposes of (i) issuing Asset Preferred Securities and common securities, (ii) investing the gross proceeds of the Asset Preferred Securities in junior subordinated debentures assumed by M&T in an acquisition and other permitted investments and (iii) engaging in only those other activities necessary or incidental thereto. M&T holds 100% of the common securities of Allfirst Asset Trust and Allfirst Capital Trust holds 100% of the Asset Preferred Securities of Allfirst Asset Trust. M&T currently has outstanding $105.3 million aggregate liquidation amount Floating Rate Junior Subordinated Debentures due July 15, 2029 that are payable to Allfirst Asset Trust. The interest rates payable on such debentures were 6.03% at March 31, 2006 and 5.58% at December 31, 2005.

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 Board’s current risk-based capital guidelines, the SKATES are includable in M&T’s Tier 1 Capital.

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings, continued

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

		March 31,				December 31,
		2006				2005
		(in thousands)
Trust I		$	154,640				154,640
Trust II			103,093				103,093
Trust III			68,628				68,709
Trust IV			143,240				143,102
Trust V			140,825				140,660
Allfirst Asset Trust			101,679				101,640
		$	712,105				711,844

5. Segment information

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

The financial information of the Company’s segments was compiled utilizing the accounting policies described in note 21 to the Company’s consolidated financial statements as of and for the year ended December 31, 2005. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to generally accepted accounting principles. As a result, the financial information of the reported segments is not necessarily comparable with similar information reported by other financial institutions. As also described in note 21 to the Company’s 2005 consolidated financial statements, neither goodwill nor core deposit and other intangible assets (and the amortization charges associated with such assets) resulting from acquisitions of financial institutions have been allocated to the Company’s reportable segments, but are included in the “All Other” category. The Company has, however, assigned such intangible assets to business units for purposes of

NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Segment information, continued

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

		Three months ended March 31
		2006												2005
						Inter-				Net								Inter-				Net
		Total				segment				income				Total				segment				income
		revenues(a)				revenues				(loss)				revenues(a)				revenues				(loss)(a)
		(in thousands)
Commercial Banking		$	134,321				148				56,094				127,413				173				51,714
Commercial Real Estate			68,489				232				33,867				65,528				203				32,763
Discretionary Portfolio			37,355				930				22,295				47,260				155				29,640
Residential Mortgage Banking			69,089				15,166				15,391				57,615				8,993				10,893
Retail Banking			345,899				2,853				92,554				313,982				4,501				75,297
All Other			44,804				(19,329	)			(17,284	)			64,515				(14,025	)			(11,017	)
Total		$	699,957				—				202,917				676,313				—				189,290

		Average total assets
		Three months ended								Year ended
		March 31								December 31
		2006				2005				2005
		(in millions)
Commercial Banking		$	12,222				11,356				11,723
Commercial Real Estate			8,374				8,475				8,335
Discretionary Portfolio			12,112				11,711				11,810
Residential Mortgage Banking			3,240				2,037				2,712
Retail Banking			14,207				14,799				14,639
All Other			4,951				4,928				4,916
Total		$	55,106				53,306				54,135

(a)

Total revenues are comprised of net interest income and other income. Net interest income is the difference between taxable-equivalent interest earned on assets and interest paid on liabilities owed by a segment and a funding charge (credit) based on the Company’s internal funds transfer methodology. Segments are charged a cost to fund any assets (e.g. loans) and are paid a funding credit for any funds provided (e.g. deposits). The taxable-equivalent adjustment aggregated $4,731,000 and $4,120,000 for the three-month periods ended March 31, 2006 and 2005 respectively, and

NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Segment information, continued

is eliminated in “All Other” total revenues. Intersegment revenues are included in total revenues of the reportable segments. The elimination of intersegment revenues is included in the determination of “All Other” total revenues.

6. Commitments and contingencies

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

		March 31,				December 31,
		2006				2005
		(in thousands)
Commitments to extend credit
Home equity lines of credit		$	5,057,912				4,903,834
Commercial real estate loans to be sold			41,283				41,662
Other commercial real estate and construction			2,147,236				2,249,805
Residential real estate loans to be sold			680,199				351,898
Other residential real estate			738,184				848,015
Commercial and other			6,836,599				6,843,170
Standby letters of credit			3,599,794				3,523,234
Commercial letters of credit			55,181				47,360
Financial guarantees and indemnification contracts			1,173,060				1,186,385
Commitments to sell real estate loans			1,652,678				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 management’s assessment of the customer’s creditworthiness.

Financial guarantees and indemnification contracts are oftentimes similar to standby letters of credit and include mandatory purchase agreements issued to ensure that customer obligations are fulfilled, recourse obligations associated with sold loans, and other guarantees of customer performance or compliance with designated rules and regulations. Included in financial guarantees and indemnification contracts are loan principal amounts sold with recourse in conjunction with the Company’s involvement in the Federal National

NOTES TO FINANCIAL STATEMENTS, CONTINUED

6. Commitments and contingencies, continued

Mortgage Association Delegated Underwriting and Servicing program. Under this program, the Company’s maximum credit risk associated with loans sold with recourse totaled $917 million and $941 million at March 31, 2006 and December 31, 2005, respectively.

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

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

The Company has an agreement with the Baltimore Ravens of the National Football League whereby the Company obtained the naming rights to a football stadium in Baltimore, Maryland for a fifteen year term. Under the agreement, the Company paid $3 million in both 2003 and 2004, $5 million in 2005, and is obligated to pay $5 million per year from 2006 through 2013 and $6 million per year from 2014 through 2017.

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

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

NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. Pension plans and other postretirement benefits

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

		Pension								Postretirement
		benefits								benefits
		Three months ended March 31
		2006				2005				2006				2005
		(in thousands)
Service cost		$	5,575				8,000				150				250
Interest cost on projected benefit obligation			9,175				9,925				850				1,350
Expected return on plan assets			(9,625	)			(9,575	)			—				—
Amortization of prior service cost			(1,775	)			—				50				—
Amortization of net actuarial loss			2,250				1,200				25				300
Net periodic benefit cost		$	5,600				9,550				1,075				1,900

Expense incurred in connection with the Company’s defined contribution pension and retirement savings plans totaled $7,831,000 and $4,021,000 for the three months ended March 31, 2006 and 2005, respectively.

8. Stock-based compensation plans

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,” as amended. Prior to that date, the Company recognized expense for stock-based compensation using the fair value method of accounting described is SFAS No. 123. Under SFAS No. 123R and 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. For the quarters ended March 31, 2006 and 2005, the Company recognized $18 million and $12 million of stock-based compensation expense and $5 million and $3 million of related income tax benefits, respectively. 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 Company’s incentive compensation plan allows 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 Company’s consolidated financial statements for the first quarter of 2006, as most of the Company’s stock-based awards are granted in January, 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 by $6 million in the first quarter of 2006 ($5 million after taxes), and reduced basic and diluted earnings per share by $.04 from what would otherwise have been recognized in the quarter had the expense recognition not been accelerated. If not for this required change, the additional $6 million of stock-based compensation expense recognized in the quarter ended March 31, 2006 would have been recognized throughout the remainder of 2006, 2007, 2008 and 2009 following the normal vesting schedule for stock options granted by the Company. The following is selected information pertaining to the Company’s stock option activity as of and for the quarters ended March 31, 2006 and 2005. Additional

NOTES TO FINANCIAL STATEMENTS, CONTINUED

8. Stock-based compensation plans, continued

information concerning the Company’s stock-based compensation plans can be found in its Annual Report on Form 10-K for the year ended December 31, 2005.

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 and $22.96 during the quarters ended March 31, 2006 and 2005, respectively. 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 and 3.95% in 2005 (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 and 21% in 2005; and estimated dividend yields of 1.65% in 2006 and 1.57% in 2005 (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 to reflect the probability of forfeiture prior to vesting.

A summary of stock option activity follows:

										Weighted-				Aggregate
						Weighted-				average				intrinsic
		Stock				average				remaining				value
		options				exercise				life				(in
		outstanding				price				(in years)				thousands)
Outstanding at January 1, 2006			10,454,663			$	73.81
Granted			1,700,030				108.93
Exercised			(564,931	)			50.19
Cancelled			(36,211	)			97.48
Outstanding at March 31, 2006			11,553,551			$	80.06				6.5			$	393,717
Exercisable at March 31, 2006			6,480,956			$	65.16				4.9			$	317,438

For the quarter ended March 31, 2006 and 2005, M&T received $27 million and $19 million, respectively, in cash and realized $11 million and $13 million, respectively, in tax benefits from the exercise of stock options. The intrinsic value of stock options exercised during those periods was $35 million and $41 million, respectively. As of March 31, 2006, there was $74 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 2.9 years. Reflecting the fact that the Company grants most of its stock option awards in January and such options vest on annual anniversary dates, the total grant date value of shares vested during the quarters ended March 31, 2006 and 2005 was $37 million and $39 million, respectively. The Company recognized stock-based compensation expense for these awards throughout their respective vesting period. Upon the exercise of stock options, the Company generally issues shares from treasury stock to the extent available, but may also issue new shares.

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

Overview

Net income for M&T Bank Corporation (“M&T”) in the first quarter of 2006 was $203 million or $1.77 of diluted earnings per common share, increases of 7% and 9%, respectively, from $189 million or $1.62 of diluted earnings per common share in the year-earlier quarter. During the fourth quarter of 2005, net income was $205 million or $1.78 of diluted earnings per common share. Basic earnings per common share were $1.82 in each of the two most recent quarters, compared with $1.65 in the first quarter of 2005.

     The annualized rate of return on average total assets for M&T and its consolidated subsidiaries (“the Company”) in 2006’s initial quarter was 1.49%, compared with 1.44% in the first quarter of 2005 and 1.48% in 2005’s final quarter. The annualized rate of return on average common stockholders’ equity was 13.97% in the recent quarter, compared with 13.41% and 13.85% in the first and fourth quarters of 2005, respectively.

     On February 1, 2006, M&T Insurance Agency, Inc., a wholly owned subsidiary of M&T’s principal banking subsidiary, M&T Bank, acquired Hess Egan Hagerty & L’Hommedieu, Inc. (“Hess Egan”), a commercial insurance and surety brokerage agency based in Chevy Chase, Maryland with additional offices in Pennsylvania and New Jersey. The acquisition is not expected to have a material impact on the Company’s consolidated financial position or results of operations. However, growth in the insurance business continues the natural progression of the Company’s expansion into the Maryland, Virginia and Washington D.C. areas.

     On April 25, 2006, M&T Bank announced that it entered into a definitive agreement to acquire from Citibank, N.A. twenty-one branches in Buffalo and Rochester, New York. The branches have approximately $274 million of loans, mostly to consumers, small businesses and middle market customers, and approximately $1.1 billion of deposits. The transaction is subject to obtaining regulatory approvals and is expected to close around mid-year 2006.

Supplemental Reporting of Non-GAAP Results of Operations

As a result of accounting for business combinations using the purchase method of accounting, the Company had recorded intangible assets consisting of goodwill and core deposit and other intangible assets totaling $3.0 billion at each of March 31, 2006 and December 31, 2005, and $3.1 billion at March 31, 2005. Included in such intangible assets at each of those dates was goodwill of $2.9 billion. Amortization of core deposit and other intangible assets, after tax effect, was $8 million ($.07 per diluted share) during each of the first quarter of 2006 and the fourth quarter of 2005, and $10 million ($.08 per diluted share) in the first quarter of 2005.

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

     Net operating income rose 6% to $211 million in the first quarter of 2006 from $199 million in the year-earlier quarter. Diluted net operating earnings per share for 2006’s initial quarter were $1.84, an increase of 8% from $1.70 in the corresponding quarter of 2005. Net operating income and diluted net operating earnings per share were $213 million and $1.85, respectively, in the fourth quarter of 2005.

     Net operating income in the recent quarter represented an annualized rate of return on average tangible assets of 1.64%, compared with 1.61% and 1.63% in the first and fourth quarters of 2005, respectively. Net operating income expressed as an annualized return on average tangible common equity was 29.31% in the first quarter of 2006, compared with 29.67% in the year-earlier quarter and 29.12% in the final quarter of 2005.

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

Taxable-equivalent Net Interest Income

Taxable-equivalent net interest income increased to $452 million in the first quarter of 2006 from $446 million in the similar 2005 quarter, but was down slightly from $454 million in the fourth quarter of 2005. The improvement in the recent quarter as compared with the first quarter of 2005 reflects a $1.8 billion, or 4%, increase in average earning assets, partially offset by a narrowing of the Company’s net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets. Average loans and leases rose $2.0 billion, or 5%, to $40.5 billion in the recently completed quarter from $38.6 billion in the initial quarter of 2005, and were up $142 million from the $40.4 billion average in the fourth quarter of 2005. Contributing to the growth in average loans in the recent quarter as compared with the first quarter of 2005 were higher average outstanding commercial loans and commercial real estate loans, up 9% and 3%, respectively. The growth in average balances in the commercial real estate loan portfolio was predominantly the result of an increase of $428 million in construction loans to developers of residential real estate properties. The residential real estate loan portfolio increased $1.4 billion or 42% from 2005’s initial quarter, in part due to higher average balances of loans held for sale by the Company’s residential mortgage banking subsidiary, M&T Mortgage Corporation. Partially offsetting the loan growth described above was a decline in average consumer loans and leases of $816 million, or 7%, in the recent quarter as compared with the year-earlier period due to lower average automobile loan and lease balances outstanding, as the Company has decided to not match the pricing offered by competitors.

     The Company experienced growth of 3% and 2% in the average balances of the commercial loan and commercial real estate loan portfolios in the recent quarter as compared with the fourth quarter of 2005, while average consumer loans declined by 3%. In dollar amount, average commercial loans and commercial real estate loans increased $297 million and $259 million, respectively, and the average balance of consumer loans decreased by $341 million. Average residential real estate loans in the recent quarter declined by $73 million, or 2%, from 2005’s fourth quarter. The accompanying table summarizes quarterly changes in the major components of the loan and lease portfolio.

AVERAGE LOANS AND LEASES
(net of unearned discount)

						Percent increase
						(decrease) from
		1st Qtr.				1st Qtr.				4th Qtr.
Dollars in millions		2006				2005				2005
Commercial, financial, etc.		$	11,034				9	%			3	%
Real estate – commercial			14,678				3				2
Real estate – consumer			4,601				42				(2	)
Consumer
Automobile			3,154				(23	)			(7	)
Home equity lines			4,115				7				—
Home equity loans			1,204				(10	)			(2	)
Other			1,758				(1	)			(5	)
Total consumer			10,231				(7	)			(3	)
Total		$	40,544				5	%			—	%

     Average balances of investment securities aggregated $8.4 billion during the first quarter of 2006, compared with $8.6 billion in the year-earlier quarter and $8.3 billion in the fourth quarter of 2005. 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 other than temporary. As of March 31, 2006 and December 31, 2005, the Company concluded that such declines were temporary in nature.

     Money-market assets are comprised of interest-earning deposits at banks, interest-earning trading account assets, federal funds sold and agreements to resell securities. Average money-market assets were $139 million in the recently completed quarter, compared with $87 million and $128 million in the first and fourth quarters of 2005, respectively. The amounts of investment securities and money-market assets held by the Company are influenced by such factors as demand for loans, which generally yield more than investment securities and money-market assets, ongoing repayments, the level of deposits, and management of balance sheet size and resulting capital ratios.

     As a result of the changes described herein, average earning assets increased 4% to $49.1 billion in the first quarter of 2006 from $47.2 billion in the corresponding 2005 quarter. Average earning assets were $48.8 billion in the final quarter of 2005.

     Core deposits represent the most significant source of funding for the Company and are comprised of noninterest-bearing deposits, interest-bearing transaction accounts, nonbrokered savings deposits and nonbrokered domestic time deposits under $100,000. The Company’s branch network is its principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Certificates of deposit under $100,000 generated on a nationwide basis by M&T Bank, National Association (“M&T Bank, N.A.”), a wholly owned bank subsidiary of M&T, are also included in core deposits. Core deposits averaged $27.8 billion in the first quarter of 2006, compared with $27.6 billion in the similar quarter of 2005 and $27.9 billion in 2005’s fourth quarter. The increase in average balances of time deposits less than $100,000 in the current quarter as compared with the prior periods was due, in part, to customer response to higher interest rates being offered on those products as market interest rates rose. In contrast, average savings deposits have declined, as depositors seek higher interest rates on their deposits and shift deposit balances into time accounts. The following table provides an analysis of quarterly changes in the components of average core deposits.

AVERAGE CORE DEPOSITS

						Percent increase
						(decrease) from
		1st Qtr.				1st Qtr.				4th Qtr.
Dollars in millions		2006				2005				2005
NOW accounts		$	409				9	%			(3	)%
Savings deposits			14,269				(5	)			(1	)
Time deposits less than $100,000			5,557				37				7
Noninterest-bearing deposits			7,572				(8	)			(3	)
Total		$	27,807				1	%			—	%

     Additional sources of funding for the Company include domestic time deposits of $100,000 or more, deposits originated through the Company’s offshore branch office, and brokered deposits. Domestic time deposits over $100,000, excluding brokered certificates of deposit, averaged $2.6 billion during the quarter ended March 31, 2006, compared with $1.4 billion in the first quarter of 2005 and $2.3 billion in 2005’s fourth quarter. Offshore branch deposits, primarily comprised of accounts with balances of $100,000 or more, averaged $3.4 billion, $4.2 billion and $3.2 billion for the quarters ended March 31, 2006, March 31, 2005 and December 31, 2005, respectively. Brokered time deposits averaged $3.7 billion during the recently completed quarter, compared with $1.9 billion and $3.5 billion in 2005’s first and fourth quarters, respectively. At March 31, 2006, brokered time deposits totaled $3.8 billion and the weighted-average remaining term to maturity of such deposits was 12 months. Certain of these brokered time deposits have provisions that allow for early redemption. In connection with the Company’s management of interest rate risk, interest rate swap agreements have been entered into under which the Company receives a fixed rate of interest and pays a variable rate and that have notional amounts and terms substantially similar to the amounts and terms of $580 million of brokered time deposits. The Company also had brokered money-market deposit accounts which averaged $66 million during the first quarter of 2006, compared with $60 million in the year-earlier quarter and $64 million in the fourth quarter of 2005. Offshore branch deposits and brokered deposits have been used by the Company as alternatives to short-term borrowings. Additional amounts of offshore branch deposits or brokered deposits may be solicited in the future depending on market conditions, including demand by customers and other investors for those deposits, and the cost of funds available from alternative sources at the time.

     The Company also uses borrowings from banks, securities dealers, the Federal Home Loan Bank of New York, Pittsburgh and Atlanta (together, the “FHLB”), and others as sources of funding. Short-term borrowings averaged $4.6 billion in the two most recent quarters, compared with $5.2 billion in the first quarter of 2005. Unsecured federal funds borrowings, which generally mature daily, included in short-term borrowings averaged $3.8 billion in the first quarter of 2006 and in the fourth quarter of 2005, and $4.4 billion in the first quarter of 2005. 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.

     Long-term borrowings averaged $6.3 billion in the first quarter of 2006, compared with $6.4 billion in the corresponding 2005 quarter and $6.6 billion in the fourth quarter of 2005. Included in average long-term borrowings were amounts borrowed from the FHLB of $4.1 billion in the initial quarter of 2006, and $3.9 billion and $4.2 billion in the first and fourth quarters of 2005, respectively, and subordinated capital notes of $1.2 billion in the two most recent quarters and $1.3 billion in 2005’s initial quarter. Junior subordinated debentures associated with trust preferred securities that were included in average long-term borrowings were $712 million in the first quarter of 2006 and in the fourth quarter of 2005, and $711 million in 2005’s first quarter. Information regarding trust preferred securities and the related junior subordinated debentures is provided in note 4 of Notes to Financial Statements.

     In addition to changes in the composition of the Company’s earning assets and interest-bearing liabilities as described herein, changes in interest rates and spreads can impact net interest income. Net interest spread, or the difference between the taxable-equivalent yield on earning assets and the rate paid on interest-bearing liabilities, was 3.18% in the first quarter of 2006 and 3.46% in the year-earlier quarter. The yield on earning assets during

the recent quarter was 6.46%, up 94 basis points (hundredths of one percent) from 5.52% in the first quarter of 2005, while the rate paid on interest-bearing liabilities increased 122 basis points to 3.28% from 2.06%. In the fourth quarter of 2005, the net interest spread was 3.18%, the yield on earning assets was 6.16% and the rate paid on interest-bearing liabilities was 2.98%. From January 1, 2005 through March 31, 2006, the Federal Reserve raised its benchmark overnight federal funds target rate ten times (including eight increases since March 31, 2005), each increase representing a 25 basis point increment over the previous effective target rate. Those interest rate increases resulted in a more rapid rise in rates paid on interest-bearing liabilities, most notably short-term borrowings, than in the yields on earning assets. The result of these conditions was a contraction of the net interest spread from the first quarter of 2005 to the similar 2006 quarter.

     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’s initial quarter, compared with $8.6 billion and $8.4 billion in the first and fourth quarters of 2005, respectively. Goodwill and core deposit and other intangible assets averaged $3.0 billion during the quarters ended March 31, 2006 and December 31, 2005, and $3.1 billion in the first quarter of 2005. The cash surrender value of bank owned life insurance averaged $1.0 billion in each of the first quarters of 2006 and 2005 and in the fourth quarter of 2005. Increases in the cash surrender value of bank owned life insurance and benefits received 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 .55% in the recent quarter, compared with .37% in the year-earlier quarter and .51% in 2005’s fourth quarter. The increase in the contribution to net interest margin ascribed to net interest-free funds in the recent quarter and 2005’s fourth quarter as compared with the first quarter of 2005 resulted largely from the impact of higher interest rates on interest-bearing liabilities used to value such contribution.

     Reflecting the changes to the net interest spread and the contribution of interest-free funds as described herein, the Company’s net interest margin was 3.73% in the first quarter of 2006, down from 3.83% in the comparable quarter of 2005, but up four basis points from 3.69% in the fourth quarter of 2005. Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s portfolios of earning assets and interest-bearing liabilities that result in reductions in spreads, could adversely impact the Company’s net interest income and net interest margin. In general, the Company’s net interest margin has been declining since the Federal Reserve began raising interest rates in June 2004. Continued pressure on the Company’s net interest margin is expected until the Federal Reserve slows or stops increasing interest rates. The increase in net interest margin from 2005’s final quarter to the first quarter of 2006 was largely due to higher fees associated with customer prepayments of commercial real estate loans and the impact of two less days in the recent quarter.

     Management assesses the potential impact of future changes in interest rates and spreads by projecting net interest income under several interest rate scenarios. In managing interest rate risk, the Company utilizes interest rate swap agreements to modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing liabilities. Periodic settlement amounts arising from these agreements are generally reflected in either the yields earned on assets or the rates paid on interest-bearing liabilities. The notional amount of interest rate swap agreements entered into for interest rate risk management purposes was $717 million as of March 31, 2006, $652 million as of December 31, 2005 and $735 million as of March 31, 2005. Under the terms of these swap agreements, the

Company receives payments based on the outstanding notional amount of the swap agreements at fixed rates of interest and makes payments at variable rates.

     As of March 31, 2006, all of the Company’s interest rate swap agreements entered into for risk management purposes had been designated as fair value hedges. In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and changes in the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the corresponding gain or loss recognized in current earnings. The difference between changes in the fair value of the interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded in “other revenues from operations” in the Company’s consolidated statement of income. In a cash flow hedge, unlike in a fair value hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in “other revenues from operations” immediately. The amounts of hedge ineffectiveness recognized during the quarters ended March 31, 2006 and 2005 and the quarter ended December 31, 2005 were not material to the Company’s results of operations. The estimated aggregate fair value of interest rate swap agreements designated as fair value hedges represented losses of approximately $13 million and $18 million at March 31, 2006 and 2005, respectively, and $9 million at December 31, 2005. 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 generally result from the effects of changing interest rates.

     The weighted average rates to be received and paid under interest rate swap agreements currently in effect were 4.97% and 5.33%, respectively, at March 31, 2006. 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 rates paid or received on those swap agreements are presented in the accompanying table.

INTEREST RATE SWAP AGREEMENTS

		Three months ended March 31
		2006								2005
Dollar in thousands		Amount				Rate*				Amount				Rate*
Increase (decrease) in:
Interest income		$	—				—	%		$	—				—	%
Interest expense			156				—				(2,816	)			(.03	)
Net interest income/margin		$	(156	)			—	%		$	2,816				.02	%
Average notional amount		$	688,630							$	733,778
Rate received **							5.13	%							6.83	%
Rate paid **							5.22	%							5.28	%

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

     As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk. Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future obligations, including demands for loans and deposit withdrawals, funding operating costs, and for other corporate purposes. Liquidity risk arises whenever the maturities of financial instruments included in assets and liabilities differ. M&T’s banking subsidiaries have access to additional funding sources through FHLB borrowings, lines of credit with the Federal Reserve Bank of New York, and other available borrowing facilities. The Company has, from time to time, issued subordinated capital notes to provide liquidity and enhance regulatory capital ratios. Such notes qualify for inclusion in the Company’s total capital as defined by federal regulators. 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 new 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 the one-month London Interbank Offered Rate plus 1.215%. The notes are redeemable after the fixed-rate period ends at M&T’s option, subject to regulatory approval. No new funding was received as a result of the exchange. As an additional source of funding, the Company maintains a $500 million revolving asset-backed structured borrowing that is secured by automobile loans that were transferred to M&T Auto Receivables I, LLC, a special purpose subsidiary of M&T Bank. M&T Auto Receivables I, LLC was formed for the purpose of borrowing $500 million in a revolving, asset-backed structured borrowing with an unaffiliated conduit lender. The subsidiary, the loans and the borrowings are included in the consolidated financial statements of the Company.

     The Company has informal and sometimes reciprocal sources of funding available through various arrangements for unsecured short-term borrowings from a wide group of banks and other financial institutions. Short-term federal funds borrowings aggregated $3.6 billion at March 31, 2006, $4.0 billion at December 31, 2005 and $4.1 billion at March 31, 2005. In general, these borrowings were unsecured and matured on the following business day. As already discussed, offshore branch deposits and brokered certificates of deposit have been used by the Company as alternatives to short-term borrowings.

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

     The Company serves in the capacity of remarketing agent for variable rate demand bonds (“VRDBs”) issued by customers of the Company for the purpose of obtaining financing. The VRDBs are 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 Company’s consolidated balance sheet. Nevertheless, M&T Bank is not contractually obligated to purchase the VRDBs. The value of VRDBs in the Company’s trading account totaled $61 million at March 31, 2006, $25 million at March 31, 2005 and $58 million at December 31, 2005. The total amount of VRDBs outstanding backed by an M&T Bank letter of credit was $1.7 billion at March 31, 2006 and December 31, 2005, and $1.6 billion at March 31, 2005. M&T Bank also serves as remarketing agent for most of those bonds.

     The Company enters into contractual obligations in the normal course of business which require future cash payments. Such obligations include, among others, payments related to deposits, borrowings, leases, and other contractual commitments. The Company also enters into various other off-balance sheet commitments to customers that may impact liquidity, including commitments to extend credit, standby letters of credit, commercial letters of credit, financial guarantees and indemnification contracts, and commitments to sell real estate loans. 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 information related to these commitments is provided in note 6 of Notes to Financial Statements.

     M&T’s primary source of funds to pay for operating expenses, shareholder dividends and treasury stock repurchases has historically been the receipt of dividends from its banking subsidiaries, which are subject to various regulatory limitations. Dividends from any banking subsidiary to M&T are limited by the amount of earnings of the banking subsidiary in the current year and the two preceding years. For purposes of the test, at March 31, 2006 approximately $84 million was available for payment of dividends to M&T from banking subsidiaries without prior regulatory approval. These historic sources of cash flow have been augmented in the past by the issuance of trust preferred securities. Information regarding trust preferred securities and the related junior subordinated debentures is included in note 4 of Notes to Financial Statements. M&T also maintains a $30 million line of credit with an unaffiliated commercial bank, of which there were no borrowings outstanding at March 31, 2006 or at December 31, 2005.

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

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

     The Company’s Risk Management Committee, which includes members of senior management, monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a computer model that forecasts net interest income under different interest rate scenarios. In modeling changing interest rates, the Company considers different yield curve shapes that consider both parallel (that is, simultaneous changes in interest

rates at each point on the yield curve) and non-parallel (that is, allowing interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve. 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. Management has taken actions, when deemed prudent, 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.

     The accompanying table as of March 31, 2006 and December 31, 2005 displays the estimated impact on net interest income from non-trading financial instruments in the base scenario described above resulting from parallel changes in interest rates across repricing categories during the first modeling year.

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

		Calculated increase(decrease)
		in projected net interest income
Changes in interest rates		March 31, 2006				December 31, 2005
+200 basis points		$	(16,513	)			(7,178	)
+100 basis points			(5,450	)			(4,096	)
-100 basis points			1,133				(5,733	)
-200 basis points			(6,527	)			(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 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 changes in interest rates 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 Company’s past or projected net interest income.

     The Company engages in trading activities to meet the financial needs of customers, to fund the Company’s obligations under certain deferred compensation plans and, to a limited extent, to profit from perceived market opportunities. Financial instruments utilized in trading activities have included forward and futures contracts related to foreign currencies and mortgage-backed securities, U.S. Treasury and other government securities, mortgage-backed securities, mutual funds and interest rate contracts, such as swap agreements. The

Company generally mitigates the foreign currency and interest rate risk associated with trading activities by entering into offsetting trading positions. The amounts of gross and net trading positions, as well as the type of trading activities conducted by the Company, are subject to a well-defined series of potential loss exposure limits established by management and approved by M&T’s Board of Directors. However, as with any non-government guaranteed financial instrument, the Company is exposed to credit risk associated with counterparties to the Company’s trading activities.

     The notional amounts of interest rate contracts entered into for trading purposes totaled $6.8 billion at March 31, 2006, compared with $6.2 billion at March 31, 2005 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 were $1.2 billion, $470 million and $679 million at March 31, 2006, March 31, 2005 and December 31, 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 all trading account assets and liabilities were $201 million and $82 million, respectively, at March 31, 2006, $153 million and $74 million, respectively, at March 31, 2005, and $192 million and $77 million, respectively, at December 31, 2005. Included in trading account assets were assets related to deferred compensation plans totaling $43 million at March 31, 2006, and $41 million at each of December 31, 2005 and March 31, 2005. Changes in the fair values of such assets are recorded in trading account and foreign exchange gains in the consolidated statement of income. Included in other liabilities in the consolidated balance sheet at each of March 31, 2006, December 31, 2005 and March 31, 2005 were $48 million of liabilities related to deferred compensation plans. Changes in the balances of such liabilities due to the valuation of allocated investment options to which the liabilities are indexed are recorded in “other costs of operations” in the consolidated statement of income.

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

Provision for Credit Losses

The Company maintains an allowance for credit losses that in management’s judgment is adequate to absorb losses inherent in the loan and lease portfolio. A provision for credit losses is recorded to adjust the level of the allowance as deemed necessary by management. The provision for credit losses in the first quarter of 2006 was $18 million, compared with $24 million in the year-earlier quarter and $23 million in the fourth quarter of 2005. Net loan charge-offs were $17 million in the recent quarter, compared with $19 million during 2005’s first quarter and $23 million during the final quarter of 2005. Net charge-offs as an annualized percentage of average loans and leases were .17% in the first quarter of 2006, compared with .20% and .22% in the first and fourth quarters of 2005, respectively. A summary of net charge-offs by loan type follows:

NET CHARGE-OFFS
BY LOAN/LEASE TYPE

		First Quarter				First Quarter				Fourth Quarter
In thousands		2006				2005				2005
Commercial, financial, etc.		$	6,085				6,070				6,681
Real estate:
Commercial			86				(769	)			544
Residential			473				492				298
Consumer			10,188				13,078				15,319
		$	16,832				18,871				22,842

     Loans classified as nonperforming, which consist of nonaccrual and restructured loans, totaled $143 million or .35% of total loans and leases outstanding at March 31, 2006, compared with $180 million or .46% a year earlier and $156 million or .39% at December 31, 2005. The lower level of nonperforming loans at the two most recent quarter-ends as compared with March 31, 2005 reflect an overall improvement in repayment performance by borrowers. The decline in nonperforming loans from the 2005 year-end to March 31, 2006 was largely attributable to the payoff of one commercial real estate loan during the first quarter which had an outstanding balance of $12 million.

     Accruing loans past due 90 days or more totaled $109 million or .27% of total loans and leases at March 31, 2006, compared with $125 million or .32% at March 31, 2005 and $129 million or .32% at December 31, 2005. Those loans included $86 million, $102 million and $106 million at March 31, 2006, March 31, 2005 and December 31, 2005, respectively, of loans guaranteed by government-related entities. Such guaranteed loans included one-to-four family residential mortgage loans serviced by the Company that were repurchased to reduce servicing costs associated with them, including a requirement to advance principal and interest payments that had not been received from individual mortgagors. The outstanding principal balances of the repurchased loans are fully guaranteed by government-related entities and totaled $66 million and $84 million as of March 31, 2006 and 2005, respectively, and $79 million at December 31, 2005. Also included in loans past due 90 days or more and accruing interest that were guaranteed by government-related entities were foreign commercial and industrial loans supported by the Export-Import Bank of the United States totaling $20 million at March 31, 2006, $17 million at March 31, 2005 and $26 million at December 31, 2005.

     Commercial loans and leases classified as nonperforming aggregated $38 million at March 31, 2006, $45 million at March 31, 2005 and $39 million at December 31, 2005.

     Nonperforming commercial real estate loans totaled $37 million at March 31, 2006, $59 million at March 31, 2005 and $44 million at December 31, 2005.

     Residential real estate loans classified as nonperforming were $30 million at March 31, 2006, compared with $39 million at March 31, 2005 and $29 million at December 31, 2005. Residential real estate loans past due 90 days or more and accruing interest totaled $82 million at March 31, 2006, compared with $100 million a year earlier and $96 million at December 31, 2005. As already noted, a substantial portion of such amounts relate to guaranteed loans repurchased from government-related entities.