UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

Commission File Number 1-9861

M&T BANK CORPORATION

(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

Number of shares of the registrant’s Common Stock, $0.50 par value, outstanding as of the close of business on July 24, 2009: 117,956,043 shares.

 

 

M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended June 30, 2009

Table of Contents of Information Required in Report		Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED BALANCE SHEET — June 30, 2009 and December 31, 2008			3
CONSOLIDATED STATEMENT OF INCOME — Three and six months ended June 30, 2009 and 2008			4
CONSOLIDATED STATEMENT OF CASH FLOWS — Six months ended June 30, 2009 and 2008			5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY — Six months ended June 30, 2009 and 2008			6
CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR CREDIT LOSSES — Six months ended June 30, 2009 and 2008			6
NOTES TO FINANCIAL STATEMENTS			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			45
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			89
Item 4. Controls and Procedures.			89
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.			89
Item 1A. Risk Factors.			89
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			90
Item 3. Defaults Upon Senior Securities.			90
Item 4. Submission of Matters to a Vote of Security Holders.			90
Item 5. Other Information.			90
Item 6. Exhibits.			91
SIGNATURES			91
EXHIBIT INDEX			92
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

		June 30,				December 31,
Dollars in thousands, except per share		2009				2008
Assets
Cash and due from banks		$	1,148,428				1,546,804
Interest-bearing deposits at banks			59,950				10,284
Federal funds sold			2,300				21,347
Agreements to resell securities			—				90,000
Trading account			495,324				617,821
Investment securities (includes pledged securities that can be sold or repledged of $4,429,821 at June 30, 2009; $1,870,097 at December 31, 2008)
Available for sale (cost: $7,531,537 at June 30, 2009; $7,656,635 at December 31, 2008)			6,963,004				6,850,193
Held to maturity (fair value: $414,173 at June 30, 2009; $394,752 at December 31, 2008)			610,777				485,838
Other (fair value: $581,653 at June 30, 2009; $583,176 at December 31, 2008)			581,653				583,176
Total investment securities			8,155,434				7,919,207
Loans and leases			53,075,393				49,359,737
Unearned discount			(360,749	)			(359,274	)
Allowance for credit losses			(855,365	)			(787,904	)
Loans and leases, net			51,859,279				48,212,559
Premises and equipment			442,162				388,855
Goodwill			3,524,625				3,192,128
Core deposit and other intangible assets			216,072				183,496
Accrued interest and other assets			4,009,643				3,633,256
Total assets		$	69,913,217				65,815,757
Liabilities
Noninterest-bearing deposits		$	12,403,999				8,856,114
NOW accounts			1,162,023				1,141,308
Savings deposits			22,519,330				19,488,918
Time deposits			9,584,351				9,046,937
Deposits at foreign office			1,085,004				4,047,986
Total deposits			46,754,707				42,581,263
Federal funds purchased and agreements to repurchase securities			901,422				970,529
Other short-term borrowings			2,049,727				2,039,206
Accrued interest and other liabilities			1,238,959				1,364,879
Long-term borrowings			11,568,238				12,075,149
Total liabilities			62,513,053				59,031,026
Stockholders’ equity
Preferred stock, par value $1.00, 1,000,000 shares authorized, 778,000 shares issued and oustanding at June 30, 2009; 600,000 shares issued and oustanding at December 31, 2008 (liquidation preference $1,000 per share)			725,472				567,463
Common stock, $.50 par, 250,000,000 shares authorized, 120,396,611 shares issued			60,198				60,198
Common stock issuable, 73,679 shares at June 30, 2009; 78,447 shares at December 31, 2008			4,244				4,617
Additional paid-in capital			2,448,851				2,897,907
Retained earnings			5,003,551				5,062,754
Accumulated other comprehensive income (loss), net			(580,756	)			(736,881	)
Treasury stock - common, at cost - 2,458,153 shares at June 30, 2009; 10,031,302 shares at December 31, 2008			(261,396	)			(1,071,327	)
Total stockholders’ equity			7,400,164				6,784,731
Total liabilities and stockholders’ equity		$	69,913,217				65,815,757

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

		Three months ended June 30								Six months ended June 30
In thousands, except per share		2009				2008				2009				2008
Interest income
Loans and leases, including fees		$	574,234				708,083			$	1,128,563				1,476,474
Deposits at banks			5				22				13				66
Federal funds sold			20				52				39				137
Agreements to resell securities			23				440				62				1,311
Trading account			194				143				315				402
Investment securities
Fully taxable			101,133				105,809				199,600				216,854
Exempt from federal taxes			1,814				3,025				3,343				6,492
Total interest income			677,423				817,574				1,331,935				1,701,736
Interest expense
NOW accounts			246				629				573				1,647
Savings deposits			26,362				60,317				68,284				126,939
Time deposits			55,697				79,467				116,026				186,110
Deposits at foreign office			576				22,075				1,557				60,448
Short-term borrowings			2,015				42,612				4,363				104,233
Long-term borrowings			90,960				125,842				191,758				256,877
Total interest expense			175,856				330,942				382,561				736,254
Net interest income			501,567				486,632				949,374				965,482
Provision for credit losses			147,000				100,000				305,000				160,000
Net interest income after provision for credit losses			354,567				386,632				644,374				805,482
Other income
Mortgage banking revenues			52,983				38,219				109,216				78,289
Service charges on deposit accounts			112,479				110,340				213,508				213,794
Trust income			32,442				40,426				67,322				80,730
Brokerage services income			13,493				17,211				28,886				32,684
Trading account and foreign exchange gains			7,543				6,636				8,978				11,349
Gain on bank investment securities			292				325				867				33,772
Total other-than-temporary impairment (“OTTI”) losses			(75,697	)			(5,746	)			(138,505	)			(5,746	)
Portion of OTTI losses recognized in other comprehensive income (before taxes)			50,928				—				81,537				—
Net OTTI losses recognized in earnings			(24,769	)			(5,746	)			(56,968	)			(5,746	)
Equity in earnings of Bayview Lending Group LLC			(207	)			(13,026	)			(4,351	)			(14,286	)
Other revenues from operations			77,393				76,797				136,532				153,259
Total other income			271,649				271,182				503,990				583,845
Other expense
Salaries and employee benefits			249,952				236,127				499,344				487,998
Equipment and net occupancy			51,321				47,252				99,493				94,017
Printing, postage and supplies			11,554				9,120				20,649				19,016
Amortization of core deposit and other intangible assets			15,231				16,615				30,601				35,098
Deposit insurance			49,637				1,534				55,493				3,073
Other costs of operations			186,015				109,062				296,476				206,212
Total other expense			563,710				419,710				1,002,056				845,414
Income before taxes			62,506				238,104				146,308				543,913
Income taxes			11,318				77,839				30,899				181,452
Net income		$	51,188				160,265			$	115,409				362,461
Net income available to common shareholders		$	40,516				160,265			$	95,105				362,461
Net income per common share
Basic		$	.36				1.45			$	.85				3.29
Diluted			.36				1.44				.85				3.26
Cash dividends per common share		$	.70				.70			$	1.40				1.40
Average common shares outstanding
Basic			113,218				110,191				111,836				110,104
Diluted			113,521				111,227				111,988				111,097

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

		Six months ended June 30
In thousands		2009				2008
Cash flows from operating activities
Net income		$	115,409				362,461
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses			305,000				160,000
Depreciation and amortization of premises and equipment			26,855				26,215
Amortization of capitalized servicing rights			31,498				32,723
Amortization of core deposit and other intangible assets			30,601				35,098
Provision for deferred income taxes			62,472				(14,312	)
Asset write-downs			80,439				6,559
Net gain on sales of assets			(139	)			(29,608	)
Net change in accrued interest receivable, payable			10,408				7,808
Net change in other accrued income and expense			38,101				(46,326	)
Net change in loans originated for sale			(241,186	)			260,987
Net change in trading account assets and liabilities			(44,953	)			42,718
Net cash provided by operating activities			414,505				844,323
Cash flows from investing activities
Proceeds from sales of investment securities
Available for sale			7,020				53,610
Other			42,522				38,689
Proceeds from maturities of investment securities
Available for sale			1,069,602				1,251,121
Held to maturity			56,024				29,023
Purchases of investment securities
Available for sale			(33,621	)			(667,060	)
Held to maturity			(19,170	)			(25,668	)
Other			(2,886	)			(137,684	)
Net (increase) decrease in agreements to resell securities			90,000				(240,000	)
Net (increase) decrease in loans and leases			110,264				(2,116,001	)
Other investments, net			(14,179	)			(4,925	)
Additions to capitalized servicing rights			(298	)			(15,744	)
Capital expenditures, net			(17,655	)			(24,196	)
Acquisitions, net of cash acquired
Banks and bank holding companies			144,009				—
Other, net			16,668				(43,791	)
Net cash provided (used) by investing activities			1,448,300				(1,902,626	)
Cash flows from financing activities
Net increase (decrease) in deposits			(881,060	)			663,520
Net decrease in short-term borrowings			(235,111	)			(2,060,092	)
Proceeds from long-term borrowings			—				3,650,010
Payments on long-term borrowings			(1,001,334	)			(1,175,977	)
Dividends paid — common			(160,023	)			(154,121	)
Dividends paid — preferred			(11,833	)			—
Other, net			9,133				5,919
Net cash provided (used) by financing activities			(2,280,228	)			929,259
Net decrease in cash and cash equivalents			(417,423	)			(129,044	)
Cash and cash equivalents at beginning of period			1,568,151				1,767,547
Cash and cash equivalents at end of period		$	1,150,728				1,638,503
Supplemental disclosure of cash flow information
Interest received during the period		$	1,330,441				1,763,523
Interest paid during the period			351,744				775,474
Income taxes paid (refunded) during the period			(9,551	)			186,313
Supplemental schedule of noncash investing and financing activities
Securitization of residential mortgage loans allocated to
Available for sale investment securities		$	140,942				541,196
Capitalized servicing rights			788				4,940
Real estate acquired in settlement of loans			51,143				40,314
Acquisitions
Fair value of
Assets acquired (noncash)			6,171,252				—
Liabilities assumed			5,878,941				—
Preferred stock issued			155,779				—
Common stock issued			272,824				—
Common stock options			1,367				—
Common stock warrants			6,467				—

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

																						Accumulated
																						other
										Common				Additional								comprehensive
		Preferred				Common				stock				paid-in				Retained				income (loss),				Treasury
In thousands, except per share		stock				stock				issuable				capital				earnings				net				stock				Total
2008
Balance — January 1, 2008		$	—				60,198				4,776				2,848,752				4,815,585				(114,822	)			(1,129,233	)			6,485,256
Comprehensive income:
Net income			—				—				—				—				362,461				—				—				362,461
Other comprehensive income, net of tax and reclassification adjustments:
Unrealized losses on investment securities			—				—				—				—				—				(212,309	)			—				(212,309	)
Defined benefit plans liablity adjustment			—				—				—				—				—				(699	)			—				(699	)
Unrealized losses on cash flow hedges			—				—				—				—				—				(5,087	)			—				(5,087	)
																															144,366
Repayment of management stock ownership program receivable			—				—				—				72				—				—				—				72
Stock-based compensation plans:
Stock option and purchase plans:
Compensation expense			—				—				—				24,949				—				—				3,944				28,893
Exercises			—				—				—				(19,518	)			—				—				33,346				13,828
Directors’ stock plan			—				—				—				(223	)			—				—				919				696
Deferred compensation plans, net, including dividend equivalents			—				—				(182	)			(383	)			(108	)			—				739				66
Common stock cash dividends - $1.40 per share			—				—				—				—				(154,121	)			—				—				(154,121	)
Balance — June 30, 2008		$	—				60,198				4,594				2,853,649				5,023,817				(332,917	)			(1,090,285	)			6,519,056
2009
Balance — January 1, 2009		$	567,463				60,198				4,617				2,897,907				5,062,754				(736,881	)			(1,071,327	)			6,784,731
Comprehensive income:
Net income			—				—				—				—				115,409				—				—				115,409
Other comprehensive income, net of tax and reclassification adjustments:
Unrealized gains on investment securities			—				—				—				—				—				149,398				—				149,398
Defined benefit plans liability adjustment			—				—				—				—				—				735				—				735
Unrealized losses on terminated cash flow hedges			—				—				—				—				—				5,992				—				5,992
																															271,534
Acquisition of Provident Bankshares Corporation:
Preferred stock issued			155,779				—				—				—				—				—				—				155,779
Common stock issued			—				—				—				(348,080	)			—				—				620,904				272,824
Common stock options			—				—				—				1,367				—				—				—				1,367
Common stock warrants			—				—				—				6,467				—				—				—				6,467
Issuance of common stock to defined benefit pension plan			—				—				—				(51,417	)			—				—				95,706				44,289
Preferred stock cash dividends			—				—				—				—				(11,833	)			—				—				(11,833	)
Amortization of preferred stock discount			2,230				—				—				—				(2,230	)			—				—				—
Stock-based compensation plans:
Stock option and purchase plans:
Compensation expense			—				—				—				(42,014	)			—				—				74,605				32,591
Exercises			—				—				—				(14,097	)			—				—				16,211				2,114
Directors’ stock plan			—				—				—				(785	)			—				—				1,480				695
Deferred compensation plans, net, including dividend equivalents			—				—				(373	)			(497	)			(101	)			—				1,025				54
Common stock cash dividends - $1.40 per share			—				—				—				—				(160,448	)			—				—				(160,448	)
Balance — June 30, 2009		$	725,472				60,198				4,244				2,448,851				5,003,551				(580,756	)			(261,396	)			7,400,164

CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR CREDIT LOSSES (Unaudited)

		Six months ended June 30
In thousands		2009				2008
Beginning balance		$	787,904				759,439
Provision for credit losses			305,000				160,000
Allowance related to loans sold or securitized			—				(327	)
Net charge-offs
Charge-offs			(259,019	)			(165,404	)
Recoveries			21,480				20,368
Total net charge-offs			(237,539	)			(145,036	)
Ending balance		$	855,365				774,076

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 generally accepted accounting principles (“GAAP”) using the accounting policies set forth in note 1 of Notes to Financial Statements included in the 2008 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. Subsequent events have been evaluated for their potential impact on the financial statements through August 4, 2009, which is the date the financial statements were issued.

2. Acquisitions

On May 23, 2009, M&T acquired all of the outstanding common stock of Provident Bankshares Corporation (“Provident”), a bank holding company based in Baltimore, Maryland, in a stock-for-stock transaction. Provident Bank, Provident’s banking subsidiary, was merged into M&T Bank, M&T’s principal banking subsidiary, on that date. The results of operations acquired in the Provident transaction have been included in the Company’s financial results since May 23, 2009. Provident common shareholders received .171625 shares of M&T common stock in exchange for each share of Provident common stock, resulting in M&T issuing a total of 5,838,308 common shares with an acquisition date fair value of $273 million. In addition, based on the merger agreement, outstanding and unexercised options to purchase Provident common stock were converted into options to purchase the common stock of M&T. Those options had an estimated fair value of $1 million. In total, the purchase price was approximately $274 million based on the fair value on the acquisition date of M&T common stock exchanged and the options to purchase M&T common stock. Holders of Provident’s preferred stock were issued shares of new Series B and Series C Preferred Stock of M&T having substantially identical terms. That preferred stock and warrants to purchase common stock associated with the Series C Preferred Stock added $162 million to M&T’s stockholders’ equity.

     The transaction has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Assets acquired totaled $6.3 billion, including $4.0 billion of loans and leases (including approximately $1.7 billion of commercial real estate loans, $1.4 billion of consumer loans, $700 million of commercial loans and leases and $300 million of residential real estate loans) and $1.0 billion of investment securities. Liabilities assumed were $5.9 billion, including $5.1 billion of deposits. The transaction added $436 million to M&T’s stockholders’ equity, including $280 million of common equity and $156 million of preferred equity. In connection with the acquisition, the Company recorded $332 million of goodwill and $63 million of core deposit intangible. The core deposit intangible is being amortized over seven years using an accelerated method. The acquisition of Provident expands the Company’s presence in the Mid-Atlantic area, gives the Company the second largest deposit share in Maryland, and tripled the Company’s presence in Virginia.

     In many cases, determining the fair value of the acquired assets and assumed liabilities required the Company to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of these determinations related to the fair valuation of acquired loans. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and other

NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisitions, continued

factors, such as prepayments. In accordance with GAAP, there was no carry over of Provident’s previously established allowance for credit losses. Subsequent decreases in the expected cash flows will require the Company to evaluate the need for additions to the Company’s allowance for credit losses. Subsequent improvements in expected cash flows will result in the recognition of additional interest income over the then remaining lives of the loans.

     In conjunction with the Provident acquisition, the acquired loan portfolio was accounted for at fair value as follows:

		May 23, 2009
		(in thousands)
Contractually required principal and interest at acquisition		$	5,465,167
Contractual cash flows not expected to be collected			(832,115	)
Expected cash flows at acquisition			4,633,052
Interest component of expected cash flows			(595,685	)
Basis in acquired loans at acquisition — estimated fair value		$	4,037,367

     Interest income on acquired loans for the period from date of acquisition to June 30, 2009 was approximately $19 million. The outstanding principal balance and the carrying amount of these loans that is included in the consolidated balance sheet at June 30, 2009 is as follows:

		(in thousands)
Outstanding principal balance		$	4,269,847
Carrying amount			3,996,718

     Receivables (including loans and investment securities) obtained in the acquisition of Provident for which there is specific evidence of credit deterioration and for which it was probable that the Company would be unable to collect all contractually required principal and interest payments represent less than .25% of the Company’s assets and, accordingly, are not considered material.

     In connection with the acquisition of Provident, goodwill of $332 million was calculated after recording all other acquired assets and liabilities at estimated fair value. In management’s opinion, that goodwill represents the inherent long-term value expected from the business opportunities and synergies created from combining Provident with the Company.

NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisitions, continued

     The consideration paid for Provident’s common equity and the amounts of acquired identifiable assets and liabilities and preferred equity assumed as of the acquisition date is as follows:

		(in thousands)
Purchase price:
Value of:
Common shares issued (5,838,308 shares)		$	272,824
Stock options			1,367
Fractional common shares paid in cash			117
Total purchase price			274,308
Identifiable assets:
Cash and due from banks			144,126
Investment securities			1,039,350
Loans and leases			4,037,367
Core deposit intangible			63,177
Other assets			698,860
Total			5,982,880
Liabilities and equity:
Deposits			5,060,546
Short-term borrowings			176,515
Long-term borrowings			580,740
Other liabilities			61,022
Total liabilities			5,878,823
Preferred stock and common stock warrants			162,246
Total			6,041,069
Net liabilities and preferred equity assumed			58,189
Goodwill resulting from acquisition		$	332,497

     None of the goodwill recognized will be deductible for income tax purposes. Changes in goodwill in the Company’s consolidated balance sheet from December 31, 2008 to June 30, 2009 were attributable to the acquisition of Provident. As described in note 12, the Company does not allocate goodwill to its reportable segments when compiling the assets associated with those segments. The Company does, however, allocate goodwill to segments for purposes of periodically testing goodwill for impairment. That allocation of goodwill has not yet been completed.

     Merger-related expenses associated with the acquisition of Provident were $66 million and $69 million during the three- and six-month periods ended June 30, 2009, respectively. Such expenses were for professional services and other temporary help fees associated with the conversion of systems and/or integration of operations; costs related to branch and office consolidations; costs related to termination of existing Provident contractual arrangements for various services; initial marketing and promotion expenses designed to introduce M&T Bank to Provident’s customers; severance and incentive compensation costs; travel costs; and printing, supplies and other costs of commencing operations in new markets and offices. The Company expects to incur additional merger-related expenses, although such costs are expected to be substantially less than the amount incurred in the first six months of 2009. As of June 30, 2009, the remaining unpaid portion of merger-related expenses was $33 million.

NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisitions, continued

     A summary of merger-related expenses included in the consolidated statement of income follows:

		Three months ended				Six months ended
		June 30, 2009				June 30, 2009
		(in thousands)
Salaries and employee benefits		$	8,768				8,779
Equipment and net occupancy			581				585
Printing, postage and supplies			2,514				2,815
Other costs of operations			54,594				56,704
		$	66,457				68,883

     The following table discloses the impact of Provident (excluding the impact of merger-related expenses) since the acquisition on May 23, 2009 through the end of the second quarter of 2009. The table also presents certain pro forma information for 2009 as if Provident had been acquired on January 1, 2009 and for 2008 as if Provident had been acquired on January 1, 2008. These results combine the historical results of Provident into the Company’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not necessarily indicative of what would have occurred had the acquisition taken place on the indicated dates. In particular, no adjustments have been made to eliminate the amount of Provident’s provision for credit losses of $42 million in 2009 and $10 million in 2008 or the impact of other-than-temporary impairment losses recognized by Provident of $87 million in 2009 and $63 million in 2008 that would not have been necessary had the acquired loans and investment securities been recorded at fair value as of the beginning of each year. Furthermore, expenses related to systems conversions and other costs of integration of $69 million are included in the 2009 periods in which such costs were incurred. Additionally, the Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts presented below.

		Actual since				Pro forma
		acquisition				Six months ended
		through				June 30,
		June 30, 2009				2009				2008
		(in thousands)
Total revenues		$	33,923				1,884,980				2,451,489
Net income			3,562				31,320				353,349

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities

The amortized cost and estimated fair value of investment securities were as follows:

						Gross				Gross
		Amortized				unrealized				unrealized				Estimated
		cost				gains				losses				fair value
						(in thousands)
June 30, 2009
Investment securities available for sale:
U.S. Treasury and federal agencies		$	212,113				2,778				58			$	214,833
Obligations of states and political subdivisions			64,297				1,631				189				65,739
Mortgage-backed securities:
Government issued or guaranteed			3,755,001				115,858				3,394				3,867,465
Privately issued residential			2,811,913				1,797				571,952				2,241,758
Privately issued commercial			37,124				—				14,106				23,018
Collateralized debt obligations			114,707				8,092				10,427				112,372
Other debt securities			296,835				5,442				88,889				213,388
Equity securities			239,547				3,866				18,982				224,431
			7,531,537				139,464				707,997				6,963,004
Investment securities held to maturity:
Obligations of states and political subdivisions			215,401				1,332				3,142				213,591
Privately issued residential mortgage-backed securities			383,962				—				194,794				189,168
Other debt securities			11,414				—				—				11,414
			610,777				1,332				197,936				414,173
Other securities			581,653				—				—				581,653
Total		$	8,723,967				140,796				905,933			$	7,958,830
December 31, 2008
Investment securities available for sale:
U.S. Treasury and federal agencies		$	290,893				6,203				383			$	296,713
Obligations of states and political subdivisions			70,425				1,641				303				71,763
Mortgage-backed securities:
Government issued or guaranteed			3,525,196				93,578				5,994				3,612,780
Privately issued residential			3,104,209				484				778,139				2,326,554
Privately issued commercial			49,231				—				8,185				41,046
Collateralized debt obligations			18,088				—				15,592				2,496
Other debt securities			245,685				18				77,601				168,102
Equity securities			352,908				581				22,750				330,739
			7,656,635				102,505				908,947				6,850,193
Investment securities held to maturity:
Obligations of states and political subdivisions			63,822				1,715				71				65,466
Privately issued residential mortgage-backed securities			411,847				—				92,730				319,117
Other debt securities			10,169				—				—				10,169
			485,838				1,715				92,801				394,752
Other securities			583,176				—				—				583,176
Total		$	8,725,649				104,220				1,001,748			$	7,828,121

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

     Gross realized gains and losses from sales of investment securities were not significant during the three- and six-month periods ended June 30, 2009 and 2008. Effective January 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP 115-2”). In accordance with FSP 115-2, the Company recognized $25 million and $57 million of pre-tax other-than-temporary impairment losses during the three and six months ended June 30, 2009, respectively, related primarily to certain privately issued residential mortgage-backed securities. The impairment charges were recognized in light of deterioration of housing values in the residential real estate market and a rise in delinquencies and charge-offs of underlying mortgage loans collateralizing those securities. Approximately $3 million of impairment charges recognized in the second quarter of 2009 related to two securities backed by trust preferred securities issued by financial institutions. The other-than-temporary impairment losses recognized were net of $51 million and $82 million of unrealized losses classified in accumulated other comprehensive income for the same securities for the three and six months ended June 30, 2009, respectively. The other-than-temporary impairment losses represent management’s estimate of credit losses inherent in the securities considering projected cash flows using assumptions of delinquency rates, loss severities, and other estimates of future collateral performance. Other-than-temporary impairment losses on investment securities of $6 million were recognized by the Company for the three and six months ended June 30, 2008. The effect of the adoption of FSP 115-2 on debt securities previously reported as other-than-temporarily impaired was not material and, therefore, the Company did not record a transition adjustment as of January 1, 2009. Changes in credit losses during the three and six months ended June 30, 2009 associated with debt securities for which other-than-temporary impairment losses have been previously recognized in earnings follows:

		Debt securities
		(in thousands)
Estimated credit losses as of March 31, 2009		$	187,618
Additions for credit losses not previously recognized			24,769
Reductions for increases in cash flows			(399	)
Reductions for realized losses			(6,070	)
Estimated credit losses as of June 30, 2009		$	205,918
Estimated credit losses as of January 1, 2009		$	155,967
Additions for credit losses not previously recognized			56,968
Reductions for increases in cash flows			(947	)
Reductions for realized losses			(6,070	)
Estimated credit losses as of June 30, 2009		$	205,918

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

     At June 30, 2009, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:

		Amortized				Estimated
		cost				fair value
		(in thousands)
Debt securities available for sale:
Due in one year or less		$	172,131				173,365
Due after one year through five years			67,468				69,510
Due after five years through ten years			35,466				36,361
Due after ten years			412,887				327,096
			687,952				606,332
Mortgage-backed securities available for sale			6,604,038				6,132,241
		$	7,291,990				6,738,573
Debt securities held to maturity:
Due in one year or less		$	45,673				46,038
Due after one year through five years			7,499				7,797
Due after five years through ten years			97,999				96,943
Due after ten years			75,644				74,227
			226,815				225,005
Mortgage-backed securities held to maturity			383,962				189,168
		$	610,777				414,173

     A summary of investment securities that as of June 30, 2009 and December 31, 2008 had been in a continuous unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss position for twelve months or longer follows:

		Less than 12 months								12 months or more
						Unrealized								Unrealized
		Fair value				losses				Fair value				losses
		(in thousands)
June 30, 2009
U.S. Treasury and federal agencies		$	7,866				(58	)			—				—
Obligations of states and political subdivisions			157,972				(3,110	)			5,942				(221	)
Mortgage-backed securities:
Government issued or guaranteed			534,525				(2,711	)			49,608				(683	)
Privately issued residential			361,683				(198,656	)			2,007,735				(568,090	)
Privately issued commercial			—				—				23,018				(14,106	)
Collateralized debt obligations			12,641				(1,992	)			6,286				(8,435	)
Other debt securities			30,337				(3,568	)			126,184				(85,321	)
Equity securities			24,795				(18,955	)			11				(27	)
Total		$	1,129,819				(229,050	)			2,218,784				(676,883	)
December 31, 2008
U.S. Treasury and federal agencies		$	6,660				(383	)			—				—
Obligations of states and political subdivisions			26,456				(315	)			2,182				(59	)
Mortgage-backed securities:
Government issued or guaranteed			392,780				(4,962	)			175,943				(1,032	)
Privately issued residential			2,173,593				(629,321	)			460,355				(241,548	)
Privately issued commercial			—				—				41,046				(8,185	)
Collateralized debt obligations			—				(2,221	)			1,520				(13,397	)
Other debt securities			102,882				(15,563	)			60,902				(62,012	)
Equity securities			37,905				(22,720	)			9				(30	)
Total		$	2,740,276				(675,485	)			741,957				(326,263	)

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

     The Company owned 1,060 individual investment securities with aggregate gross unrealized losses of $906 million at June 30, 2009. Approximately $767 million of the unrealized losses pertain to privately issued residential mortgage-backed securities with a cost basis of $3.1 billion. The Company also had $95 million of unrealized losses on trust preferred securities issued by financial institutions and securities backed by trust preferred securities issued by financial institutions and other entities having a cost basis of $264 million. Based on a review of each of the securities in the investment securities portfolio at June 30, 2009, with the exception of the aforementioned securities for which other-than-temporary impairment losses were recognized, the Company concluded that it expected to recover the amortized cost basis of its investment. As of June 30, 2009, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its impaired investment securities. At June 30, 2009, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $582 million of cost method investment securities.

4. Borrowings

The Company had $1.2 billion of fixed and floating rate junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) outstanding at June 30, 2009 which are held by various trusts that were issued in connection with the issuance by those trusts of preferred capital securities (“Capital Securities”) and common securities (“Common Securities”). The proceeds from the issuances of the Capital Securities and the Common Securities were used by the trusts to purchase the Junior Subordinated Debentures. The Common Securities of each of those trusts 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 capital. As a result of the acquisition of Provident, M&T assumed $133 million of Junior Subordinated Debentures that mature at various dates from 2028 to 2033.

     Holders of the Capital Securities receive preferential cumulative cash distributions unless M&T exercises its right to extend the payment of interest on the Junior Subordinated Debentures as allowed by the terms of each such debenture, 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. In the event of an extended interest period exceeding twenty quarterly periods for $350 million of Junior Subordinated Debentures due January 31, 2068, M&T must fund the payment of accrued and unpaid interest through an alternative payment mechanism, which requires M&T to issue common stock, non-cumulative perpetual preferred stock or warrants to purchase common stock until M&T has raised an amount of eligible proceeds at least equal to the aggregate amount of accrued and unpaid deferred interest on the Junior Subordinated Debentures due January 31, 2068. In general, 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.

NOTES TO FINANCIAL STATEMENTS, CONTINUED

4. Borrowings, continued

     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 (ranging from 2027 to 2068) of the Junior Subordinated Debentures or the earlier redemption of the Junior Subordinated Debentures in whole upon the occurrence of one or more events set forth in the indentures relating to the Capital Securities, and in whole or in part at any time after an optional redemption prior to contractual maturity contemporaneously with the optional redemption of the related Junior Subordinated Debentures in whole or in part, subject to possible regulatory approval. In connection with the issuance of 8.50% Enhanced Trust Preferred Securities associated with $350 million of Junior Subordinated Debentures maturing in 2068, M&T entered into a replacement capital covenant that provides that neither M&T nor any of its subsidiaries will repay, redeem or purchase any of the Junior Subordinated Debentures due January 31, 2068 or the 8.50% Enhanced Trust Preferred Securities prior to January 31, 2048, with certain limited exceptions, except to the extent that, during the 180 days prior to the date of that repayment, redemption or purchase, M&T and its subsidiaries have received proceeds from the sale of qualifying securities that (i) have equity-like characteristics that are the same as, or more equity-like than, the applicable characteristics of the 8.50% Enhanced Trust Preferred Securities or the Junior Subordinated Debentures due January 31, 2068, as applicable, at the time of repayment, redemption or purchase, and (ii) M&T has obtained the prior approval of the Federal Reserve Board, if required.

     On June 30, 2009, M&T retired $12 million of Junior Subordinated Debentures for which Provident had been the owner of the related Capital Securities.

     Including the unamortized portions of purchase accounting adjustments to reflect estimated fair value at the acquisition dates of the Common Securities of various trusts and reflecting the noted cancellation of Junior Subordinated Debentures on June 30, 2009, the Junior Subordinated Debentures associated with Capital Securities had financial statement carrying values of $1.2 billion and $1.1 billion as of June 30, 2009 and December 31, 2008, respectively.

NOTES TO FINANCIAL STATEMENTS, CONTINUED

5. Stockholders’ equity

M&T is authorized to issue 1,000,000 shares of preferred stock with a $1.00 par value per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference, but have no general voting rights.

     Issued and outstanding preferred stock of M&T is presented below:

Shares

Carrying

Carrying

issued and

value

value

outstanding

June 30, 2009

December 31, 2008

(dollars in thousands)

Series A (a)

Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $1,000 liquidation preference per share, 600,000 shares authorized

600,000

$

569,693

567,463

Series B (b)

Series B Mandatory Convertible Non-cumulative Preferred Stock, $1,000 liquidation preference per share, 26,500 shares authorized

26,500

26,500

—

Series C (a)(c)

Fixed Rate Cumulative Perpetual Preferred Stock, Series C, $1,000 liquidation preference per share, 151,500 shares authorized

151,500

129,279

—

NOTES TO FINANCIAL STATEMENTS, CONTINUED

6. 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 defined benefit cost for defined benefit plans consisted of the following:

										Other
		Pension								postretirement
		benefits								benefits
		Three months ended June 30
		2009				2008				2009				2008
		(in thousands)
Service cost		$	4,738				4,362				27				115
Interest cost on projected benefit obligation			11,264				10,508				747				941
Expected return on plan assets			(11,576	)			(11,933	)			—				—
Amortization of prior service cost			(1,629	)			(1,639	)			46				96
Amortization of net actuarial loss			2,499				751				(10	)			(21	)
Net periodic benefit cost		$	5,296				2,049				810				1,131

										Other
		Pension								postretirement
		benefits								benefits
		Six months ended June 30
		2009				2008				2009				2008
		(in thousands)
Service cost		$	9,613				9,705				177				279
Interest cost on projected benefit obligation			22,279				21,272				1,647				2,017
Expected return on plan assets			(23,051	)			(23,047	)			—				—
Amortization of prior service cost			(3,279	)			(3,279	)			121				138
Amortization of net actuarial loss			4,849				1,971				(10	)			21
Net periodic benefit cost		$	10,411				6,622				1,935				2,455