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 executive offices)		14203 (Zip code)

(716) 842-5445
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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). þ 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 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 (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by checkmark 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 29, 2011: 125,599,926 shares.

 

 

M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended June 30, 2011

Table of Contents of Information Required in Report		Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET - June 30, 2011 and December 31, 2010			3
CONSOLIDATED STATEMENT OF INCOME - Three and six months ended June 30, 2011 and 2010			4
CONSOLIDATED STATEMENT OF CASH FLOWS - Six months ended June 30, 2011 and 2010			5
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY — Six months ended June 30, 2011 and 2010			6
NOTES TO FINANCIAL STATEMENTS			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			52
Item 3. Quantitative and Qualitative Disclosures About Market Risk			102
Item 4. Controls and Procedures			102
Part II. OTHER INFORMATION
Item 1. Legal Proceedings			102
Item 1A. Risk Factors			102
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			103
Item 3. Defaults Upon Senior Securities			103
Item 4. (Removed and Reserved)			103
Item 5. Other Information			103
Item 6. Exhibits			104
SIGNATURES			104
EXHIBIT INDEX			105
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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		2011				2010
Assets
Cash and due from banks		$	1,297,335				908,755
Interest-bearing deposits at banks			2,275,450				101,222
Federal funds sold			35,580				25,000
Agreement to resell securities			380,000				—
Trading account			502,986				523,834
Investment securities (includes pledged securities that can be sold or repledged of $2,040,940 at June 30, 2011; $1,937,817 at December 31, 2010)
Available for sale (cost: $5,026,881 at June 30, 2011; $5,494,377 at December 31, 2010)			4,890,489				5,413,492
Held to maturity (fair value: $1,143,496 at June 30, 2011; $1,225,253 at December 31, 2010)			1,219,686				1,324,339
Other (fair value: $382,090 at June 30, 2011; $412,709 at December 31, 2010)			382,090				412,709
Total investment securities			6,492,265				7,150,540
Loans and leases			58,844,512				52,315,942
Unearned discount			(303,283	)			(325,560	)
Loans and leases, net of unearned discount			58,541,229				51,990,382
Allowance for credit losses			(907,589	)			(902,941	)
Loans and leases, net			57,633,640				51,087,441
Premises and equipment			567,107				435,837
Goodwill			3,524,625				3,524,625
Core deposit and other intangible assets			275,057				125,917
Accrued interest and other assets			4,743,109				4,138,092
Total assets		$	77,727,154				68,021,263
Liabilities
Noninterest-bearing deposits		$	18,598,828				14,557,568
NOW accounts			1,687,184				1,393,349
Savings deposits			30,712,851				26,431,281
Time deposits			7,678,799				5,817,170
Deposits at Cayman Islands office			551,553				1,605,916
Total deposits			59,229,215				49,805,284
Federal funds purchased and agreements to repurchase securities			452,091				866,555
Other short-term borrowings			115,053				80,877
Accrued interest and other liabilities			1,557,685				1,070,701
Long-term borrowings			7,128,916				7,840,151
Total liabilities			68,482,960				59,663,568
Shareholders’ equity
Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding: Liquidation preference of $1,000 per share: 381,500 shares at June 30, 2011 and 778,000 shares at December 31, 2010; Liquidation preference of $10,000 per share: 50,000 shares at June 30, 2011 and none at December 31, 2010			860,901				740,657
Common stock, $.50 par, 250,000,000 shares authorized, 125,554,637 shares issued at June 30, 2011; 120,396,611 shares issued at December 31, 2010			62,777				60,198
Common stock issuable, 67,634 shares at June 30, 2011; 71,345 shares at December 31, 2010			4,030				4,189
Additional paid-in capital			2,800,002				2,398,615
Retained earnings			5,745,253				5,426,701
Accumulated other comprehensive income (loss), net			(228,769	)			(205,220	)
Treasury stock — common, at cost — none at June 30, 2011; 693,974 shares at December 31, 2010			—				(67,445	)
Total shareholders’ equity			9,244,194				8,357,695
Total liabilities and shareholders’ equity		$	77,727,154				68,021,263

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						2011				2010				2011				2010
Interest income				Loans and leases, including fees		$	624,247				596,919			$	1,218,279				1,185,046
				Deposits at banks			479				5				515				11
				Federal funds sold			10				9				28				20
				Agreements to resell securities			127				2				128				4
				Trading account			282				110				670				193
				Investment securities
				Fully taxable			60,827				85,232				131,489				170,879
				Exempt from federal taxes			2,281				2,507				4,627				5,017
				Total interest income			688,253				684,784				1,355,736				1,361,170
Interest expense				NOW accounts			274				219				476				419
				Savings deposits			20,757				21,464				39,996				41,913
				Time deposits			19,310				26,254				38,381				55,700
				Deposits at Cayman Islands office			193				376				587				701
				Short-term borrowings			147				726				639				1,613
				Long-term borrowings			61,370				68,518				120,651				137,263
				Total interest expense			102,051				117,557				200,730				237,609
				Net interest income			586,202				567,227				1,155,006				1,123,561
				Provision for credit losses			63,000				85,000				138,000				190,000
				Net interest income after provision for credit losses			523,202				482,227				1,017,006				933,561
Other income				Mortgage banking revenues			42,151				47,084				87,307				88,560
				Service charges on deposit accounts			119,716				128,976				229,447				249,271
				Trust income			75,592				30,169				104,913				61,097
				Brokerage services income			14,926				12,788				29,222				25,894
				Trading account and foreign exchange gains			6,798				3,797				15,077				8,496
				Gain on bank investment securities			110,744				10				150,097				469
				Total other-than-temporary impairment (“OTTI”) losses			(33,211	)			(21,079	)			(42,725	)			(50,566	)
				Portion of OTTI losses recognized in other comprehensive income (before taxes)			6,681				(1,301	)			154				1,384
				Net OTTI losses recognized in earnings			(26,530	)			(22,380	)			(42,571	)			(49,182	)
				Equity in earnings of Bayview Lending Group LLC			(5,223	)			(6,179	)			(11,901	)			(11,893	)
				Other revenues from operations			163,482				79,292				254,485				158,551
				Total other income			501,656				273,557				816,076				531,263
Other expense				Salaries and employee benefits			300,178				245,861				566,268				509,907
				Equipment and net occupancy			59,670				55,431				116,333				110,832
				Printing, postage and supplies			9,723				8,549				18,925				17,592
				Amortization of core deposit and other intangible assets			14,740				14,833				27,054				31,308
				FDIC assessments			26,609				21,608				45,703				42,956
				Other costs of operations			165,975				129,786				302,183				252,835
				Total other expense			576,895				476,068				1,076,466				965,430
				Income before taxes			447,963				279,716				756,616				499,394
				Income taxes			125,605				90,967				227,985				159,690
				Net income		$	322,358				188,749			$	528,631				339,704
				Net income available to common shareholders
				Basic		$	297,164				173,588			$	487,283				310,026
				Diluted			297,179				173,597				487,308				310,037
				Net income per common share
				Basic		$	2.43				1.47			$	4.04				2.63
				Diluted			2.42				1.46				4.02				2.61
				Cash dividends per common share		$	.70				.70			$	1.40				1.40
				Average common shares outstanding
				Basic			122,181				118,054				120,699				117,910
				Diluted			122,796				118,878				121,332				118,569

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

						Six months ended June 30
In thousands						2011				2010
Cash flows from operating activities				Net income		$	528,631				339,704
				Adjustments to reconcile net income to net cash provided by operating activities
				Provision for credit losses			138,000				190,000
				Depreciation and amortization of premises and equipment			38,370				34,045
				Amortization of capitalized servicing rights			26,742				28,908
				Amortization of core deposit and other intangible assets			27,054				31,308
				Provision for deferred income taxes			(18,201	)			(22,923	)
				Asset write-downs			48,032				51,510
				Net (gain) loss on sales of assets			(181,318	)			1,420
				Net change in accrued interest receivable, payable			4,035				(2,248	)
				Net change in other accrued income and expense			23,766				155,403
				Net change in loans originated for sale			167,857				227,734
				Net change in trading account assets and liabilities			60,210				(6,091	)
				Net cash provided by operating activities			863,178				1,028,770
Cash flows from investing activities				Proceeds from sales of investment securities
				Available for sale			1,909,223				14,870
				Other			71,729				49,463
				Proceeds from maturities of investment securities
				Available for sale			751,314				729,562
				Held to maturity			114,913				77,524
				Purchases of investment securities
				Available for sale			(1,609,272	)			(401,246	)
				Held to maturity			(13,151	)			(987,993	)
				Other			(1,249	)			(6,781	)
				Net (increase) decrease in loans and leases			(454,782	)			757,032
				Net decrease in interest-bearing deposits at banks			432,037				15,509
				Net increase in agreements to resell securities			(365,000	)			—
				Other investments, net			(10,249	)			(21,152	)
				Additions to capitalized servicing rights			(6,935	)			(95	)
				Capital expenditures, net			(13,976	)			(23,403	)
				Acquisitions, net of cash acquired
				Banks and bank holding companies			178,940				—
				Purchase of Wilmington Trust Corporation preferred stock			(330,000	)			—
				Other, net			186,771				40,723
				Net cash provided by investing activities			840,313				244,013
Cash flows from financing activities				Net increase in deposits			566,316				82,464
				Net decrease in short-term borrowings			(528,035	)			(283,616	)
				Payments on long-term borrowings			(1,331,316	)			(1,106,386	)
				Proceeds from issuance of preferred stock			495,000				—
				Redemption of preferred stock			(370,000	)			—
				Dividends paid — common			(173,135	)			(167,090	)
				Dividends paid — preferred			(20,046	)			(20,113	)
				Other, net			56,885				31,502
				Net cash used by financing activities			(1,304,331	)			(1,463,239	)
				Net increase (decrease) in cash and cash equivalents			399,160				(190,456	)
				Cash and cash equivalents at beginning of period			933,755				1,246,342
				Cash and cash equivalents at end of period		$	1,332,915				1,055,886
Supplemental disclosure of cash flow information				Interest received during the period		$	1,366,981				1,382,432
				Interest paid during the period			205,514				248,214
				Income taxes paid during the period			266,240				145,202
Supplemental schedule of noncash investing and financing activities				Real estate acquired in settlement of loans Acquisitions:		$	45,774				141,168
				Fair value of:
				Assets acquired (noncash)			10,666,102				—
				Liabilities assumed			10,044,555				—
				Common stock issued			405,557				—
				Retirement of Wilmington Trust Corporation preferred stock			330,000				—
				Increase (decrease) from consolidation of securitization trusts:
				Loans			—				423,865
				Investment securities — available for sale			—				(360,471	)
				Long-term borrowings			—				65,419
				Accrued interest and other			—				2,025

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

																						Accumulated
																						other
										Common				Additional								comprehensive
		Preferred				Common				stock				paid-in				Retained				income				Treasury
In thousands, except per share		stock				stock				issuable				capital				earnings				(loss), net				stock				Total
2010
Balance — January 1, 2010		$	730,235				60,198				4,342				2,442,947				5,076,884				(335,997	)			(225,702	)			7,752,907
Comprehensive income:
Net income			—				—				—				—				339,704				—				—				339,704
Other comprehensive income, net of tax and reclassification adjustments:
Unrealized gains on investment securities			—				—				—				—				—				136,766				—				136,766
Defined benefit plans liability adjustment			—				—				—				—				—				2,175				—				2,175
Unrealized gain on terminated cash flow hedge			—				—				—				—				—				(141	)			—				(141	)
																															478,504
Preferred stock cash dividends			—				—				—				—				(20,113	)			—				—				(20,113	)
Amortization of preferred stock discount			5,115				—				—				—				(5,115	)			—				—				—
Repayment of management stock ownership program receivable			—				—				—				1,838				—				—				—				1,838
Stock-based compensation plans:
Compensation expense, net			—				—				—				(13,571	)			—				—				40,886				27,315
Exercises of stock options, net			—				—				—				(21,997	)			—				—				49,400				27,403
Directors’ stock plan			—				—				—				(232	)			—				—				787				555
Deferred compensation plans, net, including dividend equivalents			—				—				(265	)			(292	)			(96	)			—				604				(49	)
Other			—				—				—				914				—				—				—				914
Common stock cash dividends — $1.40 per share			—				—				—				—				(167,430	)			—				—				(167,430	)
Balance — June 30, 2010		$	735,350				60,198				4,077				2,409,607				5,223,834				(197,197	)			(134,025	)			8,101,844
2011
Balance — January 1, 2011		$	740,657				60,198				4,189				2,398,615				5,426,701				(205,220	)			(67,445	)			8,357,695
Comprehensive income:
Net income			—				—				—				—				528,631				—				—				528,631
Other comprehensive income, net of tax and reclassification adjustments:
Unrealized losses on investment securities			—				—				—				—				—				(27,892	)			—				(27,892	)
Defined benefit plans liability adjustment			—				—				—				—				—				4,288				—				4,288
Unrealized gain on terminated cash flow hedge			—				—				—				—				—				(141	)			—				(141	)
Foreign currency translation adjustment			—				—				—				—				—				196				—				196
																															505,082
Acquisition of Wilmington Trust Corporation - common stock issued			—				2,348				—				403,209				—				—				—				405,557
Partial redemption of Series A preferred stock			(370,000	)			—				—				—				—				—				—				(370,000	)
Conversion of Series B preferred stock into 433,144 shares of common stock			(26,500	)			192				—				21,754				—				—				4,554				—
Issuance of Series D preferred stock			500,000				—				—				(5,000	)			—				—				—				495,000
Preferred stock cash dividends			—				—				—				—				(20,046	)			—				—				(20,046	)
Amortization of preferred stock discount			16,744				—				—				—				(16,744	)			—				—				—
Stock-based compensation plans:
Compensation expense, net			—				27				—				(10,382	)			—				—				31,666				21,311
Exercises of stock options, net			—				12				—				(8,948	)			—				—				30,106				21,170
Directors’ stock plan			—				—				—				(49	)			—				—				612				563
Deferred compensation plans, net, including dividend equivalents			—				—				(159	)			(219	)			(94	)			—				507				35
Other			—				—				—				1,022				—				—				—				1,022
Common stock cash dividends — $1.40 per share			—				—				—				—				(173,195	)			—				—				(173,195	)
Balance — June 30, 2011		$	860,901				62,777				4,030				2,800,002				5,745,253				(228,769	)			—				9,244,194

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 2010 Annual Report. In the opinion of management, all adjustments necessary for a fair presentation have been made and were all of a normal recurring nature.

2. Acquisitions

On May 16, 2011, M&T acquired all of the outstanding common stock of Wilmington Trust Corporation (“Wilmington Trust”), headquartered in Wilmington, Delaware, in a stock-for-stock transaction. Wilmington Trust operated 55 banking offices in Delaware and Pennsylvania at the date of acquisition. The results of operations acquired in the Wilmington Trust transaction have been included in the Company’s financial results since May 16, 2011. Wilmington Trust shareholders received .051372 shares of M&T common stock in exchange for each share of Wilmington Trust common stock, resulting in M&T issuing a total of 4,694,486 common shares with an acquisition date fair value of $406 million.

     The Wilmington Trust 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 approximately $10.8 billion, including $6.4 billion of loans and leases (including approximately $3.2 billion of commercial real estate loans, $1.4 billion of commercial loans and leases, $1.1 billion of consumer loans and $680 million of residential real estate loans). Liabilities assumed aggregated $10.0 billion, including $8.9 billion of deposits. The common stock issued in the transaction added $406 million to M&T’s common shareholders’ equity. Immediately prior to the closing of the Wilmington Trust transaction, M&T redeemed the $330 million of preferred stock issued by Wilmington Trust as part of the Troubled Asset Relief Program — Capital Purchase Program of the U.S. Department of Treasury (“U.S. Treasury”). In connection with the acquisition, the Company recorded $176 million of core deposit and other intangible assets. The core deposit and other intangible assets are generally being amortized over periods of 5 to 7 years using an accelerated method. There was no goodwill recorded as a result of the transaction; however, a non-taxable gain of $65 million was realized, which represented the excess of the fair value of assets acquired less liabilities assumed over consideration exchanged. The acquisition of Wilmington Trust forms one of the largest banks in the Eastern United States, adding to M&T’s market-leading position in the Mid-Atlantic region, including the leading deposit market share in Delaware.

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

NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisitions, continued

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

		May 16, 2011
		(in thousands)
Contractually required principal and interest at acquisition		$	8,336,755
Contractual cash flows not expected to be collected			(1,209,749	)
Expected cash flows at acquisition			7,127,006
Interest component of expected cash flows			(716, 576	)
Basis in acquired loans at acquisition — estimated fair value		$	6,410,430

      Included in the above table is information related to loans for which there was specific evidence of credit deterioration at the acquisition date and for which it was deemed probable that the Company would be unable to collect all contractually required principal and interest payments (“purchased impaired loans”). Specifically, contractually required principal and interest, cash flows expected to be collected and estimated fair value of purchased impaired loans were $1,419,672,000, $747,265,000 and $707,907,000, respectively.

     The consideration paid for Wilmington Trust’s common equity and the amounts of acquired identifiable assets and liabilities assumed as of the acquisition date were as follows:

		(in thousands)
Purchase price:
Value of:
Common shares issued (4,694,486 shares)		$	405,557
Preferred stock purchased from U.S. Treasury			330,000
Total purchase price			735,557
Identifiable assets:
Cash and due from banks			178,940
Interest-bearing deposits at banks			2,606,265
Other short-term investments			57,817
Investment securities			510,390
Loans and leases			6,410,430
Core deposit and other intangibles			176,194
Other assets			905,006
Total identifiable assets			10,845,042
Liabilities:
Deposits			8,864,161
Short-term borrowings			147,752
Long-term borrowings			600,830
Other liabilities			431,812
Total liabilities			10,044,555
Net gain resulting from acquisition		$	64,930

NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisitions, continued

     The following table discloses the impact of Wilmington Trust (excluding the impact of the merger-related gain and expenses) since the acquisition on May 16, 2011 through the end of the second quarter of 2011. The table also presents certain pro forma information as if Wilmington Trust had been acquired on January 1, 2010. These results combine the historical results of Wilmington Trust 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 indicative of what would have occurred had the acquisition taken place on the indicated date. In particular, no adjustments have been made to eliminate the amount of Wilmington Trust’s provision for credit losses of $42 million in 2011 and $283 million in 2010 or the impact of other-than-temporary impairment losses recognized by Wilmington Trust of $5 million in 2011 and $26 million in 2010 that may not have been necessary had the acquired loans and investment securities been recorded at fair value as of the beginning of 2010. Furthermore, expenses related to preparing for systems conversions and other costs of integration of $41 million and the $65 million gain recorded in connection with the acquisition are included in the 2011 periods in which such costs were incurred and gain recognized. 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 that follow.

		Actual since				Pro forma
		acquisition				Six months ended
		through				June 30,
		June 30, 2011				2011				2010
		(in thousands)
Total revenues (a)		$	79,140				2,208,188				2,002,497
Net income			3,068				480,948				189,246

NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. Acquisitions, continued

     On November 5, 2010, M&T Bank, M&T’s principal banking subsidiary, entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (“FDIC”) to assume all of the deposits, except certain brokered deposits, and acquire certain assets of K Bank, based in Randallstown, Maryland. As part of the transaction, M&T Bank entered into a loss-share arrangement with the FDIC whereby M&T Bank will be reimbursed by the FDIC for most losses it incurs on the acquired loan portfolio. The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at estimated fair value on the acquisition date. Assets acquired in the transaction totaled approximately $556 million, including $154 million of loans and $186 million in cash, and liabilities assumed aggregated $528 million, including $491 million of deposits. In accordance with GAAP, M&T Bank recorded an after-tax gain on the transaction of $17 million ($28 million before taxes). The gain reflected the amount of financial support and indemnification against loan losses that M&T Bank obtained from the FDIC. There was no goodwill or other intangible assets recorded in connection with this transaction. The operations obtained in the K Bank acquisition transaction did not have a material impact on the Company’s consolidated financial position or results of operations.

     In connection with the Wilmington Trust and K Bank acquisitions, the Company incurred merger-related expenses related to systems conversions and other costs of integrating and conforming acquired operations with and into the Company. Those expenses consisted largely of professional services and other temporary help fees associated with preparing for systems conversions and/or integration of operations; costs related to termination of existing contractual arrangements of Wilmington Trust to purchase various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; travel costs; and printing, postage, supplies and other costs of completing the transactions and commencing operations in new markets and offices. There were no merger-related expenses during the three months or six months ended June 30, 2010. The Company expects to incur additional merger-related expenses during the remainder of 2011. As of June 30, 2011, the remaining unpaid portion of incurred merger-related expenses was $24 million. A summary of merger-related expenses included in the consolidated statement of income follows.

		Three months ended				Six months ended
		June 30, 2011				June 30, 2011
		(in thousands)
Salaries and employee benefits		$	15,305			$	15,312
Equipment and net occupancy			25				104
Printing, postage and supplies			318				465
Other costs of operations			21,348				25,410
		$	36,996			$	41,291

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, 2011
Investment securities available for sale:
U.S. Treasury and federal agencies		$	111,836				1,119				2			$	112,953
Obligations of states and political subdivisions			66,709				821				39				67,491
Mortgage-backed securities:
Government issued or guaranteed			2,965,034				60,965				2,981				3,023,018
Privately issued residential			1,507,748				9,720				211,266				1,306,202
Privately issued commercial			21,094				—				3,861				17,233
Collateralized debt obligations			44,268				18,800				1,467				61,601
Other debt securities			217,812				5,738				28,014				195,536
Equity securities			92,380				14,526				451				106,455
			5,026,881				111,689				248,081				4,890,489
Investment securities held to maturity:
Obligations of states and political subdivisions			184,595				4,239				149				188,685
Mortgage-backed securities:
Government issued or guaranteed			730,785				21,978				—				752,763
Privately issued			292,034				357				102,615				189,776
Other debt securities			12,272				—				—				12,272
			1,219,686				26,574				102,764				1,143,496
Other securities			382,090				—				—				382,090
Total		$	6,628,657				138,263				350,845			$	6,416,075
December 31, 2010
Investment securities available for sale:
U.S. Treasury and federal agencies		$	61,772				1,680				18			$	63,434
Obligations of states and political subdivisions			59,921				561				57				60,425
Mortgage-backed securities:
Government issued or guaranteed			3,146,054				161,298				1,111				3,306,241
Privately issued residential			1,677,064				10,578				252,081				1,435,561
Privately issued commercial			25,357				—				2,950				22,407
Collateralized debt obligations			95,080				24,754				9,078				110,756
Other debt securities			310,017				26,883				38,000				298,900
Equity securities			119,112				5,098				8,442				115,768
			5,494,377				230,852				311,737				5,413,492
Investment securities held to maturity:
Obligations of states and political subdivisions			191,119				1,944				694				192,369
Mortgage-backed securities:
Government issued or guaranteed			808,108				14,061				—				822,169
Privately issued			312,537				—				114,397				198,140
Other debt securities			12,575				—				—				12,575
			1,324,339				16,005				115,091				1,225,253
Other securities			412,709				—				—				412,709
Total		$	7,231,425				246,857				426,828			$	7,051,454

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

     Gross realized gains on investment securities were $111 million and $150 million for the three-month and six-month periods ended June 30, 2011. Gross realized losses were not significant in 2011. Gross realized gains and losses on investment securities were not significant during the three- and six-month periods ended June 30, 2010. During the second quarter of 2011, the Company sold residential mortgage-backed securities guaranteed by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”)having an aggregate amortized cost of approximately $1.0 billion which resulted in a gain of $66 million (pre-tax). The Company also sold trust preferred securities and collateralized debt obligations during the second quarter of 2011 having an aggregate amortized cost of $136 million and $100 million, respectively, which resulted in gains of $25 million (pre-tax) and $20 million (pre-tax), respectively. During the first quarter of 2011, the Company sold residential mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac having an aggregate amortized cost of approximately $484 million which resulted in a gain of $39 million (pre-tax).

     The Company recognized $27 million and $43 million of pre-tax other-than-temporary impairment losses during the three- and six-month periods ended June 30, 2011, respectively, related to privately issued mortgage-backed securities. The impairment charges were recognized in light of deterioration of real estate values and continued high levels of delinquencies and charge-offs of underlying mortgage loans collateralizing those securities. Other-than-temporary impairment losses on investment securities of $22 million and $49 million (pre-tax) were recognized by the Company for the three- and six-month periods ended June 30, 2010. Approximately $12 million of the losses recognized in the second quarter of 2010 related to American Depositary Shares of Allied Irish Banks, p.l.c. (“AIB ADSs”) which were obtained in M&T’s acquisition of a subsidiary of AIB in 2003. The remaining losses in 2010 related to certain privately issued residential mortgage-backed securities and collateralized debt obligations backed by pooled trust preferred securities. The impairment charges related to the AIB ADSs were recognized due to mounting credit and other losses incurred by AIB and significant dilution of AIB common shareholders based on the Irish government’s significant ownership position. The impairment charges related to the privately issued residential mortgage-backed securities 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. The other-than-temporary impairment losses on debt securities 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. The following table displays changes in credit losses for debt securities recognized in earnings for the three months and six months ended June 30, 2011 and 2010.

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

		Three months ended June 30
		2011				2010
		(in thousands)
Beginning balance		$	322,719				308,017
Additions for credit losses not previously recognized			26,530				10,387
Reductions for increases in cash flows			(4,881	)			(173	)
Reductions for realized losses			(46,227	)			(3,968	)
Ending balance		$	298,141				314,263

		Six months ended June 30
		2011				2010
		(in thousands)
Beginning balance		$	327,912				284,513
Additions for credit losses not previously recognized			42,571				37,189
Reductions for increases in cash flows			(5,020	)			(342	)
Reductions for realized losses			(67,322	)			(7,097	)
Ending balance		$	298,141				314,263

     At June 30, 2011, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:

						Estimated
		Amortized cost				fair value
		(in thousands)
Debt securities available for sale:
Due in one year or less		$	26,403				26,521
Due after one year through five years			119,212				121,204
Due after five years through ten years			16,687				18,081
Due after ten years			278,323				271,775
			440,625				437,581
Mortgage-backed securities available for sale			4,493,876				4,346,453
		$	4,934,501				4,784,034
Debt securities held to maturity:
Due in one year or less		$	23,428				23,607
Due after one year through five years			20,126				20,775
Due after five years through ten years			134,952				138,114
Due after ten years			18,361				18,461
			196,867				200,957
Mortgage-backed securities held to maturity			1,022,819				942,539
		$	1,219,686				1,143,496

NOTES TO FINANCIAL STATEMENTS, CONTINUED

3. Investment securities, continued

     A summary of investment securities that as of June 30, 2011 and December 31, 2010 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, 2011
Investment securities available for sale:
U.S. Treasury and federal agencies		$	1,903				(2	)			—				—
Obligations of states and political subdivisions			1,444				(6	)			2,323				(33	)
Mortgage-backed securities:
Government issued or guaranteed			632,513				(2,937	)			3,010				(44	)
Privately issued residential			146,893				(1,859	)			859,930				(209,407	)
Privately issued commercial			—				—				17,233				(3,861	)
Collateralized debt obligations			3,039				(19	)			5,544				(1,448	)
Other debt securities			51,652				(935	)			101,588				(27,079	)
Equity securities			3,375				(451	)			—				—
			840,819				(6,209	)			989,628				(241,872	)
Investment securities held to maturity:
Obligations of states and political subdivisions			22,591				(108	)			451				(41	)
Privately issued mortgage-backed securities			322				(123	)			184,970				(102,492	)
			22,913				(231	)			185,421				(102,533	)
Total		$	863,732				(6,440	)			1,175,049				(344,405	)

		Less than 12 months								12 months or more
						Unrealized								Unrealized
		Fair value				losses				Fair value				losses
						(in thousands)
December 31, 2010
Investment securities available for sale:
U.S. Treasury and federal agencies		$	27,289				(18	)			—				—
Obligations of states and political subdivisions			3,712				(18	)			2,062				(39	)
Mortgage-backed securities:
Government issued or guaranteed			68,507				(1,079	)			2,965				(32	)
Privately issued residential			61,192				(1,054	)			1,057,315				(251,027	)
Privately issued commercial			—				—				22,407				(2,950	)
Collateralized debt obligations			12,462				(6,959	)			6,004				(2,119	)
Other debt securities			2,134				(10	)			88,969				(37,990	)
Equity securities			5,326				(3,721	)			673				(4,721	)
			180,622				(12,859	)			1,180,395				(298,878	)
Investment securities held to maturity:
Obligations of states and political subdivisions			76,318				(638	)			467				(56	)
Privately issued mortgage-backed securities			—				—				198,140				(114,397	)
			76,318				(638	)			198,607				(114,453	)
Total		$	256,940				(13,497	)			1,379,002				(413,331	)