1
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, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9861
FIRST EMPIRE STATE CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0968385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One M & T Plaza, Buffalo, New York 14240
(Address of principal executive offices) (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. Yes x No
--- ---
Number of shares of the registrant's Common Stock, $5 par value,
outstanding as of the close of business on May 2, 1994: 6,835,347
shares.
2
FIRST EMPIRE STATE CORPORATION
------------------------------
FORM 10-Q
---------
For the Quarterly Period Ended March 31, 1994
----------------------------------------------
Table of Contents of Information Required in Report Page
- - --------------------------------------------------- ----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31,1994 and December 31, 1993 3
Consolidated Statement of Income -
Three months ended March 31, 1994 and 1993 4
Consolidated Statement of Cash Flows -
Three months ended March 31, 1994 and 1993 5
Consolidated Statement of Changes in
Stockholders' Equity - Three months ended
March 31, 1994 and 1993 6
Consolidated Summary of Changes in Allowance for
Possible Credit Losses - Three months ended
March 31, 1994 and 1993 6
Notes to Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-16
Part II. Other Information 17-18
Signatures 19
Exhibit Index 20
Exhibit No. 11 21
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET March 31, December 31,
dollars in thousands, except per share 1994 1993
(unaudited)
- - --------------------------------------------------------------------------------------------------------------
Assets Cash and due from banks $284,644 195,792
Money-market assets
Interest-bearing deposits at banks 145 55,044
Federal funds sold and
agreements to resell securities 618,296 329,429
Trading account 11,220 9,815
- - -------------------------------------------------------------------------------------------------------------
Total money-market assets 629,661 394,288
- - -------------------------------------------------------------------------------------------------------------
Investment securities
Available for sale (cost: $1,902,353 at March 31, 1994;
$2,158,262 at December 31, 1993) 1,889,887 2,174,067
Held to maturity (market value: $226,339
at March 31, 1994; $223,617 at December 31, 1993) 229,379 223,331
Other (market value: $33,891 at March 31, 1994;
$31,754 at December 31, 1993) 33,891 31,754
- - -------------------------------------------------------------------------------------------------------------
Total investment securities 2,153,157 2,429,152
- - -------------------------------------------------------------------------------------------------------------
Loans and leases 7,421,457 7,439,059
Unearned discount (181,588) (177,960)
Allowance for possible credit losses (213,041) (195,878)
- - -------------------------------------------------------------------------------------------------------------
Loans and leases, net 7,026,828 7,065,221
- - -------------------------------------------------------------------------------------------------------------
Premises and equipment 133,588 134,874
Accrued interest and other assets 183,744 145,631
- - -------------------------------------------------------------------------------------------------------------
Total assets $10,411,622 10,364,958
- - -------------------------------------------------------------------------------------------------------------
Liabilities Noninterest-bearing deposits $989,630 1,052,258
NOW accounts 758,714 764,690
Savings deposits 3,419,007 3,364,983
Time deposits 2,054,708 1,982,272
Deposits at foreign office 107,025 189,058
- - -------------------------------------------------------------------------------------------------------------
Total deposits 7,329,084 7,353,261
- - -------------------------------------------------------------------------------------------------------------
Federal funds purchased and agreements
to repurchase securities 1,306,951 1,381,335
Other short-term borrowings 852,804 720,332
Accrued interest and other liabilities 122,243 110,446
Long-term borrowings 75,000 75,000
Obligations under capital leases 565 590
- - -------------------------------------------------------------------------------------------------------------
Total liabilities 9,686,647 9,640,964
- - -------------------------------------------------------------------------------------------------------------
Stockholders' equity Preferred stock, $1 par, 1,000,000 shares authorized,
40,000 shares issued, stated at aggregate
liquidation value 40,000 40,000
Common stock, $5 par, 15,000,000 shares
authorized, 8,097,472 shares issued 40,487 40,487
Surplus 97,810 97,787
Undivided profits 618,619 595,322
Unrealized investment gains (losses), net (6,943) 9,148
Treasury stock - common, at cost - 1,260,862 shares
at March 31, 1994; 1,218,347 at December 31, 1993 (64,998) (58,750)
- - -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 724,975 723,994
- - -------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $10,411,622 10,364,958
- - -------------------------------------------------------------------------------------------------------------
4
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
amounts in thousands, except per share
Three months ended March 31
1994 1993
- - -------------------------------------------------------------------------------------------------------------
Interest income Loans and leases, including fees $148,483 152,843
Money-market assets
Deposits at banks 154 1,510
Federal funds sold and agreements to resell securities 1,443 6,006
Trading account 132 269
Investment securities
Fully taxable 26,242 22,385
Exempt from federal taxes 716 683
- - -------------------------------------------------------------------------------------------------------------
Total interest income 177,170 183,696
- - -------------------------------------------------------------------------------------------------------------
Interest expense NOW accounts 2,846 3,651
Savings deposits 20,689 24,218
Time deposits 18,747 28,399
Deposits at foreign office 928 838
Short-term borrowings 14,501 9,390
Long-term borrowings and capital leases 1,538 1,540
- - -------------------------------------------------------------------------------------------------------------
Total interest expense 59,249 68,036
- - -------------------------------------------------------------------------------------------------------------
Net interest income 117,921 115,660
Provision for possible credit losses 19,862 18,315
- - -------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible credit losses 98,059 97,345
- - -------------------------------------------------------------------------------------------------------------
Other income Trust income 5,435 5,668
Service charges on deposit accounts 8,893 7,321
Merchant discount and other credit card fees 1,896 1,984
Trading account profits (208) 754
Gain on sales of bank investment securities - 823
Other revenues from operations 12,433 10,317
- - -------------------------------------------------------------------------------------------------------------
Total other income 28,449 26,867
- - -------------------------------------------------------------------------------------------------------------
Other expense Salaries and employee benefits 39,831 39,915
Equipment and net occupancy 12,812 11,839
Printing, postage and supplies 3,187 3,612
Deposit insurance 4,144 4,539
Other costs of operations 19,241 23,534
- - -------------------------------------------------------------------------------------------------------------
Total other expense 79,215 83,439
- - -------------------------------------------------------------------------------------------------------------
Income before income taxes 47,293 40,773
Applicable income taxes 19,665 16,451
Net income $27,628 24,322
- - -------------------------------------------------------------------------------------------------------------
Net income per common share
Primary $3.77 3.31
Fully diluted 3.64 3.21
Cash dividends per common share 0.50 0.40
Average common shares outstanding
Primary 7,083 7,069
Fully diluted 7,590 7,586
5
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
dollars in thousands
Three months ended March 31
1994 1993
- - ----------------------------------------------------------------------------------------------------------------
Cash flows from Net income $27,628 24,322
operating activities Adjustments to reconcile net income to net cash
provided by operating activities
Provision for possible credit losses 19,862 18,315
Depreciation and amortization of premises
and equipment 4,291 4,119
Provision for deferred income taxes (10,465) (7,171)
Asset write-downs 1,269 4,010
Net gain on sales of assets (2,097) (823)
Net change in accrued interest receivable, payable 2,056 2,721
Net change in other accrued income and expense 6,470 22,403
Net change in loans held for sale 118,785 61,452
Net change in trading account assets (1,405) 30,927
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 166,394 160,275
- - -------------------------------------------------------------------------------------------------------------
Cash flows from Proceeds from maturities of investment securities 256,736 182,402
investing activities Purchases of investment securities (16,375) (190,626)
Net (increase) decrease in interest-bearing
deposits at banks 54,899 (55,000)
Net (increase) decrease in loans and leases (102,748) 27,021
Capital expenditures, net (3,005) (4,354)
Other, net (432) 1,336
- - -------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 189,075 (39,221)
- - -------------------------------------------------------------------------------------------------------------
Cash flows from Net decrease in deposits (24,092) (288,836)
financing activities Net increase in short-term borrowings 58,088 1,082,019
Payments on long-term borrowings (25) (23)
Purchases of treasury stock (6,347) -
Dividends paid - common (3,431) (2,740)
Dividends paid - preferred (900) (900)
Other, net (1,043) 3,533
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 22,250 793,053
- - -------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents $377,719 914,107
Cash and cash equivalents at
beginning of quarter 525,221 576,967
Cash and cash equivalents at end of quarter $902,940 1,491,074
- - -------------------------------------------------------------------------------------------------------------
Supplemental Interest received during the quarter $180,861 179,256
disclosure of cash Interest paid during the quarter 59,234 59,400
flow information Income taxes paid during the quarter 13,544 3,446
- - --------------------------------------------------------------------------------------------------------------
Supplemental schedule
of noncash investing
and financing
activities Real estate acquired in settlement of loans $2,774 2,614
- - ---------------------------------------------------------------------------------------------------------------
6
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
dollars in thousands, except per share
Unrealized
investment
gains
Preferred Common Undivided (losses), Treasury
stock stock Surplus profits net stock Total
- - ---------------------------------------------------------------------------------------------------------------
1993
Balance - January 1, 1993 $40,000 40,487 96,816 509,984 - (60,492) $626,795
Net income - - - 24,322 - - 24,322
Preferred stock cash dividends - - - (900) - - (900)
Common stock cash dividends
- $.40 per share - - - (2,740) - - (2,740)
Exercise of stock options - - 288 - - 1,365 1,653
- - ---------------------------------------------------------------------------------------------------------------
Balance - March 31, 1993 $40,000 40,487 97,104 530,666 - (59,127) $649,130
- - ---------------------------------------------------------------------------------------------------------------
1994
Balance - January 1, 1994 $40,000 40,487 97,787 595,322 9,148 (58,750) $723,994
Net income - - - 27,628 - - 27,628
Preferred stock cash dividends - - - (900) - - (900)
Common stock cash dividends
- $.50 per share - - - (3,431) - - (3,431)
Exercise of stock options - - 23 - - 99 122
Purchases of treasury stock - - - - - (6,347) (6,347)
Unrealized gains (losses)
on investment securities
available for sale, net - - - - (16,091) - (16,091)
- - ----------------------------------------------------------------------------------------------------------------
Balance - March 31, 1994 $40,000 40,487 97,810 618,619 (6,943) (64,998) $724,975
- - ----------------------------------------------------------------------------------------------------------------
CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR POSSIBLE CREDIT LOSSES (unaudited)
dollars in thousands
Three months ended
March 31
1994 1993
- - -----------------------------------------------------------------------------------------------------------------
Beginning balance $195,878 151,690
Provision for possible credit losses 19,862 18,315
Net charge-offs
Charge-offs (9,147) (9,948)
Recoveries 6,448 1,753
- - ---------------------------------------------------------------------------------------------------------------
Total net charge-offs (2,699) (8,195)
- - ---------------------------------------------------------------------------------------------------------------
Ending balance $213,041 161,810
- - ---------------------------------------------------------------------------------------------------------------
7
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
The consolidated financial statements were compiled in accordance with the
accounting policies set forth on pages 35 and 36 of the Company's 1993
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. Certain reclassifications have been made to prior period financial
statements to conform to current period presentation.
2. Investment securities
The amortized cost and estimated fair value of investment securities were
as follows:
Estimated
Amortized fair
(in thousands) cost value
----------- ----------
March 31, 1994
Investment securities
available for sale:
Mortgage-backed securities
Government issued
or guaranteed $1,050,904 1,037,556
Other 808,896 798,142
Other debt securities 31,540 32,038
Equity securities 11,013 22,151
---------- ----------
1,902,353 1,889,887
---------- ----------
Investment securities
held to maturity:
U.S. Treasury and
federal agency 173,098 169,689
Obligations of states and
political subdivisions 55,373 55,797
Other debt securities 908 853
---------- -----------
229,379 226,339
---------- -----------
Other securities 33,891 33,891
---------- ----------
Total $2,165,623 2,150,117
========== ==========
December 31, 1993
Investment securities
available for sale:
Mortgage-backed securities
Government issued
or guaranteed $1,210,921 1,214,202
Other 896,362 895,902
Other debt securities 39,893 40,831
Equity securities 11,086 23,132
---------- ----------
2,158,262 2,174,067
---------- ----------
Investment securities
held to maturity:
U.S. Treasury and
federal agency 173,193 172,871
Obligations of states and
political subdivisions 49,230 49,880
Other debt securities 908 866
---------- ----------
223,331 223,617
---------- ----------
Other securities 31,754 31,754
---------- ----------
Total $2,413,347 2,429,438
========== ==========
8
3. Interest rate swap contracts
At March 31, 1994 the Company had outstanding currently effective interest
rate swap contracts designated for hedging purposes with a notional amount
of approximately $1.2 billion. The net effect of interest rate swaps was to
increase net interest income by $6.6 million and $8.4 million during the
three months ended March 31, 1994 and 1993, respectively. As of March 31,
1994, the Company had also entered into forward swaps with an aggregate
notional amount of $775 million. These forward interest rate swap
commitments had no effect on net income. The Company estimates that as of
March 31, 1994, it would have had to pay approximately $50 million to
terminate all interest rate swap contracts. Such estimate of the fair value
of the swap contracts was based upon market quotes available to the
Company. However, since all swaps have been entered into as hedging
transactions, management believes that the estimated amount noted above is
substantially offset by increases in the value of or the interest on hedged
loans and deposits and, accordingly, is not recognized in the consolidated
financial statements.
4. Subsequent events
On April 1, 1994 the Company announced that it had entered into a
definitive agreement to acquire Ithaca Bancorp, Inc. of Ithaca, New York
("Ithaca Bancorp"). Upon consummation of the transaction, Ithaca Bancorp's
savings bank subsidiary, Citizens Savings Bank, F.S.B., will be merged into
the Company's commercial bank subsidiary, Manufacturers and Traders Trust
Company ("M&T Bank"). The Company will pay the holders of Ithaca Bancorp's
common stock cash consideration of $19 per share, subject to increase or
decrease based on the level of Ithaca Bancorp's stockholders' equity and
loan loss reserves, after various adjustments specified in the agreement,
at or near the closing. Assuming no adjustment to the per share price, the
aggregate cash consideration will be approximately $46.4 million.
Consummation of the transaction is subject to a number of conditions,
including regulatory approvals and the approval of Ithaca Bancorp's
stockholders. Subject to the satisfaction of all conditions, it is
anticipated that the transaction will be completed in the fourth quarter of
1994. The transaction will be accounted for under the purchase method of
accounting. Citizens Savings Bank, F.S.B. operates twelve banking offices
in central and southern New York. At December 31, 1993, Ithaca Bancorp
reported total assets and total deposits of $447 million and $333 million,
respectively, and stockholders' equity of $24.2 million.
On April 9, 1994, M&T Bank entered into an agreement to acquire from
Chemical Bank seven branch offices in the Hudson Valley region of New York
State and assume approximately $175 million deposits associated with the
branches. Consummation of the transaction is subject to a number of
conditions, including regulatory approvals, but is anticipated to occur in
the second half of 1994.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
OVERVIEW
Net income for First Empire State Corporation ("the Company" or "First Empire")
was $27.6 million or $3.77 per common share in the first quarter of 1994, up 14%
from $24.3 million or $3.31 per common share in the first quarter of 1993. The
Company earned $26.6 million or $3.62 per common share in the fourth quarter of
1993. The rate of return on average assets in the first quarter of 1994 was
1.11%, compared to .99% in the year-earlier quarter and .98% in the fourth
quarter of 1993. The return on average common stockholders' equity was 15.68%
and 15.88% in the first quarter of 1994 and 1993, respectively, and 15.39% in
the fourth quarter of 1993.
On April 1, 1994 First Empire announced that it had entered into a definitive
agreement to acquire Ithaca Bancorp, Inc. of Ithaca, New York ("Ithaca
Bancorp"). Upon consummation of the transaction, Ithaca Bancorp's savings bank
subsidiary, Citizens Savings Bank, F.S.B., will be merged into First Empire's
commercial bank subsidiary, Manufacturers and Traders Trust Company ("M&T
Bank"). First Empire will pay the holders of Ithaca Bancorp's common stock cash
consideration of $19 per share, subject to increase or decrease based on the
level of Ithaca Bancorp's stockholders' equity and loan loss reserves, after
various adjustments specified in the agreement, at or near the closing.
Assuming no adjustment to the per share price, the aggregate cash consideration
will be approximately $46.4 million. Consummation of the transaction is subject
to a number of conditions, including regulatory approvals and the approval of
Ithaca Bancorp's stockholders. Subject to the satisfaction of all conditions,
it is anticipated that the transaction will be completed in the fourth quarter
of 1994.
Citizens Savings Bank, F.S.B. operates twelve banking offices in central and
southern New York. At December 31, 1993, Ithaca Bancorp reported total assets
and total deposits of $447 million and $333 million, respectively, and
stockholders' equity of $24.2 million.
On April 9, 1994, M&T Bank entered into an agreement to acquire from Chemical
Bank seven branches in the Hudson Valley region of New York State and assume
deposits associated with the branches totaling approximately $175 million.
Consummation of the transaction is subject to a number of conditions, including
regulatory approvals, but is anticipated to occur in the second half of 1994.
TAXABLE-EQUIVALENT NET INTEREST INCOME
Taxable-equivalent net interest income increased to $118.9 million in the first
quarter of 1994 from $116.6 million in the corresponding 1993 period. Taxable-
equivalent net interest income was $118.8 million in the fourth quarter of
1993. Average earning assets totaled $9.7 billion in 1994's first quarter,
compared with $9.5 billion in 1993's initial quarter, and $10.4 billion in
the fourth quarter of 1993. The Company's net interest margin, expressed as
an annualized percentage of average earning assets, was 4.99% in the first
quarter of 1994, compared to 4.96% and 4.54% in the first and fourth quarter
of 1993, respectively.
The improvement in the net interest margin in the first quarter of 1994 from the
first quarter of 1993 was due to a widening of the net interest spread, or the
difference between the yield on interest-earning assets and the rate paid on
interest-bearing liabilities, from 4.51% in 1993's initial quarter to 4.56% in
the recent quarter. The increased net interest spread reflects a greater
decline in rates paid on interest-bearing liabilities than in yields on
interest-earning assets. A $732 million decrease in lower-yielding average
money-market assets, offset by increases of $580 million and $289 million in
average investment securities and loans, respectively, contributed to the
increase in the net interest spread.
The 45-basis point increase in net interest margin from the fourth quarter of
1993 to the first quarter of 1994 resulted from a 42-basis point increase from
4.14% in the net interest spread. Such increase was primarily the result of
reductions of discretionary holdings of money-market assets and investment
securities, which generally yield less than loans, of $586 million and $229
million, respectively, and a corresponding decrease in short-term borrowings
used to fund such assets.
10
The interest rate environment in recent years, in particular the historically
high spread between prime and money-market rates, has been favorable to many
banks. However, management believes that changes in the rate environment and
reductions in spreads could adversely impact the Company's net interest margin.
To help lessen the exposure to changing interest rates, the Company has entered
into interest rate swap agreements as hedging transactions. The impact of
currently effective swaps, which had an aggregate notional amount of $1.2
billion at March 31, 1994, is reflected in both the yields on loans and the
rates paid on interest-bearing deposits. The net effect of interest rate swaps
was to widen the Company's net interest spread by 29 basis points in the first
quarter of 1994, 37 basis points in the first quarter of 1993 and 28 basis
points during the fourth quarter of 1993. The aggregate effect of the rate
swaps was to increase net interest income by $6.6 million in the first quarter
of 1994, $8.4 million in the first quarter of 1993, and $6.9 million in the
fourth quarter of 1993. Additionally, the Company has entered into forward-
starting interest rate swaps with an aggregate notional amount of $775 million
at March 31, 1994. The forward-starting swaps had no effect on net income
through March 31, 1994.
Increased average holdings of investment securities as well as growth in average
loans, offset by lower average money-market assets, resulted in a modest
increase in average earning assets to $9.7 billion in the first quarter of 1994
from $9.5 billion in 1993's initial quarter. Average earning assets in 1994's
first quarter declined from 1993's fourth quarter average of $10.4 billion as a
result of lower holdings of money-market assets and investment securities.
Proceeds from the liquidation of such assets were primarily used to reduce
short-term borrowings.
Average loans totaled $7.2 billion in the first quarter of 1994, up $289 million
or 4% from $6.9 billion in the corresponding 1993 period and $108 million or 2%
from $7.1 billion in the fourth quarter of 1993. The table below summarizes
average quarterly changes in the major components of the loan and lease
portfolio.
AVERAGE LOANS AND LEASES
(net of unearned discount)
dollars in millions
Percent increase
(decrease) from
1st Qtr. 1st Qtr. 4th Qtr.
1994 1993 1993
------- ------- -------
Commercial, financial, etc. $ 1,475 3 % 2 %
Real estate - commercial 3,032 8 4
Real estate - consumer 1,425 (6) (5)
Consumer 1,256 11 2
------- ----- -----
Total $ 7,188 4 % 2 %
======= ===== =====
Money-market assets averaged $184 million in 1994's first quarter, significantly
below the $915 million in 1993's first quarter and $770 million in the fourth
quarter of 1993.
Average investment securities totaled $2.3 billion in the first quarter of 1994,
up $580 million from a year earlier but $229 million below the fourth quarter of
1993. The increase from 1993's first quarter was largely achieved through
purchases of collateralized mortgage obligations, other adjustable rate
mortgage-backed securities and shorter-term U.S. Treasury notes, which more than
replaced prepayments of mortgage-backed securities induced by the relatively low
interest rate environment.
Core deposits, which are comprised of noninterest-bearing demand deposits,
interest-bearing transaction accounts, savings deposits and domestic time
deposits under $100,000, provide the Company with a large source of funds at
generally lower interest rates than are available on wholesale funds of similar
expected maturities. Average core deposits in the recent quarter declined to
$6.8 billion or 71% of average interest-earning assets, from $7.4 billion or 78%
in the first quarter of 1993. Average core deposits totaled $6.9 billion or 67%
of average earnings assets in the fourth quarter of 1993. The declines in
average core
11
deposits since the first quarter of 1993 have been primarily in time deposit
accounts as depositors seeking potentially higher returns have redeployed funds
into alternative investment vehicles, such as mutual funds. An analysis of
quarterly changes in the components of average core deposits is presented in the
table below.
AVERAGE CORE DEPOSITS
dollars in millions
Percent increase
(decrease) from
1st Qtr. 1st Qtr. 4th Qtr.
1994 1993 1993
---------- -------- --------
NOW accounts $ 761 3 % (2)%
Savings deposits 3,400 (4) (1)
Time deposits
under $100,000 1,667 (23) (4)
Demand deposits 997 6 (1)
--------- ------ -------
Total $ 6,825 (8)% (2)%
========= ======= =======
In addition to core deposits, the Company uses short-term borrowings from banks,
securities dealers, the Federal Home Loan Bank of New York and others as sources
of funding. Short-term borrowings averaged $1.9 billion in the first quarter of
1994, compared with $1.3 billion and $2.5 billion in the first and fourth
quarter of 1993, respectively. In general, short-term borrowings have been used
to fund the Company's investments in discretionary money-market assets and
investment securities, and to replace deposit outflows. Maturities of money-
market assets, repayments of loans and investment securities, and cash generated
from operations also represent significant sources of liquidity. First Empire's
ability to pay dividends and fund parent company operating expenses is primarily
dependent on the receipt of dividend payments from its banking subsidiaries,
which are subject to various regulatory limitations. Additionally, First Empire
maintains a line of credit with a commercial bank. Management does not
anticipate engaging in any activity, either currently or in the long-term, which
would cause a significant strain on liquidity and believes that currently
available sources of funds are more than sufficient to meet anticipated funding
needs.
PROVISION FOR POSSIBLE CREDIT LOSSES
The provision for possible credit losses in the first quarter of 1994 was $19.9
million, up from $18.3 million in the first quarter of 1993, but below the $21.7
million recorded in 1993's fourth quarter. Net loan charge-offs totaled $2.7
million in 1994's first quarter, compared with $8.2 million and $13.3 million in
the first and fourth quarter of 1993, respectively. Net charge-offs as an
annualized percentage of average loans outstanding were .15% in 1994's initial
quarter, compared with .48% in the first quarter of 1993 and .75% in the fourth
quarter of 1993. Nonperforming loans at $86.8 million represented 1.20% of
total loans at March 31, 1994, down from $109.8 million or 1.59% of total loans
at March 31, 1993, but up from $82.3 million or 1.13% at December 31, 1993.
Nonperforming commercial real estate loans continue to comprise a substantial
portion of nonperforming loans, totaling $56.2 million at March 31, 1994,
including $37.3 million of commercial real estate loans secured by properties in
the New York City metropolitan area. At March 31 and December 31, 1993
nonperforming commercial real estate loans totaled $67.0 million and $48.3
million, respectively, including $47.5 million of loans secured by property in
the New York City metropolitan area at March 31, 1993 and $29.7 million at
December 31, 1993. The amount of repossessed assets taken in foreclosure of
defaulted loans totaled $11.9 million at March 31, 1994, compared with $12.2
million at the end of 1993 and $16.6 million at March 31, 1993.
Due to continuing concerns about the unsettled commercial real estate markets,
in particular in the New York City metropolitan area, and the timing and
sustainability of economic recovery in market areas served by the Company in
general, the provision for possible credit losses in 1994's first quarter
exceeded net charge-offs by $17.2 million, increasing the allowance for possible
credit losses to $213.0 million, or 2.94% of total loans and leases at March 31,
1994. In comparison, the allowance for possible credit losses was
12
$161.8 million or 2.35% of total loans and leases a year earlier and $195.9
million or 2.70% at December 31, 1993. The ratio of the allowance to
nonperforming loans at March 31, 1994 was 245%, up from 147% and 238% at March
31 and December 31, 1993, respectively.
M&T Bank retains the contractual right to require the Federal Deposit Insurance
Corporation ("FDIC") to repurchase prior to May 31, 1994 at a discount of 4%
certain loans sold to M&T Bank by the FDIC from the portfolio of a failed thrift
institution in the event such loans become adversely classified for regulatory
purposes. As of March 31, 1994, such loans included approximately $92 million
of commercial real estate loans, $48 million of consumer loans and $190 million
of residential mortgage loans. Based upon regulatory classifications as of
March 31, 1994, the Company does not expect the amount of loans to be
repurchased by the FDIC to be material to the Company's consolidated financial
condition.
A comparative summary of nonperforming assets and certain credit quality ratios
is presented in the table below.
NONPERFORMING ASSETS
dollars in thousands
1994 1993 Quarters
First Quarter Fourth Third Second First
------------- ------ ------ ------ -----
Nonaccrual loans $ 74,951 68,936 69,436 79,511 92,522
Loans past due
90 days or more 11,890 11,122 14,007 12,364 17,229
Renegotiated loans - 2,195 2,200 - -
Total nonperforming
loans 86,841 82,253 85,643 91,875 109,751
------- ------- ------ ------ -------
Other real estate owned 11,916 12,222 14,554 14,054 16,600
------- ------- ------ ------ -------
Total nonperforming
assets $ 98,757 94,475 100,197 105,929 126,351
======= ======= ======= ======= =======
Nonperforming loans
to total loans, net of
unearned discount 1.20% 1.13% 1.21% 1.31% 1.59%
Nonperforming assets
to total net loans and
other real estate owned 1.36% 1.30% 1.41% 1.51% 1.83%
==== ==== ==== ==== ====
OTHER INCOME
Other income in the first quarter of 1994 totaled $28.4 million, 6% above the
$26.9 million earned in the year earlier quarter and essentially the same as the
fourth quarter of 1993.
Reflecting revised fee schedules, service charges on deposit accounts totaled
$8.9 million in the first quarter of 1994, an increase of 21% from $7.3 million
in the first quarter of 1993. Trust income of $5.4 million and merchant
discount and credit card fees of $1.9 million were down slightly in the first
quarter of 1994, compared with the year earlier quarter. Trading account
activity resulted in a net loss of $208 thousand in the first quarter of 1994,
compared with profits of $754 thousand in the corresponding quarter of 1993.
Other revenues from operations in 1994's first quarter totaled $12.4 million, an
increase of 21% from $10.3 million in the first quarter of 1993. The increase
was primarily due to a $1.4 million gain from the sale of residential mortgage
loan participations acquired from the FDIC in 1992 and increased income from
residential mortgage loan servicing, asset management services and other loan
fees.
OTHER EXPENSE
Other expense totaled $79.2 million in the first quarter of 1994, decreasing 5%
from $83.4 million in the first quarter of 1993, and down slightly from 1993's
fourth quarter.
Salaries and employee benefits expense was $39.8 million in 1994's first
quarter, essentially unchanged from the first quarter of 1993. Merit salary
increases and higher benefit costs in 1994 were offset by a
13
reduction of expenses associated with stock appreciation rights granted in 1990
and 1991.
Nonpersonnel expenses totaled $39.4 million in 1994's first quarter, down 10% or
$4.1 million from the first quarter of 1993, and 4% below the fourth quarter of
1993. A significant factor which contributed to the decreased expenses from the
first quarter of 1993 was a reduction in write-downs of the carrying value of
excess servicing fees receivable and purchased mortgage servicing rights
associated with residential mortgage loans serviced for others. During the
first quarter of 1994, such write-downs amounted to $500 thousand, compared with
$2.7 million in the first quarter of 1993. At March 31, 1994, the Company had
approximately $17.9 million of excess servicing fees receivable and purchased
mortgage servicing rights recorded as assets. Residential mortgage loans
serviced for others totaled $3.5 billion at March 31, 1994. Reduced expenses
for professional services, software, printing, postage and supplies also
contributed to the declines from the first and fourth quarters of 1993.
CAPITAL
Common stockholders' equity totaled $685.0 million at March 31, 1994, up from
$609.1 million a year earlier and $684.0 million at December 31, 1993. On a per
share basis, common stockholders' equity was $100.19 at March 31, 1994, up 13%
from $88.68 at March 31, 1993 and 1% from $99.43 at December 31, 1993. Total
stockholders' equity was $725.0 million, or 6.96% of total assets at March 31,
1994, compared with $649.1 million or 6.23% at March 31, 1993 and $724.0 million
or 6.99% at December 31, 1993.
Pursuant to the provisions of Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", which the Company adopted on December 31, 1993, stockholders'
equity at March 31, 1994 was reduced by $6.9 million, or $1.02 per common share,
of net unrealized losses on certain investment securities. Such unrealized
losses represent the amount by which amortized cost exceeded fair value for
investment securities classified under SFAS No. 115 as available for sale, net
of applicable income taxes. At year-end 1993, total stockholders' equity
included $9.1 million, or $1.33 per common share, of net unrealized gains on
investment securities available for sale.
To assess the capital adequacy of banking institutions, Federal regulators have
implemented risk-based capital measures. Generally, a banking institution is
required to maintain risk-based "core capital" and "total capital" ratios of at
least 4% and 8%, respectively. In addition to the risk-based measures, Federal
bank regulators have also implemented a minimum "leverage" ratio guideline of 3%
of the quarterly average of total assets. The capital ratios of the Company and
its banking subsidiaries, M&T Bank and The East New York Savings Bank ("East New
York"), as of March 31, 1994 are presented in the accompanying table.
Historically, First Empire has been able to maintain capital ratios well in
excess of minimum regulatory guidelines primarily because of a high rate of
internal capital generation. The rate of internal capital generation, or net
income less dividends paid expressed as an annualized percentage of average
total stockholders' equity, was 12.92% in the first quarter of 1994 and 13.14%
in the first quarter of 1993.
REGULATORY CAPITAL RATIOS
March 31, 1994
First Empire M&T
(Consolidated) Bank East New York
-------------- ------ -------------
Core capital 9.46% 8.86% 9.75%
Total capital 11.70% 11.30% 11.01%
Leverage 7.29% 6.59% 7.60%
In December 1993, First Empire announced a plan to purchase up to 506,930 shares
of its common stock to be held as treasury stock for reissuance upon the
possible future conversion of its 9% convertible preferred stock. As of March
31, 1994 the Company had purchased 46,200 common shares pursuant to such plan at
an average cost per share of $137.38.
14
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
Amounts in thousands, except per share
Three months ended
March 31
1994 1993 Change
- - ------------------------------------------------------------------------------------------------------
FOR THE PERIOD
- - ------------------------------------------------------------------------------------------------------
Net income $27,628 24,322 + 14%
Per common share
Net income
Primary $3.77 3.31 + 14
Fully diluted 3.64 3.21 + 13
Cash dividends 0.50 0.40 + 25
Average common shares outstanding
Primary 7,083 7,069 -
Fully diluted 7,590 7,586 -
Annualized return on
Average total assets 1.11% 0.99%
Average common
stockholders' equity 15.68% 15.88%
Market price per common share
Closing $139.25 149.75 - 7
High 144.00 150.50
Low 135.00 130.25
- - ------------------------------------------------------------------------------------------------------
AT MARCH 31
- - ------------------------------------------------------------------------------------------------------
Loans and leases,
net of unearned discount $7,239,869 6,886,898 + 5%
Total assets 10,411,622 10,423,006 -
Total deposits 7,329,084 7,787,664 - 6
Total stockholders' equity 724,975 649,130 + 12
Stockholders' equity
per common share $100.19 88.68 + 13
- - ------------------------------------------------------------------------------------------------------
15-16
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES
average balance in millions; interest in thousands
1994 First quarter 1993 Fourth quarter
Average Average Average Average
balance Interest rate balance Interest rate
- - ------------------------------------------------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $1,475 $26,080 7.17% 1,443 26,278 7.23%
Real estate 4,457 93,058 8.35 4,410 93,670 8.50
Consumer 1,256 29,884 9.65 1,227 30,362 9.82
- - ------------------------------------------------------------------------------------------------------------------------------
Total loans and leases, net 7,188 149,022 8.41 7,080 150,310 8.42
- - ------------------------------------------------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 18 154 3.55 174 1,553 3.55
Federal funds sold and agreements
to resell securities 155 1,443 3.76 577 4,976 3.42
Trading account 11 177 6.81 19 268 5.61
- - ------------------------------------------------------------------------------------------------------------------------------
Total money-market assets 184 1,774 3.92 770 6,797 3.50
- - ------------------------------------------------------------------------------------------------------------------------------
Investment securities
U.S. Treasury and federal agency 1,297 14,673 4.59 1,492 17,072 4.54
State and municipal 52 731 5.66 47 677 5.74
Other 944 11,960 5.14 982 10,694 4.32
- - ------------------------------------------------------------------------------------------------------------------------------
Total investment securities 2,293 27,364 4.84 2,521 28,443 4.48
- - ------------------------------------------------------------------------------------------------------------------------------
Total earning assets 9,665 178,160 7.48 10,371 185,550 7.10
- - ------------------------------------------------------------------------------------------------------------------------------
Allowance for possible credit losses (203) (194)
Cash and due from banks 308 310
Other assets 286 288
- - ------------------------------------------------------------------------------------------------------------------------------
Total assets $10,056 10,775
- - ------------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $761 2,846 1.52 773 3,060 1.57
Savings deposits 3,400 20,689 2.47 3,430 21,372 2.47
Time deposits 1,992 18,747 3.82 2,024 20,590 4.04
Deposits at foreign office 137 928 2.75 115 788 2.70
- - ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 6,290 43,210 2.79 6,342 45,810 2.87
- - ------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,872 14,501 3.14 2,517 19,412 3.06
Obligations under capital leases 1 15 10.19 1 15 9.97
Other long-term borrowings 75 1,523 8.24 75 1,524 8.06
- - ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,238 59,249 2.92 8,935 66,761 2.96
- - ------------------------------------------------------------------------------------------------------------------------------
Demand deposits 997 1,010
Other liabilities 90 127
- - ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,325 10,072
- - ------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 731 703
- - ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $10,056 10,775
- - ----------------------------------------------------------------------------------------------------------------------------------
Net interest spread 4.56 4.14
Contribution of interest-free funds 0.43 0.40
- - -------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin on earning assets $118,911 4.99% 118,789 4.54%
*Includes nonaccruing loans
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES(CONTINUED)
average balance in millions; interest in thousands
1993 Third quarter 1993 Second quarter
Average Average Average Average
balance Interest rate balance Interest rate
- - ----------------------------------------------------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $1,387 $27,931 7.99% 1,414 29,308 8.31%
Real estate 4,411 94,939 8.61 4,395 95,295 8.67
Consumer 1,193 30,469 10.13 1,148 29,158 10.19
- - ----------------------------------------------------------------------------------------------------------------------------------
Total loans and leases, net 6,991 153,339 8.70 6,957 153,761 8.86
- - ----------------------------------------------------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 212 1,897 3.55 200 1,780 3.57
Federal funds sold and agreements
to resell securities 343 2,953 3.41 805 6,468 3.22
Trading account 17 265 6.11 45 596 5.32
- - ----------------------------------------------------------------------------------------------------------------------------------
Total money-market assets 572 5,115 3.54 1,050 8,844 3.38
- - ----------------------------------------------------------------------------------------------------------------------------------
Investment securities
U.S. Treasury and federal agency 1,497 17,065 4.52 1,258 15,561 4.96
State and municipal 34 579 6.75 38 628 6.63
Other 853 8,971 4.17 767 10,623 5.56
- - ----------------------------------------------------------------------------------------------------------------------------------
Total investment securities 2,384 26,615 4.43 2,063 26,812 5.21
- - ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 9,947 185,069 7.38 10,070 189,417 7.54
- - ----------------------------------------------------------------------------------------------------------------------------------
Allowance for possible credit losses (179) (168)
Cash and due from banks 306 305
Other assets 274 276
- - ----------------------------------------------------------------------------------------------------------------------------------
Total assets $10,348 10,483
- - ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $769 3,204 1.65 710 3,198 1.81
Savings deposits 3,479 22,108 2.52 3,542 22,694 2.57
Time deposits 2,166 23,499 4.30 2,315 26,020 4.51
Deposits at foreign office 121 827 2.72 118 790 2.68
- - ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 6,535 49,638 3.01 6,685 52,702 3.16
- - ----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,949 14,837 3.02 1,960 14,820 3.03
Obligations under capital leases 1 16 9.98 1 16 10.09
Other long-term borrowings 75 1,523 8.06 75 1,524 8.15
- - ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,560 66,014 3.06 8,721 69,062 3.18
- - ----------------------------------------------------------------------------------------------------------------------------------
Demand deposits 981 964
Other liabilities 127 139
- - ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,668 9,824
- - ----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 680 659
- - ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $10,348 10,483
- - ----------------------------------------------------------------------------------------------------------------------------------
Net interest spread 4.32 4.36
Contribution of interest-free funds 0.43 0.43
- - ----------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin on earning assets $119,055 4.75% 120,355 4.79%
*Includes nonaccruing loans
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES(CONTINUED)
average balance in millions; interest in thousands
1993 First quarter
Average Average
balance Interest rate
- - --------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $1,435 $29,051 8.21%
Real estate 4,333 95,928 8.86
Consumer 1,131 28,472 10.21
- - --------------------------------------------------------------------------------------
Total loans and leases, net 6,899 153,451 9.02
- - --------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 171 1,510 3.58
Federal funds sold and agreements
to resell securities 717 6,006 3.40
Trading account 27 305 4.59
- - --------------------------------------------------------------------------------------
Total money-market assets 915 7,821 3.47
- - --------------------------------------------------------------------------------------
Investment securities
U.S. Treasury and federal agency 945 12,722 5.46
State and municipal 44 716 6.64
Other 724 9,963 5.58
- - --------------------------------------------------------------------------------------
Total investment securities 1,713 23,401 5.54
- - --------------------------------------------------------------------------------------
Total earning assets 9,527 184,673 7.86
- - --------------------------------------------------------------------------------------
Allowance for possible credit losses (156)
Cash and due from banks 296
Other assets 284
- - --------------------------------------------------------------------------------------
Total assets $9,951
- - --------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $737 3,651 2.01
Savings deposits 3,550 24,218 2.77
Time deposits 2,503 28,399 4.60
Deposits at foreign office 124 838 2.74
- - --------------------------------------------------------------------------------------
Total interest-bearing deposits 6,914 57,106 3.35
- - --------------------------------------------------------------------------------------
Short-term borrowings 1,250 9,390 3.05
Obligations under capital leases 1 17 10.21
Other long-term borrowings 75 1,523 8.24
- - --------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,240 68,036 3.35
- - --------------------------------------------------------------------------------------
Demand deposits 942
Other liabilities 131
- - --------------------------------------------------------------------------------------
Total liabilities 9,313
- - --------------------------------------------------------------------------------------
Stockholders' equity 638
- - --------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $9,951
- - --------------------------------------------------------------------------------------
Net interest spread 4.51
Contribution of interest-free funds 0.45
- - --------------------------------------------------------------------------------------
Net interest income/margin on earning assets $116,637 4.96%
*Includes nonaccruing loans
17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
A number of lawsuits were pending against the Company and its
subsidiaries at March 31, 1994. In the opinion of management, the potential
liabilities, if any, arising from such litigation will not have a materially
adverse impact on the Company's consolidated financial condition. Moreover,
management believes that the Company or its subsidiaries have substantial
defenses in such litigation, but that there can be no assurance that the
potential liabilities, if any, arising from such litigation will not have a
materially adverse impact on the Company's consolidated results of operations in
the future.
Item 2. Changes in Securities.
(Not applicable.)
Item 3. Defaults Upon Senior Securities.
(Not applicable.)
Item 4. Submission of Matters to a Vote of Security Holders.
The 1994 Annual Meeting of Stockholders of the Company was held on
April 19, 1994. At the 1994 Annual Meeting, the Company's stockholders elected
eighteen (18) directors, all of whom were then serving as directors of the
Company, for terms of one (1) year and until their successors are elected and
qualified. The following table reflects the tabulation of the votes with
respect to each director who was reelected at the 1994 Annual Meeting.
Number of Votes
-----------------------------------
Nominee For Withheld
- - --------------- ------------- --------------
Brent D. Baird 5,942,587.125 9,550.965
John H. Benisch 5,944,987.125 7,150.965
Angela Bontempo 5,901,569.125 50,568.965
Patrick J. Callan 5,903,963.125 48,174.965
David N. Campbell 5,906,483.125 45,654.965
James A. Carrigg 5,903,983.014 48,155.076
Barber B. Conable, Jr. 5,942,771.014 9,367.076
Richard E. Garman 5,944,737.125 7,400.965
Roy M. Goodman 5,897,977.125 54,160.965
Patrick W.E. Hodgson 5,944,967.125 7,170.965
Lambros J. Lambros 5,944,711.125 7,426.965
Wilfred J. Larson 5,944,737.125 7,400.965
Jorge G. Pereira 5,944,875.125 7,262.965
William C. Shanley, III 5,903,733.125 48,404.965
Raymond D. Stevens, Jr. 5,944,987.125 7,150.965
Peter Tower 5,941,457.125 10,680.965
Richard D. Trent 5,943,637.125 8,500.965
Robert G. Wilmers 5,942,481.125 9,656.965
18
Item 5. Other Information.
Board of Directors. On April 19, 1994, Paul B. Murray retired as
chairman of the board of First Empire and as a director of First Empire and M&T
Bank. Mr. Murray continues as chairman of the board, president, chief executive
officer and a director of East New York. The board of directors elected Robert
G. Wilmers to the additional position of chairman of the board of First Empire
upon Mr. Murray's retirement, a post which Mr. Wilmers had held prior to East
New York's affiliation with First Empire.
Acquisition of Branches. On April 9, 1994, M&T Bank entered into a
definitive agreement with Chemical Bank pursuant to which M&T Bank will acquire
seven of Chemical Bank's branch offices located in Orange County and Nyack, New
York, together with substantially all of their deposit liabilities. It is
expected that M&T Bank will acquire up to approximately $175 million of deposit
liabilities.
M&T Bank will pay Chemical Bank a purchase premium on the deposit liabilities of
the acquired branches computed as of a date which is approximately one month
prior to the closing. M&T Bank will also pay Chemical Bank the agreed upon
market value of the real estate it purchases in the transaction; the net book
value of trade fixtures, furniture, equipment, leasehold improvements, other
items of personal property associated with the branches; and the unpaid balance
of principal and interest of all unclassified loans which are fully secured and
collateralized by any deposit liabilities which are acquired by M&T Bank in the
transaction.
Consummation of the transaction is subject to a number of conditions, including
regulatory approvals. Subject to the satisfaction of all conditions, it is
anticipated that the transaction will be completed in the second half of 1994.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of this report:
Exhibit
No.
-------
11 Statement re: Computation of Earnings Per Common Share.
Filed herewith.
(b) Reports on Form 8-K.
On April 12, 1994, the Company filed a Current Report on Form 8-K
with the Securities and Exchange Commission dated April 1,
1994 reporting on the Company's April 1, 1994 announcement that
it had entered into a definitive agreement with Ithaca Bancorp,
Inc. ("Ithaca Bancorp") Ithaca, New York, pursuant to which
Ithaca Bancorp will be acquired by the Company upon the
satisfaction of a number of conditions.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST EMPIRE STATE CORPORATION
Date: May 9, 1994 By: /s/ James L. Vardon
------------------------
James L. Vardon
Executive Vice President
and Chief Financial Officer
20
EXHIBIT INDEX
Exhibit
No.
- - -------
11 Statement re: Computation of Earnings Per Common Share. Filed
herewith.
21
Exhibit No. 11
FIRST EMPIRE STATE CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
amounts in thousands except per share data
Three months ended
March 31
1994 1993
- - ------------------------------------------------------------------------------------------------------------
Primary Average common shares outstanding 6,871 6,849
Common stock equivalents * 212 220
- - ------------------------------------------------------------------------------------------------------------
Primary common shares outstanding 7,083 7,069
- - ------------------------------------------------------------------------------------------------------------
Net income $27,628 24,322
Less: Preferred stock dividends 900 900
- - ------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $26,728 23,422
- - ------------------------------------------------------------------------------------------------------------
Earnings per common share - primary $3.77 $3.31
- - ------------------------------------------------------------------------------------------------------------
Fully diluted Average common shares outstanding 6,871 6,849
Common stock equivalents * 212 230
Assumed conversion of 9% cumulative convertible
preferred stock 507 507
- - ------------------------------------------------------------------------------------------------------------
Fully diluted average common shares outstanding 7,590 7,586
- - ------------------------------------------------------------------------------------------------------------
Net income $27,628 24,322
- - ------------------------------------------------------------------------------------------------------------
Earnings per common share - fully diluted $3.64 3.21
- - ------------------------------------------------------------------------------------------------------------
* Represents shares of the Company's common stock issuable upon the assumed
exercise of outstanding stock options granted pursuant to the First Empire State
Corporation 1983 Stock Option Plan under the "treasury stock" method of accounting.
