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, 1995
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
(Address of principal 14240
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 1, 1995: 6,492,281 shares.
2
FIRST EMPIRE STATE CORPORATION
------------------------------
FORM 10-Q
---------
For the Quarterly Period Ended March 31, 1995
---------------------------------------------
Table of Contents of Information Required in Report Page
- --------------------------------------------------- ----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31,1995 and December 31, 1994 3
Consolidated Statement of Income -
Three months ended March 31, 1995 and 1994 4
Consolidated Statement of Cash Flows -
Three months ended March 31, 1995 and 1994 5
Consolidated Statement of Changes in
Stockholders' Equity - Three months ended
March 31, 1995 and 1994 6
Consolidated Summary of Changes in
Allowance for Possible Credit Losses -
Three months ended March 31, 1995 and 1994 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
Part II. Other Information 20
Signatures 22
Exhibit Index 23
Exhibit No. 10 23
Exhibit No. 11 36
Exhibit No. 27 37
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
- ----------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
March 31,
1995 December 31,
Dollars in thousands, except per share (unaudited) 1994
- ----------------------------------------------------------------------------------------------------------
Assets Cash and due from banks $ 419,719 377,781
Money-market assets
Interest-bearing deposits at banks 70,444 143
Federal funds sold and
agreements to resell securities 15,000 3,080
Trading account 36,724 5,438
-------------------------------------------------------------------------------------
Total money-market assets 122,168 8,661
-------------------------------------------------------------------------------------
Investment securities
Available for sale (cost: $1,721,990 at March 31, 1995;
$1,602,916 at December 31, 1994) 1,666,964 1,514,395
Held to maturity (market value: $324,159 at
March 31, 1995; $221,165 at December 31, 1994) 327,428 227,651
Other (market value: $50,802 at March 31, 1995;
$48,994 at December 31, 1994) 50,802 48,994
-------------------------------------------------------------------------------------
Total investment securities 2,045,194 1,791,040
-------------------------------------------------------------------------------------
Loans and leases 8,819,885 8,447,117
Unearned discount (260,700) (229,824)
Allowance for possible credit losses (248,741) (243,332)
-------------------------------------------------------------------------------------
Loans and leases, net 8,310,444 7,973,961
-------------------------------------------------------------------------------------
Premises and equipment 126,986 127,274
Accrued interest and other assets 252,448 249,927
-------------------------------------------------------------------------------------
Total assets $ 11,276,959 10,528,644
- ----------------------------------------------------------------------------------------------------------
Liabilities Noninterest-bearing deposits $ 1,082,744 1,087,102
NOW accounts 774,785 748,199
Savings deposits 3,009,888 3,098,438
Time deposits 3,956,183 3,106,723
Deposits at foreign office 220,498 202,611
-------------------------------------------------------------------------------------
Total deposits 9,044,098 8,243,073
-------------------------------------------------------------------------------------
Federal funds purchased and agreements
to repurchase securities 892,643 695,665
Other short-term borrowings 351,017 669,185
Accrued interest and other liabilities 142,413 103,538
Long-term borrowings 96,198 96,187
-------------------------------------------------------------------------------------
Total liabilities 10,526,369 9,807,648
- ----------------------------------------------------------------------------------------------------------
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 98,348 98,014
Undivided profits 716,591 694,274
Unrealized investment losses, net (31,416) (50,555)
Treasury stock - common, at cost -
1,556,991 shares at March 31, 1995;
1,486,969 shares at December 31, 1994 (113,420) (101,224)
-------------------------------------------------------------------------------------
Total stockholders' equity 750,590 720,996
-------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 11,276,959 10,528,644
- ----------------------------------------------------------------------------------------------------------
4
- -------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME (unaudited)
Three months ended March 31
Amounts in thousands, except per share 1995 1994
- -------------------------------------------------------------------------------------------
Interest income Loans and leases, including fees $ 185,016 148,483
Money-market assets
Deposits at banks 1,294 154
Federal funds sold and agreements
to resell securities 200 1,443
Trading account 172 132
Investment securities
Fully taxable 27,577 26,242
Exempt from federal taxes 827 716
--------------------------------------------------------------------------
Total interest income 215,086 177,170
- -------------------------------------------------------------------------------------------
Interest expense NOW accounts 2,765 2,846
Savings deposits 22,312 20,689
Time deposits 51,573 18,747
Deposits at foreign office 2,336 928
Short-term borrowings 15,663 14,501
Long-term borrowings 1,930 1,538
--------------------------------------------------------------------------
Total interest expense 96,579 59,249
--------------------------------------------------------------------------
Net interest income 118,507 117,921
Provision for possible credit losses 8,500 19,862
--------------------------------------------------------------------------
Net interest income after provision
for possible credit losses 110,007 98,059
- -------------------------------------------------------------------------------------------
Other income Trust income 5,737 5,435
Service charges on deposit accounts 9,219 8,893
Merchant discount and other credit card fees 2,273 1,896
Trading account gain (loss) 693 (208)
Other revenues from operations 8,480 12,433
--------------------------------------------------------------------------
Total other income 26,402 28,449
- -------------------------------------------------------------------------------------------
Other expense Salaries and employee benefits 46,227 39,831
Equipment and net occupancy 12,706 12,812
Printing, postage and supplies 3,595 3,187
Deposit insurance 4,264 4,144
Other costs of operations 22,702 19,241
--------------------------------------------------------------------------
Total other expense 89,494 79,215
--------------------------------------------------------------------------
Income before income taxes 46,915 47,293
Income taxes 19,747 19,665
--------------------------------------------------------------------------
Net income $ 27,168 27,628
- -------------------------------------------------------------------------------------------
Net income per common share
Primary $3.85 3.77
Fully diluted 3.68 3.64
Cash dividends per common share .60 .50
Average common shares outstanding
Primary 6,820 7,083
Fully diluted 7,384 7,590
5
- ----------------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Three months ended March 31
Dollars in thousands 1995 1994
- ----------------------------------------------------------------------------------------------------------------
Cash flows from Net income $ 27,168 27,628
operating activities Adjustments to reconcile net income to net cash
provided by operating activities
Provision for possible credit losses 8,500 19,862
Depreciation and amortization of premises
and equipment 4,762 4,291
Provision for deferred income taxes (5,026) (10,465)
Asset write-downs 2,355 1,269
Net gain on sales of assets (195) (2,097)
Net change in accrued interest receivable, payable 3,303 2,056
Net change in other accrued income and expense 49,293 6,470
Net change in loans held for sale (40,030) 118,785
Net change in trading account assets (31,286) (1,405)
------------------------------------------------------------------------------------
Net cash provided by operating activities 18,844 166,394
- ----------------------------------------------------------------------------------------------------------------
Cash flows from Proceeds from maturities of investment securities
investing activities Available for sale 79,797 251,637
Held to maturity 9,327 5,099
Purchases of investment securities
Available for sale (202,651) (2)
Held to maturity (109,144) (11,183)
Other (2,641) (5,190)
Net (increase) decrease in interest-bearing
deposits at banks (70,301) 54,899
Net increase in loans and leases (276,645) (102,748)
Capital expenditures, net (2,720) (3,005)
Acquisitions, net of cash acquired (18,691) -
Other, net (1,619) (432)
------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (595,288) 189,075
- ----------------------------------------------------------------------------------------------------------------
Cash flows from Net increase (decrease) in deposits 800,396 (24,092)
financing activities Net increase (decrease) in short-term borrowings (154,190) 58,088
Payments on long-term borrowings (28) (25)
Purchases of treasury stock (12,003) (6,347)
Dividends paid - common (3,951) (3,431)
Dividends paid - preferred (900) (900)
Other, net 978 (1,043)
------------------------------------------------------------------------------------
Net cash provided by financing activities 630,302 22,250
------------------------------------------------------------------------------------
Net increase in cash and cash equivalents $ 53,858 377,719
Cash and cash equivalents at beginning of period 380,861 525,221
Cash and cash equivalents at end of period $ 434,719 902,940
- ----------------------------------------------------------------------------------------------------------------
Supplemental Interest received during the period $ 203,963 180,861
disclosure of cash Interest paid during the period 79,061 59,234
flow information Income taxes paid (received) during the period (18,345) 13,544
- ----------------------------------------------------------------------------------------------------------------
Supplemental schedule
of noncash investing
and financing activities Real estate acquired in settlement of loans $ 1,329 2,774
- ---------------------------------------------------------------------------------------------------------------
6
- ------------------------------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
-----------------------------------------------------------------------------------------------------------------------------
Unrealized
investment
Preferred Common Undivided gains (losses) Treasury
Dollars in thousands, except per share stock stock Surplus profits net stock Total
-----------------------------------------------------------------------------------------------------------------------------
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 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
-----------------------------------------------------------------------------------------------------------------------------
1995
Balance - January 1, 1995 $40,000 40,487 98,014 694,274 (50,555) (101,224) $720,996
Net income - - - 27,168 - - 27,168
Preferred stock cash dividends - - - (900) - - (900)
Common stock cash dividends -
$.60 per share - - - (3,951) - - (3,951)
Exercise of stock options - - 334 - - 963 1,297
Purchases of treasury stock - - - - - (13,159) (13,159)
Unrealized gains on investment
securities available for sale, net - - - - 19,139 - 19,139
-----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 1995 $40,000 40,487 98,348 716,591 (31,416) (113,420) $750,590
-----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED SUMMARY OF CHANGES IN ALLOWANCE FOR POSSIBLE CREDIT LOSSES (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31
Dollars in thousands 1995 1994
------------------------------------------------------------------------------------------------------------------------------
Beginning balance $243,332 195,878
Provision for possible credit losses 8,500 19,862
Net charge-offs
Charge-offs (5,441) (9,147)
Recoveries 2,350 6,448
-----------------------------------------------------------------------------------------------------------------------------
Total net charge-offs (3,091) (2,699)
-----------------------------------------------------------------------------------------------------------------------------
Ending balance $248,741 213,041
-----------------------------------------------------------------------------------------------------------------------------
7
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
The consolidated financial statements of First Empire State Corporation and
subsidiaries ("the Company") were compiled in accordance with the accounting
policies set forth on pages 36 and 37 of the Company's 1994 Annual Report.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
114, "Accounting by Creditors for Impairment of a Loan" in the first quarter
of 1995. Adoption of SFAS No. 114 had no impact on the Company's results of
operations. In the opinion of management, all adjustments necessary for a
fair presentation have been made and were all of a normal recurring nature.
2. Investment securities
The amortized cost and estimated fair value of investment securities were as
follows:
March 31, 1995 December 31, 1994
----------------------- ---------------------
Estimated Estimated
Amortized fair Amortized fair
In thousands cost value cost value
--------- --------- --------- ---------
Investment securities
available for sale:
U.S. Treasury and federal
agencies $ 182,270 182,162 5,775 5,762
Mortgage-backed securities
Government issued
or guaranteed 834,307 804,265 869,031 822,533
Other 686,467 660,827 706,909 665,209
Other debt securities 4,862 4,896 6,537 6,557
Equity securities 14,084 14,814 14,664 14,334
--------- --------- --------- ---------
1,721,990 1,666,964 1,602,916 1,514,395
--------- --------- --------- ---------
Investment securities
held to maturity:
U.S. Treasury and
federal agencies 270,279 266,782 171,112 164,602
Obligations of states and
political subdivisions 56,397 56,630 55,787 55,872
Other debt securities 752 747 752 691
--------- --------- --------- ---------
327,428 324,159 227,651 221,165
--------- --------- --------- ---------
Other securities 50,802 50,802 48,994 48,994
--------- --------- --------- ---------
Total $2,100,220 2,041,925 1,879,561 1,784,554
========= ========= ========= =========
3. Interest rate swap agreements
At March 31, 1995, the Company had outstanding currently effective interest
rate swap agreements entered into for interest rate risk management purposes
with a notional amount of approximately $2.6 billion. The swaps modify the
repricing characteristics of certain portions of the loan and deposit
portfolios. The net effect of interest rate swaps was to decrease net
interest income by $449 thousand during the three months ended March 31, 1995
and to increase net interest income by $6.6 million during the three months
ended March 31, 1994. The Company estimates that as of March 31, 1995, it
would have had to pay approximately $51 million to terminate all interest
rate swap agreements. Since these swaps have been entered into for interest
rate risk management purposes, the estimated amount noted above should be
considered in the context of the entire balance sheet of the Company. The
estimated market value of interest rate swaps entered into for interest rate
risk management purposes is not recognized in the consolidated financial
statements.
8
4. Acquisition
On March 6, 1995, the Company's mortgage banking subsidiary, M&T Mortgage
Corporation, acquired Statewide Funding Corporation ("Statewide"), a
privately-owned mortgage banking company based near Albany, New York. As of
the acquisition date, Statewide serviced residential mortgage loans owned by
other investors having an outstanding principal balance of approximately $1.0
billion. The acquisition has been accounted for as a purchase transaction
and, accordingly, the operating results of Statewide have been included in
the Company's results of operations since the acquisition date.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
Net income for First Empire State Corporation ("First Empire") was $27.2
million or $3.85 per common share in the first quarter of 1995, compared with
$27.6 million or $3.77 per common share in the first quarter of 1994. The
improvement in earnings per share reflects the decrease in average common
shares outstanding in the recent quarter compared with a year earlier. The
decrease in shares outstanding resulted from the repurchase of shares of
First Empire's common stock pursuant to a plan announced in December 1993.
Shares repurchased under the plan totaled 382,900 at March 31, 1995 and
46,200 at March 31, 1994. Net income was $31.9 million or $4.53 per common
share in the fourth quarter of 1994, including the after-tax benefit of $2.4
million resulting from the transfer of appreciated investment securities to
The M&T Charitable Foundation, a private, tax-exempt charitable foundation
affiliated with First Empire. The rate of return on average assets for First
Empire and its consolidated subsidiaries ("the Company") in the first quarter
of 1995 was 1.03%, down from 1.11% in the year-earlier quarter and 1.24% in
1994's last quarter. The return on average common stockholders' equity was
15.29% in the initial quarter of 1995, compared with 15.68% and 17.97% in the
first and fourth quarters of 1994, respectively.
As previously reported, on December 1, 1994 First Empire acquired Ithaca
Bancorp, Inc. ("Ithaca Bancorp"), Ithaca, New York and simultaneously merged
Ithaca Bancorp's savings bank subsidiary, Citizens Savings Bank, F.S.B., into
First Empire's commercial bank subsidiary, Manufacturers and Traders Trust
Company ("M&T Bank"). As of December 1, 1994, assets acquired totaled $470
million, including $369 million of loans, and liabilities assumed totaled
$425 million, including $330 million of deposits. On December 10, 1994, M&T
Bank purchased, in another cash transaction, approximately $146 million of
deposits from Chemical Bank, along with seven branch offices in the Hudson
Valley region of New York State.
On March 6, 1995, M&T Mortgage Corporation, the mortgage banking subsidiary
of M&T Bank, acquired Statewide Funding Corporation ("Statewide"), a
privately-held mortgage banking company based near Albany, New York.
Statewide had a mortgage servicing portfolio of approximately $1.0 billion at
the acquisition date and originated more than $400 million of mortgage loans
in 1994. In the first quarter of 1995, M&T Mortgage Corporation continued to
expand its network of out-of-state mortgage origination offices, opening
offices in Portland, Oregon, Seattle, Washington and Salt Lake City, Utah.
The acquisitions noted in the two preceding paragraphs have been accounted
for as purchase transactions and, accordingly, the operating results of the
acquired entities have been included in the consolidated results of
operations of the Company since the respective acquisition dates.
On February 9, 1995, M&T Bank entered into a definitive agreement to acquire
four branch offices and approximately $90 million in deposits from The Chase
Manhattan Bank, N.A. Two of the branch offices are located in Dutchess
County, one in Ulster County and one in Niagara County, New York.
Consummation of the transaction is subject to a number of conditions,
including regulatory approvals, but is anticipated to be completed in the
second half of 1995.
The Company's first quarter results of operations included three unusual
expense items. First, the Statewide acquisition resulted in the recognition
of $1.3 million in costs of integrating and conforming the acquired
operations with M&T Mortgage Corporation. Secondly, First Empire's $2.3
10
million investment in nonmarketable securities of Nationar, a bank that
provided services to financial institutions, was written off to expense
during the first quarter of 1995. The Nationar investment was obtained
through the acquisition of Ithaca Bancorp in 1994 and the 1987 merger with
The East New York Savings Bank ("East New York"). The write-off was in
response to the seizure of Nationar by banking regulators in February.
Thirdly, First Empire's common stock experienced unusually strong
appreciation during the first quarter of 1995, increasing 26% in market value
per share from 1994's year-end. This resulted in $3.0 million of expense
associated with outstanding stock appreciation rights, whose expense
recognition fluctuates with the underlying market value of First Empire's
common stock. Together, the after-tax effect of these three unusual expenses
depressed net income by $3.8 million or $.56 per common share.
Taxable-equivalent Net Interest Income
The Company's taxable-equivalent net interest income was $119.7 million and
$118.9 million in the first quarter of 1995 and 1994, respectively, and
$118.3 million in the final quarter of 1994. Net interest margin, or
taxable-equivalent net interest income expressed as an annualized percentage
of average earning assets, was 4.70% in the recent quarter, down from 4.99%
in the initial quarter of 1994 and 4.75% in 1994's final quarter. Increased
demand for loans and the December 1994 acquisition of Ithaca Bancorp resulted
in a $1.1 billion increase in average loans from the first quarter of 1994.
Growth in average loans was partially offset by declines in holdings of
investment securities and money-market assets resulting in a $665 million
increase in average earning assets to $10.3 billion in the first quarter of
1995 from $9.7 billion in the first quarter of 1994. Average earning assets
were $9.9 billion in the fourth quarter of 1994. The greater proportion of
loans, which generally yield more than investment securities and money-market
assets, in the portfolio of earning assets and rising interest rates in
general resulted in an overall yield on average earning assets of 8.49% in
1995's initial quarter, up 101 basis points (hundredths of one percent) from
the first quarter of 1994 and 39 basis points from the final quarter of 1994.
However, higher interest rates also resulted in an increase in the cost of
interest-bearing liabilities to 4.43% during the first three months of 1995,
up 151 basis points from the corresponding quarter in 1994 and 48 basis
points from the final quarter of 1994. As a result, the Company's net
interest spread, or the difference between the yield on earning assets and
the rate paid on interest-bearing liabilities, narrowed to 4.06% in the
recent quarter from 4.56% and 4.15% in the first and fourth quarters of 1994,
respectively.
While narrowing the net interest spread, rising interest rates also had the
effect of increasing the contribution to net interest margin of interest-free
funds, which rose to .64% in the first quarter of 1995 from .43% in the
comparable quarter of 1994 and .60% in 1994's final quarter. The improvement
in the first quarter of 1995 from a year earlier resulted from the 151 basis
point increase in the rate paid on interest-bearing liabilities used to value
these funds and a 5% increase in average interest-free funds. Average
interest-free funds, consisting primarily of noninterest-bearing demand
deposits and stockholders' equity, totaled $1.5 billion in the first quarter
of 1995, up from $1.4 billion a year earlier, and essentially unchanged from
the fourth quarter of 1994.
As a financial intermediary, the Company's earnings are sensitive to the
effects of changing interest rates. Management assesses this interest rate
risk by the variability of projected net interest income under a number of
interest rate scenarios. The projections consider statistically derived
interrelationships in the magnitude and timing of the repricing of financial
instruments, including the effect of changing interest rates on expected
prepayments and maturities.
11
As part of its interest rate risk management, the Company has entered into
several interest rate swap agreements. The swaps modify the repricing
characteristics of certain portions of the loan and deposit portfolios.
Revenue and expense arising from these agreements are reflected in either the
yields earned on loans or, as appropriate, rates paid on interest-bearing
deposits. The aggregate notional amount of interest rate swap agreements
used as part of the Company's interest rate risk management program in effect
at March 31, 1995 and 1994 was $2.6 billion and $1.2 billion, respectively.
In general, under the terms of these swaps, the Company receives payments
based on the outstanding notional amount of the swaps at a fixed rate of
interest and makes payments at a variable rate. At March 31, 1995 the
weighted average rates to be received and paid under interest rate swap
agreements were each 6.18%. The effect of interest rate swaps on the
Company's net interest income and margin as well as average notional amounts
are presented in the accompanying table.
INTEREST RATE SWAPS
Dollars in thousands
Three months ended March 31
-----------------------------------------------
1995 1994
----------------------- --------------------
Amount Rate(1) Amount Rate(1)
-------- ----- -------- -----
Increase (decrease) in:
Interest income $(1,525) (.06)% $ 4,705 .20%
Interest expense (1,076) (.05) (1,936) (.10)
------ ------
Net interest
income/margin $ (449) (.02)% $ 6,641 .28%
===== === ====== ===
Average notional
amount (2) $2,536,134 $1,210,451
========= =========
(1) Computed as an annualized percentage of interest-earning assets or
interest-bearing liabilities
(2) Excludes forward-starting interest rate swaps
The Company estimates that as of March 31, 1995 it would have had to pay
approximately $51.0 million to terminate all interest rate swap agreements
entered into for interest rate risk management purposes. This estimated fair
value of the interest rate swap portfolio results from the effects of
changing interest rates and should be considered in the context of the entire
balance sheet and the Company's overall interest rate risk profile. Changes
in the estimated fair value of interest rate swaps entered into for interest
rate risk management purposes are not reflected in the consolidated financial
statements.
Stronger loan demand resulting in part from improved economic conditions and
the December 1994 acquisition of $369 million of loans of Ithaca Bancorp
increased average loans and leases, net of unearned discount, to $8.3 billion
in the first quarter of 1995 from $7.2 billion in the first quarter of 1994
and $7.8 billion in the final quarter of 1994. The accompanying table
summarizes quarterly changes in the major components of the loan and lease
portfolio.
12
AVERAGE LOANS AND LEASES
(net of unearned discount)
Dollars in millions
Percent increase
(decrease) from
1st Qtr. 1st Qtr. 4th Qtr.
1995 1994 1994
-------- -------- --------
Commercial, financial, etc. $1,671 13 % 8 %
Real estate - commercial 3,402 12 4
Real estate - consumer 1,646 16 10
Consumer 1,592 27 6
----- -- --
Total $8,311 16 % 6 %
===== == ==
Average investment securities totaled $1.9 billion in the initial quarter of
1995, down from $2.3 billion in the first quarter of 1994, but essentially
unchanged from the final quarter of 1994. The decline from a year ago
reflected management's decision to accommodate the 1994 acquisitions and the
growth in loans, which generally yield more than investment securities,
without unduly affecting tangible capital ratios.
The Company's New York State branch network is the principal source of core
deposits, which generally carry lower interest rates than wholesale funds of
comparable maturities. Core deposits represent a significant source of
funding to the Company and include noninterest-bearing demand deposits,
interest-bearing transaction accounts, savings deposits and nonbrokered
domestic time deposits under $100,000. Including the core deposits obtained
in the December 1994 acquisitions, average core deposits increased to $7.2
billion in 1995's initial quarter, up from $6.8 billion in the year earlier
quarter and $6.9 billion in the fourth quarter of 1994. Increases in
interest rates paid on deposits in response to higher money-market rates have
served to mitigate the tendency of depositors in recent years to seek
potentially higher returns by redeploying deposits, primarily time deposits,
out of the banking system into alternative investment vehicles, such as
mutual funds, and also contributed to a shift into time deposits from more
liquid deposit accounts. The accompanying table provides an analysis of
quarterly changes in the components of average core deposits.
AVERAGE CORE DEPOSITS
Dollars in millions
Percent increase
(decrease) from
1st Qtr. 1st Qtr. 4th Qtr.
1995 1994 1994
-------- -------- --------
NOW accounts $ 734 (4)% - %
Savings deposits 3,040 (11) (2)
Time deposits under $100,000 2,421 45 21
Demand deposits 1,038 4 -
----- -- --
Total $7,233 6 % 5 %
===== == ==
To reduce short-term borrowings and lengthen the average maturity of
interest-bearing liabilities, the Company began accepting brokered retail
certificate of deposits in the fourth quarter of 1994 under a program to
solicit up to approximately $900 million of deposits. Brokered deposits
averaged $775 million during the first quarter of 1995 and totaled $888
million at March 31, 1995, compared with an average balance of $179 million
during the fourth quarter of 1994 and a total balance of $456 million at
December 31, 1994. The weighted average remaining term to maturity of
brokered deposits at March 31, 1995 was 2.3 years.
13
In addition to deposits, the Company uses short-term borrowings from banks,
securities dealers, the Federal Home Loan Bank of New York ("FHLB") and
others. The brokered deposit program and decreased holdings of investment
securities and money-market assets allowed the Company to reduce short-term
borrowings to an average of $1.1 billion in the recent quarter from $1.9
billion and $1.6 billion in the first and fourth quarters of 1994,
respectively.
Maturities of money-market assets, repayments of loans and investment
securities, and cash generated from operations provide the Company with other
sources of liquidity. Through membership in the FHLB, as well as other
available borrowing facilities, First Empire's banking subsidiaries have
access to funding aggregating several times anticipated needs. First
Empire's ability to pay dividends, repurchase treasury stock and fund
operating expenses is primarily dependent on the receipt of dividend payments
from its banking subsidiaries, which are subject to various regulatory
limitations. First Empire also maintains a line of credit with an
unaffiliated commercial bank. Management does not anticipate engaging in any
activity, either currently or in the long-term, which would cause a
significant strain on liquidity at either First Empire or its subsidiary
banks. Furthermore, management believes that available sources of liquidity
are more than adequate to meet anticipated funding needs.
Provision for Possible Credit Losses
The purpose of the provision is to replenish or build the Company's allowance
for possible credit losses to a level necessary to maintain an adequate
reserve position. In assessing the adequacy of the allowance for possible
credit losses, management performs an ongoing evaluation of the loan
portfolio, including such factors as the differing economic risks associated
with each loan category, the current financial condition of specific
borrowers, the economic environment in which borrowers operate, the level of
delinquent loans and the value of any collateral. Based upon the results of
such review, management believes that the allowance for possible credit
losses at March 31, 1995 was adequate to absorb credit losses from existing
loans, leases and credit commitments.
Improved economic conditions in market areas served by the Company and lower
nonperforming loans contributed to a reduction in the provision for possible
credit losses to $8.5 million in the first quarter of 1995 from $19.9 million
in the year earlier quarter. The provision for possible credit losses was
$12.9 million in the fourth quarter of 1994. Net loan charge-offs in the
first three months of 1995 totaled $3.1 million, up from $2.7 million in
1994's first quarter, but down from $7.4 million in last year's fourth
quarter. Net charge-offs as an annualized percentage of average loans and
leases were .15% in the first quarters of 1995 and 1994, and .37% in the
fourth quarter of 1994.
Nonperforming loans were $79.8 million or .93% of total loans and leases
outstanding at March 31, 1995, down from $86.8 million or 1.20% at March 31,
1994 and little changed from $77.5 million or .94% at December 31, 1994.
Nonperforming loans secured by commercial real estate properties totaled
$47.7 million at March 31, 1995, $56.2 million at March 31, 1994 and $47.5
million at December 31, 1994. Included in these totals were loans secured by
properties located in the New York City metropolitan area of $26.3 million at
March 31, 1995, $37.3 million at March 31, 1994 and $27.1 million at December
31, 1994. Assets taken in foreclosure of defaulted loans were $8.8 million
at March 31, 1995, $10.1 million at December 31, 1994 and $11.9 million at
March 31, 1994.
14
The allowance for possible credit losses was $248.7 million, or 2.91% of
total loans and leases at March 31, 1995, compared with $213.0 million or
2.94% a year earlier and $243.3 million or 2.96% at December 31, 1994. The
ratio of the allowance for possible credit losses to nonperforming loans was
312% at the most recent quarter-end, up from 245% at March 31, 1994 and
little changed from 314% at December 31, 1994.
A comparative summary of nonperforming assets and certain credit quality
ratios is presented in the accompanying table.
NONPERFORMING ASSETS
Dollars in thousands
1995 1994 Quarters
First Quarter Fourth Third Second First
------------- ------ ----- ------ -----
Nonaccrual loans $64,941 62,787 72,355 68,881 74,951
Loans past due
90 days or more 12,275 11,754 9,663 11,444 11,890
Renegotiated loans 2,600 2,994 - - -
------ ------ ------ ------ ------
Total nonperforming loans 79,816 77,535 82,018 80,325 86,841
------ ------ ------ ------ ------
Other real estate owned 8,824 10,065 11,281 12,418 11,916
------ ------ ------ ------ ------
Total nonperforming assets $88,640 87,600 93,299 92,743 98,757
====== ====== ====== ====== ======
Nonperforming loans
to total loans and leases,
net of unearned discount .93% .94% 1.08% 1.09% 1.20%
Nonperforming assets
to total net loans and
other real estate owned 1.03% 1.06% 1.23% 1.25% 1.36%
==== ==== ==== ==== ====
Other Income
Other income totaled $26.4 million in the first quarter of 1995, compared
with $28.4 million in the year-earlier quarter and $38.7 million in the
fourth quarter of 1994 when $10.4 million of nontaxable income was recognized
for the transfer of appreciated investment securities to The M&T Charitable
Foundation.
Reflecting the effect of deposits from the December 1994 acquisitions,
service charges on deposit accounts totaled $9.2 million in the first quarter
of 1995, an increase of 4% from $8.9 million in the corresponding quarter of
the previous year and up 8% from $8.5 million in the fourth quarter of 1994.
Trust income of $5.7 million in the first quarter of 1995 was up from $5.4
million in last year's first quarter, but down from $6.3 million in the
fourth quarter of 1994 with the decline due, in part, to lower revenues from
securities clearing activities. Merchant discount and credit card fees were
$2.3 million in the recent quarter, compared with $1.9 million and $2.5
million in the first and fourth quarters of 1994, respectively. Trading
account gains totaled $693 thousand in the first quarter of 1995, compared
with a loss of $208 thousand in the corresponding quarter of 1994 and a gain
of $224 thousand in the fourth quarter of 1994.
Other revenue from operations totaled $8.5 million in the first quarter of
1995, down from $12.4 million and $21.2 million in the first and fourth
quarters of 1994, respectively. During the first quarter of 1994, the
Company realized $1.4 million of gains from the sale of residential mortgage
loan participations acquired in 1992 from the Federal Deposit Insurance
15
Corporation ("FDIC") and $2.1 million of revenues for asset management
services provided to the FDIC. The decrease from the fourth quarter of 1994
was primarily due to $10.4 million of nontaxable income recognized in that
quarter related to the transfer of appreciated investment securities to The
M&T Charitable Foundation. Tighter pricing margins on residential mortgage
loan originations resulted in losses on loans originated for sale to other
investors of $1.5 million in the first quarter of 1995 compared with $.5
million in the first quarter of 1994. A gain of $126 thousand was recognized
in the fourth quarter of 1994 on mortgage loans originated for sale to
others.
Other Expense
Other expense totaled $89.5 million in the first quarter of 1995, compared
with $79.2 million in the first quarter of 1994 and $95.0 million in the
fourth quarter of 1994. Excluding the previously noted expenses of $6.6
million related to the acquisition of Statewide, the write-off of investment
securities issued by Nationar and increased stock appreciation rights
expense, other expense totaled $82.9 million in this year's first quarter, an
increase of $3.7 million from 1994's initial quarter. That $3.7 million
increase was primarily the result of expenses associated with the operations
of the recently completed acquisitions. In the fourth quarter of 1994, $13.8
million of charitable contribution expense arising from the transfer of
investment securities to The M&T Charitable Foundation was incurred.
For the first quarter of 1995, salaries and employee benefits expense was
$46.2 million, increases of $6.4 million and $7.2 million from the first and
fourth quarters of 1994, respectively. Personnel costs resulting from the
completed acquisitions, merit salary increases and the higher expenses
associated with stock appreciation rights granted in 1990 and 1991 were
largely responsible for the higher expense in 1995.
Nonpersonnel expenses of $43.3 million for the first quarter of 1995 were
$3.9 million higher than in the first quarter of 1994. Expenses for the
write-off of $2.3 million of nonmarketable securities of Nationar and $1.3
million of costs to integrate Statewide into and conform its operations with
M&T Mortgage Corporation were recognized during the first quarter of the
current year. Nonpersonnel expenses were $12.8 million lower in the first
quarter of 1995 than in the fourth quarter of 1994 when the aforementioned
$13.8 million of charitable contributions expense was incurred.
Capital
Common stockholders' equity totaled $710.6 million at March 31, 1995, up from
$685.0 million a year earlier and $681.0 million at December 31, 1994. On a
per share basis, common stockholders' equity was $108.64 at March 31, 1995,
an increase of 8% from $100.19 at March 31, 1994 and 5% from $103.02 at
December 31, 1994. Total stockholders' equity at March 31, 1995 was $750.6
million or 6.66% of total assets, compared with $725.0 million or 6.96% of
total assets a year earlier and $721.0 million or 6.85% of total assets at
December 31, 1994.
Stockholders' equity at March 31, 1995 was reduced by $31.4 million, or $4.80
per common share, for the net after-tax impact of unrealized losses on
investment securities classified as available for sale, compared with $6.9
million or $1.02 per common share at March 31, 1994 and $50.6 million or
$7.65 per common share at December 31, 1994. The market valuation of
investment securities and other assets and liabilities should be considered
in the context of the entire balance sheet of the Company. In general, with
the exception of investment securities classified as available for sale,
trading account assets and mortgage loans held for sale by M&T Mortgage
Corporation, the carrying values of financial instruments in the balance
16
sheet are not adjusted for appreciation or depreciation in market value
resulting from changes in interest rates.
Federal regulators generally require banking institutions to maintain "core
capital" and "total capital" ratios of at least 4% and 8%, respectively, of
risk-adjusted total assets. In addition to the risk-based measures, Federal
bank regulators have also implemented a minimum "leverage" ratio guideline of
3% of the quarterly average of total assets. Under regulatory guidelines,
unrealized gains or losses on investment securities classified as available
for sale are not recognized in determining regulatory capital. The capital
ratios of the Company and its banking subsidiaries, M&T Bank and East New
York, as of March 31, 1995 are presented in the accompanying table.
REGULATORY CAPITAL RATIOS
March 31, 1995
First Empire M&T
(Consolidated) Bank East New York
-------------- ---------- -------------
Core capital 8.53% 8.35% 8.95%
Total capital 10.65% 10.64% 10.22%
Leverage 7.02% 6.74% 7.52%
First Empire has historically maintained capital ratios well in excess of
minimum regulatory guidelines largely through a high rate of internal capital
generation. The rate of internal capital generation, or net income less
dividends paid expressed as an annualized percentage of average total
stockholders' equity, was 12.29% during the first quarter of 1995, compared
with 12.92% and 14.80% in the first and fourth quarters of 1994,
respectively.
In December 1993, First Empire announced a plan to repurchase and hold as
treasury stock up to 506,930 shares of common stock for reissuance upon the
possible future conversion of its 9% convertible preferred stock. As of
March 31, 1995, First Empire had repurchased 382,900 shares pursuant to such
plan at an average cost of $149.19.
17
- ------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Three months ended
March 31
Amounts in thousands, except per share 1995 1994 Change
- ------------------------------------------------------------------------------------
For the period
- ------------------------------------------------------------------------------------
Net income $27,168 27,628 - 2 %
Per common share
Net income
Primary $3.85 3.77 + 2
Fully diluted 3.68 3.64 + 1
Cash dividends .60 .50 + 20
Average common shares outstanding
Primary 6,820 7,083 - 4
Fully diluted 7,384 7,590 - 3
Annualized return on
Average total assets 1.03 % 1.11 %
Average common stockholders' equity 15.29 % 15.68 %
Market price per common share
Closing $171.00 139.25 + 23
High 171.00 144.00
Low 136.50 135.00
- ------------------------------------------------------------------------------------
At March 31
- ------------------------------------------------------------------------------------
Loans and leases,
net of unearned discount $ 8,559,185 7,239,869 + 18 %
Total assets 11,276,959 10,411,622 + 8
Total deposits 9,044,098 7,329,084 + 23
Total stockholders' equity 750,590 724,975 + 4
Stockholders' equity per common share $108.64 100.19 + 8
- ------------------------------------------------------------------------------------
18
- -----------------------------------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES
1995 First quarter 1994 Fourth quarter
Average Average Average Average
Average balance in millions; interest in thousands balance Interest rate balance Interest rate
- -----------------------------------------------------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $ 1,671 $ 35,772 8.68 % 1,551 32,609 8.34 %
Real estate 5,048 112,059 8.88 4,757 103,982 8.74
Consumer 1,592 37,788 9.62 1,497 34,881 9.25
- -----------------------------------------------------------------------------------------------------------------------------------
Total loans and leases, net 8,311 185,619 9.06 7,805 171,472 8.72
- -----------------------------------------------------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 67 1,294 7.82 11 138 4.85
Federal funds sold and agreements
to resell securities 14 200 5.75 124 1,674 5.35
Trading account 13 193 5.94 6 86 5.62
- -----------------------------------------------------------------------------------------------------------------------------------
Total money-market assets 94 1,687 7.25 141 1,898 5.32
- -----------------------------------------------------------------------------------------------------------------------------------
Investment securities
U.S. Treasury and federal agencies 1,100 15,671 5.78 1,075 14,841 5.48
Obligations of states and political subdivisions 56 948 6.86 53 841 6.24
Other 769 12,325 6.50 795 12,491 6.24
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment securities 1,925 28,944 6.10 1,923 28,173 5.81
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 10,330 216,250 8.49 9,869 201,543 8.10
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance for possible credit losses (247) (240)
Cash and due from banks 313 314
Other assets 285 257
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 10,681 10,200
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $ 734 2,765 1.53 734 2,786 1.51
Savings deposits 3,040 22,312 2.98 3,105 21,936 2.80
Time deposits 3,702 51,573 5.65 2,606 33,216 5.06
Deposits at foreign office 184 2,336 5.14 221 2,539 4.55
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 7,660 78,986 4.18 6,666 60,477 3.60
- -----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,076 15,663 5.90 1,609 21,135 5.21
Long-term borrowings 96 1,930 8.13 83 1,675 8.06
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,832 96,579 4.43 8,358 83,287 3.95
- -----------------------------------------------------------------------------------------------------------------------------------
Demand deposits 1,038 1,037
Other liabilities 74 81
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,944 9,476
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 737 724
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 10,681 10,200
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest spread 4.06 4.15
Contribution of interest-free funds .64 .60
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin on earning assets $ 119,671 4.70 % 118,256 4.75 %
- -----------------------------------------------------------------------------------------------------------------------------------
*Includes nonaccrual loans
18(continued)-19
- -----------------------------------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES (continued)
1994 Third quarter 1994 Second quarter
Average Average Average Average
Average balance in millions; interest in thousands balance Interest rate balance Interest rate
- -----------------------------------------------------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $ 1,457 $ 29,797 8.11 % 1,463 27,993 7.68 %
Real estate 4,562 98,574 8.64 4,471 95,067 8.50
Consumer 1,423 33,281 9.28 1,332 30,071 9.06
- -----------------------------------------------------------------------------------------------------------------------------------
Total loans and leases, net 7,442 161,652 8.62 7,266 153,131 8.45
- -----------------------------------------------------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 158 1,863 4.68 5 57 4.38
Federal funds sold and agreements
to resell securities 20 244 4.86 138 1,390 4.03
Trading account 8 110 5.34 9 126 5.65
- -----------------------------------------------------------------------------------------------------------------------------------
Total money-market assets 186 2,217 4.73 152 1,573 4.14
- -----------------------------------------------------------------------------------------------------------------------------------
Investment securities
U.S. Treasury and federal agencies 1,116 13,954 4.96 1,186 13,217 4.47
Obligations of states and political subdivisions 53 760 5.69 54 740 5.49
Other 823 11,972 5.77 857 12,510 5.86
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment securities 1,992 26,686 5.32 2,097 26,467 5.06
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 9,620 190,555 7.86 9,515 181,171 7.64
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance for possible credit losses (230) (219)
Cash and due from banks 298 309
Other assets 271 281
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 9,959 9,886
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $ 739 2,840 1.52 751 2,814 1.50
Savings deposits 3,214 21,258 2.62 3,380 20,921 2.48
Time deposits 2,119 24,307 4.55 1,993 20,797 4.18
Deposits at foreign office 159 1,610 4.01 104 817 3.14
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 6,231 50,015 3.18 6,228 45,349 2.92
- -----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,836 20,841 4.50 1,775 17,391 3.93
Long-term borrowings 76 1,537 8.07 76 1,537 8.16
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,143 72,393 3.53 8,079 64,277 3.19
- -----------------------------------------------------------------------------------------------------------------------------------
Demand deposits 1,019 992
Other liabilities 82 92
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,244 9,163
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 715 723
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 9,959 9,886
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest spread 4.33 4.45
Contribution of interest-free funds .54 .48
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin on earning assets $ 118,162 4.87 % 116,894 4.93 %
- -----------------------------------------------------------------------------------------------------------------------------------
*Includes nonaccrual loans
19-continued
- -----------------------------------------------------------------------------------------------------------------------------------
FIRST EMPIRE STATE CORPORATION AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEETS AND ANNUALIZED TAXABLE-EQUIVALENT RATES (continued)
1994 First quarter
Average Average
Average balance in millions; interest in thousands balance Interest rate
- ---------------------------------------------------------------------------------------------
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $ 1,475 $ 26,080 7.17 %
Real estate 4,457 93,058 8.35
Consumer 1,256 29,884 9.65
- ---------------------------------------------------------------------------------------------
Total loans and leases, net 7,188 149,022 8.41
- ---------------------------------------------------------------------------------------------
Money-market assets
Interest-bearing deposits at banks 18 154 3.55
Federal funds sold and agreements
to resell securities 155 1,443 3.76
Trading account 11 177 6.81
- ---------------------------------------------------------------------------------------------
Total money-market assets 184 1,774 3.92
- ---------------------------------------------------------------------------------------------
Investment securities
U.S. Treasury and federal agencies 1,297 14,673 4.59
Obligations of states and political subdivisions 52 731 5.66
Other 944 11,960 5.14
- ---------------------------------------------------------------------------------------------
Total investment securities 2,293 27,364 4.84
- ---------------------------------------------------------------------------------------------
Total earning assets 9,665 178,160 7.48
- ---------------------------------------------------------------------------------------------
Allowance for possible credit losses (203)
Cash and due from banks 308
Other assets 286
- ---------------------------------------------------------------------------------------------
Total assets $ 10,056
- ---------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $ 761 2,846 1.52
Savings deposits 3,400 20,689 2.47
Time deposits 1,992 18,747 3.82
Deposits at foreign office 137 928 2.75
- ---------------------------------------------------------------------------------------------
Total interest-bearing deposits 6,290 43,210 2.79
- ---------------------------------------------------------------------------------------------
Short-term borrowings 1,872 14,501 3.14
Long-term borrowings 76 1,538 8.25
- ---------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,238 59,249 2.92
- ---------------------------------------------------------------------------------------------
Demand deposits 997
Other liabilities 90
- ---------------------------------------------------------------------------------------------
Total liabilities 9,325
- ---------------------------------------------------------------------------------------------
Stockholders' equity 731
- ---------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 10,056
- ---------------------------------------------------------------------------------------------
Net interest spread 4.56
Contribution of interest-free funds .43
- ---------------------------------------------------------------------------------------------
Net interest income/margin on earning assets $ 118,911 4.99 %
- ---------------------------------------------------------------------------------------------
*Includes nonaccrual loans
20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
A number of lawsuits were pending against First Empire and its
subsidiaries at March 31, 1995. In the opinion of management, the potential
liabilities, if any, arising from such litigation will not have a materially
adverse impact on the Company's consolidated financial condition. Moreover,
management believes that First Empire 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 1995 Annual Meeting of Stockholders of First Empire was held on
April 18, 1995. At the 1995 Annual Meeting, stockholders elected twenty-one
(21) directors, all of whom were then serving as directors of First Empire,
for terms of one (1) year and until their successors are elected and
qualified. The following table reflects the tabulation of the votes with
respect to each director who was elected at the 1995 Annual Meeting.
Number of Votes
------------------------
Nominee For Withheld
- ---------------- --------- ---------
Brent D. Baird 5,876,381 18,256
John H. Benisch 5,876,380 18,257
C. Angela Bontempo 5,864,650 29,987
Robert T. Brady 5,870,731 23,906
Patrick J. Callan 5,876,380 18,257
David N. Campbell 5,873,381 21,256
James A. Carrigg 5,873,181 21,456
Barber B. Conable, Jr. 5,864,151 30,486
Richard E. Garman 5,870,472 24,165
James V. Glynn 5,873,030 21,607
Roy M. Goodman 5,869,372 25,265
Patrick W.E. Hodgson 5,876,380 18,257
Samuel T. Hubbard, Jr. 5,870,557 24,080
Lambros J. Lambros 5,876,407 18,230
Wilfred J. Larson 5,874,741 19,896
Jorge G. Pereira 5,855,406 39,231
William C. Shanley, III 5,874,741 19,896
Raymond D. Stevens, Jr. 5,872,741 21,896
Richard D. Trent 5,873,732 20,905
John L. Wehle, Jr. 5,870,805 23,832
Robert G. Wilmers 5,856,265 38,372
At the Annual Meeting, stockholders also approved amendments to the
First Empire State Corporation 1983 Stock Option Plan (the "Stock Option
Plan") (i) increasing from 1,500,000 to 2,000,000 the number of shares of
First Empire common stock subject to the Stock Option Plan and (ii)
establishing a maximum number of shares of common stock that may be covered by
stock options and stock appreciation rights (including stock appreciation
rights exercisable only for cash) granted to key employees of the Company
under the Stock Option Plan during any fiscal year. The following table
presents the tabulation of the votes with respect to the amendments to the
Stock Option Plan.
Number of Votes
------------------------------------------------------
Broker
For Against Abstain Non-Votes
--------- ------- ------- ---------
4,560,700 858,295 32,404 443,238
21
Item 5. Other Information. (None.)
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of this report:
Exhibit
No.
-------
10 First Empire State Corporation 1983 Stock Option Plan as
amended. Filed herewith.
11 Statement re: Computation of Earnings Per Common Share.
Filed herewith.
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K.
On March 8, 1995, First Empire filed a Current Report on Form
8-K with the Securities and Exchange Commission dated March 6,
1995 reporting that M&T Mortgage Corporation ("M&T Mortgage"),
the Company's mortgage banking subsidiary, had acquired
Statewide Funding Corporation ("Statewide"), a privately-owned
mortgage banking company based near Albany, New York, and that
Statewide had been merged into M&T Mortgage.
22
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 10, 1995 By: /s/ James L. Vardon
---------------------------
James L. Vardon
Executive Vice President
and Chief Financial Officer
23
EXHIBIT INDEX
Exhibit
No.
- -------
10 First Empire State Corporation 1983 Stock Option Plan as amended.
Filed herewith.
11 Statement re: Computation of Earnings Per Common Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.