SUBJECT TO COMPLETION, DATED JANUARY 23, 2008

 

PRELIMINARY PROSPECTUS SUPPLEMENT

 

(To Prospectus Dated February 14, 2005)

Filed Pursuant To Rule 424(b)(3)

Registration Nos. 333-122147

333-122147-03

 

M&T Capital Trust IV

 

Enhanced Trust Preferred Securities

% Enhanced Trust Preferred Securities

(liquidation amount $25 per security)

fully and unconditionally guaranteed, on a subordinated basis, as described herein, by

M&T Bank Corporation

 

M&T Capital Trust IV, a Delaware statutory trust, which we refer to as the “Trust,” will issue the Enhanced Trust Preferred Securities, which we refer to as the “Capital Securities.” Each Capital Security represents an undivided beneficial interest in the Trust. The only assets of the Trust will be the     % Junior Subordinated Debentures due 2068 issued by M&T Bank Corporation, which we refer to as the “JSDs.” The Trust will pay distributions on the Capital Securities only from the proceeds, if any, of interest payments on the JSDs.

 

The JSDs will bear interest on their principal amount from and including          , 2008 at the annual rate of     % payable quarterly in arrears on          ,          , and           of each year, beginning on          , 2008.

 

M&T Bank Corporation has the right, on one or more occasions, to defer the payment of interest on the JSDs for one or more consecutive interest periods that do not exceed five years or, if earlier, until the first interest payment date on which it pays current interest without being subject to its obligations under the alternative payment mechanism described in this prospectus supplement and for one or more consecutive interest periods that do not exceed 10 years without giving rise to an event of default. In the event of M&T’s bankruptcy, holders of the JSDs will have a claim for deferred interest that may be limited.

 

At M&T’s option, the Capital Securities may be redeemed (i) at 100% of their liquidation amount on or after          , 2013 or prior to such date after the occurrence of a “tax event,” “capital treatment event,” or “investment company event,” as described herein, or (ii) at a make-whole redemption price after the occurrence of a “rating agency event,” as described herein, in each case plus accrued and unpaid distributions through the date of redemption. Any redemption, repayment or purchase by M&T prior to          , 2048 is subject to the replacement capital covenant described herein.

 

The JSDs will mature on          , 2068.

 

The JSDs will be subordinated upon M&T’s liquidation to all of its existing and future senior and subordinated debt other than trade accounts payable and any debt that by its terms does not rank senior to the JSDs upon M&T’s liquidation, and will be effectively subordinated to all liabilities of its subsidiaries. As a result, the Capital Securities also will be effectively subordinated to the same debt and liabilities. M&T will guarantee the Capital Securities on a subordinated basis to the extent described in this prospectus supplement.

 

The Trust will apply to have the Capital Securities listed on the New York Stock Exchange under the symbol “MTBPRA.” If approved for listing, trading is expected to commence within 30 days after the Capital Securities are first issued.

 

See “Risk Factors” beginning on page S-9 of this prospectus supplement to read about important factors you should consider before buying the Capital Securities.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

 

The Capital Securities and the JSDs are not savings or deposit accounts or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

 

 

 

 

The underwriters expect to deliver the Capital Securities in book-entry form only through the facilities of The Depository Trust Company against payment in New York, New York on          , 2008.

Joint Book-Running Managers and Joint Structuring Advisors

Senior Co-Managers

 

Prospectus Supplement dated January     , 2008.

 

ABOUT THIS PROSPECTUS SUPPLEMENT

 

This document consists of two parts. The first part is the prospectus supplement, which describes the specific terms of this offering. The second part is the prospectus, which describes more general information, some of which may not apply to this offering. You should read both this prospectus supplement and the accompanying prospectus, together with additional information described below under the heading “Where You Can Find More Information”.

 

Unless otherwise mentioned or unless the context requires otherwise, all references in this prospectus supplement to “M&T Bank Corporation,” “M&T,” “we,” “us,” “our” or similar references mean M&T Bank Corporation, and references to the “Trust” mean M&T Capital Trust IV.

 

If the information set forth in this prospectus supplement differs in any way from the information set forth in the accompanying prospectus, you should rely on the information set forth in this prospectus supplement.

 

You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. This prospectus supplement may be used only for the purpose for which it has been prepared. No one is authorized to give information other than that contained in this prospectus supplement and in the documents referred to in this prospectus supplement and which are made available to the public. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it.

 

We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information appearing in this prospectus supplement, the accompanying prospectus or any document incorporated by reference is accurate as of any date other than the date of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date. Neither this prospectus supplement nor the accompanying prospectus constitutes an offer, or an invitation on our behalf or on behalf of the underwriters, to subscribe for and purchase, any of the securities and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

 

WHERE YOU CAN FIND MORE INFORMATION

 

M&T is a New York corporation and a registered bank holding company. We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, the “Exchange Act”, and in accordance with it file reports and other information with the SEC. All such reports and other information may be inspected and copied at the Public Reference Room of the SEC, at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room. The SEC also maintains a web site (http://www.sec.gov) that contains reports and other information regarding registrants that file electronically with the SEC, including M&T. M&T also maintains a web site (http://www.mandtbank.com) where information about M&T and M&T Bank can be obtained. The information contained on the M&T web site is not part of this prospectus supplement.

 

The SEC allows M&T to “incorporate by reference” into this prospectus supplement the information in documents M&T files with the SEC. This means that M&T can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus supplement and should be read with the same care. When M&T updates the information contained in documents that have been incorporated by reference by making future filings with the SEC, the information included and incorporated by reference in this prospectus supplement is considered to be automatically updated and superseded. In other words, in the case of a conflict or inconsistency between information contained in this prospectus supplement and/or information incorporated by reference into this prospectus supplement, you should rely on the information contained in the document that was filed later. M&T

incorporates by reference its Annual Report on Form 10-K for the year ended December 31, 2006, Quarterly Reports on Form 10-Q for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007, Current Reports on Form 8-K, filed February 7, February 22, May 29, July 19, 2007, January 14 and January 23, 2008 and M&T’s Definitive Proxy Statement, filed on March 5, 2007. M&T also incorporates by reference the sections entitled “Reconciliation of GAAP and Non-GAAP Results of Operations” and “Reconciliation of Total Assets and Equity to Tangible Assets and Equity” in Exhibit 99 to M&T’s Form 8-K filed on October 11, 2007. Each document or report filed by M&T with the SEC pursuant to Section 13(a), 14, or 15(d) of the Exchange Act subsequent to the date of this prospectus supplement and prior to the termination of the offering of the Notes (other than any materials that are deemed “furnished” and not filed) is incorporated herein by reference. Certain of the information incorporated by reference herein has not been audited by independent auditors.

 

M&T will provide without charge to each person to whom a copy of this prospectus supplement is delivered, upon the written or oral request of any such person, a copy of any or all of the documents incorporated by reference herein. Requests should be directed to:

 

M&T Bank Corporation
One M&T Plaza
Buffalo, New York 14203
Attention: Investor Relations
Telephone Number: (716) 842-5138

 

FORWARD-LOOKING STATEMENTS

 

This prospectus supplement and the information incorporated by reference herein include forward-looking statements, including statements regarding future financial condition, results of operations, prospects and business of each of M&T and Manufacturers and Traders Trust Company (“M&T Bank”). Forward-looking statements are often identified by such words as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. These statements are subject to risks and uncertainty. Management believes such statements to be “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, the “Securities Act”, and Section 21E of the Exchange Act. Management has made, and may continue to make, various forward-looking statements. Management cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, and that statements for periods including or after 2008 are subject to greater uncertainty because of the increased likelihood of changes in underlying factors and assumptions. Actual results could differ materially from those expressed in forward-looking statements. In addition to factors disclosed in documents incorporated by reference in this prospectus supplement and factors identified elsewhere in this document, including disclosure in such various sections labeled “Risk Factors” or “Future Factors”, the following occurrences could cause actual results to differ materially from those expressed in forward-looking statements:

 

 

Management’s forward-looking statements speak only as of the dates on which they are made. By making forward-looking statements, management assumes no duty to update them to reflect new, changing or unanticipated events or circumstances except as may be required by applicable law or regulation.

	•	issuing the Capital Securities and common securities representing undivided beneficial interests in the Trust;
	•	investing the gross proceeds of the Capital Securities and the common securities in the JSDs; and
	•	engaging in only those activities convenient, necessary or incidental thereto.

	•	default in the payment of interest, including compounded interest, in full on any JSDs for a period of 30 days after the conclusion of a 10-year period following the commencement of any deferral period; or
	•	bankruptcy of M&T (not including any of its subsidiaries).

	•	M&T has obtained the prior approval of the Federal Reserve if such approval is then required under the Federal Reserve’s capital guidelines or policies applicable to bank holding companies; and
	•	the principal amount repaid, or the applicable redemption or purchase price, does not exceed the sum of:

	•	the applicable percentage of the aggregate amount of net cash proceeds M&T and its subsidiaries have received from the sale to persons other than M&T and its subsidiaries of common stock or rights to acquire common stock (including common stock or rights to acquire common stock issued pursuant to M&T’s dividend reinvestment plan or employee benefit plans), “debt exchangeable for common equity,” “debt exchangeable for preferred equity,” “mandatorily convertible preferred stock,” “REIT preferred securities” or “qualifying capital securities”; plus
	•	the applicable percentage of the market value of any common stock that M&T or any of its subsidiaries has delivered to persons other than M&T and its subsidiaries as consideration for

		For the Nine Months
		Ended
		September 30,				For the Year Ended December 31,
		2007				2006				2005				2004				2003				2002
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
Excluding interest on deposits			2.60	x			3.12	x			3.56	x			4.65	x			4.22	x			3.72	x
Including interest on deposits			1.69	x			1.81	x			2.16	x			2.83	x			2.56	x			2.12	x

		As of September 30,								As of December 31,
		2007				2006				2006				2005				2004
		(In thousands)
ASSETS
Cash and balances due from depository institutions		$	1,303,880			$	1,347,162			$	1,612,145			$	1,487,647			$	1,344,870
Investment securities			8,003,015				7,626,300				7,251,598				8,400,164				8,474,619
Federal funds sold and securities purchased under agreements to resell			399,997				123,245				119,458				11,220				29,176
Loans and leases, net of unearned discount			44,778,472				42,098,271				42,947,297				40,330,645				38,398,477
Allowance for credit losses			(680,498	)			(646,319	)			(649,948	)			(637,663	)			(626,864	)
Loans and leases, net			44,097,974				41,451,952				42,297,349				39,692,982				37,771,613
Other assets			6,203,257				5,824,817				5,784,355				5,554,393				5,318,443
TOTAL ASSETS		$	60,008,123			$	56,373,476			$	57,064,905			$	55,146,406			$	52,938,721
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Interest-bearing deposits		$	30,907,417			$	31,324,728			$	32,030,526			$	28,958,246			$	27,012,108
Noninterest-bearing deposits			7,565,762				7,754,061				7,879,977				8,141,928				8,417,365
Total deposits			38,473,179				39,078,789				39,910,503				37,100,174				35,429,473
Short-term borrowings			4,920,901				4,418,356				3,094,214				5,152,872				4,703,664
Subordinated debt			2,200,202				1,904,321				2,396,777				1,906,682				2,030,309
Other long-term borrowings			7,315,990				3,819,167				4,493,964				4,290,312				4,318,250
Accrued interest and other liabilities			859,847				1,001,600				888,352				819,980				727,411
Total liabilities			53,770,119				50,222,233				50,783,810				49,270,020				47,209,107
STOCKHOLDERS’ EQUITY
Common stock			60,198				60,198				60,198				60,198				60,198
Additional paid-in capital and other			1,436,888				1,881,330				1,831,030				2,059,843				2,415,738
Retained earnings			4,827,583				4,296,655				4,443,441				3,854,275				3,270,887
Accumulated other comprehensive income (loss), net			(86,665	)			(86,940	)			(53,574	)			(97,930	)			(17,209	)
Total stockholders’ equity			6,238,004				6,151,243				6,281,095				5,876,386				5,729,614
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	60,008,123			$	56,373,476			$	57,064,905			$	55,146,406			$	52,938,721

		For the Nine Months								For the Year
		Ended September 30,								Ended December 31,
		2007				2006				2006				2005				2004
		(Dollars in thousands)
Interest income		$	2,632,239			$	2,443,019			$	3,314,093			$	2,788,694			$	2,298,732
Interest expense			1,252,212				1,092,196				1,496,552				994,351				564,160
Net interest income			1,380,027				1,350,823				1,817,541				1,794,343				1,734,572
Provision for credit losses			91,000				52,000				80,000				88,000				95,000
Net interest income after provision for credit losses			1,289,027				1,298,823				1,737,541				1,706,343				1,639,572
Other income			772,499				789,435				1,045,852				949,718				942,969
Other expense			1,182,216				1,167,941				1,551,751				1,485,142				1,516,018
Income before income taxes			879,310				920,317				1,231,642				1,170,919				1,066,523
Income taxes			289,981				294,457				392,453				388,736				344,002
Net income		$	589,329			$	625,860			$	839,189			$	782,183			$	722,521
Return on average assets			1.37	%(a)			1.51	%(a)			1.50	%			1.44	%			1.40	%
Return on average tangible assets(b)			1.52	%(a)			1.67	%(a)			1.67	%			1.60	%			1.59	%
Return on average equity			12.69	%(a)			14.01	%(a)			13.89	%			13.49	%			12.67	%
Return on average tangible equity(b)			26.74	%(a)			29.86	%(a)			29.55	%			29.06	%			28.76	%
Net interest margin(c)			3.66	%(a)			3.69	%(a)			3.70	%			3.77	%			3.88	%
Net charge-offs to average loans and leases			0.19	%(a)			0.14	%(a)			0.16	%			0.19	%			0.22	%
Earnings to fixed charges (excluding interest on deposits)			2.60	x			3.17	x			3.12	x			3.56	x			4.65	x
Earnings to fixed charges (including interest on deposits)			1.69	x			1.83	x			1.81	x			2.16	x			2.83	x

		As of September 30,								As of December 31,
		2007				2006				2006				2005				2004
Leverage ratio (Tier 1 capital to total assets)			7.09	%			6.97	%			7.20	%			6.94	%			6.73	%
Tier 1 risk based capital ratio			7.44	%			7.53	%			7.74	%			7.56	%			7.31	%
Total risked based capital ratio			11.31	%			10.63	%			11.78	%			10.85	%			10.91	%
Nonperforming loans as a percent of loans and leases (net of unearned discount)			0.83	%			0.43	%			0.52	%			0.39	%			0.45	%
Nonperforming assets as a percent of loans and leases and real estate and other assets owned (net of unearned discount)			0.88	%			0.46	%			0.55	%			0.41	%			0.48	%
Allowance for credit losses as a percent of loans and leases (net of unearned discount)			1.52	%			1.54	%			1.51	%			1.58	%			1.63	%
Allowance for credit losses as a percent of nonperforming loans and leases			183	%			360	%			290	%			408	%			364	%

(a)		Annualized.
(b)		Excludes amortization and balances related to goodwill and core deposit and other intangibles and merger-related expenses, net of applicable taxes. A reconciliation of amounts prepared in accordance with generally accepted accounting principles (“GAAP”) to these non-GAAP measures can be found in the sections entitled “Reconciliation of GAAP and Non-GAAP Results of Operations” and “Reconciliation of Total Assets and Equity to Tangible Assets and Equity” in Exhibit 99 to M&T’s Form 8-K filed on October 11, 2007 or in M&T’s Annual Report on Form 10-K for the year ended December 31, 2006.
(c)		Net interest margin on a fully taxable-equivalent basis.

 

RISK FACTORS

 

An investment in the Capital Securities is subject to the risks described below. You should carefully review the following risk factors and other information contained in this prospectus supplement, in documents incorporated by reference in this prospectus supplement and in the accompanying prospectus before deciding whether this investment is suited to your particular circumstances. In addition, because each Capital Security sold in the offering will represent a beneficial interest in the Trust, which will own our JSDs, you are also making an investment decision with regard to the JSDs, as well as our guarantee of the Trust’s obligations. You should carefully review all the information in this prospectus supplement about all of these securities.

 

The indenture does not limit the amount of indebtedness for money borrowed M&T may issue that ranks senior to the JSDs upon its liquidation or in right of payment as to principal or interest.

 

The JSDs will be subordinate and junior upon M&T’s liquidation to its obligations under all of its indebtedness for money borrowed that is not by its terms made pari passu with or junior to the JSDs upon liquidation and, in particular, subordinate to approximately $713.7 million of junior subordinated debt securities underlying traditional trust preferred securities at September 30, 2007. As of September 30, 2007, M&T’s indebtedness for money borrowed (excluding all of the liabilities of the subsidiaries) that would rank senior to the JSDs upon liquidation was approximately $1.2 billion and its subsidiaries’ direct borrowings and deposit liabilities that would effectively rank senior to the JSDs upon liquidation totaled approximately $52.0 billion.

 

M&T may issue debt securities or guarantees that rank on a parity with the JSDs upon M&T’s liquidation (“parity securities”) as to which it is required to make payments of interest during a deferral period on the JSDs that, if not made, would cause it to breach the terms of the instrument governing such parity securities. The terms of the JSDs permit M&T to make any payment of principal or of deferred interest on parity securities that, if not made, would cause it to breach the terms of the instrument governing such parity securities. They also permit M&T to make any payment of current or deferred interest on parity securities and on the JSDs during a deferral period that is made pro rata to the amounts due on such parity securities and the JSDs, subject to the limitations described in the last paragraph under “Description of the Junior Subordinated Debentures — Alternative Payment Mechanism” to the extent that they apply.

 

The JSDs beneficially owned by the Trust will be effectively subordinated to the obligations of M&T’s subsidiaries.

 

M&T receives substantially all of its revenue from dividends from its subsidiaries. Because it is a holding company, its right to participate in any distribution of the assets of its banking or nonbanking subsidiaries, upon a subsidiary’s dissolution, winding-up, liquidation or reorganization or otherwise, and thus your ability to benefit indirectly from such distribution, is subject to the prior claims of creditors of any such subsidiary, except to the extent that M&T may be a creditor of that subsidiary and its claims are recognized. There are also legal limitations on the extent to which some of its subsidiaries may extend credit, pay dividends or otherwise supply funds to, or engage in transactions with, it or some of its other subsidiaries. M&T’s subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay amounts due under M&T’s contracts or otherwise to make any funds available to it. Accordingly, the payments on the JSDs, and therefore the Capital Securities, effectively will be subordinated to all existing and future liabilities of M&T’s subsidiaries. At September 30, 2007, M&T’s subsidiaries’ direct borrowings and deposit liabilities were approximately $52.0 billion.

 

M&T’s ability to make distributions on or redeem the Capital Securities is restricted.

 

Federal and state banking authorities will have the right to examine the Trust and its activities because it is M&T’s subsidiary. Under certain circumstances, including any determination that M&T’s relationship to the Trust would result in an unsafe and unsound banking practice, these banking authorities have the authority to issue orders that could restrict the Trust’s ability to make distributions on or to redeem the Capital Securities.

M&T guarantees distributions on the Capital Securities only if the Trust has cash available.

 

If you hold any of the Capital Securities, M&T will guarantee, on an unsecured and junior subordinated basis, the payment of the following:

 

 

 

If M&T does not make a required interest payment on the JSDs or elects to defer interest payments on the JSDs, the Trust will not have sufficient funds to make the related distribution on the Capital Securities. The guarantee does not cover payments on the Capital Securities when the Trust does not have sufficient funds to make them. If M&T does not pay any amounts on the JSDs when due, holders of the Capital Securities will have to rely on the enforcement by the property trustee of the property trustee’s rights as owner of the JSDs, or proceed directly against M&T for payment of any amounts due on the JSDs.

 

M&T’s obligations under the guarantee are unsecured and are subordinated to and junior in right of payment to all of its secured and senior indebtedness, and will rank pari passu with any similar guarantees it may issue in the future.

 

M&T may redeem the JSDs at any time on or after          , 2013 or at any time prior to          , 2013 within 90 days of the occurrence of a tax event, rating agency event, capital treatment event or an investment company event.

 

M&T may redeem the JSDs at any time on or after          , 2013, in whole or in part, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest through the date of redemption. In addition, M&T may redeem the JSDs, in whole but not in part, prior to          , 2013, (i) at any time within 90 days of the occurrence of a tax event, capital treatment event, or an investment company event, at a redemption price equal to 100% of their principal amount or (ii) at any time within 90 days of a rating agency event at a make-whole redemption price, in each case plus accrued and unpaid interest through the date of redemption. Except as set forth in the preceding sentence, M&T may not redeem the JSDs prior to          , 2013. If the Capital Securities were redeemed, the redemption would be a taxable event to you. In addition, you might not be able to reinvest the money you receive upon redemption of the Capital Securities at the same rate as the rate of return on the Capital Securities. See “Description of the Junior Subordinated Debentures — Redemption.”

 

An IRS pronouncement or threatened challenge resulting in a tax event could occur at any time. Similarly, changes in rating agency methodology or the treatment of the Capital Securities for Federal Reserve capital adequacy purposes, and changes relating to the treatment of the trust as an “investment company,” could result in the JSDs being redeemed earlier than would otherwise be the case. See “Description of the Junior Subordinated Debentures — Redemption” for a further description of those events.

M&T’s right to redeem the JSDs prior to          , 2048 is limited by its obligations in the replacement capital covenant.

 

The replacement capital covenant described under “Replacement Capital Covenant” will limit M&T’s right to redeem or purchase JSDs prior to          , 2048. In the replacement capital covenant, M&T covenants, for the benefit of holders of a designated series of its indebtedness that ranks senior to the JSDs, or in certain limited cases holders of a designated series of indebtedness of M&T Bank, that neither it nor any of its subsidiaries will redeem, repay or purchase the JSDs or the Capital Securities prior to          , 2048 unless during the applicable measurement period M&T or its subsidiaries have received sufficient proceeds from the sale of certain equity or equity-like securities the terms of which are set forth in the replacement capital covenant. M&T’s obligations in the replacement capital covenant may prevent it from redeeming JSDs at a time that it would otherwise wish to do so. See “Replacement Capital Covenant.”

 

M&T has the right to defer interest for 10 years without causing an event of default.

 

M&T has the right to defer interest on the JSDs for one or more consecutive interest periods of not more than 10 years. Although it would be subject to the alternative payment mechanism after the earlier of (i) the fifth anniversary of the commencement of the deferral period and (ii) the first interest payment date on which it makes any payment of current interest during a deferral period, if it is unable to raise sufficient eligible proceeds, it may fail to pay accrued interest on the JSDs for a period of up to 10 consecutive years without causing an event of default. During any such deferral period, holders of Capital Securities will receive limited or no current payments on the Capital Securities and, so long as M&T is otherwise in compliance with its obligations, such holders will have no remedies against the Trust or M&T for nonpayment unless it fails to pay all deferred interest (including compounded interest) within 30 days of the conclusion of a 10-year deferral period.

 

M&T’s ability to pay deferred interest is limited by the terms of the alternative payment mechanism, and is subject to market disruption events and other factors within and beyond its control.

 

If M&T elects to defer interest payments, it will not be permitted to pay deferred interest on the JSDs (and compounded interest thereon) during the deferral period, which may last up to 10 years, from any source other than from the net proceeds received by M&T from the issuance of common stock, and “qualifying warrants”, and “qualifying preferred stock” up to the “preferred stock issuance cap” (each as defined under “Description of the Junior Subordinated Debentures — Alternative Payment Mechanism”), except in limited circumstances. Those limited circumstances are (i) the occurrence and continuance of a supervisory event (i.e., the Federal Reserve has disapproved of such issuance or disapproved of the use of proceeds of such issuance to pay deferred interest), (ii) the deferral period is terminated as permitted under the indenture on the interest payment date following certain business combinations (or if later, within 90 days following the date of consummation of the business combination) and (iii) an event of default has occurred and is continuing. In those circumstances, M&T will be permitted, but not required, to pay deferred interest with cash from any source, as described under “Description of the Junior Subordinated Debentures — Alternative Payment Mechanism.” Common stock, qualifying preferred stock and qualifying warrants issuable under the alternative payment mechanism are referred to as “qualifying APM securities.”

 

The occurrence of a market disruption event or supervisory event may prevent or delay a sale of qualifying APM securities pursuant to the alternative payment mechanism and, accordingly, the payment of deferred interest on the JSDs. Market disruption events include events and circumstances both within and beyond M&T’s control, such as the failure to obtain approval of a regulatory body or governmental authority to issue qualifying APM securities, notwithstanding its commercially reasonable efforts. Moreover, M&T may encounter difficulties in successfully marketing its qualifying APM securities, particularly during times it is subject to the restrictions on dividends as a result of the deferral of interest. If M&T does not sell sufficient qualifying APM securities to fund deferred interest payments in these circumstances (other than as a result of a supervisory event), M&T will not be permitted to pay deferred interest to the Trust and, accordingly, no payment of distributions may be made on the Capital Securities, even if it has cash available from other

sources. See “Description of the Junior Subordinated Debentures — Option to Defer Interest Payments,” “— Alternative Payment Mechanism” and “— Market Disruption Events.”

 

The terms of M&T’s outstanding junior subordinated debentures underlying traditional trust preferred securities prohibit it from making any payment of principal or interest on the JSDs or the guarantee relating to the Capital Securities and from repaying, redeeming or repurchasing any JSDs if there has occurred any event that would constitute an event of default under the applicable junior subordinated indenture or the related guarantee or at any time when it has deferred interest thereunder.

 

M&T must notify the Federal Reserve before using the alternative payment mechanism and may not use it if the Federal Reserve disapproves.

 

The indenture for the JSDs provides that M&T must notify the Federal Reserve if the alternative payment mechanism is applicable and that it may not sell its qualifying APM securities or apply any eligible proceeds to pay interest pursuant to the alternative payment mechanism if a supervisory event has occurred and is continuing (i.e., the Federal Reserve disapproves of such issuance or disapproves of the use of proceeds of such issuance to pay deferred interest). The Federal Reserve may allow the issuance of qualifying APM securities but not allow use of the proceeds to pay deferred interest on the JSDs and require that the proceeds be applied to other purposes, including supporting a troubled bank subsidiary. Accordingly, if M&T elects to defer interest on the JSDs and the Federal Reserve disapproves of the issuance of qualifying APM securities or the application of the proceeds to pay deferred interest, it may be unable to pay the deferred interest on the JSDs.

 

M&T may continue to defer interest in the event of Federal Reserve disapproval of all or part of the alternative payment mechanism until 10 years have elapsed since the beginning of the deferral period without triggering an event of default under the indenture. As a result, M&T could defer interest for up to 10 years without being required to sell qualifying APM securities and apply the proceeds to pay deferred interest.

 

The indenture limits the number of shares of common stock that we may sell to pay deferred interest.

 

The indenture limits the amount of our common stock that we are permitted to sell to pay deferred interest to the then-current “maximum share number,” as described under “Description of the Junior Subordinated Debentures — Alternative Payment Mechanism,” which will initially be   million shares. If the number of shares of our common stock that we need to sell in order to pay deferred interest in full exceeds the then-current maximum share number, we may continue to defer interest, and such deferral will not constitute an event of default or give rise to a right of acceleration or similar remedy unless it extends beyond the date which is 10 years following the first interest payment date on which we deferred interest.

 

The indenture limits M&T’s obligation to raise proceeds from the sale of common stock to pay deferred interest during the first five years of a deferral period and generally does not obligate it to issue qualifying warrants.

 

The indenture limits M&T’s obligation to raise proceeds from the sale of shares of common stock to pay deferred interest attributable to the first five years of any deferral period (including compounded interest thereon) prior to the fifth anniversary of the commencement of a deferral period in excess of an amount we refer to as the “common equity issuance cap.” The common equity issuance cap takes into account all sales of common stock and qualifying warrants under the alternative payment mechanism for that deferral period. Once M&T reaches the common equity issuance cap for a deferral period, it will no longer be obligated to sell common stock to pay deferred interest relating to such deferral period unless such deferral extends beyond the date which is five years following its commencement. Although M&T has the right to sell common stock if it has reached the common equity issuance cap but has not reached the maximum share number, it has no obligation to do so. In addition, the sale of qualifying warrants to raise proceeds to pay deferred interest is an option that M&T has, but in general it is not obligated to sell qualifying warrants and no party may require it to do so. See “Description of the Junior Subordinated Debentures — Alternative Payment Mechanism.”

M&T has the ability under certain circumstances to narrow the definition of qualifying APM securities.

 

M&T may, without the consent of the holders of the Capital Securities or the JSDs, amend the definition of “qualifying APM securities” for the purposes of the alternative payment mechanism to eliminate common stock or qualifying warrants (but not both) from the definition if it has been advised in writing by a nationally recognized independent accounting firm or an accounting standard or interpretive guidance of an existing accounting standard issued by an organization or regulator that has responsibility for establishing or interpreting accounting standards in the United States becomes effective such that there is more than an insubstantial risk that the failure to do so would result in a reduction in its earnings per share as calculated for financial reporting purposes. The elimination of either common stock or qualifying warrants from the definition of qualifying APM securities, together with continued application of the preferred stock issuance cap, may make it more difficult for M&T to succeed in selling sufficient qualifying APM securities to fund the payment of deferred interest.

 

Deferral of interest payments could adversely affect the market price of, and will adversely affect the United States federal income tax consequences of, the Capital Securities.

 

M&T has no present intention of exercising its right to defer payments of interest on the JSDs. However, if it exercises that right in the future, the market price of the Capital Securities is likely to be affected. As a result of the existence of this deferral right, the market price of the Capital Securities, payments on which depend solely on payments being made on the JSDs, may be more volatile than the market prices of other securities that are not subject to optional deferral. If M&T does defer interest on the JSDs and you elect to sell Capital Securities during the deferral period, you may not receive the same return on your investment as a holder that continues to hold its Capital Securities until the payment of interest at the end of the deferral period.

 

If M&T does defer interest payments on the JSDs, you will be required to accrue income, in the form of original issue discount, for United States federal income tax purposes during the period of the deferral in respect of your proportionate share of the JSDs, even if you normally report income when received and even though you may not receive the cash attributable to that income during the deferral period. You will also not receive the cash distribution related to any accrued and unpaid interest from the Trust if you sell the Capital Securities before the record date for any deferred distributions, even if you held the Capital Securities on the date that the payments would normally have been paid. See “Certain U.S. Federal Income Tax Considerations — Interest Income and Original Issue Discount.”

 

Claims would be limited upon bankruptcy, insolvency or receivership.

 

In certain events of M&T’s bankruptcy, insolvency or receivership prior to the redemption or repayment of any JSDs, whether voluntary or not, a holder of JSDs will have no claim for, and thus no right to receive, deferred and unpaid interest (including compounded interest thereon) that has not been settled through the application of the alternative payment mechanism to the extent the amount of such interest exceeds the first two years of accumulated and unpaid interest (including compounded interest thereon) on the JSDs.

 

Holders of the Capital Securities have limited rights under the JSDs.

 

Except as described below, you, as a holder of the Capital Securities, will not be able to exercise directly any rights with respect to the JSDs.

 

If an event of default under the amended trust agreement were to occur and be continuing, holders of the Capital Securities would rely on the enforcement by the property trustee of its rights as the registered holder of the JSDs against M&T. In addition, the holders of a majority in liquidation amount of the Capital Securities would have the right to direct the time, method and place of conducting any proceeding for any remedy available to the property trustee or to direct the exercise of any trust or power conferred upon the property trustee under the amended trust agreement, including the right to direct the property trustee to exercise the remedies available to it as the holder of the JSDs.

The indenture for the JSDs provides that the indenture trustee must give holders notice of all defaults or events of default within 30 days after they become known to the indenture trustee. However, except in the cases of a default or an event of default in payment on the JSDs, the indenture trustee will be protected in withholding the notice if its responsible officers determine that withholding of the notice is in the interest of the holders.

 

If the property trustee were to fail to enforce its rights under the JSDs in respect of an indenture event of default after a record holder of the Capital Securities has made a written request, that record holder may, to the extent permitted by applicable law, institute a legal proceeding against M&T to enforce the property trustee’s rights under the JSDs. In addition, if M&T were to fail to pay interest or principal on the JSDs on the date that interest or principal is otherwise payable, except for deferrals permitted by the amended trust agreement and the indenture, and this failure to pay were continuing, holders of the Capital Securities may directly institute a proceeding for enforcement of M&T’s obligations to issue qualifying APM securities pursuant to the alternative payment mechanism and for payment of the principal or interest on the JSDs having a principal amount equal to the aggregate liquidation amount of their Capital Securities (a “direct action”) after the respective due dates specified in the JSDs. In connection with a direct action, M&T would have the right under the indenture and the amended trust agreement to set off any payment made to that holder by it.

 

The property trustee, as holder of the JSDs on behalf of the Trust, has only limited rights of acceleration.

 

The property trustee, as holder of the JSDs on behalf of the Trust, may accelerate payment of the principal and accrued and unpaid interest on the JSDs only upon the occurrence and continuation of an indenture event of default. An indenture event of default is generally limited to payment defaults after 10 years of interest deferral, and specific events of bankruptcy, insolvency and reorganization relating to M&T.

 

There is no right of acceleration upon M&T’s breach of other covenants under the indenture or default on its payment obligations under the guarantee. In addition, the indenture does not protect holders from a sudden and dramatic decline in credit quality resulting from takeovers, recapitalizations, or similar restructurings or other highly leveraged transactions.

 

An active trading market for the Capital Securities may not develop.

 

Prior to this offering, there has been no public market for the Capital Securities. Although the Trust will apply to have the Capital Securities listed on the New York Stock Exchange, we can give you no assurance as to the liquidity of any market that may develop for the Capital Securities. Additionally, although we have been advised that the underwriters intend to make a market in the Capital Securities, the underwriters are not obligated to do so and may discontinue market making at any time. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Capital Securities.

 

There can be no assurance that the Internal Revenue Service or a court will agree with the characterization of the JSDs as indebtedness for United States federal income tax purposes.

 

The JSDs are novel financial instruments and there is no statutory, judicial or administrative authority that directly addresses the United States federal income tax treatment of securities similar to the JSDs. Thus, no assurance can be given that the Internal Revenue Service or a court will agree with the characterization of the JSDs as indebtedness for United States federal income tax purposes. If, contrary to the opinion of M&T’s tax counsel, the JSDs were recharacterized as equity of M&T, payment on the Capital Securities to Non-U.S. Holders would generally be subject to the United States federal withholding tax at a rate of 30% (or such lower applicable treaty rate). See “Certain U.S. Federal Income Tax Considerations.”

 

M&T

 

M&T is a New York business corporation registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and under Article III-A of the New York Banking Law (the “Banking Law”). The principal executive offices of M&T are located at One M&T Plaza, Buffalo, New York 14203. Its telephone number is (716) 842-5138. M&T was incorporated in November 1969 and acquired all of the then issued and outstanding shares of the capital stock of M&T Bank in December 1969. As of September 30, 2007, M&T reported, on a consolidated basis, total assets of $60.0 billion, deposits of $38.5 billion and stockholders’ equity of $6.2 billion. The number of full-time equivalent employees as of September 30, 2007 was 12,534.

 

In connection with M&T’s acquisition of Allfirst Financial, Inc. (“Allfirst”) from Allied Irish Banks, p.l.c. (“AIB”) on April 1, 2003, AIB received 26,700,000 shares of common stock of M&T as part of the consideration, which shareholding represented approximately 25.0% of the issued and outstanding shares of M&T common stock as of September 30, 2007. Currently, the Federal Reserve Board and the New York Superintendent of Banks deem AIB to “control” M&T and to be M&T’s bank holding company under applicable federal and state banking law. For further information regarding the relationship between M&T and AIB and a description of the agreements that govern such relationship, see M&T’s Annual Report on Form 10-K for the year ended December 31, 2006, incorporated herein by reference.

 

M&T’s wholly-owned subsidiary, M&T Bank, is a banking corporation incorporated and chartered under New York law. M&T Bank represented approximately 99% of the consolidated assets and consolidated revenues of M&T as of and for the nine months ended September 30, 2007 and a similar amount of consolidated assets and consolidated revenues of M&T as of and for the years ended December 31, 2006, 2005 and 2004 and as of and for the nine months ended September 30, 2006.

 

M&T Bank was incorporated in June 1893 and traces its origins to the founding of Manufacturers and Traders Bank in August 1856. M&T Bank is a member of the Federal Reserve System and the Federal Home Loan Bank System, and its deposits are insured by the FDIC up to applicable limits. As a commercial bank, M&T Bank offers a broad range of financial services to a diverse base of consumers, businesses, professional clients, governmental entities and financial institutions located in its markets. Lending is largely focused on consumers residing in New York, Pennsylvania, Maryland, northern Virginia and Washington, D.C., and on small and medium-size businesses based in those areas. In addition, certain of M&T Bank’s subsidiaries conduct lending activities in other states. M&T Bank and certain of its subsidiaries offer commercial mortgage loans secured by income producing properties or properties used by borrowers in a trade or business. Additional financial services are provided through other operating subsidiaries of M&T Bank.

 

As of September 30, 2007, M&T Bank had 663 banking offices located throughout New York, Pennsylvania, Maryland, Delaware, Virginia, West Virginia, New Jersey and the District of Columbia, plus a branch in George Town, Cayman Islands. As of September 30, 2007, M&T Bank had consolidated total assets of $59.2 billion, deposits of $38.4 billion, and shareholder’s equity of $6.5 billion.

 

Competitors of M&T Bank include commercial banks, savings and loan associations, consumer and commercial finance companies, credit unions and other financial services companies. Based on legislation passed during 1994 that effectively permits nationwide banking in the United States and the Gramm-Leach-Bliley Act of 1999, M&T Bank has faced increasing competition in recent years and believes that the level of competition will continue to increase in the future.

 

M&T Bank is subject to extensive regulation by federal regulators, including the Federal Reserve Board and the FDIC. In addition, M&T Bank is regulated by the New York State Banking Department. These regulatory bodies examine M&T Bank and supervise numerous aspects of its business. See “Regulatory Considerations” in the accompanying prospectus and the documents incorporated herein by reference. The principal offices of M&T Bank are located at One M&T Plaza, Buffalo, New York 14203. Its telephone number is (716) 842-5445.

RECENT DEVELOPMENTS

 

Financial Results and Financial Review for 2007

 

On January 14, 2008, M&T reported its results of operations for 2007.

 

GAAP Results of Operations.  Diluted earnings per share measured in accordance with GAAP were $5.95 in 2007, compared with $7.37 in 2006. On the same basis, net income was $654 million in 2007 and $839 million in 2006. GAAP-basis net income for 2007 expressed as a rate of return on average assets and average common stockholders’ equity was 1.12% and 10.47%, respectively, compared with 1.50% and 13.89%, respectively, in 2006.

 

GAAP-basis diluted earnings per share for the fourth quarter of 2007 were $.60, compared with $1.88 in the year-earlier period. Net income for the recently completed quarter totaled $65 million, compared with $213 million in the fourth quarter of 2006. Expressed as an annualized rate of return on average assets and average common stockholders’ equity, GAAP-basis net income for the fourth quarter of 2007 was .42% and 4.05%, respectively, compared with 1.50% and 13.55%, respectively, in the similar period of 2006.

 

Notable Events.  Results for the fourth quarter of 2007 were impacted by the following items:

 

 

Collateralized Debt Obligations.  An other-than-temporary impairment charge of $127 million was recorded in the fourth quarter leaving $4.4 million of collateralized debt obligations backed by sub-prime residential mortgage securities on M&T’s balance sheet at December 31, 2007. That charge reduced M&T’s net income by $78 million, or $.71 of diluted earnings per share. The impairment charge was recognized at this time in light of significant deterioration in the residential real estate market and the resulting decline in market value of the debt obligations.

 

Visa Litigation.  In October 2007, Visa completed a reorganization in contemplation of its initial public offering (“IPO”) expected to occur in 2008. As part of that reorganization M&T Bank and other member banks of Visa received shares of common stock of Visa, Inc. Those banks are also obligated under various agreements with Visa to share in losses stemming from certain litigation (“Covered Litigation”). Although Visa is expected to set aside a portion of the proceeds from its IPO in an escrow account to fund any judgments or settlements that may arise out of the Covered Litigation, recent guidance from the SEC indicates that Visa member banks should record a liability for the fair value of the contingent obligation to Visa. The estimation of M&T’s proportionate share of any potential losses related to the Covered Litigation is extremely difficult and involves a great deal of judgment. Nevertheless, in the fourth quarter of 2007 M&T recorded a pre-tax charge of $23 million ($14 million after tax effect, or $.13 per diluted share) related to the Covered Litigation. In accordance with generally accepted accounting principles and consistent with the SEC guidance, M&T did not recognize any value for its common stock ownership interest in Visa, Inc.

 

Acquisitions.  On November 30, 2007, M&T completed its acquisition of Partners Trust Financial Group, Inc. (“Partners Trust”), Utica, New York, at which time Partners Trust’s bank subsidiary, Partners Trust Bank, was merged into M&T Bank. Upon completion of the merger with Partners Trust, M&T acquired approximately $3.5 billion of assets, including approximately $2.2 billion of loans, and assumed approximately $2.1 billion of deposits, and M&T Bank acquired Partners Trust Bank’s 33 banking offices in Upstate New York. During the fourth quarter, M&T also consummated its acquisition transaction of First Horizon Bank’s Mid-Atlantic retail banking franchise. The impact of those two transactions resulted in a reduction of net income in the fourth quarter of 2007 of approximately $9 million, or $.08 per diluted share, largely the result

of $15 million (pre-tax) of merger-related expenses associated with merging the acquired branch networks into M&T Bank and introducing the customers associated with the acquired operations to M&T Bank’s products and services. M&T expects to incur additional merger-related expenses in 2008.

 

Loans and Provision for Credit Losses.  M&T experienced significant loan growth during the second half of 2007. Total loans, exclusive of loans obtained through the two acquisition transactions, increased $2.8 billion, or 6% (13% annualized), from June 30 to December 31, 2007, including growth in commercial and commercial real estate loans of $2.2 billion. During the fourth quarter, total loans, exclusive of loans obtained through the acquisitions, increased $1.8 billion, or 4% (16% annualized), including growth in commercial and commercial real estate loans of $1.6 billion. Furthermore, during recent months, lower real estate values and higher levels of delinquencies and charge-offs contributed to increased losses in M&T’s portfolio of alternative (“Alt-A”) residential mortgage loans. Declining real estate values also contributed to the recognition of an additional reserve on loans to two residential real estate builders and developers. Considering each of these factors, M&T increased the provision for credit losses to $101 million, or $48 million more than the $53 million of net charge-offs during the recent quarter.

 

Prior to 2007, M&T sold substantially all of the Alt-A residential real estate loans that it originated. However, in March 2007 M&T transferred $883 million of Alt-A loans from its held-for-sale to its held-for-investment loan portfolio rather than sell such loans at depressed market prices. As described above, higher levels of delinquencies and charge-offs in the Alt-A loan portfolio were experienced in 2007, which led to an assessment of the Company’s accounting policies during the fourth quarter as they relate to the timing of the classification of residential real estate loans as nonaccrual and when such loans are charged off. Residential real estate loans previously classified as nonaccrual when payments were 180 days past due now stop accruing interest when principal or interest is delinquent 90 days. The excess of such loan balances over the net realizable value of the property collateralizing the loan is now charged off when the loans become 150 days delinquent, whereas previously M&T provided an allowance for credit losses for such amounts and charged-off loans upon foreclosure of the underlying property. The impact of the acceleration of the classification of residential real estate loans as nonaccrual resulted in an increase in nonperforming loans of $84 million and a corresponding decrease in loans past due 90 days and accruing interest. As a result of that acceleration, previously accrued interest of $2 million was reversed and charged against income. Included in the $53 million of charge-offs noted were $15 million resulting from the change in accounting policy.

 

Taxable-equivalent Net Interest Income.  Taxable-equivalent net interest income was $1.87 billion in 2007, up 2% from $1.84 billion in 2006. Growth in average loans and leases outstanding, which rose 7% to $44.1 billion in 2007 from $41.4 billion in 2006, was the most significant contributor to the improvement. Such growth was attributable to average outstanding balance increases in commercial loans, commercial real estate loans and consumer loans. Partially offsetting the positive impact of loan growth was a narrowing of M&T’s net interest margin, or taxable-equivalent net interest income expressed as a percentage of average earning assets, to 3.60% in 2007 from 3.70% in 2006.

 

During the fourth quarter of 2007, taxable-equivalent net interest income was $476 million, 1% higher than $472 million in the similar 2006 quarter. Average loans outstanding and annualized net interest margin in the final quarter of 2007 were $46.1 billion and 3.45%, respectively, compared with $42.5 billion and 3.73% in the year-earlier period. The recent quarter’s net interest margin declined from 3.65% in the third quarter of 2007. The narrowing of the margin was attributable to several factors, including significantly higher loan balances funded partially by wholesale borrowings, higher levels of investment securities and other earning assets that generally yield less than loans, lower commercial real estate loan prepayment fees, reversal of interest on nonaccrual loans including the effect of the change in accounting policy for past-due residential real estate loans, and the impact of the two acquisition transactions.

 

Provision for Credit Losses/Asset Quality.  The provision for credit losses totaled $192 million in 2007, up from $80 million in 2006. Net loan charge-offs in 2007 totaled $114 million, or .26% of average loans outstanding, compared with $68 million or .16% of average loans in 2006. The provision for credit losses was $101 million during the final three months of 2007, compared with $28 million in the corresponding 2006 period. Net charge-offs of loans were $53 million in the fourth quarter of 2007, representing an annualized

.46% of average loans outstanding, compared with $24 million or .23% during the year-earlier quarter. If not for the previously described change in accounting policy, charge-offs would have been $38 million or an annualized .33% of average outstanding loans in the fourth quarter and for the full year would have been $99 million or .22% of average loans.

 

Loans classified as nonperforming totaled $447 million, or .93% of total loans at December 31, 2007, compared with $224 million or .52% a year earlier and $371 million or .83% at September 30, 2007. Major factors contributing to the year-over-year increase were a $133 million increase in residential real estate loans, including $84 million related to the already noted change in policy, and an $83 million increase in loans to residential builders and developers. The change in nonperforming loans since September 30, 2007 reflects a $90 million increase in residential real estate loans (including $84 million related to the policy change), partially offset by a $20 million reduction in loans to automobile dealers. Exclusive of the impact of the change in policy for classifying residential real estate loans as nonperforming, the 2007 year-end ratio of nonperforming loans to total loans would have declined by .07% from September 30, 2007. Reflecting the granularity of M&T’s loan portfolio, at December 31, 2007 there were only four loans greater than $5 million classified as nonperforming.

 

Loans past due 90 days or more and accruing interest totaled $77 million at the recent year-end, down from $111 million at December 31, 2006. Included in those past due, but accruing loans at December 31, 2007 and 2006 were $72 million and $77 million, respectively, of loans guaranteed by government-related entities. Assets taken in foreclosure of defaulted loans increased to $40 million at December 31, 2007 from $12 million at December 31, 2006, due to higher residential real estate loan defaults.

 

Allowance for Credit Losses.  The allowance for credit losses was $759 million, or 1.58% of total loans, at December 31, 2007, compared with $650 million, or 1.51%, a year earlier. The ratio of M&T’s allowance for credit losses to nonperforming loans was 170% and 290% at December 31, 2007 and 2006, respectively.

 

Noninterest Income and Expense.  Noninterest income declined 11% to $933 million in 2007 from $1.05 billion in 2006. That decline resulted from the previously discussed $127 million other-than-temporary impairment charge in the recent quarter related to collateralized debt obligations held in M&T’s available-for-sale investment securities portfolio. Excluding that charge, noninterest income was $1.06 billion in 2007, 1% higher than in 2006. Higher service charges on deposit accounts, trust income, and trading account and foreign exchange gains, and $9 million related to M&T’s pro-rata portion of the operating results of Bayview Lending Group LLC (“BLG”) were largely offset by a $31 million decline in mortgage banking revenues. Noninterest income of $160 million in the fourth quarter of 2007 was down 37% from $256 million in the corresponding 2006 quarter due to the aforementioned other-than-temporary impairment charge. Excluding that charge, noninterest income in the recent quarter was $288 million, up 12% from the year-earlier quarter. That improvement was due to higher service charges on deposit accounts, trust income, and trading and foreign exchange gains, and $15 million related to M&T’s pro-rata portion of the operating results of BLG.

 

Noninterest expense in 2007 totaled $1.63 billion, compared with $1.55 billion in 2006. Included in such amounts are expenses considered to be “nonoperating” in nature, consisting of amortization of core deposit and other intangible assets of $66 million in 2007 and $63 million in 2006 and merger-related expenses of $15 million in 2007 and $5 million in 2006. Exclusive of these nonoperating expenses, noninterest operating expenses were $1.55 billion in 2007 and $1.48 billion in 2006. Included in 2006’s operating expenses was an $18 million tax-deductible contribution made in that year’s third quarter to The M&T Charitable Foundation, a tax-exempt private charitable foundation. The most significant contributors to the increase in noninterest expense in 2007 were the already discussed $23 million charge taken in the recent quarter related to the Visa litigation and a higher level of salaries and employee benefits expense.

 

Noninterest expense in the final quarter of 2007 totaled $445 million, compared with $384 million in the year-earlier quarter. Included in such amounts were amortization of core deposit and other intangible assets of $16 million in 2007 and $19 million in 2006 and merger-related expenses of $15 million in 2007. Exclusive of these nonoperating expenses, noninterest operating expenses were $415 million in the recent quarter, compared with $365 million in 2006’s fourth quarter. Higher costs for salaries and employee benefits, including the

impact of the acquisitions completed in the fourth quarter, and the Visa litigation charge were the leading contributors to that rise in noninterest expense.

 

The efficiency ratio, or noninterest operating expenses divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment securities), measures the relationship of operating expenses to revenues. M&T’s efficiency ratio was 52.8% in 2007, compared with 51.5% in 2006. During 2007’s fourth quarter, M&T’s efficiency ratio was 54.3%, compared with 50.2% in the year-earlier quarter.

 

Balance Sheet.  M&T had total assets of $64.9 billion at December 31, 2007, up from $57.1 billion a year earlier. Loans and leases, net of unearned discount, totaled $48.0 billion at the 2007 year-end, up 12% from $42.9 billion at December 31, 2006. Deposits were $41.3 billion at December 31, 2007, 3% higher than $39.9 billion at the end of 2006. Total stockholders’ equity was $6.5 billion at December 31, 2007, representing 10.00% of total assets, compared with $6.3 billion or 11.01% a year earlier. Common stockholders’ equity per share was $58.99 at December 31, 2007, compared with $56.94 a year earlier. Tangible equity per common share was $27.98 and $28.57 at December 31, 2007 and 2006, respectively. In the calculation of tangible equity per common share, stockholders’ equity is reduced by the carrying values of goodwill and core deposit and other intangible assets, net of applicable deferred tax balances, which aggregated $3.4 billion and $3.1 billion at December 31, 2007 and 2006, respectively.

 

M&T Bank Subordinated Debt Issuance

 

On December 4, 2007, M&T Bank issued $400 million aggregate principal amount of its 6.625% Subordinated Notes due 2017.

 

THE TRUST

 

The following is a summary of some of the terms of the Trust. This summary, together with the summary of some of the provisions of the related documents described below, contains a description of the material terms of the Trust but is not necessarily complete. We refer you to the documents referred to in the following description, copies of which are available upon request as described above under “Where You Can Find More Information.”

 

M&T Capital Trust IV, or the “Trust,” is a statutory trust formed under Delaware law pursuant to a Trust Agreement between M&T, as depositor of the Trust, and the Delaware trustee and the filing of a Certificate of Trust with the Delaware Secretary of State on July 7, 2003. The Trust Agreement will be amended and restated in its entirety before the issuance of the Capital Securities. We refer to the Trust Agreement, as so amended and restated, as the “Trust Agreement.” The Trust Agreement will be qualified as an indenture under the Trust Indenture Act of 1939, as amended, or “Trust Indenture Act.”

 

The Trust was established solely for the following purposes:

 

 

M&T will own all of the Trust’s common securities, either directly or indirectly. The common securities and the Capital Securities are referred to collectively as the “Trust securities.” The common securities rank equally with the Capital Securities and the Trust will make payment on its Trust securities pro rata, except that upon certain events of default under the Trust Agreement relating to payment defaults on the JSDs, the rights of the holders of the common securities to payment in respect of distributions and payments upon liquidation and otherwise will be subordinated to the rights of the holders of the Capital Securities. M&T will acquire common securities in an aggregate liquidation amount equal to $10,000.

 

The Trust’s business and affairs will be conducted by its trustees, each appointed by M&T as depositor of the Trust. The trustees will be The Bank of New York, as the property trustee, or “property trustee,” BNYM (Delaware) as the Delaware trustee, or “Delaware trustee,” and two or more individual trustees, or “administrators,” who are employees or officers of or affiliated with M&T. The property trustee will act as sole trustee under the Trust Agreement for purposes of compliance with the Trust Indenture Act and will also act as trustee under the guarantee and the indenture.

 

Unless an event of default under the indenture has occurred and is continuing at a time that the Trust owns any JSDs, the holders of the common securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee.

 

The property trustee and/or the Delaware trustee may be removed or replaced for cause by the holders of a majority in liquidation amount of the Capital Securities. In addition, holders of a majority in liquidation amount of the Capital Securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee if an event of default under the indenture has occurred and is continuing.

 

The right to vote to appoint, remove or replace the administrators is vested exclusively in the holders of the Trust’s common securities, and in no event will the holders of the Capital Securities have such right.

 

The Trust is a “finance subsidiary” of M&T within the meaning of Rule 3-10 of Regulation S-X under the Securities Act. As a result, no separate financial statements of the Trust are included in this prospectus supplement, and M&T does not expect that the Trust will file reports with the SEC under the Securities Exchange Act of 1934, or “Exchange Act.”

 

M&T will pay all fees and expenses related to the Trust and the offering of the Capital Securities.

 

USE OF PROCEEDS

 

The Trust will invest the proceeds from its sale of the Capital Securities through the underwriters to investors and its common securities to M&T in the JSDs issued by M&T. The net proceeds will be used by M&T primarily for general corporate purposes, which may include among other purposes:

 

 

Pending such use, we may temporarily invest the net proceeds. The precise amounts and timing of the application of proceeds will depend upon our funding requirements and the availability of other funds.

 

Based upon our historical and anticipated future growth and our financial needs, we will from time to time engage in additional financings of a character and amount that we determine as the need arises.

 

ACCOUNTING CONSIDERATIONS AND REGULATORY CAPITAL TREATMENT

 

The Trust will not be consolidated on M&T’s balance sheet as a result of the accounting changes reflected in FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised in December 2003. Accordingly, for balance sheet purposes M&T will recognize the aggregate principal amount, net of discount, of the JSDs it issues to the Trust as a liability and the amount it invests in the Trust’s common securities as an asset. The interest paid on the JSDs will be recorded as interest expense on M&T’s income statement.

 

On March 1, 2005, the Federal Reserve Board adopted amendments to its risk-based capital guidelines that confirmed the Tier 1 capital treatment of trust preferred securities for bank holding companies and clarified and revised somewhat the eligibility requirements for future issuances of such securities. Among other things, the amendments established a 25% of Tier 1 capital limit on the aggregate amount of trust preferred securities, cumulative preferred stock and certain other restricted core capital elements that may be included in Tier 1 capital of bank holding companies of the size of M&T. The Federal Reserve has confirmed to M&T that the Capital Securities will qualify as Tier 1 capital for M&T, within this quantitative limit.

 

CAPITALIZATION

 

The following table sets forth the consolidated capitalization of M&T as of September 30, 2007, as adjusted to give effect to the issuance of the Capital Securities and the JSDs. You should read the following table together with M&T’s consolidated financial statements and notes thereto incorporated by reference into this prospectus supplement and the information contained in “— Recent Developments.”

 

Consolidated Capitalization of M&T

 

 

 

 

DESCRIPTION OF THE CAPITAL SECURITIES

 

The following is a brief description of certain terms of the Capital Securities and of the Trust Agreement under which they are issued. It does not purport to be complete in all respects. This description is subject to and qualified in its entirety by reference to the Trust Agreement, which will be filed with the SEC and incorporated by reference into the registration statement to which this prospectus supplement relates and copies of which are available upon request from M&T. This summary supplements the general disclosure of the capital securities contained in the accompanying prospectus. Any information regarding the Capital Securities in this prospectus supplement that is inconsistent with information in the accompanying prospectus will apply and supersede the inconsistent information in the accompanying prospectus.

 

General

 

The Capital Securities will be issued pursuant to the Trust Agreement. The property trustee, The Bank of New York, will act as indenture trustee for the Capital Securities under the Trust Agreement. The terms of the Capital Securities will include those stated in the Trust Agreement, including any amendments thereto, and those made part of the Trust Agreement by the Trust Indenture Act and the Delaware Statutory Trust Act. The Trust will own all of M&T’s     % Junior Subordinated Debentures due 2068, or “JSDs.”

 

In addition to the Capital Securities, the Trust Agreement authorizes the administrators of the Trust to issue common securities on behalf of the Trust. M&T will own directly or indirectly all of the Trust’s common securities. The common securities rank on a parity, and payments upon redemption, liquidation or otherwise will be made on a proportionate basis, with the Capital Securities except as set forth under “— Ranking of Common Securities.” The Trust Agreement does not permit the Trust to issue any securities other than the common securities and the Capital Securities or to incur any indebtedness.

 

The payment of distributions out of money held by the Trust, and payments upon redemption of the Capital Securities or liquidation of the Trust, are guaranteed by M&T to the extent described under “Description of the Guarantee.” The guarantee, when taken together with M&T’s obligations under the JSDs and the indenture and its obligations under the Trust Agreement, including its obligations to pay costs, expenses, debts and liabilities of the Trust, other than with respect to the common securities and the Capital Securities, has the effect of providing a full and unconditional guarantee of amounts due on the Capital Securities. The Bank of New York, as the guarantee trustee, will hold the guarantee for the benefit of the holders of the Capital Securities. The guarantee does not cover payment of distributions when the Trust does not have sufficient available funds to pay those distributions. In that case, except in the limited circumstances in which the holder may take direct action, the remedy of a holder of the Capital Securities is to vote to direct the property trustee to enforce the property trustee’s rights under the JSDs.

 

The term “holder” in this prospectus supplement with respect to a registered Capital Security means the person in whose name such Capital Security is registered in the security register. The Capital Securities will be held in book-entry form only, as described under “Book-Entry System,” except in the circumstances described in that section, and will be held in the name of DTC or its nominee.

 

The Trust will apply to list the Capital Securities on the New York Stock Exchange.

 

Distributions

 

A holder of record of the Capital Securities will be entitled to receive periodic distributions on the stated liquidation amount of $25 per Capital Security on the same payment dates and in the same amounts as M&T pays interest on a principal amount of JSDs equal to the liquidation amount of such Capital Security. Distributions will accumulate from          , 2008. The Trust will make distribution payments on the Capital Securities quarterly in arrears on       ,       ,        and        of each year, beginning on     , 2008.

 

In the event any distribution date is not a business day, the payment made on the following business day shall be made without adjustment. If M&T defers payment of interest on the JSDs, distributions by the Trust on the Capital Securities will also be deferred.

On each distribution date, the Trust will pay the applicable distribution to the holders of the Capital Securities on the record date for that distribution date, which shall be the business day prior to the distribution date, provided that if the Capital Securities do not remain in book-entry form, the relevant record date shall be the date 15 days prior to the distribution date, whether or not a business day. Distributions on the Capital Securities will be cumulative. The Capital Securities will be effectively subordinated to the same debts and liabilities to which the JSDs are subordinated, as described under “Description of the Junior Subordinated Debentures — Subordination.”

 

For purposes of this prospectus supplement, “business day” means any day other than a Saturday, Sunday or other day on which banking institutions in the City of Buffalo, New York or The City of New York are authorized or required by law or executive order to remain closed or a day on which the corporate trust office of the property trustee, Delaware trustee or the indenture trustee is closed for business.

 

Each date on which distributions are payable in accordance with the foregoing is referred to as a “distribution date.” The term “distribution” includes any interest payable on unpaid distributions unless otherwise stated. The period beginning on and including          , 2008 and ending on but excluding the first distribution date,          , 2008, and each period after that period beginning on and including a distribution date and ending on but excluding the next distribution date is called a “distribution period.” Distributions to which holders of Capital Securities are entitled but are not paid will accumulate additional distributions at the annual rate, compounded quarterly on each distribution date.

 

The funds available to the Trust for distribution to holders of the Capital Securities will be limited to payments under the JSDs. If M&T does not make interest payments on the JSDs, the property trustee will not have funds available to pay distributions on the Capital Securities. The Trust will pay distributions through the property trustee, which will hold amounts received from the JSDs in a payment account for the benefit of the holders of the Capital Securities and the common securities.

 

Deferral of Distributions

 

M&T has the right, on one or more occasions, to defer payment of interest on the JSDs for one or more consecutive interest periods not exceeding 10 years. If M&T exercises this right, the Trust will also defer paying a corresponding amount of distributions on the Capital Securities during that period of deferral. No deferral period may extend beyond the maturity date of the JSDs or the earlier redemption in full of the JSDs. The Trust will pay deferred distributions on the Capital Securities as and when M&T pays deferred interest on the JSDs. See “Description of the Junior Subordinated Debentures — Option to Defer Interest Payments,” “— Alternative Payment Mechanism” and “— Dividend and Other Payment Stoppages during Interest Deferral and under Certain Other Circumstances” for a description of M&T’s right to defer interest on the JSDs, the circumstances when the alternative payment mechanism applies and M&T is obligated to pay deferred interest subject to certain limitations, and restrictions on M&T’s right during any deferral period to make payments on or redeem or repurchase its capital stock or its debt securities or guarantees ranking pari passu with or junior to the JSDs upon its liquidation.

 

Redemption

 

If M&T repays or redeems the JSDs, in whole or in part, the property trustee will use the proceeds of that repayment or redemption to redeem a liquidation amount of Capital Securities and common securities equal to the principal amount of JSDs redeemed or repaid. The redemption price for each Capital Security will be equal to the redemption price paid by M&T on a like amount of JSDs. See “Description of the Junior Subordinated Debentures — Redemption.”

 

If less than all Capital Securities and common securities are redeemed, the amount of each to be redeemed will be allocated pro rata based upon the total amount of Capital Securities and common securities outstanding, except in the case of a payment default, as set forth under “— Ranking of Common Securities.”

 

Subject to applicable law, including U.S. federal securities laws and, at any time prior to its termination, to the replacement capital covenant, M&T or its affiliates may at any time and from time to time purchase

outstanding Capital Securities by tender, in the open market or by private agreement. The replacement capital covenant is scheduled to terminate on          , 2048.

 

Under the current risk-based capital adequacy guidelines of the Federal Reserve applicable to bank holding companies, Federal Reserve approval is required for the early redemption or repurchase of preferred stock or trust preferred securities included in regulatory capital. Accordingly, Federal Reserve approval would be required for redemption of the JSDs.

 

Redemption Procedures

 

Notice of any redemption will be mailed by the property trustee at least 30 days but not more than 60 days before the redemption date to the registered address of each holder of Capital Securities to be redeemed. Notwithstanding the foregoing, notice of any redemption of Capital Securities relating to the repayment of the JSDs will be mailed at least 10 but not more than 30 days before the redemption date to the registered address of each holder of Capital Securities to be redeemed.

 

If (i) the Trust gives a notice of redemption of Capital Securities for cash and (ii) M&T has paid to the property trustee, or the paying agent on behalf of the property trustee, a sufficient amount of cash in connection with the related redemption or maturity of the JSDs, then on the redemption date, the property trustee, or the paying agent on behalf of the property trustee, will irrevocably deposit with DTC funds sufficient to pay the redemption price for the Capital Securities being redeemed. See “Book-Entry System.” The Trust will also give DTC irrevocable instructions and authority to pay the redemption amount in immediately available funds to the beneficial owners of the global securities representing the Capital Securities. Distributions to be paid on or before the redemption date for any Capital Securities called for redemption will be payable to the holders as of the record dates for the related dates of distribution. If the Capital Securities called for redemption are no longer in book-entry form, the property trustee, to the extent funds are available, will irrevocably deposit with the paying agent for the Capital Securities funds sufficient to pay the applicable redemption price and will give such paying agent irrevocable instructions and authority to pay the redemption price to the holders thereof upon surrender of their certificates evidencing the Capital Securities.

 

If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit:

 

 

If any redemption date is not a business day, then the redemption amount will be payable on the next business day (and without any interest or other payment in respect of any such delay).

 

If payment of the redemption amount for any JSDs called for redemption is improperly withheld or refused and accordingly the redemption amount of the Capital Securities is not paid either by the Trust or by M&T under the guarantee, then interest on the JSDs will continue to accrue and distributions on the Capital Securities called for redemption will continue to accumulate at the annual rate, compounded on each distribution date, from the original redemption date scheduled to the actual date of payment. In this case, the actual payment date will be considered the redemption date for purposes of calculating the redemption amount.

 

If less than all of the JSDs are to be redeemed or repaid on any date, the property trustee will select the particular Capital Securities to be redeemed on a pro rata basis not more than 60 days before the redemption date from the outstanding Capital Securities not previously called for redemption by any method the property trustee deems fair and appropriate, or if the Capital Securities are in book-entry only form, in accordance with the procedures of DTC. See “Book-Entry System.”

For all purposes of the Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Capital Securities shall relate, in the case of any Capital Securities redeemed or to be redeemed only in part, to the portion of the aggregate liquidation amount of Capital Securities that has been or is to be redeemed.

 

Optional Liquidation of Trust and Distribution of JSDs to Holders

 

Under the Trust Agreement, the Trust shall dissolve upon the first to occur of:

 

 

Except as set forth in the next sentence, if an early dissolution occurs as described above, the property trustee will liquidate the Trust as expeditiously as possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to the holders of the Capital Securities and common securities a like amount of the JSDs. If the property trustee determines that such distribution is not possible or if the early dissolution occurs as a result of the redemption of Capital Securities, then the holders will be entitled to receive out of the assets of the Trust available for distribution to holders and after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the aggregate liquidation amount plus accrued and unpaid distributions to the date of payment. If the Trust has insufficient assets available to pay in full such aggregate liquidation distribution, then the amounts payable directly by the Trust on its Capital Securities and common securities shall be paid on a pro rata basis, except as set forth under “— Ranking of Common Securities.”

 

After the liquidation date fixed for any distribution of JSDs to holders of Capital Securities:

 

 

Under current United States federal income tax law, and assuming, as expected, the Trust is treated as a grantor trust, a distribution of JSDs in exchange for the Capital Securities would not be a taxable event to you. See “Certain U.S. Federal Income Tax Considerations — Receipt of JSDs or Cash upon Liquidation of the Trust” below.

 

Liquidation Value

 

Upon liquidation of the Trust, you would be entitled to receive $25 per Capital Security, plus accumulated and unpaid distributions to the date of payment. That amount would be paid to you in the form of a distribution of JSDs, subject to specified exceptions.

Ranking of Common Securities

 

Payment of distributions on, and the redemption price of and the liquidation distribution in respect of, Capital Securities and common securities, as applicable, shall be made pro rata based on the liquidation amount of the Capital Securities and common securities, except upon the occurrence and continuation of a payment default on the JSDs, the rights of the holders of the common securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Capital Securities.

 

In the case of any event of default under the Trust Agreement resulting from an event of default under the indenture for the JSDs, M&T, as holder of the Trust’s common securities, will have no right to act with respect to any such event of default under the Trust Agreement until the effect of all such events of default with respect to the Capital Securities have been cured, waived or otherwise eliminated. Until all events of default under the Trust Agreement with respect to the Capital Securities have been so cured, waived or otherwise eliminated, the property trustee shall act solely on behalf of the holders of Capital Securities and not on M&T’s behalf, and only the holders of the Capital Securities will have the right to direct the property trustee to act on their behalf.

 

If an early dissolution event occurs in respect of the Trust, no liquidation distributions shall be made on the Trust’s common securities unless full liquidation distributions are made on the Capital Securities.

 

Events of Default under the Trust Agreement

 

Any one of the following events constitutes an event of default under the Trust Agreement, or a “Trust Event of Default,” regardless of the reason for such event of default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:

 

 

Within five business days after any Trust Event of Default actually known to the property trustee occurs, the property trustee will transmit notice of such Trust Event of Default to the holders of the Capital Securities and to the administrators, unless such Trust Event of Default shall have been cured or waived. M&T, as depositor, and the administrators are required to file annually with the property trustee a certificate as to whether or not it or they are in compliance with all the conditions and covenants applicable to it and to them under the Trust Agreement.

 

The existence of a Trust Event of Default under the Trust Agreement, in and of itself, with respect to the JSDs does not entitle the holders of the Capital Securities to accelerate the maturity of such JSDs.

 

An event of default under the indenture entitles the property trustee, as sole holder of the JSDs, to declare the JSDs due and payable under the indenture. For a more complete description of remedies available upon the occurrence of an event of default and acceleration with respect to the JSDs, see “Description of the Junior Subordinated Debentures — Events of Default; Waiver and Notice” and “Relationship among Capital Securities, Junior Subordinated Debentures and Guarantee.”

Voting Rights; Amendment of the Trust Agreement

 

For a description of voting rights and amendment to the Trust Agreement, see “Capital Securities and Related Instruments — Amendment of Each Trust Agreement” in the accompanying prospectus.

 

In addition to the amendments specified in the accompanying prospectus, M&T and the administrators may amend the Trust Agreement without the consent of the holders of the Capital Securities, the property trustee or the Delaware trustee, to:

 

 

Any amendment of the Trust Agreement shall become effective when notice thereof is given to the property trustee, the Delaware trustee and the holders of the Capital Securities.

 

Registrar and Transfer Agent

 

The Bank of New York will act as registrar and transfer agent, or “Transfer Agent,” for the Capital Securities.

 

Registration of transfers of Capital Securities will be effected without charge by or on behalf of the Trust, but only upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. Neither the Trust nor the Transfer Agent shall be required to register the transfer of or exchange any Trust security during a period beginning at the opening of business 15 days before the day of selection for redemption of Trust securities and ending at the close of business on the day of mailing of notice of redemption or to transfer or exchange any Trust security so selected for redemption in whole or in part, except, in the case of any Trust security to be redeemed in part, any portion thereof not to be redeemed.

 

Any Capital Securities can be exchanged for other Capital Securities so long as such other Capital Securities are denominated in authorized denominations and have the same aggregate liquidation amount and same terms as the Capital Securities that were surrendered for exchange. The Capital Securities may be presented for registration of transfer, duly endorsed or accompanied by a satisfactory written instrument of transfer, at the office or agency maintained by M&T for that purpose in a place of payment. There will be no service charge for any registration of transfer or exchange of the Capital Securities, but the Trust may require holders to pay any tax or other governmental charge payable in connection with a transfer or exchange of the Capital Securities. M&T may at any time rescind the designation or approve a change in the location of any office or agency, in addition to the security registrar, designated by it where holders can surrender the Capital Securities for registration of transfer or exchange. However, the Trust will be required to maintain an office or agency in each place of payment for the Capital Securities.

 

Governing Law

 

The Trust Agreement will be governed by and construed in accordance with the laws of Delaware.

 

Further Issues

 

The Trust has the right to issue additional Capital Securities in the future, provided that the Trust:

 

 

 

 

Any such additional Capital Securities will have the same terms as the Capital Securities being offered by this prospectus supplement but may be offered at a different offering price and accrue distributions from a different date than the Capital Securities being offered hereby, provided that the total liquidation amount of Capital Securities outstanding may not exceed     . If issued, any such additional Capital Securities will become part of the same series as the Capital Securities being offered hereby.

 

DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES

 

The following is a brief description of certain terms of the JSDs and the indenture. It does not purport to be complete in all respects. This description is subject to and qualified in its entirety by reference to the JSDs and the indenture, which will be filed with the SEC and incorporated by reference into the registration statement to which this prospectus supplement relates and copies of which are available upon request from M&T. This summary supplements the general disclosure of the junior subordinated debentures contained in the accompanying prospectus. Any information regarding the JSDs in this prospectus supplement that is inconsistent with information in the accompanying prospectus will apply and supersede the inconsistent information in the accompanying prospectus.

 

The JSDs will be issued pursuant to a Junior Subordinated Indenture to be entered into by M&T and The Bank of New York, as indenture trustee. We refer to the Junior Subordinated Indenture, as amended and supplemented (including by a first supplemental indenture, to be dated as of the date of issuance of the JSDs), as the “indenture,” and to The Bank of New York or its successor, as indenture trustee, as the “indenture trustee.” You should read the indenture for provisions that may be important to you.

 

When we use the term “holder” in this prospectus supplement with respect to a registered JSD, we mean the person in whose name such JSD is registered in the security register.

 

The indenture does not limit the amount of debt that M&T or its subsidiaries may incur either under the indenture or other indentures to which M&T is or becomes a party. The JSDs are not convertible into or exchangeable for M&T’s common stock or authorized preferred stock.

 

General

 

The JSDs will be unsecured and junior in right of payment to all our senior and subordinated debt. For purposes of the JSDs, “senior and subordinated debt” has the meaning given to that term under “— Subordination.” As of September 30, 2007, M&T’s indebtedness for money borrowed (excluding all of the liabilities of the subsidiaries) that would rank senior to the JSDs upon liquidation was approximately $1.2 billion and its subsidiaries’ direct borrowings and deposit liabilities that would effectively rank senior to the JSDs upon liquidation totaled approximately $52.0 billion.

 

Interest Rate and Interest Payment Dates

 

The JSDs will bear interest at the annual rate of     % from and including          , 2008, payable quarterly in arrears on          ,          ,           and           of each year, beginning on          , 2008. We refer to these dates as “interest payment dates,” and to the period beginning on and including          , 2008 and ending on but excluding the first interest payment date, and each successive period beginning on and including an interest payment date and ending on but excluding the next interest payment date, as an “interest period.” The amount of interest payable will be computed on the basis of a 360-day year consisting of twelve 30-day months. In the event that any interest payment date is not a business day, the interest payment made on the following business day shall be made without the accrual of additional interest.

 

Accrued interest that is not paid on the applicable interest payment date (after giving effect to the adjustment for non-business days described above) will bear additional interest, to the extent permitted by law, at the same annual rate, from the relevant interest payment date, compounded on each subsequent interest payment date. The terms “interest” and “deferred interest” refer not only to regularly scheduled interest payments but also to interest on interest payments not paid on the applicable interest payment date (i.e., compounded interest).

 

Maturity

 

The principal amount of the JSDs, together with accrued and unpaid interest, is due and payable on          , 2068, or if that day is not a business day, on the next following business day.

Option to Defer Interest Payments

 

M&T may on one or more occasions defer payment of interest on the JSDs for one or more consecutive interest periods up to 10 years. M&T may not defer interest beyond the maturity date or the earlier redemption in full of the JSDs. M&T has no present intention of exercising its right to defer payments of interest on the JSDs.

 

Deferred interest on the JSDs will bear interest at the then applicable rate, compounded on each interest payment date, subject to applicable law. As used in this prospectus supplement, a “deferral period” refers to the period beginning on an interest payment date with respect to which M&T elects to defer interest and ending on the earlier of (i) the tenth anniversary of that interest payment date and (ii) the next interest payment date on which it has paid the deferred amount, all deferred amounts with respect to any subsequent period and all other accrued interest on the JSDs.

 

M&T has agreed in the indenture that, subject to the occurrence and continuation of a supervisory event or a market disruption event (each as described further below):

 

 

M&T may pay current interest at all times from any available funds.

 

If a supervisory event, as defined under “— Alternative Payment Mechanism,” has occurred and is continuing, then M&T may (but is not obligated to) pay deferred interest with cash from any source without a breach of its obligations under the indenture. In addition, if M&T sells qualifying APM securities pursuant to the alternative payment mechanism but a supervisory event arises as a result of the Federal Reserve disapproving the use of the proceeds to pay deferred interest, it may use the proceeds for other purposes and continue to defer interest without a breach of its obligations under the indenture.

 

If M&T is involved in a merger, consolidation, amalgamation or conveyance, transfer or lease of its assets substantially as an entirety to any other person (a “business combination”) where immediately after the consummation of the business combination more than 50% of the surviving entity’s voting stock is owned by the shareholders of the other party to the business combination, then the foregoing rules with respect to the alternative payment mechanism and payment of interest during a deferral period will not apply to any deferral period that is terminated on the next interest payment date following the date of consummation of the business combination (or, if later, at any time within 90 days following the date of consummation of the business combination). The settlement of all deferred interest, whether it occurs on an interest payment date or another date will immediately terminate the deferral period. M&T will establish a special record date for the payment of any deferred interest pursuant to this paragraph on a date other than an interest payment date, which record date shall also be a special record date for the payment of the corresponding distribution on the Capital Securities.

 

Although M&T’s failure to comply with the foregoing rules with respect to the alternative payment mechanism and payment of interest during a deferral period will be a breach of the indenture, it will not constitute an event of default under the indenture or give rise to a right of acceleration or similar remedy.

 

If M&T has paid all deferred interest (and compounded interest thereon) on the JSDs, it can again defer interest payments on the JSDs as described above.

If the property trustee, on behalf of the Trust, is the sole holder of the JSDs, M&T will give the property trustee and the relevant Delaware trustee written notice of its election to commence or extend a deferral period no more than 30 and no less than five business days before the earlier of:

 

 

The property trustee will give notice of M&T’s election of a deferral period to the holders of the Capital Securities.

 

If the property trustee, on behalf of the Trust, is not the sole holder of the JSDs, M&T will give the holders of the JSDs and the indenture trustee written notice of its election of a deferral period no more than 30 and no less than five business days before the next interest payment date.

 

If M&T defers payments of interest on the JSDs, the JSDs will be treated as being issued with original issue discount for United States federal income tax purposes. This means that you must include interest income with respect to the deferred distributions on your Capital Securities in gross income for United States federal income tax purposes, prior to receiving any cash distributions. See “Certain U.S. Federal Income Tax Considerations — Interest Income and Original Issue Discount.”

 

Dividend and Other Payment Stoppages during Interest Deferral and under Certain Other Circumstances

 

M&T will agree that, so long as any JSDs remain outstanding, if it has given notice of its election to defer interest payments on the JSDs but the related deferral period has not yet commenced or if a deferral period is continuing, then it will not, and will not permit any of its subsidiaries to:

 

 

The restrictions listed above do not apply to:

 

 

 

 

 

In addition, if any deferral period lasts longer than one year, M&T may not repurchase or acquire any securities ranking junior to or pari passu with any qualifying APM securities the proceeds of which were used to settle deferred interest during the relevant deferral period before the first anniversary of the date on which all deferred interest has been paid, subject to the exceptions listed above. However, if M&T is involved in a business combination where immediately after its consummation more than 50% of the surviving entity’s voting stock is owned by the shareholders of the other party to the business combination, then the one-year restriction on such repurchases will not apply to any deferral period that is terminated on the next interest payment date following the date of consummation of the business combination (or if later, at any time within 90 days following the date of consummation of the business combination).

 

Alternative Payment Mechanism

 

Subject to the conditions described in “— Option to Defer Interest Payments” and to the exclusions described in this section and in “— Market Disruption Events,” if M&T defers interest on the JSDs, it will be required, commencing not later than the earlier of (i) the first interest payment date on which it pays current interest (which it may do from any source of funds) or (ii) the fifth anniversary of the commencement of the deferral period, to issue qualifying APM securities until M&T has raised an amount of eligible proceeds at least equal to the aggregate amount of accrued and unpaid deferred interest on the JSDs. This method of funding the payment of accrued and unpaid interest is referred to as the “alternative payment mechanism.” M&T’s obligations pursuant to the alternative payment mechanism shall not apply upon maturity of the JSDs or if an event of default has occurred and is continuing.

 

Except as provided below, M&T has agreed to apply eligible proceeds raised during any deferral period pursuant to the alternative payment mechanism to pay deferred interest on the JSDs.

 

Notwithstanding (and as a qualification to) the foregoing, under the alternative payment mechanism:

 

 

 

 

Once M&T reaches the common equity issuance cap for a deferral period, it will not be required to issue more common stock (or, if it has amended the definition of “qualifying APM securities” to eliminate common stock, as discussed below, qualifying warrants) under the alternative payment mechanism with respect to deferred interest attributable to the first five years of such deferral period even if the amount referred to in the third bullet point above subsequently increases because of a subsequent increase in the current stock market price of M&T’s common stock or the number of outstanding shares of its common stock. The common equity issuance cap will cease to apply after the fifth anniversary of the commencement of any deferral period, at which point M&T must pay any deferred interest regardless of the time at which it was deferred, using the alternative payment mechanism, subject to the maximum share number, any supervisory event or market disruption event. In addition, if the common equity issuance cap is reached during a deferral period and M&T subsequently repays all deferred interest, the common equity issuance cap will cease to apply at the termination of such deferral period and will not apply again unless and until it starts a new deferral period.

 

“Eligible proceeds” means, for each relevant interest payment date, the net proceeds (after underwriters’ or placement agents’ fees, commissions or discounts and other expenses relating to the issuance or sale) M&T has received during the 180-day period prior to that interest payment date from the issuance or sale of qualifying APM securities (excluding sales of common stock and qualifying preferred stock in excess of the “maximum share number” and “preferred stock issuance cap,” respectively), in each case to persons that are not its subsidiaries.

 

“Intent-based replacement disclosure” means, as to any security or combination of securities (together in this definition, “securities”), that the issuer has publicly stated its intention, either in the prospectus or other offering document under which such securities were initially offered for sale or in filings with the SEC made by the issuer under the Exchange Act prior to or contemporaneously with the issuance of such securities, that the issuer or its subsidiaries will redeem or purchase such securities only with the proceeds of replacement capital securities that have terms and provisions at the time of redemption or purchase that are as or more equity-like than the securities then being redeemed or purchased, raised within 180 days prior to the applicable redemption or purchase date. Notwithstanding the use of the term “intent-based replacement disclosure” in the definition of “qualifying preferred stock,” the requirement in each such definition that a particular security or

the related transaction documents include intent-based replacement disclosure shall be disregarded and given no force or effect for so long as we are a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended.

 

“Permitted remedies” means, with respect to any securities, one or both of the following remedies: (a) rights in favor of the holders of such securities permitting such holders to elect one or more directors of the issuer (including any such rights required by the listing requirements of any stock or securities exchange on which such securities may be listed or traded), and (b) complete or partial prohibitions on the issuer paying distributions on or repurchasing common stock or other securities that rank pari passu with or junior to such securities for so long as distributions on such securities, including unpaid distributions, remain unpaid.

 

“Qualifying APM securities” means common stock, qualifying preferred stock and qualifying warrants, provided that M&T may, without the consent of the holders of the Capital Securities or the JSDs, amend the definition of “qualifying APM securities” to eliminate common stock or qualifying warrants (but not both) from the definition if it has been advised in writing by a nationally recognized independent accounting firm or an accounting standard or interpretive guidance of an existing accounting standard issued by an organization or regulator that has responsibility for establishing or interpreting accounting standards in the United States becomes effective such that there is more than an insubstantial risk that the failure to do so would result in a reduction in its earnings per share as calculated for financial reporting purposes. M&T will promptly notify the holders of the JSDs, and the trustees of the Trust will promptly notify the holders of the Capital Securities, in the manner contemplated in the indenture and the Trust Agreement, of such change.

 

“Qualifying preferred stock” means non-cumulative perpetual preferred stock of M&T that (a) ranks pari passu with or junior to all other preferred stock of M&T and (b) either (x) is subject to a “qualifying replacement capital covenant” or (y) is subject to “intent based replacement disclosure” and has a provision that provides for mandatory suspension of distributions or the payment of distributions on the applicable distribution date from “eligible proceeds” upon its failure to satisfy one or more financial tests set forth therein, and (c) as to which the transaction documents provide for no remedies as a consequence of non-payment of dividends other than “permitted remedies.”

 

“Qualifying replacement capital covenant” means a replacement capital covenant that is substantially similar to the replacement capital covenant applicable to the JSDs or a replacement capital covenant, as identified by M&T’s board of directors acting in good faith and in its reasonable discretion and reasonably construing the definitions and other terms of the replacement capital covenant described herein, (i) entered into by a company that at the time it enters into such replacement capital covenant is a reporting company under the Exchange Act and (ii) that restricts the related issuer from redeeming, repaying or purchasing identified securities except to the extent of the applicable percentage of the net proceeds from the issuance of specified replacement capital securities that have terms and provisions at the time of redemption, repayment or purchase that are as or more equity-like than the securities then being redeemed, repaid or purchased within the 180-day period prior to the applicable redemption, repayment or purchase date.

 

“Qualifying warrants” means net share settled warrants to purchase M&T’s common stock that (1) have an exercise price greater than the “current stock market price” of its common stock as of the date it agrees to issue the warrants, and (2) M&T is not entitled to redeem for cash and the holders of which are not entitled to require it to repurchase for cash in any circumstances. M&T intends that any qualifying warrants issued in accordance with the alternative payment mechanism will have exercise prices at least 10% above the current stock market price of its common stock on the date of issuance. The “current stock market price” of M&T’s common stock on any date shall be the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions by the New York Stock Exchange or, if its common stock is not then listed on the New York Stock Exchange, as reported by the principal U.S. securities exchange on which its common stock is traded. If its common stock is not listed on any U.S. securities exchange on the relevant date, the “current stock market price” shall be the last quoted bid price for its common stock in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If M&T’s common stock is not so quoted, the “current stock market

price” shall be the average of the mid-point of the last bid and ask prices for its common stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected by it for this purpose.

 

A “supervisory event” shall commence upon the date M&T has notified the Federal Reserve of its intention and affirmatively requested Federal Reserve approval both (1) to sell qualifying APM securities and (2) to apply the net proceeds of such sale to pay deferred interest on the JSDs, and M&T has been notified that the Federal Reserve disapproves of either action mentioned in that notice. A supervisory event shall cease on the business day following the earlier to occur of (a) the tenth anniversary of the commencement of any deferral period, or (b) the day on which the Federal Reserve notifies M&T in writing that it no longer disapproves of its intention to both (i) issue or sell qualifying APM securities and (ii) apply the net proceeds from such sale to pay deferred interest on the JSDs. The occurrence and continuation of a supervisory event will excuse M&T from its obligation to sell qualifying APM securities and to apply the net proceeds of such sale to pay deferred interest on the JSDs and will permit it to pay deferred interest using cash from any other source without breaching its obligations under the indenture. Because a supervisory event will exist if the Federal Reserve disapproves of either of these requests, the Federal Reserve will be able, without triggering a default under the indenture, to permit M&T to sell qualifying APM securities but to prohibit it from applying the proceeds to pay deferred interest on the JSDs.

 

Although M&T’s failure to comply with its obligations with respect to the alternative payment mechanism will breach the indenture, it will not constitute an event of default thereunder or give rise to a right of acceleration or similar remedy. The remedies of holders of the JSDs and the Capital Securities will be limited in such circumstances as described under “Risk Factors — The property trustee, as holder of the JSDs on behalf of the Trust, has only limited rights of acceleration.”

 

If, due to a market disruption event or otherwise, M&T were able to raise some, but not all, eligible proceeds necessary to pay all deferred interest on any interest payment date, it will apply any available eligible proceeds to pay accrued and unpaid interest on the applicable interest payment date in chronological order based on the date each payment was first deferred, subject to the common equity issuance cap and preferred stock issuance cap, and each holder of Capital Securities will be entitled to receive a pro rata share of any amounts received on the JSDs. If M&T has outstanding parity securities under which it is obligated to sell securities that are qualifying APM securities and apply the net proceeds to the payment of deferred interest or distributions, then on any date and for any period the amount of net proceeds received by it from those sales and available for payment of the deferred interest and distributions shall be applied to the JSDs and those other parity securities on a pro rata basis up to the maximum share number and the common equity issuance cap or the preferred stock issuance cap, as applicable (or comparable provisions in the instruments governing those parity securities), in proportion to the total amounts that are due on the JSDs and such securities, or on such other basis as the Federal Reserve may approve.

 

Market Disruption Events

 

A “market disruption event” means the occurrence or existence of any of the following events or sets of circumstances:

 

 

 

M&T will be excused from its obligations under the alternative payment mechanism in respect of any interest payment date if it provides written certification to the indenture trustee (which the indenture trustee will promptly forward upon receipt to each holder of record of Capital Securities) no more than 15 and no less than 10 business days in advance of that interest payment date certifying that:

 

 

M&T will not be excused from its obligations under the alternative payment mechanism if it determines not to pursue or complete the sale of qualifying APM securities due to pricing, dividend rate or dilution considerations.

 

Redemption

 

The JSDs are:

 

 

Except as set forth above, the JSDs are not redeemable prior to     , 2013.

 

Any redemption or repayment of the JSDs prior to     , 2048 is subject to its obligations under the replacement capital covenant as described under “Replacement Capital Covenant.” Moreover, under the current risk-based capital adequacy guidelines of the Federal Reserve, Federal Reserve approval is required for the early redemption of preferred stock or trust preferred securities included in regulatory capital. Accordingly, Federal Reserve approval would be required for the redemption of the JSDs.

 

The redemption price of the JSDs will be equal to (i) 100% of the principal amount of the JSDs being redeemed or (ii) in the case of a redemption prior to          , 2013 and within 90 days of the occurrence of a “rating agency event,” a “make-whole redemption price” equal to (x) 100% of the principal amount of the JSDs being redeemed or (y) if greater, the sum of the present values of the remaining scheduled payments of principal (discounted from          , 2013) and interest that would have been payable to and including          , 2013 (discounted from their respective interest payment dates) on the JSDs to be redeemed (not including any portion of such payments of interest accrued to the redemption date) to the redemption date on a quarterly basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate plus 50 basis points, in each case plus accrued and unpaid interest to the redemption date.

 

A “capital treatment event,” “investment company event” and “tax event” are each defined under “Junior Subordinated Debentures — Redemption” in the accompanying prospectus.

 

A “rating agency event” means an amendment, clarification or change has occurred in the equity criteria for securities such as the JSDs of any nationally recognized statistical rating organization within the meaning of Rule 15c3-1 under the Exchange Act that then publishes a rating for M&T (a “rating agency”), which amendment, clarification or change results (i) in the length of time for which such current criteria are scheduled to be in effect being shortened with respect to the JSDs or (ii) in a lower equity credit for the JSDs than the then applicable equity credit assigned by such rating agency or its predecessor on the closing date of this offering.

 

“Treasury rate” means the semi-annual equivalent yield to maturity of the “treasury security” that corresponds to the “treasury price” (calculated in accordance with standard market practice and computed as of the second trading day preceding the redemption date).

 

“Treasury security” means the United States Treasury security that the “treasury dealer” determines would be appropriate to use, at the time of determination and in accordance with standard market practice, in pricing the JSDs being redeemed in a tender offer based on a spread to United States Treasury yields.

 

“Treasury price” means the bid-side price for the treasury security as of the third trading day preceding the redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York on that trading day and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities”, except that: (i) if that release (or any successor release) is not published or does not contain that price information on that trading day; or (ii) if the treasury dealer determines that the price

information is not reasonably reflective of the actual bid-side price of the treasury security prevailing at 3:30 p.m., New York City time, on that trading day, then treasury price will instead mean the bid-side price for the treasury security at or around 3:30 p.m., New York City time, on that trading day (expressed on a next trading day settlement basis) as determined by the treasury dealer through such alternative means as the treasury dealer considers to be appropriate under the circumstances.

 

“Treasury dealer” means Citigroup Global Markets Inc. or UBS Securities LLC (or their successors) or, if UBS Securities LLC or Citigroup Global Markets Inc. (or their successors) refuses to act as treasury dealer for this purpose or ceases to be a primary U.S. Government securities dealer, another nationally recognized investment banking firm that is a primary U.S. Government securities dealer specified by us for these purposes.

 

M&T will notify the Trust of the make-whole redemption price promptly after the calculation thereof and the Trustee will have no responsibility for calculating the make-whole redemption price.

 

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of JSDs to be redeemed at its registered address. Unless M&T defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the JSDs or portions thereof called for redemption.

 

M&T may not redeem the JSDs in part if the principal amount has been accelerated and such acceleration has not been rescinded or unless all accrued and unpaid interest, including deferred interest, has been paid in full on all outstanding JSDs for all interest periods terminating on or before the redemption date.

 

In the event of any redemption, neither M&T nor the indenture trustee will be required to:

 

 

Subordination

 

M&T’s obligations to pay interest on, and principal of, the JSDs are subordinate and junior in right of payment and upon liquidation to all its senior and subordinated debt as defined below, whether now outstanding or subsequently incurred, including approximately $713.7 million of junior subordinated debt securities underlying outstanding traditional trust preferred securities at September 30, 2007.

 

For purposes of the JSDs, “senior and subordinated debt” is defined as the principal, premium, if any, unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to M&T whether or not a claim for post-filing interest is allowed in such proceeding), fees, charges, expenses, reimbursement and indemnification obligations, and all other amounts payable under or in respect of the types of debt generally described below:

 

(1) debt for money M&T has borrowed;

 

(2) debt evidenced by a bond, note, debt security, or similar instrument (including purchase money obligations) whether or not given in connection with the acquisition of any business, property or assets, whether by purchase, merger, consolidation or otherwise, but not any account payable or other obligation created or assumed in the ordinary course of business in connection with the obtaining of materials or services;

 

(3) debt which is a direct or indirect obligation which arises as a result of banker’s acceptances or bank letters of credit issued to secure M&T’s obligations;

(4) debt issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of M&T and all obligations of M&T under any conditional sale or title retention agreements (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business);

 

(5) every capital lease obligation of M&T;

 

(6) M&T’s obligation for claims (as defined in Section 101(4) of the United States Bankruptcy Code of 1978, as amended) in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements;

 

(7) every obligation of the type referred to in clauses (1) through (6) of another person and all dividends of another person the payment of which, in either case, M&T has guaranteed, secured by lien on any of its property or assets, or is responsible or liable, directly or indirectly, as obligor or otherwise; and

 

(8) the principal, premium, if any, and interest in respect of (a) indebtedness for money borrowed and (b) indebtedness evidenced by securities, notes, debentures, bonds or other similar instruments issued by M&T including (i) all indebtedness (whether now or hereafter outstanding) issued under the junior subordinated indenture, dated as of January 31, 1997, between M&T (as successor to First Empire State Corporation) and Bankers Trust Company, as trustee, as the same has been or may be amended, modified, or supplemented from time to time, (ii) all indebtedness (whether now or hereafter outstanding) issued under the junior subordinated indenture, dated as of June 6, 1997, between M&T (as successor to First Empire State Corporation) and Bankers Trust Company, as trustee, as the same has been or may be amended, modified, or supplemented from time to time, (iii) all indebtedness (whether now or hereafter outstanding) under the indenture dated as of February 4, 1997, between M&T (as successor to ONBANCorp., Inc.) and The Bank of New York, as trustee, as the same has been or may be amended, modified or supplemented from time to time, (iv) all indebtedness under the indenture, dated as of December 30, 1996, between M&T (as successor to First Maryland Bancorp) and The Bank of New York, as trustee, as the same has been or may be amended, modified, or supplemented from time to time, (v) all indebtedness under the indenture, dated as of February 4, 1997, between M&T (as successor to First Maryland Bancorp) and The Bank of New York, as trustee, as the same has been or may be amended, modified, or supplemented from time to time, (vi) all indebtedness under the indenture, dated as of July 13, 1999, between M&T (as successor to First Maryland Bancorp) and the Bank of New York, as trustee, as the same has been or may be amended, modified, or supplemented from time to time, (the indentures referred to in this paragraph are collectively referred to as the “prior junior subordinated debt indentures”), and (vii) any guarantee entered into by M&T in respect of any preferred securities, capital securities or preference stock of a statutory trust to which M&T issued any indebtedness under the prior junior subordinated debt indentures.

 

For purposes of the JSDs, senior and subordinated debt will exclude the following:

 

(A) the guarantee of the Capital Securities;

 

(B) any indebtedness or guarantee that is by its terms subordinated to, or ranks equally with, the JSDs and the issuance of which, in the case of this clause (B) only, (x) has received the concurrence or approval of the staff of the Federal Reserve Bank of New York or the staff of the Federal Reserve or (y) does not at the time of issuance prevent the JSDs from qualifying for Tier 1 capital treatment (irrespective of any limits on the amount of M&T’s Tier 1 capital) under the applicable capital adequacy guidelines, regulations, policies or published interpretations of the Federal Reserve; and

 

(C) trade accounts payable and other accrued liabilities arising in the ordinary course of business.

 

No change in the subordination of the JSDs in a manner adverse to holders will be effective against any holder without its consent.

 

All liabilities of M&T’s subsidiaries, including trade accounts payable and accrued liabilities arising in the ordinary course of business, are effectively senior to the JSDs to the extent of the assets of such subsidiaries. At September 30, 2007, M&T’s indebtedness for money borrowed (excluding all of the liabilities

of its subsidiaries) that would rank senior to the JSDs upon liquidation was approximately $1.2 billion and its subsidiaries’ direct borrowings and deposit liabilities that would effectively rank senior to the JSDs upon liquidation totaled approximately $52.0 billion.

 

If certain events in bankruptcy, insolvency or reorganization occur, M&T will first pay all senior and subordinated debt, including any interest accrued after the events occur, in full before it makes any payment or distribution, whether in cash, securities or other property, on account of the principal of or interest on the JSDs. In such an event, it will pay or deliver directly to the holders of senior and subordinated debt and of other indebtedness described in the previous sentence, any payment or distribution otherwise payable or deliverable to holders of the JSDs. M&T will make the payments to the holders of senior and subordinated debt according to priorities existing among those holders until it has paid all senior and subordinated debt, including accrued interest, in full. Notwithstanding the subordination provisions discussed in this paragraph, it may make payments or distributions on the JSDs so long as:

 

 

If such events in bankruptcy, insolvency or reorganization occur, after M&T has paid in full all amounts owed on senior and subordinated debt, the holders of JSDs together with the holders of any of its other obligations ranking equal with the JSDs will be entitled to receive from its remaining assets any principal or interest due at that time on the JSDs and such other obligations before it makes any payment or other distribution on account of any of its capital stock or obligations ranking junior to the JSDs.

 

If M&T violates the indenture by making a payment or distribution to holders of the JSDs before M&T has paid all the senior and subordinated debt in full, then such holders of the JSDs will have to pay or transfer the payments or distributions to the trustee in bankruptcy, receiver, liquidating trustee or other person distributing its assets for payment of the senior and subordinated debt. Notwithstanding the subordination provisions discussed in this paragraph, holders of JSDs will not be required to pay, or transfer payments or distributions to, holders of senior and subordinated debt so long as:

 

 

Because of the subordination, if M&T becomes insolvent, holders of senior and subordinated debt may receive more, ratably, and holders of the JSDs having a claim pursuant to those securities may receive less, ratably, than its other creditors, including trade creditors. This type of subordination will not prevent an event of default from occurring under the indenture in connection with the JSDs.

 

M&T may modify or amend the indenture as provided under “Modification of the Junior Indenture” in the accompanying prospectus. However, the modification or amendment may not, without the consent of the holders of all senior and subordinated debt outstanding, modify any of the provisions of the indenture relating to the subordination of the JSDs in a manner that would adversely affect the holders of senior and subordinated debt.

 

The indenture places no limitation on the amount of senior and subordinated debt that M&T may incur. M&T expects from time to time to incur additional indebtedness and other obligations constituting senior and subordinated debt.

Limitation on Claims in the Event of Bankruptcy, Insolvency or Receivership

 

The indenture provides that a holder of JSDs, by that holder’s acceptance of the JSDs, agrees that in certain events of bankruptcy, insolvency or receivership prior to the redemption or repayment of its JSDs, that holder of JSDs will have no claim for, and thus no right to receive, optionally deferred and unpaid interest (including compounded interest thereon) that has not been settled through the application of the alternative payment mechanism to the extent the amount of such interest exceeds the first two years of accumulated and unpaid interest (including compounded interest thereon) on the JSDs.

 

Payment; Exchange; Transfer

 

If the Trust is dissolved and the JSDs are distributed to the holders of the Capital Securities, M&T will appoint a paying agent from whom holders of JSDs can receive payment of the principal of and interest on the JSDs. It may elect to pay any interest on the JSDs by mailing a check to the person listed as the owner of the JSDs in the security register or by wire transfer to an account designated by that person in writing not less than 10 days before the date of the interest payment. One of M&T’s affiliates may serve as the paying agent under the indenture. It will pay interest on the JSDs:

 

 

Any money that M&T pays to a paying agent for the purpose of making payments on the JSDs and that remains unclaimed two years after the payments were due will, at its request, be returned to M&T and after that time any holder of such JSDs can only look to M&T for the payments on such JSDs.

 

Any JSDs can be exchanged for other JSDs so long as such other JSDs are denominated in authorized denominations and have the same aggregate principal amount and same terms as the JSDs that were surrendered for exchange. The JSDs may be presented for registration of transfer, duly endorsed or accompanied by a satisfactory written instrument of transfer, at the office or agency maintained by M&T for that purpose in a place of payment. There will be no service charge for any registration of transfer or exchange of the JSDs, but M&T may require holders to pay any tax or other governmental charge payable in connection with a transfer or exchange of the JSDs. It may at any time rescind the designation or approve a change in the location of any office or agency, in addition to the security registrar, designated by M&T where holders can surrender the JSDs for registration of transfer or exchange. However, M&T will be required to maintain an office or agency in each place of payment for the JSDs.

 

Denominations

 

The JSDs will be issued only in registered form, without coupons, in denominations of $25 each or multiples of $25.

 

Events of Default; Waiver and Notice

 

The following events are “events of default” with respect to the JSDs:

 

 

The indenture for the JSDs provides that the indenture trustee must give holders notice of all defaults or events of default within 30 days after it becomes actually known to a responsible officer of the indenture trustee. However, except in the cases of a default or an event of default in payment on the JSDs, the indenture trustee will be protected in withholding the notice if its responsible officers determine that withholding of the notice is in the interest of such holders.

If an event of default under the indenture occurs and continues, the indenture trustee or the holders of at least 25% in aggregate principal amount of the outstanding JSDs may declare the entire principal and all accrued but unpaid interest on all JSDs to be due and payable immediately. If the indenture trustee or the holders of JSDs do not make such declaration and the JSDs are beneficially owned by the Trust or a trustee of the Trust, the property trustee or the holders of at least 25% in aggregate liquidation amount of the Capital Securities shall have such right. The property trustee may annul the declaration and waive the default, provided all defaults have been cured and all payment obligations have been made current. Should the property trustee fail to annul the declaration and waive the default, the holders of a majority in aggregate liquidation amount of the Capital Securities will have the right to do so.

 

If such a declaration occurs, the holders of not less than a majority of the aggregate principal amount of the outstanding JSDs can, subject to certain conditions (including, if the JSDs are held by the Trust or a trustee of the Trust, the consent of the holders of not less than a majority in aggregate liquidation amount of the Capital Securities), rescind the declaration. If the holders of the JSDs do not rescind such declaration and the JSDs are beneficially owned by the Trust or property trustee of the Trust, the holders of at least a majority in aggregate liquidation amount of the Capital Securities shall have such right.

 

The holders of a majority in aggregate principal amount of the outstanding JSDs may waive any past default, except:

 

 

If the JSDs are beneficially owned by the Trust or a trustee of the Trust, any such waiver shall require the consent of the holders of at least a majority in aggregate liquidation amount of the Capital Securities.

 

The holders of a majority in principal amount of the JSDs shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee.

 

M&T is required to file an officers’ certificate with the indenture trustee each year that states, to the knowledge of the certifying officer, whether or not any defaults exist under the terms of the indenture.

 

If the JSDs are beneficially owned by the Trust or a trustee of the Trust, a holder of Capital Securities may institute a direct action against M&T if it breaches its obligations to issue qualifying APM securities pursuant to the alternative payment mechanism, subject to a market disruption event or it fails to make interest or other payments on the JSDs when due, taking into account any deferral period. A direct action may be brought without first:

 

 

This right of direct action cannot be amended in a manner that would impair the rights of the holders of the Capital Securities without the consent of all such holders.

 

M&T will not enter into any supplemental indenture with the Trustee to add any additional event of default with respect to the JSDs without the consent of the holders of at least a majority in aggregate principal amount of outstanding JSDs.

 

Actions Not Restricted by Indenture

 

The indenture does not contain restrictions on M&T’s ability to:

 

 

 

The indenture does not require the maintenance of any financial ratios or specified levels of net worth or liquidity. In addition, the indenture does not contain any provisions that would require M&T to repurchase or redeem or modify the terms of any of the JSDs upon a change of control or other event involving it that may adversely affect the creditworthiness of the JSDs.

 

The alternative payment mechanism, which is implemented through M&T’s covenants in the indenture, will not affect the ability of the Federal Reserve to allow or require M&T to issue qualifying APM securities for supervisory purposes independent of, and not restricted by, the alternative payment mechanism or the other terms of the JSDs.

 

Distribution of Corresponding Assets

 

If the JSDs are owned by the Trust, under circumstances involving the dissolution of the Trust, the JSDs may be distributed to the holders of the Trust securities in liquidation of the Trust after satisfaction of the Trust’s liabilities to its creditors, provided that any required regulatory approval is obtained. See “Description of the Capital Securities — Optional Liquidation of Trust and Distribution of JSDs to Holders.”

 

If the JSDs are distributed to the holders of Capital Securities, M&T anticipates that the depositary arrangements for the JSDs will be substantially identical to those in effect for the Capital Securities. See “Book-Entry System.”

 

Trust Expenses

 

Pursuant to an expense agreement with the Trust, M&T agrees to pay, and reimburse the Trust for, the full amounts of any costs, expenses or liabilities of the Trust, other than obligations of the Trust to pay to the holders of any Capital Securities the amounts due such holders pursuant to the terms of the Capital Securities. This payment obligation will include any costs, expenses or liabilities of the Trust that are required by applicable law to be satisfied in connection with a termination of the Trust.

 

Governing Law

 

The indenture and the JSDs will be governed by, and construed in accordance with, the laws of the State of New York.

 

The Indenture Trustee

 

The indenture trustee will have all of the duties and responsibilities specified under the Trust Indenture Act. Other than its duties in a case of default, the indenture trustee is under no obligation to exercise any of the powers under the indenture at the request, order or direction of any holders of JSDs unless offered reasonable indemnification. The indenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if it reasonably believes that repayment or adequate indemnity is not reasonably assured to it.

 

DESCRIPTION OF THE GUARANTEE

 

Under the guarantee, M&T will guarantee certain payment obligations of the Trust. For a description of the terms of the guarantees, see “Guarantees” in the accompanying prospectus. The Trust Agreement provides that, by your acceptance of the Capital Securities, you agree to the provisions of the guarantee and the Junior Subordinated Indenture.

 

RELATIONSHIP AMONG CAPITAL SECURITIES, JUNIOR SUBORDINATED
DEBENTURES AND GUARANTEE

 

For a description of the relationship among the Capital Securities, the JSDs and the guarantee, see “Relationship among the Capital Securities and the Related Instruments” in the accompanying prospectus.

 

REPLACEMENT CAPITAL COVENANT

 

The following is a brief description of the terms of the replacement capital covenant. It does not purport to be complete in all respects. This description is subject to and qualified in its entirety by reference to the replacement capital covenant, copies of which are available upon request from M&T.

 

At or around the time of issuance of the Capital Securities, M&T will enter into a replacement capital covenant pursuant to which M&T will agree for the benefit of persons that buy or hold a specified series of its long-term indebtedness ranking senior to the JSDs (or in certain limited cases long-term indebtedness of M&T’s largest depositary institution subsidiary, which is currently M&T Bank) that it will not repay, redeem or purchase, nor will any of its subsidiaries purchase, any of the JSDs or the Capital Securities prior to  , 2048, unless:

 

 

 

in each case within the applicable “measurement period” (without double counting proceeds received in any prior measurement period); provided that the foregoing restrictions shall not apply to (i) the purchase of the JSDs or Capital Securities or any portion thereof by subsidiaries of M&T in connection with the distribution thereof or market-making or other secondary-market activities or (ii) to any distribution of the JSDs to holders of the Capital Securities upon a dissolution of the Trust. We refer collectively to common stock, rights to acquire common stock, “debt exchangeable for common equity,” “debt exchangeable for preferred equity,” “mandatorily convertible preferred stock,” “REIT preferred securities” and “qualifying capital securities” as “replacement capital securities.” For purposes of the replacement capital covenant, the term “repay” includes the defeasance by M&T of the JSDs as well as the satisfaction and discharge of its obligations under the indenture with respect to the JSDs. The replacement capital covenant will apply to any further issues of JSDs pursuant to the indenture.

 

The replacement capital covenant will terminate if an event of default resulting in acceleration of the JSDs occurs. Furthermore, M&T will be released from all its obligations under the replacement capital covenant if it sells, conveys, transfers or otherwise disposes of all or substantially all its assets to any person and (i) such person assumes all the obligations of M&T under the indenture governing the then applicable series of long-term indebtedness and the indenture for the JSDs, (ii) such person assumes all the obligations of M&T under the replacement capital covenant and (iii) M&T is released from its obligations under the indenture governing the then applicable series of long-term indebtedness and the indenture for the JSDs.

 

M&T’s ability to raise proceeds from replacement capital securities during the applicable measurement period with respect to any repayment, redemption or purchase of JSDs or Capital Securities will depend on,

among other things, legal and regulatory requirements, market conditions at that time as well as the acceptability to prospective investors of the terms of those securities.

 

The initial series of indebtedness benefiting from the replacement capital covenant is M&T’s Floating Rate Junior Subordinated Debentures due July 15, 2029 underlying the Floating Rate Non-Cumulative Subordinated Capital Trust Enhanced Securities issued by Allfirst, which have CUSIP No. 01852FAC7. The replacement capital covenant includes provisions requiring M&T to redesignate a new series of indebtedness if the covered series of indebtedness approaches maturity or is to be redeemed or purchased such that the outstanding principal amount is less than $100,000,000, subject to additional procedures.

 

The replacement capital covenant is made for the benefit of persons that buy or hold the specified series of long-term indebtedness. It may not be enforced by the holders of the Capital Securities or the JSDs. M&T may amend or supplement the replacement capital covenant from time to time with the consent of the majority in principal amount of the holders of the then-effective specified series of indebtedness benefiting from the replacement capital covenant, provided that no such consent shall be required if (i) such amendment or supplement eliminates common stock, debt exchangeable for common equity, rights to acquire common stock and/or mandatorily convertible preferred stock as replacement capital securities if, after the date of the replacement capital covenant, M&T has been advised in writing by a nationally recognized independent accounting firm or an accounting standard or interpretive guidance of an existing accounting standard issued by an organization or regulator that has responsibility for establishing or interpreting accounting standards in the United States becomes effective such that there is more than an insubstantial risk that failure to eliminate common stock, debt exchangeable for common equity, rights to acquire common stock and/or mandatorily convertible preferred stock as replacement capital securities would result in a reduction in M&T’s earnings per share as calculated in accordance with generally accepted accounting principles in the United States, (ii) such amendment or supplement is not adverse to the covered debtholders, and an officer of M&T has delivered to the holders of the then-effective series of covered debt a written certificate stating that, in his or her determination, such amendment or supplement is not adverse to the covered debtholders, or (iii) the effect of such amendment or supplement is solely to impose additional restrictions on, or eliminate certain of, the types of securities qualifying as replacement capital securities (other than the securities covered by clause (i) above), and an officer of M&T has delivered to the holders of the then effective series of covered debt a written certificate to that effect

 

M&T may generally amend or supplement the replacement capital covenant without the consent of the holders of the JSDs.

 

BOOK-ENTRY SYSTEM

 

The Depository Trust Company, which we refer to along with its successors in this capacity as “DTC,” will act as securities depositary for the Capital Securities. The Capital Securities will be issued only as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One or more fully registered global security certificates, representing the total aggregate number of Capital Securities, will be issued and will be deposited with DTC and will bear a legend regarding the restrictions on exchanges and registration of transfer referred to below. At any time when the JSDs may be held by persons other than the property trustee, one or more fully registered global security certificates, representing the total aggregate principal amount of JSDs, will be issued and will be deposited with DTC and will bear a legend regarding the restrictions on exchanges and registration of transfer referred to below.

 

The laws of some jurisdictions may require that some purchasers of securities take physical delivery of securities in definitive form. These laws may impair the ability to transfer beneficial interests in Capital Securities or JSDs, so long as the corresponding securities are represented by global security certificates.

 

DTC has advised us that it is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its direct participants deposit with DTC. DTC also facilitates the post-trade settlement among participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation, which, in turn, is owned by a number of direct participants of DTC and members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation, as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the Financial Industry Regulatory Authority. Access to the DTC system is also available to others, referred to as “indirect participants,” such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a direct or indirect custodial relationship with a direct participant. The rules applicable to DTC and its participants are on file with the SEC.

 

Purchases of securities under the DTC system must be made by or through direct participants, which will receive a credit for the securities on DTC’s records. The ownership interest of each beneficial owner of securities will be recorded on the direct or indirect participants’ records. Beneficial owners will not receive written confirmation from DTC of their purchase. Beneficial owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the direct or indirect participant through which the beneficial owner entered into the transaction. Under a book-entry format, holders may experience some delay in their receipt of payments, as such payments will be forwarded by the depositary to Cede & Co., as nominee for DTC. DTC will forward the payments to its participants, who will then forward them to indirect participants or holders. Beneficial owners of securities other than DTC or its nominees will not be recognized by the relevant registrar, transfer agent, paying agent or trustee as registered holders of the securities entitled to the benefits of the Trust Agreement and the guarantee or the indenture. Beneficial owners that are not participants will be permitted to exercise their rights only indirectly through and according to the procedures of participants and, if applicable, indirect participants.

 

To facilitate subsequent transfers, all securities deposited by direct participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the securities; DTC’s records reflect only the identity of the direct participants to whose accounts the securities are credited, which may or may not be the beneficial

owners. The direct and indirect participants will remain responsible for keeping account of their holdings on behalf of their customers.

 

Conveyance of redemption notices and other communications by DTC to direct participants, by direct participants to indirect participants, and by direct and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. If less than all of the securities of any class are being redeemed, DTC will determine the amount of the interest of each direct participant to be redeemed in accordance with its then current procedures.

 

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to any securities unless authorized by a direct participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an omnibus proxy to the issuer as soon as possible after the record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those direct participants to whose accounts securities are credited on the record date (identified in a listing attached to the omnibus proxy).

 

DTC may discontinue providing its services as securities depositary with respect to the Capital Securities at any time by giving reasonable notice to the issuer or its agent. Under these circumstances, in the event that a successor securities depositary is not obtained, certificates for the Capital Securities are required to be printed and delivered. M&T may decide to discontinue the use of the system of book-entry-only transfers through DTC (or a successor securities depositary). In that event, certificates for the Capital Securities will be printed and delivered to DTC.

 

As long as DTC or its nominee is the registered owner of the global security certificates, DTC or its nominee, as the case may be, will be considered the sole owner and holder of the global security certificates and all securities represented by these certificates for all purposes under the instruments governing the rights and obligations of holders of such securities. Except in the limited circumstances referred to above, owners of beneficial interests in global security certificates:

 

 

All redemption proceeds, distributions and dividend payments on the securities represented by the global security certificates and all transfers and deliveries of such securities will be made to DTC or its nominee, as the case may be, as the registered holder of the securities. DTC’s practice is to credit direct participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the issuer or its agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of that participant and not of DTC, the depositary, the issuer or any of their agents, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the issuer or its agent, disbursement of such payments to direct participants will be the responsibility of DTC, and disbursement of such payments to the beneficial owners will be the responsibility of direct and indirect participants.

 

Ownership of beneficial interests in the global security certificates will be limited to participants or persons that may hold beneficial interests through institutions that have accounts with DTC or its nominee. Ownership of beneficial interests in global security certificates will be shown only on, and the transfer of those ownership interests will be effected only through, records maintained by DTC or its nominee, with respect to

participants’ interests, or any participant, with respect to interests of persons held by the participant on their behalf. Payments, transfers, deliveries, exchanges, redemptions and other matters relating to beneficial interests in global security certificates may be subject to various policies and procedures adopted by DTC from time to time. None of M&T, the Trust, the trustees of the Trust or any agent for M&T or any of them, will have any responsibility or liability for any aspect of DTC’s or any direct or indirect participant’s records relating to, or for payments made on account of, beneficial interests in global security certificates, or for maintaining, supervising or reviewing any of DTC’s records or any direct or indirect participant’s records relating to these beneficial ownership interests.

 

Although DTC has agreed to the foregoing procedures in order to facilitate transfer of interests in the global security certificates among participants, DTC is under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. Neither M&T nor the Trust will have any responsibility for the performance by DTC or its direct participants or indirect participants under the rules and procedures governing DTC.

 

Because DTC can act only on behalf of direct participants, who in turn act only on behalf of direct or indirect participants, and certain banks, trust companies and other persons approved by it, the ability of a beneficial owner of securities to pledge them to persons or entities that do not participate in the DTC system may be limited due to the unavailability of physical certificates for the securities.

 

DTC has advised us that it will take any action permitted to be taken by a registered holder of any securities under the Trust Agreement, the guarantee or the indenture, only at the direction of one or more participants to whose accounts with DTC the relevant securities are credited.

 

The information in this section concerning DTC and its book-entry system has been obtained from sources that M&T and the trustees of the Trust believe to be accurate, but we assume no responsibility for the accuracy thereof.

 

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

 

General

 

The following discussion summarizes certain U.S. federal income tax considerations that may be relevant to you if you purchase Capital Securities in the initial offering at the original issue price and will hold the Capital Securities as capital assets. This summary does not purport to be a comprehensive description of all the tax consequences that may be relevant to a decision to purchase the subordinated debentures by any particular investor, including tax consequences that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. It does not address considerations that may be relevant to you if you are an investor that is subject to special tax rules, such as a bank, thrift, real estate investment trust, regulated investment company, insurance company, dealer in securities or currencies, trader in securities or commodities that elects mark-to-market treatment, person that will hold Capital Securities as a position in a “straddle” or as a “hedge,” conversion transaction or other integrated investment transaction, tax-exempt organization, partnership or partner therein, or a person (other than a “Non-U.S. Holder,” as defined below) whose “functional currency” is not the U.S. dollar.

 

This summary is based on laws, regulations, rulings and decisions now in effect, all of which may change. Any change could apply retroactively and could affect the continued validity of this summary. The authorities on which this summary is based are subject to various interpretations, and it is therefore possible that the federal income tax treatment of the purchase, ownership and disposition of the Capital Securities may differ from the treatment described below.

 

You should consult your tax adviser about the tax consequences of holding Capital Securities, including the relevance to your particular situation of the considerations discussed below, as well as the relevance to your particular situation of state, local, non-U.S. or other tax laws.

 

Classification of the JSDs

 

In connection with the issuance of the JSDs, Cleary Gottlieb Steen & Hamilton LLP, our special tax counsel, will render its opinion that, while there is no authority directly on point and the issue is not free from doubt, under current law and assuming full compliance with the terms of the indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, the JSDs held by the Trust will be classified for U.S. federal income tax purposes as our indebtedness. An opinion of counsel is not binding on the IRS or a court, and it is possible that the IRS or a court would reach a different conclusion as to the proper characterization of the JSDs for U.S. federal income tax purposes. Prospective investors should also note that no rulings have been or are expected to be sought from the IRS with respect to any of the issues addressed by such opinion.

 

We agree, and by acceptance of a Capital Security, each beneficial owner of a Capital Security agrees, to treat the JSDs as our debt for U.S. federal income tax purposes, and the remainder of this discussion assumes this to be the case.

 

Classification of the Trust

 

In connection with the issuance of the Capital Securities, Cleary Gottlieb Steen & Hamilton LLP will render its opinion that, under then current law and assuming full compliance with the terms of the amended trust agreement, the indenture and other relevant documents, and based on the facts and assumptions contained in such opinion, the Trust will be classified for U.S. federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for U.S. federal income tax purposes, each holder of Capital Securities generally will be considered the owner of an undivided interest in the JSDs. Each U.S. holder will be required to include in its gross income all interest or original issue discount (“OID”) and any gain recognized relating to its allocable share of those JSDs.

U.S. Holders

 

For purposes of the discussion under this heading “U.S. Holders,” you will be a U.S. holder if you are the beneficial owner of a Capital Security and are an individual who is a citizen or resident of the United States, a U.S. domestic corporation, or any other person that is subject to U.S. federal income tax on a net income basis in respect of an investment in the Capital Securities.

 

Interest Income and Original Issue Discount.  Under applicable Treasury regulations, a “remote” contingency that stated interest will not be timely paid will be ignored in determining whether a debt instrument is issued with OID. We believe that the likelihood that we would exercise our option to defer payments is remote within the meaning of the Treasury regulations. Based on the foregoing, we believe that, although the matter is not free from doubt, the JSDs will not be considered to be issued with OID at the time of their original issuance. Accordingly, each U.S. holder of Capital Securities should include in gross income such U.S. holder’s allocable share of interest on the JSDs in accordance with such U.S. holder’s method of tax accounting.

 

Under the regulations, if the possibility that we would exercise our option to defer any payment of interest was determined not to be “remote,” or if the option was properly determined to be “remote” but we subsequently exercised such option, the JSDs would be treated as issued with OID at the time of issuance or at the time of such exercise, as the case may be. Then, all stated interest on the JSDs would thereafter be treated as OID as long as the JSDs remained outstanding. In such event, all of a U.S. holder’s taxable interest income relating to the JSDs would constitute OID that would have to be included in income on a constant yield basis before the receipt of the cash attributable to the interest, regardless of the U.S. holder’s method of tax accounting, and actual distributions of stated interest would not be reported as taxable income. Consequently, a U.S. holder of Capital Securities would be required to include OID in gross income even though we would not make any actual cash payments during a deferral period.

 

No rulings or other interpretations have been issued by the IRS which have addressed the meaning of the term “remote” as used in the applicable Treasury regulations, and it is possible that the IRS could take a position contrary to the interpretation in this prospectus supplement.

 

Because income on the Capital Securities will constitute interest or OID, corporate holders of Capital Securities will not be entitled to a dividends-received deduction with respect to any distributions on the Capital Securities, and individual holders will not be entitled to the lower income tax rate that applies to certain dividends in respect of those distributions.

 

Sale, Exchange or Other Disposition of Capital Securities.  Upon the sale, exchange, retirement or other taxable disposition (collectively, a “disposition”) of a Capital Security, a U.S. holder will be considered to have disposed of all or part of its ratable share of the JSDs. Such U.S. holder will recognize gain or loss equal to the difference between its adjusted tax basis in the Capital Securities and the amount realized on the disposition of such Capital Securities. A U.S. holder’s adjusted tax basis in the Capital Securities generally will be its initial purchase price. If the JSDs are deemed to be issued with OID, a U.S. holder’s tax basis in the Capital Securities generally will be its initial purchase price, increased by OID previously includible in such U.S. holder’s gross income to the date of disposition and decreased by distributions or other payments received on the Capital Securities since and including the date that the JSDs were deemed to be issued with OID. Gain or loss from the disposition of the Capital Securities generally will be capital gain or loss, except to the extent of any accrued interest relating to such U.S. holder’s ratable share of the JSDs required to be included in income, and generally will be a long-term capital gain or loss if the Capital Securities have been held for more than one year. Net long-term capital gain recognized by an individual U.S. holder generally will be subject to tax at a lower rate than net short-term capital gain or ordinary income. The ability of U.S. holders to offset capital losses against ordinary income is limited.

 

Receipt of JSDs or Cash Upon Liquidation of the Trust.  Under the circumstances described in this prospectus supplement, JSDs may be distributed to holders in exchange for Capital Securities upon the liquidation of the Trust. Under current law, such a distribution, for U.S. federal income tax purposes, would be treated as a non-taxable event to each U.S. holder, and each U.S. holder would receive an aggregate tax basis

in the JSDs equal to such holder’s aggregate tax basis in its Capital Securities. A U.S. holder’s holding period in the JSDs received in liquidation of the Trust would include the period during which the Capital Securities were held by such holder. See “Description of the Capital Securities — Optional Liquidation of Trust and Distribution of JSDs to Holders” in this prospectus supplement.

 

Under the circumstances described in this prospectus supplement, the JSDs may be redeemed by us for cash and the proceeds of such redemption distributed by the Trust to holders in redemption of their Capital Securities. Under current law, such a redemption would, for U.S. federal income tax purposes, constitute a taxable disposition of the redeemed Capital Securities. Accordingly, a U.S. holder would recognize gain or loss as if it had sold such redeemed Capital Securities for cash. See “Description of the Capital Securities — Redemption” in this prospectus supplement and “— Sale, Exchange or Other Disposition of Capital Securities” above.

 

Trust Expenses.  For individual taxpayers, deductions for trust expenses may be subject to limitations or may not be allowed for purposes of the alternative minimum tax.

 

Non-U.S. Holders

 

The following discussion is a summary of certain United States federal income tax consequences that may apply to you if you are a Non-U.S. Holder of the Capital Securities. The term “Non-U.S. Holder” means a beneficial owner of an Capital Securities that is not a U.S. holder.

 

Under current U.S. federal income tax law, while not free from doubt,

 

(a) payment on a Capital Security by us or any paying agent to a holder that is a Non-U.S. Holder will not be subject to withholding of U.S. federal income tax, provided that, with respect to interest payments, (i) the holder does not actually or constructively own 10 percent or more of the combined voting power of all classes of our stock and is not a controlled foreign corporation directly or constructively related to us through stock ownership and (ii) the beneficial owner provides a statement signed under penalty of perjury that includes its name and address and certifies that it is a Non-U.S. Holder in compliance with applicable requirements (or satisfies certain documentary evidence requirements for establishing that it is a Non-U.S. Holder); and

 

(b) a holder of a Capital Security that is a Non-U.S. Holder will not be subject to U.S. federal income tax on gain realized on the sale, exchange or redemption of the Capital Securities, unless, in the case of gain realized by an individual holder, the holder is present in the United States for 183 days or more in the taxable year of the sale and either (A) such gain or income is attributable to an office or other fixed place of business maintained in the United States by such holder or (B) such holder has a tax home in the United States.

 

Backup Withholding and Information Reporting

 

Payments made to certain U.S. Holders on the Capital Securities will be subject to United States information reporting requirements. In addition, certain U.S. Holders may be subject to United States backup withholding tax in respect of such payments if they do not provide their taxpayer identification numbers to the relevant paying agent, and may also be subject to information reporting and backup withholding requirements with respect to proceeds from a disposition of the Capital Securities. Non-U.S. Holders may be required to comply with applicable certification procedures to establish that they are not U.S. Holders in order to avoid the application of such information reporting requirements and backup withholding tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or credit against your United States federal income tax liability, provided that you furnish the required information to the United States Internal Revenue Service.

 

The U.S. federal income tax discussion set forth above is included for general information only and may not be applicable depending upon a holder’s particular situation. Holders should consult their tax advisors in determining the tax consequences to them of the purchase, ownership and disposition of the Capital Securities, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in U.S. federal or other tax laws.

 

ERISA CONSIDERATIONS

 

Each fiduciary of a pension, profit-sharing or other employee benefit plan to which Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) applies, or other arrangement that is subject to Title I of ERISA (a “plan”), should consider the fiduciary standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in the Capital Securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the plan.

 

Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well as individual retirement accounts and other arrangements to which Section 4975 of the Code applies (also “plans”), from engaging in specified transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code (“parties in interest”) with respect to such plan. M&T and the underwriters may be considered a party in interest or disqualified person with respect to a plan to the extent M&T, the underwriters or any of their respective affiliates are engaged in providing services to such plans. A violation of those “prohibited transaction” rules may result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption. In addition, the fiduciary of a plan that engaged in a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code.

 

Employee benefit plans that are governmental plans, as defined in Section 3(32) of ERISA, certain church plans, as defined in Section 3(33) of ERISA, and foreign plans, as described in Section 4(b)(4) of ERISA, are not subject to the requirements of ERISA, or Section 4975 of the Code, but these plans may be subject to other laws that contain fiduciary and prohibited transaction provisions similar to those under Title I of ERISA and Section 4975 of the Code (“Similar Laws”).

 

Under a regulation (the “plan assets regulation”) issued by the U.S. Department of Labor and modified by Section 3(42) of ERISA, the assets of the Trust would be deemed to be “plan assets” of a plan for purposes of ERISA and Section 4975 of the Code if a plan makes an “equity” investment in the Trust and no exception were applicable under the plan assets regulation. An “equity interest” is defined under the plan assets regulation as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features and specifically includes a beneficial interest in a trust.

 

Under an exception in the plan assets regulation, the assets of the Trust would not be deemed to be “plan assets” of investing plans if the Capital Securities are “publicly offered securities” for purposes of the plan assets regulation. “Publicly offered securities” are securities which are widely held (i.e., owned by more than 100 investors independent of the issuer and of each other), freely transferable, and either (i) part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or (ii) sold as part of an offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, and then timely registered under the Exchange Act. Although no assurance can be given, it is expected that the Capital Securities will be offered in a manner consistent with the requirements of the publicly-offered securities exception, and therefore that the assets of the Trust will not constitute “plan assets” of an investing plan.

 

All of the common securities will be purchased and held by M&T. Even if the assets of the Trust are not deemed to be “plan assets” of plans investing in the Trust, specified transactions involving the Trust could be deemed to constitute direct or indirect prohibited transactions under ERISA and Section 4975 of the Code regarding an investing plan. For example, if M&T were a party in interest with respect to an investing plan, either directly or by reason of the activities of one or more of its affiliates, sale of the Capital Securities by the Trust to the plan could be prohibited by Section 406(a)(1) of ERISA and Section 4975(c)(1) of the Code, unless exemptive relief were available.

 

The U.S. Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide exemptive relief for any direct or indirect prohibited transactions resulting from the purchase or holding of the Capital Securities. Those class exemptions are:

 

 

 

In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provide an exemption for transactions between a plan and a person who is a party in interest (other than a fiduciary who has or exercises any discretionary authority or control with respect to investment of the plan assets involved in the transaction or renders investment advice with respect thereto) solely by reason of providing services to the plan (or by reason of a relationship to such a service provider), if in connection with the transaction the plan receives no less, nor pays no more, than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA and Section 4975(f)(10)) of the Code.

 

Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the Capital Securities on behalf of or with “plan assets” of any plan or governmental, church or foreign plan consult with their counsel regarding the potential consequences of the investment and the availability of exemptive relief.

 

Each purchaser and holder of the Capital Securities or any interest in the Capital Securities will be deemed to have represented by its purchase or holding that either (i) it is not a plan or a governmental, church or foreign plan subject to Similar Laws, or a plan asset entity and it is not purchasing or holding such securities on behalf of or with “plan assets” or any such plan or governmental, church or foreign plan or (ii) its purchase and holding of Capital Securities will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation under any applicable Similar Laws.

 

Purchasers of Capital Securities have the exclusive responsibility for ensuring that their purchase and holding of the Capital Securities complies with the fiduciary responsibility rules of ERISA and does not violate the prohibited transaction rules of ERISA or the Code (or in the case of a governmental, church or foreign plan, any Similar Law).

 

UNDERWRITING

 

M&T Bank Corporation, M&T Capital Trust IV and the underwriters named below have entered into an underwriting agreement with respect to the Capital Securities being offered. Subject to certain conditions, the underwriters have agreed to purchase the respective number of Capital Securities indicated in the following table. Citigroup Global Markets Inc. and UBS Securities LLC are the representatives of the underwriters.

 

 

The underwriters are committed to take and pay for all of the Capital Securities being offered, if any are taken.

 

In view of the fact that the proceeds from the sale of the Capital Securities and the Trust’s common securities will be used to purchase the JSDs issued by M&T, the underwriting agreement provides that M&T will pay as compensation for the underwriters’ arranging the investment therein of such proceeds the following amounts for the account of the underwriters:

 

 

 

 

Capital Securities sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus supplement. Any Capital Securities sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price of up to $      per Capital Security (or $   for sales to certain institutions) from the initial public offering price. Any such securities dealers may resell any Capital Securities purchased from the underwriters to certain other brokers or dealers at a discount from the initial public offering price of up to $      per Capital Security (or $      for sales to certain institutions) from the initial public offering price. If all the Capital Securities are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms.

 

The underwriters intend to offer the Capital Securities for sale primarily in the United States either directly or through affiliates or other dealers acting as selling agents.

 

We have agreed for a period from the date of this prospectus supplement continuing to and including the closing date, not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities (except for (x) the Capital Securities offered hereby and (y) any securities to be offered in an exchange offer or similar transaction in respect of securities outstanding on the date hereof, in each case including any

guarantee of such securities), any other beneficial interests in the assets of the Trust (other than the Trust’s common securities) or any JSDs, any securities (including any security issued by another trust or other limited purpose vehicle) that are substantially similar to the Capital Securities, the JSDs, the guarantee, or any securities that are convertible into or exchangeable for or that represent the right to receive any such substantially similar securities of either the Trust, a similar trust or M&T, except with the prior written consent of the representatives.

 

Prior to this offering, there has been no public market for the Capital Securities being offered. The Trust intends to apply to list the Capital Securities on the New York Stock Exchange. If approved, M&T expects trading of the Capital Securities on the New York Stock Exchange to begin within the 30-day period after the original issue date. In order to meet one of the requirements for listing the Capital Securities on the New York Stock Exchange, the underwriters have undertaken to sell Capital Securities to a minimum of 400 beneficial owners.

 

In connection with the offering, the underwriters may purchase and sell the Capital Securities in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of Capital Securities than they are required to purchase in the offering. Stabilizing transactions consist of certain bids for or purchases of the Capital Securities made for the purpose of preventing or retarding a decline in the market price of the Capital Securities while the offering is in progress.

 

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased Capital Securities sold by or for the account of such underwriter in stabilizing or short covering transactions.

 

These activities by the underwriters, as well as other purchases by the underwriters for their own account, may stabilize, maintain or otherwise affect the market price of the Capital Securities. As a result, the price of the Capital Securities may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected in the over-the-counter market or otherwise.

 

It is expected that delivery of the Capital Securities will be made against payment therefor on or about the date specified on the cover page of this prospectus supplement, which is the     business day following the date hereof. Under Rule 15c6-1 of the SEC under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Capital Securities on any date prior to the third business day before delivery will be required, by virtue of the fact that the Capital Securities initially will settle on the business day following the day of pricing (“T+ ”), to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisor.

 

Each of the underwriters has represented and agreed that:

 

(a) it has not made or will not make an offer of Capital Securities to the public in the United Kingdom within the meaning of section 102B of the Financial Services and Markets Act 2000 (as amended) (“FSMA”), except to legal entities which are authorized or regulated to operate in the financial markets or if not so authorized or regulated, whose corporate purpose is solely to invest in securities or otherwise in circumstances which do not require the publication by the company of a prospectus pursuant to the Prospectus Rules of the Financial Services Authority (“FSA”);

 

(b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of the FSMA does not apply to M&T; and

(c) it has complied, and will comply, with all applicable provisions of the FSMA with respect to anything done by it in relation to the Capital Securities in, from or otherwise involving the United Kingdom.

 

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each a “Relevant Member State”), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of Capital Securities to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Capital Securities which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Capital Securities to the public in that Relevant Member State at any time:

 

 

For the purposes of this provision, the expression an “offer of Capital Securities to the public” in relation to any Capital Securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Capital Securities to be offered so as to enable an investor to decide to purchase or subscribe the Capital Securities, as the same may be varied in that Relevant Member State by any measure implementing the “Prospectus Directive” in that Relevant Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

 

The offering of the Capital Securities is being made in compliance with NASD Conduct Rule 2810. Under Rule 2810, none of the named underwriters is permitted to sell Capital Securities in this offering to an account over which it exercises discretionary authority without the prior written approval of the customer to which the account relates.

 

M&T estimates that its share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $     .

 

M&T has agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make under the Securities Act.

 

Certain of the underwriters and their affiliates have in the past provided, and may in the future from time to time provide, investment banking and other financing and banking services to M&T, for which they have in the past received, and may in the future receive, customary fees and expenses.

 

VALIDITY OF SECURITIES

 

The validity of the Capital Securities will be passed upon by Richards, Layton & Finger, P.A., special Delaware counsel for the Trust. The validity of the JSDs and the guarantee will be passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, and for the underwriters by Sullivan & Cromwell LLP, New York, New York.

 

EXPERTS

 

The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included in the Report on Internal Control over Financial Reporting) incorporated in this prospectus supplement by reference to the Annual Report on Form 10-K for the year ended December 31, 2006 have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.