M&T to receive $600M from Treasury Department

CNY Business Journal (1996+), Nov 28, 2008 by Tampone, Kevin

BUFFALO - M&T Bank Corp. (NYSE: MTB) announced Nov. 20 it has applied to participate in the federal government's $700 billion financial rescue program.

M&T's application has already received preliminary approval. The bank applied to receive $600 million through the program and said it will issue preferred stock and warrants to the Treasury Department in exchange for the cash.

"Even though our capital ratios are well in excess of the regulatory minimums, we believe it is important to join the industry in support of this pro-gram established by the Treasury Department to address the disarray in the financial sector," Rene Jones, M&T CFO and executive vice president, said in a news release. "Since we have sufficient capital to meet the credit needs of our customers and respond to current market conditions, we've taken considerable time to evaluate the benefits of the [program] to a healthy bank like M&T, examining how additional capital would be deployed effectively and efficiently."

A spokeswoman for M&T said the bank would have no further comment on its participation in the program.

Two other banks operating in Central New York have announced their participation in the program. First Niagara Financial Group, Inc. (NASDAQ: FNFG) of Lockport received $184 million from the government and Ohio-based KeyCorp (NYSE: KEY) will get $2.5 billion.

Both banks will issue senior preferred shares and warrants to the Treasury in exchange for the cash. First Niagara announced its transaction with the Treasury Department closed Nov. 25.

Buffalo-based M&T is the leading bank in the Syracuse and Binghamton areas, according to June statistics from the Federal Deposit Insurance Corp.

M&T holds more than half the deposit market in Binghamton and nearly 22 percent in Syracuse. The bank also holds the number two position in the Utica-Rome region with nearly 19 percent of the deposit market.

M&T has $65 billion in total assets and 700 branches in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware, New Jersey, and Washington, D.C. The bank earned $91.2 million in the third quarter, down 54 percent from a year earlier.

The Treasury Department first announced plans in October to buy up to $250 billion in stock in banks throughout the country as part of its efforts to deal with the ongoing crisis in the nation's economy and financial markets. Treasury Secretary Henry Paulson later said that such direct investments in banks would form the main foundation for the government's overall $700 billion rescue plan passed in early October.

Originally, Paulson and the Bush administration said they would use the money to buy the subprime-mortgage related assets at the core of the recent financial and economic upheaval.

Paulson said during an interview with National Public Radio in early November that he believed the nation's major financial institutions had stabilized. He also said during November that the Treasury Department would probably not spend additional money from the rescue program.

Since then, however, conditions in the economy and financial markets have continued to deteriorate, forcing further action. The S&P 500 is down about 42 percent on the year so far and the Dow Jones Industrial Average is down nearly 36 percent.

The Commerce Department announced Nov. 25 that the nation's economy shrank at an annual rate of 0.5 percent in the third quarter, faster than the 0.3 percent previously estimated.

The Treasury Department announced Nov. 23 that the government would use $20 billion in rescue-plan money to help bail out financial giant Citigroup, Inc (NYSE: C). The Treasury and the Federal Deposit Insurance Corp. also agreed to protect Citigroup against large losses on an asset pool of about $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet.

The company agreed to issue the government preferred shares.

A few days later, the Federal Reserve took action to help shore up consumer and small-business debt like credit-card and auto loans by lending up to $200 billion to certain institutions.

The Treasury Department will contribute $20 billion from the financial rescue plan for the new effort, according to the Fed.

Also on Nov. 25, the Fed announced it will buy up to $600 billion in mortgage-backed assets from Fannie Mae and Freddie Mac, the major players in the secondary mortgage market the government took over in September.

President-Elect Barack Obama has also been speaking out more on the financial crisis. He has said repeatedly during the transition that the nation has "only one president at a time," but in recent weeks, he has announced plans for a major stimulus package and has said he's in regular contact with members of the Bush administration on the crisis.

Obama's nominee for Treasury Secretary, Timothy Geithner, is already heavily involved in the government's response to the financial crisis as president of the Federal Reserve Bank of New York.