As filed with the Securities and Exchange Commission on February 17, 2009

File No. 333-156923

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

M&T Bank Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

 

One M&T Plaza

Buffalo, New York 14203

(716) 842-5445

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

Mark W. Yonkman

Senior Vice President and General Counsel

M&T Bank Corporation

One M&T Plaza

Buffalo, New York 14203

(716) 842-5445

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

Copies to:

 

 

Approximate Date of Commencement of Proposed Sale to the Public:  As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed document.

 

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:  o

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  o

 

Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender Offer)  o

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

PRELIMINARY — SUBJECT TO COMPLETION — DATED FEBRUARY 17, 2009

 

 

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

 

Dear Provident common stockholders:

 

On December 18, 2008, Provident Bankshares Corporation (“Provident”) and M&T Bank Corporation (“M&T”) agreed to a strategic business combination in which Provident will merge with a subsidiary of M&T. If the merger is completed, Provident common stockholders will have a right to receive 0.171625 of a share of M&T common stock for each share of Provident common stock held immediately prior to the merger. We are sending you this proxy statement/prospectus to notify you of and invite you to the special meeting of Provident common stockholders being held to consider the agreement and plan of merger and related matters and to ask you to vote at the special meeting in favor of the agreement and plan of merger and the transactions contemplated thereby, including the merger.

 

The special meeting of the common stockholders of Provident will be held at 250 North Calvert Street, Baltimore, Maryland on April 8, 2009 at 10:00 a.m. local time.

 

At the special meeting, you will be asked to approve the Agreement and Plan of Merger (“merger agreement”) dated as of December 18, 2008 that Provident has entered into with M&T and First Empire State Holding Company, a wholly owned direct subsidiary of M&T (“Merger Sub”), and the transactions contemplated thereby, including the merger. In the merger, Provident will merge with and into Merger Sub, with Merger Sub surviving the merger as a wholly owned subsidiary of M&T. You will also be asked to approve the adjournment or postponement of the special meeting, if necessary, to solicit additional proxies in favor of the merger agreement and the transactions contemplated thereby, including the merger.

 

The merger is intended to be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and holders of Provident common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of Provident common stock for shares of M&T common stock in the merger, except with respect to any cash received instead of fractional shares of M&T common stock.

 

The market value of the merger consideration will fluctuate with the market price of M&T common stock. The following table shows the closing sale prices of M&T common stock and Provident common stock as reported on the New York Stock Exchange (the “NYSE”) and the NASDAQ Global Select Market (“NASDAQ”), respectively, on December 16, 2008, the trading day on which the exchange ratio was calculated, and on February 12, 2009, the last practicable trading day before the distribution of this proxy statement/prospectus. This table also shows the implied value of the merger consideration proposed for each share of Provident common stock, which we calculated by multiplying the closing price of M&T common stock on those dates by the exchange ratio of 0.171625.

 

 

Provident’s Board of Directors has unanimously declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and recommends that Provident common stockholders vote “FOR” approval of the merger agreement and the transactions contemplated thereby, including the merger, and “FOR” the approval of the adjournment or postponement of the special meeting, if necessary, to solicit additional proxies in favor of the merger agreement and the transactions contemplated thereby, including the merger.

 

To complete the merger, the merger agreement and the transactions contemplated thereby must be approved by the holders of two-thirds of all the votes entitled to be cast on the matter by Provident stockholders. Holders of Provident preferred stock may attend the meeting, but are not entitled to and are not being requested to vote at the Provident special meeting. Your vote is very important. Whether or not you expect to attend the special meeting,

please vote as soon as possible to ensure that your shares are represented at the special meeting. Registered and many broker-managed stockholders can vote their shares by using a toll-free number or the Internet. Instructions for using these convenient services are provided on the enclosed proxy card. You may also vote your shares by marking your votes on the enclosed proxy card, signing and dating it and mailing it in the envelope provided. If you sign and return your proxy card without specifying your vote, your shares will be voted in favor of the merger agreement and the transactions contemplated thereby.

 

This proxy statement/prospectus provides you with detailed information about the merger. In addition to being a proxy statement of Provident, this proxy statement/prospectus is also the prospectus of M&T for M&T common stock that will be issued in connection with the merger. We encourage you to read the entire document carefully. Please pay particular attention to “Risk Factors” beginning on Page 12 for a discussion of the risks related to the merger and owning M&T common stock after the merger.

 

I look forward to seeing you on April 8, 2009 in Baltimore, Maryland.

 

Sincerely,

 

 

Gary N. Geisel

Chairman and Chief Executive Officer

 

Please read this proxy statement/prospectus carefully because it contains important information about the merger. Read carefully the risk factors relating to the merger beginning on Page 12. You can also obtain information about M&T and Provident from documents that each of us has filed with the Securities and Exchange Commission.

 

Neither the Securities and Exchange Commission nor any state securities commission or bank regulatory agency has approved or disapproved the securities to be issued in the merger or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

 

The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either M&T or Provident, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

 

This proxy statement/prospectus is dated February 17, 2009 and will be first mailed or otherwise delivered to Provident stockholders on or about February 17, 2009.

PROVIDENT BANKSHARES CORPORATION

 

NOTICE OF SPECIAL MEETING OF COMMON STOCKHOLDERS

TO BE HELD ON APRIL 8, 2009

 

Dear Provident common stockholder:

 

You are cordially invited to attend a special meeting of the common stockholders of Provident Bankshares Corporation, a Maryland corporation (“Provident”), on April 8, 2009 at 10:00 a.m. local time, at 250 North Calvert Street, Baltimore, Maryland, for the purpose of considering and voting upon the following matters:

 

 

We have fixed the close of business on February 12, 2009 as the record date for determining those common stockholders entitled to notice of and to vote at the special meeting and any adjournments or postponements of the special meeting. Only Provident common stockholders of record at the close of business on that date are entitled to and being requested to vote at the special meeting and any adjournments or postponements of the special meeting.

 

Please vote as soon as possible. To complete the merger, the merger agreement and the transactions contemplated thereby must be approved by the holders of two-thirds of all the votes entitled to be cast on the matter by Provident stockholders. Abstentions and shares that you have not authorized your broker to vote will have the same effect as votes against approval of the merger agreement and the transactions contemplated thereby. Whether or not you intend to attend the special meeting, please vote as promptly as possible by (1) accessing the Internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card, or (3) signing and returning the enclosed proxy card in the postage-paid envelope provided. If your shares are held in the name of a broker, bank or other fiduciary, please follow the instructions on the voting instruction card provided by such person. If you attend the special meeting, you may vote in person if you wish, even if you have previously returned your proxy card. If you wish to attend the special meeting and vote in person and your shares are held in the name of a broker, trust, bank or other nominee, you must bring with you a proxy or letter from the broker, trustee, bank or nominee to confirm your beneficial ownership of the shares.

 

We encourage you to read the attached proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Innisfree M&A Incorporated, toll-free at 888-750-5834.

 

Provident’s Board of Directors has unanimously declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and recommends that Provident common stockholders vote “FOR” approval of the merger agreement and the transactions contemplated thereby, including the merger, and “FOR” the approval of the adjournment or postponement of the special meeting, if necessary, to solicit additional proxies in favor of the merger agreement and the transactions contemplated thereby, including the merger.

 

By Order of the Board of Directors

Gary N. Geisel

Chairman and Chief Executive Officer

 

Baltimore, Maryland

February 17, 2009

ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates by reference important business and financial information about M&T and Provident from other documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain those documents incorporated by reference into this proxy statement/prospectus by accessing the Securities and Exchange Commission’s website maintained at http://www.sec.gov or by requesting copies in writing or by telephone from the appropriate company:

 

 

You will not be charged for any of these documents that you request. If you would like to request documents from either company, please do so by April 1, 2009 in order to receive them before Provident’s special meeting. M&T’s Internet address is http://www.mtb.com and Provident’s Internet address is http://www.provbank.com. The information on our Internet sites is not a part of this proxy statement/prospectus.

 

See “Where You Can Find More Information” on Page 68 and “Recent Developments” on Page 8.

 

ABOUT THIS DOCUMENT

 

This document, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission (the “SEC”) by M&T (File No. 333-156923), constitutes a prospectus of M&T under Section 5 of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the M&T common shares to be issued to Provident common stockholders as required by the merger agreement. This document also constitutes a joint proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. It also constitutes a notice of meeting with respect to the special meeting of Provident common stockholders, at which Provident common stockholders will be asked to vote upon a proposal to approve the merger agreement and the transactions contemplated thereby.

 

You should rely only on the information contained or incorporated by reference into this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated February 17, 2009. You should not assume that the information contained in, or incorporated by reference into, this document is accurate as of any date other than that date. Neither the mailing of this document to Provident stockholders nor the issuance by M&T of stock in connection with the merger will create any implication to the contrary.

 

This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in this document regarding Provident has been provided by Provident and information contained in this document regarding M&T has been provided by M&T.

 

TABLE OF CONTENTS

 

 

The questions and answers below highlight only selected procedural information from this proxy statement/prospectus. They do not contain all of the information that may be important to you. You should read carefully the entire document and the additional documents incorporated by reference into this proxy statement/prospectus to fully understand the merger agreement and the transactions contemplated thereby, including the merger, and the voting procedures for the special meeting. We generally refer to M&T Bank Corporation as “M&T,” Provident Bankshares Corporation as “Provident,” and First Empire State Holding Company, a wholly owned subsidiary of M&T, as “Merger Sub” throughout this proxy statement/prospectus.

 

 

SUMMARY

	•	the number of shares of M&T common stock subject to the adjusted M&T stock option will equal: (1) the number of shares of Provident common stock subject to the Provident stock option as of immediately prior to the completion of the merger multiplied by (2) the exchange ratio of 0.171625, rounded down to the nearest whole share; and
	•	the exercise price per share of the adjusted M&T stock option will equal: (1) the exercise price per share of the Provident stock option as of immediately prior to the completion of the merger divided by (2) the exchange ratio of 0.171625 (rounded up to the nearest whole cent).

	•	the number of unrestricted shares of M&T common stock will equal: (1) the number of shares of restricted Provident common stock as of immediately prior to the completion of the merger, less any shares of Provident common stock withheld to satisfy tax withholding obligations, multiplied by (2) the exchange ratio of 0.171625, with fractional shares to be satisfied through a cash payment in accordance with the terms of the merger agreement.

										Implied
		M&T				Provident				Value of One
		Common Stock				Common Stock				Share of Provident
		(NYSE: MTB)				(NASDAQ: PBKS)				Common Stock
December 16, 2008		$	61.18			$	6.63			$	10.50
February 12, 2009		$	38.57			$	6.37			$	6.62

	•	approval by Provident common stockholders;

	•	the receipt of all regulatory consents and approvals required in connection with the merger of Provident into M&T and the merger of certain banking subsidiaries of M&T and Provident, which we refer to herein as the bank merger (in each case unless the failure to obtain such consents and approvals would not reasonably be expected to have a material adverse effect on Provident or M&T measured on a scale relative to Provident);
	•	the receipt by each of M&T and Provident of a legal opinion with respect to certain United States federal income tax consequences of the merger;
	•	the absence of any law, statute, rule, regulation, judgment, decree, injunction or other order by any court or other governmental entity, which is in effect and prohibits completion of the merger;
	•	the effectiveness of the registration statement of which this proxy statement/prospectus is a part with respect to the M&T common stock to be issued in the merger under the Securities Act and the absence of any stop order or proceedings initiated or threatened by the SEC for that purpose;
	•	the truth and correctness of the representations and warranties of each other party in the merger agreement, subject to the materiality standards provided in the merger agreement; and
	•	the performance by each other party in all material respects of their obligations under the merger agreement and the receipt by each party of certificates from the other party to that effect.

	•	if the other party breaches the merger agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the merger, unless the breach is capable of being cured by December 18, 2009, and is cured within 30 days of notice of the breach;
	•	if the merger has not been completed by December 18, 2009, unless the failure to complete the merger by that date is due to the breach of the merger agreement by the party seeking to terminate the merger agreement;
	•	if the Provident common stockholders fail to approve the merger agreement and the transactions contemplated thereby at the special meeting; or
	•	if there is any final, non-appealable order permanently enjoining or prohibiting the completion of the merger or any consent, registration, approval, permit or authorization is denied such that the regulatory approval condition to the merger cannot be satisfied as of the closing date.

	•	an acquisition proposal has been made or proposed to Provident or its stockholders or publicly disclosed and M&T terminates the merger agreement either because Provident’s Board of Directors withdraws or changes its recommendation in favor of the merger or recommends another acquisition proposal or Provident fails to substantially comply with its obligations concerning holding the special meeting or soliciting acquisition proposals; or the merger agreement is terminated by Provident due to failure to obtain stockholder approval in such circumstances;
	•	prior to the special meeting, an acquisition proposal is made known to Provident, made directly to Provident common stockholders generally, otherwise becomes publicly known or any person has publicly announced an intention (whether or not conditional) to make an acquisition proposal; the merger agreement is terminated as a result of (i) an incurable, willful breach by Provident; (ii) a failure to obtain stockholder approval; or (iii) by Provident upon a failure to consummate the merger by December 18, 2009; and, in any such case, Provident enters into a definitive agreement to consummate an acquisition proposal within 12 months of such termination and consummates such within 18 months following such termination or, within 12 months following such termination, consummates any acquisition proposal.

 

RECENT DEVELOPMENTS

 

UNAUDITED COMPARATIVE PER COMMON SHARE DATA

 

Unaudited Comparative Per Common Share Data

														Pro Forma
		Historical								Pro Forma				Equivalent
		M&T				Provident				Combined				Provident Share
Basic Earnings
For the nine months ended September 30, 2008		$	4.12				(0.49	)			3.73			$	0.64
For the year ended December 31, 2007			6.05				1.00				5.96				1.02
Diluted Earnings
For the nine months ended September 30, 2008		$	4.09				(0.49	)			3.70			$	0.64
For the year ended December 31, 2007			5.95				1.00				5.86				1.01
Cash Dividends
For the nine months ended September 30, 2008		$	2.10				0.55				2.10			$	0.36
For the year ended December 31, 2007			2.60				1.25				2.60				0.45
Book Value
As of September 30, 2008		$	58.17				14.73				59.52			$	10.21
As of December 31, 2007			58.99				17.56				60.86				10.45

 

Selected Consolidated Historical Financial Data of M&T

		As of or for the Nine Months
		Ended September 30,								As of or for the Year Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(In thousands, except per share data)
Summarized Income Statement Data:
Net interest income		$	1,453,721			$	1,380,027			$	1,850,237			$	1,817,541			$	1,794,343			$	1,734,572			$	1,598,755
Provision for credit losses			261,000				91,000				192,000				80,000				88,000				95,000				131,000
Other income			697,562				772,499				932,989				1,045,852				949,718				942,969				831,095
Other expense			1,280,177				1,182,216				1,627,689				1,551,751				1,485,142				1,516,018				1,448,180
Income taxes			156,460				289,981				309,278				392,453				388,736				344,002				276,728
Net income			453,646				589,329				654,259				839,189				782,183				722,521				573,942
Per Common Share Data:
Basic net income		$	4.12			$	5.45			$	6.05			$	7.55			$	6.88			$	6.14			$	5.08
Diluted net income			4.09				5.34				5.95				7.37				6.73				6.00				4.95
Book value at end of period			58.17				58.40				58.99				56.94				52.39				49.68				47.55
Cash dividends			2.10				1.90				2.60				2.25				1.75				1.60				1.20
Weighted Average Number of Shares:
Basic			110,158				108,220				108,129				111,173				113,689				117,696				113,010
Diluted			111,000				110,342				110,012				113,918				116,232				120,406				115,932
Average Balance Sheet Data:
Total assets		$	65,198,034			$	57,533,005			$	58,545,310			$	55,839,101			$	54,134,983			$	51,516,603			$	45,349,219
Total borrowings			17,919,610				13,176,002				13,814,354				10,542,908				11,301,850				10,974,144				10,349,048
Stockholders’ equity			6,465,420				6,209,120				6,247,274				6,041,469				5,797,823				5,700,781				4,940,554

 

Selected Consolidated Historical Financial Data of Provident

		As of or for the Nine Months
		Ended September 30,								As of or for the Year Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(In thousands, except per share data)
Summarized Income Statement Data:
Net interest income		$	134,824			$	145,320			$	191,232			$	204,411			$	198,930			$	182,213			$	148,880
Provision for loan losses			16,085				13,338				23,365				3,973				5,023				7,534				11,122
Other income(1)			5,746				96,257				79,919				113,262				112,289				100,968				88,373
Other expense			154,997				160,081				211,089				214,579				200,737				183,728				157,261
Income taxes			(17,722	)			20,554				4,567				29,118				32,509				29,939				17,415
Net income (loss)			(12,790	)			47,604				32,130				70,003				72,950				61,980				51,455
Per Common Share Data:
Basic net income		$	(0.49	)		$	1.48			$	1.00			$	2.14			$	2.21			$	2.05			$	2.10
Diluted net income			(0.49	)			1.48				1.00				2.12				2.17				2.00				2.05
Book value at end of period(2)			14.73				19.10				17.56				19.54				19.14				18.68				13.22
Cash dividends			0.55				0.93				1.25				1.17				1.09				1.01				0.93
Weighted Average Number of Shares:
Basic			32,443				32,063				31,972				32,727				32,956				30,299				24,495
Diluted			32,443				32,259				32,195				33,082				33,656				30,971				25,142
Average Balance Sheet Data:
Total assets		$	6,463,759			$	6,243,179			$	6,284,152			$	6,375,182			$	6,381,398			$	6,061,611			$	4,991,775
Total borrowings			1,423,363				1,441,781				1,474,369				1,634,824				1,814,506				1,863,266				1,515,661
Stockholders’ equity			645,117				643,008				643,998				653,824				629,354				512,853				312,371

(1)		Includes impairment on investment securities of $87,973 and $47,488 for the nine months ended September 30, 2008 and the full year ended 2007, respectively.

(2)		Book value as of the nine months ended September 30, 2008 excludes preferred stock outstanding of $49,400.

 

In addition to general investment risks and the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the heading “Cautionary Statement Regarding Forward-Looking Statements” commencing on Page 15 and the matters discussed under the caption “Risk Factors” in the Annual Reports on Forms 10-K filed by M&T and Provident, respectively, for the year ended December 31, 2007, as updated by subsequently filed Forms 10-Q, you should carefully consider the following risk factors in deciding how to vote on the merger agreement and the transactions contemplated thereby, including the merger.

 

Because the market price of M&T common stock will fluctuate, Provident common stockholders cannot be sure of the market value of the merger consideration they will receive.

 

Upon completion of the merger, each share of Provident common stock will be converted into the right to receive merger consideration consisting of 0.171625 of a share of M&T common stock pursuant to the terms of the merger agreement. The market value of the merger consideration may vary from the closing price of M&T common stock on the date we announced the merger, on the date that this proxy statement/prospectus was mailed to Provident stockholders, on the date of the special meeting of the Provident common stockholders and on the date we complete the merger and thereafter. Any change in the market price of M&T common stock prior to completion of the merger will affect the market value of the merger consideration that Provident common stockholders will receive upon completion of the merger. Accordingly, at the time of the special meeting, Provident common stockholders will not know or be able to calculate the market value of the merger consideration they would receive upon completion of the merger. Neither M&T nor Provident is permitted to terminate the merger agreement or re-solicit the vote of Provident common stockholders solely because of changes in the market prices of either company’s stock. There will be no adjustment to the merger consideration for changes in the market price of either shares of M&T common stock or shares of Provident common stock. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond our control. You should obtain current market quotations for shares of M&T common stock and for shares of Provident common stock.

 

Provident will be subject to business uncertainties and contractual restrictions while the merger is pending.

 

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Provident and consequently on M&T. These uncertainties may impair Provident’s ability to attract, retain and motivate key personnel until the merger is consummated, and could cause customers and others that deal with Provident to seek to change existing business relationships with Provident. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles with M&T. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with M&T, M&T’s business following the merger could be harmed. In addition, the merger agreement restricts Provident from making certain acquisitions and taking other specified actions until the merger occurs without the consent of M&T. These restrictions may prevent Provident from pursuing attractive business opportunities that may arise prior to the completion of the merger. Please see the section entitled “The Agreement and Plan of Merger — Covenants and Agreements” commencing on Page 46 of this proxy statement/prospectus for a description of the restrictive covenants to which Provident is subject.

 

The opinion obtained by Provident from its financial advisor will not reflect changes in circumstances between signing the merger agreement and completion of the merger.

 

Provident has not obtained an updated opinion as of the date of this proxy statement/prospectus from its financial advisor. Changes in the operations and prospects of Provident or M&T, general market and economic conditions and other factors that may be beyond the control of Provident or M&T, and on which Provident’s financial advisor’s opinion was based, may significantly alter the value of Provident or the prices of shares of M&T common stock or Provident common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. Because Provident does

not currently anticipate asking its financial advisor to update its opinion, the opinion will not address the fairness of the exchange ratio from a financial point of view at the time the merger is completed. Provident’s Board of Directors’ recommendation that Provident common stockholders vote “FOR” approval of the merger agreement and the transactions contemplated thereby, including the merger, however, is as of the date of this proxy statement/prospectus. For a description of the opinion that Provident received from its financial advisor, please refer to “The Merger — Opinion of Provident’s Financial Advisor,” commencing on Page 26. For a description of the other factors considered by Provident’s Board of Directors in determining to declare the merger and the other transactions contemplated in the merger agreement to be advisable, please refer to “The Merger — Background of the Merger,” and “The Merger — Reasons for the Merger; Recommendation of Provident’s Board of Directors,” commencing on Page 19 and Page 23, respectively.

 

Combining the two companies may be more difficult, costly or time-consuming than we expect.

 

M&T and Provident have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees or disruption of each company’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. As with any merger of banking institutions, there also may be business disruptions that cause us to lose customers or cause customers to take their deposits out of our banks. The success of the combined company following the merger may depend in large part on the ability to integrate the two businesses, business models and cultures. If we are not able to integrate our operations successfully and in a timely manner, the expected benefits of the merger may not be realized.

 

Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.

 

Before the transactions contemplated in the merger agreement, including the merger and the bank merger, may be completed, various approvals or consents must be obtained from the Federal Reserve Board and various bank regulatory and other authorities. These governmental entities, including the Federal Reserve Board, may impose conditions on the completion of the merger or the bank merger or require changes to the terms of the merger agreement. Although M&T and Provident do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the transactions contemplated in the merger agreement or imposing additional costs on or limiting the revenues of M&T, any of which might have a material adverse effect on M&T following the merger.

 

There can be no assurance as to whether the regulatory approvals will be received, the timing of those approvals, or whether any conditions will be imposed.

 

The merger agreement limits Provident’s ability to pursue alternatives to the merger.

 

The merger agreement contains provisions that limit Provident’s ability to discuss competing third-party proposals to acquire all or a significant part of Provident. These provisions, which include a $15.8 million termination fee payable under certain circumstances, might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Provident from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquiror proposing to pay a lower per share price to acquire Provident than it might otherwise have proposed to pay.

 

If the merger is not consummated by December 18, 2009, either M&T or Provident may choose not to proceed with the merger.

 

Either M&T or Provident may terminate the merger agreement if the merger has not been completed by December 18, 2009, unless the failure of the merger to be completed has resulted from the material failure of the party seeking to terminate the merger agreement to perform its obligations.

Termination of the merger agreement could negatively impact Provident.

 

If the merger agreement is terminated, there may be various consequences. For example, Provident’s businesses may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger, or the market price of Provident common stock could decline to the extent that the current market price reflects a market assumption that the merger will be completed. If the merger agreement is terminated and Provident’s Board of Directors seeks another merger or business combination, Provident stockholders cannot be certain that Provident will be able to find a party willing to pay an equivalent or more attractive price than the price M&T has agreed to pay in the merger.

 

Some of the directors and executive officers of Provident may have interests and arrangements that may have influenced their decisions to support or recommend that you approve the merger.

 

The interests of some of the directors and executive officers of Provident may be different from those of Provident common stockholders, and directors and officers of Provident may be participants in arrangements that are different from, or in addition to, those of Provident common stockholders. These interests are described in more detail in the section of this proxy statement/prospectus entitled “The Merger — Interests of Provident’s Directors and Executive Officers in the Merger” beginning on Page 39.

 

The shares of M&T common stock to be received by Provident common stockholders as a result of the merger will have different rights from the shares of Provident common stock currently held by them.

 

The rights associated with Provident common stock are different from the rights associated with M&T common stock. See the section of this proxy statement/prospectus entitled “Comparison of Common Stockholder Rights” commencing on Page 61.

 

The market price of M&T common stock after the merger may be affected by factors different from those affecting Provident common stock or M&T common stock currently.

 

The businesses of M&T and Provident differ in some respects and, accordingly, the results of operations of the combined company and the market price of M&T’s shares of common stock after the merger may be affected by factors different from those currently affecting the independent results of operations of each of M&T or Provident. For a discussion of the businesses of M&T and Provident and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this proxy statement/prospectus and referred to under “Where You Can Find More Information” on Page 68.

 

We may fail to realize the cost savings estimated for the merger.

 

M&T estimates to achieve cost savings from the merger when the two companies have been fully integrated. While M&T continues to be comfortable with these expectations as of the date of this proxy statement/prospectus, it is possible that the estimates of the potential cost savings could turn out to be incorrect. The cost savings estimates also assume our ability to combine the businesses of M&T and Provident in a manner that permits those cost savings to be realized. If the estimates turn out to be incorrect or M&T is not able to combine successfully the two companies, the anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected.

 

Provident common stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

 

Provident’s common stockholders currently have the right to vote in the election of the Board of Directors of Provident and on other matters affecting Provident. Upon the completion of the merger, each Provident common stockholder that receives shares of M&T common stock will become a stockholder of M&T with a percentage ownership of the combined organization that is much smaller than the stockholder’s percentage ownership of Provident. It is expected that the former common stockholders of Provident as a group will receive shares in the merger constituting less than 5% of the outstanding shares of M&T common stock immediately after the merger. Because of this, Provident’s common stockholders may have less influence on the management and policies of M&T than they now have on the management and policies of Provident.

A continuation of recent turmoil in the financial markets could have an adverse effect on the financial position or results of operations of M&T, Provident and/or the combined company.

 

In recent periods, United States and global markets, as well as general economic conditions, have been disrupted and volatile. Concerns regarding the financial strength of financial institutions have led to distress in credit markets and issues relating to liquidity among financial institutions. Some financial institutions around the world have failed; others have been forced to seek acquisition partners. The United States and other governments have taken steps to try to stabilize the financial system, including investing in financial institutions. M&T and Provident’s businesses and financial condition and results of operations could be adversely affected by (1) continued disruption and volatility in financial markets, (2) continued capital and liquidity concerns regarding financial institutions generally and our counterparties specifically, (3) limitations resulting from governmental action in an effort to stabilize or provide additional regulation of the financial system, or (4) recessionary conditions that are deeper or last longer than currently anticipated. Further, there can be no assurance that action by Congress, governmental agencies and regulators, including the enacted legislation authorizing the U.S. government to invest in financial institutions, or changes in tax policy, will help stabilize the U.S. financial system and any such action, including changes to existing legislation or policy, could have an adverse effect on the financial position or results of operation of M&T, Provident and/or the combined company.

 

Impairments in the value of M&T and Provident’s respective securities portfolios or other assets could further affect each of their results of operations or the results of operations of the combined company.

 

Under accounting principles generally accepted in the United States, each of M&T and Provident is required to review its investment portfolio (as well as its other investments and goodwill) periodically for the presence of other-than-temporary-impairment of its securities, taking into consideration current market conditions, the extent and nature of change in fair value, issuer rating changes and trends, volatility of earnings, current analysts’ evaluations, our ability and intent to hold investments until a recovery of fair value, as well as other factors. Adverse developments with respect to one or more of the foregoing factors have required M&T and Provident to deem particular securities to be other-than-temporarily impaired, with the reduction in the value recognized as a charge to M&T and Provident’s respective earnings. Recent market volatility has made it extremely difficult to value certain securities held by each of M&T and Provident. Subsequent valuations, in light of factors prevailing at that time, may result in significant changes in the values of these securities in future periods. Any of these factors could require either M&T or Provident to recognize further impairments in the value of its securities portfolio, which may have an adverse effect on its results of operations in future periods. Similarly, either M&T or Provident may be required to recognize impairments in the value of other investments or goodwill, any of which may have an adverse effect on its results of operations in future periods.

 

 

Certain statements contained in this filing that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified. In addition, certain statements may be contained in the future filings of M&T and Provident with the SEC, in press releases and in oral and written statements made by or with the approval of M&T or Provident that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to:

 

 

 

Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “possible,” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

 

 

Additional factors that could cause M&T’s or Provident’s results to differ materially from those described in the forward-looking statements can be found in M&T’s and Provident’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. See “Where You Can Find More Information” on Page 68 for a description of where you can find this information. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters and attributable to M&T or Provident or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to within this proxy statement/prospectus. Forward-looking statements speak only as of the date on which such statements are made. M&T and Provident undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

 

This section contains information from Provident for Provident common stockholders about the special meeting Provident has called for common stockholders to consider and approve the merger agreement and the transactions contemplated thereby. We are mailing this proxy statement/prospectus to you, as a Provident common stockholder, on or about February 17, 2009. Together with this proxy statement/prospectus, we are also sending to you a notice of the special meeting of Provident common stockholders and a form of proxy card that Provident’s Board of Directors is soliciting for use at the special meeting and at any adjournments or postponements of the special meeting. The special meeting will be held on April 8, 2009, at 10:00 a.m. local time, at 250 Calvert Street, Baltimore, Maryland.

 

This proxy statement/prospectus is also being furnished by M&T to Provident common stockholders as a prospectus in connection with the issuance of shares of M&T common stock upon completion of the merger.

 

Matters to Be Considered

 

The only matter to be considered at the Provident special meeting is the approval of the merger agreement and the transactions contemplated thereby. You may also be asked to vote upon a proposal to adjourn or postpone the special meeting. Provident could use any adjournment or postponement of the special meeting for the purpose, among others, of allowing more time to solicit votes in favor of the merger agreement.

 

Recommendation of Provident’s Board of Directors

 

Provident’s Board of Directors has unanimously declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and recommends that Provident common stockholders vote “FOR”

approval of the merger agreement and the transactions contemplated thereby, including the merger, and “FOR” the approval of the adjournment or postponement of the special meeting, if necessary, to solicit additional proxies in favor of the merger agreement and the transactions contemplated thereby, including the merger.

 

Record Date

 

Provident’s Board of Directors has fixed the close of business on February 12, 2009 as the record date for determining the Provident common stockholders entitled to receive notice of and to vote at the special meeting. Only Provident common stockholders of record as of the record date are entitled to and are being requested to vote at the special meeting. As of the record date, 33,511,560 shares of Provident common stock were issued and outstanding and held by approximately 3,796 record holders. Provident common stockholders are entitled to one vote on each matter considered and voted on at the special meeting for each share of Provident common stock held of record at the close of business on the record date. The presence, in person or by properly executed proxy, of the holders of a majority of the shares of Provident common stock entitled to vote at the special meeting is necessary to constitute a quorum at the special meeting. For purposes of determining the presence of a quorum, abstentions and broker non-votes will be counted as shares present. Abstentions and broker non-votes will have the same effect as votes against approval of the merger agreement and the transactions contemplated thereby, including the merger.

 

Action Required

 

The merger agreement and the transactions contemplated thereby must be approved by the holders of two-thirds of all the votes entitled to be cast on the matter by Provident stockholders. Holders of Provident preferred stock are not entitled to and are not being requested to vote at the Provident special meeting. The merger agreement and the consummation of the transactions contemplated therein will not require the approval of the holders of M&T common stock under the New York Business Corporation Law or the rules of the NYSE.

 

As of the record date, Provident directors and executive officers and their affiliates held approximately 722,039 shares (or 2.15% of the outstanding shares) of Provident common stock entitled to vote at the special meeting.

 

As of the record date, M&T and its subsidiaries held no shares of Provident common stock (other than shares held as fiduciary, custodian or agent as described below) and its directors and executive officers or their affiliates held approximately 23,600 shares (or less than 0.01% of the outstanding shares) of Provident common stock. See “The Merger — Interests of Provident’s Directors and Executive Officers in the Merger.” As of the record date, subsidiaries of M&T, as fiduciaries, custodians or agents, held a total of approximately 102,583 shares of Provident common stock, representing approximately less than 0.01% of the shares entitled to vote at the Provident special meeting, and maintained sole or shared voting power over approximately 13,175 of these shares.

 

Solicitation of Proxies

 

Proxies are being solicited by Provident’s Board of Directors from Provident common stockholders. Shares of Provident common stock represented by properly executed proxies will be voted in accordance with the instructions indicated on the enclosed proxy cards. If no instructions are indicated, such proxies will be voted “FOR” approval of the merger agreement and the transactions contemplated thereby, including the merger, and “FOR” any motion to adjourn or postpone the special meeting to another time and/or place for the purpose of soliciting additional proxies or otherwise.

 

Revocation of Proxies

 

A Provident common stockholder who has given a proxy may revoke it at any time before its exercise at the special meeting by (i) giving written notice of revocation to Provident’s Corporate Secretary, (ii) properly submitting to Provident a duly executed proxy bearing a later date or (iii) attending the special meeting and voting in person. All written notices of revocation and other communications with respect to revocation of proxies should be addressed to Provident as follows: Corporate Secretary, 114 East Lexington Street, Baltimore, Maryland 21202. Proxies may also be revoked via the Internet or telephone following the instructions on your proxy card.

 

 

Each of the M&T Board of Directors and Provident’s Board of Directors has approved and adopted or declared advisable the merger agreement, which provides for the merger of Provident with and into Merger Sub, with Merger Sub being the surviving corporation in the merger and remaining a subsidiary of M&T. Each share of Provident common stock, par value $1.00 per share, issued and outstanding immediately prior to the completion of the merger, except for specified shares of Provident common stock held by Provident or M&T, will be converted into the right to receive 0.171625 of a share of M&T common stock.

 

Provident common stockholders are being asked to approve the merger agreement and the transactions contemplated thereby.

 

 

Historically, Provident has periodically reviewed ways to enhance its performance and prospects in light of market, economic, regulatory, competitive and other factors and has considered its strategic alternatives. In addition, with the approval of Provident’s Board of Directors, the Chairman of the Board of Directors and Chief Executive Officer of Provident, Gary Geisel, has maintained relationships with senior officers of possible strategic partners, including senior officers of M&T. Until recently, Provident’s Board of Directors and management considered independence to be the appropriate strategic policy for Provident because they believed that independence was in the long-term best interests of, and would deliver greater long-term value to, Provident’s stockholders as compared to other strategic options such as a sale of Provident, a joint venture or any other significant business combination transaction.

 

In the second quarter of 2007, softening residential housing markets, rising delinquency and default rates on mortgage loans and increasingly volatile and constrained secondary credit markets began affecting the banking and financial services industry generally. Although these issues first appeared in the subprime mortgage market, they grew in significance and expanded into the prime mortgage market and broader consumer and commercial credit markets. These factors, along with adverse developments in credit quality, asset values and revenue opportunities throughout the financial services industry, had negative impacts on Provident’s results of operations, credit costs and investment values. Provident reported write-downs to a significant portion of Provident’s REIT trust preferred and non-agency mortgage-backed securities portfolios and increased provisions for loan losses for the fourth quarter of 2007 and the first quarter of 2008. As a consequence of these developments, Provident’s Board of Directors and management began to consider ways to address these issues and improve Provident’s capital and liquidity positions.

 

In April 2008, Provident’s Board of Directors and management announced a multi-tiered capital plan intended to raise additional capital and provide Provident with additional liquidity, which included the successful completion of a private placement of $64.8 million of its capital stock to certain institutional and individual accredited investors, resulting in $62.4 million in cash proceeds to Provident. In connection with the private placement, Provident and its advisors, including Sandler O’Neill & Partners, L.P., which we refer to as Sandler O’Neill, approached a number of financial institutions and other investors, including M&T, as well as officers and directors of Provident. The private placement ultimately included sales of 16,000 shares of Series A Mandatory Convertible Non-Cumulative preferred stock to M&T for $16.0 million and 72,110 shares of common stock to officers and directors of Provident for $0.8 million. The capital plan also included the successful completion of a private placement of $50.0 million of subordinated unsecured debt to qualified institutional buyers and accredited investors. Provident also reported a cash dividend of $0.11 per share of common stock for the first quarter of 2008, a 66% reduction from the prior quarterly dividend.

 

For the second and third quarters of 2008, Provident announced net income of $10.2 million, or $0.27 per diluted share, and a net loss of $5.4 million, or ($0.21) per diluted share, respectively, which included non-cash, pre-tax accounting charges for other-than-temporary-impairment of $20.7 million and $24.6 million, respectively for certain investment securities. Provident’s Board of Directors and management continued to monitor the various

implications of the worsening economic and market conditions, their impact on Provident, and the possible need for and prospects of success of further capital-raising transactions and/or possible strategic transactions with other financial institutions. Among other things, Provident’s Board of Directors considered the high cost of raising capital in the current credit environment, the possible need for additional capital in the future and the possible difficulties of obtaining such capital in an expedited manner should the need arise due to downgrades in Provident’s investment securities portfolio or otherwise. Provident’s Board of Directors also considered the factors relating to the state of the economy described under “Recent Developments”, beginning at Page 8 of this proxy statement/prospectus.

 

In October 2008, the U.S. Treasury announced that it had established the Troubled Asset Relief Program (“TARP”) Capital Purchase Program. Eligible institutions were granted until November 14, 2008 to apply to participate in the TARP. After considering the implications and impacts of a TARP investment, including the potential improvement to Provident’s capital position and liquidity in the amount of any cash proceeds from the TARP investment, Provident’s Board of Directors approved Provident’s application to participate in the TARP. Provident reported on November 14, 2008 that, pursuant to the TARP, it had sold shares of a newly created class of Fixed Rate Cumulative Perpetual Preferred Stock, Series B and a warrant to purchase shares of Provident’s common stock to the U.S. Treasury for an aggregate purchase price of $151.5 million in cash, increasing its capital by a like amount. As a result of the TARP investment, Provident’s regulatory capital ratios improved. In particular, Provident’s tangible capital ratio, which was 4.63% prior to the investment, improved to 7.09% on a pro forma basis, its Tier One risk-based capital ratio, which was 10.31% prior to the investment, improved to 13.25% on a pro forma basis, and its total risk-based capital ratio, which as 12.46% prior to the investment, improved to 15.41% on a pro forma basis.

 

In mid-November 2008, a leading ratings agency reviewed and downgraded a broad range of collateralized debt obligations, or CDOs, including bank pooled trust preferred securities held by Provident in its investment portfolio. The securities had a face value of approximately $138 million in a total portfolio of $408 million. Provident understood that the ratings agency was also in the process of reviewing a range of other CDOs, which range was likely to include the remaining securities in Provident’s investment portfolio. On November 19, 2008, Provident’s management briefed Provident’s Board of Directors as to the possible impact of these downgrades, including other-than-temporary-impairment implications. Among other things, Provident’s management briefed Provident’s Board of Directors as to the potentially adverse impact of the downgrades on Provident’s compliance with regulatory capital ratio requirements. In addition, Provident’s Board of Directors and management discussed the potential risk and earnings impacts of downgrades, including other-than-temporary-impairments, of Provident’s remaining trust preferred and certain other securities, and the likelihood of any change in “fair value” accounting requirements under SFAS No. 157. Provident’s Board of Directors discussed the challenges of remaining independent following its write-down and given the adverse developments in the financial industry and uncertainty as to the economy generally. In particular, Provident’s Board of Directors considered the possible need for additional capital in the future and the potential risk and earnings impact of the downgrades, including the potential impact on the market prices for Provident’s common stock in the future. After considering these matters and the prevailing economic and market conditions and outlook, Provident’s Board of Directors, with advice from Provident’s financial advisor with respect to the merger, Sandler O’Neill, authorized and directed management to work with Sandler O’Neill to begin to explore Provident’s strategic alternatives, including by considering the potential for further public or private capital raising activities or financial or balance sheet restructurings and by soliciting initial indications of interest from financial institutions with respect to a business combination with Provident.

 

During late November 2008, Sandler O’Neill worked with Provident’s senior management to identify potential transaction partners, including by reviewing Provident’s past relationships with potential transaction partners, analyzing publicly available information about other financial institutions and applying their knowledge and expertise concerning Provident’s peers and the current market for transactions involving financial institutions. Sandler O’Neill contacted a number of potential transaction partners on Provident’s behalf and engaged in preliminary discussions with those parties regarding the possibility of a business combination. Some of the institutions contacted executed confidentiality agreements and thereafter Sandler O’Neill commenced further discussions regarding a potential transaction and Provident provided the institutions with certain non-public information regarding Provident’s business and recent operating performance. Provident also continued to work

with Sandler O’Neill during this period to consider other alternatives, including further public or private capital raising activities or financial or balance sheet restructuring alternatives.

 

In early December, certain of the potential transaction partners, including M&T, expressed an interest in a potential acquisition. Each of the proposals received contemplated a stock-for-stock merger. Each proposal was subject to further due diligence and other customary conditions. Provident also received an indication of interest from one of the potential transaction partners regarding a possible capital raising transaction. Thereafter, management worked with Sandler O’Neill and Provident’s legal advisor, Sullivan & Cromwell LLP, which we refer to as Sullivan & Cromwell, to assess the proposals and to review and consider the status of management’s review of Provident’s investment securities portfolio and Provident’s financial outlook.

 

Provident’s Board of Directors met on December 5, 2008. The Chairman of the Board and Chief Executive Officer, Mr. Geisel, updated Provident’s Board as to the work recently performed by management and Sandler O’Neill regarding the exploration of strategic alternatives and described the initial results of those efforts. A representative of Sullivan & Cromwell discussed Provident’s Board’s legal duties in connection with its consideration of strategic alternatives.

 

Representatives of management then reported on management’s review of Provident’s investment securities portfolio and discussed the prospect of further downgrades of Provident’s pooled bank issued trust preferred securities, the possible impact of such downgrades upon Provident’s regulatory capital ratios and impairment charges and the possibility of write-downs of Provident’s non-agency mortgage-backed securities and REIT trust preferred securities. Representatives of management also described Provident’s operating outlook for the 2009 fiscal year and discussed the factors affecting this outlook, including increases in FDIC insurance premiums, the costs of raising additional capital, the difficult operating environment including limited revenue opportunities, projected expenses under Provident’s capital expenditure programs, the significant product investments necessary to remain competitive in the future and the likelihood of any change in “fair value” accounting requirements under SFAS No. 157.

 

Sandler O’Neill then reviewed the process undertaken to that point with respect to Provident’s strategic alternatives, including the possibility of raising equity capital, and discussed the proposals received by Provident. Sandler O’Neill informed Provident’s Board of Directors that Provident had received three proposals for a business combination transaction. Sandler O’Neill reviewed the key characteristics of the proposals, including the amount and type of consideration offered. Sandler O’Neill further reviewed the anticipated next steps in and the timing of a strategic transaction process, including with respect to due diligence, management presentations and merger agreement negotiations. Specifically, Sandler O’Neill reviewed the process for providing selected bidders with access to Provident’s management for interviews and access to review Provident’s non-public loan file information. Following discussions and questions among the participants at the meeting, including discussion by Provident’s Board of Directors concerning the impact of conditions in the credit markets on financial institutions generally and Provident specifically, Provident’s Board of Directors authorized and directed management and Sandler O’Neill to invite the two financial institutions that had submitted the most compelling initial indications of interest with respect to an acquisition transaction (one of which was M&T) to conduct due diligence and submit final indications of interest with a view to a transaction being presented to Provident’s Board for review and consideration at the Board’s regularly scheduled meeting on December 17, 2008. Provident’s Board also made clear that it would continue to consider other alternatives, including the possibility of Provident remaining as an independent institution.

 

In the period from December 5 to December 16, 2008, representatives of management, Provident’s legal advisors and Sandler O’Neill worked with the two remaining bidders (one of which was M&T) to facilitate their respective due diligence investigations of Provident. The due diligence investigations included, among other things, discussions with Provident’s senior management regarding Provident’s senior management’s view of Provident’s business prospects, and review of Provident’s securities portfolio and other assets, capital structure, and legal documents and obligations. Provident’s legal counsel provided to each bidder a form of merger agreement, and worked with M&T’s counsel at Wachtell, Lipton, Rosen & Katz, to negotiate definitive transaction documentation. As a result of this process, on December 16, 2008, M&T proposed a stock-for-stock merger with Provident in which the holders of Provident common stock would receive 0.171625 shares of M&T stock in exchange for each share of

Provident common stock held by them. The other remaining bidder determined not to submit a revised indication of interest or negotiate potential transaction documentation.

 

On December 17, 2008, a regularly scheduled meeting of Provident’s Board of Directors was held. Management and Sandler O’Neill made presentations to Provident’s Board regarding Provident’s strategic alternatives, including the possibilities of Provident (i) remaining as an independent institution, (ii) seeking to raise capital via a public or private offering or strategic investment, or (iii) engaging in a strategic business combination. Mr. Geisel and Sandler O’Neill provided an overview of events since the Board’s December 5 meeting, including the background of discussions with M&T and other bidders, the terms of the M&T proposal received on December 16, 2008, and Provident’s due diligence review of M&T, including discussions between Provident’s and M&T’s respective senior management with respect to M&T’s financial condition and business prospects. Sandler O’Neill also reviewed M&T’s historical and current financial results and estimates of future performance as published by I/B/E/S. Provident’s Board again discussed prevailing market conditions, the possibility of further downgrades of Provident’s securities portfolio, and Provident’s strategic alternatives.

 

Representatives of Sullivan & Cromwell again discussed with Provident’s Board of Directors their legal duties in connection with any consideration of a possible strategic transaction. Sullivan & Cromwell also presented a summary of the legal terms of the merger agreement submitted by M&T with its proposal and the stockholder and regulatory approvals that would be required to complete the transaction, including the possible timeframe for obtaining such approvals. Provident’s Board also considered the M&T proposal in the light of the constituency provisions of Provident’s articles of incorporation, including the impact a merger would have on Provident’s employees and the communities in which Provident or its subsidiaries operate or are located, and M&T’s request to have a member of Provident’s Board of Directors become a director of M&T.

 

Sandler O’Neill then presented an analysis of the financial terms of the M&T proposal, including the transaction value, form of consideration, and dividend impact for Provident’s stockholders as well as the historical performance of M&T’s stock, potential effects of the proposed merger on M&T, M&T’s business and financial information, M&T’s asset and deposit mixes and retail profile, M&T’s branch footprint and potential overlap with Provident’s branches, and the performance of M&T’s stock after announcing previous mergers, as well as M&T’s request to have an as of yet unspecified current member of Provident’s Board of Directors become a director of M&T upon completion of the transaction. Sandler O’Neill’s presentation included discussion of the matters described under “Opinion of Provident’s Financial Advisor”, beginning on Page 26 of this proxy statement/prospectus. Sandler O’Neill noted that M&T’s proposal had a value of $10.50 per share of Provident common stock, based on the closing price of M&T’s stock on December 16, 2008, representing a significant premium over Provident’s stock price as of December 16, 2008. Sandler O’Neill further noted its estimate that M&T’s proposal would be accretive to Provident’s dividends per share. Sandler O’Neill discussed its analysis of Provident’s other strategic alternatives, including a capital raising transaction, and review of Provident on a stand-alone basis.

 

Sandler O’Neill then delivered to Provident’s Board of Directors its oral opinion, subsequently confirmed in writing, that based upon and subject to the factors and assumptions stated in that opinion, as of such date, the exchange ratio of 0.171625 shares of M&T stock to be received in respect of each share of Provident common stock in the transaction was fair to Provident’s common stockholders from a financial point of view. Subsequently, the merger documents were finalized and Sandler O’Neill conducted on behalf of Provident various types of due diligence on M&T, including due diligence with respect to M&T’s financial condition and business prospects.

 

Following these discussions, and extensive review and discussion among Provident’s Directors, including consideration of the factors described under “— Reasons for the Merger; Recommendation of Provident’s Board of Directors”, beginning on Page 23 of this proxy statement/prospectus and consideration of Sandler O’Neill’s presentation, including Sandler O’Neill’s analyses of transaction ratios, the trading history of Provident common stock and M&T common stock, financial results of comparable companies, selected merger transactions, discounted cash flow valuation on both a combined company and stand-alone basis, and the pro forma impact of the proposed merger, Provident’s Board of Directors unanimously approved the M&T merger agreement and the transactions contemplated thereby and declared the merger and other transactions contemplated in the merger agreement to be advisable. See “Opinion of Provident’s Financial Advisor”, beginning on Page 26 of this proxy statement/prospectus. Provident’s Board of Directors resolved that a meeting of the Provident common

stockholders be convened to consider and approve the merger agreement and the transactions contemplated in the merger agreement. Provident’s Board then directed that management and Provident’s advisors continue to negotiate terms with M&T with a view toward signing a definitive merger agreement as soon as reasonably practicable.

 

During the remainder of December 17 and on December 18, 2008, representatives of Provident and M&T management and outside legal advisors and Sandler O’Neill worked to finalize the merger agreement and related documents. Among other things, the parties continued to work to finalize provisions of the merger agreement regarding certain employee retention arrangements and mechanics of the merger procedures and the contents of Provident’s disclosure schedules. M&T informed Provident that it had selected Mr. Geisel as the director to join M&T’s board if the transaction is completed. M&T advised Provident that its selection was based on, among other things, Mr. Geisel’s extensive knowledge of Provident’s operations and financial institutions generally, as well as his valuable relationships with Provident’s various constituencies. Late in the evening on December 18, 2008, the parties executed the merger agreement. The transaction was announced prior to the opening of the financial markets in New York City on December 19, 2008.

 

After careful consideration, Provident’s Board of Directors determined that the merger is advisable and in the best interests of Provident and its stockholders. Provident’s Board of Directors therefore declared the merger and the merger agreement to be advisable and unanimously recommends that the Provident stockholders vote “FOR” the approval of the merger.

 

In reaching the determination that the merger is advisable, Provident’s Board of Directors consulted with Provident’s senior management, financial advisor and legal advisors, and drew on its knowledge of the business, operations, properties, assets, financial condition, operating results, historical market prices and prospects of Provident and M&T, as well as current economic and market conditions. In connection with its review and approval of the merger, and in the course of its deliberations, Provident’s Board of Directors considered numerous factors that weighed in favor of the merger, including the following:

 

 

 

Provident’s Board of Directors considered the low price level of M&T’s common stock in relation to the price level in recent years and the possibility that Provident stockholders would have the opportunity to participate in future stock price growth of M&T.

 

Provident’s Board of Directors also considered the risks and uncertainties in evaluating the merger consideration in view of the potential fluctuation of M&T’s common stock price given the fixed exchange ratio, and the period of time between the execution of the merger agreement and the closing.

 

 

 

In the course of its deliberation regarding the merger, Provident’s Board of Directors also considered the following factors, which it determined did not outweigh the expected benefits to Provident and its stockholders:

 

 

 

 

 

The reasons set forth above are not intended to be exhaustive, but include the material considerations of Provident’s Board of Directors in approving the merger agreement. In reaching its determination to approve and recommend the transaction, Provident’s Board of Directors looked at the totality of the information presented to it and did not assign any relative or specific weights to the factors considered, and individual directors may have given different weights to different factors. After considering, among other things, the matters discussed above and the opinion of Sandler O’Neill referred to above, Provident’s Board of Directors believed that the merger was advisable and in the best interests of Provident and its stockholders, and therefore, unanimously approved and recommended the merger.

 

It should be noted that this explanation of the reasoning of Provident’s Board of Directors (and some other information presented in this section) is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section of this proxy statement/prospectus entitled “Cautionary Statement Regarding Forward-Looking Statements” commencing on Page 15.

 

Provident retained Sandler O’Neill to act as its financial advisor in connection with a possible business combination with another financial institution. Provident selected Sandler O’Neill as its financial advisor because Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

 

Sandler O’Neill acted as financial advisor to Provident in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the December 17, 2008 meeting at which Provident’s Board of Directors considered and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, Sandler O’Neill delivered to Provident’s Board its oral opinion, subsequently confirmed in writing that, as of such date, the exchange ratio to be received in the transaction was fair to the holders of Provident common stock from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Appendix B to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. We urge Provident common stockholders to read the entire opinion carefully in connection with their consideration of the proposed merger.

 

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to Provident’s Board of Directors and is directed only to the fairness of the exchange ratio to holders of Provident common stock from a financial point of view. It does not address the underlying business decision of Provident to engage in the merger or any other aspect of the merger and is not a recommendation to any Provident common stockholder as to how such stockholder should vote at the special meeting with respect to the merger or any other matter.

 

In connection with rendering its December 17, 2008 opinion, Sandler O’Neill reviewed and considered, among other things:

 

(1) the merger agreement;

 

(2) certain publicly available financial statements and other historical financial information of Provident that Sandler O’Neill deemed relevant;

 

(3) certain publicly available financial statements and other historical financial information of M&T that Sandler O’Neill deemed relevant;

 

(4) internal financial projections for Provident for the years ending December 31, 2008 through 2012 as prepared by and discussed with senior management of Provident;

 

(5) consensus earnings per share estimates for M&T for the years ending December 31, 2008 and 2009 as revised to include M&T’s receipt of funds pursuant to TARP and an estimated long-term growth rate as published by I/B/E/S;

 

(6) the pro forma financial impact of the merger on M&T, based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and other synergies as discussed with the senior management of Provident;

 

(7) publicly reported historical price and trading activity for the common stock of Provident and M&T, including a comparison of certain financial and stock market information for Provident and M&T with similar publicly available information for certain other companies the securities of which are publicly traded;

 

(8) to the extent publicly available, the financial terms of certain recent business combinations in the commercial banking industry;

 

(9) the current market environment generally and the commercial banking environment in particular; and

(10) such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

 

Sandler O’Neill also discussed with certain members of senior management of Provident the business, financial condition, results of operations and prospects of Provident, including certain matters facing Provident including further potential write-downs to Provident’s investment portfolio and recent downgrades made to bank pooled trust preferred securities by Moody’s which were expected to result in other-than-temporary-impairment charges to Provident. We also held discussions with certain members of senior management of M&T regarding the business, financial condition and results of operations of M&T.

 

In performing its reviews and analyses and in rendering its opinion, Sandler O’Neill assumed and relied upon the accuracy and completeness of all the financial information, analyses and other information that was publicly available or otherwise provided to Sandler O’Neill by Provident or M&T and further relied on the assurances of management of Provident and M&T that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. Sandler O’Neill was not asked to and did not independently verify the accuracy or completeness of any of such information and they did not assume any responsibility or liability for the accuracy or completeness of any of such information. Sandler O’Neill did not make an independent evaluation or appraisal of the assets, the collateral securing assets or the liabilities, contingent or otherwise, of Provident or M&T or any of their respective subsidiaries, or the collectibility of any such assets, nor was it furnished with any such evaluations or appraisals. Sandler O’Neill is not an expert in the evaluation of allowances for loan losses and it did not make an independent evaluation of the adequacy of the allowance for loan losses of Provident or M&T, nor did it review any individual credit files relating to Provident or M&T and Sandler O’Neill assumed that the respective allowances for loan losses for both Provident and M&T were adequate to cover such losses.

 

Sandler O’Neill’s opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of its opinion. Sandler O’Neill assumed, in all respects material to its analysis, that all of the representations and warranties contained in the merger agreement and all related agreements were true and correct, that each party to such agreements will perform all of the covenants required to be performed by such party under such agreements and that the conditions precedent in the merger agreement will not be waived. Sandler O’Neill also assumed, with Provident’s consent, that there has been no material change in Provident’s and M&T’s assets, financial condition, results of operations, business or prospects or other financial information since the date of the last financial information made available to it, that Provident and M&T will remain as going concerns for all periods relevant to its analyses, and that the merger will qualify as a tax-free reorganization for federal income tax purposes. Finally, with Provident’s consent, Sandler O’Neill relied upon the advice that Provident received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement.

 

In rendering its December 17, 2008 opinion, Sandler O’Neill performed a variety of financial analyses. The following is a summary of the material analyses performed by Sandler O’Neill, but is not a complete description of all the analyses underlying Sandler O’Neill’s opinion. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to Provident or M&T and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Provident or M&T and the companies to which they are being compared.

The internal financial projections prepared by the senior management of Provident and the anticipated transaction costs, purchase accounting adjustments, expected cost savings and other synergies relating to the merger were discussed with the senior management of Provident. Sandler O’Neill expressed no opinion as to such financial projections or the assumptions on which they were based. These projections, as well as the other estimates used by Sandler O’Neill in its analyses, were based on numerous variables and assumptions which are inherently uncertain and, accordingly, actual results could vary materially from those set forth in such projections.

 

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Provident, M&T and Sandler O’Neill. The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to Provident’s Board of Directors at its December 17, 2008 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of Provident’s common stock or M&T’s common stock or the prices at which Provident’s or M&T’s common stock may be sold at any time. Sandler O’Neill’s fairness opinion was approved by Sandler O’Neill’s fairness opinion committee. Sandler O’Neill expresses no opinion as to the fairness of the amount or nature of the compensation to be received in the merger by Provident’s officers, directors or employees, or any class of such persons, relative to the compensation to be received in the merger by any other stockholders of Provident. Sandler O’Neill also expresses no opinion as to the fairness of the exchange ratio to or the effects of the merger on holders of Provident preferred shares.

 

Summary of Proposal.  Sandler O’Neill reviewed the financial terms of the proposed transaction. Based upon the closing price of M&T’s common stock on December 16, 2008 of $61.18 per share, a fixed exchange ratio of 0.171625, representing $10.50 per share, and the exchange of all of Provident’s shares into shares of M&T, and based upon per share financial information for Provident for the twelve months ended September 30, 2008, Sandler O’Neill calculated the following ratios:

 

Transaction Ratios

 

 

 

 

The aggregate offer value was approximately $407.1 million, based upon the purchase of 33,511,560 shares of Provident common stock (aggregate price of $351.9 million) and preferred shares outstanding (common stock equivalents of 4.7 million shares or $49.4 million in deal value), roll-over of Provident options into M&T options (rollover price of $3.6 million) and cash out of certain TARP-related warrants (cost of $2.1 million).

 

Stock Trading History of Provident.  Sandler O’Neill reviewed the history of the distribution of the reported trading prices of Provident’s common stock as a percentage of the total number of shares of Provident common stock traded for the six-month period ended December 16, 2008 and the reported trading volume of Provident’s

common stock for the six-month period ended December 16, 2008. During the six-month period, the average daily trading volume of Provident common stock was 667,236 shares and the number of shares traded represented 256.29% of the number of shares of Provident common stock outstanding.

 

Provident’s Six-Month Trading Distribution Beginning June 16, 2008

 

 

As shown in the table below, Sandler O’Neill then compared the relationship between the movements in the prices of Provident’s common stock to movements in the prices of the NASDAQ Bank Index, the S&P 500 Index, and the S&P Bank Index over the one-year period ended December 16, 2008. During that time period, Provident common stock underperformed each of the indices to which it was compared.

 

Provident’s Stock Performance

 

 

Stock Trading History of M&T.  As shown in the table below, Sandler O’Neill compared the relative price appreciation in the price of M&T’s common stock and compared it to the appreciation of the NASDAQ Bank Index over the one year and three year periods ended December 16, 2008. During that time period, M&T common stock underperformed the NASDAQ Bank Index.

 

M&T’s Stock Performance

 

 

 

Comparable Company Analysis.  Sandler O’Neill used publicly available information to compare selected financial and market trading information for Provident and M&T with groups of financial institutions selected by

Sandler O’Neill for Provident and M&T, respectively. For Provident, the peer groups consisted of the following financial institutions:

 

Regional Comparable Group:

 

 

Mid-Cap Comparable Group:

 

 

The analysis compared publicly available financial information for Provident as of and for the twelve months ended September 30, 2008 with that of each of the companies in Provident’s peer groups as of and for the twelve-month period ended September 30, 2008. The tables below set forth certain of the data for Provident and the mean and median data for the Provident peer groups, with pricing data as of December 16, 2008.

 

Comparable Group Analysis — Operating Performance

 

 

Comparable Group Analysis — Market Valuation

 

M&T Comparable Group Analysis.  Sandler O’Neill also used publicly available information to compare selected financial and market trading information for M&T with the following group of publicly traded commercial banking institutions as defined by M&T’s management.

 

Nationwide Comparable Group

 

 

The analysis compared publicly available financial information for M&T with that of each of the companies in the M&T peer groups as of and for the twelve months ended September 30, 2008. The tables below set forth the data for M&T and the median data for the M&T peer groups, with pricing data as of December 16, 2008.

 

Comparable Group Analysis — Operating Performance

 

 

Historical Market Valuation.  Sandler O’Neill compared the historical prices of M&T common stock to the shares of common stock of M&T’s peer group from a share price to last twelve months earnings perspective and determined that M&T shares were trading at a lower price to earnings per share multiple than that of M&T’s peer group, which was not the case in 2000-2007.

 

Analyst Recommendation and Estimates Analysis.  Sandler O’Neill used publicly available I/B/E/S research analyst estimates and recommendations to outline the current analyst views for M&T. Sandler O’Neill only used

research analyst estimates and recommendations that were published or reviewed after the public announcement of preliminary approval for TARP funding on November 20, 2008. For M&T, the analysts consisted of the following:

 

Firms with Published M&T Research

 

 

The analysis compared published recommendations, long-term growth rates, 2009 earnings per share estimates and 2010 earnings per share estimates. As of December 16, 2008, thirteen research analysts had published recommendations for M&T, comprised of ten “Hold” recommendations, two “Sell” recommendations and one “Buy” recommendation. As of December 16, 2008, seven research analysts had published or reviewed 2009 estimates outstanding after M&T’s public announcement of preliminary approval for TARP funding on November 20, 2008. Four of these seven analysts also had published 2010 earnings estimates outstanding. Sandler O’Neill had no published 2010 earnings estimates outstanding for M&T. The table below sets forth the median values of these estimates:

 

 

Analysis of Selected Merger Transactions.  Sandler O’Neill reviewed seven selected merger transactions announced nationwide from January 1, 2008 through December 16, 2008 involving the acquisition of commercial banking institutions in New England and the Mid-Atlantic regions with announced transaction values between $100 million and $600 million. Sandler O’Neill reviewed the multiples of transaction price at announcement to tangible book value, tangible book premium to core deposits, and premium to market value. The median multiples from this selected group were compared to the proposed transaction ratios.

 

Comparable Transaction Metrics

 

 

 

 

Discounted Cash Flow Analysis.  Sandler O’Neill performed an analysis that estimated the future stream of after-tax cash flows of Provident through December 31, 2013 under various circumstances, assuming Provident continued a quarterly cash dividend per share of $0.11 and that Provident performed in accordance with the earnings and growth projections reviewed with management of Provident. To approximate the terminal value of Provident common stock at December 31, 2013, Sandler O’Neill applied price to earnings multiples ranging from 10.0x to 16.0x. The dividend income streams and terminal values were then discounted to present values using different discount rates ranging from 11.0% to 15.0%, chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Provident common stock. In addition, the terminal value of Provident’s

common stock at December 31, 2013 was calculated using a range of price to earnings multiples ranging from 10.0x to 16.0x and applied to a range of discounts and premiums to the projected net income of Provident. The range applied to the projected net income was 25% under the projected amount to 25% over the projected amount, using a discount rate of 12.85%. In addition, the terminal value of Provident’s common stock at December 31, 2013 was calculated by applying price to tangible book value multiples ranging from 75% to 225%. As illustrated in the following tables, this analysis indicated an imputed range of values per share for Provident’s common stock of $4.93 to $8.41 when applying the price to earnings multiples to the matched projections, $4.39 to $9.35 when applying earnings multiples to the -25% / +25% projection and $3.78 to $10.32 when applying tangible book value multiples.

 

 

With Projected Net Income Variance:

 

 

 

Sandler O’Neill performed an analysis that estimated the future stream of after-tax cash flows of M&T through December 31, 2013 under various circumstances, assuming M&T’s cash dividend was flat at $0.70 quarterly through 2009 and was increased by $0.10 per quarter thereafter. It was also assumed that M&T performed in accordance with the research analyst and I/B/E/S earnings and growth projections. To approximate the terminal value of M&T common stock at December 31, 2013, Sandler O’Neill applied price to earnings multiples ranging from 10.0x to 16.0x. The dividend income streams and terminal values were then discounted to present values using different discount rates ranging from 8.0% to 12.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of M&T common stock. In addition, the terminal value of M&T’s common stock at December 31, 2013 was calculated using a range of price to earnings multiples ranging from 10.0x to 16.0x and applied to a range of discounts and premiums to the projected net income of M&T. The range applied to the projected

net income was 25% under the projected amount to 25% over the projected amount, using a discount rate of 10.12%. In addition, the terminal value of M&T’s common stock at December 31, 2013 was calculated by applying price to tangible book values multiples ranging from 175% to 250%. As illustrated in the following tables, this analysis indicated an imputed range of values per share for M&T’s common stock of $58.52 to $102.80 when applying the price to earnings multiples to the matched projections, $50.99 to $113.32 when applying the earnings multiples to the -25% / +25% projection and $57.36 to $91.34 when applying tangible book value multiples.

 

 

With Projected Net Income Variance:

 

 

 

In connection with its analyses, Sandler O’Neill considered and discussed with Provident’s Board of Directors how the present value analyses would be affected by changes in the underlying assumptions, including variations with respect to net income. Sandler O’Neill noted that the discounted cash flow and terminal value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

 

Stand-Alone Analysis.  Sandler O’Neill performed an analysis of Provident’s valuation on a stand-alone basis based on Provident’s internal financial projections for the years ended December 31, 2008 through 2012. In connection with its analysis, Sandler O’Neill considered and discussed with Provident’s senior management what underlying assumptions to reflect, including assumptions with regard to regulatory capital charges, pre-tax

impairment charges, dividend payments, share repurchases and deposits. The table below sets forth certain of the data with respect to Provident’s estimated earnings per share and growth rates on a stand-alone basis:

 

Estimated Earnings Per Share and Growth Rates Analysis

 

 

The results of Sandler O’Neill’s analysis are highly dependent upon Provident’s internal financial projections and the underlying assumptions derived from Sandler O’Neill’s discussions with senior management, and the results thereof are not necessarily indicative of actual values or future results.

 

Pro Forma Merger Analysis.  Sandler O’Neill analyzed certain potential pro forma effects of the merger, assuming the following: (1) the merger closes on March 31, 2009; (2) 100% of the Provident shares are exchanged for shares of M&T common stock; (3) estimated $100 million pre-tax additional mark to investment securities and loan portfolio taken, assumed as a 100% credit or impairment mark with no earnings generated from these assets going forward; (4) all FAS 141R accounting rules have been incorporated; (5) 35% cost savings on Provident’s non-interest expense base, $53.3 million pre-tax in the remaining 9 months of 2009 and $70.8 million pre-tax in 2010; (6) 5.00% pre-tax cost of cash used to pay transaction expenses and after-tax restructuring charges of $20.5 million; (7) 3.0% core deposit intangible amortized over eight years using sum of years digits methodology; (8) $103.7 million in aggregate core deposit intangible; (9) no deposit divestitures; and (10) Provident options roll over into M&T options and TARP warrants are exchanged for cash utilizing the Treasury Method.

 

Based upon those assumptions, Sandler O’Neill’s analysis indicated that during the years ended December 31, 2010, 2011 and 2012 the merger would be accretive to M&T’s earnings per share in 2010, 2011 and 2012.

 

From the perspective of a Provident common stockholder, the analysis indicated that at the years ended December 31, 2010 and December 31, 2011, the merger would be accretive to Provident’s earnings per share and accretive to Provident’s dividends per share. The actual results achieved by the combined company may vary from projected results and the variations may be material.

 

Pro Forma Capital Impact on M&T.  Sandler O’Neill also performed an analysis of the impact of the transaction, on a pro forma basis, as compared to those of M&T on a stand-alone basis for the quarterly periods ending December 31, 2008 and March 31, 2009 as follows:

 

Pro Forma Capital Analysis