M&T approved for Treasury money
Bank has 30 days to finalize decision
After several weeks of hemming and hawing over whether it would participate in the government’s stock purchase program, M&T Bank Corp. said Thursday that it has been approved to sell $600 million in preferred shares and warrants to the U. S. Treasury Department.
M&T had been the one noticeable holdout among the nation’s largest banks in not previously saying it had at least applied for the government money, citing uncertainties about how the program will ultimately work. The nine biggest banks already received $125 billion in capital from the Treasury’s Capital Purchase Program on Oct. 29, and another 21 banks got $33.6 billion earlier this week.
With the long-awaited announcement, the Buffalo-based bank will now join the likes of Bank of America Corp., J. P. Morgan Chase & Co., Citigroup, and Key- Corp in taking some of the $250 billion in taxpayer money, which is part of the $700 billion Troubled Assets Relief Program passed by Congress. First Niagara Financial Group has also been approved.
“At this point, we were probably one of the only banks in the top 25 that had not participated,” said Executive Vice President and Chief Financial Officer Rene Jones. “So, you’re kind of going along with everybody in the industry as a whole. And as long as there’s a level playing field, we can continue to operate.”
M&T had been hesitant to sign on because executives feel the bank is perfectly healthy, hasn’t cut back on lending in its communities, and doesn’t need the extra capital. The bank currently has $6.4 billion in capital, giving it a “Tier 1” capital ratio of 7.34 percent, which exceeds the highest regulatory minimums.
That’s why the bank requested only the minimum of $600 million, as opposed to the maximum of about $1.73 billion that it could have sought, based on its asset size.
“We’re already lending to the community we operate in and we haven’t cut back on our lending,” Jones said. “If we took too much, that capital might sit idle.”
Officials were also concerned about the idea of the government being a shareholder and possibly imposing some requirements or constraints. Banks that participate can’t raise dividends, buy back stock or issue “trust preferred securities” without Treasury’s permission, and there are restrictions on executive pay, especially so-called “golden parachutes.”
On the other hand, Jones said, “we also didn’t think it made a lot of sense not to participate at some level because it makes sense to show our support for Treasury and their overall effort.”
In addition to the preferred stock, M&T also issued “warrants’ to Treasury to buy $90 million of common shares. Upon completion, the government would own 1.49 percent of M&T, and the bank’s Tier 1 capital would rise one percentage point to 8.34 percent.
Among other local institutions, Evans Bancorp, Lake Shore Bancorp, Financial Institutions, and Northwest Bancorp have also applied for the Capital Purchase Program. By contrast, Community
Bank System and Tompkins Financial Corp. already declined and on Thursday, Cattaraugus County Bank in Little Valley followed suit, saying it’s always been able to generate enough capital through earnings with no outside help, and is concerned about government control and weakening the investment of existing shareholders.
M&T now has 30 days in which to review, complete, and sign the proper paperwork to close the transaction, assuming it plans to go through with it. Officials have previously suggested that they could also use the extra month to further review the program and see if any of the terms change before making their final decision.
“We’ll take our time to go through that process,” Jones said. “We will have to look at the investment agreements and make sure we’re comfortable with them. We would hope to continue to be able to operate the way we have over the long run.”
