First Empire State Corp. of Buffalo says it saved "tens of millions of dollars" by waiting for a change in federal tax law before merging its savings bank into its main commercial bank.
Gary S. Paul, senior vice president of corporate finance, said the $13 billion-asset banking company held off on the consolidation until Congress revised the part of the federal tax code which dealt with deductions taken by thrifts for bad-debt reserves.
Once the deductions were extended to banks that acquired thrifts, First Empire could proceed with the merger, Mr. Paul said.
With the change in the law, "it now serves our customers better by running one principal commercial bank unit," Mr. Paul said.
The thrift, the East New York Bank for Savings, was converted from a mutual to a stock-owned institution and then acquired by First Empire in late 1987.
Mr. Paul said that the cost savings involved in folding the $2 billion- asset thrift into First Empire State's $11 billion-asset banking unit, Manufacturers and Traders Trust Co., were not material, and since there were no branch overlaps, no closures are anticipated.
Following the merger, which is expected to close by the end of May, East New York will operate as the New York City division of M&T Bank.
"There will be some modest back-office transfers to the headquarters in Buffalo, but the specifics have not been ironed out yet," Mr. Paul said.
Analysts said the consolidation would give Manufacturers and Traders a simpler, more efficient structure.
"Ultimately, you want to present yourself as one company, and this merger gives the customers, as well as the bank from both downstate and upstate, the ability to do business easily," said Kevin Timmons, a bank analyst with First Albany Corp.
The merger must win approval from the Federal Reserve Board and the New York State Banking Board.
Once the consolidation is complete, East New York president Atwood Collins 3d will become president of Manufacturers and Traders' New York City division, and East New York's board of directors will become the division's regional advisory board.
Manufacturers and Traders has 162 branches throughout New York State. East New York operates 13 branches in the New York City area.
