Thank you, Elsa and good morning, everyone. This is DonMacLeod and I would like to thank everyone for participating in M&T'sfourth quarter and full year 2007 earnings conference call, both by telephoneand through the webcast.

I hope everyone has had an opportunity to read ourearnings release issued this morning. If you have not read our earningsrelease, you may access it along with the financial tables and schedules fromour website, www.mtb.com, and by clicking on the investor relations link.

Also, before we start, I would like to mention that commentsmade during this call may contain forward-looking statements relating to thebanking industry and to M&T Bank Corporation. M&T encouragesparticipants to refer to our SEC filings, including those found on forms 8-K,10-K, and 10-Q, for a complete discussion of forward-looking statements.

Now I would like to introduce our Chief Financial Officer,Rene Jones.

Thank you, Don and good morning, everyone. No doubt most ofyou have read our press release and by now have seen that we had quite a busyquarter with a number of notable items.

I would like to provide some color onthose items as well as give you my thoughts on the past year and the comingyear, and then I’ll take your questions. Diluted earnings per share, which includes the amortizationof core deposits and other intangible assets, were $0.60 in the fourth quarterof 2007 compared with $1.88 in the fourth quarter of 2006 and $1.83 earned inthe linked quarter.

Amortization of core deposits and other intangible assetsamounted to $0.09 per share in the third and fourth quarters of 2007 and $0.10per share in the fourth quarter of 2006. In addition, after tax merger relatedcosts of $9 million, or $0.08 per share, which relate to the Partners Trustacquisition and the First Horizon branch transaction were recorded in thefourth quarter of 2007.

Fourth quarter diluted net operating earnings per share,which exclude the amortization of core deposits and other intangible assets, aswell as the merger related costs I mentioned, were $0.77 compared with $1.98 inthe fourth quarter of 2006 and $1.92 in the linked quarter. This morning’spress release contains a tabular reconciliation of GAAP and non-GAAP results,including tangible assets and equity.

Net income for the fourth quarter of 2007 was $65 million,compared with $213 million a year earlier and $199 million earned in thesequential quarter. Net operating income for the quarter was $84 millioncompared with $225 million in the fourth quarter of 2006 and $209 million inthe linked quarter.

During the fourth quarter we took action to reduce ourexposure to a few areas of heightened concern specifically relating to theturmoil in the residential real estate market. In our press release, we notedfour items that lowered net income for the fourth quarter.

In the first quarter of 2007, as you are aware, we purchasedthree mezzanine ABS CDO securities totaling $132 million. The newly createdCDOs were purchased roughly at par but reflected the wider spreads in placeafter the initial sub-prime related sell-off in late 2006 and early 2007.

Theasset backed securities underlying the three CDOs include a mix of prime,mid-prime, and sub-prime residential mortgage-backed securities, commercialmortgage-backed securities and education loans. Two of the three CDOs have been downgraded by the ratingagencies and although all three are still current as of the end of 2007, wehave come to the conclusion that the impairment in the market value of thesecurities is other than temporary.

Accordingly, a $78 million after tax, or$0.71 per share unrealized loss on the CDOs has been recognized for the incomestatements in the fourth quarter. This action leaves us with only $4.4 millionof exposure to CDOS backed by residential mortgages.

During the fourth quarter, Visa completed a globalrestructuring of its legal entities and reached a settlement with AmericanExpress with respect to certain anti-trust litigation. Several other anti-trustlawsuits are still pending.

As a member of Visa, M&T is required to share in thecurrent and future losses with respect to such litigation. As a result, M&Thas recognized an after tax charge in the fourth quarter of $14 million, or$0.13 per share, representing our share of the current and estimated futurelosses with respect to the multiple anti-trust lawsuits.

As I alluded to earlier, we completed the acquisition ofPartners Trust this quarter as well as the purchase of First Horizonmid-Atlantic retail banking franchise. We reported after tax merger relatedcharges of $9 million, or $0.08 per share during the quarter as a result ofthese two transactions.

There may be limited amounts of additional mergerrelated expenses relating to these acquisitions in 2008 as well. Also, as noted in the press release, prior to 2007 M&T'spractice was to sell substantially all of the Alt-A mortgages that weoriginated.

In March 2007, we transferred $883 million of Alt-A loans to ourheld-for-investment portfolio, rather than sell them at depressed prices. Higher levels of delinquencies and charge-offs in thisportfolio led us to reassess our founding policies and to adopt what we believeis a more conservative founding posture with respect to the recognition ofnon-performing loans and charge-offs on residential mortgages.

Specifically, wehave changed our policy such that residential mortgages will be moved tonon-performing status at 90 days instead of 180 days and charge-offs will berecognized at 150 days instead of at foreclosure. The primary impact of this change is to move $84 million of90-plus days past due residential mortgages, the majority of them from ournon-agency portfolio, to non-performing status.

This change also resulted inthe accelerated recognition of approximately $15 million of charge-offs, themajority of which also relate to the non-agency mortgages. The bulk of theseloans had been carried as 90-days past due and still accruing as of September30th.

Collectively, we believe the actions we’ve taken regardingour exposure to residential real estate are consistent with M&T'slongstanding approach to identifying issues and quickly dealing with them. Now turning to the income statement, taxable equivalent netinterest income was $476 million for the fourth quarter, up from $473 millionin the linked quarter.

The net interest margin declined 20 basis points in thefourth quarter of 2007 to 3.45%, compared with 3.65% in the linked quarter. Theitems contributing to that decline, some of which were temporary, are asfollows.

Three basis points of the decline related to the reversal ofinterest previously accrued on residential real estate loans, principally theloans that were moved to non-performing status under the policy change that Ijust mentioned. An additional three basis points relates to a temporaryincrease in short term investments needed to collateralize municipal deposits.These investments were liquidated by the end of the quarter.

Another three basis points of the decline related to theimpact of Partners Trust and First Horizon transactions, both of which havenarrower net interest margins than the pre-merger M&T. The full run-rateimpact on the margin from the two acquisitions should be about eight basispoints.

Lower levels of prepayment penalties in our commercial realestate loan portfolio -- roughly half the level of the third quarter -- causeda further three basis points of the decline. Finally, six basis points of the decline related to loangrowth, which has been quite strong, and a higher level of investmentsecurities that were added near the end of the third quarter.

The bulk of thatgrowth was funded by wholesale borrowings. Turning to loan growth, as we mentioned in the pressrelease, this growth was one of the real bright spots of the fourth quarter,continuing the trend that began in September.

Average loans for the fourthquarter were $46.1 billion, including $742 million of average loans addedthrough the two acquisitions. Excluding the impact of acquisitions, averageloans grew by $1.6 billion for an annualized rate of 14% from the third quarterof 2007.

By category, annualized loan growth compared with the linkedquarter and excluding the impact of acquisitions, is as follows: averagecommercial and industrial loans grew at an annualized rate of 8%; averagecommercial real estate loans, including owner occupied, grew at a rate of 22%.As you might expect the strong commercial real estate growth was driven by thedisarray and the securitization in conduit markets which has brought businessback to balance sheet lenders like M&T. Spread, structures, and returnshave all improved significantly.

The strongest growth came in our metro region, whichincludes New York City, and in the mid-Atlantic. Almost all of our commercialactivity for the past quarter came from customers with whom we have donebusiness in the past.

The average residential real estate loans grew about 6% withmortgages originated for investment partially offset by a decline inresidential mortgages held for sale. Average consumer loans grew by 14%,including strong growth in auto loans and consumer goods and services.

Homeequity loans and lines of credit were essentially flat. The end of period loans as of December 31, 2007 were $48billion, including $1.5 billion of loans acquired through the acquisition.Excluding the impact of acquisitions, end of period loans grew an annualized16% from the end of the third quarter.

Not included in these figures are $950million of mortgages obtained in the Partners deal that were securitized nearthe end of the quarter. In terms of credit, the provision for credit losses in thefourth quarter of 2007 was $101 million and exceeded charge-offs by $48million.

The provision in excess of charge-offs is intended to bolster reservesfor the residential mortgage portfolio, particularly the non-agency segment,and for two already non-performing residential development loans in themid-Atlantic. The remaining portion of the excess provision is intended to conformour loan loss allowance with the significant loan growth that we’ve seen overthe past four months.

Non-performing loans totaled $447 million at the end of therecent quarter compared with $371 million at the end of the previous quarterand $224 million at the end of 2006. Substantially all of the increase from thelinked quarter relates to the policy change on residential mortgages and theresulting transfer of the $84 million of mortgages to non-performing statusfrom the 90 day past due classification.

As we noted in the press release, only four of ournon-performing loans are over $5 million, which we believe is an indication ofthe granularity of M&T's loan portfolio. The non-performing loan ratio was93 basis points at the end of 2007 compared with 83 basis points in the linkedquarter and 52 basis points at the end of 2006.

Excluding the policy change,the non-performing loan ratio at the end of 2007 would have been 76 basispoints, down seven basis points from the linked quarter. Net charge-offs for the quarter were $53 million,representing an annualized rate of 46 basis points of total loans.

Excludingthe $15 million of charge-offs relating to the policy change, the netcharge-off ratio was 33 basis points. This compares to 20 basis points in thelinked quarter.

The allowance for credit losses increased to $759 million,or 1.58% of total loans as of December 31, 2007, reflecting the $48 millionprovision in excess of charge-offs as well as the allowance acquired withPartners Trust. This compares with an allowance ratio of 1.52 at the end of thelinked quarter and 1.51% at the end of 2006.

Loans past due 90 days but still accruing were $77 millionat the end of the recent quarter, compared with $140 million at the end of thethird quarter of 2007, reflecting the impact from the policy change. AtDecember 31, 2007, loans 90 days past due included $72 million in loans thatare guaranteed by government-related entities.

Turning to non-interest income, excluding the securitiesloss on the CDO, non-interest income for the fourth quarter of 2007 was $288million compared with $256 million in the fourth quarter of 2006 and with $253million in the linked quarter. The strong results reflect growth in trust fees,advisory fees, and gain on lease residuals.

Also contributing to the non-interest income for the quarterwas $15 million of equity income from the Bayview Lending Group partnership.This compares with a loss of $11 million in the third quarter. The PartnersTrust and First Horizons transactions contributed $2 million of non-interestrevenue for the quarter.

Operating expenses, which exclude merger related charges andamortization of intangible assets, were $415 million, compared with $365million in the fourth quarter of 2006 and $375 million in the third quarter of2007. In addition to the $23 million pretax charge related to the Visaanti-trust litigation, the fourth quarter results included a $2 millionaddition to the valuation allowance for capitalized residential mortgage servicingrights compared to no charge in the third quarter of 2007 and a $1 millionaddition in the valuation allowance in the fourth quarter of 2006.

The twoacquisitions contributed $5 million of operating expenses during the recentquarter. Before we turn to questions, let me briefly review some ofthe highlights related to the full year.

Diluted GAAP earnings per share were$5.95 compared with $7.37 in 2006. Net income for the year was $654 million.Diluted net operating earnings per share were $6.40 compared with $7.73 in2006.

Net operating income was $704 million. This brings us to our outlook.

We were encouraged by therobust loan growth we’ve experienced over the past quarter but expect it tomoderate a bit from current levels. Our most likely scenario is for loan growthin the mid to high single digit range for 2008.

We will continue to manage thenet interest margin as we always have, with as close to a neutral sensitivityposition as possible. Ultimately the direction of the margin will be driven by earningsand net growth, with the loan growth being partially offset by run-off ininvestment securities.

For the full year 2008, our fourth quarter margin of3.45% is a better starting point than the 3.60% that we had for the full year. The events of 2007 vindicated our view that there is stillsuch a thing as a credit cycle and that it was turning.

Don and I have beentalking about loss rates approaching historical norms for some time now andexcluding the impact from the policy change, our charge-off ratio of 33 basispoints in the fourth quarter was almost spot-on with our long-term averagesince 1991 of 32 basis points. While it is difficult to predict the depth and breadth ofthe current credit cycle, at this time we would expect credit costs to fallwithin a reasonable range around our historical experience.

With respect to expenses, we continue to scrutinize expensesvery closely. We have some investment spending that we want to fund,particularly for expansion in the mid-Atlantic, but as we typically do we’vebudgeted for a positive revenue expense spread in 2008.

I would like to touch on Bayview for just a moment. Despitethe significant widening of spreads in the market for commercialmortgage-backed securities, Bayview continues to sell their productionresulting in no significant inventory overhangs.

While commercialmortgage-backed securities spreads remain at current levels, we would notexpect a significant contribution from this investment. Turning to capital, the combination of the two acquisitions,the CDO and the Visa charges and the robust loan growth reduced our tangiblecommon rate equity ratio to 5.01% as of December 31st.

With our strong capitalgeneration rate, we would expect to have our tangible common equity ratio backwithin our usual range of 5.2 to 5.6 by the second quarter. Accordingly, ourshare repurchase program will be on hold through the first quarter.

Finally, I would note that we typically see weakness indeposit service charges in the first quarter of every year relating to thepost-holiday slow down in spending, as well as seasonal increases in expenses,particularly salaries and benefits. All of these projections are of course subject to a numberof uncertainties, various assumptions regarding the national and economicgrowth, changes in interest rates, political events, and other macroeconomicfactors which may differ materially from what actually unfolds in the future.

We will now open up the call to questions, before which Elsawill briefly review the instructions.

Just some -- with respect to charge-offs, I guess you saidaround 30, 35 basis points is your normal area and that’s kind of where youexpect to be?

Well, what I said was that our long run historical averageis around 32 basis points and we have been running about 20 basis points forthe last three quarters. I think our average over the last three quarters was19 basis points and internally, we could see that given the level ofnon-performers that a more normalized growth rate for what we were seeing inthe non-performing book was somewhere in the 30s.

I would suggest thattypically our fourth quarters tend to be a little higher than the average, sosomewhere around that, in the 30s, in that historical range. At this point in time, it’s very tough to tell because asyou know, you and other folks out there all have current scenarios, recessionscenarios, some of you have four scenarios.

So what we are going to attempt todo is to tell you what we see today and not try to predict what’s going tohappen with the economy. But I would say somewhere in the 30s is what we would expecttoday.

All right, and then I guess I have a follow-up; how shouldwe think about provisioning relative to charge-off? Do you anticipate thesekind of reserves coming forward or should provisions become closer tocharge-offs?

You know, I would say that the loan growth was very unusual.I mean, we had 16%, 17% growth in loans and that’s not a typical quarter. Butas you know, we typically provide for that loan growth.

I would suggest that the other items that we’ve talked aboutare, I would consider them to be a bit unusual and unless there was some otherevent that we found out going forward, I think I would revert back to what youtypically see from M&T, which is providing for loan growth and excessprovision tends to be a little bit above charge-offs.

Very helpful. Thank you.

Rene, I’m curious -- with the margin outlook you just gave,you said 345 a good starting point. Are you suggesting that you think you canhold the margin flat here?

I think if you kind of work through the items I gave you,there were a number of unusual items so I would say that the temporary itemsare going to be offset by the full quarter impact of partners in First Horizon.And then, again our forecast is that we don’t see that same significant level ofloan growth that we had in the past. If we were to do that, I would guess thatyou’d continue to see some degree of margin compression because we are beingfunded primarily with wholesale funds on the margin.

But having said that, if things stay much like they were in2007, our margins were very, very stable until we saw that loan growth, right?And so I would expect more of the same. The other point that I’ll mention is if you just take aquick look at the yield curve, one of the things -- the yield curve is invertedso there is in the fourth quarter on average the spread between fed funds andtwo-year LIBOR was negative 25 basis points, right?

So if you think of ourlending in terms of, for example, indirect auto, we are lending to the curve.We match fund it two years but the funds that we are borrowing with todaybecause of the inversion in the curve actually are costing us a little bitmore. And until that normalizes, I think you’ve got additional margincompression from that factor.

The feds thinking that they might cut 50 basispoints helps a lot.

What was the dollar amount of the securitizations forBayview this quarter?

I think the dollar amount was between $1.2 billion, $1.3billion of securitization and 880, 890 of that were items that we had mentionedpreviously I think on the last call and then at a conference we did inNovember. The final securitization, which was somewhere around $370million, went off and they sold the entire book but it was at much higherspreads and to understand that, you can simply look at the market for CMBS,right?

Spreads are much wider so I think what we like there is that theycontinue to sell their inventory but having said that, with the cost of fundingas high as it is right now, I would expect that the profit will be very littlein terms of securitizations going forward.

And just a final quick question; why was the tax rate so lowthis quarter?

Because part of a bank’s income taxes are derived from taxcredits and when your income goes down as much as it did in the fourth quarter,the credits stay the same, right? So you naturally get a lower tax rate.Hopefully we won’t see that again.

Thanks.

I have a number of questions. First one, I am trying tounderstand what you are saying on Bayview, because I understand if they don’tsecuritize, like in the third quarter they ran at a -- I think an $11 millionloss due to fee income area.

And then when they securitize, obviously then theyhad a nice fee income so when you say you don’t expect to make any money inthat investment, is that line just break-even for ’08 or what are you trying tosay there?

Let me go back through the whole thing. In the thirdquarter, what we were talking about was signing.

So the transactions werecompleted but there were no transactions that were completed in our reportingquarter. That’s a simple thing.

In the most recent transaction that they’ve done, you sortof look at the market, look at the -- just as a bit of a proxy for the disruption,look at triple B spreads on CMBS. And as that has risen, all commercialmortgage related paper, the cost of funding that has gone up and it’s gone upsignificantly enough to erode your profit.

So the first thing that is most important is you get itsold. They did.

That’s unusual. Most of what’s happening in the commercialmortgage-backed space is that you are seeing a backlog of inventory and banksare having to put those loans on their books and fund them.

In Bayview’s case, because their profit model is so strong,they were actually able to get it off but to do so, they used up most of theirprofit on that last transaction. And I would expect more of that to be the casegoing forward until the disruption in the market actually clears up.

Interestingly enough, if you think about it, there’s acorrelation here between the fact that our loan growth surged when the capitalmarket shut down and then income from Bayview actually got less. So what youare seeing there is that is somewhat of a natural hedge.

Okay, and then I had a question -- can you just talk aboutwhy you feel good about the reserves on Alt-A and on the homebuilder loans,given the continuing declining environment?

Let me take the residential mortgages first. You know, thechange is that we had never had Alt-A mortgages on our balance sheet in thepast, so if you go back, and I’ll give you a couple of numbers here, 2002 whenwe had our normal core held-for-investment portfolio, our charge-offs were $5million on that book of about $2 billion or $3 billion.

In 2003, it was $4 million. In 2004, it was $4 million andin 2005, it was 1.8.

In 2006, it was $4 million and in 2007 it was $4 million.Nothing has changed with the core book. If you look at the whole, excluding the acceleration, the$15 million charge we took, we had $16 million of charge-offs on that wholebook.

So it’s really clear that this book that we took in, most of which wetook in in March, is of a different nature and a lower credit quality than whatwe had typically. So one, we can isolate it to that specific portfolio, whichis a portfolio of $1.2 billion, but probably more specifically than that, thereare about $150 million within that portfolio where most of the charge-offs arecoming from and these relate to a portfolio of scratch-and-dent first and aportfolio of scratch-and-dent second mortgages that we had put on our -- youknow, kept on our balance sheet and moved to held-for-investment.

So the issue is fairly isolated and we have a good abilityto track that. We’ve added quite a few collectors and we have good informationon the portfolio.

So I think that’s the best way for me to sort of dimensionfor you that the problem is fairly isolated and allows you to sort of predictwhat’s going to happen.

If I could just follow up, the $4 million that you gave for’07, that was on residential book ex the 1.2 Alt-A?

Yes.

Okay. Thank you.

If you go to the -- you know, to your question on thebuilder, I think on the builder construction, what I’ll say is that wecompleted our third semi-annual review of that portfolio in the beginning --ended the beginning of December and we reviewed about 65% of that book. Sothat’s the book that includes the mid-Atlantic, it includes the east, somewherearound a 50-mile radius around New York City.

It includes our portfolio outwest -- think of Portland -- and it includes another portfolio of loansthroughout our footprint. And when we -- through that review, we had just four loansthat we moved to our classified loan book, so that’s the sort of early stagesbefore you get to non-performing.

And interestingly enough, one of them was inthe mid-Atlantic, one was in Pennsylvania, one was in New York, and one was inPortland. We had another loan in the mid-Atlantic that got classified up out ofthat classified loan book and actually the credit improved.

I think what we know is that as we sit today, we’veadequately provided for the projects that have had problems but I would arguethat this is going to be an issue that plays out for a very long time and themost important thing is how long and how deep is the cycle in residentialmortgages. So until you get your way through some of these projects andyou get a little bit more information, I would say that we think we areadequately reserved today.

We are not saying that we think builder constructionhas improved from the last time we spoke.

When’s the next time you’ll do your semi-annual review?

I think we’re likely to do at least three, maybe four if wecan get it done in the course of the year, so we’re stepping that up. So almoston a quarterly basis, if we can get that done.

Okay, and I apologize if I missed it in the release, but doyou have a total amount of non-performing assets at the end of the quarter?

One second -- total non-performing assets were $447 millionat the end of the quarter.

Sorry, Rene, but that’s loans. Assets is $487 million.

Okay. Thank you very much.

Thanks. Good morning.

Rene, I was wondering if you couldjust also talk about other parts of the portfolio where you are not currentlyseeing any stress and give us some indications of why specifically either inthe rest of the home equity book and across the CNI portfolios, you know, areyou seeing any signs of weakness of small business, middle market slowdowns,that sort of thing?

Let me just start with the home equity portfolio that youmentioned. You know, we have seen a bit of a weakening trend in home equity butremember that these are coming from very, very low levels and on average, wehave a book that is of very high credit quality, okay?

So for example, on ourhome equity line of credit portfolio, which is about $4.2 billion, a year agomaybe we saw five basis points of loss and this year we are maybe at nine or 10basis points. And if you look at our home equity loan portfolio, maybe lastyear that was three basis points of loss.

This year it’s gone to five. The reason for that is that if you look -- give me a minuteand I’ll share with you some of the make-up of our portfolio.

In that total $5billion book of home equity loans, loans with a loan to value of less than 85%represent 84% of that loan book, so there is very little if anything better inhigh loan to value segment. Also, if you look for example at the problem vintages, wherefolks -- 2005 and 2006, something like 78% to 80% of our loans were above 700credit scores.

So we never got into any of the brokered issues. All of theloans that we have were under-written by us unless we acquired them -- like,for example, through some of the acquisitions.

So we have a very high credit quality book, so we see someof the trends but again, we’re starting from a very conservative base. If you look at indirect auto, again you can see from our --you are seeing that there are rising delinquencies there but if you compare ournumbers to the average of the industry, they are somewhat lower.

I think whathelped us there is if you remember, for two years we said that we did not likethe economic returns on that paper. So for example, if we had an auto loan bookof $3.5 billion, maybe something less than 20% is from the 2006 vintage.

And when we work with our credit folks, where we see thevintage that is sort of not performing as well as everything else is the 2006vintage. So in essence, what we were saying two years ago is that we werepricing for this current credit cycle and therefore it didn’t make much senseto book loans because you couldn’t get margins that were high enough.

And as aresult of that, we avoided some of those vintages that are turning out to be alittle bit poorer than they have historically been. I think those are the two things that are helping usprobably the most.

Also, as you know, we’ve got a large commercial real estatebook where the delinquencies are negligible and things are holding up prettywell. That in part has to do with the fact that our underwriting standards arepretty conservative.

As an indication of that, I think our loan-to-value in ourNew York City book, which is $4 billion, is about 54%. So I think -- I’m not saying that we won’t have problems aswe move through the course of the year and new things won’t arise but from whatwe see today, we think we’ve identified most of the areas of concern that areapparent and most of that centers around the residential real estate arena.

Great. Thanks, Rene.

I know this has been asked to some extent, but I would liketo come back to the margin outlook a little bit, if possible. When I justcompare your average balance sheet and rates in the third quarter to the fourthquarter, your loan portfolio, the average yield in your loan portfolio declinedby 33 basis points and I know some of that had to do with the acquisitionswhich you’ve outlined.

But I would suspect that a good chunk of that also hadto do with the decline in the prime rate. And it seemed like then when we flipover to the liability side and especially look at your deposit rates, there wasa very minimal decline.

In fact, some of your deposit categories rates went upand I know you outlined a few one-time items there. But it just seemed like such a large discrepancy between thedecline in the average loan yields versus the decline in the core depositrates.

It kind of gives you a little consternation as to what might happen tothe margin if the prime rate continues to decline. Could you speak to that alittle bit?

Sure, Ed. What you’ve outlined is spot on but let me justmake it a little clearer.

I talked about the prepayment penalties but firstyou’ve got to normalize for that. If you put that just on the loans, it’s apretty big number.

I don’t have the effect on the yield in front of me butyou’ll see that that’s depressed the yield somewhat. If you normalize for those things and partner it, absolutelythe loan yields are coming down as fed funds drop and the prime rate drops.

Andthen we’ve held our deposit pricing flat. And if you go back over the lastthree or four quarters, we have been -- the spread from wholesale funding toour cost of funds has been sort of at an all-time high.

So what we did this quarter by not adjusting deposit pricingis that we sort of reset ourselves a bit. Wholesale rates have come down quitea bit in the last six months and I think what you’ve got is that we’re muchbetter positioned than we were than over the last three quarters, to have toput another [tools] to maintain a neutral position.

So we bought something by not dropping those rates but whatyou are seeing is -- you are spot on.

Shouldn’t -- in light of that, shouldn’t the decline inprime and fed funds that we got at the end of the fourth quarter and that wepotentially might get at the end of January have the same impact though? Or atleast have more of an impact because it’s going to come on a full quarter basisas opposed to a partial quarter basis in the fourth quarter?

I don’t expect it to have more of an impact. I think thatyou’ll have some ability to reset prices if the fed moves, for example, by 50basis points.

And remember, what’s happening is you’ve got that inversion inthe yield curve, right? So what’s not price in yet is that we are still payingup quite a bit relative to say two-year LIBOR and three-year LIBOR.

A lot of what we put on, for example, is actually shorterterms, two, three, four year deals in terms of the real estate structure. So Ithink that the abnormal shape of the curve, we wouldn’t expect, if you look atthe futures, to sort of last that way and that will give us a little bit morerelief on the short end.

But again, all of that is based on the curve short ofperforming as the forward rates would suggest.

Okay, thank you very much.

If I could just give you one other thing -- if you look atour position from the forwards, if it goes down 200 basis points more, so thatwould be let’s say fed funds in our scenario is 350 by the end of next year. Soa 200 basis point ramp down from there, we lose 1%, $21 million.

So you areright in your direction but the magnitude is not that big of a deal.

Okay. All right.

Thanks.

I know you’ve gone through this, but if you wouldn’t mindjust hitting the metrics again on the Alt-A portfolio in terms of what you haveon your books, how much of that is in the reserves, and then what the NPAs areand I think you were pretty clear on the charge-offs for $15 million, but Ijust want to make sure I understand the metrics in that portfolio.

The portfolio of Alt-A mortgages is $1.2 billion. I talkedabout the fact that of the -- excluding the $15 million from the accelerationthat we had charge-offs on that portfolio of about $15 million, on the totalportfolio about $15 million, $11 million of which was on that Alt-A portfolio.

Okay, and you had said of the increase in the reserve thisquarter, a reserve in excess of charge-offs of that $48 million, a lot of thathad to do with Alt-A and then you also mentioned too to the residentialdeveloper portfolio. Can you just --

Sure. On the residential developer portfolio, we added about$14 million related to two developers.

Those two developers were the one thatwe took the non-performing in the first quarter and then another that we tookin the third quarter. What we saw on the one in the mid-Atlantic was essentiallythat the lot take-downs that occurred occurred at slightly lower prices, so wetook a charge-off of about $2 million on that property and then we readjustedthe appraised values.

The good news and what is sort of holding that up is thatthe national builder that is sort of supporting that property is still thereand willing to continue with the project. The other project we’ve provided, of the 14, $11 million wasassociated with lower appraised values.

What we’ve seen is that the appraisersare getting a bit skittish. In fact, on that particular property, the appraisedvalues were below what we’ve been able to take down some of the loss on.

But atthe end of the day, you’ve got to stick with the appraisal.

Okay. And then just on the resi developer portfolio, whatpercent of that is -- I’m sorry, could you just give the numbers that are outof footprint?

Yeah, hang on one second.

Specifically in the west. I know you referenced Portland,but --

We have $196 million in the East. In the mid-Atlantic, wehave $595 million.

In the West, we have $292 million, and then throughout ourfootprint in smaller developers, we have 770, so a total of $1.8 billion.

Okay, and then of the $1.8 billion, what is the number ofthat that’s on non-accrual right now?

That is $84 million or $85 million.

Okay, and then just one more breakdown on that; so of the84, 85, how much of the non-accruals are out of footprint?

The majority are -- I would say essentially none but themajority or almost all -- I’m not doing the math but almost all are infootprint.

Okay, great. That’s very helpful.

Thank you.

Most of my questions were answered but just quickly, Rene,you mentioned the Partners First securitization at the end of the quarter. Whatwas the residual impact of that securitization?

Or will we expect something inthe first quarter?

No, I don’t think -- I mean, what you are going to see is --you know, slightly but not noticeable lower NII but it will flip the feeincome. We were able to securitize that $950 million and the guarantee cost forsomething like 14 basis points, so it just made a lot of sense to do.

So you didn’t have a negative mark or anything that ranthrough in the quarter?

No, it was a pristine portfolio.

Okay, and then just on a go-forward basis, how do you guyslook at the Partners First portfolio in terms of the mortgage? Any anticipatedchanges in terms of their business model as it relates to mortgage and how inconformance with M&T?

We’ve retained a number of people in the mortgage unit and Iwould expect that we will run that mortgage program much like we run the restof our footprint. I wouldn’t see anything different from what M&T typicallydoes.

Okay, and then just I don’t know if you mentioned thisearlier, could you give us a sense in terms of production numbers in thequarter just as it relates to agency, non-agency production in the fourth quarterfor the company?

There is essentially no non-agency production. Closed loansin the quarter were $1.3 billion -- the same as in the third quarter.

Andapplications were $2.8 billion; in the third quarter, they were 2.9, so it’sdown slightly from the third quarter. And let me just check the other questionyou had, which is on agency -- everything was agency.

Okay, great. I appreciate it.

Thank you.

A couple of questions; with respect to growth in commercialreal estate, obviously very strong in the quarter. Generally I would assumeyou’d be, given the current market conditions, funneling a lot less productionto Bayview for securitization and that’s one of the reasons we are seeingbetter portfolio growth?

No, we don’t -- those are two separate businesses is thebest way to say it. We don’t have a conduit.

As you know, we sort of couldnever really figure out how to get into it without cannibalizing our overallportfolio, so we don’t have a traditional commercial real estate conduit.

Okay, so you are not using Bayview in that way?

No, not at all. Bayview is small, balanced commercialmortgages where the average mortgage is $350,000.

Okay, and then I was curious about your comments,particularly in the metro New York area where you are now seeing shorterstructures -- a lot of two, three, four-year deals versus I guess a traditionalproduct would be the five-year fixed product in this market. Is that accurate?

That’s accurate and the other little piece that I didn’tmention, Bob, was that most of the deals are variable so what you’ve got is adisruption in the market and people are coming back to us but the thought isthat they want to see what happens going forward for longer term financing, sothey stayed short and they’ve kept it variable.

Okay, so variable is new in this market and is that anM&T phenomenon or is that a market phenomenon?

I think it’s a market phenomenon. I mean, most of our --historically, we have had a large fixed rate portfolio in New York too, so Ithink it’s a market phenomenon.

Okay, and now that these loans are variable, they weretypically price off the five-year, what will they re-price off of goingforward? The question is that most of these were fixed at five years writtenoff fee, the five-year CMP, I think.

That’s the product in the market -- arethese now LIBOR based loans or how are these --

They are LIBOR based loans but I couldn’t -- obviously theterm was varied by each one, right? So we would typically run a duration modeland sort of match it.

Okay. And within that traditional metro New York market, multi-family’sbeen a decent sized piece of that.

Have you guys seen any stress or any cracksin the metro New York market so far?

No, we haven’t. Delinquencies are non-existent.

I haven’tseen any change.

Okay, one clarification; when you talked about mid to highsingle digit loan growth I think in 2008, were you talking average overaverage? Were you talking period end?

I guess it will come out to be the same but I was probably-- you can use it as a linked quarter over the next three or four quarters.

Okay, and then just one final question; having completedsome deals recently yourselves, I would imagine that there’s no shortage ofsellers in the environment. Can you give us some sense of how you are thinkingabout M&A going forward?

We don’t think about it any different than we have in thepast. I think there probably are a number more of candidates out there that arethinking about it but having said that, a lot of people are working throughtheir issues.

So I wouldn’t say there’s any big pick-up in volume there. But with respect to M&T, we tend to do our work and soto the extent that we had a chance to do due diligence on a company and spendthe time there, there’s nothing that would prevent us from looking atsomething.

You just have to do your credit work.

Okay. Thanks, guys.

Most of my questions have been answered but just a littlebit of clarification -- the big pick-up this quarter in the securitiesportfolio, that was the securitization?

Yes, actually. We put on some securities in the last coupleof days of September, so that obviously affected the average but then thesecuritization would have been in the last two days, last two or three days ofDecember.

Okay, and then in the first quarter, it should come backdown?

I don’t know what you mean. I mean, it will just stay there,so --

So it will stay at the close to $9 billion level?

Yeah, I mean, whatever is there is from the acquisitions. Weput on $1 billion from Partners and then we securitized almost another $1billion into that, right?

And I would guess that one of the things that we’lldo, as we typically keep a pretty, pretty low investment securities book, isthat we’ll run that down to the extent that we see loan growth. The one caveat to that is that you heard the question thatEd Najaran asked and to the extent that we need to use a little bit more fixedrate assets, we may have put on a little bit because typically we would bereceiving somewhat of a hedging benefit from the fact that the New York Cityloan growth would be fixed, but now that that’s variable we may need to do alittle bit in terms of investment securities.

But if you look over the longer term, I would expect thatbook to start to run down.

Okay, thanks, Rene.

Again, we’d like to thank you all for participating todayand as always, if clarification of any items in the call or the news release isnecessary, please call our investor relations department at area code716-842-5138. Thank you and goodbye.