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FIRST EMPIRE EXPECTS CHARGE OF $45 MILLION

First Empire State Corp.'s takeover of Onbancorp Inc. will trim its earnings next year by 4 percent, although cost savings and revenue expansion will boost the banking company's profits over the long run.

First Empire, which owns M&T Bank in Buffalo, said it will take a $45 million pretax charge for merger-related costs.

First Empire Wednesday told analysts at a Bloomberg Forum that it expects to sell more business loans and consumer financial products, taking advantage of Onbancorp's dominant market share in its home market of Syracuse and also in Wilkes-Barre, Pa. Within two years, the combined bank will increase revenue by 6 percent to 8 percent, or about $15 million.

The bank also expects to reduce Onbancorp expenses by 30 percent, or about $31 million, including the reduction of 250 to 300 jobs from back office technology support and corporate administration. There will be few branch closings.

First Empire uses purchase accounting, which means it has to pay goodwill -- the difference between a bank's liquidation value and the price paid in a takeover. Most bank acquisitions use the more favorable pooling of interest method, which eliminates goodwill expenses.

Robert Wilmers, First Empire chairman and chief executive, said investors should look at "cash earnings," which exclude goodwill. First Empire's cash earnings are expected to increase 7 percent next year and then rise 14 percent in each of the next two years.

On a reported basis, which includes goodwill costs, the transaction is expected to reduce First Empire's reported earnings per share by 4 percent next year, and then add 2 percent in 1999 and 3 percent in 2000.

Moody's Investors Service and Standard & Poor's Corp. both confirmed their ratings on debt issued by First Empire and its M&T subsidiary. In addition, S&P & Moody's both placed Onbancorp's debt under review for possible upgrade.

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