Remarks to Annual Meeting of Shareholders: April 18, 2006

It is a privilege and honor every year to address this annual meeting of M&T shareholders. It is, however, a special honor to be here today for this meeting, which marks a true milestone in the company’s history: the 150th anniversary year of its founding. It was in 1856, when the Erie Canal was still new and Buffalo was a boom town on the Western frontier, that Pascal Pratt, a foundry and ironworks owner, and Bronson Rumsey, a real estate investor and tannery owner, leased a small space on East Swan Street here in Buffalo and opened the first office of the Manufacturers and Traders Bank. We here today stand on their shoulders, as well as those of former chief executives such as Lewis Harriman, who took on the leadership of the company in 1925 and was still chairman in 1961, when he announced the plans to build the building in which we are meeting.

We pay our respects today to all—employees and investors alike—who have played a part in building M&T, as we grew from a fledgling institution, originally chartered with just $200,000 in assets, to our present condition: $55 billion in assets and 13,552 employees; 4908 of those work right here in Western New York, a reflection of the fact that we have remained locally-controlled and independent even as once-famous Buffalo bank names—Liberty National, Erie County Savings, Buffalo Savings Bank and so many more—have disappeared.

I would be remiss, by the way, not to point out that there are several other Buffalo companies as old or even older than M&T, representatives of which are here as our guests today. They include our own law firm, Hodgson Russ LLP, founded in 1817, ably represented by the previously-introduced Christian Koelbl and John Amershadian, serving as our elections inspectors today; Maid of the Mist, the Niagara Falls icon, founded in 1845 and whose former CEO James Glynn, was a long-time member of our board of directors; it’s represented here today by its President, Christopher Glynn; Mayer Brothers, founded in 1852, represented here today by its Controller, Alan Zak, and Prentice Office Environments, founded in 1834, and from whom we continue to purchase office furniture today. It is represented here by its President, Al Forster. And

I’d be less than gracious, were I not to note that the other companies as old as our own include our major regional competitor, HSBC-USA, the direct descendant of what was once the Marine Midland bank, represented here today by Brendan McDonagh and Brian Keating. Please join me in welcoming our guests to this 150th anniversary annual meeting.

On this occasion, it is worth not just celebrating M&T’s longevity but reflecting on those factors that have made that longevity—and the success it implies—possible.

Foremost among those factors have been the commitment and talents of our employees. It has been their capacity to take on new challenges successfully which has allowed us to grow. The combination of loyalty and creativity in both our management and overall workforce has been fundamental to our emergence as what Fortune Magazine has characterized as the nation’s second most-admired “super-regional” bank.

As we begin our second 150 years, we are counting on our employees and have reason to believe our trust in them is well placed. Consider some of the results from our survey of employee attitudes, which we call our employee commitment survey. We have learned from it that an overwhelming majority of our employees say they are “proud to work for M&T Bank.”

A similar number say they would recommend M&T Bank to others as a good place to work. And our employees follow their own advice: the average tenure of our employees is 8.7 years, compared to an average of just 3.9 years for the financial services industry as a whole. Indeed, among employees who have been with us at least one year, the average time with the company is 10.3 years.

That same employee survey tells us much about why our employees choose to be committed to this company. Some 81% say they believe that M&T Bank conducts its business dealings with "honesty and integrity" and 83% characterize M&T Bank as a solid community citizen – one which assists the communities in which we do business by the way we do business and which provides both financial and volunteer support to local charities.

One notable measure of the employee commitment to M&T is the extent to which our stock is owned by those who work here. Management, employees, and directors, directly or indirectly, own more than 20 percent of M&T’s shares. That both reflects and encourages commitment to the company. Stock-ownership extends well beyond an inner circle of M&T management. Of our 11,260 employees with at least one year of service, 7,998, or 71%, own shares in the company.

I’m aware that there are some who have criticized us for our use of grants of stock options which have, in part, made that employee stock ownership possible. I fully understand the concerns some rating agencies have regarding the use of this incentive, in light of the complications it has caused for some companies. At the same time, as regards M&T, I simply have no patience for such off-base criticism.

Banking is among the most regulated of all industries and we spend millions each year—indeed, millions more than I’d prefer-- to comply with the requirements of a wide array of federal and state authorities. I accept the fact that, as a financial institution, our business practices must be scrutinized closely by a range of federal and state regulators. But I do not have the same view as regards non-governmental agencies which think they know best how to structure incentives for our employees.

At M&T, those who have been granted options typically retain the stock they purchase rather than immediately selling for short-term gain. Indeed, over two-thirds of options exercised in the last 5 years were used to accumulate M&T shares and not to raise cash.

But that’s not even the point. Rating agencies concerned about the possibility that, because of the incentives created by stock options, a company’s management might run a business for short-term, personal gain, rather than for the long-term interests of shareholders, must keep something else in mind. Fundamentally, the only protection against such a scenario is an ethical corporate culture, reinforced by the tone from the top.

This is a company which has never been touched by scandal, which has avoided even adopting anti-takeover rules, which might serve to protect management, and which has posted consistent, double-digit growth in earnings, not up and down results somehow linked to grants of stock options. And yet those who rate our corporate debt feel entitled to prescribe specific, indeed, arcane compensation approaches to us about how to guard against scandal. The truth is that no accounting or compensation approaches will guard against wrongdoing absent a culture which makes it clear that malfeasance will not be tolerated.

In the same spirit, it is important for those who assess corporate governance to understand that no one company can, as a practical matter, seek to conform to every set of standards that comes down the pike and still have time to actually conduct business.

As a listed member of the New York Stock Exchange, we are cognizant of that body’s norms and standards, as well as those of government regulators. Thus when the Stock Exchange tells us that we should consider members of our board of directors who serve or have served as chief executive officers of other companies to be fully qualified to serve as members of our audit committee, we act accordingly--and will match the work conducted by that committee’s chair, Angela Bontempo, herself the chief executive officer of the Saint Vincent Health System, against that of any similar group.

And so it is that when an independent ratings agency says that it does not consider corporate chief executive officers to be appropriately experienced for such financial work, all we can say is ‘duly noted’-- but urge that we be judged on our record, not on the basis of an arbitrary scorecard. I hope that, in the future, those taking on the task of evaluating M&T, as regards matters such as compensation, governance or anything else, will take the time to look at the specifics of this company, and all those they examine, rather than prescribing the same approaches for all.

It is worth noting, in this context, the recent poll conducted by Institutional Investor magazine, as part of its annual effort to assess which of the nation’s companies were the most shareholder-friendly. It asked 950 analysts and portfolio managers at 350 money management firms- to consider the effectiveness of companies’ governance and investor relations as part of their overall efforts to maximize shareholder value.

It also took into account strong financial performance, stock price appreciation and solid governance policies such as an independent board of directors, sensible executive compensation and a lack of anti-takeover defenses. We appreciate the confidence that those participating in the Institutional Investor poll have shown in M&T by naming us one of the nation’s most shareholder-friendly companies.

There is no doubt, however, that no business remains successful for long, let alone a century and a half, by standing pat and not taking risks, no matter how much its employees like it and how popular it may appear to be in its markets.

So it is that we are able to celebrate M&T’s 150th anniversary because we have been open to innovation, willing to take some chances and to be reflective about the way we operate. It is in that spirit that we have been deeply engaged over the course of the past year in five special projects, involving hundreds of employees drawn from every region and division of the bank.

These projects have led to improvements in our organizational structure and our basic operating procedures, vital accomplishments in the wake of our acquisitions of recent years. They have or soon will change the way we make purchases, process loans, organize our regional offices and tell customers about our products. They have led us to look carefully at everything from how we organize our basic lending and billing systems to how we buy office supplies and procure delivery services.

The good work of those on the project teams has already saved us some $25 million in annual operating costs and will, we are confident, save at least that much more in the coming year. It has, what’s more, laid the groundwork for increased revenues to complement our increased efficiency.

It is well worth emphasizing that it is thanks to these projects that our operating expenses were virtually flat last year. This was a significant achievement that was crucial to our being able again to post a double-digit gain in earnings per share. The world took note. Forbes Magazine, in naming M&T one of America’s “best-managed companies”, cited our attention to detail, saying—correctly—that, at M&T, “nothing is too small to be overlooked”.

These projects are, for the most part, ongoing—and will continue to pay dividends for us and our shareholders. They will be especially important in light of the notably challenging business environment which all banks face today—including a flattened yield curve and a host of healthy competitors who are not averse to recruiting our own top people and who are becoming ever-more aggressive in their pricing policies. We well understand that attention to detail is not a luxury but a necessity if we are to maintain our earnings growth.

Good reviews from Forbes, Fortune, and Institutional Investor all in the same year may be taken as an overall vote of confidence in this company from some of the nation’s most knowledgeable observers. Yet as pleased as I am about our accomplishments this past year, I cannot help but continue to contrast the positive developments here in this company with the ongoing overall problems of our home city of Buffalo, as well as Western New York and the wider Upstate region.

As I noted at this meeting last year, those of us who live here struggle in an economy in which job growth is lower than the national average—but in which tax rates and government spending are much higher. Even with the Governor’s recent vetoes, the state budget for the upcoming fiscal year increases spending by 6 percent. That’s two and one-half times the projected inflation rate. This is not an isolated occurrence; it’s part of a long and unfortunate pattern.

Growth in total New York state government spending has exceeded the rate of inflation every year since 1998. Over the past 10 years, during which the overall U.S. rate of inflation totaled 27 percent, state spending in New York has increased by 79 percent. If New York state spending had been limited to keeping pace with inflation, the fiscal 2007 budget would be lower by 29%—or $33 billion.

Along with spending, public debt has been increasing in New York State at a breakneck pace over the past ten years — growing from $33.1 to $50.6 billion. That’s a 53 percent increase. Thus, not only are we increasing taxes to finance our current spending binge but we’re also incurring obligations that we’re passing on to future generations, even as we make it more difficult, thanks to high taxes, for them to create the wealth they will need to pay these obligations.

It simply cannot be considered a coincidence that this period of high taxes and increased spending and debt has coincided with a period of sharp decline in the population of young people in Upstate New York. In fact, from 1990 through 2000, Upstate experienced a greater decline in the number of residents aged 18 to 44—both in total numbers and as a percentage of our population—than any state in the Union.

At the same time the 18 to 44 year-olds in the U.S. increased 4.4 percent, their number in the 52-county Upstate region declined by 10 percent—a loss of 294,000. No metropolitan area was exempt from the trend: In Rochester, this measure of young people fell by 9 percent, in Albany by 10.4 percent, and in Syracuse by 13.7 percent. In our headquarters city of Buffalo proper, the population aged 18 to 44 decreased by 17.8 percent. The overall population Upstate has not been decreasing—it even went up slightly between 1990 and 2000.

But by far the biggest portion of that increase is a growing number of older residents: the number of Upstate residents 45 or older increased by 15.3 percent, even as the number of young people on whom they rely to hold jobs and pay taxes went down sharply.

Even if they wished to stay, doing so would not have been easy: there are just not enough jobs being created here. Between 1995 and 2005, the number of private sector jobs Upstate increased by an annual average of just .5 percent—far below the national average of 1.3 percent. And the news is only getting worse: last year, the number of Upstate jobs grew by just .2 percent. Viewed as a separate state, Upstate would have ranked 47th in the country. In contrast, from 1990 to 2000, local Upstate government jobs increased by 11.7%. No wonder young people are leaving.

Make no mistake: this is not business as usual. The magnitude and duration of population loss among the young is unprecedented in our history. There has never been a previous ten-year period in the history of the Upstate region when there has been any decline in this most vital portion of our population. And as much as we celebrate our past, we cannot ignore the fact that we meet today in a city in which more than 20,000 dwelling units stand vacant — and in which the assessed value of Buffalo real estate as a whole has fallen over the past decade, while Albany kept increasing spending.

One is tempted to ask the last one leaving to turn out the lights but, given the age of the population, there may be no one left who’s able to flip the switch. Who, indeed, can blame the young, as they contemplate high taxes, lack of job opportunities and increasing public debt, for leaving the region? But it is a troubling trend that we simply must take steps to reverse.

We at M&T are less reliant on revenues from Buffalo and Upstate New York than we once were. Nonetheless, we are not content to see this region, with its talented workforce and many natural advantages, fail to prosper.

It is in this context that I commend to your attention a new initiative undertaken by regional business leaders. It’s called Unshackle Upstate—and it recognizes that the economic problems of this region are not inevitable, rather that they are, in part, the result of costs and burdens that are imposed at the state level—from Albany. This group of regional business leaders is not asking for more assistance, or for new programs of state or federal aid. It calls on our elected representatives to take the steps necessary to lift the burdens of regulation and taxation which hinder us in our quest to compete.

Our message is this: before our children all leave, give us the chance to show what we can do, just as we did when Buffalo was young, and M&T had just begun. As its name implies, Unshackle Upstate seeks only for Upstate to have a better chance to thrive in today’s global economy. Its agenda is common sense: less regulation, an end to excessive taxation, and reform of laws and mandates which make it expensive and difficult to do business in this region—such as the cost of Medicaid, the nature of state liability rules for worker compensation, or the pricing of state-provided electric power.

These sorts of changes will require our legislators in Albany to work together as a group—as an Upstate caucus—with the goal of doing what it takes to unlock the competitive spirit which first built our economy. I join with Unshackle Upstate to urge that our representatives keep the goal of a renewed Upstate economy foremost in their minds. I urge business leaders to support those legislators—and only those legislators—who do just that. I endorse this mission today because a regional return to economic vitality would be the best sort of anniversary celebration M&T could have.

I would be remiss not to call your attention to a hopeful development in this context. We have in Buffalo a new Mayor notable for the energy and creativity he’s demonstrated in his first months in office. My thanks to Byron Brown for his willingness to serve and his evident determination to succeed.

Finally, let me take this occasion to note that, in addition to being our 150th anniversary year, this is the first M&T annual meeting since 1983 in which I do not speak as chief executive officer. In considering the strengths of this company, as I did earlier, it is important to add that they are no better manifest than by the fact that we have someone of the stature, integrity and qualifications of Bob Sadler to step up to take on the tasks of day-to-day leadership.

As we begin our second 150 years, we are not looking back but, rather, looking forward—toward continued growth. And no one better understands the balance of prudence and initiative necessary to lead us in that direction than my colleague and friend, Bob Sadler. Thank you Bob—and thanks to all of you.

Robert G. Wilmers
Chairman of the Board