Good afternoon, ladies and gentlemen.
I hope you’ve been enjoying your time here in Buffalo. I’d like to begin by congratulating Frank Sciortino and his team here at the SBA office in Buffalo for organizing this important event. Please join me in giving them a round of applause.
I’m going to have to find a way to get even with him, though, for making me give a speech.
I don’t particularly enjoy giving speeches. Actually, I enjoy giving my speeches about as much as others enjoy receiving them. So for your sake as well as mine, I’ll try to keep this short.
And I’ll begin by telling you that I’m troubled ... troubled by the way things are going today. Just scan the daily headlines and you’ll find bad news from just about every quarter. I need not highlight the examples. You know them well. From politics to the economy, we—as a country—seem to pitch from one crisis to another.
As bankers, we tend to be most concerned, both personally and professionally, about the issues affecting the economy— especially about economic conditions in the communities where we live and work—where our families, friends and neighbors live and work—where our customers live and work.
Well let me tell you something ... our nation’s most pressing economic problem is creating jobs. Unemployment currently stands at 9.1 percent in the U.S. We’ve lost more than 7 million jobs since the financial crisis began. There are 13.9 million unemployed people in our country today—including 6.2 million who are long-term unemployed—those jobless for 27 weeks or more.
And those unemployment statistics do NOT include people who are employed part-time for economic reasons, sometimes referred to as involuntary part-time workers, individuals who are working part-time because their hours have been cut back or because they are unable to find a full-time job—which in July totaled another 8.4 million people.
Nor do the unemployment statistics include those who are “marginally attached” to the labor force—individuals that economists have determined are not in the labor market—that’s another 2.8 million people.
So that’s 13.9 million unemployed, plus 8.4 million under-employed, plus 2.8 million who are marginally attached to the labor market ... for a total of 25.1 million Americans who are unable to find suitable, sustainable employment.
How do we solve this problem?
Not only does it affect our national economy—25 million people who aren’t producing or consuming at their normal levels is pretty bad for the economy. But it’s tragic for those unemployed workers and the families they’re trying to support.
Ladies and gentlemen … small businesses have long been the primary catalyst for job creation in America. An older MIT analysis of job creation found that approximately two-thirds of all net new jobs between 1969 and 1976 were created by firms with 20 or fewer employees.
From 1993 to 2007, we know that firms with fewer than 100 employees accounted for 44 percent of net private sector job creation in the United States. But when it comes to that all-important goal of job-creation, the small-business engine is slowing down. In fact ... it’s slowed down so much that it’s just about stopped!
In 2010, companies with fewer than 100 employees accounted for just 16 percent of net private sector job creation in the United States—and firms with under 50 employees created a mere 3 percent of net new jobs, less than one-tenth the 35 percent average from 1993-2007. In the U.S. last year, we managed to create just over 1.1 million new jobs—but only 34,000 of those jobs were created by small businesses.
If firms with less than 50 employees had created jobs last year at their long-term growth rate, the total U.S. private sector job count would have been more than half a million higher!
These numbers must not decline further. Indeed, we must reverse the trend in order to continue our recovery from the financial crisis of the past few years.
The good news is that we can help solve this problem. Accomplishing that goal will require us to change the views that many people have about banks and bankers. I don’t have to tell you, but the financial crisis has led many to distrust banks.
Personally, I believe there isn’t a more honorable profession than banking. So it troubles me when I read how people distrust banks.
A poll I saw not long ago stated that bankers are now viewed as the third worst profession—behind politicians and crooks. Research indicates that nearly a third of small businesses have shifted business away from their bank due to a lack of trust.
Surveys conducted in last year’s fourth quarter by Greenwich Associates showed that 19 percent of small businesses moved all their accounts because they didn’t trust their current bank, and 53 percent of small businesses moved more than half their accounts and balances. That same survey also shows that small businesses are now depending less on bank financing for planned capital expenditures, and instead, have shifted to cash and retained earnings.
Of course, that doesn’t mean that banks aren’t lending—we all know that businesses and consumers alike have been putting away cash like crazy, and there’s very little demand for credit out there right now. And a bank that refuses to lend money is like a factory that refuses to produce goods—neither will survive for long. But the perception is out there that banks are not lending money.
Helping small business owners receive the capital they need to open their doors, build inventories and hire workers is how banks and the SBA can come together to solve the most important economic challenge of the day—creating new jobs.
With the public’s current perception of banks, we can’t expect small business owners to come to us. It is paramount for us to reach out within our communities and show our neighbors that we want to help, and that the loan window is open.
By getting involved and staying involved in our communities, we, as bankers, can educate our neighbors—not only that credit is available, but that the SBA is also available to help with myriad other resources and support.
We can start by learning about the 14 different programs available within SBA’s product set—whether it’s the Community Advantage program, 7(a), the Express programs, 504 loans or others.
7(a) is one of the programs we use most at M&T ... it allows us to provide capital to start a new business or expand an existing business that may not have otherwise qualified under our conventional credit guidelines. Since 2005, we’ve done 1,431 7(a) loans totaling more than $443 million. Under 7(a) we can do bigger loans—up to $5 million—but the paperwork is more burdensome—about 20 pages of application.
That’s why we also make extensive use of the Express programs … SBA Express, Patriot Express and Export Express. You can get an Express loan for up to $350,000, and while the guarantees can be smaller, the application is shorter and easier. M&T has done 6,189 Express loans for more than $427 million since 2005—and last year we saw a 35 percent increase in dollars approved.
All of you here today at the America East conference have learned much that you can bring back with you ... to your banks, your communities and your customers ... and I strongly encourage you to do so.
Please feel free to speak to any of my colleagues from M&T Bank, who will be more than happy to share some of their own experiences.
To tell you the truth, this is one of the many things that makes me most proud of my colleagues. In 2010 alone, we made 139,000 new loans totaling $17 billion. We’re the number one SBA lender in Buffalo, Rochester, Syracuse and Binghamton in New York; Philadelphia, Pennsylvania; Wilmington, Delaware; Baltimore, Maryland; and Washington, D.C.
And bottom line—our outstanding SBA loans increased by 7 percent last year while other banks cut theirs by 36 percent.
Some may dismiss the traditional role of banks as a quaint vestige of bygone days. I disagree.
Our small-business focus and community-first approach, I’m pleased to say, has made M&T Bank one of the strongest, most successful companies in the U.S. financial services industry. Between 2000 and 2010, we had the best record for shareholder return among the top 50 banks, and were second in Earnings Per Share growth.
Of the 100 largest banks operating in 1983, only 25 remain in existence today—and among them, we rank first in stock price growth. We haven’t reported a quarterly or annual loss in more than 34 years—and we’re the only one of our peers through the crisis that neither cut its dividend nor issued dilutive new shares to raise capital.
This success stems from the fact that we’ve been focused, always, on attracting deposits, making solid loans and adhering to our strict but reliable credit standards. That’s our formula for success—a conservative, shareholder focused approach to business; sound lending principles; a commitment to the businesses and families within our local communities; a close partnership with the Small Business Administration.
As we seek not just to rebuild people’s confidence in the banking industry, but as we seek to rebuild our overall economy, and most importantly, as we seek to create new jobs, I urge you to consider how you can apply that formula at your bank, in your community, with your customers. Not only will you earn their confidence, you will also restore honor to our profession.
Thank you for allowing me this opportunity to speak.
Robert G. Wilmers
Chairman of the Board and Chief Executive Officer