17 April 2018

On April 18, 1984, in this same room, Bob Wilmers rose to address the Annual Meeting of Shareholders of the First Empire State Corporation—today the M&T Bank Corporation—as Chairman and CEO for the very first time.  

 

As would become his custom, he reported on “several matters affecting the company,” and to quote from the minutes of that day, he said, “the news is good.”  

 

Total net income in the first quarter of 1984 was the highest amount earned in any quarter in the previous fifteen years.  

 

Net loan charge-offs that quarter were down to $336,000 compared with the more than $5 million per quarter that was averaged in 1983.  

 

Non-performing assets were at the lowest point in nearly 10 years.  

 

And net interest income came to $23.6 million—which he called, and again I quote, “the bread-and-butter of the banking business.”

 

I’m proud to say, as Bob did in his first speech, that today at M&T, the news is good—and the state of the bank is strong and sound. 

 

Net income in 2017 surpassed that of any prior year in our company’s history—totaling $1.4 billion.  Diluted earnings per common share increased 12% from the previous year to $8.70. 

 

Our “bread and butter”—the amount we earn on interest from accepting our customers’ deposits and reinvesting them through loans into our communities—grew by nearly $319 million over the previous year and totaled $3.8 billion in 2017. 

 

Our customers are demonstrating strength as well.  At 16 basis points, charge-offs as a percentage of loans have not been lower since 1987. 

 

We contributed $50 million to the M&T Charitable Foundation—the largest amount in our nearly 162 year history.  

 

Yesterday, Darren King, our Chief Financial Officer, announced results for the first quarter of 2018.  Including an increase to our litigation reserve amounting to $0.68 per share strengthening our balance sheet, earnings per share were up 5% from the first quarter of last year.  Earnings and returns both exceeded prior year results.  Revenue growth remains solid, expenses are well managed, credit quality is strong and returns continue their ascent, suggesting that the stage is set for another year of strong performance.

 

Looking back to 1984, the success we have enjoyed is due in large part to our commitment to the idea that banking is—and should always be—a simple business; that the “bread and butter” of banking is not overly complex or complicated.  

 

Our former chairman often reminded us that, “not all companies that would call themselves banks are actually in the business of banking—taking deposits and making loans to support community growth.”  

 

We consider that commitment to community banking to be our lodestar—a set of guiding principles that over the years has helped us to chart our course, remaining close to our customers and our communities, never straying too far from them.  Staying on course, even through the most turbulent of times, is what has kept M&T safe and sound—and out in front of our peers and competitors.  

 

Sadly, we lost Bob Wilmers last December, but we have not lost our lodestar; we have not forgotten our guiding principles; we have not forgone our commitment to simple community banking.  

 

That’s why, in the years to come, we’ll remain focused on what we do best—banking the careful, conservative and consistent way, the simple way, the M&T way: 

 

By actively seeking to understand our customers, and that which is important to them, even in an ever-changing world where customer needs and consumer demands are evolving rapidly;

 

By maintaining prudent lending standards, through all economic cycles, thereby preserving our ability to lend to our best customers—even at the worst of times, just as other banks shutter their lending windows, but when our customers clearly need us most;

 

By working arduously and intelligently to be an efficient operator, enabling us to provide our clients with competitively priced services and advice;

 

By adhering to transparent and forthright accounting policies, and communicating clearly to our stakeholders, especially you, our shareholders; 

 

By judiciously allocating and deploying capital, not growing for the sake of growth itself—but rather, carefully choosing when and where to grow, when and where to invest; 

 

By maintaining a disciplined yet opportunistic acquisition strategy–and when no beneficial opportunity presents itself, returning capital to our owners;

 

All of which can only be carried out by attracting, developing and retaining the best and brightest people, and engaging them, both in our business and in our communities.

 

These principles—and our application of them—are largely responsible for the growth and preservation of shareholder value that has set us apart from our peers and competitors, and that is a source of pride to all our stakeholders.

 

This is our lodestar—these are our guiding principles.  They are simple, though not easy.  They are constant, but not outdated or obsolete.  They grow and evolve, both influencing and influenced by those of us who live them.  

 

That said, because our approach has remained constant over the years, it might be easy to overlook how much change we have undergone in order to continue to succeed. 

 

In 1983, M&T had 59 offices located in just one state—nearly all of them here in the Buffalo region.  Today our footprint includes 782 banking offices and 1,847 ATMs in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia.  We have commercial lending offices in cities including Toronto, Boston, Pittsburgh, Portland and Seattle.  

 

And with Wilmington Trust, we have 57 wealth and institutional trust offices from Long Island to Los Angeles, from Minneapolis to Palm Beach—even in London, Frankfurt and Dublin, and soon in Paris.  

 

We’ve grown from the fourth largest bank in Buffalo, to the 17th largest U.S. based commercial bank in the country, and the 12th largest by market capitalization, from $2.1 billion in assets in 1983 to $118.6 billion today, from $5.3 million in net income to $1.4 billion last year.

 

We had 2,096 employees in 1983—and today we proudly employ 16,925 people who proudly serve more than 3.5 million clients.  Our colleagues are helping a growing customer base meet their changing needs across expanding geographies.

 

Mark Czarnecki, our former president and my dear friend, once told me as we were contemplating these changes, that he appreciated how far we’d come when he realized that we had an expert in everything—from economics to big data, from cyber security to social media, from historical tax credits to small business loans.  

 

How have we managed to accomplish this over so many years?  Quite simply, it’s due to—and thanks to—the talent and tenure and tenacity of our people.

 

Our ability to adhere to our guiding principles, while adapting and evolving to changing conditions, has enabled us not only to survive—no small feat considering that,  of the 100 largest banks operating in 1983, only 23 remain in existence today, including M&T—but that ability has also enabled us to thrive.  It’s notable that, among those 23 surviving banks, M&T ranks first, having provided our shareholders with a compound annual rate of stock price appreciation of 15.1%.

 

 

So it is that our ability to evolve over the past 35 years, adapting to the shifts in the marketplace while abiding by our principles, has been a key and necessary ingredient of our success.  And so too are my colleagues and I keenly aware that further change will be necessary to navigate the evolving landscape.

 

Today, the legislative and regulatory environment, economic conditions and the general perception of the financial services industry are vastly different than they were even 10 years ago.  

 

Consider, for instance, that the federal government has erected a regulatory Mount Rushmore—with names like Dodd, and Frank, and Durbin and Crapo—that continues to fundamentally alter the way banks do business.  

 

Beyond regulation, there is a combination of other changes—societal changes—that are altering the way in which customers and bankers relate: demographics and social norms, consumer preferences and expectations, technological advancements and a faster pace of innovation.

 

Today, bank customers across all segments expect more options, more access, more speed and more security.  And they also want more information, they want more holistic solutions and they want more timely, relevant and actionable advice.  

 

In response to shifting consumer preferences, and in anticipation of our customers’ changing needs, we have been working hard, and investing substantially, not just on advanced technology, but on advancing our people to help us keep pace. 

 

As outlined in our annual message to shareholders, our ongoing efforts are, among many advancements and improvement, bringing a steady stream of upgrades to our mobile banking application to improve our customers’ ability to open and access accounts, to move money and to ensure their online security.

 

This includes our launch of Zelle—a consumer-to-consumer mobile payment solution that, for our customers, will be much faster, easier and more secure than writing and mailing checks—and is another step toward a world in which instant payments are ever more ubiquitous.  

 

Of course, these shifts in consumer preferences don’t just apply to the consumer bank—our clients across the rest of our business lines are experiencing similar changes and expecting similar advancements, and we’re evolving to meet and exceed them too.

 

For clients of the commercial bank, we are making major upgrades to our commercial loan origination systems, and rolling out new tools to help businesses manage their working capital, making these processes more effective and efficient.

 

Changes like these enable us to bring the whole bank to our clients, better leveraging our commercial lending expertise, specialty businesses and market knowledge, thereby increasing the quantity and quality of our service.

 

Similarly, these and other upgrades will enable our wealth management professionals to better bring their broad suite of offerings to business owners, helping them to preserve the wealth they’ve earned over a lifetime, especially when contemplating ownership transition.  

 

The changes we’re making are as much about investing in our people as they are in our technology.  We are focusing on improvement at all levels of our organization, with an emphasis on implementing long-term development plans, mastering new skills and recognizing and rewarding exceptional work.  

 

At the same time, we’ll enhance our efforts to make this the best place any of us ever work by promoting a more diverse, inclusive environment that allows each of us to be our best.  We want M&T Bank to be a place where each and every employee feels a sense of belonging—proud to be a part of the M&T family.

 

I said before that our guiding principles grow and evolve, both influencing and influenced by the people who live them.  Our employees—our family of community bankers—take that responsibility to heart.  

 

As but one example—a foundational example—is the emergence of “employee resource groups” in 2009.  Organized around shared interests or characteristics such as race, ethnicity, gender, age, sexual orientation and gender identity, family status, disability, military service and more, they have grown rapidly to more than 49 groups, including 13 new chapters added just last year, with more than 4,100 employees participating in one or more resource groups, and new members joining every day, 

 

They play a vital role in growing our company: they inform the organization about policies, practices and products that help meet diverse employee and customer needs, professionally develop their members, assist in recruiting talent and promote business development. 

 

Recently, our African American Resource Group organized a professional development series; Hola!, our Latino Resource Group, conducted financial literacy classes and supported hurricane relief; iGen, our Multigenerational Resource Group, initiated a reverse mentoring program; Pride, our LGBT+ Resource Group, has helped us enhance and diversify our advertising; and our Women’s Interest Network held speed mentoring, compiled a checklist for new moms returning to work and supported women owned businesses through networking events.  

 

It is difficult to express the sweeping impact they are having on the way in which we operate.  Most importantly, perhaps, they drive forward an increasing sense of empowerment and democratization among our employees.  

 

However there’s still more to do.  And in some areas, we fully recognize that we still have a long way to go.

 

We can do more as an organization to prepare, position and recruit diverse candidates for promotion through the ranks, for example—ensuring that we are including employees of every color and race and gender and orientation.  

 

We take these issues seriously, because across the bank, across every business line—our people have always been our biggest asset, and they always will be.  

 

 

I wanted to share these important priorities with you to help you see what I see: a company with a rock solid foundation built on long-standing values, upon which we can continue to build and grow, and that is both strong and supportive enough to allow us to evolve and adapt to the world around us. 

 

And while the changing world has required much of our attention, we must not forget to keep a close eye on our own backyard.

 

Looking out these very windows in 1984, the view was of a city in deep trouble—despite its strong foundation, its long history of growth, and its hard-working values.   

 

Buffalo’s unemployment rate back then was a staggering 12.2%. Manufacturing was the main occupation for Buffalonians, employing one out of every five people in the workforce.  Of the Buffalo region’s 1.2 million residents in 1984, more than 65,000 of them would leave in ensuing years.

 

Today, we see a much different Buffalo.  Unemployment, at 5.4%, is less than half the rate it was in 1983.  Total employment is up by almost 129,000, across a broader range of industries.  Our population has stabilized thanks to strong growth in the millennial age group.  Buffalo, like M&T, is changing, and changing for the better.

 

From Canalside to the Buffalo Niagara Medical Campus, from the Northland Corridor to Niagara Street, Buffalo is moving again, and working again, and building again—and M&T Bank, along with our 7,180 local employees, is helping to make it happen. 

 

Manufacturing, while still important, is not the dominant industry, now less than 10% of total employment.  Instead, our economy is diversifying, and strengthening.  

 

Since 2007, full- and part-time employment has risen by more than 10,000 jobs in the Finance, Insurance and Real Estate sectors, and more than 8,500 in the Health Care sector.  Combined, they account for two-thirds of the total increase in employment over the past 10 years.

 

A natural outcome of this more robust jobs market is a more robust housing market.  In 2011, there was 2.4 million square feet of vacant commercial real estate in downtown Buffalo—and since then, 1.1 million square feet of that vacant space has been converted to new downtown housing.  

 

Today there are 4,684 rental housing units in downtown Buffalo—and almost one-quarter of them, 1,065 units, have been added since 2011.  68% of the units completed since 2011 are market rate, and 32% designated affordable housing.  Of the downtown units permitted and under construction in 2018, 46% are market rate and 54% are affordable.  Another 1,400 new residential units are projected to come on line over the next five years. 

 

We couldn’t be happier with the progress we’re seeing right outside these windows.  Yet—we have to remember that all this progress is relatively new; the diversification of our economy and the job growth are very recent.  

 

Buffalo-Niagara’s real GDP grew six times faster between 2009 and 2016 than it did between 2002 and 2007.  During most of the 2000s, Buffalonians earned just 86% of the national average in personal income.  Now we’re at 91%. 

 

It will take more than a few years of growth to reverse decades of decline—and it will take more than a few years of work to ensure that our recovery stays on track.   

 

Let’s compare Buffalo to a very similar city—Pittsburgh: both blue-collar, rust-belt, steel-producing cities.  Since 1969, Pittsburgh’s population declined by 15.4%, exactly the same decline we saw in Buffalo over that period.   

 

Pittsburgh’s unemployment rate reached 18% in the early 80s—even worse than the 12% rate in Buffalo.  From 1969 through 1989, private employment growth in the two cities was almost identical. 

 

But for 16 years, between 1990 and 2006, employment in Pittsburgh grew five times faster than in Buffalo.  Had Buffalo matched Pittsburgh’s employment growth during that period, we would have an additional 20,600 jobs here today—50% more than the number of jobs actually created since 1990.  

 

Said another way, if we take our rate of employment growth in Buffalo today, and we sustain it, we have the potential to create a tremendous number of new jobs in the future.  The power of compounding doesn’t just apply to savings accounts!

 

The Pittsburgh renaissance began in 1990 and continues today, the better part of three decades.  But our revival is still very young—just eight years old.

 

Now, therefore, is not the time to take our foot off the gas.  Now is not the time to stop supporting the policies and programs and partnerships that are fueling our revival.  Now is not the time to put up roadblocks to healthy economic development.  

 

Indeed, now that we see that our economy can work—that it is working—we should be accelerating our efforts and our investments, especially in those parts of our city, and on those parts of our population, that remain untouched, and that are in danger of being left behind.  

 

Despite the recent burst of economic development in Buffalo, we’re still the fourth most impoverished city in the country, and despite recent improvements in our schools, the high school graduation rate still remains unacceptably low at 64%.  Local building activity slowed in 2017 and construction employment declined by 3.3%—the largest decrease since 2009.

 

From job training to the digital divide to immigrant and refugee resettlement to safe and affordable housing to health care to the opioid epidemic—these and other obstacles to full and inclusive economic recovery are still in front of us.

 

True change and true progress require sustained commitment over long periods of time.  It takes coordination among leaders, groups and individuals—not just in government, but business, civic and community as well.  It takes policies that support and reinforce change and investment by business and foundations.  None of these conditions alone is sufficient.

 

And I believe that—working together, in sustained effort—we can overcome these challenges.  Look at what we accomplished at the H.H. Richardson Towers—an architectural landmark on the historic Olmstead grounds that was in danger of being lost forever.  But our community came together—public, private, non-profit—not only to save the buildings, but to create a fabulous hotel, restaurant and conference center.  M&T is proud to support the Richardson complex—playing our role as community bankers, corporate citizens and agents of change.

 

Change, of course, is inevitable.  It is up to us to decide whether to embrace it, or to ignore it.  We’ve seen the perils of ignoring change—both in the banking industry, and in cities like Buffalo.  

 

So at M&T, we choose, as we’ve always chosen, to face change head on, knowing that managing change successfully, adapting and evolving successfully, requires not only a lodestar, a set of guiding principles and values, but it requires talented people to put forth sustained effort over time.

 

Not only are we committed to growing and changing the bank, we are committed to supporting growth and change in all our communities.  We call upon elected representatives—city, county, state and federal—to work together with the private sector and the not-for-profit sector and the labor movement, in this renewed spirit of optimism and collaboration, to equitably address the issues that affect our region, our economy and our people.  And as always, we pledge to do our part.

 

This is our mission, and this is our mandate—because we understand that taking deposits and making loans isn’t what makes us community bankers.  It’s all that we do for the good of the communities we serve, every day, over long periods of time —that’s what makes a true community banker.    

 

Thank you.