The man who made M&T big-league - Ross School of Business



The man who made M&T big-league

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Wilmers took a sleepy bank in a rust-belt city and built it into one of the nation's top 20

By JONATHAN D. EPSTEIN

News Business Reporter

8/14/2005

Twenty-two years ago, an understated but sophisticated investor from New York arrived in Buffalo to shake up the city's staid financial world. Robert G. Wilmers came with a mission: to take control of a small, struggling bank in a city in decline. With his elite education and white-shoe background, he believed he had a plan to fix Manufacturers & Traders Trust Co.

"When he first came to Buffalo, I thought "We're not going to be seeing much of this guy around town,' " said Robert E. Rich Jr., president of Rich Products Corp. and a longtime friend of Wilmers. Rich's wife, Mindy, is on the M&T board. "Bob really surprised a lot of us in how he truly became a Buffalo guy."

Two decades later, Wilmers, 71, has proved critics and doubters wrong. From a local community bank with just $2 billion in assets, he has built one of the nation's 20 largest banks, with branches in six states and the District of Columbia. Today, M&T Bank Corp. employs 13,200, including 5,000 in the Buffalo Niagara region.

In the process, he has earned a solid reputation on Wall Street for conservative accounting, steady performance and cautious acquiring - indeed, a perfect match for traditional Buffalo. And he has rewarded shareholders, who have seen $3,625 invested in 1980 grow to $1 million today.

A month ago, Wilmers announced that he would step down as president and chief executive of M&T after 22 years at the helm. He will remain chairman of the parent company and its subsidiary, but will be succeeded by his longtime No. 2, Robert E. Sadler Jr.

There's no secret to Wilmers' success. He has stuck mostly to traditional banking, cultivating business relationships and spreading the bank's tentacles steadily throughout the community, while avoiding excess risks wherever possible.

He built up the bank's market share and reputation, and then swallowed up competitors before pushing out to other cities.

He has hired the best talent and brought it to Buffalo, and some managers went on to lead other area banks. M&T graduates include the local CEOs of First Niagara Financial Group, KeyBank, Evans Bancorp and Greater Buffalo Savings Bank.

And, perhaps most impressive of all, he created this economic powerhouse - and made many people wealthy - in a most unlikely area, and during a most unlikely time. Where other parts of the country have boomed over 30 years, upstate New York and especially Buffalo have suffered a long decline.

Since 1970, the city's population has fallen 39 percent from 463,000 to 282,864, and Erie County's by more than 10 percent from 1.11 million to 936,000, as economic conditions drove people to search elsewhere for jobs.

The achievements of Wilmers and M&T show a potential path for others in Western New York: build a base for a company here, dominate the market and then focus growth elsewhere for the future. And for many, his experience is a lesson that Buffalo's economic hardships won't hold them back.

"The fact that he's been able to accomplish that in Western New York, where there's little or no organic growth, it's just been a virtuoso performance," said Robert Brady, CEO of Elma aerospace firm Moog.

Wilmers has also sought to leave his mark on his adopted community, investing in the arts and the zoo, recruiting cultural and educational leaders, encouraging others to become involved, and donating millions of his money and hundreds of hours of his time. He's spoken out on fiscal and social issues facing Western New York, and led efforts to address them, even at risk to M&T's image.

He directed the bank's adoption of a poor-performing school, now Westminster Community Charter School. And he helped fund the search for a new schools superintendent.

"I'm hard-pressed to name anyone who's done more for the community in the past 10 years," said Brian J. Lipke, CEO of Gibraltar Industries, whom Wilmers urged to serve as chairman of Buffalo's control board. Wilmers is also on the board.

"The leadership of the business community all recognizes that when Bob Wilmers calls, you return the call immediately," Brady said. "He has instant access to everyone in the business community, and he enjoys the respect of everyone and the admiration of most."

Some are critical

But not everyone lauds him. Labor unions and some politicians have said he should mind his own business and stop meddling in city and school affairs. They've questioned his motives and cited concern over his role.

Some have also criticized him for not addressing social inequalities with the same verve as cultural and economic conditions. They've said the bank has had to be prodded to make more loans to low-income and minority borrowers, though it has top ratings from regulators for community investment.

And some say Wilmers hasn't done enough at M&T to break the glass ceiling. Only one woman and two minorities are among 19 members of senior management; three minorities and two women are on the bank's 26-member board.

But even his critics concede he has done more for Buffalo and Erie County during the past two decades than almost anyone.

"Although we've had our disagreements, I consider him a friend and one of the more incredible people I've met," said Philip Rumore, president of the Buffalo Teachers Federation, which has urged teachers to withdraw money from M&T.

Wilmers says his efforts, and his encouragement to his employees to become involved, are just based on "enlightened self-interest." The better off the community and economy is, the better the bank will do.

"It's in the best interests of the bank that the community run well, and I feel the bank owes it to the community," he said. "I feel I owe the community something, too."

Friends and business leaders say there's more to his motivations than that. "I really think he cares," said M&T director Brent Baird, a Buffalo investor and part of a shareholder group that installed Wilmers in 1983. "He cares more than a lot of us do that are from here, or he's certainly more active about it."

Noting Buffalo's past size and prosperity, Wilmers said: "I would like to see Buffalo recapture its former glory. If I can help, it would be nice."

Seeing potential

When Wilmers became CEO of what was then First Empire State Corp. - M&T's parent - in 1983, the bank was burdened by bad international and real estate loans, and struggling to grow. Shares sold for one-third of their book value, and the bank had suspended the dividend a few years earlier.

"It was an interesting challenge," he said. "M&T is a fine bank. It was a bank that had fallen on difficult times, but it was still making money."

Drawing on industry contacts, he recruited a new management team from senior ranks of larger banks. They cleaned up the loans, restored the bank's focus to the basic "blocking and tackling" of local lending and deposit-taking, and re-entered the mortgage market.

Within a few years, M&T's performance had improved, so Wilmers turned to outside expansion. In 1987, M&T acquired East New York Savings Bank in New York City, with $1.86 billion in assets. The move shrewdly capitalized on the 1987 stock market crash, when others were avoiding deals. So M&T "acquired it for a song," Baird said.

Two years later, Wilmers jumped on an even bigger chance. During the U.S. savings and loan crisis, Buffalo's biggest thrifts, Empire of America and Goldome, collapsed and were seized by regulators in 1990 and 1991, respectively.

Because of their size, M&T teamed with KeyCorp to divide the local spoils, capturing $2.9 billion in assets.

To pull off the Goldome deal, M&T recruited a new investor: Warren Buffett, who injected $40 million, and stature. "He and Berkshire Hathaway being shareholders gives an aura to the bank that we wouldn't have otherwise," Wilmers said.

Over the next decade came a rapid-fire series of additional deals, and by 2001, it had $32 billion in assets and a solid reputation on Wall Street.

The biggest deal

When Allied Irish Banks Plc decided to unload its U.S. bank, Baltimore's Allfirst Financial, it found an eager buyer in M&T, which snapped it up in 2003 for $3.1 billion in cash and stock.

M&T's biggest deal added $16 billion in assets, along with 269 branches and 600 automated teller machines. It diversified M&T's revenues, and brought it into fast-growing and wealthy markets. And it raised M&T into the Top 20 banks.

Allied Irish now owns 23 percent of M&T and has a seat on its board. Together with what bank insiders control and the level at which shares trade, M&T could be impervious to takeover by others.

Investors love the bank. M&T shares have done better than the Standard & Poor's 500 index over five years, 10 years or even 20 years. The stock is up 136 percent since the bubble burst in March 2000, while an S&P bank index is up 38 percent.

Only 10 companies traded on stock exchanges since 1980 have had a better annual return than M&T's 25.2 percent.

Buffett, whose firm Berkshire Hathaway is M&T's No. 2 shareholder, called his investment "one of the best we've ever made" and M&T's record "far superior to that of virtually any other major bank." Berkshire, whose 5.9 percent stake is worth $728 million, owns The Buffalo News, and Buffett is the newspaper's chairman.

"Under Bob's management, the institution has been a model for serving customers, shareholders and community," Buffett wrote in an e-mail statement.

Local involvement

From the start, Wilmers embedded himself in local affairs, recruiting civic leaders, giving $4 million to the Buffalo Zoo and $1 million to preserve Frank Lloyd Wright's Darwin Martin House, coordinating a bailout of the Buffalo Philharmonic Orchestra, and helping to negotiate a contract for its musicians.

He's generous with time and money to causes he is passionate about, but is choosy about what they are. Once he gives his word, however, he is committed. And he urges his employees to be active. Today, 1,223 employees work with 2,592 groups.

Wilmers has used his position at M&T as a bully pulpit, and his annual letter to shareholders as a forum on taxes, fiscal policies, population loss and an oversized government.

In fact, the annual report and meeting are widely anticipated events, as observers look to see what Wilmers will take on.

"Bob is a no-nonsense kind of guy," Robert Rich said. "He sees something that needs to be done and he speaks out."

He's passionate about education and led M&T in adopting School 68, then one of the city's worst-performing elementary schools, located in the low-income Bailey-Kensington area.

After $10 million in spending by the bank over 11 years, the renamed Westminster is now one of the highest-performing schools in the city. Test scores and enrollment are up, absenteeism is down, and parents are moving into the neighborhood with their children.

"He's not easily discouraged and he shouldn't be," said Jeremy M. Jacobs Sr., chairman and CEO of Delaware North Companies. "He's not easily deterred when he knows he's doing things that are right."

Elite background

Born in New York City, Wilmers spent part of his childhood in Belgium, where his father was an executive and then president of a Belgian utility. He attended the prestigious Phillips Exeter Academy in New Hampshire, graduated from Harvard College in 1956 and attended Harvard's business school.

He says he didn't choose banking, but "just got a job" in the international department of New York-based Bankers Trust, an elite lender that focused on corporations and the wealthy.

After three years, he took a leave to work as deputy New York City finance commissioner for four years under Mayor John Lindsay. He oversaw 2,000 people, a $6 billion budget, and a $13 billion cash flow.

Returning to banking, he joined J.P. Morgan & Co. From 1973 to 1977, he led the company's Belgian operation - that country's fifth-biggest bank - and was decorated by the Belgian king for his community work.

He returned to the United States, and set up and ran Morgan's international private banking unit. Then he formed an investment company, raised money from like-minded investors and sought an undervalued bank to buy, eventually choosing M&T from 80 banks.

From the end of 1979 and through early 1982, the group bought up shares of M&T, ultimately amassing 23.9 percent of the stock and joining the board. The goal was to push for change, but Wilmers was named president in 1982, and when the former CEO retired, the board in 1983 elected him as CEO.

Lives rather modestly

Wilmers has been well paid for his work, though not as much as other bank CEOs. Last year, he earned $1.1 million in salary, bonus, and benefits, according to the bank's proxy statement. He cashed in $15.4 million in stock options, and holds $60 million more in options and $464 million in shares.

He has an apartment on West Ferry Street in Buffalo, another one on Central Park West in New York, and a home in Stockbridge, Mass., in the Berkshire Mountains. In 1998, he bought a small French winery, Chateau Haut-Bailly, that makes a single mix of Cabernet Sauvignon, Cabernet Franc and Merlot.

Otherwise, Wilmers doesn't flaunt his wealth. He plays tennis and squash. His homes aren't excessive, friends say, and he drives himself to and from work. He has a 2001 Lincoln Continental in Buffalo, a 2001 Volkswagen Beetle in New York City and a 1990 Toyota Corolla in Massachusetts. In fact, the unassuming banker bikes in New York more than drives.

"If you didn't know who Bob Wilmers was, you would have no idea from the way he carries himself and the way he treats others," said Andrew J. Rudnick, president of the Buffalo Niagara Partnership, a friend of Wilmers for more than 30 years as a fellow Harvard alumnus. "He just doesn't seek the adoring public or the aggrandizement or the accolades."

As busy as he is, friends say he also dotes on his family, and is willing to drop everything and do anything to spend time with them, even pushing a cart of dirty towels across War Memorial Stadium when his son, Christopher, was a clubbie for the Buffalo Bisons.

He's been more attentive since the death of his oldest son, Robert Jr., in 1993. Friends say that brought him closer to Christopher, now 34 and in California. He also has three stepdaughters and a stepson through his second wife, Elisabeth.

"Spending time with family is extremely important," said Ted Lownie, an architect, and friend since 1993. "He's willing to go to great lengths to do that, even if it means going to distant places to be together."

Friends say he hates discussing himself or taking credit for his achievements. Instead, he poses tough questions of others, probing to learn from them and to challenge their thinking.

Friends also say he absorbs facts and figures quickly, has a sharp memory, and understands complex transactions or situations, as well as people. He makes forward-thinking decisions only after measured consideration. And he's tenacious, persuasive and demanding, whether in banking or in the community.

"He's a numbers guy and he crunches numbers like nobody I've ever seen," said Lipke. "He's not shy about asking people to do things. But he's earned the right because he's done so much himself."



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