1. U.S. & Western NY Economic Outlook Commercial Planning & Analysis Department May 12, 2010

2. 2006 2007 2008 2009 ‘10 Seasonally Adjusted at Annual Rate U.S. Real Gross Domestic Product Trillions of Constant Q1:10 Dollars $ 14.6 $14.3 $14.8 Sources: U.S. Bureau of Economic Analysis The Big Picture: The recession’s over, but output remains 1.2% below the 2008 peak Linked Qtr Annualized Percent Change 2009 Q1 -6.4% Q2 -0.7% Q3 2.2% Q4 5.6% 2010 Q1 3. 2% Q1 Growth Drivers Stronger consumer spending +2.6 pts Change in private inventories +1.6 pts Stronger investment in equipment & software +0.8 pts Stronger exports (gross) +0.7 pts

3. 2.4 % RECESSIONRECESSION Inflation-Adjusted Year-Over-Year Percentage Change U.S. Personal Consumption Expenditure Growth 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Mar Consumers Are Peeking Out of the Foxhole … Real spending in March grew at fastest rate since Aug. 2007 2.9% average since Jan 1990 RECESSIONRECESSION Source: U.S. Bureau of Economic Analysis RECESSIONRECESSION

4. 2007 2008 2009 ‘10 Seasonally Adjusted U.S. Industrial Production - Manufacturing Production Source: Federal Reserve Industrial Production (R) Capacity Utilization (L) Year-over-Year % Change …While Manufacturers Are Easing Off The Brakes As demand improves, factories are ramping up production Capacity Utilization Y-o-Y Chg in Industrial Production

5. Seasonally Adjusted U.S. Unemployment Rate 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Apr Source: U.S. Bureau of Labor Statistics 4.4% Mar ‘07 RECESSIONRECESSION RECESSIONRECESSION June ’03 6.3% 9.9 % But not enough to keep the jobless rate from remaining near a 26-year high… RECESSIONRECESSION June ’92 7.8% 5.7% average since Jan 1990

6. How’s Western NY performing in this environment?

7. 97.4 % 95.3 % 2002 2003 2004 2005 2006 2007 2008 2009 ‘10 Based on 12-month moving average employment Western Portion of Upstate NY (counties west of Utica-Rome metro area) United States Source: U.S. Bureau of Labor Statistics Mar Mar ’08 104.5% Oct ’08 98.9% Less Boom, Less Bust… Net Change From Employment Peak United States -7.1 points Western NY -3.6 points Relative Change in Private Sector Employment Since January 2002 Western New York vs. United States

8. 2007 2008 2009 ‘10 7.8 % (Mar) 9.9 % United States Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor NYS data seasonally adjusted by M&T The regional jobless rate remains nearly two percentage points below the U.S. average Western Portion of Upstate NY Seasonally Adjusted Unemployment Rate Western Portion of Upstate NY vs. U.S.

9. Year-Over-Year Percentage Change Private Sector Employment Growth Western Portion of Upstate NY vs. U.S. - 2.0 % United States -1.3 % Mar 2007 2008 2009 ‘10 Western Portion of Upstate NY Source: U.S. Bureau of Labor Statistics WNY job losses are easing and remain below the U.S. average

10. Illinois Georgia Wisconsin Oklahoma Arizona Kansas California Colorado Nevada Wyoming 41 42 43 44 45 46 47 48 49 50 Year-Over-Year Percentage Change in Private Sector Employment U.S. States – First Quarter 2009 vs. 2010 Source: U.S. Bureau of Labor Statistics Top 10 States Bottom 10 States 0.7% -0.2% -1.0% -1.5% -1.7% -1.9% -2.1% -2.2% -2.3% -3.8% -3.9% -4.1% -4.2% -4.3% -4.7% -5.3% -6.0% Alaska North Dakota New Hampshire Vermont Western Upstate NY New York Downstate NY Iowa Louisiana Virginia 1 2 3 4 5 6 7 8

11. Utica-Rome Buffalo Syracuse Albany Poughkeepsie / Newburgh New York City Rochester United States Binghamton Source: U.S. Bureau of Labor Statistics Year-Over-Year Percentage Change in Private Sector Employment NYS Metro Areas – First Quarter 2009 vs. 2010

12. Buffalo Area Trends

13. Year-Over-Year Percentage Change Private Sector Employment Growth Buffalo Metro Area vs. United States Source: U.S. Bureau of Labor Statistics - 2.0 % - 1.1 % Buffalo 2007 2008 2009 ‘10 United States Job losses are easing and remain below the U.S. average

14. Seasonally Adjusted U.S. and Buffalo Area Unemployment Rate 8.0 % (Mar) 9.9 % Buffalo United States Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor Note: Buffalo data seasonally adjusted by M&T Like most upstate NY metros, Buffalo’s jobless rate remains below the U.S. average—and seems to be diverging from the national trend 2007 2008 2009 ‘10

15. Year-Over-Year Percentage Change Existing Home Price Appreciation Buffalo-Niagara Falls Metro Area vs. United States 2003 2004 2005 2006 2007 2008 2009 Source: Office of Federal Housing Enterprise Oversight United States - 4.7 % 1.8 % Buffalo Note: Excludes homes financed with non-conforming loans (subprime, I.O., jumbos, etc.); Includes refis Why is Buffalo Doing So Well? Local price appreciation has topped the U.S. norm since 2007—helping to insulate WNY from major swings in consumer spending 6 th highest appreciation out of 299 Metro Areas measured in Q4 2009

16. 100 Largest U.S. Metro Areas Buffalo-NF Single Family Home Building Permits Per 100,000 Residents Buffalo vs. 100 Largest U.S. Metro Areas * Based on 2008 population Source: U.S. Census Bureau Less Boom, Less Bust WNY home builders avoided speculative over building, preventing a housing bubble from forming

17. Year-Over-Year Percentage Change Construction Employment Buffalo Metro Area vs. United States Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor - 11.3 % -0.6 % 2007 2008 2009 ‘10 United States Buffalo Net Result: Construction job losses are less of a drag on the Buffalo economy

18. Year-Over-Year Percentage Change Retail Trade Employment Buffalo Metro Area vs. United States Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor - 1.2 % 3.6 % 2007 2008 2009 ‘10 United States Buffalo Another Positive As consumer spending stabilizes, retail hiring starts to rebound

19. 2009 2010 Year-Over-Year Percent Change in Automobile Traffic Into U.S. via Four Buffalo Area Bridges (Left Scale – RED) Exchange Value of Canadian Dollar Per U.S. Dollar (Right Scale – BLUE) Stronger Canadian Dollar Lends a Hand… Sources: Federal Reserve, Niagara Falls and Peace Bridge Commissions Canadian Dollar is at Par with U.S. Change in Automobile Crossings Can. Dollar Exchange Rate In USD

20. 2007 2008 2009 ‘10 Buffalo 73.9 60.2 Consumer Confidence Buffalo Metro Area vs. United States Index: 1996 Q1 = 100 United States Sources: Siena Research Institute, University of Michigan A Long, Slow Climb Ahead Confidence is slowly improving, but remains well below pre-recession levels

21. Rochester Area Trends

22. Year-Over-Year Percentage Change Private Sector Employment Growth Rochester Metro Area vs. United States Source: U.S. Bureau of Labor Statistics - 2.0 % - 1.8 % Rochester 2007 2008 2009 ‘10 United States Job losses are easing and remain below the U.S. average

23. Share of Total Private Sector Employee Compensation* Health Care & Education Payroll Income Rochester Metro Area vs. United States Rochester 1,800 net new jobs created over the past 12 months (+1.8%) United States 2002 2003 2004 2005 2006 2007 2008 ‘09 23.0 % 15.9 % * 4-Quarter running total Sources: U.S. Bureau of Labor Statistics A Nice Shock Absorber… Health care & education are a major source of stability for the Rochester economy

24. Share of Total Private Sector Employee Compensation* Manufacturing Payroll Income Rochester Metro Area vs. United States Rochester 6,100 net jobs lost over the past 12 months (-9.3%) United States 2002 2003 2004 2005 2006 2007 2008 ‘09 22.3 % 13.6 % * 4-Quarter running total Sources: U.S. Bureau of Labor Statistics …To Help Offset Factory Layoffs Industrial payrolls continue to shrink, but remain a major income source

25. 1.6% 2.1% -0.2% -2.0% -1.1% -4.8% -2.4% -3.2% -9.3% Source: U.S. Bureau of Labor Statistics Health Care Services Private Education Financial Activities Construction Retail (Ex. Food Stores) Wholesale Trade Leisure & Hospitality Professional & Business Services Manufacturing Percentage Change Manufacturing layoffs account for 71% of 2010 job losses, even though they make up just 12% of total employment Year-Over-Year Absolute Change Rochester Area Job Gain/Loss – Q1 2010

26. Total Private Sector Payroll Income Rochester Metropolitan Area Manufacturing vs. Education & Health Care Manufacturing Health Care & Education 2002 2003 2004 2005 2006 2007 2008 ‘09 $ 3.7 $ 3.8 * 4-Quarter running total Sources: U.S. Bureau of Labor Statistics Billions

27. Federal Reserve Bank of New York NYS Manufacturing Activity Index Index Numbers Above 0 = Expansion 31.9 Increase Decrease NET 2009 Oct 51.1% 17.6% +33.4 Nov 41.3% 19.0% +22.3 Dec 24.5% 20.0% +4.5 2010 Jan 33.1% 17.2% +15.9 Feb 41.6% 16.7% +24.9 Mar 43.3% 20.4% +22.9 Apr 47.5% 15.6% +31.9 Positive Outlook NYS manufacturing activity (most of which is Upstate) is rising once again 2008 2009 2010

28. ROCHESTER Buffalo Binghamton Syracuse U.S. Metro Area Average Manufacturing Share of Gross Metropolitan Product - 2008 Upstate NY Metro Areas vs. United States Industrial Impact Stronger factory output should provide a key boost to the Upstate NY economy during the second half of 2010

29. The New Normal? With less consumer spending, real sales tax receipts have shifted downward by 8.5% since mid-2008 But are up 0.8% since November 2009 2007 2008 2009 ‘10 Constant March 2010 Dollars (millions) Monroe, Livingston, Ontario, Orleans & Wayne counties Note: data are cash sales tax collections (excluding EFTs) for county governments only—excluding cities and school districts Sources: NYS Department of Taxation & Finance, U.S. Bureau of Economic Analysis $ 525 Inflation Adjusted 12-Month Running Total County Sales Tax Collections in the Rochester Metropolitan Area

30. 2007 2008 2009 ‘10 Rochester 26.8 % 14.5 % Year-Over-Year Percentage Change Consumer Confidence Rochester Metro Area vs. United States Positive Outlook Confidence is starting to improve, easing downward pressure on household spending Sources: Siena Research Institute, University of Michigan United States

31. Syracuse Area Trends

32. Source: U.S. Bureau of Labor Statistics - 2.0 % - 1.2 % Year-Over-Year Percentage Change Private Sector Employment Growth Syracuse Metro Area vs. United States A Recurring Pattern Job losses have been less severe than the national norm Syracuse 2007 2008 2009 ‘10 United States

33. Seasonally Adjusted U.S. and Syracuse Area Unemployment Rate 8.0 % (Mar) 9.9 % Syracuse United States Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor Note: Syracuse data seasonally adjusted by M&T Consistent with other upstate metro areas, Syracuse’s jobless rate remains well below the U.S. average 2007 2008 2009 ‘10

34. 4.0% 1.7% 2.2% 3.5% -1.9% -8.8% -5.9% -5.8% -6.1% Source: U.S. Bureau of Labor Statistics Private Education Health Care Services Leisure & Hospitality Construction Retail Transportation Wholesale Trade Financial Activities Manufacturing Percentage Change Transportation & wholesale trade layoffs account for 37% of 2010 job losses, even though they make up just 7% of total employment Year-Over-Year Absolute Change Syracuse Area Job Gain/Loss – Q1 2010

35. Source: U.S. Bureau of Labor Statistics * 12-month moving average 17.9 % 22.8 % Percentage of Average Private Sector Jobs* Health Care & Private Education Employment Syracuse Metro Area vs. United States Similar to Rochester Evolving labor market insulates Syracuse economy Syracuse 2007 2008 2009 ‘10 United States

36. Source: U.S. Bureau of Labor Statistics -11.3% 4.8 % Year-Over-Year Percentage Change Construction Employment Syracuse Metro Area vs. United States Another Positive… Building activity continues to support local economy Syracuse 2007 2008 2009 ‘10 United States

37. Source: U.S. Bureau of Labor Statistics - 2.7 % - 7.4 % Year-Over-Year Percentage Change Wholesale Trade & Transportation Job Growth Syracuse Metro Area vs. United States …But Also a Negative Local job losses remain well above the U.S. average Syracuse 2007 2008 2009 ‘10 United States

38. Syracuse 73.9 63.6 Consumer Confidence Index Syracuse Metro Area vs. United States 82.2 54.8 Slowly Getting Back On Our Feet… Consumer sentiment is improving — but will remain fragile until the jobless rate begins to shrink Sources: Sienna Research Institute, University of Michigan United States 2007 2008 2009 ‘10

39. Source: U.S. Bureau of Labor Statistics * 12-month moving average 18.3 % 21.1 % Percentage of Average Private Sector Jobs* State and Local Government Employment Syracuse Metro Area vs. United States Potential Storm Cloud Will NYS budget woes hurt state & local employment levels? Syracuse 2007 2008 2009 ‘10 United States

40. 2010-11 Economic Outlook ?

41. 2007 2008 2009 ‘10 Economic Cycle Research Institute U.S. Leading Economic Index Index Components Money supply (M2) Commodity prices Mortgage purchase applications Corporate bond quality spread NYSE Composite Index Ten-year Treasury yield Initial jobless claims Indicates a turning point in the economic cycle when changes in the direction of the index are persistent, pronounced, and pervasive over several months. Designed to turn down before a recession and turn up before an expansion. 134.7 Apr 30 Index 1992 = 100 6-9 Month Outlook Further growth appears to be on the horizon… Weather- related dip

42. 2007 2008 2009 2010 Institute For Supply Management U.S. Manufacturing Activity Index Index Numbers Greater Than 50 = Expansion 60.4 "Manufacturers continue to see extraordinary strength in new orders, as the New Orders Index has averaged 61.6 percent for the past 10 months.” “…signs for employment in the sector continue to improve as the Employment Index registered its fifth consecutive month of growth.” “…Overall, the recovery in manufacturing continues quite strong, and the signs are positive for continued growth." Norbert Ore—ISM Business Survey Committee chairman …led by a rebound in manufacturing, where activity expanded for the 9 th consecutive month in April

43. Inflation-Adjusted Percentage Change From Previous Quarter at Annualized Rate Fixed Investment in Equipment & Software by U.S. Businesses Business Spending Takes the Lead Capex is rebounding as firms move forward with necessary investments that were postponed over past several years 2007 2008 2009 2010 FORECAST Sources: U.S. Bureau of Economic Analysis M&T Bank forecast

44. 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 09 Q4 U.S. Household Debt Service Ratio As a Percent of Disposable Income 12.60% Q1 2008 13.92% Average Since 1980 12.07% Source: Federal Reserve Sobering Reality Consumers will continue to repair battered balance sheets by saving & paying down debt for at least another year, keeping a lid on economic growth

45. -0.6 % RECESSIONRECESSION Inflation-Adjusted Year-Over-Year Percentage Change U.S. Personal Income Ex. Transfer Payments 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Mar Income Drag Persists Ex. government payments, real income remained below year-ago levels for the 26 th consecutive month 2.3% average since Jan 1990 RECESSIONRECESSION Source: U.S. Bureau of Economic Analysis RECESSIONRECESSION

46. 6.7 8.0 Months’ Supply of Available Homes U.S. Single Family Homes For Sale Sources: U.S. Census Bureau, NAR RECESSIONRECESSION Existing Homes New Homes Months Supply At Current Sales Rate RECESSIONRECESSION 00 01 02 03 04 05 06 07 08 09 10 Mar Jan:09 12.4 Housing Drag The housing market will face significant pressure for at least another year as inventory levels remain well above historic norms

47. 2008 2009 2010 2011 Seasonally Adjusted U.S. Unemployment Rate Forecast FORECAST 10.0% 9.5% 8.9 % Labor Drag The jobless rate will remain elevated for an extended period Sources: U.S. Bureau of Labor Statistics, M&T estimates

48. 2006 2007 2008 2009 2010 2011 Seasonally Adjusted at Annual Rate U.S. Real Gross Domestic Product Trillions of Constant Q1:10 Dollars $ 15.4 $14.3 $14.8 Sources: U.S. Bureau of Economic Analysis, M&T estimates Linked Qtr Annualized Percent Change 2010 Q1 3.2 % Q2 2.9 % Q3 3.0 % Q4 3.1 % 2011 Q1 3.1 % Q2 2.9% Q3 3.1 % Q4 3.2% FORECASTFORECAST $14.9 Modest Recovery The economy should expand by 3.0% in 2010 and by 3.1% in 2011—positive, but below historic norms

49. Federal Government Expenditures As a Percent of GDP 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: Congressional Budget Office Uncle Sam Lends a Hand Fiscal policy helps support 2010-11 growth— but what comes next? 20067.4% 20072.8% 20089.3% 2009 17.9% 2010 5.8% 2011 3.0% Year-Over-Year Spending Increase 25.1 % CBOFORECASTCBOFORECAST 25.4% 0.8% 1.4% 2.5% 1.3% (1.5%) (3.4%) (3.5%) (2.6%) (1.9%) (1.2%) (3.2%) (9.9%) (10.6%) (8.3%) Surplus/ Deficit as % of GDP

50. Year-Over-Year Percentage Change U.S. Pre-Tax Corporate Profit Forecast Over Next 12 Months 2009 2010 A Critical Handoff Business profits will have to continue rising to offset the stimulus wind down

51. United States -2.4% 3.1% 2.6% Canada -2.6% 3.1% 3.2% Mexico -6.5% 4.2% 4.5% Euro Zone -4.1% 1.0% 1.5% China 8.7% 10.0% 9.9% India 5.7% 8.8% 8.4% World -0.6% 4.2% 4.3% Real GDP Growth Forecast by Region 2009 2010 2011 Source: International Monetary Fund, April 2010

52. Fed Funds 0.12 0.1 0.2 0.3 0.4 0.5 3-Month LIBOR 0.27 0.3 0.4 0.5 0.7 0.9 1-Year Treasury 0.35 0.4 0.4 0.5 0.9 1.0 10-Year Treasury 3.46 3.7 3.7 3.5 3.6 3.8 30-Year Mortgage 4.92 5.0 5.0 4.9 5.1 5.3 Inflation – CPI 3.4 1.5 1.9 1.9 2.0 2.0 2009 2010 2011 2010-11 Interest Rate Forecast Q4 Q1 Q2 Q3 Q4 Q1

53. Questions? gkeith@mtb.com

54. 99 00 01 02 03 04 05 06 07 08 09 Western NY* Private Sector Employment Manufacturing Jobs (000s) Non-Manufacturing Jobs (000s) Net Loss in Manufacturing Jobs: 98,400 (-41.0%) Net Gain in Non-Manufact. Jobs: 59,000 (+6.4%) Manufacturing (L) Non-Manufacturing (R) Source: U.S. Bureau of Labor Statistics Data are 12-month moving averages Job Growth Hokie Pokie Factory job losses offset gains in non-manufacturing employment * Buffalo, Rochester & Syracuse metro areas

55. Relative Decrease in Manufacturing Employment Since January 1999 Western New York vs. United States -41.0 % -32.7 % Western NY* RECESSIONRECESSION RECESSIONRECESSION 99 00 01 02 03 04 05 06 07 08 09 Data are 12-month moving averages Western NY factory employment has declined at a 4.7% annual rate since 1999—modestly faster than the 3.5% nation average decrease Source: U.S. Bureau of Labor Statistics * Buffalo, Rochester & Syracuse metro areas United States

56. Manufacturing Share of Private Employment Western & Downstate New York vs. United States Source: U.S. Bureau of Labor Statistics 10.9 % 12.7 % Western NY* Downstate NY 4.0 % United States Despite the long-term decline in factory jobs, the WNY region still relies on manufacturing to a greater extent than the U.S. overall * Buffalo, Rochester & Syracuse metro areas 99 00 01 02 03 04 05 06 07 08 09

57. 2002 2003 2004 2005 2006 2007 2008 2009 ‘10 1.8 % 2.2 % Mar Tortoise vs. Hare… Job growth outside the factory sector has been less volatile than for the U.S. overall Western New York vs. United States Increase in Private Non-Manufacturing Jobs Since January 2002 Western NY* United States Increase In Average Number Of Jobs From Total At Start of 2002 * Buffalo, Rochester & Syracuse metro areas

58. Increase In Average Number Of Jobs From Total At Start of 2002 Net Gain: 12,700 jobs 8.4 % Western New York vs. United States Increase in Professional & Business Services Jobs Since January 2002 2002 2003 2004 2005 2006 2007 2008 2009 ‘10 Mar Source: U.S. Bureau of Labor Statistics Opportunity #1 WNY has topped the U.S. growth rate over the past 6 years—can we continue to build on this progress? 0.5 % Western NY* United States * Buffalo, Rochester & Syracuse metro areas

59. Opportunity #2: Job creation at WNY colleges & universities has also topped the U.S. norm—how can we leverage this advantage? Increase In Average Number Of Jobs From Total At Start of 2002 Net Gain: 14,500 jobs 25.8 % Western New York vs. United States Increase in Private Education Employment Since January 2002 Source: U.S. Bureau of Labor Statistics 22.8 % Western NY United States 2002 2003 2004 2005 2006 2007 2008 2009 ‘10 Mar * Buffalo, Rochester & Syracuse metro areas

60. Opportunity / Challenge: While health care has been a steady source of job creation, WNY has not kept pace with the national norm— can we ramp up growth with further investment in our medical sector? Increase In Average Number Of Jobs From Total At Start of 2002 Net Gain: 19,700 jobs 11.7 % Western New York vs. United States Increase in Private Health Care Services Jobs Since January 2002 Source: U.S. Bureau of Labor Statistics 22.7 % Western NY United States 2002 2003 2004 2005 2006 2007 2008 2009 ‘10 Mar Note: includes social services * Buffalo, Rochester & Syracuse metro areas