Robert G. Wilmers, the chairman and chief executive officer of First Empire State Corp., fancies himself a community banker at heart.

He often talks up the Buffalo company's role in civic organizations, and he presses the flesh with customers whenever he can.

"All the bank officers around here know that if they want me to come visit a company, I will-either large or small," said Mr. Wilmers, who is also First Empire's president.

But with its biggest acquisition ever-an $872 million deal to buy Onbancorp, of Syracuse, N.Y.-scheduled to close at the end of March, $14 billion-asset First Empire is set to become a powerful force across upstate New York, analysts and competitors said.

First Empire's "purchase of Onbanc will change the landscape," said Hermes L. Ames, president of rival Fleet National Bank for New York. "Given their history, they'll be a strong player."

First Empire has made an impact in Rochester since it bought $1.1 billion-asset Central Trust Co. there in 1992, Mr. Ames said. With the additional girth that $5.5 billion-asset Onbancorp would provide, First Empire could compete for bigger loans.

First Empire had $2 billion of assets in Buffalo and in the Hudson Valley when Mr. Wilmers became company president in 1982. The bank then bought a small thrift in New York City, two banks in central New York, a thrift in Rochester, and numerous branches in the Hudson Valley and the western part of the state.

The Onbancorp purchase would put First Empire in every major upstate market, and place it among the biggest in most. Besides Fleet, which had $12 billion in upstate New York assets as of December 1996, First Empire competes in the area against Cleveland-based KeyCorp and Marine Midland Bank of Buffalo.

First Empire stock has climbed from $13.375 in March 1983 to nearly $480 recently, a compound annual growth rate of 27.1% over the 15-year period. That beats the performance of many larger banks, according to SBC Warburg Dillon Read.

First Empire's income rose last year by 17%, to $176.2 million. Return on average assets was 1.33%, up from 1.21% in 1996, and return on average equity was 18.25%, up from 17.6%.

Part of First Empire's success comes from its smart handling of real estate, according to company officials and industry observers.

"While their underwriting has always been conservative, they were doing real estate loans when other banks were getting out of real estate at any cost," said Amy Tait, executive vice president with Home Properties of New York Inc., a Rochester-based apartment real estate investment trust.

Moreover, Ms. Tait said, lenders at First Empire's lead subsidiary, Manufacturers and Traders Trust Co., have the freedom to make decisions that representatives of other large banks cannot.

"Banks tend to try to centralize credit decisions in the main office," she said. "That just doesn't work. It slows down the process and reduces your ability to get a quick and predictable answer."

M&T was able to remain in the real estate market throughout the early 1990s recession because, unlike other large banks, it never got into trouble in the 1980s, said Gary Paul, M&T's senior vice president for corporate finance.

Of M&T's $11.2 billion in total loans at yearend 1997, nearly 40%, or $4.4 billion, was in commercial real estate, including $2.4 billion, or 21.1%, in commercial real estate loans in the New York City area.

During the worst plunges of real estate prices in the early 1990s, the bank's net chargeoffs on real estate loans stayed at or below a meager 1.01%, Mr. Paul said.

"Most people were getting their heads handed to them," he added. "We have good standards. Therefore we can continue to lend in those markets."

First Empire is also ready to prove its thriftiness. It plans to pay for its latest acquisition by cutting 30% of Onbancorp's costs. That would be done by moving management of Onbancorp's computer systems from an outside vendor to M&T's system, centralizing processing in Buffalo, and the anticipated departure of some top Onbancorp officers, Mr. Paul said.

M&T and Onbancorp have overlapping branch networks only in Rochester, where no more than three or four offices are likely to be closed, he added.

The company will not quantify revenue expectations, but growth is as much a part of the game plan as cost-cutting.

"A major element of our strategic interest in Onbanc is that they've got a major retail platform," Mr. Paul said. "And where there's a major retail platform we have repeatedly found that we can go out and, over a period of years, dramatically build our share of middle-market lending."

Onbancorp had 29.9% of deposits in the Syracuse market in June 1996, according to the most recent data available from Sheshunoff Information Services Inc. That put it well ahead of second-place Key Bank, which had 14.7%.

M&T is unlikely to build significantly on this lead in deposit share, Mr. Paul said, but it does intend to sell a wider range of services to retail customers and make a dent in the commercial market.

Though Onbancorp "has been reasonably successful in converting from a thrift to a commercial bank," he said, "they still are of thrift origins."

The Onbancorp acquisition would also give M&T a foothold in Wilkes- Barre, Pa., and a retail presence in Albany, N.Y. Onbancorp has 10 branches in Albany, and had 2.2% of the area's deposits as of June 1996.

M&T already knows the Albany market well. Its mortgage subsidiary is the leading residential lender there, and an M&T loan production office, opened in 1994, has a bigger commercial portfolio in the market than Onbancorp has, Mr. Wilmers said.

Operating as Franklin First Savings and Loan Association, Onbancorp has 19 offices in the Scranton-Wilkes-Barre area and had 12.4% of the deposits there in mid-1996.

M&T said it would use the visibility of its new retail networks in Albany and Wilkes-Barre to build its commercial and industrial, and commercial real estate lending businesses in both markets, Mr. Paul said. Onbancorp's Onbank and Trust Co. and Franklin First would both be rolled into M&T.

Back in 1983, when Mr. Wilmers became First Empire's chairman, M&T was a distant second to Marine Midland Bank when it came to serving Buffalo's middle-market commercial businesses. But it now has a leading market share, Mr. Paul said.

In retail banking, M&T is well out in front; it had 34.8% of deposits in the Buffalo market in mid-1996.

But Rochester may be a better indicator of what is likely to happen when First Empire enters Syracuse, Albany, and Pennsylvania.

The bank made its first major purchase in Rochester in 1993, and since then has boosted its small-business lending portfolio there by 63%, to $130 million, according to Brian Hickey, president of First Empire's Rochester division.

M&T has also been the leading Small Business Administration lender in the Rochester area for the past four years.

In the middle market, lending to Rochester-area companies with annual sales of up to $1 billion, outstandings totaled $412 million in June 1997, up 110% since 1993. Meanwhile M&T's Rochester commercial real estate portfolio grew 63%, to $582 million.

"They're really the dominant bank in town" in real estate lending, according to Roger W. Brandt Jr., president of Rochester's Cornerstone Group Ltd., a real estate developer and manager.

M&T arrived on the scene just as most of the other big banks in Rochester were scaling back in real estate lending, Mr. Brandt said. That was a big advantage, he noted.

With the acquisition of Onbancorp, First Empire will eliminate one of the last large takeover candidates left in upstate New York. First Federal Savings Bank in Rochester, with $7.2 billion of assets, was snatched up last year by Marine Midland. And Charter One Financial Inc., Cleveland, purchased $4.1 billion-asset Rochester Community Savings Bank, also in 1997.

That leaves Albany-based Albank Financial Corp., with $3.7 billion of assets, and Trustco Bank Corp. NY, Schenectady, with $2.3 billion of assets, as the only significant independent banks left in the upstate New York market.

Although highly profitable for many years, Trustco will be hard-pressed to continue boosting earnings, because it has refused to expand beyond a short drive from its Schenectady base.

Its stock trades at about 21 times earnings, which will also discourage prospective suitors, said Donald J. Kauth, an analyst with BT Alex. Brown & Sons.

First Empire is widely viewed as an unlikely target, given that board members own 31% of the company, including 10% held by Mr. Wilmers. Another 7% is held by Warren Buffett, who is known as a long-term investor.

More importantly, Mr. Wilmers, who turns 64 in April, does not plan to step aside anytime soon.

"Retirement is the worst option. Death is in second place," he said, quoting Mr. Buffett.

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