FIRST EMPIRE STATE CORP, DEF 14A, 1996-03-14

FIRST EMPIRE STATE CORP
DEF 14A, 1996-03-14
STATE COMMERCIAL BANKS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|

Check the appropriate box:

|_| Preliminary Proxy Statement
|_| Confidential for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

FIRST EMPIRE STATE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

Richard A. Lammert, Esq.
Senior Vice President, General
Counsel and Secretary
One M&T Plaza
Buffalo, New York 14240
(716) 842-5390
- --------------------------------------------------------------------------------
(Name of Person Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

|X| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.

|_|$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:
Not applicable.
-----------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
Not applicable.
-----------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
Not applicable.
-----------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
Not applicable.
-----------------------------------------------------------------------------
5) Total fee paid:
$125
-----------------------------------------------------------------------------
|_|Fee paid previously with preliminary materials

|_|Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

1) Amount previously paid: Not applicable.

2) Form, Schedule or Registration Statement No. Not applicable.

3) Filing party: Not applicable.

4) Date filed: Not applicable.

<PAGE>

FIRST EMPIRE STATE CORPORATION
One M&T Plaza Buffalo, New York 14240

March 14, 1996

Dear Stockholder,

You are cordially invited to attend the 1996 annual meeting of stockholders
of First Empire State Corporation. Our annual meeting will be held on the 10th
floor of One M&T Plaza in Buffalo, New York on Tuesday, April 16, 1996 at 11:00
a.m.

Stockholders will be asked to elect 19 directors. Information about the
nominees is set forth in the attached proxy statement.

Whether or not you presently plan to attend the meeting, please indicate
your vote on the enclosed proxy card, sign and date it, and then return it in
the enclosed postage-paid envelope. You may withdraw your proxy if you attend
the meeting and wish to vote in person.

I urge you to vote for the election of all 19 nominees.

ROBERT G. WILMERS
Chairman of the Board,
President and Chief Executive Officer

<PAGE>

FIRST EMPIRE STATE CORPORATION
One M&T Plaza
Buffalo, New York 14240

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

The 1996 Annual Meeting of Stockholders of First Empire State Corporation
will be held on the 10th floor of One M&T Plaza in Buffalo, New York on Tuesday,
April 16, 1996 at 11:00 a.m., local time, for the following purposes:

1. To elect nineteen (19) directors for a term of one (1) year and until
their successors have been elected and qualified; and

2. To transact such other business as may properly come before the meeting
or any adjournment thereof.

Stockholders of record at 5:00 p.m., Eastern Standard Time, on March 4,
1996, are entitled to notice of, and to vote at, the meeting. Each stockholder,
even though he or she now plans to attend the meeting, is requested to execute
the enclosed proxy card and return it without delay in the enclosed postage-paid
envelope. Any stockholder present at the meeting may withdraw his or her proxy
and vote personally on each matter brought before the meeting.

By Order of the Board of Directors.

RICHARD A. LAMMERT
Secretary

March 14, 1996

<PAGE>

FIRST EMPIRE STATE CORPORATION

---------
PROXY STATEMENT
---------

This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of First Empire State Corporation ("First Empire" or
the "Company") of proxies in the accompanying form for use at the 1996 Annual
Meeting of Stockholders or any adjournment or adjournments thereof.

The proxies designated on the form, or any one of them, may exercise
all the powers of said proxies and each shall have the power to appoint a
substitute to act in his place.

The Annual Meeting of Stockholders of First Empire will be held on the 10th
floor of One M&T Plaza in Buffalo, New York on Tuesday, April 16, 1996, at 11:00
a.m., local time.

First Empire's mailing address is One M&T Plaza, Buffalo, New York 14240
and its telephone number is (716) 842-5445.

This Proxy Statement and the accompanying form of proxy are first being
sent to stockholders on or about March 14, 1996. A copy of the Company's Annual
Report for 1995, including financial statements, accompanies this Proxy
Statement, but is not part of the proxy solicitation materials.

VOTING RIGHTS

Stockholders of record at 5:00 p.m., Eastern Standard Time, on March 4,
1996 are entitled to vote at the Annual Meeting. At that time First Empire had
outstanding 6,350,518 shares of Common Stock, $5 par value ("Common Stock").
Each share of Common Stock is entitled to one vote. Shares may not be voted at
the meeting unless the owner is present or represented by proxy. Proxies will be
voted in accordance with the stockholder's direction, if any. A stockholder
giving a proxy may revoke it at any time before it is exercised by giving
written notice of such revocation or by delivering a later dated proxy or by the
vote of the stockholder in person at the Annual Meeting. Unless otherwise
directed, proxies will be voted in favor of the election as directors of the
persons named under the caption "NOMINEES FOR DIRECTOR."

<PAGE>

The vote of a plurality of the shares of the Company's Common Stock present
or represented at the meeting is required for the election of directors,
assuming a quorum is present or represented at the meeting. The presence in
person or by proxy of the holders of a majority in voting power of the Common
Stock will constitute a quorum for the transaction of business at the meeting.
Broker non-votes will be counted as being present or represented at the meeting
for purposes of establishing a quorum, but will not have an effect on the
outcome of the vote for the election of directors.

PRINCIPAL BENEFICIAL OWNERS OF SHARES

The following table sets forth certain information with respect to all
persons or groups known by the Company to be the beneficial owners of more than
5% of its shares as of March 4, 1996.

Title of Name and address Number Percent
class of beneficial owner of shares of class
- -------- ------------------- --------- --------

Common Stock A group ("Group I")
comprised of:

Robert G. Wilmers 666,664 10.35%
One M&T Plaza
Buffalo, NY 14240

West Ferry Foundation 9,000 less than 1%
One M&T Plaza
Buffalo, NY 14240

Rem Foundation 451,320 7.11%
Allgemeines Treuun-
ternehmen,
Postfach 34 722,
FL 9490
Vaduz, Liechtenstein

Hofin Anstalt 354,400 5.58%
P.O. Box 83
Vaduz, Liechtenstein

Argali [BVI] Limited 30,200 less than 1%
P.O. Box 71
Craigmuir Chambers
Road Town
Tortola, British
Virgin Islands
------------ -----------
Total for Group I 1,502,584(1) 23.33%

<PAGE>

Title of Name and address Number Percent
class of beneficial owner of shares of class
- -------- --------------------- --------- --------
<S> <C> <C> <C>
Common Stock A group ("Group II")
comprised of:

Brent D. Baird 380,388(2) 5.99%
and others
1350 One M&T Plaza
Buffalo, NY 14203

Common Stock Oppenheimer Group, Inc. 425,600(3) 6.70%
Oppenheimer Tower
World Financial Center
New York, NY 10281

9% Convertible National Indemnity 40,000(4) 100%(4)
Preferred Stock Company
3024 Harney Street
Omaha, NE 68131
</TABLE>

- -----------

(1) The members of Group I have jointly filed with the Securities and
Exchange Commission ("SEC") a Schedule 13D, as amended, indicating that
they constitute a "group" as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended ("Exchange Act"). Each
member of Group I has indicated in such amended Schedule 13D or
otherwise advised the Company that such member has sole voting and
dispositive power with respect to the shares indicated opposite such
member's name in the table. Mr. Wilmers is the trustee of the West
Ferry Foundation, a charitable trust formed by him, and, as trustee, he
holds sole voting and dispositive power over the shares which it owns.
As to Mr. Wilmers, the shares indicated in the table include the shares
owned by the West Ferry Foundation and 90,000 shares subject to options
granted under the First Empire State Corporation 1983 Stock Option Plan
("Stock Option Plan") which are currently exercisable or are
exercisable within 60 days after March 4, 1996 and which were deemed to
be outstanding for purposes of calculating the percentage of
outstanding shares beneficially owned by Mr. Wilmers and Group I. See
also the footnotes applicable to Mr. Wilmers in the table set forth
under the caption "STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE
OFFICERS." Hofin Anstalt is a corporation controlled by Jorge G.
Pereira, a director and vice chairman of the Board of Directors of the
Company. The shares indicated for Hofin Anstalt include shares held by
its wholly owned subsidiaries.

(2) Brent D. Baird, a director of the Company, and twelve of his associates
have jointly filed with the SEC a Schedule 13D, as amended, disclaiming
that they constitute a "group" as such term is used in Section 13(d)(3)
of the Exchange Act and reporting that they are the beneficial owners,
in the aggregate, of in excess of 5% of the outstanding Common Stock.
Mr. Baird has sole voting and dispositive power with respect to 6,184
shares that he owns individually. An additional 200,000 shares are
owned by entities of which Mr. Baird is a director or trustee, and

<PAGE>

as to which shares he may be deemed to share voting or dispositive
power. In addition, he has remainder interests in trusts that own an
aggregate of 40,104 shares. The remaining 134,100 shares, as to which
Mr. Baird disclaims beneficial ownership, are owned by members of Mr.
Baird's family, either individually or as trustee, or by a charitable
foundation, all the trustees of which are members of Mr. Baird's
family.

(3) Oppenheimer Group, Inc. ("Oppenheimer Group") has filed with the SEC a
Schedule 13G, as amended, reporting that it is the beneficial owner of
in excess of 5% of the outstanding Common Stock and that it has shared
voting and dispositive power with respect to 425,600 shares.
Oppenheimer Group, a holding company which owns a variety of companies
engaged in the securities business, filed the amended Schedule 13G on
behalf of Oppenheimer & Co., L.P., its parent corporation, and on
behalf of certain of its subsidiaries and investment advisory clients
or discretionary accounts of such subsidiaries.

(4) Warren E. Buffett, Berkshire Hathaway Inc. and National Indemnity
Company have jointly filed with the SEC a Schedule 13G reporting that
they are the beneficial owners of 100% of the Company's Series 9%
Convertible Preferred Stock ("9% Preferred Stock"), and, pursuant to
the conversion privilege thereunder, that they are the beneficial
owners of in excess of 5% of the outstanding Common Stock. The Schedule
13G indicates that the reporting persons have shared voting and
dispositive powers with respect to the 40,000 shares of the 9%
Preferred Stock. The 9% Preferred Stock is directly owned by National
Indemnity Company, a subsidiary of Berkshire Hathaway Inc., and is
convertible at any time into shares of the Common Stock at an initial
conversion price of $78.90625 per share, subject to certain
antidilution adjustments. First Empire has the right, subject to
regulatory approval, to redeem the 9% Preferred Stock, in whole, but
not in part, on or after March 31, 1996 at a price of $40,000,000 plus
accrued and unpaid dividends. On February 9, 1996 First Empire provided
notice to National Indemnity Company of its intention to redeem the
shares on March 31, 1996, prior to which time National Indemnity
Company is permitted to exercise the conversion privilege. National
Indemnity Company subsequently confirmed to First Empire on February
13, 1996 that it will exercise the conversion privilege prior to First
Empire's redemption of the 9% Preferred Stock. Based upon the 6,350,518
shares of the Common Stock outstanding as of the close of business on
March 4, 1996, the complete exercise of the conversion privilege will
result in the issuance of 506,930 shares of the Common Stock, or 7.39%
of the Common Stock that would be outstanding following conversion. The
holder of the 9% Preferred Stock is not entitled to vote at the Annual
Meeting of Stockholders to be held on April 16, 1996, nor may the
holder or holders of the Common Stock into which shares of the 9%
Preferred Stock may be converted vote at such meeting.

ELECTION OF DIRECTORS

Shares represented by properly executed proxies will be voted, unless such
authority is withheld, for the election as directors of First Empire of the
following nineteen (19) persons, to hold office until the 1997 Annual Meeting of
Stockholders and until their successors have been elected and qualified.

<PAGE>

Each of the nominees listed below was elected at the 1995 Annual Meeting of
Stockholders, except for Herbert L. Washington, who became a director on
February 20, 1996. If any nominee for any reason should become unavailable for
election or if a vacancy should occur before the election (which events are not
expected), it is intended that the shares represented by the proxies will be
voted for such other person as the Company's management shall designate.

The principal occupation of each of the nominees for the last five years
was substantially the same as is listed below. The information with respect to
the nominees is as of March 4, 1996 and includes their affiliations with First
Empire's subsidiary banks, Manufacturers and Traders Trust Company ("M&T Bank"),
The East New York Savings Bank ("East New York") and M&T Bank, National
Association ("M&T Bank, N.A."), and with First Empire's other subsidiaries.

NOMINEES FOR DIRECTOR

BRENT D. BAIRD is 57, is a member of the Executive and Compensation Committees
and has been a director since 1983.

Mr. Baird is a private investor. Prior to 1992, he was a limited partner of
Trubee, Collins & Co., Inc., a member firm of the New York Stock Exchange, Inc.
Mr. Baird is a director of M&T Bank and a member of its Executive, Trust and
Investment, Nomination, and Community Reinvestment Act Committees. He is a
director of East New York and M&T Financial Corporation. Mr. Baird is chairman
of the board of directors of First Carolina Investors, Inc. and president of
Citizens Growth Properties, both of which are engaged in the real estate
business. He is also a director of Oglebay Norton Company, Todd Shipyards
Corporation, Merchants Group, Inc. and Exolon-ESK Company.

JOHN H. BENISCH is 60 and has been a director since 1988.

Mr. Benisch is a founder and limited principal of Colliers ABR, Inc., a
real estate firm based in New York City which is engaged in leasing, management
and consulting services. Colliers ABR, Inc. is also an owner/member of Colliers
International Property Consultants, which has regional offices throughout the
United States and internationally. He is a director of East New York and a
member of its Community Reinvestment Act Committee. Mr. Benisch is a member of
The Real Estate Board of New York, Inc. and a member of the 53rd Street
Association N.Y.C. He is also an honorary director of St. Mary's Hospital for
Children, Bayside, New York, and is a member of The Salvation Army Greater New
York Advisory Board.

C. ANGELA BONTEMPO is 55, is a member of the Audit Committee and has been a
director since 1991.

Ms. Bontempo is senior vice president and executive director of the Roswell
Park Cancer Institute. She served as the administrator of health services at
Covenant House in New York City from July 1993 to January 1994, and from January
1987 to October 1992 was president and chief executive officer of the Sisters of
Charity Hospital, Buffalo, New York. Ms. Bontempo is a director of M&T Bank

<PAGE>

and a member of its Examining Committee, and a member of the Examining Committee
of M&T Bank, N.A. She is also a member of the Healthcare Careers Centers of
Western New York, Inc. and the American College of Health Care Executives.

ROBERT T. BRADY is 55 and has been a director since 1994.

Mr. Brady is president, chief executive officer and a director of Moog,
Inc., a manufacturer of control systems and components for aircraft, satellites
and automated machinery. He is a director of M&T Bank. Mr. Brady is a director
of Seneca Foods Corp., Acme Electric Corp., National Fuel Gas Company and
Astronics Corp. He is also a director of the Greater Buffalo Partnership and
serves as a trustee of the University at Buffalo Foundation, Inc.

PATRICK J. CALLAN is 59 and has been a director since 1988.

Mr. Callan is a principal of The RREEF Funds, pension fund real estate
investment advisors and managers. He is a partner of RREEF America Partners and
a trustee of BRT Realty Trust. Mr. Callan is a director of East New York and a
member of its Mortgage Investment Committee. He is also a member of The New York
University Real Estate Institute Advisory Board, the MIT Center for Real Estate
Advisory Board, the Association for Foreign Investors in U.S. Real Estate and
The Real Estate Board of New York, Inc.

JAMES A. CARRIGG is 62 and has been a director since 1992.

Mr. Carrigg is chairman of the board, president, chief executive officer
and a director of New York State Electric & Gas Corporation. He is the chairman
of the Directors Advisory Council of the Southern Division of M&T Bank. Mr.
Carrigg is a director of Security Mutual Life Insurance Company of New York,
Home Mutual Insurance Company and Utilities Mutual Insurance Company. He is also
a director of the New York Business Development Corporation and the Business
Council of New York State, Inc., and chairman of the board of trustees of Broome
Community College.

BARBER B. CONABLE, JR. is 73 and has been a director since 1991.

Mr. Conable retired as the president of The World Bank in September 1991, a
position which he had held since 1986. He represented the 30th District of New
York in the U.S. House of Representatives from 1965 to 1985, and served as a New
York State senator in 1963 and 1964. Mr. Conable is a director of M&T Bank, and
serves as chairman of the Directors Advisory Council of its Rochester Division.
He is a director of American International Group, Inc. Mr. Conable is chairman
of the National Committee on U.S.-China Relations, chairman of the Executive
Committee of the Board of Regents of the Smithsonian Institution, and a member
of the United Nations Commission on Global Governance. He is also a trustee
fellow and member of the Executive Committee of Cornell University.

<PAGE>

RICHARD E. GARMAN is 65, is a member of the Executive Committee and has been a
director since 1987.

Mr. Garman is president and chief executive officer of A.B.C. Paving Co.,
Inc., a general construction contractor, and Buffalo Crushed Stone, Inc., an
operator of quarries and asphalt production facilities, both of which are
located in Buffalo, New York. He is a director of M&T Bank and a member of its
Executive and Trust and Investment Committees. Mr. Garman is a director of
Merchants Group, Inc., Associated General Contractors - New York State, the
Greater Buffalo Partnership and Millard Fillmore Hospitals. He is also chairman
of the Greater Niagara Frontier Council of the Boy Scouts of America.

JAMES V. GLYNN is 61, is a member of the Audit Committee and has been a director
since 1994.

Mr. Glynn is president and owner of Maid of the Mist Corporation, a
provider of scenic boat tours of Niagara Falls. He is a director of M&T Bank and
a member of its Examining Committee, and a member of the Examining Committee of
M&T Bank, N.A. Mr. Glynn is a trustee of Niagara University and serves as
chairman of its Financial Committee. He also is a trustee of Stella Niagara
Education Park and a member of the Niagara University Council. Mr. Glynn is a
director of Artpark & Company, the Society for the Promotion, Unification and
Redevelopment of Niagara, Inc. and the Greater Buffalo Partnership.

ROY M. GOODMAN is 65 and has been a director since 1984.

Senator Goodman is a New York State senator serving his fourteenth term in
the Legislature representing the East Side of Manhattan. He is the deputy
majority leader for policy of the New York State Senate and serves as chairman
of the Senate Committee on Investigations, Taxation, and Government Operations.
Senator Goodman is also chairman of the Senate Special Committee on the Arts and
Cultural Affairs. He serves as a member of the National Council on the Arts for
the National Endowment for the Arts, a position to which he was appointed in
1989 by former President Bush.

PATRICK W.E. HODGSON is 55, is a member of the Audit Committee and has been a
director since 1987.

Mr. Hodgson is president of Cinnamon Investments Limited, a private
investment company with real estate and securities holdings. Since February
1993, he has served as chairman of the board and chief executive officer of Todd
Shipyards Corporation. Prior to 1990, Mr. Hodgson was president of London
Machinery Company Limited, London, Ontario, a manufacturer of truck bodies and
equipment. He is a director and a member of the Examining Committee of M&T Bank,
a member of the Examining Committee of M&T Bank, N.A., and a director of M&T
Capital Corporation and M&T Venture Corporation. Mr. Hodgson is president of T-W
Truck Equippers Inc., Buffalo, New York, and a director of Kissing Bridge Corp.,
Glenwood, New York, and Niagara Blower Co., Buffalo, New York. He is also a
director of Todd Shipyards Corporation, First Carolina Investors, Inc., Scotts
Hospitality Inc. and Exolon-ESK Company.

<PAGE>

SAMUEL T. HUBBARD, JR. is 46 and has been a director since 1994.

Mr. Hubbard is president, chief executive officer and a director of The
Alling & Cory Company, a distributor of paper products. He is a director of M&T
Bank. Mr. Hubbard is a director of the Genesee Corporation, McCurdy & Company,
Inc. and The Sodus Cold Storage Co., Inc. He is also a trustee of the Rochester
Institute of Technology and the Allendale Columbia Schools, a director of the
United Way of Greater Rochester, and a member of the advisory committee of
Rochester's Child Advisory.

LAMBROS J. LAMBROS is 60, is a member of the Audit Committee and has been a
director since 1984.

Mr. Lambros is managing director of J.W. Childs Associates, L.P., a private
investment company, a position he has held since October 1995. A private
investor from 1994 until October 1995, he was chairman, president, chief
executive officer and a director of Norfolk Holdings Inc., an independent oil
and gas exploration and production company, from 1986 through 1993. Prior to
1986, Mr. Lambros had been executive vice president and a director of Amerada
Hess Corporation, an integrated oil and gas producer, refiner and marketer,
where he was responsible for that company's financial and administrative
activities.

WILFRED J. LARSON is 68, is the chairman of the Audit Committee and has been a
director since 1987.

Mr. Larson retired in 1991 as president and chief executive officer of
Westwood-Squibb Pharmaceuticals Inc., a subsidiary of the Bristol-Myers Squibb
Company. Prior to his retirement, he also served as a vice president of
Bristol-Myers Squibb Company. Mr. Larson is a director of M&T Bank, the chairman
of its Examining Committee and a member of its Community Reinvestment Act
Committee, and a member of the Examining Committee of M&T Bank, N.A. He is a
director of Bryant & Stratton Business Institute, Inc. and Horus Therapeutics,
Inc.

JORGE G. PEREIRA is 62 and has been a director since 1982. He is vice chairman
of the board of First Empire and is the chairman of its Compensation Committee.

Mr. Pereira is a private investor. He is vice chairman of the board and a
director of M&T Bank, and serves as chairman of its Nomination Committee. Mr.
Pereira is also a director of East New York. He is the owner of Hofin Anstalt, a
private investment company.

RAYMOND D. STEVENS, JR. is 69, is a member of the Executive and Compensation
Committees and has been a director since 1970.

Mr. Stevens served as chairman of the board and a director of Pratt &
Lambert United, Inc. until the consummation of its merger with The
Sherwin-Williams Company on January 10, 1996. The merger concluded his 44-year
affiliation with Pratt & Lambert United, Inc. and its predecessor companies. Mr.

<PAGE>

Stevens is a director of M&T Bank and a member of its Executive, Trust and
Investment, and Nomination Committees. He is a trustee of the Buffalo General
Hospital. Mr. Stevens is also a former chairman of the National Paint & Coatings
Association.

HERBERT L. WASHINGTON is 45 and was elected a director in February 1996.

Mr. Washington is president of H.L.W. Fast Track, Inc., the owner and
operator of six McDonald's Restaurants in the greater Rochester, New York area,
and the owner of Syracuse Minority Television, Inc. He is a director of M&T
Bank. Mr. Washington is a director of the Center for Governmental Research, the
Allendale Columbia School, and the National Black McDonald's Operation
Association. He also is president of the Rochester-area McDonald's association,
and a member of the Baden Street Settlement Parenting Group of Rochester, New
York.

JOHN L. WEHLE, JR. is 50 and has been a director since 1994.

Mr. Wehle is chairman of the board, chief executive officer and
president of the Genesee Corporation and The Genesee Brewing Company, Inc. He is
a director of M&T Bank. Mr. Wehle is chair of the executive committee and
treasurer of the Genesee Country Museum, a member of the board of governors of
Strong Memorial Hospital, a trustee of The Greater Rochester Chamber of
Commerce, and a director of the Greater Rochester Visitors Association, Inc.,
the United Neighborhood Center of Greater Rochester Foundation, Inc., the
Industrial Management Council, and the Trooper Foundation, State of New York,
Inc.

ROBERT G. WILMERS is 61 and has been a director since 1982. He is the chairman
of the board, president and chief executive officer of First Empire, and is the
chairman of its Executive Committee.

Mr. Wilmers is chairman of the board, president, chief executive
officer and a director of M&T Bank, chairman of its Executive Committee and a
member of its Trust and Investment Committee; a director and member of the
Executive Committee of East New York; chairman of the board and a director of
M&T Bank, N.A.; and a director of a number of other First Empire or M&T Bank
subsidiaries. He is a director of the Greater Buffalo Partnership, the Federal
Reserve Bank of New York and The Business Council of New York State, Inc., and a
member of the Visiting Committee of the John F. Kennedy School of Government at
Harvard University. Mr. Wilmers is also a director of the Albright-Knox/Buffalo
Fine Arts Academy.

The Board of Directors recommends a vote
FOR the election of all 19 nominees.

<PAGE>

STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

Direct and indirect ownership of Common Stock by each of the directors and
the executive officers who are named in the Summary Compensation Table (the
"Named Executive Officers"), and by the directors and executive officers as a
group is set forth in the table below as of March 4, 1996, together with the
percentage of total shares outstanding represented by such ownership. (For
purposes of this table, beneficial ownership has been determined in accordance
with the provisions of Rule 13d-3 under the Exchange Act, under which, in
general, a person is deemed to be the beneficial owner of a security if he or
she has or shares the power to vote or to direct the voting of the security or
the power to dispose or to direct the disposition of the security, or if he or
she has the right to acquire the beneficial ownership of the security within 60
days.)

Percent
Name of beneficial owner Number of shares of class
- ---------------------------- ---------------- --------
<S> <C> <C>
Brent D. Baird 52,288 (1) (9)
John H. Benisch 5,484 (2) (9)
C. Angela Bontempo 15 (3) (9)
Robert T. Brady 200 (9)
Patrick J. Callan 6,784 (2) (9)
David N. Campbell 1,010 (9)
James A. Carrigg 826 (9)
Barber B. Conable, Jr. 500 (9)
Richard E. Garman 25,500 (9)
James V. Glynn 1,025 (9)
Roy M. Goodman - -
Patrick W.E. Hodgson 5,700 (4) (9)
Samuel T. Hubbard, Jr. 200 (3) (9)
Lambros J. Lambros 6,000 (9)
Wilfred J. Larson 5,551 (9)
Jorge G. Pereira 354,400 (5) 5.58
William C. Shanley, III 12,869 (2) (9)
Raymond D. Stevens, Jr. 4,756 (6) (9)
Richard D. Trent 4,885 (2) (9)
Herbert L. Washington - -
John L. Wehle, Jr. 200 (9)
Robert G. Wilmers 666,664 (2)(5)(7)(8) 10.35
Robert E. Sadler, Jr. 49,316 (2)(7) (9)
William A. Buckingham 30,414 (2)(7) (9)
James L. Vardon 25,964 (2)(7) (9)
William C. Rappolt 28,638 (2)(7) (9)

All directors and executive
officers as a group
(31 persons) 1,380,874 (2)(7) 21.00%

</TABLE>

- -----------

(1) See footnote (2) to the table set forth under the caption "PRINCIPAL
BENEFICIAL OWNERS OF SHARES."

<PAGE>

(2) Includes the following shares of Common Stock subject to options granted
under the Stock Option Plan which are currently exercisable or are
exercisable within 60 days after March 4, 1996: Mr. Benisch - 2,784 shares;
Mr. Callan - 2,784 shares; Mr. Shanley - 5,769 shares; Dr. Trent - 3,584
shares; Mr. Wilmers - 90,000 shares; Mr. Sadler - 24,551 shares; Mr.
Buckingham - 23,700 shares; Mr. Vardon - 1,398 shares; Mr. Rappolt - 9,900
shares; all directors and executive officers as a group - 225,842 shares.

(3) The indicated shares are held by a trust for which the indicated director
is a trustee and in which the director has a pecuniary interest and
investment power.

(4) Includes 600 shares of Common Stock held by a close relative for which
beneficial ownership is disclaimed. Also includes 4,500 shares of Common
Stock owned by a corporation controlled by Mr. Hodgson.

(5) See footnote (1) to the table set forth under the caption "PRINCIPAL
BENEFICIAL OWNERS OF SHARES."

(6) Includes 1,116 shares of Common Stock held as trustee for another and for
which beneficial ownership is disclaimed.

(7) Includes the following shares of Common Stock through participation in the
First Empire State Corporation Retirement Savings Plan and Trust
("Retirement Savings Plan"): Mr. Wilmers - 3,179 shares; Mr. Sadler - 1,640
shares; Mr. Buckingham - 1,808 shares; Mr. Vardon - 939 shares; Mr. Rappolt
- 2,463 shares; all directors and executive officers as a group - 10,692
shares.

(8) Includes 3,555 shares of Common Stock held by a close relative or the
estate of a close relative for which beneficial ownership is disclaimed.

(9) Less than 1%.

Under Section 16(a) of the Exchange Act, the Company's directors and
officers and persons who are the beneficial owners of more than 10% of the
Common Stock are required to report their ownership of the Common Stock, options
and stock appreciation rights (other than certain cash-only rights) and any
changes in that ownership to the SEC and the American Stock Exchange. Specific
due dates for these reports have been established, and the Company is required
to report in this proxy statement any failure to file by these dates during
1995. The Company believes that all of these filing requirements were satisfied
by its directors and officers and by the beneficial owners of more than 10% of
the Common Stock. In making this statement, the Company has relied on copies of
the reporting forms received by it or on the written representations from
certain reporting persons that no Forms 5 (Annual Statement of Changes in
Beneficial Ownership) were required to be filed under the applicable rules of
the SEC.

<PAGE>

PERFORMANCE GRAPH

The graph which has been omitted from this filing contains a comparison of
the cumulative stockholder return on the Common Stock against the cumulative
total returns of the KBW 50 Index, compiled by Keefe, Bruyette & Woods, Inc.,
and the S&P 500 Composite Index, compiled by Standard & Poor's Corporation, for
the five-year period beginning on December 31, 1990 and ending on December 31,
1995. The KBW 50 Index is comprised of fifty American banking companies,
including all money-center and most major regional banks. The data points
depicted on such graph are contained in the tabular presentation immediately
following the space intentionally left blank below.

[THIS SPACE LEFT INTENTIONALLY BLANK]

Stockholder Value at Year End*

----------------------------------------------------------------
| |
| 1990 1991 1992 1993 1994 1995 |
---- ---- ---- ---- ---- ----
| |
| First Empire $100 $185 $253 $268 $263 $427 |
| KBW 50 Index $100 $158 $202 $213 $202 $324 |
| S&P 500 Index $100 $130 $140 $155 $157 $215 |
| |
----------------------------------------------------------------

* Assumes a $100 investment on December 31, 1990 and reinvestment of all
dividends.

<PAGE>

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

Compensation Committee Report on Executive Compensation

A key objective of First Empire is to attract, develop and maintain strong
executive officers who are capable of maximizing the Company's performance for
the benefit of its stockholders. In furtherance of this objective, the
Compensation Committee has adopted a compensation strategy for its executive
officers which utilizes reasonable salaries, while placing heavy emphasis on the
use of variable incentives such as awards of cash bonuses and grants of stock
options in order to reward longer-term contributions to the Company's success.
First Empire periodically compares its compensation levels, practices and
financial performance to a select group of commercial banking institutions of
similar size, geographic market and business makeup to First Empire. The
Compensation Committee considered seventeen commercial banking companies which
it believed were reasonably comparable to the Company's asset size and
performance and which were generally located in the northeast or midwest (the
"comparative group of banks"). Twelve of the seventeen commercial banking
companies forming the comparative group of banks considered by the Compensation
Committee were included in the KBW 50 Index compiled by Keefe, Bruyette & Woods,
Inc.

Base salaries of First Empire's executive officers are determined by
competitive, market-based pay practices, performance evaluations and expected
future contributions. In line with its strategy of emphasizing variable pay, the
Compensation Committee generally targets the salaries of First Empire's
executive officers at or below the median of the comparative group of banks,
while also considering the unique responsibilities and performance of each
executive officer. Overall, the Compensation Committee targets the total cash
compensation of First Empire's executive officers above the median of the
comparative group of banks.

First Empire's executive officers participate in an annual incentive
compensation plan ("Annual Incentive Plan"). The Annual Incentive Plan provides
for discretionary grants of cash awards to executive officers out of a fund
established annually by the Compensation Committee. In establishing this fund,
the Compensation Committee considers First Empire's profitability, as well as
the number of participants in the Annual Incentive Plan, and may establish a
minimum threshold of net operating earnings after taxes below which no fund will
be created. At the end of the year, the Compensation Committee may increase the
size of the established fund in its discretion by no more than 50% to take into
account its subjective assessment of management's contribution to First Empire's
profitability. First Empire's net operating earnings after taxes for 1995
exceeded the minimum threshold of profitability which had been previously
established by the Compensation Committee, thereby initiating the payment of
cash bonuses to its executive officers under the Annual Incentive Plan, but the
Compensation Committee did not exercise its discretion to increase the aggregate
size of the fund above the predetermined level.

The aggregate amount of the Annual Incentive Plan pool and 1995's awards to
First Empire's executive officers thereunder were reviewed and approved by the
Compensation Committee. The Compensation Committee considered, but did not
formally weight, a number of quantitative and

<PAGE>

qualitative performance factors to evaluate the 1995 performance of executive
officers and other employees under the Annual Incentive Plan. The performance
factors considered were: growth and composition of earnings; achieving business
plans; asset quality; market share; and responsiveness to the economic
environment. In determining its discretionary evaluation of the Chief Executive
Officer's performance, the Compensation Committee considered, but did not
formally weight, the following performance factors: the Company's earnings
growth; its asset quality relative to the banking industry as a whole; the
integration of the Company's acquisitions; and market share. Another factor
which the Compensation Committee considered in determining the Chief Executive
Officer's 1995 incentive award was its philosophy of providing the Chief
Executive Officer with greater long-term opportunities in the form of stock
options and placing a lesser emphasis on base salary and annual cash incentives.

Consistent with its objective of attracting, developing and maintaining
strong executive management, First Empire provides potentially significant
long-term incentive opportunities to its executive officers through
discretionary grants of stock options and stock appreciation rights under the
Stock Option Plan, thereby emphasizing the potential creation of long-term
stockholder value and more closely aligning the interests of First Empire's
executive officers with those of its stockholders. Stock options and stock
appreciation rights are considered effective long-term incentives by the
Compensation Committee because an executive can profit only if the value of the
Common Stock increases. In making these grants, the Compensation Committee
considers its subjective assessment of the Company's past financial performance
and future prospects, an executive officer's current level of ownership of the
Common Stock, the period during which an executive officer has been in a key
position with the Company, individual performance and competitive practices
within the comparative group of banks.

In 1995, the Compensation Committee considered, but did not formally
weight, the following factors in connection with the number of options granted
to each executive officer: the competitive practices within the comparative
group of banks; the individual executive officer's position and potential within
First Empire; and the level of past awards of stock options or stock
appreciation rights granted to each executive officer. In the determination of
the Chief Executive Officer's 1995 stock option award, the Compensation
Committee also considered its philosophy of providing him with greater long-term
opportunities in the form of stock options and placing a lesser emphasis on base
salary and annual cash incentives.

All of the 1995 performance factors considered by the Compensation
Committee in its salary determinations and its annual incentive and stock option
awards made to the Company's executive officers exceeded predetermined
objectives or, where no predetermined level had been set, were deemed to be
above industry averages or otherwise exceeded the Compensation Committee's
expectations. The Compensation Committee believes that the total compensation
provided to the Company's executive officers is competitive and reflects the
Company's performance. Also, the Compensation Committee believes that the
Company's compensation programs have helped to focus First Empire's executive
officers on increasing the Company's performance and stockholder value.

<PAGE>

Effective as of January 1, 1994, Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), generally denies a
deduction to any publicly-held corporation for compensation paid to its chief
executive officer and its four other highest-paid executive officers to the
extent that any such individual's compensation exceeds $1 million, subject to
certain exceptions, including one for "performance-based compensation." The
Compensation Committee believes that none of the Company's executive officers
received compensation in 1995 which was nondeductible under Section 162(m) of
the Internal Revenue Code.

This report was prepared by the Compensation Committee of the Board of
Directors:

Jorge G. Pereira, Chairman
Brent D. Baird
Raymond D. Stevens, Jr.

Compensation Committee Interlocks and Insider Participation

Messrs. Pereira, Baird and Stevens served as members of the Compensation
Committee throughout 1995, and are currently serving as such.

Mr. Pereira is vice chairman of First Empire and M&T Bank, titular posts
without day-to-day managerial responsibilities which he has held since April 18,
1984. Mr. Baird served as chairman of the board of M&T Capital Corporation, the
venture capital subsidiary of M&T Bank, from August 4, 1983 to April 20, 1987.
Neither Mr. Pereira nor Mr. Baird has received additional compensation for
serving in such capacities.

The members of the Compensation Committee and their associates are, as they
have been in the past, customers of, and have had transactions with, the bank
subsidiaries of the Company; and additional transactions may be expected to take
place in the future between such persons and subsidiaries. Any loans from the
Company's subsidiary banks to such persons and their associates outstanding at
any time since the beginning of 1995 were made in the ordinary course of
business of the banks on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risk of collectibility or
present other unfavorable features.

<PAGE>

Executive Compensation

The table below contains information concerning the compensation received
by the Company's Chief Executive Officer and the four other most highly
compensated executive officers of the Company in the three fiscal years ended
December 31, 1995.

Summary Compensation Table

Long-term
Compen-
Annual Compensation sation
------------------------------------ ---------------
| Awards |

| Securities | All
| Underlying | Other
| Options/ | Compen-
Name and Principal Position Year Salary Bonus | SARs | sation
- --------------------------- ---- -------- -------- | ------ | ------
($) ($) | (#) ($)(*)
<S> <C> <C> <C> <C> <C>
Robert G. Wilmers 1995 $400,000 $300,000 | 20,000 | $12,726
Chairman of the Board, 1994 400,000 235,000 | 20,000 | 12,546
President and Chief 1993 400,000 200,000 | 20,000 | 11,963
Executive Officer of | |
First Empire and M&T Bank | |
| |
Robert E. Sadler, Jr. 1995 277,700 350,000 | 8,000 | 24,304
Executive Vice President 1994 250,000 300,000 | 7,500 | 10,875
of First Empire and 1993 248,646 300,000 | 7,500 | 19,571
M&T Bank | |
| |
William A. Buckingham 1995 235,000 265,000 | 5,000 | 12,994
Executive Vice President 1994 235,000 245,000 | 5,000 | 12,997
of First Empire and 1993 235,000 245,000 | 5,000 | 12,994
M&T Bank | |
| |
James L. Vardon 1995 218,850 275,000 | 8,000 | 164,801
Executive Vice President 1994 205,000 265,000 | 7,000 | 9,553
and Chief Financial 1993 205,000 250,000 | 7,000 | 10,118
Officer of First Empire | |
and M&T Bank | |
| |
William C. Rappolt 1995 200,000 225,000 | 4,000 | 12,806
Executive Vice President 1994 200,000 185,000 | 5,000 | 12,306
and Treasurer of 1993 200,000 215,000 | 5,000 | 12,289
First Empire and | |
M&T Bank

</TABLE>

<PAGE>

(*) Includes the following 1995 contributions by the Company to the Retirement
Savings Plan, a qualified defined contribution plan providing for salary
reduction contributions by participants and matching contributions by the
Company, for the benefit of the Named Executive Officers: Messrs. Wilmers,
Sadler, Buckingham, Vardon and Rappolt - $6,750. Includes the following
1995 credits by the Company under the Supplemental Savings Plan (as
hereinafter defined under the caption "Supplemental Benefit Plans") for the
benefit of the Named Executive Officers: Mr. Wilmers - $3,870; Mr. Sadler -
$3,862; Mr. Buckingham - $3,825; Mr. Vardon - $3,150; and Mr. Rappolt -
$2,250. Includes the following insurance premiums paid by the Company in
1995 in respect of term life insurance for the benefit of the Named
Executive Officers: Mr. Wilmers - $2,106; Mr. Sadler - $359; Mr. Buckingham
- $2,419; Mr. Vardon - $305; and Mr. Rappolt - $3,805. Includes $13,333 of
above-market interest earned by Mr. Sadler in 1995 and $154,596 of
above-market interest earned by Mr. Vardon in 1995 in respect of bonus
payments which they deferred in prior years.

Stock Option Grants in 1995

The Company's stockholders have previously approved an amendment to the
Stock Option Plan which limits the number of shares of Common Stock covered by
stock options and stock appreciation rights granted to a key employee in any
fiscal year of the Company. The effect of the amendment is to allow stock
options and stock appreciation rights granted under the Stock Option Plan to
continue to be eligible to qualify as "performance-based compensation" under
Section 162(m) of the Internal Revenue Code which, in general, limits the
deductibility of compensation paid to certain employees of the Company to $1
million per employee for any fiscal year.

The following table contains information with respect to the grants of
stock options under the Stock Option Plan during the fiscal year ended December
31, 1995 to the Named Executive Officers who are covered by the Summary
Compensation Table. No stock appreciation rights were granted under the Stock
Option Plan in 1995 other than limited stock appreciation rights granted in
tandem with stock options.

<PAGE>

Option/SAR Grants in the Last Fiscal Year

Individual Grants
----------------------------------------------------------------------
Number Percent
of of Total
Secur- Options/
ities SARs
Under- Granted to
lying Employees
Options in Exercise Expir- Grant Date
/SARs Fiscal or ation Present
Name Granted Year Base Price Date Value
- ----------------------- ------- ---------- ---------- ------- ----------
(#)(1) (4) ($/Share) ($)(5)
(2)(3)
<S> <C> <C> <C> <C> <C>
Robert G. Wilmers 20,000 12.5% $140.00 1/17/05 $887,200
Robert E. Sadler, Jr. 8,000 5.0 140.00 1/17/05 354,880
William A. Buckingham 5,000 3.1 140.00 1/17/05 221,800
James L. Vardon 8,000 5.0 140.00 1/17/05 354,880
William C. Rappolt 4,000 2.5 140.00 1/17/05 177,440

</TABLE>

- ----------

(1) Title of securities subject to grant: Common Stock.

(2) All grants to the Named Executive Officers include grants of an equal
number of related (or "tandem") limited stock appreciation rights. Limited
stock appreciation rights may be exercised only in the event of a tender or
exchange offer ("Offer") for the Common Stock (a) which, if successful,
would cause the offeror to become the beneficial owner of 20% or more of
the outstanding Common Stock, and (b) that the Compensation Committee
determines would result in a change in control of the Company, if
consummated. Upon exercise, a limited stock appreciation right granted in
tandem with a nonstatutory stock option entitles the holder to receive cash
in an amount equal to the excess of (a) the highest price paid pursuant to
the Offer during the 90 days prior to exercise, or (b) the highest market
value of a share of Common Stock during the 90 days prior to exercise,
whichever is greater, over the market value of a share of Common Stock on
the date of grant. A limited stock appreciation right granted in tandem
with an incentive stock option entitles the holder to receive cash in an
amount equal to the appreciation in the market value of a share of Common
Stock since the date of grant.

(3) The stock options are exercisable in installments that provide vesting of
10% of the optioned stock after the first anniversary of the grant, an
additional 20% after the second anniversary, 30% more after the third
anniversary, and the remaining 40% after the fourth anniversary.

(4) Excludes shares of Common Stock subject to options granted under the Stock
Option Plan to directors who are not employees of the Company. See
"Directors' Fees."

<PAGE>

(5) Consistent with the previous year, the Company used a binomial option
pricing model to determine the grant date present value of stock options
granted in 1995 upon the belief that such model is the most reasonable
method of estimating the value of stock options granted under the Stock
Option Plan. The estimated value per option is $44.36, which was calculated
through the use of the following assumptions: an option term, based on
historical data since the inception of the Stock Option Plan, of 6.5 years,
representing the estimated period between the grant dates of options under
the Stock Option Plan and their exercise dates; an interest rate that
represents the yield on a zero-coupon U.S. Treasury security with a
maturity date corresponding to that of the adjusted option term; volatility
calculated using weekly stock prices for the three-year (156-week) period
prior to the grant date; and an estimated dividend yield of 1.70%, the
approximate annualized cash dividend rate paid with respect to a share of
the Common Stock on December 31, 1994. The Company also deducted 10% to
reflect an estimate of the probability of forfeiture prior to vesting,
based on historical data since the inception of the Stock Option Plan. The
actual value an executive may realize will depend upon the excess of the
price of the Common Stock over the exercise price on the date the option is
exercised. Accordingly, there is no assurance that the value ultimately
realized by an executive officer, if any, will approximate the value
estimated by the model.

Stock Options and Stock Appreciation Rights Exercised in 1995 and Year-End
Values

The following table reflects the number of stock options and stock
appreciation rights exercised by the Named Executive Officers in 1995, the total
gain realized upon exercise, the number of stock options and stock appreciation
rights held at the end of the year, and the realizable gain of the stock options
and stock appreciation rights that are "in-the-money." In-the-money stock
options and stock appreciation rights are stock options or stock appreciation
rights with exercise prices that are below the year-end stock price because the
stock value increased since the date of the grant.

<PAGE>

Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values

Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End Fiscal Year-End (2)
------------------ ---------------------------
Shares
Acquired Value
on Real- Exer- Un- Un-
Exer- ized cis- Exercis- Exercis- Exercis-
Name cise (1) able able able able
- --------------------- -------- --------- ------- -------- ---------- ------------
(#) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Robert G. Wilmers - - 77,000 58,000 11,898,875 4,828,000
Robert E. Sadler, Jr. 3,480 395,850 24,001 24,000 3,413,209 2,047,031
William A. Buckingham 9,800 1,087,775 4,622 18,400 449,333 1,561,275
James L. Vardon 1,000 96,500 8,135 22,000 929,450 1,846,813
William C. Rappolt - - 6,750 14,000 792,813 1,185,438

</TABLE>

- --------------

(1) Based upon the difference between the closing price of the Common Stock on
the American Stock Exchange on the date or dates of exercise and the
exercise price or prices for the stock options or stock appreciation
rights.

(2) Based upon the closing price of the Common Stock on the American Stock
Exchange on December 29, 1995 of $218.00 per share.

Retirement Plan

The following table sets forth the annual retirement benefits under the
regular benefit formula of the First Empire State Corporation Retirement Plan
("Retirement Plan") payable upon retirement to persons within specified levels
of remuneration and years of service classifications assuming attainment of age
65 during 1996.

Pension Plan Table (1) (2)

Years of Service
--------------------------------------------------------------------------
Remuneration 10 15 20 25 30
------------ ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000 24,121 36,182 48,242 60,303 72,364
250,000 41,121 61,682 82,242 102,803 123,364
350,000 58,121 87,182 116,242 145,303 174,364
450,000 75,121 112,682 150,242 187,803 225,364
550,000 92,121 138,182 184,242 230,303 276,364

</TABLE>

<PAGE>

- ------------

(1) The table assumes a straight-life annuity form of payment. The
retirement benefits provided under the regular benefit formula of the
Retirement Plan, as depicted in the table, are not subject to any
deduction for Social Security or other offset amounts.

(2) The amounts in the table have not been restricted to those within the
maximum annual retirement benefit which is currently permissible under
the Internal Revenue Code. That limit (the "IRS Benefit Limit") is
$120,000 for 1996. Also, in calculating a participant's benefit, annual
compensation in excess of a limit set annually by the Secretary of the
Treasury may not be considered. That limit (the "IRS Compensation
Limit") is $150,000 for 1996.

The compensation covered by the Retirement Plan benefits summarized in the
above table approximates an employee's base annual salary. The covered
compensation for each of the Named Executive Officers in the Summary
Compensation Table would approximate the highest average of the amounts shown in
the "Salary" column of that table which are paid during any five consecutive
calendar year period in the ten calendar years preceding retirement, subject to
the applicable IRS Compensation Limits. For 1995, covered compensation taken
into account under the Retirement Plan for each of the Named Executive Officers
in the Summary Compensation Table was as follows: Mr. Wilmers -$402,203; Mr.
Sadler - $268,754; Mr. Buckingham - $233,938; Mr. Vardon - $217,318; and Mr.
Rappolt - $195,813. For purposes of the Retirement Plan, such executive officers
had the following years of service at year end 1995: Mr. Wilmers - 13 years; Mr.
Sadler - 12 years; Mr. Buckingham - 6 years; Mr. Vardon - 12 years; and Mr.
Rappolt - 11 years.

Supplemental Benefit Plans

In addition to retirement benefits under the Retirement Plan, M&T Bank has
agreed, on an unfunded basis, to pay supplemental retirement benefits to Messrs.
Buckingham, Sadler and Vardon in amounts equal to the difference between 55% of
each individual's average annual compensation, as defined in the Retirement
Plan, but without regard to the IRS Benefit and Compensation Limits, and the
amount, if any, payable to each individual from such plan. M&T Bank has also
agreed, on an unfunded basis, to pay supplemental retirement benefits to Mr.
Rappolt in an amount equal to the difference between his benefit under the
Retirement Plan and a benefit amount calculated under the Retirement Plan
formula as if he had been hired by M&T Bank on January 1, 1977. The supplemental
retirement benefits to be paid to each of them are not dependent upon their
respective entitlements to retirement benefits under the Retirement Plan. In the
case of Messrs. Buckingham and Sadler, the supplemental benefits are reduced by
payments which they will receive from the retirement plans of their previous
employers. Based on current actuarial assumptions associated with their
participation in the Retirement Plan, the following amounts would be payable to
them annually as supplemental retirement benefits commencing at age 65: Mr.
Buckingham - $46,199; Mr. Rappolt - $11,478; Mr. Sadler - $69,607; and Mr.
Vardon - $63,456. Actuarially reduced amounts would be payable to any of them
who elected early retirement.

<PAGE>

Effective January 1, 1994, the Company adopted the First Empire State
Corporation Supplemental Pension Plan (the "Supplemental Pension Plan"). The
purpose of the Supplemental Pension Plan is to provide for the payment of
supplemental retirement benefits based on a maximum compensation level of
$235,840 to select management and highly compensated employees of certain First
Empire affiliates whose benefits payable under the Retirement Plan are limited
by the IRS Compensation Limit. The supplemental benefits are dependent upon a
participant's entitlement to benefits under the Retirement Plan. A participant's
supplemental benefit is equal to the excess of (a) the payment he would have
received under the Retirement Plan were the IRS Compensation Limit $235,840 over
(b) the payment actually received under the Retirement Plan. Each of the Named
Executive Officers is eligible to participate in the Supplemental Pension Plan
and, in accordance with the terms of the Supplemental Pension Plan, M&T Bank has
agreed, on an unfunded basis, to pay retirement benefits under the Supplemental
Pension Plan to each of them. With respect to Messrs. Buckingham, Rappolt,
Sadler and Vardon, the supplemental benefits under the Supplemental Pension Plan
are reduced by the supplemental retirement benefits which M&T Bank has agreed to
pay to them in accordance with the preceding paragraph. Based on current
actuarial assumptions associated with participation in the Retirement Plan, Mr.
Wilmers would receive $7,783 annually under the Supplemental Pension Plan and
Mr. Rappolt would receive $4,084 annually under the Supplemental Pension Plan if
they retired at age 65. An actuarially reduced amount would be payable if either
elected early retirement. Based on current actuarial assumptions associated with
their participation in the Retirement Plan, Messrs. Buckingham, Sadler and
Vardon would receive no benefits under the Supplemental Pension Plan.

Also effective January 1, 1994, the Company adopted the First Empire State
Corporation Supplemental Retirement Savings Plan (the "Supplemental Savings
Plan"). The purpose of the Supplemental Savings Plan is to provide for the
payment of supplemental benefits to select management and highly compensated
employees of certain First Empire affiliates, contributions on whose behalf
under the Retirement Savings Plan are limited by the IRS Compensation Limit. To
participate in the Supplemental Savings Plan, the executive must make salary
reduction contributions to the Retirement Savings Plan of at least six percent
of compensation (up to the IRS Compensation Limit) and must have compensation in
excess of the IRS Compensation Limit. In such a case, the Company will credit to
the participant's account under the Supplemental Savings Plan an amount equal to
the excess of (a) the matching contribution that would have been made on his
behalf by the Company under the Retirement Savings Plan had compensation under
that plan been capped at $235,840 rather than at the IRS Compensation Limit,
over (b) the matching contribution actually made on his behalf by the Company
under the Retirement Savings Plan. The Supplemental Savings Plan also permits a
participant to elect to defer and have credited to his account under the
Supplemental Savings Plan an amount of compensation in excess of the IRS
Compensation Limit, but not in excess of $235,840, equal to the percentage of
compensation the participant has elected to defer under the Retirement Savings
Plan. A participant's account in the Supplem
ntal Savings Plan is credited with
investment income or loss as if the funds had been invested in the investment
funds offered under the Retirement Savings Plan, as elected by the participant.
The amount of a participant's account under the Supplemental Savings Plan will
be paid at such time as the participant elects irrevocably upon becoming a
participant under the Supplemental Savings Plan. Each of the Named Executive
Officers is eligible to participate in Supplemental Savings Plan and, in
accordance with the terms of the Supplemental Savings Plan, M&T Bank has agreed,

<PAGE>

on an unfunded basis, to pay benefits under the Supplemental Savings Plan to
them. See the footnote to the Summary Compensation Table for a listing of the
credits made by the Company in 1995 under the Supplemental Savings Plan on
behalf of each of the Named Executive Officers.

Directors' Fees

First Empire. Directors of First Empire who are not also salaried officers
of the Company or its subsidiaries receive an annual retainer of $10,000 plus
$750 for each meeting of the Board of Directors attended. Such directors who are
members of a committee of the Board of Directors of First Empire receive $500
for each committee meeting attended. If a director's domicile is more than 100
miles from the location of a board or committee meeting, such director receives
an additional $375 for attending the board meeting and an additional $250 for
attending the committee meeting. The Board of Directors has established a
limitation on total compensation for services as a director of First Empire and
its subsidiaries of $40,000 per year. All directors of First Empire are entitled
to reimbursement for travel expenses incidental to their attendance at meetings.

In connection with its acquisition of East New York, the Company agreed to
grant to persons who became directors and advisory directors of First Empire and
its subsidiaries upon First Empire's acquisition of East New York and certain
other officers of East New York, on an annual basis, nonstatutory stock options
to purchase shares of the Common Stock having an aggregate fair market value on
the date of grant, in the case of an officer, equal to his or her then basic
annual compensation and, in the case of a non-officer director, equal to the
aggregate amount of his or her then annual retainer and his or her board and
committee meeting fees in the last full calendar year preceding the date of
grant. During 1995, the following directors of First Empire were granted options
covering the indicated number of shares, each with an exercise price of $140.00
per share: Messrs. Benisch, Callan and Shanley and Dr. Trent - 285 shares.

M&T Bank. Directors of First Empire who also serve as directors of M&T Bank
or its subsidiaries, if not salaried officers of the Company or its
subsidiaries, receive attendance fees for each board or committee meeting
attended. Such attendance fees are identical to the schedule of fees paid to
directors of First Empire for board and committee meetings attended. All such
directors of M&T Bank and its subsidiaries are entitled to reimbursement for
travel expenses incidental to their attendance at meetings. An unfunded plan for
the deferral of board and committee fees is available to the directors of M&T
Bank whereby a specific amount or percentage of such fees may be deferred until
the later of January 1st following the date the director leaves the Board of
Directors or the date the director reaches age 65. Quarterly compounded interest
is credited to the deferred fees at a rate equal to that paid on M&T Bank's
regular savings accounts.

East New York. Each of the former trustees of East New York who became
a director of East New York and who is not a salaried officer of the Company or
its subsidiaries, receives an annual retainer of $18,000, a fee of $750 for each
East New York board meeting attended and a fee of $500 for each East New York
committee meeting attended. If a director must travel more than 100 miles to
attend a board or committee meeting, such director receives an additional $375
for attending the board meeting

<PAGE>

and an additional $250 for attending the committee meeting. Other directors of
East New York who also serve as directors of First Empire, if not salaried
officers of the Company or its subsidiaries, are entitled to the same schedule
of attendance fees but receive an annual retainer of $10,000 and, if applicable,
a fee of $750 for attending each meeting of the Mortgage Investment Committee of
East New York's board. If any such director must travel more than 100 miles to
attend a Mortgage Investment Committee meeting, the director receives an
additional $375 for attending the meeting. Subject to its fiduciary duties, the
Company has agreed to cause each of the former trustees of East New York who
became a director of East New York following the conversion of East New York
from mutual to stock form and its acquisition by the Company on December 24,
1987 to be elected to serve as a director of East New York until the earlier of
the director's 75th birthday or resignation. If East New York is merged into
another bank subsidiary of the Company prior thereto, subject to its fiduciary
duties, the Company has agreed to cause each such East New York director to
become an advisory director of such bank subsidiary until the earlier of such
director's 75th birthday or resignation and to cause the bank subsidiary to hold
the requisite number of meetings and to appoint such advisory director to the
requisite number of committees so that the advisory director would receive
compensation equivalent to the compensation received as a director of East New
York.

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company and their
associates are, as they have been in the past, customers of, and have had
transactions with, the bank subsidiaries of the Company; and additional
transactions may be expected to take place in the future between such persons
and subsidiaries. Any loans from the Company's subsidiary banks to such persons
and their associates outstanding at any time since the beginning of 1995 were
made in the ordinary course of business of the banks on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and did not involve more than
normal risk of collectibility or present other unfavorable features.

BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND ATTENDANCE

The Board of Directors held four meetings during 1995. Each of the directors
attended at least 75% of the total number of meetings of the Board of Directors
and of the committees on which the director served, except for Senator Goodman.

The Executive Committee of the Board of Directors is empowered to act in the
board's stead when the Board of Directors is not in session, during which time
the Executive Committee possesses all of the board's powers in the management of
the business and affairs of the Company except as otherwise limited by law. The
Executive Committee held no meetings during 1995. Messrs. Wilmers (Chairman),
Baird, Garman and Stevens comprise the current membership of the Executive
Committee.

<PAGE>

The Audit Committee met five times during 1995 with representatives of
the Company's independent accountants. In addition to recommending the selection
of the independent accountants each year, the Audit Committee reviews the
activities of the subsidiary banks' examining committees, the audit plan and
scope of work of the independent accountants, the results of the annual audit
and the limited reviews of quarterly financial information, the recommendations
of the independent accountants with respect to internal controls and accounting
procedures, and any other matters it deems appropriate. Messrs. Larson
(Chairman), Hodgson, Lambros and Glynn and Ms. Bontempo are the current members
of the Audit Committee.

The Compensation Committee is responsible for administering the Stock
Option Plan, including the making of grants thereunder, for administering the
Annual Incentive Plan and, in addition, for making such determinations and
recommendations as the Compensation Committee deems necessary or appropriate
regarding the remuneration and benefits of employees of the Company and its
subsidiaries. The Compensation Committee met three times during 1995. Messrs.
Pereira (Chairman), Baird and Stevens currently serve as the members of the
Compensation Committee.

First Empire does not have a standing committee of its Board of Directors
on nominations, or any other committee performing similar functions.

OTHER MATTERS

The Board of Directors of First Empire is not aware that any matters not
referred to in the form of proxy will be presented for action at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares represented thereby in
accordance with their best judgment.

INDEPENDENT PUBLIC ACCOUNTANTS

On the recommendation of the Audit Committee of the Board of Directors, the
firm of Price Waterhouse, certified public accountants, has been selected as
First Empire's principal independent public accountants for the year 1996, a
capacity in which it has served since 1984. Representatives of Price Waterhouse
are expected to be present at the Annual Meeting. The representatives may, if
they wish, make a statement and, it is expected, will be available to respond to
appropriate questions.

SOLICITATION COSTS

The cost of soliciting proxies in the accompanying form will be borne by
First Empire. The solicitation is being made by mail, and may also be made by
telephone or in person using the services of a number of regular employees of
First Empire and its subsidiary banks at nominal cost. Banks,

<PAGE>

brokerage firms and other custodians, nominees and fiduciaries will be
reimbursed by the Company for expenses incurred in sending proxy material to
beneficial owners of the Common Stock.

STOCKHOLDER PROPOSALS

A stockholder wishing to submit a proposal for consideration at the
1997 Annual Meeting of Stockholders should do so not later than November 14,
1996.

By Order of the Board of Directors.

RICHARD A. LAMMERT
Secretary

March 14, 1996

<PAGE>

P FIRST EMPIRE STATE CORPORATION
R
O ANNUAL MEETING OF STOCKHOLDERS - APRIL 16, 1996 AT 11:00 A.M.
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Ravinder K. Bansal, Ernest J. Del Monte and
Richard C. Penfold as Proxies and authorizes said Proxies, or any one of them,
to represent and to vote all of the shares of common stock of First Empire State
Corporation which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders to be held on April 16, 1996 and any adjournment thereof (i) as
designated on the item set forth on the reverse side and (ii) at the discretion
of said Proxies, or any one of them, on such other matters as may properly come
before the meeting.

(MARK, SIGN AND DATE ON REVERSE SIDE)

---------------
| SEE REVERSE |
| SIDE |
---------------

<PAGE>

- ------
| |
X Please mark
| | vote as in
- ------ this example.

ELECTION OF DIRECTORS

Nominees: Brent D. Baird, John H. Benisch, C. Angela Bontempo, Robert T. Brady,
Patrick J. Callan, James A. Carrigg, Barber B. Conable, Jr., Richard E. Garman,
James V. Glynn, Roy M. Goodman, Patrick W.E. Hodgson, Samuel T. Hubbard, Jr.,
Lambros J. Lambros, Wilfred J. Larson, Jorge G. Pereira,
Raymond D. Stevens, Jr., Herbert L. Washington, John L. Wehle, Jr. and
Robert G. Wilmers

FOR WITHHELD IF PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS
ALL FROM ALL SPECIFIED OR, IF NOT SPECIFIED, WILL BE VOTED FOR
NOMINEES NOMINEES ALL NOMINEES. A VOTE FOR ALL NOMINEES IS RECOMMENDED.
------ ------
| | | |
| | | |
------ ------

For, except vote
withheld from the
following nominee(s):

Please mark, date and sign below
exactly as name appears hereon and return
this proxy in the envelope provided.
Persons signing as executors, administrators,
trustees, etc. should so indicate. If a
joint account, all should sign.

Signature:___________ Date______ Signature:___________ Date______