M & T Bank Corp. (NYSE:MTB) reported a surge in profits of 50% for its fourth quarter, and nearly doubled its income for the year. Rising income from interest, fees and charges contributed to the strong performance, while loan loss provisions fell. M & T has shown solid management with positive results even throughout the recession.

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The Fourth Quarter And Fiscal Year
Diluted earnings per share on a GAPP basis were $1.59 on net income of $204 million, compared to $1.04 on $137 million in the year ago quarter. For the year, net income was $736 million or $5.69 per share, compared to $380 million or $2.89 per share. M & T has been an acquirer lately. Last year it bought Provident and Bradford banks in the mid-Atlantic region, both of which contributed to profitability. Last quarter it announced acquisitions of K Bank and troubled Wilmington Trust.

The fourth quarter earnings were led by 3% higher net interest income of $580 million, resulting from increased net interest margins, which grew from 3.71% to 3.85 percent. A key contributor to the earnings surge was the substantial reduction in loan loss provisions from $145 million in the year ago quarter to $85 million in this year's quarter.

The rest of M & T's performance was largely positive. Net charge-offs were down, with net interest income up for the year along with deposits, so M & T's business continues to strengthen. Weaker areas were loans and leases, flat for the year. Despite improvement in commercial loans, residential mortgages were down slightly. The strength was in interest, fees, deposits and better credit quality, while lending was still off.

Other Banks Report
JP Morgan Chase
(NYSE:JPM) led off the earnings season for banks with a large profit increase. JPM was also helped by a loan loss provision reduction, and had an intriguing increase in loans. Others such as Citigroup (NYSE:C), Bank Of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) are due to report this week. All are expected to produce improved results. While M & T's annual performances did show an earnings dip in 2009, the bank remained profitable through the worst of the financial crisis - something that couldn't be said for the larger banks.

What's Next For M & T?
M & T has a solid balance sheet. As a well-run midsize regional, it didn't go through the nightmare some of the big banks fashioned. M & T had $68 billion in assets at year's end, with its tangible equity per common share $33.26, up from $28.27 at year's end 2009. The stock traded recently in the $80s, in the middle of its 52-week range, with a PE of 17 and a yield of 3.25 percent.

Bottom Line
Although the economic recovery is still slow, credit quality issues for most banks are subsiding and earnings are up dramatically. At some point M &T, along with other banks, will have to ramp up its lending again to keep growing earnings. There are glimmers in the financial sector that indicate it's starting to happen. As lending increases, that's when we'll have a truer banking and economic picture, and perhaps a truer recovery. (From coins to credit, find out how the earliest system of money management started. Check out The Evolution Of Banking.)

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Tickers in this Article: MTB, JPM, C, BAC, WFC

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