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M&T Bank

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surged nearly 4% in early trading Tuesday after posting profit that widely exceeded analysts' expectations.

M&T said that net income rose 40% to $127.6 million, or 97 cents a share, vs. $91.2 million, or 83 cents a share in the year-earlier quarter.

The $69 billion-asset company recorded a host of special items in the quarter, which together reduced net income by $9 million, or 8 cents a share, it said.

Shares were rising 3.6% to $68.68 in recent trading after the market opened.

In late August, M&T acquired the deposits and certain assets of Bradford Bank of Baltimore, with assistance from the Federal Deposit Insurance Corp. M&T recorded an after-tax gain of $18 million for the third quarter as a result of the acquisition. The company is still working through merger-related expenses from its second-quarter acquisition of Provident Bankshares. For the three months ended Sept. 30, it recorded merger-related expenses of $9 million, it said.

M&T also recorded a $29 million impairment charge in the quarter related to available-for-sale securities, the company said. However, because those investment securities were previously "reflected at fair value" on its balance sheet, the impairment charges did not reduce stockholders' equity, M&T said. The company also benefited from a $10 million reversal of taxes previously accrued for uncertain tax positions in various jurisdictions.

"M&T posted solid results," CFO Rene Jones said in a statement. "Our approach of providing basic banking services to customers we know in the communities where we live and work continues to prove quite successful. Credit costs remain below current industry experience and our net interest margin improved by 18 basis points during the quarter."

Jones added that the combination of both acquisitions added 8 cents per share to operating earnings.

M&T took a $154 million provision for the quarter, up by more than half compared to the year earlier quarter and up slightly from the second quarter, but it remains lower than other banks' provisions.

Net charge offs were higher from the second quarter and year earlier at $141 million. M&T attributed the rise from the year-earlier period to table to a "partial charge-off of a commercial relationship that had been transferred to nonaccrual status during the second quarter."

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Loans categorized as "non-accrual" rose to $1.23 billion, or 2.35% of loans, reflecting the challenging economic environment for businesses and individuals, M&T said. Still, assets taken into foreclosure fell slightly from the second quarter, the bank said.

M&T has remained one of the more stable regional banks throughout the credit crisis, partially due to its footprint, and more economically stable states. M&T has branches in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware, New Jersey and Washington, D.C.

Regional banks such as


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Regions Financial

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First Horizon

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have already reported results, in which credit quality generally worsened in the quarter, particularly for those with large commercial exposures, despite positive indicators in residential loans.

--Written by Laurie Kulikowski in New York.