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M&T Bank: Earnings Preview

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During earnings season, the reports from big banks always garner a lot of interest, but don't overlook the smaller regional banks like M&T Bank (NYSE: MTB  ) . This Buffalo-based lender has been showing exceptional promise so far this year, and I'm expecting more good news ahead.

Regional banks have grabbed investors' attention lately as they busily sop up the lending business shed by the big banks, while avoiding some of those institutions' riskier behaviors. One of these ambitious banks is M&T, which reports earnings next Wednesday. M&T has been very industrious over the past few months, and all of this activity is bound to be reflected in its third-quarter earnings.

Lots of lending, and a big acquisition
The big news for M&T this quarter is its recent acquisition of Hudson City Bancorp (Nasdaq: HCBK  ) , a company that it was able to pick up for just 77% of book value. The purchase expands M&T's reach by 135 branch locations and M&T expects the new addition to be accretive to value from the get-go.

But business may also look better outside of the acquisition. Last year at this time, M&T reported a near 5% drop in earnings, which was largely due to expenses associated with its purchase of Wilmington Trust, but also reflective of lower average loans. This year is apt to present a different picture, however. As Credit Suisse (NYSE: CS  ) noted last month, regionals have been putting the pedal to the metal as far as loans are concerned, earning themselves a nice chunk of change in fee income. 

Regional banks have really picked up the slack as big banks like Bank of America (NYSE: BAC  ) -- whose lending fingers got terribly burned when it acquired Countrywide -- and JPMorgan Chase (NYSE: JPM  ) have shrunk away from the mortgage market since the great meltdown. 

M&T and peers such as BB&T (NYSE: BBT  ) , Suntrust (NYSE: STI  ) , and Huntington Bancshares (NASDAQ: HBAN  ) have all stepped up their mortgage writing, as well as increasing the number of commercial and industrial loans they make. In addition, M&T has been lauded for lending $196 million in Small Business Administration loans, which is nearly four times the $50 million that it committed to in 2011.

Foolish bottom line
Despite all the pressures affecting the banking industry, I expect M&T to continue the onward and upward trend for Q3 that it evidenced in the previous two quarters, when the bank beat estimates on earnings both times. M&T is a bank that thrives on acquisitions, and its purchase of Hudson City is a particularly important feather in its cap with all those extra branch locations -- something that matters very much to the banking public.

Is M&T making all the right moves? It looks like it, so keep your eyes peeled for the announcement next Wednesday. I'll bet you won't be disappointed.

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Fool contributor Amanda Alix has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America, Huntington Bancshares, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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