Last year at this time, money manager Legg Mason (NYSE:LM) had just announced some impressive results, with first-quarter net income spiking by nearly 50% on revenues that climbed 29%. Although the numbers were among the best in the firm's history, shares of the Baltimore-based company still lost ground after the bottom-line total came up short of expectations. This morning, Legg Mason again posted solid growth rates, with net income jumping 31% to $112.8 million ($0.93 per share), yet once again the Street was looking for more. Apparently, some things never change.

Other things, however, have changed quite a bit since last year, as evidenced by the 114% run-up in the firm's shares. In a foreshadowing of events to come, the company last summer entered into exploratory talks to acquire the managed assets of Merrill Lynch (NYSE:MER). Nothing ever materialized from the discussions, but they did illustrate that Legg Mason was serious about bolstering its reputation as a top-tier asset manager. And why not? After all, that growing segment of the business was already responsible for nearly three-fourths of the company's earnings, while revenues generated from traditional brokerage commissions seemed to be going nowhere fast.

Legg Mason never abandoned the search. And last month, it announced that it had reached a landmark agreement with financial-services giant Citigroup (NYSE:C). Under the terms of the deal, Legg Mason was handed Citigroup's asset-management business -- and its $437 billion in assets under management -- in exchange for Legg Mason's brokerage unit. The deal vaulted Legg Mason into being a top-five money manager, boosted Citigroup's sales force to nearly 14,000, and removed potential conflicts of interest from both organizations.

As a result of the swap, Legg Mason is now focused exclusively on the manufacturing side of the business -- selling the products is someone else's concern. With the addition of Citigroup's asset-management operations, which include the Smith Barney and Salomon Brothers fund families, the company's managed assets will exceed $830 billion. However, integrating (and turning around) the poor performance at many of the newly acquired funds will not be done overnight, and I would expect to see many of the laggards (and their dismal track records) absorbed into other funds.

Legg Mason should be up to the challenge, though. Despite stiff competition from the likes of Motley Fool Income Investor pick Alliance Capital (NYSE:AC), T. Rowe Price (NASDAQ:TROW), and privately owned industry titans such as Fidelity and Vanguard, the company's assets under management have still soared by more than $100 billion (or 34%) over the past year to reach nearly $400 billion, with strong cash inflows accounting for 70% of the increase.

All three divisions -- institutional, wealth management, and mutual funds -- registered sharp double-digit growth, which helped rake in fees and drive revenues and net income up 25% and 40%, respectively. Meanwhile, profits generated by the soon-to-be-discontinued private client and capital markets divisions dropped 4%.

With a few standout performers such as Smith Barney Aggressive Growth's (FUND: SHRAX) Richard Freeman teaming up with the legendary Bill Miller, as well as a three-year marketing agreement in place with Citigroup's extensive retail distribution channels, Legg Mason shareholders still have much to look forward to.

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Fool contributor Nathan Slaughter owns none of the companies mentioned.