M&T Bank (MTB) in Buffalo reported lower earnings in the first quarter as customer activity dwindled in the first two months of 2014 and costs associated with regulatory requirements grew.
M&T earned $229 million in the first quarter, down 16% from the same period a year ago. Earnings per share of $1.61 matched the estimates of analysts polled by Bloomberg.
The company's noninterest income fell 3% from the first quarter of 2013, to $420 million, primarily due to a 14% drop in mortgage revenue and a 6% decline in service charges on deposit accounts. A March rebound in customer activity helped soften these declines, M&T Vice Chairman and Chief Financial Officer Rene Jones said in a Monday press release.
M&T's net interest income was nearly unchanged from the same period a year ago, at $656.4 million. The company reported a $3.5 billion increase in earnings from average investment securities. This increase was offset by a decrease in M&T's net interest margin, which narrowed by 19 basis points, to 3.52%.
Noninterest expenses grew by 10%, to $702 million. The rising costs were driven by professional salaries and services associated with capital planning and stress testing, risk management and compliance with anti-money laundering and Bank Secrecy Act rules.
"While these initiatives contributed to operating expenses that were higher than M&T's normal run rate, they position us well for the future," Jones said in the release.
The Federal Reserve Board has ordered M&T to improve compliance with anti-money laundering and Bank Secrecy Act regulations before it will be allowed to complete its planned purchase of Hudson City Bancorp (HCBK) in Paramus, N.J. The $88.5 billion M&T initially agreed to buy Hudson City in September 2012. The deal is now expected to close by the end of 2014.
Improved asset quality allowed M&T to chop its loan-loss provision by 16%, to $32 million. Net chargeoffs also fell to $32 million, a 14% decrease from the same period a year ago.
M&T's shares were nearly 2% in early trading Wednesday, to $120.47.