M&T Bank Corp. said first-quarter profits soared by 33 percent, driven by lower credit costs and higher revenues, including from originating and selling mortgage loans.

The Buffalo-based banking company reported net income of $274 million, or $1.98 per share, up from $206 million, or $1.50 per share, a year ago.

However, profits were down by 7.4 percent from $296 million, or $2.16 per share, from the last quarter of 2012, as mortgage banking revenues fell, and the bank paid bonuses and benefits.

Not including accounting items and $3 million in merger costs, net operating income rose by 31 percent, to $285 million, or $2.06 per share, from $218 million, or $2.23 per share, a year ago. That easily beat Wall Street estimates of $1.96 per share.

Compared with the fourth quarter, net operating income fell by 6.6 percent, from $305 million, or $2.23 per share.

“The results were comparatively strong, exceeded our internal projections and get us off to a good start for 2013,” Chief Financial Officer René F. Jones told Wall Street analysts.

Jones said mortgage banking revenues “continued to be robust,” while trust income “grew nicely” from the fourth quarter, and loan losses were “well below our historical trends.”

Banks have been profiting substantially from the continued low interest rates, which have driven a mortgage refinancing boom and have also propped up the nation’s housing market. While the low rates make it hard for lenders to make money off their core business of taking deposits and making loans, they have benefited from originating and then selling mortgages on the secondary market.

But that revenue machine appears to be slowing down. Both Wells Fargo & Co. and JPMorgan Chase & Co. – the nation’s top two mortgage lenders – said Friday in their own earnings reports that mortgage banking revenues had dropped substantially in the first quarter from the fourth quarter of last year, and M&T’s report echoed that experience.

M&T is buying Hudson City Bancorp of Paramus, N.J., for $3.7 billion, adding 135 branches in the metropolitan New York City area, including 97 in New Jersey for its first major presence in the Garden State.

Friday, however, M&T disclosed that the merger would be delayed by as much as five months, until as late as Jan. 31, 2014, after the Federal Reserve expressed concerns about shortfalls in how M&T monitors for and prevents money-laundering. It hired an unidentified outside consulting firm in January to help it evaluate its internal procedures and make improvements to address the problems cited by the Fed.

Jones stressed Monday that “we have no information to believe” that the Fed had identified any actual incidents of money-laundering or other wrongdoing, and he doesn’t expect other issues “cropping up.” The bank just had “certain deficiencies” in meeting legal requirements, he said, but it has to implement the changes and prove their effectiveness before it can obtain approval for the acquisition.

Also, the findings stemmed from normal, ongoing conversations “as part of the supervisory process,” rather than any unusual situation or examination.

But he added that the bank would take these steps and make the investments regardless of whether it had a pending deal. “These things take time,” Jones said. “Compared to some other institutions that have had these issues, M&T is a relatively uncomplicated and locally focused business. We don’t have any significant overseas operations and don’t have any complex businesses that the money–center banks are engaged in. However, we do have a lot to do, as we take compliance seriously.”

Still, it’s a rare public misstep for M&T and CEO Robert G. Wilmers, who is well-regarded for his conservative stewardship of the bank. “This is the first time since current management came to M&T that we have had to publicly disclose a matter arising from discussions with our regulator,” Jones said. “We’re going to focus on this issue and make sure that when the time comes, we’re ready. We’ll just focus on hitting this one out of the park.”

He reiterated that both banks remain committed to the deal, which is beneficial to both companies. M&T shareholders will vote on the purchase today; Hudson City shareholders will vote Thursday. “We are confident we can satisfy our regulators and complete this merger,” Jones said.

The complications with the deal didn’t slow M&T down. Net interest income from taking deposits and making loans rose by 6 percent, to $663 million, as average loans and leases grew by $5.4 billion, and the profit margin widened. From the fourth quarter, loans grew by 5 percent annualized, which means one quarter’s pace multiplied by four. Average core deposits, not including high-cost CDs or foreign deposits, rose by 2 percent annualized.

Upstate New York and the bank’s New York City, New Jersey and Philadelphia metro region saw the strongest growth, with 11 percent in upstate New York, while loans in the Mid-Atlantic region fell slightly. Total assets rose by 5 percent, to $82.8 billion, while loans and leases rose by 8 percent, to $65.9 billion, and deposits were up by 7 percent, to $65.1 billion.

The bank set aside $38 million for loan losses, down from $49 million a year ago, and wrote off $37 million as uncollectible, down from $48 million a year ago. M&T foreclosed on $96 million in assets during the quarter, down from $140 million a year ago.

Fee and other income rose by 15 percent, to $433 million, led by higher mortgage banking revenues, as well as higher trust income. But non-interest income fell by 4.4 percent from the fourth quarter, when mortgage banking revenues hit a record.

Looking ahead, Jones said the bank expects a “slow tapering off” of mortgage banking revenues, particularly from refinancings. But he said that should allow M&T to help more troubled borrowers refinance under government programs such as the Home Affordable Refinance Program, which has been extended until 2015.

Expenses fell by less than 1 percent from a year ago, to $618 million, but were slightly higher from the fourth quarter on seasonally higher compensation and benefits costs.