Butterfield Bank made a profit of $14.7 million in the first three months of this year, a 75 percent increase over the same period last year, the bank announced late this afternoon.The January through March period was the bank’s fifth successive profitable quarter and the $6.3 million improvement over the prior-year period’s net income was driven by a $4.5 million increase in net interest income, as the bank achieved higher yields on its investments.However, more borrowers fell behind with repayments, as non-accrual loans increased to 3.2 percent of the total $4.3 billion loan book. This marked a significant increase from 2.8 percent from the end of last year.“Certain segments of the loan portfolio require close monitoring given the current economic conditions in our largest jurisdictions,” the bank stated in its earnings release.The results marked another step forward in Butterfield’s recovery from net losses of more than $200 million in both 2009 and 2010, driven by soured investments linked to US mortgages.“This is a significant achievement in an environment of continued low interest rates and protracted economic recovery that creates challenges for all banks,” Butterfield CEO Brad Kopp said in the bank’s earnings statement.“Taking a more strategic view of our investment portfolio, coupled with ongoing diligence in the management of credit quality, operational risks and expenses, Butterfield has made significant strides in rebuilding profits and positioning the bank for improvements in shareholder value. As such, these are the major themes that will continue to shape our business strategy going forward.”Net interest income of $52.1 million was up 9.5 percent, while return on equity was 6.3 percent, up from 2.55 percent.However, the bank increased its allowances for credit losses by $3.4 million during the quarter to a total of $64.9 million.Credit provisions made by the bank’s Bermuda operation were $3.3 million, compared to $2.7 million in the first quarter of 2011. The additional provisions related to the bank’s residential mortgage portfolio.However, Butterfield’s profit in Bermuda improved to $5.8 million from $3.1 million, which the bank put down to higher increased realised gains, coupled with lower expenditures.“Like most banks, Butterfield continues to experience decreased volumes and demand for some services — foreign exchange and transactional business, for example — as a consequence of the economic slowdown,” said Bradley Rowse, executive vice resident and chief financial officer.“But our stable deposit base and unique mix of retail and international wealth management revenue streams mean that Butterfield is in a better position than many financial services institutions to continue to generate increasing revenues in a difficult market.“In addition, whilst our efficiency ratio remains high at just under 80 percent, we are pleased with the three percent improvement from the prior year, especially given temporary increases in costs during the quarter related to the 2011 launch of our new banking system in Bermuda and Cayman.Non-interest expenses increased by $0.6 million, or 0.9 percent, to $72.5 million as a result of the following.Despite cutting the number of employees by 133 across the bank’s operations in Bermuda, Cayman, the UK and Guernsey, salaries and employee benefit costs increased by $0.3 million year on year. The bank attributed this to increased costs from overtime and temporary employees to assist with post-system conversion issues, as well as higher staff incentive costs.The bank’s headcount is now 1,344, down from 1,477 a year ago.Technology and communications expenses increased by $1.4 million as a result of increased depreciation costs related to the systems implementation projects that are now live in Bermuda and Cayman.The bank’s balance sheet strengthend in temrs of total assets, which rose $70 million to $8.9 billion, while book value per share climbed to $1.18 from $1.14.