Butterfield Bank’s first-quarter net income rose nearly 10 per cent year over year, as the bank earned more in net interest income and spent less on salaries.

Net income for the first three months of the year was $44.2 million, up from $40.3 million in the first quarter of 2017.

A slight increase in loan volume and a rise in lending rates boosted net interest income — up $3.8 million to $81.8 million — which also benefited from increased yields on Butterfield’s investment portfolio.

Non-interest income fell $2.6 million to $39.8 million, as banking fee income fell as a result of lower credit card volumes, and lower foreign exchange revenue from lower transaction volume.

Butterfield saw a $3.8 million decrease in salaries and employee benefits due to lower discretionary compensation costs.

However, expenses in total were higher due to the cost of professional services associated with the acquisition of Deutsche Bank’s banking and custody business in the Cayman Islands and Channel Islands.

In addition, the bank incurred expenses in testing the implementation of Sarbanes-Oxley and compliance infrastructure buildout.

Return on average common equity was 21.8 per cent and the return on average assets was 1.6 per cent.

Butterfield’s board declared a dividend of 38 cents per share to be paid on May 15 to shareholders of record on May 4.

“I am very encouraged by our strong results in the first quarter of 2018,” Michael Collins, Butterfield’s chairman and chief executive officer, said.

“The bank continues to deliver exceptional earnings as we benefit from our strategically positioned, asset sensitive balance sheet, high quality commercial and residential lending portfolio and capital efficient, diversified fee revenues.

“We are very pleased with the progress being made integrating the banking and trust acquisitions from Deutsche Bank and continue to seek out other acquisition opportunities in lines of business and geographies that meet our strategic requirements.”

Results for the first quarter included a release of provision for credit losses of $1.9 million compared to $5.4 million in the previous quarter and $0.3 million in the first quarter of 2017.

The bank’s current total capital ratio as at March 31 was 19.2 per cent as calculated under Basel III, down from 19.9 per cent three months earlier. Both of these ratios are significantly above regulatory requirements, Butterfield said.

Butterfield’s total assets rose $200 million during the quarter to $11 billion.

The loan portfolio rose $200 million to $4 billion, thanks to new residential loan origination in the Channel Islands and the UK, as well new government and commercial lending in Bermuda.

As of March 31, 2018, the bank had gross non-accrual loans of $42.4 million, representing 1.1 per cent of total gross loans, a slight decrease from the $43.9 million, or 1.2 per cent, of total loans at year-end 2017.