Butterfield Bank made a profit of $13.3 million in the first three months of this year, a 9.5 percent drop over the same period last year, the bank announced late yesterday afternoon.The bank reported net income of $14.7 million in the first quarter of 2012 and attributes the $1.4 million decrease to redundancy and early retirement costs of $2.0 million it incurred in the January through March period.Butterfield Bank cut eight jobs in its Corporate Banking and Investment Services departments in early March. At that time, about 28 employees in Bermuda had opted to take up the company’s offer last November of early retirement.Seventy-six jobs were cut across the bank’s operations in Bermuda, Cayman, the UK and Guernsey. Total headcount at the end of Q1 2013 was 1,154 compared to 1,230 a year ago and 1,477 in 2011.The bank’s core earnings of $15.3 million were up five percent from $14.6 million a year ago. Butterfield’s Chief Financial Officer, Brad Rowse said that was driven by “strong expense management”.“Excluding the non-core early retirement and redundancy costs, expenses were $62.6 million or more than ten percent lower than one year ago. In spite of lower interest rates and slower economic activity, our core efficiency ratio is now 75 percent as the six percent drop in revenue was outpaced by the decisive action taken to achieve expense savings,” Mr Rowse said. “Our focus on all aspects of our businesses allowed the favourable overall result, despite the challenging economic conditions.”The company’s first quarter earnings report also reveals more borrower fell behind with repayments, as non-accrual loans increased to 2.96 percent of the total $3.9 billion loan book — slightly higher than the 2.83 percent reported at the end of last year.“Non-performing loans, which includes non-accrual loans and accruing loans past due by 90 days or more, totalled $148.7 million as at 31 March 2013, up $6.9 million from the year-end. The increase is primarily the result of non-performing residential mortgages, higher by $9.2 million, offset by a $2.2 million reduction in non-performing commercial loans,” the bank stated in its earnings release.“We continue to closely monitor early warning signs of stresses in our loan portfolio and work with customers who experience financial difficulty amid ongoing economic challenges in many of our largest jurisdictions,” the report stated.Provisions for credit losses were $4.3 million, compared to $3.3 million in Q1 2012. The bank says the increase is mainly attributable to an increase in the general provision reflecting the current economic environment.Net interest income of $32.1 million was down $1.0 million due to reduced loan volumes while return on equity was 6.3 percent, up from 2.55 percent.Butterfield’s total net revenue before credit provisions and net gains was $82.0 million in the first three months of this year, down $3.7 million from $85.7 million in Q1 of 2012, reflecting a $2.6 million decrease in non-interest income and lower net interest income, down $1.1 million from the prior year.The bank’s balance sheet was little changed in terms of total assets, which were $8.9 billion — unchanged from the end of 2012, while book value per share dropped to $1.13 from $1.16.“We are pleased with our core earnings improvement in today’s environment,” said Brendan McDonagh, Butterfield’s chairman and CEO. “We have taken steps to manage our capital levels through the share repurchase programme and the payment of a Common dividend during the quarter. As a result of our Q1 2013 financial performance, I am pleased to announce that the Board has declared a first interim dividend of $0.01 per Common share. The Bank is committed to its strategy of restoring long-term sustainable profitability. This requires us to continue to focus on our key geographies and customer segments.”The Board also declared quarterly dividends of $20 per share on the bank’s 8 percent Non-Cumulative Perpetual Voting Preference Shares, to be paid on June 18, 2013 to Preference Shareholders of record on 1 June 2013.