Butterfield Bank Reports Third Quarter Earnings of $23.8 million

The Board of Directors has decided to maintain the quarterly dividend at 38 cents per share payable on Monday 15 November 2004 to shareholders of record on Tuesday 2 November 2004. Taking into account the €˜1 for 10' stock dividend shareholders received in August 2004 this represents a 10% increase in the quarterly dividend, evidencing the Bank's continuing commitment to enhancing shareholder value.

Alan Thompson, President & Chief Executive Officer said, "Butterfield Bank has once again delivered solid financial results and our core earnings remain strong. It is particularly pleasing to note that during the quarter we were named Bank of the Year for the third consecutive year for Bermuda and also named Bank of the Year for Cayman. The Cayman Islands suffered severe damage in September as a result of Hurricane Ivan. Our business continuity plans ensured that we were able to service all our Cayman clients from other locations immediately following the storm. The phenomenal work of our employees in Cayman meant that we were already offering a full banking service on the island only a few days after the Hurricane struck and we are now playing a significant role in restoring the economy. Our thoughts and prayers continue to remain with our employees and the people in Cayman who are still affected by the impact of the Hurricane."

Richard Ferrett, Executive Vice President & Chief Financial Officer, commenting on the Bank's financial performance, stated that: "Our business model continues to prove effective, with the quarter seeing record total income of $82.0 million, up 36.1% year on year, reflecting significant increases in revenues achieved from our Wealth Management & Fiduciary Services and Investment & Pension Fund Administration businesses. In addition, for the sixth consecutive quarter the Group's Return on Equity exceeded 20%, at 21.8%."

Financial Highlights of the Quarter ending 30 September 2004 compared to the Quarter ending 30 September 2003 were:

· Net interest income before credit recoveries was $38.6 million, up year on year by $9.2 million, or 31.5%. This reflects both the growth in customer deposits and loans resulting from the acquisitions in Barbados and The Bahamas in the second half of 2003 and the United Kingdom in the second quarter of 2004, and organic growth across the Bank's established businesses. During the quarter the Bank achieved recovery in the amount of $3.3 million, relating to a loan written-off 6 years ago. Non-accrual loans at 30 September 2004 totalled $21.6 million, up from $19.3 million a year, reflecting loan growth. As a percentage of total loans, they have reduced from 1.0% a year ago to 0.9%. Total provisions stood at $25.2 million at quarter end, including general provisions of $21.3 million, providing 166.0% coverage of non-accrual loans. The net interest margin for the quarter, at 2.1%, was up 0.3% on a year ago.

· Total fees and other income increased year on year by 28.4%, or $8.9 million, to $40.4 million, also reflecting the acquisitions. The quarter evidenced strong revenue increases from asset management (+66.4%), investment and pension fund administration (+62.9%), customer-related foreign exchange (+28.1%) and banking services (+16.3%). The Bank recognises loan and letters of credit origination fees over the life of the underlying transaction to which they relate. In the third quarter, $0.4 million of such fees were deferred bringing the total amount of deferred fees for the year to date to $2.1 million.

· Total operating expenses were up year on year by $18.4 million to $58.1 million. Operating expenses for the acquired companies accounted for $7.9 million, or 43.3%, of the year on year increase, in line with expectations. The remainder of the increase primarily relates to higher employee related costs, reflecting an increase in headcount in Bermuda and Cayman due to business growth and the increasing cost of healthcare in Bermuda. Whilst the Group's total headcount has increased year on year, from 1,259 at 30 September 2003 to 1,528 at the end of the quarter, primarily due to acquisitions, the number of employees reduced by 46 compared to 30 June 2004 reflecting efficiencies being achieved on the integration of the Leopold Joseph businesses in the UK and Guernsey.

· Net income from the Bank's Bermuda based businesses increased by $6.6 million, or 48.3%, to $20.2 million, reflecting significant business growth in the retail and corporate banking, wealth management & fiduciary services and investment & pension fund administration businesses, together with the loan recovery. The Bermuda based loan portfolio increased year on year by 11.5%, demonstrating the success of the Bank's community banking model in both the corporate and residential mortgage sectors.

· Overseas, Cayman recorded net income for the quarter of $4.7 million, compared to $5.9 million a year ago but down from $6.8 million last quarter due to the impact of Hurricane Ivan. A donation of $1.0 million was made in the quarter to the Cayman Islands National Recovery Fund in the wake of Hurricane Ivan and an expense of $0.6 million taken in respect of property damage suffered as a result of the Hurricane not covered by insurance. In addition, a loss of $1.0 million was recorded for the quarter in respect of the Bank's minority shareholding in Island Heritage Insurance Company Limited. Total income for the quarter increased year on year by 10.3% to $13.7 million. The improvement reflects solid growth in the community banking and investment and pension fund administration areas. Total assets as at 30 September 2004 were $2.13 billion, up year on year by $548 million, the increase driven by growth in customer deposits. The Bank is assessing the potential impact of Hurricane Ivan on both the local economy and its Cayman loan portfolio of $307 million, of which 64.9% are secured mortgages with property insurance assigned to the Bank. In common with other banks in Cayman, the Bank granted a repayment moratorium until January 2005, but will continue to accrue interest payable in appropriate cases. At this time no increase in provisions has been made, but the position will be continually reviewed, as information becomes available.

· In Guernsey net income before exceptional items was $0.8 million, up from $0.7 million a year ago. This, however, reduced to a modest loss due to a provision taken in respect of a lease on premises vacated following the move to our new offices. Total income increased by $1.1 million, or 15.9, to $8.1 million. Leopold Joseph & Sons (Guernsey) Limited has now been legally amalgamated with, and operates under the name of Butterfield Bank (Guernsey) Limited.

· In the UK a post tax loss of $1.8 million was recorded. Of this amount, $0.6 million relates to the cost of servicing debt capital injected by the parent to facilitate the acquisition of the Leopold Joseph Group. Total income has increased year on year by $5.7 million. This reflects the acquisition of Leopold Joseph & Sons Limited, which is now operating under the name of Butterfield Private Bank.

· In The Bahamas net income of $0.2 million was achieved in the quarter, compared with $0.1 million last year. Total income for the quarter was $1.5 million, up from $0.4 million a year ago.

· In its third full quarter since acquisition, Butterfield Bank in Barbados increased total income by 10.5% over the preceding quarter to $2.5 million. Net income of $0.4 million was recorded, compared to $0.1 million last quarter.

· The Group's Return on Equity for the third quarter was 21.8% compared to 21.6% at the same stage last year and 20.9% the preceding quarter.

· Earnings per share increased year on year by 16 cents, or 17.8%, to $1.06.

· Return on Assets for the quarter was 1.2%, compared to 1.4% a year ago, the decrease reflecting significant year on year balance sheet growth.

· Total assets as at 30 September 2004 were $8.02 billion, up from $6.60 billion a year ago. Some 79.0%, or $1.12 billion, of the growth was due to acquisitions.

· Customer deposits across the Group increased year on year by $1.48 billion, or 26.8%, to $7.00 billion, reflecting the growth in total assets due to acquisitions.

· Total loans increased year on year by $573 million (31.0%), of which $346 million, or 60.4%, was from the acquisitions. The balance sheet remains highly liquid with the loan portfolio, at $2.42 billion, representing 30.2% of total assets, compared to 28.0% a year ago. Customer loans as a percentage of customer deposits now stand at 34.6%, compared to 33.5% at the same stage a year ago.

· Total investments increased year on year by $354 million, or 15.3%, to $2.66 billion, reflecting the employment of the increase in customer deposits and the asset/liability management strategy of investing in high quality investment grade securities as an alternative to the inter-bank deposit market. Investments represent 33.2% of total assets, compared to 35.0% a year ago.

· Shareholders' equity increased year on year by 16.4% to $438.4 million. The €˜1 for 10' bonus share issue during the quarter resulted in the issuance of 2,217,926 new shares. Retained earnings reduced by $92.1 million as a direct result of the bonus issue in the quarter, with a corresponding increase in share premium. The loan to the Stock Option Trust decreased by $6.0 million year on year, due to the exercise of stock options. The Bank has purchased for the Stock Option Trust 6.6% of the total shares in issue, at a cost of $26.5 million, to satisfy its current obligations under the Directors' and Executive Officers' and Employee Stock Option Plans. During the quarter under review the Bank bought back and cancelled 141,976 shares, at a cost of $5.9 million, under the Share Repurchase Programme.

· Client assets under investment management increase year on year by 19.3% to $8.8 billion whilst client assets under administration increased by 33.7% to $71.0 billion over the same period.

Note to Editors:

The Bank's results, which are unaudited, are stated in accordance with accounting principles generally accepted in Bermuda and Canada and conform with Accounting Standard (CICA) 1751 - Interim Financial Statements. Butterfield Bank, Bermuda's first and largest independent bank, offers a full range of Community Banking services in Bermuda, Barbados and the Cayman Islands, encompassing Retail and Corporate Banking and Treasury activities. As a specialist offshore financial services group the Bank also provides Private Banking, Wealth Management & Fiduciary Services and Investment & Pension Fund Administration Services from its headquarters in Bermuda and its subsidiary offices in the Cayman Islands, Guernsey, The Bahamas and the United Kingdom.

Butterfield Bank is a publicly traded corporation with its shares listed on the Bermuda and Cayman Islands stock exchanges. The Bank's share price is published daily by The Bermuda Stock Exchange, The Royal Gazette, Bermuda and Bloomberg Financial Markets (symbol: NTB.BH). Further details on the Bank can be obtained from its web site at: www.butterfieldbank.com.

For information contact:

Investor Relations:

Richard Ferrett

Chief Financial Officer

Telephone: (441) 299-1643

e-mail: richardferrett@bntb.bm

Media Relations:

Anna Lowry

Marketing & Communications

Telephone: (441) 298-6463

e-mail: annalowry@bntb.bm