Butterfield Bank Reports Record Full Year Earnings Up 27.7% to $90.5 Million

Hamilton, Bermuda, 15 February 2005  - The Bank of N.T. Butterfield & Son Limited today reported net income for the full year ended 31 December 2004 of $90.5 million, a record for the Bank and up 27.7% year on year.  Diluted earnings per share were $3.86, up 49 cents on 2003. Other financial highlights include:

·      Record net interest income up 28.7% at $148.1 million

·      Record total assets of $8.6 billion compared to $7.7 billion in 2003

·      Record assets under administration up 34.7% at $80.6 billion

·      Return on equity of 21.2%

Reflecting the Group's continuing strong earnings performance and commitment to enhancing shareholder value the Board has decided to increase the quarterly dividend by 3 cents to 41 cents per share.  The dividend is payable on Monday 7 March 2005 to shareholders of record on Wednesday 23 February 2004.

Alan Thompson, President & Chief Executive Officer, commented,  "We are delighted with these results in a year that has seen us successfully integrate the Leopold Joseph group of businesses in the United Kingdom and Guernsey and overcome the challenges of the severe damage in Cayman caused by Hurricane Ivan. Transaction volumes in our Cayman business have already returned to pre-hurricane levels, and we must credit our people in Cayman for achieving record net income for the full year.  In all our jurisdictions we have focused on our strategy and responded swiftly to opportunities that complement and strengthen our core businesses. Indeed, our strong performance as a group highlights the continuing effectiveness of our business model and the commitment and creativity of all our employees.  We remain committed to enhancing shareholder value, as evidenced by the €˜1 for 10' stock dividend issued last August and the fourth quarter dividend increase of 3 cents."

Richard Ferrett, Executive Vice President & Chief Financial Officer, said, "Our return on equity for the year was 21.2%, in line with our target to achieve a return exceeding 20%. Significant increases were seen in the Bank's revenue generation with both net interest income and non interest income increasing by 28.7% and 27.3% respectively.  The increases reflect significant growth in our customer deposit base and loan portfolio, the successful acquisition of Leopold Joseph, and increased revenues generated by our Wealth Management & Fiduciary Services and Investment & Pension Fund Administration businesses across the Group."

Financial highlights for the Year ending 31 December 2004 compared with the Year ending 31 December 20003.

Group Results

·         Total non-interest income, at $156.5 million, is up year on year by $33.5 million, or 27.3%. This reflects strong growth across all revenue lines, notably from Investment & Pension Fund Administration (+52.7%), Asset Management (+38.4%), Trust & Investment Services (+29.8%) and Banking Services (+15.9%).

·         Net interest income before credit related provisions, at $151.0 million, was a record and is up year on year by $32.9 million, or 27.9%, reflecting balance sheet growth. During the year the Bank made net provisions of $2.9 million in respect of credit losses, compared to $3.0 million in 2003. 

·         Total operating revenue grew year on year by $77.1 million, or 32.9%, to $311.2 million.

·         Total operating expenses increased year on year by $59.6 million, or 36.6%, to $222.4 million; a higher percentage than that seen for operating income, reflecting acquisition and integration costs associated with the purchase of  Leopold Joseph Holdings plc in April 2004. Personnel related expenses were up 27.3% year on year, primarily reflecting the increase in employees due to acquisitions. The Group's total headcount at 31 December 2004 was 1,552 (2003: 1381), including 786 in Bermuda, compared to 734 a year ago. The increase reflects both the acquisition of Leopold Joseph Holdings plc and an increased employee base to support substantial organic business growth throughout the Group.

·         Total assets of the Group as at 31 December 2004 were a record $8.6 billion, compared to $7.7 billion a year ago. The increase reflects solid growth in customer deposits, which have increased year on year by 12.1% to $7.4 billion, particularly from the administration of third party investment funds.

·         The loan portfolio increased year on year by 35.4%, or $691 million, to $2.6 billion. This increase, which was in line with the growth in customer deposits, reflects the acquisition of Leopold Joseph in the UK and Guernsey, coupled with increased loan demand in Bermuda and Cayman. The loan portfolio now represents 30.7% of total assets, compared to 25.3% a year ago. Non-accrual loans totaled $20.5 million at 31 December 2004, representing 0.8% of total loans compared with 0.9% a year ago. Loan provisions totaled $23.8 million at year-end, representing a coverage ratio of 116% of non-accrual loans. 

·         The Bank's balance sheet remains highly liquid with a loan to customer deposits ratio of 35.7%. Deposits with banks and investments increased year on year by 2.1% to $5.7 billion and represent 65.6% of total assets.

·         Client assets under management and client assets under administration across the Group increased year on year by 17.9% and 34.7% to $9.5 billion and $80.6 billion respectively.

·         Shareholders' equity increased year on year by 12.0% to $428.4 million. The loan to the Stock Option Trust decreased by $5.6 million year on year, due to the exercise of stock options. The Bank has financed the purchase for the Stock Option Trust of 6.4% of the total shares in issue, at a cost of $25.5 million, to satisfy its current and future obligations under the Directors' and Executive Officers' and Employee Stock Option Plans. Over the course of the year the Bank bought back and cancelled 459,232 shares, at a cost of $19.4 million, under the Share Repurchase Programme at an average price of $42.14.

·         The increase in shareholder value for the year, defined as the increase in share price plus re-investment of dividends in the Bank's shares, was 4.9%.

Bermuda

·         In Bermuda, net income increased year on year by 47.8% to $68.7 million. Community Banking net income grew by 48.1% to $47.1 million, reflecting increased net interest income as a result of increased loan demand and a 12bp increase in the net interest margin. The Wealth Management & Fiduciary Services and Investment & Pension Fund Administration businesses achieved a 39.0% growth in net income to $27.4 million. This reflects significant growth in both client assets under management in the award winning family of Butterfield Funds, which increased year on year by 9.3% to $5.0 billion, and client assets under administration, which rose by 26.1% to $33.3 billion.

Cayman Islands

·         Cayman recorded record net income of $24.7 million, up year on year by $1.5 million, or 6.4%, despite the impact of Hurricane Ivan. A donation of $1 million was made to the Cayman Islands National Recovery Fund in the wake of the hurricane and an expense taken of $0.6 million in respect of property damage not covered by insurance. In addition, a loss of $1.9 million was recorded for the year in respect of the Bank's minority shareholding in Island Heritage Insurance Company Limited. In common with other banks in Cayman we granted a repayment moratorium on residential mortgages and personal loans until January 2005, but continued to accrue interest payable in appropriate cases. Following a review of the loan portfolio post Hurricane Ivan credit provisions were increased by $3 million. Nevertheless, total income increased year on year by 14.7% to $56.3 million and the Return on Equity for the year was a pleasing 25.7%. Total assets increased year on year by 17.7% to $2.3 billion, whilst client assets under management increased by 3.7% to $726 million. Client assets under administration also grew strongly, up 44.3% to $25.0 billion.

Guernsey

·         In Guernsey, post tax net income increased by 11.1% to $2.6 million. Total revenues grew year on year by 20.3% to $35.0 million, reflecting strong growth in Investment and Pension Fund Administration revenues. Total assets increased year on year by $468 million to $1.4 billion, reflecting the legal amalgamation of Leopold Joseph & Sons (Guernsey) Limited with Butterfield Bank (Guernsey) Limited. Client assets under management and under administration increased year on year by 88.5% and 10.7% respectively to $558 million and $16.4 billion respectively.

United Kingdom

·         In the UK, a post tax loss of $7.2 million was recorded for the year, in line with expectations and reflecting the acquisition of Leopold Joseph Holdings plc in April 2004. Exceptional charge-offs of $5.0 million were taken in respect of a lease on premises vacated at the year-end and redundancy costs. The year saw a $14.9 million increase in total income, to $19.3 million, and we believe Butterfield Private Bank is well placed to execute its strategic plan to focus on the provision of Private Banking and Wealth Management services to high net worth clients. Total assets at 2004 year-end were $1.1 billion compared to $0.5 billion at the same stage a year earlier. Client assets under management in the UK total $738 million.

The Bahamas

·         The Bahamian businesses achieved net income of $0.7 million compared to $0.2 million a year ago.  Pleasing growth was seen year on year in the area of fund administration, reflecting the acquisition of Deerfield Fund Services (now renamed Butterfield Fund Services (Bahamas) Limited) in the first quarter of 2004. At year-end client assets under administration were $4.4 billion compared to $1.3 billion a year ago.

Barbados

·         Butterfield Bank (Barbados) Limited, in its first full year of ownership by the Butterfield Group, made a profit of $0.4 million post tax.  Total assets increased year on year by 11.6% to $173 million, reflecting loan growth and the launch of our new residential mortgage product €˜Butterfield ninety five'.

The Bank's results, which are unaudited, are stated in accordance with US GAAP. Butterfield Bank, Bermuda's first and largest indigenous 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 in The Royal Gazette: www.theroyalgazette.com and is also available on Bloomberg Financial Markets (symbol: NTB.BH) and The Bermuda Stock Exchange web site: www.bsx.com. Certain statements in this press release may be deemed to include €˜forward-looking statements' and are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, including worldwide economic conditions, success in business retention and obtaining new business and other factors. Further details on the Butterfield Bank can be obtained from our web site at: www.butterfieldbank.com.

Investor Relations:                                                                              Media Relations                                              

Richard Ferrett                                                                                      Anna Lowry

Chief Financial Officer                                                                                           Marketing & Communications

Phone: (441) 299-1643                                                                        Phone: (441) 298-6463

Fax:     (441) 295-1220                                                                        Fax: (441) 295-3878

e-mail: richardferrett@bntb.bm                                      e-mail: annalowry@bntb.bm