Butterfield Bank Reports First Quarter Net Income of $24.3 million

Hamilton, Bermuda, 26 April 2005  - The Bank of N.T. Butterfield & Son Limited today reported net income for the first quarter ended 31 March 2005 of $24.3 million, up 12.7% on the previous quarter. Net income is also up 22.0% year on year when excluding a $5.8 million investment gain in the first quarter of 2004.  Diluted earnings per share were $1.04, up 12 cents on the previous quarter.  Other financial highlights of the quarter include:

·      net interest income up 29.5% year on year at $40.9 million

·      non-interest income up 15.3% year on year at $41.9 million

·      total assets up 30.5% year on year to $9.2 billion

·      assets under administration up 32.0% year on year to $89.4 billion

·      assets under investment management up 8.7% year on year to $8.7 billion

·      return on equity of 22.7%, up from 19.3% last quarter.

The Board has decided to maintain the quarterly dividend at 41 cents per share, payable on Monday 16 May 2005 to shareholders of record on Wednesday 4 May 2005. As a result the rolling 12-month dividend will increase from 146 cents a year ago and 155 cents last quarter to 158 cents a share. Taking into account the one-for-ten stock dividend in August 2004, this represents a year on year increase of 16.5%

Alan Thompson, President & Chief Executive Officer, commented,  "We continue to remain pleased with the Bank's performance and the significant continued progress across all our core businesses seen over the past 12 months. Particularly notable is the significant year on year increases in revenues achieved by our businesses in Barbados, Guernsey, and the United Kingdom. Our strong all round performance as a group highlights the continuing effectiveness of our business model and the commitment and creativity of all our employees."

Richard Ferrett, Executive Vice President & Chief Financial Officer, said, "Our return on equity for the quarter was 22.7%, remaining in line with our target to achieve a return exceeding 20%. Significant increases were seen year on year in the Bank's revenue generation with net interest income increasing by 29.5% and revenues from trust and investment services and asset management increasing by 44.6% and 37.5% respectively.  These increases reflect significant growth in both our customer deposit base and loan portfolio, the acquisition of Leopold Joseph, and increased revenues generated by our businesses group-wide."

Financial highlights of the Quarter ending 31 March 2005 compared with the Quarter ending 31 March 2004.

Group Results

·         Total non-interest income, at $41.9 million, was a record and up 15.3%, or $5.6 million, year on year. This reflects strong growth across all revenue lines, notably from trust and investment services (+44.6%), asset management (+37.5%), customer driven foreign exchange (26.7%) and investment and pension fund administration (+11.3%).

·         Net interest income after credit related provisions, at $40.9 million, was also a record and is up year on year by $9.3 million, or 29.5%, reflecting balance sheet growth. During the quarter the Bank made net provisions of $1.0 million in respect of credit losses, compared to $1.7 million in 2004. 

·         Total operating revenue grew year on year by $9.1 million, or 12.3%, to $82.7 million.

·         Total operating expenses increased year on year by $10.4 million, or 21.9%, to $58.0 million, reflecting the Group's increased headcount following the acquisitions made in 2004. This is also reflected in the increase in personnel related expenses, up 20.8% year on year. The Group's total headcount at 31 March 2005 was 1,567; up from 1,416 a year ago, with some 780 employees based in Bermuda, compared to 751 at the same stage last year. The increase in headcount reflects both the acquisition of Leopold Joseph Holdings plc in 2004 and an increased employee base to support substantial organic business growth throughout the Group.

·         Total assets of the Group as at 31 March 2005 were a record $9.2 billion, compared to $7.1 billion a year ago. The increase reflects solid growth in customer deposits, which have increased year on year by 32.6% to $8.0 billion, in part reflecting the acquisitions in 2004, plus organic growth in Bermuda, Barbados and Cayman.

·         The loan portfolio increased year on year by 37.5%, or $745 million, to $2.7 billion. This increase reflects the acquisition of Leopold Joseph in the UK and Guernsey, coupled with increased loan demand in Bermuda, Barbados, Cayman and the UK. The loan portfolio now represents 29.6% of total assets, compared to 28.1% a year ago. Non-accrual loans totalled $22.9 million at 31 March 2005, representing 0.8% of total loans compared with 0.9% a year ago. Loan provisions totalled $24.4 million at quarter-end, representing a coverage ratio of 106.7% of non-accrual loans. 

·         The Bank's balance sheet remains highly liquid with a loan to customer deposits ratio of 34.0%. Deposits with banks and investments increased year on year by 27.0% to $6.2 billion and represent 66.8% of total assets.

·         Client assets under management and client assets under administration across the Group increased year on year by 8.7% and 32.0% to $8.7 billion and $89.4 billion respectively.

·         Shareholders' equity increased year on year by 11.1% to $438.9 million. The loan to the Stock Option Trust decreased by $4.8 million year on year, due to the exercise of stock options. The Bank has financed the purchase for the Stock Option Trust of 6.5% of the total shares in issue, at a cost of $24.9 million, to satisfy its obligations under the Directors' and Executive Officers' and Employee Stock Option Plans. Over the course of the quarter the Bank bought back and cancelled 18,146 shares, at a cost of $0.7 million, under the Share Repurchase Programme at an average price of $41.18.

·         The increase in shareholder value for the quarter, defined as the increase in share price plus re-investment of dividends in the Bank's shares, was 4.7%.

Bermuda

·         In Bermuda, net income increased year on year by 5.4% to $13.0 million when excluding the $5.8 million investment gain recorded by Community Banking last year. Community Banking's total income grew by 3.1% to $30.2 million when excluding last year's investment gain, reflecting increased net interest income as a result of strong loan demand. Total assets in Bermuda increased by 5.6% year on year to $3.8 billion. The Wealth Management & Fiduciary Services and Investment & Pension Fund Administration businesses achieved an 18.8% growth in net income to $8.0 million, with revenues up $4.2 million to $16.3 million. This reflects significant growth in both assets under management, which increased year on year by 3.1% to $7.5 billion, and client assets under administration, which rose by 18.0% to $37.9 billion. In March the Butterfield Select Fund Fixed Income Class came first in the Standard & Poor's awards, Offshore Investment category, for US dollar bond funds over 3 years.

Barbados

·         Barbados made a profit of $0.5 million post tax compared to $0.04 million a year ago, reflecting a strong increase in net interest income.  Total assets increased year on year by 21.7% to $173 million. Loans are up 46.9%, reflecting the successful launch last year of our residential mortgage product €˜Butterfield ninety five'.

Cayman Islands

·         Cayman recorded record net income of $9.3 million, up year on year by $2.2 million, or 30.7%. Total income was up 24.4% to $17.4 million, reflecting increases of 31.1% and 34.4% respectively in non-interest income and interest income. Operating expenses increased by a lower percentage than for total revenues, up 17.8% to $8.1 million, reflecting increased headcount to support growing business volumes. Total assets increased year on year by 32.9% to $2.4 billion. Client assets under management increased to $1.2 billion, whilst client assets under administration grew strongly, up 53.3% to $29.1 billion.

Guernsey

·         In Guernsey, post tax net income increased by 98.8% to $1.5 million. Total revenues grew year on year by 22.9% to $9.8 million. Net interest income grew 46.2% year on year, reflecting the acquisition of Leopold Joseph & Sons (Guernsey) Limited in 2004. The impact of the acquisition is also reflected in total assets, up $502 million year on year to $1.5 billion. Non-interest income was up 8.6% year on year, reflecting good growth in revenues from trust and investment services and investment and pension fund administration. Assets under management for Guernsey clients increased year on year to $0.8 billion and client assets under administration at 31 March 2005 stood at $17.0 billion, up from $15.5 billion a year ago.

The Bahamas

·         The Bahamian businesses achieved net income of $0.4 million on total revenues of $1.6 million, up from $0.2 million and $1.4 million respectively a year ago, reflecting growth in revenues from fund administration services. Total assets have increased year on year by 225.7%, to $68 million and client assets under administration are up $3.0 billion to $4.1 billion.

United Kingdom

·         In the UK total revenues increased by $4.0 million to $5.2 million, reflecting the acquisition of Leopold Joseph Holdings plc in April 2004.  A post tax loss of $0.5 million was recorded for the quarter, down from $0.7 million a year ago and in line with expectations. Total assets at 31 March 2005 were $1.1 billion compared to $0.4 billion at the same stage a year earlier. The loan portfolio has increased by $340 million, to $402 million, over the past year and growth in the portfolio continues to remain strong, up 4.2% over the prior quarter. Client assets under management in the UK total $0.7 billion.

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 Butterfield Bank can be obtained from our web site at: www.butterfieldbank.com.

Investor Relations:                                                                              Media Relations                                              

Richard Ferrett                                                                                      Karen Cabral

Chief Financial Officer                                                                                           Marketing & Communications

Phone: (441) 299-1643                                                                        Phone: (441) 298-4682

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

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