Butterfield Bank Reports Third Quarter Net Income of $30.6 million, up 34.0% year on year

Hamilton, Bermuda:  1 November 2005 - The Bank of N.T. Butterfield & Son Limited ("Butterfield Bank") today reported net income for the third quarter ended 30 September 2005 of $30.6 million, up 34.0% year on year. This brings the year to date net income to $85.0 million, a 23.4% increase year on year. Diluted earnings per share were $1.18, up 29 cents year on year. Other financial highlights of the quarter compared to last year include:

·      Return on equity of 25.7%, up from 22.0%

·      Return on assets of 1.3%, up from 1.2%

·      Net interest income of $47.6 million, up 10.7%

·      Non-interest income of $43.7 million, up 11.1%

·      Total assets of $8.9 billion, up 10.6%

·      Assets under administration of $96.5 billion, up 32.2% 

·      Assets under investment management of $9.8 billion, up 10.7%

The Board has approved a third quarter dividend of 41 cents per share. When taking into account the one-for-ten bonus share issue made in August 2005, this equates to a 10% increase in the quarterly dividend and will be payable on Monday 21 November to shareholders of record on Wednesday 9 November 2005.

Alan Thompson, President & Chief Executive Officer, said: "It is pleasing to note that the Group's core businesses, both in Bermuda and overseas, continue to perform in line with expectations.  Our Bermuda businesses continue to do well; in particular the Community Banking division has demonstrated significant growth in a highly competitive environment. In the United Kingdom we recorded positive earnings in line with expectations and strong performances were also seen from our Guernsey and Bahamas businesses."

Richard Ferrett, Executive Vice President & Chief Financial Officer, said: "Most pleasing was the improvement in the Group's efficiency ratio, at 64.1% for the quarter compared to 73.3% for the same period a year ago. Our return on equity continues to remain solid at 25.7% for the quarter, compared to 22.0% for the same quarter a year ago. Significant increases were seen year on year in the Group's revenue generation with net interest income increasing by 10.7% and non-interest income increasing by 11.1%."

Financial highlights of the Quarter ending 30 September 2005 compared with the Quarter ending 30 September 2004:

Group Results

·         Total non-interest income, at $43.7 million, was up 11.1% or $4.4 million year on year. This reflects strong growth in revenues from customer-driven foreign exchange, up 26.0%, investment and pension fund administration, up 22.1%, and banking services, up 6.6%.

·         Net interest income before credit related provisions, at $47.9 million, was a record and is up year on year by $7.9 million, or 19.7%, reflecting balance sheet growth across all the Group's operations. During the quarter the Group made provisions for credit losses of $0.3 million, reflecting growth in the Bermuda loan portfolio, compared to credit recoveries of $3.0 million a year ago. The net interest margin for the quarter was 2.2% compared to 2.1% a year ago. 

·         Total operating revenue grew year on year by $8.7 million, or 10.4%, to $91.5 million, whereas total operating expenses only increased year on year by $0.6 million or 1.0%, to $60.4 million, reflecting the successful integration of the Leopold Joseph group of businesses acquired in 2004. As a result the efficiency ratio improved from 73.3% a year ago to 64.1% for the quarter. Personnel-related expenses increased by $1.8 million, up 5.2% year on year, reflecting an increase in the headcount, which has risen from 1,552 a year ago to 1,599, to support business growth.

·         Total assets of the Group as at 30 September 2005 were $8.9 billion, compared to $8.0 billion a year ago. The increase reflects solid growth in customer deposits, which have increased year on year by 8.3% to $7.6 billion.    The return on assets for the quarter was 1.3%, compared to 1.2% for the same quarter in 2004.

·         The loan portfolio increased year on year by 21.4%, or $518 million, to $2.9 billion reflecting increased loan demand, particularly in our Bermuda and UK-based businesses. The loan portfolio now represents 33.2% of total assets, compared to 30.2% a year ago. Non-accrual loans totalled $27.0 million at 30 September 2005. This represents 0.9% of total loans, the same percentage as a year ago.  

·         The Group's balance sheet remains highly liquid with a loan-to-customer-deposits ratio of 38.8%. Deposits with banks and investments increased year on year by $274 million or 5.2%, to $5.6 billion, reflecting the increase in customer deposits, and represent 62.9% of total assets.

·         Client assets under investment management and client assets under administration across the Group increased year on year by 10.7% and 32.2% to $9.8 billion and $96.5 billion respectively.

·         Shareholders' equity increased year on year by 13.3% to $477.5 million. The loan to the Stock Option Trust at 30 September 2005 was $26.4 million, in line with a year ago. The Group has financed the purchase for the Stock Option Trust of 6.3% of the total shares in issue to satisfy its obligations under the Directors' and Executive Officers' and Employee Stock Option Plans. Under the Share Buy-back Plan, during the quarter the Bank bought back and cancelled 10,373 shares, at a cost of $0.4 million and the Stock Option Trust bought 299,775 shares at a cost of $12.9 million.

·         Diluted earnings per share for the quarter were $1.18, up 29 cents or 32.6% year on year. Basic earnings per share for the quarter were $1.21, compared to 91 cents a year ago.

Bermuda

·         Net income from Community Banking was $9.8 million, a 13.5% increase year on year when excluding the impact of a $3.3 million loan recovery in the same quarter in 2004. Total assets  increased by 13.0% to $3.5 billion. The wealth management, fiduciary services and investment and pension fund administration businesses achieved a 8.4% year on year growth in net income to $8.1 million, reflecting the increase in client assets under administration, which now stand at $43.7 billion compared to $31.9 billion a year ago.

Barbados

·         In Barbados total revenues increased by 38.7% to $3.1 million, whilst net income, at $0.5 million, was down slightly from $0.6 million achieved a year ago. Total assets now stand at $187 million, up 21.3% year on year.

Cayman Islands

·         Cayman recorded net income of $11.4 million, up year on year by $6.9 million; the increase in part reflects provisions taken last year in the wake of Hurricane Ivan. Total income, at $20.4 million, was up 68.2%, reflecting strong growth in revenues from investment and pension fund administration and banking activities. The quarter saw credit recoveries of $0.3 million following a further review of the loan portfolio post-Hurricane Ivan. Total assets increased year on year by 5.3% to $2.2 billion and client assets under administration increased by 55.5% to $31.2 billion.

Guernsey

·         In Guernsey, post-tax net income was a record $1.9 million, up from $0.2 million a year ago. The increase reflects both the successful acquisition of the Leopold Joseph Guernsey-based businesses and organic growth. Total income grew year on year by 41.4% to $10.1million. Total assets increased by 5.4% year on year to $1.6 billion, reflecting solid customer deposit growth, up 9.4% year on year to $1.4 billion.  Assets under investment management and client assets under administration for Guernsey clients now stand at $0.7 billion and $16.5 billion respectively.

The Bahamas

·         The Bahamas achieved net income of $0.4 million on total revenues of $1.7 million, up from $0.3 million and $1.4 million respectively a year ago, reflecting growth in fees from fund administration services. Client assets under administration are up 22.1% year on year to $3.9 billion.

United Kingdom

·         In the UK net income of $0.1 million was recorded, compared to a loss of $0.8 million a year ago, as a result of the successful growth achieved since the acquisition of Leopold Joseph's UK businesses in April 2004.  Net interest income increased year on year by 29.5% to $3.3 million, reflecting strong growth in both customer loans and deposits, up 40.0% and 32.5% respectively. Total assets at 30 September 2005 were $1.2 billion, up $216 million year on year. Client assets under investment management in the UK now total $0.7 billion, up 15.2% year on year.

The Group's results, which are unaudited, are stated in accordance with US GAAP. The Butterfield Bank Group, 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 provider the Group also provides private banking, wealth management, fiduciary services, and investment and pension fund administration services from its headquarters in Bermuda, and its subsidiary offices in the Cayman Islands, Guernsey, The Bahamas and the United Kingdom.

The Butterfield Bank Group is a publicly traded corporation with its shares listed on the Bermuda and Cayman Islands stock exchanges. The Group'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                                                                                      Anna Lowry

Chief Financial Officer                                                                                           Marketing & Communications

Phone: (441) 299-1643                                                                        Phone: (441) 298-6469

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

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