Butterfield Reports Q1 2010 Financial Results

Hamilton, Bermuda: 27 April 2010 - The Bank of N.T. Butterfield & Son Limited (“Butterfield” or the “Bank”) today announced a first quarter net loss of $176.3 million or a loss of $0.75 per share on a fully-diluted basis, compared with a diluted loss per share of $0.22 in Q1 2009.    

Brad Kopp, President & Chief Executive Officer, commented on Butterfield’s first quarter results: “As we disclosed in our year-end results and reiterated at our shareholders’ Annual General Meeting earlier this month, Butterfield anticipated incurring further investment losses of up to $175 million in the first quarter as a consequence of our strategic restructuring and de-risking of the Bank’s balance sheet.  Under this initiative, we sold $820.1 million of asset-backed securities in March, which, combined with further other-than-temporary impairment charges, contributed to overall quarterly losses on asset-backed securities of $174.3 million.  We have now largely diminished the balance sheet exposure to potentially problematic securities, allowing us to focus our resources on returning our businesses to a state of healthy growth.”

Despite the losses reported in Q1 2010, the Bank’s regulatory capital base totalled over $1 billion as at 31 March 2010 with a total capital ratio of 20.0% and a tier 1 ratio of 14.3%, up 9.9% and 7.1% respectively, a record high for the Bank.  The Bank’s capital ratios are now well in excess of the Bermuda Monetary Authority’s prescribed minimum Tier 1 ratio and the Individual Capital Guidance for total capital set by the BMA under the Basel II framework. The Bank’s tangible common equity ratio ended the quarter at 4.9%, higher than the 4.7% forecasted for the quarter. 

On 2 March 2010, Butterfield announced the details of a balance sheet restructuring programme under which $550 million of new common equity was issued to a group of institutional investors, providing capital to offset loss provisions in respect of underperforming hospitality loans and enabling the Bank to take steps to de-risk its balance sheet by selling the majority of its asset-backed securities and collapsing its Held To Maturity investment portfolio.  As part of the agreement with the new investors, legacy shareholders received rights to purchase up to $130 million of common equity, which will reduce proportionately the ownership interest of the new investors.  The rights offering began on 12 April 2010 and will continue through the close of business on 11 May 2010.

Commenting on the rights offering, Mr. Kopp said, “We have held many rights offering information sessions over the past two weeks, and we have been extremely pleased with the level of interest that the community has shown in this unique investment opportunity.  With a substantially de-risked and liquid balance sheet and strong capital ratios, we believe the Bank is well positioned for a return to profitability and healthy growth in the medium term, as interest rates rebound.  We are pleased that we’re able to give our loyal shareholders, many of whom have experienced a substantial decrease in the value of their investments in the Bank over the past two years, the opportunity to participate in the future growth of the Bank.”

In keeping with its recently announced decision to suspend common dividend payments until the Bank returns to a position of sustainable profitability, Butterfield’s Board of Directors did not declare a dividend on common shares for the first quarter of 2010. The Board declared a dividend on its 8% preference shares, payable on 15 June to shareholders of record on 1 June 2010.

Michael Collins, Senior Executive Vice President in charge of the Bank’s Bermuda operations, shared his views on Butterfield’s Q1 performance, saying, “Thanks to a functionally and geographically diversified operating model, Butterfield normally enjoyed a good balance of interest and non-interest income.  Unfortunately, over the past couple of years, our revenues have been suppressed as a consequence of both low interest rates and low asset values on the world’s financial markets.  In Q1, net interest income was down by more than $6 million for the quarter on interest rates that continue to be at historic lows in Bermuda, the United States and United Kingdom.  Non-interest income was flat, year over year, on slightly reduced revenues associated primarily with lower valuations of our Butterfield Funds.”

For results please refer to http://www.bm.butterfieldgroup.com/About/investor_relations/quarterly_reports/