No one knew just how big the problems actually were at Bank of N.T. Butterfield and Sons Ltd. in December 1997, when Calum Johnston took over as chief executive officer.

In an exclusive interview with The Royal Gazette, the man credited with turning Bermuda's oldest bank around, said it was a shock to find out just how bad things were.

He revealed that the bank had been given a clean bill of health before he arrived and told The Royal Gazette about the measures he had to take to change its financial position and make sure it had a stable and profitable future.

His predecessor, John Tugwell, had written off $20.6 million for discontinuing operations in Singapore and London, after the bank faced years of inefficiency and falling profits. Mr. Tugwell left after six months, citing “personal reasons” for his departure. And Mr. Johnston, now 67, and who has just retired from the bank after a career spanning 50 years and many continents, said he took the job after being told that the bank had been put back on track by his predecessor.

“The real problem was that nobody knew how bad the problems really were, it was just that it had been mismanaged for a long time. It was a bit of a shock to find how bad it was.” Mr. Johnston said he joined the Bank of Butterfield following a long career in banking, but had no idea how much work he would have to put into when he arrived in Bermuda. “I knew the bank. Any international banker knows this bank and it had a far better reputation outside Bermuda than it had inside. People outside looking in don't realise that service is poor and a lot of mistakes were made.

“There was nothing to do but to get on and fix it.”

During his four-year tenure in Bermuda, he worked legendary long hours, arriving before his staff at 7a.m., and leaving after them at 7 p.m. in a bid to turn the company around.

“There were a lot of challenges. I think the biggest challenge in the beginning was to make the staff understand that I wasn't Mr. Nasty for the sake of being Mr. Nasty.

“We did have to change things and they had to change things. I couldn't change things on my own. I had to convince them that this was for the better. It was a bit painful at the time, but it was going to be OK.

“The bank fundamentally was very sound, well capitalised and I think that was perhaps the most difficult challenge, not to have them think that I was just here to throw my weight around for no good reason.”

Before he left, Mr. Johnston was able to put through his 14th consecutive record profit for the bank, having rid the company of a set of unprofitable loans and unwise investments.

After he arrived, there were many dismissals, and reports of reshuffles and growing pains reached all sectors of the Island.

“It had to be done. When I arrived, my predecessor had been here for about three months and had left about two months before I got here.

“He only spent about two or three months in the bank, and he wrote off everything and produced a first quarter profit of $10 million. He said the bank was cleaned up, everything was clean. And there is $10 million profit. Well to do that he ignored all the other things that still needed to be written off, he didn't make any provisions for anything and there was no way that we could keep that up.”

Mr. Johnston balked at the task ahead of him but decided that the loan portfolio and its manager had to go, and there had to be another write-off.

“When I looked at it I said, ‘we've got to make provisions. We've got to look at the loan portfolio'. At the end of that year, when it came to the third quarter I said, ‘we cannot go on like this'. Everyone was saying, ‘well we can't have another write-off we've said we've cleaned it up ... we can't'. And I said, ‘well I'm sorry, but you know we just have to'. This stuff needs to be written up. That was the hardest decision, to take that second big write off. But it had to be done.”

He said closing down businesses was a “no-brainer”, but the problem was to get out of them without leaving a lot of problems for the bank, adding that the bank sold the businesses just before he arrived but had continued to guarantee all the loans. “We focused our attention on what was important to the bank instead of the bits and pieces. And now we have made some acquisitions, I mean we are not solely trying to get rid of things. We are trying to get rid of the things that are peripheral and focus on what is important to us.” And now after 14 consecutive quarters of record profits, Mr. Johnston has stepped down and has handed over the business to his successor, Alan R. Thompson, who took over officially as president and chief executive officer at the end of January.