Although reported profits fell for the first half of fiscal 1998/99 at the Bank of N.T. Butterfield & Son Ltd. when compared with a year earlier, the underlying trend is considerably brighter, management reported yesterday.

The bank will maintain its quarterly dividend at 16 cents per share, payable on Monday February 15 to shareholders of record on February 2.

For the six months ending December 31, 1998, the bank has reported earnings of $17.8 million, compared with $19.5 million for the first half of last year.

Last year's figure failed to hold up for the full year as the bank took remedial action in the fourth quarter to provide for discontinued businesses and exceptional items.

A more meaningful trend, top bank executives explained yesterday, was the 2.1 percent growth of second quarter earnings for the current fiscal year, compared to the first quarter: at $9.0 million, earnings for this year's second quarter are ahead by 2.1 percent over first quarter earnings, which were $8.8 million.

President and chief executive officer Calum Johnston was quick yesterday to point out what he sees as a very real improvement in this year's operating profit.

"We are building on the solid start made this financial year in all our core businesses across the Group,'' Mr. Johnston said.

"It is significant to note that the bank successfully increased non-interest income and decreased the expense base in the second quarter of this year, when compared to the first quarter,'' he added.

Bank of Butterfield satisfied with earnings of overseas businesses He explained that, had the charges against last year's earnings been pro-rated throughout the year instead of being taken in the fourth quarter, this year's $17.8 million half-year profit would be compared to $3.6 million.

"The bank plays an integral role in the economy of Bermuda and we continue to make sound, steady progress in our community banking business, which remains an essential part of the group's activities,'' Mr. Johnston said.

"We also continue to see sound performances in our treasury and asset management businesses in Bermuda and consistently solid earnings achieved by our Cayman, Guernsey and Davenham businesses overseas,'' he said. Mr. Johnston revealed that the bank's Hong Kong business broke even and that management is "taking action to enhance performance in this competitive market.'' Recent events in world financial markets have had "a minimal effect on our business,'' a bank spokesman said.

Executive vice president and chief financial officer Richard Ferrett said yesterday that "the bank continues to enjoy a strong capital position, low-risk balance sheet and stable operating environment and is demonstrating steady improvement in its fundamental core earnings.'' Mr. Ferret highlighted return on shareholders' equity, running at 15.2 percent per annum and earnings per share of 93 cents for the first six months of fiscal 199 8/99. "In December, 1998, we successfully completed the sale of Seymour Pierce Butterfield, our former London-based stockbroking and advisory company. This was part of the banks' strategy to concentrate on our core business lines of providing community banking and specialist offshore financial services,'' Mr. Ferrett said.

The sale of Seymour Pierce was achieved at a small premium to net asset value, Mr. Ferrett said, and would not affect the activities of the group's other United Kingdom business, Davenham Group plc.

"We continue to work hard to enhance shareholder value and customer service,'' Mr. Johnston said. "It was to this end that the bank recently obtained a secondary listing of its shares on the Cayman Stock Exchange and has determined to launch in the near future a Euro class of its Triple A-rated Butterfield Money Market Fund.'' HOPEFUL -- Richard Ferrett