Butterfield Bank saw its profits drop by more than $140 million over the past year, due mainly to write-downs and losses in investments.

The bank's net income was $4.8 million, or five cents per share, for 2008, compared to $146 million, or $1.53 per share, for the same period in 2007.

But, with the write-downs and the gain on the $115.5 million sale of Butterfield's Fund Services businesses in September excluded, the bank made a normalised net income of $114 million for last year, down by 22.2 percent from the previous year.

The results were released at the same time as Butterfield Bank's announcement that it would receive a $200 million commitment of extra capital from Government to help it withstand a severe economic downturn. The bank's total capital was $694 million and shareholders' equity was $518 million at the end of 2008.

Alan Thompson, Butterfield Bank's president and CEO, said: "Butterfield posted solid results in its core operating businesses despite difficulties in the global financial markets. This included record earnings generated by our Barbados, UK and Guernsey businesses.

"During the year, the bank worked successfully to further strengthen our core businesses through investments in infrastructure and projects designed to improve our operating efficiency. We believe that this work positions us to take advantage of opportunities when the current economic environment improves."

Normalised revenues were slightly down at $464.4 million for 2008 versus $470.3 million 2007, while normalised return on shareholders' equity also declined from 25.2 percent two years ago to 18.1 percent last year.

The bank suffered $151.8 million worth of losses and write-downs in 2008 as a result of a declines in the value of some securities, primarily US residential mortgage-backed securities in the held to maturity investment portfolio, following the collapse of the US residential mortgage market and the subsequent global credit crisis. It also incurred unrealised losses of $50.2 million from two credit support agreements provided by the bank to Butterfield Money Market Fund Ltd.

Meanwhile, the bank's total mark-to-market discount on remaining US residential mortgage-backed securities in the held to maturity investment portfolio amounted to $161.7 million. Exclusive of these securities, total investments were $3.5 billion, with a market value of $3.3 billion.

Butterfield Bank also made an accelerated write-down of $29.2 million on technology investments during the past year to put its money into a cost-effective, modern and group-wide technology solution instead.

However, the bank's balance sheet remained strong, with total assets of $10.9 billion at December 31, 2008, with $3.3 billion held in cash and deposits with banks.

Elsewhere, its loan portfolio increased by 7.1 percent or $294 million to $4.4 billion in 2008, now representing 40.5 percent of its assets, while customer deposits totalled $9.4 billion by the end of last year and its loan/deposit ratio stood at 47 percent.

Assets under management at year end dropped by 22.9 percent from the 2007 level to $9.1 billion, reflecting declines in some of Butterfield's investment funds, in line with the dislocation of the international securities markets over 2008.

The bank's Bermuda operations experienced a total revenue rise of $7.3 million or three percent year-on-year to $253.4 million, down in part to good growth in net interest income, which was up 9.6 percent to $133.4 million, offset by a $4.3 million or 3.5 percent decline in non-interest income.

Normalised net income, at $47.9 million, was down $67.3 million a year ago, reflecting both the sale of the Fund Services business and increased investment in infrastructure-related projects, while assets under management were $6.8 billion, down from $8.9 billion a year earlier, highlighting declines in asset values.