Butterfield Bank has defied doubters who said it could face tougher competition in 2004 by posting a record profit of $90.5 million.

The company's net income stands 27.7 percent higher than in 2003 when the bank posted $76.5 million in net income, which was in itself a 14.6 percent increase over the previous year.

Perhaps because of its stellar performance in recent years ? in defiance of those who expected Butterfield to get a run for its money in 2004 because of multinational banking giant HSBC Plc's takeover of rival Bank of Bermuda early in the year ? Butterfield said yesterday it was sticking to its winning game plan.

So far, that plan of strategic acquisitions (the company has in recent years added operations in the Bahamas, Barbados, and England to an already established network of banks in Bermuda, Caymans, and Guernsey) and build-out of an already successful model has served Butterfield well.

The bank can also be said to have managed through another bump in the road with a quick recovery in the Caymans office after suffering significant damage from Hurricane Ivan last year forcing the short-term closure of operations.

Yesterday the bank said transaction volumes in its Cayman business had already returned to pre-hurricane levels, and that the diligence of staff there had led to record net income of $24.7 million, up 6.4 percent from the prior period.

On top of record profits in 2004, Butterfield also came out with record net interest income, rising 28.7 percent to $148.1 million. This compared to net interest income of $114.6 million a year prior which was a 13.8 percent gain on 2002.

Assets also reached a new high of $8.6 billion in 2004, up nearly $1 billion on the $7.7 billion held at the end of the prior year.

Butterfield can also boast of another feather in its cap with assets under administration moving up 34.7 percent to $80.6 billion.

CFO Richard Ferrett pointed out that assets under administration had grown across the board, and had seen particularly strong growth in Bermuda where 'Wealth management & Fiduciary Services' and 'Investment & Pension Fund Administration' businesses achieved a 39 percent growth in net income to $27.4 million. The Butterfield family of funds also achieved significant growth in client assets under management which increased year on year by 9.3 percent to $5 billion, and client assets under administration which rose by 26.1 percent to $33.3 billion.

Mr. Ferrett added: "Our return on equity for the year was 21.2 percent, in line with our target to achieve a return exceeding 20 percent. Significant increases were seen in the bank's revenue generation with both net interest income and non interest income increasing by 28.7 percent and 27.3 percent respectively. The increases reflect significant growth in our customer deposit base and loan portfolio, the successful acquisition of Leopold Joseph, and increased revenues generated by our Wealth Management & Fiduciary Services and Investment & Pension Fund Administration businesses across the group."

As for any change in direction now that the Bermuda banking landscape includes a multinational giant, chief executive officer Alan Thompson said: "Basically we have our business model, and we think it will work in any competitive market. They (HSBC Bank of Bermuda) do their thing, and we do ours."

He added that Butterfield Bank was becoming an increasingly recognised brand, with the company having rebranded last May (from the more cumbersome name of the Bank of N.T. Butterfield) to strengthen positioning.

It was a move made in each of the bank's geographical locations, Mr. Thompson said.

As for rumours that Butterfield could itself be sold to a foreign bank ? with there being persistent whispers since the time of the Bank of Bermuda's sale was announced ? Mr. Thompson said: "We obviously cannot comment, but our view is that we have a business model that is working and that it is in the shareholders' best interest."

He said the bank's existing business plan was one that has 'legs', and continued to meet and exceed expectations.

Mr. Thompson did not rule out Butterfield (which has long been listed on the Bermuda Stock Exchange) eventually listing on a large, international stock exchange (as the Bank of Bermuda did in years past with its high-profile Nasdaq listing). He said the prospect was continually reviewed, but so far was not seen as necessary. He added that the bank would only ever make that decision if it proved in the best interest of investors.

As for its wave of strategic acquisitions, Mr. Thompson said all were now successfully integrated into the Butterfield network and all were expected to 'deliver' in 2005.

That included the latest and largest acquisition of UK-based Leopold Joseph Holdings plc last year, which posted a loss last year. Mr. Thompson stressed a post tax loss of $7.2 million from that operation last year had been related to integration costs. From now on he said that unit ? renamed Butterfield Private Bank ? was expected to be a "contributing business".

Mr. Thompson would not be drawn on what acquisitions may lie ahead for the bank except to allow that the acquiring would continue.

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Dividend

Meanwhile, the Butterfield Board said it will boost shareholders' quarterly dividend by three cents to 41 cents per share. The dividend is payable on Monday, 7 March 2005 to shareholders of record on Wednesday, 23 February 2005.

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Further financial highlight's from Butterfield's 2004 results, www.butterfieldbank.com