The Bank of Butterfield has taken a hard look at itself following increased scrutiny of “corporate governance”, shareholders heard yesterday.

An external review of bank practices led to a beefing up of the structure of internal committees, said board chairman James King.

“I believe we are well positioned in this regard,'' he told the annual general meeting at the Bermuda Underwater Exploration Institute.

Dr. King presented an upbeat report of the bank's recent performance - and shareholders appeared to share management confidence by firing no questions at the board.

Dr. King said the annual report underlined the strong results of the past financial year, and he commended the bank's management and employees for their financial and strategic accomplishments.

“In particular, I would like to mention some of the prestigious recognition the bank earned over the past year. Bank of Butterfield was named Bank of the Year for 2002 by The Banker Magazine in two locations, the Cayman Islands and Bermuda.”

Dr. King also pointed out that Standard & Poor's again acknowledged the family of Butterfield Funds with several performance awards.

At his first AGM as president and CEO, Alan Thompson was hailed by Dr. King to have already proven himself to be highly effective and, added Dr. King: “I am confident that he will be instrumental in our continued strength and profitability.”

Dr. King also said the bank had taken the decision to align the bank's financial year with the calendar year, which he said was “intended to enable analysts and potential shareholders to better evaluate and compare our results”.

This means the bank's next reporting period will be the six months ending December 31, 2002, and annually thereafter.

When asked after the meeting if this was a precursor to listing on a foreign exchange, Mr. Thompson said “not necessarily”.

He said most companies ended their financial year at the end of the calendar year and that the change would enable better coverage of the bank, making their performance “easier to follow”.

In his address to shareholders, Dr. King also said that one of the issues currently affecting all public companies was the scrutiny of corporate governance. He added: “A recent external review of our practices indicated that we apply the basic fundamentals of risk management and internal control. During the year we enhanced the structure of our internal committees, and I believe we remain well positioned in this regard.”

In his address, Mr. Thompson said: “This past year was a challenging one for financial companies worldwide, and although Bank of Butterfield reported positive results, we were not immune to the global economic environment. For example, our interest income experienced a decline which was consistent with the low interest rates in the US and UK, and our non-performing loans increased from prior years.”

Despite the challenges, Mr. Thompson pointed out that the total assets of the bank, at $5.7 billion, had increased by 10.4 percent over a year ago which he said gave the bank “a very strong foundation for future growth.”

The bank's net income was $82.3 million, up from $60.7 million the prior year, representing the bank's fourth consecutive year of profit. The bank's return on equity was also improved at 27.1 percent, up from 22.7 percent the year prior. Mr. Thompson pointed out that this figure placed the bank in the top quartile of the industry, worldwide.

Earnings per share also improved from $3.14 a year ago to $4.27 this year.

Mr. Thompson said during the year, the bank continued to build their business, and early in the year, they acquired the Guernsey operations of the Canadian Imperial Bank of Commerce, “strengthening our presence in that jurisdiction”.

He also said the new Barbados office was focused on promoting the bank's investment management services to a promising market.

In addition, Mr. Thompson said: “The sale of a controlling interest in our Hong Kong operations was an important strategic move. In addition to contributing to our profits, the sale enabled us to remain focused on core business strengths while continuing to participate in the Hong Kong market through an alliance with Dexia BIL.”

Mr. Thompson also mentioned the bank's community involvement through BEST (Butterfield Employee Shared Trust) which is a partnership between the bank and its employees introduced in the past financial year.

BEST contributed $50,000 in charitable causes in Bermuda last year, and is poised to continue with the community support, in addition to the community support directly from the bank, said Mr. Thompson.