Butterfield Bank?s Alan Thompson thinks his bank has a winning formula ? and he doesn?t see any need to change it despite the trend for small banks to be sold out to bigger competitiors.

Butterfield has nearly doubled its assets in the last three years, from $5.5 billion to $9 billion. And its assets under administration last year grew to more than ten times that ? $94.2 billion.

Mr. Thompson, who joined the Island?s oldest bank as chief executive in 2002, has overseen Butterfield?s financial growth as well as geographic expansion through several strategic acquisitions. The bank, which has been offering financial services for nearly 150 years, has operations in the Cayman Islands, Guernsey, London, the Bahamas and Barbados.

While the bank has grown into other markets through the years, Bermuda continues to be its biggest operation both in terms of size ? half the group?s employees are here ? and on the bottom line.

In 2004, net income from Butterfield?s Bermuda operations nearly doubled to $68.7 million ? equal to three-quarters of a record $90.5 million in profit.

Bermuda continues to be the group?s lynchpin, Mr. Thompson said in an address to Hamilton Rotarians yesterday. And he thinks the Island will continue to play an integral role, given its hard-earned stature as a world-class banking centre.

Besides being headquartered in Bermuda, Butterfield is also 70 percent owned by Bermuda residents.

Butterfield is small in comparison to many players in today?s banking world, but Mr. Thompson said the bank holds its own.

The global banking industry is increasingly dominated by multinational giants like Citigroup and HSBC Plc. ? an entity that dwarfs banks the size of Butterfield with its $1,467 billion in assets.

While Bermuda is a remote Atlantic island, its banking landscape is no longer as isolated as its geographic location made it in years past. That point was driven home in early 2004 when the Bank of Bermuda?s $1.3 billion sale to HSBC closed.

But external pressures haven?t changed much within Butterfield?s walls, Mr. Thompson told . And that could in large part be due to satisfied investors.

Mr. Thompson said Butterfield shareholders who have reinvested dividends in bank shares from January 2003 have seen a 117 percent increase in shareholder value. ?It is quite favourable,? said Mr. Thompson, moderately.

In comparison, an investment in the blue-chip Dow Jones Industrial Index, over the same period and also taking into account reinvested dividends, has increased in value by 21.3 percent.

?The business model appears to be working,? Mr. Thompson said.

Butterfield also doesn?t plan to have to sell shares on a major stock exchange any time soon. It is listed on the Bermuda Stock Exchange and the Cayman Stock Exchange.

?We monitor the situation. We would only do it if it was in shareholders? best interest,? Mr. Thompson said.

Besides its banking business, Mr. Thompson said Butterfield was boosting its results through strong sales by its ?more speciality? businesses, including fund administration, trust, custody, asset management and private banking.

?There are only a few jurisdictions where we offer everything ? Bermuda and Cayman,? he said. Indeed, in some offices, Butterfield?s speciality offerings dominate. For example, the London operation is geared to private banking.

Fund administration business, which Butterfield offers in four of the territories it operates in, has surged on the back of more money being pumped into this largely unregulated sector.

The hedge fund industry has grown in recent years, fuelled by the prolonged bear market as well as increasing numbers of hedge funds managers capable of generating high returns, according to a July report from KPMG and UK think tank CREATE.

Mr. Thompson said hedge funds ? with the total number of funds fluctuating between 6,000 and 8,000 ? have seen assets increase into the region of $1 trillion. While fund administrators don?t actually manage funds but do the back office work, like a fund?s accounting, the sector has expanded as hedge funds have increased in number and value.

Butterfield?s fund administration arm is no exception. ?We have seen new customer growth, and existing customers are also growing,? he said. The bank?s fund administration clientele extends beyond hedge funds to private equity funds and real estate funds.

The Bank of Bermuda, before its sale to HSBC, was a leading fund administrator, especially in Asia. And HSBC saw that as one of the Bank of Bermuda?s big draws when its stepped up to buy out the Island?s largest bank.

Success in fund administration is just one of the parallels that can be drawn between Butterfield Bank and the Bank of Bermuda. Others include a long history of success in the Bermuda market, expansion into a small but profitable international enterprises, and strong returns in speciality areas like private banking. The similarities have led to wide speculation that Butterfield could also be snapped up by one of the big banks.

But Mr. Thompson said Butterfield has carved itself a ?niche? and isn?t inclined to look for a bidder. Nor have any big banks come knocking, he told

He also thinks Butterfield is holding its own in the Bermuda market, despite longtime rival Bank of Bermuda now being part of a much bigger, more strongly capitalised, financial institution.

?We saw no significant change in our business patterns,? Mr. Thompson said, following the Bank of Bermuda sale.

?We work together, as appropriate, and we compete against each other,? he said, characterising the rivalry between the two banks as ?healthy?.

An example of working together? Butterfield and the Bank of Bermuda each own 50 percent of ProServe, a cheque clearing joint venture. And on a more personal level, Mr. Thompson and Bank of Bermuda chief executive Philip Butterfield sit together on a number of charitable boards.

While he doesn?t rule out Butterfield?s business plan changing one day, it would be driven by shareholders? interests. ?We compete successfully,? he says with a smile.