Butterfield reported half year profit fell 9.3 percent.

For the six months ended December 31, the bank made $13.1 million, or 64 cents per share, compared to $14.5 million, or 72 cents per share, for the same six months a year earlier.

"Strong earnings by the bank's international operations, notably Grand Cayman and Guernsey, and the domestic trust businesses were offset by a disappointing performance from the Bermuda banking operations,'' the Bank of Butterfield said yesterday.

"The bank's operations in Bermuda are in a transitional stage and we still have to achieve the full benefits of our substantial previous periods' investments in technology and information systems,'' the bank said.

But these moves will ultimately mean increased efficiency, the bank said.

"An improvement in earnings will be achieved in the second six months of the financial year.'' Total operating expenses increased 13.9 percent to $59.7 million from $52.4 million. Salaries, accounting for half total expenses, rose 12.6 percent to $29.5 million from $26.2 million.

The banks' return on assets -- a key measure of profitability indicating how efficient a financial institution's assets are being employed -- fell to .63 percent from .69 percent and return on equity (ROE) fell to 9.15 percent from 10.9 percent. ROE, also a profitability ratio, measures how well equity capital is used.

Total income rose 8.9 percent to $72.8 million from $66.8 million, fee income rose 9.1 percent to $35.9 million from $32.9 million and net interest income was up 8.6 percent to $36.9 million compared to $33.9 million.

Total interest income fell 7.3 percent to $126.5 million from $136.4 million.

Assets at December 31 were $4.20 billion compared to $4.22 billion a year earlier.

The bank also said that at December 31, loans outstanding were $1.28 billion down from $1.49 billion a year earlier.