Former Speaker of the House of Assembly Ernest DeCouto has seen the value of his stake in Butterfield Bank fall from $6 million to about $300,000 in the space of three years.

His story is typical of many well-heeled Bermudians, who chose to invest a significant portion of their personal wealth to derive an income from the dividends.

Like all shareholders who have stayed the course through the traumatic past three years, Mr. DeCouto has seen those dividends dry up to nothing and the value of the stake fall by some 95 percent.

In 2007, the bank's dividend payout to shareholders peaked at more than $55.3 million, the majority going into the local economy. The flow of that cash into the community has dried up completely for now, and is having serious consequences, particularly for those who were relying on it for a large portion of their retirement income.

The collapse in the share price over the past three years from $21 to $1.50 yesterday, has simultaneously created a massive erosion of wealth, particularly in the higher economic strata, that will span generations.

"Many people who have shares in the bank got them handed down from previous generations," Mr. DeCouto said. "And I bought a lot of shares for my children." The 84-year-old retiree, who enjoyed a successful career running a real estate business, described the events that led to the bank's reversal of fortune as a "tremendous disappointment".

He has expressed that disappointment very publicly. At the special general meeting to discuss last year's $200 million preference share issue, he made his voice heard on a proposed change to a by-law.

"They wanted the shareholders to give 'absolute discretion' to the board," Mr. DeCouto said. "My comment was that the directors have not got the confidence of the shareholders and the 'absolute discretion' clause should be deleted." The sale of $550 million in new equity to the new investors in March rescued the bank, but inflicted further pain on individual shareholders. As a result of the deal, the number of common shares outstanding rocketed from 99 million to 557 million. For the pre-existing shareholders, it meant that each of their shares represented a much smaller stake in the company. Dividends have now been suspended until the bank returns to a period of "sustained profitability" which most experts believe is at least two or three years away.

Other Bermuda companies have also been impacted by the plunge in Butterfield shares, most notably Argus Group Holdings Ltd. Before the new investors came in this year Argus owned a seven percent stake in the bank. Now its approximately 9.8 million Butterfield shares amount to a stake of about 1.75 percent, according to Bloomberg data.

The bank's plunging share price was the biggest single reason that Argus posted the first net loss in its 60-year history for 2008. The insurer and pension provider recorded $116 million of write-downs of assets in its investment portfolio, in particular its Butterfield Bank stake, as it suffered a net loss of $115 million. Argus was hit again in 2009 as the bank's shares continued to lose value. In the second half of the company's fiscal year alone, through March 2010, Argus attributed a write-down of $29 million to its Butterfield shares, as the company posted an $18.4 million full-year loss.

There has been a knock-on effect as Argus shares have also lost value because of the insurer's large stake in Butterfield. Argus was flying on the Bermuda Stock Exchange as its shares peaked at $17.75. A year later, just after Butterfield announced its year-end results for 2008 and Government help in guaranteeing its $200 million preference share issuance, Argus plunged to $6. While Argus had other problems during this period, not least some exposure to the Bernard Madoff's multi-billion dollar fraud, Butterfield's slump played a major role in its own share price decline.

While Argus is by far the biggest local company investor in Butterfield, others have suffered too. For example, KeyTech Ltd., owner of the Bermuda Telephone Company, said in its earnings statement for the year through the end of March 2010 that its stake in Butterfield had declined in value by $2.1 million.

As the most traded and influential stock on the BSX, Butterfield has a great impact on The Royal Gazette / BSX Index, which fell from its all-time high of 5,382.06 on July 25, 2007, all the way down to its 2010 low of 1,216.81 on July 20. That fall of 77.4 percent, from peak to trough, in the space of three years, which mirrors the bank's fortunes, wiped out hundreds of millions of dollars of local wealth.