in boosting the Bank of N.T. Butterfield & Son Ltd. into record profits of $36.4 million, according to the company's annual report released yesterday.

While the balance sheet numbers have been made public previously, the annual report gives more details on the company's plans.

The number of employees fell during the year to 1,125 from 1,144, the third consecutive year the numbers have declined. Most of the reduction came from the sale of London-based Seymour Pierce Butterfield Ltd.

During the year ended operating expenses fell $6.3 million or 5.3 percent from a year ago to $113.2 million. Meanwhile total income for the group increased $1.3 million to $149.6 million to the year ended June 30.

Average earnings per employee rose to $32,000 from $25,000 in the previous year, an increase of 28 percent. Employee numbers are at their lowest level since 1992. However, the bank noted expenses at the Bermuda operations remained out of proportion with the group, accounting for 75 percent of costs but only 68 percent of revenues. The bank has launched what it calls a "productivity improvement project'' and is working with "consultants to achieve information systems and operational efficiencies''.

Bank of Butterfield president and chief executive officer Calum Johnston said the bank was not planning on making any more staff redundant. The Bermuda operation had not lost any staff over the past year.

Increased productivity in Bermuda will be achieved through the implementation of new computer systems due to be put in place next year, he said in an interview.

"I'm certain the new systems will get rid of a lot of manual intervention and mistakes and provide a better service,'' Mr. Johnston said. "In Bermuda the systems are a big expense and require a lot of service.

Staff salaries rose 9.7 percent during the year due to increased pay and performance reward payments. Total staff costs decreased by 2.8 percent or $1.9 million during the year.

Mr. Johnston noted that the bank's efficiency ratio, measured as total expenses expressed as percentage of total income, improved to 75.7 percent, the lowest level the bank has achieved since 1994.

Return on equity for the year was 15.6 percent, the highest since 1987. Return on assets improved from 0.1 percent to 0.8 percent.

Bank of Butterfield's operation in the Cayman contributed 44 percent of the group's earnings. Revenues from the operation was $29.8 million, up 6.8 percent from the previous year. Mr. Johnston said he expects the numbers for the group to continue to improve in the current financial year.

"We are shooting for even better results this (financial) year,'' he said.

Calum Johnston