Butterfield Bank’s performance for the second half of 2011 is expected to play out much the same as the first six months with quarterly earnings in the range of $4 million to $7 million.That is according to LOM’s second quarter research update on the bank, which said that there was still a lot of work to be done and profits to be produced given the almost 550 million shares outstanding and the high expectations of its new majority shareholders.LOM maintained a ‘hold’ rating on the bank’s shares due to few potential catalysts for boosting earnings and to justify a higher share valuation over the next six months to one year, setting a one-year target of $1.50 based on a 1.10 x multiple applied to its projected year-end 2012 book value of $1.35 per share.“Butterfield’s operating performance during the first half of 2011 has been stable and relatively predictable - albeit paradoxically inspiring for shareholders after the tumultuous events of the past three years,” the report stated.“Over the course of just 18 months, the current management team has unwound the formerly troubled investment book, significantly reduced headcount and operating expenses, instituted a new technology platform, and cleaned up the bank’s loan portfolio.“The result has been a windfall for investors who participated in the rights offering of March 2010.“At the current trading price of $1.60, the value of each subscription unit (including Contingent Value Convertible Voting Preference Shares shares) has risen nearly 40 percent from the offering price of $1.21.”The report concluded that the operating environment remained challenging for the bank with low interest rates, tough competition and few opportunities for domestic loan growth, while it would be difficult for the bank’s CEO Brad Kopp and his team to squeeze anything more than “marginal incremental profits” through additional cost-cutting and rate spread manouevering.Furthermore, it said that the bank was saddled with $4.5 million in quarterly preferred share servicing costs and non-interest income had shown a worrisome decline over the past few quarters.LOM said it expected foreign exchange revenue to rebound as a result of recent volatility in currency markets and a weakening US dollar, but it added that growth in asset management, banking, and custody-related revenues was harder to forecast and the bank’s management’s focus was not on those core areas currently.For more information visit http://www.lom.com/publications/NTB_Research_Update_Aug_10_2011.pdf