Butterfield Bank’s shares have dipped below a dollar for the first time, but analysts we spoke to said the company remained solid.The share price closing at a new low of 99 cents last Tuesday was more “psychologically alarming” than anything, Nathan Kowalski, chief financial officer of Anchor Investment Management, said.An LOM research report last month said it still rated Butterfield (Ticker NTB) shares “hold” with a price target of $1.40, saying the bank’s shares at 0.96x price to book “trade at the high end of US bank multiples”.“Although Butterfield faced serious book value impairments in 2009 and 2010, the balance sheet is largely clean now,” LOM’s March report said. “As investors begin to appreciate this, and provided there are no more negative surprises, we would expect NTB’s book value multiple to expand from its current level.”Butterfield shares once traded at just under $14. That was in July 2007. On Thursday before the holiday the share price closed up at $1.10.Mr Kowalski pointed to two measures of capital strength that would indicate the bank was strong and well-captilised; Its tangible common equity ratio and Tier 1 risk-based capital ratio - which are seen today as more relevant measures in assessing a company’s stability after the 2008 credit crisis.“Because the liquidity is so thin the short-term (stock) movements are pretty irrelevant,” said Mr Kowalski. “The capitalisation structure of the bank is very solid at this point with a tangible common equity ratio (TCE) of 6.62 percent, about 1.3 percent higher than our global peer average, and a Tier 1 capital ratio of 17.7 percent, about 4.8 percent higher than our global peer average.”TCE, which is tangible common equity divided by tangible assets, looks at how much common equity is supporting a company, and ignores so-called intangible assets such as goodwill, on the theory that in bad times, such assets may not have value.TCE is used to determine how much in losses a bank can take before shareholder equity is wiped out.According to Reuters, many major foreign banks have TCE ratios below three percent.The other ratio is a company’s Tier 1 capital (common stockholders’ equity, non-cumulative perpetual preferred stock, minority interests in consolidated subsidiaries) divided by risk-weighted assets. According to Reuters a US bank needs a Tier 1 risk-based capital ratio above six percent to be considered “well-capitalised.”LOM Asset Management portfolio managers Grant Hopkins and Bryan Dooley noted Butterfield’s stock trades below its stated book value despite making it back to profitability.They said the BSX’s liquidity issue also played a major part in the bank’s share price, and the bank had diluted shareholders significantly in recent years.“The price change is not too significant when you consider the wide bid/ask spread and relatively low volume of the stock,” Mr Hopkins said.“As you can see by (Wednesday’s) price of $1.06, and volume of 6,843 shares, it doesn’t take much for the price to bounce around five percent or more.”In a March 31 column in this newspaper, Mr Dooley pointed out: “Stocks in smaller companies or which have fewer shares outstanding, such as most of those listed on the local Bermuda Stock Exchange (BSX) trade very infrequently. For example, last Monday Butterfield Bank, one of the largest BSX constituents, traded only 1,300 shares on the day. If an investor wishes to sell a large position of Butterfield stock they may have to wait a week or even a month or more to find buyers at the right level.”In the March reseach report on Butterfield, Mr Hopkins wrote: “After two years of losses, Butterfield Bank (“NTB”) reported net income of $0.03 per share in 2011, with all quarterly periods registering small profits during the year. In 2009 and 2010, NTB underwent a painful process of de-risking the balance sheet by writing down troubled loans and investments and through a dilutive capital raise.“Such actions have started to yield positive results for the bank, as shown by the modest net income in 2011 and by the much improved capital ratios at the end of the year. With a healthier balance sheet, the bank has now started to focus on reducing its operating costs. However, it is our belief that revenue growth is likely to face pressure due to the weak economic backdrop, and that low interest rates are likely to suppress net interest margins below historic averages for the foreseeable future.“For these reasons, we continue to rate NTB shares ‘Hold’ with a price target of $1.40.”Mr Hopkins said from a jurisdictional perspective, “the Bermuda residential mortgage book remains a potential concern in our opinion given the deteriorating Bermuda housing market. However, we believe that the relatively low average loan-to-value of 57 percent for the Bermuda mortgage book should protect the bank from significant losses provided the housing market does not decline precipitously.”He said LOM’s projections for 2012 assumed a nominal growth of five percent in revenue and a slight decrease in operating expenses.“Our forecast of $40 million in net income, or $0.07 per share, is after dividends and fees are paid on preference shares,” Mr Hopkins said.“Provided that Butterfield is able to avoid extraordinary items this year (such as significant loan write-downs or unexpected operating costs), we believe the company will be well poised for an eventual economic recovery. The balance sheet is fairly robust, and in our opinion any growth in revenue should be magnified at the bottom line if operating expenses remain in check.“We are maintaining a rating of ‘Hold’ on NTB shares with a price target of $1.40. Relatively speaking, Butterfield shares, at 0.96x price to book, trade at the high end of US bank multiples, which currently range from approximately 0.4x to 1.0x price to book for many of the larger banks. These historically low multiples for US banks reflect investor concern about the true book value of these banks (bad mortgage loans, hidden liabilities, potential lawsuits, etc are all of concern). Although Butterfield faced serious book value impairments in 2009 and 2010, the balance sheet is largely clean now. As investors begin to appreciate this, and provided there are no more negative surprises, we would expect NTB’s book value multiple to expand from its current level.”Butterfield Bank declined to comment on its share price and whether the market was valuing the company fairly, stating: “As we are between the close of the first quarter (31 March 2012) and the release of the Q1 results at the end of April, the bank is in the ‘quiet period’ during which we cannot provide comment.”