Butterfield Bank recorded a profit of $7 million for the third quarter as low interest rates impacted the bank's profitability.

Net income dropped from $80.5 million posted for the same period last year, which included the gain on the sale of its fund services business to the Fulcrum Group, bringing the earnings per share to two cents for this third quarter compared to 85 cents for the same period in 2008.

Net income before gains and losses was $4 million, versus $15.6 million a year ago.

The difference between book and market values of investments in the bank's held to maturity portfolio was also reduced by $92 million during the third quarter, down by a total of $161 million since year-end 2008 as credit spreads tightened and liquidity improved in the securities market.

Meanwhile, Butterfield's assets under administration also increased by 4.3 percent in the third quarter of 2009 to $58.6 billion, reflecting growth in the bank's custody business lines.

Alan Thompson, president and CEO of Butterfield Bank, said: "Against the backdrop of what continues to be a challenging economic environment across all the jurisdictions in which we operate, we remain focused on improvement. The impact of continued low interest rates and net asset values, coupled with ongoing recession in some jurisdictions, particularly the UK, continues to adversely impact our profitability."

Richard Ferrett, executive vice-president and chief financial officer, said: "We continue to maintain strong capital ratios with tier one capital and total capital ratios as at 30 September of 11.4 percent and 14.1 percent respectively, in excess of regulatory requirements. There were no write-downs of investment securities and a net realised gain of $300,000 was seen in the quarter, reflecting the sale of a previously impaired security.

"The book value of the held-to-maturity investments has decreased by $1.1 billion since December 31, 2008 and $102 million since June 30, 2009 to $2.1 billion.

"The quarter also saw a significant year on year decrease of 22 percent in the bank's operating expense base, reflecting our continued focus on achieving operating efficiencies."

Net provisions for credit losses for the third quarter totalled $1.9 million, $1.2 million of which related to Bermuda, compared to $300,000 for the previous year.

The bank's Bermuda operation also recorded a net income of $3.3 million and $1.5 million respectively for its community banking and wealth management business segments, versus a loss of $15.4 million and profit of $6.8 million respectively a year earlier, offset by a $2.5 million net operating expense on its property.

Butterfield Bank's board of directors approved an unchanged third-quarter dividend of eight cents per share, consisting of four cents in cash and four cents in shares, payable on November 23.