Butterfield Bank chief executive officer Alan Thompson yesterday took the rare step of reassuring shareholders and customers that the Island's second largest bank was stable and in sound financial condition.

Mr. Thompson made the statement in a release after the close of trading on the Bermuda Stock Exchange, where the Bank's shares have hit 52-week lows in recent days.

"I want to assure all of our stakeholders that Butterfield Bank continues to be well capitalised and in sound financial condition," Mr. Thompson said.

"We continue to have a strong balance sheet, an excellent business franchise and outstanding employees."

Mr. Thompson said the Bank had received numerous queries from shareholders, customers and members of the public about the strength and stability of Butterfield Bank in the wake of the turmoil on world financial markets.

In August, the bank announced a loss of $16.5 million for the second quarter, resulting from combined losses totalling $50 million on a write-down in the value of mortgage-backed investments and support of its Money Markets Fund.

At that time, its shares were trading around $15.10. Earlier in the year, they traded as high as $18.95.

Mr. Thompson said then that the Bank was "not immune to the global economic environment" and added that he could not completely rule out more losses in future quarters.

The Bank recorded a $27.7 million unrealised loss relating to two credit support agreements with the Butterfield Money Market Fund. And it also accounted for a $23 million realised loss on an item that suffered permanent impairment in its "held to maturity" portfolio.

The net loss compared to a profit of $35.9 million in the same three months last year and came despite a net operating income of $34.3 million in the second quarter.

Yesterday, Mr. Thompson said Butterfield did not rely on inter-bank borrowing to fund our operations "(unlike certain high- profile US banks that have recently failed)".

"Our liquidity positions remain strong with a coverage ratio of loans by customer deposits of 2.74 times – among the most conservative of any bank in the world. Our loan portfolio is of very high quality."

He added: "Our held-to-maturity investment portfolio is well diversified and investments therein that have exposure to the US residential mortgage market are performing as expected."

He pointed out that Butterfield's investment grade ratings were re-confirmed by Moody's in August 2008 for bank deposits at Aa3/Stable/P1, with Moody's citing its "solid financial fundamentals, good after tax profitability and asset quality, healthy liquidity and comfortable capital ratios".

And he also reiterated that the bank would also record a gain of $115 million in its next quarterly results following the completion of the merger of its Fund Administration businesses with those of the Fulcrum Group to form the new company, Butterfield Fulcrum Group.

Mr. Thompson said the Butterfield Money Market Fund retains its AAAm rating from Standard & Poor's.

"The Fund managers invest in high-quality short-term paper and have maintained a very large percentage of the Fund in investments with counter-parties that have the strongest short-term rating from Standard & Poor's (A-1+) and Moody's (P1)," he said.

"We believe the recent decreases in the price of Butterfield Bank shares are due largely to the effects of the current dislocation in global financial markets, particularly in the US. Despite a backdrop of unsettling events in international financial markets, Butterfield Bank remains strong and well-positioned for continued growth and success."