Butterfield Bank swung to a profit of $10.3 million for the second quarter of 2009, reversing a $16.5 million loss for the same period last year — despite the economic crisis and low interest rates.

The bank also improved the difference between its book and market value in its held to maturity portfolio by $52 million for the quarter, while successfully completing the issuance of $200 million in preference shares last month, with most investors from Bermuda.

In addition, the bank made no write-downs on its investment securities and a net realised gain of $1.9 million for the quarter, reflecting the sale of its previously impaired security.

Meanwhile, Butterfield cut its operating expenses by 14.9 percent year-on-year, or $13.8 million, to $79.1 million, as it streamlined its business efficiencies.

Assets under administration increased by $1.2 billion — the second consecutive quarter they have risen.

Alan Thompson, president and CEO of Butterfield Bank, said: "It is pleasing to report that Butterfield made a profit in the current economic climate, given the ongoing recession in many of the jurisdictions in which we operate, coupled with the impact of continued low interest rates.

"It is also pleasing to report that the difference between book value and market value in the Bank's held to maturity portfolio continued to improve in the quarter by $52 million. In June, we successfully completed the issuance of $200 million of preference shares, with the vast majority of investors coming from Bermuda.

"As a result our balance sheet and capital positions have been significantly strengthened. Despite the challenging economic conditions we have confidence that, when market conditions improve, we will be well positioned to generate attractive returns for our shareholders."

Richard Ferrett, executive vice-president and chief financial officer, said: "Although we continue to hold a limited number of problematic securities in the held to maturity portfolio that may lead to further investment losses, we believe that most of the difference of $367.5 million between the book and market values of these securities is related to market illiquidity."

Total revenues were up at $90.2 million in the second quarter from $77.9 million for the same period in 2008, while non-interest income fell 32.5 percent to $40.2 million, partly due to the loss of revenue from the bank's fund administration businesses following their sale to the Fulcrum Group in September last year.

The bank also made $1.1 million in net provisions for credit losses for the second quarter 2009, compared to $1.2 million last year, $400,000 of which related to Bermuda.

The drop in total operating expenses was mainly down to a $10 million reduction in salaries and other employee benefits as a result of the drop in head count following the sale of the fund administration businesses, putting the total workforce at 1,683 by the end of last month, 799 of which were located on the Island.

In Bermuda, net income stood at $4.7 million, up from a loss of $32 million for the same time in 2008, with total revenue before gains and losses declining by 26 percent from $47.2 million to $16.6 million. Total assets were $5 billion at the end of June, $452 million down on year-end 2008, reflecting lower levels of customer deposits by fund administration clients, while assets under management were $5.6 billion, down from $6.7 billion over the respective periods as asset values fell.

The bank's board of directors approved a second quarter dividend of eight cents per share, four cents in cash and four cents in shares, payable on August 24 to shareholders of record on August 7.