Hundreds of Butterfield Bank shareholders yesterday heard an apology from chairman Robert Mulderig for the failures at the bank that led to a more than 90 percent decline in share price over the past two-and-a-half years.

That was not enough for several shareholders at the bank's annual general meeting who stood up and demanded that he and other directors resign in an atmosphere that was described by one attendee as "hostile, but polite".

Mr. Mulderig also confirmed that the string of executives who "resigned" from the bank in recent months were in fact asked to resign — all bar one of them before their contracted employment periods were up.

These included former chief executive officer Alan Thompson, whose departure was announced last month, and former chief financial officer Richard Ferrett, who was removed last year.

The bank ran into problems through its investments linked to US mortgages, which plummeted in value during the US property slump and credit crisis and forced the bank to write down the securities' values by hundreds of millions of dollars.

The chairman also revealed that one of the survival options the board had considered was the outright sale of the bank.

Non-shareholder members of the media were not allowed into the meeting and this newspaper is basing its story on the account of two of the shareholders who were present.

The Fairmont Hamilton Princess's Harbourview ballroom was packed and more shareholders were accommodated in an overflow room, with an audiovisual link to the main room.

The Bermuda Stock Exchange gave the bank an exemption from the need for the issuance of new equity sold to a group of mainly overseas investors who ploughed $550 million into the bank last month.

Mr. Mulderig said holding a vote on the investment would have risked a credit rating downgrade that would have shaken confidence in the bank. He said there were precedents of New York Stock Exchange companies that had also bypassed a shareholder vote to get an urgent capital injection in similar situations.

The chairman also described safeguards the bank had taken to ensure that the stakes of the two major new investors would not grow any bigger - in the short term, at least. Neither private-equity giant the Carlyle Group, nor Canadian Imperial Bank of Commerce will be permitted to buy any more shares in the bank over the next four years.

Peter Martin, an attorney with Mello Jones & Martin, read out a letter to Mr. Mulderig, on behalf of a shareholder client, Fiduciary Partners Trust Company Ltd., challenging the right of the new investors to vote.

Butterfield announced last month that it would stop paying dividends until it returned to a period of "sustained profitability" — something management has conceded is likely to take a number of years.

Mr. Mulderig said typically a company might pay out 30 to 40 percent of its earnings to shareholders in the form of dividends, but as Butterfield Bank had been losing money, there was nothing available for dividends.

When the chairman brought up the question of why the board had not resigned, some shareholders indicated their feeling that they should resign right then. Mr. Mulderig reportedly said: "Your feelings are understandable." He added that the directors had never done anything they felt was not in the best interests of the bank and they felt nothing would have been achieved by them stepping down.

Mr. Mulderig told a questioner there had been no bonuses or salary increases for senior executives last year. And he added that there had been no lump-sum "golden parachutes" for the executives who had been removed.

Shareholder Gavin Arton asked about insider trading, shares traded by directors and officers, during the last two years. Butterfield's annual reports have shown that the number of shares held by Butterfield's directors and officers fell from 1.44 million at the end of 2007 to just over 571,000 by the end of 2009.

Mr. Mulderig said no shares had been sold by senior management of members of the board in the past two years — the bank's rules had forbidden that, he added. The reduction in directors' and officers' holdings on the bank's books was the result of the departures of some senior executives. Those who had left were free to sell their shares following their departures, he added.

Asked to disclose how much board members earned, Mr. Mulderig said he, as chairman, earned a little more than $70,000, while directors were paid $47,000 a year.

Former Premier Sir John Swan told the meeting that shareholders had allowed the bank to get into a mess through a failure to exercise the oversight they should have.

He urged fellow shareholders to make a distinction between the "bank of yesterday" and the "bank of today" and to support the bank of today. He also called for support of Bermuda and added: "As a country we are in serious trouble."

By the end of the meeting, shareholders approved all the items on the agenda.

These included the election of a group of new directors, including the new chief executive officer Bradford Kopp and two directors each from Canadian Imperial Bank of Commerce and Carlyle Group, the two major investors of a group who ploughed $550 million into the bank last month.

The bank is holding a $130 million rights offering, giving Bermuda-based shareholders of record as at March 10 this year to purchase shares at $1.21 apiece. The offering will start on April 12 and close on May 6. The bank will be holding several information sessions on the offering during the month.