Butterfield Bank has agreed to buy Deutsche Bank’s banking businesses in the Cayman Islands, Jersey and Guernsey — a deal that could increase its deposit base by about one fifth.

The news came as the Bermudian-based bank declared net income of $40.3 million for the fourth quarter of last year, which completed a year of record profits of $153.3 million for the bank, up from $115.9 million in 2016.

Further good news for shareholders came with a 19 per cent hike in the quarterly dividend payment to 38 cents per share and the announcement of Butterfield’s plans to buy back up to one million of its own shares.

“I am pleased to report that Butterfield achieved record profits in 2017,” said Michael Collins, Butterfield’s chairman and chief executive officer.

“These strong results were driven by our specialised banking and wealth management businesses that generate consistent fee income and an expanding net interest margin that benefited from our efficient deposit franchise and a rising rate environment.

“We delivered core net income of $158.9 million, up $20.3 million or 14.6 per cent year-on-year, and a core return on average common equity of 19.7 per cent, driven by strong performances in our core banking markets, as well as strong growth in our UK mortgage business.”

The deal with Deutsche Bank is the second acquisition Butterfield has made from the German financial-services giant after it agreed last October to buy the company’s Global Trust Solutions business.

“The GTS integration process is well under way and anticipated to close early in the second quarter of 2018, ahead of plan,” Mr Collins said. “We are pleased that over 90 per cent of the staff have now accepted employment agreements with Butterfield.

“This morning we announced that we have reached a second agreement with Deutsche Bank to acquire their banking businesses in the Cayman Islands, Guernsey and Jersey. We are very excited about this acquisition as it could increase our deposit base by about 20 per cent once integrated.

“It will help us establish a foothold in Jersey, an attractive banking market, as well as increasing our scale and market share in Cayman and Guernsey. The customer base has a very similar profile to our existing banking business and we look forward to welcoming the new relationship teams and their clients to the Butterfield Group.”

Results for the fourth quarter of 2017 included lower credit costs with a release of provision for credit losses of $5.4 million compared with a release of provision for credit losses of $0.9 million in the fourth quarter of 2016. In the fourth quarter of 2017 the provision release was partially offset by $2.5 million of valuation loss adjustment on a foreclosed property included in other real estate owned.