Bank of Butterfield suffers loss of $200m

This compares to a loss of $213.4 million for the previous year.

In a statement the bank said the 2010 loss was driven primarily by non-recurring losses associated with the strategy to de-risk the balance sheet. 

These included realized losses of $113.8 million on the sale of asset-backed securities in the first quarter, the recording of other-than-temporary impairments of $60.5 million in the first quarter on structured investment vehicles, net provisions of $31.8 million taken primarily in respect of large hospitality-related corporate loans and restructuring costs of $12.4 million.

Last year Butterfield received a $550 million cash infusion from outside investors, which included The Carlyle Group and CIBC.

Revenues from operations — before provisions for credit losses — were down from $332.1 million at year-end 2009 to $321.3 million at year-end 2010. 

Expenses before one-time items declined from $300.5 million in 2009 to $294.8 million in 2010, despite expenditures on technology, asset-liability management and liquidity support.

Brad Kopp, Butterfield’s president and CEO, said: “2010 was a year of building a strong foundation amongst challenging economics, starting with the successful capital raise bringing in new investors and an over-subscribed rights offering to our historical investor base. 

“The resultant strong capital base and good liquidity position allowed us to finalise the process of ridding the balance sheet of problematic assets and putting realisable values on remaining assets. 

Olivier Sarkozy, who led the investment in Butterfield on behalf of The Carlyle Group, said: “While unfortunate, the losses realized over the course of the past fiscal year represent the culmination of the balance sheet restructuring that was necessary to put the Bank back on a path of prudent risk management and sustainable growth, as was envisioned at the time of the recapitalisation.

“We are pleased with the progress the bank has made in this regard and happy that the bank’s results are consistent with, if not slightly better than, our original projections.”

To date, the bank has taken action to place two hotel properties in Bermuda in receivership. 

Butterfield said this was deemed to be the best course of action to protect the value of the assets and safeguard the interests of Butterfield shareholders. 

Butterfield sold subsidiaries in Hong Kong and Malta in the third quarter of 2010. 

During the first quarter of 2011, the bank also announced the sale of its minority holding in fund administrator, Butterfield Fulcrum Group.

Worldwide, Butterfield shed 87 jobs as staff numbers declined from 1,606 to 1,519.

Brad Rowse, executive vice president and CFO, said: “Maintaining the appropriate staffing levels in light of changing business volumes and the need for continued strength in customer service continues to be an area of focus.”

Don Burgess owns shares in the Bank of Butterfield.