In a statement, Michael Collins, Butterfield's chairman and chief executive, said that 2018 had been an important year for the bank, completing two acquisitions and continuing to grow its residential loan portfolio in central London, while still “producing industry-leading returns.”

Collins said that a solid fourth-quarter had helped Butterfield achieve record profitability through a combination of “strong risk-adjusted returns that have benefited from a profitable and highly rated investment portfolio, a conservatively underwritten loan book, diversified fee income and diligent management of expenses.

“We are well positioned for organic growth while continuing to seek out selective strategic acquisition opportunities in private trust and banking in existing markets." He said that the bank is strongly capitalized and remains committed to an attractive investor return profile with an increased quarterly cash dividend – up by 16 per cent -- as well as a larger share repurchase programme.

He added: “As we enter 2019, Butterfield continues to focus on producing leading returns and shareholder value through our strong balance sheet, optimized capital management and a client-centered operating philosophy.”

The bank’s liquidity ratio remained high with $6.4 billion in cash and bank deposits representing 59.3 per cent of total assets, slightly down from 61.9 per cent the previous year; while total assets for the year were broadly flat at $10.8 billion.

Net interest income dropped to $87.4 million in the fourth quarter, down by $0.9 million, which the Bermuda-based firm put down to slightly higher costs on term deposits, although mostly offset by higher yields in both its investment and loan portfolios. Net interest margin for the fourth quarter increased by one basis point from 3.37 per cent to 3.38 per cent, and was up by 51 basis points for the year. Net interest stayed flat in the final quarter but was generally offset by an increase in higher-cost fixed-term deposits, the bank said.

Non-interest income was up for the quarter from $42.4 million to $45.7 million, a gain credited to seasonally higher credit card transactions and banking services fees. An annual income rise came primarily from trust fees and revenues from Butterfield’s purchase of Deutsche Bank's Global Trust Solutions business in March 2018.

The bank saw non-interest expenses rise to $83.2 million in the last quarter of 2018, up from $78.5 million in the fourth quarter the previous year, which included a $1.2 million redundancy cost, and $6.4 million associated with setup costs in new jurisdictions such as Jersey, Singapore and Mauritius.

Average customer deposit balances fell in the fourth quarter to $9.1 billion, down from $9.7 billion at the end of 2017. The firm’s investment portfolio was also down by $0.5 billion for the year at $4.3 billion.

Under Basel III terms, the bank’s total capital ratio edged up to 22.4 per cent for 2018, up from 19.9 per cent a year ago, but both were comfortably above regulatory requirements.

The New York and Bermuda-listed bank serves clients in Bermuda, the Cayman Islands, Guernsey and Jersey. It also provides financial services in the Bahamas, Switzerland, Singapore and the UK.