Butterfield Bank Q3 2014 Net Income: $22.8M
The Bank of N.T. Butterfield & Son Limited today announced net income for the third quarter ended 30 September 2014 of $22.8 million [$0.03 per share on a fully diluted basis] compared to $21.6 million [$0.03 per share on a fully diluted basis] in the same quarter a year ago.
Core earnings[1] for the third quarter were $27.1 million, an improvement of $2.6 million or 10.6% over the third quarter of 2013, which drove an improvement in the core cash return on average tangible common equity ratio to 15.4%, compared to 14.3% in the third quarter of 2013. Core earnings for the third quarter of 2014 included certain one-time items totalling $2.6 million, which are not expected to recur.
Year-to-date core earnings for the nine months ended 30 September 2014 were $76.2 million [$0.11 per share on a fully diluted basis], up $16.2 million [27.0%] from $60.0 million for the nine-month period ended 30 September 2013. Year-to-date net income for the nine months ended 30 September 2014 increased by $5.7 million to $73.5 million, compared to a year-to-date net income of $67.8 million for the nine-month period ended 30 September 2013.
Brendan McDonagh, Butterfield’s Chairman and Chief Executive Officer, said, “Our quarterly and year-to-date results demonstrate the efficacy of our approach to creating sustainable value in the Butterfield franchise. That approach involves ongoing diligence in the management of costs and the deployment of capital to low-risk acquisitions in businesses and jurisdictions where we have a meaningful market presence and demonstrated expertise.
“The impact of our second quarter acquisition of the Legis Group’s trust and fiduciary services business in Guernsey on our core results serves as a solid proof of concept; that business having an accretive impact to core cash earnings per share of nearly 5%.
“Similarly, our acquisition of parts of HSBC’s retail and corporate banking business in the Cayman Islands, which will be completed in the fourth quarter, will enhance our deposit base, providing us with expanded lending and investment opportunities to drive revenue growth, without a marked increase in associated operating costs.
“The impact of these kinds of acquisitions, along with the gradual strengthening of quality in our commercial loan book, is providing incremental improvements in quarterly core earnings, even against a backdrop of low economic growth and low interest rates in our major markets.
“With each subsequent quarter of growth, our capital position is further strengthened, providing us with the means to continue to enhance shareholder returns through dividend payments and share buy-backs. We are pleased to report that the core cash return on tangible common equity in the third quarter improved to 15.4%.”
Financial highlights for the quarter ended 30 September 2014 [with comparisons to the third quarter of 2013]:
- Core earnings of $27.1 million, up $2.6 million or 10.6%
- Core cash return on average tangible common equity of 15.4%, up from 14.3%
- Core return on average assets of 1.2%, up from 1.1%
- Core efficiency ratio of 67.3%, improved from 67.8%
- Net interest margin of 2.78%, improved from 2.72%
- Non-accrual loans of $70.1 million improved by 32.6%
John Maragliano, Butterfield’s Chief Financial Officer, said, “The Bank’s core earnings for the quarter and the year to date showed solid growth driven by revenue growth and ongoing cost management. Non-interest income improved by $2.5 million on higher Trust revenue, attributed largely to the Legis business coming on stream.
“The Bank continues to exercise diligence in managing our operating expenses. Although core operating expenses increased by $2.9 million, a substantial portion of this increase is associated with absorbing the Legis business and personnel in Guernsey. Measured against revenues that increased by 6%, our core efficiency ratio improved to 67.3% in the third quarter including the net cash contribution of $0.8 million from Legis.
“The balance sheet continues to strengthen each quarter as the quality of the loan portfolio stabilises. Non-performing loans were down $23 million year to date owing to the sales of Bermuda hotel properties that had been in receivership since 2011 offset by modest deterioration in the residential mortgage book. On a year-to-date basis, non-accrual loans declined by 33% to $70.1 million representing 1.7% of total gross loans, compared to 2.5% at 31 December 2013. The Bank continues to work with customers who are facing economic difficulty.”
