Butterfield Bank 2014 Core Earnings: $106.4M

The Bank of N.T. Butterfield & Son Limited today [Feb 26] announced core earnings for 2014 of $106.4 million, an improvement of $29.8 million over the $76.6 million earned in 2013.

The core cash return on average tangible common equity improved to 15.1% in 2014, compared to 10.3% in 2013. Reported net income for the year ended 31 December 2014 was $98.3 million [$0.15 per share on a fully diluted basis] compared to $78.2 million [$0.11 per share on a fully diluted basis] in 2013, up $20.1 million year over year.

Brendan McDonagh, Butterfield’s Chairman and Chief Executive Officer, said, “Butterfield made excellent progress in building value for shareholders during 2014, raising the core cash return on tangible common equity to 15.1% and core cash earnings per share to $0.17, up substantially from 10.3% and $0.11, respectively, in 2013.

“That progress was driven by a continued focus on prudent expansion within our core businesses and markets, and diligent management of capital, expenses and risks. As a result of our focused strategy, Butterfield is a much stronger bank, our core earnings are stable and growing, and asset quality is solid.

“During the year, Butterfield enhanced our presence in the international trust and fiduciary services business with the second quarter acquisition of the Legis Group trust and corporate services business in Guernsey. The Bank similarly expanded its community banking presence in the Cayman Islands in the fourth quarter with the acquisition of select deposit and credit business from HSBC in that market.

“In both cases, the business acquired is complementary to and leverages Butterfield’s existing operations, which allowed the Bank to quickly and effectively integrate customer portfolios without the need for investment in infrastructure or premises. Both acquisitions have proved accretive to revenues and income.

“Coupled with our ongoing diligence in the management of our balance sheet, each successive quarter of profitability in 2014 has translated into growth of capital, which has enabled the Bank to deploy funds not only to beneficial acquisitions, but also to the retirement of subordinated debt, the repurchase of shares and the payment of common dividends to directly enhance shareholder returns, whilst maintaining strong capital ratios that are comfortably in excess of regulatory requirements.

“The Bank has and continues to invest significant resources into the enhancement of our compliance and reporting procedures to fulfill regulatory obligations and ensure our records continue to meet international reporting standards. By the end of the second quarter, Butterfield was fully prepared for compliance with FATCA legislation, and we continue to work proactively with clients to ensure we have the necessary documentation on file to address current reporting requirements and respond to regulators’ requests under applicable laws. I would like to take this opportunity to thank our clients for their cooperation in this regard.

“I am pleased to note that Butterfield’s successes in 2014 were recognised with several prestigious industry awards conferred upon our businesses and people. Among them were The Banker’s ‘Bank of the Year 2014’ awards in both Bermuda and the Cayman Islands; the second consecutive year we have received the award in both jurisdictions, which is a testament to the hard work and dedicated focus of our employees on serving the needs of our stakeholders.”

Financial highlights of the year ended 31 December 2014 [with comparisons to year-end 2013]:

• Net income of $98.3 million, up $20.1 million from $78.2 million
• Core earnings of $106.4 million, up $29.8 million from $76.6 million
• Total net revenue of $371.2 million, up $29.5 million, or 8.6%
• Core cash return on average tangible common equity of 15.1%, up from 10.3%
• Core cash return on average tangible assets of 1.2%, up from 0.9%
• Core efficiency ratio of 67.7%, improved from 71.6%

John Maragliano, Butterfield’s Chief Financial Officer, said, “By all financial measures, Butterfield has delivered a fourth consecutive year of solid earnings growth and continued balance sheet strength. Core earnings grew by $30 million compared to 2013 led by top line revenue growth driven largely by a strong performance within the Bank’s investment and loan portfolios, capital management actions which reduced the cost of subordinated debt, the accretive contribution of the two acquisitions, and a substantial decrease in net provisions for loan losses.

“Prudent management of operating expenses across the Group, coupled with increased revenues, saw the core efficiency ratio improve to 67.7% from 71.6% a year ago. The growth in core net income to over $100 million provides Butterfield with a stable source of organic capital. Combined with a 31% decrease in non-accrual loans and high quality investment portfolio, the balance sheet position continued to improve year over year.

“The growth in deposits of $1 billion in 2014 further improved the loan to deposit ratio to only 46% affording the Bank flexibility to capitalise on lending and investment opportunities going into 2015.”

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