Butterfield Reports Third Quarter 2019 Results
The Bank of Butterfield announced financial results for the third quarter ended September 30, 2019.
Net income for the third quarter was $42.4 million or $0.79 per diluted common share, compared to $38.6 million or $0.72 per common share for the previous quarter and $50.4 million, or $0.90 per common share in the third quarter of 2018.
Third quarter core net income was $48.8 million, or $0.91 per diluted common share, compared to $51.1 million, or $0.95 per diluted common share, in the previous quarter and $49.1 million, or $0.88 per diluted common share, for the third quarter of 2018. Net income in the third quarter of 2019 was adversely impacted by expenses related to the acquisition of ABN AMRO [Channel Islands] Ltd.
The core return on average tangible common equity for the third quarter of 2019 was 22.5%, compared to 24.6% for the previous quarter and 24.9% for third quarter of 2018. The core efficiency ratio for the third quarter of 2019 was 62.1% compared with 60.3% in the previous quarter and 63.2% in the third quarter of 2018.
Commenting on the third quarter, Michael Collins, Butterfield’s Chairman and Chief Executive Officer said, “Butterfield reported strong third quarter earnings while also making excellent progress combining the acquired ABN AMRO [Channel Islands] business with our existing Guernsey bank. The third quarter results demonstrate the value of our stable and growing non-interest income, the initial benefits of a larger balance sheet with net interest income growth following the acquisition, and our continued emphasis on improving operating efficiencies.
“We have been working to integrate ABN AMRO [Channel Islands] since the early close of the deal on July 15, 2019. Client relationships and employee retention have been broadly stable throughout this period, while customer and staffing integration are progressing well. The expected decline in euro and sterling balances has begun as we apply a client value lens to the relationships.
“We have experienced the anticipated staff turnover and expect cost savings to match the levels contemplated when the deal was first announced in April. This is an important acquisition for Butterfield and we are pleased with the integration to date and the anticipated benefits. We continue to view this deal very favorably and believe that Butterfield’s increased presence in the Channel Islands enhances our position as a leading bank and trust company in those core markets with increased scale and improved organic growth prospects.”
Net interest income [“NII”] for the third quarter of 2019 was $86.3 million, an increase of $1.2 million compared with NII of $85.2 million in the previous quarter and $88.3 million in the third quarter of 2018. The increase in NII in the third quarter of 2019 compared to the prior quarter was due primarily to an increase in average earning assets in the third quarter of 2019 following the acquisition.
Net interest margin [“NIM”] for the third quarter of 2019 was 2.52%, a decrease of 66 basis point from the NIM of 3.18% in the previous quarter and down 85 basis points from the NIM of 3.37% in the third quarter of 2018. NIM decreased in the third quarter of 2019 compared to the prior quarter due to the inclusion of the 80 basis points NIM balance sheet from the ABN AMRO [Channel Islands] acquisition as well as lower yielding cash and short-term US dollar securities in Bermuda and Cayman.
Non-interest income was $46.6 million for the third quarter of 2019, compared with $44.2 million in the previous quarter and $41.3 million in the third quarter of 2018. The increase over the prior quarter was attributable primarily to higher foreign exchange revenue, custody and asset management fees from the acquired business in Guernsey.
Non-interest expenses were $90.4 million in the third quarter of 2019 compared to $91.7 million in the previous quarter and $82.2 million in the third quarter of 2018. Core non-interest expenses were $84.0 million in the third quarter of 2019, compared with $79.2 million in the previous quarter and $83.3 million in the third quarter of 2018.
Non-interest expenses were lower in the third quarter of 2019 compared to the prior quarter, as the second quarter of 2019 included restructuring costs in Bermuda and the Channel Islands and costs associated with the departure of a senior executive that were not present in the third quarter. On a core basis, non-interest expenses were higher in the third quarter of 2019 due to costs associated with the ABN AMRO [Channel Islands] acquisition.
