Butterfield Reports Second Quarter 2020 Results
The Bank of N.T. Butterfield & Son Limited today announced financial results for the second quarter ended June 30, 2020.
“Net income for the second quarter was $34.3 million, or $0.67 per diluted common share, compared to $40.3 million or $0.77 per diluted common share for the previous quarter and $38.6 million, or $0.72 per diluted common share in the second quarter of 2019,” a spokesperson said.
“Core net income for the second quarter was $34.4 million, or $0.67 per diluted common share, compared to $40.8 million, or $0.78 per diluted common share, in the previous quarter, and $51.1 million, or $0.95 per diluted common share, for the second quarter of 2019.
“The core return on average tangible common equity for the second quarter of 2020 was 15.5%, compared to 18.6% for the previous quarter and 24.6% for the second quarter of 2019. The core efficiency ratio for the second quarter of 2020 was 66.7%, compared with 63.8% in the previous quarter and 60.3% for the second quarter of 2019.”
Financial highlights for the second quarter of 2020:
- Net income of $34.3 million, or $0.67 per share and core net income1 of $34.4 million, or $0.67 per share
- Return on average common equity of 14.0% and core return on average tangible common equity1 of 15.5%
- Net interest margin of 2.48%
- Credit reserve build of $4.4 million
- Board declares a quarterly dividend of $0.44 per share
- Issued $100 million 5.25% 10-year fixed to floating rate subordinated debt
Michael Collins, Butterfield’s Chairman and Chief Executive Officer commented, “The Bank recorded solid earnings this quarter, as we continued to meet the challenges presented by the COVID-19 pandemic. During the temporary government-mandated closures in our home markets, we were able to provide essential banking services to our customers both in person and electronically.
“I am proud that Butterfield was able to help support local economies and offer relief to borrowers in Bermuda and Cayman through loan deferrals and other community based support programs. We continue to be in regular communication with customers and are closely monitoring our loan book for signs of credit deterioration, and we have seen a slight increase in non-performing loans this quarter.
“Our latest credit performance estimate is reflected in the second quarter reserve build, bringing our total credit reserves to 79 basis points of total loans. I am also pleased to confirm that the Bank’s balance sheet and capital ratios improved and remain strong.
“We have also started adjusting to the potential long-term implications of the changing economic landscape, and the associated extended period of low interest rates. As we work to further mitigate the impact of lower yields, we anticipate a greater emphasis on our stable fee businesses and focus on costs to improve operating efficiencies. Through this period of increased uncertainty, Butterfield remains well positioned for continued profitability and growth.”
The spokesperson added, “Net income decreased in the second quarter of 2020 versus the prior quarter due principally to a lower interest rate environment and decreased non-interest income resulting from COVID-19 related economic shut downs, which were partially offset by lower non-interest expenses.
“Net interest income [“NII”] for the second quarter of 2020 was $79.1 million, a decrease of $8.5 million compared with NII of $87.6 million in the previous quarter and down $6.1 million from $85.2 million in the second quarter of 2019.
“Net interest margin [“NIM”] for the second quarter of 2020 was 2.48%, a decrease of 15 basis points from 2.63% in the previous quarter and down 70 basis points from 3.18% in the second quarter of 2019. NIM decreased in the second quarter of 2020 compared to the prior quarter due to the impact of lower market rates across the yield curve, which was partially offset by lower deposit costs.
“Non-interest income decreased to $41.7 million for the second quarter of 2020, compared with $47.6 million in the previous quarter and $44.2 million in the second quarter of 2019. The decrease versus the prior quarter was due to much lower economic activity resulting from COVID-19 related “shelter-in-place” government mandates across all of Butterfield’s operating jurisdictions, primarily during the months of April and May.
“Non-interest expenses were $82.0 million in the second quarter of 2020, compared to $88.1 million in the previous quarter and $91.7 million in the second quarter of 2019. Core non-interest expenses1 were $81.9 million in the second quarter of 2020, compared with $87.6 million in the previous quarter and $79.2 million in the second quarter of 2019.
“Non-interest expenses were lower in the second quarter of 2020 compared to the prior quarter due to the COVID-19 related slowdown of business activity resulting in decreased travel, client entertainment, marketing activities, and consultant costs. Additionally, the first quarter of 2020 had elevated staff related costs.
“The Bank continued its balanced capital return policy. The Board declared a quarterly dividend of $0.44 per common share to be paid on August 19, 2020 to shareholders of record on August 5, 2020. During the second quarter of 2020, Butterfield repurchased 1.2 million common shares under the Bank’s current 3.5 million common share repurchase plan authorization.
“During the second quarter of 2020, Butterfield issued $100 million of 5.25% 10-year, fixed to floating rate subordinated debt. The proceeds of the issuance will primarily be used to replace existing debt.
“The current total regulatory capital ratio as at June 30, 2020 was 21.2% as calculated under Basel III, compared to 19.4% as at December 31, 2019. Both of these ratios are significantly above regulatory requirements applicable to the Bank.”
