Butterfield Reports Third Quarter 2020 Results
The Bank of N.T. Butterfield & Son Limited today announced financial results for the third quarter ended September 30, 2020.
“Net income for the third quarter was $30.5 million, or $0.61 per diluted common share, compared to $34.3 million, or $0.67 per diluted common share for the previous quarter, and $42.4 million, or $0.79 per diluted common share, in the third quarter of 2019. Core net income1 for the third quarter was $36.5 million, or $0.73 per diluted common share, compared to $34.4 million, or $0.67 per diluted common share, in the previous quarter, and $48.8 million, or $0.91 per diluted common share, for the third quarter of 2019,” a spokesperson said.
“The core return on average tangible common equity1 for the third quarter of 2020 was 16.2%, compared to 15.5% for the previous quarter, and 22.5% for the third quarter of 2019. The core efficiency ratio1 for the third quarter of 2020 was 68.0%, compared with 66.7% in the previous quarter and 62.1% for the third quarter of 2019.”
Michael Collins, Butterfield’s Chairman and Chief Executive Officer commented, “During the third quarter of 2020, the Bank performed well as we focused on managing our credit exposures and reducing costs to help offset the revenue impact from lower volumes and interest rates during the pandemic. We have enhanced our risk management and compliance capabilities through previously announced executive and board appointments, while decreasing the expense base through a cost reduction program, which included voluntary separation and redundancy initiatives.
“The cost reduction program increased non-core exit costs this quarter but is expected to lower expenses in 2021 and beyond. In addition, we will continue to provide operational support roles in Butterfield’s service center in Canada for non-client facing positions.
“In recognition of the challenges created by the health crisis, we have been pleased to offer payment relief to qualifying mortgage clients in Bermuda and Cayman for up to six months. These programs have come to an end, but we will continue to provide customers with individual assistance going forward. We are closely monitoring our loan book and proactively communicating with clients to assess their capacity to resume normal payments. We remain confident that our proven business model will continue to produce first quartile absolute and risk-adjusted returns throughout the pandemic and broader interest rate cycle.”
The spokesperson added, “Net income decreased by $3.8 million in the third quarter of 2020 versus the prior quarter due principally to staff exit costs associated with voluntary separation agreements and redundancies. On a core basis, net income improved by $2.1 million versus the previous quarter. The comparative second quarter of 2020 was impacted by lower economic activity due to COVID-19 related government mandated “shelter-in-place” requirements, which resulted in lower banking fees.
“Net interest income [“NII”] for the third quarter of 2020 was $75.3 million, a decrease of $3.8 million compared with NII of $79.1 million in the previous quarter and down $11.0 million from $86.3 million in the third quarter of 2019. Lower global interest rates in the third quarter of 2020 resulted in a decrease in NII compared to both comparative periods.
“Net interest margin [“NIM”] for the third quarter of 2020 was 2.30%, a decrease of 18 basis points from 2.48% in the previous quarter and down 22 basis points from 2.52% in the third quarter of 2019. NIM decreased in the third quarter of 2020 compared to the prior quarter due to the impact of continued low market rates across the yield curve and currencies, which impacted interest earning assets and, to a lesser extent, deposit pricing. In addition, the Bank incurred temporary higher interest costs due to the timing gap between issuance of new subordinated debt in the second quarter and the planned redemption of existing tranches in the second half of 2020.
“Non-interest income increased to $46.9 million for the third quarter of 2020, compared with $41.7 million in the previous quarter and $46.6 million in the third quarter of 2019. The increase across fee generating business lines versus the prior quarter was due to increased economic activity following the second quarter of 2020, which was impacted by “shelter-in-place” requirements in the Bank’s operating jurisdictions. This quarter also included non-recurring loan commitment fee revenue of $1.5 million.
“Non-interest expenses were $91.3 million in the third quarter of 2020, compared to $82.0 million in the previous quarter and $90.4 million in the third quarter of 2019. Core non-interest expenses1 were $84.6 million in the third quarter of 2020, compared with $81.9 million in the previous quarter and $84.0 million in the third quarter of 2019. Non-interest expenses were higher in the third quarter of 2020 compared to the prior quarter due to the implementation of the Bank’s previously announced efficiency programs, which included voluntary separation and early retirement programs, and redundancies.
“The Bank continued its balanced capital return policy. The Board declared a quarterly dividend of $0.44 per common share to be paid on November 30, 2020 to shareholders of record on November 12, 2020. During the third quarter of 2020, Butterfield repurchased 0.7 million common shares under the Bank’s current 3.5 million common share repurchase plan authorization.
“The current total regulatory capital ratio as at September 30, 2020 was 20.8% as calculated under Basel III, compared to 19.4% as at December 31, 2019. Both of these ratios are significantly above the fully phased Basel III regulatory requirements applicable to the Bank.”
