Butterfield Reports Full Year & Q4 2020 Results
The Bank of N.T. Butterfield today [Feb 10] announced financial results for the fourth quarter and year ended December 31, 2020.
Michael Collins, Butterfield’s Chairman and Chief Executive Officer commented, “2020 was an extraordinary year for Butterfield. We finished with a strong fourth quarter, having successfully navigated the challenges of a global pandemic, while continuing to position the Bank for growth and sustainable risk adjusted returns.
“Our primary operating jurisdictions in Bermuda, Cayman and the Channel Islands have managed COVID-19 relatively well. Butterfield reacted quickly with no significant disruption of services, even during periods of government mandated lockdowns and strict employee and customer safety protocols.
“We also implemented a broad-based mortgage loan deferral program to help our customers manage through the initial impacts of the pandemic. Given the economic headwinds, we have increased credit monitoring and remain cautiously confident that our conservative underwriting and an improving economic outlook are evolving into relatively mild deterioration in credit quality. We recognize that the pandemic is not over and will continue to work with customers who experience difficulty.
“Facing challenging trading conditions and historically low market interest rates, we improved operating efficiencies through voluntary separation and early retirement programs, targeted redundancies, and service role migrations to lower cost jurisdictions.
“Capital management remained an important value driver with quarterly cash dividends and share repurchases supporting earnings per share growth, as well as dividend return. We also improved the efficacy of our capital profile through a $100 million subordinated debt issue in June.
“We reached important strategic milestones this year. In the Channel Islands, we achieved meaningful market share growth and successfully completed the full integration of the acquired ABN AMRO business. It was also notable that, while all jurisdictions performed well, contributions to annual earnings from our Cayman segment have now surpassed Bermuda for two years running.
“Finally, during 2020 we enhanced our management team and Board through new appointments, with exceptional banking, compliance, risk management and communications experience. I would like to thank all of our stakeholders, including our dedicated staff and loyal customers, for their continued commitment to Butterfield’s ongoing success.”
A statement from the bank said, “Net income for the year ended December 31, 2020 was $147.2 million, or $2.90 per diluted common share, compared to $177.1 million, or $3.30 per diluted common share, for the year ended December 31, 2019. Core net income for the year ended December 31, 2020 was $154.5 million, or $3.04 per diluted common share, compared to $197.9 million, or $3.69 per diluted common share, for the year ended December 31, 2019.
“The core return on average tangible common equity for the year ended December 31, 2020 was 17.3%, compared to 23.4% for the year ended December 31, 2019. The efficiency ratio for the year ended December 31, 2020 was 67.6% compared with 66.4% for the year ended December 31, 2019. The core efficiency ratio1 for the year ended December 31, 2020 was 66.0% compared with 62.2% for the year ended December 31, 2019.
“Net income for the fourth quarter of 2020 was $42.1 million, or $0.84 per diluted common share, compared to $30.5 million, or $0.61 per diluted common share, for the previous quarter, and $43.9 million, or $0.82 per diluted common share, in the fourth quarter of 2019. Core net income1 for the fourth quarter was $42.9 million, or $0.86 per diluted common share, compared to $36.5 million, or $0.73 per diluted common share, in the previous quarter, and $46.2 million, or $0.87 per diluted common share, for the fourth quarter of 2019.
“Net income increased by $11.5 million in the fourth quarter of 2020 versus the prior quarter due primarily to lower employment costs in the current quarter. On a core basis, net income improved by $6.4 million versus the previous quarter due to a $3.8 million favorable variance in provisions for credit losses, increased non-interest income with improved banking, asset management, foreign exchange and trust revenue, as well as lower expenses.
“The core return on average tangible common equity1 for the fourth quarter of 2020 was 19.0%, compared to 16.2% for the previous quarter, and 21.1% for the fourth quarter of 2019. The efficiency ratio for the fourth quarter of 2020 was 66.3%, compared with 73.5% in the previous quarter and 68.0% for the fourth quarter of 2019. The core efficiency ratio1 for the fourth quarter of 2020 was 65.6%, compared with 68.0% in the previous quarter and 66.3% for the fourth quarter of 2019.
“Net interest income (“NII”) for the fourth quarter of 2020 was $75.6 million, a slight increase of $0.3 million compared with NII of $75.3 million in the previous quarter and down $10.7 million from $86.2 million in the fourth quarter of 2019. NII in the fourth quarter of 2020 was down relative to the prior year period due to lower market interest rates. Compared to the third quarter of 2020, higher investment volume helped offset lower yields, which were down due to the reinvestment of maturities at lower yields.
“Net interest margin (“NIM”) for the fourth quarter of 2020 was 2.25%, a decrease of 5 basis points from 2.30% in the previous quarter and down 34 basis points from 2.59% in the fourth quarter of 2019. NIM decreased in the fourth quarter of 2020 compared to the prior quarter due to continued low market rates across the yield curve and elevated pre-payment speeds in the investment portfolio.
“Non-interest income was $47.8 million for the fourth quarter of 2020, an improvement compared with $46.9 million in the previous quarter and a decline compared with $49.7 million in the fourth quarter of 2019. The increase across fee generating business lines versus the prior quarter was due to higher banking, asset management, foreign exchange and trust revenues, as economic activity continued to improve in the fourth quarter.
“Non-interest expenses were $83.2 million in the fourth quarter of 2020, compared to $91.3 million in the previous quarter and $93.9 million in the fourth quarter of 2019. Core non-interest expenses1 were $82.4 million in the fourth quarter of 2020, compared with $84.6 million in the previous quarter and $91.6 million in the fourth quarter of 2019. Non-interest expenses were lower in the fourth quarter of 2020 compared to the prior quarter due to elevated non-core expenses in the third quarter of 2020 related to the cost restructure programs. On a core basis, expenses were down due to a lower headcount, which decreased salaries and benefits costs, and lower property costs and indirect taxes.
“Deposit balances increased significantly to $13.3 billion from $11.9 billion as at September 30, 2020 and $12.4 billion as at December 31, 2019. The increase late in the fourth quarter of 2020 is expected to be transitory, and deposit balances are expected to revert back to more normalized levels in the first half of 2021.
“The Bank continued its balanced capital return policy. The Board declared a quarterly dividend of $0.44 per common share to be paid on March 10, 2021 to shareholders of record on February 24, 2021. During the fourth quarter of 2020, Butterfield repurchased 0.2 million common shares completing the Bank’s previous share repurchase program. The Board has approved a new share repurchase program of up 2.0 million common shares, which will expire on February 28, 2022.
“The current total regulatory capital ratio as at December 31, 2020 was 19.8% as calculated under Basel III, compared to 19.4% as at December 31, 2019. Both of these ratios are significantly above the Basel III regulatory requirements applicable to the Bank.”
Financial highlights for the fourth quarter of 2020:
- Net income of $42.1 million, or $0.84 per share, and core net income1 of $42.9 million, or $0.86 per share
- Return on average common equity of 16.9%, and core return on average tangible common equity1 of 19.0%
- Net interest margin of 2.25%, cost of deposits of 0.12%
- Board declares dividend for the quarter ended December 31, 2020 of $0.44 per share
- Board approves a new 2021 share repurchase program of up to 2.0 million common shares
Financial highlights for the full year 2020:
- Net income of $147.2 million, or $2.90 per share, and core net income1 of $154.5 million, or $3.04 per share
- Return on average common equity of 15.0%, and core return on average tangible common equity1 of 17.3%
- Net interest margin of 2.42%, cost of deposits of 0.21%
- Active capital management with aggregate quarterly dividends of $1.76 per common share and 3.5 million shares repurchased
- Issued $100 million 5.25% 10-year fixed to floating rate subordinated debt
- Completed Channel Islands banking integration
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