Butterfield Reports Third Quarter 2022 Results
The Bank of Butterfield today announced financial results for the quarter ended September 30, 2022.
A spokesperson said, “Net income for the third quarter of 2022 was $57.4 million, or $1.15 per diluted common share, compared to net income of $49.1 million, or $0.99 per diluted common share, for the previous quarter and $39.8 million, or $0.80 per diluted common share, for the third quarter of 2021. Core net income1 for the third quarter of 2022 was $57.6 million, or $1.16 per diluted common share, compared to $50.2 million, or $1.01 per diluted common share, for the previous quarter and $40.0 million, or $0.80 per diluted common share, for the third quarter of 2021.
“The core return on average tangible common equity1 for the third quarter of 2022 was 31.6%, compared to 27.8% for the previous quarter and 17.9% for the third quarter of 2021. The core efficiency ratio1 for the third quarter of 2022 was 57.0% compared with 60.2% in the previous quarter and 66.3% for the third quarter of 2021.
Michael Collins, Butterfield’s Chairman and Chief Executive Officer, commented, “The Bank posted solid results for the third quarter of 2022, as we continued to demonstrate resilient non-interest income in our chosen operating jurisdictions, while remaining well positioned for the rising interest rate environment. Butterfield remains asset sensitive, which we expect will continue to benefit the Bank during this period of rising market interest rates.
“We regularly monitor and review credit quality in our loan book and, at this point in the cycle, we have not seen any significant signs of credit stress. A number of mortgage customers have moved their facilities from floating rate to fixed rate over the past six months, protecting their cash flow and improving the credit quality of our loan portfolio. As anticipated, we saw deposit levels decrease due to clients investing their funds and the strengthening of the US dollar.
“During the quarter, we announced the acquisition of the Credit Suisse trust business in Singapore, Guernsey and the Bahamas. This strategic transaction will position Butterfield as one of the largest private client trust companies in Singapore. Importantly, this acquisition allows Butterfield to review and selectively acquire each individual trust client in accordance with our risk appetite, without the requirement to purchase legal entities. We look forward to welcoming our new clients and staff as we integrate the business during the first half of next year.”
“Net income increased in the third quarter of 2022 versus the prior quarter principally due to a higher interest rate environment and lower non-interest expenses, offset by lower non-interest income and a provision for future expected credit losses due to decreasing macroeconomic forecasts and net new loan originations.
“Net interest income [“NII”] for the third quarter of 2022 was $91.2 million, an increase of $9.2 million, compared with NII of $82.0 million in the previous quarter and up $15.5 million from $75.7 million in the third quarter of 2021. NII continued to increase during the third quarter of 2022 compared to the prior quarter, primarily due to higher margins on interest earning assets, which were partially offset by higher deposit costs, particularly in the more competitive Channel Islands markets. Compared to the third quarter of 2021, NII has increased due to higher yields on assets, which were moderated by lower interest earning asset volumes during the third quarter of 2022.
“Net interest margin [“NIM”] for the third quarter of 2022 was 2.59%, an increase of 33 basis points from 2.26% in the previous quarter and up 62 basis points from 1.97% in the third quarter of 2021. NIM in the third quarter of 2022 was higher than the prior quarter and third quarter of 2021 primarily due to increased market interest rates and a higher yielding asset mix.
“Non-interest income for the third quarter of 2022 of $49.9 million was $1.9 million lower than the $51.8 million earned in the previous quarter and $0.9 million higher than $49.0 million in the third quarter of 2021. Non-interest income during the third quarter of 2022 decreased compared to the prior quarter primarily due to lower other non-interest income, which included the scheduled recognition of unclaimed assets in the second quarter of 2022, as well as lower revenues from trust, due to a decrease in activity based project fees. Non-interest income was elevated in the third quarter of 2022 compared to the third quarter of 2021 due to higher banking fees as some corporate clients amended lending agreements, which resulted in fee assessments.
“Non-interest expenses were $82.0 million in the third quarter of 2022, compared to $83.0 million in the previous quarter and $84.4 million in the third quarter of 2021. Core non-interest expenses1 of $81.8 million in the third quarter of 2022 were relatively consistent with the $81.9 million incurred in the previous quarter and lower than the $84.2 million incurred in the third quarter of 2021. Compared to the third quarter of 2021, non-interest expenses were lower due to decreased technology and communications costs resulting from the third quarter of 2021 including depreciation of legacy banking system which became fully depreciated in the fourth quarter of 2021.
“Period end deposit balances were lower at $12.5 billion, compared to December 31, 2021 at $13.9 billion due to the anticipated normalization of pandemic-related elevated deposit levels, as well as the impact of foreign exchange translation of non-US dollar deposits following the strengthening of the US dollar. Customer withdrawals represent 57% of the decrease in deposits whilst the strengthening of US dollar’s impact on non-US dollar balances represents 43% of the change.
“The Bank maintained its balanced capital return policy. The Board again declared a quarterly dividend of $0.44 per common share to be paid on November 28, 2022 to shareholders of record on November 14, 2022.
“The current total regulatory capital ratio as at September 30, 2022 was 22.7% as calculated under Basel III, compared to 21.2% as at December 31, 2021. Both of these ratios remain significantly above the minimum Basel III regulatory requirements applicable to the Bank.”
