Butterfield Reports Q4 & Full Year 2022 Results
The Bank of N.T. Butterfield & Son Limited today announced financial results for the quarter and year ended December 31, 2022.
A spokesperson said, “Net income for the year ended December 31, 2022 was $214.0 million, or $4.29 per diluted common share, compared to $162.7 million, or $3.26 per diluted common share, for the year ended December 31, 2021. Core net income1 for the year ended December 31, 2022 was $215.7 million, or $4.33 per diluted common share, compared to $163.6 million, or $3.28 per diluted common share, for the year ended December 31, 2021.
“The return on average common equity for the year ended December 31, 2022 was 25.7% compared to 16.8% for the year ended December 31, 2021. The core return on average tangible common equity1 for the year ended December 31, 2022 was 28.6%, compared to 18.7% for the year ended December 31, 2021. The efficiency ratio for the year ended December 31, 2022 was 59.2% compared with 65.9% for the year ended December 31, 2021. The core efficiency ratio1 for the year ended December 31, 2022 was 58.9% compared with 65.5% for the year ended December 31, 2021.
Michael Collins, Butterfield’s Chairman and Chief Executive Officer, commented, “Butterfield’s results for the full year and fourth quarter of 2022 continued to demonstrate the Bank’s strong return profile, which benefited from rising market interest rates, non-interest income growth, and disciplined expense management that helped drive the efficiency ratio below 60%. As we enter 2023, we believe that Butterfield’s healthy returns on common equity will continue to support investor returns and overall growth objectives. Our long-standing strategy remains focused on limiting credit exposure in our conservative investment portfolio, growth through targeted acquisitions and thoughtful capital management. I was pleased to see tangible book value per common share recover 15.7% during the fourth quarter.
“We have made good progress preparing to onboard clients and new colleagues from our previously announced acquisition of the Credit Suisse trust business in Singapore, Guernsey and The Bahamas. We remain on track to progressively close the transaction during 2023. In terms of capital management, in addition to our quarterly cash dividend, we prioritize capital to support organic growth and the potential for acquisitions, and plan to recommence our share repurchase activity in the first half of 2023 [subject to market conditions].
“I am pleased that the Board has authorized a new share repurchase program of up to 3.0 million shares. I remain optimistic about Butterfield’s continuing success following the proven resilience of our business model across recent interest rate and economic cycles. I am also encouraged by the removal of pandemic-related travel restrictions to our island jurisdictions, which should help to bolster tourism and international business and stimulate local economies. I look forward to working alongside our great teams of people in 2023 and beyond to help clients achieve their financial goals while also enhancing shareholder value.”
A spokesperson added, “Net income for the fourth quarter of 2022 was $63.1 million, or $1.26 per diluted common share, compared to net income of $57.4 million, or $1.15 per diluted common share, for the previous quarter and $41.7 million, or $0.84 per diluted common share, for the fourth quarter of 2021. Core net income1 for the fourth quarter of 2022 was $63.2 million, or $1.27 per diluted common share, compared to $57.6 million, or $1.16 per diluted common share, for the previous quarter and $41.7 million, or $0.84 per diluted common share, for the fourth quarter of 2021.
“The return on average common equity for the fourth quarter of 2022 was 31.6% compared to 28.5% for the previous quarter and 17.1% for the fourth quarter of 2021. The core return on average tangible common equity1 for the fourth quarter of 2022 was 34.9%, compared to 31.6% for the previous quarter and 18.8% for the fourth quarter of 2021. The efficiency ratio for the fourth quarter of 2022 was 55.7%, compared to 57.1% for the previous quarter and 64.7% for the fourth quarter of 2021. The core efficiency ratio1 for the fourth quarter of 2022 was 55.6% compared with 57.0% in the previous quarter and 64.7% for the fourth quarter of 2021.
“Net income increased in the fourth quarter of 2022 versus the prior quarter primarily due to higher market interest rates and increased non-interest income offset by higher non-interest expenses and a moderately higher provision for future expected credit losses due to weaker macroeconomic forecasts and charge-offs on a commercial facility.
“Net interest income [“NII”] for the fourth quarter of 2022 was $94.6 million, an increase of $3.4 million, compared with NII of $91.2 million in the previous quarter and up $20.1 million from $74.5 million in the fourth quarter of 2021. NII continued to increase during the fourth quarter of 2022 compared to the prior quarter, primarily due to higher margins on loans and treasury assets, which were partially offset by higher deposit costs, particularly in the more competitive Channel Islands markets. Compared to the fourth quarter of 2021, NII similarly increased due to higher yields on assets, which was partially offset by higher deposit costs.
“Net interest margin [“NIM”] for the fourth quarter of 2022 was 2.79%, an increase of 20 basis points from 2.59% in the previous quarter and up 79 basis points from 2.00% in the fourth quarter of 2021. NIM in the fourth quarter of 2022 was higher than the prior quarter and fourth quarter of 2021 primarily due to increased market interest rates.
“Non-interest income for the fourth quarter of 2022 of $54.9 million was $5.0 million higher than the $49.9 million earned in the previous quarter and $2.3 million higher than $52.7 million in the fourth quarter of 2021. Non-interest income during the fourth quarter of 2022 increased compared to the prior quarter due to increased banking fees driven by higher card services fees from seasonal credit and debit card transaction activity and higher trust income driven by both new business and higher activity-based fees. Non-interest income in the fourth quarter of 2022 was higher than the fourth quarter of 2021 due to higher banking and foreign exchange revenues, partially offset by lower asset management, trust and custody fees.
“Non-interest expenses were $84.7 million in the fourth quarter of 2022, compared to $82.0 million in the previous quarter and $83.8 million in the fourth quarter of 2021. Core non-interest expenses1 of $84.5 million in the fourth quarter of 2022 were higher than the $81.8 million incurred in the previous quarter and the $83.7 million incurred in the fourth quarter of 2021 primarily due to higher staff-related expenses from performance-based incentive accruals and non-recurring severance costs.
“Deposit balances increased $0.5 billion compared to the prior quarter to $13.0 billion due to increased volumes and the impact of changes in foreign exchange rates. Period end deposit balances were lower 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 while the strengthening of US dollar’s impact on non-US dollar balances represents 43% of the change year-over-year.
“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 March 14, 2023 to shareholders of record on February 27, 2023. The Board approved a new share repurchase program on February 13, 2023 to replace its expiring program authorizing the purchase of up to 3.0 million common shares through to February 29, 2024. The new share repurchase authorization will take effect on March 1, 2023.
“The current total regulatory capital ratio as at December 31, 2022 was 24.1% 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.”
