The Bank of N.T. Butterfield & Son Limited (“Butterfield” or the “Bank”) today announced core earnings for the second quarter ended 30 June 2013 of $20.2 million ($0.03 per Share on a fully diluted basis), an improvement of 71% over the $11.8 million earned in the same quarter a year ago.  Net income for the quarter was $32.9 million, including non-core net items of $12.7 million, up $16.7 million compared to net income of $16.2 million in the second quarter of 2012. The core cash return on average tangible common equity doubled to 11.0% in the second quarter of 2013 compared to 5.5% in the second quarter of 2012, reflecting measures taken to achieve strategic goals, particularly expense and capital management initiatives.

Year-to-date core earnings for the six months ended 30 June 2013 was $35.5 million ($0.05 per Share on a fully diluted basis), up $9.1 million (34%) from $26.4 million for the six-month period ended 30 June 2012, due primarily to strong expense management. Year-to-date net income increased by $15.3 million for the six months ended 30 June 2013 to $46.2 million, compared to a year-to-date net income of $30.9 million for the six-month period ended 30 June 2012.

Brendan McDonagh, Butterfield’s Chairman & Chief Executive Officer, said,  “We are pleased that our strategy to improve shareholder value has doubled the core cash return on tangible common equity to 11.0% for the quarter, up from 5.5% only a year ago.  Against a backdrop of challenging economic environments in our major markets, we achieved this result largely through ongoing expense management initiatives across the organisation. By striving to earn our cost of capital, we will be stronger for our customers, employees and shareholders. To maintain this momentum, the senior management team has agreed to a ten percent reduction in compensation. With a further quarter of solid core earnings behind us, I am pleased to announce that the Board has declared a second interim Common dividend of $0.01 per Share as a means to return value to shareholders whilst maintaining the Bank’s strong capital position.”

Financial highlights of the second quarter ended 30 June 2013 (with comparisons to the second quarter of 2012):

·         Core earnings of $20.2 million, up 71%

·         Net interest margin at 2.62%, down from 2.67%

·         Core non-interest expenses improved by $6.7 million or 10%

·         Core cash return on average tangible common equity of 11.0%, up from 5.5%

·         Core efficiency ratio of 70.7%, improved from 77.7%

Brad Rowse, Butterfield’s Chief Financial Officer, said, “Our core earnings improvements were led by strong expense management and a 4.0% increase in average customer deposits. Core non-interest expenses were down more than $6.7 million, or almost 10%, compared to the second quarter last year, owed to a reduction in salaries and benefits costs resulting from headcount reductions, as well as decreased technology and property costs.  The improvement was reflected in a significant year-on-year improvement in our core efficiency ratio which decreased by seven percent to 70.7%.  Higher net interest income, driven by investing the deposit improvement, and lower provisions for credit losses more than offset lower non-interest income.”

Under the Bank’s Share Buy-back Programmes, the total Shares acquired or purchased for cancellation during the quarter ended 30 June 2013 amounted to 1.6 million Common Shares to be held as Treasury Shares at an average cost of $1.40 per Share (total cost of $2.3 million), and 10,800 Preference Shares purchased for cancellation at a cost of $13.3 million.

The Board cancelled the existing Common Share Buy-back Programme effective 1 April 2013 and implemented a new Programme for the purchase of up to 10 million Common Shares.  During the second quarter of 2013, the Board also implemented a new Preference Share Buy-back Programme to replace the previous Programme (under which the Bank was authorised to purchase for cancellation up to 8,000 Preference Shares), authorising the purchase and cancellation of up to 15,000 Preference Shares in total.

The Board declared quarterly dividends of $20 per Share on the Bank’s 8% Non-Cumulative Perpetual Voting Preference Shares, to be paid on 17 September 2013 to Preference Shareholders of record on 1 September 2013. 

The Board also declared a second interim Common dividend of $0.01 per Common and Contingent Value Convertible Preference Share to be paid on 23 August 2013 to shareholders of record on 9 August 2013.

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