Butterfield makes $40 million profit

WEDNESDAY, FEB. 29: Back in the black.

The Bank of Butterfield announced net income of $40.5 million for 2011.

This compared to a $207.6 million loss in 2010.

After deduction of dividends ($19.3 million) and the guarantee fee ($2.0 million) on Preference Shares, the net income available to common shareholders was

$19.2 million ($0.03 per share) in 2011 compared to a reported loss of $225.6 million ($0.47 per Share) in 2010.

Revenue growth was 9.8 per cent for 2011. Contributing to the revenue growth was the 19.4 per cent increase in net interest income before credit losses.

During 2011, the Bank continued to focus on expense management primarily by enhancing operational efficiency through streamlining the organizational structure, which resulted in $7.9 million one-off staff costs incurred in 2011. Excluding the one-off costs incurred in 2011 and 2010, the Bank’s operating costs decreased by $1.4 million.

These improvements were partially offset by declines in non-interest income as the recessionary environment continued to cause declines in transaction volumes.

Bradford Kopp, Butterfield’s president & CEO, said: “The Bank generated respectable levels of profit in each fiscal quarter, contributing to net income for the year of $40.5 million. Although, by historical standards, that level of annual income is modest for Butterfield, when viewed against the backdrop of ongoing economic dislocation and low interest rates in our key markets, it is a positive achievement.

“Our income was driven by the successful implementation of our strategy to improve operating efficiencies, strengthen credit quality and expand our interest margins.

 “We saw notable improvements in the overall performance of our lending business in 2011, even as we experienced increases in delinquencies on personal loans, credit cards and residential mortgages of a magnitude commensurate with general economic difficulties. By taking advantage of opportunities in under-served sectors of the UK and Guernsey loan market, and the extension of additional credit facilities to the Government of Bermuda, the Bank grew the loan portfolio during the year, whilst reducing the overall percentage of non-accrual loans on our books.”

Brad Rowse, Butterfield’s CFO, said: “In late 2010, the Bank revised its investment strategy in an effort to improve returns and largely implemented that strategy during 2011. Based on the provision of improved modelling and analytics, we were able to more effectively match the durations of our deposits against investments for improved yield, without taking on excess risk. As part of this strategy, the Bank is now holding certain securities — issued primarily by US government agencies — in a Held To Maturity (“HTM”) portfolio.

“These investments, combined with deposit pricing discipline, resulted in an increase in net interest income of more than 19 per cent.”

The Board declared $4.0 million of quarterly dividends on the Bank’s 8% Non-

Cumulative Perpetual Voting Preference Shares (“Preference Shares”) to be paid on 15 March 2012 to Preference Shareholders of record on 1 March 2012.

No Common dividend was declared.

Editor’s note: Don Burgess owns shares in the Bank of Butterfield