Butterfield reports $23.2m first quarter profit

Butterfield Reports First Quarter Profit

• Q1 2014 net income of $23.2 million, up $9.9 million or 74.3% over Q1 2013.
• Core earnings of $23.2 million, up $7.9 million or 51.6%.
• Core cash return on tangible common equity improves to 12.9%
• Core cash earnings per share of $0.04, up from $0.02 in 2013
• Board declares interim dividend of $0.01 per common share
• Strong capital position maintained with a total capital ratio of 23.1%

The Bank of N.T. Butterfield & Son Limited (“Butterfield” or the “Bank”) today announced net income for the first quarter of $23.2 million ($0.03 per share on a fully diluted basis) compared to $13.3 million ($0.02 per share on a fully diluted basis) in 2013. Core earnings for the first quarter were $23.2 million, an improvement of $7.9 million or 51.6% over the first quarter 2013. The core cash return on average tangible common equity ratio improved to 12.9% in the first quarter of 2014 compared to 7.5% in the first quarter of 2013.

During the first quarter, the Bank announced that it had reached an agreement in principle to expand its trust and fiduciary services presence in Guernsey—one of Butterfield’s core markets—through the acquisition of Legis Group’s trust and fiduciary services business.  The transaction, which closed on 1 April, will enhance Butterfield’s market presence.

Brendan McDonagh, Butterfield’s Chairman and Chief Executive Officer said, “We are pleased to report another strong quarter of double-digit core returns to common shareholders at 12.9%. Our strategy of managing our balance sheet, investing in our core businesses, and our focus on business development and cost efficiency resulted in year-on-year core earnings growth of $7.9 million or 51.6%.

“Capital management is a key pillar of Butterfield’s strategy to maximise shareholder value.  Butterfield has continued to build organic capital over and above already very high capital ratios.  We deploy excess capital to enhance shareholder returns and liquidity, through the payment of dividends and share buy-backs, and to acquisitions that will strengthen our business in our core markets.   The acquisition of Legis Group’s trust and fiduciary services business in Guernsey is an example of the latter.

“During the first quarter, the Bank retired $90 million in subordinated capital, repurchased $3.5 million of common and preference shares, and paid $11.0 million in common dividends to shareholders. These capital actions, combined with core earnings growth, resulted in a doubling of the core cash earnings per common share to $0.04 for the first quarter of 2014 from $0.02 for the same quarter last year.”

Financial highlights of the quarter ended 31 March 2014 (with comparisons to the first quarter 2013):

·         Net income of $23.2 million, up $9.9 million or 74.3% from $13.3 million

·         Core earnings of $23.2 million, up $7.9 million or 51.6%

·         Core cash return on average tangible common equity of 12.9%, up from 7.5%

·         Core cash return on average assets of 1.0%, up from 0.7%

·         Core efficiency ratio of 69.5%, improved from 75.2%

John Maragliano, Butterfield’s Chief Financial Officer said, “Both net income and core earnings are showing meaningful year-over-year improvement due to a combination of increased business volumes, cost containment and the continued focus on prudent asset and liability management strategies that targets a stable net interest margin throughout the interest rate cycle. These activities are driving revenue growth and creating a more stable and efficient expense base that when combined with steady provisions for loan losses, are resulting in significant improvement in the bank’s performance ratios.  The core efficiency ratio improved to 69.5%, down 570 basis points from the first quarter of 2013.  Our balance sheet grew $140 million off the back of deposit growth from targeted business segments but loan demand is lagging and volumes declined to $4.0 billion from $4.1 billion last quarter.

Capital Management

During the first quarter of 2014, the Board approved, with effect from 1 April 2014, the 2014 common share buy-back programme authorising the purchase and a cancellation of up to 15 million common shares.

On 28 April 2014, the Board approved the 2014 preference share buy-back programme, authorising the purchase and cancellation of up to 26,600 preference shares.

Under the Bank’s share buy-back programmes, the total shares acquired or purchased for cancellation during the quarter ended 31 March 2014 amounted to 1.8 million common shares to be held as treasury shares at an average cost of $1.96 per share (total cost of $3.5 million).  Preference share buybacks were immaterial.

The Board declared quarterly dividends of $20 per share on the Bank’s 8% non-cumulative perpetual voting preference shares, to be paid on 16 June 2014 to preference shareholders of record on 1 June 2014. 

The Board also declared an interim dividend of $0.01 per common and contingent value convertible preference share to be paid on 30 May 2014 to shareholders of record on 16 May 2014.

During the first quarter, the Bank called a $90 million tranche of subordinated debt lowering the outstanding subordinated debt balance by 43% from $207 million to $117 million.

Full Press Release HERE.