After an extensive recapitalisation
involving a capital raise and a rights offering earlier this year, Bank of
Butterfield continued its recovery in a difficult market environment.
The bank announced a small second
quarter profit of $200,000 after a net loss of $176 million in the first
quarter. In 2009 the second quarter net income had been $10.3 million.
After adjusting for preference shares,
this resulted in a fully diluted second quarter net loss of $0.01 per share for
common shareholders compared to a diluted loss of $0.75 in the first quarter of
“Butterfield continues to operate
in difficult economies with continued historically low interest rates
compressing margins and yielding lower investment returns. Against this backdrop,
the Bank remains focused on expense management,” Butterfield’s President and
Chief Executive Officer Brad Kopp said, commenting on the results.
In March Butterfield Group
announced that funds affiliated with The Carlyle Group, Canadian Imperial Bank
of Commerce and other institutional investors had invested $550 million in new
Butterfield Group common shares and mandatory convertible preference shares.
An additional rights offering
enabling shareholders to buy up to $130 million of rights shares ended
oversubscribed on 11 May 2010.
At the end of the second quarter
Butterfield had a tangible common equity ratio of 6.1 per cent, a total capital
ratio of 21.7 per cent and a tier 1 capital ratio of 15.9 per cent.
While the capital raise and rights
issue improved the group’s capital position, they also supported bank’s
strategy to restructure the group’s investment portfolio by selling off problematic
sub-prime mortgage related assets. This process, which caused the first quarter
losses continued in the second quarter.
“We also took further steps in the
quarter to de-risk the balance sheet, selling one of our remaining Structured
Investment Vehicle investments, thereby reducing our exposure by $31.6 million
and realising a gain of $5.0 million,” said Mr. Kopp. “This was offset by
additional required reserves on two hospitality loans. Such actions further
strengthen our balance sheet and help position us for future growth.”
Butterfield Cayman’s net income of
$800,000 in the second quarter was $1.8 million lower than in the second
quarter 2009 as a result of additional loan loss provisioning. Total revenues
of $13.7 million were $2.8 million below second quarter 2009 results.
Due to significantly lower
inter-bank interest rates and lower client volumes, Butterfield Cayman’s net
interest income before loan loss provisions declined.
However, the bank’s non-interest
income of $9.2 million in the second quarter of 2010 was up by 10.4 per cent
year on year, buoyed by volume-driven foreign exchange commissions and card
processing revenues as well as an increased equity pick-up from Butterfield’s
investment in Island Heritage Insurance, the bank said.
The bank’s loans portfolio
increased by $9.4 million compared to last year based on an increase in
personal lending that was only partially offset by a contraction in commercial
The bank’s total assets at the end
of the second quarter 2010 were $2.2 billion down $365 million from year end
Despite the challenging economic
and market environment Butterfield Group is taking a positive view.
“I would like to stress that our
primary responsibility is to reward our shareholders’, customers’ and employees’
loyalty by returning the Bank to profitability and rebuilding sustainable value
in the Butterfield franchise,” Mr. Kopp said. “With a further de-risked balance
sheet, a strong capital position, sound operating structure and a great team of
dedicated employees, I am very confident in our ability to achieve that goal.”