The Bank of NT Butterfield & Son Limited reported third quarter core earnings of $11.5 million, or $0.01 per share on a fully diluted basis, compared to $11.3 million in the third quarter of 2011.
During the quarter, Butterfield sold its wholly-owned Barbados subsidiary, Butterfield Bank (Barbados) Limited, to Trinidad and Tobago-based First Citizens Bank Limited for a net gain of $7.2 million. Total net income for the third quarter including income from the sale was $18.8 million.
Year-to-date core earnings for the nine months ended 30 September 2012 were $37.9 million, up 38.5 per cent compared to $27.3 million for the nine-month period ended 30 September 2011. Year-to-date core earnings per share of $0.05 on a fully diluted basis nearly doubled from the $0.03 per Share in the prior year.
Brendan McDonagh, Butterfield’s chairman and chief executive officer, said, “The board and management team are focused on improving shareholder value as our key priority. To that end, we have emphasised our focus on core earnings to drive sustainable value. We completed the sale of our subsidiary in Barbados to effect a shift of capital to initiatives and businesses that offer the potential for greater shareholder return. In addition, we continued to repurchase shares under the share buyback programme announced in May, providing enhanced market liquidity to benefit shareholders.”
The bank introduced a share buyback programme on 1 May 2012 as a means to improve shareholder liquidity and facilitate growth in share value. Under this programme, up to six million common shares and 2,000 preference shares may be repurchased. In the third quarter of 2012, 1,682,937 Shares were purchased by the Bank at an average price of $1.23 per share. Since inception of the programmme, a total of 2,216,351 shares have been repurchased at an average price of $1.23.
Book value per share grew 9.4 per cent year-on-year to end the quarter at $1.28 per share compared to $1.17 per Share last year. The year-to-date cash return on tangible common equity nearly doubled to 8.6 per cent from 4.4 per cent a year ago.
Mr McDonagh further pointed to the bank’s credit rating. “We were pleased to receive a report from Standard & Poor’s affirming the bank’s A-/A-2 ratings at the end of the quarter, which highlighted Butterfield’s strong and improving capital position, very conservative liquidity position and the improving quality of our loan portfolio against a backdrop of ongoing economic difficulties. We view that report as a solid endorsement of our strategy,” he said.
Bradley Rowse, Butterfield’s chief financial officer, said like all banks Butterfield “operated in a continuing environment of low and decreasing interest rates and ongoing economic challenges in our markets” in the third quarter. “Against that backdrop, by exercising disciplined deposit pricing and liquidity management, conservative investing and loan strategies, and our ongoing focus on managing expenses, Butterfield achieved a substantially improved [return on equity].”
The board declared $4 million of dividends on the bank’s 8 per cent non-cumulative perpetual voting preference shares to be paid on 15 December 2012 to preference shareholders of record on 1 December 2012. No common dividend was declared.
Net income of Butterfield’s Cayman operations increased by $1.3 million to $4.5 million compared to $3.2 million the same quarter a year ago. This primarily reflects higher net interest income after provision for credit losses of $3.2 million, offset by lower non-interest income of $0.5 million and lower other gains of $1.6 million.
Non-interest income of $6.9 million in the third quarter of 2012 was down $0.5 million compared to the prior year, reflecting declines in trust and asset management fees. These were partially offset by improved banking fees and foreign exchange commissions.
Net interest income before loan loss provisions was $11.3 million in the quarter, $1.8 million ahead of the prior year, driven primarily by the increase in investment income resulting from growth of $224 million in the fixed income investments and establishment of the held to maturity portfolio, which contributed to improved net interest margin of 2.31 per cent, up from 2.10 per cent in the same quarter a year ago.
Total assets at 30 September 2012 were $2.1 billion, up $0.1 billion from year-end 2011, reflecting higher corporate client deposit levels. Loans decreased by $28 million from year-end 2011, as a result of significant principal repayments in a low interest rate environment.
Client assets under administration for the Trust and Custody businesses were $2.1 billion and $1.3 billion, respectively, whilst assets under management declined by $0.2 billion to $0.8 billion.