Butterfield Bank reported a rise in earnings in the second quarter and for the first six months of the year. While the bank’s second quarter net income of $27.5 million was down $5.4 million compared to the same quarter one year ago, core earnings, which exclude transactions that are unusual or considered to be outside the normal course of business under U.S. accounting rules, were up $5.8 million, or 28.7 percent, at $26 million.
Year-to-date core earnings for the six months at $49.1 million were up $13.6 million on the same period in 2013, whereas net income for the first six months increased $4.5 million to $50.7 million year-on-year.
Brendan McDonagh, Butterfield’s chairman and chief executive, said Butterfield’s quarterly and half-year core earnings showed good year-on-year growth in earnings of nearly 30 percent. This resulted in an improvement of core returns to common shareholders of 15 percent.
He said the results help improve the already strong capital position and provide the bank with the opportunity to enhance shareholder value through investment in strategic businesses and more directly through share buy-backs and dividends.
Butterfield’s acquisition strategy seeks to minimize risk by investing in businesses in which the bank has expertise and a meaningful market presence, Mr. McDonagh added.
In July, Butterfield announced that the bank had reached an agreement to acquire parts of the corporate and retail banking business of HSBC Bank in the Cayman Islands, Butterfield’s second largest market following Bermuda.
“[This transaction] will enhance our Cayman business and see total assets grow from $2.2 billion to an anticipated $3.0 billion, strengthening our leading market position,” Mr. McDonagh said.
During the first quarter the bank added to its trust and fiduciary services presence in Guernsey with the completion of the acquisition of the Legis Group’s trust business.
John Maragliano, Butterfield’s chief financial officer, said the bank’s second quarter net income and core earnings showed significant year-over-year improvement as a result of a continued approach to prudent balance sheet and expense management, and the execution of Butterfield’s capital management plan.
“Net interest income before provision for credit losses was up by $4.0 million on improved investment yields owing to our consistent asset and liability management strategy and the effect of the retirement of two tranches of subordinated debt earlier in the year, the latter reducing quarterly interest expenses by $1.4 million,” he said.
“Non-interest income increased by $3.9 million from the combination of increasing business volumes, new business generation and additional trust revenues from the consolidation of the Legis acquisition. As a result, total revenue before credit losses and other gains grew by $7.9 million, compared to an increase in core operating expenses of $3.2 million leading to the 280 basis point improvement in the Bank’s core efficiency ratio to 67.9 percent.”
Cayman Islands
In the Cayman Islands, second quarter net income before gains and losses increased slightly by $0.2 million to $7.1 million year-on-year, based on increases in loan interest income that were offset by expenditures on professional services related to compliance with FATCA and the acquisition of parts of HSBC’s corporate and retail banking business.
In total, non-interest expenses increased $2.5 million, year over year, to $15.3 million.
An increase in loan balances boosted the bank’s net interest income before loan loss provisions to $14.5 million, up $2.2 million compared to the second quarter of 2013. Meanwhile, credit loss provision declined to $0.4 million from $0.6 million year on year.
Non-interest income was $8.3 million, up $0.3 million from the second quarter of 2013, due to higher banking fees and commissions on higher debit and credit card volumes.
The bank’s total assets in the Cayman Islands at the end of the second quarter decreased marginally by $0.1 billion to $2.2 billion compared to the end of 2013. Client assets under administration were $3.3 billion for the trust and corporate services business and $1.4 billion for the custody business, while assets under management were $0.7 billion.
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