Bank of Butterfield reported third quarter core earnings of $29.3 million, an improvement of $2.2 million compared to the same period one year ago. Net income for the third quarter increased by $2.9 million to $25.7 million year on year.
As a result, the return on average common equity improved to 15 percent in 2015, compared to 10.9 percent in the third quarter 2014.
Butterfield’s Chief Executive Officer Michael Collins said the third quarter results “are strong, with core earnings up by 8.1 percent year on year, and a growing customer deposit base in both Cayman and Bermuda.”
He said Butterfield would build on the “successful acquisitions” completed in 2014 by exploring “prudent acquisitions” in markets where the group has significant market share and business expertise.
“The high degree of liquidity within the bank’s investment portfolio and our conservative balance sheet position – with loans representing 38.9 percent of total assets – supports our ability to continue to pursue compelling acquisition opportunities going forward.”
Mr. Collins added that Butterfield intends to continue to return value to shareholders through share buy-backs and dividend payments. Butterfield declared an interim dividend of $0.01 per common share from third quarter earnings, and repurchased $0.6 million worth of common shares to support trading liquidity, he noted.
The increase in core earnings during the third quarter was mainly driven by improved credit provisions on the bank’s loan portfolio, higher fees from banking services and foreign exchange and lower property and professional services costs.
However, Chief Financial Officer Michael Schrum said, “Net interest income before credit provisions was down by 1.1 percent year over year due to lower credit demand and our net interest margin that fell slightly to 2.48 percent on lower investment yields.”
But the bank would remain well positioned to benefit from any future increases in interest rates, he added.
In Cayman, Butterfield’s third quarter net income increased by $3.3 million to $11.4 million year on year as a result of higher interest income on loans and investments, as well as higher non-interest income led by volume driven foreign exchange income and banking, trust and asset management fees.
The acquisition of parts of HSBC Cayman’s loan and deposit book in 2014 was reflected in the bank’s average loan balance, which was $94.9 million higher than in the quarter of 2014, but it also increased the amortization of intangible assets, which in turn drove up operating expenses by $0.2 million to $14.6 million.
Average customer deposits grew to $979.8 million with only a marginal upward impact on deposit liability costs, the bank reported.
Credit provisions of $0.4 million in the third quarter of 2015 were $0.1 million lower than credit provisions in the third quarter of 2014.
Meanwhile, Butterfield’s investment income was up $0.6 million, resulting from an average increase of $198.1 million in fixed-rate securities and $307.0 million in floating-rate notes.
Butterfield’s total assets in Cayman were $3.2 billion at the end of September, up $0.3 billion from year-end 2014, mainly due to higher client deposit levels.
In turn, several large commercial loan repayments reduced net loans by $54.4 million to $1.1 billion compared to the year-end 2014 levels, the bank said.