Butterfield Bank ended 2018 on a high with fourth quarter net income of $50.9 million or $0.92 per share, compared to $50.4 million in the third quarter of 2018 and $40.3 million in the fourth quarter of 2017.
The banking group’s annual net income grew from $153.3 million to $195.2 million last year, or $3.50 per diluted common share compared to $2.76 per share in 2017. Core net income, which includes revenue, gains, losses and expense items incurred in the normal course of business, jumped to $197 million from $158.9 million a year earlier.
The strong income growth benefited from a $62 million increase in interest income from interest earned on loans as a result of larger volumes and higher rates. The March 2018 acquisition of Deutsche Bank’s Global Trust Solutions business contributed to the $10.9 million increase in non-interest income with higher trust fees and revenue.
At the same time, the expanded trust business and new teams led to a $14.6 million increase in salaries and other employee benefits. Last year Butterfield also acquired Deutsche Bank’s banking and custody business in Cayman, Jersey and Guernsey.
Michael Collins, Butterfield’s chairman and chief executive officer, said 2018 was an important year for Butterfield, as the group completed two strategic and accretive acquisitions and continued to grow its residential loan portfolio in central London, while at the same time “producing industry leading returns.”
The bank’s return on equity and return on assets both improved last year. Core return on average tangible equity reached 25.6 percent up from 22.4 percent in 2017. The return on average assets for the year was 1.8 percent, up from 1.4 percent.
The group reported another “solid set of financial results in the fourth quarter, which contributed to Butterfield’s record profitability,” Mr. Collins said.
“Our strong risk-adjusted returns benefited from a profitable and highly rated investment portfolio, a conservatively underwritten loan book, diversified fee income and diligent management of expenses.”
Looking ahead, the Butterfield chief executive sees the bank well positioned for organic growth and said the group would continue to seek strategic acquisitions in private trust and banking in its current markets.
Average customer deposit balances in the fourth quarter of 2018 of $9.1 billion were down from $9.4 billion in the third quarter of 2018 and $9.7 billion in the fourth quarter of 2017.
Year on year, total assets under administration for the trust business increased slightly to $96.1 billion from $95.4 billion but dropped for the custody business from $27.5 billion to $24.5 billion. Assets under management also declined from $5 billion to $4.8 billion.
Butterfield increased its total capital ratio under Basel III calculations to 22.4 percent last year from 19.9 percent in 2017, putting the capitalization significantly above what is required by the regulations.
Mr. Collins said, “We are strongly capitalized and remain committed to an attractive investor return profile with an increased quarterly cash dividend, as well as a larger share repurchase program.”
The board increased the quarterly dividend from $0.38 to $0.44 per common share to be paid on March 15, 2019 to shareholders of record on March 4, 2019.
Butterfield maintains a board-approved share repurchase authorization of up to 2.5 million common shares available for capital management. During the fourth quarter of 2018, Butterfield repurchased 1.3 million common shares, completing the repurchases authorized under the bank’s previously announced share repurchase program.