Butterfield Bank’s third-quarter profit totalled $22.8 million — up by 5.5 percent from the same period of last year.

Net income for the first nine months of the year increased by $5.7 million to $73.5 million, the bank said in a statement this afternoon.

The bank said the quality of its loan book improved thanks to the sale of “Bermuda hotel properties that had been in receivership since 2011”. The sale of the Belmont and Newstead properties to American fund manager Larry Doyle was revealed by this newspaper last month.

Butterfield did not detail the purchase prices or the properties it was referring to, but it said non-performing loans fell by $23 million as a result of the deals, offset by “modest deterioration in the residential mortgage book”.

Brendan McDonagh, Butterfield’s chairman and chief executive officer, said the results demonstrated “the efficacy of our approach to creating sustainable value in the Butterfield franchise”.

“That approach involves ongoing diligence in the management of costs and the deployment of capital to low-risk acquisitions in businesses and jurisdictions where we have a meaningful market presence and demonstrated expertise,” he added.

Mr McDonagh said the success of that approach was evident from the accretive impact of nearly five percent on core cash earnings of the second-quarter acquisition of the Legis Group’s trust and fiduciary services business in Guernsey.

“Similarly, our acquisition of parts of HSBC’s retail and corporate banking business in the Cayman Islands, which will be completed in the fourth quarter, will enhance our deposit base, providing us with expanded lending and investment opportunities to drive revenue growth, without a marked increase in associated operating costs.

“The impact of these kinds of acquisitions, along with the gradual strengthening of quality in our commercial loan book, is providing incremental improvements in quarterly core earnings, even against a backdrop of low economic growth and low interest rates in our major markets,” Mr McDonagh said.

“With each subsequent quarter of growth, our capital position is further strengthened, providing us with the means to continue to enhance shareholder returns through dividend payments and share buy-backs. We are pleased to report that the core cash return on tangible common equity in the third quarter improved to 15.4 percent.”

John Maragliano, Butterfield’s chief financial officer, said: “The balance sheet continues to strengthen each quarter as the quality of the loan portfolio stabilises. Non-performing loans were down $23 million year to date owing to the sales of Bermuda hotel properties that had been in receivership since 2011 offset by modest deterioration in the residential mortgage book.

“On a year-to-date basis, non-accrual loans declined by 33 percent to $70.1 million representing 1.7 percent of total gross loans, compared to 2.5 percent at December 31, 2013. The bank continues to work with customers who are facing economic difficulty.”

Mr Maragliano added that core operating expenses increased by $2.9 million, but said the rise was related to the Legis acquisition, including personnel in Guernsey.

“Measured against revenues that increased by six percent, our core efficiency ratio improved to 67.3 percent in the third quarter including the net cash contribution of $0.8 million from Legis,” he added.

The bank listed financial highlights for the quarter ended September 30:

— Core earnings of $27.1 million, up $2.6 million or 10.6 percent;

— Core cash return on average tangible common equity of 15.4 percent, up from 14.3 percent;

— Core return on average assets of 1.2 percent, up from 1.1 percent;

— Core efficiency ratio of 67.3 percent, improved from 67.8 percent;

— Net interest margin of 2.78 percent, improved from 2.72 percent;

— Non-accrual loans of $70.1 million improved by 32.6 percent.