Butterfield Bank’s expansion efforts weighed on second-quarter earnings as nearly $17 million in acquisition expenses — mainly related to its planned acquisition of CIBC Caribbean — cut reported profits.

The bank posted net income of $46.9 million, or $1.16 per diluted share, for the three months ended June 30, compared with $62.6 million, or $1.53 per diluted share, in the previous quarter.

However, core net income, which excludes one-off items, edged up to $63.9 million from $63.2 million in the first quarter, and well ahead of the $53.7 million recorded a year earlier.

Butterfield reported $16.9 million in noncore expenses, primarily linked to its planned acquisition of CIBC Caribbean and the integration of trust service provider Rawlinson & Hunter Guernsey, which was completed during the quarter.

In May, Butterfield announced the $1.8 billion deal to buy CIBC Caribbean, which operates in ten countries in the region and is the Caribbean arm of Canadian Imperial Bank of Commerce.

Michael Collins, Butterfield's chairman and chief executive officer, said the quarter highlighted the strength of the bank’s core franchise.

He said higher net interest income and the first contribution from trust fees generated by the R&H Guernsey acquisition helped lift core earnings, while the bank maintained a stable net interest margin despite competitive pressures on deposits.

Mr Collins added that the agreement to acquire CIBC Caribbean would transform the scale of the business.

“During the quarter, we announced the acquisition of CIBC Caribbean, a compelling opportunity that we expect will double our size and strengthen Butterfield's position as a leading independent financial services provider across the Caribbean and international financial centres.

“We have already completed our initial regulatory filings across the relevant jurisdictions and continue to expect closing to occur in the first half of 2027, adding scale and new growth opportunities for Butterfield.”

Net interest income increased to $95.6 million from $93.3 million in the previous quarter and $89.4 million a year earlier, driven by higher interest-earning asset volumes and lower funding costs than a year ago. Net interest margin remained virtually unchanged at 2.74 per cent, compared with 2.75 per cent in the first quarter, and improved from 2.64 per cent a year earlier.

Non-interest income rose to $63.4 million from $62.6 million in the previous quarter, reflecting the addition of trust revenue from R&H Guernsey. Compared with a year earlier, the bank also benefited from higher foreign exchange income, increased banking fees, stronger asset management fees and additional custody business.

Expenses rose sharply to $109.8 million from $90.5 million in the previous quarter, largely because of acquisition-related costs.

On an underlying basis, core operating expenses increased more modestly to $92.9 million as Butterfield absorbed additional staffing, technology and integration costs associated with the Guernsey acquisition.

The balance sheet remained strong, with total assets increasing to $14.3 billion from $14.1 billion at the end of last year, while customer deposits grew to $12.9 billion.

Loans remained broadly unchanged at $4.4 billion and the bank said 65.5 per cent of its assets remained in cash and other highly liquid investments. Its total regulatory capital ratio stood at 27.5 per cent, comfortably above minimum requirements.

Butterfield declared a quarterly dividend of 50 cents per common share, payable on August 26 to shareholders of record on August 12.

The bank also repurchased about 300,000 shares for $16.1 million during the quarter before suspending its buyback programme following the announcement of the CIBC Caribbean acquisition.