Butterfield posts $115.9m full-year profit
Bank of Butterfield has reported profits of $115.9 million for last year — up $38.2 million on the $77.7 million recorded the year before.
Net income per share was $1.18, down 5 cents on the previous year.
After removing the effects of noncore items, core earnings for the year were $138.6 million, an increase of $24.7 million on the year before.
The bank declared a dividend of 32 cents per common share for the last quarter of 2016, a threefold increase on the previous quarter and the same quarter last year.
Michael Collins, Butterfield CEO, said that the bank had successfully completed its initial public offering on the New York Stock Exchange, which had improved liquidity for shareholders and given the bank access to international capital.
He added: “Our community banking and wealth management businesses performed well in 2016, leading to a 22 per cent increase in core net income.”
Mr Collins said the bank had bought HSBC's wealth management business on the island, which had increased core net income by 22 per cent and wound down Butterfield's UK private bank.
He added: “Having repositioned the bank in jurisdictions in which we have scale, we are now focused on growing our community banking market share while cautiously expanding our wealth management business through trust acquisitions.”
Mr Collins said the bank last year recorded core return on average common tangible equity of 20 per cent — without the level of credit exposure faced by a typical US regional bank.
He added the bank had an $11 billion balance sheet, with $3.6 billion in loans and $7.2 billion in cash and securities, invested mostly in US government and federal agencies.
Mr Collins said: “With high barriers to entry in each of our jurisdictions we are uniquely positioned to service the global private wealth emanating from Asia, Europe and Latin America.”
After the IPO, the bank used $212 million of capital to buy back all the outstanding preferred shares, eliminating $16 million of dividends and government guarantee funds.
Mr Collins said: “The bank's shares have performed well, increasing in value by approximately 40 per cent since the IPO.
“The bank has declared a common dividend of 32 cents per share for quarter four 2016, which is more than three times the 10 cents quarterly dividend paid to common shareholders for the fourth quarter of 2015.”
Non-interest income at the bank rose by $7.3 million, attributed to increases in revenues from banking fees, trust services and asset management, plus the acquisition of HSBC's private banking investment management and trust businesses.
Michael Schrum, Butterfield chief financial officer, said: “The HSBC acquisition was largely responsible for the year-on-year increase in deposits of nearly $1 billion, which, against a backdrop of limited loan demand in our core markets, drove the bank to direct more funds to its investment portfolio, which grew from $3.2 billion at year-end 2015 to $4.4 billion at year-end 2016.
“Funds were invested primarily in US government agency securities and 93.7 per cent of the bank's investment portfolio is held in A or better rated securities.
“The asset quality of the bank's loan portfolio is similarly strong, with non-performing loans as a percentage of our total loans amounting to 1.6 per cent.”
Operating expenses rose by $0.7 million to $285.9 million in 2016, although there were increased salary and other costs related to the HSBC acquisition, “significant” redundancy costs related to the London bank closure and $8.5 million in costs associated with the vesting of performance-based options triggered by September's IPO.
The bank also reduced professional and outside services costs, which went down by nearly $8.8 million last year.
Net income for the last quarter of 2016 was $35.4 million, up $37.7 million from a loss of $2.3 million in the same quarter the previous year.