Butterfield grows earnings, shareholder value in 2014

The Bank of N.T. Butterfield & Son Ltd. reported core earnings for 2014 of $106.4 million, an improvement of $29.8 million over 2013. Net income for the year 2014 was $20.1 million higher at $98.3 million.

The core cash return on average tangible common equity improved to 15.1 percent in 2014, up from 10.3 percent a year earlier.

Brendan McDonagh, Butterfield’s chairman and chief executive officer, said the figures show that “Butterfield made excellent progress in building value for shareholders during 2014.”

He said the bank’s strategy of “prudent expansion” within core business segments and diligent management of capital, expenses and risks had made the bank stronger with stable and growing core earnings.

In 2014, Butterfield increased its presence in the international trust and fiduciary services business with the second quarter acquisition of the Legis Group trust and corporate services business in Guernsey.

The bank also expanded its community banking presence in the Cayman Islands in the fourth quarter with the acquisition of parts of HSBC’s deposit and credit business.

“In both cases, the business acquired is complementary to and leverages Butterfield’s existing operations, which allowed the bank to quickly and effectively integrate customer portfolios without the need for investment in infrastructure or premises. Both acquisitions have proved accretive to revenues and income,” Mr. McDonagh said.

“Coupled with our ongoing diligence in the management of our balance sheet, each successive quarter of profitability in 2014 has translated into growth of capital, which has enabled the bank to deploy funds not only to beneficial acquisitions, but also to the retirement of subordinated debt, the repurchase of shares and the payment of common dividends to directly enhance shareholder returns, whilst maintaining strong capital ratios that are comfortably in excess of regulatory requirements,” he said.

Under the bank’s share buy-back programs, the total shares acquired or purchased for cancelation during 2014 amounted to 8.6 million common shares. The majority is held as treasury shares at an average cost of $1.99 per share and 560 preference shares are maintained at an average cost of $1,172 per share.

The bank’s net provision for credit losses in 2014 declined to $8 million from $14.8 million in 2013. The incremental provisions largely related to reserves for commercial and residential mortgages.

Cayman Islands

Net income from Butterfield’s Cayman operations increased $7.6 million to $33.5 million, based mainly on higher interest income on loans and investments, banking fees and foreign exchange income, as well as lower provisions for credit losses. Provisions for credit losses were $0.6 million compared to $3.6 million in 2013.

A $600 million increase to $2.9 billion in total assets at the end of 2014 reflected higher client deposit levels as a result of the acquisition of loans and deposits from HSBC Cayman in November 2014. Net loans increased by $0.2 billion from year-end 2013 to end the year at $1.1 billion. The available-for-sale investments, at $0.8 billion at the end of fiscal 2014, were up $0.3 billion year-on-year.

Client assets under administration for the trust and custody businesses were $3.4 billion and $1.5 billion, respectively, whilst assets under management were $0.8 billion at year end.

Operating expenses increased $4.2 million, year-on-year, to $58.8 million, related to acquisition integration and other project costs, as well as growth in technology and loan servicing costs.

Mr. McDonagh said Butterfield continues to invest significant resources into the enhancement of compliance and reporting procedures to meet regulatory obligations and to ensure that the bank’s records continue to meet international reporting standards.

“By the end of the second quarter, Butterfield was fully prepared for compliance with FATCA legislation, and we continue to work proactively with clients to ensure we have the necessary documentation on file to address current reporting requirements and respond to regulators’ requests under applicable laws,” he said.

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