Butterfield have reported their third quarter 2021 results, the financial highlights are:
- Net income of $39.8 million, or $0.80 per share, and core net income1 of $40.0 million, or $0.80 per share
- Return on average common equity of 16.2% and core return on average tangible common equity1 of 17.9%
- Board declares dividend for the quarter ended September 30, 2021 of $0.44 per share
Net income for the third quarter of 2021 was $39.8 million, or $0.80 per diluted common share, compared to net income of $39.6 million, or $0.79 per diluted common share, for the previous quarter and $30.5 million, or $0.61 per diluted common share, for the third quarter of 2020. Core net income1 for the third quarter of 2021 was $40.0 million, or $0.80 per diluted common share, compared to $40.1 million, or $0.80 per diluted common share, for the previous quarter and $36.5 million, or $0.73 per diluted common share, for the third quarter of 2020.
The core return on average tangible common equity for the third quarter of 2021 was 17.9%, compared to 18.7% for the previous quarter and 16.2% for the third quarter of 2020. The efficiency ratio for the third quarter of 2021 was 66.5%, compared to 67.4% from the previous quarter and 73.5% from the third quarter of 2020. The core efficiency ratio1 for the third quarter of 2021 was 66.3%, compared to 66.3% from the previous quarter and 68.0% from the third quarter of 2020.
Michael Collins (pictured), Butterfield’s Chairman and Chief Executive Officer, commented, “The third quarter of 2021 continued to illustrate the value of Butterfield’s business model across economic cycles. Our strong results were achieved despite the prevailing low interest rate environment and the continued waves of outbreaks of Covid-19.
Butterfield has been able to maintain strong net interest earnings and non-interest revenue, with excellent credit quality and performance, while managing strategic business investments and prudent expense moderation initiatives. Our balance sheet remains strong and we continue to work with depositors to best serve their needs. With historically high deposits, we continuously evaluate deployment options into earnings assets, while maintaining appropriate capital, funding and liquidity levels.”
Net interest income (“NII”) for the third quarter of 2021 was $75.7 million, an increase of $1.0 million, compared with NII of $74.7 million in the previous quarter and up $0.4 million from $75.3 million in the third quarter of 2020. NII was higher during the third quarter of 2021 compared to the prior quarter and the third quarter of 2020 due to an increase in the average volume of interest earning assets, which offset slightly lower average yields.
Net interest margin (“NIM”) for the third quarter of 2021 was 1.97%, a decrease of 4 basis points from 2.01% in the previous quarter and down 33 basis points from 2.30% in the third quarter of 2020. NIM in the third quarter of 2021 was lower than the prior quarter and third quarter of 2020 primarily due to lower portfolio yields on investments and loans, as well as a one basis point increase in deposit costs versus the prior quarter.
Non-interest income for the third quarter of 2021 of $49.0 million was $0.2 million higher than the $48.8 million earned in the previous quarter and $2.1 million higher than $46.9 million in the third quarter of 2020. Continued increases in banking and foreign exchange fees contributed to the improvement in non-interest income.
Credit reserve releases were negligible for the third quarter of 2021 versus a release of $1.0 million in the previous quarter and a provision expense of $1.4 million during the third quarter of 2020. The lower recoveries of credit losses compared to the prior quarter were driven by improving macroeconomic forecasts.
Non-interest expenses were $84.4 million in the third quarter of 2021, compared to $84.8 million in the previous quarter and $91.3 million in the third quarter of 2020. Core non-interest expenses1 were $84.2 million in the third quarter of 2021, compared to $83.4 million in the previous quarter and $84.6 million in the third quarter of 2020.
Non-interest expenses were elevated in the third quarter versus the second quarter of 2021 due to costs associated with new technology projects that went live during the third quarter and increased professional fees to support strategic initiatives and for legal advice relating to the resolution of the US Department of Justice inquiry.
Period end deposit balances increased to $13.9 billion from $13.3 billion as at December 31, 2020. Deposits remained higher across all jurisdictions as customers maintained elevated deposit balances, although lower than the prior quarter as economies continue to open and customers activate their savings.
The Bank continued its balanced capital return policy. The Board again declared a quarterly dividend of $0.44 per common share to be paid on November 24, 2021 to shareholders of record on November 10, 2021. During the third quarter of 2021, Butterfield also repurchased 0.1 million common shares under the Bank’s current 2.0 million common share repurchase plan authorization.
The current total regulatory capital ratio as at September 30, 2021 was 20.4% as calculated under Basel III, compared to 19.8% as at December 31, 2020. Both of these ratios remain significantly above the Basel III regulatory requirements applicable to the Bank.
As previously announced, during the quarter, the Bank has reached a resolution with the US Department of Justice concerning the inquiry into Butterfield’s legacy business with US clients that was first reported in November 2013. The resolution is in the form of a non-prosecution agreement with a three-year term. The Bank paid $5.6 million in respect of Forfeiture and Tax Restitution Amounts, in line with the provision that was included in the Bank’s financial statements as recorded in 2015 and 2016.
