Butterfield Reports First Quarter 2019 Results and Announces Agreement to Acquire ABN AMRO (Channel Islands) Limited
- Net income of
$52.1 million , or$0.96 per share; - Core net income1 of
$51.7 million , or$0.95 per share; - Return on average common equity of 23.7%; core return on average tangible common equity1 of 25.6%;
- Board declares a dividend for the quarter ended March 31, 2019 of
$0 .44 per share; - Completed integration and onboarding of clients and employees in
Channel Islands from Deutsche Bank acquisition; - Announced agreement today to acquire ABN AMRO (
Channel Islands ) Limited from the ABN AMRO Group.
Net income for the first quarter was
The core return on average tangible common equity1 for the first quarter of 2019 was 25.6%, broadly in line with previous quarters. The core efficiency ratio1 for the first quarter of 2019 was 60.1% compared with 61.5% in the previous quarter and 62.3% in the first quarter of 2018.
Commenting on the results, Michael Collins, Butterfield's Chairman and Chief Executive Officer, said: "The solid first quarter was underpinned by our capital efficient fee businesses, well positioned balance sheet and focused cost management. We are prepared to meet the challenges of the current interest rate environment through expense control and disciplined capital management. During this quarter, we also finished onboarding the remaining Deutsche Bank clients in the
“Today, we are also pleased to announce an agreement to acquire ABN AMRO (
More details about the acquisition have been provided in a separate press release and SEC filing also published this morning.
Net interest income (“NII”) for the first quarter of 2019 was
Net interest margin (“NIM”) for the first quarter of 2019 was 3.31%, a decrease of 7 basis point from the NIM of 3.38% in the previous quarter and up 26 basis points from the NIM of 3.05% in the first quarter of 2018. NIM declined marginally in the first quarter of 2019 compared to the prior quarter due to late first quarter transitory deposit inflows, which were placed in short term cash and securities. In addition, new deposits from the Deutsche Bank transaction have increased net interest income, but represent lower margins, due to short behavioral maturity, higher deposit cost and currency mix of those customer deposits.
Non-interest income was
Core non-interest expenses1 were
Average deposit balances in the first quarter of 2019 of
Capital Management
The current total capital ratio as at March 31, 2019 was 22.0% as calculated under Basel III, which became effective for reporting purposes beginning on January 1, 2016. As of December 31, 2018, the Bank reported its total capital ratio under Basel III at 22.4%. Both of these ratios are significantly above regulatory requirements applicable to the Bank.
The Board remains committed to a balanced capital return policy. The Board declared an interim dividend of
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ANALYSIS AND DISCUSSION OF FIRST QUARTER RESULTS |
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| Income statement | Three months ended (Unaudited) | |||||||||||
| (in $ millions) | March 31, 2019 | December 31, 2018 | March 31, 2018 | |||||||||
| Non-interest income | 43.4 | 45.7 | 39.8 | |||||||||
| Net interest income before provision for credit losses | 88.0 | 87.4 | 79.9 | |||||||||
| Total net revenue before provision for credit losses and other gains (losses) | 131.4 | 133.1 | 119.7 | |||||||||
| Provision for credit losses | — | 1.7 | 1.9 | |||||||||
| Total other gains (losses) | 1.8 | (0.3 | ) | 0.4 | ||||||||
| Total net revenue | 133.1 | 134.6 | 122.0 | |||||||||
| Non-interest expenses | (80.9 | ) | (83.5 | ) | (77.4 | ) | ||||||
| Total net income before taxes | 52.2 | 51.1 | 44.5 | |||||||||
| Income tax expense | (0.1 | ) | (0.2 | ) | (0.4 | ) | ||||||
| Net income | 52.1 | 50.9 | 44.2 | |||||||||
| Net earnings per share | ||||||||||||
| Basic | 0.97 | 0.93 | 0.80 | |||||||||
| Diluted | 0.96 | 0.92 | 0.79 | |||||||||
| Per diluted share impact of other non-core items 1 | (0.01 | ) | — | 0.02 | ||||||||
| Core earnings per share on a fully diluted basis 1 | 0.95 | 0.92 | 0.81 | |||||||||
| Adjusted weighted average number of participating shares on a fully diluted basis(in thousands of shares) | 54,229 | 55,389 | 55,813 | |||||||||
| Key financial ratios | ||||||||||||
| Return on common equity | 23.7 | % | 23.4 | % | 21.8 | % | ||||||
| Core return on average tangible common equity 1 | 25.6 | % | 25.8 | % | 24.3 | % | ||||||
| Return on average assets | 1.9 | % | 1.9 | % | 1.6 | % | ||||||
| Net interest margin | 3.31 | % | 3.38 | % | 3.05 | % | ||||||
| Core efficiency ratio 1 | 60.1 | % | 61.5 | % | 62.3 | % | ||||||
|
(1) |
See table "Reconciliation of US GAAP Results to Core Earnings" below for reconciliation of US GAAP results to non-GAAP measures |
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| Balance Sheet | As at | |||||||
| (in $ millions) | March 31, 2019 | December 31, 2018 | ||||||
| Cash due from banks | 2,601 | 2,054 | ||||||
| Securities purchased under agreement to resell | 72 | 27 | ||||||
| Short-term investments | 215 | 52 | ||||||
| Investments in securities | 4,393 | 4,255 | ||||||
| Loans, net of allowance for credit losses | 3,986 | 4,044 | ||||||
| Premises, equipment and computer software | 155 | 158 | ||||||
| Goodwill and intangibles | 74 | 75 | ||||||
| Other assets | 146 | 108 | ||||||
| Total assets | 11,643 | 10,773 | ||||||
| Total deposits | 10,294 | 9,452 | ||||||
| Other liabilities | 310 | 295 | ||||||
| Long-term debt | 143 | 143 | ||||||
| Total liabilities | 10,747 | 9,891 | ||||||
| Common shareholders’ equity | 896 | 882 | ||||||
| Total shareholders' equity | 896 | 882 | ||||||
| Total liabilities and shareholders' equity | 11,643 | 10,773 | ||||||
| Key Balance Sheet Ratios: | March 31, 2019 | December 31, 2018 | ||||||
| Common equity tier 1 capital ratio | 19.3 | % | 19.6 | % | ||||
| Tier 1 capital ratio | 19.3 | % | 19.6 | % | ||||
| Total capital ratio | 22.0 | % | 22.4 | % | ||||
| Leverage ratio | 7.0 | % | 7.6 | % | ||||
| Risk-Weighted Assets (in $ millions) | 4,341.5 | 4,321.4 | ||||||
| Risk-Weighted Assets / Total Assets | 37.3 | % | 40.1 | % | ||||
| Tangible common equity ratio | 7.1 | % | 7.5 | % | ||||
| Non-accrual loans/gross loans | 1.3 | % | 1.2 | % | ||||
| Non-performing assets/total assets | 0.4 | % | 0.4 | % | ||||
| Total coverage ratio | 46.5 | % | 51.6 | % | ||||
| Specific coverage ratio | 29.6 | % | 30.6 | % | ||||
QUARTER ENDED MARCH 31, 2019 COMPARED WITH THE QUARTER ENDED DECEMBER 31, 2018
Net Income
Net income for the quarter ended March 31, 2019 was
The
$3.8 million increase in interest income on deposits with banks due principally to higher volumes of deposits placed resulting from an increase in average customer deposits, as well as higher rates realized;$2.0 million increase in total gain/losses due principally to gains realized on the sale of certain AFS securities in the first quarter of 2019, relative to losses incurred on similar sales in the previous quarter;$1.0 million decrease in salaries and other employee benefits and non-service employee benefits due principally to a partial release of excess discretionary compensation and severance accrual recorded in the previous quarter;$0.7 million decrease in property expenses related to a lease commitment in theCayman Islands ;$0.9 million decrease in the remaining non-interest expense items, due principally to a reduction in marketing costs incurred on seasonal promotions in the previous quarter;$2.9 million increase in interest expense on deposits due principally to higher volumes and rates of term deposits;$1.7 million decrease in banking fees due principally to higher seasonal volumes of credit card transactions during the previous quarter; and$1.2 million decrease in trust fees due to lower activity-based billings during the quarter than during the previous quarter.
Non-Core Items1
Non-core items resulted in gains, net of expenses, of
Management does not believe that the expenses, gains or losses identified as non-core are indicative of the results of operations of the Bank in the ordinary course of business.
|
(1) |
See table "Reconciliation of US GAAP Results to Core Earnings" below for reconciliation of US GAAP results to non-GAAP measures |
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BALANCE SHEET COMMENTARY AT MARCH 31, 2019 COMPARED WITH DECEMBER 31, 2018
Total Assets
Total assets of the Bank were
Loans Receivable
The loan portfolio totaled
Allowance for credit losses at March 31, 2019 totaled
The loan portfolio represented 34.2% of total assets at March 31, 2019 (December 31, 2018: 37.5%), while loans as a percentage of customer deposits decreased from 42.9% at year-end 2018 to 38.8% at March 31, 2019. The decrease in both percentages are due principally to an increase in customer deposits at March 31, 2019.
As of March 31, 2019, the Bank had gross non-accrual loans of
Other real estate owned (“OREO”) decreased by
Investment in Securities
The investment portfolio was
The investment portfolio was made up of high quality assets with 99.8% invested in A-or-better-rated securities. The investment yield increased slightly from the previous quarter to 3.1% as at March 31, 2019. Total net unrealized losses were
Deposits
Average deposits were at
Average Balance Sheet2
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Average Balance Sheet2 |
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| For the three months ended | ||||||||||||||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||||||||||||||||||||||||||
| (in $ millions) | Average
balance ($) |
Interest
($) |
Average
rate (%) |
Average balance ($) |
Interest ($) |
Average rate (%) |
Average
balance ($) |
Interest
($) |
Average
rate (%) |
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| Assets | ||||||||||||||||||||||||||||||||||||
| Cash due from banks and short-term investments | 2,441.2 | 9.9 | 1.65 | 1,719.2 | 6.1 | 1.40 | 2,173.8 | 5.0 | 0.94 | |||||||||||||||||||||||||||
| Investment in securities | 4,295.6 | 32.5 | 3.07 | 4,415.1 | 32.0 | 2.87 | 4,574.6 | 28.6 | 2.54 | |||||||||||||||||||||||||||
| Trading | 1.0 | — | — | 1.0 | — | — | 1.0 | — | — | |||||||||||||||||||||||||||
| Available-for-sale | 2,180.9 | 15.5 | 2.87 | 2,310.9 | 15.6 | 2.67 | 3,121.5 | 17.3 | 2.25 | |||||||||||||||||||||||||||
| Held-to-maturity | 2,113.7 | 17.0 | 3.27 | 2,103.3 | 16.4 | 3.10 | 1,452.0 | 11.3 | 3.16 | |||||||||||||||||||||||||||
| Loans | 4,055.0 | 56.7 | 5.67 | 4,113.9 | 57.7 | 5.56 | 3,861.2 | 50.5 | 5.31 | |||||||||||||||||||||||||||
| Commercial | 1,280.2 | 19.5 | 6.16 | 1,371.1 | 20.5 | 5.94 | 1,221.5 | 16.6 | 5.52 | |||||||||||||||||||||||||||
| Consumer | 2,774.8 | 37.3 | 5.45 | 2,742.9 | 37.1 | 5.37 | 2,639.6 | 33.9 | 5.21 | |||||||||||||||||||||||||||
| Interest earning assets | 10,791.8 | 99.2 | 3.73 | 10,248.3 | 95.7 | 3.70 | 10,609.5 | 84.2 | 3.22 | |||||||||||||||||||||||||||
| Other assets | 348.3 | — | 329.5 | — | 325.4 | — | ||||||||||||||||||||||||||||||
| Total assets | 11,140.1 | 99.2 | 3.61 | 10,577.8 | 95.7 | 3.59 | 10,935.0 | 84.2 | 3.12 | |||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||||||
| Deposits | 7,634.8 | (9.2 | ) | (0.49 | ) | 6,946.5 | (6.3 | ) | (0.36 | ) | 7,411.3 | (2.9 | ) | (0.16 | ) | |||||||||||||||||||||
| Securities sold under agreement to repurchase | — | — | — | 2.7 | — | (2.33 | ) | 1.8 | — | (1.96 | ) | |||||||||||||||||||||||||
| Long-term debt | 143.3 | (2.0 | ) | (5.71 | ) | 143.3 | (2.0 | ) | (5.48 | ) | 117.0 | (1.3 | ) | (4.66 | ) | |||||||||||||||||||||
| Interest bearing liabilities | 7,778.1 | (11.2 | ) | (0.58 | ) | 7,092.4 | (8.3 | ) | (0.46 | ) | 7,530.1 | (4.3 | ) | (0.23 | ) | |||||||||||||||||||||
| Non-interest bearing current accounts | 2,154.3 | — | 2,186.2 | — | 2,366.3 | — | ||||||||||||||||||||||||||||||
| Other liabilities | 274.8 | — | 301.6 | — | 256.3 | — | ||||||||||||||||||||||||||||||
| Total liabilities | 10,207.2 | (11.2 | ) | (0.44 | ) | 9,580.2 | (8.3 | ) | (0.34 | ) | 10,152.7 | (4.3 | ) | (0.17 | ) | |||||||||||||||||||||
| Shareholders’ equity | 932.9 | — | 997.6 | — | 782.3 | — | ||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | 11,140.1 | — | 10,577.8 | — | 10,935.0 | — | ||||||||||||||||||||||||||||||
| Non-interest-bearing funds net of
non-interest earning assets (free balance) |
3,013.7 | 3,155.9 | 3,079.5 | |||||||||||||||||||||||||||||||||
| Net interest margin | 88.0 | 3.31 | 87.4 | 3.38 | 79.9 | 3.05 | ||||||||||||||||||||||||||||||
|
(2) Averages are based upon a daily averages for the periods indicated. |
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Assets Under Administration and Assets Under Management
Total assets under administration for the trust and custody businesses were
Reconciliation of US GAAP Results to Core Earnings
The table below shows the reconciliation of net income in accordance with US GAAP to core earnings, a non-GAAP measure, which excludes certain significant items that are included in our US GAAP results of operations. We focus on core net income, which we calculate by adjusting net income to exclude certain income or expense items that are not representative of our business operations, or “non-core”. Core net income includes revenue, gains, losses and expense items incurred in the normal course of business. We believe that expressing earnings and certain other financial measures excluding these non-core items provides a meaningful base for period-to-period comparisons, which management believes will assist investors in analyzing the operating results of the Bank and predicting future performance. We believe that presentation of these non-GAAP financial measures will permit investors to assess the performance of the Bank on the same basis as management.
| Core Earnings | Three months ended | |||||||||||
| (in $ millions except per share amounts) | March 31, 2019 | December 31, 2018 | March 31, 2018 | |||||||||
| Net income to common shareholders | 52.1 | 50.9 | 44.2 | |||||||||
| Non-core items | ||||||||||||
| Non-core (gains) losses | ||||||||||||
| Gain on disposal of a pass-through note investment (formerly a SIV) | (1.0 | ) | — | (0.9 | ) | |||||||
| Total non-core (gains) losses | (1.0 | ) | — | (0.9 | ) | |||||||
| Non-core expenses | ||||||||||||
| Tax compliance review costs | — | 0.1 | 0.1 | |||||||||
| Business acquisition costs | 0.6 | 0.1 | 1.6 | |||||||||
| Total non-core expenses | 0.6 | 0.2 | 1.7 | |||||||||
| Total non-core items | (0.4 | ) | 0.2 | 0.8 | ||||||||
| Core net income | 51.7 | 51.1 | 45.0 | |||||||||
| Core net income attributable to common shareholders | 51.7 | 51.1 | 45.0 | |||||||||
| Average common equity | 893.4 | 862.3 | 820.7 | |||||||||
| Less: average goodwill and intangible assets | (74.9 | ) | (75.6 | ) | (68.4 | ) | ||||||
| Average tangible common equity | 818.5 | 786.7 | 752.3 | |||||||||
| Core earnings per share fully diluted | 0.95 | 0.92 | 0.81 | |||||||||
| Return on common equity | 23.7 | % | 23.4 | % | 21.8 | % | ||||||
| Core return on average tangible common equity | 25.6 | % | 25.8 | % | 24.3 | % | ||||||
| Non-interest expenses | 80.9 | 83.5 | 77.4 | |||||||||
| Less: non-core expenses | (0.6 | ) | (0.2 | ) | (1.7 | ) | ||||||
| Less: amortization of intangibles | (1.3 | ) | (1.3 | ) | (1.1 | ) | ||||||
| Core non-interest expenses before amortization of intangibles | 79.0 | 81.9 | 74.6 | |||||||||
| Core revenue before other gains and losses and provision for credit losses | 131.4 | 133.1 | 119.7 | |||||||||
| Core efficiency ratio | 60.1 | % | 61.5 | % | 62.3 | % | ||||||
Conference Call Information
Butterfield will host a conference call to discuss the Bank’s results on Thursday, April 25, 2019 at 10:00 a.m. Eastern Time. Callers may access the conference call by dialing +1 (844) 855 9501 (toll-free) or +1 (412) 858 4603 (international) ten minutes prior to the start of the call. A live webcast of the conference call, including a slide presentation, will be available in the investor relations section of Butterfield’s website at www.butterfieldgroup.com. A replay of the call will be archived on the Butterfield website thereafter.
About Non-GAAP Financial Measures:
Certain statements in this release involve the use of non-GAAP financial measures. We believe such measures provide useful information to investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, our non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. See "Reconciliation of US GAAP Results to Core Earnings" for additional information.
Forward-Looking Statements:
Certain of the statements made in this release are forward-looking statements within the meaning of the
All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our Securities and Exchange Commission (“SEC”) reports and filings. Such reports are available upon request from the Bank,or from the SEC, including through the SEC’s website at http://www.sec.gov. We have no obligation and do not undertake to review, update, revise or correct any of the forward-looking statements included herein, whether as a result of new information, future events or other developments.
About Butterfield:
Butterfield is a full-service bank and wealth manager headquartered in
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Investor Relations Contact:
Noah Fields
Investor Relations
The Bank of N.T. Butterfield & Son Limited
Phone: (441) 299 3816
Fax : (441) 295 1220
E-mail: [email protected]
Media Relations Contact:
Mark Johnson
Group Head of Communications
The Bank of N.T. Butterfield & Son Limited
Phone: (441) 299 1624
Fax: (441) 295 3878
E-mail: [email protected]
Source: The Bank of N.T. Butterfield & Son Limited