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24 April 2007
Butterfield Bank Reports First Quarter Results

Hamilton, Bermuda – 24 April 2007: The Bank of N.T. Butterfield & Son Limited (“Butterfield Bank”) today reported 2007 first quarter net income of $35.7 million, a record for the Group, and up 7.8% year on year.

 

Pre-tax net income was $37.3 million, up 11.0% on a year ago. Diluted earnings per share were $1.22, up 7 cents year on year. Other financial highlights of the quarter compared to the same period a year ago include:

 

• Net interest income of $59.3 million, up 21.2%
• Non-interest income of $50.6 million, up 7.3%
• Customer deposits of $9.8 billion, up 14.7%
• Total assets of $11.4 billion, up 16.7%
• Assets under administration of $125 billion, up 16.7% 
• Assets under management of $10.8 billion, up 13.9%

 

The Board has decided to maintain the quarterly dividend at 48 cents per share, payable on Wednesday 16 May to shareholders of record on Wednesday 2 May 2007.

 

At the Annual General Meeting held on 18 April 2007, the Bank also announced the appointment of Mr. Brian Duperreault as Chairman following the retirement of Dr. James King who had served as a Director for 29 years, the last 10 of which were as Chairman.  Mr. Duperreault has been a Director of the Bank since 1996 and most recently held the position of Co-Vice Chairman.  Mr. Duperreault is also Chairman of the Ace Insurance Group and is well known in Bermuda and the international insurance sector.

 

Alan Thompson, President & Chief Executive Officer said, “It is pleasing to note the continued growth in our earnings achieved year on year, coupled with the significant growth in assets under administration and assets under management. Particularly noteworthy is the growth seen in the contribution from our Wealth Management and Fund Administration businesses in Bermuda and from our Cayman, Guernsey and UK businesses. We continue to focus on growing our core businesses and during the quarter under review we opened our new Fund Services operation in Halifax, Canada, as a base from which to extend our services to North American hedge funds. Also noteworthy is that in February we were named ‘Best Developed Market Bank 2007’ for Bermuda by Global Finance magazine for the third consecutive year.”

 
Richard Ferrett, Executive Vice President & Chief Financial Officer, said, “The balance sheet continues to grow significantly, reflecting strong growth in customer deposits and loans, and this reflects in the increase in net interest income, up $10.4 million, or 21.2%, year on year. Our return on equity continues to remain strong and above our target of 20%, at 25.8%.  A significant increase was also seen year on year in the Group’s revenues from investment & pension fund administration, up 14.0%.  We are also pleased to note that in March, Moody’s Investor Services upgraded the Bank’s long-term deposit ratings by three notches from A3 to Aa3 and the short-term deposit rating was also increased from P2 to P1.” 

 

Financial highlights of the Quarter ending 31 March 2007 compared with the Quarter ending 31 March 2006:


Group Results


• Total non-interest income, at $50.6 million, was a record and is up 7.3% or $3.4 million year on year. This reflects strong growth in revenues from investment and pension fund administration, up 14.0%, customer-driven foreign exchange, up 12.3%, and trust and custody, up 8.4%.

 
• Net interest income of $59.5 million before credit related provisions was also a record and is up year on year by $9.8 million, or 19.7%, reflecting balance sheet growth across all the Group’s operations. Average interest earning assets increased year on year by $1.5 billion, or 16.1%, to $11.0 billion. During the quarter the Group made provisions for credit losses of $0.3 million, reflecting growth in the Bermuda and Barbados loan portfolios, compared to a provision of $0.8 million a year ago. The net interest margin for the quarter was 2.2% compared to 2.1% a year ago.

 

• Total non-interest expense grew by $10.1 million, or 15.9%, to $73.6 million. Personnel-related expenses increased by $5.7 million, up 15.0% year on year, reflecting an increase in the headcount, which has risen from 1,619 a year ago to 1,784, to support business growth. Of the increase of 165 employees, 62 were in respect of our businesses in Bermuda and 103 in respect of overseas businesses. The Group’s efficiency ratio for the quarter was 64.7%, compared to 63.3% a year ago and 64.8% for fiscal 2006.

 

• Total assets of the Group as at 31 March 2007 were $11.4 billion, compared to $9.7 billion a year ago. The increase reflects solid growth in customer deposits, which have increased year on year by $1.3 billion, or 14.7%, to $9.8 billion.    The return on assets for the quarter was 1.3%, compared to 1.4% for the same quarter in 2006.

 

• The loan portfolio increased year on year by 19.1%, or $615 million, to $3.8 billion reflecting increased loan demand, particularly in our Bermuda, Guernsey and UK based businesses, and represents 33.7% of total assets, compared to 33.0% a year ago. Non-accrual loans totalled
$33.5 million at 31 March 2007, which represents 0.9% of total loans, in line with a year ago.  

 

• The Group’s balance sheet remains highly liquid with a loan-to-assets ratio of 33.7%. Deposits with banks and investments were $7.1 billion at 31 March 2007, up from $6.1 billion a year earlier, and represent 62.3% of total assets.

 

• Client assets under administration across the Group increased year on year by $17.9 billion, or 16.7%, to $125 billion, reflecting the growth in administration services to mutual and hedge funds. Client assets under investment management stood at $10.8 billion at 31 March 2007, with significant growth seen in client assets invested in Butterfield Funds, up year on year by 12.0% to $6.3 billion.

 

• Shareholders’ equity increased year on year by 10.2% to $575.5 million. The loan to the Stock Option Trust at 31 March 2007 was $34.5 million; up from $24.4 million a year ago. The Group has financed the purchase for the Stock Option Trust of 5.0% of the total shares in issue to satisfy its obligations under the Executive Officers’ and Employee Stock Option Plans. During the quarter under review the Bank’s Stock Option Trust purchased 28,500 shares at a cost of $1.7 million, compared to the purchase of 103,459 shares at a cost of $5.7 million for the like quarter a year ago. Under the Bank’s Share Buy-Back Plan 56,920 shares were purchased and cancelled at a cost of $3.3 million. No purchases by the Buy-Back Plan were made in the corresponding quarter in 2006.

 

• Diluted earnings per share for the quarter were $1.22, up 7 cents year on year. Basic earnings per share for the quarter were $1.26, compared to $1.18 a year ago.

 

• The increase in shareholder value for the quarter, defined as the increase in share price plus re-investment of dividends in the Bank’s shares, was 5.8%.

 


Bermuda


• Total revenue from the Bermuda businesses increased by $3.5 million to $58.3 million. Community Banking’s Net interest income was up year on year by $2.6 million, or 10.1%, reflecting the growth in customer deposits and loans, up 6.5% and 6.8% to $3.8 billion and $2.1 billion respectively, whilst earnings from customer driven foreign exchange increased by 17.7% to $3.4 million. The Wealth Management, Fiduciary Services and Investment and Pension Fund Administration businesses achieved a 9.2% year on year growth in total revenues to $19.9 million, reflecting the increase in client assets under administration, which now stand at $49.5 billion compared to $45.1 billion a year ago. Client assets under investment management were up 13.2% to $8.3 billion. Net income from the Bermuda businesses, at $16.6 million, was down 3.4% on the previous year; this reduction reflects reduced earnings from investments in affiliates and an increased expense base necessary to support business growth.

 

Barbados


• In Barbados total revenues at $2.8 million were up 4.8% year on year, whilst net income at $0.1 million was down from $0.2 million a year ago. This reduction primarily reflects that in Q1 2006 the bank recognised a tax credit, which is not the case this year. The loan portfolio increased year on year by 25.9%, whilst customer deposits were up 7.5%. Total assets now stand at $213 million, up 10.8% year on year.


Cayman Islands


• Cayman recorded net income of $14.6 million, up year on year by $1.8 million, or 14.3%; the increase reflecting continued strong business growth and the contribution from the Bank’s investment in Island Heritage Insurance Company Ltd. Total income, at $27.5 million, was up 18.8%, reflecting growth in revenues from investment and pension fund administration and banking activities. Total assets now stand at $2.9 billion, up 8.2%, and the loan portfolio increased year on year by 8.8%. Client assets under administration now stand at $40.9 billion, up 18.4% on the previous year, reflecting growth in investment and pension fund administration services.

 

Guernsey


• Guernsey's net income was a record $3.2 million, up 24.0% year on year, primarily reflecting strong revenue growth across all business lines, with total revenue rising by 26.3% to $14.4 million. Net interest income was up 50.8% year on year reflecting strong growth in customer deposits and loans, up $247 million and $229 million to $1.7 billion and $0.5 billion respectively. Organic growth in fund administration, asset management and banking were particular factors underlying the increase in non-interest income, up 14.5% year on year. Client assets under administration increased by 28.8% to $28.6 billion, whilst assets under investment management increased by 43.0% to $1.2 billion.


The Bahamas


• The Bahamas achieved net income of $0.6 million on total revenues of $2.7 million; up 17.0% and 29.7% respectively, reflecting strong growth in net interest income and fees from trust and custody; up 70.5% and 15.7% respectively. Client assets under administration increased by 20.2% year on year to $4.7 billion.

 

Switzerland


• The Zurich office, which opened in November last year, has primarily focused on office set-up, recruitment and business development during the quarter. Assets under investment of some $16 million have been attracted to-date, whilst operating costs for the quarter were $0.3 million.


United Kingdom


• The UK made net income of $0.6 million, compared to a loss of $0.2 million a year ago. Total revenues increased by 37.1% to $7.6 million. Total assets at 31 March 2007 stood at $1.9 billion, up 51.8% year on year reflecting a 59.1% increase in customer deposits to $1.5 billion and a 37.5% increase in the loan portfolio, to $0.6 billion. 


Note to Editors:

 

The Group’s results, which are unaudited, are stated in accordance with US GAAP. Butterfield Bank is Bermuda’s first and largest independent bank, and a specialist provider of offshore financial services. The Butterfield Bank Group offers a full range of community banking services in Bermuda, Barbados and the Cayman Islands, encompassing retail and corporate banking and treasury activities. In the wealth management area, the Group provides private banking, asset management and personal trust services from its headquarters in Bermuda and subsidiary offices in The Bahamas, the Cayman Islands, Guernsey, Switzerland and the United Kingdom. The Group provides services to corporate and institutional clients from offices in Bermuda, The Bahamas, Canada, the Cayman Islands and Guernsey, which include investment and pension fund administration, asset management and corporate trust services.

Butterfield Bank is a publicly traded corporation with its shares listed on the Bermuda and Cayman Islands stock exchanges. The Bank’s share price is published daily in The Royal Gazette: www.theroyalgazette.com and is also available on Bloomberg Financial Markets (symbol: NTB BH) and The Bermuda Stock Exchange website: www.bsx.com. Certain statements in this press release may be deemed to include ‘forward-looking statements’ and are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, including worldwide economic conditions, success in business retention and obtaining new business and other factors. Further details on Butterfield Bank can be obtained from our web site at: www.butterfieldbank.com.

 

Investor Relations:

                                                                     
Richard Ferrett                                                             
Chief Financial Officer                                                  
The Bank of N.T. Butterfield & Son Limited
Phone: (441) 299 1643                                                  
Fax:     (441) 295 1220                                                  
E-mail: richardferrett@bntb.bm
 

Media Relations:

 

Mark Johnson

Assistant Vice President

Marketing & Communications

The Bank of N.T. Butterfield & Son Limited

Phone: (441) 299 1624

Fax: (441) 295 3878

E-mail: markjohnson@bntb.bm

 

Stuart Roberts

Senior Communications Specialist

Marketing & Communications

The Bank of N.T. Butterfield & Son Limited

Phone: (441) 298 4610

Fax: (441) 295 3878

E-mail: stuartroberts@bntb.bm

 

 

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