The Bank of N.T. Butterfield & Son Limited (“Butterfield Bank Group” or “the Group”) today reported net income for the full year ended 31 December 2007 of $146.0 million, a record for the Group and up 8.9% year on year. Pre-tax net income, at $153.0 million was up 10.9% on 2006. Diluted earnings per share were $1.68, up 15 cents or 9.8%, on 2006 when restated for the impact of the stock split in August 2007. Other financial highlights include:
• Record non-interest income up 13.4% at $219.7 million
• Record net interest income up 16.4% at $250.6 million
• Record customer loans up 9.7% at $4.1 billion.
• Record assets under administration up 17.9% to $145.7 billion
• Record assets under management up 18.5% to $11.9 billion
• Return on equity of 25.2%, up from 24.6%
• Net interest margin improved to 2.18% from 2.15%
Reflecting the Group’s continuing strong earnings performance and commitment to enhancing shareholder value the Board has approved a one-for-ten bonus share issue, which equates to a 10% stock dividend, in addition to maintaining the quarterly dividend at 16 cents per share. Both the cash and stock dividends are payable on Wednesday 12 March 2008 to shareholders of record on Wednesday 20 February 2008. The bonus shares will be eligible for dividends from the second quarter of 2008.
Alan Thompson, President & Chief Executive Officer, commented: “We continue to be pleased with the solid growth in our financial performances across the Group in what has certainly been challenging and uncertain global market conditions. We continue to expand internationally, as evidenced by the establishment of a trust company in Switzerland, the establishment of a fund administration company in Canada and the acquisition of the Bentley Reid Group, with offices in Hong Kong, Malta and the United Kingdom. These offices increase our existing private client and fund administration business and enable the Group to expand into new international markets. We remain committed to enhancing shareholder value, as evidenced by the ‘1 for 10’ stock dividend announced today. These results are testament to the creativity, commitment and enthusiasm of our employees.”
Richard Ferrett, Executive Vice President & Chief Financial Officer, said, “The return on equity for the year, at 25.2%, is the highest seen for over a decade and in keeping with our target to achieve a return of over 20%. It is pleasing to note that our balance sheet remains strong and highly liquid with customer deposits up $0.7 billion year on year to $10.4 billion. We are also pleased with the significant year on year increase seen in the Group’s revenue generation, with total revenue up 13.2% to $470.0 million.“
Financial highlights for the Year ended 31 December 2007 compared with the Year ended 31 December 2006:
• Total non-interest income, at $219.7 million, is up year on year by $26.0 million, or 13.4%. This reflects strong revenue growth from asset management (+10.9%), foreign exchange (+17.1%), investment and pension fund administration (+14.2%), and trust and custody (+16.7%).
• Net interest income before credit related provisions, at $252.6 million, was a record and is up year on year by $34.4 million, or 15.8%, reflecting strong growth in average interest earning assets, up $1.5 billion, or 14.9%, to $11.5 billion. During the year the Group made net provisions of $2.0 million in respect of credit losses, down from $3.0 million in 2006.
• Realised gains on trading securities, which primarily comprise seed money invested in Butterfield Select Funds, was $3.2 million, up $1.6 million year on year, whilst there was a $0.2 million gain on the sale of Bermuda based affiliate company.
• An ‘other loss’ of $3.7 million was recorded. This was made up of gains of $1.0 million from the sale of the Bank’s equity interest in a fund services company, $3.4 million from the sale of part of our interest in a credit card company and $0.6 million on the sale and leaseback of premises in Cayman, offset by a $6.3 million unrealised loss on a credit support agreement provided to a related party and a $2.4 million write-down of an investment in a financial services company.
• Total operating revenue grew year on year by $54.9 million, or 13.2%, to $470.0 million.
• Total operating expenses increased year on year by $39.8 million, or 14.4%, to $317.0 million. Salaries and other employee benefits were up 13.7% year on year, to $184.8 million, primarily reflecting the expanding size of the Group. Total headcount at 31 December 2007 was 1,850 (2006: 1,730), of which 843 are located in Bermuda. The headcount increase reflects growth in our operations in Canada, Cayman and The Bahamas and the acquisition in October 2007 of the Bentley Reid Group.
• Corporation tax for the year was an expense of $7.0 million, which represents 4.6% of net income pre-tax, compared to $3.8 million in 2006; the increase reflecting the growth in taxable earnings in Guernsey and the UK. The Group also expensed $14.2 million in non-income related taxes, up from $13.0 million the previous year, primarily reflecting an increase in employee-related taxes.
• Total assets of the Group as at 31 December 2007 were $11.9 billion, up from $11.1 billion a year ago. The increase reflects solid growth in customer deposits, which have increased year on year by 7.0% to $10.4 billion.
• The loan portfolio increased year on year by 9.7%, or $364 million, to $4.1 billion. This increase reflects increased loan demand across all of our businesses, in particular in Bermuda, up 11.4%, and the UK, up 8.1%. The loan portfolio now represents 34.7% of total assets, compared to 33.8% a year ago. Non-performing loans totaled $36.8 million at 31 December 2007, representing 0.9% of total loans, compared to 0.8% last year. Loan provisions totalled $26.9 million at year-end, up from $25.7 million the previous year.
• The Group’s balance sheet remains highly liquid with a loan to customer deposits ratio of 39.5%. Deposits with banks and investments increased year on year by 4.7% to $7.3 billion and represent 61.0% of total assets.
• Assets under administration across the Group increased year on year by 17.9% to $145.7 billion.
• Assets under investment management now stand at $11.9 billion, up from $10.0 billion a year ago, including assets of $6.1 billion in the Butterfield Funds, an increase of $0.2 billion.
• Shareholders’ equity increased year on year by 14.5% to $629.3 million. The loan to the Stock Option Trust increased by $4.6 million to $41.6 million. This increase reflects the purchase by the Trust of 597,818 shares, at a cost of $22.7 million, to satisfy its obligations under the Executive Officers’ and Employee Stock Option Plans, offset by $18.1 million of repayments received on the exercise of stock options by employees and effect of other share-based payments. As at 31 December 2007 the Group had financed the purchase for the Stock Option Trust of 3.8% (2006: 5.0%) of the total shares in issue. In addition, over the course of the year the Group bought back and cancelled 125,603 shares, at a cost of $7.4 million, and purchased and held as treasury stock 967,119 shares, at a cost of $38.1 million, under the Share Repurchase Programme. There were no purchases of shares in 2007 by the Bank’s Charitable Foundation, compared to its purchase of 192,889 shares at an aggregate cost of $11.0 million in 2006.
• Diluted earnings per share increased by 9.8% to $1.68. Basic earnings per share, at $1.72, were up 8.9% on 2006.
• The increase in shareholder value for the year, defined as the increase in share price plus re-investment of dividends in the Group’s shares, was 0.1%, down from 36.8% in 2006. In contrast, when measured on the same basis the NASDAQ Bank index and the FTSE All Share Bank indexes fell by 19.8% and16.9% respectively in 2007.
• The Group remains well capitalised with a total capital ratio at year-end of 13.0% and a tier 1 ratio of 8.6%.
• In Bermuda, total revenue increased year on year by $17.9 million, or 7.8%, to $246.0 million. Net interest income from community banking before credit provisions was up 11.7% to $130.5 million, reflecting strong loan growth and a $562 million increase in total assets to $5.4 billion. Net income for the year was up 4.1% to $40.5 million. The wealth management & fiduciary services and investment & pension fund administration businesses achieved a 6.8% growth in net income to $35.9 million. This reflects growth in client assets under administration, up 6.1% to $53.3 billion, and assets under investment management, up 18.7% to $8.9 billion. The Real Estate operating segment, which represents property related costs in Bermuda, recorded a net expense of $9.1 million in 2007, up $2.6 million over 2006, reflecting increased depreciation relating to upgrades to the Bank’s premises. Net income from the Bermuda based businesses was a record $67.3 million and represents 46.1% of Group net income in 2007, compared to 49.3% in 2006.
• Barbados made net income of $0.1 million in 2007, down from $1.0 million the previous year, the decrease primarily reflecting increased investment in the infrastructure of the operation to support business growth. Total revenues, at $12.2 million, were in line with that seen a year ago, whilst total assets increased year on year by 29.9% to $277 million. This reflects significant growth in both the loan portfolio, up 18.8% to $147 million, and customer deposits, up 33.4% to $226 million.
• Cayman achieved record net income of $57.2 million, up year on year by $3.8 million, or 7.1%. Net interest income before credit provisions was up 11.3% on 2006, at $62.4 million, while non-interest income totaled $52.4 million, an increase of 20.2% on 2006, reflecting strong growth in revenues from investment and pension fund administration revenues, up 32.5% and asset management, up 16.1%. Total assets declined modestly, down 2.3% to $2.7 billion. Client assets under administration increased by 33.2% to $53.5 billion and assets under management at 31 December 2007, at $1.2 billion, were up 7.4% year on year.
• In Guernsey, net income increased by $5.3 million, or 48.8%, to a record $16.2 million. Total revenues grew year on year by 28.3% to $64.6 million, with net interest income up 35.0% and revenues from investment & pension fund administration and trust and custody up 45.4% and 22.9% respectively. Total assets increased year on year by 30.9% to $2.4 billion, reflecting strong growth in customer deposits, up 30.8% to $2.1 billion. Client assets under administration are now $31.8 billion, up 13.2% year on year.
• A loss of $1.0 million was recorded on revenues of $0.2 million, reflecting the start-up costs associated with our two new businesses. The Zurich asset management office, which opened in November 2006, has now generated client assets under investment management of $77 million, up 60.4% on the previous quarter. In October 2007 a trust company was established in Geneva, which is being formally opened for business this month.
• The Bahamian businesses achieved record net income of $3.1 million up from $2.2 million a year ago. Total revenues were up year on year by 32.7% to $12.1 million, reflecting strong growth in net interest income and fees earned from trust services. At year-end, total assets were $182 million compared to $155 million a year ago.
• In the UK, Butterfield Private Bank continued to achieve significant progress, with record net income of $3.1 million, up 310.7% on 2006. Total revenues were up 27.6% to $32.4 million, reflecting strong growth in net interest income, up 44.9%, and revenues from banking services and client driven foreign exchange, up 25.2% and 63.6% respectively. Total assets, at $2.0 billion, were in line with a year ago, reflecting continued good growth in loans and customer deposits, up 8.1% and 6.9% respectively. Assets under management totalled $0.7 billion at 31 December 2007.
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 international 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, Hong Kong, Malta, 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.
Butterfield Bank is a publicly traded corporation with 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.
Chief Financial Officer
The Bank of N.T. Butterfield & Son Limited
Phone: (441) 299 1643
Fax: (441) 295 1220
Media Relations Contacts:
Assistant Vice President
The Bank of N.T. Butterfield & Son Limited
Phone: (441) 299 1624
Fax: (441) 295 3878
Senior Communications Specialist
The Bank of N.T. Butterfield & Son Limited
Phone: (441) 298 4610
Fax: (441) 295 3878