Butterfield Bank has announced its financial results for the third quarter of 2021, ended 30 September.
Net income for Q3 was $39.8m, compared with net income of $39.6m for the previous quarter and $30.5m for Q3 2020.
Core net income for Q3 2021 was $40m, compared with $40.1m for the previous quarter and $36.5m for Q3 2020.
The core return on average tangible common equity for the third quarter of 2021 was 17.9% (18.7% for Q2, 16.2% for Q3 2020).
The efficiency ratio for the quarter was 66.5% (67.4% Q2, 73.5% Q3 2020), while the core efficiency ratio was 66.3%.
Michael Collins (pictured), Butterfield's Chairman and Chief Executive Officer, commented: "Our strong results were achieved despite the prevailing low-interest-rate environment and the continued 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."
Interest impact
Net interest income (NII) for the third quarter was $75.7m, up $1m on the previous quarter and up $0.4m from $75.3m in Q3 2020.
NII was higher during the third quarter of 2021 than the prior quarter and Q3 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 quarter was 1.97%, down 4 basis points from 2.01% in the previous quarter and down 33 basis points from 2.30% in Q3 2020.
NIM in the third quarter of 2021 was lower than the prior quarter and Q3 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 Q3 2021 of $49m was $0.2m higher than the $48.8m earned in the previous quarter and $2.1m higher than in Q3 2020. Continued increases in banking and foreign exchange fees contributed to the improvement in non-interest income.
Credit reserve releases were negligible for Q3 2021 versus a release of $1m in the previous quarter and a provision expense of $1.4m during Q3 2020.
The lower recoveries of credit losses compared with the prior quarter were driven by improving macroeconomic forecasts.
Non-interest expenses
Non-interest expenses were $84.4m in Q3 2021, compared with $84.8m in the previous quarter and $91.3m in Q3 2020.
Core non-interest expenses were $84.2m in Q3 2021, compared with $83.4m in the previous quarter and $84.6m in Q3 2020.
Period-end deposit balances increased to $13.9bn ($13.3bn at 31 December 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.
Capital return
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 24 November 2021 to shareholders of record on 10 November 2021.
During the quarter, Butterfield also repurchased 0.1 million common shares under the bank's current 2.0 million common share repurchase plan authorisation.
The current total regulatory capital ratio at 30 September was 20.4% as calculated under Basel III, compared with 19.8% as at 31 December 2020. Both of these ratios remain significantly above the Basel III regulatory requirements applicable to the bank.
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