Commenting on the Bank's performance, Alan Thompson, President & Chief Executive Officer said, "We continue to be pleased with the Bank's performance in the current economic environment. Whilst net income was down in the third quarter compared to the previous quarter, it was still up year on year and, most pleasing, the return on equity achieved was in excess of 20%. This financial year has seen declines in interest rates and the financial environment throughout the major world markets and to be 16% ahead of where our earnings were a year ago is pleasing to note. We will continue to focus on the Bank's core strengths and focus on the return we are achieving on behalf of our shareholders, which this year to date is an extremely healthy 23.1%."
"During the third quarter we continued to enhance our customer service by introducing Butterfield Direct Telephone Banking in Bermuda. This, coupled with Internet Banking, gives our customers greater flexibility in how they choose to do their banking. Another major highlight of the quarter was the announcement that for the fifth year running Butterfield Funds received prestigious performance awards in the offshore fund category from Standard & Poor's Micropal (S&P). The Bank won two first place awards for the Butterfield Capital Appreciation Bond Fund and one first place award for the Butterfield International Balanced Fund. In addition, the entire group of Butterfield Funds won second place in the World for their five year performance. This year's awards are particularly impressive as they demonstrate that our investment strategy has consistently outperformed over the long term across all sectors. This is very much a team effort and involves participation from our Bermuda, Cayman and Guernsey investment managers," said Mr. Thompson.
Richard Ferrett, Executive Vice President & Chief Financial Officer stated that "First nine months 2001/02 earnings per share of $2.67 was a record for the Bank. This represents an increase of 37 cents, or 16%, on the corresponding period in 2000/01. Third quarter earnings per share of 81 cents represents a more modest increase of 1 cent on the like period a year ago but is down 16 cents on the second quarter, primarily due to the impact of the sustained low interest environment in both the USA and the UK."
"First nine months net interest income after provisions, at $73.90 million, was up year on year by $1.48 million, or 2%. This reflects the increased size of the Bank's customer deposit base, which has increased by $282 million, or 6%, to $4.72 billion over the past year," and a lower requirement for provisions in respect of credit losses." said Mr. Ferrett. In addition, the loan portfolio has increased by $221 million, or 15%, to $1.65 billion, reflecting the acquisition of CIBC Guernsey's operations in July 2001. The balance sheet remains highly liquid and strongly capitalised with a €˜loans to assets' ratio of 30% and a loans to customer deposits ratio of total capital ratio of 35% as at 31 March 2002."
"Fee income for the first nine months was a record, at $81.39 million, is also a record and represents a year on year increase of $14.11 million, or 21%. Notable increases were achieved in the areas of trust and executorship fees, up 51%, and corporate services revenues, up 33% when comparing with the like period a year ago," commented Mr. Ferrett. The third quarter saw a year on year increase of 20% to $27.54 million in fee income; though compared to the second quarter fee income was down by $0.27 million, primarily due to the lower number of business days in the third quarter."
"The growth rate for total expenses, however, was at a higher rate than that for total income for the first nine months," said Mr. Ferrett. Operating expenses increasing by 17%, to $103.00 million, in the first nine months, compared to the 11% increase in total income achieved during the same period. The prime reason for the increase in expenses was due to the Guernsey and UK acquisitions and the fact that last year the bank took a $4 million pension related credit as a result of an actuarial review of its pension fund liabilities. Third quarter operating expenses increased year on year by 27%, to $34.24 million and were up marginally by 1.3% on the second quarter, though down $0.71 million (-2%) on the first quarter."
"In Bermuda the first nine months net income increased year on year by 15% to $32.92 million, reflecting in particular an excellent performance by the Community Banking business," said Mr. Ferrett. "Overseas, particularly noteworthy were the increases seen in Guernsey and Hong Kong, where first half net income was up 15% and 53% to $3.36 million and $1.25 million respectively. In contrast Cayman achieved net income for the first nine months of $13.36 million, compared to $18.05 million the previous year. This decrease reflects in particular the substantial dividends paid to the Parent over the past 2 years in order to support the Group's strategic growth, coupled with the negative impact of declining world interest rates."
Other Financial Highlights of the First Nine Months were:
· The return on assets, at 1.3%, is up 0.1% on that achieved in fiscal 2001 and remains at its highest level for some 2 decades.
· The operating efficiency ratio for the first nine months declined from 61.9% a year ago to 65.8%, reflecting the decline in net interest income as a percentage of total income and the beneficial impact last year of the $4 million pension related credit. The third quarter efficiency ratio was 68.1%, compared to 63.7% for the second quarter, reflecting higher systems related costs this quarter.
· Total assets as at 31 March 2002 were a record $5.57 billion, compared to $5.21 billion a year ago and $5.52 billion at 31 December 2001.
· The balance sheet remains highly liquid, with 68% of assets employed in either deposits with banks or in investments. Deposits with banks increased year on year by $401 million, or 25%, reflecting the increase in customer deposits, primarily due to the Guernsey acquisition.
· Net income from discontinued operations totalled $0.34 million for the first nine months, of which $0.03 million was in respect of the third quarter, compared to a loss of $6.28 million a year ago. There have been no loans from discontinued operations in the Bank's portfolio since the third quarter of fiscal 2001.
· Shareholders' equity increased year on year by 11% to $307.30 million, reflecting the increase in retained earnings less share buybacks.
· The Bank has purchased for the Stock Option Trust 2,074,222 shares, representing 9.8% of total issued shares, at a cost of $39.94 million in order to satisfy current and future obligations under the Employees' and Directors' Stock Option Plan. In addition, during the nine months of this fiscal year 275,321 shares were purchased under the Bank's share buyback programme at a cost of $8.73 million, of which 134,365 shares were purchased in the third quarter at a cost of $4.39 million.
The Board has declared a quarterly dividend of 32 cents per share, payable on Wednesday 15 May 2002 to shareholders of record on Tuesday 30 April 2002. Taking into account the €˜1 for 10' stock dividend shareholders received in August 2001, this represents a year on year increase in the quarterly dividend of 28.6%, evidencing the Bank's continuing commitment to enhancing shareholder value.