Diversifying and making overseas acquisitions have played a part in Butterfield Bank growing its business during the past year, according to chief executive officer Brendan McDonagh.

As he looked forward to the remainder of this year, and beyond, he is optimistic for the bank and for Bermuda.

Butterfield yesterday reported improved first quarter profits of $26.8 million, up $3.6 million compared to the same period last year.

The bank’s first quarter earnings report showed that core earnings improved $5.8 million, or 25 per cent, to $29 million during the first three months of 2015.

Shareholders are to receive an interim dividend of one cent per common share.

Core cash earnings per share were $0.05, up 25 per cent from last year.

Mr McDonagh, referred to the results as strong and said there were three key reasons why core earnings had gone up.

One was the acquisition of the Legis trust and fiduciary services business in Guernsey, which was “the primary driver of growth in group trust revenues of $2.3 million”, together with the acquisition of select community banking business from HSBC Cayman.

“We are starting to see earning flows coming in,” said Mr McDonagh.

The second reason, he said, was “keeping a good handle on costs”.

He explained: “Where costs have gone up, they have gone up as a result of acquisitions. Headcount has gone up, but it’s on-boarding.”

And the third reason for the boost to core earnings is the significant improvement in the bank’s loan-loss experience.

In the first quarter of 2014 Butterfield made provisions for credit losses of $3.5 million, in the first three months of this year the provision has been reduced to $200,000. Mr McDonagh said the bank did half of its business outside of Bermuda, which played a part in the overall picture, but he added: “It’s also a good sign that we have seen a degree of stabilisation in the credit performance here in Bermuda.

“People are paying down debts and less inclined to take out new borrowings.”

In February, Finance Minister Bob Richards was critical of the Island’s banks, when he said: “There is currently no appetite for lending. And to top it off, banks continue to lay off Bermudian staff.”

Asked for his reaction, Mr McDonagh said the bank had not laid off significant numbers of Bermudians recently.

He also said he did not agree with the contention that banks are restricting lending.

“Because the economy is not growing fast, because it is in a low-growth phase, it is clients, whether corporate or consumer, that determine what the demand for credit is. We match it with supply.

“I do not think it is wise for banks to create the demand for credit, because you have seen that in other economies around the world where they entice people into borrowing, and then there is an affordability issue.”

Mr McDonagh pointed out that the bank has lent “a significant amount of money” to new hospitality projects in the past two years. He also praised the community and customers for being disciplined in their financial management.

Looking to the future for the bank, and Bermuda, he said Butterfield Bank was “very much a local community bank, we have a wealth management division, trust division. All those produce very steady earnings, it means that the earnings are more predictable”.

He added: “Our customers and shareholders like their bank to be stable and predictable to some extent. Going forward, I do not see any storms on the horizon.

“Five or six years ago we had a need for recapitalisation. The turnaround has been reasonably quick to get back to this level of return on equity.”

And regarding his outlook for Bermuda in general, he said: “We are very much enthused about he America’s Cup. I think it’s great for a number of reasons. One is that it is a boost over a sustained number of years and will likely bring permanent benefits.

“Clearly, if the America’s Cup, or something else, brings more people to the Island, then everyone benefits, with more houses built, more apartments rented out, people spending money in supermarkets and buying cars and scooters, and local companies benefiting.”