The Bank of N.T. Butterfield & Son (NTB) Q2 2025 Earnings Call July 29, 2025 10:00 AM ET Speaker0Good morning. My name is Drew, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter twenty twenty May Call for The Bank of N. T. Butterfield and Son Limited.All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the call over to Noah Fields, Butterfield's Head of Investor Relations.Speaker1Than ...

Earnings Presentation July 29, 2025 Forward-Looking Statements Forward-Looking Statements: Certain of the statements made in this release are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions estimates, intentions, and future performance, including, without limitation, our intention to make share repurchases or ...

The market expects Bank of NT Butterfield & Son (NTB) to deliver a year-over-year increase in earnings on lower revenues when it reports results for the quarter ended June 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected t ...

Core Viewpoint - Bank of NT Butterfield & Son (NTB) is positioned as a strong investment opportunity due to its improving earnings outlook and analysts' increasing earnings estimates [1][2]. Earnings Estimates - Analysts' optimism regarding the earnings prospects of Bank of NT Butterfield & Son is leading to higher earnings estimates, which is expected to positively impact the stock price [2]. - The current quarter's earnings estimate is projected at $1.19 per share, reflecting a year-over-year increase of +7.21% [7]. - For the full year, the earnings estimate stands at $4.95 per share, indicating a year-over-year change of +3.77% [8]. Estimate Revisions - Over the past 30 days, the Zacks Consensus Estimate for the current quarter has risen by 13.33%, with one estimate moving higher and no negative revisions [7]. - The consensus estimate for the current year has also improved, with a 12.5% increase and one estimate moving higher compared to no negative revisions [9]. Zacks Rank - Bank of NT Butterfield & Son currently holds a Zacks Rank 1 (Strong Buy), indicating strong agreement among analysts in revising earnings estimates upward [10]. - Stocks with a Zacks Rank 1 and 2 have historically outperformed the S&P 500 [10]. Stock Performance - The stock has gained 9.6% over the past four weeks, driven by solid estimate revisions, suggesting potential for further growth [11].

Company Overview - Bank of NT Butterfield & Son (NTB) currently holds a Momentum Style Score of A, indicating strong momentum potential [3] - The company has a Zacks Rank of 1 (Strong Buy), which is associated with a historical outperformance in the market [4] Price Performance - NTB shares have increased by 5.07% over the past week, outperforming the Zacks Banks - Foreign industry, which rose by 3.61% during the same period [6] - Over the last quarter, NTB shares have gained 7.09%, and over the past year, they have increased by 19%, while the S&P 500 has seen declines of -7.64% and gains of only 10.16% respectively [7] Trading Volume - The average 20-day trading volume for NTB is 186,561 shares, which serves as a bullish indicator when combined with rising stock prices [8] Earnings Outlook - In the past two months, one earnings estimate for NTB has been revised upwards, while none have been lowered, leading to an increase in the consensus estimate from $4.40 to $4.95 [10] - For the next fiscal year, one estimate has also moved upwards with no downward revisions, indicating positive earnings momentum [10] Conclusion - Given the strong price performance, positive earnings outlook, and high momentum score, NTB is positioned as a promising investment opportunity [12]

Financial Data and Key Metrics Changes - Butterfield reported net income of $53.8 million and core net income of $56.7 million for Q1 2025, with core earnings per share at $1.30 and a core return on average tangible common equity of 24.2% [10] - The net interest margin increased to 2.7%, up nine basis points from the prior quarter, while the cost of deposits fell 13 basis points to 1.60% [11] - Total core noninterest expenses were $90.3 million, slightly lower than $90.6 million in the prior quarter [17] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses was $89.3 million, benefiting from a lower cost of deposits and a positive mix shift towards demand deposits [13][14] - Noninterest income totaled $58.4 million, a decrease from the previous quarter, primarily due to lower transaction volume and incentive fees, although there was an increase in FX revenue and asset management fees [16] - The bank maintained a conservative strategy of reinvesting maturities into a mix of U.S. Agency MBS securities and medium-term U.S. Treasuries [15] Market Data and Key Metrics Changes - Average interest-earning assets remained flat at $13.4 billion compared to the prior quarter, despite anticipated client outflows [15] - Period-end deposit balances decreased to $12.6 billion from $12.7 billion, with expected average deposits settling in a range of $11.5 billion to $12 billion [20][21] - The bank's loan portfolio remains predominantly full recourse residential mortgages, with 68% of loans having loan-to-values below 70% [22] Company Strategy and Development Direction - The company is focused on expanding its retail presence in the Channel Islands and integrating Credit Suisse in Singapore, with a goal to mirror its success in Bermuda and Cayman [44][46] - Butterfield's capital management strategy emphasizes delivering a sustainable quarterly cash dividend while supporting organic growth and potential acquisitions [28] - The bank is cautious about M&A opportunities, focusing on fee businesses and private trust businesses while maintaining strict standards regarding AML and fiduciary risk [47][49] Management's Comments on Operating Environment and Future Outlook - Management noted that recent U.S. trade discussions have created uncertainty but do not expect significant direct impacts on Butterfield's business [27] - Early indications suggest robust hospitality bookings for Q2 2025 in Bermuda and Cayman, supporting a positive outlook [28] - The company remains committed to managing expenses and maintaining a strong balance sheet amid potential economic challenges [96] Other Important Information - The bank's tangible book value per share increased by 5.7% to $22.94 as unrealized losses on investments declined [26] - The resolution of a legacy loan for a hospitality facility in Bermuda is expected to positively impact future financial results [23] Q&A Session Summary Question: Credit side concerns regarding residential mortgage book - Management indicated that pressure is primarily seen in Bermuda and Prime Central London, with a focus on low LTV and DSR issues [35][36] Question: Retail presence growth in Channel Islands and Singapore - Management reported success in growing the mortgage loan book and credit card product in the Channel Islands, with positive integration in Singapore [44][46] Question: Impact of market volatility on securities investment strategy - Management acknowledged stabilization in rates and indicated a shift towards medium-term U.S. Treasuries for more certainty in yields [55][56] Question: M&A discussions amid trade uncertainties - Management noted that trade situations create uncertainty but may also motivate sellers to finalize deals [63][64] Question: Economic downturn strategies for expense management - Management highlighted the successful implementation of a voluntary early retirement program and ongoing cost management strategies [96][98]

Financial Performance - The company reported net income of $538 million, or $123 per share[9, 12] - Core net income reached $567 million, equivalent to $130 per share[9, 12] - Return on average common equity was 209%, while core return on average tangible common equity was 242%[10, 12] Income Statement Analysis - Net interest income increased to $893 million[9, 14] - Non-interest income totaled $584 million, a decrease of $48 million compared to the previous quarter[9, 17, 20] - Non-interest expenses amounted to $944 million[9] Balance Sheet Review - Total assets stood at $1402 billion, a decrease of 2% from the previous quarter[25] - Total deposits reached $126 billion[25, 27] - The company's balance sheet maintained a low risk density of 300%[27] Asset Quality - Non-accrual loans increased to 23% of gross loans[29] - Allowance for credit losses was $253 million, representing an ACL/Total loans ratio of 06%[29] Capital and Dividends - The company's regulatory capital levels remained above minimum requirements[35] - The quarterly dividend rate remained at $044 per common share[12, 35] - The combined payout ratio was 112%[35]

Financial Data and Key Metrics Changes - The company reported net income of $53.8 million and core net income of $56.7 million for Q1 2025, with core earnings per share at $1.3 and a core return on average tangible common equity of 24.2% [8][19] - The net interest margin increased by nine basis points to 2.7%, while the cost of deposits fell by 13 basis points to 1.60% [8][10] - Total core noninterest expenses were $90.3 million, slightly lower than the previous quarter's $90.6 million [13] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses was $89.3 million, benefiting from a lower cost of deposits and a positive mix shift in deposits [10] - Noninterest income totaled $58.4 million, a decrease from the previous quarter, primarily due to lower transaction volume and incentive fees, although FX revenue and asset management fees increased [12] Market Data and Key Metrics Changes - Average interest-earning assets remained flat at $13.4 billion compared to the prior quarter [10] - Deposit balances decreased to $12.6 billion from $12.7 billion, with expected average deposits settling between $11.5 billion and $12.0 billion [15] Company Strategy and Development Direction - The company is focused on maintaining a conservative and highly liquid balance sheet, supporting low credit risk investments and disciplined loan books [6] - There is a strategic emphasis on growing retail presence in the Channel Islands and expanding into Singapore, with successful integration of Credit Suisse noted [31][34] - The capital management strategy aims to deliver sustainable quarterly cash dividends while supporting organic growth and potential acquisitions [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong balance sheet and ongoing profitability, despite uncertainties from U.S. trade discussions [20] - Early indications show robust hospitality bookings for the 2025 season in Bermuda and Cayman, contributing to a positive outlook [20] Other Important Information - The company implemented a voluntary early retirement program, which is expected to reduce future expense loads [6][13] - The transition to Basel IV rules improved the regulatory capital ratio by 1.9% for the quarter [18] Q&A Session Summary Question: Credit side concerns regarding residential mortgage book - Management noted pressure in Bermuda and Prime Central London markets, with a focus on low LTV and DSR issues [25][26] Question: Retail presence in Channel Islands and expansion into Singapore - The company reported good growth in the Channel Islands and successful integration in Singapore, with over $10 billion in assets under trust [31][34] Question: Impact of market volatility on securities investment strategy - Management indicated a shift towards medium-term U.S. Treasuries for stability in yields amid market volatility [41][42] Question: M&A discussions in light of trade war - Management stated that trade discussions create uncertainty but do not significantly impact M&A conversations [49][50] Question: Economic downturn and expense management - The company has tactical cost reduction strategies in place, including a successful early retirement program and building operations in a less expensive jurisdiction [72][73]

Core Insights - Bank of NT Butterfield & Son reported quarterly earnings of $1.30 per share, exceeding the Zacks Consensus Estimate of $1.03 per share, and showing an increase from $1.17 per share a year ago, resulting in an earnings surprise of 26.21% [1] - The company achieved revenues of $147.8 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 6.56% and up from $142.2 million year-over-year [2] - The stock has gained approximately 3.9% since the beginning of the year, contrasting with the S&P 500's decline of -10.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.05 on revenues of $139.7 million, and for the current fiscal year, it is $4.40 on revenues of $567.9 million [7] - The estimate revisions trend for the company is mixed, leading to a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Banks - Foreign industry, to which Bank of NT Butterfield & Son belongs, is currently ranked in the top 7% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Bank of NT Butterfield & Son (NTB) - NTB currently holds a Momentum Style Score of B and a Zacks Rank of 1 (Strong Buy), indicating strong potential for outperformance [3][4] - Over the past week, NTB shares increased by 0.73%, outperforming the Zacks Banks - Foreign industry, which rose by 0.26% [6] - In the last quarter, NTB shares rose by 4.97%, and over the past year, they increased by 31.58%, while the S&P 500 saw declines of -2.97% and gains of 15.34%, respectively [7] Price and Volume Analysis - NTB's monthly price change of 5.94% is favorable compared to the industry's 5.57% performance [6] - The average 20-day trading volume for NTB is 183,680 shares, which serves as a bullish indicator when combined with rising stock prices [8] Earnings Outlook - In the past two months, one earnings estimate for NTB increased, while none decreased, raising the consensus estimate from $3.90 to $4.40 [10] - For the next fiscal year, one estimate has also moved upwards with no downward revisions during the same period [10] Conclusion - Considering the positive momentum indicators and earnings outlook, NTB is positioned as a strong buy candidate for investors seeking short-term gains [12]