The Bank of N.T. Butterfield & Son (NTB) - 2025 Q2 - Quarterly Report

Index to Financial Statements Consolidated Balance Sheets (Unaudited) The Consolidated Balance Sheets present the Bank's financial position as of June 30, 2025, compared to December 31, 2024, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheets (Unaudited) | Metric | June 30, 2025 (in thousands of US dollars) | December 31, 2024 (in thousands of US dollars) | | :-------------------------------- | :--------------------------------------- | :---------------------------------------- | | Total assets | 14,185,002 | 14,231,396 | | Total liabilities | 13,115,863 | 13,210,584 | | Total shareholders' equity | 1,069,139 | 1,020,812 | | Cash and cash equivalents | 1,450,062 | 1,998,112 | | Total deposits | 12,837,842 | 12,745,909 | | Loans, net of allowance for credit losses | 4,577,519 | 4,473,591 | - Total assets decreased by $46.4 million from December 31, 2024, to June 30, 2025, while total liabilities decreased by $94.7 million, and total shareholders' equity increased by $48.3 million[5] Consolidated Statements of Operations (Unaudited) The Consolidated Statements of Operations present the Bank's revenues, expenses, and net income for the three and six months ended June 30, 2025, and 2024 Consolidated Statements of Operations (Unaudited) | Metric (in thousands of US dollars) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total non-interest income | 57,019 | 55,647 | 115,449 | 110,740 | | Total interest income | 140,912 | 147,581 | 280,924 | 290,293 | | Total interest expense | 51,507 | 60,145 | 102,192 | 115,779 | | Net interest income before provision for credit losses | 89,405 | 87,436 | 178,732 | 174,514 | | Net income | 53,325 | 50,591 | 107,089 | 104,022 | | Basic earnings per share | 1.28 | 1.11 | 2.55 | 2.26 | | Diluted earnings per share | 1.25 | 1.09 | 2.48 | 2.23 | - Net income increased by $2.7 million (5.4%) for the three months and by $3.1 million (3.0%) for the six months ended June 30, 2025, compared to the respective prior year periods, with basic EPS rising from $1.11 to $1.28 (15.3%) and from $2.26 to $2.55 (12.8%) respectively[8] Consolidated Statements of Comprehensive Income (Unaudited) The Consolidated Statements of Comprehensive Income detail total comprehensive income, including net income and other comprehensive income (loss) components Consolidated Statements of Comprehensive Income (Unaudited) | Metric (in thousands of US dollars) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | 53,325 | 50,591 | 107,089 | 104,022 | | Other comprehensive income (loss), net of taxes | 15,905 | 3,741 | 53,885 | (7,348) | | Total comprehensive income (loss) | 69,230 | 54,332 | 160,974 | 96,674 | - Total comprehensive income significantly increased for the six months ended June 30, 2025, to $160.97 million, up from $96.67 million in the prior year, primarily driven by a substantial increase in unrealized net gains on available-for-sale investments ($43.36 million in 2025 vs. -$12.84 million in 2024)[11] Consolidated Statements of Changes in Shareholders' Equity (Unaudited) This statement outlines changes in each component of shareholders' equity for the three and six months ended June 30, 2025, and 2024 Consolidated Statements of Changes in Shareholders' Equity (Unaudited) | Metric (in thousands of US dollars) | June 30, 2025 (Six months) | June 30, 2024 (Six months) | | :---------------------------------- | :------------------------- | :------------------------- | | Total shareholders' equity (end of period) | 1,069,139 | 999,114 | | Net Income for the period | 107,089 | 104,022 | | Common share cash dividends declared and paid | (37,124) | (40,630) | | Retirement of shares (retained earnings impact) | (37,902) | (22,412) | | Other comprehensive income (loss), net of taxes | 53,885 | (7,348) | - Shareholders' equity increased to $1.07 billion as of June 30, 2025, from $999.1 million a year prior, primarily due to net income and positive other comprehensive income, despite cash dividends paid and share retirements[14] Consolidated Statements of Cash Flows (Unaudited) The Consolidated Statements of Cash Flows categorize cash movements into operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Consolidated Statements of Cash Flows (Unaudited) | Metric (in thousands of US dollars) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by (used in) operating activities | 163,555 | 116,258 | | Cash provided by (used in) investing activities | (181,286) | 134,819 | | Cash provided by (used in) financing activities | (583,609) | 495,156 | | Net increase (decrease) in cash, cash equivalents and restricted cash | (540,802) | 744,181 | | Cash, cash equivalents and restricted cash: end of period | 1,547,740 | 2,416,441 | - The Bank experienced a net decrease in cash, cash equivalents, and restricted cash of $540.8 million for the six months ended June 30, 2025, a significant shift from a net increase of $744.2 million in the prior year, largely driven by cash used in financing activities[17] Notes to the Consolidated Financial Statements (Unaudited) Note 1: Nature of Business This note describes The Bank of N.T. Butterfield & Son Limited's core business as a full-service bank and wealth manager, its headquarters, and geographic operating segments - Butterfield is a full-service bank and wealth manager headquartered in Hamilton, Bermuda, regulated by the Bermuda Monetary Authority (BMA) in accordance with Basel principles[20][21] - The Bank operates through three primary geographic segments: Bermuda, Cayman, and the Channel Islands and the UK, offering both banking and wealth management services, with additional operations aggregated into the 'Other' segment[21] - The Bank's common shares trade on the New York Stock Exchange (NYSE: NTB) and the Bermuda Stock Exchange (BSX: NTB.BH)[22] Note 2: Significant Accounting Policies This note outlines the basis of preparation for the unaudited interim consolidated financial statements, adherence to US GAAP, and critical accounting estimates - The unaudited interim consolidated financial statements are prepared in accordance with US GAAP for interim financial information[23] - Management's critical accounting estimates include allowance for credit losses, fair value of financial instruments, impairment of goodwill, and employee benefit plans[25][29] - There were no new accounting developments issued or pending adoption during the six months ended June 30, 2025, that impacted the Bank[26] Note 3: Cash and Cash Equivalents This note provides a detailed breakdown of the Bank's cash and cash equivalents, distinguishing between non-interest bearing and interest bearing components Cash and Cash Equivalents (Unaudited) | Category (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Non-interest bearing cash and demand deposits | 99,525 | 93,145 | | Interest bearing demand deposits | 160,754 | 165,741 | | Interest bearing cash equivalents | 1,189,783 | 1,739,226 | | Total cash and cash equivalents | 1,450,062 | 1,998,112 | - Total cash and cash equivalents decreased by $548.05 million from December 31, 2024, to June 30, 2025, primarily due to a reduction in interest-bearing cash equivalents[27] Note 4: Short-Term Investments This note details the composition of the Bank's short-term investments, categorizing them by maturity and drawing restrictions Short-Term Investments (Unaudited) | Category (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total unrestricted short-term investments | 1,014,237 | 489,596 | | Total restricted short-term investments | 97,678 | 90,430 | | Total short-term investments | 1,111,915 | 580,026 | - Total short-term investments increased significantly by $531.89 million from December 31, 2024, to June 30, 2025, with unrestricted investments more than doubling[28] Note 5: Investment in Securities This note provides a comprehensive overview of the Bank's investment portfolio, including AFS and HTM securities, their fair value, and unrealized gains/losses Amortized Cost, Carrying Amount and Fair Value This section details the amortized cost, carrying amount, and fair value of the Bank's investment securities portfolio Investment in Securities (Fair Value) | Investment Type (in thousands of US dollars) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------------------------------- | :------------------------- | :----------------------------- | | Total available-for-sale | 2,336,118 | 2,272,486 | | Total held-to-maturity | 2,619,039 | 2,671,040 | | Total investment in securities (Balance Sheet) | 5,458,252 | 5,512,776 | - Gross unrealized losses on AFS securities were $127.92 million (8.6% of fair value) as of June 30, 2025, compared to $164.72 million (8.3% of fair value) as of December 31, 2024, which management does not believe represent credit losses[31][32][40] - Gross unrealized losses on HTM securities were $503.28 million (19.5% of fair value) as of June 30, 2025, compared to $569.25 million (21.3% of fair value) as of December 31, 2024, primarily due to changes in market interest rates, not credit quality[31][33][40] Investments with Unrealized Loss Positions This section identifies investment securities that are in an unrealized loss position and assesses whether these losses are credit-related Investment Maturities This section categorizes the Bank's investment securities by their contractual maturity dates Pledged Investments This section details investment securities that are pledged as collateral for various purposes Pledged Investments (Fair Value) | Pledged Investments (in thousands of US dollars) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :----------------------------------------------- | :------------------------- | :----------------------------- | | Available-for-sale | 19,779 | 21,062 | | Held-to-maturity | 87,482 | 84,003 | Taxability of Interest Income This section provides information on the taxability of interest income generated from the Bank's investment portfolio Note 6: Loans This note provides extensive details on the Bank's loan portfolio, including credit quality, age analysis of past due loans, and changes in allowance for credit losses - The effective yield on total loans as at June 30, 2025, was 6.06%, a decrease from 6.29% at December 31, 2024[47] Loans' Credit Quality This section categorizes the Bank's loans by credit quality, providing insights into the risk profile of the loan portfolio Loans' Credit Quality (Amortized Cost) | Loan Category (in thousands of US dollars) | June 30, 2025 (Amortized Cost) | December 31, 2024 (Amortized Cost) | | :----------------------------------------- | :----------------------------- | :--------------------------------- | | Total commercial loans | 640,397 | 613,820 | | Total commercial real estate loans | 566,977 | 642,038 | | Total consumer loans | 187,751 | 192,750 | | Residential mortgage loans | 3,208,063 | 3,050,692 | | Total loans | 4,603,188 | 4,499,300 | | Allowance for expected credit losses | (25,669) | (25,709) | | Total net loans | 4,577,519 | 4,473,591 | Age Analysis of Past Due Loans (Including Non-Accrual Loans) This section provides an age analysis of the Bank's past due loans, including those on non-accrual status Age Analysis of Past Due Loans (Including Non-Accrual Loans) | Past Due Status (in thousands of US dollars) | June 30, 2025 (Total past due loans) | December 31, 2024 (Total past due loans) | | :------------------------------------------- | :----------------------------------- | :--------------------------------------- | | Commercial loans | 18,280 | 17,445 | | Commercial real estate loans | 3,332 | 17,866 | | Consumer loans | 1,907 | 2,850 | | Residential mortgage loans | 109,841 | 130,282 | | Total amortized cost (past due) | 133,360 | 168,443 | Changes in Allowances For Credit Losses This section details the movements in the allowance for credit losses, including provisions, charge-offs, and recoveries - Allowance for expected credit losses remained relatively flat, decreasing slightly from $25.71 million to $25.67 million during the six months ended June 30, 2025[62][63] Collateral-dependent loans This section provides information on loans for which repayment is expected to be provided solely by the underlying collateral Non-Performing Loans This section presents details on the Bank's non-performing loans, which are typically those on non-accrual status Non-Performing Loans | Non-Performing Loans (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Total non-performing loans | 119,043 | 149,594 | Loan Modifications Made to Borrowers Experiencing Financial Difficulty This section describes modifications made to loans for borrowers experiencing financial difficulty, such as troubled debt restructurings Note 7: Credit Risk Concentrations This note details the Bank's credit risk concentrations by geographic region, encompassing cash and cash equivalents, loans, and off-balance sheet exposures Credit Risk Concentrations by Geographic Region | Geographic Region (in thousands of US dollars) | June 30, 2025 (Total credit exposure) | December 31, 2024 (Total credit exposure) | | :--------------------------------------------- | :------------------------------------ | :---------------------------------------- | | Bermuda | 1,805,710 | 1,854,898 | | Cayman Islands | 1,282,416 | 1,327,634 | | Channel Islands and the UK (Guernsey, Jersey, UK) | 1,061,538 | 949,155 | | United Kingdom | 2,586,348 | 2,396,718 | | Total gross exposure | 8,999,192 | 8,997,688 | - The total gross credit exposure remained relatively stable at approximately $9 billion, with notable shifts in regional concentrations, including an increase in the UK and Channel Islands and a decrease in Bermuda and Cayman Islands[76] Note 8: Deposits This note provides a detailed breakdown of the Bank's deposit base, segmented by maturity (demand vs. term) and by geographic region and type By Maturity This section categorizes the Bank's deposits based on their maturity profiles, distinguishing between demand and term deposits Deposits by Maturity | Deposit Category (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------- | :------------ | :---------------- | | Total demand deposits | 8,828,053 | 8,267,652 | | Total term deposits | 4,009,789 | 4,478,257 | | Total deposits | 12,837,842 | 12,745,909 | - Total deposits increased by $91.93 million from December 31, 2024, to June 30, 2025, driven by an increase in demand deposits, while term deposits decreased[77] - The weighted-average interest rate on interest-bearing demand deposits decreased from 0.87% at December 31, 2024, to 0.79% at June 30, 2025[77] By Type and Segment This section further breaks down deposits by their type and the geographic segment in which they are held Deposits by Segment | Deposits by Segment (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :----------------------------------------------- | :------------ | :---------------- | | Bermuda | 4,485,504 | 4,781,064 | | Cayman | 4,044,459 | 3,971,103 | | Channel Islands and the UK | 4,307,879 | 3,993,742 | Note 9: Employee Benefit Plans This note describes the Bank's various employee benefit plans and presents the associated expenses recognized in the consolidated statements of operations - The Bank maintains trusteed pension plans (defined benefit and defined contribution) and provides post-retirement medical benefits to qualifying retirees, with defined benefit plans closed to new participants and non-contributory[79] Employee Benefit Expense | Benefit Expense (in thousands of US dollars) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Total defined benefit pension expense (income) | 482 | 666 | | Total post-retirement medical benefit expense (income) | 2,168 | 1,326 | - Total defined benefit pension expense decreased, while total post-retirement medical benefit expense increased for the six months ended June 30, 2025, compared to the prior year[81] Note 10: Credit-Related Arrangements, Repurchase Agreements, and Commitments This note details the Bank's off-balance sheet credit exposures, repurchase agreements, and provides an update on legal proceedings Commitments This section outlines the Bank's various commitments, including commitments to extend credit and documentary letters of credit Commitments | Commitments (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Commitments to extend credit | 463,798 | 475,289 | | Documentary and commercial letters of credit | 1,006 | 1,576 | | Total unfunded commitments to extend credit | 464,804 | 476,865 | Credit-Related Arrangements This section describes the Bank's credit-related arrangements, such as standby letters of credit and letters of guarantee Financial Guarantees | Financial Guarantees (in thousands of US dollars) | June 30, 2025 (Gross) | December 31, 2024 (Gross) | | :------------------------------------------------ | :-------------------- | :------------------------ | | Standby letters of credit | 233,090 | 236,220 | | Letters of guarantee | 1,502 | 1,792 | | Total | 234,592 | 238,012 | Repurchase agreements This section provides details on the Bank's repurchase and resell agreements, including their outstanding balances - As of June 30, 2025, the Bank had $1.1 billion in resell agreements (securities purchased under agreements to resell), down from $1.2 billion at December 31, 2024, with no open repurchase agreements compared to $92.6 million at December 31, 2024[90][91] Legal Proceedings This section provides an update on significant legal proceedings involving the Bank - The Bank reached a resolution with the US Department of Justice in August 2021 regarding a cross-border tax investigation, concluding a three-year non-prosecution agreement in July 2024 and paying $5.6 million in forfeiture and tax restitution[93] Note 11: Leases This note provides information on the Bank's operating lease agreements, including lease costs, income, right-of-use assets, and lease liabilities Lease Metrics | Lease Metric (in thousands of US dollars) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Total net lease cost | 4,392 | 5,185 | | Operating lease income | 198 | 694 | | Operating cash flows from operating leases | 2,974 | 3,848 | Lease Balances | Lease Balance (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :----------------------------------------- | :------------ | :---------------- | | Operating leases right-of-use assets | 37,372 | 35,347 | | Operating lease liabilities | 38,236 | 35,604 | - The weighted average remaining lease term for operating leases was 11.91 years at June 30, 2025, with a weighted average discount rate of 5.94%[97] Note 12: Segmented Information This note presents the Bank's financial performance and assets segmented by geographic region: Bermuda, Cayman, Channel Islands and the UK, and Other - The Bank is managed and segmented on a geographic basis, with reportable segments including Bermuda, Cayman, and Channel Islands and the UK, plus an aggregated 'Other' segment[98][99] Bermuda Segment This section details the financial performance and assets attributable to the Bank's Bermuda geographic segment Cayman Segment This section details the financial performance and assets attributable to the Bank's Cayman geographic segment Channel Islands and the UK segment This section details the financial performance and assets attributable to the Bank's Channel Islands and the UK geographic segment Other segment This section details the financial performance and assets attributable to the Bank's aggregated 'Other' geographic segment Total Assets by Segment This section provides a breakdown of the Bank's total assets across its various geographic segments Total Assets by Segment | Segment (in thousands of US dollars) | June 30, 2025 (Total Assets) | December 31, 2024 (Total Assets) | | :----------------------------------- | :--------------------------- | :------------------------------- | | Bermuda | 5,043,216 | 5,438,279 | | Cayman | 4,409,304 | 4,337,829 | | Channel Islands and the UK | 4,773,869 | 4,526,623 | | Other | 70,292 | 62,682 | | Total assets before inter-segment eliminations | 14,296,681 | 14,365,413 | Segment Financial Results (Three months ended June 30, 2025) This section presents the financial results for each geographic segment for the three months ended June 30, 2025 Segment Financial Results (Three months ended June 30, 2024) This section presents the financial results for each geographic segment for the three months ended June 30, 2024 Segment Financial Results (Six months ended June 30, 2025) This section presents the financial results for each geographic segment for the six months ended June 30, 2025 Segment Financial Results (Six months ended June 30, 2024) This section presents the financial results for each geographic segment for the six months ended June 30, 2024 Segment Net Income | Segment Net Income (in thousands of US dollars) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Bermuda | 13,510 | 13,969 | 29,328 | 29,095 | | Cayman | 30,480 | 30,014 | 62,301 | 62,303 | | Channel Islands and the UK | 8,888 | 5,469 | 14,326 | 10,724 | | Other | 447 | 1,139 | 1,134 | 1,900 | | Total Net Income | 53,325 | 50,591 | 107,089 | 104,022 | Note 13: Derivative Instruments and Risk Management This note details the Bank's use of derivative instruments for risk management and client services, outlining their notional amounts and fair values - The Bank uses derivatives, primarily OTC interest rate and foreign exchange contracts, for risk management (fair value hedges, net investment hedges, and undesignated derivatives) and to meet client needs[117][123][129] Notional Amounts This section presents the notional amounts of the Bank's derivative instruments, categorized by type and purpose Derivative Notional Amounts | Derivative Type (in thousands of US dollars) | June 30, 2025 (Notional amounts) | December 31, 2024 (Notional amounts) | | :------------------------------------------- | :------------------------------- | :----------------------------------- | | Risk management derivatives | 1,868,319 | 2,171,377 | | Client services derivatives | 222,816 | 217,490 | | Total derivative instruments | 2,091,135 | 2,388,867 | Fair Value This section provides the fair values of the Bank's derivative instruments, categorized by their balance sheet presentation Derivative Fair Value | Derivative Fair Value (in thousands of US dollars) | June 30, 2025 (Net fair value) | December 31, 2024 (Net fair value) | | :------------------------------------------------- | :----------------------------- | :--------------------------------- | | Total derivative instruments | (18,029) | 33,439 | Risk Management Derivatives This section describes the Bank's use of derivatives for hedging purposes, including fair value hedges and net investment hedges Client service derivatives This section details the Bank's use of derivatives to facilitate client transactions and services Net Gains (Losses) Recognized | Net Gains (Losses) Recognized (in thousands of US dollars) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------------------------- | :----------------------------- | :----------------------------- | | Total net gains (losses) recognized in net income | (49,829) | 18,207 | | Total net gains (losses) recognized in comprehensive income | (1,639) | 190 | Note 14: Fair Value Measurements This note presents financial assets and liabilities measured at fair value on a recurring basis, categorized by valuation input levels, and fair value information for other items Items that are recognized at fair value on a recurring basis This section details financial instruments that are measured at fair value on an ongoing basis, categorized by valuation input levels Fair Value Measurements (Recurring Basis) | Item (in thousands of US dollars) | June 30, 2025 (Total carrying amount / fair value) | December 31, 2024 (Total carrying amount / fair value) | | :-------------------------------- | :------------------------------------------------- | :----------------------------------------------------- | | Total available-for-sale investments | 2,336,118 | 2,272,486 | | Other assets - Derivatives | 4,888 | 35,478 | | Other liabilities - Derivatives | 22,917 | 2,039 | - Financial instruments in Level 1 include US and UK Government Treasury notes, while Level 2 includes government debt securities, mortgage-backed securities, other asset-backed securities, forward foreign exchange contracts, and securities sold under agreements to repurchase[142] - There were no Level 3 investments and no transfers between Level 1, Level 2, or Level 3 during the six months ended June 30, 2025, and the year ended December 31, 2024[143][144] Items Other Than Those Recognized at Fair Value on a Recurring Basis This section provides fair value information for financial instruments not measured at fair value on a recurring basis Fair Value Measurements (Non-Recurring Basis) | Item (in thousands of US dollars) | June 30, 2025 (Carrying amount) | June 30, 2025 (Fair value) | December 31, 2024 (Carrying amount) | December 31, 2024 (Fair value) | | :-------------------------------- | :------------------------------ | :------------------------- | :---------------------------------- | :----------------------------- | | Investments held-to-maturity | 3,122,134 | 2,619,039 | 3,240,290 | 2,671,040 | | Loans, net of allowance for credit losses | 4,577,519 | 4,561,169 | 4,473,591 | 4,433,872 | | Term deposits | 4,009,789 | 4,018,174 | 4,478,257 | 4,482,978 | Note 15: Interest Rate Risk This note analyzes the Bank's interest rate risk by presenting the interest rate sensitivity gap, showing repricing or contractual maturity of assets and liabilities Interest Rate Sensitivity Gap | Interest Rate Sensitivity Gap (in millions of US dollars) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------- | :------------ | :---------------- | | Within 3 months | (4,083) | (3,223) | | 3 to 6 months | 112 | (284) | | 6 to 12 months | 603 | (117) | | 1 to 5 years | 2,196 | 2,421 | | After 5 years | 4,503 | 4,577 | | Non-interest bearing funds | (3,331) | (3,374) | | Total | — | — | - The cumulative interest rate sensitivity gap shifted from a negative $3.62 billion for maturities up to 12 months at December 31, 2024, to a negative $3.37 billion at June 30, 2025, indicating a slight improvement in short-term interest rate sensitivity[150] Note 16: Long-Term Debt This note details the Bank's long-term debt, specifically the redemption of US $100 million Subordinated Lower Tier II capital notes in June 2025 - The Bank redeemed US $100 million of Subordinated Lower Tier II capital notes at face value in June 2025, which were issued in June 2020 with a fixed coupon of 5.25% and became redeemable on June 15, 2025[152] - Unamortized issuance costs related to these notes were fully recognized in the Consolidated Statements of Operations as part of interest expense upon redemption[152] Note 17: Earnings Per Share This note explains the calculation of basic and diluted earnings per share, including the weighted average number of common shares outstanding and dilutive effects Earnings Per Share | EPS Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (in thousands of US dollars) | 53,325 | 50,591 | 107,089 | 104,022 | | Basic Earnings Per Share | 1.28 | 1.11 | 2.55 | 2.26 | | Diluted Earnings Per Share | 1.25 | 1.09 | 2.48 | 2.23 | | Weighted average number of common shares (in thousands) | 41,636 | 45,642 | 42,078 | 46,068 | | Weighted average number of diluted common shares (in thousands) | 42,653 | 46,298 | 43,113 | 46,730 | - Basic EPS increased by $0.17 (15.3%) for the three months and $0.29 (12.8%) for the six months ended June 30, 2025, compared to the prior year, with similar increases in diluted EPS[157] - The dilutive effect of share-based compensation plans resulted in an additional 1.02 million diluted common shares for the three months and 1.04 million for the six months ended June 30, 2025[155][157] Note 18: Share-Based Payments This note details the Bank's various share-based compensation programs, associated costs, and unrecognized expenses Stock Option Awards This section provides information on the Bank's stock option awards, including grants, exercises, and outstanding options - The Board approved an Amended and Restated 2020 Omnibus Share Incentive Plan in February 2025, making an additional 5.0 million shares available for grant, with no stock options outstanding as of June 30, 2025, or December 31, 2024[159][161] Share-Based Incentive Programs This section describes the Bank's share-based incentive programs, including the EDIP and ELTIP Employee Deferred Incentive Program This section details the Employee Deferred Incentive Program (EDIP), including shares granted, vested, and outstanding Employee Long-Term Incentive Share Program This section details the Employee Long-Term Incentive Share Program (ELTIP), including shares granted, vested, and outstanding Share-based Awards (EDIP and ELTIP) | Share-based Awards (in thousands of shares) | Six months ended June 30, 2025 (EDIP) | Six months ended June 30, 2025 (ELTIP) | Six months ended June 30, 2024 (EDIP) | Six months ended June 30, 2024 (ELTIP) | | :------------------------------------------ | :------------------------------------ | :------------------------------------- | :------------------------------------ | :------------------------------------- | | Outstanding at beginning of period | 628 | 1,151 | 665 | 915 | | Granted | 124 | 332 | 91 | 545 | | Vested | (116) | (268) | (137) | (334) | | Outstanding at end of period | 636 | 1,214 | 616 | 1,124 | Employee Share Purchase Plan This section describes the Employee Share Purchase Plan (ESPP), including employee contributions and share purchases Share-based Compensation Cost Recognized in the Financial Statements This section details the share-based compensation cost recognized in the Bank's consolidated financial statements Unrecognized Share-based Compensation Cost This section provides information on the total unrecognized share-based compensation cost and its expected recognition period Share-based Compensation Cost | Share-based Compensation Cost (in thousands of US dollars) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------------------------- | :----------------------------- | :----------------------------- | | EDIP and ELTIP | 10,701 | 10,099 | | ESPP | 292 | 305 | | Share-based Compensation Cost Recognized in Net Income | 10,993 | 10,404 | | Unrecognized Share-based Compensation Cost (June 30, 2025) | 31,337 | N/A | Note 19: Share Repurchase Programs This note outlines the Bank's common share repurchase programs, including recent board approvals and the number of shares repurchased and retired - The Board approved new common share repurchase programs on December 5, 2023 (up to 3.5 million shares), July 22, 2024 (up to 2.1 million shares), December 9, 2024 (up to 2.7 million shares), and July 28, 2025 (up to 1.5 million shares), all through to December 31, 2025[174][175] Common Share Repurchases | Common Share Repurchases | Six months ended June 30, 2025 | | :----------------------- | :----------------------------- | | Acquired number of shares | 2,210,189 | | Average cost per common share | 39.26 | | Total cost (in US dollars) | 86,782,848 | - In the six months ended June 30, 2025, the Bank repurchased and retired 2,210,189 shares at an average cost of $39.26 per share, totaling $86.78 million[176][177] Note 20: Accumulated Other Comprehensive Income (Loss) This note provides a detailed breakdown of the components of Accumulated Other Comprehensive Income (AOCI), along with their net changes Accumulated Other Comprehensive Income (Loss) | AOCI Component (in thousands of US dollars) | June 30, 2025 (Balance at end of period) | December 31, 2024 (Balance at beginning of period) | | :------------------------------------------ | :--------------------------------------- | :----------------------------------------------- | | Unrealized net gains (losses) on translation of net investment in foreign operations | (19,931) | (26,191) | | Unrealized net gains (losses) on HTM investments | (70,160) | (73,919) | | Unrealized net gains (losses) on AFS investments | (118,913) | (162,275) | | Employee benefit plans adjustments | (32,526) | (33,030) | | Total AOCIL | (241,530) | (295,415) | - Total AOCI improved significantly from a loss of $295.42 million at the beginning of the period to a loss of $241.53 million at June 30, 2025, primarily due to substantial unrealized net gains on AFS investments ($43.36 million) and positive foreign currency translation adjustments ($6.26 million)[178][180] Note 21: Capital Structure This note details the Bank's authorized capital, dividends declared, and regulatory capital adequacy, confirming compliance with Basel guidelines Authorized Capital This section outlines the Bank's authorized share capital, including common, non-voting ordinary, and preference shares - The Bank's authorized share capital includes 2 billion common shares, 6 billion non-voting ordinary shares (both BM$0.01 par), and preference shares[181] Dividends Declared This section provides information on dividends declared and paid by the Bank during the reporting period - During the six months ended June 30, 2025, the Bank declared and paid cash dividends of $0.88 per common share, with an interim dividend of $0.50 per common share declared on July 28, 2025, payable on August 25, 2025[182][193] Regulatory Capital This section presents the Bank's regulatory capital adequacy, including key capital ratios and compliance with Basel guidelines Regulatory Capital Ratios | Capital Ratio (%) | June 30, 2025 (Actual) | December 31, 2024 (Actual) | Regulatory minimum | | :---------------- | :--------------------- | :------------------------- | :----------------- | | CET 1 capital | 26.0 % | 23.5 % | 10.0 % | | Tier 1 capital | 26.0 % | 23.5 % | 11.5 % | | Total capital | 26.2 % | 25.8 % | 13.5 % | | Leverage ratio | 7.3 % | 7.3 % | 5.0 % | - The Bank is fully compliant with all regulatory capital requirements and maintains capital ratios significantly in excess of regulatory minimums as of June 30, 2025, and December 31, 2024[185] Note 22: Related Party Transactions This note discloses financing transactions and investments with related parties, detailing loan and deposit balances, as well as interest and non-interest income/expense Financing Transactions This section details financing transactions with related parties, including loans and deposits involving directors, executives, and affiliates Related Party Financing Transactions | Related Party Transactions (in thousands of US dollars) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------ | :------------ | :---------------- | | Loans with directors and executives | 19,369 | 19,637 | | Deposits from directors and executives | 75,464 | 92,182 | | Loans with affiliates | 8,877 | 9,056 | | Deposits from affiliates | 392 | 811 | | Deposits from Butterfield mutual funds | 9,793 | 9,441 | Related Party Income/Expense | Related Party Income/Expense (in thousands of US dollars) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Interest and fees on loans (directors/executives) | 587 | 632 | | Total non-interest expense (directors/executives) | 214 | 115 | | Asset management revenue (Butterfield mutual funds) | 5,773 | 5,257 | | Custody and other administration services revenue (Butterfield mutual funds) | 726 | 662 | - Loans to directors and executives were made in the ordinary course of business at normal credit terms and were considered performing, with executives potentially eligible for preferential rates[188] Investments This section provides information on investments held by the Bank that involve related parties Note 23: Subsequent Events This note reports significant events that occurred after the reporting period but before the financial statements were issued - On July 28, 2025, the Board of Directors declared an interim dividend of $0.50 per common share, payable on August 25, 2025, to shareholders of record on August 11, 2025[193]