The Bank of N.T. Butterfield & Son (NTB) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Butterfield reported net income of $61.1 million and core net income of $63.3 million for Q3 2025, with core earnings per share at $1.51 and a core return on average tangible common equity of 25.5% [5][12] - The net interest margin increased by 9 basis points to 2.73% from the prior quarter, while the cost of deposits fell by 9 basis points to 147 basis points [5][6] - Non-interest income totaled $61.2 million, an increase of $4.2 million from the last quarter, driven by higher banking fees and foreign exchange revenues [14] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses was $92.7 million, an improvement of $3.3 million or 3.7% from the prior quarter [12] - Core non-interest expenses decreased due to lower performance-based incentive accruals and reduced property expenses [15] - The fee income ratio increased to 39.9%, continuing to compare favorably to historical peer averages [14] Market Data and Key Metrics Changes - Bermuda's business environment remains stable, with signs of growth in the local economy and a forecasted budget surplus [8] - The Cayman Islands is expected to see a 2.5% GDP increase in 2025, with financial services and tourism being key economic pillars [10] Company Strategy and Development Direction - The company aims to enhance operational efficiency and maintain prudent expense discipline while focusing on capital management [18] - Butterfield is positioned for growth through disciplined M&A and organic business development, with a strong emphasis on capital-efficient fee-based businesses [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value creation and highlighted the positive outlook for Bermuda's fiscal position and the international business sector [4][8] - The company remains conservative in its underwriting approach, focusing on high-quality residential lending across its markets [15] Other Important Information - The company announced a quarterly cash dividend of $0.50 per share and continued its share repurchase program, buying back 700,000 shares at a cost of $30.3 million [7][17] - The tangible book value per share improved by 5.4% to $25.06 as unrealized losses on investments improved [17] Q&A Session Summary Question: Margin trajectory outlook - Management indicated that deposit costs have come down and there is potential for margin stability or slight expansion due to asset repricing [24][28] Question: Interest in crypto or stablecoin initiatives - Management described itself as a slow follower in the crypto space, monitoring developments but not feeling pressure from clients to lead in this area [30][32] Question: Future expense management initiatives - Management discussed ongoing efforts to manage expenses, including moving back-office functions to Halifax and maintaining a stable expense run rate [33][34] Question: Drivers of fee income growth - Management noted strong performance in banking driven by increased card volumes and transaction-related fees, particularly benefiting from a good tourism season [42][44] Question: Growth expectations in loans and deposits - Management highlighted Bermuda as a key area for deposit growth and noted a conservative approach to loan growth, with encouraging signs in the loan pipeline, especially in Cayman [46][50]