Bank of N.T. Butterfield & Son Limited (The) Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
Is Bank of N.T. Butterfield & Son Limited (The) a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $2.32b | Revenue (TTM) = $628.62m
Market Cap = $2.32b | Estimated Revenue = $645.14m
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $2.32b | Revenue (TTM) = $628.62m
Enterprise Value = $2.32b | Forward Revenue = $645.14m
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🧮 Calculation
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Bank of N.T. Butterfield & Son Limited (The) Stock Analysis
Analyst Opinions
7 Analysts have issued a Bank of N.T. Butterfield & Son Limited (The) forecast:
Analyst Opinions
7 Analysts have issued a Bank of N.T. Butterfield & Son Limited (The) forecast:
Bank of N.T. Butterfield & Son Limited (The) Events
Past Events
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JUL
28
Q2 2026 Earnings Call
about 2 months ago
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MAY
28
The Bank of N.T. Butterfield & Son Limited, CIBC Caribbean Bank Limited - M&A Call
4 months ago
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APR
29
Q1 2026 Earnings Call
5 months ago
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FEB
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Bank of N.T. Butterfield & Son Limited (The) — Q2 2026 Earnings Call
1. Management Discussion
Good morning. My name is Nick, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2026 Earnings Call for the Bank of N.T. Butterfield and Son Limited. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Noah Fields, Butterfield's Head of Investor Relations.
Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's Second Quarter 2026 Financial Results. On the call, I am joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer; Michael Schrum, President and Chief Financial Officer; and Bri Hidalgo, Chief Risk Officer. Following their remarks, we will open the call up for a question-and-answer session.
Yesterday afternoon, we issued a press release announcing our second quarter 2026 results. The press release and financial statements along with a slide presentation that we will refer to during our remarks on this call, are available on the Investor Relations section of our website at butterfieldgroup.com. Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-GAAP measures, which we believe are important in evaluating the company's performance. For a reconciliation of these measures to U.S. GAAP, please refer to the earnings press release and slide presentation. Today's call and associated materials may also contain certain forward-looking statements, which are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these risks can be found in our SEC filings.
I will now turn the call over to Michael Collins.
Thank you, Noah, and thanks to everyone joining the call today. Butterfield's second quarter performance demonstrated the strength of our franchise, the value of deep customer relationships and the discipline and execution of our strategy. As a reminder to anyone new to Butterfield, we are a leading offshore bank and wealth management company with franchise-level market shares in Bermuda and the Cayman Islands complemented by an expanding retail banking presence in the Channel Islands. .
Additionally, we provide wealth management solutions to high net worth individuals, families and institutions through our offices in the Bahamas, Switzerland, Singapore and the U.K. where we originate high net worth residential mortgages for prime Central London properties. Our business is built around enduring client relationships and a diversified suite of services that includes banking, wealth management, trust, asset management and custody. This diversified business model, combined with our strong capital position, high-quality balance sheet and disciplined risk management framework enables us to generate consistent returns while remaining focused on delivering value for our clients, communities and shareholders.
I will now turn to the second quarter highlights on Page 6. Butterfield reported net income of $46.9 million and core net income of $63.9 million. We reported core earnings per share of $1.58 with a core return on average tangible common equity of 25% in the second quarter. The net interest margin was 2.74% in the second quarter, 1 basis point lower than the prior quarter with the cost of deposits increasing 1 basis point to 125 basis points from the prior quarter. We again announced a quarterly cash dividend of $0.50 per share.
During the second quarter, we continued to repurchase shares with a total of 300,000 shares. Following the announcement of the agreement to acquire CIBC Caribbean we paused share repurchases on May 28, 2026. We will likely continue this pause or potentially scale back relative to our previous repurchase activity as we evaluate growth prospects and build back capital organically. I am pleased to say that the integration of R&H Guernsey is progressing smoothly. We are already seeing the benefits of combining complementary capabilities while maintaining the high level of service that our clients expect.
The successful execution reinforces our confidence in our ability to integrate acquisitions effectively while remaining focused on delivering strong day-to-day operating performance. The second quarter marked an important milestone for Butterfield. The announced agreement to acquire CIBC Caribbean represents a significant step forward in our long-term growth strategy, expanding our scale, expanding our regional footprint and enhancing our ability to serve customers. Opportunities like this one do not come along often. And CIBC Caribbean is a business that we know well. We are excited about the combination for our clients, our employees and our shareholders and our teams are working diligently to prepare for a successful integration following the close of the transaction, which remains subject to the required regulatory approval. We will provide a deal progress update later in the call.
I will now turn the call over to Michael Schrum for more details on the second quarter.
Thank you, Michael, and good morning. On Slide 7, we provide a summary of net interest income and net interest margin. In the second quarter, we reported net interest income before provision for credit losses of $95.6 million, an increase of $2.3 million from the prior quarter and an increase of $6.2 million from the second quarter of 2025. The improvement was driven primarily by some growth in interest-earning asset volumes as well as an extra day when compared to the prior quarter. .
The net interest margin was 1 basis point lower than the prior quarter at 2.74%. This decrease is primarily due to a 1 basis point increase in deposit costs during the quarter. We continue to expect NIM to be broadly stable with a slight positive bias for the remainder of the year due to continued asset repricing. Balance sheet trends show average loan balances increasing quarter-over-quarter supporting earnings growth while average investment balances remained relatively flat. Overall, the quarter reflects continued asset growth and higher net interest income generation while maintaining a stable margin profile.
Slide 8 provides a summary of noninterest income, which increased modestly to $63.4 million in the second quarter of 2026, up $700,000 from the prior quarter and continuing the generally stable trend observed over the past year compared with $57 million in the second quarter of 2025, fee-based revenue has shown solid year-over-year progress. This quarter's improvement was primarily driven by the R&H trust revenues, reflecting onboarding activity related to R&H during the period. This benefit was partially offset by lower foreign exchange revenue due to reduced transaction volumes and lower banking fees.
Overall, the results highlight the resilience of the bank's fee income franchise with noninterest income providing a meaningful component to net interest income. The fee income ratio of 40% compares favorably with historical peer averages, underscoring the strength and diversification of the organization's revenue base. On Slide 9, we present core noninterest expenses. Core noninterest expenses increased to $92.9 million in the second quarter of 2026, up 3.3% from the prior quarter primarily reflecting the new expenses from the recently acquired R&H Guernsey business, higher salaries and benefits, technology and communications expenses, property cost and amortization of intangibles contributed to the increase.
We would expect a continued quarterly core expense run rate of $93 million to $95 million until the closing of the CIBC Caribbean transaction in the first half of next year. Despite the higher expense base, operating efficiency remains strong. The bank's core efficiency ratio was 57%, slightly higher than the prior quarter's 56.4% but still comfortably better than management's through cycle target of 60%.
Slide 10 shows Butterfield's balance sheet remains strong and is stable in the second quarter of 2026, with total assets increasing 2% to $14.3 billion from year-end 2025. Growth was primarily driven from higher balances and short-term investments, while the loan portfolio increased modestly to $4.4 billion and the investment portfolio remained largely unchanged at $5.7 billion. The balance sheet continues to reflect a conservative asset mix supported by substantial liquidity and a low-risk profile. Funding trends were also positive with period-end deposits rising to $12.9 billion from $12.7 billion at year-end and average deposits increasing to $13.1 billion during the quarter. The bank maintained a low-risk density of 27.9%, underscoring the quality of its balance sheet. Overall, the quarter was characterized by steady asset growth, strong deposit gathering and continued balance sheet strength.
On Slide 11, we show that Butterfield's asset quality remained strong in the second quarter of 2026, supported by a conservative loan portfolio and high-quality investment holdings. The $4.4 billion loan portfolio is heavily weighted towards full recourse residential mortgages with nearly 79% of those mortgages carrying a loan-to-value ratio of below 70%, underscoring the low-risk profile of the book. The $5.7 billion investment portfolio also remained exceptionally strong with a 100% rated AA or better, reflecting a highly liquid and investment-grade securities portfolio.
Credit performance remained resilient despite a modest increase in nonaccrual loans to $96 million or 2.2% of gross loans up from 2.0% in the prior quarter, primarily driven by residential real estate exposures in the Channel Islands and U.K. segment. Importantly, the allowance for credit losses remained stable at $27.8 million representing 0.6% of total loans, while the net charge-off ratio remained effectively 0 highlighting the continued strength of the bank's underwriting standards and overall credit quality.
On Slide 12, we present the average cash and securities balances with a summary of interest rate sensitivity. Butterfield continued to maintain a balanced interest rate profile with meaningful earnings upside in a rising rate environment. The investment portfolio duration declined to 4.7 years as fixed rate securities matured. We estimate that a 100 basis point increase in interest rates would increase net interest income by 3.4%, while a 200 basis point increase would increase net interest income by 6.9%. Net unrealized losses on available-for-sale securities increased to $106.7 million at June 30, 2026, from $99.7 million at the end of the previous quarter. However, as securities continue to mature and are reinvested and as market rates evolve, management expects these unrealized losses to improve over time. with OCI projected to improve by approximately 20% over the next 12 months and 43% over the next 24 months based on current forward rate expectations.
Slide 13 summarizes regulatory and leverage capital levels. The Board of Directors has once again approved a quarterly dividend of $0.50 per share. TCE to TA continues to be conservatively above our targeted range at 6% to 6.5%.
I will now turn the call over to Bri Hidalgo, to provide an update on the CIBC Caribbean transaction. Bri?
Thank you, Michael. Following our May 28 announcement of the agreement to acquire CIBC Caribbean, we have been making excellent progress towards closing, which we expect to be in the first half of 2027. Our work streams are focusing on securing key regulatory governance, financing and stakeholder approvals required to complete the transaction and prepare for integration. Near-term priorities include filing and completing regulatory licensing applications, finalizing pro forma financials, obtaining Board approval and securing shareholder approval at the AGM in mid-September.
In parallel, the team is working through creditor related reverse diligence, jurisdictional stakeholder engagement across key Caribbean markets and communication planning for clients, employees and other stakeholders. A second major work stream is funding and transaction readiness. Refreshed CIBC Caribbean data is incorporated at key milestones, supporting pro forma updates and transaction analysis. These activities collectively aim to achieve closing requirements and maintain deal momentum through the approval process.
Overall, we are moving forward at pace. First, securing approvals and transaction prerequisites then advancing financing stakeholder engagement activities while building the operational and framework needed for closing and eventual post-closing integration. We remain on schedule and currently expect all required milestones to be achieved. Finally, I would like to add that financial performance of both companies remains on track and consistent with financial projections underlying the acquisition model.
I'll now turn the call back to Michael Collins.
Thank you, Bri. Before we open for Q&A, I just want to reiterate how excited we are to strengthen and grow Butterfield to the CIBC Caribbean acquisition. The combination of Butterfield and CIBC Caribbean creates a leading independent banking platform across the Atlantic and English-speaking Caribbean anchored by top-tier market positions in our current markets of Bermuda and the Cayman Islands and diversification and scale through an expanded presence across 9 new key international financial centers, including Barbados and the Bahamas.
The pro forma organization's expanded capabilities are expected to provide enhanced corporate, personal and wealth management services across our combined client bases and to the benefit of all stakeholders. The pro forma combined bank is expected to have approximately $29 billion in assets, $25 billion in deposit, $1.7 billion of tangible common equity and more than $400 million of run rate earnings. This positions the company among the largest independent banks in the region with the balance sheet significantly larger than most Caribbean peers and a stronger platform for growth and profitability.
As we look ahead, we remain confident in the strength of our franchise, the quality of our balance sheet and the opportunities before us. While the operating environment continues to evolve, our strategy remains unchanged, delivering sustainable earnings growth, maintaining disciplined risk and capital management, investing in our businesses and creating long-term value for our shareholders.
Thank you. And with that, we'd be happy to take your questions. Operator?
[Operator Instructions] The first question will come from David Feaster with Raymond James.
2. Question Answer
I wanted to touch a bit on the deposit side. You all have done a great job managing deposit costs. I was hoping to get your thoughts on the deposit backdrop and the competitive landscape across your jurisdictions? And it sounds like you think you're going to be able to keep funding costs relatively stable near term, but just wanted to get your thoughts there and any update on those temporary deposits that you've been expecting to flow out.
Yes. David, it's Michael Schrum. Yes. I mean, they keep hanging around. I think the businesses have done a very good job at focusing on cost of deposits and managing client expectations. Going forward with the rate outlook, that may be leading to more difficult conversations. But I think, so far, so good. In terms of the -- and I think the deposit gathering is still something that's a focus for us, obviously, as we can see the earnings coming through.
I think the temporary deposits are still hanging around for a little bit, but we're -- the reason why our cash and short-term security is quite elevated at the moment is partly because, obviously, we don't behaviorize those deposits and we continue to expect that they're going to flow out at some point. The other thing that's impacting a little bit is obviously FX minus in the balance sheet from -- particularly from sterling. As you know, we have 22% of our deposits in sterling. And that's remained -- FX rate has remained relatively stable, as you can see in the deck. So not much movement there. But if that were to move again, that could impact the deposit levels and come back sort of over the average life of the deposit, if you will.
Okay. That's helpful. And then Michael Collins, you talked about providing more enhanced services and products to your clients. I guess as you step back after the deal, as you step back and think about the combined company and you've got the dig in further since the announcement, is there anything this combined company is not going to have as you need to build out, are there any products or services that you might need to be upgraded as you look to provide maybe some more sophisticated products or -- just kind of -- just in your attempt to more fully service your clients because of the materially larger platform. Just kind of curious if there's anything that needs to be upgraded or added?
Good question. we're just getting to know their systems and technology franchise, which is actually really quite good. So we're looking at both our systems and their systems. They've got great online banking. They're very digital. The Caribbean is very digital. So they've got great products and services. I think there's more we can do on the wealth management side, both within Butterfield and the broader platform just in terms of providing more services.
Online banking they have is good. We're focused on, right now, just improving our online banking just sort of the look and feel. So the technology is great, straight through wire transfers, FX transactions in any currency anywhere in the world immediately without anyone touching it. We have all that, but we really are focused on look and feel the technology now that we've got all that in place. But I think the combination of the 2 organizations, it's a broad array of products they have, more corporate products that we have, they do a little bit of investment banking, which we don't do. So I think we're going to be able to provide huge suite of services to corporates, retail, high net worth across the region.
Yes, David, it's Michael Schrum. I'll just add. Obviously, they do have a sizable trust company in Bahamas and Cayman, which will combine obviously over time with our trust companies so that adds some scale to that business. And I think it's fair to say we are a trust bank. And so I think we will definitely focus on that and distribution to clients. The added scale of the company is going to add some of the opportunities for our corporate clients in Bermuda that we haven't been able to serve properly before, it's difficult to quantify, and we obviously haven't included anything in the projections but there are meaningful opportunities.
I think on the flip side, there are some things that they may be doing that we need to have a closer look at to see whether we would like to continue those like equity options trading or whether we want to partner up with CIBC post close and kind of allow customers to transact through us onto their balance sheet. So yes, there's a lot to do, but definitely pretty positive on the wealth side.
That's extremely helpful. And just want to get a pulse on the housing markets and updates on your resi mortgage outlook, we saw a slight increase in nonaccruals. Obviously, that book is extremely well underwritten like you highlighted with low levels of leverage. But are there any jurisdictions that are seeing more pressure? And just how underlying borrowers are holding up in the health of that book broadly? .
It's Bri. I'll take that. Yes. So as you would see, we continue to watch the Channel Islands, specifically the U.K. market. Clearly, there has been softening in that market over time. And that's where you see isolated incidents where we have increased nonaccrual loans, even though nonperforming loans improved quarter-over-quarter significantly. So we are watching the U.K. market very closely. The good news is those portfolios have very low LTVs. And so we have headroom with respect to performance and/or any softening of the markets and property valuations, but that is the space that we're looking at.
And I wish to add -- sorry, David, it's Michael Schrum. Bermuda market is very vibrant right now with multiple offers, probably a strong recovery as I have seen in my 25 years of banking here, there was a post-GFC kind of lull and now it seems to be really picking up with new international businesses setting up. Cayman is sort of cooling off a little bit, but still a very vibrant market in terms of number of transactions. I think the Bermuda market is a bit tougher for us to get into because there's a lot of cash transactions in the market. But certainly, in terms of the robustness of the price discovery, it's very good.
I'll just add in the Channel Islands in Guernsey and Jersey, we're still continuing to build out our retail or sort of mass affluent bank without branches. So we don't have to have a huge platform. We have about GBP 650 million deposits and about GBP 350 million mortgage book. So that's gone quite well and it's actually becoming much more of a sticky deposit retail bank that we saw we would build at this point. So that's good. .
[Operator Instructions] The next question will come from Emily Lee with KBW.
This is Emily stepping in for Tim Switzer. So as it relates to CIBC transaction, can you just walk us through some of the dynamics across these new jurisdictions outside of your legacy markets? Maybe just an update on what you've been seeing? And where do you expect the most opportunity to come from? I believe the Barbados economy appears to be improving. So maybe just to have some dynamics around there.
Emily, this is Bri Hidalgo. I'll take that. So since we last spoke, what we've been focusing on primarily is the regulatory applications and filings, that's a critical step in the closure process. So we successfully completed the first round. We went on site with our local management team and met with a number of the executive leaders domestically within Barbados and Bahamas and received positive feedback not only from our initial regulatory interactions, but also our team member interactions. So we're on point and on task to complete under our existing time line. So all positive movement forward there. With respect to working with the local teams, we have seen that they continue to have a robust credit book. They have great underwriting criteria and standards, and we can see that within their financial performance figures. So everything is holding up and working well.
Yes, it's Michael Schrum. I'll just add to that. Obviously, we've been primarily focused on the larger components of the transaction, and there's still some discovery for us on some of the smaller islands, no doubt we'll find some jewels in there. but certainly Barbados is very robust sort of a pivot towards more retail residential, mirroring our existing platform. We would expect that over the sort of medium term but great opportunities, very positive feedback from Barbados as well. And Bahamas will grow at 25% market share. And Cayman obviously consolidating what we already have onto the combined platform. So that brings some scale to the business. I would -- some of the smaller markets are under review, shall we say. But I think definitely, there's going to be positive developments there. And I think the team on the ground, certainly Barbados very positive about the network effect as well.
Yes. I'll just add that. If you look at across all the islands or of the post-COVID recovery and Barbados obviously had the IMF step in. But they're all doing quite well. I mean Barbados is really recovering, growing well. Bahamas from a tourism perspective, is just amazing. Every time you go, drive from the airport, it's like a different place. So a lot of money flowing there. And Cayman will have a substantial market share, and we obviously know that market pretty well.
So really good market shares across the jurisdictions. I think the timing is really great in the sense that they're all recovering and they're all growing. So I think it's a perfect time to do it.
That's really helpful. And then just on capital deployment, you noted plans to kind of focus on organic growth post CIBC with buybacks likely remaining on pause or I guess, lower levels post close. But would you be comfortable returning to buybacks once the total capital ratio returns to the low 20% range that you target? And what are the puts and takes there on capital deployment?
Yes. I mean I think we've been very strong in terms of saying that we know we need to raise some financing here. Our preference is obviously having as much CET1 as possible and boost our -- confirm our ratings on that basis. But in terms of making this a reality, there is a need to go to the financing on the subordinated debt market, which we are preparing for and will likely do in Q4 after the shelter vote, et cetera.
So I think the capital pro forma you should expect over the medium term to return to what they are now. There's a bit of debt to unwind over time. We're evaluating the impact of the new incoming corporate income tax regime as well. There's some benefiting in having some leverage on the balance sheet. So there will certainly be many more updates in the future. But yes, I mean low 20s sounds like a good number to kind of be modest buy back into help the capital return story again. But near term, we are just building obviously, this called R&H so that -- and we had some buyback before pausing in May.
So the next couple of quarters, we should expect sort of significant capital build. And then we'll just see how the earnings part goes, but our aim is ultimately to reflect the ROE of the combined entity to the shareholders in the form of either dividend, so it could be could be a review of the dividend rate or starting to buy back once we get into a comfortable sort of 20-plus zone.
Congrats on the quarter.
Thank you. .
Thanks.
This concludes our question-and-answer session. I would like to turn the conference back over to Noah Fields for any closing remarks.
Thank you, Nick, and thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day. .
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Bank of N.T. Butterfield & Son Limited (The) — Q2 2026 Earnings Call
Bank of N.T. Butterfield & Son Limited (The) — The Bank of N.T. Butterfield & Son Limited, CIBC Caribbean Bank Limited - M&A Call
1. Management Discussion
Good morning, and welcome to the Bank of N.T. Butterfield & Son Limited Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the call over to Noah Fields, Head of Investor Relations at Butterfield. Please go ahead.
Thank you, operator, and good morning from Barbados. Thank you all for joining us this morning to discuss Butterfield's proposed acquisition of the controlling interest in CIBC Caribbean from CIBC. Today, I am joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer; Michael Schrum, President and Chief Financial Officer; Bri Hidalgo, Chief Risk Officer; and Alex Twerdahl, Head of Strategy and Corporate Development. During today's call, we will make forward-looking statements, which are subject to risks and uncertainties that are intended to be covered by the safe harbor provisions of federal securities laws.
For a list of factors that may cause actual results to differ materially from expectations, please refer to Slide 2 of the investor presentation as well as the disclosures contained within our SEC filings. I will now turn the call over to Michael Collins.
Thank you, Noah, and thanks to everyone joining the call today to discuss the exciting transaction we announced this morning. Butterfield's agreement to acquire CIBC's controlling interest in CIBC Caribbean brings together 2 market-leading international franchises that have long-standing success and history to become one regional champion to the benefit of all stakeholders. This is the type of strategic combination that we have been pursuing for a number of years, and I'm delighted to be able to share our vision for the combined businesses with you.
This transaction is a defining step forward in Butterfield's strategy to become the leading bank and trust company in international financial centers and attractive Caribbean markets. Today, we'll be speaking more about that strategy, the financial details of the transaction, the comprehensive due diligence process we've undertaken and what it means for all stakeholders, including employees, customers, communities and shareholders. The transaction provides a step change in scale and presence and will result in Butterfield further expanding its banking and wealth offerings and improving customer experience across the combined footprint. We are pleased with the level of talent that will join Butterfield and the deep market knowledge that CIBC Caribbean possesses in both retail and corporate banking.
We have committed to maintain full employment of CIBC Caribbean personnel at closing and will be the first to point out that the success of the deal does not hinge on significant cost savings. We will renew CIBC Caribbean's commitments to the communities in which it operates just as we do in our own markets with charitable contributions and enrichment programs. Finally, the transaction represents what we view as an extremely efficient use of capital, and we expect that it will immediately result in double-digit tangible book value accretion at closing and U.S. GAAP earnings accretion in the periods following the closing of the transaction.
Following the closing of the transaction, Butterfield's ordinary shares will continue to be listed on the New York Stock Exchange and the Bermuda Stock Exchange, and we undertake additional secondary listings on several other exchanges in connection with the completion of the transaction. Turning now to Slide 4. Together, Butterfield and CIBC Caribbean will become the largest and most impactful banking and wealth management institution in the Atlantic and English-speaking Caribbean and leading international financial centers. On a pro forma basis, the combined group will have approximately $29 billion of assets, $25 billion of deposits, more than $400 million of run rate earnings and around $1.6 billion of tangible common equity.
The only jurisdictional overlap in our respective operations is in Cayman, where the combined institution will be the clear market leader in a fast-growing and economically vibrant market. Cayman will become the pro forma company's largest market by assets and revenue. Additionally, both institutions have long-standing leadership in their respective markets and deep experience. The additional scale further positions us with local market leadership advantages and time-honored customer relationships in Barbados, the Bahamas, Turks and Caicos and of course, Bermuda. Our objective for the combined business is to provide exceptional services across financially attractive jurisdictions, which are all united by a common history, language and economic ties.
Turning to Slide 5, we provide some of the headline benefits of the transaction. Butterfield and CIBC Caribbean are complementary institutions with similar cultures, synergistic balance sheets, but with minimal geographic overlap. Through the deal, we've gotten to know Mark S. Hill and many of the senior executives and have been encouraged by the cultural similarities of the institution, including a shared vision for serving clients and communities.
Upon closing, Butterfield will gain a deep bench of talented bankers, including several we expect will join our executive committee. As we prepare to nearly double our size and enter new markets, we are approaching execution under our robust and effective risk and governance framework. The combination is underpinned by both organizations' strong regulatory track records and relationships. This transaction also is expected to deliver compelling returns for our shareholders by creating a more resilient balance sheet. We expect approximately 12% U.S. GAAP EPS accretion in 2028, the first full year of combined operations, assuming a closing in 2027 and approximately 10% tangible book value per share accretion at close, with the transaction expected to generate an IRR of over 20% and a return on invested capital of approximately 15%. Following close, Butterfield will have a stronger and more diversified balance sheet with a granular and sticky low-cost deposit base.
We intend to maintain our currently quarterly dividend rate of $0.50 per share, which will be supported by a robust earnings stream. We will be pausing share repurchases following today's announcement and following closing, we'll continue this pause or potentially scale back relative to our repurchase activity while we evaluate growth prospects and build back capital organically.
Turning to Slide 6, you will see that Butterfield has a proven model of growth through acquisitions of complementary banking and wealth management businesses. Since our IPO nearly 10 years ago, we have consistently delivered strong returns for our shareholders aided by M&A. Our M&A history and track record demonstrate our ability to integrate new businesses while continuing to deliver strong financial performance and garnering international recognition for customer service and value creation. Before I turn the call over to Michael Schrum, I would like to thank all of the Butterfield and CIBC Caribbean employees who have gotten us to this point, and I look forward to working with all of our important stakeholders through the next phases of the transaction. I would also like to express thanks to the CIBC team for their collaboration throughout the due diligence process and how much we are looking forward to our continued relationship.
I will now turn the call over to Michael Schrum to walk through the transaction details and financial impact.
Thank you, Michael, and good morning, everyone. Turning to Slide 8. We provide a traditional summary of the transaction. The consideration to be paid by Butterfield will be based on an aggregate transaction value of USD 1.09 billion in cash and USD 703 million in Butterfield shares valued by reference to Butterfield's average share price over the past 10 days. This equates to a total purchase consideration of just below $1.8 billion. Under the terms of the agreement, which have been approved by the Boards of Directors of Butterfield and CIBC, Butterfield will acquire CIBC's 91.7% interest in CIBC Caribbean through the acquisition of CIBC's existing Cayman-based holding company.
CIBC Caribbean's 8.3% shareholders will be offered equivalent economic terms to those obtained by CIBC. The current plan is that the minority shareholders can also have an option to elect to receive up to 100% of their consideration in Butterfield shares, providing them with the opportunity to maintain the entirety of their investment in the combined organization should they choose to do so. To the extent permissible under applicable law, Butterfield's plan is to ultimately seek full ownership of CIBC Caribbean with current minority shareholders becoming shareholders in the combined group. Assuming CIBC Caribbean's minority shareholders elect the same mix of cash and Butterfield shares at CIBC, the former CIBC Caribbean minority interest shareholders are expected to collectively own approximately 2% of the combined Butterfield enterprise following completion of the transaction.
The purchase price reflects a multiple of approximately 1.06x CIBC Caribbean's tangible book value. In conjunction with the transaction, Butterfield plans to issue approximately $700 million worth of subordinated debt to target a 19% or greater total regulatory capital ratio at close for which we have obtained commitments. At closing, CIBC will hold approximately 22% of Butterfield shares and will have the right to nominate 2 directors to the Butterfield Board of Directors. The close of the transaction and shareholder agreement have been approved by Butterfield and CIBC Group Boards. We are confident that we can close the transaction in the first half of 2027, subject to required regulatory approvals, a Butterfield shareholder vote to approve the equity issuance of Butterfield shares to current CIBC Caribbean shareholders and other customary closing conditions.
Butterfield will continue to be headquartered in Bermuda and regulated by the Bermuda Monetary Authority as its consolidated regulator. Barbados will continue to serve as a regional headquarters for the Barbados and broader Caribbean operations in light of the expansion into these markets. Our operating approach and financial projections have conservative and modest synergies built in at around $49 million annually, phased in fully over 4 years from closing. This represents approximately 5.6% of the combined pro forma 2027 expected cost base. The conservative investment case is consistent with our market approach, and there are many other products and market share expansion opportunities that we will pursue over time, but not currently included in our financial projections.
Finally, this transaction will also likely mean that Butterfield Group will become subject to the global minimum tax framework under the Bermuda and OECD agreed frameworks with a minimum applicable corporate income tax rate of 15%. Additional work is ongoing to determine the impact of phase-in provisions at close, but the added annual tax has already been incorporated into our financial projections.
On Slide 9, we provide a view of the added scale and diversification of this acquisition. We expect the addition of CIBC Caribbean to nearly double the deposit base while driving down our average cost of deposits to approximately 1.2% and maintaining a greater proportion of deposits pegged to the U.S. dollar. Our respective loan portfolios are synergistic. Butterfield has historically been a residential lender, while CIBC Caribbean's loans are skewed more towards corporate. Over time, we will seek to expand traditional residential lending in the Caribbean markets carrying lower risk density and lower regulatory capital requirements. The pro forma profile of the combined Butterfield will also be more diverse from a deposits and earnings mix perspective, which will enable a bigger footprint to grow stable and capital-efficient fee-based revenue streams.
Turning to Slide 10. We provide a summary of the increased scale and entry into new markets, which present meaningful opportunities to drive earnings growth. Payment, which has become the driver of Butterfield's earnings over the past few years, will continue to be the largest earnings driver of the combined company. Butterfield's existing markets, which are now well known to our current investor base, will continue to comprise approximately 70% of pro forma earnings. New markets will both add to earnings and provide growth opportunities. The combination of having the leading market share and strong product offerings across our expanded footprint in key markets where Butterfield and CIBC Caribbean have a deep historical presence should strengthen our value proposition for new and existing customers.
Following close, the combined Butterfield will be well positioned to extend our leadership in those markets with greater scale, operational flexibility and growth. Slide 11 shows the opportunity we have to expand our fee business. The enhanced size reinforces our long-term strategic approach for adding high-quality, diversified and recurring revenue streams to our business in terms of primarily private trust services. Our expanded presence in the Bahamas, Barbados and Cayman will add significantly to our fee profile through the combination of the client bases and earnings diversification. We continue to target a long-term fee to revenue composition ratio of 50%, and we see additional revenue opportunities from the introduction of our wealth management offerings.
Turning now to our expected capital and profitability profile on Page 12. Butterfield expects to maintain a strong capital position and close on a consolidated basis with a CET1 ratio above 12%, a total capital ratio of 19% or greater and a tangible common equity to total asset ratio of approximately 6% or approximately 7%, excluding cash. Looking at anticipated profitability in 2028, the first full year following the expected close, we're anticipating approximately 12% U.S. GAAP earnings per share accretion and a return on average tangible common equity of around 20%. Finally, on capital generation, we expect approximately 10% tangible book value per share accretion, over $300 million in annual organic capital generation and a run rate annual capital generation of around 250 basis points.
This strong capital accretion will maintain our flexibility to retain earnings, invest in our business and continue returning capital to shareholders in line with our strong track record.
I'll now turn the call over to Bri for more on our due diligence process and credit composition.
Thank you, Michael, and good morning, everyone. On Slide 14, we outlined the comprehensive due diligence process undertaken to support this transaction. Consistent with Butterfield's disciplined approach and strong track record in credit assessment, our review covered all aspects of CIBC Caribbean's business with particular rigor applied to evaluating the credit portfolio. Our review was led by senior management and supported by external specialists, including detailed data-driven balance sheet and deposit analysis as well as an independent credit review covering approximately 80% of CIBC Caribbean's performing corporate credit portfolio on a loan-by-loan basis.
Within CIBC Caribbean's loan portfolio, we observed strong collateral coverage across sectors and solid cash flow performance, while the securities portfolio is high quality and predominantly investment grade. Additionally, we conducted site visits and held in-person meetings with senior leadership from both organizations and assess key regulatory and compliance areas, including AML, ATF, DSA framework as well as funding and liquidity structures, which indicated strong governance and oversight. To ensure continuity of key services during the post-closing period, a transition services agreement will be formalized from signing through close.
On Slide 15, we outlined CIBC Caribbean's loan portfolio composition. As shown on the left of the page, CIBC Caribbean brings a well-diversified risk-aligned loan portfolio with a stable mix, supported by consistent near-term performance and meaningful exposure to well-regulated and sovereign-linked assets. Portfolio performance has strengthened as pandemic-related pressures have normalized with nonperforming loans of approximately 3.1%, reflecting improving asset quality and post-COVID decline. NCOs remain very low and stable, supported by disciplined underwriting, low loss experience, and ongoing portfolio monitoring and control. Against that backdrop, we have taken a credit mark of 1.58x CIBC Caribbean's current closing reserves, reflecting a conservative view and providing meaningful balance sheet protection at close.
The increase versus the existing credit loss allowances primarily reflects the transition from IFRS to U.S. GAAP, moving from 12-month probability of default to a lifetime expected loss framework. This approach establishes a prudent opening position and provides balance sheet flexibility as we move forward. Overall, the loan composition enhances diversification while aligning well with Butterfield's target risk profile, and we believe CIBC Caribbean's credit assets are consistent with Butterfield's risk appetite and disciplined underwriting standards. Turning to deposits. We like the diversification, granularity and stability of CIBC Caribbean's deposit base. Deposits are well balanced across segments with approximately 50% corporate, 40% retail and 10% sovereign or government-related accounts.
From a currency perspective, approximately 80% of deposits are U.S. dollar and U.S. dollar-linked, with the remainder diversified across local jurisdictions. Overall funding costs remain competitive with current cost of deposits of approximately 85 basis points. The combination of CIBC Caribbean's local expertise in credit underwriting and risk management, along with its balance sheet capacity enhances Butterfield's position as a leading participant in the development of the island economy.
I'll now turn it over to Michael Collins for concluding remarks.
Thank you, Bri. As I think about this transaction, we expect to deliver value and benefits for all stakeholders of the combined Butterfield. For clients and customers, our combination will deliver a comprehensive array of complementary services in more locations and provide us with greater scale to drive investments in technology. Our increase in scale will enhance overall financial connectivity for customers traveling between each of the combined company's 19 jurisdictions and beyond, both through a larger network of unified branches and, over time, through better access to larger clients benefiting from our larger bank balance sheet, improved capital position, and cross-border network.
For our employees, the transaction unites 2 organizations with similar cultures and adds opportunities for career development and advancement through integration. Butterfield expects to maintain and where feasible, expand local employment to support operational and customer needs. The deal also benefits from the strength and knowledge of both organizations with respect to facilitating economic development in the key industries that are central to our economies and communities, including retail customers, local business, tourism and development and on the public side, infrastructure and public services. We believe Butterfield's access to public debt and equity markets adds financial flexibility for future investment across the enlarged business.
Both organizations have long-standing commitments to supporting the communities in which they operate. CIBC Caribbean has built one of the region's leading corporate responsibility platform, including its commitment to contribute 1% of post-tax profits through its charitable foundation and its long-standing partnership with the University of the West Indies, supporting scholarships across the Caribbean.
At Butterfield, we are similarly focused on long-term investment in our jurisdictions through financial education, community partnerships and sustainability initiatives that support economic resilience and opportunity, including through our membership in the United Nations Global Compact and our long-standing scholarship program, which has supported students pursuing higher education since 1978. We believe there is a natural alignment between these approaches and meaningful opportunity to build on them. More broadly, we also believe strong banks have an important role to play in supporting long-term economic growth and thriving healthy communities. The combined organization will continue to support internationally recognized partnerships that elevate the profile of our jurisdictions and deliver meaningful economic impact, including the Butterfield Bermuda Championship on the PGA Tour, which contributes significantly to Bermuda's tourism economy.
For our shareholders, the transaction is expected to be accretive to cash earnings following close, and we believe it will continue to drive execution on Butterfield's strategy of market penetration and fortification in attractive economically linked communities and international financial centers.
It will also add new growth avenues due to size and new markets, which will continue to drive shareholder value. We are approaching 10 years since our initial public offering in September. And in that time, we've accomplished a great deal as a company and for our investors. Looking ahead, this transaction puts us on the right path to continue that trajectory, and I look forward to updating you all as we move towards close and head towards Butterfield's exciting future.
I'll now turn it back to Noah.
Thank you, Michael. More detail on the pro forma financial profile of the potential combined Butterfield and market-specific information can be found in the remaining slides, which have also been published on our SEC disclosures. We may return to those slides during Q&A. Operator, do we have any questions?
[Operator Instructions] And our first question comes from Tim Switzer from KBW.
2. Question Answer
Congratulations on the deal. To start off, could you maybe talk about the background of how this deal came about? I assume it's been a long conversation with CIBC over the years, but was this an auction process or negotiated? And was there ever any consideration on your end to take certain pieces or jurisdictions of the bank rather than the whole thing?
So just to put it in context, it goes back 16 years. So it was a lot younger. So it really honestly goes back to CIBC and Carlyle's participation in Butterfield's recapitalization in 2010. So they each own 23%. And at the time, CIBC owned First Caribbean as it was called. So our view, I think most people thought that at some point, we would probably merge with First Caribbean. I mean, makes obvious sense in terms of the platform. That didn't happen. And just fast-forward to this period, I think it makes so much sense in terms of how it developed. And I would just say the rapport and cultural fit with both CIBC and CIBC Caribbean was really what drove the combination.
I mean we're an island bank. We understand when you go into island with governments and regulators, you have to come in respectfully and then employees and clients are always sacrosanct. And so we modeled the transaction based on that thought process, and I think that's kind of how we got here. So it's been a long time coming. I think we've tried to message the market over time that our first focus is always to trust acquisitions because we're trying to get fee income we're at 41% income ratio now. We're trying to get it to 50% of the time. But I think we always message that if there were a transformational opportunity in the Caribbean, whether it's Scotia or RBC or a CIBC, then we would be very interested.
So we've been talking for some time. So this hasn't -- this new round hasn't happened suddenly. And again, I think the combination of the culture is really what got us here. And now we're going to be the largest bank in the Atlantic and Caribbean -- English-speaking Caribbean, and that will give us a great platform. And really from our perspective, with no lender of last resort, it actually diversifies our deposit base. So each island is very different. They react differently. But the one thing that really stands out is how sticky the deposit bases are, and that's going to be good for us.
Yes, Michael Schrum. Just in terms of your questions about piecemeal, I think this business combination that we're doing here is really both an opportunity to deploy capital effectively, but also provide CIBC with execution certainty by keeping the perimeter intact here. Obviously, some of the smaller islands have growth potential, and we need to look a lot more at that. But obviously, overall, we're still very pleased that Cayman and Bermuda and the existing markets is still 70% of the franchise. So this really gives us a market share sort of opportunity.
Okay. Great. And you mentioned the cultural alignment is very similar. Could you discuss more broadly the integration process, just given the size of this deal and the involvement of, I think it's about 10 countries -- what are the challenges here? And what are the areas that could help, like the cultural stuff? I think you guys also mentioned similar IT systems. If you could provide more color on all that.
Yes. I mean we've obviously had some interaction with governments and regulators. So we have a sense of how it's going to play out. We're going to take our time. So this is not going to be sudden. We are going to get our filings in for regulatory approval very quickly and give each government and regulator time to really understand this and understand how it's going to play out. So it's going to take some time. We've got a good plan on both sides, and we're completely aligned in terms of what needs to happen first and what the priorities are.
But I'll hand it over to Alex Twerdahl to give more detail.
Tim, so I think the key for the integration is really that it's going to be very slow. We're not -- and I'll just point out that the deal is really not based on meaningful synergies. The synergies that we modeled in are about 10% for CIBC Caribbean, 5.5% for the combined institution. So -- and that phases in over 4 years. So in our modeling, we're really looking for sort of very little synergies early on. So we'll take our time. The -- I think one of the things that we were surprised and happy about is that most of the systems are actually contained in the Caribbean. There's not a lot of dependency on Toronto. We will have a transitional service agreement for some of the services that are actually dependent on Toronto, and that will phase out over an appropriate period of time.
And certainly, having CIBC as a partner during that period will make that a very core to our relationship. So the integration, we've -- as we've gotten to know the people at CIBC Caribbean, we've been very impressed with what we found, they've got a deep, very qualified bench in really all the jurisdictions that we've been to. So it's going to be slow. The systems conversion probably will take a little bit longer than you'd see in a traditional bank merger in the U.S., for example, we are on different systems, and we'll certainly evaluate sort of going forward, which is the best one to ultimately combine the institution on.
Okay. Got it. Very helpful, Alex. And then the last one for me. Could you guys talk a little bit more about your plans to remix the earning asset composition? You mentioned wanting to put a little bit more [ Residential ] mortgage in the legacy CIBC markets. we look at the pro forma slide you guys provided. what other actions we assume are taken? Does this look a little bit more like legacy NTB, whether in terms of more cash and securities on the balance sheet, less commercial loan exposure? And like are there any targets or time lines you can provide on this?
Yes, I'll start and then hand it over to Bri. So it's pretty exciting that the balance sheets are quite complementary. So they're -- CIBC Caribbean 70% corporate lending. we're 70% residential mortgages. And if you remember, we used to be 70% corporate. And as you know, our risk profile is very focused on the fact we don't have a central bank. So we have to have a really pristine balance sheet, which we will continue to focus on over time. So I think we will -- if you look at -- they are like 70% lend, we're like 35% lend, but you sort of come out with 50% loan-to-deposits. So it all comes together quite well. And I think we will -- we run the bank based on return on regulatory capital and risk-weighted assets. And we're at 28% risk-weighted assets today.
So incredibly low risk profile relative to U.S. regional banks. That will come up a bit. So we'll find the right balance, but we will lean a little bit more towards residential going forward.
Yes. Great. Thank you. I'd also add that we're looking closely at the investment portfolio. It's a shorter duration investment portfolio, about 2 years. So we'll have the opportunity to roll those assets over into additional treasuries, consistent with our existing investment team. And from a credit perspective, I mean, CIBC Caribbean's credit portfolio is very strong. It's aligned to our risk appetite, albeit more focused on the corporate type lending. So we'll be evaluating both portfolios upon close to understand where we can maximize to Michael's point, RWAs as well as opportunities to deploy capital in an efficient manner.
Our next question comes from Evan Kwiatkowski from Raymond James.
I just wanted to start on the funding base. It seems to be very complementary to your own. But I'm just kind of curious if you could provide more detail on the nature of those deposits in terms of noninterest-bearing composition, the general stability of those and then maybe the geographic concentration of those as well.
Yes. Great. Thank you for the question. This is Bri. So it's a very stable diversified deposit base with low cost of funds, as we mentioned earlier. The primary exposure to USD and USD-linked deposits is around 80%. Demand is about $6.2 billion, notice is about $3 billion and term deposits around $2.8 billion. So a good asset mix from a deposit perspective on funding sources, match assets and liability mixes, and we're not overly reliant on volatile funding. So really good deposit diversity and stable and sticky.
That's great. And then maybe if I could switch over to the $700 million in sub debt issuance. I'm just kind of curious about rate and terms for that and then what impact it will have on the margin trajectory going forward?
Yes. Sorry. Yes, that's a great question. So we do have commitments on behalf of the issuers that in terms of volume, we do not see have a guarantee on pricing. We're thinking that we are going to go to market sometime probably late this year. There's obviously a cost to carry, et cetera. And obviously, the ratings agencies we've spoken to are pretty optimistic about this deal and the earnings profile of this deal. Obviously, Butterfield has a long history as well of returning capital and accreting capital organically by reducing our subordinated debt in the market earlier last year. And over time, just increasing the quality of the capital.
So this will be introducing some additional leverage, which we think is appropriate. It still has a TCE of 6%. So it's still in our target range. And it manages those pieces between the consideration and the ROE together with the -- with hopefully a decent rate on the subordinated debt when we go to issue it. So I think everybody has been very supportive of the structure. It's a little bit more levered than what we usually do, but I think it's appropriate given the earnings profile and the capital accretion. So our aim here is to obviously get back to sort of the low 20s in terms of regulatory capital and then sort of think about then how do we gradually restart the share repurchases on a much bigger platform.
But I'll see if Alex has any other comments on that.
Yes. Thanks, Michael. And I think you summed it up quite well for the sub debt issuance. I think the important things are that because of the commitment, we don't have to be in a rush to actually go to market. There are a number of considerations in sort of in the timing. There's some complications, as I'm sure you've noticed, with the transaction with respect to the accounting, just there on a slightly different fiscal year-end, there's a conversion from the IFRS to the U.S. GAAP system, which we've undertaken most of that or almost all of it at this point, but there are some considerations around that and just certain windows and things like that for the issuance. So we will go to market when we feel it's appropriate. We have the commitments for the volume, and we'd be happy to continue discussing it at further time.
That's very helpful. Last one for me. I'm also just curious about the expected time line for the mandatory takeover bid and if that presents any risk of delay for closing or regulatory approval in any way?
Yes, great question. So there's a couple of moving parts. As you noticed, there's a minority that listed on the Barbados Stock Exchange. Ultimately, we would love to be 100% shareholder decomplicates the structure and the reporting going forward, certainly. So I think the aim here would be to first have a chat with the stock exchange here in Barbados and see how we can kind of achieve that conversion from existing shareholders that are minority shareholders in CIBC Caribbean into kind of the combined CIBC Butterfield Group. And then we obviously have to do a whole bunch of filings in all the different islands on -- then you can also see a snapshot of that on Page 22 of the deck.
And then we have obviously shareholder vote, which will be -- we haven't determined an exact timing of that, but obviously, the pro formas need to, kind of, be ready and go into those filings and then the debt issuance and then sort of run down towards the closing process. So likely, all of that will take a bit of time and probably put us into a 2027 first half time frame.
So I think it's realistic, but also considering that the number of filings that we have to do and talk to each regulator and stock exchanges, et cetera. So we've given ourselves a good time frame to get this done. But those are the sort of steps that are involved. Obviously, we then have to also get shareholder approval to issue the stock to existing CIBC shareholders.
Evan, it's Alex here. I can just add a little bit more on the takeover. So all the regulatory approvals will happen first. And then the way it's written right now is that the deal for the 91.7% will close. And within 7 days, we'll launch a mandatory takeover bid for the remainder. What's important is that our intention is to list on the exchanges that are currently listed on, which is Barbados, Trinidad and Tobago and Bahamas. -- we ultimately want to own 100%, and we intend to provide the minorities with the same consideration mix, equal economics to CIBC.
They will have the option should they choose to take 100% shares if they want to just roll all their shares over into Butterfield shares. But ultimately, we'd like to have just one class of shares, which is what we do today, the New York Stock Exchange will be the primary exchange. But as we do right now, we maintain a listing on the Bermuda Stock Exchange, and we intend to have equivalent listings on the other exchanges I just mentioned.
[Operator Instructions] And our next question comes from Robert Rutschow from Wells Fargo.
I just wanted to follow up on the deposit question. Can you give us any sense of how much of the deposit base is corporate versus retail? And are some of those corporate deposits like transaction accounts where you're doing treasury management or other functions? And is there any -- are there any capabilities you'll need to add to service those corporate clients?
Yes, I'll start. This is Bri. So about 59% of the deposit exposure is to corporate. And there are, in fact, services -- treasury services and other attributes that are provided to those clients. We have the ability to undertake that capability clearly. But there are some services that the parent CIBC from a wholesale markets perspective, wholesale markets activity will likely partner with to refer back to the parent company to execute those types of activities.
Yes. And I think -- sorry, it's Michael Schrum. Just to add to that. Obviously, CIBC is going to continue to be a strong supporter of the franchise and a big shareholder. And so those partnership opportunities could extend to certain products that we don't currently offer or maybe have the capabilities to offer, but we want to make sure the clients can continue to execute on the platform. So those are some of the sensitivities involved in the integration work that we're thinking about right now.
Okay. I guess one other question. It looks like the CIBC franchise had a little bit higher net interest income growth than NTB over the last few years. What accounts for that? And would you expect that to continue? Or will the NII growth rate sort of converge over time?
Yes. Sorry, it's Michael Schrum again. Yes. So absolutely correct, obviously, driven by some of the components of the income, principally low-cost deposits and corporate lending. I think that is obviously a growth avenue for us, but also want to make sure that the return on risk-weighted assets is appropriate, and we don't introduce volatility in the earnings streams going forward. So I think the match is quite good. And then we will continue to focus on return on risk-weighted assets going forward, which probably means a little bit of more of a push into the residential lending, which should not materially change the return profile overall.
Okay. And then just last question on that. The corporate loan growth or corporate loans, would we expect those to continue growing? Or is that going to be deemphasized and maybe decline over time, like 5- or 10-year time frame?
Yes. Sorry, it's Michael Schrum again. So I think we'll probably see less big corporate, I mean, we're basically a mid-market corporate bank. So we sort of bank customers that have cash flow needs and trade needs like LOCs and -- but we're not really big enough to play in the wholesale corporate banking space. And so I think where there are opportunities in these markets, we will partner with CIBC and figure out a way, obviously, because we have a smaller balance sheet, we're also going to be having some LCB constraints that maybe CIBC doesn't have in terms of participation and syndication opportunities.
So all that to say, I think over the next 5, 10 years, you'll probably see corporate slowing down and retail speeding up. And then obviously, we layer on top of those the wealth management opportunities to the earnings footprint and the market share gains. But we'll keep you updated, but that would be my sort of initial thoughts.
That concludes our question-and-answer session. I would like to turn the call back to Noah Fields for closing remarks.
Thank you all for joining us today. If you have any follow-up questions, please feel free to reach out. We look forward to speaking with you again during our July second quarter earnings call. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Bank of N.T. Butterfield & Son Limited (The) — The Bank of N.T. Butterfield & Son Limited, CIBC Caribbean Bank Limited - M&A Call
Bank of N.T. Butterfield & Son Limited (The) — Q1 2026 Earnings Call
1. Management Discussion
Good morning. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2026 Earnings Call for The Bank of N.T. Butterfield & Son Limited. [Operator Instructions] 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. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's first quarter '26 financial results. On the call, I am joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer; Michael Schrum, President and Chief Financial Officer; and Jody Feldman, Managing Director of Bermuda. Following their prepared remarks, we will open the call up for a question-and-answer session.
Yesterday afternoon, we issued a press release announcing our first quarter 2026 results. The press release and financial statements, along with a slide presentation that we will refer to during our remarks on this call are available on the Investor Relations section of our website at www.butterfieldgroup.com. Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussion will refer to certain non-GAAP measures, which we believe are important in evaluating the company's performance.
For a reconciliation of these measures to U.S. GAAP, please refer to the earnings press release and slide presentation. Today's call and associated materials may also contain certain forward-looking statements, which are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these risks can be found in our SEC filings.
I will now turn the call over to Michael Collins.
Thank you, Noah, and thanks to everyone joining the call today. The first quarter of 2026 represents a strong start to the year with solid financial performance and continued execution of our disciplined growth strategy. We were pleased to announce the agreement to acquire Rawlinson & Hunter Guernsey, reinforcing our commitment to build scale in key markets. Demand across our core businesses of banking, wealth management and trust remained robust, reflecting the strength of our client relationships and the resilience of our franchise.
Net interest income benefited from lower costs, while deposit volumes remained stable across all jurisdictions. At the same time, we improved noninterest expenses, demonstrating our ability to manage costs effectively in a low rate, more volatile environment. I'm also pleased to report that following our announcement in February, the acquisition of both Rawlinson & Hunter Guernsey has now closed. This is a strategically important transaction that enhances the scale and capability of our private trust business in Guernsey and further strengthen our position as a leading international provider of trust services with group assets under administration of $146 billion.
Looking ahead, acquisitions remain a key driver of our growth. We will continue to pursue high-quality opportunities in Island banking and trust that align with our strategy and deliver long-term value for our stakeholders. Butterfield is a leading offshore bank and wealth manager with strong leading market positions in Bermuda and the Cayman Islands and an expanding retail presence in the Channel Islands. Across markets, we deliver a broad range of services, including trust, private banking, asset management and custody, which are designed around the needs of our clients.
We also support international private trust clients in the Bahamas, Switzerland and Singapore and originate high net worth residential mortgages for prime London properties through our London office.
I will now turn to the first quarter highlights on Page 5. Butterfield reported net income of $62.6 million and core net income of $63.2 million. We reported core earnings per share of $1.55 with a core return on average common equity of 24.1% in the first quarter. The net interest margin was 2.75% in the first quarter, an increase of 6 basis points from the prior quarter with the cost of deposits falling 13 basis points to 124 basis points from the prior quarter. But we again are announcing a quarterly cash dividend of $0.50 per share.
During the first quarter, we continued to repurchase shares with a total of 800,000 shares at a cost of $42.4 million. We continue our active capital management and plan to continue to return excess capital that we do not require to support the business and growth initiatives.
I will now turn the call over to Jody for an update on Bermuda and Cayman markets and businesses.
Thank you, Michael. Starting with Bermuda, the economic outlook remains constructive, underpinned by steady growth in a thriving international business sector anchored by reinsurance. Real GDP growth is estimated at 3% for 2025, reflecting continued economic momentum. Bermuda's fiscal position has improved markedly with the government projecting a record surplus of $472 million for the 2027 fiscal year, largely driven by revenues from the new corporate income tax.
While economic growth is positive, Bermuda continues to navigate structural challenges, including a high cost of living and doing business, an aging population and limited availability of affordable housing. These factors remain important considerations as the island plans for sustainable long-term growth. The hospitality sector is benefiting from renewed investment with $182 million of capital spend planned for infrastructure and tourism revitalization. The partial reopening of the Fairmont Southampton in late 2026, followed by a full reopening in 2027 is expected to bring hotel room inventory above pre-pandemic levels.
We are also encouraged by plans for the redevelopment of Elbow Beach Resort, which is expected to commence later this year. Finally, Bermuda continues to reinforce its global profile as a premier destination for international sporting events, including the PGA Tour Butterfield Bermuda Championship, the Newport to Bermuda Sailing Race and SailGP. These events not only support tourism and international visibility, but also reinforce Bermuda's position as a high-quality jurisdiction for business visitors and residents alike.
Now turning to the Cayman Islands. GDP forecast suggest that growth is expected to moderate in 2026 to around 2% for the year, which is a steadier and more stable pace of development in the past few years of 4% to 6% GDP growth. Unlike Bermuda, Cayman has seen significant population increases, which are forecasted to grow to the low 90,000s over the next couple of years. Tourism and financial services continue to grow. January and February saw record stayover arrivals consisting primarily of U.S. tourists.
Financial Services in Cayman continue to grow with reinsurance a growing industry and the international fund services business remaining a cornerstone. The Cayman government continues to be fiscally disciplined with 2026, '27 budget expectations of a modest surplus, suggesting Cayman is entering a slower growth phase following rapid expansion.
I will now turn the call over to Michael Schrum for more detail on the quarter. Michael?
Thank you, Jody, and good morning. On Slide 6, we provide a summary of net interest income and net interest margin. In the first quarter, we reported net interest income before provisions for credit losses of $93.3 million, an increase of $700,000 from the prior quarter. Net interest margin increased 6 basis points to 2.75% compared to 2.69% in the prior quarter. This increase is largely due to lower deposit costs and increased investment yields, partially offset by treasury and loan yields as central banks cut market interest rates as well as a lower day count in the first quarter of 2026.
We expect the NIM to be broadly stable with a slight positive bias for the remainder of this year. Average investment volumes increased as assets were deployed into higher-yielding available-for-sale investment securities, helping to increase the average investment yield by 6 basis points to 2.78%. Average loan balances were stable compared to the prior quarter. Net loan volumes actually increased during the quarter in Jersey and Cayman. However, the impact of foreign exchange translation from the weakening of the pound sterling against the U.S. dollar masked this uptick.
During the quarter, the bank continued to pursue its conservative strategy of reinvesting the paydowns and investment maturities into a mix of U.S. agency MBS securities and medium-term U.S. treasuries. Slide 7 provides a summary of noninterest income, which totaled $62.6 million, a decrease of $3.7 million over last quarter. This was due to expected decrease in seasonally higher comparative fourth quarter banking fees. Gross fees were also down due to lower time-based and special fees compared to the prior quarter. Foreign exchange fees increased slightly due to higher volumes in the quarter. The fee income ratio decreased overall to 40.6% compared to 41.7% in the prior quarter and continuing to compare favorably to historical peer averages.
On Slide 8, we present core noninterest expenses. Core noninterest expenses decreased compared to the prior quarter due to lower costs associated with professional and outside services fees for project work, lower technology and communications expenses, which were offset by higher payroll taxes related to the annual vesting of share-based compensation in the first quarter.
Slide 9 shows Butterfield's balance sheet is liquid and conservatively positioned. Period-end deposit balances were slightly elevated compared to the prior quarters. Butterfield's low-risk density of 28.7% continues to reflect the regulatory capital efficiency of the balance sheet. On Slide 10, we show that Butterfield's asset quality remains strong. The Investment portfolio is low risk, consisting entirely of AA or higher rated U.S. treasuries and government-guaranteed agency securities. Credit performance was stable this quarter with negligible net charge-offs, nonaccrual at 2% and allowance for credit losses at 0.6% of total loans.
Our loan book is anchored by high-quality residential mortgages with 71% full recourse loans with nearly 80% at loan-to-value below 70%. We continue to apply conservative underwriting across Bermuda, the Cayman Islands and our U.K. and Channel Islands businesses. On Slide 11, we present the average cash and securities balances with a summary of net interest rate sensitivity. Net unrealized losses in the AFS portfolio included in OCI were $99.7 million at the end of the first quarter, an increase of $10.3 million over the prior quarter. Interest rate sensitivity has increased slightly against the prior quarter, driven by changes in asset composition with an increase in short duration assets. We continue to expect improvement in OCI with additional burn down over the next 12 to 24 months of 20% and 47%, respectively.
Slide 12 summarizes regulatory and leverage capital levels. The Board of Directors has once again approved a quarterly dividend of $0.50 per share. TCE to TA continues to be conservatively above our targeted range of 6% to 6.5%. Finally, tangible book value continued to increase and closed the quarter at $26.56 per share, an increase of 0.6% over the prior quarter end.
I will now turn the call back to Michael Collins for closing remarks.
Thank you, Michael. Butterfield's geographic footprint includes some of the world's key global financial jurisdictions, which position us well for sustained expansion, supported by both targeted acquisitions and internally driven growth initiatives. We continue to seek overlap and complementary bank and private trust acquisitions that best utilize our management team's extensive experience and furthers our ambition as a leading independent bank and wealth management group operating across strategic financial centers and island economies with favorable profiles and potential for growth.
Our capital-light fee-driven businesses continue to offer distinctive solutions tailored to evolving client needs, reinforcing our strong competitive position. Looking ahead, we are committed to further improving operational effectiveness while maintaining disciplined cost management. Butterfield's capital management remains central to our approach. Strong earnings generation enables us to strike an appropriate balance by delivering consistent shareholder returns through dividends, investing in organic growth, pursuing strategic and value-enhancing acquisitions and executing share repurchases as appropriate.
Our balance sheet remains strong with a conservative liquidity profile that is closely aligned with our operating model and regulatory oversight. The bank is well positioned to deliver service and value to all stakeholders.
Thank you. And with that, we would be happy to take your questions. Operator?
[Operator Instructions] Our first question comes from Evan Kwiatkowski with Raymond James.
2. Question Answer
This is Evan on for David Feaster. I just wanted to start off on the deal. I know it's early innings still, but just curious how things are progressing and what you're hearing from both the team and customers broadly. And then maybe on the financial impacts, I'm just curious what your updated fee income growth expectations are? And then any additional onetime costs that are expected from the transaction?
It's Michael Collins. It's -- the client base is very similar to ours. So we've been in the private trust business for 70 years, and this was a founder-owned trust company that we've looked at for years in Guernsey. So we know it quite well. The client base, I think, will be very comfortable with our approach. Very similar to their approach. We don't sort of compete in terms of trying to sell asset management into our private trust relationships and clients appreciate that. It's 50 really highly qualified staff in Guernsey, 71 client groups and about $9 billion of assets under trusteeship. So that takes us up to about $146 billion assets under administration or trusteeship.
So it's not huge. And as we've said in the past, we're very disciplined in terms of how we price these acquisitions. So it's sort of up to $50 million in terms of private trust acquisitions, 8x EBITDA sort of 12%, 15% IRR or higher and has to be at least 2/3 private trust. So we know the business well. It's incremental in terms of fee income. It helps quite a bit, but it gets us 70 new client groups, which are very high quality. So we're very happy with it. It's closed. We're working on integration. It should be seamless, very low risk.
Yes, Evan, it's Michael Schrum. Just on the question in terms of updated fee projections, we're sort of expecting this to add about GBP 8 million to GBP 10 million annualized. So obviously, we'll start to put that into the next quarter. Obviously, with that comes -- both the integration costs and also the cost line will obviously increase due to onboarding of the new colleagues as well.
I mean I think it's a really good book of business and the people we've met have been very pleased with the model that we run, which is the independent trust model. This gives our new colleagues a genuine sort of career path and the clients really do like Butterfield. It's a well-known brand in Guernsey. And I think, again, this will be -- they'll be comforted by the private credit rating of the bank and obviously, the balance sheet that sits behind the new fiduciary provider. So we just closed it. We're just in the process of looking at, obviously, the integration and potential synergies, et cetera. So we'll come back once we finalize the PPA work next quarter and give some more detail on how it's going.
That's really helpful. And then next, I thought I would touch on the NIM. I noticed you called out you managed the duration of the portfolio a bit to be a bit shorter, increasing rate sensitivity. And I'm just curious how you view the NIM trajectory from here given current Central Bank expectations?
Yes. No, great question. Obviously, maybe better than it was a month ago. I think we view the flat, higher for longer rate environment is constructive for the balance sheet. I think I said last quarter, NIM should be broadly flat. We have some tailwinds and headwinds in that. And actually, the -- I think the exit NIM for March month was at the 2.70% level. So it's a little bit lower, but again, plus/minus 5 basis points depending on the deposit composition.
And what's really driving that is this quarter was really the lowering of deposit costs overtaking essentially the downward trajectory in treasury and short cash repricing. So I think for the remainder of the year, we sort of remain cautiously optimistic that we can fight those headwinds with the asset repricing model that's in there, both on the loan and the investment securities. So at the moment, the average investment security yields for the quarter was 3.96%. And so that provides -- when you have that $1 billion or close to $1 billion resetting over the next year with a tailwind of 1%, that should be a positive bias. And certainly, like I said, central banks are, I think, weighing their options at the moment. And any time we see a higher for longer environment around us, that's going to be better for us because we get the whole asset repricing coming through.
That's helpful color. And then lastly for me, you already kind of alluded to it, but just keeping in mind your through-cycle efficiency ratio target of 60%. Curious, is it fair to see core expenses tick back into that $90 million to $92 million range per quarter for the rest of the year? Or just any updated expectations there, especially with the deal? And then maybe any seasonality trends would also be helpful.
Yes. Great question. It's Michael Schrum again. So I mean, the first quarter is always a little bit seasonally low. There tends to be a lot of sort of expense drive up to the end of the year. But I mean, it's not enough really to call it out. But in terms of the deal, so I think, yes, $90 million to $92 million without the additional new colleagues that we're onboarding and system conversion, et cetera.
So it's a little bit of noncore cost this quarter related to the drafting of the SBA and that type of thing. But we're sort of expecting, obviously, for this to be accretive overall. And so if you think about the fees that are getting added to the top line, we would expect for that to sort of generate that cost drive as well on the cost increase from salaries. And as we onboard the new folks there, they're going to be brought on to our platforms. And so it's a little bit early to talk about forward guidance on cost. But without the deal, I would say $90 million to $92 million is a good number.
Our next question comes from Emily Lee with KBW.
This is Emily Lee stepping in for Tim Switzer. Congrats on the quarter. So just on credit, NPLs and provision took a step up this quarter. So I was wondering if you could provide any color on the drivers there and what we should expect on both metrics going forward.
Yes. I mean we're starting from a very low base. Sorry, it's Michael Schrum again. I would say when you look at Note 6 to the financials, you'll see some past due migration. And really, it's something that we've seen in sort of the -- we've seen a few of these cases in -- over the last couple of years. And these are really related primarily to residential mortgages in our prime Central London loan book. And they went into -- they drop into the sort of short-term past due account this quarter.
Just as a reminder, these are 3- to 5-year mortgages underwritten at 60%, 65% LTV. So really well secured, and there's a lot of equity in these loans. We continue, therefore, to believe that they will resolve themselves over the medium term as liquidity in the London prime and super prime markets is sort of relatively thin at the moment. There's been a number of policy changes in that market, and we are patient lenders, as you know. And so we've continued to work with borrowers facing sort of temporary liquidity issues. So I think bottom line, it's a little bit elevated right now, but we expect for that to normalize either through refinancing or through repayment when the property is sold. But these are sort of similar to what we've seen before in terms of prime Central London mortgages.
Got it. And then how is the current loan pipeline looking? And what are you hearing from borrowers on the demand front? Are there any particular industries or jurisdictions that are seeing strength or that you're leaning into other -- over others right now?
Yes. I mean maybe I'll start off and Jody, who's closer to the clients can give a little bit more color on that. But essentially, it's been -- the market is all different. I think prime, super prime in London is facing some uncertainty around governmental policy changes, including the Res Non Dom regime changes that are phasing in some additional property taxes that need to kind of filter through the market in terms of either valuation changes.
So there's a lot of buyers on the side at the moment in that market. On the flip side, we're seeing the sort of Middle Eastern situation. There's a lot of people moving back and renting. So that's kind of a temporary fix, if you will, for that, particularly from Dubai, people are moving back into Central London now. Cayman actually is looking pretty good. We obviously want residential mortgages because our model is a return on risk-weighted asset model. So 35% risk weight and now potentially even lower at LTV bands under the Basel IV Endgame. So we strongly prefer residential mortgages. The Cayman loan book actually is looking decent. So as you know, we have in Bermuda and Cayman fully amortizing mortgages underwritten at 80%, max 80% LTV with the appropriate exception underwriting in place.
And for the first time in a couple of years, actually, the Cayman residential mortgage book originations overtook those amortization rundown as we improve the LTV profile overall. And Jody, do you want to talk about Bermuda?
Yes. Thanks, Michael. And let me just highlight, obviously, we're not a loan growth story. But as Michael pointed out, some good pipeline, particularly here in Cayman with some of the high-end resi towers that are popping up. We're participating pretty prominently in a lot of those, which is great to see.
On Bermuda, obviously, some pretty acute supply/demand imbalances in housing, but we do have a good position within the retail and private banking lending space, particularly in Bermuda, constrained a little bit on the corporate side in Bermuda just to lack of pretty significant projects coming online. But overall, we're seeing some decent pipeline in all of the markets combined, but a little bit subdued in Bermuda, but some good pockets of opportunity in Cayman.
That's very helpful. And if I could just squeeze in one more. You mentioned expectations for asset repricing to kind of help fight those pressures on the NIM. How are incremental loan yields looking right now?
I didn't catch the last bit. How is incremental...
Loan yields looking?
Revenue?
Loan yields.
Loan yields. Yes. I mean there's a couple of dynamics in there. As you know, in Bermuda, we underwrite LTV. We have a lot of fixed rate loans that are coming up actually this year, both in Bermuda and Cayman, which are sort of temporarily or you would probably call them arms. So they're resetting back to their original floating rate, which obviously is still elevated. So there's some significant tailwinds from that asset repricing.
I would say new loans in Bermuda, typically around the 7% mark. Cayman is a little bit more competitive around new originations. There's a number of other participants who are pretty aggressive on price competition in this market, so around kind of 6-ish. Channel Islands maybe around 5%. Again, these are sterling, Bank of England, fixed and floating rate loans that are 3 to 5 year. So if you average that out over new originations probably ends up somewhere in the 6% range, which is reasonable for that risk weighting. And the pipeline really is beyond what we can control. We can be a participant in the market.
[Operator Instructions] Our next question comes from Robert Rutschow with Wells Fargo.
A question on deposits. Could you give us an update on the outlook for deposits? Any concerns that we should think about in terms of outflows? And then do you expect to get any inflows from the R&H deal?
Yes. It's Michael Schrum again. Maybe I'll just talk about the R&H deal. Initially, these clients are trust clients. And obviously, occasionally, we can provide banking services to those clients as well. Actually, a few of them were already banking clients of ours because obviously, they were an independent trust company. So it's always something that we would like to do for administrative ease ins and outs, and we sort of can see and understand the client a bit better that way. But obviously, we're not competing on asset management for those clients. So there could be a little bit of trickle in, but I wouldn't expect it to be a major uplift to deposit balances overall.
We, for a while, have been monitoring a couple of these sort of lumpier deposits, which are typically from our trust business in Bermuda and private client business in Bermuda and some corporate deposits. So we were expecting some further outflows and for the balance sheet to kind of normalize at around $12 billion. Now we're getting notified of some new incoming deposits. So it could be a bit longer and some of the composition of the deposit base will probably end up changing a little bit over time. So I think at the moment, it's $12 billion to $12.5 billion is probably a decent number for now. We'll obviously see it when we see it, but some of those corporate deposits are held up in court proceedings and appeals processes and that type of thing. So -- but generally constructive, actually, I think.
Okay. Great. And if I can follow up with a broader question. As you think about the acquisition opportunities, how many competitors might be out there that you would be able or willing to buy? And is there any increase in competitive pressures that might encourage someone to sell like technology requirements or anything else that might spur a little more activity than we've seen, say, over the past 5 years.
Yes. So there's sort of 3 types of offshore trust entities, so to speak. So the first is the private trust companies that we're interested in. And the first type is sort of founder-owned, which is what R&H Guernsey was. So part of an affiliated network, Rawlinson & Hunter, but founder-owned, really good book of business, usually pretty small. So as we talked about, it's not huge, but a great book of business.
Then you have the sort of big bank-owned trust companies, whether it's an HSBC or RBC. Those are a lot bigger. We still think that a lot of big banks are motivated to sell offshore trust companies just from regulatory pressure. And let's be honest, scale-wise, it's just sometimes not worth having something like that. So we still think that there could be opportunities there. And the third kind is sort of the big private equity-owned fee businesses offshore, which do basically like third private trust, company administration and in fund administration.
We've looked at those. We're sort of hesitant to go into those sorts of businesses because we're really focused on private trust. Fund administration is very different. It needs a lot of technology. Company administration is tough because you have AML issues sometimes. So we're very focused on private trust. And also, if you're sort of the third buyer from private equity, it's probably not the best price. So we tend to stay away from that. So there's a lot of opportunities, founder-owned and also big sort of onshore bank-owned offshore trust companies, and we just have to be patient and stick to our guns.
So we're not going to really pay above 8 or 9x EBITDA, and it's got to be a decent IRR. And we're 40% fee income ratio. So our goal is to get that higher and become more of a fee company. And every one of these acquisitions adds a couple of percent on to that fee income ratio. So we just need to be patient, buy the right books and be very disciplined about pricing.
This concludes our question-and-answer session. I would like to turn the call back over to Noah Fields for any closing remarks.
Thank you, Bailey, and thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Bank of N.T. Butterfield & Son Limited (The) — Q1 2026 Earnings Call
Bank of N.T. Butterfield & Son Limited (The) — Q4 2025 Earnings Call
1. Management Discussion
Good day, and welcome to the Butterfield Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Noah Fields. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's fourth quarter and full year 2025 financial results.
On the call, I'm joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer; Michael Schrum, President and Chief Financial Officer; and Bri Hidalgo, Chief Risk Officer. Following their prepared remarks, we will open the call up for a question-and-answer session. Yesterday afternoon, we issued a press release announcing our fourth quarter and full year 2025 results. The press release and the slide presentation that we will refer to during our remarks on this call, are available on the Investor Relations section of our website at www.butterfieldgroup.com.
Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-GAAP measures, which we believe are important in evaluating the company's performance. For a reconciliation of these measures to U.S. GAAP, please refer to the earnings press release and slide presentation. Today's call and associated materials may also contain certain forward-looking statements, which are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these risks can be found in our SEC filings.
I will now turn the call over to Michael Collins.
Thank you, Noah, and thanks to everyone joining the call today. In 2025, Butterfield delivered strong financial results through disciplined execution. Net income improved versus the prior year, with core net income per share growing 17.4% year-on-year to total $5.60 per share. Our strong relationship-led banking and trust businesses increased noninterest income while lowering deposit costs and asset redeployment boosted interest earnings.
We maintained expense discipline and advance our technology platform by adding new customer functionality and improved interface. Capital management remains an important value lever, which is reflected in our quarterly dividend increase last year and share repurchases, which resulted in a total combined payout ratio of 97% in 2025.
Our M&A growth strategy remains on track, and we continue to have active dialogue with potential targets. Butterfield is a leading offshore bank and wealth manager with leading competitive positions in Bermuda and the Cayman Islands and a growing retail banking business in the Channel islands. We provide a range of services, including trust and private banking, asset management and custody, which are designed to meet the needs of our clients. Beyond these core banking markets, we serve international private trust clients in the Bahamas, Switzerland and Singapore. And from our London office, we offer high net worth mortgage lending for prime Central London properties.
I will now turn to the full year highlights on Page 5. Butterfield generated solid net income of $231.9 million and core net income of $237.5 million. This resulted in a core return on average tangible common equity of 24.2% for 2025. During the year, net interest margin increased 5 basis points to 2.69% from 2.64% in 2024 with the average cost of deposits falling to 150 basis points from 183 basis points in 2024. Tangible book value per common share grew 21.7% in 2025, ending the year at $26.41. Balance capital management continued to be a key driver for shareholder value. In addition to the increase in the quarterly cash dividend rate, the bank repurchased 3.5 million shares for a total value of $146.7 million in 2025.
Finally, on behalf of the bank's Board of Directors, I am pleased to welcome Meroe Park back to the Board. Meroe brings more than 30 years of distinguished public service, including senior leadership roles at the Smithsonian Institution and the Central Intelligence Agency, where she oversaw governance, operations and public accountability. Her proven ability to lead in complex environments, coupled with deep expertise in human resources, operations, technology and cybersecurity will add a meaningful voice to our Board's deliberations.
I will now turn the call over to Michael Schrum for details on the fourth quarter.
Thank you, Michael. Good morning, everyone. In the fourth quarter, Butterfield reported net income and core net income of $63.8 million. We reported earnings per share of $1.54 with a core return on average tangible common equity of 24.6% in the fourth quarter. The net interest margin of 2.69% in the fourth quarter was a decrease of 4% from the prior quarter with the cost of deposits falling 10 basis points to 137 basis points from the prior quarter. The bank has again announced a quarterly cash dividend of $0.50 per share.
During the fourth quarter, we continued to repurchase shares, acquiring and canceling 600,000 shares at a cost of $29.6 million. On December 8, the Board also approved a new share repurchase authorization for 2026 of up to 3 million common shares or $140 million.
On Slide 7, we provide a summary of net interest income and net interest margin. In the fourth quarter, we reported net interest income before provision for credit losses of $92.6 million, which is in line with the prior quarter. The net interest margin decreased 4 basis points to 2.69% compared to 2.73% in the prior quarter. This decline was as a result of lower treasury and loan yields following further cuts by central banks.
Average investment volumes increased as the bank deployed assets into high-yielding available-for-sale investments which helped increase average investment yield to 2.72% from 2.67% in the third quarter. Average loan balances continued to moderate compared to prior quarter predominantly due to lower originations relative to amortization on existing loans. Average interest-earning assets in the fourth quarter increased $199.4 million to $13.7 billion, with treasury and loan yields were 20 and 23 basis points lower, respectively. During the quarter, we maintained our conservative investment strategy with the reinvestment of maturities into a mix of U.S. agency MBS securities and medium-term U.S. treasuries.
Slide 8 provides a summary of noninterest income, which totaled $66.3 million, an increase of $5.1 million over the last quarter. This was due to higher banking fees, which improved from seasonal growth in card volumes and incentive programs. Foreign exchange revenues also rose as volumes increased, as well as higher asset management revenues due to increased asset valuations. The fee income ratio increased to 41.7% compared to the prior quarter, continuing to compare favorably to historical peer averages.
On Slide 9, we present core noninterest expenses, which increased compared to the prior quarter due to external services fees, high incentive accruals and increased event and sponsorship marketing-related costs. There were a number of costs during the quarter that we do not expect to repeat. I would anticipate that quarterly core expenses to be around $92 million over the next few quarters.
I'll now turn the call over to Bri to go through the balance sheet and some risk highlights.
Thank you, Michael. Slide 10 shows that Butterfield's balance sheet remains liquid and conservatively positioned. Period-end deposit balances were consistent with prior quarters, although actual deposit outflows of $360 million were offset by foreign exchange translation gains of $310 million when compared to the fourth quarter of 2024, as shown in the appendix on Slide 17. Butterfield's low-risk density of 28.3% continues to reflect the regulatory capital efficiency of the balance sheet.
On Slide 11, we show that Butterfield's asset quality remains very strong. The investment portfolio carries low credit risk consisting entirely of AA or higher rated U.S. treasuries and government-guaranteed agency securities. Credit performance in our loan and mortgage portfolios was stable this quarter with no net charge-offs, non-accrual loans held at around 2%, and our allowance for credit losses remained at 0.6%. Our loan book remains 71% full recourse residential mortgages with nearly 80% having loan to values below 70%. We continue to take a conservative underwriting approach, focusing on high-quality residential lending across our Bermuda, the Cayman Islands and the U.K. and Channel Island segments.
On Slide 12, we present the average cash and securities balances with a summary of interest rate sensitivity. Net unrealized losses in the AFS portfolio included in OCI were $89.4 million at the end of the fourth quarter, an improvement of $12.1 million over the prior quarter. Interest rate sensitivity has increased versus the prior quarter, driven by updates to deposit beta assumptions. We continue to expect OCI improvement with additional burn down over the next 12 months of 28%.
Slide 13 summarizes regulatory and leverage capital levels. The Board of Directors has once again approved a quarterly dividend of $0.50 per share. TCE/TA of 7.5% continues to be conservatively above the targeted range of 6% to 6.5%.
Finally, our tangible book value per share continued to improve this quarter by 5.4% to $26.41 as unrealized losses on investments improved.
I will now turn the call back to Michael Collins.
Thank you, Bri. In 2025, Butterfield continued to produce top quartile returns relative to peers, while maintaining a comparatively low ratio of risk-weighted assets to total assets of 28.3%. Our banking jurisdictions in Bermuda came in at the Channel Islands continued to perform well and provide stable, noninterest income with solid core deposits and franchise-level market shares.
We remain committed to actively pursuing trust and bank acquisitions, which should help improve the overall quality of earnings for our asset-sensitive banking franchise.
Finally, I would like to thank our clients for their continued support and business. I would also like to express my gratitude to fellow directors for your guidance and governance. As we enter 2026, I look forward to continued collaboration and success across all of Butterfield. Thank you. And with that, we would be happy to take your questions. Operator?
[Operator Instructions] And our first question will come from Tim Switzer with KBW.
2. Question Answer
I was looking for some clarification real quick on the expense guide you gave. I heard the $92 million, did you say $90 million to $92 million for quarterly expenses or it broke up a little bit. So just looking for clarification.
Yes. No, thanks for the question. Yes. I mean, they were trending a little bit higher in quarter 4. Obviously, some of that was due to incentives, et cetera, and then there was some outside services fees. But I think, some of those will not be repeating in future quarters. So sort of thinking it's going to settle between $90 million and $92 million.
Okay. Got it. Is that a good run rate for the rest of the year? And like what's the trajectory there? Because I know there's a good amount of seasonality as we get into Q1.
Yes. I mean quarter 4 is normally -- I mean, yes, depending -- quarter 4 is normally a little bit higher as you will have seen from prior years as well. Q1 tends to be sort of on the low side. So by a couple of million but nothing big expected to come through in terms of investments, et cetera, in infrastructure. So I think, yes, some of the seasonal bits in Q4 will not be repeating in the following quarters. So I think that's a pretty good run rate.
Okay. And obviously, very strong trends this quarter in your fee businesses. Can you talk about -- and I see it was pretty broad-based, but can you talk about broadly what's kind of driving that? And some of the investments you've made on the tech side, has that helped drive some of this upside?
Yes. Great. Another great question. It's Michael Schrum again. So if I just close through the fee categories, so asset management fees, obviously, most -- I mean, some of those are periodic fees, but most of them are driven by underlying valuations improving significantly in the fourth quarter and throughout 2025, actually driving the asset management fee that we then build on those accounts, particularly on the discretionary side.
Obviously, the money fund has also attracted. We have a AAA rate of money funds, also attracted additional volume in 2025. So that's been a positive, and hopefully, we'll continue in the future. As you know, banking is sort of seasonal in Q3 and Q4, where we get some volume incentives occurring from our card programs. So that probably will not be repeating in Q1 and Q2, so that's probably seasonally high in Q4.
But underneath, the banking fees, there's also transaction volume fees, standing orders and periodic fees such as bank account fees and statementing fees, et cetera. FX has been a real source of strength this quarter and throughout 2025, actually. And so we believe we're making some good progress there. There's some new functionality that we are allowing clients to access credit lines for FX, et cetera. So I think that's helped a little bit, get our name out there and drive some volume.
And then obviously, trust was particularly strong again this quarter and is primarily related to the Credit Suisse asset acquisition that we have now completely integrated, and we're starting to see good additional client volume coming through and also our standstill on that contract on fees has now expired. And so -- we're just rebalancing those fees to services provided there. So I think that probably will continue into 2026. So I think very strong performance in Q4 and throughout 2025 on the noninterest income.
Got it. That was very helpful. Appreciate all the color. One last one for me. NPAs moved a bit lower this quarter. Can you maybe talk about some of the puts and takes there? What drove that and what your outlook is for credit migration over the next year?
Yes. I mean, obviously -- sorry, it's Michael Schrum again. So we're not -- we haven't put our financials out they're coming out with the 20-F when we furnish that in a little bit. But underneath the -- I mean, we're not seeing systemic shifts in NPA migration or days past due migrations. It's really related to a few commercial accounts sort of scattered throughout the throughout the network, really, mostly in Bermuda for this quarter
Obviously, during '25, we saw some improvement in the credits, primarily related to the liquidation of the Elbow Beach Hotel, which completed in Q2, Q3. And then we had some commercial litigation that we successfully completed in sort of Q3 as well. So it's not really anything systemic there, but we're certainly keeping an eye on it.
The next question will come from Liam Coohill with Raymond James & Associates.
So you've experienced some noninterest deposit growth on the Caymans this quarter. Could you remind us if there are any seasonal elements to those flows that we should be aware of?
Hi, Liam, this is Bri Hidalgo. Yes, we definitely saw a seasonal influx associated with reinsurance payments that drove that increase. It's nothing more than that.
Okay. Great. And then to circle back to your fee businesses to take a higher level view, especially in your trust business, now that the CS business is integrated, where are you seeing the most opportunity for new clients? And how is client retention trended given the movement to your current fee structure?
Yes. Thanks for the question. Actually, Credit Suisse has bedded down quite well now. So our Singapore office is actually in sort of a growth mode. So that's helpful.
Generally, in the trust world, you organically grow like 2% a year, and you have a natural attrition of about 2% as trust come to their natural end after 30, 40 years. So basically, there's not a lot of organic growth. So we generally focus on trust acquisitions to grow the book in our existing jurisdictions, and we're continuing to have those discussions, but we are very excited about Singapore office. It's -- we're top 5 private trust company in Singapore now and there's great growth opportunities. But generally, growth in trust is going to come through acquisitions.
Great. You actually led right into my next question. It was great to hear that conversation on the M&A front have been continuing. Have you even focused on any particular geographies for those trust acquisitions and what other fee businesses interest you?
So we're really focused on our existing jurisdictions for trust or if we have an opportunity for bank overlap acquisitions, but we believe having trust companies in Guernsey, Bermuda, Cayman, Switzerland and Singapore, those are the best trust jurisdictions. So I don't think necessarily we would go outside of that footprint.
The issue with acquisitions, obviously, is we can't always get exactly what we want. So sometimes, there'll be one or two other jurisdictions that we'll have to take on. But generally, we'll continue to focus on our existing jurisdictions because they're the best, and that's where most of the opportunities are.
[Operator Instructions] And this will conclude our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.
Thank you, and thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Bank of N.T. Butterfield & Son Limited (The) — Q4 2025 Earnings Call
Bank of N.T. Butterfield & Son Limited (The) — Q3 2025 Earnings Call
1. Management Discussion
Good morning. My name is Debbie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2025 Earnings Call for The Bank of N.T. Butterfield & Son Limited. [Operator Instructions]
I would now like to turn the call over to Noah Fields, Butterfield's Head of Investor Relations. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's Third Quarter 2025 Financial Results. On the call, I'm joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer; Michael Schrum, President and Chief Financial Officer; and Jody Feldman, Managing Director of Bermuda.
Following their prepared remarks, we will open the call up for a question-and-answer session. Yesterday afternoon, we issued a press release announcing our third quarter 2025 results. The press release and financial statements, along with a slide presentation that we will refer to during our remarks on this call are available on the Investor Relations section of the website at www.butterfieldgroup.com.
Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-GAAP measures, which we believe are important in evaluating the company's performance.
For reconciliation of these measures to U.S. GAAP, please refer to the earnings press release and slide presentation. Today's call and associated materials may also contain certain forward-looking statements, which are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these risks can be found in our SEC filings.
I will now turn the call over to Michael Collins.
Thank you, Noah, and thanks to everyone joining the call today. I am pleased with our strong third quarter results, which continue to demonstrate our ability to drive long-term value. Our financial performance was supported by solid net interest income, disciplined capital management and a conservative and stable balance sheet. We delivered higher noninterest revenue and improved efficiency across the organization, underpinning our continued profitability and growth.
Butterfield is a leading offshore bank and wealth manager with franchise-level market shares in Bermuda and the Cayman Islands and a growing retail banking presence in the Channel Islands. We offer a full suite of services from trust and private banking to asset management and custody tailored to meet the needs of our clients across these markets. We also serve international private trust clients in the Bahamas, Switzerland and Singapore and provide high net worth mortgage lending for prime London properties from our London office.
I will now turn to the third quarter highlights on Page 4. Butterfield reported net income of $61.1 million and core net income of $63.3 million. We reported core earnings per share of $1.51 with a core return on average tangible common equity of 25.5% in the third quarter.
The net interest margin was 2.73% in the third quarter, an increase of 9 basis points from the prior quarter with the cost of deposits falling 9 basis points to 147 basis points from the prior quarter. We again are announcing a quarterly cash dividend of $0.50 per share. During the quarter, we continued to repurchase shares with a total of 700,000 shares at a cost of $30.3 million. We continue our active capital management and plan to return excess capital that we do not require to support the business and growth initiatives.
I will now turn the call over to Jody for an update on our Bermuda and Cayman markets and businesses.
Thank you, Michael. During the third quarter, Bermuda's business environment remained stable with continued expansion of international business and the local economy showing signs of growth. The government is forecasting its first budget surplus in over 2 decades. And with corporate income tax introduced this year, there are expectations this will generate meaningful revenue that could help ease cost of living and business pressures while reducing sovereign debt over time.
Overall, the outlook is positive for Bermuda's fiscal position with solid performance and growth continuing in the international business sector, particularly in reinsurance. Tourism in Bermuda had a good 2025 season, supported by improved hotel occupancy rates. Average daily rates were up 10% August year-to-date with occupancy levels remaining stable. Air arrivals are steady and visitor expenditure is up 2% despite a lower overall room inventory.
Looking ahead, airlift capacity and hotel inventory are expected to benefit from ongoing foreign direct investments in the island's hospitality infrastructure. The 593-room Fairmont Southampton is currently projected to reopen in summer 2026, while Grotto Bay Beach Resort has announced expansion plans. Additionally, the announced complete redevelopment of Elbow Beach Resort expected to commence in 2026, reflects overall investor confidence in the long-term prospects for Bermuda's hospitality sector.
Bermuda will also gain visibility from major international events, including the PGA Tour Butterfield Bermuda Championship and SailGP, a high-speed global professional sailing league set to return in May 2026, further reinforcing the island's position as a premier tourism and event destination.
The Cayman Islands continues to enjoy steady population and financial services growth with a 2.5% GDP increase expected in 2025. A number of major residential and mixed-use projects nearing completion reflects sustained demand and confidence across the property market. Financial services and tourism remain key pillars of the economy, representing approximately 50% and 35% of GDP, respectively. Through adherence to its fiscal responsibility framework, the government maintains discipline that keeps the budget generally close to balance. Looking ahead, growth is expected to continue at a measured pace following several years of rapid expansion.
I will now turn the call over to Michael Schrum for more detail on the quarter. Michael?
Thank you, Jody, and good morning. On Slide 6, we provide a summary of net interest income and net interest margin. In the third quarter, we reported net interest income before provision for credit losses of $92.7 million, an improvement of $3.3 million or 3.7% from the prior quarter. The net interest margin increased 9 basis points to 2.73% compared to 2.64% in the prior quarter. This increase is largely due to lower cost of deposits and the redemption of the subordinated debt during the second quarter.
Average loan balances were slightly lower compared to the prior quarter, predominantly driven by lower originations relative to amortization and to a lesser extent, the impact on foreign exchange translation from the weakening of the pound sterling against the U.S. dollar. Average interest-earning assets in the third quarter decreased $132.3 million to $13.5 billion. Treasury and loan yields were 7 basis points lower, while average investment yields were unchanged at 2.67%.
During the quarter, the bank continued to pursue its conservative strategy of reinvesting the paydowns of investment maturities into a mix of U.S. Agency MBS securities and medium-term U.S. treasuries.
Slide 7 provides a summary of noninterest income, which totaled $61.2 million, an increase of $4.2 million over the last quarter. This was due to higher banking fees, which benefited from growth in card volumes and incentive programs. Foreign exchange revenues also rose as volumes increased in the third quarter. The fee income ratio increased to 39.9%, compared to the prior quarter, continuing to compare favorably to historical peer averages.
On Slide 8, we present core noninterest expenses. Core noninterest expenses decreased compared to the prior quarter from lower performance-based incentive accruals included within core salaries and benefits. Property expenses also declined, benefiting from a consolidation of premises in the Channel Islands.
In addition, indirect taxes were lower, reflecting reduced payroll taxes and work permit fees. Slide 9 shows that Butterfield's balance sheet remains liquid and conservatively positioned. Period-end deposit balances were in line with prior quarters. Butterfield's low-risk density of 28% continues to reflect the regulatory capital efficiency of the balance sheet.
On Slide 10, we show that Butterfield's asset quality remains very strong. The investment portfolio carries low credit risk, consisting entirely of AA or higher rated U.S. treasuries and government-guaranteed agency securities. Credit performance in our loan and mortgage portfolios was stable this quarter. Net charge-offs were negligible. Nonaccrual loans held at 2% and our allowance for credit losses stayed at 0.6%.
Our loan book remains 70% full recourse residential mortgages with nearly 80% having loan-to-values below 70%. We continue to take a conservative underwriting approach, focusing on high-quality residential lending across our Bermuda, the Cayman Islands and the U.K. and Channel Islands segments.
On Slide 11, we present the average cash and securities balances with a summary of interest rate sensitivity. Net unrealized losses in AFS portfolio included in OCI were $101.5 million at the end of the third quarter, an improvement of $18.5 million over the prior quarter. Interest rate sensitivity has reduced slightly against the prior quarter, driven by a reduction in short-term investments that were deployed into fixed rate investments. We continue to expect improvement with additional burn down of OCI over the next 12 to 24 months of 31% and 37%, respectively.
Slide 12 summarizes regulatory and leverage capital levels. The Board of Directors has once again approved a quarterly dividend of $0.50 per share. TCE/TA continues to be conservatively above our targeted range of 6% to 6.5%. Finally, our tangible book value per share continued to improve this quarter by 5.4% to $25.06 as unrealized losses on investments improved.
I will now turn the call back to Michael Collins.
Thank you, Michael. Butterfield's presence in leading international financial centers provides a strong foundation for continued growth, both through disciplined M&A and organic business development. Our balance sheet and liquidity position remain conservative and fully aligned with business model and regulatory frameworks. Our capital-efficient fee-based businesses continue to deliver differentiated products and services to meet the needs of our clients.
As we move forward, we remain focused on enhancing operational efficiency and maintaining prudent expense discipline. Capital management remains a core component of our strategy. The strength of our earnings generation allows a balanced approach, funding sustainable cash dividends, supporting organic growth, pursuing strategic and accretive acquisition opportunities and repurchasing common shares. Butterfield is well positioned to support our clients and create long-term value for our communities and shareholders.
Thank you. And with that, we would be happy to take your questions. Operator?
[Operator Instructions] The first question comes from David Feaster with Raymond James.
2. Question Answer
I just wanted to -- I wanted to start -- curious how you think about the margin trajectory as we look forward. There are a lot of puts and takes here right now. You got the likelihood of Fed cuts. You've got also a pretty substantial repricing tailwind as well. And then you've got the lagging impact of repricing on deposits. I was hoping you could help us think about the margin trajectory and maybe where we could bottom out if the forward curve does come to fruition?
Yes. David, it's Michael Schrum. So yes, there are a lot of moving parts. I think we saw deposit costs come down this quarter. Just starting off, like I think the exit run rates for the quarter were broadly in line at a margin of 2.71% and cost of deposits is 1.45%.
As we look forward, we do have some room on the deposit side. There's about $10 billion of interest-earning deposits. So we could see in the short -- and these are relatively short deposits 3 to 6 months term deposits and some demand interest-bearing. So we could obviously see some of that being beneficial to us.
And then as we look at the investment securities, we're sort of thinking at the moment, certainly for the quarter is about a 150 or 150 basis point uplift on reinvestment. Over the coming sort of 12 months, we have about $1 billion of AFS and HTM assets that are going to reprice. So that's going to be, again, very beneficial, and that's something that we're clearly focused on.
And then finally, on the loan side, this quarter, we've sort of seen broadly a 100 basis point uplift between the fixed rate resetting loans and the new lending that we put into the book. So over the next about 12 months, we have about $400 million of loans resetting as well. Obviously, some of that will depend on customer preference. We've seen a little bit of a mix shift into floating over the last quarter, last couple of quarters. So we're now at 54% floating and where we used to be more like a 50-50.
So -- and then finally, the yield curve, if we get a steepener, obviously, that's going to be very beneficial. If we get a sort of lag in short rates going down, that's going to dampen the impact on the negative effect on the margin. So I think within a handful of basis points, we could probably see the next -- or the current outlook would be for NIM to be relatively stable, maybe expanding a little bit as we get this tailwind of asset repricing.
That's extremely helpful color. And then, Michael Colin, you talked about some of the unique products and services that you've got in the fee income lines. In the Trust and Asset Management business, you've obviously opened some unique and differentiated assets. I'm just curious, how do you think about crypto or stablecoins? Is that something that's on your radar? Is that something your clients are even asking about? Just curious your thoughts on that as some of the larger U.S. companies seem to be exploring it to some degree.
I think we describe ourselves as a slow follower, watching closely. We're not getting a lot of pressure from clients. I mean, just in terms of -- maybe in terms of custody and that sort of thing for digital assets. Stablecoin is obviously something we're watching closely. But I think the approach we would take is to piggyback off our correspondent banks.
So Bank of New York, obviously, is heavily analyzing and participating in this sector of the market, and we would piggyback off that, which actually provides us with a lot of safety and cover, it's not something that we would take the lead on in any sense. But you're right, the fee income lines are really well diversified.
So we've got trust, foreign exchange, banking fees, custody. But foreign exchange, I think, is what makes us pretty unique compared to U.S. regional banks, and we had a very good quarter there. And we're continuing to look for acquisitions on the fee income side. So very focused on private trust in the jurisdictions in which we already operate, and we're having constructive discussions, nothing to announce at this point, but our goal is to try to continue to increase our fee income ratio as rates start to change.
So we're watching, but I would say we're very conservative. We've talked about in the past. We have no lender of last resort. We are not going to take the lead in these sorts of things, but we will piggyback off our correspondent banking relationships.
That's great color. And then just last one, just you guys have done a great job managing expenses. We moved more back office to Halifax. We had the early retirement, consolidated some back office space in the Channel Islands, I believe it was. Just curious what other initiatives are on the horizon? And just how do you think about expenses going forward and your ability to continue to drive positive operating leverage?
Yes. No, thanks, David. It's Michael Schrum. So obviously, a great quarter this quarter. We did have some noncore expenses in this quarter related to some of the retirement of senior executives. And I think we've said before, we're sort of thinking if we can stave off the inflationary pressures in the system with some of those expense initiatives, moving back-office functions to Halifax. That will be great as we are starting to see some pickup in pipeline on loans and interest -- net interest income seems to be relatively stable.
So really, it's the same thing. We've obviously gone through a lot of investments into our infrastructure. So we did a cloud migration of our core banking system last year, and we're just catching up on the patch sets of those. So that -- while that's truncated the expense run rate a little bit higher because we're using Software as a Service, we're gradually exiting some of the older or out-of-date systems that we've been using.
So I think broadly speaking, it was a little -- good improvement this quarter. We should be thinking about the $90 million run rate as a good sort of estimate for the future, at least for the near to medium term. And then as some of the things that we're thinking about is exactly continuing to move back-office functions to Halifax.
[Operator Instructions] The next question is from Tim Switzer with KBW.
You guys have already touched on this a little bit, but really strong momentum across your fee income businesses here. Could you provide just a little bit more commentary on what drove the pretty significant upside in banking here quarter-over-quarter and year-over-year, very strong. And then are you able to kind of give us an idea of where there any kind of like nonrecurring revenues in there, kind of one-offs? And I know Q4 is usually seasonally strong, but will be maybe not quite as strong just given the performance in Q3 on like a relative basis?
Yes. Thanks, Tim. Yes. So banking has been very strong, continues to be obviously a really solid and very capital-efficient line for us. The combination of banking really is sort of recurring of periodic fees, which are sort of account maintenance fees and then a combination of that plus the card services fees or transaction-related fees, and we've really seen an uptick in volumes. And that uptick in volumes with -- on our card product really has also driven some incentive accrual increases this quarter. So there wasn't really anything to call out, particularly, obviously, tourism-related card services fees were both an acquirer and an issuer has just benefited us quite tremendously over the summer as Bermuda has had a pretty good tourism season. So that's been an uptick there.
And by all means, Cayman looks to be in decent shape for this upcoming tourism season as well. FX is -- we don't take any proprietary positions, as you know, but these are really commission-based FX exchange revenues. And I think clients have just taken the opportunity to rebalance a little bit as we've seen some movements in foreign exchange rates. And so that's driven volume in there. There were a couple of sizable deals that we did for some private trust clients in the FX side, but nothing really to call out. It may be a little bit seasonal, but we're pretty constructive on the outlook.
Okay. Great. That was really helpful. And then I appreciate the kind of overview you gave across your different jurisdictions and the growth there. Which jurisdictions are you expecting to be driving the most growth from a loan and deposit perspective over the next year or so? And what are like some of the loan categories that you have the most opportunity in?
Yes. Maybe I'll start on deposits, and Jody can just comment on loan pipelines, et cetera. I mean deposits continue to be a little bit elevated for us. I think we've certainly seen some significant movements. It's netted out to be not very much movement this quarter, but we have seen some sizable client inflows, which are probably masking a little bit of the outflow. So we continue to expect that deposit levels will sort of come down a little bit. I think Bermuda has certainly seen the most growth in the deposits. And normally in the fourth quarter, we would see a little bit of a seasonal increase in Cayman as funds kind of rebalance their cash held in the fund and cash held with us as an intermediary. So really, that's it on the sort of mid-market corporate side.
I think deposit levels have been increasing in the Channel Islands as well as we've sort of pivoted a little bit more to a retail growth strategy there. And I think that's great to see more sticky deposits and a better composition of deposits in that segment. But it is, as you know, with retail clients, it's a pretty slow growth in terms of the impact overall. And I'll let Jody just cover loan pipelines.
Sure. Tim, it's Jody Feldman. I would just comment quickly on loans. I mean, as you know, we're not a loan growth story at Butterfield, and we're not going to be stretching for credit at this point. Obviously, we maintain a low-risk density balance sheet, and we're very conservative with our underwriting, and that's not going to change. That being said, we are seeing some encouraging signs in the loan pipeline, particularly in Cayman, a slight pickup in Bermuda due to kind of macro backdrop, which is encouraging. But I think it's pretty consistent from previous times.
This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Thanks, Debbie, and thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Bank of N.T. Butterfield & Son Limited (The) — Q3 2025 Earnings Call
Financial data from Bank of N.T. Butterfield & Son Limited (The)
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 629 629 |
6%
6%
100%
|
|
| - Interest Income | 374 374 |
5%
5%
60%
|
|
| - Non-Interest Income | 254 254 |
8%
8%
40%
|
|
| Interest Expense | 171 171 |
23%
23%
27%
|
|
| Non-Interest Expense | -384 -384 |
5%
5%
-61%
|
|
| Loan Loss Provisions | 3.45 3.45 |
143%
143%
1%
|
|
| Net Profit | 234 234 |
7%
7%
37%
|
|
In millions USD.
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Bank of N.T. Butterfield & Son Limited (The) Stock News
Company Profile
StocksGuide Premium
| Head office | Bermuda |
| CEO | Mr. Collins |
| Employees | 1,299 |
| Founded | 1858 |
| Website | www.butterfieldgroup.com |


