Financial highlights for the third quarter of 2024:
- Net income of $52.7 million, or $1.16 per share, and core
net income1 of $52.8 million, or $1.16 per share
- Return on average common equity of 20.3% and core return on
average tangible common equity1 of 22.5%
- Net interest margin of 2.61%, cost of deposits of
1.91%
- Board declares dividend for the quarter ended September 30,
2024 of $0.44 per share
- Repurchases of 1.0 million common shares at an average price
of $37.00 per share
The Bank of N.T. Butterfield & Son Limited ("Butterfield" or
the "Bank") (BSX: NTB.BH; NYSE: NTB) today announced financial
results for the quarter ended September 30, 2024.
Net income for the third quarter of 2024 was $52.7 million, or
$1.16 per diluted common share, compared to net income of $50.6
million, or $1.09 per diluted common share, for the previous
quarter and $48.7 million, or $0.99 per diluted common share, for
the third quarter of 2023. Core net income1 for the third quarter
of 2024 was $52.8 million, or $1.16 per diluted common share,
compared to $51.4 million, or $1.11 per diluted common share, for
the previous quarter and $57.0 million, or $1.16 per diluted common
share, for the third quarter of 2023.
The return on average common equity for the third quarter of
2024 was 20.3% compared to 20.7% for the previous quarter and 20.6%
for the third quarter of 2023. The core return on average tangible
common equity1 for the third quarter of 2024 was 22.5%, compared to
23.3% for the previous quarter and 26.1% for the third quarter of
2023. The efficiency ratio for the third quarter of 2024 was 60.3%,
compared to 62.4% for the previous quarter and 64.1% for the third
quarter of 2023. The core efficiency ratio1 for the third quarter
of 2024 was 60.2% compared with 61.8% in the previous quarter and
58.3% for the third quarter of 2023.
Michael Collins, Chairman and Chief Executive Officer,
commented, “Butterfield delivered strong results in the third
quarter of 2024 through improved efficiency, stable non-interest
income, and focused capital management. We have a high fee/income
ratio and will continue to increase the proportion of fee revenue
over time through acquisitions, while returning excess capital to
our shareholders. Economic conditions in Bermuda, the Cayman
Islands, and the Channel Islands remain favorable, with strong
demand and contributions from both international business and
tourism. As we enter a period of easing financial conditions, we
expect to see better affordability for borrowing customers and a
general pick-up in business activity."
Net income was up in the third quarter of 2024 versus the prior
quarter primarily due to higher net interest income and lower
non-interest expense, as well as a modest increase in non-interest
income.
Net interest income (“NII”) for the third quarter of 2024 was
$88.1 million, or $0.6 million higher compared with NII of $87.4
million in the previous quarter and down $2.1 million from $90.2
million in the third quarter of 2023. NII was higher during the
third quarter of 2024 compared to the second quarter of 2024,
primarily due to higher average investable asset volume, which was
partially offset by higher deposit costs and lower treasury yields.
Compared to the third quarter of 2023, the decreased NII in the
third quarter of 2024 was due to higher deposit costs, that were
slightly offset by higher yielding interest earning assets and a
larger balance sheet.
Net interest margin (“NIM”) for the third quarter of 2024 was
2.61%, a decrease of 3 basis points from 2.64% in the previous
quarter and down 15 basis points from 2.76% in the third quarter of
2023. NIM in the third quarter of 2024 decreased compared to the
prior quarter and third quarter of 2023 due to mix shift to term
deposits and lower treasury yields, partially offset by increased
yields on investments.
Non-interest income for the third quarter of 2024 was $56.0
million, an increase of $0.4 million from $55.6 million in the
previous quarter and $4.0 million higher than $52.0 million in the
third quarter of 2023. The increase in the third quarter of 2024
compared to the prior quarter was due to higher card volume,
one-off loan prepayment fees, and growth in asset management fees
due to higher asset valuations. The increases were partially offset
by lower unclaimed balances recognized into income. Non-interest
income in the third quarter of 2024 was higher than the third
quarter of 2023 primarily due to increases in asset management
fees, as well as increased trust income from assets acquired from
Credit Suisse.
Non-interest expenses were $88.8 million in the third quarter of
2024, compared to $91.1 million in the previous quarter and $92.5
million in the third quarter of 2023. Core non-interest expenses1
of $88.6 million in the third quarter of 2024 were lower than the
$90.3 million incurred in the previous quarter and higher than the
$84.3 million incurred in the third quarter of 2023. Core
non-interest expenses1 in the third quarter of 2024 were lower
compared to the prior quarter due to decreased professional and
outside services costs. Compared to the third quarter of 2023, core
non-interest expenses1 were higher due to performance-based
remuneration accruals and inflationary increases in staff
healthcare costs and property cost; and increased expense arising
from the recently implemented core banking software.
Period end deposit balances were $12.7 billion, an increase of
6.3% compared to $12.0 billion at December 31, 2023, primarily due
to deposit increases in the Channel Islands, as well as a
strengthened British pound. Average deposits were $12.4 billion in
the quarter ended September 30, 2024, in-line with the prior
quarter.
Tangible book value per share improved by $1.87 or 9.3% this
quarter to $21.90 per share.
The Bank maintained its balanced capital return policy. The
Board again declared a quarterly dividend of $0.44 per common share
to be paid on November 19, 2024 to shareholders of record on
November 5, 2024. During the third quarter of 2024, Butterfield
repurchased 1.0 million common shares under the Bank's existing
share repurchase program.
The current total regulatory capital ratio as at September 30,
2024 was 24.3% as calculated under Basel III, compared to 25.4% as
at December 31, 2023. Both of these ratios remain conservatively
above the minimum Basel III regulatory requirements applicable to
the Bank.
(1)
See table "Reconciliation of US GAAP
Results to Core Earnings" below for reconciliation of US GAAP
results to non-GAAP measures.
ANALYSIS AND DISCUSSION OF THIRD
QUARTER RESULTS
Income statement
Three months ended
(Unaudited)
(in $ millions)
September 30,
2024
June 30,
2024
September 30,
2023
Non-interest income
56.0
55.6
52.0
Net interest income before provision for
credit losses
88.1
87.4
90.2
Total net revenue before provision for
credit losses and other gains (losses)
144.1
143.1
142.2
Provision for credit (losses)
recoveries
(1.3
)
(0.5
)
(0.5
)
Total other gains (losses)
(0.1
)
0.1
—
Total net revenue
142.7
142.7
141.7
Non-interest expenses
(88.8
)
(91.1
)
(92.5
)
Total net income before taxes
54.0
51.5
49.1
Income tax benefit (expense)
(1.2
)
(0.9
)
(0.4
)
Net income
52.7
50.6
48.7
Net earnings per share
Basic
1.18
1.11
1.00
Diluted
1.16
1.09
0.99
Per diluted share impact of other non-core
items 1
—
0.02
0.17
Core earnings per share on a fully
diluted basis 1
1.16
1.11
1.16
Adjusted weighted average number of
participating shares on a fully diluted basis (in thousands of
shares)
45,557
46,298
49,140
Key financial ratios
Return on common equity
20.3
%
20.7
%
20.6
%
Core return on average tangible common
equity 1
22.5
%
23.3
%
26.1
%
Return on average assets
1.5
%
1.5
%
1.4
%
Net interest margin
2.61
%
2.64
%
2.76
%
Core efficiency ratio 1
60.2
%
61.8
%
58.3
%
(1) See table "Reconciliation of US GAAP Results to Core Earnings"
below for reconciliation of US GAAP results to non-GAAP measures.
Balance Sheet
As at
(in $ millions)
September 30,
2024
December 31,
2023
Cash and cash equivalents
2,067
1,647
Securities purchased under agreements to
resell
1,143
187
Short-term investments
607
1,038
Investments in securities
5,468
5,292
Loans, net of allowance for credit
losses
4,648
4,746
Premises, equipment and computer software,
net
152
154
Goodwill and intangibles, net
97
99
Accrued interest and other assets
192
211
Total assets
14,373
13,374
Total deposits
12,738
11,987
Accrued interest and other liabilities
472
285
Long-term debt
99
98
Total liabilities
13,309
12,370
Common shareholders’ equity
1,064
1,004
Total shareholders' equity
1,064
1,004
Total liabilities and shareholders'
equity
14,373
13,374
Key Balance Sheet Ratios:
September 30,
2024
December 31,
2023
Common equity tier 1 capital ratio2
22.1
%
23.0
%
Tier 1 capital ratio2
22.1
%
23.0
%
Total capital ratio2
24.3
%
25.4
%
Leverage ratio2
7.1
%
7.6
%
Risk-Weighted Assets (in $ millions)
4,776
4,541
Risk-Weighted Assets / total assets
33.2
%
34.0
%
Tangible common equity ratio
6.8
%
6.8
%
Book value per common share (in $)
24.09
21.39
Tangible book value per share (in $)
21.90
19.29
Non-accrual loans/gross loans
1.9
%
1.3
%
Non-performing assets/total assets
1.5
%
1.0
%
Allowance for credit losses/total
loans
0.6
%
0.5
%
(2) In accordance with regulatory capital
guidance, the Bank has elected to make use of transitional
arrangements which allow the deferral of the January 1, 2020
Current Expected Credit Loss ("CECL") impact of $7.8 million on its
regulatory capital over a period of 5 years.
QUARTER ENDED SEPTEMBER 30, 2024 COMPARED WITH THE QUARTER
ENDED JUNE 30, 2024
Net Income
Net income for the quarter ended September 30, 2024 was $52.7
million, up from $50.6 million in the prior quarter.
Movements in net income during the quarter ended September 30,
2024 compared to the previous quarter are attributable to the
following:
- $0.4 million increase in non-interest income driven by (i) $0.6
million increase in banking fees due to one-off loan prepayment
fees and increased card volumes; (ii) $0.6 million increase in
asset management fees due to increases in asset valuations; (iii)
offset by $0.9 million decrease in other non-interest income due to
a decrease in unclaimed customer balances being recognized in
revenue, and a $0.4 million decrease in foreign exchange revenue
due to seasonality and lower volumes;
- $0.6 million increase in net interest income before provision
for credit losses driven by an increased volume of interest earning
assets, increased yields on new investment assets and additional
day count. This was partially offset by decreased yields on
treasury assets as market interest rates declined;
- $0.8 million increase in provision for credit losses driven by
a commercial facility in Bermuda;
- $2.4 million decrease in non-interest expenses driven by (i)
$1.9 million decrease in professional and outside services fees in
the current quarter; and (ii) $0.4 million decrease in technology
and communications from reduced depreciation on IT equipment and
lower software maintenance costs; and
- $0.3 million increase in income tax expenses due to higher net
income in the Channel Islands.
Non-Core Items1
Non-core items resulted in expenses, net of gains, of $0.1
million in the third quarter of 2024. Non-core items for the
quarter included legal fees for corporate restructuring work in the
Channel Islands.
Management does not believe that comparative period expenses,
gains or losses identified as non-core are indicative of the
results of operations of the Bank in the ordinary course of
business.
(1)
See table "Reconciliation of US GAAP
Results to Core Earnings" below for reconciliation of US GAAP
results to non-GAAP measures.
BALANCE SHEET COMMENTARY AT SEPTEMBER 30, 2024 COMPARED WITH
DECEMBER 31, 2023
Total Assets
Total assets of the Bank were $14.4 billion at September 30,
2024, an increase of $1.0 billion from December 31, 2023. The Bank
maintained a highly liquid position at September 30, 2024, with
$9.3 billion of cash, bank deposits, reverse repurchase agreements
and liquid investments representing 64.6% of total assets, compared
with 61.0% at December 31, 2023.
Loans Receivable
The loan portfolio totaled $4.6 billion at September 30, 2024,
which was $0.1 billion lower than December 31, 2023 balances. The
decrease was driven primarily by maturities and prepayments in
excess of originations across the residential mortgage portfolios,
partially offset by a strengthened British pound.
The allowance for credit losses at September 30, 2024 totaled
$25.8 million, which remains flat from $25.8 million at December
31, 2023.
The loan portfolio represented 32.3% of total assets at
September 30, 2024 (December 31, 2023: 35.5%), while loans as a
percentage of total deposits was 36.5% at September 30, 2024
(December 31, 2023: 39.6%). The decrease in both ratios was
attributable principally to a decrease in loan balances at
September 30, 2024 compared to December 31, 2023.
As at September 30, 2024, the Bank had gross non-accrual loans
of $89.6 million, representing 1.9% of total gross loans, an
increase of $28.6 million from $61.0 million, or 1.3% of total
loans, at December 31, 2023. The increase in non-accrual loans was
driven by a commercial facility secured by real estate in Bermuda
and residential mortgages in the Channel Islands and UK
segment.
Other real estate owned (“OREO”) decreased by $0.1 million
compared to December 31, 2023 driven by the sale of a residential
property in Bermuda.
Investment in Securities
The investment portfolio was $5.5 billion at September 30, 2024,
which was $0.2 billion lower than the December 31, 2023 balances.
The changes were attributable to paydowns and maturities in the
portfolio.
The investment portfolio is made up of high-quality assets with
100% invested in A-or-better-rated securities. The investment book
yield was 2.39% during the quarter ended September 30, 2024
compared with 2.30% during the previous quarter. Total net
unrealized losses on the available-for-sale portfolio decreased to
$117.1 million, compared with total net unrealized losses of $163.9
million at December 31, 2023, as a result of declining long-term US
dollar interest rates.
Deposits
Average total deposit balances were consistent with the prior
quarter at $12.4 billion for the quarter ended September 30, 2024,
while period end balances as at September 30, 2024 were $12.7
billion, an increase of $0.7 billion compared to December 31,
2023.
Average Balance Sheet2
For the three months ended
September 30, 2024
June 30, 2024
September 30, 2023
(in $ millions)
Average
balance
($)
Interest
($)
Average
rate
(%)
Average
balance
($)
Interest
($)
Average
rate
(%)
Average
balance
($)
Interest
($)
Average
rate
(%)
Assets
Cash and cash equivalents and short-term
investments
3,572.7
42.0
4.66
3,468.8
41.4
4.78
2,559.2
28.8
4.47
Investment in securities
5,239.2
31.5
2.39
5,172.6
29.6
2.30
5,494.9
28.5
2.06
Available-for-sale
1,907.3
12.7
2.64
1,797.1
10.8
2.41
1,926.0
8.8
1.81
Held-to-maturity
3,331.9
18.9
2.24
3,375.4
18.8
2.24
3,568.9
19.7
2.19
Loans
4,566.2
76.4
6.64
4,622.7
76.6
6.65
4,897.5
80.4
6.51
Commercial
1,298.9
21.6
6.61
1,342.8
21.7
6.50
1,394.9
23.2
6.60
Consumer
3,267.3
54.8
6.66
3,279.9
54.8
6.71
3,502.6
57.2
6.47
Interest earning assets
13,378.1
150.0
4.45
13,264.1
147.6
4.46
12,951.6
137.7
4.22
Other assets
421.5
430.4
416.7
Total assets
13,799.6
13,694.5
13,368.3
Liabilities
Deposits - interest bearing
9,805.8
(59.7
)
(2.41
)
9,807.6
(58.7
)
(2.40
)
9,340.4
(46.1
)
(1.96
)
Securities sold under agreement to
repurchase
81.9
(0.9
)
(4.30
)
2.9
—
(4.83
)
—
—
—
Long-term debt
98.6
(1.4
)
(5.52
)
98.6
(1.4
)
(5.58
)
98.4
(1.4
)
(5.53
)
Interest bearing liabilities
9,986.3
(61.9
)
(2.46
)
9,909.1
(60.1
)
(2.43
)
9,438.8
(47.5
)
(2.00
)
Non-interest bearing current accounts
2,561.9
2,636.8
2,739.3
Other liabilities
249.6
243.8
279.3
Total liabilities
12,797.8
12,789.6
12,457.4
Shareholders’ equity
1,001.9
904.9
910.9
Total liabilities and shareholders’
equity
13,799.6
13,694.5
13,368.3
Non-interest bearing funds net of
non-interest earning assets
(free balance)
3,391.8
3,355.0
3,512.8
Net interest margin
88.1
2.61
87.4
2.64
90.2
2.76
(2) Averages are based upon a daily
averages for the periods indicated.
Assets Under Administration and Assets Under
Management
Total assets under administration for the trust and custody
businesses were $133.5 billion and $30.2 billion, respectively, at
September 30, 2024, while assets under management were $6.0 billion
at September 30, 2024. This compares with $132.4 billion, $30.3
billion and $5.5 billion, respectively, at December 31, 2023.
Reconciliation of US GAAP Results to Core Earnings
The table below shows the reconciliation of net income in
accordance with US GAAP to core earnings, a non-GAAP measure, which
excludes certain significant items that are included in our US GAAP
results of operations. We focus on core net income, which we
calculate by adjusting net income to exclude certain income or
expense items that are not representative of our business
operations, or “non-core”. Core net income includes revenue, gains,
losses and expense items incurred in the normal course of business.
We believe that expressing earnings and certain other financial
measures excluding these non-core items provides a meaningful base
for period-to-period comparisons, which management believes will
assist investors in analyzing the operating results of the Bank and
predicting future performance. We believe that presentation of
these non-GAAP financial measures will permit investors to assess
the performance of the Bank on the same basis as management.
Core Earnings
Three months ended
(in $ millions except per share
amounts)
September 30,
2024
June 30,
2024
September 30,
2023
Net income
52.7
50.6
48.7
Non-core items
Non-core expenses
Early retirement program, voluntary
separation, redundancies and other non-core compensation costs
—
0.2
8.2
Restructuring charges and related
professional service fees
0.1
0.6
—
Total non-core expenses
0.1
0.8
8.2
Total non-core items
0.1
0.8
8.2
Core net income
52.8
51.4
57.0
Average common equity
1,029.2
979.4
940.2
Less: average goodwill and intangible
assets
(95.5
)
(95.3
)
(72.9
)
Average tangible common equity
933.7
884.1
867.2
Core earnings per share fully
diluted
1.16
1.11
1.16
Return on common equity
20.3
%
20.7
%
20.6
%
Core return on average tangible common
equity
22.5
%
23.3
%
26.1
%
Shareholders' equity
1,064.2
999.1
922.9
Less: goodwill and intangible assets
(96.7
)
(94.4
)
(70.6
)
Tangible common equity
967.5
904.7
852.3
Basic participating shares outstanding (in
millions)
44.2
45.2
48.1
Tangible book value per common
share
21.90
20.03
17.73
Non-interest expenses
88.8
91.1
92.5
Less: non-core expenses
(0.1
)
(0.8
)
(8.2
)
Less: amortization of intangibles
(1.9
)
(1.9
)
(1.4
)
Core non-interest expenses before
amortization of intangibles
86.7
88.4
82.9
Core revenue before other gains and losses
and provision for credit losses
144.1
143.1
142.2
Core efficiency ratio
60.2
%
61.8
%
58.3
%
Conference Call Information:
Butterfield will host a conference call to discuss the Bank’s
results on Wednesday, October 23, 2024 at 10:00 a.m. Eastern Time.
Callers may access the conference call by dialing +1 (844) 855-9501
(toll-free) or +1 (412) 858-4603 (international) ten minutes prior
to the start of the call and referencing the Conference ID:
Butterfield Group. A live webcast of the conference call, including
a slide presentation, will be available in the investor relations
section of Butterfield’s website at www.butterfieldgroup.com. A replay of the call
will be archived on the Butterfield website for 12 months.
About Non-GAAP Financial Measures:
Certain statements in this release involve the use of non-GAAP
financial measures. We believe such measures provide useful
information to investors that is supplementary to our financial
condition, results of operations and cash flows computed in
accordance with US GAAP; however, our non-GAAP financial measures
have a number of limitations. As such, investors should not view
these disclosures as a substitute for results determined in
accordance with US GAAP, and they are not necessarily comparable to
non-GAAP financial measures that other companies use. See
"Reconciliation of US GAAP Results to Core Earnings" for additional
information.
Forward-Looking Statements:
Certain of the statements made in this release are
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include statements with respect to our beliefs, plans,
objectives, goals, expectations, anticipations, assumptions
estimates, intentions, and future performance, including, without
limitation, our intention to make share repurchases, our dividend
payout target, our fee/income ratio, our OCI burndown, and
affordability for borrowing customers and business activity levels,
and involve known and unknown risks, uncertainties and other
factors, which may be beyond our control, and which may cause the
actual results, performance, capital, ownership or achievements of
Butterfield to be materially different from future results,
performance or achievements expressed or implied by such
forward-looking statements due to a variety of factors, including
worldwide economic conditions (including economic growth and
general business conditions) and fluctuations of interest rates,
inflation, a decline in Bermuda’s sovereign credit rating, any
sudden liquidity crisis, the successful completion and integration
of acquisitions (including our integration of the trust assets
acquired from Credit Suisse) or the realization of the anticipated
benefits of such acquisitions in the expected time-frames or at
all, success in business retention (including the retention of
relationships associated with our Credit Suisse acquisition) and
obtaining new business, potential impacts of climate change, the
success of our updated systems and platforms and other factors.
Forward-looking statements can be identified by words such as
"anticipate," "assume," "believe," "estimate," "expect,"
"indicate," "intend," "may," "plan," "point to," "predict,"
"project," "seek," "target," "potential," "will," "would," "could,"
"should," "continue," "contemplate" and other similar expressions,
although not all forward-looking statements contain these
identifying words. All statements other than statements of
historical fact are statements that could be forward-looking
statements.
All forward-looking statements in this disclosure are expressly
qualified in their entirety by this cautionary notice, including,
without limitation, those risks and uncertainties described in our
SEC reports and filings, including under the caption "Risk Factors"
in our most recent Form 20-F. Such reports are available upon
request from Butterfield, or from the Securities and Exchange
Commission ("SEC"), including through the SEC’s website at
https://www.sec.gov. Any forward-looking statements made by
Butterfield are current views as at the date they are made. Except
as otherwise required by law, Butterfield assumes no obligation and
does not undertake to review, update, revise or correct any of the
forward-looking statements included in this disclosure, whether as
a result of new information, future events or other developments.
You are cautioned not to place undue reliance on the
forward-looking statements made by Butterfield in this disclosure.
Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future
performance, and should only be viewed as historical data.
Presentation of Financial Information:
Certain monetary amounts, percentages and other figures included
in this report have been subject to rounding adjustments.
Accordingly, figures shown as totals in certain tables may not be
the arithmetic aggregation of the figures that precede them, and
figures expressed as percentages in the text may not total 100% or,
as applicable, when aggregated may not be the arithmetic
aggregation of the percentages that precede them.
About Butterfield:
Butterfield is a full-service bank and wealth manager
headquartered in Hamilton, Bermuda, providing services to clients
from Bermuda, the Cayman Islands, Guernsey and Jersey, where our
principal banking operations are located, and The Bahamas,
Switzerland, Singapore and the United Kingdom, where we offer
specialized financial services. Banking services comprise deposit,
cash management and lending solutions for individual, business and
institutional clients. Wealth management services are composed of
trust, private banking, asset management and custody. In Bermuda,
the Cayman Islands and Guernsey, we offer both banking and wealth
management. In The Bahamas, Singapore and Switzerland, we offer
select wealth management services. In the UK, we offer residential
property lending. In Jersey, we offer select banking and wealth
management services. Butterfield is publicly traded on the New York
Stock Exchange (symbol: NTB) and the Bermuda Stock Exchange
(symbol: NTB.BH). Further details on the Butterfield Group can be
obtained from our website at: www.butterfieldgroup.com.
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Investor Relations Contact: Noah Fields Investor
Relations The Bank of N.T. Butterfield & Son Limited Phone:
(441) 299 3816 E-mail: noah.fields@butterfieldgroup.com
Media Relations Contact: Nicky Stevens Group Strategic
Marketing & Communications The Bank of N.T. Butterfield &
Son Limited Phone: (441) 299 1624 E-mail: nicky.stevens@butterfieldgroup.com
Bank of NT Butterfield a... (NYSE:NTB)
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