NTB - Earnings call transcript Q2 2024 | The Bank of N.T. Butterfield & Son Limited

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Operator

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 2024 Earnings Call for the Bank of N.T. Butterfield & Son Limited. I would now like to turn the call over to Noah Fields, Butterfield's Head of Investor Relations.

Noah Fields

Thank you. thank joining and everyone, morning, you us. for Good Butterfield's XXXX financial we will quarter reviewing be Today, results. second

Officer; Bridgewater, the On call, Chief and Craig and Risk Officer. I'm Collins, Schrum, Financial Group Group Chief Michael Butterfield's joined Chairman Executive Chief and President Michael by Officer;

with their we results. announcing release at along the on www.butterfieldgroup.com. to we financial our quarter of XXXX will section Following press that call question release a statements our press for Investor prepared the on issued slide session. answer a remarks, The will and our and website Relations during available Yesterday this open presentation up a afternoon, we second are call refer remarks

remind measures everyone certain today's refer turn to we company's evaluating will which that I call Michael the Collins, to Before discussions non-GAAP are to performance. the over important believe in I like would

of reconciliation may contain subject those release uncertainties statements. a results refer press GAAP, U.S. earnings other to associated For may the materially differ by and to presentation. actual contemplated measures to that these which factors are these call and forward-looking statements, materials slide please and cause risks, to from Today's certain also

filings. I be Michael these will regarding our over Additional information now call found Collins. in the risks can turn SEC to

Michael Collins

mass offerings the the Island, market-leading and we bank fee develop continue while income expense our a Thank affluent am strong achieved profitability from you, the in pleased balance joining diverse we trust the benefited Noah, I quarter and Bermuda products product sheet, as we supported disciplined services, Islands. In thanks call with and in today. our Cayman and stable Channel management. to businesses, and everyone client-focused second Butterfield's performance by to

XX.X% offerings second lending specialized high-end Singapore Central now will We financial on Bahamas, mortgage Kingdom the United London. I a Page core and net quarter in also decrease second basis of Switzerland, the the share The benefited X turn in quarter where was we highlights financial earnings XXXX. points second a prior million compression the provide from X. rising quarter, of points from X.XX% the million. We this share. margin our quarter in dividend margin the to cost reported tangible core per points $XX.X and on in modestly for core of quarter. income the deposit in common of $XX.X approved net average quarter strong cash results to $X.XX quarterly $X.XX asset interest income second return has equity reported again from cost as net per deposits XXX with the with of prior Butterfield of XXX repricing. The Board Net basis quarter of with of services basis the outpaced has increases a slowed interest

call also a Butterfield's joined He efficient Cummings, details for up at $XX.XX X.X Board Director. with share and E. as producing the million repurchase management which and attractive industry Independent the to announced consistent end performance use in of capital continued and shareholder for Bank's shares we our expertise and experienced governance of also We professional, total the and strategy quarter, our X.X an shares the addition financial forward capital. Yesterday, highly repurchase per to that shares is demonstrates and continued over will of to Board Craig services supports to has on I a financial purchasing to an and of working qualified program Stephen great confidence strengthen turn returns him. I through will our XXXX, The approved second quarter. the average now also million price Board our look share. further to of a during a new

Craig Bridgewater

higher reported volume increased average interest-earning of deposit higher margin. of a the benefited was increased The the basis average million the of yielded prior you, summary provide quarter the net continued of basis higher credit X.X% per and points maturities interest reflecting the interest XXXX income quarter, net income yields million. provision interest second a quarter, quarter, which In net investment treasury we The Slide X, of from net income in we approximately before interest driven X of than and Michael, $XX than $XX.X were good by were month. reinvestment from assets compared assets up and lower-yielding quarter. securities prior assets. $XX.X Thank billion losses prior interest-earning interest-earning an the morning. on X.X%, for On of each second X to assets Average volume. The points portfolio

Bank in present prior fees, During increase the for source primarily a XX% million offset X, experienced summary non-interest stable the Average due $XX.X portfolio do securities Non-interest mix higher from revenue additional income $X.XX not reinvest a well healthcare income. $XX.X treasuries. income, investment banking $XX.X compared fee of and by the compared to to a prior volumes. and balances expenses Slide expect some software a costs, the X.X% expenses consulting FX non-interest future and non-interest continues and Total of core an with through the quarter. On a income investment as due lower decreased the were to a an this favorable increase from which totaled provides quarters. to we in The balances the partially medium-term U.S. quarter, we in equity to second core accruals primarily continue recognized MBS U.S. core ratio million, increase upgraded in recently primarily and incentive in to as expected staff to $XX.X quarter. expenses. continued to legal be is banking increase of increases were costs quarter, into cycle non-interest core the higher due of capital-efficient performance-based due unplanned benefits, inflationary that fees transaction trust changes maturities. Slide million quarter, were million, lower by versus pick-up agency to X which higher and into prior These to billion

communicated Schrum servicing the from the contemplates turn book banking servicing As system balance new increased cost our clients, of of Group-wide in the run cloud-based second rate amortization review new to resulting the and a all upgrades expect of the million sheet. quarterly over trust cost into quarter investments branch benefit and team core the the to acquired we expected in of XXXX. of of as well while will the IT the XXXX. I restructure as of taking announced consideration and expenses previously, This continued expense call half our $XX Michael to now third the

Michael Schrum

quarter in U.S. have now investment Slide of our end with charge-off X.X%. deposit sheet XX, deposit managed. conservatively loans of medium-term non-accrual quality point X.X% Loan Period-end continuing base. securities. low-risk billion strong $XX.X we loans end stability consistent $XX level increased risk-weighted balances balance also liquid $XX.X remains Craig. asset X losses capital loan and show credit the billion continues Thank prior of Slide continuing from with Butterfield's adequately risk to and $XX.X the that expect XXXX, allowance comprised of and of coverage X and sheet continued perform the is Despite lower agency to XX.X% at billion at our represent the deposit you, of to that portfolio, low density ratio assets. On of loan the regulatory credit XX% continues Butterfield the asset quarter the of a of show basis has to deposit an which a rate or shows with residential balance at quality between efficiency higher-rated government-guaranteed recently and XXX% gross with portfolio billion. total prior the to mortgage net $XX.X elevated we to continued range levels, to for Butterfield's AA of reflect billion

XX%. Our sizable The into few Bermuda past and remain due particularly Slide year. we loans this we the expected significant sheet interest facilities works through a conclude rate Bank help understand next securities economic the they're summary expect to a process, legacy sensitivity. in lend receivership facility are the conditions to over values of their accruing difficulties. On markets favorable of below quarters average if to working well and to the XX, balance borrowers collateralized them we present meet elevated with and actively and and with hospitality remained cash we obligations, a our sale which experiencing The late due to somewhat majority are with

losses to included securities. Slide in or prior were of million levels increased the leverage sensitivity $XX million million the funds, due allowing unrealized with portfolio OCI capital in Asset XX modestly short-term and for at AFS summarizes continued in second over line in Butterfield's of a rates, quarter end XXXX client regulatory AFS $XX be temporary of were next quarter. Net second XX% levels. months assets. current the expected is the forward above quarter next the regulatory held or XX in and $XXX.X improve reinvestment higher-yielding requirements. At to by OCI in months, in XX conservatively the XX% the to inflow capital which

of While Michael ratio indicative TCE the is not a and of the the call regulatory of of the now end back conservative is X.X% X.X% health TA turn to range capital our our requirement, of to to X% at Collins. overall levels. I'll target

Michael Collins

you, Thank Michael.

Islands. eventually path week first passing a a Caribbean South damage. significant Category Southeastern X quickly the intensified through spared any Cayman hurricane Hurricane into hit direct Cayman fortunately the a and was destructive Beryl of During and with of just July, the avoided

disasters well are any available and to has handle contingency quickly prepared help natural jurisdictions and hurricanes recover to other from plans Bank outages. operating Our the

and We will story organically Butterfield's develop continue through M&A. to growth

we jurisdictions, absence X%. dialogue or organic In we acquire in X% in will in participate regular trust growth appropriately potential processes M&A, in We with which the be seek estimate line the right to rate are sheet businesses long-term around be jurisdictions. the of offshore positioned blended rates and our for to with sellers, GDP balance to banking forecast bid

repurchases to These benefits improving thoughtful shareholder and management. happy a capital income, Thank our organic time stable focus of positions, stakeholders. franchise, over share per on that, a we share recurring create we fee growth, to ability take by is leading and efficiency. Butterfield's our to and will generate which Operator? you. And continue addition sheet, questions. balance operating earnings market to profitable value to all help would operating from benefit strong efficiency be with In augmented

Operator

David question Raymond first comes James. from The [Operator Feaster Instructions] with

David Feaster

increase on see, first, I deposits, starting what drove could that just touch to Channel the the just obviously, on growth some you was by deposit primarily Maybe driven maybe the trends deposit Islands. to and guess, guess, you're for what's $XX that I jurisdictions? then declining to the billion. for of seeing expectations driving going your deposits And back decline? to your expectations $XX.X across billion great

Craig Bridgewater

Craig. it's David,

out. start I'll So

-- on between settle think guess, we over $XX.X will still I billion deposits think I $XX to the that billion.

kind of around in, but some saw those for long expect we a don't large deposit to quarter, stay inflows the During come we time.

end the of towards deposits about months. We've some We saw to So come customer, kind the of start-up, talked kind of that a couple over are in kind other next of kind liquidation $XXX to proceedings. June, those a that's of deploy going that's one actually million funds about that we relates of know in.

We And investment expect some then flow customer another kind an of expect to deposit point. at still -- those large to in management company. of relates kind

we expect well. next those as over few to be again, So the would months deployed

we to $XX relevant. of around billion still guidance think So is still our $XX.X that kind billion

Michael Schrum

Michael Schrum. it's David,

that. to add to Just

bit deposit elevated. you obviously, there billion, the If the rate, look exit at the a run average was $XX.X -- balance period-end levels was at

to mentioned, push out a And wanted sight so Craig kind of to large that. we line have just of of clients, couple and of as

David Feaster

and just a great. business to the somewhat due like trends side the It see That's the And it then that this quarter. seeing fees. of strength AUM to trust curious was the some in the were trust on decent side. up in business it's special I'm looks sounds decline custody like great And Okay. the trust broadly. then you're in there

think just kind how So there about forward? curious trust trends the of the going of and some you business

Michael Schrum

Yes.

David, Michael So Schrum. it's

sort Credit in to the of non-financial portfolio assets of few those equate after coming referral do From and in and and we in or or companies on via they but and special Suisse time reporting the get AUT of the a closed are closing, coming there's shares and of kind we of get sort client still in just time. AUC fees revalued Singapore method. to clients the to restructuring Guernsey the because time, lot As you onboarding I off sort time wouldn't this the invest assets of underlying a like intangibles revenue from know, those.

the the of to bit really And then down, the it the driven of that sort up is or is so special sort off kind really relate can of time-based annual and fees. revenue. The which and but of recurring jump revenue doesn't fee,

a where to And a new we trust more and firm bit are time families jurisdictions. the record consulting or like little the the structuring that we where law a added big client. to So have or move bill kids then firm people occasionally,

rotate to assets need And the whole that orderly we so succession of some trust assets And the purpose is through generations. of of around.

about really where Singapore feel we're Suisse brought the more And trend. referrals. a the book positive pretty Credit level has so getting we to much inbound Obviously,

the is pretty looking So pipeline good.

I trends rent, that's probably with service, are compliance and just reporting of think business all a extra cost migration the and required in is tax AML higher trust that. around the going all global the trust the towards a up the

there, But is which a bit in plenty that market out of than time. fees and level wealth. So for that younger us example. Europe, of really especially some the maturity a in probably there's migrating terms entry north still point our in will opportunities to paying over of see and of Asia, extra We market bring is somebody for fees

Craig Bridgewater

add tracking Kind Suisse, to Credit close let we revenue gave kind ideas are from that those be, just actually as expect along kind well. assets we that of those some that's of lines expected. on of we me and we the I as you I'd what mean, around acquired -- the performing

a Michael particularly referrals lot around positive. lot coming of where has a assets activity, and the of mentioned, seeing led those that's more Singapore, us So trend But that's kind a an positive as increased more we're given kind to pipeline, business. trust in a onboard

David Feaster

that then Okay. you're maybe bit. with of And borrowers curious non-accrual just your housing seeing across could kind trends great. of How that the of maybe on may seeing. looks perspective, like health That's that jurisdictions? your those struggling? any just actually you trends mortgage from some improved you're your hoping -- mortgage working And in health of just the are be the touch borrowers. It I'm what the has resi you other a market

Michael Schrum

Yes.

So it's Michael Schrum.

pretty good. So are pretty let's in It's Rental Bermuda. Bermuda. start with yields stable

seeing transactions And first we're purposes, market. holding up home values and so buyers that investment are see when the the it's whether in obviously or we

And more of good. rate well. Cayman, banks and of bit point and little lend small and on the the a so a some that's valuations. not again, supply Obviously, market with But and well-seasoned sort we the in time stretch because market do lack a market. all to we of cautious, is pretty a of the into frothy be saying, consistent look, taking this underwriting going credit want small of on. the good in our that competitive provider by of a cycle. at bit in bit manual we're always parameters island, it's But Canadian levels sort There's we're But transactions as ourselves. newer, fairly we in nature the recent book conservative more terms of again,

So of going building as Cayman well. on lot quite in a

obviously the condo, of there. prefer hospitality. lending a But rather that piece being as hospitality We where are, flip seen the lending of well. rates than But recently certainly in lot prepayment sort mixed they with condo there's that. of quite activity side, bit the a So of book use, we've on

what is And is. so that it

a we're credit continues consistent loan obviously -- There's conservative think very election sense, guidelines growth perform recent on internally. London underwriting is that been provider I in a but a there. not really well. story we're of to

you are government eligibility. so the next lay to going noise liquidity not what waiting will, some platform out market, there's coming people to around is is because particularly policy and if And that the

the in work going How maybe that people want there. to relationships to purposes. forward. been but U.K., tax the is for non-domicile relationships reform resident that's tenant and some landlord going There's advertised So the leasehold be around

And taking London. in there in It's Prime a again, sitting the Central think valuations sidelines more just longer are so inventory good turn U.K., been little this really. And think has on I in for people Bermuda year. the bit I to bit up holding tourism a but

underlying resi performance we've pretty the mortgages. good So seen on

on of interest seen the environment, -- but those of some performing. rapidly of the early it's some resi Bermuda book, with out to we've I returning think we COVID kind concerns coming had rising in rate actually

there. good So news a story that's

a So I'm we're it's a down not stretching to come again, point going book cycle, steady loan credit. the of little not but the little seeing bit. sort backwards of for expect -- we again, at this the pick-up rate kind We're activity saying bit in

Craig Bridgewater

Only place as bit base. down, simply credit sort of are would now, cards, But it's little deposit accounts because mortgages flat are We've of moving the a a pick-up point. that developed mass structure good we've with be in of good rates but well. when because bank this will Islands Channel lots affluent right at simply issued slow the

Operator

next Instructions] with question The KBW. [Operator Switzer comes Tim from

Timothy Switzer

My have first and bit, guys guys about the guys as levels other little normalization you talked you and take your asset know deposits bit. sensitivity want you in question but to came to is have normalizing around time any elevated liquidity? I a this liquidity little lower beyond quarter over there maybe sensitivity increasing deposits just actions asset the are a

Michael Schrum

over question. It's we're because Yes, essentially, So just XX% asset it's lending lend, markets Michael deposits preference is in a for We're naturally rate. lending right? It's good time behaviorized our sensitive our and question. are Schrum. seasoned floating the a great

pretty I think on. this should in different path. at feel the we're that call always re-ladder down, structural we're And be something the at that Obviously, to sensitivity the that sort to -- But we burn portfolio gives But pretty securities we path discussions us. what pretty we're about we OCI so asset moment, rise doing committed for around point. there's of good and

jurisdictions. at therefore, rate investment or term loans that I own going naturally that have to a liquidity, our of OCI But we now manage longer in a often want we or down, have discuss of least because bank, path have direction of the it's what X versus book and the a us something lender banking a we it's or rate that across securities a some gives last because resort think fixed lot essentially, have tangible rate. value just of on level whether central confidence to we're around growth. of books, visibility operations rate floating is don't different a path the burn of terms And treasury need to we We

gives because that sensitivity, much a so further VAR hold. inflow/outflows -- And in rise we use asset min-max to kind cash to we increase we obviously, of estimate and test need to how

the action. I be So think Bermuda going But bit structural probably is been think we're time, banks a see to the a to long sensitive reality always more some in having yet for I cycle. through

very I than capital a stable, sort us think that, give to of But the fees ongoing it's They're discussion, but nothing efficient. buffer. an great really other report.

Timothy Switzer

$XX your that cuts? investment have few might some to levers there any XXXX knowing $XX helpful. out growth Okay. think there. about expenses with get rate from able more amount pipeline How pull, the what good are rate down million historically And been different a -- I we rate you've expenses to the understand. That's assuming dropping in a that's dropping should the in level? back in XXXX, million, plans only the run of to lead And you of the back we expense are run guys

Craig Bridgewater

here. it's Yes, Craig

well. to look kind at we probably -- inflation need you of I as that if expenses think going XXXX, one is thing into at I looking the be mean, really

professional to in we inflation of as pause see So services as works well. just as salary well expect general the how kind of inflation do of you'll regards kind

where we going this rate kind at have be what levels, kind to But point going that's of obviously, kind depending we're historic to again, of is environment unpredictable of and goes assume to that. apply see. we if So the on inflation at definitely

continued kind in our IT In it of investments comes when to making investments infrastructure. addition, we are some

and be into We and are accounting But that we're there's year. other assets that of this on increased amortization well as to becomes core year in kind of implementing in. that going operated investing live, once system IT QX obviously, next

to think in $XX we're we the second I did kind taking think in half in a this in see rate or applying I of the this one-offs get count some reasonable of things So of any expect other of kind the to which investments going expecting year, that or increases significant not summary, of given and of of infrastructure. million, those and quarter then XXXX, kind head inflation types we into

continue We management Service in have long-term with the strategy of expense Halifax us leveraging our which helps kind really longer Center, term. around to

Michael Schrum

we I committed higher. could revenue we From think, ratio there And thing Michael try time additional is, The revenue through-cycle cost/income path it to if Tim, to at look dropping, we be that and we're cost Yes. the bit see it's still generate do lever. we roughly XX% at is a a where we're either do the time, only Schrum. add And how the moment. always to use I'd how and around or

So to disciplined -- to and that we we're kind the process around get of XX%. try pretty

Operator

question closing like session. to I turn concludes to remarks. for This and conference back our answer the any over management would

Michael Collins

a next forward to for day. for Thank And you again you, look we today. with thanks Nick, We and calls. quarter. it's speaking in dialing a great busy everyone day know Have

Operator

presentation. has Thank attending The today's now for conference concluded. you

may You now disconnect.

The Bank of N.T. Butterfield & Son Limited (NTB) 23 Jul 242024 Q2 Earnings call transcript