NTB - Earnings call transcript Q4 2024 | The Bank of N.T. Butterfield & Son Limited

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Operator

Good morning. My name is Michael, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter and full year 2024 Earnings Call for the Bank of NT Butterfield & Son Limited. [Operator Instructions] Please note this event is being recorded.

to of call Investor like Fields, to now Head Butterfield's Relations. would turn over the Noah I

Noah Fields

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

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

for prepared Following will a up question-and-answer we call session. remarks, their the open

quarter a slide available press remarks year release will Yesterday and afternoon, of fourth release, a full call on results. our with refer we section Relations presentation our press The are issued Investor on this our XXXX at announcing website we the to along during that www.butterfieldgroup.com.

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

of press refer to reconciliation U.S. a slide measures please and release GAAP, these For earnings the to presentation.

call may Today's risks, factors statements. contemplated may other these forward-looking certain to and uncertainties subject contain that which by also are actual materially statements, from to results differ those associated cause and materials

be Additional risks our these can in information filings. regarding SEC found

turn over now the I will to Michael call Collins.

Michael Collins

low-risk from in businesses growing Islands and net and thanks propositions and balance interest increased Islands. a operating had sheet lower retail Cayman strong shareholder that performance its finished year benefits the through with stable to financial Channel density costs by Noah, funding the with you, customer banking fourth management. call We and value Thank were higher diversified and improved and we in joining supported everyone today. Butterfield income, banking fee the our a presence Butterfield effective in market-leading XXXX long-standing capital income, our the as results quarter Bermuda excellent margin. noninterest

Islands. where cater Bank management the with Singapore and the services financial Islands also management Central net Channel in offerings the high custody worth services, provides private Bahamas, include Cayman we Our U.K., and to comprehensive in Bermuda, clients in properties the specialized wealth trust Switzerland, prime banking, London. on asset mortgages and

now will XXXX income core common million of for million. income a strong of equity net X. tangible year Butterfield's and to Page on highlights This in resulted I produced XX% core turn average $XXX.X performance return full net the of XXXX. $XXX.X on in

XXXX. During basis the to a to margin interest year, net rising with in XXX from decreased of points X.XX% XXX XXXX, deposits X.XX% from points in basis cost

and quarterly quarterly with repurchase as net addition year on capital at interest approximately XX.X% million recently basis, the grew Tangible increasing total end the share dividends shares stabilize we seen for declared, market However, decrease. X.X management a book remains margin to Active $XX.XX. cash per to a at have earnings rates of deposit in value the of total a year value costs XX% representing million. priority of $XXX.X common

visitor On in recommence to October the months. busiest Bermuda new numbers Cayman have locations and while as in for and as Bermuda's million approved premier May, X.X December the high share Cayman improved authorization X, continue common season finished shares. both repurchase up spring experienced during XXXX Board is will see and tourism to travelers a destinations. of winter

continued jurisdictions, for and we by and drive reinsurance Tourism management. Bermuda both and assets incorporations, as to economic beyond. in Management addition, graded grow primarily in and Financial international Services jobs business, Asset measured growth in to and continue services development expect financial Cayman continue XXXX In XXXX International in to under

on fourth over quarter. Craig to details the call I will now turn the for

Craig Bridgewater

decreased and quarter $X.XX core the will equity we decrease core investments of I primarily in of in of the net interest $X.XX in quarter yield across lower Butterfield X. deposits reported shares of net of XXXX, Page for from fourth results everyone. morning, to fourth on XX.X% deposits XXX price good basis and into quarter with margin fourth term strong million. Board the quarterly banking of income quarter, an per an We stable quarter financial on a from achieved jurisdictions share. earnings as during our Michael, core share you, increase at repurchase a totaling which The quarter. whilst Deposit basis the income continue shares basis begin the per fixed of rates. Thank million with average X.XX% the the buybacks an again the from points XXXX $XX.X cost of prior highlights was share from tangible with points per X.XX%, by common driven points quarter, has average in cash dividend Net over on rolled XXX $X.XXXX return third of approved and prior of to a XXX increase X.XX%. dropped the costs with X.X all

yields was quarter, On interest here $XX.X quarter. Slide to this In of Bank net deposit of we an assets of lower the in compared increase million interest a increased before summary earning million following cuts. offset quarter, the X, margin. credit reported interest Lower interest-earning by loan quarter, net and up in the fourth assets higher million income rate losses $XX.X the we of fourth volumes. $XX.X net Central partially interest higher deposit previous income by and Average benefited driven prior of was provide costs, rates and income net provision investment the treasury for interest impact which quarter

basis Channel due in Investment increase mortgage as segments slight outpacing U.S. Islands of Average maturities a Cayman amortization to as on yield deployed decreased in X.XX% in to growth due were and treasury the the short-term the form was the QX. interest-earning securities Islands. and was yield the cash on volumes amounts assets basis quarter, excess quarter $X.X X.XX% the cash X.X% The prior investment points impact yielded during Treasury into million lower Bermuda The saw X.XX% XX to balances the securities, the by offset higher new XX on from U.K. yields which in in loans. X.XX% overall the partially as billion The quarter in prior MBS Agency to medium-term on versus of originations and in and assets was and short-term securities. or liquidity prior which and and $XXX.X portfolio was expanded loan than year X.XX% the points loan X.XX% versus X.XX% balances quarter. quarter, well

due increases incentive in income, fourth expected exchange strength XX.X% as volumes transaction revenues the volumes. seasonal card up X a million Higher totaled well noninterest QX versus quarter and for which services, $XX.X Slide summary provides prior of the quarter Banking the foreign as and also of fee benefited with Islands. card cross-border of a capital-efficient of fee ] quarter. of revenue the activity tourism be [ from volume a incentives. income Noninterest source increased the to in stable income receipt for XX.X% income Cayman ratio to continues

we expect around would per Excluding million to income mid-$XX quarter. seasonal the stabilize noninterest factors,

credit related the On X.X% we and present core professional to products The costs. noninterest Total increase attributable in our to and marketing sponsorships expenditures outside noninterest X, higher million, increased were core primarily $XX.X Slide expenses. services million expense card events and are for a to expenses quarter. core compared prior noninterest $XX.X

for salaries slightly inflationary support versus systems pressures into last elevated year specialist the due Looking and XXXX, to to expenses on investment be we and and technological continued expect rules.

X-year terms. $XX continue typically We of lower license $XX in facing appropriate between expect over now non cloud accelerated of in quarterly expenses to to Technology to million centers. expenses million Overall, position now short call client XXXX. amortized rate as staff are solutions service expect core we IT run

I Schrum review the will call to over now to the turn sheet. balance Michael

Michael Schrum

liquid conservatively steady Slide balance at the managed. Period-end sheet Thank that billion prior remains XX, quarter. you, $XX.X and held deposit shows Craig. On versus Butterfield's it balances

versus We of continue average period-end demonstrates billion the elevated balance quarter see prior billion this. the and $XX.X in deposit balances to $XX.X

We $X.XX average of reflect total continues to continue hold regulatory coming deposits assets. to portfolio, $XX.X Butterfield's billion sheet, represents a for to loan to as to be capital around the our mortgage of the into efficiency $XX density potential continues which now a the the of XX% deposits billion. low-risk over marked balance settle quarters to loan of flow out the some result, expectation range and

we XX% of AA-rated of continues low to with Butterfield risk improved quality strong is quality On gross securities. with government-guaranteed which remained nonaccrual that credit loans. Slide asset agency comprised have portfolio, U.S. Credit and show in X.X% of loan XX, strong the book the investment in

basis low of large a X of ratio to also points. We continue see

On we present Slide summary a securities interest rate balances with cash average analysis. the sensitivity and XX,

quarter, fourth the up remains consistent modest of fourth the in included of the million quarter, quarter as at end the the at in sensitivity and portfolio million unrealized the the during with increased OCI XXXX. million, losses AFS of $XXX.X from $XX.X Asset $XXX.X end but

coming estimate and months the to OCI XX% continue We burndown over over coming XX XX months. the of XX%

XX Slide regulatory continue capital and conservatively levels capital regulatory above levels. to requirements. summarizes be Butterfield's leverage

also low ratios the IV due book. for mortgage group, capital which the guidance improve XXXX to We further will expect our the to in updated in to residential transition capital Basel adequacy likely loan-to-value principally ratios

turn now the call to Michael back will Collins. I

Michael Collins

pleased very with throughout I'm Michael. you, performance Thank Butterfield's XXXX.

of for operating We strong secure balance acquisitions capital management to efficiency, managed with around bank businesses. have fee success active position conservatively a pursuit culture the a sheet, continued the and of and

the find to ongoing. right are efforts Our dealer

possible given banking opportunities Islands. well in continue the market trust We retail growing Island's as and the business focus continued where in Singapore share continued business our organically Channel the market build-out growth of on Cayman the as

benefit anticipated higher pursue to to interest continue we XXXX, growth In the environment. and well for from remain positioned longer sustainable rate

continued has managing customers to to are to thank focus efficiency Canadian addition on like to returning our I sustained and led also XXXX. We a would and colleagues capital successful of center, operational excess service improving on closely emphasis for continued all which support, shareholders. our their with our in expenses

to that, we would with your happy be Operator? questions. take And

Operator

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

David Feaster

Maybe just the start on side. deposit

transitional And I to but you're it's some cost $XX you that to get billion that mean, or continue flow about You a maybe mean, done deposit deposits job. could out, the you and just range? the side. exclusive currency, commentary and talk occurring. of seeing just like guys deposit these grow on doesn't deposit the seem front been line We've the I to great expecting XX.X% then asset on deposits. to have of that are you And what back any been time expecting

job. a done great have guys You

So question wanted deposits. broad on just I to

Michael Schrum

Michael It's Schrum.

it's here. really kick mean seen quarter. I'll subject to We've fluctuations. are a fourth a bit kind exchange I during of story strengthening So dollar a off. BAU we little Obviously,

appendix we that we so I put as -- in And well. our think

in that's or couple couple that's banking really X funding provider. of relationship in In contractual an is the terms overall call process millions has Islands to we a and of the progress Channel a another is sort RFP done our clients of of what service that hundred temporary deposits in of are moving

that, coming. that will distributed sometime seen money that a the much So level hundred probably sort Bermuda, around overall we half court's of post I the of level. would have and I of X sitting been elevated in more ] And although say, then know then million mean closer in we kind being direction to liquidation year. XX% the we've -- the this even couple [ of pending that's of and be that's deposit first recently,

but obviously, [ that it, a it's sitting starts at little sort story. rates, impact It's can you deposits a we these ] of expect bit BAU which FX to also couple continue range, around. gives really of flavor of big a that So for just stable

Michael Collins

we little the concentrated. I'd deposit is less a like Yes. feel say base

outflows a XXXX some think XXXX, weren't the in bad thing. I So of

concentrated, the we less we But stickier. like it's is So I little right feel number. think and yes, still think about a feel XX I it's like

Craig Bridgewater

well. Going is the point average looking good David, the during to as a deposits reference say, at also quarter

to it to So see flows kind it as a similar fluctuation of quite levels also of the bit you very normal kind and quarter-to-quarter, look was some of kind if At during in of it the average again, we period the of regards tells seasonal. back But QX. levels the deposit kind quarter. story in more was business which do end, levels deposit at was similar -- of

David Feaster

you book. the tailwind Okay. on could Obviously, I And the repricing securities then touch was margin trajectory, some material hoping could you there's maybe in pretty right? --

You got to some some guys you liquidity. -- opportunity excess deploy

floating asset you're bit in levers to further just costs opportunity a quarter, that pulling help rate keeping defend the some did some it done deposit going stable spite do drive curious those You margin to more reduce sensitivity. job And for the how I'm the the and deposits. of about you of in expansion. margin the just forward? great think a You've trajectory

sense get wanted you're So thinking. I of to what just a

Craig Bridgewater

of consider, rate slow start we couple where NIM. if the a environment, over guess, of of now, interest expansion they of expect the we existing next rates see I kind are to, again, kind would David, Yes, quarters, kind to of assuming

get during rates, as And you've As the in rates of in looking seen deposits in active changes cost as really deposit U.S. the at we each that's base we've the benefited quarter, through down. coming kind of able kind jurisdiction, the U.K. to of from management in well. well as been

of significant So around at [ the yield. deploy liquidity we're And well that from which you to XXX portfolio. paydowns portfolio as as kind And maturities we'll ] to kind tickets investment the as some basis XXX is benefit. existing and a into investing excess are points, continue pickup of said, rates the

we to So rates to kind kind of back kind we pretty of that's stay of elevated, in at BAU XX-year kind rate of of, kind We've assuming stable at going our on and be stay portfolio very again, been now to continue stable if benefit. into at the entering higher kind has that just seen X of and has XXX, the quarters. over rates, the XXX last

into to [ again, of think are, So the start cost a of assuming slow expansion some not we that, continue the to can control we where out back [indiscernible]. richly ] going deposits, are I then see portfolio they to

David Feaster

buyback. really priorities. touch with guys Obviously, then just And to I capital been the active wanted have on you

just in the you think, got just on new degree. that to sensitive announced. on to Day appetite price out the then got And program some are share willingness maybe in how on M&A the and of stock, price. coming some had Analyst a with catch-up, some the compete going the pop We I we conversations, those and How buybacks? nice You've are increased you pricing

kind of those curious Just how are M&A going. conversations

Michael Schrum

Schrum. Michael It's

that hopefully one, some right for the obviously, time, rate and keeping obviously, over and of expand are priorities discussions and both bank, can they're systemically a But still to our in fee period will then have a increasing that time, level base earnings sheet. the number provide find that mean important of then now, longer we secondly, lead about capital over I sort Cayman today that So we secure. still Bermuda. of right domestically And income And retaining we would on dividend. dividend deal are

they So loan seeing markets make support as we that's we're need sure that priority as well. to but to well anything migrations able as any local not We're should growth in there, credit occur. a our

capacity so obviously, the we've thirdly, have at right the any that if the we then of capital deal we I stack can deal, M&A, complete looked to And ample in far. find think certainly layers

below So so imminent -- ratio. been and way trading modest sort and unfortunately, -- a an we've your book Xx not but normal holding the regression, pretty capital the buyback we're PE of we for about that is deal. think obviously, And and

it's good for a pretty at risk-free trade feel us. we So

but in how stacking we do capital equation back, TBV up. look as So part that's that as earn well. of is obviously, priorities -- dilution really the of kind But at

Operator

The next question Fargo. with Timur comes Wells Braziler from

Timur Braziler

Or 'XX, authorization maybe through to X Are bit if maybe ratcheted down just Maybe the maybe just that of possibility guys not. did those following 'XX. wondering higher just a correlate of 'XX or hitting half down does an the talk how the rationale And is what of I'm ratcheting why on of The around buyback in up announced was M&A at maybe in transaction basis. and capital roughly buyback for you for a questioning little greater likelihood line that 'XX. kind related?

Michael Schrum

Michael Scrum It's again.

there -- just post to The authorization capital obviously, in prior was deal very had as we meeting and supportive. mining a But other current would years. election, shareholders very we I have, returns done we required, correlate uses we're Board strategy I the have in as of just volatility. as If that deploying, said that find re-up support So our say just is Board will capital. shouldn't current The think supportive that as a stakeholders. is that to do we conversations of when lot about and is and good December, extremely the to all don't the always, appropriate you of was we and

So come that used we sort that before, isn't in I bit little to think related about lines and the standard necessarily the that. level regression of terms of Obviously, just a And I talked [ to of but And these buyback. we then that swarms a reasonable. level, expect trading a that's. we at and to ] something line if of back with regression from higher obviously, of pay kind bit start little that up kind would

Michael Collins

of we're it need the on year. or a getting did in the support is And we Michael completely returning later same if capital, excess Yes. midyear the the in do right to terms shareholders. last thing we do year, back focused we'll Board authorization for to in new

doesn't start -- So that's and this really good of something but become that to case and Michael will not discussions [ we see with said, are would lot M&A likely, back, mean anything starts to we it pare But ] the dialogue have a at now. different right it If we we parties. we as point. do if

Timur Braziler

it. Got

'XX, income, as NIM XX just fact be around could might given deposits a Or And little the migrate line. from Okay. are was the then follow expansion stability And top just margin you we with guys where asset-sensitive suit balance give sheet year [ can little next bloated the bit color versus then of I as the away, the net just there margin interest wondering, think into pressure thinking I'm that and to sheet. bit maybe the your looking top at balance some does a about defend I'm still that interim some of some some on highlight the ability these that line, go you How goes here? ] maybe is getting of on? NII you're

Craig Bridgewater

Yes.

X balance be of I think of sheet inflated. bit beneficiaries you would continued inside we talked changes yields, in quarter which earlier. said, in as as the well, about -- in balance the actually, I volume a the But any as is sheet of

get we and and have some fund expecting we're again, going the So deposits, is obviously which invest on. to what to outflow assets yield

So around have them pressure would some downward as billion if that $XX deposits net on the we well. income expect to, settle do interest as

to from benefited yes, we in So changes well yield point, have the have your on balance as the we of assets of elevated volume assets investable do of the kind of kind kind the size sheet. as or that both or

Michael Schrum

would Tim, And just Schrum. I Michael sorry, Yes. it's add --

seen much bit is from NII you've pull the speaking, a haven't end the the too suffering movement As front generally But end. little to long the quarter-over-quarter, through of curve. or we seen obviously

short-term bit for benefiting asset a NII. end, going still headwind But of short to is that's repricing. the be from So obviously, a treasuries the

Timur Braziler

Yes.

me, hit you the And quarter? impact Bermuda those pull-through is resi to now? book Is for still from remaining then mind in fully for yields the Okay. Or last first going what that into the me there that's just rate if is some the baked cuts.

Craig Bridgewater

would impact of So expect quarter, in the that. first the we

know, XX So decreased a rate XX-day you adjusted basis as the stock And XXXX on rate rent it. [ that's last got by [ base lag ], for ] points. we

this through putting in So actually see we would quarter. that

Michael Schrum

book. but rate U.K., rates, to [ you've just as books, fixed is ] on the we of have rate the expected move seen this, the though reference U.K. but in for obviously, baiting significant part our wouldn't amount the be which a even And which loans loan of

Operator

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

Timothy Switzer

[ of of your you million with in range kind trajectory the million move that that the of quarterly year? quarter? expenses. above expense it of over expect in Does every of Or course the $XX guide to ] maybe do of be up the range and back in higher the half end to The $XX to that year leak

Craig Bridgewater

kind was it as expectation of quarter. comments, be The we'll in comes Kind inflationary to of range that when salaries. that the every said pressures is formal Yes. facing we in are

to that I to focused looking of our we continued are kind we [ can ]. we specialist cetera, for service is and et business We we as measure I client management. also more rules. center management, But come on can very think be is non-client-facing in than guess our manage risks expensive do guess, to kind for risk roles and these expense important where imagine, kind the against move our technology roles that looking and operational you offering. that of And roles of out Halifax in

kind So roles we're additional as And we're on to necessary, bank. in to incur going right the well that where the because we're talent places. as very focused of attracting have of to beneficial sure having people the good that's to specialist make right expense inflation

Michael Schrum

just Tim, add I to that. would

enhancements the be Bermuda updated the Island We platform. some been their are to estate on cash other continuing and rolling functionality to ATM both well as for various Cayman people test new out as customers we've new able a to for our that and access

that So from client point be of view. I should think a experience good

Michael Collins

Yes.

to So we positions bang in movement we're reductions It's up it for looking the center about that take mean then rules the a bigger range Halifax. to at process reorganize time us, the how we think to in the been function XXX some but does move Halifax but I we things successful and the term, and to tactical is very right. buck service of Halifax. short for are is

over expenses a continue with takes time. some to time, it So that will but keep lid,

Timothy Switzer

full year you're you for noninterest quarters that QX? X it. the Is a we that should question implies on fee guide for year-over-year. of kind guys lower a to about in guide income million Got stable range. slightly income How the kind And the think above gave for that Great. have I and of first mid-$XX that? the That similar more

Craig Bridgewater

Yes.

quarters. is the that's you again, said the other we if back elevated as seasonal really in going our history, compared to factors. and So comments, around And the year, as QX -- look -- every to in

higher can last kind of crystallized, around on around card in But the a So et of as had is anticipate number. significant think have being inflation shopping, cetera, in We we Christmas we cetera. of already volume, the the We kind right We basis, volume additional million Credit baked of et quarter-to-quarter acquired. planned of credit $XX X%. incentives a year, don't increases revenue normally kind that Suisse fee fee so on we income. income rates from assets around kind

of So BAU kind now that's be level. of a kind

that years So kind kind of and revenue of as add [ through. came what through over we coming X the last those clients ]

line So pretty payable that, that we that level. this at think is item much point at

Timothy Switzer

And a if facility. expects Okay. in you resolution that good was ]. have it. have, sale an residential I that mortgage [ provide you I drivers Channel then any lower a on guys Islands? I of could of a And have update kind Got on legacy the like seems last That's hospitality update believe this the you NPLs It helpful. question the quarter. on wonder

Michael Schrum

days. really lower from that slightly It's the full gone the that was had Michael The Scrum. XX Great question. over facility nonaccruals of -- came repayment

paid sold And a so so back, satisfactory how outcome. They actually it property should that's that was the work. and us

the then announced that couple and accruing of a in there number changes -- of terms kind to the I've think elevated election, was mentioned So facilities and due London we in rules of due of or some U.K. quarters, past little a to and freezing rules have market up before new I as last bit we the is of

a So money that stored the though created on even wealth it's market. side,

some book for sort And valuations ] that seen starting [ that's of to we've pick on the there. underlying up we Home good have now transactions that sign the with a

which quarter. the creation have is go or the had the we we anticipated In It's proceeds, terms resolve their get to process and cetera. hoping that But legacy of process, through track here in through we're QX before to distribute in QX. resolved et either of kind certainly would originally close liquidators first the that to hospitality, Bermuda going into on

that be should resolution. a a getting very And that various well story then as commercial of of So other are positive we that. stages couple for loans in sort of have

our we'll hard highly to So on continue focused are that. and ensuring -- but pristine that we're work credit metrics at

Operator

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

Noah Fields

and next great Michael, We everyone look thanks you, Thank quarter. to a forward with to again speaking dialing for today. Have in you day.

Operator

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

You now disconnect. may

The Bank of N.T. Butterfield & Son Limited (NTB) 11 Feb 252024 Q4 Earnings call transcript