Key Highlights

  • Net income was $61.0 million and core net income was $64.2 million.
  • Net interest income was $97.2 million, and the net interest margin was 2.76%.
  • The CET1 ratio was 29.4%, up from 27.6% at year-end.
  • The dividend is $0.50 per share, payable on November 25.
  • Core diluted EPS was $1.58, up from $1.51 a year earlier, and GAAP diluted EPS was $1.50.

Which Earnings Signal From Butterfield Could Be Easy to Miss?

Butterfield (NYSE:NTB) reported third-quarter figures on Tuesday, October 27, with core diluted EPS of $1.58, unchanged from the second quarter and up from $1.51 a year earlier. GAAP diluted EPS was $1.50, versus $1.16 in the second quarter and $1.46 a year ago. Figures are in US dollars, and the screen's $1.57 projection implies a surprise of 0.64% as screened.

Net income was $61.0 million and core net income was $64.2 million. Core return on average tangible common equity was 25.0%. By contrast, Return on average common equity was 21.3%. Non-core items were $3.2 million pre-tax, mainly CIBC Caribbean acquisition costs. The release gave no full-year outlook for margin, expenses or tax.

Butterfield is a Bermuda-based bank with $14.27 billion in assets, $12.90 billion in deposits and $155.2 billion in assets under administration.

Which Business Line Is Really Driving Butterfield's Growth?

The net interest margin was 2.76%, versus 2.74% and 2.73%. Management cited reinvestment of securities at higher yields and better treasury returns, partly offset by loan yield compression and higher deposit costs. Net interest income was $97.2 million, up from $95.6 million in the second quarter and $92.7 million a year ago.

Total net revenue before provisions was $161.9 million. Core noninterest expense was $96.2 million, up from $88.5 million, and the core efficiency ratio was 57.8%, versus 56.2%. Noninterest income was $64.8 million, up from $61.2 million a year ago, on higher card volumes, a non-recurring contractual incentive, foreign exchange fees and trust revenue from the R&H Guernsey acquisition.

The investment book yield moved higher to 2.87% from 2.78% in the second quarter. Income tax expense was only $1.7 million on pre-tax income of $62.6 million.

What Could Investors Be Missing in the Butterfield Story?

Management attributed the advance to two well-secured residential mortgage facilities in the Channel Islands and UK segment, which it stated carry no projected loss. The allowance was $27.0 million, or 0.6% of loans, and the quarterly credit provision was a $0.2 million charge. Gross non-accrual loans were $119.6 million, or 2.7% of gross loans, up from $91.3 million and 2.1% at year-end.

Liquid assets were $9.4 billion, or 65.6% of total assets, and loans were only 33.9% of deposits. Net unrealized losses on available-for-sale securities were $187.3 million, up from $89.4 million at year-end, which supported lower tangible book value per share to $25.32 from $26.19 in the second quarter. The CET1 ratio was 29.4% and the leverage ratio was 7.8%.

Which Signal Could Move Butterfield Next Around November 25?

Share repurchases were paused after the May 28 update of the CIBC Caribbean acquisition, and none were made in the quarter. Shareholders approved the share issuance on September 18, and closing is projected in the first half of 2027. With a record date of November 10 and payment on November 25, the board declared a $0.50 dividend.

Watch for integration costs, any further movement in non-accruals, deposit costs and the timeline for regulatory approvals.