Key Highlights

  • Core diluted EPS was $1.58, up from $1.51 a year earlier, and GAAP diluted EPS was $1.50.
  • 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.

Butterfield Earnings: Did the Third Quarter Meet Expectations on a Core Basis?

Butterfield (NYSE:NTB) reported third-quarter results 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, compared with $1.16 in the second quarter and $1.46 a year ago. Figures are in US dollars, and the screen's $1.57 estimate implies a surprise of 0.64% as screened.

Net income was $61.0 million and core net income was $64.2 million. Return on average common equity was 21.3%, while core return on average tangible common equity was 25.0%. 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.

Butterfield Income and Expenses: What Lifted Revenue?

Net interest income was $97.2 million, up from $95.6 million in the second quarter and $92.7 million a year ago. 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.

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. 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%, compared with 56.2%.

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

Butterfield Credit and Capital: Why Did Non-Accruals Rise to 2.7% of Loans?

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. Management attributed the rise to two well-secured residential mortgage facilities in the Channel Islands and UK segment, which it said carry no expected loss. The allowance was $27.0 million, or 0.6% of loans, and the quarterly credit provision was a $0.2 million charge.

The CET1 ratio was 29.4% and the leverage ratio was 7.8%. 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 helped lower tangible book value per share to $25.32 from $26.19 in the second quarter.

Butterfield and CIBC Caribbean: What Happens Next for the Dividend and Buyback?

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

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