Financial highlights for the first quarter of 2024:
- Net income of $53.4 million, or $1.13 per share, and core
net income1 of $55.0 million, or $1.17 per share
- Return on average common equity of 21.5% and core return on
average tangible common equity1 of 24.5%
- Net interest margin of 2.68%, cost of deposits of
1.78%
- Board declares dividend for the quarter ended March 31, 2024
of $0.44 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 March 31, 2024.
Net income for the first quarter of 2024 was $53.4 million, or
$1.13 per diluted common share, compared to net income of $53.5
million, or $1.11 per diluted common share, for the previous
quarter and $62.2 million, or $1.24 per diluted common share, for
the first quarter of 2023. Core net income1 for the first quarter
of 2024 was $55.0 million, or $1.17 per diluted common share,
compared to $55.3 million, or $1.15 per diluted common share, for
the previous quarter and $62.2 million, or $1.24 per diluted common
share, for the first quarter of 2023.
The return on average common equity for the first quarter of
2024 was 21.5% compared to 22.5% for the previous quarter and 28.0%
for the first quarter of 2023. The core return on average tangible
common equity1 for the first quarter of 2024 was 24.5%, compared to
25.4% for the previous quarter and 30.5% for the first quarter of
2023. The efficiency ratio for the first quarter of 2024 was 60.9%,
compared to 61.7% for the previous quarter and 56.0% for the first
quarter of 2023. The core efficiency ratio1 for the first quarter
of 2024 was 59.8% compared with 60.5% in the previous quarter and
56.0% for the first quarter of 2023.
Michael Collins, Butterfield's Chairman and Chief Executive
Officer, commented, “The Bank’s first quarter results are a great
start to the year and continue to demonstrate the strong
profitability of Butterfield’s capital efficient non-interest
earnings, well-structured balance sheet and thoughtful capital
management. Since listing on the NYSE in 2016, the Bank has
consistently maintained operating returns on tangible equity in the
range of 16% to 28%, and we expect these levels of profitability to
continue across typical economic cycles. We are on track to deliver
top quartile returns relative to US regional banks. The Bank
remains highly liquid with strong capital levels and has a loan
portfolio that is primarily comprised of well collateralized
residential mortgages with limited commercial and hospitality real
estate exposure in Bermuda and the Cayman Islands."
Net income and core net income1 were flat compared to the prior
quarter.
Net interest income (“NII”) for the first quarter of 2024 was
$87.1 million, relatively flat compared with NII of $86.9 million
in the previous quarter and down $10.3 million from $97.4 million
in the first quarter of 2023. NII was flat during the first quarter
of 2024 and decreased compared to the first quarter of 2023,
primarily due to higher deposit costs and a decrease in the size of
the Bank's balance sheet.
Net interest margin (“NIM”) for the first quarter of 2024 was
2.68%, a decrease of 5 basis points from 2.73% in the previous
quarter and down 20 basis points from 2.88% in the first quarter of
2023. NIM in the first quarter of 2024 decreased compared to the
prior quarter and first quarter of 2023 due to a lower volume of
interest earning assets, continued mix-shift to higher yielding
term deposit products and day-count.
Non-interest income for the first quarter of 2024 was $55.1
million, a decrease of $4.9 million from $60.0 million in the
previous quarter and $4.9 million higher than $50.2 million in the
first quarter of 2023. The decrease in the first quarter of 2024
compared to the prior quarter was mainly due to lower banking fees
due to seasonally higher fourth quarter banking revenues, which
were partially offset by higher foreign exchange revenue.
Non-interest income in the first quarter of 2024 was higher than
the first quarter of 2023 primarily due to newly acquired trust
fees and higher foreign exchange income.
Non-interest expenses were $88.5 million in the first quarter of
2024, compared to $92.2 million in the previous quarter and $84.1
million in the first quarter of 2023. Core non-interest expenses1
of $86.9 million in the first quarter of 2024 were lower than the
$90.4 million incurred in the previous quarter and higher than the
$84.1 million incurred in the first quarter of 2023. Compared to
the prior quarter, core non-interest expenses1 in the first quarter
of 2024 were lower due to reduced head-count in the current quarter
and higher bonus accruals in the previous quarter, lower technology
cost from reduced IT project related travel and other expenses,
partially offset by increases in non-income tax expenses related to
the vesting of employee share awards. Core non-interest expenses1
were higher in the first quarter of 2024 compared to the first
quarter of 2023 primarily due to increased costs associated with
the implementation and depreciation of Butterfield's upgraded
cloud-based core banking system in Bermuda and Cayman and other
physical and IT asset improvements.
Period end deposit balances were $12.1 billion, an increase of
1.2% compared to $12.0 billion at December 31, 2023, primarily due
to deposit increases in the Channel Islands. Average deposits were
$12.2 billion in the quarter ended March 31, 2024, compared to
$11.8 billion in the prior quarter.
Tangible book value per share improved by $0.16 or 0.8% this
quarter to $19.45 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 May 21, 2024 to shareholders of record on May 7,
2024. During the first quarter of 2024, Butterfield repurchased 1.2
million common shares under the Bank's share repurchase
program.
The current total regulatory capital ratio as at March 31, 2024
was 24.9% 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 FIRST
QUARTER RESULTS
Income statement
Three months ended
(Unaudited)
(in $ millions)
March 31, 2024
December 31, 2023
March 31, 2023
Non-interest income
55.1
60.0
50.2
Net interest income before provision for
credit losses
87.1
86.9
97.4
Total net revenue before provision for
credit losses and other gains (losses)
142.2
146.9
147.5
Provision for credit (losses)
recoveries
0.4
(1.7
)
(0.7
)
Total other gains (losses)
0.2
(0.3
)
0.1
Total net revenue
142.8
144.9
147.0
Non-interest expenses
(88.5
)
(92.2
)
(84.1
)
Total net income before taxes
54.3
52.7
62.9
Income tax benefit (expense)
(0.9
)
0.8
(0.7
)
Net income
53.4
53.5
62.2
Net earnings per share
Basic
1.15
1.13
1.25
Diluted
1.13
1.11
1.24
Per diluted share impact of other non-core
items 1
0.04
0.04
—
Core earnings per share on a fully
diluted basis 1
1.17
1.15
1.24
Adjusted weighted average number of
participating shares on a fully diluted basis (in thousands of
shares)
47,167
48,099
50,131
Key financial ratios
Return on common equity
21.5
%
22.5
%
28.0
%
Core return on average tangible common
equity 1
24.5
%
25.4
%
30.5
%
Return on average assets
1.6
%
1.6
%
1.8
%
Net interest margin
2.68
%
2.73
%
2.88
%
Core efficiency ratio 1
59.8
%
60.5
%
56.0
%
(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)
March 31, 2024
December 31, 2023
Cash and cash equivalents
1,746
1,647
Securities purchased under agreements to
resell
135
187
Short-term investments
1,345
1,038
Investments in securities
5,168
5,292
Loans, net of allowance for credit
losses
4,644
4,746
Premises, equipment and computer software,
net
150
154
Goodwill and intangibles, net
96
99
Accrued interest and other assets
243
211
Total assets
13,528
13,374
Total deposits
12,131
11,987
Accrued interest and other liabilities
304
285
Long-term debt
99
98
Total liabilities
12,533
12,370
Common shareholders’ equity
995
1,004
Total shareholders' equity
995
1,004
Total liabilities and shareholders'
equity
13,528
13,374
Key Balance Sheet Ratios:
March 31, 2024
December 31, 2023
Common equity tier 1 capital ratio2
22.6
%
23.0
%
Tier 1 capital ratio2
22.6
%
23.0
%
Total capital ratio2
24.9
%
25.4
%
Leverage ratio2
7.5
%
7.6
%
Risk-Weighted Assets (in $ millions)
4,648
4,541
Risk-Weighted Assets / total assets
34.4
%
34.0
%
Tangible common equity ratio
6.7
%
6.8
%
Book value per common share (in $)
21.53
21.39
Tangible book value per share (in $)
19.45
19.29
Non-accrual loans/gross loans
1.3
%
1.3
%
Non-performing assets/total assets
1.2
%
1.0
%
Allowance for credit losses/total
loans
0.5
%
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 MARCH 31, 2024 COMPARED WITH THE QUARTER ENDED
DECEMBER 31, 2023
Net Income
Net income for the quarter ended March 31, 2024 was $53.4
million, relatively flat from $53.5 million in the prior
quarter.
Movements within net income during the quarter ended March 31,
2024 compared to the previous quarter are attributable to
following:
- $4.9 million decrease in non-interest income driven by (i) $4.3
million decrease in banking fees due to prior-period seasonality;
and (ii) $1.0 million decrease in trust income driven by lower
activity-based fees;
- $2.1 million decrease in the provision for credit losses driven
by the repayment of two residential mortgages following the sale of
the underlying collateral and reduced delinquencies in
Bermuda;
- $3.6 million decrease in non-interest expenses driven by (i)
$1.7 million decrease in salaries and other employee benefits
driven by lower head-count and adjustments to performance-based
incentive accruals recorded in the previous quarter; (ii) $1.5
million decrease in professional and outside services due to costs
relating to the Credit Suisse trust asset acquisition recorded in
the previous quarter; and (iii) $1.1 million decrease in technology
and communications from lower corporate travel and other costs
associated with the core banking system upgrade which went live in
Cayman in the previous quarter; partially offset by $1.3 million
increase in indirect taxes related to the annual vesting of share
compensation; and
- $1.7 million increase in income tax expense due to the
recognition of a deferred tax asset in Singapore in the previous
quarter.
Non-Core Items1
Non-core items resulted in expenses, net of gains, of $1.6
million in the first quarter of 2024. Non-core items for the
quarter included costs associated with the departure of a senior
executive and fees relating to corporate restructuring.
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 MARCH 31, 2024 COMPARED WITH
DECEMBER 31, 2023
Total Assets
Total assets of the Bank were $13.5 billion at March 31, 2024,
an increase of $0.2 billion from December 31, 2023. The Bank
maintained a highly liquid position at March 31, 2024, with $8.4
billion of cash, bank deposits, reverse repurchase agreements and
liquid investments representing 62.0% of total assets, compared
with 61.0% at December 31, 2023.
Loans Receivable
The loan portfolio totaled $4.6 billion at March 31, 2024, which
was $0.1 billion lower than December 31, 2023 balances. The
decrease was driven primarily by maturities and prepayments in the
Channel Islands and UK residential mortgage portfolio.
The allowance for credit losses at March 31, 2024 totaled $24.8
million, a decrease of $1.0 million from $25.8 million at December
31, 2023. The movement was driven by repayment of two residential
mortgage properties following the sale of the underlying collateral
and reduced delinquencies in Bermuda.
The loan portfolio represented 34.3% of total assets at March
31, 2024 (December 31, 2023: 35.5%), while loans as a percentage of
total deposits was 38.3% at March 31, 2024 (December 31, 2023:
39.6%). The decrease in both ratios was attributable principally to
a decrease in loan balances at March 31, 2024 compared to December
31, 2023.
As of March 31, 2024, the Bank had gross non-accrual loans of
$59.1 million, representing 1.3% of total gross loans, a decrease
of $2.0 million from $61.0 million, or 1.3% of total loans, at
December 31, 2023. The decrease in non-accrual loans was driven by
a number of Bermuda residential mortgages moving back to accrual
status.
Other real estate owned (“OREO”) remained flat at $0.5 million
compared to December 31, 2023.
Investment in Securities
The investment portfolio was $5.2 billion at March 31, 2024,
which was $0.1 billion lower compared with December 31, 2023
balances. The changes were attributable to paydowns and maturities
in the portfolio, for which the majority of the proceeds were
invested into short-term treasury assets.
The investment portfolio is made up of high-quality assets with
100% invested in A-or-better-rated securities. The investment book
yield was 2.23% during the quarter ended March 31, 2024 compared
with 2.16% during the previous quarter. Total net unrealized losses
on the available-for-sale portfolio increased to $178.2 million,
compared with total net unrealized losses of $163.9 million at
December 31, 2023, as a result of rising long-term US dollar
interest rates.
Deposits
Average total deposit balances were $12.2 billion for the
quarter ended March 31, 2024, an increase of $0.4 billion compared
to the previous quarter, while period end balances as at March 31,
2024 were $12.1 billion, an increase of $0.1 billion compared to
December 31, 2023.
Average Balance Sheet2
For the three months ended
March 31, 2024
December 31, 2023
March 31, 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
3,138.3
36.8
4.71
2,603.6
31.0
4.72
2,943.9
27.1
3.74
Investment in securities
5,204.2
28.9
2.23
5,290.5
28.9
2.16
5,720.2
29.8
2.12
Available-for-sale
1,766.3
9.6
2.17
1,798.8
9.1
2.01
2,005.6
8.9
1.80
Held-to-maturity
3,437.9
19.3
2.25
3,491.7
19.7
2.24
3,714.6
20.9
2.28
Loans
4,689.5
77.0
6.58
4,732.5
79.7
6.68
5,040.7
77.5
6.23
Commercial
1,381.4
23.7
6.88
1,374.1
24.4
7.03
1,409.8
22.6
6.51
Consumer
3,308.1
53.3
6.46
3,358.3
55.4
6.54
3,630.9
54.9
6.13
Interest earning assets
13,031.9
142.7
4.39
12,626.6
139.6
4.39
13,704.7
134.5
3.98
Other assets
412.0
421.6
395.9
Total assets
13,444.0
13,048.1
14,100.7
Liabilities
Deposits - interest bearing
9,586.5
(54.2
)
(2.27
)
9,208.6
(51.2
)
(2.21
)
9,786.5
(34.7
)
(1.44
)
Securities sold under agreement to
repurchase
4.6
(0.1
)
(4.69
)
4.7
(0.1
)
(5.64
)
0.4
—
(4.50
)
Long-term debt
98.5
(1.4
)
(5.58
)
98.5
(1.4
)
(5.53
)
172.3
(2.4
)
(5.65
)
Interest bearing liabilities
9,689.7
(55.6
)
(2.30
)
9,311.7
(52.6
)
(2.24
)
9,959.2
(37.1
)
(1.51
)
Non-interest bearing current accounts
2,603.5
2,618.5
2,993.5
Other liabilities
250.0
228.9
241.1
Total liabilities
12,543.2
12,159.2
13,193.7
Shareholders’ equity
900.8
889.0
906.9
Total liabilities and shareholders’
equity
13,444.0
13,048.1
14,100.7
Non-interest bearing funds net of
non-interest earning assets (free balance)
3,342.3
3,314.9
3,745.6
Net interest margin
87.1
2.68
86.9
2.73
97.4
2.88
(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 $130.7 billion and $30.7 billion, respectively, at
March 31, 2024, while assets under management were $5.7 billion at
March 31, 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)
March 31, 2024
December 31, 2023
March 31, 2023
Net income
53.4
53.5
62.2
Non-core items
Non-core expenses
Early retirement program, voluntary
separation, redundancies and other non-core compensation costs
1.3
(0.3
)
—
Asset acquisition costs
—
1.9
—
Restructuring charges and related
professional service fees
0.3
0.2
—
Total non-core expenses
1.6
1.8
—
Total non-core items
1.6
1.8
—
Core net income
55.0
55.3
62.2
Average common equity
996.1
943.0
902.5
Less: average goodwill and intangible
assets
(97.4
)
(77.7
)
(74.2
)
Average tangible common equity
898.7
865.2
828.3
Core earnings per share fully
diluted
1.17
1.15
1.24
Return on common equity
21.5
%
22.5
%
28.0
%
Core return on average tangible common
equity
24.5
%
25.4
%
30.5
%
Shareholders' equity
995.1
1,003.6
936.9
Less: goodwill and intangible assets
(96.3
)
(98.9
)
(74.1
)
Tangible common equity
898.8
904.7
862.8
Basic participating shares outstanding (in
millions)
46.2
46.9
49.8
Tangible book value per common
share
19.45
19.29
17.32
Non-interest expenses
88.5
92.2
84.1
Less: non-core expenses
(1.6
)
(1.8
)
—
Less: amortization of intangibles
(1.9
)
(1.4
)
(1.4
)
Core non-interest expenses before
amortization of intangibles
85.0
89.0
82.7
Core revenue before other gains and losses
and provision for credit losses
142.2
146.9
147.5
Core efficiency ratio
59.8
%
60.5
%
56.0
%
Conference Call Information:
Butterfield will host a conference call to discuss the Bank’s
results on Wednesday, April 24, 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 and our
dividend payout target, 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.
BF-All
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240423386505/en/
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
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