Bank of N.T. Butterfield & Son Q1 Earnings Call Highlights

Solid Q1 results and capital returns: Net income was $62.6 million (core EPS $1.55), net interest margin rose to 2.75% sequentially, and the bank paid a $0.50 quarterly dividend while repurchasing $42.4 million of stock, with management saying excess capital will continue to be returned.

Strategic acquisition closed: Butterfield completed the purchase of Rawlinson & Hunter Guernsey, adding about 50 staff, 71 client groups and roughly $9 billion of assets under trusteeship, with an expected GBP 8–10 million annualized fee-income lift beginning next quarter.

Balance-sheet and credit profile remains strong but monitored: The investment book is AA-or-higher U.S. Treasuries/agency securities, allowance for credit losses is 0.6% of loans and non-accruals are 2%, though management noted a modest uptick in past‑due London residential mortgages and $99.7 million of unrealized AFS losses in OCI that they expect to normalize over 12–24 months; tangible book value was $26.56 and TCE sits above the 6%–6.5% target range.

Bank of N.T. Butterfield & Son (NYSE:NTB) executives outlined a “strong start to the year” during the company’s first-quarter 2026 earnings call, pointing to stable deposits, improved expense control and a modest sequential increase in net interest margin. Management also discussed the closing of its Rawlinson & Hunter Guernsey acquisition, which it said strengthens Butterfield’s private trust franchise and supports its longer-term push toward more fee-driven revenue.

Quarterly results and capital return

Chairman and CEO Michael Collins said first-quarter performance reflected “solid financial performance and continued execution of our disciplined growth strategy,” with demand across banking, wealth management and trust remaining “robust.”

Butterfield reported net income of $62.6 million and core net income of $63.2 million. Collins said core earnings per share were $1.55 and core return on average tangible common equity was 24.1%.

Net interest margin rose to 2.75% in the quarter, up six basis points from the prior quarter, which Collins attributed in part to a lower cost of deposits. The company again declared a quarterly cash dividend of $0.50 per share and repurchased 800,000 shares for $42.4 million during the quarter. Collins said Butterfield plans to continue returning excess capital not needed to support the business and growth initiatives.

Collins highlighted the company’s agreement earlier in the year to acquire Rawlinson & Hunter in Guernsey and said the acquisition has now closed. He described it as “strategically important” in expanding Butterfield’s private trust scale and capabilities in Guernsey and strengthening its position as an international trust services provider, with group assets under administration of $146 billion following the deal.

In the Q&A session, Collins said the acquired firm has “50 really highly qualified staff in Guernsey, 71 client groups and about $9 billion of assets under trusteeship.” He characterized the deal as “very low risk” and said the client base is similar to Butterfield’s, noting Butterfield has operated in private trust for 70 years. Collins also reiterated the company’s disciplined approach to pricing acquisitions, describing parameters such as “eight times EBITDA” and targeting “12%-15% IRR or higher,” with a requirement that at least two-thirds of an acquisition be private trust.

President and Group CFO Michael Schrum said the acquisition is expected to add about “GBP 8 million-10 million” on an annualized basis to fee income, with the contribution expected to begin showing in the next quarter. He said costs will rise as the bank onboards new colleagues and works through integration, and indicated Butterfield would provide more detail after finalizing purchase price accounting work.

Net interest income, fees, and expense trends

Schrum said net interest income before provision for credit losses was $93.3 million, up $0.7 million from the prior quarter. He attributed the six-basis-point increase in net interest margin to lower deposit costs and higher investment yields, partially offset by lower Treasury and loan yields as central banks cut market interest rates and by a lower day count in the quarter. Schrum added that management expects net interest income and margin to be “broadly stable with a slight positive bias for the remainder of this year.”

Average investment volumes increased as assets were deployed into higher-yielding available-for-sale securities, which helped lift the average investment yield by six basis points to 2.78%, Schrum said. Average loan balances were stable, with net loan volumes increasing in Jersey and Cayman, though he noted that foreign exchange translation from a weaker pound sterling against the U.S. dollar “masked this uptick.” He said Butterfield continued reinvesting paydowns and maturities into U.S. agency mortgage-backed securities and medium-term U.S. Treasuries.

Non-interest income totaled $62.6 million, down $3.7 million from the prior quarter. Schrum said the decline was driven by an expected seasonal decrease in banking fees versus the fourth quarter, along with lower time-based and special fees, while foreign exchange fees rose slightly on higher volumes. The fee income ratio was 40.6% compared with 41.7% in the prior quarter.

Core non-interest expenses decreased from the prior quarter, which Schrum attributed to lower professional and outside services costs tied to project work and lower technology and communications expenses. Those improvements were partially offset by higher payroll taxes related to the annual vesting of share-based compensation in the first quarter.

Asked about expense expectations, Schrum said the first quarter is “always a little bit seasonally low.” Excluding the acquisition, he said “$90-$92 [million] is a good number” for quarterly core expenses, adding it was early to provide more forward guidance including the impact of onboarding and systems conversion tied to the deal.

Asset quality, portfolio marks, and capital levels

Schrum said Butterfield’s asset quality remained strong. The investment portfolio is “low risk,” consisting “entirely of double A or higher-rated U.S. Treasuries and government-guaranteed agency securities,” he said. Credit performance was described as stable, with “negligible net charge-offs,” non-accrual at 2%, and allowance for credit losses at 0.6% of total loans. He added that the loan book is anchored by high-quality residential mortgages, with 71% full recourse and nearly 80% with loan-to-value below 70%.

During Q&A, Schrum addressed a step-up in nonperforming loans and provision, saying the bank was “starting from a very low base.” He pointed to past-due migration tied “primarily to residential mortgages in our prime central London loan book,” describing them as three- to five-year mortgages underwritten at 60% to 65% LTV with significant equity. Schrum said Butterfield is working with borrowers facing temporary liquidity issues and expects the situation to normalize through refinancing or repayment upon property sales as liquidity in the prime and super-prime London market remains thin.

On the securities portfolio, Schrum said net unrealized losses in the available-for-sale portfolio recorded in other comprehensive income were $99.7 million at quarter-end, up $10.3 million from the prior quarter. He said interest rate sensitivity increased slightly due to changes in asset composition, with more short-duration assets. Schrum said the company expects OCI to improve over the next 12 to 24 months as the portfolio burns down.

Schrum also said tangible common equity to tangible assets remained “conservatively above” Butterfield’s target range of 6% to 6.5%. Tangible book value ended the quarter at $26.56 per share, up 0.6% from the prior quarter.

Market commentary: Bermuda and Cayman

Managing Director of Bermuda Jody Feldman said Bermuda’s outlook “remains constructive,” with real GDP growth estimated at 3% for 2025, supported by international business and reinsurance. Feldman cited the Bermuda government’s projection of a record $472 million surplus for fiscal year 2027, “largely driven by revenues from the new corporate income tax,” while noting structural challenges such as high costs, an aging population and limited affordable housing.

Feldman said the hospitality sector is seeing renewed investment, including $182 million of planned capital spending. He pointed to expectations for a partial reopening of the Fairmont Southampton in late 2026 and a full reopening in 2027, which he said could lift room inventory above pre-pandemic levels. He also cited redevelopment plans for Elbow Beach Resort and referenced international sporting events that support tourism and visibility.

In the Cayman Islands, Feldman said GDP growth is expected to moderate to around 2% in 2026 after several years of 4% to 6% growth. He noted population growth into the low 90,000s over the next few years, record stayover arrivals early in the year, and continued expansion in financial services, including reinsurance and fund services. Feldman said the Cayman government’s modest surplus expectations suggest the jurisdiction is entering a slower growth phase.

Discussing loan demand, Schrum and Feldman said the company remains focused on residential mortgages, citing capital efficiency under the bank’s return on risk-weighted assets model. Schrum said Cayman’s residential mortgage originations exceeded amortization runoff for the first time in a couple of years, while Feldman said Bermuda’s pipeline is “a little bit subdued,” partly due to fewer significant corporate projects, but that the bank is seeing opportunities in Cayman, including high-end residential towers.

In closing remarks, Collins said Butterfield plans to pursue additional acquisitions that align with its focus on island banking and private trust, while continuing to improve operational effectiveness and maintain disciplined cost management. He emphasized that capital management remains central, with the company balancing dividends, organic investment, strategic acquisitions and share repurchases.

About Bank of N.T. Butterfield & Son (NYSE:NTB)

Bank of N.T. Butterfield & Son Limited, commonly known as Butterfield, is a Bermuda-based provider of banking and wealth management services. Founded in 1858, the firm has grown from a local colonial bank into an international financial institution. With a focus on personalized client service, Butterfield offers a comprehensive suite of banking and fiduciary solutions to private individuals, families, and corporate clients.

The bank's core activities include private banking, retail and commercial lending, trust and corporate administration, and fund services.