Bank of N.T. Butterfield & Son Q2 Earnings Call Highlights

Key Points

• Strong Q2 performance: Butterfield reported $46.9 million in net income, $63.9 million in core net income and core EPS of $1.58, while approving a $0.50 quarterly dividend. Net interest income and non-interest income both increased, and management expects margins to remain broadly stable through 2026.
• Balance sheet growth with monitored credit risks: Total assets rose to $14.3 billion and deposits reached $12.9 billion, while net charge-offs remained near zero. Non-accrual loans increased to 2.2% of gross loans, primarily due to residential real estate exposures in the Channel Islands and the U.K.
• CIBC Caribbean acquisition remains on track: The transaction is expected to close in the first half of 2027, subject to regulatory and shareholder approvals, and would create a combined company with approximately $29 billion in assets. Butterfield has paused share repurchases while it evaluates financing, integration and capital needs.

Bank of N.T. Butterfield & Son NYSE: NTB reported second-quarter 2026 net income of $46.9 million and core net income of $63.9 million, as the offshore banking and wealth management company cited growth in interest-earning assets, stable margins and continued progress on acquisitions.

Core earnings per share were $1.58, while core return on average tangible common equity was 25% for the quarter, Chairman and Chief Executive Officer Michael Collins said during the company’s earnings call. Butterfield also approved a quarterly cash dividend of $0.50 per share.

“Butterfield’s second quarter performance demonstrated the strength of our franchise, the value of deep customer relationships, and the disciplined execution of our strategy,” Collins said.

Revenue Growth and Margin Outlook

Net interest income before provisions for credit losses totaled $95.6 million, up $2.3 million from the first quarter and $6.2 million from the second quarter of 2025. President and Chief Financial Officer Michael Schrum said the increase reflected growth in interest-earning asset volumes and an additional day in the quarter compared with the prior period.

Net interest margin was 2.74%, down one basis point sequentially, as deposit costs increased by one basis point to 125 basis points. Schrum said management expects margin to remain broadly stable with a slight positive bias through the remainder of 2026, supported by ongoing asset repricing.

Non-interest income rose $700,000 from the prior quarter to $63.4 million. The increase was primarily driven by higher trust revenue associated with onboarding activity from the R&H Guernsey acquisition. Lower foreign-exchange revenue, stemming from reduced transaction volumes, and lower banking fees partly offset the gain.

Butterfield’s fee income ratio was 40%, which Schrum said underscored the diversity of the company’s revenue base. Core non-interest expenses increased 3.3% sequentially to $92.9 million, reflecting costs from R&H Guernsey as well as higher salaries, technology, property expenses and intangible-asset amortization.

Management expects quarterly core expenses of $93 million to $95 million until the anticipated closing of the CIBC Caribbean acquisition in the first half of 2027. Butterfield’s core efficiency ratio was 57%, compared with 56.4% in the prior quarter and below management’s through-cycle target of 60%.

Balance Sheet and Credit Quality

Total assets increased 2% from year-end 2025 to $14.3 billion. Short-term investments accounted for most of the growth, while loans rose modestly to $4.4 billion and the investment portfolio remained largely unchanged at $5.7 billion.

Period-end deposits increased to $12.9 billion from $12.7 billion at year-end, while average deposits reached $13.1 billion. Schrum said temporary deposits remained on the balance sheet, contributing to elevated cash and short-term securities balances because the bank does not treat those deposits as long-term funding.

The company’s non-accrual loans increased to $96 million, or 2.2% of gross loans, from 2.0% in the first quarter. Chief Risk Officer Bri Hidalgo attributed the increase primarily to residential real estate exposures in the Channel Islands and the United Kingdom segment.

Hidalgo said Butterfield is closely monitoring the U.K. market, where conditions have softened, but noted that the affected portfolios carry low loan-to-value ratios. Nearly 79% of the bank’s residential mortgages had loan-to-value ratios below 70%, according to Schrum. The allowance for credit losses was unchanged at $27.8 million, or 0.6% of total loans, and the net charge-off ratio remained effectively zero.

Schrum said Bermuda’s property market remained vibrant, with multiple offers and growing activity tied to new international businesses. Cayman’s market has cooled somewhat but remains active, he said. Butterfield’s Channel Islands retail operation had approximately £650 million in deposits and a £350 million mortgage book, with management describing deposits there as stickier than initially expected.

CIBC Caribbean Deal Advances

Butterfield paused share repurchases on May 28 after announcing its agreement to acquire CIBC Caribbean. The company repurchased 300,000 shares during the second quarter before the pause. Collins said repurchases will likely remain paused or be reduced as the company evaluates growth opportunities and rebuilds capital organically.

Hidalgo said the CIBC Caribbean transaction remains on schedule for a first-half 2027 close, subject to regulatory, governance, financing and stakeholder approvals. Near-term work includes regulatory licensing applications, pro forma financial statements, board approval and shareholder approval at the company’s annual general meeting in mid-September.

Management said it has received positive feedback from initial regulatory and local stakeholder meetings in Barbados and the Bahamas. Hidalgo added that CIBC Caribbean’s credit book and underwriting standards have continued to perform in line with expectations.

The combined company is expected to have approximately $29 billion in assets, $25 billion in deposits, $1.7 billion in tangible common equity and more than $400 million in run-rate earnings, Collins said. The transaction would add operations across nine new international financial centers, including Barbados and the Bahamas.

Schrum said Butterfield expects to pursue financing in the subordinated debt market, likely in the fourth quarter following the shareholder vote. Over the medium term, management expects capital priorities to return to a framework that may include dividends and eventual share repurchases once capital levels are in a “20 plus” range.

Butterfield also said the integration of R&H Guernsey is progressing smoothly. Collins said the company is already seeing benefits from combining complementary capabilities while maintaining client service levels.

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.

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