The Bank of N.T. Butterfield & Son Ltd. Q4 FY2025 earnings call

• In 2025, net income improved with core net income per share growing 17.4% to $5.60 per share. Noninterest income from relationship-led banking and trust businesses increased, deposit costs were lowered, and asset redeployment boosted interest earnings.
• Maintained expense discipline and advanced technology platform. Capital management included quarterly dividend increase and share repurchases with a 97% combined payout ratio in 2025. M&A growth strategy on track.
• 2025 full year: core return on average tangible common equity 24.2%, net interest margin 5bps higher to 2.69%, average cost of deposits fell to 150bps, tangible book value per common share grew 21.7% to $26.41, repurchased 3.5 million shares for $146.7 million.
• Fourth quarter: net income and core net income $63.8 million, EPS $1.54, core return on average tangible common equity 24.6%, net interest margin 2.69% (down 4bps from prior quarter), cost of deposits 137bps (down 10bps), repurchased 600,000 shares for $29.6 million, new share repurchase authorization for 2026 up to 3 million shares or $140 million.
• Noninterest income in Q4 increased due to higher banking fees, foreign exchange revenues, and asset management revenues. Core noninterest expenses increased in Q4 but some costs not expected to repeat, with quarterly core expenses expected around $92 million over next few quarters.
• Balance sheet: liquid and conservatively positioned, deposit balances consistent, low-risk density 28.3%, asset quality strong, loan and mortgage portfolios stable, allowance for credit losses 0.6%, loan book 71% full recourse residential mortgages.

In 2025, Butterfield achieved strong financial results. Net income was $231.9 million and core net income was $237.5 million. The core return on average tangible common equity was 24.2%. In the fourth quarter, net income and core net income were $63.8 million. The net interest margin in 2025 was 2.69%, down from 2.73% in the prior quarter. Noninterest income in the fourth quarter totaled $66.3 million, an increase of $5.1 million from the prior quarter. Absolute terms: 2025 net income $231.9M, core net income $237.5M; Q4 net income $63.8M. Revenue contribution % not specifically detailed for segments.

• Michael Schrum stated quarterly core expenses are expected to be around $92 million over the next few quarters, with some costs not repeating and settling between $90 million and $92 million. Seasonality factors like Q4 being higher and Q1 lower are noted.
• Expecting quarterly core expenses to have a good run rate with non-repeating seasonal costs in subsequent quarters.

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Q: Clarification on expense guide, specifically if $90 million to $92 million is quarterly expenses and trajectory.

A: Michael Schrum said Q4 expenses were higher due to incentives and outside services fees, but some won't repeat, expecting quarterly core expenses to settle between $90 million and $92 million with seasonality factors.

Q: Seasonality of noninterest deposit growth in Caymans.

A: Bri Hidalgo said there was a seasonal influx associated with reinsurance payments driving the increase.

Q: Trust business growth and M&A focus.

A: Michael Collins said focus on existing jurisdictions for trust acquisitions, Singapore office is growing, and growth in trust generally comes through acquisitions, with focus on existing best trust jurisdictions like Guernsey, Bermuda, Cayman, Switzerland, and Singapore.