The Bank of N.T. Butterfield & Son (NTB) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The bank reported net income of $52.7 million and core net income of$52.8 million for Q3 2024, with core earnings per share at $1.16 and a core return on average tangible common equity of 22.5$0.44 per share and repurchased 1 million shares at an average price of $37 per share [5][6] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses was$88.1 million, benefiting from increased average interest-earning assets, despite elevated deposit costs [6][7] - Non-interest income totaled $56 million, a modest increase due to higher card volume, loan repayment fees, and asset management income [7][8] - Core non-interest expenses decreased by 1.8$88.6 million, primarily due to lower professional services costs [8] Market Data and Key Metrics Changes - Average interest-earning assets increased by $114 million, or 0.9$13.4 billion, driven by higher average deposits [7] - Period-end deposit balances rose to $12.7 billion from$12.5 billion in the prior quarter, reflecting the diversified nature of the bank's markets [10] - The bank's loan asset quality remains adequate, with a net charge-off rate of three basis points and nonaccrual loans at 1.9% of gross loans [11] Company Strategy and Development Direction - The bank aims to grow through M&A and organic business development, focusing on enhancing efficiency and managing expenses as interest rates decline [13] - The bank's capital-efficient fee businesses are tailored to meet the needs of its island-based clientele, with a focus on maintaining a strong balance sheet and liquidity levels [13] - The bank is strategically positioned to profitably grow and support shareholder value while managing risks associated with its operations [13] Management's Comments on Operating Environment and Future Outlook - Management noted that the deposit balances have held up better than expected, with some deposits still considered at risk of leaving the bank [15][16] - The bank expects some credit migration but remains conservative in underwriting standards, with a focus on managing existing loans and collateral [19][20] - Management expressed confidence in the housing market across its jurisdictions, citing a shortage of supply and steady demand [21] Other Important Information - The bank's capital levels remain conservatively above regulatory requirements, with tangible book value per share increasing by 9.3% to $21.90 [12] - The bank continues to see good results from its trust business, particularly in Singapore, where it has become a top 5 trust company [25][36] Q&A Session Summary Question: Update on deposit dynamics and core deposit growth - Management acknowledged that while some deposits are at risk of leaving, they have seen success in core deposit growth, particularly in the Channel Islands [15][17] Question: Credit quality and housing market outlook - Management indicated that while there is some credit migration, they expect it to normalize, and the housing market remains strong across their jurisdictions [19][21] Question: Deposit cost and margin dynamics - Management noted a slowdown in the increase of deposit costs and expects overall deposit costs to continue on a downward trajectory [27][29] Question: Capital allocation and M&A environment - Management stated that dividends and share buybacks are prioritized, with ongoing discussions about potential acquisitions, but nothing immediate is on the horizon [31][32] Question: Future expense outlook - Management expects expenses to remain similar in Q4, with ongoing pressures from inflation and investments in technology [37][39]