Financial highlights for the first quarter of 2023:
- Net income and core net income1 of $62.2 million, or $1.24
per share
- Return on average common equity of 28.0% and core return on
average tangible common equity1 of 30.5%
- Net interest margin of 2.88%, cost of deposits of
1.10%
- Board declares dividend for the quarter ended March 31, 2023
of $0.44 per share
- First closing of previously announced acquisition of Credit
Suisse trust assets
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, 2023.
Net income for the first quarter of 2023 was $62.2 million, or
$1.24 per diluted common share, compared to net income of $63.1
million, or $1.26 per diluted common share, for the previous
quarter and $44.4 million, or $0.89 per diluted common share, for
the first quarter of 2022. Core net income1 for the first quarter
of 2023 was $62.2 million, or $1.24 per diluted common share,
compared to $63.2 million, or $1.27 per diluted common share, for
the previous quarter and $44.7 million, or $0.90 per diluted common
share, for the first quarter of 2022.
The return on average common equity for the first quarter of
2023 was 28.0% compared to 31.6% for the previous quarter and 19.7%
for the first quarter of 2022. The core return on average tangible
common equity1 for the first quarter of 2023 was 30.5%, compared to
34.9% for the previous quarter and 21.9% for the first quarter of
2022. The efficiency ratio for the first quarter of 2023 was 56.0%,
compared to 55.7% for the previous quarter and 64.0% for the first
quarter of 2022. The core efficiency ratio1 for the first quarter
of 2023 was 56.0% compared with 55.6% in the previous quarter and
63.7% for the first quarter of 2022.
Michael Collins, Butterfield's Chairman and Chief Executive
Officer, commented, "The first quarter of 2023 was a strong start
to the year. Butterfield continues to have a highly liquid and
well-funded balance sheet with a diverse client base across
multiple jurisdictions, sectors, and currencies. We are thoughtful
and strategic in our management of the balance sheet and maintain a
conservative liquidity and capital posture. With regards to
M&A, we are pleased to report the completion of the first
closing of the acquisition of trust assets from Credit Suisse,
which strengthens our presence in the Singapore market. In this
first tranche, we acquired 180 high quality, long-term client
relationships. We continue to make progress on closing The Bahamas
and the second tranche of Singapore clients, followed by Guernsey
in the coming quarters."
Net income was down in the first quarter of 2023 versus the
prior quarter primarily due to expected lower non-interest income
driven by seasonally higher fees in the previous quarter, coupled
with increased interest expenses offset by improved interest income
as a result of higher market interest rates.
Net interest income (“NII”) for the first quarter of 2023 was
$97.4 million, an increase of $2.8 million, compared with NII of
$94.6 million in the previous quarter and up $21.5 million from
$75.9 million in the first quarter of 2022. NII continued to
increase during the first quarter of 2023 compared to the prior
quarter, primarily due to higher margins on loans and treasury
assets, which were partially offset by increased deposit costs,
particularly in the more competitive Channel Islands markets.
Compared to the first quarter of 2022, NII similarly improved due
to higher yields on assets, which was partially offset by higher
deposit costs.
Net interest margin (“NIM”) for the first quarter of 2023 was
2.88%, an increase of 9 basis points from 2.79% in the previous
quarter and up 85 basis points from 2.03% in the first quarter of
2022. NIM in the first quarter of 2023 was higher than the prior
quarter and first quarter of 2022 primarily due to improved yields
on treasury assets and loans partly offset by increasing deposit
costs.
Non-interest income for the first quarter of 2023 of $50.2
million was $4.8 million lower than the $54.9 million earned in the
previous quarter and $0.3 million higher than $49.9 million in the
first quarter of 2022. Non-interest income during the first quarter
of 2023 decreased compared to the prior quarter principally as a
result of normalized card services fees relative to seasonal credit
and debit card transaction activity in the previous quarter.
Non-interest income in the first quarter of 2023 was higher than
the first quarter of 2022 due to higher banking and asset
management fees, partially offset by lower foreign exchange
revenues.
Non-interest expenses were $84.1 million in the first quarter of
2023, compared to $84.7 million in the previous quarter and $82.0
million in the first quarter of 2022. Core non-interest expenses1
of $84.1 million in the first quarter of 2023 were lower than the
$84.5 million incurred in the previous quarter, primarily due to
lower staff-related expenses from non-recurring severance costs in
the prior quarter. Core non-interest expenses1 in the first quarter
of 2023 were higher than the $81.6 million incurred in the first
quarter of 2022 due to inflationary increases in salaries and
benefits.
Period end deposit balances were $12.3 billion, a decrease of
4.6% compared to $13.0 billion at December 31, 2022, primarily due
to deposit outflows in the Channel Islands driven by client
activation of funds for investment purposes. Average deposits were
$12.8 billion in the quarter ended March 31, 2023, compared to
$12.5 billion in the fourth quarter of 2022.
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 22, 2023 to shareholders of record on May 8,
2023. The Bank also recommenced the repurchase of common shares at
a modest level, repurchasing 144,929 shares during the quarter.
The current total regulatory capital ratio as at March 31, 2023
was 26.2% as calculated under Basel III, compared to 24.1% as at
December 31, 2022. Both of these ratios remain significantly 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, 2023
December 31, 2022
March 31, 2022
Non-interest income
50.2
54.9
49.9
Net interest income before provision for
credit losses
97.4
94.6
75.9
Total net revenue before provision for
credit losses and other gains (losses)
147.5
149.5
125.8
Provision for credit (losses)
recoveries
(0.7
)
(1.6
)
0.7
Total other gains (losses)
0.1
0.6
0.8
Total net revenue
147.0
148.5
127.3
Non-interest expenses
(84.1
)
(84.7
)
(82.0
)
Total net income before taxes
62.9
63.8
45.3
Income tax benefit (expense)
(0.7
)
(0.7
)
(1.0
)
Net income
62.2
63.1
44.4
Net earnings per share
Basic
1.25
1.27
0.90
Diluted
1.24
1.26
0.89
Per diluted share impact of other non-core
items 1
—
0.01
0.01
Core earnings per share on a fully
diluted basis 1
1.24
1.27
0.90
Adjusted weighted average number of
participating shares on a fully diluted basis (in thousands of
shares)
50,131
49,963
49,829
Key financial ratios
Return on common equity
28.0
%
31.6
%
19.7
%
Core return on average tangible common
equity 1
30.5
%
34.9
%
21.9
%
Return on average assets
1.8
%
1.8
%
1.2
%
Net interest margin
2.88
%
2.79
%
2.03
%
Core efficiency ratio 1
56.0
%
55.6
%
63.7
%
(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, 2023
December 31, 2022
Cash and cash equivalents
1,345
2,101
Securities purchased under agreements to
resell
171
60
Short-term investments
1,092
884
Investments in securities
5,665
5,727
Loans, net of allowance for credit
losses
5,022
5,096
Premises, equipment and computer software,
net
149
146
Goodwill and intangibles, net
74
74
Accrued interest and other assets
215
217
Total assets
13,733
14,306
Total deposits
12,348
12,991
Accrued interest and other liabilities
275
278
Long-term debt
172
172
Total liabilities
12,796
13,441
Common shareholders’ equity
937
865
Total shareholders' equity
937
865
Total liabilities and shareholders'
equity
13,733
14,306
Key Balance Sheet Ratios:
March 31, 2023
December 31, 2022
Common equity tier 1 capital ratio1
22.2
%
20.3
%
Tier 1 capital ratio1
22.2
%
20.3
%
Total capital ratio1
26.2
%
24.1
%
Leverage ratio1
7.2
%
6.7
%
Risk-Weighted Assets (in $ millions)
4,604
4,843
Risk-Weighted Assets / total assets
33.5
%
33.9
%
Tangible common equity ratio
6.3
%
5.6
%
Book value per common share (in $)
18.80
17.42
Tangible book value per share (in $)
17.32
15.92
Non-accrual loans/gross loans
1.1
%
1.2
%
Non-performing assets/total assets
0.6
%
0.5
%
Allowance for credit losses/total
loans
0.5
%
0.5
%
(1)
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, 2023 COMPARED WITH THE QUARTER ENDED
DECEMBER 31, 2022
Net Income
Net income for the quarter ended March 31, 2023 was $62.2
million, down $0.9 million from $63.1 million in the prior
quarter.
The $0.9 million change in net income in the quarter ended March
31, 2023 compared to the previous quarter was due principally to
the following:
- $2.8 million increase in net interest income before provision
for credit losses, driven by the continued impact of higher market
interest rates across the yield curve, which was partially offset
by higher deposit costs predominantly in the Channel Islands;
- $4.8 million decrease in non-interest income driven by last
quarter's seasonally higher consumer spending supporting
interchange revenue and resulting higher banking fees, higher trust
income driven by both new business and higher activity-based fees
and higher foreign exchange income due to higher volumes; and
- $1.4 million decrease in staff-related expenses primarily due
to non-recurring severance costs incurred in the prior
quarter.
Non-Core Items1
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, 2023 COMPARED WITH
DECEMBER 31, 2022
Total Assets
Total assets of the Bank were $13.7 billion at March 31, 2023, a
decrease of $0.6 billion from December 31, 2022. The Bank
maintained a highly liquid position at March 31, 2023, with $8.3
billion of cash, bank deposits, reverse repurchase agreements and
liquid investments representing 60.2% of total assets, compared
with 61.3% at December 31, 2022.
Loans Receivable
The loan portfolio totaled $5.0 billion at March 31, 2023, which
was $0.1 billion lower than December 31, 2022 balances. The
decrease was driven primarily by scheduled paydowns in the
portfolio.
The allowance for credit losses at March 31, 2023 totaled $25.4
million, an increase of $0.4 million from $25.0 million at December
31, 2022. The movement was driven by an increase in credit card
provisions and updated forward-looking economic forecasts and
partially offset by net paydowns.
The loan portfolio represented 36.6% of total assets at March
31, 2023 (December 31, 2022: 35.6%), while loans as a percentage of
total deposits was 40.7% at March 31, 2023 (December 31, 2022:
39.2%). The increase in both ratios was attributable principally to
a decrease in deposit balances at March 31, 2023 driven by some
deposit reductions in the Channel Islands.
As of March 31, 2023, the Bank had gross non-accrual loans of
$55.5 million, representing 1.1% of total gross loans, a decrease
of $7.6 million from $63.1 million, or 1.2% of total loans, at
December 31, 2022. The decrease in non-accrual loans was driven by
the settlement of a residential mortgage in the Channel Islands and
UK segment.
Other real estate owned (“OREO”) increased by $0.4 million from
December 31, 2022 to $1.2 million due to the foreclosure of a loan
in Bermuda.
Investment in Securities
The investment portfolio was $5.7 billion at March 31, 2023,
which was comparatively flat against December 31, 2022 balances. A
decrease in total net unrealized losses on the available-for-sale
portfolio that is carried at fair value was mostly offset by
paydowns in the portfolio which were reinvested into 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 increased to 2.12% during the quarter ended March 31, 2023
from 2.03% during the previous quarter. Total net unrealized losses
on the available-for-sale portfolio decreased to $191.5 million,
compared with total net unrealized losses of $220.2 million at
December 31, 2022, as a result of declining long-term US dollar
interest rates. No credit losses have been noted as at March 31,
2023.
Deposits
Average deposits were $12.8 billion for the quarter ended March
31, 2023, an increase of $0.3 billion compared to the previous
quarter, while period end balances as at March 31, 2023 were $12.3
billion, a decrease of $0.6 billion compared to December 31, 2022,
due to normal commercial activity.
Average Balance Sheet2
For the three months ended
March 31, 2023
December 31, 2022
March 31, 2022
(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
2,943.9
27.1
3.74
2,538.4
18.0
2.81
3,809.2
1.0
0.11
Investment in securities
5,720.2
29.8
2.12
5,854.9
30.0
2.03
6,226.5
27.4
1.79
Available-for-sale
2,005.6
8.9
1.80
2,074.5
8.9
1.71
3,352.8
11.9
1.44
Held-to-maturity
3,714.6
20.9
2.28
3,780.3
21.1
2.21
2,873.6
15.6
2.20
Loans
5,040.7
77.5
6.23
5,039.8
73.5
5.79
5,144.3
54.1
4.26
Commercial
1,409.8
22.6
6.51
1,477.2
22.4
6.00
1,454.2
16.3
4.56
Consumer
3,630.9
54.9
6.13
3,562.6
51.2
5.70
3,690.1
37.7
4.14
Interest earning assets
13,704.7
134.5
3.98
13,433.0
121.5
3.59
15,180.0
82.5
2.20
Other assets
395.9
385.7
367.2
Total assets
14,100.7
13,818.7
15,547.1
Liabilities
Deposits
9,786.5
(34.7
)
(1.44
)
9,476.3
(24.5
)
(1.02
)
11,070.5
(4.3
)
(0.16
)
Securities sold under agreement to
repurchase
0.4
—
(4.50
)
2.2
—
(3.92
)
—
—
—
Long-term debt
172.3
(2.4
)
(5.65
)
172.2
(2.4
)
(5.53
)
171.9
(2.4
)
(5.66
)
Interest bearing liabilities
9,959.2
(37.1
)
(1.51
)
9,650.7
(26.9
)
(1.10
)
11,242.4
(6.7
)
(0.24
)
Non-interest bearing current accounts
2,993.5
3,039.0
3,024.3
Other liabilities
241.1
254.2
323.3
Total liabilities
13,193.7
12,943.9
14,589.9
Shareholders’ equity
906.9
874.8
957.2
Total liabilities and shareholders’
equity
14,100.7
13,818.7
15,547.1
Non-interest bearing funds net of
non-interest earning assets
(free balance)
3,745.6
3,782.3
3,937.6
Net interest margin
97.4
2.88
94.6
2.79
75.9
2.03
(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 $104.1 billion and $30.0 billion, respectively, at
March 31, 2023, while assets under management were $5.2 billion at
March 31, 2023. This compares with $106.2 billion, $32.2 billion
and $5.0 billion, respectively, at December 31, 2022.
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, 2023
December 31, 2022
March 31, 2022
Net income
62.2
63.1
44.4
Non-core items
Non-core expenses
Tax compliance review costs
—
0.1
0.1
Settlement of client related tax
inquiry
—
—
0.2
Total non-core expenses
—
0.1
0.3
Total non-core items
—
0.1
0.3
Core net income
62.2
63.2
44.7
Average common equity
902.5
791.2
912.8
Less: average goodwill and intangible
assets
(74.2
)
(73.4
)
(84.7
)
Average tangible common equity
828.3
717.8
828.1
Core earnings per share fully
diluted
1.24
1.27
0.90
Return on common equity
28.0
%
31.6
%
19.7
%
Core return on average tangible common
equity
30.5
%
34.9
%
21.9
%
Shareholders' equity
936.9
864.8
841.8
Less: goodwill and intangible assets
(74.1
)
(74.4
)
(82.9
)
Tangible common equity
862.8
790.4
758.9
Basic participating shares outstanding (in
millions)
49.8
49.7
49.6
Tangible book value per common
share
17.32
15.92
15.30
Non-interest expenses
84.1
84.7
82.0
Less: non-core expenses
—
(0.1
)
(0.3
)
Less: amortization of intangibles
(1.4
)
(1.4
)
(1.5
)
Core non-interest expenses before
amortization of intangibles
82.7
83.1
80.1
Core revenue before other gains and losses
and provision for credit losses
147.5
149.5
125.8
Core efficiency ratio
56.0
%
55.6
%
63.7
%
Conference Call Information:
Butterfield will host a conference call to discuss the Bank’s
results on Tuesday, April 25, 2023 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. 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 thereafter.
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 and fluctuations
of interest rates, inflation, a decline in Bermuda's sovereign
credit rating, the successful completion and integration of
acquisitions (including our progress on subsequent closings of the
acquisition of trust assets 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 and obtaining
new business, the impact of the COVID-19 pandemic, actions taken by
governmental authorities in response to the pandemic, the eventual
timing and duration of economic stabilization and recovery from the
pandemic 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.
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.
BF-All
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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 Cellular: (441) 524 4106 E-mail:
nicky.stevens@butterfieldgroup.com
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