Q3 2025 Bank Of NT Butterfield & Son Ltd Earnings Call
Earnings call for the bank of N T Butterfield <unk> son limited.
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I'd now like to turn the call over to Noah fields Butterfields head of Investor Relations. Please go ahead. Thank you. Good morning, everyone and thank you for joining US today, we will be reviewing Butterfields third quarter 2025 financial results.
On the call I'm joined by Michael Collins, Butterfield, Chairman and Chief Executive Officer, Michael <unk>, President and Chief Financial Officer, and Jody Feldman managing director Bermuda.
Following their prepared remarks, we will open the call up for a question and answer session.
Yesterday afternoon, we issued a press release announcing our third quarter of 2005 2025 results. The press release and financial statements along with a slide presentation that we will refer to during our remarks on this call are available on the Investor Relations section of the website at Www Butterfield group Dot com.
Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-GAAP measures, which we believe are important in evaluating the company's performance for a reconciliation of these measures to U S. GAAP. Please refer to the earnings press release and slide presentation.
Today's call and associated materials may also contain certain forward looking statements, which are subject to risks uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements.
Additional information regarding these risks can be found in our SEC filings.
I will now turn the call over to Mike Cole.
And thanks to everyone joining the call today I am pleased with our strong third quarter results, which continued to demonstrate our ability to drive long term value.
Our financial performance was supported by solid net interest income disciplined capital management, and a conservative and stable balance sheet.
We delivered a higher noninterest revenue and improved efficiency across the organization.
<unk>, our continued profitability and growth.
Porterfield as a leading offshore bank and wealth manager with franchise level market shares in Bermuda, and Cayman Islands, and a growing retail banking presence in the channel Islands.
We offer our full suite of services from trust and private banking asset management and custody tailored to meet the needs of our clients across these markets. We also serve international private trust clients in the Bahamas, Switzerland, Singapore and provide high net worth mortgage lending for Prime London properties from our London office.
I will now turn to the third quarter highlights on page four.
Butterfield reported net income of $61 1 million and core net income of $63 3 million.
We reported core earnings per share of $1 51.
With a core return on average tangible common equity of 25, 5% in.
In the third quarter.
The net interest margin was 273% in the third quarter, an increase of nine basis points from the prior quarter with the cost of deposits following nine basis points to 147 basis points from the prior quarter.
We again are announcing a quarterly cash dividend of <unk> 50 per share.
During the quarter, we continued to repurchase shares with a total of 700000 shares at a cost of $33 million.
We continue our active capital management and plan to return excess capital that we do not require to support the business and growth initiatives.
I will now turn the call over to Jody for an update on our Bermuda and Cayman markets and businesses.
Thank you Michael during the third quarter Bermuda business environment remained stable with continued expansion of international business in the local economy showing signs of growth.
The government is forecasting its first budget surplus in over two decades and with corporate income tax introduced this year. There are expectations. This will generate meaningful revenue that could help ease cost of living and business pressures, while reducing sovereign debt over time overall the outlook is positive for Bermuda fiscal position.
<unk> with solid performance and growth continuing in the international business sector, particularly in reinsurance.
Tourism in Bermuda had a good 2025 season supported by improved hotel occupancy rates average daily rates were up 10% August year to date with occupancy levels remaining stable.
Air arrivals are steady and visitor expenditure is up 2%, despite a lower overall room inventory.
Looking ahead airlift capacity and hotel inventory are expected to benefit from ongoing foreign direct investments and the island hospitality infrastructure.
The 593 room Fairmont South Hampton is currently projected to reopen in summer 2026, while Grado Bay Beach Resort has announced expansion plans. Additionally, the announced complete redevelopment available Beach resort expected to commence in 2026 reflects overall investor confidence in the long.
Term prospects for Bermuda is hospitality sector.
Bermuda will also gain visibility from major international events, including the PGA Tour Butterfield Bermuda Championship and sale GP, a high speed Global professional sailing league set to return in May 2026, further reinforcing the island's position as a premier tourism and event destination the Cayman Islands.
<unk> continues to enjoy steady population in financial services growth with a two 5% GDP increase expected in 2025, a number of major residential and mixed use projects nearing completion reflects sustained demand and confidence across the property market.
<unk> services and tourism remain key pillars of the economy, representing approximately 50% and 35% of GDP respectively.
Adherence to its fiscal responsibility framework. The government maintains disciplined that keeps the budget generally close to balance.
Looking ahead growth is expected to continue at a measured pace following several years of rapid expansion.
I will now turn the call over to Michael Schrum for more detail on the quarter Michael.
Thank you Jody and good morning on.
On slide six we provide a summary of net interest income and net interest margin.
In the third quarter, we reported net interest income before provision for credit losses of $92 7 million.
An improvement of $3 3 million or $3 <unk>.
7% from the prior quarter.
The net interest margin increased nine basis points to 273% compared to six 4% in the prior quarter.
This increase is largely due to lower cost of deposits.
And the redemption of the subordinated debt during the second quarter.
Average loan balances was slightly lower compared to the prior quarter predominantly driven by lower originations relative to amortization and to a lesser extent the impact on foreign exchange translation from the weakening of the pound Sterling against the U S dollar.
Average interest, earning assets in the third quarter decreased $132 3 million to $13 5 billion.
Treasury on loan yields were seven basis points lower while average investment yields were unchanged at two 6% 7%.
During the quarter the bank continued to pursue its conservative strategy of reinvesting the paydowns of investment maturities into a mix of U S Agency MBS Securities and medium term U S treasuries slide.
Slide seven provides a summary of non interest income, which totaled $61 2 million.
An increase of $4 $2 million over the last quarter. This was due to higher banking fees, which benefited from growth in card volumes and incentive programs.
Foreign exchange revenues also rose as volumes increased in the third quarter.
<unk> income ratio increased to 39, 9% compared to the prior quarter continuing to compare favorably to historical averages.
On slide eight we present core noninterest expenses core noninterest expenses decreased compared to the prior quarter from lower performance based incentive accruals included within core salaries and benefits.
Property expenses also declined benefiting from a consolidation of premises in the channel Islands. In addition, indirect taxes were lower reflecting reduced payroll taxes and work permit fees slide nine shows the butterfields balance sheet remains liquid and conservatively positioned period end deposit balances were in line with prior.
Butterfield low risk density of 28% continues to reflect a regulatory capital efficiency of the balance sheet on slide 10, we show that Butterfields asset quality remains very strong the investment portfolio carries low credit risk consisting entirely of double AA or higher rated U S treasuries and government guaranteed.
Agency Securities credit performance in our loan and mortgage portfolios was stable. This quarter net charge offs were negligible non accrual loans held up 2% and our allowance for credit losses stayed at 0.6%.
Loan book remains 70% full recourse residential mortgages with nearly 80% having loan to values below 70%.
We continue to take a conservative underwriting approach focusing on high quality residential lending across our Bermuda, the Cayman Islands, and the U K and channel Islands segments.
On slide 11, we present, the average cash and securities balances with a summary of interest rate sensitivity.
Net unrealized losses in the <unk> portfolio included in OCI, where $101 $5 million at the end of the third quarter.
An improvement of $18 $5 million over the prior quarter.
Interest rate sensitivity has reduced slightly against the prior quarter driven by a reduction in short term investments that were deployed into fixed rate investments.
We continue to expect improvement with additional burn down of OCI over the next 12 to 24 months of 31% and 37% respectively.
Slide 12 summarizes regulatory leverage capital levels.
Board of directors has once again approved a quarterly dividend of <unk> 50 per share.
TCE to Ta continued to be conservatively above our targeted range of six to six 5%.
Finally, our tangible book value per share continued to improve this quarter by five 4% to $25 six.
As unrealized losses on investments improved.
I will now turn the call back to Michael Collins. Thank you Michael Butterfields presence in leading international financial centers provide a strong foundation for continued growth.
Both through disciplined M&A and organic business development.
Our balance sheet and liquidity position remain conservative and fully aligned with business model and regulatory frameworks.
Michael Schrum: Slide 12 summarizes regulatory and leverage capital levels. The Board of Directors has once again approved the quarterly dividend of $0.50 per share. TCE to TA continues to be conservatively above our targeted range of 6% to 6.5%. Finally, our tangible book value per share continued to improve this quarter by 5.4% to $25.06 as unrealized losses on investments improved. I will now turn the call back to Michael Collins.
Our capital efficient fee based businesses continue to deliver differentiated products and services to meet the needs of our clients.
Board of directors has once again approved a quarterly dividend of <unk> 50 per share.
TCE to Ta continued to be conservatively above our targeted range of six to six 5%.
As we move forward, we remained focused on enhancing operational efficiency and maintaining prudent expense discipline.
Finally, our tangible book value per share continued to improve this quarter by five 4% to $25 <unk> as unrealized.
Capital management remains a core component of our strategy.
The strength of our earnings generation allows the balanced approach funding.
Funding sustainable cash dividend supporting organic growth pursuing strategic and accretive acquisition opportunities and repurchasing common shares.
Realized losses on investments improved.
I will now turn the call back to Michael Collins. Thank you Michael Butterfields presence in leading international financial centers provide a strong foundation for continued growth.
Michael Collins: Thank you, Michael. Butterfield's presence in leading international financial centers provides a strong foundation for continued growth, both through disciplined M&A and organic business development. Our balance sheet and liquidity position remain conservative and fully aligned with business model and regulatory frameworks. Our capital-efficient, fee-based businesses continue to deliver differentiated products and services to meet the needs of our clients. As we move forward, we remain focused on enhancing operational efficiency and maintaining prudent expense discipline. Capital management remains a core component of our strategy. The strength of our earnings generation allows a balanced approach, funding sustainable cash dividends, supporting organic growth, pursuing strategic and accretive acquisition opportunities, and repurchasing common shares. Butterfield is well-positioned to support our clients and create long-term value for our communities and shareholders. Thank you, and with that, we would be happy to take your questions. Operator?
Brookfield is well positioned to support our clients and create long term value for our communities and shareholders.
Both through disciplined M&A and organic business development.
And with that we would be happy to take your questions operator.
Our balance sheet and liquidity position remain conservative and fully aligned with business model and regulatory frameworks.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
Our capital efficient fee based businesses continue to deliver differentiated products and services to meet the needs of our clients.
You are using a speakerphone, please pick up the handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
As we move forward, we remained focused on enhancing operational efficiency and maintaining prudent expense discipline.
Capital management remains a core component of our strategy.
The strength of our earnings generation allows the balanced approach funding.
The first question comes from David Feaster with Raymond James. Please go ahead.
Funding sustainable cash dividend supporting organic growth pursuing strategic and accretive acquisition opportunities and repurchasing common shares.
Hi, good morning, everybody.
Good morning, David.
<unk> is well positioned to support our clients and create long term value for our communities and shareholders.
I just wanted to I wanted to start I guess I'm curious how you think about the margin trajectory as we look forward. There are a lot of puts and takes you right. Now you got the likelihood of fed cuts you've got also a pretty substantial repricing tailwind as well and then you've got the lagging impact of repricing on deposits I was hoping you could help us think about the March.
And with that we would be happy to take your questions operator.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one, on your touch-tone phone. If you are using a speaker phone, please pick up the handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from David Feaster with Raymond James. Please go ahead.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up the handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
<unk> trajectory.
And maybe where we could bottom out if the forward curve does come to fruition.
Yes, good morning, David It's Michael Schrum. So yes, there are a lot of moving parts.
At this time, we will pause momentarily to assemble our roster.
Deposit costs come down this quarter.
Just starting off I think.
The exit run rate for the quarter were broadly in line.
The first question comes from David Feaster with Raymond James. Please go ahead.
On a margin of $2 71 on cost deposits is $1 45.
[Analyst 1]: Hi, good morning, everybody.
Hi, good morning, everybody.
As we look forward.
Michael Collins: Morning, David.
Good morning, David.
We do have some room on the deposit side.
[Analyst 1]: I wanted to start, you know, curious how you think about the margin trajectory as we move forward. There are a lot of puts and takes here right now. You know, you got the likelihood of Fed cuts. You got also a pretty substantial repricing tailwind as well, and then you got the lagging impact of repricing on deposits. I was hoping you could help us think about the margin trajectory, you know, and maybe where we could bottom out if the forward curve does come to fruition.
I just wanted to I wanted to start I guess I'm curious how you think about the margin trajectory as we look forward. There are a lot of puts and takes you right now you've got the likelihood of fed cuts you've got also a pretty substantial repricing tailwind as well and then you've got the lagging impact of repricing on deposits I was hoping you could help us think about the margins.
$10 billion of interest.
<unk>.
Trust, earning deposits.
We could see.
And these are relatively short deposit three to six months term deposits.
Demand interest bearing.
So we can obviously see some of that.
Trajectory.
Where we could bottom out if the forward curve does come to fruition.
Being beneficial to us.
And as we look at the investment Securities.
Michael Schrum: Yeah, good morning, David. It's Michael Schrum. There are a lot of moving parts. I think we saw deposit costs come down this quarter. Just starting off, I think the exit run rates for the quarter were broadly in line, at a margin of 2.71% and cost of deposit at 1.45%. As we look forward, we do have some room on the deposit side. There's about $10 billion of interest-earning deposits. We could see, in the short term, and these are relatively short deposits, three to six months, term deposits and some demand interest bearing. We could obviously see some of that being beneficial to us. As we look at the investment securities, we're sort of thinking at the moment, certainly for the quarter, is about a 1.50% or 150 basis point uplift on reinvestment.
Yes, good morning, David It's Michael Schrum. So yes, there are a lot of moving parts.
We're sort of thinking at the moment certainly for the quarter was about a 150 or 150 basis point uplift on reinvestment or.
We saw deposit costs come down this quarter.
Over the coming sort of 12 months, we have about 1 billion of EFS and HTML assets.
Just starting off I think the exit run rates for the quarter were broadly in line.
At a margin of $2 71 on cost of deposits was 145.
That are going to reprice, so that's going to be again very very beneficial.
The thing that we're.
As we look forward.
Clearly focused on and then finally on the loan side.
Do have some room on the deposit side.
This quarter, we sort of see broadly a 100 basis point uplift.
It's about $10 billion of interest.
Interest earning deposits.
Tween.
Fixed rate resetting loans under new.
We could see.
Lending that we've put into the book.
And these are relatively short deposit three to six months term deposits on some demand interest bearing.
So over the next.
12 months, we have about $400 million of loans resetting as well.
So we can obviously see some of that.
Obviously some of that will depend on customer preference, we've seen a little bit of a mix shift into floating over the last quarter last couple of quarters. So we're now at 50.
Beneficial to us.
And then as we look at the investment Securities.
We're sort of thinking at the moment certainly for the quarter. It was about a 150 or 150 basis point uplift on reinvestment.
54% floating and.
Where we used to be more like a $50 50, So and then finally the yield curve, if we get a steeper narrow obviously, that's going to be very beneficial if we get a.
Michael Schrum: Over the coming 12 months, we have about $1 billion of AFS and HTM assets that are going to reprice. That's going to be, again, very beneficial, and that's something that we're clearly focused on. Finally, on the loan side, this quarter, we've seen broadly a 1.00% or 100 basis point uplift between the fixed rate resetting loans and the new lending that we put into the book. Over the next 12 months, we have about $400 million of loans resetting as well. Obviously, some of that will depend on customer preference. We've seen a little bit of a makeshift into floating over the last quarter, the last couple of quarters. We're now at 54% floating, where we used to be more like a 50/50. Finally, the yield curve, if we get a steeper one, obviously, that's going to be very beneficial.
Over the coming sort of 12 months, we have about 1 billion of <unk> assets.
Sort of lag in short rates going down that's going to dampen the impact on a negative effect on the margin. So I think within the within a handful of basis points, we could probably see the next.
That are going to reprice so.
It's going to be again, very very beneficial and that's something that we're.
Clearly focused on and then finally on the loan side.
This quarter, we've sort of seen broadly a 100 basis points uplift.
The current outlook would be for NIM to be relatively stable, maybe expanding a little bit as.
Tween.
As we get this tailwind of asset repricing.
Fixed rate resetting loans under new.
Lending that we've put into the book.
That's extremely helpful color.
So over the next <unk>.
And then Michael call you talked about some of the unique products and services that you've got in the fee income lines.
12 months, we have about $400 million of loans resetting as well.
Obviously some of that will depend on customer preference, we've seen a little bit of a mix shift into floating over the last quarter last couple of quarters. So we're now at 50.
In the trust and asset management business.
Obviously openness and unique and differentiated assets I'm just curious how do you think about crypto or stable coin is that something that's on your radar is that something youre clients. We've been asking about just curious your thoughts on that as some of the larger.
54% floating and.
Where we used to be more like a 50 50, so and then finally the yield curve, if we get to steepen or obviously, that's going to be very beneficial if we get a.
U S companies seem to be exploring it to some degree.
Michael Schrum: If we get a sort of lag in short rates going down, that's going to dampen the impact on the negative effect on the margin. I think, within a handful of basis points, we could probably see the next, or the current outlook would be for them to be relatively stable, maybe expanding a little bit as we get this tailwind of asset repricing.
I think we describe ourselves as a slow follower watching closely.
Sort of lag in short rates going down that's going to dampen the impact on a negative effect on the margin. So I think within within a handful of basis points, we could probably see the next.
Not getting a lot of pressure from clients.
Just in terms of maybe in terms of custody and that sort of thing for for our digital assets.
The current outlook would be for them to be relatively stable, maybe expanding a little bit.
Stable clients, obviously, something we're watching closely but I think the approach we would take us to.
We get this tailwind of asset repricing.
Michael Collins: That's extremely helpful, Collins.
That's extremely helpful color.
To piggyback off our correspondent banks, So bank in New York, Obviously is heavily.
[Analyst 1]: Michael Collins, you talked about some of the unique products and services that you've got in the fee income lines. In the trust and asset management business, you've obviously opened to some unique and differentiated assets. I'm just curious, how do you think about crypto or stablecoins? Is that something that's on your radar? Is that something your clients are even asking about? Just curious your thoughts on that as some of the larger U.S. companies seem to be exploring it to some degree.
And then Michael call you talked about some of the unique products and services that you've got in the fee income lines and.
Analyzing and participating in this sector of the market and we would piggyback off of that which actually provides us with a lot of safety and cover it is not something that we would take the lead on in any sense, but youre right. The fee income lines are really well diversified so we've got trust.
In the trust and asset management business.
Obviously, your openness and unique and differentiated assets I'm just curious how you think about crypto or stable coin is that something that's on your radar is that something youre clients have been asking about just curious your thoughts on that as some of the larger.
Foreign exchange banking fees.
Custody.
U S companies seem to be exploring it to some degree.
But foreign exchange I think is what makes us pretty unique compared to U S regional banks, and we had a very good quarter there.
Michael Collins: I think we describe ourselves as a slow follower, watching closely. We're not getting a lot of pressure from clients, just in terms of maybe in terms of custody and that sort of thing for digital assets. Stablecoins, obviously, something we're watching closely. I think the approach we would take is to piggyback off our correspondent banks. Bank of New York, obviously, is heavily analyzing and participating in this sector of the market, and we would piggyback off that, which actually provides us with a lot of safety and cover. It's not something that we would take the lead on in any sense. You're right, the fee income lines are really well diversified. We've got trust, foreign exchange, banking fees, custody, but foreign exchange, I think, is what makes us pretty unique compared to U.S. regional banks, and we had a very good quarter there.
I think we describe ourselves as a slow follower watching closely.
And we're continuing to look for acquisitions.
Not getting a lot of pressure from clients.
On the fee income side, so very focused on private trust in the jurisdictions in which we already operate and we're having constructive discussions nothing to announce at this point, but our goal is to try to continue to increase our fee income ratio.
Just in terms of maybe in terms of custody and that sort of thing for for our digital assets.
Table clients, obviously, something we're watching closely but I think the approach we would take us to.
To piggyback off our correspondent bank So bank in New York, Obviously is heavily.
Rates as rates start to change so we're watching but I would say, we're very conservative we've talked about in the past we have no lender of last resort.
Analyzing and participating in this sector of the market and we would piggyback off that which actually provides us with a lot of safety and cover it's not something that we would take the lead on in any sense, but youre right that the fee income lines are really well diversified so we've got trust.
We are not going to take the lead in these sorts of things, but we will we will piggyback off our correspondent banking relationships.
That's great color and then just last one just you guys have done a great job managing expenses.
Foreign exchange banking fees.
More back office to Halifax, and we had the early retirement.
Custody.
<unk> consolidated some back office space and the Channel Islands I believe it was just curious what are the initiatives are on the horizon and just how do you think about expenses going forward and your ability to continue to drive positive operating leverage.
But foreign exchange I think is what makes us pretty unique compared to U S regional banks, and we had a very good quarter there.
Michael Collins: We're continuing to look for acquisitions on the fee income side, so very focused on private trust in the jurisdictions in which we already operate. We're having constructive discussions, nothing to announce at this point, but our goal is to try to continue to increase our fee income ratio as rates start to change. We're watching, but I would say we're very conservative. We've talked about in the past, we have no lender of last resort. We are not going to take the lead in these sorts of things, but we will piggyback off our correspondent banking relationships.
And we're continuing to look for acquisitions.
On the fee income side, so very focused on private trust in the jurisdictions in which we already operate and we're having constructive discussions nothing to announce at this point, but our goal is to try to continue to increase our fee income ratio.
Yes, Thanks, David It's Michael Schrum, So obviously, great great quarter. This quarter, we did have some non core expenses.
In this quarter related to some of the retirement of Xena executives.
Rates as rates start to change so we're watching but I would say, we're very conservative we've talked about in the past we have no lender of last resort.
And I think we've said before we're sort of thinking if we can stave off the inflationary pressures in our system with some of those expense initiatives moving back office functions to Halifax.
We are not going to take the lead in these sorts of things, but we will we will piggyback off our correspondent banking relationships.
Great as we are starting to see some pickup in pipeline on loans.
[Analyst 1]: That's great, Collins. Just last one, you guys have done a great job managing expenses. We moved more back office to Halifax. We had the early retirement, consolidated some back office space in the Channel Islands, I believe it was. Just curious, what other initiatives are on the horizon? How do you think about expenses going forward and your ability to continue to drive positive operating leverage?
That's great color and then just last one just you guys have done a great job managing expenses.
Interest net interest income seems to be relatively stable.
More back office to Halifax, and we had the early retirement of consolidated.
No.
It is the same thing we've obviously gone through a lot of investments into our infrastructure. So we did a cloud migration of our core banking system last year.
Consolidated some back office space and the Channel Islands I believe it was just curious what are the initiatives are on the horizon and just how do you think about expenses going forward and your ability to continue to drive positive operating leverage.
We're just catching up on the past.
Of those.
So while that's truncated the expense run rate a little bit higher because we were using software as a service we are gradually exiting some of the some of the older.
Michael Schrum: Yeah, thanks, David. It's Michael Schrum. Obviously, great, great quarter this quarter. We did have some non-core expenses this quarter related to some of the retirement of senior executives. I think, you know, we've said before, we're sort of thinking if we can stave off the inflationary pressures in the system with some of those expense initiatives, moving back office functions to Halifax, that would be great as we are starting to see some pickup in pipeline on loans and interest, net interest income seems to be relatively stable. Rheidi's the same thing. We've obviously gone through a lot of investments into our infrastructure. We did a cloud migration of our core banking system last year, and we're just catching up on the patch sets of those.
Yes, Thanks, David It's Michael Schrum, So obviously, great great quarter. This quarter, we did have some non core expenses.
In this quarter related to some of the retirement of Xena executives.
To date CIS.
And I think we've said before we're sort of thinking if we can stave off the inflationary pressures in our system with some of those expense initiatives moving back office functions to Halifax that'll be great. As we are starting to see some pickup in pipeline on loans and.
Systems that we've been using so I think broadly speaking it was a little low.
Good improvement this quarter, we should be thinking about 90 $90 million run rate.
Good sort of estimate for the future at least for the near to medium term and then.
As some of the things that we're thinking about is exactly continuing to move back office functions to Halifax.
And interest net interest income seems to be relatively stable.
Okay. That's helpful. Thanks, everybody.
So.
<unk> the same thing, we've obviously gone through a lot of investments into our infrastructure. So we did a cloud migration of our core banking system last year.
Thanks.
Again, if you have a question. Please press Star then one.
The next question is from Tim Switzer with K B W. Please go ahead.
Just catching up on the past perhaps sets.
Rose.
Michael Schrum: While that's truncated the expense run rate a little bit higher because we're using software as a service, we're gradually exiting some of the older or out-of-date systems that we've been using. I think, broadly speaking, it was a little good improvement this quarter. We should be thinking about the $90 million run rate as a good sort of estimate for the future, at least for the near to medium term. As some of the things that we're thinking about is exactly continuing to move back office functions to Halifax.
Hey, good morning, Thanks for taking my question.
So while that's truncated the expense run rate a little bit higher because we were using software as a service. We are gradually exiting some of the some of the older or out of date.
Good morning, Tim I wanted to.
You guys already touched on this a little bit, but really strong momentum across your fee income businesses here.
Systems that we've been using so I think broadly speaking it was a little low.
You provide just a little bit more commentary on what drove the pretty significant upside in banking here quarter over quarter and year over year very strong.
Good improvement this quarter, we should be thinking about the 90 $90 million run rate.
And then are you able to kind of give us an idea of where there any kind of like nonrecurring revenues in there kind of one offs.
As a good sort of estimate for the future at least for the near to medium term and then.
Some of the things that we're thinking about is exactly continuing to move back office functions to Halifax.
I know Q4, usually seasonally strong but will be maybe not quite as strong just given the performance in Q3.
[Analyst 1]: Yeah, that's helpful. Thanks, everybody.
Okay. That's helpful. Thanks, everybody.
Unlike a relative basis.
Michael Collins: Thanks.
Thanks.
Operator: Again, if you have a question, please press star, then one. The next question is from Tim Switzer with KBW. Please go ahead.
Again, if you have a question. Please press Star then one.
Yeah. Thanks, Tim So banking banking has been very strong continues to be.
The next question is from Tim Switzer with <unk>. Please go ahead.
Really solid.
Very capital efficient online for us the combination of banking really is sort of recurring a periodic fees, which are sort of account maintenance fees.
[Analyst 2]: Hey, good morning. Thanks for taking my questions.
Hey, good morning, Thanks for taking my question.
Michael Collins: Morning, Tim.
Michael Schrum: Morning, Tim.
Good morning, Tim Good morning, Tim.
[Analyst 2]: You guys have already touched on this a little bit, but really strong momentum across your fee income businesses here. Could you provide just a little bit more commentary on what drove the pretty significant upside in banking here, quarter over quarter and year over year, very strong? Are you able to kind of give us an idea of, you know, were there any kind of non-recurring revenues in there or kind of one-offs? I know Q4 is usually seasonally strong, but will it be maybe not quite as strong just given the performance in Q3, on a relative basis.
You guys already touched on this a little bit, but really strong momentum across your fee income businesses here.
And then a combination of that plus the.
Comp services fees or transaction related fees, and we've really seen an uptick in volumes and net uptick in volumes.
Could you provide just a little bit more commentary on what drove the pretty significant upside in banking here quarter over quarter and year over year very strong.
With our on our Cob product really has also driven some incentive accrual increases this quarter. So there wasn't really any any anything to call out, particularly obviously tourism related card services fees, coupled with both an acquirer.
And then are you able to kind of give us an idea of where there any kind of like nonrecurring revenues in there kind of one offs and I know Q4, usually seasonally strong but will be maybe not quite as strong just given the performance in Q3.
On an issuer.
Has this benefited us quite tremendously over the summer, but you guys had a pretty good.
On a relative basis.
Michael Schrum: Yeah, thanks, Tim. Banking has been very strong, continues to be, obviously, you know, a really solid and very capital-efficient line for us. The combination of banking really is sort of recurring or periodic fees, which are sort of account maintenance fees, and then a combination of that plus the card services fees or transaction-related fees. We've really seen an uptick in volumes. That uptick in volumes on our card product really has also driven some incentive accrual increases this quarter. There wasn't really anything to call out particularly. Obviously, tourism-related card services fees, we're both an acquirer and an issuer, has just benefited us quite tremendously over the summer. Bermuda's had a pretty good tourism season. That's been an uptick there. By all means, Cayman looks to be in decent shape for this upcoming tourism season as well.
Yeah. Thanks, Tim So banking banking has been very strong continues to be.
Tourism season, so that's been an up tick there on viral means came and looks to be.
Really solid.
In decent shape for this for this upcoming tourism season as well.
Im very capital efficient line for us the combination of banking really is.
FX.
Recurring a periodic fees, which are sort of account maintenance fees.
We don't take any proprietary positions as you know, but these are really commission based effects.
And then a combination of that plus the.
Comp services fees or transaction related fees, and we've really seen an uptick in volumes.
Exchange revenues and I think clients have just taken the opportunity to rebalance a little bit as we've seen some movements in foreign exchange rates.
Net uptick in volumes.
And so that's driven volume in there there were a couple of sizable.
With our on our comp product really has also driven some incentive accrual increases this quarter. So there wasn't really any any anything to call out, particularly obviously tourism related card services fees, coupled with both an acquirer.
Deals that we did for some private trust clients and the FX side, but nothing really to call out maybe a little bit seasonal about.
We're we're pretty constructive on the outlook.
On an issuer.
Has this benefited us quite tremendously over the summer, but you guys had a pretty good good tourism season, So thats been an up tick there viral means came and looks to be.
Okay, Great that was really helpful and then I.
I appreciate the kind of overview you gave across your different jurisdictions and the growth there, which jurisdiction there you're expecting to be driving the most growth from a loan and deposit perspective over the next year or so and what are like some of the loan categories that you have the most opportunity in.
In decent shape.
For this upcoming tourism season as well.
Michael Schrum: FX, we don't take any proprietary positions, as you know, but these are really commission-based FX exchange revenues. I think clients have just taken the opportunity to rebalance a little bit as we've seen some movements in foreign exchange rates, and that's driven volume in there. There were a couple of sizable deals that we did for some private trust clients in the FX side, but nothing really to call out. It may be a little bit seasonal, but we're pretty constructive on the outlook.
FX is we don't take any proprietary positions as you know, but these are really commission based effects.
Yes, maybe I'll start on the deposits and Jody can just comment on loan pipelines et cetera.
Exchange revenues and I think clients have just taken the opportunity to rebalance a little bit as we've seen some movements in foreign exchange rates.
I mean deposits continue to be a little bit elevated for us I think we.
We have certainly seen some significant moves.
And so that's driven volume in there there were a couple of <unk>.
<unk>, it's netted out to be not very much movement this quarter.
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Deals that we did for some private trust clients and the FX side, but nothing really to call out maybe a little bit seasonal but.
We have seen some some sizable client inflows, which are probably masking it a little bit of the outflow. So we continue to expect that deposit levels will sort of come down a little bit I think Bermuda is suddenly seeing the most growth in the deposits.
We're we're pretty constructive on the outlook.
[Analyst 2]: Okay, great. That was really helpful. I appreciate the kind of overview you gave across your different jurisdictions and the growth there. Which jurisdictions are you expecting to be driving the most growth from a loan and deposit perspective over the next year or so? You know, what are some of the loan categories that you have the most opportunity in?
Okay, great that was.
Really helpful and then.
Normally in the fourth quarter, we would see a little bit of a seasonal increase in Cayman is.
I appreciate the kind of overview you gave across your different jurisdictions and the growth there, which jurisdictions are you expecting to be driving the most growth from a loan and deposit perspective over the next year or so and what are like some of the loan categories that you have the most opportunity in.
Funds kind of rebalance there.
They are.
Cash held in the fund and cash out with us as an intermediary.
So really that sit on the sort of mid market corporate side, I think deposit levels have been increasing in the channel islands as well as we've sort of pivoted a little bit more to retail growth strategy there.
Michael Schrum: Maybe I'll start on deposits and Jody can just comment on loan pipelines, etc. Deposits continue to be a little bit elevated for us. I think we have certainly seen some significant movements. It's netted out to be not very much movement this quarter, but we have seen some sizable client inflows, which are probably masking a little bit of the outflow. We continue to expect that deposit levels will sort of come down a little bit. I think Bermuda has certainly seen the most growth in the deposits. Normally in the fourth quarter, we would see a little bit of a seasonal increase in Cayman as funds kind of rebalance their cash held in the fund and cash held with us as an intermediary. Really, that's it on the sort of mid-market corporate side.
Yes, maybe I'll start on the deposits and Jody can just comment on loan pipelines et cetera.
<unk> continued to be a little bit elevated for us I think we have certainly seen some significant move.
And I think that's that's great to see more sticky deposits.
And a better composition of deposits in that segment.
It's netted out to be not very much movement this quarter, but.
We have seen some some sizable client inflows.
As you know with retail clients, it's a pretty slow growth.
Masking it a little bit of the outflow. So we continue to expect that deposit levels will sort of come down a little bit I think Bermuda is suddenly seeing the most growth in the deposits and normally in the fourth quarter, we would see a little bit of a seasonal increase in Cayman.
In terms of the impact overall and I'll, let Jody just cover loan pipelines sure Hey, Tim It's Jodi Feldman I would just comment quickly on loans I mean, as you know we're not a loan growth story at Butterfield and we're not going to be stretching for credit at this point and obviously, we maintain a low risk density balance sheet.
Funds kind of rebalance there.
There are.
Cash held in the fund and cash out with us as an intermediary.
And we're very conservative with our underwriting and that's not going to change that being said we.
So really.
Are seeing some encouraging signs in the loan pipeline, particularly in came in a slight pickup in Bermuda due to kind of macro backdrop, which is which is encouraging.
I've said on the sort of mid market corporate side, I think deposit levels have been increasing in the channel islands as well as we've sort of pivoted a little bit more to retail growth strategy there.
Michael Schrum: I think deposit levels have been increasing in the Channel Islands as well, as we've sort of pivoted a little bit more to a retail growth strategy there. I think that's great to see more sticky deposits and a better composition of deposits in that segment. It is, as you know, with retail clients, a pretty slow growth in terms of the impact overall. I'll let Jody just cover loan pipelines.
But I think it's.
It's pretty consistent from.
And I think that's that's great to see more sticky deposits.
Previous times.
Interesting got it thank you for all the color.
And a better composition of deposits in that segment.
Thanks, Thanks, Dave.
As you know with retail clients, it's pretty slow growth.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
In terms of the impact overall and I'll, let Jody just cover loan pipelines sure Hey, Tim It's Jodi Feldman I would just comment quickly on loans I mean, as you know we're not a loan growth story at Butterfield and we're not going to be stretching for credit at this point and obviously, we maintain a low risk density balance sheet.
Michael Collins: Sure. Hey, Tim, it's Jody Feldman. I would just comment, you know, quickly on loans. I mean, as you know, we're not a loan growth story at Butterfield, and we're not going to be stretching for credit at this point. Obviously, we maintain a low-risk density balance sheet, and we're very conservative with our underwriting, and that's not going to change. That being said, we are seeing some encouraging signs in the loan pipeline, particularly in Cayman, a slight pickup in Bermuda due to kind of macro backdrop, which is encouraging. I think it's pretty consistent from previous times.
Thanks, Debbie and thanks to everyone for dialing in today, we look forward to speaking with you again next quarter have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
And we're very conservative with our underwriting and that's not going to change that being said we are seeing some encouraging signs in the loan pipeline, particularly in came in a slight pickup in Bermuda due to kind of macro backdrop, which is which is encouraging.
But I think it's pretty consistent from.
Previous times.
[Analyst 1]: Interesting. Got it. Thank you for all the color.
Interesting got it thank you for all the color.
Michael Schrum: Thanks, Tim.
Thanks, Thanks, Dave.
Operator: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Michael Collins: Thanks, Debbie, and thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day.
Thanks, Debbie and thanks to everyone for dialing in today, we look forward to speaking with you again next quarter have a great day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.