The Bank of N.T. Butterfield & Son Ltd. Q1 FY2025 earnings call

• Michael Collins highlighted strong first quarter results, conservative balance sheet, and successful group-wide voluntary early retirement program reducing future expenses. - Craig Bridgewater discussed net interest income improvement due to lower cost of deposits and higher investment yields, and noninterest income details. - Michael Schrum reviewed the balance sheet's liquidity, asset quality, regulatory capital levels, and mentioned resolution of a legacy loan for the Elbow Beach hotel property.

In the first quarter, Butterfield reported net income of $53.8 million and core net income of $56.7 million. Core earnings per share were $1.30 with a core return on average tangible common equity of 24.2%. The net interest margin was 2.7%, an increase of nine basis points from the prior quarter. Noninterest income totaled $58.4 million, down from the fourth quarter due to lower transaction volume, but FX revenue and asset management fees increased. Core noninterest expenses were $90.3 million, slightly lower than the prior quarter. Period-end deposit balances decreased to $12.6 billion. The loan portfolio is 68% full recourse residential mortgages, with 81% having loans to values below 70%.

• Expect core expense run rate between $90 million to $92 million in 2025. - Anticipate average deposits to settle into a range of around $11.5 billion to $12 billion over coming quarters. - Expect improvement in AFS portfolio net unrealized losses over the next twelve to twenty-four months by 31-55% respectively.

• Impact of U.S. trade discussions on global supply chains, taxes, inflation, and interest rates. - Volatility in the bond market affecting securities investment strategy. - Uncertainty in hospitality market in Bermuda and Prime Central London impacting loan portfolio. - Cost of living increases in Bermuda, Cayman, and Channel Islands due to tariffs on imported goods.

Q: David Feaster asked about credit side, market expansion, and margin.

A: Michael Schrum discussed credit risks in Bermuda and Prime Central London, Michael Collins and Michael Schrum talked about growth in Channel Islands retail and Singapore integration. Craig Bridgewater spoke about margin impacts from rate cuts and investment strategy.

Q: Timur Braziler inquired about M&A, fee side, and Elbow Beach resolution.

A: Michael Schrum and Michael Collins discussed M&A focus on fee businesses, Craig Bridgewater talked about fee impacts from market volatility, and Michael Schrum explained the Elbow Beach loan resolution and its impact on NII.

Q: Emily Lee asked about tariff impact and economic downturn levers.

A: Michael Schrum discussed minimal direct tariff impact on jurisdictions but cost of living concerns, and Michael Collins talked about expense levers like early retirement program and building Halifax office for cost reduction