Bank of N.T. Butterfield & Son (NYSE:NTB) reported third-quarter 2026 net income of $61 million, or $1.50 per share, as net interest income and fee-based revenue increased. Core net income was $64.2 million, or $1.58 per share, according to Chairman and Chief Executive Officer Michael Collins.
The offshore bank and wealth manager posted a return on average common equity of 21.3% and a core return on average tangible common equity of 25%. Net interest margin increased 2 basis points from the prior quarter to 2.76%, even as deposit costs rose 2 basis points to 1.27%.
“Our third quarter performance reflects the strength and resilience of Butterfield, the depth of our client relationships, and the disciplined execution of our strategy,” Collins said. The company also maintained its quarterly cash dividend at $0.50 per share.
Net Interest Income and Fees Rise
Net interest income before provisions for credit losses totaled $97.2 million, up $1.6 million from the second quarter and $4.4 million from the year-earlier period. President and Chief Financial Officer Michael Schrum said the improvement reflected continued reinvestment into higher-yielding securities and stronger returns from the treasury portfolio.
Those gains were partly offset by lower loan yields and modestly higher funding costs. Average investment balances were largely unchanged during the quarter, while average loan balances increased modestly from the second quarter.
Non-interest income rose $1.4 million sequentially to $64.8 million and increased $3.6 million from the third quarter of 2025. Schrum attributed the improvement primarily to higher banking revenues and foreign-exchange activity. Banking revenue benefited from increased card transaction volumes and a modest non-recurring contract renewal fee, while foreign-exchange revenue increased with client volumes.
Fee-based revenue represented 40% of total revenue during the quarter.
Core non-interest expenses increased 3.5% from the previous quarter, reflecting a full quarter of operating costs from the R&H Guernsey acquisition, compared with a partial-quarter impact in the second quarter. Excluding acquisition-related costs, expenses were also affected by higher salaries and benefits, including staff departure costs, and higher other operating expenses.
The company’s core efficiency ratio was 57.8%, below its through-cycle target of 60%. Butterfield reiterated its expectation for quarterly core non-interest expenses of $93 million to $95 million until the planned CIBC Caribbean transaction closes.
Deposits Expected to Decline by About $500 Million
Total assets increased to $14.3 billion from $14.1 billion at the end of 2025, driven mainly by higher deposit balances. Deposits ended the quarter at $12.9 billion, while average deposits increased to $13.1 billion from $12.6 billion at year-end 2025.
However, Schrum said the company had received notice before quarter-end that approximately $500 million of deposits would leave within weeks. The expected withdrawals involve a handful of private trust and corporate liquidation fund deposits across demand and interest-bearing accounts.
Butterfield expects the outflows to reduce deposits to its previously projected range of $12 billion to $12.5 billion. Schrum said the withdrawals would reduce the balance sheet by roughly $500 million and would come out of cash initially. The bank had $3.8 billion in cash and short-term securities, he said.
Management expects net interest income to remain relatively flat in the short term, with a positive medium-term bias from prior Federal Reserve rate increases and potentially further rate adjustments. Schrum said net interest margin is also expected to be relatively flat near term, as deposit outflows are offset by asset repricing, including in investments and short-term cash.
Asset Quality Remains Solid Despite Higher Non-Accrual Loans
Loans ended the quarter at $4.4 billion and investments totaled $5.6 billion, both largely unchanged from the preceding quarter. The bank said its loan portfolio remains concentrated in full-recourse residential mortgages, with 78% of mortgages carrying loan-to-value ratios below 70%.
Non-accrual loans rose to $119.6 million, or 2.7% of gross loans, from 2.2% in the prior quarter. The increase was driven mainly by residential real estate exposures in the Channel Islands and U.K. segment. Schrum said the facilities are well secured and that the bank does not expect credit losses from them.
The allowance for credit losses was $27 million, or 0.6% of total loans, and the net charge-off ratio was 0.02%. Butterfield’s U.S. Treasury and agency investment portfolio was entirely rated double-A or better.
The available-for-sale portfolio’s unrealized losses increased to $187.3 million at quarter-end from $106.7 million in the second quarter, following an increase in longer-term interest rates. Based on current implied forward rates, the company expects those unrealized losses in accumulated other comprehensive income to improve by about 21% over 12 months and 42% over 24 months.
CIBC Caribbean Deal Still Expected to Close in First Half of 2027
Chief Risk Officer Bri Hidalgo said Butterfield’s acquisition of CIBC Caribbean remains on schedule, with shareholder approval received and required regulatory applications submitted. The company is also preparing for a debt issuance to support the transaction.
“Dedicated integration teams have been established and are actively planning for a successful transition and realization of the strategic benefits of the transaction,” Hidalgo said.
Butterfield continues to anticipate closing the transaction during the first half of 2027. Collins said the combined company would have approximately $29 billion in assets, $25 billion in deposits, $1.7 billion in tangible common equity and more than $400 million in pro forma run-rate earnings.
During the question-and-answer session, management said it was reviewing CIBC Caribbean’s investment portfolio and liquidity arrangements ahead of closing. Schrum said most of the acquired bank’s investments are relatively short-dated U.S. Treasuries, though Butterfield is also evaluating sovereign securities in the Bahamas and Barbados.
Management said it sees long-term opportunities to expand retail banking, residential mortgage lending, collateral-backed lending and potentially merchant-acquiring services in acquired markets. Collins said the company is not projecting substantial cost synergies initially and plans to focus on supporting governments, communities and employees across the region.
About Bank of N.T. Butterfield & Son (NYSE:NTB)
The Bank of N.T. Butterfield & Son Limited, commonly known as Butterfield, is a full-service bank headquartered in Hamilton, Bermuda. Founded in 1858, the company provides banking, wealth management and fiduciary services to individuals, businesses, institutions and international clients.
Butterfield’s banking activities include personal and commercial deposit accounts, residential and commercial lending, credit and debit cards, cash management, foreign exchange and other financial services.
