The Bank of N.T. Butterfield & Son Limited’s net income rose 44 per cent to $57.4 million for the third quarter of the year as it benefited from interest rate rises.

That compares to net income of $49.1 million for the previous quarter and $39.8 million for the third quarter of 2021.

Core net income for the third quarter was $57.6 million compared to $50.2 million for the previous quarter and $40 million for the third quarter of 2021.

The core return on average tangible common equity for the quarter was 31.6 per cent, compared to 27.8 per cent for the previous quarter and 17.9 per cent for the third quarter of 2021.

The core efficiency ratio for the quarter was 57 per cent compared with 60.2 per cent in the previous quarter and 66.3 per cent for the third quarter of 2021.

Michael Collins, Butterfield's chairman and chief executive officer, said: "The bank posted solid results for the third quarter of 2022, as we continued to demonstrate resilient non-interest income in our chosen operating jurisdictions, while remaining well positioned for the rising interest rate environment. Butterfield remains asset sensitive, which we expect will continue to benefit the bank during this period of rising market interest rates.

"We regularly monitor and review credit quality in our loan book and, at this point in the cycle, we have not seen any significant signs of credit stress. A number of mortgage customers have moved their facilities from floating rate to fixed rate over the past six months, protecting their cashflow and improving the credit quality of our loan portfolio. As anticipated, we saw deposit levels decrease due to clients investing their funds and the strengthening of the US dollar.”

He added: "During the quarter, we announced the acquisition of the Credit Suisse trust business in Singapore, Guernsey and the Bahamas. This strategic transaction will position Butterfield as one of the largest private client trust companies in Singapore.

‘Importantly, this acquisition allows Butterfield to review and selectively acquire each individual trust client in accordance with our risk appetite, without the requirement to purchase legal entities. We look forward to welcoming our new clients and staff as we integrate the business during the first half of next year.”

Butterfield said net income increased in the third quarter versus the prior quarter principally due to a higher interest rate environment and lower non-interest expenses, offset by lower non-interest income and a provision for future expected credit losses due to decreasing macroeconomic forecasts and net new loan originations.

Net interest income for the quarter was $91.2 million, an increase of $9.2 million, compared with $82 million in the previous quarter and up $15.5 million from $75.7 million in the third quarter of 2021.

Net interest margin was 2.59 per cent, an increase of 33 basis points from 2.26 per cent in the previous quarter and up 62 basis points from 1.97 per cent in the third quarter of 2021.

Non-interest income was $49.9 million, $1.9 million lower than the $51.8 million earned in the previous quarter and $0.9 million higher than $49 million in the third quarter of 2021.

Period end deposit balances were lower at $12.5 billion, compared to December 31, 2021 at $13.9 billion due to the anticipated normalisation of pandemic-related elevated deposit levels, as well as the impact of foreign exchange translation of non-US dollar deposits following the strengthening of the US dollar. Customer withdrawals represent 57 per cent of the decrease in deposits while the strengthening of US dollar's impact on non-US dollar balances represents 43 per cent of the change.

Total assets of the bank were $13.7 billion at September 30, a decrease of $1.6 billion from December 31, 2021.

The bank maintained a highly liquid position at September 30, with its $8.3 billion of cash and demand deposits with banks, reverse repurchase agreements and liquid investments representing 60.5 per cent of total assets, compared with 63.3 per cent at December 31, 2021.

The board declared a quarterly dividend of $0.44 per common share to be paid on November 28 to shareholders of record on November 14.

The current total regulatory capital ratio as at September 30 was 22.7 per cent as calculated under Basel III, compared to 21.2 per cent as at December 31, 2021. Both of these ratios remain significantly above the minimum Basel III regulatory requirements applicable to the bank.