NTB

We rate Bank of N.T. Butterfield & Son Ltd (NTB) as a Hold with a composite score of 61.8/100 at a current price of $51.00. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (79th percentile) and stability (78th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (32th percentile) and investment (58th percentile) tempers our overall conviction. We assign a Narrow Moat rating (50/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Bank of N.T. Butterfield & Son Ltd holds an above-average position (#23 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 61.8/100 places it at rank #514 in our full 7,333-stock universe. At $1.7B in market capitalization, Bank of N.T. Butterfield & Son Ltd is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 0% and favorable momentum (79th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 61% (-15.9pp vs sector) narrow to operating margins of 39% (+22.4pp vs sector) and net margins of 37.3%, yielding a gross-to-net conversion rate of 62%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $51.00, Bank of N.T. Butterfield & Son Ltd appears undervalued relative to its fundamentals. Our value factor score of 73/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 10.7x (roughly in line with the sector median of 11.9x), EV/EBITDA of 0.5x (discounted to peers), P/B of 2.2x, P/S of 0.9x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to Bank of N.T. Butterfield & Son Ltd. The company exhibits strong financial stability with a beta of 0.56, conservative leverage (19% D/E), and a stability factor in the 78th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: weak quality scores (32th percentile); low beta of 0.56 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 78th percentile and quality factor at the 32th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 61% provide a buffer against cost pressures; conservative leverage (19% D/E) limits balance sheet risk; above-average stability (78th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Bank of N.T. Butterfield & Son Ltd's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 84.8%, disciplined leverage (19% D/E), a 4.82% dividend yield. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — Bank of N.T. Butterfield & Son Ltd meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 4.82% dividend yield, and the combination of 6.1% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, Bank of N.T. Butterfield & Son Ltd receives a Hold rating with a composite score of 61.8/100 (rank #514 of 7,333). Our quantitative framework assigns a Narrow Moat (50/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 64/100.

Our analysis supports a neutral stance on Bank of N.T. Butterfield & Son Ltd. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.