2017 Q3 Analyst Call The Bank of N.T. Butterfield & Son Limited October 25, 2017
Forward-Looking Statements Forward-Looking Statements : Certain of the statements made in this presentation are “forward-looking statements” within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our current beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance, capital, ownership or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Our performance may vary due to a variety of factors, including worldwide economic conditions, success in business retention and obtaining new business and other factors. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our Securities and Exchange Commission (“SEC”) reports and filings. Such reports are available upon request from the Bank, or from the SEC, including through the SEC’s Internet website at http:// www.sec.gov. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date hereof, or after the respective dates on which any such statements otherwise are made. About Non-GAAP Financial Measures : This presentation contains non-GAAP financial measures including “core” net income and other financial measures presented on a “core” basis. We believe such measures provide useful information to investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, our non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. Reconciliations of these non-GAAP measures to corresponding GAAP financial measures are provided in the Appendix of this presentation. 2 All information in $millions and as of 30 September 2017 unless otherwise indicated . Conversion rate: 1 BMD$ = 1 US$.
Q3 2017 Earnings Call Presenters Agenda Six International Locations Michael Collins • Overview Chairman & Chief Executive Officer • Financials Michael Schrum • Summary Chief Financial Officer • Q&A Dan Frumkin Chief Operating Officer Butterfield Overview • Leading Bank in Attractive Markets • Strong Capital Generation and Return • Efficient, Conservative Balance Sheet Awards • Visible Earnings 3
Q3 2017 Highlights Core Net Income** • Net income of $41.1 million, or $0.74 per share • Core Net Income** of $40.7 million, or $0.73 per share $40.7 $38.5 $37.5 • Net Interest Margin of 2.81%, cost of deposits of 0.10% $37.1 $33.4 • Return on average common equity of 20.7%; core return on average tangible common equity** of 22.2% • Butterfield to acquire Global Trust Solutions business from Deutsche Bank**** Q3 Q4 Q1 Q2 Q3 2016 2017 Core Return on Average Tangible Common Equity** vs. Q2 2017 vs. Q3 2016 Q3 2017 $ % $ % 23.4% 22.2% 21.6% Net Interest Income $ 74.3 $ 2.8 3.9 % $ 9.3 14.2 % 19.3% 19.0% Non-Interest Income 38.2 (0.5) (1.2)% 2.0 5.4 % 12.9% 12.9% 12.9% Prov. for Credit Losses 0.7 1.2 (228.8)% 1.0 (315.3)% 10.5% Non-Interest Expenses* (73.8) (1.7) (2.2)% (3.7) (4.8)% Other Gains (Losses) 1.8 (0.2) (11.6)% 1.1 181.3 % Q3 Q4 Q1 Q2 Q3 2016 Net Income $ 41.1 $ 5.0 14.0 % $ 17.0 70.9 % 2017 Non-Core Items** (0.4) (1.8) (128.6)% (9.8) (104.5)% Butterfield Peer average *** Core Net Income** $ 40.7 $ 3.2 8.5 % $ 7.3 21.7 % * Includes income taxes 4 ** See the Appendix for a reconciliation of the non-GAAP measure. *** Includes US banks identified by management as a peer group. See the Appendix for a list of these banks. **** Announced subsequent to quarter-end.
Financials
Income Statement Net Interest Income Net Interest Income before Provision for Credit Losses - Net Interest Margin & Yields Trend Q3 2017 vs. Q2 2017 Avg. Balance Yield Avg. Balance Yield $74.3 Cash, S/T Inv. & Repos 0.81% $ (395.3) 0.13% $ 2,241.5 $71.5 Investments 4,561.9 2.22% 22.7 0.02% Loans (net) 3,682.3 5.16% 75.6 0.05% $65.0 Interest Earning Assets 10,485.8 2.95% $60.0 Total Liabilities 10,042.0 0.15% (338.9) —% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2016 2015 2017 Net Interest Margin 2.81% 0.15% • Continued margin expansion resulting from higher short-term rates. • Increase in commercial loan yields improved lending margins. 6
Income Statement Non-Interest Income Non-Interest Income Trend vs. Q2 2017 $38.7 $38.2 $36.3 Q3 $ % $34.2 Asset management $ 6.3 $ 0.4 6.5 % 34.0% Banking 10.8 (0.1) (1.3)% FX Revenue 7.6 — 0.3 % Trust 10.9 (0.3) (2.7)% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Custody and Other 2.0 0.1 6.5 % 2016 2015 2017 Other 0.5 (0.6) (50.4)% Non-Interest Income Fee Income Ratio Total Non-Interest Income $ 38.2 $ (0.5) (1.2)% • Acquisition of Global Trust Solutions (“GTS”) business from Deutsche Bank will add scale and talent to existing trust operations in Switzerland, Guernsey and Cayman and add a profitable and strategically important private trust platform in Singapore. • GTS will generate stable trust fee income and will be accretive once integrated. • Stability of non-interest income supported by diversification of fee-related businesses. • Fee income ratio of 34.0% remains well above peers* and increases returns on equity. 7 *Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks.
Income Statement Non-Interest Expenses Non Interest Expense Trend *** Core Non-Interest Expenses* vs. Q2 2017 Q3 $ % Salaries & Benefits $ 37.2 $ 0.1 0.3 % Technology & Comm. 13.1 (0.2) (1.5)% $77.5 $75.6 Property 5.1 (0.2) (3.8)% $73.8 $67.6 Professional & O/S Services 5.6 (0.1) (1.8)% Indirect Taxes 4.6 0.1 2.2 % 66.8% 66.1% 62.8% 65.3% Intangible Amortization 1.0 (0.1) (9.1)% Marketing 0.9 (1.5) (62.5)% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Other ** 4.2 (0.6) (12.5)% 2016 2015 2017 Total Core Non-Interest Expenses* $ 71.8 $ (2.4) (3.2)% Non-Interest Expenses Core Efficiency Ratio Non-Core Expenses* 2.0 0.6 (42.4)% Non-Interest Expenses*** $ 73.8 $ (1.8) (2.3)% • Elevated expense levels in Q3 due to Sarbanes Oxley-related costs, investment in compliance systems and processes, and Group Service Center (Halifax) build out. • Increased professional fees expenses related to the acquisitions of GTS. • Expecting to return to normalized cost / income ratios in the short term. * See the Appendix for a reconciliation of the non-GAAP measure. 8 ** Includes Other Non-Interest Expenses and Income Taxes *** Includes Income Taxes
Capital Requirements and Return Regulatory Capital (Basel III) - Leverage Capital Total Capital Ratio 8.8% 19.9% 8.3% 0.6% 6.6% 1.3% 1.6% 8.2% 7.0% 15.1% 14.9% 5.0% Butterfield - Pre IPO Butterfield - Current US Peer Median * Butterfield Current BMA 2017 Required US Peer Average * TCE/TA TCE/TA Ex Cash • Continued conservative capital management provides capacity for acquisitions. • $0.32 per share dividend declared for 3rd quarter. • Butterfield continues to build capital resulting in leverage capital at the high end of target capital range. 9 * Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks.
Balance Sheet Total Assets Q3 2017 Q2 2017 Cash & Equivalents $ 1,546 $ 1,720 $11.0 $10.7 $10.6 $10.2 S/T Inv. & Reverse Repos 418 478 Loans (net) 3,664 3,588 Investments 4,613 4,558 Other Assets 338 335 $4.6 $4.6 $4.1 $4.0 Total Assets $ 10,578 $ 10,679 $3.8 $3.7 $3.6 $3.3 Int. Bearing Deposits $ 7,036 $ 7,150 Non-Int. Bearing Deposits 2,371 2,329 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Other Liabilities 368 430 2015 2016 2017 Shareholders Equity 802 770 Total assets Investments Loans Total Liab. & Equity $ 10,578 $ 10,679 Total Deposits • Loan balances flat with paydowns in commercial lending $9.7 $9.5 $9.4 $9.1 offset by growth in residential mortgages. 0.19% • Cash balances within target range due to further 0.11% 0.11% 0.10% deployment into short-dated securities and slightly lower deposit balances. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Cost of deposit steady at 0.10%. 2015 2016 2017 Total deposits Non-interest bearing Interest bearing Cost of deposits 10
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