Fourth Quarter and Year-End 2017 Earnings Presentation The Bank of N.T. Butterfield & Son Limited February 15, 2018
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 other than required by law. 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 $millions and as of December 31, 2017 unless otherwise indicated . Conversion rate: 1 BMD$ = 1 US$.
Fourth Quarter and Year-End 2017 Earnings Call Presenters Agenda Six International Locations Michael Collins • Overview Chairman and 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
2017 Highlights Core Net Income* • Record net income of $153.3 million, or $2.76 per share • Core Net Income* of $158.9 million, or $2.86 per share • Net Interest Margin of 2.73%, cost of deposits of 0.11% $158.9 • Return on average common equity of 19.9%; core return on $138.6 average tangible common equity* of 22.4% $113.9 • Acquired Global Trust Solutions business from Deutsche Bank $106.4 • Announced major acquisition of Deutsche Bank’s banking $76.6 businesses in Cayman and Channel Islands; expected to close before the end of 2018 (Announced February 15, 2018) 2013 2014 2015 2016 2017 • Increased common share dividend and authorized share repurchase program (Announced February 15, 2018) Core Return on Average Tangible Common Equity* 22.4% vs. 2016 20.5% 2017 $ % 17.6% Net Interest Income $ 289.7 $ 31.3 3.9 % Non-Interest Income 157.8 10.4 (1.2)% 14.4% Prov. for Credit Losses 5.8 10.2 (228.8)% Non-Interest Expenses** (301.4) (14.8) (2.2)% 9.7% Other Gains (Losses) 1.3 0.3 (11.6)% Net Income $ 153.3 $ 37.3 32.2 % 2013 2014 2015 2016 2017 Non-Core Items* 5.6 (17.0) (128.6)% Core Net Income* $ 158.9 $ 20.3 15.0 % * See the Appendix for a reconciliation of the non-GAAP measure 4 ** Includes income taxes
Financials
Fourth Quarter 2017 Highlights • Net income of $40.3 million, or $0.72 per share • Core Net Income** of $42.2 million, or $0.76 per share vs. Q3 2017 vs. Q4 2016 • Net Interest Margin of 2.87%, cost of deposits of 0.12% Q4 2017 $ % $ % Net Interest Income $ 76.1 $ 1.8 3.9 % $ 9.3 14.2 % • Return on average common equity of 19.7%; core return on average tangible common equity** of 22.3% Non-Interest Income 42.4 4.1 (1.2)% 3.6 5.4 % Prov. for Credit Losses 5.4 4.7 (228.8)% 4.5 (315.3)% • Common share dividend increased 18.8% to $0.38 per Non-Interest Expenses* (80.8) (7.0) (2.2)% (8.9) (4.8)% share*** Other Gains (Losses) (2.7) (4.5) (11.6)% (3.5) 181.3 % • Announced the acquisition of Global Trust Solutions from Net Income $ 40.3 $ (0.8) (2.0)% $ 4.9 13.8 % Deutsche Bank Non-Core Items** 1.9 2.3 (128.6)% 0.1 (104.5)% • Strong revenue from margin expansion and loan growth, Core Net Income** $ 42.2 $ 1.5 3.7 % $ 5.0 13.6 % offset by increased SOX and performance bonus expenses Net Interest Income before Provision for Credit Losses - Net Interest Margin & Yields Trend Q4 2017 vs. Q3 2017 Avg. Balance Yield Avg. Balance Yield $76.1 Cash, S/T Inv. & Repos 0.86 % $ (105.8) 0.05 % $ 2,135.8 $74.3 Investments 4,638.0 2.27 % 76.1 0.05 % $66.8 Loans (net) 3,731.7 5.23 % 49.4 0.07 % $61.2 Interest Earning Assets 10,505.5 3.03 % 19.7 Total Liabilities 10,040.1 (0.17)% (1.9) (0.02)% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 Net Interest Margin 2.87 % 0.06 % * Includes income taxes ** See the Appendix for a reconciliation of the non-GAAP measure 6 *** Announced subsequent to quarter-end
Income Statement Non-Interest Income Non-Interest Income Trend $42.4 vs. Q3 2017 $38.8 $38.2 $37.3 Q4 $ % Asset management $ 6.6 $ 0.3 3.9% 34.2% Banking 12.0 1.2 11.1% FX Revenue 8.8 1.3 16.6% Trust 11.3 0.4 3.6% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Custody and Other 2.2 0.1 6.0% 2016 2015 2017 Other 1.4 0.9 163.9% Non-Interest Income Fee Income Ratio Total Non-Interest Income $ 42.4 $ 4.1 10.7% • Non-interest income grew significantly across all business lines • Banking and FX Revenue growth saw largest increases with seasonal promotions • Stable and capital efficient non-interest income across diversified fee generating businesses • Fee income ratio of 34.2% remains well above peers* and increases returns on equity * Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks. 7
Income Statement Non-Interest Expenses Non-Interest Expense Trend *** Core Non-Interest Expenses* vs. Q3 2017 Q4 $ % Salaries & Benefits $ 42.2 $ 5.0 0.3 % $87.9 Technology & Comm. 14.3 1.2 (1.5)% $80.8 Property 4.5 (0.6) (3.8)% $73.8 $71.9 Professional & O/S Services 6.7 1.1 (1.8)% Indirect Taxes 4.7 0.1 2.2 % 65.6% 62.8% 65.4% 63.7% Intangible Amortization 1.1 — (9.1)% Marketing 1.5 0.6 (62.5)% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Other ** 3.9 (0.2) (12.5)% 2016 2015 2017 Total Core Non-Interest Expenses* $ 78.9 $ 7.2 10.0 % Non-Interest Expenses Core Efficiency Ratio Non-Core Expenses* 1.9 (0.1) (42.4)% Non-Interest Expenses*** $ 80.8 $ 7.0 9.5 % • Expenses pressured by accelerated Sarbanes-Oxley-related costs, investment in compliance systems and processes, and year-end increase in performance related bonus accrual • Some core office set up costs incurred in the quarter in anticipation of the Singapore Global Trust Solutions acquisition • Non-core expenses related primarily to acquisition of Global Trust Solutions • Cost / income ratios expected to normalize in the short term on existing businesses * 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 19.9% 8.8% 8.3% 0.6% 1.2% 8.2% 7.1% 15.1% 14.9% Butterfield - Current US Peer Median * Butterfield Current BMA 2017 Required US Peer Average * TCE/TA TCE/TA Ex Cash • Capital management remains conservative and has capacity for further acquisitions • Board approved 18.8% increase in quarterly cash dividend to $0.38 per common share • Share repurchase program of one million shares announced • Leverage capital below peer median but remains 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.
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