Second Quarter 2019 Earnings Presentation The Bank of N.T. Butterfield & Son Limited July 24, 2019
Forward-Looking Statements Forward-Looking Statements : Certain of the statements made in this release are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. 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. Forward-looking statements include statements with respect to our 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 the actual results, performance, capital, ownership or achievements of the Bank to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements due to a variety of factors, including worldwide economic conditions, the successful completion and integration of acquisitions (including the recently closed acquisition of ABN AMRO (Channel Islands) Limited) or the realization of the anticipated benefits of such acquisitions in the expected time-frames or at all, 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. All 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 website at http://www.sec.gov. Except otherwise required by law, Butterfield assumes no obligation and does not undertake to review, update, revise or correct any of the forward-looking statements included herein, whether as a result of new information, future events or other developments. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. 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$.
Agenda and Overview Presenters Agenda Butterfield Overview Michael Collins • Overview • Leading Bank in Attractive Markets Chairman and Chief Executive Officer • Financials • Strong Capital Generation and Return Michael Schrum • Summary • Efficient, Conservative Balance Sheet Chief Financial Officer • Q&A • Visible Earnings Ten International Locations Awards 3
Second Quarter 2019 Highlights (In US$ millions) vs. Q1 2019 vs. Q2 2018 • Net income of $38.6 million, or $0.72 per share Q2 2019 $ % $ % • Core Net Income** of $51.1 million, or $0.95 per share Net Interest Income $ 85.2 $ (2.8) $ (2.2) 14.2 % • Return on average common equity of 17.1%; core return on Non-Interest Income 44.2 0.9 2.3 5.4 % average tangible common equity** of 24.6% Prov. for Credit Losses 0.9 0.9 0.4 (315.3)% • Net Interest Margin of 3.18%, cost of deposits of 0.42% Non-Interest Expenses* (91.9) (10.8) (13.3) (4.8)% • Core efficiency ratio of 60.3%** Other Gains (Losses) 0.2 (1.6) 1.8 181.3 % • Quarterly common share dividend of $0.44 per share and active Net Income $ 38.6 $ (13.5) (25.8)% $ (11.0) (22.3)% share repurchases Non-Core Items** 12.5 12.9 10.5 (104.5)% • Closed acquisition of ABN AMRO (Channel Islands) Limited Core Net Income** $ 51.1 $ (0.6) (1.1)% $ (0.5) (1.1)% announced on April 25, 2019 Core Return on Average Tangible Common Equity** Core Net Income** (In US$ millions) 27.6% 25.8% 25.6% $51.7 $51.7 24.9% $51.1 $51.1 24.6% $49.1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2018 2019 2019 2018 * Includes income taxes ** See the Appendix for a reconciliation of the non-GAAP measure 4
Financials
Income Statement Net Interest Income Net Interest Income before Provision for Credit Losses - Net Interest Margin & Yields Trend (In US$ millions) Q2 2019 vs. Q1 2019 (In US$ millions) Avg. Balance Yield Avg. Balance Yield $88.0 $87.4 $85.2 Cash, S/T Inv. & Repos 1.46 % $ (175.6) (0.19)% $ 2,265.5 Investments 4,453.5 2.92 % 157.9 (0.15)% Loans (net) 4,012.8 5.67 % (42.2) — % Interest Earning Assets 10,731.8 3.64 % (60.0) Total Liabilities 10,139.2 (0.48)% (68.0) (0.04)% Q2 Q3 Q4 Q1 Q2 2018 2019 Net Interest Margin 3.18 % (0.13)% • Net interest margin (NIM) decreased 13 bps from the previous quarter and 2 bps from the second quarter of 2018, due primarily to: ◦ Lower market rates on cash and short term investments; ◦ New Channel Island deposits that arrived at end of first quarter 2019 were mixed currency and lower margin; and ◦ Marginal increase in term deposits costs • Loan yields of 5.67% were flat compared to the prior quarter and increased 23 bps compared to the second quarter of 2018 • Net interest income was down 3.2% compared to the first quarter of 2019 and down 2.6% compared to the second quarter of 2018, due primarily to the currency mix of new deposits and a marginal increase in term deposit costs 6
Customer Deposits Deposit Composition By Currency Average Deposit Volume and Cost of Deposits 6.0% 6.1% 6.4% (In US$ millions) 5,000 11.0% 1.52% 14.7% 14.1% 1.41% 83.0% 79.2% 79.6% 4,000 Q2 Q3 Q4 Q1 Q2 3,000 2019 2018 USD / USD Pegged GBP 2,000 0.63% Other 0.42% 0.38% 1,000 By Type 0.09% 16.9% 22.5% 0.14% 0.07% 24.1% 0.01% 0 60.9% 56.2% 52.6% Q2 Q3 Q4 Q1 Q2 2019 2018 23.3% 22.2% 21.3% Bermuda Demand Deposits Bermuda Term Deposits Q2 Q3 Q4 Q1 Q2 Cayman Demand Deposits Cayman Term Deposits 2019 2018 Non-interest bearing demand deposits Channel Islands Demand Deposits Channel Islands Term Deposits Interest bearing demand deposits Interest bearing demand deposit cost Term deposit cost Term deposits Overall cost of deposits 7
Income Statement Non-Interest Income Non-Interest Income Trend (In US$ millions) (In US$ millions) Q2 2019 vs. Q1 2019 $44.2 $43.4 Asset management $ 6.9 $ 0.1 $41.9 Banking 12.1 0.9 FX Revenue 8.4 (0.4) Trust 13.0 0.4 Custody and Other 3.1 0.4 Q2 Q3 Q4 Q1 Q2 Other 0.9 (0.5) 2019 2018 Total Non-Interest Income $ 44.2 $ 0.9 • Non-interest income was up 2.0% versus last quarter and up 5.5% compared to the second quarter of 2018 • Banking fees increased due to higher credit card volumes and improved interchange rates • Fee income ratio of 33.9% remains favorable compared to peer average* • Fee revenues continue to be an important and capital efficient contributor to earnings * Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks. 8
Income Statement Non-Interest Expenses Core Non-Interest Expense Trend* Core Non-Interest Expenses* vs. Q1 2019 (In US$ millions) (In US$ millions) Q2 2019 $ % Salaries & Benefits** $ 41.1 $ (1.7) (3.9)% $80.3 $79.2 Technology & Comm. 15.2 0.6 4.0 % $77.7 Property 5.7 0.4 6.6 % Professional & O/S Services 5.0 — 0.3 % 60.1% 60.3% 59.0% Indirect Taxes 5.0 (0.2) (4.8)% Intangible Amortization 1.2 (0.2) (12.9)% Q2 Q3 Q4 Q1 Q2 Marketing 1.7 — (0.8)% 2018 2019 Other 4.3 — 0.7 % Core Non-Interest Expenses* Total Core Non-Interest Expenses* $ 79.2 $ (1.1) (1.4)% Core Efficiency Ratio* Non-Core Expenses* 12.5 11.9 2,032.6 % Non-Interest Expenses $ 91.7 $ 10.8 13.3 % • Core cost / income ratio* of 60.3% is at target and slightly above 60.1% in the prior quarter • Second quarter 2019 expenses were impacted by certain restructuring programs: ◦ Bermuda branch closure, early voluntary retirement program, redundancies in Bermuda and Jersey; ◦ Costs associated with the departure of a group senior executive • Cost / income ratio target continues to be 60% with anticipated short term variances as the ABN AMRO transaction settles • Improved cost efficiencies remain key to operating leverage * See the Appendix for a reconciliation of the non-GAAP measure 9 ** Includes Non-Service Employee Benefits Expense
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