Bank of N T Butterfield & Son : Butterfield Q2 2020 Earnings

Second Quarter Earnings Presentation

The Bank of N.T. Butterfield & Son Limited July 23, 2020

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 the impact of the COVID-19 pandemic, the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, worldwide economic conditions and fluctuations of interest rates, the successful completion and integration of acquisitions 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 https://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

Agenda and Overview

Presenters		Agenda		Butterfield Overview
Michael Collins	•	Overview	•	Leading Bank in Attractive Markets
Chairman and Chief Executive Officer	•	Second Quarter 2020 Highlights	•	Strong Capital Generation and Return
Michael Schrum	•	COVID-19 Update	•	Efficient, Conservative Balance Sheet
Group Chief Financial Officer	•	Financials	•	Visible Earnings
•	Q&A

Ten International Locations

Awards

3

Second Quarter 2020 Highlights

• Net income of $34.3 million, or $0.67 per share	(In US$ millions)				vs. Q1 2020	vs. Q2 2019
	Q2 2020		$	%	$	%
• Core Net Income** of $34.4 million, or $0.67 per share
• Return on average common equity of 14.0%; core return on average	Net Interest Income	$	79.1	$	(8.5)	$	(6.1)	14.2 %
tangible common equity** of 15.5%	Non-Interest Income		41.7		(5.9)		(2.5)	5.4 %
• Net Interest Margin of 2.48%, cost of deposits of 0.14%	Prov. for Credit Losses		(4.4)		0.8		(5.3)	(315.3)%
• Credit reserve build of $4.4 million in Q2 2020	Non-Interest Expenses*		(82.8)		6.3		9.1	(4.8)%
• Cash dividend of $0.44 per common share and active share	Other Gains (Losses)		0.7		1.3		0.5	181.3 %
repurchases
Net Income	$	34.3	$	(6.0)	(14.9)% $	(4.3)	(11.1)%
• Issued $100 million 5.25% 10-year fixed to floating rate subordinated
Non-Core Items**		0.1		0.4		(12.4)	(104.5)%
debt
Core Net Income**	$	34.4	$	(6.4)	(15.6)% $	(16.7)	(32.7)%

Core Return on Average Tangible Common Equity**

Core Net Income**

24.6%	22.5%				$51.1	$48.8	$46.2
	21.1%
		18.6%					$40.8
				15.5%					$34.4
Q2	Q3	Q4	Q1	Q2	Q2	Q3	Q4	Q1	Q2
	2019			2020		2019			2020

* Includes income taxes	4
** See the Appendix for a reconciliation of the non-GAAP measure

COVID-19 Update*

Principal Markets Update**

Butterfield Actions

Guernsey &

•

Near term

Bermuda

Cayman

◦ Support local economic activity through mortgage

Jersey

deferral program for qualifying residential mortgage

Active COVID-19 Cases

7

2

5

holders in Bermuda and Cayman

Total COVID-19 Cases

153

203

583

◦ Working with customers to meet financing needs

◦ Effect deposit repricing and tactical cost initiatives

Deaths

9

1

44

•

Medium/Longer term

Status

Open

Restricted

Open

◦ Evolve business model for lower interest rate

environment

• All offices are open to some degree with social distancing

Direct Hotel and Restaurant Lending Exposure Limited

and adhering to local protocol

• Domestic economies are open despite limited tourist visitors

$

millions

%

Market commentary

Hotel Operators

$

183.2

11.1 %

• Bermuda's airport is open with limited but increasing flights

Hotel Construction

30.9

1.9 %

Restaurants

7.1

0.4 %

and robust health guidelines/checks and testing for arrivals

Other Commercial and CRE Loans

1,429.4

86.6 %

• Cayman remains closed to flights with local economy open

Total Commercial and CRE Loans

$

1,650.6

100.0 %

• Channel Islands are open with quarantine/testing rules for

visitors

* Please see the Appendix for commentary on factors influencing COVID-19 implications

5

** Data as of July 21, 2020

Financials

Income Statement

Net Interest Income

Net Interest Margin & Yields

(In US$ millions)		Q2 2020				vs. Q1 2020
	Avg. Balance	Yield		Avg. Balance	Yield
Cash, S/T Inv. & Repos	$	3,358.4		0.13 %	$	(322.8)	(0.90)%
Investments		4,426.6		2.52 %			(76.5)	(0.26)%
Loans (net)		4,997.3		4.53 %			(162.5)	(0.27)%
Interest Earning Assets		12,782.3		2.68 %			(561.8)	(0.40)%
Interest Bearing Liabilities		9,827.6		(0.25)%			(488.1)	0.33 %
Net Interest Margin				2.48 %				(0.15)%

Net Interest Income before Provision for Credit Losses -

Trend

		(In US$ millions)	$87.6
$85.2
				$79.1
Q2	Q3	Q4	Q1	Q2
	2019			2020

• Net interest margin ("NIM") decreased by 15 bps from the previous quarter due to a drop in global interest rates
• Loan yields of 4.53% down 27 bps in the second quarter of 2020 as interest rates declined on floating rate loans
• Lower rates on roll-over maturities have decreased term deposit costs and are nearing zero

7

Income Statement

Non-Interest Income

(In US$ millions)
		Q2 2020			vs. Q1 2020
Asset management	$	7.4	$	(0.4)
Banking		9.1			(2.1)
FX Revenue		8.1			(2.7)
Trust		12.3			0.2
Custody and Other		3.3			(0.3)
Other		1.5			(0.5)
Total Non-Interest Income	$	41.7	$	(6.0)

Non-Interest Income Trend

(In US$ millions)

$44.2			$47.6
			$41.7
Q2	Q3	Q4	Q1	Q2
	2019			2020

• Non-interestincome down $6.0 million or 12.4% sequentially
• The impact of COVID-19 related economic slowdown resulted in lower non-interest income due to lower transactional volumes, particularly in card and merchant services fees and foreign exchange commissions
• Fee income ratio of 35.8% in the second quarter of 2020 remains higher than the peer average*

* 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 Expenses*					vs. Q1 2020
	(In US$ millions)		Q2 2020		$		%
	Salaries & Benefits**	$	41.4	$	(2.7)	(6.1)%
	Technology & Comm.		16.3			(0.1)	(0.6)%
	Property		7.2			(0.1)	(1.4)%
	Professional & O/S Services		5.0			(0.8)	(13.8)%
	Indirect Taxes		4.9			(0.6)	(10.9)%
	Intangible Amortization		1.4			-	- %
	Marketing		0.7			(0.9)	(56.3)%
	Other		5.0			(0.5)	(9.1)%
	Total Core Non-Interest Expenses*	$	81.9	$	(5.7)	(6.5)%
	Non-Core Expenses*		0.1			(0.4)	(80.0)%
	Non-Interest Expenses	$	82.0	$	(6.1)	(6.9)%

Core Non-Interest Expense Trend*

$79.2			$87.6	$81.9
60.3%			63.8%	66.7%
Q2	Q3	Q4	Q1	Q2
	2019			2020

Core Efficiency Ratio*

Core Non-Interest Expenses*

• Core non-interest expenses* were down in the second quarter of 2020 compared to the prior quarter primarily due to:
• • elevated severance costs in Q1 2020;
  • decrease in consultant costs;
  • minimal travel and client entertainment; and
  • limited marketing activities.
• Core cost / income ratio* of 66.7% was higher than 63.8% in the prior quarter due to revenue decreases (COVID-19 and interest rate related) outpacing tactical expense control measures

* See the Appendix for a reconciliation of the non-GAAP measure	9
** Includes Non-Service Employee Benefits Expense

Capital Requirements and Return

Regulatory Capital (Basel III) - Total Capital Ratio***

21.2%			9.8%
	8.3%		0.8%
		1.4%
16.3%
				9.0%
13.9%		6.9%

Butterfield Current	BMA 2020 Required	US Peer Median *		Butterfield - Current	US Peer Median *
					TCE/TA	TCE/TA Ex Cash
	Dividend Payout Ratio**		•	Capital levels remain strong and well above regulatory requirements
			60.7%	•	TCE/TA ratio of 6.9% remains conservatively above targeted range
					of 6.0% to 6.5%
		52.9%		•	TBVPS of $17.94 increased 3.6% in the second quarter
46.4%	42.8%			•	Board declared a quarterly dividend of $0.44 per common share
			•	Share repurchase program active subject to market conditions
				•	Capital management emphasizes dividend sustainability, share
					repurchases and capacity for selective M&A, subject to market
					conditions
2017	2018	2019	2020 YTD
* Includes US banks identified by management as a peer group. Please see the Appendix for a list	10	*** In accordance with regulatory capital guidance, the Bank has elected to make use of transitional
arrangements which allow the deferral of the January 1, 2020 CECL impact of $7.8 million on its
of these banks
				regulatory capital over a period of 5 years. Please see Appendix for further discussion and
** 2020 is based on year-to-date dividend and earnings per share
		assumptions

Balance Sheet

												Total Assets
(In US$ millions)		Q2 2020		Q4 2019
Cash & Equivalents	$	2,228	$	2,550													$13.2	$13.2
Reverse Repos & S/T Investments		1,136		1,361		$11.2
Investments		4,354		4,436
Loans (net)		5,018		5,143
Other Assets		415		432
Total Assets	$	13,151	$	13,922			$4.5									$4.5			$4.4
Int. Bearing Deposits	$	9,441	$	10,203			$4.0									$5.0			$5.0
Non-Int. Bearing Deposits		2,175		2,238
Other Liabilities		545		516
					Q2		Q3		Q4	Q1			Q2
Shareholders Equity		990		964
										2019							2020
Total Liab. & Equity	$	13,151	$	13,922
										Total assets			Investments			Loans

	Total Deposits			•	Average and period end balance sheet stabilized in Q2 2020 as
	(In US$ billions)
				deposit pricing alignment following completion of ABN AMRO
			$11.8		$11.6	acquisition in Channel Islands
$9.9					•	As expected, deposit balances have declined to $11.6 billion
						from $12.4 billion at December 31, 2019 due to active deposit
						repricing in the Channel Islands, which has reduced Euro
						balances
					•	Butterfield's balance sheet remains conservative with low risk
						density (risk weighted assets/total assets was 37.1%)
Q2	Q3	Q4	Q1	2020	Q2
	2019			11

Residential & Commercial Loans

Residential Mortgage Loans (US$ Billions)

Commercial Loans (US$ Billion)

$2.3	$2.5	$2.7	$3.2	$3.2	$1.1	$1.1	$1.2	$1.7	$1.6
25%	32%	37%
	48%	47%			46.9%	44.6%	45.9%
			51.7%
23%			56.5%
22%
	21%
						8.6%
52%			18%	18%			22.0%
46%		10.4%	13.6%	2.7%	22.5%
42%
			1.9%		1.7%
		34%	35%	2.4%		2.6%
					41.8%
					30.7%	32.8%	31.7%	29.0%
2016	2017	2018	2019	Q2 2020	2016	2017	2018	2019	Q2 2020

Bermuda

Cayman

UK and Channel Islands

Commercial and Industrial (Bermuda & Cayman Islands)

Commercial Overdrafts

Government

Commercial Real Estate (Bermuda & Cayman Islands)

COVID-19 Customer* Mortgage Assistance Program

•

Stable loan book balance and composition with 63% in well seasoned

•

Bermuda & Cayman principal and interest deferral participation rates:

residential mortgage books

•

Loans are individually underwritten in all markets

Deferral Participation

Rate

•

Minimal wholesale or cross border lending outside of current

April - June (Opt-out)

85%

jurisdictions

July - September (Opt-in)

50%

•

All qualifying residential mortgages in Bermuda and Cayman Islands

•

Business customers* with remaining loan principal of less than $2

were given automatic principal and interest deferrals during Q2 with

million permitted to pay interest only April - June

opt-out

12

* For qualifying customers who were current at at March 31, 2020

Asset Quality
							Non-Accrual Loans
		Investment Portfolio			(In US$ millions)		$73.3
Loan Distribution		Rating Distribution
				AA 0.3%	$55.9			$53.1
				A 0.5%
	Co
Res Mtg	4.			BBB 0.1%
63.1%
	Gov't	AAA 99.0%
$5.0 billion	7.3%		$4.4 billion
		Q2	Q3	Q4	Q1	Q2
						2019		2020
0.10%	Net Charge-Off Ratio
			•	High quality investment portfolio with 99% AAA rated
0.08%						securities, primarily US Government guaranteed securities
				•	Manually underwritten loan book is comprised of 63% full
0.05%						recourse residential mortgages in Bermuda, Cayman and
					the UK
					•	Non-accrual loans increased to 1.5% of gross loans due to
0.03%				0.01%		one C&I loan and a number of retail facilities, which were
			0.01%		already on watch at the end of 1Q 2020
-%
0.00%
Q2	Q3	Q4	Q1	Q2
	2019			2020

13

Interest Rate Sensitivity

Average Balance - Balance Sheet

Interest Rate Sensitivity

	Average Balances			Weighted
	(US$Mil)
					Average
	Q2 2020	vs. Q1 2020	Duration	vs. Q1 2020	Life
Cash & Reverse	3,358.4	(322.8)	< 0.2	N/A	N/A
Repos & S/T Invest.
AFS	2,340.9	21.1	2.1	(0.5)	3.6
HTM**	2,084.4	(96.8)	2.7	(0.4)	4.1
Total	7,783.7	(398.5)

		20.1%
10.4%	10.2%	7.4%
	4.9%
(3.2)%
-100bps	+100bps	+200bps
NTB		US Peer Median *

• The Bank's balance sheet is currently positioned to benefit from both up and down interest rate scenarios
• NII increases in a down 100 bps rate environment because negative rates would be charged on deposits, while fixed rate assets would continue to generate revenue
• Increased prepayments in the Agency securities book from lower interest rates, resulted in lower weighted average life of AFS and HTM investments
• The Bank now has $180 million in unrealized gains in AFS and HTM, which will continue to moderate securities book yield compression in future years

* Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks. Q1 2020 comparative data is used as Q2 2020 peer

information was not widely available at time of publication.

** The HTM portfolio is comprised of securities with negative convexity which typically exhibit higher prepayment speeds when assuming lower future rates.

14

Appendix

Appendix

Current Expected Credit Losses (CECL)

ACL / Total Loans

ACL by Loan Type

0.60%	0.51%	0.46%	0.72%	0.79%	(In US$ millions)		Q2 2020		Q1 2020		Q4 2019
			$36.2	$40.2	Loans
				Commercial	$	14.9	$	15.5	$	7.3
$24.0	$23.9	$23.6			Commercial Real Estate		2.2		2.6		1.5
		Consumer		5.5		4.6		1.5
					Residential Mortgage		17.6		13.5		13.3
					Total	$	40.2		$36.2		$23.6
Q2	Q3	Q4	Q1	Q2
	2019			2020
	ACL	ACL / Total Loans

	Q2 2020 Highlights		CECL Assumptions
•	CECL adoption impact:	•	The adoption of CECL is driving reserve build through lifetime losses,
◦	The adoption of CECL resulted in a 'Day 1' increase of		past and current conditions as well as a reasonable and supportable
	forecast
	$7.8 million
	•	The Bank employs a PD/LGD approach in calculating its expected
◦	Q1 2020 and Q2 2020 reserve build of $5.2 million and
	losses
	$4.4 million respectively.
	◦	Historical PDs are adjusted using forecasted macro-economic
◦	Consumer and commercial lending book experienced the
	variables such as GDP growth and unemployment rates to reflect
	largest increases
		the forward-looking lifetime view
		◦	The Bank uses both internal data as well as external data sources
		16	to derive assumptions used within the expected credit loss
		calculations

Appendix

Customer Deposits	Average Deposit Volume and Cost of Deposits

3,500
3,000
2,500
1.52%
2,000
Desposits			1.21%
				0.97%
1,500			0.42%
0.42%
				0.14%
1,000
500
0
Q2	Q3	Q4	Q1	Q2
	2019		2020
	Bermuda Demand Deposits		Bermuda Term Deposits
	Cayman Demand Deposits		Cayman Term Deposits
	Channel Islands Demand Deposits		Channel Islands Term Deposits
	Term deposit cost		Overall cost of deposits

Deposit Composition

By Currency

6.4%			8.8%	7.7%
14.1%			21.4%	20.7%
79.5%			69.8%	71.6%
Q2	Q3	Q4	Q1	Q2
	2019			2020
	USD / USD Pegged		GBP	Other

By Type

24.1%						24.3%		19.4%
52.6%	57.5%	61.9%

23.3%			18.2%	18.7%
Q2	Q3	Q4	Q1	Q2
	2019			2020

	Non-interest bearing demand deposits		Interest bearing demand deposits
	Term deposits

Appendix

Balance Sheet Trends

(in millions of US Dollars, unless		2020						2019								2018
otherwise indicated)
		Q2		Q1			Q4		Q3		Q2		Q1			Q4		Q3		Q2
Assets
Cash & Equivalents	$	2,228	$	1,978	$	2,550	$	3,605	$	2,011	$	2,601	$	2,054	$	1,259	$	1,756
Reverse Repos & S/T Investments		1,136		1,240			1,361		855		330		288			80		148		167
Investments		4,354		4,538			4,436		4,662		4,524		4,393			4,255		4,576		4,727
Loans, Net		5,018		5,001			5,143		4,673		4,000		3,986			4,044		4,092		3,986
Other Assets		415		441			432		420		364		374			340		355		367
Total Assets		13,151		13,197		$	13,922	$	14,216	$	11,229	$	11,643		$	10,773	$	10,430	$	11,002
Liabilities and Equity
Total Deposits	$	11,616	$	11,753	$	12,442	$	12,663	$	9,852	$	10,294	$	9,452	$	9,066	$	9,718
Long-Term Debt		241		144			144		143		143		143			143		143		143
Other Liabilities		303		320			373		446		305		310			295		349		293
Total Liabilities	$	12,160	$	12,217		$	12,958	$	13,252	$	10,300	$	10,747		$	9,891	$	9,558	$	10,154
Common Equity	$	990	$	981	$	964	$	965	$	929	$	896	$	882	$	872	$	849
Total Equity	$	990	$	981		$	964	$	965	$	929	$	896		$	882	$	872	$	849
Total Liabilities and Equity	$	13,151	$	13,197		$	13,922	$	14,216	$	11,229	$	11,643		$	10,773	$	10,430	$	11,002
Key Metrics
TCE / TA		6.9 %		6.8 %			6.3 %		6.2 %		7.7 %		7.1 %			7.5 %		7.7 %		7.1 %
CET 1 Ratio		17.0 %		17.5 %			17.3 %		17.4 %		20.1 %		19.3 %			19.6 %		20.2 %		19.1 %
Total Tier 1 Capital Ratio		17.0 %		17.5 %			17.3 %		17.4 %		20.1 %		19.3 %			19.6 %		20.2 %		19.1 %
Total Capital Ratio		21.2 %		19.8 %			19.4 %		19.6 %		22.7 %		22.0 %			22.4 %		23.3 %		22.3 %
Book value per common share		19.73		19.09			18.40		18.14		17.53		16.81			16.31		15.75		15.38

18

Appendix

Average Balance Sheet Trends

(in millions of US Dollars, unless otherwise indicated)			Q2 2020						Q1 2020						Q2 2019
Assets		Average	Interest	Average rate			Average		Interest	Average rate			Average		Interest	Average rate
	balance ($)	($	)	(%)			balance ($)		($)	(%)			balance ($)		($)	(%)
Cash due from banks, reverse repurchase agreements	$	3,358.4	$	1.1	0.13 %	$	3,681.2	$	9.4	1.03 %	$	2,265.5	$	8.2	1.46 %
and short-term investments
Investment in securities		4,426.6		27.8	2.52 %			4,503.2		31.2	2.78 %			4,453.5		32.4	2.92 %
Equity securities at fair value		1.4						2.3						1.3
AFS		2,340.9		12.8	2.19 %			2,319.8		15.0	2.59 %			2,237.1		15.1	2.71 %
HTM		2,084.4		15.1	2.90 %			2,181.1		16.2	2.99 %			2,215.1		17.3	3.13 %
Loans		4,997.3		56.4	4.53 %			5,159.8		61.7	4.80 %			4,012.8		56.7	5.67 %
Commercial		1,693.3		21.5	5.09 %			1,792.4		23.2	5.19 %			1,218.9		18.8	6.18 %
Consumer		3,304.1		34.9	4.24 %			3,367.4		38.5	4.59 %			2,793.9		38.0	5.45 %
Total interest earning assets		12,782.3		85.3	2.68 %			13,344.1		102.4	3.08 %			10,731.8		97.4	3.64 %
Other assets		401.3						403.5						342.8
Total assets	$	13,183.6					$	13,747.6					$	11,074.7
Liabilities
Interest bearing deposits	$	9,661.8	$	(4.1)	(0.17)%	$	10,172.2	$	(12.9)	(0.51)%	$	7,520.9	$	(10.2)	(0.55)%
Customer demand deposits		7,051.4		2.1	0.12 %			7,075.0		(3.5)	(0.20)%			5,106.5		(0.8)	(0.07)%
Customer term deposits		2,566.5		(6.2)	(0.97)%			3,083.9		(9.3)	(1.21)%			2,391.7		(9.1)	(1.52)%
Deposits from banks		43.9		(0.1)	(0.79)%			13.3		(0.1)	(3.93)%			22.7		(0.3)	(5.23)%
Long-term debt		165.8		(2.1)	(5.00)%			143.5		(1.9)	(5.22)%			143.4		(2.0)	(5.56)%
Interest bearing liabilities		9,827.6		(6.2)	(0.25)%			10,315.7		(14.8)	(0.58)%			7,664.3		(12.2)	(0.64)%
Non-interest bearing customer deposits		2,166.8						2,227.3						2,167.8
Other liabilities		274.2						316.6						307.1
Total liabilities	$	12,268.6					$	12,859.6					$	10,139.2
Shareholders' equity		915.0						888.0						935.5
Total liabilities and shareholders' equity	$	13,183.6					$	13,747.6					$	11,074.7
Non-interest bearing funds net of non-interest earning	$	2,954.7				$	3,028.4				$	3,067.5
assets (free balance)
Net interest margin			$	79.1	2.48 %				$	87.6	2.63 %				$	85.2	3.18 %

19

Appendix

Income Statement Trends

(in millions of US Dollars, unless otherwise		2020						2019								2018
indicated)
		Q2		Q1			Q4		Q3		Q2		Q1			Q4		Q3		Q2
Net Interest Income	$	79.1	$	87.6	$	86.2	$	86.3	$	85.2	$	88.0	$	87.4	$	88.3	$	87.4
Non-Interest Income		41.7		47.6			49.7		46.6		44.2		43.4			45.7		41.3		41.9
Prov. for Credit Recovery (Losses)		(4.4)		(5.2)			(0.4)		(0.4)		0.9		-			1.7		2.8		0.5
Non-Interest Expenses*		82.8		89.1			92.0		90.6		91.9		81.0			83.7		82.6		78.6
Other Gains (Losses)		0.7		(0.6)			0.3		0.5		0.2		1.8			(0.3)		0.7		(1.6)
Net Income	$	34.3	$	40.3		$	43.9	$	42.4	$	38.6	$	52.1		$	50.9	$	50.4	$	49.7
Non-Core Items**	$	0.1	$	0.5		$	2.3	$	6.4	$	12.5	$	(0.4)		$	0.2	$	(1.2)	$	2.0
Core Net Income**	$	34.4	$	40.8	$	46.2	$	48.8	$	51.1	$	51.7	$	51.1	$	49.1	$	51.7
Key Metrics
Loan Yield		4.53 %		4.80 %			4.95 %		5.22 %		5.67 %		5.67 %			5.56 %		5.54 %		5.44 %
Securities Yield		2.52		2.78			2.77		2.82		2.92		3.07			2.87		2.78		2.67
Cost of Deposits		0.14		0.42			0.50		0.54		0.42		0.38			0.27		0.20		0.14
Net Interest Margin		2.48		2.63			2.59		2.52		3.18		3.31			3.38		3.37		3.20
Core Efficiency Ratio**		66.7		63.8			66.3		62.1		60.3		60.1			61.5		63.2		59.0
Core ROATCE**		15.5		18.6			21.1		22.5		24.6		25.6			25.8		24.9		27.6
Fee Income Ratio		35.8		36.6			36.7		35.2		33.9		33.0			33.9		31.2		32.4
Fully Diluted Share Count (in millions of		51.0		52.4			53.3		53.6		53.5		54.2			55.4		56.0		55.9
common shares)
* Includes income taxes
** See the reconciliation of non-GAAP measures on pages 23-24						20

Appendix

Non-Interest Income & Expense Trends

(in millions of US Dollars, unless		2020						2019								2018
otherwise indicated)
		Q2		Q1			Q4		Q3		Q2		Q1			Q4		Q3		Q2
Non-Interest Income
Trust	$	12.3	$	12.2	$	13.0	$	12.7	$	13.0	$	12.6	$	13.8	$	13.1	$	13.2
Asset Management		7.4		7.8			7.8		7.4		6.9		6.7			6.5		6.5		6.2
Banking		9.1		11.2			14.0		12.1		12.1		11.2			12.8		10.6		10.8
FX Revenue		8.1		10.8			9.8		10.0		8.4		8.8			8.6		7.8		8.3
Custody & Other Admin.		3.3		3.6			3.5		3.6		3.1		2.7			2.4		2.2		2.4
Other		1.5		2.0			1.7		0.8		0.9		1.4			1.6		1.0		1.1
Total Non-Interest Income	$	41.7	$	47.6	$	49.7	$	46.6	$	44.2	$	43.4	$	45.7	$	41.3	$	41.9
Non-Interest Expense
Salaries & Benefits*	$	41.5	$	44.6	$	48.8	$	45.6	$	52.1	$	42.8	$	43.7	$	43.8	$	40.9
Technology & Comm.		16.3		16.4			16.5		16.3		15.2		14.6			14.9		15.6		15.1
Property		7.2		7.3			7.0		6.1		5.7		5.4			6.1		5.3		5.3
Professional & O/S Services		5.0		5.8			6.7		9.5		6.2		5.6			6.1		5.1		5.1
Indirect Taxes		4.9		5.5			5.3		5.3		5.3		5.2			4.7		4.8		5.0
Intangible Amortization		1.4		1.4			1.5		1.5		1.2		1.3			1.3		1.4		1.3
Marketing		0.7		1.6			3.1		1.6		1.7		1.7			2.3		1.5		1.4
Other		5.0		5.5			5.0		4.6		4.3		4.3			4.3		4.9		4.1
Total Non-Interest Expense	$	82.0	$	88.1	$	93.9	$	90.4	$	91.7	$	80.9	$	83.5	$	82.2	$	78.2
Income Taxes		0.8		1.0			(1.9)		0.2		0.2		0.1			0.2		0.4		0.3
Total Expense incld. Taxes	$	82.8	$	89.1		$	92.0	$	90.6	$	91.9	$	81.0		$	83.7	$	82.6	$	78.6

*Includes non-service employee benefits

21

Appendix

Core Non-Interest Expense* Trends

(in millions of US Dollars, unless otherwise		2020						2019								2018
indicated)
		Q2		Q1			Q4		Q3		Q2		Q1			Q4		Q3		Q2
Salaries & Benefits**	$	41.4	$	44.1	$	46.6	$	42.8	$	41.1	$	42.8	$	43.7	$	43.8	$	40.9
Technology & Comm.		16.3		16.4			16.5		16.3		15.2		14.6			14.8		15.4		14.9
Property		7.2		7.3			7.0		6.1		5.7		5.4			6.1		5.3		5.3
Professional & O/S Services		5.0		5.8			6.5		5.9		5.0		5.0			6.0		6.3		4.7
Indirect Taxes		4.9		5.5			5.3		5.3		5.0		5.2			4.7		4.8		5.0
Intangible Amortization		1.4		1.4			1.5		1.5		1.2		1.3			1.3		1.4		1.3
Marketing		0.7		1.6			3.1		1.6		1.7		1.7			2.3		1.5		1.4
Other		5.0		5.5			5.1		4.6		4.3		4.3			4.3		4.8		4.1
Total Core Non-Interest Expense	$	81.9	$	87.6	$	91.6	$	84.0	$	79.2	$	80.3	$	83.1	$	83.3	$	77.6
Income Taxes		0.8		1.0			(1.9)		0.2		0.2		0.1			0.2		0.4		0.3
Total Core Expense incld. Taxes	$	82.7	$	88.6		$	89.7	$	84.2	$	79.4	$	80.5		$	83.2	$	83.7	$	77.9

* See the reconciliation of non-GAAP measures on pages 23-24** Includes non-service employee benefits

22

Appendix

Non-GAAP Reconciliation

(in millions of US Dollars, unless otherwise indicated)			2020						2019
			Q2		Q1			Q4		Q3		Q2
Net income	A	$	34.3	$	40.3		$	43.9	$	42.4	$	38.6
Non-core (gains), losses and expenses
Non-core expenses
Early retirement program, redundancies and other non-core compensation costs			0.1		0.4			2.2		2.8		11.3
Business acquisition costs			-		0.1			0.1		3.6		1.2
Total non-core expenses	C	$	0.1	$	0.5		$	2.3	$	6.4	$	12.5
Total non-core (gains), losses and expenses	D=B+C		0.1		0.5			2.3		6.4		12.5
Core net income to common shareholders	E=A+D	$	34.4	$	40.8		$	46.2	$	48.8	$	51.1
Average shareholders' equity			985.0		973.3			964.8		948.4		905.7
Average common equity	F		985.0		973.3			964.8		948.4		905.7
Less: average goodwill and intangible assets			(90.5)		(94.2)			(95.3)		(87.1)		(73.0)
Average tangible common equity	G		894.5		879.1			869.5		861.3		832.7
Return on equity	A/F		14.0 %		16.6 %			18.0 %		17.8 %		17.1 %
Core return on average tangible common equity	E/G		15.5 %		18.6 %			21.1 %		22.5 %		24.6 %
Core earnings per common share fully diluted
Adjusted weighted average number of diluted common shares (in thousands)	H		51.0		52.4			53.3		53.6		53.5
Earnings per common share fully diluted	A/H		0.67		0.77			0.82		0.79		0.72
Non-core items per share	D/H		-		0.01			0.05		0.12		0.23
Core earnings per common share fully diluted	E/H		0.67		0.78			0.87		0.91		0.95
Core return on average tangible assets
Total average assets	I	$	13,202.8	$	13,761.4	$	13,814.7	$	13,519.2	$	11,294.3
Less: average goodwill and intangible assets			(90.5)		(94.2)			(95.3)		(87.1)		(73.0)
Average tangible assets	J	$	13,112.3	$	13,667.2		$	13,719.4	$	13,432.1	$	11,221.3
Return on average assets	A/I		1.0 %		1.2 %			1.3 %		1.2 %		1.4 %
Core return on average tangible assets	E/J		1.1 %		1.2 %			1.3 %		1.4 %		1.8 %

23

Appendix

Non-GAAP Reconciliation (cont'd)

(in millions of US Dollars, unless otherwise indicated)			2020						2019
			Q2		Q1			Q4		Q3		Q2
Tangible equity to tangible assets
Shareholders' equity	K	$	990.3	$	980.5	$	963.7	$	964.6	$	928.7
Less: goodwill and intangible assets			(89.7)		(91.2)			(96.5)		(93.4)		(72.2)
Tangible common equity	L		900.7		889.3			867.2		871.2		856.5
Total assets	M		13,150.7		13,197.4			13,921.6		14,216.3		11,229.0
Less: goodwill and intangible assets			(89.7)		(91.2)			(96.5)		(93.4)		(72.2)
Tangible assets	N	$	13,061.0	$	13,106.2		$	13,825.1	$	14,122.9	$	11,156.8
Tangible common equity to tangible assets	L/N		6.9 %		6.8 %			6.3 %		6.2 %		7.7 %
Tangible book value per share
Basic participating shares outstanding (in millions)	O		50.2		51.4			52.4		53.2		53.0
Tangible book value per common share	L/O		17.94		17.31			16.55		16.38		16.16
Efficiency ratio
Non-interest expenses		$	82.0	$	88.1	$	93.9	$	90.4	$	91.7
Less: Amortization of intangibles			(1.4)		(1.4)			(1.5)		(1.5)		(1.2)
Non-interest expenses before amortization of intangibles	P		80.6		86.7			92.4		88.9		90.5
Non-interest income			41.7		47.6			49.7		46.6		44.2
Net interest income before provision for credit losses			79.1		87.6			86.2		86.3		85.2
Net revenue before provision for credit losses and other gains/losses	Q	$	120.8	$	135.2		$	136.0	$	133.0	$	129.4
Efficiency ratio	P/Q		66.7 %		64.1 %			68.0 %		66.9 %		70.0 %
Core efficiency ratio
Non-interest expenses		$	82.0	$	88.1	$	93.9	$	90.4	$	91.7
Less: non-core expenses	(C)		(0.1)		(0.5)			(2.3)		(6.4)		(12.5)
Less: amortization of intangibles			(1.4)		(1.4)			(1.5)		(1.5)		(1.2)
Core non-interest expenses before amortization of intangibles	R		80.5		86.2			90.1		82.5		78.0
Net revenue before provision for credit losses and other gains/losses	S		120.8		135.2			136.0		133.0		129.4
Core efficiency ratio	R/S		66.7 %		63.8 %			66.3 %		62.1 %		60.3 %

24

Appendix

Commentary on Factors Influencing COVID-19 Implications

The short- and medium/long-term implications of the pandemic on our business, financial condition, liquidity and results of operations will depend on factors such as, but not limited to the following:

• The duration and scope of the pandemic and related economic fallout
• The pace and magnitude of the economic recovery in the jurisdictions in which we operate
• The continuation of a low interest rate environment, or further reductions in interest rates, over the medium or long term, which would adversely impact our net interest income and net interest margin, as well as increase our reliance on fee businesses
• A decrease in tourism in Bermuda and Cayman, with the timing of any recovery being uncertain, which would adversely affect our revenues, including fee income, as well as increase our credit exposure
• Increased unemployment and decreased business in the jurisdictions in which we operate
• An increase in defaults on our residential mortgage loans
• Ratings downgrades, credit deterioration and defaults in many industries, including the hotel/restaurants/hospitality sector, financial services and commercial real estate
• A decrease in the rates and yields on US Government guaranteed securities and increased pre-payments in mortgage backed securities we hold, which may lead to a decrease in the quality of our investment portfolio
• Significant draws in credit lines, as customers and clients seek to increase liquidity
• Volatility of market conditions and increased demands on capital and liquidity, leading the Bank to cease repurchases of its common shares
• A reduction in the value of the assets under administration for the trust and custody businesses, which may affect related fee income and/or demand for these services
• Heightened cybersecurity, information security and operational risks as a result of remote working arrangements implemented for staff
• Actions that have been, or may be taken in the future, by governmental authorities in response to the pandemic, such as a suspension of mortgage and other loan payments and foreclosures
• Heightened risk of litigation and governmental and regulatory scrutiny as a result of the effects of COVID-19 on market and economic conditions and actions governmental authorities take in response to those conditions
• An increase in our provision for credit losses under CECL due to changes in the macroeconomic environment, including as a result of COVID-19

25

Appendix

Peer Group

Our peer group includes the following banks, noted by their ticker symbols:

• First Republic Bank (FRC)	• First Hawaiian, Inc. (FHB)
• SVB Financial Group (SIVB)	• Bank of Hawaii Corporation (BOH)
• East West Bancorp, Inc. (EWBC)	•	Trustmark Corporation (TRMK)
• Cullen/Frost Bankers, Inc. (CFR)	• International Bancshares Corporation (IBOC)
• Associated Banc-Corp (ASB)	• Community Bank System, Inc. (CBU)
• Wintrust Financial Corporation (WTFC)	• Boston Private Financial Holdings, Inc. (BPFH)
• Commerce Bancshares, Inc. (CBSH)	• First Financial Bankshares, Inc. (FFIN)
• UMB Financial Corporation (UMBF)	•	Westamerica Bancorporation (WABC)

26