UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of July, 2023
 
Commission File Number: 001-37877
 
The Bank of N.T. Butterfield & Son Limited
(Translation of registrant’s name into English)
 
65 Front Street
Hamilton, HM 12
Bermuda
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
Form 20-F ý Form 40-F o
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o


DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K
 
Attached hereto (i) as Exhibit 99.1 is the earnings release, (ii) as Exhibit 99.2 is the financial statements, and (iii) as Exhibit 99.3 is the earnings call presentation, all for The Bank of N.T. Butterfield & Son Limited for the three months ended June 30, 2023.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date:  July 31, 2023THE BANK OF N.T. BUTTERFIELD & SON LIMITED
  
  
 By:/s/ Shaun Morris
 Name:Shaun Morris
 Title:General Counsel and Group Chief Legal Officer
2


EXHIBIT INDEX
 
Exhibit Description
   
 
Earnings release - Second quarter 2023 results
Financial Statements - Second quarter 2023 results
Earnings call presentation - Second quarter 2023 results
3



newsheaderworkivaa02.jpg
Butterfield Reports Second Quarter 2023 Results

Financial highlights for the second quarter of 2023:
•Net income of $61.0 million, or $1.22 per share, and core net income1 of $57.0 million, or $1.14 per share
•Return on average common equity of 25.9% and core return on average tangible common equity1 of 26.3%
•Net interest margin of 2.83%, cost of deposits of 1.27%
•Board declares dividend for the quarter ended June 30, 2023 of $0.44 per share
•Second closing of previously announced acquisition of Credit Suisse trust assets
•Completed early redemption of $75 million 2018 series of the Bank's subordinated debt

Hamilton, Bermuda - July 31, 2023: The Bank of N.T. Butterfield & Son Limited ("Butterfield" or the "Bank") (BSX: NTB.BH; NYSE: NTB) today announced financial results for the quarter ended June 30, 2023.
Net income for the second quarter of 2023 was $61.0 million, or $1.22 per diluted common share, compared to net income of $62.2 million, or $1.24 per diluted common share, for the previous quarter and $49.1 million, or $0.99 per diluted common share, for the second quarter of 2022. Core net income1 for the second quarter of 2023 was $57.0 million, or $1.14 per diluted common share, compared to $62.2 million, or $1.24 per diluted common share, for the previous quarter and $50.2 million, or $1.01 per diluted common share, for the second quarter of 2022.
The return on average common equity for the second quarter of 2023 was 25.9% compared to 28.0% for the previous quarter and 24.5% for the second quarter of 2022. The core return on average tangible common equity1 for the second quarter of 2023 was 26.3%, compared to 30.5% for the previous quarter and 27.8% for the second quarter of 2022. The efficiency ratio for the second quarter of 2023 was 57.6%, compared to 56.0% for the previous quarter and 61.0% for the second quarter of 2022. The core efficiency ratio1 for the second quarter of 2023 was 57.6% compared with 56.0% in the previous quarter and 60.2% for the second quarter of 2022.
Michael Collins, Butterfield's Chairman and Chief Executive Officer, commented, “Butterfield reported a solid second quarter of 2023, as we delivered consistent quarter-over-quarter non-interest income and expense discipline, which partially offset lower net interest income. During the quarter, we were pleased to have Moody’s assign an A3 long-term deposit rating with a stable outlook to our Cayman subsidiary in addition to reaffirming our Group rating. This demonstrates the strength of our Cayman business model and ability to support the Cayman Islands market, which has benefited from steady economic growth, driven by resurgent tourism and a healthy financial services sector. In Bermuda, we successfully implemented the upgrade of our core banking system and online platform and inaugurated our new flagship retail banking center in Hamilton.
"As expected, we also completed the second closing of our planned acquisition of Credit Suisse trust assets. To date, 374 relationships representing $21.1 billion of AUA have now transferred to Butterfield, significantly expanding our footprint in Asia. Work is now under way on client due diligence for subsequent tranches, which will include residual relationships in Singapore and selected Credit Suisse trust relationships in Guernsey and The Bahamas.”
(1)    See table "Reconciliation of US GAAP Results to Core Earnings" below for reconciliation of US GAAP results to non-GAAP measures.         1


Net income was down in the second quarter of 2023 versus the prior quarter primarily due to lower net interest income as a result of lower average interest-earning assets, higher deposit costs and accelerated amortization of $0.9 million of issuance costs related to the Bank's early redemption of its 2018 issuance of subordinated debt.
Net interest income (“NII”) for the second quarter of 2023 was $92.5 million, a decrease of $4.9 million, compared with NII of $97.4 million in the previous quarter and up $10.5 million from $82.0 million in the second quarter of 2022. NII decreased during the second quarter of 2023 compared to the prior quarter, primarily due to lower balance sheet volumes, increasing deposit costs and the early redemption of subordinated debt. Compared to the second quarter of 2022, NII improved due to higher yields on assets, which was partially offset by increased deposit costs.
Net interest margin (“NIM”) for the second quarter of 2023 was 2.83%, a decrease of 5 basis points from 2.88% in the previous quarter and up 57 basis points from 2.26% in the second quarter of 2022. NIM in the second quarter of 2023 was lower than the prior quarter due to lower balance sheet volumes, increasing deposit costs and early redemption of subordinated debt, which was partially offset by increased yields on interest earning assets. Compared to second quarter of 2022, NIM improved primarily due to higher yields on treasury assets and loans, partially offset by increased deposit costs.
Non-interest income for the second quarter of 2023 of $50.2 million was sequentially flat against the previous quarter and $1.7 million lower than $51.8 million in the second quarter of 2022. Non-interest income for the second quarter of 2023 was comprised of increased trust income driven by the onboarding of relationships acquired from Credit Suisse and higher activity-based revenues, offset by lower banking income, driven by reduced volumes, as well as lower other non-interest income driven by a decrease in equity pick-up on a portfolio investment. Non-interest income in the second quarter of 2023 was lower than the second quarter of 2022 primarily due to a lower level of unclaimed balances recognized into income, which was partially offset by higher revenues from asset management and trust activities.
Non-interest expenses were $83.5 million in the second quarter of 2023, compared to $84.1 million in the previous quarter and $83.0 million in the second quarter of 2022. Core non-interest expenses1 of $83.6 million in the second quarter of 2023 were lower than the $84.1 million incurred in the previous quarter, primarily due to lower staff-related expenses, which were partially offset by higher technology and communications costs related to the Bank's implementation of its core banking system upgrade in Bermuda. Core non-interest expenses1 in the second quarter of 2023 were higher than the $81.9 million incurred in the second quarter of 2022 due to inflationary increases in salaries and benefits, as well as the aforementioned increase in technology and communications costs.
Period end deposit balances were $12.2 billion, a decrease of 6.2% compared to $13.0 billion at December 31, 2022, primarily due to deposit movement across all banking jurisdictions as customers activated their funds and sought higher yielding products, with the largest decrease in the Channel Islands. Average deposits were $12.2 billion in the quarter ended June 30, 2023, compared to $12.8 billion in the first quarter of 2023.
The Bank maintained its balanced capital return policy. The Board again declared a quarterly dividend of $0.44 per common share to be paid on August 28, 2023 to shareholders of record on August 14, 2023. During the second quarter of 2023, the Butterfield repurchased 0.7 million common shares under the Bank's share repurchase plan authorization.
The current total regulatory capital ratio as at June 30, 2023 was 25.1% as calculated under Basel III, compared to 24.1% as at December 31, 2022. Both of these ratios remain significantly above the minimum Basel III regulatory requirements applicable to the Bank.










2

ANALYSIS AND DISCUSSION OF SECOND QUARTER RESULTS
Income statementThree months ended (Unaudited)
(in $ millions)June 30, 2023March 31, 2023June 30, 2022
Non-interest income50.2 50.2 51.8 
Net interest income before provision for credit losses92.5 97.4 82.0 
Total net revenue before provision for credit losses and other gains (losses)142.6 147.5 133.8 
Provision for credit (losses) recoveries(1.5)(0.7)(0.7)
Total other gains (losses)4.0 0.1 0.1 
Total net revenue145.1 147.0 133.2 
Non-interest expenses(83.5)(84.1)(83.0)
Total net income before taxes61.5 62.9 50.2 
Income tax benefit (expense)(0.5)(0.7)(1.1)
Net income61.0 62.2 49.1 
Net earnings per share
Basic
1.23 1.25 0.99 
Diluted
1.22 1.24 0.99 
Per diluted share impact of other non-core items 1
(0.08)— 0.02 
Core earnings per share on a fully diluted basis 1
1.14 1.24 1.01 
Adjusted weighted average number of participating shares on a fully diluted basis (in thousands of shares)
49,890 50,131 49,772 
Key financial ratios
Return on common equity25.9 %28.0 %24.5 %
Core return on average tangible common equity 1
26.3 %30.5 %27.8 %
Return on average assets
1.8 %1.8 %1.3 %
Net interest margin2.83 %2.88 %2.26 %
Core efficiency ratio 1
57.6 %56.0 %60.2 %
(1)See table "Reconciliation of US GAAP Results to Core Earnings" below for reconciliation of US GAAP results to non-GAAP measures.
3
Balance SheetAs at
(in $ millions)June 30, 2023December 31, 2022
Cash and cash equivalents1,795 2,101 
Securities purchased under agreements to resell60 60 
Short-term investments670 884 
Investments in securities5,546 5,727 
Loans, net of allowance for credit losses5,003 5,096 
Premises, equipment and computer software, net153 146 
Goodwill and intangibles, net74 74 
Accrued interest and other assets208 217 
Total assets13,510 14,306 
Total deposits12,192 12,991 
Accrued interest and other liabilities269 278 
Long-term debt98 172 
Total liabilities12,559 13,441 
Common shareholders’ equity950 865 
Total shareholders' equity950 865 
Total liabilities and shareholders' equity13,510 14,306 
Key Balance Sheet Ratios:June 30, 2023December 31, 2022
Common equity tier 1 capital ratio1
22.7 %20.3 %
Tier 1 capital ratio1
22.7 %20.3 %
Total capital ratio1
25.1 %24.1 %
Leverage ratio1
7.6 %6.7 %
Risk-Weighted Assets (in $ millions)4,6284,843
Risk-Weighted Assets / total assets34.3 %33.9 %
Tangible common equity ratio6.5 %5.6 %
Book value per common share (in $)19.3417.42
Tangible book value per share (in $)17.8315.92
Non-accrual loans/gross loans1.2 %1.2 %
Non-performing assets/total assets0.7 %0.5 %
Allowance for credit losses/total loans0.5 %0.5 %
(1)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 Current Expected Credit Loss ("CECL") impact of $7.8 million on its regulatory capital over a period of 5 years.

QUARTER ENDED JUNE 30, 2023 COMPARED WITH THE QUARTER ENDED MARCH 31, 2023

Net Income
Net income for the quarter ended June 30, 2023 was $61.0 million, down $1.2 million from $62.2 million in the prior quarter.
The $1.2 million change in net income in the quarter ended June 30, 2023 compared to the previous quarter was due principally to the following:
•$4.9 million decrease in net interest income before provision for credit losses primarily due to lower average interest-earning assets, increased deposit costs and the accelerated amortization of issuance costs due to the early redemption of the 2018 series of the Bank's subordinated debt;
•$3.9 million increase in total other gains (losses) due to a gain realized on the liquidation settlement from a legacy investment previously written-off;
•$0.9 million increase in provision from credit losses driven by a small number of loan facilities in Bermuda; and
•$0.6 million decrease in non-interest expense, primarily due to a reduction in staff-related expenses which were partially offset by higher technology and communications costs as the core banking system upgrade in Bermuda came into operation.

4

Non-Core Items1
Non-core items resulted in gains, net of expenses, of $4.0 million in the second quarter of 2023. Non-core items for the quarter mainly relates to the liquidation settlement from a legacy investment previously written-off.
Management does not believe that comparative period expenses, gains or losses identified as non-core are indicative of the results of operations of the Bank in the ordinary course of business.
(1)See table "Reconciliation of US GAAP Results to Core Earnings" below for reconciliation of US GAAP results to non-GAAP measures.

BALANCE SHEET COMMENTARY AT JUNE 30, 2023 COMPARED WITH DECEMBER 31, 2022
Total Assets
Total assets of the Bank were $13.5 billion at June 30, 2023, a decrease of $0.8 billion from December 31, 2022. The Bank maintained a highly liquid position at June 30, 2023, with $8.1 billion of cash, bank deposits, reverse repurchase agreements and liquid investments representing 59.7% of total assets, compared with 61.3% at December 31, 2022.
Loans Receivable
The loan portfolio totaled $5.0 billion at June 30, 2023, which was $0.1 billion lower than December 31, 2022 balances. The decrease was driven primarily by scheduled paydowns in the portfolio.
The allowance for credit losses at June 30, 2023 totaled $26.0 million, an increase of $1.0 million from $25.0 million at December 31, 2022. The movement was driven by an increase in credit card provisions, specific provisions on a small number of loan facilities in Bermuda and updated forward-looking economic forecasts. This was partially offset by net paydowns.
The loan portfolio represented 37.0% of total assets at June 30, 2023 (December 31, 2022: 35.6%), while loans as a percentage of total deposits was 41.0% at June 30, 2023 (December 31, 2022: 39.2%). The increase in both ratios was attributable principally to a decrease in deposit balances at June 30, 2023.
As of June 30, 2023, the Bank had gross non-accrual loans of $58.1 million, representing 1.2% of total gross loans, a decrease of $5.0 million from $63.1 million, or 1.2% of total loans, at December 31, 2022. The decrease in non-accrual loans was driven by the settlement of a residential mortgage in the Channel Islands and UK segment.
Other real estate owned (“OREO”) increased by $0.4 million from December 31, 2022 to $1.2 million due to the foreclosure of a loan in Bermuda.
Investment in Securities
The investment portfolio was $5.5 billion at June 30, 2023, which was $0.2 billion lower against December 31, 2022 balances driven by paydowns in the portfolio which were reinvested into treasury assets.
The investment portfolio is made up of high quality assets with 100% invested in A-or-better-rated securities. The investment book yield decreased to 2.07% during the quarter ended June 30, 2023 from 2.12% during the previous quarter. Total net unrealized losses on the available-for-sale portfolio decreased to $207.3 million, compared with total net unrealized losses of $220.2 million at December 31, 2022, as a result of a decline in long-term US dollar interest rates. No credit losses have been noted as at June 30, 2023.
Deposits
Average deposits were $12.2 billion for the quarter ended June 30, 2023, a decrease of $0.6 billion compared to the previous quarter, while period end balances as at June 30, 2023 were $12.2 billion, a decrease of $0.8 billion compared to December 31, 2022, due to normal commercial activity.
5
Average Balance Sheet2
For the three months ended
June 30, 2023March 31, 2023June 30, 2022
(in $ millions)
Average
balance
($)
Interest
($)
Average
rate
(%)
Average
balance
($)
Interest
($)
Average
rate
(%)
Average
balance
($)
Interest
($)
Average
rate
(%)
Assets
Cash and cash equivalents and short-term investments2,488.2 25.2 4.06 2,943.9 27.1 3.74 3,364.5 4.2 0.50 
Investment in securities5,614.7 28.9 2.07 5,720.2 29.8 2.12 6,143.9 29.0 1.89 
   Available-for-sale1,970.7 8.8 1.78 2,005.6 8.9 1.80 2,759.9 9.6 1.40 
   Held-to-maturity3,644.0 20.2 2.22 3,714.6 20.9 2.28 3,384.0 19.3 2.29 
Loans4,984.1 79.8 6.42 5,040.7 77.5 6.23 5,066.9 56.5 4.48 
   Commercial1,396.7 23.0 6.59 1,409.8 22.6 6.51 1,455.3 17.3 4.76 
   Consumer3,587.4 56.8 6.35 3,630.9 54.9 6.13 3,611.6 39.3 4.36 
Interest earning assets13,087.0 133.9 4.10 13,704.7 134.5 3.98 14,575.4 89.7 2.47 
Other assets402.0 395.9 359.1 
Total assets13,489.0 14,100.7 14,934.5 
Liabilities
Deposits9,308.0 (38.5)(1.66)9,786.5 (34.7)(1.44)10,590.3 (5.4)(0.20)
Securities sold under agreement to repurchase0.4 — (5.45)0.4 — (4.50)— — — 
Long-term debt147.4 (2.9)(8.02)172.3 (2.4)(5.65)172.0 (2.4)(5.60)
Interest bearing liabilities9,455.8 (41.4)(1.76)9,959.2 (37.1)(1.51)10,762.3 (7.8)(0.29)
Non-interest bearing current accounts2,863.2 2,993.5 2,997.8 
Other liabilities243.6 241.1 300.8 
Total liabilities12,562.6 13,193.7 14,061.0 
Shareholders’ equity926.4 906.9 873.6 
Total liabilities and shareholders’ equity13,489.0 14,100.7 14,934.5 
Non-interest bearing funds net of
   non-interest earning assets
   (free balance)		3,631.2 3,745.6 3,813.1 
Net interest margin92.5 2.83 97.4 2.88 82.0 2.26 
(2) Averages are based upon a daily averages for the periods indicated.

Assets Under Administration and Assets Under Management
Total assets under administration for the trust and custody businesses were $118.5 billion and $29.0 billion, respectively, at June 30, 2023, while assets under management were $5.4 billion at June 30, 2023. This compares with $106.2 billion, $32.2 billion and $5.0 billion, respectively, at December 31, 2022.

6
Reconciliation of US GAAP Results to Core Earnings
The table below shows the reconciliation of net income in accordance with US GAAP to core earnings, a non-GAAP measure, which excludes certain significant items that are included in our US GAAP results of operations. We focus on core net income, which we calculate by adjusting net income to exclude certain income or expense items that are not representative of our business operations, or “non-core”. Core net income includes revenue, gains, losses and expense items incurred in the normal course of business. We believe that expressing earnings and certain other financial measures excluding these non-core items provides a meaningful base for period-to-period comparisons, which management believes will assist investors in analyzing the operating results of the Bank and predicting future performance. We believe that presentation of these non-GAAP financial measures will permit investors to assess the performance of the Bank on the same basis as management.
Core EarningsThree months ended
(in $ millions except per share amounts)June 30, 2023March 31, 2023June 30, 2022
Net income61.0 62.2 49.1 
Non-core items
Non-core (gains) losses
Liquidation settlement from an investment previously written-off
(4.0)— — 
Total non-core (gains) losses(4.0)— — 
Non-core expenses
Early retirement program, voluntary separation, redundancies and other non-core compensation costs— — 1.0 
Total non-core expenses— — 1.1 
Total non-core items(4.0)— 1.1 
Core net income57.0 62.2 50.2 
Average common equity943.3 902.5 804.6 
Less: average goodwill and intangible assets(74.0)(74.2)(80.0)
Average tangible common equity869.3 828.3 724.6 
Core earnings per share fully diluted 1.14 1.24 1.01 
Return on common equity25.9 %28.0 %24.5 %
Core return on average tangible common equity26.3 %30.5 %27.8 %
Shareholders' equity950.3 936.9 802.4 
Less: goodwill and intangible assets(74.0)(74.1)(77.5)
Tangible common equity876.3 862.8 725.0 
Basic participating shares outstanding (in millions)49.1 49.8 49.6 
Tangible book value per common share17.83 17.32 14.61 
Non-interest expenses83.5 84.1 83.0 
Less: non-core expenses— — (1.1)
Less: amortization of intangibles(1.4)(1.4)(1.4)
Core non-interest expenses before amortization of intangibles82.1 82.7 80.5 
Core revenue before other gains and losses and provision for credit losses142.6 147.5 133.8 
Core efficiency ratio57.6 %56.0 %60.2 %

7
Conference Call Information:
Butterfield will host a conference call to discuss the Bank’s results on Tuesday, August 1, 2023 at 10:00 a.m. Eastern Time. Callers may access the conference call by dialing +1 (800) 225-9448 (toll-free) or +1 (203) 518-9708 (international) ten minutes prior to the start of the call and referencing the Conference ID: BUTTERFIELD. A live webcast of the conference call, including a slide presentation, will be available in the investor relations section of Butterfield’s website at www.butterfieldgroup.com. A replay of the call will be archived on the Butterfield website for 12 months.
About Non-GAAP Financial Measures:
Certain statements in this release involve the use of non-GAAP financial measures. 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 US 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 US GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. See "Reconciliation of US GAAP Results to Core Earnings" for additional information.
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. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions estimates, intentions, and future performance, including, without limitation, our intention to make share repurchases and our dividend payout target, 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 Butterfield 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 (including economic growth and general business conditions) and fluctuations of interest rates, inflation, a decline in Bermuda’s sovereign credit rating, the successful completion and integration of acquisitions (including our progress on subsequent closings of the acquisition of trust assets from Credit Suisse) or the realization of the anticipated benefits of such acquisitions in the expected time-frames or at all, success in business retention (including the retention of relationships associated with our Credit Suisse acquisition) and obtaining new business, the impact of the COVID-19 pandemic, the success of our updated systems and platforms and other factors. Forward-looking statements can be identified by words such as "anticipate," "assume," "believe," "estimate," "expect," "indicate," "intend," "may," "plan," "point to," "predict," "project," "seek," "target," "potential," "will," "would," "could," "should," "continue," "contemplate" and other similar expressions, although not all forward-looking statements contain these identifying words. All statements other than statements of historical fact are statements that could be forward-looking statements.

All forward-looking statements in this disclosure are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our SEC reports and filings, including under the caption "Risk Factors" in our most recent Form 20-F. Such reports are available upon request from Butterfield, or from the Securities and Exchange Commission ("SEC"), including through the SEC’s website at https://www.sec.gov. Any forward-looking statements made by Butterfield are current views as at the date they are made. Except as 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 in this disclosure, whether as a result of new information, future events or other developments. You are cautioned not to place undue reliance on the forward-looking statements made by Butterfield in this disclosure. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, and should only be viewed as historical data. BF-All
About Butterfield:
Butterfield is a full-service bank and wealth manager headquartered in Hamilton, Bermuda, providing services to clients from Bermuda, the Cayman Islands, Guernsey and Jersey, where our principal banking operations are located, and The Bahamas, Switzerland, Singapore and the United Kingdom, where we offer specialized financial services. Banking services comprise deposit, cash management and lending solutions for individual, business and institutional clients. Wealth management services are composed of trust, private banking, asset management and custody. In Bermuda, the Cayman Islands and Guernsey, we offer both banking and wealth management. In The Bahamas, Singapore and Switzerland, we offer select wealth management services. In the UK, we offer residential property lending. In Jersey, we offer select banking and wealth management services. Butterfield is publicly traded on the New York Stock Exchange (symbol: NTB) and the Bermuda Stock Exchange (symbol: NTB.BH). Further details on the Butterfield Group can be obtained from our website at: www.butterfieldgroup.com.

Investor Relations Contact:                Media Relations Contact:        
Noah Fields                    Nicky Stevens
Investor Relations                 Group Strategic Marketing & Communications
The Bank of N.T. Butterfield & Son Limited        The Bank of N.T. Butterfield & Son Limited        
Phone: (441) 299 3816                Phone: (441) 299 1624    
E-mail: noah.fields@butterfieldgroup.com         Cellular: (441) 524 4106
E-mail: nicky.stevens@butterfieldgroup.com        




8

bntb_fsxcoverx2023q2a.jpg


INDEX TO FINANCIAL STATEMENTS
Unaudited Consolidated Financial StatementsPage
Consolidated Balance Sheets (unaudited) as of June 30, 2023 and December 31, 2022
Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2023 and 2022
Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2023 and 2022
Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the Three and Six Months Ended June 30, 2023 and 2022
Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2023 and 2022
Notes to the Consolidated Financial Statements (unaudited)
1
The Bank of N.T. Butterfield & Son Limited
Consolidated Balance Sheets (unaudited)
(In thousands of US dollars, except share and per share data)

As at
June 30, 2023December 31, 2022
Assets
Cash and demand deposits with banks - Non-interest bearing93,495 93,032 
Demand deposits with banks - Interest bearing172,684 258,239 
Cash equivalents - Interest bearing1,528,675 1,749,516 
Cash and cash equivalents1,794,854 2,100,787 
Securities purchased under agreements to resell59,693 59,871 
Short-term investments669,714 884,478 
Investment in securities
Equity securities at fair value— 236 
Available-for-sale at fair value (amortized cost: $2,156,855 (2022: $2,209,078))1,949,560 1,988,865 
Held-to-maturity (fair value: $3,077,037 (2022: $3,197,508))3,596,889 3,738,080 
Total investment in securities5,546,449 5,727,181 
Loans
Loans5,029,487 5,121,391 
Allowance for credit losses(26,008)(24,961)
Loans, net of allowance for credit losses5,003,479 5,096,430 
Premises, equipment and computer software, net152,919 146,141 
Goodwill23,948 22,892 
Other intangible assets, net50,051 51,478 
Equity method investments7,293 12,484 
Other real estate owned, net1,165 800 
Accrued interest and other assets199,966 203,520 
Total assets13,509,531 14,306,062 
Liabilities
Deposits
Non-interest bearing2,838,416 3,039,701 
Interest bearing9,353,636 9,951,375 
Total deposits12,192,052 12,991,076 
Employee benefit plans92,567 92,018 
Accrued interest and other liabilities176,262 185,864 
Total other liabilities 268,829 277,882 
Long-term debt98,372 172,289 
Total liabilities12,559,253 13,441,247 
Commitments, contingencies and guarantees (Note 10)
Shareholders' equity
Common share capital (BMD 0.01 par; authorized voting ordinary shares 2,000,000,000 and
   non-voting ordinary shares 6,000,000,000) issued and outstanding: 49,757,131 (2022: 50,277,466)
498 503 
Additional paid-in capital1,024,846 1,032,632 
Retained earnings (Accumulated deficit)300,375 229,732 
Less: treasury common shares, at cost: 619,212 (2022: 619,212)(17,651)(20,600)
Accumulated other comprehensive income (loss)(357,790)(377,452)
Total shareholders’ equity950,278 864,815 
Total liabilities and shareholders’ equity13,509,531 14,306,062 
The accompanying notes are an integral part of these consolidated financial statements.
2
The Bank of N.T. Butterfield & Son Limited
Consolidated Statements of Operations (unaudited)
(In thousands of US dollars, except per share data)


Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Non-interest income
Asset management8,228 7,410 16,166 14,881 
Banking12,553 12,919 26,153 25,596 
Foreign exchange revenue11,283 12,044 21,995 24,477 
Trust14,257 13,266 27,095 26,004 
Custody and other administration services3,327 3,338 6,663 6,928 
Other non-interest income502 2,834 2,263 3,845 
Total non-interest income50,150 51,811 100,335 101,731 
Interest income
Interest and fees on loans79,785 56,542 157,273 110,598 
Investments (none of the investment securities are intrinsically tax-exempt)
Available-for-sale8,758 9,637 17,666 21,505 
Held-to-maturity20,172 19,340 41,093 34,903 
Cash and cash equivalents, securities purchased under agreements to resell and short-term investments25,203 4,219 52,341 5,256 
Total interest income133,918 89,738 268,373 172,262 
Interest expense
Deposits38,489 5,368 73,185 9,625 
Long-term debt2,949 2,401 5,349 4,801 
Securities sold under agreement to repurchase5 — 9 — 
Total interest expense41,443 7,769 78,543 14,426 
Net interest income before provision for credit losses92,475 81,969 189,830 157,836 
Provision for credit (losses) recoveries (1,527)(690)(2,198)10 
Net interest income after provision for credit losses90,948 81,279 187,632 157,846 
Net gains (losses) on equity securities(7)42 43 (14)
Net realized gains (losses) on available-for-sale investments(3)— (11)— 
Net gains (losses) on other real estate owned(30)65 29 39 
Net other gains (losses)4,006 (29)4,015 856 
Total other gains (losses)3,966 78 4,076 881 
Total net revenue145,064 133,168 292,043 260,458 
Non-interest expense
Salaries and other employee benefits41,192 41,336 83,523 81,419 
Technology and communications14,895 14,012 28,824 28,116 
Professional and outside services4,760 5,426 9,793 10,484 
Property7,502 7,576 14,938 15,491 
Indirect taxes5,296 5,468 11,043 11,407 
Non-service employee benefits expense1,397 940 2,795 1,865 
Marketing1,695 1,610 3,198 3,091 
Amortization of intangible assets1,436 1,405 2,854 2,884 
Other expenses5,375 5,211 10,686 10,191 
Total non-interest expense83,548 82,984 167,654 164,948 
Net income before income taxes 61,516 50,184 124,389 95,510 
Income tax benefit (expense)(516)(1,055)(1,185)(2,030)
Net income61,000 49,129 123,204 93,480 
Earnings per common share
Basic earnings per share1.23 0.99 2.48 1.89 
Diluted earnings per share1.22 0.99 2.47 1.88 
The accompanying notes are an integral part of these consolidated financial statements.

3
The Bank of N.T. Butterfield & Son Limited
Consolidated Statements of Comprehensive Income (unaudited)
(In thousands of US dollars)

Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net income61,000 49,129 123,204 93,480 
Other comprehensive income (loss), net of taxes
Unrealized net gains (losses) on translation of net investment in foreign operations
400 (3,084)356 (4,083)
Net changes on investments transferred to held-to-maturity
2,604 (51,148)4,631 (96,940)
Unrealized net gains (losses) on available-for-sale investments(15,758)(18,404)14,058 (130,109)
Employee benefit plans adjustments299 1,748 617 2,609 
Other comprehensive income (loss), net of taxes(12,455)(70,888)19,662 (228,523)
Total comprehensive income (loss) 48,545 (21,759)142,866 (135,043)
The accompanying notes are an integral part of these consolidated financial statements.

4
The Bank of N.T. Butterfield & Son Limited
Consolidated Statements of Changes in Shareholders' Equity (unaudited)

Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Number of sharesIn thousands of
US dollars		Number of sharesIn thousands of
US dollars		Number of sharesIn thousands of
US dollars		Number of sharesIn thousands of
US dollars
Common share capital issued and outstanding
Balance at beginning of period50,447,997 504 50,211,963 502 50,277,466 503 49,911,351 499 
Retirement of shares(723,066)(7)— — (867,995)(9)(102,000)(1)
Issuance of common shares32,200 1 36,927 — 347,660 4 439,539 4 
Balance at end of period49,757,131 498 50,248,890 502 49,757,131 498 50,248,890 502 
Additional paid-in capital
Balance at beginning of period1,035,074 1,018,876 1,032,632 1,017,640 
Share-based compensation5,013 3,626 9,486 6,946 
Share-based settlements512 595 535 595 
Retirement of shares(15,752)— (17,803)(2,080)
Issuance of common shares, net of underwriting discounts and commissions
(1)— (4)(4)
Balance at end of period1,024,846 1,023,097 1,024,846 1,023,097 
Retained earnings (Accumulated deficit)
Balance at beginning of period267,169 125,573 229,732 104,329 
Net Income for the period61,000 49,129 123,204 93,480 
Common share cash dividends declared and paid, $0.44 and $0.88 per share (2022: $0.44 and $0.88 per share)
(21,849)(21,822)(43,824)(43,655)
Retirement of shares(5,945)— (8,737)(1,274)
Balance at end of period300,375 152,880 300,375 152,880 
Treasury common shares
Balance at beginning of period619,212 (20,511)619,212 (20,600)619,212 (20,600)619,212 (20,058)
Purchase of treasury common shares723,066 (18,844)— — 867,995 (23,600)102,000 (3,897)
Retirement of shares(723,066)21,704 — — (867,995)26,549 (102,000)3,355 
Balance at end of period619,212 (17,651)619,212 (20,600)619,212 (17,651)619,212 (20,600)
Accumulated other comprehensive income (loss)
Balance at beginning of period(345,335)(282,552)(377,452)(124,917)
Other comprehensive income (loss), net of taxes
(12,455)(70,888)19,662 (228,523)
Balance at end of period(357,790)(353,440)(357,790)(353,440)
Total shareholders' equity950,278 802,439 950,278 802,439 
The accompanying notes are an integral part of these consolidated financial statements.
5
The Bank of N.T. Butterfield & Son Limited
Consolidated Statements of Cash Flows (unaudited)
(In thousands of US dollars)

Six months ended
June 30, 2023June 30, 2022
Cash flows from operating activities
Net income 123,204 93,480 
Adjustments to reconcile net income to operating cash flows
Depreciation and amortization17,762 21,386 
Provision for credit losses (recoveries) 2,198 (10)
Share-based payments and settlements10,021 7,541 
Net change in equity securities at fair value236 14 
Net realized (gains) losses on available-for-sale investments11 — 
Net (gains) losses on other real estate owned(29)(39)
(Increase) decrease in carrying value of equity method investments10 222 
Dividends received from equity method investments5,181 79 
Net other non-cash movements1,089 — 
Changes in operating assets and liabilities
(Increase) decrease in accrued interest receivable and other assets8,333 (13,233)
Increase (decrease) in employee benefit plans, accrued interest payable and other liabilities(14,075)(6,844)
Cash provided by (used in) operating activities153,941 102,596 
Cash flows from investing activities
(Increase) decrease in securities purchased under agreements to resell178 (168,594)
Short-term investments other than restricted cash: proceeds from maturities and sales1,247,780 1,545,871 
Short-term investments other than restricted cash: purchases(989,492)(1,683,417)
Available-for-sale investments: proceeds from sale 4,539 — 
Available-for-sale investments: proceeds from maturities and pay downs58,948 153,230 
Available-for-sale investments: purchases— (34,443)
Held-to-maturity investments: proceeds from maturities and pay downs139,589 227,850 
Held-to-maturity investments: purchases— (343,107)
Net (increase) decrease in loans193,174 (111,142)
Additions to premises, equipment and computer software(14,993)(13,226)
Proceeds from sale of other real estate owned— 730 
Cash provided by (used in) investing activities639,723 (426,248)
Cash flows from financing activities
Net increase (decrease) in deposits(972,869)(364,716)
Repayment of long-term debt(75,000)— 
Common shares repurchased(23,600)(3,897)
Cash dividends paid on common shares(43,824)(43,655)
Cash provided by (used in) financing activities(1,115,293)(412,268)
Net effect of exchange rates on cash, cash equivalents and restricted cash24,159 (97,582)
Net increase (decrease) in cash, cash equivalents and restricted cash(297,470)(833,502)
Cash, cash equivalents and restricted cash: beginning of period2,116,546 2,203,497 
Cash, cash equivalents and restricted cash: end of period1,819,076 1,369,995 
Components of cash, cash equivalents and restricted cash at end of period
Cash and cash equivalents1,794,854 1,339,503 
Restricted cash included in short-term investments on the consolidated balance sheets24,222 30,492 
Total cash, cash equivalents and restricted cash at end of period1,819,076 1,369,995 
Supplemental disclosure of non-cash items
Transfer to (out of) other real estate owned336 773 
Transfer of available-for-sale investments to held-to-maturity investments— 998,157 
Initial recognition of right-of-use assets and operating lease liabilities— 138 
The accompanying notes are an integral part of these consolidated financial statements.
6
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited)
(In thousands of US dollars, unless otherwise stated)

Note 1: Nature of business

The Bank of N.T. Butterfield & Son Limited (“Butterfield”, the “Bank” or the “Company”) is incorporated under the laws of Bermuda and has a banking license under the Banks and Deposit Companies Act, 1999 (“the Act”). Butterfield is regulated by the Bermuda Monetary Authority (“BMA”), which operates in accordance with Basel principles.

Butterfield is a full service bank and wealth manager headquartered in Hamilton, Bermuda. The Bank operates its business through three geographic segments: Bermuda, the Cayman Islands, and the Channel Islands and the United Kingdom ("UK"), where its principal banking operations are located and where it offers specialized financial services. Butterfield offers banking services, comprised of retail and corporate banking, and wealth management, which consists of trust, private banking, and asset management. In the Bermuda and Cayman Islands segments, Butterfield offers both banking and wealth management. In the Channel Islands and the UK segment, the Bank offers wealth management and residential property lending. Butterfield also has operations in the jurisdictions of The Bahamas, Canada, Mauritius, Singapore and Switzerland, which are included in our Other segment.

The Bank's common shares trade on the New York Stock Exchange under the symbol "NTB" and on the Bermuda Stock Exchange ("BSX") under the symbol "NTB.BH".

Note 2: Significant accounting policies

The accompanying unaudited interim consolidated financial statements of the Bank have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and should be read in conjunction with the Bank’s audited financial statements for the year ended December 31, 2022.

In the opinion of Management, these unaudited interim consolidated financial statements reflect all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair statement of the Bank’s financial position and results of operations as at the end of and for the periods presented. The Bank’s results for interim periods are not necessarily indicative of results for the full year.

The preparation of financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period, and actual results could differ from those estimates. Management believes that the most critical accounting policies upon which the financial condition depends and which involve the most complex or subjective decisions or assessments, are as follows:
•Allowance for credit losses
•Fair value of financial instruments
•Impairment of goodwill
•Employee benefit plans
•Share-based compensation

New Accounting Standards

Troubled Debt Restructurings and Vintage Disclosures
Beginning January 1, 2023, the Bank adopted Accounting Standards Update ("ASU") 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings ("TDRs") by creditors that have adopted the CECL model while enhancing disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, this ASU also requires disclosure of current period gross charge-offs by year of origination. The Bank has elected to adopt these amendments on a prospective basis.

Accordingly, from the date of adoption, the Bank will evaluate whether a modified loan represents a new loan or a continuation of an existing loan. If the effective yield on the restructured loan is at least equal to the effective yield for comparable loans with similar collection risks and the modifications to the original loan are more than minor, the Bank will derecognize the existing loan and recognize the restructured loan as a new loan. If a loan restructuring does not meet these conditions, the Bank will account for the modification as a continuation of the existing loan. See Note 6: Loans for the new required disclosures.

New Accounting Pronouncements
There were no accounting developments issued during the six months ended June 30, 2023 or accounting standards pending adoption which impacted the Bank.


Note 3: Cash and cash equivalents
June 30, 2023December 31, 2022
Non-interest bearing
Cash and demand deposits with banks93,495 93,032 
Interest bearing¹
Demand deposits with banks172,684 258,239 
Cash equivalents1,528,675 1,749,516 
Sub-total - Interest bearing1,701,359 2,007,755 
Total cash and cash equivalents1,794,854 2,100,787 
¹Interest bearing cash and cash equivalents includes certain demand deposits with banks as at June 30, 2023 in the amount of $113.6 million (December 31, 2022: $157.2 million) that are earning interest at a negligible rate.



7
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited)
(In thousands of US dollars, unless otherwise stated)

Note 4: Short-term investments
June 30, 2023December 31, 2022
Unrestricted
Maturing within three months358,510 390,540 
Maturing between three to six months268,527 421,734 
Maturing between six to twelve months18,455 56,445 
Total unrestricted short-term investments645,492 868,719 
Affected by drawing restrictions related to minimum reserve and derivative margin requirements
Interest earning demand and term deposits24,222 15,759 
Total restricted short-term investments24,222 15,759 
Total short-term investments669,714 884,478 

Note 5: Investment in securities

Amortized Cost, Carrying Amount and Fair Value
On the consolidated balance sheets, equity securities and available-for-sale ("AFS") investments are carried at fair value and held-to-maturity ("HTM") investments are carried at amortized cost.
June 30, 2023December 31, 2022
Amortized
 cost		Gross
 unrealized
 gains		Gross
 unrealized
 losses		Fair valueAmortized
 cost		Gross
 unrealized
 gains		Gross
 unrealized
 losses		Fair value
Equity securities
Mutual funds— — — — 724 — (488)236 
Total equity securities— — — — 724 — (488)236 
Available-for-sale
US government and federal agencies1,859,515 — (193,579)1,665,936 1,919,285 14 (206,523)1,712,776 
Non-US governments debt securities275,845 — (11,451)264,394 262,892 — (11,429)251,463 
Asset-backed securities - Student loans1,090 — (3)1,087 5,640 — (14)5,626 
Residential mortgage-backed securities20,405 — (2,262)18,143 21,261 — (2,261)19,000 
Total available-for-sale 2,156,855 — (207,295)1,949,560 2,209,078 14 (220,227)1,988,865 
Held-to-maturity¹
US government and federal agencies3,596,889 — (519,852)3,077,037 3,738,080 — (540,572)3,197,508 
Total held-to-maturity3,596,889 — (519,852)3,077,037 3,738,080 — (540,572)3,197,508 
¹For the six months ended June 30, 2023, and the six months ended June 30, 2022, impairments recognized in other comprehensive loss for HTM investments were nil.

Investments with Unrealized Loss Positions
The Bank does not believe that the AFS debt securities that were in an unrealized loss position as of June 30, 2023, comprising 165 securities representing 100% of the AFS portfolios' carrying value (December 31, 2022: 163 and 99.8%), represent credit losses. Total gross unrealized AFS losses were 10.6% of the fair value of the affected securities (December 31, 2022: 11.1%).

The Bank’s HTM debt securities are comprised of US government and federal agencies securities and have a zero credit loss assumption under the CECL model. HTM debt securities that were in an unrealized loss position as of June 30, 2023, were comprised of 219 securities representing 100.0% of the HTM portfolios’ carrying value (December 31, 2022: 220 and 100.0%). Total gross unrealized HTM losses were 16.9% of the fair value of affected securities (December 31, 2022: 16.9%).

Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of the cost of these securities. Unrealized losses were attributable primarily to changes in market interest rates, relative to when the investment securities were purchased, and not due to a decrease in the credit quality of the investment securities. The issuers continue to make timely principal and interest payments on the securities. The following describes the processes for identifying credit impairment in security types with the most significant unrealized losses as shown in the preceding tables.

Management believes that all the US government and federal agencies securities do not have any credit losses, given the explicit and implicit guarantees provided by the US federal government.

Management believes that all the Non-US governments debt securities do not have any credit losses, given the explicit guarantee provided by the issuing government.

Investments in Asset-backed securities - Student loans are composed of securities collateralized by Federal Family Education Loan Program loans (“FFELP loans”). FFELP loans benefit from a US federal government guarantee of at least 97% of defaulted principal and accrued interest, with additional credit support provided in the form of over-collateralization, subordination and excess spread, which collectively total in excess of 100%. Accordingly, the vast majority of FFELP loan-backed securities are not exposed to traditional consumer credit risk.

8
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Investments in Residential mortgage-backed securities relates to 13 securities (December 31, 2022: 13) which are rated AAA and possess similar significant credit enhancement as described above. No credit losses were recognized on these securities as the weighted average credit support and the weighted average loan-to-value ratios range from 15.6% - 49.0% and 46.5% - 55.2%, respectively. Current credit support is significantly greater than any delinquencies experienced on the underlying mortgages.
In the following tables, debt securities with unrealized losses that are not deemed to be credit impaired and for which an allowance for credit losses has not been recorded are categorized as being in a loss position for "less than 12 months" or "12 months or more" based on the point in time that the fair value most recently declined below the amortized cost basis.
Less than 12 months12 months or more
June 30, 2023Fair
value		Gross
 unrealized
 losses		Fair
value		Gross
unrealized
losses		Total
 fair value		Total gross
unrealized
losses
Available-for-sale securities with unrealized losses
US government and federal agencies91,678 (2,693)1,574,257 (190,886)1,665,935 (193,579)
Non-US governments debt securities— — 264,394 (11,451)264,394 (11,451)
Asset-backed securities - Student loans— — 1,087 (3)1,087 (3)
Residential mortgage-backed securities— — 18,144 (2,262)18,144 (2,262)
Total available-for-sale securities with unrealized losses91,678 (2,693)1,857,882 (204,602)1,949,560 (207,295)
Held-to-maturity securities with unrealized losses
US government and federal agencies609,326 (46,392)2,467,711 (473,460)3,077,037 (519,852)
Less than 12 months12 months or more
December 31, 2022Fair
value		Gross
 unrealized
 losses		Fair
value		Gross
unrealized
losses		Total
fair value		Total gross
unrealized
losses
Available-for-sale securities with unrealized losses
US government and federal agencies713,462 (68,016)995,154 (138,507)1,708,616 (206,523)
Non-US governments debt securities— — 251,463 (11,429)251,463 (11,429)
Asset-backed securities - Student loans— — 5,626 (14)5,626 (14)
Residential mortgage-backed securities14,474 (1,618)4,526 (643)19,000 (2,261)
Total available-for-sale securities with unrealized losses727,936 (69,634)1,256,769 (150,593)1,984,705 (220,227)
Held-to-maturity securities with unrealized losses
US government and federal agencies1,462,005 (142,228)1,735,504 (398,344)3,197,509 (540,572)

Investment Maturities
The following table presents the remaining term to contractual maturity of the Bank’s securities. The actual maturities may differ as certain securities offer prepayment options to the borrowers.
Remaining term to maturity
June 30, 2023Within
 3 months		3 to 12
 months		1 to 5
 years		5 to 10
 years		Over
10 years		No specific or single
 maturity		Carrying
 amount
Available-for-sale
US government and federal agencies148,770 58,583 639,075 — — 819,508 1,665,936 
Non-US governments debt securities— 176,491 87,903 — — — 264,394 
Asset-backed securities - Student loans— — — — — 1,087 1,087 
Residential mortgage-backed securities— — — — — 18,143 18,143 
Total available-for-sale148,770 235,074 726,978 — — 838,738 1,949,560 
Held-to-maturity
US government and federal agencies— — — — — 3,596,889 3,596,889 

Pledged Investments
The Bank pledges certain US government and federal agencies investment securities to further secure the Bank's issued customer deposit products. The secured party does not have the right to sell or repledge the collateral.
June 30, 2023December 31, 2022
Pledged Investments Amortized
 cost 		 Fair
 value 		 Amortized
 cost 		 Fair
 value
Held-to-maturity40,295 33,991 32,938 24,991 

9
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)



Sale Proceeds and Realized Gains and Losses of AFS Securities
Six months ended
June 30, 2023June 30, 2022
Sale proceeds Gross realized gains Gross realized
(losses) 		Transfers to HTMSale
proceeds 		Gross realized
 gains 		Gross realized
(losses)
Transfers to HTM1
Asset-backed securities - Student loans4,539 — (11)— — — — — 
US government and federal agencies— — — — — — — 998,157 
Total4,539 — (11)— — — — 998,157 
1During the six months ended June 30, 2022, certain investments were transferred out of the AFS categorization and into HTM. The transfers were recorded at fair value of the securities on the date of transfer. The related net unrealized losses of $99.1 million that were recorded in AOCIL will be accreted over the remaining life of the transferred investments using the effective interest rate method.

Taxability of Interest Income
None of the investments' interest income have received a specific preferential income tax treatment in any of the jurisdictions in which the Bank owns investments.

Note 6: Loans

The principal means of securing residential mortgages, personal, credit card and business loans are entitlements over assets and guarantees. Mortgage loans are generally repayable over periods of up to thirty years and personal and business loans are generally repayable over terms not exceeding five years. Government loans are repayable over a variety of terms which are individually negotiated. Amounts owing on credit cards are revolving and typically a minimum amount is due within 30 days from billing. The credit card portfolio is managed as a single portfolio and includes consumer and business cards. The effective yield on total loans as at June 30, 2023 is 6.34% (December 31, 2022: 5.91%). The interest receivable on total loans as at June 30, 2023 is $9.9 million (December 31, 2022: $16.6 million). The interest receivable is included in Accrued interest and other assets on the consolidated balance sheets and is excluded from all loan amounts disclosed in this note.

Loans' Credit Quality
The four credit quality classifications set out in the following tables are defined below and describe the credit quality of the Bank's lending portfolio. These classifications each encompass a range of more granular internal credit rating grades. Loans' internal credit ratings are assigned by the Bank's customer relationship managers as well as members of the Bank's jurisdictional and Group Credit Committees. The borrowers' financial condition is documented at loan origination and maintained periodically thereafter at a frequency which can be up to monthly for certain loans. The loans' performing status, as well as current economic trends, are continuously monitored. The Bank's jurisdictional and Group Credit Committees meet on a monthly basis. The Bank also has a Group Provisions and Impairments Committee which is responsible for approving significant provisions and other impairment charges.

A pass loan shall mean a loan that is expected to be repaid as agreed. A loan is classified as pass where the Bank is not expected to face repayment difficulties because the present and projected cash flows are sufficient to repay the debt and the repayment schedule as established by the agreement is being followed. Loans in this category are reviewed by the Bank’s management on at least an annual basis.

A special mention loan shall mean a loan under close monitoring by the Bank’s management on at least a quarterly basis. Loans in this category are currently still performing, but are potentially weak and present an undue credit risk exposure, but not to the point of justifying a classification of substandard.

A substandard loan shall mean a loan whose evident unreliability makes repayment doubtful and there is a threat of loss to the Bank unless the unreliability is averted. Loans in this category are under close monitoring by the Bank’s management on at least a quarterly basis.

A non-accrual loan shall mean either management is of the opinion full payment of principal or interest is in doubt or that the principal or interest is 90 days past due unless it is a residential mortgage loan which is well secured and collection efforts are reasonably expected to result in amounts due. Loans in this category are under close monitoring by the Bank’s management on at least a quarterly basis.


10
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


The amortized cost of loans by credit quality classifications and allowance for expected credit losses by class of loans is as follows:
June 30, 2023PassSpecial
mention		SubstandardNon-accrualTotal amortized costAllowance for expected credit lossesTotal net loans
Commercial loans
Government276,433 — — — 276,433 (1,011)275,422 
Commercial and industrial273,622 — 887 18,424 292,933 (10,354)282,579 
Commercial overdrafts106,820 — — 377 107,197 (442)106,755 
Total commercial loans656,875 — 887 18,801 676,563 (11,807)664,756 
Commercial real estate loans
Commercial mortgage593,367 732 2,656 3,116 599,871 (1,518)598,353 
Construction6,240 — — — 6,240 — 6,240 
Total commercial real estate loans599,607 732 2,656 3,116 606,111 (1,518)604,593 
Consumer loans
Automobile financing19,364 — — 120 19,484 (78)19,406 
Credit card74,942 — 304 — 75,246 (1,961)73,285 
Overdrafts44,644 — — 14 44,658 (372)44,286 
Other consumer1
45,373 — 1,676 707 47,756 (875)46,881 
Total consumer loans184,323 — 1,980 841 187,144 (3,286)183,858 
Residential mortgage loans3,361,636 38,000 124,695 35,338 3,559,669 (9,397)3,550,272 
Total4,802,441 38,732 130,218 58,096 5,029,487 (26,008)5,003,479 
1Other consumer loans’ amortized cost includes $8 million of cash and portfolio secured lending and $32 million of lending secured by buildings in construction or other collateral.

December 31, 2022PassSpecial
mention		SubstandardNon-accrualTotal amortized costAllowance for expected credit lossesTotal net loans
Commercial loans
Government281,518 — — — 281,518 (1,368)280,150 
Commercial and industrial298,137 — 796 18,461 317,394 (10,359)307,035 
Commercial overdrafts123,874 — 632 45 124,551 (416)124,135 
Total commercial loans703,529 — 1,428 18,506 723,463 (12,143)711,320 
Commercial real estate loans
Commercial mortgage613,090 2,082 1,503 3,182 619,857 (884)618,973 
Construction7,474 — — — 7,474 — 7,474 
Total commercial real estate loans620,564 2,082 1,503 3,182 627,331 (884)626,447 
Consumer loans
Automobile financing20,673 — — 161 20,834 (93)20,741 
Credit card77,419 — 295 — 77,714 (1,043)76,671 
Overdrafts44,414 — — 6 44,420 (355)44,065 
Other consumer1
56,699 — — 801 57,500 (1,205)56,295 
Total consumer loans199,205 — 295 968 200,468 (2,696)197,772 
Residential mortgage loans3,419,186 8,132 102,413 40,398 3,570,129 (9,238)3,560,891 
Total4,942,484 10,214 105,639 63,054 5,121,391 (24,961)5,096,430 
1Other consumer loans’ amortized cost includes $9 million of cash and portfolio secured lending and $37 million of lending secured by buildings in construction or other collateral.


11
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Based on the most recent analysis performed, the amortized cost of loans by year of origination and credit quality classification is as follows:

June 30, 2023PassSpecial
 mention		SubstandardNon-accrualTotal amortized cost
Loans by origination year
2023251,363 — — — 251,363 
2022929,349 — — 567 929,916 
2021611,501 3,094 — 3 614,598 
2020435,067 534 2,644 — 438,245 
2019651,238 — 6,205 3,128 660,571 
Prior1,681,724 34,854 121,067 54,005 1,891,650 
Overdrafts and credit cards242,199 250 302 393 243,144 
Total amortized cost4,802,441 38,732 130,218 58,096 5,029,487 

December 31, 2022PassSpecial
 mention		SubstandardNon-accrualTotal amortized cost
Loans by origination year
2022971,776 — — 4 971,780 
2021646,436 — — 20 646,456 
2020485,944 142 508 23 486,617 
2019680,939 — 277 3,118 684,334 
2018393,623 — 12,133 1,355 407,111 
Prior1,499,410 9,767 91,795 58,483 1,659,455 
Overdrafts and credit cards264,356 305 926 51 265,638 
Total amortized cost4,942,484 10,214 105,639 63,054 5,121,391 

Age Analysis of Past Due Loans (Including Non-Accrual Loans)
The following tables summarize the past due status of the loans. The aging of past due amounts are determined based on the contractual delinquency status of payments under the loan and this aging may be affected by the timing of the last business day at period end. Loans less than 30 days past due are included in current loans.
June 30, 202330 - 59
days		60 - 89
days		More than 90 daysTotal past
 due loans		Total
current		Total
amortized cost
Commercial loans
Government— — — — 276,433 276,433 
Commercial and industrial550 2 18,424 18,976 273,957 292,933 
Commercial overdrafts— — 377 377 106,820 107,197 
Total commercial loans550 2 18,801 19,353 657,210 676,563 
Commercial real estate loans
Commercial mortgage466 361 3,116 3,943 595,928 599,871 
Construction— — — — 6,240 6,240 
Total commercial real estate loans466 361 3,116 3,943 602,168 606,111 
Consumer loans
Automobile financing104 30 120 254 19,230 19,484 
Credit card530 230 304 1,064 74,182 75,246 
Overdrafts— — 14 14 44,644 44,658 
Other consumer731 184 2,375 3,290 44,466 47,756 
Total consumer loans1,365 444 2,813 4,622 182,522 187,144 
Residential mortgage loans36,659 11,648 65,734 114,041 3,445,628 3,559,669 
Total amortized cost39,040 12,455 90,464 141,959 4,887,528 5,029,487 
12
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


December 31, 202230 - 59
days		60 - 89
days		More than 90 daysTotal past
 due loans		Total
current		Total
amortized
cost
Commercial loans
Government— — — — 281,518 281,518 
Commercial and industrial5 — 18,461 18,466 298,928 317,394 
Commercial overdrafts— — 45 45 124,506 124,551 
Total commercial loans5 — 18,506 18,511 704,952 723,463 
Commercial real estate loans
Commercial mortgage363 — 3,181 3,544 616,313 619,857 
Construction— — — — 7,474 7,474 
Total commercial real estate loans363 — 3,181 3,544 623,787 627,331 
Consumer loans
Automobile financing104 5 160 269 20,565 20,834 
Credit card423 231 295 949 76,765 77,714 
Overdrafts— — 6 6 44,414 44,420 
Other consumer179 16 797 992 56,508 57,500 
Total consumer loans706 252 1,258 2,216 198,252 200,468 
Residential mortgage loans30,813 4,081 49,486 84,380 3,485,749 3,570,129 
Total amortized cost31,887 4,333 72,431 108,651 5,012,740 5,121,391 

Changes in Allowances For Credit Losses
The increase in the allowance for credit losses during the six months ended June 30, 2023 was primarily attributable to an increase in credit card provisions, changes in specific provisions on identified loans, changes in macroeconomic factors, such as GDP forecasts, and partially offset by net paydowns in the portfolio. As per the Bank’s accounting policy, as disclosed in Note 2 of the December 31, 2022 Audited Consolidated Financial Statements, the Bank continuously collects and maintains attributes related to financial instruments within the scope of CECL, including current conditions, and reasonable and supportable assumptions about future economic conditions.

Six months ended June 30, 2023
CommercialCommercial
 real estate		ConsumerResidential
 mortgage		Total
Balance at the beginning of period12,143 884 2,696 9,238 24,961 
Provision increase (decrease)356 644 621 560 2,181 
Recoveries of previous charge-offs67 — 564 306 937 
Charge-offs, by origination year
2023— — — — — 
2022— — — — — 
2021— — (16)— (16)
2020— — (20)— (20)
2019— — — — — 
Prior(704)(8)(122)(737)(1,571)
Overdrafts and credit cards(62)— (431)— (493)
Other7 (2)(6)30 29 
Allowances for expected credit losses at end of period11,807 1,518 3,286 9,397 26,008 
13
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Six months ended June 30, 2022
CommercialCommercial
 real estate		ConsumerResidential
 mortgage		Total
Balance at the beginning of period11,126 1,168 3,020 12,759 28,073 
Provision increase (decrease)874 (259)316 (574)357 
Recoveries of previous charge-offs1 — 617 187 805 
Charge-offs(17)— (1,346)(2,742)(4,105)
Other(37)— (6)(109)(152)
Allowances for expected credit losses at end of period11,947 909 2,601 9,521 24,978 

Collateral-dependent loans
Management identified that the repayment of certain commercial and consumer mortgage loans is expected to be provided substantially through the operation or the sale of the collateral pledged to the Bank ("collateral-dependent loans"). The Bank believes that for the vast majority of loans identified as collateral-dependent, the sale of the collateral will be sufficient to fully reimburse the loan's carrying amount.

Non-Performing Loans
During the six months ended June 30, 2023, no interest was recognized on non-accrual loans. Non-performing loans at June 30, 2023 include PCD loans, which have all been on non-accrual status since their acquisition. No credit deteriorated loans were purchased during the period.
June 30, 2023December 31, 2022
Non-accrual loans with an allowanceNon-accrual loans without an allowancePast
 due more than 90 days and accruing		Total non-
performing
 loans		Non-accrual loans with an allowanceNon-accrual loans without an allowancePast
 due more than 90 days and accruing		Total non-
performing
 loans
Commercial loans
Commercial and industrial18,122 302 — 18,424 18,159 302 — 18,461 
Commercial overdrafts— 377 — 377 — 45 — 45 
Total commercial loans18,122 679 — 18,801 18,159 347 — 18,506 
Commercial real estate loans
Commercial mortgage1,469 1,647 — 3,116 1,494 1,688 — 3,182 
Total commercial real estate loans1,469 1,647 — 3,116 1,494 1,688 — 3,182 
Consumer loans
Automobile financing117 3 — 120 141 20 — 161 
Credit card— — 304 304 — — 295 295 
Overdrafts— 14 — 14 — 6 — 6 
Other consumer551 156 1,676 2,383 649 152 — 801 
Total consumer loans668 173 1,980 2,821 790 178 295 1,263 
Residential mortgage loans21,367 13,971 35,093 70,431 20,621 19,777 10,964 51,362 
Total non-performing loans41,626 16,470 37,073 95,169 41,064 21,990 11,259 74,313 

Loan Modifications Made to Borrowers Experiencing Financial Difficulty (from January 1, 2023)
The following table summarizes the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the six-month period ended June 30, 2023.

Amortized cost basisWeighted average financial effects
June 30, 2023Significant
 payment delay		Term extensionInterest rate
 reduction		In % of the class of loansMonths of
 payment delay		Months of term extensionInterest rate
 reduction
Residential mortgage loans2,478 4,557 0.2 %34 3.4 %
Age analysis of modified loans
As at June 30, 2023, except for $0.3 million of residential mortgages for which a reduction in interest rate was granted and which are 30 to 59 days past due, all loans to borrowers experiencing financial difficulty for which a concession was granted in the preceding 6 month period are current.

Modified loans that subsequently defaulted
As at June 30, 2023, no loans to borrowers experiencing financial difficulty for which a concession was granted in the preceding 6 month period had a payment default.




14
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Loans modified in a TDR (Prior to January 1, 2023)
As at December 31, 2022, the Bank had no loans that were modified in a TDR during the preceding 12 months that subsequently defaulted.
December 31, 2022
TDRs (prior to January 1, 2023) Outstanding AccrualNon-accrual
Commercial loans796 — 
Commercial real estate loans1,503 2,357 
Residential mortgage loans59,175 10,342 
Total TDRs outstanding61,474 12,699 

Note 7: Credit risk concentrations

Concentrations of credit risk in the lending and off-balance sheet credit-related arrangements portfolios arise when a number of customers are engaged in similar business activities, are in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Bank regularly monitors various segments of its credit risk portfolio to assess potential concentrations of risks and to obtain collateral when deemed necessary. In the Bank's commercial portfolio, risk concentrations are evaluated primarily by industry and by geographic region of loan origination. In the consumer portfolio, concentrations are evaluated primarily by products. Credit exposures include loans, guarantees and acceptances, letters of credit and commitments for undrawn lines of credit. Unconditionally cancellable credit cards and overdraft lines of credit are excluded from the tables below.

The following table summarizes the credit exposure of the Bank by geographic region. The exposure amounts disclosed below do not include accrued interest and are gross of allowances for credit losses and gross of collateral held.
June 30, 2023December 31, 2022
Geographic regionCash due from
 banks, resell agreements and
 short-term
 investments		LoansOff-balance
 sheet		Total credit
 exposure		Cash due from
 banks, resell agreements and
 short-term
 investments		LoansOff-balance
 sheet		Total credit
 exposure
Belgium2,792 — — 2,792 2,641 — — 2,641 
Bermuda42,090 1,826,698 233,887 2,102,675 40,671 1,920,467 243,904 2,205,042 
Canada577,507 — — 577,507 1,216,876 — — 1,216,876 
Cayman32,526 1,202,234 208,014 1,442,774 36,609 1,236,373 233,599 1,506,581 
Germany3,808 — — 3,808 20,422 — — 20,422 
Guernsey2 644,163 216,294 860,459 1 674,562 199,714 874,277 
Ireland21,622 — — 21,622 26,597 — — 26,597 
Japan16,845 — — 16,845 13,071 — — 13,071 
Jersey— 172,802 15,120 187,922 — 150,769 35,042 185,811 
Norway363,271 — — 363,271 99,777 — — 99,777 
Switzerland1,401 — — 1,401 2,748 — — 2,748 
The Bahamas1,602 6,419 — 8,021 1,521 7,510 — 9,031 
United Kingdom 473,743 1,177,171 69,529 1,720,443 715,750 1,131,710 108,406 1,955,866 
United States982,818 — — 982,818 865,671 — — 865,671 
Other4,234 — — 4,234 2,781 — — 2,781 
Total gross exposure2,524,261 5,029,487 742,844 8,296,592 3,045,136 5,121,391 820,665 8,987,192 


15
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Note 8: Deposits

By Maturity
Demand      Total
demand
deposits		TermTotal
term
deposits
June 30, 2023Non-interest
 bearing		Interest
bearing		Within 3
 months		3 to 6
 months 		6 to 12
 months		After 12 monthsTotal
deposits
 Demand or less than $100k¹2,838,416 6,029,833 8,868,249 40,082 10,322 16,802 11,565 78,771 8,947,020 
 Term - $100k or moreN/AN/A— 2,277,348 296,292 590,854 80,538 3,245,032 3,245,032 
Total deposits2,838,416 6,029,833 8,868,249 2,317,430 306,614 607,656 92,103 3,323,803 12,192,052 
DemandTotal
demand
deposits		TermTotal
term
deposits
December 31, 2022Non-interest
 bearing		Interest
bearing		Within 3
 months		3 to 6
 months 		6 to 12
 months		   After 12 monthsTotal
deposits
 Demand or less than $100k¹3,039,701 6,844,127 9,883,828 32,764 9,814 12,848 11,391 66,817 9,950,645 
 Term - $100k or moreN/AN/A— 2,093,464 447,471 423,737 75,759 3,040,431 3,040,431 
Total deposits3,039,701 6,844,127 9,883,828 2,126,228 457,285 436,585 87,150 3,107,248 12,991,076 
¹The weighted-average interest rate on interest-bearing demand deposits as at June 30, 2023 is 0.67% (December 31, 2022: 0.47%).

By Type and SegmentJune 30, 2023December 31, 2022
Payable
on demand		Payable on a
fixed date		TotalPayable
on demand		Payable on a
fixed date		Total
Bermuda3,795,231 771,666 4,566,897 3,813,274 674,895 4,488,169 
Cayman3,269,403 773,159 4,042,562 3,641,646 651,168 4,292,814 
Channel Islands and the UK1,803,615 1,778,978 3,582,593 2,428,908 1,781,185 4,210,093 
Total deposits8,868,249 3,323,803 12,192,052 9,883,828 3,107,248 12,991,076 

Note 9: Employee benefit plans

The Bank maintains trusteed pension plans including non-contributory defined benefit plans and a number of defined contribution plans, and provides post-retirement medical benefits to its qualifying retirees. The defined benefit provisions under the pension plans are generally based upon years of service and average salary during the relevant years of employment. The defined benefit and post-retirement medical plans are not open to new participants and are non-contributory and the funding required is provided by the Bank, based upon the advice of independent actuaries. The defined benefit pension plans are in the Bermuda, Guernsey and UK jurisdictions, and the defined benefit post-retirement medical plan is in Bermuda. The Bank has a residual obligation on top of its defined contribution plan in Mauritius.

The Bank included an estimate of the 2023 Bank contribution and estimated benefit payments for the next ten years under the pension and post-retirement plans in its audited financial statements for the year-ended December 31, 2022. During the six months ended June 30, 2023, there have been no material revisions to these estimates.
Three months endedSix months ended
Line item in the consolidated statements of operationsJune 30, 2023June 30, 2022June 30, 2023June 30, 2022
Defined benefit pension expense (income)
Interest cost Non-service employee benefits expense1,346 759 2,678 1,539 
Expected return on plan assets Non-service employee benefits expense(1,534)(1,665)(3,052)(3,374)
Amortization of net actuarial (gains) lossesNon-service employee benefits expense572 555 1,142 1,114 
Amortization of prior service (credit) costNon-service employee benefits expense20 20 39 44 
Settlement (gain) lossNet other gains (losses)— 28 — (820)
Total defined benefit pension expense (income)404 (303)807 (1,497)
Post-retirement medical benefit expense (income)
Service costSalaries and other employee benefits19 32 38 65 
Interest costNon-service employee benefits expense1,196 779 2,393 1,558 
Amortization of net actuarial (gains) lossesNon-service employee benefits expense131 361 262 722 
Amortization of prior service (credit) costNon-service employee benefits expense(334)131 (667)262 
Total post-retirement medical benefit expense (income)1,012 1,303 2,026 2,607 

The components of defined benefit pension expense (income) and post-retirement benefit expense (income) other than the service cost component are included in the line item non-service employee benefits expense in the consolidated statements of income.
16
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)



Note 10: Credit related arrangements, repurchase agreements and commitments

Commitments
The Bank enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of the Bank's commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. Management assesses the credit risk associated with certain commitments to extend credit in determining the level of the allowance for expected credit losses.

The Bank has a facility with one of its custodians, whereby the Bank may offer up to US$200 million of standby letters of credit to its customers on a fully secured basis. Under the standard terms of the facility, the custodian has the right to set-off against securities held of 110% of the utilized facility. At June 30, 2023, $121.0 million (December 31, 2022: $121.3 million) of standby letters of credit were issued under this facility.

Outstanding unfunded commitments to extend creditJune 30, 2023December 31, 2022
Commitments to extend credit488,502 564,324 
Documentary and commercial letters of credit1,540 2,331 
Total unfunded commitments to extend credit490,042 566,655 
Allowance for credit losses(292)(274)

Credit-Related Arrangements
Standby letters of credit and letters of guarantee are issued at the request of a Bank customer in order to secure the customer’s payment or performance obligations to a third party. These guarantees represent an irrevocable obligation of the Bank to pay the third party beneficiary upon presentation of the guarantee and satisfaction of the documentary requirements stipulated therein, without investigation as to the validity of the beneficiary’s claim against the customer. Generally, the term of the standby letters of credit does not exceed one year, while the term of the letters of guarantee does not exceed four years. The types and amounts of collateral security held by the Bank for these standby letters of credit and letters of guarantee are generally represented by deposits with the Bank or a charge over assets held in mutual funds.

The Bank considers the fees collected in connection with the issuance of standby letters of credit and letters of guarantee to be representative of the fair value of its obligation undertaken in issuing the guarantee. In accordance with applicable accounting standards related to guarantees, the Bank defers fees collected in connection with the issuance of standby letters of credit and letters of guarantee. The fees are then recognized in income proportionately over the life of the credit agreements. The following table presents the outstanding financial guarantees. Collateral is shown at estimated market value less selling cost. Where the collateral is cash, it is shown gross including accrued income.

June 30, 2023December 31, 2022
Outstanding financial guaranteesGrossCollateralNetGrossCollateralNet
Standby letters of credit249,303 242,153 7,150 250,543 243,393 7,150 
Letters of guarantee3,499 3,463 36 3,467 3,431 36 
Total252,802 245,616 7,186 254,010 246,824 7,186 

Repurchase agreements
The Bank utilizes repurchase agreements and resell agreements (reverse repurchase agreements) to manage liquidity. The risks of these transactions include changes in the fair value of the securities posted or received as collateral and other credit related events. The Bank manages these risks by ensuring that the collateral involved is appropriate and by monitoring the value of the securities posted or received as collateral on a daily basis.

As at June 30, 2023, the Bank had 5 open positions (December 31, 2022: 2) in resell agreements with a remaining maturity of less than 30 days involving pools of mortgages issued by US federal agencies. The amortized cost of these resell agreements is $59.7 million (December 31, 2022: $59.9 million) and is included in securities purchased under agreements to resell on the consolidated balance sheets. As at June 30, 2023, there were no positions (December 31, 2022: no positions) which were offset on the consolidated balance sheets to arrive at the carrying value, and there was no collateral amount which was available to offset against the future settlement amount.

Legal Proceedings
There are actions and legal proceedings pending against the Bank and its subsidiaries which arose in the normal course of its business. Management, after reviewing all actions and proceedings pending against or involving the Bank and its subsidiaries, considers that the resolution of these matters would in the aggregate not be material to the consolidated financial position of the Bank, except as noted in the following paragraph.

As publicly announced, in November 2013, the US Attorney’s Office for the Southern District of New York applied for and secured the issuance of so-called John Doe Summonses to six US financial institutions with which the Bank had correspondent bank relationships in connection with a US cross border tax investigation. On August 3, 2021, the Bank announced it had reached a resolution with the United States Department of Justice concerning this inquiry. The resolution is in the form of a non-prosecution agreement with a three-year term. The Bank paid $5.6 million in respect of Forfeiture and Tax Restitution Amounts which is consistent with that previously provisioned for.

Note 11: Leases

The Bank enters into operating lease agreements either as the lessee or the lessor, mostly for office and parking spaces as well as for small office equipment. The terms of the existing leases, including renewal options that are reasonably certain to be exercised, extend up to the year 2035. Certain lease payments will be adjusted during the related lease's term based on movements in the relevant consumer price index.







17
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Lease costs
Operating lease costs1,9181,939 3,7973,977 
Short-term lease costs640576 1,222924 
Sublease income(186)(306)(558)(647)
Total net lease cost2,3722,209 4,4614,254 
Operating lease income246247 512502 
Other information for the period
Right-of-use assets related to new operating lease liabilities— — — 138 
Operating cash flows from operating leases1,973 1,982 3,903 3,981 
Other information at end of periodJune 30, 2023December 31, 2022
Operating leases right-of-use assets (included in other assets on the balance sheets)33,40433,641
Operating lease liabilities (included in other liabilities on the balance sheets)32,63932,965
Weighted average remaining lease term for operating leases (in years)8.969.24
Weighted average discount rate for operating leases5.40 %5.40 %
The following table summarizes the maturity analysis of the Bank's commitments for long-term leases as at December 31, 2022:
Year ending December 31Operating Leases
20237,129
20246,457
20254,133
20263,357
20273,152
2028 & thereafter17,735
Total commitments41,963
Less: effect of discounting cash flows to their present value(8,998)
Operating lease liabilities32,965

Note 12: Segmented information

The Bank is managed by the Chairman & Chief Executive Officer (“CEO”) on a geographic basis. The Bank presents four reportable segments, three geographical and one other: Bermuda, Cayman, Channel Islands and the UK, and Other. The Other segment is composed of several operating segments that have been aggregated in accordance with GAAP. Each reportable segment has a managing director who reports to the Chairman & CEO. The Chairman and CEO and the segment managing director have final authority over resource allocation decisions and performance assessment.

The geographic segments reflect this management structure and the manner in which financial information is currently evaluated by the Chairman & CEO. Segment results are determined based on the Bank's management reporting system, which assigns balance sheet and income statement items to each of the geographic segments. The process is designed around the Bank's organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions. A description of each reportable segment and table of financial results is presented below.

Accounting policies of the reportable segments are the same as those described in Note 2 of the Bank's audited financial statements for the year ended December 31, 2022. Transactions between segments are accounted for on an accrual basis and are all eliminated upon consolidation. The Bank generally does not allocate assets, revenues and expenses among its business segments, with the exception of certain corporate overhead expenses and loan participation revenue and expenses. Loan participation revenue and expenses are allocated pro-rata based upon the percentage of the total loan funded by each jurisdiction participating in the loan.

The Bermuda segment provides a comprehensive range of retail, commercial and private banking services. Retail services are offered to individuals and small to medium-sized businesses through three branch locations and through internet banking, mobile banking, automated teller machines (“ATMs”) and debit cards. Retail services include deposit services, consumer and mortgage lending, credit cards and personal insurance products. Commercial banking includes commercial lending and mortgages, cash management, payroll services, remote banking and letters of credit. Treasury services include money market and foreign exchange activities. Bermuda’s wealth management offering consists of Butterfield Asset Management Limited, which provides investment management, advisory and brokerage services and Butterfield Trust (Bermuda) Limited, which provides trust, estate, company management and custody services. Bermuda is also the location of the Bank's head offices and accordingly, retains the unallocated corporate overhead expenses.

The Cayman segment provides a comprehensive range of retail, commercial and private banking services. Retail services are offered to individuals and small to medium-sized businesses through three branch locations and through internet banking, mobile banking, ATMs and debit cards. Retail services include deposit services, consumer and mortgage lending, credit cards and property/auto insurance. Commercial banking includes commercial lending and mortgages, cash management, payroll services, remote banking and letters of credit. Treasury services include money market and foreign exchange activities. Cayman’s wealth management offering comprises investment management, advisory and brokerage services and Butterfield Trust (Cayman) Limited, which provides trust, estate and company management.
18
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)



The Channel Islands and the UK segment includes the jurisdictions of Guernsey and Jersey (Channel Islands), and the UK. In the Channel Islands, a broad range of services are provided to private clients and financial intermediaries including mortgage lending, private banking and treasury services, internet banking, wealth management and fiduciary services. The jurisdiction also offers mortgage lending to the retail market. The UK jurisdiction provides mortgage services for high-value residential properties.

The Other segment includes the jurisdictions of The Bahamas, Canada, Mauritius, Singapore and Switzerland. These operating segments individually and collectively do not meet the quantitative threshold for segmented reporting and are therefore aggregated as non-reportable operating segments.

Total Assets by SegmentJune 30, 2023December 31, 2022
Bermuda5,268,967 5,405,365 
Cayman 4,339,888 4,566,144 
Channel Islands and the UK4,025,520 4,626,183 
Other42,753 35,874 
Total assets before inter-segment eliminations13,677,128 14,633,566 
Less: inter-segment eliminations(167,597)(327,504)
Total13,509,531 14,306,062 
 Net interest incomeProvision for
 credit (losses) recoveries		Non-interest
 income		Net revenue
 before gains
 and losses		Gains and
 losses		Total net revenueTotal
expenses		Net income
Three months ended June 30, 2023CustomerInter- segment
Bermuda45,978 (660)(1,877)21,392 64,833 3,967 68,800 46,452 22,348 
Cayman 33,261 1,402 171 15,444 50,278 2 50,280 15,559 34,721 
Channel Islands and the UK13,225 (742)179 9,476 22,138 (3)22,135 18,880 3,255 
Other11 — — 8,578 8,589 — 8,589 7,913 676 
Total before eliminations92,475 — (1,527)54,890 145,838 3,966 149,804 88,804 61,000 
Inter-segment eliminations — — — (4,740)(4,740)— (4,740)(4,740)— 
Total92,475 — (1,527)50,150 141,098 3,966 145,064 84,064 61,000 
Net interest incomeProvision for
 credit (losses) recoveries		Non-interest
 income		Net revenue
 before gains
 and losses		Gains and
 losses		Total net revenueTotal
expenses		Net income
Three months ended June 30, 2022CustomerInter- segment
Bermuda38,909 (725)348 21,293 59,825 107 59,932 47,531 12,401 
Cayman 25,712 441 (921)17,063 42,295 — 42,295 15,301 26,994 
Channel Islands and the UK17,345 284 (117)10,428 27,940 (29)27,911 18,655 9,256 
Other3 — — 7,463 7,466 — 7,466 6,988 478 
Total before eliminations81,969 — (690)56,247 137,526 78 137,604 88,475 49,129 
Inter-segment eliminations — — — (4,436)(4,436)— (4,436)(4,436)— 
Total81,969 — (690)51,811 133,090 78 133,168 84,039 49,129 
19
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


 Net interest incomeProvision for
 credit (losses) recoveries		Non-interest
 income		Net revenue
 before gains
 and losses		Gains and
 losses		Total net revenueTotal
expenses		Net income
Six months ended
 June 30, 2023		CustomerInter- segment
Bermuda93,847 (1,881)(2,502)43,239 132,703 4,079 136,782 94,185 42,597 
Cayman 67,862 2,811 206 32,295 103,174 (1)103,173 30,908 72,265 
Channel Islands and the UK28,100 (930)98 17,994 45,262 (2)45,260 37,992 7,268 
Other21 — — 16,211 16,232 — 16,232 15,158 1,074 
Total before eliminations189,830 — (2,198)109,739 297,371 4,076 301,447 178,243 123,204 
Inter-segment eliminations — — — (9,404)(9,404)— (9,404)(9,404)— 
Total189,830 — (2,198)100,335 287,967 4,076 292,043 168,839 123,204 
Net interest incomeProvision for
 credit (losses) recoveries		Non-interest
 income		Net revenue
 before gains
 and losses		Gains and
 losses		Total net revenueTotal
expenses		Net income
Six months ended
June 30, 2022		CustomerInter- segment
Bermuda75,305 (1,237)892 42,317 117,277 24 117,301 93,874 23,427 
Cayman 48,515 779 (693)32,415 81,016 — 81,016 30,277 50,739 
Channel Islands and the UK34,013 458 (189)21,267 55,549 857 56,406 37,806 18,600 
Other3 — — 14,334 14,337 — 14,337 13,623 714 
Total before eliminations157,836 — 10 110,333 268,179 881 269,060 175,580 93,480 
Inter-segment eliminations — — — (8,602)(8,602)— (8,602)(8,602)— 
Total157,836 — 10 101,731 259,577 881 260,458 166,978 93,480 

Note 13: Derivative instruments and risk management

The Bank uses derivatives for risk management purposes and to meet the needs of its customers. The Bank’s derivative contracts principally involve over-the-counter ("OTC") transactions that are negotiated privately between the Bank and the counterparty to the contract and include interest rate contracts and foreign exchange contracts.

The Bank may pursue opportunities to reduce its exposure to credit losses on derivatives by entering into International Swaps and Derivatives Association master agreements (“ISDAs”). Depending on the nature of the derivative transaction, bilateral collateral arrangements may be used as well. When the Bank is engaged in more than one outstanding derivative transaction with the same counterparty, and also has a legally enforceable master netting agreement with that counterparty, the net marked-to-market exposure represents the netting of the positive and negative exposures with that counterparty. When there is a net negative exposure, the Bank regards its credit exposure to the counterparty as being zero. The net marked-to-market position with a particular counterparty represents a reasonable measure of credit risk when there is a legally enforceable master netting agreement between the Bank and that counterparty.

Certain of these agreements contain credit risk-related contingent features in which the counterparty has the option to accelerate cash settlement of the Bank's net derivative liabilities with the counterparty in the event the Bank's credit rating falls below specified levels or the liabilities reach certain levels.

All derivative financial instruments, whether designated as hedges or not, are recorded on the consolidated balance sheets at fair value within other assets or other liabilities. These amounts include the effect of netting. The accounting for changes in the fair value of a derivative in the consolidated statements of operations depends on whether the contract has been designated as a hedge and qualifies for hedge accounting.

Notional Amounts
The notional amounts are not recorded as assets or liabilities on the consolidated balance sheets as they represent the face amount of the contract to which a rate or price is applied to determine the amount of cash flows to be exchanged. Notional amounts represent the volume of outstanding transactions and do not represent the potential gain or loss associated with market risk or credit risk of such instruments. Credit risk is limited to the positive fair value of the derivative instrument, which is significantly less than the notional amount.

Fair Value
Derivative instruments, in the absence of any compensating up-front cash payments, generally have no market value at inception. They obtain value, positive or negative, as relevant interest rates, exchange rates, equity or commodity prices or indices change. The potential for derivatives to increase or decrease in value as a result of the foregoing factors is generally referred to as market risk. Market risk is managed within clearly defined parameters as prescribed by senior management of the Bank. The fair value is defined as the profit or loss associated with replacing the derivative contracts at prevailing market prices.

Risk Management Derivatives
The Bank enters into interest derivative contracts as part of its overall interest rate risk management strategy to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. The Bank’s goal is to manage interest rate sensitivity by modifying the repricing or maturity characteristics of certain consolidated balance sheet assets and liabilities so that movements in interest rates do not adversely affect the net interest margin. Derivative instruments that are used as part of the Bank’s risk management strategy include interest rate swap contracts that have indices related to the pricing of specific consolidated balance sheet assets and liabilities. Interest rate swaps generally involve the exchange of fixed and variable-rate interest payments between two parties, based on a common notional principal amount and maturity date. The Bank uses foreign currency derivative instruments to hedge its exposure to foreign currency risk. Certain hedging relationships are formally designated and qualify for hedge accounting as fair value or net investment hedges. Risk management derivatives comprise fair value hedges, net investment hedges and derivatives not formally designated as hedges as described below.

20
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Fair value hedges include designated currency swaps that are used to minimize the Bank's exposure to variability in the amortized cost of AFS investments due to movements in foreign exchange rates. The foreign exchange movement on the unrealized gain or loss on the AFS investments is not considered to be part of the hedging relationship and continues to be recognized in AOCIL.The effective portion of changes in the amortized cost of the hedged items attributable to foreign exchange rates is recognized in current year earnings consistent with the related change in fair value of the hedging instrument. For fair value hedges, hedging effectiveness of the hedged item and the hedging instrument are assessed and managed at inception and on an ongoing basis using a partial-term method.

Net investment hedges include designated currency swaps and qualifying non-derivative instruments and are used to minimize the Bank’s exposure to variability in the foreign currency translation of net investments in foreign operations. The effective portion of changes in the fair value of the hedging instrument is recognized in AOCIL consistent with the related translation gains and losses of the hedged net investment. For net investment hedges, all critical terms of the hedged item and the hedging instrument are matched at inception and on an ongoing basis to minimize the risk of hedge ineffectiveness.

For derivatives designated as net investment hedges, the Bank follows the method based on changes in spot exchange rates. Accordingly:
- The change in the fair value of the derivative instrument that is reported in AOCIL (i.e., the effective portion) is determined by the changes in spot exchange rates.
- The change in the fair value of the derivative instrument attributable to changes in the difference between the forward rate and spot rate are excluded from the measure
of the hedge ineffectiveness and that difference is reported directly in the consolidated statements of operations under foreign exchange revenue.
Amounts recorded in AOCIL are reclassified to earnings only upon the sale or substantial liquidation of an investment in a foreign subsidiary.

For foreign-currency-denominated debt instruments that are designated as hedges of net investments in foreign operations, the translation gain or loss that is recorded in AOCIL is based on the spot exchange rate between the reporting currency of the Bank and the functional currency of the respective subsidiary. See Note 20: Accumulated other comprehensive income (loss) for details on the amount recognized into AOCIL during the current period from translation gain or loss.

Derivatives not formally designated as hedges are entered into to manage the foreign exchange risk of the Bank's exposure. Changes in the fair value of derivative instruments not formally designated as hedges are recognized in foreign exchange revenue.

Client service derivatives
The Bank enters into foreign exchange contracts primarily to meet the foreign exchange needs of its customers. Foreign exchange contracts are agreements to exchange specific amounts of currencies at a future date at a specified rate of exchange. Changes in the fair value of client services derivative instruments are recognized in foreign exchange revenue.

The following table shows the aggregate notional amounts of derivative contracts outstanding listed by type and respective gross positive or negative fair values and classified by those used for risk management (sub-classified as hedging and those that do not qualify for hedge accounting), client services and credit derivatives. The fair value of derivatives is recorded in the consolidated balance sheets in other assets and other liabilities. Gross positive fair values are recorded in other assets and gross negative fair values are recorded in other liabilities, subject to netting when master netting agreements are in place.
June 30, 2023Derivative instrumentNumber of contractsNotional 
amounts 		Gross
 positive
fair value		Gross
 negative
fair value		Net 
fair value 
Risk management derivatives
Net investment hedgesCurrency swaps2 15,989 97 (628)(531)
Fair value hedgesCurrency swaps4 157,095 3,557 (66)3,491 
Derivatives not formally designated as hedging instrumentsCurrency swaps62 1,439,241 2,855 (13,507)(10,652)
Subtotal risk management derivatives1,612,325 6,509 (14,201)(7,692)
Client services derivativesSpot and forward foreign exchange150 385,234 2,498 (2,297)201 
Total derivative instruments1,997,559 9,007 (16,498)(7,491)
December 31, 2022Derivative instrumentNumber of contractsNotional 
amounts 		Gross
 positive
fair value		Gross
 negative
fair value		Net 
fair value 
Risk management derivatives
Net investment hedgesCurrency swaps1 5,207 — (215)(215)
Fair value hedgesCurrency swaps4 130,751 2,714 (191)2,523 
Derivatives not formally designated as hedging instrumentsCurrency swaps63 1,884,169 8,052 (10,269)(2,217)
Subtotal risk management derivatives2,020,127 10,766 (10,675)91 
Client services derivativesSpot and forward foreign exchange160 312,772 2,401 (2,237)164 
Total derivative instruments2,332,899 13,167 (12,912)255 
In addition to the above, as at June 30, 2023 foreign denominated deposits of £279.6 million (December 31, 2022: £235.5 million) and CHF 0.4 million (December 31, 2022: CHF 0.4 million) were designated as a hedge of foreign exchange risk associated with the net investment in foreign operations.

We manage derivative exposure by monitoring the credit risk associated with each counterparty using counterparty specific credit risk limits, using master netting arrangements where appropriate and obtaining collateral. The Bank elected to offset in the consolidated balance sheets certain gross derivative assets and liabilities subject to netting agreements.

The Bank also elected not to offset certain derivative assets or liabilities and all collateral received or paid that the Bank or the counterparties could legally offset in the event of default. In the tables below, these positions are deducted from the net fair value presented in the consolidated balance sheets in order to present the net exposures. The
21
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


collateral values presented in the following table are limited to the related net derivative asset or liability balance and, accordingly, do not include excess collateral received or paid.
Gross fair
 value
 recognized		Less: offset
 applied
 under master
 netting
 agreements		Net fair value
presented in the
 consolidated
 balance sheets		Less: positions not offset in the consolidated balance sheets
June 30, 2023Gross fair value of derivativesCash collateral
 received / paid		Net exposures
Derivative assets
Spot and forward foreign exchange and currency swaps9,007 (6,605)2,402 — — 2,402 
Derivative liabilities
Spot and forward foreign exchange and currency swaps16,498 (6,605)9,893 — (4,048)5,845 
Net negative fair value(7,491)
Gross fair
 value
 recognized		Less: offset
 applied
 under master
 netting
 agreements		Net fair value
presented in the
 consolidated
 balance sheets		Less: positions not offset in the consolidated balance sheets
December 31, 2022Gross fair value of derivativesCash collateral
 received / paid		Net exposures
Derivative assets
Spot and forward foreign exchange and currency swaps13,167 (6,658)6,509 — (9)6,500 
Derivative liabilities
Spot and forward foreign exchange and currency swaps12,912 (6,658)6,254 — (352)5,902 
Net positive fair value255 
The following tables show the location and amount of gains (losses) recorded in either the consolidated statements of operations or consolidated statements of comprehensive income on derivative instruments outstanding.
Three months endedSix months ended
Derivative instrumentConsolidated statements of operations line itemJune 30, 2023June 30, 2022June 30, 2023June 30, 2022
Spot and forward foreign exchangeForeign exchange revenue(88)(122)38 16 
Currency swaps, not designated as hedgeForeign exchange revenue(6,091)17,418 (8,434)6,273 
Currency swaps - fair value hedgesForeign exchange revenue69 520 967 (4,086)
Total net gains (losses) recognized in net income(6,110)17,816 (7,429)2,203 
Three months endedSix months ended
Derivative instrumentConsolidated statements of comprehensive income line itemJune 30, 2023June 30, 2022June 30, 2023June 30, 2022
Currency swaps - net investment hedgeUnrealized net gains (losses) on translation of net investment in foreign operations(828)(1,538)(317)(847)
Total net gains (losses) recognized in comprehensive income(828)(1,538)(317)(847)

Note 14: Fair value measurements

The following table presents the financial assets and liabilities that are measured at fair value on a recurring basis. Management classifies these items based on the type of inputs used in their respective fair value determination as described in Note 2 of the Bank's audited financial statements for the year ended December 31, 2022.

Management reviews the price of each security monthly, comparing market values to expectations and to the prior month’s price. Management's expectations are based upon knowledge of prevailing market conditions and developments relating to specific issuers and/or asset classes held in the investment portfolio. Where there are unusual or significant price movements, or where a certain asset class has performed out-of-line with expectations, the matter is reviewed by management.

Financial instruments in Level 1 include US and UK Government Treasury notes.

Financial instruments in Level 2 include government debt securities, mortgage-backed securities and other asset-backed securities, forward foreign exchange contracts and mutual funds not actively traded.

Financial instruments in Level 3 included asset-backed securities for which the market was relatively illiquid and for which information about actual trading prices was not readily available.

There were no transfers between Level 1 and Level 2 or Level 2 and Level 3 during the six months ended June 30, 2023. During the year ended December 31, 2022, there were no transfers between Level 1 and Level 2. There was a transfer out of Level 3 into Level 2 due to increased price observability during the year ended December 31, 2022.

22
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


June 30, 2023December 31, 2022
Fair valueTotal carrying
amount /
fair value		Fair valueTotal carrying
amount /
fair value
Level 1Level 2Level 3Level 1Level 2Level 3
Items that are recognized at fair value on a recurring basis:
Financial assets
Equity securities
Mutual funds— — — — — 236 — 236 
Total equity securities— — — — — 236 — 236 
Available-for-sale investments
US government and federal agencies846,428 819,508 — 1,665,936 838,938 873,838 — 1,712,776 
Non-US governments debt securities242,002 22,392 — 264,394 229,071 22,392 — 251,463 
Asset-backed securities - Student loans— 1,087 — 1,087 — 5,626 — 5,626 
Residential mortgage-backed securities— 18,143 — 18,143 — 19,000 — 19,000 
Total available-for-sale1,088,430 861,130 — 1,949,560 1,068,009 920,856 — 1,988,865 
Other assets - Derivatives— 2,402 — 2,402 — 6,509 — 6,509 
Financial liabilities
Other liabilities - Derivatives— 9,893 — 9,893 — 6,254 — 6,254 

Level 3 Reconciliation
The Level 3 financial instrument, was a federal family education loan program guaranteed student loan security and was valued using a non-binding quote from an external security pricing service. During the year ended December 31, 2022, this instrument was transferred to Level 2 due to increased price observability.

The table below summarizes realized and unrealized gains and losses for Level 3 assets at the reporting date.
Six months ended
June 30, 2023
Year ended December 31, 2022
Available-
 for-sale investments		Available-
 for-sale investments
Carrying amount at beginning of period— 13,174 
Proceeds from sales, paydowns and maturities— (7,631)
Change in unrealized gains (losses) recognized in other comprehensive income— 102 
Realized and unrealized gains recognized in net income— (19)
Transfers in (out of) Level 3 out of (into) Level 2 - AFS— (5,626)
Carrying amount at end of period— — 
Cumulative gain (loss) recognized in other comprehensive income— (14)

Items Other Than Those Recognized at Fair Value on a Recurring Basis:
June 30, 2023December 31, 2022
LevelCarrying
amount		Fair
 value		Appreciation /
(depreciation)		Carrying
amount		Fair
 value		Appreciation /
(depreciation)
Financial assets
Cash and cash equivalentsLevel 11,794,854 1,794,854 — 2,100,787 2,100,787 — 
Securities purchased under agreements to resellLevel 259,693 59,693 — 59,871 59,871 — 
Short-term investmentsLevel 1669,714 669,714 — 884,478 884,478 — 
Investments held-to-maturityLevel 23,596,889 3,077,037 (519,852)3,738,080 3,197,508 (540,572)
Loans, net of allowance for credit lossesLevel 25,003,479 4,934,377 (69,102)5,096,430 5,049,570 (46,860)
Other real estate owned¹Level 21,165 1,165 — 800 800 — 
Financial liabilities
Term depositsLevel 23,323,803 3,328,070 (4,267)3,107,248 3,108,511 (1,263)
Long-term debtLevel 298,372 93,978 4,394 172,289 177,919 (5,630)
¹The current carrying value of OREO is adjusted to fair value only when there is devaluation below carrying value.


23
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Note 15: Interest rate risk

The following tables set out the assets, liabilities and shareholders' equity on the date of the earlier of contractual maturity, expected maturity or repricing date. Use of these tables to derive information about the Bank’s interest rate risk position is limited by the fact that customers may choose to terminate their financial instruments at a date earlier than the contractual maturity or repricing date. Examples of this include fixed-rate mortgages, which are shown at contractual maturity but which may pre-pay earlier, and certain term deposits, which are shown at contractual maturity but which may be withdrawn before their contractual maturity subject to prepayment penalties. Investments are shown based on remaining contractual maturities. The remaining contractual principal maturities for mortgage-backed securities (primarily US government agencies) do not consider prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.

June 30, 2023Earlier of contractual maturity or repricing date
(in $ millions)Within 3
 months		3 to 6
 months 		6 to 12
 months		1 to 5
 years 		After
 5 years		Non-interest
 bearing funds 		Total
Assets
Cash and cash equivalents1,701 — — — — 94 1,795 
Securities purchased under agreement to resell60 — — — — — 60 
Short-term investments382 270 18 — — — 670 
Investments 152 34 216 892 4,252 — 5,546 
Loans 2,643 52 172 1,693 420 24 5,004 
Other assets— — — — — 435 435 
Total assets 4,938 356 406 2,585 4,672 553 13,510 
Liabilities and shareholders' equity
Shareholders’ equity— — — — — 950 950 
Demand deposits6,030 — — — — 2,838 8,868 
Term deposits2,317 307 608 92 — — 3,324 
Other liabilities— — — — — 270 270 
Long-term debt— — — 98 — — 98 
Total liabilities and shareholders' equity8,347 307 608 190 — 4,058 13,510 
Interest rate sensitivity gap(3,409)49 (202)2,395 4,672 (3,505)— 
Cumulative interest rate sensitivity gap(3,409)(3,360)(3,562)(1,167)3,505 — — 
December 31, 2022Earlier of contractual maturity or repricing date
(in $ millions)Within 3
 months		3 to 6
 months 		6 to 12
 months		1 to 5
 years 		After
 5 years		Non-interest
 bearing funds 		Total
Assets
Cash and cash equivalents2,008 — — — — 93 2,101 
Securities purchased under agreement to resell60 — — — — — 60 
Short-term investments406 422 56 — — — 884 
Investments 6 8 179 943 4,592 — 5,728 
Loans2,927 35 166 1,533 406 29 5,096 
Other assets— — — — — 437 437 
Total assets5,407 465 401 2,476 4,998 559 14,306 
Liabilities and shareholders' equity
Shareholders’ equity— — — — — 865 865 
Demand deposits6,819 25 — — — 3,040 9,884 
Term deposits2,126 457 437 87 — — 3,107 
Other liabilities— — — — — 278 278 
Long-term debt— 75 — 97 — — 172 
Total liabilities and shareholders' equity8,945 557 437 184 — 4,183 14,306 
Interest rate sensitivity gap(3,538)(92)(36)2,292 4,998 (3,624)— 
Cumulative interest rate sensitivity gap(3,538)(3,630)(3,666)(1,374)3,624 — — 
24
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Note 16: Long-term debt

On May 24, 2018, the Bank issued US $75 million of Subordinated Lower Tier II capital notes. The notes were issued at par and due on June 1, 2028.  The issuance was by way of a registered offering with US institutional investors. The notes are listed on the BSX in the specialist debt securities category. The proceeds of the issue were used, among others, to repay the entire amount of the US $47 million outstanding subordinated notes series 2003-B. The notes issued pay a fixed coupon of 5.25% until June 1, 2023 when it became redeemable in whole at the option of the Bank. The notes were priced at a spread of 2.27% over the 10-year US Treasury yield. The Bank incurred $1.8 million of costs directly related to the issuance of these capital notes. These costs have been capitalized directly against the carrying value of these notes on the balance sheet and amortized over the life of the notes. These notes were redeemed at face value in June 2023.

On June 11, 2020, the Bank issued US $100 million of Subordinated Lower Tier II capital notes. The notes were issued at par and due on June 15, 2030.  The issuance was by way of a registered offering with US institutional investors. The notes are listed on the BSX in the specialist debt securities category. The proceeds of the issue were used, among others, to repay the entire amount of the US $45 million outstanding subordinated notes series 2005-B which matured on July 2, 2020. The notes issued pay a fixed coupon of 5.25% until June 15, 2025 when they become redeemable in whole at the option of the Bank. The notes were priced at a spread of 4.43% over the 10-year US Treasury yield. The Bank incurred $2.3 million of costs directly related to the issuance of these capital notes. These costs have been capitalized directly against the carrying value of these notes on the balance sheet, and will be amortized over the life of the notes.

No interest was capitalized during the six months ended June 30, 2023 and the year ended December 31, 2022.

In the event the Bank would be in a position to redeem long-term debt, priority would go to the redemption of the higher interest-bearing Series, subject to availability relative to the earliest date the Series is redeemable at the Bank's option.

The following table presents the contractual maturity and interest payments for long-term debt issued by the Bank as at June 30, 2023. The interest payments are calculated until contractual maturity using the current Secured Overnight Financing Rate ("SOFR").
Interest payments until contractual maturity
Long-term debtEarliest date redeemable at the Bank's optionContractual maturity dateInterest rate until date redeemableInterest rate from earliest date redeemable to contractual maturityPrincipal  OutstandingWithin
 1 year		1 to 5
 years 		After
 5 years
Bermuda
2020 issuanceJune 15, 2025June 15, 20305.25 %3 months US$ SOFR + 5.060%100,000 5,250 36,151 20,582 
Unamortized debt issuance costs(1,628)
Long-term debt less unamortized debt issuance costs98,372 

Note 17: Earnings per share

Earnings per share have been calculated using the weighted average number of common shares outstanding during the period after deduction of the shares held as treasury stock. The dilutive effect of share-based compensation plans was calculated using the treasury stock method, whereby the proceeds received from the exercise of share-based awards are assumed to be used to repurchase outstanding shares, using the average market price of the Bank’s shares for the period. Numbers of shares are expressed in thousands.

During the six months ended June 30, 2023, the average number of outstanding awards of unvested common shares was 1.4 million (June 30, 2022: 1.0 million). Only awards for which the sum of 1) the expense that will be recognized in the future (i.e., the unrecognized expense) and 2) its exercise price, if any, was lower than the average market price of the Bank‘s common shares were considered dilutive and, therefore, included in the computation of diluted earnings per share. An award's unrecognized expense is also considered to be the proceeds the employees would need to pay to purchase accelerated vesting of the awards. For the purposes of calculating dilution, such proceeds are assumed to be used by the Bank to buy back common shares at the average market price. The weighted-average number of outstanding awards, net of the assumed weighted-average number of common shares bought back, is included in the number of diluted participating shares.
Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net income61,000 49,129 123,204 93,480 
Basic Earnings Per Share
Weighted average number of common shares issued50,139 50,223 50,238 50,173 
Weighted average number of common shares held as treasury stock(619)(619)(619)(619)
Weighted average number of common shares (in thousands)49,520 49,604 49,619 49,554 
Basic Earnings Per Share1.23 0.99 2.48 1.89 
Diluted Earnings Per Share
Weighted average number of common shares49,520 49,604 49,619 49,554 
Net dilution impact related to awards of unvested common shares370 168 360 252 
Weighted average number of diluted common shares (in thousands)49,890 49,772 49,979 49,806 
Diluted Earnings Per Share1.22 0.99 2.47 1.88 
25
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Note 18: Share-based payments

The common shares transferred to employees under all share-based payments are either taken from the Bank's common treasury shares or from newly issued shares. All share-based payments are settled by the ultimate parent company which, pursuant to Bermuda law, is not taxed on income. There are no income tax benefits in relation to the issue of such shares as a form of compensation.

In conjunction with the 2010 capital raise, the Board of Directors approved the 2010 Omnibus Plan (the "2010 Plan"). Under the 2010 Plan, 5% of the Bank’s fully diluted common shares, equal to approximately 2.95 million shares, were initially available for grant to certain officers in the form of stock options or unvested share awards. Both types of awards are detailed below. In 2012 and 2016, the Board of Directors approved an increase to the equivalent number of shares allowed to be granted under the 2010 Plan to 5.0 million and 7.5 million shares, respectively.

In May 2020, the Board of Directors approved the 2020 Omnibus Plan (the "2020 Plan") which replaces the 2010 Plan. Under the 2020 Plan, 3.0 million shares are initially available for grant to employees in the form of stock options or unvested share awards. Both types of awards are detailed below.

Stock Option Awards

2010 and 2020 Plans
Under the 2010 and 2020 Plans, options are awarded to Bank employees and executive management, based on predetermined vesting conditions that entitle the holder to purchase one common share at a subscription price usually equal to the price of the most recently traded common share when granted and have a term of 10 years. The subscription price is reduced for all special dividends declared by the Bank. Stock option awards granted under the 2010 and 2020 Plans vest based on two specific types of vesting conditions i.e., time and performance conditions, as detailed below:

Time vesting condition
50% of each option award was granted in the form of time vested options and vested 25% on each of the second, third, fourth and fifth anniversaries of the effective grant date.

In addition to the time vesting conditions noted above, the options will generally vest immediately:
• by reason of the employee’s death or disability,
• upon termination, by the Bank, of the holder’s employment, unless if in relation with the holder’s misconduct, or
• in limited circumstances and specifically approved by the Board, as stipulated in the holder’s employment contract.

In the event of the employee’s resignation, any unvested portion of the awards shall generally be forfeited and any vested portion of the options shall generally remain exercisable during the 90-day period following the termination date or, if earlier, until the expiration date, and any vested portion of the options not exercised as of the expiration of such period shall be forfeited without any consideration therefore.

Performance vesting condition
50% of each option award was granted in the form of performance options and would vest (partially or fully) on a “valuation event” date (the date that any of the March 2, 2010 new investors transfers at least 5% of the total number of common shares or the date that there is a change in control and any of the new investors realize a predetermined multiple of invested capital (“MOIC”)). On September 21, 2016, it was determined that a valuation event occurred during which a new investor realized a MOIC of more than 200% of the original invested capital of $12.09 per share and accordingly, all outstanding unvested performance options vested.

Changes in Outstanding Stock Option Plans
There were no stock options outstanding as at June 30, 2023 and December 31, 2022.

Share Based Plans
Recipients of unvested share awards are entitled to the related common shares at no cost, at the time the award vests. Recipients of unvested shares may be entitled to receive additional unvested shares having a value equal to the cash dividends that would have been paid had the unvested shares been issued and vested. Such additional unvested shares granted as dividend equivalents are subject to the same vesting schedule and conditions as the underlying unvested shares.

Unvested shares subject only to the time vesting condition generally vest upon retirement, death, disability or upon termination, by the Bank, of the holder’s employment unless if in connection with the holder’s misconduct. Unvested shares subject to both time vesting and performance vesting conditions remain outstanding and unvested upon retirement and will vest only if the performance conditions are met. Unvested shares can also vest in limited circumstances and if specifically approved by the Board, as stipulated in the holder’s employment contract. In all other circumstances, unvested shares are generally forfeited when employment ends.

The grant date weighted average fair value of unvested share awards granted in the six months ended June 30, 2023 was $32.94 per share (December 31, 2022: $35.05 per share). The Bank expects to settle these awards by issuing new shares.

Employee Deferred Incentive Program (“EDIP”)
Under the Bank’s EDIP, shares are awarded to Bank employees and executive management based on the time vesting condition, which states that the shares will vest equally over a three-year period from the effective grant date.

Executive Long-Term Incentive Share Program (“ELTIP”)
Under the Bank’s ELTIP, performance shares as well as time-vested shares were awarded to executive management. The performance shares will generally vest upon the achievement of certain performance targets in the three-year period from the effective grant date. The time-vested shares will generally vest over the three-year period from the effective grant date.

Employee Share Purchase Plan ("ESPP")
The Bank's ESPP was approved in July 2021 and registered in November 2021. The first offering period started in March 2022. Under the Bank's ESPP, eligible employees may elect to contribute up to 15% of their regular compensation toward the purchase of the Bank's shares at a 10% discount from market price on the closing date of each offering period. The ESPP specifies two consecutive six month offering periods per year. In the case of termination of employment or voluntary partial or full withdrawal from the plan, the related current offering period ESPP contributions are refunded to the employee and thus cannot be used to purchase shares under the ESPP. During the six months ended June 30, 2023, 12,523 shares (December 31, 2022: 10,143) were issued under the ESPP Plan.
26
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Changes in Outstanding ELTIP and EDIP awards (in thousands of shares transferable upon vesting)
Six months ended
June 30, 2023June 30, 2022
EDIPELTIPEDIPELTIP
Outstanding at beginning of period621 705 297 704 
Granted178 362 111 262 
Vested (fair value in 2023: $10.6 million, 2022: $16.7 million)
(133)(185)(145)(278)
Outstanding at end of period666 882 263 688 

Share-based Compensation Cost Recognized in Net Income
Six months ended
June 30, 2023June 30, 2022
EDIP and
 ELTIP		EDIP and
 ELTIP
Cost recognized in net income9,285 7,070 
Unrecognized Share-based Compensation Cost
June 30, 2023December 31, 2022
Unrecognized costWeighted average years over which it is expected to be recognizedUnrecognized costWeighted average years over which it is expected to be recognized
EDIP14,575 2.9914,234 3.35
ELTIP
Performance vesting shares17,119 2.1010,232 1.75
Total unrecognized expense31,694 24,466 

Note 19: Share repurchase programs

From time to time, the Bank may seek to repurchase and retire equity securities of the Bank, through cash purchases, privately negotiated transactions, or otherwise. Such transactions, if any, depend on prevailing market conditions, liquidity and capital requirements, contractual restrictions, and other factors.

Common Share Repurchase Program
On December 2, 2019, the Board approved a common share repurchase program, authorizing the purchase of up to 3.5 million common shares through to February 28, 2021. The program came into effect on December 20, 2019 following the completion of the previous program.

On February 10, 2021, the Board approved a common share repurchase program, authorizing the purchase of up to 2.0 million common shares through to February 28, 2022.

On February 14, 2022, the Board approved a common share repurchase program, authorizing the purchase of up to 2.0 million common shares through to February 28, 2023.

On February 13, 2023, the Board approved a new common share repurchase program, authorizing the purchase of up to 3.0 million common shares through to February 29, 2024.

In the six months ended June 30, 2023, the Bank repurchased and retired 867,995 shares.
Six months endedYear ended December 31
Common share repurchasesJune 30, 202320222021
Acquired number of shares (to the nearest 1)867,995 102,000 534,828 
Average cost per common share27.19 38.21 36.93 
Total cost (in US dollars)23,599,594 3,897,268 19,753,336 

27
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Note 20: Accumulated other comprehensive income (loss)
Unrealized net gains (losses)
 on translation of
 net investment in
 foreign
 operations		Unrealized net
 gains (losses)
 on HTM
 investments		Unrealized net
 gains (losses)
 on AFS
 investments		Employee benefit plans adjustments
Six months ended June 30, 2023PensionPost-retirement
 healthcare		Subtotal -
 employee
benefits plans		Total AOCIL
Balance at beginning of period(25,700)(91,212)(220,345)(47,905)7,710 (40,195)(377,452)
Other comprehensive income (loss), net of taxes356 4,631 14,058 1,022 (405)617 19,662 
Balance at end of period(25,344)(86,581)(206,287)(46,883)7,305 (39,578)(357,790)
Unrealized net gains (losses)
 on translation of
 net investment in
 foreign
 operations		Unrealized net
 gains (losses)
 on HTM
 investments		Unrealized net
 gains (losses)
 on AFS
 investments		Employee benefit plans adjustments
Six months ended June 30, 2022PensionPost- retirement
 healthcare		Subtotal -
 employee
benefits plans		Total AOCIL
Balance at beginning of period(20,913)91 (21,982)(56,400)(25,713)(82,113)(124,917)
Transfer of AFS investments to HTM investments— (99,143)99,143 — — — — 
Other comprehensive income (loss), net of taxes(4,083)2,203 (229,252)1,625 984 2,609 (228,523)
Balance at end of period(24,996)(96,849)(152,091)(54,775)(24,729)(79,504)(353,440)
28
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Net Change of AOCIL ComponentsThree months endedSix months ended
 Line item in the consolidated
statements of operations, if any		June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net unrealized gains (losses) on translation of net investment in foreign operations adjustments
Foreign currency translation adjustmentsN/A10,182 (25,414)17,669 (35,711)
Gains (losses) on net investment hedgeN/A(9,782)22,330 (17,313)31,628 
Net change400 (3,084)356 (4,083)
Held-to-maturity investment adjustments
Net unamortized gains (losses) transferred from AFSN/A— (52,972)— (99,143)
Amortization of net gains (losses) to net incomeInterest income on investments2,604 1,824 4,631 2,203 
Net change2,604 (51,148)4,631 (96,940)
Available-for-sale investment adjustments
Gross unrealized gains (losses)N/A(14,562)(73,305)16,353 (231,608)
Net unrealized (gains) losses transferred to HTMN/A— 52,972 — 99,143 
Transfer of realized (gains) losses to net incomeNet realized gains (losses) on AFS investments3 — 11 — 
Foreign currency translation adjustments of related balancesN/A(1,199)1,929 (2,306)2,356 
Net change(15,758)(18,404)14,058 (130,109)
Employee benefit plans adjustments
Defined benefit pension plan
Net actuarial gain (loss) N/A— — — 348 
Net loss (gain) on settlement reclassified to net incomeNet other gains (losses)— 28 — (820)
Amortization of net actuarial (gains) lossesNon-service employee benefits expense572 555 1,142 1,114 
Amortization of prior service (credit) costNon-service employee benefits expense20 20 39 44 
Foreign currency translation adjustments of related balancesN/A(90)653 (159)939 
Net change502 1,256 1,022 1,625 
Post-retirement healthcare plan
Amortization of net actuarial (gains) lossesNon-service employee benefits expense131 361 262 722 
Amortization of prior service (credit) costNon-service employee benefits expense(334)131 (667)262 
Net change(203)492 (405)984 
Other comprehensive income (loss), net of taxes(12,455)(70,888)19,662 (228,523)

Note 21: Capital structure

Authorized Capital
The Bank trades on the New York Stock Exchange under the ticker symbol "NTB" and on the BSX under the symbol "NTB.BH".

The par value of each issued common share and each authorized but unissued common share is BM$0.01 and the authorized share capital of the Bank comprises 2,000,000,000 common shares of par value BM$0.01 each, 6,000,000,000 non‑voting ordinary shares of par value BM$0.01 each, 110,200,001 preference shares of par value US$0.01 each and 50,000,000 preference shares of par value £0.01 each.

Dividends Declared
During the six months ended June 30, 2023, the Bank declared and paid cash dividends of $0.88 (June 30, 2022: $0.88) for each common share as of the related record date.

The Bank is required to comply with Section 54 of the Companies Act 1981 issued by the Government of Bermuda (the “Companies Act”) each time a dividend is declared or paid by the Bank and also obtain a letter of no objection from the BMA pursuant to the Banks and Deposit Companies Act 1999 for any dividends declared. The Bank has complied with Section 54 and has obtained the BMA's letter of no objection for all dividends declared during the periods presented.


29
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Regulatory Capital
The Bank’s regulatory capital is determined in accordance with current Basel III guidelines as issued by the BMA. The Bank is fully compliant with all regulatory capital requirements to which it is subject, and it maintains capital ratios in excess of regulatory minimums as at June 30, 2023 and December 31, 2022. The following table sets forth the Bank's capital adequacy in accordance with the Basel III framework:

June 30, 2023December 31, 2022
ActualRegulatory minimumActualRegulatory minimum
Capital
CET 1 capital1,052,203 N/A983,342 N/A
Tier 1 capital1,052,203 N/A983,342 N/A
Tier 2 capital109,143 N/A183,640 N/A
Total capital1,161,346 N/A1,166,982 N/A
Risk Weighted Assets4,627,552 N/A4,843,370 N/A
Leverage Ratio Exposure Measure13,899,229 N/A14,774,309 N/A
Capital Ratios (%)
CET 1 capital22.7 %10.0 %20.3 %10.0 %
Tier 1 capital22.7 %11.5 %20.3 %11.5 %
Total capital25.1 %13.5 %24.1 %13.5 %
Leverage ratio7.6 %5.0 %6.7 %5.0 %

Note 22: Related party transactions

Financing Transactions
Certain directors and executives of the Bank, companies in which they are principal owners and/or members of the board, and trusts in which they are involved, have deposits with the Bank, have loans and/or are guarantors for loans with the Bank. Loans to directors were made in the ordinary course of business at normal credit terms, including interest rate and collateral requirements. Loans to executives may be eligible for preferential rates. All of these loans were considered performing loans as at June 30, 2023 and December 31, 2022. Loan balances with directors and executives of the Bank, companies in which they are principal owners and/or members of the board, and trusts in which they are involved were as follows:

Balance at December 31, 20217,375 
Net loans issued (repaid) during the year(5,362)
Effect of changes in the composition of related parties18,380 
Balance at December 31, 202220,393 
Net loans issued (repaid) during period(515)
Balance at June 30, 2023
19,878 

Consolidated balance sheetsJune 30, 2023December 31, 2022
Deposits86,087 92,806 
Three months endedSix months ended
Consolidated statement of operationsJune 30, 2023June 30, 2022June 30, 2023June 30, 2022
Interest and fees on loans285 273 556 326 
Total non-interest expense80 78 125 126 
Other non-interest income37 — 91 — 

Certain affiliates of the Bank have loans and deposits with the Bank which were made and are maintained in the ordinary course of business on normal commercial terms. Balances with these parties were as follows:

Consolidated balance sheetsJune 30, 2023December 31, 2022
Loans10,009 10,211 
Deposits275 560 

30
The Bank of N.T. Butterfield & Son Limited
Notes to the Consolidated Financial Statements (unaudited) (continued)
(In thousands of US dollars, unless otherwise stated)


Three months endedSix months ended
Consolidated statement of operationsJune 30, 2023June 30, 2022June 30, 2023June 30, 2022
Interest and fees on loans207 152 405 299 
Total non-interest expense397 383 772 741 
Other non-interest income 61 58 121 117 

Investments
The Bank held seed investments in Butterfield mutual funds, which were managed by a wholly-owned subsidiary of the Bank. These investments were sold during the year ended December 31, 2021.

As at June 30, 2023, several Butterfield mutual funds which are managed by a wholly owned subsidiary of the Bank, had loan balances and deposit balances held with the Bank. The Bank also earned asset management revenue and custody and other administration services revenue from funds managed by a wholly-owned subsidiary of the Bank and from directors and executives, companies in which they are principal owners and/or members of the board and trusts in which they are involved, as well as other income from other related parties.

Consolidated balance sheetsJune 30, 2023December 31, 2022
Loans992 — 
Deposits35,461 20,549 
Three months endedSix months ended
Consolidated statement of operationsJune 30, 2023June 30, 2022June 30, 2023June 30, 2022
Asset management2,319 1,799 4,499 3,086 
Custody and other administration services296 193 559 310 

Note 23: Subsequent events

On July 31, 2023, the Board of Directors declared an interim dividend of $0.44 per common share to be paid on August 28, 2023 to shareholders of record on August 14, 2023.



31
Second Quarter 2023 The Bank of N.T. Butterfield & Son Limited Earnings Presentation August 1, 2023

 
2 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. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions estimates, intentions, and future performance, including, without limitation, our intention to make share repurchases and our dividend payout target, 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 Butterfield 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 (including economic growth and general business conditions) and fluctuations of interest rates, inflation, a decline in Bermuda’s sovereign credit rating, the successful completion and integration of acquisitions (including our progress on subsequent closings of the acquisition of trust assets from Credit Suisse) or the realization of the anticipated benefits of such acquisitions in the expected time-frames or at all, success in business retention (including the retention of relationships associated with our Credit Suisse acquisition) and obtaining new business, the impact of the COVID-19 pandemic, the success of our updated systems and platforms and other factors. Forward-looking statements can be identified by words such as "anticipate," "assume," "believe," "estimate," "expect," "indicate," "intend," "may," "plan," "point to," "predict," "project," "seek," "target," "potential," "will," "would," "could," "should," "continue," "contemplate" and other similar expressions, although not all forward-looking statements contain these identifying words. All statements other than statements of historical fact are statements that could be forward-looking statements. All forward-looking statements in this disclosure 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, including under the caption "Risk Factors" in our most recent Form 20-F. Such reports are available upon request from Butterfield, or from the SEC, including through the SEC’s website at https://www.sec.gov. Any forward-looking statements made by Butterfield are current views as at the date they are made. Except as 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 in this disclosure, whether as a result of new information, future events or other developments. You are cautioned not to place undue reliance on the forward-looking statements made by Butterfield in this disclosure. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, and should only be viewed as historical data. 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.

 
3 Agenda and Overview Ten International Locations Butterfield Overview Michael Collins Chairman and Chief Executive Officer Craig Bridgewater Group Chief Financial Officer Michael Schrum President and Group Chief Risk Officer • Leading Bank in Attractive Markets • Strong Capital Generation and Return • Resilient, Capital Efficient, Diversified Fee Revenue Model • Efficient, Conservative Balance Sheet • Experienced Leadership Team • Overview • Second Quarter 2023 Financials • Q&A Presenters Agenda • Leading market positions in Bermuda & Cayman • Expanding loan and mortgage offerings in The Channel Islands • Well-secured lending in all markets • Award winning banking and wealth management offerings ESG Membership Awards

 
4 Second Quarter 2023 Highlights Net Income (In US$ millions) Return on Equity (In US$ millions) vs. Q1 2023 vs. Q2 2022 Q2 2023 $ % $ % Net Interest Income $ 92.5 $ (4.9) $ 10.5 Non-Interest Income 50.2 — (1.7) Provision for Credit Losses (1.5) (0.9) (0.8) Non-Interest Expenses* (84.1) 0.7 — Other Gains (Losses) 4.0 3.9 3.9 Net Income $ 61.0 $ (1.2) (1.9) % $ 11.9 24.2 % Non-Core Items** (4.0) 4.0 (5.1) Core Net Income** $ 57.0 $ (5.2) (8.4) % $ 6.8 13.6 % • Net income of $61.0 million, or $1.22 per share • Core net income** of $57.0 million, or $1.14 per share • Return on average common equity of 25.9%; core return on average tangible common equity** of 26.3% • Net Interest Margin of 2.83%, cost of deposits of 1.27% • Cash dividend rate of $0.44 per common share during the quarter • Second closing of previously announced acquisition of Credit Suisse trust assets • Completed early redemption of $75 million 2018 series of the Bank's subordinated debt * Includes income taxes ** See the Appendix for a reconciliation of the non-GAAP measure $49.1 $57.4 $63.1 $62.2 $61.0 $50.2 $57.6 $63.2 $62.2 $57.0 Net income Core Net Income** Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 24.5% 28.5% 31.6% 28.0% 25.9% 27.8% 31.6% 34.9% 30.5% 26.3% Return on Equity Core Return on Average Tangible Common Equity** Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023

 
Financials

 
6 Net Interest Income before Provision for Credit Losses -Trend (In US$ millions) $82.0 $97.4 $92.5 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Net Interest Margin & Yields Income Statement Net Interest Income • Net interest income (“NII”) decreased by $4.9 million versus the prior quarter primarily due to lower average balance sheet volumes, higher deposit costs and the accelerated amortization of issuance costs due to early redemption of the 2018 issuance of subordinated debt • Net interest margin (“NIM”) decreased by 5 basis points to 2.83% as of a result of increased deposit costs and the early redemption of subordinated debt. Adjusted for the impact of the redemption*, NIM is 2.86% • Average interest earning assets fell by $618 million, due to cash outflows to depositors, which outpaced securities portfolio and net loan portfolio paydowns (In US$ millions) Q2 2023 vs. Q1 2023 Avg. Balance Yield Avg. Balance Yield Cash, S/T Inv. & Repos $ 2,488.2 4.06 % $ (455.7) 0.32 % Investments 5,614.7 2.07 % (105.5) (0.05) % Loans (net) 4,984.1 6.42 % (56.6) 0.19 % Interest Earning Assets 13,087.0 4.10 % (617.7) 0.12 % Interest Bearing Liabilities 9,455.8 (1.76) % (503.4) (0.25) % Net Interest Margin 2.83 % (0.05) % * Accelerated recognition of $0.9 million unamortized debt issuance costs

 
7 Non-Interest Income Trend (In US$ millions)(In US$ millions) Q2 2023 vs. Q1 2023 Asset management $ 8.2 $ 0.3 Banking 12.6 (1.0) Foreign exchange revenue 11.3 0.6 Trust 14.3 1.4 Custody and other 3.3 — Other 0.5 (1.3) Total Non-Interest Income $ 50.2 $ — $51.8 $50.2 $50.2 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 • Total non-interest income was unchanged versus the prior quarter, with increases in asset management, trust and foreign exchange income, offset by decreases in banking and other income • Foreign exchange income increased due to higher volumes, while trust income also increased due to the impact of the newly acquired relationships from Credit Suisse and higher activity-based fees • Banking fees decreased on lower volumes, while other income was impacted by a decrease in investment income from a legacy equity investment and a decrease in unclaimed balances recognized into income • The fee income ratio was 35.5% in the second quarter of 2023 which compares favorably to the peer average* and the 34.2% in the prior quarter Income Statement Non-Interest Income * Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks. Q1 2023 comparative data is used as Q2 2023 peer information was not widely available at time of publication.

 
8 Core Non-Interest Expense* Trend (In US$ millions)Core Non-Interest Expenses* vs. Q1 2023 (In US$ millions) Q2 2023 $ % Salaries & Benefits** $ 42.6 $ (1.1) (2.6) % Technology & Comm. 14.9 1.0 6.9 % Professional & O/S Services 4.7 (0.3) (5.3) % Property 7.5 0.1 0.9 % Indirect Taxes 5.3 (0.5) (7.8) % Marketing 1.7 0.2 12.8 % Intangible Amortization 1.4 — 1.3 % Other 5.4 0.1 1.9 %Total Core Non-Interest Expenses* $ 83.6 $ (0.5) (0.6) % Non-Core Expenses* — — — % Non-Interest Expenses $ 83.5 $ (0.6) (0.7) % $81.9 $84.1 $83.6 60.2% 56.0% 57.6% Core Efficiency Ratio* Core Non-Interest Expenses* Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 • Core non-interest expenses* were lower than the prior quarter primarily due to lower staff-related expenses, partially offset by higher technology & communications expenses related to the implementation of the new core banking system upgrade in Bermuda • Core efficiency ratio* of 57.6% is higher than the prior quarter due to lower net revenues. Butterfield continues to target a through-cycle core efficiency ratio of 60% * See the Appendix for a reconciliation of the non-GAAP measure ** Includes Non-Service Employee Benefits Expense Income Statement Non-Interest Expenses

 
9 Balance Sheet Total Assets (In US$ billions) • Changes in deposit volumes represent normal commercial movements • Period end deposit balances decreased by $0.1 billion to $12.2 billion compared to Q1 2023 due to client deposit activation in Cayman and the Channel Islands • Average deposits decreased over the second quarter of 2023 by $0.6 billion from $12.8 billion to $12.2 billion at quarter end • Butterfield’s balance sheet remains low in risk density (risk weighted assets/total assets) at 34.3% vs Q4 2022 (In US$ millions) Q2 2023 Q4 2022 % Cash and cash equivalents $ 1,795 $ 2,101 (15) % Reverse Repos & S/T Investments 729 944 (23) % Investments 5,546 5,727 (3) % Loans (net) 5,003 5,096 (2) % Other Assets 435 437 — % Total Assets $ 13,510 $ 14,306 (6) % Int. Bearing Deposits $ 9,354 $ 9,951 (6) % Non-Int. Bearing Deposits 2,838 3,040 (7) % Other Liabilities 367 450 (18) % Shareholders’ Equity 950 865 10 % Total Liab. & Equity $ 13,510 $ 14,306 (6) % $14.3 $13.7 $13.5 $6.0 $5.7 $5.5 $5.1 $5.0 $5.0 Total assets Investments Loans Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $13.1 $12.3 $12.2 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Total Deposits (In US$ billions)

 
10 Group (US$ Billions) Bermuda (US$ Billions) Deposit Composition by Segment Cayman (US$ Billions) Channel Islands (US$ Billions) 23% 24% 23% 24% 23% 56% 55% 53% 49% 49% 21% 21% 24% 27% 27% $13.1 $12.5 $13.0 $12.3 $12.2 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 26% 25% 28% 27% 25% 62% 61% 57% 56% 56% 12% 14% 15% 17% 19% $4.4 $4.3 $4.3 $4.2 $4.0 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 41% 42% 40% 42% 39% 45% 44% 45% 43% 44% 14% 14% 15% 15% 17% $4.6 $4.5 $4.5 $4.5 $4.6 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 —% —% 1% 1% —% 61% 61% 57% 48% 50% 39% 39% 42% 51% 50% $4.0 $3.7 $4.2 $3.7 $3.6 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023

 
11 34% 32% 29% 29% 28% 18% 18% 21% 23% 22% 48% 49% 50% 49% 50% $3.2 $3.4 $3.6 $3.6 $3.6 Bermuda Cayman UK and Channel Islands 2019 2020 2021 2022 Q2 2023 32% 29% 26% 24% 23% 2% 5% 7% 9% 8% 22% 18% 18% 21% 22% 45% 49% 48% 46% 47% $1.7 $1.6 $1.4 $1.4 $1.3 Commercial and Industrial Commercial Overdrafts Government Commercial Real Estate 2019 2020 2021 2022 Q2 2023 Residential Mortgage Loans (US$ Billions) Commercial Loans (US$ Billions) Loans 44% 44% 39% 37% 35% 18% 18% 20% 24% 24% 38% 38% 41% 39% 41% $5.1 $5.2 $5.2 $5.1 $5.0 Bermuda Cayman UK and Channel Islands 2019 2020 2021 2022 Q2 2023 Loan Portfolio Composition by Originating Segment (US$ Billions) 22% 20% 19% 43% 51% 78% 80% 81% 57% 49% $5.1 $5.2 $5.2 $5.1 $5.0 Fixed Floating 2019 2020 2021 2022 Q2 2023 Fixed vs. Floating Rate Loans (US$ Billions)

 
12 Loan-to-Deposit Ratio Balance Sheet Asset Mix Liquidity: Cash & Cash Equivalents** to Total Assets 39% 40% 39% 41% 41% 60% 62% 65% 67% NTB US Peer Median* Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 20% 18% 21% 19% 19% 6% 5% 4% 5% NTB US Peer Median* Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 • Butterfield takes a conservative approach to managing the liquidity and funding risk profile of its balance sheet. This involves the retention of a significant liquidity holding of cash or cash equivalent balances, comprised of interbank deposits and short-dated sovereign Canadian, UK and US Treasury Bills as well as maintaining significant liquidity facilities with correspondent banks • Butterfield also maintains capital, liquidity and funding buffers conservatively in excess of regulatory requirements * Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks. Q2 2023 peer information was not widely available at time of publication and therefore not included. ** Includes securities purchased under agreements to resell and short-term investments.

 
13 Asset Quality Non-Accrual Loans (In US$ millions) $62.2 $55.5 $58.1 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Res Mtg 70.8% Consumer 3.7% Comm’l R/E 12.1% Other Comm’l 8.0% Government 5.5% Loan Distribution 0.07% 0.01% 0.02% Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 0.00% 0.05% 0.10% 0.15% 0.20% Net Charge-Off Ratio AAA 95.2% AA 4.4% A 0.4% $5.0 billion $5.5 billion Investment Portfolio Rating Distribution • Investment portfolio continues to be of very high credit quality with 95% comprised of AAA rated securities, primarily US Government guaranteed mortgage backed securities • Non-accrual loans of 1.2% of gross loans compared to 1.1% in the prior quarter • Allowance for credit losses at $26.0 million representing an ACL/Total loans of 0.5% • The net charge-off ratio continues to be low at 0.02% of total gross loans

 
14 Interest Rate Sensitivity Interest Rate SensitivityAverage Balance - Balance Sheet Average Balances (US$Mil) Weighted Average Life Q2 2023 vs. Q1 2023 Duration vs. Q1 2023 Cash & Reverse Repos & S/T Invest. $ 2,488.2 $ (455.7) 0.2 — N/A AFS 1,970.7 (34.8) 3.3 (0.1) 4.3 HTM** 3,644.0 (70.6) 6.5 0.1 9.3 Total $ 8,102.9 $ (561.1) (5.0)% 1.7% 3.4% (2.2)% 2.4% 3.3% NTB US Peer Median * -100bps +100bps +200bps • Total investment portfolio duration was unchanged at 5.3 years compared to the prior quarter • Interest rate sensitivity has a slight bias towards asset sensitivity due to fixed-rate assets rolling over in the next few months • Unrealized losses on securities increased by $15.8 million during the quarter. As of June 30, 2023, the Bank had $207.3 million in net unrealized losses in the AFS portfolio, compared with net unrealized losses of $191.5 million as at the end of the first quarter of 2023. * Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks. Q1 2023 comparative data is used as Q2 2023 peer information was not widely available at time of publication. ** The HTM portfolio is comprised of securities with negative convexity which typically exhibit lower prepayment speeds when assuming higher future rates.

 
15 Capital Requirements and Dividend Return Leverage Capital • Regulatory capital levels remain conservatively above requirements • Quarterly dividend rate continues at $0.44 per common share • TCE/TA ratio of 6.5% has increased compared to 6.3% last quarter, due primarily to the change in deposit levels • TCE/TA ex-cash and ex-OCI are 7.5% and 9.2%, respectively Regulatory Capital (Basel III) - Total Capital Ratio* 25.1% 13.5% 14.5% Butterfield Current BMA Minimum US Peer Median*** *** Includes US banks identified by management as a peer group. Please see the Appendix for a list of these banks. Q1 2023 comparative data is used as Q2 2023 peer information was not widely available at time of publication. 7.5% 8.0% 6.5% 7.8% 1.0% 0.2% TCE/TA TCE/TA Ex Cash Butterfield - Current US Peer Median*** 60.5% 53.7% 40.7% 35.5% 2020 2021 2022 Q2 2023 Dividend Payout Ratio** * 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 regulatory capital over a period of 5 years. ** 2023 is based on year-to-date dividend and earnings per share

 
Appendix

 
17 Balance Sheet Movements Deposit Composition by Currency (US$ billions)Deposit Movements (US$ millions) $(165) $(805) Change vs Q1 2023 Change vs Q4 2022 Loan Movements (US$ millions) Loan Composition by Currency (US$ billions) -235 +70 $(20) $(90) Change vs Q1 2023 Change vs Q4 2022 Volume FX Translation 74% 75% 75% 21% 19% 19% 6% 6% 6% $13.1 $12.3 $12.2 USD / USD Pegged GBP Other Total deposits Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 62% 61% 60% 37% 38% 39% 1% 1% 1% $5.1 $5.0 $5.0 USD / USD Pegged GBP Other Total loans Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 -920 +115 -75 +55 -190 +100

 
18 (in millions of US Dollars, unless otherwise indicated) 2023 2022 2021 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Assets Cash and cash equivalents $ 1,795 $ 1,345 $ 2,101 $ 1,485 $ 1,340 $ 2,103 $ 2,180 $ 2,310 $ 2,766 Reverse Repos & S/T Investments 729 1,263 944 995 1,516 1,601 1,295 1,446 1,651 Investments 5,546 5,665 5,727 5,805 5,970 6,111 6,237 5,984 5,605 Loans, Net 5,003 5,022 5,096 4,992 5,139 5,068 5,241 5,204 5,221 Other Assets 435 438 437 422 386 383 382 389 421 Total Assets $ 13,510 $ 13,733 $ 14,306 $ 13,699 $ 14,350 $ 15,266 $ 15,335 $ 15,332 $ 15,665 Liabilities and Equity Total Deposits $ 12,192 $ 12,348 $ 12,991 $ 12,461 $ 13,075 $ 13,933 $ 13,870 $ 13,861 $ 14,193 Long-Term Debt 98 172 172 172 172 172 172 172 172 Other Liabilities 269 275 278 311 300 319 316 325 334 Total Liabilities $ 12,559 $ 12,796 $ 13,441 $ 12,944 $ 13,547 $ 14,424 $ 14,358 $ 14,358 $ 14,698 Common Equity $ 950 $ 937 $ 865 $ 755 $ 802 $ 842 $ 977 $ 974 $ 967 Total Equity $ 950 $ 937 $ 865 $ 755 $ 802 $ 842 $ 977 $ 974 $ 967 Total Liabilities and Equity $ 13,510 $ 13,733 $ 14,306 $ 13,699 $ 14,350 $ 15,266 $ 15,335 $ 15,332 $ 15,665 Key Metrics CET 1 Ratio 22.7 % 22.2 % 20.3 % 18.9 % 17.7 % 17.3 % 17.6 % 16.9 % 16.1 % Total Tier 1 Capital Ratio 22.7 % 22.2 % 20.3 % 18.9 % 17.7 % 17.3 % 17.6 % 16.9 % 16.1 % Total Capital Ratio 25.1 % 26.2 % 24.1 % 22.7 % 21.4 % 20.9 % 21.2 % 20.4 % 19.5 % Leverage ratio 7.6 % 7.2 % 6.7 % 6.4 % 5.8 % 5.5 % 5.6 % 5.5 % 5.2 % Risk-Weighted Assets (in $ millions) 4,628 4,604 4,843 4,780 4,854 5,043 5,101 5,185 5,321 Risk-Weighted Assets / total assets 34.3 % 33.5 % 33.9 % 34.9 % 33.8 % 33.0 % 33.3 % 33.8 % 34.0 % Tangible common equity ratio 6.5 % 6.3 % 5.6 % 5.0 % 5.1 % 5.0 % 5.8 % 5.8 % 5.6 % Book value per common share (in $) 19.34 18.80 17.42 15.21 16.17 16.97 19.83 19.68 19.49 Tangible book value per share (in $) 17.83 17.32 15.92 13.76 14.61 15.30 18.08 17.92 17.67 Non-accrual loans/gross loans 1.2 % 1.1 % 1.2 % 1.2 % 1.2 % 1.2 % 1.2 % 1.2 % 1.3 % Non-performing assets/total assets 0.7 % 0.6 % 0.5 % 0.5 % 0.5 % 0.5 % 0.5 % 0.5 % 0.6 % Allowance for credit losses/total loans 0.5 % 0.5 % 0.5 % 0.5 % 0.5 % 0.5 % 0.5 % 0.5 % 0.6 % Balance Sheet Trends

 
19 (in millions of US Dollars, unless otherwise indicated) Q2 2023 Q1 2023 Q2 2022 Assets Average balance ($) Interest ($) Average rate (%) Average balance ($) Interest ($) Average rate (%) Average balance ($) Interest ($) Average rate (%) Cash and cash equivalents, reverse repurchase agreements and short-term investments $ 2,488.2 $ 25.2 4.06 % $ 2,943.9 $ 27.1 3.74 % $ 3,364.5 $ 4.2 0.50 % Investment in securities 5,614.7 28.9 2.07 % 5,720.2 29.8 2.12 % 6,143.9 29.0 1.89 % AFS 1,970.7 8.8 1.78 % 2,005.6 8.9 1.80 % 2,759.9 9.6 1.40 % HTM 3,644.0 20.2 2.22 % 3,714.6 20.9 2.28 % 3,384.0 19.3 2.29 % Loans 4,984.1 79.8 6.42 % 5,040.7 77.5 6.23 % 5,066.9 56.5 4.48 % Commercial 1,396.7 23.0 6.59 % 1,409.8 22.6 6.51 % 1,455.3 17.3 4.76 % Consumer 3,587.4 56.8 6.35 % 3,630.9 54.9 6.13 % 3,611.6 39.3 4.36 % Total interest earning assets 13,087.0 133.9 4.10 % 13,704.7 134.5 3.98 % 14,575.4 89.7 2.47 % Other assets 402.0 395.9 359.1 Total assets $ 13,489.0 $ 14,100.7 $ 14,934.5 Liabilities Deposits $ 9,308.0 $ (38.5) (1.66) % $ 9,786.5 $ (34.7) (1.44) % $ 10,590.3 $ (5.4) (0.20) % Securities sold under agreement to repurchase 0.4 — (5.45) % 0.4 — (4.50) % — — — % Long-term debt 147.4 (2.9) (8.02) % 172.3 (2.4) (5.65) % 172.0 (2.4) (5.60) % Interest bearing liabilities 9,455.8 (41.4) (1.76) % 9,959.2 (37.1) (1.51) % 10,762.3 (7.8) (0.29) % Non-interest bearing customer deposits 2,863.2 2,993.5 2,997.8 Other liabilities 243.6 241.1 300.8 Total liabilities $ 12,562.6 $ 13,193.7 $ 14,061.0 Shareholders’ equity 926.4 906.9 873.6 Total liabilities and shareholders’ equity $ 13,489.0 $ 14,100.7 $ 14,934.5 Non-interest bearing funds net of non- interest earning assets (free balance) $ 3,631.2 $ 3,745.6 $ 3,813.1 Net interest margin $ 92.5 2.83 % $ 97.4 2.88 % $ 82.0 2.26 % Average Balance Sheet Trends

 
20 (in millions of US Dollars, unless otherwise indicated) 2023 2022 2021 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Net Interest Income $ 92.5 $ 97.4 $ 94.6 $ 91.2 $ 82.0 $ 75.9 $ 74.5 $ 75.7 $ 74.7 Non-Interest Income 50.2 50.2 54.9 49.9 51.8 49.9 52.7 49.0 48.8 Prov. for Credit (Losses) Recovery (1.5) (0.7) (1.6) (0.8) (0.7) 0.7 0.6 — 1.0 Non-Interest Expenses* 84.1 84.8 85.4 82.9 84.0 82.9 84.6 85.2 85.6 Other Gains (Losses) 4.0 0.1 0.6 0.1 0.1 0.8 (1.6) 0.3 0.7 Net Income $ 61.0 $ 62.2 $ 63.1 $ 57.4 $ 49.1 $ 44.4 $ 41.7 $ 39.8 $ 39.6 Non-Core Items** $ (4.0) $ — $ 0.1 $ 0.2 $ 1.1 $ 0.3 $ 0.1 $ 0.2 $ 0.5 Core Net Income** $ 57.0 $ 62.2 $ 63.2 $ 57.6 $ 50.2 $ 44.7 $ 41.7 $ 40.0 $ 40.1 Key Metrics Loan Yield 6.42 % 6.23 % 5.79 % 5.05 % 4.48 % 4.26 % 4.18 % 4.22 % 4.28 % Securities Yield 2.07 2.12 2.03 1.94 1.89 1.79 1.65 1.77 1.82 Cost of Deposits 1.27 1.10 0.78 0.34 0.16 0.12 0.12 0.11 0.10 Net Interest Margin 2.83 2.88 2.79 2.59 2.26 2.03 2.00 1.97 2.01 Core Efficiency Ratio** 57.6 56.0 55.6 57.0 60.2 63.7 64.7 66.3 66.3 Core ROATCE** 26.3 30.5 34.9 31.6 27.8 21.9 18.8 17.9 18.7 Fee Income Ratio 35.5 34.2 37.1 35.6 38.9 39.5 41.2 39.3 39.2 Fully Diluted Share Count (in millions of common shares) 49.9 50.1 50.0 49.8 49.8 49.8 49.8 49.9 49.9 * Includes income taxes ** See the reconciliation of non-GAAP measures on pages 23-24 Income Statement Trends

 
21 (in millions of US Dollars, unless otherwise indicated) 2023 2022 2021 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Non-Interest Income Asset Management $ 8.2 $ 7.9 $ 7.4 $ 7.4 $ 7.4 $ 7.5 $ 7.6 $ 7.4 $ 7.4 Banking 12.6 13.6 17.5 14.1 12.9 12.7 15.4 12.6 12.5 FX Revenue 11.3 10.7 11.5 11.8 12.0 12.4 10.9 10.8 10.5 Trust 14.3 12.8 13.7 12.6 13.3 12.7 14.2 12.9 13.0 Custody & Other Admin. 3.3 3.3 3.4 3.3 3.3 3.6 3.9 3.7 3.8 Other 0.5 1.8 1.4 0.7 2.8 1.0 0.8 1.5 1.5 Total Non-Interest Income $ 50.2 $ 50.2 $ 54.9 $ 49.9 $ 51.8 $ 49.9 $ 52.7 $ 49.0 $ 48.8 Non-Interest Expense Salaries & Benefits* $ 42.6 $ 43.7 $ 44.7 $ 42.0 $ 42.3 $ 41.0 $ 41.1 $ 42.0 $ 43.2 Technology & Comm. 14.9 13.9 14.3 14.3 14.0 14.1 15.7 16.3 15.7 Professional & O/S Services 4.8 5.0 4.3 4.8 5.4 5.1 5.6 5.7 4.9 Property 7.5 7.4 8.0 7.9 7.6 7.9 8.0 7.8 7.6 Indirect Taxes 5.3 5.7 5.4 5.2 5.5 5.9 5.5 5.4 5.4 Marketing 1.7 1.5 1.8 1.5 1.6 1.5 1.2 0.9 1.0 Intangible Amortization 1.4 1.4 1.4 1.4 1.4 1.5 1.5 1.5 1.5 Other 5.4 5.3 4.7 4.9 5.2 5.0 5.2 4.8 5.4 Total Non-Interest Expense $ 83.5 $ 84.1 $ 84.7 $ 82.0 $ 83.0 $ 82.0 $ 83.8 $ 84.4 $ 84.8 Income Taxes 0.5 0.7 0.7 0.9 1.1 1.0 0.8 0.8 0.8 Total Expense incld. Taxes $ 84.1 $ 84.8 $ 85.4 $ 82.9 $ 84.0 $ 82.9 $ 84.6 $ 85.2 $ 85.6 *Includes non-service employee benefits Non-Interest Income & Expense Trends

 
22 (in millions of US Dollars, unless otherwise indicated) 2023 2022 2021 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Salaries & Benefits** $ 42.6 $ 43.7 $ 44.7 $ 42.0 $ 41.2 $ 41.0 $ 41.1 $ 42.0 $ 41.8 Technology & Comm. 14.9 13.9 14.3 14.3 14.0 14.1 15.7 16.3 15.7 Professional & O/S Services 4.7 5.0 4.2 4.7 5.4 4.9 5.5 5.6 4.9 Property 7.5 7.4 8.0 7.9 7.6 7.9 8.0 7.8 7.6 Indirect Taxes 5.3 5.7 5.4 5.2 5.5 5.9 5.5 5.4 5.4 Marketing 1.7 1.5 1.8 1.5 1.6 1.5 1.2 0.9 1.0 Intangible Amortization 1.4 1.4 1.4 1.4 1.4 1.5 1.5 1.5 1.5 Other 5.4 5.3 4.7 4.9 5.2 4.8 5.2 4.7 5.4 Total Core Non-Interest Expense* $ 83.6 $ 84.1 $ 84.5 $ 81.8 $ 81.9 $ 81.6 $ 83.7 $ 84.2 $ 83.4 Income Taxes 0.5 0.7 0.7 0.9 1.1 1.0 0.8 0.8 0.8 Total Core Expense incld. Taxes* $ 84.1 $ 84.8 $ 85.3 $ 82.8 $ 83.0 $ 82.6 $ 84.5 $ 84.9 $ 84.2 * See the reconciliation of non-GAAP measures on pages 23-24 ** Includes non-service employee benefits Core Non-Interest Expense* Trends

 
23 (in millions of US Dollars, unless otherwise indicated) 2023 2022 Q2 Q1 Q4 Q3 Q2 Net income A $ 61.0 $ 62.2 $ 63.1 $ 57.4 $ 49.1 Non-core (gains), losses and expenses Non-core (gains) losses Liquidation settlement from an investment previously written-off (4.0) — — — — Total non-core (gains) losses B $ (4.0) $ — $ — $ — $ — Non-core expenses Early retirement program, voluntary separation, redundancies and other non-core compensation costs — — — — 1.0 Tax compliance review costs — — 0.1 0.2 — Total non-core expenses C $ — $ — $ 0.1 $ 0.2 $ 1.1 Total non-core (gains), losses and expenses D=B+C (4.0) — 0.1 0.2 1.1 Core net income to common shareholders E=A+D $ 57.0 $ 62.2 $ 63.2 $ 57.6 $ 50.2 Average shareholders' equity 943.3 902.5 791.2 799.0 804.6 Average common equity F 943.3 902.5 791.2 799.0 804.6 Less: average goodwill and intangible assets (74.0) (74.2) (73.4) (75.1) (80.0) Average tangible common equity G 869.3 828.3 717.8 723.9 724.6 Return on equity A/F 25.9 % 28.0 % 31.6 % 28.5 % 24.5 % Core return on average tangible common equity E/G 26.3 % 30.5 % 34.9 % 31.6 % 27.8 % Core earnings per common share fully diluted Adjusted weighted average number of diluted common shares (in thousands) H 49.9 50.1 50.0 49.8 49.8 Earnings per common share fully diluted A/H 1.22 1.24 1.26 1.15 0.99 Non-core items per share D/H (0.08) — 0.01 0.01 0.02 Core earnings per common share fully diluted E/H 1.14 1.24 1.27 1.16 1.01 Core return on average tangible assets Total average assets I $ 13,660.8 $ 14,115.6 $ 13,863.7 $ 14,160.1 $ 14,793.3 Less: average goodwill and intangible assets (74.0) (74.2) (73.4) (75.1) (80.0) Average tangible assets J $ 13,586.8 $ 14,041.4 $ 13,790.3 $ 14,085.0 $ 14,713.3 Return on average assets A/I 1.8 % 1.8 % 1.8 % 1.6 % 1.3 % Core return on average tangible assets E/J 1.7 % 1.8 % 1.8 % 1.6 % 1.4 % Non-GAAP Reconciliation

 
24 (in millions of US Dollars, unless otherwise indicated) 2023 2022 Q2 Q1 Q4 Q3 Q2 Tangible equity to tangible assets Shareholders' equity K $ 950.3 $ 936.9 $ 864.8 $ 754.9 $ 802.4 Less: goodwill and intangible assets (74.0) (74.1) (74.4) (71.9) (77.5) Tangible common equity L 876.3 862.8 790.4 683.0 725.0 Total assets M 13,509.5 13,732.7 14,306.1 13,699.3 14,349.9 Less: goodwill and intangible assets (74.0) (74.1) (74.4) (71.9) (77.5) Tangible assets N $ 13,435.5 $ 13,658.6 $ 14,231.7 $ 13,627.5 $ 14,272.5 Tangible common equity to tangible assets L/N 6.5 % 6.3 % 5.6 % 5.0 % 5.1 % Tangible book value per share Basic participating shares outstanding (in millions) O 49.1 49.8 49.7 49.6 49.6 Tangible book value per common share L/O 17.83 17.32 15.92 13.76 14.61 Efficiency ratio Non-interest expenses $ 83.5 $ 84.1 $ 84.7 $ 82.0 $ 83.0 Less: Amortization of intangibles (1.4) (1.4) (1.4) (1.4) (1.4) Non-interest expenses before amortization of intangibles P 82.1 82.7 83.3 80.6 81.6 Non-interest income 50.2 50.2 54.9 49.9 51.8 Net interest income before provision for credit losses 92.5 97.4 94.6 91.2 82.0 Net revenue before provision for credit losses and other gains/losses Q $ 142.6 $ 147.5 $ 149.5 $ 141.1 $ 133.8 Efficiency ratio P/Q 57.6 % 56.0 % 55.7 % 57.1 % 61.0 % Core efficiency ratio Non-interest expenses $ 83.5 $ 84.1 $ 84.7 $ 82.0 $ 83.0 Less: non-core expenses (C) — — (0.1) (0.2) (1.1) Less: amortization of intangibles (1.4) (1.4) (1.4) (1.4) (1.4) Core non-interest expenses before amortization of intangibles R 82.1 82.7 83.1 80.4 80.5 Net revenue before provision for credit losses and other gains/losses Q 142.6 147.5 149.5 141.1 133.8 Core efficiency ratio R/Q 57.6 % 56.0 % 55.6 % 57.0 % 60.2 % Non-GAAP Reconciliation (continued)

 
25 Our peer group includes the following banks, noted by their ticker symbols: Peer Group • First Hawaiian, Inc. (FHB) • Bank of Hawaii Corporation (BOH) • East West Bancorp, Inc. (EWBC) • Cullen/Frost Bankers, Inc. (CFR) • Associated Banc-Corp (ASB) • Wintrust Financial Corporation (WTFC) • Commerce Bancshares, Inc. (CBSH) • Trustmark Corporation (TRMK) • International Bancshares Corporation (IBOC) • Community Bank System, Inc. (CBU) • First Financial Bankshares, Inc. (FFIN) • Westamerica Bancorporation (WABC) • UMB Financial Corporation (UMBF)

 
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