UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ...

Financial Performance - Full Year 2021 - Net income was $162.7 million[9], a 10.5% increase compared to 2020[9] - Core net income reached $163.6 million[9], a 5.9% increase compared to 2020[9] - Return on average common equity was 16.8%, and core return on average tangible common equity was 18.7%[10] - Net interest income was $299.8 million[9] - Non-interest income was $198.1 million[9], a 14.2% increase compared to 2020[9] Financial Performance - Fourth Quarter 2021 - Net income and core net income were both $41.7 million[18], a 4.7% increase compared to Q3 2021[18] - Core return on average tangible common equity was 18.8%[18] - Net interest income was $74.5 million[18] - Non-interest income was $52.7 million[18], a 4.9% increase compared to Q3 2021[18] Balance Sheet and Capital - Total assets were $15.335 billion[40] - Total deposits were $13.9 billion[44] - The bank's balance sheet remains efficient and conservative with a low risk density (risk weighted assets/total assets) of 33.3%[44]

The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) Q4 2021 Earnings Conference Call February 15, 2022 10:00 AM ET Company Participants Noah Fields ??? Vice President, Investor Relations Michael Collins ??? Chairman and Chief Executive Officer Michael Schrum ??? Group Chief Financial Officer Conference Call Participants Tim Switzer ??? KBW Timur Braziler ??? Wells Fargo David Feaster ??? Raymond James Alex Twerdahl ??? Piper Sandler Operator Good morning. My name is Matt and I will be your conference oper ...

| --- | --- | --- | --- | |------------------------------------------------------------------------------------------------------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | Third Quarter 2021 Earnings Presentation The Bank of N.T. Butterfield & Son Limited October 28, 2021 | | | | | | | | | 合 三 元 号 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 Litig ...

The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) Q3 2021 Earnings Conference Call October 28, 2021 10:00 AM ET Company Participants Noah Fields - Vice President, Investor Relations Michael Collins - Chairman and Chief Executive Officer Michael Schrum - Group Chief Financial Officer Conference Call Participants Tim Switzer - KBW Timur Braziler - Wells Fargo Jeffrey Kitsis - Piper Sandler Operator Good morning. My name is Tom, and I will be your conference operator today. At this time, I would like to we ...

[INDEX TO FINANCIAL STATEMENTS](index=2&type=section&id=INDEX%20TO%20FINANCIAL%20STATEMENTS) [Consolidated Balance Sheets (unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20(unaudited)) As of September 30, 2021, total assets and liabilities increased, cash decreased, investments and loans rose, and shareholders' equity slightly declined due to expanded other comprehensive loss | Metric | Sep 30, 2021 (Thousands of USD) | Dec 31, 2020 (Thousands of USD) | Change (Thousands of USD) | Change (%) | | :----------------------------------- | :------------------------------ | :------------------------------ | :------------------------ | :--------- | | **Assets** | | | | | | Cash and non-interest-bearing demand deposits | 203,784 | 133,363 | 70,421 | 52.80 | | Interest-bearing cash equivalents | 1,655,734 | 2,722,718 | (1,066,984) | -39.19 | | Cash due from banks | 2,309,502 | 3,289,592 | (980,090) | -29.79 | | Short-term investments | 1,276,562 | 823,039 | 453,523 | 55.10 | | Total investment securities | 5,983,693 | 4,862,804 | 1,120,889 | 23.05 | | Net loans | 5,203,788 | 5,160,810 | 42,978 | 0.83 | | **Liabilities** | | | | | | Total deposits | 13,861,154 | 13,250,084 | 611,070 | 4.61 | | Long-term debt | 171,773 | 171,462 | 311 | 0.18 | | Total liabilities | 14,358,280 | 13,756,686 | 601,594 | 4.37 | | **Shareholders' Equity** | | | | | | Retained earnings | 86,652 | 33,918 | 52,734 | 155.47 | | Accumulated other comprehensive income (loss) | (112,864) | (49,680) | (63,184) | 127.19 | | Total shareholders' equity | 973,886 | 981,948 | (8,062) | -0.82 | | **Total Liabilities and Shareholders' Equity** | 15,332,166 | 14,738,634 | 593,532 | 4.03 | [Consolidated Statements of Operations (unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20(unaudited)) Net income and EPS grew for the three and nine months ended September 30, 2021, driven by higher non-interest and net interest income, and lower expenses | Metric (Thousands of USD) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | YoY Change (%) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | YoY Change (%) | | :----------------------------------- | :------------------------------ | :------------------------------ | :------------- | :----------------------------- | :----------------------------- | :------------- | | Total non-interest income | 49,017 | 46,877 | 4.57 | 145,433 | 136,097 | 6.86 | | Total interest income | 82,002 | 82,358 | -0.43 | 243,944 | 270,071 | -9.67 | | Total interest expense | 6,321 | 7,045 | -10.28 | 18,654 | 28,052 | -33.50 | | Net interest income before provision for credit losses | 75,681 | 75,313 | 0.49 | 225,290 | 242,019 | -6.91 | | Provision for credit losses (recovery) | (4) | (1,355) | -99.71 | 2,521 | (10,891) | -123.15 | | Net interest income after provision for credit losses | 75,677 | 73,958 | 2.32 | 227,811 | 231,128 | -1.39 | | Total other net gains (losses) | 274 | 1,512 | -81.88 | 204 | 1,616 | -87.37 | | Total net income | 124,968 | 122,347 | 2.14 | 373,448 | 368,841 | 1.25 | | Total non-interest expense | 84,411 | 91,262 | -7.49 | 250,091 | 261,377 | -4.32 | | Net income before income tax | 40,557 | 31,085 | 30.47 | 123,357 | 107,464 | 14.79 | | Income tax benefit (expense) | (774) | (542) | 42.80 | (2,344) | (2,310) | 1.47 | | Net income | 39,783 | 30,543 | 30.25 | 121,013 | 105,154 | 15.08 | | Basic earnings per share | 0.80 | 0.61 | 31.15 | 2.44 | 2.07 | 17.87 | | Diluted earnings per share | 0.80 | 0.61 | 31.15 | 2.42 | 2.06 | 17.48 | [Consolidated Statements of Comprehensive Income (unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(unaudited)) Net income grew, but total comprehensive income (loss) significantly decreased for the three and nine months ended September 30, 2021, due to a substantial decline in other comprehensive income (loss) from AFS investments | Metric (Thousands of USD) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | YoY Change (%) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | YoY Change (%) | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :------------- | :----------------------------- | :----------------------------- | :------------- | | Net income | 39,783 | 30,543 | 30.25 | 121,013 | 105,154 | 15.08 | | Other comprehensive income (loss), net of tax | (10,980) | 4,015 | -373.38 | (63,184) | 63,328 | -199.77 | | **Total comprehensive income (loss)** | 28,803 | 34,558 | -16.65 | 57,829 | 168,482 | -65.79 | [Consolidated Statements of Changes in Shareholders' Equity (unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(unaudited)) For the nine months ended September 30, 2021, total shareholders' equity slightly decreased, as significant growth in retained earnings from net income was offset by expanded accumulated other comprehensive loss and increased treasury stock | Metric (Thousands of USD) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change (Thousands of USD) | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------------------ | | Common share capital | 501 | 501 | 0 | | Additional paid-in capital | 1,018,231 | 1,012,902 | 5,329 | | Retained earnings | 86,652 | 14,628 | 72,024 | | Less: Treasury common shares | (18,634) | (15,352) | (3,282) | | Accumulated other comprehensive income (loss) | (112,864) | (23,769) | (89,095) | | **Total shareholders' equity** | 973,886 | 988,910 | (15,024) | - The company distributed **$1.32 per common share in cash dividends** for the nine months ended September 30, 2021, consistent with the prior year period[13](index=13&type=chunk) [Consolidated Statements of Cash Flows (unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) For the nine months ended September 30, 2021, operating cash flow grew strongly, but investing cash outflows significantly increased due to higher purchases of short-term and available-for-sale/held-to-maturity investments, while financing cash flow turned positive driven by net deposit increases | Metric (Thousands of USD) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change (Thousands of USD) | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------------------ | | Net cash provided by operating activities | 179,678 | 153,415 | 26,263 | | Net cash used in investing activities | (1,745,258) | 19,633 | (1,764,891) | | Net cash provided by (used in) financing activities | 584,827 | (543,714) | 1,128,541 | | Effect of exchange rate on cash and cash equivalents | (70) | (22,696) | 22,626 | | Net increase (decrease) in cash and cash equivalents | (980,823) | (393,362) | (587,461) | | Cash and cash equivalents at end of period | 2,333,675 | 2,185,540 | 148,135 | - Investing cash outflows significantly increased, primarily due to short-term investment purchases rising from **$1,311,306 thousand in 2020 to $2,285,207 thousand in 2021**, alongside substantial increases in purchases of available-for-sale and held-to-maturity investments[16](index=16&type=chunk) - Financing cash flow shifted from a **net outflow of $543,714 thousand in the prior year period to a net inflow of $584,827 thousand in 2021**, primarily driven by a **net increase in deposits of $662,316 thousand**[16](index=16&type=chunk) [Notes to the Consolidated Financial Statements (unaudited)](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(unaudited)) [Note 1: Nature of Business](index=8&type=section&id=Note%201%3A%20Nature%20of%20business) Butterfield Bank is a full-service banking and wealth management company headquartered in Hamilton, Bermuda, regulated by the Bermuda Monetary Authority, operating across Bermuda, the Cayman Islands, the Channel Islands, and the UK, offering retail and corporate banking, trust, private banking, and asset management services, with its common shares listed on the NYSE and BSX - Butterfield Bank is a full-service banking and wealth management company headquartered in Hamilton, Bermuda, regulated by the Bermuda Monetary Authority (BMA) and adhering to Basel principles[19](index=19&type=chunk) - The company operates across three primary geographic regions: Bermuda, the Cayman Islands, the Channel Islands, and the UK, with additional operations in the Bahamas, Canada, Mauritius, Singapore, and Switzerland[20](index=20&type=chunk) - Butterfield offers banking services, including retail and corporate banking, and wealth management services, encompassing trust, private banking, and asset management[20](index=20&type=chunk) - The company's common shares are listed on the New York Stock Exchange (ticker 'NTB') and the Bermuda Stock Exchange (ticker 'NTB.BH')[21](index=21&type=chunk) [Note 2: Significant Accounting Policies](index=8&type=section&id=Note%202%3A%20Significant%20accounting%20policies) These unaudited consolidated interim financial statements are prepared under US GAAP, relying on management's estimates for assets, liabilities, income, and expenses, with critical policies including credit loss allowances, fair value and impairment of financial instruments, goodwill impairment, and employee benefit and share-based payment plans - The unaudited consolidated interim financial statements are prepared in accordance with US Generally Accepted Accounting Principles (GAAP) and should be read in conjunction with the audited financial statements for the year ended December 31, 2020[22](index=22&type=chunk) - Management considers the most critical accounting policies to include allowances for credit losses, fair value and impairment of financial instruments, impairment of long-lived assets and goodwill, employee benefit plans, and share-based payments[24](index=24&type=chunk)[27](index=27&type=chunk) - ASU 2021-06, issued in August 2021, did not have a material impact on the bank's consolidated financial statements[25](index=25&type=chunk) [Note 3: Cash Due from Banks](index=8&type=section&id=Note%203%3A%20Cash%20due%20from%20banks) As of September 30, 2021, total cash due from banks decreased to **$2,309,502 thousand** from **$3,289,592 thousand** on December 31, 2020, with non-interest-bearing cash and demand deposits increasing while interest-bearing cash equivalents and demand deposits decreased | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Non-interest-bearing cash and demand deposits | 203,784 | 133,363 | 70,421 | 52.80 | | Interest-bearing demand deposits | 449,984 | 433,511 | 16,473 | 3.80 | | Interest-bearing cash equivalents | 1,655,734 | 2,722,718 | (1,066,984) | -39.19 | | Interest-bearing subtotal | 2,105,718 | 3,156,229 | (1,050,511) | -33.29 | | **Total cash due from banks** | 2,309,502 | 3,289,592 | (980,090) | -29.79 | [Note 4: Short-Term Investments](index=9&type=section&id=Note%204%3A%20Short-term%20investments) As of September 30, 2021, total short-term investments significantly increased to **$1,276,562 thousand** from December 31, 2020, driven by a substantial rise in unrestricted short-term investments, partially offset by a slight decrease in restricted short-term investments | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Total unrestricted short-term investments | 1,252,389 | 798,133 | 454,256 | 56.91 | | Total restricted short-term investments | 24,173 | 24,906 | (733) | -2.94 | | **Total short-term investments** | 1,276,562 | 823,039 | 453,523 | 55.10 | [Note 5: Investment in Securities](index=9&type=section&id=Note%205%3A%20Investment%20in%20securities) As of September 30, 2021, total investment in securities significantly increased, driven by available-for-sale and held-to-maturity investments, with a substantial rise in unrealized losses on available-for-sale investments attributed by management to market interest rate changes rather than credit quality deterioration, alongside disclosures on maturity structure, pledged investments, and realized gains/losses from equity and available-for-sale securities sales | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Fair value of equity securities | 222 | 7,317 | (7,095) | -97.00 | | Fair value of available-for-sale securities | 3,227,944 | 2,661,116 | 566,828 | 21.30 | | Fair value of held-to-maturity securities | 2,803,129 | 2,304,756 | 498,373 | 21.62 | | **Total investment in securities** | 5,983,693 | 4,862,804 | 1,120,889 | 23.05 | - As of September 30, 2021, **64.8% of available-for-sale (AFS) debt securities** were in an unrealized loss position (compared to 5.9% on December 31, 2020), with total unrealized AFS losses representing **1.8% of the fair value of affected securities** (0.7% on December 31, 2020)[32](index=32&type=chunk) - Management believes that unrealized losses are primarily attributable to changes in market interest rates rather than a deterioration in the credit quality of investment securities, with issuers continuing to make timely principal and interest payments[34](index=34&type=chunk) [Amortized Cost, Carrying Amount, and Fair Value](index=9&type=section&id=Amortized%20Cost%2C%20Carrying%20Amount%20and%20Fair%20Value) This section details the amortized cost, unrealized gains/losses, and fair value for equity securities, available-for-sale (AFS) investments, and held-to-maturity (HTM) investments, with equity and AFS securities presented at fair value and HTM investments at amortized cost | Security Type | Amortized Cost Sep 30, 2021 (Thousands of USD) | Fair Value Sep 30, 2021 (Thousands of USD) | Amortized Cost Dec 31, 2020 (Thousands of USD) | Fair Value Dec 31, 2020 (Thousands of USD) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Equity securities | 724 | 222 | 5,274 | 7,317 | | Available-for-sale securities | 3,222,560 | 3,227,944 | 2,588,335 | 2,661,116 | | Held-to-maturity securities | 2,755,527 | 2,803,129 | 2,194,371 | 2,304,756 | [Investments with Unrealized Loss Positions](index=9&type=section&id=Investments%20with%20Unrealized%20Loss%20Positions) As of September 30, 2021, both available-for-sale (AFS) and held-to-maturity (HTM) debt securities held unrealized losses, which management attributes to market interest rate changes rather than credit deterioration, maintaining confidence in the credit quality of US government, federal agency, non-US government, and student loan asset-backed securities - As of September 30, 2021, **64.8% of AFS debt securities** (2020: 5.9%) were in an unrealized loss position, with total unrealized losses representing **1.8% of the fair value of affected securities** (2020: 0.7%)[32](index=32&type=chunk) - As of September 30, 2021, **53.8% of HTM debt securities** (2020: 1.7%) were in an unrealized loss position, with total unrealized losses representing **1.9% of the fair value of affected securities** (2020: 0.4%)[33](index=33&type=chunk) - Management believes that all US government and federal agency securities, non-US government debt securities, and asset-backed securities (student loans) have no credit losses due to government guarantees or sufficient credit support[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [Investment Maturities](index=10&type=section&id=Investment%20Maturities) This section presents the remaining contractual maturities of the company's investment securities, including available-for-sale and held-to-maturity securities, with most available-for-sale securities maturing within 1 to 5 years or having no specific maturity, while held-to-maturity securities are primarily concentrated in maturities over 5 years | Security Type | Within 3 Months (Thousands of USD) | 3 to 12 Months (Thousands of USD) | 1 to 5 Years (Thousands of USD) | 5 to 10 Years or No Stated Maturity (Thousands of USD) | Carrying Value (Thousands of USD) | | :--------------------------- | :------------------------------- | :-------------------------------- | :------------------------------ | :----------------------------------------------------- | :-------------------------- | | **Available-for-sale** | | | | | | | US government and federal agencies | — | — | 501,307 | 2,659,747 | 3,161,054 | | Non-US government debt securities | — | — | 22,392 | — | 22,392 | | Asset-backed securities - student loans | — | — | — | 12,875 | 12,875 | | Residential mortgage-backed securities | — | — | — | 31,623 | 31,623 | | **Held-to-maturity** | | | | | | | US government and federal agencies | — | — | — | 2,755,527 | 2,755,527 | [Pledged Investments](index=10&type=section&id=Pledged%20Investments) The company pledged certain US government and federal agency investment securities to further secure its issued customer deposit products, with changes in amortized cost and fair value for both available-for-sale and held-to-maturity pledged investments as of September 30, 2021 | Pledged Investment Type | Amortized Cost Sep 30, 2021 (Thousands of USD) | Fair Value Sep 30, 2021 (Thousands of USD) | Amortized Cost Dec 31, 2020 (Thousands of USD) | Fair Value Dec 31, 2020 (Thousands of USD) | | :--------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Available-for-sale | 861 | 907 | 1,387 | 1,456 | | Held-to-maturity | 34,344 | 33,193 | 2,460 | 2,623 | [Sale Proceeds and Realized Gains and Losses of Equity Securities](index=11&type=section&id=Sale%20Proceeds%20and%20Realized%20Gains%20and%20Losses%20of%20Equity%20Securities) For the nine months ended September 30, 2021, the company sold mutual funds, resulting in realized gains and losses, with no comparable transactions in the prior year period | Security Type | Sale Proceeds Nine Months Ended Sep 30, 2021 (Thousands of USD) | Realized Gains Nine Months Ended Sep 30, 2021 (Thousands of USD) | Realized Losses Nine Months Ended Sep 30, 2021 (Thousands of USD) | | :--------------------------- | :---------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | Mutual funds | 7,179 | 124 | (26) | [Sale Proceeds and Realized Gains and Losses of AFS Securities](index=11&type=section&id=Sale%20Proceeds%20and%20Realized%20Gains%20and%20Losses%20of%20AFS%20Securities) For the nine months ended September 30, 2021, the company sold available-for-sale US government and federal agency securities, generating realized gains and losses, with both sale proceeds and realized gains decreasing, and realized losses increasing, compared to the prior year period | Security Type | Sale Proceeds Nine Months Ended Sep 30, 2021 (Thousands of USD) | Realized Gains Nine Months Ended Sep 30, 2021 (Thousands of USD) | Realized Losses Nine Months Ended Sep 30, 2021 (Thousands of USD) | | :--------------------------- | :---------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | US government and federal agencies | 189,417 | 1,563 | (1,802) | | Security Type | Sale Proceeds Nine Months Ended Sep 30, 2020 (Thousands of USD) | Realized Gains Nine Months Ended Sep 30, 2020 (Thousands of USD) | Realized Losses Nine Months Ended Sep 30, 2020 (Thousands of USD) | | :--------------------------- | :---------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | US government and federal agencies | 349,699 | 1,171 | (55) | [Taxability of Interest Income](index=11&type=section&id=Taxability%20of%20Interest%20Income) Interest income from all company investments does not receive specific preferential income tax treatment in any jurisdiction - Interest income from all company investments does not receive specific preferential income tax treatment in any jurisdiction[50](index=50&type=chunk) [Note 6: Loans](index=11&type=section&id=Note%206%3A%20Loans) As of September 30, 2021, total loans increased slightly to **$5,232,463 thousand** from December 31, 2020, with this section detailing loan credit quality classifications, delinquency status, changes in allowances for credit losses, collateral-dependent loans, COVID-19 loan deferral programs, and information on non-performing loans and troubled debt restructurings (TDRs) | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Total loans | 5,232,463 | 5,194,908 | 37,555 | 0.72 | | Allowances for credit losses | (28,675) | (34,098) | 5,423 | -15.90 | | Net loans | 5,203,788 | 5,160,810 | 42,978 | 0.83 | | Effective yield on loans | 4.01% | 4.13% | -0.12% | -2.91 | | Total past due loans | 106,939 | 97,978 | 8,961 | 9.15 | | Total non-performing loans | 80,623 | 91,602 | (10,979) | -11.99 | | Total TDRs outstanding | 79,090 | 84,140 | (5,050) | -6.00 | - For the nine months ended September 30, 2021, allowances for credit losses decreased by **$2,946 thousand**, primarily due to changes in macroeconomic factors and the repayment of certain commercial loans[66](index=66&type=chunk)[67](index=67&type=chunk) [Loans' Credit Quality](index=11&type=section&id=Loans'%20Credit%20Quality) The company classifies loans into four categories based on internal credit ratings: pass, special mention, substandard, and non-accrual, with most loans remaining in the pass category as of September 30, 2021, despite increases in amortized cost for special mention and substandard loans | Credit Quality Classification (Thousands of USD) | Amortized Cost Sep 30, 2021 | Amortized Cost Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------------------ | :---------- | | Pass | 4,927,986 | 4,843,953 | 84,033 | 1.73 | | Special mention | 150,082 | 190,274 | (40,192) | -21.12 | | Substandard | 90,610 | 88,190 | 2,420 | 2.74 | | Non-accrual | 63,785 | 72,491 | (8,706) | -12.01 | | **Total amortized cost of loans** | 5,232,463 | 5,194,908 | 37,555 | 0.72 | [Age Analysis of Past Due Loans (Including Non-Accrual Loans)](index=13&type=section&id=Age%20Analysis%20of%20Past%20Due%20Loans%20(Including%20Non-Accrual%20Loans)) As of September 30, 2021, total past due loans increased to **$106,939 thousand** from December 31, 2020, with residential mortgages representing the largest portion of delinquencies and a significant amount of loans past due for over 90 days | Past Due Status (Thousands of USD) | Total Past Due Loans Sep 30, 2021 | Total Past Due Loans Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | :---------- | | Commercial loans | 19,014 | 18,425 | 589 | 3.20 | | Commercial real estate loans | 5,377 | 7,010 | (1,633) | -23.30 | | Consumer loans | 2,270 | 2,259 | 11 | 0.49 | | Residential mortgage loans | 80,278 | 70,284 | 9,994 | 14.22 | | **Total amortized cost of past due loans** | 106,939 | 97,978 | 8,961 | 9.15 | [Changes in Allowances For Credit Losses](index=14&type=section&id=Changes%20in%20Allowances%20For%20Credit%20Losses) For the nine months ended September 30, 2021, total allowances for credit losses decreased from **$34,098 thousand** at the beginning of the period to **$28,675 thousand** at the end, primarily due to a reduction in provisions and increased charge-offs, partially offset by recoveries | Metric (Thousands of USD) | Nine Months Ended Sep 30, 2021 | | :--------------------------- | :----------------------------- | | Beginning balance | 34,098 | | Provision for (reduction in) allowances | (2,946) | | Recoveries of previous charge-offs | 1,250 | | Charge-offs | (3,693) | | Other | (34) | | **Ending allowances for credit losses** | 28,675 | - The decrease in allowances for credit losses is primarily attributed to changes in macroeconomic factors, such as GDP forecasts, and the repayment of certain commercial loans[66](index=66&type=chunk) [Collateral-Dependent Loans](index=14&type=section&id=Collateral-dependent%20loans) Management has identified certain commercial and consumer collateral-dependent loans whose repayment relies primarily on the operation or sale of the collateral, and the company believes that for the vast majority of these loans, the sale of collateral would be sufficient to fully repay the loan's carrying value - Management has identified certain commercial and consumer collateral-dependent loans whose repayment relies primarily on the operation or sale of the collateral[68](index=68&type=chunk) - The company believes that for the vast majority of collateral-dependent loans, the sale of collateral would be sufficient to fully repay the loan's carrying value[68](index=68&type=chunk) [Loan Deferral Program](index=15&type=section&id=Loan%20Deferral%20Program) In response to COVID-19, the company implemented a residential mortgage and consumer loan deferral program on April 1, 2020, allowing eligible borrowers to defer principal and interest payments, which was subsequently extended to include credit card payment deferrals and is not considered a troubled debt restructuring (TDR) - The company implemented a residential mortgage and consumer loan deferral program on April 1, 2020, allowing eligible borrowers to defer principal and interest payments[71](index=71&type=chunk) - The program was subsequently extended through September 30, 2020, and included credit card payment deferrals in Bermuda and the Cayman Islands[71](index=71&type=chunk)[72](index=72&type=chunk) - Eligible deferred loans are not considered troubled debt restructurings (TDRs) or past due, as borrowers were current on payments and not experiencing financial difficulty at the time of modification[71](index=71&type=chunk) [Non-Performing Loans](index=15&type=section&id=Non-Performing%20Loans) As of September 30, 2021, total non-performing loans decreased to **$80,623 thousand** from December 31, 2020, with residential mortgages remaining the primary component of non-performing loans | Non-Performing Loan Type (Thousands of USD) | Total Non-Performing Loans Sep 30, 2021 | Total Non-Performing Loans Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | :------------------------ | :---------- | | Commercial loans | 18,661 | 18,316 | 345 | 1.88 | | Commercial real estate loans | 4,807 | 6,300 | (1,493) | -23.70 | | Consumer loans | 1,411 | 1,411 | 0 | 0.00 | | Residential mortgage loans | 55,744 | 65,575 | (9,831) | -14.99 | | **Total non-performing loans** | 80,623 | 91,602 | (10,979) | -11.99 | - For the nine months ended September 30, 2021, no interest income was recognized on non-accrual loans[73](index=73&type=chunk) [Loans Modified in a TDR](index=15&type=section&id=Loans%20modified%20in%20a%20TDR) As of September 30, 2021, the company had no loans that defaulted after being modified in a TDR within the past 12 months, with this section also presenting the number and amount of residential mortgages entering TDRs during the period and outstanding TDRs at period-end - As of September 30, 2021, the company had no loans that defaulted after being modified in a TDR within the past 12 months[75](index=75&type=chunk) [TDRs Entered Into During the Period](index=16&type=section&id=TDRs%20entered%20into%20during%20the%20period) For the nine months ended September 30, 2021, the company had **2 residential mortgage loans** enter TDRs with a modified carrying value of **$1,138 thousand**, compared to **1 residential mortgage loan** with a modified carrying value of **$352 thousand** in the prior year period | Loan Type | Number of Contracts Nine Months Ended Sep 30, 2021 | Modified Carrying Amount Nine Months Ended Sep 30, 2021 (Thousands of USD) | | :--------------------------- | :----------------------------------------- | :---------------------------------------------------------------- | | Residential mortgage loans | 2 | 1,138 | [TDRs Outstanding](index=16&type=section&id=TDRs%20Outstanding) As of September 30, 2021, total TDRs outstanding decreased to **$79,090 thousand** from December 31, 2020, with residential mortgages remaining the primary component of outstanding TDRs | TDR Type (Thousands of USD) | TDRs Outstanding Sep 30, 2021 | TDRs Outstanding Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :---------------------------- | :---------------------------- | :------------------------ | :---------- | | Commercial loans | 861 | 901 | (40) | -4.44 | | Commercial real estate loans | 4,053 | 4,173 | (120) | -2.88 | | Residential mortgage loans | 74,176 | 79,066 | (4,890) | -6.19 | | **Total TDRs outstanding** | 79,090 | 84,140 | (5,050) | -6.00 | [Note 7: Credit Risk Concentrations](index=16&type=section&id=Note%207%3A%20Credit%20risk%20concentrations) The company regularly monitors its credit risk portfolio for potential concentrations, with total credit exposure decreasing to **$10,075,095 thousand** as of September 30, 2021, from December 31, 2020, and the UK, Bermuda, and Cayman Islands representing the primary areas of credit exposure concentration | Geographic Region (Thousands of USD) | Total Credit Exposure Sep 30, 2021 | Total Credit Exposure Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :------------------------ | :---------- | | UK | 2,780,719 | 2,634,823 | 145,896 | 5.54 | | Bermuda | 2,480,259 | 2,599,827 | (119,568) | -4.60 | | Cayman | 1,460,630 | 1,374,424 | 86,206 | 6.27 | | US | 1,238,549 | 1,428,090 | (189,541) | -13.27 | | Canada | 734,948 | 996,213 | (261,265) | -26.23 | | Guernsey | 925,064 | 993,377 | (68,313) | -6.88 | | **Total credit exposure** | 10,075,095 | 10,613,677 | (538,582) | -5.07 | [Note 8: Deposits](index=17&type=section&id=Note%208%3A%20Deposits) As of September 30, 2021, total deposits increased to **$13,861,154 thousand** from December 31, 2020, with both interest-bearing demand deposits and time deposits rising, and the Channel Islands and UK showing the most significant deposit growth | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Non-interest-bearing demand deposits | 2,955,760 | 3,012,360 | (56,600) | -1.88 | | Interest-bearing demand deposits | 8,028,540 | 7,577,642 | 450,898 | 5.95 | | Total time deposits | 2,876,854 | 2,660,082 | 216,772 | 8.15 | | **Total deposits** | 13,861,154 | 13,250,084 | 611,070 | 4.61 | | Geographic Region (Thousands of USD) | Total Deposits Sep 30, 2021 | Total Deposits Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------------------ | :---------- | | Bermuda | 4,605,995 | 4,812,646 | (206,651) | -4.29 | | Cayman | 4,520,013 | 4,108,722 | 411,291 | 10.01 | | Channel Islands and UK | 4,735,146 | 4,328,716 | 406,430 | 9.39 | | **Total deposits** | 13,861,154 | 13,250,084 | 611,070 | 4.61 | [Note 9: Employee Benefit Plans](index=17&type=section&id=Note%209%3A%20Employee%20benefit%20plans) The company maintains trusteed pension plans, including non-contributory defined benefit and multiple defined contribution plans, and provides post-retirement medical benefits to eligible retirees, with defined benefit pension expense being a net benefit and post-retirement medical benefit expense being a net cost for the nine months ended September 30, 2021 - The company maintains trusteed pension plans, including non-contributory defined benefit plans and multiple defined contribution plans, and provides post-retirement medical benefits to eligible retirees[85](index=85&type=chunk) | Metric (Thousands of USD) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total defined benefit pension expense (benefit) | (228) | 78 | (683) | (340) | | Total post-retirement medical benefit expense (benefit) | 1,220 | 966 | 3,659 | 2,896 | [Note 10: Credit Related Arrangements, Repurchase Agreements, and Commitments](index=18&type=section&id=Note%2010%3A%20Credit%20related%20arrangements%2C%20repurchase%20agreements%20and%20commitments) The company discloses its outstanding commitments to extend credit, credit-related arrangements such as standby letters of credit and guarantees, and repurchase agreements, with total outstanding commitments to extend credit at **$815,434 thousand** and total standby letters of credit and guarantees at **$271,610 thousand** as of September 30, 2021, and has settled a 2013 US cross-border tax investigation for **$5.6 million** | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Total outstanding commitments to extend credit | 815,434 | 837,691 | (22,257) | -2.66 | | Allowances for credit losses | (604) | (179) | (425) | 237.43 | | Total standby letters of credit | 267,922 | 265,959 | 1,963 | 0.74 | | Total letters of guarantee | 3,688 | 5,449 | (1,761) | -32.32 | | **Total outstanding financial guarantees** | 271,610 | 271,408 | 202 | 0.07 | | Amortized cost of securities repurchase agreements | 169,524 | 197,039 | (27,515) | -13.96 | - The company settled a 2013 US cross-border tax investigation with the US Department of Justice, entering into a three-year non-prosecution agreement and paying **$5.6 million** in forfeiture and tax restitution[99](index=99&type=chunk) [Commitments](index=18&type=section&id=Commitments) The company enters into commitments to extend credit with fixed expiration dates or termination clauses, typically contingent on customers maintaining specific credit standards at the time of loan funding, with total outstanding commitments to extend credit at **$815,434 thousand** as of September 30, 2021 | Commitment Type (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Commitments to extend credit | 814,331 | 836,710 | (22,379) | -2.68 | | Documentary and commercial letters of credit | 1,103 | 981 | 122 | 12.44 | | **Total outstanding commitments to extend credit** | 815,434 | 837,691 | (22,257) | -2.66 | [Credit-Related Arrangements](index=18&type=section&id=Credit-Related%20Arrangements) The company issues standby letters of credit and guarantees at customer request to secure payment or performance obligations to third parties, representing irrevocable obligations typically collateralized by deposits or mutual fund assets, with total outstanding financial guarantees at **$271,610 thousand** as of September 30, 2021 | Guarantee Type (Thousands of USD) | Total Sep 30, 2021 | Collateral Sep 30, 2021 | Net Sep 30, 2021 | | :--------------------------- | :----------------- | :------------------ | :--------------- | | Standby letters of credit | 267,922 | 260,662 | 7,260 | | Letters of guarantee | 3,688 | 3,652 | 36 | | **Total** | 271,610 | 264,314 | 7,296 | [Repurchase Agreements](index=18&type=section&id=Repurchase%20agreements) The company utilizes repurchase and reverse repurchase agreements for liquidity management, mitigating risk by monitoring collateral values, and as of September 30, 2021, held **17 open reverse repurchase agreement positions** with an amortized cost of **$169,524 thousand** - The company utilizes repurchase agreements and reverse repurchase agreements for liquidity management, managing risk through daily monitoring of collateral values[96](index=96&type=chunk) - As of September 30, 2021, the company had **17 open reverse repurchase agreement positions** with remaining maturities of less than 30 days and an amortized cost of **$169,524 thousand**[97](index=97&type=chunk) [Legal Proceedings](index=18&type=section&id=Legal%20Proceedings) The company faces legal proceedings arising in the ordinary course of business, which management believes will not materially impact its consolidated financial position, and has settled a 2013 US cross-border tax investigation for **$5.6 million** - Management believes that the legal proceedings faced by the company will not, in the aggregate, have a material impact on its consolidated financial position[98](index=98&type=chunk) - The company settled a 2013 US cross-border tax investigation with the US Department of Justice, entering into a three-year non-prosecution agreement and paying **$5.6 million** in forfeiture and tax restitution[99](index=99&type=chunk) [Note 11: Leases](index=19&type=section&id=Note%2011%3A%20Leases) The company enters into operating lease agreements as a lessee or lessor, primarily for office and parking spaces and small office equipment, with total net lease costs of **$6,288 thousand** for the nine months ended September 30, 2021, and both operating lease right-of-use assets and liabilities decreasing | Metric (Thousands of USD) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease cost | 2,061 | 1,933 | 6,260 | 6,030 | | Short-term lease cost | 352 | 454 | 998 | 968 | | Sublease income | (322) | (290) | (970) | (849) | | **Total net lease cost** | 2,091 | 2,097 | 6,288 | 6,149 | | Operating lease income | 315 | 206 | 968 | 711 | | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Operating lease right-of-use assets | 40,064 | 46,244 | (6,180) | -13.37 | | Operating lease liabilities | 39,476 | 44,940 | (5,464) | -12.16 | | Weighted-average remaining lease term (years) | 9.94 | 10.14 | -0.20 | -1.97 | | Weighted-average discount rate for operating leases | 5.25% | 5.25% | 0.00% | 0.00 | [Note 12: Segmented Information](index=19&type=section&id=Note%2012%3A%20Segmented%20information) The company is managed and reported by geographic region (Bermuda, Cayman, Channel Islands and UK, and Other), with total assets and net income increasing as of September 30, 2021, and the Cayman Islands and Channel Islands and UK contributing significantly to both asset and net income growth | Geographic Region (Thousands of USD) | Total Assets Sep 30, 2021 | Total Assets Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :----------------------------------- | :------------------------ | :------------------------ | :------------------------ | :---------- | | Bermuda | 5,771,173 | 5,924,779 | (153,606) | -2.59 | | Cayman | 4,869,414 | 4,479,937 | 389,477 | 8.70 | | Channel Islands and UK | 5,236,764 | 4,826,671 | 410,093 | 8.50 | | Other | 32,393 | 32,928 | (535) | -1.62 | | **Total assets (before intersegment eliminations)** | 15,909,744 | 15,264,315 | 645,429 | 4.23 | | Geographic Region (Thousands of USD) | Net Income Nine Months Ended Sep 30, 2021 | Net Income Nine Months Ended Sep 30, 2020 | Change (Thousands of USD) | Change (%) | | :----------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------------ | :---------- | | Bermuda | 35,856 | 27,929 | 7,927 | 28.38 | | Cayman | 66,940 | 61,930 | 5,010 | 8.09 | | Channel Islands and UK | 18,216 | 15,749 | 2,467 | 15.66 | | Other | 1 | (454) | 455 | -100.22 | | **Total net income** | 121,013 | 105,154 | 15,859 | 15.08 | [Note 13: Derivative Instruments and Risk Management](index=21&type=section&id=Note%2013%3A%20Derivative%20instruments%20and%20risk%20management) The company uses derivative instruments for risk management and client needs, primarily involving over-the-counter interest rate and foreign exchange contracts, with total notional derivatives of **$1,867,430 thousand** and a net fair value of **$11,366 thousand** as of September 30, 2021, managing credit risk through ISDA Master Agreements and bilateral collateral arrangements - The company uses derivative instruments for risk management and to meet client needs, primarily involving over-the-counter interest rate and foreign exchange contracts[116](index=116&type=chunk) | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Total notional risk management derivatives | 1,187,127 | 1,737,850 | (550,723) | -31.70 | | Total notional client service derivatives | 680,303 | 770,113 | (89,810) | -11.66 | | **Total notional derivatives** | 1,867,430 | 2,507,963 | (640,533) | -25.54 | | Net fair value of derivatives | 11,366 | (18,842) | 30,208 | -160.32 | | Derivative Type (Thousands of USD) | Net Gains (Losses) Nine Months Ended Sep 30, 2021 | Net Gains (Losses) Nine Months Ended Sep 30, 2020 | Change (Thousands of USD) | | :----------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :------------------------ | | Spot and forward foreign exchange | (82) | 408 | (490) | | Currency swaps, not designated as hedges | 32,416 | (10,297) | 42,713 | | Currency swaps - fair value hedges | (8,028) | — | (8,028) | | **Total net gains (losses) recognized in net income** | 24,306 | (9,889) | 34,185 | [Notional Amounts](index=21&type=section&id=Notional%20Amounts) Notional amounts represent outstanding transaction volumes and do not indicate potential gains or losses related to market or credit risk, with credit risk limited to the positive fair value of derivatives, which is significantly lower than notional amounts - Notional amounts represent outstanding transaction volumes and do not indicate potential gains or losses related to market or credit risk[120](index=120&type=chunk) - Credit risk is limited to the positive fair value of derivatives, which is significantly lower than notional amounts[120](index=120&type=chunk) [Fair Value](index=21&type=section&id=Fair%20Value) The fair value of derivative instruments is defined as the gain or loss that would be incurred to replace the derivative contract at current market prices, with market risk managed within explicit parameters set by senior management - The fair value of derivative instruments is defined as the gain or loss that would be incurred to replace the derivative contract at current market prices[121](index=121&type=chunk) - Market risk is managed within explicit parameters set by senior management[121](index=121&type=chunk) [Risk Management Derivatives](index=21&type=section&id=Risk%20Management%20Derivatives) The company manages interest rate and foreign exchange risks through interest rate derivative contracts and foreign currency derivative instruments, including fair value hedges to minimize fluctuations in the fair value of available-for-sale investments and net investment hedges to minimize foreign currency translation risk of overseas net investments - The company manages interest rate risk through interest rate derivative contracts and hedges foreign currency risk through foreign currency derivative instruments[122](index=122&type=chunk) - Fair value hedges are used to minimize fluctuations in the fair value of available-for-sale investments arising from changes in foreign exchange rates[123](index=123&type=chunk) - Net investment hedges are used to minimize fluctuations in the foreign currency translation risk of net investments in overseas operations[124](index=124&type=chunk) [Client Service Derivatives](index=22&type=section&id=Client%20service%20derivatives) The company primarily meets client foreign exchange needs through foreign exchange contracts and interest rate caps, with changes in the fair value of these derivative instruments recognized in the company's foreign exchange income - The company primarily meets client foreign exchange needs through foreign exchange contracts and interest rate caps[129](index=129&type=chunk) - Changes in the fair value of client service derivative instruments are recognized in foreign exchange income[129](index=129&type=chunk) [Note 14: Fair Value Measurements](index=23&type=section&id=Note%2014%3A%20Fair%20value%20measurements) The company categorizes fair value measurements of financial assets and liabilities into three levels based on input types, with most financial assets, such as available-for-sale investments and derivatives, classified as Level 2 as of September 30, 2021, while equity securities and short-term investments are primarily Level 1, and Level 3 assets mainly comprise asset-backed securities (student loans) | Financial Assets (Thousands of USD) | Level 1 | Level 2 | Level 3 | Total Carrying/Fair Value | | :----------------------------------- | :------ | :------ | :------ | :------------------------ | | Equity securities - mutual funds | — | 222 | — | 222 | | Available-for-sale investments - US government and federal agencies | 685,752 | 2,475,302 | — | 3,161,054 | | Available-for-sale investments - non-US government debt securities | — | 22,392 | — | 22,392 | | Available-for-sale investments - asset-backed securities - student loans | — | — | 12,875 | 12,875 | | Available-for-sale investments - residential mortgage-backed securities | — | 31,623 | — | 31,623 | | Other assets - derivatives | — | 15,216 | — | 15,216 | | **Financial Liabilities** | | | | | | Other liabilities - derivatives | — | 3,850 | — | 3,850 | [Level 3 Reconciliation](index=24&type=section&id=Level%203%20Reconciliation) Level 3 financial instruments primarily consist of student loan securities guaranteed by the Federal Family Education Loan Program, valued using non-binding quotes from external security pricing services, with a carrying value of **$12,875 thousand** and **$70 thousand** in unrealized losses recognized as of September 30, 2021 - Level 3 financial instruments primarily consist of student loan securities guaranteed by the Federal Family Education Loan Program, valued using non-binding quotes from external security pricing services[144](index=144&type=chunk) | Metric (Thousands of USD) | Nine Months Ended Sep 30, 2021 | | :--------------------------- | :----------------------------- | | Beginning carrying value | 12,945 | | Change in unrealized gains (losses) recognized in other comprehensive income | (70) | | **Ending carrying value** | 12,875 | | Cumulative gains (losses) recognized in other comprehensive income | (415) | [Items Other Than Those Recognized at Fair Value on a Recurring Basis](index=24&type=section&id=Items%20Other%20Than%20Those%20Recognized%20at%20Fair%20Value%20on%20a%20Recurring%20Basis) This section presents financial assets and liabilities measured at fair value on a non-recurring basis, including cash due from banks, repurchase agreements, short-term investments, held-to-maturity investments, net loans, other real estate owned, time deposits, and long-term debt, with most items having fair values close to carrying values, but held-to-maturity investments and long-term debt showing significant fair value premiums or discounts | Financial Assets/Liabilities (Thousands of USD) | Carrying Value Sep 30, 2021 | Fair Value Sep 30, 2021 | Appreciation/(Depreciation) Sep 30, 2021 | | :----------------------------------- | :-------------------------- | :---------------------- | :--------------------------------------- | | Cash due from banks | 2,309,502 | 2,309,502 | — | | Securities repurchase agreements | 169,524 | 169,524 | — | | Short-term investments | 1,276,562 | 1,276,562 | — | | Held-to-maturity investments | 2,755,527 | 2,803,129 | 47,602 | | Net loans | 5,203,788 | 5,233,947 | 30,159 | | Other real estate owned | 691 | 691 | — | | Time deposits | 2,876,854 | 2,880,764 | (3,910) | | Long-term debt | 171,773 | 161,534 | 10,239 | [Note 15: Interest Rate Risk](index=25&type=section&id=Note%2015%3A%20Interest%20rate%20risk) Interest rate risk is assessed via gap analysis, showing a **$2,619 million negative sensitivity gap** within three months as of September 30, 2021, indicating liabilities reprice faster than assets | Maturity (Millions of USD) | Interest Rate Sensitivity Gap Sep 30, 2021 | Interest Rate Sensitivity Gap Dec 31, 2020 | Change (Millions of USD) | | :--------------------------- | :--------------------------------------- | :--------------------------------------- | :----------------------- | | Within 3 months | (2,619) | (1,132) | (1,487) | | 3 to 6 months | 145 | (255) | 400 | | 6 to 12 months | (457) | (244) | (213) | | 1 to 5 years | 1,182 | 474 | 708 | | Over 5 years | 5,368 | 4,898 | 470 | | Non-interest-bearing funds | (3,619) | (3,741) | 122 | | **Cumulative interest rate sensitivity gap** | — | — | — | - As of September 30, 2021, the company had a **negative interest rate sensitivity gap of $2,619 million** within three months, indicating that liabilities reprice faster than assets in the short term, potentially exposing it to rising interest rate risk[151](index=151&type=chunk) [Note 16: Long-Term Debt](index=26&type=section&id=Note%2016%3A%20Long-term%20debt) The company has issued multiple subordinated Tier 2 capital notes for refinancing and general corporate purposes, with total outstanding long-term debt of **$171,773 thousand** as of September 30, 2021, including notes issued in 2018 and 2020, both at a **5.25% interest rate** | Long-Term Debt Type | Earliest Call Date | Contractual Maturity Date | Interest Rate | Outstanding Principal (Thousands of USD) | | :--------------------------- | :----------------- | :------------------------ | :------------ | :--------------------------------------- | | 2018 Issue | Jun 1, 2023 | Jun 1, 2028 | 5.25% | 75,000 | | 2020 Issue | Jun 15, 2025 | Jun 15, 2030 | 5.25% | 100,000 | | **Total** | | | | 175,000 | | Unamortized debt issuance costs | | | | (3,227) | | **Long-term debt less unamortized debt issuance costs** | | | | 171,773 | - The company issued **$75 million** and **$100 million** in subordinated Tier 2 capital notes in 2018 and 2020, respectively, both at a **5.25% interest rate**[155](index=155&type=chunk)[156](index=156&type=chunk)[159](index=159&type=chunk) [Note 17: Earnings Per Share](index=26&type=section&id=Note%2017%3A%20Earnings%20per%20share) For the three and nine months ended September 30, 2021, both basic and diluted earnings per share increased, calculated using the weighted-average number of common shares outstanding and considering the dilutive effect of share-based payment plans | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (Thousands of USD) | 39,783 | 30,543 | 121,013 | 105,154 | | Basic earnings per share | 0.80 | 0.61 | 2.44 | 2.07 | | Diluted earnings per share | 0.80 | 0.61 | 2.42 | 2.06 | | Basic weighted-average common shares outstanding (Thousands of Shares) | 49,540 | 49,747 | 49,576 | 50,840 | | Diluted weighted-average common shares outstanding (Thousands of Shares) | 49,883 | 50,041 | 49,903 | 51,164 | [Note 18: Share-Based Payments](index=27&type=section&id=Note%2018%3A%20Share-based%20payments) The company grants stock options and unvested share awards to employees and executives through its 2010 and 2020 Omnibus Plans, typically vesting based on time or performance conditions, recognizing **$11,003 thousand** in share-based compensation cost for the nine months ended September 30, 2021, with **$16,927 thousand** in unrecognized share-based compensation cost at period-end - The company grants stock options and unvested share awards to employees and executives through its 2010 and 2020 Omnibus Plans, with awards typically vesting based on time or performance conditions[166](index=166&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk) - As of September 30, 2021, the company had no outstanding stock options[174](index=174&type=chunk) | Metric (Thousands of USD) | Nine Months Ended Sep 30, 2021 | | :--------------------------- | :----------------------------- | | Share-based compensation cost recognized in net income | 11,003 | | Total unrecognized share-based compensation cost | 16,927 | [Stock Option Awards](index=27&type=section&id=Stock%20Option%20Awards) The company previously granted stock options under its 1997 Stock Option Plan and the 2010 and 2020 Omnibus Plans, with these options typically vesting based on specific time or performance conditions, and no outstanding stock options as of September 30, 2021 - The company previously granted stock options under its 1997 Stock Option Plan and the 2010 and 2020 Omnibus Plans, with these options typically vesting based on specific time or performance conditions[168](index=168&type=chunk)[169](index=169&type=chunk) - As of September 30, 2021, and December 31, 2020, the company had no outstanding stock options[174](index=174&type=chunk) [Changes in Outstanding Stock Option Plans](index=28&type=section&id=Changes%20in%20Outstanding%20Stock%20Option%20Plans) For the nine months ended September 30, 2020, the number of company stock options decreased, with **101 thousand outstanding options** at period-end, and no outstanding stock options as of September 30, 2021, and December 31, 2020 | Metric (Thousands of Shares) | Nine Months Ended Sep 30, 2020 | | :--------------------------- | :----------------------------- | | Outstanding at beginning of period | 159 | | Exercised | (43) | | Forfeited and canceled | (15) | | **Outstanding at end of period** | 101 | | Vested and exercisable at end of period | 101 | - As of September 30, 2021, and December 31, 2020, the company had no outstanding stock options[174](index=174&type=chunk) [Share-Based Plans](index=28&type=section&id=Share%20Based%20Plans) Recipients of unvested share awards are entitled to receive the underlying common shares free of charge upon vesting, potentially receiving additional unvested shares as dividend equivalents, with these awards typically vesting upon retirement, death, disability, or termination of employment by the company not for cause - Recipients of unvested share awards are entitled to receive the underlying common shares free of charge upon vesting[175](index=175&type=chunk) - These awards typically vest upon retirement, death, disability, or termination of employment by the company not for cause[176](index=176&type=chunk) - For the nine months ended September 30, 2021, the weighted-average fair value of unvested share awards granted was **$33.26 per share**[177](index=177&type=chunk) [Employee Deferred Incentive Plan ("EDIP")](index=28&type=section&id=Employee%20Deferred%20Incentive%20Plan%20(%22EDIP%22)) Under the EDIP, share awards vest based on time-based conditions, typically ratably over three years following the effective grant date - Under the EDIP, share awards vest based on time-based conditions, typically ratably over three years following the effective grant date[178](index=178&type=chunk) [Executive Long-Term Incentive Share Plan ("ELTIP") - Years 2013 - 2021](index=28&type=section&id=Executive%20Long-Term%20Incentive%20Share%20Plan%20(%22ELTIP%22)%20-%20Years%202013%20-%202021) The ELTIP grants performance shares and time-vesting shares to executives, with performance shares typically vesting after three years upon achieving specific performance targets, and time-vesting shares vesting ratably over three years - The ELTIP grants performance shares and time-vesting shares to executives[179](index=179&type=chunk) - Performance shares typically vest after three years upon achieving specific performance targets, while time-vesting shares vest ratably over three years[179](index=179&type=chunk) [Changes in Outstanding ELTIP and EDIP Awards (in Thousands of Shares Transferable Upon Vesting)](index=28&type=section&id=Changes%20in%20Outstanding%20ELTIP%20and%20EDIP%20awards%20(in%20thousands%20of%20shares%20transferable%20upon%20vesting)) For the nine months ended September 30, 2021, the total number of outstanding EDIP and ELTIP awards increased, despite some awards vesting or lapsing due to resignations | Plan Type (Thousands of Shares) | Unvested at Beginning of Nine Months Ended Sep 30, 2021 | Granted Nine Months Ended Sep 30, 2021 | Vested Nine Months Ended Sep 30, 2021 | Unvested at End of Nine Months Ended Sep 30, 2021 | | :--------------------------- | :------------------------------------------------------ | :------------------------------------- | :------------------------------------ | :-------------------------------------------------- | | EDIP | 364 | 115 | (176) | 301 | | ELTIP | 658 | 275 | (237) | 696 | [Share-Based Compensation Cost Recognized in Net Income](index=28&type=section&id=Share-based%20Compensation%20Cost%20Recognized%20in%20Net%20Income) For the nine months ended September 30, 2021, share-based compensation cost recognized in net income for EDIP and ELTIP plans was **$11,003 thousand**, a slight decrease from the prior year period | Plan Type (Thousands of USD) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------------------------- | :----------------------------- | :------------------------ | :---------- | | EDIP and ELTIP | 11,003 | 11,331 | (328) | -2.89 | [Unrecognized Share-Based Compensation Cost](index=29&type=section&id=Unrecognized%20Share-based%20Compensation%20Cost) As of September 30, 2021, total unrecognized share-based compensation cost was **$16,927 thousand**, expected to be recognized over a weighted-average period of **1.62 to 1.89 years** | Plan Type (Thousands of USD) | Unrecognized Cost Sep 30, 2021 | Weighted-Average Period of Expected Recognition (Years) | | :--------------------------- | :----------------------------- | :------------------------------------------------------ | | EDIP | 6,124 | 1.62 | | ELTIP - time-vesting shares | 51 | 0.37 | | ELTIP - performance-vesting shares | 10,752 | 1.89 | | **Total unrecognized cost** | 16,927 | | [Note 19: Share Buy-Back Plans](index=29&type=section&id=Note%2019%3A%20Share%20buy-back%20plans) The company regularly implements common share buy-back plans to repurchase and cancel its equity securities, having repurchased and canceled **330,828 common shares** at a total cost of **$11,939,348** for the nine months ended September 30, 2021 - The company regularly implements common share buy-back plans to repurchase and cancel its equity securities[184](index=184&type=chunk) - The Board of Directors approved a new common share buy-back program on February 10, 2021, authorizing the repurchase of up to **2 million common shares** by February 28, 2022[186](index=186&type=chunk) | Metric | Nine Months Ended Sep 30, 2021 | Full Year 2020 | Full Year 2019 | | :--------------------------- | :----------------------------- | :------------- | :------------- | | Shares repurchased | 330,828 | 3,452,000 | 2,293,788 | | Average cost per share (USD) | 36.09 | 25.10 | 35.55 | | Total cost (USD) | 11,939,348 | 86,639,889 | 81,534,076 | [Common Share Buy-Back Program](index=29&type=section&id=Common%20Share%20Buy-Back%20Program) The company's Board of Directors has approved multiple common share buy-back programs, with the most recent approved on February 10, 2021, authorizing the repurchase of up to **2 million common shares** by February 28, 2022, and **330,828 shares** repurchased and canceled for the nine months ended September 30, 2021 - The Board of Directors approved a new common share buy-back program on February 10, 2021, authorizing the repurchase of up to **2 million common shares** by February 28, 2022[186](index=186&type=chunk) - For the nine months ended September 30, 2021, the company repurchased and canceled **330,828 common shares**[187](index=187&type=chunk) [Note 20: Accumulated Other Comprehensive Income (Loss)](index=29&type=section&id=Note%2020%3A%20Accumulated%20other%20comprehensive%20income%20(loss)) As of September 30, 2021, accumulated other comprehensive income (loss) significantly increased to **($112,864 thousand)** from December 31, 2020, primarily due to net changes in unrealized gains/losses on available-for-sale investments and employee benefit plan adjustments | Metric (Thousands of USD) | Sep 30, 2021 | Dec 31, 2020 | Change (Thousands of USD) | Change (%) | | :--------------------------- | :----------- | :----------- | :------------------------ | :---------- | | Foreign currency translation net investment unrealized gains (losses) | (20,839) | (21,065) | 226 | -1.07 | | Held-to-maturity investments | 105 | (60) | 165 | -275.00 | | Available-for-sale investments | 5,237 | 72,779 | (67,542) | -92.81 | | Pension plans | (69,940) | (72,255) | 2,315 | -3.20 | | Post-retirement healthcare | (27,427) | (29,079) | 1,652 | -5.68 | | **Total accumulated other comprehensive income (loss)** | (112,864) | (49,680) | (63,184) | 127.19 | [Net Change of AOCIL Components](index=30&type=section&id=Net%20Change%20of%20AOCIL%20Components) For the nine months ended September 30, 2021, the net change in accumulated other comprehensive income (loss) was **($63,184 thousand)**, primarily impacted by a significant decline in unrealized gains/losses on available-for-sale investments | AOCIL Component (Thousands of USD) | Net Change Nine Months Ended Sep 30, 2021 | Net Change Nine Months Ended Sep 30, 2020 | Change (Thousands of USD) | | :----------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------------ | | Foreign currency translation net investment unrealized gains (losses) adjustment | 226 | (969) | 1,195 | | Held-to-maturity investments adjustment | 165 | 397 | (232) | | Available-for-sale investments adjustment | (67,542) | 60,800 | (128,342) | | Employee benefit plans adjustment | 3,967 | 3,100 | 867 | | **Net other comprehensive income (loss), net of tax** | (63,184) | 63,328 | (126,512) | [Note 21: Capital Structure](index=30&type=section&id=Note%2021%3A%20Capital%20structure) The company's common shares are traded on the NYSE and BSX, with cash dividends declared and paid, and it adheres to Basel III regulatory capital requirements, maintaining capital ratios above the minimum regulatory thresholds - The company's common shares are listed on the New York Stock Exchange (NTB) and the Bermuda Stock Exchange (NTB.BH)[192](index=192&type=chunk) - For the nine months ended September 30, 2021, the company declared and paid **$1.32 per common share in cash dividends**[194](index=194&type=chunk) - The company complies with Basel III regulatory capital requirements and maintains capital ratios above the minimum regulatory thresholds[198](index=198&type=chunk) [Authorized Capital](index=30&type=section&id=Authorized%20Capital) The company's authorized share capital includes **2,000,000,000 common shares** with a par value of **$0.01 Bermuda dollar**, **6,000,000,000 non-voting common shares** with a par value

Second Quarter 2021 Earnings Presentation The Bank of N.T. Butterfield & Son Limited July 27, 2021 四十八月 1 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, inc ...

Bank of N T Butterfield & Son Ltd (NYSE:NTB) Q2 2021 Earnings Conference Call July 27, 2021 10:00 AM ET Company Participants Noah Fields - VP, IR Michael Collins - Chairman & CEO Michael Schrum - Group CFO Conference Call Participants Alex Twerdahl - Piper Sandler & Co. Timur Braziler - Wells Fargo Securities Operator Good morning. My name is Chuck, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2021 Earnings Call for the Bank of N.T. Butterf ...

Bank of N.T. Butterfield & Son Ltd (NYSE:NTB) Q1 2021 Earnings Conference Call April 29, 2021 10:00 AM ET Company Participants Noah Fields - VP, IR Michael Collins - Chairman & CEO Michael Schrum - Group CFO & Executive Director Conference Call Participants Alex Twerdahl - Piper Sandler & Co. Timur Braziler - Wells Fargo Securities Will Nance - Goldman Sachs Group Operator Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Firs ...

Part I [Key Information](index=8&type=section&id=Item%203.%20Key%20Information) This section presents key financial data, non-GAAP reconciliations, and significant risk factors for fiscal years 2018-2020 [Selected Financial Data](index=8&type=section&id=A.%20Selected%20Financial%20Data) Provides selected financial data and key ratios for 2018-2020, highlighting trends in income, assets, and non-GAAP core metrics Consolidated Financial Highlights | Indicator | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Net Income (in millions)** | $147.2 | $177.1 | $195.2 | | **Diluted EPS (in US$)** | $2.90 | $3.30 | $3.50 | | **Total Assets (in millions)** | $14,738.6 | $13,921.6 | $10,773.2 | | **Total Deposits (in millions)** | $13,250.1 | $12,441.6 | $10,315.8 | | **Total Shareholders' Equity (in millions)** | $981.9 | $963.7 | $882.3 | Key Financial Ratios | Ratio | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Return on average common shareholders' equity (%)** | 15.0 | 19.1 | 23.1 | | **Core return on average tangible common equity (%)** | 17.3 | 23.4 | 25.6 | | **Net interest margin (%)** | 2.42 | 2.86 | 3.25 | | **Core efficiency ratio (%)** | 66.0 | 62.2 | 61.5 | | **Total capital ratio (%)** | 19.8 | 19.4 | 22.4 | - Net interest income decreased to **$317.6 million** in 2020 from $345.7 million in 2019, driven by a lower average rate on interest-earning assets (2.68% in 2020 vs 3.35% in 2019), despite an increase in average interest-earning assets[59](index=59&type=chunk) - The company adjusts GAAP net income for non-core items to calculate 'core net income', including **$8.0 million** in 2020 for an early retirement program and **$21.8 million** in 2019 for executive departure and acquisition costs[67](index=67&type=chunk)[70](index=70&type=chunk) [Risk Factors](index=15&type=section&id=D.%20Risk%20Factors) Details material risks including the COVID-19 pandemic's impact, geopolitical events, cybersecurity threats, and a complex regulatory environment - The COVID-19 pandemic has adversely affected the business through **significant reductions in interest rates**, increased credit risk, decreased tourism in key markets, and heightened operational risks[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - The Bank's operations are concentrated in Bermuda, the Cayman Islands, and the Channel Islands/UK, making it susceptible to economic downturns in these markets, which generated **48%**, **29%**, and **20%** of total net revenue, respectively, in 2020[84](index=84&type=chunk) - Unlike in many other jurisdictions, banks in Bermuda, the Cayman Islands, and the Channel Islands are **not supported by a central bank as a lender of last resort**, posing a potential challenge in a severe liquidity shortage[89](index=89&type=chunk) - The company's growth strategy includes acquisitions, but it faces risks in obtaining regulatory approval and achieving anticipated synergies, such as with the **ABN AMRO (Channel Islands) integration**[106](index=106&type=chunk)[107](index=107&type=chunk)[111](index=111&type=chunk) - The company is subject to an ongoing investigation by the US Attorney's Office related to potential tax evasion by US persons, with a **provision of $5.5 million** recorded as of December 31, 2020[150](index=150&type=chunk) - The company faces risks from new **economic substance legislation** in jurisdictions like Bermuda and the Cayman Islands, where non-compliance could lead to penalties and negatively impact the Bank's client base[176](index=176&type=chunk)[178](index=178&type=chunk) [Information on the Company](index=42&type=section&id=Item%204.%20Information%20on%20the%20Company) Outlines the company's history, corporate structure, business operations, regulatory frameworks, and provides selected statistical data [History and Development of the Company](index=42&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Traces the company's history, post-crisis restructuring, and recent strategic acquisitions to expand its core offshore businesses - Following the 2008-2009 financial crisis, the Bank implemented a comprehensive restructuring plan, which included hiring a new management team, de-risking the balance sheet, and **raising $550 million of common equity**[215](index=215&type=chunk) - Recent strategic acquisitions to expand its core business include Deutsche Bank's Global Trust Solutions (GTS) business in 2018 and **ABN AMRO (Channel Islands) Limited in July 2019 for £160.7 million** ($201.1 million)[216](index=216&type=chunk) [Business Overview](index=44&type=section&id=B.%20Business%20Overview) Describes the company's banking and wealth management services, key markets, competitive landscape, and regulatory supervision Key Metrics (as of Dec 31, 2020) | Metric (as of Dec 31, 2020) | Value (USD) | | :--- | :--- | | Total Assets | $14.7 billion | | Net Loans | $5.2 billion | | Total Deposits | $13.3 billion | | Trust Assets Under Administration | $104.1 billion | | Custody Assets Under Administration | $32.4 billion | | Assets Under Management | $5.6 billion | - The company's net revenue is geographically diversified across its main segments, with Bermuda contributing **$238.0 million**, Cayman Islands **$145.6 million**, and the Channel Islands & UK **$101.9 million** for the year ended December 31, 2020[219](index=219&type=chunk) - Total deposits increased by **6.5% to $13.3 billion** as of December 31, 2020, from the previous year, with demand deposits constituting 79.9% of total deposits[250](index=250&type=chunk) - The loan portfolio stood at **$5.2 billion** as of December 31, 2020, with residential mortgages comprising the largest portion at **$3.4 billion**, or 65.5% of the total gross loan portfolio[251](index=251&type=chunk)[253](index=253&type=chunk) - The Bank is subject to extensive regulation by the Bermuda Monetary Authority (BMA), which has adopted Basel III requirements, and is designated as a **Domestic Systemically Important Bank (D-SIB)** in Bermuda[272](index=272&type=chunk)[287](index=287&type=chunk) [Selected Statistical Data](index=83&type=section&id=E.%20Selected%20Statistical%20Data) Presents detailed statistical tables on the Bank's average balance sheet, loan portfolio composition, and credit quality metrics Average Balance Sheet and Net Interest Margin | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Average Yield on Interest-Earning Assets** | 2.68% | 3.35% | 3.48% | | **Average Rate on Interest-Bearing Liabilities** | 0.35% | 0.66% | 0.33% | | **Net Interest Spread** | 2.33% | 2.73% | 3.12% | | **Net Interest Margin** | 2.42% | 2.86% | 3.25% | - The decrease in net interest income in 2020 was primarily driven by a **decline in interest rates**, which contributed to an **$88.4 million negative impact**, partially offset by a $35.3 million positive impact from increased asset volume[443](index=443&type=chunk) Loan Portfolio Composition | Loan Portfolio Composition (Gross, as of Dec 31, 2020) | Amount (in millions) | % of Total | | :--- | :--- | :--- | | Residential Mortgages | $3,406.4 | 65.5% | | Commercial Loans | $811.5 | 15.6% | | Commercial Real Estate Loans | $760.3 | 14.6% | | Consumer Loans | $232.0 | 4.5% | | **Total** | **$5,210.2** | **100.0%** | - Credit quality indicators showed some deterioration in 2020, with the ratio of **non-accrual loans to total loans increasing to 1.4%** from 1.0% in 2019, and the net charge-off ratio rising to 0.12% from 0.03%[446](index=446&type=chunk)[447](index=447&type=chunk) [Operating and Financial Review and Prospects](index=89&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Provides management's analysis of financial results, highlighting pandemic impacts, segment performance, and risk management [Operating Results](index=89&type=section&id=A.%20Operating%20Results) Details the decline in 2020 net income due to interest rate pressure, offset by cost controls and segment performance - Net income for 2020 **decreased by $29.9 million to $147.2 million**, largely due to the low interest rate environment related to the COVID-19 pandemic[474](index=474&type=chunk) - **Net interest margin (NIM) fell by 44 basis points to 2.42%** in 2020, driven by lower yields on loans and investments, while the cost of funding decreased by 26 basis points to 0.21%[476](index=476&type=chunk) - Total non-interest expenses **decreased by $12.3 million to $344.6 million** in 2020, aided by lower staff-related costs and professional services fees[476](index=476&type=chunk) - The Bank's asset quality remained strong, with **non-accrual loans representing 1.4%** of total gross loans as of December 31, 2020, an increase from 1.0% at year-end 2019[476](index=476&type=chunk) - The Bank adopted the **Current Expected Credit Loss (CECL) model** on January 1, 2020, resulting in a **$7.8 million negative adjustment** to retained earnings and a provision for credit losses of $8.5 million for 2020[521](index=521&type=chunk)[665](index=665&type=chunk)[667](index=667&type=chunk) [Liquidity and Capital Resources](index=89&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Outlines the Bank's strong liquidity and capital positions, capital management activities, and regulatory capital ratios Capital Ratios | Capital Ratio (%) | Dec 31, 2020 | Dec 31, 2019 | Regulatory Minimum | | :--- | :--- | :--- | :--- | | **Common Equity Tier 1 (CET1)** | 16.1 | 17.3 | 10.0 | | **Tier 1 Capital** | 16.1 | 17.3 | 11.5 | | **Total Capital** | 19.8 | 19.4 | 13.5 | | **Leverage Ratio** | 5.3 | 5.9 | 5.0 | - The Bank **repurchased 3,452,000 common shares in 2020** for a total cost of $86.6 million, at an average price of $25.10 per share[812](index=812&type=chunk) - The Bank declared and paid dividends totaling **$1.76 per common share in 2020**, consistent with 2019, representing a payout ratio of 60.5%[813](index=813&type=chunk)[928](index=928&type=chunk) - In June 2020, the Bank **issued $100 million of 5.25% 10-year subordinated notes** to replace existing debt and increase its Tier 2 capital[610](index=610&type=chunk)[1353](index=1353&type=chunk) [Off Balance Sheet Arrangements](index=92&type=section&id=E.%20Off%20Balance%20Sheet%20Arrangements) Describes off-balance sheet activities including fiduciary assets and credit-related arrangements for clients - The Bank holds significant **assets under administration and management** for clients in a fiduciary capacity, which are not included on its balance sheet[825](index=825&type=chunk) - The Bank enters into credit-related arrangements such as **standby letters of credit and letters of guarantee**, which are subject to the same credit controls as loans[826](index=826&type=chunk)[827](index=827&type=chunk) [Tabular Disclosure of Contractual Obligations](index=92&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) Presents a breakdown of contractual obligations and credit-related commitments as of year-end 2020 Contractual Obligations | Contractual Obligations (as of Dec 31, 2020) | Total (in millions) | Less than 1 year | 1 to 3 years | 3 to 5 years | After 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long term debt | $175.0 | — | — | $175.0 | — | | Sourcing arrangements | $13.0 | $13.0 | — | — | — | | Term deposits | $2,660.1 | $2,561.6 | $98.5 | — | — | | Other obligations | $40.1 | $18.6 | $17.2 | $4.3 | — | | **Total** | **$2,888.3** | **$2,593.2** | **$115.7** | **$179.3** | **—** | Credit-Related Arrangements | Credit-Related Arrangements (as of Dec 31, 2020) | Gross (in millions) | Collateral (in millions) | Net (in millions) | | :--- | :--- | :--- | :--- | | Standby letters of credit | $266.0 | $258.7 | $7.3 | | Letters of guarantee | $5.4 | $5.4 | — | | **Total** | **$271.4** | **$264.1** | **$7.3** | - **Unfunded commitments to extend credit** increased significantly to $837.7 million as of December 31, 2020, from $549.4 million in the prior year[831](index=831&type=chunk) [Directors, Senior Management and Employees](index=94&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) Details the Board and executive team, compensation structure, committee responsibilities, and employee headcount changes - The Board is composed of eleven members, with the **majority being independent** under NYSE listing standards[840](index=840&type=chunk)[842](index=842&type=chunk) - The aggregate compensation paid to directors and senior management in 2020 was **$19.8 million**, with executives subject to share ownership requirements[868](index=868&type=chunk)[869](index=869&type=chunk)[870](index=870&type=chunk) - The Bank's governance structure includes five key Board committees: **Audit, Risk Policy & Compliance, Corporate Governance, Compensation & Human Resources, and Executive**[875](index=875&type=chunk) - Total full-time equivalent employee headcount **decreased from 1,512 in 2019 to 1,314 in 2020** as a result of a cost restructuring program[899](index=899&type=chunk) [Major Shareholders and Related Party Transactions](index=101&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) Discloses the Bank's principal shareholders, executive ownership, and policies for related-party transactions Major Shareholders | Major Shareholder | Beneficial Ownership % (as of Feb 15, 2021) | | :--- | :--- | | Davis Selected Advisers, L.P. | 8.0% | | Blackrock, Inc. | 5.1% | - As of February 15, 2021, all directors and executive officers as a group beneficially owned **less than 1%** of the total outstanding common shares[907](index=907&type=chunk) - The Board has a **written policy for reviewing and approving related-party transactions**, managed by the Corporate Governance Committee[916](index=916&type=chunk) [Financial Information](index=103&type=section&id=Item%208.%20Financial%20Information) Covers ongoing legal proceedings with the US Attorney's Office and outlines the company's dividend policy and history - The Bank is involved in an ongoing investigation by the US Attorney's Office regarding potential tax evasion by US persons, with a **provision of $5.5 million** recorded as of December 31, 2020[922](index=922&type=chunk)[923](index=923&type=chunk) Dividend History | Dividend per Common Share | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Total Annual Dividend ($)** | $1.76 | $1.76 | $1.52 | [Additional Information](index=105&type=section&id=Item%2010.%20Additional%20Information) Discusses the Bermuda tax environment and material US federal income tax considerations for shareholders, including PFIC status - Under current Bermuda law, the Bank is **not subject to income or capital gains taxes**, and there are no withholding taxes on dividends[943](index=943&type=chunk)[944](index=944&type=chunk) - The Bank believes it was **not a Passive Foreign Investment Company (PFIC)** for the 2020 taxable year, but cannot provide assurance for future years, which could result in adverse US tax consequences for US shareholders[185](index=185&type=chunk)[952](index=952&type=chunk) - The Bank **will not provide US shareholders with the information necessary to make a Qualified Electing Fund (QEF) election** under the PFIC rules[960](index=960&type=chunk) Part II [Controls and Procedures](index=109&type=section&id=Item%2015.%20Controls%20and%20Procedures) Confirms the effectiveness of the Bank's disclosure controls and procedures as evaluated by management - The Chairman and Chief Executive Officer and Group Chief Financial Officer concluded that the company's **disclosure controls and procedures were effective** as of the end of the reporting period[990](index=990&type=chunk) - Management's annual report on internal control over financial reporting and the auditor's report are included in the **financial statements section** of the report[991](index=991&type=chunk) [Other Information](index=109&type=section&id=Item%2016.%20Other%20Information) Covers governance topics, accountant fees, share repurchase details, and differences from NYSE listing standards Principal Accountant Fees | Service Type | FY 2020 Fees (in millions) | FY 2019 Fees (in millions) | | :--- | :--- | :--- | | Audit services | $6.3 | $6.5 | | Audit-related services | $0.1 | $0.1 | | Other services | $0.2 | $0.2 | | **Total** | **$6.6** | **$6.8** | - The Bank **repurchased a total of 3,452,000 common shares** during the year ended December 31, 2020, completing its previously announced 3.5 million share repurchase program[1006](index=1006&type=chunk)[1008](index=1008&type=chunk) - As a foreign private issuer, the Bank's corporate governance practices **largely comply with NYSE requirements**, with the exception that it does not submit equity compensation plans to shareholders for approval[1012](index=1012&type=chunk)[1017](index=1017&type=chunk) Part III [Financial Statements](index=112&type=section&id=Item%2017.%20Financial%20Statements) Presents the complete audited consolidated financial statements, management's report on internal controls, and the auditor's report - Management concluded that as of December 31, 2020, the Bank's **internal control over financial reporting was effective**, based on the COSO framework (2013)[1023](index=1023&type=chunk) - The independent auditor, PricewaterhouseCoopers Ltd, issued an **unqualified opinion** on both the consolidated financial statements and the effectiveness of internal control over financial reporting[1027](index=1027&type=chunk) - A critical audit matter identified by the auditor was the **qualitative assessment of the allowance for credit losses**, due to significant management judgment involved[1036](index=1036&type=chunk)[1037](index=1037&type=chunk) - The Bank adopted the new **CECL model** for credit losses on January 1, 2020, which resulted in a **negative adjustment of $7.8 million** to the opening balance of accumulated deficit[1116](index=1116&type=chunk)