Bank of N.T. Butterfield & Son Limited (The)

Good morning. My name is Carrie, and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2020 earnings call for the Bank of N.T. Butterfield and Sun Limited. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the call over to Noah Fields, Butterfield's Head of Investor Relations.

Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's third quarter 2020 financial results. On the call, I'm joined by Butterfield's Chairman and Chief Executive Officer, Michael Collins, and Chief Financial Officer, Michael Scrum. Following their prepared remarks, we will open the call up for a question and answer session. Yesterday afternoon, we issued a press release announcing our third quarter results. The press release, along with a slide presentation that we will refer to during our remarks on this call, are available on the investor relations section of our website at www.butterfieldgroup.com. Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-GAT measures which we believe are important in evaluating the company's performance, For a reconciliation of these measures to US GAAP, please refer to the earnings press release and slide presentation. Today's call on associated materials may also contain certain forward-looking statements which are subject to risks, uncertainties, and other factors that may cause actual results different materially from those contemplated by these statements. On slide 25 of the presentation, we have also included a list of potential factors relevant to the implications of COVID-19 for the bank. Additional information regarding these risks can be found in our SEC filings. I will now turn the call over to Michael Collins.

Michael Collins Thank you, Noah, and thanks to everyone joining the call today. During the third quarter of 2020, we continued to strengthen our position as a leading offshore provider of banking and wealth management with franchise-level market shares in our core operating jurisdictions. Our ability to support clients with world-class financial services helps us generate capital-efficient fees, which complements our solid revenues from a conservatively managed balance sheet. As you will see on slide four, Butterfield has continued to report strong results with net income of $30.5 million and core net income of $36.5 million, or 73 cents per share, and a core return on tangible common equity of 16.2%. The core results in the third quarter exclude $6.7 million in staff exit costs resulting from the voluntary retirement and redundancy programs that are being implemented and resulting in the reduction of around 100 full-time roles across the organization. This corresponds to 7.4% of the workforce. In light of the continued ultra-low interest rate environment and business challenges of the COVID-19 epidemic, we have made a significant adjustment to the ongoing cost base to help offset the financial impact to the bank. During the third quarter of 2020, we were pleased to complete the full Channel Islands banking integration, which was one quarter later than planned due to COVID. Overall, I'm delighted with the results of the acquisition and the transition of the business and people onto Butterfield's platform. This now positions Butterfield to grow with a more meaningful market share in the Channel Islands. We also added two new non-executive directors and enhanced risk and compliance management with new executive-level hires. In addition to the new directors, I would also like to acknowledge the onboarding of new Group Executive Committee members, Sabeth Sadiq, Group Chief Risk Officer, Brie Hidalgo, Group Head of Compliance and Operational Risk, and Kevin Dallas, Group Head of Marketing and Communications. They are all strong additions to our executive management team and have already started making meaningful contributions towards the success of Butterfield. Turning now to slide five. In general, the island jurisdictions where our businesses are located have handled the health-related aspects of the pandemic well. Bermuda, Cayman, and the Channel Islands are experiencing relatively low infection levels and sporadic cases, which has allowed the local economies to open up and allowed for fairly normal domestic commerce to resume. Visitor numbers for Bermuda and Cayman are down this year with no cruise ship business and significantly lower airlift and stayover visitors on those flights than in prior years. For context, pre-pandemic, tourism represented 17% and 25% of GDP for Bermuda and Cayman, respectively. While difficult for tourism-related businesses, the islands are doing well and are seeing visitor numbers increase. slowly return with stringent health-related arrival protocols, contacts tracing, and testing to control imported and local transmission of COVID cases. At this point, the testing and tracing have been effective at maintaining low rates of transition. On the top right of slide 5, we have provided a summary of the deferral program we offered to mortgage clients in good standing, which covered a total of six months' principal and interest deferrals. By the end of the second three-month period in September, the participation rate was 34% of total qualifying borrowers. In order to better understand current customer needs and repayment capacity, we started an ongoing calling program in Bermuda, which has contacted around 500 borrowers, or 20% of Bermuda mortgage holders. Of those borrowers, 92% have so far indicated that they plan to resume normal payments in while 6% have indicated that they may require potential further relief. Only 2% have stated that they do not anticipate being able to resume normal payments. As stated in the past, we will continue to work closely with customers to determine how best to help those who experience difficulty. We closely monitor all credit assets and the general credit environment and view these initial results as a positive indicator that the majority of clients should be in a position to resume payments and meet their obligations. I will now turn the call over to Michael Scrum to provide more details on the third quarter.