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

Good morning. My name is Andrew, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter and year-end 2020 earnings call for the Bank of N.T. Butterfield & Son Limited. All participants will be in listen-only mode. Should you need assistance, please signal a conference special by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Noah Fields, Butterfield's Head of Investor Relations.

Thank you, Operator. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's fourth quarter and year-end 2020 financial results. On the call, I am 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 fourth quarter near end results. The press release, along with a slide presentation that we will be referring 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-GAAP measures, which we believe are important in evaluating the company's performance. For reconciliation of these measures with US GAAP, please refer to the earnings press release and slide presentation. Today's call and associated materials may also contain certain forward-looking statements, which are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. On slide 26 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.

Thank you, Noah, and thanks to everyone joining the call today. I will begin our discussion with a look back at the full year and provide some observations on the bank's experience in 2020, and then provide an update on COVID-19. I will then turn the call over to Michael Scrum, our CFO, to provide a detailed review of the fourth quarter financials. Turning now to slide four. As a whole, for 2020, I am very proud of Barfield's performance and the resilience of the business model. In a near zero interest rate environment, we produced net income of $147 million, or $2.90 per share, and core net income of $155 million, or $3.04 per share, which equates to a core return on average tangible common equity of 17.3%. NIM finished the year at 2.42% with an average cost of deposit of 21 basis points for the year. We continued with a $0.44 per share quarterly cash dividend and completed a $3.5 million share repurchase program with the most activity during the second and third quarters. We also improved our capital profile with $100 million, 5.25% qualifying subordinated debt offering in June. Butterfield's business model, which focuses on maximizing returns while closely managing credit and operational risk, proved successful during this period of uncertainty. The global pandemic tested us across all jurisdictions, and the bank continued to perform well. Our technology and collaborative culture allowed us to maintain safe and uninterrupted services for our clients by decisively moving between the office and remote working environments as conditions required. Our conservative credit profile consists of 65% residential mortgages with relatively low LTVs, no out-of-market lending, a loan-to-deposit ratio of just 39%, and an investment portfolio consisting of 97% U.S. government and federal agency securities. The historically low interest rates in 2020 also brought a renewed focus on improving efficiency. As a result, we implemented a bank-wide restructuring program to lower headcount, as well as moving non-client-facing positions to lower-cost service centers wherever possible. We were very pleased to complete the integration of ABN AMRO Channel Island's acquisition this year. The Channel Islands continue to represent a growth opportunity for us, both organic and through potential acquisitions. In 2021, we are launching retail lending products to complement our UK mortgages business and to activate a portion of our sterling deposits over time. We expect this business to be similar in underwriting standards and character to our loan portfolios in Bermuda and Cayman. We plan to develop the book organically and anticipate it could grow to around $500 million over the next four to five years. Finally, I would like to recognize the additions to our executive management team during 2020, which now benefits from fresh perspectives and deep experience to their roles in trust, compliance and operations, risk communications, and human resources. I am proud and confident in our management team and believe we have the right people in place to grow Butterfield and reach its potential. Turning now to slide five. Here we have provided some context and an overview of our core markets and how the bank continues to manage through the pandemic. Bermuda Cayman and the Channel Islands continue to have active domestic economic activity. However, much of the travel and tourism industry is operating well below historical norms. The vaccine rollout is progressing well, and all jurisdictions have active government-sponsored vaccination programs. We expect that visitor numbers will continue to improve as we move through the summer and fall tourism seasons in 2021. As we discussed last quarter, following the mortgage assistance programs, we had implemented a calling program at Bermuda to better understand borrowers' status and the ability to restart payments. I am pleased to say that the actual customer payment rates have exceeded the indications from the program. At this point, we are seeing short-term delinquency of less than 1% of the total residential loan book and continue to work closely with customers to determine the best way forward. While we are encouraged by these initial results, we recognize that the pandemic continues to impact customers and will maintain close monitoring of the mortgage books in Bermuda and Cayman. Our commercial lending book remains solid and has not been significantly impacted by COVID-19-related issues. Direct hotel and restaurant lending continues to be limited, well underwritten, and performing loans. I will now turn the call over to Michael Scrum to provide a detailed review of the fourth quarter.