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

Good morning. My name is Nikki and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2023 earnings call for the Bank of NT, Butterfield and Sun Limited. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask questions at any time by pressing the star and 1 on your touch-tone phone. you may withdraw yourself from the queue by pressing star two. Please note this call is being recorded and it will be sending by should you need any assistance. 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 second quarter 2023 financial results. On the call, I'm joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer. Craig Bridgewater, Group Chief Financial Officer, and Michael Scrum, President and Group Chief Risk Officer. 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 second quarter 2023 results. The press release and financial statements, 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-GAAP measures, which we believe are important in evaluating the company's performance. For reconciliation of these measures to U.S. 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. 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. The second quarter results continue to demonstrate the strength of Butterfield's leading bank franchise and market position, as well as our conservative and well-managed balance sheet. We delivered consistent quarter-over-quarter non-interest income and expense discipline, which helped offset lower net interest income. As a reminder, Butterfield is comprised of well-established bank and private trust businesses located in premier offshore jurisdictions. We maintain leading bank market shares in Bermuda and the Cayman Islands with targeted growth in the Channel Islands. In the Bahamas, Switzerland, and Singapore, we provide private trust services in addition to our prime central London mortgage offerings available to high network borrowers. I will now turn to the second quarter of 2023 highlights on page four. Butterfield reported solid results with net income of $61 million and coordinate income of $57 million. We reported a core return on average tangible common equity of 26.3% for the second quarter of 2023 with core earnings per share of $1.14. The net interest margin was 2.83% in the second quarter, a decrease of five basis points with the cost of deposits rising to 127 basis points from 110 basis points in the prior quarter. Deposit pricing increased across jurisdictions as fixed-term deposits rolled into higher rates due to rising market interest rates. Our business in the Channel Islands, which has a higher proportion of corporate banking customers, continues to be the most competitive market and the most significant contributor to the increase in the cost of deposits. Our TCE to TA ratio of 6.5% has improved to the conservative end of our targeted range of between 6% and 6.5%. As a result, we have been able to continue with the execution of our balanced capital return strategy, accelerating our share buyback program in the second quarter with a repurchase of 723,000 shares in the quarter. We expect to continue repurchasing shares throughout 2023, subject to market conditions. Our liquidity position and strong capital profile also allowed us to redeem our 2018 issuance of $75 million, 5.25% supported aid debt in June, which will lower our interest expense going forward. The redemption had a one-time $900,000 interest cost impact in the quarter due to the accelerated amortization of issuance costs. I am also pleased that we completed the second closing of our planned acquisition of trust assets from Credit Suisse. To date, 374 relationships representing $21.1 billion of assets under administration have now transferred to Butterfield, significantly expanding our footprint in Asia. Work is continuing on acquiring due diligence for subsequent tranches, which will include additional relationships in Singapore as well as Guernsey in the Bahamas. We continue to expect to add between $8 to $10 million in annual trust fees from the deal in 2024, with anticipated associated running costs of around $6 million per annum. I will now turn the call over to Craig for more detail on the quarter.