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

Good morning. My name is Nihugi, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter and full year 2023 earnings call for the Bank of NC, Butterfield, and Sunlipset. All participants will be in a listen-only mode. To do this system, please press 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 the star, then one, on your telephone keypad. To withdraw your questions, 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.

Please go ahead, sir. Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's fourth quarter and full year 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 fourth quarter and full year 2023 results. The press release, along with the 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 a reconciliation of these measures to this 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. I am pleased with Butterfield's performance in 2023 as we completed a number of important projects, including the implementation of our upgraded core banking system in Bermuda and Cayman, the onboarding of trust assets acquired from Credit Suisse, and executed a significant cost reduction program which should improve operating efficiencies and help offset inflationary pressures and the expected impact of lower market interest rates on net interest income. Butterfield continues to benefit from leading bank market shares in Bermuda and Cayman Islands with an expanding retail banking presence in the Channel Islands. Wealth management services in Bermuda, the Cayman Islands, and the Channel Islands include Trust, private banking, asset management, and custody. The bank also offers specialized financial services in the Bahamas, Switzerland, Singapore, and in the UK, where we provide mortgages to high net worth clients with properties in prime central London. I will now turn to the full year highlights on page four. Butterfield had an excellent year with net income of $225.5 million, and core net income of $231.5 million. This resulted in a core return on average tangible common equity of 27% for 2023. The bank earned higher net interest income in an elevated market interest rate environment, as well as increased non-interest earnings. The strong revenues were somewhat offset by higher expenses, which trended higher due to inflationary pressures the investments in our core banking system and branches, and costs associated with the Credit Suisse asset acquisition. The net interest margin increased to 2.80% from 2.41% in 2022, with the cost of deposits rising to 140 basis points from 34 basis points in 2022. We have continued to carefully balance the cost of deposits with the competitive landscape in our banking jurisdictions, and we continue to see mixed shift to higher cost term products, while our core non-interest bearing deposit franchises remain somewhat insulated. Tangible book value per common share increased by 21.2% to end the year at $19.29. This was due to an improved OCI position, normalization to a smaller balance sheet post-COVID, as well as retained earnings for the year. We remain committed to actively managing our capital, and throughout the year, we have paid out approximately 38% of earnings in quarterly dividends. In addition, during 2023, the bank repurchased just over 3 million shares at a total value of $88 million. On December 5th, the Board approved a new share repurchase authorization for 2024 of up to 3.5 million common shares, which came into effect on December 15th. As anticipated, during the fourth quarter, we completed the acquisition of trust assets from Credit Suisse. I'm very happy with the quality of business that we have successfully onboarded and have been impressed with talented new colleagues that have also come across to Butterfield. I will circle back at the end and walk through some of the highlights of the deal. I will now turn the call over to Craig for details on the fourth quarter.