About The Bank of N.T. Butterfield & Son

The Bank of N.T. Butterfield & Son Limited (Butterfield) provides a full range of community, commercial, and private banking services in select jurisdictions. The company is a full service bank and wealth manager. The company operates its business through three geographic segments: Bermuda, the Cayman Islands, and the Channel Islands and the UK (CI & UK). The company offers banking services, comprising of retail, private and corporate banking, treasury services, and wealth management, which consists of investment management, advisory and brokerage services, trust, estate, and company management in both its Bermuda and Cayman Islands segments, as well as custody services in its Bermuda segment. The CI & UK segment includes the jurisdictions of Guernsey and Jersey (Channel Islands), and the UK. In the Channel Islands, a broad range of services are provided to individuals, private clients and trusts, and to financial intermediaries and funds, including deposit services, mortgage lending, private and corporate banking, treasury services, wealth management and fiduciary services. In 2023, the company began issuing credit cards to residents of Guernsey and Jersey. The UK jurisdiction provides mortgage lending for high-value residential properties. The company also has operations in the jurisdictions of The Bahamas, Canada, Mauritius, Singapore and Switzerland, which it includes in its Other segment. In its Bermuda and Cayman segments, the company’s bank provides a full range of retail and corporate banking services to individuals, local businesses, captive insurers, reinsurance companies, trust companies, and hedge funds. The key products the company offers include personal and business deposit services, residential and commercial mortgages, small and medium-sized enterprise and corporate loans, credit and debit cards, merchant acquiring, mobile and internet banking, and cash management. In its Channel Islands and UK segment, the company’s bank provides a broad range of services to individuals, private clients and trusts, and to financial institutions and funds including deposit services, mortgage lending, private and corporate banking, treasury services, wealth management and fiduciary services. In 2023, the segment began issuing credit cards to local residents of Guernsey and Jersey. The UK jurisdiction provides mortgages for high-value residential properties. In all of its segments, the company offers wealth management to high net worth and ultra-high net worth individuals, family offices, and institutional and corporate clients. The company’s wealth management platform has three lines of business: trust, private banking, and asset management. The trust business line, which utilizes specialists in each of the company’s geographic areas, responds to client needs in estate and succession planning, administration of complex asset holdings, and efficient coordination of family affairs. In addition, the business provides pension and employee benefits services for multinational corporations, as well as services that involve administration of and fiduciary responsibility for customized trust structures holding a wide range of asset types, including financial assets, property, business assets and art. The company’s private banking business line offers access to a suite of services, targeted toward high net worth and ultra-high net worth individuals, trusts, and family offices, that can be customized to each client's needs and preferences and delivered as part of a coordinated strategy by a dedicated private banker. The company provides clients in its Bermuda, Cayman, and Channel Islands and the UK segments with an integrated model that combines traditional wealth management with banking, lending, cash management, foreign exchange services, custody and access to asset management and trust professionals within Butterfield. The company also provides its clients with access to their account information through the use of internet and mobile banking. The company’s asset management business line provides a broad range of portfolio management services to institutional and private clients. The company’s target client base includes institutions, such as pension funds and captive insurance companies with investable assets over $10 million and private clients such as high net worth and ultra-high net worth individuals, families, and trusts with investable assets over $1 million. The company’s principal services include discretionary investment management, managed portfolio services, money market, and mutual fund offerings. The company also offers advisory and self-directed brokerage options. Over 90% of the business's discretionary investment mandates call for balanced growth to conservative allocations. The company focuses on delivery of reasonable appreciation with an emphasis on capital preservation. The bank relies on third parties to provide research and investment management expertise, while its own services are concentrated on portfolio construction and managing client relationships. The company also provides customized reporting to meet specific needs of its major clients. Markets The Bermuda and Cayman Islands banking markets have historically been characterized by a limited number of participants and significant barriers to entry. In addition, these markets provide the company with access to several attractive customer bases: in retail banking, it serves local residents and businesses; in corporate banking, the company serves captive insurers, hedge funds, middle-market reinsurers, and other corporates; and in wealth management, it serves private trust clients and high net worth and ultra-high net worth individuals and families. The international trust market is primarily concentrated in select jurisdictions, including Bermuda, the Cayman Islands, Guernsey, Jersey, Hong Kong, Singapore, and Switzerland. The leading international trust law firms serve as key introducers of clients to Butterfield and are the primary source of new business. Trust clients often hold assets that are international in nature, and as a result, performance of trust businesses is expected to have limited correlation with the performance of the domestic economies where clients are served. The private banking market in Bermuda, the Cayman Islands, and Guernsey is composed largely of resident high net worth and ultra-high net worth individuals meeting minimum deposit and/or loan thresholds. Clients are introduced to the private bank through Butterfield's retail banking operation upon reaching the appropriate deposit or loan threshold, Butterfield's trust and asset management arms, as well as through external introducers. Although locally based, private banking clients often hold international assets, and as a result, business performance is not necessarily correlated to the domestic economies where clients are served. The company’s asset management business line operates in Bermuda, the Cayman Islands, and Guernsey. As of December 31, 2023, 68% of the company’s AUM was in Bermuda, 17% was in the Cayman Islands, and 14% was in Guernsey. In Bermuda and the Cayman Islands, a majority of the company’s institutional and private clients are domestic from a domicile perspective while a majority of its clients in Guernsey are tied to its trust business and are international in nature. Bermuda The bank itself is licensed in Bermuda to provide banking and custody services. Through Butterfield Asset Management Limited and Butterfield Securities (Bermuda) Limited, it is licensed and provides investment services and, through Butterfield Trust (Bermuda) Limited and Bermuda Trust Company Limited, it is licensed and provides corporate trustee, fiduciary and corporate administration services. Butterfield Securities (Bermuda) Limited also provides investment advisory and listing sponsor services. The Bahamas Butterfield Trust (Bahamas) Limited provides trust and fiduciary services. Cayman Islands Butterfield Bank (Cayman) Limited provides banking services and Butterfield Trust (Cayman) Limited provides trustee, fiduciary and corporate administration services. Guernsey Butterfield Bank (Guernsey) Limited provides banking and custody services. Butterfield Trust (Guernsey) Limited provides trustee and fiduciary services. The United Kingdom Butterfield Mortgages Limited provides residential property lending services. Switzerland Butterfield Holdings (Switzerland) Limited provides investment services and Butterfield Trust (Switzerland) Limited provides trust and fiduciary services. Jersey Butterfield Bank (Jersey) Limited provides banking and custody services. Singapore Butterfield Trust (Asia) Limited provides trust and fiduciary services. Deposits The company is a deposit-led institution with leading market shares in Bermuda and the Cayman Islands1, and a small but growing market share in the Channel Islands. The company strives to maintain deposit growth and to maintain a strong liquidity profile through a significant excess of deposits over loans through market cycles. The company’s deposits are generated principally by its banking business line, which offers retail and corporate checking, savings, and term deposits through its segments in Bermuda, Cayman and the Channel Islands. In addition, wealth management, through its private banking business line, also provides deposit services to high net worth and ultra-high net worth clients in those same geographic segments. Lending The company offers a broad set of lending products and services including residential mortgage lending, automobile lending, credit cards, consumer financing, and overdraft facilities to its retail customers, and commercial real estate lending, commercial and industrial loans, and overdraft facilities to its commercial and corporate customers. These offerings are provided to the company’s retail, commercial, and private banking clients in its key jurisdictions of Bermuda and the Cayman Islands. The company also offers residential mortgage lending through its banking business in the Channel Islands and to its high net worth and ultra-high net worth clients in the U.K. Residential Mortgage Lending The residential mortgage portfolio comprises mortgages to clients with whom the company is seeking to establish (or already have) a comprehensive financial services relationship. It includes mortgages to individuals and corporate loans secured by way of first ranking charges over the residential property to which each specific loan relates, generally on terms which allow for the repossession and sale of the property if the borrower fails to comply with the terms of the loan. Consumer Lending The company provides loans, as part of its normal banking business, in respect of automobile financing, consumer financing, credit cards and overdraft facilities to retail and private banking clients in the jurisdictions in which it operates. Commercial Real Estate Lending Commercial real estate loans are offered to real estate investors, developers and builders domiciled primarily in Bermuda, the Cayman Islands, Guernsey and the U.K. To manage the Group's credit exposure on such loans, the principal collateral is real estate held for commercial purposes and is supported by a registered mortgage. Cash flows from the properties, primarily from rental income, are generally supported by long-term leases. The company’s commercial real estate loan portfolio is broken down into two categories: commercial mortgage and construction. Other Commercial Lending The commercial and industrial loan portfolio includes loans and overdraft facilities advanced primarily to corporations and small and medium-sized entities, which are generally not collateralized by real estate and where loan repayments are expected to flow from the operation of the underlying businesses. Investments Given the large customer deposit base commanded in the company’s Bermuda, Cayman Islands and Channel Islands operations, and the relatively low volume of lending demand from its customer base, its investment strategy is more important than may be the case for most financial institutions. The company’s investment portfolio comprises mainly securities issued or guaranteed by the U.S. government or federal agencies. The securities in which the company invests are limited generally to securities that are considered investment grade (i.e., BBB and higher by S&P's Financial Services LLC or an equivalent credit rating). Cash and Liquidity Management The company operates across multiple currency jurisdictions with multi-currency products. In its deposit taking jurisdictions—Bermuda, the Cayman Islands, Guernsey and Jersey—there are no dedicated central banks, and no pre-funded deposit insurance scheme infrastructures (such as the Federal Deposit Insurance Corporation in the United States), with the exception of Bermuda, where a pre-funded deposit insurance scheme has been implemented. Foreign Exchange Services The company provides foreign exchange services in the normal course of business in all banking jurisdictions. The major contributors to foreign exchange revenues are Bermuda and the Cayman Islands, accounting for 84% of the company’s foreign exchange revenue for the year ended December 31, 2023. Administration Services The company provides custody administration and settlement services to a wide range of internal and external investment clients dealing in global markets. The company’s custody service offers custody settlement and safekeeping services in 39 markets globally, including major markets and smaller, less-developed markets, with principal markets covered being the United States, Canada, Europe and Asia. The company’s custody service offers safekeeping services for physical and book-entry assets. Custody for listed securities is conducted through BNYM. Hedge funds, mutual funds and exchange traded funds are held by BBH. Trading in investment transactions is settled via the company’s global sub-custodians, BNYM and BBH. Custody services are offered from its Bermuda, Cayman and Channel Islands segments and complement core wealth management services offered by other parts of the Group, and it anticipates this business to grow in line with its wealth management business. Clients of its custody service include a wide range of investment funds and other investment vehicles, corporations and trusts whose related banking requirements are provided by the Bank. As such, the custody client base, in addition to delivering a fee based income, also provides cash balances and foreign exchange transaction flows. Custody fees are earned based on the value of Assets Under Custody, which are subject to a minimum levels for smaller, less complex portfolios. In addition to these fees, custody clients are charged banking transaction fees based on account activity. Marketing Through its Marketing & Communications department, the company engages select advertising, branding and promotional companies on an as-needed basis and provide business development and sales support for businesses in all jurisdictions. In support of its banking businesses, the company broadly markets its products and services through print, broadcast, web and social media advertising in the major markets in which it operates. Trust and fiduciary services are marketed primarily to intermediaries through representative attendance at and sponsorship of industry conferences and through print advertising in international trade journals. Supervision and Regulation The bank is subject to regulation and supervision by the Bermuda Monetary Authority (the BMA) under the Bermuda Monetary Authority Act 1969; the Banks and Deposit Companies Act 1999; the Trusts (Regulation of Trust Business) Act 2001; the Investment Business Act 2003; the Exchange Control Regulations 1973; the Corporate Services Provider Business Act 2012; and any applicable code of practice or guidance notes that may be published by the BMA from time to time. The bank is also subject to regulation by the Minister of Finance in Bermuda under the Companies Act 1981, the Banking (Special Resolution Regime) Act 2016 and the Economic Substance Act 2018 and regulations promulgated thereunder (including applicable guidance notes published by the Registrar of Companies from time to time). It is also subject to the Deposit Insurance Act 2011 and the Deposit Insurance Rules 2016. The bank and certain of its subsidiaries hold unlimited licenses issued by the BMA pursuant to the Trusts (Regulation of Trust Business) Act 2001 (the Trusts Business Act). The bank and its wholly owned subsidiaries Butterfield Trust (Bermuda) Limited, Butterfield Securities (Bermuda) Limited and Butterfield Asset Management Limited hold licenses under the Investment Business Act. As a local company incorporated in Bermuda, the bank is subject to the Companies Act 1981 (the Companies Act). The Banks & Trust Companies Act (2021 Revision) (BATCA) provides that it is an offense to conduct banking business or trust business without the appropriate license. Butterfield Bank (Cayman) Limited holds a category A banking license and a trust license, both issued by Cayman Islands Monetary Authority (CIMA). Butterfield Bank (Cayman) Limited is an ordinary resident company incorporated in the Cayman Islands, meaning that, subject to it being licensed under the Banks and Trust Companies Act (2020 Revision) (BATCA). Butterfield Bank (Cayman) Limited is required to comply with the requirements of the Companies Act (2020 Revision), this being the principal statute governing the incorporation and ongoing operations of the Cayman Islands companies. Butterfield Bank (Cayman) Limited is subject to the Anti-Money Laundering Regulations (2020 Revision) (the ‘Regulations’) made pursuant to the Proceeds of Crime Act (2020 Revision) (the ‘PCL’), each as amended. Butterfield Trust (Bahamas) Limited has been granted a license from the Central Bank of The Bahamas to conduct trust business from within The Bahamas. As the primary regulator of Butterfield Trust (Bahamas) Limited, the Central Bank of The Bahamas is responsible for the regulation and supervision of Butterfield Trust (Bahamas) Limited with respect to all of its operations, corporate governance issues, and compliance with applicable laws and regulations. Butterfield Trust (Bahamas) Limited is also subject to various other acts and regulations, including the Proceeds of Crime Act, which sets forth that it is a crime in The Bahamas for a person to conceal, transfer or deal with the proceeds of criminal conduct (such as money laundering) and the Anti-Terrorism Act, which sets forth that it is a crime in The Bahamas for a person to provide or collect funds or provide financial services or make such services available to persons with the intention that such funds or services are to be used in full or in part to carry out a terrorist act. In addition to the laws and regulations set forth above, Butterfield Trust (Bahamas) Limited is also obligated to comply with the guidelines released by the Central Bank of The Bahamas from time to time. The company’s activities in Guernsey are monitored by the Guernsey Financial Services Commission (the ‘GFSC’) through its Probability Risk and Impact System. Butterfield Bank (Guernsey) Limited holds a license under the Banking Supervision (Bailiwick of Guernsey) Law, 2020. Butterfield Bank (Jersey) Limited is regulated by the JFSC to carry on deposit-taking business under the Banking Business (Jersey) Law 1991; investment business pursuant to the Financial Services (Jersey) Law 1998; fund services business pursuant to the Financial Services (Jersey) Law 1998; and has notified the JFSC that it is carrying on money service business pursuant to the Financial Services (Jersey) Law 1998. Butterfield Bank (Jersey) Limited holds a license under the Banking Business (Jersey) Law 1991. Further, Butterfield Mortgages Limited must comply with its obligations under the Proceeds of Crime Act 2002, the Terrorism Act 2000, the Anti-terrorism, Crime and Security Act 2001, the Counter-Terrorism Act 2008 (Schedule 7), certain specific obligations under the Transfer of Funds (Information on the Payer) Regulations 2007 and certain specific obligations in FSMA (in particular with respect to market abuse and insider dealing) and the FCA Handbook. In addition, Butterfield Mortgages Limited must adhere to the Bribery Act 2010 which has broad extra-territorial reach. Butterfield Mortgages Limited is regulated by the Financial Conduct Authority (FCA). Butterfield Mortgages Limited must also comply with legislation of third countries to the extent that such legislation has extra-territorial effect and is applicable to it. Examples of this are the U.S. PATRIOT Act of 2001 and The Foreign Account Tax Compliance Act (FATCA) of 2010. Butterfield Mortgages Limited is required to have in place compliant policies and procedures to meet the DPA obligations to deal with data appropriately. Butterfield Trust (Switzerland) Ltd must comply with its obligations under the Swiss Federal Act on Combating Money Laundering and Terrorist Financing of 10 October 1997 (AMLA) and is affiliated to Organisme de Surveillance pour Intermediaires Financiers & Trustees (SO-FIT), a Supervisory Organisation licensed and supervised by the Swiss Financial Market Supervisory Authority (FINMA). Butterfield Trust (Asia) Limited holds a trust business license issued by the Monetary Authority of Singapore (MAS) pursuant to the Trust Companies Act (Chapter 336 of Singapore) (TCA). The company monitors all present and new legislation that is or will be applicable for its organization, and is continuing to monitor all implications of the Foreign Account Tax Compliance Act (FATCA) and legislation of countries that have entered into intergovernmental agreements. Competition The company views HSBC Bank Bermuda in Bermuda and Scotia and Canadian Imperial Bank of Commerce (CIBC) FirstCaribbean in the Cayman Islands as its most significant competitors in those markets. History The Bank of N.T. Butterfield & Son Limited was founded in 1784. It was incorporated under the laws of Bermuda in 1904.