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 2017 Earnings Call The Bank of N.T. Butterfield & Son Limited. All participants will be in listen-only-mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brian Stevens, Butterfield's Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone and thank you for joining us today as we review Butterfield's third quarter 2017 financial results. On the call, I'm joined by Butterfield's Chief Executive Officer, Michael Collins; Chief Financial Officer, Michael Schrum; and Chief Operating Officer, Dan Frumkin. Following their prepared remarks, we will open up the call up for question-and-answer session. This morning, we issued a news release announcing our third quarter 2017 results. The release along with the slide presentation that we will refer to during our remarks on the call is available on the Investor Relations section of our website. Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussion 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. Today's call may also contain certain forward-looking statements, which are subject to risks and uncertainties. Please refer to the forward-looking statement disclosure contained in our SEC filings for a full description of the company's risk factors. I will now turn the call over to Michael Collins.

Thank you, Brian and thanks to everyone for joining the call today. We're pleased to announce another strong quarter of Butterfield as rate increases led to margin improvement and expenses began to return to a more normal level. It was a little more than a year ago, that we completed our initial public offering. And I'd like to thank our customers, employees and shareholders who have contributed to our success as a public company. Without your support, we could not have achieve the record results that are highlighted on slide 4, with core net income increasing to $0.73 per share, net interest margin increasing to 2.81%, and core return on equity increasing to 22.2%. During the quarter, hurricanes caused significant damage to communities in the Caribbean and Southern United States. We were fortunate and we're not affected, but as residents of island communities ourselves our thoughts and prayers go out to everyone who was impacted. Today, we're also excited to announce an agreement to acquire Deutsche Bank's Global Trust Solution's business, which will add scale and talent to our existing operations and at a profitable and strategically important private trust platform in Singapore. This transaction represents our four such acquisitions in three years and is consistent with our strategy to expand our capital efficient, fee-based trust business in select market. It also validates Butterfield's reputation as a leader in international wealth management and trust services, with the proven ability to integrate businesses from global financial leaders like Deutsche Bank. In addition to the acquisition, we're pleased to have entered into a partnership with Deutsche Bank's Wealth Management team, whereby Butterfield will provide trust solutions to Deutsche Bank's clients on an ongoing basis. We believe that working closely with Deutsche Bank will provide us with additional opportunities to expand our businesses especially in Asia. Taking together, we believe our strong financial results, combined with our success in growing our trust business demonstrates that our strategy to create shareholder value is working. I'll now turn over the call to Michael Schrum.

Thank you, Michael and good morning everyone. On slide 6, we show a healthy third quarter increase in net interest income to $74.3 million and a corresponding 15 basis points increase in net interest margin to 2.81%. This continued margin expansion was due to higher short term rates that boosted the returns on our liquidity and investment portfolios, as well as repricing that increased the yields on our loan book. In aggregate, loan margins expanded by 5 basis points as commercial loan yields increased by 19 basis points and consumer loan yields decreased by 1 basis point. The decline in consumer yields was due to lower yielding UK residential mortgage originations replacing higher yielding amortization from the Bermuda and Cayman mortgage book. Slide 7, details the performance of our various fee businesses which generated $38.2 million of capital efficient non-interest income in the third quarter. Banking, trust and FX revenues were broadly flat. While we did see some growth in asset management and 34% Butterfield's fee income ratio is well above our peer average and helps produce industry leading returns on equity. We expect the acquisition of Global Trust Solutions Business from Deutsche Bank will add new trust revenue and will be accretive once integrated in the first half of 2018. We're also pleased to be acquiring a high quality and profitability trust platform in Singapore, that will accelerate our plans to expand in that region. As you may have guess by now, we've limited in what financial information we can disclose, but we can confirm that the transaction is within previously disclosed parameters in terms of size, expected returns and earnings multiple. Upon completion of the transaction, which is subject to regulatory approvals, Butterfield will take over the ongoing management and administration of Global Trust Solutions business comprising approximately…

Thank you, Michael. Good morning everyone. We are aware of the unique environment in which we operate and seek to maximize safety and stability by managing risk while maintaining sufficient capital in an efficient and liquid balance sheet. Slide 10, summarizes the bank's balance sheet at the end of the third quarter, which at $10.6 billion which is actually flat from the second quarter 2017. We continue to maintain a highly liquid position with 62% of our total assets comprised of cash and equivalence, short-term investments and investment assets. Loan balances remain flat from the prior quarter due primarily to commercial and residential loan amortization, offset by continued growth in the new residential mortgages particularly in our UK mortgage business. As we've discussed before, average deposit balances tend to fluctuate into quarter as our largest trust customers manage their commercial interest. A summary of loan investment portfolios on slide 11, shows the composition in size of the loan portfolio remaining broadly flat at $3.6 billion and made up of essentially the same mix of assets. Non-performing loans which include gross non-accrual loans and accruing loans past due 90 days or more totalled $61.8 million as of September 30, 2017, which is in line with last quarter's balance. The net charge-off ratio remained low at 2 basis points in the quarter. Our investment portfolio remains stable at $4.6 billion, as a lack of attractive pricing in the U.S. dollar term rate market deterred any significant rebalancing. We are cautiously optimistic that we will have opportunities to prudently deploy additional excess deposits into this margin in the near term at better rates. At quarter end, approximately 92% of the investment portfolio consisted of AAA rated securities. Slide 12, summarizes the average balance sheet of the left side of our balance sheet, and highlights the client-driven quarter-to-quarter changes we tend to see. Slide12 also illustrates our interest rate sensitivity relative to our U.S. peers, and shows that the 200 basis points increase in rates would generate an uptick in net interest income of 12.7%, versus our peers at 6%. I will now turn the call back over to Michael Collins for closing remarks.

Thank you, Dan. The third quarter again demonstrated the strength of the Butterfield franchise, with expanding net interest margins, stable fee revenue, continued low cost deposits and core return on equity that remained above 20% for the third consecutive quarter. Our acquisition of Deutsche Bank's Global Trust Solutions business demonstrates our ability to transact with industry leaders, and is expected to create additional opportunities for us as we continue to add scale to our international trust business. We also believe that Butterfield's partnership with Deutsche Bank Wealth Management will benefit both companies by deepening existing client relationships, and helping also to create to new ones. With that, we'd like to take your questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question will come from Timur Braziler of Wells Fargo. Please go ahead.

Hi, good morning. Looking maybe first at the period end loan growth, the strong result out of the residential line items. How much of that came from the UK business versus the traditional Island businesses?

It's Dan, Tim. Listen the majority of it came from the UK business. UK business is turn out to be a good generator of new assets for us. There was, while Bermuda and came and showed a bit of growth. The reality is that it still happen amortizing book that runs off. So, the UK book overall was probably up $70 million or $80 million of that difference. So, it's the lion share of the piece.

Okay. And I guess, as that book continues to grow until the amortization schedule catches up, is it a fair assumption to think that loan growth might actually exceed prior quarters, as that book gets up to speed? Or as a still the assumption that it should be relatively flat?

I think that's fair. And I don't think it's going to grow meaningfully. We've never sort to given guidance since grow meaningfully. But flat to slightly up is still the right model.

Okay. And was there any positive benefit from strengthening pound over the quarter, as far as the loan growth?

It's Michael Schrum. So we've retranslate obviously through the balance sheet. And then will you kind a get the average on the NII if you will. So there was a benefit in terms of the translation into dollars, but it wasn't really very material actually.

Okay, that's helpful. And then last one for me, just looking at the expense base, is there a way that we can get some color around the remaining expenses associated with the stocks and the investment and the compliance piece and the transition out to Halifax? I guess, what's the good remaining balance that should be kind of out of the run rate and as we head into 2018?

Yeah, it's Michael Schrum again, thanks Timur. As you saw that we did make some, I think we'd previously talked about at America's Cup. And obviously that ended and it was good to see that coming down. I think on the Q1 call, I said, sort of 69 to 70 is kind of a good run rate a quarter obviously, ex-acquisitions where we'll be join by some new colleagues once that completes. So on a core basis, that's kind of where I'm aiming and kind of gets us to that guidance number around the 60% in Q4, Q1 next year. So, we ended this quarter, I think at 71.8 on a core basis, there's little bit of noise in the noncore. So, say couple 3 out of that base and then going into next year, obviously as we start to get some capacity out of the Halifax Centre. That will be a tailwind if you will to offset maybe some of the headwinds that we're seeing elsewhere.

Understood. Thank you.

Our next question is from Alex Twerdahl with Sandler O'Neill, please go ahead.

Hey good morning guys.

Good morning, Alex.

My first question, I understand you're limited and probably what you can say in term of the acquisition this quarter. But I'm just wondering did this acquisition come with deposits the way that the Bermuda Trust Company did two years ago?

Thanks Alex, it's Michael Collins. The difference with this acquisition is it's a trust only acquisition. So we're partnering with the Deutsche Bank's Wealth Management business to provide trustee services for those clients. So initially, it won't with the lot of deposits, so it's different from the HSBC acquisition, which was both a trust company acquisition that came with parts of wealth management. So that's the only different, but we do expect to pick up deposit overtime, but I would make that distinction that this is trust only acquisition.

Okay. And then maybe you can provide just a little bit little more color on what we saw for deposit trends this quarter. I know last quarter you alluded to several large flows, I think there was specific customers that had outflows in the second quarter. Were there any large inflows or outflows across the clients during the third quarter that just kind of won't be necessarily seen from the headline numbers?

Not really, no. And we're not really seeing any pressure from interest rates again. So we come back when done an analysis name-by-name for every movement above a pretty small size to make sure that as we come off the bottom and then we've not pass along rates that there is no real rate pressure yet in the market. So no, not really, I think just a normal course of business has been some transactions done by some families, but nothing of trend, Alex.

Okay, great. And then that brings me to my next question, which is sort of how much, it's been maybe somewhat of a moving target maybe not in terms of how much liquidity you can actually take from the cash in short-term securities and in divest or not divest invest over a longer time period to get some incremental spread? And now that the tenure treasure is getting within striking distance that kind of that 250 mark where you have deployed cash in the past? How much do you think realistically, if the yield curve continues to move in the right direction that we could see deployed in the fourth quarter in terms of the excess liquidity?

It's Michael Schrum. Maybe, I'll start on the liquidity front book and then Dan can kind a pitching on the investment side. So I think we've consistently said, look we're operating 3 banks across the different jurisdiction in multi-currency with no lender buzz results. So our target surrounding liquid book is somewhere between $1.5 billion to $2 billion. That gets us ample liquidity with additional repo lines behind to ensure that we're always on the conservative side of that spectrum that where we should be. So we're just under the $2 billion in ending this quarter in cash in short term investments. So we thought somewhat another 200, 300 maybe depending on the demand and commitments and cash flow, there is some opportunity there. And liquidity also hold short dated or short duration assets in investments book as well. So I'll let Dan to speak about that.

Yeah. So I think Alex, you're right. I think the last couple of weeks, and certainly last couple of days have been good in terms of stiffening and fields finally moving. And we were very patient through this process to try to understand where the markets are because we just couldn't understand where they went for the last six months. So we're probably reaching an entry point. And Michael is right, there is two areas. One, there is a bit of cash, a bit. And then we have a lot of bunch of Ginnie [ph] floaters. So the Ginnie floaters have been a good interim step for us to create a little bit of earnings momentum, but we move out of the Ginnie floaters and probably add in a bit of duration into the investment portfolio if rates continues to move in the steepen the way we've seen over the last couple of days.

Great. Thanks for taking my question.

Thanks Alex.

The next question comes from Will Nance of Goldman Sachs. Please go ahead.

Hi, guys. Congratulations on the acquisition and also Dan, congrats on the new role. So I guess first on the acquisition, Singapore is been a target market for you guys for a while. Can you give a sense of what pro forma market share might look like there? And I guess second is, just having a physical presence there, open-up opportunities for further M&A in that market?

Yeah, thanks Will, it's Michael Collins. So, obviously what we talked about where we can't disclose the financial terms of the transactions. But what we can say going back to the acquisition criteria that we've laid out in the past. It really meets all the buckets, so in terms of the size under $15 million purchase price. We talked about price of 8 times to EBITDA last, it meets that in terms of trailing EBITDA. The profile that this is has to be at least two-thirds private trust, so, as we talked about the past, we're less interested or not interested really in fund administration and company secretarial work and that sort of stuff. It really is private trust --, this obviously 100% private trust. And did you remember the locations have to be in our existing jurisdictions Switzerland, Guernsey, Bermuda, Cayman where we have scale, and as you pointed out with the exception of Singapore. So Singapore, obviously is a market we wanted to get into for a long time and it goes back historically to our trust business from a lot of the Hong Kong family. So, having a presence there is really important. It's not possible really to talk about market share in terms of trust in Singapore really any jurisdiction. It's information private confidential, so it's really hard to get that sort of data. But I can tell you that Singapore is basically about the acquisition comes with about 90 people in those jurisdictions. Singapore is about 15% of that, and would represent about 20% of the revenue of that business. And overall roughly, this acquisition is about 20%-25% of the size of our existing trust business, so I think that gives you little bit of sense of the scale. So, having a platform in Singapore will allow us to grow, but it's tough to actually talk about what sort of market share we would have there.

Sure, okay. I think that make sense. And then maybe switching over to the margins. So you talked about consumer yield being down, I guess. I'm assuming that did include some pick-up in the loan yields in Bermuda. I guess, looking forward to next year, and maybe even beyond, can you give us a sense for how you'd expect the margin to trend given from the repricing dynamics and the consumer book and I guess maybe ex-rate high just to let set everyone.

Yeah, thanks for the question. Well, it's Michael Schrum. As you correctly pointed out, the UK mortgage origination, they're accretive from a net interest income perspective. But they tend to obviously close it down with pressure on the overall consumer margin, which in this quarter offset the margin expansion from the Bermuda book, which is an amortizing book. So, as we continue to see growth opportunities in the UK, that will tend to in the absence of any further rates hikes tend to have a flattish to slightly downward pressure on the overall consumer yields. In terms of the commercial, it's really, this quarter, we have some significant margin expansion really a product mix issues. So we had a higher utilization of commercial overdrafts at higher yields during the entire quarter. Long-term balances remained fairly stable. So, it's a really a product mix there on the commercial, which cost a significant uptick in yields on our book. I think going forward, on the commercial side, it's relatively small book, but I think we should expect that to sort of be flattish again absent any further funding cost increases.

Great, that's helpful. And if I get to squeeze one more in. You guys have been talking about and setting a buyback from sometime, I guess, with an acquisition now on the table. Does this at all change your thoughts about potential capital distribution going forward?

Yeah. I think, I mean, look there was a very good discussion at the Board. I think there is quote around capital commitment et cetera. And I think where we land it was look, we want to see the plant for next year, we're currently going through that process, we've an acquisition similar to last year where, we really came out of the gates in Q1. That would be the point at which we would look at all the capital occasion, including a buyback. I don't think that thoughts have changed in that area. I think, tactically deploying some of the excess capital into sort of a tactical buyback still seems to be broadly acceptable and certainly would be accretive.

Great, all right. Thanks for taking my question.

Thanks Will.

Our next question comes from a Michael Perito, of KBW. Please go ahead.

Hey good morning guys. Thanks for taking my question.

Good morning, Mike

Maybe wanted to start on the deal. I appreciate that the Mike, about some of the size, relative to size. And when I know you guys are eliminated as you said. I'm just curious, maybe if you could comment about how the overall kind of profitability of the trust business you're acquiring maybe compares to your legacy trust business?

Thanks. It's Michael Collins. It's similar, I mean, I think that, these sorts of businesses that we know very well. They're not necessarily scale businesses we talked about. If banking has efficiency ratios in the low 50s, trust would be sort of around 70%. So, it similar in that sense, it is I think we can say to accretive so, that's important, but it's a very similar business. And I think we're excited. And I think we've talked about it little bit in the past, that our focus is going from founder owned trust company acquisitions but potentially to more bank owned trust company acquisition, simply because we're probably a little bit more comfortable in terms of they are having done their work descriptive book, and make sure what we requiring is as clean it can possibly be. So, but profitability would be relatively similar.

Okay, thank you. That's helpful.

So we'll have some cost in the near-term, because we're setting up to new, in two new locations. So, obviously we haven't been in Singapore, we haven't been in Mauritius so, we can't combine those with the existing operations Switzerland and Guernsey and Cayman, that's much easier, we've got existing staff and systems and everything. So, there will be a little bit more cost in the near term, but nothing substantial.

And just to clarify one. I mean in near term, I mean kind of out of the gates once the transaction is closed or kind of an anticipation of closing the transaction?

Yeah, so, sorry it's Michael Schrum. So, I mean, we're going to see model this forward. But, just bear in mind, we've got signed new leases in Singapore. We've got stand up IT systems, we've got the normal stuff ready. So once it completes and obviously that's the hard work that's going on now. That will come through in the near term, and obviously that tape is often becomes a BAU. So, when you ask about the metrics relative to the existing trust business, I would say yes, that's absolutely the case once it's integrated.

Okay. Great, thank you. And then just one last one for me, just on the asset management business had a really nice quarter. Just curious if you could maybe dig into that a little deeper, what kind of drove in the up revenues? And what the outlook is from here after putting up the strong results?

Yes, it was actually nice to see, they've been out chasing prospects for a while. And they landed a couple of new significant clients this quarter. So, very pleased to see that growth in that area.

Okay, great. And most my other questions are answered. Thanks guys, I appreciate the color.

Thanks Mike

And this concludes our question and answer session. I would now like to turn the conference back over to Brian Stevens for any closing remarks.

Thanks everyone for joining. And I look forward to talk to you again next quarter.