Good morning and welcome to the Butterfield's First Quarter 2019 Earnings Conference Call. All participants will be in a 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 Noah Fields, Butterfield's Head of Investor Relations. Mr. Fields please go ahead.

Thank you. Good morning everyone and thank you for joining us today. We will be reviewing Butterfield's first quarter 2019 financial results as well as the announced acquisition of ABN AMRO's Channel Islands business which was announced in a separate press release this morning. On the call, I'm joined by Butterfield's Chairman and Chief Executive Officer, Michael Collins; Chief Financial Officer, Michael Schrum; and Chief Operating Officer, Daniel Frumkin. Following their prepared remarks, we will open up the call up for question and answers. This morning, we issued two press releases announcing our first quarter 2019 results and Butterfield's acquisition of ABN AMRO Channel Islands. The press releases are available on the Investor Relations section of our website at www.butterfieldgroup.com. In addition, on today's call, we will be referencing two presentations. One on the quarterly results and the other on the ABN AMRO Channel Islands deal. Both of these presentations can be found on the Investor Relations section of Butterfield's 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 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.

Thanks Noah and thanks to everyone for joining the call today. We have a lot to cover this morning and we'll begin with a review of our solid first quarter results and then provide an overview of our acquisition of ABN AMRO Channel Islands. Turning to slide 4 of the earnings deck. I'm very pleased to announce a strong start to 2019 with first quarter net income of $52 million or $0.96 per share and $0.95 per share on a core basis. Our core return on tangible common equity was 25.6% which was driven by our well-positioned investment portfolio, diversified and capital-efficient fee businesses, as well as robust cost controls which resulted in a cost/income ratio of 60.1%. We continue to focus on efficiency and last week, we announced the streamlining of our group operations through voluntary early retirements, the closing of one of our four Bermuda bank branches which resulted in reduction of 11 positions in Bermuda. We are continuing to work on alternative employment opportunities for the employees affected by the branch closure. In addition to brief remarks on the first quarter earnings, I'm very pleased to have the opportunity to discuss our acquisition of ABN AMRO Channel Islands which we just announced this morning. The deal furthers our efforts to position Butterfield as a leading global offshore bank and trust services provider. With this acquisition, we gain significant scale in the Channel Islands, particularly, in Guernsey and Jersey where we have existing platforms in which to grow. This acquisition helps us balance our geographic and product mix in high-quality and well-understood markets and businesses. We have frequently discussed the landscape and potential pipeline for acquisitions. I'm very pleased to be able to discuss our definitive agreement reached on this acquisition in more detail later in the call. Finally, I'm also pleased to report that we have now completed the last tranche of client transfers from the Deutsche Bank acquisition in the Channel Islands. While customer deposit balances are subject to normal business close, we have seen periods in the first quarter with deposit balances well in excess of the expected $1 billion resulting from this acquisition and we continue to see organic growth opportunities for our new bank in Jersey. I'll now turn the call over to Michael Schrum to provide further commentary on the first quarter results.

Thank you and good morning everyone. Starting on slide 6 of the earnings deck, we provide a summary of net interest income and NIM. Net interest income rose 1% to $88 million as investment yields increased 20 basis points sequentially. Despite growth in net interest income, NIM was seven basis points lower in the first quarter compared to the prior quarter as we experienced some transitory fund deposit inflows in Bermuda late in the first quarter. In addition the flattening U.S. dollar yield curve provided less opportunity to deploy excess balances. On slide 7, we provide an overview of average deposit balances by geography, currency, and contractual nature. As of the end of the first quarter, we had an uptick in terms deposits which was one of the drivers for the increased cost of deposits. We also continue to see an inflow in pound sterling balances which represented 14.7% of deposits at the end of the first quarter. As we'll discuss shortly, the ABN AMRO Channel Islands acquisition will see an increase in non-U.S. dollar currencies, particularly sterling and euros. As a reminder, from quarter-to-quarter, we can also experience variability in our deposit levels due to large trust and fund clients managing their normal commercial flows. At the end of the quarter we had a significant deposit of inflow amounting to approximately $300 million. In terms of fee income, we've seen the expected sequential seasonal decrease in Bermuda and Cayman. We continue to have a relatively high fee income ratio compared to U.S. peers which should help stabilize revenue through the interest rate cycle. On slide 9 we provide an overview of core non-interest expense. We're pleased to have achieved our targeted efficiency ratio of 60% during this quarter. However, there were a few items which benefited the first quarter…

Thanks Michael. I'm now going to be referring to the deal related presentation that we have posted on our website. This morning we also made customary SEC filing of this material together with the related documentation. Looking first to slide 3 of the deal presentation. You will see a fairly detailed assessment of the strategic and financial benefits of Butterfield's purchase of ABN AMRO Channel Islands. We have been discussing the potential opportunity for growth in the Channel Islands. And this acquisition gives us additional scale, which complements our current operations. Similar to the previous deal, the client profile of this business is similar in nature and risk profile to Butterfield's existing Channel Islands' business. In addition to the strategic rationale, we are confident that this will bring accretive financial growth. We have negotiated to pay 1.1 times tangible book value, which permits low to mid-single digit accretion based on conservative deposit attrition and cash reinvestment functions. We believe this is an excellent use of capital, which will exceed IR hurdles. We feel this is a fairly straightforward acquisition as well. It is lower risked, as we are acquiring mainly cash and securities. Our prior acquisition to the Channel Islands have positioned us with established infrastructure on which to build. We've had the opportunity to meet with local management and are very comfortable with their knowledge and professionalism. We look forward to driving sales and growth with the expanded Channel Islands' teams. Turning now to slide 4. We provide an overview of the Channel Islands, which is a leading financial center. The jurisdiction has a strong regulatory framework with full Basel III recognition and is a long-standing and well-established banking market. The economies of Guernsey and Jersey are relatively small, but are experiencing growth with limited exposure to Brexit and a stable political and social environment. The market is attractive for Butterfield and with a small market share, we are well positioned to grow. Now I'll turn it over to Dan Frumkin, who will begin with slide 5.

Thank you Michael. Good morning everyone. On slide 5, you'll see ABN AMRO's business is very similar to ours, servicing financial intermediaries and private clients. It's a simple banking model with 88% of their 2018 revenues coming from a traditional banking, 7% from investment management and 5% from custody. As you can see on the top charts on page 5, the deposit portfolio is diversified across euro, sterling and U.S. dollars with the cost of deposits of 97 basis points. We are expecting attrition to these deposit levels and our current estimate is to expect a significant reduction in deposits by the end of 2020. The loan portfolio is approximately £500 million via mostly residential mortgages and residential buy-to-let mortgages. Moving on to slide 6. You will see pro forma geographical business mix profile following the acquisition. We have consistently stated our aspiration to have balance across our three banking markets in order to reduce growth dependency on our two largest segments, Bermuda and Cayman. This new liability currency mix is likely to result in NIM and ROAA reductions due to lower yields available from high-quality euro and GBP investments. However, the acquisition is accretive, and therefore, it enhances our return on average tangible common equity. Now turning to slide 7. For convenience, we've provided a transactional summary, which outlines the 100% cash consideration and purchase price of £161 million, representing the sum of book value, plus 50 basis point deposit premium and a 10 basis point premium on customer assets. This price equates to a small premium of 1.1 times tangible book value. We expect the deal to close in the third quarter of 2019, once all regulatory approvals are obtained. I will now turn the call over to Michael Schrum to review terms and pro forma capital.

Thanks Dan. On slide 8, we've outlined some of the key model assumptions and pro forma financial impacts resulting from the acquisition. We've done a fair bit of capacity modeling. And as mentioned earlier, we anticipate deposit attrition by the end of 2020 and the cash reinvestment will match deposit currencies and remain short until the season end. We'll continue to have sufficient regulatory capital. However, we will likely pause on our share repurchases to allow TCE to rebuild over a couple of quarters. Overall, we anticipate this deal will be accretive to earnings in short-term and will be 3% to 5% accretive in the following years. We expect the deal to be approximately 4.5% dilutive to tangible book value per share at close with an earn back period of less than three years. Looking now to slide 9. You can see the pro forma model capital ratios remain above thresholds and regulatory minimums. We expect to exclusively activate excess capital for this deal, with no change in the dividend plan. We’re putting affirming anticipated to remain above regulatory minima with adequate buffers. On slide 10, we discuss the due diligence process to ensure that the transaction meet our expectations. In addition to extensive Butterfield senior management participation in the diligence process, we also had our advisers from Goldman Sachs and Sullivan & Cromwell with ABN AMRO being advised by Rothschilds. I can confirm that we can conduct a significant diligence in all key operational areas. I'll now turn the call back to Michael Collins to summarize with page 11.

Thank you Michael. We're really pleased with our solid first quarter results and hope to build on that success throughout the year. In terms of the ABN AMRO deal, we expect to further our position as a premier global offshore bank and trust company. We're paying a low premium to the business that will increase scale. Once closed the Butterfield footprint is balanced with strong returns from our core stable and profitable markets in Bermuda and the Cayman Islands and increase the market growth opportunity in the Channel Islands. Execution risk for the deal is relatively low, the payback is acceptable and the financial returns are attractive. We are really excited by the set of opportunities and look forward to providing regular updates on integration over the coming year. Thank you. And with that, we'd be happy to take your questions. Operator?

We will now begin the question-and-answer session [Operator Instructions] The first question today comes from Alex Twerdahl with Sandler O'Neill. Please go ahead.

Hi, good morning guys.

Good morning.

Good morning, Alex.

First off, Dan I was wondering maybe you could run us through some of the specific P&L items that leads you to that 3% to 5% earnings accretion?

So, Alex I think it's a good question. And, obviously, we put a ton of work into the modeling and we've done a lot of effort into getting to the core profitability. What I would say is fundamentally we're buying cash with a small loan book. And I think the way to look at it is again until we're comfortable with the cash is stable and we believe it will stick, it gets invested in the short end of the curve. So you end up with -- as you can see from the slides, you end up with a fair chunk of euros and pounds as well as dollars. So again if you go to slide 5, you'll see that 26% of the deposit book is euros and 30% is pounds. I mean, realistically on euros you're going to earn zero plus or minus a little and on pounds you're going to end up with a margin that's certainly sub-100 basis points, yeah? So I think the earnings come from the scale we're going to get out of the business. As we said it will reduce NIM and reduce ROAA but be accretive to NII and shareholder returns. And again when we did calculate the overall accretion, we did factor in the buybacks. So the accretion is over and above buyback activity. So again I don't think we're going to get much more specific on the underlying financials. But I think that gives you an idea of how the business unfolds. In terms of the loan book, we do have in there yields 2.81%. We're not expecting lot of loan growth. We're also not expecting a lot of loan attrition either. So I think building any model I think are build in pretty significant attrition assumptions for euros, and I've built in reasonable attrition assumptions for pounds and dollars. And then I start thinking about what margins we can earn on those and I think on euro zero pounds probably more closer to 50 than 100. And then dollars if we keep it at the short end of the curve, we're not going to earn that much. And then deposit cost will high at 97 basis points. I'm not expecting that to drop significantly for at least the first couple of years and it will bring it down slightly, but we're not going to get down to 32 or 33 basis points. We're going to -- we'll bring it down 10, 15 basis points over the first year or two just because we want to try to maintain the customer base and the market there is more competitive. So I think if you put all that in the mix and you end up with a pretty easy way to show that NIM is going to decline.

Great. And then of the 35% to 40% of expected deposit attrition, is that just using some conservative assumptions or have you identified specific customers that you expect to leave?

Yeah -- no, it's just using conservative assumptions. And I think you can assume euro attrition to be 2.5 to three times higher than pounds and dollars.

Okay. And then just final question. You do have this great slide on the due diligence processes, but maybe you can just touch on some of the differences in the due diligence and the deal structure from this transaction versus the Deutsche Bank one for those that may not be fully aware of all the differences?

Yeah. Listen, Alex it's a great question. So first let's just start that this is actually an acquisition. So the Deutsche Bank was a relationship transfer agreement. So we had to go around getting client consents and we had to go build the bank from scratch in Jersey with all the cost associated with that. In this case, we're buying a bank in a territory where we already have a bank so it's a straight overlap transaction. It is a stock purchase. So all clients and all staff transfer on day one with the transaction. So we don't need client consent. So that again minimizes attrition. The due diligence we did for Deutsche Bank was less robust, because at the end of the day we were getting it for free. So zero cost just meant that some of the processes that we would have like to do were truncated. And again, Deutsche Bank and ourselves really did use advisers in that transaction. So in this transaction, we had advisers on both sides, we had a full data room built by Rothschilds, we had 50 people working in the data room for days and days. We run over more than 400 documents. We asked and got answered well over 200, 250 questions through the process. We went through a couple of stages of diligence, initial bids followed up by further diligence and then final bids. So this is an extremely robust process. You'll also see that we had to publish the SPA, which you will see, I'm sure not everybody has read yet. But the SPA has all of what you'd consider to be pretty typical reps warranties protections. It is a hybrid between U.K. lock box structure or a European lock box structure and the U.S. transaction. So it's slightly different. But it's a -- it was much more robust process to get us here. And the fact that we’re doing an equity purchase really takes a lot of the client risk out of the transaction. So there are really just two fundamentally different deals. One really was a relationship transfer agreement sort of organic growth on steroids and this is a bona fide acquisition. Is that helpful?

Incredibly. Thanks for taking my questions.

The next question comes from Timur Braziler with Wells Fargo. Please go ahead.

Hi, good morning.

Good morning, Timur

Good morning, Timur.

Maybe just following up on the Deutsche Bank deposits and the quarterly deposit inflows. If I'm not mistaken, I think 25% of that expected $1 billion was supposed to hit in the first quarter. It's about $250 million. With growth of $840 million, I think you said $300 million came in late. So was Deutsche Bank essentially like $1.3 billion at the end of the day? Is that a closer number?

No. Good question, Tim. It's Michael Schrum. The $300 million was unrelated to the DB. So the DB was expected $250 million. And, obviously, it does fluctuate a bit but we've seen periods well in excess of $1 billion. If you take Jersey $500 million; and Jersey-Guernsey $250 million in the last quarter and then that came into deposits that came in at the end of Q2. So the $300 million was one of those significant depositor relationships that we've been talking about for the last couple of quarters where we had some outflows in Q2 and in Q3. And then we saw some stabilization in that balance overall balance in Q4. And then actually this quarter we just had one of those depositors that came on balance sheet quite late in the quarter, but again sort of transitory, but obviously beneficial to NII.

Okay. And as far as the Deutsche Bank deposit integration that's all donors. There's still some spillover into the second quarter from some of those transactions?

Yeah. So it's all done. I think we had a couple of clients lately, but it's been – it's pretty good – it's all done.

Yeah. It completed. And again, we – the clients really transition at a very high percentage. So Deutsche probably – I don't know, it was in excess of what we guided, but probably not 30% in excess of what we guided which would be the $300 million you're referring to. Maybe more like a 15% number in excess of what we guided

Okay. That's helpful. And then maybe switching over to the acquisition, I think you guys have been pretty forward in your wantingness to expand your presence in the Channel Islands. But also in prior conversations it seems like the banking landscape is a little bit larger over there than what you're typically dealing with. And if I'm not mistaken, I think ABN AMRO had some deposit attrition over the past couple of years. I guess, how are they as a competitor in the Channel Islands? And now with this acquisition do you guys have enough critical mass to really grow that business? And I guess, where is that growth going to be coming from by business and then by competitor as well?

Okay. Thanks Timur. It's Michael Collins. I'll start off and then Dan can follow-up. So, essentially ABN AMRO is obviously a significant bank in the Channel Islands. We've been in the Channel Islands for 45 years. They have been there about 30 years. So we know each other very well, which is one of the reasons we think it's a pretty low-risk acquisition on the risk spectrum simply because it's a same client base, same systems that sort of thing. So it will give a significant market share. It's always hard to tell in our island markets, exactly what your market share is but we will be a real competitor. And with our new bank in Jersey, I think our presence in the Channel Islands will allow us to grow organically going forward. So the focus is really going to be on integration and organic growth. I mean, I think if you just look at it strategically it really does what we wanted to do which is spread our business and our balance sheet more evenly amongst the three jurisdictions where Bermuda came into the Channel Islands. And at closing, deposits from the Channel Islands we'll represent about 41% of our deposit base and about 19% of our earnings. So we're kind of there where we want to be and I think the focus is really just going to be to grow it. It's both private banking and financial intermediary business, so really right up our alley, but I'll let Dan give some follow-up.

Yeah. No. I think that's right Michael. I don't think there's much more to say. I mean, there's – the competitive landscape includes the RBS' of the world and the Barclays' and Lloyds' and Standard Bank and a few others. And we think our service proposition and the depth of talent we have on the relationship management side puts us in really good stead. We are – I mean, there is a couple of systems bids, we need to get right before we can finish the integration. Our online banking platform isn't as advanced as ABN. So we need to enhance our online banking platform. That was already, a work in progress. So we just need to finish that. But we're pretty confident putting the two banks together. It really gives us the scale necessary to compete. And we think our proposition resonates well in that market. And ABN has been successful. The team there is quite good. There are really – they have been in that market a long time. We're definitely picking up some talent through the ABN transaction.

Okay. That's very helpful. And maybe, if I can just one more, looking at the loan yield – loan mark, I guess, I was kind of surprised to see a 3% mark on that portfolio given that I think the reserves were somewhere in the 50, 60 basis points. Is that just being conservative because you guys can be conservative? And to the extent that it outperforms is that going to be an avenue to kind of juice NIM in the out-years?

Yeah Tim, it's Michael Schrum. Yeah, I think both pursued observations. So one we wanted to be conservative going into this. It's a fairly small loan portfolio, but looking through the credit files and some detail in the due diligence there are some things that we might want to reshape over time. So as you know, we have a very low-risk density balance sheet so primarily resi mortgages. This is a little bit different and it's a little bit unknown in the market that we are in. So we see some more opportunities on our sort of lending platform, if you will but we also see potentially something that needs to get to be reshaped a bit over time.

Okay. Helpful. Thank you.

The next question comes from Mark Lynch with Wellington Management. Please go ahead.

Good morning. Should we infer from your comments that the geography is now pretty balanced that you will not be seeking further acquisitions in the Channel Islands unless someone comes to you with an amazing proposition?

Thanks, Mark. It's Michael Collins. Yeah. I think as I sort of mentioned earlier that, we wanted to get a relatively even balance amongst the different jurisdictions. I mean, there are different growth rates among the three jurisdictions as we all know so that will change over time. And we've also modeled in the deposit attrition. So maybe the deposits went up in the Channel Islands being a third of our total. And maybe as we re-priced deposits it will be 25% of earnings that sort of thing. So I think it's fair to say that, with the Deutsche acquisition with this relatively large acquisition our focus is going to be on integration in the near and medium term. That's never to say, if we got a great opportunity to even increase our market share whether it's in Guernsey and Jersey we would definitely look at it, but that's not our focus at this point. So I think we really are where we want to be at this point and we just really need to integrate and focus on organic growth and integrate the people get the culture right, get the risk right, and go from there.

Great. Thank you.

Next question comes from Arren Cyganovich with Citi. Please go ahead.

Thanks. Just looking at the pro forma of this transaction that your loan-to-deposits falls down to about a third from about 39%. Is that a level that you'd like to have that there? Or do you expect to add assets or find other loan opportunities in the future? Just trying to think of where you see the balance sheet mix going over time.

Well, I think from a sort of overall perspective, we've obviously never sold ourselves as a loan growth opportunity. We're really focused on lending in market and we certainly consider the Channel Islands in-market. So I think there's potential opportunities there. And I think the loan-to-deposit balance is always going to be somewhere between probably 30% and 40% not much higher, because we're not going to look outside of our core markets to find other lending opportunities and that's just really the focus. So I think it's going to be down for a little while, but I wouldn't say there aren't going to be lending opportunities in the Channel Islands. We just need to take our time and get to know that side of the market a bit more.

And all I would add to that is that the funding profile that's really helps us with funding the growth and the mortgages out of the Butterfield Mortgages Limited. So Butterfield Mortgages Limited growth was starting to outstrip our native pound capability as a bank and this really starts to fill some of that hole.

Okay. And then, on slide 8, there's a section on balance sheet restructuring. Can you discuss what you mean by that from -- I'm assuming that's just restructuring of the ABN AMRO side?

Yes. I think that's exactly what that means. It's nothing to us. It's just literally the restructuring of the entity as we acquire it, yes.

Okay. And then, maybe on the expenses, they were a little lower in the first quarter. And you discussed how that might bounce back. Do you have the idea of magnitude how much the expenses might creep up in 2Q? And then further, I guess, have you discussed what the expenses -- yes, the expenses of ABN AMRO will be once that's fully integrated?

Yes, Arren. It's Michael Schrum. So I think we said previously that, total expense run rate is probably in that 84-ish range. And, obviously, because the DB staff came over later on -- some in middle and some late in the quarter, we didn't get a full quarterly run rate of that. So expenses are better, I think, during this quarter, but obviously helped by that timing, if you will. Then we had a few releases of -- on these bonus accrual in the quarter. So, again, I would say, that's kind of where we are still thinking that's going to be and that's pre-ABN, obviously. And then, associated with some of those -- the structural cost programs, you're likely to see some of those retirement cost come through in the near term, but again that should result in sustainable savings, obviously, going forward into -- towards the end of 2019. And it's a little bit early on the ABN side. I think we've been fairly conservative, again, on both one-time cost, transaction cost, as well as the fact that we believe this is clearly -- well, clearly an overlap acquisition. So there will be cost saves associated with it, sort of, emerging over a two to three-year period. And I think we'll just come back with some more updated information, once we get a bit closer to actually completing the transaction.

Yes. And I think if you look on slide 8, the very first bullet point, it does say that we're expecting $7.5 million of pre tax savings, expense savings, which is roughly 30% of the 2018 non-interest expense. So that's once we're stabilized late 2020, but it gives you pretty good guidepost to where we'll end up.

Right. Thank you. First bullet of the page 8, right? Should have seen that one. All right. Thank you.

Next question comes from Michael Perito with KBW. Please go ahead.

Hi. Good morning guys.

Good morning.

A few of my questions have been asked already. But I wanted to ask, are you guys willing to share what the cost-to-income ratio is on the ABN franchise that you're bringing over?

I don't have it in hand, Mike. So it's not -- no, because I think the way to think about it is, I think, you need to just look at the liability mix, which would get you to an asset mix, which should get you to a yield and a NIM. We've been pretty clear about the expense savings. So you should be able to get pretty close to what that looks like come late 2020. So I think you'll be okay. I think what we're bringing over is not just similar business to the one we run today. We think bringing the two together, like any overlap transaction, does give us some opportunities to, I think, enhance cost-income ratios. So I would do it that way, I think, is the right way to look at it.

Okay. Yes, I guess, I was asking more just to try and get a sense if this transaction, once it's fully integrated, I mean, do you anticipate any kind of different approach to how you were trying to manage your cost-to-income ratio towards the 60% level? Or do you think you'll be pretty similar, maybe a little bit better, once everything is fully run through and seasoned?

No, I think that -- I don't think so, Mike. So I think this is actually just becomes another sort of retail bank. So, again, a little bit lower than the 60%, right? We've always said, trust and asset management will be a bit higher than the 60% in our core banking operations, but it probably will not be as efficient as Bermuda and Cayman, so it kind of lives in the middle. So I don't think we would change our guidance around the 60% even when it's fully embedded in.

Yes. And that’s -- that 60% is, I think, a lot of years of experience across these different jurisdictions and trust and banking are very different, but Bermuda, Cayman and the Channel Islands banking side all have very different cost-income ratios. But if you sort of mix that altogether, 60% is where the sort of offshore Bermuda, Cayman and Channel Islands banks ends up.

Yes. And the other thing I would add, Mike, is just, again, there's a few differences between being a standalone bank like Butterfield, while being a subsidiary of them. One of them is being a subsidiary of ABN. So if you look at published information and that kind of thing, I think, our experience, as Michael says, is more in the 60% when you have a head office, a bunch of functions and a bunch of opportunities that kind of run through the head office. So I just got a little bit against using the published financials potentially and sort of guide more towards what we try to give, there's a lot of information about how we should slightly differently think about this.

Just, I guess, I mean -- Michael, I think its right. And since it's comes up as a topic, we should just be really clear. You can obtain the 2017 and 2018 financials of ABN AMRO, Channel Islands by going on the website that people have so desire, but really do not use those to do your modeling going forward, because to be honest ABN Group created some funding -- cross funding between the sub and parent at rates that you could not obtain in the market, not even come close to obtaining in the market. So you just need -- so from a balance sheet perspective, honestly, the financials you could download are pretty good and they're fine to use. Just start to think about what deposits look like, but in terms of earnings it's not a great starting point. From cost, it's not bad, again. So you can use that as a cost and then look at the savings, but their NII and even their non-interest is a bit inflated, thanks to having a parent who was kind.

Got it. Thank you for that. And then, just a quick clarification point. So you guys are assuming 35% to 40% of deposit attrition, which maybe needing about $1.8 billion $1.9 billion of deposits coming over. I think on slide 7 you guys mentioned that if the attrition exceeds 25% that the considerations will be adjusted. So is it fair to say that, if this deal performs as you are base case modeling today, that you'll get the 3% to 5% accretion on something less than $2 billion of deposits? But if that were to occur, the pro forma capital and earn backs that you guys have provided would likely be better in that scenario, because the considerations would probably be lower. Is that a fair way to think about it? Or am I reading too far between the lines?

Yes. You sort of made a leap of intellect that I don't think sets. So you're right. That's exactly how it would work, but I think we're going to close the transaction before we get to that runoff. So it's the runoff of ABN on that we get paid for. And we would expect to close it by the end of the third quarter I think is what we said. We have seen March 31 financials their draft, but not audited and deposits are actually up from the December 31 numbers; they are up about $100 million. So the franchise is holding up well and those deposits are U.S. dollar. So for us better. So that franchise is holding up well. We think it will hold up well. As we get in and take ownership where we start to reprice deposits and we start to implement more pricing discipline we anticipate that we will have meaningful attrition.

Got it. Okay. So the consideration -- so the base case accretion assumes that that attrition occurs after the close date which would have no impact on the consideration phase?

Exactly, but it is in the capital models. So the four capital models, assuming its right. And let's be clear, I mean, we are paying one time tangible book. The total premium here is like $23 million plus or minus. I mean, it's a pretty tiny print, yes? I mean, everything else in the purchase price is just around trip and capital, right? All we're doing is basically paying them dollar for dollar for capital that stays behind in the business. The premium is pretty small.

Yes. Okay. And then just last one from me. Any thoughts you could provide on where you kind of expect trust fees to move going forward after the first quarter production?

Yes. So I think fourth quarter and maybe we have -- so fourth quarter is always a bit elevated for trust fees not as consistent as little hike, but it could be periodically elevated because of year-end restructurings for tax reasons and others. There is a moment in time the year-end creates. And just the fourth quarter of last year, we had a chunk of fees that were related to some large family restructuring prior to year-end.

Got it. So around $30 million plus or minus obviously changes probably a better starting point?

Yes, agreed, which is like $52 million a year or something. Yes?

Okay. Thank you for taking my questions. Appreciate it.

Thanks, Mike.

Thanks, Mike.

The next question comes from Don Worthington with Raymond James. Please go ahead.

Thank you. Good morning everyone.

Good morning, Don.

Good morning, Don.

You may have disclosed it I missed it but what were the actual amount of shares repurchased in the quarter?

Yes. So we -- I think we disclosed it on the capital slide, although it wasn't strictly on the quota. So if you recall, we had a tactical share buyback in place throughout really 2018 and we activated that after the earnings in Q3 and exhausted that completely and put a new 2.5 million share repurchase authorization in place in October. And of that, we have 1.1 million remaining. So 1.4 million has been used some of that was a bit in Q4 and some in Q1. So about 1.1 million from memory in Q1.

Okay. All right. Thank you. And then how many regulatory approvals do you need for the acquisition?

So at this stage Don, we need the GFSC, so the Guernsey Financial Services Commission. We need the BMA the Bermuda Monetary Authority. We need the Guernsey Competition Authority approval and ABN has yet to provide clarity although it's in the agreement. We may need ECB and their local regulator approval and they are away checking. So pretty manageable list. Honestly, we've already had conversations with the BMA. We've had conversation with the GFSC. We've had an initial conversation sort of high level with the Guernsey competition authority. So again -- and our applications with those regulators are for all intents and purposes ready to go and should be submitted within I would think the next three to four business days at the latest.

Okay. Thanks, Dan. Thank you.

This concludes our question-and-answer session. I'd now like to turn the conference back over to Butterfield's management for any closing remarks.

Thank you, Anita. And thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.