Bank of N.T. Butterfield & Son Ltd Annual Report 2022

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FY2022 Annual Report · Bank of N.T. Butterfield & Son Ltd

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES

EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934
For the fiscal year ended

December 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

For the transition period from ___________________________ to ___________________________

Commission file number: 001-37877

The Bank of N.T. Butterfield & Son Limited

(Exact name of Registrant as specified in its charter)

Bermuda
(Jurisdiction of incorporation or organization)

65 Front Street, Hamilton, HM 12 Bermuda
(Address of principal executive offices)

Shaun Morris, 65 Front Street, Hamilton, HM 12 Bermuda
Telephone: (441) 295-1111; Fax: (441) 292-4365
E-mail: Shaun.Morris@Butterfieldgroup.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class
Voting ordinary shares of par value BM$ 0.01 each
Voting ordinary shares of par value BM$ 0.01 each

Trading Symbol (s)
NTB
NTB.BH

Name of each exchange on which registered
New York Stock Exchange
Bermuda Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the

period covered by the annual report.

As at December 31, 2022, there were 50,277,466 shares of the registrant's common stock outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.

xYes oNo

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those Sections.

oYes xNo

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).

xYes oNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an

emerging growth company. See definition of "large accelerated filer,"accelerated filer," and "emerging growth company" in
Rule 12b-2 of the Exchange Act.:
Large accelerated filerx Accelerated filero Non-accelerated filero Emerging growth company ☐

xYes oNo

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check

mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting

Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the

effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.

☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of
o

the registrant included in the filing reflect the correction of an error to previously issued financial statements

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b).

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in

this filing:
U.S. GAAPx
International Financial Reporting Standards as issued by the International Accounting Standards Boardo
Othero

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

oItem 17 oItem 18

☐Yes xNo

TABLE OF CONTENTS

Part I

Item 1

Item 2

Item 3

Explanatory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cautionary Note Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implications of Being a Foreign Private Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Enforcement of Civil Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identity of Directors, Senior Management and Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Capitalization and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Reasons for the Offer and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

D. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4

Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. History and Development of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Property, Plants and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Selected Statistical Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4A

Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 5

Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Research and Development, Patents and Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

D. Trend Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6

E. Critical Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Directors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Board Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Major Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Interests of Experts and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Consolidated Statements of Other Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Significant Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7

Item 8

Item 9

The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 10

A. Offering and Listing Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Expenses of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Memorandum and Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Dividends and Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

102

103

104

105

106

106
107

107

109

G. Statements by Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Documents on Display . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I. Subsidiary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

J. Annual Report to Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
K. Shareholder Information & Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Securities other than Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Material Modifications to the Rights of Security Holders and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Financial Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exemption from the Listing Standards for Audit Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of Equity Securities by the Issuer and Affiliated Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 11

Item 12

Part II

Item 13

Item 14

Item 15

Item 16

Item 16A

Item 16B

Item 16C

Item 16D

Item 16E

Item 16F

Changes in Registrant's Certifying Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16G Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16H Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16I

109

110

112

113

114

115

Part III

Item 17

Item 18

Item 19

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-1

Financial Statements - Prepared Using a Basis of Accounting Other than IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EXPLANATORY NOTE

In this report, unless the context indicates otherwise, the term:

•

"Bank" or "Butterfield" refers to:

◦ The Bank of N.T. Butterfield & Son Limited;

"BMA" refers to:

◦ The Bermuda Monetary Authority;

"Board" refers to:

◦ The Board of Directors of the Bank;

"common shares" refers to:

◦

the voting ordinary shares of par value BM$ 0.01 each in the Bank; and

"we", "our", "us", "the Company" and "the Group" refer to:
the Bank and its consolidated subsidiaries.

◦

Refer also to the Glossary at the end of this document for additional terms.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this report, references to “BMD”, “BM$”, or “Bermuda Dollars” are to the lawful currency of Bermuda, and “USD”, “US$”, “$” and “US Dollars” are to the lawful
currency of the United States of America. The Bermuda Dollar is pegged to the US Dollar on a one-to-one basis and therefore, for all periods presented, BM$1.00 = US$1.00.

Certain monetary amounts, percentages and other figures included in this report have been subject to rounding adjustments. Accordingly, figures shown as totals in

certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable,
when aggregated may not be the arithmetic aggregation of the percentages that precede them.

Our consolidated financial statements as at December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 have been audited, as

stated in the report appearing herein, by PricewaterhouseCoopers Ltd., Bermuda ("PwC"), and are included in this report and are referred to as our audited consolidated financial
statements. We have prepared these financial statements in accordance with GAAP.

We believe that the non-GAAP measures included in this report provide valuable information to readers because they enable the reader to identify the financial

measures we use to track the performance of our business and guide management. Furthermore, these measures provide readers with valuable information regarding our core
activities, which allows for a more meaningful evaluation of relevant trends when considered in conjunction with measures calculated in accordance with GAAP. Non-GAAP
measures used in this report are not a substitute for GAAP measures and readers should consider the GAAP measures as well. For more information on non-GAAP measures,
including a reconciliation to the most directly comparable GAAP financial measures, see Item 5.A. "Operating Results — Reconciliation of Non-GAAP Financial Measures”.

INDUSTRY AND MARKET DATA

Some of the discussion contained in this report relies on certain market and industry data obtained from third-party sources that we believe to be reliable. Market

estimates are calculated by using independent industry publications and third-party forecasts in conjunction with our assumptions about our markets. While we believe the
industry and market data to be reliable as of the date of this report, this information is subject to change based on various factors, including those discussed under the headings
“Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this report.

TRADEMARKS AND SERVICE MARKS

We own or have rights to trademarks and service marks for use in connection with the operation of our business. All other trademarks or service marks appearing in

this report that are not identified as marks owned by us are the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names
referred to in this report are listed without the ®, (TM) and (sm) symbols, but we will assert, to the fullest extent under applicable law, our applicable rights in these trademarks,
service marks and trade names.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are

based on our current beliefs, expectations or assumptions regarding the future of our business, future plans and strategies, our operational results and other future conditions.
Forward-looking statements can be identified by words such as "anticipate," "assume," "believe," "estimate," "expect," "indicate," "intend," "may," "plan," "point to," "predict,"
"project," "seek," "target," "potential," "will," "would," "could," "should," "continue," "contemplate" and other similar expressions, although not all forward-looking statements
contain these identifying words. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this annual
report and include statements regarding our intentions, beliefs or current expectation concerning, among other things, our results of operations, financial condition, capital and
liquidity requirements, prospects, growth, strategies, share repurchases and the industry in which we operate.

There are important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements. By their nature, forward-
looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these
risks and uncertainties include, but are not limited to, those described in the section captioned "Risk Factors" that appear in Item 3.D. "Risk Factors" of this annual report. These
factors should not be construed as exhaustive and should be read with the other cautionary statements in this annual report.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are

not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may
differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and
liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this report, those results or developments may
not be indicative of results or developments in subsequent periods.

Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in
this report speaks only as of the date of such statement. Except to the extent required by applicable law, we undertake no obligation to update any forward-looking statements or
to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are
not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

We are an FPI, and so long as we qualify as an FPI under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to

US domestic public companies, including:

IMPLICATIONS OF BEING A FOREIGN PRIVATE ISSUER

•

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from
trades made in a short period of time;

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified
information, or current reports on Form 8-K, upon the occurrence of specified significant events; and

Regulation FD, which regulates selective disclosures of material information by issuers.

We are, however, required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we have published and intend to

continue to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the New York Stock Exchange. Press releases
related to financial results and material events have been and will continue to be furnished to the SEC on Form 6-K. However, the information we are required to file with or
furnish to the SEC is less extensive and less timely compared to that required to be filed with the SEC by US domestic issuers. As a result, you may not be afforded the same
protections or information that would be made available to you were you investing in a US domestic issuer.

ENFORCEMENT OF CIVIL LIABILITIES

The Bank is incorporated under the laws of Bermuda. As a result, the rights of holders of the Bank’s common shares will be governed by Bermuda law, the

Butterfield Act and the Bank’s bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other
jurisdictions. Some of our directors and some of the named experts referred to in this annual report are not residents of the United States, and a substantial portion of our assets
are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United
States judgments obtained in US courts against us or those persons based on the civil liability provisions of the US federal securities laws. However, we may be served with
process in the United States with respect to actions against us arising out of or in connection with violations of US federal securities laws relating to offers and sales of common
shares made hereby by serving C T Corporation System, 28 Liberty Street, New York, NY 10005, our US agent irrevocably appointed for that purpose.

It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers

under the securities laws of those jurisdictions, or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

PART 1

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 3. KEY INFORMATION

Not applicable

[Reserved]

B. Capitalization and Indebtedness

Not applicable

C. Reasons for the Offer and Use of Proceeds

Not applicable

D. Risk Factors

The material risks and uncertainties that management believes affect us are described below. Any of the following risks, as well as risks that we do not know of or currently deem
immaterial, could have a material adverse effect on our business, financial condition or results of operations. Further, the risk factors below include cautionary statements
identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. See
"Cautionary Note Regarding Forward-Looking Statements."

Risks Relating to the Markets in Which We Operate

Adverse economic and market conditions in Bermuda, the Cayman Islands, the Channel Islands and the UK, and other markets in which we operate, have in the past
resulted in and could in the future result in lower revenue, lower asset quality, increased provisions and lower earnings.

Our financial performance generally, and in particular the ability of our borrowers to pay interest and repay principal on outstanding loans and the value of the collateral
securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our future growth, are highly dependent upon
the business environment in the markets in which we operate. A downturn in Bermuda, the Cayman Islands, and the Channel Islands and the UK can have a profound impact on
our business performance. Some elements of the business environment that affect our financial performance include short-term and long-term interest rates, any downgrade in
sovereign credit ratings to which our credit ratings are correlated, the prevailing yield curve, inflation and price levels, monetary and fiscal policy, regulatory or legal changes
(including changes in tax laws) or changes in enforcement thereof, unemployment rates, investor or business confidence, natural or man-made disasters, the strength of the
local economy in the markets in which we operate, or a combination of these or other factors.

Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the

number of loan delinquencies, defaults and charge-offs, additional provisions for loan losses, decreases in asset values, deterioration in investment performance and an overall
material adverse effect on the quality of our loan portfolio.

Unlike banks that are more geographically diversified, our business is concentrated primarily in Bermuda, the Cayman Islands, and the Channel Islands and the UK,
and we may be more affected by a downturn in these markets than more diversified competitors.

Our banking operations are concentrated in Bermuda, the Cayman Islands, and the Channel Islands and the UK, and we serve customers in these markets. In the year
ended December 31, 2022, 44%, 32% and 19%, of our total net revenue was derived from our Bermuda, Cayman Islands, and Channel Islands and UK segments, respectively.
In addition, in the year ended December 31, 2022, 37%, 24% and 39%, of our loans originated in Bermuda, the Cayman Islands, and Channel Islands and the UK, respectively.
Accordingly, a downturn in these markets may have a profound effect on our banking business. In addition, we have sought to expand our core business lines, including through
recent acquisitions. Any failure in our ability to expand our core business lines, successfully integrate recent acquisitions or any reduction in demand for our core services in our
Bermuda, Cayman Islands and Channel Islands and UK segments, including due to perceived reputational risks, increasing regulatory scrutiny over activities in these
jurisdictions or otherwise, may adversely impact our business and results of operations, including the ongoing success of any of our acquired businesses.

Macroeconomic factors, including the Russia/Ukraine conflict, and other geopolitical events could disrupt our businesses and adversely affect our financial
condition or results of operations.

We are exposed to risks arising out of geopolitical events, such as trade barriers, including the imposition of tariffs and other limitations on international trade and travel;

exchange controls; uncertainty concerning fiscal or monetary policy, government shutdowns, debt ceilings or funding; concerns about sovereign defaults; other measures taken
by sovereign governments, including by the US; and uncertainty arising from recent or upcoming elections that can hinder economic or financial activity levels. Furthermore,
unfavorable political, military or diplomatic events, armed conflict, terrorist acts and threats, and pandemics, and the responses to them by governments, could also negatively
affect economic activity and have an adverse effect upon our business, financial condition or results of operations.

Political and economic uncertainty or conflict has in the past led, and could in the future lead, to declines in market liquidity and activity levels, volatile market conditions

and exchange rates, a contraction of available credit, exacerbation of supply chain disruptions, inflationary pressures and higher interest rates and financing issues, declines in
the real estate market, weaker economic growth and investment performance and reduced business confidence, all of which could impact our business. The international
response to Russia’s invasion of Ukraine and the impact of the resulting direct and indirect sanctions against Russian and Belarusian individuals and entities may continue to
expose us to legal and regulatory uncertainty associated with indirect exposure to Russia, Belarus or Ukraine through operations, investment and securities trading; or business
relationships, connections to, or assets in Russia, Belarus or Ukraine. The US-China relationship remains complex, and there is a risk of increased restrictions and other
measures being imposed by the US and other governments in relation to China. In addition, the Russia-Ukraine conflict and recent COVID-19 lockdowns in China may continue
to exacerbate issues, affecting supply in certain sectors including consumer goods, metals, food, chemicals and commodities.

Changes in legislation and regulation or an attempt by any territory or dependency of the UK in which we operate to declare independence from the UK or to implement
changes in its constitution, including its fiscal and monetary policies, could have a negative effect on the applicable jurisdiction's position as an international business center. This
could have a significant negative effect on the local economy and in turn negatively affect our business.

Because the primary markets in which we operate do not have well-diversified economies, a downturn in their key industries could affect their economies as a
whole and have an adverse effect on our business, financial condition or results of operations.

Bermuda is among the largest reinsurance markets in the world. The Cayman Islands is a leader in fund domiciliation for global asset managers, with 12,995 regulated
mutual funds as at December 31, 2022 according to CIMA. International financial services account for a significant portion of the economies of the Channel Islands. Many of our
commercial customers are reinsurance or regulated fund service providers. As a result, a downturn in these key sectors, a change in laws or regulations (including the favorable
tax treatment of entities in these jurisdictions), or a shift of business away from Bermuda, the Cayman Islands, or the Channel Islands, including as a result of the inclusion of any
of these jurisdictions on the EU list of non-cooperative jurisdictions for tax purposes or the implementation of the global minimum tax regime proposed by the Organization for
Economic Cooperation and Development ("OECD") in any of these jurisdictions, could result in job losses and adversely impact the economies in these markets. Any downturn
or further concentration in the reinsurance, investment and asset management and banking markets could also adversely affect our business, financial condition and results of
operations.

Banks domiciled in Bermuda, including us, are not supported by a central bank from which to borrow funds, so if we are unable to maintain sufficient liquidity by
continuously attracting deposits and other short-term funding, our financial condition, including our capital ratios, funding costs or results of operations could be
adversely affected.

Unlike many other jurisdictions, there is no central bank or similar governmental agency in Bermuda from which we may borrow US or Bermuda Dollars if we
experience liquidity shortages, which may leave us without a lender of last resort in the event that Bermuda suffers a severe economic downturn at the same time as a liquidity
shortage. Similarly, there is no central bank in the Cayman Islands, Jersey or Guernsey to act as a lender of last resort. Accordingly, we may not have a lender of last resort in

case of future liquidity shortages and we may be unable to sufficiently fund our liquidity needs. While there is no central bank or similar governmental agency in Bermuda, the
Cayman Islands, Jersey or Guernsey that insures bank deposits, such as the Federal Deposit Insurance Corporation in the United States, the Governments of Bermuda and the
Government of the States of Jersey and Guernsey have each implemented a Deposit Insurance Scheme or Deposit Compensation Scheme. See Item 4.B. "Business Overview -
Supervision and Regulation" and "- Certain jurisdictions in which we operate, including Bermuda, Guernsey and Jersey, have a Deposit Insurance Scheme or Deposit
Compensation Scheme and we incur ongoing costs as a result.” The regulators in these jurisdictions have also required us to hold capital add-ons to compensate for the
systemic importance of our bank to the economy in the absence of a central bank. Without a central bank from which we could borrow funds, liquidity management will be critical
to the management of our consolidated balance sheet, and an inability to obtain sufficient liquidity could adversely affect our financial condition.

Certain jurisdictions in which we operate, including Bermuda, Guernsey and Jersey, have a Deposit Insurance Scheme or Deposit Compensation Scheme and we
incur ongoing costs as a result.

As a bank licensed by the BMA, we are required to be a member of the Deposit Insurance Scheme ("DIS") and pay contributions to the Deposit Insurance Fund.
Currently, our premium contribution is calculated by the Bermuda Deposit Insurance Corporation as 0.25% per annum of the average total amount of our Bermuda Dollar
deposits that are covered by the DIS guarantee over a rolling three-month period, payable every three months in arrears. The amount of the contribution we are liable to pay may
change from time to time as the total level of our insured Bermuda Dollar deposits changes; in addition, there is no guarantee that the current rate of premium contributions
charged by the Bermuda Deposit Insurance Corporation will stay the same and not increase or that the Bermuda Deposit Insurance Corporation will not require additional
contributions in the event that the Deposit Insurance Fund is insufficient to pay compensation due to insured depositors. We may also not be able to recover our contributions to
the Deposit Insurance Fund from any failed institution whose insured depositors receive payments from the Deposit Insurance Fund. Any contributions we are required to make
as part of the DIS (and any associated costs) are a cost to our business, and such costs, including any future increases, may have an adverse effect on our business, financial
condition or results of operations.

As a bank licensed by the Guernsey Financial Services Commission, we are required to pay contributions to the Guernsey Deposit Compensation Scheme (the
"Guernsey DCS"). Currently, we are required to pay an administration levy which is calculated by the Guernsey DCS Board. The amount of the contribution we are liable to pay
may change from time to time and there is no guarantee that the current rate charged by the Guernsey DCS Board will stay the same and not increase. In the event of the failure
of a Guernsey licensed bank, the Guernsey DCS Board will estimate the total level of compensation levy required and the Bank will be liable in equal shares with every other
participant (i.e., every other licensed bank in Guernsey) for the first £10,000,000 and subject to certain caps for any one bank. If the total compensation levy exceeds
£10,000,000, then the Bank will be liable on a pro-rata basis (calculated by reference to the total "value at risk" of our Guernsey deposits compared to the Guernsey market) with
every other participant for the amount of such excess. We may also not be able to recover our contributions to the Guernsey DCS from any failed licensed bank whose insured
depositors receive payments from the Guernsey DCS. Any contributions we are required to make as part of the Guernsey DCS (and any associated costs) are a cost to our
business, and such costs, including any future increases, may have an adverse effect on our business, financial condition or results of operations.

The Jersey Bank Depositors Compensation Scheme ("Jersey DCS") is funded primarily through an upfront loan from the States of Jersey. In the event of a bank failing,

levies would be raised on Jersey banks, subject to certain caps for banking groups over a five-year period, based on the proportion of protected deposits each bank holds to
repay the loan. In the event that the full £100 million liability of the Jersey DCS was called upon, banks would contribute approximately two-thirds of funding, with the States of
Jersey contributing one-third.

We are not currently required to pay any contributions to the Jersey DCS. Any contributions we may be required in future to make as part of the Jersey DCS (and any

associated costs) are a cost to our business, and such costs, including any future increases, may have an adverse effect on our business, financial condition or results of
operations.

Severe weather, natural disasters and potential impacts of climate change could disrupt our businesses and adversely affect our financial condition or results of
operations.

The key markets in which we operate include Bermuda and the Cayman Islands and our business is therefore subject to the risks associated with severe tropical

storms, hurricanes, tornadoes, earthquakes and rising sea levels, including downed telephone lines, flooded facilities, power outages, fuel shortages, damaged or destroyed
property and equipment, and work interruptions. Although hurricanes in the Caribbean during 2020, 2021 and 2022 did not negatively impact the Bank's operations or cause any
insurable losses, such severe weather conditions and natural disasters may, in the future, negatively impact us and our clients and their ability to meet their financial obligations
to us, including the repayment of loans. Climate change may also aggravate the impact and increase the incidence of severe weather conditions and natural disasters, which
may include altered distribution and intensity of rainfall, prolonged droughts or flooding, rising sea levels, and a rising heat index. Such events may, among other impacts,
adversely affect borrowers, including resulting in an impairment of the value of property or other collateral used to secure the loans that we extend, as well as significantly impact
the economies of the key markets in which we operate. The occurrence of any of these events could have a material adverse effect on our financial condition and results of
operations.

In addition, we cannot predict whether we will continue to be able to obtain insurance for natural disaster or climate change-related damages to our premises or, if

obtainable and carried, whether this insurance will be adequate to cover our losses. Moreover, we expect any insurance of this nature to be subject to substantial deductibles
and to provide for premium adjustments based on claims, and we do not carry insurance against all types of losses. For these reasons, costs and work interruptions resulting
from such events could have an adverse effect on our business, financial condition or results of operations.

A decline in tourism in Bermuda and the Cayman Islands could adversely affect our business, financial condition or results of operations.

Tourism is a major contributor to the economies of Bermuda and the Cayman Islands. A decline of this industry in Bermuda or the Cayman Islands could have adverse
effects on the economic stability of these jurisdictions, and our business, financial condition or results of operations. In addition, a decline in tourism could lead to (i) decreases in
the value of hotels and other commercial properties, which could adversely affect our commercial loan portfolio, and (ii) increases in unemployment, which could affect the ability
of our residential borrowers to make payments on their loans.

The majority of the markets in which we operate do not have systemic credit bureau reports.

Unlike the US where the Fair Credit Reporting Act ("FCRA") is designed to help ensure that credit bureaus furnish correct and complete information when evaluating

loan applications, the majority of the markets in which we operate do not have systemic credit bureau reports. Therefore, we review each loan and we use a formal and
documented tiered credit approval process that is administered through and governed by our risk management framework. Due to limitations in the availability of information, our
assessment of credit risk associated with a particular customer may not be based on complete, accurate or reliable information. In addition, although we have made and continue
to make improvements to our credit scoring systems to better assess borrowers' credit risk profiles, we cannot provide assurance that our credit scoring systems collect complete
or accurate information reflecting the actual behavior of customers or that their credit risk can be assessed correctly. Without complete, accurate and reliable information, we
have to rely on other publicly available resources and our internal resources, which may not be effective. As a result, our ability to effectively manage our credit risk and
subsequently our impairment losses and allowance for credit losses may be materially adversely affected. In addition, because our credit approval process involves detailed
analyses of the customer or credit risk, taking into account both quantitative and qualitative factors, it is subject to human or information technology systems errors. In exercising

their judgment on current or future credit risk behavior of our customers, our employees may not always be able to assign an accurate credit rating, which may result in our
exposure to higher credit risks than indicated by our risk rating system. In addition, we aim to continuously refine our credit policies and guidelines to address potential risks
associated with particular industries or types of customers. However, we may not be able to timely detect all possible risks before they occur, or due to limited tools available to
us, our employees may not be able to effectively implement them, which may increase our credit risk. Failure to effectively implement, consistently follow or continuously refine
our credit risk management system may result in an increase in the level of nonperforming loans and a higher risk exposure for us, which could have a material adverse effect on
us.

The COVID-19 pandemic and its effect on the global economy have continued to impact our customers and organization, and the future effects of the

pandemic remain uncertain.

The COVID-19 pandemic created economic and financial disruptions that have adversely affected, and may in the future adversely affect, our business, financial

condition, liquidity and results of operations. The extent to which the COVID-19 pandemic may continue to negatively affect our business, financial condition, liquidity and results
of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the emergence of new variants, the scope and duration of future
infections and surges, the continued effectiveness of our business continuity plan, the direct and indirect impact of the pandemic on our employees, customers, clients,
counterparties and service providers, as well as other market participants, actions taken by governmental authorities and other third parties in response to the pandemic, and the
effectiveness and acceptance of COVID-19 vaccines, including boosters.

The COVID-19 pandemic has contributed, and may continue to contribute, to among other things: (i) sudden and significant declines, and significant increases in
volatility, in global financial markets; (ii) ratings downgrades, credit deterioration and defaults of companies operating in many industries; (iii) supply chain disruptions, labor
shortages and structural factors; and (iv) heightened cybersecurity, data privacy, information security and operational risks as a result of remote working arrangements or
otherwise. In addition, many of our customers, counterparties and third-party service providers were, and may continue to be, affected by travel restrictions, quarantines and/or
curfews in various jurisdictions, market volatility and other factors that increased their risks of business disruption or that otherwise could affect, or have affected, their ability to
repay loans, perform under the terms of any agreements with us or provide other essential services. As a result, our credit, operational and other risks could increase if there are
widespread infections and surges in the future.

Governmental authorities took measures in response to the pandemic, and may take action in the future, to provide economic assistance to individual households and
businesses, stabilize the markets and support economic growth. The full duration and scope of the pandemic and related economic consequences remain unknown. Even after
the pandemic materially subsides, our businesses would be materially and adversely affected by any subsequent, prolonged recession in the jurisdictions in which we have
banking and trust operations. The impacts of the pandemic also have the effect of heightening many of the other risks set out in the “Risk Factors” section.

Risks Relating to Our Strategy, Brand, Portfolio and Other Aspects of Our Business

We rely on our reputation and the appeal of our brand to our customers. Any damage to our reputation and appeal could harm us and our business prospects.

The success of our strategy relies significantly on our reputation and the reputation of our senior management and the Board. In addition, our customers and key

introducers must continue to associate our brand with meeting customer needs and delivering value to those customers. Adverse publicity (whether or not justified) relating to
activities by our management, employees, agents or others with whom we do business, such as customer service mishaps or non-compliance with laws, could tarnish our
reputation and reduce the value of our brand. With the increase in the use of social media outlets, adverse publicity can be disseminated quickly and broadly, making it
increasingly difficult for us to effectively respond. Such unfavorable publicity could also require us to allocate significant resources to rebuild our reputation.

As a bank operating in Bermuda, the Cayman Islands, the Channel Islands and other international financial centers, we are subject to increasing scrutiny with respect to

potential or alleged legal and regulatory breaches and unethical behavior and associated reputational risks, including with respect to the general perception and reputation of
financial institutions in those jurisdictions, which may in turn be affected by factors including the EU list of non-cooperative jurisdictions for tax purposes, and policies on
controversial industries such as gaming and cryptocurrencies, among others. See "Our business may be negatively impacted by the economic substance legislation and
regulations in the jurisdictions in which we operate, including Bermuda, the Cayman Islands, and the Channel Islands." Any circumstance that causes real or perceived damage
to our brand or reputation, or banking or wealth management generally in these jurisdictions, may negatively affect our relationships with our customers and key introducers,
which would have an adverse effect on our business, financial condition or results of operations.

Potential reputational issues include, but are not limited to:

• breaching or facing allegations of having breached legal and regulatory requirements (including, but not limited to, conduct requirements, anti-money laundering

requirements, anti-terrorism financing requirements, laws against assisting in tax evasion, cybersecurity and data protection laws, bribery and corruption);

•

legacy issues we inherit from the businesses we acquire through a merger or acquisition;

• acting or facing allegations of having acted unethically (including having adopted inappropriate sales and trading practices);

•

failing or facing allegations of having failed to maintain appropriate standards of customer privacy, customer service and record-keeping;

failing to appropriately address potential conflicts of interest;

• experiencing technology failures that impact customer services and accounts;

•

failing to properly identify legal, reputational, credit, liquidity and market risks inherent in products offered;

failing to meet expectations from investors, customers, employees and regulators relating to environmental, social and governance standards and practices; and

changing the terms of our product offerings and pricing that may result in outcomes for customers that are unfair or perceived to be unfair.

A failure to address the above or any other relevant issues appropriately could make customers unwilling to do business with us, which could have an adverse effect on

our business, financial condition or results of operations and could damage our relationships with our employees and regulators.

The effect of inflation, rising interest rates and other macroeconomic factors has and may continue to negatively impact our net interest margin and our profitability.

Net interest income is a significant component of our revenues and changes in prevailing interest rates may adversely affect our business, including the level of net

interest income we earn, and for our banking business, the levels of deposits and the demand for loans. Interest rates are highly sensitive to many factors that are beyond our
control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the U.S. Federal Reserve and the Bank of
England. Changes in monetary policy, including changes in interest rates, influence not only the interest we receive on loans and investments and the amount of interest we pay
on deposits and borrowings, but such changes also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities and the average
duration of our mortgage portfolio and other interest-earning assets.

In 2022, the strategy of central banks globally included the introduction of a series of interest rate increases. Additional rate hikes are expected to continue into 2023.

As interest rates increase, our net interest income would narrow if our cost of funding increased without a correlating increase in the interest we earn from loans, investments and
other interest-earn. Because we rely extensively on deposits to fund our operations, our cost of funding would increase if there is an increase in the interest rate we are required
to pay our customers to retain their deposits, as is currently being experienced in our Channel Islands and UK segment. This could occur, for instance, if we are faced with
competitive or regulatory pressures to increase rates on deposits. In addition, our cost of funding would increase if the interest rates we are required to pay for other sources of
funding increases. Moreover, increases in interest rates may decrease customer demand for loans as the higher cost of obtaining credit may deter customers from seeking
increases in or new loans. Further, the effects of inflation and rising interest rates may lead to liquidity issues for borrowers and debt covenant violations. An increase in interest
rates may lead to the need for borrowers to amend the terms of existing debt agreements or obtain waivers if they no longer satisfy debt covenants. Changes to existing debt
arrangements may represent restructuring, modification or extinguishment, which might lead to an increased number of delinquent loans and defaults, which would affect the
value of our loans. Changes in interest rates may negatively affect the value of our assets and our ability to realize gains or avoid losses from the sale of those assets, all of
which may also ultimately affect earnings and capital, as well as our regulatory solvency position.

Continued elevated levels of inflation could pose a risk to our financial performance.

Global economies, including the jurisdictions in which we operate, are experiencing elevated levels of inflation. The duration and severity of the current inflationary

period is unknown and cannot be estimated with precision. Increased costs as a result of inflation could reduce our profit margins or could result in deposit outflows, which could
also negatively impact our liquidity. Inflation may also result in reduced valuations on long duration financial assets and real estate and impact the value of collateral pledged for
loans. Additionally, inflation has increased volatility and uncertainty in the business environment, which could adversely impact loan demand and our clients’ ability to repay
indebtedness. A failure to accurately anticipate higher inflation may result in mispricing of our products. As a result, a sustained period of high inflation in our key markets could
adversely affect our business, financial position or results of operations.

Our loan and investment portfolios are subject to risk of prepayment, which could have a material adverse effect on us.

Our fixed rate loan and investment portfolios are subject to prepayment risk, which results from the ability of a borrower or issuer to pay a debt obligation prior to
maturity. Generally, in a low interest rate environment, prepayment activity increases, which reduces the weighted average lives of our earning assets and could have a material
adverse effect on us. For example, decreases in global market interest rates in 2020 and 2021 increased prepayment speeds and resulted in lower yields on the Bank's
investments. Conversely in 2022, increases in global market interest rates decreased prepayment speeds resulting in higher yields on the Bank’s investments. Prepayments also
require us to recognize net premiums or commissions as income over a shorter period of time, thereby reducing the corresponding asset yield and net interest income.
Prepayment risk also has a significant adverse impact on credit card and collateralized mortgage loans, since prepayments could shorten the weighted average life of these
assets, which may result in a mismatch in our funding obligations and reinvestment at lower yields. Prepayment risk is inherent to our commercial activity and an increase in
prepayments could have a material adverse effect on us.

The value of the securities in our investment portfolio may continue to decline in the future.

As at December 31, 2022, we owned $5.7 billion of investment securities consisting primarily of securities issued by the US government and US governmental agencies
and recorded net unrealized losses in our AFS and HTM portfolios of $220.2 million and $540.6 million, respectively, due to changes in fair value as a result of rapidly rising long-
term market interest rates. In 2022, our investment portfolio had an average yield of 1.91%.

The fair value of our investment securities may continue to be adversely affected by market conditions, including future changes in interest rates and the occurrence of

any events adversely affecting the issuers of particular securities in our investment portfolio. We perform periodic reviews to determine if a credit impairment exists. Our Group
Asset and Liability Committee reviews the results of the impairment analysis and advises whether a credit impairment exists. The process for determining whether a credit
impairment exists usually requires complex, subjective judgments about the future financial performance of the issuer of the relevant security in order to assess the probability of
receiving all contractual principal and interest payments on the security.

We did not record any credit impairment losses on investments in the years ended December 31, 2022, 2021 and 2020. We may be required to recognize credit
impairments in the future periods, which could have an adverse effect on our business, financial conditions or results of operations. See "- If we are unable to effectively manage
our liquidity we may need to seek additional financing and our business, financial condition or results of operations could be adversely affected."

Volatility levels and fluctuations in foreign currency exchange rates may affect our business, financial position and results of operations.

We are exposed to foreign currency risk as a result of our holdings of foreign currency denominated assets and liabilities, investments in foreign subsidiaries, and future
foreign currency denominated revenues and expenses. Fluctuations in exchange rates may raise the potential for losses resulting from foreign currency trading positions, where
aggregate obligations to purchase and sell a foreign currency do not offset each other or offset each other in different time periods. Exchange rate volatility may have negative
impacts on our business, financial position and results of operations. For example, the GBP/USD volatility experienced in the latter half of 2022 significantly impacted the value of
GBP-denominated loans and deposits recorded on our consolidated balance sheets.

We also provide foreign exchange services to our clients, including trading on behalf of clients in all major currencies and providing hedging solutions to manage foreign

exchange risk. Foreign currency volatility influences the level of client activity. Changes in client activity may result in reduced foreign exchange trading income.

In addition, the Bermuda Dollar and the Cayman Islands Dollar are pegged to the US Dollar at exchange rates of 1 Bermuda Dollar to 1 US Dollar and 1 Cayman
Islands Dollar to 1.20 US Dollars, respectively. However, we cannot make assurances that these pegs will be maintained. In the event that the Bermuda Dollar or Cayman
Islands Dollar is de-pegged or the current ratios are changed, including as a result of changes in laws, regulations or policies in these jurisdictions, the value of our financial
position or results of operations could be adversely affected. Moreover, our US Dollar deposits are used to fund mortgages in Bermuda Dollars and Cayman Islands Dollars. As
the Bermuda Dollar and the Cayman Islands Dollar are pegged to the US Dollar, we do not engage in hedging activities to counteract this currency risk. If the Bermuda Dollar or
Cayman Islands Dollar ceased to be pegged to the US Dollar at the current ratios, however, we could be exposed to significant currency risks.

A decline in the residential real estate market, including in Bermuda, the Cayman Islands, the Channel Islands and the United Kingdom, could increase the risk of
loans being impaired and could have an adverse effect on our business, financial condition or results of operations.

We are exposed to the risk that our borrowers may not repay their loans according to their contractual terms and that the collateral securing the payment of these loans

may be insufficient. As at December 31, 2022, approximately 55% of our Bermuda loan portfolio, net of allowance for credit losses, was composed of residential mortgages in
Bermuda; approximately 65% of our Cayman Islands loan portfolio, net of allowance for credit losses, was composed of residential mortgages in the Cayman Islands and
approximately 86% of our Channel Islands and UK loan portfolio, net of allowance for credit losses, was composed of residential mortgages in the Channel Islands and the UK. A
decline in the real estate market, in particular in Bermuda, the Cayman Islands, the Channel Islands and the UK, would mean that the collateral for our loans would hold less
value. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on the
defaulted loans. Declines in the real estate market, including as a result of lower infrastructure spending in the markets in which we operate, could also adversely affect demand

for new loans, further decreasing the interest revenue generated by our loan portfolio. In addition, if our estimate for our allowance for credit losses proves to be inadequate, we
will have to increase the allowance accordingly and may have future charge-offs. This may lead to impairment charges on loans and other assets, higher costs and higher
incurred provisions for credit losses.

The risk of loan impairment may be compounded by the fact that there is limited economic and statistical data regarding the Bermuda, the Cayman Islands and the
Channel Islands real estate markets. Although reliable and comprehensive economic and statistical data is available for certain real estate markets, such as the Case-Schiller
Home Price Index in the United States, there is no comparable statistical data or mechanism to value the overall real estate market in all our markets. This lack of information
makes it difficult to assess the market value of real estate in these markets, and requires us to rely on observations of the valuation of our own real estate originations in order to
assess whether the value of mortgaged real estate has declined. See "- The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real
property may not accurately describe the net value of the collateral that we can realize." Any of the above factors could have an adverse effect on our business, financial
condition or results of operations.

We could be negatively affected if the soundness of other financial institutions and counterparties deteriorates or if such counterparties, including clearing houses,
are unwilling to do business with us, in particular in respect of US Dollar transactions.

Given the high level of interdependence between financial institutions, we are and will continue to be subject to the risk of actual or perceived deterioration in the
commercial and financial soundness of other financial services institutions. Within the financial services industry, the default by any one institution could lead to defaults by other
institutions. Concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions, because the commercial and
financial soundness of many financial institutions may be closely related as a result of their credit, trading, clearing or other relationships. Even the perceived lack of
creditworthiness of, or questions about, a financial institution may lead to market-wide liquidity problems and losses or defaults by us or by other institutions. This risk is
sometimes referred to as "systemic risk" or "contagion" and may adversely affect financial intermediaries, such as clearing agencies, clearing houses and banks with whom we
interact on a daily basis. In particular, BNYM and Wells Fargo Bank, N.A. ("Wells Fargo") act as clearing houses for all our US Dollar transactions. If BNYM's or Wells Fargo's
ability to act as our clearing houses becomes impaired or BNYM or Wells Fargo cease to act as our clearing houses for any other reason and other financial institutions are not
willing to provide the services currently provided to us by BNYM and Wells Fargo, we could lose our ability to engage in US Dollar transactions, which could lead to severe
disruptions in our operations and adversely impact our business, financial condition or results of operations.

Our strategy includes expansion of our business through acquisitions of, or investments in, other companies or new products and services, but we may not be able
to achieve regulatory approval for such transactions or be able to achieve the anticipated cost savings, growth opportunities and other benefits anticipated from
such transactions.

We seek to grow both organically and through acquisitions. In the past several years, we have made various acquisitions and investments intended to complement and
expand our businesses, including our September 2022 agreement with Credit Suisse to acquire its trust business in Singapore, Guernsey and The Bahamas, which is expected
to be completed in 2023. Our long-term growth strategy includes identifying and effecting selective acquisitions in our core geographies, but we cannot be sure that we will be
able to continue to identify suitable acquisition candidates or investment opportunities. Even if we identify suitable targets, there can be no assurance that we will be able to
obtain the necessary funding on acceptable terms, if at all, to finance any of those potential acquisitions or investments.

We may also be required to obtain regulatory approval (including from the BMA) prior to any potential acquisition or investment depending on the transaction and the

laws and regulations of the target’s country of incorporation. Regulators consider a number of factors when determining whether to approve a proposed transaction, and we may
have difficulty obtaining the necessary regulatory approvals, government permits or licenses required for such acquisitions. We may fail to pursue, evaluate or complete strategic
and competitively significant business opportunities as a result of our inability, or our perceived inability, to obtain any required regulatory approvals in a timely manner or at all.

Even where we are able to complete an acquisition or an investment, we cannot be sure that such acquired entity, business or asset or such investment will perform in

line with our assumptions or expectations or otherwise complement our business or strategy due to a variety of factors, including lower revenues than expected, unforeseen
operating difficulties and expenditures, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers,
clients or suppliers) and risks associated with the disruption of management’s attention from ongoing business operations due to acquisition and integration activities.

In addition, integrating an acquired company, business or technology possesses significant risks, including, among other things:

•

the incorporation of new technologies into our existing business infrastructure;

the maintenance of standards, controls, procedures and policies throughout the organization (including effective internal controls over financial reporting and
disclosure controls and procedures);

the consolidation of our corporate or administrative functions;

the coordination of our sales and marketing functions to incorporate the new business or technology;

the potential for liabilities and claims arising out of the acquired businesses;

the integration of corporate cultures;

the maintenance of morale, retention and integration of key employees to support the new business or technology and management of our expansion in capacity;
and

compliance with the regulatory regimes of newly entered jurisdictions.

In addition, a significant portion of the purchase price of companies that we may acquire may be allocated to goodwill and other intangible assets. Intangible assets are
tested for impairment annually or when there is a triggering event requiring such testing; an intangible asset that is subject to amortization is periodically reviewed for impairment.
Goodwill is tested for impairment on an annual basis. As at December 31, 2022, we had $22.9 million and $51.5 million of goodwill and intangible assets, respectively. In the
future, if our acquisitions do not yield expected returns or there are changes in discount rates, we may be required to take additional charges to our earnings based on the
impairment assessment process, which could harm our business, financial condition, results of operations and prospects.

If we are unable to effectively manage our liquidity we may need to seek additional financing and our business, financial condition or results of operations could be
adversely affected.

We need liquidity to pay our operating expenses, to fund depositor withdrawals, interest on our debt and dividends on our common shares, and to replace certain

maturing liabilities. Without sufficient liquidity, we will be forced to curtail our operations and our business will suffer.

Our main source of funding is customer deposits. As at December 31, 2022, we had $13.0 billion in deposits (55% USD deposits, 19% USD-pegged deposits), with
35% of our deposits derived from our Bermuda segment, 33% from the Cayman Islands segment, and 32% from the Channel Islands segment. In addition, we source funding

from net income generated by the Bank, net of dividends paid, and to a lesser extent from other sources including the sale of securities to institutional counterparties under
repurchase agreements and the sale of equity securities and AFS securities. Our deposit base includes both demand and term liabilities, with the significant majority of such
deposits being demand deposits or are due within six months. Because we rely primarily on short-term deposits for funding, a sudden or unexpected shortage of funds in the
banking systems in which we operate may prevent us from obtaining necessary funding without incurring higher costs. Our deposit base includes deposits from commercial and
institutional clients which may be more sensitive to financial strength rating changes. A significant withdrawal of deposits in either of these markets could significantly affect our
liquidity and our ability to meet our funding needs.

In addition, as a bank with subsidiaries located in various jurisdictions, the Bank’s access to inter-company funds can be restricted because our regulated banking

subsidiaries are required to maintain certain liquidity ratios or minimum levels of capital in accordance with the laws of the jurisdictions in which they operate or otherwise. The
necessity of maintaining these ratios or levels of capital or other liquidity considerations could restrict the ability of these subsidiaries to transfer funds to us, in the form of cash
dividends, loans or advances.

In the event that our current resources do not satisfy our needs, we may need to seek additional financing. The availability of additional financing will depend on a

variety of factors, such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our
credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long- or short-term financial prospects, including
as a result of economic uncertainty or any downgrade in sovereign credit ratings in key markets in which we operate.

We rely on third parties to provide services that are integral to our ordinary operations, and their failure to perform in a satisfactory manner could negatively affect
us.

We rely on third parties to provide services that are integral to our ordinary course operations, including providers of information technology, administrative or
investment advisory services. These third party supported functions or operating systems may not function properly, become insufficient to support our evolving business needs
or become defective or damaged as a result of a number of factors including events beyond our control. Enhancements and upgrades to third party supported infrastructure or
operating systems entail significant time and costs, and create risks associated with implementing new systems and integrating them with existing ones. Due to the complexity of
our systems, across multiple jurisdictions and product types, the process of enhancing our infrastructure and operating systems, including their security measures and controls,
can create a risk of system disruptions and security issues. Similarly, we may not be able to timely recover critical business processes or operations that have been disrupted,
which may further increase the associated costs and consequences of such disruptions. Although we have business continuity plans in place, cybersecurity and other
safeguards in place to help provide operational resiliency, our business operations may be adversely affected by significant and prolonged disruption to our operating systems
that support our businesses and customers. Furthermore, third parties on which we rely, could also introduce operational risk to us, including from information breaches or loss,
breakdowns, cyber incidents, disruptions or failures of their own systems or infrastructure, or any deficiencies in the performance of their responsibilities. A material breach of
customer data may negatively impact our business reputation and cause a loss of customer business; may result in increased expense to contain the event and/or require that
we provide credit monitoring services for affected customers; may result in regulatory fines and sanctions; and/or may result in litigation. We rely on our outsourced service
providers to implement and maintain prudent cybersecurity controls. We have procedures in place to assess a vendor's cybersecurity controls prior to establishing a contractual
relationship and to periodically review assessments of those control systems; however, these procedures are not infallible and a vendor's system can be breached despite the
procedures we employ. In addition, outsourcing is subject to regulatory controls in certain jurisdictions in which we operate and we may not always be able to obtain approval to
outsource on terms available or sought by us, which could adversely affect our ability to enter into outsourcing arrangements.

In addition, BNYM and Wells Fargo act as clearing houses for all our US Dollar transactions and, if our relationships with BNYM and Wells Fargo are terminated, we

could lose our ability to engage in US Dollar transactions. For more information see " - We could be negatively affected if the soundness of other financial institutions and
counterparties deteriorates or if such counterparties, including clearing houses, are unwilling to do business with us, in particular in respect of US Dollar transactions."

Changes in banks’ inter-bank lending rate reporting practices and the phase-out of the London Interbank Offered Rate ("LIBOR") may adversely affect our business
and results of operations.

For several years, global regulators and central banks have been pursuing international efforts to reform interest rate benchmarks, such as the London Interbank

Offered Rate (“LIBOR”). In July 2017, the UK Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to
submit rates for the calculation of LIBOR after 2021. On March 5, 2021, the FCA and ICE Benchmark Administration, the authorized and regulated administrator of LIBOR,
announced that all the GBP, CHF, JPY, EUR LIBOR settings and the one-week and two-month USD LIBOR settings will cease after December 31, 2021, and the remaining USD
LIBOR settings will cease after June 30, 2023.

Uncertainty as to the nature of potential changes, alternative reference rates or other reforms may adversely affect market liquidity, the pricing of LIBOR-based

instruments and the availability and cost of associated hedging instruments and borrowings. Payments under contracts referencing new reference rates may differ from those
referencing LIBOR. The transition may change the Bank’s risk profile and require changes to its risk and pricing models, valuation tools, product design and hedging strategies.
Although the Bank is unable to quantify the ultimate impact of the transition from LIBOR given the uncertain nature of the potential changes, it continues to monitor the
developments related to the future of LIBOR in line with any regulatory or quasi-regulatory guidance. Moreover, the failure to manage any potential transition from LIBOR to a
different reference rate, or rates, may adversely affect the Bank’s reputation, business and financial condition, and results of operations. As at December 31, 2022, the Bank had
72 loans totaling $290.8 million linked to LIBOR. This excludes one-week and two-month USD LIBOR which have already transitioned.

We face competition in all aspects of our business, and may not be able to attract and retain wealth management, trust and banking clients at current levels.

We compete with a broad range of financial institutions. Many of our competitors are larger and have broader ranges of product and service offerings, increased access

to capital, and greater efficiency and pricing power. We face competition from other lending institutions and from numerous other providers of financial services, including the
following:

• Non-banking financial institutions. The ability of these institutions to offer services previously limited to commercial banks has intensified competition. Because non-

banking financial institutions are not subject to the same regulatory restrictions as banks, they can often operate with greater flexibility and lower cost structures; and

• Competitors that have greater financial resources. Some of our larger competitors, including certain international banks that have a significant presence in our

market area, may have greater capital and resources and higher lending limits and may offer products, services and technology that we do not. We cannot predict
the reaction of our customers and other third parties with respect to our financial or commercial strength relative to our competition, including our larger competitors.

In our banking business, we face competition mainly from other local banks, such as Bermuda Commercial Bank and Clarien Bank in Bermuda and from Cayman
National Corporation in the Cayman Islands, as well as from subsidiaries of international banks, being Royal Bank of Canada in the Cayman Islands and HSBC in Bermuda,
whom we view as our most significant competitors. In our wealth management business line, we face competition from local competitors, as well as much larger financial
institutions, including financial institutions that are not based in the markets in which we operate. Revenues from the trust and wealth management business depend in large part
on the level of AUA.

In our trust business, we face competition primarily from other specialized trust service providers. Many of our competitors in the international financial sector offer fund

administration and corporate services work alongside private client fiduciary services.

Our ability to successfully attract and retain trust, wealth management and banking clients is dependent upon our ability to compete with competitors' investment
products, retail products and services, level of investment performance, client services and marketing and distribution capabilities. If we are not successful, our business,
financial condition or results of operations may be adversely affected.

The addition of new products and services, or modified products or services may subject us to implementation and reputational risk.

From time to time, we may introduce new activities or new technology through new products and services within business entities (e.g. in Guernsey and Jersey we are
introducing retail products such as residential mortgages and credit cards). There may be substantial risks and uncertainties associated with these efforts. Insufficient planning
may lead to an incomplete assessment and understanding of associated risks involved with new activities and may result in inadequate oversight and controls. New activities
may increase strategic risk where not compatible with the bank’s risk appetite or strategic plan or do not provide an adequate return on investment; engagement of new activities
without adequate due diligence and failure to provide adequate resources, expertise and experience to properly implement and oversee new activities. This can increase
reputational risk and negative public opinion. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or
services could have a material adverse effect on our business, financial condition, and results of operations.

The Bank's credit ratings have a direct effect on its competitive position, and declines in the Bank's ratings may increase the cost of borrowing funds and make our
ability to raise new funds, attract and retain deposits or renew maturing debt more difficult, which may negatively affect long-term and short-term funding.

The Bank's credit strength ratings are an important component of its liquidity profile and competitive position. Ratings show each agency's view of our financial strength,

operating performance and ability to meet debt obligations as they become due. Nationally recognized statistical rating organizations ("NRSROs") periodically review the
financial performance and condition of banks and may downgrade or change the outlook on a bank's ratings due to, for example: a change in a bank's regulatory capital ratios; a
change in an NRSRO's determination of the amount of capital cushion required to maintain a particular rating; an increase in the perceived risk of a bank's investment portfolio;
reduced confidence in management; or other considerations that may or may not be under our control. The Bank has credit ratings from Standard & Poor's ("S&P"), Moody's
Investor Service ("Moody's") and Kroll Bond Rating Agency ("KBRA"). Each of the rating agencies reviews its ratings and rating methodologies on a recurring basis and may
decide on a downgrade at any time. The Bank's ratings as at December 31, 2022 are shown in the table below:

Long-term issuer

Short-term issuer

Subordinated debt

Long-term counterparty risk assessment

Short-term counterparty risk assessment

KBRA

A+

S&P

BBB+

A-2

Ratings

Moody's

P-2

P-1

A downgrade in our credit ratings could adversely affect clients' perception of us and our ability to compete successfully in the marketplace for deposits (or result in the
withdrawal of deposits). A downgrade in our short-term debt ratings may affect our short-term funding capabilities. There has been no measurable correlation or effect on deposit
levels during previous downgrades and, as a result, historically, no material impacts on the Bank's operations or results.

Negative changes in the Bank's long-term credit ratings would also likely increase the cost of raising long-term funding in the capital markets or of borrowing funds.

Even where we can access the capital markets, negative changes in our ratings could affect our share price and make any equity offerings more difficult and dilutive to current
shareholders, further driving down the Bank's share price. Our ability to replace maturing or existing debt may be more difficult and expensive. In addition, our lenders and
counterparties in derivative transactions are sensitive to the risk of a ratings downgrade. However, we may issue additional debt securities in the future which may increase the
impact of a one-notch downgrade in credit ratings.

Management cannot predict what actions rating agencies may take, or what actions we may take in response to the actions of rating agencies that could adversely

affect our business. As with other companies in the financial services industry, our ratings could be downgraded at any time and without any notice by any NRSRO, which could
adversely affect our business, financial conditions or results of operations.

We could fail to attract, retain or motivate highly skilled and qualified personnel, including our senior management, other key employees or members of the Board,
which could adversely affect our business.

Our ability to implement our strategic plan and our future success depends on our ability to continue to attract, retain and motivate highly skilled, diverse and qualified
personnel, including our senior management and other key employees and directors, competitively with our peers. The marketplace for skilled personnel is competitive, which
means the cost of hiring, incentivizing and retaining skilled personnel may continue to increase. For example, labor shortages and increased turnover in recent years has
increased the cost of hiring, incentivizing and retaining skilled personnel. Increased turnover and the shortage of employees may put stress on internal control environments.
While the Bank has experienced slightly higher turnover levels in 2022 as compared to historical averages, we don't consider them to be material or systemic in nature. The
failure to attract or retain, including as a result of an untimely death or illness of key personnel, or replace a sufficient number of appropriately skilled and key personnel could
place us at a significant competitive disadvantage and prevent us from successfully implementing our strategy or effectively managing our risk framework and business
operations. This could impair our ability to implement our strategic plan successfully, achieve our performance targets and otherwise have an adverse effect on our business,
financial condition or results of operations.

We may also be unable to attract and retain staff due to our locations. Many of our employees are employed in Bermuda, the Cayman Islands, and the Channel Islands,

which are small markets. Therefore, location may be an impediment to attracting and retaining experienced personnel. Further, immigration laws in small markets impose
limitations on attracting experienced personnel.

In addition, governmental scrutiny with respect to matters relating to compensation and other business practices in the financial services industry has increased

dramatically in the past several years and has resulted in more aggressive and intense regulatory supervision in certain markets in which we operate or are regulated. Future
legislation or regulation or government views on compensation may result in us altering compensation practices in ways that could adversely affect our ability to attract and retain
talented employees.

Our business is subject to risks related to litigation and regulatory actions.

We are, from time to time, involved in various legal and regulatory proceedings arising from our normal business activities. These claims and legal actions, including

supervisory actions by our regulators or proceedings or investigations brought by other regulators, could involve large monetary claims and significant defense costs. The
outcome of these cases is uncertain. Substantial legal liability or significant regulatory action against us could have material financial effects or cause significant reputational
harm to us, which in turn could seriously harm our business, financial condition, results of operations and prospects. We may be exposed to substantial uninsured liabilities,
which could materially affect our results of operations and financial condition.

As previously publicly announced, in November 2013, the USAO applied for and secured the issuance of so-called John Doe Summonses to six US financial institutions

with which the Bank had correspondent bank relationships. The purpose of these summonses was to identify US persons who may have been using our banking, trust, or other
services to evade their own tax obligations in the United States. The Bank cooperated with the US authorities in their investigation and reached a resolution with the US
Department of Justice in July 2021. The resolution was in the form of a non-prosecution agreement with a three-year term and payment of $5.6 million.

Requirements and expectations from our regulators and other stakeholders on environmental, social and governance issues could significantly impact our
business.

Regulators, investors and customers are increasingly focused on ESG issues. Certain of our regulators have proposed or adopted, or may propose or adopt, ESG-

related rules or standards that could apply to our business. Other stakeholders have also proposed or adopted ESG-related standards or policies, and may evaluate our
business and other practices according to such requirements, standards and policies, which are continually evolving and not always clear. ESG regimes in different jurisdictions
and ESG standards used by different stakeholders may also impose different and potentially conflicting requirements, or reflect inconsistent or conflicting values or agendas. See
also "- Our international business model exposes us to various and possibly conflicting regulatory regimes across multiple jurisdictions."

We may need to incur significant costs in order to meet the expectations of our regulators and other stakeholders on ESG issues. Our policies and processes to
evaluate and manage ESG standards in coordination with other business priorities may not prove completely effective or satisfy regulators, investors, customers, or other
stakeholders. As a result, we could face adverse regulatory, investor, customer, media, or public scrutiny leading to business, reputational, or legal challenges.

Risks Relating to Operations, Risk Oversight and Internal Controls

Our operations are reliant on effective implementation and use of technology and require us to adapt to new technologies, and a breach, interruption or failure of
our technology services or the inability to effectively integrate new technologies could have an adverse effect on our business, financial condition or results of
operations.

We rely heavily on communications and information systems to conduct business. In particular, we rely on technology to provide key components of our information

system infrastructure, including loan, deposit and general ledger processing, risk management information collection and processing for internal control purposes, internet
connections and network access. Any disruption in service of these key components, for example due to system errors, a natural catastrophe, or the termination of any third-
party software licenses upon which any of these systems is based, could adversely affect our ability to effectively deliver products and services to clients, to detect, assess and
manage risk and otherwise to conduct operations. See "- We rely on third parties to provide services that are integral to our ordinary operations, and their failure to perform in a
satisfactory manner could negatively affect us.” Furthermore, any security breach, due to computer viruses, programming, malfeasance or human errors or other events or
developments, of information systems or data, whether managed by us or third parties, could interrupt our business, harm our reputation or cause a decrease in the number of
clients using our services. The financial services industry is continually undergoing rapid technological change with frequent introductions of new, and technology-driven products
and services. We face the risk of having to establish and maintain further improved technological capabilities, and our future success depends, in part, on our ability to recognize
and implement new technologies to address our operational and internal control needs, operational efficiencies and to meet the demands of our clients. See "- Cyber-attacks,
distributed denial of service attacks and other cybersecurity matters, if successful, could have an adverse effect on our business, financial condition or results of operations.”

The widespread adoption of new technologies, including cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing
products and services as we continue to grow our internet and mobile banking capabilities or other technological-based distribution channels . The persistence or acceleration of
this shift in demand towards internet and mobile banking may necessitate changes to our retail distribution strategy, which may include restructuring our branches and work
force. These actions could lead to losses on these assets and may lead to increased expenditures to reform our retail distribution channel.

Many of our competitors have substantially greater resources to invest in technological improvements than we do. We may not be able to effectively implement new,
technology-driven products and services or be successful in marketing these products and services to our customers. In addition, the implementation of technological changes
and upgrades to maintain current systems and integrate new ones may also cause service interruptions, transaction processing errors and system conversion delays and may
cause us to fail to comply with applicable laws. Failure to successfully keep pace with technological change affecting the financial services industry and avoid interruptions, errors
and delays could have an adverse effect on our business, financial condition, results of operations, or competitive position.

Cyber-attacks, distributed denial of service attacks and other cybersecurity matters, if successful, could have an adverse effect on our business, financial condition
or results of operations.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and store sensitive, proprietary or

confidential data. The secure processing, storage, maintenance and transmission of this data is critical to our operations and reputation. We are under continuous threat from
cyber-attacks, especially as we continue to expand customer capabilities to utilize the internet and other remote channels to transact business. If any of our data were
mishandled, misused, improperly accessed, lost or stolen, or if our operations were disrupted, we could suffer significant financial, reputational or other damages. Two of the
most significant cyber-attack risks that we face are e-fraud and loss of sensitive customer data. These risks may be more likely where third party vendors have access to or
process data on our behalf. While such attacks are infrequent, they could present significant reputational, legal and regulatory costs to us if successful. In addition, the nature of
cyber-attacks is constantly and rapidly evolving, and attempts to infiltrate our systems may not be recognized until launched against us and in some cases are designed not to be
detected. Although we make significant efforts to maintain the security and integrity of our information systems, there can be no assurances that our security measures will be
effective.

Third parties with whom we or our customers do business also present operational and information security risks to us, including security breaches or failures of their
own systems. Cyber-attacks at third party service providers are also becoming increasingly common and, as a result, risks relating to cyber-attacks on our vendors have been
increasing. We also face risks related to cyber-attacks and other security breaches in connection with credit card transactions that typically involve the transmission of sensitive
information regarding our customers through various third parties, including merchant acquiring banks, payment processors, payment card networks (e.g., Visa or Mastercard),
our processors, and clearing banks. Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third
parties and environments such as the point of sale that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us
through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them, including from remediation costs, increased

future protection costs, reputational harm, loss of customers and potential regulatory inquiries and/or civil litigation. We also rely on numerous other third-party service providers
to conduct other aspects of our business operations and face similar risks relating to them.

Our increased use of cloud and other technologies may expose us to security weaknesses that may increase our risks to data breaches, data loss, data leakage,

account hijacking, insecure application programming interfaces and other potential cyber-risk events. Many of our employees (and staff of service providers) now work remotely
or from other sites. These working arrangements could potentially provide increased opportunities for cyber threat actors to exploit. We cannot provide assurances that the
safeguards we have put in place or may implement in the future will prevent all unauthorized infiltration or breach, or that we will not suffer material losses related to a security
breach in the future.

In recent years, U.S. regulators, including the FDIC, SEC, and the Financial Industry Regulatory Authority (“FINRA”), have made statements concerning cybersecurity
risk management, preparedness and resiliency for financial institutions such as us. These statements range from issues with respect to client account protections to business
continuity, and represent the regulators’ expectations for financial institutions to have more robust cybersecurity risk management and a preparedness and resiliency program for
themselves and their service providers. A financial institution is also expected to develop processes to enable recovery of data and business operations and address rebuilding
network capabilities and restoring data if the institution, or its critical service providers, fall victim to this type of cyber-attack. Any cyber incidents, such as those of our third party
vendors, could result, among other things, in increased regulatory scrutiny and adverse regulatory or civil litigation consequences.

The occurrence of a cyber-threat scenario could cause interruptions in our operations and result in the incurrence of significant costs, including those related to forensic

analysis and legal counsel, each of which may be required to ascertain the extent of any potential harm to our customers, or employees, or damage to our information systems
and any legal or regulatory obligations that may result therefrom. The occurrence of a cyber-threat may therefore have a material adverse effect on our financial condition and
results of operations. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and
sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our clients.

Due to the increasing sophistication of such attacks, we have not been able, and may in the future not be able, to prevent denial-of-service or other cyber-attacks that

could compromise our normal business operations or the normal business operations of our clients, or result in the unauthorized use or disclosure of clients’ confidential and
proprietary information. The occurrence of any failure, interruption or security breach of network and computer systems resulting from denial-of-service or other cyber-attacks or
security incidents could impact our ability to operate and serve our clients, damage our reputation, result in a loss of client business, subject us to additional regulatory scrutiny,
or expose us to civil litigation and possible financial liability, any of which could adversely affect our business, results of operations or financial condition.

Our risk management and compliance framework, systems and process, and related guidelines and policies, may prove inadequate to manage our risks, and any
failure to properly assess or manage such risks could harm us.

We maintain an enterprise risk management program that is designed to identify, quantify, monitor, report and control the risks we face. We also maintain a compliance

program to identify, measure, assess and report on adherence to applicable laws, policies and procedures. Our approach to risk management requires senior management to
make complex judgments, including decisions (based on assumptions about economic factors) about the level and types of risk that we are willing to accept in order to achieve
our business objectives. These also include the maximum level of risks we can assume before breaching constraints determined by regulatory capital and liquidity needs and our
regulatory and legal obligations including, among others, from a conduct and prudential perspective. Given these complexities, and the dynamic environment in which we
operate, the decisions made by senior management may not be appropriate or yield the results expected. In addition, senior management may be unable to recognize emerging
risks quickly enough for us to take appropriate action in a timely manner. There can be no assurances that our framework for risk management, compliance and related controls
will effectively mitigate risk and limit financial losses for our operations.

Our controls and procedures may fail or be circumvented, which could have an adverse impact on our business, financial condition or results of operations.

We face the risk that the design of our controls and procedures that govern operations, financial reporting and compliance across jurisdictions, including those to

mitigate the risk of human error, fraud or breach of fiduciary duties relating to our trust services by employees or outsiders, or to monitor financial reporting, may be inadequate,
circumvented or exposed to variations in compliance at the local level, thereby causing inaccuracies in data and information or delays in the detection of errors. At present, we do
not have a uniform core banking platform in place across the jurisdictions in which we operate and, therefore, we need to use manual processes to compile certain financial
information from certain subsidiaries. Moreover, in the past, our information technology capabilities in Bermuda and other jurisdictions have experienced difficulties with certain
identified weaknesses, including internal control deficiencies in our operations (including interest rate calculation functions). To address this, we used manual processing, data
spreadsheets or a combination thereof. Use of such manual procedures and data spreadsheets presents financial reporting and operational risks and increases the importance
of staff compliance with internal operating and security procedures. In addition, we may incur operational losses due to non-compliance by our staff with internal operating and
control procedures and arising from human error. Any failure or circumvention of our controls and procedures or failure to comply with any current or future regulations related to
controls and procedures could have an adverse effect on our business, financial condition or results of operations.

Regulatory and Tax-Related Risks

We operate in a complex and changing regulatory environment and legal and regulatory changes or our failure to comply with laws and regulations could have a
negative impact on our business, financial condition or results of operations.

Our business is subject to ongoing changes in laws, regulations, policies, voluntary codes of practice and interpretations in the markets in which we operate. We

currently face an increasingly extensive and complex set of laws, regulations and standards as a result of the concerns enveloping the global financial sector. We are exposed to
potential changes in governmental or regulatory policies, price controls, capital controls, exchange controls, other restrictive actions, unfavorable political and diplomatic
developments, and changes in legislation.

Some areas of potential regulatory change involve multiple jurisdictions seeking to adopt a coordinated approach. This may result in conflicts with specific
requirements of the jurisdictions in which we operate and, in addition, such changes may be inconsistently introduced across jurisdictions. See "- Our international business
model exposes us to various and possibly conflicting regulatory regimes across multiple jurisdictions."

Changes may also occur in the oversight approach of regulators. It is possible that governments in jurisdictions in which we operate or obtain funding might revise their

application of existing regulatory policies that apply to, or impact, the Bank's business, including for reasons relating to national interest and/or systemic stability. The powers
exercisable by our regulators may also be expanded in the future.

Regulatory changes and the timing of their introduction continue to evolve and we manage our businesses in the context of regulatory uncertainty. The nature and

impact of future changes are not predictable and are beyond our control. Regulatory compliance and the management of regulatory change are an important part of our planning
processes. We expect that we will be required to continue to invest significantly in compliance and the management and implementation of regulatory change and, at the same
time, significant management attention and resources will be required to update existing, or implement new, processes to comply with new regulations.

Changes and restrictions imposed by our primary lead regulator, the BMA, and other regulators may also impact our operations by requiring us to have increased

levels of liquidity, and higher levels of, and better quality, capital and funding, as well as placing restrictions on the businesses we conduct (including limiting our ability to provide
products and services to certain customers), requiring us to amend our corporate structure or requiring us to alter our product or service offerings. If a regulatory change has any
such effect, it could adversely affect one or more of our businesses, restrict our flexibility, require us to incur substantial costs and impact the profitability of one or more of our
business lines. Any such costs or restrictions could adversely affect our business, prospects, financial performance or financial condition.

Our failure or inability to fully comply with the laws and regulations could lead to fines, public reprimands, reputational damage, civil liability, enforced suspension of
operations or, in extreme cases, withdrawal of authorization to operate, which could adversely affect our business, financial condition, results of operations or prospects. We
could also be required to incur significant expenses to comply with new or revised regulations. Future developments or changes in laws, regulations, policies, voluntary codes of
practice and their effects may require greater capital resources and significant management attention, and may require us to modify our business strategies and plans.

The costs of complying with, or our failure to comply with, US and foreign laws related to privacy, data security and data protection, such as the EU General Data
Protection Regulation, could adversely affect our financial condition, operating results and reputation.

Regulatory authorities have increased their focus on how companies collect, process, use, store, share and transmit personal data. New privacy security laws and
regulations, including the UK's Data Protection Act 2018, the Data Protection (Jersey) Law 2018, the Data Protection (Bailiwick of Guernsey) Law 2017, The Cayman Islands
Data Protection Law 2017 (which became effective on September 30, 2019), Bermuda’s Personal Information Protection Act 2016, and the EU General Data Protection
Regulation 2016, pose increasingly complex and rigorous compliance challenges, which may increase our compliance costs. Any failure to comply with data privacy laws and
regulations could result in significant penalties, fines, legal challenges and reputational harm. See Item 4.B. "Business Overview - Supervision and Regulation".

Failure to comply with any applicable anti-corruption legislation could result in fines, criminal penalties and an adverse effect on our business, financial condition or
results of operations.

We must comply with all applicable laws and regulations, which include anti-corruption, anti-money laundering, international financial sanctions and anti-terrorist

financing laws and regulations. Recently, there has been a substantial increase in the global enforcement of these laws and regulations, in particular in respect of the financial
services industry. The measures and procedures we have in place may not be entirely effective in preventing third parties from using us (and our correspondent banks) as a
conduit for money laundering (including illegal cash operations), terrorist financing or other financial crimes without our (and our correspondent banks') knowledge or consent.
Although, as of the date of this report, we have not been subject to any fines or penalties, as a result of violations of anti-money laundering and counter-terrorism laws and
regulations, there can be no assurances that we will not be subject to such fines, penalties or losses or harm in the future. If we were to be associated with money laundering
(including illegal cash operations) or terrorist financing, our reputation could be harmed and we could become subject to fines, sanctions or legal enforcement (including being
added to any "blacklists" that would prohibit certain parties, potentially including US Dollar clearing banks, from engaging in transactions with us), which could have an adverse
effect on our business, financial condition or results of operations.

Our international business model exposes us to various and possibly conflicting regulatory regimes across multiple jurisdictions.

Our international business model exposes us to different regulatory schemes across multiple jurisdictions. Although our central management and a large part of our
business are located in Bermuda, our operations are spread throughout ten international jurisdictions. In addition to the logistical and communications challenges this creates,
the financial services industry is heavily regulated in many jurisdictions, and each line of the business is exposed to different, constantly evolving and possibly conflicting
regulatory schemes. Our management has enacted internal controls and procedures that are designed to result in compliance with these regulatory schemes, which are
periodically reviewed and updated, but in the future we might have difficulty meeting and remaining in compliance with existing or new regulatory requirements imposed by a
particular jurisdiction, particularly in light of the increasing regulatory scrutiny of financial institutions and their subsidiaries. Our current internal controls for one jurisdiction may
not sufficiently comply with the demands of increased oversight in another jurisdiction.

To the extent we are unable to comply with the regulatory scheme of a particular jurisdiction, we might not be able to operate in that jurisdiction, or we may incur fines
or penalties for compliance failures or incur costs in order to remediate compliance failures, any or all of which could adversely affect our business, financial condition or results
of operations.

The Financial Action Task Force (“FATF”) may identify any of the jurisdictions in which we operate as a jurisdiction which has systemic anti-money laundering and/
or anti-terrorist financing deficiencies, which could have an adverse effect on our business.

The FATF is an international body that identifies jurisdictions with weak measures to combat money laundering and terrorist financing in public documents published

three times a year. FATF and its regional bodies work with such jurisdictions, governments, and regulatory bodies and report on progress made in addressing identified
deficiencies. Such reviews are at a country level, rather than an entity-specific level. Thus, while the Bank can have in place globally accepted standards to fight money
laundering and terrorist financing, the existing regulations in any of the jurisdictions in which we operate may not meet FATF requirements. Failure to comply with FATF
standards by any jurisdictions in which we operate could adversely affect our reputation and our ability to obtain financing from the international markets and attract foreign
investments.

Our business may be negatively impacted by the economic substance legislation and regulations in the jurisdictions in which we operate, including Bermuda, the
Cayman Islands, and the Channel Islands.

In 2018, all major offshore jurisdictions enacted legislation in response to new requirements imposed by the EU’s ECOFIN regarding the need for entities registered in

offshore jurisdictions to demonstrate economic substance. Compliance with these requirements is necessary to avoid a jurisdiction being placed on the EU’s list of non-
cooperative jurisdictions for tax purposes. Many of the jurisdictions in which we operate, including Bermuda, the Cayman Islands, The Bahamas, Guernsey and Jersey have
enacted legislation that requires entities registered, incorporated or continued under certain legislation in the respective jurisdictions engaged in “relevant activities” (which
includes engaging in banking or financing activities) to satisfy economic substance requirements by maintaining a substantial economic presence in the respective jurisdiction.
For example, in December 2018, Bermuda passed The Economic Substance Act 2018, the Cayman Islands passed the International Tax Co-operation (Economic Substance)
Law, The Bahamas passed the Commercial Entities (Substance Requirement) Act, Guernsey passed the Income Tax (Substance Requirements) (Implementation) Regulations,
2018 and Jersey passed the Taxation (Companies - Economic Substance) (Jersey) Law 2019. Any entity that must satisfy economic substance requirements but fails to do so
could face financial penalties, a restriction of its business activities or being struck-off as a registered entity in the relevant jurisdiction.

In October 2022, The Bahamas was added to the EU’s list of non-cooperative jurisdictions for tax purposes as the EU’s ECOFIN concluded that they failed to
adequately address a number of recommendations of the OECD Forum on Harmful Tax Practices in connection to the enforcement of economic substance requirements. From
February to October 2020, the Cayman Islands were on the EU’s list of non-cooperative jurisdictions for tax purposes. The EU’s ECOFIN concluded that the Cayman Islands did
not have appropriate measures in place relating to collective investment vehicles, and in response the Cayman Islands adopted reforms sufficient to address this deficiency.
Bermuda was similarly placed on the EU’s list of non-cooperative tax jurisdictions in March 2019, but removed from this list in May 2019 and added to the EU's list of cooperative

tax jurisdictions in February 2020. EU Finance Ministers signaled their approval of the economic substance regulations by placing Jersey and Guernsey on the EU's list of
cooperative tax jurisdictions in March 2019, and the OECD has endorsed Jersey and Guernsey’s domestic legal framework as being in line with the relevant standard. As the EU
continues to monitor compliance by the jurisdictions in which we operate, further economic substance requirements imposed by these jurisdictions or a future addition of these
jurisdictions to the EU's list of non-cooperative tax jurisdictions could have a material adverse effect on us.

We are required to obtain approval from our regulators before engaging in certain activities.

The laws, regulations, policies, voluntary codes of practice and interpretations applicable to us govern a variety of matters, including acquisitions and other activities we

may engage in. As our primary lead regulator, the BMA requires that we obtain its prior consent, letter of no objection and/or approval before engaging in certain activities,
including paying dividends on our common shares, entering into material acquisitions or issuing or repurchasing our common shares, and there can be no assurance that any
regulatory approvals we may require will be obtained, either in a timely manner or at all. See "- Our strategy includes expansion of our business through acquisitions of, or
investments in, other companies or new products and services, but we may not be able to achieve regulatory approval for such transactions or be able to achieve the anticipated
cost savings, growth opportunities and other benefits anticipated from such transactions." Our regulators have the ability to compel us to, or restrict us from, taking certain
actions entirely, such as actions that our regulators deem to constitute an unsafe or unsound banking practice. Any restrictions on our business placed by a regulator could have
a negative impact on our ability to execute on our growth strategy. See "- Laws in certain jurisdictions in which we operate and our bye-laws could adversely affect the rights of
our shareholders or prevent or delay a change in control.” For example, if our capital levels are deemed insufficient by the BMA or otherwise, they may not approve our payment
of a regular quarterly dividend.

Our ability to pay dividends to non-residents of Bermuda and the transfer of our common shares to non-residents of Bermuda could be impaired by Bermuda
regulations.

A large number of our shareholders are resident outside of Bermuda, and our common shares are listed on the BSX and the NYSE. Bermuda regulations impacting

non-Bermuda holders of our common shares are set by the Bermuda Controller of Foreign Exchange, whose current policy:

• permits the conversion of Bermuda Dollars for payment of dividends in foreign currency to shareholders who are non-residents of Bermuda for exchange control

purposes, provided that all payments are processed through an authorized dealer, including, for this purpose, us; and

• permits the free transferability of equity securities of a Bermuda company for so long as such equity securities of such company are listed on an ‘‘appointed stock

exchange’’ appointed by the Minister of Finance under section 2(9) of the Companies Act 1981.

However, if the Controller of Foreign Exchange were to change the foregoing policies, our ability to pay dividends in US Dollars to non-residents of Bermuda for
exchange control purposes could be impaired. Furthermore each transfer of our common shares to or from non-residents of Bermuda for exchange control purposes could
require specific approval by the Controller of Foreign Exchange. This could impact the liquidity of the market for our common shares, and the value of the common shares could
be adversely affected.

If we are considered to be a passive foreign investment company, such characterization could result in adverse US federal income tax consequences to
shareholders that are US investors.

Special adverse US federal income tax rules apply if a US shareholder holds shares of a company that is treated as a passive foreign investment company ("PFIC"),

for any taxable year during which the US shareholder held such shares. A foreign corporation will be considered a PFIC for any taxable year in which (1) 75% or more of its
gross income is passive income, or (2) 50% or more of the average fair market value of its assets is attributable to assets that produce or are held for the production of passive
income (the "asset test"). Passive income for this purpose generally includes dividends, interest, royalties, rents, annuities and gains from assets that produce passive income. If
a foreign corporation owns at least 25% (by value) of the stock of another corporation, the foreign corporation is treated, for purposes of the PFIC tests, as owning a
proportionate share of the other corporation's assets and receiving its proportionate share of the other corporation's income.

Banks generally derive a substantial part of their income from assets that are interest-bearing or that otherwise could be considered passive under the PFIC rules. The

US Internal Revenue Service (the "IRS"), has issued a notice, and has proposed regulations, that exclude from passive income any income derived in the active conduct of a
banking business by a qualifying foreign bank.

Based upon the proportion of our income derived from activities that are "bona fide" banking activities for US federal income tax purposes, we believe that we were not
a PFIC for the taxable year ended December 31, 2022 (the latest period for which the determination can be made) and, based further on our present regulatory status under local
laws, the present nature of our activities, and the present composition of our assets and sources of income, we do not expect to be a PFIC for the current year or for any future
years. However, PFIC status is a factual determination and there are uncertainties in the application of the relevant rules. Moreover, the IRS may issue guidance in the future
with different requirements to be a qualified foreign bank, which we may not satisfy. Accordingly, there can be no assurances that we will not be a PFIC for any particular year. If
we were a PFIC in any taxable year during which a US shareholder owns our common shares and the US shareholder does not make a "mark-to-market" election, as discussed
under the heading "Certain Taxation Considerations - Material US Federal Income Tax Consequences - US shareholders - Passive Foreign Investment Company
Considerations," or a special "purging election," we generally would continue to be treated as a PFIC with respect to such US shareholders in all succeeding years, regardless of
whether we continue to meet the income or asset test discussed above. US shareholders are urged to consult their own tax advisers with respect to the tax consequences to
them if we were to become a PFIC for any taxable year in which they own our common shares.

US withholding tax and information reporting requirements imposed under the Foreign Account Tax Compliance Act may apply.

As discussed below under the heading "Certain Taxation Considerations - Material US Federal Income Tax Consequences - Foreign Account Tax Compliance Act
Withholding," pursuant to the Foreign Account Tax Compliance Act ("FATCA") enacted in 2010, a 30% withholding tax will be imposed on certain payments to certain non-US
financial institutions that fail to comply with certain information-reporting, account identification, withholding, certification and other FATCA-related requirements in respect of their
direct and indirect US shareholders and/or US account holders. To avoid becoming subject to FATCA withholding, we and other financial institutions may be required to report
information to the IRS regarding the holders of our common shares and to withhold on a portion of payments under our common shares to certain holders that fail to comply with
the relevant information reporting requirements (or that hold our common shares directly or indirectly through certain non-compliant intermediaries). However, under proposed
Treasury regulations, such withholding will not apply to payments made before the date that is two years after the date on which final regulations defining the term “foreign
passthru payment” are enacted. The rules for the implementation of this legislation have not yet been fully finalized, so it is impossible to determine at this time what impact, if
any, this legislation will have on holders of the common shares.

Many countries, including Bermuda, have entered into agreements with the United States ("intergovernmental agreements" or "IGAs") to facilitate the implementation

of FATCA. These IGAs modify the FATCA withholding regime described above. In December 2013, Bermuda entered into a Model 2 IGA with the United States pursuant to
which Bermudian financial institutions are directed by the Bermudian authorities to register with the IRS and to enter into an agreement with the IRS to perform specified due
diligence, reporting and withholding functions.

We, like many financial institutions, remain under considerable regulatory scrutiny regarding our ability to prevent and detect financial crime. The financial crime
threats we face have continued to evolve, often in tandem with broader geopolitical, socioeconomic and technological shifts in our markets, leading to challenges
such as managing conflicting laws and approaches to legal and regulatory regimes.

Financial crime risk evolved during the COVID-19 pandemic, notably with the manifestation of fraud risks linked to the economic slowdown and resulting deployment of

government relief measures. The accelerated digitization of financial services has fostered significant changes to the payments ecosystem, including a multiplicity of providers
and new payment mechanisms, not all of which are subject to the same level of regulatory scrutiny or regulations as financial institutions. Developments around digital assets
and currencies, notably the role of cryptocurrencies, are increasing regulatory and enforcement focus on the financial crimes linked to these types of assets. While we
continuously monitor for financial crime, there is a risk that we may unknowingly becoming a party to, associated with, or accused of being associated with, money laundering or
violations of sanctions laws or regulations which could damage our reputation and could make us subject to fines, sanctions and/or legal enforcement. Any one of these
outcomes could have a material adverse effect on our business, financial condition, results of operations, prospects and reputation.

Risks Relating to the Common Shares

Purchases of our common shares under our share repurchase program may result in the price of our common shares being higher than the price that otherwise
might have existed in the open market.

On February 13, 2023, the Board of Directors approved a new share repurchase program. Pursuant to the program, the Bank is authorized to repurchase up to 3.0
million common shares of the Bank through February 29, 2024. This was executed following the expiration of the previous share repurchase program of 2.0 million common
shares approved by our Board of Directors on February 14, 2022. The timing, manner, price and amount of any repurchases will be determined by the Company, in its discretion,
based upon the evaluation of economic and market conditions, stock price, available cash, applicable legal and regulatory requirements and other factors, and which may
include purchases pursuant to Rule 10b5-1 of the Exchange Act. The program does not require the Company to repurchase any specific number of shares and there can be no
assurance that any shares will be repurchased under the program. The program may be suspended, extended, modified or discontinued by the Company at any time. These
activities may have had the effect of maintaining the market price of our common shares or retarding a decline in the market price of the common shares, and, as a result, the
price of our common shares may have been higher than the price that otherwise might have existed in the open market.

We are a "foreign private issuer" under US securities law. Therefore, we are exempt from certain requirements applicable to US domestic registrants.

Although we are subject to the periodic reporting requirements of the Exchange Act, the periodic disclosure required of FPIs, including us, under the Exchange Act is

different from periodic disclosure required of US domestic registrants. Therefore, there may be less publicly available information about us than is regularly published by or about
US domestic registrants. We are exempt from certain other sections of the Exchange Act to which US domestic registrants are subject, including the requirement to provide our
shareholders with information statements or proxy statements that comply with the Exchange Act. In addition, our insiders and large shareholders are not obligated to file reports
under Section 16 of the Exchange Act. See ‘‘Implications of Being a Foreign Private Issuer.”

As an FPI, we are also permitted by the NYSE to comply with Bermuda corporate governance practice in lieu of complying with certain NYSE corporate governance

requirements. This means that we are not required to comply with NYSE requirements that:

the board of directors consists of a majority of independent directors;
independent directors meet in regularly scheduled executive sessions;
the audit committee satisfy NYSE standards for director independence;
the audit committee has a written charter addressing the committee's purpose and responsibilities;

•
•
•
•
• we have a nominating and corporate governance committee composed of independent directors with a written charter addressing the committee's purpose and

responsibilities;

• we have a compensation committee composed of independent directors with a written charter addressing the committee's purpose and responsibilities;
• we establish corporate governance guidelines and a code of business conduct;
• our shareholders approve any equity compensation plans; and
•

there be an annual performance evaluation of the nominating and corporate governance and compensation committees.

With the exception of having shareholders approve equity compensation plans, we have elected to comply with the NYSE requirements listed above, notwithstanding

the exemptions available to us as an FPI. However, as ongoing compliance is not required by the NYSE, our shareholders may not have the same protections afforded to
shareholders of companies that are subject to all of the NYSE corporate governance requirements.

We are a Bermuda company. Bermuda law differs from the laws in effect in the United States and might afford less protection to shareholders.

We are a Bermuda-based company incorporated under the laws of Bermuda. As a result, the rights of holders of our common shares will be governed by Bermuda
law, including the Companies Act, the Butterfield Act and our bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies
incorporated in other jurisdictions. In particular, under Bermuda law, the duties of directors and officers of a company are generally owed to the company only, and shareholders
do not generally have rights to take action against directors or officers of the company. In addition, class actions and derivative actions are generally not available to
shareholders under Bermuda law. The status of laws currently in place, and areas not currently governed, are subject to change. The interests of our shareholders could be
adversely affected if significant regulations are added or deleted from Bermuda’s existing statutory framework. For a summary of the existing legal framework in Bermuda, see
Item 4.B. “Business Overview - Supervision and Regulation.”

In addition, our business is based outside of the United States, a majority of our directors and officers reside outside of the United States and a majority of our assets

and some or all of the assets of such persons are located outside of the United States. As a result, it may be difficult or impossible to effect service of process on us or our
directors and officers in the United States or to enforce in the United States judgments obtained in the United States courts against us or those persons based on the civil liability
provisions of the United States securities laws. Furthermore, it is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United
States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the
securities laws of other jurisdictions.

There are provisions in our bye-laws that may be used to delay or block a takeover attempt, which could discourage, delay or prevent a change in control of the Bank

and could adversely impact the value of our common shares. For a detailed summary of the anti-takeover provisions in our bye-laws, see "Description of Share Capital" in our
registration statement on Form F-1 filed with the SEC on February 13, 2017 with file number 333-216018.

Laws in certain jurisdictions in which we operate and our bye-laws could adversely affect the rights of our shareholders or prevent or delay a change in control.

Under the provisions of Bermuda's Banks and Deposit Companies Act 1999 ("BDCA"), the rights of our shareholders could be impaired if any such shareholder

becomes a shareholder controller. If a shareholder controller fails to comply with the notice requirements in connection with a change in control under the BDCA or continues as
such after being given notice of objection to its being a shareholder controller, the BMA may take the actions specified in the BDCA, including, among other things, revoking the
relevant license of the Bank under the BDCA. For more information, see the summaries of relevant provisions of the BDCA regulations under Item 4.B. "Business Overview -
Supervision and Regulation” and "Description of Share Capital" in our registration statement on Form F-1 filed with the SEC on February 13, 2017 with file number 333-216018.

Similarly, in Guernsey certain changes to the ownership structure of our Guernsey company (which is licensed by the Guernsey Financial Services Commission) may

be considered to be a change of control requiring a declaration of "no objection" from the regulator, and in Jersey a change to the ownership or control of the Jersey regulated
entity may also require regulatory approval.

In addition to these restrictions, the provisions of our bye-laws provide that a person who is not "Bermudian" (as such term is defined in the Companies Act) who is
"interested" (as such term is defined in the bye-laws) in our shares which constitute more than 40% of all shares then issued and outstanding is not entitled to vote the shares
which are in excess of such 40% interest at any general meeting without the prior written approval of the Minister of Finance. See also Item 4.B. "Business Overview -
Supervision and Regulation.”

Our common shares trade on more than one market and this may result in price variations; in addition, investors may not be able to easily move shares for trading
between such markets.

Our common shares have traded on the BSX since 1971 and began trading on the NYSE in September 2016. Trading in our common shares on these markets takes

place in different currencies (US Dollars on the NYSE and Bermuda Dollars on the BSX), and at different times (resulting from different time zones, different trading days and
different public holidays in the United States and Bermuda). The trading prices of our common shares on these two markets may differ due to these and other factors. Any
decrease in the price of our common shares on the BSX could cause a decrease in the trading price of our common shares on the NYSE, or vice versa. Investors could seek to
sell or buy our common shares to take advantage of any price differences between the markets through a practice referred to as arbitrage. Any arbitrage activity could create
unexpected volatility in both our share prices on one exchange, and the shares available for trading on the other exchange.

The value of the common shares may fluctuate significantly.

The value of our common shares may fluctuate significantly as a result of a large number of factors, including, in part, changes in our actual or forecasted operating
results and the inability to fulfill the profit expectations of securities analysts, as well as the high volatility in the securities markets generally, and more particularly in shares of
financial institutions. The current market price of our common shares may not be indicative of future market prices.

Other factors, besides our financial results, that may impact the price of our common shares include, but are not limited to:

investor perception of the success and impact of our strategies;
investor perception of our positions and risks, including risks associated with economic uncertainty in key markets in which we operate;

• market expectations of the performance and capital adequacy of financial institutions in general;
•
•
• a downgrade or review of our credit ratings;
• potential litigation or regulatory action involving us;
• announcements concerning financial problems or any investigations into the accounting practices of other financial institutions; and
• general market circumstances.

Holders of our common shares may not receive dividends.

The dividend policy described under Item 8.A. "Consolidated Statements and Other Financial Information - Dividend Policy" should not be construed as a dividend
forecast. Our results of operations and financial condition are dependent on our performance. There can be no assurance that we will declare and pay dividends in the future.
Any decision to declare and pay dividends in the future will be subject to the prior approval of the BMA and be made at the discretion of the Board. Such dividends shall be
declared and paid by the Board only as permitted under applicable law. In determining the amount of any future dividends, factors the Board may take into account include: (1)
our financial results; (2) our available cash, as well as anticipated cash requirements (including debt servicing); (3) our capital requirements, including the capital requirements of
our subsidiaries; (4) our capital requirements to fund potential acquisitions; (5) contractual, legal, tax and regulatory restrictions on, and implications of, the declaration and
payment of dividends by us to our shareholders or share repurchase activity; (6) general economic and business conditions; (7) restrictions applicable to the Bank and its
subsidiaries under Bermuda and other applicable laws, regulations and policies, including the requirement to obtain a letter of no objection from the BMA for the payment of
dividends on our common shares; and (8) any other factors that the Board may deem relevant. Therefore, there can be no assurance that we will declare or pay any dividends to
holders of the common shares, or as to the amount of any such dividends.

Our ability to declare and pay dividends may also depend on the level of distributions, if any, received from our operating subsidiaries. Our operating subsidiaries may

be precluded from declaring and paying dividends by various factors, such as their own financial condition, or restrictions applicable to us and our subsidiaries under Bermuda
and other applicable laws, regulations and policies. The ability of certain of our subsidiaries to upstream funds has been increasingly restricted due to changes in the business
and regulatory environments in the jurisdictions in which those subsidiaries operate. In addition, any change in tax treatment of dividends or interest received by us may reduce
the level of yield received by our shareholders.

The issuance of additional shares in connection with future acquisitions, any share incentive or share option plan or otherwise may dilute all other shareholdings.

We may seek to raise capital to fund future acquisitions and other growth opportunities. We may, for these and other purposes, such as in connection with share

incentive and share option plans, issue additional equity or convertible securities. Any issuance of additional shares, however, is subject to prior BMA approval, and we cannot
guarantee that their approval will be obtained, either in a timely manner or at all. In the event that we are able to and do issue additional shares, existing shareholders could
suffer dilution in their percentage ownership.

Information provided to us about clients and counterparties may not be accurate or complete.

General Risk Factors

In deciding whether to extend credit or enter into other transactions with clients and counterparties, we rely on information furnished by or on behalf of clients and

counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and
completeness of that information and, with respect to financial statements, on reports of independent auditors. Such information could turn out to be inaccurate, including as a
result of fraud or misrepresentation on behalf of our clients, counterparties or other third parties, which would increase our credit risk and expose us to possible write-downs and
losses.

We cannot be certain that our underwriting and operational controls will prevent or detect such fraud or that we will not experience fraud losses or incur costs or other
losses related to such fraud. Our clients and counterparties may also experience fraud in their businesses which could adversely affect their ability to repay their loans or make
use of our services.

During the periods reported in this annual report, we have not experienced any material losses, or had to write down collateral, as a result of fraud or misrepresentation,
but we cannot be certain that the Bank will not experience any such losses or have to write down any such collateral in the future, which could have a material adverse impact on
our results of operation and financial condition.

The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property may not accurately describe the net value of the
collateral that we can realize.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the

value of the property at the time the appraisal is made, and, as real estate values may change significantly in relatively short periods of time (especially in periods of heightened
economic uncertainty and in rising interest rate environments), this estimate may not accurately describe the net value of the real property collateral after the loan is made. As a
result, we may not be able to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and
other valuation techniques to establish the value of our OREO and to determine certain loan impairments. If any of these valuations are inaccurate, our consolidated financial
statements may not reflect the correct value of our OREO, and our allowance for credit losses may not reflect accurate loan impairments. This could have an adverse effect on
our business, financial condition or results of operations.

We may be alleged to have infringed upon intellectual property rights owned by others or may be unable to protect our own intellectual property.

Competitors or other third parties may allege that we, or consultants or other third parties retained or indemnified by us, infringe on their intellectual property rights.

Even in instances where we believe that claims and allegations of intellectual property infringement against us are without merit, defending against such claims is time
consuming and expensive and could result in the diversion of time and attention of our management and employees. In addition, although in some cases a third party may have
agreed to indemnify us for such costs, such indemnifying party may refuse, or be unable, to uphold its contractual obligations.

Moreover, we rely on a variety of measures to protect our intellectual property and proprietary information, including copyrights, trademarks, and controls on access and

distribution. These measures may not prevent misappropriation or infringement of our intellectual property or proprietary information and a resulting loss of competitive
advantage. In any event, we may be required to litigate to protect our intellectual property and proprietary information from misappropriation or infringement by others, which is
expensive and could cause a diversion of resources and may not be successful.

Our insurance coverage may not be adequate to cover all possible losses that we could suffer, and our insurance costs could increase in the future.

Our insurance policies do not cover all types of potential losses and liabilities and are subject to limits and excesses. There can be no assurance that our insurance will

be sufficient to cover the full extent of all losses or liabilities for which we are ultimately responsible, which could result in losses being incurred by the Bank. Additionally, we
cannot guarantee that we will be able to renew our current insurance policies on favorable terms, or at all.

Changes in accounting policies and practices may be adopted by applicable regulatory agencies or other authoritative bodies, which could materially impact our
financial statements.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, applicable

regulatory agencies and other authoritative bodies change the financial accounting and reporting standards that govern the preparation of our financial statements. These
changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

History and Development of the Company

Corporate Information

ITEM 4. INFORMATION ON THE COMPANY

We are a company incorporated under the laws of Bermuda, incorporated on October 22, 1904, pursuant to The N.T. Butterfield & Son Bank Act, 1904 (the "Butterfield
Act"). We are registered with the Registrar of Companies in Bermuda under registration number 2106. Our registered office and principal executive offices are located at 65 Front
Street, Hamilton, HM 12, Bermuda. Our agent for service of process in the United States is C T Corporation System, 28 Liberty Street, New York, New York 10005. Our
telephone number is (441) 295 1111. We maintain a website at www.butterfieldgroup.com. Neither this website nor the information on or accessible through this website is
included or incorporated in, or is a part of, this report.

The SEC maintains an internet site at https://www.sec.gov that contains reports, information statements, and other information regarding issuers that file electronically

with the SEC.

Our History

The origin of The Bank of N.T. Butterfield & Son Limited dates back to the founding of the trading firm of Nathaniel Butterfield circa 1784. In 1858, our company was

established as a bank in Bermuda and has been instrumental to the functioning of the local economy ever since. The Bank was later incorporated under a special act of the local
Parliament in 1904. In the 1960s, as international businesses began contributing substantially to Bermuda's economy, we developed services to work to meet their needs. In
1967, we opened offices in the Cayman Islands and by the 1980s had expanded our operations to include retail banking, investment management, and fund administration. In
1973, we opened our Guernsey office in order to provide customers with access to the Pound Sterling currency after Bermuda's departure from the British Sterling zone. In
addition to being Bermuda's first bank, we opened the first ATMs in Bermuda in the 1980s and launched Bermuda's first internet banking service in 2001. In 1971, we listed our
common shares on the BSX ("Bermuda Stock Exchange") under the ticker symbol "NTB.BH". In 2016, we listed our common shares on the NYSE under the ticker symbol
"NTB".

In 2008 and 2009, as a result of the global financial crisis, we realized losses attributable primarily to US non-agency mortgage backed securities in our investment

portfolio, as well as write-downs on local market hospitality loans. To raise capital to offset these losses, the Bank executed a $200 million preference share offering in
June 2009. In 2009 and 2010, we implemented a comprehensive restructuring plan for the Company: we hired a new management team, de-risked our balance sheet, and
raised $550 million of common equity from a group of investors as well as existing shareholders.

Since our restructuring, we have pursued a strategy to focus on our core business in banking and wealth management. We have executed upon our strategy by

streamlining the Company's operations through exiting non-core markets, repositioning our balance sheet, investing in efficiency initiatives, and continuing to invest in our core
business lines to grow both organically and through acquisitions. By following this strategy, we have improved our financial results and have been able to initiate a progressive
capital return policy for investors. The following are the most recent key steps in executing our strategy:

•

In October 2017, we entered into an agreement to acquire Deutsche Bank AG’s ("Deutsche Bank's") Global Trust Solutions (“GTS”) business, excluding its US
operations, for net cash payments of $24.7 million. Upon completion of the transaction, Butterfield took over the ongoing management and administration of the GTS
portfolio, comprising approximately 1,000 trust structures for some 900 private clients in Guernsey, Switzerland, the Cayman Islands and Singapore. As part of the
transaction, we also acquired a service company in Mauritius to provide operations and support services to our trust businesses. This transaction was completed in
March 2018.

In February 2018, we entered into an agreement to acquire Deutsche Bank’s banking and custody business in the Cayman Islands, Jersey and Guernsey, which
provides services primarily to financial intermediaries and corporate clients. The Bank began to onboard certain customer deposits relating to the acquisition in
2018, and this onboarding activity was completed in the first half of 2019.

In May 2018, we issued $75 million of 5.25% Fixed to Floating Rate Subordinated Notes due in 2028 to repay a portion of our outstanding indebtedness and for
other general corporate purposes.

In July 2019, we completed the £160.7 million ($201.1 million) acquisition of ABN AMRO (Channel Islands) Limited ("ABN AMRO (Channel Islands)"), which
provides banking, investment management and custody products to three distinct client groups, including trusts, private clients, and funds.

In June 2020, we issued $100 million of 5.25% Fixed to Floating Rate Subordinated Notes due in 2030 for general corporate purposes, including the repayment of a
portion of our previously outstanding debt.

In September 2022, we entered into an agreement to acquire the Credit Suisse global trust businesses operating in Singapore, Guernsey and The Bahamas. This
transaction is expected to close in 2023.

Business Overview

Overview

We are a full service bank and wealth manager headquartered in Hamilton, Bermuda. We operate our business through three geographic segments: Bermuda, the

Cayman Islands, and the Channel Islands and the UK. We offer 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 our Bermuda and Cayman Islands
segments, as well as custody services in our Bermuda segment. The Channel Islands and the UK segment include the jurisdictions of Guernsey and Jersey (Channel Islands),
and the UK. In the Channel Islands, a broad range of services are provided to private clients and financial intermediaries including private banking and treasury services, internet
banking, wealth management and fiduciary services. In 2021, the Channel Islands entered the local mortgage market offering various products to local residents. The UK
jurisdiction provides mortgage services for high-value residential properties. We also have operations in the jurisdictions of The Bahamas, Canada, Mauritius, Singapore and
Switzerland, which we include in our Other segment.

For the year ended December 31, 2022, we generated $549.3 million in net revenue after provision for credit losses and other gains/losses ("net revenue"). Our total
net revenue, before inter-segment eliminations, by each of our three geographic segments and our non-reportable "Other" segment for the years ended December 31, 2022,
2021 and 2020 are as follows:

In millions of $

Net Revenue

Bermuda

Cayman Islands

Channel Islands and the UK

Other

For the year ended

2022

2021

2020

248.6

182.0

107.1

29.5

233.7

150.7

105.2

27.6

238.0

145.6

101.9

14.4

As at December 31, 2022, we had $14.3 billion in total assets, $5.1 billion in net loans, $13.0 billion in total deposits (55% USD deposits, 19% USD-pegged deposits),

$106.2 billion and $32.2 billion of trust and custody businesses assets under administration, respectively, and $5.0 billion of assets under management.

In our Bermuda and Cayman Islands segments, our 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 we offer 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 our Channel Islands and UK segment, our bank provides a broad range of services to private clients and financial institutions including private banking, corporate

banking and treasury services, internet banking, wealth management, mortgage lending and fiduciary services. In 2021, the segment entered the local mortgage market offering
various products to local residents. The UK jurisdiction provides mortgages for high-value residential properties.

In all of our segments, we offer wealth management to high net worth and ultra-high net worth individuals, family offices, and institutional and corporate clients. Our

wealth management platform has three lines of business: trust, private banking, and asset management.

The trust business line, which utilizes specialists in each of our 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.

Our 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. We provide clients in our Bermuda,
Cayman Islands, 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. We also provide our clients with access to their account
information through the use of internet and mobile banking.

Our asset management business line provides a broad range of portfolio management services to institutional and private clients. Our 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. Our principal services include discretionary investment management, managed portfolio services, money
market, and mutual fund offerings. We also offer advisory and self-directed brokerage options. Over 90% of the business's discretionary investment mandates call for balanced
growth to conservative allocations. We focus 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 our own services are concentrated on portfolio construction and managing client relationships. We also provide
customized reporting to meet specific needs of our major clients.

From 2017 to 2022, our GAAP net income to common shareholders and our core net income to common shareholders ("Core Net Income to Common")(1) had
compound annual growth rates ("CAGR") of 5.7% and 5.2%, respectively. Our earnings generation has allowed us to build capital to return to shareholders and invest
strategically, both organically and through acquisitions, to further enhance the growth prospects of our Company. We aim to continue to build excess capital in the future, which
we can redeploy into growing our business and return to shareholders.

__________________________
(1)

Core Net Income to Common is a non-GAAP financial measure that is calculated by adjusting net income for income or expense items which management considers not
to be representative of the ongoing operations of our business and preference share dividends, guarantee fees and premiums paid on preference share buybacks and
redemptions. For a reconciliation of Core Net Income to Common to GAAP net income to common, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP
Financial Measures".

Our Markets

The charts below provide the geographic distribution of our Net Revenue for the year ended December 31, 2022.

2022 Net Revenue: $549.3 million

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 us with access to several attractive customer bases: in retail banking, we serve local residents and businesses; in corporate banking, we serve captive
insurers, hedge funds, middle-market reinsurers, and other corporates; and in wealth management, we serve 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.

Our asset management business line operates in Bermuda, the Cayman Islands, and Guernsey. As at December 31, 2022, 71% of our AUM was in Bermuda, 16% was

in the Cayman Islands, and 13% was in Guernsey. In Bermuda and the Cayman Islands, a majority of our institutional and private clients are domestic from a domicile
perspective while a majority of our clients in Guernsey are tied to our trust business and are international in nature.

Segment Distribution of Net RevenueBermuda 44%Cayman 32%Channel Islands and the UK 19%Other 5%
Our International Network and Group Structure

The following map presents the several geographic regions in which our business operates. Business support centers in Canada and Mauritius are not shown.

The following chart presents our corporate structure, indicating our principal regulated subsidiaries as at December 31, 2022. All of the subsidiaries listed below are

wholly owned by the Bank.

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 private banking, corporate banking, custody services and mortgage lending. Butterfield Trust (Guernsey) Limited provides

trustee and fiduciary services.

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 deposit-taking, mortgage lending, investment business and custody services.

Singapore

Butterfield Trust (Asia) Limited provides trust and fiduciary services.

Competition

The financial services industry and each of the markets in which we operate are competitive. We face strong competition in gathering deposits, making loans and

obtaining client assets for management. We compete, both domestically and internationally, with globally oriented asset managers, retail and commercial banks, investment
banking firms, brokerage firms and other investment service firms. Due to the trend toward consolidation in the global financial services industry, our larger competitors tend to
have broader ranges of product and service offerings, greater access to capital, and greater efficiency. Larger financial institutions may also have greater ability to leverage
increasing regulatory requirements and investment in technology platforms. We also face competition from non-banking financial institutions. These institutions have the ability to
offer services previously limited to commercial banks. In addition, non-banking financial institutions are not subject to the same regulatory restrictions as banks, and can often
operate with greater flexibility and lower cost structures.

The Bermuda banking industry currently consists of four licensed banks and one licensed deposit-taking institution. These include one subsidiary of an international

bank, HSBC, and three domestic institutions: Butterfield, Bermuda Commercial Bank and Clarien Bank. In the Cayman Islands, the Bank is one of six Class 'A' full service retail
banks licensed to conduct business with domestic and international clients. There are also 3 non-retail Category 'A' banks and 83 limited service Category 'B' banks according to
CIMA. In the Channel Islands, Guernsey has 20 licensed banks and Jersey has 20, the majority of which are subsidiaries of global banking groups and brands such as Barclays,
RBS, Lloyds, Credit Suisse, Investec, Royal Bank of Canada and Northern Trust. In certain interest rate environments, additional significant competition for deposits may be
expected to arise from corporate and government debt securities and money market mutual funds. We view HSBC in Bermuda and Scotia Bank and CIBC FirstCaribbean in the
Cayman Islands as our most significant competitors in those markets.

In our wealth management business line, we face competition from local competitors, as well as much larger financial institutions, including financial institutions that are

not based in the markets in which we operate. Revenues from the trust and wealth management business depend in large part on the level of assets under management, and
larger international banks may have higher levels of assets under management.

In our trust business line, we face competition primarily from other specialized trust service providers. There are many trust companies in the main international financial

centers, and many of our competitors in this sector offer fund administration and corporate services alongside private client fiduciary services.

Competition for deposits is also affected by the ease with which customers can transfer deposits from one institution to another. Our cost of funds fluctuates with market

interest rates and may be affected by higher rates being offered by other financial institutions. We believe that our most direct competition for deposits comes from international
and domestic financial services firms that target the same customers as the Bank.

Deposits

We are 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. We

strive to maintain deposit growth and to maintain a strong liquidity profile through a significant excess of deposits over loans through market cycles.

Our deposits are generated principally by our banking business line, which offers retail and corporate checking, savings, and term deposits through our segments in
Bermuda, the Cayman Islands 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. As at December 31, 2022, our Bermuda, Cayman Islands and Channel Islands and the UK segments
contributed $4.5 billion, $4.3 billion and $4.2 billion, respectively, to our total deposit base.

Total deposits as at December 31, 2022 were $13.0 billion, down 6.3% over total deposits as at December 31, 2021. Demand deposits, which include checking,

savings and call accounts, totaled $9.9 billion, or 76.1% of our total deposits, as at December 31, 2022, compared to $10.9 billion, or 78.8%, as at December 31, 2021. Term
deposits totaled $3.1 billion as at December 31, 2022 compared to $2.9 billion as at December 31, 2021. The cost of funds on total deposits increased from 11 basis points in
2021 to 34 basis points in 2022. The decrease in deposit balances was driven by clients investing their funds and the strengthening of the US dollar. Cost of funds increased
primarily due to the active repricing of deposits, particularly in the more competitive Channel Islands markets, driven by increased market interest rates.

Lending

We offer a broad set of lending products and services including residential mortgage lending, automobile lending, credit cards, consumer financing, and overdraft

facilities to our retail customers, and commercial real estate lending, commercial and industrial loans, and overdraft facilities to our commercial and corporate customers. These
offerings are provided to our retail, commercial, and private banking clients in our key jurisdictions of Bermuda and the Cayman Islands. We also offer residential mortgage
lending through our banking business in the Channel Islands and to our high net worth and ultra-high net worth clients in the UK. Our loan portfolio, net of allowance for credit
losses, stood at $5.1 billion as at December 31, 2022 compared to $5.2 billion as at December 31, 2021. The loan portfolio represented 35.6% of total assets as at
December 31, 2022, and loans, net of allowance for credit losses, as a percentage of total deposits were 39.2%. The effective yield on total loans for the year ended
December 31, 2022 was 5.91%, compared to 4.00% for the year ended December 31, 2021.

Residential Mortgage Lending

The residential mortgage portfolio comprises mortgages to clients with whom we are 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. As at December 31, 2022, residential
mortgages totaled $3.6 billion, accounting for approximately 69.7% of the Group's total gross loan portfolio with $40.4 million of residential mortgage non-accrual loans
representing 64.1% of total non-accrual loans in the loan portfolio.

1 Based on interpretive data provided by the BMA and CIMA respectively.

Consumer Lending

We provide loans, as part of our 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 we operate. As at December 31, 2022, non-residential loans to consumers totaled $200.5 million, accounting for approximately
3.9% of the Group's total gross loan portfolio and approximately 1.5% of total non-accrual loans in the Group's loan portfolio.

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 UK.

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.

As at December 31, 2022, our commercial real estate loan portfolio totaled $627.3 million, accounting for approximately 12.2% of the Group's total gross loan portfolio

with $3.2 million of commercial real estate non-accrual loans representing 5.0% of total non-accrual loans in the loan portfolio.

Our commercial real estate loan portfolio is broken down into two categories: commercial mortgage and construction. As at December 31, 2022, commercial mortgages

totaled $619.9 million, and construction loans totaled $7.5 million, accounting for approximately 98.8% and 1.2% of our commercial real estate loan portfolio, respectively.

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. As at December 31, 2022, the
Group's commercial loan portfolio, excluding loans to governments, totaled $441.9 million, accounting for approximately 8.6% of the Group's total gross loan portfolio and the
Group's loans to governments totaled $281.5 million, accounting for approximately 5.5% of our total gross loan portfolio. There was $18.5 million of other commercial non-accrual
loans representing approximately 29.3% of total non-accrual loans in the loan portfolio.

Investments

Given the large customer deposit base commanded in our Bermuda, Cayman Islands and Channel Islands operations, and the relatively low volume of lending demand
from our customer base, our investment strategy is more important than may be the case for most financial institutions. In recognition of this, we maintain what we believe to be a
conservative approach to investments, requiring the purchase of mainly fixed-rate investments in order to manage interest rate risk. Our investment portfolio comprises mainly
securities issued or guaranteed by the US government or federal agencies. The securities in which we invest 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). Effective April 1, 2013, we entered into an agreement with Alumina pursuant to
which Alumina provides investment advisory services to us in respect of our US Treasury and agency portfolio.

As at December 31, 2022, the Group held $5.7 billion in investments, representing approximately 40.0% of total assets.

Cash and Liquidity Management

We operate across multiple currency jurisdictions with multi-currency products. In our deposit taking jurisdictions—Bermuda, the Cayman Islands, Guernsey and Jersey
—there are currently 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, and as described below in “- Supervision and Regulation” and
Item 3.D. “Risk Factors - Risks Relating to the Markets in Which We Operate - Certain jurisdictions in which we operate, including Bermuda, Guernsey and Jersey, have a
Deposit Insurance Scheme or Deposit Compensation Scheme and we incur ongoing costs as a result”. In addition, we do not have access to borrowing or deposit facilities with
the US Federal Reserve or the European Central Bank; therefore, we conservatively manage client deposit balances and the liquidity risk profile of our balance sheets. This
involves the retention of significant cash or cash equivalent balances, management of intra-bank counterparty exposure and management of a significant short-dated Canadian,
UK and US Treasury Bill portfolio. As at December 31, 2022, the cash and cash equivalents of $2.1 billion was composed primarily of $1.7 billion in interest earning cash
equivalents, which are investments with a less than 90-day duration. The remaining amounts were comprised of non-interest bearing and interest bearing deposits of $0.1 billion
and $0.3 billion, respectively.

Foreign Exchange Services

We provide 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 81% of our foreign exchange revenue for the year ended December 31, 2022. We do not maintain a proprietary trading book. Foreign
exchange commission income is generated from client-driven transactions and totaled $47.8 million during the year ended December 31, 2022.

Administration Services

Through our wholly-owned trust subsidiaries, we provide custody administration and settlement services to a wide range of internal and external investment clients
dealing in global markets. Our custody service currently 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.

Our 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 our global sub-custodians, BNYM and BBH. Custody services are offered
from our Bermuda, Cayman Islands and Channel Islands segments and complement core wealth management services offered by other parts of the Group, and we currently
anticipate this business to grow in line with our wealth management business. Clients of our 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.

Information Technology

We devote significant resources to maintaining stable, reliable, efficient and scalable information technology systems. We work with our third-party vendors to monitor

and maximize the efficiency of our use of their applications. We use integrated systems to originate and process loans and deposit accounts, which reduces processing time,

improves customer experience and reduces costs. Most customer records are maintained digitally. We are also currently executing several initiatives to enhance our online and
mobile banking services to further improve the overall client experience.

Currently, our information technology is operationally divided into two platforms: (i) Bermuda and Cayman and (ii) Channel Islands and the UK and Group Trust. In our

Bermuda and Cayman operations, we operate on a single industry standard banking technology platform utilizing a predominantly outsourced and supported model hosted
across paired data centers in Canada. In our Channel Islands and UK and Group Trust operations, core services and applications are hosted across both Guernsey and Jersey
data centers.

Protecting our systems to ensure the safety of our customers' information is critical to our business. We use multiple layers of protection to control access and reduce

risk, including conducting access testing and regular vulnerability scanning on our platforms, systems and applications to reduce the risk that any attacks are successful. To
protect against disasters, we have a Business Continuity Management framework and IT Disaster Recovery plans. For more information, see Item 3.D. "Risk Factors - Risks
Relating to Risk Oversight and Internal Controls".

Marketing

Through our Marketing & Communications department, we engage 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 our banking businesses, we broadly market our products and services through print,
broadcast, web and social media advertising in the major markets in which we operate. 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.

Intellectual Property

In the highly competitive banking industry in which we operate, intellectual property is important to the success of our business. We own a variety of trademarks, service

marks, trade names and logos and spend time and resources maintaining this intellectual property portfolio. We control access to our intellectual property through license
agreements, confidentiality procedures, non-disclosure agreements with third parties, employment agreements and other contractual rights to protect our intellectual property.
For more information, see Item 3.D. "Risk Factors - Risks Relating to Our Strategy, Brand, Portfolio and Other Aspects of Our Business".

Supervision and Regulation

Bermuda

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 "BDCA");
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

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• 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.

Supervision and Monitoring by the BMA

Our activities are regulated by the BMA and our ability to engage in certain activities is subject to prior approval by the BMA. One of the principal objectives of the BMA

is to supervise, regulate and inspect financial institutions which operate in or from within Bermuda and further to promote the financial stability and soundness of such financial
institutions. The supervision is primarily for the benefit and protection of the Bank's clients and not for the benefit of our investors. The BMA is also responsible for managing and
regulating transactions in foreign currency or gold.

In addition to conducting on-site reviews, the BMA utilizes a comprehensive quarterly statistical return system that enables off-site monitoring of institutions licensed
under the BDCA. The statistical system, which follows the standards imposed on banks in the UK by the Financial Conduct Authority and is consistent with Basel Committee
Standards, provides the BMA with a detailed breakdown of the Bank's balance sheet and profit-and-loss accounts on both a consolidated and unconsolidated basis. This
information enables the BMA to monitor the soundness of the Bank's financial position and ensure that it meets certain capital requirements.

As the Bank's supervisory authority in Bermuda, the BMA is responsible for the consolidated supervision of our worldwide operations. There are also host regulatory

bodies performing a similar function to that of the BMA in all major locations in which the Bank operates regulated activities. Many of these local authorities require detailed
reporting on the activities of the Bank's subsidiaries located in their jurisdictions. As part of its oversight process, the BMA receives copies of each of these reports on a regular
basis and liaises with the regulatory authorities in the respective locations.

From time to time, in the ordinary course of business, the Bank enters into agreements with the BMA under which the Bank agrees to achieve or maintain certain levels

of capital and to obtain the BMA's prior approval or letter of no objection to take certain corporate actions. Certain actions that may not be taken without prior BMA approval
include: (1) creating or increasing the authorized amount of, or issuing any class of shares; and (2) entering into a material acquisition.

Under the market disclosure requirements (referred to as Pillar III disclosures) applicable under the Basel III Accord ("Basel III"), the Bank is required to publish

information about the risks to which it is exposed. Effective as of January 1, 2015, the BMA adopted capital and liquidity regulatory requirements consistent with Basel III, a
framework released by the BCBS. Basel III aims to raise the quality, consistency and transparency of the capital base, limit the build-up of excess leverage and increase capital
requirements for the banking sector.

The Bank is subject to the following requirements:

• CET1 as the primary and predominant form of regulatory capital, with a requirement of CET1 of at least 7.0% of RWA, inclusive of a minimum CET1 capital

adequacy ratio of 4.5% plus a capital conservation buffer of 2.5%, but excluding the D-SIB surcharge described below. The BMA allowed Bermuda banks to make
the one-time irrevocable election to exclude other comprehensive income on their AFS portfolios from CET1;

• a Tier 1 capital requirement of at least 8.5% of RWA, inclusive of a minimum Tier 1 ratio of 6% and the capital conservation buffer of 2.5% but excluding the D-SIB

surcharge described below;

• a total capital requirement of at least 10.5% of RWA, inclusive of a minimum total capital ratio of 8% and the capital conservation buffer of 2.5% but excluding the D-

SIB surcharge described below;

•

the Bank is considered to be a D-SIB and is subject to a 3% surcharge composed of CET1-eligible capital implemented by the BMA effective September 30, 2015.
This is based upon its assessment of the extent to which the Bank (individually and collectively with the other Bermuda banks) poses a degree of material systemic
risk to the economy of Bermuda due to its role in deposit taking, corporate lending, payment systems and other core economic functions;

the inclusion of a countercyclical buffer to be introduced when macro-economic indicators provide an assessment of excessive credit or other pressures building in
the banking sector, potentially increasing the Bank's required capital buffer by up to 2.5%;

the introduction of a 5% leverage ratio as calculated in accordance with Basel III;

• an LCR with a minimum requirement of 100%; and

• a NSFR with a minimum requirement of 100%.

The minimum capital ratio requirements set forth above do not reflect additional Pillar II add-on requirements that the BMA may impose upon the Group as a prudential
measure from time to time. As the Group's capital requirements remain under continuous review by the BMA pursuant to its prudential supervision, the Group cannot guarantee
that the BMA will not seek higher total capital ratio requirements from time to time.

The Bank may from time to time also be subject to additional regulatory requirements imposed by the BMA in its role as Bermuda’s main prudential regulator such as

the Outsourcing Guidance Notes for Relevant Legal Entities, including banks, corporate service providers, trust companies, investment businesses and fund administrators,
which require (among other things) these entities to demonstrate good risk management, and to notify the BMA of any new material outsourcing arrangements.

Effective February 29, 2020, the Bermuda Banking Association Code of Ethical Conduct was promulgated. This is a voluntary code that the Bank subscribes to. It sets

out a number of guiding principles and commitments in the Bermuda banking industry for customers. The code complements the BDCA, and the code of conduct promulgated
under the BDCA, in promoting best practice and encouraging higher standards for the benefit of customers through competition and market forces.

Bermuda Monetary Authority Act 1969

The Bermuda Monetary Authority Act 1969 established the BMA as a statutory corporate body responsible for, among other things, supervising, regulating and

inspecting any financial institution which operates in or from within Bermuda (which includes the Bank). Specific areas of financial regulation, such as the banking industry, are
also the subject of separate, specific legislation (some of which is discussed below), but this specific legislation is nevertheless administered by the BMA in its supervisory
capacity. In addition to its supervisory functions, both under the Bermuda Monetary Authority Act 1969 and the specific legislation discussed below, the BMA is empowered to
assist foreign regulatory bodies by requiring entities supervised and regulated by the BMA to furnish information on demand to the BMA in connection with foreign regulatory
requests. In 2022, the objects of the BMA were expanded to include promoting the protection of customers using products and services provided by financial institutions (such as
the Bank) through the oversight by the BMA of the conduct of business by those financial institutions.

Banks and Deposit Companies Act 1999

The BDCA prohibits any person from carrying on a deposit-taking business in or from within Bermuda unless that person is a company incorporated in Bermuda and
licensed by the BMA under the BDCA. The BDCA provides for three classes of licenses: banking licenses, restricted banking licenses and deposit company licenses. The Bank
holds a banking license and a deposit company license. Unless otherwise permitted by the BMA, a company that holds a banking license must provide a range of minimum
services to the public in Bermuda, including (without limitation) current accounts in Bermuda dollars, other deposit accounts, loan facilities in Bermuda Dollars, foreign exchange
services and credit card or debit card facilities. A company holding a deposit company license typically offers a small range of services but, unless otherwise permitted by the
BMA, must also provide some specified services to the public in Bermuda, including (without limitation) savings, deposit or other similar accounts in Bermuda Dollars and loans
in Bermuda Dollars secured on mortgages of real property in Bermuda.

As the agency responsible for administering the BDCA, regulating deposit-taking businesses and protecting depositors, the BMA has broad authority to compel

companies licensed under the BDCA to take or cease specific actions and comply with informational or access requests. Under the BDCA, the BMA can, or can compel these
companies, including us, to, among other things, do any or all of the following:

•

submit a report prepared by the Bank's auditors or by an accountant or other person with professional skills on any matter about which the BMA could require us to
provide information;

• produce documentation or other information as the BMA may reasonably require; and

• permit any officer, servant or agent of the BMA, on producing evidence of his authority, to enter the Bank's premises to obtain information and documents.

In addition, the BMA has the power to do any or all of the following:

•

require the Bank to take certain steps or to refrain from adopting or pursuing a particular course of action or to restrict the scope of the Bank's business in a
particular way;

• appoint competent persons to investigate and report to the BMA on the Bank's business or the Bank's ownership and control;

•

restrict the scope of a license or revoke a license; and

vary or revoke the Bank's banking license and to give directions if it feels these are necessary to protect the Bank's depositors.

The Bank's failure to comply with any of the statutory requirements set forth in the BDCA could result in civil or criminal penalties.

The Bank is required to report certain transactions to the BMA. These include any transaction or transactions relating to any one person as a result of which the Bank
would be exposed to a risk of incurring losses in excess of 10% of the Bank's available capital resources, or where the Bank proposes to enter into a transaction or transactions
relating to any one person, which, either alone or together with previous transactions entered into by the Bank in relation to the same person, would result in the Bank being
exposed to the risk of incurring losses in excess of 25% of its available capital resources. This also applies where the transaction relates to different persons if they are
connected in such a way that the financial soundness of any of them may affect the financial soundness of the others or the same factors may affect the financial soundness of
both or all of them. The BMA may extend the scope of this requirement to the Bank's subsidiaries even if these subsidiaries are not licensed under the BDCA as if the
transactions and available capital resources of the Bank's subsidiaries were included in the Bank's available capital resources. For the purpose of the foregoing, the transactions
which must be reported by the Bank to the BMA are those between the Bank and a person where:

(a)

(b)

(c)

that person incurs an obligation to the Bank or as a result of which such person may incur such an obligation;

the Bank will incur, or as a result of which it may incur, an obligation in the event of that person defaulting on an obligation to a third party; or

the Bank acquires or incurs any obligation to acquire, or as a result of which it may incur an obligation to acquire, an asset the value of which depends wholly or
mainly on that person performing their obligations or otherwise on his financial soundness.

The risk of loss attributable to the transaction is, in a case within paragraph (a) or (b), the risk of the person concerned defaulting on the obligation therein mentioned
and, in a case within paragraph (c), the risk of the person concerned defaulting on the obligations therein mentioned or of a deterioration in such person's financial soundness.
The Bank's available capital resources may be determined by the BMA, after consultation with it and in accordance with principles published by the BMA, which are currently the
Basel III principles described above. It is an offense for the Bank to fail to make the required reports.

Under the BDCA, any person who becomes a significant shareholder of a deposit-taking institution, which is defined to include persons, either individually or with
associates (within the meaning of the BDCA), who (i) hold 5% or more of the shares in the institution or another company of which it is a subsidiary company; or (ii) are entitled to
exercise, or control the exercise of 5% or more of the voting power at any general meeting of the institution or of another company of which it is such a subsidiary, must notify the
BMA in writing of that fact within seven days. Failure to provide the BMA with prompt and appropriate notice would constitute an offense that could result in a fine.

The BDCA prohibits a person from becoming a shareholder controller of any company licensed under the BDCA unless the person provides written notice to the BMA

of his intent to do so and the BMA does not object. The definition of shareholder controller is set out in the BDCA but generally refers to a person who, among other things, either
alone or with any associate or associates (i) holds 10% or more of the shares in the licensed institution or another company of which it is a subsidiary company; (ii) is entitled to
exercise, or control the exercise of 10% or more of the voting power at any general meeting of the licensed institution or another company of which it is such a subsidiary; or (iii)
is able to exercise a significant influence over the management of the institution or of another company of which it is a subsidiary by virtue of holding shares in or an entitlement
to exercise or control the exercise of the voting power at any general meeting of either the institution or the other company concerned. The BDCA distinguishes between
shareholder controllers of the following threshold descriptions: "10% shareholder controllers," "20% shareholder controllers," "30% shareholder controllers," "40% shareholder
controllers," "50% shareholder controllers," "60% shareholder controllers" and "principal shareholder controllers" who have a 75% or greater interest. A person who intends to
become a shareholder controller, or a shareholder controller who intends to increase his shareholding/control, meaning generally, ownership of shares or the ability to exercise
or control the exercise of voting rights attached to shares, beyond his present threshold, must provide written notice to the BMA that he intends to do so. It is an offense not to
give this notice. The BMA may object to a person's notice of intent to become a shareholder controller of any description or to an existing shareholder controller seeking to
increase their control where it appears to the BMA that, among other things, such person is not or is no longer a fit and proper person to be such controller. If the BMA objects,
the BMA will provide such person with written notice of its objection.

Prior to serving a notice of objection, the BMA shall serve the person seeking to become a shareholder controller of any description or existing shareholder controller
seeking to increase their control with a preliminary written notice stating that the BMA is considering service on that person of a notice of objection, and that notice shall state
among other things, the reasons for the BMA's proposed objection. The statement of the BMA's reasons for their proposed objection will, however, be subject to the BMA's
determination that such statement would not involve the disclosure of confidential information, the disclosure of which would be prejudicial to a third party. A person served with a
preliminary written notice may, within a period of 28 days beginning with the day on which the notice is served, make written representations to the BMA and the BMA shall take
any such representations into account in deciding whether to serve a notice of objection.

If three months pass from the date of giving notice of intent to the BMA without the BMA serving a notice of objection, then the person may become a shareholder

controller as requested in the notice of intent. In practice, the BMA's procedure is generally to respond to a shareholder controller notification of intent.

If a person becomes a shareholder controller or increases their shareholding/control in spite of the BMA's objection thereto, if a shareholder controller fails to comply

with the foregoing notice requirements or if a shareholder controller continues as such after being given notice of objection to his or her being a shareholder controller, the BMA
may take the actions specified in the BDCA, including revoking the relevant license where a 50%, 60% or principal shareholder controller is involved, or mandating that any
specified shares become subject to one or more of the following restrictions:

• any transfer of or agreement to transfer those shares or, in the case of unissued shares, any transfer of or any agreement to transfer the right to be issued with

them, will be void;

• no voting rights may be exercisable in respect of the shares;

• no further shares may be issued in right of them or pursuant to any offer made to their holder; or

• except in liquidation, no payment may be made of any sums due from the institution on the shares, whether in respect of capital or otherwise.

A court in Bermuda may, on the application of the BMA, order the sale of any such shares. Any person may appeal to a tribunal constituted under the BDCA for a
review of a notice of objection given by the BMA as described above. However, this right of appeal does not apply to a person in any case in which such person has failed to give
a notice or has become or continued to be a controller in contravention of the BDCA. In addition, if a person has had its license revoked or has been subject to any of the
restrictions set forth above, the tribunal may confirm or reverse the decision which is the subject of the appeal but shall not have power to vary it except:

• where the decision was made to impose or vary any restriction, the tribunal may direct the BMA to impose different restrictions or to vary them in a different way; or

• where the decision was to revoke a license, the tribunal may direct the BMA to restrict it instead.

In the event that the BMA imposes any of the restrictions listed above, the restrictions may apply to:

• all shares of the institution where the person in question is a shareholder controller that (i) are held by him or any associate of his, and (ii) were not so held

immediately before he became such shareholder controller of the institution; and

• all shares in another company where the person in question became a shareholder controller (i) as a result of the acquisition by him or any associate of his of shares

in such other company, and (ii) the shares were not so held before he became a shareholder controller of such institution.

A company licensed under the BDCA must give written notice to the BMA in the event that any person has either become or ceased to be a director, controller or senior
executive of such licensed company. The written notice is required to be given to the BMA within 14 days beginning with the day on which the licensed company becomes aware
of the relevant change in director, controller or senior executive. The definition of "controller" is set out in the BDCA but generally refers to a shareholder controller, a managing
director or chief executive officer of the institution or of another company of which it is a subsidiary, or a person in accordance with whose directions or instructions the directors
of the institution or of another company of which the institution is a subsidiary, or persons who are shareholder controllers (or any of them) are accustomed to act.

In August 2022, the BMA published a new code of conduct issued pursuant to section 8A of the BDCA. The Bank is required to comply with this code of conduct, and

the BMA has indicated that the Bank’s compliance with the BDCA code of conduct will be considered when determining whether the Bank’s business is being conducted in a
prudential manner as required under the BDCA’s minimum criteria for licensing. The BDCA code of conduct seeks to ensure that, amongst other things, institutions licensed

under the BDCA deal with their customers fairly and equitably. To this end, the BDCA code of conduct sets out principles the Bank is expected to observe in several key areas
including compliance with laws, integrity and ethics, conflicts of interests, handling of customer information, internal management controls, publication and disclosure of license
and cooperation with regulatory authorities.

Also in August 2022, the BDCA was amended to add provisions that give the Minister of Finance of Bermuda, in consultation with the BMA, the power to make

regulations regulating any commercial or operational business fee, charge or penalty the Bank proposes to charge its clients. These provisions are not yet in force, and no
related regulations have been issued to date.

Trusts (Regulation of Trust Business) Act 2001

The principal purpose of the Trusts (Regulation of Trust Business) Act 2001 (the "Trusts Business Act"), is to regulate "trust business," which is generally defined as
providing the services of a trustee as a business, trade, profession or vocation. Under the Trusts Business Act, a license is required to conduct trust business in or from within
Bermuda. Licenses are designated as either "unlimited" or "limited." Only bodies corporate are entitled to obtain unlimited licenses, which allow them to conduct trust business
and solicit business from the public generally. Holding a license under the Trusts Business Act obliges the licensed undertaking to maintain a physical presence in Bermuda at
which the licensed undertaking is directed and managed. A licensed undertaking is also required to hold all client funds separately from its own funds or funds held in respect of
any other business and maintain such books of account and other records such that client funds may be readily identified at any time.

At present, the Bank and certain of its subsidiaries hold unlimited licenses issued by the BMA pursuant to the Trusts Business Act. Pursuant to Section 6 of the Trusts

Business Act, the BMA has published a Statement of Principles, in accordance with which it is acting or purporting to act with respect to the exercise of its powers under the
Trusts Business Act, including (without limitation) the BMA's minimum licensing criteria, the grounds for revocation of licenses, the power to grant, revoke or restrict a license and
the power to obtain information or require the production of documents. As at December 31, 2019, the BMA amended the minimum licensing criteria under the Trusts Business
Act, such that a licensed undertaking is not regarded as conducting its business in a prudent manner (which is a requirement for licensing) unless it maintains or will maintain
adequate liquidity, having regard to the relationship between its assets and its actual and contingent liabilities, to the time at which those liabilities will or may fall due and its
assets mature, and to other factors appearing to the BMA to be relevant. In addition, pursuant to Section 7 of the legislation, the BMA published a Code of Practice that provides
guidance as to the duties, requirements, procedures, standards and principles to be observed by persons carrying on trust business under the Trusts Business Act.

The BMA's powers under the Trusts Business Act include (without limitation) the power to:

•

impose conditions on a license with respect to scope and type of business, to protect a client or potential client of a licensee;

revoke a license in certain circumstances including if the licensee has not complied with the licensing criteria; and

request and obtain information from a licensee to ensure compliance with the Trusts Business Act, and to safeguard the interests of the licensee's clients and
potential clients.

The Trusts Business Act prohibits a person from becoming a 10% shareholder controller or a majority shareholder controller of a licensed undertaking, unless such

person provides written notice to the BMA of his intent to do so and the BMA does not object. It is an offense not to provide this notice. The definition of shareholder controller is
set out in the Trusts Business Act, but generally refers to a person who, among other things, either alone or with any associate or associates (within the meaning of the Trusts
Business Act): (i) holds 10% or more of the shares in the licensed undertaking or another company of which it is a subsidiary company; or (ii) is entitled to exercise, or control the
exercise of 10% or more of the voting power at any general meeting of the licensed undertaking or another company of which it is such a subsidiary or (iii) is able to exercise a
significant influence over the management of a licensed undertaking or of another company of which the licensed undertaking is a subsidiary by virtue of holding shares in or an
entitlement to exercise or control the exercise of the voting power at any general meeting of either the licensed undertaking or the other company concerned. A "majority
shareholder controller" is defined under the Trusts Business Act as a shareholder controller which, among other things, (i) holds 50% or more of the shares in the licensed
undertaking or another company of which it is a subsidiary company; or (ii) is entitled to exercise, or control the exercise of 50% or more of the voting power at any general
meeting of the licensed undertaking or another company of which it is such a subsidiary.

The BMA may object to a person's notice of intent to become a 10% shareholder controller or majority shareholder controller or may object to an existing shareholder

controller of any description where it appears to the BMA that, among other things, such person is not or is no longer a fit and proper person to be such a controller of the
licensed undertaking. If the BMA objects, the BMA will provide such person with a written notice of objection. Prior to serving any such notice of objection, the BMA shall serve
the person seeking to become a shareholder controller or the existing shareholder controller with a preliminary written notice stating that the BMA is considering service on that
person of a notice of objection, stating, among other things, the reasons for the BMA's proposed objection. The statement of the BMA's reasons for its proposed objection will,
however, be subject to the BMA's determination that such statement would not involve the disclosure of confidential information, the disclosure of which would be prejudicial to a
third party. A person served with a preliminary written notice may, within a period of 28 days beginning with the day on which the notice is served, make written representations
to the BMA and the BMA shall take any such representations into account in deciding whether to serve a notice of objection.

If three months pass from the date of notifying the BMA of a new shareholder controller or an increased shareholding/control beyond a shareholder controller's then

current threshold, without the BMA serving a notice of objection, then the person may become a shareholder controller as requested in the notice. In practice, the BMA's
procedure is generally to respond to a person's shareholder controller notification.

If a person becomes a shareholder controller or increases their shareholding control, in spite of the BMA's objection thereto, if a shareholder controller fails to comply
with the foregoing notice requirements or if a shareholder controller continues as such after being given notice of objection to his being a shareholder controller, the BMA may
take certain actions, including revoking the relevant license where a shareholder controller holding 50% or more of the shares of the licensed undertaking is involved or
mandating that any specified shares become subject to one or more of the following restrictions:

• any transfer of or agreement to transfer those shares or, in the case of unissued shares, any transfer of or any agreement to transfer the right to be issued with

them, will be void;

• no voting rights may be exercisable in respect of the shares;

• no further shares may be issued in right of them or pursuant to any offer made to their holder; or

• except in liquidation, no payment may be made of any sums due from the licensed undertaking on the shares, whether in respect of capital or otherwise.

A court in Bermuda may, on the application of the BMA, order the sale of any such shares. Any person may appeal to a tribunal constituted under the Trusts Business

Act for a review of a notice of objection given by the BMA as described above. However, this right of appeal does not apply to a person in any case in which such person has
failed to give a notice or has become or continued to be a controller in contravention of the Trusts Business Act. In addition, if a person has had their license revoked or has been
subject to any of the restrictions set forth above, the tribunal may confirm or reverse the decision which is the subject of the appeal but shall not have power to vary it except:

• where the decision was made to impose different restrictions or vary them in a different way, the tribunal may direct the BMA to impose different restrictions; or

• where the decision was to revoke a license, the tribunal may direct the BMA to restrict it instead.

In the event that the BMA imposes any of the restrictions listed above, the restrictions may apply to:

• all shares of the licensed undertaking of which the person in question is a shareholder controller that (i) are held by him or any associate of his, and (ii) were not so

held immediately before he became such shareholder controller of the licensed undertaking; and

• all shares in another company where the person in question became a shareholder controller (i) as a result of the acquisition by him or any associate of his of shares

in such other company, and (ii) the shares were not so held before he became a shareholder controller of such licensed undertaking.

An undertaking licensed under the Trusts Business Act must give written notice to the BMA in the event that any person has either become or ceased to be a controller

or officer of such licensed undertaking. The written notice is required to be given to the BMA within 14 days beginning with the day on which the licensed undertaking becomes
aware of the change in controller or officer. The definition of "controller" is set out in the Trusts Business Act but generally refers to a shareholder controller, a managing director
or chief executive officer of the undertaking or of another company of which it is a subsidiary, or a person in accordance with whose directions or instructions the directors of the
undertaking or of another company of which the undertaking is a subsidiary, or persons who are shareholder controllers (or any of them) are accustomed to act. The definition of
"officer" under the Trusts Business Act includes a director, secretary or any senior executive.

Investment Business Act 2003

The Investment Business Act 2003 (the "Investment Business Act") prohibits any person from carrying on, or purporting to carry on, an investment business in or from

within Bermuda unless that person holds a license granted under the Investment Business Act, or is registered as a Class A registered person or a Class B registered person
under the Investment Business Act (or is otherwise designated as non-registrable). A person is deemed to carry on investment business in or from Bermuda if it is incorporated
or formed in Bermuda and carries on investment business, or is incorporated or formed outside of Bermuda and carries on investment business in or from Bermuda. The
Investment Business Act defines "investment business" broadly as the business of dealing in investments, arranging deals in investments, managing or offering investments and
giving advice on investments.

Under the Investment Business Act, the BMA is given the authority to grant licenses and to supervise license holders (which includes issuing codes of conduct or

practice and making rules prescribing prudential and technical standards). The BMA will only grant a license if it is satisfied that the applicant complies with licensing criteria set
out in the Investment Business Act, which include (without limitation) that controllers and senior executives of the applicant are fit and proper persons to carry on such business,
the applicant company's business is effectively directed by at least two individuals (unless the BMA otherwise approves), the Board of the applicant has a number of non-
executive directors considered appropriate by the BMA, the applicant's business is conducted in a prudent manner, the applicant maintains its principal place of business in
Bermuda, the position of the applicant in the group does not obstruct effective consolidated supervision and the applicant will carry on the investment business with integrity and
professional skill appropriate to the nature and scale of its activities.

At the present time, 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.

Under the Investment Business Act, the BMA may require an accountant's or auditor’s report on a license holder or the appointment of an inspector to carry out an

investigation into the affairs of a license holder and/or demand the production of documents or information relating to the investment business of a license holder. The Investment
Business Act also grants the BMA broad powers to enforce the provisions of the Investment Business Act, including (without limitation) powers to issue directions, to vary, restrict
or cancel a license, to appoint a person to manage and administer an offending investment business, to give directions desirable to safeguard the interests of the investment
provider’s clients, to levy fines and to seek from the court injunctions and restitution orders.

The Investment Business Act prohibits a person from becoming a 10% shareholder controller or a majority shareholder controller of an investment provider, unless such

person provides written notice to the BMA of his intent to do so and the BMA does not object. It is an offense not to provide this notice. The definition of 10% shareholder
controller is set out in the Investment Business Act, but generally refers to a person who, among other things, either alone or with any associate or associates (within the
meaning of the Investment Business Act): (i) holds 10% or more of the shares in the investment provider or its parent undertaking; (ii) is entitled to exercise, or control the
exercise of 10% or more of the voting power in the investment provider or in the parent undertaking; or (iii) is able to exercise a significant influence over the management of the
investment provider or its parent undertaking by virtue of the voting power in the investment provider or its parent undertaking. A "majority shareholder controller" is defined
under the Investment Business Act as a shareholder controller which (i) holds 50% or more of the issued and outstanding shares in the investment provider or its parent
undertaking; or (ii) is entitled to exercise, or control the exercise of 50% or more of the voting power in the investment provider or in the parent undertaking.

The BMA may object to a person's notice of intent to become a 10% shareholder controller or majority shareholder controller or to an existing shareholder controller of
any description where it appears to the BMA that, among other things, such person is not or is no longer a fit and proper person to be such controller of the licensed company. If
the BMA objects, the BMA will provide such person with a written notice of objection. Prior to serving any such notice of objection, the BMA serves the person seeking to become
a shareholder controller or will serve an existing shareholder controller with a preliminary written notice stating that the BMA is considering service on that person of a notice of
objection, stating, among other things, the reasons for the BMA's proposed objection. The statement of the BMA's reasons for their proposed objection will, however, be subject
to the BMA's determination that such statement would involve the disclosure of confidential information, the disclosure of which would be prejudicial to a third party. A person
served with a preliminary written notice may, within a period of 28 days beginning with the day on which the notice is served, make written representations to the BMA and the
BMA shall take any such representations into account in deciding whether to serve a notice of objection.

If ninety days pass from the date of notifying the BMA of a new shareholder controller or an increased shareholding/control beyond a shareholder controller's then

If a person becomes a shareholder controller or increases their shareholding/control in spite of the BMA's objection to his becoming a shareholder controller, or if a

shareholder controller fails to comply with the foregoing notice requirements, or if a shareholder controller continues as such after being given notice of objection to his being a
shareholder controller, the BMA may take certain actions, including revoking the relevant license where a shareholder controller holding 50% or more of the shares of the
licensed company is involved or mandating that any specified shares become subject to one or more of the following restrictions:

• any transfer of or agreement to transfer those shares or, in the case of unissued shares, any transfer of or any agreement to transfer the right to be issued with

them, will be void;

• no voting rights may be exercisable in respect of the shares;

• no further shares may be issued in right of them or pursuant to any offer made to their holder; or

• except in liquidation, no payment may be made of any sums due from the investment provider on the shares, whether in respect of capital or otherwise.

A court in Bermuda may, on the application of the BMA, order the sale of any such shares. Any person may appeal to a tribunal constituted under the Investment
Business Act for a review of a notice of objection given by the BMA as described above. However, this right of appeal does not apply to a person in any case in which such
person has failed to give a notice or has become or continued to be a controller in contravention of the Investment Business Act. In addition, if a person has had its license
revoked or has been subject to any of the restrictions set forth above, the tribunal may confirm or reverse the decision which is the subject of the appeal but shall not have power
to vary it except:

• where the decision was made to impose or vary any restriction, the tribunal may direct the BMA to impose different restrictions or to vary them in a different way; or

• where the decision was to revoke a license, the tribunal may direct the BMA to restrict it instead.

In the event that the BMA imposes any of the restrictions listed above, the restrictions may apply to:

• all shares of the investment provider of which the person in question is a shareholder controller that (i) are held by him or any associate of his; and (ii) were not so

held immediately before he became such shareholder controller of the investment provider; and

• all shares in another company where the person in question became a shareholder controller (i) as a result of the acquisition by him or any associate of his of shares

in such other company; and (ii) the shares were not so held before he became a shareholder controller of such investment provider.

A company licensed under the Investment Business Act must give written notice to the BMA in the event that any person has either become or ceased to be a controller

or officer of such investment provider. The written notice is required to be given to the BMA within 14 days beginning with the day on which the investment provider becomes
aware of the change in controller or officer. The definition of "controller" is set out in the Investment Business Act but generally refers to a shareholder controller, a managing
director or chief executive officer of the investment provider or of another company of which it is a subsidiary, or a person in accordance with whose directions or instructions the
directors of the investment provider or of its parent undertaking or persons who are shareholder controllers (or any of them) are accustomed to act. The definition of "officer"
under the Investment Business Act includes a director, secretary or any senior executive.

Corporate Service Provider Business Act 2012

The Corporate Service Provider Business Act 2012 (“CSPB”) regulates persons carrying on a corporate service provider business in Bermuda. “Corporate service

provider business” in this context means the provision of any of the following services for a profit: (a) acting as a company formation agent or agent for establishment of a
partnership; (b) providing nominee services, including (among other things) providing nominee shareholders; (c) providing administrative and secretarial services to companies
or partnerships (including, among other things, providing a registered office and maintaining the books and records of a company or partnership); (d) performing functions in the
capacity as a resident representative under various Bermuda statutes; and (e) providing any other corporate or administrative services as may be specified in regulations made
under the CSPB. Under the CSPB, the Bank or any of its subsidiaries is required to hold a corporate service provider license to lawfully provide corporate services to our
customers in Bermuda. Licensing under the CSPB is administered by the BMA. Holding a license under the CSPB obliges the licensed undertaking to maintain a physical
presence in Bermuda at which the licensed undertaking is directed and managed. A licensed undertaking is also required to hold all client funds separately from its own funds or
funds held in respect of any other business and maintain such books of account and other records such that client funds may be readily identified at any time.

Pursuant to the provisions of the CSPB any person who, together with their associates (within the meaning of the CSPB), intends to become either a shareholder

controller or a majority shareholder controller of a CSPB licensed entity, must first serve notice of their intent to do so on the BMA and either receive a notice of non-objection
from the BMA, or wait for the expiration of a three month period starting from the date of the notice to the BMA without the BMA having served a written notice of objection. A
“shareholder controller” under the CSPB is any person who, either alone or with any associate or associates, (i) holds 10% or more of shares of the licensed entity (if it is a
company) or 10% or more of another company of which the licensed entity is a subsidiary; (ii) is entitled to control or control the exercise of 10% or more of the voting power at
any general meeting of the licensed entity (if it is a company) or of another company of which the licensed entity is a subsidiary; or (iii) is able to exercise a significant influence
over the management of a licensed entity or of another company of which the licensed entity is a subsidiary by virtue of holding shares in or an entitlement to exercise or control
the exercise of the voting power at any general meeting of either the licensed entity (if it is a company) or its holding company. A “majority shareholder controller” under the
CSPB has the same meaning as limbs (i) and (ii) in the preceding sentence, save that the relevant percentage threshold for ownership is 50% or more.

In addition to the requirement to notify and obtain BMA non-objection (whether express or deemed) of any change in shareholder controller or majority shareholder
controller of a CSPB licensed entity, if at any time it appears to the BMA that a person who is a “controller” of any description of a CSPB licensed entity is not a fit and proper
person for such role, the BMA may serve a written notice of objection to that controller; provided that, before serving such a notice, the BMA must serve that person with a
preliminary written notice stating that the BMA is considering service on that person of a notice of objection, specifying the reasons for which it appears to the BMA why that
person is not or is no longer a fit and proper person and advising as to the rights of that person to make written representations to the BMA within 28 days beginning on the day
on which such notice is served, and that such written representations shall be taken into account by the BMA in deciding whether to serve a notice of objection. For these
purposes a “controller” includes (i) a managing director of a licensed entity or the licensed entity’s holding company; (ii) the CEO of the licensed entity or the licensed entity’s
holding company; and (iii) a person in accordance with whose directions or instruction the directors of the licensed entity (or its holding company) are accustomed to act. Upon
determining that any individual is not a fit and proper person, the BMA may pass a prohibition order, thereby preventing that individual from exercising any functions in
connection with any business requiring licensing under the CSPB. Furthermore, under the CSPB, a licensed entity is required to give written notice to the BMA of any person
becoming or ceasing to be a controller or an “officer” (director, company secretary or senior executive) of the licensed entity.

Breaches of the CSPB are punishable by a range of criminal and civil penalties including fines, imprisonment and public censure; breaches can result in the licensed

entity losing its license and therefore its ability to conduct corporate service provider business. The BMA is also empowered to restrict a controller’s ability to sell any shares (and
exercise any rights in respect of such shares) held by the controller in a CSPB licensed entity if they continue to be or become a controller following a notice of objection from the
BMA.

Companies Act 1981

As a local company incorporated in Bermuda, the Bank is subject to the Companies Act 1981 (the "Companies Act"). Under section 114 of the Companies Act, no local

company may carry on business of any sort in Bermuda unless, among other things, (i) it complies with the control and ownership requirements set out in Part I of the Third
Schedule of the Companies Act; (ii) it is licensed under section 114B of the Companies Act and is carrying on such business in accordance with the terms and conditions
imposed in such license; or (iii) its shares are listed on a designated stock exchange and the company is engaged as a business in a material way in a prescribed industry
pursuant to section 114(1)(e) of the Companies Act.

In December 2000, the Minister of Finance issued to the Bank a license pursuant to section 114B of the Companies Act allowing the Bank to carry on business in
Bermuda without complying with certain provisions of the Third Schedule to the Companies Act. Effective June 10, 2016, the Bank relinquished its section 114B license and
carries on business in Bermuda without complying with the provisions of the Third Schedule in reliance upon the exemption in section 114(1)(e) of the Companies Act. The Bank
qualifies for this statutory exemption by virtue of (i) the listing of the Bank's shares on the BSX, which is a "designated stock exchange" for the purposes of the Companies Act
and (ii) the Bank's material business of banking, which is a "prescribed industry" for the purposes of the Companies Act.

Exchange Control

The Bank is designated as resident in Bermuda for exchange control purposes.

The BMA has given its consent for the issue and free transferability of all of the common shares to and between non-residents of Bermuda for exchange control

purposes, provided the Bank's shares remain listed on an appointed stock exchange, which includes the NYSE. Approvals or permissions given by the BMA do not constitute a
guarantee by the BMA as to our performance or our creditworthiness. Accordingly, in giving such consent or permissions, the BMA shall not be liable for the financial soundness,
performance or default of our business or for the correctness of any opinions or statements expressed in this report.

Financial Crime Regulation

Bermuda has enacted a number of laws relating to combating money laundering and terrorist financing. These laws include the Proceeds of Crime Act 1997, the

Anti-Terrorism (Financial and Other Measures) Act 2004, the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Supervision and Enforcement) Act 2008 and the
Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008, the Financial Intelligence Agency Act 2007, and the Anti-Terrorism (Financial and
Other Measures) (Businesses in Regulated Sector) Order 2008 each as amended from time to time.

The Bank may be regulated together with its branches and subsidiaries in respect of anti-money laundering and anti-terrorist financing policies and procedures as a

“financial group” if so designated by the Bermuda minister responsible for justice. Furthermore, under the Bribery Act 2016 of Bermuda, the Bank may be guilty of an offense if
persons associated with the Bank (which can include the Bank’s employees, agents or subsidiaries) bribe another person intending to obtain or retain business for the Bank or to
obtain or retain an advantage in the conduct of business for the Bank. It is a defense to such offenses if the Bank proves that it has in place adequate procedures designed to
prevent persons associated with the Bank from undertaking such bribery.

Following the UK’s exit from the EU, the UK enacted the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) as enabling legislation for a raft of economic and
other sanctions, and money laundering and terrorist financing regulations. Regulations made under SAMLA have been extended to certain overseas territories (but not Bermuda,
owing to Bermuda’s unique measure of self-government) by Order in Council (the “Orders”). Bermuda has separately applied the Orders in its domestic law under the
International Sanctions Act 2003. They are listed in the International Sanctions Regulations 2013. Such action to apply the Orders in Bermuda ensures that the list of financial
sanctions targets in Bermuda tracks the UK Sanctions List maintained by HM Treasury’s Office for Financial Sanctions Implementation. Bans on new investment and on financial
or professional services also track applicable UK sanctions.

Stamp Duty

Stamp duty is a tax in Bermuda imposed on written documents. The governing legislation is the Stamp Duties Act 1976, as amended (the "Stamp Duties Act"). The
Stamp Duties Act sets out the instruments that are subject to stamp duty, which generally include certain instruments or documents as specified in the Stamp Duties Act that are
executed in Bermuda or, if executed outside of Bermuda, are then brought into Bermuda.

There are certain limited stamp duty exemptions under the Bermuda Stock Exchange Company Act 1992 (the ‘‘BSX Act’’), which extend to local companies, the
securities of which are listed on the BSX. The Bank’s common shares are currently listed on the NYSE and BSX. Pursuant to the BSX Act, the provisions of the Stamp Duties
Act will not apply to any instrument which relates to (i) a conveyance or transfer on sale, (ii) a conveyance or transfer to effect or having the effect of a voluntary disposition inter
vivos, or (iii) any agreement for the lending and borrowing, of any securities which are listed on the BSX. Accordingly, for so long as the common shares of the Bank remain
listed on the BSX (and to the extent any other securities issued by the Bank are listed on the BSX), the foregoing stamp duty exemptions under the BSX Act would apply.
However, dealings in the Bank’s common shares beyond the limited exemptions under the BSX Act may attract stamp duty under various heads of the Schedule to the Stamp
Duties Act. For example, ad valorem stamp duty may be payable (i) where security is granted over shares of the Bank, (ii) where shares of the Bank form part of a deceased’s
estate and probate is sought, and (iii) on a share certificate where the share is issued by the Bank for the first time at a premium in excess of the par value thereof.

The Stamp Duties Act prescribes the persons liable to pay the stamp duty, whether the amount of duty is a fixed or ad valorem amount and the time period in which

the duty must be paid, depending on the nature of the instrument. The Stamp Duties Act also sets out the consequences for failure to stamp instruments which are subject
to duty.

Generally, if a stampable document has been executed in Bermuda or has been executed outside of Bermuda and then brought into Bermuda and stamp duty is not

paid, the document is not valid for any purpose (including registration) in Bermuda, until such time as it is stamped. In addition, a stampable document which is not stamped (i) is
not admissible in court proceedings in Bermuda, except in criminal proceedings or stamp duty violation prosecutions; and (ii) may not be acted upon, filed, or registered by any
public official or by any company. For any instrument which is liable to stamp duty that is not duly stamped, every person who is specified in the Stamp Duties Act as liable for
stamping commits an offense.

Limits on Shareholding

Generally, the Companies Act imposes limits on the percentage of shares in a local company carrying on business in Bermuda which may be held by persons who are

non-Bermudian as that term is defined in the Companies Act. As described above, the Bank relies on an exemption under section 114(1)(e) of the Companies Act to these
ownership and related control requirements.

Additionally, the bye-laws of the Bank restrict the voting rights of a person who is not "Bermudian" (as such term is defined in the Companies Act) and who is
"interested" (as such term is defined in the bye-laws) in the shares of the Bank which constitute more than 40% of all shares then issued and outstanding, and such person is not
entitled to vote the shares which are in excess of this 40% interest at any general meeting without the prior written approval of the Minister of Finance.

In addition, there are certain prior approval requirements pursuant to the BDCA, the Trusts Business Act, the CSPB and the Investment Business Act with respect to

any person who seeks to become a "shareholder controller" (as defined in each of those Acts) of the Bank.

Deposit Insurance Scheme

Pursuant to the Deposit Insurance Act 2011 and the Deposit Insurance Rules 2016 of Bermuda, a Deposit Insurance Scheme (“DIS”) has come into effect in Bermuda.

The DIS is administered by the Bermuda Deposit Insurance Corporation. The DIS is designed to protect the deposits of individuals, charities, unincorporated associations,
partnerships, sole proprietors and small businesses by guaranteeing up to $25,000 of their aggregate Bermuda Dollar deposits in the event of a Bermuda deposit taking
institution’s failure. The DIS is backed by a Deposit Insurance Fund which is in turn funded from premium contributions that are payable by all banks and credit unions licensed
by the BMA . As a bank licensed by the BMA, we are required to be a member of the DIS and pay contributions to the Deposit Insurance Fund. Currently, our premium
contribution is calculated by the Bermuda Deposit Insurance Corporation as 0.25% per annum of the average total amount of our Bermuda Dollar deposits that are covered by

the DIS guarantee over a rolling three-month period based on information disclosed by us to the Bermuda Deposit Insurance Corporation. Each contribution to the Deposit
Insurance Fund is payable every three months in arrears.

Personal Information Protection Act 2016

Bermuda’s principal data protection legislation is the Personal Information Protection Act 2016 (“PIPA”). PIPA applies to every organization (which includes any
individual, entity or public authority) that uses personal information in Bermuda where that personal information is used by automated or other means which form, or are intended
to form, part of a structured filing system. For the purposes of PIPA, “personal information” means any information about an identified or identifiable individual (meaning a natural
person), and “use” or “using” are very broadly defined and effectively include possessing or carrying out any operation on personal information. The Bank uses and holds
individuals’ personal information in Bermuda, so must comply with the provisions of PIPA.

The majority of the operative provisions of PIPA, which include certain personal information privacy rights for individuals and specific obligations on organizations that
control the processing of personal information, are not yet in force in Bermuda. The first Bermuda Privacy Commissioner was appointed with effect from January 20, 2020, and
this appointment is an important step in bringing the remaining operative provisions of PIPA into force. As of December 2022, there is no clear timetable for the publication of
PIPA codes of practice or the implementation of the remaining operating provisions, however, the Bermuda Throne Speech in November 2022 stated that the coming legislative
session will see a phased implementation of PIPA.

The Cayman Islands

The Cayman Islands Monetary Authority ("CIMA")

Our activities in the Cayman Islands are regulated by CIMA. CIMA is responsible for currency management, regulation and supervision of the Cayman Islands financial
services sector (which includes securities and investments business, banking, insurance and fiduciary services), advice to the Cayman Islands government and cooperation with
overseas regulatory authorities. CIMA's principal focus is to promote and maintain a sound financial system in the Cayman Islands and to promote and enhance market
confidence, consumer protection and the reputation of the Cayman Islands as a financial center.

CIMA has broad statutory powers of enforcement. These powers are intended to permit CIMA to have access to information held or maintained by a licensee as

necessary and to enable CIMA to take appropriate remedial action if a licensee is in default of its obligations under applicable laws.

Relevant Legislation/Regulations

Banks & Trust Companies Act (2021 Revision)

The Banks and Trust Companies Act (2021 Revision) (the "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 CIMA.

The BATCA is supplemented by certain regulations which, among other things, prescribe the fees that are payable by licensees and certain information that must be

submitted to CIMA in connection with any license application.

Licensees must adhere to certain capital adequacy requirements and must file audited financial statements with CIMA within three months of their financial year-end.
Prior written approval of CIMA is required in a number of circumstances including, but are not limited to, the issue, transfer or disposal of any shares, the appointment of a new
director or senior officer or where the licensee wishes to conduct business that deviates from its business plan submitted at the time of its license application.

Securities Investment Business Act (2021 Revision), as amended

The Securities Investment Business Act (2021 Revision), as amended (the "SIBA") provides that a person shall not carry on, or purport to carry on, securities
investment business in or from the Cayman Islands unless that person is for the time being licensed under SIBA or is exempted from the requirement to hold a license pursuant
to SIBA. Butterfield Bank (Cayman) Limited holds a securities investment business license, issued by CIMA, to conduct its business.

SIBA is essentially designed to achieve the licensing and regulation of securities investment providers and applies to (i) any company, foreign company or partnership
incorporated or registered in the Cayman Islands and carrying on "securities investment business" anywhere in the world, or (ii) any entity which has a "place of business" in the
Cayman Islands through which "securities investment business" is carried on. The entity need not have a physical presence in the Cayman Islands in order for such entity to fall
within the ambit of SIBA.

Certain categories of persons conducting activities that would otherwise fall within the definition of securities investment business are categorized as non-registrable

persons under SIBA. Such persons include single family offices who do not advise third parties and managers of non-Cayman limited liability companies who carry on securities
investment business only in that capacity. In addition, SIBA requires certain persons who are engaged in securities investment business with, among other things, sophisticated
or high net worth persons (as such terms are defined in SIBA) to register as a registered person under SIBA. Upon such registration, a registered person is subject to CIMA
regulation, however a number of requirements applicable to SIBA licensees do not apply to SIBA registered persons. For example, a SIBA registered person is not required to
submit annual audited financial statements or business plans to CIMA.

Insurance Act, 2010 (as amended)

CIMA regulates the insurance industry in the Cayman Islands pursuant to the Insurance Act, 2010 (as amended) (the "IA"). Such regulation includes licensing, ongoing

supervision, and enforcement.

Pursuant to the IA, a company is required to hold a license in order to carry on insurance or reinsurance business or business as an insurance agent, insurance broker

or insurance manager in or from the Cayman Islands. Butterfield Bank (Cayman) Limited (which is not itself an insurer) holds an insurance agent license, issued by CIMA,
permitting it to solicit domestic business on behalf of not more than one general insurer and one long term insurer.

Companies Act (2022 Revision) as amended

Butterfield Bank (Cayman) Limited is an ordinary resident company incorporated in the Cayman Islands, meaning that, subject to it being licensed under the BATCA, it

can carry on business within the Cayman Islands. Butterfield Bank (Cayman) Limited is required to comply with the requirements of the Companies Act (2022 Revision), this
being the principal statute governing the incorporation and ongoing operations of the Cayman Islands companies.

Anti-Money Laundering Regulations (2020 Revision); Proceeds of Crime Act (2020 Revision); and Terrorism Act (2018 Revision), each as amended

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. The Regulations apply to anyone conducting "relevant financial business" in or from the Cayman Islands intending to form a
business relationship or carry out a one-off transaction. The Regulations require a financial service provider to maintain certain anti-money laundering procedures including those
for the purposes of verifying the identity and source of funds of an "applicant for business" except in certain circumstances, including where an entity is regulated by a recognized
overseas regulatory authority and/or listed on a recognized stock exchange in an approved jurisdiction. In addition, if any person resident in the Cayman Islands knows or
suspects, or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct, or is involved with terrorism or terrorist property, and the
information for that knowledge or suspicion came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the
person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands (the "FRA"), pursuant to the PCL, if the disclosure
relates to criminal conduct or money laundering; or (ii) a police officer of the rank of constable or higher, or the FRA, pursuant to the Terrorism Law (2018 Revision), if the
disclosure relates to involvement with terrorism or terrorist financing and property.

The Cayman Islands Data Protection Act, (2021 Revision)

The Data Protection Act (2021 Revision) (the “DPA”) came into force on September 30, 2019 and establishes a framework of rights and duties designed to safeguard
individuals’ personal data, balanced against the need of public authorities, businesses and organizations to collect and use personal data for legitimate purposes. The DPA was
developed in line with international best practices while ensuring that it reflects the specific needs of the Cayman Islands. It is based substantially on the Data Protection Act,
1998 of the United Kingdom. The DPA defines “personal data” very widely to include any data which enables a living individual to be identified.

In common with most businesses, Butterfield Bank (Cayman) Limited records information in respect of individuals, particularly those who are employees, clients or

suppliers, and the obligations under the DPA require a detailed review or establishment of policies and procedures in order to achieve compliance. Non-compliance with the DPA
may have serious ramifications.

The DPA is centered on eight data protection principles under which personal data must:

• be processed fairly and only when specific conditions are met, including where consent has been given, where there is a legal obligation, or where it is necessary for
the performance of a contract to which the data subject is a party. Additional conditions apply in respect of “sensitive personal data” (examples of which include
racial or ethnic origin, political opinions, religious beliefs, trade union membership, genetic data, health, sex life and offenses);

• be obtained only for one or more specified lawful purposes, and shall not be further processed in any manner incompatible with such purposes;

• be adequate, relevant and not excessive in relation to the purpose or purposes for which they are collected or processed;

• be accurate and, where necessary, kept up to date;

• not be kept for longer than is necessary for the purpose;

• be processed in accordance with the rights of individuals as specified under the DPA;

• be protected by appropriate technical and organizational measures against unauthorized or unlawful processing, and against accidental loss, destruction or damage;

and

• not be transferred abroad unless the country or territory to which it is transferred ensures an adequate level of protection for the rights and freedoms of data subjects

in relation to the processing of personal data.

Under the DPA, individuals have the right to be informed how personal data is processed and Butterfield Bank (Cayman) Limited is required to provide individuals with a

privacy notice in this regard. Individuals also have the right (i) to request access to their personal data, (ii) to request rectification or correction of personal data, (iii) to request
that processing of personal data be stopped or restricted and (iv) to require Butterfield Bank (Cayman) Limited to cease processing personal data for direct marketing purposes.

Individuals who believe that their personal data has been handled incorrectly or are not satisfied with responses from Butterfield Bank (Cayman) Limited to any requests

made regarding the use of their personal data have a right under the DPA to complain to the Cayman Islands’ Ombudsman.

The Bahamas

The Central Bank of The Bahamas

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. The Central Bank of The Bahamas' regulations
on capital adequacy and the regulatory framework within The Bahamas take into account the recommendations of the BCBS.

Relevant Legislation/Regulations

The Banks and Trust Companies Regulation Act and Regulations

The Banks and Trust Companies Regulation Act and Regulations set forth the basic provisions relating to the licensing and operations of banks and trust companies in
The Bahamas, as well as the powers of the Central Bank of The Bahamas to supervise and audit the activities of such entities. As it relates to the preservation of confidentiality,
the Banks and Trust Companies Regulation Act makes it an offense for certain individuals to disclose without customer consent, inter alia, the identity, assets, liabilities,
transactions or accounts of a customer of a licensee, save for in specified circumstances.

The Central Bank of The Bahamas Act and Regulations

The Central Bank of The Bahamas Act provides general provisions relating to the structure and operation of the Central Bank of The Bahamas, the regulatory reporting
required to be submitted to the Central Bank of The Bahamas by the licensees and the penalties that may be imposed for failure to comply with the orders of the Central Bank of
The Bahamas. From time to time, the Central Bank issues regulations, guidelines and policies which are available on its website.

Financial and Corporate Service Providers Act

The Financial and Corporate Service Providers Act provides regulations for the administration and supervision of all licensed financial and corporate service

providers in The Bahamas. This Act details the obligations and duties of a licensee under the Act and sets out the supervisory powers of the Securities Commission over its
licensees inclusive of penalties and sanctions for non-compliance.

Financial Intelligence and Reporting

The Financial Intelligence Unit Act provides for the establishment of the financial intelligence unit organization in The Bahamas that is responsible for receiving,
analyzing, obtaining and disseminating information which relates to or may relate to the proceeds of offenses under the Proceeds of Crime Act or the Anti-Terrorism Act.

The Financial Transactions Reporting (Amended) Act and Regulations provides the basic requirements applicable to financial institutions in The Bahamas with respect

to verifying the identities of facility holders and bank customers, the obligation to report suspicious transactions to the financial intelligence unit, and minimum record retention
policies and procedures.

Data Protection (Privacy of Personal Information) Act

This Data Protection (Privacy of Personal Information) Act makes provision for the protection of the privacy of the personal data of individuals and the regulation of its

collection, processing, keeping, use and disclosure.

Other Relevant Legislation

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.

Guernsey

Guernsey Financial Services Commission

Our activities in Guernsey are monitored by the Guernsey Financial Services Commission (the "GFSC") through its Probability Risk and Impact System. The primary

objective of the GFSC is to regulate and supervise finance businesses in the Bailiwick of Guernsey ("Guernsey," or the "Bailiwick"). Almost all financial service activities in
Guernsey are required to be licensed by the GFSC. Once licensed, the businesses are subject to the regulation, oversight, investigatory, information gathering and enforcement
powers of the GFSC.

The various divisions of the GFSC perform regular visits with the purpose of understanding the business and reviewing the risk management and internal control

environment (including monitoring and any outsourced functions). Such visits also monitor compliance with applicable law and regulation.

In addition to conducting on-site reviews, the GFSC has a continuing duty to determine whether entities it regulates and the persons who own or run them remain fit and

proper. Licensees therefore have a statutory obligation to notify the GFSC of various changes, which are set out in comprehensive rules and regulations. The GFSC also
requires financial services businesses to submit periodic returns for statistical analysis and inclusion in thematic studies.

The GFSC has wide powers of enforcement to address shortcomings and breaches by financial services businesses. These range from private warnings and

reprimands to revocation and suspension of applicable licenses and consents, fines and referral for criminal prosecution, among others.

The Banking Supervision (Bailiwick of Guernsey) Law, 2020

The Banking Supervision (Bailiwick of Guernsey) Law, 2020 (the "BSL") provides that no person in the Bailiwick shall accept a deposit in the course of carrying on,

whether in Guernsey or elsewhere, a deposit-taking business except under the authority of and in accordance with the conditions of a license granted by the GFSC. Butterfield
Bank (Guernsey) Limited holds a license under the BSL. In order to be granted a license, a company's business must be carried on with prudence, integrity, professional skills
and in a manner which will not tend to bring the Bailiwick into disrepute. The business must also be directed by at least two individuals who are resident in the Bailiwick of
Guernsey with appropriate standing and experience and sufficiently independent of each other. Businesses must also adhere to codes, principles, rules and instructions issued
from time to time.

Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law 2020

The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law 2020 (the "Guernsey Fiduciaries Law") provides

that only a person licensed by the GFSC under the Guernsey Fiduciaries Law can operate fiduciary businesses, which includes:

•

formation, management and administration of trusts;

company or corporate administration;

• provision of executorship services; and

•

the formation and management of foundations.

The GFSC can grant three different categories of license, including a primary or secondary fiduciary license, which can only be granted to a company or a partnership,

and a personal fiduciary license. The primary fiduciary license covers any director, manager, partner or employee acting in the course of their employment.

The Protection of Investors (Bailiwick of Guernsey) Law, 2020

Under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (the "POI Law"), a person shall not (subject to certain exemptions) carry on, or hold himself out as

carrying on, any controlled investment business in or from within the Bailiwick, except under and in accordance with the terms of a license. For the purposes of the POI Law, a
controlled investment includes collective investment schemes and general securities and derivatives. All Guernsey domiciled funds have to be authorized by or registered with
the GFSC and be administered by a Guernsey licensed administrator. In addition, open-ended funds must also have a Guernsey-licensed custodian.

The Financial Services Commission (Bailiwick of Guernsey) Law, 1987

The Financial Services Commission (Bailiwick of Guernsey) Law, 1987 provides that the general functions of the GFSC are to supervise the finance business in the

Bailiwick, to counter financial crime and the financing of terrorism and to maintain confidence in the Bailiwick's reputation as an international finance center.

The Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999

The Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 established certain offenses in connection with the proceeds of criminal conduct including

concealing or transferring the proceeds of crime, assisting another person to retain the proceeds of criminal conduct, acquisition, possession or use of proceeds of criminal
conduct and tipping-off.

The Terrorism and Crime (Bailiwick of Guernsey) Regulations, 2007

The Terrorism and Crime (Bailiwick of Guernsey) Regulations, 2007 provides for a positive obligation on businesses to report internally any suspicions of money

laundering. A money laundering reporting officer must be appointed to fulfil this function and to make disclosure to the relevant division of Guernsey's police unit.

Guernsey Banking Deposit Compensation Scheme (Bailiwick of Guernsey) Ordinance, 2008

Pursuant to the Banking Deposit Compensation Scheme (Bailiwick of Guernsey) Ordinance, 2008, a Guernsey DCS is in effect in Guernsey. The Guernsey DCS

provides compensation of up to £50,000 per qualifying deposit in the event of the failure of a Guernsey-licensed bank. The maximum total amount of compensation is capped at
£100 million in any 5 year period. If claims exceed this cap, compensation will be reduced pro rata. The cap also means that compensation in respect of any one bank cannot
exceed £100 million. The Guernsey DCS is paid for by Guernsey banks through an annual administration levy and, in the event of a bank failure, a compensation levy.

Data Protection (Bailiwick of Guernsey) Law, 2017

The Data Protection (Bailiwick of Guernsey) Law, 2017 ("DPL 2017") came into force on May 25, 2018 to coincide with the enforcement of the EU's General Data

Protection Regulation (EU) 2016/679. The DPL 2017 updated Guernsey's data protection framework to ensure that Guernsey retained its data protection "adequacy" status with
the European Commission.

The DPL 2017 applies to the processing of personal data and provides rights to data subjects (i.e., individuals) and places obligations on data controllers and

processors of personal data including, among other matters, in relation to subject access requests, transfers of personal data and notification of data breaches.

The Office of the Data Protection Authority is the independent regulatory authority responsible for the regulatory functions under the DPL 2017, including the ability to

levy fines.

Jersey

Butterfield Bank (Jersey) Limited is regulated by the Jersey Financial Services Commission (“JFSC”) to carry on deposit-taking business under the Banking

Business (Jersey) Law 1991 (as amended); investment business pursuant to the Financial Services (Jersey) Law 1998 (as amended); fund services business pursuant to the
Financial Services (Jersey) Law 1998 (as amended); and money service business pursuant to the Financial Services (Jersey) Law 1998 (as amended).

The JFSC uses four key areas in supervising banks which are the development of regulatory requirements including laws and codes of practice; on-site
examinations and meetings; off-site supervision including the analysis of financial information; and international dialogue and liaison with other regulators involved in the
supervision of the broader group.

The JFSC has wide powers of enforcement to address shortcomings and breaches by financial services businesses. These range from private warnings and

reprimands to revocation and suspension of applicable licenses and consents, fines and referral for criminal prosecution, among others.

Financial Services Commission (Jersey) Law 1998

The Financial Services Commission (Jersey) Law 1998 provides that the JFSC is, among other things, responsible for the supervision and development of financial
services in or from within Jersey, preparing and submitting recommendations for legislation regarding financial services, supervising regulated entities, and administering laws
such as the Control of Borrowing (Jersey) Law 1947 and the Companies (Jersey) Law 1991. It also has particular regard to the reduction of risk to the public of financial loss, to
protecting and enhancing the reputation and integrity of Jersey, and to the best economic interests of Jersey and the need to counter financial crime.

Banking Business (Jersey) Law 1991

The Banking Business (Jersey) Law 1991 (the "BBL") provides that no person shall carry on or hold themselves out as carrying on a deposit taking business in or
from within Jersey unless they are registered under the BBL. Butterfield Bank (Jersey) Limited holds a license under the BBL. In order to be granted a license, the JFSC will
consider the integrity, competence and financial standing of a company's business and that it would be in the best interests of persons who may deposit money that the company
should be registered. The business must also have a physical presence in Jersey involving meaningful decision making and management, and be subject to supervision by a
relevant supervisory authority. Businesses must adhere to secondary legislation and codes issued from time to time. This law also contains provisions regarding notification of
principal persons, key persons and shareholders, and sets out further powers of the JFSC.

Financial Services (Jersey) Law 1998

This law regulates investment, trust company, general insurance mediation, money service, fund services and alternative investment fund services business. It
includes requirements to register if carrying on regulated business, provisions for the supervision of financial services (including requirements to notify of changes to principal
persons, key persons and shareholders), and gives the JFSC powers to issue directions and public statements, request information, and issue further orders and regulations. It
also sets out the offenses of market manipulation, misleading information and insider dealing.

Collective Investment Funds (Jersey) Law 1988

Under the Collective Investment Funds (Jersey) Law, a person shall not (subject to certain exemptions) hold himself out as being a functionary of a recognized fund
in or from within Jersey, except under a permit. For the purposes of this law, a recognized fund is a type of collective investment fund subject to additional regulations. Any
person carrying on the business of an unclassified fund must also hold a certificate. This law also contains provisions regarding notification of principal persons, key persons and
shareholders, and sets out further powers of the JFSC.

Bank (Recovery and Resolution) (Jersey) Law 2017

The Bank (Recovery and Resolution) (Jersey) Law 2017 came into force in 2022 (except provisions in relation to contractual recognition of bail-in, which
will be brought into force later). Butterfield Bank (Jersey) Limited is therefore now subject to the recovery and resolution powers, as well as investigatory powers, exercisable by
the Jersey Resolution Authority. Butterfield Bank (Jersey) Limited is also subject to the bank winding up procedure set out in this Law, in place of all other existing Jersey law
bankruptcy proceedings.

Proceeds of Crime (Jersey) Law 1999 and Terrorism (Jersey) Law 2002

The Proceeds of Crime (Jersey) Law 1999 established certain offenses in connection with the proceeds of criminal conduct including acquiring, using or having
possession or control of criminal property, concealing, disguising, converting, transferring or removing such criminal property from Jersey, and tipping off and interference with
material.

The Terrorism (Jersey) Law 2002 contains similar offenses regarding using, possessing, providing, collecting or receiving property for the purposes of terrorism, and

otherwise dealing with terrorist property.

Both the Proceeds of Crime (Jersey) Law 1999 and the Terrorism (Jersey) Law 2002 provide for a positive obligation on businesses to report any suspicions of
money laundering or terrorist financing. The Proceeds of Crime (Jersey) Law 1999 was also amended in 2022 to introduce an offense of failing to prevent money laundering by
employees, agents, service providers or customers, as a result of failing to maintain and apply adequate prevention procedures.

Depositors Compensation Scheme, 2009

Pursuant to the Banking Business (Depositors Compensation) (Jersey) Regulations 2009, the Jersey Bank Depositors Compensation Scheme ("Jersey DCS") is in
effect in Jersey. The law covers all "eligible deposits" and, in the event of the failure of a Jersey bank, provides protection of up to £50,000 for deposits placed in Jersey per
person, per banking group, for local and international depositors. The maximum liability of the Jersey DCS is capped at £100 million in any 5 year period.

Data Protection (Jersey) Law, 2018 / Data Protection Authority (Jersey) Law, 2018

The Data Protection (Jersey) Law 2018 ("DPJL"), and its companion statute the Data Protection Authority (Jersey) Law 2018 ("DPAJL"), came into force on May 25,

2018 to coincide with implementation of the EU General Data Protection Regulation (EU) 2016/679 ("GDPR"). The DPJL updated Jersey's data protection framework expressly
to mirror the GDPR and ensure that Jersey retained its data protection "adequacy" status with the European Commission.

In outline, the DPJL governs the processing of personal data in Jersey or in relation to Jersey residents; it provides rights to data subjects (i.e. individuals) and places
obligations on data controllers and processors of personal data including, among other matters, in relation to subject access requests, transfers of personal data and notification
of data breaches. The DPAJL requires any organization which is "established" in Jersey to be registered with the Jersey Office of the Information Commissioner ("JOIC") and to
pay an annual charge.

The JOIC is the independent authority responsible for the regulatory and enforcement functions of the DPJL and DPAJL, including the ability to levy fines.

United Kingdom

Regulatory Regime

Butterfield Mortgages Limited provides UK residential property lending services.

The primary legislation governing the provision of Butterfield UK's services is the Financial Services and Markets Act 2000 ("FSMA") and its secondary regulations.
FSMA requires that in order to carry on mortgage and investment services in the UK, a firm must be authorized (or exempt) and have the necessary permissions. Butterfield
Mortgages Limited is authorized and has permissions to enter into, advise on and administer regulated mortgage contracts.

Because its permissions are limited to mortgage activities, Butterfield Mortgages Limited is regulated by the FCA. The FCA has responsibility for both prudential and

conduct of business regulation of Butterfield Mortgages Limited.

Butterfield Mortgages Limited must comply with the FCA handbook which contains detailed rules and guidance in respect of governance and conduct matters. The

FCA's Principles for Business require, among other things, that Butterfield Mortgages Limited conducts its business with integrity and due skill, care and diligence and deal with
its regulators in an open and cooperative way. In addition, certain persons occupying senior management functions and certifications at Butterfield Mortgages Limited are subject
to statements of principle and a code of practice that describes behaviors expected of persons operating in the regulated sector. Butterfield Mortgages Limited is subject to and
has implemented the FCA's Senior Management and Certification Regime, the purpose of which is to increase individual accountability of senior management under the UK
regulatory system.

Control

FSMA requires any person seeking to obtain (and in certain circumstances increase) control over Butterfield UK to first get approval from the FCA. A person will

become a controller if it holds (itself or with another where they are acting together) (i) 20% or more of the shares of Butterfield UK or in any parent undertaking; or (ii) 20% or
more of the voting power in Butterfield UK or any parent.

The Companies Act 2006 requires that UK incorporated companies maintain a register of persons who have significant control over them. A person will be considered

to have significant control if it holds (itself or with another where they are acting together) 25% or more of the company's shares or voting rights or has the ability to appoint a
majority of the board of directors.

Capital

Butterfield UK is subject to capital rules under the FCA's Prudential sourcebook for Mortgage and Home Finance Firms and Insurance Intermediaries handbook

("MIPRU"). The MIPRU capital rules stipulate the minimum level and quality of capital that must be maintained to support the activities carried on.

AML and Financial Crime

Butterfield UK is subject to a range of legislation at a UK level requiring it to take steps to detect and prevent potential money laundering, financial crime or terrorist

financing. The FCA and HM Treasury have investigatory powers in relation to suspected breaches.

The principal UK anti-money laundering legislation applicable to the regulated activities of Butterfield UK is The Money Laundering, Terrorist Financing and Transfer of
Funds (Information on the Payer) Regulations 2017 (as amended) ("MLRs 2017") from June 26, 2017. The MLRs 2017 prescribed obligations in relation to know your customer
(KYC) information and assessment as well as ongoing monitoring obligations.

Further, Butterfield UK 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. Together, this legislation requires regulated firms to create
appropriate and risk-sensitive policies and procedures in relation to customer due diligence procedures and monitoring of transactions, to avoid financing terrorism or money
laundering or facilitating either of these, to avoid dealing with certain persons specified by HM Treasury, and to disclose suspicious activity to the relevant regulatory authorities.
In addition, the UK and all entities of the Bank must adhere to the Bribery Act 2010 which has broad extra-territorial reach.

Butterfield UK 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 US PATRIOT Act of 2001 and The Foreign Account Tax Compliance Act ("FATCA") of 2010.

Data Protection Act, 2018

The Data Protection Act 2018 (“DPA”) implements the EU General Data Protection Regulation (2016/679). Butterfield UK is required to have in place compliant policies
and procedures to meet the DPA obligations to deal with data appropriately. The DPA applies to any business or person using or holding personal data on individuals within the
EU and UK. Breaches of the legislation are criminal offenses and can result in severe penalties. The Information Commissioner’s Office has regulatory and disciplinary powers
and breach of the DPA can give rise to financial penalties based on a percentage of annual turnover.

Following the UK leaving the EU on January 31, 2020, the GDPR is incorporated into the UK’s domestic law under The European Union (Withdrawal Agreement) Act

2020 that makes legal provision for ratifying the Brexit Withdrawal Agreement of January 24, 2020 and implementing it into the domestic law of the United Kingdom.

Switzerland

Financial Institutions Act

The Swiss Federal Financial Institutions Act ("FinIA") and the implementing ordinance to the Swiss Federal Financial Institutions Act ("FinIO") entered into force on
January 1, 2020. FinIA and FinIO set forth the basic provisions relating to the licensing in Switzerland of financial institutions, which includes trustees and (collective) asset
managers but excludes banks and insurance companies as they are already subject to specific legislation. Pursuant to FinIA, Swiss trustees acting on a professional basis in
Switzerland or from Switzerland, must obtain a license from the Swiss Financial Market Supervisory Authority ("FINMA") to carry on their trustee activities. A Swiss branch or a
Swiss representative office of a foreign trustee must also obtain a license from FINMA.

FINMA is responsible for granting the license and for taking any enforcement actions. In order to obtain a license from FINMA, a trustee will first need to affiliate to a
Supervisory Organization, which is licensed and supervised by FINMA. The Supervisory Organization will conduct the day-to-day supervision and perform regular audits of the
affiliated trustees. In order to obtain a license, the applicant must further, inter alia, comply with minimum capital requirements, have an appropriate level of own funds, an
appropriate organization, qualified executives and generally meet a "fit and proper" requirement.

In accordance with the obligations for existing trustees under FinIA, Butterfield Trust (Switzerland) Ltd complies with the licensing requirements as set forth under
FinIA, is affiliated to a Supervisory Organization (see below under Swiss Anti-Money Laundering Act) and has submitted its application for authorization with FINMA before
December 31, 2022. In accordance with the transitional provisions under FinIA, Butterfield Trust (Switzerland) Ltd may continue to provide trustee services until FINMA has
made a decision concerning authorization, provided it remains affiliated to a Self-Regulatory Organization or a Supervisory Organization for anti-money laundering compliance
purposes.

Swiss Anti-Money Laundering Act

The Swiss Federal Act on Combating Money Laundering and Terrorist Financing of 10 October 1997 ("AMLA") and the related implementing ordinances apply to

financial intermediaries, which include trustees. It governs the combating of money laundering and terrorist financing. It ensures the exercise of due diligence by the financial
institutions in the conduct of financial transactions. Pursuant to AMLA, financial institutions must affiliate to a recognized Self-Regulatory Organisation or a recognized
Supervisory Organisation (see above under Financial Institutions Act) which shall supervise compliance by financial intermediaries of their duties set out in AMLA. Butterfield
Trust (Switzerland) Ltd must comply with its obligations under AMLA and is currently affiliated to Organisme de Surveillance pour Intermédiaires Financiers & Trustees ("SO-
FIT"), a Supervisory Organisation licensed and supervised by FINMA.

Swiss Data Protection Act

The Swiss Federal Act on Data Protection of June 19, 1992 ("DPA") and the Ordinance to the Federal Data Protection of June 14, 1993 ("DPO") aim to protect the

privacy and the fundamental rights of persons when their data is processed. The DPA and DPO provide for several requirements and limits with respect to data processing in
Switzerland as well as the transfer of data outside Switzerland. The data protection legislation applies to any private entity processing data related to individuals or corporate
entities. Data processing is defined as any operation with personal data, irrespective of the means applied and the procedure, and in particular the collection, storage, use,
revision, disclosure, archiving or destruction of data. The DPA and DPO impose a series of duties on the so-called controller of the database, i.e. the entity that defines the

purpose and controls the content of the collected data. The activities of Butterfield Trust (Switzerland) Ltd imply data processing on various data subjects. As a result, it is to
comply with the provisions of the DPA when processing data.

The general principles of the Swiss data protection legislation include the obligations to lawfully, accurately and not excessively process data. Further, data processing

must be protected by appropriate technical and organizational measures against accidental destruction, loss, theft and any other unauthorized use. The persons or entities
whose data are being processed must be granted a right of access to their data if they request so and must have the opportunity to request the correction of the data that is
inaccurate.

On September 25, 2020, the Swiss Parliament adopted the revision of the DPA. The Federal Council has decided that the revised DPA will enter into force on
September 1, 2023. The revised DPA provides for strengthened individuals' rights, increased transparency in data processing activities and extended governance and process
rules for data controllers. The revised DPA also provides for increased fines for violation of duties under the revised DPA. The revisions further bring the DPA more in line with
the EU General Data Protection Regulation (EU 2016/679), so that Switzerland may uphold its status as a country adequately protecting personal data from an EU perspective.

Singapore

("TCA").

Butterfield Trust (Asia) Limited holds a trust business license issued by the Monetary Authority of Singapore (“MAS”) pursuant to the Trust Companies Act 2005

As the integrated financial services regulatory authority in Singapore, the MAS administers (among other financial services related statutes) the TCA and regulates

and supervises (among other types of financial institutions) trust business license holders (such as Butterfield Trust (Asia) Limited) in accordance with the TCA and all related
subsidiary legislation, notices, guidelines and other regulatory instruments issued by the MAS ("MAS Instruments"). These MAS Instruments cover a wide range of ongoing
obligations relating to, inter alia, capital adequacy, audit, conduct of business, confidentiality, anti-money laundering and countering of terrorist financing and also impose
approval and/or notification requirements in respect of controllers, directors and key officers.

Under the TCA, the MAS is empowered to conduct inspections and/or investigations of Butterfield Trust (Asia) Limited to ensure that it is in compliance with

requirements contained in the MAS Instruments. Where there is a breach, the MAS may pursue a wide range of enforcement sanctions, including private warnings, private or
public reprimands, composition offers (i.e., allowing the offense to be compounded by payment of a fine), prohibition orders, suspension or revocation of licenses, civil penalties
and criminal prosecution.

United States

Foreign Account Tax Compliance Act (FATCA)

Under FATCA, US federal tax legislation passed in 2010, a 30% withholding tax will be imposed on "withholdable payments" made to non-US financial institutions

(including non-US investment funds and certain other non-US financial entities) that fail (or, in some cases, that have 50% affiliates which are also non-US financial institutions
that fail) to provide certain information regarding their US accountholders and/or certain US investors (such US accountholders and US investors, "US accountholders") to the
IRS. For non-US financial institutions that fail to comply, this withholding will generally apply without regard to whether the beneficial owner of a withholdable payment is a US
person or would otherwise be entitled to an exemption from US federal withholding tax. "Withholdable payments" generally include, among other items, payments of US-source
interest and dividends. Furthermore, FATCA may also impose withholding on non-US source payments by non-US financial institutions that comply with FATCA to non-US
financial institutions that fail to comply with FATCA. However, under proposed Treasury regulations, such withholding will not apply to payments made before the date that is two
years after the date on which final regulations defining the term "foreign pass thru payment" are published. In general, non-publicly traded debt and equity interests in investment
vehicles will be treated as "accounts" and be subject to these reporting requirements. In addition, certain insurance policies and annuities are considered accounts for these
purposes.

Some countries, including the Cayman Islands, Guernsey, Jersey, the UK, Singapore, Switzerland and The Bahamas, have entered into, and other countries are

expected to enter into, intergovernmental agreements ("IGAs") with the United States to facilitate the type of information reporting required under FATCA. While the existence of
IGAs will not eliminate the risk of the withholding described above, these agreements are expected to reduce that risk for financial institutions and investors in countries that have
entered into IGAs. IGAs will often require financial institutions in those countries to report some information on their US accountholders to the taxing authorities of those
countries, which will then pass the information to the IRS.

The Group closely monitors all present and new legislation that is or will be applicable for its organization, and is continuing to monitor all implications of FATCA and
legislation of countries that have entered into IGAs. While monitoring these implications, the Group is and will be in close contact with all of its stakeholders, including its peers
and financial industry representative organizations.

The Group has taken all the steps it believes are necessary to comply with current FATCA regulations, including analysis of its group entities and conclusions as to their

FATCA classifications, entering into agreements with the US tax authorities (as necessary), identification of reportable accounts, and timely and accurate filing of all required
annual FATCA filings, all in accordance with the appropriate IGA. Certain payments to the Group may be subject to withholding under FATCA if, in the future, the Group cannot
enter into such agreements or satisfy the requirements thereunder (including as a result of local laws in non-IGA countries prohibiting information-sharing with the IRS, as a
result of contracts or local laws prohibiting withholding on certain payments to account holders, policyholders, annuitants or other investors, or as a result of the failure of account
holders, policyholders, annuitants or other investors to provide requested information). The possibility of such withholding and the need for US account holders, policyholders,
annuitants and investors to provide certain information may adversely affect the sales of certain of the Group's products. In addition, entering into agreements with the IRS and
compliance with the terms of such agreements and with FATCA and any regulations or other guidance promulgated thereunder or any legislation promulgated under an IGA may
substantially increase the Group's compliance costs.

Office of Foreign Assets Control Regulation

The US Treasury Department's Office of Foreign Assets Control ("OFAC"), administers and enforces economic and trade sanctions against targeted foreign countries
and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries.
OFAC sanctions apply to all transactions that take place in the United States. Transactions that take place outside the United States may become subject to the jurisdiction of the
United States and subject to compliance with OFAC sanctions if they involve US persons or payment in US dollars. Such payments typically are cleared through the US Dollar
settlement system located in the United States and involve the intermediation of US financial institutions. Although we currently do not have any operations in the United States,
our operations may involve transactions with US persons or in US Dollars and as a result, in order to comply with OFAC sanctions, we are responsible for, among other things,
blocking any such transactions with designated targets and countries and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could have
serious legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval
is required or to prohibit such transactions even if approval is not required.

Anti-Money Laundering and the USA PATRIOT Act

A major focus of worldwide governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. In
particular, United States anti-money laundering laws and regulations including the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020 ("2020 AMLA"),
applicable to non-US banks with operations in the United States, including banks that engage in transactions outside the United States with US persons or in US Dollars, such as
the Bank, impose significant compliance and due diligence obligations.

Under these laws and regulations, financial institutions are prohibited from entering into specified financial transactions and account relationships and must use
enhanced due diligence procedures in their dealings with certain types of high-risk customers and implement a written customer identification program. Financial institutions must
also take certain steps to assist government agencies in detecting and preventing money laundering and report certain types of suspicious transactions. Regulatory authorities
routinely examine financial institutions for compliance with these obligations, and failure of a financial institution to maintain and implement adequate programs to combat money
laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution, including
causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if
approval is not required. Institutions that violate these obligations can be subject to cease and desist orders, civil money penalties and criminal sanctions.

Moreover, the 2020 AMLA requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities,

conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that may be
imposed on financial institutions. The 2020 AMLA also expands the US Department of Justice’s subpoena authority with respect to any foreign bank that maintains a
correspondent account in the US, increases penalties for violations of US anti-money laundering laws and significantly expands a whistleblower award program, which could
increase the prospect of regulatory enforcement. Many of the statutory provisions in the 2020 AMLA will require additional rulemakings, reports and other measures, and the
impact of the 2020 AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network of the US
Treasury Department issued the required priorities, which include: corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and
proliferation financing.

Future Legislation and Regulation

The above jurisdictions and the other jurisdictions in which we operate may enact legislation from time to time that affects the regulation of the financial services

industry or that affect the regulation of financial institutions chartered by or operating in those jurisdictions. These governments and their regulatory agencies also periodically
propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or
regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which we operate and may
significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital and modify our business strategy, and limit
our ability to pursue business opportunities in an efficient manner. Our business, financial condition, results of operations or prospects may be adversely affected, perhaps
materially, as a result.

Additional Information

The Butterfield Act and our current amended and restated bye-laws have been filed as exhibits to this annual report on Form 20-F. The information contained in these

exhibits is incorporated by reference herein.

Information regarding the rights, preferences and restrictions attaching to each class of our common and preferred shares, as well as other information regarding
director and shareholder rights and proceedings, is described in the section entitled "Description of Share Capital" in our registration statement on Form F-1 filed with the SEC on
February 12, 2017 with the file number 333-216018 and incorporated by reference herein.

C. Organizational Structure

Refer to Item 4.B. "Business Overview".

D. Property, Plants and Equipment

Our corporate headquarters is located at 65 Front Street, Hamilton HM 12, Bermuda. In addition to our corporate headquarters we also maintain offices in the Cayman
Islands, Guernsey, Jersey, the UK, The Bahamas, Switzerland, Singapore, Mauritius and Canada. Additionally, we operate three branch locations in Bermuda and four branch
locations in the Cayman Islands. Premises are owned in Bermuda and the Cayman Islands, with the remainder being held under commercial leases.

E. Selected Statistical Data

The following tables present select statistical information as required by the new subpart 1400 of Regulation S-K (previously Industry Guide 3).

Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest Differential

Average Balance Sheet and Interest Rates

The following table presents average consolidated balance sheets and net interest income for the years indicated:

(in millions of $)

Assets

Cash and cash equivalents — Interest bearing

Securities purchased under agreement to resell

Short-term investments

Available-for-sale

Held-to-maturity

Investment in securities(1)

Commercial loans

Consumer loans

Total loans, net of allowance for credit losses(2)

Interest-earning assets

Other assets

Total assets

Liabilities

Deposits

Securities sold under agreement to repurchase

Long-term debt

Interest bearing liabilities

Non-interest bearing current accounts

Other liabilities

Total liabilities

Shareholders' equity

Total liabilities and shareholders' equity

Non-interest bearing funds net of non-interest-earning assets (free balance)

Net interest margin

Net interest spread

For the year ended December 31

2022

Interest
income
(expense)

Average
yield/
rate

Average
balance

2021

Interest
income
(expense)

Average
yield/
rate

Average
balance

2020

Interest
income
(expense)

Average
yield/
rate

19.8

2.5

10.9

38.9

76.9

1.04 % 2,615.4

2.12 %

148.1

0.98 % 1,208.7

1.51 % 3,105.4

2.21 % 2,587.8

0.5

0.9

0.1

48.4

53.5

0.02 % 2,481.6

0.60 %

132.7

0.01 %

916.4

1.56 % 2,346.3

2.07 % 2,166.2

7.2

1.4

3.6

50.6

58.6

0.29 %

1.04 %

0.39 %

2.15 %

2.70 %

Average
balance

1,903.9

118.2

1,110.6

2,581.8

3,476.3

6,058.1

115.8

1.91 % 5,693.2

101.9

1.79 % 4,512.5

109.2

2.41 %

1,477.5

76.7

5.19 % 1,585.8

72.1

4.55 % 1,693.1

83.9

4.94 %

3,616.0

5,093.5

14,284.3

370.3

14,654.6

172.7

249.4

398.4

4.78 % 3,614.0

4.90 % 5,199.9

2.79 % 14,865.3

149.5

221.5

324.9

4.14 % 3,368.6

4.26 % 5,061.7

2.19 % 13,104.9

146.8

230.7

352.0

4.34 %

4.54 %

2.68 %

367.4

15,232.7

395.4

13,500.3

10,269.1

(45.2)

(0.44) % 10,845.3

(15.5)

(0.14) % 9,710.8

(25.1)

(0.26) %

0.6

172.1

—

(3.95) %

—

— %

—

— %

(9.6)

(5.58) %

171.7

(9.6)

(5.59) %

173.4

(9.3)

(5.35) %

10,441.8

(54.8)

(0.52) % 11,016.9

(25.1)

(0.23) % 9,884.2

(34.4)

(0.35) %

3,033.3

284.3

13,759.3

895.3

14,654.6

3,842.5

2,895.0

295.1

14,207.0

1,025.7

15,232.7

3,848.4

2,363.9

280.6

12,528.6

971.7

13,500.3

3,220.7

343.6

2.41 %

299.8

2.02 %

317.6

2.42 %

2.32 %

1.95 %

2.33 %

Ratio of average interest earning asset/ interest bearing liabilities

136.8 %

134.9 %

132.6 %

______________________________
(1)

Yields are based on average historical costs and yields on securities held in income tax exempt jurisdictions are not computed on a tax-equivalent yield basis.

(2)

Interest income and rates on loans include loan fees (December 31, 2022: $6.3 million; December 31, 2021: $7.0 million and December 31, 2020: $6.3 million).
Additionally, average non-accrual loans were included in the average loan balances used to determine the average yield on loans in all of the periods presented. Interest
income on non-accrual loans is recognized only to the extent it is received in cash. See "Note 2: Significant accounting policies" of our audited consolidated financial
statements for further information.

Analysis of Changes in Volume and Rate on Interest Income and Interest Expense

The following table presents the amount of changes in interest income and interest expense from December 31, 2021 to December 31, 2022 and from December 31,

2020 to December 31, 2021, due to changes in both average volume and average rate. Changes not solely due to volume or rate have been allocated to volume.

(in millions of $)

Interest income related to:

Cash and cash equivalents — Interest bearing

Securities purchased under agreement to resell

Short-term investments

Available-for-sale

Held-to-maturity

Total investment in securities(1)

Commercial loans

Consumer loans

Total loans, net of allowance for credit losses(2)

Total interest-earning assets

Interest expenses related to:

Deposits

Long-term debt

Total interest bearing liabilities

Change in net interest income

2022 compared to 2021

2021 compared to 2020

Increase/
(Decrease)
due to
Changes in

Net
Increase/
(Decrease)

Increase/
(Decrease)
due to
Changes in

Net
Increase/
(Decrease)

Volume

Rate

Volume

Rate

(7.45)

(0.65)

(0.98)

(7.91)

19.68

11.77

(5.67)

0.09

(5.58)

(2.89)

2.53

(0.02)

2.51

26.75

2.25

11.78

19.30

1.60

10.80

(1.59)

(9.50)

3.72

2.13

10.27

23.11

33.38

76.29

23.40

13.90

4.60

23.20

27.80

73.40

0.04

0.09

(0.01)

11.74

8.61

20.35

(5.07)

9.76

4.69

25.16

(6.74)

(0.59)

(3.49)

(13.94)

(13.71)

(27.65)

(6.73)

(7.06)

(13.79)

(52.26)

(32.23)

(29.70)

(1.61)

11.21

0.02

—

0.13

(0.43)

(32.21)

(29.70)

(1.48)

10.78

(6.70)

(0.50)

(3.50)

(2.20)

(5.10)

(7.30)

(11.80)

2.70

(9.10)

(27.10)

9.60

(0.30)

9.30

(0.38)

44.08

43.70

23.68

(41.48)

(17.80)

______________________________
(1)

Yields are based on average historical costs and yields on securities held in income tax exempt jurisdictions are not computed on a tax-equivalent yield basis.

(2)

Investment Portfolio

The following table presents an analysis of the weighted average yields for interest bearing debt securities that are not held at fair value through earnings as at

December 31, 2022:

Available-for-sale

US government and federal agencies

Non-US governments debt securities

Asset-backed securities - Student loans

Residential mortgage-backed securities
Weighted average yield(1)
Held-to-maturity

US government and federal agencies
Weighted average yield(1)

Total Weighted average yield(1)

Remaining term to maturity

Within
1 year

1 to 5
years

After 5
through 10
years

After 10
years

No specific
or single
maturity

Total

0.24 %

4.80 %

— %

1.09 %

0.53 %

— %

1.26 %

— %

0.85 %

0.93 %

1.26 %

— %

0.85 %

0.93 %

1.26 %

— %

2.51 %

— %

1.69 %

3.22 %

2.52 %

2.51 %

1.77 %

0.90 %

1.69 %

3.22 %

1.68 %

2.51 %

2.20 %

___________
(1)

Yields are based on average historical costs and yields on securities held in income tax exempt jurisdictions are not computed on a tax-equivalent yield basis.

Loan Portfolio

Maturity Profile of the Loan Portfolio

The following table presents certain items in our loan portfolio by contractual maturity as at December 31, 2022:

(in millions of $)

Commercial loans

Government

Commercial and industrial

Commercial overdrafts

Total Commercial loans

Commercial real estate loans

Commercial mortgage

Construction

Total Commercial real estate loans

Consumer loans

Automobile financing

Credit card

Overdrafts

Other consumer

Total Consumer loans

Remaining term to average contractual maturity

Within
1 year

1 to 5
years

After 5
years
through 15
years

After 15
years

No specific
maturity(1)

Total

2.7

73.6

124.6

200.9

29.7

—

29.7

1.0

77.7

44.4

17.3

140.4

—

177.4

—

177.4

107.7

2.5

110.2

18.9

—

20.5

39.4

278.9

78.1

—

357.0

474.4

2.0

476.4

0.9

—

16.4

17.3

—

8.0

2.9

10.9

—

3.2

—

281.6

329.1

124.6

735.3

619.8

7.4

627.2

20.8

77.7

44.4

57.4

200.3

3,570.2

Total Residential mortgages

422.6

1,150.3

754.0

1,243.3

Non-interest bearing items without a contractual maturity(1)

—

(11.6)

Total

793.6

1,477.3

1,604.7

1,257.4

(11.6)

5,121.4

The following table presents our loan portfolio by maturity and type of interest as at December 31, 2022:

(in millions of $)

Loans with fixed interest rates:

Commercial loans

Commercial real estate loans

Consumer loans

Residential mortgages

Total Loans with fixed interest rates

Loans with floating or adjustable interest rates:

Commercial loans

Commercial real estate loans

Consumer loans

Residential mortgages

Total loans with floating or adjustable interest rates

Remaining term to average contractual maturity

Within
1 year

1 to 5
years

After 5
years
through 15
years

After 15
years

No specific
maturity(1)

Total

0.2

4.2

2.2

129.8

136.4

200.7

25.6

138.1

292.8

657.2

14.1

55.4

2.5

594.9

666.9

163.2

54.8

37.0

555.4

810.4

333.3

273.1

2.5

252.7

861.6

23.8

203.2

14.8

501.3

743.1

—

4.9

2.5

543.1

550.5

—

6.0

0.7

700.2

706.9

—

347.6

337.6

9.7

1,520.5

2,215.4

387.7

289.6

190.6

2,049.7

2,917.6

Non-interest bearing items without a contractual maturity(1)

—

(11.6)

Total loans

793.6

1,477.3

1,604.7

1,257.4

(11.6)

5,121.4

(1)Included here are items without a contractual maturity such as deferred loans fees and fair value adjustments.

Credit Ratios

The following table presents our credit ratios for the years indicated:

(in millions of $)

Allowance for credit losses to total loans outstanding:

Allowance for credit losses

Total loans outstanding

Non-accrual loans to total loans outstanding:

Non-accrual loans

Total loans outstanding

Allowance for credit losses to non-accrual loans:

Allowance for credit losses

Non-accrual loans

Net charge-offs (recoveries) during the period to average loans outstanding:

Commercial loans

Net charge-offs (recoveries) during the period

Average amount outstanding

Commercial real estate loans

Net charge-offs (recoveries) during the period

Average amount outstanding

Consumer loans

Net charge-offs (recoveries) during the period

Average amount outstanding

Residential Mortgages

Net charge-offs (recoveries) during the period

Average amount outstanding

Total loans

Net charge-offs (recoveries) during the period

Average amount outstanding

For the year ended December 31

2022

2021

2020

25.0

5,121.4

0.5 %

63.1

5,121.4

1.2 %

25.0

63.1

28.1

5,268.7

0.5 %

61.0

5,268.7

1.2 %

28.1

61.0

34.1

5,194.9

0.7 %

72.5

5,194.9

1.4 %

34.1

72.5

39.6 %

46.0 %

47.0 %

1.3

741.4

0.18 %

0.0

647.3

— %

1.6

195.7

0.80 %

2.7

3,514.8

0.08 %

5.5

5,093.5

0.11 %

0.0

758.1

0.01 %

0.0

747.0

— %

-0.1

211.1

(0.05) %

2.5

3,516.9

0.07 %

2.5

5,199.9

0.05 %

3.6

852.9

0.42 %

0.0

750.3

— %

0.6

228.2

0.28 %

1.7

3,260.1

0.05 %

5.9

5,061.7

0.12 %

Allowance for credit losses to loans outstanding remained flat at 0.5% in 2022 and 2021.

Non-accrual loans to total loan outstanding ratio remained flat at 1.2% in 2022 from 2021.

Net charge-off (recoveries) ratio increased from 0.05% to 0.11% in 2022 from 2021 mainly due to a charge-off on a commercial facility in Bermuda.

Allocation of the Allowance for Credit Losses

(in millions of $)

Balance at End of Period Applicable to:

Commercial

Commercial real estate

Consumer

Residential Mortgage

December 31, 2022

Percent of
loans in each
category to
total loans

Amount

12.1

0.9

2.7

9.2

25.0

14 %

12 %

4 %

70 %

100 %

See "Note 6: Loans" to our audited consolidated financial statements as at December 31, 2022 for the breakdown of allowance for credit losses by each loan category.

Deposits

The following table presents our deposits by category for the years indicated:

(in millions of $)

Interest bearing deposits

Bermuda

Demand

Term

Total Bermuda

Non-Bermuda

Demand

Term

Non-Bermuda

Total interest bearing deposits

Non-interest bearing demand deposits

Bermuda

Non-Bermuda

Total non-interest bearing deposits

For the year ended December 31

2022

2021

2020

Average
balance

Average
rate

Average
balance

Average
rate

Average
balance

Average
rate

2,120.7

658.5

2,779.2

5,308.4

2,181.5

7,489.9

10,269.1

1,878.8

1,154.5

3,033.3

(0.01) %

2,151.8

(0.02) %

1,879.8

0.89 %

654.5

0.52 %

961.3

2,806.3

2,841.1

0.18 %

5,853.8

(0.04) %

5,190.0

1.35 %

2,185.2

0.68 %

1,679.7

(0.03) %

0.90 %

0.02 %

0.96 %

8,039.0

10,845.3

1,810.0

1,085.0

2,895.0

6,869.7

9,710.8

1,511.5

852.4

2,363.9

The following table presents the amount of uninsured deposits by reportable segment:

(in millions of $)
Bermuda(1)
Cayman(2)
Channel Islands and the UK(3)(4)

___________________________

As at December 31

2022

2021

4,252.6

4,292.8

4,161.9

4,274.5

4,612.0

4,702.8

12,707.3

13,589.3

(1)

(2)

(3)

(4)

The Bermuda Deposit Insurance Scheme covers only BMD deposits up to a maximum of $25,000 per group of depositor relationships. Eligibility is limited to individuals;
sole proprietors; partnerships; unincorporated associations; charities; and companies registered in the Register of Small Businesses maintained by the Bermuda Economic
Development Corporation.

Cayman currently has no deposit insurance scheme in place.

The Guernsey DCS covers deposits up to a maximum of £50,000 per qualifying claimant which is defined as a natural person; the trustee of a Guernsey Retirement
Annuity Trust; the executor or administrator of a deceased person's estate; or a Guernsey-registered charity. The total amount of compensation is capped at £100 million
in any 5-year period. Claims exceeding this cap will be reduced pro rata.

The Jersey DCS covers deposits up to a maximum of £50,000 per qualifying depositor per Jersey banking group. Qualifying depositors are defined as private individuals
and charities. The total amount of compensation is capped at £100 million in any 5-year period.

The following table presents the amount of uninsured time deposits by reportable segment and time to maturity as at December 31, 2022:

(in millions of $)

Time deposits in excess of insured limit:

Bermuda

Channel Islands and the UK

Total time deposits in excess of insured limit

Time deposits in uninsured accounts:

Bermuda

Cayman

Channel Islands and the UK

Total time deposits in uninsured accounts

Remaining term to contractual maturity

Within
3 months

3 to 6
months

6 to 12
months

Over 12
months

Total

29.2

138.9

168.1

339.1

504.3

1,077.6

1,921.0

10.8

36.5

47.3

107.0

74.5

185.6

367.1

19.6

11.4

31.0

104.5

62.5

263.1

430.1

35.9

—

35.9

19.4

9.9

—

29.3

95.5

186.8

282.3

570.0

651.2

1,526.3

2,747.5

Total uninsured time deposits

2,089.1

414.4

461.1

65.2

3,029.8

None.

ITEM 4A: UNRESOLVED STAFF COMMENTS

ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Operating Results

Management's Discussion and Analysis of Financial Condition and Results of Operations

This section presents management's perspective on our financial condition and results of operations. The following discussion and analysis is intended to highlight and
supplement data and information presented elsewhere in this report, including the consolidated financial statements and related notes and should be read in conjunction with the
accompanying tables and our financial statements included in this report. The consolidated financial statements and notes have been prepared in accordance with GAAP. Certain
statements in this discussion and analysis may be deemed to include "forward-looking statements" and are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Forward-looking statements are not historical facts but instead represent only management's belief regarding future events, many of which
by their nature are inherently uncertain and outside of management's control. Actual results may differ materially from those included in these statements due to a variety of factors,
including worldwide and local economic conditions, success in business retention and obtaining new business and other factors. Factors that could cause these differences are
discussed in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors." For management's considerations and determinations of each non-core
item discussed, please see "Reconciliation of Non-GAAP Financial Measures".

Overview

We are a full service bank and wealth manager headquartered in Hamilton, Bermuda. We operate our business through our four reportable segments, three
geographical and one other: Bermuda, the Cayman Islands, the Channel Islands and the UK and Other. We offer banking services, comprising of retail and corporate banking,
and wealth management, which consists of trust, private banking, and asset management. In our Bermuda and Cayman Islands segments, we offer retail banking and wealth
management. In our Channel Islands and the UK segment, we offer corporate banking, wealth management and residential property lending. The Other segment includes our
operations in the jurisdictions of The Bahamas, Canada, Mauritius, Singapore and Switzerland. In these jurisdictions we either provide wealth management or operate service
centers. These jurisdictions individually and collectively do not meet the quantitative threshold for segmented reporting and are therefore aggregated as a non-reportable
operating segment.

The following table details our Net Revenue in total and by segment, as well as our total assets, total loans, total deposits, total AUA (which includes trust and custody

AUA) and AUM for the years ended December 31, 2022, December 31, 2021 and December 31, 2020.

Net Revenue

% of Net Revenue from:

Bermuda segment

Cayman Islands segment

Channel Islands and the UK segment

Other segment

(in millions of $)

Summary Balance Sheet

Total Assets

Total Loans

Total Deposits

Assets under administration

Custody and other administration services

Trust

Assets under management

Butterfield Funds

Other assets under management

Market Environment

For the year ended December 31

2022

2021

2020

43.8 %

32.1 %

18.9 %

5.3 %

45.2 %

29.1 %

20.3 %

5.4 %

47.6 %

29.1 %

20.4 %

2.9 %

14,306.1

5,096.4

12,991.1

15,335.2

5,240.7

13,870.2

32,181.7

36,757.6

106,154.6

106,362.3

1,752.5

3,296.3

1,757.6

3,740.2

Our business is affected by international, regional and local economic conditions as well as the perception of future economic prospects. The significant macro-

economic factors that impact our business include the US and global economic landscapes, unemployment rates, the housing markets and interest rates. As the year 2022
began, most market participants and central bankers believed that the inflationary pressures which began in 2021 would prove to be a temporary offshoot of COVID-19 related
supply chain disruptions. As the year progressed, it became more clear that other forces, namely, both fiscal and monetary stimulus during the pandemic were fuelling more
persistent aggregate demand and with it, continued inflationary pressures. Central banks responded by raising short term interest rates across the globe at a pace far more
significant than had been anticipated by markets earlier in the year. As a result, the US bond market, in particular, logged its worst price performance in over 40 years with the
10-year treasury rate rising approximately 230 bps over the course of 2022. The US Federal Reserve raised its overnight target rate by a total of 425 bps, is engaged in
quantitative tightening, and is signalling another +50-75 bps of rate hikes in the early part of 2023 to combat inflation. The impact of this monetary austerity is being felt
throughout all types of financial assets and across all markets.

Bermuda Segment

Bermuda continues to recover from the pandemic, growing at an estimated 5.8% in 2021 but is projected to have grown at a slower pace in 2022, with most estimated

forecasts at less than 2.0%. This can largely be attributed to an imbalance across sectors of the economy. International business, especially the reinsurance and captive

insurance markets, continues to grow attracting billions in new capital. New company formations also continues to climb. Bermuda remains the world’s largest captive domicile
and the third largest market for reinsurance underwriting as well as by far and away the largest market for insurance-linked securities. However, recovery for small- and medium-
sized local enterprises has been sluggish. Retail activity is still well short of 2019 levels. Online sales remain a headwind and a good portion can be attributed to a slower than
expected recovery in the hospitality sector. Guest visitor numbers have been constrained by less than ideal airlift capacity and,until recently, COVID-19 testing for visitors. The
largest hotel (650 rooms) remains offline pending redevelopment and another large resort remains closed pending a sale. Tourism numbers are expected to continue to improve
in 2023 with no testing requirements and a fuller schedule of cruise ship arrivals. However, a full recovery to pre-pandemic levels is still not likely before 2024 or 2025.
Construction activity suffers from a lack of large projects but has been sustained by renovation work in the housing sector. There are an estimated 3,000 Airbnb beds now
available on the island. In the real estate sector, rents continue to climb due to a lack of inventory against current demand. Housing sales have picked up from 2021 with a
majority being cash buyers but still lag behind pre-pandemic levels. Government finances continue to improve with total revenue expected to exceed the target for the
2022-2023 fiscal year. Expenses have also risen to assist local Bermudians in need of financial support, but the deficit target of $70 million is forecasted to be met. Early in the
year, debt that matured was successfully refinanced albeit at higher rates than prior years. The Bermuda government continues to pledge to bring the deficit to zero by the
2025-2026 fiscal year and thereafter run a surplus of at least $50 million to begin reducing the $3.1 billion in outstanding debt. All of the rating agencies have reaffirmed their
debt ratings and maintain a ‘stable’ outlook for the jurisdiction. See Item 3.D. "Risk Factors - Risks Relating to the Markets in Which We Operate - Adverse economic and market
conditions in Bermuda, the Cayman Islands and the Channel Islands and the UK, have in the past resulted in and could in the future result in lower revenue, lower asset quality,
increased provisions and lower earnings" and Item 3.D. “Risk Factors - Risks Relating to the Markets in Which We Operate - A decline in tourism in Bermuda or the Cayman
Islands could have a material adverse effect on our business, financial condition or results of operations”.

Bermuda GDP (in millions of BMD $)

% change from prior year

Selected GDP Components:

Real estate and renting GDP (in millions of BMD $)

% change from prior year

International business GDP (in millions of BMD $)

% change from prior year

2021P

7,287

5.8%

1,096

4.3%

2,001

5.1%

2020R

6,887

(7.2)%

1,051

1.0%

1,903

3.7%

2019

7,423

2.7%

1,041

2.8%

1,835

6.4%

2018

7,226

1.2%

1,013

3.3%

1,724

0.2%

2017

7,142

3.5%

981

5.6%

1,720

0.1%

Source: Government of Bermuda, Department of Statistics, Annual Publication - 2021, Gross Domestic Product at current purchaser's prices, Table 4

Cayman Islands Segment

The Cayman Islands is experiencing a recovery in both cruise and stayover tourism following the cessation of all COVID-19 testing, vaccination and prevention
mandates for visitors to its shores in August 2022. The first cruise ship passengers in two years began to arrive in late March 2022. Arrivals in 2022 are projected to have
reached 70% of pre-pandemic levels. Cayman’s GDP is projected to have grown by 4% in 2022 as tourism continues to recover. GDP growth expectations for 2023 and 2024
are 2.5% and 2.0% respectively. The Cayman Islands government implemented prudent fiscal measures to support impacted businesses and individuals during a period of
heightened inflation, estimated to be 10.1% for 2022 and trending downwards to historical averages over the next several years. Elevated pandemic related expenditures and
reduced revenues are anticipated to result in an operating deficit of 0.4% of GDP in 2022. Government's prudent fiscal management should see budgets returning to fiscal
surpluses of 0.7% in 2023 and 1.8% in 2024. The Cayman Islands government strategically locked in favorable long term lending arrangements to provide the financing for
phased infrastructure projects. Real estate transaction levels reported the second highest sales level in 2022, 11% below 2021’s all-time record sales level of $1.1 billion.

Cayman GDP (in millions of $)

% change from prior year

Source: Economist Intelligence Unit

Channel Islands and UK Segment

2021E

6,144

9.5%

2020

5,609

(5.6)%

2019

5,943

7.5%

2018

5,530

7.3%

2017

5,153

5.2%

2022 reflected a year of transition with the economies of Guernsey, Jersey and the UK reverting back to more normal levels of activity as COVID-19 restrictions were
effectively removed during Q1 2022 and have not been re-introduced since. In 2021, the economies of Guernsey, Jersey and the UK estimated to have GDP growth of 10.3%,
10.8% and 7.5% respectively – reversing most of the contractions seen in 2020. 2022 has been characterized by a general improvement in economic activity across the
economies of Guernsey, Jersey and the UK, but the impact of sharp increases in central bank interest rates from the end of 2021 has started to impact certain aspects of
economic activity, most notably the housing markets.

The war in the Ukraine and its impact on global energy costs has resulted in inflation increasing significantly in all of our jurisdictions to approximately 8% in Guernsey,

10.4% in Jersey and 10% in the UK. This, together with the sharp increase in interest rates, will inevitably challenge each of these economies through an adverse impact on
household expenditure.

In the UK, direct support to the economy in relation to COVID-19 ceased with the ending of the furlough scheme towards to end of 2021. Despite the onset of the
"omicron" variant and a rapid increase in cases through early 2022, the UK started to "live with COVID" and by Q2 2022, final travel restrictions were lifted. The re-opening of the
economy has been met with strong economic growth through 2021 and the first half of 2022. Returning economic activity to levels beyond the 2019 highs has been accompanied
by a sharp rise in inflation driven by strong demand and supply chain issues. While originally seen as transitory, inflation forces become more ingrained as a result of the food
and fuel crisis which followed the onset of the war in Ukraine. In an attempt to control inflation, the Bank of England has increased interest rates from 0.25% to 3.5% during 2022,
with another 1% priced in for 2023. Inflation is starting to peak and shift lower, but this is coming at the cost of a weaker economy during the latter part of 2022, which will likely
persist through 2023. Such weakness has already been reflected in financial markets and is likely to flow through to a housing market contraction (both transaction volume and
house prices) as 2023 progresses.

Our operations in the Channel Islands and UK all use the Pound Sterling as their functional currency. Despite the Channel Islands being autonomous from the UK, their

economies are closely linked to economic trends in both the UK and the eurozone due to the close relationships between the regions. See Item 3.D. “Risk Factors".

Against this backdrop, our banking businesses in the Channel Islands have benefited from loan demand from the local housing markets, cooled somewhat in the final
quarter of the year in line with overall market conditions. Our loan offering has continued to be competitive in the UK market, specifically in the Prime Central London property
market.

Current/Nominal (in £ Millions)

Guernsey GDP (GVA Market/GBP)

Annual Changes (%)

Source: States of Guernsey

Jersey GDP (GBP (in £ millions))

Annual Changes (%)

Source: States of Jersey

2021 CE

2020 CE

3,446

10.3%

2021

5,087

10.8%

3,125

(3.8)%

2020

4,592

(10.1)%

2019

3,248

2.6%

2019R

5,108

6.4%

2018

3,170

2.2%

2018

4,803

2.0%

2017

3,101

5.7%

2017

4,710

0.9%

We continue to maintain a cautious stance with a liquid balance sheet, a conservative investment portfolio, and no reliance on wholesale funding. Total liquid cash and

investments made up 61.3% of our balance sheet at December 31, 2022, which is slightly down from 63.3% at December 31, 2021.

The Bank continued to support customers and operate as permitted across all jurisdictions in 2022 without any support or concessions from governments or regulators

in any of our operating jurisdictions.

2022 Overview

In 2022, our net income increased by $51.4 million to $214.0 million from $162.7 million in 2021. This increase is driven primarily by the impact of higher market interest

rates on net interest income, increased non-interest income offset by higher non-interest expenses and a higher provision for future expected credit losses due to weaker
macroeconomic forecasts. Management continued to focus on the diligent management of capital, expenses and risks, and maintaining our strong capital position with CET1 and
Total capital ratios of 20.3% and 24.1%, respectively, as at December 31, 2022. For the year ended December 31, 2022, the Board declared four quarterly dividends of $0.44
per quarter totaling $1.76 for each common share held on record as of the applicable record dates, and repurchased 102,000 common shares from the existing share
repurchase program. Subsequent to year end, the Board approved a new share repurchase program authorizing the purchase of up to 3.0 million common shares expiring on
February 29, 2024. The Board will continue to evaluate capital planning options and the payment of future dividends as warranted, subject to regulatory requirements. See Item
8.A. "Consolidated Statements and Other Financial Information - Dividend Policy" and Item 3.D. "Risk Factors – General Risk Factors - Holders of our common shares may not
receive dividends" elsewhere in this report for further details.

The quality of our assets remained strong and total assets decreased year-over-year by $1.0 billion to $14.3 billion, driven primarily by decreased deposit levels in

Cayman and the Channel Islands. Deposits decreased by $0.9 billion to $13.0 billion while loans decreased by $0.1 billion to $5.1 billion. The decrease in deposit balances was
driven by the anticipated normalization of pandemic-related surge deposit levels and the impact of a strengthening US dollar on non-US dollar denominated deposits. The
decrease in loans was driven by the Channel Islands and UK segment as a result of a decrease in the GBP/USD foreign exchange rate, the early repayment of a number of
commercial facilities and is partially offset by the extension of a government facility in the Cayman Islands. Investments decreased by $0.5 billion to $5.7 billion driven by an
increase in total net unrealized losses on the available-for-sale portfolio that is carried at fair value as a result of rising long-term US dollar interest rates. Overall liquidity
remained strong, as measured by cash and cash equivalents, securities purchased under agreements to resell, short-term investments and investments in securities as a
percentage of total assets, ending the year at 61.3% compared to 63.3% in the prior year.

Our shareholders’ equity decreased year-over-year by $112.7 million to $864.8 million, which was a result of negative mark-to-market movements in the value of our

fixed income investments as long term US dollar rates have increased, common share repurchases and retirements throughout the year, partially offset by organic growth
through net income net of dividends paid out during the year.

Key contributors to our 2022 results were as follows:

• Profitability: Net income increased year-over-year by $51.4 million, or 31.6%, to $214.0 million, primarily due to higher market interest rates and increased non-

interest income offset by higher non-interest expenses and a higher provision for future expected credit losses.

• Net interest margin: NIM increased by 39 basis points to 241 basis points compared to 202 basis points in 2021, and the cost of funding increased by 23 basis
points to 34 basis points. The increase in NIM was due to increased market interest rates across the yield curve; loan yields increased by 64 basis points to 490
basis points; the investment portfolio yields increased by 12 basis points to 191 basis points; and yields on cash and cash equivalents, securities purchased under
agreements to resell and short-term investments were up by 102 basis points to 106 basis points. The yield uptick on the investment portfolio was muted due to the
slowing down of prepayment speeds in the rising interest rate environment thereby reducing the ability to reinvest at higher rates. The cost of funding increased and
saw expense yields increasing by 23 basis points to 34 basis points, with pricing pressure coming from the more competitive Channel Islands markets.

• Expenses: Total non-interest expenses decreased year-over-year by $2.3 million to $331.6 million in 2022, largely due to a $7.1 million decrease in technology and
communications spending due to the depreciation charges on the existing core banking system in the prior year continuing to outpace costs associated with the new
technology projects. This was partially offset by a $4.9 million increase in staff-related costs due to higher staff incentive accruals, costs associated with the
departure of a senior executive that was recorded as a non-core item, other non-recurring severance costs and inflationary salary adjustments. Our expenses also
included $1.7 million of non-core expenses including those associated with the aforementioned departure of a senior executive; residual professional fees incurred in
relation to the resolved US Department of Justice inquiry and costs associated with the settlement of a non-US corporate income tax inquiry in connection with the
commercial affairs of a legacy custody client. The core efficiency ratio decreased from 65.5% in 2021 to 58.9% in 2022, reflecting the rate of core non-interest
expense relative to the increase in revenue.

• Deposits: Deposits decreased year-over-year by $0.9 billion to $13.0 billion as at December 31, 2022. The decrease in deposit balances was driven by the

anticipated normalization of pandemic-related surge deposit levels and the impact of a strengthening US dollar on non-US dollar denominated deposits. Interest
bearing deposit costs increased by 30 basis points to 44 basis points in 2022. With non-interest bearing deposits totaling $3.0 billion on December 31, 2022, the
average cost of deposits for the year increased by 23 basis points to 34 basis points. Cost of funds increased due to higher market rates and pricing pressure seen
in the more competitive Channel Islands market.

• Loan quality: As at December 31, 2022, we had gross non-accrual loans of $63.1 million representing 1.2% of total gross loans, an increase from $61.0 million, or
1.2%, of total loans at December 31, 2021. The increase in non-accrual loans was driven by a few residential mortgages in the Channel Islands and UK segment
moving into non-accrual and partially offset by a number of Bermuda residential mortgages improving to current status.

2021 Overview

In 2021, our net income increased by $15.5 million to $162.7 million from $147.2 million in 2020. Despite the headwinds of the continued low interest rate environment
following the COVID-19 pandemic on net interest income, the Bank saw an uplift in net income of $15.5 million driven by an increase in fee income attributable to increased card
service contributions and foreign exchange transactional volumes, a decrease in the provision for credit losses due primarily to improving macroeconomic forecasts, and
decreases in non-interest expenses due primarily to realizing the benefits from the 2020 COVID-19 driven staff restructuring programs. These staff restructuring programs were
considered non-core and contributed to non-core costs decreasing by $6.4 million in 2021 from $7.3 million in 2020. Management continued to focus on the diligent management
of capital, expenses and risks, and maintaining our strong capital position with CET1 and Total capital ratios of 17.6% and 21.2%, respectively. For the year ended December 31,
2021, the Board declared four quarterly dividends of $0.44 per quarter totaling $1.76 for each common share held on record as of the applicable record dates, and repurchased
534,828 common shares from the existing share repurchase program. Subsequent to year end, the Board approved a new share repurchase program authorizing the purchase
of up to 2.0 million common shares expiring on February 28, 2023. The Board will continue to evaluate capital planning options and the payment of future dividends as
warranted, subject to regulatory requirements. See Item 8.A. "Consolidated Statements and Other Financial Information - Dividend Policy" and Item 3.D. "Risk Factors – General
Risk Factors - Holders of our common shares may not receive dividends" elsewhere in this report for further details.

The quality of our assets remained strong and total assets increased year-over-year by $0.6 billion to $15.3 billion, driven primarily by increased deposit levels in

Cayman and the Channel Islands. Deposits increased by $0.6 billion to $13.9 billion whilst loans remained stable at $5.2 billion. The increase in deposit balances was driven by
corporate deposit increases in Cayman and the Channel Islands, and partially offset by expected corporate deposit decreases in Bermuda. Investments increased by $1.4 billion
to $6.2 billion driven by increased depositor funding and the deployment of assets into the investment portfolio. Overall liquidity remained strong, as measured by cash and cash
equivalents, securities purchased under agreements to resell, short-term investments and investments in securities as a percentage of total assets, ending the year at 63.3%
compared to 62.2% in the prior year.

Our shareholders’ equity decreased marginally year-over-year by $4.5 million to $977.5 million, which was a result of negative mark-to-market movements in the value

of our fixed income investments as long term US dollar rates have increased, common share repurchases and retirements throughout the year and partially offset by organic
growth through net income net of dividends paid out during the year.

Key contributors to our 2021 results were as follows:

• Profitability: Net income increased year-over-year by $15.5 million, or 10.5%, to $162.7 million, which was largely attributable to increased fee revenues due to
improved economic activity as economies re-opened, a decrease in the provision for credit losses and cost-savings from the prior year COVID-19 driven staff
restructuring programs implemented in order to create operating leverage in a low interest rate environment.

• Net interest margin: NIM decreased by 40 basis points to 202 basis points compared to 242 basis points in 2020, and the cost of funding decreased by 10 basis
point to 11 basis points. The decrease in NIM was due to margin declines across all interest earning asset categories, driven by lower market interest rates and
increased paydowns of higher yielding investment positions with re-investment at lower rates; loan yields decreased by 28 basis points to 426 basis points; the
investment portfolio yields decreased by 62 basis points to 179 basis points; and yields on cash and cash equivalents, securities purchased under agreements to
resell and short-term investments were down 30 basis points to 4 basis points. The cost of funding offset the overall NIM decrease, with expense yields decreasing
by 10 basis points to 11 basis points, primarily due to the active repricing of deposits in response to lower market rates.

• Expenses: Total non-interest expenses decreased year-over-year by $10.7 million to $333.9 million in 2021 due to a $12.3 million decrease in staff-related costs
from reduced headcount as a result of non-core restructuring programs initiated in 2020 and a $1.3 million decrease in technology and communications spending
due to the full depreciation of the Bank's core banking system outpacing costs associated with the new technology projects. This was offset by a $1.5 million
increase in property costs driven by increased property maintenance costs and a $1.2 million increase in non-service employee benefits expense driven by
increased costs from the post-retirement medical benefit plan. Our expenses also included $1.8 million of non-core expenses which relate to redundancy costs
associated with the transfer of Channel Islands banking operations functions from Mauritius to Butterfield's service centers in Canada and Guernsey and
professional fees related to the settlement of the US Department of Justice inquiry which commenced in 2013. After removing the effect of these items, core non-
interest expenses decreased marginally by $4.5 million, from $336.6 million in 2020 to $332.1 million in 2021.

• Deposits: Deposits increased year-over-year by $0.6 billion to $13.9 billion as at December 31, 2021. The increase in deposit balances was driven by corporate
deposit increases in Cayman and the Channel Islands, and partially offset by expected corporate deposit decreases in Bermuda. Interest bearing deposit costs
decreased by 12 basis points to 14 basis points in 2021. With non-interest bearing deposits totaling $2.8 billion on December 31, 2021, the average cost of deposits
for the year decreased by 10 basis points to 11 basis points. Cost of funds decreased due to the active repricing of deposits in response to lower market rates.

• Loan quality: As at December 31, 2021, we had gross non-accrual loans of $61.0 million representing 1.2% of total gross loans, a decrease from $72.5 million, or
1.4%, of total loans at December 31, 2020. The decrease in non-accrual loans was driven by the payoff of residential mortgages and a commercial mortgage in
Bermuda and partially offset by a residential mortgage in the Channel Islands moving into non-accrual in the fourth quarter of 2021.

Financial Summary

(in millions of $)

Assets

Cash and cash equivalents

Of which cash and demand deposits with banks — non-interest bearing

Of which demand deposits with banks — interest bearing

Of which cash equivalents — interest bearing

Securities purchased under agreements to resell

Short-term investments

Investment in securities

Of which equity securities at fair value
Of which available-for-sale(1)
Of which held-to-maturity(2)

Loans, net of allowance for credit losses

Premises, equipment and computer software, net of accumulated depreciation

Goodwill

Other intangible assets, net

Equity method investments

Other real estate owned, net

Accrued interest and other assets

Total assets

Liabilities

Total deposits

Of which — non-interest bearing

Of which — interest bearing

Employee benefit plans

Accrued interest and other liabilities

Long-term debt

Total liabilities
Total shareholders' equity(3)(4)

Of which common share capital(4)

Total liabilities and shareholders' equity
Common shares outstanding (number)(4)

______________________________

As at December 31

2022

2021

Dollar
change

Percent
change

2,100.8

2,179.8

93.0

258.2

115.7

437.6

1,749.5

1,626.5

59.9

884.5

5,727.2

0.2

1,988.9

3,738.1

5,096.4

146.1

22.9

51.5

12.5

0.8

96.1

1,198.9

6,237.3

0.2

3,473.7

2,763.3

5,240.7

138.7

25.4

60.8

12.6

0.7

203.5

144.3

(79.0)

(22.7)

(179.4)

123.0

(36.2)

(314.4)

(510.1)

—

(1,484.8)

974.8

(144.3)

7.4

(2.5)

(9.3)

(0.1)

0.1

59.2

14,306.1

15,335.2

(1,029.1)

12,991.1

13,870.2

3,039.7

9,951.4

92.0

185.9

172.3

2,820.6

126.2

189.4

171.9

13,441.2

14,357.7

864.8

0.5

977.5

0.5

(879.1)

219.1

(3.5)

0.4

(916.5)

(112.7)

—

14,306.1

15,335.2

(1,029.1)

50.3

49.9

0.4

(3.6) %

(19.6) %

(41.0) %

7.6 %

(37.7) %

(26.2) %

(8.2) %

— %

(42.7) %

35.3 %

(2.8) %

5.3 %

(9.8) %

(15.3) %

(0.8) %

14.3 %

41.0 %

(6.7) %

(6.3) %

7.8 %

(9.9) %

(1.8) %

0.2 %

(6.4) %

(11.5) %

— %

(6.7) %

0.8 %

11,049.6

(1,098.2)

(34.2)

(27.1) %

(1)

(2)

(3)

Amortized cost of AFS debt securities was $2,209.1 million as at December 31, 2022 and $3,495.6 million as at December 31, 2021.

Fair value of HTM debt securities was $3,197.5 million as at December 31, 2022 and $2,786.1 million as at December 31, 2021.

As at December 31, 2022, the number of outstanding awards of unvested common shares was 1.1 million (December 31, 2021: 1.0 million). Only awards for which the
sum of 1) the expense that will be recognized in the future (i.e., the unrecognized expense) and 2) its exercise price, if any, was lower than the average market price of the
Bank's common shares were considered dilutive and, therefore, included in the computation of diluted earnings per share.

(4)

Figures reflect the retirement of 0.1 million shares during the year ended December 31, 2022 (December 31, 2021: 0.5 million).

Summary Income Statement

For the year ended December 31

Dollar change

Percent change

(in millions of $, except per share data)

2022

2021

2020

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

Interest income

Loans

Investments

Deposits with banks and other

Interest expense

Net interest income before provision for credit losses

Non-interest income

Net revenue

Provision for credit (losses) recoveries

Salaries and other employee benefits

Other non-interest expenses (including income taxes)

Net income before other gains (losses)

Total other gains (losses)

Net income

Non-core items

Core net income (Non-GAAP)

Core earnings to common shareholders (Non-GAAP)

249.4

115.8

33.2

221.5

101.9

1.4

230.7

109.2

12.1

27.9

13.9

31.8

(9.2)

(7.3)

12.6 %

13.6 %

(10.7)

2,271.4 %

(54.8)

(25.1)

(34.4)

(29.7)

343.6

206.6

550.2

(2.4)

(166.2)

(169.1)

212.5

1.5

214.0

1.7

215.7

299.8

198.1

497.9

3.1

(161.3)

(175.7)

164.0

(1.4)

162.7

0.9

163.6

317.6

183.9

501.5

(8.5)

(173.7)

(173.3)

146.0

1.2

147.2

7.3

154.5

(4.0) %

(6.7) %

(88.4) %

(27.0) %

(5.6) %

7.7 %

(0.7) %

118.3 %

14.6 %

4.3 %

10.5 %

(177.4) %

(136.5) %

3.0 %

(3.8) %

29.6 %

(7.1) %

1.4 %

12.3 %

(207.1) %

(216.7) %

31.5 %

88.9 %

31.8 %

— %

10.5 %

(87.7) %

5.9 %

(1.8) %

9.3

(17.8)

14.2

(3.6)

11.6

12.4

(2.4)

18.0

(2.6)

15.5

(6.4)

9.1

1.6

0.37

0.36

31.7 %

31.6 %

12.7 %

12.4 %

43.8

8.5

52.3

(5.5)

(4.9)

6.6

48.5

2.9

51.3

0.8

52.1

—

1.04

1.03

Common dividends paid

(87.3)

(88.9)

Earnings per common share from continuing operations
(in US$)

Basic
Diluted(1)

______________________________

4.32

4.29

3.28

3.26

2.91

2.90

(1) Reflects only "in the money" options and certain unvested share awards, which have a dilutive effect.

Financial Ratios and Other Performance Indicators

We use a number of financial measures to track the performance of our business and guide our management. Some of these measures are defined by, and calculated

in compliance with, applicable banking regulations, but such regulations often provide for certain discretion in defining and calculating the measures. These measures allow
management to review our core activities, and enable us and our investors to evaluate relevant trends meaningfully when considered in conjunction with (but not in lieu of)
measures that are calculated in accordance with GAAP. Non-GAAP measures used in this report are not a substitute for GAAP measures and readers should consider the
GAAP measures as well.

The following table shows certain of our key financial measures for the periods indicated. Because of the discretion that we and other banks and companies have in
defining and calculating these measures, care should be taken in comparing such measures used by us with similarly titled measures of other banks and companies, as such
measures may not be directly comparable.

Many of these measures are non-GAAP financial measures. We believe that each of these measures is useful for investors in understanding trends in our business that

may not otherwise be apparent when relying solely on our GAAP-calculated results. For more information on the non-GAAP financial measures presented below, including a
reconciliation to the most directly comparable GAAP financial measures, see Item 5.A. "Item 5 - Operating and Financial Review and Prospects - Overview and highlights -
Reconciliation of Non-GAAP Financial Measures".

(in %, unless otherwise indicated)
Return on average common shareholders' equity(1)
Core return on average tangible common equity(2)
Return on average assets(3)
Core return on average tangible assets(4)
Net interest margin(5)
Efficiency margin(6)
Core efficiency ratio(7)
Fee income ratio(8)
Common equity Tier 1 capital ratio(9)(10)
Tier 1 capital ratio(9)
Total capital ratio(9)
Leverage ratio(9)(10)
Tangible common equity/tangible assets(10)
Tangible total equity/tangible assets(11)
Non-performing assets ratio(12)
Non-accrual ratio(13)
Non-performing loan ratio(14)
Net charge-off (recoveries) ratio(15)
Core net income attributable to common shareholders(16)(17) (in $ million)
Core net income per common share fully diluted(18)(20) (in $)
Common equity per share(19) (in $)

______________________________

For the year ended December 31

2022

2021

2020

25.7

28.6

1.5

2.41

59.2

58.9

37.7

20.3

24.1

6.7

5.6

0.5

1.2

1.5

0.1

215.7

4.33

17.42

16.8

18.7

1.1

2.02

65.9

65.5

39.5

17.6

21.2

5.6

5.8

0.5

1.2

1.4

0.1

163.6

3.28

19.83

15.0

17.3

1.1

2.42

67.6

66.0

37.3

16.1

19.8

5.3

6.1

0.6

1.4

1.8

0.1

154.5

3.04

19.88

(1)

(2)

(3)

(4)

ROE measures profitability by revealing how much profit is generated with the money invested by common shareholders. ROE represents the amount of net income to
common shareholders as a percentage of average common equity and is calculated as net income to common shareholders / average common equity. Net income to
common shareholders is net income for the full fiscal year, before dividends paid to common shareholders but after dividends to preference shareholders. Average
common equity does not include the preference shareholders' equity.

Core ROATCE is a non-GAAP financial measure. Core ROATCE measures core profitability as a percentage of average tangible common equity. Core ROATCE is the
amount of core income to common shareholders as a percentage of average tangible common equity and is calculated as core earnings to common shareholders /
average tangible common equity. Core earnings to common shareholders is net earnings to common shareholders for the full fiscal year (before dividends paid to common
shareholders but after dividends to preference shareholders) adjusted to exclude certain items that are included in the financial results presented in accordance with
GAAP. Average tangible common equity does not include the preference shareholders' equity or goodwill and intangible assets. For more information on the non-GAAP
financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

ROA is an indicator of profitability relative to average total assets and is intended to demonstrate how efficient management is at using the assets to generate earnings.
The ROA ratio is calculated as net income / average total assets.

Core ROATA is a non-GAAP financial measure. Core ROATA is an indicator used to assess the core profitability of average tangible assets and is intended to
demonstrate how efficiently management is utilizing its tangible assets to generate core net income. Core ROATA is calculated by taking the core income as a percentage
of average tangible assets and is calculated as core net income / average tangible assets. Core net income is the net income adjusted to exclude certain items that are
included in the financial results presented in accordance with GAAP. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results -
Reconciliation of Non-GAAP Financial Measures".

(5) NIM is a performance metric that examines how successful the Bank's investment decisions are compared to its cost of funding assets and is expressed as net interest
income as a percentage of average interest-earning assets. NIM is calculated as net interest income before provision for credit losses / average interest-earning assets.
Net interest income is the interest earned on cash and cash equivalents, investments, loans and other interest earning assets minus the interest paid for deposits, short-
term borrowings and long-term debt. The average interest-earning assets is calculated using daily average balances of interest-earning assets.

(6)

(7)

(8)

(9)

Efficiency margin is a non-GAAP financial measure. Efficiency margin is an indicator used to assess operating efficiencies and is intended to demonstrate how efficiently
management is controlling expenses relative to generating revenues. The efficiency margin is calculated by taking the non-interest expenses as a percentage of total net
revenue before total other gains (losses) and provisions for credit losses, and is calculated as (non-interest expense - amortization of intangible assets) / (total non-interest
income + net interest income before provision for credit losses). For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results -
Reconciliation of Non-GAAP Financial Measures".

The core efficiency ratio is a non-GAAP financial measure. The core efficiency ratio is an indicator used to assess operating efficiencies and is intended to demonstrate
how efficiently management is controlling expenses relative to generating revenues on our core activities. The core efficiency ratio is calculated by taking the core non-
interest expenses as a percentage of total net revenue before provision for credit losses and other gains and losses and is calculated as (core non-interest expenses -
amortization of intangible assets) / (core non-interest income + core net interest income before provision for credit losses). Core non-interest expenses exclude certain
items that are included in the financial results presented in accordance with GAAP including income taxes and amortization of intangible assets. For more information on
the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

The fee income ratio is a measure used to determine the proportion of revenues derived from non-interest income sources. The ratio is calculated as non-interest income /
(non-interest income + net interest income after provision for credit losses).

The Bank's regulatory capital is determined in accordance with Basel III guidelines as issued by the BMA. The total capital ratio measures the amount of the Bank's capital
in relation to the amount of risk it is taking. All banks must ensure that a reasonable proportion of their risk is covered by permanent capital. Under Basel III, Pillar I, banks
must maintain a minimum total capital ratio of 13.5%, inclusive of all capital buffers. In effect, this means that 13.5% of the RWA must be covered by permanent or near

permanent capital. The risk weighting process takes into account the relative risk of various types of lending and asset placements. The higher the capital adequacy ratio a
bank has, the greater the level of unexpected losses it can absorb before becoming insolvent. The tier 1 capital ratio is the ratio of the Bank's core equity capital to its total
RWA. RWA is the total of all assets held by the Bank weighted by credit risk according to a formula determined by the BMA which follows the BCBS guidelines in setting
formulas for asset risk weights. The CET1 ratio is equivalent to the tier 1 capital ratio except that it only includes common equity in the numerator and we must maintain a
minimum CET1 ratio of 10%. The Leverage Ratio is calculated by dividing tier 1 capital by an exposure measure and banks must maintain a minimum Leverage Ratio of
5.0%. The exposure measure consists of total assets (excluding items deducted from tier 1 capital) and certain off balance sheet items converted into credit exposure
equivalents as well as adjustments for derivatives to reflect credit and other risks.

(10) The TCE/TA ratio is a non-GAAP financial measure. The TCE/TA ratio is a measure used to determine how significant of an unexpected loss can be incurred by the Bank
before other forms of capital, other than common equity, are impacted. The TCE/TA ratio is calculated as (common equity - intangible assets - goodwill) / tangible assets.
Tangible common equity does not include the preference shareholders' equity or goodwill and intangible assets. Tangible assets are the Bank's total assets from
continuing operations less goodwill and intangibles. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-
GAAP Financial Measures".

(11) The TE/TA ratio is a non-GAAP financial measure. The TE/TA ratio is a measure used to determine how much loss the Bank can absorb before subordinated debt capital

is impacted. The TE/TA ratio is calculated as (total shareholders' equity - intangible assets - goodwill) / tangible assets. Tangible assets are the Bank's total assets from
continuing operations less intangible assets and goodwill. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of
Non-GAAP Financial Measures".

(12) The NPA ratio is an indicator of the credit quality of the Bank's total assets by expressing the non-performing assets as a percentage of total assets. The NPA ratio is

calculated as (gross non-accrual loans + accruing loans past due 90 days + OREO) / total assets.

(13) The NACL ratio is an indicator used to assess the credit performance of the Bank's loan portfolio by calculating the non-accrual loans as a percentage of loans. The NACL

ratio is calculated as gross non-accrual loans / gross total loans. Note the reference to gross implies the amounts prior to loan allowances for credit losses.

(14) The NPL ratio is an indicator used to assess the credit performance of the Bank's loan portfolio by calculating the non-performing loans as a percentage of loans. The NPL

ratio is calculated as total gross non-performing loans / total gross loans.

(15) The NCO ratio is an indicator used to assess the net credit loss of the Bank's loan portfolio by calculating the net charge-offs as a percentage of average total loans. The
NCO ratio is calculated as net charge-off expense / average total loans. Average total loan is calculated as the average of the month-end asset balances during the
relevant period.

(16) Core net income is a non-GAAP financial measure. Core net income measures net income on a core basis. Core net income is calculated by adjusting net income for
income or expense items which are not representative of the ongoing operations of our business. For a reconciliation of core net income to net income, see Item 5.A.
"Operating Results - Reconciliation of Non-GAAP Financial Measures".

(17) CEACS is a non-GAAP financial measure. CEACS measures profitability attributable to common shareholders on a core basis. For a reconciliation of CEACS to net

income, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(18) Core net income per common share — fully diluted is a non-GAAP financial measure. Core net income per common share — fully diluted measures core profitability

attributable to common shareholders on a per share basis. For a reconciliation to net income per share, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP
Financial Measures".

(19) Common equity per share is calculated as total common equity / number of common shares issued and outstanding at period end.

Reconciliation of Non-GAAP Financial Measures

The tables below present computations of earnings and certain other financial measures, which exclude certain significant items that are included in the financial results

presented in accordance with GAAP.

We focus on core net income in many of these measures and ratios, which we calculate by adjusting net income for income or expense items which are not
representative of the ongoing operations of our business, which results in non-core gains, losses and expense measures. Core net income includes revenue, gains, losses and
expense items incurred in the normal course of business. We consider the normal course of business to be the general operations of our business lines of banking and wealth
management. We believe that expressing earnings and certain other financial measures excluding these non-core items provides a meaningful base for period-to-period
comparisons, which management believes will assist investors in analyzing the operating results of the Bank and predicting future performance. Non-core items are determined
by the CFO in conjunction with the CEO, and approved by our Board of Directors. Consideration is given as to whether the expense, gain or loss is a result of exceptional
circumstances or other decisions made not in the normal course of business. Items which are not in the normal course of business, such as business acquisition costs or
impairment losses, or a result of exceptional circumstances, such as business restructuring costs, are considered non-core. These non-GAAP financial measures based on core
net income are also used by management to assess the performance of the Bank's business because management does not consider the activities related to the adjustments to
be indications of core operations. We believe that presentation of these non-GAAP financial measures will permit investors to assess the performance of the Bank on the same
basis as that applied by management. Management and the Board utilize these non-GAAP financial measures as follows:

• Preparation of the Bank's operating budgets;

• Quarterly financial performance reporting; and

• Monthly reporting of consolidated results (management reporting only).

We calculate core net income attributable to common shareholders by deducting preference dividends and guarantee fees from core net income. We calculate core net

income per common share by dividing the core net income attributable to common shareholders by the average number of common shares issued and outstanding during the
relevant period.

The core efficiency ratio (non-GAAP), which is a measure of productivity, is generally calculated by taking the core non-interest expenses (which is the total non-interest
expenses excluding non-core non-interest expenses) as a percentage of total net revenue before provision for credit losses and other gains and losses and is calculated as (core
non-interest expenses - amortization of intangible assets) / (core non-interest income + core net interest income before provision for credit losses). Management uses this ratio to
monitor performance regarding the efficiency of expense management and believes this measure provides meaningful information to investors.

Tangible common shareholders' equity ratios and tangible total asset ratios have become a focus of some investors in analyzing the capital position of the Bank absent
the effects of intangible assets and preference shareholders' equity. The BMA and other banking regulatory bodies assess a bank's capital adequacy based on CET1 capital, the
calculation of which is codified in the Basel III framework as implemented by the BMA. Because tangible common shareholders' equity and tangible total assets are not formally
defined by GAAP, these measures are considered to be non-GAAP financial measures and other entities may calculate them differently. Since analysts and banking regulators
may assess the Bank's capital adequacy using tangible common shareholders' equity or tangible assets, the Bank believes that it is useful to provide investors the ability to
assess the Bank's capital adequacy on this same basis. The Bank calculates tangible common equity and tangible total assets on a period-end basis. The Bank also measures

performance relative to core net income over average tangible common shareholders' equity and average tangible assets to monitor performance and efficiency relative to the
Bank's capital adequacy.

We believe the non-GAAP financial measures presented in this report provide useful information to management and investors that is supplementary to our financial

condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of
limitations. As such, these non-GAAP financial measures should not be viewed as a substitute for results determined in accordance with GAAP, and they are not necessarily
comparable to non-GAAP financial measures that other companies use.

The following tables provide: (1) a reconciliation of net income (GAAP) to core net income and core net income attributable to common shareholders (non-GAAP), (2) a

computation of core net income attributable to common shareholders per common share fully diluted (non-GAAP), (3) a reconciliation of average and total shareholders' equity
(GAAP) to average and total equity and average tangible common equity (non-GAAP), (4) a computation of core return to average tangible common equity (non-GAAP), (5) a
reconciliation of average total assets (GAAP) to average tangible assets (non-GAAP), (6) a computation of core return on average tangible assets (non-GAAP), (7) a
computation of tangible common equity to tangible assets (non-GAAP), (8) a computation of tangible total equity to tangible assets (non-GAAP), (9) a reconciliation of non-
interest expenses (GAAP) to core non-interest expenses (non-GAAP), (10) a computation of the efficiency ratio (non-GAAP), and (11) a computation of the core efficiency ratio
(non-GAAP).

(in millions of $, unless otherwise indicated)

Reconciliation of net income (GAAP) to core net income (non-GAAP)

Net income

Non-core (gains), losses and expenses

Non-core (gains) losses

Distribution from equity method investment(1)
Gain on disposal of Visa Inc. Class B shares(2)

Total non-core (gains) losses

Non-core expenses

Early retirement program, redundancies and other non-core compensation costs(3)
Tax compliance review costs(4)
Provision in connection with tax compliance review(4)
Total non-core expenses

Total non-core (gains), losses and expenses

Core net income attributable to common shareholders

Reconciliation of return on equity (GAAP) to core return on average tangible common equity (non-GAAP)

Core net income attributable to common shareholders

Average common equity

Less: average goodwill and intangible assets

Average tangible common equity

Return on equity

Core return on average tangible common equity
Reconciliation of diluted earnings per share (GAAP) to core earnings per common share fully diluted (non-
GAAP)

Adjusted weighted average number of diluted common shares (in thousands)

Earnings per common share fully diluted

Non-core items per share

Core earnings per common share fully diluted

Reconciliation of return on average assets (GAAP) to core return on average tangible assets (non-GAAP)

Total average assets

Less: average goodwill and intangible assets

Average tangible assets

Return on average assets

Core return on average tangible assets

For the year ended December 31

2022

2021

2020

214.0

162.7

147.2

—

1.0

0.4

0.2

1.7

—

(0.9)

1.5

0.2

0.1

1.8

0.9

(0.7)

—

(0.7)

8.0

—

8.0

7.3

215.7

163.6

154.5

D=B+C

E=A+D

215.7

163.6

154.5

A/F

E/G

A/J

D/F

A/G

E/H

833.2

965.7

981.0

(78.5)

(90.0)

(92.3)

754.7

875.8

888.8

25.7 %

28.6 %

16.8 %

18.7 %

15.0 %

17.3 %

49.9

4.29

0.04

4.33

49.9

3.26

0.02

3.28

50.9

2.90

0.14

3.04

14,596.1

15,261.8

13,618.2

(78.5)

(90.0)

(92.3)

14,517.6

15,171.9

13,525.9

1.5 %

1.1 %

(in millions of $, unless otherwise indicated)

Tangible equity to tangible assets

Shareholders' equity

Less: goodwill and intangible assets

Tangible common equity

Total assets

Less: goodwill and intangible assets

Tangible assets

Tangible common equity to tangible assets

Efficiency ratio

Non-interest expenses

Less: amortization of intangibles

Non-interest expenses before amortization of intangibles

Non-interest income

Net interest income before provision for credit losses

Net revenue before provision for credit losses and other gains/losses

Efficiency ratio

Core efficiency ratio

Non-interest expenses

Less: non-core expenses

Less: amortization of intangibles

Core non-interest expenses before amortization of intangibles

Core revenue before other gains and losses and provision for credit losses

Core efficiency ratio

______________________________

For the year ended December 31

2022

2021

2020

864.8

(74.4)

790.4

977.5

(86.1)

891.4

981.9

(92.8)

889.1

14,306.1

15,335.2

14,738.6

(74.4)

(86.1)

(92.8)

14,231.7

15,249.1

14,645.8

5.6 %

5.8 %

6.1 %

331.6

(5.7)

325.9

206.6

343.6

550.2

333.9

(6.0)

327.9

198.1

299.8

497.9

344.6

(5.8)

338.8

183.9

317.6

501.5

59.2 %

65.9 %

67.6 %

331.6

333.9

344.6

(1.7)

(5.7)

324.2

550.2

(1.8)

(6.0)

326.1

497.9

(8.0)

(5.8)

330.8

501.5

I/J

K/L

M/N

58.9 %

65.5 %

66.0 %

(1)

(2)

(3)

Relates to gain on distribution from an equity method investment as a result of the sale of a legacy business interest.

Relates to gain on disposal of Visa Inc. Class B shares which were received as part of the restructuring of Visa U.S.A. in 2007.

In 2020, primarily relates to the efficiency program, including voluntary separation, early retirement and redundancy costs. Management does not consider the costs
associated with these projects to be core to the strategy of the business.

In 2021, primarily relates to redundancy costs associated with the transfer of Channel Islands banking operations functions from Mauritius to Butterfield's service centers in
Canada and Guernsey.

In 2022, primarily relates to costs associated with the departure of a senior executive.

(4)

Relates to the professional fees and final settlement of the US Department of Justice inquiry which commenced in 2013 and the settlement of a non-US corporate income
tax inquiry in connection with the commercial affairs of a legacy custody client.

The following charts show the trajectory of our performance from 2018 to 2022:

____________________________

(1)

(2)

Core Net Income to Common is a non-GAAP financial measure that is calculated by adjusting net income for income or expense items which management
considers not to be representative of the ongoing operations of our business and preference share dividends, guarantee fees and premiums paid on preference
share repurchases and redemptions. For a reconciliation of Core Net Income to Common to GAAP net income to common, see Item 5.A. "Operating Results -
Reconciliation of Non-GAAP Financial Measures".

Core Earnings per Common Share Fully Diluted is a non-GAAP financial measure that is calculated by dividing Core Earnings to Common by the weighted
average shares outstanding. For a reconciliation of Core Earnings per Common Share Fully Diluted to GAAP earnings per share, see Item 5.A. "Operating
Results - Reconciliation of Non-GAAP Financial Measures".

Our return on equity for 2022 of 25.7% and our Core ROATCE1 for 2022 of 28.6% were driven by a number of factors, including: significant fee income with historically
low capital requirements; increasing market interest rates benefiting net interest income; reductions in AOCIL, specifically in the AFS investment portfolio due to higher US dollar
market interest rates; and our operations in corporate income tax neutral jurisdictions. As a result, our business generated core net income in 2022 well in excess of that needed
to execute our organic balance sheet growth strategy.

GAAP Net Income to Common ($ in millions)$195.2$177.1$147.2$162.7$214.020182019202020212022GAAP Earnings per Common Share Fully Diluted$3.50$3.30$2.90$3.26$4.2920182019202020212022Core Net Income to Common ($ in millions)¹$197.0$197.9$154.5$163.6$215.720182019202020212022Core Earnings per Common Share Fully Diluted²$3.53$3.69$3.04$3.28$4.3320182019202020212022

____________________________
(1)

Core ROATCE is a non-GAAP financial measure that is calculated by dividing core earnings to common shareholders by average tangible common equity. Average
tangible common equity does not include the preference shareholders' equity or goodwill and intangible assets. For more information on the non-GAAP financial
measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

The following chart shows total deposit trends for 2018 to 2022:

Return on Equity23.1%19.1%15.0%16.8%25.7%20182019202020212022Core ROATCE¹25.6%23.4%17.3%18.7%28.6%20182019202020212022Deposit Balance and Funding Costs ($ in billions)$9.5$12.4$13.3$13.9$13.00.18%0.47%0.21%0.11%0.34%Period-End Total DepositsCost of Deposit Funding20182019202020212022

Historically, the markets in which we operate generate fewer loans than deposits, which has led us to take a conservative approach to managing our balance sheet. We

accomplish this by maintaining a large cash balance and investing in high quality and liquid securities. The following chart illustrates our asset composition from 2018 to 2022:

As at December 31, 2022, 15% of our balance sheet was cash and cash equivalents, which included cash and demand deposits with banks, unrestricted term deposits,

and treasury bills with a maturity of less than three months.

In addition to maintaining a large cash and cash equivalents balance, we also have a large and conservative securities investment portfolio. We have a disciplined

investment portfolio selection process and invest in highly rated securities. We also seek to ensure that our portfolio remains liquid across market cycles: 94.7% of our portfolio
was invested in US government treasuries and mortgage-backed securities issued by US governmental agencies. Our investment strategy as at December 31, 2022, aims to
align the behavioral interest rate risk profile of our assets and liabilities — as at December 31, 2022, the average duration of our AFS investment portfolio was 3.6 years, the
average duration of our HTM investment portfolio was 6.5 years, and the average duration of our total investment portfolio was 5.4 years. As at December 31, 2022, the total
carrying value of our AFS investment portfolio was $2.0 billion, and the total carrying value of our HTM investment portfolio was $3.7 billion.

The following charts show the composition of our investment portfolio by rating and asset type from 2018 to 2022:

The combination of our significant cash and securities portfolios helps drive our capital efficient balance sheet, with risk-weighted assets equal to 33.9% of our total

assets and a Basel III total capital ratio of 24.1%, each as at December 31, 2022.

Our loan underwriting process requires that we complete a full credit assessment of every customer prior to committing to a loan, which we believe has resulted in a

high quality loan portfolio. Our lending markets do not have secondary markets for loans and as such we hold all of our originated loans on our balance sheet. In 2021 and 2022,

Balance Sheet Composition - Total Assets ($ in billions)37.5%36.9%35.0%34.2%35.6%39.5%31.9%33.0%40.7%40.0%19.1%18.3%22.3%14.2%14.7%3.9%12.9%9.7%10.9%9.7%Loans Securities Cash & equivalentsOther assets20182019202020212022Investment Portfolio - Rating96%99%99%95%96%2%1%4%4%2%1%AAAAAA20182019202020212022Investment Portfolio - Asset Type91%96%98%95%95%2%3%4%3%1%1%1%1%1%1%5%4%US Government & AgencyCorporate DebtCommercialABS/RMBSNon-US Gov't20182019202020212022net charge-offs represented 0.05% and 0.11%, respectively, of average loans. As at December 31, 2022, our non-accrual loan balance was $63.1 million, or 1.2% of total gross
loans, and our loans past due were $108.7 million or 2.1% of total gross loans, of which 77.7% were full recourse residential mortgages. As at December 31, 2022, our loan
portfolio consisted of 57% floating-rate loans and 43% fixed-rate loans generally with contractual rate resets of 3 to 5 years.

The following chart shows the segment composition of our loan portfolio from 2018 to 2022:

Our loan portfolio has exhibited stability over time. The following chart shows loan portfolio trends for 2018 to 2022:

The domestic lending markets in Bermuda, the Cayman Islands, and the Channel Islands have a limited number of participants and significant barriers to entry. 69.7%
of our loan balances were residential mortgages as at December 31, 2022. These loans are attractive for a number of reasons. Our mortgages have exhibited predictable cash
flows, with historically negligible refinancing activity due to significant transaction costs to refinance in these lending markets. Additionally, our mortgages in these markets have
historically benefited from a manual underwriting process, low LTVs (with 59% of residential loans below 70% LTV as at December 31, 2022), and a full recourse legal system.

Loan Portfolio Composition by Origination - Geography56%44%44%39%37%19%18%18%20%24%17%21%21%25%22%7%17%17%14%14%1%2%3%BermudaCaymanUKGuernseyOther20182019202020212022Loan Balance and Yield ($ in billions)65%62%66%69%70%14%15%15%13%12%13%11%10%9%9%3%7%5%5%6%4%5%4%4%4%$4.0$5.1$5.2$5.2$5.15.47%5.36%4.54%4.26%4.90%ResidentialCommercial Real EstateOther CommercialGovernmentConsumerLoan Yield20182019202020212022We have also generated balanced sources of non-interest income from a well-diversified customer base. For the five-year period ended December 31, 2022, our non-
interest income is evenly split between banking which consists of banking and foreign exchange revenue, and wealth management, which consists of trust, asset management,
and custody and other administration services.

Fee income from a typical trust client serviced in our wealth management business line is driven primarily by the size and complexity of our clients’ assets and holdings,

which are generally diversified across multiple geographies; the performance of these businesses is not typically linked to the performance of the domestic economies of our
local markets. Non-interest income represented 37.7% of our total Net Revenue (our fee income ratio) in 2022, and contributed significantly to the Company’s high Core
ROATCE and excess capital generation as limited capital is required for our fee income business.

The following chart shows our various sources of non-interest income from 2018 to 2022:

2022 Non-Interest Income: $206.6 million / 37.7% Fee Income Ratio

_____________
(1)

Foreign exchange revenue represents income generated from client-driven transactions in the normal course of business. We do not engage in proprietary trading.

Growth Opportunities

We expect that, all else being equal, a rising interest rate environment would increase our net interest income before provision for credit losses because an increase in

our cost of deposits would lag an increase in yield of our cash, securities and loans. In addition, a significant portion of our deposits are non-interest bearing (23% as at
December 31, 2022), and as a result, a portion of our funding is only partially sensitive to rising rates. Our non-interest bearing deposit balances have historically exhibited low
correlation with market interest rates, a behavior that we attribute in part to a sizable client base that utilizes our bank for custody and clearing services as well as cash
management purposes. Potential changes to our net interest income in hypothetical rising and declining rate scenarios, measured over a 12-month period, are presented in the
chart below (these projections assume parallel shifts of the yield curves occurring immediately and no changes in other potential variables):

Non-interest Income¹15%16%16%15%14%27%27%26%26%28%20%20%20%22%23%30%28%28%27%25%5%7%8%8%7%3%2%3%2%3%Asset ManagementBankingForeign Exchange RevenueTrustCustody and Other Administration ServicesOther Non-Interest Income20182019202020212022A negative 100 basis points interest rate shock reflects a reduction in projected 12-month net interest income of 5.6% compared to the flat rate scenario. The loss of

income is driven by lower loan and investment yields, which more than offset reduced rates paid on deposits. Mitigating against the loss of income is the potential to charge
negative interest rates on deposits (which we did for certain currencies in 2020 and 2021 in the low interest rate environment) and certain loans that have rate floors. Refer to
discussion under "- Risk Management".

In addition, we are well-positioned as an acquirer of certain businesses, in private trust and banking. Our acquisition strategy seeks to capitalize on opportunities
created by international financial institutions and trust companies that wish to simplify their businesses and deploy capital to other markets or business lines. We consider a wide
range of potential acquisition opportunities, and we have a well-defined, disciplined approach to identifying potential acquisition targets across numerous criteria including:
geography, business alignment, size, timing, quality, buyer universe and financial hurdles. Our focus has been on the private trust business and banking in our core markets
where we have expertise, scale and a strong brand.

In October 2017, we entered into an agreement to acquire Deutsche Bank’s Global Trust Solutions business, excluding its US operations. This transaction added the

ongoing management and administration of the GTS portfolio, comprising approximately 1,000 trust structures for approximately 900 private clients in Guernsey, Switzerland, the
Cayman Islands, and Singapore. As part of the deal, we also purchased a service company in Mauritius to provide operations and support services to the Cayman and Channel
Islands banking and custody businesses. This transaction was completed in March 2018.

In February 2018, we entered into an agreement to acquire Deutsche Bank’s banking and custody business in the Cayman Islands, Jersey and Guernsey, which

provide services primarily to financial intermediaries and corporate clients. The Bank began to onboard certain customer deposits relating to the acquisition in 2018, and this
activity was completed in the first half of 2019.

In April 2019, we entered into an agreement to acquire ABN AMRO (Channel Islands) Limited which provides banking, investment management and custody products

to three distinct client groups, including trusts, private clients, and funds in Jersey and Guernsey. The transaction was completed in July 2019.

In September 2022, we entered into an agreement to acquire the Credit Suisse global trust businesses operating in Singapore, Guernsey and The Bahamas. This

transaction is expected to close in the latter half of 2023.

Our relationship-driven business model and international corporate clientele have allowed us to develop a stable core deposit base with historically low funding costs.
We believe our customers’ deposit activity has historically been relatively inelastic to deposit pricing given the nature of corporate activity and competition in retail deposit taking
in our segments. From 2018 to 2022, deposits have grown at a CAGR of approximately at +5% in the Cayman Islands and +21% in the Channel Islands and the UK while it has
remained flat in Bermuda, taking into account the Deutsche Bank's banking and custody businesses acquisition in February 2018 that added $0.9 billion of new deposits, and the
ABN AMRO (Channel Islands) acquisition in April 2019 that added $3.5 billion in deposits. As at December 31, 2022, we had $13.0 billion in deposits at a cost of 0.34%, of which
23% were non-interest bearing demand deposits, 53% were interest bearing demand deposits with a weighted-average cost of 0.12%, and 24% were term deposits with a
weighted-average cost of 2.54% and an average contractual or remaining maturity of 101 days. We believe the current market conditions in Bermuda, the Cayman Islands, and
the Channel Islands will allow us to continue to benefit from favorable deposit pricing, despite the pricing pressure experienced in the Channel Islands in 2022.

Consolidated Results of Operations and Discussion for Fiscal Years Ended December 31, 2022, 2021 and 2020

Net Revenue

2022 vs. 2021

Total net revenue before provision for credit losses and other gains and losses for 2022 was $550.2 million, up $52.3 million, or 10.5%, from 2021. Net interest income

before provision for credit losses increased from $299.8 million in 2021 to $343.6 million in 2022, an increase of $43.8 million, or 14.6%, which was primarily due to higher
margins on all interest-earning assets and liabilities as major central banks raised interest rates with 10-year US Treasuries reaching their highest levels since 2008. Loan
interest income increased by $27.8 million to $249.4 million as yields increased by 64 basis points. The average volume of loans outstanding decreased by $106.4 million. The
decrease was driven by the Channel Islands and UK segment as a result of a decrease in the GBP/USD foreign exchange rate, the maturity and early repayment of a few
commercial facilities and partially offset by the extension of a government facility in the Cayman Islands. Investment interest income increased by $13.9 million to $115.8 million,
the average volume of investments increased by $0.4 billion, and yields on investments increased by 12 basis points. Deposits with banks interest income increased by $31.8
million, or 2,199.2%, whilst the average volume decreased by $839.6 million as a result of reduced depositor funding. The total cost of deposits increased by $29.7 million or
191.6%, reflecting a 23 basis points increase to 34 basis points, driven by pricing pressure in the more competitive Channel Islands markets. In addition, non-interest income
was up by $8.5 million, or 4.3%, principally attributable to volume-driven increases in both banking and foreign exchange revenue coupled with one-off loan restructuring and
breakage fees.

Net Interest Income Sensitivity(5.6)%0.0%1.6%3.3%-100bpsFlat+100bps+200bps
2021 vs. 2020

Total net revenue before provision for credit losses and other gains and losses for 2021 was $497.9 million, down $3.5 million, or 0.7%, from 2020. Net interest income

before provision for credit losses decreased from $317.6 million in 2020 to $299.8 million in 2021, a decline of $17.8 million, or 5.6%, and was due to margin declines across
interest earning assets driven by lower global market interest rates. Loan interest income decreased by $9.1 million to $221.5 million as yields decreased by 28 basis points due
to lower rates, the repayment of a few large commercial facilities and paydowns in the higher-yielding Bermuda residential mortgage portfolio. The average volume of loans
outstanding increased by $138.2 million. Cayman and the Channel Islands and UK segments saw growth in their residential mortgage portfolios, which was partially offset by the
repayment of a number of commercial and commercial real estate facilities in Bermuda and the Channel Islands and UK segments during the period. Investment interest income
decreased by $7.3 million to $101.9 million, the average volume of investments increased by $1.2 billion, and yields on investments decreased by 62 basis points due to the
aforementioned decrease in global market interest rates, increasing prepayment speeds with re-investment at lower rates in the investment portfolio. Deposits with banks interest
income decreased by $10.7 million, or 88.1%, the average volume increased by $441.6 million which was driven by corporate deposit funding increases in Cayman and the
Channel Islands, and partially offset by expected corporate deposit decreases in Bermuda. The total cost of deposits improved by $9.6 million or 38.3%, reflecting a 10 basis
points decrease to 11 basis points. In addition, non-interest income was up by $14.2 million, or 7.7%, principally attributable to volume-driven increases in both banking and
foreign exchange revenue coupled with higher facility non-utilization fees and one-off loan breakage fees.

Net Interest Income Before Provision for Credit Losses

Net interest income is the amount of interest earned on our interest-earning assets less interest paid on our interest bearing liabilities. There are several drivers of the

change in net interest income, including changes in the volume and mix of interest-earning assets and interest bearing liabilities, their relative sensitivity to interest rate
movements, and the proportion of non-interest bearing sources of funds, such as equity and non-interest bearing current accounts.

The following table presents the components of net interest income for the years ended December 31, 2022, 2021 and 2020:

Year ended December 31

Average
balance
($)

2022

Interest
($)

Average
rate
(%)

Average
balance
($)

2021

Interest
($)

Average
rate
(%)

Average
balance
($)

2020

Interest
($)

Average
rate
(%)

3,132.6

6,058.1

5,093.5

14,284.3

370.3

33.2

115.8

249.4

398.4

1.06 %

3,972.2

1.91 %

5,693.2

4.90 %

5,199.9

2.79 % 14,865.3

—

367.4

1.4

101.9

221.5

324.9

0.04 %

3,530.6

1.79 %

4,512.5

4.26 %

5,061.7

2.19 % 13,104.9

—

395.4

12.1

109.2

230.7

352.0

0.34 %

2.41 %

4.54 %

2.68 %

—

14,654.6

398.4

2.72 % 15,232.7

324.9

2.13 % 13,500.3

352.0

2.60 %

10,269.1

(45.2)

(0.44) % 10,845.3

(15.5)

(0.14) %

9,710.8

(25.1)

(0.26) %

0.6

172.1

10,441.8

3,033.3

284.3

—

(3.95) %

—

(9.6)

(54.8)

(5.58) %

171.7

(0.52) % 11,016.9

—

(9.6)

(25.1)

— %

—

(5.59) %

173.4

(0.23) %

9,884.2

—

(9.3)

(34.4)

— %

(5.35) %

(0.35) %

2,895.0

295.1

2,363.9

280.6

13,759.3

(54.8)

(0.40) % 14,207.0

(25.1)

(0.18) % 12,528.6

(34.4)

(0.27) %

895.3

1,025.7

15,232.7

3,848.4

971.7

13,500.3

3,220.7

343.6

2.41 %

299.8

2.02 %

317.6

2.42 %

(in millions of $)

Assets
Cash and cash equivalents, securities

purchased under agreements to resell, and
short-term investments

Investment in securities

Loans

Interest earning assets

Other assets

Total assets

Liabilities

Deposits
Securities sold under agreement to

repurchase

Long-term debt

Interest bearing liabilities

Non-interest bearing current accounts

Other liabilities

Total liabilities

Shareholders' equity

Total liabilities and shareholders' equity

14,654.6

Non-interest bearing funds net of non-interest

earning assets (free balance)

3,842.5

Net interest margin

2022 vs. 2021

Net interest income before provision for credit losses of $343.6 million in 2022 represented an increase of $43.8 million (or 14.6%) compared to 2021. Net interest

income is generated by our main segments of Bermuda, the Cayman Islands, and the Channel Islands and the UK. Interest income increased by $73.5 million in 2022, which
was driven by higher market interest rates across the yield curve as major central banks increased rates in response to inflation concerns.

Loan interest income increased in 2022 by $27.8 million as base rate increases in all segments increased during the year. The yield pick-up was partially offset by a

decline in average balances driven by the maturity and early repayment of a few commercial facilities.

Investment interest income increased by $13.9 million, primarily driven by the increase in the US treasury rates. The overall duration of the portfolio at year-end was 5.4

years, an increase of 1.2 years from 2021 as prepayments slowed in response to the rising rate environment.

Interest bearing liability costs increased to 52 basis points, which resulted in an increase in interest expense by $29.7 million, attributable to the active repricing of

deposits in response to market conditions, particularly in the Channel Islands and UK segment.

Average free balances for 2022 were $3.8 billion (2021: $3.8 billion), including non-interest bearing current accounts of $3.0 billion (2021: $2.9 billion), shareholders'

equity of $895.3 million (2021: $1,025.7 million), net of other assets and other liabilities totaling $86.0 million (2021: $72.3 million). See "-Risk Management" below for more
information on how interest rate risk is managed.

2021 vs. 2020

Net interest income before provision for credit losses of $299.8 million in 2021 represented a decrease of $17.8 million (or 5.6%) over our net interest income before

provision for credit losses in 2020. Net interest income is generated by our main segments of Bermuda, the Cayman Islands, and the Channel Islands and the UK. Interest
income decreased by $27.1 million in 2021, which was driven by lower market interest rates across the yield curve.

Loan interest income decreased in 2021 by $9.1 million due to lower rates, the repayment of a few large commercial facilities and paydowns in the higher-yielding

Bermuda residential mortgage portfolio.

Investment interest income decreased by $7.3 million, primarily driven by increased paydowns and reinvestment at lower yields in the low market rate environment.

This was partially offset by an increase of $1.2 billion in average investment balances which was driven by both increased depositor funding and the redeployment of funds from
cash and cash equivalents. The overall duration of the portfolio at year-end was 4.2 years, an increase of 1.5 years from 2020.

Interest bearing liability costs decreased to 23 basis points, which resulted in a decrease in interest expense of $9.3 million, attributable to the active repricing of

deposits in response to market conditions.

Average free balances for 2021 were $3.8 billion (2020: $3.2 billion), including non-interest bearing current accounts of $2.9 billion (2020: $2.4 billion), shareholders'
equity of $1,025.7 million (2020: $971.7 million), net of other assets and other liabilities totaling $72.3 million (2020: $114.9 million). See "-Risk Management" below for more
information on how interest rate risk is managed.

Provision for Credit Losses

2022 vs. 2021

Our net provision for credit losses in 2022 was a charge of $2.4 million compared to a release of $3.1 million in 2021. The movement is due to weaker macroeconomic
forecasts impacting future expected credit loss estimates, the extension of a large, long-term government facility in the Cayman Islands and charge-offs on a commercial facility.

2021 vs. 2020

Our net provision for credit losses in 2021 was a release of $3.1 million compared to a charge of $8.5 million in 2020. Provisions decreased due to both the

improvement in macroeconomic forecasts impacting future expected credit loss estimates and a reduction in non-performing loans.

Other Gains (Losses)

The following table represents the components of other gains (losses) for the years ended December 31, 2022, 2021 and 2020:

(in millions of $)

Net gains (losses) on equity securities

Net realized gains (losses) on available-for-sale investments

Net gains (losses) on other real estate owned

Net other gains (losses)

Total other gains (losses)

Net Gains (Losses) on Equity Securities

For the year ended December 31

Dollar Change

Percent Change

2022

2021

2020

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

—

0.4

1.1

1.5

0.1

(0.2)

(0.1)

(1.2)

(1.4)

0.7

1.2

(0.1)

(0.6)

1.2

(0.1)

0.2

0.5

2.3

2.9

(0.6)

(1.4)

—

(0.6)

(2.6)

(100.0) %

(500.0) %

(191.7) %

(207.1) %

(85.7) %

(116.7) %

— %

100.0 %

(216.7) %

The balance in 2021 reflected the net realized gain on the sale of seed investments in Butterfield mutual funds. The balance in 2020 reflected lower mark-to-market

gains on equity securities, partly due to mark-to-market losses recognized earlier in 2020 due to market volatility as a result of the COVID-19 pandemic.

Net Realized Gains (Losses) on Available-for-Sale Investments

Net realized losses of $0.2 million were recorded in 2021 and gains of $1.2 million in 2020. In 2021, the loss was due to the strategic disposal of lower yielding explicitly

guaranteed and implicitly guaranteed US government and federal agency securities. In 2020, the gain was due to the strategic decision to liquidate floating rate and purchase
fixed rate US government and federal agency securities.

Net Gains (Losses) on Other Real Estate Owned

Valuation adjustments and realized gains and losses related to real estate held for sale resulted in gains of $0.4 million in 2022 compared to losses of $0.1 million in

2021 and $0.1 million in 2020. In 2022, these gains relate to the disposal of foreclosed property in the Channel Islands and UK segment. In 2021 and 2020, these losses relate to
the net revaluation losses on foreclosed properties.

Net Other Gains (Losses)

Net other gains were $1.1 million in 2022 compared to net other losses of $1.2 million in 2021 and $0.6 million in 2020. The gains in 2022 mainly relate to the reversal
of a defined benefit settlement accounting adjustment in the Channel Islands and UK segment recorded in the previous year. The aforementioned losses in 2021 were partially
offset by a gain on the disposal of Visa Inc. Class B shares which were received as part of the restructuring of Visa U.S.A. in 2007 and which management considers to be non-
core. The losses in 2020 relate to a defined benefit pension plan adjustment offset by a distribution from an equity method investment as a result of the sale of a legacy business
interest.

Non-Interest Income

Non-interest income represents capital efficient and stable revenue sources for the Group. Non-interest income is derived primarily from banking, including cards,

foreign exchange commissions, asset management fees as well as trust fees. Our trust fee structure provides for varied pricing that depends primarily on the size of the
relationship and the nature of services provided. As a result, it is not always possible to draw a direct relationship between the value of client assets and the level of non-interest
income, though the trend of non-interest income generally follows the trend in client asset levels.

Total non-interest income increased by $8.5 million from $198.1 million in 2021 to $206.6 million in 2022. Non-interest income as a percentage of total net revenue

decreased from 39.5% in 2021 to 37.7% in 2022 as a result of the increased contribution of net interest income to total net revenue in the rising rate environment.

Total non-interest income increased by $14.2 million from $183.9 million in 2020 to $198.1 million in 2021. Non-interest income as a percentage of total net revenue

increased from 37.3% in 2020 to 39.5% in 2021.

The following table presents the components of non-interest income for the years ended December 31, 2022, 2021 and 2020:

(in millions of $)

Asset management

Banking

Foreign exchange revenue

Trust

Custody and other administration services

Other non-interest income

Total non-interest income

Asset Management

For the year ended December 31

Dollar change

2022

2021

2020

2021 to
2022

2020 to
2021

Percent change

2021 to
2022

2020 to
2021

29.7

57.1

47.8

52.3

13.6

6.0

29.9

51.9

43.4

52.9

15.2

4.8

29.2

47.3

37.2

50.7

13.8

5.6

206.6

198.1

183.9

(0.2)

5.2

4.4

(0.6)

(1.6)

1.2

8.5

0.7

4.6

6.2

2.2

1.4

(0.8)

14.2

(0.7) %

10.0 %

10.1 %

(1.1) %

(10.5) %

25.0 %

4.3 %

2.4 %

9.7 %

16.7 %

4.3 %

10.1 %

(14.3) %

7.7 %

Asset management revenues are generally based on the market value of assets managed and the volume of transactions and fees for other services rendered. We

provide asset management services from our offices in Bermuda, the Cayman Islands, and the Channel Islands. Revenues from asset management were $29.7 million in 2022,
compared to $29.9 million in 2021, and $29.2 million in 2020.

The table that follows shows the changes in the year-end values of clients' assets under management, sub-divided between those managed for clients on a

discretionary basis and client funds invested in mutual funds that Butterfield manages ("Butterfield Funds"):

(in millions of $)

Butterfield Funds

Other assets under management

Total assets under management

2022 vs. 2021

Year ended December 31

2022

2021

2020

1,753

3,296

5,049

1,758

3,740

5,498

2,029

3,529

5,558

Dollar Change

2021 to
2022

2020 to
2021

(5)

(444)

(449)

(271)

211

(60)

Asset management fees are generated primarily from management fees earned from Butterfield Funds and discretionary portfolios, as well as custody and brokerage

fees. AUM decreased by $0.4 billion to $5.0 billion as at December 31, 2022, compared to $5.5 billion as at December 31, 2021, driven by reduced discretionary portfolio values
in Bermuda and Cayman and the impact of the strengthening of the USD on the Channel Islands discretionary portfolio values. Asset management fees earned remained flat at
$29.7 million compared to 2021.

2021 vs. 2020

Asset management fees are generated primarily from management fees earned from Butterfield Funds and discretionary portfolios, as well as custody and brokerage
fees. AUM were relatively unchanged at $5.5 billion as at December 31, 2021, compared to $5.6 billion as at December 31, 2020. Asset management fees earned increased by
$0.7 million or 2.4% in 2021, compared to 2020. This was driven by an increase in brokerage fees coupled with market growth and new business, primarily in the Channel
Islands and Cayman Islands.

Banking

We provide a full range of community, commercial, and private banking services in select jurisdictions. Banking services are offered to individuals and small to medium-
sized businesses through branch locations, internet banking, automated teller machines, debit and credit cards, and mobile banking in Bermuda and the Cayman Islands, while
private banking services are offered in Bermuda, the Cayman Islands, and Guernsey. Banking revenues reflect loan, transaction processing, and other fees earned in these
jurisdictions.

Banking fee revenues increased by 10.0% in 2022 to $57.1 million, compared to $51.9 million in 2021, primarily due to volume-driven increases in both banking and

foreign exchange revenue coupled with one-off loan restructuring and breakage fees.

Banking fee revenues increased by 9.7% in 2021 to $51.9 million, compared to $47.3 million in 2020, primarily due to volume-driven increases from increased

economic activity and higher facility non-utilization and one-off breakage fees.

Foreign Exchange

We provide foreign exchange services in the normal course of business in all jurisdictions. The major contributors to foreign exchange revenues are Bermuda and the

Cayman Islands, accounting for 81% of our foreign exchange revenue (2021: 78%; 2020: 79%). We do not maintain a proprietary trading book. Foreign exchange income is
generated from client-driven transactions and totaled $47.8 million in 2022, compared to $43.4 million in 2021 and $37.2 million in 2020. The $4.4 million increase from 2021 to
2022 and $6.3 million increase from 2020 to 2021 were primarily due to volume-driven increases driven by market volatility in 2022 and increased economic activity in 2021.

Trust

We provide both personal and institutional fiduciary services from our operations in Bermuda, The Bahamas, the Cayman Islands, Guernsey, Singapore and
Switzerland. Revenues are derived from a combination of fixed fees, fees based on the size and complexity of the trust relationship and fees based on time spent in relation to
the range of personal trust and company administration services and pension and employee benefit trust services we provide.

In 2022, trust revenues represented 25.3% of our non-interest income, slightly down from 26.7% in 2021. In 2022, trust revenues totaled $52.3 million, $0.6 million

lower than 2021. This was driven by lower contributions by the Channel Islands and UK segment impacted by the strengthening USD as well as lower special and accounting
fees charged. This was partially offset by net new business and increased activity-based fees charged in Bermuda and Cayman.

In 2021, trust revenues represented 26.7% of our non-interest income, down from 27.5% in 2020. In 2021, trust revenues totaled $52.9 million, an increase of $2.2

million or 4.4% over 2020. This increase was driven primarily by higher activity-based fees.

Trust AUA remained relatively flat at $106.2 billion at the end of 2022 compared to the end of 2021.

Custody and Other Administration Services

Custody fees are generally based on market values of assets in custody, the volume of transactions and flat fees for other services rendered. We provide custody

services from our offices in Bermuda, Guernsey, and Jersey. In 2022, revenues were $13.6 million, a decrease of $1.6 million from 2021 due to lower market values impacting
the AUA. From 2020 to 2021, revenues increased by $1.4 million due to the on-boarding of new business.

Total AUA for the custody and other administration services business were $32.2 billion on December 31, 2022, a decrease from $36.8 billion as at December 31, 2021

and $32.4 billion as at December 31, 2020.

Other Non-Interest Income

The components of our other non-interest income for the years ended December 31, 2022, 2021 and 2020 are set forth in the following table:

(in millions of $)

Net share of earnings from equity method investments

Rental income

Other

Total other non-interest income

Year ended December 31

Dollar Change

Percent Change

2022

2021

2020

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

—

1.8

4.1

5.9

0.1

2.2

2.5

4.8

0.6

1.7

3.3

5.6

(0.1)

(0.4)

1.6

1.1

(0.4)

0.5

(0.8)

(100.0) %

(18.2) %

64.0 %

22.9 %

(66.7) %

29.4 %

(24.2) %

(14.3) %

In 2021, we recorded our net share of earnings from equity method investments as a gain of $0.1 million, a $0.4 million decrease due to lower equity pick-up by equity
method investments. Rental income decreased by $0.4 million to $1.8 million in 2022 due to a reduction in tenants as Bermuda's Head Office undergoes refurbishment. In 2021,
rental income increased by $0.5 million from 2020 to 2021 due to increased sub-let income in the Channel Islands. Increases in the "Other" category are due to the scheduled
recognition of long-held unclaimed assets.

Non-Interest Expenses

Expense management continued to be a key focus in 2022 with management targeting a 60% efficiency ratio through the cycle. Total non-interest expenses in 2022

were $331.6 million compared to $333.9 million in 2021 and $344.6 million in 2020. These figures include non-core expenses in 2022, 2021 and 2020 of $1.7 million, $1.8 million
and $8.0 million, respectively.

After adjusting for these non-core items, 2022 core expenses decreased by $2.2 million or 0.7% with a corresponding decrease in the core efficiency ratio to 58.9%

from 65.5% in 2021, driven by the uplift in revenue in the rising rate environment. From 2020 to 2021, core non-interest expenses decreased by $4.5 million with a corresponding
decrease in the core efficiency ratio to 65.5% from 66.0% in 2020.

In 2022, salaries and other employee benefits accounted for 50.1% of non-interest expenses, with technology and communications and property making up

26.6% combined.

The following table presents the components of non-interest expenses for the years ended December 31, 2022, 2021 and 2020:

(in millions of $)

Salaries and other employee benefits

Technology and communications

Professional and outside services

Property

Indirect taxes

Non-service employee benefits expense

Marketing

Amortization of intangible assets

Other non-interest expenses

Total non-interest expenses

Non-core items (Non-GAAP)

Core non-interest expenses (Non-GAAP)

Year ended December 31

Dollar Change

Percent Change

2022

2021

2020

166.2

161.3

173.7

56.7

19.6

31.4

22.0

3.8

6.4

5.7

19.8

331.6

63.8

21.4

30.9

22.1

3.9

4.6

6.0

19.9

333.9

(1.7)

(1.8)

329.9

332.1

65.2

21.3

29.4

21.3

2.6

4.4

5.8

20.9

344.6

(8.0)

336.6

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

4.9

(7.1)

(1.8)

0.6

(0.1)

1.8

(0.3)

(0.1)

(2.3)

0.1

(2.2)

(12.3)

(1.3)

0.1

1.5

0.8

1.2

0.1

0.2

(1.0)

(10.7)

6.2

(4.5)

3.0 %

(11.1) %

(8.2) %

1.9 %

(0.5) %

(2.9) %

39.4 %

(5.5) %

(0.6) %

(0.7) %

(5.6) %

(0.7) %

(7.1) %

(2.0) %

0.6 %

5.0 %

3.6 %

47.3 %

2.7 %

3.3 %

(4.7) %

(3.1) %

(77.5) %

(1.3) %

For a full reconciliation of GAAP net income to core net income, please see Item 5.A. "Operating Results — Reconciliation of Non-GAAP Financial Measures".

Salaries and Other Employee Benefits

Total salaries and other employee benefits costs were $166.2 million in 2022, an increase of $4.9 million compared to 2021. Included in 2022 were $1.0 million of non-

core expenses in relation to the departure of a senior executive. Included in 2021 were $1.5 million of non-core expenses in relation to redundancy costs associated with the
transfer of Channel Islands banking operations functions from Mauritius to Butterfield's service centers in Canada and Guernsey. In 2020, $8.0 million relates to COVID-19
related cost restructure programs (voluntary separation and redundancy costs).

Core salaries, which exclude these amounts, and other employee benefits costs were $165.2 million in 2022, up $5.3 million compared to $159.9 million in 2021

primarily due to higher staff incentive accruals and inflationary salary adjustments. From 2020 to 2021, core salaries decreased by $5.8 million primarily due to the resulting
benefits from previous restructuring programs.

Headcount on a full-time equivalency basis at the end of 2022 was 1,341, compared to 1,277 in 2021 and 1,314 in 2020. The increase in 2022 from 2021 was mostly a
result of the Service Center expansion in Halifax and Mauritius. The decrease in 2021 from 2020 was a result of the COVID-19 related cost restructuring program, which included
voluntary separation, early retirement and redundancies across all operating segments.

Technology and Communications

Technology and communication costs reflect expenses relating to the support for our IT infrastructure and decreased by $7.1 million from 2021 to 2022 and by $1.3

million from 2020 to 2021, all due to the depreciation of the Bank's core banking system outpacing costs associated with the new technology projects.

Professional and Outside Services

Professional and outside services primarily include consulting, legal, audit and other professional services. Professional and outside services costs were $19.6 million in

2022, lower compared to $21.4 million in 2021 due to lesser outsourced consultancy and legal professionals. From 2020 to 2021, professional and outside services costs were
relatively flat.

Property

Property costs, which reflect occupancy expenses, building maintenance, and depreciation of property, plant and equipment, increased by $0.6 million from 2021 to

2022 and by $1.5 million from 2020 to 2021, driven by the continued investment in property projects and renovations of our Head Office branch in Bermuda.

Indirect Taxes

These taxes reflect taxes levied in the jurisdictions in which we operate, including employee-related payroll taxes, customs duties, and business licenses. In 2022, the

expense was $22.0 million which remains flat when compared with 2021. From 2020 to 2021, indirect taxes increased by $0.8 million which mainly relates to the elevated deposit
and gross asset volumes which impact deposit insurance and financial services tax contributions, increased insurance costs, banking license fees and partially offset by lower
payroll taxes due to reduced headcount. Of the $22.0 million in indirect taxes, $17.2 million was paid to the Bermuda government agencies for payroll tax, business licenses,
deposit insurance, land taxes, and financial services tax and $4.8 million was paid to other governments for business licenses, insurance tax, land taxes and work permit fees.

Marketing

Marketing expenses reflect costs incurred in advertising and promoting our products and services. Marketing expenses totaled $6.4 million in 2022, an increase of $1.8

million compared to 2021 due to increased sponsored event costs during the year. From 2020 to 2021, marketing expenses were relatively flat.

Amortization of Intangible Assets

Intangible assets relate to client relationships acquired from business acquisitions and are amortized on a straight-line basis over their estimated useful lives, not

exceeding 15 years. The estimated lives of these acquired intangible assets are re-evaluated annually and tested for impairment. The amortization expense associated with
intangible assets was $5.7 million in 2022 compared to $6.0 million in 2021 and $5.8 million in 2020. Amortization decreased by $0.3 million from 2021 to 2022 and increased by
$0.2 million from 2020 to 2021, all due to the impact of foreign currency exchange rates.

Other Non-Interest Expenses

(in millions of $)

Stationery & supplies

Custodian & handling

Charitable donations

Professional lines insurance

Other expenses

Total other non-interest expenses

For the year ended December 31

Dollar Change

Percent Change

2022

2021

2020

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

1.0

3.4

1.1

4.2

10.1

19.8

1.0

3.4

1.1

3.9

10.4

19.9

1.2

3.0

1.6

3.7

11.5

20.9

—

(0.1)

0.3

(0.3)

(0.1)

(0.2)

0.4

(0.4)

0.3

(1.1)

(1.0)

2.1 %

(1.6) %

(6.1) %

6.6 %

(2.6) %

(13.5) %

14.5 %

(27.6) %

7.3 %

(9.5) %

(0.6) %

(4.7) %

Other non-interest expenses of $19.8 million in 2022 were relatively flat compared to 2021.

From 2020 to 2021, other non-interest expenses decreased by $1.0 million, driven by lower operational losses and write-offs.

Income Taxes

Each jurisdiction in which we operate is subject to different corporate income tax laws. See Item 3.D. "Risk Factors - Regulatory and Tax-Related Risks". We are

incorporated in Bermuda as a local company and, pursuant to Bermuda law, not obligated to pay any direct corporate taxes in Bermuda on either income or capital gains. Our
subsidiaries in the Cayman Islands and The Bahamas are not subject to any taxes on either income or capital gains under current laws applicable in the respective jurisdictions.
In general, entities in Bermuda and the Cayman Islands are not subject to corporate income taxes but are required to pay higher rates of indirect taxes (included above) such as
license fees and, in Bermuda, payroll taxes and import duties.

Our subsidiaries in the UK, Guernsey, Jersey, Switzerland, Canada, Singapore, and Mauritius are subject to the tax laws of those jurisdictions. See "Note 25 Income

taxes" in the Audited Consolidated Financial Statements for a reconciliation between the effective income tax rate and the statutory income tax rate.

In 2022, income tax expense netted to an expense of $3.7 million compared to $3.1 million in 2021. The increase of $0.6 million in 2022 was driven by increased
profitability in our Channel Islands and UK segment and partially offset by changes in the deferred tax valuation allowance. The increase of $0.7 million in 2021 was driven by an
increase in profitability in our Guernsey subsidiary, changes in the deferred tax valuation allowance and offset by the impact of a change in tax rates.

Consolidated Balance Sheet and Discussion

The following table shows the balance sheet as reported as at December 31, 2022 and 2021:

(in millions of $)

Assets

Cash and cash equivalents

Securities purchased under agreement to resell

Short-term investments

Investment in securities

Loans, net of allowance for credit losses

Premises, equipment and computer software

Goodwill and intangibles

Other assets

Total assets

Liabilities

Total deposits

Total other liabilities

Long-term debt

Total liabilities

Common shareholders' equity

Total shareholders' equity

Total liabilities and shareholders' equity

As at
December 31

2022

2021

Dollar
Change

Percent
Change

2,101

884

5,727

5,096

146

217

2,180

1,199

6,237

5,241

139

158

(79)

(36)

(315)

(510)

(145)

(12)

14,306

15,335

(1,029)

12,991

13,870

278

172

316

172

13,441

14,358

865

977

(879)

(38)

—

(917)

(112)

14,306

15,335

(1,029)

(3.6) %

(37.5) %

(26.3) %

(8.2) %

(2.8) %

5.0 %

(14.0) %

37.3 %

(6.7) %

(6.3) %

(12.0) %

— %

(6.4) %

(11.5) %

(6.7) %

Capital Ratios

Risk-weighted assets

Tangible common equity (TCE)

Tangible assets (TA)

TCE/TA

Common Equity Tier 1

Total Tier 1

Total Capital

Leverage ratio

As at
December 31

2022

2021

4,843

790

5,101

891

14,232

15,249

5.6 %

20.3 %

24.1 %

6.7 %

5.8 %

17.6 %

21.2 %

5.6 %

We maintain a liquid balance sheet and are well capitalized. As at December 31, 2022, total cash and cash equivalents, short-term investments and investment in
securities represented $8.8 billion, or 61.3% of total assets, down from 63.3% at the end of 2021. Shareholders' equity at December 31, 2022 was $864.8 million, down from
$977.5 million at the end of 2021 due primarily to the unrealized losses on AFS investments included in AOCIL in 2022 as a result of rising long-term US dollar interest rates and
partially offset by net income for the year net of dividends paid and shares repurchased.

Total assets decreased by $1.0 billion to $14.3 billion from 2021 to 2022, primarily due to the decrease in depositor funding which is reflected in the decrease in cash

and cash equivalents, short-term investments and investment in securities balances.

As at December 31, 2022, our capital ratios were strong, and were significantly in excess of regulatory requirements. The Bank's regulatory capital is determined in

accordance with current Basel III guidelines as issued by the BMA.

The TCE/TA ratio at the end of 2022 was 5.6% (2021: 5.8%), while the CET1 and total Tier 1 capital ratios at the end of 2022 were 20.3% (2021: 17.6%) and 20.3%

(2021: 17.6%), respectively. These ratios continue to remain in excess of regulatory minimums at December 31, 2022.

Cash and cash equivalents, Securities Purchased Under Agreement to Resell and Short-Term Investments

We only place deposits with highly-rated institutions and ensure that there is appropriate geographic and sector diversification in our exposures. Limits are set for

aggregate geographic exposures and for every counterparty for which we place deposits. Those limits are monitored and reviewed by our Credit Risk Management division and
approved by the Financial Institutions Committee. We define cash and cash equivalents to include cash on hand, cash items in the process of collection, amounts due from
correspondent banks and liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in fair value. Such
investments are those with less than three months maturity from the date of acquisition and include unrestricted term deposits, certificates of deposit and treasury bills.
Investments of a similar nature that are either restricted or have a contractual maturity of more than three months but one year or less are classified as short-term investments.
Securities purchased under agreement to resell are treated as collateralized lending transactions, and are referred to as repurchase agreements. We utilize repurchase
agreements to manage liquidity. The risks of these transactions include changes in the fair value in the securities posted or received as collateral and other credit-related events.
The Bank manages these risks by ensuring that the collateral involved is appropriate and by monitoring the value of the securities posted or received as collateral on a daily
basis.

As at December 31, 2022, cash and cash equivalents, securities purchased under agreements to resell and short-term investments were $3.0 billion, compared to $3.5

billion as at December 31, 2021. The decrease from 2021 to 2022 is primarily due to the decrease in depositor funding.

See "Note 3: Cash and cash equivalents", "Note 4: Short-term investments" and "Note 12: Credit related arrangements, repurchase agreements and commitments" to

our audited consolidated financial statements as at and for the year ended December 31, 2022 for additional tables and information.

Investment in Securities

Our investment policy requires management to maintain a portfolio of securities that provide the liquidity necessary to cover our obligations as they come due, and

mitigate our overall exposure to credit and interest rate risk, while achieving a satisfactory return on the funds invested. The securities in which we invest are limited to securities
that are considered investment grade. Securities in our investment portfolio are accounted for as either equity securities at fair value, AFS or HTM. Investment policies are
approved by the Board, governed by the Group Asset and Liability Committee and monitored by Group Market Risk, a department of the Group Risk Management division.

Consistent with industry and rating agency designations, we define investment grade as "BBB" or higher. As at December 31, 2022, 100% (2021: 100%) of our total

investments were investment grade. Of these securities, 100% (2021: 100%) are rated "A" or higher.

The following table presents the carrying value of investment securities by balance sheet category as at December 31, 2022 and 2021:

(in millions of $)

Available-for-sale

Held-to-maturity

Total Investment in Securities

As at
December 31

2022

2021

Dollar
Change

Percent
Change

1,989

3,738

5,727

3,474

2,763

6,237

(1,485)

975

(42.7) %

35.3 %

(510)

(8.2) %

The investments were placed almost exclusively in US government and federal agency securities totaling $4.9 billion, based upon carrying value, or 95.2% of the total

investment portfolio, as at December 31, 2022. Total net unrealized losses in the investment portfolio were $761.3 million, compared to net unrealized gains of $0.4 million at the
end of 2021. The movement in unrealized losses for the year was a result of rising long-term US dollar interest rates. The 10-year treasury rate was 3.87% as of December 31,
2022 compared to 1.51% the year before.

Equity securities at fair value remains flat at $0.2 million at the end of 2022. As at December 31, 2022, the equity securities at fair value consisted of real estate mutual

funds.

AFS securities totaled $2.0 billion at the end of 2022, compared to $3.5 billion at the end of 2021. As at December 31, 2022, 86.1% or $1.7 billion (2021: 90.5%, or $3.1

billion) of AFS securities consisted of holdings of securities issued by the US government and federal agencies. As at December 31, 2022, the remaining 13.9%, or $276.1
million of AFS securities (2021: 9.5% or $330.1 million) was comprised primarily of guaranteed student loan-backed securities of 0.3%, or $5.6 million (2021: 0.4%, or $13.2
million), debt securities issued by non-US governments of 12.6%, or $251.5 million (2021: 8.3%, or $289.6 million) and residential mortgage-backed securities of 1.0%, or $19.0
million (2021: 0.8%, or $27.3 million). The overall decrease in US government and federal agency securities was due to the Q1 and Q2 transfers totaling $1.0 billion of securities
from the AFS to HTM portfolio at fair value and the increase in total net unrealized losses from rising long-term US dollar interest rates`. Securities were transferred from the AFS
to HTM portfolio in order to mitigate any further downward impacts to AOCIL as a result of the rapidly rising interest rate environment.

HTM investments were $3.7 billion as at December 31, 2022 (2021: $2.8 billion) and consisted entirely of mortgage-backed securities issued by US federal agencies
that management does not intend to sell before contractual maturity. The increase in US government and federal agency securities was due to the aforementioned transfer of
$1.0 billion of securities from the AFS to HTM portfolio at fair value and offset by scheduled paydowns.

Investment Valuation — Impairment and Credit Loss Considerations

Securities in unrealized loss positions are analyzed as part of management's ongoing assessment of impairment and credit losses. For debt securities, where

management does not expect to recover the entire amortized cost basis of the security and intends to sell such securities or it is more likely than not that the Bank will be
required to sell the securities before recovering the amortized cost, it recognizes an impairment loss equal to the full difference between the amortized cost basis and the fair
value of those securities through the income statement. Following the recognition of impairment, the security's new amortized cost basis is the previous basis less impairment.

When management does not intend to sell or it is more likely than not that the Bank will hold such securities until recovering the amortized cost, management

determines whether any credit losses exist. See "Note 2.H: Investments" and "Note 2.J: Allowance for Credit Losses".

While management sold AFS securities during 2022 and 2021, these securities were sold for a net loss of minimal amount in 2022 and $0.2 million in 2021. The sale in

2022 involved asset-backed securities-student loans. The sale in 2021 involved selling US agency securities as part of a portfolio rebalancing strategy in order to manage
duration and interest rate sensitivity. This also included selling lower yielding explicitly guaranteed US agency securities and purchasing higher yielding implicitly guaranteed US
agency securities. Management does not have the intention or does not foresee a more likely than not scenario where the Bank will be required to sell any further securities
which are in an unrealized loss position, and accordingly, management has concluded that these sales are not credit loss indicators for any remaining securities in a loss position
as at December 31, 2022.

See "Note 5: Investment in securities" to our audited consolidated financial statements as at December 31, 2022 for additional tables and information.

Loans

The loan portfolio decreased from $5.2 billion at the end of 2021 to $5.1 billion as at December 31, 2022. The decrease was driven by the impact of the strengthening of

the US dollar on GBP denominated balances, the early repayment of a number of commercial facilities and partially offset by the extension of a government facility in the
Cayman Islands.

The loan portfolio represented 35.6% of total assets as at December 31, 2022 (2021: 34.2%), while loans as a percentage of total deposits increased from 37.8% at the
end of 2021 to 39.2% at the end of 2022. The increase in both ratios were attributable principally to a decrease in deposit balances at December 31, 2022 driven by the expected
withdrawal of some pandemic-related deposits as well as the impact of the strengthening US dollar on non-US dollar denominated balances.

Allowance for credit losses as at December 31, 2022 totaled $25.0 million, a decrease of $3.1 million from the prior year. The movement was driven by a decrease in

provisioned non-accrual loans, net paydowns and foreign exchange movements in the portfolio. This was partially offset by slightly weaker economic forecasts and the extension
of a large, long-term government facility in the Cayman Islands.

Gross non-accrual loans totaled $63.1 million as at December 31, 2022, $2.0 million higher than $61.0 million as at December 31, 2021, and represented 1.2% of the
total loan portfolio as at December 31, 2022, compared to 1.2% as at December 31, 2021.The increase in non-accrual loans was driven by a few residential mortgages in the
Channel Islands and UK segment moving into non-accrual and partially offset by a number of Bermuda residential mortgages improving to current status. In 2022, we held
OREO amounting to $0.8 million (2021: $0.7 million), a decrease of $0.1 million due to the foreclosure of three loans in the Bermuda and Channel Islands and UK segments and
which was partially offset by the sale of three properties in the Bermuda and Channel Islands and UK segments.

Overall, the credit quality of the Bank's lending portfolio held steady from December 31, 2021 to December 31, 2022.

Government

Loans to governments were $281.5 million, which was a $21.9 million increase from 2021, due primarily to the extension of a long-term facility to the Cayman Islands

Government and partially offset by the repayment of facilities in Bermuda and the Channel Islands.

Commercial

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.

Commercial real estate loans are offered to real estate investors, developers and builders based primarily in Bermuda and the Cayman Islands. To manage our 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 non-cancellable long-term leases to high quality international businesses. These cash flows are generally sufficient to service the
loan. The portfolio decreased by $65.8 million to $627.3 million at December 31, 2022.

Commercial loans outstanding as at December 31, 2022 were $441.9 million, which represented a decrease of $36.4 million from the previous year driven by the

repayment of two facilities in Bermuda and Cayman and the maturity of a facility in Bermuda.

Residential

The residential mortgage portfolio comprises mortgages to clients with whom we are seeking to establish (or already have) a comprehensive financial services

relationship. It includes mortgages to individuals and corporate loans secured by residential property.

All mortgages were underwritten utilizing our stringent credit standards. See Item 5.A. "Operating Results". Residential loans consist of conventional home mortgages

and equity credit lines.

As at December 31, 2022, residential mortgages totaled $3.6 billion (or 69.7% of total gross loans), a $52.8 million decrease from December 31, 2021. This decrease

was attributed mainly to the impact of the strengthening USD exchange rate on the Channel Islands and UK mortgage books, repayments exceeding new loan growth in
Bermuda and partially offset by net new loan growth in the Cayman Islands.

Other Loan Portfolios

We provide loans, as part of our normal banking business, in respect of automobile financing, consumer financing, credit cards, commercial financing, loans to financial
institutions and overdraft facilities to retail, corporate and private banking clients in the jurisdictions in which we operate. As at December 31, 2022, other consumer loans totaled
$200.5 million (or 3.9% of total gross loans), a $14.3 million decrease from December 31, 2021. This was primarily driven by the completion of residential construction projects in
the Cayman Islands.

See "Note 6: Loans" and "Note 7: Credit risk concentrations" to our audited consolidated financial statements as at December 31, 2022 for more information on our loan

portfolio and contractual obligations and arrangements.

Deposits

Deposits are our principal funding source for use in lending, investments and liquidity. We are a deposit-led bank and do not require the use of wholesale or institutional

markets to fund our loan business. See Item 5.A. "Operating Results - Liquidity Risk" and "- Credit Risk". Deposit balances at the end of reporting periods can fluctuate due to
significant balances that flow in and out from private trust, fund and insurance clients to meet quarter-end operational requirements.

The table below shows the year-end and average total deposit balances by jurisdiction for the year ended and as at December 31, 2022 and 2021:

(in millions of $)

Bermuda

Cayman Islands

Channel Island and the UK

Total deposits

As at
December 31

2022

2021

4,488

4,293

4,210

4,511

4,612

4,747

12,991

13,870

Dollar
change

Average balance

2022

2021

Dollar
change

(23)

(319)

(537)

(879)

4,658

4,437

4,208

4,616

4,400

4,724

13,303

13,740

(516)

(437)

Average total deposits decreased by $0.4 billion to $13.3 billion in 2022. On a year-end basis, total deposits were down by $0.9 billion from $13.7 billion at the end of

2021. The decrease in deposit balances was driven by the normalization of pandemic surge deposit levels and the impact of a strengthening US dollar on non-US dollar
denominated deposits.

Demand deposits, which include checking accounts (both interest bearing and non-interest bearing), savings and call accounts, totaled $9.9 billion, or 76.1% of total

deposits at the end of 2022, compared to $10.9 billion or 78.8%, at the end of 2021. Term deposits increased by $0.2 billion to $3.1 billion compared to the prior year. The cost of
funds on deposits increased from 11 basis points in the full year ended 2021 to 34 basis points in 2022 primarily due to higher market interest rates. Average non-interest
bearing deposits increased to $3.0 billion from $2.9 billion in 2021.

Included in total deposits are deposits from banks of $12.6 million at the end of 2022, down from $26.4 million at the end of 2021.

See "Note 10: Deposits" to our audited consolidated financial statements as at December 31, 2022 for additional tables and information.

Borrowings

We have no issuances of certificates of deposit ("CD"), commercial paper ("CP") or senior notes outstanding and have no CD or CP issuance programs. We use
funding from the inter-bank market as part of interest rate risk and liquidity management. As at December 31, 2022, deposits from banks totaled $12.6 million, $13.8 million lower
than the prior year.

Employee Future Benefits

We maintain trusteed pension plans including non-contributory defined benefit plans and a number of defined contribution plans, and provide post-retirement healthcare

benefits to our qualifying retirees. The defined benefit provisions under the pension plans are generally based upon years of service and average salary during the final years of
employment. The defined benefit pension and post-retirement healthcare plans are not open to new participants, are non-contributory and thus the funding required is provided
by us, based upon the advice of an independent actuary. The defined benefit pension plans are in the Bermuda, Guernsey and UK jurisdictions, and the defined benefit post-
retirement medical plan is in Bermuda. The Bank also has a residual obligation in addition to its defined contribution plan in Mauritius.

Effective December 31, 2011, the Bermuda defined benefit pension benefits were amended to freeze credited service and final average earnings for remaining active

members. Effective January 2012, all the participants of the Bermuda defined benefit pension plan are inactive and in accordance with GAAP, the net actuarial loss of the
Bermuda defined benefit pension plan is amortized over the estimated average remaining life expectancy of the inactive participants of 22.8 years. Prior to all Bermuda
participants being inactive, the net actuarial loss of the Bermuda defined benefit pension plan was amortized to net income over the estimated average remaining service period
for active members of 4.5 years.

Effective September 30, 2014, the defined benefit pension benefits of our Guernsey operations were amended to freeze credited service and final average earnings for

remaining active members. The benefits amendment resulted in a further reduction in the Guernsey defined benefit pension liability of $4.6 million as at September 30, 2014.

Effective October 2014, all of the participants of the Guernsey defined benefit pension plan are inactive and in accordance with GAAP, the net actuarial loss of the
Guernsey defined benefit pension plan will be amortized over the estimated average remaining life expectancy of the inactive participants of 39 years. Prior to all Guernsey
participants being inactive, the net actuarial loss of the Guernsey defined benefit pension plan was amortized to net income over the estimated average remaining service period
for active members of 15 years.

For the year ended December 31, 2014, numerous changes in the plan provisions were made to align the plan provisions with our administrative practices resulting in a

further increase in the Bermuda defined benefit post-retirement healthcare plan liability of $7.9 million. We amortize prior service credit resulting from plan amendments that
occurred when plan members were active employees, on a linear basis over the expected average remaining service period (to full eligibility) of active members expected to
receive benefits under the plan. Such remaining service periods are as follow: 3.1 years for the 2010 plan amendments and 4.6 years for the 2011 plan amendments. Plan
amendments occurring in 2014 resulted in the recognition of new prior service cost on December 31, 2014 on a plan for which substantially all members are now inactive and, in
accordance with GAAP, we have elected to amortize this new prior service cost on a linear basis over 21 years, which is the average remaining life expectancy of members
eligible for benefits under the plan at the time of the amendments.

As at December 31, 2022, we had a net obligation for employee future benefits in the amount of $92.0 million, down $34.2 million (27.1%) from $126.2 million at the

end of 2021. The decrease was driven primarily by experienced gains from increases in discount rate assumptions used to measure the obligation.

See "Note 11: Employee benefit plans" to our audited consolidated financial statements as at December 31, 2022 for additional tables and information.

Long-Term Debt, Interest Payments and Maturities

We had outstanding issuances of long-term debt with a carrying value of $172.3 million as at December 31, 2022 and $171.9 million as at December 31, 2021, all
issued in US Dollars. On June 11, 2020, the Bank issued US $100 million of Subordinated Lower Tier II capital notes. The notes were issued at par and are due on June 15,
2030. The issuance was by way of a registered offering with US institutional investors. The notes are listed on the BSX in the specialist debt securities category. The proceeds
of the issue were used, amongst other, to repay the entire amount of the US $45 million outstanding subordinated notes series 2005-B which matured on July 2, 2020 and the
entire amount of the US $25 million outstanding subordinated notes series 2008-B which were eligible for redemption. As at December 31, 2022, all of our outstanding long-term
debt was eligible for inclusion in our Tier 2 regulatory capital base, limited to 50% of Tier 1 capital.

The following table presents the contractual maturity, interest rates and principal outstanding as at December 31, 2022:

Long-term debt (in millions of $)

2018 issuance

2020 issuance

Unamortized debt issuance costs

Total

Earliest date
redeemable at
the Bank's option

Contractual
maturity date

Interest rate until
date redeemable

Interest rate from earliest date
redeemable to contractual maturity

Principal
outstanding

June 1, 2023

June 1, 2028

June 15, 2025

June 15, 2030

5.25%

3 months US$ LIBOR + 2.255%

3 months US$ SOFR + 5.060%

75.0

100.0

(2.7)

172.3

See "Note 19: Long-term debt" to our audited consolidated financial statements as at December 31, 2022 for additional information.

Other Liabilities

Other liabilities include operating lease liabilities, derivative liabilities, current employee salaries and benefits payable and related payroll tax, as well as sundry

liabilities. Other liabilities decreased by $3.5 million to $185.9 million as at December 31, 2022. The decrease was a result of decreased mark-to-market losses on derivatives
and offset by higher sundry liabilities.

Leases

In the normal course of operation, the Bank enters into leasing agreements either as the lessee or the lessor, mostly for office and parking spaces as well as for small

office equipment. The Bank recognizes right-of-use assets and lease liabilities for operating leases. Lease liabilities are measured as the present value of future lease payments,
including term renewals that are reasonably certain to occur, discounted using the Bank’s incremental borrowing rate. The Bank has used the rate of its June 11, 2020 debt
issuance as the incremental borrowing rate for existing lease liabilities and, for any new leases commencing in 2023 but recognized as at December 31, 2022, has adjusted this
rate upwards to reflect the movements in relevant reference rate indices since this issuance.

The terms of the existing leases, including renewal options that are reasonably certain to be exercised, extend up to the year 2035. Certain lease payments will be

adjusted during the related leases’ terms based on movements in the relevant consumer price index.

See "Note 13: Leases" to our audited consolidated financial statements as at December 31, 2022 for additional information.

Repurchase Agreements

We also obtain funds from time to time from the sale of securities to institutional investors under repurchase agreements. In a repurchase agreement transaction, we

will generally pledge investment securities as collateral in a borrowing transaction, agreeing to repurchase the identical security on a specified later date, generally not more than
90 days, at a price greater than the original sales price. The difference between the sale price and repurchase price is the cost of the use of the proceeds, or interest expense.
The investment securities underlying these agreements may be delivered to securities dealers who arrange such transactions as collateral for the repurchase obligation.
Repurchase agreements represent a cost competitive funding source and also provide liquidity on agency paper for us. However, we are subject to the risk that the borrower of
the securities may default at maturity and not return the collateral. In order to minimize this potential risk when entering into such transactions, we generally deal with large,
established investment brokerage firms with whom we have master repurchase agreements. Repurchase transactions are accounted for as collateralized financing
arrangements rather than as sales of such securities, and the obligation to repurchase such securities is reflected as a liability in our consolidated financial statements. As at
December 31, 2022 and 2021, there were no repurchase agreements outstanding.

Shareholders' Equity

Shareholders' equity decreased during the year ended December 31, 2022 by $112.7 million to $864.8 million.

Increases totaling $273.0 million included:

• $214.0 million of net income for the year;

• $41.9 million from adjustments to employee benefit plans; and

• $17.1 million for share-based compensation and settlements.

The increases were offset by the following decreases of $385.7 million:

• $87.3 million of common share dividends;

• $3.9 million from net increases in treasury shares;

• $4.8 million from net change in unrealized gains (losses) on translation of net investment in foreign operations;

• $91.3 million from net change in unrealized gains (losses) on HTM investments; and

• $198.4 million from net change in unrealized gains (losses) on AFS investments.

Segment Overview

The Bank is managed by the Chairman & CEO on a geographic basis. The Bank presents four reportable segments, three geographical and one other: Bermuda,

Cayman Islands, Channel Islands and the UK, and Other. The Other segment is composed of several non-reportable operating segments that have been aggregated in
accordance with GAAP. Each reportable segment has a managing director who reports to the Chairman & CEO. The Chairman & CEO and the segment managing director have
final authority over resource allocation decisions and performance assessment.

Transactions between segments are accounted for on an accrual basis and are all eliminated upon consolidation. The Bank generally does not allocate assets,

revenues and expenses among its business segments, with the exception of certain corporate overhead expenses and loan participation revenue and expenses. Loan
participation revenue and expenses are allocated pro-rata based on the percentage of the total loan funded by each jurisdiction participating in the loan.

Bermuda (Including Head Office)

For more than 150 years, Bermuda has served as home to our headquarters and remains our largest jurisdiction in terms of number of employees and business

volume. The following table provides certain financial information for our Bermuda segment for the years ended December 31, 2022, 2021 and 2020.

Summary Income Statement

For the year ended December 31

Dollar change

Percent change

(in millions of $)

Net interest income

Provision for credit recoveries (losses)

Non-interest income

Net revenue before other gains (losses)

Operating expenses

Net income before other gains (losses)

Total other gains (losses)

Net income

Summary Balance Sheet

(in millions of $)

Total deposits

Loans, net of allowance for credit losses

Total assets

Assets under administration

Custody and other administration services

Trust

Assets under management

Butterfield Funds

Other assets under management

Total assets under management

Number of employees

2022

2021

2020

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

161.9

(1.2)

87.9

248.6

146.0

2.2

84.6

232.8

159.6

(8.8)

85.2

236.0

(188.7)

(186.8)

(192.8)

59.9

—

59.9

46.0

0.9

46.9

43.2

2.0

45.2

15.9

(3.4)

3.3

15.8

(1.9)

13.9

(0.9)

13.0

(13.6)

11.0

(0.6)

(3.2)

6.0

2.8

(1.1)

1.7

10.9 %

(8.5) %

(154.5) %

125.0 %

3.9 %

6.8 %

1.0 %

30.2 %

(100.0) %

27.7 %

(0.7) %

(1.4) %

(3.1) %

6.5 %

(55.0) %

3.8 %

As at December 31

2022

2021

Dollar
change

Percent
change

4,488

1,879

5,405

4,511

2,023

5,728

(23)

(144)

(323)

14,534

57,617

16,099

54,452

(1,565)

3,165

1,529

2,046

3,575

413

1,531

2,272

3,803

413

(2)

(226)

(228)

—

(0.5) %

(7.1) %

(5.6) %

(9.7) %

5.8 %

(0.1) %

(9.9) %

(6.0) %

— %

2022 vs. 2021

Net income before other gains and losses was $59.9 million for the year ended December 31, 2022, up by $13.9 million from $46.0 million in the prior year. This

increase is due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

Net interest income before provision for credit losses increased by $15.9 million to $161.9 million in 2022, driven primarily by higher market interest rates across the

yield curve.

There is a provision for credit losses of $1.2 million in 2022 compared to a provision for credit recoveries of $2.2 million in 2021. The movement is due to weaker

macroeconomic forecasts impacting future expected credit loss estimates and charge-offs on a commercial facility.

Non-interest income increased by $3.3 million to $87.9 million in 2022. This was primarily due to higher banking income and foreign exchange revenue as a result of
one-off breakage fees and increased volumes; increased asset management fees due to an increase in net asset values driven by rising rates and increased trust income driven
by new business and accounting fees. These increases were partially offset by lower custody and other administration fees driven by declining AUAs from market declines and
decreases in other income due to the timing of recognizing unclaimed assets.

Operating expenses increased by $1.9 million to $188.7 million in 2022 which was driven by the increase in staff related costs due to higher staff incentive accruals

and costs associated with the departure of a senior executive recorded as a non-core item; increased professional and outside services costs due to an increase in inter-
company charges related to increased staff levels in support centers and higher marketing costs driven by an increase in sponsored event costs. This was partially offset by a
decrease in technology and communications cost due to the depreciation charges on the existing core banking system in the prior year continuing to outpace costs associated
with the new technology projects.

Total assets as at December 31, 2022 were $5.4 billion, down $0.3 billion from December 31, 2021. Total deposits were $4.5 billion in December 31, 2022, mostly

flat from December 31, 2021, and loan balances at December 31, 2022 were $144.0 million lower at $1.9 billion, driven by the early repayment of government and other
commercial facilities.

Client AUA for the trust and custody businesses as at December 31, 2022 were $57.6 billion and $14.5 billion, respectively, while assets under management were

$3.6 billion. This compares with $54.5 billion, $16.1 billion and $3.8 billion, respectively, as at December 31, 2021.

2021 vs. 2020

Net income before other gains and losses was $46.0 million for the year ended December 31, 2021, up by $2.8 million from $43.2 million in the prior year. This

increase is due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

Net interest income before provision for credit losses decreased by $13.6 million to $146.0 million in 2021, due primarily to the impact of lower market rates across

the yield curve as a result of the COVID-19 pandemic, which was partially offset by lower deposit costs.

There was a provision for credit recoveries of $2.2 million in 2021 compared to a provision for credit losses of $8.8 million in 2020. The movement is due to both the

improvement in macroeconomic forecasts impacting future expected credit loss estimates and a reduction in non-performing loans.

Non-interest income decreased by $0.6 million to $84.6 million in 2021. This was primarily due to lower administration fees on loan participations; lower asset

management fees and reduced dividends as a result of the liquidation of a private equity investment. These decreases were partially offset by increases in foreign exchange
revenue, trust income and custody income from higher volumes, increased fees and onboarding of new clients during the year, respectively.

Operating expenses decreased by $6.0 million to $186.8 million in 2021 which was driven by the decrease in staff related costs due primarily to the resulting benefits

from previous restructuring programs and partially offset by increases in property maintenance costs and non-service employee benefits expense due to increased costs from
the post-retirement medical benefit plan.

Total assets as at December 31, 2021 were $5.7 billion, down $0.2 billion from December 31, 2020. Total deposits were $4.5 billion in December 31, 2021, down

$0.3 billion from December 31, 2020, and loan balances at December 31, 2021 were relatively flat at $2.0 billion.

Client AUA for the trust and custody businesses as at December 31, 2021 were $54.5 billion and $16.1 billion, respectively, while assets under management were

$3.8 billion. This compares with $53.5 billion, $16.1 billion and $4.0 billion, respectively, as at December 31, 2020.

Cayman Islands

We are a leading financial services provider in the Cayman Islands, offering a comprehensive range of personal and corporate financial services. In addition to our

strong retail presence, we are focused on the provision of wealth management services including private banking, asset management and trust services.

We have continued to enhance our client delivery channels and online and mobile banking platform upgrades. With four banking centers in desirable locations and

17 ATMs strategically located in Grand Cayman, we continue to be a leading provider of financial services locally. The following table provides certain financial information for
our Cayman Islands segment for the years ended December 31, 2022, 2021 and 2020.

Summary Income Statement

For the year ended December 31

Dollar change

Percent change

(in millions of $)

Net interest income

Provision for credit (losses) recoveries

Non-interest income

Net revenue before other gains (losses)

Operating expenses

Net income before other gains (losses)

Total other gains (losses)

Net income

Summary Balance Sheet

(in millions of $)

Total deposits

Loans, net of allowance for credit losses

Total assets

Assets under administration

Custody and other administration services

Trust

Assets under management

Butterfield Funds

Other assets under management

Total assets under management

Number of employees

2022 vs. 2021

2022

2021

2020

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

115.9

(0.6)

66.7

182.0

91.0

1.4

58.1

95.4

0.5

49.3

150.5

145.2

(62.1)

(58.9)

(62.6)

119.9

—

119.9

91.5

0.2

91.7

82.6

0.4

83.0

24.9

(2.0)

8.6

31.5

(3.2)

28.4

(0.2)

28.2

(4.4)

27.4 %

(4.6) %

(142.9) %

180.0 %

0.9

8.8

5.3

3.7

8.9

14.8 %

20.9 %

5.4 %

31.0 %

(0.2)

8.7

(100.0) %

30.8 %

17.8 %

3.7 %

(5.9) %

10.8 %

(50.0) %

10.5 %

As at December 31

2022

2021

4,293

1,270

4,566

3,444

6,614

175

622

797

244

4,612

1,137

4,973

4,396

8,008

163

702

866

241

Dollar
change

Percent
change

(319)

133

(407)

(6.9) %

11.7 %

(8.2) %

(952)

(1,394)

(21.7) %

(17.4) %

(80)

(69)

7.4 %

(11.4) %

(8.0) %

1.2 %

Net income before other gains and losses for the year ended December 31, 2022 was $119.9 million, up by $28.4 million from $91.5 million in 2021. This increase is

due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

Net interest income before provision for credit losses was $115.9 million in 2022, up by $24.9 million compared to 2021. The increase from 2021 to 2022 was due to

higher market interest rates across the yield curve.

Provision for credit losses of $0.6 million in 2022 represented a decrease of $2.0 million compared to credit recoveries of $1.4 million in 2021. The decrease was driven
by the extension of a large, long-term government facility in the Cayman Islands as well as decreasing macroeconomic forecasts impacting future expected credit loss estimates.

Non-interest income was $66.7 million, up $8.6 million from 2021 driven by favorable volume variances impacting banking and foreign exchange revenue and the

scheduled recognition of unclaimed assets.

Operating expenses increased by $3.2 million from 2021 to $62.1 million in 2022, driven by an increase in staff related costs due to higher staff incentive accruals

coupled with higher property maintenance costs. The increases were partially offset by a decrease in technology and communications costs due to the existing core banking
system being fully depreciated in the prior year.

Total assets as at December 31, 2022 were $4.6 billion, down $0.4 billion from December 31, 2021, reflecting lower depositor funding levels. Net loans were up at $1.3

billion at December 31, 2022 mainly from the extension of a government facility in the Cayman Islands and residential mortgage growth.

Client AUA for the trust and custody businesses were $6.6 billion and $3.4 billion, respectively, while AUM were $0.8 billion at December 31, 2022. This compares with

$8.0 billion, $4.4 billion and $0.9 billion, respectively, on December 31, 2021.

2021 vs. 2020

Net income before other gains and losses for the year ended December 31, 2021 was $91.5 million, up by $8.9 million from $82.6 million in 2020. This increase is due

principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

Net interest income before provision for credit losses was $91.0 million in 2021, down by $4.4 million compared to 2020. The decrease from 2020 to 2021 was due

primarily to the impact of lower market rates across the yield curve as a result of the COVID-19 pandemic and was partially offset by lower deposit costs.

Provision for credit recoveries of $1.4 million in 2021 represented an increase of $0.9 million compared to credit recoveries of $0.5 million in 2020. The favorable

variance was mainly due to the completion of a large condominium development and repayment of the associated construction loan during the year.

Non-interest income was $58.1 million, up $8.8 million from 2020 driven by increased economic activity impacting card service fee contributions and foreign exchange

transactional volumes coupled with higher non-utilization fees on certain credit facilities.

Operating expenses decreased by $3.7 million from 2020 to $58.9 million in 2021, driven by a decrease in staff related costs due primarily to the resulting benefits from

previous restructuring programs and lower technology and communications costs due to lower depreciation costs which is outpacing the new system roll-out. This was partially
offset by an increase in professional and outside services due to higher intercompany charges from increased utilization of our Canadian service center.

Total assets as at December 31, 2021 were $5.0 billion, up $0.5 billion from December 31, 2020, reflecting higher depositor funding levels. Net loans were relatively

stable at $1.1 billion at December 31, 2021 with growth in residential mortgage lending offsetting repayments from commercial facilities.

Client AUA for the trust and custody businesses were $8.0 billion and $4.4 billion, respectively, while AUM were $0.9 billion at December 31, 2021. This compares with

$7.6 billion, $3.2 billion and $0.8 billion, respectively, on December 31, 2020.

Channel Islands and the UK

The Channel Islands and UK segment includes the jurisdictions of Guernsey, Jersey (both in the Channel Islands), and the UK. In the Channel Islands, a broad range

of services are provided to private clients and financial institutions including private banking, corporate banking and treasury services, internet banking, wealth management,
mortgage lending and fiduciary services. In 2021, the segment entered the local mortgage market offering various products to local residents. The UK jurisdiction provides
mortgages for high-value residential properties. The following table provides certain financial information for our Channel Islands and the UK segment for the years ended
December 31, 2022, 2021 and 2020.

Summary Income Statement

For the year ended December 31

Dollar change

Percent change

(in millions of $)

Net interest income

Provision for credit (losses) recoveries

Non-interest income

Net revenue before other gains (losses)

Operating expenses

Net income before other gains (losses)

Total other gains (losses)

Net income

Summary Balance Sheet

(in millions of $)

Total deposits

Loans, net of allowance for credit losses

Total assets

Assets under administration

Custody and other administration services

Trust

Assets under management

Butterfield Funds

Other assets under management

Total assets under management

Number of employees

2022 vs. 2021

2022

2021

2020

2021 to
2022

2020 to
2021

2021 to
2022

2020 to
2021

65.7

(0.6)

40.5

105.6

62.8

(0.5)

45.3

107.6

62.7

(0.2)

40.7

103.2

(74.0)

(81.7)

(82.2)

31.6

1.5

33.1

25.9

(2.4)

23.5

21.0

(1.2)

19.8

2.9

(0.1)

(4.8)

(2.0)

7.7

5.7

3.9

9.6

0.1

(0.3)

4.6

4.4

0.5

4.9

(1.2)

3.7

4.6 %

0.2 %

20.0 %

150.0 %

(10.6) %

(1.9) %

(9.4) %

22.0 %

162.5 %

40.9 %

11.3 %

4.3 %

(0.6) %

23.3 %

100.0 %

18.7 %

As at December 31

2022

2021

Dollar
change

Percent
change

4,210

2,017

4,626

4,747

2,171

5,235

(537)

(154)

(609)

(11.3) %

(7.1) %

(11.6) %

14,203

10,010

16,263

10,374

(2,060)

(364)

(12.7) %

(3.5) %

629

677

379

766

830

369

(16)

(137)

(153)

(25.0) %

(17.9) %

(18.4) %

2.7 %

Our Channel Islands and UK segment posted net income before gains and losses of $31.6 million in 2022, an increase of $5.7 million when compared to 2021. This

increase is due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

Net interest income before provision for credit losses reflected an increase of $2.9 million to $65.7 million in 2022, compared to $62.8 million in 2021. The increase was

due to higher market interest rates across the yield curve and partially offset by the strengthening of the US dollar.

Provision for credit losses remained mostly flat at $0.6 million in 2022.

Non-interest income decreased by $4.8 million to $40.5 million in 2022 due to the strengthening of the US dollar as it was mostly flat in local GBP. In local currency,

favorable volume-driven variances in banking and foreign exchange revenue were offset by decreased trust revenues as a result of lower special and accounting fees and
decreased asset management revenues due to lower brokerage fees.

Operating expenses of $74.0 million in 2022 were $7.7 million lower than 2021, again due to the strengthening of the US dollar as it was mostly flat in local GBP. In

local currency, a favorable professional and outside services fees variance driven by lower inter-company charges was offset by an increase in staff related costs due to higher
staff incentive accruals and inflationary salary adjustments.

Total other gains (losses) for 2022 were gains of $1.5 million, an increase of $3.9 million compared to losses in 2021 due to losses related to defined benefit settlement

accounting recorded in the previous year that did not re-occur.

Total assets of $4.6 billion as at December 31, 2022, a decrease from $5.2 billion as at December 31, 2021 reflecting lower depositor funding levels and the
strengthening of the US dollar. Net loans decreased $0.2 billion to $2.0 billion at December 31, 2022 as a result of the aforementioned strengthening of the US dollar .

As at December 31, 2022, client AUA for the trust and custody businesses were $10.0 billion and $14.2 billion, respectively, while AUM were $0.7 billion. This

compares with $10.4 billion, $16.3 billion and $0.8 billion, respectively, as at December 31, 2021.

2021 vs. 2020

Our Channel Islands and UK segment posted net income before gains and losses of $25.9 million in 2021, an increase of $4.9 million when compared to 2020. This

increase is due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

Net interest income before provision for credit losses reflected an increase of $0.1 million to $62.8 million in 2021, compared to $62.7 million in 2020. Favorable GBP/
USD foreign exchange rates throughout 2021 more than offset the impact of lower market rates across the yield curve as a result of the COVID-19 pandemic which were also
partially offset by lower deposit costs.

Provision for credit losses was up $0.3 million to $0.5 million in 2021, due to an increased provision on a residential mortgage which moved into non-accrual status.

Non-interest income increased by $4.6 million to $45.3 million in 2021, due to increases in foreign exchange revenue, asset management fees and custody income

driven by a combination of higher volumes, increased fees and onboarding of new clients during the year.

Operating expenses of $81.7 million in 2021 were $0.5 million lower than 2020, driven by a decrease in staff related costs due primarily to the resulting benefits from

previous restructuring programs and lower operational losses and write-offs. This was partially offset by an increase in professional and outside services due to higher
intercompany charges from increased utilization of our Canada and Mauritius service centers and higher legal and professional fees.

Total other gains (losses) for 2021 increased by $1.2 million compared to 2020 due to a defined benefit pension plan adjustment.

Total assets of $5.2 billion as at December 31, 2021, an increase from $4.8 billion as at December 31, 2020 reflecting higher depositor funding levels. Net loans

increased $0.1 billion to $2.2 billion at December 31, 2021 driven primarily by the growth in the residential mortgage portfolios.

As at December 31, 2021, client AUA for the trust and custody businesses were $10.4 billion and $16.3 billion, respectively, while AUM were $0.8 billion. This
compares with $19.2 billion, $13.2 billion and $0.8 billion, respectively, as at December 31, 2020. The decrease in AUA for trust is mainly due to the revision of fee agreements
for a trust structure in Guernsey. The increase in AUA for custody is mainly due to the on-boarding of new business while AUM remains stable.

Off Balance Sheet Arrangements

Assets Under Administration and Assets Under Management

In the normal course of business, we hold AUA and AUM in a fiduciary or agency capacity for our clients. In accordance with GAAP, these assets are not our assets

and are not included in our consolidated balance sheets.

Credit-Related Arrangements

We enter into standby letters of credit, letters of guarantee and contractual commitments to extend credit in the normal course of business, which are not required to be

recorded on the balance sheet. Since many commitments expire unused or only partially used, these arrangements do not necessarily reflect future cash requirements.
Management believes there are no material commitments to extend credit that represent risks of an unusual nature.

Standby letters of credit and letters of guarantee are issued at the request of our clients in order to secure a client's payment or performance obligations to a third party.

These guarantees represent our irrevocable obligation to pay the third-party beneficiary upon presentation of the guarantee and satisfaction of the documentary requirements
stipulated therein, without investigation as to the validity of the beneficiary's claim against the client. Generally, the term of the standby letters of credit does not exceed one year,
while the term of the letters of guarantee does not exceed four years.

Credit risk is the principal risk associated with these instruments. The contractual amounts of these instruments represent the credit risk should the instrument be fully
drawn upon and the client defaults. To control the credit risk associated with issuing letters of credit and letters of guarantee, we subject such activities to the same credit quality
and monitoring controls as our lending activities. The types and amounts of collateral security we hold for these standby letters of credit and letters of guarantee are generally
represented by our deposits or a charge over assets held in mutual funds. We are obligated to meet the entire financial obligation of these agreements and in certain cases are
able to recover the amounts paid through recourse against the collateral security.

Risk Management

Risk Oversight and Management

Organizational Structure

The Board has overall responsibility for determining the strategy for risk management, setting the Bank's risk appetite and ensuring that risk is monitored and controlled

effectively. It accomplishes its mandate through the activities of two dedicated committees:

The Risk Policy and Compliance Committee ("RPCC"): This committee of the Board assists the Board in fulfilling its responsibilities by overseeing the Group's risk

profile and its performance against approved risk appetites and tolerance thresholds. Specifically, the committee considers the sufficiency of the Group's policies, procedures
and limits related to the identification, measurement, monitoring and control of activities that give rise to credit, market, liquidity, interest rate, operational, regulatory, compliance,
climate and reputational risks, as well as overseeing its compliance with laws, regulations and codes of conduct.

The Audit Committee: This committee reviews the overall adequacy and effectiveness of the Group's system of internal controls and the control environment,

including in respect of the risk management process. It reviews recommendations arising from internal and independent audit review activities and management's response to
any findings raised.

Both the RPCC and Audit Committee are supported in the execution of their respective mandates by the dedicated Audit, Compliance and Risk Policy Committees for

our UK, Guernsey, Jersey, Cayman Islands and The Bahamas operations, which oversee the sufficiency of local risk management policies and procedures and the effectiveness
of the system of internal controls that are in place. These committees are chaired by non-executive directors drawn from the boards of directors for each segment.

The Group executive management team is led by the Chairman & CEO and includes the members of executive management reporting directly to the Chairman & CEO.
The executive management team is responsible for setting business strategy and for monitoring, evaluating and managing risks across the Group. It is supported by the following
management committees:

The Group Risk and Compliance Committee ("GRCC"): This committee comprises executive and senior management team members and is chaired by the Group
Chief Risk Officer. It provides a forum for the strategic assessment of risks assumed across the Group as a whole based on an integrated view of credit, market, liquidity, legal,
regulatory and financial crime compliance, fiduciary, operational, cybersecurity, climate, insurance, pension, investment, capital and reputational risks, ensuring that these
exposures are consistent with the risk appetites and tolerance thresholds promulgated by the Board and oversees the compliance of regulatory obligations arising under
applicable laws, rules and regulations. It is responsible (i) for reviewing, evaluating and recommending the Group's Risk Appetite Framework, the results of the Capital
Assessment and Risk Profile and recovery and resolution planning processes (including all associated stress testing performed) and the Group's key risk policies to the Board for
approval; (ii) for reviewing and evaluating current and proposed business strategies in the context of our risk appetites; and (iii) for identifying, reviewing and advising on current
and emerging risk issues and associated mitigation plans; and (iv) for reviewing the Group’s compliance with external regulations and internal policies.

The Group Asset and Liability Committee ("GALCO"): This committee comprises executive and senior management team members and is chaired by the Group

CFO. The committee is responsible for liquidity, interest rate and exchange rate risk management and other balance sheet issues. It also oversees key policies and the
execution of the Group's investment and capital management strategies and monitors the associated risks assumed. It is supported in the execution of its mandate by the work
undertaken by the dedicated Asset & Liability Committees in each of the Bank's segments.

The Group Credit Committee ("GCC"): This committee comprises executive and senior management and is chaired by the Group Chief Risk Officer. The committee

is responsible for a broad range of activities relating to the monitoring, evaluation and management of credit risks assumed across the Group at both transaction and portfolio
levels. It is supported in the execution of its mandate by the Financial Institutions Committee ("FIC"), a dedicated sub-committee that is responsible for the evaluation and
approval of recommended inter-bank and counterparty exposures assumed in the Group's treasury and investment portfolios, and by the activities of the jurisdictional Credit
Committees, which review and approve transactions within delegated authorities and recommends specific transactions outside of these limits to the GCC for approval.

The Provisions and Impairments Committee: This committee comprises executive and senior management team members and is chaired by the Group Chief Risk
Officer. The committee is responsible for approving significant provisions and other impairment charges. It also oversees the overall credit risk profile of the Group in regards to
non-accrual loans and assets. It is supported in the execution of its mandate by jurisdictional credit committees and the GCC, which make recommendations to this committee.

Risk Management

We manage our exposure to risk through a three "lines of defense" model.

The first "line of defense" is provided by our jurisdictional business units, which retain ultimate responsibility for the risks they assume and for bearing the cost of risks

associated with these exposures.

The second "line of defense" is provided by our Risk Management and Compliance groups, which work in collaboration with our business units to identify, assess,

mitigate and monitor the risks associated with our business activities and strategies. They do this by:

• making recommendations to the GRCC regarding the constitution of the Risk Appetite Framework;

•

setting risk strategies that are designed to manage risk exposures assumed in the course of pursuing our business strategies and aligning them with agreed
appetites;

• establishing and communicating policies, procedures and limits to control risks in alignment with these risk strategies;

• measuring, monitoring and reporting on risk levels;

• opining on specific transactions that fall outside delegated risk limits; and

•

identifying and assessing emerging risks.

The functions within the Risk Management group that support our risk management activities are outlined below.

Group Market Risk: This unit provides independent oversight of the measurement, monitoring and control of liquidity and funding risks, interest rate and foreign

exchange risks as well as the market risks associated with our investment portfolios. It also monitors compliance with both regulatory requirements and our internal policies and
procedures relating to the management of these risks.

Group Credit Risk Management: This unit is responsible for the adjudication and oversight of credit risks associated with our retail and commercial lending activities

and the management of risks associated with our investment portfolios and counterparty exposures. It also establishes the parameters and delegated limits within which credit
risks may be assumed and promulgates guidelines on how exposures should be managed and monitored.

Group Operational Risk: This unit assesses the effectiveness of our procedures and internal controls in managing our exposure to various forms of operational risk,

including those associated with new business activities and processes and the deployment of new technologies. It is also responsible for our incident management processes
and reviews the effectiveness of our loss data collection activities.

Group Compliance: This unit provides independent analysis and assurance of our compliance with applicable laws, regulations, codes of conduct and recommended

best practices, including those associated with the prevention of financial crime, including money laundering and terrorist financing. It is also responsible for assessing our
potential exposure to upstream risks and for providing guidance on the preparations that should be made in advance of these changes coming into effect.

The third "line of defense" is provided by our Group Internal Audit function, which performs oversight and ongoing review, and challenges the effectiveness of the

internal controls that are executed by the business and Risk Management. The Group Head of Internal Audit has a dual reporting line to both the Chair of the Audit Committee
and the Chairman & CEO.

Regulatory Review Process

Our banking, trust and investment business activities in Bermuda are monitored by the BMA as the lead regulator. One of the principal objectives of the BMA is to

supervise, regulate and inspect Bermuda-based financial institutions to ensure their financial stability and soundness.

In addition to conducting on-site reviews, the BMA utilizes a comprehensive quarterly statistical return system that enables off-site monitoring. The statistical system is

consistent with Basel Committee Standards, and provides the BMA with a detailed breakdown of a bank's balance sheet and profit-and-loss accounts on both a consolidated and
unconsolidated basis. This information enables the BMA to monitor the soundness of a bank's financial position and ensure that it meets certain capital requirements. For more
information, see Item 4.B. "Business Overview - Supervision and Regulation - Bermuda - Supervision and Monitoring by the BMA".

Each of our regulated entities is separately monitored by the local regulatory authority in that jurisdiction to ensure its financial stability and soundness.

The Risk Appetite Framework

In pursuit of its strategic goals and objectives, the Bank is exposed to a broad range of risks. In support of effective governance and risk informed decision-making, the

Bank has set out a risk appetite statement and framework covering its principal risk exposures and approach to managing risk. The Bank’s risk appetite is set annually by the
Board with the goal of aligning risk taking with statutory requirements, strategic business objectives and capital planning activities. It serves to express a clear and unambiguous
methodology to foster a common risk culture across the organization, predicated on a common risk language and guide for internal stakeholders regarding acceptable and
unacceptable behavior.

Our framework comprises the following elements:

(1) Level 1: Principle categories of Financial, Compliance, Operational, Reputational and Strategic risk.

(2) Level 2: These risks more granularly classified to sub-risk types which represent the various risks that the Group assumes across the entirety of its

operations in the pursuit of its strategic initiatives:

•
•
•

•
•

Financial (Credit, Liquidity, Market)
Compliance (Regulatory Compliance, Financial Crime)
Operational (Outsourcing, Fiduciary, Investment, Tax Reporting, Financial Reporting, Correspondent Banking, People, Cyber, Technology Performance,
Governance)
Reputational
Strategic

(3) There are three options for our risk appetite (set out in the following table) for each Level 2 risk type, with each appetite designed to convey a clear strategic

direction in terms of the risk/reward profile assumed, to ensure consistency in our risk conversations.

Appetite

Conservative

Balanced

Tolerant

Definition

Profile

Areas in which the Group avoids risk, or acts to

Our processes and controls are defensive and focus on

minimize or eliminate the likelihood that the risk will
occur, because we have determined the likelihood and
impact of potential implications are intolerable.

detection and prevention.

Areas in which the Group must constantly strike a
balance between the potential upside benefits and
potential downside costs of a given decision.

Exposures are only assumed when the risk can be
quantified accurately and is assessed as being
acceptable.

Areas in which the Group prefers disciplined risk-taking

because we have determined the potential upside
benefits outweigh the potential costs.

Exposures can be estimated reliably and structures,
systems and processes are in place to manage them.

(4) A statement of our governing principles relating to each risk category. This establishes the characteristics of the risks that the Bank is willing to assume and

the management behaviors it should exhibit when doing so.

Specific performance measures (Key Risk Indicators) and tolerance thresholds have been established with respect to each risk category, combining quantitative and

qualitative targets (which are designed to reflect both forward-looking as well as historical perspectives), to help provide executive management and the Board with an indication
of the "direction" of our exposure relative to our declared risk appetite and an early warning of material adverse developments requiring remedial action.

The limits, targets and thresholds used to measure performance continue to be refined through the Enterprise Risk Management framework, including the expansion of
Level 2 risk types, in an effort to express more granular exposure of risk relative to the stated appetite. All changes proposed pass through a formal review and approval process
at both the executive management and Board levels prior to their adoption. Through this approach, the risk appetite statement sets the tone for our risk culture across the Group
as a whole, influencing behaviors at all levels of the organization and reinforcing accountability for decisions taken.

Market Risks

Interest Rate Risk Management

Our primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or changes in net interest margin because of changes in

interest rates. Interest rate risk for the Bank is confined to the banking book as the bank does not engage in proprietary trading.

We seek to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest earning assets and interest bearing liabilities mature or

re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when our assets, liabilities and off-balance sheet contracts each respond
differently to changes in interest rates, including as a result of explicit and implicit provisions in agreements related to such assets and liabilities and in off-balance sheet
contracts that alter the applicable interest rate and cash flow characteristics as interest rates change. The two primary examples of such provisions that we are exposed to are
the duration and rate sensitivity associated with indeterminate-maturity deposits (e.g., interest bearing call accounts) and the rate of prepayment associated with fixed-rate
lending and mortgage-backed securities. Interest rates may also affect loan demand, credit losses, mortgage origination volume and other items affecting earnings.

Our management of interest rate risk is overseen by the RPCC, which outlines reporting and measurement requirements. In particular, this infrastructure sets limits and
management targets, calculated for various metrics, including our economic value sensitivity, our economic value of equity and net interest income simulations involving parallel
shifts in interest rate curves, steepening and flattening yield curves, and various prepayment and deposit duration assumptions. Our risk management infrastructure also requires
a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, non-interest
bearing and interest bearing demand deposit durations based on historical analysis, and the targeted investment term of capital.

The principal objective of our interest rate risk management is to maximize profit potential while minimizing exposure to changes in interest rates. Our actions in this

regard are taken under the guidance of GALCO. The committee is actively involved in formulating the economic assumptions that we use in our financial planning and budgeting
processes and establishes policies which control and monitor the sources, uses and pricing of funds. From time to time, we utilize hedging techniques to reduce interest rate risk.
GALCO uses interest income simulations and economic value of equity analysis to measure inherent risk in our balance sheet at specific points in time.

Appetite for interest rate risk is documented in the Group's policies on market risk and investments. This includes the completion of stress testing on at least a quarterly

basis of the impact of an immediate and sustained shift in interest rates of +/– 200 basis points on net interest income, economic value of equity and the ratio of tangible total
equity to average assets. If any of the parameters established by policy are exceeded, GALCO will provide a plan to executive management to bring the exposure back within
tolerance under advice to the Board. The plan does not have to bring the exposure back within limit immediately, but must adjust the exposure within Board and management
approved timeframes.

We also use derivatives in the asset and liability management of positions to minimize significant unplanned fluctuations in earnings that are caused by interest rate

volatility. Our derivative contracts principally involve over-the-counter transactions that are privately negotiated between the Group and the counterparty to the contract.
Derivative instruments that may be used as part of our interest rate risk management strategy include interest rate swaps. Interest rate swaps generally involve the exchange of
fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date.

Interest Rate Risk

The following table sets out the assets, liabilities and shareholders' equity and off-balance sheet instruments on the date of the earlier of contractual maturity, expected

maturity and repricing date. Use of these tables to derive information about our interest rate risk position is limited by the fact that customers may choose to terminate their
financial instruments at a date earlier than the contractual maturity or repricing date. Examples of this include fixed-rate mortgages, which are shown at contractual maturity but
which may pre-pay earlier, and certain term deposits, which are shown at contractual maturity but which may be withdrawn before their contractual maturity subject to
prepayment penalties. Investments are shown based on remaining contractual maturities. The remaining contractual principal maturities for mortgage-backed securities
(primarily US government agencies) do not consider prepayments. Remaining expected maturities differ from contractual maturities because borrowers may have the right to
prepay obligations before the underlying mortgages mature.

December 31, 2022

(in $ millions)

Assets

Cash and deposits with banks

Securities purchased under agreement to resell

Short-term investments
Investments(2)
Loans(3)
Other assets

Total assets

Liabilities and shareholders' equity

Demand deposits
Term deposits(4)
Other liabilities
Subordinated capital(4)
Shareholders' equity

Total liabilities and shareholders' equity

Interest rate sensitivity gap

Cumulative interest rate sensitivity gap

Earlier of contractual maturity or repricing date

Within
3 months

3 to 6
months

6 to 12
months

1 to 5
years

After
5 years

Non-interest
bearing

Total

Total fair
value(1)

2,008

406

2,927

—

5,407

6,819

2,126

—

8,945

(3,538)

—

422

—

465

457

—

557

—

179

166

—

401

—

437

—

437

—

943

1,533

—

2,476

—

184

—

4,592

406

—

4,998

—

437

559

3,040

—

278

—

865

2,101

884

5,728

5,096

437

884

5,187

5,050

437

14,306

13,719

9,884

3,107

278

172

865

9,884

3,109

278

178

271

4,183

14,306

13,719

(92)

(36)

2,292

(3,630)

(3,666)

(1,374)

4,998

3,624

(3,624)

—

____________________________
(1)

See Item 5.A. "Operating Results - Critical Accounting Policies and Estimates - Fair Values" and "Note 17: Fair value measurements" of the audited consolidated financial
statements for further detail on the determination of fair value.
Investments include (i) HTM, which are carried at their amortized cost on the consolidated balance sheet, and (ii) equity securities and AFS investments, each of which are
carried at fair value on the consolidated balance sheet. The fair value column presents all classifications at their fair value.
Loans are carried on the consolidated balance sheet as the principal amount outstanding, net of allowance for credit losses, unearned income, fair value adjustments
arising from hedge accounting and net deferred loan fees.
Term deposits and subordinated capital are carried on the consolidated balance sheet as the principal outstanding.

(2)

(3)

(4)

Asset/Liability Management and Interest Rate Risk

The principal objective of our asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of

interest rate risk while maximizing net income and preserving adequate levels of liquidity funding and capital.

As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and
expense recorded on most of our assets and liabilities, and the fair value of all interest earning assets and interest bearing liabilities, other than those which have a short term to
maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income
and/or a loss of current fair values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same
time maximizing income.

We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business. We do not typically enter into derivative
contracts for the purpose of managing interest rate risk, but we may elect to do so in the future. Based upon the nature of our operations, we are not subject to foreign exchange
or commodity price risk. Our exposure to holdings categorized as "trading positions" falls below the de minimis threshold established of 5% (ratio of total trading book open
position compared to the sum of on- and off-balance sheet assets that are not part of the trading book).

We use an interest rate risk simulation model to test the interest rate sensitivity of net interest income and the balance sheet. Instantaneous parallel rate shift scenarios

are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin. These scenarios, known as rate shocks, simulate an
instantaneous change in interest rates and use various assumptions, including, but not limited to, prepayments on securities, deposit decay rates, pricing decisions on loans and
deposits, reinvestment and replacement of asset and liability cash flows. We also analyze the economic value of equity as a secondary measure of interest rate risk. This is a
complementary measure to net interest income where the calculated value is the result of the fair value of assets less the fair value of liabilities. The economic value of equity is
a longer-term view of interest rate risk because it measures the present value of all future cash flows. The impact of changes in interest rates on this calculation is analyzed for
the risk to our future earnings and is used in conjunction with the analysis on net interest income.

The following table summarizes the simulated change in net interest income versus unchanged rates as at December 31, 2022 and December 31, 2021:

+300 basis points

+200 basis points

+100 basis points

Flat rates

−100 basis points

For the year ended

December 31, 2022

December 31, 2021

Following
12 Months

Months 13 - 24

Following
12 Months

Months 13 - 24

4.9 %

3.3 %

1.6 %

0.0 %

(5.6) %

10.1 %

6.7 %

3.4 %

0.0 %

(7.4) %

21.6 %

14.2 %

6.6 %

0.0 %

17.8 %

24.8 %

16.6 %

8.1 %

0.0 %

15.7 %

The following table presents the change in our economic value of equity as at December 31, 2022 and December 31, 2021, assuming immediate parallel shifts in

interest rates:

+300 basis points

+200 basis points

+100 basis points

Flat rates

−100 basis points

For the year ended

December 31, 2022

December 31, 2021

(17.1) %

(11.2) %

(5.4) %

0.0 %

3.5 %

(7.4) %

(5.2) %

(2.0) %

0.0 %

(0.6) %

With interest rates rising rapidly in 2022, the duration of our investment portfolio expanded as prepayments slowed and our ratio of fixed versus floating rate loans

increased. Deposit costs are also getting more sensitive to market rates, most notably in our Channel Islands market, which explains the change in the IRR profile i.e. showing
less NII sensitivity to upside shocks and a higher (negative) impact of those shocks on EVE.

Many assumptions are used to calculate the impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors,
including the timing and frequency of rate changes, market conditions and the shape of the yield curve. The computations of interest rate risk shown above do not include the full
suite of actions that our management may undertake to manage the risks in response to anticipated changes in interest rates, and actual results may also differ materially.

Foreign Exchange Risk

The Group holds various non-USD denominated assets and liabilities and maintains investments in subsidiaries whose domestic currency is either not USD or whose

domestic currency is not pegged to USD. Assets and liabilities denominated in currencies other than USD are translated to USD at the rates of exchange prevailing at the
balance sheet date. The resulting gains or losses are included in foreign exchange revenue in the consolidated statements of operations. Assets and liabilities of subsidiaries
outside of Bermuda are translated at the rate of exchange prevailing on the balance sheet date while associated revenues and expenses are translated to USD at the average
rate of exchange prevailing through the accounting period. Unrealized translation gains or losses on investments in foreign currency based subsidiaries are recorded as a
separate component of shareholders' equity within accumulated other comprehensive loss. Such gains or losses are recorded in the consolidated statements of operations only
when realized. Our foreign currency subsidiaries may give rise to significant foreign currency translation movements against the USD. We also provide foreign exchange
services to our clients, principally in connection with our banking and wealth management businesses, and effect other transactions in non-USD currencies. Foreign currency
volatility and fluctuations in exchange rates may impact the value of non-USD denominated assets and liabilities and raise the potential for losses resulting from foreign currency
trading positions where aggregate obligations to purchase and sell a currency other than USD do not offset one another, or offset each other in different time periods. If the
policies and procedures we have in place to assess and mitigate potential impacts of foreign exchange volatility are not followed, or are not effective to mitigate such risks, our
results and earnings may be negatively affected. The Group maintains a clearly articulated foreign exchange risk exposure tolerance framework which limits exposures to select
major currencies.

Liquidity Risk

The objectives of liquidity risk management are to ensure that the Group can meet its cash flow requirements and capitalize on business opportunities on a timely and

cost-effective basis. Liquidity is defined as the ability to hold and/or generate cash adequate to meet our needs for day-to-day operations and material long and short-term
commitments. Liquidity risk is the risk of potential loss if the Group were unable to meet its funding requirements at a reasonable cost.

We monitor and manage our liquidity by banking location and on a Group-wide basis. The treasury functions in the Group's banking operations, located in Bermuda, the

Cayman Islands, Guernsey, and Jersey, manage day-to-day liquidity. The Group market risk function has the responsibility for measuring and reporting to senior management
on liquidity risk positions. We manage our liquidity based on demand, commitments, specific events and uncertainties to meet current and future financial obligations of a short-
term nature. Our objective in managing liquidity is to respond to the needs of depositors and borrowers as well as to earnings enhancement opportunities in a changing
marketplace. Management is responsible for establishing and monitoring liquidity targets as well as strategies to meet these targets. The Group adopts a conservative liquidity
risk appetite with internal quantitative liquidity risk tolerances more stringent than regulatory requirements. Specifically, the Group manages liquidity against internal limits
established by the market risk management policy and its related liquidity risk standard and quarterly stress testing methodology.

We maintained a balance sheet with loans representing 35.6% of total assets as at December 31, 2022. Further, at that date there were significant sources of liquidity
within our balance sheet in the form of cash and cash equivalents, short-term investments, securities purchased under agreements to resell and investments amounting to $8.8
billion, or 61.3%, of total assets.

An important element of our liquidity management is our liquidity contingency plan which can be employed in the event of a liquidity crisis. The objective of the liquidity

contingency plan is to ensure that we maintain our liquidity during periods of stress. This plan takes into consideration a variety of scenarios that could challenge our liquidity.
These scenarios include specific and systemic events that can impact our on- and off-balance sheet sources and uses of liquidity. This plan is reviewed and updated at
least annually.

Credit Risk

Credit risk is defined as the risk that unexpected losses arise as a result of the Group's borrowers or market counterparties failing to meet their obligations to repay.

Credit risk is managed through the jurisdictional CRM departments. CRM provides a system of checks and balances for our diverse credit-related activities by establishing and
monitoring all credit-related policies and practices throughout the Group and assuring their uniform application. These activities are designed to diversify credit exposure on an
industry and client basis, thus lessening overall credit risk. These credit management activities also apply to our use of derivative financial instruments, including foreign
exchange contracts and interest rate risk management instruments, which are used primarily to facilitate client transactions.

Individual credit authority for commercial and other loans is limited to specified amounts and maturities. Credit decisions involving commitment exposure in excess of

the specified individual limits are submitted to CRM and then to the GCC, which provides a forum for ongoing executive review of loan activity, establishing our credit guidelines
and policies and approving selected credit transactions in accordance with our business objectives. The committee reviews large credit exposures, establishes and reviews
credit strategy and policy and approves selected credit transactions. The FIC manages counterparty risk in respect of third party bank counterparties which do not have
commercial credit relationships within the Group and also approves country exposure limits.

As part of our ongoing credit granting process, internal ratings are assigned to commercial clients before credit is extended, based on an assessment of

creditworthiness. At least annually, a review of all significant credit exposures is undertaken to identify, at an early stage, clients who might be facing financial difficulties. Internal
borrower risk ratings are also reviewed during this process, allowing identification of adverse individual borrower and sector trends, and accurate application of internal borrower
risk ratings which incorporates but is not limited to an assessment of climate risk impacting borrower risk ratings.

An integral part of the CRM function is to formally review past due and potential problem loans to determine which credits, if any, need to be placed on non-accrual

status or charged off. The allowance for loan losses is reviewed quarterly to determine the amount necessary to maintain an adequate provision for current expected
credit losses.

Another way credit risk is managed is by requiring collateral. Management's assessment of the borrower's creditworthiness determines whether collateral is obtained.
The amount and type of collateral held varies but may include deposits held in financial institutions, mutual funds, US Treasury securities, other marketable securities, income-
producing commercial properties, accounts receivable, residential real estate, property, plant and equipment, and inventory. Values of variable collateral are monitored on a
regular basis to ensure that they are maintained at an appropriate level, which includes an assessment of the climate risk impact on the value of the collateral.

Credit Risk — Retail and Private Banking

Retail and private lending activity is split between residential mortgages, personal loans, credit cards and authorized overdrafts. Retail credit risks are managed in
accordance with limits and processes set out in the credit risk policies and guidelines approved by GCC and GRCC (and approved by the Board). The policies set out where
specialist underwriting may be needed.

For residential mortgages, a combination of lending policy criteria, lending guidelines and underwriting are used to make a decision on applications for credit. The
primary factors considered are affordability, residential status, residential history, credit history, employment history, nature of income and LTV of the residential property. In
addition, confirmation of a borrower's identity is obtained and an assessment of the value of the collateral is carried out prior to granting a credit facility. When considering
applications, the primary focus is placed on the willingness and ability to repay.

LTV ratios are derived based on third-party valuations as part of the original underwriting or when increased borrowing has been requested. Updated valuations are not
otherwise obtained unless the loan reaches non-accrual status. Non-accrual loans which are collateral-dependent on real estate must be supported by a third-party valuation no
older than 12 months. Costs of sale for commercial properties are calculated based on individual circumstances, whereas the haircuts for residential real estate are prescribed in
lending guidelines by geographic location and are never less than 15% of the valuation amount.

As valuations are conducted throughout the year, the rolling average age of the valuations are closer to 6 months than 12 months. To further ensure that valuations
within the 12-month revaluation period remain appropriate measures for input into the CECL model, we: (1) compare renewal valuations to the prior valuation to track market
movement; (2) back-test all sales to compare net carrying value versus any additional gain/loss at the time of sale; (3) segregate the tests described in (1) and (2) by geographic
area and, where required, amend provision factors accordingly; and (4) perform a review of new valuations to ascertain such valuations' reasonableness and determine if any
change in value may impact similar properties or locations where valuations are more stale-dated and require an adjustment to the CECL model.

The Bank performs an annual assessment of group residential LTV ranges as part of its stress-testing exercise for regulatory and capital-adequacy purposes. Real

estate indices are not available in the Bank's primary markets and LTV values are based on standard reductions in value over time, based on observed market activity.

Generally, maximum LTV for new residential and commercial loans is as follows:

Residential

Owner-occupied freehold

Owner-occupied leasehold condominium

Investment (not owner-occupied)

Raw land

Commercial Real Estate

Bermuda

Cayman Islands

UK—London

Channel Islands

70 %

65 %

50 %

65 %

85 %

75 %

80 %

65 %

N/A

80 %

N/A

65 %

For other retail lending products, similar lending policy criteria are used, and each of these products has its own policy and underwriting guidelines to enable decisions
on applications for credit and to manage accounts. The factors used are attuned to the lending product in question, although affordability and credit history are considered in all

cases. Ongoing monitoring of all retail and private banking credit is undertaken by the business unit concerned as well as by CRM. In addition, the GCC reviews reports on a
weekly basis. In the event that particular exposures show adverse features such as arrears, the Bank's specialist recovery teams generally work with borrowers to resolve the
situation.

Unlike the United States where the FCRA is designed to help ensure that credit bureaus furnish correct and complete information when evaluating loan applications, the

markets in which we operate do not have systemic credit bureau reports. Therefore, we manually review each loan and we use a formally governed tiered credit approval
process that is administered through and governed by our Risk Management framework.

Credit Risk — Commercial Banking

Commercial credit risks are managed in accordance with limits and asset quality measures set out in the credit risk policies and guidelines approved by the GCC

(and ratified by the Board).

In respect of Commercial Banking, there is a level of delegated sanctioning authority to underwrite certain credit risks based upon an evaluation of the borrower's

experience, track record, financial strength, ability to repay, transaction structure and security characteristics. Lending decisions for large or high risk exposures are based upon
a thorough credit risk analysis and the assignment of an internal borrower risk rating, and are subject to further approval by the assigned officers in CRM or the GCC.

Consideration is also given to risk mitigation measures which will provide the Group with protection, such as third-party guarantees, supporting collateral and security,

legal documentation and financial covenants. Commercial portfolio asset quality monitoring is based upon a number of measures, including the monitoring of financial covenants,
cash flows, pricing movements and variable collateral. In the event that particular exposures begin to show adverse features such as payment arrears, covenant breaches or
business trading losses, a full risk reassessment is undertaken. Where appropriate, a specialist recovery team will work with the borrower to resolve the situation. If this proves
unsuccessful, the case will be subject to intensive monitoring and management procedures designed to maximize debt recovery.

Credit Risk — Treasury

Treasury credit risks are managed in accordance with limits, asset quality measures and criteria set out within the policy approved by the GCC and ratified by the

Board. The policy also sets out powers which require higher levels of authorization according to the size of the transaction or the nature of the associated risk. The FIC identifies,
assesses, prioritizes and manages our risks associated with counterparty exposure to other financial institutions, as well as country-specific exposures.

Exposures to financial institutions arise within the Group's investment portfolio and treasury operations. The Group has treasury operations in all of its banking

locations. Treasury exposures primarily take the form of deposits with banks and foreign exchange positions. Exposures to financial institutions in the investment portfolio can
take the form of bonds, floating rate notes and/or certificates of deposit.

Diversification and avoidance of concentration is emphasized. The Group establishes limits for countries and each financial institution where there is an expected

exposure. Ongoing asset quality monitoring is undertaken by Treasury and CRM and reports are sent to the FIC, GCC and GRCC on a monthly basis. Exception reporting takes
place against a range of asset quality triggers. Treasury uses a number of risk mitigation techniques including netting and collateralization agreements. Other methods (such as
margining and derivatives) are used periodically to mitigate the risk associated with particular transactions or groups of transactions.

For its exposure to Treasury credit risk, the Group uses external credit assessment institutions as permitted under Basel III for sovereign, financial institutions, asset-

backed securities, covered bonds and corporate risks. With regard to financial institutions and corporates, the Group's preference for a long-term rating is the senior unsecured
rating. However, counterparty ratings and/or short-term deposit or commercial paper ratings are used if this is unavailable. For asset-backed securities, the issue or tranche
rating is used.

Exposures

The following tables analyze the Group's regulatory credit risk exposures as at December 31, 2022 and December 31, 2021. Exposures are allocated to specific

standardized exposure portfolios determined by the BMA's Revised Framework for Regulatory Capital Assessment and it is these portfolios that determine the risk weights used.
These exposures include both on- and off-balance sheet exposures, with the latter shown separately after credit conversion factors have been applied.

Analysis of exposures class
(in millions of $)

Cash

Claims on Sovereigns

Claims on Public Sector Entities

Claims on Corporates

Claims on Banks and Securities Firms

Securitizations

Retail Loans

Residential Mortgages

Commercial Mortgages

Past Due Loans

Other Balance Sheet Exposures

Non-Market Related Off-Balance Sheet Credit Exposures

Market Related Off-Balance Sheet Credit Exposures
Total

Average
Exposure 2022

Position as at
December 31, 2022

Average
Exposure 2021

Position as at
December 31, 2021

69.4

2,758.6

42.8

595.5

1,458.6

4,896.0

202.8

3,499.3

644.2

64.6

260.1

535.5

60.4

73.9

2,933.5

6.4

477.0

1,346.9

4,646.7

211.8

3,544.8

619.5

68.6

282.6

482.8

51.1

70.2

2,539.2

88.2

666.0

1,804.6

5,194.9

226.6

3,444.3

703.5

72.4

268.5

628.7

58.0

66.5

3,091.5

68.2

559.0

1,527.6

5,134.3

222.3

3,582.8

675.7

63.3

246.6

608.7

54.8

15,087.9

14,745.6

15,765.2

15,901.3

Geographic segment distribution of exposures class
as at December 31, 2022
(in millions of $)

Bermuda

Cayman
Islands

Channel
Islands & UK

Other

Total

Cash

Claims on Sovereigns

Claims on Public Sector Entities

Claims on Corporates

Claims on Banks and Securities Firms

Securitizations

Retail Loans

Residential Mortgages

Commercial Mortgages

Past Due Loans

Other Balance Sheet Exposures

Non-Market Related Off-Balance Sheet Credit exposures
Market Related Off-Balance Sheet Credit Exposures

Total

Residual maturity breakdown of exposures class
as at December 31, 2022
(in millions of $)

Cash

Claims on Sovereigns

Claims on Public Sector Entities

Claims on Corporates

Claims on Banks and Securities Firms

Securitizations

Retail Loans

Residential Mortgages

Commercial Mortgages

Past Due Loans

Other Balance Sheet Exposures

Non-Market Related Off-Balance Sheet Credit exposures
Market Related Off-Balance Sheet Credit Exposures

Impairment Provisions

Credit Risk Concentrations

38.8

912.4

6.4

313.0

503.9

35.1

722.2

—

42.1

417.2

1,811.1

2,165.3

100.3

997.5

457.7

48.1

161.1

170.7

24.5

72.5

815.0

79.9

0.7

55.7

180.4

1.5

—

1,298.9

—

121.9

415.2

670.3

39.0

1,732.3

81.9

19.8

53.3

131.7

25.1

5,545.5

4,587.6

4,589.4

—

10.6

—

12.5

—

23.1

73.9

2,933.5

6.4

477.0

1,346.9

4,646.7

211.8

3,544.8

619.5

68.6

282.6

482.8

51.1

14,745.6

Up to
12 months

1 - 5 years

More than
5 years

No specific
maturity

Total

73.9

1,736.6

—

215.9

1,346.9

—

157.5

410.7

28.5

36.4

—

482.8

51.1

—

763.7

—

178.9

—

18.0

40.3

1,156.9

107.7

5.9

—

433.2

6.4

82.2

—

4,628.7

14.0

1,977.2

483.3

26.3

—

282.6

—

73.9

2,933.5

6.4

477.0

1,346.9

4,646.7

211.8

3,544.8

619.5

68.6

282.6

482.8

51.1

4,540.3

2,271.4

7,651.3

282.6

14,745.6

Concentration risk is defined as: any single exposure or group of exposures with the potential to produce losses large enough (relative to the Group's capital, total

assets or overall risk level) to threaten the Group's health or ability to maintain core operations. The management of concentration risk is addressed in the first instance by the
Group's large exposure policy and related credit guidelines, which require that credit facilities to entities that are affiliated through common ownership or management are
aggregated for adjudication and reporting purposes. The policy also defines what constitutes a large exposure and the related reporting requirements. The CRM function also
undertakes monitoring and assessment of our exposure to concentration risk, reporting the results of these analyses to the GCC, GRCC and RPCC.

The factors taken into consideration when assessing concentration risk are as follows:

•

single or linked counterparty;

industry or economic sector (e.g., hospitality, property development, commercial office building investment);

• geographic region;

• product type;

•

collateral type; and

• maturity date (whether of the facility or of interest rate fixes).

Counterparty Concentrations

Counterparty concentrations is the risk associated with assuming a high level of exposure to a single counterparty, the failure of which could have an adverse impact on

the Group.

Large exposures are reviewed quarterly by the GRCC and RPCC for the loan portfolio and the treasury/investment portfolios. Group Market Risk and Treasury work

closely together on daily treasury positions and exceptions.

All large exposures and concentrations in the portfolio are reviewed and agreed by the FIC on a quarterly basis and are reported to the Board and the BMA as a part of

this process. The review of large exposures considers:

•

facility total;

• any link with other facilities;

•

total linked facility being within guidelines;

• borrower risk rating;

•

security value on the facility; and

loan-to-value percentage against minimum security covenants.

Industry Concentration

Industry concentration encompasses the scenario that a risk factor inherent within an industry is tied to an entire portfolio of accounts or investments; e.g., a portfolio

made up of a large number of small individual loans where all the counterparties are hotel operators. We believe that due to the nature of the Group's client base our exposure to
the property, insurance and fund sectors could be classified as industry concentration, although we believe geographic and product concentration are the more appropriate risks
to measure.

Geographic Concentration

Geographic concentration of the book is monitored as follows: Reports are generated which provide details of all the property loan exposure of the Group. Through this,

loans are subdivided into regional exposure. From this, the percentage breakdown per region of the Group's property exposure is analyzed and reported to the GRCC and
RPCC. Assessment of the exposure allows the committees to decide whether the Group should decline further lending in any area in which it is becoming over-weighted.

Product Concentration

Product concentration is defined in the context of credit risk, as an over-weighting in the portfolio to a given product type, making the Group vulnerable to the impact of

a variety of external factors that could either reduce demand for the product itself or lead to an increase in the level of default rates experienced. We operate as a full service
bank in Bermuda and the Cayman Islands and aim to satisfy the requirements of our customers in these communities through the range of products and services we offer.
Accordingly, there is no dependence or concentration on a single product in these markets outside of the residential mortgage portfolios, which comprised 69.7% of the Group's
loan book as at December 31, 2022 (compared to 68.8% as at December 31, 2021); in Bermuda, residential mortgage lending made up 55.0% of the Bermuda loan book as at
December 31, 2022 (compared to 53.1% as at December 31, 2021), and loans for many purposes (education, business support, family requirements) were made in the form of
residential mortgages. Product category analysis confirms that the total lending portfolio is concentrated in the property market; this has been addressed by performing stress
testing.

Collateral Concentration

Collateral concentration considers whether the Group's loan book is secured by a limited number of collateral types. An example of this would be when a large value of
loans to a diversified group of borrowers is all secured by shares in the same company or by the shares of various companies within the same industry sector. Any decline in the
value of these shares or in the performance of the sector as a whole could have an adverse impact on the Group's security position across all affected borrowers. The most
relevant example of collateral concentration is the Group's exposure to real estate property values. Ignoring cash-backed facilities, the largest collateral concentrations within the
portfolio are to residential and commercial property. The greatest risk with collateral concentration is that the value of the security could be severely reduced. To simulate this,
the Group's stress testing process incorporates a scenario in which all real estate collateral is devalued by factors as high as 30%.

Credit Risk Mitigation

The Group uses a wide range of techniques to reduce the credit risk of its lending. The most basic of these is performing an assessment of the ability of a borrower to

service the proposed level of borrowing without distress. However, the risk can be further mitigated by obtaining security for the funds advanced.

Residential Mortgages

Residential property is the Group's main source of collateral and means of mitigating credit risk inherent in the residential mortgage portfolio. All mortgage lending

activities are supported by underlying assumptions and estimated values received by independent third parties. All residential property must be insured to cover property risks
through a third party.

Commercial

Commercial property is one of the Group's primary sources of collateral and means of mitigating credit risk inherent in its commercial portfolios. Collateral for the

majority of commercial loans comprises first legal charges over freehold or long leasehold property but the following may also be taken as security: life insurance policies; credit
balances assignments; shares; guarantees; equitable charges; debentures; chattel mortgages and charges over residential property.

For property-based lending, supporting information such as professional valuations are an important tool to help determine the suitability of the property offered as

security and, in the case of investment lending, generating the cash to cover interest and principal payments. All standard documentation is subject to in-house legal review and
sign-off in order to ensure that the Group's legal documentation is robust and enforceable. Documentation for large advances may be specifically prepared by independent
solicitors. Insurance requirements are always fully considered as part of the application process and the Group ensures that appropriate insurance is taken out to protect the
property against an insurable event.

Treasury

Collateral held as security for treasury assets, including investments, is determined by the nature of the instrument. Loans, debt securities, treasury and other eligible

bills are generally unsecured with the exception of asset-backed securities and similar instruments, which are secured by pools of financial assets. The ISDA master agreement
is the Group's preferred method of documenting derivative activity. It is common in such cases for a Credit Support Annex to be executed in conjunction with the ISDA master
agreement in order to mitigate credit risk on the derivatives portfolio. Valuations are performed, agreed with the relevant counterparties, and collateral is exchanged to bring the
credit exposure within agreed tolerances. The EAD value to the counterparty is measured under the standardised approach for measuring counterparty credit risk exposures
method and is derived by adding the gross positive fair value of the contract (replacement cost) to the contract's potential future credit exposure, which is derived by applying a
multiple base on the contracts residual maturity to the notional value of the contract, and applying an alpha of 1.4 to the sum of these components.

The following table shows the exposures to counterparty credit risk for derivative contracts as at December 31, 2022 and December 31, 2021:

Gross
Positive
Fair Value of
Contracts
as at
December 31,
2022

Potential
Future
Credit
Exposure
as at
December 31,
2022

Alpha as at
December 31,
2022

EAD Value
as at
December 31,
2022

Gross
Positive
Fair Value of
Contracts
as at
December 31,
2021

Potential
Future
Credit
Exposure
as at
December 31,
2021

Alpha as at
December 31,
2021

EAD Value
as at
December 31,
2021

13.2

23.3

1.4

51.1

18.0

21.2

1.4

54.9

(in millions of $)
Spot and forward

foreign exchange
and currency
swap contracts . .

Securitizations

The Bank has not, to date, securitized assets that it has originated. The Bank's total exposure to purchased securitization positions as at December 31, 2022 was $4.6

billion by market value (compared to $5.1 billion as at December 31, 2021), with US government and federal agencies accounting for the majority of this exposure.

The following table provides an analysis of the Bank's investments in securitization positions by exposure type as at December 31, 2022 and December 31, 2021:

Underlying asset type (in millions of $)

US government and federal agencies

Mortgage backed securities — Retail

Asset-backed securities — Student loans

Total

Operational Risk

Exposure Value
as at
December 31,
2022

Exposure Value
as at
December 31,
2021

4,611.9

19.0

5.6

4,636.5

5,083.2

27.3

13.2

5,123.7

In providing our services, we are exposed to operational risk. This is the risk of loss from inadequate or failed internal processes and systems, actions or inactions of

people, or from external events. Operational risk is inherent in our activities and can manifest itself in various ways including fraudulent acts, business interruptions, inappropriate
behavior of employees, unintentional failure to comply with applicable laws and regulations, cybersecurity incidents and privacy breaches or failure of vendors to perform in
accordance with their arrangements. These events could result in financial losses, litigation and regulatory fines, as well as other damage to us. Our risk management goal is to
keep operational risk at appropriate levels consistent with our risk appetite, financial strength, the characteristics of our businesses, the markets in which we operate and the
competitive and regulatory environment to which we are subject.

As we continue to expand our use of technology, we are exposed to various forms of cyber-attacks. We devote significant resources to maintain and regularly upgrade
our systems and networks and review the ever changing threat landscape in order to mitigate our exposure to cyber risks. In addition to the policy reviews, we continue to look to
implement technology solutions that enhance preventive and detection capabilities and our ability to recover quickly should a successful cyber-attack occur. We assess our third-
party vendor controls and have a developed business continuity plan that addresses potential cyber risks. We also maintain insurance coverage that may, subject to policy terms
and conditions, cover certain aspects of cyber risks. However, such insurance may be insufficient to cover all losses.

Operational risk is mitigated through internal controls embedded in our business activities and our risk management practices, which are designed to continuously

reassess the effectiveness of these controls in order to keep the risk we assume at levels appropriate to our risk appetite as approved by the Board. Data on operational losses
and any significant control failures incurred are captured through an incident reporting process. These events are reported to both the GRCC and RPCC, which assess the
sufficiency of the corrective actions taken by management to prevent recurrence. Both committees also receive regular reporting on actual performance against established risk
tolerance metrics.

Russian Invasion of Ukraine

Butterfield adopts a conservative risk posture and maintains robust preventative and detective controls that have meant that the identified exposure to targets of

sanctions has, to date, been minimal. Our business generally contains very few clients with Russian, Belarusian or Ukrainian ties and we therefore do not expect the current
geopolitical conflict and related sanctions to present significant reputational or financial exposure for the Bank. The Bank's Group Compliance function continues to monitor for
new sanctions, review our client base and ensure our control environment remains appropriately calibrated to manage our reputational and compliance risk as events continue to
unfold.
Interest Rate Benchmark Reform

On March 5, 2021, the FCA and ICE Benchmark Administration, the authorized and regulated administrator of LIBOR, announced that all the GBP, CHF, JPY and EUR

LIBOR settings and the one-week and two-month USD LIBOR settings will cease after December 31, 2021, and the remaining USD LIBOR settings will cease after June 30,
2023. It was subsequently announced that one-, three- and six-month GBP and JPY LIBOR settings would continue for the duration of 2022, albeit on a synthetic basis.

These reforms have the potential to impact various risk areas for the Bank, including but not limited to: operational risk (potential adverse impacts to the business,

customers and technology); market risk (potential adverse impacts to the business and customers if markets are disrupted); and accounting risk (potential adverse impacts to the
statement of operations if issues with hedge accounting/effectiveness arise). The Bank, however, does not expect any material change to its risk management frameworks and
controls as a result of the reforms.

The Bank has established a LIBOR transition working group, consisting of senior members of management, with significant representation from the Legal and Risk
departments. The working group reports directly to the GRCC which feeds into the RPCC of the Board. The working group has set up a detailed project plan which includes:
transition planning; financial exposure measurement and risk assessment; operational preparedness and controls; legal contract preparedness/modification; communication; and
training and oversight.

As at December 31, 2022, the Bank had 72 loans totaling $290.8 million linked to LIBOR (December 31, 2021: 121 loans totaling $563.5 million). This excludes one-

week and two-month USD LIBOR which have already transitioned. The Bank is engaging with impacted customers to ensure adequate fallback provisions are included in
contracts, where not already provided for.

There were no derivative positions maturing after the relevant transition dates.

Capital Adequacy Management

Effective January 1, 2015, the BMA adopted capital and liquidity requirements consistent with Basel III. These requirements are contained within the BMA's "Basel III

for Bermuda Banks November 2017 Rule Update" and can be found on its website.

The Group manages its capital both on a total Group basis and, where appropriate, on a legal entity basis. The finance department has the responsibility for measuring,

monitoring and reporting capital levels within guidelines and limits established by the RPCC. The management of capital will also involve regional management to ensure
compliance with local regulation. In establishing the guidelines and limits for capital, a variety of factors are taken into consideration, including the overall risk of the business in
stressed scenarios, regulatory requirements, capital levels relative to our peers, and the impact on our credit ratings.

Capital Assessment and Risk Profiling

Under the requirements of the Basel II Accord as implemented by the BMA, the Group undertakes a CARP process, which is an internal assessment of all material

risks to determine our capital needs. This internal assessment takes account of the minimum capital requirement and other risks not covered by the minimum capital requirement
(Pillar II). Where capital is deemed as not being able to mitigate a particular risk, alternative management actions are identified and described within the CARP. The CARP is
presented to the RPCC before being presented to the Board for challenge and approval and then submission to the BMA. The CARP process is performed annually or more
frequently should the need arise.

A SREP is then undertaken biannually by the BMA, which is designed to assess the Group's risk profile as documented in the CARP. This assessment is used to

determine and set the Individual Capital Guidance which is the minimum level of capital the Group will be required to hold until the next SREP review is conducted.

Liquidity and Capital Resources

Liquidity

We define liquidity as our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or

maturity of existing assets or by obtaining additional funding through liability management.

Sources and Uses of Cash

Our primary sources of cash are (i) cash obtained from deposits, (ii) long-term debt, and (iii) cash from operations. Our primary uses are (i) the payment of our
operating expenses, (ii) payment of dividends on our common shares, (iii) repayment of certain maturing liabilities, (iv) repurchase of our common shares, and (v) extraordinary
requirements for cash, such as acquisitions. We had $2.1 billion of cash and cash equivalents as at December 31, 2022 and $2.2 billion as at December 31, 2021, as well as
$6.7 billion and $7.5 billion, respectively, of liquid securities, the balance of which could be sold to meet liquidity requirements. In our opinion, the Bank’s working capital is
sufficient for the Bank’s present requirements.

Liquidity Risk

Our liquidity risk is managed through a comprehensive framework of policies and limits overseen by GALCO. We consider the effective and prudent management of

liquidity to be fundamental to our health and strength. Our objective is to manage our cash flow and liquidity reserves so that they are adequate to fund our obligations and other
commitments on a timely basis and at a reasonable cost.

We continuously monitor and make adjustments to our liquidity position by adjusting the balance between sources and uses of funds as we deem appropriate. Our

primary measures of liquidity include monthly cash flow analysis under ordinary business activities and conditions and under situations simulating a severe run on the Bank. The
Bank strives to use a balanced liquidity risk appetite with internal quantitative liquidity risk tolerances more stringent than regulatory requirements. Specifically the Bank manages
liquidity against internal limits established by the market risk management policy and its related liquidity risk standard and quarterly stress testing methodology. The results of
these measures and analysis are incorporated into our liquidity contingency plan, which provides the basis for the identification of our liquidity needs. For more information, see
Item 11 "Operating Results - Liquidity Risk".

Capital Resources

We have financed our operations, growth and cash needs primarily through income from operations and issuances of debt and equity securities. We believe that our
cash on hand and cash flows from operations will be sufficient to repay our outstanding debt as it matures. In the future, we may need to incur additional debt or issue additional
equity securities, which we may be unable to do or which may be on less favorable terms.

We manage our capital both on a consolidated basis and, where appropriate, on a legal entity basis. The group finance team has the responsibility for measuring,

monitoring and reporting capital levels within guidelines and limits established by the RPCC. The management of capital will also involve jurisdictional management to ensure
compliance with local regulations. In establishing the guidelines and limits for capital, a variety of factors are taken into consideration, including the overall risk of the business in
stressed scenarios, regulatory requirements, capital levels relative to our peers, and the impact on our credit ratings.

Effective January 1, 2015, the BMA implemented the capital reforms proposed by the BCBS and referred to as the Basel III regulatory framework. Basel III aims to
raise the quality, consistency and transparency of the capital base, limit the build-up of excess leverage and increase capital requirements for the banking sector. We are now
subject to the following requirements:

•

CET1 ratio of at least 7.0% of RWA, inclusive of a minimum CET1 ratio of 4.5% and the new capital conservation buffer of 2.5%, but excluding the Domestic
Systematically Important Bank ("D-SIB") surcharge described below;

Tier 1 capital of at least 8.5% of RWA, inclusive of a minimum Tier 1 ratio of 6% and the new capital conservation buffer of 2.5%, but excluding the D-SIB surcharge
described below;

Total capital of at least 10.5% of RWA, inclusive of a minimum total capital ratio of 8% and the new capital conservation buffer of 2.5%, but excluding the D-SIB
surcharge described below;

•

We are considered to be a D-SIB and are subject to a 3% surcharge composed of CET1-eligible capital implemented by the BMA effective September 30, 2015.
This is based upon our assessment of the extent to which we (individually and collectively with the other Bermuda banks) pose a degree of material systemic risk to
the economy of Bermuda due to our role in deposit taking, corporate lending, payment systems and other core economic functions;

Counter-cyclical buffer of up to 2.5% composed of CET1-eligible capital may be implemented by the BMA when macroeconomic indicators provide an assessment of
excessive credit or other pressures building in the banking sector, potentially increasing the CET1, Tier 1 and total capital ratios by up to 2.5%. No counter-cyclical
buffer has been implemented to date;

Leverage ratio must be at 5.0% or higher;

LCR with a minimum requirement of 100%; and

NSFR with a minimum requirement of 100%.

The minimum capital ratio requirements set forth above do not reflect additional Pillar II add-on requirements that the BMA may impose upon us as a prudential

measure from time to time. Our capital requirements remain under continuous review by the BMA pursuant to its prudential supervision and we cannot guarantee that the BMA
will not seek higher total capital ratio requirements at any time.

In December 2017, the BCBS published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly

referred to as "Basel IV"). Among other things, these standards revise the BCBS's standardized approach for credit risk (including by recalibrating risk weights and introducing
new segmentations for exposures) and provides a new standardized approach for operational risk capital. Under the BCBS framework, these standards will generally be effective
on January 1, 20232, with an aggregate output floor phasing in through January 1, 2028. The BMA issued consultation papers in 2022 which set out the Authority’s proposed
adoption of the BCBS's revised standardized approach for operational and credit risk with implementation dates of January 1, 2023 and January 1, 2024, respectively.

The following table sets forth our capital adequacy as at December 31, 2022 and 2021 in accordance with the Basel III framework:

(in millions of $)

Capital

Common Equity Tier 1

Tier 1 capital

Tier 2 capital

Total capital

Risk Weighted Assets

Cash and cash equivalents and investments

Loans

Other assets

Off-balance sheet items

Operational risk charge

Total risk-weighted assets

Capital Ratios (%)

Common Equity Tier 1

Tier 1 total

Total capital

Leverage ratio

As at December 31

2022

2021

983.3

183.6

896.3

184.0

1,167.0

1,080.3

1,023.4

2,507.3

288.6

173.5

850.5

1,141.4

2,606.0

255.3

230.9

867.9

4,843.4

5,101.5

20.3 %

24.1 %

6.7 %

17.6 %

21.2 %

5.6 %

Overall, capital ratios have increased, driven primarily by a decrease in RWAs and earnings accretion and partially offset by dividend payments and share repurchases.

The decrease in RWA is driven primarily by decreased depositor funding. As at December 31, 2022, we were in compliance with the minimum LCR of 100% as well as the
minimum NSFR of 100%.

Share Repurchase Program

The Bank repurchases its common shares through share repurchase programs from time to time as a means to improve shareholder liquidity and facilitate growth in

share value. In accordance with applicable laws, regulations and listing standards, each program was approved by the Board and repurchases of shares pursuant to each
program are subject to the approval of the BMA. In addition, the BSX is advised monthly of shares purchased pursuant to each program.

On December 6, 2018, following the completion of the initial 2018 share repurchase program, the Board approved the 2019 share repurchase program, authorizing the

purchase of up to 2.5 million common shares through February 29, 2020.

On December 2, 2019, the Board approved, with effect from the completion of the previous program on December 20, 2019 through February 28, 2021, a common

share repurchase program, authorizing the purchase of up to 3.5 million common shares or $125 million.

On February 10, 2021, the Board approved a new common share repurchase program, authorizing the purchase of up to 2.0 million common shares through February

2022.

2 In March 2020, in response to the pandemic, the BCBS deferred the implementation timeline from January 1, 2022 to January 1, 2023 and the output floor phasing in from
January 1, 2027 to January 1, 2028.

On February 14, 2022, the Board approved, with effect from the completion of the previous program, a new common share repurchase program, authorizing the

purchase of up to 2.0 million common shares through February 28, 2023.

On February 13, 2023, the Board approved, with effect from the completion of the previous program, a new common share repurchase program, authorizing the

purchase of up to 3.0 million common shares through February 29, 2024. The timing and amount of repurchase transactions under the new program will be based on market
conditions, share price, legal requirements and other factors. No assurances can be given as to the amount of common shares that may actually be repurchased.

Total common share repurchases for the years ending December 31, 2022, 2021 and 2020 are as follows:

Acquired number of shares (to the nearest share)

Average cost per common share (in $)

Total cost (in $)

For the year ending December 31

2022

2021

2020

102,000

38.21

534,828

36.93

3,452,000

25.10

3,897,268

19,753,336

86,639,889

From time to time, our associates, insiders and insiders' associates as defined by the BSX regulations may sell shares which may result in such shares being

repurchased pursuant to each program, provided no more than any such person's pro-rata share of the listed securities is repurchased. Pursuant to the BSX regulations, all
repurchases made by any issuer pursuant to a securities repurchase program must be made: (1) in the open market and not by private agreement; and (2) for a price not higher
than the last independent trade for a round lot of the relevant class of securities.

Dividends

During the year ended December 31, 2022, we paid cash dividends totaling $87.3 million or $1.76 (2021: $87.3 million or $1.76; 2020: $88.9 million or $1.76) for

each common share on record as of the related record dates. The Board declared these dividends as a quarterly dividend of $0.44 per common share for each quarter of 2022,
2021 and 2020.

For more information, see Item 3.D. "Risk Factors – Risks Relating to the Common Shares".

Cash Flows

2022 vs. 2021

Cash and cash equivalents was $2.1 billion as at December 31, 2022, compared to $2.2 billion as at December 31, 2021. The decrease is described below by

category of operating, investing and financing activities.

For the year ended December 31, 2022, net cash provided by operating activities totaled $219.3 million (2021: $251.3 million). Cash flows from operating activities are
generally the cash effects of transactions and other events that enter into the determination of net income. Cash provided by operating activities decreased by $32.1 million from
2021 to 2022, due primarily to movements in other assets and liabilities, reduced depreciation and amortization and partially offset by an increase in net income.

Net cash provided by investing activities for the year ended December 31, 2022 totaled $292.0 million, compared to cash used in investing activities of $1,905.7 million

in 2021. The $2,197.7 million increase in cash provided by investing activities in 2022 was mainly attributable to the reduced purchases of investments in securities due to
reduced depositor funding.

Net cash used in financing activities totaled $506.8 million in 2022, compared to net cash provided by financing activities of $535.8 million in 2021. The $1,042.6 million

decrease is mainly due to reduced deposit liabilities partially offset by common share repurchases.

2021 vs. 2020

Cash and cash equivalents was $2.2 billion as at December 31, 2021, compared to $3.3 billion as at December 31, 2020. The decrease is described below by

category of operating, investing and financing activities.

For the year ended December 31, 2021, net cash provided by operating activities totaled $251.3 million (2020: $188.2 million). Cash flows from operating activities are
generally the cash effects of transactions and other events that enter into the determination of net income. Cash provided by operating activities increased by $63.2 million from
2020 to 2021, due primarily to an increase in net income as well as movements in other liabilities.

Net cash used in investing activities for the year ended December 31, 2021 totaled $1,905.7 million, compared to cash used in investing activities of $41.7 million in
2020. The $1,864.0 million increase in cash used in investing activities in 2021 was mainly attributable to the purchases of investments in securities which was driven by both
increased depositor funding as well as the redeployment of funds from cash and cash equivalents.

Net cash provided by financing activities totaled $535.8 million in 2021, compared to net cash provided by financing activities of $546.4 million in 2020. The $10.7

million decrease is mainly due to a decreases in common share repurchases during the year and partially offset by a reduced increase in deposit liabilities and the issuance of
subordinated debt in 2020.

Contractual Obligations

Credit-Related Arrangements

See "Note 12: Credit related arrangements, repurchase agreements and commitments" to our audited consolidated financial statements as at December 31, 2022 for

additional information.

Contractual Obligations

The following table presents our outstanding contractual obligations as at December 31, 2022:

(in millions of $)
Long term debt(1)
Sourcing arrangements(2)
Term deposits

Other obligations

Total outstanding contractual obligations

Total

Less than 1
year

1 to 3
years

3 to 5
years

After 5
years

175.0

42.9

—

12.6

3,107.2

3,020.1

25.5

12.9

—

21.7

87.2

9.1

175.0

8.6

—

2.2

3,350.7

3,045.6

117.9

185.7

—

1.4

______________________________
(1)
(2) We have an outstanding contractual obligation relating to a five-year agreement entered into in November 2021 with DXC to supply technology infrastructure and

Long-term debt excludes interest and unamortized debt issuance costs.

application development management, information security and technical support for our locations in Bermuda and the Cayman Islands. Under our agreement with DXC,
server management and maintenance, technology field support, application support and development and help desk functions are managed by DXC.

See "Note 12: Credit related arrangements, repurchase agreements and commitments" to our audited consolidated financial statements as at December 31, 2022 for

additional information.

Interest expense on our contractual obligations relates primarily to deposit liabilities and our long-term debt. Interest expense on customer deposits was $45.2 million

for the year-ended December 31, 2022, compared to $15.5 million and $25.1 million for the years ended December 31, 2021 and 2020, respectively. Movements in interest
expense on deposit liabilities are due primarily to market interest rate movements, with yearly average deposits liabilities of $13.3 billion, $13.7 billion and $12.1 billion for 2022,
2021 and 2020, respectively. The increase in the expense is related primarily to a rapid increase in market interest rates during the year and partially offset by lower average
deposit volumes.

Capital Commitments

In 2021, the Bank embarked on a significant information technology project intended to modernize and upgrade its technology applications and infrastructure. It is a

three-year programme that will improve the efficiency and stability of the Bank's technology estate and enhance the Bank's ability to provide broader and better digital solutions
to its clients. The project is anticipated to be completed towards the end of 2023.

The Bank is expected to spend between $30 million to $40 million over the three year project horizon, which will be funded by existing cash resources.

The Bank has established a project management steering committee and program office. The steering committee consists of senior and executive members of

management and reports directly to the Board.

For more information, see Item 3.D. "Risk Factors - Risks Relating to Risk Oversight and Internal Controls - Our operations are reliant on effective implementation and

use of technology and require us to adapt to new technologies, and a breach, interruption or failure of our technology services or the inability to effectively integrate new
technologies could have an adverse effect on our business, financial condition or results of operations."

See also "Note 12: Credit related arrangements, repurchase agreements and commitments" to our audited consolidated financial statements as at December 31, 2022

for additional information.

Research and Development, Patents and Licenses, etc.

Not applicable.

Trend Information

See discussion in Item 5.A. "Operating Results" for a description of the trend information relevant to us.

E. Critical Accounting Estimates

The Bank's significant accounting policies conform to GAAP and are described in Note 2 of our audited consolidated financial statements. Various elements of our

accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Given the sensitivity of our
consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in our results of
operations or financial condition. Details of certain critical policies and estimates that affect our business results are summarized below:

Allowance for Credit Losses

Accounting for Financial instruments - Credit losses

On January 1, 2020, the Bank adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326). Accordingly, from the date of

adoption, the Bank uses a current expected credit loss model ("CECL") which is based on expected losses. The model used by the Bank up to December 31, 2019 to estimate
credit losses was based on incurred losses. The CECL model is applied by the Bank to the measurement of credit losses on financial instruments at amortized cost, including
loan receivables and HTM debt securities. The Bank also applies the CECL model to certain off-balance sheet credit exposures such as undrawn loan commitments, standby
letters of credit, financial guarantees, and other similar instruments. In line with Topic 326, the Bank will present credit losses on AFS securities as a valuation allowance rather
than as a direct write-down. Changes in expected credit losses are recorded through the respective credit loss allowances on the consolidated balance sheets as well as in the
provision for credit losses (recoveries) in the consolidated statements of operations.

The Bank's purchased credit-impaired (“PCI”) loans outstanding as at January 1, 2020 were classified as purchased credit deteriorated (“PCD”) loans and both the

amortized cost and an allowance for expected credit losses are disclosed and included with other non-PCD loans figures. The Bank will continue to recognize the amortization of
the noncredit discount, if any, as interest income based on the yield of such assets.

The Bank has not restated comparative information previously accounted for under the incurred loss and the PCI models. The total adjustment resulting from the

adoption of this methodology on the opening balance of the Bank’s accumulated deficit as at January 1, 2020 was a negative adjustment of $7.8 million relating to the Bank's
loan portfolio.

Under the CECL model, the Bank collects and maintains attributes as they relate to its financial instruments that are within the scope of CECL including fair value of

collateral, expected performance over the lifetime of the instruments and reasonable and supportable assumptions about future economic conditions. The Bank's measurement
of expected losses takes into account historical loss information and is primarily based on the product of the respective instrument’s probability of default (“PD”), loss given
default (“LGD”) and exposure at default (“EAD”). For AFS securities, any allowance for credit losses is based on an impairment assessment.

The Bank made the accounting policy election to write off accrued interest receivable on loans that are placed on non-accrual status by reversing the then accrued

interest balance against interest income revenue.

The Bank maintains an allowance for credit losses, which in management’s opinion is adequate to absorb all estimated credit-related losses that are expected in its

lending and off-balance sheet credit-related arrangements at the balance sheet date.

Management measures expected credit losses on HTM and AFS debt securities on a collective basis by major security type when similar risk characteristics exist, or

failing that, on an individual basis.

For AFS debt securities in an unrealized loss position, the Bank first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the

security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair
value through income. For AFS debt securities that do not meet the aforementioned criteria, the Bank evaluates whether the decline in fair value has resulted from credit losses
or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating
agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows
expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the
amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost
basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Losses are charged against the allowance when management believes the uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding

intent or requirement to sell is met.

The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected

on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries typically do not
exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and

reasonable and supportable forecasts as well as the Bank's internal risk rating framework. Historical credit loss experience provides the basis for the estimation of expected
credit losses. Adjustments to historical loss information are made for differences in the current-loan specific risk characteristics such as differences in underwriting practices,
vintage, portfolio mix, delinquency level and term as well as changes in environmental conditions, such as changes in macroeconomic factors and collateral values.

The allowance for credit losses is measured on a collective pool basis when similar risk characteristics exist. In each of its jurisdictions, the Bank has identified the

following portfolio segments: residential mortgages, consumer loans (including overdrafts), commercial loans, commercial overdrafts, commercial real estate loans and credit
cards. For loans and overdrafts, management uses a PD and LGD model to estimate the allowance for credit losses. Loans that do not share risk characteristics are evaluated
on an individual basis. Loans evaluated individually are not included in the collective evaluation. For credit cards, management uses a loss rate to estimate expected credit
losses.

Expected credit losses are estimated over the contractual term of the loans. The contractual term excludes potential extensions, renewals and modifications unless

management has a reasonable expectation at the reporting date that the extension or renewal options included in the original contract will occur or that a troubled debt
restructuring will be executed. Credit card receivables do not have stated maturities, therefore establishing a contractual term is performed by using an analytical approximation
of behavior.

Fair Value of financial instruments

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market

for the asset or liability in an orderly transaction between market participants on the measurement date. We determine the fair values of assets and liabilities based on the fair
value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The relevant
accounting standard describes three levels of inputs that may be used to measure fair value. Equity securities and debt instruments classified as AFS, and derivative assets and
liabilities are recognized in the consolidated balance sheet at fair value.

Fair value inputs are considered Level 1 when based on unadjusted quoted prices in active markets for identical assets.

We determine fair value based on quoted market prices, where available. If quoted prices are not available, fair value is estimated based upon other observable inputs,
and may include valuation techniques such as present value cash flow models or other conventional valuation methods. In addition, when estimating the fair value of assets, we
may use the quoted price of similar assets, if available.

We use unobservable inputs when observable inputs are not available. These inputs are based upon our judgments and assumptions, which represent our assessment

of the assumptions market participants would use in pricing the asset or liability, which may include assumptions about risk, counterparty credit quality and liquidity and are
developed based on the best information available. The use of different assumptions could produce significantly different results, which could have material positive or negative
effects on the Bank's results of operations.

Significant assets measured at fair value on a recurring basis include our US government and federal agencies investments, non-US government debt securities, and
residential mortgage-backed securities. The fair values of these instruments are generally sourced from an external pricing service and are classified as Level 2 within the fair
value hierarchy. The service's pricing models use predominantly observable valuation inputs to measure the fair value of these securities under both the market and income
approaches.

Fair value is also used on a nonrecurring basis to evaluate certain assets for impairment or for disclosure purposes. Examples of nonrecurring uses of fair value include

OREO, loan impairments for certain loans and goodwill.

We review and update the fair value hierarchy classifications on a quarterly basis. We also verify the accuracy of the pricing provided by our primary external pricing

service on a quarterly basis.

During the year ended December 31, 2022, there were no transfers between Level 1 and Level 2 and there was a transfer out of Level 3 and into Level 2 due to

increased price observability. There were no transfers between Level 1 and Level 2 or Level 2 and Level 3 during the year ended December 31, 2021.

Refer to "Note 17: Fair value measurements" of the audited consolidated financial statements for further detail on the judgments made in classifying instruments in the

fair value hierarchy.

Impairment of Goodwill

We account for acquisitions using the acquisition method of accounting, under which the acquired company's net assets are recorded at fair value at the date of the
acquisition and the difference between the fair value of consideration and fair value of the net assets acquired is recorded as goodwill, if positive, and as a bargain purchase
gain, if negative.

Goodwill is tested annually in the third quarter for impairment at the reporting unit level, or more frequently if events or circumstances indicate there may be impairment.

The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit's fair value to its carrying value
including goodwill. If the fair value of a reporting unit exceeds its carrying value, applicable goodwill is deemed to be not impaired. If the carrying value exceeds fair value, there
is an indication of impairment and the second step is performed to measure the amount of impairment.

The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment. The implied fair value of

goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as
determined in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangible assets as if the reporting unit were being acquired in a
business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of
goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss recognized cannot
exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not
permitted.

We rely on several assumptions when estimating the fair value of our reporting units using the discounted cash flow method. These assumptions include the estimated

future cash flows from operations, required discount rate, as well as projected loan losses, an estimate of terminal value and other inputs. Our estimated future cash flows are
largely based on our historical actual cash flows and industry and economic trends, among other considerations. Although management has used the estimates and
assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain valuation assumptions used in
management's calculation would result in significant differences in the results of the impairment test.

The valuation of goodwill is dependent on forward-looking expectations related to nationwide and local economic conditions and our associated financial performance.
In the future, if our acquisitions do not yield expected returns or there are changes in discount rates, we may be required to take additional charges to our earnings based on the
impairment assessment process, which could harm our business, financial condition, results of operations and prospects. We had $22.9 million of goodwill as of December 31,
2022 and $25.4 million as of December 31, 2021, and the results of the impairment analysis for both annual periods resulted in no impairment being required.

Employee Benefit Plans

We maintain trusteed pension plans for substantially all employees as either non-contributory defined benefit plans or defined contribution plans. Benefits under the

defined benefit plans are primarily based on the employee's years of credited service and average annual salary during the final years of employment as defined in the plans. We
also provide post-retirement medical benefits for certain qualifying active and retired Bermuda-based employees.

The calculations of the amounts recorded require the use of various actuarial assumptions, such as discount rates, assumed rates of return on plan assets,
compensation increases, and turnover rates. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and
trends when appropriate. We believe that the assumptions used in recording our defined benefit plan obligations are reasonable based on our experience and advice from our
actuaries.

The post-retirement medical benefits obligation is determined using our assumptions regarding health care cost trend rates. The health care trend rates are developed

based on historical cost data, the near-term outlook on health care trends and the likely long-term trends.

In accordance with GAAP, actual results that differ from these assumptions are accumulated and amortized over future periods and, therefore, generally affect
recognized expenses and the recorded obligation of future periods. While management believes that the assumptions used are appropriate, differences in actual experience or
changes in assumptions may affect the defined benefit obligations and future expense.

See "Note 11: Employee benefit plans" to our audited consolidated financial statements as at December 31, 2022 for more information on our pension plans and post-

retirement medical benefit plan, along with the key actuarial assumptions.

Share-based Compensation

We engage in equity settled share-based payment transactions in respect of services received from eligible employees. The fair value of the services received is
measured by reference to the fair value of the shares or share options granted on the date of the grant. The cost of the employee services received in respect of the shares or
share options granted is recognized in the consolidated statements of operations over the shorter of the vesting or service period.

The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the current share price, the

risk-free interest rate, expected dividend rate, the expected volatility of the share price over the life of the option and other relevant factors. The fair value of unvested share
awards is deemed to be the closing price of the publicly traded Bank shares on the grant date. The fair value of time vesting conditions are taken into account by adjusting the
number of shares or share options included in the measurement of the cost of employee services so that ultimately, the amount recognized in the consolidated statements of
operations reflects the number of vested shares or share options. The Bank recognizes compensation cost for awards with performance conditions if and when the Bank
concludes that it is probable that the performance condition will be achieved, net of an estimate of pre-vesting forfeitures (e.g., due to termination of employment prior to vesting).

See "Note 21: Share-based payments" to our audited consolidated financial statements as at December 31, 2022 for more information on share-based

compensation.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

Board

Our Board oversees the affairs of the Bank. The current Board is composed of ten members, consisting of our Chairman & Chief Executive Officer, President & Group

Chief Risk Officer and eight non-executive independent directors. The Bank's bye-laws provide that the Board shall consist of not less than six and not more than
twelve directors. The Board holds regular meetings five times per year and ad hoc meetings as necessary.

Persons may be proposed for election or appointed as directors at a general meeting either by the Board or by one or more shareholders holding shares which in the

aggregate carry not less than 5% of the voting rights in respect of the election of directors. There is only a single class of director and each director holds office until the next
annual general meeting.

As an FPI we are allowed to follow our "home country" corporate governance practices in lieu of the NYSE governance requirements for NYSE-listed US companies.

Notwithstanding this, our Board has determined that, under current NYSE listing standards regarding independence (to which we are not currently subject), and taking into
account any applicable committee standards, a majority of our Board, including Alastair Barbour, Sonia Baxendale, James Burr, Mark Lynch, Ingrid Pierce, Jana Schreuder,
Pamela Thomas-Graham and John Wright, are independent directors.

As the regulatory environment in which we operate becomes more complex, our governance practices and the structures and methodology we use to operate the Bank

continue to be of key strategic significance. With the exception of the Chairman & Chief Executive Officer and President & Group Chief Risk Officer, our Board is comprised
entirely of Directors who are not employees of the Bank. Our Board reviews and oversees the Bank's implementation of corporate governance policies and practices in
accordance with prevailing standards. The following table lists the names, positions and ages of the Directors of the Bank:

Name

Michael Collins

Alastair Barbour

Sonia Baxendale

James Burr

Mark Lynch

Ingrid Pierce

Jana Schreuder

Michael Schrum

Pamela Thomas-Graham

John Wright

Age

Position

Chairman & Chief Executive Officer

Lead Independent Director

Non-Executive Director

President & Group Chief Risk Officer

Non-Executive Director

Each of our directors may be reached at our registered office at: 65 Front Street, Hamilton, HM 12, Bermuda, or by postal mail at P.O. Box HM 195, Hamilton HM AX,

Bermuda.

Michael Collins joined the Board in 2015 when he was named Chief Executive Officer of the Bank. He was named Chairman in July of 2017. Prior to this appointment,
Mr. Collins was Senior Executive Vice President with responsibility for all of the Bank's client businesses in Bermuda, including Corporate, Private and Retail Banking, as well as
the Operations, Custody and Marketing functions in Bermuda and the Cayman Islands. Mr. Collins has more than 40 years of experience in financial services, having held
progressively senior positions at Morgan Guaranty Trust Company in New York and later at Bank of Bermuda and HSBC in Bermuda. Before joining the Bank in 2009, Mr.
Collins was Chief Operating Officer at HSBC Bank Bermuda. Mr. Collins holds a BA in Economics from Brown University.

Alastair Barbour joined the Board in 2012 and was appointed Lead Independent Director in October 2021. He is a Chartered Accountant with more than 25 years of
experience providing auditing and advisory services to publicly traded companies, primarily in the financial services industry. Mr. Barbour was employed with KPMG from 1978
until his retirement in 2011. During his time there, he held various positions both locally and overseas. In 1985, he was named a Partner at KPMG (Bermuda). Mr. Barbour's most
recent position was head of KPMG's Financial Services Group in Scotland. Currently, Mr. Barbour serves on the Board of Directors of several public and private companies,
including as non-executive Chairman of Liontrust Asset Management plc and Phoenix Group Holdings plc. Mr. Barbour trained with Peat, Marwick, Mitchell & Co. in London and
holds a Bachelor of Science from the University of Edinburgh. He is a Fellow of the Institute of Chartered Accountants in England & Wales.

Sonia Baxendale joined the Board in 2020. She is currently the President and CEO of the Global Risk Institute, a government, industry and academic partnership.

From 1992 to 2011, Ms. Baxendale held senior leadership roles within Canadian Imperial Bank of Commerce (“CIBC”), including six years as Senior Executive Vice President
and President of Retail Banking and Wealth Management. Prior to joining CIBC, Ms. Baxendale held progressively senior positions with Saatchi & Saatchi and American
Express Canada. Ms. Baxendale serves on the Boards of several public and private companies, including Foresters Financial and Laurentian Bank of Canada. Ms. Baxendale
also serves as Chair of the Board of Directors of the Hospital for SickKids Foundation and on the Board of Trustees for Toronto’s Hospital for Sick Children. She holds a
Bachelor of Arts in Political Science and Economics from Victoria College, University of Toronto.

James Burr joined the Board in 2016 and served as Lead Independent Director from October 2018 until October 2021. Mr. Burr is a Managing Director in the Global

Financial Services Group of The Carlyle Group, where he focuses on investing in management buyouts, growth capital opportunities and strategic minority investments in
financial services. Prior to joining Carlyle, Mr. Burr served as Corporate Treasurer of Wachovia Bank, where he was responsible for activities relating to funding, investing, risk
transference, balance sheet management, liquidity and capital usage. He served in various other roles at Wachovia Bank, including as Assistant Treasurer, Controller of the
Corporate and Investment Bank and Management Analyst. Mr. Burr began his career at Ernst & Young, where he was a certified public accountant focused on banking and
computer audit issues. Mr. Burr formerly served on the Board of Directors of Central Pacific Financial Corp. and currently serves as a Director of several private companies,
including The Hilb Group, Benefit Mall and NSM Insurance Group.

Mark Lynch joined the Board in 2019. Until June 30, 2019, he was a partner of Boston-based Wellington Management Co., where he served as the firm’s senior

financial services analyst since 1994 and a partner since 1996. He was also a portfolio manager of mutual funds, hedge funds, and institutional portfolios over that period. Prior
to joining Wellington, Mr. Lynch was a US regional bank analyst with Lehman Brothers and Bear Stearns. He holds a degree in European History from Harvard College.

Ingrid Pierce joined the Board in December 2022. She is the Global Managing Partner of Walkers, a leading international law firm that provides legal, corporate,

fiduciary and compliance services to global corporations, financial institutions, capital markets participants and investment fund managers. Recognized as one of the world's
leading investment funds lawyers, she acts for major institutions, asset managers, insurers, reinsurers, trustees and other fiduciaries. Ms. Pierce was made a partner of Walkers
in 2008 having joined the firm in 2002. She practiced in the Insolvency and Dispute Resolution Group, Trusts Group and Investment Funds Group, where she became head of
the Cayman Islands practice. Prior to Walkers, Ms. Pierce spent nearly a decade working as a Barrister in London in the commercial chancery field. Ms. Pierce serves as a
member of the Board of Directors of Lex Mundi, the world's leading network of independent law firms, and is a member of the Society of Trust and Estate Practitioners (STEP).
She holds a Bachelor of Laws from University College London (UCL) and was admitted to the Bar of England and Wales (1992) (not practicing), the Cayman Islands (2002) and
the British Virgin Islands (2002).

Jana Schreuder joined the Board in 2020. She is an experienced executive who most recently served as Executive Vice President and Chief Operating Officer of
Northern Trust Corporation, a role from which she retired in 2018. Ms. Schreuder joined Northern Trust in 1980 and during her tenure held multiple roles as a member of the
executive management team, including: the President of Wealth Management from 2011 through 2014; President of Operations & Technology from 2007 through 2010; and
Chief Risk Officer from 2005 through 2006. Ms. Schreuder currently serves as a Director and Chair of the Compensation Committees of Kyndryl Holdings Inc. and Avantax, Inc.
(formerly Blucora). Since 2008, Ms. Schreuder has served as a Director and is currently Chair of the Compensation Committee for Entrust Corporation. From 2016 to 2018, Ms.
Schreuder was a member of the Board of Directors of LifePoint Health. Ms. Schreuder received her Bachelor of Business Administration degree from Southern Methodist
University and a Master’s degree in finance and marketing management from Northwestern University's Kellogg Graduate School of Management. Ms. Schreuder is a member of
the New York Chapter of Women Corporate Directors and the National Association of Corporate Directors, from which she has received the NACD Directorship Certification.

Michael Schrum joined the Board in 2020. He was appointed President & Group Chief Risk Officer in May 2022 and served as Group Chief Financial Officer from

2015. He was previously Chief Financial Officer at HSBC Bank Bermuda. Mr. Schrum has more than 25 years of financial services experience in London, New York and
Bermuda, mainly in banking, insurance and tax. He joined HSBC in Bermuda in 2001 and held progressively more senior positions within the bank’s Commercial Banking,
Strategy, and Finance divisions. He is a CFA Charterholder (CFA Institute), and a Fellow Chartered Accountant (Institute of Chartered Accountants in England and Wales). Mr.
Schrum holds a Master’s (University of London) and Bachelor’s (Southern Denmark Business School) degree in Economics.

Pamela Thomas-Graham joined the Board in 2017. She is the Founder and Chief Executive Officer of Dandelion Chandelier LLC, a private digital media enterprise

focused on the intersection of luxury, marketing and technology. Prior to establishing Dandelion Chandelier, Ms. Thomas-Graham spent six years with Credit Suisse where she
served as Chief Talent, Branding and Communications Officer, and Chief Marketing and Talent Officer & Head of Private Banking and Wealth Management New Markets. From
2008 to 2010, she was Managing Director of the private equity firm, Angelo, Gordon & Company, leading the firm’s investments in the consumer and retail sectors. Before
assuming leadership roles in financial services, Ms. Thomas-Graham was Senior Vice President, Global Brand Development and Group President, Apparel Brands at Liz
Claiborne (now Kate Spade & Company) where she was responsible for the P&L of 18 global brands. Prior to joining Liz Claiborne, she spent six years at NBC Universal, where
she served as President and Chief Executive Officer of CNBC.com, and later President and Chief Operating Officer, and Chairman, President and Chief Executive Officer of
CNBC. Ms. Thomas-Graham began her career at global consulting firm McKinsey & Company in 1989, and became the firm’s first African-American female partner in 1995. She
serves as a Director for several listed companies, including Rivian Automotive, Inc., Compass, Inc., Peloton Interactive, Inc. and Bumble Inc. Ms. Thomas-Graham holds
Bachelor of Arts in Economics, Masters of Business Administration, and Doctor of Law degrees from Harvard University.

John Wright joined the Board in 2002. Mr. Wright served as a non-executive director of Butterfield UK from 2001 through 2014. Mr. Wright retired as chief executive of

Clydesdale & Yorkshire Banks in 2001. Mr. Wright’s career in commercial banking spans over 43 years and includes assignments in the UK, India, Sri Lanka, West Africa,
Canada, Hong Kong and the United States. He is a visiting Professor at Heriot-Watt University Business School and he serves on the Board of Directors of several public and
private U.K. and overseas companies, including XM International Associates Limited, where he serves as Chairman of the Advisory Board, and Rasmala UK Limited. He is also
a past President of the Irish Institute of Bankers and a past Vice President of the Chartered Institute of Bankers in Scotland. Mr. Wright was educated at Daniel Stewart's College
Edinburgh.

Executive Management Team

The Group's current executive management team is as follows:

Name

Michael Collins

Craig Bridgewater

Andrew Burns

Kevin Dallas

Bri Hidalgo

Michael McWatt

Shaun Morris

Michael Neff

Jane Pearce

Richard Saunders

Michael Schrum

Age

Position

Chairman & Chief Executive Officer

Group Chief Financial Officer

Group Head of Human Resources

Group Head of Marketing and Communications

Group Head of Compliance and Operational Risk

Managing Director, Cayman

General Counsel & Group Chief Legal Officer

Managing Director, Bermuda and International Wealth

Group Head of Trust

Managing Director, Channel Islands and the UK

President & Group Chief Risk Officer

Each member of our executive management team may be reached at our registered office at 65 Front Street, Hamilton, HM 12, Bermuda, or by postal mail at P.O. Box

HM 195, Hamilton HM AX, Bermuda.

Craig Bridgewater was appointed Group Chief Financial Officer in May 2022 having served as Group Head of Finance since 2019. Prior to joining Butterfield, Mr.

Bridgewater was a Partner at KPMG where he spent 18 years working in both Bermuda and the US with responsibility for clients in banking, asset management and insurance-
linked securities in addition to prominent local industries including retail and hospitality. Before KPMG, Mr. Bridgewater worked at Orbis Investment Management Limited and
Price Waterhouse (now PricewaterhouseCoopers) where he began his career. He is a Fellow of the Chartered Professional Accountants of Bermuda and Canada. He holds a
Bachelor of Arts (Honours) degree (Carleton University, Ottawa) in Economics.

Andrew Burns was named Group Head of Human Resources in September 2020. He was previously Group Head of Internal Audit from 2016, and became a member

of the Executive Committee in October 2017. Mr. Burns has more than 20 years of progressive leadership experience in the financial services sector, having begun his career
with PricewaterhouseCoopers’ financial services group in Australia. He first joined the Butterfield Group of companies in the Fund Services subsidiary in Bermuda before
transferring to the Internal Audit team in 2007, where he held progressively senior management roles. Mr. Burns is a Chartered Accountant and a Certified Internal Auditor. He
holds a Bachelor of Commerce degree from the University of Melbourne, Australia.

Kevin Dallas joined Butterfield as Group Head of Marketing and Communications in October 2020. Mr. Dallas was previously Chief Executive Officer at the Bermuda

Tourism Authority from 2017 to 2020, overseeing the strategy, operations, and financial management of Bermuda’s independent public authority, which focuses on delivering
economic growth through tourism. He was previously Chief Product and Marketing Officer at Worldpay Group plc (2013 to 2016), and spent 13 years at Monitor Group LLP and
Bain & Company Inc., as a Partner, in London and Johannesburg. Mr. Dallas holds a Bachelor of Arts degree in Economics from Brown University.

Bri Hidalgo joined Butterfield as Group Head of Compliance and Operational Risk in September 2020. Before joining Butterfield, Ms. Hidalgo spent 14 years with Wells
Fargo Bank in compliance and risk management roles, with her most recent role having been Chief Risk Officer, Wealth & Investment Management. Prior to joining Wells Fargo,
she worked in senior risk management and compliance roles at Wachovia Securities and First State Investments in the US and the UK. Ms. Hidalgo holds a Bachelor of Science
degree from San Francisco State University.

Michael McWatt currently serves as Managing Director for Butterfield Bank (Cayman) Limited, with responsibility for the overall operations of the bank in the Cayman

Islands. Mr. McWatt joined the Group in 1999 and was appointed Managing Director in 2016. He has held progressively senior leadership positions with the Group, including
Deputy Managing Director, EVP Group Head of Community Banking and SVP Group Chief Credit Officer. Mr. McWatt is a career banker with more than 30 years of experience
in Canada, Bermuda and the Cayman Islands. Prior to joining Butterfield, he held progressively senior positions in Corporate Banking and Risk Management in Canada. Mr.
McWatt holds a BA in Economics from McMaster University, an Honors Commerce Degree from University of Windsor and is a graduate of the Ivey Executive Program at
Western University. He is a Director and past president of the Cayman Islands Bankers’ Association and is a Director of Cayman Finance.

Shaun Morris currently serves as General Counsel and Group Chief Legal Officer. Mr. Morris joined the Group as General Counsel and Group Chief Legal Officer in

2012. From 2005 to 2012, Mr. Morris was the Managing Partner of Appleby's Bermuda Office. Prior to joining Butterfield, Mr. Morris spent his entire professional career at
Appleby and was a Partner in the Banking and Asset Finance team in Bermuda. In that role, he practiced corporate and commercial law, specializing in shipping, capital markets,
mergers & acquisitions and project finance. Mr. Morris holds an MA (Economics) from Dalhousie University in Canada and a Bachelor of Laws from the London School of
Economics & Political Science. He is currently a member of the Bermuda Bar Association.

Michael Neff currently serves as Managing Director, Bermuda and International Wealth. He previously served as the Bank's Group Head of Wealth Management. Mr.

Neff has over 30 years’ experience in financial services, having held senior roles in wealth management, commercial banking, client services, and business development
functions. He began his career at Chemical Bank’s Private Banking Group where he ultimately served on the Executive Committee and led relationship management across the
group. Mr. Neff then led the implementation of the global wealth management client relationship model at Citibank’s Private Bank before leaving to establish AnswerSpace Inc., a
financial planning technology consultancy in 1998. He went on to found Monetaire Inc., a leading provider of financial and investment planning software that was acquired by the
RiskMetrics Group. At RiskMetrics, he initially served as Global Head of Wealth Management, rising to become Co-Head of the firm’s Global Financial Risk Management
business in 2009. Mr. Neff holds a Bachelor of Arts from Middlebury College and a Master of Business Administration from Columbia Business School.

Jane Pearce joined Butterfield as Group Head of Trust in 2020 with responsibility for the delivery of the Group Trust strategy and value proposition across all

jurisdictions. Prior to joining Butterfield, she was Regional Managing Director of Vistra’s UK, Ireland and Channel Islands businesses. She has previously worked in senior
positions at several Jersey-based firms, including EY, Deutsche Bank, Kleinwort Benson, and Ogier. Ms. Pearce is a regular speaker at industry events and has been named to
the Citywealth Leaders List and the IFC Powerwomen Top 200. She is a Fellow of the Association of Chartered Certified Accountants, and holds degrees from Teesside
University and the Scottish School of Physical Education.

Richard Saunders currently serves as Managing Director, Channel Islands, with responsibility for Butterfield Bank (Guernsey) Limited, Butterfield Bank (Jersey)

Limited and Butterfield Mortgages Limited in London. Mr. Saunders joined the Group in 2001 and was appointed Managing Director in 2015. He has held progressively senior
leadership positions with the Group, including Head of European Asset Management. Mr. Saunders joined the Butterfield Group Executive Committee in July 2018. He has more
than 25 years of progressive management experience, having begun his career at Royal Bank of Canada in Guernsey. Mr. Saunders is a Chartered Member of the London-
based Chartered Institute for Securities & Investment and holds a Bachelor’s degree in Mathematics and Sports Science from Loughborough University, England.

Compensation

Senior Management and Director Compensation

In 2022, senior management included the following executives: Michael Collins, Craig Bridgewater, Andrew Burns, Kevin Dallas, Bri Hidalgo, Michael McWatt, Shaun

Morris, Michael Neff, Jane Pearce, Richard Saunders and Michael Schrum. Our compensation program is designed to reward and retain senior management and includes base
salary, annual short-term cash and equity incentive compensation, long-term equity incentive compensation and miscellaneous employee benefits and fringe benefits (including,
among others, executive medical benefits). In 2022, our compensation program for directors was comprised of an annual cash retainer and an equity grant. Directors can elect to
receive the annual cash retainer in common shares. None of our directors have entered into service contracts with the Group that provide for benefits upon the termination of
their service as a director.

The CEO is required to own a minimum aggregate value of our common shares equal to five times base salary. Eligible stock includes vested shares, unvested

restricted stock and restricted stock units, and other stock held by the CEO. The intrinsic value of vested or unvested stock options is not considered eligible stock. The CEO
complies with this requirement. If the market value of the CEO’s common stock falls below the requirements, the CEO must retain 50% of the shares he receives as
compensation until he achieves the specified ownership level.

Effective April 2020, senior management are required to own a minimum aggregate value of our common shares equal to two times base salary by December 31, 2022,

or within five years following first appointment. Eligible stock includes vested shares, unvested restricted stock and restricted stock units, and other stock held by senior
management. The intrinsic value of vested or unvested stock options is not considered eligible stock. If the market value of senior management's common stock falls below the
required threshold, senior management must retain 50% of the shares they receive as compensation until they achieve the specified ownership level. All members of senior
management currently or intend to comply with this requirement.

The aggregate amount of compensation, including the value of in-kind benefits, accrued and/or paid to our directors and senior management during the fiscal year 2022

was $23.2 million. Amounts accrued during 2022, include contingent or deferred compensation plans.

Short-Term Incentive Compensation

Senior management participates in our annual discretionary bonus program. Our Compensation & Human Resources Committee establishes an annual bonus pool

based on overall company-wide performance during the applicable fiscal year. Once the compensation committee has approved the pool, the pool is allocated to eligible
employees, including senior management, based on the employee's achievement of pre-established performance goals during the applicable fiscal year. Annual bonuses for
executives are paid 50% in cash and 50% in the form of restricted stock unit awards that vest in three equal installments on the first three anniversaries of the date of grant. The
plans under which share awards are granted are described below.

Equity Compensation

The Group sponsors two equity incentive plans in which our senior management and directors have been or are eligible to participate: the 2010 Omnibus Share

Incentive Plan (the "2010 Plan") and the 2020 Omnibus Share Incentive Plan (the "2020 Plan"). The Group previously granted equity awards under the 2010 Plan, which was
replaced with the adoption of the 2020 Plan. Awards granted pursuant to the 2010 Plan prior to the adoption of the 2020 Plan that remain outstanding will continue to be
governed by the 2010 Plan, but no new awards are issued thereunder. The Group currently grants restricted stock unit and performance-vesting restricted stock unit awards
under the 2020 Plan. As at December 31, 2022, in the aggregate, our members of senior management held 1,023,262 restricted stock units (assuming that performance with
respect to performance-vesting restricted stock unit awards is satisfied at target levels) and no options.

Senior management participates in our long-term equity incentive compensation program. During 2022, our compensation committee granted annual restricted stock
unit and performance-vesting restricted stock unit awards under our 2010 and 2020 Plan. Restricted stock unit awards granted in 2020, 2021 and 2022 were granted (i) under
our long-term equity incentive compensation program in the form of performance shares, generally vesting upon the achievement of certain performance targets in the three-year
period from the effective grant date, and (ii) under the omnibus programs in the form of time-based restricted stock units, generally vesting in three equal installments on the first
three anniversaries of the date of grant. Certain members of senior management also participate in our 2010 and 2020 Executive Stock Purchase Plan, which allows participants
to borrow against their common shares held in a restricted account to purchase common shares.

During calendar year 2022, in the aggregate, our Compensation & Human Resources Committee granted senior management 646,673 restricted stock units (which

includes restricted stock unit awards granted under both the annual bonus program and as long-term equity incentive compensation, and assumes that performance with respect
to performance-vesting restricted stock unit awards will be is satisfied at target levels).

Board Practices

The Bank's bye-laws authorize the Board to delegate certain of its duties to committees of directors. The principal board committees are the: (1) Audit Committee,

(2) Risk Policy & Compliance Committee, (3) Corporate Governance Committee, and (4) Compensation & Human Resources Committee. Members of committees are appointed
by, from and among the non-executive members of the Board. The responsibilities and compositions of these committees are described below.

Audit Committee

Our Audit Committee, on behalf of the Board, monitors: (1) the integrity of the financial reports and other financial information provided by the Group to any
governmental body or the public; (2) the independent auditor's qualifications and independence; (3) the performance of the Group's internal audit function and the independent
auditors; (4) compliance with legal and regulatory requirements with respect to financial reporting[including but not limited to those related to environmental, social and
governance matters]; (5) the Group's system of internal controls regarding finance and accounting as established by management and the Board; and (6) the Group's auditing,
accounting and financial reporting processes generally. Subject to shareholder approval, the Audit Committee has responsibility for the appointment or replacement of the
independent auditor and for the compensation and oversight of the work of the independent auditor. In addition, the Audit Committee is responsible for approving all audit
services, internal control-related services and permitted non-audit services. With respect to internal controls, the Audit Committee reviews and evaluates any major issues as to
the adequacy of the Bank's internal controls, and any major control deficiencies or changes in internal controls over financial reporting are discussed with the Bank's
management and the independent auditor. With respect to financial reporting, the Audit Committee consults with management and the independent auditor about the integrity of
the financial reporting process, reviews significant financial reporting risk exposure and management's responses, reviews significant auditor findings and establishes and

reviews procedures for the receipt, retention and treatment of complaints about accounting and auditing matters, and reviews and recommends for the Board's approval the
Group's financial reports.

Our Audit Committee consists of five directors that are independent under the NYSE requirements. Each member of the Audit Committee also meets the additional

criteria for independence of Audit Committee members set forth in Rule 10A-3(b)(1) under the Exchange Act.

The members of the Audit Committee are appointed by the Board upon the recommendation of the Corporate Governance Committee. The Audit Committee's

membership is as follows:

Name

Alastair Barbour

Sonia Baxendale

Mark Lynch

John Wright

Mr. Barbour qualifies as the Audit Committee financial expert.

Risk Policy & Compliance Committee

Position

Chairperson

Member

The Risk Policy & Compliance Committee, on behalf of the Board, acts as the oversight function in respect of those activities throughout the Group that give rise to

credit, market, liquidity, interest rate, operational, cybersecurity and reputational risks and reviews compliance with laws and regulations. Specifically, the Risk Policy &
Compliance Committee assists the Board in fulfilling its responsibilities by overseeing the Group's risk profile and its performance against approved risk appetites and tolerance
thresholds. It approves and ensures compliance with the capital allocation model and approves overall insurance coverage for the Group. The Risk Policy & Compliance
Committee also reviews the credit risk of the Group with respect to country and financial institution risk, large exposures, reserves and provisioning, off-balance sheet risk and
related capital needs, as well as market, interest rate and liquidity risks. The Risk Policy & Compliance Committee monitors operational risks, including cybersecurity risks,
material breaches of agreed risk limits, appropriate product risk profiles and management policies for the identification and management of risk. In doing so, the Risk Policy &
Compliance Committee seeks to ensure compliance with all applicable policies and establishes the Group's risk appetite and tolerance.

The Risk Policy & Compliance Committee’s membership is as follows:

Name

Mark Lynch

James Burr

Ingrid Pierce

Jana Schreuder

Corporate Governance Committee

Position

Chairperson

Member

The Corporate Governance Committee, on behalf of the Board, reviews the effectiveness and performance of the Directors, the Board as a whole, and each Board

committee, as well as the boards and board committees of the Bank's subsidiaries through its oversight of the corporate governance guidelines and policies of the Group. This
committee acts as the nomination committee for the Board. The principal duties of the Corporate Governance Committee include reviewing and recommending to the Board
membership criteria and director nominees, membership of the Board’s committees and matters relating to the performance, diversity and independence of directors. The
Corporate Governance Committee oversees questions of director independence and conflicts of interest, induction and ongoing training for directors and the Board’s corporate
governance-related policies and procedures. The Corporate Governance Committee also recommends director compensation and reviews and approves related-party
transactions.

The Corporate Governance Committee's membership is as follows:

Name

Sonia Baxendale

Pamela Thomas-Graham

John Wright

Compensation & Human Resources Committee

Position

Chairperson

Member

The Compensation & Human Resources Committee, on behalf of the Board, reviews and approves executive compensation, employee salary ranges, levels and

degrees of participation in incentive compensation programs (including bonuses and equity-based incentive plans) and oversees employee development, relations and
succession. Specifically, the Compensation & Human Resources Committee evaluates the fairness and effectiveness of the compensation practices implemented by the Group,
approves overall compensation packages for executives, provides regular updates on executive compensation to the Board, approves changes in employee salary ranges for
employees, approves the criteria and design of the Group's incentive bonus plans and approves changes to the other employee benefit plans. The Compensation & Human
Resources Committee also recommends to the Board changes in the Group's equity-based incentive plans and the granting of awards under such plans, reviews and approves
changes to our pension plans, reviews periodic management reports on our compensation and benefits, as well as other matters bearing on the relationship between
management and employees, while making recommendations to the Board concerning our senior level organization structure and staffing, training and employee development
programs.

100

The Compensation & Human Resources Committee's membership is as follows:

Name

Jana Schreuder

Alastair Barbour

James Burr

Pamela Thomas-Graham

John Wright

Governance of Geographical Segments

Position

Chairperson

Member

Our banking business operates in three geographical segments — Bermuda, the Cayman Islands, and the Channel Islands and the UK— and each geographical

segment utilizes operating subsidiary companies of the Bank within these jurisdictions. See Item 4.B. "Business Overview - Our International Network and Group Structure",
which presents the corporate structure chart of our principal subsidiaries as at December 31, 2022. Our principal operating subsidiaries are each regulated by their respective
geographical regulator and are fully capitalized as stand-alone operating companies, each with its own board of directors consisting of both executive and non-executive
independent directors, as required by the relevant regulatory body and applicable rules and regulations. Guidance on general corporate governance, board sub-committee
structuring, and the various governance policies and procedures of the operating subsidiaries is determined at the Group level.

Board Leadership Structure and Qualifications

The Bank must comply with the BMA Corporate Governance Policy, which requires the Bank to appoint board members who have appropriate experience,

competencies and personal qualities, including professionalism and personal integrity.

It is the Bank's policy to ensure that all companies within the Group have board members who are fit and proper persons to direct the Bank's business with prudence,

integrity and professional skills. The Boards of the Bank and the Bank's subsidiaries are composed of individuals who possess diverse skills, experience and knowledge that are
key to understanding the Bank's business and the execution of the Bank's strategies.

The Bank has established guidelines that address the size and composition of its own Board and those of its subsidiaries, and for identifying and selecting suitable

candidates for appointment to these boards. The Corporate Governance Committee makes appointment recommendations to the Board and the appointment procedure is
formal, rigorous and transparent. Each of the Bank and the Bank's subsidiary boards are reviewed as appropriate in order to assess whether the Board composition is
commensurate with the Bank's strategic objective and diversity principles.

In assessing continuity of service on the Board there is a general presumption that individuals should serve for a maximum of 15 years in order that the Board tenure be

refreshed. Non-executive directors who have served for a period of more than 15 years are subject to an independent assessment in accordance with applicable legal
requirements and regulatory and listing standards.

Board Oversight of Risk Management

The Board believes that effective risk management and control processes are critical to our safety and soundness, our ability to predict and manage the challenges that

we face and, ultimately, our long-term corporate success. The Board, both directly and through its committees, is responsible for overseeing our risk management processes,
with each of the committees of the Board assuming a different and important role in overseeing the management of the risks we face.

The Risk Policy & Compliance Committee oversees our enterprise-wide risk management framework, which establishes our overall risk appetite and risk management

strategy and enables our management to understand, manage and report on the risks we face. The Risk Policy & Compliance Committee also reviews and oversees policies and
practices established by management to identify, assess, measure and manage key risks we face, including the risk appetite metrics developed by management and approved
by the Board. The Audit Committee of the Board is responsible for overseeing risks associated with financial, accounting and legal matters (particularly financial reporting,
accounting practices and policies, disclosure controls and procedures and internal control over financial reporting), reviewing and discussing generally the identification,
assessment, management and control of our risk exposures on an enterprise-wide basis and engaging as appropriate with the Risk Policy & Compliance Committee to assess
our enterprise-wide risk framework. The Compensation & Human Resources Committee of the Board has primary responsibility for risks and exposures associated with our
compensation policies, plans and practices, regarding both executive compensation and the compensation structure generally. In particular, our Compensation & Human
Resources Committee, in conjunction with our Chairman & Chief Executive Officer, Group Head of Human Resources and President & Group Chief Risk Officer and other
members of our management as appropriate, reviews our incentive compensation arrangements to ensure these programs are consistent with applicable laws and regulations,
including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees. The Corporate Governance Committee of the Board
oversees risks associated with the independence of the Board and potential conflicts of interest.

Our senior management is responsible for implementing and reporting to the Board regarding our risk management processes, including by assessing and managing
the risks we face, including strategic, operational, cybersecurity, regulatory, investment and execution risks, on a day-to-day basis. Our senior management is also responsible
for creating and recommending to the Board for approval appropriate risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection
with the operation of our business and pursuit of our business objectives.

The role of the Board in our risk oversight is consistent with our leadership structure, with our Chairman & Chief Executive Officer and the other members of senior
management having responsibility for assessing and managing our risk exposure, and the Board and its committees providing oversight in connection with those efforts. We
believe this division of risk management responsibilities presents a consistent, systemic and effective approach for identifying, managing and mitigating risks throughout
our operations.

101

Employees

As at December 31, 2022, 2021 and 2020, we had the following employees:

Per segment:

Bermuda

Cayman Islands

Channel Islands and the UK

Other Segment

Total per full-time equivalency basis

Of which:

Full-time and part-time employees

Temporary employees

Total per full-time equivalency basis

As at December 31

2022

2021

2020

413

244

379

305

413

241

369

254

449

236

363

266

1,341

1,277

1,314

1,261

1,341

1,217

1,277

1,258

1,314

The increase in 2022 from 2021 was mostly a result of the Service Center expansion in Halifax and Mauritius.The decrease in 2021 from 2020 was a result of the

COVID-19 related cost restructuring program, which included voluntary separation, early retirement and redundancies across all operating segments.

We have not experienced any material employment-related issues or interruptions of services due to labor disagreements and are not a party to any collective

bargaining agreements.

Share Ownership

See Items 6.B. "Compensation - Equity Compensation" and 7.A. "Major Shareholders".

102

ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS

Major Shareholders

The following table sets forth information with respect to the beneficial ownership of our common shares as at February 15, 2023, unless noted otherwise, in each case

by: each person or entity known by us to beneficially own 5% or more of our issued and outstanding common shares; each of our directors and executive officers individually;
and all of our directors and executive officers as a group. As at February 15, 2023, we had approximately 50 million common shares issued and outstanding.

Under the rules of the Securities and Exchange Commission, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power,"

which includes the power to vote or to direct the voting of such security, or "investment power," which includes the power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules,
more than one person may be deemed to be a beneficial owner of such securities as to which such person has voting or investment power. Except as described in the footnotes
below, to our knowledge, each of the persons named in the table below has sole voting and investment power with respect to the common shares beneficially owned, subject to
community property laws where applicable.

Unless otherwise noted, the address for each shareholder listed on the table below is: c/o The Bank of N.T. Butterfield & Son Limited, 65 Front Street, Hamilton, HM 12,

Name of beneficial owner

Number of common
shares beneficially owned

Beneficial ownership
percentage

2,876,843

3,270,744

2,720,513

5.7 %

6.5 %

5.4 %

Bermuda.

Major Shareholders:
Capital World Investors(1)
Davis Selected Advisors, L.P.(2)
FMR LLC(3)

Directors and Executive Officers:

Alastair Barbour

Sonia Baxendale
Andrew Burns(4)
James Burr(5)
Michael Collins(6)
Kevin Dallas(7)
Bri Hidalgo(8)
Mark Lynch(9)
Michael McWatt(10)
Shaun Morris(11)
Michael Neff(12)
Jane Pearce(13)
Ingrid Pierce
Richard Saunders(14)
Jana Schreuder
Michael Schrum(15)
Craig Bridgewater(16)
Pamela Thomas-Graham
John R. Wright(17)
All directors and executive officers as a group (19 persons)

Indicates less than 1%

18,543

8,036

19,486

9,188

97,188

41,533

5,482

181,459

22,007

65,053

17,466

2,575

155

10,407

6,851

149,960

10,850

8,585

10,298

685,122

(1)

Based on the Schedule 13G filed on February 13, 2023 by Capital World Investors ("CWI"), which reported that as at December 31, 2022, CWI beneficially owned 2,876,843 common shares, with sole voting and sole dispositive power over all such shares.

CWI is a division of Capital Research and Management Company ("CRMC"), as well as its investment management subsidiaries and affiliates Capital Bank and Trust Company, Capital International, Inc., Capital International Limited, Capital International Sarl,

Capital International K.K., Capital Group Private Client Services, Inc., and Capital Group Investment Management Private Limited (together with CRMC, the "investment management entities"). CWI's divisions of each of the investment management entities

collectively provide investment management services under the name "Capital World Investors." CWI is deemed to be the beneficial owner of 2,876,843 shares The business address of CWI is 333 South Hope Street, 55th Floor, Los Angeles, California

90071.

(2)

Based on the Schedule 13G/A filed on February 10, 2023 by Davis Selected Advisers, L.P., which reported that as at December 31, 2022, Davis Selected Advisers, L.P. beneficially owned 3,270,744 common shares, with sole voting power over 3,270,639

shares and sole dispositive power over 3,270,744 shares. The business address of Davis Selected Advisers, L.P. is 2949 East Elvira Road, Suite 101, Tucson, Arizona 85756.

(3)

Based on

the Schedule 13G filed on February 9, 2023 by FMR LLC, which reported that as at December 31, 2022, FMR LLC beneficially owned 2,720,513 common shares, with sole voting power over 2,720,498 of such shares and sole dispositive power over

2,720,513 of such shares. FMR is a parent holding company and other entities that beneficially hold the shares pursuant to their Schedule 13G include FIAM LLC, Fidelity Institutional Asset Management Trust Company, Fidelity Management & Research

Company LLC, FMR Investment Management (UK) Limited, and Strategic Advisors LLC. The business address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210.

Consists of (i) 11,325 ordinary shares and (ii) 8,161 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

Consists of (i) 8,284 ordinary shares held directly by Mr. Burr and (ii)

904 ordinary shares held by Wells Fargo over which Mr. Burr exercises voting and dispositive control.

Consists of 97,188 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

Consists of (i) 12,406 ordinary shares, (ii) 603 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023, and (iii) 28,544 ordinary shares held by North Cote Limited, over which Mr. Dallas exercises voting and

dispositive control.

Consists of (i) 1,714 ordinary shares and (ii) 3,768 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

Consists of (i) 180,659 ordinary shares held by Mr. Lynch directly and (ii) 800 ordinary shares held by a family member over which Mr. Lynch exercises voting and dispositive control.

(4)

(5)

(6)

(7)

(8)

(9)

103

(10) Consists of (i) 9,189 ordinary shares and (ii) 12,818 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

(11) Consists of (i) 48,585 ordinary shares and

(ii) 16,468 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

(12) Consists of (i) 4,541 ordinary shares and (ii) 12,925 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

(13) Consists of (I) 863 ordinary shares and (ii) 1,712 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

(14) Consists of 10,407 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

(15) Consists of (i) 103,261 ordinary shares held jointly with his spouse and (ii) 46,699 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

(16) Consists of

(i) 7,956 ordinary shares and (ii) 2,894 ordinary shares underlying restricted stock units that will vest within 60 days of February 15, 2023.

(17) Consists of 10,298 ordinary shares held jointly with his spouse.

The shareholders listed above do not have voting rights that are different from those held by any other holder of common shares of the Bank. As at January 31, 2023,

approximately 84% of our common shares were held by holders and/or Custodians of record located in the United States, and there were approximately 218 holders of record of
our common shares located in the United States. As at January 31, 2023, approximately 16% of our common shares were held by holders of record located in Bermuda, and
there were approximately 3,767 holders of record of our common shares located in Bermuda.

Related Party Transactions

See "Note 26: Related party transactions" to our audited consolidated financial statements as at December 31, 2022 for information on transactions with related parties

and with directors and executive officers.

Employment Agreements

The Group has entered into employment agreements with senior management. The compensation paid in 2022 to senior management under the employment
agreements is described above under Item 6.B. "Compensation". The senior management employment agreements generally provide for terms and conditions of employment,
including the payment of a base salary, participation in the Group’s short and long-term incentive compensation programs, notice provisions, severance benefits, change in
control, double-trigger equity award vesting and participation in the Group’s health, welfare and retirement programs available to all senior executives. For certain members of
senior management, the employment agreements also provide for executive life insurance and participation in the Group’s share purchase programs.

Related-Party Transaction Policy

The Board has adopted a written policy governing the review, approval or ratification of transactions between the Bank or any of its subsidiaries and any "related party,"
which is a person or entity: (1) that controls, is controlled by, or is under common control with the Bank; (2) that is an associate of the Bank; (3) that is a shareholder of the Bank
that has significant influence by virtue of its ownership of the Bank; (4) that is a director, executive officer or other key management person at the Bank; or (5) in which a
substantial interest in its voting power is held by the persons described in (3) or (4) above. The policy calls for the related-person transactions to be reviewed and, if deemed
appropriate, approved or ratified by our Corporate Governance Committee. In determining whether or not to approve or ratify a related-person transaction, our Corporate
Governance Committee takes into account, among other factors it deems important, whether the related-person transaction is in our best interests and whether the transaction is
on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances. In the event that a member of our Corporate
Governance Committee is not disinterested with respect to the related-person transaction under review, that member may not participate in the review, approval or ratification of
that related-person transaction. Approval of the disclosure of any related party transaction included in our financial statements or any other SEC filing is the responsibility of the
Audit Committee.

Interests of Experts and Counsel

Not applicable.

104

Refer to Part III, Item 17 for the Consolidated Financial Statements and Notes to the Consolidated Financial Statements

ITEM 8. FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

Refer to Part III, Item 17 for the Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

Legal Proceedings

From time to time we are a party to various litigation matters incidental to the conduct and in the ordinary course of our business.

As publicly announced, in November 2013, the US Attorney’s Office for the Southern District of New York applied for and secured the issuance of so-called John Doe

Summonses to six US financial institutions with which the Bank had correspondent bank relationships in connection with a US cross border tax investigation. On August 3, 2021,
the Bank announced it had reached a resolution with the United States Department of Justice concerning this inquiry. The resolution is in the form of a non-prosecution
agreement with a three-year term. The Bank paid $5.6 million in respect of Forfeiture and Tax Restitution Amounts which is consistent with that previously provisioned for.

Dividend Policy

It is our intention to pay a quarterly dividend subject to the requisite approvals. There can be no assurance, however, that we will pay any dividend for any given period,

and the declaration of dividends remains subject to the approval of our Board and receipt of a letter of no objection from the BMA.

Although we currently expect to pay dividends according to our dividend policy, we may elect not to pay dividends. Any declarations of dividends will be at the discretion
of the Board and will be subject to the receipt of a letter of no objection from the BMA. Such dividends may be declared and paid by the Board only as permitted under applicable
law. In determining the amount of any future dividends, the Board may take into account: (1) our financial results; (2) our available cash, as well as anticipated cash requirements
(including debt servicing); (3) our capital requirements, including the capital requirements of our subsidiaries; (4) contractual, legal, tax and regulatory restrictions on, and
implications of, the payment of dividends by us to our shareholders; (5) general economic and business conditions; (6) restrictions applicable to us and our subsidiaries under
Bermuda and other applicable laws, regulations and policies, including the requirement to obtain a letter of no objection from the BMA for the payment of dividends on our
common shares; and (7) any other factors that the Board may deem relevant. Therefore, there can be no assurance that we will declare or pay any dividends to holders of the
common shares, or as to the amount of any such dividends. See Item 3.D "Risk Factors - Risks Relating to the Common Shares".

Our Historical Dividends

Since 2013 we have declared and paid dividends on a quarterly basis. For the year ended December 31, 2022, we declared four quarterly dividends of $0.44 per

quarter totaling $1.76 for each common share held on record as of the applicable record dates.

The following table sets forth dividends paid per common share during the periods indicated.

(in $, unless otherwise indicated)

Period

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total dividends per common share

Year ended December 31

2022

2021

2020

0.44

1.76

0.44

1.76

0.44

1.76

Total dividends per common share as a percentage of earnings per share (in %)

40.7 %

60.5 %

52.9 %

On February 13, 2023, the Board of Directors declared an interim dividend of $0.44 per common share to be paid on March 14, 2023 to shareholders of record on

February 27, 2023.

Significant Changes

Except as otherwise disclosed in this annual report, no significant change has occurred since December 31, 2022.

105

Offering and Listing Details

ITEM 9. THE OFFER AND LISTING

The Bank's common shares trade on the New York Stock Exchange under the symbol "NTB" and on the Bermuda Stock Exchange under the symbol "NTB.BH".

Plan of Distribution

Not applicable.

Markets

The Bank's common shares began trading on the New York Stock Exchange under the symbol "NTB" on September 21, 2016 and on the Bermuda Stock Exchange

under the symbol "NTB.BH" on February 2, 1971.

Selling Shareholders

Not applicable.

Dilution

Not applicable.

Expenses of the Issue

Not applicable.

106

ITEM 10. ADDITIONAL INFORMATION

Share Capital

Not applicable.

Memorandum and Articles of Incorporation

Information can be found in the following Exhibits:

• 1.1 Amended and Restated Bye-laws of The Bank of N.T. Butterfield & Son Limited
• 1.2 The N.T. Butterfield & Son Bank Act, 1904 (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form F-1, filed on August 4,

2016)

• 2.2 Description of Securities

Material Contracts

We have not entered into any material contracts outside the ordinary course of business within the last two years.

Exchange Controls

Refer to Item 4.B. "Business Overview - Supervision and Regulation".

Taxation

Bermuda Tax Considerations

Under Bermuda law, there are currently no stamp or documentary taxes, duties or similar taxes in connection with a conveyance or transfer on sale, or a conveyance or

transfer to effect or having the effect of a voluntary disposition inter vivos or any agreement for the lending and borrowing of the Bank's shares which are listed on the BSX or
NYSE.

We are not required by any Bermuda law or regulation to make any deductions or withholdings in Bermuda from any payment we may make in respect of the Bank's

shares. However, during 2018 the Bermuda Tax Reform Commission proposed the introduction of a withholding tax on interest and dividend income, amongst other reforms. The
Bermuda government has not introduced this tax as yet. In January 2021, the Bermuda Government passed the Tax Reform Commission Amendment Act 2021, which allows
the Minister of Finance to appoint a further Tax Reform Commission. No subsequent appointments were made to a further Tax Reform Commission, and the Bermuda
Government has stated that any substantive future tax reforms will take account of the 2018 commission’s recommendations. These recommendations included a withholding
tax on interest and dividend income, but it is unclear what changes will be proposed to Bermuda’s system of taxation, as well as whether or not such changes will be
implemented and on what terms. If additional taxes are introduced, whether in the form of withholding or otherwise, there may be an impact on holders of the Bank’s shares,
along with an increase in our compliance obligations.

Furthermore, Bermuda currently has no corporate or capital gains taxes.

Material US Federal Income Tax Consequences

This section describes the material US federal income tax consequences of owning and disposing of common shares of the Bank. It applies solely to US shareholders

(as defined below) that hold shares as capital assets for US federal income tax purposes. This section does not describe the tax consequences arising under the Medicare
contribution tax on net investment income or the alternative minimum tax or all the tax consequences that may apply to members of a special class of holders subject to special
rules, including:

• a dealer in securities or foreign currencies;
• a regulated investment company;
• a trader in securities that elects to use a mark-to-market method of accounting for securities holdings;
• a tax-exempt organization;
• a bank, an insurance company, or any other financial institution;
• a person that actually or constructively owns 10% or more, by vote or value, of the Bank;
• a person that holds the Bank's common shares as part of a straddle or a hedging, conversion, or other risk reduction transaction for US federal income tax purposes;
• a person that purchases or sells common shares as part of a wash sale for tax purposes;
• an entity classified as a partnership for US federal income tax purposes; or
• a person whose functional currency is not the US Dollar.

This section is based on the Internal Revenue Code of 1986, as amended (the "IRC"), its legislative history, existing and proposed Treasury regulations, published

rulings and court decisions, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis.

If an entity treated as a partnership for US federal income tax purposes holds common shares, the US federal income tax treatment of a partner will generally depend
on the status of the partner and the tax treatment of the partnership. A partner in an entity treated as a partnership for US federal income tax purposes holding common shares
should consult its tax advisers with regard to the US federal income tax treatment of the ownership and disposition of the Bank's common shares.

Shareholders should consult their own tax advisers regarding the US federal, state, local and foreign and other tax consequences of owning and disposing of the Bank's
common shares in their particular circumstances.

Special adverse US federal income tax rules apply if a US shareholder owns shares of a company that is or was treated as a PFIC for US federal income tax purposes
for any taxable year during which the US shareholder held such shares. US shareholders should consult their own tax advisers as to the potential application of the PFIC rules to
their ownership and disposition of the Bank's common shares.

107

US Shareholders

For the purposes of this discussion, a "US shareholder" is a beneficial owner of common shares that is:

• an individual that is a citizen or resident of the United States,
• a corporation, or other entity taxable as a corporation, created or organized under the laws of the United States, any state therein or the District of Columbia,
• an estate whose income is subject to US federal income tax regardless of its source, or
• a trust if a US court can exercise primary supervision over the trust's administration and one or more US persons are authorized to control all substantial decisions of

the trust.

Passive Foreign Investment Company Considerations

Special adverse US federal income tax rules apply if a US shareholder holds shares of a company that is treated as a PFIC for any taxable year during which the US
shareholder held such shares. This conclusion is a factual determination that is made annually and thus may be subject to change. A foreign corporation will be considered a
PFIC with respect to a US shareholder for any taxable year if (i) at least 75% of its gross income for the taxable year is passive income, or (ii) at least 50% of the value,
determined on the basis of a quarterly average, of its assets is attributable to assets that produce or are held for the production of passive income (the "asset test"). Passive
income for this purpose generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business),
annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% (by value) of the shares or stock of another corporation, the foreign
corporation is treated, for purposes of the PFIC tests, as owning a proportionate share of the other corporation's assets and receiving its proportionate share of the other
corporation's income.

Banks generally derive a substantial part of their income from assets that are interest bearing or that otherwise could be considered passive under the PFIC rules. The

IRS has issued a notice, and has proposed regulations, that exclude from passive income any income derived in the active conduct of a banking business by a qualifying
foreign bank.

Based upon the proportion of our income derived from activities that are "bona fide" banking activities for US federal income tax purposes, we believe that we were not

a PFIC for the taxable year ending December 31, 2022 (the latest period for which the determination can be made) and, based further on our present regulatory status under
local laws, the present nature of our activities, and the present composition of our assets and sources of income, we do not expect to be a PFIC for the current year or any future
years. However, PFIC status is a factual determination and there are uncertainties in the application of the relevant rules. Moreover, the IRS may issue guidance in the future
with different requirements to be a qualified foreign bank, which we may not satisfy. Accordingly, there can be no assurances that we will not be a PFIC for any particular year. In
addition, our current position that we are not a PFIC is based in part upon the value of our goodwill which is based on the market value for our shares. Accordingly, we could
become a PFIC in the future if there is a substantial decline in the value of our shares.

If the Bank were a PFIC in any taxable year during which a US shareholder owns the Bank's common shares and the US shareholder does not make a "mark-to-
market" election, as discussed below, or a special "purging" election, the Bank generally would continue to be treated as a PFIC with respect to such US shareholder in all
succeeding taxable years, regardless of whether the Bank continues to meet the income or asset test discussed above. US shareholders are urged to consult their own tax
advisers with respect to the tax consequences to them if the Bank were to become a PFIC for any taxable year in which they own the common shares.

If the Bank is a PFIC for any taxable year during which a US shareholder holds the common shares and the US shareholder does not make a mark-to-market election,

as described below, the US shareholder will be subject to special rules with respect to:

• any gain realized on the sale or other disposition of its common shares; and
• any "excess distribution" that the Bank makes to the US shareholder (generally, any distributions to the US shareholder during a single taxable year that are greater

than 125% of the average annual distributions received by the US shareholder in respect of its common shares during the three preceding taxable years or, if
shorter, the portion of the US shareholder's holding period for the common shares that preceded the current taxable year).

Under these rules:

•
•

•

the gain or excess distribution will be allocated ratably over the US shareholder's holding period for the common shares;
the amount allocated to the taxable year in which the US shareholder realized the gain or excess distribution and to years before the Bank became a PFIC will be
taxed as ordinary income; and
the amount allocated to each other taxable year, with certain exceptions, will be subject to additional tax calculated by multiplying the amount allocated to such other
taxable year by the highest tax rate in effect for that taxable year for individuals or corporations, as appropriate, and the interest charge generally applicable to
underpayments of tax will be imposed in respect of the tax attributable to each such year.

Alternatively, if a US shareholder owns shares in a PFIC that are treated as "marketable stock," the US shareholder may make a mark-to-market election. The common

shares will be treated as marketable stock if they are regularly traded on a "qualified exchange." For these purposes, the common shares will be considered regularly traded
during any calendar year during which it is traded, other than in negligible quantities, on a qualified exchange, which includes the NYSE, on at least 15 days during each
calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded.

A US shareholder that makes a mark-to-market election will not be subject to the PFIC rules described above. Instead, the US shareholder will include as ordinary

income each year that the Bank is a PFIC the excess, if any, of the fair market value of its common shares at the end of the taxable year over its adjusted basis in the common
shares. These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains discussed above. The
US shareholder will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its common shares over their fair market value at the end of
the taxable year that the Bank is a PFIC (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). The US shareholder's
basis in its common shares will be adjusted to reflect any such income or loss amounts recognized. Any gain recognized on the sale or other disposition of the common shares in
a taxable year when the Bank is a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income
previously included as a result of the mark-to-market election). Distributions paid on the common shares will be treated as discussed below under "- Taxation of Dividends".

A mark-to-market election will continue to be in effect for all taxable years in which the Bank is a PFIC and the common shares are treated as marketable stock, and

may not be revoked without the consent of the IRS. If the US shareholder makes a mark-to-market election with respect to its common shares, it will be treated as having a new
holding period in its common shares beginning on the first day of the first taxable year beginning after the last taxable year for which the mark-to-market election applies. The
application of the mark-to-market rules to an investment in a PFIC with a subsidiary that is also a PFIC is not entirely clear; however, there is a significant risk that some or all of
such an investment will be subject to the special rules described above that apply if a mark-to-market election is not made, even if a mark-to-market election is made with respect
to the parent PFIC. In the event that the Bank is a PFIC, US shareholders are urged to consult their tax advisers regarding the availability of the mark-to-market election, and
whether the election would be advisable in the holder's particular circumstances.

108

The PFIC rules outlined above would also not apply to a US shareholder if such holder were to elect to treat us as a qualified electing fund ("QEF"). An election to treat
us as a QEF will not be available, however, if the Bank does not provide the information necessary to make such an election. The Bank will not provide US shareholders with the
information necessary to make a QEF election, and thus, the QEF election will not be available with respect to the common shares.

Notwithstanding any election made with respect to the common shares, dividends received with respect to the common shares will not constitute "qualified dividend

income" if we are a PFIC (or are treated as a PFIC with respect to the relevant US shareholder) in either the taxable year of the distribution or the preceding taxable year.
Dividends that do not constitute qualified dividend income are not eligible for taxation at the reduced tax rate available to certain non-corporate holders described below in "-
Taxation of Dividends". Instead, such dividends would be subject to tax at ordinary income rates.

If a US shareholder owns common shares during any taxable year in which we are a PFIC, the US shareholder generally must file annual tax returns (including on

Form 8621), for each taxable year that the US shareholder owns the common shares, unless its ownership satisfies a de minimis test.

Taxation of Dividends

Subject to the preceding discussion under the heading "— Passive Foreign Investment Company Considerations" above, a US shareholder must include in its gross

income as dividends the gross amount of any distribution paid by the Bank to the extent that it is paid out of the Bank's current or accumulated earnings and profits as
determined for US federal income tax purposes. Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will
be treated as a non-taxable return of capital to the extent of the US shareholder's basis in the common shares of the Bank, causing a reduction in the US shareholder's adjusted
basis in such common shares, and thereafter as a capital gain. Because the Bank does not maintain calculations of its earnings and profits under US federal income tax
principles, it is expected that distributions generally will be reported to US shareholders as dividends.

Dividends paid to certain non-corporate US shareholders by a "qualified foreign corporation" that constitute qualified dividend income are taxable to the shareholder at

the preferential rates applicable to long-term capital gains provided that the shareholder holds the shares for more than 60 days during the 121-day period beginning 60 days
before the ex-dividend date and meets other holding period requirements. For this purpose, common shares of the Bank will be treated as stock of a "qualified foreign
corporation" if the Bank was not a PFIC for the taxable year in which the dividend was paid, or the preceding taxable year and if such common shares are listed on an
established securities market in the United States, such as the NYSE. The common shares of the Bank are listed on the NYSE. Accordingly, subject to the preceding discussion
under the heading "— Passive Foreign Investment Company Considerations", dividends the Bank pays with respect to the common shares will constitute qualified dividend
income, assuming the holding period requirements are met.

The dividend will not be eligible for the dividends-received deduction allowed to US corporations in respect of dividends received from other US corporations.

Dividends generally will be treated as foreign source income for US foreign tax credit purposes. Under Section 904(h) of the IRC, however, dividends paid by a foreign
corporation that is treated as 50% or more owned, by vote or value, by US persons for US federal income tax purposes may be treated as US source income (rather than foreign
source income) for foreign tax credit purposes, to the extent the foreign corporation earns US source income. In general, therefore, the application of Section 904(h) of the IRC
may adversely affect a US shareholder's ability to use foreign tax credits. As a result of the listing of the common shares of the Bank on the NYSE, the Bank may be treated as
50% or more owned by US persons for purposes of Section 904(h) of the IRC. US shareholders are strongly urged to consult their own tax advisers regarding the possible
impact if Section 904(h) of the IRC should apply.

Taxation of Capital Gains

Subject to the preceding discussion under the heading "— Passive Foreign Investment Company Considerations", a US shareholder that sells or otherwise disposes of
common shares of the Bank will recognize a capital gain or loss for US federal income tax purposes equal to the difference between the amount that the US shareholder realizes
and the US shareholder's tax basis in those common shares. The capital gain of a non-corporate US shareholder is generally taxed at preferential rates where the property is
held for more than one year. The gain or loss will be US source income or loss for foreign tax credit limitation purposes. The deduction of capital losses is subject to limitations.

Dividends and Paying Agents

Not applicable.

Statements by Experts

Not applicable.

Documents on Display

As an FPI, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not
privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5
under the Securities Act. Since many of the disclosure obligations required of us as an FPI are different than those required by other United States domestic reporting
companies, the Bank’s shareholders, potential shareholders and the investing public in general should not expect to receive information about us in the same amount, and at the
same time, as information is received from, or provided by, other United States domestic reporting companies. We are liable for violations of the rules and regulations of the SEC
which do apply to us as an FPI, see ‘‘Implications of Being a Foreign Private Issuer’’.

The SEC maintains an internet site at https://www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC. These SEC

filings are also available to the public from commercial document retrieval services.

Subsidiary Information

Not applicable.

Annual Report to Security Holders

The Bank is not required to provide an annual report to security holders in response to the requirements of Form 6-K.

109

Shareholder Information & Directory

DIRECTORS’ AND EXECUTIVE OFFICERS’ SHARE INTERESTS
AND DIRECTORS’ SERVICE CONTRACTS

EXCHANGE LISTING
The Bank’s shares are listed on the following stock exchanges:

In accordance with Regulation 6.8(3) of Section IIA of the Bermuda
Stock Exchange Listing Regulations, the total interests in common
shares of the Bank held by all Directors and Executive Officers as
listed in Item 6.A. "Directors and Senior Management" are noted in
Item 7.A. "Major Shareholders". For information on equity
compensation for Directors and Executive Officers, please see Item
6.B. "Compensation".

Save for those arrangements described in Note 26 to the Bank’s
December 31, 2022 consolidated financial statements, there are no
contracts of significance subsisting during or at the end of the
financial year ended December 31, 2022 in which a Director of the
Bank is or was materially interested, either directly or indirectly.

WRITTEN NOTICE OF SHARE REPURCHASE PROGRAM — BSX
REGULATION 6.38

On February 13, 2023, the Board approved, with effect from March 1,
2023 through to February 29, 2024, a common share repurchase
program, authorizing the purchase for treasury of up to 3.0 million
common shares.

The repurchase of shares pursuant to the repurchase program was
confirmed by way of non-objection from the Bermuda Monetary
Authority. The timing and amount of repurchase transactions will be
based on market conditions, share price, legal requirements and
other factors. No assurances can be given as to the amount of
common shares that may actually be repurchased.

Under the Bank’s share repurchase programs, the total shares
acquired or purchased for cancellation during the year ended
December 31, 2022 amounted to 102,000 common shares to be held
as treasury shares or cancelled.

From time to time, the Bank’s associates, insiders and insiders’
associates as defined by the BSX regulations may sell shares, which
may result in such shares being repurchased pursuant to the
program, but under BSX regulations, such trades must not be pre-
arranged and all repurchases must be made in the open market.
Prices paid by the Bank must not, according to BSX regulations, be
higher than the last independent trade for a “round lot” defined as 100
shares or more.

The Bank will advise the BSX monthly of the number of shares
repurchased by the Bank.

LARGE SHAREHOLDERS

See Item 7.A. "Major Shareholders" for a listing of registered holders
of 5% or more of the issued share capital as at February 15, 2023.

BERMUDA STOCK EXCHANGE
110 Pitts Bay Road
4th Floor
Pembroke, HM 08
Bermuda Tel: (441) 292 7212
Fax: (441) 292 7619
www.bsx.com

NEW YORK STOCK EXCHANGE
11 Wall Street
New York, NY 10005
United States of America
Tel: (212) 656 3000
www.nyse.com

SHARE DEALING SERVICE
Butterfield Securities (Bermuda) Limited
65 Front Street
Hamilton, HM 12
Bermuda
Tel: (441) 299 3972
Fax: (441) 292 9947
E-mail: info@butterfieldgroup.com

REGISTRAR AND TRANSFER AGENT
For Bermuda-registered securities:
MUFG Fund Services (Bermuda) Limited
4th Floor North, Cedar House
41 Cedar Avenue
Hamilton, HM 12
Bermuda
Tel: (441) 295 1355
Fax: (441) 295 6759
E-mail: bntbshareholders2@mfsadmin.com

For US-registered securities:
Computershare
462 South 4th Street
Suite 1600
Louisville, KY 40202
United States of America
Tel: (800) 736 3001
(781) 575 3100

MEDIA RELATIONS / PUBLICATION REQUESTS
Nicky Stevens
Group Strategic Marketing & External Communications
Tel: (441) 299 1624
E-mail: nicky.stevens@butterfieldgroup.com

INVESTOR RELATIONS
Noah Fields
Head of Investor Relations
Tel: (441) 299 3816
E-mail: noah.fields@butterfieldgroup.com

110

JERSEY
Butterfield Bank (Jersey) Limited
Community Banking, Corporate and Intermediary
Banking, Private Banking, Credit and Treasury
Services, Custody
Managing Director: Richard Saunders
P.O. Box 250
St. Paul’s Gate
New Street St. Helier Jersey JE4 5PU Channel
Islands Tel: (44) 1534 843 333 Fax: (44) 1534 843
334 E-mail: jersey@butterfieldgroup.com

SINGAPORE
Butterfield Trust (Asia) Limited
Trust and Fiduciary Services
Managing Director: Mark Florance
#14 02-04
6 Battery Road
Singapore 049909
Tel: (65) 6916 3636
E-mail: singapore@butterfieldgroup.com

SWITZERLAND
Butterfield Trust (Switzerland) Limited
Trust and Fiduciary Services
Managing Director: Jim Parker
Boulevard des Tranchées 16
1206 Geneva
Switzerland
Tel: (41) 22 839 0000
Fax: (41) 22 839 0099
E-mail: switzerland@butterfieldgroup.com

UNITED KINGDOM
Butterfield Mortgages Limited
UK Residential Property Lending
Chief Executive Officer: Alpa Bhakta
Sun Court 6
6-67 Cornhill
London EC3V 3NB
United Kingdom
Tel: (44) 020 3871 6900
Fax: (44) 020 3871 6901
E-mail: ukmortgages@butterfieldgroup.com