UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2016

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o 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

(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	Name of each exchange on which registered
voting ordinary shares of par value BM$ 0.01 each	New York Stock Exchange Bermuda 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 of December 31, 2016, there were 53,284,872 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.

oYes xNo

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.

oYes xNo

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.

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.

xYes oNo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

xYes oNo

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

definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero Accelerated filero Non-accelerated filerx

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.

oItem 17 oItem 18

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).

oYes xNo

TABLE OF CONTENTS

Cross Reference Sheet	i
Explanatory Note	iii
Implications of Being an Emerging Growth Company and a Foreign Private Issuer	iv
Cautionary Note Regarding Forward-Looking Statements	v
Information on the Company	1
Selected Consolidated Financial and Other Data	17
Risk Factors	26
Market Information	40
Dividend Policy	41
Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Selected Statistical Data	72
Risk Management	83
Supervision and Regulation	94
Management	105
Major Shareholders and Related Party Transactions	111
Certain Taxation Considerations	114
Enforcement of Civil Liabilities	117
Material Modifications to the Rights of Security Holders and Use of Proceeds	118
Disclosure Control and Procedures	119
Principal Accountant Fees and Services	120
Issuer Purchases of Equity Securities	121
Where You Can Find More Information	122
Index to the Financial Statements	F- 1

CROSS REFERENCE SHEET

Form 20-F

	Item Caption	Location	Page
Part I
Item 1	Identity of Directors, Senior Management and Advisors	Not Applicable	N/A
Item 2	Offer Statistics and Expected Timetable	Not Applicable	N/A
Item 3	Key Information	Explanatory Note	iii
		Risk Factors	26
		Selected Consolidated Financial and Other Data	17
		Dividend Policy	41
Item 4	Information on the Company	Information on the Company	1
		Supervision and Regulation	94
Item 4A	Unresolved Staff Comments	Not Applicable	N/A
Item 5	Operating and Financial Review and Prospects	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 6	Directors, Senior Management and Employees	Management	105
		Major Shareholders and Related Party Transactions	111
Item 7	Major Shareholders and Related Party Transactions	Major Shareholders and Related Party Transactions	111
Item 8	Financial Information	Reports of Independent Registered Public Accounting Firms	F- 2
		Consolidated Financial Statements and Notes to the Consolidated Financial Statements	F- 3
Item 9	The Offer and Listing	Market Information	40
Item 10	Additional Information	Management	105
		Dividend Policy	41
		Supervision and Regulation	94
Item 11	Quantitative and Qualitative Disclosures about Market Risk	Risk Management	83
Item 12	Description of Securities other than Equity Securities	Not Applicable	N/A
Part II
Item 13	Defaults, Dividend Arrearages and Delinquencies	None	N/A
Item 14	Material Modifications to the Rights of Security Holders and Use of Proceeds	Material Modifications to the Rights of Security Holders and Use of Proceeds	118
Item 15	Controls and Procedures	Disclosure Controls and Procedures	119
Item 16A	Audit Committee Financial Expert	Management - Audit Committee	105
Item 16B	Code of Ethics	Management - Code of Conduct and Ethics and Whistleblower Policy	105
Item 16C	Principal Accountant Fees and Services	Principal Accountant Fees and Services	120
Item 16D	Exemption from the Listing Standards for Audit Committees	Not Applicable	N/A
Item 16E	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	Issuer Purchases of Equity Securities	121
Item 16F	Changes in or Disagreements with Accountants	Not Applicable	N/A
Item 16G	Significant Differences in Corporate Governance Practices	Management - Foreign Private Issuer Status	105
Item 16H	Mine Safety Disclosure	Not Applicable	N/A

i

	Item Caption	Location	Page
Part III
Item 17	Financial Statements	See Item 18	N/A
Item 18	Financial Statements - Prepared Using a Basis of Accounting Other than IFRS	Consolidated Financial Statements and Notes to the Consolidated Financial Statements	F- 3
Item 19	Exhibits	Exhibits	III - 1

ii

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;

• "IPO" refers to:

• Our initial public offering of 12,234,042 common shares completed on September 21, 2016;

• "common shares" refers to:

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

• "we", "our", "us", "the Company" and "the Group" refer to:

• The Bank and its consolidated subsidiaries.

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 of and for the years ended December 31, 2016, 2015 and 2014 have been audited, as stated in the report appearing herein, by PricewaterhouseCoopers Ltd., Bermuda, 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 generally accepted accounting principles in the United States of America (“US 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 US GAAP. Non‑GAAP measures used in this report are not a substitute for US GAAP measures and readers should consider the US GAAP measures as well. For more information on non‑GAAP measures, including a reconciliation to the most directly comparable US GAAP financial measures, see “Selected Consolidated Financial Data — 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, including, but not limited to, the word Butterfield. 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.

iii

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY AND

A FOREIGN PRIVATE ISSUER

As a company with less than $1.0 billion in revenues during our last fiscal year, we are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies.

As an emerging growth company:

• we are exempt from the requirement to obtain an attestation and report from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002;

• we may provide reduced disclosure regarding our executive compensation arrangements pursuant to the rules applicable to foreign private issuers and emerging growth companies, which means we do not have to include a compensation discussion and analysis and certain other disclosure regarding our executive compensation; and

• we are not required to seek a nonbinding advisory vote on executive compensation or golden parachute arrangements.

We have elected to take advantage of the scaled disclosure requirements and other relief described above in this report and may take advantage of these exemptions for so long as we remain an emerging growth company. We will remain an emerging growth company until the earliest of (1) the end of the fiscal year during which we have total annual gross revenues of $1.0 billion or more, (2) the end of the fiscal year following the fifth anniversary of the completion of our IPO, (3) the date on which we have, during the previous three‑year period, issued more than $1.0 billion in nonconvertible debt and (4) the end of the fiscal year, after we have been subject to the requirements of Section 13(a) or 15(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for a period of 12 calendar months and have filed at least one annual report pursuant to those sections, in which the market value of the Bank’s equity securities that are held by non‑affiliates exceeds $700 million as of June 30 of that year. We are expected to cease to qualify as an emerging growth company on December 31, 2017.

In addition to scaled disclosure and the other relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We do not intend to take advantage of this extended transition period, which means that the financial statements included in this report, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies.

We are a foreign private issuer, and so long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to US domestic public companies, including:

• 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 Securities and Exchange Commission 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 Fair Disclosure, or 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 NYSE. 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. For additional discussion on our foreign private issuer status, see “Management — Foreign Private Issuer Status”.

iv

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," "believe," "estimate," "expect," "intend," "may," "plan," "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 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 "Risk Factors" section of this annual report, which include, but are not limited to, the following:

• changes in economic and market conditions;

• changes in market interest rates;

• our access to sources of liquidity and capital to address our liquidity needs;

• our ability to attract and retain customer deposits;

• our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business;

• our ability to successfully execute our business plan and implement our growth strategy;

• our ability to successfully manage our credit risk and the sufficiency of our allowance for credit loss;

• our ability to successfully develop and commercialize new or enhanced products and services;

• our ability to transact business in EU countries in the aftermath of Brexit;

• damage to our reputation from any of the factors described in this section, in "Risk Factors" and in "Management's Discussion and Analysis of Financial Condition and Results of Operations";

• our reliance on appraisals and valuation techniques;

• our ability to attract and maintain qualified employees and key executives;

• our reliance on third-party vendors;

• our reliance on the effective implementation and use of technology;

• our ability to identify and address cyber-security risks;

• the failure or interruption of our information and communications systems;

• the effectiveness of our risk management and internal disclosure controls and procedures;

• our ability to maintain effective internal control over financial reporting;

• the likelihood of success in, and the impact of, litigation or regulatory actions;

• the complex and changing regulatory environment in which we operate, including any changing regulatory requirements and restrictions placed on us by our principal regulator, the BMA, and other regulators, as well as our ability to comply with regulatory schemes in multiple jurisdictions; and

• the incremental costs of operating as a public company.

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.

v

INFORMATION ON THE COMPANY

Overview

We are a full service bank and wealth manager headquartered in Hamilton, Bermuda. We operate our business through six geographic segments: Bermuda, the Cayman Islands, and Guernsey, where our principal banking operations are located; and The Bahamas, Switzerland, and the United Kingdom, where we offer specialized financial services. We offer banking services, comprised 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 both banking and wealth management. In our Guernsey, Bahamas, and Switzerland segments, we offer wealth management. In our United Kingdom segment, we offer residential property lending.

For the year ended December 31, 2016 we generated $406.0 million in net revenue before provision for credit losses and other gains/losses ("Net Revenue"). Our total net revenue by each of our six geographic segments for the years ended December 31, 2016, 2015 and 2014 are as follows:

	For the year ended
In millions of $	2016		2015		2014
Net Revenue
Bermuda segment	$	231.4	$	202.5	$	201.0
Cayman Islands segment	$	121.0	$	105.8	$	91.9
Guernsey segment	$	39.0	$	43.1	$	46.1
United Kingdom segment	$	6.0	$	19.3	$	26.4
Bahamas segment	$	4.7	$	5.3	$	5.5
Switzerland segment	$	3.8	$	3.4	$	2.5

Our Net Revenue for the year ended December 31, 2016 consisted of 57% from our Bermuda segment, 30% from our Cayman Islands segment, 10% from our Guernsey segment, 1% from our United Kingdom segment, and 1% from each of our Bahamas and Switzerland segments. As of December 31, 2016, we had $11.1 billion in total assets, $3.6 billion in net loans, $10.0 billion in customer deposits (67% USD deposits, 18% USD-pegged deposits), $98.0 billion of trust assets under administration ("AUA"), and $4.7 billion of assets under management ("AUM").

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 card suite, merchant acquiring, mobile / online banking, and cash management. With seven branches and 51 ATMs as ofDecember 31, 2016, we have a 39% Bermudian Dollar ("BMD") deposit market share in Bermuda and a 35% local deposit market share in the Cayman Islands as of December 31, 2015 based on data from the Bermuda Monetary Authority ("BMA") and the Cayman Islands Monetary Authority ("CIMA"), respectively.

In all of our segments except the United Kingdom, 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, meets 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. As of December 31, 2016, trust AUA totaled $98.0 billion.

Our private banking business line offers access to a suite of services, targeted toward 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 Guernsey 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 immediate access to their account information through the use of internet banking. As ofDecember 31, 2016, totaldeposits and loans in our private banking business were $3.3 billion and $0.9 billion, respectively.

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 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 well-recognized and leading 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.As ofDecember 31, 2016our asset management AUM were $4.7 billion.

From 2012 to 2016, our GAAP net income to common shareholders and our core net income to common shareholders (‘‘Core Net Income to Common’’) had compound annual growth rates (‘‘CAGRs’’) of 67% and 35%, respectively⁽¹⁾. These results were achieved despite a low interest rate environment. We attribute this financial performance to the attractive markets in our segments, leading position in those markets, strong operating discipline, conservative balance sheet deployment, and ability to grow our award-winning wealth management business. 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

The following charts show the trajectory of our performance from 2012 to 2016:

GAAP Net Income to Common ($ in millions) GAAP Earnings per Common Share Fully Diluted

Core Net Income to Common ($ in millions)¹ Core Earnings per Common Share Fully Diluted²

(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 "Selected Consolidated Financial and Other Data – Reconciliation of Non-GAAP Financial Measures".

(2) 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 "Selected Consolidated Financial and Other Data – Reconciliation of Non-GAAP Financial Measures".

2

Our History

The origin of The Bank of N.T. Butterfield & Son Limited traces back to 1758, to the founding of the trading firm of Nathaniel Butterfield. In 1858, our company was established as a bank in Bermuda and has been instrumental to 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 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 after Bermuda's departure from the British Sterling zone. In addition to being Bermuda's first bank, we have a long history of innovating financial services on the island: 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 Bermuda Stock Exchange under the ticker symbol "NTB.BH".

In 2016, we listed our common shares on the New York Stock Exchange 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 that included Carlyle Global Financial Services and related entities (collectively, "The Carlyle Group" or "Carlyle") and Canadian Imperial Bank of Commerce ("CIBC"), as well as existing shareholders. As part of the transaction, we launched a rights offering of $130 million on April 12, 2010, so as to allow the pre-transaction shareholders to participate in the recapitalization of the Company. The rights offering, which closed on May 12, 2010, was fully subscribed to, and the proceeds were used to repurchase shares from the recapitalization investors. As a result, the recapitalization investors' total investment was reduced to $420 million.

Since our restructuring, we have pursued a strategy to focus on our core strengths 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 significantly improved our financial results including growing Core Earnings to Common every year since 2011 and have been able to initiate a capital return policy for investors. The following items were key steps in executing our strategy:

• In 2010, we sold our operations in Hong Kong and Malta, and in 2012, we sold our operations in Barbados as they were no longer consistent with our strategy.

• In 2010, we sold $820 million of asset-backed securities to cleanse our investment portfolio.

• In 2013, we implemented an annual cash dividend of $0.40 per year plus a $0.10 per year special dividend.

• In 2014, we completed two acquisitions, which allowed us to both expand and complement our existing business lines: Legis Group Holdings' Guernsey-based trust and corporate services business, as well as a significant portion of HSBC's corporate and retail banking business in the Cayman Islands.

• In April 2015, CIBC sold its 19% ownership stake. We repurchased and retired 8 million shares for a total of $120 million, and The Carlyle Group purchased CIBC's remaining 2.3 million shares and subsequently sold them to other existing investors.

• In December 2015, we repositioned our balance sheet to better match the duration of our assets and liabilities and to reclassify a portion of our Available for Sale ("AFS") portfolio as Held to Maturity ("HTM").

• In February 2016, we commenced an orderly wind-down ("OWD") of our UK operations. We exited our private banking and asset management operations in our UK segment, but retain our UK high net worth mortgage lending business. The OWD was largely completed by the end of 2016 with the change in the business operations to mortgage lending services and the change of name from UK operations to Butterfield Mortgages Limited. The excess capital in the UK was released early in 2017, which we intend to invest in other areas of our business.

• In April 2016, we completed an acquisition of HSBC's Bermuda trust business and private banking investment management operations that added $1.6 billion of deposits to our balance sheet. As part of the transaction, HSBC also entered into an agreement to refer its existing private banking clients to Butterfield.

• In September 2016, we successfully completed a $288 million initial public offering and listing on the New York Stock Exchange, through which we raised approximately $126 million in net primary proceeds.

• In December 2016, we redeemed and canceled all of our issued and outstanding preference shares, which had a book value of $183 million, removing approximately $16 million of annual preference dividend and guarantee fees. We also repurchased for cancellation the outstanding warrant from the Government of Bermuda, removing a potentially dilutive instrument.

Our Markets

Our two largest segments are Bermuda and the Cayman Islands. As of December 31, 2016, 59% of our total assets were held by our Bermuda segment and 29% by our Cayman Islands segment. Bermuda is our largest segment by number of employees, and we are the country's largest independent bank. As of December 31, 2016, our Bermuda segment had $6.8 billion of assets, $50.1 billion of trust AUA and $3.4 billion of AUM, and our Cayman Islands segment had $3.4 billion of assets, $4.0 billion of trust AUA and $0.8 billion of AUM.

3

The charts below provide the geographic distribution of our Net Revenue for the year ended December 31, 2016.

Segment Distribution of Net Revenue

2016 Net Revenue: $406.0 million

Bermuda is a leading international financial center and a global hub for reinsurers, captive insurers, and other multi-national corporations. Foreign currency assets held by local banks totaled $18 billion in 2015, more than three times gross domestic product ("GDP") for the same period. According to a 2015 report from the Federal Insurance Office of the US Department of the Treasury, Bermuda is the domicile for 15 of the world's 40 largest reinsurance groups and accounts for 11% of global reinsurance premiums written and 15% of global property & casualty reinsurance premiums written. Bermuda's captive insurance market includes approximately 750 captive insurers according to a 2015 report by the BMA. Home to a population of approximately 66,000, the country had the second highest GDP per capita income in the world in 2015 at approximately $92,500 and a nominal GDP of $5.7 billion according to The Economist.

The Cayman Islands is also a leading international financial center, serving as the leading domicile for hedge funds globally and the second largest domicile (after Bermuda) for captive insurers globally. Total deposits held by banks equaled $12 billion as of 2015, or more than three times GDP for 2015. As of December 31, 2016, there were 10,586 regulated mutual funds registered in the Cayman Islands with 106 mutual fund administrators according to CIMA. We hold business relationships with approximately 650 funds, fund administrators, and related entities. Home to a population of approximately 60,000, the country had a 2015 GDP per capita of approximately $56,100 and a nominal GDP of $9.2 billion according to the Cayman Islands' Annual Economic Report.

The table below highlights the relative position of Bermuda and the Cayman Islands compared to the US and UK based on several macroeconomic factors:

Comparison of Selected 2015 Macroeconomic Indicators⁽¹⁾ 

	Bermuda			Cayman Islands			USA			UK
GDP per Capita (in thousands of $)	$	92.5		$	56.1		$	55.9		$	44.2
Unemployment	7.0		%	4.2		%	5.3		%	5.4		%
Consumer Price Inflation	1.4		%	(2.3		)%	0.1		%	0.1		%

___________________

⁽¹⁾  Source: The Economist, 2015 Bermuda Labour Force Survey Executive Report, and The Cayman Islands' Labour Force Survey Report Fall 2015

The international trust market is primarily concentrated in select jurisdictions, including Bermuda, the Cayman Islands, Guernsey, Hong Kong, Jersey, 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 not generally linked to 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 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 of December 31, 2016, 73% of our AUM was in Bermuda, 18% was in the Cayman Islands, 8% 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.

4

Our Competitive Strengths

Leading Bank in Attractive Markets

We are a leading bank in Bermuda with a 39% market share in BMD deposits and a 36% market share in BMD loans, respectively, as of December 31, 2015 (Source: BMA). In the Cayman Islands, we have a 35% market share in local deposits and a 25% market share in local mortgages as of December 31, 2015 (Source: CIMA). 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 ultra-high net worth and high net worth individuals and families. Our market share, scale, history, and brand in our Bermuda and Cayman Islands segments have enabled us to achieve our strategic objectives, including lending at attractive margins, attracting low cost, sticky deposits, and growing our wealth management business, all of which have driven our earnings and capital generation.

Strong Capital Generation and Return

Since our recapitalization, we have streamlined our business by exiting non-core markets, executing on various operating efficiency initiatives, shifting the risk profile of our loan and securities portfolios, running off our legacy loan and securities portfolios, and deploying our excess capital in the form of dividends and share repurchases. Our return on equity for 2016 of approximately 9% and our Core ROATCE for 2016 of approximately 21% were driven by a number of factors, including: significant fee income with historically low capital requirements, low cost deposits, a high yielding loan portfolio, a conservative capital efficient securities portfolio, and our operations in corporate income tax neutral jurisdictions. As a result, our business generated core net income in 2016 well in excess of that needed to execute our organic balance sheet growth strategy.

Return on Equity Core ROATCE¹

____________________________

⁽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 "Selected Consolidated Financial and Other Data — Reconciliation of Non-GAAP Financial Measures."

Growth Opportunities

We expect that, all else being equal, a rising 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 securities and loans. In addition, a significant portion of our deposits are non-interest bearing (24% as of December 31, 2016), and as a result, a portion of our funding is insensitive to rising rates. Our non-interest bearing deposit balances have historically exhibited low correlation with interest rates, a behavior that we attribute in part to a sizeable client base that utilizes our bank for 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):

5

Net Interest Income Sensitivity

A down 100 basis points interest rate shock shows a reduction in projected 12-month net interest income of 8.9% from the flat 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 currently do in some instances) and certain loans that have rate floors.

In addition, we are well-positioned as an acquirer of certain businesses, primarily in wealth management. Our acquisition strategy seeks to capitalize on opportunities created by international financial institutions that have faced operating issues requiring them to simplify their businesses. 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 recent focus has been primarily on the private trust business where we have expertise, scale and a strong brand.

In 2014, we completed two acquisitions that allowed us to both expand and complement our existing businesses: In April 2014, we completed the acquisition of Legis Group’s Guernsey-based trust and corporate services business. The transaction enhanced the scale of our international trust capabilities and fortified our position as a leading player in Guernsey. In November 2014, we acquired select deposits and loans in the Cayman Islands from HSBC. At close, the transaction added approximately $0.5 billion of customer deposits with an average cost of 0.12%, and $144 million of loans.

In April 2016, we acquired HSBC’s Bermuda trust business and private banking investment management operations. HSBC also entered into an agreement to refer its existing private banking clients to Butterfield. This acquisition added over $18.9 billion of trust AUA, $1.3 billion of AUM, and $1.6 billion of deposits.

Efficient Balance Sheet and Visible Earnings

Our relationship-driven business model and international corporate clientele have allowed us to develop a sticky deposit base with historically low funding costs. We believe our customers’ deposit activity has historically been inelastic to deposit pricing given the nature of corporate activity and competition in retail deposit taking in our segments. From 2012 to 2016, customer deposits have grown at a compound annual growth rate (‘‘CAGR’’) of approximately 14% in Bermuda and 12% in the Cayman Islands, taking into account the HSBC Cayman acquisition in November 2014 that added $0.5 billion of new deposits, and the April 2016 acquisition of HSBC’s Bermuda trust business and private banking investment management operations that added $1.6 billion of new deposits. As of December 31, 2016, we had $10.0 billion in deposits at a cost of

0.12%, of which 24% were non-interest bearing demand deposits, 58% were interest bearing demand deposits with a weighted-average cost of 0.07%, and 18% were term deposits with a weighted-average cost of 0.47% and an average maturity of 80 days. We believe the market conditions in Bermuda and the Cayman Islands will allow us to continue to benefit from favorable deposit pricing.

6

The following chart shows customer deposit trends for 2012 to 2016:

Deposit Balance and Funding Costs ($ in billions)

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 as of December 31, 2016:

Balance Sheet Composition - Total Assets ($ in billions)

As ofDecember 31, 2016, 19% of our balance sheet was cash and cash equivalents, which included cash and demand deposits with banks, unrestricted term deposits, certificates of deposits, and treasury bills with a maturity less than three months.

In addition to maintaining a large cash balance, we also have a large 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: 79% of our portfolio was invested in US government treasuries and mortgage-backed securities issued by US governmental agencies. Our investment strategy aims to align the interest rate risk profile of our assets and liabilities — as of December 31, 2016, the average duration of our AFS investment portfolio was 2.5 years, the average duration of our HTM investment portfolio was 6.3 years, and the average duration of our total investment portfolio was 3.4 years. As of December 31, 2016, the total value of our AFS investment portfolio was $3.3 billion, and the total value of our HTM investment portfolio was $1.1 billion.

7

The following charts show the composition of our investment portfolio by rating and asset type asofDecember 31, 2016:

Investment Portfolio - Rating Investment Portfolio - Asset Type

The combination of our significant cash and securities portfolios helps drive our capital efficient balance sheet, with risk-weighted assets equal to 39% of our total assets and a Basel III total capital ratio of 17.6%, each as of December 31, 2016.

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 2015 and 2016, net charge-offs represented 0.2% and 0.3%, respectively, of average loans. As of December 31, 2016, our non-accrual loan balance was $48.5 million, or 1.3% of total loans, and 84% of our loans past due were full recourse residential mortgages. As of December 31, 2016, our loan portfolio consisted of 94% floating-rate loans and 6% fixed-rate loans.

The following chart shows the segment composition of our loan portfolio as of December 31, 2016:

Loan Portfolio Composition - Geography

8

Our loan portfolio has exhibited stability over time. The following chart shows loan portfolio trends for 2012 to 2016:

Loan Balance and Yield ($ in bilions)

The domestic lending markets in Bermuda and the Cayman Islands have a limited number of participants and significant barriers to entry. 65.2% of our loan balances were residential mortgages as of December 31, 2016. These loans are attractive for a number of reasons. The average yield on new retail residential mortgage originations in our Bermuda and Cayman segment in the fourth quarter of 2016 was 4.47%, which we believe is consistent with other firms that compete in our markets. In addition, our mortgages have exhibited predictable cash flows, with historically negligible refinancing activity due to high costs to refinance in Bermuda and the Cayman Islands. Finally, our mortgages have historically benefited from a manual underwriting process, low LTVs (68% of residential loans below 70% LTV as of December 31, 2015), and a full recourse system in Bermuda and the Cayman Islands.

We have also generated balanced sources of non-interest income from a well-diversified customer base. For the five year period ended December 31, 2016, 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. The wealth management non-interest income stream is not directly correlated with the performance of our banking business. For example, the typical trust we manage generates a relatively constant fee stream on an annual basis throughout its life. In addition, because fee revenue in our wealth management business lines is primarily driven by the size of our clients’ assets and holdings, which are generally diversified across multiple geographies, the performance of these businesses is not typically linked to the economies of our local markets. Non-interest income represented 36% of our total Net Revenue in 2016, and contributed materially to the Company’s high Core ROATCE and excess capital generation as limited capital is required for our fee income business.

9

The following charts show our various sources of non-interest income for the year ended December 31, 2016:

Non-Interest Income¹

2016 Non-Interest Income: $147.5 million / 36.3% of Net Revenue

_____________

⁽¹⁾Foreign exchange revenue represents income generated from client-driven transactions in the normal course of business. We do not engage in proprietary trading.

Strong Leadership with Deep Knowledge of Our Domestic and International Markets

Our management team has extensive and varied experience managing banking and financial services firms. We believe that our management team’s reputation and performance track record gives us an advantage in executing our organic growth and acquisition strategies.

Name	Title	Joined Butterfield	Prior Experience	Years of Experience
Michael Collins	Chief Executive Officer	2009	COO of HSBC Bermuda	31
Michael Schrum	Chief Financial Officer	2015	CFO of HSBC Bermuda	21
Daniel Frumkin	Chief Risk Officer	2010	CRO of Retail Banking at RBS	30
Robert Moore	Group Head of Trust	1997	Senior Manager of International Private  Banking with Lloyds	38
Michael Neff	Group Head of Wealth Management	2011	Global Head of Wealth Management at RiskMetrics	29

In addition to his role as CEO, Michael Collins serves as a member of our Board. Barclay Simmons, our Non-Executive Chairman since 2015, joined our Board in 2011 and was named Vice Chairman in 2012. We have seven additional non-executive directors, who bring to the Bank a diverse array of experiences in the financial services industry from across the globe.

Our Strategy

Butterfield is both a leading banking business in Bermuda and the Cayman Islands and a growing, award-winning, and international wealth management business with operations in Bermuda, the Cayman Islands, Guernsey, The Bahamas, and Switzerland. Our strategy focuses on maintaining our leading banking position in Bermuda and the Cayman Islands while continuing to grow scale in our wealth management business across our core geographies. The key components of our strategic plan are:

Banking

Leverage Our Leading Market Position

We seek to remain a leading bank in Bermuda and the Cayman Islands in terms of local deposit and lending market share by continuing to provide excellent service, employ a high-quality work force, and offer a competitive product suite to our customers.

10

Improve Operating Efficiency

Our banking business operates in geographies with high operational costs. We carefully manage our cost structure to improve efficiency through the deployment of technology and continuous process improvement. We expect continued investments in core banking systems and expansion of electronic channels in Bermuda and the Cayman Islands, as well as upgrades in Guernsey, to result in improved operational efficiency.

Wealth Management

Leverage Relationships with Key Introducers

We have over 70 years of experience providing sophisticated trust services and an award-winning brand and we believe that our reputation and expertise are well-recognized by industry insiders, including the leading international trust law firms. These firms act as a key source of new business for trust services. We plan to leverage our relationships with key introducers to continue to grow our company and build our brand, as well as invest in the further development of our technical expertise and multi-jurisdictional offering. Our recent trust acquisitions have grown the size and reach of our business. As we continue to grow through organic and inorganic means, we believe that our business will increasingly benefit from referrals by key introducers.

Utilize Multi-Jurisdictional Offerings to Attract Client Base

We seek to take advantage of our presence, seasoned trust officers, and product offerings in key international financial centers in Bermuda, the Cayman Islands, Guernsey, The Bahamas, and Switzerland to attract our target client base. International trust law varies across different jurisdictions, and our multi-jurisdictional presence enables us to cater to a variety of client preferences from a geographical perspective. In recent years, we have experienced increased demand for trust services from our European, Asian, Latin American, and Middle Eastern clients. We view our trust business line as an opportunity for further growth.

Emphasize Strong Client Relationships

Our primary focus is to build strong client relationships using our knowledge of the local market and combining our banking and wealth management services to meet the financial needs of our customers. We believe our experience in building strong, long-term client relationships in our wealth management business will enable us to retain our existing clients and attract additional trust, private banking, and asset management business from them, as well as receive referrals to potential new clients. In addition, our wealth management business sources customers and benefits from the strong relationships we have in our banking business.

Expand Revenues from Client Relationships Across Our Wealth Management Services

We believe that there is an opportunity to increase the revenues generated from client relationships across our wealth management business lines. For example, we seek to create personal banking and wealth management relationships with the professionals for whom we provide corporate banking services. In addition, trust relationships, which are very long lived, can present opportunities for use of other Butterfield services at different stages of a trust's lifecycle or to meet needs of family members outside the trust itself.

Client relationships from our recent acquisitions represent another area of opportunity to expand Butterfield services and products for high net worth customers and certain corporate and institutional clients. Through the acquisition of HSBC's Bermuda trust business and private banking investment management operations, we migrated 285 new relationships and $1.6 billion of deposits onto our platform.

Improve Operating Efficiency

We continue to identify areas where we can improve cost efficiency without impacting our quality of client service. Past initiatives have included implementation of one global Trust Administration system across segments, implementation of a new custody system, consolidation of our trading operations, and reduction in our fund administration expenses through consolidation.

Pursue Prudent Acquisitions to Increase Scale

We intend to continue pursuing acquisitions aligned with existing business operations, in particular to increase the scale of our trust business line. The fragmented nature of the market, with approximately 500 trust companies operating in key international financial centers, and recent sales of subsidiaries by several international financial institutions have created a favorable environment for companies with the resources and expertise to act as effective consolidators. We believe that our management team has developed a rigorous approach for conducting due diligence and efficiently integrating acquired businesses to meet our internal financial hurdles. In addition, we may pursue acquisitions of other wealth management businesses, including private banking businesses, and we plan to continue to opportunistically analyze potential acquisitions as a means of capital deployment.

Corporate Information

We are a local company incorporated under the laws of Bermuda, incorporated on October 22, 1904, pursuant to 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, 111 Eighth Avenue, New York, New York 10011. 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.

Summary Risk Factors

Any of the factors set forth under "Risk Factors" may limit our ability to successfully execute our business strategy. Among these important risks are the following:

• Adverse economic and market conditions, in particular in Bermuda and the Cayman Islands, have in the past resulted in and could in the future result in lower revenue, lower asset quality, increased provisions and lower earnings.

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

• A decline in the residential real estate market, in particular in Bermuda, could increase the risk of loans being impaired and could have an adverse effect on our business, financial condition or results of operations.

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

11

• Fluctuations in interest rates and inflation may negatively impact our net interest margin and our profitability.

• We depend primarily on deposits to fund our liquidity needs; if we are unable to effectively manage our liquidity across the jurisdictions in which we operate, our business, financial condition or results of operations could be adversely affected.

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

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

• Our international business model exposes us to different and possibly conflicting regulatory schemes across multiple jurisdictions.

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

• Fulfilling public company financial reporting and other regulatory obligations in the United States is expensive, time-consuming and may strain our resources.

• The uncertainty resulting from the recent vote by the UK electorate in favor of a UK exit from the European Union ("EU"), as well as changes in US legislation, regulation and government policy as a result of the 2016 US presidential and congressional elections, could adversely impact our business, financial condition and results of operations.

• We operate in a complex regulatory environment and legal and regulatory changes could have a negative impact on our business, financial condition or results of operations.

• Changes in US tax laws could cause the insurance and reinsurance industry to relocate from Bermuda, which could have an adverse effect on our business, financial condition and results of operations.

• Provisions of Bermuda law and our bye-laws could adversely affect the rights of our shareholders or prevent or delay a change in control.

• Bermuda law differs from the laws in effect in the United States and might afford less protection to shareholders.

12

Our International Network and Group Structure

The following map presents the several geographic regions in which our business operates:

The following chart presents our corporate structure, indicating our principal subsidiaries as of December 31, 2016:

Bermuda

The Bank itself is licensed in Bermuda to provide banking services and wealth management services. Through its wholly owned Bermuda subsidiary Butterfield Asset Management Limited it provides asset management services and through its wholly owned Bermuda subsidiaries Butterfield Trust (Bermuda) Limited and Bermuda Trust Company Limited it provides corporate trustee, fiduciary and corporate administration services. Bermuda Securities (Bermuda) Limited provides investment advisory and listing sponsor services.

Cayman Islands

Butterfield Bank (Cayman) Limited, a wholly owned subsidiary of the Bank, provides banking services and its subsidiary Butterfield Trust (Cayman) Limited provides trustee, fiduciary and corporate administration services.

13

Guernsey

Butterfield Bank (Guernsey) Ltd. is a wholly owned subsidiary of the Bank and provides private banking, custody and administered banking services. Butterfield Trust (Guernsey) Ltd. is a subsidiary of Butterfield Bank (Guernsey) Limited. and provides trustee and fiduciary services.

Bahamas

Butterfield Trust (Bahamas) Limited is a wholly owned subsidiary of the Bank and provides trust and fiduciary services.

Switzerland

Butterfield Holdings (Switzerland) Limited is a wholly owned subsidiary of the Bank and provides investment services and through its subsidiary Butterfield Trust (Switzerland) Limited provides trust and fiduciary services.

United Kingdom

Butterfield Mortgages Limited is a wholly owned subsidiary of the Bank and provides residential property lending 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, increased access to capital, and greater efficiency. Larger financial institutions may also have greater ability to leverage increasing regulatory requirements and investment in expensive 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 segment currently consists of four licensed banks and one licensed deposit-taking institution including one large subsidiary of an international bank, HSBC, and three domestic institutions, including 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 five non-retail Class 'A' banks and 148 limited service Class 'B' banks, including Cayman National and subsidiaries of international banks, such as RBC. 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 RBC in the Cayman Islands 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 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 approximately 500 trust companies in the main international financial centers, and many of our competitors in this sector offer fund administration and corporate services work 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. Our management believes 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 share in our primary segments: Bermuda and the Cayman 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 Guernsey. 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 of December 31, 2016, our Bermuda, Cayman Islands and Guernsey segments contributed $5.9 billion, $3.0 billion and $1.0 billion, respectively, to our total customer deposit base. Deposits from all other segments totaled $0.1 billion as of December 31, 2016.

Total deposits as of December 31, 2016 were $10.0 billion, up 9.3% over total deposits as of December 31, 2015. Customer demand deposits, which include checking, savings and call accounts, totaled $8.2 billion, or 81.9% of customer deposits, as of December 31, 2016, compared to $7.7 billion, or 84%, as of December 31, 2015. Customer term deposits totaled $1.8 billion as of December 31, 2016. The cost of funds on total deposits improved from 21 basis points in 2015 to 12 basis points as of December 31, 2016 as a result of an increase in non-interest bearing deposits and small rate decreases in some jurisdictions, as well as the full repayment of the UK segment deposits, which carried a relatively higher cost than other jurisdictions.

Lending

We offer a broad set of lending offerings 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 including Bermuda and the Cayman Islands. We also offer residential mortgage lending through our private banking business in Guernsey 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 $3.6 billion as of December 31, 2016. The loan portfolio represented 32.2% of total assets as of December 31, 2016, and loans, net of allowance for credit losses, as a percentage of customer deposits were 35.7%. The effective yield on total loans for the year ended December 31, 2016 was 4.78%, compared to 4.57% for the year ended December 31, 2015.

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 of December 31, 2016, residential

14

mortgages (after specific allowance for credit losses) totaled $2.3 billion (a $197.5 million decrease from December 31, 2015), accounting for approximately 64.6% of the Group's total gross loan portfolio (after specific allowance for credit losses) and approximately 84.3% of total non-accrual loans in the Group's loan portfolio.

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 of December 31, 2016, non-residential loans to consumers (after specific allowance for credit losses) totaled $197.8 million, accounting for approximately 5.5% of the Group's total gross loan portfolio and approximately 2.1% 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 and the United Kingdom. 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 of December 31, 2016, our commercial real estate loan portfolio (after specific allowance for credit losses) totaled $609.8 million, accounting for approximately 16.9% of the Group's total gross loan portfolio and approximately 12.4% of total non-accrual loans in the Group's loan portfolio.

Our commercial real estate loan portfolio is broken down into two categories: commercial mortgage and construction. As of December 31, 2016, commercial mortgages totaled $580.9 million (after allowance for credit losses), and construction loans totaled $28.9 million, accounting for approximately 95.3% and 4.7% of our commercial real estate loan portfolio before allowance for credit losses, 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 of December 31, 2016, the Group's other commercial loan portfolio totaled $469.0 million, accounting for approximately 13.0% of the Group's total gross loan portfolio. As of the same date, the Group's loans to governments totaled $112.4 million, accounting for approximately 3.1% of our loan portfolio. As of December 31, 2016, other commercial loans accounted for approximately 1.2% of our total non-accrual loans, and there were no loans to governments classified as non-accrual loans.

Investments

Given the large customer deposit base commanded in our Bermuda and Cayman 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 is comprised mainly of securities issued or guaranteed by the US Government or federal agencies. The securities in which we invest are generally limited 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 July 31, 2012, we entered into an agreement with Alumina Investment Management LLC ("Alumina") pursuant to which Alumina provides investment advisory services to us in respect of our US Treasury and agency portfolio.

As of December 31, 2016, the Group held $4.4 billion in investments, representing approximately 39.6% of total assets.

Cash and Liquidity Management

We operate across multiple currency jurisdictions with pervasive multi-currency products. In our deposit taking jurisdictions—Bermuda, the Cayman Islands and Guernsey—there are currently no dedicated central banks, and no deposit insurance scheme infrastructures (such as the Federal Deposit Insurance Corporation in the United States), with the exception of Bermuda, where a deposit insurance scheme has recently been implemented. 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 US Treasury Bill portfolio. As of December 31, 2016, the cash due from banks of $2.1 billion was comprised primarily of $1.7 billion in interest earning cash equivalents, which are investments with a less than ninety day duration. The remaining amounts were comprised of non-interest earning and interest earning 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 jurisdictions. The major contributors to foreign exchange revenues are Bermuda and the Cayman Islands, accounting for 90% and 87% of our foreign exchange revenue for the year ended December 31, 2016 and 2015, respectively. We do not maintain a proprietary trading book. Foreign exchange income is generated from client-driven transactions and totaled $30.6 million during the year ended December 31, 2016, compared to $31.9 million for the comparative period in 2015. The $1.3 million period-over-period decrease reflects decreasing client activity and related volumes in retail and institutional foreign exchange flows, as well as increased unrealized gains on client service derivatives held over period ends.

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 40 markets globally, including major markets and smaller, less-developed markets, with principal markets covered being the United States, Canada, Europe and Japan.

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 Trust Funds are held by Brown Brothers Harriman ("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 Guernsey segments and complement core wealth management services offered by other parts of the Group, and we currently anticipate this business to grow generally proportionally 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 dealing flows.

Custody fees comprise a basis point charge on the value of Assets Under Custody ("AUC"), which are subject to a minimum level for smaller, less complex portfolios and charged on a reducing scale as AUC values increase. In addition to these fees, custody clients are charged banking transactions fees based on account activity.

15

Employees

As of December 31, 2016, we had 1,240 employees on a full-time equivalency basis, which included 1,061 full-time employees, 5 part-time employees and 51 temporary employees. As of December 31, 2016, we had 668 employees in Bermuda, 304 employees in the Cayman Islands, 209 employees in Guernsey, 23 employees in the United Kingdom, 28 employees in The Bahamas and 9 employees in Switzerland. 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.

Information Technology

We devote significant resources to maintain 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.

Since 2011, we have made significant investment to alignments and banking operations, as well as to make further alignment across the whole Group for products, services, licensing and hosting locations. Currently, our information technology is operationally divided into two platforms: (i) Bermuda and Cayman and (ii) Guernsey, the United Kingdom and the Group Trust. In 2011, our Bermuda and Cayman operations transitioned to a single industry standard technology platform utilizing a predominantly outsourced and supported model hosted in Canada. In late 2013, our Guernsey and UK operations were placed under the Group Technology governance structure with a goal to hub core services in a single location (Guernsey). The process to move to a common platform is currently underway.

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 a variety of vulnerability and penetration tests on our platforms, systems and applications to reduce the risk that any attacks are successful. To protect against disasters, we have a backup offsite core processing system and recovery plans.

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 Bermuda and the Cayman Islands. 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.

Properties

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, the United Kingdom, The Bahamas and Switzerland. Additionally we operate four branch locations in Bermuda and three branch locations in the Cayman Islands.

Legal Proceedings

From time to time we are a party to various litigation matters incidental to the conduct of our business.

As publicly announced, in November 2013, the US Attorney's Office ("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 has been cooperating with the US authorities in their ongoing investigation.

Although we are unable to determine the amount of financial consequences, fines and/or penalties resulting from this tax compliance review, we have recorded as of December 31, 2016, a provision of $5.5 million (December 31, 2015: $4.8 million). As the investigation remains ongoing at this time, the timing and terms of the final resolution, including any fines or penalties, remain uncertain and the financial impact to the Bank could exceed the amount of the provision. In this regard, we note that the US authorities have not approved or commented on the adequacy or reasonableness of the provision. The provision is included on the consolidated balance sheets under other liabilities and on the consolidated statements of operations under other expenses.

16

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

Consolidated Financial Information

The following tables present our selected consolidated financial information as of and for the years ended December 31, 2016,2015,2014,2013, and2012.

Our historical results for any prior period do not necessarily indicate our results to be expected for any future period. The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations".

The selected consolidated financial information presented as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 have been derived from the audited consolidated financial statements of The Bank of N.T. Butterfield & Son Limited included elsewhere in this report. The selected consolidated financial information presented as of December 31, 2014, 2013 and 2012 and for the years ended December 31, 2013 and 2012 have been derived from the audited consolidated financial statements of The Bank of N.T. Butterfield & Son Limited, which are not included elsewhere in this report.

Statement of Operations Data

	For the year ended December 31,
(in millions of $, unless indicated otherwise)	2016		2015		2014		2013		2012
Total interest income	274.9		262.6		265.1		253.2		244.8
Total interest expense	16.4		23.3		26.6		29.4		33.1
Net interest income before provisions for credit losses	258.5		239.3		238.5		223.8		211.7
Provisions for credit losses	(4.4	)	(5.7	)	(8.0	)	(14.8	)	(14.2	)
Net interest income after provisions for credit losses	254.1		233.5		230.4		209.0		197.5
Total non-interest income	147.5		140.2		134.8		126.0		128.5
Total other gains (losses)	1.0		(9.4	)	15.7		(8.8	)	(26.4	)
Total net revenue	402.6		364.3		381.0		326.2		299.7
Total non-interest expense	285.9		285.2		273.0		262.6		274.9
Net income before income taxes from continuing operations	116.7		79.0		108.0		63.5		24.8
Income tax (expense) benefit	(0.7	)	(1.3	)	0.2		(0.9	)	(5.9	)
Net income from continuing operations	115.9		77.7		108.2		62.6		18.9
Net income(1)	115.9		77.7		108.2		62.6		26.5
Net income to common shareholders	58.4		61.2		91.6		42.8		7.5
Earnings per common share from continuing operations (in US$)(2)
Basic	1.20		1.25		1.67		0.78		0.14
Diluted(3)	1.18		1.23		1.65		0.77		0.14
Cash Dividends declared per common share (in BM$)(2)	0.40		0.50		0.50		0.70		—
Dividends declared per preference share (in US$)	80.00		80.00		80.00		80.00		80.00

______________________________

(1) Net income (loss) attributable to our Barbados operations that were reported as discontinued operations in 2012 amounted to $7.6 million in 2012.

(2) Figures reflect the reverse share split that the Bank effected on September 6, 2016.

(3) Reflects only "in the money" options and warrants to purchase the common shares as well as certain unvested share awards, which have a dilutive effect. Warrants issued to the Government of Bermuda in exchange for the Government's guarantee of the preference shares are not included in the computation of earnings per share because the exercise price was greater than the average market price of the common shares for the relevant periods. In December 2016, in connection with the preference share redemption, the warrant issued to the Government of Bermuda was repurchased for cancellation by the Bank. Only share awards and options 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 common shares were considered dilutive, and therefore, included in the computation of diluted earnings per share.

17

Balance Sheet Data

	As of December 31,
(in millions of $)	2016	2015	2014	2013	2012
Assets
Cash due from banks	2,101.7	2,288.9	2,063.3	1,730.5	1,542.5
Of which cash and demand deposits with banks — non-interest bearing	110.7	110.9	343.1	247.0	216.6
Of which demand deposits with banks — interest bearing	326.4	378.6	139.2	164.2	150.4
Of which cash equivalents — interest bearing	1,664.5	1,799.4	1,581.0	1,319.3	1,175.5
Securities purchased under agreement to resell	148.8	—	—	—	—
Short-term investments	519.8	409.5	394.8	55.0	76.2
Investment in securities	4,400.2	3,223.9	2,989.1	2,613.6	2,881.7
Of which trading	6.3	321.3	417.4	552.3	771.1
Of which available-for-sale	3,332.7	2,201.3	2,233.5	1,728.0	1,871.2
Of which held-to-maturity(1)	1,061.1	701.3	338.2	333.4	239.3
Loans, net of allowance for credit losses	3,570.5	4,000.2	4,019.1	4,088.2	3,956.0
Premises, equipment and computer software	167.8	183.4	215.1	240.6	243.3
Accrued interest	22.8	17.5	19.2	19.6	19.0
Goodwill	19.6	23.5	24.8	7.1	6.9
Intangible assets	42.3	27.7	33.0	12.0	15.3
Equity method investments	13.5	12.8	12.8	12.5	18.6
Other real estate owned	14.2	11.2	19.3	27.4	34.4
Other assets	82.5	77.1	67.8	64.2	39.0
Total assets	11,103.5	10,275.6	9,858.4	8,870.8	8,833.0
Liabilities
Total customer and bank deposits	10,033.6	9,182.1	8,671.6	7,638.0	7,393.2
Of which customer deposits — Bermuda — non-interest bearing	1,733.7	1,348.9	1,021.4	713.3	664.1
Of which customer deposits — Bermuda — interest bearing	4,213.4	2,922.8	2,848.7	2,837.7	2,591.2
Of which customer deposits — non-Bermuda — non-interest bearing	651.3	532.9	536.7	299.5	254.7
Of which customer deposits — non-Bermuda — interest bearing	3,411.4	4,363.1	4,224.8	3,747.1	3,756.8
Of which bank deposits — Bermuda	0.3	0.4	9.5	0.5	88.2
Of which bank deposits — non-Bermuda	23.5	14.1	30.4	39.7	38.3
Securities sold under agreement to repurchase	—	—	—	25.5	109.0
Employee future benefits	140.0	122.1	117.9	89.1	103.1
Accrued interest	2.1	2.7	4.8	3.8	2.8
Preference share dividends payable	—	0.7	0.7	0.6	0.7
Payable for investments purchased	—	—	—	—	—
Other liabilities	100.0	100.5	97.2	104.2	107.0
Liabilities of discontinued operations	—	—	—	—	—
Long-term debt	117.0	117.0	117.0	207.0	260.0
Total liabilities	10,392.8	9,525.2	9,009.1	8,068.3	7,975.8
Total shareholders' equity(2)	710.7	750.4	849.4	802.6	857.2
Of which common share capital(6)	0.5	0.5(5)	0.6	0.6	0.6
Of which preference share capital(3)	—	—	—	—	—
Of which contingent value convertible preference (CVCP) share capital(4)(6)	—	—	—	—	—
Total liabilities and shareholders' equity	11,103.5	10,275.6	9,858.4	8,870.8	8,833.0

______________________________

(1) Fair value of held to maturity debt securities was $1,046.8 million as of December 31, 2016, $701.5 million as of December 31, 2015, $344.0 million as of December 31, 2014, $315.5 million as of December 31, 2013 and $244.8 million as of December 31, 2012.

(2) As of December 31, 2016, the number of outstanding awards of unvested common shares was 0.8 million (December 31, 2015: 0.8 million, December 31, 2014: 1.0 million, December 31, 2013: 0.9 million and December 31, 2012: 0.7 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) the exercise price, if any, was lower than the average market price of $34.72. A warrant, outstanding until the Bank repurchased it in December 2016, to purchase 0.43 million shares (December 31, 2015: 0.43 million, December 31, 2014: 0.43 million, December 31, 2013: 0.43 million and December 31, 2012: 0.42 million) was excluded from the computation of earnings per share because the exercise price was greater than the average market price of the common shares. Figures reflect the reverse share split that the Bank effected on September 6, 2016.

18

(3) Preference share capital in all periods presented was nil, $182,863, $183,046, $183,606 and $195,578 as of December 31, 2016, 2015, 2014, 2013 and 2012, respectively, representing $0.01 par value per preference share issued and outstanding as of the respective dates. In December 2016, the Bank redeemed and canceled all outstanding preference shares.

(4) All CVCP shares were converted to common shares at a 1:1 ratio on March 31, 2015.

(5) Reflects the repurchase for cancellation of 8,000,000 common shares previously held by CIBC effected on April 30, 2015. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Contingent Value Convertible Preference Shares — Share Buy-Back Program." Figures reflect the reverse share split that the Bank effected on September 6, 2016.

(6) Figures reflect the reverse share split that the Bank effected on September 6, 2016.

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, enabling 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 US GAAP. Non-GAAP measures used in this report are not a substitute for US GAAP measures and readers should consider the US 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 in 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 "— Reconciliation of Non-GAAP Financial Measures."

	For the year ended December 31,
(in %, unless otherwise indicated)	2016	2015	2014	2013	2012
Return on common shareholders' equity(1)	8.9	10.1	13.7	6.8	1.1
Core return on average tangible common equity(2)	20.5	17.6	14.4	9.7	5.8
Return on assets(3)	1.1	0.8	1.2	0.7	0.3
Core return on average tangible assets(4)	1.3	1.1	1.2	0.9	0.6
Net interest margin(5)	2.45	2.48	2.74	2.64	2.63
Efficiency margin(6)	69.3	74.0	72.0	74.1	79.3
Core efficiency ratio(7)	63.8	66.0	67.7	71.6	78.4
Fee income ratio(8)	36.7	37.5	36.9	37.6	39.5
Common equity Tier 1 capital ratio(9)(10)	15.3	10.7	N/A	N/A	N/A
Tier 1 common ratio(9)	N/A	12.0	14.6	15.2	14.0
Tier 1 capital ratio(9)	15.3	16.2	19.0	19.6	18.5
Total capital ratio(9)	17.6	19.0	22.2	23.7	24.2
Leverage ratio(9)(10)	5.8	6.4	N/A	N/A	N/A
Tangible common equity/tangible assets(11)	5.9	5.1	6.2	6.8	7.3
Tangible total equity/tangible assets(12)	5.9	6.8	8.1	8.9	9.5
Non-performing assets ratio(13)	0.5	0.7	1.0	1.4	1.7
Non-accrual ratio(14)	1.3	1.6	1.8	2.5	2.8
Non-performing loan ratio(15)	1.6	2.0	2.4	2.8	3.5
Net charge-off ratio(16)	0.3	0.2	0.4	0.6	0.4
Core earnings attributable to common shareholders(17)(18) (in BM$ million)	123.0	97.4	89.9	59.6	36.9
Core earnings per common share fully diluted(19)(21) (in BM$)	2.48	1.95	1.61	1.08	0.66
Common equity per share(20)(21) (in BM$)	13.34	12.24	12.25	11.28	12.03

______________________________

(1) Return on common shareholders' equity ("ROE") measures profitability 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 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.

(2) Core return on average tangible common 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 "— Reconciliation of Non-GAAP Financial Measures".

(3) Return on assets ("ROA") is an indicator of profitability relative to 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.

19

(4) Core return on average tangible 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. Core ROATA is a non-GAAP financial measure. For more information on the non-GAAP financial measures, see "— Reconciliation of Non-GAAP Financial Measures".

(5) Net interest margin ("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 due from banks, 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) 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 "— Reconciliation of Non-GAAP Financial Measures".

(7) 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. 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 excludes 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 "— Reconciliation of Non-GAAP Financial Measures".

(8) 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).

(9) 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. Prior to January 1, 2015, the Bank's regulatory capital was determined in accordance with Basel II guidelines issued by the BMA. Under Basel II, Pillar I, banks must maintain a minimum total capital ratio of 14.46%, inclusive of all capital buffers. In effect, this means that 14.46% of the risk-weighted assets must be covered by permanent or near permanent capital. The risk weighting process takes into account the relative risk of various types of lending. The higher the capital adequacy ratio a bank has, the greater the level of unexpected losses it can absorb before becoming insolvent. Under Basel III as implemented by the BMA for 2016, we must maintain a total capital ratio of 15.3%. The tier 1 capital ratio is the ratio of the Bank's core equity capital, as measured under Basel II, to its total RWA. RWA are the total of all assets held by the Bank weighted by credit risk according to a formula determined by the regulator. The Bank follows BCBS guidelines in setting formulas for asset risk weights. The tier 1 common ratio is equivalent to the tier 1 capital ratio except that it only includes common equity in the numerator and deducts the preference shareholders' equity. Note that the tier 1 common ratio is calculated in the same manner as the common equity tier 1 ("CET1") ratio discussed below, but differs in its inputs based upon RWA calculations under Basel II versus Basel III.

(10) Effective January 1, 2015, the Bank's regulatory capital is determined in accordance with current Basel III guidelines issued by the BMA. However, the Bank was not required to publish its capital ratios under Basel III until January 1, 2016 as per guidance from the BMA and continued to publish certain ratios under Basel II during 2015. Basel III adopts CET1 as the predominant form of regulatory capital with the CET1 ratio as a new metric. Under Basel III as implemented by the BMA for 2016, we must maintain a minimum CET1 ratio of 8.1%. Basel III also adopts the new Leverage Ratio regime, which is calculated by dividing tier 1 capital by an exposure measure. Under Basel III, 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.

(11) The tangible common equity/tangible assets ("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 "— Reconciliation of Non-GAAP Financial Measures".

(12) The tangible total equity/tangible assets ("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 "— Reconciliation of Non-GAAP Financial Measures".

(13) The non-performing assets ("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 - specific allowance for credit losses on non-accrual loans + accruing loans past due 90 days + other real estate owned) / total assets.

(14) The non-accrual ("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.

(15) The non-performing loan ("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.

(16) The net charge-off ("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 loans is calculated as the average of the month-end asset balances during the relevant period.

(17) 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 "— Reconciliation of Non-GAAP Financial Measures".

(18) Core earnings attributable to common shareholders ("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 "— Reconciliation of Non-GAAP Financial Measures".

(19) 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 "— Reconciliation of Non-GAAP Financial Measures".

(20) Common equity per share is calculated as total common equity / number of common shares issued and outstanding at period end.

(21) Figures reflect the reverse share split that the Bank effected on September 6, 2016.

20

Net Interest Income

Net interest income is the amount of interest earned on our interest‑earning assets less interest paid on our interest bearing liabilities. The following table shows our net interest income before provision for credit losses for the periods indicated.

	For the years ended December 31,
	2016					2015
(in millions of $)	Average balance ($)	Interest ($)		Average rate (%)		Average balance ($)	Interest ($)		Average rate (%)
Assets
Cash due from banks and short‑term investments	2,655.3	9.8		0.37	%	2,407.9	6.5		0.27	%
Investment in securities	3,940.6	77.2		1.95	%	3,217.0	69.6		2.16	%
Loans	3,921.1	188.0		4.78	%	4,026.7	186.5		4.63	%
Interest earning assets	10,517.0	275.0		2.61	%	9,651.6	262.6		2.72	%
Other assets	343.4					371.5
Total assets	10,860.4	275.0		2.53	%	10,023.1	262.6		2.62	%
Liabilities
Deposits	7,733.8	(11.8	)	(0.15	)%	7,156.7	(18.4	)	(0.26	)%
Securities sold under agreement to repurchase	16.0	(0.1	)	(0.73	)%	2.1	—		—	%
Long-term debt	117.0	(4.5	)	(3.84	)%	117.0	(4.9	)	(4.15	)%
Interest bearing liabilities	7,866.8	(16.4	)	(0.21	)%	7,275.8	(23.3	)	(0.32	)%
Non-interest bearing current accounts	2,042.5					1,720.7
Other liabilities	123.7					196.8
Total liabilities	10,033.0	(16.4	)	(0.16	)%	9,193.3	(23.3	)	(0.25	)%
Shareholders’ equity	827.4					829.8
Total liabilities and shareholders’ equity	10,860.4					10,023.1
Non‑interest bearing funds net of non‑interest earning assets (free balance)	2,650.2					2,375.8
Net interest margin		258.6		2.45	%		239.3		2.48	%

	For the years ended December 31,
	2014					2013					2012
(in millions of $)	Average balance ($)	Interest ($)		Average rate (%)		Average balance ($)	Interest ($)		Average rate (%)		Average balance ($)	Interest ($)		Average rate (%)
Assets
Cash due from banks and short‑term investments	1,752.9	5.4		0.31	%	1,794.7	5.4		0.30	%	1,494.4	5.1		0.34	%
Investment in securities	2,877.8	67.7		2.35	%	2,655.3	60.9		2.29	%	2,455.9	48.6		1.98	%
Loans	4,075.0	192.0		4.71	%	4,022.9	187.0		4.65	%	4,022.6	190.6		4.74	%
Interest earning assets	8,705.7	265.1		3.05	%	8,472.9	253.3		2.99	%	7,972.9	244.3		3.06	%
Other assets	410.8					413.7					474.2
Total assets	9,116.5	265.1		2.91	%	8,886.6	253.3		2.85	%	8,447.1	244.3		2.89	%
Liabilities
Deposits	6,741.6	(20.9	)	(0.31	)%	6,559.5	(20.0	)	(0.30	)%	6,205.7	(21.4	)	(0.34	)%
Securities sold under agreement to repurchase	22.0	(0.1	)	(0.38	)%	63.8	(0.2	)	(0.38	)%	1.3	—		(1.38	)%
Long-term debt	117.2	(5.6	)	(4.80	)%	228.7	(9.2	)	(4.02	)%	261.3	(12.6	)	(4.81	)%
Interest bearing liabilities	6,880.8	(26.6	)	(0.39	)%	6,852.0	(29.4	)	(0.43	)%	6,468.4	(34.0	)	(0.53	)%
Non-interest bearing current accounts	1,211.0					990.7					974.3
Other liabilities	187.2					198.0					205.6
Total liabilities	8,279.0	(26.6	)	(0.32	)%	8,040.7	(29.4	)	(0.37	)%	7,648.3	(34.0	)	(0.44	)%
Shareholders’ equity	837.5					845.9					798.8
Total liabilities and shareholders’ equity	9,116.5					8,886.6					8,447.1
Non-interest bearing funds net of non-interest earning assets (free balance)	1,824.9					1,620.9					1,504.6
Net interest margin		238.5		2.74	%		223.9		2.64	%		210.4		2.63	%

21

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 Chief Financial Officer in conjunction with the Chief Executive Officer, and approved by our Board of Directors. Consideration is given 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 utilizing core net income 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 dividend 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 as core expenses, which is total expenses excluding non-core expense items, minus amortization of intangible assets divided by core revenue before other gains and losses and provision for credit losses, which excludes non-core revenue items or non-core gains or 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. Traditionally, the BMA and other banking regulatory bodies have assessed a bank's capital adequacy based on Tier 1 capital, and from January 1, 2016 onwards, CET1, the calculation of which is codified in the Basel II and Basel III framework, respectively, 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 disclosures 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 reconciliation of non-interest income (GAAP), and (11) a computation of the core efficiency ratio (non-GAAP).

22

		For the year ended December 31,
(in millions of $, unless otherwise indicated)		2016			2015			2014			2013			2012
Net income	A	115.9			77.7			108.2			62.6			26.5
Dividends and guarantee fee of preference shares		(15.7	)		(16.5	)		(16.5	)		(17.0	)		(18.0	)
Premium paid on repurchase/redemption of preference shares(1)	B	(41.9	)		—			(0.1	)		(2.8	)		(1.0	)
Net income to common shareholders	C	58.4			61.2			91.6			42.8			7.5
Non-core (gains), losses and expenses
Non-core (gains) losses
Gain on disposal of a pass-through note investment (formerly a SIV)(2)		(0.6	)		—			(8.7	)		—			—
Net gain on sale of affiliate(3)		—			—			—			(0.4	)		(4.2	)
Additional consideration from previously disposed of entities(4)		—			—			(0.3	)		(0.8	)		—
Impairment of equity method investment(5)		—			—			—			3.8			—
Realized gain on legal settlement(6)		—			—			—			(13.1	)		—
Realized gain on private equity investment(7)		—			—			(1.1	)		—			—
Income tax refund(8)		—			—			(1.0	)		—			—
Impairment of and gain on disposal of fixed assets (including software)(9)		—			5.1			2.0			—			14.5
Impairment of goodwill and intangible assets(10)		—			—			—			—			18.6
Change in unrealized (gains) losses on certain investments(11)		—			0.7			(9.9	)		15.6			(0.9	)
Deferred tax valuation allowance and tax adjustments(12)		—			—			—			—			5.0
Adjustment to holdback payable for a previous business acquisition(13)		0.9			—			1.2			—			—
Total net gains from discontinued operations(14)		—			—			—			—			(8.0	)
Total non-core (gains) losses	D	0.3			5.8			(17.8	)		5.1			25.0
Non-core expenses
Early retirement program, redundancies and other non-core compensation costs(15)		1.8			8.2			2.7			8.9			2.2
Onerous leases(16)		—			—			—			—			0.8
Tax compliance review costs(17)		1.6			3.8			10.2			—			—
Provision in connection with ongoing tax compliance review(18)		0.7			4.8			—			—			—
Business acquisition costs(19)		3.2			1.0			3.1			—			—
Restructuring charges and related professional service fees(20)		6.3			2.5			—			—			—
Investigation of an international stock exchange listing costs(21)		—			10.1			—			—			—
Total expenses from discontinued operations(14)		—			—			—			—			0.4
Cost of 2010 legacy option plan vesting and related payroll taxes(22)		8.8			—			—			—			—
Total non-core expenses	E	22.4			30.4			16.0			8.9			3.4
Total non-core (gains), losses and expenses	F=D+E	22.7			36.2			(1.8	)		14.0			28.4
Core net income	G=A+F	138.6			113.9			106.4			76.6			54.9
Core net income attributable to common shareholders(1)	H=C-B+F	123.0			97.4			89.9			59.6			36.9
Average shareholders' equity		826.0			791.8			849.4			821.1			874.7
Less: average preference shareholders' equity		(168.8	)		(182.9	)		(183.4	)		(189.3	)		(199.6	)
Average common equity	I	657.2			608.9			666.0			631.8			675.1
Less: average goodwill and intangible assets		(58.6	)		(54.8	)		(42.1	)		(20.0	)		(42.0	)
Average tangible common equity	J	598.6			554.1			623.9			611.8			633.1
Return on equity	C/I	8.9		%	10.1		%	13.7		%	6.8		%	1.1		%
Core return on average tangible common equity	H/J	20.5