Bank of N.T. Butterfield & Son Ltd (NTB)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This section presents management's perspective on our financial condition and results of operations. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this report, including the consolidated financial statements and related notes and should be read in conjunction with the accompanying tables and our financial statements included in this report. The consolidated financial statements and notes have been prepared in accordance with GAAP. Certain statements in this discussion and analysis may be deemed to include "forward-looking statements" and are based on management's current expectations and are subject to uncertainty and changes in circumstances. Forward-looking statements are not historical facts but instead represent only management's belief regarding future events, many of which by their nature are inherently uncertain and outside of management's control. Actual results may differ materially from those included in these statements due to a variety of factors, including worldwide and local economic conditions, success in business retention and obtaining new business and other factors. Factors that could cause these differences are discussed in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors." For management's considerations and determinations of each non-core item discussed, please see "Reconciliation of Non-GAAP Financial Measures".

Overview

We are a full service bank and wealth manager headquartered in Hamilton, Bermuda. We operate our business through our four reportable segments, three geographical and one other: Bermuda, Cayman, Channel Islands and the UK, and Other. We offer banking services, comprising of retail and corporate banking, and wealth management, which consists of trust, private banking, and asset management. In our Bermuda and Cayman segments, we offer retail banking and wealth management. In our Channel Islands and the UK segment, we offer retail and corporate banking and wealth management. The Other segment includes our operations in the jurisdictions of The Bahamas, Canada, Mauritius, Singapore and Switzerland. In these jurisdictions we either provide wealth management or operate service centers. These jurisdictions individually and collectively do not meet the quantitative threshold for segmented reporting and are therefore aggregated as a non-reportable operating segment.

The following table details our Net Revenue in total and by segment, as well as our total assets, total loans, total deposits, total AUA (which includes trust and custody AUA) and AUM for the years ended December 31, 2025, December 31, 2024 and December 31, 2023.

Market Environment

Our business is affected by international, regional and local economic conditions as well as, the perception of future economic prospects. The significant macro-economic factors that impact our business include the US and global economic landscapes, unemployment rates, the housing markets and interest rates. 2025 began with elevated uncertainty in financial markets as a new administration came into office in the US. Tariffs, fiscal deficits, elevated inflation, and the threat of reduced global trade briefly destabilized sovereign bond and equity markets across the globe. Since that time, as the US tariff threat has lessened, and the US Federal Reserve along with other global central banks, has further eased monetary policy, volatility has declined significantly. While the issues listed above remain threats to growth in 2026, markets appear better equipped to handle the uncertainty. In addition, slightly slower growth and some disinflationary pressures will likely give global central banks room to further ease financial conditions at the margin. Nevertheless, sovereign yield curves and longer-term risk premia are likely to remain elevated for some time.

Bermuda Segment

Bermuda’s economy grew 1.9% in 2024 and Real GDP was 10% higher than when compared to 2019 levels of GDP, indicating that Bermuda has recovered from the COVID-19 pandemic economic impacts and has experienced growth.

The international business sector, especially the life reinsurance and captive insurance markets, continue to grow, attracting new capital and companies, demonstrated by employment levels reaching new highs of 5,040 employed in the international business sector in 2024. This is an increase of 1,020 from 2019 levels and currently represents

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15% of total employment in Bermuda. Bermuda remains the world’s largest captive domicile, one of the largest markets for reinsurance underwriting and the largest market for insurance-linked securities.

Retail activity continues to be challenged and consumer imports via online retailers remain at elevated levels. While the official inflation rates recorded in Bermuda have been modest, general cost of living challenges remain, driven by food costs, energy costs and housing costs, both in rental rates and building costs.

Airlift increased by just over 1.2% in 2025, however, several hurricane related impacts caused a reduction in air and cruise arrivals for the year, with air arrivals down 1.65% and cruise arrivals down 14.6%. There continues to be positive news on hotel developments, with two hotels, including the largest in Bermuda, currently undergoing redevelopment. Recent hotel operating performance has been strong, with revenue per available room night in 2025 of $413 compared to $379 in 2024, driven by stable occupancy trends (64.0% compared to 63.2% in 2024) and increasing average daily rates of $611 compared to $554 in 2024.

Construction activity has been bolstered with two new office developments in Hamilton and the redevelopment of two hospitality properties. There are an estimated 500+ Airbnb units now available on the island, still down slightly from pre-pandemic levels. In the real estate sector, rental rates continue to climb due to limited inventory against current demand. Housing sales have remained stable but still lag behind pre-pandemic levels, however, current real estate prices have seen some uplift.

Government finances continue to improve with a projected budget surplus for the 2025-2026 fiscal year, largely from increases in payroll tax receipts in the international business sector and customs duties and the implementation of the Corporate Income Tax in Bermuda. Expenses have also risen to assist resident Bermudians in need of financial support and capital expenditure directed at affordable housing is expected to continue. The Corporate Income Tax Act became effective on January 1, 2025 and there is an expectation of substantive revenue generation for the Bermuda Government - see Item 10.E. "Additional Information - Taxation". S&P recently reaffirmed their long term debt ratings at A+ and maintain a ‘stable’ outlook for the jurisdiction, with Morningstar DBRS upgrading Bermuda’s long term issuer rating to A with ‘stable’ outlook. Government debt to GDP ratio is currently 35%, and with support of the Corporate Income Tax receipts, this is expected to improve further over the next several years.

See also Item 3.D. "Risk Factors - Risks Relating to the Markets in Which We Operate - Adverse economic and market conditions in Bermuda, the Cayman Islands and the Channel Islands and the UK, have in the past resulted in and could in the future result in lower revenue, lower asset quality, increased provisions and lower earnings" and Item 3.D. “Risk Factors - Risks Relating to the Markets in Which We Operate - A decline in tourism in Bermuda and the Cayman Islands could adversely affect our business, financial condition or results of operations”.

Source: Government of Bermuda, Department of Statistics, Economist Intelligence Unit

Cayman Segment

The Cayman Islands continues to experience strong inbound tourism with arrivals in 2025 projected to be above 2024 arrivals, while construction projects related to tourism continue to add to the island’s high quality room stock and support growth. Cruise ship and cruise passenger arrivals remain structurally lower, reflecting a permanent post-COVID shift. Cayman Island’s GDP is projected to have grown by 2.5% in 2025 but expected to ease to 2.0% in both 2026 and 2027. Financial services and tourism are expected to remain the key drivers of growth along with ongoing development of condominiums, hotels, apartment complexes and residential homes, keeping the construction sector vibrant in the near term with several large scale developments scheduled to be completed in 2026. Interest rates have fallen during the second half of 2025 but, at current levels, appetite for new speculative development remains low.

The Cayman Islands has experienced a meaningful increase in its population in order to service the expanding economy. Given the Cayman Island’s dependence on the US for imports, it is expected that the recent increases in US import tariffs will have a pass through effect on local inflation, resulting in estimated year-end inflation of 1.9% in 2025. However, a high base effect means that inflation is expected to ease to 1.2% at year-end 2026 and 0.9% at year-end 2027. In addition to imported inflation, firm housing demand related to strong tourism and an increase in guest workers will keep upward pressure on consumer prices. Real estate transaction levels showed steady momentum in 2025 and activity remained balanced across both luxury and mid-market segments.

The Cayman Islands Government is forecasting a budgetary surplus for 2025 resulting from better than planned revenues from economic expansion. Surpluses in each of 2026 and 2027 were also planned in the Government’s approved two-year budget.

Source: Economist Intelligence Unit

Channel Islands and UK Segment

The macroeconomic backdrop across the economies in which we operate remains challenging, as both domestic and international factors continue to weigh on policymakers’ ability to navigate a clear path forward. The key themes across the UK and the Channel Islands are broadly consistent: below-trend growth, inflation that remains above target, and increasing pressure on government finances.

The UK economy and its monetary policy continue to set the tone for the Channel Islands, although global factors do have an overarching impact. As we entered 2025, expectations were for a heightened degree of uncertainty and inconsistency in US policymaking. While the US focus on deregulation and lower taxation was generally expected to support economic growth, the inward-looking nature of expansive US tariff policies has weighed on global confidence, intensifying concerns around deglobalization. A similar level of uncertainty is evident in the domestic UK economy, where the ruling Labour Party has made limited progress in curbing government spending, raising fears that higher taxation may be required to restore fiscal balance and decreasing confidence to invest.

Overall, these factors have contributed to stagnation in the UK economy. Growth is expected to remain below trend in 2026 and beyond, with median forecasts of 1.0 - 1.5% per annum. In response, the Bank of England has sought to support activity by cutting interest rates from 4.75% to 3.75% during 2025. However, the scope for more aggressive easing has been constrained by services inflation continuing to run above target. The low-growth environment is likely to persist over the coming years, with confidence low, fiscal policy constrained and monetary policy decisions needing to strike a careful balance between supporting growth and avoiding a resurgence in inflation.

Growth data in the Channel Islands is relatively limited, with data for 2025 not due until the end of 2026. The latest releases suggest that in 2024 Jersey experienced a contraction of 0.7% in real terms. There has been no GDP data released for Guernsey through 2025 due to ‘operational changes’ by the States of Guernsey.

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However, given the limited growth in Jersey and a large factor in this being the effect of lower interest rates on the finance industry profitability, it is fair to expect that the situation of low to no growth in Guernsey is also the case.

Looking ahead, both Channel Island economies display characteristics similar to those of the UK. Inflation remains above target, house prices are broadly flat, and demographic pressures are contributing to fiscal deficits that are politically challenging to address. That said, the Channel Islands economies are starting from a relatively strong position, with negligible unemployment and low levels of government debt on a gross basis, and largely offset by strategic reserves. In addition, S&P remains comfortable with Jersey’s AA- rating and Guernsey’s A- rating, although it continues to highlight that economic growth is likely to remain below trend in the coming years.

Our operations in the Channel Islands and UK use the Pound Sterling as their functional currency, and are closely linked to economic trends in both the UK and the Eurozone due to the close relationships between the UK and Europe, despite the Channel Islands autonomy from the UK. See Item 3.D. “Risk Factors".

Prime Central London lending remained subdued throughout the year but, despite that environment, the overall loan portfolio has remained flat. Overall credit levels remaining largely unchanged throughout the year with Channel Islands government and residential mortgage progress being offset by a reduction in Lombard lending.

Source: States of Guernsey

Source: States of Jersey

We continue to maintain a cautious stance with a liquid balance sheet, a conservative investment portfolio, and no reliance on wholesale funding. Total liquid cash and investments made up 65.6% of our balance sheet at December 31, 2025, which is slightly up from 65.3% at December 31, 2024.

Group Overview and Highlights

2025 Overview

In 2025, our net income increased by $15.6 million to $231.9 million from $216.3 million in 2024. This increase was driven primarily by decreasing deposit costs outpacing lower loan and treasury yields and higher non-interest income, which were partially offset by higher non-interest expenses. Management continued to focus on management of capital, expenses and risks, and maintaining our strong capital position with CET1 and Total capital ratios of 27.6% and 27.8%, respectively, as at December 31, 2025. For the year ended December 31, 2025, the Board declared four quarterly dividends totaling $1.88 for each common share held on record as of the applicable record dates, and repurchased 3.5 million common shares from the share repurchase programs. On December 8, 2025, the Board approved a new share repurchase program authorizing the purchase of up to 3.0 million common shares through to December 31, 2026. The Board will continue to evaluate capital planning options and the payment of future dividends as warranted, subject to regulatory requirements. See Item 8.A. "Consolidated Statements and Other Financial Information - Dividend Policy" and Item 3.D. "Risk Factors – Risks Relating to the Common Shares - Holders of our common shares may not receive dividends" elsewhere in this report for further details.

The quality of our assets remained robust, total assets decreased year-over-year by $0.1 billion to $14.1 billion, primarily driven by loan repayments outpacing originations and the early repayment of the Banks' long-term debt. Deposits and loans remain relatively flat at $12.7 billion and $4.4 billion, respectively. Investments were up by $0.2 billion to $5.7 billion due to the redeployment of assets into the available-for-sale investment portfolio and improvements in net unrealized losses on AFS securities. Overall liquidity remained strong, as measured by cash and cash equivalents, securities purchased under agreements to resell, short-term investments and investments in securities as a percentage of total assets, ending the year at 65.6% compared to 65.3% in the prior year.

Our shareholders’ equity increased year-over-year by $0.1 billion to $1.1 billion, which was primarily as a result of organic growth through net income net of dividends paid out during the year, improvements in net unrealized losses on the AFS investment portfolio and partially offset by common share repurchases and retirements.

Key contributors to our 2025 results were as follows:

•Profitability:  Net income increased year-over-year by $15.6 million, or 7.2%, to $231.9 million, primarily due to higher non-interest income, decreasing deposit costs outpacing decreasing loan and treasury yields and a decrease in provision for credit losses. These increases were partially offset by increases in non-interest expenses and income taxes.

•Net interest margin:  NIM increased by 5 basis points to 269 basis points compared to 264 basis points in 2024. The increase in NIM was due to lower cost of deposits as central banks cut market interest rates and increased investment yields as assets were deployed into higher yielding AFS securities and which were partially offset by lower treasury and loan yields. Loan yields decreased by 35 basis points to 622 basis points; the investment portfolio yields increased by 33 basis points to 269 basis points; and yields on cash and cash equivalents, securities purchased under agreements to resell and short-term investments were down by 91 basis points to 369 basis points. The cost of funding decreased and saw expense yields decreasing by 33 basis points to 150 basis points due to central bank market interest rate cuts.

•Expenses:  Total non-interest expenses increased year-over-year by $9.7 million to $368.8 million in 2025, largely due to increases in staff related costs of $10.2 million from senior management departures, inflationary increases, group-wide voluntary early retirement and redundancy programs and higher incentive accruals. These were partially offset by a decrease of $1.1 million in technology and communications cost due to lower IT software maintenance expenses and $0.8 million decrease in professional and outside services costs. These expenses included $5.6 million of non-core expenses related primarily to costs associated with senior executive departures and the group-wide voluntary early retirement and redundancy programs. The core efficiency ratio improved from 60.0% in 2024 to 58.5% in 2025, reflecting the rate of core non-interest expense relative to the increase in revenue.

•Deposits: Deposits remained relatively flat year-over-year at $12.7 billion as at December 31, 2025. Deposit volumes were down in Bermuda but offset by increased volumes in Cayman and the Channel Islands and UK and positive foreign exchange translation as a result of a strengthened Pound Sterling. Interest bearing deposit

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costs decreased by 42 basis points to 189 basis points in 2025. With non-interest bearing deposits totaling $2.7 billion as at December 31, 2025, the average cost of deposits for the year decreased by 33 basis points to 150 basis points.

•Loan quality:  As at December 31, 2025, we had gross non-accrual loans of $91.3 million representing 2.1% of total gross loans, an increase from $76.7 million, or 1.7%, of total loans at December 31, 2024. The increase in non-accrual loans was driven by a few residential mortgage facilities in the Channel Islands and UK segment and partially offset by the repayment of a commercial real estate loan facility in Bermuda.

2024 Overview

In 2024, our net income decreased by $9.2 million to $216.3 million from $225.5 million in 2023. This decrease was driven primarily by increasing deposit costs outpacing yields on loans and treasury assets, higher non-interest expenses, a decrease in other gains and (losses) and an increase in income tax expenses. This was partially offset by higher non-interest income and a decrease in provision for credit losses. Management continued to focus on the diligent management of capital, expenses and risks, and maintaining our strong capital position with CET1 and Total capital ratios of 23.5% and 25.8%, respectively, as at December 31, 2024. For the year ended December 31, 2024, the Board declared four quarterly dividends of $0.44 per share totaling $1.76 for each common share held on record as of the applicable record dates, and repurchased 4.5 million common shares from the share repurchase programs. On December 9, 2024, the Board approved a new share repurchase program authorizing the purchase of up to 2.7 million common shares through to December 31, 2025. The Board will continue to evaluate capital planning options and the payment of future dividends as warranted, subject to regulatory requirements. See Item 8.A. "Consolidated Statements and Other Financial Information - Dividend Policy" and Item 3.D. "Risk Factors – Risks Relating to the Common Shares - Holders of our common shares may not receive dividends" elsewhere in this report for further details.

The quality of our assets remained strong, total assets increased year-over-year by $0.9 billion to $14.2 billion, primarily driven by increased deposit levels in Bermuda and the Channel Islands. Deposits were up by $0.8 billion to $12.7 billion while loans decreased by $0.3 billion to $4.5 billion. The decrease in loans was driven primarily by maturities and prepayments in excess of originations across the residential mortgage portfolios. Investments were up by $0.2 billion to $5.5 billion due to activation of cash and short-term securities into US Treasuries and Agency MBS securities. Overall liquidity remained strong, as measured by cash and cash equivalents, securities purchased under agreements to resell, short-term investments and investments in securities as a percentage of total assets, ending the year at 65.3% compared to 61.0% in the prior year.

Our shareholders’ equity increased year-over-year by $17.2 million to $1.0 billion, which was primarily a result of organic growth through net income net of dividends paid out during the year, amortization of net gains (losses) on the HTM investment portfolio to net income, employee benefit plan adjustments and partially offset by common share repurchases and retirements throughout the year.

Key contributors to our 2024 results were as follows:

•Profitability:  Net income decreased year-over-year by $9.2 million, or 4.1%, to $216.3 million, primarily due to increasing deposit costs outpacing yields on loans and treasury assets, higher non-interest expenses, a decrease in other gains and (losses) and an increase in income tax expenses. This was partially offset by higher non-interest income and a decrease in provision for credit losses.

•Net interest margin:  NIM decreased by 16 basis points to 264 basis points compared to 280 basis points in 2023. The decrease in NIM was due to increasing deposit costs outpacing yields on interest earning assets; loan yields increased by 11 basis points to 657 basis points; the investment portfolio yields increased by 26 basis points to 236 basis points; and yields on cash and cash equivalents, securities purchased under agreements to resell and short-term investments were up by 37 basis points to 460 basis points. The cost of funding increased and saw expense yields increasing by 43 basis points to 183 basis points due to higher market rates.

•Expenses:  Total non-interest expenses increased year-over-year by $6.7 million to $359.1 million in 2024, largely due to $4.1 million increase in technology and communications driven by increased software maintenance costs; $2.7 million increase in property cost due to increased depreciation on Head Office renovations; $2.3 million increase in amortization of intangible assets associated with the Credit Suisse trust asset acquisition; $1.6 million increase in professional and outside services for project work. The increases were offset by a $5.6 million decrease in staff-related costs as a result of redundancy expenses recognized in 2023 as part of a group-wide restructuring. These expenses included $2.6 million of non-core expenses that comprise mainly fees relating to corporate restructuring; final costs relating to the acquisition of assets from Credit Suisse; and costs associated with the departure of a senior executive. The core efficiency ratio increased from 58.1% in 2023 to 60.0% in 2024, reflecting the rate of core non-interest expense relative to the increase in revenue.

•Deposits: Deposits increased year-over-year by $0.8 billion to $12.7 billion as at December 31, 2024, driven by inflows in Bermuda and the Channel Islands and a mix-shift to term deposits. Interest bearing deposit costs increased by 50 basis points to 231 basis points in 2024. With non-interest bearing deposits totaling $2.7 billion as at December 31, 2024, the average cost of deposits for the year increased by 43 basis points to 183 basis points.

•Loan quality:  As at December 31, 2024, we had gross non-accrual loans of $76.7 million representing 1.7% of total gross loans, an increase from $61.0 million, or 1.3%, of total loans at December 31, 2023. The increase in non-accrual loans was driven by a commercial facility secured by real estate in Bermuda and residential mortgages in the Channel Islands and UK segment.

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Financial Summary

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(1)Amortized cost of AFS debt securities was $2,785.6 million as at December 31, 2025 and $2,435.8 million as at December 31, 2024.

This includes assets pledged that secured parties are permitted to sell or repledge as at December 31, 2025: Nil (December 31, 2024: $93.5 million).

(2)Fair value of HTM debt securities was $2,566.5 million as at December 31, 2025 and $2,671.0 million as at December 31, 2024.

(3)As at December 31, 2025, the number of outstanding awards of unvested common shares was 1.8 million (December 31, 2024: 1.7 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) its exercise price, if any, was lower than the average market price of the Bank's common shares were considered dilutive and, therefore, included in the computation of diluted earnings per share.

(4)Figures reflect the retirement of 4.1 million shares during the year ended December 31, 2025 (December 31, 2024: 4.5 million).

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(1) Reflects only certain unvested share awards, which have a dilutive effect.

Financial Ratios and Other Performance Indicators

We use a number of financial measures to track the performance of our business and guide our management. Some of these measures are defined by, and calculated in compliance with, applicable banking regulations, but such regulations often provide for certain discretion in defining and calculating the measures. These measures allow management to review our core activities, and enable us and our investors to evaluate relevant trends meaningfully when considered in conjunction with (but not in lieu of) measures that are calculated in accordance with GAAP. Non-GAAP measures used in this report are not a substitute for GAAP measures and readers should consider the GAAP measures as well.

The following table shows certain of our key financial measures for the periods indicated. Because of the discretion that we and other banks and companies have in defining and calculating these measures, care should be taken in comparing such measures used by us with similarly titled measures of other banks and companies, as such measures may not be directly comparable.

Many of these measures are non-GAAP financial measures. We believe that each of these measures is useful for investors in understanding trends in our business that may not otherwise be apparent when relying solely on our GAAP-calculated results. For more information on the non-GAAP financial measures presented below, including a reconciliation to the most directly comparable GAAP financial measures, see Item 5.A. "Item 5 - Operating and Financial Review and Prospects - Overview and highlights - Reconciliation of Non-GAAP Financial Measures".

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(1)ROE measures profitability by revealing how much profit is generated with the money invested by common shareholders. ROE represents the amount of net income to common shareholders as a percentage of average common equity and is calculated as net income to common shareholders / average common equity. Net income to common shareholders is net income for the full fiscal year, before dividends paid to common shareholders but after dividends to preference shareholders. Average common equity does not include the preference shareholders' equity.

(2)Core ROATCE is a non-GAAP financial measure. Core ROATCE measures core profitability as a percentage of average tangible common equity. Core ROATCE is the amount of core income to common shareholders as a percentage of average tangible common equity and is calculated as core earnings to common shareholders / average tangible common equity. Core earnings to common shareholders is net earnings to common shareholders for the full fiscal year (before dividends paid to common shareholders but after dividends to preference shareholders) adjusted to exclude certain items that are included in the financial results presented in accordance with GAAP. Average tangible common equity does not include the preference shareholders' equity or goodwill and intangible assets. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(3)ROA is an indicator of profitability relative to average total assets and is intended to demonstrate how efficient management is at using the assets to generate earnings. The ROA ratio is calculated as net income / average total assets.

(4)Core ROATA is a non-GAAP financial measure. Core ROATA is an indicator used to assess the core profitability of average tangible assets and is intended to demonstrate how efficiently management is utilizing its tangible assets to generate core net income. Core ROATA is calculated by taking the core income as a percentage of average tangible assets and is calculated as core net income / average tangible assets. Core net income is the net income adjusted to exclude certain items that are included in the financial results presented in accordance with GAAP. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(5)NIM is a performance metric that examines how successful the Bank's investment decisions are compared to its cost of funding assets and is expressed as net interest income as a percentage of average interest-earning assets. NIM is calculated as net interest income before provision for credit losses / average interest-earning assets. Net interest income is the interest earned on cash and cash equivalents, investments, loans and other interest earning assets minus the interest paid for deposits, short-term borrowings and long-term debt. The average interest-earning assets is calculated using daily average balances of interest-earning assets.

(6)Efficiency margin is a non-GAAP financial measure. Efficiency margin is an indicator used to assess operating efficiencies and is intended to demonstrate how efficiently management is controlling expenses relative to generating revenues. The efficiency margin is calculated by taking the non-interest expenses as a percentage of total net revenue before total other gains (losses) and provisions for credit losses, and is calculated as (non-interest expense - amortization of intangible assets) / (total non-interest income + net interest income before provision for credit losses). For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(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 on our core activities. The core efficiency ratio is calculated by taking the core non-interest expenses as a percentage of total net revenue before provision for credit losses and other gains and losses and is calculated as (core non-interest expenses - amortization of intangible assets) / (core non-interest income + core net interest income before provision for credit losses). Core non-interest expenses exclude certain items that are included in the financial results presented in accordance with GAAP including income taxes and amortization of intangible assets. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(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 Bank's regulatory capital is determined in accordance with Basel III guidelines as issued by the BMA. The total capital ratio measures the amount of the Bank's capital in relation to the amount of risk it is taking. All banks must ensure that a reasonable proportion of their risk is covered by permanent capital. Under Basel III, Pillar I, banks must maintain a minimum total capital ratio of 13.5%, inclusive of all capital buffers. In effect, this means that 13.5% of the RWA must be covered by permanent or near

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permanent capital. The risk weighting process takes into account the relative risk of various types of lending and asset placements. The higher the capital adequacy ratio a bank has, the greater the level of unexpected losses it can absorb before becoming insolvent. The tier 1 capital ratio is the ratio of the Bank's core equity capital to its total RWA. RWA is the total of all assets held by the Bank weighted by credit risk according to a formula determined by the BMA which follows the BCBS guidelines in setting formulas for asset risk weights. The CET1 ratio is equivalent to the tier 1 capital ratio except that it only includes common equity in the numerator and we must maintain a minimum CET1 ratio of 10%. The Leverage Ratio is calculated by dividing tier 1 capital by an exposure measure and banks must maintain a minimum Leverage Ratio of 5.0%. The exposure measure consists of total assets (excluding items deducted from tier 1 capital) and certain off balance sheet items converted into credit exposure equivalents as well as adjustments for derivatives to reflect credit and other risks.

(10)The TCE/TA ratio is a non-GAAP financial measure. The TCE/TA ratio is a measure used to determine how significant of an unexpected loss can be incurred by the Bank before other forms of capital, other than common equity, are impacted. The TCE/TA ratio is calculated as (common equity - intangible assets - goodwill) / tangible assets. Tangible common equity does not include the preference shareholders' equity or goodwill and intangible assets. Tangible assets are the Bank's total assets from continuing operations less goodwill and intangibles. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(11)The TE/TA ratio is a non-GAAP financial measure. The TE/TA ratio is a measure used to determine how much loss the Bank can absorb before subordinated debt capital is impacted. The TE/TA ratio is calculated as (total shareholders' equity - intangible assets - goodwill) / tangible assets. Tangible assets are the Bank's total assets from continuing operations less intangible assets and goodwill. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(12)The NPA ratio is an indicator of the credit quality of the Bank's total assets by expressing the non-performing assets as a percentage of total assets. The NPA ratio is calculated as (gross non-accrual loans + accruing loans past due 90 days + OREO) / total assets.

(13)The NACL ratio is an indicator used to assess the credit performance of the Bank's loan portfolio by calculating the non-accrual loans as a percentage of loans. The NACL ratio is calculated as gross non-accrual loans / gross total loans. Note the reference to gross implies the amounts prior to loan allowances for credit losses.

(14)The NPL ratio is an indicator used to assess the credit performance of the Bank's loan portfolio by calculating the non-performing loans as a percentage of loans. The NPL ratio is calculated as total gross non-performing loans / total gross loans.

(15)The NCO ratio is an indicator used to assess the net credit loss of the Bank's loan portfolio by calculating the net charge-offs as a percentage of average total loans. The NCO ratio is calculated as net charge-off expense / average total loans. Average total loan is calculated as the average of the month-end asset balances during the relevant period.

(16)Core net income is a non-GAAP financial measure. Core net income measures net income on a core basis. Core net income is calculated by adjusting net income for income or expense items which are not representative of the ongoing operations of our business. For a reconciliation of core net income to net income, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(17)CEACS is a non-GAAP financial measure. CEACS measures profitability attributable to common shareholders on a core basis. For a reconciliation of CEACS to net income, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(18)Core net income per common share — fully diluted is a non-GAAP financial measure. Core net income per common share —  fully diluted measures core profitability attributable to common shareholders on a per share basis. For a reconciliation to net income per share, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

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

Reconciliation of Non-GAAP Financial Measures

The tables below present computations of earnings and certain other financial measures, which exclude certain significant items that are included in the financial results presented in accordance with GAAP.

We focus on core net income in many of these measures and ratios, which we calculate by adjusting net income for income or expense items which are not representative of the ongoing operations of our business, which results in non-core gains, losses and expense measures. Core net income includes revenue, gains, losses and expense items incurred in the normal course of business. We consider the normal course of business to be the general operations of our business lines of banking and wealth management. We believe that expressing earnings and certain other financial measures excluding these non-core items provides a meaningful base for period-to-period comparisons, which management believes will assist investors in analyzing the operating results of the Bank and predicting future performance. Non-core items are determined by the CFO in conjunction with the CEO, and approved by our Board of Directors. Consideration is given as to whether the expense, gain or loss is a result of exceptional circumstances or other decisions made not in the normal course of business. Items which are not in the normal course of business, such as business acquisition costs or impairment losses, or a result of exceptional circumstances, such as business restructuring costs, are considered non-core. These non-GAAP financial measures based on core net income are also used by management to assess the performance of the Bank's business because management does not consider the activities related to the adjustments to be indications of core operations. We believe that presentation of these non-GAAP financial measures will permit investors to assess the performance of the Bank on the same basis as that applied by management. Management and the Board utilize these non-GAAP financial measures as follows:

•Preparation of the Bank's operating budgets;

•Quarterly financial performance reporting; and

•Monthly reporting of consolidated results (management reporting only).

We calculate core net income attributable to common shareholders by deducting preference dividends and guarantee fees from core net income. We calculate core net income per common share by dividing the core net income attributable to common shareholders by the average number of common shares issued and outstanding during the relevant period.

The core efficiency ratio (non-GAAP), which is a measure of productivity, is generally calculated by taking the core non-interest expenses (which is the total non-interest expenses excluding non-core non-interest expenses) as a percentage of total net revenue before provision for credit losses and other gains and losses and is calculated as (core non-interest expenses - amortization of intangible assets) / (core non-interest income + core net interest income before provision for credit losses). Management uses this ratio to monitor performance regarding the efficiency of expense management and believes this measure provides meaningful information to investors.

Tangible common shareholders' equity ratios and tangible total asset ratios have become a focus of some investors in analyzing the capital position of the Bank absent the effects of intangible assets and preference shareholders' equity. The BMA and other banking regulatory bodies assess a bank's capital adequacy based on CET1 capital, the calculation of which is codified in the Basel III framework as implemented by the BMA. Because tangible common shareholders' equity and tangible total assets are not formally defined by GAAP, these measures are considered to be non-GAAP financial measures and other entities may calculate them differently. Since analysts and banking regulators may assess the Bank's capital adequacy using tangible common shareholders' equity or tangible assets, the Bank believes that it is useful to provide investors the ability to assess the Bank's capital adequacy on this same basis. The Bank calculates tangible common equity and tangible total assets on a period-end basis. The Bank also measures

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performance relative to core net income over average tangible common shareholders' equity and average tangible assets to monitor performance and efficiency relative to the Bank's capital adequacy.

We believe the non-GAAP financial measures presented in this report provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, these non-GAAP financial measures should not be viewed as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

The following tables provide: (1) a reconciliation of net income (GAAP) to core net income and core net income attributable to common shareholders (non-GAAP), (2) a computation of core net income attributable to common shareholders per common share fully diluted (non-GAAP), (3) a reconciliation of average and total shareholders' equity (GAAP) to average and total equity and average tangible common equity (non-GAAP), (4) a computation of core return to average tangible common equity (non-GAAP), (5) a reconciliation of average total assets (GAAP) to average tangible assets (non-GAAP), (6) a computation of core return on average tangible assets (non-GAAP), (7) a computation of tangible common equity to tangible assets (non-GAAP), (8) a computation of tangible total equity to tangible assets (non-GAAP), (9) a reconciliation of non-interest expenses (GAAP) to core non-interest expenses (non-GAAP), (10) a computation of the efficiency ratio (non-GAAP), and (11) a computation of the core efficiency ratio (non-GAAP).

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(1)Relates to the liquidation settlement received from an investment that was previously written-off.

(2)In 2025, relates to group-wide voluntary early retirement and redundancy programs that resulted in the recognition of redundancy expenses and costs associated with senior executive departures.

In 2024, relates to costs associated with senior executive departures.

In 2023, relates to the group-wide restructuring that resulted in the recognition of redundancy expenses.

(3)Relates to the professional fees and final settlement of the US Department of Justice inquiry which commenced in 2013.

(4)Relates to costs incurred in the Credit Suisse asset acquisition completed in December 2023.

(5)Fees related to corporate restructuring.

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The following charts show the trajectory of our performance from 2021 to 2025:

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(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 repurchases and redemptions. For a reconciliation of Core Net Income to Common to GAAP net income to common, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

(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 Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

Our return on equity for 2025 of 21.7% and our Core ROATCE1 for 2025 of 24.2% were driven by a number of factors, including: significant fee income with historically low capital requirements; lower costs of deposit from central bank market interest rate cuts and higher investment yields as assets were deployed into higher yielding available-for-sale investment securities, which were partially offset by lower loan and treasury yields; reductions in accumulated other comprehensive losses due to the amortization of net gains (losses) on the HTM investment portfolio to net income and employee benefit plan adjustments; and our operations in corporate income tax neutral jurisdictions. As a result, our business generated core net income in 2025 well in excess of that needed to execute our organic balance sheet growth strategy.

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(1)Core ROATCE is a non-GAAP financial measure that is calculated by dividing core earnings to common shareholders by average tangible common equity. Average tangible common equity does not include the preference shareholders' equity or goodwill and intangible assets. For more information on the non-GAAP financial measures, see Item 5.A. "Operating Results - Reconciliation of Non-GAAP Financial Measures".

The following chart shows total deposit trends for 2021 to 2025:

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Historically, the markets in which we operate generate fewer loans than deposits, which has led us to take a conservative approach to managing our balance sheet. We accomplish this by maintaining a large cash balance and investing in high quality and liquid securities. The following chart illustrates our asset composition from 2021 to 2025:

As at December 31, 2025, 25.3% of our balance sheet was cash and cash equivalents (including cash and demand deposits with banks, unrestricted term deposits, and treasury bills with a maturity of less than three months), securities purchased under agreements to resell and liquid short-term investments.

In addition to maintaining a large cash and cash equivalents balance, we also have a large and conservative securities investment portfolio. We have a disciplined investment portfolio selection process and invest in highly rated securities. We also seek to ensure that our portfolio remains liquid across market cycles: 99.7% of our portfolio was invested in US government treasuries and mortgage-backed securities issued by US governmental agencies. Our investment strategy as at December 31, 2025, aims to align the behavioral interest rate risk profile of our assets and liabilities — as at December 31, 2025, the average duration of our AFS investment portfolio was 2.9 years, the average duration of our HTM investment portfolio was 7.0 years, and the average duration of our total investment portfolio was 4.9 years. As at December 31, 2025, the total carrying value of our AFS investment portfolio was $2.7 billion, and the total carrying value of our HTM investment portfolio was $3.0 billion.

In August 2023 and May 2025, Fitch and Moody's downgraded the US' long term sovereign credit rating to 'AA+' from 'AAA' and to "Aa1" from "Aaa", respectively. This impacted the ratings on the Bank's holdings of US government treasuries and mortgage-backed securities issued by US governmental agencies. The following charts show the composition of our investment portfolio by rating and asset type from 2021 to 2025:

The combination of our significant cash and securities portfolios helps drive our capital efficient balance sheet, with risk-weighted assets equal to 28.3% of our total assets and a Basel total capital ratio of 27.8%, each as at December 31, 2025.

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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 2024 and 2025, net charge-offs represented 0.04% and 0.01%, respectively, of average loans. As at December 31, 2025, our non-accrual loan balance was $91.3 million, or 2.1% of total gross loans, and our loans past due were $162.0 million or 3.7% of total gross loans, of which 85.0% were full recourse residential mortgages. As at December 31, 2025, our loan portfolio consisted of 55% floating-rate loans and 45% fixed-rate loans generally with contractual rate resets of 3 to 5 years.

The following chart shows the segment composition of our loan portfolio from 2021 to 2025:

Our loan portfolio has exhibited stability over time. The following chart shows loan portfolio trends for 2021 to 2025:

The domestic lending markets in Bermuda, the Cayman Islands, and the Channel Islands have a limited number of participants and significant barriers to entry. A total of 70.6% of our loan balances were residential mortgages as at December 31, 2025. These loans are attractive for a number of reasons. Our mortgages have exhibited

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predictable cash flows, with historically negligible refinancing activity due to significant transaction costs to refinance in these lending markets. Additionally, our mortgages in these markets have historically benefited from a manual underwriting process, low LTVs (with 78.8% of residential loans below 70% LTV as at December 31, 2025), and a full recourse legal system.

We have also generated balanced sources of non-interest income from a well-diversified customer base. For the five-year period ended December 31, 2025, our non-interest income is evenly split between banking which consists of banking and foreign exchange revenue, and wealth management, which consists of trust, asset management, and custody and other administration services.

Fee income from a typical trust client serviced in our wealth management business line is driven primarily by the size and complexity of our clients’ assets and holdings, which are generally diversified across multiple geographies; the performance of these businesses is not typically linked to the performance of the domestic economies of our local markets. Non-interest income represented 40.0% of our total Net Revenue (our fee income ratio) in 2025, and contributed significantly to the Company’s high Core ROATCE and excess capital generation as limited capital is required for our fee income business.

The following chart shows our various sources of non-interest income from 2021 to 2025:

2025 Non-Interest Income: $242.9 million / 40.0% Fee Income Ratio

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

Growth Opportunities

We expect that, all else being equal, a rising interest rate environment would generally increase our net interest income before provision for credit losses because an increase in our cost of deposits would lag an increase in yield of our cash, securities and loans. In addition, a significant portion of our deposits are non-interest bearing (21% as at December 31, 2025), and as a result, only a portion of our funding is sensitive to rising rates. Our non-interest bearing deposit balances have historically exhibited low correlation with market interest rates, a behavior that we attribute in part to a sizable client base that utilizes our bank for custody and clearing services as well as cash management purposes. Potential changes to our net interest income in hypothetical rising and declining rate scenarios, measured over a 12-month period, are presented in the chart below (these projections assume parallel shifts of the yield curves occurring immediately and no changes in other potential variables):

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At December 31, 2025, a negative 100 basis points interest rate shock reflects a reduction in projected 12-month net interest income of 5.5% compared to the flat rate scenario. The loss of income is driven by lower treasury, loan and investment yields, which more than offset reduced rates paid on deposits. Refer to discussion under "- Risk Management".

In addition, we are well-positioned as an acquirer of certain businesses, in private trust and banking. Our acquisition strategy seeks to capitalize on opportunities created by international financial institutions and trust companies that wish to simplify their businesses and deploy capital to other markets or business lines. We consider a wide range of potential acquisition opportunities, and we have a well-defined, disciplined approach to identifying potential acquisition targets across numerous criteria including: geography, business alignment, size, timing, quality, buyer universe and financial hurdles. Our focus has been on the private trust business and banking, primarily in our core markets where we have expertise, scale and a strong brand.

In October 2017, we entered into an agreement to acquire Deutsche Bank’s Global Trust Solutions business, excluding its US operations. This transaction added the ongoing management and administration of the GTS portfolio, comprising approximately 1,000 trust structures for approximately 900 private clients in Guernsey, Switzerland, the Cayman Islands, and Singapore. As part of the deal, we also purchased a service company in Mauritius that also provided operations and support services to the Cayman Islands and Channel Islands banking and custody businesses. This transaction was completed in March 2018.

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

In April 2019, we entered into an agreement to acquire ABN AMRO (Channel Islands) Limited which provides banking, investment management and custody products to three distinct client groups, including trusts, private clients, and funds in Jersey and Guernsey. The transaction was completed in July 2019.

In September 2022, we entered into an agreement to acquire the assets of the Credit Suisse global trust businesses operating in Singapore, Guernsey and The Bahamas. This was completed in December 2023.

Our relationship-driven business model and international corporate clientele have allowed us to develop a stable core deposit base with historically low funding costs. We believe our customers’ deposit activity has historically been relatively inelastic to deposit pricing given the nature of corporate activity and competition in retail deposit taking in our segments. We did, however, see some pricing pressure come through in 2024 and 2023 as expectations of market interest rates remaining higher for longer emerged and clients began activating deposits and seeking higher yielding products. As at December 31, 2025, we had $12.7 billion in deposits at a cost of 1.50% for the year then ended, of which 21% were non-interest bearing demand deposits, 48% were interest bearing demand deposits with a weighted-average cost of 0.7%, and 31% were term deposits with a weighted-average cost of 3.0% and an average contractual or remaining maturity of 72 days. We believe the current market conditions in Bermuda, the Cayman Islands, and the Channel Islands will allow us to continue to benefit from higher market interest rates despite a higher cost of funding.

Consolidated Results of Operations and Discussion for Fiscal Years Ended December 31, 2025, 2024 and 2023

Net Revenue

2025 vs. 2024

Total net revenue before provision for credit losses and other gains and losses for 2025 was $607.0 million, up $25.8 million, or 4.4%, from 2024. Net interest income before provision for credit losses increased from $351.2 million in 2024 to $364.1 million in 2025, an increase of $12.9 million, or 3.7%, which was primarily due to lower costs of deposit from central bank market interest rate cuts and higher investment yields as assets were deployed into higher yielding AFS securities, which were partially offset by lower loan and treasury yields. Loan interest income decreased by $26.7 million to $277.4 million on decreasing average volumes of $152.9 million and decreasing yields of 35 basis points. The volume decrease was driven primarily by maturities and prepayments in excess of originations across the portfolios. Investment interest income increased by $24.0 million to $148.6 million from increases in the average volume of investments by $263.4 million and increasing yields on investments of 33 basis points. Investment yield increases were driven by the re-investment of lower yielding AFS and HTM investment paydowns into higher yielding AFS securities. Interest income from cash and cash equivalents, securities purchased under agreements to resell and short-term investments decreased by $25.9 million, or 16.5%, while the average volume increased by $149.0 million as a result of increased deposit funding in Cayman and the Channel Islands. The total cost of deposits decreased by $37.9 million or 16.7%, reflecting a 33 basis points decrease to 150 basis points, driven by the central bank market interest rate cuts throughout 2025. In addition, non-interest income was up by $12.9 million, or 5.6%, principally attributable to higher trust income, higher asset management services fees, higher banking fees and foreign exchange revenue.

2024 vs. 2023

Total net revenue before provision for credit losses and other gains and losses for 2024 was $581.2 million, up $1.9 million, or 0.3%, from 2023. Net interest income before provision for credit losses decreased from $367.0 million in 2023 to $351.2 million in 2024, a decrease of $15.8 million, or 4.3%, which was primarily due to increasing deposit costs outpacing yields on interest earning assets. Loan interest income decreased by $13.2 million to $304.1 million on decreasing average volumes of $300.8 million,

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despite yields increasing by 11 basis points. The volume decrease was driven primarily by maturities and prepayments in excess of originations across the residential mortgage portfolios. Investment interest income increased by $8.4 million to $124.5 million, whilst the average volume of investments decreased by $261.8 million, yields on investments increased by 26 basis points. Interest income from cash and cash equivalents, securities purchased under agreements to resell and short-term investments increased by $44.9 million, or 40.1%, while the average volume increased by $375.0 million as a result of increased deposit funding in Bermuda and the Channel Islands. The total cost of deposits increased by $56.5 million or 33.1%, reflecting a 43 basis points increase to 183 basis points, driven by the higher interest rate environment. In addition, non-interest income was up by $17.7 million, or 8.3%, principally attributable to higher trust income, higher asset management services fees, higher banking fees and foreign exchange revenue.

Net Interest Income Before Provision for Credit Losses

Net interest income is the amount of interest earned on our interest-earning assets less interest paid on our interest bearing liabilities. There are several drivers of the change in net interest income, including changes in the volume and mix of interest-earning assets and interest bearing liabilities, their relative sensitivity to interest rate movements, and the proportion of non-interest bearing sources of funds, such as equity and non-interest bearing current accounts.

The following table presents the components of net interest income for the years ended December 31, 2025, 2024 and 2023:

2025 vs. 2024

Net interest income before provision for credit losses of $364.1 million in 2025 represented an increase of $12.9 million (or 3.7%) compared to 2024. Net interest income is generated by our main segments of Bermuda, Cayman, and the Channel Islands and the UK. Interest income decreased by $28.6 million in 2025, which was driven by higher investment yields as assets were deployed into higher yielding AFS securities, which were partially offset by lower loan and treasury yields.

Loan interest income decreased in 2025 by $26.7 million as average loan volumes decreased driven by maturities and prepayments in excess of originations across the portfolios and decreases in yields as central banks cut market interest rates.

Investment interest income increased by $24.0 million, primarily driven by higher investment yields as lower yielding AFS and HTM investment paydowns were re-invested into higher yielding AFS securities. The overall duration of the portfolio at year-end was 4.9 years, slightly down from 5.3 years in 2024, due to re-investments into shorter duration fixed rate investments and increased prepayment speeds on agency securities.

Interest bearing liability costs decreased to 192 basis points, which resulted in a decrease in interest expense of $41.5 million, attributable to central bank market interest rate cuts.

Average free balances for 2025 were $3.5 billion (2024: $3.4 billion), including non-interest bearing current accounts of $2.6 billion (2024: $2.6 billion), shareholders' equity of $1,051.5 million (2024: $953.5 million), net of other assets and other liabilities totaling $188.0 million (2024: $176.3 million). See "-Risk Management" below for more information on how interest rate risk is managed.

2024 vs. 2023

Net interest income before provision for credit losses of $351.2 million in 2024 represented a decrease of $15.8 million (or 4.3%) compared to 2023. Net interest income is generated by our main segments of Bermuda, Cayman, and the Channel Islands and the UK. Interest income increased by $40.1 million in 2024, which was driven by increases in average volumes of treasury assets as a result of increased deposit funding.

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Loan interest income decreased in 2024 by $13.2 million as average loan volumes decreased driven by maturities and prepayments in excess of originations across the residential mortgage portfolios. The volume-driven decline in income was partially offset by an increase in yields.

Investment interest income increased by $8.4 million, primarily driven by the increase in market rates. The overall duration of the portfolio at year-end was 5.3 years, which remains flat from 2023.

Interest bearing liability costs increased to 235 basis points, which resulted in an increase in interest expense of $55.8 million, attributable to the higher market interest rate environment.

Average free balances for 2024 were $3.4 billion (2023: $3.6 billion), including non-interest bearing current accounts of $2.6 billion (2023: $2.8 billion), shareholders' equity of $953.5 million (2023: $908.3 million), net of other assets and other liabilities totaling $176.3 million (2023: $160.8 million). See "-Risk Management" below for more information on how interest rate risk is managed.

Provision for Credit Losses

2025 vs. 2024

Our net provision for credit losses in 2025 is $0.2 million, a 86.9% decrease compared to $1.7 million in 2024 due to net releases during the year.

2024 vs. 2023

Our net provision for credit losses in 2024 was $1.7 million, a 62.7% decrease compared to $4.5 million in 2023 due to the recognition in 2023 of increased specific provisions, net write-offs and cost associated with the recovery of collateral and not repeated in 2024.

Other Gains (Losses)

The following table represents the components of other gains (losses) for the years ended December 31, 2025, 2024 and 2023:

Net Gains (Losses) on Other Real Estate Owned

The balance in 2024 reflects gains on the disposal of foreclosed property in the Bermuda segment.

Net Other Gains (Losses)

Net other gains in 2024 reflect gains from a legal settlement and the revaluation of a private equity investment, which was partially offset by the impairment of a leased asset, all in the Channel Islands. Net other gains in 2023 relate to the liquidation settlement received from an investment that was previously written-off and which management considers to be non-core.

Non-Interest Income

Non-interest income represents capital efficient and stable revenue sources for the Group. Non-interest income is derived primarily from banking, including cards, foreign exchange commissions, asset management fees as well as trust fees. Our trust fee structure provides for varied pricing that depends primarily on the size of the relationship and the nature of services provided. As a result, it is not always possible to draw a direct relationship between the value of client assets and the level of non-interest income, though the trend of non-interest income generally follows the trend in client asset levels.

Total non-interest income increased by $12.9 million from $230.0 million in 2024 to $242.9 million in 2025. Non-interest income as a percentage of total net revenue increased to 40.0% in 2025, from 39.7% in 2024.

Total non-interest income increased by $17.7 million from $212.3 million in 2023 to $230.0 million in 2024. Non-interest income as a percentage of total net revenue increased to 39.7% in 2024, from 36.9% in 2023.

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The following table presents the components of non-interest income for the years ended December 31, 2025, 2024 and 2023:

Asset Management

Asset management revenues are generally based on the market value of assets managed and the volume of transactions and fees for other services rendered. We provide asset management services from our offices in Bermuda, the Cayman Islands, and the Channel Islands. Revenues from asset management were $39.2 million in 2025, compared to $36.3 million in 2024, and $32.5 million in 2023.

The table that follows shows the changes in the year-end values of clients' assets under management, sub-divided between those managed for clients on a discretionary basis and client funds invested in mutual funds that Butterfield manages ("Butterfield Funds"):

Asset management fees are generated primarily from management fees earned from Butterfield Funds and discretionary portfolios, as well as custody and brokerage fees.

2025 vs. 2024

AUM increased by $0.9 billion to $6.9 billion as at December 31, 2025, compared to $6.0 billion as at December 31, 2024, driven by increased market values of assets managed. As a result, asset management fees earned increased by $2.9 million to $39.2 million compared to 2024.

2024 vs. 2023

AUM increased by $0.5 billion to $6.0 billion as at December 31, 2024, compared to $5.5 billion as at December 31, 2023, driven by increased market values of assets managed. As a result, asset management fees earned increased by $3.8 million to $36.3 million compared to 2023.

Banking

We provide a full range of community, commercial, and private banking services in select jurisdictions. Banking services are offered to individuals and small to medium-sized businesses through branch locations, internet banking, automated teller machines, debit and credit cards, and mobile banking in Bermuda and the Cayman Islands, while private banking services are offered in Bermuda, the Cayman Islands, and the Channel Islands. In 2023, we began offering credit cards to residents in the Channel Islands. Banking revenues reflect loan, transaction processing, and other fees earned in these jurisdictions.

Banking fee revenues increased by 5.8% in 2025 to $67.4 million, compared to $63.7 million in 2024, primarily due to increased card services and wire fees and volume incentives.

Banking fee revenues increased by 8.3% in 2024 to $63.7 million, compared to $58.8 million in 2023, primarily due to increased card services and wire fees and volume incentives.

Foreign Exchange

We provide foreign exchange services in the normal course of business in all jurisdictions. The major contributors to foreign exchange revenues are Bermuda and Cayman, accounting for 83% of our foreign exchange revenue (2024: 80%; 2023: 84%). We do not maintain a proprietary trading book. Foreign exchange income is generated from client-driven transactions and totaled $52.5 million in 2025, compared to $51.2 million in 2024 and $46.1 million in 2023. The $1.3 million increase from 2024 to 2025 and the decrease in 2024 of $5.1 million from 2023 were volume-driven.

Trust

We provide both personal and institutional fiduciary services from our operations in Bermuda, The Bahamas, the Cayman Islands, the Channel Islands, Singapore and Switzerland. Revenues are derived from a combination of fixed fees, fees based on the size and complexity of the trust relationship and fees based on time spent in relation to the range of personal trust and company administration services and pension and employee benefit trust services we provide.

In 2025, trust revenues represented 27.1% of our non-interest income, relatively flat from 26.7% in 2024. In 2025, trust revenues totaled $65.8 million, $4.5 million higher than 2024. This was mainly driven by increased fees and new clients.

In 2024, trust revenues represented 26.7% of our non-interest income, down from 27.2% in 2023. In 2024, trust revenues totaled $61.3 million, $3.5 million higher than 2023. This was mainly driven by the full year impact of client relationships acquired from Credit Suisse customers in 2023.

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Trust AUA increased to $134.7 billion at the end of 2025 compared to $131.3 billion at the end of 2024.

Custody and Other Administration Services

Custody fees are generally based on market values of assets in custody, the volume of transactions and flat fees for other services rendered. We provide custody services from our offices in Bermuda and the Channel Islands. In 2025, revenues were $13.8 million, which remains relatively flat from 2024. From 2023 to 2024, revenues increased by $0.5 million primarily by higher average GBP/USD exchange rates impacting the Channel Islands revenue recognized.

Total AUA for the custody and other administration services business were $32.3 billion on December 31, 2025, an increase from $30.5 billion as at December 31, 2024 and $30.3 billion as at December 31, 2023.

Other Non-Interest Income

The components of our other non-interest income for the years ended December 31, 2025, 2024 and 2023 are set forth in the following table:

In 2025, we recorded a gain in our net share of earnings from equity method investments of $0.2 million due to a higher equity pick-up. In 2024, we recorded a loss in our net share of earnings from equity method investments of $0.3 million due to a lower equity pick-up.

Rental income decreased by $0.5 million to $1.1 million in 2025 and from $1.6 million in 2024 from 2023 due to the expiry of a sub-lease agreement in the Channel Islands during 2024.

The 'Other' category of other non-interest income increased by $0.4 million in 2025 due to the increase in income from premise maintenance fees on rental properties as compared to 2024.

Non-Interest Expenses

Expense management continued to be a key focus in 2025 with management targeting a 60% efficiency ratio through the cycle. Total non-interest expenses in 2025 were $368.8 million compared to $359.1 million in 2024 and $352.3 million in 2023. These figures include non-core expenses in 2025, 2024 and 2023 of $5.6 million, $2.6 million and $10.0 million, respectively.

After adjusting for these non-core items, 2025 core expenses increased by $6.8 million or 1.9% with a corresponding increase in the core efficiency ratio to 58.5% from 60.0% in 2024. The improvement in the core efficiency ratio is driven by the increase in revenues outpacing the increase in non-interest expenses. From 2023 to 2024, core non-interest expenses increased by $14.1 million with a corresponding increase in the core efficiency ratio to 60.0% from 58.1% in 2023.

In 2025, salaries and other employee benefits accounted for 49.5% of non-interest expenses, with technology and communications and property making up 26.9% combined.

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The following table presents the components of non-interest expenses for the years ended December 31, 2025, 2024 and 2023:

For a full reconciliation of GAAP net income to core net income, please see Item 5.A. "Operating Results — Reconciliation of Non-GAAP Financial Measures".

Salaries and Other Employee Benefits

Total salaries and other employee benefits costs were $182.6 million in 2025, an increase of $8.6 million compared to 2024. Included in 2025 were $5.6 million of non-core expenses, which relates mainly to costs recognized related to the group-wide voluntary early retirement and redundancy programs and costs associated with senior executive departures. Included in 2024 were $1.5 million of non-core expenses, primarily in relation to the departure of a senior executive. Included in 2023 were $7.6 million of non-core expenses in relation to the group-wide restructuring that resulted in the recognition of redundancy expenses.

Core salaries, which exclude these amounts, and other employee benefits costs were $177.4 million in 2025, up $4.9 million compared to $172.5 million in 2024 primarily due to inflationary increases and higher staff incentive accruals. From 2023 to 2024, core salaries increased by $2.2 million primarily due to higher staff incentive accruals.

Headcount on a full-time equivalency basis at the end of 2025 was 1,315, compared to 1,306 in 2024 and 1,334 in 2023. The increase in headcount in 2025 compared to 2024 was mainly due to the expansion of our Halifax Service Center offset by the group-wide voluntary early retirement and redundancy programs implemented. For more information see "Item 6.D Employees".

Technology and Communications

Technology and communication costs reflect expenses relating to the support for our IT infrastructure and decreased by $1.1 million from 2024 to 2025 due to decreased software maintenance costs. From 2023 to 2024, expenses increased by $4.1 million due to increased software maintenance costs.

Professional and Outside Services

Professional and outside services primarily include consulting, legal, audit and other professional services. Professional and outside services costs were $21.9 million in 2025, a decrease compared to $22.7 million in 2024 due to lower project costs. From 2023 to 2024, professional and outside services costs were higher primarily due to increased project work, which included the conversion of the Jersey banking business to a branch of the Guernsey bank.

Property

Property costs, which reflect occupancy expenses, building maintenance, and depreciation of property, plant and equipment, remained flat from 2024 to 2025 and increased by $2.7 million from 2023 to 2024. The increase from 2023 to 2024 was driven by increased depreciation on Head Office renovations.

Indirect Taxes

These taxes reflect taxes levied in the jurisdictions in which we operate, including employee-related payroll taxes, customs duties, and business licenses. In 2025, the expense was $23.3 million, an increase of $0.6 million when compared with 2024 driven by increased payroll taxes associated with senior management departure and group-wide voluntary early retirement and redundancy program costs. From 2023 to 2024, expenses increased by $1.2 million, driven by increased tax rates and fees. Of the $23.3 million in indirect taxes, $17.7 million was paid to the Bermuda government agencies for payroll tax, business licenses, deposit insurance, land taxes, and financial services tax and $5.6 million was paid to other governments for business licenses, insurance tax, land taxes and work permit fees.

Marketing

Marketing expenses reflect costs incurred in advertising and promoting our products and services. Marketing expenses totaled $6.8 million in 2025, an increase of $0.3 million compared to 2024 from increased event costs and sponsorships. From 2023 to 2024, marketing expenses remained relatively flat.

Amortization of Intangible Assets

Intangible assets relate to client relationships acquired from business acquisitions and are amortized on a straight-line basis over their estimated useful lives, not exceeding 15 years. The estimated lives of these acquired intangible assets are re-evaluated annually and tested for impairment. The amortization expense associated with intangible assets was $8.0 million in 2025 compared to $8.0 million in 2024 and $5.7 million in 2023. Amortization remained flat from 2024 to 2025 but increased $2.3 million from 2023 to 2024 as a result of the Credit Suisse asset acquisition in 2023.

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Other Non-Interest Expenses

Other non-interest expenses increased by $0.4 million to $21.5 million in 2025 compared to 2024 primarily due to higher operational losses and write-offs and increased register and transfer agent fees.

Income Taxes

Each jurisdiction in which we operate is subject to different corporate income tax laws. See Item 3.D. "Risk Factors - Regulatory and Tax-Related Risks" and Item 10.E Taxation. We are incorporated in Bermuda as a local company and, pursuant to Bermuda law, not obligated to pay any direct corporate taxes in Bermuda on either income or capital gains. Our subsidiaries in the Cayman Islands and The Bahamas are not subject to any taxes on either income or capital gains under current laws applicable in the respective jurisdictions. In general, entities in Bermuda and the Cayman Islands are not subject to corporate income taxes but are required to pay higher rates of indirect taxes (included above) such as license fees and, in Bermuda, payroll taxes and import duties.

Our subsidiaries in the UK, the Channel Islands, Switzerland, Canada, Singapore and Mauritius are subject to the tax laws of those jurisdictions. See "Note 24 Income taxes" in the Audited Consolidated Financial Statements for a reconciliation between the effective income tax rate and the statutory income tax rate.

In 2025, income tax expense netted to an expense of $6.0 million compared to $4.5 million in 2024. The increase of $1.5 million in 2025 was driven by higher net income in the Channel Islands. The increase of $3.8 million in 2024 was driven by higher net income in the Channel Islands and the initial recognition of a deferred tax asset in Singapore in 2023.

Consolidated Balance Sheet and Discussion

The following table shows the balance sheet as reported as at December 31, 2025 and 2024:

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We maintain a liquid balance sheet and our regulatory capital held exceeds minimum capital requirements. As at December 31, 2025, total cash and cash equivalents, short-term investments and investment in securities (including assets pledged that secured parties are permitted to sell or repledge) represented $9.3 billion, or 65.6% of total assets, up from 65.3% at the end of 2024. Shareholders' equity at December 31, 2025 was $1.1 billion, higher compared to $1.0 billion at the end of 2024 primarily as a result of organic growth through net income net of dividends paid out during the year, improvements in net unrealized losses on the AFS investment portfolio and partially offset by common share repurchases and retirements.

Total assets decreased by $0.1 billion to $14.1 billion from 2024 to 2025, primarily due to loan prepayments and scheduled amortization outpacing originations and the early repayment of the Banks' long-term debt which is reflected in the net decrease in cash and cash equivalents, securities purchased under agreements to resell and short-term investments.

Effective January 1, 2025, the Bank has adopted the Basel Committee on Banking Supervision's ("BCBS") revised standardized approach for credit risk framework as required by the Bermuda Monetary Authority ("BMA"). Comparatives were prepared under the prior credit risk framework. As at December 31, 2025, our capital ratios exceeded our regulatory requirements.

The TCE/TA ratio at the end of 2025 was 7.5% (2024: 6.6%), while the CET1 and total Tier 1 capital ratios at the end of 2025 each were 27.6% (2024: 23.5%), respectively. These ratios continue to remain in excess of regulatory minimums at December 31, 2025.

Cash and Cash Equivalents, Securities Purchased Under Agreements to Resell and Short-Term Investments

We only place deposits with highly-rated institutions and ensure that there is appropriate geographic and sector diversification in our exposures. Limits are set for aggregate geographic exposures and for every counterparty for which we place deposits. Those limits are monitored and reviewed by our Credit Risk Management division and approved by the Financial Institutions Committee. We define cash and cash equivalents to include cash on hand, cash items in the process of collection, amounts due from correspondent banks and liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in fair value. Such investments are those with less than three months maturity from the date of acquisition and include unrestricted term deposits, certificates of deposit and treasury bills. Investments of a similar nature that are either restricted or have a contractual maturity of more than three months but one year or less are classified as short-term investments. Securities purchased under agreements to resell are treated as collateralized lending transactions, and are referred to as repurchase agreements. We utilize repurchase agreements to manage liquidity. The risks of these transactions include changes in the fair value in the securities posted or received as collateral and other credit-related events. The Bank manages these risks by ensuring that the collateral involved is appropriate and by monitoring the value of the securities posted or received as collateral on a daily basis.

As at December 31, 2025, cash and cash equivalents, securities purchased under agreements to resell and short-term investments were $3.6 billion, compared to $3.8 billion as at December 31, 2024. The decrease of $0.2 billion from 2024 to 2025 was primarily due to the decrease in depositor funding and the early repayment of the Banks' long-term debt.

See "Note 3: Cash and cash equivalents", "Note 4: Short-term investments" and "Note 12: Credit related arrangements, repurchase agreements and commitments" to our audited consolidated financial statements as at and for the year ended December 31, 2025 for additional tables and information.

Investment in Securities

Our investment policy requires management to maintain a portfolio of securities that provide the liquidity necessary to cover our obligations as they come due, and mitigate our overall exposure to credit and interest rate risk, while achieving a satisfactory return on the funds invested. The securities in which we invest are limited to securities that are considered investment grade. Securities in our investment portfolio are accounted for as either equity securities at fair value, AFS or HTM. Investment policies are approved by the Board, governed by the Group Asset and Liability Committee and monitored by Group Market Risk, a department of the Group Risk Management division.

Consistent with industry and rating agency designations, we define investment grade as "BBB" or higher. As at December 31, 2025, 100% (2024: 100%) of our total investments were investment grade. Of these securities, 100% (2024: 100%) are rated "A" or higher.

The following table presents the carrying value of investment securities by balance sheet category as at December 31, 2025 and 2024:

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The investments were placed almost exclusively in US government and federal agency securities totaling $5.2 billion, based upon carrying value, or 99.8% of the total investment portfolio, as at December 31, 2025. Total net unrealized losses in the investment portfolio were $514.9 million, compared to net unrealized losses of $732.5 million at the end of 2024. The decrease in net unrealized losses for the year was as a result of decreasing long-term US dollar interest rates and paydowns in the portfolio. The 10-year treasury rate as of December 31, 2025 decreased to 4.17% compared to 4.57% as of December 31, 2024.

AFS securities totaled $2.7 billion at the end of 2025, compared to $2.3 billion at the end of 2024. As at December 31, 2025, 99.5% or $2.7 billion (2024: 95.2%, or $2.2 billion) of AFS securities consisted of holdings of securities issued by the US government and federal agencies. As at December 31, 2025, the remaining 0.5%, or $13.8 million of AFS securities (2024: 4.8% or $108.9 million) was comprised of residential mortgage-backed securities.

HTM investments were $3.0 billion as at December 31, 2025 (2024: $3.2 billion) and consisted entirely of mortgage-backed securities issued by US federal agencies that management does not intend to sell before contractual maturity.

The overall increase in the investment portfolio during the year was attributable to the redeployment of treasury assets into the portfolio to manage interest rate sensitivity with the expectation of market interest rate decreases as well as a decrease in net unrealized losses. The proceeds from AFS and HTM paydowns and maturities were reinvested back into the AFS portfolio.

Investment Valuation — Impairment and Credit Loss Considerations

Securities in unrealized loss positions are analyzed as part of management's ongoing assessment of impairment and credit losses. For debt securities, where management does not expect to recover the entire amortized cost basis of the security and intends to sell such securities or it is more likely than not that the Bank will be required to sell the securities before recovering the amortized cost, it recognizes an impairment loss equal to the full difference between the amortized cost basis and the fair value of those securities through the income statement. Following the recognition of impairment, the security's new amortized cost basis is the previous basis less impairment.

When management does not intend to sell or it is more likely than not that the Bank will hold such securities until recovering the amortized cost, management determines whether any credit losses exist. See "Note 2.H: Investments" and "Note 2.J: Allowance for Credit Losses".

While management sold AFS securities during 2024 and 2023, these securities were sold either at amortized cost or for a net loss of a minimal amount. The sales in 2024 and 2023 involved asset-backed securities-student loans. Management does not have the intention or does not foresee a more likely than not scenario where the Bank will be required to sell any further securities which are in an unrealized loss position, and accordingly, management has concluded that these sales are not credit loss indicators for any remaining securities in a loss position as at December 31, 2025.

See "Note 5: Investment in securities" to our audited consolidated financial statements as at December 31, 2025 for additional tables and information.

Loans

The loan portfolio remains relatively flat at $4.4 billion as at December 31, 2025 when compared to $4.5 billion as at December 31, 2024.

The loan portfolio represented 31.1% of total assets as at December 31, 2025 (December 31, 2024: 31.4%), while loans as a percentage of total deposits was 34.5% (December 31, 2024: 35.1%). Both ratios remain relatively flat as at December 31, 2025 as compared to December 31, 2024.

Allowance for credit losses as at December 31, 2025 totaled $25.4 million, a slight decrease from $25.7 million in the prior year.

Gross non-accrual loans totaled $91.3 million as at December 31, 2025, $14.7 million higher than $76.7 million as at December 31, 2024, and represented 2.1% of the total loan portfolio as at December 31, 2025, compared to 1.7% as at December 31, 2024. The increase in non-accrual loans was driven by a residential mortgage facility in the Channel Islands and UK segment and partially offset by the settlement of a commercial real estate loan facility in Bermuda.

Government

Loans to governments were $276.8 million, which was $10.5 million higher from 2024, primarily due to increases in borrowings by the States of Jersey and partially offset by the amortization of a long-term facility to the Cayman Islands Government.

Commercial

The commercial and industrial loan portfolio includes loans and overdraft facilities advanced primarily to corporations and small and medium-sized entities, which are generally not collateralized by real estate and where loan repayments are expected to flow from the operation of the underlying businesses.

Commercial real estate loans are offered to real estate investors, developers and builders based primarily in Bermuda and the Cayman Islands. To manage our credit exposure on such loans, the principal collateral is real estate held for commercial purposes and is supported by a registered mortgage. Cash flows from the properties, primarily from rental income, are generally supported by non-cancellable long-term leases to high quality international businesses. These cash flows are generally sufficient to service the loan. The portfolio decreased by $76.8 million to $565.2 million at December 31, 2025 due primarily to prepayments and scheduled amortization and partially offset by growth in Cayman construction projects.

Commercial loans outstanding (excluding Government) as at December 31, 2025 were $258.3 million, which represented a decrease of $89.2 million from the previous year, driven primarily by the early repayment of a few facilities in Bermuda and the Channel Islands and UK.

Residential

The residential mortgage portfolio comprises mortgages to clients with whom we are seeking to establish (or already have) a comprehensive financial services relationship. It includes mortgages to individuals and corporate loans secured by residential property.

All mortgages were underwritten utilizing our stringent credit standards. See Item 5.A. "Operating Results". Residential loans consist of conventional home mortgages and equity credit lines.

As at December 31, 2025, residential mortgages totaled $3.1 billion (or 70.6% of total gross loans), a $61.2 million increase from December 31, 2024. This increase was attributed to new loan growth and positive foreign exchange translation as a result of a strengthened Pound Sterling in the Channel Islands and UK and partially offset by regular amortization outpacing originations in both Bermuda and Cayman.

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Other Loan Portfolios

We provide loans, as part of our normal banking business, in respect of automobile financing, consumer financing, credit cards, commercial financing, loans to financial institutions and overdraft facilities to retail, corporate and private banking clients in the jurisdictions in which we operate. As at December 31, 2025, other consumer loans totaled $195.6 million (or 4.4% of total gross loans), a $2.8 million increase from December 31, 2024.

See "Note 6: Loans" and "Note 7: Credit risk concentrations" to our audited consolidated financial statements as at December 31, 2025 for more information on our loan portfolio and contractual obligations and arrangements.

Deposits

Deposits are our principal funding source for use in lending, investments and liquidity. We are a deposit-led bank and do not rely on the use of wholesale or institutional markets to fund our loan business. See Item 5.A. "Operating Results - Liquidity Risk" and "- Credit Risk". Deposit balances at the end of reporting periods can fluctuate due to significant balances that flow in and out from private trust, fund and insurance clients to meet quarter-end operational requirements.

The table below shows the year-end and average total deposit balances by jurisdiction for the year ended and as at December 31, 2025 and 2024:

Average total deposits increased by $269.0 million to $12.6 billion in 2025. On a year-end basis, total deposits remains relatively flat at $12.7 billion at the end of 2025. Deposit volumes were down in Bermuda but offset by increased volumes in Cayman and the Channel Islands and UK and positive foreign exchange translation as a result of a strengthened Pound Sterling.

Demand deposits, which include checking accounts (both interest bearing and non-interest bearing), savings and call accounts, totaled $8.8 billion, or 69.0% of total deposits at the end of 2025, compared to $8.3 billion or 64.9%, at the end of 2024. Term deposits decreased by $0.5 billion to $3.9 billion compared to the prior year. The cost of funds on deposits decreased from 183 basis points in 2024 to 150 basis points in 2025 primarily due to central bank market interest rate cuts. Average non-interest bearing deposits remained relatively stable at $2.6 billion in 2025.

Included in total deposits are deposits from banks of $13.4 million at the end of 2025, down from $42.9 million at the end of 2024.

See "Note 10: Deposits" to our audited consolidated financial statements as at December 31, 2025 for additional tables and information.

Borrowings

We have no issuances of CD, CP or senior notes outstanding and have no CD or CP issuance programs. We use funding from the inter-bank market as part of interest rate risk and liquidity management. As at December 31, 2025, deposits from banks totaled $13.4 million, $29.5 million lower than the prior year.

Employee Future Benefits

We maintain trusteed pension plans including non-contributory defined benefit plans and a number of defined contribution plans, and provide post-retirement healthcare benefits to our qualifying retirees. The defined benefit provisions under the pension plans are generally based upon years of service and average salary during the final years of employment. The defined benefit pension and post-retirement healthcare plans are not open to new participants, are non-contributory and thus the funding required is provided by us, based upon the advice of an independent actuary. The defined benefit pension plans are in the Bermuda, Guernsey and UK jurisdictions, and the defined benefit post-retirement medical plan is in Bermuda. The Bank also has a residual obligation in addition to its defined contribution plan in Mauritius.

Effective December 31, 2011, the Bermuda defined benefit pension benefits were amended to freeze credited service and final average earnings for remaining active members. Effective January 2012, all the participants of the Bermuda defined benefit pension plan are inactive and in accordance with GAAP, the net actuarial loss of the Bermuda defined benefit pension plan is amortized over the estimated average remaining life expectancy of the inactive participants of 22.8 years. Prior to all Bermuda participants being inactive, the net actuarial loss of the Bermuda defined benefit pension plan was amortized to net income over the estimated average remaining service period for active members of 4.5 years.

Effective September 30, 2014, the defined benefit pension benefits of our Guernsey operations were amended to freeze credited service and final average earnings for remaining active members. The benefits amendment resulted in a further reduction in the Guernsey defined benefit pension liability of $4.6 million as at September 30, 2014.

Effective October 2014, all of the participants of the Guernsey defined benefit pension plan are inactive and in accordance with GAAP, the net actuarial loss of the Guernsey defined benefit pension plan will be amortized over the estimated average remaining life expectancy of the inactive participants of 39 years. Prior to all Guernsey participants being inactive, the net actuarial loss of the Guernsey defined benefit pension plan was amortized to net income over the estimated average remaining service period for active members of 15 years.

For the year ended December 31, 2014, numerous changes in the plan provisions were made to align the plan provisions with our administrative practices resulting in a further increase in the Bermuda defined benefit post-retirement healthcare plan liability of $7.9 million. We amortize prior service credit resulting from plan amendments that occurred when plan members were active employees, on a linear basis over the expected average remaining service period (to full eligibility) of active members expected to receive benefits under the plan. Such remaining service periods are as follow: 3.1 years for the 2010 plan amendments and 4.6 years for the 2011 plan amendments. Plan amendments occurring in 2014 resulted in the recognition of new prior service cost on December 31, 2014 on a plan for which substantially all members are now inactive and, in accordance with GAAP, we have elected to amortize this new prior service cost on a linear basis over 21 years, which is the average remaining life expectancy of members eligible for benefits under the plan at the time of the amendments.

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As at December 31, 2025, we had a net obligation for employee future benefits in the amount of $84.5 million, up $0.9 million (1.0%) from $83.6 million at the end of 2024. The movement is driven primarily by interest costs partially offset by lower than expected benefit payments and a decrease in the discount rate assumptions used to measure the obligation.

See "Note 11: Employee benefit plans" to our audited consolidated financial statements as at December 31, 2025 for additional tables and information.

Long-Term Debt, Interest Payments and Maturities

We had no outstanding issuances of long-term debt as at December 31, 2025 (December 31, 2024: $98.7 million). On June 11, 2020, the Bank issued US $100 million of Subordinated Lower Tier II capital notes. The notes were issued at par and were due on June 15, 2030.  The issuance was by way of a registered offering with US institutional investors. The notes were listed on the BSX in the specialist debt securities category. The proceeds of the issue were used, amongst other, to repay the entire amount of the US $45 million outstanding subordinated notes Series 2005-B which matured on July 2, 2020 and the entire amount of the US $25 million outstanding subordinated notes Series 2008-B which were eligible for redemption. The notes issued paid a fixed coupon of 5.25% until June 15, 2025 when they became redeemable in whole at the option of the Bank. The notes were priced at a spread of 4.43% over the 10-year US Treasury yield. The Bank incurred $2.3 million of costs directly related to the issuance of these capital notes which were capitalized directly against the carrying value of these notes on the balance sheet and amortized over the life of the notes. These notes were redeemed at face value in June 2025 at which time, unamortized issuance costs were fully recognized in the Consolidated Statements of Operations as part of interest expense.

See "Note 18: Long-term debt" to our audited consolidated financial statements as at December 31, 2025 for additional information.

Securities sold under agreements to repurchase

From time to time, the Bank also obtains funds from the sale of securities to institutional investors under repurchase agreements. In a repurchase agreement transaction, we will generally pledge investment securities as collateral in a borrowing transaction, agreeing to repurchase the identical security on a specified later date, generally not more than 90 days, at a price greater than the original sales price. The difference between the sale price and repurchase price is the cost of the use of the proceeds, or interest expense. The investment securities underlying these agreements may be delivered to securities dealers who arrange such transactions as collateral for the repurchase obligation. Repurchase agreements represent a cost competitive funding source and also provide liquidity on agency paper for us. However, we are subject to the risk that the borrower of the securities may default at maturity and not return the collateral. In order to minimize this potential risk when entering into such transactions, we generally deal with large, established investment brokerage firms with whom we have master repurchase agreements. Repurchase transactions are accounted for as collateralized financing arrangements rather than as sales of such securities, and the obligation to repurchase such securities is reflected as a liability in our consolidated financial statements.

As at December 31, 2025, the Bank had no open positions in a repurchase agreement. As at December 31, 2024, the Bank had one open position in a repurchase agreement with a remaining maturity of less than 30 days involving one non-US government debt security, with the carrying value of the repurchase agreement being December 31, 2024: $92.6 million.

See "Note 12: Credit related arrangements, repurchase agreements and commitments" to our audited consolidated financial statements as at December 31, 2025 for additional information.

Other Liabilities

Other liabilities include operating lease liabilities, derivative liabilities, current employee salaries and benefits payable and related payroll tax, as well as sundry liabilities. Other liabilities decreased by $19.3 million to $170.5 million as at December 31, 2025. The decrease was a result of lower accrued interest on deposits offset and lower sundry liabilities.

Leases

In the normal course of operation, the Bank enters into leasing agreements either as the lessee or the lessor, mostly for office and parking spaces as well as for small office equipment. The Bank recognizes right-of-use assets and lease liabilities for operating leases. Lease liabilities are measured as the present value of future lease payments, including term renewals that are reasonably certain to occur, discounted using the Bank’s incremental borrowing rate. The Bank determines its incremental borrowing rate using various market inputs as well as the rate on its past debt issuances.

The terms of the existing leases, including renewal options that are reasonably certain to be exercised, extend up to the year 2039. Certain lease payments will be adjusted during the related leases’ terms based on movements in the relevant consumer price index.

See "Note 13: Leases" to our audited consolidated financial statements as at December 31, 2025 for additional information.

Shareholders' Equity

Shareholders' equity increased by $121.0 million during the year ended December 31, 2025 to $1.1 billion.

Increases totaling $345.4 million included:

•$231.9 million of net income for the year;

•$74.0 million from net change in unrealized gains (losses) on AFS investments;

•$22.2 million for share-based compensation and settlements;

•$7.9 million from net change in unrealized gains (losses) on HTM investments;

•$6.4 million from net change in unrealized gains (losses) on translation of net investment in foreign operations; and

•$3.0 million from adjustments to employee benefit plans;

The increases were offset by the following decreases of $224.4 million:

•$77.7 million of common share dividends; and

•$146.7 million from net increases in treasury shares from share repurchases.

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Segment Overview

The Bank is managed by the Chairman & CEO, its Chief Operating Decision Maker ("CODM"), on a geographic basis. The Bank presents four reportable segments, three geographical and one other: Bermuda, Cayman, Channel Islands and the UK, and Other. The Other segment is composed of several non-reportable operating segments that have been aggregated in accordance with GAAP. The Bermuda, Cayman, and Channel Islands and UK segments have a managing director who reports to the Chairman & CEO. Within the Other segment, each operating segment has a managing director that reports to the Group Head of Trust or Chief Operating Officer who ultimately reports to the Chairman & CEO. The Chairman & CEO and the segment managing director have final authority over resource allocation decisions and performance assessment.

Transactions between segments are accounted for on an accrual basis and are all eliminated upon consolidation. The Bank generally does not allocate assets, revenues and expenses among its business segments, with the exception of certain corporate overhead expenses and loan participation revenue and expenses. Loan participation revenue and expenses are allocated pro-rata based on the percentage of the total loan funded by each jurisdiction participating in the loan.

Bermuda (Including Head Office)

For more than 150 years, Bermuda has served as home to our headquarters and remains our largest jurisdiction in terms of number of employees and business volume. The following table provides certain financial information for our Bermuda segment for the years ended December 31, 2025, 2024 and 2023.

2025 vs. 2024

Net income before other gains and losses was $65.2 million for the year ended December 31, 2025, an increase of $1.9 million from $63.3 million in the prior year. This increase was primarily due to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

•Net interest income before provision for credit losses was $170.5 million in 2025, an increase of $0.6 million as compared to 2024, primarily due to lower costs of deposit from central bank market interest rate cuts and higher investment yields as assets were deployed into higher yielding AFS securities, which were partially offset by lower volumes and yield on loans and lower treasury yields.

•The provision for credit recoveries (losses) decreased by $4.5 million to a provision release of $2.7 million in 2025 mainly due to a release from the settlement of a commercial real estate facility.

•Non-interest income increased by $6.7 million to $100.4 million in 2025. This was primarily due to higher asset management fees from increases in assets under management; increased foreign exchange revenue due to higher volumes and higher trust income from new business.

•Operating expenses increased by $9.9 million to $208.5 million in 2025 which was mainly driven by staff related costs from the group-wide voluntary early retirement and redundancy programs, executive management departures and higher staff incentive accruals; higher technology and communication costs driven by travel; and other expenses related to non-service employee benefits for pension and post-retirement plans.

Total assets as at December 31, 2025 were $5.1 billion, down $0.3 billion from December 31, 2024. Total deposits were $4.6 billion in December 31, 2025, down from December 31, 2024. Total loan balances as at December 31, 2025 were $1.5 billion, down $0.1 billion from December 31, 2024 due to scheduled paydowns in the portfolio outpacing originations.

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Client AUA for the trust and custody businesses as at December 31, 2025 were $55.9 billion and $19.3 billion, respectively, while assets under management were $4.7 billion. This compares with $55.8 billion, $14.8 billion and $4.1 billion, respectively, as at December 31, 2024.

2024 vs. 2023

Net income before other gains and losses was $63.2 million for the year ended December 31, 2024, a decrease of $3.6 million from $66.8 million in the prior year. This decrease was due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

•Net interest income before provision for credit losses was $169.9 million in 2024, a decrease of $10.7 million as compared to 2023, primarily due to increasing deposit costs outpacing yields on interest earning assets and reduced loan volumes.

•The provision for credit losses decreased by $3.0 million to $1.8 million in 2024 due to the recognition in 2023 of increased specific provisions, net write-offs and cost associated with the recovery of collateral.

•Non-interest income increased by $3.8 million to $93.7 million in 2024. This was primarily due to higher asset management fees from increases in assets under management and increased banking fees driven by credit card utilization and banking fee volumes.

•Operating expenses decreased by $0.3 million to $198.6 million in 2024 which was mainly driven by lower staff related costs following the group-wide restructuring initiative announced in 2023, offset by increased property depreciation expenses, technology and communications costs and professional fees.

Total other gains (losses) decreased by $3.9 million in 2024 as 2023 mainly represents a gain realized on the liquidation settlement from a legacy investment which did not re-occur in 2024.

Total assets as at December 31, 2024 were $5.4 billion, up $0.3 billion from December 31, 2023. Total deposits were $4.9 billion in December 31, 2024, up from $4.6 billion December 31, 2023 and loan balances at December 31, 2024 were $0.1 billion lower at $1.6 billion due to scheduled paydowns in the portfolio outpacing originations.

Client AUA for the trust and custody businesses as at December 31, 2024 were $55.8 billion and $14.8 billion, respectively, while assets under management were $4.1 billion. This compares with $55.9 billion, $14.1 billion and $3.8 billion, respectively, as at December 31, 2023.

Cayman Islands

We are a leading financial services provider in the Cayman Islands, offering a comprehensive range of personal and corporate financial services. In addition to our strong retail presence, we are focused on the provision of wealth management services including private banking, asset management and trust services.

We have continued to enhance our client delivery channels and online and mobile banking platform upgrades. With three banking centers in desirable locations and eighteen ATMs strategically positioned across fourteen locations in Grand Cayman, we continue to be a leading provider of financial services locally. The following table provides certain financial information for our Cayman segment for the years ended December 31, 2025, 2024 and 2023.

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2025 vs. 2024

Net income before other gains and losses for the year ended December 31, 2025 was $128.9 million, an increase of $6.5 million from $122.4 million in 2024. This increase was due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

•Net interest income before provision for credit losses was $120.6 million in 2025, an increase of $3.2 million compared to 2024 primarily due to lower costs of deposit from central bank market interest rate cuts and higher investment yields as assets were deployed into higher yielding AFS securities, which were partially offset by reduced loan volumes and yields.

•The provision for credit recoveries (losses) increased by $0.3 million to $0.2 million in 2025 from a provision release of $0.1 million in 2024 due to higher credit card charge-offs, which was partially offset by reduced provisions on sovereign borrowings as the tenor continued to decrease and a reduction in loan balances.

•Non-interest income was $77.0 million in 2025, an increase of $5.1 million from 2024. This was primarily due to increased banking fees driven by credit card utilization and banking fee volumes, increased foreign exchange revenue driven by volumes, and higher asset management fees from positive market performance.

•Operating expenses increased by $1.5 million from 2024 to $68.5 million in 2025, mainly driven by higher staff related costs from the group-wide voluntary early retirement and redundancy programs and higher staff incentive accruals; increases in professional and outsourced services and partially offset by lower technology and communications costs due to lower software maintenance costs.

Total assets as at December 31, 2025 were $4.4 billion, up by $0.1 billion when compared with December 31, 2024. Total deposits were $4.1 billion in December 31, 2025, up $0.1 billion from December 31, 2024. Net loans decreased by $0.1 billion to $1.0 billion at December 31, 2025 due to scheduled paydowns in the portfolio outpacing originations.

Client AUA for the trust and custody businesses were $6.4 billion and $3.9 billion, respectively, while AUM were $1.3 billion at December 31, 2025. This compares with $6.3 billion, $3.6 billion and $1.2 billion, respectively, on December 31, 2024.

2024 vs. 2023

Net income before other gains and losses for the year ended December 31, 2024 was $122.4 million, a decrease of $13.7 million from $136.1 million in 2023. This decrease was due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

•Net interest income before provision for credit losses was $117.4 million in 2024, a decrease of $16.3 million compared to 2023 primarily due to increasing deposit costs outpacing yields on interest earning assets and reduced loan volumes.

•Provision for credit recoveries of $0.1 million in 2024 was flat when compared to 2023. The credit recovery is mainly due to reduced provisions on sovereign borrowings as the tenor continued to decrease as well as a reduction in loan balances.

•Non-interest income was $71.9 million, an increase of $5.0 million from 2023. This was primarily due to higher asset management fees from increases in assets under management, increased banking fees driven by credit card utilization and banking fee volumes and increased foreign exchange revenue driven by volumes and partially offset by lower trust income.

•Operating expenses increased by $2.5 million from 2023 to $67.0 million in 2024, mainly driven by higher technology and communications costs due to higher software maintenance costs; increases in professional and outsourced services partially offset by lower staff related costs following the group-wide restructuring initiative in 2023.

Total assets as at December 31, 2024 were $4.3 billion, flat when compared with December 31, 2023. Total deposits were $4.0 billion in December 31, 2024, also flat from December 31, 2023. Net loans decreased slightly by $0.1 billion to $1.1 billion at December 31, 2024 due to higher unscheduled prepayments in the residential mortgage portfolio.

Client AUA for the trust and custody businesses were $6.3 billion and $3.6 billion, respectively, while AUM were $1.2 billion at December 31, 2024. This compares with $6.5 billion, $3.4 billion and $1.0 billion, respectively, on December 31, 2023.

Channel Islands and the UK

The Channel Islands and UK segment includes the jurisdictions of Guernsey, Jersey (both in the Channel Islands), and the UK.

In the Channel Islands, a broad range of services are provided to individuals, private clients and trusts, and to financial institutions and funds including deposit services, mortgage lending and credit card services, private and corporate banking, treasury services, wealth management, fiduciary services and local savings deposits. Commencing June 1, 2024, all business formerly carried on in or from within Jersey by Butterfield Bank (Jersey) Limited has been transferred to Butterfield Bank (Channel Islands) Limited (formerly known as Butterfield Bank (Guernsey) Limited) acting through Butterfield Bank (Channel Islands) Limited, Jersey Branch.

The UK jurisdiction provides mortgages for high-value residential properties.

The following table provides certain financial information for our Channel Islands and the UK segment for the years ended December 31, 2025, 2024 and 2023.

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2025 vs. 2024

Our Channel Islands and UK segment posted net income before other gains (losses) and income tax of $39.9 million in 2025, an increase of $9.7 million when compared to 2024. This increase was due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

•Net interest income before provision for credit losses reflected an increase of $9.3 million to $72.9 million in 2025, primarily due to lower costs of deposit from central bank market interest rate cuts partially offset by lower loan and treasury yields.

•Provision for credit losses in 2025 represented an increase of $2.8 million compared to 2024 which is primarily due to a residential mortgage facility that moved to non-accrual status during the year.

•Non-interest income remained relatively flat at $44.5 million in 2025 as compared to 2024.

•Operating expenses decreased by $3.1 million to $74.7 million in 2025, driven by a decrease in technology and communications expenses from reduced depreciation and contractor costs, lower property costs due to property consolidation in the Channel Islands and a decrease in professional and outside service fees from lower project costs

Total other gains (losses) for 2025 decreased by $0.3 million, compared to 2024. This was driven by 2024 gains from a legal settlement and the revaluation of a private equity investment, which was partially offset by the impairment of a leased asset which did not re-occur in the current year.

Income tax expenses increased by $1.6 million in 2025 as compared to 2024 due to higher taxable income.

Total assets of $4.6 billion as at December 31, 2025, an increase of $0.1 billion from $4.5 billion as at December 31, 2024 primarily driven by foreign exchange translation as a result of a strengthened Pound Sterling as deposit volumes in local currency were down $0.1 billion. Net loans increased by $0.1 billion to $1.9 billion at December 31, 2025, again driven by foreign exchange translation as a result of a strengthened Pound Sterling as volumes were relatively flat.

As at December 31, 2025, client AUA for the trust and custody businesses were $25.3 billion and $9.1 billion, respectively, while AUM were $0.9 billion. This compares with $15.9 billion, $12.1 billion and $0.8 billion, respectively, as at December 31, 2024.

2024 vs. 2023

Our Channel Islands and UK segment posted net income before gains and losses of $30.2 million in 2024, an increase of $15.1 million when compared to 2023. This increase was due principally to the following movements in net interest income, provision for credit losses, non-interest income and operating expenses:

•Net interest income before provision for credit losses reflected an increase of $11.1 million to $63.6 million in 2024, compared to $52.5 million in 2023, primarily due to increasing yields and volume on interest earning assets outpacing the increasing deposit costs.

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•Provision for credit losses in 2024 represented a decrease of $0.2 million compared to credit losses in 2023.

•Non-interest income increased by $5.3 million to $44.4 million in 2024 due to higher foreign exchange revenue from higher volumes; increased trust income from the full year impact of the Credit Suisse asset acquisition; and higher banking income driven by increasing fees and volumes; and higher asset management and dealing fees.

•Operating expenses increased by $1.1 million to $77.8 million in 2024, from $76.7 million in 2023, driven by an increase in property costs due to higher depreciation, maintenance and property relocation costs; this was partially offset by lower staff related costs following the group-wide restructuring initiative in 2023.

Total other gains (losses) for 2024 were gains of $0.3 million, compared to losses of $0.3 million in 2023. This was driven by gains from a legal settlement and the revaluation of a private equity investment, which was partially offset by the impairment of a leased asset.

Income tax expenses increased by $2.0 million in 2024 as compared to 2023 due to higher taxable income.

Total assets of $4.5 billion as at December 31, 2024, an increase from $4.2 billion as at December 31, 2023 reflecting higher depositor funding levels. Net loans decreased by $26.0 million to $1.8 billion at December 31, 2024 mainly as a result of scheduled repayment.

As at December 31, 2024, client AUA for the trust and custody businesses were $15.9 billion and $12.1 billion, respectively, while AUM were $0.8 billion. This compares with $15.6 billion, $12.8 billion and $0.8 billion, respectively, as at December 31, 2023.

Off Balance Sheet Arrangements

Assets Under Administration and Assets Under Management

In the normal course of business, we hold AUA and AUM in a fiduciary or agency capacity for our clients. In accordance with GAAP, these assets are not our assets and are not included in our consolidated balance sheets.

Credit-Related Arrangements

We enter into standby letters of credit, letters of guarantee and contractual commitments to extend credit in the normal course of business, which are not required to be recorded on the balance sheet. Since many commitments expire unused or only partially used, these arrangements do not necessarily reflect future cash requirements. Management believes there are no material commitments to extend credit that represent risks of an unusual nature.

Standby letters of credit and letters of guarantee are issued at the request of our clients in order to secure a client's payment or performance obligations to a third party. These guarantees represent our irrevocable obligation to pay the third-party beneficiary upon presentation of the guarantee and satisfaction of the documentary requirements stipulated therein, without investigation as to the validity of the beneficiary's claim against the client. Generally, the term of the standby letters of credit does not exceed one year, while the term of the letters of guarantee does not exceed four years.

Credit risk is the principal risk associated with these instruments. The contractual amounts of these instruments represent the credit risk should the instrument be fully drawn upon and the client defaults. To control the credit risk associated with issuing letters of credit and letters of guarantee, we subject such activities to the same credit quality and monitoring controls as our lending activities. The types and amounts of collateral security we hold for these standby letters of credit and letters of guarantee are generally represented by our deposits or a charge over assets held in mutual funds. We are obligated to meet the entire financial obligation of these agreements and in certain cases are able to recover the amounts paid through recourse against the collateral security.

Risk Management

Risk Oversight and Management

Organizational Structure

The Board has overall responsibility for determining the strategy for risk management, setting the Bank's risk appetite and ensuring that risk is monitored and controlled effectively. It accomplishes its mandate through the activities of two dedicated committees:

The Risk Policy and Compliance Committee:    This committee of the Board assists the Board in fulfilling its responsibilities by overseeing the Group's risk profile and its performance against approved risk appetites and tolerance thresholds. Specifically, the committee considers the sufficiency of the Group's policies, procedures and limits related to the identification, measurement, monitoring and control of activities that give rise to credit, market, liquidity, interest rate, operational, regulatory, compliance, climate and reputational risks, as well as overseeing its compliance with laws, regulations and codes of conduct.

The Audit Committee:    This committee reviews the overall adequacy and effectiveness of the Group's system of internal controls and the control environment, including in respect of the risk management process. It reviews recommendations arising from internal and independent audit review activities and management's response to any findings raised.

Both the RPCC and Audit Committee are supported in the execution of their respective mandates by the dedicated Audit, Compliance and Risk Policy Committees for our UK, Channel Islands, Cayman Islands and The Bahamas operations, which oversee the sufficiency of local risk management policies and procedures and the effectiveness of the system of internal controls that are in place. These committees are chaired by non-executive directors drawn from the boards of directors for each segment.

The Group executive management team is led by the Chairman & CEO and includes the members of executive management reporting directly to the Chairman & CEO. The executive management team is responsible for setting business strategy and for monitoring, evaluating and managing risks across the Group. It is supported by the following management committees:

The Group Risk and Compliance Committee:    This committee comprises executive and senior management team members and is chaired by the Group Chief Risk Officer. It provides a forum for the strategic assessment of risks assumed across the Group as a whole based on an integrated view of risks including credit, market, liquidity, legal, regulatory and financial crime compliance, fiduciary, operational, cybersecurity, climate, insurance, pension, investment, capital and reputational risks, ensuring that these exposures are consistent with the risk appetites and tolerance thresholds promulgated by the Board and oversees the compliance of regulatory obligations arising under applicable laws, rules and regulations. It is responsible (i) for reviewing, evaluating and recommending the Group's Risk Appetite Framework, the results of the Capital

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Assessment and Risk Profile and recovery and resolution planning processes (including all associated stress testing performed) and the Group's key risk policies to the Board for approval; (ii) for reviewing and evaluating current and proposed business strategies in the context of our risk appetites; and (iii) for identifying, reviewing and advising on current and emerging risk issues and associated mitigation plans; and (iv) for reviewing the Group’s compliance with external regulations and internal policies. It is supported in its mandate by the CORC, a dedicated sub-committee that is responsible for the evaluation and monitoring of non-financial risks, including compliance, conduct, reputational and operational risks, as well as the Group's policies.

The Group Asset and Liability Committee:    This committee comprises executive and senior management team members and is chaired by the Group CFO. The committee is responsible for liquidity, interest rate and exchange rate risk management and other balance sheet issues. It also oversees key policies and the execution of the Group's investment and capital management strategies and monitors the associated risks assumed. It is supported in the execution of its mandate by the work undertaken by the dedicated Asset & Liability Committees in each of the Bank's segments.

The Group Credit Committee:    This committee comprises executive and senior management team members and is chaired by the Group Chief Risk Officer. The committee is responsible for a broad range of activities relating to the monitoring, evaluation and management of credit risks assumed across the Group at both transaction and portfolio levels. The committee is also responsible for evaluating and approving recommended inter-bank and counterparty exposures taken by the Group’s treasury and investment portfolios. In addition, it is responsible for approving significant provisions and other impairment charges (excluding general accounting and legal provisions). The committee oversees the Group’s overall credit risk profile, including non-accrual loans and assets. It is supported in the execution of its mandate by the jurisdictional Credit Committees, which review and approve transactions within delegated authorities and recommend transactions outside those limits to the GCC for approval.

Risk Management

The Bank manages its exposure to risk through a three "lines of defense" model.

The first "line of defense" is provided by our jurisdictional business units, which retain ultimate responsibility for the risks they assume and for bearing the cost of risks associated with these exposures.

The second "line of defense" is provided by our Risk Management and Compliance groups, which work in collaboration with our business units to identify, assess, mitigate and monitor the risks associated with our business activities and strategies. They do this by:

•making recommendations to the GRCC regarding the constitution of the Risk Appetite Framework;

•setting risk strategies that are designed to manage risk exposures assumed in the course of pursuing our business strategies and aligning them with agreed appetites;

•establishing and communicating policies, procedures and limits to control risks in alignment with these risk strategies;

•measuring, monitoring and reporting on risk levels;

•opining on specific transactions that fall outside delegated risk limits; and

•identifying and assessing emerging risks.

The functions within the Risk Management group that support our risk management activities are outlined below.

Group Market Risk:    This unit provides independent oversight of the measurement, monitoring and control of liquidity and funding risks, interest rate and foreign exchange risks as well as the market risks associated with our investment portfolios. It also monitors compliance with both regulatory requirements and our internal policies and procedures relating to the management of these risks.

Group Credit Risk Management:    This unit is responsible for the adjudication and oversight of credit risks associated with our retail and commercial lending activities and the management of risks associated with our investment portfolios and counterparty exposures. It also establishes the parameters and delegated limits within which credit risks may be assumed and promulgates guidelines on how exposures should be managed and monitored.

Group Operational Risk:    This unit assesses the effectiveness of our procedures and internal controls in managing our exposure to various forms of operational risk, including those associated with new business activities and processes and the deployment of new technologies. It is also responsible for our incident management processes and reviews the effectiveness of our loss data collection activities.

Group Compliance:    This unit provides independent analysis and assurance of our compliance with applicable laws, regulations, codes of conduct and recommended best practices, including those associated with the prevention of financial crime, including money laundering and terrorist financing. It is also responsible for assessing our potential exposure to upstream risks and for providing guidance on the preparations that should be made in advance of these changes coming into effect.

The third "line of defense" is provided by our Group Internal Audit function, by providing independent and objective assurance over the design and effectiveness of controls in place to manage the key risks impacting the Group. To enhance the independence of the function, the Group Head of Internal Audit has a functional reporting line to the Chair of the Audit Committee and administratively reports to the Chairman & CEO.

Regulatory Review Process

Our banking, trust and investment business activities in Bermuda are monitored by the BMA as the lead regulator. One of the principal objectives of the BMA is to supervise, regulate and inspect Bermuda-based financial institutions to ensure their financial stability and soundness.

In addition to conducting on-site reviews, the BMA utilizes a comprehensive quarterly statistical return system that enables off-site monitoring. The statistical system is consistent with Basel Committee Standards, and provides the BMA with a detailed breakdown of a bank's balance sheet and profit-and-loss accounts on both a consolidated and unconsolidated basis. This information enables the BMA to monitor the soundness of a bank's financial position and ensure that it meets certain capital requirements. For more information, see Item 4.B. "Business Overview - Supervision and Regulation - Bermuda - Supervision and Monitoring by the BMA".

Each of our regulated entities is separately monitored by the local regulatory authority in that jurisdiction to ensure its financial stability and soundness.

The Risk Appetite Framework

In pursuit of its strategic goals and objectives, the Bank is exposed to a broad range of risks. In support of effective governance and risk informed decision-making, the Bank has set out a Risk Appetite Statement and framework covering its principal risk exposures and approach to managing risk. The Risk Appetite Statement is set annually by the Board with the goal of aligning risk taking with statutory requirements, strategic business objectives and capital planning activities. It serves to express a clear and

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unambiguous methodology to foster a common risk culture across the organization, predicated on a common risk language and guide for internal stakeholders regarding acceptable and unacceptable behavior.

The Group has classified its identified key risks at two different levels. Our Level 1 principal risk categories are financial, operational, compliance, reputational, and strategic risks. These represent the various risks that the Group assumes in the pursuit of its strategic initiatives.

Each Level 1 risk has subcategories or more granular risk types, known as Level 2 risk types. Level 2 risk exposures are managed with corresponding risk postures and methods to avoid, transfer, mitigate, or accept those risks in alignment with our governing objectives, risk indicators, and strategic goals.

Together, these risk types set out the Group’s Risk Taxonomy:

•There are three options for our risk posture (set out in the following table). Each posture is designed to convey a clear strategic direction in terms of the risk-reward profile assumed to ensure consistency in our risk conversations.

•Additionally, we provide a statement of our governing objectives relating to each risk category, establishing the characteristics of the risks that the Bank is willing to assume and the management behaviors that we should exhibit in managing the risk.

•The Group has adopted a tiered risk taxonomy and hierarchy with corresponding key risk indicators. The risk indicators are organized into three reporting tiers based on their significance and impact on the business objectives and the Group’s risk profile. The ultimate goal of tiering is to streamline monitoring and reporting, ensuring that the most critical metrics receive the necessary attention while providing a holistic view of the overall performance of each identified risk.

Key Risk Indicator tolerance thresholds have been established concerning each risk category, combining quantitative and qualitative targets (which are designed to reflect both forward-looking as well as historical perspectives), providing executive management and the Board with an indication of the "direction" of our exposure relative to our declared risk appetite and an early warning of material adverse developments requiring remedial action.

Our enterprise risk management approach allows the organization to establish a repeatable and sustainable system for monitoring and enhancing operational and financial performance. The risk appetite statement sets the tone for our risk culture across the Group as a whole, influencing behaviors at all levels of the organization and reinforcing accountability for decisions taken.

Market Risks

Interest Rate Risk Management

Our primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or changes in net interest margin because of changes in interest rates. Interest rate risk for the Bank is confined to the banking book as the bank does not engage in proprietary trading.

We seek to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest earning assets and interest bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when our assets, liabilities and off-balance sheet contracts each respond differently to changes in interest rates, including as a result of explicit and implicit provisions in agreements related to such assets and liabilities and in off-balance sheet contracts that alter the applicable interest rate and cash flow characteristics as interest rates change. The two primary examples of such provisions that we are exposed to are the duration and rate sensitivity associated with indeterminate-maturity deposits (e.g., interest bearing call accounts) and the rate of prepayment associated with fixed-rate lending and mortgage-backed securities. Interest rates may also affect loan demand, credit losses, mortgage origination volume and other items affecting earnings.

Our management of interest rate risk is overseen by the RPCC, which outlines reporting and measurement requirements. In particular, this infrastructure sets limits and management targets, calculated for various metrics, including our economic value sensitivity, our economic value of equity and net interest income simulations involving parallel shifts in interest rate curves, steepening and flattening yield curves, and various prepayment and deposit duration assumptions. Our risk management infrastructure also requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, non-interest bearing and interest bearing demand deposit durations based on historical analysis, and the targeted investment term of capital.

The principal objective of our interest rate risk management is to maximize profit potential while minimizing exposure to changes in interest rates. Our actions in this regard are taken under the guidance of GALCO. The committee is actively involved in formulating the economic assumptions that we use in our financial planning and budgeting processes and establishes policies which control and monitor the sources, uses and pricing of funds. From time to time, we utilize hedging techniques to reduce interest rate risk. GALCO uses interest income simulations and economic value of equity analysis to measure inherent risk in our balance sheet at specific points in time.

Appetite for interest rate risk is documented in the Group's policies on market risk and investments. This includes the completion of stress testing on at least a quarterly basis of the impact of an immediate and sustained shift in interest rates of +/– 200 basis points on net interest income, economic value of equity and the ratio of tangible total equity to average assets. If any of the parameters established by policy are exceeded, GALCO will provide a plan to executive management to bring the exposure back within tolerance under advice to the Board. The plan does not have to bring the exposure back within limit immediately, but must adjust the exposure within Board and management approved timeframes.

We also use derivatives in the asset and liability management of positions to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. Our derivative contracts principally involve over-the-counter transactions that are privately negotiated between the Group and the counterparty to the contract.

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Derivative instruments that may be used as part of our interest rate risk management strategy include interest rate swaps. Interest rate swaps generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date.

Interest Rate Risk

The following table sets out the assets, liabilities and shareholders' equity and off-balance sheet instruments on the date of the earlier of contractual maturity, expected maturity and repricing date. Use of these tables to derive information about our interest rate risk position is limited by the fact that customers may choose to terminate their financial instruments at a date earlier than the contractual maturity or repricing date. Examples of this include fixed-rate mortgages, which are shown at contractual maturity but which may be subject to early prepayment, and certain term deposits, which are shown at contractual maturity but which may be withdrawn before their contractual maturity subject to prepayment penalties. Investments are shown based on remaining contractual maturities. The remaining contractual principal maturities for mortgage-backed securities (primarily US government agencies) do not consider prepayments. Remaining expected maturities differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.

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(1)See Item 5.A. "Operating Results - Critical Accounting Policies and Estimates" and "Note 17: Fair value measurements" of the audited consolidated financial statements for further detail on the determination of fair value.

(2)Investments include (i) HTM, which are carried at their amortized cost on the consolidated balance sheet, and (ii) equity securities and AFS investments, each of which are carried at fair value on the consolidated balance sheet. The fair value column presents all classifications at their fair value.

(3)Loans are carried on the consolidated balance sheet as the principal amount outstanding, net of allowance for credit losses, unearned income, fair value adjustments arising from hedge accounting and net deferred loan fees.

Asset/Liability Management and Interest Rate Risk

The principal objective of our asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing net income and preserving adequate levels of liquidity funding and capital.

As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest earning assets and interest bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business. We do not typically enter into derivative contracts for the purpose of managing interest rate risk, but we may elect to do so in the future. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. Our exposure to holdings categorized as "trading positions" falls below the de minimis threshold established of 5% (ratio of total trading book open position compared to the sum of on- and off-balance sheet assets that are not part of the trading book).

We use an interest rate risk simulation model to test the interest rate sensitivity of net interest income and the balance sheet. Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin. These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and use various assumptions, including, but not limited to, prepayments on securities, deposit decay rates, pricing decisions on loans and

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deposits, reinvestment and replacement of asset and liability cash flows. We also analyze the economic value of equity as a secondary measure of interest rate risk. This is a complementary measure to net interest income where the calculated value is the result of the fair value of assets less the fair value of liabilities. The economic value of equity is a longer-term view of interest rate risk because it measures the present value of all future cash flows. The impact of changes in interest rates on this calculation is analyzed for the risk to our future earnings and is used in conjunction with the analysis on net interest income.

The following table summarizes the simulated change in net interest income versus unchanged rates as at December 31, 2025 and December 31, 2024:

The following table presents the change in our economic value of equity as at December 31, 2025 and December 31, 2024, assuming immediate parallel shifts in interest rates:

The NII sensitivity profile has increased compared to the prior year from a change in deposit composition and a shortening investment securities repricing horizon coupled with its forward maturity profile.

Many assumptions are used to calculate the impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. The computations of interest rate risk shown above do not include the full suite of actions that our management may undertake to manage the risks in response to anticipated changes in interest rates, and actual results may also differ materially.

Foreign Exchange Risk

The Group holds various non-USD denominated assets and liabilities and maintains investments in subsidiaries whose domestic currency is either not USD or whose domestic currency is not pegged to USD. Assets and liabilities denominated in currencies other than USD are translated to USD at the rates of exchange prevailing at the balance sheet date. The resulting gains or losses are included in foreign exchange revenue in the consolidated statements of operations. Assets and liabilities of subsidiaries outside of Bermuda are translated at the rate of exchange prevailing on the balance sheet date while associated revenues and expenses are translated to USD at the average rate of exchange prevailing through the accounting period. Unrealized translation gains or losses on investments in foreign currency based subsidiaries are recorded as a separate component of shareholders' equity within accumulated other comprehensive loss. Such gains or losses are recorded in the consolidated statements of operations only when realized. Our foreign currency subsidiaries may give rise to significant foreign currency translation movements against the USD. We also provide foreign exchange services to our clients, principally in connection with our banking and wealth management businesses, and effect other transactions in non-USD currencies. Foreign currency volatility and fluctuations in exchange rates may impact the value of non-USD denominated assets and liabilities and raise the potential for losses resulting from foreign currency trading positions where aggregate obligations to purchase and sell a currency other than USD do not offset one another, or offset each other in different time periods. If the policies and procedures we have in place to assess and mitigate potential impacts of foreign exchange volatility are not followed, or are not effective to mitigate such risks, our results and earnings may be negatively affected. The Group maintains a clearly articulated foreign exchange risk exposure tolerance framework which limits exposures to select major currencies.

Liquidity Risk

The objectives of liquidity risk management are to ensure that the Group can meet its cash flow requirements and capitalize on business opportunities on a timely and cost-effective basis. Liquidity is defined as the ability to hold and/or generate cash adequate to meet our needs for day-to-day operations and material long and short-term commitments. Liquidity risk is the risk of potential loss if the Group were unable to meet its funding requirements at a reasonable cost.

We monitor and manage our liquidity by banking location and on a Group-wide basis. The treasury functions in the Group's banking operations, located in Bermuda, the Cayman Islands and the Channel Islands, manage day-to-day liquidity. The Group market risk function has the responsibility for measuring and reporting to senior management on liquidity risk positions. We manage our liquidity based on demand, commitments, specific events and uncertainties to meet current and future financial obligations of a short-term nature. Our objective in managing liquidity is to respond to the needs of depositors and borrowers as well as to earnings enhancement opportunities in a changing

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marketplace. Management is responsible for establishing and monitoring liquidity targets as well as strategies to meet these targets. The Group adopts a conservative liquidity risk appetite with internal quantitative liquidity risk tolerances more stringent than regulatory requirements. Specifically, the Group manages liquidity against internal limits established by the market risk management policy and its related liquidity risk standard and quarterly stress testing methodology.

We maintained a balance sheet with loans representing 31.1% of total assets as at December 31, 2025. Further, at that date there were significant sources of liquidity within our balance sheet in the form of cash and cash equivalents, short-term investments, securities purchased under agreements to resell and investments amounting to $9.3 billion, or 65.6%, of total assets.

An important element of our liquidity management is our liquidity contingency plan which can be employed in the event of a liquidity crisis. The objective of the liquidity contingency plan is to ensure that we maintain our liquidity during periods of stress. This plan takes into consideration a variety of scenarios that could challenge our liquidity. These scenarios include specific and systemic events (e.g. significant withdrawals of deposits) that can impact our on- and off-balance sheet sources and uses of liquidity. This plan is reviewed and updated at least annually.

Credit Risk

Credit risk is defined as the risk that unexpected losses arise as a result of the Group's borrowers or market counterparties failing to meet their obligations to repay. Credit risk is managed through the jurisdictional CRM departments. CRM provides a system of checks and balances for our diverse credit-related activities by establishing and monitoring all credit-related policies and practices throughout the Group and assuring their uniform application. These activities are designed to diversify credit exposure on an industry and client basis, thus lessening overall credit risk. These credit management activities also apply to our use of derivative financial instruments, including foreign exchange contracts and interest rate risk management instruments, which are used primarily to facilitate client transactions.

Individual credit authority for commercial and other loans is limited to specified amounts and maturities. Credit decisions involving commitment exposure in excess of the specified individual limits are submitted to CRM and then to the GCC, which provides a forum for ongoing executive review of loan activity, establishing our credit guidelines and policies and approving selected credit transactions in accordance with our business objectives. The committee reviews large credit exposures, establishes and reviews credit strategy and policy and approves selected credit transactions. The committee also manages counterparty risk in respect of third party bank counterparties which do not have commercial credit relationships within the Group and also approves country exposure limits.

As part of our ongoing credit granting process, internal ratings are assigned to commercial clients before credit is extended, based on an assessment of creditworthiness. At least annually, a review of all significant credit exposures is undertaken to identify, at an early stage, clients who might be facing financial difficulties. Internal borrower risk ratings are also reviewed during this process, allowing identification of adverse individual borrower and sector trends, and accurate application of internal borrower risk ratings which incorporates but is not limited to an assessment of climate risk impacting borrower risk ratings.

An integral part of the CRM function is to formally review past due and potential problem loans to determine which credits, if any, need to be placed on non-accrual status or charged-off. The allowance for loan losses is reviewed quarterly to determine the amount necessary to maintain an adequate provision for current expected credit losses.

Another way credit risk is managed is by requiring collateral. Management's assessment of the borrower's creditworthiness determines whether collateral is obtained. The amount and type of collateral held varies but may include deposits held in financial institutions, mutual funds, US Treasury securities, other marketable securities, income-producing commercial properties, accounts receivable, residential real estate, property, plant and equipment, and inventory. Values of variable collateral are monitored on a regular basis to ensure that they are maintained at an appropriate level, which includes an assessment of the climate risk impact on the value of the collateral.

Credit Risk — Retail and Private Banking

Retail and private lending activity is split between residential mortgages, personal loans, credit cards and authorized overdrafts. Retail credit risks are managed in accordance with limits and processes set out in the credit risk policies and guidelines approved by GCC and GRCC (and approved by the Board). The policies set out where specialist underwriting may be needed.

For residential mortgages, a combination of lending policy criteria, lending guidelines and underwriting are used to make a decision on applications for credit. The primary factors considered are affordability, residential status, residential history, credit history, employment history, nature of income and LTV of the residential property. In addition, confirmation of a borrower's identity is obtained and an assessment of the value of the collateral is carried out prior to granting a credit facility. When considering applications, the primary focus is placed on the willingness and ability to repay.

LTV ratios are derived based on third-party valuations as part of the original underwriting or when increased borrowing has been requested. Updated valuations are not otherwise obtained unless the loan reaches non-accrual status. Non-accrual loans which are collateral-dependent on real estate must be supported by a third-party valuation no older than 12 months. Costs of sale for commercial properties are calculated based on individual circumstances, whereas the haircuts for residential real estate are prescribed in lending guidelines by geographic location and are never less than 15% of the valuation amount.

As valuations are conducted throughout the year, the rolling average age of the valuations are closer to 6 months than 12 months. To further ensure that valuations within the 12-month revaluation period remain appropriate measures for input into the CECL model, we: (1) compare renewal valuations to the prior valuation to track market movement; (2) back-test all sales to compare net carrying value versus any additional gain/loss at the time of sale; (3) segregate the tests described in (1) and (2) by geographic area and, where required, amend provision factors accordingly; and (4) perform a review of new valuations to ascertain such valuations' reasonableness and determine if any change in value may impact similar properties or locations where valuations are more stale-dated and require an adjustment to the CECL model.

The Bank performs an annual assessment of group residential LTV ranges as part of its stress-testing exercise for regulatory and capital-adequacy purposes. Real estate indices are not available in the Bank's primary markets and LTV values are based on standard reductions in value over time, based on observed market activity.

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Generally, maximum LTV for new residential and commercial loans is as follows:

For other retail lending products, similar lending policy criteria are used, and each of these products has its own policy and underwriting guidelines to enable decisions on applications for credit and to manage accounts. The factors used are attuned to the lending product in question, although affordability and credit history are considered in all cases. Ongoing monitoring of all retail and private banking credit is undertaken by the business unit concerned as well as by CRM. In addition, the GCC reviews reports on a weekly basis. In the event that particular exposures show adverse features such as arrears, the Bank's specialist recovery teams generally work with borrowers to resolve the situation.

Unlike the United States where the FCRA is designed to help ensure that credit bureaus furnish correct and complete information when evaluating loan applications, the markets in which we operate do not have systemic credit bureau reports. Therefore, we manually review each loan and we use a formally governed tiered credit approval process that is administered through and governed by our Risk Management framework.

Credit Risk — Commercial Banking

Commercial credit risks are managed in accordance with limits and asset quality measures set out in the credit risk policies and guidelines approved by the GCC (and ratified by the Board).

In respect of Commercial Banking, there is a level of delegated sanctioning authority to underwrite certain credit risks based upon an evaluation of the borrower's experience, track record, financial strength, ability to repay, transaction structure and security characteristics. Lending decisions for large or high risk exposures are based upon a thorough credit risk analysis and the assignment of an internal borrower risk rating, and are subject to further approval by the assigned officers in CRM or the GCC.

Consideration is also given to risk mitigation measures which will provide the Group with protection, such as third-party guarantees, supporting collateral and security, legal documentation and financial covenants. Commercial portfolio asset quality monitoring is based upon a number of measures, including the monitoring of financial covenants, cash flows, pricing movements and variable collateral. In the event that particular exposures begin to show adverse features such as payment arrears, covenant breaches or business trading losses, a full risk reassessment is undertaken. Where appropriate, a specialist recovery team will work with the borrower to resolve the situation. If this proves unsuccessful, the case will be subject to intensive monitoring and management procedures designed to maximize debt recovery.

Credit Risk — Treasury

Treasury credit risks are managed in accordance with limits, asset quality measures and criteria set out within the policy approved by the GCC and ratified by the Board. The policy also sets out powers which require higher levels of authorization according to the size of the transaction or the nature of the associated risk. The GCC identifies, assesses, prioritizes and manages our risks associated with counterparty exposure to other financial institutions, as well as country-specific exposures.

Exposures to financial institutions arise within the Group's investment portfolio and treasury operations. The Group has treasury operations in all of its banking jurisdictions. Treasury exposures primarily take the form of deposits with banks and foreign exchange positions. Exposures to financial institutions in the investment portfolio can take the form of bonds, floating rate notes and/or certificates of deposit.

Diversification and avoidance of concentration is emphasized. The Group establishes limits for countries and each financial institution where there is an expected exposure. Ongoing asset quality monitoring is undertaken by Treasury and CRM and reports are sent to the GCC and GRCC on a monthly basis. Exception reporting takes place against a range of asset quality triggers. Treasury uses a number of risk mitigation techniques including netting and collateralization agreements. Other methods (such as margining and derivatives) are used periodically to mitigate the risk associated with particular transactions or groups of transactions.

For its exposure to Treasury credit risk, the Group uses external credit assessment institutions as permitted under Basel III for sovereign, financial institutions, asset-backed securities, covered bonds and corporate risks. With regard to financial institutions and corporates, the Group's preference for a long-term rating is the senior unsecured rating. However, counterparty ratings and/or short-term deposit or commercial paper ratings are used if this is unavailable. For asset-backed securities, the issue or tranche rating is used.

Exposures

The following tables analyze the Group's regulatory credit risk exposures as at December 31, 2025 and December 31, 2024. Exposures are allocated to specific standardized exposure portfolios determined by the BMA and it is these portfolios that determine the risk weights used. These exposures include both on- and off-balance sheet exposures, with the latter shown separately after credit conversion factors have been applied.

Effective January 1, 2025, the Bank has adopted the Basel Committee on Banking Supervision's ("BCBS") revised standardized approach for credit risk framework as required by the Bermuda Monetary Authority ('BMA'). Comparatives were prepared under the prior credit risk framework.

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* Included in Other assets category are cash and other on- and off-balance sheet exposures.

* Included in Other assets category are cash and other on- and off-balance sheet exposures.

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* Included in Other assets category are cash and other on- and off-balance sheet exposures.

Impairment Provisions

Credit Risk Concentrations

Concentration risk is defined as: any single exposure or group of exposures with the potential to produce losses large enough (relative to the Group's capital, total assets or overall risk level) to threaten the Group's health or ability to maintain core operations. The management of concentration risk is addressed in the first instance by the Group's large exposure policy and related credit guidelines, which require that credit facilities to entities that are affiliated through common ownership or management are aggregated for adjudication and reporting purposes. The policy also defines what constitutes a large exposure and the related reporting requirements. The CRM function also undertakes monitoring and assessment of our exposure to concentration risk, reporting the results of these analyses to the GCC, GRCC and RPCC.

The factors taken into consideration when assessing concentration risk are as follows:

•single or linked counterparty;

•industry or economic sector (e.g., hospitality, property development, commercial office building investment);

•geographic region;

•product type;

•collateral type; and

•maturity date (whether of the facility or of interest rate fixes).

Counterparty Concentrations

Counterparty concentrations is the risk associated with assuming a high level of exposure to a single counterparty, the failure of which could have an adverse impact on the Group.

Large exposures are reviewed quarterly by the GRCC and RPCC for the loan portfolio and the treasury/investment portfolios. Group Market Risk and Treasury work closely together on daily treasury positions and exceptions.

All large exposures and concentrations in the portfolio are reviewed and agreed by the GCC on a quarterly basis and are reported to the Board and the BMA as a part of this process. The review of large exposures considers:

•facility total;

•any link with other facilities;

•total linked facility being within guidelines;

•borrower risk rating;

•security value on the facility; and

•loan-to-value percentage against minimum security covenants.

Industry Concentration

Industry concentration encompasses the scenario that a risk factor inherent within an industry is tied to an entire portfolio of accounts or investments; e.g., a portfolio made up of a large number of small individual loans where all the counterparties are hotel operators. We believe that due to the nature of the Group's client base our exposure to the property, insurance and fund sectors could be classified as industry concentration, although we believe geographic and product concentration are the more appropriate risks to measure.

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Geographic Concentration

Geographic concentration of the book is monitored as follows: Reports are generated which provide details of all the property loan exposure of the Group. Through this, loans are subdivided into regional exposure. From this, the percentage breakdown per region of the Group's property exposure is analyzed and reported to the GRCC and RPCC. Assessment of the exposure allows the committees to decide whether the Group should decline further lending in any area in which it is becoming over-weighted.

Product Concentration

Product concentration is defined in the context of credit risk, as an over-weighting in the portfolio to a given product type, making the Group vulnerable to the impact of a variety of external factors that could either reduce demand for the product itself or lead to an increase in the level of default rates experienced. We operate as a full service bank in Bermuda and the Cayman Islands and aim to satisfy the requirements of our customers in these communities through the range of products and services we offer. Accordingly, there is no dependence or concentration on a single product in these markets outside of the residential mortgage portfolios, which comprised 70.6% of the Group's loan book as at December 31, 2025 (compared to 67.8% as at December 31, 2024); in Bermuda, residential mortgage lending made up 57.0% of the Bermuda loan book as at December 31, 2025 (compared to 54.4% as at December 31, 2024), and loans for many purposes (education, business support, family requirements) were made in the form of residential mortgages. Product category analysis confirms that the total lending portfolio is concentrated in the property market; this has been addressed by performing stress testing.

Collateral Concentration

Collateral concentration considers whether the Group's loan book is secured by a limited number of collateral types. An example of this would be when a large value of loans to a diversified group of borrowers is all secured by shares in the same company or by the shares of various companies within the same industry sector. Any decline in the value of these shares or in the performance of the sector as a whole could have an adverse impact on the Group's security position across all affected borrowers. The most relevant example of collateral concentration is the Group's exposure to real estate property values. Ignoring cash-backed facilities, the largest collateral concentrations within the portfolio are to residential and commercial property. The greatest risk with collateral concentration is that the value of the security could be severely reduced. To simulate this, the Group's stress testing process incorporates a scenario in which all real estate collateral is devalued by factors as high as 30%.

Credit Risk Mitigation

The Group uses a wide range of techniques to reduce the credit risk of its lending. The most basic of these is performing an assessment of the ability of a borrower to service the proposed level of borrowing without distress. However, the risk can be further mitigated by obtaining security for the funds advanced.

Residential Mortgages

Residential property is the Group's main source of collateral and means of mitigating credit risk inherent in the residential mortgage portfolio. All mortgage lending activities are supported by underlying assumptions and estimated values received by independent third parties. All residential property must be insured to cover property risks through a third party.

Commercial

Commercial property is one of the Group's primary sources of collateral and means of mitigating credit risk inherent in its commercial portfolios. Collateral for the majority of commercial loans comprises first legal charges over freehold or long leasehold property but the following may also be taken as security: life insurance policies; credit balances assignments; shares; guarantees; equitable charges; debentures; chattel mortgages and charges over residential property.

For property-based lending, supporting information such as professional valuations are an important tool to help determine the suitability of the property offered as security and, in the case of investment lending, generating the cash to cover interest and principal payments. All standard documentation is subject to in-house legal review and sign-off in order to ensure that the Group's legal documentation is robust and enforceable. Documentation for large advances may be specifically prepared by independent solicitors. Insurance requirements are always fully considered as part of the application process and the Group ensures that appropriate insurance is taken out to protect the property against an insurable event.

Treasury

Collateral held as security for treasury assets, including investments, is determined by the nature of the instrument. Loans, debt securities, treasury and other eligible bills are generally unsecured with the exception of asset-backed securities and similar instruments, which are secured by pools of financial assets. The ISDA master agreement is the Group's preferred method of documenting derivative activity. It is common in such cases for a Credit Support Annex to be executed in conjunction with the ISDA master agreement in order to mitigate credit risk on the derivatives portfolio. Valuations are performed, agreed with the relevant counterparties, and collateral is exchanged to bring the credit exposure within agreed tolerances. The EAD value to the counterparty is measured under the standardized approach for measuring counterparty credit risk exposures method and is derived by adding the gross positive fair value of the contract (replacement cost) to the contract's potential future credit exposure, which is derived by applying a multiple base on the contracts residual maturity to the notional value of the contract, and applying an alpha of 1.4 to the sum of these components.

The following table shows the exposures to counterparty credit risk for derivative contracts as at December 31, 2025 and December 31, 2024:

Securitizations

The Bank has not, to date, securitized assets that it has originated. The Bank's total exposure to purchased securitization positions as at December 31, 2025 was $4.3 billion by market value (compared to $4.5 billion as at December 31, 2024), with US government and federal agencies accounting for the majority of this exposure.

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The following table provides an analysis of the Bank's investments in securitization positions by exposure type as at December 31, 2025 and December 31, 2024:

Operational Risk

In providing our services, we are exposed to operational risk. This is the risk of loss from inadequate or failed internal processes and systems, actions or inactions of people, or from external events. Operational risk is inherent in our activities and can manifest itself in various ways including fraudulent acts, business interruptions, inappropriate behavior of employees, unintentional failure to comply with applicable laws and regulations, cybersecurity incidents and privacy breaches or failure of vendors to perform in accordance with their arrangements. These events could result in financial losses, litigation and regulatory fines, as well as other damage to us. Our risk management goal is to keep operational risk at appropriate levels consistent with our risk appetite, financial strength, the characteristics of our businesses, the markets in which we operate and the competitive and regulatory environment to which we are subject.

As we continue to expand our use of technology, we are exposed to various forms of cyber-attacks. We devote significant resources to maintain and regularly upgrade our systems and networks and review the ever changing threat landscape in order to mitigate our exposure to cyber risks. In addition to the policy reviews, we continue to look to implement technology solutions that enhance preventive and detection capabilities and our ability to recover quickly should a successful cyber-attack occur. We assess our third-party vendor controls and have a developed business continuity plan that addresses potential cyber risks. We also maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks. However, such insurance may be insufficient to cover all losses.

Operational risk is mitigated through internal controls embedded in our business activities and our risk management practices, which are designed to continuously reassess the effectiveness of these controls in order to keep the risk we assume at levels appropriate to our risk appetite as approved by the Board. Data on operational losses and any significant control failures incurred are captured through an incident reporting process. These events are reported to both the GRCC and RPCC, which assess the sufficiency of the corrective actions taken by management to prevent recurrence. Both committees also receive regular reporting on actual performance against established risk tolerance metrics.

Regional Conflicts - Russian Invasion of Ukraine and Middle Eastern Conflict

Butterfield maintains robust preventative and detective controls to ensure compliance with international sanctions. Under the Bank's conservative risk appetite, the business maintains very few clients with Russian, Belarusian, Ukrainian, Middle Eastern or other active conflict zones and we therefore do not expect the current geopolitical conflict and related sanctions to present significant reputational or financial exposure for the Bank. The Bank's Group Compliance function continues to monitor for new sanctions, review our client base and ensure our control environment remains appropriately calibrated to manage our reputational and compliance risk as events continue to unfold.

Capital Adequacy Management

Effective January 1, 2025, the Bank has adopted the Basel Committee on Banking Supervision's ("BCBS") revised standardized approach for credit risk framework as required by the Bermuda Monetary Authority ("BMA").

The Group manages its capital both on a total Group basis and, where appropriate, on a legal entity basis. The finance department has the responsibility for measuring, monitoring and reporting capital levels within guidelines and limits established by the RPCC. The management of capital will also involve regional management to ensure compliance with local regulation. In establishing the guidelines and limits for capital, a variety of factors are taken into consideration, including the overall risk of the business in stressed scenarios, regulatory requirements, capital levels relative to our peers, and the impact on our credit ratings.

Capital Assessment and Risk Profiling

Under the requirements of the Basel II Accord as implemented by the BMA, the Group undertakes a CARP process, which is an internal assessment of all material risks to determine our capital needs. This internal assessment takes account of the minimum capital requirement and other risks not covered by the minimum capital requirement (Pillar II). Where capital is deemed as not being able to mitigate a particular risk, alternative management actions are identified and described within the CARP. The CARP is presented to the RPCC before being presented to the Board for challenge and approval and then submission to the BMA. The CARP process is performed annually or more frequently should the need arise.

A SREP is then undertaken biennially by the BMA, which is designed to assess the Group's risk profile as documented in the CARP. This assessment is used to determine and set the Individual Capital Guidance which is the minimum level of capital the Group will be required to hold until the next SREP review is conducted.

B.Liquidity and Capital Resources

Liquidity

We define liquidity as our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management.

Sources and Uses of Cash

Our primary sources of cash are (i) cash obtained from deposits, (ii) long-term debt, and (iii) cash from operations. Our primary uses are (i) the payment of our operating expenses, (ii) payment of dividends on our common shares, (iii) repayment of certain maturing liabilities, (iv) repurchase of our common shares, and (v) extraordinary requirements for cash, such as acquisitions. We had $1.7 billion of cash and cash equivalents as at December 31, 2025 and $2.0 billion as at December 31, 2024, as well as $7.5 billion and $7.3 billion, respectively, of liquid securities, the balance of which could be sold to meet liquidity requirements. In our opinion, the Bank’s working capital is sufficient for the Bank’s present requirements.

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Liquidity Risk

Our liquidity risk is managed through a comprehensive framework of policies and limits overseen by GALCO. We consider the effective and prudent management of liquidity to be fundamental to our health and strength. Our objective is to manage our cash flow and liquidity reserves so that they are adequate to fund our obligations and other commitments on a timely basis and at a reasonable cost.

We continuously monitor and make adjustments to our liquidity position by adjusting the balance between sources and uses of funds as we deem appropriate. Our primary measures of liquidity include monthly cash flow analysis under ordinary business activities and conditions and under situations simulating a severe run on the Bank. The Bank strives to use a balanced liquidity risk appetite with internal quantitative liquidity risk tolerances more stringent than regulatory requirements. Specifically the Bank manages liquidity against internal limits established by the market risk management policy and its related liquidity risk standard and quarterly stress testing methodology. The results of these measures and analysis are incorporated into our liquidity contingency plan, which provides the basis for the identification of our liquidity needs. For more information, see Item 11 "Operating Results - Liquidity Risk" and Item 3.D Risk Factors - Risks Relating to Our Strategy, Brand, Portfolio and Other Aspects of Our Business - If we are unable to effectively manage our liquidity we may need to seek additional financing and our business, financial condition or results of operations could be adversely affected.

Capital Resources

We have financed our operations, growth and cash needs primarily through income from operations and issuances of debt and equity securities. We believe that our cash on hand and cash flows from operations will be sufficient to repay our outstanding debt as it matures. In the future, we may need to incur additional debt or issue additional equity securities, which we may be unable to do or which may be on less favorable terms.

We manage our capital both on a consolidated basis and, where appropriate, on a legal entity basis. The group finance team has the responsibility for measuring, monitoring and reporting capital levels within guidelines and limits established by the RPCC. The management of capital will also involve jurisdictional management to ensure compliance with local regulations. In establishing the guidelines and limits for capital, a variety of factors are taken into consideration, including the overall risk of the business in stressed scenarios, regulatory requirements, capital levels relative to our peers, and the impact on our credit ratings.

In December 2017, the BCBS published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as "Basel IV"). Among other things, these standards revise the BCBS's standardized approach for credit risk (including by recalibrating risk weights and introducing new segmentations for exposures) and provides a new standardized approach for operational risk capital. Under the BCBS framework, these standards became effective on January 1, 20232, with an aggregate output floor phasing in through January 1, 20282. The BMA adopted BCBS's revised standardized approach for operational and credit risk effective January 1, 2023 and January 1, 2025, respectively, which the Bank has implemented.

The Basel standards aim to raise the quality, consistency and transparency of the capital base, limit the build-up of excess leverage and increase capital requirements for the banking sector. We are subject to the following requirements:

•CET1 ratio of at least 7.0% of RWA, inclusive of a minimum CET1 ratio of 4.5% and the new capital conservation buffer of 2.5%, but excluding the D-SIB surcharge described below;

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

•Total capital of at least 10.5% of RWA, inclusive of a minimum total capital ratio of 8% and the new capital conservation buffer of 2.5%, but excluding the D-SIB surcharge described below;

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

•Counter-cyclical buffer of up to 2.5% composed of CET1-eligible capital may be implemented by the BMA when macroeconomic indicators provide an assessment of excessive credit or other pressures building in the banking sector, potentially increasing the CET1, Tier 1 and total capital ratios by up to 2.5%. No counter-cyclical buffer has been implemented to date;

•Leverage ratio must be at 5.0% or higher;

•LCR with a minimum requirement of 100%; and

•NSFR with a minimum requirement of 100%.

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

2 In March 2020, in response to the pandemic, the BCBS deferred the implementation timeline from January 1, 2022 to January 1, 2023 and the output floor phasing in from January 1, 2027 to January 1, 2028.

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The following table sets forth our capital adequacy as at December 31, 2025 and 2024 in accordance with the Basel framework:

1 Effective January 1, 2025, the Bank has adopted the BCBS's revised standardized approach for credit risk framework as required by the BMA. Comparatives were prepared under the prior credit risk framework.

Overall, capital ratios have increased, driven primarily by reduced RWAs and partially offset by lower capital levels. RWAs decreased year-over-year due primarily to the adoption of the new credit risk framework which reduced RWAs by approximately 2.0%. Total capital levels decreased due to the early redemption of the Banks' $100 million Tier 2-qualifying subordinated debt in June 2025, with earnings accretion offset by dividend payments and share repurchases. As at December 31, 2025, we were in compliance with the minimum LCR and NSFR of 100%.

Share Repurchase Program

The Bank repurchases its common shares through share repurchase programs from time to time as a means to improve shareholder liquidity and facilitate growth in share value. In accordance with applicable laws, regulations and listing standards, each program was approved by the Board and repurchases of shares pursuant to each program are subject to a letter of no objection from the BMA. In addition, the BSX is advised monthly of shares purchased pursuant to each program.

On February 14, 2022, the Board approved a new common share repurchase program, authorizing the purchase of up to 2.0 million common shares through to February 28, 2023.

On February 13, 2023, the Board approved a new common share repurchase program, authorizing the purchase of up to 3.0 million common shares through to February 29, 2024.

On December 5, 2023, the Board approved a new common share repurchase program, authorizing the purchase of up to 3.5 million common shares through to December 31, 2024.

On July 22, 2024, the Board approved a new common share repurchase program, authorizing the purchase of up to 2.1 million common shares through to December 31, 2024.

On December 9, 2024, the Board approved a new common share repurchase program, authorizing the purchase of up to 2.7 million common shares through to December 31, 2025.

On July 28, 2025, the Board approved a new common share repurchase program, authorizing the purchase of up to 1.5 million common shares through to December 31, 2025.

On December 8, 2025, the Board approved a new common share repurchase program, authorizing the purchase of up to 3.0 million common shares through to December 31, 2026.

The timing and amount of repurchase transactions under the new program will be based on market conditions, share price, legal requirements and other factors. No assurances can be given as to the amount of common shares that may actually be repurchased.

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Total common share repurchases for the years ending December 31, 2025, 2024 and 2023 are as follows: