Q4 2022 Bank of N T Butterfield & Son Ltd Earnings Call
Speaker 1: And.
Speaker 2: Conference Operator today at this time, I would like to welcome everyone to the fourth quarter and full year 2022 earnings call for the Bank of NT Butterfield and Suns Limited. After today's presentation, there will be an opportunity to ask questions.
Speaker 2: To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the call over to NOAA Fields, but our Fields Head of Investor Relations.
Speaker 2: Thank you. Good morning everyone and thank you for joining us. Today we will be reviewing Butterfield's fourth quarter and full year 2022 financial results. On the call I'm joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer.
Speaker 3: Craig Bridgewater, Group Chief Financial Officer, and Michael Strump, President and Group Chief Risk Officer. Following their prepared remarks, we will open the call up for a question and answer session.
Speaker 3: Yes, in the afternoon, we issued a press release announcing our fourth order in full year 2022 results.
Speaker 3: The press release, along with a slide presentation that we will refer to during our remarks on this call, are available on the Investrelations section of our website at www.Butterfieldsleep.com.
Speaker 3: Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-GAAP measures which we believe are important in evaluating the company's performance.
Speaker 3: For reconciliation of these measures to US GAAP, please refer to the earnings press release and slide presentation. Thank you.
Speaker 3: Today's call on associated materials may also contain certain forward-looking statements.
Speaker 3: which are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements.
Speaker 3: Additional information regarding these risks can be found in our FEC fileings.
Speaker 3: I will now turn the call over to my book home.
Speaker 4: Thank you, Noah, and thanks to everyone joining the call today.
Speaker 4: Butterfield's excellent results in the fourth quarter and full year 2022 benefited from strong positioning in our core banking and private trust markets in Burmita, the Cayman Islands and the Channel Islands.
Speaker 4: In addition to these locations, we provide specialized financial and trust services in Singapore, the Bahamas and Switzerland, as well as United Kingdom-based mortgage lending and high-end central London.
Speaker 4: The Bank's geographic footprint is strategically based across best-in-class offshore banking and trust locations.
Speaker 4: Our revenue generating operating jurisdictions are efficiently supported in market and in addition by our service centers in Mauritius and Halifax Canada.
Speaker 4: I will now turn to the full year highlights on page 4.
Speaker 4: Butterfield had an excellent year with net income of a $214 million and corned income of $215.7 million.
Speaker 4: Operating results have increased with rising market rates and resulted in a core return an average tangible common equity at 28.6% for 2022.
Speaker 4: In addition to higher net interest income, non-interest earnings were up 4% and expenses held steady, despite some inflationary cost pressures.
Speaker 4: I was also pleased to see tangible book value for common share recovered by 15.7% in the fourth quarter.
Speaker 4: The net interest margin increased to 2.41% from 2.02% in 2021, with the cost of deposits rising to 34 basis points.
Speaker 4: from 11 basis points in 2021.
Speaker 4: The current cycles deposit costs differ somewhat from previous cycles as a result of our larger baking presence in the Channel Islands.
Speaker 4: which is more corporate than retail based and therefore more competitive.
Speaker 4: We continue to pursue an active capital management strategy and have paid out around 40% of earnings in quarterly cash dividends.
Speaker 4: We are beginning to see our TCE-TA ratio improved towards our targeted range and expect to recommence share repurchases.
Speaker 4: The board has approved a new share repurchase authorization for 2023, about the 3 million common shares, which will replace the expiring authorization at the end of February 2023.
Speaker 4: One of our growth vectors is in market accretive acquisitions and we are making good progress towards the first closing and the private trust asset deal with Credit Suisse that we announced in September last year.
Speaker 4: Throughout 2023, we'll be taking over the administration and servicing of selected private trust client structures in Singapore, granting the Bahamas.
Speaker 4: We still expect the timing of the onboarding to occur progressively by jurisdiction, with the first smaller tranche of Singapore clients coming across at the end of the first quarter, and Guernsey and the Bahamas in the second and third quarters.
Speaker 4: Our compliance team continues to conduct extensive due diligence at the client level, and we are generally pleased with the quality of business so far.
Speaker 4: I will now turn the call over to Craig for more detail in the quarter.
Speaker 5: Thank you Michael and good morning.
Speaker 6: I will begin the slide six, we will be providing the fourth quarter highlights.
Speaker 6: Butterfield reported net income for the fourth quarter of $63.1 million, or $1.26 per deleted common share, and core net income of $63.2 million, or $1.27 per share.
Speaker 6: Our core return on average tangible common equity increased to 34.9% in the quarter from 31.6% in the prior quarter.
Speaker 6: Our net interest margin improved 20 basis points to 2.79%, with the cost of deposits rising 44 basis points to 78 basis points.
Speaker 6: The Board of Directors again declared a quarterly cash dividend of $0.44 per share.
Speaker 6: We did not conduct share repartices during the fourth quarter, although as Michael mentioned, we expect to resume share buybacks as we approach our targeted TCE TA range of 6 to 6.5% due to deposit stabilization and sustained improvement in OCI marks.
Speaker 6: I will now turn to slide seven, which provides a summary of net interest income and net interest margin.
Speaker 6: In the fourth quarter, we reported net interest income before provision for credit losses of $94.6 million, an increase of 3.7% versus the prior quarter.
Speaker 6: The increase was due mainly to continued improvement of yields on all interest-earning assets, which was somewhat offset by higher deposit costs.
Speaker 6: Average cash and short-term investment bonuses were down $280.1 million during the quarter, driven by expected customer deposit outflows on the funding side.
Speaker 6: Average investment balances decreased by $152.5 million.
Speaker 6: We deployed the $108 million of portfolio maturities and short-dated instruments in the fourth quarter of 2022 compared to $90 million in the previous quarter.
Speaker 6: The average loan balance was down $83.3 million, driven by net maturities in Bermuda and Cayman.
Speaker 6: Overall, the loan yields were up 74 basis points during the fourth quarter, primarily due to the impact of previously announced rate increases or affording rate loans.
Speaker 6: We had new loan originations of $2404 million and an average year of 5.48% versus $239 million at 4.83% in the third quarter of 2022.
Speaker 7: I.
Speaker 5: Turning to slide eight.
Speaker 6: Non-interesting outcome was up 10% quarter-over-quarter, primarily due to higher banking fees, which benefited from increased seasonal credit and debit card transaction activities, and higher trust revenue from new business and increased activity-based fees.
Speaker 6: Non-interested income continues to be stable and capital efficient source of revenues with a fee income ratio of 37.1% up from 35.6% during the third quarter.
Speaker 6: Slide 9 provides a summary of core non-interest expenses.
Speaker 6: Total core non-interest expenses were $84.5 million and 3.3% higher than $81.8 million in the prior quarter and slightly above our targeted run rate.
Speaker 6: The higher expenses are primarily the results of increased staff via costs, mostly from performance-based incentive accruals and service costs.
Speaker 6: The core efficiency ratio continued to improve to 55.6% and remains below our through cycle target of 60%.
Speaker 6: I will now turn the call over to Michael Scrum to review the balance sheet.
Speaker 4: Thank you, Craig. Slide 10 summarizes regulatory and leverage capital levels.
Speaker 6: Butterfield's capital levels continue to be significantly above regulatory minimum requirements.
Speaker 6: Our tangible leverage ratio of 5.6% has improved from 5.0% in the prior quarter due to improved OCI marks in our available for sale portfolio.
Speaker 4: As we see sustained improvements in the TCE to TA ratio towards our target range of 6 to 6.5%, we plan to recommit share repurchases subject to market conditions.
Speaker 6: It is important to note that the TCE to TA is not a regulatory ratio for Butterfield, and the XCache ratio also improved to 6.5%, and excluding OCI on the Security's book, the TCE to TA ratio remained at 8.2%.
Speaker 6: Turning now to slide 11, Butterfield's balance sheet remains conservatively managed with a high degree of liquidity.
Speaker 6: Period and deposit balances increased by approximately $530 million to $13 billion versus the prior quarter end.
Speaker 6: The stabilization and increase in deposits came from higher customer volumes, as well as the impact of foreign exchange translation of non-USDOR deposits.
Speaker 6: reversing some of the decline we saw in the third quarter of 2022.
Speaker 6: Butterfield's low-risk density of 33.9% continues to reflect the regulatory capital efficiency of the balance sheet with a low-risk weighted residential mortgage loan portfolio, which now represents 70% of the total loan assets.
Speaker 6: Turning to slide 12, here we provide a loon and deposit changes by volume and foreign exchange movement, as well as currency by segment.
Speaker 6: The chart shows the $530 million fourth quarter increase in deposits, which consists of of 290 million of underlying deposit inflows and 240 million due to currency translation changes from a weaker US dollar.
Speaker 6: New loan originations decreased as expected.
Speaker 6: But that decline was more than offset by foreign exchange movement.
Speaker 6: On slide 13, we show that Butterfield continues to have a strong asset quality with low credit risk and investment portfolio, which is comprised of 96 percent triple A rated U.S. government guaranteed agency securities.
Speaker 6: Craig Quality in the loan book also continues to remain robust with non-acroll loans holding at 1.2% of gross loans.
Speaker 6: and the low net charge off ratio, which is up three basis points from the prior quarter to a level basis points.
Speaker 6: On slide 14, we present the average cash and securities balance sheet with a summary interest rate sensitivity analysis.
Speaker 6: The duration of the investment book held steady during the quarter at 5.4 years.
Speaker 6: We continue to expect asset sensitivity to result in improving NRI with higher market rates.
Speaker 6: Butterfield's interest rate sensitivity has moderated somewhat.
Speaker 6: Due to a higher proportion of fixed rate loans and continued relatively higher sensitivity of US dollar deposits
Speaker 6: to market rates in the Channel Islands.
Speaker 6: I will now turn the call back to Michael Collins.
Speaker 4: Thank you, Michael. I am pleased to note that Butterfield became a member of the UN Global Compact in 2022, which is a public confirmation of her commitment to her responsible business practices in the areas of human rights, labor, the environment, and anti-corruption.
Speaker 4: Our ESG program includes a specific focus on climate change and sustainable infrastructure, climate well-being, and workforce equity.
Speaker 4: Barfield results continue to validate the strengths of our best in class operating jurisdictions.
Speaker 4: Sustainable non-adjusting come and discipline expense management that help drive the efficiency ratio below 60%.
Speaker 4: As we enter 2023, we believe that Butterfield's return in common equity will continue to support overall growth objectives and investor returns.
Speaker 4: Our long-standing strategy remains focused on limiting credit exposure in our conservative investment portfolio, growth through targeted acquisitions, and thoughtful capital management.
Speaker 4: Our core markets and market conditions remain constructive for Butterfield's continuing success given the proven, relatively low risk and high return profile of our business model across recent interest rate and economic cycles.
Speaker 4: I look forward to working alongside our great teams of people in 2023 and beyond to help clients achieve their financial goals and enhancing shareholder value. Thank you and with that we'd be happy to take your questions. Operator?
Speaker 2: We will now begin the question in the answer session to ask a question. You may press star then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker 2: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster.
Speaker 2: Our first question comes from Alex Tordell with Piper Sandler. Please go ahead.
Speaker 2: Our first question comes from Alex Tordell with Piper Sandler. Please go ahead. Hey, morning guys.
Speaker 8: it gonna help
Speaker 9: Now, I wanted to ask about the deposit flows you had during the fourth quarter. Obviously, it's nice to see the reversal after a couple quarters of outflows. As you look forward into 23, do you think that another deposit are kind of back?
Speaker 9: closer to where they were pre-pandemic that we should see some deposit stability or is there still some at risk deposit or do you think that maybe there could actually see some inflows over the next couple of months?
Speaker 6: Yeah, morning else. It's Michael scrum. So maybe I'll just kick off obviously in the slide back. You can see the FX movement, which is, you know, quite significant in terms of the underlying.
Speaker 6: you know, the underlying values that we put on the balance sheet. The underlying deposit flows, as you said, have we've seen sort of a post-pandemic outflow, net outflow. So, we're still a bit elevated, I would say. So, I think we still believe when we look at the—
Speaker 6: that the retail has helped very steady, corporate, particularly in Panther, Mutant, and came in a bit more volatile in terms of business flows. So, you know, I still think we'll land somewhere in the region of 12 and a half billion, so we're still a little bit elevated right now, but I was here trying to carefully balance the rate
Speaker 6: the cost of deposits with the flows as well. So I think we've done a decent job of that, even though cost deposits are ticking up. But that's the balance of this part of the cycle. So I think we're still looking at.
Speaker 6: 12, 12 and a half maybe a little bit higher maybe a little bit lower up but they're about.
Speaker 9: Okay. And then, you know, in the same, I guess, correlated to that, you know, as you think about cash flows from the investment portfolio, I think last year it was mostly just expecting the cash flows to kind of turn into cash. Have you changed the strategy? Are you thinking about reinvesting some more, you know, just given a little bit more stability.
Speaker 6: to the FS book impact in TCE. So again, we're just kind of sitting there until we kind of start the march back and we were pleased to see a recovery obviously of the TCE at this quarter, help by some of the OSEAN marks coming back a little bit. So I was like, you know, as well, we're pretty conservative, so we're gonna...
Speaker 6: kind of, you know, short-term rates are still pretty productive, but over time obviously we want the fixed rate assets in investment portfolio. So, you know, maybe a couple of quarters more and see how it's see how rates develop and then we should be relattering out and going back to BAU.
Speaker 9: Okay, that's great. And then you know, you talk a little bit about the deposit pressures starting to pick up a little bit, you know, specifically in the Channel Island. So I was wondering if you could help us just get a little bit better sense for how we're thinking about or how you're thinking about overall deposit betas in the various jurisdictions.
Speaker 6: Yeah, so I'll kick off and I'm cranking also.
Speaker 6: chime in obviously the exit run rates are a bit higher if you look at you know the the march particularly on the on the term deposit side
Speaker 6: You know, has really largely been due to the Channel Islands where again, we don't have a significant enough market share to have an impact on the pricing in those markets and we're still trying to grow market share obviously there. And it is just a more competitive environment and I'll thanks there are primarily.
Speaker 6: mid-market commercial banks, and so again there's this more price sensitivity in those markets. In terms of how we think about the betas in Bermuda and Cayman, that hasn't really changed very much in terms of the deposit betas, so I think for demand we model something like a 30% beta and nothing.
Speaker 6: So those on a back testing base is a pretty conservative assumptions for those two markets really. And then the channel islands were obviously a little bit newer to the market. And so we're modeling it a little bit more aggressive deposit beta. These are through cycle. I think we're sort of peaking in terms of deposit beta.
Speaker 4: We have over 200 million strolling and mortgages now and sort of over about 100 million in deposits. So over time, I think the channel allowance will become, the funding will become somewhat less expensive as we grow the retail book.
Speaker 4: But today it's very much a corporate book and I think that will change over time. It'll start to look a little bit more like Bermedon came in, but it'll take some time to get there.
Speaker 10: Thank you for taking my questions.
Speaker 2: Thanks. Our next question comes from Timur, Briziler, with Wells Fargo Securities. Please go ahead.
Speaker 2: Our next question comes from Timur, Brizeler, with Wells Fargo Securities. Please go ahead. Good morning.
Speaker 3: Good morning, Timur. On the buyback, I just want to make sure I'm hearing you correctly. You're re-upping it. You're optimistic about the trajectory of TCE. Are you still waiting to get to that 6% level before you re-engage or are you starting to re-engage already?
Speaker 3: higher than the prior year to serve as a catch-up for kind of shares not purchased during
Speaker 5: Thanks, Timor. I guess probably a few point of just to tee it up is, you know, that kind of always said that, you know, as we see a pathway back into our range of 66.5 percent, you know, we'll give consideration to whether we go back into the market and commence our share repartises. Stuttering Department
Speaker 5: And as you know, you can see that we are kind of marching towards that. So at the end of December , I think we're like 5.6 and we're kind of still seeing positive conditions around that. And then secondly, we always like to have a program that's authorized. So to your point, we do have the existing one that expires the end of February . So that's available to us. And then what we did announced yesterday.
Speaker 5: is a renewal or replacement program of 3 million shares to take us through to next February . And we'll continue to look at that. And we're really happy that we just finished our board meeting yesterday. People would approve that and we're very supportive of going back into the market for share repartuses, obviously subject to market conditions. So we're all seeing some nice activity on the shares this morning.
Speaker 5: which is good to see. But yeah, we are kind of in having internal discussions and looking at recommencing share of iBex. And we do have the current program available to us as well as come March 1st. We have the new program.
Speaker 6: Yeah, and I think team of sorts Michael's grounds can add to that. I think the pace will probably be slower in the first half of the year is what we would expect. We just want to see conditions kind of stabilized both the positive levels and OCI. But I think that's how we think about internally.
Speaker 3: And then you had mentioned that you extended a large line of credit to the CAME UNG??? it in Government.
Speaker 3: Can you quantify the size of that and as you're looking at the loan book through 23 is there any kind of visibility to other chunky activity taking place or does that come up a little bit more kind of I don't want to say unexpected but is that situation a little bit more fluid and seeing?
Speaker 5: pipeline there. The size of the one that was extended during 2022 was kind of mid-teens to the payment items government. Obviously that's been also amortizing and paying down over the last couple of months as well. It's somewhere around 12 to 13 at this point.
Speaker 5: That is obviously we continue to kind of focus on those relationships, those significant relationships, nothing significant in the pipeline at the moment, but as those opportunities come up we are always kind of looking to put our heads in the ring as long as the terms and conditions are appropriate, the prices appropriate.
Speaker 3: You know, we'll extend those types of facilities. Great. And then just last for me looking at your expectation on the deposit side, the fact that we still have some lagging rates to be input into the Bermuda mortgages.
Speaker 3: Just looking at net interest margin and kind of putting all that together, is the expectation here kind of steady as she goes as these two dynamics work out, at least in the first quarter, or do you see slowing or maybe even reversal as you start getting more pressure on the funding base and as a yield.
Speaker 6: that name expansion at a slower pace than what we've seen in Q3 and Q4. Obviously it's a big uptick.
Speaker 6: you know, in Q3 and then slightly more moderate uptake in them in Q4 and it's what it's just mentioning we still have two announced base rate increases in the Bermuda residential book which are coming through in Q1.
Speaker 6: So, you know, when you put it all together, you know, the cash and short term.
Speaker 6: Securities will continue to trend up. Loans will trend up a little bit, but there's about 40% fixed in that. And then obviously security, when we start to reload, I should reinvest at much higher rate as we start to see T.C. coming back. So.
Speaker 6: You know, we can't see a path of a longer expansion as long as the rates market remains constructive for us, which is...
Speaker 6: you know, somewhere where we're sitting at the moment, a little bit higher, a little bit low up, but you know, there's still, there's still, um...
Speaker 6: there's still additional expansion to come.
Speaker 3: Got it. And what's the magnitude of the two announced bass increases on the
Speaker 6: The book, 25 basis points.
Speaker 6: 25 basis points. 25 each. So 50. Yeah. Yeah.
Speaker 5: Great, thank you. Sorry, Tim, I have to correct myself. So, sorry, that KMA facility is in the region of 150. I was actually thinking of tenure when I said kind of mid-teens. So that's the tenure of it. But it's in the region of 150.
Speaker 3: That's 150 million commitment and that's fully drawn down or is that...
Speaker 3: The only part of that is, okay, great. Thanks for the color, I appreciate it.
Speaker 3: Thanks for the color. I appreciate it.
Speaker 2: Our next question comes from David Feaster with Raymond James. Please go ahead.
Speaker 11: Hey, good morning, everybody. I just wanted to maybe get a quick economic update from y'all. We've got the restrictions now lifted in the island economy. Great to see the uptick in the banking fees.
Speaker 11: I'm curious, the pulse of your local economies from your perspective, how inflation in higher rates are impacting the local businesses there, and then just any expectations for that banking fee line item as well. Yeah, thanks for the question. I mean, I think all the economies in our jurisdictions are actually doing quite well.
Speaker 4: It is seasonal in a sense. So obviously, it's fourth quarter came in late November . Thanksgiving through December is actually really busy. That's their high season. But on the other hand, Bermuda is the low season from a church in perspective so it balances out. Bermuda is holding its own.
Speaker 4: reinsurance industries doing well. We sort of have a whole new type of reinsurance company over the last five to ten years of life re-entures. So as property catastrophe is actually waned a bit, Burby's reinvented itself again. So reinsurance and international businesses is doing well. We do have a bit of a problem in terms of flight capacity.
Speaker 4: which came and doesn't have, came and has tons of flights per meter today has fewer flights and we're working with the airlines try to get more capacity, but the economy is doing reasonably well, Kankman is doing very well, so expanding population growth.
Speaker 4: A lot of the new people sort of setting up there and the channel island is doing quite well as well. So all the economies are doing well. Everything's open. Burmese.pl will have a good summer season so far so good in terms of cost of living. Burmese.pl. came in.
Speaker 4: I have always been very expensive. So I think inflation isn't any surprise here. We've talked in the past. We haven't seen any credits rest at this point, but we're keeping on it as rates go up. But so far, there's enough indigenous wealth and saved wealth in Burmita in particular.
Speaker 4: That we haven't seen any real credit stress. So we'll keep an eye on it But you know, we're you know quite positive about the way all all four economies are looking on the banking side
Speaker 11: Okay, that's helpful. And maybe to the point on credit, it was great to see the decrease in non accruals. Obviously we're not seeing anything significant. Could you maybe just talk about what drove that decline? And then just curious on your mortgage clients and how they're holding up with higher rates on those floating rate mortgages.
Speaker 11: and your approach to working with those borrowers that may be struggling more, and whether there's just anything on the credit front that you're watching or maybe concerned about at this point. Sounds like there might not be much, but just...
Speaker 5: I guess the answer to the first question in regards to the decreases in non-prool, we actually had a non-prool learn that was played down.
Speaker 5: So that's kind of come off the books. So that was a very positive development in regards to our credit loan book during the quarter. It was a facility in the UK and a very kind of unusual circumstance, if you will, that caused it to come up and something that you necessarily wouldn't see expect to re-appear, but that was settled and that was...
Speaker 5: on known affordability or payment affordability on nodes, as the interest rate has increased over 2022. So very focused on that. And so far we haven't seen anything come through, no indications of any decreases in credit quality. So no mispayments kind of not seen anything unusual when it comes to mispayments or days pass due.
Speaker 5: Usually, kind of around Christmas time, people do ignore the mortgage payments at least for a month as they're going to Christmas and make sure that they have a good Christmas and kind of bringing happiness to their family. That's kind of seasonal and we don't see that as being unusual. And it's a different market in the sense that we don't.
Speaker 4: do credit scoring. We have so few mortgages and the average size of the mortgages is much higher than you'd see in the US. So we actually, in both Cayman and Burmita, we actually know each property. So when someone's getting into trouble and struggling a bit, you know, we've got our arms around and we actually know how to restructure it.
Speaker 4: are settling but we're just not seeing at this point.
Speaker 11: He respected the person. He respected the person. Which is very, very important in the eyes of this. That's right. And then that's helpful. Thank you. And then maybe just touching on the acquisition, just curious. It sounds like we might be getting some revenues here in the first quarter. Just kind of curious.
Speaker 6: Yeah, so hi, David, it's Michael Scrom. So yeah, teams are working very diligently on pushing both the consent through the system. So we need client consent in order to actually do the due diligence. And that's going pretty well. A little bit slower. A lot of questions from clients around, hey, what's this for? And so needing to explain what's happening, but it's a good conversation.
Speaker 6: has been very high quality of client files. It's also a slightly younger book than the Guernsey book. And we're very pleased that we're going to be closing the first tranche of clients at the end of the first quarter here.
Speaker 6: There's still a few moving pieces. It's not going to be material, but it's obviously helpful both for Singapore entity and it's helpful for a fee income as a whole. But it's not a large acquisition. And there's still some moving parts around which clients actually.
Speaker 6: what the pipeline is as well. I think overall the deal is still within the state of parameters. Clients are some of them are fantastic trust clients and there's a lot of additional opportunity for us to look at going forward. But the initial push is we'd be just kind of get it through the system. I would say this very few.
Speaker 6: differences in the risk appetite, there are some, and that's been put to sort of an arbitration committee to kind of discuss and figure out whether we reject or whether there's some way that we could take them on in a conditional way. So that discussion has been productive. So I think overall it's going well.
Speaker 6: There are some great clients and Michael and I have been on early calls in Singapore, you know, talking to some of the families, talking through the process and what they can expect to happen. So very pleased with the quality, very pleased with the way that Chris Wee says has cooperated as well during this process. I was actually got a lot going on, but I think they...
Speaker 6: I was very committed to getting this done with us and so that's been very helpful as well. So financials, it's a little early still with those social movement pieces, but we're definitely keen to come and talk about an excursion. I think we're really happy about the quality of the clients. So I think what we're seeing is generational wealth and age.
Speaker 12: the quality point.
Speaker 11: all the clients. That's terrific. All right, thanks everybody.
Speaker 2: Thank you. Again, a few other questions. Please press star, then one. Our next question comes from Tim Switzer with KBW. Please go ahead.
Speaker 13: Hey, good morning. Thanks for taking my questions.
Speaker 13: Good morning. Thanks for taking my questions. Item.
Speaker 13: I had a quick follow up on, I guess your M&A pursuits and interests, you know, I know it's, you guys are spending a lot of time doing this due diligence. You know, do you still have appetite to maybe, you know, acquire another trust prison this year if you find a right opportunity or is that kind of on the back burner for now? And then, a similar question, if, you know, I know it's thank M&A, you don't have too many options, but, you know, is that still a adventurous...
Speaker 6: There's still active dialogue. The CSD will talk about it about a year to kind of get from initial conversations to something that worked for everybody. And then it's another year to kind of get the teams to have an integrate. So in terms of just having conversations and making that pipeline work, and there's still some great opportunities for us.
Speaker 6: And so we would definitely be in the natural buy-off eventually. It just is the station period is a bit longer and sometimes it, you know, sometimes it doesn't, it doesn't work for both parties at the same time. So it definitely is still an appetite. You know, parameters are still the same, you know, so we're paying up to eight times EBITDA presynidies. It in market, maximum outlay of $50 million. And $50 million.
Speaker 6: accretive and so you know it these things these are not financial acquisitions they're kind of strategic moves for for the sellers and and for us so so yeah still you know definitely a handful of good opportunities nothing to talk about yet and you know maybe maybe they end up going away and coming back again who knows but there's there's still appetite in it.
Speaker 13: in the bank and the trust company. Okay, great. And for the margin outlook, you guys talked about, you expect a little bit of expansion still. It seems like in Q1.
Speaker 13: But, you know, what's the trajectory over the rest of 2023 assuming we get maybe another 50 basis points of high school or something from the Fed? If the Fed pauses, is there a moderation in the margin in the back after the year as the positive costs continue to rise but lonely, settle out or do you think you're being able to maintain the name?
Speaker 6: Yeah, so we would see it as drivers of the NIM expansion really are, as you correctly said, you see a moderation in the loan, both in terms of new originations are starting to moderate at higher rates.
Speaker 6: And there's obviously a fixed component that's, you know, that's flawed, if you will. You know, but retail loans on the exit run rate is still up a fair bit for us. What's going to kick in in a more meaningful way for us is the relattering of the cash, as we see to pause stabilization.
Speaker 6: You know, the X of run rate on the cash is pretty low, but it's definitely getting there in terms of just that T-vill's rolling over. And that will just continue, really, as we roll into longer-dated fixed rate maturities. And then to pause the cost, we would expect that to moderate in terms of cost.
Speaker 6: For now, but it just depends on what the market then does we have to remain competitive so I need to fix to a bucket and I will see that's where
Speaker 6: You know, we have the this is the first rate cycle we've done since the ABA and acquisition in Stirling in the Channel Islands and so this is a bit of a learning experience But I think our model assumptions are still very conservative and as you can see on the our sensitivity You know with another Part of basis point, you know even 200 base points with we're not expect
Speaker 2: the confidence back over to you, but it felt for any closing remarks.
Thank you, Dave, and thanks everyone for dialing in today. We look forward to speaking with you next quarter. Have a great day.