Q1 2025 The Bank of N.T. Butterfield & Son Ltd Earnings Call
Michael: Good morning, my name is Michael and I will be your conference operator today. At this time I would like to welcome everyone to the first quarter 2025 earnings call for the Bank of N.T. Butterfield & Son Ltd.
Michael: All participants will be in listen only mode. Should you need assistance, please say no to conference specialists by pressing the star key followed by zero.
Michael: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded.
Speaker Change: I would now like to turn the call over to Noah Fields, Butterfield's head of investor relations. Please go ahead.
Noah Fields: Thank you. Good morning everyone and thank you for joining us. Today we will be reviewing Butterfield's first quarter of 2025 financial results.
Speaker Change: On the call, I am joined by Michael Collins, Butterfield's chairman and chief executive officer, Craig Bridgewater, Group Chief Financial Officer, and Michael Schrum, President and Group Chief Risk Officer.
Noah Fields: Following their prepared remarks, we will open the call up for a question and answer session.
Noah Fields: Yesterday afternoon we issued a press release announcing our first quarter of 2025 results.
Noah Fields: The press release and financial statements along with a slide presentation that we will refer to during our remarks on this call are available on the Invest Relations section of our website at www.butterfieldgroup.com
Speaker Change: Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-gab measures which we believe are important in evaluating the company's performance.
Speaker Change: For reconciliation of these measures to U.S. Gap, please refer to the earnings press release and slide presentation.
Speaker Change: Today's call and associated materials may also contain certain forward-looking statements which are subject to risks uncertainties and other factors that may cause actual results different materially from those contemplated by these statements.
Speaker Change: Additional information regarding these risks can be found in our SEC filings.
I will now turn the call over to Michael Collins.
Michael Collins: Thank you, Noah, and thanks to everyone joining the call today. I'm really pleased with our strong first quarter results. Butterfield continues to manage a conservative and highly liquid balance sheet that supports our low credit risk investment portfolio and disciplined loan book, as well as our relationship led to speed generating businesses.
Michael Collins: Our ongoing dedication to efficiency was evident during the quarters. We successfully executed a group-wide voluntary early retirement program, resulting in a moderate reduction in future
Michael Collins: Butterfield is a market-leading bank in Bermuda and the Ketayam and Islands.
of the growing retail presence in the Channel Islands.
Michael Collins: We offer wealth management solutions across these island jurisdictions, including trust, private banking, asset management and custody.
Michael Collins: We also provide specialized financial services in the Bahamas, Switzerland, Singapore, and the UK, focusing on high net worth individuals with mortgage needs for prime central London properties.
Michael Collins: I will now turn to the first quarter highlights on page 4.
Michael Collins: Butterfield reported excellent financial results in the quarter with net income of $53.8 million and in court net income of $56.7 million.
Michael Collins: We reported core earnings per share of $1.30 with a core return on average tangible common equity of 24.2% in the first quarter.
Michael Collins: The net interest margin was 2.7% in the first quarter, an increase of 9 basis points from the prior quarter, with a cost of deposits falling 13 basis points to 160 basis points
This is more than all set reductions in asset yields.
Michael Collins: The board has again approved a quarterly cash dividend of $0.44 per share.
Michael Collins: We also continue to repurchase shares during the quarter, purchasing a total of 1.1 million shares at an average price of $37.78 per share.
Craig: I will now turn the call over to Craig for details in the first quarter
Craig: Thank you, Michael and good morning. On slide 6, we provide a summary of net interest income and net interest margin.
Craig: In the first quarter, we reported increased net interest income before provision for credit losses of $89.3 million and $1.
Craig: During the quarter and at NII, benefited from a lower course of deposits as we experienced a positive shift in deposits to demand from term at repricing on road overs.
Craig: Yields on new investments continue to be higher than expiring majorities, adding to the overall portfolio yields.
Craig: Central Bank cuts in overnight rates during the prior quarter resulted in lower, loan and treasury yields during the first quarter of 2025.
Craig: Average interest-earning assets in the first quarter were flat compared to the prior quarter, at $13.4 billion, despite some anticipated client outflows, partially offset by the impact of FX translation of my strengthening British pound versus the US dollar.
Craig: Treasury yields were 27 basis points lower at 3.98% and loan yields were 11 basis lower at 6.32%
Craig: While's average investment yields with 17 and bases points higher at 2.68%.
Craig: During the quarter, the bank maintained its conservative strategy of reinvesting securities into a mix of US agency MBS securities and medium-term US treasuries.
Craig: Slide 7 provides a summary of non-interest income reached total of $58.4 million, a decrease compared to the seasonally elevated fourth quarter, primarily due to Noah transaction volume and incentive fees.
Craig: The income did see an increase in effects revenue and asset management fees due to increased client activity, as well as an increase in trust income due to an expanded mandate with an existing client, as well as special project fees.
Craig: Non-interest income continues to be stable and capital-efficient stores of revenue through the cycle with a fee income ratio of 39.4% in this quarter.
For a slight age, we present core non-interest expenses.
Craig: Total core non-interest expenses were at 90.3 million dollars which is slightly lower than 90.6 million dollars in the prior quarter.
Craig: The largest relative movement in salaries and benefits, technology and communications market, marketing, and indirect taxes were a result of seasonal payroll taxes on the annual besting of share-based compensation.
Craig: Salaries and benefits improved due to a better than expected experience in health care costs for the quarter, offset by the impact of annual salary reviews and promotions.
Craig: During the first quarter of 2025, we implemented a group-wide voluntary early retirement program which will benefit the ongoing expense run rate and was contemplated in the expense guidance we have already provided.
Craig: At this point we continue to expect a quarterly core expense run rate of between $90 million to $92 million in 2025, but we should caution that there are a number of inflationary risks that are emerging.
Craig: Overall, core non-interest expenses continued to be within our fund rate expectations as discussed on previous calls.
Speaker Change: I will now turn the co-load to Michael Schrum to review the bathroom sheet
Thank you, Craig.
Speaker Change: The slide line shows that Butterfield's balance sheet remains liquid and conservatively positioned.
Speaker Change: A period and deposit balances decreased to $12.6 billion from $12.7 billion at the Priake Water
During the quarter we experienced volume.
Speaker Change: Outflows of $238 million, which was partially offset by a $110 million FX translation on the strength of the British pound versus the dollar.
Speaker Change: We continue to expect some customer overflow over the coming quarters and expect average deposits to settle into a range of around $11.5 billion to $12 billion.
Speaker Change: Butterfield's low risk density of 30% continues to reflect the regulatory capital efficiency
Timur Braziler
Speaker Change: On slide 10, we show that Butterfield continues to have the strong overall asset quality with low credit risk in the investment portfolio, which is 100 percent double A or higher rated U.S. Treasuries and Government Guaranteed Agency Securities.
The net charge of rate was negligible [inaudible]
Speaker Change: and both non-accrual loans of 2.3% of gross loans, along with an allowance for credit losses coverage ratio.
of 0.6% remain with the next expectations.
Speaker Change: As a reminder, Butterfield's loan portfolio continues to be 68% full recourse residential mortgages, of which 81% have looms to values below 70%.
Thank you.
Speaker Change: We're also pleased that a legacy loan for a sizable hospitality facility in Bermuda has been fully resolved following a period of receivership.
Speaker Change: On the 9th of April , the buyer announced the close and the plan to redevelop the historic
and that is currently progressing.
Speaker Change: This event occurred after the current reporting period and is expected to be reflected in the second quarter results.
Timur Braziler
Speaker Change: On the slide 11, we present the average cash and securities balances with a summary of interest rate sensitivity.
Speaker Change: Guration decreased slightly for the AFS book and increased for the HTM as a result of the increased spreads and elevated market rates.
Speaker Change: Unveilized losses in the AFS portfolio included in OCI were $131.4 million at the end of the first quarter.
Speaker Change: An improvement of 31.9 million or 20% over the prior quarter.
Speaker Change: We continue to expect improvement with additional burn-down of OCI over the next 12 to 24 months of 31% and 55% respectively.
Slide 12 summarizes regulatory and leverage capital levels.
Butterfield's capital levels continue to be conservatively if our regulatory requirements.
Speaker Change: On the 1st of January , we transitioned to the new Pausa Four Rules, which resulted in lower risk-weighted assets due principally to the banding of LTVs in our residential mortgage portfolio under the updated standardized approach.
Speaker Change: This changed improved our regulatory capital ratio by 1.9% for this quarter.
Speaker Change: Tangible Book Value per share also continued to improve this quarter and increased by 5.7% to $22.94 as unrealized losses on investments declined.
I'll now turn the call back to Michael Collins.
Speaker Change: Thank you, Michael. Recent U.S. trade discussions have created a significant uncertainty around changes to global supply chains, taxes, inflation and interest rates. At this point, we do not expect any significant direct impact on Marshall's business as our small and stable operating jurisdictions have not been in direct scope. [inaudible]
Speaker Change: Early indications are that hospitality bookings for the upcoming 2025 season and for meeting came in, remain robust.
Speaker Change: Butterfield's strong balance sheet is supported by capital efficient and recurring non-interest income, disciplined expense management and net interest earnings.
Speaker Change: Our capital management strategy focuses on delivering a sustainable quarterly cash dividend while supporting organic growth and the potential for select trust and bank acquisitions.
Speaker Change: Butterfield remains highly profitable and stable, which consistently exceeds regulatory requirements as we provide clients with essential financial services and tailored services to the communities we serve and helps create value for our shareholders.
Speaker Change: Thank you, and with that, we would be happy to take your questions. Operator?
Speaker Change: We will now begin the question and answer session. To ask a question you may press star than one on your telephone keypad.
Speaker Change: If you are using a speaker phone, please pick up your hand set before pressing the keys. 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 Change: The first question comes from David Feasters with Raymond James. Please go ahead.
Good morning, everybody.
Speaker Change: Hey, good morning, David. Um, maybe just starting, you know, one question on the credit side. You know, we've seen continued migration within the Rezzy Mortgage Book.
Speaker Change: I was hoping, you know, you obviously, you talked about in the prepare to marks, like very conservatively under written low LTV. I was hoping you could just touch on maybe where you're seeing, you know, some of this.
Speaker Change: pressure and your approach to it and just kind of any thoughts on the housing market probably.
Speaker Change: Yeah, good morning, David. It's Michael Schrum. So I would say it's really focused, a good question. It's really focused around two markets. So a little bit in Permuda and a little bit in the Prime Central London book.
Speaker Change: Two different markets. I think Bermuda, less of a concern. We're seeing valuations kind of coming through on the orio side and sales kind of picking up so.
Speaker Change: Not really worried about sort of the LTV profiles. It's more of a DSR issue for the Bermuda book a little bit.
Speaker Change: And obviously we have a couple of commercial facilities there. I mentioned one earlier, Elba Beach Hotel which has been in receivership for a while, and I will see it's.
Speaker Change: We're still accruing, so that's going to impact a little bit going forward, but sizable hospitality is coming out and then there's a couple of commercial facilities that have been in litigation for a while and some encouraging news.
Speaker Change: to see some normalization in that over the next couple quarters, I hope. And in the London book, it's really been more impacted by
Speaker Change: Sort of the government changes around Resnon-Dom, stamp duty increases, inherent tax increases. As you know, we only underwrite 60 to 65 LTV in Prime Central London, so Knightsbridge, Chelsea, Kensington area.
Speaker Change: And so what's happened there is demand is really dried up a little bit. There's been a lot of conversations about people up paying from the Prime Central London market and moving, you know, other places like Monaco, Switzerland, etc, because they no longer able to. [inaudible]
Speaker Change: to live there for long periods of time and not pay taxes on overseas earnings.
Speaker Change: and sort of spin, you know, I think less turnover in that market. Now remember that market is three to five year revolving. So there is a certain amount of refinancing that's going on.
Speaker Change: But I think valuations are still holding up broadly. We've seen some good sales, but there's also some sizeable facilities there that have gone into non-accrual really.
Thank you very much.
Speaker Change: You know, nothing systemic, but divorces, post-COVID and business sales being delayed, etc. And so the social repayment for those who are mainly either the sale of the property or the refinancing.
Speaker Change: and they've just kind of gone into hibernation a little bit in that market for the last couple of years and seeing some encouraging signs not really worried about credit content as you can see in the provisions but certainly something to watch there.
Speaker Change: Yeah, that's good color. And then maybe just staying on on the market side. I mean, you know, in the fair to marks you talked on about growing the retail presence in the Channel Islands. I know that's been a big focus. We've also had the expansion into Singapore. I was hoping you could just touch on the reception those markets where you're having success and
Speaker Change: and then maybe the other market you're expanding into and just again how that plays into the M&A landscape and what you're seeing.
Speaker Change: Sure, yeah, so we're doing quite well in the Channel Island, so we actually got a good mortgage loan book now fully supported by local deposits or credit card
Speaker Change: It's been taken up quite well, so we're pretty excited about how that's been been going
Speaker Change: No concerns there. So the growth is good and corporate deposits and everything are holding up. But as you know or I mean our plan is to try to make you look...
Speaker Change: More like Bervidian Cayman, so the funding is stickier than corporate funding and you know we are over getting close to 10,000 to local clients and across gurney and jerseys, so that's going quite well in Singapore.
Speaker Change: The Credit Suisse Integration is also going well. We're actually working quite well with UBS in terms of referrals and for some other business. So that's going well and we're making decent money there now. We're up to...
Speaker Change: Over 10 billion in assets under trust in Singapore alone, so we're pretty excited about that. So, both the retail expansion of the Channel Islands and the integration of Chris, we sent Singapore a good chat.
Speaker Change: Yeah, maybe I'll just add that, David, it's Michael Schrum. Just on the M&A side, as you know, we're particularly focused around fee businesses and in particular private trust businesses, so good conversations, but we're also a little bit picky in terms of
Speaker Change: You know, any new jurisdictions or anything like that. So where we have franchise level conversations, there can sometimes be jurisdictions that we don't want to be in.
Speaker Change: But overall, I mean, you know, so we're kind of sticking with our existing trust jurisdictions and obviously we would always look at banking overlap in our existing jurisdictions as well.
Speaker Change: And the one thing that we compromise on the trust acquisition is obviously AML and fiduciary risk. We're willing to negotiate a bit on price because we do have to compete with...
Speaker Change: Private Equity Occasionally, but the real sacri-saint part is AML it's got to be pretty pure, so that's why it takes so long. But as Michael said, we are having some good discussions.
That's great.
Speaker Change: And then just wanted to touch a bit on the margins side. There's a lot of moving parts in here, right? I mean, we've got the lag impacts on repricing and from the recent rate cuts, you know, on both loans and deposits. And then we've got a ton of volatility in the bond market of late. I'm curious, you know, maybe how that volatility is.
Speaker Change: Impacted your securities investment strategy and how that plays in the margin and just help us think through about the again the repricing side on both loans and deposits is that you know impacts the margin trajectory as we look forward.
Speaker Change: Yeah, yeah, David, it's Craig. So being kind of over the last quarter and we've seen a bit of kind of stabilization in regards to kind of rates on your own deposits and on loans to be actually seen.
Speaker Change: The Ray Cuts has kind of set in the inferior commands. We've seen some of the Ray Cuts from that quarter actually now kind of coming in and taking them in to make making an impact. So that's had a kind of downward draft impact on kind of the Treasury, what was even on kind of a short-term cash. [inaudible]
Speaker Change: as well as what we're receiving on loan balances as well. As you're aware kind of came in as well as the kind of C.I.U.K. book moves directly as a result of moving to the Fed 108 for a came in or for U.S. Prime.
Speaker Change: and then for the kind of UK book directly in regards to chain is in the bank of email rate and we've seen decreases in both of those over the last quarter. So that's impacting kind of the loan deals as we would expect.
Speaker Change: I guess we continue to have positive yield pickup on the investment book.
Speaker Change: I know we continue to reinvest proceeds from any maturities or pay-downs back into the investment book.
Investing in NBS Securities, so we'll kind of meet in term U.S. Treasury's.
Speaker Change: I'm giving the volatility in the market over the last couple of months, sorry months I should say, we've kind of been putting more, leading more towards kind of medium-term U.S. treasuries, kind of gives us a bit more certainty around the yield that we're going to get to over the lifetime of those treasuries.
and that'd be...
Speaker Change: Um, subject to kind of no pre-primit risk that will come with N.B.A. security risk.
Speaker Change: But again, kind of fuel high quality oil kind of about rated, so no credit rates that were getting as a result of acquiring the securities.
Speaker Change: And again, the yield is very much high above the existing portfolio yields. So we're investing somewhere in the kind of 390 basis point range compared to the portfolio yield, which is substantially lower than that, so you'll continue to get picked up there.
Speaker Change: But I guess if you know can't be weak environment stays as it is then you know that's very constructive for our name as well as that's for our balance sheet.
Speaker Change: Having said that, as Michael said, some of these larger facilities that we are now kind of getting some resolution on, you know, those were at, you know, kind of, I guess, rates that on it.
Speaker Change: Quite favourable to the bank. And as those get resolved, then you know, we should see some headlines on the year or on the portfolio. Or let me learn more from you.
Speaker Change: So, to sum it all up, I think there will still continue to see some new expansion at a slow rate than what we saw in Q1s, a really driven lie.
Speaker Change: the pick up on the investment book, but again the headwinds are on the on the book.
Okay, that's all full. Thanks everybody for the color.
Thanks.
Speaker Change: And your next question will come from Timur Braziler with Wells Fargo. Please go ahead.
Hi, good morning.
Mourning Timur, A.B. [inaudible]
Speaker Change: I'm circling back on the M&A discussion. I'm just wondering with all of the trade war noise if the level of conversation has changed at all in recent months.
Speaker Change: Just maybe give me your thoughts on getting a deal done in this current backdrop if it changes at all.
Yeah, good question. I don't think that necessarily the trade...
Speaker Change: The situation really has an impact. If anything, it sort of creates more uncertainty and on part of the cellos, it creates sort of more impetus to get things done.
Speaker Change: given a marker risk backdrop. I think we operate in, as you know, on the trust side in multiple jurisdictions, so we've seen quite a lot of this on a certainty play out in FX.
Speaker Change: You know, whether it's the sterling, as you can see on a balance sheet or, you know,
or Euro or any other currency, so it's kind of...
Speaker Change: Moving things around quite a bit as we go through these discussions and obviously does an impact growth on the underlying business.
Speaker Change: that we're talking about in terms of the earnings profile and also ultimately on valuation of things. So I think.
Speaker Change: I think that's probably the main thing. The FX piece is probably more important to this than you know than to trade situation reading.
Speaker Change: Got it. And maybe keeping to that same line of questioning, just looking at the fee side.
Speaker Change: Does all of this uncertainty, I'm assuming it pulled forward maybe some of the fees into you to your comment on attacks. I'm just wondering.
Speaker Change: If there is a slowdown in cross-border trade, does that negatively affect some of your few lines or just how you guys participate there, just increase uncertainty and you can actually drive more business kind of on a prolonged basis and not so much on a
Speaker Change: That is a very insightful question. I think what we so are, and it's probably similar to some of our kind of concept bars as well.
Speaker Change: You know, we saw some benefit of that both in terms of kind of effects revenue as well as asset management revenue. So, notable volumes were up in both of those lines.
Speaker Change: and obviously that's positive for the activity there and the revenue that we're earning. So if that continues then we would expect to see people keeping a close eye on
Speaker Change: kind of foreign exchange balances and also kind of how they're positioning their portfolios as we go forward as well.
Speaker Change: We have a lot of customers are actually looking at their portfolios and trying to manage liquidity or go into liquid positions as a result just to kind of get some stability in their portfolios and many banks have been the beneficiaries of that. [inaudible]
Thank you.
I think…
Speaker Change: Again, going forwards, a large part of the effects is the currency pairs between Bravita and US dollars as well as Cumin and US dollars.
Speaker Change: And that's quite stable over time. But so there's really the fluctuation in foreign currency transactions that people will be looking to position themselves to other protect themselves or take advantage of movements in foreign currency.
Timur Braziler
Speaker Change: Yeah, I think in terms of the jurisdiction and the impact on the trade discussions, we talked about this though.
Speaker Change: Real Direct Impact, but the indirect impact is cost of living in Bermuda and Caminus already very high and so obviously more expensive goods coming from the U.S. to both jurisdictions will drive our costs up but the good news is
Speaker Change: Both jurisdictions actually were exempted from the new legislation for Chinese built ships for port fees, so they made an exemption for all voyages less than 2,000 miles.
Speaker Change: and for the smaller ships, so there's a bit of a scare early on, but...
Speaker Change: So we won't be impacted by that, but we will be impacted by a higher cost of living just because US goods will be more expensive But it was a good example of I think in a situation where you know there was a reasonable decision because obviously no one wants [inaudible]
Speaker Change: Small island jurisdictions to suddenly triple the cost of food coming in so that turned out quite well.
Speaker Change: I think, finally, Timur Braziler, Michael Schrum. Just on the broader FX question, obviously FX is pec currency. Most of it is related to tourism activity on the island, so if there was a GDP, kind of slow down, obviously, we would see some...
Thank you very much.
Speaker Change: Great, and it just lasts for me on the Elbow Beach Resolution. Can you just remind us?
What that means?
Speaker Change: for your numbers. You had mentioned, you know, maybe a little bit of a hit at the NII. But was there any portion of that that had been charged off in the past? Is there any reserves set aside against it? Could you just kind of talk us through the moving pieces for Butterfield as that loan as a result or that property as a result?
Speaker Change: Yeah, sure. I mean, the biggest piece is really in our past few disclosures and of six of the loans that's been sitting around. It's a legacy.
Facility, that was-
Thank you.
Speaker Change: You know, washing his face while interest rates were low because they were getting rental income on a residential part of the hotel development and that was covering basically all the outgoing during the lower interest environment when rates went up.
Speaker Change: You know, there was an equity ask and I think we all decided we were going to put that into some receivership and I think that's been at benign and a sales process that's now completed.
Speaker Change: So, essentially, it will be a significant reduction in our past, in our 90 days past due, it was an occurring facility.
Speaker Change: at penalty rates. And so from that perspective, and I, you know, we would expect to...
Speaker Change: I see some pressure on that going forward, but effectively most of the impact here is just going to be the 90 days past two bucket, it's going to move, and then you'll see a drop obviously in low-nice hits on a balance sheet.
But I guess there may be a non-clearance effort.
Speaker Change: So to be clear, there is no lowest content in there, so we expect to get fully repaid on the outstanding principle and interest. There is no provision that's been set aside for that, and we don't expect any lowest is coming through as a result of settling that.
Speaker Change: Okay, and any lending opportunity to the Lauren Group as part of the sale or is that not anticipated?
Speaker Change: Yeah, I mean because of the receivership obviously we were pretty clear and it was a competitive bidding process that we wouldn't, we weren't first out of the gates to, you know, to be learning into, um,
You know the initial transaction but I think there's certainly opportunities we'll see what the plans are [inaudible]
Speaker Change: So we'll see what happens and what their plans are and certainly we'll be able to support maybe parts of that as we move forward. It's been a very good relationship over over many years and hopefully we'll continue.
Great. Thanks for all the color.
Thanks.
Speaker Change: Again, if you have a question, please press star then one. Our next question comes from Emily Lee with KBW. Please go ahead.
Emily Lee: Hi everyone, this is Emily Stepping in for Tim Slitzer. Thanks for taking my question.
Sure. Good morning. Morning.
Emily Lee: So, just expanding on the last few questions surrounding economic uncertainty and tariffs.
Emily Lee: Can you expand a little more on the impact of tariffs on your customer base and more specifically are there any jurisdictions that are especially impacted by tariff threats or a potential recession whether that's in the US or more broadly?
Emily Lee: No, so I think, again, I think there are not any direct implications for Bermuda came in emergency in Jersey. Quite honestly, we get overlooked sometimes during HDO political
Emily Lee: Battles between the continents, which is not a bad place to be.
Emily Lee: Different businesses and different geographies so there may obviously there'll be impacts there individually and by industry but it's pretty complex to try to figure out.
Emily Lee: The real impact is cost of living, so both Bermuda and Cayman and the Channel Islands have a huge international business and fund industries which is fantastic, but that obviously is driven up.
Emily Lee: The cost of living for the local population which is a big issue of discussion, so I think anything that...
Emily Lee: Increases the cost of a loaf of bread in the U.S., which is then shipped to Bermuda, including the tariffs on the loaf of bread plus the cost of the shipping to Bermuda is going to impact us. So it really is mostly cost of living and people.
Emily Lee: Stregly, and that could have some impact on mortgage payments as well. It's all groceries go up as an example. So it's really direct, but I think we're pretty happy that we're sort of under the radar at this point.
Speaker Change: That's great, very helpful. Thank you. One more question I have was in the case of a potential economic downturn. If say, loan growth or revenue doesn't come through as strong as expected, what levers do you have to pull on the expense of the non-interesting side to kind of your earnings targets?
Speaker Change: So expenses we've just completed a voluntary early retirement program which was quite successful actually.
You know, a number of people took it up, and-
Speaker Change: It has two impacts, basically, gives opportunities for younger employees to move up in the organization.
Speaker Change: Less expensive positions and actually set most of those up in Halifax which is a less expensive jurisdiction. So we've just done that in Q1. Every year we look at that and we either do.
Speaker Change: A round of redundancies or early retirement and beyond that we have been building the health tax office which
Speaker Change: including the Canadian dollars, sort of 60% of the cost of Bermuda and Cayman in terms of employee, we're up to 250 people, so it's a combination of sort of immediate tactical cost reductions, which we will absolutely do if we see revenue starting to decline, but the longer term cost plays really to build Halifax.
and just have all processing and operations for Timur.
Speaker Change: You know compliance alert monitoring in a jurisdiction that's a little less expensive so it's a combination but we have in the past when we we sense that we're going to have some revenue troubles down the road we will take tactical action to reduce expenses and we can't do that.
Great. Thanks so much for taking my question.
Thank you.
Speaker Change: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Michael Collins: Thank you, Michael, and thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day.
Michael Collins: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.