Bank of NT Butterfield & Son Ltd (NTB) 2016 Q3 法說會逐字稿

Good morning, and welcome to the Third Quarter 2016 Earnings Call for the Bank of N.T. Butterfield & Son Limited. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

I would now like to turn the call over to Mr. Mark Johnson, Vice President, Group Head of Communications for the Bank of N.T. Butterfield & Son Limited. Please go ahead, sir.

Thank you, Dan. Good morning, everybody, and thank you for joining us for Butterfield's third quarter 2016 earnings call. On the call today, I'm joined by Butterfield's Chief Executive Officer, Michael Collins; Chief Financial Officer, Michael Schrum; and Chief Risk Officer, Dan Frumkin. Following their prepared remarks, we will open the call up for questions. Yesterday, we issued a news release announcing our third quarter 2016 results. The release is available on the Investor Relations section of our website.

Before I turn the call over to CEO, Michael Collins, I would like to remind everybody that today's discussion will refer to certain non-GAAP measures, which we believe are important in evaluating the Company's performance. For reconciliation of these measures to US GAAP, please refer to the earnings press release. Today's call may also contain certain forward-looking statements, which are subject to risks and uncertainties. Please refer to the forward-looking statement disclosure contained in our earnings press release for a fuller discussion of these risks associated with such forward-looking statements. I will now turn the call over to Michael Collins.

: Thank you, Mark, and thanks to those joining the call today as -- first as a publicly listed Company in the US and successfully completing our initial public offering on the New York Stock Exchange on September 16. After the market close yesterday, we reported strong results for the third quarter of 2016. While overall net income of $24 million, decreased $4.8 million compared to this time period last year. It was due primarily to the incurrence of $8.8 million in non-core option vesting costs from a legacy option plan for employees related to the 2010 private equity recapitalization of the Bank.

With the valuation achieved by our recapitalization, investors in connection with the offering, the option in question are now fully vested which resulted in the non-core expenses including related payroll taxes. Excluding the non-core items, Butterfield had an improved third quarter with core earnings for the quarter at $33.4 million, a 14.1% increase over the same period in 2015. Revenue continues to be strong with growth in both net interest income and non-interest income. While our third quarter core operating expenses increased over last year, expenses as a percentage of core revenues decreased and our third quarter core efficiency ratio improved to 65.3% compared to 66.8% in the third quarter of 2015.

We continued to maintain a highly liquid conservative balance sheet with resilient asset quality. Michael Schrum and Dan Frumkin will go into more detail on these and our other financial results later during this call. We are pleased with what we've accomplished so far in this milestone year for the Bank and believe that we're on track to continue accomplishing our long-term strategic goals. Since this is our first conference call as the US publicly listed Company, I'd like to provide you with a brief overview of our Company and reiterate what we view as Butterfield's compelling core attributes and key competitive strength. Butterfield is a leading full-service bank and trust manager focused on shareholder value and growth with compelling offerings in the attractive markets.

Founded in 1858 in Bermuda, our principal banking operations are located in Bermuda, the Cayman Islands and Guernsey and we offer specialized financial services in the Bahamas, Switzerland and the United Kingdom. We offer banking services composed of retail and corporate banking, and wealth management, which consists of trust, private banking and asset management to high net worth -- and also high net worth individuals, family offices and institutional and corporate clients. In terms of geographic reach, our wealth management platform is offered in our Bahamas, Bermuda, Cayman Islands, Guernsey and Switzerland segments.

Our full range of retail and corporate banking services to individuals, local businesses, captive insurers, reinsurance companies, trust companies and hedge funds is also offered in our Bermuda and Cayman Islands segments. Our key banking products include personal and business deposit services, residential and commercial mortgages, small and medium-sized enterprise and corporate loans, credit and debit card suites, merchant acquiring, mobile and online banking, and cash management. Our United Kingdom segment offers residential property lending.

Over the last several years, we've strategically repositioned Butterfield to focus on our core markets to support our growth and provide strong and stable returns for shareholders. In support of our strategy, we believe that Butterfield has several key competitive strengths that differentiate us and provide a solid foundation for growth, strong capital generation and returns, a robust and efficient balance sheet and visible earnings, leading market share in attractive global markets, potential growth opportunities and an experienced management team. Our strong capital generation is driven by a number of factors including significant fee income with historically low capital requirement, low-cost deposits, a high-yielding loan portfolio, a conservative capital efficient securities portfolio and operations in corporate income tax neutral jurisdiction. As part of our strategy to focus on our core markets, maintain our leading position in Bermuda and the Cayman Islands and scale our trust and asset management business, the third quarter saw the orderly wind down of the deposit-taking and asset management businesses of our London-based private bank.

Consistent with the previously announced changes in our UK segment, we are maintaining our residential property lending business there. The integration of HSBC Bermuda private banking, investment management and trust business was completed seamlessly and has enabled us to add scale to and drive revenue in our trust and asset management business in a core market. This acquisition is in line with our strategy and reflective of our ability to acquire certain businesses, particularly in wealth management which complement our existing portfolio and capitalize on opportunities stemming from dislocation in the international wealth management market. We believe there could be other acquisition opportunities in this business as well. Lastly, but no less important, we successfully completed our public offering of common shares on the New York Stock Exchange on September 16. Becoming a publicly listed Company in the US, provides our shareholders with enhanced trading liquidity and gives us access to capital to maintain our leading position in core markets, pursue strategic growth opportunities and continue to bring value to our clients, shareholders and communities.

In Board matters during the third quarter, Butterfield welcomed David Zwiener to the Board -- to the Company's Board as a non-executive director. David is a Senior Operating Executive with the Carlyle Group's financial institutions group and joins fellow Carlyle Group Executive, James Burr, on Butterfield's Board of Directors. In August, Wendall Brown who had served as a director since 2013 retired from the Board, and subsequent to quarter end, Richard Venn who had served as a director since 2010 also retired from the Board.

We thank both Wendall and Richard for their many contributions to the Bank during their tenure as directors. In closing, we believe that we're in an excellent position to continue executing our growth strategy of maintaining our leading position in Bermuda and the Cayman Islands while continuing to grow scale in our trust and wealth management business across our core geographies, all while providing our shareholders with solid returns. With that, I'll now turn the call over to Chief Financial Officer, Michael Schrum.

Thank you, Michael, and good morning to everyone on the call. It's a pleasure to be with you today. I'll take a few minutes now to take you through some of the details of our financial results for the third quarter. As Michael noted, the overall decrease in net income by $4.8 million to $24 million compared to this time period last year was primarily due to the incurrence of an $8.8 million of non-core costs associated with the vesting of [Alexion] stock option program.

Taking away the non-core items, as Michael noted, Butterfield had a strong third quarter with core earnings for the quarter of $33.4 million, a 14.1% increase over the same period in 2015. Net interest income before provision for credit losses increased $5 million year-on-year and non-interest income increased by $2.1 million. The increase in net interest income is primarily due to a combination of growth in the Bermuda loan portfolio, volume increases in Bermuda and Cayman available for sale and held to maturity investment portfolios and a decrease in interest expense on deposits due to lower rates paid across several jurisdictions.

The acquisition of HSBC Bermuda's private banking, trust and asset management businesses that Michael spoke about earlier helped drive growth in non-interest income due to increases in trust and asset management fees collected. Looking at results from our core geographies, net income in Bermuda decreased by $3.2 million compared to the third quarter of 2015, mainly due to increased share-based compensation and other salary and benefits costs. In the Cayman Islands, net income during the quarter was up $2.8 million from the prior year, mainly due to increases in interest income on investments and loans, banking fees and decreases in loan loss provision recoveries, as well as lower salaries and reduced head count, while net income in our Guernsey segment was flat year-over-year. In the UK segment, we recorded a net loss before gains and losses of $2.8 million, primarily due to costs associated with the orderly wind down of the deposit-taking and asset management businesses. During the third quarter, we repaid the remaining $78 million of deposits to customers of our UK Bank.

Third quarter provisions for credit losses decreased year-over-year from $0.9 million to $0.3 million this quarter because of a specific provision raised in the third quarter of 2015 compared with no significant specific provisions raised in the third quarter of this year. While overall operating expenses increased by $16.1 million to $80.6 million, this was largely due to the non-core items discussed previously. Quarterly core operating expenses also increased by $3.4 million over the same quarter last year, largely as a result of the increased compliance-related costs, as well as head count related costs for our new colleagues joining from HSBC. Our expenses as a percentage of core revenues decreased. We are pleased that the core efficiency ratio improved by 360 basis points to 65.3% this quarter. Total non-interest operating expenses, which include non-core, non-interest expenses, grew to $77.3 million this quarter, an increase of $9.9 million from the same period in 2015. The increase is mainly due to the previously mentioned non-core vesting expenses of the option program as well as salary and benefit increases in the Bank's compliance division.

Our Cayman Islands segment saw a slight increase in operating expenses this quarter due to the increase in IT-related expenses, while our Guernsey and UK segments saw a decrease in operating expenses, primarily driven by favorable exchange rate movements. Additional non-core expenses related to the HSBC Bermuda business acquisition as well as wind down costs continuing to wind down investment management business and the banking operations in the UK. Under the capital return policy, the Board has declared a dividend of $0.10 per share for the current quarter. Consistent with our history of prudent capital targets and disciplined capital management, Butterfield maintained a solid capital position throughout the third quarter due to a strong organic capital generation and high-quality capital. And with the implementation of the Basel III framework reforms, our current total capital ratio is 22.9% as at September 30, 2016, which is significantly above regulatory requirements. All in all, we remain well positioned to meet emerging regulatory capital requirements while continuing to service our customers.

In summary, this was another strong quarter for Butterfield, led by disciplined execution and a commitment to our growth strategy. Now, I'll turn the call over to Chief Risk Officer, Dan Frumkin, to talk about our balance sheet.

Thank you, Michael. As both Michael Collins and Michael Schrum noted, Butterfield continues to generate strong profits and produce solid returns for shareholders. This is due in large part to our efficient and liquid balance sheet and how we strategically manage our risk profile. As of September 30, 2016, our total assets were $11 billion, which represents a $700 million increase from the close of 2015. Of that, 54.6% or $6 billion of our total assets is comprised of cash and demand deposits with banks for short and long-term investments excluding held-to-maturity investments. This compares with 50.8% from the close of 2015.

Our loan portfolio totaled $3.8 billion at the end of the third quarter, down slightly from year end 2015. Paydowns in commercial lending and lower new residential lending mortgage loans were slightly offset by increased sovereign and public sector lending in Bermuda. Unfavorable exchange rate movements also affected the loan portfolio. The loan portfolio represented 34.9% of total assets and 39.7% of total customer deposits at the end of the quarter. The allowance for credit losses was down slightly from end of 2015 due to the release of some specific provisions, offset by higher general provisioning rates in several jurisdictions due to decreased sovereign credit ratings on countries where those jurisdictions had loan exposure.

Turning to credit quality, we continue to proactively engage with clients who experience financial difficulty. Gross non-accrual loans were $65.4 million at quarter end or 1.7% of total gross loans. This is a slight increase from the end of 2015, due primarily to one commercial mortgage, which moved to non-accrual during the second quarter of 2016. Net non-accrual loans were $49.6 million or 1.3% of net loans after specific provisions of $15.8 million. The specific provision coverage ratio was 24.1% at September 30. Butterfield's investment portfolio increased to $4.1 billion as of September 30, 2016 compared to $3.2 billion at year end 2015. The increased portfolio size was funded through an increase in total deposits, which we used to purchase liquid US Government and federal agency securities, as well as highly-rated corporate fixed income securities and prime-rated mortgage-backed securities.

Additionally, approximately $315 million of trading securities were sold during the first nine months of the year, with the proceeds used to acquire US Government and federal agency fixed income securities and mortgage-backed securities within the available for sale portfolio. Our investment portfolio is comprised of high-quality assets. Approximately 93.2% of the portfolio is invested in A- or better-rated securities and 100% of the investments are investment grade or better.

A weakening and long-term treasury rates decreased the investment yield year-over-year by 25 basis points. Total net unrealized gains in the portfolio were $51.6 million compared to an unrealized gain of $100,000 at year end 2015. The significant increase is largely attributable to a continued decrease in long-term treasury rates in the first nine months of 2016. Finally, average customer deposits increased to $10 billion this quarter and we have an attractive core deposit base including a combination of interest-bearing and non-interest-bearing accounts with the latter comprising 20.2% of total deposits. Now, I'll turn the call back over to Mark.

Thank you, Dan. We'll now open the line to questions.

(Operator Instructions) Will Nance, Goldman Sachs.

Nice quarter again. You mentioned a pipeline of wealth management opportunities. Maybe you could just elaborate a little bit on the acquisition strategy and any color on the pipeline that you're seeing right now in the market?

Well, it's Michael Collins. Good morning, everybody. We're continuing to have discussions with various parties. As we talked about it during our roadshow, there is quite a number of opportunities in different sectors of the trust market whether its (inaudible)offshore trust companies or subsidiaries of some of the larger onshore banks that may want to get out of the market due to sort of the regulatory pressures and that sort of things. So, nothing has changed in terms of our view of the dislocation in the market, where there is obviously a lot of sellers or a few buyers. So, we think there are some decent opportunities. It does take time. So, I would provide that caution. It takes time, because we're looking for very specific kind of companies that are -- I think we talked about our criteria, under $50 million acquisition price in the jurisdictions in which we operate today, possible addition of Singapore, two-thirds of it has to be private trust only. So, we're not interested in company administration and fund administration, and we're looking for the deals sort of under eight times EBITDA. So, we are very disciplined in the criteria. So, it will take time once you begin discussions, and then after that, it takes some time to do due diligence. So, we're not rushing it. I think we said we'll hopefully be doing sort of one every 12 months or 18 months. And the best part of it is obviously we buy the fee income, but because our trust company is owned by a bank, we obviously get a lot of deposits in other banking business and FX with it. So, it's still a really exciting opportunity and we're absolutely focused on it, but it will take some time to sort through the market.

Timur Braziler, Wells Fargo Securities.

I guess my first question is going to be on the HSBC acquisition that was completed in April. Just maybe provide an update on how sticky those deposits have been. I know the attrition rate was better than what you guys had originally expected. Is that still the case? And then maybe following up on that with margin, the excess liquidity kind of generated from that acquisition. Has that all been fully deployed or should we continue to see some excess liquidity you run down here in the fourth quarter?

So, the HSBC acquisition occurred at the end of April. So, the third quarter was the first full quarter that we had all the revenues and expenses associated with it. I would say just from a cultural fit perspective, it really has gone seamlessly. The people came over well. It is very much like an asset management business. So, the people own the relationships and sort of drive the business here to make sure they're happy. We had very little attrition in terms of people leaving and the big relationship managers with the real heavy clients are still with us and quite happy. So, that's gone well.

In terms of the stickiness of the deposit base, we started off with $1.6 billion and we're still a bit over $1.3 billion. Some of the attrition went into our money fund. So, overall, we're probably down a couple hundred million dollars. So, it is very sticky. We'll watch this for six months or seven months and we will continue to improve that stickiness. It's -- as trust clients, we intuitively know that this is multi-generational money that will be with us for many, many years, but we just have to be careful and make sure that it's as sticky as we think it is. So, we have started to deploy it a bit and you will continue to see us start to reduce our liquidity as we get more and more comfortable, but we will take it gradually. But so far, in terms of where we thought fee income was going to come in in terms of the retention to the deposit base, it's exactly what we hoped it would be.

And then maybe just switching over to capital management. Can you maybe just provide a little bit of an update on dividend policy, Board conversations and then where share repurchases, if any, you're going to continue to factor into the equation?

Sure, I'll start off and then I'll pass it over to Michael Schrum. It remains our intention to -- the intention of both the Board and the Management team to proceed with the forward redemption of the preferred share issue. So, we obviously talked quite a bit about that in the roadshow and that's still our intention. Following the redemption, we also intend to increase the quarterly dividend to $0.32 per share. So, the dividend for the fourth quarter payable in the first quarter next year.

So, nothing has changed in our view. We're working through the regulatory approvals now, but that's still our stated intention. In terms of share buybacks, we're going to increase the dividend and continue to look for investment opportunities, but we always have shown and will continue to show that we won't sit on capital. If we don't find investment opportunities, we will give it back to shareholders. But at this stage, we're looking at the dividend policy and then also acquisitions. Michael, do you have any comment.

Yes. So, maybe I can just clear up. There's obviously a note in the press release -- and thanks, Timur, for the question. There's a note in the press release referring to the share repurchase activity, which is obviously pre the US listing. As you can see, the prices there are not related to (inaudible) the prices we've seen since then. At the moment, we're not anticipating any share repurchase activity. We have a couple of these very large capital [restacking]. You can see our regulatory capital is really high this quarter, because we are sitting on that whole preferred issue, which has -- the next redemption date is December 15 for that and so clearly we're not planning to use the money we just raised to repurchase shares at this point. We have to kind of get through these capital management actions over the next two quarters or three quarters and then we'll look where we are in terms of both the rate environment as well as the acquisition side and we'll come back certainly to investors and give periodic updates on the quarterly as to what we see out there in terms of opportunities.

Jefferson Harralson, KBW.

Can you talk about the expense line and maybe the change from last quarter to this quarter, and do you think that probably [$67 million] is a decent run rate going forward?

Yes. So, thanks, Jefferson, for the question. Our core expenses are up a bit this quarter, about $3.5 million and it's driven by two things. As I said, it's the first full quarter of betting down the HSBC acquisition. So, we've got obviously the fee revenues associated with it which is why our core expenses went down as a percentage of revenues. But the absolute number went up a bit, because we've betted in all those HSBC employees. And I think as we talked about in the roadshow, compliance is continuing and will continue to be a major focus of ours. And we're going to -- continuing to invest in it, but I think you would see stability in that number, but we did have to hire some additional compliance resources just to get to a level where we felt that we are keeping up with the strenuous and continually increasing regulatory demand, but a lot of it really was just betting in the HSBC team in the third quarter.

And then a follow-up is on the foreign exchange revenue. It is, from my model looks like it was down a little bit. Can you talk -- is there a seasonality to it, is it just a volatile number or can you talk about the foreign exchange or what to expect there?

Yes, I think we do have a little bit of seasonality. The part that isn't seasonal was obviously lot of the international global capital flows. Even some of that's seasonal in terms of when the reinsurance industry books premiums and books their policies in January 1 and in July 1. So, there is a bit of seasonality there. But generally captives have currencies coming in and out all year. So, there's not too much there. So, the seasonality you would be seeing there off a little bit would really be from Cayman. So, Cayman, obviously, we have a big tourist population there and the summer, if any who has been to Cayman in the summer is pretty miserable. So, not too many tourists and I think that's really what's causing. And as we go into October, November, December, the high season Cayman, it picks up a bit. So, there's not a huge amount of seasonality, but I think quarter to quarter, we'll see some variation.

(Operator Instructions) Alex Twerdahl, Sandler O'Neill.

First question, suppose we see a 25 basis point rate increase in December from our fed here, can you just remind us sort of the impact to your loan portfolio, how quickly you might raise the Butterfield base rate and how loans might reprice following a rate increase here?

Yes, so this is Dan Frumkin. Alex, it's a good question. So, if we see a 25 basis point rate, we would reprice both the Bermuda commercial and Bermuda residential mortgages. There is notice period. First, you have the 60-day notice period, we will provide the notice shortly after the rate move were to occur and we would reprice both those portfolios in Cayman, both the commercial and residential loans reprice off of US prime. So, they move automatically. We have a little bit of other US dollar lending, but not significant.

So, we would anticipate moving rates across -- all of our loan books across Bermuda and Cayman that are US dollar pretty shortly thereafter a fed move, if we get one.

And if you remember, we didn't increase in December last year in Bermuda. We did increase our commercial base rate for small businesses and some of the commercial lending we do. But we did not increase it for residential mortgages. So, the sense that we have in our marketplace is that I think it will be somewhat expected that this next move we will take action on both sides.

And I would just add one more point to this. You have seen in some of the roadshow materials and some of the materials in the F1, where we were significantly more asset sensitive than our peer group in the US. We remain asset sensitive, if not slightly more asset sensitive than was disclosed as part of that process. So, an increasing rate environment is good for us.

And then just, in the future should we sort of expect that Butterfield base rate to be increased every other rate hike or I know you said it sort of would be like 50% of the rate increase over time. Is it really more of an every other thing or is it as we get maybe a little more consistency in higher rates, maybe like 50% like -- if it goes to 50 basis points, it might be 25 basis points. How do you think about the timing of that Butterfield's base rate change?

We've modeled it really about 50% sensitivity. So, I think the concept is sort of every other one makes sense to think of it that way. But, I would say there is so many variables that go into our decision that it's hard to say with exact certainty and we look at reactions and how the market reacts and what other banks do. And historically, we've been able to -- all the banks have been able to do somewhat better than 50% sensitivity, but we're trying to be conservative since we've never come off a bottom really anywhere, but certainly in Bermuda. So, we are not sure how it's going to react going forward. But as we've talked about, we've got significant pricing power given the nature of our markets. And we will use it -- and we'll try to use it in a measured way. And we've got pricing power both on the asset side and on the deposit side, but these are small communities and we are very cautious about how we do it. But we'll -- I think that's a good way to think of it, but I would say it could be a little choppier than that, we could do two in a row and not do the next one or do every other. It just depends on what's happening, but the general trend will be that we can control it pretty well.

And then just to piggyback on the question on expenses earlier. Are there any additional cost saves to be expected from the HSBC deal? Are those pretty much in run rate at this point?

Those are pretty much in run rate, at this point, it is. The trust industry, trust business is not particularly scalable, because again you're -- it's like asset management. So, you're hiring, you are sort of acquiring the people who own the relationships for 10 years or 20 years and you can do a little bit on the operational side just in terms of the technology and administration. But generally, it's not too much on the cost save side, it's really buying their fee income and you obviously get the deposits with it which drives the returns.

Yes, I would say, Alex, it's Michael Schrum, the cost saves are going to come more from the strategic programs that we're looking at. So, we're currently in renegotiations with our IT service provider, HP Enterprise and hope to both modernize the infrastructure slightly and also achieve some cost saves in the near term on that. And secondly, we have a group service center in the Halifax location that we are planning to utilize more in the future.

And then just a final question from me is that you guys, if I'm not mistaken, got hit pretty directly by Hurricane Nicole a couple weeks ago. Typically, after some hurricanes and natural disasters here in the States, you generally see kind of an uptick in lending activity in some of those geographies. Do you -- is that based on your historical -- history? Have you -- following some other hurricanes, I mean, do you expect to see like an uptick in that kind of activity in the next couple of quarters? Do you expect some loan growth to result from that?

So based on this particular storm, I would say, no. It is a good point because the biggest one we had in years was Fabian in 2003 and that caused a huge amount of damage. And so you've got a lot of insurance -- external (insurance) insurance money coming into the island and then people start -- they replace the roof and they start to renovate at the same time and then start to borrow some money. So, that did happen in that storm. Nicole was really strange, but it was a category 3 that came straight over us with an eye for two hours. But for some reason, we seemed to be on the good side of the eyewall. So, the damage was really minimal and some roofs off that sort of thing. So I don't think it's going to have a major impact on our loan volumes, but if you got a category 4 or something or a different storm, theoretically that's what does happen. And then if you go back to Hurricane Cayman -- Hurricane Ivan in Cayman 2004, I think [we talked] about that completely. We got $1.3 billion of external insurance money coming into the island and completely rebuilt the place. So, it does happen, but not in this one.

Don Worthington, Raymond James.

Just following up on kind of the loan growth idea, do you see opportunities where you might be able to expand the loan portfolio, say, over the next 12 months or so?

So, we do in one area. So, as we talked about, we're just completing our orderly wind down of our UK bank. So, we're about to give back our deposit-taking license to the PRA. And as part of that transition, we are continuing on with Butterfield Mortgages Limited, so basically a mortgage Company with a handful of people. And we will continue to lend in that market, maximum 65% LTVs, kind of 3.25% floating, Knightsbridge in Kensington. So, really disciplined lending that we've done historically and have never honestly seen a delinquency at this point. So, we consider the core market and we will continue to lend there. And even with Brexit, with the decline in Sterling, I think their property prices are down a bit, but then people have a historic opportunity to buy property in the UK, in London with the price of the pound. So, we actually think that's neutral, maybe even helped a bit. So, we continue to lend there.

In Bermuda and Cayman, honestly we won't see growth, we don't expect it. Both markets are growing a bit, so Cayman a little faster, but Bermuda has finally come out of its recession and has positive GDP and continuing increases in retail sales. And we've got Americas coming in the summer which will be huge impact in the economy. So, we're all doing better, but they are really small markets and there is not enough construction activity, I think, to justify a [lot of] lending. And as we said on the roadshow, we can produce really attractive returns without reaching for credit. So, I think the growth will be in the UK, Central London, but outside of that, I would say it's going to be flat.

Don, maybe I can just -- it's Michael Schrum. I just wanted to highlight something. As you look over the past three quarters or four quarters, obviously you've seen the Sterling exchange rate to the dollar rate move quite significantly and that has had obviously an impact of the dollar value of the Sterling loans. So, as you look at sort of the trend, we are flat from year end, but there's about a $70 million FX impact on retranslating those loans from pounds into dollars as a result of that. So, I think that's just worth a mention.

(Operator Instructions) And at this time, I'm showing no further questions. I would like to turn the conference back over to management for any closing remarks.

Okay. Thank you, Dan. And thanks to everyone for dialing in today. We had the pleasure of meeting many of you during the IPO roadshow and look forward to seeing you again soon. We will do our utmost to be out at conferences and thus use as much as we can and hope to get many of you down to Bermuda as well. So, we look forward to that and we look forward to meeting you in the weeks and months come. But thanks for all your support and we will talk again soon.

And ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.