Bank of NT Butterfield & Son Ltd (NTB) 2023 Q2 法說會逐字稿

Good morning, my name is Nicky and I'll be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2023 Earnings Call for The Bank of N.T. Butterfield & Son Limited. (Operator Instructions) Please note this call is being recorded, and I will be standing by should you need any assistance.

早安，我叫尼基，今天我將擔任你們的會議操作員。此時此刻，我謹歡迎大家參加新界銀行 2023 年第二季財報電話會議。巴特菲爾德父子公司。 （操作員說明）請注意，此通話正在錄音，如果您需要任何協助，我將隨時待命。

I would now like to turn the call over to Noah Fields, Butterfield's Head of Investor Relations.

我現在想把電話轉給巴特菲爾德投資者關係主管諾亞·菲爾茲(Noah Fields)。

Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's second quarter 2023 financial results. On the call, I'm joined by Michael Collins, Butterfield's Chairman and Chief Executive Officer; Craig Bridgewater, Group's Chief Financial Officer; and Michael Schrum, President and Group Chief Risk Officer.

謝謝。大家早安，感謝您加入我們。今天，我們將回顧巴特菲爾德 2023 年第二季的財務表現。巴特菲爾德董事長兼執行長邁克爾柯林斯 (Michael Collins) 也參加了電話會議。 Craig Bridgewater，集團財務長；以及總裁兼集團首席風險長 Michael Schrum。

Following their prepared remarks, we will open the call up for a question-and-answer session. Yesterday afternoon, we issued a press release announcing our second quarter 2023 results. 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 Investor Relations section of our website at www.butterfieldgroup.com.

在他們準備好的發言之後，我們將開始問答環節。昨天下午，我們發布了新聞稿，公佈了 2023 年第二季業績。新聞稿和財務報表以及我們將在本次電話會議發言中參考的幻燈片簡報可在我們網站 www.butterfieldgroup.com 的投資者關係部分取得。

Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will reference -- will refer to certain non-GAAP measures, which we believe are important in evaluating the company's performance. For a reconciliation of these measures to U.S. GAAP, please refer to the earnings press release and slide presentation.

在我將電話轉交給麥可‧柯林斯之前，我想提醒大家，今天的討論將參考某些非公認會計準則衡量標準，我們認為這些衡量標準對於評估公司績效非常重要。有關這些措施與美國公認會計準則的協調，請參閱收益新聞稿和幻燈片簡報。

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 to differ materially from those contemplated by these statements. Additional information regarding these risks can be found in our SEC filings.

現今的電話會議和相關資料也可能包含某些前瞻性陳述，這些陳述受到風險、不確定性和其他因素的影響，可能導致實際結果與這些陳述預期的結果有重大差異。有關這些風險的更多資訊可以在我們向 SEC 提交的文件中找到。

I will now turn the call over to Michael Collins.

我現在將把電話轉給麥可柯林斯。

Thank you, Noah, and thanks to everyone joining the call today. The second quarter results continued to demonstrate the strength of Butterfield's leading bank franchise and market position as well as our conservative and well-managed balance sheet. We delivered consistent quarter-over-quarter noninterest income and expense discipline, which helped offset lower net interest income.

謝謝諾亞，也感謝今天加入電話會議的所有人。第二季業績繼續證明了巴特菲爾德領先的銀行特許經營權和市場地位的實力以及我們保守且管理良好的資產負債表。我們實行了季度環比一致的非利息收入和支出紀律，這有助於抵消淨利息收入的下降。

As a reminder, Butterfield is comprised of well-established bank and private trust businesses located in premier offshore jurisdictions. We maintain leading bank market shares in Bermuda and the Cayman Islands with targeted growth in the Channel Islands. In the Bahama, Switzerland and Singapore, we provide private trust services in addition to our prime Central London mortgage offerings available to high net-worth borrowers.

需要提醒的是，巴特菲爾德由位於主要離岸司法管轄區的成熟銀行和私人信託公司組成。我們在百慕達和開曼群島保持領先的銀行市場份額，並在海峽群島實現目標成長。在巴哈馬、瑞士和新加坡，除了向高淨值借款人提供優質的倫敦市中心抵押貸款產品外，我們還提供私人信託服務。

I will now turn to the second quarter 2023 highlights on Page 4. Butterfield reported solid results with net income of $61 million and core net income of $57 million. We reported a core return on average tangible common equity of 26.3% for the second quarter of 2023, with core earnings per share of $1.14. The net interest margin was 2.83% in the second quarter, a decrease of 5 basis points with the cost of deposits rising to 127 basis points from 110 basis points in the prior quarter. Deposit pricing increased across jurisdictions as fixed-term deposits rolled into higher rates due to rising market interest rates.

我現在將轉向第 4 頁上的 2023 年第二季亮點。巴特菲爾德報告了穩健的業績，淨利潤為 6100 萬美元，核心淨利潤為 5700 萬美元。我們報告的 2023 年第二季平均有形普通股核心回報率為 26.3%，每股核心收益為 1.14 美元。第二季淨利差為2.83%，下降5個基點，存款成本由上季的110個基點上升至127個基點。由於市場利率上升，定期存款利率上升，各司法管轄區的存款定價均上漲。

Our business in the Channel Islands, which has a higher proportion of corporate banking customers, continues to be the most competitive market and the most significant contributor to the increase in the cost of deposits.

我們在海峽群島的業務，企業銀行客戶比例較高，仍是競爭最激烈的市場，也是存款成本上升的最重要因素。

Our TCE/TA ratio of 6.5% has improved the conservative end of our targeted range of between 6% and 6.5%. As a result, we have been able to continue with the execution of our balanced capital return strategy, accelerating our share buyback program in the second quarter with a repurchase of 723,000 shares in the quarter. We expect to continue repurchasing shares throughout 2023, subject to market conditions.

我們的 TCE/TA 比率為 6.5%，改善了我們目標範圍（6% 至 6.5%）的保守端。因此，我們能夠繼續執行平衡資本回報策略，加快第二季的股票回購計劃，本季回購了 723,000 股股票。我們預計將根據市場狀況在 2023 年繼續回購股票。

Our liquidity position and strong capital profile also allowed us to redeem our 2018 issuance of $75 million, 5.25% supported debt in June which will lower our interest expense going forward.

我們的流動性狀況和強勁的資本狀況也使我們能夠在 6 月贖回 2018 年發行的 7,500 萬美元、利率為 5.25% 的債務，這將降低我們未來的利息支出。

The redemption had a onetime $900,000 interest cost impact in the quarter due to the accelerated amortization of issuance costs. I am also pleased that we completed the second closing of our planned acquisition of trust assets from Credit Suisse. To date, 374 relationships representing $21.1 billion of assets under administration have now transferred to Butterfield, significantly expanding our footprint in Asia.

由於發行成本的加速攤銷，本季贖回一度產生了 90 萬美元的利息成本影響。我還很高興我們完成了計劃收購瑞士信貸信託資產的第二次交割。迄今為止，管理資產達 211 億美元的 374 個關係現已轉移至巴特菲爾德，顯著擴大了我們在亞洲的足跡。

Work is continuing on a client due diligence for subsequent tranches, which will include additional relationships in Singapore as well as Guernsey and Bahamas. We continue to expect to add between $8 million to $10 million in annual trust fees from the deal in 2024 with anticipated associated running costs of around $6 million per annum.

後續部分的客戶盡職調查工作仍在繼續，其中將包括在新加坡、根西島和巴哈馬的其他關係。我們仍預計 2024 年該交易將增加 800 萬至 1,000 萬美元的年度信託費用，預計相關營運成本約為每年 600 萬美元。

I will now turn the call over to Craig for more detail in the quarter.

我現在將把電話轉給克雷格，以了解本季的更多細節。

Thank you, Michael, and good morning, everyone. Looking now at Slide 6. Here, we provide a summary of net interest income and net interest margin. In the second quarter, we reported net interest income before provision for credit losses of $92.5 million, a decrease of 5% versus the prior quarter. The decrease was mainly due to lower average balance sheet volumes, higher deposit costs and the accelerated amortization of issuance costs from the 2018 subordinated debt issue.

謝謝你，邁克爾，大家早安。現在請看投影片 6。在這裡，我們提供了淨利息收入和淨利差的摘要。第二季度，我們報告未計信貸損失準備金的淨利息收入為 9,250 萬美元，比上一季下降 5%。下降的主要原因是平均資產負債表規模下降、存款成本上升以及2018年次級債發行的發行成本加速攤銷。

During the quarter, the net interest margin decreased 5 basis points due to increased deposit costs and the early redemption of the sub debt, which had a 3 basis point negative impact on NIM in the quarter. Average interest-earning assets fell 4.5% to $13.1 billion, due to customer deposit outflows. The yield on interest-earning assets increased 12 basis points to 4.1% from 3.98% as investment portfolio runoff was invested in cash and short-term securities at the shorter end of the yield curve.

本季，由於存款成本增加以及次級債提前贖回，淨利差下降了5個基點，對本季淨利差產生了3個基點的負面影響。由於客戶存款外流，平均生息資產下降 4.5% 至 131 億美元。由於投資組合資金被投資於殖利率曲線較短端的現金和短期證券，生息資產殖利率從 3.98% 上升 12 個基點至 4.1%。

The yield on treasury assets during the quarter was 4.06% versus an investment portfolio yield of 2.07%. Average investment balances were down $105.5 million or 1.8% compared to the prior quarter as paydowns and maturities were deployed into cash and short-term investments.

本季庫存資產收益率為 4.06%，而投資組合收益率為 2.07%。平均投資餘額較上一季下降 1.055 億美元，或 1.8%，因為付款和到期日被部署到現金和短期投資。

We continue to evaluate the market interest rate environment and expect to resume investment into longer-dated securities over time, subject to market conditions.

我們將繼續評估市場利率環境，並預期根據市場狀況，隨著時間的推移恢復對長期證券的投資。

Turning to Slide 7. Noninterest income was unchanged sequentially quarter-over-quarter as increased asset management, trust and foreign exchange revenues offset lower banking and other income earnings. Noninterest income continues to be stable and a capital-efficient source of revenues with a fee income ratio of 35.5%.

轉向幻燈片 7。非利息收入環比保持不變，因為資產管理、信託和外匯收入的增加抵消了銀行業和其他收入收入的下降。非利息收入持續穩定，是資本效率高的收入來源，手續費收入率為 35.5%。

During the quarter, we saw the impact of the fresh tranche of clients onboarded from Credit Suisse and increased ad hoc services on cost revenue.

在本季度，我們看到了瑞士信貸的新一批客戶以及臨時服務增加對成本收入的影響。

Slide 8 provides a summary of core noninterest expenses. Total core noninterest expenses were $83.6 million and improved compared to the $84.1 million in the prior quarter. The lower expenses are primarily attributable to lower staff-related costs, partially offset by higher technology and communications expenses related to the implementation of the new core banking system upgrade in Bermuda. Expenses were somewhat better than expected this quarter. However, we anticipate a quarterly run rate of between $85 million to $86 million over the next few quarters due to the investment in bank branch upgrades in Bermuda and Cayman as well as the costs associated with the go-live of the cloud-based core banking system in Bermuda and the expected completion of a similar upgrade in Cayman during the second half of 2023.

幻燈片 8 提供了核心非利息支出的摘要。核心非利息支出總額為 8,360 萬美元，較上一季的 8,410 萬美元有所改善。費用減少主要是由於與員工相關的費用減少，部分被百慕達實施新核心銀行系統升級相關的技術和通訊費用增加所抵銷。本季的支出略優於預期。然而，由於百慕達和開曼銀行分行升級的投資以及與基於雲端的核心銀行業務上線相關的成本，我們預計未來幾季的季度運行率將在 8,500 萬至 8,600 萬美元之間百慕達的系統預計將於2023 年下半年在開曼完成類似的升級。

I will now turn the call over to Michael Schrum to review the balance sheet.

我現在將把電話轉給邁克爾·施魯姆，以審查資產負債表。

Thank you, Craig. Slide 9 shows that Butterfield's balance sheet remains conservatively managed with a high degree of liquidity. Period-end deposit balances decreased to $12.2 billion from the prior quarter end. The decline in deposits of approximately $150 million is the result of typical client activity and some seasonality. As the year has progressed, we now expect to see post-pandemic stabilization of total deposit levels at around $12 billion. This is broadly in line with the longer-term deposit trends prior to the pandemic and adjusted for the 2019 acquisition of ABN AMRO, Channel Islands. Butterfield's low risk density of 34.3% continues to reflect the regulatory capital efficiency of the balance sheet with the low risk-weighted residential mortgage loan portfolio, which now represents 71% of total loan assets.

謝謝你，克雷格。投影片 9 顯示，巴特菲爾德的資產負債表仍維持保守管理，流動性較高。期末存款餘額較上季末減少至 122 億美元。存款減少約 1.5 億美元是典型客戶活動和某些季節性因素的結果。隨著今年的進展，我們現在預計疫情後總存款水準將穩定在 120 億美元左右。這與大流行之前的長期存款趨勢大致一致，並根據 2019 年收購海峽群島荷蘭銀行的情況進行了調整。 Butterfield 34.3% 的低風險密度繼續反映了資產負債表的監管資本效率，其低風險加權住宅抵押貸款組合目前佔總貸款資產的 71%。

Turning now to Slide 10. We provide additional detail on our deposit composition by segment. Butterfield's deposits remained well diversified across jurisdictions, with Bermuda holding the largest deposit share followed by Cayman and then the Channel Islands. We continue to offer term deposit product alternatives for clients seeking additional yield and we are seeing consistency in the mix with core noninterest-bearing deposits remaining at approximately 23% of deposits and a $2.8 billion at quarter end.

現在轉向投影片 10。我們按部門提供有關存款構成的更多詳細資訊。巴特菲爾德的存款在各個司法管轄區仍然保持多元化，其中百慕達擁有最大的存款份額，其次是開曼群島，然後是海峽群島。我們繼續為尋求額外收益的客戶提供定期存款產品替代品，我們看到核心無息存款的組合保持一致，仍佔存款的約 23%，季度末為 28 億美元。

As we have discussed in the past, deposit balances can fluctuate quarter-to-quarter as our larger corporate and trust clients manage their commercial interests.

正如我們過去所討論的，隨著我們較大的企業和信託客戶管理其商業利益，存款餘額可能會出現季度波動。

Turning to Slide 11, we provide details on loans by type, business segment and rate typing. The chart on the bottom left shows the growth of loans in Cayman and the Channel Islands compared to Bermuda, which has seen a net reduction as the portfolio amortizes. On the bottom right, we have seen a significant increase in the proportion of fixed rate loans in 2022 and the first half of 2023. The larger proportion of fixed-rate loans is expected to help stabilize yield and mitigate any potential credit issues. The recent change in mix has also significantly decreased the overall asset sensitivity over the past 5 quarters.

轉向幻燈片 11，我們按類型、業務部門和利率類型提供了有關貸款的詳細資訊。左下角的圖表顯示了開曼群島和海峽群島的貸款成長情況，而百慕達則隨著投資組合攤銷而出現淨減少。在右下角，我們看到2022年和2023年上半年固定利率貸款的比例顯著增加。固定利率貸款比例的增加預計將有助於穩定收益率並緩解任何潛在的信貸問題。最近的組合變化也顯著降低了過去 5 個季度的整體資產敏感度。

Turning to Slide 12. We display 2 charts that demonstrate the conservative nature of Butterfield's balance sheet versus peers. A high degree of liquidity is a structural feature for Butterfield as our banking entities do not have access to a central bank or a Fed window.

轉向投影片 12。我們展示了兩張圖表，展示了巴特菲爾德資產負債表相對於同業的保守性質。高度流動性是巴特菲爾德的結構特徵，因為我們的銀行實體無法進入央行或聯準會窗口。

Butterfield has significant holdings of cash and cash equivalents into bank deposits and short-dated sovereign securities as well as liquidity facilities with correspondent banks.

巴特菲爾德持有大量現金和現金等價物，包括銀行存款和短期主權證券以及代理銀行的流動性便利。

Butterfield's loan-to-deposit ratio remains low at 41% as we have conservative lending standards and only offer credit products in our home markets.

巴特菲爾德的貸存比仍然很低，為 41%，因為我們的貸款標準保守，並且只在本國市場提供信貸產品。

On Slide 13, we show that Butterfield continues to have strong asset quality with low credit risk in the investment portfolio, which is comprised of 95% AAA-rated U.S. government-guaranteed agency securities. Credit quality in the loan book also continues to be strong with nonaccrual loans standing at 1.2% of gross loans and a very small charge-off rate at 2 basis points.

在投影片 13 中，我們顯示 Butterfield 的投資組合持續保持良好的資產品質和較低的信用風險，該投資組合由 95% AAA 級美國政府擔保機構證券組成。貸款帳簿中的信貸品質也持續保持強勁，非應計貸款佔貸款總額的 1.2%，沖銷率​​非常低，僅 2 個基點。

On Slide 14, we present the average cash and securities balance sheet with a summary of interest rate sensitivity analysis. We continue to model modest asset sensitivity to result in improved NII with higher market rates. Unrealized losses in the AFS portfolio included in OCI stood at $207.3 million at June 30, 2023.

在投影片 14 上，我們展示了平均現金和證券資產負債表以及利率敏感性分析摘要。我們繼續對適度的資產敏感性進行建模，以提高NII並提高市場利率。截至 2023 年 6 月 30 日，OCI 中包含的 AFS 投資組合的未實現損失為 2.073 億美元。

At the current implied forward curve, we expect the OCI burn down to be $68 million or 33% of the total in the next 12 months and an expected decrease in OCI of $105 million or 51% in 24 months.

依照目前隱含的遠期曲線，我們預計未來 12 個月內 OCI 消耗將達到 6,800 萬美元，佔總數的 33%，24 個月內 OCI 預計將減少 1.05 億美元，即 51%。

Slide 15 summarizes regulatory and leverage capital levels. Butterfield's capital levels continue to be significantly above regulatory requirements. Our tangible leverage capital ratio has further improved to 6.5% from 6.3% at the end of the prior quarter. This has allowed us to gradually increase share repurchase activity this quarter in addition to our regular dividend.

投影片 15 總結了監管和槓桿資本水準。巴特菲爾德的資本水準持續大大高於監管要求。我們的有形槓桿資本比率從上季末的 6.3% 進一步改善至 6.5%。這使我們能夠在本季度除了定期股息之外逐步增加股票回購活動。

I will now turn the call back to Michael Collins.

現在我將把電話轉回給麥可柯林斯。

Thank you, Michael. As a management team, we regularly evaluate our operations, capital levels and efficiency. Our current outlook anticipates the Fed holding rates at an elevated level for a period and then begin to ease economic conditions to encourage growth. As a result, we will sharpen our focus on efficiency, credit risk mitigation and expense management with a continued emphasis on conservative liquidity and capital management.

謝謝你，麥可。作為管理團隊，我們定期評估我們的營運、資本水準和效率。我們目前的前景預計聯準會將利率維持在一段時間內較高水平，然後開始放鬆經濟條件以鼓勵成長。因此，我們將更加重視效率、信用風險緩解和費用管理，並繼續強調保守的流動性和資本管理。

We have successfully navigated interest rate cycles in the past and remain well positioned for a more moderate rate environment when that emerges. Over the past year, we have upgraded our core banking system in Bermuda and onboarded the first 2 tranches of the Credit Suisse trust clients while navigating the challenges of the recent liquidity crisis.

我們過去已經成功地駕馭了利率週期，並且在出現更溫和的利率環境時仍處於有利地位。在過去的一年裡，我們升級了百慕達的核心銀行系統，並接納了瑞士信貸信託公司的前兩批客戶，同時應對了近期流動性危機的挑戰。

Following the official end of the global pandemic, we now look forward to continue recovery in tourism activity, and we will continue to focus on delivering exceptional services and products to our customers to help them reach their financial objectives. Thank you. And with that, we'd be happy to take your questions. Operator?

全球疫情正式結束後，我們現在期待旅遊業活動持續復甦，我們將繼續專注於為客戶提供卓越的服務和產品，幫助他們實現財務目標。謝謝。因此，我們很樂意回答您的問題。操作員？

(Operator Instructions) I will take our first question from Eric Spector with Raymond James.

（操作員說明）我將回答艾瑞克·史佩克特和雷蒙德·詹姆斯提出的第一個問題。

This is Eric on the line for David Feaster. Just wanted to touch on the funding side to start off. So looking at the period end balances versus the averages, it looks like there might have been some migration towards the end of the quarter. Just curious if you could provide some color on flows throughout the quarter, whether you're seeing noninterest-bearing balances to stabilize. And then how they're trying to adhere early in 3Q and how deposit costs are trending as well? I appreciate any color on that.

我是艾瑞克，正在接聽大衛費斯特的電話。只是想從資金方面開始。因此，從期末餘額與平均值來看，似乎在季度末可能會出現一些遷移。只是好奇您是否可以提供有關整個季度流量的一些信息，以及您是否看到無息餘額趨於穩定。那麼他們如何努力在第三季初期堅持下去以及存款成本的趨勢如何？我很欣賞上面的任何顏色。

It's Michael Schrum, I will start off just on the balance side and then Craig can talk a little bit more about the cost of deposits and how that's trending. I think we sort of -- when we look at average balances, you're absolutely right, there's been some movement throughout the quarter. Mostly sort of normal commercial movement, really. We're not seeing a lot of pressure. So we're kind of thinking stabilization is mostly what we've seen towards the end of the quarter.

我是邁克爾·施魯姆（Michael Schrum），我將從平衡方面開始，然後克雷格（Craig）可以更多地談論存款成本及其趨勢。我認為，當我們查看平均餘額時，你是完全正確的，整個季度出現了一些變化。實際上，主要是正常的商業運動。我們沒有看到很大的壓力。因此，我們認為穩定主要是我們在本季末看到的情況。

So at this point, I think the period end balance is probably a good reflection of where we see things kind of shaking out. Obviously, there's ongoing conversations with customers around -- on our balance sheet strategies as well as laddering strategies. But I think what we've seen market rates kind of stabilizing a little bit. So we kind of -- we've also seen our deposit base kind of stabilize. And I think coming out of the pandemic and then the central banks kind of shrinking their balance sheets, we've certainly seen the impact of that with -- in a higher rate environment as well. And we continue to balance the cost of deposits versus the flows. But so far, what we've seen is really normal commercial flows. I'll let Craig just talk about cost of deposits.

因此，在這一點上，我認為期末餘額可能很好地反映了我們看到的情況正在改變。顯然，我們正在與客戶就我們的資產負債表策略以及階梯策略進行持續對話。但我認為我們所看到的市場利率有所穩定。所以我們也看到我們的存款基礎趨於穩定。我認為，在疫情結束後，央行開始縮減資產負債表，我們當然也看到了這種影響——在利率上升的環境下。我們持續平衡存款成本與資金流。但到目前為止，我們看到的都是正常的商業流動。我讓克雷格談談存款成本。

Yes. And I guess just to kind of add to that in regards to just the mix, if you kind of look on Slide 10 of our presentation, the mix of deposits between noninterest-bearing, interest-bearing demand deposits as well as term deposits is relatively stable. On a group basis, you can see it stable. We did see a little bit of mix shift in Bermuda and Cayman. And that's just a result of customers kind of just looking to get increased yield and kind of putting some duration on those deposits.

是的。我想補充一點，如果你看看我們簡報的幻燈片 10，無息存款、有息活期存款以及定期存款之間的存款組合相對而言是相對較低的。穩定的。在團體的基礎上，你可以看到它很穩定。我們確實在百慕達和開曼看到了一些混合轉變。這只是客戶只是希望獲得更高的收益並為這些存款設定一些期限的結果。

We're seeing average duration is about 3 months, 3.5 months is the average duration. And as a result, we will expect to see a little bit ticking up in the cost of deposits as those roll over as they mature. But overall, as Michael said, kind of seeing some stability, kind of the beta cycle to date is 24%, and we're modeling somewhere around 27%, so we're going to see some more creeping up in the cost of deposits, we think, over the next couple of quarters as well.

我們看到平均持續時間約為 3 個月，平均持續時間為 3.5 個月。因此，隨著存款到期，我們預計存款成本會略有上升。但總體而言，正如邁克爾所說，有點穩定，迄今為止的測試週期是 24%，我們正在建模 27% 左右，所以我們將看到存款成本進一步上升我們認為，在接下來的幾個季度也會如此。

Great. I appreciate all the color. Just wanted to touch going off that on to the loan growth side. You saw some continued declines this quarter. Just curious, your thoughts on the lending environment and growth and how pipelines are trending and your appetite for growth going forward?

偉大的。我欣賞所有的顏色。只是想談談貸款成長方面的問題。本季您看到了一些持續下降。只是好奇，您對貸款環境和成長的看法以及管道的趨勢以及您對未來成長的興趣？

Yes, sure. Thanks, Eric. So I mean, the first thing is we've never really been a loan growth story. We've always sort of said low single digits growth sort of in line with the economies that we lend into. We only lend in our home markets because we know the markets quite well, and we tend to favor lower risk density assets -- loan assets, such as residential mortgages that have a better diversification and a more efficient regulatory capital treatment as well.

是的，當然。謝謝，埃里克。所以我的意思是，首先我們從來沒有真正實現過貸款成長。我們總是說低個位數的成長與我們貸款的經濟體是一致的。我們只在國內市場放貸，因為我們非常了解市場，而且我們傾向於青睞風險密度較低的資產——貸款資產，例如具有更好的多元化和更有效的監管資本處理的住宅抵押貸款。

So mostly resi and we warehouse all the loans on our balance sheet, so we get amortization coming through, obviously, the repayment cycle, but that conversely results in a pretty good LTV profile of the loan book overall because the different vintages obviously have amortized significantly. Some of them are contractually up to 20, 25 years. And so the loan book is one that we've consciously changed from being primarily commercial about 6, 7 years ago to primarily resi at this point.

因此，大多數情況下，我們都會將所有貸款存入資產負債表上，因此顯然，我們會透過還款週期進行攤銷，但這反過來會導致整個貸款帳簿的LTV 狀況相當不錯，因為不同年份顯然已顯著攤銷。其中一些合約期限長達20年、25年。因此，貸款簿是我們有意識地從大約六、七年前的主要商業性轉變為此時主要的房地產性貸款簿。

We don't lend outside of our home market. So we only really lend into -- down to the prime central into Bermuda and Cayman and obviously, the Channel Islands. More recently, we've started a resi program there as well. So we continue to see good opportunities. I would say, particularly where we see higher growth, and that for us is at the moment in the Cayman Islands. Bermuda, as you can tell, quarter-over-quarter is kind of going a little bit backwards and London has kind of been mostly stable, but we do have some good opportunities in the pipeline in the Cayman Islands, both on the resi side but also on the commercial side.

我們不向本國市場以外的地區提供貸款。因此，我們實際上只向百慕達和開曼群島的主要中部地區以及海峽群島提供貸款。最近，我們也在那裡啟動了一個 resi 計畫。因此，我們繼續看到良好的機會。我想說，特別是在我們看到更高成長的地方，對我們來說，目前在開曼群島。如你所知，百慕達的季度環比有點倒退，倫敦基本上保持穩定，但我們在開曼群島確實有一些很好的機會，都在房地產方面，但商業方面也是如此。

So again, I think low single digits is probably where we normally see ourselves. It's obviously a little bit slow at the moment because of where rates are, but I think we're sort of a through cycle consistent lender into the market. And at this point, I think we'll just continue to see sort of a slightly slower than average growth. But as rates sort of get normalized a little bit more, people have more certainty about their cash flows, and then we'll probably start to see that pick up a little bit. We don't really stretch for credit in that way.

再說一次，我認為低個位數可能是我們通常看到的自己。由於利率的原因，目前顯然有點慢，但我認為我們是進入市場的整個週期一致的貸款人。在這一點上，我認為我們將繼續看到略低於平均的成長。但隨著利率更加正常化，人們對自己的現金流有了更多的確定性，然後我們可能會開始看到現金流回升。我們並沒有真正以這種方式獲得信貸。

Yes. I think we'll always be about 40% loans to deposits, that's about what's right for us.

是的。我認為貸款與存款的比例始終保持在 40% 左右，這對我們來說是合適的。

Got it. That's helpful. And then just wanted to touch upon just liquidity deployment strategy plans, like 13% of your balance sheet is now in cash. And I know you obviously want to be prudent with that, but just curious, your plans for deploying ex-liquidity with a normalized level of cash balance and it was good to see that the debt repayment during the quarter. Is there any appetite for further debt paydowns. Just curious, any color on that end.

知道了。這很有幫助。然後只想談談流動性部署策略計劃，例如你的資產負債表的 13% 現在是現金。我知道您顯然希望對此保持謹慎，但只是好奇，您計劃以正常化的現金餘額水平部署流動性，並且很高興看到本季度的債務償還。是否有進一步償還債務的興趣？只是好奇，那一端有什麼顏色。

Yes. So it's Michael Schrum again. So we're running the AFS and HTM broke down a little bit. You can see that the balances are coming in through the maturities there. It will take a little bit of time. But as a result of that, we're also getting the OCI burn down and improvement in tangible book value as a result of that. I think for the last 9 months, we've really just put all the maturities into cash and short-term securities because there was a significant amount of uncertainty around where central banks ultimately are going to end up doing, and we didn't want to increase or exacerbate the OCI risk any more than what was already in the book. And so that's worked out quite well for us in terms of the short end.

是的。又是麥可·施魯姆。所以我們運行的 AFS 和 HTM 出現了一點故障。您可以看到餘額是通過那裡的到期日進入的。這需要一點時間。但結果是，我們的 OCI 也隨之減少，有形帳面價值也隨之改善。我認為在過去的 9 個月裡，我們實際上只是將所有到期日都投入了現金和短期證券，因為中央銀行最終會做什麼存在很大的不確定性，而且我們不希望增加或加劇OCI風險超過書中已有的風險。因此，就短期而言，這對我們來說效果很好。

We are conscious, though that we do need fixed rate assets. At the moment, we have also swapped quite a lot of -- our customers have actually originated quite a lot of fixed rate loans. So that's providing some duration on the balance sheet, that is non-investment assets related. And so ultimately, we do need to start laddering back out. And I think we're probably at that point pretty close here in the next couple of quarters where we have now recovered a significant amount of TCE. We're back in the range where we need to be and I think we're kind of reaching the -- slowly reaching the crest of the rate cycle.

儘管我們意識到我們確實需要固定利率資產。目前，我們也交換了相當多的資金——我們的客戶實際上發放了相當多的固定利率貸款。因此，這在資產負債表上提供了一些與非投資資產相關的期限。因此最終，我們確實需要開始逐步退出。我認為，在接下來的幾個季度中，我們可能已經非常接近這個目標了，我們現在已經恢復了大量的 TCE。我們回到了我們需要的範圍，我認為我們正在慢慢達到利率週期的頂峰。

We do have a couple of pretty chunky maturities coming out here in the next couple of quarters. So I think you ultimately would want a systematic way of laddering out the balance sheet. We do have a lot of cash on our balance sheet, approximately 20% of the balance sheet is always going to be held in cash because we don't have a central bank that will end up last resort and we deal in multiple currencies across all the 4 different balance sheets. And so that results in a holdback position that's significant because we have to fund our own deposit flows. But as we see deposit flows stabilizing and TCE recovering, we want to kind of put that back on a systemic track over the next couple of quarters.

在接下來的幾個季度中，我們確實將推出一些相當成熟的債券。所以我認為你最終會想要一個系統化的方法來逐步完善資產負債表。我們的資產負債表上確實有大量現金，大約 20% 的資產負債表總是以現金形式持有，因為我們沒有最後手段的央行，而且我們在所有領域都以多種貨幣進行交易。4 張不同的資產負債表。因此，這會導致嚴重的阻礙，因為我們必須為自己的存款流動提供資金。但隨著我們看到存款流動穩定和 TCE 復甦，我們希望在接下來的幾季將其重新納入系統性軌道。

We'll take our next question from Timur Braziler from Wells Fargo.

我們將回答來自富國銀行的 Timur Braziler 的下一個問題。

Maybe sticking on the bond book. Can you just talk through the dynamic again as to what drove yields in the bond book lower this quarter? And then, I guess, bigger picture question, as we look out at margin and NII going forward, just some of the headwinds this quarter, is the expectation that we're going to get top line growth and NIM expansion from here given the forward rate curve?

也許會留在債券簿上。您能否再次談談是什麼導致本季債券殖利率下降？然後，我想，更大的問題是，當我們展望未來的利潤率和NII時，本季的一些不利因素是，考慮到未來，我們將獲得營收成長和NIM擴張的預期利率曲線？

Timur, it's Craig. I think the -- I guess with regards to the investment portfolio and the slight decrease in the yield on that is really driven by, I guess, the increase in paydowns. So we're getting paydowns of that's above $30 million a month on that about $100 million a quarter. So it's an increase in paydowns over the quarter as well as amortization of premiums -- or discounts, I'm sorry, on the securities. That's what driven down. Well, so coupons actually remained flat. It was really the amortization that drove it down slightly by about 2 basis points on that.

帖木兒，我是克雷格。我認為，我想，就投資組合而言，其收益率的小幅下降實際上是由付款增加所驅動的。因此，我們每季獲得的付款額約為 1 億美元，而每月的付款額則超過 3,000 萬美元。因此，這是本季度付款的增加以及溢價攤銷——抱歉，是證券的折扣。這就是被壓垮的原因。好吧，優惠券實際上保持不變。實際上是攤銷導致其略微下降了約 2 個基點。

In regards to the outlook, what's thinking that is that NIM will remain flat as to where we are now. We do have some headwinds in regards to cost of deposits, but we also have some tailwinds as well. So again, we paid off the sub debt. So that's going to result in increased savings. And then obviously, we're not going to have that accelerated amortization coming through every quarter as well. And then we also have -- we've seen some rate increases -- we saw a Fed increase last week. In Bermuda, we passed that on to the personal base rate, 25 basis points. So we have that one that will come through in October, obviously, on 90 days notice, and we have another one coming through becoming effective next week. That will be a rate that we announced back in May. So I think we have some tailwinds, but they'll be offset by cost of deposits and as kind of term deposits roll over into higher rates we would offset that. So we're thinking level to where we are now.

就前景而言，我們認為 NIM 將與我們現在的水平持平。在存款成本方面，我們確實面臨一些不利因素，但我們也有一些有利因素。我們再次還清了次級債務。因此，這將導致節省更多。顯然，我們不會每季都進行加速攤銷。然後我們也——我們看到了一些升息——我們上週看到聯準會升息。在百慕達，我們將其轉入個人基本利率 25 個基點。因此，我們有一項將於 10 月通過，顯然是在提前 90 天通知的情況下完成的，而我們還有另一項將於下週生效。這將是我們五月宣布的利率。因此，我認為我們有一些順風，但它們將被存款成本所抵消，並且隨著定期存款轉入更高的利率，我們將抵消這一點。所以我們的思考水準就達到了現在的水準。

Okay. And then looking at Slide 14, the asset sensitivity profile, I guess, I'm a little surprised to the -- still the magnitude of decline on a negative 100 basis point move especially given your comments about laddering out kind of longer term in the bond book again. In reality, is that, I guess, included in that negative 5% expectation? And what should we expect from the deposit base on the way down? Are you going to be able to move as quickly or does the addition of Channel Islands and kind of that competitive dynamic limit your ability to move rates on deposits down in tandem with the falling rates?

好的。然後看投影片 14，資產敏感性概況，我想，我對負 100 個基點變動的下降幅度感到有點驚訝，特別是考慮到您關於在更長期的情況下逐步退出的評論再次債券書。事實上，我猜這是否包含在 5% 的負預期中？對於存款基礎的下降，我們該期待什麼？您是否能夠盡快採取行動，或者海峽群島的加入以及這種競爭動態是否會限制您隨著利率下降而降低存款利率的能力？

Timur, it's Michael Schrum. So the negative 100 is obviously a parallel shock that we model. Most of that from where we are today really relates to the fact that there will be a lag in cost of deposits coming down on term deposits. But we obviously flowed on noninterest-bearing deposits right away because we're paying 0 on that, obviously. And a lot of the -- even the interest-bearing demand deposits in Bermuda and Cayman is also paying 0. So that's going to have a pretty pronounced effect, and we're not at the floors on the fixed rate loans and the first $100 million and so that's really why you're seeing that minus 5%.

帖木兒，我是麥可‧施魯姆。所以負 100 顯然是我們建模的平行衝擊。從我們今天的情況來看，大部分確實與定期存款的存款成本下降的滯後有關。但我們顯然立即流入了無息存款，因為顯然我們支付的是 0。而且很多——甚至是百慕達和開曼的有息活期存款也支付0。所以這將產生相當明顯的影響，而且我們還沒有達到固定利率貸款和前100美元的底線百萬，這就是為什麼你看到負5% 的原因。

I think we continue to model obviously modest asset sensitivity in the current environment. And some of the things that we're looking at, at the moment is obviously how can we moderate that down scenario as we get towards the top of the cycle through additional fixed rate assets in the investment profile.

我認為我們在當前環境下繼續對明顯適度的資產敏感性進行建模。目前我們正在考慮的一些事情顯然是，當我們透過投資組合中的額外固定利率資產進入週期頂部時，我們如何能夠緩和這種下行情境。

Okay. That's helpful. And then just last for me. I appreciate you reiterating the $10 million in revenue, $6 million in expenses for CS. I guess what's included in the existing numbers? How much of that $10 million and $6 million is captured in the second quarter balances?

好的。這很有幫助。然後就對我來說最後一次。感謝您重申 CS 的收入為 1000 萬美元，支出為 600 萬美元。我猜現有的數字包含了什麼？這 1000 萬美元和 600 萬美元中有多少屬於第二季餘額？

Timur, it's Craig. So I guess we had -- as you know, we had the fresh tranche that closed just at the end of Q1. So we have a full quarter of the impact of that. So then what we did have, we had revenue of about $600,000 on those newly acquired relationships over the quarter. And then we had expenses of around $400,000 in the quarter. So that would include salaries expense as well as onboarding those employees and kind of getting them operational as well. So $600 million in revenue and $400 million in expenses, that's for net first tranche.

帖木兒，我是克雷格。所以我想我們——如你所知，我們有新的部分，在第一季末結束。所以我們有整整四分之一的影響。因此，我們在本季新獲得的關係中獲得了約 60 萬美元的收入。然後我們這個季度的開支約為 40 萬美元。因此，這將包括工資費用以及這些員工的入職費用以及讓他們正常運作的費用。因此，第一筆淨收入為 6 億美元，支出為 4 億美元。

And then I guess, when we come back in Q3, we kind of have an update in regards to what we are continuing to earn on those relationships year-to-date.

然後我想，當我們在第三季回來時，我們會對今年迄今為止我們在這些關係中繼續賺取的收入有一個更新。

Got it. Okay. So the vast majority of both revenue and expenses are still to come?

知道了。好的。那麼絕大多數收入和支出仍將到來？

Yes. So we have -- obviously, we had the first close at the end of the first quarter. We just had another close. Then we have a close of Bahamas, which is relatively small at the end of July, so just -- kind of just yesterday, I guess. And then we have another close at the end of September, which will be Guernsey and then a late close at the end of November. So that's the big the expected sequencing of that transaction. So by year end, we should be complete, but Singapore will be pretty much onboard and then Guernsey at the end of September.

是的。所以我們——顯然，我們在第一季末完成了第一次結束。我們剛剛又結束了一次。然後我們有巴哈馬的收盤，七月底的收盤相對較小，所以我想就在昨天。然後我們將在 9 月底再次關閉，將在根西島，然後在 11 月底進行較晚的關閉。這就是該交易的預期排序。因此，到年底，我們應該會完成工作，但新加坡將基本上參與其中，然後是九月底的根西島。

We'll take our next question from Michael Perito with KBW.

我們將回答 KBW 的 Michael Perito 提出的下一個問題。

Just a couple follow-ups. So just on Timur's last line of questioning (inaudible). Craig, the $85 million to $86 million near-term expense run rate, that will capture the [six] that needs to come in, correct? Or would that be theoretically on top of it, particularly in the fourth quarter if all the closings, call, as you just laid out?

只是幾個後續行動。就帖木兒的最後一句話（聽不清楚）。克雷格，8500 萬至 8600 萬美元的近期費用運行率，將捕獲需要進入的[六]，對嗎？或者，從理論上講，這會是最重要的，特別是在第四季度，如果所有的結帳都如您剛才所說的那樣？

Yes. So that will be on top of that. So what we did -- the guidance that we did give is the full annual run rate that we would expect. So getting to 2024 that will be the full annual run rate. Obviously, as we bring on the various tranches this year, it will come more proportionately, but that's the full annual run rate. And the guidance, the $85 million to $86 million is operating expenses also taken into account, the expenses related to the new core banking upgrade, the amortization of that as well as kind of cloud-based fees. Now also us bringing online branches -- a new branch in Bermuda and then some branch upgrades in Cayman as well. So we expect to see some increases in costs related to those. And those are coming online now. So the Bermuda branch has opened this quarter, and the Cayman kind of refits are happening as we speak.

是的。所以這將是最重要的。所以我們所做的——我們給出的指導是我們預期的全年運行率。因此，到 2024 年，這將是全年運行率。顯然，隨著我們今年進行不同的分期，它的比例會更大，但這就是全部年度運行率。在指導意見中，8,500 萬至 8,600 萬美元還考慮了營運費用、與新核心銀行升級相關的費用、攤提以及基於雲端的費用。現在我們也帶來了線上分支機構——百慕達的一個新分支機構，然後開曼的一些分支機構也進行了升級。因此，我們預計與這些相關的成本將會增加。這些現在正在上線。因此，百慕達分公司已於本季開業，而就在我們說話之際，開曼分公司正在進行類似的改裝。

Yes. And we do have obviously a sharp focus on -- we have a sharp focus on expenses right now, obviously, where we are in the interest rate cycle. So we're working on a program that we'll talk about in the coming quarters, but we're very focused on total compensation expenses, given where we are in terms of NIM. So we'll make some progress in expenses for sure a little bit down the road.

是的。顯然，我們現在確實非常關注支出，顯然，我們處於利率週期的哪個階段。因此，我們正在製定一項計劃，我們將在未來幾季討論該計劃，但考慮到我們的淨利差（NIM）狀況，我們非常關注總薪酬支出。因此，我們肯定會在費用方面取得一些進展。

Got it. So the $85 million, $86 million near term, maybe a little upward pressure on that if the deal closes as expected, and then opportunities in '24 to hopefully reduce net expense growth that you'll communicate in the coming quarters?

知道了。因此，如果交易按預期完成，近期的 8500 萬美元、8600 萬美元可能會帶來一點上行壓力，然後您將在未來幾個季度中傳達的 24 年有望減少淨支出增長的機會？

Yes.

是的。

Fair. Okay. Perfect. And on the NIM, also following up on Timur's question. So I mean, stable in the mid-280s from here, but is it fair, I mean, obviously the NIM bottomed, I think, just below 2 in the prior 0 cycle. I mean is it just structurally with the fixed assets you've put on, the idea would be that the rate of attrition if rate cuts did indeed occur, which obviously the forward curve is not pulling in now, but you would expect something more optimistic than that as long as kind of the current duration of the asset side of the balance sheet hold stable. Is that generally there? I mean, it seems if I just want to make sure that that's how you guys were thinking about it?

公平的。好的。完美的。 NIM 也跟進帖木兒的問題。所以我的意思是，從這裡開始穩定在 280 年代中期，但這公平嗎？我的意思是，顯然 NIM 已經觸底，我認為，在之前的 0 週期中略低於 2。我的意思是，這只是在結構上與您投入的固定資產有關，這個想法是，如果降息確實發生，那麼磨損率，顯然遠期曲線現在沒有拉動，但您會期待更樂觀的情況只要資產負債表中資產方目前的久期保持穩定即可。一般都是這樣嗎？我的意思是，看來我只是想確定你們是這麼想的嗎？

Yes. I mean, I think -- sorry, it's Michael Schrum. I mean if you look at the asset sensitivity disclosures, obviously, with the implied forwards, we are thinking there is a possibility of getting some modest NIM expansion as we get through. But for the near term, it's probably in the mid-280s. Obviously, the sub debt not being there will help NII effectively in future quarters. But over the medium term, if we have a longer elongated elevated rate cycle, then that would be a net positive for us.

是的。我的意思是，我想——抱歉，這是麥可·施魯姆。我的意思是，如果你看一下資產敏感性披露，顯然，透過隱含的遠期，我們認為在我們度過難關後，淨息差有可能會出現一些適度的擴張。但就近期而言，可能是 280 年代中期。顯然，子債務的不存在將在未來幾季有效地幫助NII。但從中期來看，如果我們有更長的升息週期，那麼這對我們來說將是一個淨利好。

Right. Got it. Okay. And then just last for me. On the noninterest income side, you guys mentioned it's been fairly stable on a core basis the last 2 quarters. Between some seasonality pickup and the fees coming on, is it fair for us to be thinking that, that quarterly run rate could see a healthy step higher in the back half of the year? Is that kind of in line with what you're budgeting? Or how are you guys -- how would you have us think about where that run rate could go in the next 6 months based on what you know today?

正確的。知道了。好的。然後就對我來說最後一次。在非利息收入方面，你們提到過去兩季的核心基礎相當穩定。在一些季節性回升和即將到來的費用之間，我們認為季度運行率可能會在今年下半年出現健康的上升，這是否公平？這符合您的預算嗎？或者你們怎麼樣——你們如何讓我們根據你們今天所知的情況來考慮未來 6 個月內運行率的方向？

I think based on what we know today, it is -- I mean, that's a reasonable run rate subject to seasonality. As you know, when we get to Q4, as an example, kind of the Christmas and the shopping season, we usually see an increase in banking fees. So we would expect that. But absent seasonality and then as we bring on the kind of Credit Suisse assets as well, we would expect the run rate that we're seeing now to be a reasonable proxy to put it for the way forward.

我認為，根據我們今天所了解的情況，我的意思是，這是一個受季節性影響的合理運行率。如您所知，當我們進入第四季度時，例如聖誕節和購物季，我們通常會看到銀行費用增加。所以我們會期待這一點。但如果沒有季節性因素，而且當我們引入瑞士信貸資產時，我們預計現在看到的運作率將是一個合理的指標，可以預測未來的發展方向。

Got it. Great. And then just one last kind of bigger picture question for me. You guys mentioned the cloud-based core on the Bermuda platform now. Can you just maybe give us a little bit more flavor on what that means exactly. So like how much of your core base system is in the cloud today? And what do you guys view as kind of the biggest benefits of that moving forward as you think about managing the tech costs, particularly the technical debt and then being more nimble to move forward if opportunities arise to plug-in upgrades. We just would love a little bit deeper in terms of what that looks like and what the benefits could be longer term as you guys see it?

知道了。偉大的。對我來說，還有最後一個更大的問題。你們現在提到了百慕達平台上基於雲端的核心。您能否讓我們更了解一下這到底意味著什麼？那麼，現在您的核心基礎系統有多少位於雲端？當你們考慮管理技術成本，特別是技術債務，然後在出現插件升級機會時更加靈活地向前推進，你們認為向前推進的最大好處是什麼。我們只是想更深入地了解它的樣子以及你們所看到的長期好處是什麼？

Yes. Sorry, Mike, you broke up a little bit. I think you were asking about what are the sort of longer-term benefits of having the IT migration? Is that?

是的。抱歉，麥克，你們分手了一點。我想您是在問 IT 遷移有哪些長期好處？就是它？

Yes. sorry. Can you guys hear me okay?

是的。對不起。你們聽得到我說話嗎？

It's breaking up a bit. Sorry.

有點分手了對不起。

No, sorry, it was just about the cloud core-based system and what some of the benefits of that would be longer term, why it's worth the investment today as you guys see it?

不，抱歉，這只是關於基於雲端核心的系統以及它的一些長期好處是什麼，為什麼你們認為今天值得投資？

Okay. Great. Yes. I mean, obviously, it's a -- sorry, I got that perfectly, Mike. Thanks. So obviously, we're going through a transition where we've had a 10-year amortization period to broadly a 5-year amortization period. And so with the sort of broadly the same run rate. So I think that certainly is helpful from a financial perspective.

好的。偉大的。是的。我的意思是，很明顯，這是——抱歉，我完全明白了，麥克。謝謝。顯然，我們正在經歷一個過渡期，從 10 年攤銷期到大致 5 年攤銷期。因此，運行速度大致相同。所以我認為從財務角度來看這肯定是有幫助的。

In terms of the functionality, going to cloud means that we don't need to have as big an IT team internally effectively because we're -- we previously had a big contract with [DXC], we actually owned all the racks. And so now we've kind of go into a Software-as-a-Service kind of model, where effectively Oracle, who is the owner of the banking system, is also responsible for the maintenance.

就功能而言，轉向雲端意味著我們不需要在內部有效地擁有那麼大的 IT 團隊，因為我們之前與 [DXC] 簽訂了一份大合同，我們實際上擁有所有機架。所以現在我們進入了一個軟體即服務的模型，在這個模型中，銀行系統的所有者 Oracle 實際上也負責維護。

So on the risk side, the single point of failure, on the positive side, obviously, we just push it to Oracle right away if there are service issues, and they're pretty significant vendor in the space. And so we have a pretty good relationship with them.

因此，從風險面來看，單點故障，從正面方面來看，顯然，如果出現服務問題，我們會立即將其推送給 Oracle，而他們是該領域非常重要的供應商。所以我們和他們有很好的關係。

It will allow us to move to more frequent updates in the future. And therefore, quicker timing to market for new functionality that's rolling out. The upgrade that we just did was quite a major migration update. So even though it was a version upgrade, it was fairly significant in terms of the new functionality that was added to the platform in addition to going to the cloud.

這將使我們能夠在未來進行更頻繁的更新。因此，即將推出的新功能可以更快地推向市場。我們剛剛所做的升級是相當重大的遷移更新。所以雖然是版本升級，但除了上雲之外，平台新增的功能也是相當重要的。

So effectively, it becomes a sort of more independent model where we are not in the IT business, we're in the banking business and ultimately will allow us cost of time in to market for new products and functionality coming through the platform.

因此，它實際上成為一種更獨立的模式，我們不再從事 IT 業務，而是從事銀行業務，最終將使我們能夠節省透過該平台推出的新產品和功能的上市時間成本。

We will take our next question from Alexander Twerdahl with Piper Sandler.

我們將回答 Alexander Twerdahl 和 Piper Sandler 提出的下一個問題。

First question for me. Just can you talk us through a little bit with the loan fixing, moving to fixed rate, the 51% you've done, sort of what those new loans look like? I think you alluded to there being some floors on some of them. But just so we fully understand exactly what the product is in terms of the new time frame on them and new duration and what could impact them in the future? And then also just maybe the geographic breakdown or the breakdown by product on what's been fixed so far?

我的第一個問題。您能否向我們介紹一下貸款固定利率、轉向固定利率、您已經完成的 51%，以及這些新貸款是什麼樣子的？我想你提到其中一些有一些樓層。但正是這樣，我們才能完全了解該產品在新的時間框架和新的持續時間方面是什麼，以及未來可能對他們產生什麼影響？然後也許只是地理細分或按產品細分到目前為止已修復的內容？

Sure. I'll start out Alex in regards to just the movement to fixed loans. And I guess as you kind of -- you'll be familiar with that. We've seen a significant increase in that. So from about 21% at the beginning of last year to 51% now. So it kind of turned it around in because it's a split between fixed and variable. And I think we've kind of seen a lot of that come on. There were some historically internal items, but in Bermuda and Cayman, as you (inaudible), our larger commercial customers, that's largely where it's coming from. And Bermuda and then in regards to some residential, we're working with customers, just to help them to understand and just to certify their cash flow requirements going forward. So sort of comfortable with that.

當然。我將從亞歷克斯開始討論固定貸款的變化。我想你會熟悉這一點。我們已經看到這方面的顯著增加。所以從去年年初的21%左右，到現在的51%。所以它有點扭轉它，因為它是固定和可變之間的分裂。我想我們已經看到很多這樣的事情發生了。有一些歷史上的內部項目，但在百慕達和開曼，正如您（聽不清），我們的較大商業客戶，這主要是它的來源。在百慕達，對於一些住宅，我們正在與客戶合作，只是為了幫助他們了解並證明他們未來的現金流需求。對此感到很舒服。

But largely, most of our commercial customers are now on fixed. So we expect, I guess, the rate of increase in that to slow down a bit, but it has been able to kind of help them to secure and understand their cash flows. And also, as you know, kind of on the rate down in the interest rate cycle, it will give us some protection, but just as a recap, that is just between 2- or 3-year fixed within a longer loan duration. And then so when we get to that -- at the end of that 3-year period, we all need to renegotiate where it goes from there, whether it stays on fixed or it goes back to variable.

但在很大程度上，我們的大多數商業客戶現在都是固定的。因此，我猜，我們預計成長率會稍微放緩，但它能夠在某種程度上幫助他們確保和了解自己的現金流。而且，如您所知，利率週期中的利率下降，將為我們提供一些保護，但正如回顧一下，這只是在較長貸款期限內固定在 2 至 3 年之間。然後，當我們達到這個目標時——在三年期結束時，我們都需要重新協商它的走向，無論它保持固定還是回到可變狀態。

Okay. So yes, perfect. That's incredibly helpful. And so in the residential, like you alluded to the residential rate increases in Bermuda, the way that's going to impact the residential portfolio. You said some of that maybe has moved to fixed, but it's certainly not 51% that's on the residential book?

好的。所以是的，完美。這非常有幫助。因此，在住宅方面，就像您提到百慕達的住宅利率上漲一樣，這將影響住宅投資組合。你說其中一些可能已經轉為固定，但住宅帳簿上肯定不是 51%？

Yes. I mean I think at this point, we're not seeing any credit stress if that was the question, I think, on the residential book. It does help that we have a higher proportion of fixed rate loans that at this point in the cycle than we've ever seen in the past, so that happened pretty quickly.

是的。我的意思是，我認為目前，如果這是住宅帳簿上的問題，我們還沒有看到任何信貸壓力。這確實有幫助，因為我們在周期的這個階段擁有比以往任何時候都更高的固定利率貸款比例，所以這種情況發生得很快。

So I think 2 things, it will help us on the way down, obviously, but it's clearly helped us on delinquencies and 30-day delinquencies in Bermuda and Cayman are pretty much where they've been. So we're not seeing any credit stress at this point.

所以我認為有兩件事，它顯然會幫助我們走下坡路，但它顯然對我們的拖欠率和百慕達和開曼的 30 天拖欠率有幫助。因此，我們目前沒有看到任何信貸壓力。

Some of it is because it's fixed, but I think the both islands are pretty flushed with cash right now. So I think we're seeing a little bit better experience in this part of the cycle than we have seen in the past. And I'd just also point out, obviously, we don't have any commercial real estate exposure. So it's 2/3 residential, 1/3 commercial and the commercial is really pretty straightforward stuff. So we're pretty pleased where we are with the credit portfolio right now.

部分原因是它已經修復了，但我認為這兩個島嶼現在現金都非常充裕。所以我認為我們在周期的這一部分看到的體驗比過去更好。我還想指出，顯然，我們沒有任何商業房地產風險。所以它的 2/3 是住宅，1/3 是商業，商業真的是很簡單的東西。因此，我們對目前信貸投資組合的狀況感到非常滿意。

And I guess if we look kind of in detail around delinquency rates, again, we haven't seen a significant uptick in delinquency rates. Just a little bit kind of a 30-day, but as we kind of look past that and get to 60 and 90 days, it gets back to expectations. So it shows that those are kind of one-offs, if you will, and then they are being corrected kind of before they get to 90 days past due and nonaccrual.

我想，如果我們仔細觀察拖欠率，我們並沒有看到拖欠率顯著上升。只是有點像 30 天，但當我們回顧過去並達到 60 和 90 天時，它就會回到預期。因此，這表明這些都是一次性的（如果您願意的話），然後在逾期 90 天且非應計之前對其進行糾正。

The increase that we did see and nonaccrual that you might have noted in the presentations is really specific facilities. They are around -- there are some interest -- some late interest rate payments that have been remediated after quarter end. And what we do is just kind of hold them in that nonaccrual status for 1 or 2 months to make sure they're back on track and then we move them back into pass and be comfortable with those.

我們確實看到的增長和您可能在演示中註意到的非應計增長實際上是特定設施。它們是——有一些利息——一些在季度末後已得到補救的逾期利息支付。我們所做的只是將它們保持在非應計狀態 1 或 2 個月，以確保它們回到正軌，然後我們將它們重新調整到正常狀態並對此感到滿意。

So working really closely with those customers, trying to understand this, but they are unique circumstances, that some have been remediated, some are waiting for sales of properties to happen. And then in the first quarter, and I think it's kind of worked through now, we had a divorce proceeding that was going on, so selling other assets in order to satisfy the loan proceeds. But it's just kind of a long legal process for that specific facility.

因此，與這些客戶密切合作，試圖了解這一點，但它們是獨特的情況，有些已經得到修復，有些正在等待房產銷售。然後在第一季度，我認為現在已經解決了，我們正在進行離婚訴訟，因此出售其他資產以滿足貸款收益。但這對於該特定設施來說只是一個漫長的法律程序。

Got it. And then I think the press release alluded to a higher ACL associated with credit cards as well as worsening economic conditions. Is there anything specific that you're seeing in credit cards? Or is it just -- is it more tied to the change in the economic conditions and how that impacts the modeling?

知道了。然後我認為新聞稿提到了與信用卡相關的更高的 ACL 以及不斷惡化的經濟狀況。您在信用卡中看到了什麼具體的東西嗎？或者只是——它是否與經濟狀況的變化以及經濟狀況的變化如何影響模型更相關？

Yes, it's more tied to economic conditions and kind of just looking at the forward-looking rates or GDP rates or macroeconomic rates. We actually are seeing kind of good performance in credit cards. That's good. We're keeping a very close eye on that. We kind of think that potentially credit cards could be a leading indicator to other issues when it comes to customers and being able to satisfy their commitments and then potentially have some issues around other credits in the residential, but we're actually seeing good performance on credit cards, which is a good thing to see at this point in the rate cycle.

是的，它與經濟狀況更相關，並且只是關注前瞻性利率或 GDP 率或宏觀經濟率。事實上，我們看到了信用卡的良好表現。那挺好的。我們正在密切關注這一點。我們認為，當涉及客戶並能夠履行他們的承諾時，潛在的信用卡可能成為其他問題的先行指標，然後可能會在住宅的其他信用方面出現一些問題，但我們實際上看到了良好的表現信用卡，在利率週期的這個階段，這是一件好事。

Yes. We're not really seeing utilization moving up either. People are paying out their credit card and using it as normal really.

是的。我們也沒有真正看到利用率上升。人們正在正常支付信用卡並使用它。

Great. And then just a final question, just with respect to capital, M&A, et cetera? I mean, it seems like given all the AOCI that you mentioned will be coming back in over the next 24 months combined with earnings that you're going to -- that TCE ratio target of 6.5%, you're going to be well above that before you know it. As you think through capital return and sort of utilizing the capital, does that push you to look more towards some M&A or additional M&A, I guess, or increasing the buyback? Or just how are you kind of thinking about, I guess, one, the updates to the long-term TCE targets and, two, remind us how you're thinking about achieving those targets?

偉大的。最後一個問題，關於資本、併購等？我的意思是，考慮到您提到的所有 AOCI 將在未來 24 個月內回歸，再加上您將要實現的收益——即 6.5% 的 TCE 比率目標，您將遠遠高於在您意識到之前。當您考慮資本回報和資本利用時，我想這是否會促使您更專注於一些併購或額外的併購，或增加回購？或者，我想，您是如何考慮的，一是長期 TCE 目標的更新，二是提醒我們您是如何考慮實現這些目標的？

Alex, it's Michael Schrum. So I think we -- we set a target of 6% to 6.5% on TCE. Obviously, we do hold a lot of cash on the balance sheet. So that draw us some -- we have to capitalize that. And you're absolutely correct. In terms of the AOCI burn down, we could expect to see that TCE drift higher if forward rates are holding the way they are at the moment.

亞歷克斯，我是麥可‧施魯姆。所以我認為我們為 TCE 設定了 6% 至 6.5% 的目標。顯然，我們的資產負債表上確實持有大量現金。所以這吸引了我們一些——我們必須利用這一點。你是完全正確的。就 AOCI 燒毀而言，如果遠期利率保持目前的水平，我們預計 TCE 會走高。

We're not really too concerned about being a little bit on the high side from a TCE perspective. We feel that the credit content or the credit profile of our book should allow us to run a slightly below peer leverage. But at this point in the cycle when we're just coming off the sort of regional bank crisis in the U.S., having a little bit of extra resources maybe to a slight detriment of ROE for this part of the cycle is actually not a bad thing.

從 TCE 的角度來看，我們並不太擔心是否有點偏高。我們認為，我們的信用內容或信用狀況應該允許我們運行略低於同業的槓桿率。但在周期的這個階段，當我們剛擺脫美國那種區域性銀行危機時，擁有一點額外資源可能會稍微損害週期這一部分的股本回報率，實際上並不是一件壞事。

In terms of capital return, absolutely focused. We view the current situation is sort of cyclical, if you will. And so we would tend to favor share repurchases, which has the flexibility for us to dial up or dial down during this period. Obviously, the Board continues to be committed to the stable dividend rate of $0.44 per quarter per share. And then we obviously looked at acquisition pipeline and there's still ongoing discussions. We absolutely are focused on bedding in the tranches and getting that, Chris, we steal over the line at the end of this year, but there's still ongoing conversations around other potential books of business that we could buy. So that factors into how much capital we want to utilize for the share repurchases. But we have dialed it up this quarter as we saw sort of TCE coming back, and I think we'll continue, obviously, to do that subject to market conditions, of course.

在資本回報方面，絕對專注。如果你願意的話，我們認為目前的情況有點週期性。因此，我們傾向於支持股票回購，這讓我們可以在此期間靈活地增加或減少股票回購。顯然，董事會繼續致力於維持每季每股 0.44 美元的穩定股息率。然後我們顯然關注了收購管道，並且仍在進行討論。我們絕對專注於分批鋪墊，克里斯，我們在今年年底偷過了線，但圍繞著我們可以購買的其他潛在商業書籍仍在進行對話。因此，這會影響我們想要利用多少資金進行股票回購。但我們在本季度加大了力度，因為我們看到了 TCE 的回歸，而且我認為我們顯然會根據市場條件繼續這樣做。

It appear that we have no further questions at this time. I would now like to turn the program over to management for closing remarks.

目前看來我們沒有其他問題了。我現在想將該計劃移交給管理層以供結束語。

Thank you, Nicky, and thanks to everyone for dialing in today. We look forward to speaking with you again next quarter. Have a great day.

謝謝你，尼基，也謝謝大家今天撥電話。我們期待下個季度再次與您交談。祝你有美好的一天。

And this does conclude today's program. Thank you for your participation. You may disconnect at any time.

今天的節目到此結束。感謝您的參與。您可以隨時斷開連線。