The Bank of N.T. Butterfield & Son - Earnings Call - Q1 2025

Transcript

Operator (participant)

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 Limited. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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. I would now like to turn the call over to Noah Fields, Butterfield's head of investor relations. Please go ahead.

Noah Fields (Head of Investor Relations)

Thank you. Good morning, everyone, and thank you for joining us. Today, we will be reviewing Butterfield's first quarter 2025 financial results. 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. 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 first quarter 2025 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. Before I turn the call over to Michael Collins, I would like to remind everyone that today's discussions will refer to certain non-GAAP measures, which we believe are important in evaluating the company's performance.

For reconciliation of these measures to US GAAP, please refer to the earnings press release and slide presentation. 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. I will now turn the call over to Michael Collins.

Michael Collins (Chairman and CEO)

Thank you, Noah, and thanks to everyone joining the call today. I am 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 fee-generating businesses. Our ongoing dedication to efficiency was evident during the quarter as we successfully executed a group-wide voluntary early retirement program, resulting in a moderate reduction in future expense loads. Butterfield is a market-leading bank in Bermuda and the Cayman Islands, with a growing retail presence in the Channel Islands. We offer wealth management solutions across these island jurisdictions, including trust, private banking, asset management, and custody. We also provide specialized financial services in the Bahamas, Switzerland, Singapore, and the U.K., focusing on high-net-worth individuals with mortgage needs for prime central London properties.

I will now turn to the first quarter highlights on page four. Butterfield reported excellent financial results in the quarter, with net income of $53.8 million and core net income of $56.7 million. 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. The net interest margin was 2.70% in the first quarter, an increase of nine basis points from the prior quarter, with the cost of deposits falling 13 basis points to 160 basis points from the prior quarter. This more than offset reductions in asset yields. The board has again approved a quarterly cash dividend of $0.44 per share. We also continued to repurchase shares during the quarter, purchasing a total of 1.1 million shares at an average price of $37.78 per share.

I will now turn the call over to Craig for details on the first quarter.

Craig Bridgewater (Group CFO)

Thank you, Michael, and good morning. On slide six, we provide a summary of net interest income and net interest margin. In the first quarter, we reported increased net interest income before provision for credit losses of $89.3 million. During the quarter, NII benefited from a lower cost of deposits as we experienced a positive mix shift in deposits to demand from term and repricing on rollovers. Yields on new investments continue to be higher than expiring maturities, adding to the overall portfolio yields. Central bank cuts in overnight rates during the prior quarter resulted in lower loan and treasury yields during the first quarter of 2025. 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 from a strengthening British pound versus the US dollar.

Treasury yields were 27 basis points lower at 3.98%, and loan yields were 11 basis points lower at 6.32%, while average investment yields were 17 basis points higher at 2.68%. During the quarter, the bank maintained its conservative strategy of reinvesting maturities into a mix of US agency MBS securities and medium-term U.S. Treasuries. Slide seven provides a summary of non-interest income, which totaled $58.4 million, a decrease compared to the seasonally elevated fourth quarter, primarily due to lower transaction volume and incentive fees. Fee income did see an increase in FX 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. Non-interest income continues to be a stable and capital-efficient source of revenue through the cycle, with a fee income ratio of 39.4% in this quarter.

On slide eight, we present core non-interest expenses. Total core non-interest expenses were $90.3 million, which is slightly lower than $90.6 million in the prior quarter. The largest relative movement in salaries and benefits, technology and communications, marketing, and indirect taxes were a result of seasonal payroll taxes on the annual vesting of share-based compensation. Salaries and benefits improved due to a better-than-expected experience in healthcare costs for the quarter, offset by the impact of annual salary reviews and promotions. 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. At this point, we continue to expect a quarterly core expense run rate of between $90 million-$92 million in 2025, but we should caution that there are a number of inflationary risks that are emerging.

Overall, core non-interest expenses continue to be within our run rate expectations, as discussed on previous calls. I will now turn the call over to Michael Schrum to review the balance sheet.

Michael Schrum (President and Group Chief Risk Officer)

Thank you, Craig. Slide nine shows that Butterfield's balance sheet remains liquid and conservatively positioned. Period end deposit balances decreased to $12.6 billion from $12.7 billion at the prior quarter end. During the quarter, we experienced volume outflows of $238 million, which was partially offset by a $110 million FX translation on the strength of the British pound versus the dollar. We continue to expect some customer outflow over the coming quarters and expect average deposits to settle into a range of around $11.5 billion-$12 billion. Butterfield's low-risk density of 30% continues to reflect the regulatory capital efficiency of the balance sheet. On slide 10, we show that Butterfield continues to have a strong overall asset quality with low credit risk in the investment portfolio, which is 100% AA or higher-rated US treasuries and government-guaranteed agency securities.

The net charge-off rate was negligible, and both non-accrual loans of 2.3% of gross loans, along with an allowance for credit losses coverage ratio of 0.6%, remained within expectations. As a reminder, Butterfield's loan portfolio continues to be 68% full-recourse residential mortgages, of which 81% have loans to values below 70%. We're also pleased that a legacy loan for a sizable hospitality facility in Bermuda has been fully resolved following a period of receivership. On the 9th of April, the buyer announced the close and a plan to redevelop the historic Elbow Beach Hotel property, and that is currently progressing. This event occurred after the current reporting period and is expected to be reflected in the second quarter results. On slide 11, we present the average cash and securities balances with a summary of interest rate sensitivity.

Duration decreased slightly for the AFS book and increased for the HTM as a result of the increased spreads and elevated market rates. Net unrealized losses in the AFS portfolio included in OCI were $131.4 million at the end of the first quarter, an improvement of $31.9 million, or 20%, over the prior quarter. We continue to expect improvement with additional burn down of OCI over the next 12-24 months of 31% and 55%, respectively. Slide 12 summarizes regulatory and leverage capital levels. Butterfield's capital levels continue to be conservatively above regulatory requirements. On the 1st of January, we transitioned to the new Basel 4 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. This change improved our regulatory capital ratio by 1.9% for this quarter.

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.

Michael Collins (Chairman and CEO)

Thank you, Michael. Recent U.S. trade discussions have created 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 Butterfield's business, as our small and stable operating jurisdictions have not been in direct scope. Early indications are that hospitality bookings for the upcoming 2025 season in Bermuda and Cayman remain robust. Butterfield's strong balance sheet is supported by capital-efficient and recurring non-interest income, disciplined expense management, and net interest earnings. 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.

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. Thank you, and with that, we would be happy to take your questions. Operator.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset 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'll pause momentarily to assemble our roster. The first question comes from David Feaster with Raymond James. Please go ahead.

David Feaster (Managing Director)

Hi, good morning, everybody.

Michael Schrum (President and Group Chief Risk Officer)

Hey, good morning, David.

David Feaster (Managing Director)

Maybe just starting, you know, one question on the credit side. You know, we've seen continued migration within the resi mortgage book. I was hoping, you know, you obviously talked about in the prepared remarks, like very conservatively underwritten, low LTV. I was hoping you could just touch on maybe where you're seeing, you know, some of this pressure and your approach to it and just kind of any thoughts on the housing market broadly.

Michael Schrum (President and Group Chief Risk Officer)

Yeah, good morning, David. It's Michael Schrum. I would say it's really focused, good question. It's really focused around two markets, a little bit in Bermuda and a little bit in the prime central London book. Two different markets. I think Bermuda, less of a concern. We're seeing valuations kind of coming through on the OREO side, and sales are kind of picking up. Not really worried about the LTV profile. It's more of a DSR issue for the Bermuda book a little bit. Obviously, we have a couple of commercial facilities there. I mentioned one earlier, Elbow Beach Hotel, which has been in receivership for a while and was still accruing. That's going to impact NII a little bit going forward, but sizable hospitality is coming out.

There are a couple of commercial facilities that have been in litigation for a while and some encouraging news to see some normalization in that over the next couple of quarters, I hope. In the London book, it has really been more impacted by sort of the government changes around res non-dom, stamp duty increases, inheritance tax increases. As you know, we only underwrite 60-65% LTV in prime central London, so Knightsbridge, Chelsea, Kensington area. What has happened there is demand has really dried up a little bit. There have been a lot of conversations about people upping from the prime central London market and moving, you know, other places like Monaco, Switzerland, etc., because they are no longer able to live there for long periods of time and not pay taxes on overseas earnings. There has been, 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. I think valuations are still holding up broadly. We've seen some good sales, but there's also some sizable facilities there that have gone into non-accrual, really, you know, nothing systemic, but divorces post-COVID and business sales being delayed, etc. There is also repayment for those who are mainly either the sale of the property or the refinancing. 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 under provisions, but certainly something to watch there.

David Feaster (Managing Director)

Yeah, that's good color. Maybe just staying on the market side, I mean, you know, in the prepared remarks, you talked 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 in those markets, where you're having success, and then, you know, maybe other markets you're expanding into and just, again, how that plays into the M&A landscape and what you're seeing.

Michael Collins (Chairman and CEO)

Sure. Yeah. We're doing quite well in the Channel Islands. We've actually got a good mortgage loan book now, fully supported by local deposits. Our credit card product is being taken up quite well. We're pretty excited about how that's been going. No concerns there. The growth is good, and corporate deposits and everything are holding up. As you know, I mean, our plan is to try to make it look more like Bermuda and Cayman, so the funding is stickier than corporate funding. You know, we're over getting close to 10,000 new local clients across Guernsey and Jersey. That's going quite well. In Singapore, the Credit Suisse integration is also going well. We're actually working quite well with UBS in terms of referrals and transfer some other business. That's going well. We're making decent money there now.

We're up to over $10 billion in assets under trust in Singapore alone. We're pretty excited about that. Both the retail expansion of the Channel Islands and the integration of Credit Suisse in Singapore are in good shape.

Michael Schrum (President and Group Chief Risk Officer)

Yeah, maybe I'll just add to 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. Good conversations, but we're also a little bit picky in terms of, you know, any new jurisdictions or anything like that. Where we have franchise-level conversations, there can sometimes be jurisdictions that we don't want to be in. Overall, I mean, you know, we're kind of sticking with our existing trust jurisdictions and obviously would always look at banking overlap in our existing jurisdictions as well.

Michael Collins (Chairman and CEO)

Yeah. The one thing that we, you know, we compromise on the trust acquisitions is obviously AML and fiduciary risk. You know, we're willing to negotiate a bit on price because, you know, we do have to compete with private equity occasionally. The real sacrosanct part is, you know, AML, it's got to be really pretty pure, so that's why it takes so long. As Michael said, we are having some good discussions.

David Feaster (Managing Director)

That's great. I just wanted to touch a bit on the margin side. There's a lot of moving parts in here, right? I mean, we've got the lag impacts on repricing from the recent rate cuts, you know, on both loans and deposits. We've had a ton of volatility in the bond market of late. I'm curious, you know, maybe how that volatility's 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 as that, you know, impacts the margin trajectory as we look forward.

Craig Bridgewater (Group CFO)

Yeah. Yeah. Hi, David. It's Craig. I mean, kind of over the last quarter, we've seen a bit of kind of stabilization in regards to kind of rates on deposits and on loans. We've actually seen the rate cuts just kind of set in the prepared comments. We've seen some of the rate cuts from last quarter actually now kind of coming in and making an impact. That's had a kind of downward draft impact on kind of the treasury, what we're receiving on kind of short-term cash balances as well as what we're receiving on loan balances as well. I mean, as you're aware, you know, it kind of came in as well as the kind of CI UK book moves directly as a result of moving to the Fed fund rate for Cayman or for US prime.

For the kind of U.K. book directly in regards to changes in the Bank of England rate, we have seen decreases in both of those over the last quarter. That is impacting kind of the loan yields as we would expect. I guess we continue to have, you know, kind of positive yield pickup on the investment book. You know, we continue to reinvest proceeds from any maturities or paydowns back into the investment book, investing in MBS securities, so kind of medium-term US treasuries. Given the volatility in the market over the last couple of months, I should say, we have kind of been putting more, leaning more towards kind of medium-term US treasuries.

Kind of gives us a bit more certainty around, you know, the yield that we're going to get over the lifetime of those treasuries and not be subject to kind of, you know, prepayment risk that will come with MBS securities. Again, kind of still high quality, all kind of above-rated. No credit risk that we're getting as a result of acquiring those securities. Again, the yield is, you know, very much high, is high above the existing portfolio yield. We're investing, you know, somewhere in through the kind of 390 basis point range compared to the portfolio yield, which is substantially lower than that. We'll continue to get pickup there. I guess if, you know, kind of the rate environment stays as it is, then, you know, that's very constructive for NIM as well as for our balance sheet.

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 are quite favorable to the bank. As those get resolved, you know, we should see some headwinds on the yield on the portfolio or the loan portfolio. To sum it all up, I think we'll still continue to see some NIM expansion, but at a slower rate than what we saw in Q1. Really driven by the pickup on the investment book. Again, the headwinds are on the loan book.

David Feaster (Managing Director)

Okay. That's helpful. Thanks, everybody, for the color.

Michael Collins (Chairman and CEO)

Thanks.

Operator (participant)

Your next question will come from Timur Braziler with Wells Fargo. Please go ahead.

Timur Braziler (Director of Mid-Cap Bank Equity Research)

Hey, good morning. Morning, Timur. Maybe circling back on the M&A discussion, I'm just wondering with all of this trade war noise, if the level of conversations have changed at all in recent months and just maybe give me your thoughts on getting a deal done in this current backdrop if it changes at all.

Michael Schrum (President and Group Chief Risk Officer)

Yeah, good question. I don't think that necessarily the trade situation really has impacted. If anything, it sort of creates more uncertainty and on part of the sellers, it creates sort of more impetus to get things done given the market risk backdrop. I think we operate in, as you know, on the trust side in multiple jurisdictions. We've seen quite a lot of this uncertainty play out in FX, you know, whether it's the sterling, as you can see on our balance sheet, or euro or any other currency. It's kind of moving things around quite a bit as we go through these discussions. Obviously, it has an impact both on the underlying business that we're talking about in terms of the earnings profile and also ultimately on valuation of things. I think that's probably the main thing.

The FX piece is probably more important, you know, to this than, you know, than the trade situation, really.

Timur Braziler (Director of Mid-Cap Bank Equity Research)

Got it. Maybe keeping to that same line of questioning, just looking at the fee side, does all of this uncertainty, I'm assuming, you know, it pulled forward maybe some of the fees into one Q to your comment on FX. I'm just wondering if there is a slowdown in cross-border trade, does that negatively affect some of your fee lines or just how you guys participate there? Just increased uncertainty can actually drive more business kind of on a prolonged basis and not so much on a pull-forward basis.

Craig Bridgewater (Group CFO)

Yeah. I mean, that's a very kind of insightful question. I think kind of what we saw, and it's probably similar to some of our kind of concept products as well, what we saw in the first quarter is as a result of a lot of the volatility in markets, you know, we saw some benefit of that both in terms of kind of FX revenue as well as asset management revenue. Notable volumes were up in both of those lines. Obviously, that's positive for the activity there and the revenue that we're earning. If that continues, then we would expect to see people keeping a close eye on kind of foreign exchange balances and also kind of how they're positioning their portfolios as we go forward as well.

A lot of customers are actually looking at their portfolios and trying to, you know, manage liquidity or go into liquid positions as a result just to kind of get some stability in their portfolios. You know, banks and kind of many banks have been the beneficiaries of that. I think, again, going forward, a large part of the FX is, you know, kind of the currency pairs between Bermuda and US dollars as well as Cayman and US dollars. That is quite stable over time. It is really the fluctuation in kind of foreign currency transactions that people will be looking to position themselves to either protect themselves or take advantage of movements in foreign currencies.

Michael Collins (Chairman and CEO)

Yeah. I think in terms of the jurisdictions and the impact on the trade discussions, we talked about this. No real direct impact, but the indirect impact is cost of living in Bermuda and Cayman is already very high. Obviously, more expensive goods coming from the U.S. to both jurisdictions will drive our costs up. The good news is both jurisdictions actually were exempted from the new legislation for Chinese-built ships for port fees. They made an exemption for all voyages less than 2,000 mi and for the smaller ships. There was a bit of a scare early on, but both Bermuda and Cayman and CARICOM, you know, talked to the U.S. and we were able to get exemptions. We will not be impacted by that, but we will be impacted by a higher cost of living just because U.S. goods will be more expensive.

It was a good example of, I think, a situation where, you know, there was a reasonable decision because obviously no one wants small island jurisdictions to suddenly, you know, triple the cost of food coming in. That turned out quite well.

Michael Schrum (President and Group Chief Risk Officer)

Yeah. I think finally, Timur, it's Michael Schrum. Just on the broader FX question, obviously FX is pegged currency. Most of it is related to tourism activity on the island. If there was a GDP kind of or an economic slowdown, obviously we would see some spillover effect into our fees, both in terms of cross-border transactions and also FX flows coming in, but a little too early to say at the moment.

Timur Braziler (Director of Mid-Cap Bank Equity Research)

Great. It just lasts for me on the Elbow Beach resolution. Can you just remind us what that means for your numbers? You had mentioned, you know, maybe a little bit of a hit to NII, but was there any portion of that that had been charged off in the past? Was there any reserve set aside against? Could you just kind of talk us through the moving pieces for Butterfield as that loan is resolved or that property is resolved?

Michael Schrum (President and Group Chief Risk Officer)

Yeah, sure. I mean, there isn't. The biggest piece is really in our past two disclosures in note six of the loans. This has been sitting around. It's a legacy facility that was, you know, washing its 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 outgoings during a lower interest rate environment. When rates went up, you know, there was an equity ask and I think we all decided we were going to put that into some receivership. I think that's been a benign and a sales process that's now completed. Essentially it will be a significant reduction in our past, in our 90 days past due. It was an accruing facility at penalty rates.

From that perspective, NI, you know, we would expect to see some pressure on that going forward. Effectively, most of the impact here is just going to be the 90 days past due bucket is going to move. You will see a drop, obviously, in loan assets on the balance sheet.

Craig Bridgewater (Group CFO)

I guess maybe another thing to be clear, there is kind of no kind of loss content in there. We expect to get, you know, fully repaid on the outstanding principal and interest. There was, there was, there's no provision that's been set aside for that. We don't expect any losses coming through as a result of selling that.

Timur Braziler (Director of Mid-Cap Bank Equity Research)

Okay. Any lending opportunity to the Loren Group as part of the sale or is that not anticipated?

Michael Schrum (President and Group Chief Risk Officer)

Yeah. I mean, because of the receivership, obviously we were pretty clear and it was a competitive bidding process that we were not first out of the gates to, you know, to be lending into, you know, the initial transaction. I think there are certainly opportunities. We will see what the plans are. As I said, we are not a big hospitality lending bank. We do not really stretch for credit in that space or at least the ones that we have done have been a very different structure to just a land build. We will see what happens and what their plans are. Certainly we will be able to support maybe parts of that as we move forward. It has been a very good relationship over many years and hopefully we will continue.

Timur Braziler (Director of Mid-Cap Bank Equity Research)

Great. Thanks for all the calling.

Michael Collins (Chairman and CEO)

Thanks.

Operator (participant)

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 (Senior Equity Research Analyst)

Hi everyone. This is Emily stepping in for Tim Switzer. Thanks for taking my question.

Michael Schrum (President and Group Chief Risk Officer)

Sure. Good morning.

Michael Collins (Chairman and CEO)

Morning.

Emily Lee (Senior Equity Research Analyst)

Expanding on the last few questions surrounding economic uncertainty and tariffs. Can you expand a little more on the impact of tariffs on your customer base? More specifically, are there any jurisdictions that are especially impacted by tariff threats or a potential recession, whether that's in the U.S. or more broadly?

Michael Collins (Chairman and CEO)

No. I think, again, I think there are not any direct implications for Bermuda, Cayman, Guernsey, and Jersey. Quite honestly, we get overlooked sometimes during these geopolitical battles between the continents, which is not a bad place to be. Obviously, all of our different industries, so Bermuda's reinsurance, Cayman and captives and hedge funds are all invested and, you know, involved in different businesses and different geographies. There may obviously be impacts there individually and by industry, but it is pretty complex to try to figure out. The real impact is cost of living. You know, both Bermuda and Cayman and the Channel Islands have huge international business and fund industries, which is fantastic, but that, you know, obviously has driven up the cost of living for the local population, which is a big issue of discussion.

I think anything that increases the cost of a loaf of bread in the U.S., which is then shipped to Bermuda, including, you know, the tariffs on the loaf of bread, plus the cost of the shipping to Bermuda is going to impact us. It really is mostly cost of living and people struggling. That could have some impact on mortgage payments as well if all groceries go up, as an example. It is really indirect, but I think we're pretty happy that we're sort of under the radar at this point.

Emily Lee (Senior Equity Research Analyst)

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 or the non-interest income side to kind of haggle in earnings targets?

David Feaster (Managing Director)

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 it has two impacts. Basically, it gives opportunities for younger employees to move up in the organization. We, even if we backfill, eliminate more expensive positions and take on less expensive positions and actually set most of those up in Halifax, which is a less expensive jurisdiction. We've just done that in Q1. Every year we look at that and we either do a round of redundancies or early retirement. Beyond that, we have been building the Halifax office, which, including the Canadian dollars, is sort of 60% of the cost of Bermuda and Cayman in terms of employee. We're up to 250 people.

Michael Collins (Chairman and CEO)

It's a combination of sort of immediate tactical cost reductions, which we will absolutely do if we see revenue starting to decline. The longer-term cost plays really to build Halifax and just have all processing and operations, you know, compliance, alert monitoring in a jurisdiction that's a little less expensive. It's a combination. We have in the past, when we sense that we're going to have some revenue troubles down the road, we will take tactical action to reduce expenses. We can't do that.

Emily Lee (Senior Equity Research Analyst)

Great. Thanks so much for taking my questions.

Michael Collins (Chairman and CEO)

Thank you.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Noah Fields (Head of Investor Relations)

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

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.