Bank of N.T. Butterfield & Son Ltd Q4 FY2020 Earnings Call

Good morning. My name is Andrew and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter and Year-End 2020 Earnings Call for The Bank of N.T. Butterfield & Son Limited. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Noah Fields, Butterfield's Head of Investor Relations.

Thank you, operator. Good morning, everyone, and thank you for joining us. Today we will be reviewing Butterfield's fourth quarter and year-end 2020 financial results. On the call, I'm joined by Butterfield's Chairman and Chief Executive Officer, Michael Collins; and Chief Financial Officer, Michael Schrum. Following their prepared remarks, we will open the call up for a question-and-answer session.

Thank you, Noah, and thanks to everyone joining the call today. I will begin our discussion with a look back at the full year and provide some observations on the bank’s experience in 2020 and then provide an update on COVID-19. I will then turn the call over to Michael Schrum, our CFO, to provide a detailed review of the fourth quarter financials. Turning now to slide four, as a whole for 2020, I am very proud of Butterfield's performance and the resilience of the business model. In a near zero interest rate environment, we produced net income of $147 million, or $2.90 per share, and core net income of $155 million, or $3.04 per share, which equates to a core return on average tangible common equity of 17.3%. NIM finished the year at 2.42%, with an average cost of deposits of 21 basis points for the year. We continued with a $0.44 per share quarterly cash dividend and completed a $3.5 million share repurchase program with the most activity during the second and third quarters. We also improved our capital profile with a $100 million 5.25% qualifying subordinated debt offering in June. Butterfield's business model, which focuses on maximizing returns while closely managing credit and operational risk, proved successful during this period of uncertainty. The global pandemic tested us across all jurisdictions and the bank continued to perform well. Our technology and collaborative culture allowed us to maintain safe and uninterrupted services for our clients, by decisively moving between the office and remote working environments, as conditions required.

Thank you, Michael. I'll begin on slide 7, which provides some highlights from the fourth quarter. We ended 2020 with the most profitable quarter for the year, with net income of $42.1 million, core net income of $42.9 million or $0.86 per share, and core return on average tangible common equity of 19%. The net interest margin was 2.25% for the quarter. And the average cost of deposits improved to 12 basis points. Turning to slide 8, net interest income continued to be impacted by lower market rates, particularly the reinvestment book yields of securities, which are lower than maturities. Prepayment speeds in our investment portfolio moderated slightly in the fourth quarter compared to the third quarter. However, they were still elevated with $329 million of paydowns, compared to $339 million in the prior quarter. Investment yields were down 15 basis points in the fourth quarter compared to the prior quarter. New money yields averaged 1.46% in the fourth quarter or 4.7 basis points higher than the prior quarter. During the fourth quarter, the blended rate for loan originations was 3.66% for $201 million of new loans down from 3.93% for $156 million of originations in the prior quarter. On slide 9, you can see that non-interest income was up 1.9% compared to the prior quarter, due to improving economic activity across our jurisdictions and increases across asset management, banking, FX, and trust business lines. The bank's contribution from fees continues to represent stable and capital-efficient earnings. For the fourth quarter, fees were 38% of total revenue. Slide 10 provides a summary of core non-interest expense which improved by 2.6% in the fourth quarter compared to the prior quarter. Expenses fell, as we started to experience the benefits of the cost restructuring program in the third quarter, which achieved the expected reduced run rate. In addition, lower technology costs and indirect taxes improved, which was partially offset by higher marketing spend that increased along with improving economic activity. We continue to target a through-cycle cost income ratio of 60% and we expect to remain in the mid-60s during this ultra-low part of the rate cycle.

Thank you, Michael. I am proud of Butterfield's performance during 2020 as we were able to achieve a core return on average tangible common equity of 17.3% during a global pandemic in an ultra-low interest rate environment and at a time when our home markets were facing economic contraction. It was with confidence in the strength of our business that we were also well-positioned to contribute and support local communities at a time when many people faced great uncertainty. We were proud to offer mortgage deferrals and provide our communities with food security programs and other targeted charitable actions. I would like to express my thanks to our clients, staff, and business partners for all of your support and contributions throughout the past year. I believe Butterfield is well-positioned to benefit from the anticipated economic recovery in 2021. We continue to focus on building the world's leading offshore bank and trust business and aim to maintain top quartile risk-adjusted returns with meaningful non-interest income contribution, limited credit risk, and an emphasis on efficiency and shareholder-conscious capital management. Thank you. And with that, we'd be happy to take your questions.

We will now begin the question-and-answer session. The first question comes from Michael Schiavone of KBW. Please go ahead.

Hi. Good morning, everyone.

Good morning, Michael.

So with the TCE near the bottom of your target levels, but your regulatory capital very healthy, how should we think about the amount and the aggressiveness of your capital deployment strategy? And also on this point can you just discuss your deployment priorities and if you're seeing any opportunity for M&A?

Yes. Thanks, Michael. It's Michael Schrum. So I'll kick off just on the sort of BAU side of it and Michael Collins can talk a bit about the M&A. So as you saw, we obviously measure both tangible as well as regulatory capital. So you're quite right that the regulatory capital benefited from a slight mix shift in terms of getting our subordinated debt issued midyear, which obviously made the efficacy at the existing capital stack a bit cheaper for us, but also allowed us to continue obviously with the buyback program that was fairly substantial last year, particularly executed in Q2 and Q3. The priorities are, I think, as we stated a little bit earlier, to protect the dividend rate that we have at the moment, which we view as very sustainable. Payout ratio has been around 60% this year. But probably due to the procyclicality of reserve builds from CECL and obviously rates being much lower than at the beginning of last year.

So we were happy to finish the integration of ABN AMRO last year. And if you remember, it provided us with three things. First, it provided us with a growth platform in a jurisdiction where we have very low market share. Obviously, Bermuda and Cayman have about 35% to 40% market share so it's harder to grow. Secondly, it reduced our concentration risk in Bermuda. And thirdly, it created relative balance sheet parity amongst our three banking jurisdictions. So strategically that did a lot for us. Last year, obviously conversations were pretty slow given the pandemic. We have a sense now that people are starting to get vaccinated and starting to think about travel and starting to think about transactions more across our jurisdiction. So, we are having some conversations, but we're always very cautious about thinking about whether they're going to come to fruition, or the pricing is right, or the AML is where we want it to be. So we are having conversations. The strategy is the same. So it's stressed companies across our existing jurisdictions as sort of overlap acquisitions, with a particular focus on Singapore; we’d like to build scale there. And secondly, overlap acquisitions in our existing jurisdictions whether it be Bermuda, Cayman, or more likely the Channel Islands. So we continue to have conversations, and we think this could be a good year to bring something to conclusion, but we're always cautious because we are very focused on due diligence and AML given where we operate. So we'll just continue having those discussions.

Great. Thank you for all that color. And then my second question relates to the margin. Should we expect the continuation of the slow creep downward as your books mature in this low rate environment? Or are there any further opportunities to offset or at least stabilize the compression within 2021?

Yes. Great question. So I'll just try and unpack that a little bit starting with loan assets. Obviously, there's a front book backlog. As you know, we amortize all of our loans on balance sheet. So they're manually underwritten full recourse loans. So you see that loan yield kind of stabilizing, even though I gave a little bit of detail around the most recent loan originations, which was 3.66% in the last quarter, so down a little bit on the front book side. But relatively stable overall, as we look at the whole loan book as a whole. We do expect some modest mix shift as we launch the residential lending opportunity in the Channel Islands. Those are sterling loans, which would be at a slightly lower rate. But again that will take some time organically to come through there, and it would be activated out of our cash balances effectively. So that should be helpful to NIM. In terms of cash, pretty much floor there at 5 to 10 basis points. We're obviously watching the current discussions on sterling rates, in terms of where they might go in the future. But that's probably reasonable there. That's been fully realized, if you will at the short end of the curve. And then finally on investments, prepayment speeds are obviously pretty elevated and have been pretty elevated throughout 2020. So we're seeing approximately 5% of the total investment book roll over a quarter, which is almost double what we saw in prior years, a combination thereof from a very flat forward yield curve. And then obviously, on the opposite side of that, we're deploying excess cash from the ABN AMRO into the securities book. So you see volume, a positive volume impact from that. So overall, I'm expecting some stabilization as long as there's a reasonable sort of 10-year and a normal sloping yield curve that we've seen more recently. But obviously, the short end of the curve seems to be at a floor for a longer period of time. So medium-term stabilization around where we are, I would expect.

Okay. Very helpful. Thanks for taking my questions.

The next question comes from Alex Twerdahl of Piper Sandler. Please go ahead.

Hey, good morning, guys.

Good morning, Alex.

Hey, Alex.

So first off, I was hoping you could give a little bit more color around the large deposit inflows that we saw in the fourth quarter. And I guess what drove that and then why we expect those to move off-balance sheet and sort of the time frame for that to happen?

Yeah, it's Michael Schrum. I'll provide some insights on this. The average balance at the end of the quarter was primarily due to retail deposits, with some unusual flows in this area driven by mortgage deferrals. This has led people to retain their payments and deposit them into bank accounts. Over time, I anticipate that some of this will exit, particularly in Cayman, influenced by allowable pension withdrawals, which serve as a one-time fiscal stimulus. Eventually, those funds could shift into real assets, like property, or return to retirement portfolios. So there's some uncertainty here, but these are retail deposits, which is beneficial. Roughly half of this is attributed to what I would term hot money, such as hedge fund flows in Cayman and capital insurance deposits in Bermuda, which usually follow a premium claims cycle at the quarter's end. There tends to be significant activity in asset management toward the end of the fourth quarter, but we’re not relying on these deposits long-term. I expect a portion of that to dissipate over the next few quarters.

Yes, it's difficult at year-end obviously because we have our RMs talking to corporate clients encouraging them not to put a lot of deposits on our balance sheet over year-end. But it's difficult in a sense these are good clients and you can't necessarily turn away deposits, but we've been reasonably successful. We'll retain some of it. But as Michael said, we're not expecting to retain all of it.

Okay. And then just thinking about I guess the amount that potentially could flow out and then going back to the strategy of laddering cash into investments has that changed at all in this rate environment? And is the goal there just to kind of consistently still put whatever it is $100 million, $150 million of cash into securities per quarter? Or is there a different target such as just aiming to keep NII flat over the next couple of quarters by deploying cash?

Yes. I mean nothing's really changed in terms of the core balances. So as we think about what's the behavioralized nature of the underlying deposits we've been watching the ABN piece for over a year now and feel we have a good handle on those kinds of relationships. Obviously, it was very key to integrate our systems and get them onto one platform there. So you'll see that that's continued throughout the fourth quarter. So over and above the maturities that we get from the investments, which obviously would keep rolling into lower rates, we're also deploying the extra at that sort of clip of $150 million around that a quarter. So the strategy hasn't really changed. Obviously, as the deposit base has increased quite a lot, we'll just have to wait and see if that sticks around and what we can do with that. It's been pleasing obviously to see 10-year a little bit higher lately. So that helps to slow down prepayment rates and also helps the reinvestment rates.

Got it. And then in terms of the loan growth strategy in the Channel Islands, $500 million over five years, is it fair to assume that by the end of 2021 you'll be around $100 million? Is it a pretty straight-line ramp up? And just sort of how should we think about overall loan balances when we consider that potential growth versus other loan categories that I know may be a little inflated based on stimulus around the pandemic or other items that other loan balances that could actually potentially flow off the balance sheet?

Yes, we've engaged in extensive discussions. Currently, we're in the launch phase, and although we've experienced some delays, it’s reasonable to consider that as a gradual annual increase. While we are not primarily focused on loan growth, it’s encouraging that we can utilize some excess sterling, especially given the current alternatives for sterling, such as the secondary market or gilts, which are largely stagnant. The outcome will largely depend on market reactions and the overall reception. So far, discussions have been positive, indicating some pent-up demand. However, there are also established high street banks competing in the market, and it's unclear how that will unfold. Overall, things appear to be progressing well.

Yes. The plan is to develop the Channel Islands into a full-service bank on both sides of the balance sheet, similar to Bermuda and Cayman, while reducing the proportion of UK, Central London loans within our portfolio. Although it's been a strong portfolio, we aim to prevent it from comprising 50% of our overall loan book. Expanding in the Channel Islands will be beneficial. However, as Michael mentioned, we anticipate this growth will occur more gradually this year as we proceed.

Okay. That's helpful. Is that a broker-driven market, the way that the book in the U.K. is? Or is it more of an originated branch type of a product?

There are several buildings involved. It's not a broker market; it's more of a direct underwriting market. However, there are many traditional buildings, societies, and property brokers that function as underwriters in that space. This means there is a wide range of products available. We are primarily focused on the same type of character underwriting that we perform for Bermuda and Cayman, which will be in whole loan underwriting.

Yeah. It's a lot more like jumbo mortgages, I guess. And it actually interacts really well with our corporate management company relationships. So if you have captive managers or fund management companies or trust companies, we know a lot of the executives in all these companies. And once you start launching mortgages, the corporate relationships then turn into mortgage relationships personally as well.

Perfect. Thanks for taking my questions.

Thanks, Alex.

The next question comes from Will Nance of Goldman Sachs. Please go ahead.

Hi, guys. Good morning.

Hi, Will.

Can you provide an update on the growth initiatives and their potential impact on margins over time? Specifically, what are you currently paying on sterling deposits? I understand that the reinvestment rate on gilts is close to zero, which suggests there is significant potential to leverage that for incremental margin. What are your thoughts on how this might influence margins? Do you anticipate it will be a net positive, or will it mostly offset declines in the security portfolio and the reduction of some higher yielding loans in the legacy jurisdictions?

It's a net positive, but it's too small to make a significant impact over a half-year period. Once we consider a broader portfolio, it should help with stability. The rates for new business are similar to those in prime Central London, around 350 gross sterling, which would help activate cash. Currently, the rates for secondary market assets in sterling are between zero and 50, which is quite flat. There's even talk of negative rates, so we're not incentivized to pay up for sterling deposits. There are client considerations following ABN, and we service some funds in Guernsey and Jersey that have both sterling and dollar deposits, making it more about relationship-based pricing. The secondary market is challenging, but I believe the residential lending program will be beneficial for margins. The volumes are modest since we're growing organically, and while we're also engaging with other market players, we are quite selective about our underwriting standards. Overall, it will be helpful but won't completely offset other declines.

Yeah. No that makes sense. And then maybe a follow-up on the question on the strategic discussions earlier. I think you just mentioned that you'd like to take the Channel Islands to look more like the Bermuda and Cayman jurisdictions in terms of being like a full-service bank. I mean, can you maybe just expand on what the vision is for the footprint there? How are you thinking about the pieces you have in place today? Do you need to acquire more in order to make that happen? Can you build it organically? Can it be brick-and-mortar light? I'm just curious to kind of, entering a new market wanting to take market share, what your thoughts are on like how to build that infrastructure over time?

Yes. We've actually had a presence in the Channel Islands for many years. While Jersey is a new market for us, we have been active in Guernsey for decades, so we know this market well. It resembles the corporate market in Bermuda and Cayman. In Bermuda, management companies often focus on captives and reinsurance, while the Cayman Islands are known for hedge funds and captives. Guernsey and Jersey, on the other hand, deal more with funds and trust companies, but they share a similar management company structure. Our systems and relationship managers are set up to support this business, so we are well-equipped. With ABN, we have balanced our risk exposures across the three jurisdictions fairly evenly, though earnings are not distributed the same way. In 2020, Cayman contributed about 56% of our core net income, Bermuda 31%, and the Channel Islands 14%. The Channel Islands have more competitive pricing, which explains these figures. We believe we are positioned to allow the Channel Islands to grow organically. Our current focus is on growing fee businesses, particularly in the trust sector, to build scale across our jurisdictions, especially in Singapore. However, if a sizable bank in Jersey were to become available, we would be interested, as there aren’t many natural buyers for such opportunities. Overall, we feel our platform allows for organic growth in the Channel Islands while all three jurisdictions can develop together, giving us a balanced portfolio and reducing our dependence on any single location, like Bermuda.

And Will, the only thing I would just add to that is it's exactly right. The reason why we're going in on a product-by-product basis here is we want to keep it bricks-and-mortar light, right? So it's a bit of proof of concept. We don't need lots of branches to do the residential lending platform. It could be a slick, online form-filling processing. And we're aware obviously of the competition there in terms of the true retail and merchant acquiring driven by HSBC, Barclays, NatWest, Lloyds, etc. So, that's one of the reasons this isn't opening a whole bunch of branches at the moment. Let's start with the stuff that's most accretive for us.

Got it. That's very helpful. Can you provide an update on where we stand with fee income? How much it has declined due to the current environment? If activity levels return to normal across the various jurisdictions, what is our potential recovery and what would be the appropriate run rate moving forward?

Yes. I mean, it was great to see the fourth quarter increase obviously, across the board, mostly from domestic activity. So domestic activity, I would say is probably elevated in the fourth quarter. People aren't traveling. They're spending here. So you get a domestic Christmas shopping boost as opposed to an Amazon and shipping in kind of boost for Christmas. So that's been good. What's missing is obviously the tourism-related credit card fees that we normally get in the fourth quarter particularly from Cayman. Airlift and capacity has been severely reduced during COVID. So that's been muted. There's a few smaller positive items in the banking fees in the fourth quarter as well. But I would say you're probably going to see that run rate as a decent run rate. It was a bit smaller under trust fees, in terms of activity-based fees; there was some recovery in that, but probably a bit smaller than we would see on the run rate side. And you'll probably see a substitution from domestic activity in the merchant acquiring side to credit card tourism-related within the banking fees once the borders open and we get the vaccine passports.

Great, super helpful. Thanks for taking all my questions.

The next question comes from Timur Braziler of Wells Fargo. Please go ahead.

Hi, good morning. I wanted to follow-up on the M&A line of questioning. I guess in looking at the Channel Islands, if the presence there organically is good enough to launch kind of product by product, I guess what's the rationale for looking at some of these larger deals if they do come up? Is it an expense story? I guess what would be the rationale for doing a larger deal in the Channel Islands right now?

So, first and foremost, I think, so we talk about our market shares and pricing power in Bermuda and Cayman came being market share of 35%, 40%. What's been attractive about both Guernsey and Jersey is we have a small market share had and still have a small market share in both jurisdictions. So we really can't grow organically or we can't as well as Bermuda and Cayman. So even after the ABN acquisition, we estimate our market share in Guernsey and we're only on the corporate side and private banking and trust side would be about 15%. So there's a lot more banks obviously in the Channel Islands than in Bermuda and Guernsey. So even at 15%, that gives us a platform where we can grow organically but if we were to find an attractive acquisition it would be nice to be 30%, 30%, 40%. But what we're saying is that 15% in Guernsey is a platform where at least we can grow organically and we'll be opportunistic about whether there's an acquisition. Jersey is even more interesting in the sense that I think our market share we're guessing is about 1%. So there's about GBP 120 billion in deposits. So it's a huge banking market, and we only have a 1% market share. So I think, Jersey would even be more interesting on the acquisition side. But I guess the point is across both Guernsey and Jersey we have enough market share that we can grow product organically. But if there were a very attractively priced bank that were to come up for sale, we definitely would be interested. So our point is we don't need to do it, but if it happened we would look at it opportunistically.

So yes, a couple of things there. The CECL model now reflects the improved macro GDP outlook, forecasting a V-shaped recovery in Q2. We are being cautious and want to see the vaccine programs taking effect and assess the actual outcomes. There is good news on the domestic side as almost all borrowers resumed normal payments in Q4, which was encouraging, but we continue to monitor the situation since we are still not out of the pandemic. It's important to view CECL as a model that reflects an improved credit and macro outlook rather than just a backward-looking perspective. The actual release was roughly balanced, showing an increase in non-performing loans due to the sale of a lower-rated corporate loan that crystallized a loss, along with a small legacy sovereign loan from our previous Barbados operation. This is part of a cleanup effort. As we consider reserves moving forward, CECL aims to reflect the future GDP outlook, particularly in the US, alongside portfolio experiences that inform the model. This year has been quite volatile for macro forecasts, which has likely led to more fluctuations in reserves, contrary to the initial intent of CECL. While predicting future conditions is challenging, we believe the current reserving levels adequately reflect the underlying credit conditions and macroeconomic outlook. If conditions improve, we could see some releases, but generally speaking, the coverage ratio suggests we are comfortable with how it aligns with the current state of the loan book. I realize that wasn't a direct question, but predicting the future is quite difficult.

Right. No, that's good color. I appreciate that, and one last one from me. Just looking at the expense base you guys did a good job kind of modeling that out or calling that out for the fourth quarter. Is the expectation here that we should continue to expect expenses to migrate lower over the course of the year? Are some of these new initiatives going to weigh into that trajectory?

Yes. I mean I think we're sort of nearly 33 is probably an appropriate run rate following the cost restructure program. There's a bit more of a staggered release benefit that's coming into Q1, but there's a bit of backfill coming into that as well. We do keep a sharp focus on expenses in this ultra-low part of the cycle. And I think mid-60s efficiency during this part is probably where we're going to stay. But it is also worth remembering that as we're not subject to corporate income tax, we pay all of our taxes in the expense line, which has that kind of 4% to 5% dilutive effect on the cost-income ratio. But we keep a sharp focus on it. It was obviously difficult to execute a cost restructuring program, but I think it was the right thing following the health crisis.

Yes. And our full run rate in terms of our cost reductions will hit in Q2 this year. So, as you know, we did substantial voluntary departures, early retirements, redundancies in 2020. I wouldn't see us repeating that in this year because I think we obviously are very focused on operational risk and we don't want to cut into bone. But I would say we will continue to focus on Halifax as our service center and continue to move operational non-client-facing positions to Halifax. And that's been going on for four or five years; we have 150 people up there now, and it's a really good model. We'll continue to support and move positions from higher cost jurisdictions to Halifax.

Great. Thank you for taking my questions.

Good morning, everybody. I just wanted to start on your asset sensitivity. Clearly you're very asset sensitive at this point. You guys have demonstrated that. I'm just curious how you plan to manage your rate sensitivity. It looks like you're staying pretty short on the securities book. But, just given your leverage to rising rates, does that maybe give you a bit more confidence to take some duration in the securities book to get some yield and maybe drive some accelerating NII growth?

Yes, it's been interesting to see discussions about negative rates and their potential impact on us charging negative rates to customers. However, our strategy remains unchanged. We are continuing to extend the maturity of what is maturing. The short duration is partly due to elevated prepayment speeds, which are influenced by refinancing rates and new originations in the U.S. market. MBS prepayment speeds have been notably high, along with the buyout options available on those securities. We are continuously extending the maturities as they come up. Additionally, the pace of expanding the ABN has not changed and should align with the behavioral duration of our underlying deposits as we gather more data on ABN deposits. While we are not a mark-to-market organization and do not speculate on asset sensitivity, it naturally arises due to our low loan asset to deposit and total asset ratios, which is a result of our market conditions. If we begin to see a return to a more normal yield curve, there will be opportunities for more tactical deployment. For now, over the past year, we have focused on managing the impact of reinvestment rates and prepayment speeds through re-laddering, and we will continue to do so while always reviewing our portfolio and seeking tactical opportunities.

Okay. That's helpful. It was great to see the increase in AUM during the quarter. I'm curious about how much of this growth came from market increases and underlying assets compared to new client additions, and how that may affect asset management fees in the future.

Yes. So about half. So about half the book is on the AUM side is the money fund that we run in Bermuda and that's really to allow some additional optionality for hot money in particular or customers who want to balance their exposures from on balance sheet to a AAA-rated money fund. So that's just fees that we generate from our asset management subsidiary. The other half is really in the discretionary bucket and brokerage fees. So that's responsive obviously to changes in market valuations. So about 50%.

Okay. Okay. And then could you just give kind of a pulse for the market in Bermuda and I guess across your footprint the health of your clients in the housing market and maybe where we are in the recovery?

Yes, certainly. Regarding the situation in Bermuda concerning COVID, we currently have 10 active cases. There was a slight increase in cases around December, but that has since decreased significantly. The testing process is efficient and effective given the island's size and isolation by saltwater, which helps in controlling the situation. Overall, COVID conditions are stable. In terms of the public sector, Bermuda's fiscal situation is somewhat strained, with a higher national debt and deficit exacerbated by COVID-related issues, although we started with a manageable amount of debt. This limits government spending flexibility. As Michael pointed out, the local market remains quite active since people are not traveling; similar to trends elsewhere, residents are dining out and ordering takeout, which somewhat masks the impact of the absence of tourists. Once tourism resumes, we expect this to boost activity. Interestingly, the housing market has performed well. Regardless of location—be it Vermont, Bermuda, or Cayman—there is increased demand for safe and clean properties with few COVID cases, both from locals and international buyers. In Bermuda, we are managing to stay afloat, but recovery may be challenging. Cayman, meanwhile, is faring better since it entered the crisis without national debt and has lower deficits, leading to quicker GDP growth. Their housing market was already strong before the pandemic, and they continue to do well, with about 35 active COVID cases compared to our 10. The Channel Islands have higher case numbers, with around 400 active cases, but they are larger regions with populations of 110,000 in Jersey and 60,000 in Guernsey. Consequently, they are experiencing more shutdowns. Economically, both Guernsey and Jersey are well-managed with no national debt and have emerged from the crisis on solid fiscal footing, with a robust GDP performance and a thriving fund sector. Overall, our jurisdictions have navigated the situation reasonably well. However, we see signs of a temporary improvement due to increased domestic activity that may be obscuring deeper issues that could resurface as tourism resumes. Thankfully, each island's fiscal situation differs, allowing some to spend more freely than others. Each has taken on debt to address pandemic needs through incentive spending and community support, and we have been active participants in these efforts. Looking back, in March of last year, we anticipated a much worse outcome than we have experienced so far.

That's great. Thanks for color. Thanks everybody.

Thank you, Andrew. And thanks to everyone for joining us today. We look forward to speaking with you again next quarter. Have a great day.

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