Michael Schrum: Yeah. I mean, as you know, we only really lend in our home markets. We don’t try and become innocent capacity in markets we don’t know. So we only lend primarily residential, a little bit of commercial in Bermuda and Cayman, Central London, and increasingly now the Channel Islands as well. I would say the loan pipeline is pretty healthy at this point, but we are being fairly selective when we go into, what we would call, 100% risk-weighted assets. So [indiscernible] return on risk weighted asset story, so prefer very strongly residential, family-occupied housing that amortizes over a long period, and we can offer fixed rate three to five years to offset some of the cash flow issues there. But we are looking at selectively working with some hospitality newbuilds and mixed use residential new builds in both Bermuda and Cayman.
And there are some interesting things out there, but again we’re being quite selective on the amount of experience that we require people to have to undertake those types of projects and preferably people that we worked with before. So some opportunity — pipelines actually probably on the corporate side is a little stronger than it was this time last year interestingly given the rate environment. But I think the certainty about the supply chain issues has kind of slowed down — has increased a little bit, so people are better able to project their cash flows and presales are very strong still in some developments. So there’s some light out there, but again, we’re not stretching at this point in the cycle.
Michael Collins: Yeah. And I’d say the Bermuda market, just going through them all, is flat to a little bit up but we’ll be opportunistic. Cayman, as I talked about, is growing quite quickly, and our goal there is to pick the right developers for condo developments, have the right amount of presales. So we really stick with a handful of well-known developers that we’ve worked with for years. But there’ll be growth there. Channel Islands is growing quite well. As you know, we’ve had pricing pressure on the deposit side because it is a very corporate market led by investment funds who are obviously very price sensitive. So the goal there is to turn Guernsey and Jersey into much more retail banks that look like Bermuda and Cayman.
So we’re up to about $300 million in retail deposits and about GBP260 million in mortgages. So we’ve had a good start there, actually, and we’ll continue to grow that. The London book, as you know, we won’t lend outside of Central London, so we’re very disciplined and the market has slowed down, particularly on the political side with maybe a Labor government coming in, so that’ll be flattish as facilities refinance. So sort of slightly different in every market, but we’ll be conservative, but definitely there’ll be some opportunities as you said.
Craig Bridgewater: But if I may, we did still have originations in the quarter, so we do still have a pretty healthy pipeline. Obviously, everyone is navigating the interest rate environment, but we did have originations just above $100 million during the quarter. So we are still writing business, maintaining underwriting standards, and just kind of meeting the customers where they are and their needs.
Michael Perito: That was a good rundown. Thank you guys. I appreciate you taking my question.
Michael Collins: Thanks, Mike.
Operator: [Operator Instructions] And our next question will come from Alex Twerdahl of Piper Sandler. Please go ahead.
Alex Twerdahl: Good morning.
Michael Collins: Good morning. How are you, Alex?
Alex Twerdahl: A couple questions here. First off, the loans that prepaid during the quarter, can you help us just sort of compare the yields that you’re getting on those loans? I know that they vary across the different jurisdictions.
Craig Bridgewater: Yeah, I mean the — the paydowns mainly came from our UK book as well and the Cayman book. I think in the UK book, it would have been — those were fixed early on, so they were rather low rates, so it’s actually kind of been positive to the yield. In Cayman, the average yield on loans is around 7%. So it would have been loans that were probably paying — I would say we’re paying around 5%, 5.5% because again, we saw a lot of loans being fixed early on in the cycle.
Alex Twerdahl: Okay, yeah. That was — I guess that was my question is that if that cash — I guess the paydown cash just goes into cash, it doesn’t wind up necessarily having as big an impact on NII, I guess, at least in the near-term. Just back to the conversation on what happened with loans in the quarter, I know you guys were reaching some capacity limits in the UK with respect to the level of mortgages you want to take on in that market. Now, I know you said that the market has slowed down quite a bit there, but do the paydowns create some additional capacity should that market actually provide the supply?
Michael Schrum: Yeah, absolutely. I mean, we haven’t really set a hard limit around the portfolio, but I think a couple of quarters ago, we were reaching $1 billion. So it was becoming sort of 20%, 25% of the overall loan book. And it is a specialized product, a monoline product for us. It helps activate the deposits coming out of the Channel Islands, the sterling deposits, and kind of provide that interest spread there. So it wasn’t really a regulatory capacity thing. It was more a portfolio consideration around the loans. So we had a soft limit there of 20%, 25% of overall loan volumes. But yeah, we’re definitely active in that market. I think the markets are slowing down, and I think that’s consistent with the wishes of central bankers, obviously.
