Q3 2021 Eastern Bankshares Inc Earnings Call
Yeah.
Hello, and welcome to the Eastern Bancshares, Inc. Third quarter 2021 earnings Conference call.
Today's call will include forward looking statements, including statements about eastern future financial and operating results.
Luke business strategies and plans, including its pending merger with century Bancorp, Inc. As well as other opportunities and potential risks that's management for CS.
Such forward looking statements reflect management's current estimates or beliefs and are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially.
From those expressed or implied.
In such forward looking statements listeners are referred to the disclosures set forth under the caption forward looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission.
For more information about the risks and uncertainties.
Any forward looking statements made during this call represent managements views and estimates only as of today, while the company may elect to update forward looking statements at some point in the future. The company specifically disclaims any obligation to do so even if the management's views or estimates change and you should.
Not to rely on such statements as representing management views as of any date subsequent to the DS.
G call. The company will also discuss certain non-GAAP financial measures.
For a reconciliation of such non-GAAP financial measures to the comparable GAAP figures. Please refer to the company's earnings press release, which can be found at investors thought Eastern Bank dotcom.
Note that this event is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question.
Chin press the pound key thank you I would now like to turn the call over to Bob Devers Chair and CEO.
Please go ahead Sir.
Thank you Patricia and good morning, everyone with me today is Jim Fitzgerald, our Chief administrative officer, and Chief Financial Officer, and we're pleased to be with you today to provide another quarterly update.
Two weeks ago, we marked the one year anniversary since eastern IPO, which we undertook to provide additional resources to grow our customer offerings accelerate new business opportunities and better serve our customers and communities. A year. Later, we believe that we are delivering on our commitments in a number of ways and are now just two weeks away from closing on the <unk>.
Largest acquisition in eastern history.
A few recent accomplishments that make us, especially proud and food we were once again named by the U S. Small business administration is the number one lender for SBA seven a and 504 loans in Massachusetts for the 13th consecutive year.
In the area of AI and advanced analytics, we were recognized as a winner of the 2021 impact Innovation Award in cash management and payments by 18 America Group, a global advisory firm to the financial services industry for our partnership with signal financial technologies to build them on it.
A digital financial assistant for small business owners. The 2021 Synovate Awards also recognised Easter and as a finalist for its best small business banking solution award for offering quality products.
And an exceptional digital experience to small and medium businesses. In addition, Mark Com an international organization that honors the best creative storytelling and marketing recognized eastern's join us for good advertising campaign with Tree Awards for strategic Communications video and print media.
And finally, we were ranked by Boston business Journal as the fifth largest the fifth most charitable company in Massachusetts, our fifth consecutive year in the top 10.
A few weeks ago, Jim and I were joined by the rest of the executive management team and our board of directors at our annual strategic planning retreat, a time to reflect on the successes and learnings over the past year, but more importantly to plan for the future our president Quincy Miller outlined plans for the future of our commercial and small business banking.
Businesses in which we have a long track record of success and continues to represent our greatest opportunity for strategic growth, we discussed ways to prudently expand these businesses and talked about the importance of doubling down on investments in technology and people.
We also discussed our longstanding commitment to diversity equity and inclusion and through the continued advancement of our road to equity plan, which reflects our greater intentionality in advancing DNI in a number of areas, including talent acquisition retention and development with a particular focus upon driving.
A greater representation of women and people of color on our board within our executive and senior management ranks and our procurement practices.
I think we can all agree that some things never change where in a people driven business and relationships matter more than ever before.
But we're also on a constant state of evolution.
And we are keenly focused on continuing to ensure we have the talent and technology to compete effectively and continue to build upon our position as the leading community bank in the greater Boston market.
And we have had and continue to have great leaders to get US there Jim Miller Eastern's, Chief commercial banking officer, who joined US as part of Eastern's acquisition of Wainwright Bank and Trust company in 2010 has announced his plans to retire at the end of this year.
Under John's leadership Eastern's commercial banking team has continually generated record results and developed significant management depth in order to sustain and build upon this recognized strength in our markets.
Jane is an exceptional leader in banker and many of the community development lending and philanthropic programs developed under his leadership at Wainwright flourish at eastern today.
Words cannot express our gratitude to Jan for his tremendous impact and many contributions as part of our ongoing succession planning two years ago senior commercial banking offices, Greg Mosconi, and Matthew Osborne were promoted to executive Vice President and since July of this year, Greg and math you have reported.
Directly to our President Quincy Miller, they will continue to serve in these roles upon John's retirement and shell formally assume shared responsibility for the commercial banking business. We expect this transition will be smooth, which is a testimony to the strong leadership of Jan Greg and Matthew and.
And I am pleased to report that Jan will continue to serve as a member of our board of advisors.
Likewise at Eastern insurance, President and CEO, John cable will be transitioning to a consultant role to the business at the end of this year and we will focus on cultivating potential agency acquisition opportunities as he moves towards retirement in the next few years as.
As a member of the executive management team of Allied American insurance, John joined Eastern as part of our initial foray into the insurance brokerage business in 2002.
Under John's leadership Eastern insurance completed 30 for insurance agency acquisitions, becoming the second largest insurance broker in Massachusetts, and the 30th largest property and casualty agency in the United States.
Effective January one 2022 executive Vice President, Tim Lodge will be promoted to president and CEO of <unk> insurance.
Tim has been an integral member of the Eastern insurance group Executive leadership team over the past two years overseeing our commercial lines Division. In addition to serving as the lead sponsor of a multiyear project to migrate operations to a new agency management system.
Tim's knowledge industry experience and strong relationships, both internally with our colleagues and externally with our customers and our community partners position him exceptionally well to lead this business. We congratulate him on this well deserved promotion and look forward to his leadership in this new role while continuing to benefit from.
John's expertise and executing eastern insurances acquisition strategy.
Transitioning to the capital front I'm very pleased to announce our plans to establish a corporate share repurchase program, which has been approved by our board and remains subject to regulatory non objection.
This program is expected to be another tool in our toolbox that enables us to demonstrate our commitment to delivering shareholder value.
I'd also like to provide a brief update on our pending merger with century Bank, which is just two weeks away.
Thinking about thinking back to our inaugural earnings call in January I spoke about our exciting future and how does the capital raised in our IPO would make us better positioned than ever before to undertake bank acquisitions in our region supplementing our organic growth with the century merger now at our doorstep I'm fully confident that our partnership will provide.
The scale and resources to better serve our customers and more effectively compete against the larger banks in our region, while continuing to increase our position in the greater Boston market over time.
Our efforts to onboard and integrate centuries customers are already well underway. We look forward to serving these new customers and we will make every effort to earn their trust and provide them with a great level of service they've come to expect.
To the hard work and dedication of our teams at eastern and century, our merger and conversion remains on schedule for mid November we are especially proud of the commitment that employees at both banks have demonstrated to our customers and our colleagues and we thank them for their extraordinary efforts as our two organizations combined.
To become one.
Regarding our third quarter performance, we had another successful and very profitable quarter.
I'm excited to report that after seeing signs of revitalization earlier in the year, but third quarter saw a return to strong core commercial loan growth.
Excluding the impact of PPP loans commercial loans increased 9% in the third quarter on an annualized basis up from a 5% annualized growth.
Last quarter, our loan pipeline has continued to build and asset quality trends have remained strong.
I also wanted to say a few words about the eastern Bank Foundation's activities in the quarter as a reminder, the Eastern Bank Foundation is the philanthropic arm of eastern.
The foundation is led by its president and CEO, Nancy Huntington Stagger and is governed by our board of Trustees, which includes myself several directors of eastern and several community leaders. Recent activities include to address the inequities in vaccination experienced in communities of color, especially within the gateway.
Cities in Massachusetts, and New Hampshire, The foundation collaborated with local community partners and invested $2 million to support culturally inclusive outreach and access to vaccines.
Foundation's investments in the community, including those focused on racial justice and economic inclusion and mobility led to it being recognized by the Commonwealth Institute as a top women led organization in Massachusetts. In addition foundation, President and CEO and Nancy Stagger was recognized among the Boston business Journal's annual.
Power 50, most influential bostonians and honor proudly shared with several members of eastern banks Advisory boards are many community partners and this work as well as what's going Lloyd.
<unk> director of the foundation for business equity Another foundation, which eastern launched four years ago to address the wealth gap by supporting the growth of businesses of color.
This is truly an exciting time at eastern and I'm, So grateful and honored to be sharing it with our exceptional team of colleagues, where they're serving as a trusted adviser to our customers innovating to continually enhance our customer experience and our workplace, giving back to the community or simply being there for one another their commitment to eastern.
And all that we do is extraordinary and I cannot thank them enough for their contributions. They are accomplishments are even more impressive given that 60% of our colleagues are contributing while working remotely from home with the other 40% of our colleagues working onsite in our branches insurance offices and other critical roles.
We are continually evaluating our future of work environment, incorporating feedback from our employees and expect to formalize our plan next year.
Once again, we thank you for your interest in eastern and with that I'll turn it over to Jim for an in depth review of our financial performance.
Thanks, Bob and good morning, everyone.
As Bob mentioned, we're very pleased with our third quarter results and look forward to closing the century merger as expected on November 12.
As we communicated we have received all of our regulatory approvals back in September.
We are converting century eastern systems over the weekend of the closing and look forward to adding the former century customers and our new colleagues at that time.
I'll have more comments on both the impact of century and our outlook later in this presentation.
GAAP net income was $37 1 million for the quarter were 22 per share.
Operating net income was $37 4 million or <unk> 22 per share as well, although the nonoperating items were relatively small in the third quarter. We would encourage everyone to review the reconciliation of non-GAAP earnings in appendix a of the press release and the earnings presentation to see the adjustments.
Our board of directors approved a quarterly dividend of <unk> per share payable on December 15th and approved a share repurchase program to repurchase up to 5% of outstanding shares.
Graham remains subject to non objection from the federal reserve, which we have applied for but have not yet received.
Book value at September 30 was $18 36 per share and tangible book value was $16 33 per share.
Both of these were very similar to the values at June 30 as growth in retained earnings was offset by a reduction in other comprehensive income due to the reduction in the market value of the securities portfolio.
I'll start with some comments on the balance sheet.
As Bob mentioned and we covered in the press release, we experienced strong growth in our core loans in the quarter.
Excluding PPP loans, both residential and commercial loan growth was 9% on an annualized basis and overall loan growth was 8%.
Commercial growth was strong in both C&I and commercial real estate.
Although we expect to see continued strong growth in commercial loans, the 9% growth in the third quarter is slightly higher than what we expect over the longer term.
We also continue to anticipate strong origination activity from our mortgage group.
Although we expect that our balance sheet growth rate will reduce over time as the portfolio increases in size.
We also had another strong quarter for deposit growth, which was 400 million or 12% on an annualized basis.
Although this growth adds to our liquidity challenges in the short run we're confident it will add value over the long term.
The asset quality picture remains to be strong as net charge offs were three basis points.
And the reserve coverage ratio to nonperforming loans of 246% remains very comfortable.
Our COVID-19 modifications continues to reduce and ended the quarter at $111 million down from $150 million at June 30.
We continue to work with customers with modified loans. We are generally comfortable that this group of customers has made significant progress and that the terms of their modifications are appropriate.
Although I won't go into details our capital ratios remained very strong.
And we believe our overall capital and liquidity position will provide us with an ability to continue to look at strategic growth opportunities in the future.
I will now focus on earnings for the third quarter.
While net interest income was $102 7 million in the third quarter net interest income on a fully tax equivalent basis was $104 million or $1 9 million less than the second quarter.
The reduction was driven by lower <unk> fee income of $5 9 million down $3 3 million from the second quarter total of $9 3 million.
During the third quarter. The average securities portfolio grew $900 million from the second quarter, which added $1 8 million of interest income quarter to quarter.
The net interest margin on a tax equivalent basis was 253% for the quarter down 16 basis points from the second quarter.
Core margin was 263% in the quarter down 17 basis points from the second quarter.
It continued to be a challenging interest rate environment, as we deployed excess liquidity into loans and securities at lower interest rates when compared to our existing portfolio yields.
We encourage you to review the non-GAAP reconciliation of the net interest margin in appendix C. As.
As it includes the impact of PPP loans, and our high cash position both of which we expect to change over time.
We included an update of our PPP portfolio on page 14 of the presentation.
At September 30, we had $534 million of PPP loans outstanding and $23 million of PPP fees.
Not yet recognized.
We anticipate that the remaining PPP fees will be recognized in the fourth quarter of 2021 in early 2022.
We have been and continue to be very asset sensitive.
We added a look at the repricing characteristics of our loans on page 13 of the presentation.
As you'll see 42% of our loans are expected to reprice within 30 days.
We believe this repricing characteristic will be beneficial to us as short term rates rise.
But it makes them it makes the current environment much more difficult.
Total noninterest income was $43 2 million in the third quarter on.
On an operating basis noninterest income totaled $43 million showing good growth from the second quarter of $41 5 million.
We generated solid growth compared to Q3 of 2020 and deposit service charges wealth management and debit card revenues with growth rates of 17, 19, and 11% respectively.
Our insurance group posted revenues of $22 million in the quarter flat from a year ago and gains on mortgage sales were down from the record levels of 2020.
Noninterest expense in the quarter was $99 million and $97 $2 million on an operating basis.
Operating noninterest expense was down from $99 9 million in Q2.
Although theres variability and some llama line items from quarter to quarter, our core noninterest expenses have been at or below 2020 expense levels and.
And we look forward to leveraging our operating platform as we integrate the century acquisition starting next month.
As mentioned earlier asset quality continued to be sound and we had a reserve release of $1 5 million in the third quarter compared to $3 3 million released in the second quarter as.
As we have mentioned previously we plan to adopt <unk> as of January one 2022.
The effective tax rate was 23% in the quarter.
I wanted to make sure everyone was aware of some items. We've communicated recently and then provide an update on our outlook.
We have scheduled the shareholder meeting on November 29 related to our proposed equity plan and the definitive proxy statement, which summarizes that plan is currently available.
We look forward to the meeting and would encourage any shareholders that have questions to contact our investor relations team through the website.
Given the ongoing pandemic, we also encourage shareholders as of the record date, who are interested in attending meetings to participate virtually.
All of the relevant information about virtual attendance is in the proxy materials.
As mentioned earlier, our board of directors approved a share repurchase program, which is subject to a non objection from the federal reserve, which we requested earlier this month.
As previously mentioned, we are on track to close the century transaction and convert the systems in mid November.
We'd all like to acknowledge the support and partnership we received from Barry Sloane, and Linda Sloan K and all of the century employees and customers Bank.
Bank mergers are complex and the most successful ones start with the partnership of the management teams.
Barry and Linda have been wonderful partners to eastern on all levels.
We feel very good about the financial targets, we provided for the century acquisition back in April.
The integration is scheduled for mid November and we have a very good plan in place and are very very well prepared.
The eastern and central teams have done an excellent job.
We believe that the cost savings of 45% we projected at the time, we announced the acquisition will be fully achieved in 2022.
Which is faster than originally anticipated.
Had initially expected that we would not realize the full expense synergies from the transaction until 2023 <unk>.
However, the overall integration planning has progressed more quickly than we expected back during the due diligence phase.
Although the assist associated purchase accounting adjustments are subject to swings due to interest rate changes. We also feel very good about our original estimates and assumptions there as well.
We provide an early outlook for 2022, including century on page 16 of the presentation.
We realize there are only four quarters of data on eastern as a public company and that there isn't a lot of analyst coverage of century. So we hope our outlook can help investors and analysts.
The key assumptions behind this outlook are an improving economy.
Slightly higher long term interest rates in 2022.
On a rate hike in very late 2022, which we would expect would have very minimal impact to our full year results.
We expect non it excuse me, we expect net interest income to be between 490 and $510 million in 2022.
As we have mentioned in prior outlooks, we expect very little PPP fee income in 2022, and this will affect the year over year comparisons of 2021 and 2022.
We expect core commercial loan we expect our core commercial loan portfolio, excluding PPP loans to grow at a mid to high single digit rate, although we expect to experience some modest runoff from the century portfolio as we integrate and align century's existing portfolio with the eastern's approach to lending.
We also expect to reshape the existing century funding structure, which is likely to cause some century deposit runoff.
We will plan to use some of our excess liquidity to cover any century deposit runoff.
We think a more efficient balance sheet long term will help improve our overall returns.
And we'll begin that process after the closing.
We expect our overall net interest margin to be lower in 2022% in 2021 levels as the century net interest margin is below the current eastern margin.
As mentioned, we expect 2022 to be a bit of a repositioning year for the balance sheet.
2022, operating noninterest income is expected to be between $180 and $190 million in.
In operating noninterest expense in 2022 is expected to be between 445 and $460 million.
This includes the projected expenses associated with the century acquisition as well as the proposed equity plan, assuming we receive shareholder approval.
The effective tax rate for 2022 is anticipated to be between 20 and 21%.
Thank you very much and we're ready to open it up for questions.
Thank you and at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Damon Delmonte from <unk>. Your line is open.
Hey, good morning, guys hope everybody's doing well today.
Yes, good morning, Damon how are you.
Doing great. Thanks. So first question kind of looking at your outlook a little bit here. The non interest income expectation of one I think it's 180 to 190.
How much contribution are you expecting from from century anyway, and I guess, if you take that out what kind of organic growth would you be expecting year over year.
Sure No. It's a good question David I think.
Century, if you look historically did not have a large fee component to its income stream.
They had.
Approximately somewhere between on a core basis, 12% and $15 million a year.
If you look at our noninterest income there has been some variability this year, especially the non operating numbers.
The Rabbi trust gains and in the operating categories swap revenue.
So if you can see through those we expect basically flat noninterest noninterest income year to year.
Got it okay.
Alright thats helpful. Thanks.
And then as you do.
You look at your <unk> your outlook for loan growth I think you said mid <unk>.
Mid to high single digits on the commercial side in 2022 can you just talk a little bit about what's your commercial customers are seeing as far as like supply chain issues of wage inflation is that kind of factoring into the demand that may or may not be happening in the next 12 months.
Sure no it's a.
It's a very good question as well so I think there's a number of mixed things going on right. There clearly what we hear from customers is wage inflation and supply chain.
Slowness to construction projects.
Any of the things that you.
You hear commonly and so that's definitely a factor.
Offsetting that a little bit the other way the Boston markets doing well it's growing.
A couple of our major industries bio and pharma in particular really growing and so the support that dose and education to support that those sectors give makes the underlying economy here a little bit stronger than what we sense in other parts of the country. So sort of a balancing act there but those.
Those two things.
What we hear most.
Got it Okay. That's helpful and then I guess, if I squeeze in one more question here.
And the outlook for credit obviously things are continuing to go very well for you guys.
Can you just give a little perspective on year.
Forward book on the provision now you've had three releases.
In a row and just wondering if you could expect further relief again.
Preface this by saying absent any <unk> impact or any type of accounting impacts from the merger closing, but if you look at our core eastern.
Yes, yes.
Yes.
So I'm going to lap and just give a shout out to our credit and accounting teams, who actually have to do that.
Accounting for century on one basis and then we are adopting seasonal as you mentioned January one so to say, it's a moving fluid target is.
The understatement.
A lot of work and very time sensitive it's really hard to give you an answer a straight answer to your question.
I mean, there's so much uncertainty in the transition from sort of the incurred loss model of the past over to diesel.
I think the best we can tell you is the credit credit tenants had been very strong and the fourth quarter.
We will be on the incurred loss model it probably looks like what you've seen in the last couple of quarters.
And then we'll probably give an update more in January as we know more from the century closing and seasonal.
Got it Okay fair enough. That's all I had thanks a lot appreciate it thanks.
Your next question comes from the line of Laurie Hunsicker from Compass point Your line is open.
Hi, Thanks, good morning.
Morning, Larry.
Hoping you can give us Jim and update on what intangibles are going to look like with the closing.
Okay.
You gave us it was around $617 million I don't know if thats been fine tune.
Yeah, So I think Laurie no.
We don't know Theres, so many moving pieces at this point.
The biggest change and thats outside of our control as interest rates. So.
What we feel good about and what I communicated a couple of minutes ago is that.
We certainly had all the areas.
Purchase accounting marks and due diligence and we feel very good about the process, we had and the understanding that we had there the interest rates interest rates were a little bit different than they were back in April.
Then I'll get determined as of November 12, So that's the one variable that makes it hard to give you an answer but we feel very good about.
The knowledge that we had in due diligence we feel very good about.
Great Okay and.
That's helpful. And then your color around margin with helpful. Just hoping you can you can help us think about it.
Just a little bit more specifically right because obviously to your point <unk>. These are our country's margin is 182 as of the third quarter.
And you still have liquidity is a challenge.
And so I'm kind of putting all that together the 235 or so baseline, but I'm just hoping that you can help that line.
Youre not a little bit is that still too high or how should we be thinking more specifically about margin for 2022.
Sure So I think.
Got you.
You've done a good job there Laurie <unk> gotten all of the inputs that right in Europe. They were accurate. So the century margin is lower than eastern Thats, obviously going to put downward pressure on our margin and as we've tried to say, where we are originating loans and buying securities today are at lower yields.
Our overall aggregate portfolio yields so the margin compression issue is still there.
<unk>.
On top of that it's a cash transaction. So the liquidity component at eastern is going to change as well.
We did try to be helpful on the dollars.
And that's as much guidance as I think we can give at this point.
Okay.
Okay, and then expenses.
Expense guide looks Fabulous can you can you help us think a little bit maybe more specifically assuming your benefit plans are approved in their conversion IPR norm.
It would seem to make sense. They are assuming that comes in can you just for questions. I believe it's about a $20 million expense and then help us think about how you're mitigating that.
Generally in dollar amounts in terms of you know high end cash bonuses would be eliminated.
Maybe if you've got some more specific dollar numbers around that that you could share.
Sure. So I can I hope we can be helpful. Laurie I think first thing I would say is there's no decisions and you know that I'm not sure everybody else does no decisions about the management team.
<unk> made until post approval. So we don't we.
Certainly when we put together our budgets for next year have some thoughts about what the equity plans might cost, but none of that has been.
Approved nor really individually reviews.
The visuals reviewed so it's a little premature to.
Talk about that.
As I said in my comments, though we have included that in the $4 $45 million to $460 million next year. The component of that what I would say is and I think I'll be consistent here and Bob spend consistent coming into being a public company. We realized we had to change many of the eastern compensation.
Programs.
In part because the equity plans, we knew we'd be coming.
In 2022, so just to recap there we changed the pension plan for the company back in 2020.
That was a significant employee benefit change.
We structured it reduced the expense to the company in a significant way and we expect that benefit to continue into the future.
As we've articulated previously you can see in our detailed disclosures the pension cost. This year was about $7 million to $8 million less than last year. So that's a component going the right way second as we disclosed back in July.
There were some supplemental executive retirement programs.
A few executives that got modified again that was an.
In anticipation of the equity plans coming next year.
And then thirdly going back to 2020 really 2019, we had an executive incentive program that was a cash based program here that we.
Basically stopped making new grants in the years 2020, and the year 2020 in 2021 again, it's in anticipation of the equity plans coming so.
Hopefully that gives you some of the tools of how we approached it and the balances and the tradeoffs that we made to to get to that position.
Okay. Okay. That's helpful and then.
Two more questions. If I may on loan deferrals love to see that coming down to $111 million.
Kind of a two part question here do you have do you have balances on restaurant hotel and retail or if not I can follow up with you separately and then on the $111 million of total deferrals can you remind us how much of that is drawn as of December 31.
So we.
We should follow up.
Hi.
The.
There are a significant number of there are some maturities in that last modification bucket I don't believe are later in the fourth quarter of this year, but there is certainly more in 2022.
Okay I'll follow up with you offline and then just Bob last question for you.
This deal just about to close can you can you give us a refresh now on how you're approaching future M&A. If you will but the digester you would potentially look to do something in 2022 if the opportunity arose and Dan.
Second part of that how you think about using cash versus your currency.
Sure.
So certainly we continue to look for opportunities for M&A.
If one were to come along in 2022, we'd certainly consider that very seriously.
Mindful of the fact that.
The targets in the space that we're focused on here in greater Boston or fewer of these these are rare opportunities in.
And they are terrific potential opportunities. So they are kind of things that.
We wouldn't let pass by.
That said, we are very focused on organic growth.
Has always been very solid to strong and continues to be that way, we see a lot of opportunities. So right now our energies are very focused on things that will help accelerate organic growth. We're in the middle for example of a of a major project in the middle of it.
Integrating century in our systems conversion, so really kudos to our technology team of a new digital account opening system.
There were currently underway in building and very excited about as a way to to further.
Improve access for our clients as well as help accelerate account acquisition, so and as I mentioned in my remarks.
As always focused on our middle market and small business.
<unk> and see a lot of opportunities there I think and in terms of preference for for cash versus stock.
Defer to Jim on that one.
Yes.
I've said this before Laurie it's ironic because it's a very good question, but in reality the sellers dictate that so.
Obviously, we have a very strong balance sheet.
Cash is something that's a relative advantage for us but in reality, that's determined more by sellers than buyers.
Great. Thanks for taking my question.
Again, if you would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from Dave Bishop from Seaport Research. Your line is open.
Yes, good morning, gentlemen.
Good morning.
Okay.
A little bit late.
The balance sheet.
<unk>.
From a wall to wall.
Ill walk through that again, just on a high level basis.
Sure David you faded in and out but I think I got the question if not redirect me, but I think the question was.
Century re balance sheet balance sheet positioning I think.
If you look at century, and you look at eastern Eastern's very strong funding capabilities and one of the things that we anticipate doing is looking at the deposits and probably and expecting some deposit run off from the century side and we feel very comfortable with that because we've got so much liquidity.
At Eastern and our funding sources are so strong so it's really just optimizing that funding side now that takes time.
It doesn't happen immediately so it will be.
That will reposition over time, but it's really the funding side is where we see the potential improvements there and again, it's really just capitalizing on the eastern strengths right.
Got it and then maybe.
Some color on.
And installation.
Yes.
Hello.
I'm, sorry could you repeat that.
Our securities portfolio.
In terms of maybe.
Installation.
Yes.
Paul.
Yes.
Sure.
Generally there's a pretty decent disclosure on the securities portfolio is what we bought in the past and.
So I think the question is more of these specific recent purchases, which look in terms of types like what we have in the portfolio. The average durations between three and four years.
Yeah.
Portfolio yields.
Yields the yields on the bonds.
Portfolio purchases in the quarter were about 1% not about where 1% or 1%.
Okay.
And then.
Global Formula.
Outlook guidance effective tax rate.
41% looks a little bit lower.
<unk> been running generally just curious what sort of driving that outlook a little bit lower.
Sure a century, so one of the SaaS century strength in their education portfolio lending as they did you.
What you would generally referred to as an IRB kind of loan.
So its tax advantaged, one reason their margins a little bit lower.
But the tax advantages.
Obviously run through the tax line.
And thats whats, causing the.
In essence, the reduction the lower rate in 'twenty, two compared to 21 21.
Got it.
And there are no further questions at this time I will now turn the call over to Bobby Frist for closing remarks.
Great well again, thanks, so much for tuning in and for listening in and for your interest and for those of you ask questions your questions as well so.
Again best wishes for the upcoming holiday season, and we look forward to talking with you again next quarter.
Okay.
This concludes today's conference call you may now disconnect.
Okay.
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Yes.
Yeah.
Yes.
Yes.
Yes.
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Yes.
Okay.