Q3 2023 Eastern Bankshares Inc Earnings Call

Speaker 1: Hello and welcome to Eastern bank shares Inc. 3.25 2023 earnings conference call. Today's call will include four-looking statements, including statements about Eastern's future financial and operating results, outlook, business, strategies and plans, as well as other opportunities and potential risks that management foresee. Such four-looking statements reflect management's current estimates or beliefs.

Hello, and welcome to Eastern Bancshares, Inc. Third quarter 2022 earnings Conference call.

This call will include forward looking statements, including statements about <unk>.

Future financial and operating results.

Business strategies and plans.

As other opportunities and potential risks that management foresees.

Such forward looking statements reflect management's current estimates or beliefs and.

Risks and uncertainties that may cause.

Actual results or the timing of events to differ materially from the views expressed today.

More information about such risks and uncertainties are set forth under the caption forward looking statements.

<unk> press release, as well as into risk factors section and other disclosures.

<unk> periodic filings with the Securities and Exchange Commission.

Any forward looking statements made during this call represent managements estimates as of today and the company undertakes no obligation to update these statements as a result of new information of future events.

During the call the company will discuss both GAAP and certain non-GAAP financial measures.

Reconciliation of GAAP and non-GAAP financial measures. Please refer to the company's earnings press release, which can be found at investor that Eastern Bank Dotcom.

Please note 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'd like to ask a question. During this time separate press star followed by the number one I just had a phone keypad. If you would like to withdraw your question. Please press the star followed by the number two thank you I would now like to turn the call over to Bob Rivers chairs.

Speaker 1: phone keypad if you'd like to which are your questions.

Oh.

Speaker 2: Thank you, Julie. Good morning, everyone, and thank you for joining our third quarter earnings call. I'm joined today by Jim Fitzgerald, our Chief Administrative Officer and Chief Financial Officer, who will review our financial results short.

Great. Thank you Julie good morning, everyone and thank you for joining our third quarter earnings call I'm joined today by Jim Fitzgerald, Our Chief administrative officer, and Chief Financial Officer, who will review our financial results shortly.

Speaker 2: The third quarter marked a very significant event for Eastern, as we further advanced our strategic initiatives with the simultaneous announcement on September 19th of the sale of Eastern Insurance to AJ Gallagher and the agreement to merge with Cambridge Trust.

Third quarter marked a very significant event for Easter and as we further advanced our strategic initiatives with the simultaneous announcement on September 19th of the sale of eastern insurance to a J Gallagher and the agreement to merge with Cambridge Trust.

Speaker 2: Both transactions are on track with the anticipated timelines communicated last month.

Both transactions are on track with the anticipated timelines communicated last month.

Speaker 2: We expect to close on the sale of Eastern Insurance next week and have filed all of the bank regulatory applications for the approvals required for the Cambridge Trust merger, which is expected to be completed in the first quarter of 2024.

We expect to close on the sale of East and insurance next week and have fun.

While all of the bank regulatory applications for the approvals required for the Cambridge Trust merger.

It is expected to be completed in the first quarter of 2024.

Speaker 2: In addition, both the teams that Eastern and Cambridge Trust are engaged in planning the integration and a seamless transition for affected customers.

In addition, both the teams at Eastern and Cambridge Trust or engaged in planning the integration and a seamless transition for affected customers.

Speaker 2: We are also very pleased to announce our board approved a 10% increase in our dividend from 10 cents per share to 11 cents.

We are also very pleased to announce our board approved a 10% increase in our dividend from <unk> 10 per share to <unk> 11 per share, which will be paid in December demonstrating our confidence in both our strategic direction and our operating results.

Speaker 2: which we paid in December , demonstrating our confidence in both our strategic direction and our operating result.

Yeah.

Speaker 2: In the midst of these two significant transactions, we produce strong operating results during the quarter.

In the midst of these two significant transactions, we produced strong operating results during the quarter.

Speaker 2: As Jim mentioned on the September 19th call, the Assurance Sale required us to account for Eastern Insurance as a discontinued operation in Q3 and also helped us realize some tax benefits that we weren't able to realize previously. Although these are...

As Jim mentioned on the September 19th call. The insurance sale required us to account for eastern insurance as a discontinued operation in Q3, and also helped us realize some tax benefits that we werent able to realize previously.

Although these items cause.

Speaker 2: our results to look different than earlier quarters. We have worked hard to provide transparency so that you can see the underlying result.

Our results to look different than earlier quarters, we have worked hard to provide transparency. So that you can see the underlying results.

Speaker 2: We experienced a slower increase in our cost of funds in the third quarter, although like many banks, we continue to see the shift out of lower cost deposits into higher cost deposits. And we expect that to continue in Q4 and into 2024.

We experienced a slower increase in our cost of funds in the third quarter, although like many banks, we continue to see the shift out of lower cost deposits into higher cost deposits and we expect that to continue in Q4 and into 2024.

Speaker 2: In spite of the increasing costs, we continue to be confident that our lower cost deposit portfolio will be a long-term competitive advantage.

In spite of the increasing costs, we continue to be confident that our lower cost deposit portfolio will be a long term competitive advantage.

Speaker 2: We work very hard to keep our wholesale funding levels at modest.

We have worked very hard to keep our wholesale funding levels at modest levels and we think an inefficient balance sheet is in our long in our shareholders long term interest.

Speaker 2: And we think an efficient balance sheet is in our long, in our shareholders long-term interest.

Speaker 2: excluding the sale of the shared national credit loans, we describe in the presentation core commercial loan growth in Q3 was modest and we expected to stay that way for the next few quarters. We are finding loan demand to be limited as our customers are being cautious, in part due to the...

Excluding the sale of the shared national credit loans, we describe in the presentation core commercial loan growth in Q3 was modest and we expect it to stay that way for the next few quarters.

We are finding loan demand to be limited as our customers are being cautious.

In part due to the higher level of interest rates.

Speaker 2: We also expect consumer and mortgage loan growth in the single digits over the next

We also expect consumer and mortgage loan growth in the single digits over the next few quarters.

Speaker 2: With the pending sale of Eastern Insurance, there is more visibility into the expense profile of the bank on a standalone base.

With the pending sale of eastern insurance, there is more visibility into the expense profile of the bank on a standalone basis.

Speaker 2: We believe that we have made significant progress on the efficiency goals we set at the time of our IPO in 2020.

We believe that we have made significant progress on the efficiency goals, we set at the time of our IPO in 2024.

Speaker 2: for both our efficiency ratio and expense to assets ratio and expect further improvements as we combine with Cambridge Trust.

For both our efficiency ratio and expense to assets ratio and expect further improvements as we combine with Cambridge Trust.

Speaker 2: Our acroality metrics continue to be very strong in 2-3, with credit losses below one basis point, and continuing low levels of...

Our asset quality metrics continue to be very strong in Q3 with credit losses below one basis point and continuing low levels of nonperforming loans, we continue to manage our exposure to the office sector.

Speaker 2: We continue to manage our exposure to the office sector and provide details on the portfolio in the presentation.

Provide details on the portfolio in the presentation.

Speaker 2: Our balance sheet strength continues to be a focus and a source of strength. Both our regulatory and gap capital levels are strong relative to requirements and as compared with many of our peers. Our loan deposit portfolios are of high quality and our wholesale funding levels at 5% of assets are low.

Our balance sheet strength continues to be a focus and a source of strength.

With our regulatory and GAAP capital levels are strong relative to requirements and many too.

As compared with many of our peers our loan deposit portfolios are of high quality.

In our wholesale funding levels at 5% of assets are low.

Speaker 2: We will continue to look for ways to strengthen the balance she even further over time, but believe this strength is a competitive advantage.

We will continue to look for ways to strengthen the balance sheet, even further over time, but believe this strength is a competitive advantage.

Speaker 2: Looking ahead, we are very excited about the future opportunities as we merge with Cambridge Trust. Our enhanced market position, increased scale and capabilities, along with significantly larger wealth management and private banking businesses, will provide a stronger platform for future growth and earnings than we have historically had. We look forward to providing you additional details as we move through the regulatory approval process and close the process.

Looking ahead, we are very excited about the future opportunities as we merge with Cambridge Trust, our enhanced market position increased scale and capabilities, along with significantly larger wealth management and private banking businesses will provide a stronger platform for future growth and earnings than we have historically had.

We look forward to providing you additional details as we move through the regulatory approval process and closing.

Speaker 2: As I conclude my remarks, I express my thanks and deepest appreciation to all of our Eastern and Churns Group colleagues for their many contributions to Eastern's overall success and culture over the past 21 years.

As I conclude my remarks, I Express my thanks, and deepest appreciation to all of our eastern insurance group colleagues for their many contributions to eastern overall success and culture over the past 21 years and ask their planned transition to a J Gallagher approaches we send our best wishes for continued success.

Speaker 2: And as their plan transitioned to AJ Gallagher approaches, we send our best wishes for continued success. I have every confidence they will continue to excel leveraging Gallagher's market leading capabilities and we look forward to partnering with them in serving our mutual clients.

I have every confidence they will continue to excel leveraging gallagher's market, leading capabilities and we look forward to partnering with them and serving our mutual clients.

Speaker 2: And once again, I especially thank Eastern Insurance's President and CEO Tim Lodge and his executive team for their many contributions to Eastern and for leading the team through this process.

And once again, I, especially think eastern insurance as President and CEO, Tim Lodge and his executive team for their many contributions to eastern and for leading the team through this process.

Finally, I also want to thank our Chief Credit Officer, Dan Sullivan for his 27 years of service to eastern as he retires this month.

Speaker 2: Finally, I also want to thank our Chief Credit Officer, Dan Sullivan, for his 27 years of service to Eastern as he retires this month. And I wish him a very happy and...

Wish him, a very happy and healthy retirement.

Speaker 2: Dan was the architect of our credit process and culture at Eastern, a longtime strength of our company, with delinquency rates, levels of non-performing loans, and net credit losses regularly among the lowest of our peers.

Dan was the architect of our credit process and culture at Eastern a longtime strength of our company with delinquency rates levels of nonperforming loans and net credit losses regularly among the lowest of our peers Dan joined US in 1990, 6% is our very first chief credit officer, when eastern had just $2 one.

Speaker 2: Dan joined us in 1996 as our very first Chief Credit Officer when Eastern had just $2.1 billion in assets with 28 branches, helping to lead our transformation from a savings bank to one with a loan portfolio that is now over 70% commercial. Quite a legacy. I'm delighted to share that Matthew Osborne, former head of our Commercial Real Estate and Community Development Lending Team.

And in assets with 28 branches, helping to lead our transformation from a savings bag to one with a loan portfolio that is now over 70% commercial quite a legacy.

I am delighted to share that Matthew Osborne, former head of our commercial real estate and community development lending teams.

Speaker 2: And a 25-year veteran at Eastern has assumed Dan's role as our Chief Credit Officer.

And a 25 year veteran at eastern is assumed dan's role as our Chief credit Officer.

Speaker 2: creating a seamless transition for our teams. As a result, Greg Boscone, who leads our middle market lending and international banking teams, will become our chief commercial banking officer. Each of these promotions is representative of long time thoughtful succession planning, as well as the tremendous talent and bench strength within our organization.

Creating a seamless transition for our teams as a result, Greg Mosconi leads our middle market lending in international banking teams will become our chief commercial banking officer.

Each of these promotions is representative of long times thoughtful succession planning as well as the tremendous talent and bench strength within our organization.

Speaker 2: Once again, we are pleased with our results this quarter and feel very confident regarding Eastern's future growth and performance. As always, most of the credit for this goes to my 2,100 colleagues.

Once again, we are pleased with our results this quarter and feel very confident regarding eastern's feature growth and performance as always most of the credit for this goes to my 2100 colleagues, who continue to ensure that eastern remains a strong and reliable financial and community partner, we have been for the past 205 years as well.

Speaker 2: who continue to ensure that Eastern remains the strong and reliable financial and community partner we have been for the past 205 years, as well as to our customers and community partners for their business, support, and partnership.

To our customers and community partners for their business support and partnership and with that I'll turn it over to Jim.

Speaker 2: And with that, I'll turn it over to Jim. Great. Thank you, Bob. And good morning, everyone.

Thank you Bob and good morning, everyone.

Speaker 3: As Bob mentioned, it was a very busy third quarter for us with the insurance transaction and the merger with Cambridge announced together in mid-September.

As Bob mentioned it was a very busy third quarter for us with the insurance transaction and the merger with Cambridge announced together in mid September.

Speaker 3: Both are very important strategic transactions for us and combined will lead to a stronger balance sheet, enhanced market share and a platform for future earnings growth that we are very excited about.

Both are very important strategic transactions for us and combined will lead to a stronger balance sheet enhanced market share and a platform for future earnings growth that we are very excited about.

Speaker 3: As I mentioned on the call in September , the transactions do create some short-term noise in our results.

As I mentioned on the call in September the transactions do create some short term noise in our results.

Speaker 3: The sale of the insurance operations requires us to account for Eastern Insurance as a discontinued operation and to restate our prior period results accordingly.

The sale of the insurance operations requires us to account for eastern insurance as a discontinued operation and.

And to restate our prior period results accordingly.

Speaker 3: In some ways, this is helpful as it provides an early view of what we will look like going forward without Eastern Insurance.

In some ways. This is helpful. As it provides an early view of what we will look like going forward without eastern insurance.

Speaker 3: although we recognize it's a change from what we've presented historically.

Although we recognize it is a change from what we've presented historically.

Speaker 3: We provide details on the results for Eastern Insurance that are contained in discontinued operations on page 7 of the earnings presentation.

We provide details on the results for eastern insurance that are contained in discontinued operations on page seven of the earnings presentation.

Speaker 3: In addition to the core results, there were 10.7 million of transaction-related charges that occurred in Q3. Excluding those costs, EIG's results were in line with expectations.

In addition to the core results there were $10 7 million of transaction related charges that occurred in Q3 excluding.

Excluding those costs Aig's results were in line with expectations.

Speaker 3: One reminder is that discontinued operations are not included in our operating net income, which makes comparisons with the overall expectations.

One reminder, is that discontinued operations are not included in our operating net income, which makes comparisons with the overall expectations difficult.

Speaker 3: In addition, the insurance transaction allowed us to eliminate a tax valuation allowance of approximately $15 million that we set up as part of the security sale in Q1.

In addition, the insurance transaction allowed us to eliminate a tax valuation allowance of approximately $15 million that we set up as part of the security sale in Q1.

Speaker 3: Although this was very positive and an additional economic benefit of the transaction, it's a one-time event.

Although this was very positive and an additional economic benefit of the transaction.

It's a onetime event.

Speaker 3: I'll provide some comments on our tax rate later in my remarks.

I'll provide some comments on our tax rate later in my remarks.

Speaker 3: As Bob mentioned, both transactions are progressing very well. We expect the sale of EIG to occur next week as anticipated and have submitted all the regulatory applications for approval for the Cambridge merger.

As Bob mentioned, both transactions are progressing very well, we expect to sell at AIG to occur next week as anticipated and have submitted all the regulatory applications for approval for the Cambridge merger.

Speaker 3: I'll follow up with some specific comments on both transactions when I discuss our outlook.

Follow up with some specific comments on both transactions when I discuss our outlook.

Speaker 3: We are very pleased to announce a 10% increase in our dividend from $0.10 to $0.11 per share, which is payable in December . We have a high degree of confidence in our strategic direction and our operating earnings and believe this dividend reflects that confidence.

We're very pleased to announce a 10% increase in our dividend from 10 cents to <unk> 11 per share which is payable in December we have a high degree of confidence in our strategic direction and our operating earnings and believe this dividend reflects that confidence.

Speaker 3: Starting with some highlights, net income for the quarter was $59.1 million, or $0.36 per share. Operating earnings were $52.1 million, or $0.32 per share.

Starting with some highlights net income for the quarter was $59 1 million or <unk> 36 per share.

Operating earnings were $52 1 million or <unk> 32 per share.

Speaker 3: Net income includes both a loss of $4.4 million from discontinued operations and a tax benefit of $16.2 million, which was driven by the elimination of the $15 million tax valuation allowance I mentioned.

Net income includes both a loss of $4 4 million from discontinued operations and a tax benefit of $16 2 million, which was driven by the elimination of the $15 million tax valuation allowance I mentioned.

Speaker 3: Also, as I mentioned, the loss on discontinued operations is due to transaction costs incurred in the sale of Eastern Insurance.

Also as I mentioned the loss on discontinued operations is due to transaction costs incurred in the sale of eastern insurance.

Speaker 3: The net interest margin of 2.77% was relatively stable quarter to quarter down just three basis points from Q2.

The net interest margin of 277% was relatively stable quarter to quarter down just three basis points from Q2.

Speaker 3: Deposit costs were well-contained, up 11 basis points in the quarter from 1.22 to 1.33 percent, and interest-bearing deposit costs were up 18 basis points from 1.71 percent to 1.89 percent.

Deposit costs were well contained up 11 basis points in the quarter from one point to 2% to 133% and interest bearing deposit costs were up 18 basis points from 171% to $1 89%.

Total assets declined approximately 400 million from June 30, due primarily to declines in cash and securities.

Speaker 3: Total assets declined approximately $400 million from June 30th due primarily to declines in cash and security.

Speaker 3: Capital levels remain very strong with a CET1 ratio of 16% and a fully marked tangible equity to tangible assets ratio, which includes unrealized losses on HTM securities of 8.5%.

Capital levels remained very strong with a CET one ratio of 16% and.

And our fully marked tangible equity to tangible assets ratio, which includes unrealized losses on HTM securities of eight 5%.

In the quarter core commercial loan growth, which excludes the sale of shared national credits I'll discuss shortly was just under 2%.

Speaker 3: in the quarter core commercial loan growth, which excludes the sale of shared national credits I'll discuss shortly, was just under 2%, which was down from earlier in the year but consistent with our expectations.

Which was down from earlier in the year, but consistent with our expectations.

Speaker 3: Residential mortgage growth was 6% annualized in the quarter and consumer loan growth was 2%.

Residential mortgage growth was 6% annualized in the quarter in consumer loan growth was 2%.

Speaker 3: Asset quality remained very strong with essentially no net loan charge-offs and NPLs were up from Q2 but still a very low 34 basis points of loan.

Asset quality remained very strong with essentially no net loan charge offs and Npls were up from Q2, but still a very low 34 basis points of loans.

Speaker 3: I'll have more to add on the details behind these headlines as I go through my remarks.

I'll have more to add on the details behind these headlines as I go through my remarks.

Speaker 3: Starting with the balance sheet, assets declined by $400 million during the quarter to $21.1 billion.

Starting with the balance sheet assets declined by $400 million during the quarter to $21 1 billion.

Cash declined $265 million as we lowered the amount of on balance sheet cash we've been holding.

Speaker 3: Cash declined $265 million as we lowered the amount of on-balance sheet cash we have been holding.

Speaker 3: Securities were lower by 268 million due to runoff and lower market values. And loans were down by 54 million due to the sale of the shared national credit loans I'd just mentioned.

Securities were lower by $268 million due to run off and lower market values and loans were down by $54 million due to the sale of the shared national credit loans I just mentioned.

Speaker 3: Deposits were down $757 million due to reductions in brokered deposits of $306 million.

Deposits were down $757 million due to reductions in brokered deposits of $306 million.

Speaker 3: the maturity of a $230 million non-court term deposit from the century acquisition, and a seasonal decrease in municipal deposits of $375 million.

The maturity of a $230 million non core term deposit from the century acquisition.

And a seasonal decrease in municipal deposits of $375 million.

Speaker 3: borrowings increased by $364 million to replace maturing brokered CDs.

Borrowings increased by $364 million to replace maturing broker Cds. We made this shift to short term borrowings to more easily facilitate the pay down of wholesale funding. When we received the cash from the AIG sale next week.

Speaker 3: We made this shift to short-term borrowings to more easily facilitate the pay-down of wholesale funding when we receive the cash from the EIG sale next week.

Speaker 3: Chairholder's equity declined by 80 million due to a decrease in AOCI, partially offset by retained earnings.

Shareholders equity declined by $80 million due to a decrease in OCI, partially offset by retained earnings.

Speaker 3: And book value ended the quarter at $13.87 per share. And tangible book value ended the quarter at $10.14 per share.

And book value ended the quarter at $13 87 per share and tangible book value ended the quarter at $10 14 per share.

Speaker 3: Nenincom was 59.1 million or 36 cents per diluted share, and operating net income was 52.1 million or 32 cents per diluted share. As I mentioned, there are significant number of items that created noise, and I will try to point them out in my review.

Net income was $59 1 million or <unk> 36 per diluted share and operating net income was $52 1 million or 32 cents per diluted share as I mentioned, there are significant number of items that created noise and I will try to point them out in my review.

Speaker 3: Net interest income was $137.2 million, down $4.4 million from the prior quarter.

Net interest income was $137 2 million down $4 4 million from the prior quarter.

Speaker 3: As I mentioned, the net interest margin was 2.77%, which was down three basis points from Q2. The decline in net interest income was primarily due to the reduced size of the balance.

As I mentioned, the net interest margin was 277%, which was down three basis points from Q2 to.

The decline in net interest income was primarily due to the reduced size of the balance sheet.

Speaker 3: As we outlined on page 8, loan yields were up 16 basis points on average in the quarter. I'll turn total interest earning assets were up 10 basis points. In part due to the reduction in cash, I mentioned earlier.

As we outlined on page eight loan yields were up 16 basis points on average in the quarter.

Our total interest, earning assets were up 10 basis points in part due to the reduction in cash I mentioned earlier.

Speaker 3: Intrace-Resparing liability costs were up 20 basis points and deposit costs were up 11 basis points as well.

Interest bearing liability costs were up 20 basis points and deposit costs were up 11 basis points as well.

Speaker 3: We provided a waterfall chart on page 8 to show the changes from Q2 to Q3 and we also show the 5 quarter trend for the net interest margin.

We provided a waterfall chart on page eight to show the changes from Q2 to Q3, and we also show the five quarter trend for the net interest margin.

Speaker 3: The LONOS provision was $7.3 million and included specific reserves for three non-performing office loans that I will describe in more detail later in my remarks.

The loan loss provision was $7 3 million and included specific reserves for three nonperforming office loans that I will describe in more detail later in my remarks.

Speaker 3: Non-interest income was 19.2 million and 20.7 million on an operating base.

Noninterest income was $19 2 million and $27 million on an operating basis.

Speaker 3: This excludes the insurance revenue that's been reclassified to discontinued operation.

This excludes the insurance revenue that's been reclassified to discontinued operations.

Speaker 3: As is outlined on page 9, the PATHAT service charges trust

As is outlined on page nine deposit service charges Trust debit card and other fees are in line with last quarter and combined are up 8% from the prior year quarter.

Speaker 3: DeVocard and other fees are in line with last quarter and combined are up 8% from the prior year quarter.

Speaker 3: We took the opportunity to sell approximately 200 million of shared national credit loans out of our commercial loan portfolio at a 2.7 million dollar loss during the quarter.

We took the opportunity to sell approximately $200 million of shared national credit loans out of our commercial loan portfolio at a $2 $7 million loss during the quarter.

Speaker 3: The cell of these loans triggered a release of associated reserves bringing the economic loss close to break even.

The sale of these loans triggered a release of associated reserves, bringing the economic loss close to breakeven.

Speaker 3: The reason for the sale was very straightforward. We expect funding conditions to remain tight for their perceivable future. And this preserves some balance sheet capacity for a core lending customer.

The reason for the sale was very straightforward, we expect funding conditions to remain tight for the foreseeable future and this preserve some balance sheet capacity for our core lending customers.

Speaker 3: One additional note on this is that the loss is included in our operating result.

One additional note on this is that the losses included in our operating results as you can see on page nine of the presentation. Excluding this loss operating noninterest income was essentially the same as Q2.

Speaker 3: As you can see on page 9 of the presentation, excluding this loss, operating non-interesting was essentially the same as Q2.

Speaker 3: Non-interest expense was 101.6 million or 98.7 million on an operating base.

Noninterest expense was $101 6 million or <unk> $98 $7 million on an operating basis.

As I've mentioned, a few times. This excludes the expenses of eastern insurance, which were moved to discontinued operations.

Speaker 3: As I've mentioned a few times, this excludes the expenses of Eastern insurance, which were moved to discontinued operation.

Speaker 3: Q3's operating expense of $98.7 million is very similar to Q2 and an increase of 2% over the prior year as we continue to focus on efficiency.

Q3's operating expense of $98 $7 million is very similar to Q2, and an increase of 2% over the prior year as we continue to focus on efficiency.

Operator: Hello and welcome to Eastern Bankshare's Inc. 3.25, 2023 Earnings Conference Call. Today's call will include four-looking statements, including statements about Eastern future financial and operating results, outlook, business, strategies and plans, as well as other opportunities and potential risks that management foresee.

Operator: Such four-looking statements reflect management's current estimates are beliefs and a subject to risks and uncertainties than because actual results are the timing of events to differ mentally from the views expressed today. More information about such risks and uncertainties is set forth under the caption for looking statements and the earnings press release, as well as in the risk factors, section and other disclosures and the company's periodic filings with the Secreties and Exchange Commission.

Speaker 3: To repeat one of the comments Bob made, we've made significant progress on our expense efficiency since the IPO in 2020, and we look forward to creating more efficiencies as we merge with Cambridge.

To repeat one of the comments Bob made we have made significant progress on our expense efficiency since the IPO in 2020, and we look forward to creating more efficiencies as we merge with Cambridge and.

In 2024.

Speaker 3: Our tax line includes several components from the securities loss on sale earlier in the year. As I mentioned, the insurance sale allows us to eliminate a $15 million valuation allowance. We had set up back in Q1.

Our tax line includes several components from the securities loss on sale earlier in the year.

As I mentioned the insurance sale allows us to eliminate a $15 million valuation allowance, we had set up back in Q1.

Speaker 3: Also because year to date we are in a lost position, there are limited taxes on our overall results as well.

Also because year to date, we are in a loss position there are limited taxes on our overall results as well.

Speaker 3: When we record the insurance gain in Q4, we will be applying a higher tax rate both on the gain and their operating result.

When we record the insurance gain in Q4, we will be applying a higher tax rate both on the gain and our operating results.

Speaker 3: I'll add some more comments on our taxes when I go over our outlook.

I'll add some more comments on our taxes when I go over our outlook.

Operator: Any four-looking statements made during this call represent management's views and estimates as of today and the company undertakes no obligations to update these statements as a result of new information of future events. During the call, the company will also discuss both GAAP and certain non-GAAP financial measures. For reconciliation of GAAP and non-GAAP financial measures, please refer to the company's earnings press release, which can be found at emfaster.easternbake.com.

Yes.

Speaker 3: Switching gears to asset quality, we continue to be very focused on the challenges and commercial real estate in general and the office sector in particular.

Switching gears to asset quality, we continue to be very focused on the challenges in commercial real estate in general and the office sector in particular.

Speaker 3: But we remain very confident our long-term approach to dealing with customers would serve us well throughout the rest of this cycle and all economic sites.

But we remain very confident our long term approach to dealing with customers or serve us well throughout the rest of this cycle and all economic cycles.

Speaker 3: saw an increase in non-performing loans from $31 million to $48 million in the quarter.

So an increase in nonperforming loans from 31 million to $48 million in the quarter.

Speaker 3: As a percentage of loans, the increase was from 22 basis points to 34 basis points.

As a percentage of loans the increase was from 22 basis points to 34 basis points.

Operator: Please note this event is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question and answer session. If you'd like to ask a question during this time, senprepare star followed by the number one on your telephone keypad. If you'd like to wish on your question, please press the star followed by the number two. Thank you.

Speaker 3: These are very low levels that we expect to see normalize higher up over time.

They are very low levels that we expect to see normalize higher up overtime.

Included in the increase were three Investor office properties that totaled $26 million.

Speaker 3: Included in the increase were three investor office properties that totaled 26 million.

Speaker 3: We are working with the borrowers and expect these loans to move through the sale process over the next several quarters.

We are working with the borrowers and expect these loans to move through the sale process over the next several quarters.

Julie: I would now like to send a call over to Bob Revers, shares, and see you. Great. Thank you, Julie.

Speaker 3: Included in the provision for the quarter of 7.3 million were specific reserves against these three loans to cover our expected losses from the sale process. Actual charge-

Included in the provision for the quarter of $7 3 million were specific reserves against these three loans to cover our expected losses from the sale process.

Bob Revers: Good morning, everyone. And thank you for joining our third quarter earnings call. I'm joined today by Jim Fitzgerald, our Chief Administrative Officer and Chief Financial Officer, who will review our financial results shortly. The third quarter marked a very significant event for Eastern. If we further advanced our strategic initiatives with the simultaneous announcement on September 19th of the sale of Eastern insurance to AJ Gallagher and the agreement to merge with Cambridge Trust.

Actual charge offs for the quarter were less than one basis points.

Speaker 3: Aside from the office portfolio, all other loan categories are performing well, and our credit metrics are in a very strong position.

Aside from the office portfolio all other loan categories are performing well and our credit metrics are in a very strong position.

Speaker 3: We updated the Office portfolio presentation and included it as page 15 in the presentation and added some data that we haven't provided previous.

We updated the office portfolio presentation and included is page 15 in the presentation and added some data that we haven't provided previously.

Bob Revers: Both transactions are on track with the anticipated timelines communicated last month. We expect to close on the sale of Eastern insurance next week and have filed all of the bank regulatory applications for the approvals required for the Cambridge Trust merger, which is expected to be completed in the first quarter of 2024. In addition, both the teams that Eastern and Cambridge Trust are engaged in planning the integration and a seamless transition for affected customers.

Speaker 3: We have 96 million of criticized and classified assets in the office portfolio of which 26 million are the three new NPLs I just mentioned.

We have $96 million of criticized and classified assets in the office portfolio.

Of which $26 million of the three new Npls I just mentioned.

Speaker 3: Additionally, we have $100 million of loans that will mature before Q4 of 2024, or approximately 14% of all investor office CREs.

Additionally, we have $100 million of loans that will mature before Q4 of 24 or approximately 14% of all investor Office CRE.

Speaker 3: But the 100 million of blown maturities is also a reasonable proxy for the annual maturities for the years after 2024 as well.

The $100 million of loan maturities is also a reasonable proxy for the annual maturities for the years after 2024 as well.

Bob Revers: We are also very pleased to announce our board approved a 10% increase in our dividend, from 10 cents per share to 11 cents per share, which we paid in December, demonstrating our confidence in both our strategic direction and our operating results. In the midst of these two significant transactions, we produce strong operating results during the quarter. As Jim mentioned on the September 19th call, the insurance sale required us to account for Eastern insurance as a discontinued operation in Q3 and also helped us realize some tax benefits that we weren't able to realize previously.

Speaker 3: Our expectations for the office portfolio remain the same. It's a challenging environment for all office properties, but especially those in urban markets and particularly those in the Boston financial dissonance.

Our expectations for the office portfolio remained the same.

It's a challenging environment for all office properties, but especially those in urban markets and particularly those in the Boston Financial District.

Speaker 3: We will work with our borrowers as they work through the challenges and try and get to the other side.

We will work with our borrowers as they worked through the challenges and try and get to the other side.

Speaker 3: If they can't or won't do that, we'll protect our interests and manage to work out to optimize our process.

If they can't or won't do that will protect our interest in managed to work out to optimize our proceeds.

Speaker 3: As I mentioned, we provided specific reserves for the three office properties this quarter. And we put on the progress of those assets as we move through the next three few quarters.

As I mentioned, we provided specific reserves for the three office properties this quarter and will report on the progress of those assets as we move through the next few quarters.

Bob Revers: Bank. Below these items cause our results to look different than earlier quarters. We have worked hard to provide transparency so that you can see the underlying results. We experienced a slower increase in our cost of funds in the third quarter, although like many banks, we continue to see the shift out of lower cost deposits into higher cost deposits. And we expect that to continue in Q4 and into 2024. In spite of the increasing cost, we continue to be confident that our lower cost deposit portfolio will be a long-term competitive advantage.

Speaker 3: We'll also continue to report on the level of criticized and classified assets in the office portfolio as well.

We will also continue to report on the level of criticized and classified assets in the office portfolio as well.

Turning to our outlook, we are looking forward to closing the insurance transaction next week.

Speaker 3: Turning to our outlook, we are looking forward to closing the insurance transaction next week.

Speaker 3: It's a very significant milestone and we anticipate the gain to be approximately 260 million or in line with our prior guide.

It's a very significant milestone and we anticipate the gain to be approximately $260 million were in line with our prior guidance.

Speaker 3: We expect to have a 28% tax rate against the gain and also for our Q4 results.

We expect to have a 28% tax rate against the gain.

And also for our Q4 results.

Speaker 3: Typically Q4 is a seasonally low-pury for funding in our municipal business and leads to higher levels of wholesale funding requirements as we experience the 2022.

Typically Q4 is a seasonally low period for funding in our municipal business and leads to higher levels of wholesale funding requirements as we experienced in 2022.

Bob Revers: We have worked very hard to keep our wholesale funding levels at modest levels. And we think an efficient balance sheet is in our shareholders' long-term interests. Excluding the sale of the shared national credit loans, we describe in the presentation core commercial loan growth in Q3 was modest, and we expected to stay that way for the next few quarters. We are finding loan demand to be limited as our customers are being cautious, in part due to the higher level of interest rates.

This will put additional pressure on our net interest margin and net interest income in Q4 and early 2024.

Speaker 3: This will put additional pressure on our net interest margin and net interest income in Q4 and early 2024. We expect the net interest margin to decline in Q4 to the mid-260s.

We expect the net interest margin to decline in Q4 to the mid $2 <unk> and for net interest income to be between 127 and $132 million.

Speaker 3: And for net interest income to be between 127 and 132 million.

Speaker 3: We expect non-operating, non-interest income to be very similar to Q3, and to be in a range between 22 and 25 million.

We expect non op, we expect operating noninterest income to be very similar to Q3 and to be in a range between 22% and $25 million.

Bob Revers: We also expect consumer and mortgage loan growth in the single digits over the next few quarters. With the pending sale of eastern insurance, there is more visibility into the expense profile of the bank on a standalone basis. We believe that we have made significant progress on the efficiency goals we set at the time of our IPO in 2020, for both our efficiency ratio and expense to assets ratio, and expect further improvements as we combine with Cambridge Trust.

Speaker 3: We expect operating non-interest expenses to be four to five million dollars higher in Q4 due to higher marketing costs.

We expect operating noninterest expenses to be $4 million to $5 million higher than Q4.

Due to higher marketing costs.

Speaker 3: some timing issues, and some typical year-end items.

Some timing issues and some typical year end items.

Speaker 3: Similar to this quarter, we expect to prioritize the strength of the balance sheet as we move forward. We continue to expect modest, long growth in Q4.

Similar to this quarter, we expect to prioritize the strength of the balance sheet as we move forward.

We continue to expect modest loan growth in Q4.

Speaker 3: And we'll seek to keep wholesale borrowings as low as practical and to keep our capital levels robust.

Bob Revers: Our asset quality metrics continue to be very strong in Q3, with credit losses below one basis point, and continuing low levels of non-performing loans. We continue to manage our exposure to the office sector and provide details on the portfolio in the presentation. Our balance sheet strength continues to be a focus and a source of strength. Both our regulatory and gap capital levels are strong relative to requirements and as compared with many of our peers.

And we will seek to keep wholesale borrowings as lowest practical and to keep our capital levels robust.

Speaker 3: We believe focusing on our balance sheet's strength will position us well for when the environment improves.

We believe focusing on our balance sheet strength will position us well for when the environment improves.

Speaker 3: As noted in our earnings release, our shared purchase authorization expired in a third quarter.

As noted in our earnings release, our share repurchase authorization expired in the third quarter.

Speaker 3: And there are restrictions on our ability to repurchase shares while the merger with Cambridge is pending.

And there are restrictions on our ability to repurchase shares while the merger with Cambridge is pending.

Speaker 3: We look forward to seeking another repurchase authorization when allowable and also look forward to resuming our share repurchase activity.

We look forward to seeking another repurchase authorization when allowable and also look forward to resuming our share repurchase activity.

Bob Revers: Our loan deposit portfolios are high quality and our wholesale funding levels at 5% of assets are low. We will continue to look for ways to strengthen the balance sheet even further over time, but believe this strength is a competitive advantage.

Speaker 3: In closing, we believe we have a major opportunity in front of us with the Cambridge Trust Merge.

In closing, we believe we have a major opportunity in front of us with the Cambridge Trust merger.

Speaker 3: The combined companies expected to produce 20% earnings accretion in a very challenging environment, have significant levels of both regulatory and gap capital, a leading market share in some very attractive markets, and a fully marked acquired balance sheet.

The combined company is expected to produce 20% earnings accretion in a very challenging environment have significant levels of both regulatory and GAAP capital.

Bob Revers: Looking ahead, we are very excited about the future opportunities as we merge with Cambridge Trust. Our enhanced market position, increased scale and capabilities, along with significantly larger wealth management and private banking businesses, will provide a stronger platform for future growth and earnings than we have historically had. We look forward to providing you additional details as we move through the regulatory approval process in closing. As I conclude my remarks, I express my thanks and deepest appreciation to all of our Eastern and Churns Group colleagues for their many contributions to Eastern's overall success and culture over the past 21 years.

Our leading market share in some very attractive markets.

And our fully marked acquired balance sheet.

The IRR for the transaction is 20%.

Speaker 3: We are very focused on the execution of the merger, including the required regulatory and shareholder approvals. And we report next quarter with an update as we approach the close.

We are very focused on the execution of the merger, including the required regulatory and shareholder approvals and we report next quarter with an update as we approach the closing.

Speaker 3: Thank you very much and Julie, you can open up the lines for questions.

Thank you very much and Julie you can open up the lines.

For questions.

Speaker 1: Thank you. At this time, I would like to remind everyone in order to ask a question, press star, then a number one on your telephone keypad. We'll pause to spare moment to compile the journey.

Thank you 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.

Moment for the Q&A roster.

Bob Revers: As their plan transition to AJ Gallagher approaches, we send our best wishes for continued success. I have every confidence they will continue to excel leveraging Gallagher's market leading capabilities and we look forward to partnering with them in serving our mutual clients, and once again, I especially thank Eastern Insurance's president and CEO Tim Lodge and his executive team for their many contributions to Eastern and for leading the team through this process.

Your first question comes from Mark Fitzgibbon from Piper Sandler. Please go ahead.

Speaker 1: First question comes from Mark Sitzgiven, some Piper Sandler.

Speaker 4: Hey guys, good morning, happy Friday. Good morning, Mark, how are you? Good, thanks. Maybe could start off with a couple questions around the Snicks. I was impressed by the price that you were able to sell those at if my math's correct, sort of 98 and a half cents on the dollar. I guess I was curious to whom did you sell them, maybe not specifically the buyer, but the type of buyer. And what do you have left in terms of the Snicks?

Guys Good morning Happy Friday.

Good morning, Mark how are you.

Good thanks.

Maybe could start off with a couple of questions around the snacks I was impressed by the price that you were able to sell those out if my math is correct sort of $98.05 in the dollar I guess I was curious to whom did you sell them, maybe not specifically the buyer, but the type of buyer and what do you have left in terms of the snick portfolio.

Bob Revers: Finally, I also want to thank our Chief Credit Officer Dan Sullivan for his 27 years of service to Eastern as he retires this month and wish him a very happy and healthy retirement. Dan was the architect of our credit process and culture at Eastern, a long-time strength of our company with delinquency rates, levels of non-performing loans and net credit losses regularly among the lowest of our peers. Dan joined us in 1996 as our very first Chief Credit Officer when Eastern had just 2.1 billion in assets with 28 branches, helping to lead our transformation from a savings bank to one with a loan portfolio that is now over 70% commercial, quite a legacy.

Yeah.

Speaker 3: Sure, no good question Mark and Without getting into precision your your assumption on the economics are pretty good So good job on your part there You know there's a pretty active market for that. I don't know who the buyer was or you know We think they were banks, but there's

Sure.

Question Mark and.

Without getting into precision Youre your assumption on the economics are pretty good so good job on your part there.

There's a pretty active market for that I don't know who the buyer was are we think they were banks, but there is.

Speaker 3: you know, there's an active market for those assets. As we looked at the portfolio, those were the ones that made the most sense to us as health, so I don't anticipate more of that if that's how I interpret a part of your question.

There is an active market for those assets.

As we looked at the portfolio those who are the ones that made the most sense to us to sell so I don't anticipate more of that.

That's how I interpret part of your question so.

Speaker 3: you know, we evaluated that pretty carefully and those are the assets that made the most sense to us. In roughly how much do you have?

We evaluated that pretty carefully and those are the assets that made the most sense to us and roughly how much do you have any remaining snakes chip.

Bob Revers: I'm delighted to share that Matthew Osborne, former head of our commercial will estate and community development lending teams, and a 25-year veteran at Eastern has assumed Dan's role as our Chief Credit Officer, creating a seamless transition for our teams. As a result, Greg Bisconey, who leaves our market lending and international banking teams, will become our Chief Commercial Banking Officer. Each of these promotions is representative of long times thoughtful succession planning, as well as the tremendous talent and bench strength within our organization.

Speaker 3: And you know, I'm gonna have to follow up.

And im going to have to follow up.

Speaker 3: you know, let me rather than off the seat of my pants. We can follow up on that work.

Let me rather than.

I have to say to my past, but we can follow up on that market. Okay fair enough and then the $4 million to $5 million a year end expenses that you referenced in your guidance.

Speaker 4: Fair enough. And then the four to five million of year end expenses that you reference in your guidance What what is in that exactly? Sure

What is in that exactly sure so.

Speaker 3: to a fair question. So if you break it down, marketing.

Fair question.

If you break it down marketing.

Speaker 3: We always do a lot of marketing in Q4. So we expect our marketing expenses to be $2 million higher than what they were in Q3. So that's a big component of it. Not to get too gritty, but our provision for off-balance sheet commitments is pretty volatile. It was volatile high in the first half of the year.

We always do a lot of marketing in Q4, so we expect our marketing expenses to be $2 million higher than what they were in Q3. So that's a big component of it.

Bob Revers: Once again, we are pleased with our results this quarter and feel very confident regarding Eastern's future growth and performance. As always, most of the credit for this goes to my 2100 colleagues, who continue to ensure that Eastern remains the strong and reliable financial and community partner we have been for the past 205 years, as well as to our customers and community partners for their business, support, and partnership.

Not to get too greedy, but our provision for off balance sheet commitments is pretty volatile.

It was volatile high in the first half of the year. It was volatile low and was actually negative in the third quarter and we expect it to kind of revert to the mean in the fourth quarter. So that's another factor and then the residual a couple million dollars is just year end sort of typical year end expenses.

Speaker 3: It was volatile low and was actually negative in the third quarter. And we expected to kind of revert to the mean in the fourth quarter. So that's another factor. And then the residual, a couple of million dollars is just year end, sort of typical year end expensive that get recorded at year end.

Jim Fitzgerald: And with that, I'll turn it over to Jim. Thank you Bob.

Recorded at year end.

Jim Fitzgerald: Good morning everyone. As Bob mentioned, it was a very busy third quarter for us with the insurance transaction and the merger with Cambridge announced together in mid-September. Both are very important strategic transactions for us and combined will lead to a stronger balance sheet, enhanced market share, and a platform for future earnings growth that we are very excited about. As they mentioned on the call in September, the transactions do create some short-term noise in our results.

Okay.

Speaker 4: And then on those three office loans, I wondered if you could share with us what the vacancy rates look like on those and maybe LTVs and debt service at origination.

And then on those those three office loans I wondered if you could share with us what the vacancy rates look like on those and maybe ltvs and debt service at origination.

Sure.

Speaker 3: Sure. So all three, each one's a little bit different, but I think to answer your question, the characteristics are similar for all three. All three, the buildings were sold well before the pandemic, the original TVs were 60%.

All three.

Each one is a little bit different but I think to answer your question.

Characteristics are similar for all three.

All three of the buildings were sold well before the pandemic the loan the original Ltvs were 60%.

Jim Fitzgerald: The sale of the insurance operations requires us to count for Eastern insurance as a discontinued operation and to restate our prior period results accordingly. In some ways, this is helpful as it provides an early view of what we will look like going forward without Eastern insurance, although we recognize it's a change from what we've presented historically. We provide details on the results for Eastern insurance that are contained in discontinued operations on page 7 of the earnings presentation.

Speaker 3: They are battling vacancies now and cash flow issues. And we are working, as I said, we are working with the borrower to try and execute sales in those. And as I also said, we put some specific reserves up against all three of those to cover what we think will be the expected loss.

They are they are battling vacancies now and cash flow issues.

And we are working as I said, we are working with the borrowers to try and execute sales and those.

And as I also said we.

Put some specific reserves up against all three of those to cover what we think will be the expected losses.

Speaker 4: And then last question, you all seem fairly confident that you'll be able to close the Cambridge deal on the end of the first quarter. Given that a lot of other banks have had an excruciatingly long approval process recently, what gives you confidence that you'll be able to close it so quickly? TRALEboarding.

Okay and then last question you all seem fairly confident that youll be able to close the Cambridge deal and at the end of the first quarter.

Given that a lot of other banks have had an excruciating Lee long approval process recently.

Jim Fitzgerald: In addition to the core results, there were 10.7 million of transaction-related charges that occurred in Q3, excluding those costs EIG's results were in line with expectations. One reminder is that discontinued operations are not included in our operating net income, which makes comparisons with the overall expectations. Vocalty. In addition, the insurance transaction allowed us to eliminate a tax valuation allowance of approximately $15 million that we set up as part of the security sale in Q1.

What gives you confidence that you'll be able to close it so quickly.

Yes.

Yes.

Speaker 3: It's a good question, or I understand the question. I sometimes get surprised because if you look at our track record for deal, the century one being the most recent, it's really the same timeline. So,

It's a good question or I understand the question I guess, sometimes I get surprised because if you look at our track record for deals that century, one being the most recent it.

It's really the same timeline so.

Speaker 3: It's similar to century. It's an in-market transaction. We have very good regulatory relations as does Cambridge as the century. And as we have, we're aware of the sort of slowness in some particular transactions, but we have very constant communication with our regulators and have set the dates and expect to complete on that timetable.

It's similar to century, it's an in market transaction.

We have very good regulatory relations as does Cambridge as did century.

Jim Fitzgerald: Although this was very positive and an additional economic benefit of the transaction, it's a one-time event. I'll provide some comments on our tax rate later in my remarks. As Bob mentioned, both transactions are progressing very well. We expect a sale of the EIG to occur next week as anticipated and have submitted all the regulatory applications for approval for the Cambridge merger. I'll follow up with some specific comments on both transactions when I discuss our outlook.

And as we have we are aware of the.

Sort of slowness since in some particular transactions, while we have for our constant communication with our regulators and have set the dates.

And expect to complete on that timetable.

Speaker 3: As I said, if you go back and look at the century, it's really a different time of the year, but it's the same timeline.

As I said, if you go back and look at the century.

It's really a it's a different time of the year, but at the same timeline.

Thank you.

Thanks Mark.

Speaker 1: your next question come from Damon Del Matty from KBW.

Your next question comes from Damon Delmonte from K B W. <unk>. Please go ahead.

Jim Fitzgerald: We're very pleased to announce a 10 percent increase in our dividend from 10 cents to 11 cents per share, which is payable in December. We have a high degree of confidence in our strategic direction and our operating earnings and believe this dividend reflects that confidence.

Speaker 5: Hey, good morning, everyone. Thanks for taking my questions and hope everybody's doing well today. I'm just trying to start off with, yeah, just wanted to start off with a little bit on the topic of credit here and kind of looking at the reserve level. And I know the build was specific to these three office loans, but just kind of wondering what your thoughts are going forward with the provision line, kind of given the pullback and loan growth and what you're seeing elsewhere in the portfolio and the potential need to build reserve further from here.

Hey, good morning, everyone. Thanks for taking my questions and hope everybody is doing well today.

Thank you I wanted to start off with.

Just wanted to start off with.

On the capital credit here and kind of looking at the reserve level I know that build with specific to these three office loans, but just kind of wondering what your thoughts are.

Jim Fitzgerald: Starting with some highlights, net income for the quarter was 59.1 million or 36 cents per share. Operating earnings were 52.1 million or 32 cents per share. Net income includes both a loss of 4.4 million from discontinued operations and a tax benefit of 16.2 million, which was driven by the elimination of the $15 million tax valuation allowance I mentioned. Also, as I mentioned, the loss on discontinued operations is due to transaction costs incurred in the sale of Eastern insurance.

Going forward with the provision line kind of given the pullback in loan growth and what youre seeing elsewhere in the portfolio and the potential need to build reserves further from here.

Speaker 3: Sure, no, fair question. And as we talked.

Sure No a fair question.

As we've talked in previous quarters and certainly.

Speaker 3: previous quarters and certainly, you know, similar to others. Long growth is a big factor in provisioning levels, right? If you look specifically at Eastern, if you look at when we had...

Similar to others loan growth is a big factor and provisioning levels right. If you look specifically at Easter and if you look at when we had.

Speaker 3: Much faster long growth last year, we had much higher provisions and the correlation is pretty clear from that. We do expect modest long growth over the fourth quarter and into the first quarter of next year. That will be a factor.

Much faster loan growth last year, we had much higher provisions and the correlation is pretty clear from that we do expect modest loan growth over the quarter, the fourth quarter and into the first quarter of next year that will be a factor.

Jim Fitzgerald: The net interest margin of 2.77 percent was relatively stable quarter to quarter down just three basis points from Q2. Deposit costs were well contained up 11 basis points in the quarter from 1.22 to 1.33 percent and interest bearing deposit costs were up 18 basis points from 1.71 percent to 1.89 percent. Total assets declined approximately 400 million from June 30th due primarily to declines in cash and securities. Capital levels remained very strong with the tangible assets ratio, which includes unrealized losses on HTM securities of 8.5 percent.

Speaker 3: You know, our seasonal methodology is very consistent and it's the same quarter to quarter. It starts with an economic forecast.

Yes.

Our seasonal methodology is very consistent and it's the same quarter to quarter. It starts with an economic forecast.

Speaker 3: to date the economic outlook continues to be reasonably good. And that's a factor with that were to change then obviously the CISO calculations would change.

To date, the economic outlook continues to be reasonably good and that's a factor if that were to change then obviously the seesaw calculations would change but over the last couple of quarters and what we see through literally October whatever today's date is 2007 the economy. The economic outlook is still pretty strong. So we don't see.

Speaker 3: But over the last couple of quarters and what we see through literally, October , whatever today's data is 27th, the economic outlook is still pretty strong. So we don't see the provision levels that we've seen both in 22 and 23 and the correlation with Longbrough is what we would expect over the next quarter or two.

C.

The provision levels that we've seen both in 'twenty, two and 'twenty three and the correlation with loan growth is what we would expect over the next quarter or two.

Jim Fitzgerald: In the quarter core commercial loan growth, which excludes the sale of shared national credits I'll discuss shortly, was just under 2 percent, which was down from earlier in the year, but consistent with our expectations. Residential mortgage growth was 6 percent annualized in the quarter and consumer loan growth was 2 percent. As they quality remained very strong with essentially no net loan chargeoffs and MPLs were up from Q2, but still a very low 34 basis points of loans. I'll have more to add on the details behind these headlines as I go through my remarks.

Speaker 5: That's helpful. Thank you. And then with respect to the office portfolio and kind of the...

Okay. That's helpful. Thank you.

And then with respect to the.

Office portfolio in Canada.

Speaker 5: like 38% is in the Boston, Cambridge area. You know, are there any other properties or locations that are showing early signs of stress that have kind of popped up on the radar? Do you think these three loans were just unique situations and not indicative of a broader week?

Like 38% is in the Boston, Cambridge area are there any other.

Properties relocations that are showing early signs of stress that that's kind of popped up on the radar or do you think these three loans were just unique.

And then.

Not indicative of a broader weakening.

Speaker 3: Yep, no, very good question. Damien, there's a lot there. Let me sort of unpack it a little bit at a time. So I think...

Yeah, No very good question, David and there's a lot there, let me sort of unpack it a little bit at a time, so I think.

Sure.

Speaker 3: We do provide the statistics about Boston and Cambridge and not to get local here, but Cambridge is very different than Boston. There's a lot going on in Cambridge and we expect that to continue. If you look at the portfolio generally, it is the Boston financial district where these three assets were and where the issues.

We do provide that.

The statistics about Boston, and Cambridge, and not to get local here, but Cambridge is very different in Boston.

Jim Fitzgerald: Starting with the balance sheet, assets declined by 400 million during the quarter to 21.1 billion. Cash declined 265 million as we lowered the amount of on balance sheet cash we have been holding. The securities were lower by 268 million due to runoff and lower market values, and loans were down by 54 million due to the sale of the share national credit loans I just mentioned. Deposits were down 757 million due to reductions in broker deposits of 306 million, the maturity of a $230 million nine core term deposit from the century acquisition, and a seasonal decrease in municipal deposits of 375 million.

What going on in Cambridge, and we expect that to continue if you look.

The portfolio generally it is the Boston financial District, where these three assets, where and where the issues we expect to be concentrated.

Speaker 3: We expect to be concentrated. That's not to say there won't be issues other places and we're carefully monitoring all of that. But the issues that were specific to these three loans that I described on Mark's question, you know, we're very specific to the financial district. That's that we continue to monitor the entire portfolio very, very carefully.

That's not to say there wont be issues other places and we're carefully monitoring.

All of that but the issues that were specific to these three loans that I described on marks question.

Were very specific to the financial district.

That said, we continue to monitor the entire portfolio very very carefully.

Got it okay.

Speaker 5: Again, I guess that's all that I have for now, so I'll step back. Thank you very much.

I guess, that's all that I had for now so I'll step back. Thank you very much.

Jim Fitzgerald: Barrowings increased by 364 million to replace maturing brokerage CDs. We made this shift to short-term borrowings to more easily facilitate the paydown of wholesale funding when we receive the cash from the EIG sale next week. Shareholder's equity declined by 80 million due to a decrease in AOCI partially offset by retained earnings, and book value ended the quarter at $13.87 per share, and tangible book value ended the quarter at $10.14 per share.

Thanks Damon.

Speaker 1: your next question come some Lori on sicker from seaport.

Your next question comes from Laurie Hunsicker from Seaport Research partners. Please go ahead.

Speaker 6: Yeah, hi, thanks, Bob and Jim, good morning. Morning, Lori. I hope that I could just circle back where Damon was. So the 38% that you give on your $717 million book that's Boston and Cambridge, do you have the split as to what's just Boston financial?

Yeah, Hi, Thanks, Jim Good morning.

Laurie.

Hoping that I could just circle back where where diamond was 38% that you give on your $717 million back.

Boston and Cambridge do you have the split as to what's what.

Boston Financial District.

Speaker 3: We haven't provided that, Laurie. So we'd have to review that. I don't know it off the, I don't know it this second. We are very focused on the financial district and that's where these three loans were from, as I mentioned. We can caucus internally about providing a little bit more information on that specifically.

We haven't provided that.

Jim Fitzgerald: Nin income was 59.1 million or 36 cents per deluded share, and operating net income was 52.1 million or 32 cents per deluded share. As I mentioned, there are significant number of items that created noise, and I will try to point them out in my review. Nin interest income was 137.2 million down 4.4 million from the prior quarter. As I mentioned, the net interest margin was 2.77 percent which was down three basis points from Q2.

Laurie.

You'd have to review that I don't know it off that I don't know what the second.

We are very focused on the financial district, and Thats, where these three loans were from as.

As I mentioned.

We can caucus internally about providing a little bit more information on that specifically.

Speaker 6: Right, okay. And then just going back to the 26 million and non-performers, what was the split there on those three properties in terms of cross A, cross B, cross C?

Great. Okay, and then just one.

Back to the 26 million of non performers.

What was the split there on those three properties in terms of OSA Christy Rossi.

Jim Fitzgerald: The decline in net interest income was primarily due to the reduced size of the balance sheet. As we outlined on page 8, loan yields were up 16 basis points on average in the quarter while total interest earnings assets were up 10 basis points in part due to the reduction in cash, I mentioned earlier. Interest repairing liability costs were up 20 basis points, and deposit costs were up 11 basis points as well.

Speaker 3: Yeah, so I get a little worried about the class A class C because you know different people have different definitions but I think they would all be class B types and they were all in the financial district in Boston.

Yeah, So I get a little worried about the class a plus Blake class C. Because different people have different definitions, but I think they would all be class b types and they were all in the financial district in Boston.

Speaker 6: And then can you share with us what actually triggered the non-performing status that either they hit a maturity wall or was it just something else?

Okay, Great and then.

Can you share with us what actually triggered the nonperforming status I E did they hit a maturity wall art.

Jim Fitzgerald: We provided a waterfall chart on page 8 to show the changes from Q2 to Q3, and we also show the five quarter trend for the net interest margin. The loan loss provision was 7.3 million and included specific reserves for three non-performing office loans that I will describe in more detail later in my remarks. Non-interest income was 19.2 million and 20.7 million on an operating basis. It excludes the insurance revenue that has been reclassified to discontinued operations.

Was it something else.

Speaker 3: Sure. So these are, again, every situation is slightly different. But I think in general, to answer the question the way you asked it, these are buildings that had lease issues. So, there's a problem there. OK? So I don't have any feeling again.

Sure. So these are.

In every launch every situation is slightly different but I think in general to answer the question. The way you asked it. These are buildings that had lease issues.

Speaker 3: You know, leases had come up, they had vacancies in the building, which led to deteriorating cash flow. And they had the borrowers have elected not to support the assets. Our strategy in that situation generally is to work with the borrowers to try and sell the buildings. And as, you know, appropriate manner as possible to optimize price but also timing. And that's what happened really in all three of these cases.

Leases had come up they had some vacancies in the building, which led to deteriorating cash flow and they had the borrowers have elected not to support the assets.

Our strategy in that.

Situation generally is to work with the borrowers to try and sell the buildings and as you know.

Appropriate manner as possible to optimize price, but also timing.

Jim Fitzgerald: As is outlined on page 9, deposit service charges, trust, debit card, and other fees are in line with last quarter and combined are up 8% from the prior year quarter. We took the opportunity to sell approximately 200 million of shared national credit loans out of our commercial loan portfolio at a 2.7 million dollar loss during the quarter. The sale of these loans triggered a release of associated reserves bringing the economic loss close to break even.

And that's what happened really in all three of these cases.

Got it got it and then just in terms of thoughts on selling some office some of your peers.

Speaker 6: Got it, got it. And then just in terms of thoughts on telling some office, some of your peers sold office loans in the third quarter, including one who took a 37 cent haircut. How do you think about selling these? Are you actively trying to sell them? Or what can you share with us there?

Solid office bonds in the third quarter.

Anyone who would take a 37% haircut how do you how do you think about selling knees are you actively trying to sell them or what can you share with us there.

Speaker 3: Yeah, so I'd say our managed asset team who does a very good job here, every time they get an asset and the same would be the true for these three. And they didn't just, these issues just didn't appear late in the third quarter. They've been monitoring these loans for a period of time. But to answer the question, they do an asset by asset review and figure out the optimal strategy.

Yeah, So I would say our.

Our managed asset team, who does a very good job here.

Jim Fitzgerald: The reason for the sale was very straightforward. We expect funding conditions to remain tight for their foreseeable future, and this preserves some balance sheet capacity for a core lending customer, members. One additional note on this is that the loss is included in our operating results. As you can see on page 9 of the presentation, excluding this loss, operating non-interested income was essentially the same as Q2. Non-interested expense was 101.6 million or 98.7 million on an operating basis.

Every time, they get an asset and the same would be true for these three.

And they didn't just these issues just didn't appear late in the third quarter they've been monitoring these loans for a period of time.

But to answer the question they do an asset by asset review and figure out the optimal strategy. They.

Speaker 3: They include things like note sales as you referenced, the benefits being it moves out quickly, sometimes prices less than one would like there. But for each individual asset based on the facts and circumstances, that strategy is developed. In the cases of these three, it's to take the buildings themselves through this failed process. That's how we thought we would optimize our process.

They include things like note sales as you referenced.

The benefits being it moves out quickly sometimes prices less than one would like there but for each individual asset based on the facts and circumstances that strategy has developed in the cases of these three it's to take the buildings themselves through the sale process. That's how we felt we would optimize our proceeds.

Jim Fitzgerald: As I've mentioned a few times, this excludes the expenses of Eastern insurance, which were moved to discontinued operations. Q3's operating expense of 98.7 million is very similar to Q2 and an increase of 2 percent over the prior year as we continue to focus on efficiency.

Speaker 6: Got it. Got it. And then just sort of one last question on this. The $717 million investor Creebook, what is the specific reserve you have against that? Is it just on the three loans, i.e. the $7 million, or is there more there?

Got it got it and then just sort of one last question Mr.

$717 million Investor creep up what is the specific reserve you have.

Against that is it just on this rebound by a $7 million or is there more there.

Jim Fitzgerald: To repeat one of the comments Bob made, we've made significant progress on our expense efficiency since the IPO in 2020 and we look forward to creating more efficiencies as we merge with Cambridge in 2024. Our tax line includes several components from the securities loss on sale earlier in the year. As I mentioned the insurance sale allows us to eliminate a $15 million valuation allowance we had set up back in Q1. Also because year-to-date we are in a loss position, there are limited taxes on our overall results as well.

So we have specific reserves against the three loans that we've been talking about and you just referenced and in addition to that the seesaw calculation that we do has a lot of risk factors for all commercial real estate and included in there are certain attributes that we think the office portfolio has but it is included in the general reserve in that way.

So.

I think the way you're asking the question is really just the specific reserves on these three assets.

Speaker 6: Okay, great. That's helpful. And then just go back to the next sale. Can you help us think about when in the quarter that occurred or impact margin in the quarter or how much in that interest income it did or didn't contribute just trying to try to understand. And then if you also have a spot margin for the month of September .

Okay, Great that's helpful and then.

Jim Fitzgerald: When we record the insurance gain in Q4, we will be applying a higher tax rate both on the gain and our operating results. I'll add some more comments on our taxes when I go over our outlook.

Just going back to the <unk> sale can you help us think about when in the quarter that occurred or.

<unk> margin in the quarter or how much of net interest income it did or didn't contribute to China.

I understand and then if you also have a spot market for the month of September.

Jim Fitzgerald: Switching gears to asset quality, we continue to be very focused on the challenges and commercial real estate in general and the office sector in particular. But we remain very confident our long-term approach to dealing with customers would serve us well throughout the rest of this cycle and all economic cycles. So an increase in non-performing loans from 31 million to 48 million in the quarter. As a percentage of loans the increase was from 22 basis points to 34 basis points.

That would be helpful.

Speaker 3: Yeah, so I'll probably start there because it's pretty consistent, it's very consistent with our guidance for Q4. So the closing margin.

Yes, so ill.

Probably start there because it's pretty consistent it's very consistent with our guidance for Q4, so the closing margin.

Speaker 3: was in the 260s, again, consistent with our guidance. To answer your question, the SNCCS sales, it wasn't one loan, it was multiple loans, and they happened over the quarter. tended to be a little bit earlier in the quarter.

Was in the 200, <unk> again, consistent with our guidance to answer your question. The snick sales. It wasn't one loan it was multiple loans and they happened over the quarter tended to be a little bit earlier in the quarter.

Speaker 3: The one thing I always get worried about doing one specific month on the march and there's always lots of ins and outs and September happens to be a seasonally low, lower month for municipal deposits.

<unk>.

The one thing I always get worried about doing one specific month on the margin, there's always lots of ins and outs in September happens to be seasonally low lower month for municipal deposits.

Jim Fitzgerald: These are very low levels that we expect to see normalize higher up over time. Included in the increase were three investor office properties that totaled 26 million. We are working with the borrowers and expect these loans to move through the sale process over the next several quarters. Included in the provision for the quarter of 7.3 million were specific reserves against these three loans to cover our expected losses from the sale process. Actual charge loss for the quarter were less than one basis point. Aside from the office portfolio, although their loan categories are performing well and our credit metrics are in a very strong position.

Speaker 3: So September has a little bit more in borrowings than the month of August and July . And also there's a day count difference, not to get too great, but there's a day count July and August of 31 days, which may not sound like much, but can have an impact as well. But to answer your question, the exit margin was in the 260s, and very comparable to the guidance we gave for Q4.

September has a little bit more in borrowings than than the months of August and July and also there is a day count difference not to get too greedy, but.

There is a day count to July and August at 31 days, which may not sound like much but can have an impact as well but to answer. Your question. The exit margin was in the $2 60 is very comparable to the guidance we gave for Q4.

Okay, and then just any.

Speaker 6: I don't know. Do you have a rate on where's the next form? Maybe that's the better way to ask it.

I don't know do you have a rate on on where the snacks, where maybe that's a better way to ask it.

Speaker 3: You know, I don't have it as I'm sitting here now. We can think about that. And, you know, they were, they were there just the, the one thing I can say, so they were variable and loans priced over so for variable.

I don't have it as I'm sitting here now we can think about that.

They were just the one thing I can say is that they were variable loans priced silver sulfur.

Jim Fitzgerald: We updated the office portfolio presentation and included as page 15 in the presentation and added some data that we haven't provided previously. We have 96 million of criticized and classified assets in the office portfolio of which 26 million are the three new NPLs I just mentioned. Additionally we have 100 million dollars of loans that we'll mature before Q4 of 24, or approximately 14% of all investor office CRE. County. But the 100 million of blown maturities is also a reasonable proxy for the annual maturities for the years after 2024 as well.

They are going Thats price over sofa.

Speaker 6: Okay, okay. And then last question on COTC, on their office, can you provide us with any update on their book? I think it's around 285 million. If you have any new update or just any other color you could add on their office book and how you're thinking about it.

Okay. Okay.

And then last question on CTC on their office can you provide us with any update on their part.

It gets around $285 million, if you have any new update or just any other color you could add on there and how youre thinking about it.

Speaker 3: So sure, I think I'll probably repeat some of the things that we've said in the past, you know, we're at a point in the process where, you know, Camry's still a very independent company. So, you know, I don't feel like we can say too much more.

So sure I think probably repeat some of the things that we've said in the past we're at a point in the process where.

Camera is still a very independent company so.

I don't feel like.

Jim Fitzgerald: Our expectations for the office portfolio remain the same. It's a challenging environment for all office properties, but especially those in urban markets and particularly those in the Boston financial district. We will work with our borrowers as they work through the challenges and try and get to the other side. If they can't or won't do that, we'll protect our interests and manage to work out to optimize our proceeds. As I mentioned, we provided specific reserves for the three office properties this quarter and we put on the progress of those assets as we move through the next three few quarters. We'll also continue to report on the level of criticized and classified assets in the office portfolio as well.

We can say too much more than we've said.

Speaker 3: When we did extensive due diligence on all their loans, but also the office portfolio, in many ways it's similar to Easterns, meaning it's constant.

When we did extensive due diligence on the on all their loans, but also the office portfolio.

In many ways, it's similar to Easterns.

Meaning it's.

Concentrated in our markets.

But it does have some exposure to Boston, but it's got exposure outside of Boston as well and in many ways. It looks a lot like the eastern portfolio.

Speaker 3: It does have some exposure to Boston, but it's got exposure outside of Boston as well. And in many ways, it looks a lot like the Eastern portfolio. I will say, we carefully reviewed it in due diligence, talked about at the time of the announcement, or not just our due diligence process, but also some of the purchase accounting that we assumed there, which included an evaluation of the office portfolio.

I'll say.

Carefully reviewed it in due diligence talked about at the time of the announcement.

And not just our due diligence process, but also some of the purchase accounting that we assumed there which included an evaluation of the office portfolio.

Jim Fitzgerald: Turning to our outlook, we are looking forward to closing the insurance transaction next week. It's a very significant milestone and we anticipate the gain to be approximately 260 million or in line with our prior guidance. We expect to have a 28% tax rate against the gain and also for our Q4 results. Typically, Q4 is a seasonally low period for funding in our municipal business and leads to higher levels of wholesale funding requirements as we experience in 2022.

Speaker 3: I think to, you know, one of your questions as we get closer closing, we'll be giving updates generally and happy to include more on that subject as we get closer. Great.

So one of your questions as we get closer to closing, we'll be giving updates generally happy to include more on that subject as we get closer.

Great. Thanks, Tim.

Thank you Laura.

And there are no further questions at this time I will turn the call back over to Bob <unk> for closing remarks.

Speaker 1: And there are no further questions at this time. I will tend to call back over to Bob Rever.

Great. So thanks, everyone for your interest and your questions today and best wishes for the remainder of the year happy holidays.

Speaker 2: Great, so thanks everyone for your interest and your questions today and best wishes for the remainder of the year. Happy holidays.

This concludes today's conference call you may now disconnect.

[music].

Jim Fitzgerald: This will put additional pressure on our net interest margin and net interest income in Q4 in early 2024. We expect the net interest margin to decline in Q4 to the mid to 60s and for net interest income to be between 127 and 132 million. We expect operating non-interest income to be very similar to Q3 and to be in a range between 22 and 25 million. We expect operating non-interest expenses to be 4 to 5 million dollars higher in Q4 due to higher marketing costs, some timing issues and some typical year end items.

Jim Fitzgerald: Similar to this quarter, we expect to prioritize the strength of the balance sheet as we move forward. We continue to expect modest long growth in Q4 and we will seek to keep wholesale borrowings as low as practical and to keep our capital levels robust. We believe focusing on our balance sheet strength will position as well for when the environment improves.

Jim Fitzgerald: As noted in our earnings release, our share repurchase authorization expired in the third quarter and there are restrictions on our ability to repurchase shares while the merger with Cambridge is pending. We look forward to seeking another repurchase authorization when allowable and also look forward to resuming our share repurchase activity.

Jim Fitzgerald: In closing, we believe we have a major opportunity in front of us with the Cambridge Trust merger. The combined companies expected to produce 20% earnings accretion in a challenging environment have significant levels of both regulatory and gap capital, a leading market share and some very attractive markets and a fully marked acquired balance. University. The IRR for the transaction is 20%. We are very focused on the execution of the merger, including the required regulatory and shareholder approvals, and we report next quarter with an update as we approach the closing.

Julie: Thank you very much, and Julie, you can open up the lines for questions. Thank you. At this time, I would like to remind everyone in order to ask a question, press star, then a number one on your telephone keypad.

Operator: We'll pause to spare a moment to compile the journey of roster.

Mark Fitzgibbon: Your first question comes from Mark Fitzgibbon, some Piper Sandler. Please go ahead. Hey guys, good morning, happy Friday. Good morning, Mark, how are you? Good, thanks. Maybe could start off with a couple of questions around the snacks. I was impressed by the price that you were able to sell those out of my math correct, sort of 98 and a half cents on the dollar. I guess I was curious to whom did you sell them, maybe not specifically the buyer, but the type of buyer, and what do you have left in terms of the snack portfolio?

Mark Fitzgibbon: Sure, no good question, Mark, and without getting into precision, your assumption on the economics is pretty good, so good job on your part there. There's a pretty active market for that. I don't know who the buyer was, or we think they were banks, but there's an active market for those assets. As we looked at the portfolio, those were the ones that made the most sense to us as well, so I don't anticipate more of that if that's how I interpret a part of your question. We evaluated that pretty carefully, and those are the assets that made the most sense to us. In roughly how much do you have in remaining snacks, Jim? I'm going to have to follow up.

Jim Fitzgerald: Let me, rather than off the seat of my pencil, we can follow up on that mark. Okay, fair enough. And then the four to five million of year-end expenses that you referenced in your guidance, what is in that exactly? Sure. So fair question. So if you break it down, marketing, we always do a lot of marketing in Q4, so we expect our marketing expenses to be two million dollars higher than what they were in Q3, so that's a big component of it.

Jim Fitzgerald: Not to get too gritty, but our provision for off-balance sheet commitments is pretty volatile. It was volatile high in the first half of the year. It was volatile low and was actually negative in the third quarter, and we expected to kind of revert to the mean in the fourth quarter, so that's another factor. And then the residual, a couple of million dollars is just year-end, sort of typical year-end expenses that get recorded at year-end.

Jim Fitzgerald: Okay. And then on those three office loans, I wondered if you could share with us what the vacancy rates look like on those, and maybe LTVs and debt service at origination? Sure. So all three, each one's a little bit different, but I think to answer your question, the characteristics are similar for all three. All three, the buildings were sold well before the pandemic. The original LTVs were 60 percent. They are battling vacancies now and cash flow issues, and we are working, as I said, we are working with the borrowers to try and execute sales in those, and as I also said, we put some specific reserves up against all three of those to cover what we think will be the expected losses.

Jim Fitzgerald: And then last question, you all seem fairly confident that you'll be able to close the Cambridge deal on the end of the first quarter, given that a lot of other banks have had an excruciatingly long approval process recently, what gives you confidence that you'll be able to close it so quickly? Yeah, no, it's a good question or I understand the question, sometimes I get surprised because if you look at our track record for deal, the century one being the most recent, it's really the same timeline, so it's similar to century, it's an in-market transaction, we have very good regulatory relations as does Cambridge as did century, and as we have, you know, we're aware of the sort of slowness in some particular transactions, but we have very constant communication with our regulators and have set the dates and expect to complete on that timetable. As I said, if you go back and look at the century, it's really, you know, it's a different time of the year, but it's the same timeline. Thank you. Thanks, Mark.

Damon Delmonte: You're an ex-question, come from Damon Del Matty, from KBW, please go ahead. Hey, good morning, everyone. Thanks for taking my questions and hope everybody's doing well today.

Jim Fitzgerald: Just wanted to start off with a little bit on the topic of credit here and kind of looking at the the reserve level, and I know the build was specific to these three office loans, but just kind of wondering what your thoughts are going forward with the provision line kind of given the pullback and loan growth and what you're seeing elsewhere in the portfolio and the potential need to build reserve further from here. Sure.

Jim Fitzgerald: No, fair question. And as we talked previous quarters and certainly, you know, similar to others, loan growth is a big factor in provisioning levels, right? If you look specifically at Eastern, if you look at when we had much faster loan growth last year, we had much higher provisions and the correlation is pretty clear from that. We do expect modest loan growth over the fourth quarter and into the first quarter of next year.

Jim Fitzgerald: That will be a factor. You know, our seasonal methodology is very consistent and it's the same quarter to quarter. It starts with an economic forecast. You know, to date, the economic outlook continues to be reasonably good, and that's a factor with that were to change than obviously the seasonal calculations would change. But over the last couple of quarters and what we see through literally, you know, October, whatever today's date is 27th, you know, the economic outlook is still pretty strong. So we don't see, you know, the provision levels that we've seen both in 22 and 23 and the correlation with loan growth is what we would expect over the next quarter or two. Thank you.

Jim Fitzgerald: And then with respect to the office portfolio and kind of the 38% is in the Boston Cambridge area. Are there any other properties or locations that are showing early signs of stress that kind of popped up on the radar? Do you think these three loans were just unique situations and not indicative of broader weakening? Yeah, no, very good question. Damon, there's a lot there. Let me sort of unpack it a little bit at a time.

Jim Fitzgerald: So I think we do provide the statistics about Boston and Cambridge. And not to get local here, but Cambridge is very different than Boston. There's a lot going on in Cambridge and we expect that to continue. If you look at the portfolio generally, it is the Boston financial district where these three assets were and where the issues we expect to be concentrated. That's not to say there won't be issues other places and we're carefully monitoring all of that. But the issues that were specific to these three loans that I described on Mark's question, we're very specific to the financial district. That's that we continue to monitor the entire portfolio very, very carefully. Got it.

Damon Delmonte: Okay. I guess that's all that I have for now. So I'll set back. Thank you very much. Thanks, Damon.

Laura Hunsicker: You're next question. Come some Laurie on sicker from C-part research partners. Please go ahead. Yeah. Hi. Thanks. Bob and Jim. Good morning. Good morning, Laurie.

Laura Hunsicker: I'm hoping that I can just circle back where where Damon was. So the 38% that you give on your $717 million book that's Boston and Cambridge. Do you have the split as to what's just Boston financial district? We haven't provided that, Laurie. So we'd have to review that. I don't know it off the, I don't know it this second. We are very focused on the financial district and that's where these three loans were from, as I mentioned. We can caucus internally about providing a little bit more information on that specifically. Great. Okay.

Laura Hunsicker: And then just going back to the 26 million of non performers. What was the split there on those three properties in terms of class A, class C, class C? Yeah. So I get a little worried about the class A class C because you know different people have different definitions, but I think they would all be class B types and they were all in the financial district in Boston. Okay. Great.

Jim Fitzgerald: And then can you share with us what actually triggered the non performing status that either they hit a maturity wall or was it just something else? Sure. So these are, you know, again, every loans, every situation is slightly different, but I think in general to answer the question the way you asked it, these are buildings that had lease issues, lease, you know, leases had come up. They had vacancies in the building which led to deteriorating cash flow, and they had the borrowers have elected not to support the assets.

Jim Fitzgerald: Our strategy in that situation generally is to work with the borrowers to try and sell the buildings, and as, you know, appropriate manners possible to optimize price but also timing. And that's what happened really in all three of these cases. Services. Got it.

Jim Fitzgerald: And then just in terms of thoughts on telling some office, some of your peers sold office loans in the third quarter, including one who took a 37 cent haircut. How do you how do you think about selling these or you actively trying to sell them or what can you service us there? Yeah, so I'd say are managed asset team who does a very good job here. Every time they get an asset and the same would be the true for these three.

Jim Fitzgerald: And they didn't just, these issues just didn't appear, you know, late in the third quarter. They've been monitoring these loans for a period of time. But in, but to answer the question, they do an asset by asset review and figure out the optimal strategy. They include things like note sales as your reference, the benefits being it moves out quickly, sometimes prices less than one would like there. But for each individual asset based on the facts and circumstances, that strategy is developed in the cases of these three, it's to take the buildings themselves through this fail process. That's how we thought we would optimize our proceeds. Got it.

Jim Fitzgerald: And then just sort of one last question. The $717 million investor, Creebook, what is the specific reserve you have against that? Is it just on the three loans by you the $7 million or is there more there? So we have specific reserves against the three loans that we've been talking about and you just referenced. And in addition to that, you know, the seasonal calculation that we do has a lot of risk factors for all commercial real estate and included in there are certain attributes that we think the office portfolio has, but it's included in the general reserve in that way. So I think the way you're asking the question is really just the specific reserves on these three assets. That's $7 million. Okay. Great. That's helpful.

Jim Fitzgerald: And then just go back to the next sale. Can you help us think about when in the quarter that occurred or impact margin in the quarter or how much and that interest income it did or didn't contribute just trying to try to understand. And then if you also have a spot margin for the month of September, that would be helpful. Yeah. So I'll probably start there because it's pretty consistent. It's very consistent with our guidance for Q4.

Jim Fitzgerald: So the closing margin was in the 260s. Again, consistent with our guidance. To answer your question, the snake sales wasn't one loan. It was multiple loans and they happened over the quarter tended to be a little bit earlier in the quarter. The one thing I always get worried about doing one specific month on the margin, there's always lots of ins and outs and September happens to be a seasonally lower month for municipal deposits.

Jim Fitzgerald: So September has a little bit more in borrowings than than the month of August and July. And also there's a day count difference not to get too great, but there's a day count July and August of 31 days, which may not sound like much, but can have an impact as well. But to answer your question, you know, the exit margin was in the 260s and very comparable to the guidance we gave for Q4. Okay.

Jim Fitzgerald: And then just any, I don't know, do you have a rate on where this next one, maybe that's the better way to ask it. You know, I don't have it as I'm sitting here now, we can think about that and, you know, they were, they were, just the one thing I can say, so they were variable and loans priced over so far. They were over and then priced over so far. Okay.

Jim Fitzgerald: And then last question on COTC on their office, can you provide us with any update on their book? I think it's around 285 million. If you have any new update or just any other color you could add on their office book and how you're thinking about it. Thanks.

Jim Fitzgerald: So sure, I think I'll probably repeat some of the things that we've said in the past, you know, we're to point in the process where, you know, camera's still a very independent company. So, you know, I don't feel like we can say too much more than we said, but when we did extensive due diligence on the, on all their loans, but also the office portfolio. In many ways it's similar to Eastern's, meaning it's concentrated in our markets.

Jim Fitzgerald: It does have some exposure to Boston, but it's got exposure outside of Boston as well. And in many ways, it looks a lot like the Eastern portfolio. I will say, you know, we carefully reviewed it in due diligence, talked about at the time of the announcement, you know, or not just a due diligence process, but also some of the purchase accounting that we assume there, which included, you know, an evaluation of the office portfolio. I think to, you know, one of your questions as we get closer closing, we'll be giving updates generally and happy to include more on that subject as we get closer. Great. Thanks, Jim. Thank you, Laura.

Operator: And there are no further questions at this time.

Bob Revers: I will tend to call back over to Bob Revers for closing remarks. Great. So, thanks everyone for your interest in your questions today and best wishes for the remainder of the year.

Operator: Happy Holidays.

Operator: This concludes today's conference call. You may now disconnect. Thank you.